$3.032 plus 70 cents in fringe benefits per hour or a total of $3.732 per hour.

(3) It effectively precluded organization of the employees working for the new contractor.

The contract for these Nike missile sites was let for a 1-year term. It was on a fixed fee basis. The low bid was based upon the payment of the minimum wage of $1.25 per hour and was not the prevailing rate for guards in the Detroit area. The successful bidder could not possibly meet the union's Detroit area scale during the period of his contract on the basis of his bid.

To further explain: The primary cost factor for guard agencies is the direct cost per man-hour. Bids are submitted upon the basis of the number of man-hours required or furnished. The normal overhead factor (which includes supervision, overtime, insurance benefits, uniforms, administration, profit, et cetera) is around 50 cents per man-hour worked. Assume the Government specifies that 10,000 guard-hours shall be furnished for the contract year. If the contractor plans to hire guards for $1.25 per hour, he adds 50 cents for overhead and profit and submits a bid for $1.75 per hour. If, however, the contractor bases his bid upon a union scale of $3 per hour, he must bid for at least $3.50 per hour.

The competition among guard agencies is quite fierce. They are actually little more than labor workers. Many agencies operate out of their homes or small offices. Very little capital investment is required to become a guard agency. About the only requirement is that an individual have a connection to obtain a contract and possess enough cash to meet the payroll until he receives his first payment under the contract.

Almost all Government contracts for guard services are on a fixed fee basis. The bidder who bases his bid upon a minimum rate of $1.25 per hour cannot make any economic concessions to his employees during his contract year and will refuse to resubmit a bid because of inability to compete with other nonunion contractors paying the minimum rate.

Another illustration: A contract for guard services at the NASA missile test site at Wallops Island, Va., had been let to Guard Services, Inc., a private guard agency. There were approximately 24 guards employed by this agency at the site. They were paid at the rate of $1.25 to $1.322 per hour without fringe benefits.

Our union was certified by the National Labor Relations Board as exclusive collective bargaining agent for these employees on March 29, 1963. The contractor successfully stalled negotiations until its contract expired on October 1, 1963. The only offer ever made by the contractor to increase wages or benefits was an offer to pass along to the employees any increase that NASA might agree to make in its contract. NASA refused to make any such concessions and the employees were forced to strike on August 26, 1963. This resulted in an order by the President's Missile Sites Labor Commission in accordance with Executive Order No. 10946 to terminate the strike and return to work. Our members obeyed this directive and returned to work only to be informed that they had been discharged for engaging in this concerted activity. The National Labor Relations Board has issued a complaint against this contractor on the

basis that it refused to bargain in good faith with our union in violation of section 8(a) (5) of the Labor Management Relations Act, and also discriminated against the employees in violation of section 8(a) (3) of the act because of their membership in and activities on behalf of this union. The contractor has failed to even respond to this complaint and default proceedings are pending, and I understand also from the people involved that this company did not even pay unemployment compensation for their employees and, as a result, their laid-off employees have been unable to collect unemployment compensation.

This contractor refused to even resubmit a bid for the 1963-64 year and the contract has been let to another contractor who was the low bidder, a machine and tool company known as the M & T Co. of Philadelphia. This bidder has refused to recognize our union as the bargaining agent for the guards employed at the Wallops Island Station and has hired an entirely new guard force at the minimum rate of $1.25 per hour.

This is a pathetic illustration of how 24 guards at Wallops Island lost their jobs and were deprived of their rights under the Labor Management Relations Act to be represented for purposes of collective bargaining because of the lack of a standard establishing prevailing rates for their work.

The irony of the situation at Wallops Island is that the guards, who were charged with the responsibility of protecting this highly secret and important space project, were being paid $1.25 to $1.35 per hour, while common laborers were being paid a minimum of $1.73 per hour plus fringe benefits. Asbestos workers receive a minimum of $3.65 per hour and boilermakers $4.15 per hour.

This is because the Secretary of Labor had made a determination of the prevailing minimum rates for these and other classifications pursuant to the Bacon-Davis Act. But no such determination was made for the guards and they received less than $1.35 per hour.

The $1.25 to $1.35 hourly rate for guards at our space and missile defense installations is rapidly becoming a standard rate at all unorganized sites. These low rates lead to a high turnover in personnel which results in extra costs to the Government for security clearances. It also results in a general deterioration in the quality of our national security and a lessening of public confidence in our space and defense effort.

