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Privatization's Dark Side

Privatization advocates argue that private sector workers deliver comparable services more cheaply than their public sector counterparts. The truth is that sometimes they can, but very often they can’t. And, as documented by a recently-released General Accountability Office (GAO) study on federal outsourcing, the savings can sometimes come at a very high price, including employees’ lives.

The GAO reports that contractors have been awarded billions of dollars in federal contracts, despite having histories of federal safety, health and labor law violations. Some of violations have been extensive and serious. One food supplier was cited more than 100 times for health and safety infractions, including one instance in which a worker was "asphyxiated after falling into a pit containing poultry debris." This same employer was later ordered by a federal court to "properly compensate" more than 3,000 workers.

Another contractor violated fair labor laws when it "coerced employees" and in another incident refused to rehire a worker due to "prior union involvement." This federal contractor has been ordered to pay $4.4 million in back wages to 2,100 employees since FY 2005. It also agreed to pay nearly $300,000 in back wages to African-American workers after a discrimination suit.

The list goes on and on. GAO auditors found that half of the 50 largest fines levied by the Labor Department between fiscal 2005 and 2009 were aimed at 20 federal contractors. The DOL’s Wage and Hour Division which oversees federal minimum wage, overtime pay, and child labor requirements, assessed these contractors for more than $80 million in back wages. Despite these problems, in fiscal 2009, the government awarded these 20 worst companies more than $9 billion in contracts. None lost their right to bid for federal contracts, even temporarily.

Moreover, the GAO admits that the list is "likely" incomplete. Due to limitations in U.S. labor law and National Labor Relations Board practices, it could not include the largest violators of federal collective bargaining laws. Furthermore, the limitations of the federal systems that govern procurement data collection and contractor identification prevented auditors from identifying all the contractors involved in these cases.

The GAO study was conducted against the background of a developing fight over the Obama Administration’s proposed ‘High Road’ contracting initiative, which gives preferential treatment to federal contract bidders who pay decent wages and benefits. The Chamber of Commerce and Senate Republicans are leading the charge against the Initiative.

In this context, two members of Congress who were concerned about dangerous and illegal contractor practices asked the GAO to check into it. One of them, Rep. Robert Andrews, D-N.J, told Government Executive magazine:

"Too often, taxpayers are essentially charged twice for the cost of a federal contract: once for the cost of the project and again when the poorly paid employees qualify for federal assistance, like Medicaid and food stamps."

Andrews’ assertion is rooted in data. According to the Economic Policy Institute (EPI), one in five federal contract workers make below-poverty-threshold wages. The EPI study further notes that between 2000 and 2006, federal contract spending increased 69.1 percent—from $256 billion to $415 billion. Somebody’s getting rich from taxpayer dollars but, as the data make clear, it’s not public sector workers or their private sector counterparts.

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