Senator Tower. I would like, however, to emphasize the importance of the 4 days of hearings which the subcommittee embarks upon this morning.

The legislation introduced by Senator Brock, which I have cosponsored, seeks to cure many of the ills which plague our efforts to insure that low-cost housing can be constructed in the future at prices the Federal Government can justly afford to pay, and justify to the taxpayer.

My legislation is directed at removing anachronistic provisions from the National Housing Act and Housing Act of 1937.

Unfortunately, the Federal Government, due to the strictures of prevailing wage provisions in current housing statutes, has contributed to inflationary pressures in the construction industry.

In addition, inordinately high determinations, far above the average wage scales in many instances, have taken the Davis-Bacon Act in full circle-intended in 1931 to protect local laborers and contractors by insuring the integrity of local wages, we now find in 1972 that local contractors in smaller communities are unable to bid on federally financed projects in their locality due to the high wage rates, thus opening the door to contractors from the larger metropolitan areas. We have a good list of witnesses who have agreed to appear this week and discuss the pending legislation. I have requested that the normal order of witnesses be altered just slightly this morning. Ordinarily we would begin with Under Secretary Silberman; however, to insure the greatest benefit of the testimony to be presented this morning, we will open with Mr. Ahart from the General Accounting Office, for I feel that the Department of Labor would like to respond to the testimony that he delivers.

Now, I would like to call on Mr. Ahart of the GAO, and you may proceed any way you like, sir. I believe that you have a printed statement which is in the hands of the members of the committee. You may read that in its entirety, or you may submit that for the record and proceed informally, however you want to do it.

Senator BROCK. Let me ask if I may insert my remarks at this point. Without objection, I would like to insert my own remarks in the record at this point to save some time.

Senator TOWER. No objection.

(The complete statement of Senator Brock follows as though read:)

OPENING STATEMENT OF SENATOR BROCK

At the outset, I want to thank the chairman for calling these hearings. As has been announced, they will be concerned with several proposals aimed at lowering housing construction costs in federally assisted housing programs.

I believe it is an absolute tragedy that Congress has allowed a situation to develop where housing is priced out of the reach of many American families-most notably, those in the middle and lower income groups. When housing costs rise from 10 to 15 percent a year, there is no way that we in Washington can increase subsidies to keep pace with those costs. To the contrary, our past willingness to do so has contributed to our problems. The very fact that the Housing and Urban Development Act of 1972, which was reported out by this sub

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committee and recently passed the Senate, raised the Federal subsidy to an amount that would cover families with earnings of $11,000, indicates something is fundamentally wrong in the industry. That is why I fought for these hearings-to try to find some way to cut the ever-spiraling increase in construction costs.

During the next 4 days, testimony will be given on two bills, S. 3373, which I introduced, and S. 3654, which was introduced by the distinguished senior Senator from Texas, Mr. Tower.

My bill, S. 3373, is aimed at ending restrictive work rule and outmoded building code bars to the use of new or improved building products and methods. It is cosponsored by Senators Beall, Bennett, Dole, Dominick, Fannin, Gurney, Packwood, Taft, and Tower.

We are not here to discuss all construction wage levels, even though wage rates for the building trades have increased far faster than other sectors of the economy. My target is to cut construction costs by increasing job productivity. A recent survey by Engineering News Record showed that low productivity wastes from 15 to 40 percent of every construction payroll dollar. The publication estimates that, as a result, Americans this year are spending from $12 billion to $16 billion "for something they aren't getting." A significant portion of that amount is being spent through federally assisted programs. I believe we in Congress have an obligation to encourage maximum productivity in these programs alone, if not throughout the construction industry.

Industrialized building products and techniques can vary from prehung doors to entire buildings designed as a system with one prebuilt component fitting into another such component. In some cases, complete houses are factory constructed and only have to be attached to foundations at the site.

Employment of such products can raise productivity and decrease overall costs. Less time is lost due to weather since much of the work is completed in a factory. Unit labor costs are reduced because assembly line production requires labor with lesser skills than those on the jobsite. Overall job overhead is also reduced since prefabrication saves time. Most importantly, greatly increased employment can be achieved by increased sales of more reasonably priced homes.

