B-179250, FEB 28, 1974, 53 COMP GEN 646

B-179250, FEB 28, 1974, 53 COMP GEN 646

CONTRACTS - LABOR STIPULATIONS - SERVICE CONTRACT ACT OF 1965 - "SUCCESSOR EMPLOYER DOCTRINE" SINCE THE CONGRESSIONAL PURPOSE UNDERLYING SECTION 4(C) OF THE 1972 SERVICE CONTRACT ACT AMENDMENTS APPEARS TO BE THAT THE "SUCCESSORSHIP" PRINCIPLE - THE OBLIGATION THAT THE SUCCESSOR SERVICE CONTRACTOR PAY EMPLOYEES NO LESS THAN THE RATES IN THE PREDECESSOR'S COLLECTIVE BARGAINING AGREEMENT - WAS INTENDED TO APPLY WITH RESPECT TO SUCCESSOR CONTRACTS TO BE PERFORMED IN THE SAME GEOGRAPHICAL AREA, LABOR DEPARTMENT'S APPLICATION OF 4(C) TO PROCUREMENTS OF SERVICES REGARDLESS OF PLACE OF PERFORMANCE IS SUBJECT TO QUESTION. HOWEVER, BECAUSE THE PRACTICE IS NOT PROHIBITED BY THE ACT, THE PROTEST IS DENIED, BUT THE MATTER SHOULD BE PRESENTED TO THE CONGRESS BY THE SECRETARY OF LABOR TO OBTAIN CLARIFYING LEGISLATION. GENERAL ACCOUNTING OFFICE - RECOMMENDATIONS - IMPLEMENTATION WHEN A GENERAL ACCOUNTING OFFICE DECISION CONTAINS A RECOMMENDATION TO AN AGENCY FOR CORRECTIVE ACTION, COPIES OF THE DECISION ARE TRANSMITTED TO THE CONGRESSIONAL COMMITTEES NAMED IN SECTION 232 OF LEGISLATIVE REORGANIZATION ACT OF 1970, 31 U.S.C. 1172, AND THE AGENCY'S ATTENTION IS DIRECTED TO SECTION 236 OF ACT, 31 U.S.C. 1176, WHICH REQUIRES AN AGENCY TO SUBMIT WRITTEN STATEMENTS OF THE ACTION TO BE TAKEN ON A RECOMMENDATION TO THE HOUSE AND SENATE COMMITTEES ON GOVERNMENT OPERATIONS, NOT LATER THAN 60 DAYS AFTER THE DATE OF THE DECISION, AND TO COMMITTEES ON APPROPRIATIONS IN CONNECTION WITH THE FIRST REQUEST FOR APPROPRIATIONS MADE BY THE AGENCY MORE THAN 60 DAYS AFTER THE DATE OF DECISION.

IN THE MATTER OF A-V CORPORATION, FEBRUARY 28, 1974:

INVITATION FOR BIDS (IFB) NO. DABE34-73-B-0059 WAS ISSUED MAY 9, 1973, BY THE PROCUREMENT DIVISION, FORT SAM HOUSTON, TEXAS, CALLING FOR FILM PROCESSING SERVICES DURING THE PERIOD FROM JULY 1, 1973, THROUGH JANUARY 31, 1974. THE SERVICES WERE TO BE PERFORMED AT THE LOCATION OF THE SUCCESSFUL CONTRACTOR OR CONTRACTORS.

AV'S PROTEST RAISES CERTAIN OBJECTIONS, DESCRIBED IN DETAIL INFRA, CONCERNING THE MANNER IN WHICH THE SERVICE CONTRACT ACT OF 1965 HAS BEEN APPLIED TO THE PROCUREMENT. THE BACKGROUND FACTS REGARDING THE APPLICATION OF THE ACT HAVE BEEN OUTLINED IN THE DEPARTMENT OF THE ARMY'S ADMINISTRATIVE REPORT TO OUR OFFICE. THE PREDECESSOR CONTRACTS FOR THIS WORK, WHICH COVERED THE PERIOD FROM JULY 1, 1972, THROUGH JUNE 30, 1973, WERE PERFORMED BY ACME FILM LABORATORIES, INC. (ACME), LOS ANGELES, CALIFORNIA, AND PRECISION FILM LABORATORIES, INC. (PRECISION), NEW YORK, NEW YORK. NO SERVICE CONTRACT ACT WAGE DETERMINATIONS WERE ISSUED FOR THE PREDECESSOR CONTRACTS. THE CONTRACTING OFFICER STATES THAT AS A RESULT OF THE 1972 AMENDMENTS TO THE SERVICE CONTRACT ACT (PUBLIC LAW 92-473, OCTOBER 9, 1972, 86 STAT. 789, 41 U.S.C. 351 NOTE), IT WAS REQUIRED THAT, IN CONNECTION WITH THE NEXT PROCUREMENT OF THE SERVICES, COPIES OF ANY COLLECTIVE BARGAINING AGREEMENTS BETWEEN THE CONTRACTORS AND THEIR SERVICE EMPLOYEES BE SUBMITTED TO THE DEPARTMENT OF LABOR WITH STANDARD FORM 98, "NOTICE OF INTENTION TO MAKE A SERVICE CONTRACT ***." THE SUBMISSION WAS MADE BY THE CONTRACTING OFFICER. SUBSEQUENTLY, THE LABOR DEPARTMENT ISSUED WAGE DETERMINATIONS NOS. 73 627 (REV.-1) AND 73-628 (REV.-1), BOTH DATED JUNE 8, 1973, SPECIFYING MINIMUM WAGES AND FRINGE BENEFITS FOR VARIOUS CLASSES OF SERVICE EMPLOYEES. BOTH DETERMINATIONS CONTAINED THE FOLLOWING "NOTE";

