- In summary, the Act's profit limitations serve to the disadvantage of everyone the federal government, taxpayer, and contractor. The statutorily-imposed profit limitations discourage a contractor from reducing his costs and being "profitable." This results in a government loss of tax revenue that otherwise would be realized from increased profits. At the same time, the statutorily-imposed profit limitations discourage a contractor from reducing his costs below the point at which his profits reach the "profit maximum." This motivation to increase profits to the statutory maximum results in the government ultimately paying more for its goods and services than is necessary. Finally, low cost, efficient and profitable suppliers will not compete for government business. This reduction in competition will further compound the problem of higher costs paid by the government. All of these by-products of Vinson-Trammell are contrary to the best interests of the federal government, taxpayer and contractor. Evidently, the Reagan Administration and some members of Congress view it the same way and steps have been taken in the Senate to repeal the Act, steps the Chamber clearly supports. Recently, the Senate approved its version of the FY '82 DOD Authorization Act (S. 815) which contains an Administration-backed provision repealing Vinson-Trammell. The House of Representatives soon will consider its version (H.R. 2970) of the bill which contains a provision extending the present moratorium to July 1, 1982. We will appreciate Subcommittee members' support for inclusion of a Vinson-Trammell repeal provision when the Senate considers this legislation in conference with the House in the coming weeks. Procurement Policies to Achieve Socio-Economic Goals Many labor relations laws and regulations have a specific impact on government contractors. In implementing national employment policies, these statutes and regulations give rise to obligations unrelated to the substance of the contract. In The government contract is merely a vehicle, in labor relations as in other areas, for the imposition of unique socio-economic requirements deemed to be in the national interest. fact, in the wake of recent court decisions upholding mandatory enforcement of President Carter's Wage and Price Guidelines solely on large government contractors, it is clear that contractors cannot avoid the socio-economic burdens imposed by the fine print of government contracts. Two of the most controversial labor relations statutes are the Davis-Bacon and the Service Contract Acts. Both federal laws provide that "prevailing" wage rates be paid to private sector employees. These Acts have limited jurisdiction, applying only to employees of federal government contractors in construction and service industries, respectively -- and set "local prevailing" minimum wage rates for them. - We urge repeal of the Davis-Bacon Act which has been an absolute and miserable failure. It is impossible to administer and adversely impacts on local labor standards and local economies exactly opposite to the intent of its original sponsors. It survives today mainly through the persistence of special interest groups. The Davis-Bacon Act is a federal super-minimum wage law that requires private contractors to pay not less than federallypredetermined wage rates to each class of employees working on federal and federally-assisted construction projects. As currently administered, it restricts competitive bidding on federal construction contracts and impedes the hiring of youth, minorities and adult women for jobs on federal and federally-assisted construction. A 1971 GAO study found that the Act causes such construction projects to cost 5% to 15% more than equivalent private contracts, and a 1979 GAO study called for repeal of the law. We concur. We also recommend repeal of the Service Contract Act. The Act sets workers' wages on federal contracts when the contracts' principal purpose is to provide services in the United States using service employees. For contracts over $2,500, the minimum wages and fringe benefits must be based on rates the Secretary of Labor determines as prevailing for service employees in the locality. This Act has had an effect on the service industries similar to Davis-Bacon's effect on construction. The Act unduly increases the cost of service contracts, arbitrarily inflates wages and creates added burdens on those who administer it. Accordingly, the Service Contract Act should be repealed. Until repealed, both Acts should be amended substantially to incorporate definitive and fair minimum wage determination procedures, standards, and review. We would appreciate your Subcommittee members' support. Conclusion In addition to these specific concerns, these are more general problems we hope will be addressed when the Office of Federal Procurement Policy submits its "New Federal Procurement System" to Congress in October, 1981. Increased economy, efficiency, and effectiveness in the procurement of property and services by and for the executive branch of government should be promoted. There is a need to simplify and streamline existing procurement processes and programs so that organizational layering and regulatory burdens are minimized and unnecessary paperwork is eliminated. And, the mechanisms and necessary authority to establish, monitor, and enforce the policies, procedures, and programs governing or directly affecting all phases of the procurement process must be provided. Inherent in this is the development of managers directly and personally accountable and responsible for all phases of the process for a given commodity, procurement program or project, who make management decisions based on the best available information provided through comprehensive, accurate and timely data collection and reporting programs. Accordingly, we look forward to working closely with you as you review the "New Federal Procurement System" which aspires to meet the above-stated goals. In the interim, we will be working with the Office of Federal Procurement Policy as it formulates its procurement system, management system and legislative proposal the three elements of the "New Federal Procurement System." - The U.S. Chamber appreciates this opportunity to submit our statement. I will appreciate your consideration of our views, and I respectfully request that this statement be included in the hearings record. 81-896 0-81--11 |