The President has one of four factors to take into consideration, and they are named in the bill. One is the code. It is not conclusive. The other is the prevailing wage in that particular locality. It may differ in different localities. The other is the cost of living and the condition of the industry in 1934. There are four different factors. The code is one but not conclusive and not binding. In my judgment, it is the most far-reaching in its benefit.

The CHAIRMAN. As I understood it, the question went to the matter of power and not to the various factors which went into the determination of how the power was to be exercised. Now, in order to get a clear picture of the bill, isn't this the situation: These four factors which you have indicated are supposed to be those things that would persuade the judgment of whoever puts the specifications into the advertisement for the bid?

Senator WALSH. Yes; that is correct, sir.

The CHAIRMAN. But having considered those four elements, there is to be incorporated in the invitation for the bid certain specifications in regard to labor and wages and so forth-that is the bill, isn't it?

Senator WALSH. That is true. I call attention to page 15-the specific minimum wages and maximum hours specified to go in any invitation to bid or contract shall be, first, the cost of living; second, the standards for the same class of labor in the same State or industry in the same locality; third, the standards in effect for such class of labor during the year 1934."

That is practically the code. Then [reading]

The minimum rates of pay and maximum hours of labor specified in the applicable codes of fair competition and approved amendments thereto.

It is one of the four factors. In my judgment it is the most valuable, because it is the one recorded information we have where there was at one time an agreement between employees and employers as to what would be the best labor conditions.

Mr. ROBSION. Doesn't it result, using the four elements, the four factors, as the Chairman says, in the necessary implication, in giving the power to somebody to make a code?

Senator WALSH. There is absolutely no doubt that under this bill in the written request for bids and in the written contracts there shall be specified how their people shall work and the minimum wage, just as is specified the kind of granite and the kind of timber and the kind of steel.

Mr. ROBSION. It would be a code still, would it not?

Senator WALSH. I do not call it a code to specify what kind of lumber or steel you use in building a building.

Mr. MICHENER. There is vast difference in the quality.

The CHAIRMAN. That is a discussion of terms. You have agreed on what the bill does, have you not? The question of whether it is a code or not is a discussion of terms or definitions.

Mr. MICHENER. There is a vast difference. You always can specify as to quality, but when you go to designating the conditions under which the article is produced in the mine or in the factory or in the home, and conferring that power upon the President or his subordinates, it is vastly different.

Senator WALSH. That is true, but it only applies to a man who seeks a favor from the Government in a contract. Any other manufacturers, any other miners, any other person in the world, who does not ask a Government contract, can disregard all hours of labor and minimum wages. It only applies to a man when he comes and says, "I want a Government contract."

Mr. ROBSION. But, Senator, doesn't it reach back and put the measure of wages and so forth on the man who is going to furnish the materials?

Senator WALSH. Yes, it is true that many of the Government contracts are past contracts, so to speak. For instance, let us say the purchase of shoes. They are already manufactured. Therefore, the bill provides that you should maintain these labor conditions in the production of these shoes. It would not be fair to say that shoes that are going to be manufactured in the future shall have certain labor conditions, but shoes that we buy now that have already been produced shall not have any labor conditions.

The CHAIRMAN. Senator, while you have the floor, this suggestion has been made in criticism of the bill, that the operation of the proposed plan would be a great deal broader than under the usual governmental conditions heretofore, because of the fact that the Government is at the moment engaged in so many activities in which the Government has not heretofore been engaged. That is being offered in criticism. What observation have you to make on that?

Senator WALSH. You think it would be difficult of application? The CHAIRMAN. No, sir; I am not taking a position about the bill. Let me repeat that.

Senator WALSH. Oh, yes.

The CHAIRMAN. I say this bill is being criticized by two members of the committee

Senator WALSH. Yes.

The CHAIRMAN. On the score that the Federal Government at the moment is engaged in a great many activities; that its activities are much broader and very much more extended than governmental activities have been accustomed to be, and that therefore the Government is, as a matter of fact, attempting to establish a code that operates not only as between the people who contract with it but to be spread out to the whole country.

