Thomas R. Henchey, Business Manager
Responsible Contractor Policies (RCPs) ordinances or policies are adopted by Pennsylvania municipalities, school districts, or other entities in order to set certain minimum compensation and other standards in bidding practices for construction work.1
The standards often include requirements for contractors to :
- provide pensions and employment-based health insurance
- participate in state or federally-certified apprenticeship programs
- comply with residency and/or affirmative action requirements
- provide safety training (or to maintain a certain insurance modification rate)
- pay prevailing wages, and to contribute to employee retirement plans.
Adopting such standards creates a level playing field for contractors who play by the rules, and protects responsible contractors in Pennsylvania- and their workers - from abuses such as employee misclassification.
RCPs may be established as 1) actual bidding requirements or 2) used in the pre-qualification or deliberation process in considering who is a qualified contractor.
A responsible contractor policy acts as an alternative to the “just take the lowest bid” mentality by factoring in certain “community benefit” standards while ensuring bids are competitive..
It discourages contractors who try to "lowball" bids by shirking their responsibility to provide decent pay and benefits for their workers and meet other statutory provisions.
In addition to passing RC laws, citizens of state and local governments can add RC language to existing regulations in order to clarify contracts, ordinances, and even economic development subsidy agreements.
These provisions can be introduced by executive order, or in the form of policy directives and bidding specifications.
Why It Matters :
Responsible Contractors are employers that "take the High-road."
High road employers do not cut corners at the expense of workers and taxpayers. They often offer benefits, pay mandated taxes and insurances, are union neutral, and may be from the local community.
There is the erroneous belief, often advanced by non-affiliated firms, or others with the "low-wage agenda" of the Association of Building Contractors, that enforcing such policies carries higher construction costs.
Our customers and communities increasingly recognize this as a myth.
With the savings in public assistance funds that would go to poorly paid workers, hiring responsible contractors is, in fact, smart business from the economic development perspective as well, especially where the contract encourages the hiring of local workers.
In addition, there is the well-known "multiplier effect," as the living wages and benefits paid to these workers contribute to their local communities and economy.
By contrast, "Low-road" employers offer the "lowest bid at all costs." They may misclassify their laborers as independent contractors to avoid paying workers compensation, payroll taxes, and benefits, such as health insurance.
Multiple studies and reports have cited higher rates of misclassification in the construction industry than in other industries.
This enables low-road employers in Pennsylvania to pay low wages and avoid paying vital employee benefits, payroll taxes, and insurances.
There are other ways for these dishonest employers to violate the law as well, such as paying "under the table" without tax deductions.
(they may pay substandard wages, with few or no benefits, to other employees as well.)
Because of these employment practices and mistreatment of workers, low-road contractors are able to offer lower bids and win public contracts with this unfair advantage.
In reality, such employers can cost communities and the state significant revenues in public assistance and other expenses over time, despite the appearance of lower costs.
Numerous studies, conducted by state governments and policy organizations have concluded :
"It is up to state and local governments to protect the integrity of their communities and assure fairness in public contracting, by developing and implementing responsible contracting requirements."
Responsible Contracting in Pennsylvania :
Pennsylvania state policy defines a "Responsible Contractor" as "A person who has the capability in all respects to fully perform the Contract requirements and the integrity and reliability, which will assure good faith performance."
The Office of the Budget, in partnership with the Department of General Services, Office of General Counsel, and Office of Inspector General, administers the Commonwealth Contractor Responsibility Program. The goals of the program are stated as :
To ensure commonwealth agencies contract with responsible and competent contractors
To identify, evaluate, and appropriately sanction contractors that do not meet the standards of responsibility, that render deficient performance, or that engage in wrongdoing or other inappropriate activities
To develop and maintain a centralized system to collect and disseminate information concerning issues affecting contractor responsibility
In addition, Responsible Contractor and Qualified bidder policies, adapted at the county and community level across Pennsylvania, exist to secure and safeguard the protection of workers in our trade, and in the construction industry generally. Local 229 and its signatory contractors play a vital and critical role on York ensuring these principles and provisions are upheld.
This helps keep our workers safe and allows our contractors to pay livable wages and benefit our communities while keeping the projects we work on safe, productive, and competitively bid.
We encourage responsible employers and businesses to familiarize themselves with this page and contact us with any questions!
Responsible Contractor Questions :
1 What is responsible contractor language, and why is it important?
2 What is a responsible contractor language designed to do?
3 How does RC language help to ensure that construction projects are completed on time?
4 What specifics are contained in a typical Responsible Contractor Policy?
5 How are registered apprenticeship programs relevant to responsible contracting?
6 Why are transparency and prequalification requirements important in responsible contracting?
1. What is responsible contractor language, and why is it important?
Public construction projects are often costly undertakings. In recent years, municipalities and schools are increasingly using responsible contractor policies to "set certain minimum employment standards" for bidding on construction work. In response to this trend, responsible contractor (RC) language is being developed and used to provide needed reform in the construction contract bidding process. According to a recent study of responsible contractor reforms, the public policy goal of these reforms is to "ensure that all contracts for public works are awarded to reputable, responsible firms that have the qualifications, resources, and personnel required to successfully perform contract work."
RC language also is designed to address various contract problems that may arise in the absence of regulation. Lacking federal solutions to these problems, states and communities are challenged to provide RC reforms in order to avoid costs that unreliable contractors can, and often do, pass on to the public.
