It is our understanding that the phrase "such service employees" as used in section 1 of the bill is intended to refer only to those employees who are, at the time the Secretary issues his wage rate determination, currently performing the same services which are to be performed under the follow-on contract. However, the phrase can also be construed to include any service employees of the same type who may be covered by a collective bargaining agreement in performing non-governmental work in the locality, and such a construction would appear to be justified since the phrase "such employees" in subsections 2(a)(1) and (2) of the act as presently constituted does include service employees working on non-governmental work. Under such a construction the phrase "such service employees" in the bill would require the Secretary to adopt any wage rate specified in a collective bargaining agreement covering service employees in the locality, irrespective of whether there was a predecessor contract on which such rate was being paid, or whether such rate was in fact the prevailing rate being paid in the locality. If such is not intended, we suggest that the words "service employees currently performing the work for which the contract is to be awarded" be substituted for the words "such service employees" in lines 3 and 12, page 5, of the bill. Conversely, if the intent of section 1 of the bill is to require the same rates to be paid on all Federal service contracts as are being paid under a collective bargaining agreement in the locality for similar work, the section should be revised to clearly require this. In that event, however, we suggest that guidance should be provided in the bill as to how the Secretary is to select a rate when more than one collective bargaining rate is being paid in a locality. Section 2 of the bill requires that there be added to the required contract provisions specified in section 2(a) of the Service Contract Act, a statement of the rates which would be paid to the various classes of service employees under section 5341 of title 5, U.S.C., if such section were applicable to them. This section also directs the Secretary to give due consideration to such rates of pay in determining minimum monetary wages and fringe benefits. The purpose of listing Federal wage board rates in service contracts is not clear, but apparently these rates would have no binding effect on the contractor. We believe that having two sets of rates listed in the contracts (i.e., the wage board rates and the minimum rates determined by the Secretary under section 2(a)(1) of the act) could be confusing to contractors, and we therefore suggest consideration be given to its deletion. Additionally, we suggest that the bill be revised so as to indicate how the Secretary should consider wage board rates in determining minimum wages to be paid, especially in situations where he would be required to specify collective bargaining rates under section 1 of the bill. The new subsection (c) which would be added to section 4 of the act by section 3(b) of the bill, deals with contracts under which substantially the same services are furnished and which succeed contracts subject to the Service Contract Act. Contractors and subcontractors under such contracts would be required to pay service employees at least the wages and fringe benefits (including accrued wages and fringe benefits) to which the service employees would have been entitled had they been employed under the predecessor contract. If the Secretary elects, the new contractor would also be required to pay any prospective wage and fringe benefits increases provided for in a collective bargaining agreement to which the service employees would have been entitled under the predecessor contract if such prospective increases were the result of arms-length negotiations. We assume that the intent of this section, in specifying wage increases resulting from arms-length negotiations, was to preclude an incumbent contractor from raising his employees wages during the last days of his contract, in order to force his successor to pay these wages. If this is correct, we suggest that the bill should identify the parties, including the contracting agency, who could question whether the wage increases were the result of arms-length negotiations, and the appeal procedures available to such parties. Additionally, we question whether there will be any incentive for true arms-length negotiations by an incumbent contractor, since all of his competitors on any follow-on contract will be required to adopt the incumbent's wage rates in computing their bid prices. Subsection 3(b) of the bill also adds a new subsection (d) to section 4 of the act. This new subsection would permit service contracts to be for any term of years not exceeding 5, subject to annual appropriation acts, if each contract provided for future redeterminations of the minimum wages to be paid to service employees. These redeterminations would have to be made no less often than every two years. It would seem to us to be unlikely that a contractor would enter a fixed price contract for a period longer than that covered by a firm determination of the minimum wages he will be required to pay, unless there was also some provision in the contract for the price to be changed in accordance with changes in the minimum wage determination. If such changes in contract prices are intended, we believe the bill should so indicate. INTERNATIONAL BROTHERHOOD OF TEAMSTERS OF AMERICA 25 LOUISIANA AVENUE, N.W. • WASHINGTON, D.C. 20001 OFFICE OF FRANK E. FITZSIMMONS. GENERAL PRESIDENT August 16, 1972 The Labor Subcommittee of the Committee on Labor and Public Welfare is presently holding hearings on amendments to the Service Contract Act of 1965. The amendments contained in H.R. 15376 would strengthen the administration of the Service Contract Act and provide for wage and fringe benefit determination over a six-year period for all government contracts subject to the Act. We feel these amendments are necessary and long overdue. Testimony in the House of Representatives revealed that a substantial disparity exists between wages and fringe benefits for federal Wage Board employees and their counterparts employed by service contractors. This discrimination is unfair and H. R. 15376 does a considerable amount in correcting these and other problems currently evidenced with the Service Contract Act. We urge your support of the bill and encourage whatever effort you may be able to extend in assuring its passage. Sincerely, FEF:mn Frank E. Fitzsimmons |