RECOMMENDATIONS FOR IMPROVEMENT IN ADMINISTRATION

A. It is our observation that some of the most troublesome problems of DavisBacon Act coverage arise at the site at the time the work is being performed. We recognize that there are difficulties in the way of giving full consideration to problems of the coverage of the act in advance of the working stage and at the time that the contracts are let. Clearly, however, to the extent that it can be determined by Air Force personnel, well in advance of the time when work is being performed, that particular operations will be covered by the DavisBacon Act, it is reasonable to believe that subsequent controversy will be diminished and confusion avoided. Accordingly we—

Recommend that the Air Force be encouraged, at the earliest possible stage of contract letting and well in advance of the time of work performance, to determine and identify those items of work which it regards as falling within the coverage of the act.

B. Our investigations and discussions, both in Washington and in the field, have impressed us with the fact that confusion exists as to the significance of a wage predetermination or a coverage ruling under the act. So far as we can determine, there is no clear and simply expressed declaration on these matters, well designed to dispel such confusion. In our judgment such a declaration would tend to discourage claims to work jurisdiction based on misconstruction of the provisions of the act. Accordingly, we

Recommend that there be issued, in such form as seems appropriate, an official clarification of the purpose and impact of the Davis-Bacon Act.

C. The committee has reached the conclusion that the administrative procedures employed in the Air Force and the Department of Labor for handling and processing important coverage questions with respect to work on missile sites could be improved and streamlined, particularly with respect to matters that could develop into labor disputes affecting the success of the program. Accordingly, we

Recommend as follows:

1. While the responsibility for making initial coverage rulings as to the appliIcation of the act to work on missile sites rests with the Air Force, if it is persuaded that there is need for a coverage ruling by the Department of Labor, it should be encouraged to follow procedures that will assure a prompt reference of the question, directly from the missile site, or other location, to a single Air Force officer in Washington, D.C., at a high level of responsibility who would perform a liaison function with the Department of Labor.

2. Requests for coverage rulings with respect to missile sites are of sufficient importance to deserve special expeditious handling by a group or committee acting for the Secretary. This group might consist of the Solicitor of Labor and other department officials with responsibility running directly to the Secretary. With the staff assistance of the Office of the Solicitor, they could

determine

(a) whether the reference by the Air Force is accompanied by sufficient facts and if not, what further fact-collecting procedures are indicated;

(b) whether a coverage ruling by the Secretaary of Labor is appropriate; (c) whether, if a ruling is indicated, discussions should be held with interested parties, organizations or agencies;

(d) whether the subject should be referred to the Missile Sites Labor Commission or to the Director of the Federal Mediation and Conciliation Service, or elsewhere, for dispute handling if the facts so warrant.

DEPARTMENT OF LABOR
Washington, D.C.

STATEMENT OF THE MISSILE MANUFACTURERS, THEIR ASSOCIATE CONTRACTORS AND

SUBCONTRACTORS

(Submitted by Aerospace Industries Association)

Before the Missile Sites Public Contracts Advisory Committee on Application of Davis-Bacon Act to Certain Air Force Contracts

Because of the disruptive impact of rulings extending the Davis-Bacon Act to operations essentially not of a construction character, the missile contractors are gratified by this opportunity to appear before your committee. We share the

hope expressed by the Secretary of Labor in his letter of April 25, 1961, announcing the appointment of the committee, that your recommendations on the standards for statutory coverage to be followed in the defense program will settle these vitally important problems.

It is the purpose of this memorandum to advance for your consideration what we consider to be the general line of demarcation between activities covered by the act and those operations to which its application would be inappropriate. Individual companies have representatives here who are prepared to supplement this statement with detailed testimony on particular operations.

When this Davis-Bacon Act was passed in 1931, and amended in 1935, there was little doubt about either its purpose or its scope. As a result of the drastic curtailment of commercial and industrial construction incident to the depression, thousands of building craftsmen had become unemployed. While most of the major contractors were under contract with building trades unions, they found themselves underbid on numerous public construction contracts, because nonunion companies were able to recruit unemployed craftsmen willing to work for less than the prevailing local standards. The chief purpose of the act, therefore, was to prevent these standards from being undermined. This was done by putting the union contractors on the same footing, so far as labor costs were concerned, with their nonunion competitors in submitting bids on Federal public buildings and public works. At that time there was no ambiguity to the meaning of the term "public work," for such mixed operations as the activation of atomic installations, radar detection sites, or missile bases-projects requiring the utilization of manufacturing personnel, as well as construction labor-were unknown.