IN ACCORDANCE WITH SECTION 4(C) OF THE SERVICE CONTRACT ACT, AS AMENDED, THE WAGE RATES AND FRINGE BENEFITS SET FORTH IN THIS WAGE DETERMINATION ARE BASED ON A COLLECTIVE BARGAINING AGREEMENTS) UNDER WHICH THE INCUMBENT CONTRACTOR IS OPERATING. THE WAGE DETERMINATION SETS FORTH THE WAGE RATES AND FRINGE BENEFITS PROVIDED BY THE COLLECTIVE BARGAINING AGREEMENT AND APPLICABLE TO PERFORMANCE ON THE SERVICE CONTRACT. HOWEVER, FAILURE TO INCLUDE ANY JOB CLASSIFICATION, WAGE RATE OR FRINGE BENEFIT ENCOMPASSED IN THE COLLECTIVE BARGAINING AGREEMENT DOES NOT RELIEVE THE SUCCESSOR CONTRACTOR OF THE STATUTORY REQUIREMENT TO COMPLY AS A MINIMUM WITH THE TERMS OF THE COLLECTIVE BARGAINING AGREEMENT INSOFAR AS WAGES AND FRINGE BENEFITS ARE CONCERNED.

THE DETERMINATIONS WERE INCORPORATED IN THE SOLICITATION BY AMENDMENT NO. 2, JUNE 11, 1973, WHICH STATED:

WAGE DETERMINATION NUMBERS 73-627 (REV.-1) *** AND 73-628 (REV.-1) *** ARE APPLICABLE TO THIS SOLICITATION. ***

NOTE: OFFEROR MUST REALIZE THAT THE WAGE RATES STATED IN THE WAGE DETERMINATIONS PROVIDED BY THE U.S. DEPARTMENT OF LABOR ARE THE ABSOLUTE MINIMUM WAGE RATES ALLOWABLE, AND NO WAGES MAY BE PAID TO THOSE EMPLOYEES LISTED WHICH ARE LOWER THAN THE STATED "MINIMUM HOURLY WAGE" ***.

BIDS WERE RECEIVED ON JUNE 26, 1973, FROM ACME, PRECISION AND HOLLYWOOD FILM ENTERPRISES, INC. (HOLLYWOOD), HOLLYWOOD, CALIFORNIA. CONTRACTS DAKF49-74-D-0002 AND -0003 WERE AWARDED TO ACME AND HOLLYWOOD, RESPECTIVELY, ON JULY 2, 1973.

BY ITS LETTER OF JULY 3, 1973, FORWARDED BY A CONGRESSIONAL SOURCE, A V PROTESTED TO OUR OFFICE. THE PROTESTOR POINTS OUT THAT THE WAGE DETERMINATIONS ATTACHED TO THE IFB ARE BASED UPON THE PREDECESSOR CONTRACTORS' COLLECTIVE BARGAINING AGREEMENTS IN CALIFORNIA AND NEW YORK AND CONTENDS THAT THE ACT SHOULD HAVE BEEN APPLIED SO THAT THE WAGE DETERMINATIONS WERE BASED ON WAGES PREVAILING IN THE AREA WHERE THE SERVICE IS PERFORMED. A-V, WHICH IS LOCATED IN HOUSTON, TEXAS, POINTS OUT THAT ITS EMPLOYEES ARE COVERED BY A COLLECTIVE BARGAINING AGREEMENT WHICH IT BELIEVES TO BE APPROPRIATE FOR ECONOMIC CONDITIONS IN ITS AREA, BUT THAT IT CANNOT "LIVE WITH" THE SERVICE CONTRACT ACT REQUIREMENTS AS THEY HAVE BEEN APPLIED TO THIS PROCUREMENT. A-V STATES THAT, UNDER THE CIRCUMSTANCES, IT WAS PRECLUDED FROM SUBMITTING A BID.

