Contractors' Use of Foreign Labor on Federal Contracts

GAO responded to concerns about the Navy's use of small business contractors who allegedly employ foreign labor in the performance of Government contracts outside the United States.

After reviewing pertinent laws, GAO concluded that none of the Navy procurements mentioned in constituent complaints violated these statutes. The Walsh-Healey Act is limited to supply contracts and would not prevent a contractor from hiring foreign labor. The Davis-Bacon Act is not applicable to contracts performed in foreign countries and, therefore, would not apply to an American base overseas. The Service Contract Act is limited to contracts within the United States and its territories and expressly excludes U.S. bases within foreign countries. The Buy American Act does not address the issue of American or foreign labor, only the issue of American or foreign material. Also, the nationality of the company is not germane to Buy American Act determinations. While many laws have been enacted dealing with labor in Federal procurement, it is permissible for a contractor to use foreign labor in the performance of a Government contract overseas. The Small Business Administration (SBA) is authorized to make the small business size and status determinations for Federal procurement. Thus, the contract will not be awarded in the procurement in question until SBA certifies that the contractor qualifies as a small business.