The United States Code, title 5, section 3310, based on Public Law 89-554, September 6, 1966, 80 Stat. 420, states explicitly the following:

"§ 3310. Preference eligibles; examinations; guards, elevator operators, messengers and custodians.

In examinations for positions of guards, elevator operators, messengers, and custodians in the competitive service, competition is restricted to preference eligibles as long as preference eligibles are available."

Nothing can be more clear. This is a commitment of conscience made by the Congress of the United States to veterans. Yet, today, with almost 500,000 veterans unemployed, the General Services Administration as well as other agencies of the executive branch is disregarding this national commitment to our veterans by the subterfuge of contracting out the jobs which Congress has reserved to them.

There is no point in passing public laws if the General Services Administration and other Federal Department managers can put the laws out of force simply by evading them through contracting out.

I most strongly beseech your subcommittee to ascertain from the White House, the General Services Administration, and from the Civil Service Commission why this practice, depriving our veterans of their rights to Federal employment, has been tolerated so long.

We were recently advised by the General Services Administration management that the personnel ceiling was lowered by 1,400 positions for custodial, protective service and related positions for fiscal year 1973 and that the budget request for fiscal year 1974 approved by the Office of Management and Budget provided for a further reduction of 600 positions in these classifications. We were also advised that the General Services Administration is completing a large construction program enabling it to remove many Federal agencies during fiscal year 1974 from leased space in which custodial and protective services were provided by the private owners as part of the lease arrangements. Such services will now have to be supplied by the Government in its own buildings, either through the use of civil service employees or by contract. Apparently, these jobs, as well as the 600 jobs eliminated from the budget ceiling, will be performed by private contractor employees.

We were seriously concerned with the practices and policies of the GSA even prior to the issuance by President Nixon of Executive Order 11717, dated May 9, 1973, and appearing in the Federal Register, volume 38, No. 91, Friday, May 11, 1973, pages 12315-12316.

Executive Order 11717 transferred to the Administrator of the General Services all functions that were being performed in the Office of Management and Budget on April 13, 1973 by:

(1) The financial management branch, the procurement and property management branch, and the management systems branch of the Organization and Management Systems Division; and

(2) The Management Information and Computer Systems Division with respect to policy control over automatic data processing (except those functions relating to establishment of governmentwide automatic data processing standards).

We have diligently sought to ascertain from the Office of Management and Budget whether basic responsibility for OMB circular A-76 has been transferred under Executive Order 11717 to the General Services Administration or retained by the Office of Management and Budget. To this date, we have not been able to obtain a response to our inquiry.

Even in the absence of a clear answer to this last question, the fact is clear that the General Services Administration has acquired far more weight than heretofore in the implementation of procurement of support services by contracts. Consequently, the practices of the General Services Administration regarding the contracting of positions reserved for preference eligibles will be cited as precedents by the other departments and agencies. For this reason, we believe that the General Services Administration should set the example of scrupulous observance of section 3310 of title 5 of the United States Code.

REQUEST FOR EXPLICIT LANGUAGE IN GSA APPROPRIATIONS BILL FORBIDDING THE CONTRACTING OUT OF ELIGIBLE PREPERENCE JOBS

In light of this threat to the potential employment of preference eligible veterans and their survivors, we believe that it is not enough to have such laws on the books as the Veterans Preference Act, as amended. These laws can be evaded simply by contracting the jobs out.

It is not enough to have laws and statutes since they do not implement themselves. Even today the intent of Congress regarding the reservation of certain positions for preference eligibles under the Veterans Preference Act is being subverted by contracting out. We, therefore, believe it will be essential that every appropriation bill should include explicit language which expressly prohibits the expenditure of any funds for the contracting out of positions reserved for preference eligibles.

We, therefore, most earnestly beseech your subcommittee to take a decision which will serve as a landmark for all other appropriations bills. We request you to incorporate into the fiscal 1974 appropriations for the General Services Administration language similar in purpose to the following, which we submit as an example:

"None of the funds appropriated to the General Services Administration, or administered by it through transfer of appropriated funds from any Federal department or agency, may be expended to obtain support services by contract from private sources for any of the positions designated in the United States Code, title 5, section 3310, entitled, preference eligibles; examinations; guards, elevator operators, messengers, and custodians."

We believe that such language is essential because the Congress has made a commitment of conscience to our veterans which should be honored both in the letter and in the spirit. Our organization assures you that we shall do everything in our power to preserve these rights for our noble men who placed life itself at the service of our country and who, when returning to civilian status, should have these positions available at the outset while they make the transitions back to peace.

