At $350 billion to $500 billion a year, U.S. government spending on goods and services doesn’t just influence markets — it creates them. A new study urges the U.S. government to leverage its vast spending power to effect change along the supply chain.
WASHINGTON — The federal government is failing to put in place rules and safeguards to ensure that its massive annual procurement spending does not facilitate human rights abuses and environmental destruction, including child labor and even worker deaths.
The U.S. government is the world’s single largest purchaser, yet new research warns that its procurement policies have not kept pace with the rapidly changing global economy. As a result, the federal government’s purchasing is unable to effect positive change by pushing supply-chain contractors to adopt more stringent policies around labor and other rights concerns.
Rather, by continuing to focus on getting the best possible deal on goods without adopting strong safeguards, the government is creating a potent “race to the bottom,” a report released last week by the International Corporate Accountability Roundtable (ICAR), a Washington-based network, states. The study suggests the federal government is “turning a blind eye” to such concerns.
The federal government’s procurement policies “were not designed to protect workers or provide relief to victims, with a few exceptions, but rather to enable the government to enforce its contracts and ensure that taxpayers get their money’s worth,” the report, written by three prominent legal scholars, states.
“The [policies’] foundation is the assumption of law-abiding competition, and that foundation is breaking down. As the economy evolves, more and more suppliers are using global supply chains to gain a competitive advantage or keep up with their competitors.”
In particular, the globalized economy has led price-focused contractors to move their businesses and sourcing to countries with little history of rights-related enforcement and weak capacity to do so today. Yet, even as multinational companies have been forced to pay greater attention to their supply chains in recent years, ICAR’s researchers note that U.S. federal policy has yet to follow suit.
“Efforts to persuade government to use its purchasing power [to promote positive change] have met with limited success,” the report finds. “It has failed to take advantage of or leverage private sector efforts, as well as federal agency efforts … to monitor high-risk countries and specific sectors to identify the risk of human rights abuses.”
Although the U.S. State Department was unable to offer comment for this story by deadline, a spokesperson did point to formal remarks made earlier this year at a workshop on potential government procurement reforms.
“We recognize that the U.S. government is one of the largest purchasers of goods and services in the world, and as such we have an opportunity to use our role as buyers to influence the market,” Patrick Kennedy, the agency’s undersecretary for management, said at the January event, according to prepared text.
“This means considering everything from total costs to taxpayers to matters of responsible business conduct. We realize the government must continue to have clear systems and policies in place to promote these goals.”
Observers tell MintPress News that a new interagency process is now going forward to further discuss potential reforms.
The U.S. government spends anywhere from $350 billion to $500 billion each year to buy the broad spectrum of products and materials needed to run and facilitate the running of the federal government, according to ICAR. These include, for instance, uniforms for the U.S. Border Patrol, cellphones for the FBI, and computers for the IRS, among a host of other items. The report notes that the government’s spending is so vast that it doesn’t just influence markets – it creates them.
The federal government’s rules and policies around procurement are collected in a Byzantine set of guidelines called the Federal Acquisition Regulation, or FAR. Stretching to over 2,500 pages and applicable for nearly all federal agencies, the FAR is a 1970s-era regulatory base topped with decades’ worth of additions, subtractions and tweaks.
Overhauling the FAR is an extremely cumbersome process, despite the presence of what appear to be widely understood gaps. While the regulations continue to be geared primarily toward safeguarding taxpayer money, the FAR has been updated to address some rights-related concerns. President Barack Obama has put forth three procurement-related executive actions during his time in office, around trafficking, discrimination against sexual minorities and, most recently, around “repeat offender” companies.
The ICAR report, however, notes that federal regulations do not yet cover, for instance, the guarantee of freedom of association or prohibitions against child labor. Further, basic safeguards such as the right to life or bans on discrimination apply only to the United States, not to global supply chains.
In addition, the FAR exempts from these protections the sourcing of a broad spectrum of products considered to be “commercially available.” This typically includes, for instance, electronics and apparel – industries with long track records of widespread labor abuse.
Yet, even when contractors or subcontractors do engage in verified abuse, the federal government has been hesitant to sanction those companies. ICAR’s director, Amol Mehra, says this is, in part, because federal officials don’t have enough options available to them to meet the varied infractions they uncover.
