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Mr. FRANKLIN. Right.

Mr. O'HARA. That is what you have to worry about. If it weren't for that provision

Mrs. FRANKLIN. You would be home free

Mr. O'Hara. If you want to look at the pure competition, the only thing would be to figure on ignoring the requirements of the law.

Mr. FRANKLIN. If this is allowed to go on, this is what is going to happen. Others and much smaller companies say, “This big guy can get by with it, why can't I ?

So, they will follow in their footsteps. Mr. O'HARA. All right. I might say I use this case only as an example, I am not saying this is the only violation of the Act that has ever occurred or there is only one violator around, but it is one particular case that we can use to illustrate our theses.

In this particular case, here we had a decision finding violations under 13 separate contracts in which the Hearing Examiner found that the company had been systematically violating the Act almost since the company started doing business.

That decision by the Hearing Examiner is dated September last year. The Hearing Examiner found that this was a pattern of repeated and flagrant violation and he recommended against the waiver of this debarment penalty. That was over 9 months ago and so far nothing has happened.

Mr. FRANKLIN. That is right. And we must at this time bid competitively at some 50 military installations within the next two weeks, where this bidder will be welcomed the same as all responsible contractors.

This is very difficult. Mr. FRANKLIN. We went to Fort Myer to visit regarding a contract that is going to be let there on 20 April. Dynamics stand just as tall as you or I or anyone else because they have not been debarred.

They have been slapped on the wrist with a few fines but this is it.

Mr. O'HARA. Mr. Chairman, with respect to that question and as one of the original sponsors of this legislation, I would like to remind the committee of the provisions of the legislation that we are talking about here.

Section 5-A provides :

That the Comptroller-General is directed to distribute a list to all agencies of the government giving the names of the persons or firms that the federal agencies or the Secretary have found to have violated this Act.

Now if that were all the section said, one would think that at regular intervals or promptly after such findings were made, that lists would be sent out by the Comptroller General.

The section goes on to say: Unless the Secretary otherwise recommends, no contract of the U.S. shall be awarded to the persons or firms appearing on this list or to any firm, corporation, partnership or association in which such persons or firms have a substantial interest until three years have elapsed from the date of publication of the list containing the name of such person or firm.

So the statutory intent is that a list goes out of the people or firms who are not eligible to receive contracts and this is the way it works,

unless the Secretary finds that there is some good reason for waiving this provision with respect to the particular violator. .

Well, that isn't the way it is working, Mr. Chairman, because what has happened is that 9 months ago the Hearing Examiner found the contractor guilty of violations under 13 separate and distinct contracts and nothing has happened.

The Secretary hasn't waived it. Mr. THOMPSON. Has the Hearing Examiner's recommendations been appealed or reviewed ?

Mr. O'HARA. Yes, it has. It has not been disposed of. It would be one thing if the Secretary had made a finding that the penalty ought to be waived in this particular case and had so announced, then at least you would understand why nothing has happened.

But apparently the Department is interpreting this language as saying not what I just read but instead saying, "However, unless and until the Secretary decides that he wants to, there will be no debarment.

In other words, as long as the Secretary takes no action, nothing happened to this contractor. He has been going on now for better than 9 months, happy as a lark, as if nothing had happened.

Thirteen violations and nothing happened. The Secretary may be sitting on it for I don't know how much longer. Who knows? Is the Secretary coming up, Mr. Chairman? Mr. THOMPSON. The Secretary is very busy. The Under-Secretary will be here. Mrs. FRANKLIN. Let me call to your attention simply this: you will find in the report that the first time it was brought to the Labor Department's attention that he was required to comply, was back in 1967 and this was at Williams Air Force Base in Arizona.

They state he hasn't had Williams Air Force Base since that time. So he is not bothered about being debarred there. You take this much time, many of the contracts are out on an annual basis so in another month or so he may not have his present contract any longer.

He will have a new bunch of contracts and the way the law says now he won't even be debarred. I have recommended here that when a contractor is found in violation, not only the contracts that he has been found in violation of be put in jeopardy but also all of the contracts that they have should be affected.

Mrs. FRANKLIN. The reason for this, Mr. O'Hara, if the timing happens to be right for whatever reasons, and I would not like to suggest what they might be, he could in fact not suffer too badly because in a month from now, if nothing is done about this decision, he receives 20 new contracts and if he doesn't do anything on them, he may then have them for a period of 1 year, 2 years, and even 3 years.

Mr. THOMPSON. Until he moves elsewhere.
Mrs. FRANKLIN. That is right.

