(Mr. Courtney aside to the chairman.)

Mr. HÉBERT. The executive session hearings will be released after action by the committee, which is necessary under our rules.

The executive sessions on sole source were held in accordance with our rules. They have been cleared for security, and as soon as we have the full clearance for security review made, and the testimony back with the necessary deletions in the interest of security, the committee will make available in public the full text of those executive hearings, within the realm of security, of what has been deleted.

Mr. COURTNEY. One of the purposes of the meeting would be, on Tuesday, to take the necessary vote to clear the record and authorize the release of the transcript.

Mr. HÉBERT. If there is no further business before the committee, then the committee stands recessed until Tuesday.

Mr. COURTNEY. Tuesday, August 22.

Mr. HÉBERT. August 22.

Thank you, gentlemen.

(Whereupon, at 10:47 a.m., the subcommittee adjourned, to reconvene at 10 a.m., Tuesday, August 22, 1961.)

(COMMITTEE NOTE.-Subsequent to the hearings, the American Federation of Government Employees submitted a statement for the record which is set forth in the appendix hereof. Also set forth in the appendix is an exchange of correspondence between the committee staff and the Department of the Navy with reference to the statement submitted by the National Education Association.)

APPENDIX

STATEMENT OF AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES TO THE HOUSE ARMED SERVICES COMMITTEE CONCERNING ADVERSE EFFECTS OF CONTRACTING GOVERNMENT WORK TO PRIVATE BUSINESS

(Submitted by John A. McCart, director of legislation)

The interest of the American Federation of Government Employees in the Government's use of contractual agreements with private industry is twofold: (1) The need for safeguarding the interest of the Government in utilizing the most economical means of satisfying its needs; and (2) protecting the employment rights of Federal civil service employees who are needlessly displaced and who in so many instances are subjected to extreme hardship by the deprivation of their means of livelihood.

The organization is disturbed over the increasing practice of contracting with private interests for certain governmental services and activities which for many years have been provided by civil service employees. The policy of discontinuing Government services and facilities and having the same work done in private industry has caused the separation of thousands of career employees of the Government. In many instances it has occurred when those employees were unable to obtain employment elsewhere or at a time when they were economically unprepared for the ending of their services with the Government. Such a policy wastes valuable skills and in some instances has resulted in a sizable loss to the Government of millions of dollars invested in special equipment or plant facilities which were peculiarly suited to their governmental use but which were not readily adaptable to other uses. It is a policy ostensibly intended to bring about savings, but which in many instances has increased the cost of national defense and of other services needed by the Government.

During the last several years this practice of contracting by the Government has been accelerated in compliance with the Bureau of the Budget Bulletin 60-2, dated September 21, 1959, which amplifies two earlier directives-Bureau of the Budget Bulletins No. 55-4 of January 15, 1955, and No. 57-7 of February 5, 1957. Those who have supported this policy have the viewpoint that the Government is needlessly competing with private enterprise when it provides a service or a product for its own benefit. It is our view that it is wrong to consider the Government as being in competition with private enterprise when it provides a service or does any work which superficially would seem to duplicate the same type of work done in industry.

We believe that the purpose of the service, the circumstances of its need and its existence should govern. True economizing does not necessarily consist of seeking the lowest price of a service or a product.

The general policy outlined in Bureau of the Budget Bulletin 60-2 is that the Federal Government is not to start or carry on any commercial-industrial activity if the product or service involved can be procured from private enterprise. Exceptions to this policy provide that Government operation may be continued where an activity cannot for reasons of national security be turned over to private industry or if procurement through commercial sources would involve higher costs.

We submit that national security is not always served by contracting and that in many instances the work can be done in a less costly manner if the Government were to use its own facilities and its own employees. Some work traditionally belongs in an establishment operated by the Government. While many private contracts have been substituted for governmental activities, numerous examples of Government disillusionment with private contracting have come to light. Contracting has been erroneously believed to be economical and to afford services which the Government itself could not provide. This viewpoint is

fallacious and numerous instances can be cited of contractual situations which do not offer as satisfactory results as doing the job with Government personnel or which are more costly than if the work were done in Government facilities. It is our contention that certain types of work required by the Government should be done by Government personnel. By so doing the Government can maintain greater control over such activities. This is of vital concern where there is any involvement of security or the national defense.

There have been proposals that as much as 75 percent of the money expended by the Navy for conversion, alteration, and repair of naval vessels be allocated to private shipyards. Presently the amount spent for these types of work is about 20 percent. It is appropriate to patronize the facilities provided by private enterprise where a governmental agency is not as well equipped to supply the product or service needed. However, naval shipyards provide essential service to ships of the Navy. This capability of the Naval Establishment is fundamental to the strength of the Navy and typifies a principle which has governed the repairing of naval ships from the founding of this country.

The paramount issue is not the desirability of giving profitable business to commercial operators but rather providing needed repairs and engineering changes to complicated ships in a timely and reliable manner. Private shipyards are given the opportunity to bid on selected work on the repair of certain auxiliary ships and smaller noncombatant vessels. Ship conversion, alteration, and repair is normally assigned to naval shipyards to enable the Navy to maintain the proper amount and kinds of skilled manpower as well as facilities at strategically dispersed navy yards.

Government-owned shipyards already represent $12 billion invested in buildings, drydocks, and other facilities including special tools and equipment. They also have prepaid inventories of shipboard equipment and spare parts which are readily available when needed. Emergency work cannot be preplanned and specifications could not be prepared adequately to bid the work commercially. Finally, reserves of journeymen mechanics and technical personnel are required to serve as the nucleus for increases upon mobilization. Such reserves exist in the Navy shipyards.

