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.

When such things as recognition, promotion, pay increases, job security and seniority are no longer motivational incentives in the work environment, the effect on the morale and welfare of the work force can ultimately influence the safety and success of the United States space program.

The responsibility of maintaining and operating facilities and equipment at the Kennedy Space Center grows in importance. We are coming to the time when equipment begins to show wear on a large scale, when the knowledge of the craftsman and the engineer increases in importance, when the performance of accurate and intelligent action by logistic and support technicians create the very capability to run a prompt and effective Installation Support section. The increased reliance on the technical skills and speciality training of these workers is not a sensible basis for deciding to lower the level of talent for staffing these jobs.

But, the result of NASA's recent award to Boeing of a $20 million Support Services Contract has led to this fact. By underbidding the incumbent contractor TWA, Boeing has forced salary cuts on union and non-union personnel of anywhere from 25 to 50 percent.

The response at KSC has been outrage and disbelief that such a situation could be created.

Protests have been filed. Review has been called for through the NLRB. And court suits are pending.

All of the facts of this complex situation are not crystal clear. And although the Administration has repeatedly stated there are no actual legal standards violated, the fact remains that from a "people point of view" a great disservice of government and industry has been perpetrated on many faithful and dedicated employees of this country's space effort.

What seems to have taken place is that the purchasing power of the government has been used as an instrument to deprive organized employees (as well as non-union employees) of an incumbent contractor of the wages and other benefits gained through collective bargaining, a result seemingly contrary to national labor policy and government procurement policy. NASA has taken advantage of an over-supply of labor which has caused industry as well as the individual employee to bid against each other in an atmosphere of "take the job or someone else will."

I can think of no reason for the government to condone such practices on a government project. It appears completely inconsistent with the intent of Congress.

Although I am not an expert at labor law, there seems to exist two areas of concern resulting from the letting of the contract to the Boeing Company. The Boeing Company maintains its position, and has been supported by NASA, the Comptroller General's Office and the Department of Labor.

The first being whether Boeing would be a successor employer to the IAMTWA labor agreement, both bound to the term's of the predecessors TWA agreement and required to recognize the predecessor's labor organization as the representative of the successor's employees? Boeing replies in the negative.

The second question is the Service Contract Act of 1965, and whether it is intended to protect the employees in this instance from exactly what has taken place. The Act calls for the determination of the prevailing wage in the area by the Secretary of Labor to establish a minimum wage figure to be used for contract bidding purposes. There has been no such action by the Department of Labor.

NASA selected the Boeing Company bid for a cost-plus fee contract for the performance of installation support services at the Kennedy Space Center. The previous contract had been held by TWA. The procurement solicited was Request for Proposal (RFP) 2-370-0, dated June 30, 1970, and the closing date for submission of proposals was on August 19, 1970.

The Pan American Corporation submitted a proposal which was considerably lower than the Boeing proposal which was ultimately accepted by NASA. NASA refused to accept the Pan Am proposal on the basis that they were setting up what amounted to a "sweetheart agreement" with a new Teamster's local and that this would result in a cut in labor wages and a disruption in morale.

After considering the past history of poor relations between the involved union

at KSC, NASA was of the opinion that labor problems could reasonably be expected to result if employees were required to accept lower wage rates and change union affiliation.

However, NASA accepted and agreed to negotiate with Boeing on the basis of a labor plan reflected in Boeing's proposal, on the rationale that Boeing had a binding agreement with the International Association of Machinists, the same union which held the contract with TWA-the difference being that Boeing's contract was with an "aerospace division" of IAM and called for much lower wage scales than the TWA wage agreement with the IAM which was with their "airline carrier division." The separate union agreements were subject to different law, the Boeing contract subject to the National Labor Relations Act and the TWA agreement subject to the National Railroad Labor Act.

In reviewing the RFP, NASA designated Boeing the second highest score and a rating of "good." It presented an attractive cost proposal and made a prima facie case for its ability to achieve the labor rates upon which its cost estimate was based. Boeing proposed on the basis of wage rates which were lower than those being paid by TWA and more comparable to the prevailing rates in the local area. Boeing already had an agreement with a different local of the same international union which now represents the TWA employees.

