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CONDITION OF GOVERNMENT CONTRACTS

MONDAY, AUGUST 19, 1935

HOUSE OF REPRESENTATIVES,
COMMITTEE ON THE JUDICIARY,

Washington, D. C. The committee met in the hearing room at 10:20 a. m., Hon. Hatton W. Sumners (chairman) presiding.

The CHAIRMAN. I presume you all know this meeting this morning is for the considering of Senate 3055.

(The bill under consideration is as follows:)

[S. 3055, 74th Cong. 1st sess.)

AN ACT To provide conditions for the purchase of supplies and the making of contracts,

loans, or grants by the United States, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That in connection with all or any purchases of or contracts for construction, articles, materials, supplies, equipment, or services, except professional services, made, extended, or modified on or after the effective date hereof, by any executive department, independent establishment, or other agency or instrumentality of the United States, by the District of Columbia, or by any corporation all the stock of which is beneficially owned by the United States (all the foregoing being hereinafter designatell as agencies of the United States "), there shall be required to be included in the proposal or contract a representation or agreement that all persons employed by the principal contractor in classes of employment described specifically or by reference in the invitation to bid, while engaged in the construction, or the production or furnishing of articles, materials, supplies, equipment, or services, in connection with, or which may be identified as part of the subject matter of, the purchase or contract have since the effective date of this Act been paid not less than such minimum rates of pay and employed not to exceed such maximum hours as on May 26, 1935, were specified in the codes of fair competition and amendments thereto (subject, however, to any stays, exemptions, or exceptions theretofore issued or granted and then operative under Executive, administrative, or other applicable orders, rules, or regulations) approved pursuant to section 3 (a) and/or section 2 (b) of Title I of the National Industrial Recovery Act approved June 16, 1933, purporting to apply to their respective trades or industries, or as were specified in the President's Reemployment Agreement or approved substitutions therefor, if any, where there were on May 26, 1935, no approved codes of fair competition for such trades or industries, and further that they will be paid not less than such minimnum rates of pay and employed not to exceed such maximum hours as shall be designated specifically or by reference in the invitation to bid, and that no person under sixteen years of age and no convict labor has been on or after the effective date hereof or will be employed by the principal contractor in the construction, or the production or furnishing of articles, materials, supplies, equipment, or services, in connection with, or which may be identified as part of the subject matter of, the purchase or contract.

SEC. 1-A. There shall also be included in every contract entered into pursuant to section 1 a covenant that the principal contractor will obtain from every

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subcontractor or supplier of such articles, materials, supplies, equipment, or services as may be identified as part of the subject matter of the principal contract, a written representation or agreement that all persons employed by such subcontractor or supplier in classes of employment described specifically or by reference in the invitation to bid issued by the agency of the United States, while engaged in carrying out the subcontract, or in the production or furnishing of articles, materials, supplies, equipment, or services, in connection with, or which may be identified as part of the subject matter of, the purchase or contract, have since the effective date of this Act been paid not less than such minimum rates of pay and employed not to exceed such minimum hours as on May 26, 1935, were specified in the codes of fair competition and amendments thereto (subject, however, to any stays, exemptions, or exceptions theretofore issued or granted and then operative under Executive, administrative, or other applicable orders, rules, or regulations), approved pursuant to section 3 (a) and/or section 2 (b) of Title I of the National Industrial Recovery Act approved June 16, 1933, purporting to apply to their respective trades or industries, or as were specified in the President's Reemployment Agreement or approved substitutions therefor, if any, where there were on May 26, 1935, no approved codes of fair competition for such trades or industries, and that they will be paid not less than such minimum rates of pay and employed not to exceed such maximum hours of labor as shall be described specifically or by reference in such invitations to bid, and that no person under sixteen years of age and no convict labor has been or after the effective date hereof will be employed by such subcontractor or supplier in the carrying out of the subcontract or in the production or furnishing of articles, materials, supplies, equipment, or services in connection with, or which may be identified as part of the subject matter of, the principal contract.

