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Senator Walsh. I do not suppose he knows all the details.
Mr. MICHENER. Yes; he is presumed to.

Dr. Lubin. Definite provision is made in the bill that in the event that as a result of conditions that are imposed by this bill, it can be proven that the costs of production of a contractor have been increased, recompense can be made for such increase.

Mr. MICHENER. Yes. In other words, the way the bill is drafted, the code prices as of the date of May 26, whenever it is, would be static for all time, because this is not emergency legislation. This is permanent legislation. Therefore, those code prices would be static for all time, unless some power was lodged somewhere to change that condition, and it was the purpose to give the President the power to rewrite the codes as he might think equitable.

Dr. Lubin. On condition that they were criticized as inequitable;

yes, sir.

The CHAIRMAN. On condition what?

Dr. LUBIN. On condition that the conditions were critized as being inequitable.

STATEMENT OF HON. DAVID I. WALSH, UNITED STATES SENATOR

FROM MASSACHUSETTS

Senator WALSH. Mr. Chairman, I do not like to have any misunderstanding.

The CHAIRMAN. No

Senator Walsh. There is no provision in this bill compelling the President to fix any figure as the minimum or as the maximum hours of labor. It is one of four factors which he is taking in consideration, one being the cost of living—and they are named on page 15, four of them—the codes of the code is one factor, and it is a factor because it is the one information we have where employers and employees everywhere in every industry agreed upon what would be the minimum wage and what would be the maximum hours. So, it is one of the things that the President takes into consideration.

Now, taking into consideration, not as a fixed policy but when a written request for bids is put out, the President may change that in every single written request, just as the Bureau Chief can change the kind of granite, the kind of lumber, the kind of metal that we buy, the strength and the amount of it. So these bureaus in each contract will say that under this contract the hours shall be 40, the hours shall be 36, or the hours shall be 38, or what the wages are.

The CHAIRMAN. Senator, the suggestion of Mr. Michener was that you do give the President the power to do what was attempted to be done in the codes.

Senator Walsh. It is not.

The CHAIRMAN. Then why isn't that so now, in justice to the sitnation? You start out with a code, but don't you say that before the bid is advertised, or in the advertisement, there is to be a statement of labor and wage conditions, and so forth?

Senator Walsh. When a request is made for bids it shall be stipulated, as in every request, not only what material is going to be used, but what labor is going to be paid, and in that shall be the maximum hours of labor employed.

The President has one of four factors to take into consideration, and they are named in the bill. One is the code. It is not conclusive. The other is the prevailing wage in that particular locality. It may differ in different localities. The other is the cost of living and the condition of the industry in 1934. There are four different factors. The code is one but not conclusive and not binding. In my judgment, it is the most far-reaching in its benefit.

The CHAIRMAN. As I understood it, the question went to the matter of power and not to the various factors which went into the determination of how tlie power was to be exercised. Now, in order to get a clear picture of the bill, isn't this the situation: These four factors which you have indicated are supposed to be those things that would persuade the judgment of whoever puts the specifications into the advertisement for the bid?

Senator WALSH. Yes; that is correct, sir.

The CHAIRMAN. But having considered those four elements, there is to be incorporated in the invitation for the bid certain specifications in regard to labor and wages and so forth—that is the bill, isn't it?

Senator WALSH. That is true. I call attention to page 15—the specific minimum wages and maximum hours specified to go in any invitation to bid or contract shall be, first, the cost of living; second, the standards for the same class of labor in the same State or industry in the same locality; third, the standards in effect for such class of labor during the year 1934."

That is practically the code. Then [reading]— The minimum rates of pay and maximum hours of labor specified in the applicable codes of fair competition and approved amendments thereto.

It is one of the four factors. In my judgment it is the most valuable, because it is the one recorded information we have where there was at one time an agreement between employees and employers as to what would be the best labor conditions.

Mr. Robsion. Doesn't it result, using the four elements, the four factors, as the Chairman says, in the necessary implication, in giving the power to somebody to make a code?

