B-148930, JULY 2, 1962, 42 COMP. GEN. 1

B-148930, JULY 2, 1962, 42 COMP. GEN. 1

BIDS - COMPETITIVE SYSTEM - LABOR AGREEMENT BENEFITS THE INCLUSION IN MISSILE CONSTRUCTION CONTRACTS OF A CLAUSE PROVIDING EMPLOYEE WAGE, HOUR AND FRINGE BENEFITS RESULTING FROM A LABOR-MANAGEMENT AGREEMENT, WHICH BENEFITS ARE NOT AUTHORIZED BY STATUTE, WOULD RESTRICT COMPETITION AND INCREASE THE COST TO THE GOVERNMENT; THEREFORE, SUCH A LABOR CLAUSE AS A CONDITION PRECEDENT WOULD BE CONTRARY TO THE LAWS OF GOVERNMENT CONTRACTING; HOWEVER, IF A DETERMINATION IS MADE THAT THE INCLUSION OF SUCH A LABOR CLAUSE WOULD FACILITATE THE NATIONAL DEFENSE UNDER THE AUTHORITY IN THE ACT OF AUGUST 28, 1958, PUBLIC LAW 85-804, 50 U.S.C. 1431-1435. NO OBJECTION WILL BE MADE TO THE EXECUTION OR MODIFICATION OF CONTRACTS WITH SUCH A CLAUSE.

TO THE SECRETARY OF DEFENSE, JULY 2, 1962:

BY LETTER OF MAY 17, 1962, YOU REQUESTED--- ON BEHALF ALSO OF THE ADMINISTRATOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, AND THE SECRETARY OF LABOR--- THE ADVICE OF OUR OFFICE CONCERNING A COURSE OF ACTION PROPOSED TO BE UNDERTAKEN BY YOUR DEPARTMENT AND NASA IN CONNECTION WITH CONTRACTS COVERING CONSTRUCTION ACTIVITIES INVOLVED IN CERTAIN MISSILE PROGRAMS OF YOUR RESPECTIVE AGENCIES AT CAPE CANAVERAL AND PATRICK AIR FORCE BASE.

IN ESSENCE, THE PROPOSED ACTION IS TO INCORPORATE INTO CONTRACTS--- APPARENTLY BOTH THOSE CURRENTLY BEING PERFORMED AND THOSE WHICH MAY BE AWARDED HEREAFTER--- THE TERMS OF A PROJECT STABILIZATION AGREEMENT NEGOTIATED BETWEEN A JOINT COMMITTEE REPRESENTING THE PATRICK AIR FORCE BASE CONTRACTORS ASSOCIATION AND OTHER LOCAL AND NATIONAL ASSOCIATIONS OF CONTRACTORS, AND THE BREVARD BUILDING AND CONSTRUCTION TRADES COUNCIL AND THE BUILDING AND CONSTRUCTION TRADES DEPARTMENT, AFL-CIO.

YOU REPORT THAT THE PRESIDENT'S MISSILE SITES LABOR COMMISSION, CREATED BY EXECUTIVE ORDER NO. 10946, MAY 26, 1961, AFTER REVIEWING THE MONEY PROVISIONS OF THE AGREEMENT, RECOMMENDED TO THE DEPARTMENT OF DEFENSE AND NASA: (1) THAT THE COSTS WHICH WOULD BE INCURRED BY CONTRACTORS UNDER THE TERMS OF THE AGREEMENT WOULD BE REASONABLE FOR PURPOSES OF COST REIMBURSEMENT, AND ANY AMOUNTS IN EXCESS THEREOF SHOULD BE DISALLOWED AS UNREASONABLE; AND (2) THAT ALL CONSTRUCTION CONTRACTORS, WHETHER PARTIES TO THE AGREEMENT OR NOT, SHOULD CONFORM TO THE MONEY PROVISIONS OF THE AGREEMENT AND OF THOSE LOCAL COLLECTIVE BARGAINING AGREEMENTS WHICH ARE INCORPORATED THEREIN BY REFERENCE TO THE EXTENT THEY ARE NOT INCONSISTENT THEREWITH.