Both the Boeing and TWA union agreements were nationwide. Boeing proposed to extent its existing agreement to cover its operations at KSC, and to pay at a wage scale applicable to the Boeing agreement. The NASA selection board, based on Boeing having had good relations with the union, expressed the opinion that the Boeing Company has a good probability of realizing its objectives in this area. NASA said Boeing's proposed wage rates were competitive in the KSC area, while the rates paid by TWA were higher than those prevailing in the

area.

This question as to the prevailing wage rate is one of the central issues of the current dispute, there being no determination (by the Secretary of Labor). It seems Boeing created its own determination.

TWA, on the other hand, received the highest score and a rating of excellent by NASA in considering the RFP. TWA is an incumbent contractor and performed most of the work. NASA stated that TWA offered an excellent plan for technical management, a sound organizational structure, excellent key personnel, and good labor relations. As an incumbent contractor, TWA had been performing in a very good to excellent manner for the past six years. It's only drawback was its high cost. ($24 million to Boeing's $20 million).

TWA contended that any follow-on contractor who proposes to hire any substantial number of TWA's employees should also be required to pay the wage rates which TWA was required to pay under its union agreements with International Association of Machinists and that Boeing's proposed price should therefore be evaluated on that basis.

Boeing, who had a union agreement with a different branch of IAM providing for payment of lower wage rates than those being paid by TWA, contended that the "successor-employer" doctrine advanced by TWA had no application, and Boeing therefore proposed to perform the support services at the lower wage rate set out in its own agreement with IAM.

TWA further stated that a NASA answer to a question of a preproposal bidders conference led them and possibly other bidders to assume that any successor must assume the predecessor's collective bargaining agreement. If this is not to be required, then TWA contended it was not afforded an opportunity to compete on the same basis and the procurement should have been recompeted. Obviously, it should not be reserved to Boeing alone to negotiate with TWA's work force for reductons in rates of pay and fringe benefits that this group would be willing to accept. It goes without saying that the wages and fringe benefits of organized workers are established by agreement between the workers and their employer and not under the terms of an agreement with the United States (Boeing-NASA). The NASA response to the question referred to above offered information as to recent NLRB cases and cited certain cases for reference. However, the NASA answer also pointed out that offerors would have to apply NLRB's reasoning to their own intended modes of operation. As a result, both companies applied the NLRB reasoning and came up with diverging points of view which has in effect

created the problem. NASA further stated in supporting Boeing's proposal that "there is no known law or national policy, as such, that specifically prohibits Boeing from proceeding as they propose or KSC from accepting their course of action." At this point, it is clear the Congress must designate precise and thorough procedures to avoid such arbitrary determinations and confusions.

It appears to me that NASA attempted to do indirectly what they said they would refuse to do directly when they eliminated Pan Am's proposal due to the expectation that employees would be required to accept lower wage rates and change union affiliation.

The ensuing result, I think, jeopardizes the morale of the work force and the ultimate success of the space program. NASA maintained that by dealing with Boeing who had a binding agreement with the IAM, they in effect, were not engaging in wage cutting. However, there are many critical non-union, middle management personnel, employees, clerks, engineers and other personnel not covered by the union agreement who have suffered wage cuts of from 25 to 50 percent by Boeing. I am not sure that TWA was fully apprised that NASA would allow these cuts in the non-union personnel which would have allowed TWA to perhaps work out reductions with its employees and therefore be able to actively bid on the same basis. as Boeing did on the contract.

The above disputed factors resulted in formal protests filed with the Comptroller General of the United States by TWA and Pan Am contending that Boeing's bid was unrealistic and non-responsive to the Request for Proposal issued by NASA. There was also a protest made to NASA by the union personnel representing the union employees of TWA.

On March 30, 1971, the IAMAW AFL-CIO filed a complaint against the Boeing Company before the NLRB Region 12 Tampa. The complaint charged Boeing with failure to recognize the IAMAW as the bargaining representative alleging that Boeing unilaterally reduced the wages of employees in the IAM unit without notice or negotiation with IAMAW, that Boeing refused to recognize the terms and wages for which the IAM-TWA agreement provided and that Boeing had refused to employ IAM members of the former TWA unit. The NLRB is continuing the investigation.

