Living Wage Requirements in Public Contracts. (State and Municipal Management)

By Matthews, Darin | The Public Manager, Winter 2002 | Go to article overview

Living Wage Requirements in Public Contracts. (State and Municipal Management)


Matthews, Darin, The Public Manager


A local government procurement director lays out the challenge to public managers and provides a case study in the Multnomah County Schools of Portland, OR.

From Little Rock to San Francisco, local agencies throughout the United States are adopting living wage policies. These statutes mandate pre-established wage floors in public contracts for services. By and large, the challenge of carrying out this directive on behalf of the public and its elected officials falls to procurement officers. This article introduces the issue of living wages and examines how it impacts the procurement function, which brings practical application to the policy. With living wage policies gaining popular support across the country, procurement officers need to be prepared in advance for the unique challenges these policies pose.

What Are Living Wages?

Requiring a set level of wages in government contracts is nothing new. In 1931, the federal Davis-Bacon Act was enacted, requiring that union-level wages be paid to all workers on construction projects. This mandate is still in force throughout the United States and is commonly accepted by both the buying and selling communities. But the notion of requiring minimum wage floors on other types of service contracts is relatively new. Only in the last decade have local government commissions and boards adopted these kinds of wage floors.

A living wage is established for a specific region or jurisdiction and, if earned, will put the worker above the poverty level. Several factors inform the establishment of the wage floor. Normally inputs are received from state labor departments, the federal government, and local community groups. The factors that go into a living wage determination can include existing minimum wage levels, cost of living indices, and studies on urban poverty. Ultimately, these factors are used to determine what a worker would need to earn in order to rise above the region's poverty level.

The City and County of San Francisco was among the first jurisdictions to adopt a living wage policy. Local agencies in Portland, OR, followed with their own versions of a living wage policy (sometimes referred to as "fair wage"). Local governments in Virginia and Arizona followed closely behind. In these agencies, the governing board or council normally acts as the local contract review board, which gives it the authority to adopt rules on how contracts are structured.

Procurement Challenges

Like any new directive, living wage policies certainly bring their share of challenges to the affected agency, and given the nature of the policy, it is the procurement officer who will face them. The specific challenges of implementing a living wage policy are identified as:

* Integrating social policy within existing practices;

* Providing clear direction to the contractor community;

* Ensuring policy compliance through contract administration; and

* Facing the dilemmas of fiscal impact and cost control.

Integration with Existing Practices

Public procurement is a highly regimented and rule-bound profession. A given agency can have countless policies and procedures and everything from bid advertisement to bid opening to contract award. To protect the integrity of the public bidding process, and to ensure a fair and level playing field for all contractors, many entities adopt procedures that are consistent with the American Bar Association's Model Procurement Code. These existing practices are tried and true, but with the adoption of a living wage policy, they need to be revised since the living wage requirement effectively increases bid prices. This can create a quandary for public purchasers, who are taught early in their careers to secure the lowest-priced contract.

Contractor Communication

It is not a coincidence that the service areas targeted by living wage policies (e. …

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