Until there is unrestricted use of these products, the full extent of the resultant cost savings will not be known. For instance, the Douglas Commission (National Commission on Urban Problems) pointed out that code and work rule restrictions limit the application of industrialized products on a national basis. Thus, cost savings that could result from mass production are not presently available. Moreover, architects and engineers, knowing they will face code or union problems, intentionally "design around" the new products. Contractors, in order to get the job done, acquiesce to union refusals to handle the new products. Based on available data, Kenneth Zapp of Case Western Reserve University predicted, in a recent Technology Review article, that the time to construct a building under a systems approach would be only 50 to 66 percent of the present construction time with an overall cost savings of up to 25 percent. The cost figures from Europe and the U.S.S.R., where industrialized building is employed extensively, bear out Professor Zapp's estimates.

My bill, S. 3373, is aimed at breaking down work rule and code barriers to the use of industrialized housing products. The work rule.

barriers result from collective bargaining agreements that allow building trades unions to refuse to handle or to install certain products. The agreements and the subsequent union action under those agreements violate congressional intent as set forth in the Taft-Hartley and Landrum-Griffin Acts. Nevertheless, the courts and the National Labor Relations Board have allowed such monopoly conduct even though it results in a proscription on the use of cost-saving products, lower availability of housing, and higher prices. The building code barriers, ostensibly established to protect health and safety, are many times union instigated to protect existing jobs, an objective they fail to achieve. To the contrary, they have priced construction out of reach at a cost of thousands of jobs.

What is important is that my bill contains the mechanics to allow the use of the new technology without the involvement of the Federal bureaucracy. It recognizes the need to protect health and safety and adapt to local differences while still providing the needed boost to productivity in the construction industry.

The bill is an outgrowth of the breakthrough amendment offered by Senator Tower to the Housing and Urban Development Act of 1969. As finally adopted, the amendment directed the Secretary of HUD to: "... (4) assure, to the extent feasible in connection with housing construction, any major rehabilitation and maintenance under programs assisted under this section that there is no restriction by contract, building codes, zoning ordinances, or practice against the employment of new or improved technologies, techniques, materials, and methods, or of preassembled products which may reduce the cost or improve the quality of such construction, rehabilitation, and maintenance, and therefore stimulate expanded production of housing under such programs, except where such restriction is necessary to insure safe and healthful working and living conditions."

Thus, Congress has evidenced a legislation policy recognizing the necessity for full use of technological advances in construction. Unfortunately, Congress has not given enforcement power to support this legislative policy. My bill should fill this gap.

I offered an amendment identical to S. 3373 during the executive session on the Housing and Urban Development Act of 1972. The subcommittee initially adopted it. Later, it was reconsidered and narrowly defeated. I then offered the proposal during floor debate on the housing bill. I withdrew the amendment after our committee chairman graciously offered to schedule the hearings we start today. I wish to commend Senator Paul Fannin, whose bill, S. 1691, is similar in many ways to mine, and Representatives Bob Wilson, John Anderson, and Ben Blackburn, who have been leaders in this fight in the House. I am happy that they are lending their support to my

measure.

The bill itself is straight forward. Its important provisions are:

First, through a civil court action in a Federal or State court, any person may prevent the enforcement of any local code, law, ordinance, or work rule that restricts his use of new techniques or materials in a federally assisted housing program unless it is necessary to enhance health or safety. No action by a government agency is required.

Second, the remedy does not apply if the restrictive code or work practice is required to protect the health or safety of working or living conditions. If this defense is raised, the new product or technique

will be presumed to meet the required test by conforming to standards established by any nationally recognized standard setting or testing agency designated by the Secretary of Housing and Urban Development and qualified and equipped to perform suitable tests or evaluations.

Third, the court may order equitable or preventive relief and damages, although damages may not be assessed against a local governmental body.

Fourth, the safety and health issue and all other questions under the bill will be decided by a State or Federal court in the locality.