Senator WALSH. There is absolutely no doubt that under this bill in the written request for bids and in the written contracts there shall be specified how their people shall work and the minimum wage, just as is specified the kind of granite and the kind of timber and the kind of steel.

Mr. Rossion. It would be a code still, would it not?

Senator Walsh. I do not call it a code to specify what kind of lumber or steel you use in building a building.

Mr. MICHENER. There is vast difference in the quality.

The CHAIRMAN. That is a discussion of terms. You have agreed on what the bill does, have you not? The question of whether it is a code or not is a discussion of terms or definitions.

Mr. MICHENER. There is a vast difference. You always can specify as to quality, but when you go to designating the conditions under which the article is produced in the mine or in the factory or in the home, and conferring that power upon the President or his subordinates, it is vastly different.

Senator Walsh. That is true, but it only applies to a man who seeks a favor from the Government in a contract. Any other manufacturers, any other miners, any other person in the world, who does not ask a Government contract, can disregard all hours of labor and minimum wages. It only applies to a man when he comes and says, “I want a Government contract."

Mr. Robsion. But, Senator, doesn't it reach back and put the measure of wages and so forth on the man who is going to furnish the materials?

Senator Walsh. Yes, it is true that many of the Government contracts are past contracts, so to speak. For instance, let us say the purchase of shoes. They are already manufactured. Therefore, the bill provides that you should maintain these labor conditions in the production of these shoes. It would not be fair to say that shoes that are going to be manufactured in the future shall have certain labor conditions, but shoes that we buy now that have already been produced shall not have any labor conditions.

The CHAIRMAN. Senator, while you have the floor, this suggestion has been made in criticism of the bill, that the operation of the proposed plan would be a great deal broadler than under the usual governmental conditions heretofore, because of the fact that the Government is at the moment engaged in so many activities in which the Government has not heretofore been engaged. That is being offered in criticism. What observation have you to make on that?

Senator Walsh. You think it would be difficult of application?

The CHAIRMAN. No, sir; I am not taking a position about the bill. Let me repeat that.

Senator Walsh. Oh, yes.

The CHAIRMAN. I say this bill is being criticized by two members of the committee

Senator Walsh. Yes.

The (CHAIRMAN. On the score that the Federal Government at the moment is engaged in a great many activities; that its activities are much broader and very much more extended than governmental activities have been accustomed to be, and that therefore the Government is, as a matter of fact, attempting to establish a code that operates not only as between the people who contract with it but to be spread out to the whole country.

Senator Walsh. That is very true. This bill would be much more effective at the present time because of the large undertakings of the Government and the large number of contracts than ordinarily. That criticism is very proper and very appropriate for anybody who is opposed to the Government fixing the standards of minimum labor conditions. In fact, anybody who does not believe in the Government entering into the domain, in the transaction of its own business, of minimum standard labor provisions, ought to be opposed to this bill. This bill is an attempt to lift up and preserve minimum standards of labor in contracts with the Government.

The CHAIRMAN. I understand that you have taken the position that, particularly when the Government is being called upon to supply from the public Treasury the maintenance of people who are released because of the unusual or unreasonable extension of hours,

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the Government has a peculiar interest at the moment in trying to
avoid the increase in the number of those whom it has to take care
of out of the public Treasury?

Senator WALSH. Very true.
The CHAIRMAN. I understand you make that argument.

Senator Walsh. And also the breakdown that has come since the
abolition of the N. R. A. The Government has an obligation. Let
us take the case of sweaters. The Government has a contract for
furnishing sweaters tomorrow, we will say. Who is going to get the
contract? The sweat-shop operator, of course. Just as sure
you are alive, the factory that is working under sweat-shop condi-
tions will be the lowest bidder, and the one in Texas and the one in
North Carolina that is trying to maintain these conditions will be:
absolutely lost. Under present law the one who chisels the most,
the one who works his employees the longest, who pays the lowest
labor, will get every one. And the most enthusiastic supporters of
all of this bill are those who have had Government contract exper-
ience—the builders. Practically every road builder and every con-
structionist in this country is very strong for this bill, because they
have learned from sad experience what happens when you go to
chiseling on wages.