THE SERVICE CONTRACT ACT OF 1965, 41 U.S.C. 351-358, WAS ENACTED TO PROVIDE WAGE AND SAFETY PROTECTION FOR EMPLOYEES PERFORMING CERTAIN GOVERNMENT SERVICE CONTRACTS. AS ORIGINALLY ENACTED IN PUBLIC LAW 89 286, OCTOBER 22, 1965, 79 STAT. 1034, SECTIONS 2(A)(1) (41 U.S.C. 351 (A)(1) AND 2(A)(2) PROVIDED THAT CONTRACT SPECIFICATIONS CONTAIN DEPARTMENT OF LABOR DETERMINATIONS OF MINIMUM MONETARY WAGES AND FRINGE BENEFITS TO BE PAID SERVICE EMPLOYEES IN THE PERFORMANCE OF THE CONTRACT BASED UPON THE PREVAILING WAGES AND FRINGE BENEFITS FOR SUCH EMPLOYEES IN THE LOCALITY. PUBLIC LAW 92-473 AMENDED THESE PROVISIONS TO ADD THAT DETERMINATIONS BE BASED UPON RATES IN COLLECTIVE BARGAINING AGREEMENTS WHERE SERVICE EMPLOYEES ARE COVERED BY SUCH AGREEMENTS. AS AMENDED, SECTION 2(A)(1) STATES:

(A) EVERY CONTRACT (AND ANY BID SPECIFICATION THEREFOR) ENTERED INTO BY THE UNITED STATES OR THE DISTRICT OF COLUMBIA IN EXCESS OF $2,500, EXCEPT AS PROVIDED IN SECTION 356 OF THIS TITLE, WHETHER NEGOTIATED OR ADVERTISED, THE PRINCIPAL PURPOSE OF WHICH IS TO FURNISH SERVICES IN THE UNITED STATES THROUGH THE USE OF SERVICE EMPLOYEES, AS DEFINED HEREIN, SHALL CONTAIN THE FOLLOWING:

(1) A PROVISION SPECIFYING THE MINIMUM MONETARY WAGES TO BE PAID THE VARIOUS CLASSES OF SERVICE EMPLOYEES IN THE PERFORMANCE OF THE CONTRACT OR ANY SUBCONTRACT THEREUNDER, AS DETERMINED BY THE SECRETARY, OR HIS AUTHORIZED REPRESENTATIVE, IN ACCORDANCE WITH PREVAILING RATES FOR SUCH EMPLOYEES IN THE LOCALITY, OR, WHERE A COLLECTIVE-BARGAINING AGREEMENT COVERS ANY SUCH SERVICE EMPLOYEES, IN ACCORDANCE WITH THE RATES FOR SUCH EMPLOYEES PROVIDED FOR IN SUCH AGREEMENT, INCLUDING PROSPECTIVE WAGE INCREASES PROVIDED FOR IN SUCH AGREEMENT AS A RESULT OF ARM'S LENGTH NEGOTIATIONS. ***. (41 U.S.C. 351(A)).

THE PROVISIONS CONCERNING DETERMINATIONS OF FRINGE BENEFITS, AS AMENDED, ARE SET FORTH IN SECTION 2(A)(2) (41 U.S.C. 351(A)(2)) IN SUBSTANTIALLY SIMILAR LANGUAGE.

IN ADDITION, PUBLIC LAW 92-473 ADDED SECTION 4(C) TO THE ACT (41 U.S.C. 353(C)). SECTION 4(C) STATES:

NO CONTRACTOR OR SUBCONTRACTOR UNDER A CONTRACT, WHICH SUCCEEDS A CONTRACT SUBJECT TO THIS CHAPTER AND UNDER WHICH SUBSTANTIALLY THE SAME SERVICES ARE FURNISHED, SHALL PAY ANY SERVICE EMPLOYEE UNDER SUCH CONTRACT LESS THAN THE WAGES AND FRINGE BENEFITS, INCLUDING ACCRUED WAGES AND FRINGE BENEFITS, AND ANY PROSPECTIVE INCREASES IN WAGES AND FRINGE BENEFITS PROVIDED FOR IN A COLLECTIVE-BARGAINING AGREEMENT AS A RESULT OF ARM'S-LENGTH NEGOTIATIONS, TO WHICH SUCH SERVICE EMPLOYEES WOULD HAVE BEEN ENTITLED IF THEY WERE EMPLOYED UNDER THE PREDECESSOR CONTRACT: PROVIDED, THAT IN ANY OF THE FOREGOING CIRCUMSTANCES SUCH OBLIGATIONS SHALL NOT APPLY IF THE SECRETARY FINDS AFTER A HEARING IN ACCORDANCE WITH REGULATIONS ADOPTED BY THE SECRETARY THAT SUCH WAGES AND FRINGE BENEFITS ARE SUBSTANTIALLY AT VARIANCE WITH THOSE WHICH PREVAIL FOR SERVICES OF A CHARACTER SIMILAR IN THE LOCALITY.

