Mr. TERRY. This came through numerous personnel at Hill Air Force Base, and back through the contracting officer.

I sent my personnel to the Hill Air Force Base time after time to attempt to get assurance that something could continue.

Now, to bring up the rest of this story, this was to be a 1-year contract. We limped along for 16 months. Instead of $1,300,000, we received a total value of input of $407,000, a fraction of what we intended.

This, of course, made it impossible for us to hire 80 personnel, which we had under our contract conditions, 40 hardcore and 40 regular.

We had, if I recall, six or seven total shutdowns, which caused total lay-off. It was difficult for us to even find our trainees after a lay-off, much less get them back to work.

Numerous slowdowns also occurred due to the lack of input. Eventually, the contract was terminated for the convenience of the Government, and that is another story.

There were inferences made in the FAO report, as I heard it here, and statements made which technically may be true, yet should be properly explained.

One of the statements that was made, as I recall, and I would like questions if I miss some of these, off the top of my head was that these trainees did not receive full 40 hours classroom orientation.

In my original estimate based on a plant operating on the basis of what we expected, with 80 employees, 40 to be hard-core, this classroom operation as I bid it was a practical, logical proceeding, but when we operated with six, seven, 10 employees, and at the very highest point we reached a total of 51 on one particular day, classroom orientation was a practical impossibility.

It was of much greater value to us, and much more effective with such a small crew, and with a full time counselor, to use individual, specific tutor-type training.

We were running an asembly line, where it was obvious and easy to pick out of men on that line those who were the weak men and take them into specific conference and work on them and bring them up to the level of the line, rather than bringing all the men in for a general discussion, and there is no doubt in my mind that our men received all the training they were intended to receive, although after the first 3 weeks it was not classroom training. It was individual or small group training.

Another point that I recall in this FAO report, and I am sorry that I didn't have time to outline the points as they were read, was the statement that these men did not, or may not have received full on-the-job training, that we had a "buddy system".

We had a "buddy system" as such, my proposal was not a onefor-one or an hour-for-hour "buddy system". It was a percentage system, in which I calculated that if I had 40 trainees and 40 journeymen, which was the original intention, that 10 percent of the journeyman's time would be used on trainees, not 100 percent, that 5 percent of the foreman's time would be used in training, and onehalf of 1 percent of the superintendent's time would be used.

This was, of course, based on the original estimates. What actually occurred is that when we were unable to hire this number of people, I sent most of, or a mjaority of, or a high percentage of the socalled regular industrial employees back to our regular operations and increased the percentage of training done by the superintendent and foreman, so that instead of the superintendent spending onehalf of 1 percent of his time in training, he was spending 40 or 50 percent of his time training.

In other words, since I could only provide work on a certain day, we will say for 12 men, rather than holding that group at six regular and six hard core, I would operate with seven or eight hard core and three or four so-called journeymen. But these were journeyman-plus. These were superintendents and foremen that were doing the training.

This, as I say, may be misleading in this G.O.A. report. If you wish, and have the time, I would be perfectly willing to run down the specific items of our proposal and give a quick explanation of each one.

Would you like to do that, sir?

Senator NELSON. How long will it take?

Mr. TERRY. 15 minutes, without questions.

Senator NELSON. Would you think it would impair your presentation to submit this later in writing, or would you prefer to present it now?

Mr. TERRY. You asked me a question. I don't want to keep all these people here, but I would like to get away from here without a future report hanging over my head.

Senator NELSON. Go ahead.

Mr. TERRY. Thank you.

I should point out very clearly that though the contract was for $166,000, it never went to that figure. We were paid 70.4 percent of the contract.

The original contract contemplated 83,200 hard-core hours in 1 year. We actually provided 59,000 some-odd hard-core hours of employment over a 16-month period.

If the exact same contract were offered to me today under the same circumstances that existed, I would immediately turn it down because it could not be done, except at a loss.

I cannot answer as to what would happened if this had completed its expected course. It might then have been profitable.

