Meghan McGuirk (email@example.com) is a J.D. candidate at The George Washington University Law School and is a Senior Articles Editor for the Public Contract Law Journal.
In 2014, it seemed as though labor protections in federal procurement were on the rise and federal contractors would be held responsible for any violations against U.S. labor laws when President Barack Obama issued the Fair Pay and Safe Workplaces Executive Order (E.O.).1 This order allowed contracting officers within agencies to consider labor violations in making responsibility determinations in the pre-award stage.2 This program was criticized heavily by conservatives and ultimately was ended in 2017, but the revocation did not go without criticism given that certain provisions of the executive order were intended to protect workers from sexual harassment and pay inequality in the workplace.3
This is not simply an issue of using taxpayer funds to pay contractors who violate federal law. One study conducted by the Center for American Progress showed a correlation between violations in wage, hour, and safety laws with poor performance of the contract itself.4 The study found “significant performance problems” in seven of the twenty-eight companies that received some of the worst workplace violations between 2005 and 2009.5 This correlation between poor performance and labor violations indicates that continuing to award contracts to known violators of federal wage, hour, and safety laws costs the government more money.
Continuing to award contracts to contractors violating federal law also adversely impacts employees of those contractors. With over twenty-two percent of the U.S. workforce employed by federal contractors,6 it is vital that the government use its power as the largest buyer in the country to enforce the labor laws that are rampantly disregarded by contractors. As the United States has pulled back on protections for employees of government contractors, the trend elsewhere, particularly in Europe, has been to connect social policies such as labor and environmental laws and regulations to procurement.7 Because government contractors continue to violate labor laws and to receive contract awards from the federal government, the United States must take a more active role in enforcing labor laws through procurement policy. Provisions such as those used in the European Union, and implemented in Sweden and Norway, offer a guide to less intrusive ways that a government can use procurement policy to enforce labor laws that ultimately will improve the lives of many.
This Note argues that the European model is an example of a less intrusive yet still protective form of ensuring wage, hour, and safety violations are considered in awarding government contracts. Following the Introduction in Part I, Part II will discuss labor violations and subsequent awards in U.S. government contracts. Part II also outlines the Fair Pay Safe Workplaces Executive Order issued by President Obama and its subsequent revocation through the courts and the Trump administration. As discussed in Part III, the European Union has already taken steps to enforce labor protections through procurement. The trend towards labor protections in government procurement will be examined in the context of advancements taking place in Europe, particularly in Sweden and Norway. Part IV outlines how Sweden implemented the EU directive by only requiring the consideration of social, labor, and environmental policies in procurement “when necessary.” Norway’s implementation of the same directive, requiring considerations of social, labor, and environmental policies in high-risk sectors, is discussed in Part V. Part VI argues that the United States should look to both Sweden and Norway as examples of implementing incremental changes to procurement on a sector-by-sector basis. By implementing adjustments over the course of time, in place of one government-wide regulation, change can be both sustainable and efficient.
II. Considering Labor & Safety Violations in U.S. Procurement
This section will provide an overview of the current status of federal con- tractors who violate federal wage, hour, and safety laws. First, this section will outline the history of the federal government continuing to award contracts to federal contractors in violation of federal wage, hour, and safety laws. Next, this section will outline the process by which the United States implemented and consequently ended protections that would allow contracting officers to include labor violations in pre-award responsibility determinations.
A. Repeated Wage, Hour, and Safety Violations by Federal Contractors in the United States
With over $500 billion in taxes going to federal contracts8 whose contractors employ approximately twenty-two percent of the U.S. workforce,9 the government should take more steps to ensure federal contract workers are protected in the workplace. In a 2013 report, the U.S. Senate Health, Education, Labor, and Pensions Committee found that many federal contractors continued to be awarded federal contracts despite paying $196 million in penalties and assessments in one fiscal year.10 A clear pattern has emerged that the current applicable wage and safety laws enacted to protect employees are not an adequate deterrence to keep companies from putting their workers in compromising positions.
