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gressman Thompson, the chairman, and Congressman O'Hara, a member of this special committee.

The purpose of this amendment is to free the Secretary of Labor from the tremendous pressures which are now placed upon him by violators of the Service Contract Act of 1965 who wish to be able to continue to bid on future contracts even though they have not been complying with the law on past contracts.



Inasmuch as your subcommittee will be evaluating the actual enforcement of Public Law 89–286 by the Federal authorities, particularly the Secretary of Labor, you may find relevant other provisions of law, and interpretations of law, which today govern the relationships between Federal authorities and their employees, on the one hand, and private firms having Federal contracts and their employees, on the other hand. These legal and occupational relationships have been clearly established administratively and they have been upheld by the courts.

The issue of the legal determination of the interrelationships between Federal employees and private contractor employees is generally related to the decision of the General Counsel of the Civil Service Commission, replying to a request from the Office of the Comptroller General, regarding the legality of a contract let by the Air Force for its base at Fuchu, Japan. The decision, rendered on February 12, 1965, examined the terms of the contract and established that certain contract technicians at the Fuchu Air Force Base, Japan, were performing a Federal function under detailed Government supervision. For this reason, the decision concluded that the specific contract for technical services was clearly invalid as an evasion of the civil service and classification laws. Subsequently, on October 23, 1967, the Fuchu opinion was followed and amplified in a detailed opinion of the General Counsel, Mr. L. M. Pellerzi, holding two Goddard Space Flight Center support service contracts as being proscribed by the Federal civil service personnel laws. The Comptroller General of the United States reviewed both the Fuchu and Goddard Space Flight Center decisions and concurred in them.

For the sake of the record, I request permission to incorporate in the record as Annex III to my statement the full text of the October 23, 1967 decision of the General Counsel of the Civil Service Commission, in which the Comptroller General concurred.

(The document referred to follows:)

Annex III


Washington, D.C.


TECHNICAL SUPPORT SERVICES CONTRACTS The Civil Service Commission has completed a review of contracts for technical support services at the Goddard Space Flight Center, as requested by the General Accounting Office on September 6, 1966. The review was made in conjunction with an overall inspection of NASA personnel practices.

It is the opinion of the Commission's General Counsel that

(1) The contracts reviewed placed contractor-supplied personnel in a status tantamount to Federal employment status in derogation of the personnel laws.

(2) The Civil Service System can supply the necessary personnel. (3) Corrective action is required.


General Accounting Office auditors had questioned the legality of certain contracting practices discovered in the course of an audit of Goddard operations Without making a full study of the fact, the GAO referred six contracts to the Commission in September 1966 for determination of legality. Since it appearrd that all six contracts were basically similar in form and operation the Commission decided to make an in-depth study of two representative contracts, one with Jelpar, the other with Electro-Mechanical Researcb.

The Commission's authority and responsibility to interpret and administer the personnel laws to effectuate their purposes has long been recognized by the Attorney General, the Congress, and the courts. A statement of the requirements, purposes, and national policies which are prescribed by the personnel late is set forth in the Attached Appendix A to the General Counsel's opinion.

As stated in the attached appendix, it has been the Civil Service Commission's experience that the procurement and use of personnel by unauthorized contracting practices has an adverse impact upon the civil service system and tends to frustrate the purposes and national policies expressed by the personnel laws. The extensive use of contractor-supplied personnel for the performance of Gorernment missions poses issues of critical importance to our system of Government, to any meaningful concept of public service and to the continuing vitality of the civil service system.

LEGALITY OF REVIEWED CONTRACTS UNDER THE PERSONNEL LAWS On February 12, 1965, the General Counsel of the Commission gave his opinion that a contract between a Government agency and a private corporation to furnish technicians to work at an air base in Japan resulted in a form of personnel procurement which was not authorized by law and which violated the personnel laws in that it created a relationship tantamount to Federal employment. The Comptroller General concurred. As established in that opinion, the Commission has devised three criteria to judge whether or not an employeremployee relationship exists for purposes of the personnel laws. These are whether a person is (a) engaged in the performance of a Federal function under authority of an act of Congress or an Executive order; (b) performing duties subject to the supervision of a Federal officer or employee; and (c) appointed in the civil service by a Federal officer or employee.