IN A TYPICAL SERVICE CONTRACT PROCUREMENT - FOR EXAMPLE, A SOLICITATION FOR JANITORIAL SERVICES - IF THE PREDECESSOR CONTRACTOR HAS A COLLECTIVE BARGAINING AGREEMENT, IN THE PERFORMANCE OF THE CONTRACT THE SUCCESSOR CONTRACTOR WOULD BE BOUND BOTH BY THE CONTRACT TERMS AND BY SECTION 4(C) OF THE ACT TO PAY WAGES AND FURNISH FRINGE BENEFITS IN ACCORDANCE WITH THE PREDECESSOR'S COLLECTIVE BARGAINING AGREEMENT.

HOWEVER, THE DEPARTMENT OF LABOR HAS APPLIED THE STATUTORY PROVISIONS IN THE SAME MANNER TO PROCUREMENTS OF SERVICES WHICH ARE PERFORMED AT THE LOCATION OF THE SUCCESSFUL BIDDER, WHICH MAY NOT BE THE SAME AS THE LOCATION OF THE GOVERNMENT INSTALLATION. SEE 29 CFR 4.1C. THUS, IN THE PRESENT CASE, A-V AND ANY OTHER PROSPECTIVE BIDDER, WHATEVER THEIR LOCATIONS, WERE OBLIGATED TO BID ON THE BASIS OF DETERMINATIONS WHICH REFLECT COLLECTIVE BARGAINING AGREEMENTS OF THE PREDECESSOR CONTRACTORS IN NEW YORK AND CALIFORNIA.

WE AGREE WITH THE CONTRACTING OFFICER'S VIEW THAT THE APPLICATION OF SECTION 4(C) IN THIS MANNER TO THE PRESENT PROCUREMENT AND SIMILAR PROCUREMENTS CAN RESULT IN THE GOVERNMENT BEING "LOCKED INTO" CONTRACTS WITH FIRMS PAYING HIGH WAGES BECAUSE OF THEIR GEOGRAPHIC LOCATION AND THE COLLECTIVE BARGAINING AGREEMENTS IN EFFECT AT THEIR PLANTS. IN FUTURE PROCUREMENTS OF THESE SERVICES, PRESUMABLY THE APPLICABLE WAGE AND FRINGE BENEFIT DETERMINATIONS WILL AGAIN BE BASED ON THE TERMS OF COLLECTIVE BARGAINING AGREEMENTS IN EFFECT IN CALIFORNIA AND NEW YORK. IN THAT REGARD, IN A LEGAL MEMORANDUM SUBMITTED WITH THE DEPARTMENT OF THE ARMY ADMINISTRATIVE REPORT IT IS STATED:

*** DEPARTMENT OF LABOR'S INTERPRETATION OF SECTION 4(C) WILL HAVE THE EFFECT OF RESTRICTING COMPETITION AS IS MADE CLEAR FROM PROTESTANT'S FACT SITUATION. CONTRACTORS WHO PERFORM SERVICES FOR PRIVATE COMPANIES AS WELL AS THE GOVERNMENT ARE DISCOURAGED FROM BIDDING ON CONTRACTS WHICH REQUIRE THAT THEY PAY HIGHER RATES IMPORTED FROM ANOTHER LOCATION TO EMPLOYEES PERFORMING ON GOVERNMENT CONTRACTS. SINCE THE PRIVATE SECTOR OF THE ECONOMY IN THEIR AREA HAS PRESUMABLY ESTABLISHED THE EFFECTIVE PRICE FOR THE TYPE OF SERVICE, SUCH CONTRACTORS ARE IN NO POSITION TO PAY ALL EMPLOYEES SUCH RATES. BY ESTABLISHING TWO DIFFERENT RATES FOR EMPLOYEES BASED UPON WHETHER AN EMPLOYEE WAS WORKING ON A GOVERNMENT CONTRACT, THE CONTRACTOR WOULD ONLY BE BUYING LABOR DIFFICULTIES.

IN ADDITION, IT IS APPARENT THAT THE COSTS TO THE GOVERNMENT OF PROCURING SUCH SERVICES WILL BE INCREASED.

