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For the government to bid for shortage category personnel against personal service contractors is highly obstructive to the civil service system and contrary to sound manpower utilization practices. It is apparent in many cases that the contractor employees who possess these scarce skills are employed, or become kibcontractors to the contractor, solely for the purpose of having their services sold to the government. In these situations, the contractor who provides solely personal service is actually substituted by a contracting officer for the civil service system. The net effect, as has been established by General Accounting Office audits, may well be higher cost to the government for services which should have been, and could have been, provided by regularly appointed Federal employees

These comparisons, founded upon our investigations of contracting practices at several government agencies, can be shown with the same adverse impact upon the civil service system across the broad spectrum of personnel administration. There are similar disparities between the civil service and contractor employees in the entitlement to, and use of, leave for vacation, sickness, military service, jury duty,* voting, blood donation, and family deaths; in compensation for on-the-job injuries *; in retirement benefits for disability and old age”; in group life and health insurance benefits *; in travel and relocation allowances *; in training and development opportunities **; and in the rights and entitlements to inventions, patents, and the use of new technology *a, among others.

The extent of these disparities is magnified by the obligations imposed by law and regulation upon the Federal employee. Unlike his counterpart employed by a contractor, the civil servant must proclaim his loyalty to our constitutional form of government, 34 under oath. His conduct is circumscribed by strict rules of ethics, prescribed by Executive order and Congressional resolution * and special provisions of the civil and criminal laws relating to bribery, graft,* conflicts of interest, * partisan political activity and fund raising," misuse or destruction of government property and records,“ habitual use of intoxicants, agency for a foreign principal," and the right to strike," among others.

We must also consider the impact upon employee loyalty. An employee's loyalty to his employer, be it government or private enterprise, is essential for efficiency of operations and for protection of the employee's interests. One surmises from onr investigations that some contractor employees are sorely perplexed as to where their loyalties should lie—with the original contractor who hired them, the successor contractor that presently pays them, the future contractor that may hire or fire them, or the civil service supervisor in the unit in which they serve.

Civil service training, career development and merit promotion programs are incentives to motivate the employee to improve his skills, to enlarge his capabilities, and to adopt a public service career. These programs are mutually beneficial; the employee gains new capabilities and the government benefits by the retention of a skilled and experienced career civil servant. The training

22 5 U.S.C. 6303.
45 U.S.C. 6307.
* 5 U.S.C. 6323. 0.
25 U.S.C. 6322, 5515, 5537.
27 FPM Supp. 990–2, p. 630–51.
28 5 U.S.C. 8101-8150.
25 U.S.C. 8301-8348.
3 5 U.S.C. 8701-8716.
m 5 U.S.C. 8901-8913.
32 5 U.S.C. 5701-5742 ; 80 Stat. 323.
% 5 U.S.C. 4101-4118.

23a Executive Order 10096, 15 Fed. Reg. 389 (1950) ; Presidential Memorandum ano Statement of Government Patent Policy, issued October 10, 1963, 28 Fed. Reg. 10943 (1963).

34 5 U.S.C. 3331, 3333 * Executive Order 11222:3 CFR (1965). * H. Con. Res. 175, 85th Cong. 72 Stat. Pt. 2-B-12. 27 18 U.S.C. 201. 39 18 U.S.C. 203. 29 18 U.S.C. 205, 207, 208. 40 5 U.S.C. 7321-7327. 41 18 U.S.C. 2071. 42 5 U.S.C. 7352. 43 18 U.S.C. 219. 4 5 U.S.C. 7311.

of contractor employees on the other hand is often at government request and either directly or indirectly at government expense. The government is not assured, however, of any continuing benefit from this investment.

Closely related to employee loyalty and morale is the matter of performance evaluation. Performance evaluation at best is a difficult, sensitive undertaking; however, where civil service and contractor employees are intermixed on the job, it becomes exceedingly difficult, if not impossible. This is particularly true where a contractor employee may be replaced by a civil service, employee, or vice versa, on a particular task assignment prior to its completion.

As to on-the-job performance of the contractor employee, government managers have advised in the past that they could get an unsatisfactory contractor employee off the job in 24 hours. However, we are cited one example where separation was delayed three months and accomplished through the quarterly evaluation for determination of the incentive award fee. Presumably at this point, the contractor was informed that the "end product" e.g., the employee's services, were unsatisfactory.

Lastly, the furtherance of national policies through the civil service system may be compromised by unauthorized contracts for personal services. For example, in the Veterans Preference Act, now codified in title 5, United States Code, Congress has provided an absolute preference to veterans for positions of guards, elevator operators and custodians in the competitive service as long as preference eligibles are available. And what of the policy objectives served by the statutory restrictions on partisan political activity by Federal employees and the prohibitions against the right to strike? By what authority does an administrative officer, perhaps even a minor one, decide in the course of contracting for personal services that veterans shall not be accorded preference for custodial jobs; or that what is tantamount to Federal employee status can be conferred without the concurrent obligations to refrain from exercising the right to strike, or to avoid pernicious political activity?

There is clear recognition of the national policy embodied in the personnel laws in BOB Directive A-76, which prescribes contracting policy for the executive branch. This policy directive explicitly negates any intent to alter existing authorities, or to justify departure from any law or regulation of the Civil Service Commission, or to avoid established salary or personnel limitations. Contracts for personal services which in fact and in law do depart from civil service laws and regulations, are accordingly in violation of this policy.

