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Congress must act to insure that its intent is carried to the people it seeks to protect.

It was my understanding that the Installation Support Services contract is one which would logically fall within the provisions of the Service Contract Act of 1965, to provide protection to the employees of KSC.

The Service Contract Act provides that the "prevailing wage rate" as determined by the Secretary of Labor would be expected to become the minimum wage which the successful contractor would be required to pay his employees. The prevailing wage rate is the rate at which the majority of employees in the service labor category in the area are paid, or, if there is no such rate for the majority, then at the rate at which the greatest number, being not less than 30 percent are paid. Obviously, if two, three, or five thousand unemployed persons reside in the Brevard County area, it is both theoretically and practically possible to employ a fully qualified individual at a wage less than the prevailing wage rate for his classification. Most responsible unemployed, or threatened with unemployment individuals would feel compelled to work for less than the prevailing wage rather than accept unemployment compensation. I feel that within the context of the Service Contract Act of 1965, the wage determination should have been based on the "enclave theory" (Kennedy Space Center) rather than the entire depressed area (Brevard County) which would produce a prevailing wage based on the majority of workers on the KSC in the same classification.

However, the Secretary of Labor failed to produce a determination based on any test and therefore left the wage scales open subject only to Fair Labor Standards Act.

I am of the opinion that the Act was intended to preclude just the course of action which NASA and Boeing Company appear to have perpertrated. If the Administration intended to impose wage controls, or wage roll backs, in a particular area or category, I would presume that the President would act in the appropriate manner specifically designated by Congress to achieve such purposes.

In the absence of such action, I must assume that the National Interest intends that prevailing wage rates, freely paid in the area for responsible and dedicated work performance would be the governing criteria in NASA's contract evaluations. In this instance the Service Contract Act was not adhered to, served no purpose, and was disregarded in the area of employment for which it was specifically intended to afford protection. Hopefully, this case in point will enable Congress to tighten up and strengthen the Act to protect those people for which it was intended. I hope that this Committee will seek to unravel this mess and propose adequate remedies to see that this injustice be corrected as soon as possible.

Senator CHILES. If I might briefly discuss the problem and then seek to answer any questions you might have.

The contract was a service contract, TWA held the contract, and it was up for rebidding and renegotiation. Actually submitting bids on the contract were TWA, Boeing and Pan American.

The real controversy here, I think, arises on the proposition of whether a successor to the contract would be required under the Act and under decisions relating to the Act to give the same wages to the personnel that the existing holder of the contract had to give.

Mr. THOMPSON. The predecessor contractor?

Senator CHILES. That is right. This point specifically was brought up at a pre-contract meeting; and at that time NASA gave an answer. Both Boeing and TWA made a different interpretation on the answer, and NASA said something that it would be covered by NLRB decisions relating to the contract, and that seemed to be really where the problem arose.

Boeing felt that they were not required to pay the existing wages, and TWA felt they were.

This agreement, then, covered not only the union personnel, but also many of the nonunion personnel that woud be carried with this

contract, and that is going to be tried in a lawsuit, I think. It will be into the courts.

GSA has ruled with NASA that Boeing did not have to follow the successor wages. Certainly there was enough controversy right there, and it is clear to me that TWA felt any other contractors were bound by that. So I am convinced that the Government did not get a bona fide proposition from TWA.

TWA, I don't think, was offered the opportunity of going to their employees, union and nonunion employees, and seeking to find out if they would take a reduction in wages so they could submit a more competitive bid.

As a result of that, the existing carrier on the contract, I don't think, did get the opportunity to submit that kind of bid.

The employees themselves that were working for TWA didn't get that opportunity.

More than that, they had the strong feeling they were protected by the successor wages, and then when Boeing was awarded the contract and they found that they were getting wage cuts of anywhere from 25 to 50 percent in many instances. There was a tremendous turmoil that occurred at the Cape and many of these people refused to sign with Boeing. They were given that opportunity, over a short period of time, but they refused to sign with Boeing and many of them lost their jobs or did not sign on with Boeing.

I am concerned about NASA's actions in several regards: If they are seeking the lowest bidder, Pan American came in with a bid that was way lower than either Boeing or TWA, but NASA said, “We are not going to take that bid."

