Prepared statements, letters, supplemental material, etc.-Continued Gurney, Hon. Edward J., a U.S. Senator from the State of Florida: Letter to Hon. James D. Hodgson, Secretary of Labor, dated Paper identifying certain inconsistencies resulting from decisions Hamilton, William L., Mims, Fla., letter to Chairman Thompson, Hodgson, Hon. James D., Secretary of Labor: Letter to Hon. James G. O'Hara, a Representative in Congress from the State of Michigan, dated September 28, 1971, enclos- Jacobs, David L., business manager, Laborers' International Union of McCabe, John T., president, Brevard County Central Labor Council, 1971_ Meischeid, Robert J., Melbourne, Fla., letter to Chairman Thompson, dated September 24, 1971 ... .... Money, Harry W., Melbourne, Fla., letter to Chairman Thompson, Murphy, William B., business manager, IBEW, Local 2088, Cocoa Kiffmeyer, Edward W., labor relations officer, HQ, Air Force Statement of Pillard, Charles H., International president, IBEW, AFL-CIO, statement of.. Stern, John R., Eau Gallie, Fla., letter to Chairman Thompson, dated September 27, 1971. 79 Sweeney, David A., legislative and political director, International Brotherhood of Teamsters, Warehousemen and Helpers of America, statement of.. Taylor, B. A., Jr., Eau Gallie, Fla., letter to Chairman Thompson, dated September 15, 1971 Wiles, Alexander, letter to Chairman Thompson, dated October 12, 1971___ TO AMEND THE SERVICE CONTRACT ACT OF 1965 TUESDAY, OCTOBER 12, 1971 HOUSE OF REPRESENTATIVES, SPECIAL SUBCOMMITTEE ON LABOR, OF THE COMMITTEE ON EDUCATION AND LABOR, Washington, D.C. The subcommittee met at 10 a.m., pursuant to call, in room 2175, Rayburn House Office Building, Hon. Frank Thompson, Jr. (chairman of the subcommittee) presiding. Present: Representatives Thompson, O'Hara, and Dellenback. Staff members present: Hugh G. Duffy, counsel; Jeunesse M. Beaumont, subcommittee clerk; Michael J. Bernstein, minority counsel for labor; and John C. Miller, associate minority counsel for labor. Mr. THOMPSON. The subcommittee will be in order. Today we begin 3 days of oversight hearings on the administration of the Service Contract Act of 1965. The Service Contract Act was authored by my distinguished colleague Mr. O'Hara, and was intended to protect the wages and working conditions of service employees performing housekeeping functions under Government contracts. We discovered, during 5 days of hearings this spring, that the Labor Department was administering the act in such a way as to frustrate that objective, and we issued a unanimous report which concluded, to quote from section 2 of the report: "Findings and Conclusions," quote: "The subcommittee found that the act is being so interpreted and administered as to substantially thwart the intent of the Congress in enacting it." In spite of that conclusion and the detailed criticisms contained in our report, we have convened here this morning to hear about yet another instance of gross maladministration, this one affecting 5,000 employees of the Air Force Eastern Test Range in Florida. I have called these hearings in the hope that we can stop the events set in motion there by the Secretary of Labor's refusal to issue a wage determination, and avoid another tragic situation such as the one we discovered at Cape Kennedy earlier in the year. We have a large number of witnesses scheduled for today, and I will end my statement by saying that personally I have heard one story too many about the Labor Department and the Service Contract Act. It is clear to me we will have to take legislative action to cure this problem. Our first witness today is Senator Lawton Chiles from the State of Florida. Senator Chiles, good morning, sir. (1) STATEMENT OF HON. LAWTON CHILES, A UNITED STATES SENATOR FROM THE STATE OF FLORIDA Senator CHILES. Thank you, Mr. Chairman. I want to say at the outset I am delighted the committee has reopened the hearings and is looking into this problem. There are many, many concerned people in my State at Cape Kennedy that really don't know where they will turn now because of the events that have taken place as they have. They are certainly looking with great hope on the work of this committee, with the hope, in these hearings and that you uncover something to give them some equity. Mr. THOMPSON. We are going to try. Senator CHILES. Thank you, sir. Mr. Chairman and members of the committee, I appear before your committee once again to speak out against the callous-and, perhaps, the illegal-practices of the U.S. Government in awarding contracts at the Air Force Eastern Test Range, composed of Patrick Air Force Base and the Cape Kennedy Air Force Station, in my home State of Florida. However, there is a larger, more important question at handand that is the moral responsibility of the Government to its people who have dedicated their lives to strengthening our national defense and moving forward in the frontiers of space. On May 5, 1971, I testified before this committee on the situation at the Kennedy Space Center, following NASA's award to the Boeing Co. of a $20 million support services contract. By underbidding the then-incumbent contractor, TWA, Boeing forced salary cuts on personnel from 25 to 50 percent. The response at the Kennedy Space Center was one of outrage and disbelief. Protests were filed, reviews were called for, hearings were held. and now, the National Labor Relations Board has recently brought the case to Washington for action. On June 30, 1971, I learned that the Air Force intended to open competition for the contract at the eastern test range. The present contract at a cost of $78 million at the range has been held by Pan American Airways, Inc., and its major subcontractor, Radio Corp. of America. The jobs, pay, and work conditions of more than 5,000 employees were in jeopardy. If some of the prevailing wages for workers in the test range contract were too high, then they could be scaled down with a prevailing wage rate determination. However, it could be done fairly and equitably, and each bidding contractor would be on notice to the wages he must pay and the workers would not be left as pawns in a wage-busting contest between contractors only intent on submitting a low bid in an area with a high rate of jobless and underemployed people. Thus, the purchasing power of the Government would be used to deprive the employees of an incumbent contractor of the wages and benefits gained through collective bargaining and merit increases, a result seemingly contrary to national labor and Government procurement policies. Yet, the administration has repeatedly