Federal contractors have been violating wage and safety laws for decades. The General Accounting Office found that eighty companies receiving thirteen percent of the contracts awarded in the 1993 fiscal year had violated the National Labor Relations Act.11 In addition, the Government Accountability Office (GAO) conducted a study in 2010 of the fiscal years spanning from 2005 through 2009, 12 where it collected data from the Department of Labor on federal contractors who were given citations and large penalties for violating occupational safety and health regulations.13 Out of fifty of the largest Occupational Safety and Health Administration (OSHA) fines levied, almost forty percent were against companies who then received federal contracts in 2009, the subsequent fiscal year.14 Although violations of most federal labor laws do not result in debarment, violating the Service Contract Act or the Davis-Bacon Act should result in debarment for federal contractors.15
The Senate Health, Education, Labor, and Pensions Committee conducted a study finding that “[fifty-eight] of the 200 largest penalties for violations of the health and safety standards, or the largest back pay awards, were assessed against large government contractors.”16 In fiscal year 2012 alone, forty-nine of these companies were awarded $81 billion in federal contracts and fined $196 million for failing to pay workers fair wages or not upholding the safety requirements in working conditions.17 These studies demonstrate that fair labor standards are not heavily considered by agencies when awarding federal contracts since violations did not affect subsequent awards.18
From 2007 to 2012, eighteen companies who received federal contracts were assessed some of the harshest OSHA penalties for serious workplace safety violations, receiving “[twenty-three] of the 100 largest initial penalties imposed by OSHA.”19 Eight of the eighteen contractors were involved in workplace fatalities, but only one was suspended or debarred with the debarment resulting from a different incident.20 Tyson Foods, Inc., a company that has received over $4.2 billion in federal contracts since 2000, was responsible for workplace fatalities of eleven employees between 2007 and 2012.21 The company has continued to receive federal contract awards in spite of its repeated history of workplace safety violations and fines levied by OSHA.22
In a study conducted by the Center for American Progress, a correlation was found between violations in wage, hour, and safety laws and poor performance of the contract itself.23 Of the twenty-eight companies that received some of the worst workplace violations from 2005 through 2009, seven, or twenty-five percent of the companies, had performance problems.24 Performance problems included “contractors submitting fraudulent billing statements to the federal government, . . . cost overruns, performance problems, and schedule delays.”25 This correlation between poor performance and labor violations indicates that continuing to award contracts to known violators of federal wage, hour, and safety laws costs the government more money.
Because federal contractors employ a large portion of the U.S. workforce, employees are adversely affected by the government’s decision to continue awarding contracts to contractors who consistently violate federal law. In 2002, the Department of Labor estimated that 26 million workers are employed by federal contractors covered by the Office of Federal Contract Compliance.26 In the last decade alone, more than 300,000 workers employed by federal contractors suffered wage violations by their employers.27 In the GAO’s 2010 study of the fifty largest Wage and Hour Division assessments from fiscal years 2005 through 2009, “over [sixty] percent of these assessments were made against companies that subsequently received contracts in fiscal year 2009.”28 Although companies were punished for violating these fair labor laws, this penalty did not necessarily harm their ability to be awarded future federal contracts. These conditions and patterns led President Obama to issue the “Fair Pay and Safe Workplaces” Executive Order.