While both state and federal laws and ordinances typically specify that bids should be awarded to the lowest responsible bidder, what is meant by "responsible" in this context is not usually defined clearly in construction contracts. RC language, developed by project stakeholders working together, is designed to close this loophole.
Addressing responsible contractor issues and language is part of a wider campaign to protect community interests from being harmed by questionable business practices.
RC agreements are thus akin to Living Wage campaigns, Prevailing Wage statutes, and Project Labor Agreements. All consider the larger economic picture in order to ensure quality contract work, and a proper balance of interests that protects the public.
2. What is a responsible contractor language designed to do?
RC language protects communities by clearly defining contractor responsibilities to address critical issues in public contracting. A cost analysis of RC policies by May and Waddoups describes responsible contracting as a "potential remedy forbidding practices that drive down wages, reduce health insurance and retirement security discourage job skill training and competent safety programs, and inhibit community workforce inclusion.
In addition, RC policies address the problem of contractors who provide "poverty wages and limited benefits," a practice that imposes substantial costs on taxpayers since "their employees must rely on public safety net programs to make ends meet."
3. How does RC language help to ensure that construction projects are completed on time?
Good planning before construction starts can help avoid work stoppages caused by disputes and other misunderstandings among contractors. To this end, responsible contractor agreements can include language similar to a Project Labor or Community Workforce Agreement (PLA). A PLA mediates labor relations for projects involving both union and non-union contractors. Its scope "generally includes mutually agreed-to work and wage rules for the duration of the project, including deadlines, wages, costs, production incentives, and hiring."
For example, such agreements can help prevent delays by clearly specifying all jurisdictional boundaries among participating contractors on a project.
4. What specifics are contained in a typical Responsible Contractor Policy?
While many state and local public contracting laws mandate the hiring of responsible contractors, often they do not go far enough in clearly defining the requirements for "responsibility."
The experiences of states and municipalities suggest that RC language should include the following:
- Proper employee classification: This is especially important in avoiding cost-shifting to taxpayers, since misclassified workers may earn poverty wages and are likely to lack benefits.
For example, ordinances in Worcester and Somerville, Massachusetts require contractors to certify compliance with independent contractor classification requirements on a weekly basis.
- Registered Apprenticeship Programs :
Responsible contractors play an important role by working with trade unions to sponsor and support registered apprenticeship programs.
(These programs have extensive training and education standards that are approved by both federal and state Bureau of Apprenticeship and Training Departments.)
According to the U.S. Department of Labor, the benefits of Registered apprenticeship programs, such as the electrician's apprenticeship at Local 229, are numerous and multifaceted.
For employers, apprenticeship programs produce highly skilled workers, reduce turnover rates, increase productivity, lower investment in employee recruitment, increase the diversity of the workforce, and help to establish career progression.
For apprentices and unions, apprenticeship programs enable the apprentice to attain nationally recognized and portable credentials, improve skills and abilities, and attain higher compensation and advancement as both skills and experience progress.
- Responsibility standards and review:
This should be the first step in the bidding process, and pre-qualification should be used where possible to disqualify low road bidders. A standard questionnaire and quantified point system are extremely helpful for this important provision.
- Transparency provisions: There should be clearly defined processes and requirements to ensure transparency in the bidding process, such as a public prequalification system described previously.
- Living wages or prevailing wages: Living wages or prevailing wages promote economic development and help reduce the need for publicly funded assistance to low-wage workers.
- Health benefits for workers: This provision also helps factor in costs that would otherwise be shifted to taxpayers, and helps discourage low-balling contractors.
(For example, the city of El Paso, Texas has found that "while the bids that the city receives from contractors that provide health benefits may tend to be a little higher, the net impact on the taxpayer is about the same because of offsetting public health care system savings.")
- Paid sick days: These reduce costs in employee recruitment and turnover and prevent the spread of illness in the workplace that can cause delays. San Francisco's Office of Labor Standards Enforcement has concluded that "requiring city contractors to provide paid time off that employees may use when they are sick results in a healthier, more stable and more productive workforce."
5. How are registered apprenticeship programs relevant to responsible contracting?
Apprenticeship is a training strategy that has had a remarkably long and successful record in the U.S. for producing highly skilled and educated workers. Registered apprenticeship programs provide an intensive and structured educational program, which combines practical on-the-job training with related academic classroom instruction.
This education and training is very comprehensive. For example, in the unionized building and construction trades, the typical apprenticeship program is four to five years in duration.
6. Why are transparency and prequalification requirements important in responsible contracting?
Ideally, RC language should use a prequalification system so that only those employers who are prepared to meet RC requirements can move on to the bidding process. Experts advise the use of a standard points system and prequalification questionnaire for an impartial review.
Public contracts by states, counties, and municipalities are a critical arena in which the economic well being of both workers and the public at large needs to be supported. It is up to state and local governments to protect the integrity of their communities and assure fairness in public contracting, by developing and implementing responsible contracting requirements.
These will help create a level playing field for contractors who play by the rules and will help protect responsible contractors and their employees from abuses such as employee misclassification.
Responsible contractor language is therefore a versatile and practical tool for providing these protections.
Without such regulation and protections, dishonest contractors will reap their profits at public expense, while taxpayers, responsible contractors, communities, and workers will be the losers.
This document is prepared and adapted as a public service from research done by the Bureau of Labor Education, UMaine, Orono.