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together with other factors, it was concluded that available resources could best be spent in determining rates in other localities where Government service contractor rates were generally below prevailing wage rates. There were two factors which caused a generally favorable comparison between Government contractor wage rates and other wage rates in Brevard County : (1) The wage rates of many of the employees of the contractors were set by collective bargaining, and (2) a number of the contractors operated elsewhere in higher wage localities and wage rates to some extent were "imported" to Brevard County and did have an effect on other wage rates of the contractor. It was also felt that the "bootstrap" effect of a wage determination would be rather profound in this locality where Government contract employment was so extensive. There were a variety of rate ranges and related fringe benefits for the same employee classifications and the establishment of a single wage or rate range as prevailing would tend to cancel out the lower half of most of the wage scales. In short, it was concluded that in this particular area, all interested parties were better served by letting the active labor-management bargaining continue unhindered, and that there was no overriding need to issue wage determinations in Brevard County as compared to greater needs in other localities. The janitor job classification was an exception. A wage determination was issued for janitors because a large group of janitors, unorganized, were employed by a Government contractor at rates well below those being paid other janitors in the locality. Neither labor nor management representatives have made any formal objections to the Department on this approach.

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2. SEPARATE WAGE DETERMINATIONS FOR SEPARATE FEDERAL INSTALLATIONS A Federal installation such as a shipyard or military base may itself be considered a locality for purposes of applying wage determinations under the Act. If the installation is in a remote area, it is ordinarily considered as a "locality" where the only available information as to wage rates and fringe benefits consists of the rates and benefits provided at the installation by an incumbent contractor, either in accordance with a collective bargaining agreement or company policy. Also, within a locality such as a Standard Metropolitan Statistical Area for which survey or other probative wage data are available, a Federal facility or installation may constitute a separate locality, if within that enclave wage and fringe benefit patterns have been established which differ significantly from those generally prevailing in the larger locality. This latter concept is considered appropriate only where the enclave is somewhat removed from the center of business in the larger locality and has an employment identity of its own. It is not considered appropriate where the facility or installation in question is situated in the central metropolitan area or business district and is in effect part and parcel of the surrounding metropolitan area.

Certainly it is clear that the Service Contract Act was not intended and cannot properly be used, to undercut what labor has bargained for and obtained in Federal installations. If a contractor on a Federal installation enters into a collective bargaining agreement to pay higher rates and fringe benefits than those already provided in an applicable wage determination, he must pay the wage rates and fringe benefits agreed upon. We do not, however, treat every Federal installation as a separate “locality" in determining prevailing wages and fringe benefits merely because one or more service contractors there have entered into collective bargaining agreements. Decisions to treat a Federal installation as a separate “locality" are made on a case-by-case basis using the criteria set out above,

There may be some misunderstanding of this as indicated in the enclosure to Congressman O'Hara's letter. The particular, ease referred to a rose at the Lackland Air Force Base, San Antonio, Texas-and not at Ft. Bliss. It had been our policy where a collective bargaining agreement was controlling in determining prevailing wage rates and fringe benefits to include prospective increases in such rates and benefits in the wage determination. The procedure was questioned by the Comptroller General and on September 19, 1969, he requested the Depart. ment of Labor to discontinue the practice on the ground that "prevailing" meant wages and fringe benefits in effect and being paid. After careful consideration of this matter, it was decided to conform to the Comptroller General's view. ACcordingly, several wage determinations were withdrawn. Among these was a wage determination at Lackland Air Force Base, which was withdrawn on April 6, 1970. At this time it was decided to consider Lackland Air Force Base as part of

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the Bexar County "locality". This decision was reconsidered when it became apparent that it could mean a cut in wages for employees if a new contractor took over the contract. WD 70-102 was issued on May 13, 1970, treating Lackland Air Force Base as a separate "locality" and providing the wage rate and fringe benefits then in effect and being paid under the collective bargaining agreement. We could not, in view of the policy, include prospective increases.

All wage determination actions are in the public domain and are thus subject to disclosure to any interested party. Wage determinations are made on an evi. dentiary basis and are subject to reconsideration upon request. Every effort is made to keep lines of communication open to contracting agencies, and to service émployees and service contractors and their representatives.

STANOON TIRDAOIN

SEPTEMBER 10, 1971.
Hon. FRANK THOMPSON,
House of Representatives,
Washington, D.C.

DEAR CONGRESSMAN THOMPSON: This is in further response to your correspondence concerning the Air Force contract for operations and management of the Eastern Test Range at Cape Kennedy, Florida. 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.

