I have also appended to my statement as exhibit II a copy of an internal Federal agency memorandum showing the way in which position ceilings cause manipulation within agencies, whereby blue collar employees are eliminated so that other workers may be retained or hired. This is indeed a cruel, and I am sure as far as this committee is concerned an unintended consequence of the use of personnel position ceilings.

Senator NUNN. We took a close look this year at the difference between the decrease in blue collar workers and white collar workers over the last 10 years and it is a tremendous difference. We have had an increase in the category of GS-13 to GS-18 and we have had tremendous decrease in blue collar employees. Some people call it grade creep; I call it grade leap.

Mr. BLAYLOCK. When we take a look, we should seriously consider productivity in the Federal sector. You are going to find that is one factor that contributes very highly to increased costs and lower productivity. The truth is in just about every case, I mentioned this onewhen I testified before your committee before and we had our private discussion, we are taking people out of the productive side of the work force and because of a centralized system we are putting them into the nonproductive side of the work force and it is a serious problem. Again I am glad to see members of this Congress and the Senate recognizing that.

Senator NUNN. Well, the authorization bill this year is taking some steps to try to direct the attention of the executive branch in this area of tremendous grade

Mr. BLAYLOCK. In the area of facility maintenance, I know some discussion on that from previous witnesses, civil engineering operation, the truth is now most of your civil engineer operations don't have the capability of maintaining their facility because the manpower in the shops have been reduced while at the same time the people in the statistical side, over in the office side, have been increased and, therefore, you have a tremendous overhead figure. A simple formula that is used there, they take all of the overhead costs and add it to the hourly rate and divide it up among the number of people performing the work. Where you have actually, say, an hourly rate of $5.50 an hour or $6.50 an hour they add the overhead cost and you are really getting cost comparison, you are getting a figure like $11 an hour for every productive hour performed, and it is caused by this very problem that you mentioned.

Senator NUNN. I believe they are going to start taking a look at this. Mr. BLAYLOCK. We hope so.

Senator NUNN. I think they will.

Mr. BLAYLOCK. Further, as exhibit III, I have appended an illustrative letter wherein an executive branch management official candidly admits that "workload requirements" and "personnel ceilings" are not synonymous and that the lack of personnel ceilings requires that the work be contracted out.

My concluding remarks will be concerned with the situation in Defense Department.

On March 31, 1977, before the Subcommittee on Employee Ethics of the House Post Office and Civil Service Committee, the Acting As

sistant Secretary of Defense for Procurement revealed that during fiscal year 1976, the Defense Department used 97,250 man-years of contract effort and that, over the past 5 years, about 25 percent of DOD's manpower effort has been obtained by contract.

Senator NUNN. Excuse me. You say the lack of personnel ceiling? Mr. BLAYLOCK. That is a typo there. I thought you had a corrected copy. That word "lack" should be "use."

Senator NUNN. I didn't think you had reversed your position since our last dialog.

Mr. BLAYLOCK. No.

Senator NUNN. What should that be?

Mr. BLAYLOCK. Use.

AFGE had sought this kind of information from Defense Department for years and had been repeatedly told it did not exist. Today, we are still told it does not exist for the entire Government. We believe this to be true. No one knows how much of the total Government manpower effort is obtained by contract.

The various studies I mentioned earlier should remedy this rather surprising lack of information on a subject of such importance, if properly conducted by OMB, GAO, and Defense Department.

Chairman George H. Mahon of the House Committee on Appropriations was sufficiently concerned about the trend of contracting out in Defense Department to write the Secretary of Defense on March 16, 1977, questioning the propriety of contracting out services and functions on military bases to commercial contractors, rather than using Government employees. Mr. Mahon was concerned about the costs to taxpayers and the adverse and demoralizing effects on the career civil service stemming from such practices.

We welcomed the concern of the House Civil Service and Appropriations Committees with the situation in Defense Department, as we do that of the two Armed Services Committees of the House and Senate, as evidenced in the Defense Department 1978 procurement authorization bill.

The Nixon-Ford administrations engaged in a particularly massive drive to force the contracting out of many base support functions previously performed in-house by career civil servants, many of whom were veterans. This drive resulted in hundreds of career veterans losing their jobs, late in life, when they are almost otherwise unemployable. The social and economic costs of this misguided policy were immense.

Our union has tried unsuccessfully for years, as I have mentioned, to get an accounting of DOD service contracts, by agency, by dollar amount, and by man-years of services purchased. Therefore, we are not able to give you data on the overall dimensions of Defense Department contracting out for services or of trends in such contracting over the years.

However, we can tell you that Defense Department contracts run the gamut. Whatever the problem, you can be sure there is more than one Defense Department contract to exemplify it-whether of contracting out work which is inappropriate to give a private contractor, loss of Government capability or control over a function, loss of Government accountability, defaults of contractors, poor performance by contractors, contracting out forced by arbitrary personnel ceilings un

related to workload or funds, conflicts of interest, dubious cost comparisons, adverse impact on civil service employees, violations of the Service Contract Act, reductions in force, and so forth.

