oversight

Evaluation of Results and Administration of the Job Opportunities in the Business Sector (JOBS) Program in Five Cities

Published by the Government Accountability Office on 1971-03-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

  REPORT TO THE CONGRESS




  Eva luation Of Results And
  Adminlstratron Of The Job
  Opportunities In The Business
  Sector (JOBS) Program
  In Five Cities B-763922
I Department of Labor




 BY THE      COMPTROLLkR    GENERAL
 OF THE      UNITED  STATES



                          2ARcH24,19?1.
                                                           ^I
                                               I



                 COMPTROLLER     GENERAL      OF    THE         UNITED     STATES
                               WASHINGTON      DC         200548




B- 163922




To the      President   of the Senate and the
Speaker       of the House    of Representatives

          This 1s our report      on evaluation        of results     and admmls-
tratlon     of the Job Opporturutles       m the Busmess             Sector      (JOBS)
program       In five cities - -Detroit,     Mxhlgan,        Oakland,       Callfornla,
Portland,       Oregon,   San Francisco,       Callforma,         and Seattle,        Wash-
ington.

           Our  review was made pursuant                            to the Budget   and Account-
ing Act,      1921 (31 U.S.C. 53), and the                         Accountmg     and Audltlng    Act
of 1950      (31 U.&c.  67).

        Copies        of this report        are being    sent               to the Director,      Office
of Management             and Budget,       the Secretary                   of Labor,   and    the Dl-
rector,   Office        of Economic         Opportumty.




                                                    Comptroller                 General
                                                    of the United               States




                        50 TH ANNIVERSARY                  1921-         1971
GOM??TROLLER
           GENERAL'S                           EVALUATION OF RESULTS AND ADMINISTRATION OF THE JOB
REPORTTO THE CONGRESS                          OPPORTUNITIES TN THE BUSINESS SECTOR (JOBS) PROGRAM
                                               IN FIVE CITIES
                                               Department    of Labor B-163922


DIGEST
_-----

WHYTHEREVIEW
           WASMADE
       The Senate Committee on Labor and Public Welfare has urged the General Accounting Of-
       fice (GAO) to provide the Congress with broad, independent appraisals  of the manage-
       ment of Federal manpower programs by executive  agencies

       One of the principal     manpower programs 1s the Job Opportunities      in the Business Sec-
       tor (JOBS) program       It 1s designed to assist disadvantaged     persons achieve self-
       sufficiency through     employment in private  enterprise.

       The program consists of a contract  component under which about 25 percent of the
       persons were reported as hired and a noncontract    or voluntary component under which
       about 75 percent of the persons were reported    as hired
       The Department of Labor, in cooperation   with the National Alliance               of Businessmen,
       started the JOBS program in January 1968      Through June 30, 1970,             the Department had
       programmed $499 1 million  for the program

       Inltlally      50 cities were designated      for participation    in the JOBS program        GAO se-
       lected five metropolitan          areas on the basis of the desirability       of including    a large
       ~lty--Detroit,       Michigan--where    the program is quite extensive       and other cities--San
       Francisco and Oakland, California,           Portland,    Oregon, and Seattle,   Washlngton--where
       the programs are more limited             GAO also cons1 dered the results     of various other
       evaluations      of JOBS


FINDINGSANDGOA'GLUSIOMS
       OveraZZaondusmns
       JOBS, a new and somewhat experimental   program, has been effective   in focusing the
       attention  of businessmen on the employment problems of disadvantaged    persons and in
       eliciting  broad responses and commitments by many private   employers to hire, train,
       and retain the disadvantaged

       The Department of Labor and the National     Alliance of Businessmen,            however, have not
       compiled accurate data on the results    achieved, and their reports             on accomplishments
       generally  are overstated

       The most significant    problems with the JOBS program concern (1) the need for more
       accurate and meaningful     data on program operations,   (2) questions relating to how
       the program was conceived and deslgned,and      (3) improvements needed ln the operation
       and administration   of the program.

       Data on program operatzons
       Reporting by the Department of Labor and the National Alliance     of Businessmen               on the
       total number of Jobs pledged by business,  trainees  hired, trainees   terminated,

Tear Sheet
trainees  on board, and the trainee     retention rate was based substantially   on data
that, for the most part, had not been verified       and, in some cases, was based on
~naccwate   or mlsleadtng data      (See p 13 )

A revised and improved      management    information   system was put into      use in February
1970     (See p 20 )

Bums m whzch the JOBS procgm~ was concezved             and deszgned

As presently  conceived,   the JOBSprogram provides for helping the disadvantaged   to
obtain meaningful   employment creditably well during periods of high or rising   employ-
ment levels but not during periods of high or increasing     unemployment

This program was begun during a period of high employment     It now appears that                  ade-
quate conslderatlon  may not have been given to what would happen during periods                   of
decllnlng  labor demand   (See p 23 )

The JOBS program 1s not a Job-creation        program, ordsnanly     at does not increase the
number of existing    Job openings     Therefore,     during periods of decllnlng   or rela-
t-ively stable labor demand, for an employer to participate          in the program he would
have to give preference    to disadvantaged      persons over persons he would have hired
normally   in filling  Job openings     When this happens, the program appears to simply
shift the burden of unemployment from disadvantaged          persons to others     (See p 24 )

