Responsible contracting policies help governments reduce the risk of contract failure and ensure that contractors have a track record of providing employees with living wages and benefits. It leads to better quality services and reduces the hidden costs that result when workers don’t receive living wages and benefits. Responsible contracting can be achieved through ordinances or laws, regulations, or administrative policies.
Responsible contracting policies establish a basic set of qualifications that all firms must meet in order to bid on public construction or private construction projects that:
- Receive public funding
- Require public approvals
- Benefit from public investment
Responsible contracting policies require contractors to demonstrate that they offer high-quality employment and work product. Firms that meet responsible contractor standards typically would be able to show that they:
- Are fully licensed and bonded
- Have had no wage/hour violations for the past three consecutive years
- Provide OSHA 10-hour safety training
- Participate in an ERISA or joint labor-management training program (e.g. certified apprenticeship program)
- Pay prevailing wages and offer health insurance
- Provide all benefits of employment to their workforce (including social security, workers comp, and unemployment insurance)
- Comply with all other federal and state regulations
- Have no history of violating this policy in previous public contracts
Moreover, strong policies require general contractors to incorporate these components into their agreements with subcontractors.
Responsible contracting policies can help leverage a higher quality construction industry by making sure that public policy and public funding support only those contractors that meet these critical job quality standards.
Responsible contracting policies make for good public policy for several reasons:
- They make sure that construction firms do not wrongly classify their workers as independent contractors, rendering them ineligible for social security, unemployment insurance, health insurance and workers compensation.
- They ensure that contractors cannot underbid public contracts merely by shortchanging their workforce, an practice that creates public costs elsewhere when those workers rely on publicly-subsidized health insurance or when the quality of construction suffers as a result of lack of skills training and workforce stability.
Responsible contracting policies can help leverage a higher quality construction industry by making sure that public policy and public funding support only those contractors that meet these critical job quality standards.