we have that this is a very sad and unfortunate situation, and the Government shouldn't stand by idly and allow this to happen. Mr. THOMPSON. If the gentleman from Ohio will yield, there is another complicating and fascinating factor in this situation. TWA, having an agreement with the IAM, because it is a transportation industry, is covered by the Railway Labor Act, which allows union shops even in the presence of a State right-to-work law. Senator CHILES. Yes, sir. Mr. THOMPSON. Boeing, because they are essentially in construction, is covered by the National Labor Relations Act and, therefore, the Florida right-to-work law is invoked with respect to Boeing. This means that the employees can no longer have a union shop. This is one of the complicating factors as well. Mr. ASHBROOK. Well, it is interesting for us at this point to talk about complications, but if you were one of the workers who had to work for less, I assume all of these various ramifications would be very meaningless. Mr. THOMPSON. I agree with your observation and that of Senator Chiles thoroughly. It is obvious that the absence of wage protections for the employees is the problem, and it is the Government's fault. Senator CHILES. What further complicates the thing or adds to the grievance is that when Boeing sends out an offer to an existing TWA worker saying will you accept this cut and do you want to come in and talk to us about being hired, Boeing knows, and NASA more than Boeing knows, that there are five other people standing in line to accept that who are out of employment at the Cape now if the person doesn't accept. So, in effect, now, the Government, so to speak, NASA, is really preying on a situation which is caused by a tremendous reduction there in the NASA personnel and pitting worker against worker. Mr. ASHBROOK. I have noted page 13 of your prepared text and can see probably why you prefer the enclave theory as against the entire area theory that has obviously been used in determining the prevailing wage. Över and beyond that, what general recommendations would you make to this committee based on your observations and your intimate involvement in this situation? Are there any further recommendations you would make to us as a part of our remedial legislative oversight responsibility? Mr. CHILES. Well, in regard to the oversight responsibility, and maybe this by legislation can be spelled out, obviously TWA, Boeing and Pan American had a misunderstanding and NASA did not make it clear, whether in their minds, that wages would have to be paid, existing wages, by the successor or not. It was very clear there was an ambiguity on a specific answer to a question that NASA was asked on that. They didn't answer that. Certainly, that should be clear, because the taxpayers are entitled to have the bidders have the same information if they are going to make a bid. Mr. ASHBROOK. Then I assume from your testimony, you referred to the Labor Department earlier, that there is an inaction and a certain degree of nonfeasance on the part of certain Government agencies which was, in a certain way, responsible. Senator CHILES. The other thing is that I can't speak for all Government contracts, but it seems to me in something as critical as the space program some protection to the worker's rights of fringe benefits, to his retirement rights, to his seniority rights, certainly should carry forth if he is going to be doing the same job. I really think the same thing should apply to his wages, too. When you can lop a 50 percent cut and expect the man to do the same job, you might make the bird sing, but he won't sing sweetly. Mr. ASHBROOK. I think what I find interesting is that this is not a small, isolated town in the textile mill, but this is where the Government is involved in a multitude of agencies and programs, and we seem to have a no man's land. We can understand the jurisdictional problem in a small town. This is a union problem, but I don't think this is an area where you could put them in this same category. Mr. THOMPSON. We have seen evidence in cases from all over the United States of essentially a failure in the administration of the Service Contract Act. It happens to be a huge installation and a particularly tragic and bitter situation at Cape Kennedy for a variety of reasons, but the same thing exists at other bases. Mrs. Hicks, do you have any questions? Mrs. HICKS. Senator Chiles, the purpose for the determination of the prevailing wage by the Secretary of Labor is to establish the minimum wage for labor, and in the act he is given certain flexibilities. Now, your testimony states here today that the Secretary in this particular case failed to produce a determination. My question to you is: Do you feel that strong guidelines are necessary to require the Secretary of Labor to make the determination as set forth in the act? Senator CHILES. I think if it is going to be required, if we are going to require him to set it, then we should certainly set some guidelines to take care of the situation where you have an enclave situation that might be different from the overall prevailing wage. Mrs. HICKS. Also, in