AMENDING THE SERVICE CONTRACT ACT OF 1965

THURSDAY, JUNE 1, 1972

HOUSE OF REPRESENTATIVES,

SPECIAL SUBCOMMITTEE ON LABOR

OF THE COMMITTEE ON EDUCATION AND LABOR,

Washington, D.C.

The committee met at 10:15 a.m., pursuant to call, in room 2175, Rayburn House Office Building, Hon. Frank Thompson, Jr. (chairman of the subcommittee) presiding.

Present: Representatives Thompson, O'Hara, and Carlson.

Staff members present: Hugh G. Duffy, counsel; Jeunesse M. Beaumont, subcommittee clerk; Michael J. Bernstein, minority counsel for labor; and John C. Miller, associate minority counsel for labor. (The text of H.R. 11884 follows:)

[H.R. 11884, 92d Cong., first sess.]

A BILL To amend the Service Contract Act of 1965 to revise the method of computing wage rates under that Act

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 2(a) (1) of the Service Contract Act of 1965 is amended by inserting at the end thereof the following: "If a collective bargaining agreement covers the affected employees, such agreement shall be used as the basis for making the wage and fringe benefit determination, and the Secretary shall incorporate in such determination prospective wage increases provided for in such collective bargaining agreement, provided such agreement has been negotiated in good faith."

SEC. 2. Section 2(b)(1) of such Act is amended to read as follows:

"(b) (1) No contractor who enters into any contract with the Federal Government the principal purpose of which is to furnish services through the use of service employees as defined herein and no subcontractor thereunder shall pay any of his employees engaged in performing work on such contracts less than the greater of

"(A) the minimum wage specified under section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended (52 Stat. 1060; 29 U.S.C. 201, et seq.),

or

"(B) the rates that are paid pursuant to section 5341 of title 5, United States Code, by the Federal agency to its employees performing work of equivalent difficulty and responsibility: Provided, That prevailing wages under this subsection shall be determined in the same manner as such agency determines prevailing wages for its own employees pursuant to section 5341 of title 5, United States Code.

SEC. 3. Section 4 of such Act is amended by adding at the end thereof the following new subsections:

"(c) The Secretary, notwithstanding the provisions of subsection (b) of this section, may not decline to make the determinations specified in section 2 of this Act, except upon application of the contracting agency. The Secretary shall then give written notice of the application to the affected employees, and an opportunity to partcipate in a hearing. The Secretary may make such variation, tolerance, or exemption only if he determines on the record, and after a hearing if (1)

requested by the affected employees, that the issuance of a determination as specified in section 2 of this Act (1) will seriously impair the conduct of government business, or (2) will not be in the public interest, specifying in detail his reasons for so concluding. No such variation, tolerance, or exemption may be made unless the Secretary finds that the action is in accord with the remedial purpose of this Act to protect prevailing labor standards. All papers and documents made a part of the official record of administrative action pursuant to the issuance of any such variation, tolerance, or exemption shall be available for inspection by the public.

"(d) In the event the Secretary declines to make a wage determination under the authority of subsection (b) of this section, the contractor or subcontractor shall pay his employees no less than the greater of (1) the wages and fringe benefits the employees were receiving immediately before the new contract was entered into, (2) the wages and fringe benefits being paid under a valid collective bargaining agreement immediately before the new contract was entered into, (3) the minimum specified in section 2(b) (1) of this Act.

"(e) Subject to limitations in annual appropriation Acts, but notwithstanding any other provision of law, contracts to which this Act applies may, if authorized by the Secretary, be for any term of years not exceeding five: Provided, That each such contract provides for the periodic adjustment of wages and fringe benefits pursuant to future determinations covering the affected employees issued pursuant to section 2 of this Act: Provided further, That such future determinations shall be issued no less often than once every two years during the term of the contract."

SEC. 4. Section 5(a) of such Act is amended by striking the first comma of the second sentence and inserting in lieu thereof the words "because of unusual circumstances," and by adding the following sentence after the last sentence: "The Secretary shall, no later than thirty days after a hearing examiner has made a finding of a violation of this Act, forward to the Comptroller General the name of the person or firm found to have violated this Act."

Mr. THOMPSON. The subcommittee will be in order.

During the first session of this Congress, the subcommittee held 8 days of oversight hearings on the administration of the Service Contract Act of 1965. As a result of those hearings, I became convinced that there were a number of defects both in the act itself and in the way the act was being administered, and I introduced H.R. 11884 to correct those defects.

Several changes in the wording of H.R. 11884 were suggested to me during the succeeding months, and I decided to adopt a number of the suggestions.

I have asked designees of the Comptroller General and the Secretary of Labor to appear here today to testify both on H.R. 11884 and on the proposed changes in language, which they have seen in draft form.

