being used to reinvest in the system and not dissipated in current outlay.

Senator STAFFORD. Thank you very much, Mr. Sommers.

We want to express our appreciation to both you and Ms. Whaley for joining us this morning and helping us in our deliberations. We will be sending you some questions in writing for your response at your early convenience, if that is agreeable.

MS. WHALEY. Thank you, Mr. Chairman. For the record, I must say that in expert consultation from my colleague, the unemployment rate in the Washington area is 11.1 percent.

Senator STAFFORD. All right. Thank you.

MS. WHALEY. Thank you.

Senator STAFFORD. Thank you both.

We now have a panel of five people representing three assocations.

The panel will consist of Mr. Richard S. Pepper, Associated General Contractors, chairman of the board, Pepper Construction Co., Washington, D.C.; Douglas Pitcock, Associated General Contractors, president, Williams Bros. Construction Co., Washington, D.C.; Mr. Richard W. Sprinkel, chairman of the board of directors, National Asphalt Pavement Assn., Riverdale, Md.; and Mr. William Burgett, president, and Leon Asadoorian-I had not heard of the name-chairman of Government Relations Committee, National Utility Contractors Assn., Arlington, Va.

Gentlemen, we welcome you here.

We will go in the order in which we have named you, if that is agreeable, so Messrs. Pepper, Pitcock, Sprinkel, Burgett, and Asadoorian.

If one of you is speaking for the association rather than both of you, that would be fine. We would ask you to summarize as much as you can because the committee is beginning to run over into the noon hour.

Your presence here is valued by the committee, we won't try to cut anybody off, and the chairman is going to stay as long as is necessary to get the job done.

Let us start with Mr. Pepper.

STATEMENT OF RICHARD S. PEPPER, PRESIDENT, ASSOCIATED GENERAL CONTRACTORS OF AMERICA, ACCOMPANIED BY DOUG PITCOCK, SENIOR VICE PRESIDENT

Mr. PEPPER. Thank you, Mr. Chairman.

On behalf of the Associated General Contractors of America, we want to thank you for having the opportunity to present our testimony on the Public Investment Jobs Act of 1983.

As you mentioned, my name is Richard Pepper. I am the president of Pepper Construction Co. from Chicago. I am the current president of the Associated General Contractors of America. I have with me here today Doug Pitcock, who is president of Williams Bros. Construction Co., of Houston, Tex., and senior vice president of AGC.

The Associated General Contractors of America and its 112 chapters nationwide is comprised of approximately 32,000 firms including 8,500 of the Nation's leading general contracting companies

that perform more than $100 billion of construction annually, our member firms normally employ some 3,400,000-plus workers, a signficant portion of our national labor pool.

We most appreciate the opportunity to testify before this committee on proposals to improve this Nation's infrastructure and to develop new long-term job opportunities.

Our industry, more so than any other single industry, knows only too well the unemployment problems that burden our Nation: 1.2 million construction workers are presently unemployed.

This represents almost 25 percent of the work force of the Nation's largest industry. Construction currently accounts for some $230 billion of our gross national product, directly employing 3.8 million people and indirectly employing an additional 16 million people in construction supply industries such as cement, glass and steel, insurance, architecture and engineering.

However, unlike the recent past, when construction accounted for 10 percent of the gross national product, today's level represents less than 72 percent of the gross national product and a sharp drop in the number of people that work on construction sites.

With the passage of last year's Surface Transportation Assistance Act, Congress recognized a very important need: The restoration of our Nation's deteriorating highways and bridges. Through that recognition, Congress also provided an estimated 63,000 jobs for every billion dollars spent on the highway program. Increased expenditures in the highway program will result in increased productive employment of 13,100 onsite, 13,200 offsite and 36,700 “induced" employees per billion dollars of construction.

The decaying nature of our highways and bridges, however, is only a part of the story. What we as a nation must be concerned about is the basic fiber of our framework, the Nation's infrastructure.

AGC believes that a great opportunity exists to address our Nation's unemployment ills without the necessity of creating any new employment programs while at the same time addressing another of our Nation's ills, the poor condition of our Nation's infrastructure. That opportunity exists in using established Federal, State, and local public works programs to reverse the deterioration of our Nation's infrastructure and to provide productive employment in the process.

Since March 1982, the Associated General Contractors of America has been alerting the public to the steady deterioration of infrastructure in the United States. AGC believes an infrastructure repair program needs to be undertaken because it is urgenly needed. An infrastructure program will not only revitalize the Nation's economy but have the ability to directly reemploy or employ many of the Nation's jobless in a timely and efficient and constructive manner.

In November 1982, the Associated General Contractors of America issued a major report to the Nation entitled "Our Fractured Framework: Why American Must Rebuild" which was also submitted to Congress.

The study analyzed the infrastructure crisis facing our Nation and reported on documented infrastructure needs of $910 billion.

As complete as the study was, it was also lacking in two major areas: First, the $910 billion in documented needs was almost exclusively just Federal and federally assisted infrastructure needs. Second, while the report raised many questions, it provided few suggestions. A special AGC infrastructure task force was created to supplement the original report. Although this report is not yet in final form, certain information is available.

With the chairman's permission, we would be most pleased to submit the final report to the committee upon its completion.

I would like to call on Doug Pitcock, who is our senior vice president, since he is chairman of the task force, to continue with our testimony.

Senator STAFFORD. We would be glad to hear from him. First, let me say that the committee will be delighted to get the report whenever it is available. We are greatful for it.

STATEMENT OF DOUG PITCOCK

Mr. PITCOCK. Thank you.

