Public Report on the Ability of Public Universities and Political Subdivisions in Virginia To Require Contractors To Pay Employees a Living Wage

In 2006, the Virginia Office of the Attorney General issued an erroneous official opinion stating that a living wage “is not related to the goods or services sought to be procured” and thus is not a permissible factor in determining “best value” under the Virginia Public Procurement Act. Another 2002 official opinion applied the same reasoning to find that the Act also bars political subdivisions from requiring contractors to pay a living wage. Several local governments have defied the Attorney General’s interpretation of the Procurement Act and expressed the values of their constituents by imposing living wage requirements in their procurement contracts. Despite the enactment of these local ordinances, uncertainty about the legality of such measures remains. And although the University of Virginia was able to negotiate higher wages without directly challenging the 2006 opinion, public universities can still only wonder whether they have legal authority to include living wage provisions in procurement contracts. This report shows that nothing limits the otherwise lawful public purposes that universities and localities may pursue through their contracting authority. The Procurement Act gives them “broad flexibility” to structure the competitive bidding process, and the “best value” provision’s very purpose is to deliver “the overall combination of quality, price, and various elements of required services that in total are optimal relative to a public body's needs.” Contrary to the Attorney General’s assertions, an ever-growing body of empirical evidence shows that employee wages affect the quality of services rendered. Numerous studies have found that higher pay reduces turnover, improves productivity, lowers operating costs, increases customer satisfaction, and even makes the public procurement process more competitive. Because the Attorney General’s opinions still cast a pall over public bodies’ efforts to ensure that workers receive a living wage, we call on the General Assembly to enact legislation that would expressly authorize minimum employee wage requirements. When drafting the Procurement Act, the General Assembly quite properly believed that public bodies themselves could best weigh competing considerations of quality and cost for procurement contracts. The proposed bill would restore that understanding, and it rests firmly on the large body of empirical evidence linking living wage provisions to better public services and a more competitive public procurement process.