The President plans to increase Government Contractor minimum wage requirements from the Federal minimum of $7.25/hr to $10.10/hr; a 39% increase. This will, in effect, materially change the conditions under which every Federal Government Contract has been negotiated, necessarily forcing every contracting office in the Government to negotiate new terms for existing contracts to reflect the new Executive Order.
Largely, this will not have a significant impact on the big ticket items the Government contracts out for; for instance, weapons, IT services, marketing support, etc, because every one of those contractors will be drawing an income well above the $10.10/hr being pushed by the President. However, this will have a significant effect on existing contracts for low skill labor contract services provided to the Government under thousands and thousands of contracts providing services ranging from food preparation and service to janitorial and non-For Official Use Only administrative services (read: paper pushers).
Having first hand experience with every aspect of the Governmentally contracted labor force this sort of Executive Order will affect, I can speak to specific, detrimental effects associated with this sort of misguided ploy to “improve the livelihoods of the working poor”, or whatever hogwash is applied to the plight of the low skilled contract labor force for the Federal Government.
When this Executive Order goes into effect (because it will, and because it will not be challenged by the House, as it should be), the President will have effectively committed the Executive Branch, and thereby, the entire Federal Government, to a mass re-negotiation of all existing Federal Contracts impacted by this Order. That will have wide reaching effects, the least of which will cause every Contracting Agency to either consider in-sourcing the services provided (due to a lack of commensurate increase in budget to cover the added costs from Congress), or a significant reduction in the services purchased through Contract from the providers. Nearly every Contract involved in this mess will have to be re-bid, and the asking price for every new bid will be outside of the already constrained budgets of the Agencies involved, either as a result of the recently rescinded Sequestration, already reduced budgets as a result of Congressional and Executive action, or due to consistently constricted budgetary climate through year upon year of reduced funding through Appropriations Legislation at the Congressional Level.
Speaking from experience, I will be able to point to a very clear and present danger to the entire Coast Guard’s means of feeding and caring for the facilities janitorial services of nearly its entire shore facility asset complement. All large installations have contracted Food Service facilities, and nearly all shore facilities with over 100 attached members have janitorial services provided by contracted labor. These positions do not make the contracting entity any money unless they can develop efficiencies in how the services are provided, and the way they do so is to ensure their labor force is made up of special needs individuals, which, as a matter of Federal Law, have special considerations mandated into their compensation. Where these services are not able to be provided through the labor of special needs individuals the contracting entity pays minimum wage (where their locality allows), and the efficiencies that allow for the contract to result in a profit for the contracting entity are found elsewhere; generally in the quality of work, the frequency that quality of work is provided, etc.
Make no mistake; the President is not attempting to help anyone in his effort to “help the little guy”. His efforts will, predictably, cost the Government, and thereby, the Taxpayer, more money in the long run, and will result in a reduction in service quality and/or an elimination of some contracts that will invariably grow outside of the budgetary ability for their host Agency to afford given their unaltered budgetary constraints. You see, although the President can change how contracts are written, he cannot change how much money Congress has allotted to those Agencies that can write those contracts. They will still be forced to live within the means Congress has provided them.