in the Twin Cities area which had the capacity or equipment to produce the spun fittings or oval ductwork as required by our firm's plans.

In effect, we were being told that we could not specify the type of ductwork we felt was best suited for this project, even though the client was relying upon us to assure the subsequent satisfactory operation of his facility. Fortunately, the Board of Arbitration, to which this argument was referred, ruled in our favor and our right to control the specifications was upheld under binding arbitration.

To our knowledge this is the only such case to come before an arbitration board. In numerous other disagreements, the same question of "right-of-control"-whether or not the design architect-engineer or the building trades union should dictate what products or materials are utilized on a project-have been decided both ways. It is expected that this issue must eventually be resolved permanently by the U.S. Supreme Court. In the meantime, lack of legislation, such as S. 3373, leaves the issue open to disagreement and permits labor disputes which, in terms of hard feelings and delays, more than offset the potential gains of "Optimum Value Engineering (OVE)."

Several man-weeks of work can be lost when (as actually happened) bricklayers near Milpitas, California, sought to block use of prefabricated fireplaces on approximately 1500 homes being built on three large tracts. The union, which had a traditional on-site labor contract work clause, told its members not to handle the prefabricated fireplaces and fined those members who did. The National Labor Relations Board ruled that the contract clause, while enforceable with the masonary subcontractors, was inapplicable to the general contractor. Accordingly, the complaint was rejected, but not until the project had been significantly delayed.

Despite a few positive breakthroughs-such as the Tri-Trades Agreement, wherein national unions representing carpenters. electricians and plumbers signed contracts allowing factory construction of prefabricated, light-frame house sections-the increasing frequency of product-related boycott complaints indicates that this problem demands solution. Product boycotts are injurious in four ways:

(1) They increases costs; not only by preventing the savings inherent in doing most of the work at the factory, but also when construction unions insist upon being paid for services which they don't perform as a prerequisite to allowing certain prefabricated products or materials on the job site. Furthermore, any disagreement, with subsequent work stoppage, may delay numerous other portions of a job, thus adding to costs. Delaying completion of a project beyond occupancy date may require the prospective owners to continue paying interest on borrowed capital, rather than collecting rentals. This cost is, of course, passed on to occupants.

(2) They stifle innovation and technical advances. If a manufacturer (for example) develops a prepackaged air conditioning and air distribution system, with expandable, insulated ducts, there is serious question as to where, or even if, sheet metal workers would permit its installation. The natural trend, there fore, is for manufacturers to stick to existing products and for engineers and architects to specify those items which they know will be acceptable to the various trades.

(3) They raise serious questions of liability. My own firm, as the mechanical engineer on a job, may specify a certain boiler or compressor which we believe will best suit the overall heating and cooling needs of a particular building. If the union refuses to install that particular boiler or compressor and forces the contractor to use a substitute in order to continue with a job, who is liable if the heating and air conditioning system fails to perform as anticipated? No A-E is going to assume responsibility for a project over which he lacks full and complete control.

(4) They represent an improper organizing tool. In several cases (including our Northern Federal Bank Building project), unions have objected to certain products on the basis that employees of the company which manufactured those products were either unorganized, or represented by a different union. Accordingly, such companies are left with the alternative of (a) fighting, (b) negotiating a contract with the union, or (c) recognizing that their market for a particular product may be severely limited.

Every member of Congress must be aware that the problem of restrictive building practices is not an idle threat. Even the National Commission of Urban Problems-the Douglas Commission-in its 1969 report to the President, noted: "Many restrictive practices do exist. They vary greatly from place-to-place.

Beneath these variations from place-to-place and from trade-to-trade are certain practices that, in their totality, retard the adoption of new materials and, improved systems of handling old materials, thereby adding to housing costs."

The practices and events of the building industry since issuance of the Douglas Commission Report have done little to correct this shortcoming. A continuing impediment to the development and utilization of modern technology for all U.S. housing is Congressional inaction relative to restrictive agreements between housing contractors and the trade unions. The decisions of courts at all levels have made it abundantly clear that relief from restrictive work practices clauses in collective bargaining agreements can be obtained only by changes in existing law or enactment of new statutes which will assure adherence to national policy, including progress in federally assisted housing programs.

