An Obvious but Important Point Regarding Executive Orders

July 31st, 2014 at 5:52 pm

It was my privilege to visit the White House today to attend the signing of the new Executive Order to ensure that federal contracts don’t go to firms that violate labor laws.

As I wrote earlier, it’s a good idea for a number of reasons:

First, the federal government does a lot of business with private firms, something in the neighborhood of $500 billion per year, and many firms depend on the business. The new order thus raises the cost of labor violations and strengthens the incentives to do the right thing. In so doing, it puts scofflaws at a competitive disadvantage.

Second, since the minority of firms that have shoddy labor practices and/or ongoing labor disputes are likely lousy performers anyway, I suspect this new rule will improve contract efficiency.

As the White House put it: “Contractors who invest in their workers’ safety and maintain a fair and equitable workplace shouldn’t have to compete with contractors who offer low-ball bids—based on savings from skirting the law—and then ultimately deliver poorer performance to taxpayers.”

But here’s something that I didn’t mention which I thought about as I listened to President Obama: the next president could revoke this order day one of his or her term. In fact, it’s common practice to do so, depending of course on the party of the new president.

EO’s are not legislation, and while I know everyone knows this, it’s worth remembering, especially with regards to an EO like this. I suspect that if it lives long enough, the positive impact of this new order will grow over time. It will become part of the embedded culture among firms that contract with the feds that it’s much better for your bottom line if you don’t break labor laws. And it will become a standard practice among procurement officers to enforce that discipline using the information they’ll now have on firms’ histories of such violations.

But that kind of cultural shift will take years to evolve and if the next president revokes this EO, it won’t happen. It’s just a thought worth reflecting upon when contemplating the costs of Congressional dysfunction, the shutting down of legislative options, and the stakes of the next presidency.

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