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heavily organized so that practically all construction workers were under union agreement, and maybe there was a 3 year agreement or whatever it was.
They would look at that agreement and if the agreement provided for an annual wage increase of such and such a percentage that applied to all construction in the area, they would look at that and pay some attention to that in setting the rate.
Perhaps I am mistaken but let's agree on this much in any event. If it was the intention of the Congress in 1965 to follow Davis-Bacon and Davis-Bacon at that time sometimes to account of wage increases already bargained for and provided for in a collective bargaining agreement, then by that interpretation our intention would have been to take them to account, wouldn't it?
Mr. MILLER. I would certainly have to agree with that, Mr. O'Hara, if as you say, this was being done, if it was the proper way of doing it, and if, of course, the congress or the committee was aware of the fact that this was a procedure being followed.
Mr. THOMPSON. If the gentleman would yield.
Mr. O'HARA. OK. Let me get this one thing cleaned up. All right, you say, yes, but I want to stop there. You say if one, in fact that was the procedure being followed and if two, it was a proper way and if the Congress knew that that was the way. Well, I will go along with one and three, but I won't go along with two. If that was the way it was being done and we knew that was the way it was being done and we said we want this done the same way as Davis-Bacon and we did not note any impropriety in the way Davis-Bacon was being operated, I think number two is not a completely valid basis for interpretation of legislative intent.
But your third point is an interesting one. You now raise the question whether we knew it was being done that way. You did not worry about that when you said since Davis-Bacon does not permit prospective wage increases to be taken into account, the Congress did not intend that McNamara-O'Hara should do that. Did you ask yourself then did we know that Davis-Bacon did not permit those wage increases to be taken into account?
Mr. MILLER. May I answer that this way? We assumed at the time we rendered the decision on Davis-Bacon Act, that this was a new procedure. Since it was our thought that it was a new procedure, we did not consider whether the procedure was being followed in 1965 and whether you were aware of it.
Mr. AHART. May I add one thing to that, Mr. O'Hara? I think since this question was posed to us-Mr. Miller can check me on this because he is more familiar with it than I am since this question was posed to us, I would think that if there had been a long standing administrative practice of doing it this way, that it would have either been discovered by our lawyers in considering the case or it would have been brought to our attention by the Department at the time that case was under consideration and it would have been considered at that time.
It appears from the language of the decision that the question was not raised either in our own research of what the existing conditions were or by the administrative reports or other information that we obtained from the Departments involved.
We would be happy to check that for you and find out what in fact the practices were at that time and give you a report on that.
Mr. O'Hara. Let me be perfectly frank with you. I don't think that we ever really specifically directed our attention to that question, the narrow question that is presented in your lir Force decision. We did not even get down into that detail I don't think in the legislation. We knew that Davis-Bacon had been operating for sometime. What we intended was that, our overall intent was to be looked at, and our overall intent was that the people who were working for contractors who had contracts with the Federal Government would get the same pay for the same work as people who were working on contracts for contractors that were not federal contractors.
We just wanted to equalize the thing and so the question would really boil down to, well, how do you equalize it best? I certainly would think, getting away from the specific case brought up in the Air Force decision, I don't know about that so much, if, for instance, in a town where all construction was union, getting back to DavisBacon, or substantially commercial and industrial construction was union, that if there was a contractor who was building a courthouse for Uncle Sam and right across the street another contractor was building an office building for the lawyers that hoped to make their living in the court house, but the idea would be that the carpenters and the plumbers on the courthouse job would end up getting the same as the ones working across the street and that if the ones across the street had already had in effect an agreement that provided for a wage increase in a month or two months and the job was going to go on for two years, that some considerations ought to be given to that in the Davis-Bacon determinations.
I would like to get your response to my specific questions which I understand you are going to supply, but in terms of my recollection on legislative intent, I have given you my recollection.
One last point Mr. Chairman, if I might. Section 5 (a) of the Service Act, reads as follows:
“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 secretaries 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, any firm, corporation, partnership, or association in which such person or firms have substantial interest until three years have elapsed from date of publication of the list containing the name of such person or firm.”
