The Labor Surplus Policy:

Is It Effective in Providing Government Contracts to High Unemployment Areas and Jobs for the Disadvantaged?

PSAD-77-133: Published: Jul 15, 1977. Publicly Released: Jul 15, 1977.

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One of the main objectives of the Defense Manpower Policy Number 4, better known as the Labor Surplus Policy, is to direct portions of federal procurements into economically distressed areas to help the economy of the area and, in particular, to create job opportunities for disadvantaged persons. Firms participating in the program are given a preference in government contracts.

From 1972 to 1976, average total government procurement expenditures amounted to $52.7 billion, of which about $254 million (or 0.48 percent) was set aside for labor surplus firms. In 1976, labor surplus firms reported hiring almost 25,900 disadvantaged people, a 23 percent decline from the number reported hired in 1973. During this same period, unemployment increased by 70 percent. The number of firms participating in the labor surplus program remained relatively constant despite the increase in surplus labor areas. The Federal Preparedness Agency, which has oversight responsibility over the policy, has not provided specific guidance on the policy to federal and state agencies. The federal procurement activities varied in their use of the Labor Surplus Policy. At the state level, responsibility for implementing the policy was often assigned as a part-time duty to a single employee who knew little about the policy's objectives.

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