Mr. DELLENBACK. There is a January 3 date for cost proposal.
Mr. SILBERMAN. I think that is the operable date.

Mr. DELLENBACK. All I am saying is since it is to be done it is my own personal hope it will be done sufficiently rapidly so that if it shows there should be a determination that the determination can be made and the data made available to bidders in time to be effective on this particular situation.

Mr. SILBERMAN. Your view coincides exactly with the Secretary. Mr. DELLENBACK. Fine. Thank you again, Mr. Chairman.

Mr. THOMPSON. Mr. Secretary, thank you very, very much. We look forward to the results of that survey and we will appreciate being informed as it progresses.

Thank you very much for coming.

Mr. SILBERMAN. Thank you, Mr. Chairman.

Mr. THOMPSON. Our next witness is Aaron J. Racusin, the Deputy Assistant Secretary for Procurement for the Air Force.

Mr. Racusin, will you identify the gentleman with you for the record, please?

STATEMENT OF AARON J. RACUSIN, DEPUTY ASSISTANT SECRETARY FOR THE AIR FORCE, PROCUREMENT, ACCOMPANIED BY WILLIAM MUNVES, DEPUTY GENERAL COUNSEL

Mr. RACUSIN. Yes, sir.

Good morning, Mr. Chairman and Mr. O'Hara. I have with me Mr. William Munves who is our Deputy General Counsel. We are here in response to your invitation of September 29 to Secretary Seamans to have him or his designee explain to your committee our plans in the competition we are conducting for the operation of the Eastern Test Range at Cape Kennedy. We are pleased to be afforded the opportunity to do so.

At the outset, I would like to assure this committee that the Air Force fully supports the objectives of the Service Contract Act and we endeavor at all times to adhere to its provisions and the implementing Department of Labor regulations and rulings.

We, of course, must also adhere to the statutes and regulations governing Federal procurement, primarily the Armed Services Procurement Act, and the Armed Services Procurement Regulation. Generally, this Act and regulation require that we afford the maximum number of qualified sources an opportunity to compete on each of our contracts. Sole source procurement is an exception to this general rule and requires constant review and justification. I would call to your attention the following direction contained in paragraph 3-102(c) of the Armed Services Procurement Regulation:

Negotiated procurements shall be on a competitive basis to the maximum practical extent. When a proposed procurement appears to be necessarily noncompetitive, the purchasing activity is responsible not only for assuring that competitive procurement is not feasible, but also for acting whenever possible to avoid the need for subsequent noncompetitive procurements.

Moreover we have, in fact, been instructed many times by appropriate Congressional committees to compete whenever feasible rather than award contracts on a sole source basis. The Secretary was not unmindful of the countervailing considerations in weighing the decision

to compete the ETR contract. On balance he determined that it should be competed.

The ETR contract was first awarded some 16 years ago. Since that time, it has been determined on an annual basis that the complexities of the requirement made it an exception to the general rule and justified award on a sole source basis.

Over the years, however, the Air Force has refined the requirements, gathered technical data and developed a comprehensive statement of work which can now be used as the basis of competition.

In our judgment, there is now no valid justification to continue awarding the contract on a sole source basis. Accordingly, the requirement was synopsized in the Commerce Business Daily on June 8, 1971 and on September 2, 1971 a Request for Proposal was issued to 12 prospective bidders. Technical proposals are required to be submitted by November 15, and cost proposals by January 3, 1972.

The request for proposal requires the prospective contractors to submit priced proposals covering the first, second and third year of the program beginning in fiscal year 1973. We plan to execute a 1-year contract with priced options for the second and third years' requirements. The contract will also provide unpriced options for the fourth and fifth years.

Incidentally, this is in line with the subcommittee's thinking when you noted in your report of June 1971, Mr. Chairman, that the use of renewal options would go a long way toward correcting some of the problems in the service industry.

In this connection, I would like to note parenthetically that the Air Force has long recognized the difficulties inherent in one year service contracts, and for years we have attempted to get legislation authorizing multiyear contracts in this area.

Regrettably, we were only partially successful. The bill ultimately enacted on July 5, 1968, that is Public Law 90-378, to authorize contracts for services extending beyond 1 year was restricted to offshore procurements.

