Now, I would be very glad to answer any questions which members of the committee or their staffs may have concerning it.

At the threshold I have been told that there is some curiosity as to why we did not simply take the Davis-Bacon Act and extend it so that it would cover service contracts as well as construction contracts. I think perhaps that there are several answers to that question, the first of which is that at the time this bill was first being considered, that approach was thought of. In fact, there were in the House of Representatives at least several bills which took that approach to covering service contracts under the Davis-Bacon Act.

We did not take it at that time and thereafter did not take it, because, as the Senators will recall, about 1962 when this measure was first introduced, the Davis-Bacon Act was under very thorough investigation in the House of Representatives and there seemed little possibility of seeking to amend it or change it at that time other than perhaps adding fringe benefits to it.

A second reason is that, very frankly, the building trades unions have very properly considered themselves as having a strong interest in this statute and would have been adverse to any amendment or change in it which brought it beyond the scope of the construction field. I do know that in this very bill itself-I think it was last year's version of it-we made specific reference to the Davis-Bacon Act and that, while it did not extend the Davis-Bacon Act in any way, the intended exception was misconstrued by some as meaning that we were applying the Davis-Bacon Act.

I believe the complaint was that we were excluding maintenance and repair work from the Davis-Bacon Act and putting it under another statute. We were not doing that and we changed the language here to insure that that would not be misunderstood in any way.

I just cite that to show that there is a certain amount of real sensitivity as to any amendment which affects the scope and purpose of the Davis-Bacon Act confined as it now is to the construction industry. Another answer to that question is, that in principle, without mentioning it, we have followed the Davis-Bacon Act. I address myself to the provisions on page 2 of the bill as it was reported in the House of Representatives, paragraph No. 2, which provides for the determination of prevailing wage rates by the Secretary of Labor on the basis of those prevailing for service employees in the locality.

Now the word "locality" is comparable to the words in the DavisBacon Act; city, town, village, or any other political division of the State in which the contract work is to be performed.

We have found in the administration of the Davis-Bacon Act that we cannot give a technical construction to those specific words in the act. For that reason, we have substituted the word "locality" for the words of the Davis-Bacon Act.

Another departure from the Davis-Bacon Act which we have made in the light of experience is to provide Walsh-Healey Act type of enforcement procedures with authority centered in the Secretary of Labor and with the Comptroller General directed to follow the Secretary's determinations as to any violations which may have occurred. In that area we have also provided-I think wisely-for flexibility of the blacklist provisions. Under the Davis-Bacon Act you can blacklist for 3 years, but you cannot relieve an individual once he has been blacklisted and you cannot shorten the period.

We would provide in this bill for a flexible blacklist so that those who thereafter qualify themselves as Government contractors by payment of fair labor standards wages, will thereafter become once more qualified for contracts short of the full 3-year period of disqualification. If there are any other questions concerning this bill that I can answer, I certainly will do my best to do so.

Senator MCNAMARA. Mr. Donahue, you mentioned a couple of instances where wages were paid, 70 to 80 cents an hour, in that area. Were there fringe benefits in addition to these wages?

Mr. DONAHUE. I could not answer that question, but I would assume there were not.

Senator MCNAMARA. Were these people in any manner temporary employees or were they what you would consider permanent employees?

Mr. DONAHUE. Well, from the categories of workers, in Atlanta, for example, wage rates for laundry and cleaning services; and in Baltimore, they give wage rates for elevator operators; I assume that that is as permanent as any other similar type of employment is. At those wage rates I would regard any employment as probably temporary in character, because each person is trying to move on as fast as he can to something that pays him a little more.

Senator MCNAMARA. Senator Prouty, you apparently had some questions.

Senator PROUTY. Senator Javits is here.

Senator MCNAMARA. Senator Javits?

Senator JAVITS. I just walked in, but what I have in mind may be troubling Senator Prouty, too. We are troubled, and I am briefed by the minority labor counsel, by two questions: One, why do you need a bill at all; why do you not just have a very brief amendment to the Davis-Bacon Act? And two, what is the legal and conceptual difference between the catechism proposed by this bill, to wit: "prevailing rates for such employees in the locality," and the catechism of the Davis-Bacon Act, "prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract"?

It would seem to us that you are trying to establish a new standard, to wit: A locality standard as contrasted with the Davis-Bacon standard, which is a standard based not only on locality but also on the type of employment and the nature of the business.

