Effort to advance the movement to regulate public contracts
-The situation surrounding the issue and the present stage and future of our movement

By Committee for the Promotion of the Movement to Regulate Public Contracts, National Confederation of Trade Unions (Zenroren)


1. Introduction: Issues involved

Amid the economic downturn, the national and local governments are called upon to play their role in defending the livelihoods and jobs. Secure policies, quality administration, public works programs and various services for residents can be ensured by guaranteeing workers for the public sector and public works-related workers equitable treatment in terms of wages, working conditions and job security.

The National Confederation of Trade Unions (Zenroren) has launched a movement to regulate public contracts so that they are fair and equitable. It has joined forces with members of various unions participating in the Joint Spring Struggle Committee to raise this demand and carried out various activities, including petitions to the national and local governments. Zenroren has called on other labor organizations and movements to join their forces in an active campaign. National and local authorities have also made certain efforts on this issue. We have called on local assembly members as well as Diet members, who share the same awareness of the importance of this issue, to take up our demand. Some municipality heads have decided to implement policies in support of our demand. All this shows how the movement to make public contract work fair and equitable is growing steadily.

However, the present government’s stance on the issue of public contract work will never allow us to be optimistic. The ruling Democratic Party government put the Fundamental Law on Public Services into force in 2009. The law requires the national and local authorities to make efforts to implement measures necessary to secure appropriate working conditions and work environment for workers in public services so that safe and quality public services will be provided appropriately and without fail.

On the other hand, however, the government is pushing ahead with so-called “public services reform” with emphasis on competition and cost-effectiveness, paving the way for the private sector to take up public services. Calling for a “small government”, it is moving to further carry out personnel cuts in the services and cutbacks in expenditure on public-services-related projects. Eliminating wasteful use of tax money is important. Look at the budget screening process and you will see cutbacks in spending being recommended for areas where short-term profits are not expected. Screening officials are also blatant in calling for reductions or abolitions of programs without regard for workers’ well-being. This is how workers’ and the general public’s basic rights and livelihoods are being left without any security.

The government is also promoting so-called “local sovereignty reform.” It sounds good when the government says local residents will deal with various local problems on their own judgment and responsibility. But the government’s true intention is to lower the standards for receiving public assistance guaranteed by the government, to remove restrictions on the usage of state subsidy to local government so that local authorities can decide on its use, making it easier to carry out large-scale development projects. Labor-related affairs and management of rivers and national highways would be transferred to local jurisdiction. Criteria for urban development, regulation of land use, equipment and management of children's facilities, medical services, nursing care, and livelihood protection would be established in each municipality. This raises concerns that there can be big regional differences in public protection and public services under the constitutional rights.

We must work hard to boost the movement in local communities to reject the "structural reform" policy that undermines our livelihoods as well as the right to work. The movement demanding that public contractors give workers just treatment aims to stop the “structural reform” as its immediate goal and to develop a grassroots movement unifying unions, civic organizations and individual residents. This article discusses where we stand now in this movement, focusing on local ordinances and guidelines for public contracts. But the goal of this movement is to secure jobs and ensure proper working conditions for employees of public contractors and to enhance the quality of jobs instead of seeking to get ordinances or guidelines established. This is also the way to form a local community consensus by residents, administrative authorities, local legislature, service operators, and workers regarding local administration and public services, and business operations that the community needs. Forming “local consensus” will help change public opinion. The public will pay attention to the present structure of mutual bashing that pits national government employees against local government employees, public sector workers against private sector workers, and full-time regular workers against contingent workers. This has important bearings on the taxation system, fiscal policy, the role of local governments and the national government, and large corporations’ social responsibility. This is the starting point of Zenroren’s movement for a welfare state structured on employment and social security services.


2. Accidents and disruption of employment in public contract work
--How can we approve public services that don’t protect residents?

In defending the residents’ safety and livelihoods and in securing jobs and supporting local economies, the national and local governments have important roles to play in providing administrative services, public works projects and public services. However, serious problems arise on the ground. Due to budget cuts, the prices of public works projects, outsourced work, and supplies are falling, which in turn lead to cutbacks in wages and working conditions. The unit price of designing-related work in public works projects has fallen 30 percent in the last 10 years. In outsourcing, the highest winning bid is somewhere around 30 percent. Some janitors’ wages have fallen to minimum wage levels. Some people employed by the “Senior Manpower Center” (for senior citizens) are forced to work for wages lower than the minimum wage on the grounds that they are “NOT WORKERS,” or even left without being paid work-related accident insurance.