This Department has not applied the wage determination provisions of the Service Contract Act to work at Cape Kennedy except in the case of janitors and porters. This limitation 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 contractors in the locality. 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 suiccess of the President's economic program to combat inflation.

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 appropriately be utilized in other localities. I have concluded that the policy is still reasonable and proper.

Wage rates paid service workers at Cape Kennedy have been and continue to be equal to or greater than those paid other workers elsewhere in the general community. This has been the case because the wage rates paid the service workers in the aerospace complex historically have been bargained collectively and many rates were "imported" to Brevard County from other higher-wage localities There the Government contractors were operating. I

Consideration of the current wage patterns in Brevard County has convinced me that service contracts for technical and aerospace support do not at this time require the insertion of additional wage determinations to assure that the wages paid service employees will not be less than those prevailing in the locality or in the general community in which Cape Kennedy and Patrick AFB are located. Sincerely,

JAMES D. HODGSON,

Secretary of Labor, Mr. SILBERMAN. That decision, of course,' is subject to continuing review. To date, our examination of the situation has not disclosed evidence that would warrant reversal of the Department's position.

In light of the letter received by the Secretary this week from Senator Gurney of Florida, where it was the Senator's view, based on an informal survey that he had taken, that the factual basis of the action taken by the Department in 1967 and reaffirmed in 1970, may no longer be valid, the Secretary will conduct another survey in the Cape Kennedy area so as to make a judgment as to whether the facts have indeed changed or whether they have not.

Of course, making the survey does not imply that a determination will necessarily be made, but the Secretary wants to be sure, par

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ticularly in light of Senator Gurney's communication, that the fact upon which he previously based his decision not to make a determination are still valid.

Mr. THOMPSON. Mr. Secretary, Senator Gurney, Senator Chiles, Representative Frey, and Representative Pepper, all testified. Senator Gurney gave us, for the record, a rather comprehensive survey done by some private source, the reliability of which he will attest to.

In addition, if it would be useful to the Secretary, witnesses from the labor unions and others have given us pay comparability statistics which are reliable and which can be verified and if they will be of any constructive use to the Secretary, we would be delighted to show them to you or make copies of them and send them to you.

Mr. SILBERMAN. I cannot imagine that any material or views developed by this subcommittee would not be of use to the Secretary of Labor and, of course, we would be delighted to accept any material.

Mr. THOMPSON. We will have the staff extrapolate those statistics which we think are relevant and might be useful and we will send them to you.

Mr. SILBERMAN. My point only being and I am sure you recognize it, Mr. Chairman--that this information is useful to us in triggering our survey on our own. But our decision, of course, would have to be made upon our survey:

Mr. THOMPSON. I recognize that.

Mr. SILBERMAN. Now, as regards the present situation at the Eastern Air Force Test Range in Brevard County, and of course, that is what I refer to when I talk about the survey, the reasoning supporting the Secretary's decision not to issue a wage determination was set out in a letter to Chairman Thompson on September 10, 1971. I request that this letter also be made a part of the record.

Mr. THOMPSON. That is in the record. I have been referring to it as a letter dated September 13, but it is the same.

Mr. SILBERMAN. As I am sure you are aware, the Secretary's 1967 decision not to make wage determinations for the numerous classifications of workers employed by the contractor providing support services for NASA at the Kennedy Space Center (other than janitors) is the subject of pending litigation in International Association of Machinists and Aerospace Workers v. Hodgson et al. (Civil Action No. 126372,) U.S. District Court for the District of Columbia. :,

I might say, that the 1967 decision was made by Secretary Wirtz. For that reason, it would be inappropriate for me to comment further on either this matter or the more recent decision not to issue wage determinations for the service contract employees at the Eastern Air Force Test Range, which was taken on similar grounds.

I may say parenthetically that one of the dangerous aspects of testifying on a matter that is before the court was illustrated, as I understand it, by the chairman's efforts to make sure that his comments of yesterday would not be prejudicial one way or the other in the law suits involved, and I am sympathetic of that point..

I would ask that the chairman bear with me, too, in my efforts not to prejudice that case one way or another.

However, I can discuss some principles which apply to these and other determinations.

In the Department's view, the Service Contract Act does not provide authority for the Secretray of Labor to take action intended solely to preserve an existing wage rate in a particular contract. There is, on occasion, some confusion with respect to that. Neither does the act allow him to require a successor contractor to conform to the wage rates and fringe benefits paid by his predecessor. That is a question for the NLRB.