B. Fair Pay and Safe Workplaces Executive Order Provisions
On July 31, 2014, President Obama issued Executive Order 13673, which sought “to promote economy and efficiency in procurement” by only contracting with contractors who comply with federal labor laws.29 The E.O. was premised on the idea that contractors who “consistently adhere to labor laws are more likely to have workplace practices that enhance productivity and increase the likelihood of timely, predictable, and satisfactory delivery of goods and services to the [f]ederal [g]overnment.”30
To comply with the E.O., a contractor seeking a contract for goods and services, including construction, where the estimated contract value exceeds $500,000, must show to the “best of the offeror’s knowledge and belief” that the contractor had not been subject to “administrative merits determinations, arbitral award or decision, or civil judgment, as defined by the Department of Labor . . . within the preceding three-year period.”31 Violations of any of the following labor laws or orders must be included in the representation by the offeror:
- the Fair Labor Standards Act;
- the Occupational Safety and Health Act of 1970;
- the Migrant and Seasonal Agricultural Worker Protection Act;
- the National Labor Relations Act;
- 40 U.S.C. chapter 31, subchapter IV, also known as the Davis-Bacon Act;
- 41 U.S.C. chapter 67, also known as the Service Contract Act;
- Executive Order 11246 of September 24, 1965 (Equal Employment Opportunity);
- section 503 of the Rehabilitation Act of 1973;
- 38 U.S.C. 3696, 3698, 3699, 4214, 4301-4306, also known as the Vietnam Era Veterans’ Readjustment Assistance Act of 1974;
- the Family and Medical Leave Act;
- Title VII of the Civil Rights Act of 1964;
- the Americans with Disabilities Act of 1990;
- the Age Discrimination in Employment Act of 1967;
- Executive Order 13658 of February 12, 2014 (Establishing a Minimum Wage for Contractors); or
- equivalent State laws, as defined in guidance issued by the Department of Labor.32
The contracting officer should use this information as a part of the responsibility determination prior to making an award.33 For a contractor to be deemed responsible under FAR 2.101, the following factors may be considered, among others: “adequate financial resources to perform the contract,” a “satisfactory performance record,” and a “satisfactory record of integrity and business ethics.”34 The offeror has the opportunity to disclose “any steps taken to correct the violations of or improve compliance with the labor laws listed.”35 The agency Labor Compliance Advisor would then inform the contracting officer whether the steps taken by the offeror are sufficient “to address appropriate remedial measures, compliance assistance,” or if further steps should be taken to avoid future violations.36
The Labor Compliance Advisor position was created under E.O. section 3 to enable a senior agency official to “work with the acquisition workforce, agency officials, and agency contractors to promote greater awareness and understanding of labor law requirements, including recordkeeping, reporting, and notice requirements, as well as best practices for obtaining compliance with these requirements.”37 Information submitted by the offeror to the contracting officer may be submitted by the contracting officer and Labor Compliance Advisor to the agency suspending and debarring official.38
Furthermore, this E.O. extends to subcontractors. If a subcontract was involved where the subcontract value exceeded $500,000 and was not for “commercially available off-the-shelf items,” the contracting officer required the contractor to disclose information about any “administrative merits determination, arbitral award or decision, or civil judgment rendered against the subcontractor within the preceding three-year period” with updates made every six months.39
After a contract has been awarded, the agency must require that contractors submit reports every six months updating the information provided about any labor violations.40 The contracting officer along with the Labor Compliance Advisor may take action against the contractor including agreements requiring “appropriate remedial measures, compliance assistance, and resolving issues to avoid further violations,” and providing remedies such as decisions not to exercise an option on a contract, contract termination, or referral to the agency suspending and debarring official.41
The Department of Labor also must inform agencies of any investigations of contractors and subcontractors under current federal contracts.42 Once again, the contracting officer in conjunction with the Labor Compliance Advisor may pass the information “to the agency suspending and debarring official in accordance with agency procedures,” if seen fit.43
Along with provisions concerning violations of current labor laws, the E.O. also sought to ensure that employees had information from the contractor about their paychecks. Contractors and covered subcontractors as described above must provide their workers with a document informing the employees of “hours worked, overtime hours, pay, and any additions made to or deductions made from pay.”44 Even if the contractor or subcontractor considers an individual to be an independent contractor and not an employee, the same disclosures must still be made.45 This provision was included to ensure employees received basic information so that they can be sure they are getting paid what is owed to them by their employer.46
Additionally, the E.O. addressed complaint and dispute transparency. Where the value of the contract exceeds $1 million, contractors must agree that the “decision to arbitrate claims arising under Title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment may only be made with the voluntary consent of employees or independent contractors after such disputes arise.”47 This provision also applies to subcontractors where the estimated value of the supplies acquired and services required exceeds $1 million.48 The complaint and dispute transparency provisions of the E.O. do not apply to employees covered by any type of collective bargaining agreement or between employees and independent contractors who entered into valid contracts “to arbitrate prior to the contractor or subcontractor bidding on a contract covered by this order.”49 This last exception does not apply if the contractor or subcontractor is allowed “to change the terms of the contract with the employee or independent contractor.”50
The E.O. specified that one violation of law “may not necessarily give rise to a determination of lack of responsibility, depending on the nature of the violation” itself.51 Contracting officials may consider “any remedial measures or mitigating factors” that the contractor has taken to rectify the violation.52 The Obama administration was concerned with the high burden reporting would place on federal contractors; therefore, the E.O. instructed the Administrator of General Services, in consultation with relevant agencies, to develop a website for federal contractors to use that would serve as a one-stop reporting mechanism that applied across contracts and agencies.53
