“It’s Free Money”: D.C. Now Paying Contractors Extra to Hire Local
At least 100 construction industry-types filed into the Capitol View Terrace Lounge at RFK Stadium this morning to hear more details beyond the announcement at the beginning of March: If subcontractors meet a baseline of 35 percent of hours worked by District residents, they could make 10 percent of the total wages paid to those workers. General contractors that comply could get an additional five percent of their design-build fee. To help out, they've got a list of 300 pre-vetted job candidates, and will be holding job fairs in the wards where the six school projects are located.
The economics of the pilot are compelling. Under standard labor cost assumptions, subcontractors on a project worth $3 million could collectively earn a $26,000 bonus, just for meeting the 35 percent hours-worked mark.
"It's basically free money," an OPEFM official told the group. "All you have to do is adhere to the goals set out for the program."
The pilot is the brainchild of Allen Lew, whom Mayor Vince Gray plucked from leading OPEFM–which itself is not long for this world–to be his City Administrator. At the info session, Lew was clear that if this thing works, he'd like to make it standard operating procedure for the $5 billion in capital projects coming over the next five years.
I asked him about my concern when the pilot was announced: Why hand out bonuses for doing what the District's poorly-designed First Source law was intended to do? And how will this jibe with Council Chairman Kwame Brown's proposal to dock contractors for not meeting standards for hours worked by District residents?
Lew said the two approaches were "compatible," and would just serve as both a carrot and a stick. But it still seems that if the District had established a precedent of enforcing the First Source law in the first place, then it would be more believable when it tweaked the law to actually get more District residents hired, and wouldn't have to use incentives that would inflate construction budgets by $50 million if applied to the next five years worth of capital projects.
Lew's OPEFM was generally a well-respected outfit, and I don't doubt his pilot program will work. But really: Isn't the contract itself is the reward? Shouldn't hiring District residents, provided that job training resources are available, be a matter of course?
You didn't have to be a contractor to be happy about the new incentive program. During the Q&A, one entrepreneur stood up and announced he would be launching a "workforce aggregator," which would allow firms to outsource their vetting and hiring of District residents.
"It's got to happen, and I see a way to get paid doing it," said the businessman.
"You're going to be the most popular guy in the room!" Lew quipped.