STATEMENT OF AUSTIN E. KERBY, DIRECTOR, ECONOMIC COMMISSION,

THE AMERICAN LEGION

Mr. Chairman and members of the subcommittee, the American Legion appreciates this opportunity to present its views in connection with the proposed fiscal year 1974 budget request of the General Services Administration.

At the outset, we would mention that the American Legion strongly supports the Veterans Preference Act of 1944, as amended, and now codified under title 5, United States Code. That statute was enacted with the Legion's assistance and with its endorsement.

The Veterans Preference Act clearly states that preference in Federal employment shall be given to eligible veterans. Title 5, United States Code, section 3310 (formerly section 3 of the Veterans Preference Act), restricts eligibility for positions as guards, elevator operators, messengers, and custodians to persons entitled to preference under the act so long as such persons are available. In recent years the General Services Administration has been contracting with private concerns for the services of guards and custodial personnel. These services were traditionally rendered by Government employees, most of whom were veterans, by reason of section 3310 of title 5, United States Code. This contracting out policy circumvents the purpose and intent of the Veterans Preference Act and is prejudicial to the employment of veterans, especially the disabled, who are entitled by law to special consideration. Additionally, the Government has a moral obligation to utilize veterans in custodial and guard positions, especially at a time when there are more than 300,000 unemployed Vietnam era veterans in the 20-29 year age group alone.

We are informed that the General Services Administration recently lowered the personnel ceiling by some 1,400 custodial, guard and related positions for fiscal year 1973, and that the budget request for fiscal year 1974 provides for an additional reduction of 600 positions in these classifications. Therefore, many qualified veterans are, not only being denied employment, but also many who are employed are being dismissed.

The General Services Administration has authority to enter into contracts for the services of elevator operators, cleaning or custodial services, building maintenance people and guards on a year-to-year basis. The reason for such authority is alleged to be economy. The American Legion does not believe this policy results in any real savings to the Government.

It is our opinion that private contractors in business solely for profit do not secure the same caliber of personnel as is found in the Government service. The Government employee must pass an examination; he must be reliable, of good character and possess overall suitability for Federal employment. Further, the Government employee is reasonably assured of permanent employment and other benefits provided for him, which is not the case with respect to employees of private contractors. Because of this, the Government benefits economically by utilizing the services of its own capable and dependable employees. We do not believe that the private contractor can secure for less money as reliable, honest and efficient personnel as Government standards require, which must be done if savings are to be accomplished. Are the savings, if any, worth the potential impairment to the security and efficiency of the Government department involved? We believe not. It brings to mind the saying, "Penny-wise and poundfoolish."

The American Legion desires economy in Government. However, we do not believe that the contracting out of Government jobs traditionally held by inservice personnel results in any real economy. But our interest here is not based upon pure economics. We are defending a principle-a principle that this country has embraced since its birth. The most recent statement of this principle is, of course, the Veterans Preference Act. If inefficiency is produced by adherence to this principle, it has never been demonstrated to the Congress to be of sufficient magnitude to abandon the principle. The economy achieved, if any, is not sufficient to abandon this procedure for the first time in history. But if the practice of circumventing the Veterans Preference Act is allowed to continue and flourish, that will be the result, and will be cited as a precedent by other Departments and agencies of the Federal Government.

The American Legion believes, therefore, that until the law is amended to rectify this situation, it will be necessary for all appropriations bills to include legislative language to specifically prohibit the expenditure of any moneys for the contracting out of positions reserved for veterans preference eligibles as specified in section 3310, title 5 of the U.S. Code.

The Legion respectfully requests this subcommittee to incorporate into the fiscal year 1974 appropriations for the General Services Administration appropriate language similar to the following:

"None of the funds appropriated to the General Services Administration, or administered by it through transfer of appropriated funds from any Federal department or agency, may be expended to obtain support services by contract from private sources for any of the positions designed in the United States Code, title 5, section 3310, entitled, preference eligibles; examinations; guards, elevator operators, messengers, and custodians."

We believe that such language will carry out the purpose and intent of the Congress when it approved and enacted the Veterans Preference Act of 1944. TELEGRAM RECEIVED FROM CHARLES L. HUBER, NATIONAL DIRECTOR OF LEGISLATION, DISABLED AMERICAN VETERANS

[Telegram]

WASHINGTON, D.C., May 29, 1973.

Hon. Toм STEED, Chairman, Subcommittee on Treasury, Post Office and General Government, House Appropriations Committee, Capitol Building, Washington, D.C.: The Disabled American Veterans is greatly concerned over the increasing evasions of section 3310 of title 5 United States Code by the General Services Administration in contracting out Government jobs which the Congress intended to be specifically reserved for veterans.

