articles, inventories stock, tallies customers' purchases, and bags groceries. That portion of the contract relating to the San Francisco Bay area amounted to $495,500 to train 100 persons. We found that $380,969 of the $495,500 was for on-the-job training. This amount exceeded the on-thejob training costs allowable under the Department's own guidelines by $93,200. Analysis of on-the-job training costs showed that they were excessive because unrealistic assumptions were made regarding the amount of time the trainee would be unproductive.

5. In certain instances, the Department has entered into JOBS contracts which appeared to us to commit employers to hire more individuals than their operations could reasonably be expected to absorb.

A manufacturing company in Portland, Oregon, for example, received & JOBS contract to hire 155 persons even though it was a newly established company with only 65 employees, of which between 25 to 30 were trainees under a prior JOBS contract. It was the company's intention to expand its business and to obtain most of its new employees through the JOBS program. However, these plans never materialized.

The JOBS contract was later reduced from 155 to 74 authorized job openings. At the time of our last inquiry, about one year after the contract had been executed, only 24 persons had been hired and retained.

6. We have noted various examples of employers who did not provide contractually required supportive services to trainees, although the employers were paid for such services. Supportive services include initial orientation to a working environment (not normal orientation such as company rules), special counseling and job coaching, job-related basic education, transportation assistance, and sensitivity training for supervisors.

Experience gained by the Department in prior manpower training programs indicates that supportive services are necessary to assist a disadvantaged person in adjusting to the job and in keeping him on the job.

For example, a landscaping firm in the San Francisco Bay area had an MA-4 contract to hire and train ten landscape gardeners. After 8 months of performance, 44 trainees had been hired and 41 had terminated, a termination rate of 93 percent. The contract provided $850 per trainee to cover the standard range of supportive services, to be paid at a rate of $3.27 per day of training. However, no services, other than normal first-day orientation and some counseling had been provided to the trainees. The contractor told us that he had not provided the services, and that he thought the Opportunities Industrialization Center from which he had planned to obtain the trainees would provide the serivce. He did not explain why he agreed to accept $850 per trainee under the contract if he did not plan to provide the services.

7.

Next we have noted certain weaknesses in contract reimbursement

cover this phase of program administration in more detail in the other cities before we complete our review.

CONCLUSION

Mr. Chairman, we have discussed here today some of the more significant problems we have noted concerning the concept and implementation of the JOBS program. We hope that this information will assist your Subcommittee in its current deliberations.

Our general impression is that the JOBS program has served to focus the attention of businessmen on the need to hire and train the disadvantaged and that it has undoubtedly helped some disadvantaged persons obtain gainful employment. We would hope that the results of our review efforts currently underway will serve to further improve the effectiveness and efficiency of the JOBS program.

This concludes our statement Mr. Chairman; we will be happy to respond to any questions you may have.

40-963 O-70-pt. 4-6

Mr. ESCHWEGE. Our review is still underway, but we hope we can make a contribution here today by discussing the results so far.

We have reviewed manpower programs in the past, and some pursuant to specific legislation. One of these was the review of the antipoverty programs in 1968 and 1969, and when this work was completed-which, incidentally, included the review of several of the manpower programs such as Neighborhood Youth Corps, Job Corps. and Work Experience and Training program-we intensified our efforts in other manpower programs, and one of these is the Jobs program.

This review is going on in five cities, Detroit, Mich., Portland. Oreg., Seattle, Wash., San Francisco and Oakland, Calif.

We have at least three comments about the conceptual basis of the program, and if I may just summarize, the first one is that the JOBS program is not essentially a jobs creation program.

Senator NELSON. Excuse me one moment. When you say this, are you referring to both the contract employers and the noncontract employers?

Mr. ESCHWEGE. As far as the conceptual side is concerned, yes, sir, I am referring to both.

It is not essentially a jobs creation program, and in certain instances we find that we are reallocating existing job openings to persons other than those who would have been hired normally.

This, then, shifts the burden of unemployment from the disadvantaged to others not so categorized. We recognize that there are arguments that can be advanced for doing so.

Secondly, we believe that the JOBS program can work best in a period of full employment. In a period of rising unemployment it is difficult to sign up the disadvantaged when well-qualified persons are available for employment, and who need no further training.

Also, in a slackening economy, we believe that the JOBS enrollees are likely to be the first ones laid off. We think that in such a period, the Department of Labor has a special responsibility to assist these laid-off individuals so that gains made are not entirely dissipated.

Thirdly, we have some question about the eligibility requirements for the JOBS program. We are not sure that the parameters, as to who should be included in the target population, are as well drawn as they should be. The target population encompasses many more persons than the program, as presently structured, can absorb.

We believe that more restrictive criteria for eligibility may be needed. Here, we are talking specifically about the Federally-supported portion of the program.

Senator NELSON. There wouldn't be any way to achieve that, would there, on the voluntary part?

Mr. ESCHWEGE. On a voluntary basis, I suppose you could suggest that they hire from a certain group. They are doing it now. We feel that there should be a further restriction of what individuals qualify under the category of disadvantaged.

Senator NELSON. With voluntary reporting, there is no way to be certain that the categories we are talking about are being employed

if we rely solely upon voluntary reporting, and then upon whatever the employer says about the employees hired, is there?

Mr. ESCHWEGE. That is correct.

Senator NELSON. So there are two questions there, one, what you might attempt to do about that in terms of getting a definition and statistics from voluntary people, and secondly setting a more precise standard for contracts. Is that right?

Mr. ESCHWEGE. That is right.

We also, as others, had some problems with the JOBS reporting and information system. NAB has prescribed procedures for reporting by employers of demographic data, but certain data have only been reported for about 42 percent of the enrollees.

NAB instead, relies on limited data obtained from employers, mostly by telephone, which is called the "tally count".

We believe complete data is essential to permit effective administration and evaluation of the JOBS program.

In the area of program implementation, or administration, we recognize that it is a rather new program. It is not surprising therefore that the program experiences problems in administration. We also recognize that the Department of Labor is making some changes in the program.

We find in our reviews which are still underway that some enrollees are not eligible under the prescribed criteria.

Generally, they are ineligible because the family income is above the prescribed poverty level, and we feel that this has an effect on meeting the objectives of the JOBS program since, as I said before, there are many more individuals who could be brought into the program than can be financed, at least under the Department of Labor component. Taking in ineligibles displaces the job slots otherwise available for the eligibles.

We also find some examples of jobs being offered at low wages which are described as dead-end jobs, and that in turn means there is little chance for upgrading.

As a result, termination rates for such jobs are fairly high. The concentrated employment program, which is to refer individuals to the JOBS program needs to have better coordination with

JOBS.

We find, for instance, in the San Francisco area that very few referrals were made from the concentrated employment program to JOBS employers.

We also believe that there is a need for improved procedures for evaluating contractor proposals by the Department of Labor, and for negotiating JOBS contracts.

Little time seems to be spent on contract negotiations, particularly in face to face negotiations. Guidelines are not always being followed, and as a result we have some examples of excessive allow

ances.

JOBS contracts permitted some employers to hire more employees than their operations could absorb, and we have examples of those. Supportive services are designed to give orientation, counseling, medical attention, transportation and other assistance to those being trained under the JOBS contracts. These supportive services were not always provided under the contracts that we reviewed.