Now the question which we are interested in is, are you seeking a new standard by this bill, and if so, what is it?

Mr. DONAHUE. That is a good question, Senator, and I think I can explain it best this way.

In the first place, the word "locality" is not a new word, it is used in the Walsh-Healey Act and it has been accorded a very wide degree of flexibility by use of the statute in court decisions in a number of

cases.

Now, the second answer is the Davis-Bacon provision: "City, town, village or other political subdivision of the State in which the contract work is to be performed," is language which cannot be literally applied. If it is, it is much too rigid to suit the needs of that statute and I think that that was recognized at the time the statute was first enacted by some of the colloquies which occurred, particularly in the House of Representatives, as I remember it.

We cannot confine ourselves under that statute to one State, for example, we even have to reach out beyond a State line in many areas of the West to find a prevailing wage rate. We cannot confine ourselves to the District of Columbia, for example, in establishing wage rates for this metropolitan area. And we do not do so; we reach out beyond the District of Columbia.

So, it is in deference to that need for flexible applications under the Davis-Bacon Act that we have used what we believe to be a more realistic word when we use the word "locality." A question might come up, how would we construe that word? We would construe it, I would believe, in terms of metropolitan areas in the first instance; I believe it would be most convenient administratively, for example, to take what they call the standard metropolitan statistical area which is established by the Bureau of the Census, and use that as a practical measure of a locality.

Now, I know there will be cases where military installations, for example, are built in remote areas where there is no realistic wage rate in relation to the numbers that may be employing under maintenance or service contract on that base, in which even we would realistically have to reach out beyond perhaps the immediate small town which may be neighboring to the military base until we got an area which is large enough to present comparable employment of comparable numbers of people in the same types of jobs to which the contracts on the base relate.

Senator JAVITS. In other words, really, you are telling us that because of the nature of this business, you need a standard which is more administrable?

Mr. DONAHUE. That is correct. As a matter of fact, we ran into fairly sharp criticism in investigation a couple of years ago in the House of Representatives because we did not literally apply the Davis-Bacon Act.

One example was Quantico, Va., the Marine base there. We determined it was the equivalent of a city by itself and that there was enough construction there so that the Quantico rate was the prerailing rate. We were criticized because Quantico was not a State or a political subdivision, for example, but I think it was a realistic result we reached.

Senator JAVITS. You do not intend to come in for changes in the Davis-Bacon Act itself, do you?

Mr. DONAHUE. Not at this time, Senator, and we did not consider it advisable to attempt to open up that statute in this way at this time. As I said to the committee before you came here, the building trades are very sensitive to any amendments which may affect that statute and I would anticipate some concern on their part if we were to take that course.

We believe we have taken as effective a course as we can under this bill and we have done it in a way in which we have avoided any opposition from the Government agencies which it will affect.

Senator JAVITS. I have one other question, Mr. Chairman.
Senator MCNAMARA. All right.

Senator JAVITS. One other question: Will you define in the administration of this bill, if we report it out, the word "locality" in the same way as it has been defined by the courts under the WalshHealey Act?

Mr. DONAHUE. I would think not, Senator, because the localit under that statute, under most wage determinations, is nationwid in character and that is because competition for contracts is nationwid in character.

That has been upheld by the courts, but I think that would b inadvisable under this particular statute. We would seek out th wage rates in what I first described as the standard statistical metro politan area. We would take metropolitan areas and determine wag rates on that basis rather than on any nationwide basis, I woul believe.

Senator JAVITS. Why use the word of art, "locality," which ha been construed by the courts?

Mr. DONAHUE. We have not been confined in establishing wag rates by the courts. We have not been restricted under the Walsh Healey Act. There is authority to have multiple rates for differen parts of the country under that statute.

We have that type of discretion. If the committee should thin that we should not use that discretion on a nationwide basis, and ma I say it is only because and in those cases where there is nationwid competition that the courts have sustained a nationwide wage rat under the word "locality." It is doubtful in my mind that they woul be able to do that under this word "locality" in this statute where think it may be found that no such nationwide competition wi probably occur.

Senator JAVITS. Mr. Chairman, I ask unanimous consent the the record may be corrected by Mr. Donahue in view of the specificit which he used in defining how he would administer this law if o review he should decide something else needs to be said or added. Senator MCNAMARA. Without objection.

