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involve, to whatever limited that you are

of results of any future investigations under the Service Contract Act involving Dynamic Enterprises for the next few months and how they come out. I am not saying forever. But if you would let us know so we can determine if that was in fact the case that future compliance was assured. Mr. SILBERMAN. We shall, Mr. O'Hara.

Mr. O'HARA. Thank you. I am pleased that you are repeating your assurance that, subject to whatever limitations the President's economic policy might involve, you would not oppose legislation to include prospective wage increases in contracts or the inclusion of bona fide escalator clauses in wage determinations and so forth-right?

Mr. SILBERMAN. That is correct.

Mr. O'HARA. I am very pleased with that. I have some questions with respect to a couple of matters that Mr. Dellenbach raised. First, regarding the question of discretion of the Secretary, I don't think, if I might suggest, that discretion is quite the right word. We didn't say, “When in his discretion the Secretary provides * * *" every contract shall contain assurances. We said every contract shall contain assurances and then we provided an escape hatch in 4(b) under certain particular circumstances.

It is just not a matter of discretion, and I think you would agreed with that.

Mr. SILBERMAN. It is not a matter of absolutely unbridled discretion.

Mr. O'HARA. There have to be certain circumstances present before the Secretary may make an exception?

Mr. SILBERMAN. I don't know what the legal test in court would be, but certainly that is what I would understand what Congress intended.

Mr. DELLENBACK. If the gentleman will yield. That is the only sense I was using the word. I didn't mean unbridled discretion, but discretion within the limit.

Mr. O'HARA. That is right. Within the circumstances described in section 4(b), right. I don't think there is really any disagreement with that. I am in complete agreement with the gentleman from Oregon that what we meant to provide was that the workers on these contracts should be paid the prevailing wage in the area, for the same or similar work, whether or not there were collective bargaining agreements, and that whether it provided for more or less, the prevailing wage was the thing.

Now, my point was that I hope you will go in and make a determination for the Eastern Test Range. I don't mean to say that the determination will necessarily provide that the current negotiated collective bargaining rates are prevailing. They may be more or less than prevailing. We have had conflicting testimony on that. And I expect if you do make a survey, you will come up with the prevailing rate whether it is more or less than what the workers are now being paid, right?

Mr. SILBERMAN. If we make a determination, that would be true.

Mr. O'HARA. Right. Now, with respect to the difference between the conditions in 1967 and the conditions now, I think it was the Departmen and not myself who drew the parallel between negotiated collective bargaining rates and prevailing rates.

In other words, they said, “We don't really have to set a prevailing rate because these people are covered by these collective bargaining agreements.” The Department is the one who said that, not me.

In any event, if a new contractor came in, the employees wouldn't be covered by the same collective bargaining agreements here in 1971 ?

Mr. SILBERMAN. It is that "same collective bargaining agreements" on which I guess we differ. I read the Department's rationale in 1967 as saying these people are generally covered by collective bargaining agreements in the area. They weren't referring to any specific collective bargaining agreement.

Mr. O'HARA. I think what they meant was the Department could rely on the collective bargaining agreement under which the cmployees were covered to protect their wage rates so the Department didn't have to worry.

One last question, Mr. Silberman, I note in the Secretary's letter to Chairman Thompson, “that a change at this time might be prejudicial to the public interest in the success of the President's economic program to combat inflation." · I assume that what he meant by that was that a change in wage rates—because that is what we are talking about, wage rates—"might be prejudicial to the public interest in the success of the President's economic program to combat inflation.”

Now, the President's economic program to combat inflation, as I understand it, involves an effort to restrain wage increases. I don't think it involves wage decreases, reductions in wage, does it?

Mr. SILBERMAN. Well, I think you are right generally, although I must say one of the things that we have been concerned about is that certainly on the price side we don't want to discourage price decreases. The program is not aimed at developing wages decreases. But we certainly don't prohibit them.

Mr. O'HARA. I am sure you don't prohibit them, but the program is not aimed at developing wage decreases, is that correct?

Mr. SILBERMAN. That is correct.

Mr. THOMPSON. If the gentleman will yield, the ultimate objective, as I understand it, is to reduce the current 6-percent rate of inflation over the next 2 years to 2 to 3 percent.

