STATEMENT OF W. E. REYNOLDS, ASSISTANT DIRECTOR OF PROCUREMENT

Mr. REYNOLDS. Gentlemen of the committee, I am Assistant Director of Procurement, in immediate charge of the Public Works Branch of the Procurement Division, which handles the construction of Federal buildings.

The question was asked as to the effect of the recent amendment to the Bacon-Davis Act with respect to the predetermination of the prevailing wage and if it added to the work of our Division. Mr. Chairman, I have a very short statement to make which I think will probably cover the entire question.

Following the passage of act, Public, No. 403, Seventy-fourth Congress, approved August 30, 1935, in amendment of the Davis-Bacon Act approved March 3, 1931, conferences and correspondence were exchanged with the Department of Labor to determine the method to be adopted giving effect to the law. As a result the Department of Labor promulgated two forms, DB-11 and DB-15, the first to be employed by a contracting officer in requesting predeterminations in the individual case, the second in furnishing such information as to prevailing wages in the locality in question as might be known or obtainable by the contracting officer presenting the request.

The method agreed upon between the Procurement Division and the Department of Labor and since followed in this connection is the presentation of the individual request on form DB-11 accompanied by a list of the crafts probably to be involved in the project requested, and the submission at the same time of the forms DB-15 to a field representative of the Division or a local building custodian with instructions to obtain to the extent possible the indicated data and return it directly to the Solicior of Labor.

Where the data so furnished has been considered adequate it has been employed by the Department of Labor in conjunction with other existing records in the predetermination of wages to be advertised for the project in question. Where the data appeared inadequate the Department of Labor has itself sent referees to the locality where hearings are held and testimony taken as to wages prevailing. Following this procedure requests have been made for 610 determinations, of which 457 are for construction projects proper and 153 for more or less minor incidental cases which it was expected would be in excess of $2,000. Of the construction projects above mention, approximately 315 were submitted between the dates of January 9 and 17.

In response, determinations have been received in connection with 186 construction projects and 107 miscellaneous projects. The records show in this connection that the average period transpiring between the date of the request and the date of the determination has been 522 days for construction projects and 361⁄2 for miscellaneous. On December 31, 1935, a letter was addressed to the Department of Labor indicating the approximate scope of the program which it was at that time the purpose to put upon the market by March 1, in order that they might make any possible arrangements for handling this work in the office and the field, and following the heavy submissions above mentioned between January 9 and 17, the

policy was adopted of addressing a letter from the Director of Procurement to the Secretary of Labor, pointing out the date upon which it was then anticipated that the individual project would be ready for the market and requesting a ruling by that date.

As such projects have subsequently been completed and are otherwise ready for advertisement, a letter has been addressed by the Assistant Director to the Labor Department stating the circumstances and further urging expedition of the rendering of the ruling.

In some instances the issuance of a ruling by the Department of Labor has not been conclusive, as protests are received either from labor organizations or contractors associations which in some instances have necessitated reconsiderations by the Department of Labor and have involved, as in the case of the Forth Worth, Tex., Narcotic Farm, in postponements of opening in order to permit of corrections in these rates.

From the above statement it should be noted that requests made of the Department of Labor during January were abnormally heavy and have imposed a volume of work upon the force which is detailed to handle it which must inevitably be reflected in the time which must be required to render decisions to cover the entire program submitted.

On all cases the attitude of the Department of Labor has been most heartily cooperative, but it is believed that they have been confronted by a situation for which they have not had time to prepare. Mr. HEALEY. Are there any questions?

If not, Mr. Reynolds, I would like to ask this question. With your experience in the administration of the Davis-Bacon Act, do you have a great deal of difficulty in administration, in so framing your contracts as to comply with the provisions of that act?

Mr. REYNOLDS. No, sir. We simply include in the specifications the predetermined wage as made by the Department of Labor, and then our field engineer who is assigned to the project follows it through to see that those rates are paid.

Mr. HEALEY. As I understand it, your department is responsible for the bids that are made for any construction. Is that correct? Mr. REYNOLDS. Building construction, such as post offices, hospitals, Federal office buildings, and so on.

Mr. HEALEY. Prior to your proposals for bids you must confer with the Secertary of Labor or someone in that Department to obtain information on their predetermined wage level for the locality where the building is to be erected?

Mr. REYNOLDS. Yes, sir; that is correct.

Mr. HEALEY. That is stipulated in your proposal for bids, is it? Mr. REYNOLDS. Yes, sir: it is.

Mr. DUFFY. Do you have much trouble with what is known as the "kick-back"?