Mr. Ahart, tell us what procedure does the General Accounting Office follow in carrying out the responsibilities assigned to it under section 5A?
Mr. AHART. I would like to ask Mr. Miller to respond to that.
Mr. MULLER. Mr. O'Hara, we issue periodically a circular letter to all of the government agencies which is entitled “The Consolidated List of Persons or Firms Currently Debarred for Violations of Various Public Contract Acts Incorporating Labor Standards Provisions."
Included in this list are Service Contract Act debarments and all of the debarments under the other labor acts. We issue a consolidated
list the first of January or as near thereto as we can, the first of April, the first of July and the first of October.
Thereafter, every 15 days we publish an interim list which will contain the names of those contractors who have either been debarred during the 15-day period of who have been relieved of debarment because of expiration of the 3 year debarment period or such other reasons as may be appropriate.
Mr. O'HARA. Let me ask this then. When do you get the names? You get the names of these violating firms from the Secretary of Labor, right?
Mr. MILLER. Shall we speak now of the service contracts ?
Mr. MILLER. Yes; we get a letter which includes a file as to the action taken within the Department of Labor on each particular case. The letter will either indicate that the contractor who has violated the act has either been relieved or has not been relieved from the ineligibility list provisions of section 5 of the Service Contract Act.
Mr. O'HARA. I would assume then, that you don't get that list until the Secretary sends to it you, until the Secretary has made some sort of decision because right in that letter he would indicate to you whether or not the firm had been relieved of debarment provisions, is that right?
Mr. MILLER. That is correct.
If he advises us that the firm has not been relieved, we will then include the name of that firm on the next issue of the debarred list.
Mr. O'HARA. Let's cite a hypothetical. situation. Suppose a firm, let's say the XYZ corporation has violated the act. Let's suppose over a long period of investigation and hearing by a hearing examiner and review by the Solicitor and consideration by the Work Place Standards, Administrator and consideration by the Secretary to make, that might all take quite awhile, other accounts are being let during this whole period of time. Let's suppose, XYZ admits its violations under the Service Contract Act, throws itself on the mercies of the Labor Department, and the Hearing Examiner makes a recommendation to the Work Place Standards Administrator and he makes a further recommendation to the Secretary and he finally makes a decision and advises you.
During the pendency, during the time all of this is going on, XYZ would be fully qualified to bid on other contracts I guess, wouldn't he?
Mr. MILLER. I would assume so, yes.
Mr. O'Hara. If it was the low bidder on any of them, it might be awarded other contracts.
Mr. MILLER. True.
Mr. O'HARA. Once that contract is awarded, I would assume there is no way once the Department comes out subsequently and debars, that you can go back then and take the new contract away from XYZ.
Mr. MILLER. No.
Mr. O'HARA. All right. Let's assume a somewhat different set of circumstances. Let's assume, XYZ has been conclusively shown to have violated the act and let's assume not just that it takes quite awhile for all of this review process to go on but let's assume that the Secretary after getting the recommendations of the hearing examiner and administrator of workplace standards just sits on the case, does not do anything at all with it. Doesn't recommend that the fellow be debarred or does not recommend that he not be debarred.
He just does not do anything. Under the procedure you have described to me, what about that?
Mr. MILLER. We would never know and we would never debar until such time as we were notified by the Secretary that he was not relieving the contractor of the ineligibility provisions.
Mr. O'HARA. Right. The section of the act we read said unless the Secretary otherwise recommends, no contract of the United States shall be awarded, and so forth. That is section 5A. But in its actual administration, the act is being interpreted as if it read “the Comptroller General may be directed by the Secretary of Labor in the Secretary's discretion to distribute a list” and all of that sort of thing because you don't have anything to distribute until the Secretary sends it to you.
Mr. MILLER. That is correct Mr. O'Hara. We consider our function in the service contract area to be strictly ministerial. They tell us to list this person because he is debarred. We will list him. If they don't tell us or if they tell us not to list because of relief from the ineligibility sanctions, we will not list him.
