Mr. GALLAGHER. Just as much so as the general contractor is until the bond is issued.

Senator GREEN. I though they were informal estimates that the subcontractor gave the contractor.

Mr. GALLAGHER. Would you believe that some general contractors have resorted to this sort of a tactic: After they have gotten the subcontractor's bids they write a figure down on a subcontractor, a figure that does not appear at all on the subcontractor's letterhead, but they show it to another subcontractor and say, "If you can meet that figure I will give you the job", and that is not the figure of the contractor at all. The poor subcontractor in need of work will accept that sort of a proposition.

The general contractor has taken maybe a $4,000 or $5,000 profit without turning a swivel in his chair, denying the subcontractor the legitimate profit he could have made when he took the job.

In many cases you will find just what I stated a while ago, an inferior workmanship, inferior materials and a direct violation of every stipulation in the general contract.

Take on some of the jobs right here in Washington where the painting calls for four coats of paint and a coat of neutralizer, what they call oxide of zinc in order to kill the hot spots in plaster before any paint is put on. I can show you jobs here for the Government that call for a coat of neutralizer and four coats of paint that had been finished, mind you, and the contractor paid, by applying one coat of color size and one coat of flat paint. Is that the sort of work that the Government wants to pay for? I am a taxpayer and I believe in being protected. I am going to protect myself against that sort of unscrupulous contract.

Senator GREEN. I do not want you to understand that I am taking a position one way or the other. I am trying to get the facts. Mr. GALLAGHER. Those are the facts.

Senator GREEN. Yes; but they are not all the facts. How would this act prevent the subcontractor from doing that very sort of thing? Mr. GALLAGHER. How would it prevent him from doing the same thing?

Senator GREEN. Yes.

Mr. GALLAGHER. It should be prevented by inspection on the job. Senator GREEN. That would also be true of any other subcon

tractors.

Mr. GALLAGHER. The Government is supposed to have inspectors qualified to inspect all parts of building construction.

Senator GREEN. But that is not provided in this act.

Mr. GALLAGHER. Well, that is the policy of the Government, Senator GREEN. Yes; but my point is how does this in any way protect the Government against such cheating, as we might call it, as you described?

Mr. GALLAGHER. How would it protect the Government?
Senator GREEN. Yes.

Mr. GALLAGHER. Now, you are asking a funny question: How would it protect the Government? My idea of protecting the Government is to see that bona-fide subcontractors who figure for general contractors get the work that they figure on, if the general contractor is fortunate enough to procure that job, and not peddle the job from Maine to California in order to get a cheaper fellow to do it.

7620-37-2

Senator CHAVEZ. I would like to ask a question.

Senator WALSH. Are you through, Senator Green?

Senator GREEN. For the present.

Senator CHAVEZ. Just to clear one proposition. Is not the difficulty that you meet every day in the week due more to the fact that most of these general contractors are nothing but jobbers?

Mr. GALLAGHER. They are brokers.

Senator CHAVEZ. They are brokers. They get the general contract and then go all over the country and peddle the plastering contract, the sheathing contract, and all the other contracts?

Mr. GALLAGHER. I think the chairman of this committee is quite well acquainted with that sort of situation.

Senator CHAVEZ. Is not that the difficulty?

Mr. GALLAGHER. That is the difficulty, exactly.

Senator CHAVEZ. Some of these contractors, as a matter of fact, do not drive a nail in the entire building; is that not a fact? Mr. GALLAGHER. They do not do anything at all.

Senator WALSH. The committee will adjourn to room 357, which is air-conditioned, which will be more comfortable to the members of the committee and the witnesses.

(The further hearing was resumed in room 357, Senate Office Building.)

Senator WALSH. Are there any other questions to be asked of Mr. Gallagher? Is there any other statement you desire to make?

Senator AUSTIN. I would like to ask Mr. Gallagher a question. Senator WALSH. Senator Austin.

Senator AUSTIN. Suppose the contracts for painting and other materials are handled by subcontractors, does the contractor obtain samples from the subcontractors? Is there anything you can furnish us with respect to materials furnished in your line of work?

Mr. GALLAGHER. Perhaps I can, Senator. For many years I have argued with the Treasury Department, that is, the Procurement Division of the Treasury Department, which awards contracts for painting, and so forth, and I have used this as a sort of an argument against what I consider downright thievery, and nothing short of it: The policy of the Procurement Division is to construct a building today and omit the painting of the walls and ceilings for, perhaps, legitimate reasons, for 12 months or 18 months. In other words, that painting is not in the general contract. The only painting that is in the general contract is the fire escapes, and things of that kind. On a $75,000 post-office building there is very little painting in that general contract. They then award a separate contract for the painting of the walls and ceilings. That is competitive bidding, of course, it is advertised in accordance with the law, and so forth, and under the rulings of the Comptroller General the Procurement Division, or any awarding department, is duty bound under the act to award that contract to the lowest responsible bidder.

