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order to determine how much they are getting, we are going to look at guards at Fort Rucker and they are getting whatever they are getting.

Mr. THOMPSON. $2.25, I believe they are getting.

Mr. O'HARA. Mr. McGahey runs in and says, “Our contract provides for $2.55 starting next month," or whenever it is. They say, “No, you can't look at that. You only look at the existing wage.” So they put it to $2.25, McGahey's contractor is obligated by the term of his contract to pay $2.55. So as a consequence, and this was pointed out by earlier witnesses, as a consequence, either the contractor that you have organized loses the contract because he is bidding on the basis of the $2.55 wage and his competition is bidding on the basis of $2.25 wage, or in the case you lose the contract because of the Emerald Maintenance decision, the new fellow doesn't have to pay $2.55, he isn't bound by the terms and conditions of your agreement. Either McGahey's contractor loses and the guards are thrown out of work and maybe have an opportunity to go back to work with a new contractor at lower wages or else McGahey in order to protect the fellow he has been dealing with, who has dealt with him at arms' length but openly and aboveboard, he has to go to him and renegotiate and say, “All right, we negotiated $2.55 but in order to give you a shot at retaining the contract, we are going to have to renegotiate and take the increase that we had bargained for these guards away from them.” That is the choice he faces. What is the consequence? In any event, in either one of these events, the guards never get $2.55; they get $2.25, and next year when it is time to let the contract all over again in spite of what he may have negotiated with the old employer or new one, they go out and look and say, “These guards are getting $2.25." That is what the determination is going to do.

If those guards are working there under the system 20 years from now, the rate will still be $2.25. It will never go up. It can't go up. They are the ones used as the base and they never get any raise so they keep making the same thing.

If the Congress had intended that all the law ever meant was that you should keep on paying these fellows what they are now receiving, we could have written that in two sentences, but we would not have bothered if that was our intention. But, nevertheless, that is the way it is.

Mr. McGAHEY. I had a real good experience on this just last week down at Cape Kennedy. We have had the guards at Cape Kennedy since 1956 organized on both sides of the Cape, one Pan Am is the prime contractor, and the other TWA is the prime contractor. So Boeing got the prime contract from the one that TWA had. We had to go down to negotiate to cover our people. In the 5 years that this act has been in effect, there has never been a wage determination. Of 26,000 people, I think there is one small group of less than a hundred of laborers that there has been a wage determination made on. Boeing made it plain to me that there has been no wage determination made, that the Emerald decision put it clear that in a Government contract, they did not have to follow the prevailing wage or the wages in the contract that we had, and the only reason I was able to get this contract and keep the wages and the fringes that we had was on a threat of a strike.

Now, if we are trying to set up stable labor-management relations and working conditions, we can't have it if we are going to have to strike in order to keep the wage scales as we have them in the different areas in these Government installations.

Mr. THOMPSON. We realize that and are going to try to do something about it. We thank you very much.

Mr. O'HARA. Mr. Chairman, one more comment. I want to say Mr. Gregory, who accompanied Mr. McGahey, is one of the outstanding attorneys in the Michigan bar and he played a very brilliant role in getting the Burns Detective Agency decision and Wackenhut and I hope, Mr. McGahey, that you are going to give Mr. Gregory free rein to go after this Emerald decision.

Mr. McGAHEY. We certainly are. Maybe he would like to make some comments on that.

Mr. GREGORY. Only to thank you, Mr. O'Hara, for your flattering remarks. I think the committee might be well advised to make the trial examiner's decision in the Emerald case part of the record. I will quote one sentence: "The net effect of all of this is an insistence that among civilian employees working for Government contractors, there may be no union activity, no union representation, and no collective bargaining."

That was the position advanced by the U.S. Air Force, rejected by the trial examiner who wrote a brilliant decision which NLRB chose to hide against the Contract Service Act and, of course, passed the buck to somebody and hopefully this committee can unravel that now.

Thank you.
Mr. THOMPSON. Thank you very much.
Mr. McGAHEY. Thank you very much, gentlemen.

Mr. THOMPSON. Our last witness for the morning is Mr. Clyde M. Webber, Executive Vice President of the American Federation of Government Employees.