The people whom the JOBS program was deslgned to assist are too broad a segment of
the population  and include many who have no clear and legitimate    need for assistance
under this type of program.   Many persons enrolled   under present el3glblllt.y   criteria
appeared to require placement assistance   only, not costly on-the-Job    training   and the
support services that are also Integral   parts of this program     (See p 26 )

Operahon    of the JOBS pm.qram

Contracting      for on-the-Job    training   on a fixed-unit-price     basis generally     1s not
appropriate         Many contracts    provided for excessive payments to contractors          for on-
the-Job training         This was due primarily      to the fundamental     difficulty  of negotlatlng
flxed-unit-price       contracts   at a time when neither the amount of training          required nor
the costs of providing         the training   wete known       (See p 31 >
The number of Job pledges by some prospective                employers were unrealistically    high and
not always consistent        with their ability,       or intentaon,      to provide the Jobs   As a
result,  lnformatlon     on JOBS program activities           available    to the Congress did not pro-
vide a reallstlc     picture     of industry   participation.          (See p 41 )

A slgnlflcant        number of the Jobs provided by contractors     paid low wages and appeared
to afford     little    or no opportunity    for advancement   Often these were ~ob’s tradition-
ally filled       with unskilled   or low-skilled   persons   In these cases, it appeared to
GAO that very little        was being accomplished under the JOBS program for the funds ex-
pended.

This same condition     existed,   but to a lesser degree, under the noncontract        component
of the program      This condltlon      appeared to have been caused, in substantial      part,
by the lack of appropriate       departmental    guidelines defining    the elements of meamng-
ful employment for use by JOBS program admlmstrators.               (New guidelines, which pro-
vtde a system for rating Jobs pledged under the contract             component, were promulgated
after the completion     of GAO's fieldwork)      (See p 47 )

Substantial   improvements are needed in the procedures and practices for ascertaining
and documenting the eligibility   of persons for enrollment in the JOBSprogram
      GAO's tests of el~gibll1t.y   of trainees   reported    as "hires"    in the JOBS program showed
      that a substantial   number of the trainees      either did not meet the ellglblllty      cntena
      established   by the Department or could not be identified         readily   as having met the
      crltena,    because pertinent   information  either    had not been obtained from them or had
      not been reported to the National Alliance        of Businessmen        (See p 51 )

      Enrollees   In the Concentrated  Employment                   Program were not always given first  priority
      in filling    openings In the JOBS program,                   contrary to provisions of the Department's
      policy statements      (See p 58 >

      For 17 of the 31 contracts    reviewed, the contractors were providing   substantially
      fewer services than were required by the contracts      In all cases, however, the con-
      tractors  were receiving   payment as if the services were being provided      (See p 63 )

      Overpayments totaling      about $24,000 and underpayments   totaling   $240 were noted on 16
      of 29 contracts    reviewed      For the most part, the erroneous payments appeared to be
      due to m-rsunderstandings     of the bllllng  procedures by contractors      (See p 71 1

      The Department's         failure     to scrutinize contractor               performance     has perpetuated   many
      of the problems        identified        (See p 73 )


REC~NDATIONS            OR SUGGESTIONS


      The JOBS proqmm         man~ment            znfomatzon       system

      The Deparaent         should    examine periodically             the information      system for     the JOBSpro-
      gram to ensure        that

         --the   system provides          all     the data      necessary   for    program management and evaluation,

         --employers       of trainees          are reporting      program data      accurately     and timely,

         --statistical    reports on operations of the program are qualified    appropriately                          to de-
            scribe the llllltations  under which the reports must be considered when data                             IS
            known to be incomplete,   has not been verified,  or 7s only estimated
             (See P* 21 )


      The deszqn of the JOBS pmqram
      The Department        should    direct       the JOBSprogram more speclflcally                to

         --helping   the disadvantaged obtain employment in those segments of the economy
            where labor shortages exist and thereby avoid competition    in those segments
            where there already IS an ample supply of trained   labor (see p. 25),

         --redefining    the parameters of the disadvantaged     segment of the population and
             apolying resources to those persons who are not Job-ready and who require      costly
             on-the-Job training   and supportive services   (see p 27), and

         --provldlng    Job counselors     and placement officials   with detailed instructions                       for
            screening    prospective   enrollees   and requlnng,   in the case of each applicant,
            written   Justlflcatlon    concerning   how the program IS to fulfill  an appltcant's
            specific   needs (see p 27)

Tear Sheet
Operatzm        of the JOBS program

The Department       should

  --contract     for on-the-Job    training    and supportive services on (1) a cost-
     reimbursable    basis when services       to be provided cannot be specifically   defined
     and when sufficient      experience    is not avallable  to enable a realistic   estimate  of
     the costs of provldlng      the services and (2) a fixed-unit-price       basis when the ser-
     vices can be adequately       defined    and a realistic estimate   can be made of the costs
     (see P 38),

  --require       contractors,    under cost-reimbursable          contracts,   to adequately          document
     tralnlng      and supportive    services    provided       and costs Incurred   (see p           39),