THE VIEWS OF THE DEPARTMENT OF LABOR ON A-V'S PROTEST WERE FURNISHED TO OUR OFFICE IN A LETTER DATED DECEMBER 7, 1973, FROM THE ACTING ADMINISTRATOR, EMPLOYMENT STANDARDS ADMINISTRATION. THE LETTER OFFERS THE FOLLOWING EXPLANATION OF THE RATIONALE BEHIND THE MANNER IN WHICH SECTIONS 2(A)(1), 2(A)(2) AND 4(C) OF THE ACT WERE APPLIED TO THE PRESENT PROCUREMENT:

WE HAVE TAKEN THIS POSITION, BASED ON OUR READING AND INTERPRETATION OF THE LANGUAGE OF THE ACT IN THE LIGHT OF ITS ENTIRE LEGISLATIVE HISTORY, THAT SECTION 4(C) WAS INTENDED TO APPLY TO ALL SUCCESSOR CONTRACTS FOR FURNISHING THE SAME SERVICES, ENTERED INTO PURSUANT TO PROCUREMENT ACTION BY THE SAME FEDERAL FACILITY, AND NOT ONLY IN THOSE CASES WHERE THE GOVERNMENT CONTRACT WORK IS PERFORMED AT THE SAME GOVERNMENT INSTALLATION.

IN OUR INTERPRETATION AND APPLICATION OF SECTION 4(C) THIS DEPARTMENT HAS BEEN GUIDED BY THE LEGISLATIVE INTENT AS EXPRESSED IN THE REPORT OF THE SENATE COMMITTEE (S. REPT. 92-1131). ACCORDING TO THIS REPORT, SECTION 4(C) AND THE RELATED AMENDMENTS TO PARAGRAPHS (1) AND (2) OF SECTION 2(A) ARE INTENDED TO APPLY IN SITUATIONS WHERE A CONTRACT TO FURNISH SERVICES TO MEET THE GOVERNMENT'S NEEDS AT A PARTICULAR LOCATION SUCCEEDS A PRIOR CONTRACT UNDER WHICH SUBSTANTIALLY THE SAME SERVICES WERE FURNISHED TO THE GOVERNMENT (ALTHOUGH NOT NECESSARILY PERFORMED) AT THE SAME LOCATION THROUGH THE USE OF SERVICE EMPLOYEES WHOSE WAGE AND FRINGE BENEFITS WERE GOVERNED BY A COLLECTIVE BARGAINING AGREEMENT. THE OBLIGATIONS OF THE SUCCESSOR CONTRACTOR IN SUCH A SITUATION, AS STATED IN SECTION 4(C), ARE TO PAY THE SERVICE EMPLOYEES HE EMPLOYS UNDER HIS CONTRACT NOT LESS THAN "THE WAGE AND FRINGE BENEFITS, INCLUDING ACCRUED WAGES AND FRINGE BENEFITS, AND ANY PROSPECTIVE INCREASES IN WAGES AND FRINGE BENEFITS ..., TO WHICH SUCH SERVICE EMPLOYEES WOULD HAVE BEEN ENTITLED IF THEY WERE EMPLOYED UNDER THE PREDECESSOR CONTRACT," UNLESS "THE SECRETARY FINDS AFTER A HEARING IN ACCORDANCE WITH REGULATIONS ADOPTED BY THE SECRETARY THAT SUCH WAGES AND FRINGE BENEFITS ARE SUBSTANTIALLY AT VARIANCE WITH THOSE WHICH PREVAIL FOR SERVICES OF A CHARACTER SIMILAR IN THE LOCALITY."

WAGE DETERMINATIONS MADE UNDER SECTION 2(A) OF THE ACT MUST GIVE EFFECT TO SECTION 4(C). THE REPORT STRESSES THAT "SECTIONS 2(A)(1), 2(A)(2), AND 4(C) MUST BE READ IN HARMONY TO REFLECT THE STATUTORY SCHEME" AND THAT IT IS INTENDED THAT THESE SECTIONS "BE SO CONSTRUED THAT THE PROVISO IN SECTION 4(C) APPLIES EQUALLY TO ALL THE ABOVE PROVISIONS." A PURPOSE OF THESE AMENDMENTS IS STATED TO BE "TO EXPLICATE THE DEGREE OF RECOGNITION TO BE ACCORDED COLLECTIVE BARGAINING AGREEMENTS COVERING SERVICE EMPLOYEES IN THE PREDETERMINATION OF PREVAILING WAGES AND FRINGE BENEFITS FOR FUTURE SUCH CONTRACTS FOR SERVICES AT THE SAME LOCATION."