In other words, the original act was passed to protect construction companies conforming to proper labor standards from unfair competition in the construction industry itself-not to give a competitive advantage to the construction industry as against manufacturing industry.

Although the structures and buildings at the missile and space sites, particularly the underground complexes, are novel in design and adapted particularly for the testing and launching of missiles and space vehicles, we do not challenge the application of the Davis-Bacon Act provided the term "construction" is clearly understood. Contracts for such work awarded by the Corps of Engineers, almost invariably go to firms in the construction industry. These contractors employ building tradesmen and it is appropriate that the local prevailing wage rates for such mechanics and laborers, should be written into or embodied in the contract terms. Witnesses before Senator McClellan's committee estimated that 80 percent of the employment at the missile sites is accounted for by those construction contracts.

The major labor difficulties which have retarded the completion of the missile sites and have enormously increased the cost, stem from the persistent campaign of the building trades unions and their employers to encroach upon the other 20 percent of employment, viz, the operations which are the responsibility of the missile and space vehicle contractors and their associates under the contracts awarded by the Air Force. One of the stratagems the building trades unions have used in this campaign is to assert that major phases of these operations constitute the construction of a public work and consequently are subject to the Davis-Bacon Act, knowing that if such a ruling is made, the missile contractor rather than using factory personnel covered by collective agreement with an industrial union, will probably sublet such operations to a construction company. At certain bases, subordinate military officials relying upon questionable opinions of staff judge advocates or rulings of the Department of Labor have given the Davis-Bacon Act an application for which it was never intended, with a resultant disruption of the program of assembling, installing and maintaining ground support and operating systems.

Wherever such rulings have been made the costs have skyrocketed and the final completion of the ground support and operating systems have been immeasurably delayed, as such work has been traditionally and efficiently performed by technicians trained in the factory techniques of the missilemakers and not by building craftsmen. Moreover, the technicians employed at the missile sites by the manufacturers of such major missiles as the Atlas, Titan, Minuteman and Thor, are generally represented in collective bargaining agreements by such industrial unions as the United Automobile Workers and the International Association of Machinists. Hence, such rulings have produced serious jurisdictional disputes.

It is our considered opinion that the recommendations of this committee should recognize that the ground operating, support, testing, control and communications equipment is an integral part of the missile weapons system and not a part of the facility itself. Once this principle is established, most of the problems with which the administrators of the Davis-Bacon Act have been concerned will disappear. We therefore propose to the committee the adoption of a regulation which could be used as a guide by the Department of Labor in passing upon question of coverage of the Davis-Bacon Act, reading as follows:

"The terms 'public building' and 'public works' shall refer to the permanent structural improvements of land owned and directly operated by the Government of the United States, including items and equipment of general usage that are constructed as an integral part of such improvement such as elevators and central air conditioning, heating, plumbing and illuminating systems; but excluding all items and equipment of specialized usage that are capable of severance from the land and the basic structure in connection with which they are used without substantial injury to the land or structure and also excluding all ground operating, support, and communications systems and equipment for missiles or any other land, water, air, or space craft, irrespective of whether the installation, assembly, repair or alteration of such systems or equipment is performed at the site of the public building or public work or whether such systems or equipment have become affixed to real property."

If this definition is adopted, the application of the act to specific items readily falls into place. It then becomes plain that not only the modification, maintenance, and checkout of ground support and operating equipment but also its installation is outside the coverage of the act. Such installation is basically the assembly of manufactured components and represents a continuation of the manufacturing process.

Under this approach to the problem no significance would be attached to the question of whether or not certain building trades are capable of performing, or have at times performed at certain missile sites, a portion of the equipment installation work. Admittedly there are members of building trade unions who can, after a sufficient period of training, perform some such tasks. The application of a statute, however, does not depend upon such transient considerations, but rather upon its language and basic purpose. It is submitted that to describe any portion of the weapons system, which is not an integral and irremovable portion of the military facility itself as a public building or public work does violence to the intent of Congress.

