I. Introduction
Forced and child labor touch all parts of the world, with the International Labor Organization (ILO) estimating that 27.6 million adults and children worldwide are being exploited as of 2021. Although violative labor practices plague the global supply chain, violations do not only happen in the global East, which are traditionally seen as high-risk areas that are constantly flagged for their use of child and forced labor in services and goods production. Abuses happen in New York and Los Angeles, where undocumented immigrants are regularly exploited in sweatshops. Such practices also happen in Alabama, where illegal child labor has been used in automobile manufacturing, and they regularly happen in nations that have ratified international covenants prohibiting these practices. The U.S. Department of Labor (USDOL) has identified 159 products from 78 countries that have been produced by forced or child labor in 2022, proving that labor violations remain widespread in the international economy.
This Note uncovers instances of unethical labor practices used by public contractors and their suppliers and argues that the United States should better harness the market power of its procurement system to promote adherence to labor standards. To better prohibit labor law violations and sourcing from cheap labor, this Note argues that the U.S. procurement system should add social considerations to responsibility determinations to eliminate noncompliant contractors, fully investigate and conduct audits of contractors involved in high-risk sectors rather than relying on contractor self-certification, and increase its use of suspension and debarment in response to violations to highlight the importance of ethical considerations.
This Note first illustrates labor violations of federal contractors and their supply chains and highlights the power of the U.S. procurement regime to disincentivize the use of unethical labor practices worldwide. It finds that the Federal Acquisition Regulation (FAR) lacks sufficient labor rights considerations, agencies over-rely on contractor self-certification, and current penalties are scarcely used to deter noncompliance with social considerations. To find solutions to these deficiencies, this Note analyzes the successful incorporation of social considerations in European Union (EU) procurement reforms. This Note concludes by finding that the United States can better discourage the use of illegal labor by adopting more effective enforcement mechanisms that prevent, monitor, and punish violations. It hopes that a change in enforcement will influence the private sector and international economy to improve global working conditions and clean supply chains over time.
II. Background
A. Labor Violations in Public Procurement
Illegal labor touches almost every supply chain, with documented violations in various sectors including raw materials, production, and transportation. As a result, governments use their tax dollars on contractors who purchase from chains where serious human and labor rights abuse are present, therefore spending their money to indirectly incentivize violative practices. In fact, public buyers are increasingly implicated in global supply chains where human rights abuses are evident. The U.S. government specifically relies heavily on foreign manufacturers, which are either based in or subcontract from places of growing concern for child and forced labor. Both international and domestic law show consideration for human rights in the labor context, but many countries lack adequate practices to uphold them. Although there are labor obligations federal contractors are bound to, governments lack sufficient steps to avoid the workplace violations of their contractors and labor issues within supply chains. Even in the United States, evidence suggests that taxpayer money is being paid to American companies that are putting the livelihoods and lives of their workers at risk by violating federal workplace safety and wage laws. Much of this is due to the lack of social considerations in contracting as the U.S. government currently prioritizes awarding contracts to the best value bid.
Although economic factors should be a priority, when procurement systems appreciate lowest price over social considerations, states inadvertently provide an avenue for contractors who violate workplace and labor laws to beat law-abiding companies. By using cheap supplies and labor, violators are able to submit lower bids than their more ethical competition, therefore winning at the cheapest bid. This result rewards the lowest bid without thorough consideration of workers’ rights, “mak[ing] competition unfair for those companies that do adhere to international labor standards.” Governments should be cognizant of this issue by recognizing that the lowest possible bid scheme can incentivize unethical practices: low bids can translate directly to lower pay, cheaper products, and worse standards for workers. This problem is intensified by the fact that, although wage and labor laws exist, the federal government typically does not have the tools to evaluate whether proposed bids are sufficient to cover total contract costs since the FAR heavily relies on contractor self-certification. Since little scrutiny is applied to self-certification, it allows for labor abuses when contractors use the cheapest available resources.
There is evidence that the U.S. government has contracted with companies with a record of workplace violations, and some federal contractors have even been found to put workers’ lives and livelihoods at risk. The U.S. Senate and Government Accountability Office (GAO) has identified numerous labor law violations by federal contractors and found that the government annually awards approximately $22.8 billion in contracts to companies responsible for some type of labor law violation. These violations—from workplace neglect to preventable workplace fatalities—are egregious, and the nature of these violations prove that labor laws are not being adequately considered, analyzed, or enforced in the procurement process.
