It's Time to Really Reinvent Federal Procurement

I’ve seen both the good and the bad in federal government contracting during the past 45 years as both an Air Force Contracting Officer and a Purchasing Manager in the private sector.  While many efforts have been made to improve Government procurement, very few have had much impact.

In a recent Fortune magazine piece Jon Huntsman, Jr. former governor of Utah and Joe Lieberman, former U.S. senator from Connecticut discuss policy proposals that an advocacy group called No Labels has developed to encourage bipartisan problem solving in America.  One of the solutions proposed by Huntsman and Lieberman involves the reconsideration of all federal regulations every 15 years. This idea from Mr. Huntsman and former Senator Lieberman is forward looking and should be started now.  Using this idea as a springboard for reform, Congress can REALLY reinvent Government contracting by making the acquisition cycle more efficient for government contracting officers and contractors while saving taxpayer money. But how can Congress do this and where should they begin?

I suggest that a good starting point would be to rescind the 1931 Davis-Bacon Act.

As a warranted contracting officer in the Air Force and a Supply Chain manager in private industry following my retirement, it has been very obvious to me that the Federal Acquisition Regulations (FAR) rules and regulations involving the Davis-Bacon Act wage rate requirements discriminated against non-union contractors and increased the cost to the government and the American taxpayer.

I encourage Government employees and contractors to put political correctness aside and step outside of the box and look at the business aspects of the current system that should be changed.

As mentioned previously, the 1931 Davis-Bacon Act would be a good starting point.

Why the Davis-Bacon Act?   In simplest terms, because of the increased cost to perform if Davis-Bacon wage rates are required.  Additionally, the very reason behind the creation of the Davis-Bacon Act is appalling.

The expressed purpose of Davis-Bacon was to protect the wages and employment of union workers in the buildings trades. Under the law, workers on federally funded construction projects must be paid wages at “prevailing” rates. “The methodology used to calculate this prevailing wage sets it close to union wage scales and well above average wages,” explained the Heritage Foundation in a 2007 report. “Davis-Bacon rates are typically 15 to 40 percent higher than average wages for the same job.  In some cases, Davis Bacon rates more than double the competitive wage.”   This act does nothing more than increase the cost of Government construction projects while causing contractors to pay its employees more when they are working on a Davis-Bacon project.  A 2008 study by the Beacon Hill Institute, stated that the prevailing wage set by the Labor Department is on average 22% higher than the going market rate.  As Andy Koenig reported in his recent Wall Street Journal article, a 2013 Congressional Budget Office report estimated that repealing the law would save $13 Billion between 2015 and 2023 – more than $1.6 billion in average annual savings. James Sherk, Senior Policy Analyst in Labor Economics in the Center for Data Analysis at the Heritage Foundation, found that simply suspending Davis-Bacon would allow government contractors to hire more than 160,000 new workers at no additional cost.

But you might argue that if a company bids on a Government construction project and doesn’t have to pay its employees “prevailing wages” the project will be performed in a shoddy manner and employees working on the project will not receive fair payment for the work they perform.  Neither of these arguments are supportable.  Whether Davis-Bacon is part of a Government construction project or not, the company performing the project still has to meet prescribed construction standards and the specific requirements of the Government contract.  The contractor will also have to pay its employees market wages for the specific task each employee performs.  Typically, just as required by Davis-Bacon, a laborer will receive less pay/hour than a mechanical engineer.

But there is another reason Davis-Bacon Act should be rescinded.  This reason has to do with why it was passed in the first place. When Davis-Bacon became law in the 1930’s it was enacted to keep non-union companies that employed a large percentage of black American’s from winning Government projects.  William Green, then president of the American Federation of Labor – half of the modern AFL-CIO – testified before Congress that “colored labor is being brought in to demoralize wage rates.

The Davis-Bacon Act discriminated against American blacks since black construction workers weren’t usually unionized.  This is supported by the fact that 1930, the year before the law passed, was the last year that the black jobless rate was lower than the white rate.  Richard Nixon, among other presidents, temporarily suspended Davis-Bacon.  Nixon explained his actions by saying Davis-Bacon prevents “taxpayers from getting their money’s worth” and harms “the construction worker himself” by hindering job creation.  These comments by President Nixon, combined with the original purpose of the Act to keep minorities out of the construction workforce, justify the rescission of the Davis-Bacon Act once and for all. 

I’ve identified just one idea that, if implemented, could make federal contracting more responsive to its customers; and, result in lower overall cost. The path to improving federal contracting can only begin if we start questioning what we are doing and why; and then taking action to make the system better. 

Best,
Phil