Can Virginia cities and counties require government contractors to pay a living wage above the state minimum?

Plain-English summary

Senator Jennifer Boysko asked whether Virginia public bodies could write a living-wage requirement into procurement solicitations. The AG concluded that the Virginia Public Procurement Act (VPPA) gives public bodies discretion to do so. Two prior AG opinions (2002 and 2006) had concluded the opposite, but the 2020 opinion expressly explains that those rested on the pre-2015 "price-centric" model of the VPPA, which the General Assembly abandoned when it removed the requirement that public bodies make a written determination before using competitive negotiation instead of competitive sealed bidding.

The current VPPA gives public bodies "broad flexibility in fashioning details" of competition (§ 2.2-4300(C)), authority to set "any other criteria ... which are helpful in determining acceptability" (§ 2.2-4302.1(4)), and discretion under § 2.2-4302.2 to select the offeror whose proposal "best meets the needs" of the body. The AG also points to evidence (San Francisco Airport study, UMass Pol. Econ. Research Inst. analysis) that living-wage requirements can reduce turnover and improve service quality. The General Assembly's separate prevailing-wage requirement at § 2.2-4321.3 (effective May 1, 2021) confirms that worker-wage standards are within the scope of legitimate procurement considerations.

The decision to include or not include a living-wage requirement remains a policy choice by each public body, bounded by the body's procurement needs.

Currency note

This opinion was issued in 2020. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

The VPPA's stated policies (§ 2.2-4300) include maximum competition, broad flexibility for public bodies, and acquisition of high-quality goods and services at reasonable cost. The only specific limitation on solicitation requirements is that "specifications reflect the procurement needs of the purchasing body rather than being drawn to favor a particular vendor."

Section 2.2-4302.1 governs competitive sealed bidding: the Invitation to Bid must include "specifications and contractual terms and conditions" and "a statement of any requisite qualifications of potential contractors." There is no enumerated limit on what can be included in those specifications or qualifications. Section 2.2-4302.2 governs competitive negotiation, with similarly broad flexibility ("including any unique capabilities, specifications or qualifications that will be required").

The 2015 amendments to the VPPA removed the rule that price must be the primary criterion. Public bodies can now choose between sealed bidding and competitive negotiation freely. The two prior AG opinions (2002 Op. Va. Att'y Gen. 13 and 2006 Op. Va. Att'y Gen. 5) that excluded living-wage requirements assumed the price-centric model. They are superseded to the extent they relied on that model.

The opinion stops short of saying procurement is a general tool for social or economic policy. It says wages may be a legitimate procurement consideration "where the wages paid to persons performing services or creating goods may be an important factor in meeting the procurement needs of the agency."

Common questions

Q: My city council wants to add a living wage requirement to all city contracts. Can it?
A: Per this 2020 opinion, yes, the VPPA gives the council that discretion. The requirement should be tied to the procurement needs of the city, not a stand-alone economic-policy mandate, but the council has broad flexibility to define those needs.

Q: Are public bodies required to include living-wage requirements?
A: No. The opinion gives discretion in both directions. A public body can include the requirement, exclude it, or scope it to certain contract categories.

Q: What's the difference between a living wage and a prevailing wage?
A: A living wage is a locally determined minimum hourly wage intended to cover basic cost-of-living needs. A prevailing wage is the wage typically paid for similar work in the locality, often set by Department of Labor surveys. Virginia's § 2.2-4321.3 created a prevailing-wage mandate for certain public works contracts.

Q: Does this opinion overrule the 2002 and 2006 AG opinions?
A: Yes, in substance. The 2020 opinion says the earlier opinions were tied to a price-centric VPPA model that the 2015 amendments eliminated. Public bodies should rely on this 2020 opinion for current authority.

Q: How is a living-wage requirement enforced in a contract?
A: Typically through contract terms (a representation, a certification, an audit right, and a remedy clause). The procurement solicitation would specify the wage floor, and the contract would build in compliance mechanics.

Citations and references

Statutes:

• Va. Code § 2.2-4300 (VPPA policy)
• Va. Code § 2.2-4302.1 (Competitive sealed bidding)
• Va. Code § 2.2-4302.2 (Competitive negotiation)
• Va. Code § 2.2-4303 (Methods of procurement)
• Va. Code § 2.2-4321.3 (Prevailing wage)

Prior AG opinions superseded in part:

• 1992 Op. Va. Att'y Gen. 38
• 2002 Op. Va. Att'y Gen. 13
• 2006 Op. Va. Att'y Gen. 5

Sessions law:

• 2015 Va. Acts ch. 760 (VPPA amendments removing the price-centric default)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2020/20-056-Boysko-issued.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Mark R. Herring
Attorney General

December 28, 2020

The Honorable Jennifer B. Boysko
Member, Senate of Virginia
730 Elden Street
Herndon, Virginia 20170

Dear Senator Boysko:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You ask whether a public body may include in a solicitation issued pursuant to the Virginia Public Procurement Act a requirement that the successful bidder or offeror pay its employees or contract workers a minimum wage or living wage, other than the wage levels required by federal and state law.

