(e) It would very probably limit competition and increase the costs of materials.

(f) It might cause unfavorable public reaction to the law as a whole. It is believed that the disadvantages of the proposed amendment far outweigh the advantages.

It is not practicable to make an estimate of the probable costs or savings under the bill S. 1032. It is recommended that the bill do not pass.

Senator WALSH. Thank you. The other representative of the Navy will come forward, please.

Commander M. L. Ring, Supply Corps, United States Navy?
Commander RING. Yes, sir.

Senator WALSH. Commander Ring, we will be pleased to hear from you.

STATEMENT OF COMMANDER M. L. RING, SUPPLY CORPS, UNITED STATES NAVY

Commander RING. Mr. Chairman, I have no prepared statement but simply in support of the views of Captain Fisher I would like to point out to the committee the very serious situation caused by the possible delay of procurement of urgently needed articles by our field activities.

In the Bureau of Supplies and Accounts of the Navy Department we take upon ourselves the burden of purchasing all those articles which seem likely to present the most difficulty. That we do for the very good reason that we have the chance to consult with the Comptroller General, with the executive departments, the Labor Department notably.

The difficult contracts are of course those which contain the most stipulations, the most requirements of law.

Captain Fisher mentioned nine laws which affect most Government contracts. I would like to point out that our whole Government purchasing system is made up of something over 220 separate statutory enactments which we must follow, must observe, in Government purchasing.

As a general rule the Navy Department delegates to its field purchasing activities, the procurement authority for purchases less than $5,000 in amount. Our field purchasing activities do not attempt to secure the wide competition that is mandatory upon the Bureau of Supplies and Accounts.

Two things, as I see it, can happen, due to the lowering away of the effective monetary limit of the Walsh-Healey Act from $10,000 to $2,000. One is that either the field purchasing activities must take the same length of time and go through the same difficulties that we do in the Navy Department in purchasing, thereby necessarily lengthening the time of purchase; or must ask us in the Navy Department, because of our better facility for handling the more complicated matters, to take on the added burden of these smaller contracts. In a great many cases in connection with ship construction, despite the best planning that the Navy can do, unforeseen and unforeseeable emergencies arise which require quick action on the part of supplies of material.

The Navy Department believes that anything which will tend to increase the difficulties of the smaller purchases must necessarily slow down the procurement of those essential materials.

I believe that is all I have to say, sir.

Senator WALSH. You are familiar with section 6 of the original act? Commander RING. Yes, sir.

Senator WALSH (reading):

SEC. 6. Upon a written finding by the head of the contracting agency or department that the inclusion in the proposal or contract of the representations or stipulations set forth in section 1 will seriously impair the conduct of Government business, the Secretary of Labor shall make exceptions in specific cases or otherwise when justice or public interest will be served thereby. Upon the joint recommendation of the contracting agency and the contractor, the Secretary of Labor may modify the terms of an existing contract respecting minimum rates of pay and maximum hours of labor as he may find necessary and proper in the public interest or to prevent injustice and undue hardship. The Secretary of Labor may provide reasonable limitations and may make rules and regulations allowing reasonable variations, tolerances, and exemptions to and from any or all provisions of this Act respecting minimum rates of pay and maximum hours of labor or the extent of the application of this Act to contractors, as herein before described. Whenever the Secretary of Labor shall permit an increase in the maximum hours of labor stipulated in the contract, he shall set a rate of pay for any overtime, which rate shall be not less than one and one-half times the basic hourly rate received by any employee affected.

Has the Navy Department ever had occasion to make application to the Secretary of Labor, to take advantage of the provisions of that section?

Commander RING. Yes, sir. I think possibly Mr. Walling will give you exactly the same answer that I do, on that.

At the beginning of the effective period of the act, September 28, 1936, a great many difficulties early appeared in the administration of the act as far as the execution of contracts was concerned.

The Navy Department-and, I presume, other Government departments-made representations of these difficulties to the Department of Labor. I don't have before me, sir, the actual number of cases. I do not know of any exemptions granted by the Secretary of Labor. It was possible in many cases to work out the problem through other means than the granting of a formal exemption. I think that Mr. Walling would be better able to answer that question from the viewpoint of the Department of Labor, than I from the Navy Department, sir.

Senator WALSH Certainly it would appear to be made clear that in the interest of national defense action should be taken to modify or change or limit the provisions of this law, and that in such a situation one would expect favorable action, would they not?

Commander RING. I recall a good many cases with regard to basic commodities, such as copper and zinc and steel, in the early part of the administration of the act, where a considerable delay occurred.

In the case of copper, the Navy advertised three times for bids on copper. The situation finally became so acute that what was done was to purchase under the emergency statute, which permits us to purchase without advertisement, and therefore without the application of the act to the purchase. This was done after three attempts had been made to procure the copper under the regular form of advertisement.

Senator WALSH. Have such experiences been somewhat responsible for the claim made of delay in the naval construction program?