What the Secretary can do is determine the prevailing wage rates in a given locality, when such a determination is required to achieve the purposes of the act. For the reasons set forth in the letter of September 28, 1970, it was decided that wage determinations would be inappropriate for the NASA installation on Cape Kennedy. Since the Eastern Air Force Test Range facility is also located in Brevard County and the rationale on which the earlier position was based still seems to be appropriate, the same decision was made respecting service contract employees in that facility.

I will add that in light of Senator Gurney's letter and the other information which the subcommittee may have developed, and subject to which I said at the outset, the Secretary is going to make another survey.

When I testified before this subcommittee in April 1971, I was questioned extensively about the Secretary's decision to reclassify mailhaul drivers under contract to the Postal Service for wage and fringe benefit determination purposes. As you know, that decision was arrived at after consideration of a GÃO preliminary report which advised that the classification used by the Secretary in determining wage rates was inappropriate. The GAO suggested that mail-haul contract drivers should be classified separately from all other freight-hauling drivers, and wage determinations made accordingly.

Although we agreed that the old classification needed modification, we did not accept the narrowly limited GAO) suggestion. To do so would have been to ignore employees engaged in exactly the same work as contract mail-haul drivers those drivers who are employed directly by the Postal Service.

When I last testified before the subcommittee, the Department was considering inclusion of drivers in related jobs, such as employees of large parcel delivery services. We found that these jobs were different from mail-haul work, so we'excluded them from our wage determinations.

As a result of these changes, a wage determination for contract mailhaul drivers in any given area now includes consideration of the rates of pay for Postal Service drivers.

Increases granted to Postal Service drivers will be reflected in each annual survey, and will tend to push up the prevailing rate for contract mail-haul drivers. The new determinations, issued September 1, 1971, are already being reflected in mail-haul contracts all over the country. Preliminary figures indicate that the result of the new classification for mail-haul drivers will be an overall increase. - Most important of all, the new classification means that all mailhaul contract drivers, short and long haul, are now covered by prevailing wage determinations. Under the old system of classification, many short-haul drivers were not covered because they worked in localities for which no wage data were available.

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Resources were not sufficient to conduct surveys to determine prevailing wages in these localities. Another problem was the GAO allegation that Teamster rates did not prevail in 10 States. Pending review of that charge, the Department had decided not to issue revised wage determinations in the areas covered by the 10 States in question.

The new system of classification allows efficient and expeditious wage determinations for both short- and long-haul mail contract drivers.

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DEBARMENT

In its interim report, the subcommittee urged that the debarment provision of the act be more rigorously applied. As I stated in my April testimony, we believe that the Secretary's discretion in deciding whether to list for debarment a particular contractor who has violated the act is an essential element of the act's enforcement mechanism, which often results in prompt recovery of back wages and assurance of future compliance. Discretion also permits mitigation of what may be, in certain circumstances, an unjustly harsh penalty.

This should not be confused with a go-easy policy on stubborn violators. As has been true for years in the administration of the WalshHealey Act, no relief from debarment is considered justified in any case where the hearing record in the administrative proceedings demonstrates that the violations were willful or records were falsified.

Further, the Secretary will not lift a debarment until the contractor pays all of the back wages due and presents the Department with reasonable assurances that he will not shortchange employees again. As a further safeguard, we are advising field personnel to give special enforcement attention to contractors with a record of past violations.

The discretion provided for in the act permits a flexible enforcement mechanism that allows a measured response to violations. Elimination of this discretion would restrict the Secretary to the unsatisfactory alternatives of either settling a case, before a finding of a violationthereby losing the prophylatic effect of a formal charge and background evidence for future legal action in case of repeated violationor else going through the time and expense of litigation to recover the sums due.

The subcommittee has expressed particular concern about one contractor, Dynamic Enterprises, Inc. When I appeared before you in April, the decision of whether to debar this contractor was pending before the Secretary. On August 18, 1971, the Secretary accepted the recommendation of the Administrator of the Wage and House and Public Contracts Division, and recommended to the Comptroller General that this firm be relieved from the debarment penalty. That decision was communicated to Chairman Thompson in my letter of September 28. ,

The decision was based on the factors discussed above, including the Secretary's judgment that future compliance was reasonably assured. As stated in the Secretary's letter to the Comptroller General, prior violations sprung mainly from the company's refusal to accede to our interpretation of the act on certain fringe benefits. When Dynamic Enterprises clearly renounced future challenges to Labor Department rulings, we believed that the major obstacle to a worthwhile assurance of future compliance was removed.

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