Mr. O'HARA. Well, I think there are some ways but we will save that discussion until our later meeting, if we could. But I thank you gentlemen for appearing before us; thank you.

Mr. SILBERMAN. Thank you, Mr. Chairman.

Mr. O'HARA. And I hope as we go on through the year that we will grow to be even more in harmony on these matters than we have

been.

Thank you.

STATEMENT OF JOHN A. McCART, OPERATIONS DIRECTOR, AFL-CIO GOVERNMENT EMPLOYEES COUNCIL

Mr. O'HARA. We have one other witness today, Mr. John McCart, representing the Government Employes Council, AFL-CIO. Mr. McCart is the Operations Director of the Government Employes Council. Mr. McCart, the House is in session and we are halfway through a quorum call. I wonder if you would mind inserting your statement or if you would prefer to come at a subsequent meeting of the committee?

Mr. MCCART. Mr. Chairman, I will be happy to insert my statement in the record and just speak for a moment or two about it.

Mr. O'HARA. Without objection the statement as provided the committee will be entered in full at this point in the record. (The statement referred to follows:)

Mr. Chairman and members of the Subcommittee, The Council, which is comprised of 34 AFL-CIO unions representing in excess of 1 million Federal workers, is happy to offer its views on the administration of the Public Service Contract Act. Many of the unions associated with the Council maintain a large membership in private firms, including those who have contracts with the Federal Government and are covered by the Public Service Contract Act.

Thus, it is necessary for the GEC to view the statute and its application as they relate to both Federal and private employes. We find that the present system is producing injustices to public and private workers.

Some idea of the magnitude of the problem can be gleaned from the fact that expenditures by the Federal Government for services by contract is in the neighborhood of $8 billion annually. The Council does not know the portion of that figure covered directly by the Public Service Contract Act. With the growth of such contracts, however, it is logical to believe that the statute applies to a large segment of the total expenditure.

On January 30, 1964, the GEC testified before a similar Subcommittee on two bills establishing minimum work standards for employes of contractors providing cleaning, janitorial, food, and other services to the Federal Government. We endorsed the legislation.

One excerpt from that statement summarizes our basic approach to the legislative proposals under consideration at that time

"Interest of the Government Employes Council in the pending legislation is stimulated solely by the necessity to accord these private industry workers some measure of equitable treatment with respect to wages and related employment benefits."

It is axiomatic in public service that a law is only as effective as the quality of its administration.

This is the root of the problem confronting Federal employes, service contract workers. and contractors as we view administration of the statute since 1969. Even before that date, one of our unions was involved in a controversy over the application of Public Law 89-286. In April, 1967, the Department of Labor proposed vacating 58 wage and fringe benefit determinations made earlier on Star Route contracts for hauling mail. The Post Office Department actively advocated this action. Only after strenuous and time consuming efforts was it possible to reach a reasonable solution with the Department of Labor.

Today, four years later, there are Star Route contractors who are not covered by Public Service Act requirements because of the withdrawal of the 58 decisions and renewal of these contracts for another four year period following the cancellations.

In other areas, such as janitorial and food handling contracts, another serious problem has emerged. It stems from Decision B-167639-September 19, 196949 C.G. 186 by the Comptroller General. The Department of Air Force had requested the General Accounting Office to rule on the question. The Comptroller decided that prospective wage increases could not be used by the Department of Labor in determining "prevailing rates" and "fringe benefits" for the locality in which the contract was sought.

As a result, the practical effect is to prohibit contractor employees form receiving wage and benefit improvements.

For example, a union could negotiate an agreement with a contractor for certain wage and benefit adjustments, effective the following July 1, the commencement of a new service contract. Since the General Accounting Office decision prohibits consideration of wage rates taking effect in the future, the contractor employes are deprived of the fruits of collective bargaining between the union and the contractor.

Thus, the intent of the statute is being ignored.

The 1969 decision of the General Accounting Office has caused an additional adverse effect on labor relations in the contract service industry. It has influenced a decision by the National Labor Relations Board granting an exception to the "successor" doctrine for companies operating under service contracts. In the Emerald Maintenance Company case, the Board has determined that service contractors with the Federal Government need not adhere to the "successor" principle, which requires that a successor employer observe conditions negotiated between a union and a preceding company.

However, there is another group of workers adversely affected by these actions. I refer to Federal employes performing the same kind of service for which contracts are made.

At a time when large numbers of Federal employes are losing their jobs and at a time when the number of contracts to private firms is increasing. Federal workers are at a serious disadvantage in retaining their jobs. If contractors are permitted to continue providing substandard wages and benefits to their employes, Federal agencies have an incentive for enlarging the number of contracts at the expense of both private industry and Federal employes. Private employers who insist on maintaining these conditions and are abetted by Federal Government policy reflected by the Comptroller's conclusion are doing a disservice to their workers and to Federal employes alike.

It is sad, indeed, that the Federal Government is a party to these maneuvers and that the real victims are the very individuals the Public Service Contract Act was designed to help.

Many of these employes are disadvantaged. Many have little education or experience to qualify them for the mainstream of the work force. They necessarily gravitate to the jobs requiring less skill. Despite the enactment of the Public Service Contract Act, they are exploited with respect to wages and fringe benefits largely because the statute has been the subject of faulty administration.

