tains higher wages than anticipated it may be found that because of the higher labor costs it is not feasible to build the project. That would leave HUD with an insurance obligation backed by a mortgage of little value. The only safe course is to make sure that the wage determination is available before initial closing and start of construction.

4. Question: On September 30, 1969, you addressed a letter to the General Accounting Office which was made a part of their Report entitled: "Construction Costs for Certain Federally Financed Housing Projects Increased Due to Inappropriate Minimum Wage Rate Determinations."

Quoting from your letter: "Your finding that minimum wage rates prescribed by the Dept. of Labor on certain federally financed housing projects were not the wage rates actually prevailing for similar private, residential construction projects but rather were the higher, union-negotiated wage rates paid on commercial-type building construction certainly is substantiated by our own experience. Indeed, we find that this situation is not limited to the low-rent public housing program, the subject of the draft report, but exists also in housing programs assisted by the Federal Housing Administration of our Department. Now, in your testimony this morning, you again note that these problems existed "in the past." Do they not still exist? Can you not give us recent examples, or even current examples, of such inequitable wage determinations?

Answer: As indicated in my testimony, the new procedures adopted by HUD in cooperation with the Department of Labor have had a very affirmative impact on those problem areas which were widespread in the past and which were alluded to in my 1969 letter to the General Accounting Office.

5. Question: What are HUD procedures to assist Labor Department in DavisBacon wage determinations? What are problems in doing so? How could it be made more effective? How can wage determinations be speeded?

Answer: HUD has agreed to conduct wage rate surveys and to recommend prevailing wage rates to the Department of Labor for residential construction. Surveys are to be made by HUD staff every six months in areas where there is continuing multi-family activity; as necessary to expedite processing of proposed projects requiring wage determinations; or are made as required by the Director, Office of Technical and Credit Standards.

Initially, a project list is prepared at the Area or Insuring Office covering all projects (insured and/or conventionally financed) of the type for which a wage determination is to be made. Projects included on the list must be under construction or have been completed within the last 12 months. Generally, projects considered for wage information are within the same county as the proposed project unless there are distinct wage rate differences within the county. For example, wage rates in a large metropolitan city are not necessarily considered representative of the suburban or rural balance of the county. If, however, wage rates in a larger adjacent area are representative of the area under consideration, this area too is included in the survey.

Upon completion of the survey, the Area or Insuring Office Director concurs and transmits the survey to the Regional Labor Relations Officer for review and transmittal to the Employment Standards Administration Regional Office, Department of Labor.

The efficiency and effectiveness of HUD's cooperative effort with the Department of Labor is primarily a function of an adequate level of staffing and the degree to which the wage survey process is perceived as a high priority. The Department is making a concerted effort to stress the priority nature of the wage survey process, to provide training for existing staff in its proper implementa tion, and is currently evaluating staff levels in this area. As was indicated in our testimony on S. 3654, improvement has already been noted.

6. Question: We hear that the Europeans and the Russians are far ahead of the United States in the application and use of modular components in construction. Do you agree with this and if so to what do you attribute this?

Answer: European countries in general and Eastern European countries in particular are generally ahead of the United States in industrialized building and the application of modular coordination. For example, in England 38% and in Russia 57% of all new residential building in 1970 was constructed by industrial systems. By comparison, in this country in the late 60's, factory buildings accounted for about 25% of housing production including the 15% of the market attributable to mobile homes.

This increased use of industrialized housing in Europe can be attributed to: the critical skilled manpower shortage; the need to replace housing destroyed

by the war; the traditionally different and more extensive role of the central government in providing housing; the concentration on multi-family housing units which can be rapidly built through industrialized methods; and the stimulus provided by the availability of markets that cross not only local but national boundaries. In spite of the early lead of European countries and our relatively late start in industrialized housing, I think that initiatives taken by this Department, such as Operation Breakthrough, will enable us to catch up with many of these nations in the not too distant future.

7. Question: Through approval of the Workable Program HUD has required cities and counties to update the building codes to provide for the use of new, cost saving products. In doing so, does HUD require that these new products meet standards other than health and safety? If so, what are they?

Answer: Our Department does not establish the code standards. The Workable Program, in part, requires communities to place in their codes, standards that are comparable to national standards as accepted in national model codes. In adopting these codes the national groups consider many factors including health and safety.

Senator CRANSTON. Thank you very much.

Our next witness is Mr. E. J. Newbould, vice president, Government relations, National Clay Pipe Institute. We welcome you and appreciate your presence. But before we continue let me insert in the record, at this point, a statement just received from Congressman Robert D. Price, of Texas.

(The statement follows:)

STATEMENT OF CONGRESSMAN ROBERT D. PRICE IN SUPPORT OF LEGISLATION TO REMOVE DAVIS-BACON ACT PROVISION FROM THE NATIONAL HOUSING ACT Mr. Chairman, the economic history of this country covering the past 25 years clearly indicates that the Davis-Bacon Act is a terribly outmoded and anachronistic law that, in the interest of all parties concerned, should be struck from the law books of our Nation. Its repeal would benefit not only the economy as a whole, but the construction industry itself, especially government construction, and the thousands of unemployed construction workers who are baffled by the anomaly of concurrent peak construction demand and unusually high construction unemployment.