The final rule, issued on August 25, 2016, responded to the many comments provided during the comment period. The final rule allowed for a “phase-in” process to allow contractors and subcontractors time to acclimate to the new regulatory scheme since no reporting or tracking requirement had been enforced prior to the rule.54 The reporting requirement when the final rule takes effect would only require disclosures be made for one year, increasing up to the three-year requirement until 2018.55 The final rule required all violations be reported, even those without a final judgment.56 In response to comments arguing that the E.O. would be costly for contractors, thus decreasing efficiency and economy, the government reiterated that the economy and efficiency are intrinsically tied to only awarding contracts to responsible bidders “that abide by the law, including labor laws.”57 The final rule was set to go into effect on October 25, 2016.58
C. Revoking the Fair Pay and Safe Work Places Executive Order
After the 2010 GAO report and the subsequent U.S. Senate Health, Education, Labor, and Pensions Committee findings in 2013, many senators and representatives in Congress called for action to ensure workers were protected from further violations by their federal contractor employers.59 Congressional democrats and certain organizations, including the AFL-CIO and the Teamsters, praised the E.O.60 Federal contractors in the industry were not all supportive of the E.O; the U.S. Chamber of Commerce sent a letter signed by twenty different trade organizations to the chairmen and ranking members of both the House and Senate Armed Services Committees stating their disapproval of the E.O. and claiming the protections were redundant and only served to make procurement less efficient and more expensive.61
Many of the concerns with the order were held largely by congressional conservatives who argued that the provisions would show little improvement in the lives of workers and would increase transaction costs, ultimately having a negative impact on businesses and the economy.62 Others had concerns that the E.O. constituted an unreasonable use of federal authority.63 In 2016, a federal judge issued a nationwide preliminary injunction that blocked the E.O. sections requiring contractors to disclose labor law violations and prohibiting the use of arbitration clauses in employee contracts.64 The court determined the disclosure requirements were not found in or authorized by statute as required for executive orders.65
The court relied on Wisconsin Department of Industry v. Gould, a U.S. Supreme Court case from 1986 in which a state law attempted to disqualify government contractors who were found to have violated the National Labor Relations Act (NLRA) because the Act itself foreclosed “regulatory or judicial remedies for conduct prohibited or arguably prohibited by the [NLRA].”66 The court also found that the Executive Branch departed from “Congress’s explicit instructions dictating how violations of the labor law statutes are to be addressed.”67 The federal contractors in the case also successfully argued that the requirement to disclose potentially harmful labor violations to the Department of Labor violated the First Amendment.68 Under the preliminary injunction, the paycheck transparency provisions were left untouched and went into effect on January 1, 2017.69
The court also had issue with the final rule requirement that contractors disclose non-final agency allegations of labor law violations.70 Courts have long held that contractors have a liberty interest in the right to be “free from stigmatizing governmental defamation having an immediate and tangible effect on [their] ability to do business.”71 The court held that this final rule violates the due process rights of contractors by forcing them to “report and defend against non-final agency allegations of labor violations.”72
On March 27, 2017, President Donald Trump issued Executive Order 13,782 revoking the Fair Pay and Safe Workplaces E.O. originally put forward by President Obama.73 President Trump then signed a joint resolution on the same day eliminating the Fair Pay and Safe Workplaces rule.74 Many viewed the rule rescission as being an attack on women and enabling workplace sexual harassment.75 The National Women’s Law Center argued that the provisions mandating dispute transparency kept contractors from using forced arbitration clauses to hide sexual harassment charges.76 Ultimately, the E.O. could not withstand the judicial scrutiny and the public backlash against the expanded reporting requirements.77
D. Current State of Labor Protections for Employees of Federal Contractors
Although companies can still be penalized for violating health, safety, wage, and hour laws, there is no longer a prohibition on further contracting with employers who violate wage, hour, and safety provisions.78 Revoking the Fair Pay and Safe Workplaces order did not completely end the consideration of labor conditions in government procurement. Under the Davis-Bacon Act, contractors must pay their workers the “prevailing wages” when working on federally funded or assisted construction projects of public buildings or public works valued in excess of $2,000.79
Contractors and subcontractors must also pay the “local prevailing wage,” including fringe benefits, to laborers and mechanics who are employed “directly upon the site of the work.”80 The prevailing wage is determined by assessing the wages paid to various classes of laborers employed on specific projects in an area.81 Although this requirement protects workers employed by federal contractors, it is a very narrow protection that does not cover most employees of federal contractors. Even construction workers who have proven that their employer did not pay adequate wages under the Davis-Bacon Act may be subjected to years of appeals, all the while still not receiving back pay.82 As the United States has pulled back on regulations that protect workers in the federal contracts field, an international trend ties contractor responsibility to labor standards in procurement.83 The United States must take steps to protect the employees of federal contractors, considering they represent an estimated twenty-two percent of the U.S. workforce.84
III. European Union Directives on the Consideration of Social, Labor, and Environmental Issues in Contract Awards
While the United States has reduced protections for federal contract employees, the European Union (EU) has taken steps to further incorporate social, labor, and environmental considerations into contract award decisions. This section will outline the most recent EU directives as they relate to social, labor, and environmental policies. It is also important to note the process of implementation and how the directive compares to recent attempts by the United States to accomplish the same ends.