As for the equity of the employes in this matter, it is relevant to quote an excerpt from the report of the House Committee on Education and Labor approving the original legislation (House Report No. 548-September 1, 1965)"The Federal Government has added responsibility in this area because of the legal requirement that contracts be awarded to the lowest responsible bidder. Since labor costs are the predominant factor in most service contracts, the odds of making a successful low bid for a contract are heavily stacked in favor of the contractor paying the lowest wage. Contractors who wish to maintain an enlightened wage policy may find it almost impossible to compete for Government service contracts with those who pay wages to their employees at or below the subsistence level. When a Government contract is awarded to a service contractor with low wage standards, the Government is in effect subsidizing submimimum wages."

Except that we are dealing with the administration of the statute approved by Congress, rather than the need for its enactment, that philosophy applies to our present problems with even greater force than in 1965.

What needs to be done, Mr. Chairman, is for Congress to enunciate clearly the principles to be observed by the Department of Labor in making wage and fringe benefit determinations. Apparently, the agencies involved in administering Public Law 89-286 do not comprehend its real purpose. If the latitude accorded the Secretary of Labor in Section 2(a)(1) and (2) of the statute has resulted in unfairness to the employes in question-whether through direct action of that agency or related decisions by other governmental bodies-then the Congress should amend the law to make certain that there can be no misunderstanding about its intent.

As for the bills pending before the Subcommittee-H.R. 6244 and H.R. 6245— the Council endorses them. Uniform application of the Public Service Contract Act requires that violators of the statute not be able to obtain waivers of these sanctions at the discretion of the Department of Labor.

Mr. Chairman, the GEC is most grateful for the opportunity to explore with you the problems encountered by our affiliated unions in the administration of this vital law.

Mr. MCCART. The Government Employees Council is comprised of 34 unions, AFL-CIO representing in excess of a million Federal employees. Some of these unions have a predominant membership in the private sector also. So we have an interest from the viewpoints of both the Federal workers and private industry workers including those who operate under service contracts.

What we find now with the maladministration of the statute is that it is producing injustices to both groups of employees. The injustices to the service contract employees have been discussed and explored here at great length today. It also means that as more Federal workers are losing jobs, there is an incentive for Federal agencies to award contracts to the contractors who are paying substandard wages.

As a result, the purpose of the act itself is not being adhered to in either respect. Mr. Chairman, that concludes my extemporaneous statement. I appreciate the work that is being done by this subcommittee in this area.

Mr. O'HARA. Thank you, Mr. McCart. We know of your long interest in the matter. We recall discussing the matter with you when the legislation was just an idea. I think you have well summed up one of the grave problems we have found in the administration of this

act.

We thank you for your contribution today.

Mr. MCCART. Thank you, Mr. Chairman.

Mr. O'HARA. The committee will stand in adjournment on the call of the Chair.

(Whereupon, at 12:25 p.m. the hearing adjourned, subject to call of the Chair.)

TO AMEND THE SERVICE CONTRACT ACT OF 1965

WEDNESDAY, MAY 5, 1971

HOUSE OF REPRESENTATIVES,

SPECIAL SUBCOMMITTEE ON LABOR

OF THE COMMITTEE ON EDUCATION AND LABOR,

Washington D.C.

The special subcommittee met at 10 a.m., pursuant to recess, in room 2165, Rayburn House Office Building, Hon. Frank Thompson, Jr., presiding.

Present: Representatives Thompson, O'Hara, Hicks, Ashbrook, and Dellenback.

Staff members present: Hugh G. Duffy, Counsel; Jeunesse M. Beaumont, clerk, and Michael J. Bernstein, minority counsel for labor. Mr. THOMPSON. The subcommittee will be in order.

This morning we continue hearings on H.R. 6244 and H.R. 6245 and proceed with our general legislative review of the administration of the Service Contract Act of 1965.

Our witness today is Senator Lawton Chiles from the State of Florida, who has asked to be heard on some recent developments affecting service contract employees at Cape Kennedy.

I understand, Senator, that you personally investigated the situation there, and I certainly do welcome you here this morning.

Senator CHILES. Thank you, Mr. Chairman. There was a great deal of turmoil with the employment force at the Cape, the people connected with this contract, and I think people connected with other service contracts in general at the Cape were very concerned.

I made two trips to the Cape in connection with that, and then listened to many people, some that came to Washington, some that came to my home in Lakeland before I had gone to Washington, and I talked with representatives, of course, from companies as well as NASA on this.

Mr. Chairman, I have about a 13-page statement that I will save you the problem of listening to me read.

Mr. THOMPSON. We will accept it from you and print it in the record in full, Senator.

STATEMENT OF HON. LAWTON CHILES, A U.S. SENATOR FROM THE STATE OF FLORIDA

(The statement referred to follows:)

Mr. Chairman and Members of the Committee, Today, I address myself to a situation of extreme significance, in relation to the responsibility of government to its people, as well as that of private industry.

The current state of affairs at Kennedy Space Center (KSC) in Florida is critical.