  --revJew contractors'   costs and performances to ensure                    that    the Government           'IS pay-
     lng only for services provided  (see p 391,

  --watch closely the lmplementatlon             of its guIdelines  for evaluating prospective
     contractors' present and planned            capacity to perform In accordance with their
     Job pledges (see p 461,

  --adopt       guidelines  for rating  Jobs, offered by noncontraLt                 employers,      slmllar      to
     those      adopted for contract   employers (see p 50),

  --develop     more exacting   procedures    for screenrng           prospective     trainees, lncludlng
     substantiation    of their    statements    as to the1        r family     Incomes (see p 56),

  --take     the necessary steps In collaboration     with the National  Alliance    of Buslness-
     men (1) to ensure that trainees       hired by noncontract  employers are comparable to
      trajnees   hired by contract   employers and (2) to explore the feasiblllty       of having
     the Alllance     request noncontract   employers to hire JOBStrainees      only through the
     Concentrated     Employment Program, the Work Incentive Program, and the local Employ-
     ment Service offices      (see p 56),

  --ensure    that employers give the Concentrated      Employment Program and the Work Incen-
     tive Program the highest    priority    in filling  trainjng openings and instruct      the
     Concentrated   Employment Program and the Employment Service to refrain         from certl-
     fylng persons selected    in advance by the contractors,     or subcontractors,     unless
     there is adequate JUStlflCatlOf'I    for so doing (see p fjl),

  --emphasize      to its contract     negotiators       the need     for (I) adherence to prescribed
     guIdelInes      in negotlatlng    contracts    for trainee         supportive    services,   taking into
     consideration      the contractors'      capabilities     to     provide the services,       (2) specl-
     Rclty     concerning    the nature of the services          to     be provided,and      (3) documentation
     of the services       actually   provided and the costs            Incurred   (see p 69),

  --review    contractors' actlvitles  to ensure that payments are made only for supportive
     services   provided and to recover payments that have been clalmed improperly
      (see p 69) , and
  --revise   its bllllng lnstructlons to show contractors                   how monthly      Invoices      should         be
     prepared and how the amounts should be calculated                   (see p 72)

Lastly,    the Department   should monitor        effectively       contractors'       compllances      with      con-
tract   requTrements      (See p 76 )




                                                     4
AGENCY
     ACTIONSAiVDVNRESOLTrED
                        1SSVES

        Both the Department  of Labor and the Natlonal   Alllance  of Businessmen questloned
        whether GAO coutd draw broad conclusions   and recommendations    concerning  the JOBS pro-
        gram on the basis of a revtew lnvolvlng   only five cities   and 31 contracts

        GAO contends that the scope of its review extended beyond an examination     of the con-
        tracts   ln the five cltles     GAO notes that the results of its review generally were
        conf-rrmed by other evaluations   of the JOBS program made in other areas
        (See p 78 )

        The Department of Labor agreed that the timeliness          , accuracy,   and comprehensiveness  of
        data were extremely       important   and that slgmhcant     actions had already been undertaken,
        ln cooperation     with the National     Alliance  of Businessmen,   to improve the management
        lnformatlon    system of the JOBS program         The Department stated that this improvement
        represents    departmental     action on GAO's recommendations.       (See p. 21 )

        The Department   stated that it endorsed GAO's suggestion    that an additional      Job-
        readiness  determination   be added to the baste ellglblllty    requirements    to focus the
        JOBS program more speclflcally    on those persons most ln need.       (See p 28 )

        The Department disagreed        with GAO's recommendation       that, where cost experience       1s
        lacking,   contracting     for on-the-Job    training     and supportive     services be on a cost-
        reimbursement    basis rather      than on a fixed-unit-price        basis     The Department stated
        that contracting       on a cost-reimbursement       basis did not appear to be feasible        or prac-
        ticable   and would preclude       many smaller     companies that did not have suitable        cost ac-
        counting   systems from participating        in the program        GAO believes,     however, that rea-
        sonable documentation        of costs need not be burdensome and need not preclude             any pro-
        spective   contractor,     however small, from participating           ln the program      (See p 39 )

        The Department   concurred  for the most part with GAO's other recomnendatlons               for lm-
        proving the administration     of the JOBS program and cited various corrective              actions
        that either   had been taken or were being considered       (See pp. 50, 56, 69,            72,and 76 )


         Although the Department     acknowledged certain    dlfflculhes        in coordination    between
         JOBS employers and the Concentrated      Employment Program and the Work Incentive             Pro-
           ram regarding the filling     of Jobs, it indicated      no specific    corrective   action.
         9 See p 61 )


MATTERSFORCONSIDERATION
                     BY THECONGRESS
         As stated ln the opening section      of this digest,     a committee of the Congress has ex-
         pressed its interest   in how effectively     and efficiently     the Department of Labor ad-
         mlnlsters  Federal manpower programs.       The lnformatlon    in this report on problems in
         the design and admlnlstratlon      of the JOBS program, therefore,      may be useful to the
         Congress ln consldenng      future manpower leglslatlon




Tear   Sheet




                                                         5
                               Contents
                                                                       Page
DIGEST                                                                   1