Senator WALSH. That is very true. This bill would be much more effective at the present time because of the large undertakings of the Government and the large number of contracts than ordinarily. That criticism is very proper and very appropriate for anybody who is opposed to the Government fixing the standards of minimum labor conditions. In fact, anybody who does not believe in the Government entering into the domain, in the transaction of its own business, of minimum standard labor provisions, ought to be opposed to this bill. This bill is an attempt to lift up and preserve minimum standards of labor in contracts with the Government. The CHAIRMAN. I understand that you have taken the position that, particularly when the Government is being called upon to supply from the public Treasury the maintenance of people who are released because of the unusual or unreasonable extension of hours,

the Government has a peculiar interest at the moment in trying to avoid the increase in the number of those whom it has to take care of out of the public Treasury?

Senator WALSH. Very true.

The CHAIRMAN. I understand you make that argument.

Senator WALSH. And also the breakdown that has come since the abolition of the N. R. A. The Government has an obligation. Let us take the case of sweaters. The Government has a contract for furnishing sweaters tomorrow, we will say. Who is going to get the contract? The sweat-shop operator, of course. Just as sure as you are alive, the factory that is working under sweat-shop conditions will be the lowest bidder, and the one in Texas and the one in North Carolina that is trying to maintain these conditions will be absolutely lost. Under present law the one who chisels the most, the one who works his employees the longest, who pays the lowest labor, will get every one. And the most enthusiastic supporters of all of this bill are those who have had Government contract experience the builders. Practically every road builder and every constructionist in this country is very strong for this bill, because they have learned from sad experience what happens when you go to chiseling on wages.

Mr. MCLAUGHLIN. If I may interrupt to ask a question, I am just wondering what effect this bill will have on the contractor for construction work.

Senator WALSH. The Bacon-Davis Law takes care of builders, and you have amended it this session.

Mr. MCLAUGHLIN. Take any contract with the Government: This last, as I understand, provides that in taking a contract a contractor must represent that he has secured certain written agreements from his subcontractor. Now, then, in those written agreements the subcontractor agrees to do the things which the law requires him to do. Senator WALSH. Yes.

Mr. MCLAUGHLIN. In section 3 on page 10 it then provides:

Every representation or agreement made pursuant to the provisions of this Act by a principal contractor, borrower, grantee, subcontractor, or supplier, shall provide:

(1) That any breach or violation thereof shall render the party responsible therefor liable to the United States as and for liquidating damages.

I am just interested to know what the definition is of the terms "the party responsible therefor." Does that mean the contractor himself?

Senator WALSH. The invitation for bids and the written contracts require the contractor to certify that he is going to or has exacted those conditions-minimum wage conditions-from his subcontractor.

Mr. MCLAUGHLIN. Yes.

Senator WALSH. Now, if a subcontractor is found on complaints— as appears very frequently in the kick-back investigations-they found that he had violated these laws, the President, acting through the bureau chief, the Navy Department, will say: "Mr. Contractor, your subcontractor is not living up to the terms of this bill. Unless you change, and compel him to, we will ask you to cancel your subcontract with him." The main contractor is liable for the subcon

tractor only to the extent of being requested to cancel the subcontract. He is not liable for the wages.

Mr. MCLAUGHLIN. In that respect, assume that there is some damage due to delay to the contractor who has the contract with the subcontractor; the subcontractor has fabricated his material, and then, after the passage of a considerable amount of time, it has developed and has been ascertained that the subcontractor has not lived up to the provisions of the law, and the contractor is required to again let his subcontract. Would the contractor be held responsible for the delay and the damage?

Senator WALSH. No. But assume that pressure would be exerted upon him to see that the subcontractor did right. There is a very sweeping and very extensive provision here providing for modifications and changes by the President. I do not know how better to put it.

You know in building a house after the contract is made how frequently it is changed-how you decide upon a different kind of lumber, you decide that the cement that you first picked out is not the right kind of cement. Therefore, there has got to be an authority and it is there in the bill, for the President to make modifications, to make changes, acting, of course through his bureaus. I do not know how better to put it than to say that we are simply writing in, together with the other specifications, the construction and building and purchasing supplies, just a few items about labor conditions. That is all, just as you have all the other items. That is all we are doing. Now, of course, it is going to be a little more difficult to deal with the human element than it is the material element, but it can be done. Mr. MCLAUGHLIN. My inquiry was directed to the point whether or not under this law the contractor is going to be penalized for the character of a subcontractor.