The national government and many local governments, which are outsourcers, give these practices tacit approval saying that they are not in a position to intervene in labor relations in the private sector or in contracts between private sector businesses. They even go as far as to hire many low-paid contingent workers without job security, forcing them to do the same work as full-time regular workers do.

“Market testing” and the “designated administrator system,” and the “private finance initiative” system are paving the way to privatize public services. Competition based on market forces and the profit-first principle is causing adverse effects. Competitive bids for public contracts will result in forcing workers to work at lower wages. A company’s failure to win a successful bid might lead to dismissals of workers. Without clear prospects for their business for the future in sight, companies participating in bids would not employ workers until they win a successful bid. Such companies in most cases use term-fixed workers or independent contractors. This way of doing business only helps to rapidly increase working poor.

This question affects not only workers. Contractors might withdraw from work before the term of contract expires. Slipshod work might result in a collapse of the roof. There can be accidents resulting in the death of workers at worksites which are not directly supervised by the local government. These problems will cause financial difficulties to business contractors and endanger the residents’ safety. There have been cases in which local government officials were dismissed from their posts because they were found responsible for accidents caused by contractors’ sloppy safety measures.


<Some of the cases of accident and damage to residents>

(1) In June 2010, a girl junior high school student died when a boat was capsized while being towed during a training session in a bad weather, as part of the school curriculum, at a Shizuoka prefectural facility, Mikkabi Youth House at Lake Hamana. The prefecture had outsourced the administration and management of the facility to ShoPro, a subsidiary of Japan's largest publishing houses: Shogakukan Inc., Shueisha Inc. and Hakusensha Inc., under the designated administrator system in April. ShoPro conducted no training for boat towing, which had been done until it was outsourced by the prefecture. The administrator had no manual for accidents. Clearly, safety management was a major problem.

(2) In 2009, a 29-year-old worker died when his head was caught by a pole of a basketball goal at Kusanagi Sports Park, a sports facility in Shizuoka Prefecture run by a designated administrator. Although it had been found that the basketball goals had serious problems due to their ageing, the administrator did nothing to solve them

(3) In October 2009, at the “Granship” complex of cultural facilities and convention halls in Shizuoka Prefecture, visitors found stone material on the exterior walls fallen off. The prefectural authorities later admitted that there had been 40 such cases in the same building. In February 2010, concrete lumps fell off at ECOPA Stadium, which is a part of a multipurpose sports park in Fukuroi City, Shizuoka Prefecture. In March 2010, the ceiling board fell off at the Shizuoka Prefectural Swimming Pool. No one was injured in both cases.

(4) In 2006, a 7-year-old girl died after being sucked into a municipal swimming pool's intake pipe in Fujimino, Saitama Prefecture. The management of the swimming pool was outsourced to a private company, Taiyo Kanzai. This company was outsourcing life guard services and the maintenance of the facility to another company in violation of a contract with the city. The accident was apparently a result of the company’s irresponsible management practices. The city administration’s division chief and section chief were dismissed to take responsibility for the incident.

(5) Kokubunji City in the western suburb of Tokyo contracted out garbage collection to a local company. The Tokyo Metropolitan Government outsourced water meter reading work to a company. These companies were awarded contracts each at a low price. But the contracts were cancelled because they were unable to continue with the work.

(6) In Saga Prefecture, the prefectural authorities contracted out the lunch service for public child care centers but the contractor used uniform lunch boxes and unable to deal with children with allergic problems. As a result, a child with allergy problems was taken to hospital in an ambulance. In Saitama Prefecture, after school lunch services were outsourced, glass pieces were found mixed in meals.

(7) Saitama Prefecture replaced an experienced contractor for the management of the tap water pump with one that would provide services at a cheaper price, but due to the decrepit facility, the new contractor was unable to operate it. As a result, a rain gust caused a reverse current in sewage water damaging the area's houses.

<Problems: falling prices, employment, and wage cuts>

(1) Shiga Prefecture hired temporary workers as school lunch staff, school janitors and school bus drivers and renewed their contracts over again. But it terminated the contracts of all 160 temporary workers. Fifty of them were transferred to other jobs. (But a year later, they became independent contractors.) The prefecture recruited new temporary workers but did not accept the former temporary workers.

