discretion of the Secretary of Labor to do or not to do. Thus, if cancelation is ordered, an extension of time should be granted. In order to apply the principle contained in this paragraph it is absolutely necessary to require the principal contractor to be provided with uncontrovertible evidence that a breach had been committed by the subcontractor.

In order to overcome in part our objection to the language of this paragraph, we suggest that it be amended by removing the period after the word "cancelation" in the last line and substitute a colon, and adding the following words thereafter:

Provided, however, That the principal contractor shall not be required to cancel any subcontract as provided in this paragraph until supplied with conclusive evidence that a finding adjudicated pursuant to the provisions of this act has been made which establishes breach of the contract by the subcontractor: Provided further, That the contracting officer is hereby authorized and shall defend and hold the principal contractor harmless from any action or claims for damages arising from the question of the existence or nonexistence of such breach of the subcontract: Provided further, That the contracting officer is authorized to grant to the principal contractor an extension of the time of completion of the contract commensurate with the delay resulting from a cancelation of a subcontract pursuant to these provisions.

If it is a desirable public policy to require private industry, when under contract with the Government, to observe certain standards with reference to wages and hours, then it must be equally in the public interest that the Government be required to observe such standards when engaged in any operation or service which could be furnished by private enterprises subject to the imposition of these standards.

Unless the Government is willing to place itself in a position of fair competition with private enterprise by observing the same regulations that it imposed upon private enterprise, then it has seized the means of eliminating private enterprise at its will, and substituting Government operations, for neither the Government nor the citizen can judge whether or not it is economical for the Government to engaged in competition with private enterprise unless the agencies of the United States are required to meet all of the regulations and requirements, including taxation that the Government imposes upon the private enterprise with which it competes.

In fairness, we request that an additional section be added to the bill in an appropriate place with the provisions such as the following: Any and all provisions required by this act to be included in proposals or contracts shall apply with respect to all persons in similar direct employment by any agencies of the United States while engaged in construction, or the production or furnishing of articles, materials, supplies, equipment, or services which would otherwise be constructed, produced, or furnished by private enterprises required to comply with this act.

We have stated herein some of our specific objections to this bill as drawn in order to show that our objections are based on sound conclusions, however, we wish the committee to understand that we are opposed to the general purposes of this bill as applied to the construction of Federal buildings and public works. Existing law now provides, for employees on such construction, every benefit which this bill could provide and make workable.

We also respectfully object to the passage of the Walsh bill, S. 3055, which is now before your committee for consideration. This bill S. 3055 apparently has the same objectives as H. R. 11554, and is objected to for reasons similar to those stated herein.

Mr. HEALEY. Is there anything further?

STATEMENT OF RALPH F. PROCTOR, REPRESENTING THE ASSOCIATION OF CASUALTY AND SECURITY EXECUTIVES

Mr. PROCTOR. My name is Ralph F. Proctor. I represent the Association of Casualty and Surety Executives.

Mr. HEALEY. Have you a statement?

Mr. PROCTOR. My remarks will be very brief.

Mr. HEALEY. Please make them as brief as possible.

Mr. PROCTOR. In order that you may understand properly our interest in this, let me say that any legislation that will increase the hazard to the construction industry increases the hazard to the surety companies, and, as Mr. Marshall, who has just spoken and who represents the Associated General Contractors of America, has presented the increased hazards as they view them, I would like to say for the surety companies that we endorse his remarks.

We are opposed to the bill as it is drawn, because we believe that it will materially increase the hazard of building construction and engineering construction. As we interpret the bill, it provides for an obligation of the general contractor which extends way down the line. We believe that that will increase the cost of the work to the Government, and drive out of Government competition contractors who are amply able under present conditions to successfully bid and to carry out contracts.

There are three other things in connection with the bill that I would like to point out to you. It has been stated that in article 3 the contractor may be relieved of responsibility if he notifies the subcontractor. We are not sure as to the wording, whether that means all the way down the line or not, but that does not relieve the contractor from his entire responsibility, because of the fact that if a subcontract is canceled because of the violation of law, then the general contractor must substitute another subcontractor, and on a rising market it is impossible for the general contractor to find that substitution at the same price, and therefore the cost to him of completing the contract will be increased. Even on a falling market, it has been my experience in completing defaulted contracts that it is almost invariably impossible to secure a substitute for a defaulted contractor whose price is equal to or less than the price originally submitted by that subcontractor. Therefore, it increases the cost to the general contractor and it may even mean a loss to him in carrying out the full contract.

As to a default of a subcontractor, or of a subcontractor, we believe that the result will be litigation as to anticipated profits all down the line, and that the general contractor will be obliged to protect himself in these suits at considerable cost, and even may be

obliged to pay penalties which, of course, will reduce his possibility of making a profit on the job which he is entitled to have.

The third thing is that the cancelation of a subcontract or of a subcontract may cause a default on the principal contractor, for the reason that he will be delayed in his work and cannot complete within the time specified in the contract. As you gentlemen all know, all contracts provide that the work must be completed at a stipulated date, and if the general contractor runs over that time, then he is penalized and therefore that would be a possible increase to the general contractor in operating under this bill if it becomes a law.

