area. Also, they expressed concern over restrictive worker classifications which required them to pay different wage rates for each different type of work performed. In nonmetropolitan areas contractors said that the wage rates assigned under Davis-Bacon requirements are usually much higher than the minimum wage rates prevailing in the area and that assigned rates were based on union wage rates of the metropolitan area nearest the construction project. (See pp. 85 to 88, enc. A, for additional details.) Requirements involving job safety--In 1969 and 1970 the President signed into law two acts which provide, in general, for the Secretary of Labor to set safety and health standards for businesses, including the construction industry, involved in interstate commerce. Federal standards implementing the acts were issued in 1971. Because of the relatively short time that the Federal safety standards had been in effect, contractors could give only rough estimates of the effect they would have on costs. Estimates of increased construction costs ranged from less than 1 percent to approximately 30 percent. The wide variation in estimates appears to be due to such factors as the safety level maintained by the contractor in the past; whether the contractor owns equipment which will require extensive modification; and the familiarity with safety legislation. Union officials stated they will support contractors in their efforts to maintain a safe job site. (See pp. 89 and 90, enc. A, for additional details.) Requirements for equal employment opportunity--All construction contracts involving Federal funds must contain equal employment provisions. These requirements do not appear to be affecting construction costs significantly, but future costs may be increased because of difficulties in recruiting qualified minority workers in some areas, pecially in the more highly skilled trades. (See p. 91, enc. A, for additional details.) Availability of skilled labor es According to a Department of Labor study, construction manpower requirements for skilled workers will increase from about 1.9 million in 1970 to 2.5 million in 1980, on an annual average basis. The Department forecasts an increase of as many as 100,000 job openings a year for skilled construction trades during this period. In areas where we held discussions, construction industry and union representatives stated that, although labor shortages existed during the period of high construction activity several years ago, shortages were not currently a significant problem. This is evidenced by the average unemployment rate of 10.4 percent during 1971 for the construction industry. Studies point out and contractors stated that, because of the cyclical and seasonal nature of construction work, labor shortages have existed at one time or another in nearly every area of the country. Trades identified as being in short supply included carpenters, bricklayers, electricians, plumbers, sheet-metal workers, and roofers. Labor shortages can increase construction costs due to delays in construction, scheduling of overtime work, and/or payments of higher wages necessary to attract qualified workers. One of the ways that construction journeymen receive their training is through an apprenticeship program which generally lasts 3 to 5 years. Some contractors think this training period is too long for some crafts, and they believe it can be reduced. Also contractors told us that the number of apprentices on a project could be increased with no adverse effect on construction quality or costs, but union officials said that increasing the number of apprentices would reduce productivity and increase construction costs. (See pp. 91 to 94, enc. A, for additional details.) Construction materials From 1960 through 1967 prices for construction materials were relatively stable, increasing at a rate which averaged less than 1 percent annually. However, during the 4-year period ended December 1971, material prices rose at an average rate of almost 4 percent a year. Our research and many discussions with construction industry representatives and material suppliers showed that the costs of construction materials have been primarily affected by (1) increases in wages paid to production workers, (2) increases in freight rates, (3) domestic supply and demand considerations, and (4) level of foreign trade for certain materials. pp. 95 to 99, enc. A, for additional details.) Prefabricated materials (See The use of prefabricated materials in hospital construction has been limited because hospitals generally are individually designed and building codes and union agreements in some areas prevent their use. Contractors' views have varied on the effect the use of prefabricated materials has on construction costs. Many have stated that savings may be realized through reductions in construction time and onsite labor costs. Others have considered the cost of these materials to be high and overall construction and lifecycle cost savings from their use to be negligible. In our view, prefabricated materials have been used insufficiently in hospital construction to assess whether significant savings may be realized. (See pp. 100 to 102, enc. A, for additional details.) Conclusions Many factors have contributed to the increase in labor and materials costs of health facilities construction. The factors contributing to the increase in costs of these facilities are also intrinsically related to the overall construction industry. Wage increases for both onsite construction labor and production workers in material industries have had a significant impact on construction costs in recent years. The costs of hospital construction appear to be affected more by wage increases than by costs of other building construction because of the higher percentage of skilled construction workers required on hospital projects. Actions must be taken by both construction industry and union representatives if wages are to be stabilized on a voluntary basis. It appears that recent wage and fringe benefit increases being approved by the Construction Industry Stabilization Committee should reduce the rate of increase. Costly labor and management practices being followed on construction projects contribute to high construction costs. Certain contractor and trade union practices, as well as jurisdictional disputes between trade unions, may be affecting productivity and increasing costs. Finding practical solutions to the many problems involved will be a difficult task. Until contractor and union officials join to eliminate costly practices and to hold down costs, construction costs will continue to increase. The implementation of the Davis-Bacon Act has increased the costs of some Federal and federally assisted construction projects, and requirements involving job safety and equal employment opportunity may increase costs in the future. Estimates of the cost increases, or potential increases, associated with these requirements vary widely. However, each of these Federal requirements has been established for a specific purpose and the costs involved, both past and future, should be evaluated with this in mind. Although significant labor shortages did not exist in areas covered by our study, they have existed in the past; future requirements, particularly for skilled workers, are expected to be much higher than present manpower levels. Manpower availability can affect the cost of health facility construction because these projects must compete with other construction projects for required skills. Finally, the costs of construction labor, as evidenced by the increases in average hourly earnings and wage rates for construction workers, have increased at a much higher rate than the costs of construction materials. Therefore areas involving the costs of construction labor afford the best opportunities for reducing the rising costs of health facility construction. The use of prefabricated materials tion costs. may offer savings through the use of less costly, offsite labor, but these materials have not been used sufficiently in hospital construction to assess their impact on construcAlso the individual designs of most hospitals, building code requirements in some areas, and provisions in union agreements may prevent the future use of prefabricated materials on a large scale. Agency and other comments Department of Labor In commenting on our draft report, the Department of Labor, by letter dated October 5, 1972, stated that the report presented "an adequate description of the cost situation in construction from the standpoint of the Department of Labor." The Department attached the following statement on productivity to its reply and requested that it be included in our final report. "Although there are no reliable measures of productivity change in the construction industry, certain events in recent months may result in an improvement in the productivity situation in 1972 and beyond. The level of strikes in the construction industry declined significantly between 1970 and 1971. Strikes over economic issues (contract terminations) dropped from 424 to 233 over the period. Average duration of these strikes also fell from 42 calendar days in 1970, to 30 days in 1971. In the first half of 1972, the level of strikes over economic issues remained at about the same level as in 1971, while the average duration fell slightly. Man-days lost because of jurisdictional disagreements among unions also fell signiDeclines in ficantly between 1970 and 1971. strikes in the industry reflect improved relationships and greater stability among the parties which could lead to productivity improvements in the years ahead. "Several other important events argue for |