Mr. BLACKHALL. May I say, Mr. Griffin, I think it was this letter of November 29 from the Ohio Society of Professional Engineers which was really what knocked it on the head.

Mr. GRIFFIN. But at some indefinite time in the future, some other Solicitor could write you a letter and tell you he changed his mind.

Mr. BLACKHALL. If the operating engineer, after 20 years, had the authority to walk into their office and have them change it, why couldn't they do the same thing tomorrow?

Mr. GRIFFIN. That is the point of your testimony?

Mr. BLACKHALL. Yes.

Mr. GRIFFIN. Thank you very much.

Mr. ROOSEVELT. Thank you very much.

Mr. BLACKHALL. Being on the top or bottom of the totem pole, Mr. Chairman and the committee, I want to thank you on behalf of the AGC and all the directors before me for the privilege of coming here, and I want to say one thing, Mr. Chairman. When you have gentlemen like Mr. Pucinski and Mr. Goodell, not here today, you did a good job trying to keep them both together.

Mr. ROOSEVELT. Thank you very much.

That completes the list of witnesses for today. The committee will hear on Monday, beginning at 9:45, Mr. Robert T. Borth, the Washington representative of the General Electric Corp., on behalf of the U.S. Chamber of Commerce; at 10:30 Mr. J. E. Welch, Deputy General Counsel of the Office of the Comptroller General of the United States; and at 11:30 Brig. Gen. T. J. Hayes, Assistant Chief of Engineers for NASA support.

The committee will stand adjourned until 9:45 a.m. Monday next. (Whereupon, at 11:30 a.m., the subcommittee adjourned, to reconvene at 9:45 a.m., Monday, June 11, 1952.)

ADMINISTRATION OF THE DAVIS-BACON ACT

MONDAY, JUNE 11, 1962

HOUSE OF REPRESENTATIVES,

SPECIAL SUBCOMMITTEE ON LABOR OF THE

COMMITTEE ON EDUCATION AND LABOR,

Washington, D.C. The subcommittee met at 9:45 a.m., pursuant to adjournment, in room 429, Old House Office Building, Hon. James Roosevelt (chairman of the subcommittee) presiding.

Present: Representatives Hiestand, Pucinski, Griffin, and Martin. Staff members present: Howard G. Gamser, chief counsel for labormanagement; Edmund D. Edelman, subcommittee counsel; Richard T. Burress, minority clerk; and Adrienne Fields, subcommittee clerk. Mr. ROOSEVELT. The subcommittee will be in order.

The committee this morning has the pleasure of welcoming as its first witness, Mr. Robert T. Borth, representative of the General Electric Co. on behalf of the Chamber of Commerce of the United States.

Mr. Borth, we want to thank you for your presence and appearance before the committee. I note that you have a rather full statement. I don't know whether you want to read it in its entirety or how you would prefer to proceed. You may do so in any manner which you choose.

STATEMENT OF ROBERT T. BORTH, CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA, ACCOMPANIED BY EUGENE A. KEENEY

Mr. BORTH. Thank you, Mr. Chairman, I intend merely to summarize it and put it in its entirety into the record.

Mr. ROOSEVELT. Without objection, if it is agreeable to you, we will have your full statement as you have submitted it in the record followed by your summary.

Mr. BORTH. Thank you.

(The prepared statement of Mr. Robert T. Borth follows:)

TESTIMONY OF ROBERT T. BORTH FOR THE CHAMBER OF COMMERCE
OF THE UNITED STATES

I am Robert T. Borth, Washington representative of the General Electric Co. of New York, N.Y. I am chairman of the Walsh-Healey and Davis-Bacon Committee of the Chamber of Commerce of the United States.

I am here today to discuss the administration of the Davis-Bacon Act by the Labor Department. May I commend Congressman James Roosevelt, chairman of this special subcommittee and his subcommittee for scheduling these comprehensive hearings relating to the administration of the Davis-Bacon Act. These hearings have been long overdue and this subcommittee is making an

outstanding contribution to due process and fairplay by a complete airing of the problems encountered by this outmoded law.

The national chamber established a special committee on the Walsh-Healey and Davis-Bacon Acts in December 1959, mainly because of the unfair and seemingly biased administration of these acts by the Labor Department. It is our hope that once this investigation of the administration of the Davis-Bacon Act has been completed, this subcommittee will recommend remedial legislation. It is also our hope that the subcommittee will then devote itself to a full inquiry into the administration of the Walsh-Healey Act. It is our sincere observation that the retention of the minimum wage provisions of both the Walsh-Healey and Davis-Bacon Acts can no longer be justified by considerations affecting the national interest and such laws should now be repealed in view of the subsequent enactment of the Fair Labor Standards Act which covers most of industry. There is no justification for the imposition of different, conflicting, and overlapping statutory wage standards on American business.