And those others have gone and he has some new ones to start on again.

Mr. THOMPSON. Kind of like a Mississippi gambler.
Mrs. FRANKLIN. That is right.

Mr. O'HARA. Mr. Chairman, I 'certainly want to make it clear that I never intended that debarment provision would only operate if the Secretary decided to make it operate.

The intent and the language is quite the other way around, in other words, debarment procedure is automatic and goes into immediate effect unless the Secretary makes a finding to the contrary.

Here the Secretary has made no finding and doesn't appear to be in a great hurry to make one and in the meantime the contractor goes on with impunity and that, I think, is certainly a violation of the intent of the law.

I note under the regulation adopted by the Department in connection with blacklisting under the Public Contract Act, which is a similar matter, that they say:

"Factors which operate toward the imposition of the blacklist include the following," and three and four of those are: “Violations where willful and deliberate, or there was a history of repeated violations."

Mitigating circumstances which persuade against the imposition of the penalty include "that the violations were not deliberate, the contractor adopted a cooperative attitude, or only a single violation occurred.”

And so I am not going to get into what the Secretary ought to decide but I wanted to bring that out.

Mr, Chairman, I would like to make a brief statement and enter some documents in the record, if I may.

Mr. THOMPSON. Yes.

Mr. O'HARA. Mr. Chairman, the first four documents that I would like to enter into the record are official records of the Department of Labor and relate to their case SCA-50 in the matter of Dynamic Enterprises, Inc., a firm located in Dunn, N.C.

Mr. THOMPSON. Without objection, the records will be made a part of our record. (The documents referred to follow :) United States of America, Department of Labor

No. SCA-50 :
In the Matter of Dynamic Enterprises, Inc., Respondent.

COMPLAINT Investigation having disclosed that the contracts identified herein have been breached and the provisions of the McNamara-O'Hara Service Contract Act of 1965 (41 U.S.C. 351, et seq.) and regulations issued thereunder (29 CFR, Part 4) have been violated, it is charged that:

I

Respondent Dynamic Enterprises, Inc., at all times hereinafter mentioned until approximately June 30, 1969, engaged in providing mess attendant, kitchen police, and janitor services at Belle Chasse, Louisiana; Charleston, South Carolina ; Dothan, Alabama; Fort McClellan, Alabama; Fort Stewart, Georgia ; Glynco, Georgia ; Gulfport, Mississippi ; Jacksonville, Florida ; Meridian, Mississippi; Pensacola, Florida; Savannah, Georgia; and Yorktown, Virginia.

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The following contracts have been awarded respondent by the Government of the United States :

Contract number

Period of performance

Services rendered

Mess attendant

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Feb. 1, 1969 to Jan. 31, 1970.
July 1, 1968 to June 30, 1969
July 1, 1967 to June 30, 1968.
Jan. 1, 1968 to Dec. 30, 1968.
July 1, 1968 to June 30, 1969.
July 1, 1968 to June 30, 1969.
Feb. 1, 1958 to May 31, 1969..

July 1, 1968 to June 30, 1969
..Sept. 1, 1967 to June 30, 1969

July 1, 1968 to June 30, 1969.
June 20, 1968 to June 30, 1969..

Sept. 1, 1968 to Aug. 31, 1969.
- May 1, 1968 to Apr. 30, 1969..

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These contracts contain the provisions and clauses required by the Act and the aforesaid regulations and were performed in the United States through the use of service employees.

III

Respondent failed and refused to pay service employees employed in the performance of the said contracts minimum monetary wages required by the contracts, by section 2(b) (1) of the Act, and by section 4.6 of the aforesaid regulations.

IV By reason of the aforesaid breaches of contract and violations of the Act and regulations, respondent has become liable for a sum equal to the amount of underpayment of compensation due employees engaged in the performance of said contracts and have become subject to the provisions of section 5(a) of the Act whereby respondents and any firm, corporation, partnership, or association in which they have a substantial interest may be denied the award of any contract with the United States until 3 years have elapsed from the date of publication by the Comptroller General of a list naming them as having been found to have violated the Act;

Wherefore, this complaint has been signed and issued at Washington, D.C., this 4th day of August 1969.

JETER S. RAY, Deputy Solicitor of Labor.

United States of America, Department of Labor

No. SCA-50
In the Matter of Dynamic Enterprises, Inc., Respondent.