Mr. DONAHUE. Thank you, sir.

Senator MCNAMARA. Will you give the subcommittee an idea how many additional employees would be required by the passag of this legislation?

Mr. DONAHUE. I have heard an estimate of that, Mr. Chairman which is frankly an estimate. We would estimate that approximatel 10 additional personnel would be necessary to administer this statut at a cost of approximately $80,000.

Now, I did not get up those figures, they were purely tentativ ones which were made for the purposes of the Bureau of the Budget. do not know how the statute would be administered in the Departmen of Labor if passed. My own personal view of it would be that very appropriate place for its administration would be with the Wag and Hour Act in the Wage and Hour and Public Contracts Division: and if so, I imagine that a fair amount of the inspection and enforce ment could be reasonably absorbed by that operating arm of th Department of Labor.

Senator MCNAMARA. Well then, your guess is that it would requir approximately 10?

Mr. DONAHUE. That is the estimate which has been made; yes. Senator MCNAMARA. You mentioned the Budget Bureau. Do w understand that the Budget Bureau has approved this legislation? Mr. DONAHUE. They have said there is no objection to it and tha it is consistent with the objectives of the administration.

Senator MCNAMARA. Very well. Any other questions?

Senator JAVITS. Senator Prouty has some.

Senator MCNAMARA. Senator Prouty?

Senator PROUTY. Mr. Donahue, first, I wish you would submit for the record a memorandum indicating the differences and similarities between this proposed legislation and the Walsh-Healey and DavisBacon Acts. I think that would be helpful.

Mr. DONAHUE. I will be delighted to do that.

Senator JAVITS. Would the Senator yield? One other point. Are we to assume that these statutes, including this one, will now cover everybody, or do you still have any interstices?

Mr. DONAHUE. There is one group that would not be covered and in my opinion they need coverage very much, and that is part of the employees who are paid by nonappropriated funds who are, in effect, employees of the Federal Government such as employees in PX's, for example. They are not subject either to a minimum wage rate or to a prevailing wage rate, and they are direct employees of Government activities. But virtually except for the exemptions in this bill tself and the exemptions which occur in the Walsh-Healey Act, there would be substantial coverage of most employees employed by contractors with the Federal Government under this as it supplements the Davis-Bacon Act and the Walsh-Healy Act.

Senator JAVITS. Why not include in the memo for which Senator Prouty has asked, any thoughts you may have for those employees who work in the PX's. If we are going to do the job, let's do it.

Mr. DONAHUE. The principal fact of the matter is it could be done by administrative action.

Senator JAVITS. Tell us that anyway. Let us have that information.

Mr. DONAHUE. Surely.

(The memorandum and additional information referred to follow:)

MEMORANDUM ON PRINCIPAL DIFFERENCES BETWEEN THE SERVICE CONTRACT ACT PROPOSAL, S. 2369, AND THE DAVIS-BACON ACT (40 U.S.C. 276a-276a-7) AND WALSH-HEALEY PUBLIC CONTRACTS ACT (41 U.S.C. 35-45)

PURPOSE

These acts have the common purpose of requiring minimum wage standards for Employees on Government contracts, as determined by the Secretary of Labor. The Davis-Bacon Act and the Service Contract Act proposal include express requirements for the payment of certain fringe benefits. The Walsh-Healey Public Contracts Act and the Service Contract Act further include health and safety requirements.

COVERAGE

The Davis-Bacon Act covers contracts of the United States exceeding $2,000 for the construction, alteration, or repair, including painting and decorating of Federal public buildings or public works. The act requires that laborers and mechanics employed directly upon the site of the construction work be paid wages which are not to be less than those found by the Secretary of Labor to be prevailing en construction of a similar character in the "city, town, village, or other civil subdivision" where the work is to be performed.

The Walsh-Healey Public Contracts Act sets basic labor standards for Federal Contracts for materials, supplies, articles or equipment, exceeding $10,000. Among other things, the act requires the payment of a minimum wage which is not less than the minimum wage determined by the Secretary of Labor to be the preVailing minimum "for persons employed": (1) on "similar work," (2) in the "particslar or similar industries," or (3) in "groups of industries currently operating in the locality in which the contract is to be performed."

The Service Contract Act proposal covers contracts, the principal purpose of which is to furnish services through the use of service employees, as defined in the