CHAPTER
  1     INTRODUCTION
            legislative authority and funding of the JOBSprogram
            Operation of the 3OBSprogram
   2     RESULTSOF JOBSPROGRAM   OPERATIONS                             13
            halysls   of program results reported by NAB and the De-
              partment of Labor                                         13
                 Conclusions                                            21
                 Recommendations to the Secretary of Labor              21
   3     OBSERVATIONS ON CERTAINPROBLEMS IN THE CONCEPTUALBASJS
         ANDDESIGNOF THE JOBSPROGRAM                                    23
            Inherent limitations of the JOBSprogram during periods
              of economic downturn                                     23
            Possible shifting of the burden of unemployment            24
                Agency comments and our evaluation                     25
                Recommendationto the Secretary of Labor                25
            Target population for the JOBSprogram needs to be re-
              defined                                                   26
                Recommendations to the Secretary of Labor               27
   4     NEEDEDIMPROVEMENTS   IN PROGRAMOPERATIONS                      29
            Substantial improvements needed in contracting for
              on-the-job training                                       31
                 Conclusions                                            38
                Recommendations to the Secretary of Labor               38
            Need to evaluate ability  of prospective employers to
              provide the Jobs pledged                                  41
                 Conclusions
                 Recommendation to the Secretary of Labor               Ifi
            Need for more meaningful employment opportunities for
              JOBStrainees                                              47
                 Conclusions                                            50
                 Recommendation to the Secretary of Labor               50
            Improvaents needed in procedures and practices for
              ascertaining and documenting the eligibility   of per-
              sons for enrollment in the JOBSprogram                    51
                 Conclusions                                            56
                 Recommendations to the Secretary of Labor              56
            Better coordination with the Concentrated Employment
              Program needed to fall JOBS openings                      58
                 Conclusions                                            61
                 Recommendation to the Secretary of Labor               61
            Need to ensure that contractors provide required sup-
              portive services                                          63
                 Conclusions                                            69
                 Recommendations to the Secretary of Labor              69
‘ii’

       CHAPTER                                                                       Page

                      Erroneous payments to contractors                               71
                          Conclusions                                                 72
                          Recommendationto the Secretary of Labor                     72

              5   MONITORINGJOBSPROGRAM  CONTRACTORS                                  73
                         Conclusions                                                  76
                         Recommendations to the Secretary of Labor                    76
             6    ADDITIONALCOMMENTS  BY TEE DEPARTMENT
                                                      OF LABORAND NABAND
                  OUREVALUATION                                                       78
                     Scope of the GAOreview                                           78
                         GAOevaluation                                                78
                     Accomplishments of the JOBSprogram                               81
                         GAOevaluation                                                81
                     Business commitment and support                                  82
                         GAOevaluation                                                82
                     Changes in hiring practices                                      82
                         GAOevaluation                                                82
             7    SCOPEOF REVIEW                                                      84
       APPENDIX
              I   Reported characteristics    of JOBStrainees   and training   and
                    job opportunities                                                 87
         II       Other studies of the JOBSprogram                                    90
       III        Letter dated January 4, 1971, from the Acting Assistant Sec-
                    retary for Administration, Department of Labor, to the Gen-
                    eral Accounting Office                                            92
        IV        Letter dated December 11, 1970, from the Executive Vice
                    President, Secretary-Treasurer,  National Alliance of Busi-
                    nessmen, to the General Accounting Office                        105
             V    Principal officials   of the Department of Labor responsible
                    for the administration   of the JOBSprogram                      111
                                             ABBREVIATIONS
       CEP        Concentrated Employment Program
       GAO        General Accounting Office
       JOBS       Job Opportunities in the Business Sector
                  National Alliance of Businessmen
       OEO        Office of Economic Opportunity
       WIN        Work Incentive Program
                                                                                                            !       ‘1




COMPTROLLERGENEiZ4L'S                         EVALUATION OF RESULTS AND ADMINISTRATIONOF THE JOB                ’
REPORTTO THE CONGRESS                         OPPORTUNITIES IN THE BUSINESS SECTOR (JOBS) PROGRAM
                                              IN FIVE CITIES
                                              Department   of Labor B-163922


DIGEST
_-----

WHYTHEREVIEWWASMADE
       The Senate Committee on Labor and Public Welfare has urged the General Accounting Of-
       flee (GAO) to provide the Congress with broad, Independent appraisals  of the manage-
       ment of Federal manpower programs by executive  agencies
   a
       One of the pnnclpal     manpower programs 1s the Job Opportunities      In the Business Sec-
       tor (JOBS) program      It 1s deslgned to assist disadvantaged     persons achieve self-
       sufficiency through    employment in private  enterpnse

       The program consists of a contract  component under which about 25 percent of the
       persons were reported  as hlred and a noncontract  or voluntary component under which
       about 75 percent of the persons were reported as hIred

       The Department of Labor, In cooperation    with the National Alliance of Businessmen,
       started  the JOBSprogram In January 1968 Through June 30, 1970, the Department had
       programmed $499 1 m7lllon  for the program

