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Mr. YATES. I looked at this statement of operations. I see no computation under leave expense. Shouldn't there be something under that, and under employee benefits?

Mr. BASSETT. We have grouped 6.9 percent or $100,689 in corporations that has a base of approximately 16 percent of the direct payroll dollars. That makes allowance for leave, vacation, holidy, fringe benefits, payroll taxes, and the like.

Mr. YATES. Is that okay?
Any other questions?

Mr. Roof. What leave system would you operate on, basically? Would it be similar to what we have?

Mr. BASSETT. I would hope it would not be quite as generous.
Mr. YATES. What is the difference in the two leave systems?

Mr. BASSETT. We have some leave situations around the country that are as great as you have here and we have a lot that are less. We think that is a point for negotiation. It is probable that we would keep the same situation for what we call “red line” or “red circle” employees, some of the older employees, but for the new employees we would firm it up into something that is more equitable in our business.

Mr. YATES. He has stated he would keep the employees under the same wage scale and I assume they would have the same benefits.

Mr. BASSETT. What about the pensions? That is a thorny thing.

Mr. HENLOCK. We stated that in 1967, in comparision to your $100,000 figure, we paid out for three fringe benefit items along: $34,418 for Government contributions to the retirement benefits fund; $7,571 for health benefits, and $2,644 for life insurance a total of $45,000; whereas, your figure of $100,000, I gather, includes not only fringe benefits, but also leave, meals, payroll taxes, and other items. As indicated, our total of $45,000 does not include such items as leave, meals, holiday permium pay, so there appears to be quite a wide difference in benefits costs.

Mr. YATES. Have you seen a copy of that statement?
Mr. BASSETT. Yes.

Mr. Yates. If you have seen this, is it acceptable to you? What he is saying is as new employes come in they would have their own type of leave benefits that would accrue but the present employees would still be entitled to the same standards of leave. Is that correct?

Mr. BASSETT. Leaves and pensions are two different things to me. Mr. HIENLOCK. They are using a $100,000 figure for all fringe benefits, including leaves and meals, whereas we are paying out over $45,000 for fringe benefits, exclusive of meals and leave and other premium benefits.

Mr. YATES. A year? Mr. HENLOCK. For those fringe benefits, without counting any leave cost or meals, holiday pay, or similar items. Those were our costs for fiscal year 1967. For fiscal year 1968, they are running higher.

Mr. YATES. Our employees around here who have been on for many years have grown up with these leave benefits and that is something we are trying to maintain.

Mr. BASSETT. Does an employee get a leave of 30 days?

Mr. Roof. Twenty-six days is the maximum and 13 days is the minimum. That is annual leave.

Mr. BASSETT. Is that over and above vacation?

Mr. Roof. That is vacation. The days allowed depend on longevity. Sick leave is 13 days per year.

Mr. Y ATES. In addition?

Mr. Roof. Yes. Up to the eleventh accounting period we spent $130,000 for these various fringe items so by the end of the year it will be $150,000, which is 50 percent more than Mr. Bassett has allowed.

Mr. YATES. How do you break that down?

Mr. Roor. For the present fiscal year 1968, leave expense is $36,000; meals, $30,000; and benefits, $13,000; which totals $130,000, roughly.

Mr. YATES. And how many employees are represented by that?
Mr. RooF. 232.

Mr. BASSETT, We may be somewhat off. If we had had more time to investigate this area in question our calculations and questions would have brought this out in clearer detail.

Mr. YATES. You will get more time if you need it.

Mr. BASSETT. In this area 4 percent goes to vacation allowance. The total is 15 percent of the payroll dollar. This cost varies materially and is variable even within States. FICA and other taxes and hospitalization is included in this and Blue Cross and Blue Shield benefits. I could submit contracts which show what we gave for that amount of expenditures. It could include Blue Cross, up to $5,000 life insurance, 2 or 3 weeks' vacation, which would be your leave, and there is a new insurance program with major medical coming in for salary personnel over and above standard Blue Cross and Blue Shield. We are using approximately 15 percent of the payroll dollar. The 6.96 percent indicated on the proforma is the percent of sales, so it should not be confused with the percent of payroll dollar figured at 15%.

Mr. YATES. Any further questions, Mr. Roof?