SIGNIFICANTLY, NEITHER THE STATUTORY LANGUAGE NOR THE COMMITTEE REPORTS PURPORT TO LIMIT THE APPLICABILITY OF SECTION 4(C) TO SUCCESSOR CONTRACTS FOR SERVICES TO BE PERFORMED AT THE SAME LOCATION AS UNDER THE PREDECESSOR CONTRACT, IN CASES WHERE THE PLACE OF PERFORMANCE CANNOT BE ASCERTAINED WHEN BID SPECIFICATIONS ARE SUPPLIED TO POTENTIAL CONTRACTORS. THE SERVICES, WHEREVER PERFORMED, ARE OF COURSE FURNISHED TO MEET THE SERVICE NEEDS OF THE PROCURING FACILITY INVITING THE BIDS AND CHARGED WITH ADMINISTRATION OF THE CONTRACT, AND SUCH SERVICES MUST BE CONSIDERED TO BE FURNISHED AT THE LOCATION OF SUCH FACILITY. WE DO NOT AGREE WITH THE LABOR DEPARTMENT'S VIEWS. INITIALLY, EXAMINATION OF THE LEGISLATIVE HISTORY OF THE 1972 SERVICE CONTRACT ACT AMENDMENTS REVEALS A STRONG CONGRESSIONAL CONCERN OVER A SPECIFIC TYPE OF PROBLEM WHICH HAD ARISEN IN CONNECTION WITH THE ADMINISTRATION OF THE ACT. IN CERTAIN SERVICE CONTRACT PROCUREMENTS AT PARTICULAR GOVERNMENT INSTALLATIONS WHERE WAGE AND FRINGE BENEFIT DETERMINATIONS WERE NOT FURNISHED BY THE DEPARTMENT OF LABOR, AND WHERE THE INCUMBENT CONTRACTOR WAS UNDERBID, THE RESULT WAS THAT THE INCUMBENT'S EMPLOYEES LOST THEIR JOBS AND WERE FORCED TO SEEK EMPLOYMENT AT LOWER WAGES WITH THE SUCCESSOR CONTRACTOR, AND THE EMPLOYEES ALSO LOST THE BENEFITS FURNISHED THEM UNDER THEIR COLLECTIVE BARGAINING AGREEMENT WITH THEIR FORMER EMPLOYER. THESE CONCERNS WERE SUMMARIZED AT PAGE 3 OF H. REPT. NO. 92-1251 ON H.R. 15376, JULY 27, 1972, AS FOLLOWS:

A GREAT DEAL OF LABOR-MANAGEMENT INSTABILITY HAS ARISEN BECAUSE OF A FAILURE TO TAKE THE EXISTENCE OF COLLECTIVE BARGAINING AGREEMENTS INTO ACCOUNT IN THE WAGE AND FRINGE BENEFIT DETERMINATION PROCESS; ***

*** THE PRACTICE OF REBIDDING CONTRACTS YEARLY EITHER WITHOUT WAGE AND FRINGE DETERMINATIONS OR WITH UNREALISTICALLY LOW DETERMINATIONS IS CREATING CHAOS FOR REPUTABLE CONTRACTS AND GREAT HARDSHIPS FOR EMPLOYEES.

IT IS NOTEWORTHY THAT THE EXAMPLES OF SPECIFIC SITUATIONS OF THIS TYPE CITED IN THE LEGISLATIVE HISTORY APPEAR TO INVOLVE PROCUREMENT OF SERVICES WHICH ARE PERFORMED ON THE GOVERNMENT INSTALLATION INVOLVED. SEE, FOR EXAMPLE, THE COMMENTS OF SENATOR GURNEY REGARDING PROCUREMENTS OF SERVICES FOR CAPE KENNEDY AND PATRICK AIR FORCE BASE, REPORTED AT PAGES 12-14 OF THE HEARINGS ON S. 3827 AND H.R. 15376, SUBCOMMITTEE ON LABOR, SENATE COMMITTEE ON LABOR AND PUBLIC WELFARE, AUGUST 16 AND SEPTEMBER 6, 1972; SEE, ALSO, PAGES 23-24 AND 32-34. ALSO TO BE NOTED ARE THE COMMENTS OF CONGRESSMAN O'HARA CONCERNING WAGE UNDERCUTTING ON A JANITORIAL SERVICES PROCUREMENT FOR THE EASTERN TEST RANGE, REPORTED AT PAGE 32 OF THE HEARING ON H.R. 11884 BEFORE THE SPECIAL SUBCOMMITTEE ON LABOR, HOUSE COMMITTEE ON EDUCATION AND LABOR, JUNE 1, 1972. CONGRESSMAN O'HARA POINTED OUT THAT "IT IS THAT SORT OF PROBLEM WHICH PROMPTED US TO INCLUDE IN THE BILL THAT IN NO EVENT SHALL THE NEW CONTRACTOR BE PERMITTED TO PAY LESS THAN WHAT THE EXISTING RATE WAS UNDER THE OLD CONTRACT."

