to be performed substantially within the United States, is entirely consistent with this language.
The plaintiff also argues that the changes occurring between proposal of the regulation and the promulgation of the regulation in final form violate Section 4(b)(3) of the APA, 5 U.S.C. § 553(b)(3). That section provides that general notice of proposed rulemaking shall include "either the terms or substance of the proposed rule or a description of the subjects and issues involved." The purpose of the rulemaking process, however, is to generate comments that will permit the agency to improve on the tentative rule announced in the notice of rulemaking. See Transpacific Freight Conference v. FMC, 209 U.S. App. D.C. 27, 650 F.2d 1235, 1249 (D.C. Cir. 1980), cert. denied, 451 U.S. 984, 68 L. Ed. 2d 840, 101 S. Ct. 2316 (1981); Ethyl Corp. v. EPA, 176 U.S. App. D.C. 373, 541 F.2d 1, 48 (D.C. Cir.) (en banc), cert. denied, 426 U.S. 941, 96 S. Ct. 2662, 49 L. Ed. 2d 394 (1976). Plaintiff, Seafarer's International Union, however, expressly commented on the proposed retention of the regulation in its current form, recommending instead coverage of all contracts on American flag ships regardless of the actual place of performance. Plaintiffs thus had actual knowledge that the final regulation might deviate from the proposed regulation. See Common Carrier Conference v. United States, 175 U.S. App. D.C. 244, 534 F.2d 981, 982-83 (D.C. Cir.), cert. denied, 429 U.S. 921, 97 S. Ct. 317, 50 L. Ed. 2d 288 (1976). The Court is satisfied that the procedures here followed met the requirements of the APA.
The Locality of Prevailing Wage in Cases Where Place of Performance is Unknown at the Time of Bidding
The regulation here challenged pertains only to those few cases (less than one percent) where there is more than one locality in which a service contract might be performed. There currently is no regulation to guide agencies soliciting bids for contracts that could be performed wherever the successful bidder happens to operate. 48 Fed. Reg. 49738 (1983). Current practice is to make separate wage determinations for the area in which each prospective bidder is operating, when that can be determined before contracting. A nationwide, composite wage determination is used if the location of prospective bidders cannot be ascertained or prospective bidders are too numerous to permit pre-contract, bidder-by-bidder determinations.
The new regulation provides for a two-step procedure in these cases. The first step is the identification of prospective bidders and their localities. The second step is the issuance of a wage determination for each locality where there is a potential bidder. Where this procedure is impracticable, it may be replaced by a wage determination for composite localities.
The plaintiffs have argued that a single prevailing wage must be issued based on the locality of the contracting agency or a nationwide locality. They argue that the two-step procedure results in channeling contract awards to low-wage areas of the country. This concern was asserted during the rule-making, and addressed in the Discussion of Final Rule, 48 Fed. Reg. 49738 (1983). The discussion recognizes that the legislative history does not "evidence a congressional intent that potential bidders in widely divergent locations should be subject to a single 'prevailing' wage standard for all communities across the country, each of which has its own distinct wage patterns." Id. The Court shares the view that a primary intent of Congress was "to prevent Government contracts from disrupting local wage standards."
The two step procedure is the only alternative that achieves localization. The Court disagrees with the plaintiffs' contention that the "Secretary failed to provide any explanation for his rejection of alternatives to adoption of the two-step procedure" since the alternative chosen most ably effectuates the apparent intent of the statute. The Secretary acted within his authority in deciding that wage determinations should be based upon the locality of the contracting party in cases where place of performance is uncertain at the time of bidding.
Application of the Successorship Provisions of Section 4(c) of the Act to only those situations where the Successor performs in the same locality as the Predecessor (4.163(i))
The situation where a service contract may be performed in more than one place gives rise to a second locality issue addressed by the new regulations. Section 4(c) of the SCA, 41 U.S.C. § 353(c), provides that a contractor providing substantially the same services as were performed by a different contractor is bound to pay its employees at least as much as the predecessor paid its employees, if the predecessor paid its employees pursuant to a collective bargaining agreement. The SCA further states that the successor is bound by what his predecessor paid unless the Secretary determines that that amount is at variance with prevailing rates in the area. The new regulation provides that "the successorship requirement of section 4(c) applies to all contracts for substantially the same services as were furnished under the predecessor contract in the same locality." 48 Fed. Reg. 49789-90 (1983). The plaintiffs argue that a successor contractor, regardless of where located, must pay the collective bargaining wages of the predecessor. Although the language of Section 4(c) does not specify that the successorship provision applies only to successors to contractors in that locality, the absence of that language does not preclude a construction that applies the section only in the same locality. Cf. Building & Construction Trades Dept., AFL-CIO v. Donovan, 229 U.S. App. D.C. 297, 712 F.2d 611, 617-18 (D.C. Cir. 1983), cert. denied, 464 U.S. 1069, 79 L. Ed. 2d 213, 104 S. Ct. 975, 52 U.S.L.W. 3533 (1984). Where, as here, the purpose and language of the statute as a whole stress the theme of comparability within the locality, the restriction is appropriate.