Therefore it is our hope that if the Davis-Bacon Act is not to be repealed now, then it should be amended to assure judicial review of administration interpretations and of wage determinations.

Accordingly, the chamber proposes to discuss in this testimony the following: (1) A representative sample of letters regarding administration of the Davis-Bacon Act received from members of the Chamber of Commerce of the United States.

(2) Legislative history of the Davis-Bacon Act which sheds light on congressional intent pertinent to the administration of the law.

(3) Administration of the Davis-Bacon Act including how determinations are made, Labor Department interpretations, selected examples, and miscellaneous comments made by Members of Congress.

(4) The chamber remedy, namely amendment of the Davis-Bacon Act to assure judicial review of administrative interpretations and of wage determinations; with an analysis of the legislation introduced by Congressman Charles Goodell, Republican, of New York (H.R. 11115).

1. THE CHAMBER'S WALSH-HEALEY AND DAVIS-BACON COMMITTEE

I have been chairman of the chamber's Walsh-Healey and Davis-Bacon ComImittee since its inception in December 1959. My study of this law has revealed glaring deficiencies and bias in the administration of the act by the Labor Department.

I believe this committee will be interested in selected excerpts of letters from our files regarding the administration of the Davis-Bacon Act which indicate the great controversy involved in the administration of the law.

New Jersey

"I should like to take this opportunity to draw your attention to what we consider some of the detrimental effects of the Davis-Bacon Act. As an engineering and construction management firm, we are constantly aware of, and struggling with, rising building costs. It is our belief that the Davis-Bacon Act, in situations where it has artificially inflated local wage rates, appreciably aggravates this problem.

"The set of conditions under which the Davis-Bacon Act was originally passed, the depression of the 1930's when it was important to inflate the value of the dollar and increase purchasing power, is no longer applicable. To the contrary, inflation is as great`a problem today as deflation was in the 1930's. Nevertheless, despite the complete reversal of economic conditions, the Davis-Bacon Act still operates. It would seem then that, since maintaining the value of the dollar is as important today as increasing purchasing power was in the 1930's, repeal of this law should be seriously considered."

Michigan

"Our city of Fremont has the advantage of having a Fremont Foundation. The foundation distributes funds from two or three trusts, one of which is set up to aid and assist aged needy individuals. When it appeared that loans were available from the FHA organization for the construction of retirement homes. we set up a separate housing corporation for the purpose of constructing 5 duplexes to house 10 aged couples and made application to the proper agency for a loan in the amount of $100,000 at 3% percent payable over a period of 50 years. It appeared that this loan would be available and our housing corporation went ahead and advertised for bids. One of our local contractors was

awarded the contract for approximately $93,000. The construction of these houses was well begun before the Government agency sent a representative to Fremont to consult with the housing company and to check over the location and the plans and specifications. Everything seemed to be in order except that our contractor was paying local building trades wages and under the DavisBacon laws he was supposed to pay current union wages as they prevail in neighboring Muskegon and Grand Rapids. Our contractor indicated that if he had to refigure the contract on the basis of union labor rates in Muskegon and Grand Rapids, the contract price would have to be increased by $20,000 so it appeared to us that this housing program was set up to benefit union labor rather than the aged. While we have not officially withdrawn our application for the loan and have secured other funds and have the project practically completed, the lending agency has not contacted us in any matter and we assume that our application will not be approved.

"In view of this experience we would heartily favor the repeal of the DavisBacon and Walsh-Healey laws."

Iowa

"I am very glad to see the chamber of commerce tackle this problem. It has been particularly effective in the constant up-pushing of labor rates. The fixing of erroneous and outrageously high Davis-Bacon wage predeterminations on a hospital, for instance, built in a community like Estherville, Iowa, means that thereafter, every person building anything of any character-a commercial remodeling job or a residence is subject to increased wages and resulting higher costs. The construction employees in the community do not accept the wage level existing previous to the predetermination willingly. A compromise of some sort results. So the hospital construction, because partially financed by Federal funds, has raised the wage level, and thus the cost of all subsequent construction. This is eminently unfair to the community and has a negative effect on its development.

"The Davis-Bacon Act has increased the cost of Federal construction in all areas and, in particular, in rural areas. Bremer County, Iowa, is such an area, "As proof of this there is enclosed a copy of wage determination S-23,200 for work at the Waverly Air Force Station and a list of rates for like skills in private work. The original determination set $2 per hour for laborers. We were able to get this item changed by the submission of preponderant evidence showing that the above rate was excessive. Later determinations for this same location have been similar.