Mr. RooF. Yes. Under the cost of labor you do not show anything for overtime or straight time. Is that a lump sum figure?

Mr. BASSETT. Yes, in the $671,000.
Mr. Roor. Is that a lump sum figure including overtime?
Mr. BASSETT. Yes.
Mr. Roor. You realize you have to pay overtime?
Mr. BASSETT. Right.

Mr. HENLOCK. Last year there were 113 sessions after 4 p.m. That includes overtime.

Mr. YaTEs. In the last calendar year we had 113 sessions that extended after 4 p.m. How many sessions did we have for dinners?

Mr. HENLOCK. In a number of instances, we had to work employees overtime to maintain service beyond the regular daily work schedule. I do not know how many times we served dinner. We will furnish that for the record.

(The information is as follows:) Out of 113 sessions that extended beyond 4 p.m., there were 10 occasions on which a substantial number of dinners were served ; 23 occasions when the number of dinners served was fairly light; few dinners were served during the remaining late sessions.

Mr. MALAMUT. After 4 o'clock does not necessarily mean overtime. It means rescheduling employee groups but it does not have to be overtime.

Mr. HENLOCK. If you have adequate notice you can do so, but if you do not know until 3:30 or so, you do not have an opportunity to get hold of relief employees.

Mr. TURNER. We had considered a call basis to provide this service. Mr. HENLOCK. Your women employees are subject to the 8-hour law!

Mr. BASSETT. Yes. Mr. HENLOCK. What would you do, if the sessions run beyond 8 o'clock at night?

Mr. YATES. How many times has this happened?
Mr. HENLOCK. They have run until 5 or 6 o'clock in the morning.

Mr. YATEs. You know what a legislative body is. Occasionally we go through a night.

Mr. BASSETT. I refer back to the Mississippi test facility which requires putting a man "in the hole.” This is a term they understand and we have to make provision for that.

Mr. YATES. Which is the same type of operation ?
Mr. BASSETT. Yes.
Mr. TURNER. Twenty-four hours.
Mr. YATEs. Any other questions?
Mr. ANDREWS. I have no more questions.

Mr. HENLOCK. May I point out that the statement was made that they pay for life insurance up to $5,000, whereas under the Federal Employees Pay Act passed by Congress, December 16, 1967, the Government now provides for a minimum of $10,000 insurance per employee.

Nr. YATES. Gentlemen, let me say we will consider this and we are grateful to you for taking the time to look into this. I find your presentation quite impressive and your representations quite hopeful. We will consider it and, again, let me thank you for coming in. We will be in touch with you and if there is any other information you want from the Architect he will be glad to supply it.

SOME OGDEN FACILITIES

Mr. TURNER. At the beginning you asked about operations in the area. We would like to extend to you an invitation to inspect our operations.

Mr. YATES. Where are they?
Mr. TURNER. At Dulles and Germantown and Hagerstown.
Mr. YATES. We try to avoid Dulles as much as possible.

Mr. ANDREWS. You say at the Fairchild operation at Hagerstown you maintain cafeterias as well as executive dining rooms. How many people are involved in this complex ?

Mr. TURNER. We have a potential of 6,500 now.

Mr. MALAMUT. Right now there are at least 4,200 employees plus approximately 300 executives.

Mr. ANDREWs. In other words, this is a complex pretty close in size to the complex you would be serving here as far as total number of people and all of that?

Mr. MALAMUT. Yes.
Mr. YATES. Thank you very much for coming in, gentlemen.

PROPOSAL OF ACTION ONE, INC.

WITNESS
RALPH E. KLOETZLI, PRESIDENT ACTION ONE, INC.

Mr. YATES. Thank you for coming in, Mr. Kloetzli. I trust the Architect has given you all the information you need in order to make your calculations.

92-655—68—45

We have a reporter so that we can help our memories of what you say. You will be given the transcript and an opportunity to correct it in any way or to take anything off the record if you feel it jeopardizes your business operation.

How long has Action One been in business? Mr. KLOETZLI. Since November 1967. Mr. YATES. And what is your total annual sales volume? Mr. KLOETZLI. Approximately $475,000. Mr. YATES. How many employees do you have in the management end of your firm ?

Mr. KLOETZLI. About eight.

Mr. YATES. Do you operate now any large facility somewhat comparable to the House restaurant complex? Mr. KLOETZLI. Not presently.