The Organization for Economic Co-operation and Development (OECD), of which the United States, Sweden, and Norway are all members, acknowledges that countries increasingly use procurement to enforce other policies such as protections for minorities and small businesses.85 “Governments have a national interest” in encouraging all nations to use the same standards in an effort to create a “level playing field” for contractors across the world.86 Governments must balance multiple factors including “transparency, economy, openness, fairness and competition” in crafting procurement processes that serve their objectives.87
This section will outline the EU directive issued to address social, environmental, and namely labor concerns in procurement as well as compare the directive to the E.O. that has been dismantled in the United States.
A. Directives Implemented and Enforced in the European Union
In early 2014, the EU adopted European Procurement Directive 2014/24. Article 18.2 of Directive 2014/24 states:
Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social, and labo[u]r law established by Union law, national law, collective agreements or by the international environmental, social, and labo[u]r law provisions listed in Annex X.88
This directive also indicates that these provisions should be performed at all “relevant stages of the procurement procedures.”89
The directive contains exclusionary language that provides that noncompliance with obligations under social policies could be considered to be grave misconduct on the part of the economic operator.90 The directive allows member states discretion in implementing exclusionary language in their own laws; the decision can be left up to the contracting authority to decide what constitutes a valid exclusion, or the member state may include it as a requirement when enacting the directives.91 When these provisions are all read together, the European Union has created a call for member states to implement procurement rules that incorporate compliance with labor laws into the award of government contracts.
B. Comparing the EU Directive to the Fair Pay Safe Workplaces Executive Order
Together, the provisions of the European Procurement Directive 2014/24 create an obligation on member states to consider what the European Union considers “social” policies in awarding government contracts. This program differs from the previously discussed Fair Pay and Safe Workplaces E.O. because the EU procurement directive does not create a debarment system; the directive states each determination should be made on a contract-by-contract basis.92 Contracting officials who may or may not have expertise on the grounds for exclusion are the judges of what would be considered in the United States as a “responsible bidder.”93
Although the European concept echoes the protections contemplated by President Obama in the Fair Pay and Safe Workplaces E.O., the system that it created is less burdensome on the contractor. The EU directive involved a greater use of contractor self-declarations that are only certified through the submission of certificates and documents after an award has been made.94 The directive also allows contractors, previously excluded from public procurement for bad practice, to have the exclusion lifted if they “self-clean.”95 Procurement officials in the member states can refer to factors linked to the production process, or supply chain, when making award decisions under the directive.96
Prior to the revocation of the Fair Pay and Safe Workplaces E.O., the United States and the European Union were on a converging path to including labor violations in award decisions for government contracts.97 These policies have since been implemented into the procurement regimes of European Union member states, further cementing this practice as the common approach.98 The United States can look to the various ways European Union member states have complied with the directive to determine a more flexible, but still protective, policy regime that considers labor violations in determinations of government contractor responsibility and award criteria. Sweden and Norway have used two separate but similar approaches in implementing the EU 2014 Directive. Their policies indicate labor protections can work in procurement in less burdensome ways than was found in the Fair Pay and Safe Workplaces E.O.