That an agency or management official may consider the requirements of the civil service laws and policies difficult or tedious in application is no justification for turning the hiring and management of personnel over to a contractor.

The foregoing findings and conclusions have been distilled from Commission experience and constitute the basis of the Commission's concern in the matter of contract practices. There is no intent or purpose to reflect adversely upon the performance or capability of any contractor or upon the unparalleled contribution of private enterprise to government programs.

It is, however, considered necessary for the full discharge of the Civil Service Commission's duties and responsibilities as the central staff agency for civilian personnel, to clarify and amplify the legal, policy, and factual basis upon which contracts for personal services are prescribed under the national policy expressed in the civil service laws.

Mr. WEBBER. From the foregoing, it is manifest that insofar as service contracts are concerned, the Comptroller General and the Civil Service Commission also have a direct legal interest to ascertain whether the specific terms of these contracts conform to the classification and civil service personnel statutes. Although the legislative oversight and jurisdiction over these Federal functions are, by definition, the responsibility of other committees, the proper enforcement of the collective laws on service contracts cannot be assured unless the Secretary of Labor is in close liaison with the Civil Service Commission and the Comptroller General and applies the same principles in establishing rates and insuring complete compliance.

45 5 U.S.C. 3310.

SUMMARY AND CONCLUSION In summary, I should like to reiterate that there is today indisputable evidence that the Department of Defense and the military departments are resorting in a massive way to contracting out janitorial services, apparently because of the low pay rates certified under this law. Because of the total commitment of these departments to this policy, we believe the Congress should require compliance with the law as it was intended and not as it is being administered.

To assure full compliance, it is imperative that the sanctions of the law be applied consistently and uniformly and that offenders not be able to obtain waivers of penalties through the discretionary actions of the Secretary of Labor. For this reason, no waivers of penalties should be permitted, at least for the immediate several years. We endorse H.R. 6244 and H.R. 6245 for this reason.

However, the enactment of these bills will not alone assure compliance with the other provisions of Public Law 89–286, the Service Contract Act of 1965. To assure that the intent of that statute be implemented, we recommend that it be amended so that the term, "prevailing rate” which the Secretary of Labor certifies for the locality be identical with the term "prevailing rate” as it is used by the Federal departments and agencies when setting the “pay line” of their own blue collar "prevailing rate” employees. This will provide consistency in standards between Federal and private contractor pay based on "prevailing rates."

To assure compliance with the law, we request Public Law 89-286 be further amended requiring that all contracts over $2,500,000 be deposited in a central repository maintained by the Secretary of Labor; who shall assemble, compile, file, and evaluate these contracts in order to submit annually a report to the Congress as to the total amounts involved; the numbers and categories of personnel employed by contract, by agency and department; the pay, including the range of pay, by job classification; and the relationship of fringe benefits to pay rates.

In concluding, I wish to thank the subcommittee once again for the opportunity to present our views and to assure you of our fullest cooperation and support for amending Public Law 89–286 to conform to current conditions.

Mr. O'HARA. Thank you very much, Mr. Webber. I think your statement is an excellent and well documented statement.

I want to congratulate you on the work that went into its preparation. I like your proposed amendment contained on page 10. We insert after the word "locality" "as established by the Federal departments and agencies in setting the pay line for their 'prevailing rate' employees.” That would certainly eliminate the condition called to our attention by the Laborers' International Union on the opening day of these hearings that showed the growing discrepancy between the Board wage rate and the service contract rate and low rate in the Air Force base, for example.

The testimony that was given on that day by Mr. Jacobs indicated that at the time the law was enacted, the first determination succeeded in establishing a rough equality between the wage board rate paid to Federal blue collar employees and the service contract rate paid to

employees of service contractors doing the same work and that in the meantime, that the equality has eroded and now there are substantial differentials between the wage board rate and service contract rate which we never intended.

Mr. WEBBER. Of course this is our principal interest in the legislation. As I indicated earlier, our union does not represent employees in the private sector but is limited to employees of the Federal Government. Apparently, the Department of Defense has elected, because of the operations of the Coordinated Federal Wage System which has tended to raise the pay of people in the public sector, to utilize the contract method to reduce the cost. We feel that if this law were properly implemented, the wage rates would be comparatively the same and the basis for a decision on a contract would be on whether the work to be performed would be more appropriately carried out by a contractor or by Federal personnel rather than on the amounts of pay the employees would receive.

Mr. O'HARA. I couldn't agree with you more and that was the intent of the committee at the time we enacted the legislation. I might point out to you, to conclude the matter, that the bill that this committee reported in the 88th Congress, which did not get through the legislative process, it got to the Rules Committee and got hung up, did include a provision for using the wage board as a determination method. That was our intent, that there be that kind of equivalence between wage board rates and service contract rates.

Mr. Thompson, do you have questions?

Mr. THOMPSON. I have no questions, but I do want to thank these witnesses for their statement, which is a splendid one, and for their suggestions, with which I am in general agreement. They are in a particularly difficult situation, and I do appreciate their interest and the thoroughness of their preparation.

You have some documentation here that is going to be extremely valuable to us.

Thank you very much.
That concludes the witnesses for today.

The committee will stand in adjournment until April 6 at 10 a.m., in room 2175, when we will have witnesses from the U.S. Department of Labor.

(Whereupon, at 12:55 p.m., the subcommittee recessed, to reconvene at 10 a.m., Tuesday, April 6, 1971.)

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