U.S. DEPARTMENT OF LABOR, OFFICE OF THE SECRETARY, Washington, February 17, 1971. Re Powers Building Maintenance Company, a Corporation, Respondent. No. SCA-29 Hon. ELMER B. STAATS, Comptroller General of the United States, General Accounting Office, Washington, D.C. DEAR MR. STAATS: Pursuant to the authority granted to me under Section 5(a) of the McNamara-O'Hara Service Contract Act of 1965 (41 U.S.C. 351 et seq.), it is hereby recommended that the respondent in the above-listed proceeding not be relieved from the ineligibility list provisions of that Act. This action is recommended because the respondent has not made restitution of the liquidated damages in the sum of $4,069.15 which were found to be due in the Hearing Examiner's decision rendered December 18, 1969, and by the Administrator of Wage and Hour and Public Contracts Divisions in his decision on appeal dated December 18, 1970. Both the Hearing Examiner and the Administrator recommended that upon payment in full of the amount found to be due relief should be granted, but not until then. Until such time, respondent should be placed upon the list of ineligible bidders. Please notify the agencies accordingly. Copies of the decisions of the Hearing Examiner and the Administrator are enclosed herewith. Sincerely, J. D. HODGSON, Secretary of Labor. SERVICE CONTRACT ACT VIOLATIONS REPORTED TO THE GENERAL ACCOUNTING OFFICE BY THE DEPARTMENT OF LABOR FROM THE EFFECTIVE DATE OF THE ACT TO APR. 1, 1971 Sept. 23, 1968 Buhl's Quality Laundry and Dry Cleaners, a corporation. (3) 914.19 Relieve. 3 880.56 Do. Nov. 8, 1968 Escalante Garden Apartments, Inc. Edward White, Jr., individually and doing business as John B. Marshall, doing business as Marshall Co... Stanely Farha, doing business as Manor Enterprises, Apr 25, 1969 Space Services of Georgia, Inc., and Space Services May 13, 1969 May 20, 1969 Oxnard Van & Storage, Inc., doing business as Oxnard SERVICE CONTRACT ACT VIOLATIONS REPORTED TO THE GENERAL ACCOUNTING OFFICE BY THE DEPARTMENT OF LABOR FROM THE EFFECTIVE DATE OF THE ACT TO APR. 1, 1971-Continued 1 Shown as number of employees underpaid, or number of charges if safety and health requirements were violated. 2 Over. Exact number not shown in letter from Secretary of Labor. 3 N/R. Number of underpayments not mentioned in correspondence to this Office. * Removed from debarred list on July 1, 1969. 3 Charges. Safety and health requirements. PROVISIONS FOR WAGE ESCALATION IN WAGE RATE DETERMINATIONS We had found no indications during our reviews over the past 10 years (1961 to 1971) that wage determinations issued by the Department of Labor under the Davis-Bacon Act included provisions for wage escalation. This finding was further confirmed by our examination in April 1971, of 120 randomly selected wage determinations issued during the 15-month period immediately preceding the enactment in October 1965 of the Service Contract Act, and five randomly selected determinations issued 2 months prior to the effective date of the act in January 1966. The randomly selected wage determinations covered 35 counties in seven States and the District of Columbia. Although many union agreements with provisions for wage escalation were applicable to the counties we reviewed, none of the wage determinations issued by the Department incorporated any such provisions. Our findings are consistent with the statement made by the Under Secretary of Labor before the Subcommittee on April 6, 1971, that the Department did not include provisions for wage escalation in wage determinations made under the Davis-Bacon Act. Mr. THOMPSON. Our next witness is Mr. Thomas Donahue, executive secretary of the Service Employees International Union of the AFL-CIO. STATEMENT OF THOMAS R. DONAHUE, EXECUTIVE SECRETARY, SERVICE EMPLOYEES INTERNATIONAL UNION, AND RICHARD E. MURPHY, ASSISTANT TO THE GENERAL PRESIDENT Mr. DONAHUE. Good morning, Mr. Chairman. Mr. THOMPSON. Good morning, Mr. Donahue. It is nice to see you. Mr. DONAHUE. Mr. Chairman, I am Thomas R. Donahue. I am executive secretary of the Service Employees International Union, AFL-CIO. I am accompanied by Mr. Richard E. Murphy, assistant to the president. Our union represents over 450,000 people engaged in work in service occupations. Our members work in public and private buildings, hospitals, nursing homes and other institutions, apartments, hotels, sports arenas, and other places. We have many collective bargaining agreements with Government contractors and subcontracts across the Nation which cover the employment conditions of thousands of people on military installations, in Government office buildings and in other service contract situations. It is on their behalf that I appear today to express their support of the proposed amendment to the McNamara-O'Hara Service Contract Act of 1965. Let me just note for the record, that our interest in the Service Contract Act and its operations is a very old one. As long ago as 1958 and 1959 our union made representations to then Secretary of Labor Mitchell to protest to him procedures under which Government contracts were let and to bring to his attention the resultant continuing displacement of contractor after contractor by a successor who could underbid his predecessor by exploiting the workers to some greater degree. In 1961 we met then Secretary of Labor Goldberg and held an extensive series of discussions with officials of the Department of Defense and its constituent groups and with officials of the General Services Administration. In 1964 when Congressman O'Hara introduced his first bill to provide some measure of relief for the workers who found themselves trapped in these situations, we testified in support of the legislation and did our best to bring this problem to the attention of the Nation. Since the passage of the act in 1965 we have worked closely with the officials of the Labor Department charged with responsibility for ad ministration of the act. The Service Contract Act was properly hailed as a giant step for our Nation's service workers when it was passed in 1965. The purpose of the act was to establish minimum standards for compensation, safety, and