Numerous examples of workplace abuses are linked to U.S. public procurement:
In 2013, an investigation revealed that four factories in China that are part of the supply chain of a computer manufacturer that supplies the U.S. government were not paying their workers enough to meet basic living costs . . . . [A]t a large IT manufacturing company that is part of the U.S. government’s supply chain for electronics[, o]ne of the workers that jumped to his death, a nineteen-year-old boy, had worked 286 hours during the month before he died.
More direct links exist as well: “[S]hirts with Marine Corps Logos sold in military stores were made at a factory where children make up a third of the workforce.” Additionally, workplace violations are not limited to overseas services and production. The U.S. Senate has identified the following violation by a U.S. company on U.S. soil:
Tyson Foods, Inc., a company that holds federal contracts to provide poultry, beef and other products to the United States Department of Agriculture and to the Department of Defense, was also responsible for the death of eleven American workers . . . . Those violations include: . . . Two employees [who] died in a raw meat waste bin[,] . . . [a]n employee [who] was repairing a leak on a machine that cooks down poultry feathers . . . [and] was killed from exposure to the gas . . .[, and] [a]n employee [who] was killed when a full corn silo collapsed, engulfing him in 9.2 million pounds of corn. No safety inspection of the silo had been conducted in the previous 10 years.
In its case study, the Senate Committee on Health, Education, Labor, and Pensions found that violations such as the one above are not even available for contracting officers to consider when evaluating bids, allowing these kinds of violations to fly under the radar in contracting decisions.
Instances like the one above are not outliers. The Senate has found that 3.4 billion taxpayer dollars were given to federal contractors who were responsible for the deaths of forty-two workers between 2007 and 2012. Many of these deaths stem from inadequate worker protection and dangerous working conditions. In its report, the Senate found that the United States has an unfortunate history of awarding contracts to employers who engage in dangerous workplace conditions, violating both federal workplace laws and international labor conventions. This record of non-compliance suggests that not enough is being done by contracting officers and agencies to ensure that labor laws are adequately considered in award decisions and throughout the life of the contract. The Committee found that many of these types of violations pass into the procurement system because the government currently lacks effective mechanisms to prevent agencies from contracting with companies that violate federal labor laws.
What indication does this give sellers? If the United States maintains its lenient standpoint on labor violations with the companies that it directly funds, companies have little incentive to avoid these practices. This Note seeks to address this issue, which is not simply an issue of labor. The Center for American Progress found that contracting with companies that frequently break workplace laws also results in poor performance of federal contracts. Furthermore, it is a waste of public resources on top of allowing appalling and anti-American practices to continue.
Although federal law is intended to prevent taxpayer dollars from increasing the profits of companies who employ harmful practices, enforcement of human rights in global supply chains is often weak. This issue transcends borders as globalization has taken over the economy, leading to many goods produced in areas where working conditions and respect for labor rights traditionally remain unenforced. The integration of labor considerations in powerful procuring countries, like the United States, can be a key mechanism to promote ethical workplaces both at home and worldwide.
Currently, the principal policy objectives of public procurement around the world are efficiency, the achievement of value for money, non-discrimination of awards, and open competition. Governments that do take human rights into consideration generally fall into two types of enforcement mechanisms: compliance-based and commitment focused. On the one hand, countries following the compliance-based approach are the closest to providing an enforcement mechanism by precluding companies from being a government contractor if they do not follow human rights requirements. Under this system, the bidder must certify compliance with pre-existing standards to be able to submit a bid and be awarded a contract. The commitment-focused approach, on the other hand, provides more of an incentive against labor violations since it allows violative companies to bid under the promise of improving working conditions throughout the life of the contract.
Both mechanisms, though, fail as they rely on promises made by contractors, rather than actual investigation by the contracting agency. The failures of these mechanisms to adequately deter all labor law violations show that solely relying on contractor self-certification is a weak position, and this does not even include violations further up the supply chain with the contractor’s own suppliers. Thus, self-reporting not only has a history of failing to discourage a contractor’s own violative practices, but it may allow contractors to reap the benefits of cheap labor without having to report the violations as their own. They can get the benefit of using cheap supplies, which are routinely made by children or mass produced in hazardous working conditions, while being able to wash their hands of any unethical practices involved in creating them.