In view of the extremely high unemployment of Vietnam veterans and in keeping with our Nation's commitment to aid in their rehabilitation we urge that the veterans preference laws be enforced and that specific language be included in the fiscal 1974 Appropriations Act to provide that none of the funds appropriated to the General Services Administration may be expended for contracting out any of the positions reserved for preference eligibles by section 3310 of title 5 United States Code.

Respectfully yours,

CHARLES L. HUBER.

APPENDIX A

CIVIL SERVICE COMMISSION

[The following information was requested on page 275.]

U.S. CIVIL SERVICE COMMISSION,
June 7, 1973.

MEMORANDUM

Subject: Some Impacts of a 6.1 percent Annuity Increase.
From: Andrew E. Ruddock.

To: Mr. Aubrey A. "Tex" Gunnels, Staff Assistant, House of Representatives
Committee on Appropriations.

This responds to your request for information about some of the impacts of the annuity increase of 6.1 percent which will become effective July 1, 1973 on the Civil Service Retirement System. We have explored the effect, on disbursement retirement financing, and on employees not yet retired.

IMPACT ON DISBURSEMENT

We estimate that there will be 1,255,000 employee annuitants and survivors on the annuity roll as of June 30, 1973 receiving a total monthly annuity of $397 million. The number includes an extra 60,000 estimated to retire early as a result of the increase.

The disbursements from the CSR fund will be increased by 6.1 percent of the $397 million each month and, assuming each of the extra 60,000 annuitants are retiring one-half year earlier than they would have, by one-half year's annuity for each of the early retirees. The added disbursements in fiscal year 1974 will be $291 million for the increase and $180 million for the added annuitants, for a total of $471 million. This calculation ignores several minor factors such as deaths during the year and differences in annuity for the early retirees.

IMPACT ON RETIREMENT FINANCING

The increase of 6.1 percent will result in additional annuities for each of the 1,255,000 annuitants on the rolls on June 30, 1973 for the rest of their lives. For example, we estimate that 269,000 of these annuitants will be on the rolls in the year 2000 and there is a good chance that at least one of these will be on the rolls in the year 2045. The added disbursement decreases year by year but it will have an effect for many years.

Recognizing the long-term effect, we adjust the unfunded liability each time a cost-of-living increase occurs. The actuarial calculation allows for each added disbursement and discounts these to the present time using an interest rate of 5 percent. The discounted value of the added disbursements which will result from the June 30, 1973 increase is $2,753 million.

The law provides that the unfunded liability will be stabilized through payment of the interest on the existing liability each year. The interest on the additional $2,753 million at 5 percent is $138 million. Until 1980, only a portion of the full amount will be paid.

IMPACT ON EMPLOYEES NOT YET RETIRED

Employees eligible for retirement on June 30, 1973 who anticipate retiring in the near future face a difficult decision. If they retire on June 30, 1973, they will receive a "bonus" of 6.1 percent for the rest of their lives. On the other hand, they recognize that the longer they work, the higher their annuity will be since each additional period of service increases the annuity formula and high-three salary for most employees. We have prepared a table showing the number of months needed to increase their normal annuity to the same level the normal annuity plus the bonus would be on June 30, 1973.

I am enclosing a copy of the table to which two columns have been added. Some employees are now in the position where their high-three is not changing because they have been at the same pay level for 3 years or more. Another variation is for Members of Congress. The high-three salary for most Members will remain at the level of $42,500 until the law is changed and, because of the higher formula, they reach the maximum 80 percent benefit earlier than covered employees. Column

D shows the results for an employee with no salary increase and column E shows the results for a Member. The only increase for employees after 42 years and Members after 32 years for these two columns results from the use of contributions after the maximum 80 percent is reached to produce additional annuities.

EFFECT OF

COST-OF-LIVING INCREASES ON FEDERAL

RETIREMENT

EMPLOYEES

CONSIDERING

Civil service annuities will be automatically increased by 6.1 percent effective July 1, 1973 under the "cost-of-living" provision.

The Commission has had numerous inquiries from employees asking how much longer they would have to remain in active employment after June 30, 1973, before their annuity without the cost-of-living increase would come back to the amount they could get by retiring no later than June 30. The answer to this question is affected by factors which vary widely with the individual. These factors include amount of salary increases in the past 3 years, expected future salary increases, and amount of past service of the individual, including credit for unused sick leave. Although no simple formula can give the correct answer for each case, the following table can be used to give a rough approximation of the additional service required. MONTHS OF FUTURE SERVICE REQUIRED

Col. A assumes only statutory increases in the past 3 years.

Col. B assumes a "normal" pattern of past and future salary increases. This includes the statutory pay increases and step increases. Col. C assumes both statutory salary increases and one or more promotions that substantially increase high-3 average salary.