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 NELSON. 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.

We placed individuals in an on-the-job training situations immediately, at union wages, which at that particular time were $3.16 an hour. We incorporated the required supportive services alone with his OJT.

The original concept was to bring them into a schoolroom environment at $2.00 an hour, keeping them there 8 weeks and giving them so-called supportive services, and then placing them in the plant again at $2.00 an hour in an observation status making them job-ready for productive employment.

Then he would receive his union scale.

We felt by placing the individual directly into the plant at union wages that we eliminated the great percentage of the problems accounting for the lack of retention in industry. We felt if a man is gainfully employed and had a sense of direction the possibility of his staying in a job environment were greater than in placing him back in a classroom environment, when in most instances the person left school as a school dropout.

We felt that once he became gainfully employed he was in a more receptive mood to education, and he sought the type of training he was most desirous of.

The jobs involved in our company require no basic education, or a minimal amount. In fact, most of the individuals working for us are on a "look-see" concept, to see how it should be done and do it from there.

We are confronted with the same kind of problems that most of the people in the JOBS program face today.

I have been here listening since 9 o'clock this morning, and I think one point has been missed, in that the industry man is constantly looked to for the success of the program; and it is felt that the contract existed between the contractor and the Department of Labor, but I think there should be a third person considered.

I think these contracts consist of three parties, three entities involving: The Government, the industry, and the trainee himself. We are asked constantly why the retention factor is low, why we can't retain people in employment; and yet, in many instances who knows, in our particular cases we have taken a new approach by placing them directly into gainful employment augmented with supportive service. We still have people who leave Hoffman Bros. We still have people not interested in the training program. We still have people who are more prone to go back into the welfare state, because even at the hourly rate of $3.16, in some cases there is only a matter of $10 or $15 a week difference between what he can receive on welfare and what he can receive in gainful employment.

And I have had people tell me, "Well, there is no sense to continue working when we know we can go back on welfare and not do anything." The incentative to work is removed.

I have heard the term used, "dead-end training." Any job is dead end in a sense. You arrive at a point of incompetence where you are locked in that particular situation merely by circumstances.

I came off another program where we trained people in the hotel industry. This is supposedly dead-end training. This supposedly is meaningless employment. I was told "You can't expect a person to go to work for $1.40, which was the hourly rate then, when he can toy on welfare or wait for a better job to come along."