I believe it is imperative to note that my bill does not provide the means for establishing a national building code. Standards are involved only if the health and safety exception is invoked and, in that event, only standards set by nationally recognized standards or testing agencies. HUD merely identifies these agencies, nothing more. If no standard has been established by such an agency or if HUD has not designated such an agency the only result will be that there is no presumption in favor of the product meeting the health and safety standards. In such a case, the plaintiff will have the burden of proving this element. Important in my bill is the fact that the court action is initiated by a private party and decided by a local court, all without the involvement of a Federal agency. Moreover, I cannot see why any producer would be afraid to have the health and safety question concerning a competing product decided in open court where all parties have the opportunity to present evidence.

I want to make one point in conclusion. First, I am sure we will hear from witnesses that the high cost of housing is due to something other than low construction productivity. This will be attributed to increases in land and materials or to unconscionable settlement fees. I hope we can consider each of these in future hearings for I agree that each is a contributor to the outrageous cost of housing. However, there is too much evidence to deny that productivity can and should be significantly raised in the housing industry. Hunter Wharton, president of the International Union of Operating Engineers, bears this out when he told a recent convention of his union that, "had productivity increased as wages began to rise, we wouldn't now be faced with (some of) our present day problems."

We have a long list of witnesses so I will not detain the subcommittee further. I again want to thank the chairman for calling these hearings. I know they will be productive.

Senator TowER. All right, Mr. Ahart, you may proceed in any way

you like.

STATEMENT OF GREGORY J. AHART, DIRECTOR, MANPOWER AND WELFARE DIVISION, GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY MELVIN MILLER, ASSISTANT GENERAL COUNSEL OF THE GENERAL ACCOUNTING OFFICE; MORTON HENIG, ASSOCIATE DIRECTOR OF THE MANPOWER AND WELFARE DIVISION; AND WARREN BROWN, SUPERVISORY INVESTIGATOR

Mr. AHART. Thank you, Mr. Chairman. I do have a fairly brief statement which I would like to read into the record.

Also, I would like to introduce my associates here at the table: On my left, Mr. Melvin Miller, Assistant General Counsel of the General

Accounting Office; on my right, Mr. Morton Henig, Associate Director of the Manpower and Welfare Division, and Mr. Warren Brown, Supervisory Investigator of the Manpower and Welfare Division. We are pleased to be here today to discuss in the light of the reviews that we have performed, the Department of Labor's administration of the Davis-Bacon Act, and a bill (S. 3654) which would remove certain types of federally assisted housing construction from the requirements of the act.

The principal objective of the Davis-Bacon Act, which applies to construction, alteration, and repair contracts in excess of $2,000 on Federal or federally assisted projects, was to protect communities from the depressing influences of lower wage rates at which workmen might be hired elsewhere and brought into the communities to perform construction work.

This objective was to be accomplished through contract conditions requiring payment of not less than minimum wages based on wages prevailing for corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the community in which the work is to be performed.

The General Accounting Office has carried out a number of reviews which concerned the Davis-Bacon Act. In a series of reports issued between June 1962 and August 1970, we informed the Congress of the manner in which the Department of Labor had made minimum wage rate determinations for selected major federally financed construction projects.

The reports pointed out that the minimum rates determined by the Department were significantly higher than the wages prevailing in the areas where the construction work was performed and had substantially increased the construction costs borne by the Federal Government.

Because of the large volume of wage determinations made by the Department about 25,900 in fiscal year 1970-and the substantial dollar amount of federally financed construction contracts-about $28 billion in 1970-GAO sought to identify the basic shortcomings in the wage determination process and to recommend corrective actions beyond those taken by the Department in response to GAO's prior reports.

The results of this effort were presented in a report issued on July 14, 1971, entitled "Need for Improved Administration of the DavisBacon Act Noted Over a Decade of General Accounting Office Reviews" (B-146842). I believe a copy of this report has been provided to each member of this subcommittee.

I would like to briefly present the findings and conclusions, and recommendations for corrective action, which we included in the summary report.

Our earlier reports issued between 1962 and 1970 covered wage rate determinations for 29 selected construction projects, including military family housing, low-rent public housing, federally insured housing, and a water storage dam.

We estimated that, as a result of minimum wages being established at rates higher than those actually prevailing in the areas of the projects, construction costs increased 5 to 15 percent. The increased costs may have amounted to about $9 million of the total $88 million construction costs involved in these projects.