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Yes, He Can Lift Contractor Pay

Jenn Rolnick Borchetta

The “Procurement Act" allows President Obama to pass an executive order to raise the pay for federal contract workers.

In the State of the Union last night, the President announced that he would sign an executive order in the coming weeks to raise the pay for federal contract workers. Before the speech, Republican lawmakers got a jump on attacking such a move and accused the president of executive overreach. “We’re going to watch very closely because there’s a Constitution that we all take an oath to, including him, and following that Constitution is the basis for our republic and we shouldn’t put that in jeopardy,” said Speaker John Boehner. Representative Steve King was a little more colorful, noting “we’ve never had a president with that level of audacity and that level of contempt for his own oath of office.”

The problem for these lawmakers is that they're wrong. This is not only sound policy; it is an order Obama is roundly authorized to issue.

President Obama’s executive authority for this order comes from a 65-year-old statute that has long permitted wide ranging presidential action – the Federal Property and Administrative Services Act of 1949, a.k.a. the “Procurement Act.”

The Procurement Act gives the President broad authority to set the terms of federal contracts. Under this law, the President has the power to prescribe policies and directives that are in his judgment necessary to an economical and efficient system for obtaining property and services. The breadth of power that Congress gave to the President by this statute was meant to guarantee him the same kind of flexibility in determining best contracting practices that characterizes private sector transactions.

An executive order requiring federal contractors to pay federally funded workers a minimum wage is plainly rooted in the Procurement Act—the president is exercising his statutory authority to establish terms for procurement contracts with the federal government. Whether this particular directive is legally proper—that is, whether Obama has exceeded the bounds of his authority under the statute—depends on whether the order (a minimum wage of $10.10 per hour for federally funded workers on federal contracts) has a “sufficiently close nexus” to the goals of economy and efficiency.

The bottom line: The president is within his authority as long he reasonably deems the contract requirements to be related to economy and efficiency.

And those terms—economy and efficiency—are not narrow. Courts have repeatedly said that the President’s authority under the Procurement Act is generous. One court opined in 2009 that the close nexus requirement “mean[s] little more than that [the] President’s explanation for how an Executive Order promotes efficiency and economy must be reasonable and rational.” In over 65 years, this congressional grant of authority to the president has never been found to run afoul of the Constitution.

Importantly, the President does not need to support his exercise of authority under the Procurement Act with proof or evidence or a factual record. And his determination of what is necessary to serve the Act’s goal of an “economical and efficient” system for the procurement of supplies and services is entitled to great deference. Even when reasonable arguments exist that a directive would not serve or would undermine economy and efficiency, the President’s judgment—as long as it has that nexus to the Procurement Act’s goals—prevails.  

Given the wide latitude the President enjoys in setting federal procurement contract standards, this executive order does not exceed Obama’s authority. A fact sheet from the White House lays out the case: A higher minimum wage for federal workers will lower turnover and increase productivity on federal contracts. The number of bidders for government contracts will likely increase, as will the quality of the contracts submitted. Federal contracts will still enjoy—and benefit from – robust competition. Under even a less lenient standard this executive order would surely be appropriate.

In fact, the proposed minimum wage order is far more obviously within the procurement power than many executive orders upheld before it. Prior presidents have used their power under the Procurement Act to require federal contract terms that prohibit employment discrimination and include affirmative action plans; control wages and prices; obligate contractors to post notices to employees about their rights to opt-out of unions; and compel contractors to use a unified system for determining the eligibility of employees to work in this country. If there is a sufficiently close nexus between posting union notices and economy and efficiency—as the federal appellate court in D.C. held in 2003—then there is surely a sufficiently close nexus here.

Obama’s promise to use his executive authority to increase the minimum wage for federal contract workers is a welcome move toward easing national economic inequality. His power to so act is certain.