B. The Power of Procurement
Public procurement is a significant field in both domestic and international economic systems, with governments directly funneling $13 trillion into the private sector every year. The United States makes up a significant portion of this expenditure, spending on average $665 billion annually. Not only does this give the United States substantial spending power, but this direct marketplace participation puts the United States in a unique position to use its contracting to shape labor market practices and the behaviors of suppliers who wish to participate. As a mega-consumer, the U.S. government can influence working conditions by imposing supply chain and contract requirements over its immediate suppliers.
The power of procurement is one recognized by Principle 6 of the United Nations Guiding Principles on Business and Human Rights (UNGPs), which encourages states to harness their spending to promote respect for human rights from the private businesses with which they conduct commercial transactions. Similarly, the Organisation for Economic Co-operation and Development (OECD) acknowledges that countries increasingly use procurement to enforce other policies such as protections for minorities and small businesses, in which the United States is a leader. With the Committee on Health, Education, Labor, and Pensions of the United States Senate identifying that thirty percent of U.S. contractors have committed wage and safety violations, this is an area where the United States has the influence and opportunity to apply additional safeguards and penalties to ensure further compliance with domestic and international labor laws.
Due to the immense amount of money governments put into contracting, procurement is a powerful instrument and provides governments with a substantial opportunity to promote social values and practices in the private sector. This is not a novel idea; procurement is a tool that has directly impacted the behaviors of suppliers and has been used to achieve policy and economic objectives in the past, most notably through the anti-discrimination movement and the inclusion of race-neutral strategies in the procurement process. One of the earliest and most notable uses of procurement to achieve social objectives was seen following the Civil Rights Movement when President Lyndon Johnson issued Executive Order 11246. First of many executive orders promoting non–discriminatory practices in federal procurement, Executive Order 11246 required that “federal contractors not discriminate in employment and take affirmative action to ensure equal opportunity based on race, color, religion, and national origin.” The non-discrimination requirements implemented through the issuance of this order quickly set standards across the domestic economy and subsequently resulted in “nondiscrimination even when the employee’s work does not involve a federal contract.”
From this, requirements for federal contracts spread into the private sector as a whole; the executive order on anti-discrimination in employment “helped to set standards across the economy, including at firms that had no direct business relationships with the federal government.” The order not only paved the way for social change to be nationally reinforced but also led the charge for nations around the world to begin harnessing their own procurement power to further uphold civil and social rights in their countries.
Following the American Civil Rights Movement and the succeeding orders governing social considerations in federal contracting, anti-discrimination law in procurement developed significantly in other countries, influenced by developments in American law. Emulating the United States’ example of using procurement regimes as a way to uphold national values, countries have been practicing selective purchasing and increasingly incorporate contract conditions to address social issues. Today, as labor violations in the forms of forced and child labor plague worldwide supply chains, the same technique of using procurement as a mechanism to reinforce social values is being called on to uphold labor standards at home and influence similar action abroad.
Following this successful history of using public procurement to achieve social justice goals, the ILO has recommended the establishment of minimum standards of work for producing goods and services for the public sector. To accomplish this goal, the U.S. government should step away from conventional methods of self-certification and raise labor standards across the economy by actively ensuring that companies wishing to receive contracts adequately meet regulations. The federal government has a considerable impact on the labor market: firms that contract with the federal governments employ twenty-two percent of the United States’ workforce. Beyond its borders, the United States awards contracts valued at twelve billion dollars to foreign-located firms. These numbers give the United States significant influence on the labor markets that it chooses to contract with; therefore, it should place greater considerations on social values during contracting rather than just economic efficiency and lowest price. The sheer numbers and influence that the United States puts into the market gives it the power to disincentivize the use of unethical labor practices in the worldwide economy by telling prospective contractors to behave responsibly or lose the opportunity to win a contract.