SEC. 2. In all or any contracts or agreements made, extended, or modified hereafter by agencies of the United States for a loan (including Federal Reserve bank industrial loans) or grant of funds or labor to any private person or corporation, there shall be included a representation or agreement that his or its employees engaged in the operations involving the expenditure of funds so loaned or granted or the use of such labor have since the effective date of this Act been paid not less than such minimum rates of pay and employed not to exceed such maximum hours as on May 26, 1935. were specified in the codes of fair competition and amendments thereto (subject, however, to any stays, exemptions, or exceptions theretofore issued or granted and then operative under Executive, administrative, or other applicable orders, rules, or regulations), approved pursuant to section 3 (a) and/or section 2 (b) of Title I of the National Industrial Recovery Act approved June 16, 1933, purporting to apply to their respective trades or industries, or as were specified in the President's Reemployment Agreement or approved substitutions therefor, if any, where there were on May 26, 1935. no approved codes of fair competition for such trades or industries and that during the expenditure of the funds so loaned or granted or during the utilization of such labor they will be paid not less than the minimum rates of pay and employed not more than the maximum hours of labor as shall be specified in such contract for loan or grant and that no person under sixteen years of age and no convict labor has been on or after the effective date hereof or will be employed in the carrying out of such operations or in the production or furnishing of articles, materials, supplies, equipment, or services in connection therewith; and a further covenant that the borrower or grantee will require a similar written representation or agreement from those with whom it contracts or from whom it makes purchases of articles, materials, supplies, equipment, or services in connection with the carrying out of projects or operations financed wholly or in part with the funds so loaned or granted or in connection with which such labor is used : Provided, That this section shall not apply to loans to financial institutions where the funds are commingled with the funds of the borrower and used for general business purposes.

SEC. 2-A. In all or any contracts or agreements made, extended, or modified hereafter, by agencies of the United States for the loan or grant of funds or labor to any State, Territory, possession, including subdivisions and agencies thereof, municipality, and the District of Columbia, there shall be included a representation or agreement by the borrower or grantee that it will require a representation or agreement from those with whom it contracts or from whom it makes purchases of articles, materials, supplies, equipment, or services in connection with the projects or operations financed or carried out wholly or in part with funds or labor so loaned or granted to it, that all persons employed by them in classes of employment described specifically or by reference in the contract or agreement for the loan or grant by the United States or any agency thereof, while engaged in the carrying out of the projects or operations, or in the production or furnishing of articles, materials, supplies, equipment, or services which shall be used in connection therewith have, since the effective date of this Act, been paid not less than such minimum rates of pay and employed not to exceed such maximum hours as on May 26, 1935, were specified in the codes of fair competition and amendments thereto (subject, however, to any stays, exemptions, or exceptions thereto issued or granted and then operative under Executive, administrative, or other applicable orders, rules, or regu. lations), approved pursuant to section 3 (a) and/or section 2 (b) of Title I of the National Industrial Recovery Act approved June 16, 1933, purporting to apply to their respective trades or industries, or as were specified in the Presideut's Reemployment Agreement or approved substitutions therefor, if any, where there were on May 26, 1935, no approved codes of fair competition for such trades or industries, and will be paid not less than such minimum rates of pay and employed not to exceed such maximum hours of labor as shall be designated specifically or by reference in such contract or agreement for loan or grant, and that no person under sixteen years of age and no convict labor has been on or after the effective date hereof or will be employed by them in the carrying out of such projects or operations or in the production of articles, materials, or supplies or the furnishing of services in connection therewith: Provided, however, That where any borrower or grantee of funds or labor directly carries out the projects or operations wholly or in part with the funds or labor so loaned or grant to it, then, and in that event, all persons in classes of employment described specifically or by reference in the contract or agreement for the loan or grant, especially employed by the borrower or grantee to carry out such projects or operations, shall be paid not less than such minimum rates of pay and employed not to exceed such maximum hours of labor as shall be designated specifically or by reference in such contract or agreement for loan or grant, and no person under sixteen years of age and no convict labor shall be employed in the carrying out of such projects or operations.

