AGENDA AND PAPERS FOR THE JULY 9 MEETING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88G01332R000901080019-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 11
• Document Creation Date: December 27, 2016
• Document Release Date: January 12, 2012
• Sequence Number: 19
• Publication Date: July 7, 1986
• Content Type: MEMO

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DO NOT use this form as a RECORD of approvals. concunences, disposals
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FROM (Names, org. symbol. Agency/Post) Room No.-Bldg.
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Hai-
EXECUTIVE SECRETARIAT
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THE WHITE HOUSE 3040X
WASHINGTON
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Loa %C.- 7/7f86 Number: 317+ 1-46 Due By:
Subject:
Economic Pn 1 i cy rn?nn i t Malt i ng - m y 9
9:00 A.M. Roosevelt Room
Action FYI
ALL CABINET MEMBERS ^ ^
Vice President
State
Treasury
Defense
Justice
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy
Education
Chief of Staff
UN
USTR
EPA
GSA
NASA
OPM
SBA
VA
REMARKS:
CEA
cEQ
OSTP
Poindexter
Svahn
Chew (For WH Staffing)
Executive Secretary for:
DPC
EPC
The Economic Policy Council will meet on Wednesday,
July 9, 1986 at 9:00 A.M. in the Roosevelt Room.
The agenda and background papers are attached.
RETURN TO:
Alfred H. Kingon
Cabinet Secretary
456-2823
(Ground Floor, West Wing)
^ Don Claret'
^ Rick Davis
^ Ed Stucky
Associate Director
Office of Cabinet Affairs
456-2800 (Room 235, OEOB)
Go -7
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July 7, 1986
MEMORANDUM FOR THE ECONOMIC POLICY COUNCIL
FROM: EUGENE J. McALLISTER6
~utne Re
BS3040X
SUBJECT: Agenda and Papers for the July 9 Meeting
The agenda and one of the papers for the July 9 meeting of
the Economic Policy Council are attached. The meeting is
scheduled for 9:00 a.m. in the Roosevelt Room.
The first agenda item will be agricultural exports. A paper
outlining several options for increasing U.S. agricultural
exports will be distributed tomorrow.
The second agenda item will be the Service Contract Act.
There are several proposals in Congress to raise the threshold
for coverage of the Service Contract Act from the current
$25,000. A paper prepared by the Working Group on the Service
Contract Act, which outlines several options for an
Administration position, is attached.
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ECONOMIC POLICY COUNCIL
July 9, 1986
9:00 a.m.
Roosevelt Room
AGENDA
1. Agricultural Exports
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U.S. Department of Labor
Assistant Secretary for Policy
Washington. D C 20210
`+ i 7 i9%
MEMORANDUM FOR THE ECONOMIC POLICY COUNCIL
FROM: THE WORKING GROUP ON THE SERVICE CONTRACT ACT
SUBJECT: Changes in the Service Contract Act (SCA)
What should be the Administration's position on legislative changes
to the Service Contract Act (SCA), especially the coverage threshold?
Background:
The SCA, enacted in 1965 and amended in 1972, requires that workers
on Federal Service Contracts of $2,500 or more be paid at least the
locally prevailing wages and fringe benefits as determined by the
Secretary of Labor. The statute was designed to cover nearly all
federal contracts not covered by the two 1930's laws covering
manufacturing (Walsh-Healey) and construction (Davis-Bacon). In
late 1985, the CBO estimated that the annual dollar volume of
SCA covered contracts was $11.7 billion. The Office of Federal
Procurement Policy (OFPP) estimates that about 60,000 new contracts
are covered annually.
In 1984, the Grace Commission recommended repeal of the SCA or,
if that was not deemed feasible, an increase in the coverage
threshold (in one part to $100,000 and in another part of the
report to $25,000) . The GAO's 1984 review of these reports
concurred in the recommendations, favoring repeal. The only
Administration position on the SCA is contained in an OFPP Bill
(S. 2392) which would provide for an 18-month test of raising
the coverage threshold to $25,000 as part of a broader effort
to simplify the procurement process. The President did not
address the SCA when he decided in favor of supporting increases
in the Davis-Bacon threshold to $1 million for military construc-
tion contracts and $100,000 for all other construction contracts.
While the SCA has been less well studied than Davis-Bacon, it
appears, based on some preliminary estimates, that changing
the SCA thresholds to the same levels the President supports
for Davis-Bacon (DBRA) would have about the same effect.
% of Contracts
% of Dollar Volume
Exempted Exempted
Threshold
n RA
S
BBRA
$ 100,000
66.5
73.9
6.9
9.6
1,000,000
94.6
96.1
28.5
18.1
Repeal
100.0
100.0
100.0
100.0
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In its 1983 study, GAO concluded that application of SCA wage
determinations increased total contract costs by between 9.9 and
11.6 percent. Reducing this range by 2.1 percent to reflect
savings resulting from DOL's revised regulations for SCA
(which are described below) and applying the result to the
percent and value of contracts that would be exempted yields
the following government-wide annual estimates of potential
savings:
Threshold
$ of Dollar
Volume Exempted
$ Value of
Contracts Exempted
Savings
$ 100,000
6.9
$ 0.807B
$ 63 - 77M
200,000
16.9
1.777B
139 - 169M
1,000,000
28.5
3.335B
260 - 317M
Repeal
100.0
11.700B
913-1,112M
For DOD only, the $1 million threshold would exempt $1.9 billion
in contracts with estimated savings of $148-180 million.