YOU ENCLOSED COPIES OF THE COMMISSION'S FINDINGS, AND OF A LETTER OF THE SECRETARY OF LABOR DATED APRIL 19, 1962, CONTAINING FURTHER INFORMATION CONCERNING THE PROSPECTIVE BENEFITS TO THE GOVERNMENT WHICH WOULD BE EXPECTED TO RESULT FROM APPLICATION OF THE AGREEMENT. ALSO ENCLOSED WAS A COPY OF THE CONTRACT CLAUSE PROPOSED TO BE USED. IT IS STATED TO BE YOUR OPINION THAT THE AGREEMENT WILL DECREASE TOTAL COST TO THE GOVERNMENT AND THAT THE MATTER IS DISTINGUISHABLE FROM PROPOSALS TO ESTABLISH LABOR STANDARDS WHICH HAVE BEEN CONSIDERED BY OUR OFFICE IN THE PAST. YOU DO NOT INDICATE ANY GROUNDS FOR THE DISTINCTION; HOWEVER, WE ASSUME THE DISTINCTION IS ON THE BASIS THAT COSTS WILL BE DECREASED.

THE PROPOSED CONTRACT AGREEMENT WOULD REQUIRE PAYMENT TO LABORERS AND MECHANICS OF WAGES AND OTHER COMPENSATION, INCLUDING OVERTIME PREMIUMS, SHIFT PREMIUMS, HOLIDAY PAY AND TRAVEL PAY, AT THE RATES AND IN THE AMOUNTS SET FORTH IN THE PROJECT AGREEMENT OR AMENDMENTS THEREOF APPROVED BY THE SECRETARY. THE AGREEMENT IN TERMS PROVIDES THAT WAGE RATES AND FRINGE BENEFITS SHALL BE IN ACCORDANCE WITH LOCAL UNION AGREEMENTS, AND THAT EMPLOYERS NOT PARTIES TO SUCH LOCAL AGREEMENTS SHALL BE CONSIDERED AS COMPLYING WITH THE AGREEMENT BY PAYING THE MONEY EQUIVALENT OF SUCH FRINGE BENEFITS IN THE FORM OF SUPPLEMENTARY WAGES. THE CONTRACT CLAUSE WOULD ALSO REQUIRE PROVISION OF THE SPECIFIED FRINGE BENEFITS OR PAYMENT OF THE MONETARY EQUIVALENT THEREOF. IN ADDITION TO THE WAGE RATES AND FRINGE BENEFITS TO BE FIXED BY UNION AGREEMENTS, THE PROJECT AGREEMENT FIXES HOURS OF SHIFTS, PREMIUMS FOR SECOND AND THIRD SHIFTS, OVERTIME PREMIUMS OF TIME-AND-A-HALF OR DOUBLE TIME UNDER STATED CONDITIONS, AND PROVIDES FOR GRIEVANCE PROCEDURES AND OTHER INCIDENTAL UNDERTAKINGS.

OUR OFFICE HAS CONSIDERED MANY PROPOSALS TO INCORPORATE IN GOVERNMENT CONTRACTS CONDITIONS OR REQUIREMENTS CONCERNING WAGES AND OTHER EMPLOYMENT CONDITIONS AND PRACTICES, AND HAS IN A LONG SERIES OF DECISIONS ADHERED TO THE PRINCIPLE THAT CONTRACT STIPULATIONS TENDING TO RESTRICT COMPETITION AND TO INCREASE THE COST OF PERFORMANCE ARE UNAUTHORIZED UNLESS REASONABLY REQUISITE TO THE ACCOMPLISHMENT OF THE LEGISLATIVE PURPOSES OF THE CONTRACT APPROPRIATION INVOLVED, OR UNLESS SUCH STIPULATIONS ARE EXPRESSLY AUTHORIZED BY STATUTE; AND THAT WHEN THE CONGRESS HAS LEGISLATED ON THE SUBJECT IT IS NOT OPEN TO ADMINISTRATIVE DISCRETION TO STIPULATE CONDITIONS BEYOND OR AT VARIANCE WITH THOSE SPECIFICALLY DIRECTED BY THE STATUTE.