       Inltlally      50 cltles were designated for participation      -in the JOBS program      GAO se-
       lected five metropolttan areas on the basis of the desirability            of including    a large
       city--Detroit,       Michigan--where the program is quite extensive      and other cities--San
       Francisco and Oakland, Callfornla,       Portland,   Oregon , and Seattle,   Washington--where
       the programs are more llmlted          GAO also considered   the results   of various other
       evaluations      of JOBS


FINDIIGS ANDCONCLL!SIO~'S
       OveraZl wncluszons
       JOBS, a new and somewhat experimental   program, has been effective   in focusing the
       attention  of businessmen on the employment problems of disadvantaged    persons and In
       elicIting  broad responses and commitments by many private   employers to hires train,
       and retain the disadvantaged

       The Department of Labor and the NatIonal Alliance   of Businessmen,           however, have not
       complled accurate data on the results   achieved, and their reports           on accomplishments
       generally  are overstated

       The most slgnlflcant    problems with the JOBSprogram concern (1) the need for more
       accurate and meaningful     data on program operations,   (2) questlons relating to how
       the program was conceived and deslgned,and      (3) improvements needed in the operatton
       and admlmstratlon    of the program

       Data on pro.qram operatzom

       Reporting by the Department of Labor and the Natyonal Alllance    of Businessmen            on the
       total number of Jobs pledged by business,  trainees hlred, trainees   terminated,
trainees    on board, and the trainee    retention rate was based substantially   on data
that,    for the most part, had not been venfled      and, in some cases, was based on
inaccurate     or misleading data     (See p 13 )

A revised and improved      management    information    system was put     into   use In February
1970     (See p 20 )

Baszs on whzch the JOBS p,~ogmm was concezved            and deszgned

As presently  conceived,   the JOBS program provides for helping    the disadvantaged   to
obtain meaningful   employment creditably  well during periods of high or nslng       employ-
ment levels but not during periods of high or lncreaslng      unemployment

This program was begun during a period of high employment    It now appears that                     ade-
quate conslderatlon  may not have been given to what would happen during periods                     of
decllmng   labor demand   (See p 23 )

The JOBS program 1s not a Job-creation          program, ordlnarlly    it does not increase    the
number of existing      Job openings     Therefore,     during periods of declining   or rela-
tively    stable labor demand, for an employer to participate          in the program he would
have to give preference      to disadvantaged      persons over persons he would have hired
normally     in filling  Job openings     When this happens, the program appears to simply
shift   the burden of unemployment from disadvantaged          persons to others     (See p 24 )

The people whom the JOBS program was designed to assist are too broad a segment of
the population   and include many who have no clear and legitimate      need for assistance
under this type of program.      Many persons enrolled   under present eligibility    cnterla
appeared to require    placement assistance   only, not costly on-the-Job    training  and the
support services   that are also integral    parts of this program     (See p 26 )

Opercztzon of the JOBS pro.gra?n

Contracting      for on-the-Job    training   on a fixed-unit-price      basis generally     1s not
appropriate         Many contracts    provided for excessive payments to contractors           for on-
the-Job training         This was due primarily      to the fundamental      difficulty  of negotiating
fixed-unit-price       contracts   at a time when neither        the amount of training    required   nor
the costs of providing         the training   were known       (See p 31 )

The number of Job pledges by some prospective                  employers were unrealistically     high and
not always consistent       with their    ability,       or intention,      to provide the Jobs    As a
result,  information      on JOBS program actlvitles            avallable     to the Congress did not pro-
vide a reallstlc     picture    of industry      participation           (See p 41 )

A significant         number of the Jobs provided by contractors      paid low wages and appeared
to afford     little     or no opportunity   for advancement     Often these were JObS tradition-
ally filled        with unskilled   or low-skilled  persons     In these cases, it appeared to
GAO that very little         was being accomplished    under the JOBS program for the funds ex-
pended

This same condltlon     existed,   but to a lesser degree, under the noncontract       component
of the program      This condition     appeared to have been caused, in substantial      part,
by the lack of appropriate       departmental   guidelines defining    the elements of meamng-
ful employment for use by JOBS program admlnlstrators              (New guidelines, which pro-
vide a system for rating       Jobs pledged under the contract      component, were promulgated
after the completion     of GAO's fieldwork)     (See p 47 )

Substantial   improvements   are needed in the procedures   and practices for ascertaining
and documenting    the el~g~b~l~ty  of persons for enrollment   in the JOBS program




                                                  2
    GAO's tests of ellglblllty    of trasnees reported as "hires"          sn the JOBS program showed
    that a substantial   number of the trainees         either djd not meet the ellglblllty    criteria
    established   by the Department or could not be identified          readily  as having met the
    criteria,   because pertinent   information      either had not been obtaIned from them or had
    not been reported to the NatIonal       Alliance     of Businessmen     (See p. 51 1

    Enrollees   in the Concentrated  Employment                  Program were not always given first   pnonty
    in filling    openrngs in the JOBS program,                  contrary to prov-isions of the Department's
    policy statements      (See p. 58 )

    For 17 of the 31 contracts    reviewed,  the contractors were provldlng  substantially
    fewer services  than were required by the contracts      In all cases, however, the con-
    tractors  were receiving   payment as if the services were being provided      (See p 63 )