(2) In Okayama Prefecture, a company that was awarded a contract four years ago for a city's service at 942 yen per hour was found to have had a worker do the job for 800 yen per hour. And two years ago, another company was awarded a contract for the same job at 921 yen per hour. As a result, the hourly wage was reduced to 750 yen. The resident service department of a city, which had hired temporary workers at 800 yen per hour, turned to another staffing agency that offered to provide temporary workers at 700 yen per hour, and many temporary workers chose not to continue to work there.

(3) In Saitama Prefecture, in electricity equipment-related work, a little more than ten companies always offer the lowest acceptable price, which is 85 percent of the cost estimates. Consequently, contract has been awarded by lots in more than 10 past bids. A local company says, "Due to slow demand, we are forced to be ready for suffering deficit. Contracts for public works projects won't pay." Another company says, "Wages for workers in public works projects are lower than private sector wages by 866 yen per day.”

(4) In Kyoto Prefecture, a city requires contractors to collect advertisements to be run in the city's bulletin if they wish to be awarded contracts. They would be asked to pay for six such advertisements. If a contractor was unable to collect such ads, it will be forced to pay the cost of ads.

(5) In Tokyo, falsework engineers are participating in low-price bidding.

(6) A local government designated an administrator for a public facility, which cut labor cost by 20 percent. As the result, the employees’ annual income decreased by 1.4 million yen.

(7) Cleaning of parks, which had been done by aged workers in accordance with the Law for the Stabilization of Employment of the Aged, was put up for a competitive bidding, and the workers were thrown out of work. The local authorities have refused to meet union representatives to listen to the protesting workers.

(8) The director of a public library in Tokyo, which came under a designated administrator, was fired on the grounds that his effort to improve the services required too much overtime work.

(9) A worker who had been working at a construction site near the Diet members’ office building came to seek advice from counselors for temporary workers who have been dismissed. The man, who lived in a bullpen, complained about being low paid by a subcontracting firm.

(10) There are about 148,000 non-permanent employees working at government ministries and agencies, including their outpost agencies. About 50 percent of them receive only about 1.6 million yen a year, which is so low that many of them have to take up another job. About 25,000 people have day work, renewing work contract every day.

(11) In local governments, contingent workers (part-time, temporary, and so on) account for 20 percent of their workforce. A survey on local governments shows that temporary office workers are low-paid, ranging between 800 yen and 1,133 yen per hour, and the average is 870 yen. Those cities that pay 1,000 yen per hour do not pay workers travelling expenses. In Saitama Prefecture, temporary teachers are paid just 1,210 yen per hour. A teacher depends on welfare assistance because he would not be able to work five hours.

These are just some of the many problems regarding public contracts. These kinds of problems are everywhere throughout Japan, in national government offices and local governments.

Far from trying to improve these situations, the government is accelerating cutbacks in public services. Due to fiscal difficulty, the government is seeking to bring the government’s hidden money into sharp relief through screening the government’s spending and making it more effective. Fiscal crunch has been caused by a policy of shifting the financial burden onto working people instead of being fair in levying taxes from large corporations that amass huge amounts of profits and from the wealthy. Prime Minister KAN Naoto’s government has put forward a “new growth strategy” that includes new corporate tax cuts. It has no intention of ending the pro big business policy.


3. Progress has been made in the effort to regulate public contracts

The on-going serious situation, which even includes fatal accidents, local government heads, administrative authorities, companies on public contracts, workers, and residents are questioning whether public works can be carried out at a low cost by disregarding the quality of work. This is why the call for an ordinance regulating public contracts and for reform of bidding system is spreading throughout the country.
Since several years ago, a number of local governments have been making efforts to ensure that workers at companies on public contracts are reasonably paid. Hakodate City has established a rule to have the contractor provide the grounds for its cost estimate and carry it out. Kumamoto City uses the pay scale for local government employees to estimate labor costs. Shizuoka City estimates costs requiring the contractor to pay wages of the same level as wages for private sector workers on similar jobs. In these cases, labor cost estimates are made open, and this helps maintain certain wage levels for workers. In some municipalities, including Osaka’s Toyonaka City and Tokyo’s Hino City, contracts are awarded based not only on price but also on workers’ wages, job security and concerns for people with difficulty finding jobs.