Sec. 2-B. There shall also be included in every contract or agreement for loan or grant entered into pursuant to sections 2 and 2-A a covenant that the principal contractor of the borrower or grantee will be required to obtain from every subcontractor or supplier of articles, materials, supplies, equipment, or services which may be identified as part of the subject matter of the principal contract, a written representation or agreement that all persons employed by such subcontractor or supplier in classes of employment described specifically or by reference in the contract or agreement for loan or grant while engaged in carrying out the subcontracts, or in the production or furnishing of articles, materials, supplies, equipment, or services in connection with, or which may be identified as part of the subject matter of, the principal contract, have since the effective date of this Act been paid not less than such minimum rates of pay and employed not to exceed such maximum hours as on May 26, 1935, were specified in the codes of fair competition and amendments - thereto (subject, however, to any stays, exemptions, or exceptions, theretofore issued or granted and then operative under Executive, administrative, or other applicable orders, rules, or regulations), approved pursuant to section 3 (a) and/or section 2 (b) of Title I of the National Industrial Recovery Act approved June 16, 1933, purporting to apply to their respective trades or industries, or as were specified in the President's Reemployment Agreement or approved substitutions therefor, if any, where there were on May 26, 1935, no approved codes of fair competition for such trades or industries, and will be paid not less than such minimum rates of pay and employed not to exceed such maximum hours of labor as shall be designated specifically or by reference in such contract or agreement for loan or grant, and that no person under sixteen years of age and no convict labor has been on or after the effective date hereof or will be employed by such subcontractor or supplier in carrying ont the subcontract or in the production or furnishing of articles, materials, supplies, equipment, or services as may be identified as part of the subject mintter of the principal contract.

Sexc. 3. 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 liquidated damages in

(a) a sum equal to twice the difference between the amount required to be paid to employees, including the amount required to be paid for overtime in excess of the maximum hours designated in the invitation for bids, and the amount actually paid ;

(b) the sum of $10 per day with respect to each person under sixteen years of age employed in violation of any representation or agreement.

(2) That the exaction or acceptance of any refunds (“kick-backs") of wages in any form whatsoever, from employees shall render the party exacting or accepting same liable to the United States as and for liquidated damages in a sum equal to five times the amount of such refund: Provided, That allowance shall be made for any penalty imposed on account of the same act or transaction and collected under any other Act of Congress ;

(3) That any breach or violation thereof shall entitle the other contracting party to cancel the contract with respect to which the representation or agreement is made, and to make open-market purchases or have the work completed, charging any additional cost to the party responsible for the breach or violation ;

(4) That the principal contractor shall, if directed by the contracting officer upon the recommendation of the President, cancel any subcontract for a breach by the subcontractor of his written representation or agreement, and failure on the part of the principal contractor so to cancel shall subject his contract to cancelation;

(5) That the representatives of any agency charged with the administration. of this Act may enter upon the premises of any borrower, grantee, contractor, subcontractor, or supplier for the purpose of obtaining information necessary for the administration of the provisions of this Act and that the borrower, grantee, contractor, subcontractor, or supplier will furnish upon request, duly authenticated or certified copies of his pay roll and such other relevant records as may be requested by any duly authorized representative of any agency charged with administration of this Act.

SEC. 4. Any sums due to the United States by virtue of the foregoing section if not withheld from any amounts due upon any contracts may be recovered in suits brought in the name of the United States by the Attorney General. Sums withheld or recovered shall be held in a special deposit account, and shall be applied, on order of the President to payment of deficiency in wages to employees who have been paid less than the minimum rates of pay and on account of whose services such sums were withheld or recovered : Provided, That no claims by employees for such payments shall be entertained unless made within one year from the date of the notification to the supplier or contractor of the withholding or recovery by the United States of such sums : Provided, however, That nothing herein contained shall authorize or permit any such claims to be prosecuted against the United States or any agency thereof, at law or otherwise, to obtain or recover any funds which are collected, collectible, deducted, or deductible under the provisions of this Act.