FOR EXAMPLE, IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY THEREFOR A CONTRACT MAY NOT PRESCRIBE A MINIMUM RATE OF WAGES TO BE PAID BY A CONTRACTOR. 10 COMP. GEN. 294. COMPLIANCE WITH THE REQUIREMENTS OF THE NATIONAL LABOR RELATIONS ACT OF JULY 5, 1935, 29 U.S.C. 151, MAY NOT BE REQUIRED AS A CONDITION OF A CONTRACT, NOR MAY NONCOMPLIANCE THEREWITH BE CONSIDERED AS A GROUND FOR REJECTION OF A BID. 17 COMP. GEN. 37. STIPULATION FOR PERIODIC ADJUSTMENT BY THE SECRETARY OF LABOR OF MINIMUM WAGES INCORPORATED IN A CONTRACT PURSUANT TO THE DAVIS BACON ACT, 40 U.S.C. 276A, IS NOT AUTHORIZED. 17 COMP. GEN. 471. PROVISIONS OF A PROCUREMENT DIVISION CIRCULAR LETTER REQUIRING CONTRACTORS TO REPORT PAYROLL STATISTICS, COSTS OF MATERIAL, ETC., MAY NOT BE INCLUDED IN CONTRACTS INVOLVING THE EXPENDITURE OF APPROPRIATED FUNDS. 17 COMP. GEN. 585; ID. 700. CONSTRUCTION CONTRACTS OF THE FARM SECURITY ADMINISTRATION UNDER THE EMERGENCY RELIEF APPROPRIATION ACT OF 1938, 52 STAT. 809, MAY NOT LAWFULLY CONTAIN A PROVISION THAT THE CONTRACTOR SHALL NOT INTERFERE WITH SELF-ORGANIZATION OF HIS EMPLOYEES OR REFUSE TO BARGAIN COLLECTIVELY WITH REPRESENTATIVES OF A MAJORITY, OR A PROVISION REQUIRING CONTRACTOR TO COLLATE AND REPORT PAYROLL AND OTHER STATISTICAL DATA, OR A PROVISION FOR MODIFICATION OF THE MINIMUM WAGE SCHEDULE OF THE CONTRACT UPON A CHANGE IN ECONOMIC CONDITIONS. 18 COMP. GEN. 285. THE SAME PRINCIPLES ARE APPLICABLE TO CONTRACTS INVOLVING THE USE OF TRUST FUNDS TRANSFERRED FROM STATE RURAL REHABILITATION CORPORATIONS TO THE UNITED STATES. 20 COMP. GEN. 18. MINIMUM WAGE RATES INCLUDED IN A CONTRACT FOR LESS THAN $2,000 MAY NOT BE ENFORCED, SINCE NOT AUTHORIZED BY THE DAVIS-BACON ACT. COMP. GEN. 394. CONTRACTS FOR CARRIAGE OF MAIL SHOULD NOT REQUIRE COMPLIANCE WITH THE EIGHT-HOUR LAWS, 40 U.S.C. 321, SINCE CONTRACTS FOR TRANSPORTATION ARE EXPRESSLY EXEMPTED THEREFROM. 19 COMP. GEN. 748. CERTIFICATION BY A CONTRACTOR THAT IT HAS COMPLIED WITH THE NATIONAL LABOR RELATIONS ACT MAY NOT BE REQUIRED AS A CONDITION TO PAYMENT OF THE CONTRACT PRICE. 20 COMP. GEN. 14. A REQUIREMENT FOR COMPLIANCE WITH THE FAIR LABOR STANDARDS ACT, 29 U.S.C. 201, MAY NOT BE INCLUDED IN GOVERNMENT CONTRACTS. 20 COMP. GEN. 24. THERE BEING NO STATUTE REQUIRING GOVERNMENT CONTRACTORS TO EMPLOY UNION LABOR, A LOW BID MAY BE REJECTED BECAUSE THE BIDDER DOES NOT EMPLOY UNION LABOR. 31 COMP. GEN. 561. DEPARTMENT OF DEFENSE CONSTRUCTION CONTRACTS MAY NOT INCLUDE PROVISIONS FOR A 40-HOUR WORKWEEK AND OVERTIME COMPENSATION FOR EXCESS TIME. 33 COMP. GEN. 477.