IV. Sweden's Consideration of Labor Policies in Procurement
Sweden has successfully implemented the 2014/24 directive.99 Additionally, Swedish subnational units have been using labor considerations in their smaller procurements for a longer period with clear, positive results, proving that considering various violations in contract awards can have a quantifiable benefit on the working population. This section outlines the Swedish government’s recent implementation of the EU directive as well as the success found by subnational units in imposing labor restrictions on government procurement.
A. Implementation of the 2014 EU Directive: “When Necessary”
The purpose of procurement legislation in Sweden and more broadly in the European Union is to “facilitate the free movement of goods and services in the European Union.”100 Sweden implemented the changes from EU Directive 2014/24 beginning in contracts after June 2017.101 Under the Swedish system, specific environmental, social, and labor conditions are included only in contract performance if deemed “necessary” under the statute; “necessary” means that they are “connected to the subject-matter of [the] procurement.”102 A specific condition is considered connected to the subject matter if it is “connected to the supplies, services or works to be purchased if the criterion in some way relates to the supplies, services or works at any time during their life cycle.”103 If the labor conditions (i.e., wage standards) are not clear to the contracting authority, then they cannot be used as a condition of the contract.104
There is no established methodology for determining when labor conditions are “necessary” to the procurement; preparatory work on the law indicates that the decision should be made “in light of the risks of unfair working conditions and distortion of competition in connection with the public procurement.”105 Under the Swedish regime, the contracting authority also can require the contractor to perform the contract in accordance with stated wage and hour requirements if “necessary” for the procurement.106 These requirements also may require the contractor to ensure compliance among subcontractors that contribute to performance of the contract if necessary under the procurement to include social and labor policies in the procurement process.107
Similar to the Fair Pay and Safe Workplaces E.O., the Swedish law only applies to contracts meeting the threshold established by the European Union “for government goods and services EUR 134,000, for other contracting authorities . . . EUR 207,000, and for all contracting authorities in procuring public works, EUR 5,186,000.”108 Because these are the thresholds set by the EU Directives, contracts valued under the thresholds are not governed by EU law.109 This threshold protects small businesses from undergoing intense labor disclosures that ultimately could hurt their ability to contract with the government. Seventy-five percent of the national public procurement contracts in Sweden fall below these thresholds.110 Another limitation on the Swedish labor protections is the type of work being contracted for: public procurements relating to social services are exempted from the labor condition obligations.111
B. Subnational Swedish Protections on Labor Policies
Prior to the 2014 directive, subnational units in Sweden had already successfully implemented policies that incorporated labor standards in their procurements.112 Sweden is made up of 340 national-level government agencies, twenty-one county councils, and 290 municipalities that procure goods and services for public institutions.113 While Sweden is considered at the forefront of including labor policies in public procurement, regional-level labor policies only apply to procurements for certain goods and services.114 Even so, Sweden continues to develop its procurement framework to expand its inclusion of fair labor standards at both the national and regional level.
Swedish county councils have taken it upon themselves to ensure public procurements processed through the county level also contain labor protections.115 County councils’ procurement is valued at EUR 13 billion annually and is largely made up of imported goods, which has led to the counties’ commitment to ensuring social policies are met in the production of the goods.116 The twenty-one counties use the same labor standards and apply the Universal Declaration on Human Rights, ILO Core Conventions, Article 32 of the UN Convention on the Rights of the Child, and all work- and health-related laws in the manufacturing country.117
Swedish county councils formed a cooperative in 2010 focused on social responsibility in purchasing, with an emphasis on health care and public transportation procurement since those areas generally are procured at the county level.118 Social criteria have been introduced into the procurement of “surgical instruments and stainless steel medical products; gloves; syringes and needles; first aid supplies; textiles; pharmaceuticals; and information technology.”119 Social criteria must be included through contract performance clauses in the acquisition of these goods.120 This approach of applying labor standards to sectors with proven, systemic violations allows governments to address the issue of noncompliance while not overburdening the procurement process.