These criteria have been incorporated into the statutory definition of employee in the codification of the personnel laws.

Whether an employer-employee relationship is created under the criteria is not discernible merely by adding up the separate elements. The criteria not only carry with them the traditional common-law and technical administrative definitions but also draw substance from the policy and purposes of the complex of laws bearing directly on Government employment.

The criteria must be realistically applied and the end-point determination reached on the basis of the overall substance of the contract operations. For the purpose of insuring compliance with the personnel laws, the Commission does not believe it possible to refine the criteria or weight their elements in applications so as to indicate the mere changes in form or terminology will meet the substance of the commission's objections.

If, in substantial effect, the contract results in a form of personnel procurement not expressly authorized by law, it is proscribed by the personnel laws.

Commission Counsel held that employees of the two firms, in providing services in performance of the contracts under review, are engaged in the performance of a Federal function which is being conducted under authority of law; that they perform duties under the direction and supervision of Federal officers and employees; and that in actuality Goddard officials have the power to, and do, direct and control the manner in which they perform their services.

If support services contracting in an integral part of Goddard operations required “to accomplish the NASA mission assigned to its various organizational

divisions, it necessarily follows that contractor personnel are performing the regular work of the agency," the Counsel continued. Since the members and required skills of personnel required are identifiable in terms of man years, it seems clear that what Goddard has done in this situation is to create Federal positions."

The Commission Counsel held that (1) Goddard officials retain the power to select key personnel ; (2) Federal positions have been created and are occupied by contractor-supplied personnel; and (3) the retention of a substantial number of employees in continuing positions at Goddard under different contractors negates any real selection of these individuals by the contractor.

Viewed in the light most favorable to NASA, we are at the very least confronted with a situation which has resulted in a delegation to a private corporation of the right to select necessary personnel to perform the functions of the agency,” CSC Counsel said. Under 5 U.S.C. 302, this authority may be delegated only to subordinate officials of the agency. NASA has no legal authority to (ontract for personal services without regard to the personnel laws.


Commission investigation showed that in June 1967 there were approximately 2,500 contractor employees serving at Goddard which included those supplied by the contracts under review. Specific information in terms of the number of people working in any one position or in any one group of positions was not obtainable. It was determined, however, that the majority of contractor employees provides trades, labor, and technical support services and that relatively few are physical scientists and engineers.

The Commission's Bureau of Recruiting and Examining, after a review of the situation reported:

Generally we either have or could readily provide examination coverage for the kinds of positions we have been able to identify as occupied by contractor employees. ... The labor market situation for skilled tradesmen, and technical and professional personnel is such that all agencies in the Washington area are required to take positive recruitment action in order to meet their staffing needs. ... With aggressive recruiting by the Goddard operating and personnel officials, we see no reason why the Civil Service examining system cannot supply Goddard with the kind of people now working their (sic) under contract.


The Commission has been advised by NASA that it plans to rectify all violations and that if they cannot be remedied consistent with the intended independent contractor status of Melpar and EMR, all necessary action will be undertaken to have the involved functions performed by civil service employees. NASA officials have assured the Commission that personnel ceilings are not the causes of the contracting practices under review, and the Commission is informed by the Bureau of the Budget that additional ceiling can be provided to NASA where conversion is necessary.

In the absence of specific legislative authority to continue the contracts under review, the Commission General Counsel is of the view that orderly termination or conversion is required.

THE PERSONNEL LAWS AS AN EXPRESSION OF NATIONAL POLICY "All officers of the government, from the highest to the lowest, are creatures of the law and are bound to obey it.

