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Newsletter | Revolving Door Project Newsletter | November 3, 2022

Biden Can Make Change by Fixing Federal Contracting

DefenseExecutive BranchGovernanceGovernment CapacityLaborRevolving Door

Federal contracting facilitates a massive commercial economy; Biden can make it more fair.

This edition of the Revolving Door Project newsletter was originally published on our Substack. View and subscribe here.

If the Trumpiest predictions for the midterms come true next week, and Republicans sweep Congress, opportunities for implementing progressive policy priorities – and Biden’s campaign promises – will disproportionately fall to the strategic maneuvering of the executive branch. From climate action to stopping runaway corporate profiteering to defending the working class from exploitation, the executive branch holds immense power with which it can tangibly better the lives of everyday Americans even amidst a sure-to-be-hostile potential Republican-controlled Congress.

As independent and cabinet agencies emerge at the forefront of policy gains, though, a crucial reckoning must take place within the federal government’s implementation infrastructure: federal contracting. Federal contracting facilitates a massive commercial economy (totaling no less than $637 billion in FY21 and $665 billion in FY20) through which federal aid and policy is often implemented. Yet this system is mired in waste, fraud, and abusive labor practices. Though such fraught realities did not begin with the Biden administration, Biden should finally address them, and commit the federal government to deploy its massive purchasing power to achieving a more ethical and responsible economy.

Federal Contracting Matters

Federal contracts are often lucrative and desirable business exchanges, promising significant returns on investment for contracted firms over extended periods of promised work. This motivates contractors to maintain their eligibility for contracting with federal agencies. Indeed, the federal government is often the best paying customer in town, which means that when federal contracting is reformed by implementing and enforcing new standards and policies in its contract award processes, firms have extraordinary motivation to actually service those expected changes. These policies, when actually implemented, have significant potential impact on workers and firm practices beyond the scope of federal contracts themselves, making these changes all the more necessary. 

For example, only about an estimated five million workers are employed by the federal government through federal contracting systems. This is a relatively small number, certainly as compared to the approximately 165 million adults who participate in the U.S. civilian labor force. However, historically nearly 25 percent of this same population (working U.S. adults) are employed by firms that contract with federal agencies, even if they are not specifically assigned to federal contracts. This means that when agencies increase fair labor compliance standards or equal opportunity mandates, they have the potential to influence and materially better the lives of far more workers across the country than just those under the direct employ of the federal government. 

Of course, working for the federal government should also just be a good job, and Biden’s administration should reject and work to eradicate the exploitation of workers nationwide. Federal dollars should not pad the profit margins of corporations and their CEOs at the expense of the workers actually delivering contracted services. However, that’s the kind of system that exists right now. 

Why Is Contracting So Broken? 

President Biden’s April 2021 executive order raising the minimum wage for federal contractors to $15 an hour was a crucial first step, and a necessary reform, in fighting for fair labor standards within federal contracting. However, such increases only scratch the surface of root issues in procurement processes. 

Pay gaps between contractors’ CEOs and their employees continue to reach staggering new depths. Wage theft and workplace health and safety standards violations remain endemic amongst these corporations. Contractors with massive award portfolios are still union busting, illegally, and with apparent impunity. Some federal contractors have even been accused of human trafficking and other extreme abuses while benefiting from public dollars.

Biden postures himself as one of the best-on-labor presidents ever. Yet, his government – which has certainly endeavored to protect people from corporate abuse – is still partnering with and paying those same corporations to do the same abusive things, and from public coffers. When corporations deflate and steal workers’ wages, artificially inflate CEO compensation, union bust, and otherwise abuse their workforce, such abuses have been shown to generate severely degraded quality of goods and services that is ultimately delivered, if delivered at all. This failure to deliver and to deliver quality goods – often still rewarded with full compensation – is of course itself a betrayal of the federal government’s responsibility to competently steward public funds for and in the public interest. 

These abuses – of people, and of public funds – are utterly unacceptable. Unfortunately, waste, fraud, and abuse within contracting is also not limited to labor issues, though neither are the potentials for positive reforms that procurement revisions can generate.

Not Just Labor 

Where, for what, and to whom federal dollars go matters. The U.S. government is the largest single purchaser of goods and services in the world, and the kinds of firms it favors with those dollars is itself a significant political choice. Procurement policies have perhaps the most opportunity to prop up labor unions and workers through targeted reforms, but other provisions also have the opportunity to motivate broader changes.

For example, seriously reevaluating what within the federal government actually needs to be outsourced, and what within government would actually be cheaper, more effective, safer, and more streamlined a model if kept ‘in house’ so to speak, could help address long-standing cycles of manipulation and exploitation by contracted firms in a wide array of industries. 

