We know of the needs in the public sector, the health and education needs, the social service needs, and we know the people with whom we are dealing in the JOBS program can and have made significant contributions in the public sector. In view of our experience and the condition of the economy and the way the unemployment rate is increasing, I would like to suggest that some attention might be paid to increasing the support to cities, States, counties, and other public jurisdictions for the kinds of jobs and careers that would assist in meeting public needs.

Third, I would recommend that for the JOBS program that does remain in the private sector, there should be firm limits and standards below which government assistance will not be provided.

Wage rates at or slightly above the statutory minimum rate should preclude the granting of a contract. I can testify from painful and costly experience that the resources that we have poured in in a futile attempt to locate and hold workers on low paying jobs could more usefully be spent in providing more services for fewer but better paying jobs.

Fourth, I think the emphasis of the program should move away from the training center and from the separateness of the training operations to the plant itself, in all but exceptional cases.

Senator NELSON. You mean that the job related basic education should be performed at the factory, at the plant, and not at a center away from the plant?

Mr. HOWARD. That is correct, Senator. In recent months I have taken increased responsibilities for the operations of this company, and we have deliberately embarked upon a policy of closing our training center and insisting that employers provide space in the plant or immediately adjacent to it, and that our counselors get into the plant for the job related and special counseling, and that the premises of the plant, if at all possible, be made available.

In some cases we are using lunchrooms that are used only 1 hour a day by the company. In other cases, we are using unused office space, and in two or three instances, we have rented trailers that are parked immediately adjacent to the plant and which are used for counseling and for job related education and other services.

I think this is clear. It is clear what this does.

It establishes a closer relationship of the employee to the supportive service. This cuts down on the transportation problem of moving back and forth to a training center, and this makes the employer more willing to cooperate in the scheduling of their people off the line or off the job for the training and the remedial education.

Fifth, I would state that except in the case of smaller employers whose limitations and capacity for staff might preclude it, I think that employers should be encouraged or required to establish and maintain in their own operational staff the capacity to carry on the necessary services needed for the population for which the program was designed.

It may well be that this will seriously restrict the program. I suggest that perhaps this is the price for the program. În this, I would see the requirement that effective personnel policy and effective per

sonnel staff be retained by employers if there is to be any lasting impact of the training program which seeks to introduce the socalled disadvantaged or hard-core employee into new situations here. Let me state that the point has been made that there seems to be little difference between those hired before and those hired after the program.

I believe the point is, do they stay on, and are they better workers and is the adjustment and performance better?

I believe if this program is to continue in the private sector, some attention should be paid to the requirement that the employer staff and integrate into his management structure persons and capabilities for providing the work attitudes and the work atmosphere so that people brought in under these Government subsidized programs will be more effective and will remain.

It would be ingenuous to say that we delivered a lot of services at Merit Industries and is not that great, and ignore the fact that a total plant shutdown wiped out the program.

I don't think Merit is any happier about that than we are. We know, for example, that the employers at their expense kept our trainees on during a holiday period over Thanksgiving and earlier in the summer, even though they had not earned vacation time, kept them on at full pay because they expected fully to stabilize into a year around operation.

My understanding is that at the time the Merit contract was sought and signed in March of last year, Merit was at full production and needed additional workers-so that I do not have the facts that would indicate to me clearly that Merit is indeed a seasonal operation and that a shutdown last year should have warned the Government about contracting against possible shutdown this year. Nevertheless, we're deeply disappointed on the Merit program. The recommendations I have made in terms of standards of wages, standards of skills, standards of jobs, skill levels, obviously have to include standards of seasonality and standards of expectation.

These tighter standards, I believe, if imposed on the program, can continue to make it effective, perhaps in a more limited, but perhaps in a more real way.

The JOBS program cannot and should not be used as a sort of public employment program to take up slack. That is not the intent, and I regret that some of the experiences with Merit and other layoff's would appear to give the program that appearance.