your testimony you say NASA refused the contract to Pan American because the employees would be required to accept lower wage rates and they spoke about a sweetheart agreement. Now, in your opinion, why do you really think the proposal of Pan Am was not acceptable, even though it was considerably lower than Boeing and the employees would receive a lower wage rate than the Boeing contract? Senator CHILES. Because, in my opinion, NASA realized that Boeing had the same union, IAM, bound by their national agreement, so that there couldn't be too much of a problem with the union because they caught the same union on another division bound with lower wages. Mrs. HICKS. Is that same union now still representing the employees? Senator CHILES. Yes, ma'am. Mrs. HICKS. Even though they are now being paid lower wages? Senator CHILES. There is a dispute now as to whether the existing local, I think, is going to be able to represent them or whether they are going to have to change over to the other division. Mrs. HICKS. Well, as I mentioned before, do you have any suggestions for this committee on its oversight responsibility regarding this act that could be written into the act?. Senator CHILES. My prime observation is the act should be written. so that it is clear that we don't get into a situation where contractors don't know what they are bidding about. I think that is bad. I think the Congress perhaps, has to determine the intent: Do we want to have the successor contract have to pay the existing wage? That is probably something that Congress should speak to. Or do we want to seek the lowest wage we can find? Mr. THOMPSON. If the gentlewoman will yield, I might make this observation. All of the evidence I have seen indicates that the contractors know perfectly well on each job, to the fraction of the penny, what the wage situation is. The whole pattern in this service contract industry is essentially to chisel, to get the work done for as little as possible, and in many, many instances contractors never succeed themselves at the same establishment. They will go elsewhere and try to get another contract and negotiate lower wages. That is the name of the game. Senator CHILES. Well, you have seen so many more of these than I have. My experience has only really been in what has happened here. Mrs. HICKS. Thank you, Mr. Chairman. Mr. THOMPSON. I am anxious to hear what Mr. O'Hara says. He is the original author of the act. Mr. O'HARA. I thank you very much for your testimony, Senator. I think the situation you have brought to our attention today, which was referred to by an earlier witness but not explained in the detail you have explained it, is a classic example of the damage that can be done to a community and to its citizens by these violations of the spirit and intent of the Service Contract Act. That is what I have to call them, because I think you can make an argument, as, indeed, some have made an argument before this subcommittee to the effect that the law isn't being violated but the spirit of the law is certainly being violated. What we intended to do was to protect service contract employees, to enhance their wages, to permit them to obtain some job security and attain decent living standards for themselves and their families. We never intended when we enacted this legislation back in the 89th Congress that we would see the kind of situation that you have described; people thrown out of their jobs or asked to take a wage cut in the neighborhood of 50 percent at the same time that others at that installation are getting wage increases. I am pleased to learn that the IAM has filed a complaint with the NLRB under the successor doctrine asking that the successor doctrine be followed. I think that my own opinion is that the Emerald Maintenance decision, which, in effect, looks at the Service Contract Act and says, "Well, we shouldn't have applied the successor doctrine with respect to wages with respect to these Government service contracts," was a mistaken decision. I am delighted that the NLRB is going to be confronted with this type of issue again quickly, under the circumstances you have described, Senator, because I think it is a terrible case for anyone to try to sustain the Emerald Maintenance decision on, and I think maybe we can get the Emerald Maintenance decision reconsidered. because I really think that is a big part of the problem. Obviously, if the successor doctrine would have applied, all of these bidders would have known exactly what wages, fringes, the whole bit that they would have had to pay. Senator CHILES. Contrary to that, if it isn't going to apply, all of the bidders ought to know that, and TWA clearly in this intsance did not and so bid accordingly. Even if these workers would have to take the cut, TWA did not have an opportunity to go to the workers, union and nonunion and say, "Look, we have to be competitive and what will you do?" Even had they come in at some differing figure, it might be they would have been awarded the contract because of their existing work and their skills and excellent rating, in which they were rated excellent to very good on