"It is the only supreme power in our system of government, and every man who by accepting office participates in its functions is only the more strongly bound to submit to that supremacy, and to observe the limitations which it imposes upon the exercise of the authority which it gives." United States v. Lee, 106 U.S. 196, 220, 1 S.Ct. 240, 27 L.Ed. 171 (1882).

"No department of the government has any other powers than those thus delegated to it by the people." Hepburn v. Griswold, 75 U.S. (8 Wall.) 603, (1869).

In a government of delegated powers, where public office is a public trust, the authority to discharge official responsibilities reposes only in those persons duly appointed and vested by law with an office or employment. It is axiomatic that official authority can be delegated only to those properly appointed to exercise it. The Federal civilian service of the executive branch is in this aspect the personification of government by law; it is through the exercise of the powers of public office by Federal employees that the process of self-government is executed. The personnel systems prescribed by Congressional and Presidential authority constitute the exclusive methods of staffing this civilian service; of investing private persons with public authority.

The power to create Federal positions outside the civil service and personnel laws cannot therefore be implied; it exists only if expressly provided by the Congress. For a properly appointed official to create a relationship that by law must be regarded as an employer-employee relationship, in derogation of the laws and regulations controlling Federal employment in ultra vires. To the extent the exercise of official authority and responsibility is in actual practice delegated through such acts to private persons or corporations, there is an unlawful delegation or an abdication. To the extent such acts contravene the specific requires ments of the civil service laws they are illegal.

Consistent with the genius of our government, the personnel and related statutes embody certain essential principles which must be observed if our concept of democracy is to be preserved.

Without express statutory authority a government agency cannot accept donated services from an individual, even if freely given.' A contrary rule of law would contain the seeds of tyranny and chicanery. Conversely, a Federal employee cannot accept any supplementation of salary from private interests. To permit this would be to compromise integrity. A Federal employee cannot perform any service other than that for which his salary is appropriated by the Congress. To allow otherwise would permit unauthorized expenditures of public funds and confound accountability.8

Consistent with the notion that ours is a government of the people and by the people, the opportunity to gain public employment must be open to all-without regard to race, religion, color, national origin or political affiliation.

Consistent with the notion of a government for the people, only those whose character, fitness, and loyalty * are considered worthy of a public trust are deemed suitable, and only those willing to accept, under oath, the responsibilities of public service are appointed. Limitations imposed by law upon the individual's right to strike, political activity, and conflicting interests are strict but essention appurtenances to public office.

The classification law requires that governmental duties and responsibilities be identified and grouped into discrete positions, that positions be classified and that compensation be allotted on the principle of equal pay for equal work. The entitlement to a certain level of pay, to employee benefits, the evaluation of employee performance, accountability for public funds, government liability to third parties, employer-employee rights and obligations, and the ultimate legality of official acts are all affected by compliance or lack of compliance with the civil service and personnel laws."

In addition, certain national policies of inherent social value are prescribed in the personnel laws. That honorable service in the armed forces of the United States deserves recognition through veterans preference is one such policy. Nondiscrimination on the basis of race, creed, color, sex, national origin, or politics 12 is another. Official recognition and dealing with employee organizations conditioned upon a no-strike pledge is another.13 And economic security through retirement annuities for service or disability 14 is yet another.

1 R.S. 3679 (1875), 31 U.S.C. 665 (b). 2 18 U.S.C. 209

3 Art. 1, sec. 9. cl. 7, U.S. Constitution, R.S. 3678 (1875), 31 U.S.C. 82(c),628. Cf. Converse v. United States, 62 U.S. 462, 470 (1858).

4 5 U.S.C. 3333, 7311.
55 U.S.C. 3331, 7311.
65 U.S.C. 3333. 7311.
75 U.S.C. 7321-7327.
8 18 U.S.C. 201-219.

95 U.S.C. 5105-5115, 5 U.S.C. 5331, 5 U.S.C. 6301-6324, 5 U.S.C. 8701-8716, 5 U.S.C. 8901-8913, 5 U.S.C. 4301-4308, 28 U.S.C. 2647, see e.g., 26 Op. Atty. Gen. 363 (1907), 32 Comp. Gen 18

10 5 U.S.C. 3309-3319.