Good morning, Mr. Webber.



I have submitted a statement for the president of our organization. I would like to read it. I am sure you know that we do not represent emplovees of a service contractor, but we do represent their counterparts that are on the Federal payroll.

I appear before you distinguished members of the Special Subcommittee on Labor with a sense of deep appreciation for the opportunity to speak to you on one of the most urgent matters regarding the impact of Federal Government operations on the welfare not only of Federal emplovees but also of employees in the private labor market. This subject concerns the terms under which support services contracts are

processed and the monitoring and safeguarding by the Federal authorities of the rights of all employees, whether they work for the Federal Government or for private contractors.

I appear before you today as the representative of more than 650,000 Federal Government employees in exclusive recognition units through the world. Many of these employees work for the military departments and a large number are so-called "blue-collar” employees working for laundries, food service facilities and for janitorial services units.

During the last six years, we have repeatedly appeared before the Post Office and Civil Service, the Government Operations and the Armed Services Committees of Congress asking for legislation requiring all contracts for support services to be let by rigorous legal standards; that they be deposited in a central agency; and that they be properly monitored for compliance. We have asked for this not only to protect Federal employees but also because, as taxpayers, we believe that one of the major fiscal issues which has been most elusive in escaping control by the Congress has been the executive branch's practice of “contracting out" support services.


Today we appear before you with an especial sense of urgency, both as union representatives and as taxpayers.

I have documents showing that it is now firm Department of Defense policy to "contract out," wherever and whenever possible, all janitorial services, In effect, the Defense Department is now resorting to a policy of “firing” by “contracting out." To support mv claim, I ask permission to insert immediately hereunder two quotations from official communications from the Army and Navy and a newspaper report concerning the Air Force.

On January 14, 1971, Assistant Secretary of the Army Benton G. Moeller, Jr., wrote me a letter in which the following paragraph, which speaks clearly for itself, is included:

Contract is the Army's preferred method for obtaining custodial services and it is used predominantly. At Army installations, custodial service is a function of the Facilities Engineer. The performance of this service by contract is under the supervision of the Facilities Engineer, and the General Services Administration is not involved.

On February 8, 1971, I received a letter from the Assistant Secretary of the Navy, James D. Hittle, saying in effect the same thing in the following words:

Attached for your consideration is a discussion paper which explains our policy on the contracting out of support services" by the naval shipyard.

As you will note in the discussion paper, periodic reviews are conducted to ensure that it is still in the best interest of the government to continue contracting out a particular service. * * *

As to the current and future impact on blue collar Federal employees of these Department of Defense policies, I should like to insert the following report which appeared in the Birmingham Post-Herald, March 11, 1971. about cutbacks of 1,300 “military support personnel” at Craig Air Force Base in Selma, Ala. Among other passages, the report includes the following:

The Air Force said it would make every effort to provide placement for those who are losing civilian jobs. They said many would possibly be hired by the contractor. * * *

One civilian employee, who might be in a position of being without a job or working for a contractor, said that they would lose all civil service ranking, even is hired by the contractor.

Their same job with the contractor would probably be at a much lower rate of pay, resulting in a lower per capita payroll for any of those who are retained by contractors, the employee said ***.

The cutback involves about half of the work force at Craig.
(The article referred to follows:)

[From the Post-Herald, Mar. 11, 1971]

(By Dick Bell) SELMA.— Military operations in Alabama, boosted three times since January with announcements of buildups, received a severe blow Wednesday when the cutback of some 1,300 personnel at Craig Air Force Base here was revealed.

The Department of Defense, in making the announcement, said about 950 military and 350 civilian personnel will be affected by the decision to convert military support operations at Craig to contract status.

Announcement was made Feb. 23 that 200 persons would be added to the Safeguard command at Huntsville's Redstone Arsenal; on March 3, word was released that up to 2,500 in the Army's basic helicopter training program would be moved from Ft. Wolters, Tex. to Ft. Rucker and just this week, Republican Rep. Bill Dickinson said the Air Force was moving it's computer operations from Washington to Gunter AFB at Montgomery.

