Arizona First Procurement Act
ONE‑PAGE SUMMARY
The Problem
Too many state contractors pay poverty wages ($15/hr while billing $78/hr), force workers into three part‑time jobs, post fake openings, and hide profit through shell companies. Workers end up on food stamps – you pick up the tab. The state lost $2.8 billion to fraud in the “sober living” scheme alone.
The Solution – One Bill, Six Simple Rules
1. No unlimited profit. Profit on any state service contract over $250,000 cannot exceed 5 times the median wage of the workers on that contract. Pay fairly, you can earn more. Pay poverty wages, your profit is capped.
2. Full‑time by default. Every position is presumed 35+ hours/week. Part‑time only if the worker voluntarily certifies in writing that they prefer it. No more forcing people to stitch together three jobs to survive.
3. Honest job postings. Pay, hours, shift times (day/night), schedule – all upfront. No ghost jobs. Rejection requires a specific, job‑related reason – not “not a good fit.” The posting is a binding promise.
4. No bad faith underbidding. If a contractor bids a wage it can’t actually hire at, then tries to get the state to pay for training, that’s fraud. The contract is recompeted and the contractor is barred.
5. Workers can sue. File a complaint with the state. If validated, bring a class action. Agency finding creates a presumption of liability. Statutory damages ($1,000+ per violation), treble damages for bad faith, attorney fees.
6. Serious consequences. Audits, treble damages, criminal referral (class 2 felony), racketeering (class 3 felony), 5‑year debarment. Agencies keep 50% of recovered funds for more oversight.
Why This Is Not a “Job Killer”
The jobs are there. The state needs the work done. What this bill kills is profiteering – the ability to extract unlimited profit from taxpayer money while paying poverty wages. A contractor’s legitimate role is to organize workers for a reasonable finder’s fee. That fee is 5 times the median wage – a generous cap. Demanding 15‑20% of a multi‑million dollar contract for work you’re not doing is a gift of public funds.
The Bottom Line
If you take taxpayer money, you don’t get unlimited profit. Pay fairly, offer full‑time work, share success – you can still make good money. Gouge the state or cheat workers, and you go to prison.
Working on a state contract should be as rewarding, stable, and sustainable as working for the state itself.
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ARIZONA FIRST PROCUREMENT ACT
AN ACT relating to state procurement; limiting contractor profit; requiring workforce stability and job posting transparency; prohibiting ghost jobs, credential inflation, and bad faith underbidding; establishing a private right of action for workers; providing for audits, criminal penalties, and racketeering charges; and delegating detailed standards to agency rulemaking.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ARIZONA:
Section 1. Findings and declarations
The Legislature finds:
1. The State of Arizona spends hundreds of millions of dollars annually on service contracts. These expenditures should provide fair value to taxpayers while ensuring quality services.
2. Some contractors extract excessive profits by paying poverty wages, resulting in high employee turnover, chronic callouts, no‑shows, and unsafe working conditions. This harms service quality and increases state costs for public assistance.
3. Limiting contractor profit to five times the median wage paid to workers on a contract prevents price gouging while allowing reasonable returns.
4. This act does not mandate any wage rate. Contractors remain free to set wages and profits as they choose, subject only to the profit cap as a condition of accepting state funds.
5. The State has a governing interest in workers being able to find employment on state projects and maintain those positions to standard for the life of the contract. Working on a state contract should be as rewarding, stable, and sustainable as working directly for the state.
Section 2. Definitions
In this act:
1. “Awarding agency” means any department, agency, board, commission, or political subdivision of the State of Arizona that enters into a covered contract.
2. “Covered contract” means any state contract for services (excluding construction contracts subject to A.R.S. Title 34, Chapter 2) with an estimated annual value of $250,000 or more.
3. “Median wage” means the median of the annualized gross wages paid to all employees of the contractor and its subcontractors who perform work directly on the covered contract.
4. “Total contract profit” means the difference between the total contract price and the sum of all allowable costs directly incurred for labor, materials, equipment, and other approved expenses, excluding any payments to owners, partners, executives, or investors that are not documented as verifiable billable hours for services actually performed on the contract. Any payment to an affiliate that is not at fair market value shall be treated as profit.
5. “Affiliate” means any person or entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the contractor.
6. “Full‑time position” means a position in which the worker is scheduled for and works an average of 35 hours or more per week over the term of the contract.
7. “Part‑time position” means a position in which the worker is scheduled for and works an average of fewer than 35 hours per week, and the worker has voluntarily provided a signed, dated written certification to the contractor stating that they prefer part‑time status and do not desire full‑time hours.