My first item of concern was in hiring the hard core, and I think everyone here realizes what we are talking about when we say hardcore unemployed.

The people we hired were unemployable. It told my councelor that we wanted the bottom. We took the bottom. We took people with prison records, drug records, and other serious records which I can submit, if these records are desired, and we really attempted to do something with the very hard part of the hard core.

Nor, realizing that we were going to work with that group, I estimated that their production efficiency, for the first 6 months, would be 70 percent of the efficiency of a normal industrial journeyman in our trade.

I was very wrong. Their productivity deficiency is much greater. They were found to be about 50 percent as productive in their first 6 months as a normal industrial, union type of employee that I would use in my normal operations.

There were many reasons for this production differential, which you may or may not want to get into, such as absenteeism, or violence, or what-have-you, but I assure you that the people hired by us were much more inefficent than 15 percent, which is what I figured in my estimate.

Going to item 4(2) the problem of counceling, which I have just discussed. I think we can jump over that.

Item 2 is the point that was brought up in the G.A.O. report that I agreed to hire a counseling force, including assistant counselor, but that I had not hired an assistant counselor. Let us go back. I hired probably one of the finest black counselors available in the area, Jack Williams, a well known athlete.

For the record, my plant superintendent was a black exmurderer. My general foreman was a black Baptist minister, and the counselor was a black athlete.

I hired Jack Williams. I put in for $11,000. I paid him $11,906. The point is made in the report that I did not hire the assistant counselor. I didn't need an assistant counselor, when I only was allowed to have five, six or seven hard-core employees, where I had orginally made an estimate on 40.

However, by the same token, I totally underestimated the administrative cost of this job. I did not realize I would need a clerical assistant, for instance. I did not realize that the problems here would be so great that I would have to hire a plant manger for this purpose alone, just to mention a few things, which would counter that.

Regarding the "buddy system" we discussed that briefly.
Unless you want to go further, I will not.

I have an item in the contract of $2,500 for abnormal theft, breakage, and spoilage. I was paid 70 percent of the contract so that comes down to $1,760. This was a bad underestimate of what was going to happen.

The actual destruction of equipment, the theft of tools, particularly of handtools, and the total disregard of the company's facilities and equipment was unbelievable.

In addition, we had a serious problem with outright sabotage, which was not predicted. We were finding rocks in the equipment, and everything they could do to sabotage "whitey." This had nothing to do with the program. It was the act of individuals.

Another thing we underestimated was the problem of unemployment insurance. I knew, and you heard from the report that I would have an unemployment insurance problem, because this was a 1-year contract, and I could not absorb 80 men in a 200-man operation overnight. I knew that I was going to have to pay unemployment insurance. I estimated $10,000.

At present, we have 67 of the hard core we laid off, who are eligible, each of whom is entitled to $750 or more.

Now, it doesn't take much to figure that I have an exposure there in the neighborhood of $50,000, instead of $10,000.

Transportation costs, we had $3,520 in the contract, after it is scaled down by the 70 percent. We picked up men who were stranded. It did not cost us $3,520 in total-at least, I cannot substantiate that amount of expediture but we picked up every man we could find who was stranded every morning.

The additional cost of accident insurance, I predicted that because of these people's lack of experience, nervousness, inability to read, and horseplay, that, obviously, we would have a high accident rate. I predicted a 40 percent increase. My loss ratio went from Aug. 1, 1968, 68 percent, Sept. 1, 1969, to 148 percent. I underestimated. Instead of 40 percent, I had a 217 percent increase.

Medical examinations, I estimated that 90 percent of those that would be hired would either have had a recent exit examination from prison or from some other Government-supported institution. We actually found that higher than 90 percent of those which we hired, who were almost entirely from OIC, had had their medicals, and had been taken care of in that direction.

Our costs did not run quite as high per trainee for medical purpose, as the estimated $172 per slot filled.