Compare these hourly rates with the rates paid by industries for comparable duties and responsibilities. As noted above, Chrysler Corp. guards receive a total of $3.732 per hour; General Motors Corp. guards receive $2.95 per hour plus 70 cents in fringe benefits or $3.65 per hour. McDonnell Aircraft in St. Louis, Mo., pays its guards $2.76 per hour plus approximately 60 cents per hour in fringe benefits or a total of $3.36 per hour.

Mr. GRIFFIN. Mr. Chairman.

Mr. O'HARA. The gentleman from Michigan.

Mr. GRIFFIN. Could I just interrupt you for a second?

Do you represent the guards at Chrysler Corp. and at General Motors in the Detroit area?

Mr. McGAHEY. Yes, sir; I do. All of these that are mentioned in here I do represent.

Mr. GRIFFIN. Thank you.

Mr. McGAHEY. A listing of various benefits paid plant guards is attached to this statement as appendix A.

The present policy of our Federal agencies is to contract out such services to the lowest bidder, who may contract to a subcontractor and then, in many cases, a subcontractor will subcontract to another subcontractor and, as a result, this can carry into several different companies, taking a piece out of this original cost that does not get to the employee.

Now, such policy apparently derives from the theory held by the procurement officers of all Federal agencies that they are somehow obligated to award the contracts to the lowest bidder without regard to the economic impact upon the employees or the affected community. This policy only leads to the general depressing of wages and therefore adversely affects the economic status of all employees engaged in similar work in private industries in the community where such contracts are to be performed.

The above points out the urgent need of minimum wage protection for the guards performing duties under Government contracts. I would now like to summarize some of the benefits to be gained by establishing a formula for determining the prevailing minimum wage and fringe benefits for plant guard employees:

(1) The passage of either of the proposed bills would decrease our unemployment rolls.

As earlier noted, the holding of two jobs or "moonlighting" is most prevalent among the service groups. An organizational campaign was conducted by our union in the Cleveland area during the year 1960-61, and involved approximately 550 to 600 guards employed by the Pinkerton and Burns detective agencies. We ascertained that more than 50 percent of guards working for these two agencies held full-time jobs in other manufacturing plants and shops. The reason: because they could work odd hours. Any hour that they so desired was all right with the employer as long as they worked for this low rate of pay.

Requiring Government contractors to pay the prevailing rates would greatly reduce the number of "moonlighters." Service employees would no longer need to work at other jobs to earn a living wage. The contractor would no longer have a motive for hiring parttime employees holding full-time jobs elsewhere because of their willingness to work for substandard wages.

We would estimate that the passage and enforcement of either of the pending bills would put another 1 million unemployed citizens to work.

(2) Our national economy would be strengthened.

An immediate direct effect of the higher minimum prevailing rates would be the increased purchasing power of these low-income groups. There are an estimated 12 million employees performing guard duties in this Nation.

Another immediate effect would be the new purchasing power of the additional 1 million wage earners estimated to be in the service. groups who are now unemployed. Payment of the prevailing rates would also preserve the present purchasing power of our organized members which has been won through the processes of many years of collective bargaining. Failure to provide for a minimum prevailing

rate on Government contracts will eventually lead to a depressing of wage rates among service employees in private industry in those communities where these contracts are let to the lowest bidders.

(3) The rights of employees in the service groups to self-organization and collective bargaining guaranteed by the Labor Management Relations Act will be preserved.

The contracts for services are let on a fixed-fee basis. The fierce competition among contractors leaves little room for collective bargaining. So long as service contracts are let under fixed-fee contracts, the employees are, for all practical purposes, denied their rights of effective collective bargaining. The enactment of either of the pending bills will afford substantial relief to employees in this regard. (4) Our national security will be strenthened.

The payment of substandard wages to guards is wasteful and weakens our national security. Substandard wages are destructive of morale, create unrest and turmoil among all workingmen. The guards at Wallops Island, Va., received 50 cents per hour less than the laborers. This created such unrest that it resulted in a work stoppage. Their picket line was respected by all other unions working at the site. Where the rates of $1.25 to $1.50 per hour are paid for guardwork, most employees accept the job as a stopover or as a means of obtaining a better job in the project. The guard has an excellent opportunity to make a valuable contact for a better job inside the plant or site.