BRIEF IN SUPPORT OF GOVERNMENT'S CONTENTION THAT THE HEARING EXAMINER

SHOULD RECOMMEND TO THE SECRETARY THAT HE TAKE NO AFFIRMATIVE ACTION TO RELIEVE RESPONDENT FROM THE INELIGIBILITY LIST SANCTIONS PROVIDED BY SECTION 5 OF THE SERVICE CONTRACT ACT

In accordance with the stipulation filed as part of the record on March 30, 1970, whereby the respondent agreed to pay, and has paid, $50,000 in underpayment of wages due under the Service Contract Act to the Wage and Hour Division, United States Department of Labor, for distribution to employees engaged in the performance of work on the 13 contracts listed in the complaint, plus back wages due employees disclosed by an investigation of the respondent's pay practices in connection with performance of a contract subject to the Act at Corpus Christi, Texas, the only remaining issue to be decided by the Hearing Examiner is whether the respondent's course of conduct has been such that he

should recommend to the Secretary of Labor that no affirmative action be taken to relieve respondent from the ineligibility list provisions of section 5 of the McNamara-O'Hara Service Contract Act of 1965 (79 Stat. 1034, 41 U.S.C. 351, et seq.). Section 5 of the Act provides :

"The Comptroller General is directed to distribute a list to all agencies of the Government giving the names of persons or firms that the Federal agencies or the Secretary have found to have violated this Act. Unless the Secretary otherwise recommends, no contract of the United States shall be awarded to the persons or firms appearing on this list or to any firm, corporation, partnership, or association in which such persons or firms have a substantial interest until three years have elapsed from the date of publication of the list containing the names of such persons or firms."

In addition to the $50,000 paid in restitution as a result of this action, the trial record discloses that the respondent has paid restitution for violation of the Act revealed by investigation at the following locations in the month and year and in the amount set forth below: Naval Station, Jacksonville, Fla., October 1967

$1, 130.00 U.S. Naval Station, Charleston, S.C., March 1968_

7. 933. 00 Fort Benning, Ga., November 1968_

25, 904. 47 Williams Air Force Base, Arizona, November 1968

6, 316. 89

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Total

-- 41, 184. 36 Thus, in a period of less than three years the firm has paid a total of $91,184.36 in restitution to employees as a result of violations of the Service Contract Act. No one would seriously contend that the above amount is the full amount that may have been due as a result of the violations. However, because of the difficulty of proof of amounts due individual employees this was the total amount agreed to for the purpose of disposing of the investigations resulting in this action, and those reusiting in payment of restitution which are not a part of this action.

The respondent having paid restitution, the violations resulting in the filing of this complaint stand admitted.

The sole issue involved here is not whether the respondent should be placed on the ineligible list for a period of three years as a contractor having been found to have violated the Act, for the application of the sanction provided in section 5 of the Act is automatic upon such a finding. The issue is whether having found that respondent violated the Act, has its course of conduct been such as to merit a recommendation by the Hearing Examiner that the Secretary take affirmative to relieve it from the ineligibility list sanction provided by section 5 of the Act. We respectfully submit that the answer to this question should be an emphatic no.

The ineligibility sanction of section 5 of the Service Contact Act is not a new remedy applicable to Government contractors who violate the labor standards provisions of statutes and contracts awarded by the Government. Other statutes containing the debarment remedy for violating labor standards for Government contractors include the Davis-Bacon Act (41 U.S.C. section 227a2(a)) and the Walsh-Healey Public Contracts Act (41 U.S.C. section 37).

It has long been a criterion in administrative proceedings arising under the Walsh-Healey Public Contracts Act that contractors should not be relieved from the ineligible list sanctions in cases where the violations resulted from "such gross carelessness and disregard for the obligations which the respondent assumed as part of their contracts." See Tip-Top Hoisery Mills Inc., PC No. 117, Secretary, February 22, 1945. Similarly, respondents were not relieved from the ineligibility sanctions provided by section 3 of the Public Contracts Act where they exhibit an "indifference to the requirement of the Act.” In the Matter of H. T. Barnes and Leroy Jones, d/b/a Colonial Furniture Company, PC No. 163, Secretary, April 17, 1945. This test has been consistently applied with respect to contractors whose conduct either under previous contracts or under other circumstances clearly demonstrates that they are not likely to maintain prescribed labor standards should they be awarded further Government contracts. Southland Manufacturing Corporation, PC-971, Administrator, February 18, 1966; Vaughn Lumber Company, PC-955, Administrator, April 6, 1965; and Seanor Coal Company, PC-967, Administrator, October 25, 1965.

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