8. “Turnover rate,” “callout rate,” “no‑show rate,” “substantiated OSHA violation,” and “labor violation” have their ordinary meanings as defined by the awarding agency by rule.
9. “Bad faith underbidding” means knowingly submitting a bid with a certified median wage that the contractor does not intend to pay or that it knows is insufficient to attract a qualified workforce, with intent to later seek contract modifications for training or other additional compensation.
Section 3. Mandatory profit cap and anti‑evasion
A. Profit cap. For any covered contract, the contractor’s total contract profit shall not exceed five times the median wage paid to its workers on the contract.
B. Certification. The contractor shall certify compliance with the profit cap as part of its bid. The awarding agency shall verify compliance through audit.
C. Affiliate payments as profit. Any payment to an owner, partner, executive, investor, or any affiliate of the contractor not documented as a reasonable fee for verifiable billable hours on the contract shall be deemed part of total contract profit. Markups from affiliates exceeding actual cost plus a reasonable markup are profit.
D. Pass‑through charges. The state will not pay excessive pass‑through charges. Disallowed amounts become profit.
E. Disclosure of affiliates. Contractor shall disclose all affiliates and transactions. Failure to disclose is grounds for debarment.
Section 4. Full‑time presumption
A. Presumption. All workers on a covered contract are presumed full‑time (35+ hours/week). A worker may be scheduled fewer than 35 hours only if the worker provides a signed, dated written certification that they prefer part‑time hours.
B. Prohibition on coercion. Coercing a worker to accept part‑time status is fraud.
C. Part‑time deviation. Any week a worker works fewer than 35 hours without a voluntary part‑time certification is a deviation. The awarding agency shall define by rule the calculation method and acceptable thresholds.
D. Anti‑splitting. A contractor may not assign a worker to multiple contracts to deny full‑time status. Combined hours across all contracts count.
E. Performance consequences. Excessive part‑time deviations may be treated as material breach, triggering recompete or management consultant oversight.
Section 5. Fair and accurate job advertising
A. Required disclosures. Job postings for positions on a covered contract must include:
1. Rate of pay and benefits.
2. Expected weekly hours (full‑time or specific part‑time range).
3. Shift times (e.g., day, night, specific hours).
4. Shift schedule (e.g., three 12‑hour shifts, five 8‑hour shifts).
5. Statement that part‑time status is available only upon worker’s voluntary written request.
B. False or misleading advertising prohibited. Including but not limited to: advertising full‑time with intent to schedule fewer than 35 hours without voluntary certification; advertising pay not actually paid; changing shift times or schedule without written notice and consent (such change treated as part‑time deviation).
C. Ghost job prohibition. A contractor shall not post a position it does not intend to fill within a reasonable period (to be defined by agency rule). General talent pool postings are allowed if clearly labeled as such.
D. Credential standards.
1. A contractor shall not require credentials substantially higher than the awarding agency’s minimum qualifications unless justified in writing.
2. Preferences (e.g., “preferred: two years experience”) are not absolute disqualifiers.
3. Artificial inflation of credentials to create ghost jobs or discriminate is prohibited.
E. Labor market exception. If a contractor makes a good faith effort to recruit qualified candidates at the certified median wage and cannot fill positions, the awarding agency may grant a temporary waiver to hire under‑qualified workers under a training and supervision plan approved by the agency. During the waiver:
1. The contractor must provide or arrange training leading to standard qualifications within a reasonable period (to be defined by agency rule).
2. The worker must be under immediate supervision of a credentialed individual for any work requiring credentials.
3. The contractor shall not charge the worker for training or require repayment or indentured service.
4. The worker shall be paid at least the advertised wage or the certified median wage, whichever is higher – no training wage.
5. If the worker does not achieve standard qualifications within the training period, the contractor may not continue to employ them on the contract without the required credentials.
F. Job posting as binding promise. A job posting is a binding offer. A worker may rely on its terms. Unilateral changes without written consent are actionable as misrepresentation, promissory estoppel, or fraud.
G. Substantive rejection feedback. A contractor that solicits applications for a posted position shall, within a reasonable period after filling the position or ceasing consideration, provide each rejected applicant with a written notice including a specific, job‑related reason for rejection. Boilerplate such as “not a good fit” does not comply. Specific reasons may include but are not limited to: lack of availability, lack of required experience, lack of adequate credentials, defects in one’s public record, outcompeted by other applicants with superior qualifications, or other legal and direct business-related causes.
Section 6. Unfeasible bids and bad faith underbidding
A. Presumption of unfeasibility. A bid is presumed unfeasible if:
1. The contractor certifies a median wage less than it actually pays its workers performing similar work on any other contract in the same geographic area; or
2. The contractor cannot fill positions at the certified median wage after a documented good‑faith recruitment effort (duration to be defined by agency rule).