III. International Labor Laws and the FAR
A. ILO and UNGPs
The International Labor Organization (ILO) is an agency of the United Nations (UN) focused on promoting social and economic justice by setting international labor standards. These standards are promulgated in the form of conventions and recommendations that nations are legally bound to protect, promote, and uphold once ratified. Today, the United States has freely ratified—and is therefore obligated to uphold—two of ILO’s fundamental Conventions: the Abolition of Forced Labor Convention and the Worst Forms of Child Labor Convention. The United States, as a member of the Organization, is also subject to respecting and promoting the ILO Constitution and Declaration of Fundamental Principles and Rights at Work. These fundamental rights include:
(a) freedom of association and the effective recognition of the right to collective bargaining;
(b) the elimination of all forms of forced or compulsory labour;
(c) the effective abolition of child labour;
(d) the elimination of discrimination in respect of employment and occupation; and
(e) a safe and healthy working environment.
Article 2(1) of the ILO Forced Labour Convention defines forced labor as “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily.” These penalties can include clear violations such as harsh working conditions as well as more subtle forms of coercion such as the deception, withholding wages and benefits, the threat of dismissal from employment, or the leveraging of immigration or nationality status. The U.S. Department of Homeland Security (DHS) similarly recognizes that forced labor occurs when “individuals are compelled against their will to provide work or service through the use of force, fraud, or coercion.” Violations do not just encompass forms of modern slavery and indentured servitude; they include all kinds of exploitation for labor, in the United States and overseas. As a signatory of the ILO Abolition of Forced Labor Convention, the United States is obligated to “suppress and not make use of any form of forced or compulsory labor.” To adequately uphold this obligation, the United States must take a more stringent approach on considering and evaluating labor violations within its acquisition system, since a portion of contractors have been identified by the Senate as functioning in harsh, dangerous, and substandard working conditions.
The United States has also ratified ILO Convention Number 182 on the Worst Forms of Child Labor. Child labor, however, remains a significant issue in global supply chains. Until governments intentionally work to uncover the practices involved in the supply chains from which they procure, they are lacking in their obligation to take “immediate and effective measures to secure the prohibition and elimination of the worst forms of child labour as a matter of urgency.”
Other instruments prohibiting and denouncing the use of forced and child labor include the Universal Declaration of Human Rights (UDHR), the United Nations Guiding Principles on Business and Human Rights (UNGPs), International Labour Organization Fundamental Conventions, Article 32 of the United Nations Convention on the Rights of the Child (CRC), and the ILO Declaration on Fundamental Principles and Rights at Work. Additionally, the UNGPs set “guidelines for States and companies to prevent, address, and remedy human rights abuses committed in business operations.” Many of these guidelines fall in line with ILO conventions and recommendations that the United States is committed to protect, such as taking “appropriate steps to prevent, investigate, punish, and redress [corporate human rights abuses] through effective policies, legislation, regulation, and adjudication.” Notably, Guidelines 5 and 6 of the Foundational Principles acknowledge the unique opportunity countries have to promote awareness and respect for private businesses with which they contract:
5. States should exercise adequate oversight in order to meet their international human rights obligations when they contract with, or legislate for, business enterprises to provide services that may impact upon the enjoyment of human rights . . . .
6. States should promote respect for human rights by business enterprises with which they conduct commercial transactions.
Although countries are not responsible for the abuses of private actors, they may breach their international human rights obligations when they fail to take appropriate steps to prevent, investigate, punish, and redress a private actor’s abuse. This duty can be extended to a country’s responsibility to take adequate steps to prevent violations by including labor criteria in awarding contracts, since taxpayer money directly funds awarded contractors.
The loss of life caused by workers being exploited and forced to work with inadequate workplace safety and protections is not an issue reserved for economically underprivileged nations. These fundamental rights are not enforced to their fullest potential in the U.S. procurement system, although U.S. domestic law does integrate many of these obligations.
B. The Federal Acquisition Regulation: Part 22 and Its Limitations
The rules for U.S. federal procurement are contained in the Federal Acquisition Regulation (FAR), which addresses human rights issues such as prohibitions on child labor, wage regulations, and prohibitions on human trafficking and forced labor. Specifically, FAR Part 22 provides the application of labor laws to government acquisitions:
Agencies shall cooperate, and encourage contractors to cooperate with Federal and State agencies responsible for enforcing labor requirements such as - (a) safety; (b) health and sanitation; (c) maximum hours and minimum wages; (d) equal employment opportunity; (e) child and convict labor . . . .