In Amagasaki (Hyogo Prefecture), a group of local legislators worked to enact the nation’s first public contract ordinance, but their proposal was turned down by the city assembly in May 2009. Nevertheless, this effort and the debate between these assembly members and the mayor contributed to making clear legal issues involved in a public contract ordinance and played an important role in helping enact an ordinance in Noda City (Chiba Prefecture). This whole process confirmed that the minimum requirement imposed by an ordinance on wages is not a provision to be enforced by the power of public authorities but one based on civil code that comes into force only when there is an agreement between contracting parties and that it does not run counter to the minimum wage act or the constitutional principle of being governed by the Labor Standards Act. This “discovery” will make the use of a public contract ordinance more effective. It is possible to establish various pro-labor provisions, make their observance prerequisite for participating in bidding and include them in the awarded contract. That can be the way to foster the business operator as a “socially good business operator.” This means that local government that the ordering party should be creative when contracting out its work.

The past year has witnessed progress in the effort to improve public contracts, using the various attempts by people and organizations concerned as the springboard. A public contract ordinance was enacted in Noda City in late September 2009. The Noda mayor wrote a letter to 806 local governments throughout the country, saying, “We have established this ordinance because the state has no intention of doing what it should. It is my hope that all the other municipalities follow our example.” Later, Kokubunji City (Tokyo) and Kawasaki City (Kanagawa Prefecture) began to move toward enacting their respective bills in December. Some local governments near Kokubunji and Kawasaki have begun to consider introducing a similar system. In the Chiba Prefectural Assembly, it has been pointed out that firms that undertakes the management of prefectural buildings and parking lots have repeatedly violated the law and terms of contract. The city’s head of the general affairs division told the prefectural assembly that the ordering and the establishment of a public contract ordinance would be considered.

As I said earlier, our movement is not aimed at having public contract ordinances established. There are two meanings involved in it.

One is that, as is the case with Tokyo’s Shinjuku Ward, a “guideline” or something like that, instead of ordinance, would be able to meet need (Shinjuku Ward in July introduced a guideline for making procurements by bidding).

The other is that ordinance alone is not enough. The trade union and other popular movements and residents’ interest are essential to utilize the system to eliminate working poor and develop local business. The existing public contract ordinances are not necessarily perfect. The need is to confirm where they stand now and explore the way to further improve and develop them.


4. Zenroren members’ involvement in the movement to regulate public contracts

(1) The movement to regulate public contract work provides an important initiative
to expose various problems on the ground, put forward demands for better wages and working conditions for workers, and organize efforts to help every resident, every business operator, and the local administration feel happy.

During the past year, forums to discuss public contract work have been established in various parts of the world. They are sharing trade union experiences of intervention in the arrangements of contracts and discussing problems arising from them on the ground. Study meetings or symposiums have been held in a majority of regions about issues relating to public contract work. They have confirmed the significance of the effort to regulate public contracts. They shared information about problems relating to working conditions at places of public contract work.

In the movement to establish regulation to make public contract work appropriate, Zenroren considers that the main task is to survey local governments in cooperation with Zenroren-affiliated industrial federations and regional organizations and to request local governments in this direction. Since last year, the survey has been conducted in 36 regions and the drive to request local governments for cooperation in this movement has taken place in most municipalities.

(2) In surveys on local governments, we look at the ongoing process of replacing full-time
regular employees with contingency workers, the state of underpaid local government contingent workers, efforts to reform the bidding, and opinions about public contract ordinance. We learn about the actual state of administration by region, sum them up and discuss their comparison so that we can make known what’s happening on the ground, how residents feel about them, and what reform efforts are being made in advanced local governments. In sum, we are trying to discuss with administrative officials and influence them into improving the way they put administrative measures into practice. Our nationwide campaign on this issue has helped local authorities increase awareness of their responsibility for the employment of workers and responsibility as authorities that contract out work. We have helped in winning a bottom-up of wages for local government contingent workers every year.

The Mie Prefectural Federation of Trade Unions used the findings of a survey to rank the worst municipalities in terms of percentage of contingent workers and pay scale, in order to induce them to compete with each other for better treatment of workers. It also focuses on how workers are being treated at child care centers, nursing care facilities and hospitals, where the federation is trying to organize workers. It is working together with officials of unions without national affiliation and of these facilities to increase regional cooperation to demand that local governments improve treatment of workers. It has won a bottom-up of hourly wages for contingent workers and an increase in the number of case workers, while unionizing non-municipal child care centers and nursing care facilities.

The Kyoto General Council of Trade Union is conducting a survey on contingent workers at municipal hospitals. It is planning to survey firms that undertake municipal work.

