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ask you at what point a prospective rate becomes a prevailing rate and what is your position on prospective rates ?

Mr. SILBERMAN. Prospective rates ?
Mr. REID. Yes.
Mr. SILBERMAN. Are you talking about deferred increase!
Mr. REID. Yes.

Mr. SILBERMAN. Our position, which is in accord with the position taken by the General Accounting Office, of course which I have been lead to understand is a creature of the U.S. Congress, is that the prevailing rate can be based on only wages paid, not wages which may be paid in the future.

Mr. Reid. My query is at what point do you review a prospective rate to have become the prevailing rate, and at what point do you change the prevailing rate?

Mr. SILBERMAN. I would like to check Mr. Moran on that.

My understanding is at the time the contract is bid we make an examination of what the prevailing rates are. Is that correct?

Mr. REID. If you have a contract that stipulates in fiscal 1972 you will go up $1 an hour or whatever it is, do you change the prevailing rate at the beginning of the fiscal year, and that becomes the prevailing rate on the basis of new contracts, the majority of which go into effect at the beginning of the year?

Mr. SILBERMAN. We set prevailing rate at the time the contract is let. With respect to that contract, we don't change the prevailing rate. That is true under all of the prevailing wage statutes, the Service Contract Act, Davis-Bacon, and so forth.

Mr. REID. I have one other question, Mr. Secretary, which perhaps is more nearly related to the Walsh-Healy Act but it is a current matter and I did want to ask you about it because I have recently written a letter to the Secretary on the subject.

On March 4, the General Labor Subcommittee of the House Education and Labor Committee continued hearings on proposals to amend title 7 of the Civil Rights Act of 1964.

And specifically we received testimony from Howard A. Glickstein, appearing as staff director of the U.S. Commission on Civil Rights, relative to the F-15 fighter plane contract which was awarded without the required pre-award contract compliance review and which was awarded without the company being required to submit an adequate affirmative action plan concerning equal employment opportunity. We are apprised that the President has issued an Executive order requiring that this pre-award contract compliance review be completed prior to and precedent to the signing of the contract and that an affirmative action plan must be worked out prior to the signing.

Secretary Shultz testified earlier that this was implicit in the Executive order that at that time the matter had not yet been resolved within the Federal Government and my letter to the Secretary of March 8 inquires whether the Department of Labor has, in fact, worked out the appropriate procedures with the Office of Contract Compliance so that contract cannot be approved without these two steps having taken place.

Mr. SILBERMAN. I am not immediately familiar with your letter, Congressman Reid. May I check and see if anything, if the Solicitor is

familiar with that? Which Government contractor was awarded the F-1j contract?

Mr. Reid. I don't have that data. The McDonnell Douglas, Corp., excuse me, it is in the letter.

Mr. SILBERMAN. Could it have been McDonnell Douglas?
Mr. Reid. Yes.

Mr. SILBERMAN. We did, in fact, work out an extensive affirmative action plan with McDonnell Douglas. It is true, as I recall, that the Civil Rights Commission brought to the attention of the Department of Labor the fact that the contract was in process of being awarded without affirmative action plan review. We were then in the process of drafting order No. 4 which was our attempt to expand, implement, flesh out the language of the Executive order to make it clear to all contractors what we would require of them prior to an award of a large contract.

The McDonnell Douglas agreement was the first one negotiated under that new order No. 4 principle and it is one I think we could be reasonably proud of. So the problem was taken care of.

We appreciated the reference from the Civil Rights Commission. They are often very helpful giving us information about a contract being awarded somewhere in the Government without appropriate safeguards.

We have also in cooperation with the compliance officers of the various accounting agencies reemphasized again and again and again our position that they can't award a large contract without the procedures being followed.

I don't think since that time, which was a year ago, we have had any major difficulties.

Mr. REID. My only question, Mr. Secretary, is have you formalized procedures consistent with the Executive order of the President that would require these two steps being taken prior to any contract being assigned or approved ?

Mr. SILBERMAN. That is correct and they are embodied in order No. 4, a copy of which I will have the solicitor send to you.

