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port for the administrative action challenged and thus as a defense to a request for a star—the likelihood that the contractor will be able to stay this essential enforcement procedure is further enhanced. In effect, the admitted danger has been disguised, but not removed.
As noted above, the provision for an indemnity bond is made permissive by use of the word "may." In view of the not uncommon business occurrence of bankruptcy of contractors, such a provision cannot be fully effective to protect employees covered under the act unless it is made mandatory. In any event, even a fully effective indemnity bond for purposes of employees' protection does not mitigate against the damage to our fair bidding system, as described more fully below.
JUDICIAL REVIEW IN ENFORCEMENT PROCEEDINGS IS NOW AVAILABLE
It should also be noted that, at the present time, contractors who feel aggrieved by the enforcement procedures of the Davis-Bacon Act have the right of judicial review from the Court of Claims. Generally, this review arises through an action by the contractor to recover from the Government wages which he was required to pay in excess of those specified in his contract. In such a suit, the subjects open to review include whether the Government acted properly in withholding funds, whether the Government is responsible for increased labor costs to the contractor, whether the affected employees performed work which would place them in the classification requiring the increased payments to which the contractor objects, the amount of time worked by employees in the pertinent elassifications, etc. Thus it is not accurate to say that a contractor has no right of judicial review under present operation of the act. And, the present form of judicial review in no way impairs the effectiveness of the statutory enforcement procedures.
DAMAGE TO OUR FAIR BIDDING SYSTEM
The proposals in H.R. 9590 will also tend to destroy or weaken the contract bidding and awarding procedures as such. Contractors are invited by the bill to base their bids or rates less than those predetermined by the Secretary of Labor as prevailing, pay their laborers and mechanics wages at such lower rates and seek review of the determination through the proposed judicial procedures. Even the most scrupulous contractor may be forced to take a "business gamble" on the rate to keep himself in a competitive position. Those even vaguely familiar with the process of appellate litigation realize that 3 or 4 years may pass before such an appeal procedure would be completed. Indeed, in this respect, the new bill is even worse than the old one which provided for initial court review in a court of appeals. Under H.R. 9590, however, the first step of judicial review begins with a district court determination. Whatever the results of the review proceedings, the contractor will have obtained his contract on a cost basis different from his competitors who used the specified prevailing wage rates in figuring and submitting their bids. The judicial review proposal thus operates in a manner contrary to a full and fair system of fair and competitive hidding, and places fair bidders who are operating in a manner consistent with the law at a disadvantage.
Obviously no final judicial determination can be made of the validity of DavisBacon Act predeterminations prior to the opening of bids in the particular Government contract.
The danger to a fair bidding process and to the orderly administration of the Daris-Bacon Act can be brought into sharp focus by a brief examination of the legislative development of the act. The 1931 act required only that advertised Specifications for covered contracts contain a provision that the wages paid *shall not be less than the prevailing rate of wages * * *." The act contained Do provision for a system of wage predeterminations or for effective enforcement machinery. Almost immediately following passage of the act, many contractors, as well as the Comptroller General of the United States, recognized the danger of a system of postdeterminations rather than predeterminations.
An amendment to the act was passed in 1932 which, to establish a system of wage predeterminations, required a provision "stating the prevailing rate of #ages as determined by the Secretary of Labor.” [Emphasis added.] In addition, the amendment added enforcement provisions. (See Senate report to accompany S. 3847, 1932, p. 1.) The act was vetoed by President Hoover. During the hearings which preceded the 1932 amendment, representatives of the National Association of Builders Exchanges and the Associated General Contrac
tors supported the amendment. The Associated General Contractors, in a letter by Mr. Walbridge to President Hoover, stated that:
"We ask only that the officials who are now charged with making decisions as to what constitutes the prevailing wage to exercise the same function previous to the taking of bids, thereby placing all bidders on a parity and again establish competitive bidding on a known basis (italics supplied.] (Legis. Hist. DavisBacon Act, p. 47).
In a letter to Congressman Connery, Mr. Harding of the Associated General Contractors stated that it would be for the good of all that prevailing wages should be stipulated and made a part of the advertisement, specification, and contract. Congressman Mead of New York urged passage of the amendment as protection for workers and builders and to the end that “all contractors would have an equal and fair opportunity."
