President’s Column - It’s All a Matter of Priorities

The cost of federal contractors to accomplish the work of the government is astronomical. Some of the work is that which can not and should not be done by the government, but a lot of it is work that is currently being accomplished more efficiently and more effectively by federal employees. That is the end of my diatribe about contracting out for this article.

Federal Contractors are required to operate under the laws of the land, enforced by the various agencies of the U.S. Government. Agencies that regulate wages, overtime and safety laws, in addition these contractors have to pay all state, local and federal taxes and other fees that might apply. Some of the agencies are the Department of Labor’s Wage and Hour Division; OSHA, OFCCP, the Equal Opportunity Commission and Immigration. Non-compliance with these varied and many agencies should result in the loss of the federal contract. In fact, companies with these types of violations should not be given federal contracts until the issues are resolved.

Yet, many of the contractors are repeat violators of most of the federal, state and local laws and still secure lucrative federal contracts. Even if such “monitoring” is being accomplished for compliance, which is doubtful, it appears to be forgiven and the same violators secure contracts over and over.

A Government Accountability Office (GAO) report has uncovered that more than 33,000 civilian contractors, many of which continue to win new contracts from the federal government – owe more than $3.3 billion in back taxes.

The report, Financial Management: Thousands of Civilian Agency Contractors Abuse the Federal Tax System with Little Consequence (GAO-5-637), investigated 50 civilian agency contractors more closely and found that all of them had “abusive and potentially criminal activity “auditors stated. It reported that businesses failed to forward the payroll taxes they collected from their employees to the IRS, which is a felony.

In one case, a contractor repeatedly opened new business and closed old ones that carried large tax debts for more than 20 years. Federal agencies paid that contractor $1 million in fiscal 2004, despite the fact that he owed almost $9000, 000 in taxes. In another case, a waste collection agency that contracts with the Veteran Affairs Department owes almost $13 million in taxes and the owner has property worth more than $2 million.

GAO auditors said the Treasury Department’s Financial Management Service (FMS), which dispenses and collects money for the government---mismanaged data related to tax collection and in some cases was not even aware of problems until GAO pointed them out. In fiscal 2004, FMS paid $3.8 billion to contractors without recording their proper name, the report stated.

The report recommended withholding payments to contractors if their payment file lacks a proper name. FMS disagreed, saying that withholding might delay payments to contractors who are paying their taxes. The GAO report said that the fact that these contractors have not paid taxes reduces their operating costs, which gives them an unfair competitive advantage against those who are paying their taxes.

There are no statistics that show how many of these same contractors violate the provisions of the Department of Labor’s Service Contract Act, the Davis Bacon Act and other wage and safety laws. Little oversight is accomplished, unless an employee complaint is filed. Other federal agencies such as EEOC and OFCCP and ICE operate similarly. But it appears that laws are being broken or at least bent to the same advantage by these contractors.

DOL’s OFCCP is one of the agencies charged with checking out potential federal contractors for compliance with the discriminatory and immigration laws and do very little of that at present. All Department of Labor agencies are supposed to check for illegal immigrants while conducting their investigations. Checking the INS I-9s against the names on the payroll lists, but has not happened much of late.

With all of this fraud, waste, abuse, non-payment of over $3.3 billion in taxes and potential violations of safety regulations, wage laws, potential discrimination and illegal immigrants, the Administration has by an Executive Order, charged OFCCP to go out and check whether federal contractors have posted and explained the Beck Poster. This is the Poster based on a Court Decision letting employees know that unless the company is a union shop, there is no requirement to join a union.

See, it’s all a matter of priorities! Collecting taxes isn't as important that keeping the union out of the workplace!