Federal policy has already been enunciated by the Congress through adoption, in 1969, of an amendment to Section 1010(a) of the Demonstration Cities and Metropolitan Development Act of 1966. That amendment clearly states:

"... to the extent feasible, in connection with housing construction, any major rehabilitation, and maintenance under programs administered by the Department of Housing and Urban Development, that there is no 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."

S. 3373 will, we believe, provide a vehicle for assuring compliance with the intent of the 1969 Demonstration Cities policy enunciation. The current legislation will support the aforementioned amendment by providing a means by which any person, including builders, contractors or manufacturers (and we would certainly include architects and engineers) may, through civil court action in a Federal or State Court, prevent the enforcement of any local code, law, ordinance or work rule that restricts use of new techniques or materials on a federally assisted housing program. No action by a government agency is required. Obviously, civil court action would not be authorized if the existing restrictive code or labor agreement is deemed necessary to protect public health, safety or welfare. The new building technique or material must be shown to be of a quality of excellence comparable to existing standards which have been developed to cover such products. Whether or not the products can match such standards, or pass qualifying tests, is the responsibility of the aggrieved company or individual which must prove same using tests conducted by a recognized body, approved by the Secretary of Department of Housing and Urban Development. Some concern has been expressed over the possibility that the Secretary of HUD will utilize this responsibility to promulgate code exceptions which may lack the concensus endorsement of the professions, builders, suppliers, and other groups interested in maintaining safe healthful standards.

In this regard, the Consulting Engineers Council of the U.S. and the National Society of Professional Engineers believe that the assignment of responsibility for approving a recognized, standards-setting or testing agency (line number 8, page 2, of S. 3373) should be assigned to the proposed, new National Institute of Building Sciences. This body, which would be created under legislation already approved by the Senate (and included in similar legislation in the House), represents an independent, unbiased entity which is both equipped and competent to adjudge the qualifications of various testing bodies.

Also, our two organizations would like to suggest the addition of the word "concensus" following the word "appropriate" on line 6, page 2, of S. 3373. This change would delineate the fact that Congress is neither condoning nor authorizing "sweetheart arrangements" whereby a manufacturer pressures a testing facility or standards-setting body to endorse his product, after which he goes to court to force its use. The changes we are suggesting will, hopefully, help avoid any harassment-type claims by producers or fabricators who wish to promote questionable products. By requiring that the National Institute of Building Science stipulate which bodies are qualified to adjudge the merits of a particular product, Congress will remove any political considerations from the standards clearance process.

With these changes, the engineering profession believes that S. 3373 will deal effectively with the problems of overcoming restrictive practices in the building industry. It will make invalid and unenforceable any contract provision or other type of agreement which blocks the use of new or improved techniques, methods or materials or of preassembled products in connection with the construction or major rehabilitation of housing assisted by Federal funds.

If America is to meet its housing goals, increased emphasis must be given to volume production, to new technology, and to advanced methods of homebuilding procedures and management. Congress already has indicated a resolve to overcome existing restraints which hinder progress in the housing industry. Approval of S. 3373, with the changes we have suggested, will, we believe, represent a major step forward in providing quality housing to those 10 million U.S. families whose current habitation is regarded as totally unacceptable.

We urge your support and thank you for the opportunity of presenting our views on this important matter.

Senator TOWER. Thank you very much, Mr. Chapman. I appreciate your testimony, and we do appreciate your suggestions relative to amendments, and can assure that they will get careful consideration. Tomorrow we will conduct the final session of the hearings, hearing from the National Association of Homebuilders, Mr. Frank Bonadio, president of the Building Trades Department of the AFL-CIO, the Associated General Contractors, the International Union of Operating Engineers, and the National Association of Building Manufac

turers.

I declare that the committee is in recess until 10 o'clock tomorrow morning.

(Whereupon, at 12:10 p.m., the committee was adjourned, to re convene at 10 a.m., June 23, 1972.)

IMPROVED TECHNOLOGY AND REMOVAL OF PREVAILING WAGE REQUIREMENTS IN FEDERALLY ASSISTED HOUSING

FRIDAY, JUNE 23, 1972

U.S. SENATE,

COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS,
SUBCOMMITTEE ON HOUSING AND URBAN AFFAIRS,

Washington, D.C.