Because they said there might be some dissension, there may be some labor dissension, even though Pan American was submitting a Teamster contract but NASA seemed to feel that was a sweetheart contract they set up to create a new Teamster local, they wouldn't take the bid.

The thing is further complicated in that Boeing and TWA had the same union. IAM represented both companies, but under different divisions of the union, TWA being under the airline carriers division with a separate vice-president, and Boeing being under the areospace workers with a separate vice-president and a separate division. And they both have national contracts. Boeing felt they had IAM bound by their national contract, and workers under the areospace division, many of them feeling electricians get less than a worker under the other division of aerospace workers, and so they had the union bound under the same contracts.

I think the concern is two-fold primarily: One, I think there certainly was a misunderstanding, and I am not sure the Government got the kind of bid it should have received, regardless of what NASA's policy was going to be, and if they weren't going to require the successor contractor to pay the same wages, it should have been clearly stated. Then the workers would have understood that, and all of the carriers would have understood. By not clearly stating that, I think they added tremendously to the turmoil and confusion that resulted.

The second concern I have is whether, in shaving some dollars off of the labor portion of this contract, you are being penny wise and pound foolish as to what you are doing to the space program, because many of these people, I think, over the years have had a

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dedication and feeling in this program that went beyond the normal 8-hour day. They all felt they were involved in a team effort. Everyone had as much at stake in that bird flying and the safety of everyone connected with it.

And if we get into a situation where someone is required to do something because of some agreement, if they don't work at this, (the space activities), really wanting to work at it with the highest morale, then I think the government is going to lose so much in the long run.

We are talking about a $4 million difference in this contract. $4 million sounds like a lot of money, but when you determine what it costs for one of these birds, when you determine what it costs and what it takes to make one shot, then I think everything we can put in for the safety of those men and the efficiency of the operation counts much more than any confusion that you are going to bring about.

Mr. THOMPSON. This is really an extremely complex situation. There are about 26,000 workers involved in one way or another, aren't there?

Senator CHILES. Yes, sir. This is only one contract, and many of them are coming up for renewal. NASA said maybe we picked the wrong place with this contract to determine whether the successor-and this is a test, I think, by NASA to determine whether they are bound to accept the existing wage thing.

But they intimated to me that maybe they picked the wrong place to test this, and maybe they should have gone out on the desert where it didn't involve any employees and test it out there.

Mr. THOMPSON. In this case, as I understand it, the Labor Department made no wage determinations except for a hundred or so workers.

Senator CHILES. That is right, and they never did make such a determination.

Mr. THOMPSON. That is because, as I understand it, they felt that if the wage determination were to be made using the entire county of Brevard as the area rather than the Space Center as an enclave, the determination would almost certainly be lower than if it was determined on the enclave itself.

Sanator CHILES. Yes, sir. I am sure that is true.

Mr. THOMPSON. Then NASA ultimately, despite the difference in the bidding, awarded the contract to Boeing ?

Senator CHILES. Yes, sir. Mr. THOMPSON. TWA and Pan Am, my notes indicate, both protested and asked for a ruling from GAO, which in turn supported NASA's decision in the matter.

Senator CHILES. That is right. Now, I think it will be litigated.

Mr. THOMPSON. Pan Am had no existing union agreement and would have had to negotiate an agreement from scratch had they gotten the contract.

Senator CHILES. Yes, sir, they would have. They had an arrangement, evidently, or said they had an arrangement, with the 'Teamsters, which would have been a new union.

Mr. THOMPSON. In Pan Am's proposal they also proposed paying wages at the Space Center which were lower than paid by them to similar workers ?

Senator CHILEs. Yes, sir.

Mr. THOMPSON. So fundamentally we are talking about two major problems here. The first involves whether the successor contractor is bound by his predecessor's wage level. The second, of course, as we have found with virtually all of these services contracts, is the government agency, which is willing to bring in a new contractor who will pay the lowest possible rates, and thereby save the agency a few dollars.

Senator CHILEs. Yes, sir. Of course, you know how these contracts are; once you get the contract you start working from there, and then ererything gets added from the starting place.