JOINT SUBMISSION OF THE INTERNATIONAL ASSOCIATION OF MACHINISTS AND THE UNITED AUTOMOBILE WORKERS, AFL-CIO, IN THE MATTER OF THE APPLICABILITY OF THE DAVIS-BACON ACT TO INDUSTRIAL MANUFACTURERS' MISSILE SITE ACTIVATION CONTRACTS

We welcome this opportunity to present this joint submission for the IAM and the UAW regarding the question of the applicability of the Davis-Bacon Act to the missile site activation contracts between industrial manufacturers and the Air Force. Both of our unions made submissions on this subject to the U.S. Department of Labor in June of 1960 and these have been made available to this committee. We respectfully refer the attention of the committee to the various points and demonstrations in those submissions.

The interests of the UAW and the IAM in the determination as to the coverage of the Davis-Bacon Act arises from these organizations' extensive representation of employees of missile manufacturers and related industries. These unions represent employees of Boeing, Douglas, Lockheed, Convair and Martin corporations, all large aircraft manufacturers who have been extensively engaged in producing various types of missiles and ground-support equipment for the Air Force. These missiles and ground-support equipment are often referred to as either missiles and missiles systems or weapons and weapons systems. In the course of their employment by these manufacturers, the unions' members in considerable numbers have been employed at the various Air Force missile testing sites, such as Cape Canaveral, Fla., Vandenburg Air Force Base, Santa Maria, Calif., Cheyenne, Wyo., and the like.

These members are engaged in manufacturing, operating, proving, testing and maintaining the various missiles and missiles systems manufactured by their employers. This work is normally performed at the various plants of these manufacturers but recently some of these manufacturers have received contracts to in

stall missiles and missiles systems at operational sites scattered throughout the United States. The work performed by the employees of the manufacturers at these missile sites is the same identical work that the employees performed at the manufacturers' plants. However, the equipment known as the missiles systems or weapons systems is at times attached to the blockhouse, building, etc.

Presently, the Air Force missile manufacturers' contracts at the testing site are of a type generally designated "operational and maintenance." Existing Air Force facilities are utilized by the manufacturers to conduct research and development, to test and improve the missiles and their systems. At many of these sites there are additional test activities performed by the manufacturers' employees. The manufacturers at the test sites are primarily interested in testing and improving the performance of the respective missiles and systems. Therefore, they are engaged in a program of modification. This is a continuation of the manufacturing process and particularly its research and development phase.

Today we deem it most important to emphasize to this committee our basic position that the installation of industrial equipment at missile sites, which ele ments of the building trades are seeking to obtain as work for their own members through a perverted misuse of the Davis-Bacon Act, cannot conceivably be deemed to be "construction, alteration or repair" within the meaning and contemplation of the act. To regard as "construction" what is nothing more than the completion of the manufacture of complex industrial components, would utterly subvert the purposes of the act to guarantee the payment of construction rates on construction wok-not on industrial manufacture. Moreover, to treat the industrial operations involved in the installation, checkout and activation of industrial components at the missile sites as construction subject to the Davis-Bacon Act, would be to create a vast "grey area" of conflict, duplication and confusion between the Walsh-Healey Act and the Davis-Bacon Act wherever the completion of industrial manufacturing operations is performed at a fixed site or location. Such a grey area would result in a most unfortunate and dangerous field of contention, creating schisms and jurisdictional disputes between the contesting unions and causing untold delays and padded expense. Indeed, all that can possibly result from the creation of such a grey area is permanent interunion strife and discord. The industrial unions will not countenance encroachment upon industrial work upon the pretext of the Davis-Bacon Act and will resist attempted encroachment with all the resources at their command.

Turning to the statutory issue before this committee, we submit, first, that the Davis-Bacon Act must be construed to be inapplicable to installation of industrial equipment within fixed structures, irrespective of the amount of "affixture to realty" involved in such installation. Second, we submit that, even if this reasonable functional approach were for some reason rejected, nevertheless, so inconsequential a proportion of the industrial installation operation at the missile sites involves "affixture to realty" or other construction-type functions, that as a whole the installation phase must be deemed to be completion of manufacture rather than construction of the structure. On either view, the act is inapplicable to the area of missile site work presently under dispute.

