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Senator WALSH. I think you spoke to me about this.
Mr. FLETCHER. I did, Senator.

Senator Walsh. I rather agreed to the proposition, and the only reason it was in the bill was that the President in his Executive order and during the whole time the N. R. A. was in operation left the railroads out of operation of it.

The CHAIRMAN. We thank you very much, Mr. Fletcher, for your suggestion.

Mr. FLETCHER. May I file this memorandum of the Federal Coordinator of Railroads to the President, giving the reason in detail why it should not be done?

The CHAIRMAN. We have an understanding of it, I believe, and we have your suggested modification.

Mr. FLETCHER. Very well. Thank you very much. I did speak to Senator Walsh about it, and I understand that he agreed to it in principle.

Senator Walsh. It is not intended to apply.

The CHAIRMAN. Who else here can speak in as short a length of time and as much to the point as Mr. Fletcher?

Mr. FULBRIGHT. Mr. Chairman, we have had no opportunity to get together as yet, and I would suggest that Judge C. L. Bardo, of the National Association of Manufacturers, appear, and when we recess at noon we will meet together and try to organize our presenttation.

The CHAIRMAN. Very well; we will hear you now, Mr. Bardo.

STATEMENT OF C. L. BARDO, PRESIDENT NATIONAL ASSOCIATION

OF MANUFACTURERS, WASHINGTON, D. C.

Mr. BARDO. Mr. Chairman and gentlemen of the committee, the National Association of Manufacturers, representative directly and indirectly through State and local manufacturing associations of a large segment of American industrial life, and with deep concern for industrial recovery and prosperity for all, submits below its views upon Senate bill S. 3055 now before your honorable committee.

My remarks will deal only with the practical effect of the bill upon industry, as it passed the Senate.

Industry wants to go full speed ahead. We believe that we are entitled by experience to call the attention of the appropriate authority when obstacles are being put in the way. We are opposed to the bill for the following reasons:

The dollar value, volume, and geographic distribution of all Gov. ernment purchases, direct and indirect, represent the products of approximately 50 percent of the industries supplying Government material so that the effect upon industry would be more extensive than hertofore stated.

It proposes to exclude from its provisions all direct Government production by departments or agencies in competition with private industry.

It attempts by indirection to do that which the Supreme Court held it was forbidden by law to do directly.

It would do irreparable damage to private industry by driving out of Government supply directly or indirectly every industry failing to accept its provisions—a boycott of the most reprehensible type.

It would definitely injure the Government by narrowing and limiting competition and tending toward monopoly:

Under N. I. R. A. many industries were subject to a number of codes. Many compliance disputes were pending when the Supreme Court spoke. How many industries could say without fear of contradiction and the double-barreled penalties under what code or codes they were operating under on Sunday, May 26, 1935?

It is impossible for any private industry, or very few, at the most, to police the chain of compliance certificates required by the bill.

It will inevitably enhance the cost of performance bonds and the difficulty of getting them.

It will create labor unrest in many industries and localities where conditions are now mutually satisfactory.

Will organized or unorganized labor accept the wages and hours as fixed by the President for many contracts running over a period of years or will such fixation be used as a springboard for further demands after contract is let?

Section 1-A, lines 11 and 12, refers to minimum rates of pay. This contemplates, as we understand it, not only the minimum rate for the lowest-paid class, but the minimum rate for all classes. Does this refer to hourly, weekly, or annual compensation?

This impairs the right of collective bargaining and further restricts management in the conduct of its business.

Time is the essence of every contract; inventories the bane of every industry. Both problems will be greatly increased under the proposed act.

May I declare that industry is emphatically and honestly opposed to this bill? By what inherent right can the bureaus created under this bill prescribe the hours and wages of the American workman who has fought throughout the years to preserve his right to bargain for himself?