Congressman Bill Nichols from Alabama's Fourth District, said he was "extremely disappointed at the impending reduction in force at Craig ... and I am especially unhappy since I have been continually pleased with the Air Force and the status of Craig and have been assured time and time again that there were no plans affecting the base or its personnel."

Nichols said the Department of Defense, in a letter to him announcing the planned reduction, said the base support mission for the Undergraduate Pilot Training (UPT) operation had been based on operational readiness requirements which have been reduced.

BEING ABSORBED The reduced requirements are being absorbed through the elimination of military support authorization at Craig AFB, the Department of Defense told Nichols.

The reduced requirement permits the current military support workload to be converted to contractor status, the Defense Department said.

"I have been assured that the announcement does not affect the continued operation of the Undergraduate Pilot Training mission," Nichols said, "and the Air Force expects to train just as many pilots in the future as they are training now."

Nichols said he was particularly disturbed because the Defense Department "did not extend me the courtesy of discussing the matter with me prior to the announcement."

The military support personnel to be cut back will involve mainly maintenance, mechanical and other similar jobs.

FEWER PEOPLE Of the 1,300 jobs to be cut back, one source said the contractor might be able to do the work with as little as 600 or 700 people.

The Air Force said it would make every effort to provide placement for those who are losing civilian jobs. They said many would possibly be hired by the contractor.

Most of the military personnel will be reassigned away from Craig.

One civilian employee, who might be in a position of being without a job or working for the contractor, said that they would lose all civil service ranking, even if hired by the contractor.

Their same job with the contractor would probably be at a much lower rate of pay, resulting in a lower per capita payroll for any of those who are retained by contractors, the employe said.

"HAVE OUR TROUBLES" "We'll have our troubles, no matter how many the contractor hires," said the employee, who wished not to be named.

Rep. Nichols said he was planning a meeting to be held sometime in early April to discuss the problem and make plans with local leaders for improving the overall mission at Craig.

He said the meeting will be attended by Senators John Sparkman and Jim Allen, Selma Mayor Joe Smitherman, Dallas County Probate Judge B. A. Reynolds and other Dallas County civic and business leaders.

The cutback involves about half of the work force at Craig.
Mr. WEBBER. Circular No. A-76 of the Bureau of the Budget:

A complicating factor in the "contracting out” of support services is the ambiguity which exists in the basic Federal document concerning Federal procurements of goods and services. Hearings before the House Government Operations ('ommittee in 1968 clearly revealed the losses to taxpayers resulting from the inconsistencies of practices employed. House Report No. 1850, U'nion Calendar No. 754, “Criteria for Support Service Cost Comparisons, issued by the Committee on Government Operations, contained recommendations, which our organization endorsed, for standardizing and simplifying the letting of contracts. Since then, I have repeatedly written without avail to the White House urging the revision of Circular A--76 along the lines of that report.

In our own investigations, I have been struck most of all by the fact that the Federal Government spends approximately $8 billion annually solely on contracts for the services of human beings. When one considers that the total pay of all Federal officials, including the President of the United States, the Congress, the courts and all officers and employees of all Federal departments is approximately $22 billion, one realizes that about 1 million people work for the Federal Government on contract as employees of private firms.

Because Circular No. A-76 is basic to the issue of service contracts, I should like, with your permission, to incorporate it into the record as Annex I to my testimony.

(The document referred to follows:)

Annex I

Washington, D.C., March 3, 1966.

Circular No. A-76

To the Heads of Executive Departments and Establishments.
Subject: Policies for acquiring commercial or industrial products and services

for Government use. 1. Purpose. This Circular replaces the statement of policy which was set forth in Bureau of the Budget Bulletin No. 60–2 dated September 21, 1959. It restates the guidelines and procedures to be applied by executive agencies in determining whether commercial and industrial products and services used by the Government are to be provided by private suppliers or by the Government itself. It is issued pursuant to the President's memorandum of March 3, 1966, to the heads of departments and agencies.

2. Policy. The guidelines in this Circular are in furtherance of the Government's general policy of relying on the private enterprise system to supply its needs.

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