Mr. YATES. Could you give us a list of your present facilities, their locations, size, and sales volume?

Mr. KLOETZLI. We are operating a facility at St. John's College in Annapolis, Md.; at Leonard Hall Junior Naval Academy in Leonardtown, Md.; and the Xaverian College in Silver Spring, Md. These are the operations we are actively engaged in now. Mr. YATES. What wage scale do you use in paying your employees?

Mr. KLOETZLI. This, Mr. Chairman, depends on the area in which we are working. The wage scales in Leonardtown, Md., would vary somewhat from Annapolis, Md., and would vary quite a bit from those paid in the District of Columbia.

Mr. YATES. Do you pay less than the minimum wage?

Mr. KLOETZLI. No. As a matter of fact we pay more than the minimum wage in all of our operations.

Mr. YATES. Do your employees receive meals in addition to their salaries?

Mr. KLOETZLI. Yes.
Mr. YATES. One or two?
Mr. KLOETZLI. Two is the average.

Mr. YATES. And if you were to be given the task, or the contract, for operating the House restaurant complex, what would your plan be with respect to continuing the services of the present House employees? Would you retain them under your proposal ?

Mr. KLOETZLI. Not necessarily. We would like to interview all the people presently in the House employment and give them an equal opportunity just as we would any outsiders who are interested. I think we are speaking of so-called hourly employees, is that correct?

Mr. YATES. Yes.
You know about our wage scale?
Mr. KLOETZLI. Yes.
Mr. YATES. Would you continue that?

Mr. KLOETZLI. Not necessarily. We had considered the union wage scale. This is a good guideline and this is the basis on which we made our proposal. Mr. YATES. The union wage scale? Mr. KLOETZLI. Yes. I use that term because it is familiar to you.

Mr. YATES. What is the present rate of turnover among your employees?

Mr. KLOETZLI. I do not have an exact figure. However, I would make an estimate.

Mr. YATES. Ours averages about 40 percent.
Mr. KLOETZLI. Ours would average 5 percent or less.
Mr. YATES. Five percent or less ?
Mr. KLOETZLI. Yes.
Mr. YATEs. That includes the lowest grade?

Mr. KLOETZLI. That includes the lowest grade up through management.

Mr. YATES. In the operation of the House facilities, would food preparation occur on the premises or in offsite commissaries?

Mr. KLOETZLI. On the premises.

Mr. YATES. And, as I understand it, your proposal is based on the Architect's statement of May 23 and your own visit to the facilities?

Mr. KLOETZLI. That is correct.

Mr. YATES. You state you made a thorough study of the House facilities and you talk about the subsidy being reduced. Do you think the study you have made so far justifies that optimistic a conclusion ?

Mr. KLOETZLI. Yes, sir.

Mr. YATES. How do you arrive at that? Can you tell us how you propose to reduce the deficit ? For example, would you change the days and time or place of service? Would you increase the menu prices, and if so, how much and in what kind of service? What changes do you propose to make in order to reduce the deficit ?

Mr. KLOETZLI. I think our primary objective here—which may seem a little bit in reverse of some of the thinking that seems to have come out of the record that I have read our emphasis would be on improving the quality of the food and the service and at the same time reducing the cost. We feel that the key to this industry is qualified management people that have direction and a place to go.

Our thinking in this respect is through the right kind of management all these other things will develop. More specifically, for example in the area of food, not passing over lightly the thinking of food quality because with good food quality and good service lower cost of food and lower cost of services result. We operate on a weekly inventory basis. That is to say that weekly we inventory every item in the food operation, and this is done by our management people. For example, the cafeteria 'here in the Capitol Building would have a manager. This manager would be totally responsible for his operation, not only including the purchasing of the food for that operation but for the inventory of that operation and a profit and loss statement at the end of each week, 52 week a year. This is the way we operate our existing units and we find this type of system puts the manager in full control.

We have standardized recipes and these recipes are followed and adjusted depending on the geographic area. This is tied in very closely with the purchasing and food production of the food items being used.

I would like to interject at this point I am speaking not only as president of Action One but I am a food person and my background has been in food. One position which I held was director of dining services at George Washington University. I have operated a food service comparable in size to the operation here at the Capitol and I was operating under the type of wage scale that we are proposing in this proposal, which is the union wage scale.

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