It is important to note the weakness in the FAR is that, although Part 22 ensures contractor satisfaction with workplace and labor laws, it does not directly force agencies to consider compliance with labor law as a condition for awarding a contract. In fact, the FAR may allow contracting with businesses with labor law violations, since Part 22.1703(c) allows contracts even “[i]f abuses relating to any of the prohibited activities identified in 52.222-50(b) have been found” as long as the contractor “has taken the appropriate remedial and referral actions.” Additionally, “there is nothing in the FAR [Part 22] that requires the contractor to correct the violation or provide a remedy to workers.”
A key problem with the FAR, when it comes to labor rights, is the fact that the FAR was designed to prioritize economic efficiency, which may come at the expense of workers’ rights. This priority is seen in Part 9, which establishes the general standards for responsibility determinations, including factors such as “hav[ing] a satisfactory performance record,” “hav[ing] a satisfactory record of integrity and business ethics,” and being “otherwise qualified and eligible to receive an award under applicable laws and regulations.”
This provision can mean that contractors are found non-responsible, and therefore cannot be awarded a contract, when compliance with labor law is notably absent. According to the FAR, though, these factors are defined economically: having a “satisfactory performance record” means that a contractor who has been “seriously deficient in contract performance” will be determined “nonresponsible.” Serious deficiencies in performance include “delinquent performance; delivery of nonconforming items; failure to adhere to contract specifications; late deliveries; poor management or technical judgment; failure to correct production problems; failure to perform safely; and inadequate supervision of subcontractors.” The FAR itself does not explicitly take social and labor factors into responsibility determinations. Rather, the scope of responsibility begins and ends with economic factors, instead of taking moral, social, and integral performance factors into account—factors that are just as valuable to procurement as economic efficiency. A “satisfactory record of integrity and business ethics” is based on previous satisfactory performance and lowest price, rather than social and ethical determinations. Even if agencies did want to take labor law into consideration, adequate information regarding legal violations and integrity offenses is often unavailable to contracting officers. Additionally, given the absence of a strong history of including labor considerations in procurement, agencies also lack clear standards of how to evaluate contractor compliance with federal labor law prior to awarding a contract.
Beyond the FAR, U.S. federal law has adopted many laws against the practice of forced and child labor, with special labor requirements for companies that anticipate contracting with the government. These laws include the National Labor Relations Act, Executive Order 13126 on the Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor, Executive Order 13627 on Strengthening Protections Against Trafficking in Persons, the Walsh-Healey Act, the Service Contract Act, and the Davis-Bacon Act, all touching issues of forced and child labor and working conditions. Recently, in considering issues within global supply chains, the Biden administration implemented the Uyghur Forced Labor Prevention Act (UFLPA), which prohibits entry into the United States of any goods produced or manufactured, wholly or in part, in the Xinjiang region of China.
These regulations are not upheld to their fullest potential, though, since their enforcement is primarily reliant on contractor self-compliance. The General Services Acquisition Manual (GSAM) Subpart 542.70 governs the audit of contractors’ records, which are conducted by the Office of Inspector General (OIG). The GSAM, however, only provides audits to look into “cost and time determination[,] . . . [the] [a]dequacy of a contractor’s measures to safeguard government property[,] . . . [the] [c]ontractor’s compliance with contractual obligation concerning progress payments, advance payments, guaranteed loans, cash return provisions, and price adjustments[,] . . . [and the] [r]easonableness of a contractor’s termination settlement proposals.” Thus, OIG audits are limited to economic considerations and do not extend to workplace wage and safety concerns.
Additionally, although these laws do a good job of establishing guidelines for federal workers’ rights and working conditions, their compliance is often overlooked in evaluation considerations and suspension and debarment determinations. Although the FAR allows for suspension or debarment in egregious violations, agencies rarely, if ever, choose to suspend or debar contractors for labor law violations. In fact, according to the Senate, “it does not appear that the Department of Labor has ever suspended or debarred a contractor as a result of a discretionary finding that a federal contractor has a record of non-compliance with wage or safety or health laws.” The Senate committee assumes that the lack of discretionary debarments, even for egregious and repetitive violations, are due to its cumbersome and harsh process, so it is generally reserved for cases of serious statutory violations. This is a problem because, although there are a host of statutory debarment provisions, when it comes to labor law, automatic debarments are currently limited only to violations of the Davis Bacon, Service Contracts, and Walsh Healy Acts.