In summation, the constructive analysis of the staff study sets the tone for our own experience, a relatively new program conceived at a time of expansion and increasing employment has run into difficulty today.

It is now being given a careful look by persons committed to the objective but properly skeptical of the means to that objective. We have had problems and perhaps more than our share.

But we have had successes, and we have learned from our experience. The contribution that this subcommittee is making to the analysis of the program cannot be measured, but we for one welcome your attention and interest and a determination to correct that which is wrong and strengthen that which is actually working.

Thank you, Mr. Chairman.

Senator NELSON. Do I understand that you are not at this time. prepared to respond to the statement made by the first witness and to the GAO letter in which they discuss four companies and services provided to them by ALS?

Mr. HOWARD. Mr. Chairman, I could respond in a general understanding of how the program operates and some of the facts on Merit, which were in the staff study. I did prepare to respond to the material in the staff study and the staff report.

I was unaware of the GAO letter until I just heard it, and therefore I regret that I do not have the specifics.

I would be glad to discuss, certainly, our intentions and my understanding of them, but I believe I could be more responsive by getting precise facts and hopefully a copy of the letter, and I will respond to that for the record properly.

Senator NELSON. All right. You will be furnished a copy of the letter, and we would appreciate it if you would specify what services ALS did in fact perform and respond to the specific points raised by the General Accounting Office as well as Mr. Ruffin, the first wit

ness.

Mr. HOWARD. We will be glad to do that.

Mr. Chairman, I understand the limitations under which GAO operated, and we will try to supply some of that which they did not cover, some notion of the costs and expenses laid out by us in attempting to fulfill the contract.

I think it might be of interest to the subcommittee.

Senator NELSON. All right. If you would provide that specifically. (The information referred to follows:)

EXPENDITURES INCURRED BY AMERICAN LEARNING SYSTEMS

BETWEEN JULY 1, 1969 AND APRIL 30, 1970

In attempting to meet its obligations under the Consortium contract, American Learning Systems rented quarters for counseling and classroom instruction, expended thousands of dollars to render them suitable for such activities, and retained experienced teachers and counselors. The figures below are a number of major types of expenditures incurred between July 1, 1969 and April 30, 1970, the latest period for which data are available.

Certain explanations should be noted. Several training centers required extensive renovation before local authorities would permit them to be used for instruction purposes. For example, the company expended approximately $25,000 for its Hackensack center and about $15,000 for the East New York Center. Similarly, the company expended $15,000 to establish a center in Los Angeles only to have the Labor Department rescind its approval of operations in that city, so that no income whatsoever was received to offset out-of-pocket costs.

Finally, the central administrative and executive function was responsible for operations in Washington, D.C., Newark and Hackensack, N.J., and Bronx, East New York and Farmingdale, New York. There were therefore costs incurred for communications, travel and other management functions which had to be shared by center operations. For purposes of this analysis consortium activities generated approximately 60 percent of the company's income and bear the same share of general and administrative costs.

Teacher-Counselor salaries and benefits, 150,500; Administrative salaries and benefits, 17.500: Executive Salaries and benefits, 30,000; Center rent, utilities and custodial, 33,000: Consultants, 6,800; Training costs, school supplies, 3,500; Medical charges, 1,300; Office supplies, 5,000; Communications, 8,000.

Senator NELSON. It says under medical services and dental services, the GAO letter says the employers had no information whether these services were supplied by ÂLS.

Will you respond to the question of which services were furnished?

Mr. HOWARD. In many cases the employers did not know, because the counselors would detect the need for glasses and so forth.

Senator NELSON. Do you have the medical and dental bills that would verify the services performed?

Mr. HOWARD. Yes, sir.

Senator NELSON. Senator Javits?

Senator JAVITS. Did you make any money on this contract?

Mr. HOWARD. That is a very painful question. At the present time the parent company has advanced American Learning more than $100,000. We have lost $100,000.