the checks for this work. Mr. O'Hara. In the end what they based their major decision on was that they wanted to cut wages while avoiding as much labor difficulty as they could. Mr. THOMPSON. They are faced with the Emerald Maintenance case, which is now on appeal. That is the case that holds that a successor contractor must negotiate with the union from ground zero each time and, in effect, says the successor doctrine of the Burns case doesn't apply. Now here Boeing and the IAM have an 8(a) (5) dispute under the National Labor Relations Act, which is why Mr. O'Hara expressed his pleasure that the Board is going to be faced with this issue again soon. Mr. O'HARA. Here they went and gave the contract. In order to do that, they had to give the contract to the bidder that had been rated by them as having technically the least satisfactory bid. In other words, they ended up giving it to the one that had been rated by them in their own evaluation of the bids as having the least satisfactory proposal, just in order to cut wages without much labor difficulty. Mr. THOMPSON. They first made the determination that Boeing's bid was technically inferior to the others, and then proceeded to award them the contract. Mr. O'HARA. The big thing here is not how good a job is going to be done; the big thing is how can you cut the wages and cut the cost while not at the same time having too much labor difficulty. You will note, Senator, that one of our earlier witnesses was Mr. Jim McGahey, of the United Plant Guard Workers of America, who represents some of the guards down there-not all of them, but some of them. He testified that Boeing had agreed to honor his collective bargaining agreement with TWA. He told us that the reason they have was that he had made it clear he was going to pull the guards off and put a picket on every gate and really stir things up. At any rate, I am delighted to see the guards are back. But, Senator, you have done a great public service in bringing this problem to the attention of the committee and to the Nation and the press, and I hope this graphic example you have brought to us will result in helping improve the administration of the law and helping us adopt any amendments to the law which might be useful, too. Mr. THOMPSON. Senator, I would hope that from time to time you would transmit any further information you get on this subject, be cause I suspect that your office is going to be literally swamped for a long time by constituent requests until this situation is straightened out, many of which are going to be very sad. I am grateful to you, too. Senator CHILES. We do constantly hear about it, Mr. Chairman, and many of these people, because they were so upset initially, didn't sign up with Boeing and now they find they are completely out of work. Mr. THOMPSON. Thank you very much. This brings to an end our current series of hearings on the administration of the Service Contract Act of 1965. We are closing the hearings at this point so that the members of the subcommittee will have an opportunity to analyze the large amount of evidence we have collected thus far. It may well be necessary to reopen the hearings at a later date to take additional testimony and to recall some of the witnesses who have previously appeared before us. That, of course, depends on our analysis of the record so far and future actions of the administration. We will keep the hearing record open until May 14 for the benefit of those who were unable to appear here, but who wish to have their views in the record. Mr. ASHBROOK. For the record, possibly we ought to consider some examination of the entire process by which yearly contracts are awarded by all phases of the Government. It seems to me there must be some interrelation of policies at the various levels, not just defense, but I would assume everybody from the Interior Department on down would have some type of service employees. If there isn't an overall general service policy, maybe that is one thing we could indicate the need for. Mr. THOMPSON. I couldn't agree more. We will have committee counsel get together to see what we can do about it. The subcommittee is adjourned. (Whereupon, at 10:50 a.m. the subcommittee adjourned, subject to the call of the Chair.) (Letters and related material previously referred to follow :) Hon. FRANK THOMPSON, Jr., Chairman, Special Subcommittee on Labor, Education and Labor Committee, House of Representatives, Washington, D.C. U.S. SENATE, Washington, D.C., May 21, 1971. DEAR MR. CHAIRMAN: In accordance with your request, I am forwarding additional correspondence relative to the contract dispute between Boeing and TWA in connection with my testimony before your Subcommittee on May 5. Most sincerely, LAWTON CHILES. INTERNATIONAL ASSOCIATION OF MACHINIST & AEROSPACE WORKERS, Attention: Mr. Charles Canady, Senator LAWTON CHILES, Jr., Senate Office Building, Washington, D.C. DEAR SIR: Pursuant to our recent conversation pertaining to Boeing's request for additional monies of 4.5 million dollars, we cannot confirm this nor do the NASA people we have contacted deny it. We understand that this request for |