    Overpayments totaling     about $24,000 and underpayments   totaling    $240 were noted on 16
    of 29 contracts   reviewed      For the most part, the erroneous payments appeared to be
    due to misunderstandings     of the billing  procedures by contractors.      (See p. 71 )

    The Department's       failure     to scrutinize          contractor         performance      has perpetuated     many
    of the problems      identified        (See p           73 )


REC-NDATIONS         OR SUGGESTIONS


    !l%e JOBS pxqream management              znformatzon      systsn

    The Department      should    examine periodically             the information             system for   the JOBS pro-
    gram to ensure      that

       --the   system provides        all     the data necessary           for    program management        and evaluation,

       --employers     of trainees          are reporting       program data accurately             and timely,

       --statistical   reports on operations  of the program are qualified    appropriately                              to de-
          scribe the l~ntatlons   under which the reports must be consadered when data                                  1s
          known to be incomplete,  has not been verified,   or 1s only estimated
          (See p 21 )

     The deszqn of the JOBS program

    The Department      should    direct       the JOBS program more specifically                   to

       --helping   the disadvantaged obtain employment in those segments of the economy
          where labor shortages exist and thereby avoid competition  ln those segments
          where there already 1s an ample supply of trained labor (see p, 26),

       --redeflmng    the parameters of the disadvantaged     segment of the population and
          applying resources to those persons who are not Job-ready and who require costly
          on-the-Job  training  and supportive services   (see p 27), and

       --providing   Job counselors     and placement officials   with detailed instructions                             for
          screening prospective     enrollees   and requiring,  in the case of each applicant,
          written  Justlflcatlon    concerning   how the program 1s to full11   an applicant's
          specific  needs (see p 27)
Opemtzon        of the JOBS program

The Department       should

  --contract     for on-the-Job    training   and supportive services on (1) a cost-
     reimbursable    basis when services to be provided cannot be specifically        defined
     and when sufficient      experience    1s not available to enable a reallstlc   estimate of
     the costs of providing      the services and (2) a fixed-unit-price     basis when the ser-
     vices can be adequately       defined and a realistic   estimate can be made of the costs
     (see PO 38),

  --require       contractors,    under cost-reimbursable contracts,   to adequately document
     training      and supportive    services provided and costs incurred   (see p. 39),

  --review   contractors' costs and performances to ensure              that    the Government           1s pay-
     lng only for services provided (see p 39),

  --watch closely the lmplementatlon          of its guidelines  for evaluating prospective
     contractors' present and planned         capacity to perform ln accordance with their
     Job pledges (see p 46),

  --adopt       guidelines for rating Jobs, offered  by noncontract            employers,      similar      to 0
     those      adopted for contract  employers (see p. 50),

  --develop      more exacting procedures for screening         prospective  trainees, lncludlng
     substantlatlon     of their statements  as to their        family incomes (see p 56),

  --take the necessary steps in collaboration         with the National Alliance    of Buslness-
      men (1) to ensure that trainees      hired by noncontract  employers are comparable to
      trainees   hired by contract   employers and (2) to explore the feasibility      of having
      the Alliance    request noncontract   employers to hire JOBS trainees    only through the
      Concentrated    Employment Program, the Work Incentive    Program, and the local Employ-
     ment Service offices      (see p 56),

  --ensure that employers give the Concentrated        Employment Program and the Work Incen-
     tive Program the highest priority      in filling  training openings and instruct      the
     Concentrated  Employment Program and the Employment Service to refrain         from certl-
     fylng persons selected    ln advance by the contractors,    or subcontractors,     unless
     there 1s adequate Justification     for so doing (see p 61),

  --emphasize      to its contract     negotiators       the need for (1) adherence to prescribed
     guidelines      ln negotiating    contracts    for trainee supportive      servlcesr   taking into
     conslderatlon      the contractors'      capabllltles     to provide the services,     (2) specl-
     flclty    concerning    the nature of the services to be provlded,and             (3) documentation
     of the services actually         provided and the costs incurred        (see p 69),

  --review    contractors'      actlvltles  to ensure that payments are made only for supportive
     services   provided      and to recover payments that have been claimed improperly
      (see p 69), and

  --revise   its billing instructions to show contractors             how monthly      invoices      should        be
     prepared and how the amounts should be calculated             (see p 72)

Lastly,  the Department should monitor         effectively    contractors'       compliances      with     con-
tract requirements     (See p 76 )
AGENCY
     ACTIONSANDlJNRESOLk%D
                        ISSUES

    Both the Department of Labor and the National   Alllance  of Businessmen questioned
    whether GAO could draw broad conclusions  and recommendations    concerning  the JOBS pro-
    gram on the basis of a review tnvolvlng  only five cltles   and 31 contracts

    GAO contends thdt the scope of its review extended beyond an examination     of the con-
    tracts   In the f-tve cities   GAO notes that the results of its review generally  were
    confirmed by other evaluations   of the JOBS program made in other areas
     (See p 78 )
    The Department of Labor agreed that the timeliness , accuracy,         and comprehensiveness  of
    data were extremely Important       and that signihcant    actIons had already been undertaken,
    in cooperation     with the National Alliance    of Businessmen, to Improve the management
    Information    system of the JOBSprogram        The Department stated that this improvement
    represents    departmental  action on GAO's recommendations        (See p 21 )