Mr. REID. Thank you, Mr. Secretary,

Mr. SILBERMAN. I am not sure I understood the Walsh-Healey part of the question, though, Congressman. I lost it somewhere.

Mr. REID. I was raising the question to suggest where this falls actually. It does not come under any particular act, although it may be more nearly related to procurement than a service contract.


Mr. O'HARA. Mr. Secretary, I am, of course, pleased that in your testimony you indicated that interpreting the act was the responsibility of the Department of Labor and it was up to the Department of Labor to determine congressional intent.

And certainly that is a legal truism. That is your position with respect to interpreting this act as well as other acts, is it not?

Mr. SILBERMAN. Well, I won't say that it is solely our responsibility. I have been advised by various Members of Congress on numerous occasions that we should at least pay some deference to the Comptroller General's view as to the law. Where we think he is dealing with

matters of procurement law and where we think he is on good grounds we ought to try to accommodate our views to his.

There is apparently some conflict within the Congress and I must say some confusion even within the executive branch as to exactly how much authority the Congress has given the Comptroller General to interpret this law.

But certainly within the area of procurement, we have regarded him as having a great amount of expertise.

Mr. O'HARA. In any event, you state at the bottom of page 3:

While the interpretation of how the Service Contract Act applies is clearly a function of the Department of Labor, careful consideration was given to the Comptroller General's opinion.

I think that is a fair enough way of stating it and I want now to pursue a couple of interpretations that the Department has made of this act and try to square them with the congressional intent.

To begin with Mr. Silberman, let me ask you what you conceive to have been the broad overall congressional intent behind the Service Contract Act of 1965?

Mr. SILBERMAN. To treat service employees in a fashion so that prevailing rates paid to them would not be undercut by Government contracting.

Mr. O'HARA. Or to put it another way, that persons employed on Government service contracts would receive the same wages and fringe benefits and other benefits that their counterparts employed by contractors not working for the Government did in that same vicinity or locale, isn't that correct?

In other words, to make sure they were treated as well as the people performing the same kind of work for the others in that particular area?

Mr. SILBERMAN. That might be an overly broad statement. It certainly carries with it the kernel of the intent but it may be expressing it in an overly broad statement.

Mr. O'HARA. Let's take your statement then. You say that the intent of the Congress was to prevent prevailing rates in the vicinity from being undercut. Now, in light of the situation that the Congress confronted at the time, we face the situation where wages on Government service contracts were very low, were in fact lower than the wages for similar occupations in the private economy, and we were trying to bring the service employees up.

I think that is pretty clear from the intent. So let's take just a couple of cases. Let's take for instance, the mailtruck drivers. You are saying that you propose that the rate of pay—prevailing rate of pay—for Star Route drivers of mail be determined on the basis of what Star Route drivers of mail are presently receiving.

Mr. SILBERMAN. I think that perhaps you misunderstood my testimony on that, Mr. Chairman.

Mr. O'HARA. What is it then?

Mr. SILBERMAN. I will turn to my written testimony there. Pages 8 and 9, particularly at the top of page 9 :

This would include all mail haul drivers and other drivers engaged in performing work similar in duties and equipment to mail haul contract work, including such drivers, for example, as those employed by larger parcel driver services.

The question that you asked would have been accurately put to the Comptroller General. It was his view that it should be limited only to the mail haul drivers. We did not accept that position.

Mr. O'HARA. Under the Standard Industrial Classification Manual, which is a publication of the Executive Department, the Bureau of the Budget, there are no distinctions made between the carriers of parcels and carriers of other kinds of dry freight. I wonder if you can enlighten the committee by telling us if there is a distinction anywhere else, if that distinction is recognized any place else in the law?

Mr. SILBERMAN. Your question is: Is there any document put out by the Government which recognizes that distinction ?

Mr. O'HARA. Or is there any law enforced by the Government that recognizes such a distinction?

Mr. SILBERMAN. I think we are talking about the Service Contract Act law.