AFGE is now litigating a number of these cases. I am attaching to this statement as exhibit ÏV a listing of the cases being litigated and as exhibit V some information on probable reductions in force due to contracting out planned over the next several months. I hope this information will be useful to his subcommitttee.

of

As I indicated earlier, we will send to this subcommittee a copy the detailed analysis we are now making of OMB circular A-76 as soon as that analysis is completed. It will provide specific data beyond that contained in the five exhibits attached to this statement.

AFGE will also have a number of specific, formal recommendations to make to the Congress and to this subcommittee when the OMB, GAO, and DOD reports and studies I have mentioned become available and the Congress moves to act on them.

In the meantime, AFGE would be eager to work with this subcommittee and the other interested committees of the House and Senate, and also with the administration, OMB, DOD, and the Civil Service Commission to improve immediately the laws, policies, regulations: and practices involving any of the problems that should not be put aside until all the studies are completed.

This concludes my testimony. I thank the committee for its kind' attention and would be pleased to answer any questions you may wish to ask.

[The exhibits referred to follow:]

EXHIBIT I.-THE PERSONNEL LAWS AS AN EXPRESSION OF NATIONAL POLICY "All officers of the government, from the highest to the lowest, are creatures of the law and are bound to obey it. "It is the only supreme power in our system of government, and every man who by accepting office participates in its functions: is only the more strongly bound to submit to that supremacy, and to observe the limitations which it imposes upon the exercise of the authority which it gives." United States v. Lee, 106 U.S. 196, 220, 1 S.Ct. 240, 27 L.Ed. 171 (1882).

"No department of the government has any other powers than those thus delegated to it by the people." Hepburn v. Griswold, 75 U.S. (8 Wall.) 603, (1869). In a government of delegated powers, where public office is a public trust, the authority to discharge official responsibilities reposes only in those persons duly appointed and vested by law with an office of employment. It is axiomatic that official authority can be delegated only to those properly appointed to exercise it. The Federal civilian service of the executive branch is in this aspect the personification of government law; it is through the exercise of the powers of public office by Federal employees that the process of self-government is executed. The personnel systems prescribed by Congressional and Presidential authority constitute the exclusive methods of staffing this civilian service; of investing private persons with public authority.

The power to create Federal positions outside the civil service and personnel laws cannot therefore be implied; it exists only if expressly provided by the Congress. For a properly appointed official to create a relationship that by law must be regarded as an employer-employee relationship, in derogation of the laws and regulations controlling Federal employment is ultra vires. To the extent the exercise of official authority and responsibility is in actual practice delegated through such acts to private persons or corporations, there is an unlawful delegation of an abdication. To the extent such acts contravene the specific requirements of the civil serivce laws they are illegal.

Consistent with the genius of our government, the personnel and related statutes embody certain essential principles which must be observed if our concept of democracy is to be preserved.

Without express statutory authority a government agency cannot accept donated services from an individual, even if freely given.1 A contrary rule of law would contain the seeds of tyranny and chicanery. Conversely, a Federal employee cannot accept any supplementation of salary from private interests." To permit this would be to compromise integrity. A Federal employee cannot perform any service other than that for which his salary is appropriated by the Congress. To allow otherwise would permit unauthorized expenditures of public funds and confound accountability."

Consistent with the notion that our is a Government of the people and by the people, the opportunity to gain public employment must be open to all-without regard to race, religion, color, national origin or political affiliation.

5

Consistent with the notion of a Government for the people, only those whose character, fitness, and loyalty are considered worthy of a public trust are deemed suitable, and only those willing to accept, under oath, the responsibilities of public service are appointed. Limitations imposed by law upon the individual's right to strike," political activity, and conflicting interests are strict but essential appurtenances to public office.

7

The classification law requires that governmental duties and responsibilities be identified and grouped into discrete positions, that positions be classified and that compensation be allotted on the principle of equal pay for equal work. The entitlement to a certain level of pay, to employee benefits, the evaluation of employee performance, accountability for public funds, government liability to third parties, employer-employee rights and obligations, and the ultimate legality of official acts are all affected by compliance or lack of compliance with the civil service and personnel laws.

In addition, certain national policies of inherent social value are prescribed in the personnel laws. That honorable service in the armed forces of the United State deserves recognition through veterans preference is one such policy.10 Nondiscrimination on the basis of race, creed, color, sex, national origin," or politics is another. Official recognition and dealing with employee organizations conditioned upon a no-strike pledge is another. And economic security through retirement annuities for service or disability 1 is yet another.