IN SUPPORT OF ITS RECOMMENDATIONS THAT THE PROVISIONS OF THE PROJECT AGREEMENT BE SPECIFIED AS STANDARDS FOR ALL EMPLOYEES ENGAGED IN CONSTRUCTION AT CAPE CANAVERAL AND PATRICK AIR FORCE BASE, THE PRESIDENT'S COMMISSION HAS REPORTED ITS FINDINGS THAT THE FINANCIAL PROVISIONS OF THE AGREEMENT "WILL RESULT DIRECTLY IN LOWER CONSTRUCTION COSTS, WILL PERMIT ECONOMIES ARISING FROM THE STANDARDIZATION OF SHIFTS, HOLIDAYS AND OVERTIME ARRANGEMENTS, AND WILL FACILITATE CONSTRUCTION OPERATIONS BY PROVIDING MORE UNIFORM CONDITIONS ON A PROJECT OF EXTENDED DURATION.' HOWEVER, FROM A SUPPLEMENTAL MEMORANDUM OF FACTS SUBMITTED TO YOU BY THE SECRETARY OF LABOR, WHO WAS ALSO CHAIRMAN OF THE PRESIDENT'S COMMISSION, IT APPEARS THAT THE QUOTED FINDING IS BASED TO A LARGE EXTENT UPON COMPARISONS WITH PAST AND CURRENT COSTS, WHICH INCLUDE EXCESSIVE PAYMENTS FOR OVERTIME (ESTIMATED TO HAVE CONSTITUTED APPROXIMATELY ONE-FOURTH OF THE TOTAL MAN-HOURS APPLICABLE TO ONE COMPLEX DURING THE PERIOD FROM SEPTEMBER 1959, TO MARCH 1961) AND OTHER EXCEPTIONALLY HIGH COSTS, AS DEVELOPED BY EVIDENCE HEARD BY THE PERMANENT SUBCOMMITTEE ON INVESTIGATIONS OF THE SENATE COMMITTEE ON GOVERNMENT OPERATIONS IN APRIL AND MAY 1961. (S.REPT. 1312, 87TH CONG., 2D SESS.) THE FINDINGS AND CONCLUSIONS OF THE SUBCOMMITTEE, STATED IN THE REPORT REFERRED TO, MENTION INTOLERABLE DELAYS FROM WILDCAT STRIKES, WORK STOPPAGES, SLOWDOWNS, PRODUCTIVITY RATES AS LOW AS 40 PERCENT OF NORMAL CAPACITY, EXORBITANT AND UNNECESSARY OVERTIME PAY RUNNING INTO MILLIONS OF DOLLARS, FEATHERBEDDING AND LOAFING, AND A LACK OF CONTROL OR DISCIPLINARY MEASURES BY INTERNATIONAL UNIONS DURING THE 4 1/2 YEAR PERIOD PRECEDING THE INVESTIGATION. THE CONCLUSION OF THE COMMISSION THAT ADOPTION OF THE PROJECT AGREEMENT WILL RESULT IN LOWER COSTS IS NECESSARILY SPECULATIVE. PROJECTION OF THE LOWER COST CONCLUSION INTO THE FUTURE MUST REST ON THE ASSUMPTION THAT PAST CONDITIONS WOULD CONTINUE IN THE ABSENCE OF ADHERENCE TO THE AGREEMENT. SUCH AN ASSUMPTION, PARTICULARLY IN THE LIGHT OF THE IMPROVEMENT IN CONDITIONS NOTED IN THE REPORT OF THE PERMANENT SUBCOMMITTEE, AFFORDS A DOUBTFUL BASIS FOR DEPARTURE FROM OUR PRIOR POSITION, AS EXEMPLIFIED IN THE DECISIONS CITED, THAT INCLUSION OF SUCH TERMS AND CONDITIONS IN GOVERNMENT CONTRACTS NORMALLY TENDS TO RESTRICT COMPETITION AND INCREASE COSTS.

THOSE DECISIONS ALSO EMBODY THE PROPOSITION THAT WHERE THE CONGRESS HAS SPECIFICALLY AUTHORIZED THE INCLUSION IN GOVERNMENT CONTRACTS OF CONDITIONS OR RESTRICTIONS OF THE SAME GENERAL CHARACTER, THE ADMINISTRATIVE AGENCIES ARE NOT AUTHORIZED TO IMPOSE FURTHER OR ADDITIONAL REQUIREMENTS. IN THIS CONNECTION, IT IS TO BE NOTED THAT A SUBSTANTIAL PART OF THE PROJECT AGREEMENT CONCERNS THE FIXING OF FRINGE BENEFITS OF THE SAME GENERAL NATURE AS THOSE PROPOSED TO BE PROVIDED FOR BY BILLS CURRENTLY PENDING IN THE CONGRESS, PARTICULARLY H.R. 9656, ON WHICH EXTENSIVE HEARINGS WERE HELD BY A SPECIAL SUBCOMMITTEE OF THE HOUSE COMMITTEE ON EDUCATION AND LABOR IN MARCH OF THIS YEAR. IN THOSE HEARINGS IT WAS SPECIFICALLY REPRESENTED BY THE OFFICIALS OF THE DEPARTMENT OF LABOR THAT SUCH LEGISLATION WAS NECESSARY TO PERMIT CONSIDERATION OF THESE FRINGE BENEFITS IN DETERMINING PREVAILING WAGES UNDER THE DAVIS-BACON ACT, AND NO CONTENTION WAS MADE THAT ANY PROVISIONS OF EXISTING LAW WOULD AUTHORIZE INCORPORATION OF SUCH PROVISIONS IN CONTRACTUAL MINIMUM WAGE SCHEDULES.