11 5 U.S.C. 7151. The policy of nondiscrimination applies to government contracttors also.

12 5 U.S.C. 3303.
13 Executive Order 10988, 3 CFR (1959-1963 Comp.).
14 5 U.S.C. 8331-8348.

It is these principles and policies that are disserved when personnel are unlawfully procured by means of contract to perform duties under circumstances that must under law be regarded as creating an employer-employee relationship with the government. This is particularly acute where the contractor supplies personnel who work on government premises, use government equipment, and are interspersed with and directed by civil service employees. There is, in such situations, an "interface" between the contractor's personnel system and all facets of the civil service system which is abrasive to employee morale, erosive of civil service laws and policies and destructive of efficiency and sound management.

For example, the government and private employer alike know the evils of nepotism, personal favoritism, and patronage, and the perils of incompetence. The civil service system has met this problem with the competitive examining process. This process has stood the test of time and has been effective for a myriad of occupations in all types of labor markets. A civil service examination rating is accepted as evidence of competence by private and public employers alike.

Contractors may also examine their job applicants but the quality of such examinations vary widely. Some of the contracts we have examined call for personnel "competent to perform the work,” or for "qualified" personnel. Standing alone, such standards are not especially meaningful. Where qualification standards are prescribed in contracts we find they are invariably civil service standards, sometimes slightly modified for the occasion. In our review of operations under contracts over the past two years, we often find in occupation after occupation, where both civil service and contractor employees are involved, that the assignments given civil service employees are the more responsible and difficult and require the greater skill.

In the matter of pay, such as incremental increases for superior performance,15 time in grade,1e and promotion practices, the use of contractor personnel sets up countervailing forces at the work site that derogate civil service objectives. Federal pay rates in the General Schedule are predicated on position classification principles. They are interrelated to provide orderly progression from one grade to another and designed to provide in-grade increases for performance at a satisfactory level of competence for periods of one year or longer.17 Although comparable pay with the private sector is the policy,18 Congressional action in prescribing General Schedule rates has resulted in compression at the higher levels, so that pay in the lower grades is comparable, and pay in the higher grades lower, than for private enterprise. Cash incentives are awarded only for special individual or group achievements.19 A minimum of one year must be served in grade before a regular promotion can be made to a higher grade.20 Wage board employees' rates are set at levels equal to average prevailing rates for the same level of skills in private industry in the area involved.* A wage board employee must be hired and compensated at established rates.

These compensation requirements of the public service do not necessarily bind the private contractor's pay, bonus, or promotion policies. For essentially the same work performed under the same conditions, for the same government, a contractor and civil service employee of comparable skill and proficiency may be compensated and promoted at substantially disparate rates. Both, however, are paid by the government, one directly, the other indirectly.

Overtime work and pay levels are also prescribed by law for the civil servant, 22 but subject only to individual contractor policies for the contractor employee. These on-the-job conditions lead to justifiable as well as fancied reasons for employee dissatisfaction. The disadvantage from the civil servant's perspective is often apparent. Where this is so, morale is depressed, motivation is dulled, performance is affected, and in the end the ability of the civil service to function efficiently and effectively is diminished.

Another adverse ramification of these disparities is that the government is in reality generating its own competition for scarce skills. The esoterics of space science and technology, for example, are the results of a national commitment

15 5 U.S.C. 5336.
16 5 U.S.C. (1958 ed.) 43 note; 65 Stat. 757, § 1310 (1951).
17 5 U.S.C. 5335.
18 5 U.S.C. 5301-5302.
19 5 U.S.C. 4501-4506.
20 5 U.S.C. (1958 ed.) 43 note ; 65 Stat, 757, § 1310 (1951).
21 5 U.S.C. 5341-5344,
22 5 U.S.C. 5541-5544.

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