Senator WALSH. There is no penalty on the contractor for the failure of a subcontractor, but he may be required to cancel the subcontract. He is not penalized; the subcontractor is penalized.

Mr. MCLAUGHLIN. In the event the contract contained the provisions that the contractor should receive some benefit from the contract if he should finish the contract within a certain time, or should suffer some damage in the event he did not finish the contract within that certain time, would that fact that a subcontractor with whom he had to concel the contract caused a delay-cause a penalty to be imposed upon the contractor?

Senator WALSH. Well, if the contractor says he is going to perform a certain work in a certain time he has got to do it. He cannot get out and say, "My subcontractor has had a strike; my subcontractor failed me." He has got to deliver, else we do not get anywhere in life if we do not hold the principal contractor.

Mr. MCLAUGHLIN. Is the burden being imposed upon the contractor for the trouble of a subcontractor, over which he has no control? That is the question?

Senator WALSH. He is obliged to guarantee that he will see to it, so far as he can, that his subcontractor will carry out those minimum labor conditions; and if he does not do it, the contractor must cancel the subcontract.

Mr. MCLAUGHLIN. I do not want to argue; but as I understand it, the law does not say that he shall see to it that the subcontractor

shall do so and so, but that he should be required to extract from the subcontractor an agreement that the subcontractor shall do so and so. That is as far as the law goes, is it not?

Senator WALSH. It is true. It is also hoped that a Government inspector who is looking to see what kind of cement goes into the job will look and see what these labor conditions are and make a complaint to his department head, and he will, in turn, to the contractor. Mr. MCLAUGHLIN. But the contractor himself has had, perhaps, no opportunity to know the working conditions obtaining in the industry of the subcontractor in many instances.

Senator WALSH. That may be so, where it may be, for instance, the production of the soles of the shoe. It may be difficult to do that. Mr. MCLAUGHLIN. Is there any leeway given?

Senator WALSH. Yes; there is the widest latitude to the President. He does not need to apply this law at all if he does not want to.

Mr. MICHENER. And right there I want to stress what you said— that he does not have to pay any attention to this law at all if he does not want to. Under section 6 the President can absolutely nullify the conventional policy by exempting anybody from the terms of the bill before or after the contract was let, without any findings of fact. He can make any exceptions, exemptions, variations, or alterations he sees fit. This, of course, means the power will be exercised entirely by the subordinates and the agencies, and the authority for that is section 6 of the bill, plus what you have just said.

Senator WALSH. All of that is true before the written contract is entered into. He may find a condition on the purchase of certain kinds of supplies where he cannot have a rigid rule; and therefore, he is given the power of elasticity under this bill to order it. But once the written contract is made, he cannot cancel it; and the contractor has the right of a hearing, and the President has only through his agents the right to make a recommendation.

Mr. MICHENER. Yes; but he may sit down around the table with the agents of particular contractors, and they may work out this think, regardless of the law which Congress lays down here.

Senator WALSH. Of course, you have to have elasticity. You cannot lay down the law what kind of cement is going to be in every Government contract.

Mr. MICHENER. Yes; but don't you think it is vastly different to provide for quality of material in a contract and to provide for the manner of the manufacturing or the mining or the quarrying of that material?

Senator WALSH. I personally think it is vastly more important to require the human element to be protected than the material element in a contract. Now, I realize it is most difficult. It cannot be the same in two contracts. It is practically impossible. You cannot have a 40-hour maximum week in every industry. One has got to be 36 and one 48 and one has to be 60, perhaps.

Mr. MICHENER. I am just opposed to a general policy of giving any agency the power to make these laws and changes.

Senator WALSH. I can appreciate the objection.

Mr. MICHENER. Because we cannot camouflage a statute here for the purpose of giving it constitutionality. That is the whole thing. Senator WALSH. I appreciate that, but you are not going to have that law unless you have the elasticity. You cannot write the same