When the requirement for social criteria applies, potential contractors must be notified and must complete a self-assessment questionnaire during the contract.121 The self-assessment questionnaire consists of fifteen questions relating to subcontractors used on the contract, actual social requirements expected of subcontractors, and a process to assess noncompliance.122
In a study conducted by the independent organization Swedwatch, researchers found that conditions in Pakistani factories, which produced surgical equipment, were improved after Swedish county councils integrated labor requirements into their procurement frameworks.123 Even though Pakistan has ratified the eight ILO Core Conventions, working conditions are still poor, including the use of child labor, lack of safety measures in the factories, and disregard of local minimum wage and overtime laws.124
When Swedwatch released its first report in 2007, county councils did not include any labor standards in their procurement contracts.125 The county councils came together and created a common code of conduct for their suppliers that was then applied to procurement contracts for surgical tools.126 The same factories were visited again in 2014, and Swedwatch found that the “prohibition on child labor was strictly enforced,” minimum wage laws were being followed by the employers, and employees were no longer forced to work overtime.127 Many gains were made; however, health and safety standards in the factories remained dismal.128 Other factories in Pakistan visited in 2014 that did not contract with the Swedish counties saw no change in any workplace standards.129
This is only a small example of the effects of social policy in procurement, but it indicates that policies can be implemented on a small scale that ultimately can change the course of workers’ lives. As it integrates labor standards into its contracts, the Swedish procurement system likely will continue to see tangible positive changes with workers employed by companies that contract with the national and regional governments on a normal basis. Approximately seventy-five percent of procurements in Sweden fall below the threshold that triggers wage and workplace requirements.130 This more limited approach is an example of a step that the United States can take to increase its labor protections while not being overly burdensome on the federal contractors and marketplace.
V. Norway's Consideration of Labor Policies in Procurement
Norway has also successfully implemented EU Directive 2014/24.131 Nor- way is not a member of the European Union but is still subject to certain directives because of its membership in the European Economic Area. Norway has chosen to implement the directive in a different way than Sweden, as outlined below. Norway implemented EU Directive 2014/24 in June 2016.132 Public procurement makes up approximately fifteen percent of Norway’s gross national product.133 Prior to the enactment of this legislation, Norwegian officials already had started the gradual shift towards applying ethical standards such as ILO Core Conventions and minimum labor standards in purchase categories identified as high risk.134
Norway has chosen to protect human rights through its procurement process with the implementation of EU 2014/24 Directive.135 Difi is the Norwegian Agency for Public Management and eGovernment that oversees ethical procurement in Norway.136 Under the 2016 Act, contracting authorities implement measures to promote human rights in public procurement, particularly in sectors where there is a high risk of violation of those rights.137
When the agency is planning the procurement, it must make a risk assessment to determine if the products or services being contracted for are considered “high risk.”138 Products are placed on the High Risk List “when there is systematic documented high risk of human rights abuse occurring in the supply chain.”139 Difi has created a list of non-exhaustive categories where the documented risk is high and systematic; these categories include: “coffee, tea, cocoa, construction materials, cut flowers, electronics and ICT, medical consumables/ supplies, office supplies, play and sports equipment, textiles, workwear, footwear, and tropical fruit.”140 Difi compiled this list of categories to make the risk-assessment process more manageable for government officials.141
Norwegian procurement regulations require contracting authorities to stipulate certain requirements addressing pay and working conditions in their contracts.142 Next, contracting officials must include contract clauses that address the minimum expected standards as well as include a requirement that the supplier and sub-supplier document their compliance with the wage and workplace conditions requirements.143 The contract must also contain language on the consequences for violating the pay and workplace conditions; these consequences must encourage the supplier and sub-supplier to ultimately fulfill the requirements.144 Finally, during the contract follow-up stage, the contracting authority must carry out controls to ensure the wage and working conditions requirements are being met.145
Section 6 of the 2016 legislation stipulates that states, counties, and municipalities may incorporate clauses into service and building contracts that ensure wage and working conditions are in line with current regulations.146 These regulations apply to general contracts worth more than EUR 116,500 and social services contracts valued above EUR 667,500.147 The thresholds outlined above were raised under the 2016 legislation, with the government arguing that the raised thresholds would simplify the procurement process and make it more efficient.148 The government estimates that eighty percent of public contracts will now fall below the thresholds and will not be subject to the wage and workplace protections implemented under the 2016 statute.149 By implementing higher thresholds, the government can protect smaller businesses from the burdens of the disclosure process, while still addressing violations in the largest procurements in the country.