This Note emphasizes that non-compliance with labor standards leads to horrific workplace conditions, and the United States should raise its standards to ensure that the suppliers it works with do not employ these practices. To do this, the United States needs to add labor rights considerations to responsibility determinations, conduct labor audits with contractors in problematic sectors, and increase the use of suspension and debarment for repeated or egregious violations.
IV. Analysis and Recommendations
To better uphold federal and international standards in its acquisitions, the United States should implement reformed standards in its public procurement regime. In its own procurement regime, there is an opportunity to create fuller responsibility determinations that include social considerations. In comparison with the Swedish procurement regime, the United States lacks the thorough investigation of its contractors and the imposition of adequate penalties, which has allowed contractors to continue using violative practices while in business with the U.S. government. The U.S. procurement system should be inspired by recent reforms in Europe and strive to implement similar social considerations into its procurement regime.
A. European Union Reform 2014/24
The European Union and its Member States have shown a commitment to advancing labor standards over the years, and all Member States have ratified the eight ILO core labor standards. Sustainable development and social progress have consistently been a priority of the organization, included in Article 3 of the Treaty of the European Union: “[Members] shall work for the sustainable development of Europe based on balanced economic growth and price stability . . . aiming at full employment at social progress, and a high level of protection and improvement of the quality of the environment.” To further accomplish these goals, the European Union adopted Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on Public Procurement, which recognizes that public procurement can be used to achieve sustainable and inclusive growth. Under this Directive, “the highest available quality and best price . . . no longer means just buying the cheapest possible supplies or services.” The Directive mandates EU member states to gradually introduce specific labor and environmental provisions into contract award decisions to ensure transparency by contractors regarding human rights and sustainability in global supply chains. To implement social and labor considerations on a large scale the Directive provides:
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 labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X [which lists the eight ILO Core Conventions].
Many states, such as the United States, are similarly bound to the various international obligations listed in Annex X, but this Directive notably requires states to include social considerations in the procurement processes and set social criteria into their awarded contracts. Paragraph 97 provides:
Contracting authorities should be allowed to use award criteria or contract performance conditions relating to the works, supplies or services . . . in any respect or at any stage of their life cycles from extraction of raw materials for the product to the stage of disposal of the product.
Paragraph 98 implements this further by stating that “it is essential that award criteria or contract performance conditions concerning social aspects of the production process relate to the works, supplies, or services to be provided under the contract.” These requirements ensure that governments consider the full life cycle of products and their supply chains in their purchasing decisions, rather than just price.
With this Directive, the European Union has created a comprehensive approach to assessing social criteria in contract awards and procurement policy. Although public procurement regimes are bound by international treaties upholding social and sustainability standards, these considerations are secondary objectives in the procurement process and are therefore unenforced. By creating legally enforceable considerations all members states are bound to, this Directive is the start of new considerations in procurement regimes. Since the U.S. and EU government procurement markets are comparable in size and scope, these considerations are currently missing but can be similarly integrated into the American system of government procurement.
B. Sweden’s Successful Implementation of Social Considerations
EU Directives do not in themselves provide specific means for implementation; rather, it is up to each Member State to decide how to achieve the results outlined. Sweden’s method of implementation serves as a model of success. Empirical evidence collected by SwedWatch, an independent organization reporting on business in developing nations, found that the implementation of social conditions mandated by Directive 2014/24 has led to successes in improving the labor rights utilized by contractors and their suppliers. In its report, which has been reinforced by the Organization for Security and Co-operation in Europe (OSCE), SwedWatch found clear evidence of benefits reaped from giving a competitive advantage to suppliers working to improve labor rights in their business and from imposing contractual obligations to improve labor conditions.