SEC. 5. Upon his own motion, or on complaint of a breach or violation of a representation, agreement, or covenant made as herein provided, the President shall have the power to hold hearings and to issue orders requiring the attend:ance and testimony of witnesses and the production of evidence. Witnesses shall be paid the same fees and mileage that are paid witnesses in the courts of the United States. In case of contumacy, failure, or refusal by any person to obey such an order, any District Court of the United States or of any Territory or possession, or the Supreme Court of the District of Columbia, within the jurisdiction of which the inquiry is carried on, or within the jurisdiction of which said person who is guilty of contumacy, failure, or refusal is found, or resides or transacts business, upon the application by the President, shall have jurisdiction to issue to such person an order requiring such person to appear before the President, to produce evidence if, as, and when so ordered, and to give testimony relating to the matter under investigation or in question; and any failure to obey such order of the court may be punished by said court as a contempt thereof; and the President shall have the power to make findings of fact after notice and hearing, which findings shall be conclusive upon all agencies of the United States, and if supported by the evidence, shall be conclusive upon review by the courts, and the President shall have the power, and is hereby authorized, to make such decisions based upon findings of fact as are deemed to be necessary to enforce the provisions of this Act.

SEC. 6. The President may inake exceptions in specific cases or otherwise under the provisions of this Act whenever such action shall be recommended by an agency of the United States and when justice or public interest will be served thereby and upon the joint recommendation of the governmental agency and the contractor, may modify the terms of an existing contract respecting minimum rates of pay and maximum hours of labor as may be found necessary and proper in the public interest or to prevent injustice or undue hardship and the President may provide reasonable limitations and may make rules and regulations allowing reasonable variations, tolerances, and exemptions to and from any or all provisions of this Act on the extent of the application of this Act to contractors, subcontractors, suppliers, borrowers, or grantees as hereinbefore described.

SEC. 7. Any bid or proposal received by an gency of the United States may be rejected when it has been previously determined pursuant to the provisions of this Act, that the person submitting the same has previously breached any of the covenants required by this Act and that the acceptance of such bid or proposal would not be in the public interest.

SEC. 8 The specific minimum wages and maximum hours specified or referred to in any invitation to bid or contract or agreement for loan or grant shall be determined by the President: Provided, however, That minimum wages and maximum hours fixed under this Act shall be such as are fair and reasonable taking into account the following primary standards:

(a) The cost of living;

(b) The standards for the same class of labor in the same trade or industry in the same locality;

(c) The standards in effect for such class of labor during the year 1934; and

(d) The minimum rates of pay and maximum hours of labor specified in the applicable codes of fair competition and approved amendments thereto, if any, approved pursuant to section 3 (a) and/or sections 2 (b) of Title I of the National Industrial Recovery Act approved June 16, 1933, purporting to apply to the respective trades or industries, or where there were on May 26, 1935, no approved codes of fair competition for such trades or industries, then those minimum rates of pay and maximum hours specified in the President's Reemployment Agreement or approved substitutions therefor, if any: Provided further, That the President shall set a rate for any overtime in excess of the maximum hours designated in the specification or invitation to bid.

Sec. 9. (a) This Act shall take effect thirty days after its approval: Provided, however, That

(b) Where permitted by the terms of such contracts, this Act shall be applicable to contracts entered into prior to its effective date: Provided, That in such cases the requirements as to the minimum rates of pay, maximum hours of labor, and minimum age of employees shall be those prescribed therefor in accordance with the foregoing provisions of this Act, whether such requirements a re prescribed before or after such contract was entered into: Provided further, That such contracts shall be subject to modification as to compensation upon proof by the contractor of excess cost occasioned solely by compliance with such requirements.

(c) Where proposals have been invited prior to the effective date of this Act and bids are submitted thereon containing no provisions with respect to requirements as to minimum rates of pay, maximum hours of labor, or minimum age of employees, contracts may be executed according to such proposals.

(d) Where proposals have been invited prior to the effective date of this Act, no bid submitted in response thereto if otherwise valid and acceptable, shall be rejected because made subject to the provisions of any code or codes of fair competition or the President's Reemployment Agreement or applicable approved substitutions therefor, if any, or any related requirements prescribed by Executive Order Numbered 6246 of August 10, 1933, as modified by Executive Order Numbered 6646 of March 14, 1934, if the bidder, with the assent of his surety, shall agree in writing that the contract, if entered into, shall, in lieu of said code provisions or other related requirements prescribed by said Executive orders, be subject to the provisions of this Act in the same manner and to the same extent as contracts made subject thereto by the provisions of this Act: Provided, That in such cases the compensation to be provided for in the contract shall be reduced or increased from that stated in such bid in the amount and to the extent that the contracting officer shall find the cost of per

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