accepted in view of the contractor's transition from a period of growth to one of slight retrenchment in which hires and promotions are limited largely to replacement of attrition. This facility has outlined the following program and procedures to achieve these goals:

A career development program to qualify employees for promotion, whose participants are scheduled to be 60 percent minority and 30 per

cent women.

An immediately promotable minority and female employee system; in other words, "a skill bank," whose members become candidates for all appropriate promotional openings.

A specialized recruiting program to increase minority and female applicant flow. A comprehensive monitoring system requiring concurrence by the company's equal employment management system, EEMS office, in promotions where an "immediately promotable" candidate is rejected; the initial routing of all job requisitions through the EEMS office for its identification of qualified minorities and females, and documentation of the reasons for rejection of any minority or female applicant.

We believe that these programs and procedures will achieve the goals of their affirmative action program.

Mr. HAWKINS. May I ask you at that point what is the position of the Defense Contract Administration Services in monitoring the efforts of companies against which there are a great number of complaints? Do you recognize the fact that there may be pending in other Federal agencies a substantial number of complaints and if you found that to be a pattern, would you more vigorously investigate and analyze the affirmative action program of that particular contract?

General DEARMOND. Yes, sir. Our primary activity is not one of investigating claims, Mr. Chairman. That is handled by other Federal agencies. Our primary responsibility is to insure the adequacy of their affirmative action program. If we were requested by an appropriate agency to conduct an investigation, we would, or it is my understanding if we had a large number of complaints which might be considered a class action complaint, we would conduct an investigation. We would not, however, on individual complaints.

Mr. HAWKINS. Do you conduct investigations on a preaward basis? General DEARMOND. Yes, we do on a preaward basis.

Mr. HAWKINS. At that point, do you consider the fact that there may be a substantial number of complaints filed, and if so, how do you recognize this situation, and how do you reconcile it?

General DEARMOND. Mr. Schreiber, head of the division, says we do check with the Equal Employment Opportunity Commission where there are a large number of complaints, we do take this into consideration in conducting the preaward, and in determining the adequacy of the affirmative action program.

Mr. HAWKINS. Now, in the statement, on page 7, you say from July 1 to date, our region has issued 30 show-cause letters to noncomplying contractors. Were these all in the field of noncompliance with the affirmative action order?

General DEARMOND. Yes, sir.

Mr. HAWKINS. This is not the total of show-cause actions, I assume! General DEARMOND. That is the total number of show-cause letters issued, sir.

Mr. HAWKINS. But is it confined merely to Executive Order 11246 and subsequent orders relating thereto?

General DEARMOND. Yes, sir.

Mr. HAWKINS. Did you issue show-cause letters in the other areas of your responsibilities with respect to noncompliance with other contract provisions, let's say for materials or time schedules?

General DEARMOND. Show-cause letters are basically for equal opportunity employment. If we do a preaward and find that a corporation is unsatisfactory or a number of other reasons that we would advise the procuring activities of our finding of unsatisfactory, either for technical competence, financial responsibility, or a number of other reasons. Mr. HAWKINS. Well, I was referring back to page 2, where you list responsibilities of the agency and the responsibilities include such things as performance of quality, assurance functions, surveillance of production, safeguarding industrial materials, the timely delivery of products, et cetera.

General DEARMOND. That is correct.

Mr. HAWKINS. And I assume that in the furtherance of those responsibilities, that you sometimes find it necessary to issue show-cause letters, do you not?

General DEARMOND. Sir, they are not called show-cause letters. We advise the procuring agency that there is a difficulty, the contractor will not make its delivery on time. A show-cause letter is

Mr. HAWKINS. Only confined then to Executive Order 11246 ?
General DEARMOND. Yes.

Mr. HAWKINS. And subsequent orders?

General DEARMOND. Yes, sir.

Mr. HAWKINS. What do you in the event that a company fails in its performance with respect to some of the activities that I have just enumerated? What action do you take against them? Do you cancel, terminate, or do you refuse to continue contracts because of any of the activities outlined?

General DEARMOND. Yes, sir.

If I might briefly turn to the actions that were taken when a contractor is found in noncompliance with the equal opportunity requirement of this contract, in this event, our region issues a show-cause letter to that organization in accordance with the prescribed procedures.

We advise the Department of Defense buying activity and the Office of Federal Contracts Compliance that the contractor is noncompliance. This in effect precludes the awarding of Government contracts to any facility, not to just the one we investigated, under that contractor until he has taken positive action to correct the discrepancies noted in his plan. If an agreement to correct such deficiencies cannot be reached by the contractor within 30 days, our next step would be to recommend to our headquarters in Washington that a notice be issued to the contractor opposing cancellation or termination of the existing contract

or subcontract, and debarment from future contracts or subcontracts. The contractor is provided 14 days to request a formal hearing to present his reasons why such action should not be taken and to date none of the show-cause letters that we have issued have resulted in this letter action.

Mr. HAWKINS. So you have never had any termination or cancellation as a result of failure to comply with the Executive Order 11246?

General DEARMOND. No, sir. Not that I know of. They made the corrections after they received the show-cause letter or actually before the show-cause letter was really issued.

Mr. HAWKINS. And they

General DEARMOND. There was one instance where we recall where one lost a contract worth $200,000 on a procurement order, sir.

Mr. HAWKINS. That is the only instance that you know of in which a contractor

General DEARMOND. Yes, sir.

Mr. HAWKINS [continuing]. Any contractor has lost a contract as a result of failure to comply?

General DEARMOND. Yes, sir.

Mr. HAWKINS. Does it seem to you somewhat remarkable that out of all of the contractors whom you have jurisdiction over, that they would be in such perfect compliance with the Executive order at the same time. that such a tremendous number of allegations of discrimination are being made both with respect to minorities as well as women? Are you satisfied that every contractor who is doing business with the Federal Government is reasonably complying with the Executive order?