IN SHORT, THERE ARE SUBSTANTIAL INDICATIONS IN THE LEGISLATIVE HISTORY OF THE 1972 AMENDMENTS THAT THE INTENTION BEHIND THE AMENDMENT OF SECTION 2(A) OF THE ACT AND THE INCLUSION OF SECTION 4(C) WAS MERELY TO ASSURE THAT A SUCCESSOR CONTRACTOR COULD NOT DECREASE THE WAGES AND BENEFITS OF EMPLOYEES HIRED FROM THE PREDECESSOR CONTRACTOR IN THE PERFORMANCE OF SERVICES AT A PARTICULAR GOVERNMENT INSTALLATION. SEE THE STATEMENT OF SENATOR GURNEY, WHO SPONSORED S. 3827, A BILL IDENTICAL TO H.R. 15376, THE BILL ENACTED AS PUBLIC LAW 92-473, REPORTED AT PAGE 15343 OF THE CONGRESSIONAL RECORD, SENATE, SEPTEMBER 19, 1972:

THIS BILL IS SIMPLE ONE. IT MERELY REQUIRES THAT A SUCCESSFUL BIDDER ON A SERVICE CONTRACT CANNOT PAY EMPLOYEES LESS THAN THEY WERE RECEIVING FROM THEIR FORMER EMPLOYER UNLESS HIS WAGES ARE OUT OF LINE. ***.

TO THE SAME EFFECT IS A STATEMENT BY CONGRESSMAN ASHBROOK, A PROPONENT OF H.R. 15376, REPORTED AT PAGE 7258, CONGRESSIONAL RECORD, HOUSE, AUGUST 7, 1972.

IN VIEW OF THE FOREGOING, WE BELIEVE THAT THE "SUCCESSORSHIP" CONCEPT OF SECTION 4(C) OF THE ACT WAS INTENDED BY CONGRESS TO BE APPLIED TO SUCCESSOR CONTRACTS UNDER WHICH SUBSTANTIALLY THE SAME SERVICES ARE BEING PERFORMED ("FURNISHED") AT A PARTICULAR GOVERNMENT INSTALLATION. IT IS NOT APPARENT FROM THE LEGISLATIVE HISTORY THAT CONGRESS SPECIFICALLY INTENDED SECTION 4(C) TO APPLY TO PROCUREMENTS OF SERVICES WHICH CAN BE PERFORMED ANYWHERE. WE ARE THEREFORE OF THE VIEW THAT THE DEPARTMENT'S APPLICATION OF SECTION 4(C) TO THE PRESENT PROCUREMENT IS SUBJECT TO QUESTION.

WE RECOGNIZE, HOWEVER, THAT SECTIONS 2(A)(1), 2(A)(2) AND 4(C) OF THE AMENDED ACT MUST BE READ IN HARMONY. SECTIONS 2(A)(1) AND 2(A)(2) CLEARLY PROVIDE THAT WHERE A COLLECTIVE BARGAINING AGREEMENT COVERS "ANY SUCH SERVICE EMPLOYEES," THE LABOR DEPARTMENT'S WAGE AND FRINGE BENEFIT DETERMINATIONS MUST BE "IN ACCORDANCE WITH" SUCH WAGE RATES AND FRINGE BENEFITS. IT WOULD APPEAR THAT THIS STATUTORY MANDATE APPLIES TO COLLECTIVE BARGAINING AGREEMENTS COVERING SERVICE EMPLOYEES PERFORMING SERVICE CONTRACTS AT THE LOCATION OF THE CONTRACTOR AS WELL AS AGREEMENTS COVERING EMPLOYEES PERFORMING SERVICE CONTRACTS AT OR IN THE IMMEDIATE VICINITY OF THE GOVERNMENT INSTALLATION.

AFTER CAREFUL CONSIDERATION OF THIS MATTER, WE CANNOT CONCLUDE THAT THE LABOR DEPARTMENT'S INTERPRETATION OF THE ACT AS REQUIRING A DETERMINATION BASED ONLY UPON THE COLLECTIVE BARGAINING AGREEMENTS COVERING SERVICE EMPLOYEES OF THE PREDECESSOR CONTRACTORS IS SPECIFICALLY PROHIBITED BY THE ACT. ACCORDINGLY, THE PROTEST IS DENIED.

THE ISSUE CONSIDERED IN THE PRESENT PROTEST IS ANALOGOUS TO THE ONE CONSIDERED IN 53 COMP. GEN. 370 (1973). THAT DECISION ALSO INVOLVED A PROCUREMENT OF SERVICES TO BE PERFORMED AT THE LOCATION OF THE SUCCESSFUL BIDDER. OUR DECISION CRITICIZED THE LABOR DEPARTMENT'S PRACTICE OF INTERPRETING THE "LOCALITY" BASIS OF WAGE DETERMINATIONS AS REFERRING ONLY TO THE LOCATION OF THE GOVERNMENT INSTALLATION BEING SERVED, SINCE THE LANGUAGE AND LEGISLATIVE HISTORY OF THE SERVICE CONTRACT ACT INDICATE THAT "LOCALITY" REFERS TO THE PLACE WHERE SERVICES ARE PERFORMED.

