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OVERSIGHT OF THE FEDERAL PROCUREMENT SYSTEM

SATURDAY, MAY 2, 1981

U.S. SENATE,

SUBCOMMITTEE ON FEDERAL EXPENDITURES,

RESEARCH, AND RULES,

COMMITTEE ON GOVERNMENTAL AFFAIRS,

St. Louis, Mo.

The subcommittee met pursuant to notice in St. Louis, Mo., in the West Courtroom, Old Courthouse, Senator John C. Danforth (chairman of the subcommittee) presiding.

Present: Senator Danforth.

OPENING STATEMENT OF SENATOR DANFORTH

Senator DANFORTH. Two years ago, I brought this subcommittee to St. Louis. Then the subject was Federal paperwork. We heard from the assistant director of the Center for the Study of American Business at Washington University, representatives of the medical profession, small business leaders, and people who work for local governments here in the St. Louis metropolitan area. They told us about their firsthand experiences dealing with Federal paperwork and gave us their thoughts on how that burden might be reduced-testimony that helped us enact the Paperwork Reduction Act, a statute that gives the Office of Management and Budget new powers to crack down on Federal paperwork. OMB Director David Stockman has called the new law one of the most significant regulatory reform measures in the last 50 years, and the man in charge of cutting paperwork, Jim Miller, told me in Washington hearings recently that he will consider himself a failure if he cannot show a significant reduction in paperwork this year.

Today, I've brought the subcommittee back to St. Louis. The subject we're here to talk about is not paperwork, though I suspect there may be a comment or two about paperwork. The subject we're here to talk about is the business of doing business with the Federal Governmentthe Federal procurement system. The subject is complex-and, like paperwork, it's not the most exciting stuff in the world-but if we get the kind of results from this hearing that we got from our paperwork hearings, the time we spend here this morning will be well worth our while.

Each year, the Federal Government spends something on the order of $100 billion for goods and services-everything from paper clips and file cabinets to janitorial services, to research, to missile systems. But the process by which the Federal Government buys things is almost hopelessly complex. A 5-foot stack of Federal regulations governs procurement. There are more than 40,000 military specifications and standards-more than 6,000 Federal specifications and standards. Some 4,000

statutory provisions affect procurement-some going back almost as far as the Revolutionary War. And, while Congress has merrily proceeded over the years to tack on new and burdensome requirements for Federal contractors, there has been no successful effort to amend the basic laws affecting procurement for more than 30 years.

This October the Office of Federal Procurement Policy must submit to the Congress a proposal to make some sense out of the procurement system-a unified system-a single statute to create a coherent procurement policy for the Federal Government. It probably won't answer all the problems, but we hope it will address a good many of them.

In today's hearing we will hear from construction contractors, small business and minority contractors, and defense contractors. We have asked them to identify for us the problems they have encountered in doing business with the Federal Government, and we have asked for their suggestions for improvements in the procurement system.

No one knows better what's wrong with the system than the people who deal with it day in and day out. I look forward to today's testimony.

Now, unfortunately, because of time constraints, what I would like you to do, if you could, is to summarize your testimony in about 5 minutes. Otherwise we will just run out of time. Then we will have some time for questions and discussion. Any written comments you have or any more extended comments you have will be included in the record.

Our first witnesses are from the construction industry. They are Mr. Marion Medic, senior vice president for finance for Fred Weber, Inc., and Mr. Joseph Krispin, vice president of J. S. Alberici Construction Co.

Gentlemen, who would like to speak first?

TESTIMONY OF MARION "MIKE" MEDIC, SENIOR VICE PRESIDENT FOR FINANCE FOR FRED WEBER, INC.; AND JOSEPH F. KRISPIN, VICE PRESIDENT, J. S. ALBERICI CONSTRUCTION CO.

Mr. MEDIC. Thank you, Senator. My name is Marion Medic. We thank you for the opportunity to participate in this field hearing. The Associated General Contractors of America presented a statement to your subcommittee on March 18, 1981, in which they directed attention to specific paperwork requirements. As a member of the Associated General Contractors we heartily concur with their statement. We would like to present some details regarding the numerous reports that are required for Federal aid projects. Form WA-348 is a certified payroll for each project and must be submitted weekly to the Missouri State Highway Department and other municipal agencies to be in compliance with the Copeland Act. Weekly reports submitted show all kinds of details, employee's name, address, social security number, classification, rates of pay, daily and weekly hours worked, along with a statement that the payroll is correct and complete. Now even though all this detail is submitted the contractor is

1 See p. 29.

still required to preserve this information for 3 years after the job is completed. Upon completion of the contract the contractor submits his final certificate stating that the proper wage rates have been paid. This final certificate should be sufficient; a weekly payroll should be eliminated. In addition to these weekly payrolls, contractors are required also to submit training reports. Now the purpose of these training reports is to gather information by the State in which they pay the contractor 80 cents an hour, but it is also for the preparation of reports by the State to the division office of the Federal Highway Administration. This is a tedious weekly job. One list showing all the trainees with hours and rates for a particular job certified by the contractor should be sufficient.