Incidentally, it gives us authority to go up to 5 years.

In planning this solicitation, we have taken into consideration the cost to the Government of changing contractors in the event a firm other than the incumbent were to win the competition. The "Request for Proposal" sets forth a factor of over $4 million in nonproductive cost, the bulk of which is severance pay, which will be added to all nonincumbent contractor's proposals for evaluation purposes.

Also, in recognition of the possibility of changing contractors, the RFP requires all the bidders to submit, as a part of their technical proposal, a labor impact plan which will be carefully examined as part of the evaluation process.

There has been a great deal of discussion about the application of the Service Contract Act to the ETR contract. As I mentioned earlier, it has been and continues to be the policy of the Air Force to apply that act in strict accordance with Department of Labor rulings and regulations.

When the decision was made to recompete for fiscal year 1973, the question arose as to whether the act applied to the new contract. Accordingly, on August 2, 1971, we requested an official opinion from the Solicitor of Labor as to its applicability.

At the same time, we requested that if it were determined that the act does apply, wage rates be issued for each category of service employee or, as a minimum, a basic rate for each major classification of employees. On September 2, 1971, the Associate Solicitor of the Department of Labor informed us that the act would apply to certain portions of the contract.

On September 9, 1971, we were informed by the Department of Labor that no wage survey would be made, and that the only rate applicable to the contract would be that for janitors, porters, and cleaners.

As you know, a Department of Labor regulation-that is section 4.6(b)-requires that when some, but not all of the rates needed for a particular solicitation are issued by the Department of Labor, those not issued must be established by the interested parties-namely, the contracting agency, the contractor, and the contractor's employees or their representatives.

The missing rates must thus be established after award of the contract since, of course, there is no contractor and there are no employees until the contract is awarded. The rates established by this procedure must conform, or bear a reasonable relationship, to those rates which were issued by the Department of Labor.

The Air Force has found this procedure to be very impractical. We believe that to require negotiation of wage scales with contractors and employee representatives subsequent to award is incompatible with laws and regulations governing competitive procurement in that it would make meaningful evaluation of bid proposals impossible.

For, without knowing what rates he might be required to pay as a result of post award negotiations with his employees and the contracting agency, a potential contractor can only guess in pricing his bid. The Air Force would also be obliged to indulge in such speculation. I bring this up because of the situation we were confronted with on the eastern test range solicitation. The Department of Labor has issued one rate; that for janitors, porters, and cleaners. I should point out here that the janitor and tugboat requirements were removed from the solicitation in August and will be set aside for competition exclusively by small business concerns in accordance with Small Business Administration recommendations.

It is anticiapted that a separate contract will be awarded on a competitive basis for food service. We cannot be certain, however, that the successful contractor won't, to some minimal degree, utilize janitors.

Therefore, since we were issued one rate that might be applicable to the contract, it is our position that, pursuant to the regulations, and in the absence of clear direction from the Secretary of Labor, the numerous other rates would have to be established conformably.

For the reasons I have already mentioned, we requested from the Secretary of Labor a variation from the conformable requirements in the regulations. This was done on September 21, 1971 pursuant to section 4(b) of the act itself; on October 5, 1971, the variation was granted.

I wish to close by assuring the subcommittee that the Air Force has adhered to, and will continue to adhere to, all appropriate statutes, rules and regulations, as well as to decisions of appropriate boards and

courts of competent jurisdiction. We have done so in making the decision to complete the fiscal year 1973 ETR contract and in all subsequent actions related to that procurement.

And now sir, to the best of our ability, we will be prepared to answer some questions.

Mr. THOMPSON. Mr. O'Hara.

Mr. O'HARA. Mr. Racusin, I appreciate your statement. It seems to be a rather complete recitation of the circumstances surrounding the application of the Service Contract Act at the eastern test range rebidding.

I note that you did not request an exemption from the act, that is, from that portion of the act that requires that the invitations to bid contain the prevailing rates for those jobs in that locality. In fact, what you did was, as I understand it, you asked the Department if the Service Contract Act applied to this contract, and they said it did, and so then you asked them to go ahead and make the determination required by the law, right?

Mr. RACUSIN. In essence that is right, Mr. O'Hara, we did. When we got the determination that the Service Contract Act did apply, we amended the Request for Proposal to include the appropriate provision that did apply.

