Wage increases From 1960 through 1971 the average hourly earnings for contract construction workers increased about 86 percent, while the average hourly earnings for all production and nonsupervisory workers increased about 64 percent. Department of Labor statistics show that the average annual increase in union hourly wage rates and fringe benefits for the six trades predominantly employed in hospital construction ranged from 10.1 percent to 11.3 percent for each trade during the 4 years ended July 1971. More skilled work is required for hospital construction than for construction of Federal office buildings and schools because of the complex equipment and sophisticated systems used in hospitals. Therefore the cost of construction labor for hospitals is higher than labor costs for these buildings and probably is higher than for other types of buildings. Both construction industry and union representatives must act if wages are to be stabilized voluntarily. Labor unions generally have been well organized and have bargained for what appeared to be best for their members. This usually has meant higher wages and increased fringe benefits. Unions can and do strike when agreements cannot be reached. When contractors fight strikes, they have been pressed by project owners to settle quickly to complete construction. Any increases in wages agreed to by contractors are generally passed on as increased costs to owners on future projects. Before the implementation of wage and price stabilization guidelines on November 14, 1971, the President, because of concern over spiraling wages in the construction industry, established the Construction Industry Stabilization Committee on March 29, 1971, to review and approve collectively bargained wage and salary increases in the construction industry. The Pay Board delegated authority to the Committee to administer regulations for collective-bargaining agreements in the construction industry. As of August 17, 1972, the Committee had approved 1,340 cases1 for the six trades predominantly employed in hospital construction. The Committee provided the following data. On the basis of the above data, the average annual increases for approved agreements negotiated on or after November 14, 1971, are substantially lower than the approved increases for agreements negotiated before that date. (See pp. 75 to 78, enc. A, for additional details.) Costly management and labor practices We asked both contractor and union representatives to comment on practices which increased construction costs--in particular, hospital construction costs--unnecessarily. The views obtained during our interviews generally reflected the self-interests of the various groups. Following are the results of our study on (1) productivity, (2) restrictive work practices, and (3) jurisdictional disputes. Productivity--Presently, no reliable means of measuring productivity exist in the construction industry and productivity statistics on building construction are virtually nonexistent. The majority of contractors we interviewed believes that productivity has decreased in recent years. A case may include more than one collective-bargaining agreement. Reasons given by contractors for decreased productivity include apathy on the part of workers, deterioration of pride and quality of workmanship, increased featherbedding,1 jurisdictional disputes, absence of incentives for better workers to produce more than poor workers, time lost from absenteeism and prolonged rest breaks, and later starting times and earlier cleanup by workers at the end of the day. Some union representatives said that productivity had increased, but others felt that if productivity had declined in the construction field, it was no different than in other fields. Some pointed out that contractors could fire the unproductive worker and that contractors frequently mismanaged projects by (1) not having equipment ready when needed, (2) requiring workers to report to the office before proceeding to the construction site, and (3) overstaffing projects. (See pp. 79 and 80, enc. A, for additional details.) Restrictive work practices--Many union contractors told us that restrictive work practices were causing increased construction costs. Many of these practices stem from work rules in union agreements. Union representatives pointed out that contractors acknowledge these work rules when they sign the agreements. In contrast, open-shop contractors told us that they did not have significant problems with restrictive work practices. Many examples were cited of practices considered costly and unnecessary by contractors. One contractor was required by union agreement to hire a full-time operator on each of three daily shifts to man an automatic sump pump on a construction project. Wages paid to these operators while the project was under construction amounted to $143,000. The project was completed over 2 years ago, and according to the contractor the same pump continues in use in the building without an operator. 1Practices or work rules which limit the amount of work to be done in a given period, including payment for unneeded workers, unnecessary tasks, work not performed, or job duplication. A union representative stated that operating engineers, such as sump pump operators, were needed in most cases and that any exception to the rule should be worked out between the contractor and the respective trade union. Another union representative said that the use of sump pump operators is sound, as evidenced by the union agreements negotiated with contractors. Another contractor stated that a union agreement required an operator for an automatic elevator during construction. This practice, which the contractor considered unnecessary, added $20,000 to the cost of the building. Other examples given by contractors and the comments of union officials are discussed on pages 80 to 83 of enclosure A. Jurisdictional disputes--Jurisdictional disputes occur when more than one building trade claims the right to do a particular job. Union officials claim that jurisdictional disputes are due to mismanagement of work by contractors. Contractors stated that these disputes have increased construction costs but that, because the disputes are between two or more trade unions, they are caught in the middle. Examples of jurisdictional disputes given by contractors and comments by union officials are discussed on pages 83 and 84 of enclosure A. Federal requirements We inquired into the cost impact of requirements for minimum wages and for those involving job safety and equal employment opportunity. Although we inquired primarily into the economic aspects of Federal requirements, we recognize that the basic purpose and future benefits of each requirement may be far more important than the costs involved. Requirements for minimum wages--The Davis-Bacon Act of 1931, as amended (40 U.S.C. 276a), requires the payment of minimum wages to laborers and mechanics (skilled workers) employed under Federal contracts in excess of $2,000 for construction of public buildings and public works. It provides that the minimum wages be based on wages determined by the Secretary of Labor to prevail for the corresponding classes of workers employed on similar projects in the "*** city, town, village, or other civil subdivision of t the State in which the work is to be performed.***" The On July 14, 1971, we issued to the Congress, summary report B-146842, entitled, "Need for Improved Administration of the Davis-Bacon Act Noted Over a Decade of General Accounting Office Reviews." The report pointed out that, because the Department of Labor made improper minimum wage rate determinations, construction costs increased by 5 to 15 percent on selected projects. The Department agreed with the basic recommendation in the report, took action on those recommendations, and made other changes in policies and procedures to improve wage determinations. During our present study we did not evaluate wage determinations made by the Department of Labor but concentrated on obtaining the views of construction industry and union representatives as to whether there were cost differences, due to requirements of the Davis-Bacon Act, in construction of Federal or federally assisted projects, as opposed to construction of privately funded projects. Openshop contractors told us that the requirements of the DavisBacon Act have increased the cost of Federal and federally assisted projects significantly. Union contractors believed there was little difference in costs because wage rate and classification requirements under the act were virtually the same as union requirements. Union representatives generally did not comment on the cost impact of the act, but some said that it had properly enabled the union contractors to compete for Federal construction work. In the Southeastern United States, for example, union contractors generally agreed that in metropolitan areas the wage rates required under the Davis-Bacon Act were usually the local union rates. Open-shop contractors stated that they were discouraged from bidding on Federal and federally assisted projects because, due to Davis-Bacon requirements, they had to pay higher wages than they normally paid in the |