General DEARMOND. Sir, I would hope so. I cannot comment accurately on your question. I would say that the contractors are most aware of the potential when they are awarded a show-cause letter or when we consider the fact that they are going to receive a show-cause letter, and they take very prompt corrective action to correct the discrepancies.

Mr. HAWKINS. Well, would you detail a little bit the type of corrective actions to which you refer?

General DEARMOND. Yes, sir. It is basically showing good faith to complete the goals and agreements of their affirmative action plan. Mr. HAWKINS. Well, let's say that it is a company which has a pattern or history of past discriminations. Would you depend largely on their affirmative action program that they will not discriminate in the future or that they would show good faith effort in order to overcome past discrimination? Would you accept their assurance that if they get the contract, they are going to be good fellows?

General DEARMOND. Yes, sir. We would accept on good faith that their intentions are honorable in this direction, but we would also check to make sure that they would follow up on it, and I would like, if I may, to discuss a case which your office requested, Data Design, to show you perhaps the operation.

Data Design Corp., at the time of a routine compliance review in 1971, had a total work force of 155 people, including 21.9 percent females and 5.8 percent minorities.

That is in 1971. A determination was made to the effect that an underutilization existed in each job category.

A preaward review of April 4, 1972, indicated a total work force of 172, including 9.2 percent females and 8.1 percent minorities. The contractor was making slow progress and agreed to an accelerated goal of 8 minorities out of the next 11 hires.

Also, this is in communications with our agency. Also, quarterly reports would be submitted on this hiring program.

A preaward review of October 1972 revealed further slow progress. However, from October 1, 1972, through March 15, 1973, considerable progress was made, as indicated by the fact that the contractor made a total of 38 new hires, including 71 percent females and 31.6 percent minorities. From July 1 through August 31, 1973, there were 15 new hires involving 20 percent females, although the numbers are small, and 26.7 percent minorities.

On July 1, 1974, the total work force was 96, which is now a reduction in number, but now included 33 percent female and 17.7 percent minorities.

In January 1975 we received a progress report showing that substantial emphasis on the employment of minorities and females had resulted in these achievements: out of a total work force now of 104, Data Design reported 9 blacks, 14 Spanish surnamed, 1 oriental and 39 females, well scattered over most job categories. These figures indicate that minorities now make up 23 percent of the total work force and females 38 percent.

I mentioned this to give you some idea of the checks that we would do, and the progress reports we would get of an organization that we consider having inadequate minority employment.

Mr. HAWKINS. Gentlemen, let me ask you this: Using Rockwell International, for example, which has many divisions. Let's assume that we are seeking a contract in one division, and their affirmative action plan for that division was acceptable, but that in another division and I am not stating this as a fact, I am using this as an example their record was not good; that is, another division would not comply with the provisions of an affirmative action program. Would the contract to the one division based on that single contract be acceptable, or would all divisions of that company be required to have an affirmative action program acceptable before being approved?

General DEARMOND. Sir, if one division was unacceptable, all divisions would be barred from Government contracts.

Mr. HAWKINS. The final question, which I would like to ask with respect to the relationship between the Office of Federal Contract Compliance and your particular agency is: What type of relationship do you have with the Office of Federal Contract Compliance today? Do they supervise or do they interject their control or guidelines over what you do, and do they review from time to time the administrative functions that you perform?

General DEARMOND. Sir, the Federal Office of Contract Compliance is responsible for the total contracts compliance operation Government-wide and determines the rules, regulations, and procedures for all Government agencies. These instructions are then received by the Deputy Assistant Secretary of Defense for Equal Opportunity, Mr. Francis, who then codifies and verifies these corrections provided to DSA, in turn which promulgates the regulations and gives us our guidelines. So, I guess you can say that the Office of Federal Contract Compliance is overall responsible and sets the guidance and general direction.

Mr. HAWKINS. Thank you. I have no further questions.
Mr. Mosse.

Mr. MOSSE. Thank you, Mr. Chairman.

Aside from the regulations which it promulgates, how does the OFCC supervise agencies such as yours in the approval of affirmative action plans? How does it know that the implemention of those regulations which it has promulgated will be fully effectuated?

General DEARMOND. Sir, I am unqualified to answer just the management techniques used by OFCC. I assume they have management measures which they look at the job done not only in the Department of Defense, but other departments, and compare their activities. But I am not qualified to respond on that.

Mr. Mosse. Is your immediate line of responsibility to the Department of Defense?

General DEARMOND. Yes.

Mr. MOSSE. And not to OFCC?

General DEARMOND. No, sir. Mine is to the Defense Supply Agency. Mr. MOSSE. I see.

General DEARMOND. Which is a segment of the Department of Defense.

Mr. MOSSE. And then the Defense Department in turn has to coordinate with OFCC?

General DEARMOND. They in turn coordinate with Mr. Francis' office, or Mr. Francis coordinates with the Office of Federal Contract Compliance.

Mr. MOSSE. Have you ever had a visit by an OFCC representative? General DEARMOND. No, sir. Not that I know of.

Mr. Mosse. Do you think that it would be helpful to have visits by OFCC staff?

General DEARMOND. We would welcome visits, sir, for any recommendations they have on how we might increase our productivity or areas where we possibly have shortcomings.

Mr. Mosse. Do you find that you lack guidance from OFCC?

General DEARMOND. No. I think our guidance is detailed and specific.

Mr. Mosse. Do you think it would be helpful to have training programs for your employees, guided by OFCC officials, so that your employees would know exactly what was expected of them and of DCASR in its analysis of affirmative action plans?

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