These effects are most clearly demonstrated through Sweden’s strict implementation of social criteria in the procurement of high-risk sectors, of which surgical instruments from Pakistan are a part. Through the life of procurement contracts using these products, contractors must “comply with the code of conduct, report on their compliance efforts, and submit to third-party audits.” Although the USDOL has a similar list of high risk sectors, Sweden’s current procurement initiatives differ from U.S. requirements in that the United States relies on a contractor’s good faith effort to use clean supply chains. Sweden, on the other hand, provides:
By entering into a contract with any of the Swedish county councils, a supplier agrees to deliver products made in compliance with the UN Universal Declaration of Human Rights, the ILO core conventions, Article 32 of the UN Convention on the Rights of the Child, and all work-related health and safety legislation and labor laws in the manufacturing country.
Compliance is confirmed through the Swedish contractor’s three requirements to ensure items that have not been produced under these circumstances are not used: implementation of due diligence processes to ensure the goods used are made in compliance with standards, including a clear (not merely good faith) method for evaluating suppliers; access for the country to conduct inspection of the contractor and their subcontractors; and timely corrective action in case of a breach, where repeated breaches are treated as a breach of contract. These regulatory actions are notably missing from the FAR’s Procedures for Acquiring End Products on the List of Products Requiring Contractor Certification as to Forced or Indentured Child Labor, which provides that “the contracting officer must rely on the offeror’s certifications in making award decisions [when procuring from high risk sectors].” Although the United States strives to take special considerations to avoid labor violations, its regulations are much less effective than the Swedish model, which incorporates audits and evaluation procedures to enforce violations.
In its investigation, SwedWatch observed improvements in working conditions and workers’ rights in factories in Sialkot, Pakistan from 2010, when the above social criteria were included in award considerations for surgical instruments. Over four years, the agency found that “[t]he prohibition of child labor is now strictly enforced [in these factories], wages are paid in accordance with the minimum wage, and employees are not forced to work overtime.” Although there is more improvement to be made in terms of workplace safety, there are tangible improvements that have been influenced by Sweden’s contracting limitations. It is also important to note that SwedWatch also evaluated Pakistani factories outside of the Swedish supply chain. These factories showed little change in their use of child labor and other improper labor practices. Although these factories neighbor each other, this distinction is stark: factories contracted with Sweden were forced to offer better workplace protections while factories not bound by Sweden’s procurement requirements continued using exploitative labor practices (even factories that supply other European countries like the United Kingdom). This evidence shows that, if suppliers are not being strictly regulated in their practices, they are unlikely to be motivated to improve.
SwedWatch was able to uncover this information by auditing contractors and investigating the factories that supply them. Although this investigation was independently done by SwedWatch, the Swedish government also provides for its own inspections of contractors, subcontractors, and suppliers in high-risk sectors. Investigations like this one should serve as inspiration to the United States to replace the current self-certification system for more engaged evaluations. The improvements that SwedWatch reported shows the benefit of probing further and inspecting the supply chains contractors use to ensure the effects of the social clauses within contracts are being applied all the way up.
C. Recommendations for the United States
The EU Directive and Sweden’s successful implementation of it should encourage the United States, as a world leader, to adopt these values on a much larger scale. Sweden’s small-scale success of adding labor considerations in award and contract criteria is encouraging, and the United States should similarly make its award determinations with the clear intention to prevent taxpayer dollars from profiting harmful companies.
The current penalties for labor violations in the U.S. procurement system have allowed instances of violations by contractors themselves and within their supply chains. This is proven by the many instances of government contractors failing to comply with workplace and labor obligations, both within the United States and abroad. Child labor also continues to be rampant in supply chains, with the U.S. Bureau of International Affairs finding that child labor practices continue to be used in the supply chains of 159 goods from 78 countries and areas. Although the Office of Federal Contract Compliance Programs (OFCCP) conducts compliance checks on federal contractors, these checks are limited to ensuring compliance with “Executive Order 11246 [equal employment opportunity] . . ., Section 503 of the Rehabilitation Act (Section 503) [prohibition against discrimination against individuals with disabilities], . . ., and the Vietnam Era Veterans’ Readjustment Assistance Act,” none of which explicitly regulates labor law. The United States funnels too much money into its procurement system for it to justify a lax approach to issues of labor compliance.
Following the positive results observed from the success of the EU social directive applied in Sweden’s procurement system, the United States has an incentive to utilize similar practices. This Note urges the U.S. procurement system to implement three recommendations that can be implemented in various stages of the procurement process involving responsibility determinations, audits, and the increased use of suspensions.