The other thing that concerns me is the problem where in testimony I set forth that some of these cuts carried electricians below what a Whackenhut guard would get, what a service station attendant gets at the Cape, and at the same time this is happening the NASA employees are, of course, getting a 6-percent raise.

It is kind of hard to tell a man that he is going to take home 50 percent of the wages that he previously took home for the same job. He is going to be required to do exactly the same work. He is going to work within the critical area of the bird itself in which many of these electricians were working, and yet he is going to get less than some of the guides that show people around the Cape and some of these c-her people I have enumerated in the other occupations.

The other great concern I have, and this is even a bigger question, some of these people have worked 7 years. At 10 years they are retirement-vested and many of the other of the fringe benefits vested. They lost that entirely. They go to work with Boeing. They start all over. They don't get any seniority; they don't get any retirement and none of the fringe benefits are vested, yet they are doing the same work that they were doing the day before, and they suddenly see all of that lost and out the window.

Mr. THOMPSON. Well, in this case there was no wage determination. That was the essential ingredient in the whole thing.

Senator CHILES. Yes, sir.

Vr. THOMPSON. So that if the successor doctrine did not apply, that would have been their only protection.

Senator CHILES. Yes, sir.

Mr. THOMPSON. So actually the decision in the Emerald Maintenumre case has had the effect of bringing situations like this about.

Vr. Ashbrook, do you have any question or comment ?

Vr. ASHIBROOK. Yes, I do. Thank you very much, Mr. Chairman. Thank you, Senator, for your insight into this problem.

A couple of points you raised I would like to further explore. You indicated that the two divisions of the machinists union were involved. Was there a position that the IAM took in this, the international? It would seem to me that they would be likely to take one position or the other. What was the position of the IAM in this particular dispute ?

Senator CHILES. Well, I have a hard time speaking for the IAM. Mr. ASHBROOK. In your capacity as investigating this.

Senator CHILES. The division that was representing TWA said we are going to the wall with it; the successor doctrine should apply, and it must apply.

They are the ones that went to file a protest with GAO. I understand that they have subsequently filed a protest with the NLRB, or that they have filed a grievance with NLRB. So they did pursue the proposition that the successor doctrine applied.

Now, I can't tell you what position the other division teok. I think they are probably bound by their national agreement if Boeing gets the contract.

Mr. ASHBROOK. According to your testimony, TWA was represented, I think you said, by the airline carriers division of the IAM and Boeing was represented by the aerospace workers division of IAM. TWA division of the IAM recommended the successor doctrine. Boeing won.

Then you further went on to say-I think you used the figure $4 million was involved in the contract.

Senator CHILES. The bids were $24 million to $20 million, I think.

Mr. ASHBROOK. From what your testimony has indicated, it appears that most of the $4 million came out of the hides of the workers.

Senator CHILES. Not all union workers now, because there were many workers involved who were nonunion, the engineers and other related people.

Mr. ASHBROOK. But most of it came out of the situation where lower wages

Senator CHILES. Yes, sir, it was wages that made the difference.

Mr. ASHBROOK. So wages made most of the difference but not all of the difference.

Senator CHILES. Yes, sir.

Mr. ASHBROOK. The workers could have gotten on had the successor doctrine been applied ?

Senator CHILES. Yes, sir. Mr. ASHBROOK. So what has the aerospace workers division done at this point? They are in a position of working for the group which won the contract, but they are also in a position of bringing to their union members lower wages. Have they in any way appealed? What has been their position? I am trying to see whether or not a jurisdictional dispute played a small part in this.

You have only indicated there were two different divisions of IAM. The one seemed to advocate what would appear to be the better deal for their employees. The other side won.

Senator CHILES. Well, as you know, each one of these divisions has negotiated on a national basis a wage scale. I can't tell you what part the aerospace workers division has played. I think they have played a very quiet part. They took no action whatsoever, but they will be the successor to Boeing, or they will be the division that will organize the Boeing employees.

One of the questions now is whether the same local can now represent 'these workers and will represent these workers, or whether there must be a new local coming in.

Mr. ASHBROOK. Well, whatever the situation and whatever the forces or facts conspired to make this situation possible, it certainly would appear from the testimony you have given and what evidence

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