That $15 wage proposal for federal contractors, will it help or hurt?

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The Biden administration wants federal contractors to pay their employees a minimum of $15 an hour. For some contractors it’s a moot issue. For others, it would have a lot of implications for profits and competitiveness. President and CEO of the Professional Services Council David Berteau joined Federal Drive with Tom Temin with analysis on a couple of topics.

Interview transcript:

Tom Temin: David, let’s start with the $15 wage, I suppose that high-end COBOL programmers and people that can engineer information systems are probably making more than $15 an hour anyhow. So what’s your take on this whole gambit?

David Berteau: Well first Tom, PSC strongly supports paying a living wage to all personnel and particularly contract or personnel. So we think this is a useful undertaking for the administration to put out. But there’s three dynamics there that come into play. One is the one you mentioned, most of our member companies, or government contractors are already in a very competitive marketplace with respect to talent, right? And so that the prices bit is determined at least as much by the marketplace as it is by rule. The second thing is that the contracting process itself tends to drive costs down, not up. In fact, most companies don’t win by proposing higher wages, they win by proposing lower wages. And so, I think the administration has a very good opportunity and affirmative responsibility to rethink the basic nature of how you pick a best value contract winner, looking at performance and results rather than input. No indication from the executive order that they understand that and that they recognize that the leading cause of low wages is, in fact, LPTA contracts that drive bidders to low costs. So, if the government is willing to change that, that’s a big step. And then the third thing that comes into play, so the executive order put January 2022 as the implementing date for new solicitations, and put March 2022 for the exercise of awards under existing contracts and task order contracts. And so, the question then becomes, who’s going to pay for those additional costs, if it’s built into your rates, if it’s built into your fixed price contract bids, there have to be constructive changes that will cover those costs. None of those questions have been answered yet. But we’ve raised all of them with the administration.

Tom Temin: Because there is the phenomenon not unknown of where, when the government is asking for bids, they will tell a contractor, tell all bidders, in this cell, this is the value you shall insert. And so that could be $15 an hour minimum or something like that, they’d have to turn it into actual bidding language. But, that’s not an unknown phenomenon.

David Berteau: No, and January 2022 sounds like a long ways off, right? But we’re already in May. And the process for issuing new Federal Acquisition Regulation language often takes longer than seven or eight months. And so, we’re looking forward to a dialogue with the administration. And in particular, we’re looking forward to the actual implementing language here.

Tom Temin: Yeah, I mean, here we are almost at May Day. Next thing you know it’ll be Labor Day, and then it’s Thanksgiving, and then New Year’s Eve. So yeah, the time is going fast this year.

David Berteau: Time’s gonna go fast here. And we look forward to their implementation proposals.

Tom Temin: And I wanted to ask you briefly about Jason Miller. Now that is not the Jason Miller that works as our colleague here at Federal News Network, but the one who has been confirmed as deputy director for management, the DDM, at the Office of Management and Budget. Because we haven’t really seen a presidential management agenda yet. We can probably guess what it’s going to look like, but from the Biden administration, but maybe this Jason Miller will push that along?

David Berteau: We’re optimistic that he will. For contract and contractors, the president’s management agenda has the cross cutting priorities across the agencies that matter a whole lot. This is how the White House sets its priorities and flows down through the Office of Management Budget into programs across the board. And the last two administrations, the Obama administration and the Trump administration, both put a lot of energy into both integrating priorities across agencies in those Cross-Agency Priority Goals, the so-called CAP Goals, that are built into the president’s management agenda, and perhaps more importantly, over time beginning to report publicly on a quarterly basis data that would allow us to track implementation. This is important for companies as they prioritize their investments for bidding on future projects. And it’s important for competition across the agencies to know what the priorities are. We’ve not seen it update in quite some time. We’re optimistic that the appointment of a new DDM deputy director for management will reinvigorate not only the process of the president’s management agenda, but get the items into play so that they can match up with the budgets in the appropriations.

Tom Temin: We’re speaking with David Berteau, president and CEO of the Professional Services Council. And what’s going on on the vaccine front? Because earlier it was the contractors trying to get the government’s help to get their people, the crucial people vaccinated. That problem has largely vanished now that the supplies are up there.

David Berteau: We have pulsed a number of our members to see, can your employees still get vaccines, are they having trouble getting vaccines? And this is kind of a regional area. There are some parts of the country where you still have a wait-list, you still have trouble getting, particularly if you have a day job and you don’t have the ability to go wait in line at a mass vaccination center for hours and hours at a time. But I think the problem of access to vaccines is diminishing. Of course eligibility does not imply access. Just because you’re eligible doesn’t mean you’re going to get it. What we’re also beginning to see though, is the government’s very interested in knowing how many contractors have been vaccinated. So what we’re starting to see is contract at a time questions going out somewhat at random. It doesn’t look to me like there’s an organized structure in this perspective from the government’s point of view — of how many of your employees have been vaccinated? The implication is access to work, access to facilities will be determined in part by whether or not you’ve been vaccinated. There’s no policy on this. We’ve raised a number of times, both at the agency level, Defense Department and other agencies, and at the White House and the Office of Federal Procurement Policy, that we need to have consistent guidance across the board. And not only consistent by contract, but what you apply to contractors and what you apply to federal civilian employees should be integrated and make sense. So, a lot of vacuum there, a lot of uncertainty, the more we’re vaccinated, the more this is going to come into play.

Tom Temin: And I can see maybe a holographic sticker for your employee badge to get in saying, I’ve been vaccinated.

David Berteau: Well, you have this very real question of how do you confirm whether a vaccine has been received and taken place or not? There’s been a pushback, obviously, on the vaccine passport and the other things in that regard, those little white documents, those little white pieces of paper you get that have the CDC emblem on it, you can buy blank ones for sale, apparently on eBay, and over the internet. So, verification of vaccination is a really critical factor. It’s especially a critical factor if there’s going to be a requirement for vaccination for contractors. We’re continuing to work with the government on behalf of our members on that.

Tom Temin: All right. And as the Taliban has advertised, it’s going to shoot back now if we don’t get out of there even quicker, the troops. Your members are seeing USAID, new contracts, possibly coming through for work in that part of the world, five year contracts?

David Berteau: We’ve got a real dichotomy in Afghanistan with respect to contracting. The Defense Department is withdrawing and is withdrawing faster, the embassy has speculated in public as to how many people will still be in the embassy in Kabul after the military leaves, because of course, the military is partially responsible for security and will continue to be responsible for security, as they are worldwide. But, so, contracts that are maybe a big question on the Defense Department side, what’s going to continue? How do you support the Afghan government, the Afghan military through DoD contracts? But on the civilian agency side, there’s a rush to issue new contracts, new task orders, and our members have a couple of big challenges. Number one is, what do you assume about the future of Afghanistan as you put your fixed price bid together? And of course, if you’re going to have to put security costs and legal costs into your bid, what’s a reasonable assumption? How do you remain both competitive and be able to win an award? And most importantly, how do you secure your personnel so that in fact, they’ll still be there tomorrow after you award the contract today? These are huge unanswered questions that need to be answered quickly. The clock is ticking. It may be that the May 1 deadline is gone. But the Sept. 11 deadline is looming over us and so it really needs more attention by the administration and we’re hoping to get that soon.

Tom Temin: David Berteau is president and CEO of the Professional Services Council. As always, thanks so much.

David Berteau: You’re welcome, Tom. Appreciate it.

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