The subcommittee met, pursuant to adjournment, at 10:10 a.m. in room 5302, New Senate Office Building, Senator John G. Tower presiding.

Present: Senator Sparkman (chairman of the committee), and Tower.

Senator TOWER. The committee will come to order.

We are continuing hearings this morning on S. 3373 and S. 3654, and the first witness this morning is Mr. Stanley Waranch, president of the National Association of Home Builders.

Let me say first, Mr. Waranch, that we are delighted to have you here at the hearings, and I am particularly delighted that the National Association of Home Builders has decided to continue having its convention in Texas. We hope you spend lots of money around our State because we need it.

STATEMENT OF STANLEY WARANCH, PRESIDENT, NATIONAL ASSOCIATION OF HOME BUILDERS, ACCOMPANIED BY CARL A. S. COAN, JR., STAFF VICE PRESIDENT AND LEGISLATIVE COUNSEL, AND RICHARD CANAVAN, STAFF VICE PRESIDENT FOR BUILDER SERVICES

Mr. WARANCH. Mr. Chairman, we are delighted to be in Texas. As you know, I was the chairman of the first convention that moved to Texas in 1969. Texas has been very good to us. We hope we have been reciprocally good in being able to return.

Senator TOWER. You are always welcome here.

Mr. WARANCH. As you know, I am a homebuilder from Norfolk, Va. I appear here today as president of the National Association of Home Builders, an association of almost 62,000 members and 518 associations throughout the 50 States, Puerto Rico, and the Virgin Islands.

On my right is Mr. Carl A. S. Coan, Jr., our staff vice president and legislative counsel, and on my left is Mr. Richard Canavan, our staff vice president for builder services.

Senator TOWER. Mr. Waranch, if I might interrupt at this point, you may either read your statement in its entirety, or you may submit it for the record and summarize it. You may proceed in any way you

want to.

Mr. WARANCH. My statement is rather brief, Mr. Chairman, I think I would prefer just to read it.

Senator TOWER. That is quite all right.

Mr. WARANCH. We greatly appreciate this opportunity to appear before you today to give you our views on S. 3373 and S. 3654. These two bills, if enacted, would greatly simplify the construction of housing under the many housing programs administered by the Department of Housing and Urban Development. More importantly, they would contribute to a substantial reduction in the cost of building housing under these programs, a very important consideration in light of the substantial increase in costs that have confronted homebuilders over the past several years. I would like to treat with each of the bills separately, taking up first S. 3654.

S. 3654 would repeal the present provisions of the National Housing Act and the U.S. Housing Act of 1937 which require the payment of prevailing wages, pursuant to the provisions of the Davis-Bacon Act, in connection with the construction of almost all FHA-insured multifamily housing and all public housing. This would represent a major and significant step forward in the Government's efforts to keep down the cost of housing. Probably no other provision of law, practice, or custom has more substantially caused housing, constructed under these Federal programs, to cost more than similar, and, in many cases, identical housing built with conventional financing.

This additional cost element for housing built under the FHA multifamily and public housing programs has long been recognized. In investigation after investigation, it has been pointed out that so-called prevailing wages are in fact not prevailing wages, but are, in most cases, the highest wages paid in the locality. As recently as 1971, the General Accounting Office in a report to Congress (B-146842) on the need for improved administration of the Davis-Bacon Act noted that requirements for the payment of prevailing wages increased construction costs in the range of 5 percent to 15 percent over what they otherwise would have been.

This is totally unacceptable, especially when applied to housing built for low- and moderate-income families. It is difficult enough to build housing for these families at cost levels which will permit the greatest utilization of the limited Federal resources available, without artificially inflating its price as a result of prevailing wage requirements. For years the National Association of Home Builders has been urging the Congress to remove this anachronism from the Nation's housing laws. We compliment the committee and its chairman for agreeing to hold these hearings, thereby giving to us and others an opportunity to demonstrate the great need to remove the dead hand of the past represented by the existing prevailing wage requirements.

While there may have been at one time a need for requiring the payment of prevailing wages in connection with federally assisted projects, this is no longer the early 1930's and the conditions that then prevailed are no longer with us. We are not in the depths of a depression and the union and the working man in general are now in a much