Report: Many service contract workers are underpaid

For many Americans, the prevailing image of a federal contractor is that of a highly compensated professional with a deep stock portfolio and a rich 410(k) plan.

But a report released Monday by the Center for American Progress, a left-leaning advocacy group, paints a different picture of the men and women who provide services to the government.

The report found that many contract service workers are poorly paid, receive relatively few health benefits and work in subpar conditions. Many of these workers are excluded from prevailing wage requirements -- which, even if provided, can be below a living wage. Taxpayers, meanwhile, are forced to pick up the burden through increased costs for Medicaid and food stamps, the center said.

"The government is failing to live up to its ethical and moral obligations as a model employer," said David Madland, director of the center's American Workers Project and one of the authors of the report. Madland and other contracting experts discussed the report and state of the federal procurement during a panel discussion Monday.

The center's report is one of the first full-fledged examinations of the salaries and working conditions of the service contract workforce.

But the authors acknowledge that a lack of government transparency makes it difficult to fully calculate how many contract workers fail to make a reasonable living. The government doesn't systematically collect information on the wages or benefits of its contract employees.

"Federal contractors underpay workers, violate their collective bargaining rights, and put them at personal risk in the workplace," the report stated. "Yet in a sign that living up to its aspirations of being a model employer has been a relatively low priority for the government, there is not a comprehensive way to measure the scope of the problem. Furthermore, very few of those found to violate workers' rights have lost their federal contracts, and in fact, many continue to win lucrative new contracts."

The most recent data in the report is from 2004, when the Labor Department evaluated 654 investigations under the Service Contract Act, a 1965 law designed to ensure that all low-wage federally contracted workers were covered by prevailing wage laws.

According to a 2005 Government Accountability Office study, the Labor Department discovered that in more than 80 percent of cases studied -- involving more than 20,000 violations -- employers had failed to pay their workers the minimum wages and benefits owed them under the law. The negligent companies were forced to repay $16.4 million in back wages to more than 14,000 workers. But only 17 of the 450 firms were barred from future contracts with the government.

The center also cited a 1994 GAO report that found the facilities of 261 federal contractors had been cited for more than 5,100 Occupational Safety and Health Administration violations.

The report found that of the 50 companies tracked in a misconduct database compiled by the Project on Government Oversight, a government watchdog group, more than half had reported labor violations, including retaliation against worker complaints, racial and age discrimination, and unfair termination.

The labor problems appear to be exacerbated in certain industries. For example, the center examined the labor records of 12 domestic private security contractors that in 2006 had received a combined $1.7 billion in sole-source contracts. Ten of the contractors had records of labor abuse.

The center called for the creation of a centralized database that would track the number of contract workers, their salaries and benefits. The database, the group said, should be used by federal contracting officers when evaluating bids and be available to the public. The report also recommended improved job standards for contract workers and better oversight of existing laws and regulations.

Industry officials generally agreed with the recommendations, but took issue with some of the sources of information used to compile the report.

"What they did was aggregate all kinds of data, some of it valid and relevant, and others not, to paint a picture that is inaccurate in its totality," said Stan Soloway, president of the Professional Services Council, an industry trade group.

For example, Soloway said, the report downplays the efforts that contractors have made in attempting to comply with the complicated Service Contract Act.

The center pinned much of the blame for the problems of the contractor workforce on the Bush administration, accusing its officials of weakening worker protection laws and shutting down efforts to increase transparency and accountability -- including at least three surveys that would have tracked wages and labor conditions of contract employees.

But panelists said the blame for problems with contracting should be spread on a bipartisan basis.

Richard Loeb, who served as a deputy administrator for federal procurement policy in the Office of Management and Budget, said many of the issues cited in the report can be traced back to acquisition reforms championed during the Clinton administration.

"We are where we are because of many years -- maybe 15 years -- of relying on contracts and creating a contractor-friendly environment," said Loeb, who now serves as an adjunct professor of government contract law at the University of Baltimore Law School.

The panelists agreed that Congress should modernize the Service Contract Act and the 1931 Davis-Bacon Act, which mandates that construction workers be paid a prevailing wage. Statutory and administrative exemptions prevent the laws from covering all service workers, meaning that relatively few of the problems cited in the center's report are illegal, or even violate federal acquisition regulations.

Panelists said President-elect Barack Obama's administration now bears the burden of implementing contract reforms.

Scott Lilly, a senior fellow at the Center for American Progress, said, "there is no issue that will be more daunting for the next administration" than reforming how we purchase products and services.

John Podesta, the president and CEO of the center, is heading up Obama's transition effort.