Boeing was offered jobs to TWA employees (union and non-union) at salary cuts up to 50 percent. NASA was advised that this would result in a tremendous loss in performace, effectiveness and morale by disrupting and demoralizing the work force and business community at the Cape Kennedy area. This was. in effect, taking an unfair advantage of an economically depressed area by offering lower salaries. Yet, comparable NASA personnel were receiving a six percent increase in salary by virtue of the Federal Pay Comparability Act of 1970.

To cite some examples of the specific effect and results of the contract award, The Society of Technical Writers and Publishers stated, "Boeing has established the salary ranges for technical writers, one of $130 to $160 a week for regular writers, and $150 to $180 a week for lead writers. In practice to date, Boeing has consistently offered personnel employed on the existing contract $135 a week for writers and $150 a week for lead writers. These salary rates compare on a nationwide basis, to an average of $225 to $250 a week for jobs of equivalent skill in industry and government. Most technical writers now at the Kennedy Space Center draw wages within the national average."

Harold B. Davis, a non-union middle management engineer, wrote me, "My first offer from Boeing was for a 43% cut in pay-followed by a verbal apology and a verbal offer for employment at a 24% cut in pay-with no job definition, no specified length of employment, no definition of range of pay rates for the position being offered, and a clearly stated attitude that there were many uneinployed clamouring to take the job."

In addition, a systems analyst wrote, "I am now earning $962.00 a month and Boeing is offering $551.00 a month to perform the same duties. At age 54, I have little choice but to accept."

Finally, Bill Dicks, a technical writer, told me in a letter, ". . . . Same job and wage I held with Boeing in 1957-58, fourteen years ago. This is $110.00 less per week than my present salary of $260.00 per week. I have been on the KSC support contract for the past 10 years, 7 with TWA. My starting salary at that time was $180.00 per week."

Some further comparisons in pay scales show Boeing's rates well below comparable contractor wages at KSC. For example:

In addition to those who accepted jobs at substantially less wages, there are those who are now unemployed. The unemployment figures for the month of March in Brevard County was 6.7% and up to 7.1% at the present time

Dean C. Morehead, head of Boeing's operations said in December, "Boeing is expected to hire about 90% of the TWA and sub-contractor employees." According to a recent canvas of employees now with Boeing, only 276 union members are former TWA employees or 25% of the 1100 who actually worked for TWA under the Space Center Service Contract.

There are some definite facts and questions as a result of these events that must be considered, and dealt with in a constructive and proper manner: if this decision was based on the differences in the structure of labor agreements between Boeing and TWA, why then were the management and non-union people who worked for TWA offered similarly large wage cuts to work for Boeing? Since these people were not covered by any collective bargaining agreement, should I now believe that TWA didn't know what wages and salaries were to be paid to attract and retain qualified personnel.

The wages that were previously enjoyed, were legally negotiated with TWA through free collective bargaining under federal law. The agreement with the airline industry contained a supplemental KSC agreement tailored to the special requirements of the government. If NASA was unhappy with the labor agreement why didn't they make objection known to TWA prior to the awarding of the contract?

Accrued benefits, seniority, wages and pride of accomplishment of 7 years service by over 2000 employees has been lost. These fringe benefits normally available to loyal, tenured employees means little when 7 years service is wiped out. NASA surely stands to lose the services of its most highly qualified and experienced employees because it is they who are capable of finding other employment. Many are forced to accept the lower wages because of their age and lack of mobility which ultimately results in low morale and lost pride. Will those who remain be happy and do good work knowing that he, himself, or the man before him made 40% more money for the same work? Will the loss of experience, efficiency and the damage to morale be worth any proposed dollar saving?

Much of the great accomplishment of our space program has been by the dedication to purpose of the many workers involved. Everyone working as a part of the team, no matter what his job, maintained a pride in being part of the successful efforts in space.

And now, I have great apprehension whether there will still be a program such as the one that brought us to the moon. I feel that the problems in connection with the contract are not over-there could be work stoppage, inefficiency, and even possible sabotage as a result of the bitterness and feelings in connection with the way this has been handled.

I ask, is there no protection for these people, and if there is, why hasn't it achieved its purpose?