Another form is a form 257 and that is called an employment utilization report that must be filed monthly. Monthly hours are shown by craft and how many of these hours are worked by minority and female employees. This form could be eliminated because records are available for inspection.

Another form PR-1391 is submitted annually on each project for the month of July indicating a current work force by classification, number of minority, women and non-minority employees. This should be eliminated; it is not indicative of the entire work force of the company and serves no real purpose.

For form PR-47 the contractor must maintain records not only of the total cost of all material and supplies purchased for the work but also the quantities of specific materials and supplies listed on this form PR-47. The total hours worked and the total amount earned by the employees are all submitted on this form. We think that should be eliminated.

The Missouri State Highway Department and other municipalities use a form called EEO project questionnaire. It is used on a Federal aid project when the project is approximately 30 percent complete. The purpose of this form is to provide specific information and actual documentation of what efforts the contractors and their subcontractors have actually made to comply with EEO requirements. This is another time when numerous documents must be made available to these agencies in their administration of Federal regulations. At this time the Missouri State Highway Department is completing this questionnaire for projects outside the St. Louis and Kansas City areas. This questionnaire should be eliminated.

Compliance reviews are called for by the regional office of the Federal Highway Administration. These reviews have been held on an individual project basis or on an areawide basis. The contractor must maintain detailed documentation for each project to demonstrate his affirmative efforts if a review is called. Copies of all the documentation are submitted at the time of the review. Documentation includes copies of the union bargaining agreements, recruitment sources, subcontractor agreements, list of new hires, list of minority forms, a variety of notes pertaining to meeting and telephone conversations. This certainly can be streamlined to cut down the quantity and type of documentation.

In the area of minority business enterprises and women's business enterprises, the Associated General Contractors covered this

controversial regulation very well in their statement. This regulation is being amended and hopefully the amendment will be worthwhile.

On OSHA regulations, the Associated General Contractors of America also made mention of the burdensome regulation that it is. The recordkeeping and length of time to preserve the records, the ordinary and common materials used in the construction industry, and the turnover rate of employment make this is an extremely burdensome and expensive piece of legislation. It is important to emphasize that all of this paperwork is burdensome and costly to the Federal and local governments as well as the contractors.

In conclusion, it is obvious that our energies and capital should be utilized toward real operation and production. Thank you. Senator DANFORTH. Thank you. Mr. Krispin?

Mr. KRISPIN. I guess Mike stole a lot of my thunder. However, my responsibilities include management of Federal contracts from the bidding process through the construction to final payment. It is a much broader area, and I would really like to thank you for the opportunity to present my views on problems concerning business with the Federal Government. Today we are saddled with literally thousands of regulations which increase cost, create time-consuming redtape, and decrease competition.

These regulations have promulgated in recent years to include noise abatement, water quality, air quality, solid waste, facilities for the physically handicapped, equal employment opportunity, safety and health, protecting threatened and endangered species, conserving fish and wildlife, archeological, historical and cultural preservation, small business set-asides, minority business subcontracting, esthetics, and freedom of information, and I'm sure there are more.

I would say that these regulations, if you know everyone of them and complied with everyone of them on every contract, you would never build a contract; it would be mind boggling in my opinion.

I have a statement with respect to redtape, but for the sake of time I have made copies of the regulations, Mr. Chairman, with probably appropriate comments for your record.

One of the programs that we find that eliminates competition for the Federal contracts is the Small Business Administration section 8(a) pilot program with the Corps. I am sure you are aware of this program. There is considerable information on the program; in fact I enclose an article in my notes that was published in the Engineers News Record of this program's failures and this article is dated April 23, and the gist of it is that out of the 4,600 contractors who are involved in the program, only 144 have graduated into the free enterprise system and that is over a period of 12 years. I really think the program needs to be looked at, upgraded, and a goal set for the contractors to become a part of our system.

In the area of specifics, and there are maybe two or three specifics, I would like to address to you as far as contracts. In Federal clauses we are required in many contracts to obtain permits to do work. One of the permits that really needs to be looked at by your committee is the

See p. 71.

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