Senator Stafford, in the task force, AGC surveyed existing literature and virtually all known major studies on infrastructure needs. In addition to that, we contacted directly over 100 organizations, States and cities in an effort to develop a documented estimate of necessary investment to meet the presently identified infrastructure needs. The new AGC research reveals a necessary minimum capital investment of approximately $3.03 trillion, most of which is needed over the next 19 years.

Public works investments at all levels of government generally account for about 24 percent of all construction put in place, or approximately $56 billion based on the 1982 value of construction put into place.

Continuation of such public works investment levels would produce over the next 19 years, a total investment of $1.06 trillion compared to the minimum necessary investment level of $3.03 trillion. The bottom line of our study is that we have shortfall in investment for public works construction of $1.97 trillion over 19 years, which works out to a shortfall of about $1.04 billion per year.

This ties in closely with Mr. Summers' testimony in talking about an $80 billion per year need

A review of the study to date reveals the diversity and complexity of funding needs. We also found that there is no single answer, no single investment strategy, no single funding mechanism that will answer the problem. Only through a variety of mechanisms at all levels of government can progress be made. The fact is that public works investments must be dramatically increased at all levels of government.

AGC makes the following general recommendations regarding future funding:

One, where a Federal presence in infrastructure funding; both direct and federally assisted, is justified, such Federal funding must be adequate.

Two, all levels of government must realine funding priorities. The infrastructure crisis is of such magnitude, in our judgment,

and so integral to economic revitalization, economic growth and employment, that it must take precedence over social spending.

Three, the key element in infrastructure funding must be dedicated long-term funding mechanisms for all infrastructure categories. The funding must be dedicated to avoid the shifting of capital investment spending priorities as occurred during the past 20 years.

The funding must be long term in order to provide stability in the infrastructure effort.

Four, to maximize efficiency and economy in the expenditure of infrastructure funds and to provide productive private sector employment, infrastructure construction must be accomplished by the private sector through the single contract method and open competitive bidding process.

Five, user fee funding mechanisms and enterprise authorities should be used to the maximum extent.

Six, capital budgeting should be implemented by all levels of government as a means to assure increased investment in infrastructure.

Seven, State infrastructure banks should be established with initial capitalization from both the Federal Government and the States, provided that the creation of such banks will result in a net increase in infrastructure investment.

We are pleased to see that Senate bills 23, 532, and 724 address most of these recommendations. AGC supports both 532 and 724, and because of similarities between 532 and title I of 724, believes that Senate bill 724 is a more complete vehicle for addressing this Nation's infrastructure crisis.

We urge, however, that both bills be amended as follows:

To assure maximum efficiency and economy in the expenditure of infrastructure funding, and to assure protective private sector employment, we recommend that infrastructure construction be accomplished by contracting out to the private sector rather than by direct employment by government agencies.

Increasingly large amounts of tax dollars are spent on construction of public works by government employees at all levels of government. Under this trend, which is commonly called "force account" construction, the public does not receive full value for its tax dollars.

Studies have shown that it costs significantly more in real dollars for the government to complete work with its own equipment and personnel than it does to contract out to private contractors. Although we support the major thrust of 532 and 724, we do have some concerns with title V.

We do not take exception with the objective of title V, which is to provide employment for youth. However, the methods of implementation and assumption inherent in the legislative proposals appear to be somewhat flawed, in our opinion.

For example, the program implementation under either part A or part B of title V is through a new procedure which will undoubtedly take months to initiate. To the extent that any of the provisions are designed to provide youth summer employment, it will be the summer of 1984 in many instances before the youth unemployment roles are reduced.

A thrust of title V, aside from removing youth from the ranks of the unemployed, is to provide some degree of training. Yet the short length of projects contemplated and unidentifiable nature of training programs to provide increased skill level leaves room for concern by others.

In this regard, the construction industry has a history of training its own work force. For example, AGC and its chapters participate in over 2,400 on line training programs. The resources and facilities which will provide long term employment opportunities for our Nation's youth are available. All that is needed to insure that these resources function is a concentrated effort on meeting the needs of the infrastructure as far as funding.

AGC encourages Congress to consider the problem of youth unemployment in a manner consistent with our previous comments. Congress should provide the private sector with the opportunity to do what we have historically accomplished: A long-term constructive career path for our Nation's youth.

AGC believes that a great opportunity exists to address our Nation's unemployment ills without the necessity of creating a new employment program while, at the same time, addressing another national ill, probably our major national ill; the deteriorating condition of our infrastructure. That opportunity exists when you use established Federal, State, and local public works programs to reduce the deterioration of our infrastructure, to lead the county out of economic recession and to provide productive employment in the process.

The vehicles, methods and procedures of public construction programs entailing competively bid contract construction to the private sector are already in place.

They only need adequate funding to be employment effective. Construction is the engine that drives the rest of our economy.

When the infrastructure needs are adequately funded, and which the government at all levels must provide or risk the total disintegration of our public facilities, the construction industry can and will lead America to real economic recovery.

Thank you, Mr. Chairman.

Senator STAFFORD. Thank you, very much.

Next, the committee would be very pleased to hear from Mr. Richard Sprinkel, chairman of the board of directors, National Asphalt Pavement Association of Riverdale, Md.

Mr. Sprinkel, did I pronounce that correctly?

Mr. SPRINKEL. That is correct.

Senator STAFFORD. All right.

We would be glad to hear from you.

STATEMENT OF RICHARD W. SPRINKEL, CHAIRMAN OF THE BOARD, NATIONAL ASPHALT PAVEMENT ASSOCIATION

Mr. SPRINKEL. Thank you, Mr. Chairman.

I do appreciate the opportunity to be here this morning and to participate in this process of presenting our testimony.

I am Richard W. Sprinkel, president of the Vernon Paving Co., in Los Angeles, Calif., and I am the 1983 chairman of the board of