Mr. REYNOLDS. Remarkably little trouble since the "kick-back" law went into effect. Under the provisions of that law we receive the certified pay rolls each week from the contractors. We have had very little trouble with it.

Mr. HEALEY. How are those certified pay rolls taken care of? Whose function is it to return them to your office?

Mr. REYNOLDS. Our man in the field is responsible for seeing that they come to us. We have a man in the field on each one of these projects.

Mr. HEALEY. You always have had that man in the field on construction?

Mr. REYNOLDS. Yes, sir; we do.

Mr. HEALEY. This is just an added duty? Is that right?

Mr. REYNOLDS. That is right.

Mr. HEALEY. Have you experienced any difficulty because of the performance of this added duty?

Mr. REYNOLDS. No, sir; not at all. As a matter of fact, his duties are probably somewhat lessened under the amended Davis-Bacon Act, because under the old Davis-Bacon Act, which provided for the payment of the prevailing wage, it was necessary at times for the construction engineer to interpret what is the prevailing wage. Under the present law the prevailing wage is set out in the contract, and that settles the matter so far as we are concerned.

Mr. HEALEY. It has not been necessary to add any personnel to your supervision of projects because of the recent amendment to the Bacon-Davis Act?

Mr. REYNOLDS. No, sir; none whatever.

Mr. DUFFY. When you receive bids from the general contractors do you require them to name the subcontractors for the various classes of work, that is, name them in his bid?

Mr. REYNOLDS. No, sir; we do not do that.

Mr. DUFFY of New York. The general contractor may shop around?

Mr. REYNOLDS. Sometime ago we gave consideration to putting a condition into our contracts in order to do away as far as possible with the bid peddler or the bid broker, as you may call him, and also to protect the subcontractor. In this connection we require the contractor to do with his own forces at least 25 percent of the work, except in one or two large cities, like in New York City, where subcontracting is highly specialized and it is impossible to require a general contractor to do that much work. The general contractor himself must have a personnel sufficient to do 25 percent of the work.

The point you raise of including in the specifications that the contractor shall furnish the names of the subbidders and the amounts brings up a rather broad question for determination. The better contractors generally, and the men who are not in the habit of chiseling on contracts, object to it because they contend that ordinarily they receive the bids from the subcontractors just a few hours before they must make up their bids, and they sometimes find that these bids interlap, and some subcontractor will be covering items that another subcontractor has covered. For them to say that they will give this work in certain amounts to these various subcontractors would be more than they would be able to do, because there is the overlapping and the amounts would be more than they would expect to pay for the individual work.

Mr. DUFFY of New York. But they have to know in submitting their bids?

Mr. REYNOLDS. The subcontractors?

Mr. DUFFY of New York. The general contractors.

Mr. REYNOLDS. Yes; the general contractors.

Mr. DUFFY of New York. They receive their estimates from the subcontractors in order to build up their figures which are submitted to the Government?

Mr. REYNOLDS. Yes, sir. But sometimes a subcontractor will cover paragraphs, say, nos. 150 to 216 and another subcontractor will cover a part of those in his work.

Mr. DUFFY of New York. I know from experience in one political subdivision in the construction of school buildings that until they required the general contractor to submit the subcontract figures in his bid and would only permit him to change the subcontract by consent, did we get the best contractors in the community to go into the work. When I see so many contracts on Government jobs that are performed by outside contractors, and where the local contractorsseem to be unable to get anywhere, I wonder whether we may not be doing wrong.

Mr. REYNOLDS. Of course, in every case we prefer the local contractor. We have been giving very serious consideration to the very point you have raised.

Mr. DUFFY of New York. I have in mind now one place in the District where the best local contractors were 40 percent under the outside contractor. That seems to be a pretty wide spread, does it not, if the specifications are clearly written?

Mr. REYNOLDS. Very much so.

Mr. HEALEY. Are there any further questions of the witness?

Mr. Arthur Morris Torrey, executive secretary, Employers Association of North Jersey, Newark, N. J., wishes to have a statement inserted in the record, and that may be done.

(Statement of Arthur Morris Torrey, executive secretary, Employers' Association of North Jersey, follows:)

STATEMENT PRESENTED FOR THE EMPLOYERS ASSOCIATION OF NORTH JERSEY, NEWARK, N. J., BY ARTHUR MORRIS TORREY, EXECUTIVE SECRETARY

The committee's consideration is asked for views offered on behalf of 125 industrial employers whose businesses are located in the vicinity of Newark, N. J. These establishments produce a wide diversity of goods and materials and in point of size range from shops employing only a few persons to plants employing several thousand. They constitute a fairly typical cross-section of American manufacturing industry. Products of many of these plants are such as may, from time to time, be required in connection with the performance of contracts made by the United States Government. They have, therefore, a logical basis for interest in the provisions of the bill you are considering.