We are all aware of the fact that the original purpose of Davis-Bacon was to deal with the problems created by itinerant construction firms and workers who, operating in the depression years of the 1930's, were depressing already abysmally low wage rates on government-related construction projects by underbidding local contractors and local workers. That era is long past. A law requiring the Secretary of Labor to predetermine, on the basis of local prevailing wage and benefit rates, what the pay level and benefits must be on each Federal or Federally-related construction project of $2,000 or more, is, to say the least, out of tune with the economic facts of today's construction labor market, and, more important, counters the total Federal effort to develop a consistent set of government policies to more effectively deal with the persistent problems of our modern society.

Mr. Chairman, Davis-Bacon has been found to be not only irrelevant to today's economy, but difficult to administer as well. Studies that have been referred to before and quoted from extensively, such as the ones conducted by the General Accounting Office and others, have clearly shown that the task confronting the Department of Labor to accurately determine local prevailing wage rates has been, to a large degree, unsuccessful. These data, because of the tremendous workload brought on by a long period of rising governmentrelated construction activity has imposed on the government-and on each individual taxpayer, I might add-abnormally high wage costs that have taken their toll in skyrocketing appropriations. Its effect on unemployment has also been substantial as high wage costs have acted as disincentives to hire more workers.

Cases have been documented by the General Accounting Office showing serious disparities between local prevailing wages and those set for contractors by the Department of Labor under requirements of Davis-Bacon. In a Detroit construction project, for example, the Davis-Bacon wage set by the Department of

Labor was actually higher than the contractor's contractual obligation set by collective bargaining with his employees' unions. In other instances, levels set by the Department of Labor were up to $2.50 per hour more than the actual local prevailing wage rate at the time.

Mr. Chairman, these are only two examples to indicate the inefficiency of the statutory procedures imposed on the Federal construction program by DavisBacon. The practice, I understand, is national in scope and unfortunately results in artificially set levels of wages biased on the high side.

A result of the practice has been a tremendous backlog in federally-related construction projects. Cost overruns are common. Postponements, and in some cases, actual cancellations of building projects, were made necessary simply because financing is difficult largely due to rapidly escalating labor costs. Wages in the construction crafts increased from 15 percent to 18 percent in 1970. In 1971, construction wage levels continued their rapid climb. The Construction Industry Stabilization Committee tried to moderate the 1971 escalation with little success. Hopefully, this year, it will do better. Yet, while construction wages keep on their upward course some doubling in a period of six years-the high unemployment rate among construction workers has troubled the American economy for the past several years. I submit, Mr. Chairman, that high unemployment and wage spiralling in construction are seriously and materially abetted by the Davis-Bacon Act. When we realize that a third of the more than $100 billion worth of construction anticipated for 1972 will be government-related, the impact of Davis-Bacon is not small, to be sure. In fiscal 1971, more than 59,000 government construction contracts were awarded and over 26,000 local wage determinations under Davis-Bacon had to be made by the Department of Labor. Realizing that most, if not all of these determinations might have been on the high side, the cost to government has been substantially more than it might have been under a system in which free market forces and unimpeded collective bargaining were in operation.

One other fact must be considered in these deliberations. The American economy is experiencing a new economic era in which the trade-off, or choice, between rates of unemployment and inflation is being redefined. With the institutional changes taking place in our workforce, some labor economists and government officials have stated that we must be prepared to live with a greater degree of inflation if unemployment is to reach acceptable lower levels. Others, realizing that unemployment and inflation are both moving up at the same time, are advocating the acceptance of a higher rate of joblessness and price rises. Yet, a third group sees the only solution to the twin problems of inflation and unemployment in developing massive job-creation projects, retraining programs, and more incentives for employers to increase hiring especially among unskilled and lowerskilled workers.

Mr. Chairman, present economic and social policies designed to implement this third approach-those dealing with manpower training and re-training, wageprice controls, public works acceleration, minimum wages-are all contravened by Davis-Bacon. The inflationary pressures generated by the law and the concomitant lay-offs of marginal and lower-skilled workers to cut labor costs add to the problems we in Federal government are so desperately trying to solve. The justification for repeal of Davis-Bacon is convincing indeed. It is a law that has run far past its time. It is a law that is diametrically opposed to current efforts to improve the lot of construction workers, the construction industry, and the future stability of the American economy. I urge the members of this Committee to weigh the evidence carefully, both for and against the law. I am confident that having done so, you will decide that all the people of the United States will best be served by its early repeal. Thank you.

STATEMENT OF E. J. NEWBOULD, VICE PRESIDENT, GOVERNMENT RELATIONS, NATIONAL CLAY PIPE INSTITUTE

Mr. NEWBOULD. Mr. Chairman, my statement is mercifully short, so, with your permission, I will read it.