Senator JAVITS. What is the term of the contract?

Mr. HOWARD. The consortium is an MA-4 contract. It was signed. I believe, in April, and was effective the 15th of May. The contract runs for 2 years.

The jobs slots in the contract are 12 month slots and services may be performed within a 2-year period.

Senator JAVITS. How did this consortium come to be formed?

Mr. HOWARD. Again, this was before my day. This was done, actually, before I even came to work for the corporation. This was done in late 1968. A number of employers in the New York area were interested apparently in participating in the MA-4 program, the JOBS program, and as my understanding of this went, it was that a number of them did not feel they would establish the staff or the expertise for training and counseling and it was suggested to them that perhaps they should form a consortium to handle the bookkeeping and administrative work.

I believe early in 1969 the consortium was formed and it was that body, then, that signed the contract with the Department of Labor. Senator JAVITS. Who suggested it to them?

Mr. HOWARD. It is my understanding that the Department of Labor regional office in New York suggested that a consortium might be useful to handle the work.

Senator JAVITS. At what stage did American Learning Systems get into it?

Mr. HOWARD. My understanding is that very early in the negotiations, American Learning was involved very early in the negotiations.

Senator JAVITS. Is there a common officer between the consortium and the American Learning System?

Mr. HOWARD. Yes, sir, the treasurer of the consortium is also our treasurer, James C. Souran.

Senator JAVITS. That is the man who has controlling stock?
Mr. HOWARD. No that is Thomas C. They are brothers.

Mr. GERBER. I am secretary for the consortium, and was secretary of Educational Sciences programs. However, I have not performed any functions for, or drawn a salary from the consortium.

I think at that time I became secretary as a matter of convenience. I have never functioned as a secretary.

Senator JAVITS. Did Thomas Souran get into this from the beginning?

Mr. HOWARD. He served as chairman of the board of the parent company from the beginning. My understanding is that the work on the negotiations and development of the consortium was done largely by John Douglas, the president of the company, as well as by other employees.

Senator JAVITS. So that the American Learning System was really an integral element of the consortium, was it not?

Mr. HOWARD. Yes.

Senator JAVITS. Did they actually put the consortium together?
Mr. HOWARD. I would say they played a major role.

Senator JAVITS. This $6 million contract which is referred to on the second page of the GAO letter-you do have that in front of you?

Mr. HOWARD. No. I do not.

Senator JAVITS. It is $6,675,310. The amount of the contract. Is this for the whole consortium?

Mr. HOWARD. Yes. It is.

Senator JAVITS. How much of the gross volume is that of the American Learning System?

Mr. HOWARD. I would estimate less than half. The figure, by the way, was amended shortly after the execution of the contract, to 6.2, I believe.

There is a revised figure downward. Less than half of that are services by ALS.

Senator JAVITS. This is a $3 million contract to be performed in 2

years.

Did you include this figure in the volume?

Mr. HOWARD. We don't count accrual bookings.

What we would be talking about would be the services rendered and paid for.

Mr. GERBER. I might point out, Senator, that the Government is billed only on the basis of billable days. So though we might be talking about $6.6 million, the actual billings to the Government were no where approximating that.

In other words, if an employer does not take on the employees, the Government will not be billed for that employee.

Senator JAVITS. This contract has now run a reasonable length of time, hasn't it?

Roughly?

Mr. HOWARD. Yes.

Senator JAVITS. How much money has American Learning Systems received under it, gross?

Mr. HOWARD. I would have to provide the exact figure for the record. I would doubt it was more than 2 or 3 hundred thousand dollars.

Senator JAVTTS. So this has been a big flop for you, too?

Mr. HOWARD. It has been a bigger flop for us than the employers. It has been a learning experience, one that I hope I don't have to repeat.

Senator JAVITS. Would you be prepared to submit an audited statement to this committee as to the income and outgo on this con