(3) Industrial federations are also stepping up efforts. The public sector unions’ federation is
already in a difficult situation due to the government policy as stated above, but they are striving to establish public service workers’ rights in defiance of the adversity. In Motegi Town (Tochigi Prefecture), cleaning of the town’s elementary and junior high schools used to be contracted out to Daishinto Human Service company. After the contractor’s treatment of temporary workers as independent contractors (instead of employees) was exposed by the Japan Federation of Prefectural and Municipal Workers’ Unions (Jichiroren), the town authorities admitted to its mistreatment of workers and directly hire them as contract workers. In line with the town’s regulation, these workers’ got a pay raise. The town also reduced the cost. The workers are also pleased to improve their relationship with teachers.

5. Strategy for the movement in 2011 and after

(1)The government of Prime Minister KAN Naoto has made it clear that a consumption tax increase and cuts in wasteful administrative spending would be needed to secure ways and means while giving tax breaks to large corporations, which ought to be asked to do their part to solve the fiscal problem. Across-the-board cuts in public procurements and competitive bids for contracts for lower prices might be accelerated. Spending cuts might be further accelerated in disregard of the state of working conditions at worksites. If that happens, chances of advancing the movement to make public contract appropriate might slow down, and workers could face wage cuts and employment could become even more difficult.

(2)If cuts in expenditure are necessary to reduce wasteful spending, we must fight to prevent the quality of administrative services from being degraded. To this end, it is necessary to have policymakers observe the baseline for securing certain levels of workers’ wages and working conditions. Local governments are said to be concerned about reforming the contract awarding system and about government’s moves regarding legislation of a public contract ordinance. It is essential to have parliament embrace the notion that establishing fair wages and working conditions as well as job security in public contracts is very important. In this context it is important to help pave the way for introducing in the Diet the bill to secure compensation to be paid to public works contractors, a bill that has been prepared in the Democratic Party.

(3)Zenroren is calling for the following actions to be taken by unions throughout 2011:

1.Promote study within the organization in order to help union members, who are the key players in this movement, understand the significance of the movement.

2.Utilize the leaflet produced by Zenroren in discussions with people of different sectors, so that the significance of the movement to regulate public contracts is understood by administrative authorities, companies and workers (contractors) and citizens (beneficiaries).

3.Conduct investigation to discover how the quality of public services is downgraded, and what difficulty workers are having with regard to job insecurity and declining wages and make the findings known to the residents, who are beneficiaries of public services and tax payers, and to local assembly members; and request the administrative authorities to improve the present system as much as possible under the current law.

4.Examine local governments’ experiences in establishing the public contract ordinance or in reforming the contract-awarding system, sum up their merits to help increase public support.

Afterword

(1) It is often the case that national and local government officials are reluctant to take steps to make public contracts proper or to carry out reform in the contract-awarding system, such as the establishment of ordinance. Many in administrative authorities, contractors and residents lack understanding, or have misunderstanding, concerning positive effects that would be brought about by correcting public contracts.

(2) Many residents tend to believe that “the lower the tax rates, the better” and wish successful budget screening. They also believe that lowering salaries for public service employees would help reduce tax rates. But we need to let the public know that streamlining public service employees would degrade the amount and quality of public services and even cripple the income redistribution through taxation and force residents to pay for losses.

(3) Firms awarded contracts for public works or public services may want to preserve the structure that enables them to rake off a part of proceeds. But we need to ask such contractors to break with the attitude of behaving like brokers and properly implement awarded contracts. It is necessary to establish a structure in which reasonable profits are guaranteed to contractors. We need to persuade them that this is the basic that makes community-based business sustainable.

(4) Administrative authorities may say that there is no way other than to cut costs and that there is no room for caring for workers at contracting companies. It is necessary to ask local government officials in charge of contracts to understand that (i) regulating public contracts will mean having contractors regulate themselves so that administrative authorities will not be occupied with problems related to public contracts, (ii) putting subcontractors under control will prevent brokers from intervening in contracts, which in turn will prevent prices from rising, (iii) contracting out at too low costs will sow the seeds of accidents, having to pay extra costs and take responsibility for accidents. How can the fiscal question, which is a key issue, be solved? If we ask large corporations to fulfill their social responsibility according to ability to pay, this problem will be solved.

(5) Amid the revival of the “structural reform policy,” our movement to regulate public contracts, particularly regarding the workers’ wages and working conditions should increase dialogues and joint action with a broader range of sectors in order to dispel misconceptions among the various forces, organizations and groups that obstruct our efforts.

I would like to call on a broader range of trade unions, civic organizations and residents to join forces to further advance the united grassroots movement, by increasing activities.