The purpose of this measure is perpetuation of the doctrine of Government control of private employment relations which was a basic theory of the National Industrial Recovery Act. The title of the bill gives the impression that its provisions would apply to a limited number of businesses; those doing business with the Government. What it proposes, however, is to give to a Government agency discretionary power to fix minimum wages and maximum hours for all employees engaged in the production of materials, goods, or services required as part of any Government purchase or incidental to any work done under any Government contract. This brings under the scope of the bill's provisions the workmen engaged, say, in the manufacture of the ordinary washers placed on bolts used to hold temporarily in place for riveting the columns and beams of the steel structure of a building constructed under Government contract. It makes the measure apply to persons engaged in the manufacture of this little metal stamping by which the eraser is held on a pencil bought by the Government for use by this committee's clerk. The obvious effect of the bill, then, is to extend the application of Government control over a very broad field.

The control provided for is more inflexible than that relating to hours and wages under the National Industrial Recovery Act. It calls for the setting of not only a minimum basic wage, but of an entire schedule of wages. While this theoretically would apply only to employees actually engaged on work connected with a Government contract, in practice it would affect all employees in a plant where any employees were so engaged. The wage structure of a manufacturing plant is a complex mechanism; no part can be altered arbitrarily without taking into consideration the effect the change will have upon all its other parts.

In considering the potential effects of this proposed measure it must be recognized that production for a Government contract is not the sole output of a plant undertaking such production. It may be only a small part of the total output, the balance being for private purchase. If the effect of the control proposed by this bill is to increase costs, and it unquestionably will be, the manufacturer will either decline to bid on the Government work, or if he bids and secures the order, he will have to charge higher prices to private consumers of his product.

That contingency raises a question of broad public interest. If the Government control provided for by this bill influences manufacturers to refrain from bidding on work involved in Government contracts, the result will be decreased competition for such work. In such event the bill would run counter to the established principle that in spending the taxpayers' funds the broadest practicable competition in bidding must be provided as a protection against excessive cost to the taxpayer. If, on the other hand, manufacturers generally do bid and secure Government work, any added cost of their product resulting from the wage and hour control will have to be paid not only by the Government, but also by private consumers. In the interest of the public, both as taxpayers and as consumers, the committee is urged to give consideration to these phases of the subject.

It may be argued that the powers conferred on a Government agency by this measure would not be exercised in such a way as to increase costs for any business which, in the language of the bill, maintains "fair-wage standards." We respectfully submit that no limitations are provided with respect to levels at which wages may be fixed by the Government agency. Further, the standards set forth in section 9 as those which may be used are so vague as to provide no assurance on this point.

In the fixing of maximum hours of work the probability of detrimental effects is as great as in the matter of wage levels. While the manufacturers here represented have generally maintained the hour limits fixed under the National Industry Recovery Act, they depart from those limits occasionally with respect to certain operations when such departure is necessary to prevent obstruction of the flow of production. There is, as a matter of fact, no certainty that the hour limitations fixed by the codes in a time of extreme business depression will prove to be economically sound under other conditions. We have not yet reached a point making possible a definite conclusion as to either the desirability or undesirability of those limits. Already, however, in some classes of work there is an actual shortage of skilled men. A renewal of arbitrary limitation of working hours would result in slowing down production dependent upon those particular operations. In this connection we point out that section 9 of the bill prescribes the total weekly hours worked in 1934 as a guide that may be followed in fixing maximum working hours. Under conditions existing in that year many manufacturers were unable to operate steadily for even the full number of hours permitted by code regulations.

From the practical standpoint serious difficulties are foreseen in the application of the provisions of this bill. Orders for materials and goods entering into the performance of a Government contract may be placed with establishments in widely separated parts of the country. Living costs, production practices, and prevailing wage levels for the same classes of labor will vary widely in those different localities. There can be no knowledge, in advance of letting the principal contract, as to the location of each subordinate operation. Hence, despite the wide variation in conditions, only one set of limitations could be fixed for all. The effect might be to deprive the low-cost rural communities of all work connected with Government purchases and concentrate this work in the higher-cost urban localities. While that result might seem to favor the manufacturers who now address you, they nevertheless believe that it would be undesirable as a matter of public policy.