Obama may use contracts to pressure companies on wages

WASHINGTON - The Obama administration may use the government's $500 billion in annual purchasing power to pressure companies for improved wages and benefits, affecting contractors from Lockheed Martin to small businesses seeking work.

A proposal that White House spokesman Tommy Vietor said is in the "development phase" would alter how the government awards contracts by disqualifying companies with labor, environmental or other violations. Companies that provide better pay, health coverage and pensions would receive extra credit in a scoring system used to award contracts.

Labor unions are pushing for the plan, saying it would force negligent companies to follow the law. The U.S. Chamber of Commerce, the nation's largest business lobby, is fighting the proposal, which it says would impose more burdens on business amid an economy still recovering from a recession.

"This is an attempt by the unions to force their policy agenda on a wide swath of the economy by rigging the government procurement process," Glenn Spencer, who handles labor issues at the Chamber, said in an e-mailed statement. "It could increase costs to taxpayers by $100 billion a year at a time when we are struggling with unsustainable deficits."

"No recommendation has been sent to the president, much less approved," Vietor said in e-mailed statement.

The plan could mandate higher wages, health and retirement benefits and paid sick leave and reduce the ability of smaller companies to compete for contracts, the Chamber said.

Under the proposal, companies of all sizes would be judged on whether they provide ample pay and benefits across their workforces, not solely to employees who would be assigned to federal contracts, according to lawmakers.

"Injecting such an arbitrary variable could jeopardize the integrity of the federal competitive source selection process," five Republican senators, including Olympia Snowe of Maine and Tom Coburn of Oklahoma, said in a letter to White House budget director Peter Orszag earlier this month.

Lockheed, the world's largest defense contractor, was the biggest recipient of U.S. government work in fiscal 2009, followed by Boeing, according to an administration Web site.

Two administration officials, who declined to be identified because the proposal is in its early stages, said in a phone interview that the idea was offered to the Obama administration by the Center for American Progress, a Washington research group with close ties to the White House, and the Service Employees International Union, one of the nation's largest labor unions, as well as other interest groups.

"We should not be rewarding irresponsible contractors who reap excess profits at the same time they don't pay taxes, drive down wages and make the taxpayers shoulder the burden of paying for their workers' health care," Michelle Ringuette, an SEIU spokeswoman, said in an e-mailed statement.

The proposal builds on regulations that former Democratic President Bill Clinton sought to block federal contracts for companies with a record of violating labor-related laws. Clinton's Republican successor, President George W. Bush, canceled those regulations early in his administration.

The Obama administration plan was reported earlier this week by the Daily Caller, a Web site.