    The Department stated that it endorsed GAO's suggestion   that an addltlonal     Job-
    readiness determination  be added to the basic ellglbl11 ty requirements     to focus the
    JOBSprogram more specifically    on those persons most In need.    (See p 28 )

    The Department disagreed with GAO's recommendation              that, where cost experience       IS
    lacking,   contracting     for on-the-Job    tra'lning    and supportive     services be on a cost-
    reimbursement     basis rather than on a flxed-unit-price            basis     The Department stated
    that contracting       on a cost-reimbursement       basis did not appear to be feasible        or prac-
    ticable   and would preclude many smaller companies that did not have suitable                  cost ac-
    counting systems from participating          in the program        GAO believes,     however, that rea-
    sonable documentation        of costs need not be burdensome and need not preclude any pro-
    spectlve   contractor,     however small, from participating           in the program      (See p 39.)

    The Department concurred for the most part with GAO's other recomnendatlons  for lm-
    proving the acbnlnlstratlon of the JOBSprogram and cited various corrective  actions
    that either had been taken or were being considered.    (See pp 50, 56, 69, 72,and 76 )


    Although the Department acknowledged certain   dlfftcultles       in coord~ nation between
    JOBSemployers and the Concentrated Employment Program and the Work Incentive Pro-
     ram regarding the filling of Jobs, it Indicated      no specific    corrective   action
    9See p 61 >

MATTERSFORCONSiDERATION
                     BY THECONG!RESS
    As stated In the opening sectlon of this digest,         a committee of the Congress has ex-
    pressed Its Interest   in how effectively    and efficiently     the Department of Labor ad-
    ministers  Federal manpower programs.      The information    In this report on problems In
    the design and administration      of the JOBSprogram. therefore,      may be useful to the
    Congress in consldenng      future manpower leglslat~on
                                 CHAPTER1

                                INTRODUCTION

      The General Accounting Offlce has made a review of the results of opera-
tlons and the admlnlstratlon of the Job Opportunltles in the Business Sector
program in five cltles--San Franc~sco, Oakland, Portland, Seattle, and
Detroit--from  the lnceptlon of the program early In 1968 through June 30,
1970. Our review in these cltles was supplemented by certain addltional
work performed In the regional and headquarters offlces of the Department of
Labor and the headquarters offlce of the Natlonal Alliance of Buslnessmen
WLB) . We also consldered the results of various other evaluations of the
JOBSprogram      (See app II >
      The JOBSprogram was announced by the Preszdent in his Manpower Message
to the Congress on January 23, 1968. The program represents a Joint effort
by the Government and the private sector to find meaningful employment for
disadvantaged persons   The President announced also the formatlon of NAB to
assist the Department of Labor in lmplementlng and admlnlsterlng the program
     Of the 50 cltles lnltlally  designated for partlclpatlon In the JOBSpro-
gram, we selected the above-cited five cltles on the basis of the deslrablllty
of including a large city (Detroit)  where the program 1s wte extensive and
several cltles where the programs are more llmlted.
     Our review was made with three basic objectives   in rend.
     1 To evaluate the accuracy, relrablllty, and completeness of reports
       Issued by the Department of Labor and NAB on JOBSresults and ac-
       compllshments
     2. To evaluate the basic concepts of the JOBSprogram and Its prlnclpal
        design characterlstlcs
     3 To evaluate program admlnlstratlon   on a test basis in certain   se-
       lected cities.
With regard to our third ObJectlve, our review was not directed to establlsh-
lng the full extent to which admlnlstratlve   deflclencles exlsted either in
the five cltles or on a progrmde     basis , although sufflclent  work was per-
formed to lndlcate whether or not the matters noted represented asolated
instances or broader scale problems arlslng from lnadequacles in procedures
establlshed on a programwlde basis. It 1s our frequent practice to ldentlfy
problem areas on this basis in order to provide responsible admlnlstratlve
agencies mth information necessary for timely corrective action       The scope
of our review 1s described on page 84
     The Department of Labor's and NAB's comments and views on our draft re-
port were furnlshed by letters dated January 4, 1971 (app. III),  and Decem-
ber 11, 1970 (app IV), respectively    Where pertinent,  these comments and
views have been incorporated znto the applicable sections
      We presented our prellmlnary review flndlngs   and observations    Ln testl-
mony before the Select Subcommittee on Labor of the House CommIttee on Edu-
cation and Labor on May 1, 1970, and the Subcommittee on Employment, Man-
power, and Poverty of the Senate Committee on Labor and Public Welfare on
May 5 and 6, 1970    This report 1s basically   an ampllflcatlon   of that testl-
mony

LEGISLATIVE AUTHORTTY AND FUNDING
OF THE JOBS PROGRAM

     The basic concepts of the JOBS program are authorized under both the
Economic Opportunity  Act of 1964, as amended (42 U S C 27401, and the Man-
power Development and Training Act of 1962, as amended (42 U S C 2571)