stated that no standards have been violated. How can our Government condone such practices? Definitive, firm guidelines must be set to insure continued quality in contract handling and to protect the present employees from wage cuts of up to 50 percent. Without wage determinations to serve as standards for bidding, contractors can compete solely at the expense of the workers, while protecting their own overhead and profit margins. With the request for proposals for a new support services contract at the eastern test range, we will undoubtedly face another situation like the NASA contract award at the Kennedy Space Center. After learning of the Air Force's decision to recompete the award at the range, I was determined that the events at the Kennedy Space Center would not be repeated. First, I tried to avert the problem through a series of meetings. I asked the Department of the Air Force to brief me on the procedures and guidelines for obtaining proposals from the bidders. At the same time, I requested a meeting with Warren D. Landis, Deputy Director of the Department of Labor's Office of Contract and Wage Standards, to gain their help in imposing a wage determination in the area of the eastern test range. In this way, the Government could assure that the bidding was based on all overhead expenses and profits rather than just the workers' pay. Less than 1 week later, on July 6, 1971, I met with Aaron Racusin, Deputy Assistant Secretary for Procurement of the Air Force, and Mr. William Munves, Deputy General Counsel of the Air Force, requesting that I be kept abreast of all developments and emphasizing the importance of proper guidelines being established prior to the issuance of the request for proposals. The next day. July 7, I held a meeting with representatives from the Department of Labor to learn their position. I advised Mr. Landis, of the Office of Contract and Wage Standards, of the absolute necessity of establishing wage determinations for the area of the two bases before the Air Force went on the streets with the request for proposals. At that time, Mr. Landis informed me that in 1967 the Department of Labor adopted a policy of not making wage determinations in Brevard County. Therefore, on that same day, I wrote directly to Secretary of Labor James Hodgson, formally requesting immediate implementation of a wage determination for the eastern test range, stating that: The picture has changed drastically from the peak employment of 1967 due to the extensive cutback in the aerospace industry. Two weeks passed and, not having heard further from either Secretary Hodgson or Mr. Racusin of the Air Force, I wrote to the latter for additional information on the proposed recompetition. Mr. Racusin replied on July 20, promising to apprise me of the Department of Labor's decision as soon as he received word. Nine days later, I received a letter from Mr. Horace E. Menasco, Administrator of the U.S. Department of Labor, advising me that Warren Landis was at Cape Kennedy with other representatives to obtain firsthand knowledge. During the last week of July, my office contacted Mr. Landis for a status report and was told that economists from Labor would be taking a feasibility trip to Brevard County for further study. Then, on August 6, when I contacted Mr. Landis for a report on his trip, I learned the Department of Labor had not arrived at a final decision. From August 7 to September 8, a period of 1 month, my staff made regular contacts with the Department of Labor for up-to-date progress reports. Still, I could get no definite answers on the Secretary's decision. On September 8, we tried to contact Aaron Racusin at the Air Force and, in his absence, spoke with Col. James Wheeler. When asked if the Department of the Air Force had proceeded with the request for proposals, Colonel Wheeler replied that they had done so on Tuesday, September 7. He noted that the Department of Labor had requested a ruling from the Justice Department to ascertain if the Service Contract Act did apply to the Pan Am contract, and the response was affirmative. On September 2 or 3, the Department of Labor had informed the Air Force of the Justice Department's ruling that the Service Contract Act of 1965 did apply and that Secretary of Labor Hodgson had full latitude in the matter. Colonel Wheeler further stated it would be extremely beneficial to the Air Force if they knew if wage determinations were to be set before the proposals were submitted. After the conversation with Colonel Wheeler, we immediately contacted Fred Webber, Congressional Liaison Office of the Department of Labor, for a progress report. Mr. Webber told us that no decision had been made but his office was working on the matter that afternoon. Thus, after 3 months, the Secretary of Labor had sent economists and other Department officials, including Warren Landis, to Brevard County; he was well aware of the tremendous amount of unemployment in the area of the eastern test range; he knew that our Government had a large investment in the space industry and that continued success of the program rested on the job performance of its employees; he had the legal go-ahead from the Department of Justice-yet, Secretary Hodgson still had not made a decision to set wage determinations. Finally on September 10, 1971, Secretary Hodgson sent a letter to me in which he said: After considerable deliberation, I have decided that, under current conditions, continuation of the limitations previously adopted by the Department of Labor on the issuance of wage determinations under the Service Contract Act for work at Cape Kennedy is necessary and proper in the public interest. He further stated that he felt that nonapplication of the wage determination provisions of the Service Contract Act "continues to be a reasonable administrative practice in view of the history and present character of pay rates and fringe benefits of the employees engaged in work for the contractors in the locality. . . . The conditions which led to the adoption of the limitation in 1967 under 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 economic program to combat inflation..."" Mr. THOMPSON. I might interrupt you, Senator, to say that, in a letter to me dated September 13, the Secretary uses that same incredible logic; and, following your statement, I ask unanimous consent that that letter be made a part of the record. Senator CHILES. "... the Department of Labor decided in 1967 that the pattern of wages in Brevard County was such that the limited resources available for making wage determinations could more appro |