Background

Responsible Contractor ordinances or policies are adopted by municipalities, school districts, or other entities in order to set certain minimum compensation and other standards in bidding practices for construction work.

The standards often include requirements for contractors to:

• participate in state or federally-certified apprenticeship programs
• 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.”

Investments in union labor are shown to have pay-offs for capital projects in the United States. In fact, “union labor delivers lower and more predictable project costs.” (Independent Project Analysis)

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. The Lehigh Valley Building Trades & Construction Council and its partner contractors play a vital and critical role in 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!