Why Federal Contracts Matter for Good Jobs

Federal contracts are a powerful tool for promoting fair wages, safe working conditions and domestic economic growth — yet they’re under renewed scrutiny after recent actions by the Trump administration.

Federal agencies spend taxpayer dollars through contracts with private companies to deliver products and services — everything from road repairs to clean energy projects and humanitarian aid. Congress controls this spending, setting rules that direct how these public dollars are used.

One of the most important rules is that federal contractors must follow strict labor standards. As the U.S. Department of Labor explains, these measures make sure that companies “cannot exploit their workforce using federal—public—dollars.” When federal money pays for a project, everyone involved — from direct employees to independent contractors — must be paid at least the prevailing local wage and receive proper benefits.

This isn’t new. The Buy American Act of 1933 required agencies to purchase “domestic end products” and use “domestic construction materials,” with the goal of ensuring taxpayer dollars stay in the U.S. economy. Other landmark rules — like the Davis-Bacon Act — protect construction workers by guaranteeing they’re paid local prevailing wages and benefits for government-funded work.

Newer laws continue this mission. The Inflation Reduction Act of 2022 extended Davis-Bacon wage protections to qualifying clean energy projects, ensuring workers on solar, wind and other green jobs earn a fair living.

And protections go beyond wages. Executive Order 13706 established paid sick leave for federal contractors, while Section 503 of the Rehabilitation Act requires them to take proactive steps to recruit and employ people with disabilities. The Vietnam Era Veterans’ Readjustment Assistance Act ensures protected veterans get a fair chance at quality jobs too.

These rules don’t just help workers directly on federal projects. They raise the bar for private employers too — companies that want to compete for the same skilled workers often improve pay and conditions to match federal standards.

“What starts out as a transfer of funds from the public to the private company to produce something for the U.S. government turns out to be a vital mechanism to secure quality employment across the United States,” the original text notes.

One clear example is USAID’s long-term contract with Edesia, which makes fortified peanut butter packets that feed malnourished children worldwide. Edesia’s founder, Navyn Salem, explained that their USAID contract required all ingredients to come from the U.S. — “the dairy was sourced from Massachusetts farms, the peanuts from Georgia, the soy flour from Iowa, and the vitamin and mineral premix from New York.” The packets are made in Rhode Island, where 160 people are employed because of that contract.

But the system only works if those protections are enforced — and recent moves threaten to unwind them. On March 14, 2025, President Trump signed Executive Order 14236, which revoked Executive Order 14026 that had raised the minimum wage for federal contractors. As a result, the U.S. Department of Labor is no longer enforcing that wage floor.

This change, critics argue, risks lowering pay and job quality for thousands of workers whose livelihoods depend on federal projects. It also affects local suppliers — from farmers to packaging makers — who benefit when federal contracts require American-made materials.

When stop-work orders hit, they ripple outward. For example, when USAID halted Edesia’s production, it didn’t just impact hungry children overseas — it disrupted supply chains across Georgia, Iowa, Massachusetts, New York and Rhode Island. Workers lost income, and local communities lost economic activity.

Federal contracts remain one of the most direct ways the government can support good American jobs — but only if strong wage and sourcing rules stay in place. Without them, the guarantee of quality jobs, fair pay and domestic investment may fade, harming communities big and small.

Key takeaway

Federal contracts are more than transactions — they’re a vital lever for building a fairer, stronger U.S. economy.

Originally reported by Anne Marie Brady in ILR Carow.