7% of the 10.9 million poor. By 1971 it is estimated that a larger percentage of the poor will be served as average enrollment rises over 50% from 1968. Question 8: A considerable portion of the JOBS funds provided to the JOBS contractor is for on-the-job training. The periods of OJT typically run many weeks at considerable cost in tax funds. Please comment on the quality of this OJT, and the complexity of the skills being taught. Give some concrete examples. Because of the number of employers involved and the variety of skills for which JOBS enrollees are being trained, no overall conclusion is possible. We have indications, however, of some relatively good OJT projects and of some questionable ones. For example, as a part of its JOBS contract a heavy steel fabrication company in Detroit contracted to train 25 disadvantaged persons as arc welders. Besides providing the supportive services, an intensive OJT program was conducted. The contract provided $1,225 per trainee to cover 35 weeks of on-the-job training costs. Trainees were paid $3.04 per hour. A training unit was established in one corner of the plant where instruction in welding was provided to the trainees. When a trainee demonstrated that he could do simple welding, he was transferred to the production line. Most trainees required about 14 weeks or 560 hours of OJT to qualify to work on the production line. In this instance, the OJT appeared to us to furnish disadvantaged persons a means to obtain meaningful employment. In other cases, however, we found that the jobs being offered under the proggram were of the type which have high labor turnover, and in which the possession of a specific skill or training is not typically a prerequisite for employment. For example, a janitorial service firm in Portland, Oreg., has an MA-4 contract to hire 16 persons as janitors at $2.33 per hour. The contract provides for 17 weeks or a total of 680 hours of OJT with a unit OJT cost of $792 per enrollee. Trainees hired by the company were placed on janitorial assignments after only a few days of orientation during which janitorial techniques were explained. Three of the trainees told us that they were expected to be able to perform as regular employees from the time they reported to their assignments. Also, in Detroit, a large manufacturing firm submitted a proposal to hire 200 persons as machinists and casters at a wage rate of $2.85 per hour. Under the contract trainees were to receive 26 weeks of OJT at a total cost of $1,040 per trainee. Officials of this firm told us that although the proposal indicated that 26 weeks of OJT would be provided, no formal or scheduled OJT program was implemented. OJT training was substantially the same as for regular employees. As a result, the officials were not able to provide us with any information concerning extraordinary cost incurred because of OJT. At this firm, we also found that some trainees were assigned to jobs requiring less skill than the jobs proposed. Of nine trainees interviewed, six stated that they were assigned jobs as general laborQuestion 9: One of the serious questions being raised concerning the implementation of JOBS concerns the activities of subcontractors who undertake to provide the supportive services. ers. In your review of the JOBS programs, what have you learned about the activities of such subcontractors? Why is there such a rapid proliferation of such firms (reportedly over 150 in the Los Angeles area alone)? How do such firms seem to come out financially under the JOBS contracts? Please give some concrete examples. We have not noted any rapid proliferation of subcontractors who undertake to provide supportive services in the five cities in which we are making our review, although we, too, understand that this may be occurring. Little information is available on how well these firms come out financially under the JOBS program. We did note, however, that one subcontractor in Detroit was reimbursed rather substantially in relation to the costs for the services that it actually provided to three employers, each of whom had a JOBS contract with the Department of Labor. The subcontractor was to provide a full range of supportive services such as prevocational training, counseling, medical and dental services, transportation, and supervisory training for contractor personnel. In return, one of the contractors agreed to reimburse the subcontractor 50 percent of the payment received from the Department of Labor; the other two contractors agreed to reimburse the subcontractor 25 percent of such payments. We found that in most instances, these services were not provided. Officials of the three companies told us that many of the supportive services were not necessary because most of the JOBS trainees had a background similar to that of their regular employees. Further, an official of one company told us that supportive services were not needed because the skill level of the automatic screw machine operators at his plant were quite low. The subcontractor informed us that