Mr. O'HARA. It wasn't at your request that the Department decided not to make a wage determination, right?

Mr. RACUSIN. No, sir.

Mr. O'HARA. The request that you did make, the one you have referred to as having been made on September 21, came after the Department's decision that it wasn't going to make a determination. You said in effect then: Well, if you are not going to make a determination, please don't hold us subject to your regulation Section 4.6 (b) which says that where some of the rates have been determined-since there is a rate prevailing for janitors right now--that the other rates have to be set after the contract is awarded.

For the reasons you set forth in your statement that seemed to be a highly impractical procedure in this particular case.

Mr. RACUSIN. That is correct, sir.

Mr. O'HARA. Right. Well, I would agree with that. In other words, that would have been a very impractical way of going about it in this case and I think you were entirely correct in making your request on September 21 to be relieved of the provisions of regulation 4.6(b).

I think 4.6(b) more appropriately applies where you have a wage determination that covers the vast majority of people who are being employed and maybe leaves a few employees not covered by the determination. Then with respect to that few, you can sit down afterwards and work out rates.

Mr. RACUSIN. It at least reduces the scope of the impracticality, Mr. O'Hara, yes.

Mr. O'HARA. I think every bid has enough water in it to take care of a wage determination for a few, but not where you have a wage determination for janitors and not for anybody else and then expect to go in and set all of the others after the contract is awarded.

I just want to say, Mr. Racusin, that I think the Air Force has acted entirely properly in the matter. I hope that the Department of Labor will reconsider its refusal to make a wage determination and I hope

the matter can be cleared up in a manner that is satisfactory to all parties and in compliance with the intent and the letter, indeed, of the Service Contract Act.

Mr. RACUSIN. I would like to quit while I am ahead, right now. Mr. O'HARA. That is a good time to stop. (Laughter)

Mr. THOMPSON. I agree with Mr. O'Hara, Mr. Racusin. I think the Air Force in looking over the situation step by step, did what it should have done and found itself somewhat bound by the fact that the Secretary has, as yet, decided not to make the determination. That leaves you in limbo. Perhaps that situation will be clarified before the ultimate award of bids. I have no questions.

Mr. O'HARA. Just one more question. It won't change the nature of your appearance, Mr. Racusin. If the Labor Department, as a result of the survey that they are going to begin tomorrow, were to decide they will make a wage determination, would it be possible for the Air Force to withdraw the invitations? That is, how would you be able to then incorporate the determination in the bidding process?

Mr. RACUSIN. That is a good question, Mr. O'Hara. At the present time, as I have indicated in my statement, technical proposals are due on November 15. Cost proposals are due on January 3. We have between now and the 3d of January to amend the request for proposal to insert whatever wage rate determination the Secretary of Labor may care to make and that then will be the guidelines for the bidders, whoever they might be, to submit cost proposals on that basis. Time is running out as has been indicated earlier. The sooner we get them it will give the bidders that much more time to intelligently prepare their proposals for the evaluation. We can amend the request for proposals. That is presently outstanding.

Mr. O'HARA. You can amend it.

Mr. RACUSIN. Yes, sir.

Mr. O'HARA. You can even maybe postpone that date if you absolutely had to, but it would be better if you didn't have to.

Mr. RACUSIN. You stated it well, sir. But I should say in the past we had on occasion, when we received late wage rate determinations, been granted an extension when time permitted. I hope we are in the same situation now.

Mr. THOMPSON. I would hope that you would communicate to the Air Force that if an extension on the basis of a determination is necessary that it should be granted, that is, an extension of the time for bids. There being very little else in Brevard County in the way of employment except at the Government facility, it would seem to me it shouldn't take the Department very long at all to do its survey and to arrive at a conclusion.

Now the Under Secretary was quite careful to say he didn't know whether or not there would be a determination on the basis of the survey. We just hope that there will be. I note in your statement that the Air Force is very aware of its responsibilities and the obligations that it has to the Department of Labor and to the courts, and I hope that it is equally aware of its responsibilities to carry out congressional intent.

Mr. RACUSIN. Yes, sir, Mr. Chairman.

Mr. THOMPSON. We are one of the branches of Government.