Commander RING. That did delay it. The situation, particularly at the navy yard at Portsmouth, N. H., and at the navy yard here in Washington, became most acute.

Senator WALSH. Would you favor a provision giving this power to the President, rather than to the Secretary of Labor, the President who is both the Commander in Chief and head of the executive departments of the Government?

Commander RING. Well

Senator WALSH (interposing). You need not answer unless you

want to.

Commander RING. That is a question of policy, sir, that I would not like to commit the Navy Department on, sir, if you will excuse me. Senator WALSH. Very well. Thank you.

Senator HILL. In connection with the suggested amendment dealing with collective bargaining, I have a short memorandum explaining that amendment that I would like to put into the record.

Senator WALSH. It will be inserted at this point. (The document referred to is as follows:)

MEMORANDUM

Re Proposed amendment to S. 1032.

(1) The present Walsh-Healey Act authorizes the Secretary of Labor to fix a prevailing minimum wage for the industry which is to supply goods and supplies under contracts with the United States Government. The statute further provides that any corporation with a Government contract which violates the stipulation regarding the payment of prevailing minimum wages shall be placed on an ineligible list and may not for three years thereafter, unless the Secretary otherwise recommends, bid for any Government contracts.

(2) The proposed amendment would add to such list all corporations which are held by a court in a final adjudication to have violated the rights of labor to organize into unions of their own choosing for collective bargaining.

(3) The proposed amendment does not invoke any new or novel policy. It is already the law of the land that workers shall enjoy the right to organize into unions of their own choosing for the purpose of collective bargaining. This amendment merely reiterates such policy.

The enforcement of this policy is the surest guaranty that the production of supplies for the Government will be maintained without any interruption due to industrial disputes. The stable and peaceful relationships enjoyed by corporations when they enter into collective bargaining arrangements with unions are to be compared with the disturbed and chaotic conditions in the plants of corporations who have refused to enter into any such relationships.

It is desirable that this policy be enunciated in order to assure the workers of the country that insofar as the Government purchases are concerned their rights to organize and to bargain collectively through their unions will be maintained. We must give assurance to the workers that private industries engaged in manufacturing and furnishing supplies for the Government will not be permitted under any pretext to flout such fundamental rights of labor.

(4) No excessive burden is being placed upon the manufacturers who will obtain the Government contracts through the enunciation of the policy incorporated in the amendment. This policy is nothing other than the present law of the land and does not initiate any novel or new prniciple.

Statutory precedent for this procedure can be found in 11 U. S. A., section 205, subdivisions (p) and (q) where it is provided that in railroad reorganizations the rights of labor to organize and be free from so-called company unions and may not compelled to sign any "yellow dog" contract. Similar provisions for the protection of the rights of labor were incorporated in the Chandler Act for corporate reorganization enacted by this Congress at its last session.

Many provisions protection labor are now made requirements for Government contracts. For instance, employers are required to comply with Federal and local safety laws for labor and also to carry employer's liability insurance and maintain workmen's compensation. This provision will merely assure labor of protection in regard to their right to organize.

(5) The policy covered by the proposed amendment was recommended by the special committee of the House headed by Representative Shannon of Missouri, in its report on Government Competition with Private Enterprise in 1933. (H. Rept. No. 1985, 72d Cong., 2d sess.) This report urged that private firms getting Government contracts "must demonstrate their conformity with public policy as to their industrial relations" and "(c) Organization-no contract shall be let to any organization, plant or establishment, in which it is made a condition of employment that the workers engaged therein shall not belong to, or remain or become a member of, a labor organization, or in which workers shall be denied the right to bargain collectively, should they chose to do so, through representatives selected by them."

"In brief: The committee believes that the Government, as the largest purchaser of goods in the Nation, should not sacrifice the welfare of workers to the sole consideration of economy. On the contrary, we feel that the Government has a distinct obligation to set standards which shall maintain and even improve the ability of workers to buy the products of a mechanized civilization."

(6) This proposed amendment eliminates all the arguments that were aimed at previous attempts to obtain similar remedial legislation. For instance:

(a) This proposed amendment, as distinguished from other attempts made last year and the Barkley amendment will not place any person on an ineligible list until after a court of final jurisdiction has held the corporation to be in violation of labor's rights to organize, etc.

(b) No new ineilgible list is created but merely includes violators of labor's rights on the ineligible list already established under the Walsh-Healey Act.

(c) In regard to corporations who have a monopoly and whose supplies the Government may need for emergencies, etc., the Walsh-Healey Act already provides that the Secretary of Labor may recommend for emergency reasons or in the public interest or otherwise, that persons on the ineligible list be permitted to bid for specific Government contracts or be entirely taken off the list.

Senator WALSH. Mr. Walling, would you like to make any comment with reference to the last question I asked?

Mr. WALLING. I would be very glad to.

I also want to present a statement by the Secretary of Labor, and a technical draft of amendments which Mr. Reilly, the Solicitor, who had unfortunately to leave for another appointment, asked me to present.