Comments in the history indicate that this section was designed to preclude a successful bidder's paying less to employees than they were receiving from the contractor's predecessor, the former employer.
The provision was inspired by a situation at Cape Kennedy, Florida, in which service workers experienced large pay cuts from collectively bargained rates when a successor contractor took over a service contract with NASA. The hearings and debates on the 1972 Amendments that added this provision to the statute, as well as the Senate Report, support the conclusion that the successorship provisions were intended to apply to successor contracts at the same location. The regulations reflect that apparent legislative intent.
Exemption for Contracts for Commercial Product Support Services of High Technology Companies
The Secretary has promulgated a regulation exempting contracts for the services of automatic data processing, high technology, and certain business equipment product support services from the Act's requirements. Disputes first arose in 1977 about whether these groups should be covered by the Act. From 1979 to the present they have in fact been exempt under an interim variance. The variance provides that actual wages and fringe benefits paid by the government contractor are to be considered "prevailing", thus acceptable.
The new regulations at section 4.123(e)(1), 48 Fed. Reg. 49782, aim to settle the ongoing dispute over whether this class of contracts is covered by the act by exempting them pursuant to Section 4(b) of the Act, 41 U.S.C. § 353(b), which provides:
The Secretary may provide such reasonable limitations and may make such rules and regulations allowing reasonable variations, tolerances, and exemptions to and from any and all provisions of this chapter (other than section 358 of this title), but only in special circumstances where he determines that such limitation, variation, tolerance, or exemption is necessary and proper in the public interest or to avoid the serious impairment of government business and is in accord with the remedial purpose of this chapter to protect prevailing labor standards.
The question for the Court is whether the exemption is proper under this section of the staute. There can be little doubt that the regulation comports with the requirements of this provision that any exemption be in accord with the remedial purposes of the Act. A number of facts led to the conclusion that this class of employees did not need the protections of the SCA and were not, in fact, subject to the kinds of difficulties Congress sought to protect against in the SCA. The industry is not conducive to "wage-busting," and thus not in need of protections geared toward preventing depression of wages through price competition for labor-intensive service contracts. It was expressly found that the interim variance had not had the effect of depressing wages for employees within the industry. By contrast, imposition of the SCA requirements on this class of workers would disrupt the well established "merit pay systems," that pervade this industry.
Consistent with the remedial objectives of the SCA, protective restrictions are imposed on employers within the exemption. The regulations require that workers working on government contracts must receive pay equal to that of workers on contracts with private organizations. This is expected to diminish the possibility that employers may cut workers' wages to obtain government contracts. The record also indicates that the exemption is necessary to avoid the serious impairment of government business. A significant segment of the ADP industry may cease to do business with the government if their contracts include SCA requirements. They cite a GAO report that refers to a specific instance where continued industry refusal to enter into contracts with SCA requirements would severely affect operations at the Department of the Army's Redstone Arsenal in Alabama and White Sands Missile Range in New Mexico. It was found that vital missions of other agencies would be disrupted if computers were not available as a result of manufacturers' refusal to accept service contracts. The court finds that the regulation in question creates an exemption that comports with the purposes and language of the SCA.
As discussed above, the Secretary's rationales for the new regulations satisfy the Court that the regulations are the product of reasoned analysis and are consistent with the language and purpose of the SCA. The Final Regulatory Impact analysis does not demonstrate that the Secretary placed greater weight on economic factors than on SCA goals. On the contrary, the aim was to "improve cost-effectiveness of the Service Contract Act regulations and . . . at the same time be consistent with the language and intent of the Act." Final Regulatory Impact Analysis at 1. For the foregoing reasons, judgment is hereby entered that the decision of the Secretary of Labor is upheld.