VI. Implementation of Labor Considerations in the United State's Procurement Process: Analysis & Possible Solutions
EU Directive 2014/24, and its implementation by both Sweden and Norway, illustrate that including labor protections in the government procurement process can protect workers while not imposing such a large burden on contractors or agencies. Even though the Fair Pay and Safe Workplaces order was unpopular with federal contractors, the idea that labor violations should factor into responsibility determinations has gained prominence worldwide, particularly after EU Directive 2014/24.150 Internationally, governments are becoming concerned with more than just price factors when awarding government contracts.151 Although factors other than price commonly are used to award government contracts, this does not imply that there will not be resistance to change, as seen in the United States.152
The full revocation of the Fair Pay and Safe Workplaces E.O. ignored that the pay transparency and dispute transparency provisions could have helped many employees.153 Critics of President Trump’s revocation of the dispute transparency provision, in particular, state that this provision kept employers from implementing so called “cover-up clauses” that forced women to arbitrate cases of sexual harassment, keeping the story quiet and the female workers isolated.154
Both the Swedish and Norwegian procurement models, based on the same EU directive, show that many different ways exist to integrate at least some form of labor protections into procurement procedures. The Swedish system is a more general model because of the ambiguous legislative wording used in determining that social, labor, and environmental violations could be considered in award determinations.155 Because this legislation was only passed last year, it is yet unclear how the “necessary” standard will be used in procurements. Since the Swedish model still has issues with ambiguity, it is not likely to be a workable model to implement in the United States in its current state.
The Swedish regime offers flexibility when determining which procurements should be affected by labor considerations, whereas the Norwegian regime identifies certain sectors proven to pose issues to employees of con- tractors.156 Under the Norwegian model, the contracting agency would have the ability to determine if a contract falls under a “high risk” category.157 The United States also should implement Norway’s procedure for lessening the burden on each individual contracting authority by creating set sectors with a proven history of systemic violations. By doing so, the risk assessment stage of the procurement process will become less burdensome over time as sectors are determined to be high risk. The United States, through the Davis-Bacon Act, has a history of using heightened labor considerations in certain sectors with compliance issues.158 The United States should introduce a regulatory model similar to Norway’s to consider wage, hour, and safety violations in projects from sectors proven to be “high risk” to workers.159
Norway’s laws are clear that potential bidders must be put on notice if a procurement requires certain wage and workplace standards and disclosures under the contract.160 Although the disclosures required under the Fair Pay and Safe Workplaces E.O. violated the right to due process of contractors because it required disclosure of non-final allegations,161 the new regulation could be written to only disclose final agency violations. This addition would protect contractors’ right to due process and provide transparency once a decision has been made.
By including notifications of labor considerations in the request for proposals then including the standards in the contract itself, potential bidders and contract awardees will know what disclosures are required and what is expected of them throughout the life of the contract. It is important to note that the process of requiring disclosures when necessary in high-risk sectors could be implemented over time and would not dramatically impact all sectors of procurement. As shown by the subnational units in Sweden, making changes industry by industry can have a quantifiable positive effect on certain industries and the workers.162
Neither Norway nor Sweden made sweeping regulations that applied to all sectors of government procurement; Sweden chose to focus on labor standards that are “necessary” to the individual procurement,163 whereas Norway placed limitations on procurement for “high risk” contracts.164 A combination of these models could be utilized to protect employees in the most vulnerable sectors. The overall trend towards using procurement to regulate social and labor policy is accelerating but will still take time.165
Data have shown that assessments and penalties for labor violations by U.S. contractors is not enough to deter illegal employment practices.166 Until federal contractors are forced out of contract awards, employees will continue to suffer from wage, hour, and workplace safety violations while completing work for the U.S. government. As proven by studies completed in Swedish procurement, small, calculated steps towards a broader policy shift to integrate labor policy and procurement procedure can yield tangible results that can be built upon in the future.167 As indicated by both Sweden and Norway, countries can and should implement procurement reforms that take calculated steps towards protecting workers employed by government contractors. The United States should look to the policies enacted in Norway and Sweden under the EU Directives as an example of workable policy solutions to combat the labor abuses still occurring today by federal contractors.