Mr. O'HARA. That is under phase 2, Mr. Chairman, which hadn't been announced at that time, and that sort of complicates it. Under phase 1, which was then the current policy, the Secretary said, “A change at this time might be prejudicial to the public interest in the success of the President's economic program to combat inflation," which is a matter of restraining wage increases.

Mr. SILBERMAN. May I interject one point there, because the figures are so terribly important.

Mr. Chairman, I don't believe it is correct to refer to the present rate of inflation as 6 percent. I think it is considerably below that. According to the CPI figures, I think it runs 4 percent now. You do correctly state the President's goal which is to reduce that rate to between 2 and 3 percent by the end of 1972. · Mr. THOMPSON. I won't insist on saying that it is 6 percent. I am just relying on one Government source. There are a number and there is obvious confusion.

But to keep it to 2 or 3 percent, I think, we could agree, is the objective.

Mr. SILBERMAN. Which I think we can agree to as an objective, too, I would hope.

Mr. O'HARA. Mr. Chairman, if as the witness has testified, the President's policy-and certainly that is the clear understanding of it—is not to reduce wages but rather to restrain wage increases, a wage determination at this time for the Eastern Test Range might be prejudicial to the public interest in the success of the President's economic program.

In other words, it might result in increasing wages. Is that right?

Mr. SILBERMAN. I am not sure I understood that interpretation. I think I would characterize the reference in the Secretary's letter as simply saying that anything that is done in this area should not be inconsistent with either the general goal or specific criteria developed by the Pay Board in the phase 2 program. That is just a general framework in which it operates. I would not wish to attempt to relate specific potential determinations to that at this time.

Mr. O'HARA. Mr. Secretary, you say that making a wage determination now might be prejudicial to the public interest in the success of the President's economic program. That program is to restrain wage increases. So what the Secretary is saying and he said it, I didn't, you know is that a wage determination on the Eastern Test Range might result in wage increases being paid to the workers on those jobs.

Under what circumstances would that arise? That would arise only if the workers were now receiving less than the prevailing rate in that area for the same or similar work, right? They wouldn't get a wage increase under a determination unless they were getting less than the prevailing rate; and so what the Secretary is in effect saying is that he is afraid that the process of issuing a wage determination might result in a finding that the employees are now getting less than the prevailing rate and we would have to start paying them the prevailing rate and therefore that is contrary to the policy.

But the policy of the act, Mr. Chairman, is that they do get the prevailing rate and the Secretary is saying that if the prevailing rate would result in their getting increases, we don't want to apply the act to achieve that result. Mr. DELLENBACK. Will the gentleman yield ?

It seems to me when we are dealing with the concept of true speculation, Mr. O'Hara, and in light of what the Under Secretary said a bit ago, it seems to me that you could get to exactly the converse implication.

Now, it is part of the matter of combatting inflation, not only to be sure that prices of anything, whether it be money or of labor or of goods, do not rise exorbitantly, and frankly we also have to keep them up and not let them suddenly go to pieces. If we do, we are going to be in real trouble and we will have the worst impact of a combination of recession and inflation.

If the study were to show such a disparity on a downward side, that it would be almost mandatory that there would be a drop in wages, that also could have a severe effect on the economy.

I don't know the area at all and I don't mean that is going to happen. From the Gurney study it would appear that the converse might be the case and at least that might not happen. I think we are in the area of speculation and I just point out that it is possible to speculate 180 degrees in the other direction.

Mr. THOMPSON. I think that is possible, but I think that Mr. O'Hara's reasoning is unassailable.

Mr. SILBERMAN. I don't know whether Mr. O'Hara's reasons ever had a question mark, and was directed at me for response, but if so, I would almost want the reporter to read back a list of questions. I had a first question I had a response prepared to and I got lost after the third or fourth question.

Mr. O'HARA. Without retracing my own steps, the Secretary said to make a wage determination at this time might be prejudicial to the public interest in the success of the President's economic program to combat inflation.

Now, are you prepared to go along with Dr. Dellenback's reasoning

Mr. DELLENBACK. I wasn't putting his words in the mouth of the Secretary. I was following your interesting conclusion in saying I think if you are going to speculate you go in all directions. The Secretary may not be walking in that direction at all.