12

14

13

It is these principles and policies that are disserved when personnel are unlawfully procured by means of contract to perform duties under circumstances that must under law be regarded as creating an employer-employee relationship with the Government. This is particularly acute where the contractor supplies personnel who work on Government premises, use Government equipment, and are interspersed with and directed by civil service employees. There is, in such situations, an "interface" between the contractor's personnel system and all facets of the civil service system which is abrasive to employee morale, erosive of civil service laws and policies and destructive of efficiency and sound management.

For example, the Government and private employer alike know the evils of nepotism, personal favoritism, and patronage, and the perils of incompetence. The civil service system has met this problem with the competitive examining process. This process has stood the test of time and has been effective for a myriad of occupations in all types of labor markets. A civil service examination rating is accepted as evidence of competence by private and public employers alike.

Contractors may also examine their job applicants but the quality of such examinations vary widely. Some of the contracts we have examined call for per

3 Art. 1. sec. 9, cl. 7, U.C. Constitution, R.S. 3678 (1875), 31 U.S.C. 82(c), 628. Cf. Converse v. United States, 62 U.S. 462, 470 ̊ (1858).

45 U.S.C. 3333, 7311.

55 U.S.C. 3331, 7311.

65 U.S.C. 3333, 7311. 75 U.S.C. 7321-7327.

8 18 U.S.C. 201-219.

95 U.S.C. 5101-5115, 5 U.S.C. 5331, 5 U.S.C. 6301-6324, 5 U.S.C. 8701-8716, 5 U.S.C. 8901-8913, 5 U.SC 4301-4308, 28 US.C. 2674, see e.g., 26 Op. Atty. Gen. 363 (1907), 32 Comp. Gen. 18.

10 5 U.S.C. 3309-3319.

115 U.S.C. 7151. The policy of nondiscrimination applies to Government contractors also. 12 5 U.S.C. 3303.

13 Executive Order 10988, 3 CFR (1959-1963 Comp.).

14 5 U.S.C. 8331-8348.

sonnel "competent to perform the work," or for "qualified" personnel. Standing alone, such standards are not especially meaningful. Where qualification standards are prescribed in contracts we find they are invariably civil service standards, sometimes slightly modified for the occasion. In our review of operations under contracts over the past two years, we often find in occupation after occupation, where both civil service and contractor employees are involved, that the assignments given civil service employees are the more responsible and difficult and require the greater skill.

16

15

In the matter of pay, such as incremental increases for superior performance," time in grade, and promotion practices, the use of contractor personnel sets up countervailing forces at the work site that derogate civil service objectives. Federal pay rates in the General Schedule are predicated on position classification principles. They are interrelated to provide orderly progression from one grade to another and designed to provide in-grade increases for performance at a satisfactory level of competence for periods of one year or longer." Although comparable pay with the private sector is the policy,18 congressional action in prescribing General Schedule rates has resulted in compression at the higher levels, so that pay in the lower grades is comparable, and pay in the higher grades lower, than for private enterprise. Cash incentives are awarded only for special individual or group achievements.1 A minimum of one year must be served in grade before a regular promotion can be made to a higher grade.20 Wage board employees' rates are set at levels equal to average prevailing rates for the same level of skills in private industry in the area involved. A wage board employee must be hired and compensated at established rates.

21

These compensation requirements of the public service do not necessarily bind the private contractor's pay, bonus, or promotion policies. For essentially the same work, performed under the same conditions, for the same Government, a contractor and civil service employee of comparable skill and proficiency may be compensated and promoted at substantially disparate rates. Both, however, are paid by the government, one directly, the other indirectly.

Overtime work and pay levels are also prescribed by law for the civil servant," but subject only to individual contractor policies for the contractor employee. These on-the-job conditions lead to justifiable as well as fancied reasons for employee dissatisfaction. The disadvantage from the civil servant's perspective is often apparent. Where this is so, morale is depressed, motivation is dulled, performance is affected, and in the end the ability of the civil service to function efficiently and effectively is diminished.

Another adverse ramification of these disparities is that the government is in reality generating its own competition for scarce skills. The esoterics of space science and technology, for example, are the results of a national commitment to explore space. There is but one ultimate consumer and one ultimate beneficiary of this effort the public.

For the Government to bid for shortage category personnel against personal service contractors is highly obstructive to the civil service system and contrary to sound manpower utilization practices. It is apparent in many cases that the contractor employees who possess these scarce skills are employed, or become subcontractors to the contractor, solely for the purpose of having their services sold to the government. In these situations, the contractor who provides solely personal services is actually substituted by a contracting officer for the civil service system. The net effect, as has been established by General Accounting Office audits, may well be higher cost to the government for services which should have been, and could have been, provided by regularly appointed Federal employees.

These comparisons, founded upon our investigations of contracting practices at several Government agencies, can be shown with the same adverse impact upon the civil service system across the broad spectrum of personnel administration. There are similar disparities between the civil service and contractor employees in the entitlement to, and use of, leave for vacation," sickness," military service,"