My major concern is on the practical effect of these amendments if they are passed by the Congress. We are interested in making the Service Contract Act a workable and effective vehicle for achieving the Congress' initial objectives in enacting it, particularly those, of course, of my colleague, Mr. O'Hara, who was the original House sponsor, and the late Senator McNamara. We want to make certain that the changes we are proposing will not present intolerable burdens to the Department of Labor.

Our first witness is Gregory J. Ahart, Director of the Manpower and Welfare Division of the General Accounting Office. Mr. Åhart, will you introduce the gentlemen who are accompanying you?

STATEMENT OF GREGORY J. AHART, DIRECTOR, MANPOWER AND WELFARE DIVISION, GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY MORTON E. HENIG, ASSOCIATE DIRECTOR; WARREN BROWN, SUPERVISORY INVESTIGATOR; AND MELVIN E. MILLER, ASSISTANT GENERAL COUNSEL, GENERAL ACCOUNTING OFFICE Mr. AHART. Thank you, Mr. Chairman. On my left is Mr. Melvin E. Miller, who is Assistant General Counsel of the General Accounting Office; on my immediate right is Mr. Morton Henig, who is an Associate Director of the Manpower and Welfare Division, and Mr. Warren Brown, who is a supervisory investigator with that same division.

We will be using some charts, Mr. Chairman, to help us with the presentation of some of the statistical information which we will be covering in the statement.

We are pleased to appear here today to present information requested by the subcommittee related to the administration of the Service Contract Act of 1965 and certain proposed amendments to the act. The Service Contract Act requires that every contract entered into by the United States or the District of Columbia in excess of $2,500— the principal purpose of which is to furnish services to the United States through the use of service employees shall specify the minimum wage rates and fringe benefits to be paid the various classes of service employees in the performance of the contract or any subcontract thereunder. The wage rates specified are those determined by the Secretary of Labor as being the prevailing rates for such employees in the locality where the contract is to be performed.

The Department of Labor requires contracting agencies to submit "notices of intention" to award service contracts not less than 30 days prior to the issuance of invitations for bids or commencement of negotiations. The Department does not receive information, however, on whether each contract is finalized or the number of service employees actually employed in performing the work.

The Department provides a form which may be used for the notice of intention. Whether or not the form is used, the following information is required: (1) The date on which the agency expects to invite bids or commence negotiations; (2) the place or locality in which the service is to be performed; (3) a description of the services called for by the contract; and (4) the number and classes (types) of service employees likely to be required for contract performance.

PROCESSING OF NOTICES OF INTENTION AND WAGE DETERMINATIONS

According to the Department, notices of intention received by the Department are subjected to administrative control, including the recording of the date of receipt and the amount of time available until the invitation for bids is to be issued and are reviewed to identify any unusual circumstances which dictate special handling.

The notice is then evaluated and a series of decisions are made regarding the Department's response to the notice. If the Department

needs additional information from the contracting agency, that information is requested at this point, usually by telephone. If the contract is found not to be a service contract within the purview of the act, the contracting agency is so notified.

If the contract is subject to the act, the Department must determine whether an appropriate current wage determination-one which has not been superseded by a later wage determination-or data upon which to base a new or revised wage determination, is available. The decision as to whether a current wage determination applies is based on the following criteria: (1) Is the locality of the proposea work and of the current wage determination the same? (2) Is the nature of the proposed work similar to that for which the current wage determinations were issued? (3) Are the classes of employees expected to be involved in the proposed work similar to those for which the current wage determinations were issued?

If a current wage determination is to be applied, a copy of it is attached to the original notice of intention and both are returned to the contracting agency.

A decision to revise an applicable current wage determination is made if more recent data are available and can be obtained in time. If no current wage determinations apply, the Department must determine whether data are available upon which to base a new wage determination and whether it can be obtained in time, and if so, whether the expenditure of resources necessary to make a determination is warranted. The Department is more likely to decide to issue a wage determination if: (1) A large number of service employees are expected to be involved in the work; (2) The types of employees expected to be utilized, the type of work to be performed, or the location in which the work is to be performed makes it likely that low wages will be paid under the contract; or (3) The Department expects other similar service contracts to be awarded in the locality to which the wage determination can be applied.

If the Department decides to issue a wage determination, it is attached to the original notice of intention, and both are returned to the contracting agency. If no wage determination is issued the original notice of intention is so noted and returned, but the reason for the Department's decision not to issue a determination is not shown. The primary reasons for not issuing wage determinations, according to the Department are the lack of available data and the fact that few employees would be covered. For your information, Mr. Chairman, we have attached to my statement (Attachment 1) a flow chart depicting the basic steps and decision points involved in processing notices of intention and wage determinations.