Hot meals. We knew that these people-well, you had to get them to work. The quickest way to get them up and to work was to feed them. We didn't realize that what was going to happen was that some of them were going to come all the way out to San Leandro to get a free breakfast and then leave, but that is the way it went.

We estimated, or we proposed that the employee pay half the cost and we pay half the cost. That came to a modest breakfast, we figured $3,900 for the 40 trainees. That scales down to 70 percent of the contract or $2,745. In actual dollars, we paid out only $1,466. Why they did not all eat breakfast, I do not know. Breakfast was available to anyone who wanted it.

Our administration overhead, extra and above, I threw in $750 for my time appearing at unemployment hearings, compensation hearings, and such problems. This is hard to measure, and, of course, there is a lot of this still to come.

I put in for a full-time timekeeper at $6,400. That scales down when you take 70 percent of it.

I overlooked many, many items in this situation, and what I am trying to say is, yes, I estimated $422 for extra costs of interview testing and evaluation, and I can't support it. I estimated $1,000 too much for hot meals. It is true.

On busing, I may have been a few dollars high. But by the same token, I was very low on the things that really counted, which were the productivity and the unemployment, the compensation, the theft, the damage, the sabotage and other factors, which should be part of the employer's costs of training hard core trainees.

I think I have said my piece, sir. Are there any questions?
Senator NELSOx. I don't have any questions.

If you wish to submit anything further that you think of, we will be glad to print it in the record along with your testimony here.

Mr. TERRY. If there are no questions, I feel that perhaps I have covered it.

Senator NELSON. Thank you very much, Mr. Terry.

We will take a 5-minute recess.

(Whereupon, a brief recess was taken.)

Senator NELSON. We will resume hearings now.

Our next witness is Mr. Joseph J. Russo, Hoffman Bros. Packing Co. Inc., Los Angeles, Calif.

STATEMENT OF JOSEPH J. RUSSO, HOFFMAN BROTHERS
PACKING CO., INC., LOS ANGELES, CALIF.

Senator NELSON. We are pleased to have you here today. Do you have a prepared statement?

Mr. Russo. No, sir, Idon't. I would just like to expound on some of the points that were previously submitted, if this is agreeable to the Chair.

Senator NELSON. Go ahead.

Mr. Russo. Hoffman Bros. Packing Co. is a processor of meat on the West Coast. It was awarded a contract to train 150 so-called disadvantaged people. My position with the company is as its project director. I was brought into the program after it ran approximately 8 months.

Our program ran into some problems insofar as the training facilities were concerned. Hoffman Bros. acquired the services of a subcontractor, feeling that they needed expertise in the field, the subcontractor helped prepare the contract for Hoffman.

As time went on, it became very apparent that the performance of the contract was not in accordance with what the Department of Labor or ourselves felt was sufficient.

The president of our company called in the subcontractor and went into some of the details of the performance and started questioning some of the expenditures involved.

I would like to explain something to the Chair. At the present time, my company and our subcontractor are involved in litigation insofar as the performance of the subcontractor's contract with Hoffman Bros.

Our opponent is in the room at the time, so there is certain information I cannot develop.

Senator NELSON. As far as any legal dispute is concerned, that is a matter between the litigants, and not the committee, so I would hope we don't have to get into a discussion as to legal points between the two litigants.

Mr. Russo. Right.

As I say, I can't expound some of the points of contention on the differences of performance between what we claim were improper. All I can say is that much time, money, and effort have been spent in preparing the legal action involving this particular case.

When I was brought to the program, the retention factor at Hoffman was down to 39 people, based on an input of 161, so my job at this time was to troubleshoot and find out why the contract wasn't operating properly.

We found that some of the support services we were getting, such as remedial reading, writing and arithmetic were not required to make the applicant job ready.

We tried to bring the program back on the track so that we could wind up with a success, rather than a failure story.

We restructured the program, eliminating a lot of the so-called supportive services that were not necessary to make them job-ready.