IN VIEW OF THE SERIOUS IMPACT ON THE GOVERNMENT'S PROCUREMENT OF SERVICES, WE RECOMMENDED THAT THE DEPARTMENT PRESENT THE MATTER TO CONGRESS WITH A VIEW TOWARDS OBTAINING CLARIFYING LEGISLATION.

IN THE PRESENT CASE, WE LIKEWISE BELIEVE THAT THE LABOR DEPARTMENT'S IMPLEMENTATION HAS A SERIOUS ADVERSE IMPACT ON THE GOVERNMENT'S PROCUREMENT PRACTICES IN TERMS OF REDUCED COMPETITION AND INCREASED COSTS. IN ADDITION, WE BELIEVE THE ADMINISTRATIVE CONFUSION INHERENT IN THE DEPARTMENT'S PRACTICES WILL ADVERSELY AFFECT FUTURE PROCUREMENTS OF THIS KIND. THE EXTENT TO WHICH THE DEPARTMENT'S INTERPRETATION OF SECTIONS 2(A)(1), 2(A)(2) AND 4(C) OF THE ACT HAS RESULTED IN A DEPARTURE FROM THE BASIC CONCEPT OF WAGE AND SAFETY PROTECTION FOR EMPLOYEES PERFORMING A SERVICE CONTRACT IN A PARTICULAR LOCATION IS WELL ILLUSTRATED IN THE FOLLOWING HYPOTHETICAL EXAMPLE CITED BY THE DEPARTMENT OF THE ARMY:

THE (LABOR DEPARTMENT) PROCEDURE *** CAN PRODUCE ABSURD RESULTS. FOR EXAMPLE, A FACILITY IN WASHINGTON, D.C. HAS A NEED FOR A CONTINUING SERVICE WHICH CAN BE PERFORMED ANYWHERE. THE PREDECESSOR CONTRACTOR PERFORMED IN NEW YORK CITY AND HAD A COLLECTIVE BARGAINING AGREEMENT. THE SUCCESSOR CONTRACTOR PERFORMS IN DUBUQUE, IOWA. THE DUBUQUE CONTRACTOR MUST PAY THE RATES CONTAINED IN THE NEW YORK CITY CONTRACTOR'S COLLECTIVE BARGAINING AGREEMENT UNLESS THOSE RATES ARE SUBSTANTIALLY AT VARIANCE WITH PREVAILING RATES FOR WASHINGTON, D.C. IF THERE IS A SUBSTANTIAL VARIANCE, THE DUBUQUE CONTRACTOR THEN MUST PAY WASHINGTON, D.C. PREVAILING RATES TO HIS EMPLOYEES PERFORMING IN DUBUQUE.

APPLYING THIS EXAMPLE TO THE PRESENT PROCUREMENT, IF A DUBUQUE CONCERN HAD BEEN SUCCESSFUL IN BIDDING FOR THE FORT SAM HOUSTON, TEXAS, CONTRACTS, IT WOULD NEVERTHELESS BE OBLIGATED TO PAY WAGES AND FURNISH FRINGE BENEFITS BASED ON COLLECTIVE BARGAINING AGREEMENTS IN NEW YORK CITY AND LOS ANGELES, UNLESS THE SECRETARY FOUND THE RATES TO BE SUBSTANTIALLY AT VARIANCE WITH THOSE IN THE "LOCALITY" (FORT SAM HOUSTON), IN WHICH CASE THE PREVAILING RATES IN THE FORT SAM HOUSTON AREA WOULD APPLY.

IN VIEW OF THE FOREGOING, WE ARE RECOMMENDING TO THE SECRETARY OF LABOR BY LETTER OF TODAY THAT THE ISSUES CONSIDERED IN THIS DECISION BE PRESENTED TO CONGRESS WITH A VIEW TOWARDS OBTAINING CLARIFYING LEGISLATION. AS THIS DECISION CONTAINS A RECOMMENDATION FOR CORRECTIVE ACTION, IT IS BEING TRANSMITTED BY LETTER OF TODAY TO THE CONGRESSIONAL COMMITTEES NAMED IN SECTION 232 OF THE LEGISLATIVE REORGANIZATION ACT OF 1970, 31 U.S.C. 1172. THE SECRETARY WILL BE REQUIRED PURSUANT TO 31 U.S.C. 1176 TO SUBMIT WRITTEN STATEMENTS WITH RESPECT TO THE ACTION TO BE TAKEN ON THE RECOMMENDATION TO THE HOUSE AND SENATE COMMITTEES ON GOVERNMENT OPERATIONS NOT LATER THAN 60 DAYS AFTER THE DATE OF THE DECISION, AND TO THE COMMITTEES ON APPROPRIATIONS IN CONNECTION WITH THE FIRST REQUEST FOR APPROPRIATIONS MADE BY THE AGENCY MORE THAN 60 DAYS AFTER THE DATE OF THE DECISION.