In addition to these two points, which we deem critical in determining the applicability of the Davis-Bacon Act to the installation of industrial equipment, we intend to demonstrate through expert witnesses present today (1) that the missile system installation and related operations here under dispute are in fact no more than completion of the supply, manufacture and activation of industrial components, (2) that the very history of the effort by the construction trades to arrogate to themselves these areas of work at the missile sites, an effort fraught with failure and the necessity of rework by industrial employees, demonstrates that the disputed work cannot possibly be deemed "construction." I. INSTALLATION OF INDUSTRIAL EQUIPMENT CANNOT BE DEEMED "CONSTRUCTION" UNDER THE DAVIS-BACON ACT

The erection and construction of supporting buildings and structures at the missile sites is performed under Corps of Engineers contracts, and completed before the phase of the work performed by the industrial contractors-the installation and activation of industrial components (weapons systems) which constitute the missile launching equipment. What is under dispute is not the construction of the basic supporting structures, but only the installation within those structures of industrial equipment constituting the missile launching system, including the electrical circuiting between the industrial components, their checkout, validation and activation. It is clear that the function performed by

the industrial contractors at the missile sites is thus the "manufacture and furnishing of materials, supplies, articles, and equipment," regulated by the WalshHealey Act, rather than the "construction, alteration or repair" of public buildings and public works subject to the Davis-Bacon Act.

Only a distorted interpretation of the function performed by the industrial contractors at the missile sites could lead to the conclusion that they are performing "construction" work. The Davis-Bacon Act applies to "every contract *** for construction, alteration, and/or repair" of public buildings or public works. Is a contract under which industrial equipment is placed in an already completed structure and made operable a "contract for construction?" It seems clear that the answer to this question must be in the negative, unless by the statutory language "contract for construction" Congress meant "contract for work"-i.e., unless Congress meant that all work in or on public buildings and public works was to be subject to the Davis-Bacon Act. But clearly, Congress did not intend that all work in and on public buildings and public works was to be subject to the Davis-Bacon Act, for it could have said so easily and simply and it did not. Indeer, the Labor Department's own Davis-Bacon regulations (sec. 5.2(f)) recognize the limited coverage of the act, whose terms the regulations state to "include construction activity as distinguished from manufacturing, furnishing of materials, or servicing and maintenance work."

What, then, is the status of the installation of industrial equipment—is such installation activity "construction" or a continuation of manufacturing and furnishing of materials? The answer, it seems to us, is clearly that the installation of industrial equipment is not construction under the act. Construction can only be deemed to relate to the erection of structure as distinguished from the supply and installation of industrial equipment and components within the structure. Of course, there are industrial components which constitute part of the structure itself-for instance, an elevator in a factory is not an industrial component housed by the factory, but an integral part of the housing itself; it is essential to the utilization of the structure. Thus, no one is disputing that the DavisBacon Act applies at the missile sites to the installation for the supporting structures of basic power, lighting, heating, air conditioning, and the like. In sum, the test must be a functional one: Activity (including installation) which is necessary to the erection and completion of a fixed structure, is construction under the act; activity which is necessary to the placement and completion of industrial equipment within the structure (and which is merely house by, rather than a functioning part of, the structure itself) is manufacture and supply, to which the act is inapplicable.

There is support in Davis-Bacon precedents for such a functional test of construction. Thus, as early as 1944 in a ruling of the Comptroller General in Pratt & Whitney (Comp. Gen. B-42407, unpublished, June 24, 1944) a functional dividing line between construction and manufacture (including installation of equipment) was suggested. There the Comptroller General stated that installation of machinery is subject to the Davis-Bacon Act only where such installation "can be determined to be an essential part of the construction, alteration, or repair of public buildings or public works." And he went on to distinguish construction and installation of equipment in the following terms: "As a practical matter, it must be recognized that installations of machinery often are made as an integral part of their manufacture and delivery and may not involve any appreciable construction work.”

A similar functional approach appears in the Solicitor's ruling to the AEC in 1951 concerning the Hanford Works project. There the Solicitor recognized that the distinction between construction and manufacture hinges upon whether the work is "so closely integrated with the production operations that it should be classified more in the nature of a production activity than as construction, alteration, or repair." Indeed, as recently as July 17, 1959, a ruling of the Solicitor to the AEC regarding Westinghouse Electric Corp. at Arco, Idaho, recognized that a functional test must be applied to distinguish construction from manufacture and supply. There the Solicitor ruled that "assembling and fitting the components of a nuclear steam propulsion system into the hull section" of a public work, including "installation of pressure vessels, turbogenerator sets, heat exchangers, control panels, wiring, etc," was "so closely connected with the operational activities of the Arco installation" as not to be subject to the Davis-Bacon Act.

Under the functional test of construction, semantic contradiction is avoided, for it is impossible to have manufacture, equipment modification, checkout and