Industrialists have no quarrel with the elimination of child and convict labor. We demand the right granted under the Constitution to participate without interference in the American competitive system. We are reluctant to believe that in order to carry out this act our Government would resort to the use of the boycott which is condemned by every enlightened nation and forbidden by law to the private citizen. If undertaken, it will be the most emphatic abuse of power ever imposed on a free people. It would constitute a denial of the right of industries to serve their country upon the same basis that they serve each other and the consuming public. It will increase costs; slow up industrial recovery by interjecting a requirement coincident with its passage that will literally take months for industry, working day and night, to reach a point where new business can be quoted on for either Government or general use.

We maintain, and have assurances from industry, that it is their intention to continue on substantially code wages and hours. If we mean to have recovery without further delay the normal forces of recovery should be permitted to carry on. Why burn the barn to catch a few rats in the granary?

It is almost impossible for a primary contractor dealing with several hundred suppliers of material to ascertain in the first place if the subcontractor's compliance certificate is correct and, if challenged, to prove subsequently that he is dealing only with legally qualified agencies.

Government specifications from some departments exceed in many directions the requirements of the ordinary trade. They exact high engineering and mechanical skill possessed only by larger organizations.

Government business is a relatively small part of their total product. They are in competition with many other producers of generalconsumer goods. It is utterly impossible to maintain differing schedules of rates and hours in one plant covering comparable services.

The normal contract penalty provision covering completion, the double-barreled penalties for violation under this act, combined with the arbitrary power conferred under section 6, are of such a drastic nature as to defy any contractor to know on the first instance what he might reasonably be expected to do. A single simple violation would imperil the entire transaction. The act divests him of every common right. He is in the hands and subject to the control of bureaucratic government with all that that implies.

The “justice and public interest” provisions are interpreted by whatever agencies are designated under the act, and relief from the other provisions can be had only by and with the consent and recommendation of the governmental agency. It is a contract by force majeur.

Section 8 undertakes to prescribe standards for the determination of wages and hours. The cost of living is the primary test. How can the President, or any Government agency, know in advance what the hours and wages may be without knowing where the contracts are to be placed ? I do not know, gentlemen, how that provision of the law can be carried out at all.

Take the building of a ship, if you please, which is something that I know something about. You send out inquiries when you are invited to bid on a ship to several thousand suppliers of materials. You finally get down to probably as many as 3 or 4 thousand, and you buy from them, scattered all over 38 States. There is not a single supplier of material that could tell you what his price was going to be for that stuff until you had interchanged with all of these groups all of the information that would be necessary to interchange and have brought down to a common denominator what was the lowest price of the bidder that was complying with this law.

Now, to make up an estimate on a bid on a ship is a big job. It takes at the very minimum 60 days, working day and night, with all the force that you can put to work at it. Under this law, gentlemen, it would take you 6 months at the very least to find out what price you could submit to the Government of the United States or to a private shipbuilder to build the ship.

The CHAIRMAN. Why would that be true?

Mr. Bardo. Because of all of this investigation that you have got to make to satisfy yourself of these suppliers of materials, that they are all complying with this particular provision. And they do not know what it is.

Mr. HEALEY. Right there, Mr. Bardo; you say you have been operating under the codes!

Mr. Bardo. Yes; we operated under codes.

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Mr. HEALEY. Then, that did not require 6 months?

Mr. BARDO. No; but my dear fellow, that was a very simple thing All we were required to do was to take a certificate from the supplier of material that he was complying with the code. We had no obligation beyond that. Under this law we only have got to have a certificate from him but we have got to have a certificate of bank, back to the final beginning, before we can say here that we have got a legalized bill on this particular phase of the contract. That is what this law means, as I see it as a practical man.

Mr. WALTER. What provision of the act has caused you to reach that conclusion?

Mr. BARDO. I think the language of the act itself.
Mr. WALTER. Where?
Mr. BARDO. I haven't got the act right here.
Mr. HEALEY. You have to have an agreement in writing.

Mr. BARDO. No; not the contractor, and I think the honorable Senator just made that statement here himself, that it does not devolve upon the final contractor to trace it all the way back to its source.