Responsibility is a key factor in winning a government contract; however, the FAR currently does not prioritize social considerations when making responsibility determinations. Although social considerations may be included in determining whether a contractor is “eligible to receive an award under applicable laws and regulations,” this provision does not rise to the same level as similar provisions in Sweden that ensure measures are taken to include labor law in procurement decisions. While further investigation into bidders’ workplaces and supplies may elongate the contracting process, it is necessary to ensure the United States is only paying companies that reflect its values. Adding this to procurement decisions will make violations of labor law costly since it adds the penalty of losing an opportunity to win a contract early in the process.
After a company has been awarded a contract, the U.S. government should not take a hands-off approach. Like Sweden, which provides independent government investigation along with supplier self-declarations, the United States needs to step away from its reliance on contractor self-certification and implement a stronger method of enforcement. Although the United States conducts audits through the OFCCP, its scope is currently limited to ensuring that contractors comply with laws requiring nondiscrimination. The expansion of OFCCP auditing to compliance with labor laws would ensure that ethical values are maintained in government contracts. Through such a system, the USDOL will have a route to monitor contractors and investigate the supply chains it works with to ensure that federal contractors comply with labor laws throughout the life of the contract. Efficiency is consistently desired in business, and it can quickly lead to companies taking shortcuts if not adequately monitored. Enforcement through a scheme like this will make it less likely for contracted companies to fall into these practices.
Finally, the USDOL should expand its use of suspension and debarments to properly enforce against repeated and egregious violations. Penalties for labor issues are currently reserved for cases of statutory violations, and few labor statutes include automatic suspension or debarment in response to violations. FAR 9.407-2(a), which provides causes for contractor suspension, should be amended to include violations of federal labor law in its causes for suspension, with egregious and repeated violations rising to the level of debarment.
Including the above enforcement mechanisms of labor compliance in contract performance will weed out contractors who use unethical and violative practices. This is an opportunity for the United States to use its position as the most powerful buyer in the world to further promote labor rights in each phase of the procurement process. To assure that the goods and services that the United States procures are produced with respect for labor rights, procurement should be reformed to include a supplier’s social performance as a decisive factor, rather than just price. By creating stringent penalties and maintaining oversight against contractors using dirty supply chains, the United States will be able to use its procurement to create change in the behaviors of its contractors and throughout supply chains that feed the international economy. Thousands of companies contract with the government, and self-reporting systems have not adequately reinforced the compliance of these laws from the contractors themselves or the places they subcontract from. Often, products are produced at low cost without the knowledge of the immediate contractor working with the U.S. government, but ignorance of this concern does not lessen the effect of U.S. tax dollars supporting these practices to continue.
This Note argues that taking these enforcement recommendations will significantly improve and decrease labor violations around the world. It should be a priority of the procurement regime to ensure that the U.S. government does not fund companies that use violative practices. The effects seen in Sweden show how stronger enforcement can make a substantial difference on the ground. The United States should be inspired by Sweden’s successes and see its potential to include similar considerations in its procurement regime.
V. Conclusion
The U.S. approach against labor violations in procurement is currently failing to disincentivize the use of problematic labor practices. Public procurement is an instrument that can be used to push policy objectives and increase respect and adherence to labor standards worldwide. Examples of procurement being used in this manner can be found in the success that we have seen as Sweden continues to implement EU social procurement initiatives on its government contracts. By taking labor law violations into account during the contracting process and emphasizing such violations as criteria that will be prioritized in the award decision and throughout the term of the contract, there is an opportunity for the United States to use its pockets to significantly influence worldwide labor practices. The goal of all merchants is to be purchased, and, if the biggest purchaser in the world becomes more selective on social considerations, the marketplace will follow suit since the harm of losing the United States as a purchaser outweighs the money saved from using cheap labor. By incorporating labor considerations into responsibility determinations, establishing an auditing and investigation system to ensure contractor compliance throughout the life of contracts in high-risk sectors, and increasing the use of suspension and debarment as penalties for repeated and willful labor law violators, the United States can use its procurement regime to clean supply chains by making cheap labor costly.