IN ADDITION, BY PROVIDING FOR TIME-AND-A-HALF PAY FOR WORK IN EXCESS OF 8 HOURS ON MONDAY THROUGH FRIDAY, AND DOUBLE TIME FOR SATURDAY AND SUNDAY WORK, THE AGREEMENT CLEARLY GOES BEYOND THE REQUIREMENTS OF THE EIGHT HOUR LAWS AND IN EFFECT ESTABLISHES THE 40-HOUR WEEK, AS CONTEMPLATED BY ANOTHER PENDING MEASURE, H.R. 10786, PASSED BY THE HOUSE OF REPRESENTATIVES ON APRIL 16, 1962. IN EXPLAINING THE PURPOSES OF THE BILL ON THE FLOOR OF THE HOUSE, THE CHAIRMAN OF THE SUBCOMMITTEE POINTED OUT THAT PRESENT EIGHT-HOUR LAWS PERMIT THE EMPLOYMENT OF WORKERS ON GOVERNMENT CONSTRUCTION UP TO 56 HOURS PER WEEK WITHOUT OVERTIME PAY.

IN THE LIGHT OF THE FOREGOING WE MUST CONCLUDE THAT ADHERENCE TO THE PROJECT AGREEMENT AS A REQUIRED CONDITION OF CONSTRUCTION CONTRACTS BY THE CLAUSE PROPOSED BY YOU HAS NOT BEEN SHOWN TO BE IN CONFORMITY WITH THE GENERAL STATUTES GOVERNING GOVERNMENT CONTRACTING.

HOWEVER, IF IT BE DETERMINED THAT PROMPT AND ORDERLY PERFORMANCE OF CONTRACTS OF THE CLASS INVOLVED MIGHT BE SERIOUSLY IMPEDED BY FAILURE TO ADOPT THE PROVISIONS OF THE PROJECT AGREEMENT, AND THAT SUCH CONTRACTS DIRECTLY AFFECT THE NATIONAL DEFENSE, YOUR ATTENTION IS DIRECTED TO THE ACT OF AUGUST 28, 1958, PUBLIC LAW 85-804, 72 STAT. 972 (50 U.S.C. 1431- 35), AND EXECUTIVE ORDER NO. 10789, NOVEMBER 14, 1958, UNDER WHICH YOUR DEPARTMENT IS AUTHORIZED--- SUBJECT TO THE LIMITATIONS THEREIN SET FORTH-- - TO ENTER INTO CONTRACTS AND AMENDMENTS OR MODIFICATIONS OF CONTRACTS WITHOUT REGARD TO PROVISIONS OF LAW RELATING TO THE MAKING, PERFORMANCE, AMENDMENT, OR MODIFICATION OF CONTRACTS, WHENEVER IN YOUR JUDGMENT OR THAT OF THE SECRETARY OF THE ARMY, NAVY, OR AIR FORCE, THE NATIONAL DEFENSE WILL BE FACILITATED THEREBY. BY PART II OF THE EXECUTIVE ORDER SIMILAR AUTHORITY IS VESTED IN THE ADMINISTRATOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION.

IN 20 COMP. GEN. 245, NOVEMBER 5, 1940, WE ADVISED THE SECRETARY OF THE NAVY THAT OUR OFFICE WOULD INTERPOSE NO OBJECTION TO PAYMENTS UNDER CONTRACT MODIFICATIONS REQUIRING OVERTIME PAYMENTS FOR TIME WORKED IN EXCESS OF 40 HOURS PER WEEK, IF DETERMINED BY HIM TO BE NECESSARY IN ORDER TO AVOID DELAY OR OTHER SERIOUS INTERFERENCE WITH THE NATIONAL DEFENSE PROGRAM--- SUCH MODIFICATIONS BEING DEEMED TO BE AUTHORIZED BY THE PROVISIONS OF SECTION 9 OF THE ACT OF JUNE 28, 1940, 54 STAT. 680, 50 U.S.C. APP. 1159 (1946 ED.) , CONFERRING EXTRAORDINARY POWERS FOR EXPEDITION OF MILITARY AND NAVAL DEFENSE. THE AUTHORITY CREATED BY PUBLIC LAW 85-804 APPEARS TO BE AT LEAST AS BROAD AS THAT CONFERRED BY THE 1940 ACT, AND IF DETERMINATIONS SHOULD BE MADE BY THE OFFICIALS AUTHORIZED BY THE LAW AND EXECUTIVE ORDER REFERRED TO THAT ADHERENCE TO THE TERMS OF THE PROJECT AGREEMENT WILL FACILITATE THE NATIONAL DEFENSE, WE WILL NOT OBJECT TO THE MAKING AND MODIFICATION OF CONTRACTS UNDER PUBLIC LAW 85-804 TO INCLUDE THE CLAUSE PROPOSED.