Senator Walsh. I made no such statement. Let us get that cleared up now. I do not want to be wrong on it.

Mr. Bardo. When does the obligation of the primary contractor stop under this act, if I may ask a question?

Mr. MICHEN ER. The Senator answered and said it went back to the subcontractor.

Mr. Bardo. The subcontractor?

Senator WALSH. The contractor who has a contract, let us say, to make shoes, a million pair or 2 million pair of shoes for the Government, must present certificates from his subcontractors, and those that prepared the material for him, that they have complied with the terms of this bill. That is all.

Mr. BARDO. Well, but would not that same analysis, Senator, carry you back to the

Senator Walsh. He hasn't got to have it. The subcontractor may have got it, the man behind him. But the contractor only speaks for the subcontractor.

Mr. BARDO. But don't you hold him responsible for the subcontractors all the

way

down? Senator Walsh. We do not. The contractor deals only with the subcontractor, and the Government only asks the contractor to cancel the contract of a subcontractor in case he does not meet these terms.

Mr. BARDO. But now let us get the ramifications of that definitely before the committee, because that is very important. Assume I have a contract to build a ship and you are the first subcontractor. You are buying materials from 25 different subcontractors all over these United States to do it. You violate your contract to me. I cancel your contract.

Senator WALSH. Yes.

Mr. BARDO. Now, what happens to all the rest of it? Where does the rest of it go and what am I going to do about it?

Senator WALSH. As I understand, a subcontractor has violated the labor terms in its contract?

Mr. BARDO. You are the first contractor under my primary contract.

Senator WALSH. And the department of the Government says the subcontractor has failed to meet the requirements in your written contract. Therefore, we request, because it is such a flagrant violation of the law, that you cancel his contract, and it has got to be canceled.

Mr. BARDO. That is true, but what happens then?

Senator WALSH. If a contractor refuses to do it he is just in the same position that he is now. But the statement you made a few minutes ago is not founded. Any contractor who has a contract with the Government now that is violated has the same remedy under this bill as he has at the present time, which is in the Court of Claims.

Mr. BARDO. That may be true, but I am frank to say that I did not read it into the law.

Senator WALSH. When a contractor now violates his contract he is not barred from his legal rights. It is true, though, that the subcontractors who deal with the contractor must in writing certify to him that they intend to comply with the terms of his contract. Otherwise you would have just a superficial contractor and he would do all his business through subcontractors, and the subcontractors would violate the law and the contractor would be pretending to maintain the law. Otherwise, the law would have no effect.

Mr. HEALEY. Senator, the obligation of the principal contractor is to require that all subcontractors of supplies and material state in writing that they will comply with the terms that are set out?

Senator Walsh. That is all. He is not financially punished if they do not do it. But the Government will say, “I want to cancel that contract if he does not do it."

Mr. BARDO. The effect of that, Senator, is this, that here is a big operation going on. That particular thing itself might throw out of work for an indefinite period of time four or five thousand men while you are waiting for this.

Senator Walsh. Why shouldn't it? Up to the present time under the Supreme Court decision every one of these people have agreed to these terms. The Supreme Court decided upon a technicality, not opposing this objective; the Supreme Court never entered a protest against that, but because of the fact that the bill was not drawn properly and sought to go into the domain of the States' rights it was rejected. Why should we be so tender and careful and considerate of people who ask the Government for favors in contracts by not requiring them to live up to their contracts?

Mr. BARDO. I gather from what you say that because I get a contract from the Government the Government is doing me a favor. It is a mutual obligation, just the same as when I contract with anybody else. The Government specifies its materials and all that. That is understood.

Here is another thing: That gets into the field that is almost impossible.

The CHAIRMAN. You are right at the heart of the bill now, it seems to me. When you receive from the Government specifications with regard to labor and so forth, and then you open up negotiations with the subcontractors who are to furnish you with material, you would

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