until they (the contractors) have received payment from the Government. Effective enforcement will thus be achieved and at the same time injustice to contractors will be avoided. It is not the intention of the amendments to subject to the jurisdiction of the act all subcontractors with whom the contractor may have relationship, as it is recognized that there are many purchases of routine supplies out of stock-for example, screws, buttons, etc.-which are technically subcontractual in nature but which are not so closely tied up with performance of the particular contract in question that they must be brought within the jurisdiction of the act. The department recognizes that there is merit to the contention that only those subcontracts which are entered into pursuant to the requirements of the principal contract or which are entered into in order to evade the obligation of the contractor should be made subject to the act, and it is believed that the suggested language achieves this and without imposing an unfair obligation on the contractor and subcontractor or an administratively unworkable burden on the department. I also call your attention to what appears to be an inadvertent omission in the provisions of section 2 (line 3, p. 4). You will note that, in terms, liquidated damages are imposed in respect of violations of the 16-year provision but not for violations of the 18-year provision. Consequently I suggest that line 3, page 4 be deleted and that there be substituted therefor the following language: "person under sixteen years of age or each person under eighteen years of age employed in any occupation or industry which the Secretary of Labor has determined to be hazardous or injurious to the health of such person or each convict laborer." I also suggest that the language of section 1, line 6, page 2, be deleted and that there be substituted therefor the following: "of supplies in an amount in excess of $2,000 and shall be". In addition, I wish to suggest one amendment of especial importance and two clarifying amendments to the Public Contracts Act. Consistent with the public policy underlying the Fair Labor Standards Act of 1938, it seems to me extremely desirable that the same floor be placed under wages in the field of Government supply contracts that has been placed under wages in the field of activities in or affecting interstate commerce. To this end it seems to me desirable that an amendment to the Public Contracts Act be adopted which will provide that in no case shall the prevailing minimum wages as determined by the Secretary of Labor in any industry be less than the minimum wage required to be paid by employers subject to section 6 of the Fair Labor Standards Act of 1938 to employees in the particular industry or industries, or branches thereof, and that upon any increase in the applicable minimum wage required to be paid by employers subject to section 6 of the Fair Labor Standards Act of 1938, Government contractors stipulate that they will pay their employees such increased minimum wage. In view of the suggestions regarding the method for handling the subcontractor situation it will no longer be necessary to preserve the definition of subcontractor contained in subsection (c) of the amended section 7, and I therefore suggest the deletion of that subsection. In order to remove any possible conflict between the Federal 8-hour law and the Public Contracts Act I suggest the addition of a new section 12 as follows: "SEC. 12. In respect of all contracts subject to the provisions hereof, the provisions of this act and of any regulations of the Secretary of Labor issued hereunder shall be deemed to be controlling, anything in the provisions of section 1 or section 2 of chapter 174 of the act of June 19, 1912 (37 Stat. 137), or of any other act to the contrary notwithstanding." I also suggest the addition of a new section 13 as follows: "SEC. 13. This act may be cited as the Public Contracts Act." In order to avoid confusion I am attaching hereto a redraft of amended sections 1 and 2 incorporating the further amendments which I have suggested to these sections. You will note that the redrafted section 1 carries forward the language contained in the amended section 1 regarding the problem of deductions. This language is in substance the same as the language on the same subject contained in section 3 (m) of the Fair Labor Standards Act of 1938. However, the application of this provision in the Fair Labor Standards Act has already given rise to considerable administrative difficulty, and in view of the fact that numerous labor organizations have raised objection to the provision allowing deductions of any kind, I believe your committee should give especial consideration to the desirability of introducing similar provisions into the Public Contracts Act. Sincerely yours, THE SECRETARY. SUGGESTED AMENDMENTS SECTION 1. That in any contract made and entered into by any executive department, independent establishment, or other agency or instrumentality of the United States, or by the District of Columbia, or by any corporation all the stock of which is beneficially owned by the United States (all the foregoing being hereinafter designated as agencies of the United States) for the manufacture or furnishing of supplies in any amount in excess of $2,000, there shall be included the following representations and stipulations: (a) That the contractor is the manufacturer of or a regular dealer in the supplies to be manufactured or used in the performance of the contract; (b) that all persons employed by the contractor in the manufacture or furnishing of the supplies required under the contract will be paid not less than the minimum wages as determined by the Secretary of Labor to be the prevailing minimum wages for persons employed on similar work or in the particular or similar industries or groups of industries currently operating in the locality in which the supplies are to be manufactured or furnished under said contract, such minimum wages as determined by the Secretary of Labor in no case to be less than the applicable minimum wages required to be paid by employers subject to section 6 of the Fair Labor Standards Act of 1938 (52 Stat. 1060) to employees in the particular industry or industries, or branches thereof, for which such minimum wages are being determined; (c) that if the applicable minimum wage required to be paid by employers subject to section 6 of the Fair Labor Standards Act of 1938 to employees in the particular industry or industries or branches thereof shall be increased prior to the performance or completion of performance of the contract, all persons employed by the contractor in the manufacture or furnishing of the supplies required under the contract will be