supportive services were available, but that the JOBS contractors did not request many of these services. Because the three prime contractors did not require the subcontractor to provide many of the supportive services, we estimate that the subcontractor incurred costs of only about $14,000, although the subcontractor received reimbursement of about $56,000. Subcontractors may also provide supportive services to a consortium of employers who have obtained a JOBS contract. For example, we are presently reviewing the activities of a large consortium in the San Francisco Bay area. The consortium is composed of 75 large and small employers and has an MA-3, an MA-4, as well as an MA-5 JOBS contract. The consortium subcontracted the supportive service components and pre-on-the-job skill training to a large corporation. The subcontractor set up two training centers to provide suppor tive services and skill training to trainees being hired by the participating employers. The trainees, after being hired, spend 4 weeks in the training center, and then report to the various employers. Question 10: Working with the disadvantaged is often not easy, and the employer who undertakes such a task may find himself confronted with serious and novel problems. Your statement indicates that little help is given him by the Department of Labor. In your review of JOBS contracts, what is your impression of the level of assistance which is typically offered by the National Alliance of Businessmen in developing and implementing a workable, successful JOBS program? Please give some examples. During our review at five locations, we found that the extent of NBA's involvement in the program varied from city to city. In each of the five cities, NAB conducted a vigorous campaign promoting the JOBS program and soliciting job pledges from employers. In three of the cities (Detroit, San Francisco, and Oakland), NAB made its staff available to assist companies in developing contract proposals; in the other two cities (Portland and Seattle), NAB did not emphasize the contract component of the program and did not offer assistance to companies desiring to submit proposals to the Department of Labor. In some instances, NAB did provide assistance to employers by conducting "sensitivity training" workshops for supervisors and middle managers. However, subsequent to the award of the contracts, we found that NAB generally did not provide any substantive assistance to employers who were experiencing problems or who had questions regarding their participation under the contract component of the program. Question 11: It is difficult to compute a true cost-per-enrollee under the JOBS program. It would appear that the actual cost per enrollee must take into account the termination rate. For example, Department of Labor figures indicate that of every 100 trainees under MA-3 contracts, 32 are still on the job and 68 have terminated. Of every 100 trainees who have terminated, 93 did so in less than 8 months. This indicates that 63 percent of those hired under MA-3 contracts have terminated in less than 8 months. Furthermore, 49 percent of those hired under MA-3 contracts have terminated in less than 4 months. We would hope, and this is still the question, that the General Accounting Office could compute a cost-per-enrollee which would take into account these termination figures. What we seek to determine is the actual cost of providing a job to a successful trainee under the JOBS program. Our reply is as follows: We recognize that the man-year costs presented in our statement do not allocate the costs of the program to only those persons who may be considered a successful trainee under the JOBS program. At this time, however, the data available through the JOBS management information system is not adequate to develop costs on such a basis. Also, it is difficult to measure "success" in absolute terms. A trainee may have achieved some success even though he did not complete the training program. The costs as presented in the statement represent the dollars allocatable for a trainee who participates in the program over the full period for which the employer can be reimbursed. Under the MA-3 program, each 260 days of employment under the contract was used by us in determining the cost of training an enrollee. For example, under the MA-3 phase of the contract program, Department of Labor records show that through February 28, 1970, contractors had submitted to the Department claims for reimbursement amounting to about $45.7 million, representing 4,046,730 days of employment under the JOBS program. Using these figures, we computed a daily unit cost of $11.29. The daily unit cost was multiplied by 260 to arrive at the average cost of $2,935 per enrollee. Mr. Chairman, we have one more question that pertains to a specific contractor, which we have selected in the course of our review in the San Francisco-Oakland area. We have with us Mr. David Peltier from our San Francisco reional office, who was actually out there making the