The definition of the word "responsibility" is one that is hard to determine, however. There is no trouble, of course, in knowing who the low figurer is, but as to the responsibility of the low figurer, that is another question.

The contract calls, as a general rule, for what I said a short while ago, a coat of neutralizer, or oxide of zinc, four coats of paint, and to give you the exact wording of the clause, the last coat to be stippled. As a general rule that is written into the specifications. I have asked

on many jobs where inspectors from that Department have been supervising the jobs if they could tell me how many coats of paint were on the wall. They could not do it.

I have a job now that the Department of Justice is interesting themselves in and we are going to try and analyze the paint that is on the wall by taking some of it off and bringing to the Bureau of Standards to find out how much paint is on the wall, because we know that the paint is not on there in accordance with the contract specifications. We have men that have made sworn affidavits to that effect, that worked on the job. That is how sure we are of it.

I have suggested this, Mr. Senator, in answer to your question, that when they let a contract for painting out that they supply the man that is going to supervise that job for the Government with four samples of the color, to give the first sample to the contractor and tell him when he has that paint all over the wall and the ceiling, and then give him the second shade, and when he has the second shade on he will then give him the third shade, and when he has that on he will give him the finishing shade, and then the Government will get a dollar's worth of work done for a dollar spent, and until they do adopt that sort of policy they will everlastingly be robbed.

What they do today is to give him a sample of the color that the wall is to be finished in, and that gives the contractor, or the subcontractor, whoever he may be, all the opportunity in the world to skin the ears off the job, and, believe me, they do it.

Senator AUSTIN. Now, I think that is very interesting but it relates to another type of legislation than this is. This legislation has for its object the protection of the subcontractor against the use or misuse of his information privately given to the contractor either on the subject of cost of services or quality and kind of materials. That is what this bill is for, and I was wondering if you could tell us what the situation is in the painting and decorating trade with respect to subcontractors who furnish them materials.

Mr. GALLAGHER. Well, there are not so many jobs-I will be frank in saying where subcontractors have taken painting contracts from the general contractor and then in the midst of the job have fallen down, walked off the job. I know one job where they owed 3 weeks' salary to the mechanics that worked on the job. Now, that was a case where the general contractor failed to see that the subcontractor was placed under bond and the men that worked on the job were left hanging in the air, so far as getting their money was concerned, for quite some time.

Senator AUSTIN. That is a phase of contractual relationship not covered by this bill. Mr. Logan, Senator from Kentucky, introduced S. 1686 at the Seventy-fifth Congress, first session, which bill does provide for some security for the labor of the workmen on these Government jobs.

Mr. GALLAGHER. We already have the law on the statute books, Senator. We have the old Heard Act, we have the amended Heard Act.

Senator AUSTIN. The Heard Act does not do you any good.

Mr. GALLAGHER. Yes; it does.

Senator AUSTIN. You have got to wait 6 months until after the Government has accepted the job.

Mr. GALLAGHER. Not under the amended act, it does not.
Senator AUSTIN. Has it been amended?

Mr. GALLAGHER. Yes; in the last session of Congress we had it amended.

Senator AUSTIN. And under that act is there a provision for a special bond for the subcontractor?

Mr. GALLAGHER. There is a provision in there whereby the mechanics who have been done out of their work can immediately start proceedings to collect their money.

Senator AUSTIN. I am glad to hear that.

Mr. GALLAGHER. I have a job of that kind right now in Cincinnati where it is being prosecuted. I went there and started the case myself 3 weeks ago.

Senator AUSTIN. Mr. Chairman, I think it would be a good idea for us to get that amended act before us and perhaps put it in the record. Senator WALSH. Yes.

Mr. KNOWLES. I have it here.

Senator WALSH. The stenographer will insert in the minutes of the meeting the amended act at this point.

(The act referred to is as follows:)

(PUBLIC NO. 321-74TH CONGRESS)

(H. R. 8519)

AN ACT Requiring contracts for the construction, alteration, and repair of any public building or public work of the United States to be accompanied by a performance bond protecting the United States and by an additional bond for the protection of persons furnishing material and labor for the construction, alteration, or repair of said public buildings or public work

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) before any contract, exceeding $2,000 in amount, for the construction, alteration, or repair of any public building or public work of the United States is awarded to any person, such person shall furnish to the United States the following bonds, which shall become binding upon the award of the contract to such person, who is hereinafter designated as "contractor":

(1) A performance bond with a surety or sureties satisfactory to the officer awarding such contract, and in such amount as he shall deem adequate, for the protection of the United States.