paid not less than such increased minimum wage from and after the date such increase shall be effective under the Fair Labor Standards Act of 1938; (d) that no person employed by the contractor in the performance of the contract for supplies shall be permitted to work in excess of 8 hours in any 1 day or in excess of 40 hours in any 1 week; (e) that no person under 16 years of age and no convict labor will be employed by the contractor in the performance of the contract for supplies, and that no person under 18 years of age will be employed in any occupation or industry which the Secretary of Labor has determined to be hazardous or injurious to the health of such persons; (f) that no part of the contract for supplies will be performed in any plants, factories, buildings, or surroundings, or under working conditions which are insanitary or hazardous or dangerous to the health or safety of the employees engaged in the performance thereof. Compliance with the safety, sanitary, and factory-inspection laws of the State in which the work, or part thereof, is to be performed, shall be prima facie evidence of compliance with this subsection; (g) that the contractor will comply with all the terms and conditions of this act, including any and all rules and regulations in force and effect; (h) that the contractor will, on or before entering into any contract with any person for the manufacture or furnishing to him or to the contracting agency of the United States, whether directly or through any middleman or broker, of all or any part of the supplies specifically required under the contract in any amount in excess of $2,000, file with the Secretary of Labor a certificate or certificates executed by each person with whom he proposes to or has entered into such contract, which certificates shall contain the same representations and stipulations required of the contractor. SEC. 2. (a). That any breach or violation of any of the representations and stipulations in any contract for the purposes set forth in section 1 hereof shall render the party responsible therefor liable to the United States of America for liquidated damages, in addition to damages for any other breach of such contract, the sum of $10 per day for each person under 16 years of age or each person under 18 years of age employed in any occupation or industry which the Secretary of Labor has determined to be hazardous or injurious to the health of such person or each convict laborer employed in the performance of such contract, and a sum equal to the amount of any underpayment of wages due to any employee engaged in the performance of such contract, and for the second breach or violation double such amount due any employee, and for the subsequent breach or violation treble such amount; and, in addition, the contracting agency of the United States shall have the right to cancel the original contract with the contractor and to make openmarket purchases or to enter into other contracts for the completion of the original contract, charging any additional cost to the original contractor or to the party responsible for such breach or violation. Any sums of money due to the United States of America by reason of any violation of any of the representations and stipulations in any contract for the purposes set forth in section I hereof may be withheld from any amounts due the contractor on any contract or may be recovered from the party responsible for such breach or violation in suits brought in the name of the United States of America by the Attorney General thereof. All sums withheld or recovered for underpayment of wages, including such double or treble damages as may be found due, shall be held in a special deposit account and shall be paid, on order of the Secretary of Labor, directly to the employees who have been paid less than minimum rates of pay as set forth in such contracts and on whose account such sums were withheld or recovered: Provided, That no claims by employees for such payments shall be entertained unless made within 1 year from the date of actual notice to the contractor of the withholding or recovery of such sums by the United States of America; (b) any breach or violation of any of the representations and stipulations contained in such certificates as are required under section 1 (h) shall subject the party responsible therefor to the provisions of subsection (a) of this section. AMENDMENT TO BE INTRODUCED TO S. 1032 In regard to S. 1932 insert on page 5 between lines 5 and 6: Section 3 is hereby amended by adding at the end of the first sentence thereof the following clause: "Provided further, That such list shall contain the names of all persons who shall be found in a final adjudication by the appropriate court to have interfered with, restrained, or coerced their employees in the exercise of their rights to selforganization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, or to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection." Mr. WALLING. Perhaps I might first comment on some of the statements that have been made by my good friends Captain Fisher and Commander Ring, with whom we have very pleasant relations and work very satisfactorily. I think it ought to be said in the interests of fairness that the requests for exemption which have been made of the Department of Labor by the Navy Department and other departments I think both representatives of the Navy will bear me out in this-were all made almost exclusively during, let us say, the first 6 or 8 months when there was difficulty about obtaining copper and steel and so on. One of the requests was for an exemption, a blanket exemption, for the steel industry, which the Department had brought to its attention, I should say in December of 1936 or January of 1937, which was just a few months after the law became effective at the end of September, and the Department at that time felt that a blanket exemption for the entire steel industry, from the obligation to comply with the 8-hour-day and the 40-hour-week requirements, would not be in the public interest, as it would very seriously emasculate the statute and not carry out the intent of Congress in writing the provision in. And so the Department did not grant, immediately, the request which was made, but did negotiate with the steel companies, and as a result of considerable discussion of ways and means, the steel companies of the country did go on a 40-hour-week basis, which made the granting of the exemption which had been requested, unnecsary. In the case of some of the other commodities which the representatives of the Navy referred to, the situation was liquidated as they suggested, by an explanation of the requirements of the act to the bidders, who were reluctant to commit themselves to obligations