Congressional hearings in 1933 and 1934 added further evidence of the need of enforcement machinery and a system of wage predeterminations. These hearings led to passage of the Copeland (Anti-Kickback) and False Statement Acts of 1934, and the Davis-Bacon Amendments of 1935. The 1935 amendment added the requirement that the advertised specifications contain a provision stating the minimum wage to be paid “which shall be based upon the wages that will be determined by the Secretary of Labor *
Thus, for the first time, a system of wage predeterminations by the Secretary of Labor became a part of the law. The purpose of the amendment in this regard is clearly stated by the Senate and House reports accompanying S. 3303 at page 7:
"To provide for a predetermination of the prevailing wage on contracts so that the contractor may know definitely in advance of submitting his bid what his approximate labor costs will be *
[Emphasis added.] Reduced to its fundamentals, the proposals embodied in H.R. 9590 will have the effect of returning the law and conditions thereunder to the status existing prior to the 1937 amendments; a status which representatives of industry and the Congress recognized were not desirable or feasible. In operation, these proposals would strip the act's enforcement machinery of its effectiveness and would do away with the system of wage predeterminations. The ideas underlying these proposals are neither new nor feasible. They have been tried, and abandoned nearly 30 years ago.
Labor unions are in favor of all valid procedures which assure proper compensation for employees. We must point out, however, that the availability of judicial review proceedings to labor organizations and employees and prospective employees (all of which is probably necessary from a constitutional point of view if there is to be judicial review for employers) would add a further uncertainty to the bidding process. Even if all contractors bidding on a particular job use the Secretary's predetermination and do not challenge same in court, the challenge may come from the employee side to secure a higher rate.
The inclusion of the judicial review amendment may have the effect of starting a wave of litigation comparable to the flood of wage-hour suits preceding the Portal-to-Portal Act.
The backlog on our already orerburdened courts, and particularly the U.S. district courts, is a fact well-known to lawyers and lawmakers alike. Yet, the proposals embodied in H.R. 9.590 would add substantially to the burdens of these district courts—which have little knowledge of or experience with the subject matter involved and, in the process, serve to increase the delay in a final determination in ever-increasing fashion. The problems of the district courts under both proposed sections is made even more difficult by the fact that the actions before them are either specifically made a de novo action or are in the nature of such an action
Specifically, under proposed section 8, the district court, if it finds that the wage predetermination of the Secretary of Labor was not made “in accordance with law" must “determine the prevailing wage” itself, and, in the course of its review. the court is not permitted to accord any presumption of validity to the Secre tary's determination by reason of any prior administrative finding, action, practice, policy or rule. Under proposed section 7, the action is specifically designated as a de novo action, and, once again, no presumption of validity can be accorded the administrative agency's finding of violations. The courts are thus invited to second guess the Secretary of Labor and the contracting agencies and to suhstitute their judgment for that of administrative officers, even though such judgments may be supported by substantial evidence in the record. It is to be noted in this regard that under proposed section 7(b) of Representative Goodell's original bill, H.R. 11115, the findings of the Secretary as to the facts were to be conclusive if supported by substantial evidence_which is the more customary provision in the relationship of administrative agencies to courts.
If only a small percentage of the some 5 million individual determinations issued yearly were subjected to this proposed procedure, the magnitude of the increased burden on our courts woulā be staggering. By subjecting the effectiveness of the existing enforcement machinery under the act to a cumbersome system of continual delay, the proposal would have as its end result the emasculation of that enforcement machinery.
There is no need for a new procedure for judicial review of enforcement cases because the present Court of Claims judicial procedure is entirely adequate to remedy any injustices caused by the contracting agencies to contractors.
It is not possible to have predeterminations and the judicial review of such predeterminations proposed by H.R. 9590, because no judicial review proceeding could be processed to final judgment of the Supreme Court or even a circuit court of appeals before the bids are submitted on a particular Government construction
(Whereupon, at 11:10 a.m., the subcommittee recessed, subject to call of the Chair.)