The Redstone Arsenal is one of the military installations where contracting has had adverse effect on a substantial number of employees. At beginning of this year there were 1,072 contractor employees working at the George C. Marshall Space Flight Center. Their services ranged from the operation and maintenance of motor vehicles to engineering and fabrication of parts for the Saturn heavy space vehicle. There were 626 other contractor facilities in the city of Huntsville also working for Marshall Center.

The varied impact of contracting is well illustrated by events at this one installation. The salaries paid to these 1,698 employees totaled more than $1 million a month.

One of the first instances of contracting at this installation was for transportation services. One motor vehicle contract called for the delivery of 133 vehicles to the Marshall Center and 56 to Cape Canaveral. They ranged from motor scooters to 5-ton truck tractors. The firm supplying these items also provided maintenance for 90 other road vehicles which have been transferred from the Army and for 163 material-handling vehicles such as forklifts, warehouse cranes, and tractors. Contracting at this one installation had every indication a year ago of expanding to a point where within a year 90 percent of the National Space Agency's work at Huntsville would be performed by contractors.

These facts were only part of the story of contracting at Huntsville. Of far greater importance was its effect on the persons who bore its real brunt-the employees who were displaced by workers hired by the contractors. Included in their number were veterans who ironically were displaced when Government called in private enterprise to take over certain features of defense activities. Their personal problems were many and to them were of major seriousness. A 41-year-old truckdriver caught in a r.i.f. which abolished 100 jobs had built a new home for his wife and 6 children. Repayment of the loan almost overnight became a virtual impossibility.

Another employee of 18 years was let out, ending his hope to make Government a career. Then there was a veteran's widow who lost out despite her 10point preference status and despite the fact that her husband had some years before given his life for the same national defense which now has deprived his widow of her livelihood.

Some phases of contracting at the Marshall Space Flight Center raised serious questions as to the economic benefits if any which accrued to the Government.

Information has reached us that maintenance contractors are using Government-owned tools and equipment in supplying the carpentry, plumbing, steamfitting, and other building trades services which are being performed under contract to the Marshall Space Flight Center. We have been told that their employees are transferred to and from the arsenal construction and maintenance locations by Government transportation. Further, that daily overtime and Saturday overtime is being authorized for contractor personnel but not for civil service employees performing the same type of functions.

This instance of large-scale contracting with its attendant adverse effect on employees began a little more than a year ago when part of the Army Ballistic Missile Agency was transferred to form the nucleus of the George C. Marshall Space Flight Center of the National Aeronautics and Space Agency. It was believed at the time that in transferring, individual civil service employees would lose no pay nor be in any danger of losing their jobs. Since entire functions were transferred, the employees had no choice but to go along with the organization in which they had been employed.

However, in the reduction-in-force letters mailed to the personnel affected by the transfer, it was stated "prior to the activation of this center it was determined that certain support functions, such as guard service, motor pool operations, and janitorial services, could best be obtained by award of contract to private enterprise." It has also been stated that in addition to the support functions already mentioned the center is planning to contract certain general maintenance services which will include carpenters, concrete finishers, electricians, masons, millwrights, painters, sheet metal workers, welders, and unskilled laborers.

Had the policy of contracting been made known at the inception of the center, civil service employees who have been or had been affected could have availed themselves of retreat rights within the entire Army installation. Now their competitive area is restricted to NASA. Even those who were willing to transfer to the Space Flight Center could have applied for employment within the Department of the Army if they had known that their jobs eventually were to be discontinued because of contracting.

Serious question can be raised with respect to the contracting engaged in at the center from the standpoint of economic operation and justice to employees. Reportedly the contractor hourly rate at the Marshall Space Flight Center ranges upward to more than $10 an hour. Such a rate does not mean that an individual employee will be so compensated. On the contrary his earnings remain essen tially at the rate at which he would be employed directly by the Government. The difference of course would remain with the contractor.

There are also instances of substandard wages paid by a contractor. It has been stated that contractors costs of janitorial services had been fixed at $5 an hour, but that the services of janitors obtained for such work were compensated by the contractor at $1 an hour and at $1.15 an hour for supervisors. It is difficult to understand why contracting is necessary for some of the services and positions involved. It would appear on the basis of available information that the total cost to the Government is likely to increase as time goes on. Two months ago there were 5,500 civil service employees at the Marshall Center. The immediate effect of contracting was indicated as the elimination of 105 civil service positions. However, the 1962 budget for NASA called for an additional 460 civil service employees at the Space Center.

It was not clear whether these additional positions would be filled by use of contractor or civil service personnel. The AFGE has been able to obtain assurance that the proposed contracting for maintenance work will not adversely effect civil service employees at the center, but there was no such assurance for the security of nearly 80 employees who were facing separations because of extensions of a previous contract for janitorial and truck-driving operations. The costly effects of Government contracting were evidenced at Fort Wainwright at Fairbanks, Alaska. Contracting reportedly has been becoming more extensive at this post, and the result has been that several reductions in force have taken place during the last 3 years. Many activities previously manned by civilians are more and more carried on by contractors.

When it was indicated that certain work was to go to private industry, the AFGE Lodge at Fort Wainwright in cooperation with other lodges in Alaska circulated a petition among the employees seeking their support for a request that Congress make an investigation. Letters also were addressed to President Kennedy, the Director of the Budget, and to Members of the Alaska delegation

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