"The wages as determined are the rates that the building trades in Waterloo, Black Hawk County, Iowa, would like established. These unions have constantly tried to include Bremer County within their jurisdiction. This we in the local construction industry have just as constantly resisted for the principal reason that the existing locals cannot and will not effectively service our projects. "In addition to the extra costs added by these inflated wage rates, there are the added expenses, for the contractor, of maintaining and submitting the required reports and, for the Government, the job of policing all covered jobs. "I have been associated with jobs covered by Davis-Bacon since 1933. In no instance can I recall where the law has done anything except increase the costs of construction and provide many additional administrative and clerical jobs. We now note this same effect in connection with the present interstate highway program.

"It is the firm conviction of the construction industry in Iowa that the DavisBacon Act should be repealed and let competition set the wage rates for all projects. The law of supply and demand will safeguard the wages of all workers. By letting wages follow the trends in the economic cycle the Government can be assured of obtaining the maximum value for its construction expenditures."

Florida

"The projects freshest in my mind when I wrote the chamber were the Student Union Building at Stetson University in DeLand, Fla., costing $1,250,000 and the Florida Lutheran Retirement Center, also at DeLand, Fla., costing $135,000. "Stetson University borrowed about $1 million for the Union Building from HHFA and under the Davis-Bacon Act were obliged to pay the minimum wage rates established in Washington.

"DeLand is a town of about 15,000 people and its building trades had been paying the going rate in that locality, which averaged some 33 percent less than

the Davis-Bacon rates. There was no builder in DeLand who could bond $1,250,000 so the job went to an out-of-town contractor. The higher rates which he was obliged to pay drew the best men in town away from the local builders or forced these builders to pay the higher rates in order to keep their men. This caused considerable ill feeling in DeLand among the building trades and even more resentment toward Stetson.

"The case of the Lutheran Retirement Center was similar in many respects. Plans were completed and turned over to a local builder to estimate and he proposed a lump sum contract price of $135,000. Contributions to the building fund came in slowly so application was made to the FHA for a loan.

"Because of the required minimum wage rates and certain other FHA requirements, the same builder refigured the job and submitted a revised proposal in the amount of $180,000. The owner withdrew his loan application, finally raised the money privately and completed the building last year at the original figure of $135,000.

"The State of Florida has a similar law called the prevailing wage statute under which wage rates for all public buildings, including schools and other city and county building construction costing over $5,000, must pay a minimum wage established in Tallahassee. This law works the same hardship on the building trades in the smaller communities as the Davis-Bacon Act and is almost as unrealistic."

California

"The original reason behind the Davis-Bacon Act was to assure that construction for Government account was not performed under cost-cutting conditions but rather on the basis of paying comparable rates for comparable work within a given labor market area. This principle has been subverted by taking wages and conditions set in high-cost metropolitan areas and forcing them upon low-cost rural areas under the guise of paying equal rates for the same kind of work throughout a given region. This has been the major accusation against the way the Davis-Bacon Act has been administered for many years."

These letters are just a representative sample of comments that the chamber has received regarding the administration of this law.

The 1931 statute

2. LEGISLATIVE HISTORY

The Davis-Bacon Act is the first Federal law governing wages to be paid by contractors with the Federal Government. As originally enacted in 1931 it applied to contracts in excess of $5,000, to which the United States was a party and which involved the employment of laborers or mechanics in the construction, alteration, and/or repair of any public buildings of the United States. Contracts subject to the act were required to contain a provision that laborers and mechanics employed by the contractor of any subcontractor on the public buildings covered by the contract would be paid not less than the prevailing rate of wages for work of a similar nature in the city, town, village, or other civil division of the State in which the public buildings are located. Covered contracts were also required to provide that any dispute as to what the prevailing rates were which could not be adjusted by the contracting officer be referred to the Secretary of Labor for determination and that his decision was conclusive on all parties to the contract.

The general background and immediate history of the Davis-Bacon Act show strong pressures for some means of stabilizing labor costs on Government construction contracts. The spark for the exertion of these pressures in the early 1930's was provided by the widespread unemployment caused by the depression which made migratory labor available at almost any price and the imminence of substantial governmental expenditures for public works to be constructed under contract.

The Republican administration was prompted to press for action by widespread importation of cheap labor, often from a distance, and the consequent depressing effect upon the very incomes and wage scales which the Federal Government was trying to maintain by a greatly expanded public building program in localities with substantial unemployment.

This has been the cry of the Davis-Bacon advocates since its enactment, Le., that Federal funds should not be permitted to underwrite substandard working conditions-to make certain that a competitive advantage in obtaining contracts will not be given to bidders who base their bids on wage levels lower than those actually prevailing in the area-to protect local workers against importation of distant, low-wage workers.