B. Bad faith underbidding. A contractor engages in bad faith underbidding if it knowingly submits a bid with a certified median wage it does not intend to pay, or that it knows is insufficient to attract a qualified workforce, with intent to later seek contract modifications for training or other additional compensation.
C. Consequences. If the awarding agency determines bad faith underbidding occurred:
1. The contract shall be opened for recompete.
2. The contractor shall be barred from the recompete and from any other covered contract for a period to be determined by agency rule (not less than two years).
3. The contractor shall be liable for all costs incurred by the state as a result of the bad faith bid.
Section 7. Disclosure and best‑value evaluation
Contractors shall disclose turnover rate, callout rate, no‑show rate, substantiated OSHA violations, labor violations, full‑time employment ratio, and part‑time deviation rate. The awarding agency shall evaluate bids using a best‑value standard that considers price, workforce stability, safety and compliance record, full‑time ratio, and part‑time deviation rate. The agency shall publish the weight of each factor in the solicitation.
Section 8. Audits, penalties, criminal referral, racketeering
A. Mandatory audit. Every covered contract shall be audited to verify profit cap compliance and accuracy of disclosed metrics. The audit shall include payroll, vendor, overhead, and time/billing reviews.
B. Civil liability. False certification or schemes to circumvent the profit cap (shell vendors, affiliate overcharges, inflated overhead, kickbacks) subject the contractor to treble damages under the Arizona False Claims Act.
C. Criminal referral. Knowing false certification or fraudulent schemes shall be immediately referred to the Attorney General for prosecution under A.R.S. § 13-2310 (class 2 felony) or § 13-2311 (class 5 felony). Obstructing an audit is a class 5 felony under A.R.S. § 35-215.
D. Racketeering. A pattern of racketeering activity (two or more acts within five years) under this act is subject to the Arizona Racketeering Act (A.R.S. § 13-2312 et seq.), including class 3 felony charges, treble damages, forfeiture, and dissolution of enterprises.
E. Automatic debarment. A contractor convicted of fraud under this act is debarred from state contracts for not less than five years.
F. Agency enforcement funding. Any funds recovered by an awarding agency through civil penalties, repayment of excess profit, or settlements shall be split: 50% to the agency’s enforcement account (for hiring personnel, audits, investigations), 50% to the state general fund.
Section 9. Private right of action for workers
A. Conditions precedent. A worker must first file a complaint with the awarding agency. The agency shall investigate and issue a written determination. If the agency finds a violation, that determination creates a rebuttable presumption of liability in any subsequent civil action.
B. Right of action. Any worker adversely affected by a violation may bring a class action in superior court. Relief may include: statutory damages of not less than $1,000 per violation per worker (or actual damages, whichever is greater), treble damages for knowing or reckless violations, reasonable attorney fees, and equitable relief (reinstatement, injunction, restitution).
C. No waiver. Any agreement waiving rights under this section is void.
Section 10. Worker benefit safe harbor
A contractor may distribute excess profits to workers as equity shares (identical per‑hour value for all workers), cash bonuses, retirement contributions, 529 plan contributions, HSAs, or other tangible benefits approved by the awarding agency. Such distributions are treated as compensation, not profit, for purposes of the profit cap. The contractor must distribute proportionally to hours worked, with identical per‑hour value, and retain worker elections. Differential treatment favoring owners or executives is treated as a scheme to circumvent the profit cap.
Section 11. Recompete trigger and management consultant oversight
A. Recompete trigger. The awarding agency shall annually recalculate the contractor’s best‑value score using actual performance metrics. If the recalculated score falls below the original score of the next highest‑rated bidder (or below the contractor’s own original score if sole bidder) by a margin to be defined by agency rule, the agency shall issue a notice of default. The contractor shall have a reasonable cure period (to be defined by agency rule). If not cured, the agency may declare default and recompete the contract.
B. Management consultant oversight. If a contractor fails to cure a default, the agency may appoint a qualified management consultant from a pre‑qualified list maintained by the State Procurement Office. The consultant shall have authority to review records, require corrective actions, and direct the contractor to relieve any employee posing a risk to safety or compliance. The contractor shall pay the consultant’s fees, capped at five times the median monthly wage of the contractor’s workers on the contract (or a different cap established by agency rule).
Section 12. Severability
If any provision of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications that can be given effect without the invalid provision or application.
Section 13. Effective date and rulemaking
This act takes effect 90 days after the general effective date of legislation passed in the same session. The State Procurement Office shall adopt necessary rules within 180 days after the effective date.
