the present mechanisms are adequate to prevent wage cutting that could occur, exploitation that could occur, under the present law? What are the problems that exist? Mr. MCCURDY. I am not aware of really serious problems that exist under the present law. There are many problems, but I am not aware of serious ones. I believe serious ones could occur under the proposed law. For instance, the proposed law would bring in the very high airline-type of wages at the cape that we have redressed by this recompetition. Senator TAFT. Have you had any other instances with NASA that you know of in which there has been a recontracting where a bidder came in on a service contract paying lower wages than the contractor previously paid? Mr. MCCRUDY. I would like to divide these into two types of cases. Remember that in the main, NASA's service contracts are on a cost basis rather than a fixed-price basis for a number of reasons: The work is technical, we never know exactly how much there will be, and we want the proper quality of people. When we have proposals that come in from people in a competition on a cost basis, they will propose what costs they are going to pay, but that does not mean that they are required to pay those costs. We have to pay what they actually incur, so we look at those cost proposals with a critical eye. We decide whether that fellow is actually going to be able to do that or not. If he comes in with something which we consider to be below the prevailing wages in the area, we do not believe his costs in general because we know from experience that sooner or later he will come to pay the prevailing wage if he is going to get people of the quality that we need for our job. So that is the basic redress in that case against what you would call wage cutting. The answer is simple, that under a cost type of contract you cannot get the type of people you want unless you pay the prevailing wage, because we are really asking for the work to be performed by the kind of people-largely technical people that we want to have on the job. In the case of the cape, that was different because these wages were covered by union contracts. We knew that if we took man A, we would have to pay according to his contract; and if we took man B, we would pay according to his; and, consequently, we did not have that uncertainty as to what the wages would be. I have to make these two groups, to answer your question. You have mentioned the Commission on Government Procurement studies including service contracts. Do you have any information as to when the report is expected? Mr. VECCHIETTI. It is due before the end of the year, Senator Taft. I do not know the exact date, but I know it is certainly before the end of this calendar year. Senator TAFT. Thank you, Mr. Chairman. The CHAIRMAN. Senator Stafford? Senator STAFFORD. No questions, Mr. Chairman. The CHAIRMAN. Back to the Cape Kennedy situation and the change of contract, the chairman of the board of county government that is in Brevard County, Fla.-testified in the House and stated that the wages went below the comparable wages in comparable jobs in the community with the new contract. He submitted a detailed table describing this. I thought you said it was otherwise, Mr. McCurdy. Mr. MCCURDY. Boeing installed a contract that they already had with something like 400 people working at the cape. They installed the same contract. The CHAIRMAN. All of our other testimony indicated that the wages for the workers went down, and this testimony of Commissioner Evans said they were below comparable jobs in private industry. I thought you said that under the new contract, wages then became comparable to private industry in the community. Commissioner Evans says that is not the case. Mr. MCCURDY. I can only tell you what I believe and pretty well know to be the case. Boeing installed the contract under which a large number of people were already working at the cape. Now, there have been individuals who may have ended up with less money than they were getting; indeed, people who were operating under the TWA contract had to come down to the Boeing rate, yes. The CHAIRMAN. No, I am not disputing the TWA rate was reduced by Boeing. My only question to you was whether that Boeing rate went below comparable rates for comparable jobs in the community. Mr. Evans, the chairman of the commission down there, said that they did. Let me ask you this. How do you from NASA go about wage surveys in the area? Do you do it? Does the Labor Department do it? How do you do your wage surveys in the Department so that you can make judgments and conclusions on your comparability? Mr. MCCURDY. You mean in the normal case? The CHAIRMAN. No, not the normal, at the cape. Mr. MCCURDY. We did not have to make a survey in this case because all of the proposers had actual union contracts. The CHAIRMAN. Then I will have to take this statement of Mr. Evans and put it in the record. Let me just tell you what it will show. This is Eastern Test Range we are talking about. Mr. MCCURDY. No, it is Cape Kennedy. The Eastern Test Range is Air Force. The CHAIRMAN. I see. Then we will deal with the Eastern Test Range. Mr. VECCHIETTI. Mr. Chairman, there they did negotiate, as I understand, a special agreement which was considerably below the prevailing wage rate. In our case, which was the earlier case, as Mr. McCurdy said, Boeing merely continued the rate that had been paid not only at the cape but nationwide. I think the two cases do get a little confusing. The CHAIRMAN. Thank you. MR. MCCURDY. Senator Williams, we have been roundly held up as wage