“Enforcement has traditionally been viewed around debarment, by which a company can be suspended entirely from contracting with the federal government,” Mehra told MintPress. “But this is such a severe sanction that agencies typically don’t want to use it, either due to fear of litigation or because doing so could disrupt the government’s functioning.”
Instead, ICAR’s report proposes a new range of potential sanctions that the government could use at its discretion – withholding or reducing payments, for example, or public shaming. Proponents hope that a flexible but robust system of punishments could allow the U.S. government to directly curb certain patterns of behavior.
Expanding enforcement options constitutes one of 15 recommendations that the new ICAR study offers for reforming the federal government’s procurement policies. None of these options would require congressional action but could, for example, be enacted by executive action from the president. Mehra says another recommendation revolves around changes to the way the government certifies its supply-chain contractors.
“Some federal contracts aim to certify whether a contractor has any knowledge of abuse – basically, certifying that contractor’s ignorance,” he explained.
“Instead, we’re suggesting that the government should certify a company’s plans for compliance – for instance, around its due diligence plans. Where are the factories located? Is there a risk of abuse in those factories? How are the companies mitigating that risk?
There are a few important models for these and related reforms already in existence. Proponents point to policies that have been put in place by the Norwegian government, for instance. Still, important progress is being made in the U.S., as well.
Special note should be made around stringent new rules at the Department of Defense regarding its now extremely widespread use of private security contractors. Not only do these regulations now require security companies to comply with both the Geneva Conventions and domestic law wherever they are operating, but public pressure has also led the Pentagon to implement an international code of conduct that revolves around basic due diligence principles.
Beyond the federal government, a spectrum of innovative new procurement initiatives and experiments are also taking place in towns and states across the country. Over the past decade and a half, some 45 U.S. cities, eight states and even school districts have unilaterally put in place new requirements aimed at forcing their supply-chain contractors to demonstrate greater levels of respect for labor and human rights.
“In every city and community across the country where procurement officers are requiring that their contactors address labor rights issues in their supply chains, this process began with citizens,” Bjorn Claeson, executive director of the Sweatfree Purchasing Consortium and a senior policy analyst for the International Labor Rights Forum, told MintPress.
“Sometimes it’s a consortium of citizens and sometimes it’s just an individual or two, but that’s the common denominator nationwide. The federal government has a lot to learn from these approaches.”
At the moment, Claeson and others are focused on a unique process currently underway in Madison, Wisconsin. There, the city government is currently evaluating bids from apparel suppliers who would agree to a particularly extensive set of requirements aimed at building transparency and disclosure, and allowing for independent oversight and evaluation.
“In Madison, they’re shifting from the question of whether a contractor complies with labor rights to whether they can show the capacity to maintain good conditions in their supply chains,” Claeson said.
“The winning bidder will need to show a comprehensive plan for how they’re going to address non-compliance and what measures they’re taking to prevent violations. Madison is giving contractors a full blueprint of what they need to address.”
Known as a cooperative or piggyback contract, such agreements are specifically made to be adopted by other public agencies, including those in other cities or states – and the bigger the contract, the more leverage these agencies will have regarding labor standards. While much of this energy so far has taken place around the apparel sector, Claeson notes that the Madison approach would be easily replicable with regard to, for instance, the electronics industry.
Meanwhile, work continues in states and cities to convince local officials that cleaning up their supply chains is an important use of their time and effort. In Duluth, Minnesota, organizers say city officials agree with the aims in principle, currently focusing on reforming procurement around apparel purchases. They have also been receptive to the bipartisan argument that tax dollars shouldn’t go to support labor rights abusers.
Still, officials have had difficulty prioritizing the issue.
“This matter has not been a priority for our elected officials and has been routinely put on the back burner while issues of taxation and infrastructure funding and repair have consumed the councilors’ time,” Steve Wick, an organizer with the Minnesota Public Interest Research Group, a watchdog organization, told MintPress.
While the Duluth campaign has been underway since early 2013, Wick noted that a breakthrough came this past summer, when county officials in the area began working on a similar “sweatshop-free” policy.
“Working with officials in this area has been a very easy process, in part because many agree with the greater end goal of such policies,” Wick said. “[But] the work that has been happening with the county has shown that working directly with staff first, as opposed to the elected officials, may be a more prudent practice when initially starting a policy campaign.”
The city and county are both expected to vote on related resolutions next month.