Mr. O'Hara. I wonder if you could base your finding of such a distinction for the application of the Service Contract Act on similar findings in the application of other laws, or is this distinction being made for the first time anywhere?

Mr. SILBERMAN. You mean between two types of truckdrivers, is that your point ?

Mr. O'Hara. You have singled out a group of truckdrivers and made a separate class out of them where there is a separate class nowhere else.

Mr. SILBERMAN. In the first place, we did not single them out. The issue was brought to us by the Comptroller General. He took the position that the mail haulers ought to be a distinct classification all to themselves. That we did not accept. Now your question is is the distinction that we are drawing, similar kinds of work as mailhaul drivers within the trucking group, is that distinction recognized in other documentation of the Government ?

I don't know. I will have my associates check that but I don't regard our duties to interpret the Service Contract Act and to determine appropriate classes of employees as being derived from any other law. I am not sure if I understand your question, but the Service Contract Act, as you point out, deals with the kind of employee that previously had not been covered at all.

Mr. O'Hara. And in any event, you know of no other such classification of drivers? You don't know that they are not that way classified anywhere else but you can't cite any instance where they are?

Mr. SILBERMAN. We will check that, Mr. Chairman. There is some precedent in our operations for treating some drivers differently than others. We have based some moving and storage driver determinations on BLS Wage surveys but your question goes into a good deal of detail and you ask us whether that material is available. I believe we do have material available and I would like to submit this subsequently to the committee.

Mr. O'HARA. Well, we recognize that there is a distinction on moving and storage, and the Standard Industrial Classification Manual in fact makes such a distinction and it does so by distinguishing drivers of goods where warehousing or storage is also involved from

other drivers of goods. So that is a perfectly legitimate distinction under the Standard Industrial Classification Manual and so recognized and it is recognized in the trade and in collective bargaining agreements and what have you. The plain fact of the matter is, though, that the distinction that you are now attempting to make with respect to the drivers of mails is a distinction that is not made in the Standard Industrial Classification Manual or any collective bargaining agreement or anything else.

Mr. SILBERMAN. I won't say it is not made in any collective bargaining agreement. I think we would have to examine it very carefully.

Mr. O'HARA. I would be willing to say that, and I would be happy to have you prove me wrong, but I doubt that you will.

We had before us representatives of the Teamsters Union at our last hearing and they indicated they represent companies who sometimes bid upon and sometimes have contracts for the carriage of mail and there is no distinction made between those employees and other employees with respect to wage rates, fringe benefits, and so: forth.

Mr. SILBERMAN. What do you mean by "other employees ?" Mr. O'HARA. Other drivers. There their distinction of drivers has to do with the same, they use the same classification that the Standard Industrial Classification Manual does, over-the-road drivers and local drivers, and then a separate classification for drivers of goods where storage and warehousing is also involved.

They use those same classifications, they indicated to us, and not separate classifications just for mail drivers.

Mr. SILBERMAN. I recall out in Hawaii, which is where I am from, we had four or five drivers—different wage rates for drivers, collective. bargaining agreements, for drivers, depending on the kind of material they hauled but it is very difficult for me to categorically state what the number of different classifications of drivers would be in all localities of the country.

Mr. O'HARA. All right. In any event, you place heavy reliance on recommendations of GAO. I call to your attention two points.

First, GAO, in their testimony to us, said, they never recommended that to you. They simply suggested that was one way that you might change the system then used for classifying, setting prevailing rates for mailtruck drivers, and they went on to say that they are in fact in the process of continuing to consider their recommendations in this field and that so are you, and they were surprised when we told them that in fact you people had already made a decision.

They said, “Is that right? They have already made a decision? They never told us that they had already made that decision. We thought they were still considering it as we are." In other words, they said, “We have not reached any final conclusion on that. We merely suggested this as one possible way and evidently the Labor Department seized on a suggestion and they did not tell us anything about it.”

Mr. SILBERMAN. Well, I prefer not to categorize the testimony of the General Accounting Office. They can come and testify as they wish. There is a letter to Mr. Fletcher, dated August 31, 1970, which I thought you had in the record, from the Associate Director of General

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