cutters all over the place, and we do not really believe that that is justified. The CHAIRMAN. Senator Taft. Senator TAFT. Thank you, Mr. Chairman. Senator Williams just a minute ago asked what procedures or what standards you apply. Under the existing law, as I understand it, you have to look for the standards in the community. Mr. MCCURDY. Yes. Senator TAFT. You looked at this other contract that you said you already had with 400 employees. That was one standard you looked at? Mr. MCCURDY. Yes. Senator TAFT. How long had that been in effect? Mr. MCCURDY. That was a nationwide contract that Boeing has. It covers people in Seattle, the cape, wherever Boeing operates. Senator TAFT. Do you know what the expiration date is? Mr. MCCURDY. I do not know. It is a longstanding contract which has been renewed regularly. Senator TAFT. Do you know how recently the most recent wage increase had occurred under it? Mr. MCCURDY. I think Mr. Whitney may be the one to answer this. Mr. WHITNEY. Senator, that agreement did expire during the first year of the contract award. Boeing and the union negotiated a renewal of it during that time that provided for increases, and it will be interesting to the committee, I think, that the Pay Board then cut back those increases to perhaps a 60 or 70 percent of the negotiated increase. Senator TAFT. That is another question I wanted to ask. You are covered by the Pay Board, are you not? Mr. WHITNEY. The private contractors are covered by the Pay Board. Senator TAFT. Yes, that is what I was referring to. If this legislation were enacted, would you still be covered by the Pay Board? Mr. WHITNEY. As I understand the arrangements that the Labor Department has worked out with the Pay Board, the Pay Board defers to determinations that the Labor Department makes, so that we do have-you will recall during the period when Senator TAFT. You would not have that under the proposed bill? Senator TAFT. The question I asked related to the proposal that the rates be set by the prior contract. Mr. WHITNEY. Under the proposed bill, I would assume the legislation would take precedence over the Pay Board. Senator TAFT. Unless there were a prospective increase, you would already have approval by the Pay Board? Mr. WHITNEY. You will recall during the time there was an absolute freeze on wages, Senator, we still had the prevailing wage laws, and during that time the Pay Board agreed if the Labor Department established prevailing rates, then the companies could bring themselves up to those rates without violating the freeze. Senator TAFT. This is under the Davis-Bacon and Walsh-Healey? So now when we have a Pay Board granting increases, it would seem to me the Pay Board would be in an untenable position if it tried to overrule an increase mandated by the Labor Department under this bill. The CHAIRMAN. Thank you very much. At this point I order printed all statements of those who could not attend and other pertinent material submitted for the record. (The material referred to follows:) United States Senate COMMITTEE ON APPROPRIATIONS WASHINGTON, D.C. 20310 September 13, 1972 Honorable Harrison A. Williams, Jr. United States Senate Washington, D. C. Dear Pete: I strongly support S. 3827, a bill amending the Service Contract Act of 1965 to revise the method of computing wage rates for service employees. The Act as it stands has allowed repeated detrimental effects on contractor employees in Alaska through the years. Moreover, an impending contractor change in Alaska makes it particularly important that S. 3827 be favorably reported out of committee as soon as possible. With best regards, Cordially, bel ED STEVENS United States Senator ING B-151261 COMPTROLLER GENERAL OF THE UNITED STATES September 15, 1972 The Honorable Harrison A. Williams, Jr. Chairman, Committee on Labor and Public Welfare Dear Mr. Chairman: koference is made to your letter of August 10, 1972, requesting our comments on H.R. 15376. This bill would amend the Service Contract Act of 1965 to revise the method of making wage rate determinations under such Act, and to make various other revisions in the administration of the Act. To the extent that the bill would require union wage rates to be paid on Federal service contracts under certain circumstances, irrespective of whether these rates prevail in the locality, and would allow prospective increases in wages and fringe benefits to be considered in determining such wage rates, the bill's provisions represent a radical departure from the basic concept of other Federal wage legislation, such as the Walsh-Healey Act and the Davis-Bacon Act. We believe such provisions, if enacted, would significantly increase Government costs under service contracts and would tend to diminish the competition which other Federal procurement laws are designed to encourage. We believe that the bill needs to be clarified in certain respects, and that there are certain of the ramifications in the bill which may not be readily apparent. We therefore offer the following comments. Section 1 of the bill requires that where a collective-bargaining agreement covers "such service employees," the minimum wage rates determined by the Secretary of Labor for incorporation into the proposed service contract be in accord with, the rates provided in the collective bargaining agreement. This section also permits the Secretary to include in his determination prospective wage increases provided for in the collective bargaining agreement and requires that determinations of fringe benefits be handled in the same manner as wage rate determinations. 82-582 O 729 |