US Senate Committee on Health, Education, Labor, & Pensions

Senator Harkin's Remarks at the Center for American Progress Action Fund, "How the Federal Contracting System Harms Workers and Taxpayers"

*As Prepared for Delivery*

Wednesday, December 11, 2013

"It’s great to be back at the Center for American Progress, a real intellectual center of progressive policy development.

"In March 2007, Eleazar Torres Gomez, a 46 year old father of four, was working as a washroom operator at a Cintas Corporation facility in Tulsa, Oklahoma. When Eleazar attempted to dislodge a clothes jam he was swept into an industrial dryer, which then continued to spin with him inside for 20 minutes at over 300 degrees.  Emergency responders pronounced him dead at the location.

"In 2002, in my state of Iowa, two employees of Insituform Technologies, a subsidiary of the Aegion Corporation, drowned in more than a foot of watery sewage while working on an older sewer line. Experts believe the workers accidentally released hydrogen sulfide, a byproduct of sewage, and collapsed after being overcome by the fumes. Five other workers were hospitalized after being overcome by the fumes when they tried to rescue the collapsed employees. 

"In 2010, seven workers were killed at a Tesoro-owned refinery in Anacortes, Washington when a heat exchanger ruptured and spewed vapor and liquid that exploded.  The equipment was 40-years-old and had not been properly inspected in 12 years.  In fact, the seven workers who died were standing near the exchangers specifically to attempt to stop leaks of the volatile, flammable gases.  

"Each of these tragic stories I just shared with you have two things in common:  the companies responsible were found to have committed serious violations of our occupational safety and health laws, and all of the companies currently receive contracts from the federal government.

"When we think about federal contracting we often think of the military purchasing weapons and other goods. While that is a substantial amount of what the government contracts for, we actually spend more money for the purchase of services, like janitors, security guards, and call center operators.  In fact, since 2000, federal spending for service work has tripled, from $99 billion to $307 billion.

"When the federal government enters into these kinds of contracts, in many cases, it is effectively paying the wages and benefits of these workers. For that reason, it is particularly critical that the federal government have sound mechanisms in place to ensure that taxpayer dollars are supporting workplaces that are safe, that provide the required compensation, and that are in compliance with federal labor laws. Instead I fear we are all too often paying companies that fail to pay their workers what they have earned and that regularly subject those workers to unsafe working conditions.

"As Chairman of the Senate Labor Committee, I am deeply committed to the proposition that the federal government should use all of its might to ensure that hardworking Americans are paid fairly and are able to work in safe and healthy workplaces. But, as the report I am releasing today demonstrates, too often the federal government is undermining that goal by contracting with firms that do not comply with health and safety and wage laws.

"The scope of this problem was first brought to my attention by a 2010 report from the Government Accountability Office. This report found that the federal government routinely awards contracts to companies that had previously been cited for significant violations of federal wage and health and safety laws. However, GAO noted that they could not determine the full extent to which the federal government contracts with companies cited for violations of federal labor laws.

"In response to this report, I asked my staff to try and dig deeper.  I wanted to determine the full extent to which the government contracts with companies that fail to comply with federal labor law and to better understand the breakdowns in the contracting process that have allowed this to go on.

"In expanding the scope of the GAO report to the 100 largest safety and health penalties and back wage assessments, we found that 49 federal contractors were responsible for 58 of the 200 largest enforcement actions resulting from violations of federal labor laws between 2007 and 2012.  According to my findings, almost 30 percent of the companies receiving the highest penalties or back pay awards for violations of federal labor laws are federal contractors.

"Additionally, these 49 federal contractors were typically repeat offenders -- responsible for a total of almost 1,800 separate enforcement actions for labor law violations, for which they paid or were ordered to pay back wages and initial penalties of more than $196 million dollars between 2007 and 2012.

"Notwithstanding this record, in 2012 alone, these 49 contractors received over $81 billion in taxpayer dollars in the form of federal contracts. Over the six year period of 2007 to 2012, these 49 companies received almost half a trillion dollars from American taxpayers.

"As the case at Cintas, Insituform, and Tesoro make clear, these violations are more than minor offenses: they have real consequences, sometimes life and death consequence, for American workers and their families.  In fact, eight government contractors identified in my report were responsible for violations that led to the deaths of 42 Americans between 2007 and 2012.

"And unsafe working conditions aren’t the only problem.  Over the same period, these companies paid $91 million in back wages to 80,000 American workers as a result of violations of the Fair Labor Standards Act and prevailing wage laws. For instance, the URS Corporation paid over $1.5 million in back wages to over 400 workers as a result of the company’s failure to adhere to the Service Contract Act in performance of a contract to clean up a hazardous nuclear waste site. In addition to the failure to pay prevailing wages and benefits, these employees were not compensated and did not receive overtime pay for the time they spent putting on and taking off the protective equipment required to perform their work, which is required by law.

"Each instance identified in the report in which workers failed to receive wages they earned or were forced to work in unsafe workplaces is deeply troubling on its own. Yet taken in total, these findings are a serious indictment of the way the federal government evaluates prospective contractors.

"These findings are particularly startling since there is an existing, legal requirement that the federal government only contract with responsible companies – those that demonstrate a satisfactory record of integrity and business ethics. However, based on the number of enforcement actions identified in this report, it is clear to me that a prospective contractor’s record of compliance with federal labor law is not being sufficiently considered when determining whether or not a prospective contractor is responsible.

"Indeed, in undertaking this investigation, I was unable to find any evidence at all that a single one of these violations or penalties has been taken into consideration when the government has considered providing additional contracts to these companies. 

"Consider the case of BP – the only company that has had its ability to contract curtailed.  Was it as a result of the deaths of 15 workers in the 2005 refinery explosion in Texas City, Texas?  No.  Was it as a result of the re-inspection of that facility which found the company had not made the agreed to fixes?  No.  Was it as a result of findings of similar hazards at an Ohio refinery?  No.  Was it as a result of the 11 workers killed in the Deep Water Horizon explosion?  No, because OSHA had no jurisdiction offshore.  In fact BP has been suspended – not debarred – for the environmental damage caused in the BP explosion, and is currently contesting that suspension.  Meanwhile, no misconduct entry appears for BP in the database that contracting officers use in making the responsibility determination.

"That is simply irresponsible.  We need an accessible and transparent system means of tracking and evaluating serious labor violations by federal contractors.  Contracting officers in charge of making responsibility determinations must be able to access data about a prospective contractor’s record of compliance with labor laws and rationally incorporate that data into their responsibility determination. Based on the findings of the report released by the Center for American Progress today, I am confident that by taking the steps I have called for in this report we can be better stewards of taxpayer dollars. 

"The federal government has a long record of using its purchasing power to promote compliance with the law and raise the standard of working conditions for all Americans.  Indeed, that is exactly what happened in 1965, when President Johnson signed an Executive Order preventing companies that contract with the government from discriminating on the basis of race, sex or other protected characteristics. With this action, President Johnson didn’t just help alleviate the scourge of discrimination for those working on government contracts or for those who work for the government. In fact, this Executive Order applied to every worker at every company that contracts with the federal government, and helped to set standards across the economy, including at firms that had no direct business relationships with the federal government.

"We can make the same kind of difference today by taking comprehensive steps to ensure that the federal government is using its contracting power to support and promote fair treatment of workers. I hope that this report will help spur us to do so."

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