Implementing student loan forgiveness would be infinitely simpler, for example, if student loan debt wasn’t needlessly outsourced in a manner that made it both more expensive for the government and also made students and debtors vulnerable to the profit-driven manipulations of privatized service providers. Student loan servicers don’t have to, and in fact perhaps shouldn’t, exist. Private loan servicers have made student loan repayment more costly, burdensome, confusing, and painful through fraught (if not illegal) manipulations of policy procedures that effectively exploit the most vulnerable at an exorbitant cost to taxpayers. Why do these companies still exist when they represent a bad deal for the government and a poor service for students and debtors? 

The government could also address climate and environmental concerns through contracting reform by mandating emissions disclosures and climate-related financial risk, while potentially prioritizing low-cost, low-risk, firms in bidding processes. These policies were actually proposed by the Biden administration last year, but have yet to be implemented. They should be. 

Of course, the federal government has been found to “award contracts to companies that pollute at disproportionately high rates relative to other firms in their industry, a disparity that is even more exaggerated for firms contracted by the [Department of Defense].” This is unacceptable. Federal contracting policies should work to hold contractors accountable to the public interest through various accountability measures, evaluation criteria, and cleanup mandates if contracted work is completed at a cost to the environment. Federal dollars shouldn’t insulate polluters from accountability, or motivate pollution and wanton destruction by virtue of a lack of oversight.

What’s To Be Done About It? 

To realize these potentials, those tasked with federal procurement reform should perhaps start by reevaluating what jobs actually need to be outsourced, and what jobs would benefit from a reabsorption into actual government jobs. The National Economic Law Project (NELP) has demonstrated for years that a reabsorption of many currently contracted positions would go a long way in “reducing waste, increasing accountability, and cutting costs overall.” As with student loan debt, such an expansion of – and reinvestment in – federal bureaucracy would also likely lead to more consumer-oriented services while eliminating profit-driven corner cutting and other exploitations. 

Barring such reinvestment, ending the revolving door in acquisition and procurement roles is also a crucial initial step in holding companies accountable to quality service standards and legal compliance to labor, environmental, and financial laws. When contracting officers are materially or financially invested in contractors’ bottom line, or are awaiting highly-inflated checks at current or former contractors upon their departure from government service, these officials create for themselves a massive conflict of interest through which it is impossible to adequately implement models of oversight, reform, or accountability. Federal procurement jobs are critical – these jobs should be made desirable (both compensation and prestige) such that the people who hold them expect to make them their final career destination. If the United States can make these jobs as desirable as they are in, e.g., Western Europe and East Asia, American procurement officials will have the status and incentive to rein in decades of bad habits in government contracting.

This revolving door framework “inherently befuddles these actors’ apparent, and actual, commitment to centering the public in this work, leading to consistently bad outcomes and a general apathy regarding reform.” Reforms that do not address this pervasive pattern and the consequences it causes will ultimately fail as a result, making revolving door reform a crucial part of any push to improve contracting.

Reforms should also include the new or improved contracting standards that have been advocated by folks like Americans for Financial Reform (AFR), most recently in a sign-on letter campaign last month. Their suggestions include precluding companies from using federal funds to enable stock buybacks, and giving priority in future contract awards to firms that don’t engage in such self-serving and ill-conceived behaviors. 

AFR’s letter also advocates an expansion of measures like President Biden’s executive order that requires project labor agreements for large-scale construction contracts. This EO is an excellent start, but improved contracting policies can further boost worker interests by actively encouraging union building for privately contracted employees and refusing to bear the costs for union busting activities. Additionally, reforms should include implementing and expanding family leave and paid sick leave policies for contracted employees across the federal government. As Sarah Anderson from Inequality.org wrote last month, “U.S. taxpayers should not have to fund corporate practices that undermine their own economic security.” 

Want more? Check out some of the pieces that we have published or contributed research or thoughts to in the last week:

Gina Raimondo Should (Still) Fire NHC Acting Director Jamie Rhome

How Governing Can Motivate Politics

A Crisis Of (Un)Accountability: Amidst Profound Political Cruelty, Ethics Matter More Than Ever

Hack Watch: Debunking the Big Budget Bogeyman

The Democratic left has a problem with Gina Raimondo

Preventing a Return of Schedule F

Journalism and media organizations call on White House to support local journalism, pass the JCPA

The Fed Likes to Tout its Independence. So Why Are Big Banks Lobbying It?

DefenseExecutive BranchGovernanceGovernment CapacityLaborRevolving Door

More articles by Toni Aguilar Rosenthal

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