which they were not familiar with, and in almost all cases, when the obligations were explained to them, they have submitted bids; and, as far as I know, we have had no request for an exemption from the Navy for well, I am sure a year, and I should say it would be nearer 18 months, would that be your recollection? Commander RING. I don't have my complete record here, but I have one on zinc in September 1937-I see that before me here. Mr. WALLING. And that was the last one filed, I think, in May 1837, and that was taken care of by a consultation with the company which arranged to make a shipment to the Navy as needed. I have some figures which I would be very glad to file with the committee in regard to the increased cost, because we were requested by the House Appropriations Committee to make a study of such matters and we found, somewhat to our surprise, in a wide variety of the purchases that the amount which the Government was paying for products purchased subsequent to the imposition of a minimum wage requirement, for instance, and the other labor standards of the WalshHealy Act, were actually less than those paid before the legal obligation to comply with those labor standards. I think probably the explanation of that is that the best workers in a factory are customarily used on Government contracts because the possibility of rejection of the order as not meeting specifications is very great, and it is not worth a manufacturers' risk to use his less efficient employees. So that actually, by having to pay the minimum wage and having to confine his employees to the hour requirements, and in general to use his best, most effective, and efficient workers, his productivity and his efficiency go up very materially in the performance of those contracts. We know from countless statements that manufacturers simply dropped out of the Government market during the 5 or 6 years prior to the enactment of the Walsh-Healey Act, for instance, because they were not willing to subject themselves to the unfair competitive practices of some of their fellow manufacturers who were shaving costs at every corner in order to get Government business, and they were not able, frequently, because of agreements with their employees or because of a voluntary desire not to cut corners at the expense of labor, they were not able to get Government business. So that while it is perhaps true, as Captain Fisher said, that the total number of bidders has fallen off, I think it is also true that the type of manufacturer now dealing with the Government is very much higher, he is much more responsible, than he used to be, and this fringe of bidders who are not the desirable type of contractors with the Government, has been eliminated. And if you look over the awards of any of the Government departments, including the Navy, you will find a very impressive list of names which might perhaps be described as the social register of American industry. The Government is dealing with the cream of American manufacturers at the present time, instead of having to take the skimmed milk, which was the case before the enactment of the Walsh-Healey Act. If the committee has any questions I would be glad to answer them. Senator WALSH. You will be here during the course of these hearings? Mr. WALLING. Yes. Senator WALSH. We are going to hold hearings next Thursday and Friday, and I believe we have 16 witnesses scheduled, and I assume you will be here at that time? Mr. WALLING. I shall be very glad to. Senator WALSH. The reporter may put into the record some letters that I have received from various department heads and others with reference to some of the provisions of this bill. (The correspondence referred to is as follows:) Hon. DAVID I. WALSH, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Subcommittee of the Committee on Education and Labor, United States Senate. MY DEAR MR. CHAIRMAN: Your letter dated May 8, 1939, extending the opportunity for a representative of this office to appear and testify at the hearing, May 13, 1939, on the bill (S. 1032) 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, is appreciated. Pursuant to request of the chairman of the Committee on Education and Labor, the Acting Comptroller General made a report on the bill, February 28, 1939, which contained certain suggestions for changes. I am confident these suggestions will be duly considered by your committee and since they are fully explained in the report and I have nothing to add thereto, it does not appear necessary for a representative of this office to consume time at the hearing for the purpose of restating the substance of the report. If, however, you should have reason for wishing an appearance from this office I shall be glad to have someone present upon notice from you to that effect. Sincerely yours, FRED H. BROWN, Comptroller General of the United States. UNITED STATES SENATE, COMMITTEE ON EDUCATION AND LABOR, March 9, 1939. GOVERNMENT CONTRACTS Hon. DAVID I. WALSH, United States Senate, Washington, D. C. DEAR SENATOR WALSH: For your information I am enclosing a copy of the report received from the Comptroller General of the United States on S. 1032, a bill introduced by yourself. The report is unfavorable. Most sincerely, ELBERT D. THOMAS, Chairman. COMPTROLLER GENERAL OF THE UNITED STATES, Hon. ELBERT D. THOMAS, The above bill proposes to amend the act of June 30, 1936 (49 Stat. 2036), by striking out sections 1, 2, and 7 thereof and by substituting new sections therefor. There is set forth below the text of the recommended amendment of said sections indicating (a) in regular type the provisions of the substitute sections which are identical with the sections proposed to be repealed, (b) by italicizing the provisions of the proposed amendment which are additions, and (c) within brackets the provisions of the present act which are repealed by the proposed amendment. "SECTION 1. That in any contract made and entered into by any executive department, independent establishment, or other agency or instrumentality of the United States, or by the District of Columbia, or by any corporation all the stock of which is beneficially owned by the United States [all the foregoing being hereinafter designated as agencies of the United States], for the manufacture or furnishing of [materials] supplies [, articles, and equipment] in [and] an amount [exceeding $10,000] of $2,000 or more, there shall be included the following representations and stipulations: (a) That the contractor is the manufacturer of or a regular dealer in the [materials] supplies [articles, or equipment] to be manufactured or used in the performance of the contract; (b) that all persons employed by the contractor and subcontractor in the manufacture or furnishing of the |