I do not believe that it is the intention to penalize unfairly the construction industry in any legislation, and we feel that the operation of this bill would be bound to do that and the result would be that many contractors who are amply able to compete in Government work will be driven out of the competition, and the result will be an increase in cost to the Government.

I appreciate this opportunity to speak to you.
Mr. HEALEY. We thank you.

STATEMENT OF JAMES M. MYLES, VICE PRESIDENT, OPERATIVE PLASTERERS' AND CEMENT FINISHERS' INTERNATIONAL ASSOCIATION

Mr. MYLES. Mr. Chairman, I am vice president of the Operative 'Plasterers' and Cement Finishers' Association, which is composed of modelers, sculptors, model makers, casters, plasterers, cement mastic composition workers, artificial marble and imitation stone. workers.

I am speaking in favor of H. R. 11554, which makes clear that all Government contracts of the United States must be awarded to firm's 'that observe by agreement the minimum wages and the maximum hours of labor.

If you will permit me, I will stop right here and say that after listening to the statement submitted on behalf of the general contractors, represented by Mr. Marshall, I certainly am astonished at the opposition of the general contractors to this bill, for the reason that they were a part of that construction industry code, and they do not believe, according to the provisions of that code, in unfair practices, chiseling, or bid peddling.

This bill does not interfere with contractors engaged in private business, as some of the opposition would have this committee believe. The only interference the Government would have is when contractors do not comply with the provisions of the contract bill, H. R. 11554. Surely no one with sound common sense would question the right or authority of the Government to regulate its own business, and that is just what the Healey bill is attempting to do, to have Congress and the Government regulate its own business and thereby protect the citizens of the United States who have been at the mercy of unscrupulous contractors who have no regard or consideration for those who give their labor so that such employers

may benefit from the profits of labor, and thereby elevate their own positions in life.

It seems strange how the minds of men become distorted and twisted in a fashion to condemn and criticize every attempt to elevate their labor, to pay decent living wages, and to regulate hours of work. They are among the untold numbers of unscrupulous, cheating contractors within this Nation who are preying like vultures upon the long-suffering laboring people. They employ every method and trick of unfair practices to exploit labor and deprive our employees of wages, hours, and decent living standards which they are justly entitled to. Labor is the first producer of capital, and we are entitled to and must receive from society and the Government protection by regulation for proper minimum standards of pay and maximum hours of labor on all Government contracts.

After hearing Congressman Zimmerman's plea for cheap labor, I am prompted to make these remarks:

Mankind generally condemns that which it does not understand, and through prejudice or ignorance disregards the principles of unity which can elevate the conditions and render easy the accomplishment of good works, which are so much required in creating. confidence, generating esteem and respect, and for promoting harmony and good-fellowship among men.

I do not understand why they set $2,000 for contracts under this bill. There are many Government contracts under $2,000 which employ thousands of men, and I therefore recommend that the $2,000 be stricken out, and that no amount shall be specified.

I also note that this bill does not make any provisions for labor standards, other than minimum rates of pay and maximum hours, nor does the word "agreement" make clear that employees have the right to bargain collectively or reach understandings between employers and employees in accordance with the Disputes Act. I herewith submit a list of Works Progress Administration force-account projects, which is not provided for in H. R. 11554. While the Government allocates these millions of dollars for construction projects to the various States, under present rules and regulations of the Works Progress Administration the States have authority to allocate funds to the various counties of each State. There are no contractors of any description involved on the designated work, which work is similar in character and nature to that work awarded by contract by other different departments of Government.

Just let me give you these figures right now, just to show you' what this really means.

In Alabama there were 924 projects, and the amount was $14,259,561, and the percentage of construction projects 60 percent.

In Arizona there were 286 projects and the amount was $5,183,438, and the percentage of construction projects 60 percent.

In California there were 2,201 projects and the amount was $76,446,681, and the percentage of construction projects 75 percent. Mr. HEALEY. If you have that in a table, will you just put it in the record?

Mr. MYLES. I will, Mr. Chairman.

(The table referred to is as follows:)

List of Works Progress Administration force account projects and amounts of money allocated to the States enumerated herein for the construction, alterations, additions, and repairs of buildings and highways (contractors are eliminated)

The above Works Progress Administration allocations which have been verified and released under date of March 9, 1936, by the Division of Research and Statistics. The bulk of W. P. A. projects involve additions and improvements to public property which constitutes 86 percent of all the projects on which funds of the Works Progress Administration are being spent. Submitted by

JAMES M. MYLES, Vice President.

I would therefore request that this committtee give serious consideration to the thousands of construction projects enumerated herein, so that it may be possible to make provisions in this bill for some jurisdiction by contract over these projects.

We firmly believe the contents of H. R. 11554 clearly defines and sets forth the principles that will retrieve the loss that labor suffered