health protection for employees working for contractors, and subcontractors of service contracts entered with the Federal Government or the District of Columbia. Basically it provided the service workers with nothing more than the protections already enjoyed by construction workers by means of the Davis-Bacon and Walsh-Healey Acts. Prior to the act Government agencies awarded service contracts to the low bidding contractor regardless of the wages and conditions that the contractor's employees would have to work under. Contractors would come from out of a locality, underbid a contractor paying the locality's prevailing wage and thereby destroy a decent working condition and the quality of the work performed. The Service Contract Act aimed to prevent such a situation. We feel that the spirit underlying this act is most admirable. Unfortunately it now appears that while the flesh of the act remains willing, the spirit is weak. It is our hope that these hearings and the proposed amendment will help restore the original spirit of the act. There are several current problems with the administration of the act which we would like to bring to your attention. In recent years there has been an increasing reliance by the Department of Labor on the Bureau of Labor Statistics standard area wage surveys as the basis for Service Contract Act wage rates. This is perhaps understandable from an administrative standpoint, given the workload and the small staff available for this work in the Wage Hour and Public Contracts Divisions-but it has several disadvantages. In the first place the area wage surveys cover broad categories of employment and include within any single category many different jobs and types and classifications. The act however calls for the payment of wages to the various classes of employees employed under a service contract, based upon the "prevailing rates for such employees in the locality." When area wage survey rates are used a higher prevailing rate for a particular job classification is reduced by being lumped into a larger standard category, and a second problem with the use of the area wage surveys is the timelag that exists from the time the survey is taken to the time when it is published. Three months has been the average delay and further delay of a month or more often occurs between the publication date and the date of wage determination. What can and what has happened during this timelag is most noteworthy. Contracting officers either wittingly or unwittingly put out their bid invitations during this period. This means that the contractors bid using the old wage determinations, and are only required to pay the old rates. The service worker, therefore, will be paid the old rate for the duration of the contract. Obviously such a situation completely defeats the intent of the Service Contract Act. There are several ways to resolve this burden and save the service. workers from bearing the burden of a contracting officer's slowness or forgetfulness or the burden of the fact that the BLS survey for his area comes a month too late. Present Department of Labor regulations requires that contracting officers advise the Department of their intention to let a service contract. However, if they fail to do so, there is no effective way, remedy or recourse. Neither does anyone in Government know how many service contracts may be let in any given year without a predetermined wage rate. I have always believed that where this occurs the agency should be required to obtain a wage determination and then rebid the contract. I recognize this may be burdensome to certain agencies, but I see no other effective control over the forgetful or slow contracting officer. I also believe that when wage determinations are issued based upon area wage surveys, they should be made retroactive to the date of the surveys and contracts which have been let in the meantime could be adjusted between the contracting agency and the contractor. Under the present system only the service worker suffers from the fact that BLS surveys his area in June, and he is employed under a service contract let in July, and consequently always working a year behind even the BLS determined prevailing rate. As the dominant union in the service industries, we are frequently called upon by the Department of Labor staff to provide contract wage data on which determinations of wages and fringes can be based for particular job titles and localities. We have cooperated completely with the Department in these efforts and are impressed by the efforts of the staff handling these matters, but they obviously need more staff to keep up and insure that determinations are made in timely fashion. The last index of wage determinations issued by the Department showed that as of December 31, 1970, 4,181 wage determinations are in force. Of these, 1,037 or 25 percent were issued prior to 1970 and are more than 1 year old, while it would appear that the vast majority of service contracts are let annually and the determinations should be revised annually. A second problem with the administration of the act, and in my view, a very important one, has been the refusal of the Department to issue prospective wage determinations even where they can be based on known future wage or fringe increases in the prevailing wage and fringes in the locality. During 1967 and 1968 the Department began issuing such determinations. To my mind it makes eminent good sense from an administrative standpoint to issue one determination covering 3 years rather than to have to issue three separate ones. More importantly, where mature collective bargaining has brought the parties to the kind of stability indicated by a longer term agreement, it is folly for governmental agencies to fail to recognize, accept and benefit from that stability. Instead the Department accepted the Comptroller General's September 1969 opinion that it is improper for the Department to include what he called "escalation provisions" in their determinations. It is my opinion that the Comptroller General is wrong, and that the Department should have as vigorously opposed his opinion, in this |