audit, and with your permission, I would like him to come up front and help me with this particular one. Senator NELSON. Fine. Mr. ESCHWEGE. The 12th question is: Would you please make available to the Subcommittee the results of your audit of the JOBS contract of Aladdin Heating Corp. of San Leandro, Calif.? The Aladdin Heating Corp. (Aladdin) contract is one of 14 which we selected for review in the San Francisco-Oakland area under the contract component of the JOBS program. We selected Aladdin because it had received one of the larger contracts awarded in the Bay area and because it appeared to be experiencing a high termination rate for JOBS trainees. BACKGROUND Aladdin is located in San Leandro, Calif., just outside of Oakland. Its principal business consists of mechanical contracting, and the manufacture of industrial blowers, ovens, steel buildings, vending machines, and other industrial products. Its total work force at the time of our review was about 200. On June 24, 1968, an MA-3 JOBS contract was awarded to Aladdin by the Department of Labor in the amount of $166,174. In essence, the contract called for Aladdin to do the following: 1. Hire and train 40 disadvantaged persons. 2. Provide each trainee with approximately 322 hours of on-thejob (OJT) training over a period of 52 weeks. The training was to be in the occupations of welder, painter, sandblaster, assembler, laborer, and material handler. The training was to be accomplished by the so-called "buddy system" (journeymen, and to a lesser degree, foremen would assist trainees). 3. Provide the trainees with supportive services to ensure their retention on the job. These supportive services were to consist of the following: Initial classroom orientation and counseling; vocational classroom training; medical and dental examinations and eyeglasses, as neces sary; special counseling; sensitivity training for all Aladdin employees; transportation to and from work, consisting of a standby driver and vehicle; and hot breakfast for each trainee. The contract provided that Aladdin would be paid about $4,173 and for each trainee, consisting of about $2,720 for OJT costs and $1,453 for supportive service costs. Our preliminary findings and observations with regard to the Aladdin contract are as follows: 1. The job slots provided by the Aladdin contract did not appear to be permanent jobs in the sense contemplated by Department of Labor guidelines governing the JOBS program. The trainees' tenure with Aladdin was premised on Aladdin's ability to secure a limitedterm Government contract to refurbish missile cases. Aladdin's JOBS contract proposal clearly indicated that the retention of trainees after the end of the refurbishment contract was highly problematical. The contractor's proposal stated that: The actual added cost of unemployment insurance will be a major cost resulting from the hiring of 40 hard-core unemployed. Since our contract with the Small Business Administration terminates after 12 months with no provision for renewal, we have no alternative but to figure that the total crew (regular and hard-core) will be subject to lay-off upon contract termination. We predict that 20 percent of the hard-core trainees will be retained or immediately rehired by other employers with an average unemployed period of 1 week: 20 percent will find employment within an average period of three weeks; 20 percent within 6 weeks; 15 percent within 12 weeks; 15 percent within 18 weeks, and 10 percent will remain unemployed after 26 weeks. Notwithstanding the declared temporary nature of the jobs, the Department of Labor issued a JOBS contract to Aladdin. We found that regional evaluators had at one point recommended that the proposal not be accepted, as the jobs were not permanent. This objection was apparently overcome by a statement from Aladdin that there was a possibility that some trainees would be taken into the regular business. 2. As of February 28, 1970, the 40 job slots provided by the Aladdin contract had resulted in a total of 155 hires and 146 terminations, for a termination rate of 94 percent. As of the same date, Aladdin had billed the government $116,816 for the OJT and supportive services provided to the persons hired. At the time of our review (April 1970), nine trainees were working in Aladdin's main plant. Sixty-six trainees had quit, 49 had been fired, and 31 were laid off. We analyzed the number of days worked by 69 trainees terminated prior to April 1969 and found that 43 had worked less than 2 months. Aladdin officials advised us that the major cause of the high termination rate was the fact that the anticipated number of missile containers was never made available to Aladdin for refurbishment. They stated that the sporadic availability of missile containers caused production scheduling problems, resulting in lay-offs. 3. On-the-job training did not appear to have been provided to the extent required under the contract. The contracted called for 322 hours of OJT to be given over a period of 52 weeks by journeymen, |