Mr. McLaughlin. If I may interrupt to ask a question, I am just wondering what effect this bill will have on the contractor for construction work.

Senator Walsh. The Bacon-Davis Law takes care of builders, and you have amended it this session.

Mr. McLAUGHLIN. Take any contract with the Government: This last, as I understand, provides that in taking a contract a contractor must represent that he has secured certain written agreements from his subcontractor. Now, then, in those written agreements the subcontractor agrees to do the things which the law requires him to do.

Senator WALSH. Yes.
Mr. McLaughlin. In section 3 on page 10 it then provides:

Every representation or agreement made pursuant to the provisions of this Act by a principal contractor, borrower, grantee, subcontractor, or supplier, shall provide :

(1) That any breach or violation thereof shall render the party responsible therefor liable to the United States as and for liquidating damages.

I am just interested to know what the definition is of the terms the party responsible therefor.” Does that mean the contractor himself?

Senator Walsh. The invitation for bids and the written contracts require the contractor to certify that he is going to or has exacted those conditions—minimum wage conditions—from his subcontractor.

Mr. McLAUGHLIN. Yes.

Senator Walsh. Now, if a subcontractor is found on complaintsas appears very frequently in the kick-back investigations—they found that he had violated these laws, the President, acting through the bureau chief, the Navy Department, will say: “Mr. Contractor, your subcontractor is not living up to the terms of this bill. Unless you change, and compel him to, we will ask you to cancel your subcontract with him.” The main contractor is liable for the subcon

tractor only to the extent of being requested to cancel the subcontract. He is not liable for the wages.

Mr. McLAUGHLIN. In that respect, assume that there is some damage due to delay to the contractor who has the contract with the subcontractor; the subcontractor has fabricated his material, and then, after the passage of a considerable amount of time, it has developed and has been ascertained that the subcontractor has not lived up to the provisions of the law, and the contractor is required to again let his subcontract. Would the contractor be held responsible for the delay and the damage!

Senator Walsh. No. But assume that pressure would be exerted upon him to see that the subcontractor did right.

There is a very sweeping and very extensive provision here providing for modifications and changes by the President. I do not know how better to put it.

You know in building a house after the contract is made how frequently it is changed—how you decide upon a different kind of lumber, you decide that the cement that you first picked out is not the right kind of cement. Therefore, there has got to be an authority and it is there in the bill, for the President to make modifications, to make changes, acting, of course through his bureaus. I do not know how better to put it than to say that we are simply writing in, together with the other specifications, the construction and building and purchasing supplies, just a few items about labor conditions. That is all, just as you have all the other items. That is all we are doing.

Now, of course, it is going to be a little more difficult to deal with the human element than it is the material element, but it can be done.

Mr. McLAUGHLIN. My inquiry was directed to the point whether or not under this law the contractor is going to be penalized for the character of a subcontractor.

Senator Walsh. There is no penalty on the contractor for the failure of a subcontractor, but he may be required to cancel the subcontract. He is not penalized; the subcontractor is penalized.

Mr. McLAUGHLIN. In the event the contract contained the provisions that the contractor should receive some benefit from the contract if he should finish the contract within a certain time, or should suffer some damage in the event he did not finish the contract within that certain time, would that fact—that a subcontractor with whom he had to concel the contract caused a delay—cause a penalty to be imposed upon the contractor!

Senator WALSH. Well, if the contractor says he is going to perform a certain work in a certain time he has got to do it. He cannot get out and say, "My subcontractor has had a strike; my subcontractor failed me. He has got to deliver, else we do not get anywhere in life if we do not hold the principal contractor.

Mr. McLAUGHLIN. Is the burden being imposed upon the contractor for the trouble of a subcontractor, over which he has no control ? That is the question?

Senator WALSH. He is obliged to guarantee that he will see to it, so far as he can, that his subcontractor will carry out those minimum labor conditions; and if he does not do it, the contractor must cancel the subcontract.

Mr. McLAUGHLIN. I do not want to argue; but as I understand it, the law does not say that he shall see to it that the subcontractor

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