The result is a high turnover of guards. This requires the Government to bear the expense of extra security clearances. This is a great direct additional cost to the Government.

The guards employed by Pan American at Cape Kennedy is one of the finest security forces in the missile industry in our Nation. It is the subject of a special commendatory article in the September 1, 1963, issue of the FBI Law Enforcement Bulletin. The employees have high morale and there have been no work stoppages by the guards at this installation.

A valuable lesson is to be learned from Cape Kennedy. During the year 1956, Pan American, the prime contractor, hired guards at the wage rates of $1.40 to $1.60 per hour. While these rates remained in effect, it experienced a turnover of 300 percent within the period of 1 year.

Thereafter, the guards became organized in our union and their rates were adjusted to rates paid to employees performing comparable work in private industry, and also in accordance with the policy as established by the Government for civil service and Government guards.

The turnover has been eliminated and there are now only 2 or 3 openings per year among the approximately 430 members of the guard force. The guards now receive the rate of $2.76 per hour plus 45 cents in fringe benefits, or a total of $3.21 per hour.

Another incidental benefit of establishing rates equivalent to those paid other employees for comparable work would be the elimination of the fly-by-night and marginal contractors who would be unable to successfully bid on Government contracts based upon the payment of the prevailing rates. It will assure continuity of contractors and eliminate an annual turnover in personnel resulting from a change in contractors.

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In conclusion, the adoption of a standard for establishing minimum prevailing rates for service employees will place them on a par with their fellow workers engaged at the same project and installation. The wage should not be frozen, as it is now, at the minimum set by the wage and hour law because of the fixed fee bidding policy for Government contracts. The service employees should no longer be relegated to second-class citizenship. They should no longer be the forgotten men of labor. They should no longer be left in this vicious circle of uncertainty and insecurity where they stand just one step ahead of the welfare rolls.

They are the helpless victims of the policy of our Government to award contracts to the lowest bidder on the one hand and the policy of that same Government which, up to now at least, denies them protection against substandard wages and other standard economic benefits. We believe both bills will go a long way toward correcting the evils which we have pointed out. However, we tend to prefer H.R. 6088 because of its wider coverage and simplicity of administration.

We again thank you for the privilege accorded us to appear and express our views.

(Appendix A referred to follows:)

Chrysler Corp.:

APPENDIX A

Fringe benefits: 80 cents per hour.

Wage rates: $125.40 per week; $3.031⁄2 per hour; shift premium, 5 and 10 percent.

General Motors Corp.:

Fringe benefits: 80 cents per hour.

Wage rates: $2.95 per hour; shift premium, 5 and 10 percent.

Detroit city employees:

Fringe benefits: Same as all city employees.

Wage rates: $2.41 to $2.46 per hour.

West coast patrols:

Fringe benefits: 16 to 18 cents shift premium; 7 holidays at double time; Group hospital-life, paid by company; vacation, 1 to 3 weeks; 6 days sick leave.

Wages: $2.10 to $2.20 per hour.

Boeing Co.:

Fringe benefits: 75 cents.

Wages: $2.70 to $2.99; cost of living; shift premium, 10 to 12 cents. Pan American World Airways:

Fringe benefits: 55 cents per hour.

Wage rates: $2.76, 18 months' service; shift premium, 9 and 18 cents. Mason-Rust:

Fringe benefits: 40 cents per hour.

Wage rates: $2.40 (21 months); shift premium, 6 and 12 cents.

Union Carbide Co., Oak Ridge, Tenn., and Paducah, Ky.:

Fringe benefits: Approximately 60 cents per hour.

Wages: $2.81 per hour; 14 and 20 cents per hour shift premium.

International Harvester:

Fringe benefits: Approximately 65 cents per hour.

Wages: $2.82 to $3.16 per hour; 10 and 15 cents per hour shift premium. General Electric Co., Louisville, Ky. :

Fringe benefits: Approximately 65 cents per hour.

Wages: $2.68 to $2.91 per hour.

North American Aviation, Rocketdyne, McGregor, Tex. :

Fringe benefits: Approximately 65 cents per hour.

Wages: $2.60 to $2.75 per hour plus cost-of-living allowance; 12 to 42 cents shift premium.

Martin Marietta Corp., Orlando, Fla. :

Fringe benefits: Approximately 70 cents per hour.

Wages: $2.28 to $2.38 per hour; plus cost-of-living allowance; 10 and 15 cents shift premium.