Mr. THOMPSON. What effect have you found your listing has on those contractors placed on the debarment list?
Mr. MILLER. There are instances in which the bidder whose name appeared on the debarred list has submitted a bid, and he has been the low bidder. Presumably, except for the fact that his name appeared on the debarred list, he would have been given the contract, but because he did appear in the debarred list, he was denied the contract.
Mr. THOMPSON. In other words, the list is adhered to? Mr. MILLER. Yes. When I speak of the list in this context, I am not speaking of the service contract listings only. I have no knowledge of this having happened on a service contract listing.
Mr. THOMPSON. I understand. I was referring to Walsh-Healy and Davis-Bacon also; I note there are about 25 names on your list for service contracts violations at this time.
Mr. MILLER. Twenty, sir, in the last list.
Mr. O'HARA. Mr. Chairman, I think that we ought to talk to the Secretary about that. My own feeling is that the proper administration of this act would be to send the names over once the decision has been rendered and not wait arount for the secretary's decision whether the fellow ought to be relieved, that the name ought to be sent, and there is nothing GAO can do about it.
Mr. MILLER. Perhaps I have some information, Mr. O'Hara, which may help you in this area. I have brought several copies of the transmittal letters to our office from the Secretary of Labor both in cases in which he states that he has determined that the contractor shall be relieved and cases in which he has determined that the contractor shall be debarred.
(The letters appear at the conclusion of the witness testimony.)
From my reading of these documents, it would appear that normally, following a determination that the contractor has violated the Service Contract Act and has underpaid a number of employees, number of dollars, it is recommended that ineligibility sanctions be imposed unless the contractor makes restitution to the underpaid employees in the amount of the underpayments that have been found.
It also appears that in cases where restitution is made, the contractor is then relieved of the ineligibility sanctions, and we get a letter which say, "it is hereby recommended that respondent in the above listed proceedings be relieved from the ineligibility provisions of that act. This action is recommended because the respondent has made restitution of the liquidated damages in the amount of $19,000 which was found to be due.”
Mr. O'HARA. That is extremely interesting. I had not been aware of that. We had a witness here yesterday who was talking to us about that very problem. If the only penalty is restitution, and frequently the restitution does not amount to the full amount because some of the employees disappear and they are no longer on the job, and so if the only penalty is restitution, it is really competitively advantageous to figure in your bid that you're going to violate the act unless and until you get caught because you can always get out of the debarment procedure by making restitution.
In some cases you won't get caught. In other cases, if you do get caught, all you will have to pay at the outside was what the law required you to pay in the first place and it may be less because often you can settle these cases and even if you don't succeed in settling, the proof then of the full amount due is a difficult matter.
But that has been the pattern, hasn't it?
Mr. MILLER. Please don't misunderstand me. I can't say that has been the pattern. Perhaps it has. All I can say is that I have documentation showing instances of this.
Mr. O'Hara. We will ask the Secretary, but you have brought up an extremely interesting point in terms of the interpretation of the act by the Secretary and I won't ask you to tell me what the Secretary is doing. I will ask the Secretary to tell me. Mr. Chairman, I have taken too long.
Mr. THOMPSON. When I asked you to yield and did not succeed earlier, you went on to ask virtually the same question that I had planned to ask. I look forward to having the GAO response to those specific questions as soon as possible. It is my very best recollection with respect to Davis-Bacon that at the time of the drafting of the Service Contract Act we did look at the question of prevailing wages. In the course of discussing wage determinations, we did contemplate consideration of contractual agreements between labor and management very much in the manner which Mr. O'Hara referred to.
My understanding of the legislative history is that this act was to be construed and carried out as closely as possible to the way the DavisBacon Act was being administered, and therefore the unanswered question with respect to the Air Force case interests me greatly. I would appreciate if we could have an answer to that as soon as possible.
We will of course have a recess for Easter and would like your answer as soon as possible after we return. We would appreciate it because quite clearly, if this act is revised, we will have to be very