Applicable Law and Discussion

The purpose of the Virginia Public Procurement Act[1] is "to enunciate the public policies pertaining to governmental procurement from nongovernmental sources."[2] Among the policies expressly enumerated in the Procurement Act are "that competition be sought to the maximum feasible degree, ... [and] that individual public bodies enjoy broad flexibility in fashioning details of such competition."[3] One of the express objectives of the Procurement Act is "that public bodies in the Commonwealth obtain high quality goods and services at reasonable cost."[4] The only limiting language in the Procurement Act directly applicable to a public body[5] establishing the requirements for a solicitation is a statement of the general principle "that specifications reflect the procurement needs of the purchasing body rather than being drawn to favor a particular vendor."[6]

The Procurement Act generally requires public bodies to procure contracts for goods and services through either competitive sealed bidding or competitive negotiation.[7] The processes for competitive sealed bidding and competitive negotiation found in §§ 2.2-4302.1 and 2.2-4302.2, respectively, include broad and flexible language about what specifications and requirements are to be included in solicitations. The section of the Procurement Act specific to the competitive sealed bidding process (§ 2.2-4302.1) directs a public body to include in its written Invitation to Bid "the specifications and contractual terms and conditions applicable to the procurement" and "a statement of any requisite qualifications of potential contractors."[8] That section of the Procurement Act contains no language that limits or narrows the range of "specifications" or qualifications that a public body may include in the Invitation to Bid. Likewise, the section of the Procurement Act specific to the competitive negotiation process (§ 2.2-4302.2) imposes no limitations on the broad discretion afforded a public body when issuing a "written Request for Proposal indicating in general terms that which is sought to be procured, ... including any unique capabilities, specifications or qualifications that will be required."[9]

With respect to a public body's evaluation of bids and proposals, and its award decisions, the Procurement Act also affords public bodies certain broad discretion. Section 2.2-4302.1 of the Code, which applies to the competitive sealed bidding process, provides that the evaluation of bids can include "any other criteria [as set forth in the Invitation to Bid] ... which are helpful in determining acceptability."[10] When making award decisions under the competitive negotiation process, the Procurement Act requires that the public body rely on its opinion of which proposal best meets the needs of the public body based on the requirements and factors in the solicitation: "After negotiations have been conducted with each offeror so selected, the public body shall select the offeror which, in its opinion, has made the best proposal and provides the best value, and shall award the contract to that offeror."[11]

Taken together, these provisions of the Procurement Act afford public bodies broad discretion in determining the specifications, qualifications, and other requirements that form the foundation of a solicitation for goods and services, consistent with the Act's policies and objectives. Accordingly, each public body is best suited to make decisions about what requirements and specifications are needed to obtain the goods and services that will meet "the procurement needs of the [public] body."[12]

The same analysis applies in the case of a solicitation requirement that the successful bidder or offeror pay its employees or contract workers a living or other minimum wage. Nothing in the Procurement Act or other applicable law categorically prohibits public bodies from including such a requirement in its solicitations. There is no legal basis upon which I can conclude that public bodies lack the discretion to determine whether a living wage or other minimum wage requirement is properly included in solicitations under the Procurement Act. Such a determination is bounded by the procurement needs of the public body with respect to the goods and services being procured.

Two prior Attorney General opinions have addressed the requirement of a living wage in a solicitation under the Procurement Act. A 2002 opinion of the Attorney General concluded that "a 'living wage' requirement is unrelated to the goods or services to be procured and, therefore, is not authorized under the Virginia Public Procurement Act."[13] Similarly, a 2006 opinion stated that "[t]he amount of wages paid by a private contractor to its employees does not affect the needs of a public body or the quality of the product or services," and concluded that "the Virginia Public Procurement Act does not authorize the requirement of a living wage in the public procurement process."[14] The conclusions in both opinions rely heavily on the price-centric model of the Procurement Act that was in place prior to 2015, which generally mandated that "price should be the primary criterion in the award of public contracts."[15]

The prior opinions cite no support for the statements that the wages of employees and contractors is unrelated to the quality of the goods or services being procured. In fact, there is evidence demonstrating that payment of a living wage by employers often improves the quality of goods or services produced.[16] This is due to the effect a living wage generally has in making employees more productive, reducing turnover, and decreasing costs, which in turn often improves the quality of the goods and services produced.[17]