Senator WALSH. They may go into the record. I thought probably that Mr. Reilly would be more useful to the committee after we had heard a good deal of the evidence and some of the objections, so that we could get his views with reference to them. That is why I didn't call on him earlier this morning.

I think Mr. Reilly prepared for me a statement showing the differences or the changes made in this law, from the basic law, did he not, at one time?

Mr. WALLING. I think he probably did. Whether they bore on these amendments or the ones a year ago, I am not sure, I think it was last year's amendments.

Senator WALSH. I would like such a parallel column contrast made covering this year's amendments, for the convenience of the committee.

Mr. WALLING. Yes sir.

(The documents submitted by Mr. Walling were as follows:)

Hon. ELBERT D. THOMAS,

United States Senate, Washington, D. C.

MARCH 15, 1939.

DEAR SENATOR THOMAS: You have requested the opinion of this Department concerning S. 1032, entitled "A bill to amend the act entitled 'An act to provide conditions for the purchase of supplies and the making of contracts by the United States' and for other purposes.'

148441-39-4

This bill amends the act popularly known as the Walsh-Healey Act or the Public Contracts Act. Section 1 of the act is amended to extend its jurisdiction to contracts in excess of $2,000 instead of $10,000 and to subcontractors as well as contractors. There is also added to the criteria for determining the prevailing minimum wages a consideration of the reasonable costs of board, lodging, and other facilities when customarily furnished. A minimum age of 16 years is set for both sexes instead of 16 for males and 18 for females as now provided, and a minimum of 18 years is set for both sexes in hazardous occupations. Compliance with the terms and conditions of the act and rules and regulations issued thereunder is to be required of subcontractors as well as contractors. Section 2 of the act is amended to increase the liquidated damages for under-payment of wages to double damages for the second violation and treble damages for subsequent violations. To section 7 of the act there are added definitions of the terms "supplies" and "subcontractor." Supplies includes materials, articles, vessels, equipment (including floating equipment) and services in any form excepting professional services. To section 11 there is added the proviso that the amendments shall apply to contracts entered into pursuant to invitations for bids issued on or after 90 days from the effective date of the bill.

The substance of all of these amendments have been found necessary by the Administrator of the Public Contracts Act during the past 2 years. The act in its present form permits in some cases an evasion by the use of subcontractors and in other cases an unfair competitive advantage to contractors using subcontractors.

For instance, in the textile industry it is customary for many contracts to be made between the Government and dealers or converters who make subcontracts with the manufacturer or finisher who in turn delivers cloth to the warehouse of the converter and whose manufacturing or finishing operations are thereby not subject to the provisions of the act. The jurisdiction of the act over textile contracts has been materially cut down by this legal avoidance of jurisdiction. The integrated mill which customarily bids directly is required to comply but its competitor who happens to be able to deal with the Government through the medium of the converter is free from jurisdiction, and unfair competitive conditions are actually being promoted by the present language of the act.

The present act also fails to cover the great bulk of Government purchases in contracts between $2,000 and $10,000 and the adaptation of industry and Government agencies to the present act will now permit its extension to additional contracts without much difficulty. Convenience in administering the act calls for an equalization of the child labor ages with the possibility of considering sex differences in the case of hazardous employment. Doubts in the prevailing situation will be eliminated by the express requirement of compliance with the rules and regulations of the Secretary of Labor and by the definition of supplies. Additional effectiveness in enforcement will be accomplished by the provision of punitive damages for repeated violations of the act.

With respect to the form of the amendments relating to subcontractors, however, I wish to make a suggestion. In the present form it is contemplated that a contractor will stipulate that subcontractors will comply with the representations and stipulations required by section 1. In the absence of further implementing provisions it seems to me that enforcement of this provision will be very difficult.

Consequently, I suggest that all reference to subcontractors be deleted from the bill and that there be included in section 1, as subsection (h) thereof, a new stipulation in effect requiring that the contractor will, upon entering into any subcontract for the supplies specifically required by the contract, file with the Secretary of Labor certificates executed by such subcontractors, which certificates shall contain the same representations and stipulations required of the principal contractor. I further suggest that the provisions of the amended section 2 be designated as subsection (a) of section 2, and that there be added a new subsection (b) providing in effect that violations of any of the representations and stipulations contained in the certificates to be executed by the subcontractors shall subject the subcontractors to the provisions of subsection (a) of section 2.

In this way, it seems to me, the sound objective of reaching subcontractors will be implemented in a practical and enforceable way. Primary liability for the breach of substantive requirements by subcontractors is thus placed upon the subcontractors, themselves, and not primarily on the contractors. However, in order to achieve practical enforcement the Government is permitted to withhold from contractors liquidated damages resulting from violations by subcontractors, as well as for violations by the contractors, themselves. This will work no hardship on contractors, since they may be expected to withhold payment from subcontractors