My name is E. J. Newbould. I represent the National Clay Pipe Institute, which is a trade association composed of major manufacturers of vitrified clay sewer pipe.

We appreciate this opportunity to express our views on S. 3373. The National Clay Pipe Institute opposes the enactment of S. 3373, because we consider it unnecessary, duplicative, and unwise. One direct effect of this legislation would be to provide an almost unlimited opportunity for litigious mischief.

An undesirable but likely side effect, we believe, could well be reduced productivity and increased cost of low- and moderate-income housing.

Fundamentally, we see this as an ingenious two-pronged attack on certain organized labor construction practices, and on some of the putative evils of local building codes. Organized labor is well equipped to respond for itself where its interests are involved.

The comments I am submitting, therefore, are limited to replying to this effort, which is the latest in a long series of unceasing battles against the local building code. The first question to be asked is, Is this statute really necessary?

Mr. Romney has recently stated, "We are now one-half million units ahead of the pace for meeting the 1968 housing goals." Under these circumstances, what is the purpose of a legislative effort, we ask, designed to "increase productivity in order to meet our national housing goals"?

However, despite this remarkable recovery in terms of the number of housing construction, we accept that there still remains a need to reduce the exorbitant cost. We suggest that this proposal is not an effective way to achieve this laudable goal.

In January 1966, the Advisory Commission on Intergovernmental Relations, in its study, Building Codes, page 45, came to a startling conclusion. In the face of past and present conventional wisdom that local building codes and restrictive work practices are the twin villains resulting in spiraling housing costs, the Commission found:

In summary, higher costs of construction may be due more to the general economic organization of the housing and building industry, rather than to resistance to the use of new materials and construction systems.

We support this view. Furthermore, as outlined below, we contend that adequate existing and prospective legislation and regulations are available to correct weaknesses which are traceable to local building codes. We do not believe this is the moment to pass another Federal law to inflict the coup de grace on a reeling opponent, who in the long run may have been innocent all along.

A second pertinent question may be asked. Are local building codes still strong and sturdy enough to resist the introduction of new and improved materials, and techniques? And here, Mr. Chairman, if I may, I refer to the experience of the city of San Francisco in your own great State.

It is fitting that the chief sponsor of the legislation in his statement supporting and introducing this legislation, did refer to the city of San Francisco. In order to continue to receive urban renewal funds from HUD, San Francisco was required to "modernize" its local building codes. The elected representatives of the city were told, in effect, in the bluntest terms, "Change your building code to allow the use of plastic pipe and Romex cable or HUD will withhold a $19 million urban renewal grant."

San Francisco, first voting against this type of action, a week later voted unanimously to knuckle under to this imperial edict, and did so on December 13, 1971. This is how the workable program works, Mr. Chairman, and there are few cities who dare defy it. I would like at this point just to divert to explain how clay pipe, which is a sewer pipe, is involved in the entire subject of this legislation, S. 3363.

Our material is controlled by local building codes, which in most jurisdictions include plumbing codes, sometimes called mechanical codes. We are also controlled by local and city ordinances. Our experience with HUD in administering the workable program-far from the manner which it has been mildly referred to in the past by previous speakers is that the workable program's administration favors new materials, and in so doing, in effect, is discriminating against those which are not new materials, such as clay pipe, and yet which have a long experience of proven use.

I wrote in my statement that there are 20 States that have adopted new State building codes which respond to the Operation Breakthrough initiative to convert to the statewide use of preassembled products. It is more than 23, according to Mr. Van Dusen.

Area programs aimed at unifying local building codes are in effect in a number of jurisdictions, and this is a proper and acceptable approach-Atlanta, Denver, Miami, Washington, D.C., and there are others as well.

For our part, we are pleased to note that the Senate-passed housing legislation, S. 3248, does call for the establishment of the National Institute of Building Sciences. One of its duties will be to establish standards and technical provisions for use in local building codes.

This is the impartial, technically acceptable approach we have consistently favored. Operation Breakthrough itself continues to study the effect of local building codes and restrictive work practices on the cost of housing construction.

I am interested to note that HUD very recently presented us with their first public report on Operation Breakthrough. But, there is, strangely enough, no comment about any savings in cost which might have been achieved, or are being achieved, despite the fact that there are no restraints upon Operation Breakthrough, in either local building codes or work practices, as the chairman well knows.

So, it would appear from a listing of all these activities that are now going on in terms of local building codes, and these are by no means all-inclusive, that yet another weapon in the battle against local building codes would seem to be redundancy compounded.

I would like to point out with respect to local building codes—I think it is sometimes forgotten that local building codes are in fact laws passed by local representatives of the people, and not something dreamed up by elderly plumbers in the evening, as was indicated by one of the prior speakers.

Furthermore, the assertion that the Federal Government is not to be found anywhere in this legislation in the role of a "dictator," turns out, upon further examination, to be imprecise. The legislation proposes to grant to the Secretary of the Department of Housing and Urban Development the authority to determine, in effect, which standard-setting or testing agencies are to be permitted to exist.