One major difference between SCA and DBRA is that the DBRA covers
skilled construction workers at relatively high wage levels while
the SCA covers a wide range of services and occupations. Some of
these are skilled (e.g., aircraft mechanics) but many others are
unskilled, low-wage employees. Preliminary data (1986) indicate
that 46 percent of SCA covered employees are in such low skill
jobs as janitor, cleaner, food service worker and guard. While
the wage rates for these workers vary greatly, most are at or
below $6.00 an hour compared to average construction wages of
about $12.40 an hour.
Because there are a large number of different occupations and
industries covered by the SCA, a large number of different
unions would be affected by any major change in the Act.
Current Status
New regulations under the SCA were issued (effective January,
1984) as part of the Administration's regulatory reform efforts.
As the GAO noted, these met some of the Grace Commission's
criticisms (e.g., exempting most ADP and high technology main-
tenance, limiting the successorship provisions which require
new contractors to continue payment of established wage rates).
The regulatory impact analysis (1983) of these regulations
estimated the savings at $124 million.
The following significant legislative proposals are pending in
the Senate.
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o S. 2261 (Humphrey) would raise the coverage threshold
to $200,000, require that wage determinations only
be issued if there are more than 25 employees, and make
other major changes.
o S. 2459 (Gramm/Humphrey) would effectively make all the
S. 2261 changes apply immediately to military SCA con-
tracts except that the threshold would be $1 million.
(The Armed Services Committee has reported its bill
which would raise the SCA threshold to $1 million for
DOD. However, in a surprise, Senator Quayle offered
an amendment which reduced the increase in the Davis-
Bacon threshold to $250,000 despite the Administration's
support for $1 million. Senator Gramm has now indicated
that he will not try to raise this to $1 million when
the Bill comes to the Senate floor.)
o S. 2392 is OFPP's proposed bill to test a $25,000
threshold under several procurement laws as a method
of simplifying the procurement process.
options
1. Maintain the status quo and continue to seek the proposed
OFPP procurement test of raising the threshold to $25.000
for selected projects. The test could be expanded to a
higher threshold (e.g., $100,000) and/or to deal with other
ideas such as only issuing wage determinations for jobs
under some fixed maximum (e. g. , $10 an hour) .
o The increased threshold would be justified as only
a temporary test and should be easier to enact.
o The results could give a better indication of what
changes are really needed.
o It should greatly lessen the dispute with labor.
o The Administration would lose an opportunity to gain
savings through legislative change of the SCA.
o The proposed test would only be applied to selected
contracts and not across the board.
o It would be perceived as being inconsistent with
the President's decision on Davis-Bacon.
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2. seek increases in the SCA threshold to the same levels
approved by the President for the Davis-Bacon Act. (This
would be $1 million for DOD and $100,000 for other SCA
contracts.)
o Significant budget savings would result from increased
competition and lower wages ($63-77 million at a
threshold of $100,000 and $148-180 million for the
$1 million threshold for DOD).
o This would be consistent with the President's decision
on Davis-Bacon.
o The SCA threshold has not changed for more than twenty
years and some change is appropriate in recognition of
economic changes and Gramm-Rudman-Hollings.
o There is significant support for the DOD part of this
option in the Senate; it has been approved by the
Armed Services Committee but it is not clear that it
can be passed on the floor.
o opportunities for contracting out federal programs
would be increased, furthering privatization.
o Labor unions would be critical of such increases
and may be able to block any such legislation.
o Rigid threshold goals by the Administration have
proven a handicap in negotiating for changes with
the Congress.
o The adverse impact of any decreased wages would
be felt primarily by relatively low-wage, unskilled
workers.
o While some increase in the threshold may be possible,
the $1 million threshold would be sure to strengthen
opposition, especially in the House.
o There has been no business community push for
legislative change in the SCA.
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3. Seek across the board increases in the threshold to not
less than $100.000. Other changes, such as to add an
employee threshold and to exempt small businesses, may
also be sought to ensure passage of the threshold change.
DOD and NASA are in favor of such other changes.
Pros: Much the same as for Option 2, plus
o Provides negotiating flexibility with the Congress which
should increase chances for actually getting a change
enacted both for SCA and Davis-Bacon.
o The Quayle Amendment to reduce the proposed Davis-Bacon
threshold increase to $250,000 indicates uneasiness with
going as high as $1 million, even though the SCA change
to $1 million was approved by Armed Services.
o Considering other changes to the SCA may give even
more flexibility in negotiating a threshold increase.
Cons: Much the same as for Option 2, plus
o Gaining, for example, a $100,000 threshold across the
board might not save as much as getting a $1 million
threshold for DOD and no change for other agencies.
4. Seek an increase in the threshold to $1 million across
the board.
Pros: the same as for Options 2 except that the savings
would be greater.
Cons: the same as for Options 2 except that opposition
would be stronger, passage would be questionable, and
efforts to enact changes in the DBRA might be harmed.
5. Seek repeal of the SCA.
o It would result in the greatest amount of savings
under current levels of contracting (about $1 billion
annually), would encourage more contracting out, and
would reduce agency administrative burdens.
o It would limit the federal interference in setting
labor prices in the marketplace through increased
competition, small business participation, and job
opportunities plus reduced paperwork burdens.
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o it would eliminate the problems GAO still feels
exist in accurately developing prevailing wage rates.
o Unlike Davis-Bacon, the President did not take a
public position against repeal of the SCA.
o The Fair Labor Standards Act (FLSA) would provide
a measure of wage protection for employees the SCA
now covers.
Cons:
o It stands virtually no chance of enactment, provoking
strong labor opposition with little business support.
o It might increase opposition to changes in the
Davis-Bacon by giving currency to the argument
that the Administration's Davis-Bacon efforts are
merely a first step towards removing all wage
protections.
o If enacted, it could increase pressures for raising
the minimum wage since many of the SCA covered
workers are relatively low paid and unskilled.
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