(2) A payment bond with a surety or sureties satisfactory to such officer for the protection of all persons supplying labor and material in the prosecution of the work provided for in said contract for the use of each such person. Whenever the total amount payable by the terms of the contract shall be not more than $1,000,000 the said payment bond shall be in a sum of one-half the total amount payable by the terms of the contract. Whenever the total amount payable by the terms of the contract shall be more than $1,000,000 and not more than $5,000,000, the said payment bonds shall be in a sum of 40 per centum of the total amount payable by the terms of the contract. Whenever the total amount payable by the terms of the contract shall be more than $5,000,000 the said payment bond shall be in the sum of $2,500,000.

(b) The contracting officer in respect of any contract is authorized to waive the requirement of a performance bond and payment bond for so much of the work under such contract as is to be performed in a foreign country if he finds that it is impracticable for the contractor to furnish such bonds.

(c) Nothing in this section shall be construed to limit the authority of any contracting officer to require a performance bond or other security in addition to those, or in cases other than the cases specified in subsection (a) of this section. SEC. 2. (a) Every person who has furnished labor or material in the prosecution of the work provided for in such contract, in respect of which a payment bond is furnished under this Act and who has not been paid in full therefor before the expiration of a period of ninety days after the day on which the last of the labor was done or performed by him or material was furnished or supplied by him for which such claim is made, shall have the right to sue on such payment bond for the amount, or the balance thereof, unpaid at the time of institution of such suit and to prosecute said action to final execution and judgment for the sum or sums justly due him: Provided, however, That any person having direct contrac

tual relationship with a subcontractor but no contractual relationship express or implied with the contractor furnishing said payment bond shall have a right of action upon the said payment bond upon giving written notice to said contractor within ninety days from the date on which such person did or performed the last of the labor or furnished or supplied the last of the material for which such claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed. Such notice shall be served by mailing the same by registered mail, postage prepaid, in an envelop addressed to the contractor at any place he maintains an office or conducts his business, or his residence, or in any manner in which the United States marshal of the district in which the public improvement is situated is authorized by law to serve summons.

(b) Every suit instituted under this section shall be brought in the name of the United States for the use of the person suing, in the United States District Court for any district in which the contract was to be performed and executed and not elsewhere, irrespective of the amount in controversy in such suit, but no such suit shall be commenced after the expiration of one year after the date of final settlement of such contract. The United States shall not be liable for the payment of any costs or expenses of any such suit.

SEC. 3. The Comptroller General is authorized and directed to furnish, to any person making application therefor who submits an affidavit that he has supplied labor or materials for such work and payment therefor has not been made or that he is being sued on any such bond, a certified copy of such bond and the contract for which it was given, which copy shall be prima facie evidence of the contents, execution, and delivery of the original, and, in case final settlement of such contract has been made, a certified statement of the date of such settlement, which shall be conclusive as to such date upon the parties. Applicants shall pay for such certified copies and certified statements such fees as the Comptroller General fixes to cover the cost of preparation thereof.

SEC. 4. The term "person" and the masculine pronoun as used throughout this Act shall include all persons whether individuals, associations, copartnerships, or corporations.

SEC. 5. This act shall take effect upon the expiration of sixty days after the date of its enactment, but shall not apply to any contract awarded pursuant to any invitation for bids issued on or before the date it takes effect, or to any persons or bonds in respect of any such contract. The Act entitled "An Act for the protection of persons furnishing materials and labor for the construction of public works,' approved August 13, 1894, as amended (U. S. C., title 40, sec. 270), is repealed, except that such Act shall remain in force with respect to contracts for which invitations for bids have been issued on or before the date this Act takes effect, and to persons or bonds in respect of such contracts.

Approved, August 24, 1935.

Senator WALSH. Are there any other questions of Mr. Gallagher? Senator GREEN. Mr. Gallagher, several of the Senators who have asked you questions have sought to obtain information from you as to how the evils that you have described can be cured by this act. Will you point out the provision in this act that cures the evil that you have described?

Mr. GALLAGHER. How is that?

Senator GREEN. Will you point out the provision of the act that will cure the evils that you have so graphically described?

Mr. GALLAGHER. I do not see that there is anything, so far as the wording of this bill is concerned, that will take care of some of the abuses that I have mentioned.

Senator GREEN. That is what I mean.

Mr. GALLAGHER. I do believe this, that this has to do with these shyster contractors getting work that rightfully did belong to another fellow that figured on the job. That is the reason why I say it applies. Senator GREEN. But as far as the Government is concerned there could be the same kind of shyster contractors after the bill was passed as before, could there not?