Moreover, even if the prior opinions were correct at the time they were written under the price-centric model of the Procurement Act, they would be superseded by legislation enacted by the General Assembly in 2015 that abandoned the price-centric model. Prior to 2015, the Procurement Act set a default for public bodies to award contracts to the lowest responsive and responsible bidder using competitive sealed bidding.[18] Public bodies could utilize competitive negotiation, and thereby award contracts based on factors other than price, only after making a written determination that "competitive sealed bidding is either not practicable or not fiscally advantageous to the public."[19] The General Assembly removed this requirement in 2015, allowing public bodies to freely choose between competitive sealed bidding and competitive negotiation. This amendment demonstrates a clear expression of the General Assembly that price is not required to be the primary factor, but rather may be one among many that a public body uses to make a decision to award a contract.[20]

Accordingly, the 2015 amendment removed any doubt that a public body can adopt a living wage requirement to meet its procurement needs, because it made clear that such a requirement is not inconsistent with the general policies of the Procurement Act.[21]

Conclusion

Accordingly, it is my opinion that the Procurement Act provides public bodies with the discretion to determine whether it is appropriate to include in a solicitation the requirement that a successful bidder or offeror pay its employees or contract workers a minimum wage or a living wage, other than the wage levels required by federal and state law.

Ample evidence exists to show that a living wage requirement can improve the quality of goods or services obtained by a public body. Further, the amendments to the Procurement Act made by the General Assembly in 2015 make clear that adoption of a living wage requirement by a public body to meet its procurement needs is permitted.

With kindest regards, I am,

Very Truly Yours,

Mark R. Herring
Attorney General

1. VA. CODE ANN. §§ 2.2-4300 to -4377.
2. VA. CODE ANN. § 2.2-4300(B).
3. VA. CODE ANN. § 2.2-4300(C) (emphasis added).
4. Id.
5. This opinion applies to all public bodies whose procurement authority is governed by the provisions of the Procurement Act. See VA. CODE ANN. § 2.2-4301 (defining the term "public body").
6. Id.
7. VA. CODE ANN. § 2.2-4303.
8. VA. CODE ANN. § 2.2-4302.1(1).
9. VA. CODE ANN. § 2.2-4302.2(A)(1).
10. VA. CODE ANN. § 2.2-4302.1(4). Although competitive sealed bidding requires award to the "lowest responsive and responsible bidder," the discretion to broadly set requirements, qualifications, terms, and other criteria can significantly impact responsiveness and responsibility.
11. VA. CODE ANN. § 2.2-4302.2(A)(3).
12. VA. CODE ANN. § 2.2-4300(C).
13. 2002 Op. Va. Att'y Gen. 13, 15.
14. 2006 Op. Va. Att'y Gen. 5, 7, 8.
15. 1992 Op. Va. Att'y Gen. 38, 39.
16. See, e.g., Michael Reich, Peter Hall & Ken Jacobs, Living Wage Policies at the San Francisco Airport: Impacts on Workers and Businesses, 44 INDUS. RELATIONS 106, 136 (2005) (noting that implementation of a living wage requirement at the San Francisco Airport significantly decreased turnover, improved job performance and productivity, and increased customer satisfaction); MARK D. BRENNER & STEPHANIE LUCE, LIVING WAGE LAWS IN PRACTICE: THE BOSTON, NEW HAVEN AND HARTFORD EXPERIENCES 16 (Univ. of Mass., Pol. Econ. Research. Inst., 2005), available at http://www.peri.umass.edu/fileadmin/pdf/research_brief/RR8.pdf ("Evidence ... shows that living wage ordinances can boost municipalities' satisfaction with service contracts. In Multnomah County [Oregon], the contractor's performance rating rose from 2 out of 5 before the living wage to 4 out of 5 six months after it took effect."); see also NOOREEN REEZA, ELIZA SCHULTZ & J.H. YERKERKE, PUBLIC REPORT ON THE ABILITY OF PUBLIC UNIVERSITIES AND POLITICAL SUBDIVISIONS IN VIRGINIA TO REQUIRE CONTRACTORS TO PAY EMPLOYEES A LIVING WAGE (Univ. of Va., Feb. 20, 2020), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3541394 (discussing the San Francisco Airport study). A living wage requirement can also function on the front end of the procurement process by attracting a better quality pool of bidders or offerors: that is, bidders or offerors producing better quality products or services that might otherwise have avoided applying due to the likelihood of being undercut by lower-quality firms solely on the basis of price. See Brenner and Luce, supra, at 21-23.
17. See supra Reich, Hall & Jacobs, at 136; Brenner and Luce, at 16. Thus, while I do not conclude that the Procurement Act broadly authorizes public bodies to implement their own social or economic policy goals through their procurements, the wages paid to persons performing services or creating goods may be an important factor in meeting the procurement needs of the agency.
18. See § 2.2-4303(C) of Chapter 760 Acts of Assembly (2015).
19. Id.
20. See, e.g., VA. CODE ANN. § 2.2-4302.2(A)(3).
21. Notably, the General Assembly has taken notice of workers' wages when requiring a prevailing wage for public works contracts. VA. CODE ANN. § 2.2-4321.3 (eff. May 1, 2021).