Mr. O'HARA. I have asked you how it might be prejudicial.

Mr. SILBERMAN. The Secretary actually said, Mr. O'Hara, not that a determination might be prejudicial. That is not what he said. He said:

The conditions which led to the adoption of the limitation in 1967 under the authority of section 4(b) of the act are equally persuasive now and are reinforced by the fact that a change at this time might be prejudicial to the public interest in the success of the President's economie program to combat inflation.

Really, the question is whether or not—and I think you get this out of the 1967 memo--to take certified rates brought into the Cape area which were not and may not be characteristic of the locality on a whole and use that to bootstrap all the rates up to make a higher prevailing.

Obviously once you determine that x is prevailing, you are legally required to bring all rates up to prevailing. So you cannot in light of the President's economic program or indeed, any other act of the President with congressional authority, specifically overrule the language in the Service Contract Act which requires that the rate come up to prevailing rates.

The question is how do you determine what the prevailing rate is. All the Secretary said is that the question of how you determine what the prevailing rate is has to be approached with an eye toward another corollary policy which came from the Congress, the Economic Stabilization Act of 1970. That does not mean, and I wouldn't be willing to say that that means that a particular rate is held down below a prevailing rate. It is simply not the case.

I think we could wait on that and see what this survey develops.

Mr. O'HARA. Mr. Chairman, the Secretary's letter was not concerned with explaining how you determine prevailing rates, but said that the Department was refusing to make a prevailing rate determination in this case because doing so might be prejudicial to the public interest.

In other words, doing so might result in wage increases for these workers. But, of course, the very policy of the act was that if prevailing

rates exceeded the rate being paid on the contract that the contract rate ought to be increased, that the rates ought to be the same.

So, Mr. Chairman, I wish to reiterate my strong agreement with the decision of the Department to reexamine the situation at Eastern Test Range and to determine if it might not indeed be appropriate to make a wage determination there.

Mr. THOMPSON. Well, I applaud that, too. I wonder if the Secretary can tell us when that survey will be undertaken and how soon we can get the results?

Mr. SILBERMAN. I believe the Secretary directed that it be undertaken yesterday or the day before and I don't know how quickly the results can be developed, but I could give that information to you after the hearing. And we would certainly keep the members of this committee advised as to the nature of the survey and what the results show.

Mr. THOMPSON. We will be grateful for that.

Mr. O'HARA. With respect to that, Mr. Chairman, might not it be appropriate for me to ask what the results of the earlier survey you conducted were? You had your people down there 3 days last month making a survey. What was the result of that?

Mr. SILBERMAN. I would have to defer to Mr. Menasco on that.

Mr. DELLENBACK. Mr. Chairman, while he is doing that, may I ask a question to the witness?

Mr. THOMPSON. I think he is ready with that answer.

Mr. MENASCO. The purpose of the people we had in the area last month was checking on the comparability of position classifications. In other words, one of the problems that is involved is the extreme number of differing position classifications.

Mr. O'Hara. You weren't looking at wage rates. You were looking at position comparability, job description comparability?

Mr. MENASCO. Yes.

Mr. DELLENBACK. May I say to the Secretary that I do hope personally that that survey, if it is to be made, will be made rapidly, because my prior comments are not to be read as indicating that I don't think that the law is a good law. I think it is a good law. I think we ought to be enforcing it as written, as do you, Mr. Secretary.

I think it would be the feeling of our subcommittee and the hope of our subcommittee that since now the decision has been made that the survey be conducted, that it will be done in time so if it is determined that there are results there that should lead to further action, you would be concerned as we are that it be done in time to have an impact on the contract.

Mr. SILBERMAN. I assure you, Congressman, it will be done in time to have an impact on the contract.

Mr. DELLENBACK. I notice from the testimony from Mr. Racusin, who is about to testify, that there are some dates set forth therein and some proposals for submission by November 15 of certain data. Technical proposals are to be in by November 15, which is rapidly approaching.

Mr. SILBERMAN. I think the operable date is even beyond that. I think all we have to be concerned about is to make a decision by the time the bids are let out further down the line. We have more than November 15, I think.

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