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The Congressional policy manifest in the (National Labor Re-
lations) Act is to enable the parties to negotiate for any
protection either deems appropriate, but to allow the balance
of bargaining advantage to be set by economic power realities.
Strife is bound to occur if concessions which must be honored
do not correspond to the relative economic strength of the
parties. (40 U.S. Law Week at 4504)

That the imposition of the collective bargaining agreement of the predecessor on the succeeding contractor might encourage less than arm's length negotiation was recongized by the National Labor Relations Board, the agency of recognized expertise in the labor-management field, in Emerald Maintenance, Inc., 188 NLRB No. 139 (1971). The Supreme Court in specifically relying upon the Board's expertise; stated:

"The Board held that the employer had a duty to recognize and
bargain with the union (in Emerald Maintenance) but could not
agree with the trial examiner that the employer was bound by
the provisions of the collective bargaining contract.... The
Board noted, 'This case suggests the hazards of enforcing the
contracts of one employer against a successor where annual
rebidding normally produces annual changes in contractual
identity. These circumstances might encourage less arm's
length collective bargaining whenever the employer had reason
to expect that it would not be awarded the next succeeding
annual service contract.'" (40 U.S. Law Week at 4505)

The Boeing Company suggests that total security as a service contractor, in that the incumbent service contractor will set the wage rates and fringe benefits which will control the bids of all competitors, will likewise lead to less than arm's length collective bargaining.

A further shortcoming in the proposed amendments is that it possibly restricts the right of a bidder to realign the work or propose new methods of accomplishing the service required. Specific reference is made to the proposed amendment Section 2(a) (1) of the Act, which requires bidders to pay rates and fringes set in the collective bargaining agreement, and to Section 4 of the Act which will require bidding contractors, where substantially the same services are to be furnished, not to pay service employees less in wages and fringe benefits than he would have been entitled to receive but for the change in contractors. If the same ultimate service is to de

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endered, it would appear that prospective bidders may be prohibited from proposing ew or improved methods of performing the task because they are locked in by the vages paid by the incumbent contractor. Does Congress, by enacting the proposed mendments, truly intend to eliminate the possiblity of introducing new work allignments or procedures by requiring maintenance of existing wage rates simply because substantially the same service (goal) will be performed?

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2.

SERVICE CONTRACT EMPLOYEES AND THE UNIONS WHICH
REPRESENT THOSE EMPLOYEES ARE PROTECTED UNDER THE
TERMS OF THE CURRENT SERVICE CONTRACT ACT PROVIDED
THE DEPARTMENT OF LABOR IS ADEQUATELY FUNDED AND
STAFFED TO CARRY OUT THE INTENT OF THE ACT.

The argument is made that service contract workers, together with the unions representing those workers, need further protection that would be provided by requiring bidders to pay either the rates set forth in the collective bargaining agreement or, presumably in the absence of such collective bargaining agreements, not to pay less in wages and fringe benefits than were paid by the predecessor contractor. Such an argument is fallacious for two reasons.

First, on most if not all service contracts that are competitively bid, bidders are required to explain the impact of their proposal on the local community and the local labor market. Failure to adequately consider this

problem can and has resulted in elimination from consideration for contract award.7

The second reason is that unions are in a position to protect both themselves and the individuals they represent. Witness the recent bidding at the Air Force Eastern Test Range at Cape Kennedy. The prior contract between the Air Force and Pan American was a 78 million dollar annual contract. Through recompetition, Air Force will receive the same basic services for approximately 35 million dollars annually savings of over 40 million dollars to the taxpavers.

a net

Pan American

7.

As a specific example, Pan American World Airways was eliminated from consideration at the Kennedy Space Center for the reason that they failed to minimize the impact of their proposal upon the incumbent work force and the incumbent unions. See Hearinas Before the Special Subcommittee, ibid, p. 248.

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and the unions representing its employees entered into collective
bargaining agreements reducing the rates paid to Pan American
employees. What rates were agreed upon? For the most part,
Pan American and the unions reached agreement to pay the rates
set in a recently conducted wage determination in Brevard County.
Those were not "poverty" or "starvation" rates. In fact, recent
figures from the Sales Management Magazine, Florida State Chamber
of Commerce, show that Brevard County residents have the highest
"effective buying income" in the State of Florida - $11,684 per
household more that $1,000 ahead of its nearest competitor county.
It must be recognized that, had the proposed legislation been in
effect at the time of the Eastern Test Range recompetition, there
would have been no wage reduction agreement between Pan American
and its principal unions, thus preventing realignment of wages
to be consistent with local prevailing rates as determined by the
Department of Labor.

3.

REQUIREMENT FOR THE PAYMENT OF ACCRUED BENEFITS AND,
IN MANY CASES, CURRENT BENEFITS ARE UNWORKABLE.

The last specific problem to be addressed is that portion of the proposed amendments requiring bidders to pay "accrued wages and fringe benefits." In the broad category of accrued benefits fall pensions, profit sharing, stock options, etc. Given a literal reading, would this legislation not require, for example, The Boeing Company as a successful bidder, to contribute to the profit sharing plan of the predecessor or grant stock options in the predecessor corporation? Or what about pension plans. How could a successful bidder make an employee whole for his pension loss, recognizing that pensions are not portable.

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Consider present benefits.

One of the benefits granted by TWA

at the Kennedy Space Center and Pan American on the Eastern Test Range was free airline travel. Is The Boeing Company or any other bidder for example Dynalectron required to furnish free world

wide travel simply because that was a fringe benefit provided by the predecessor?

While The Boeing Company is hopeful and indeed confident it is not the intent of this Committee nor of the House of Representatives to place burdens of this type upon succeeding contractors, the clear language of the proposed amendments is to the contrary.

The Boeing Company therefore respectfully suggests that further consideration be given to the proposed amendments. If indeed amendments are necessary, 8then consideration should be given to the draftin of an amendment which not only gives the added measure of protection to the service contract employee but also promotes the concept and practice of competitive bidding on service contracts, free from the imposition of impossible conditions and requirements upon succeeding employers.

8. The Boeing Company agrees with the Department of Labor that no further amendments are necessary. Rather, adequate funding and the resulting enforcement of the current law would provide sufficient protection to service employees.