       The Economic Opportunity   Act authorizes      the Office of Economic Opportu-
nlty (OEO) to provide flnanclal      assistance    in urban and rural areas for
comprehenslve work and tralnlng     programs, Including       programs to provide In-
centives   to private employers,   other than nonprofit       organlzatlons,     to train
or employ unemployed or low-Income persons            The act authorizes     also (1) re-
imbursements to employers for unusual tralnlng           costs for a llmlted     period
when an employee might not be fully       productive,     (2) payments for on-the-job
counseling   and other supportive    services,    and (3) payments to permit employers
either   to provide employees with transportation         to and from work or to relm-
burse the employees for such transportation            OEO has delegated Its authority
with regard to the JOBS program to the Department of Labor

      The Manpower Development and Training Act directs    the Secretary      of
Labor to provide occupational  training   for those unemployed or underemployed
persons who cannot otherwise be expected to secure appropriate      full-time
employment

       In carrying  out the purposes of this act, the Secretary 1s responsible
for determlnlnk    the skill    requirements    of the economy, developing pollcles
for the adequate occupational        development and maximum utlllzatlon        of the
skills   of the Nation's workers, promoting and encouraging the development
of broad and dlverslfled      training    programs, lncludlng    on-the-Job   training,
designed to qualify     for employment the many persons who cannot reasonably
be expected to secure full-time        employment without     such training,    and equlp-
ping the Nation's     workers with the new and improved skills          that are or will
be required

     The total   funds programmed, obligated,     and expended for the JOBS pro-
gram through June 30, 1970, were as follows
             Fiscal
               year         Programmed        Obllpated       Expended

                                                 (millions)

               1968             $114 2               $ 84 9         $ 60.0
               1969              209 9                126 6           49 4
               1970              175 0                168 9           21 7

               Total            $499 1               $380 4


                                             7
       Budget estimates submitted to the Congress by OECand the Department of
Labor m support of requests for fiscal year 1970 funds for the JOBSprogram
totaled $420 million     After various reductions by the Congress and adminis-
trative adJustments by the Office of Management and Budget, the Department
of Labor and OEOappropriations totaling $280 million were made available
for fiscal year 1970
     In April 1970 the Department of Labor transferred $105 million to other
manpower programs and activities   This transfer left a total of $175 mil-
lion available for the JOBSprogram
      As of June 30, 1970, Department records showed that    $168.9 million,  or
about 97 percent of the available funds for fiscal year     1970, had been obli-
gated    This amount represented about 40 percent of the    program funds orig-
inally requested    Of the amounts obligated , only $21.7   million had been ex-
pended at the end of the year
       The reprogramming of fiscal year 1970 funds from the JOBSprogram was
attributable    primarily to the shrinkage in the demandfor labor which re-
sulted in the award of fewer contracts to private employers for the training
and employment of persons. The shrinkage in demandfor labor resulted also
in the expenditure in fiscal year 1970 of only $21 7 million, or about
12 8 percent of the funds obligated in that year, because some contract
employers (1) were hiring at a rate lower than proposed and (2) were ex-
periencing a high rate of trainee turnover and were unable to recruit persons
to keep trainee positions filled throughout the training period
OPERATION
        OF THE JOBSPROGRAM
      The JOBSprogram 1s dlrected to persons classlfled as disadvantaged who
need on-the-Job tralnlng and such varzous supportive services as health care
and counseling to enable them to become productive workers.   The program is
founded on the premise that lmmedlate placement In Jobs at regular wages,
followed by on-the-Job tralnlng and supportive services, provides superizn?
motivation for disadvantaged persons. The program consists of a contract
component and a noncontract, or voluntary, component
      Under the contract component, private employers enter into negotiated
contracts with the Department of Labor either lndlvldually   or In groups--
consortiums-- for the employment and tralnlng of disadvantaged persons. The
contracts provide for the payment of the extraordinary costs in hlrlng,
traznlng, and retalnlng disadvantaged persons on the basis of the number of
days worked by trainees and at a dally rate speclfled in the contract
       Under the noncontract component, private employers pledge to hire spe-
clflc numbers of disadvantaged persons without any cost reimbursement by the
Government. Noncontract employers are not SubJect to the same Government
restrictions,   controls, and reporting requirements as contract employers
     Other prlnclpal   differences   between the contract   and noncontract   compo-
nents are:
     --Under the contract component, private employers are required to use
        the State Employment Service or theconcentrated Employment Program
        (CEP) and more recently the Work Incentive Program (WIN) as sources
        for obtalnlng persons for job-training   openings and to give CEPand
       WIN 48 hours wzthln which to refer persons before obtalnlng persons
        through other manpower sources    Thrs procedure was adopted to give
        added assurance that the program would be dlrected to the dlsadvan-
        taged since CEP is operatlonal primarily in the Inner-city  ghetto
        areas and WIN 1s directed toward reclplents of aid for dependent
        children
       Noncontract employers are encouraged to use CEP, WIN, and the State
       Employment Service as a source of referrals, however, they are not
       required to give preference to these source, and may obtain trainees
       from any source.
     --Under the contract component, trainees are required to be certlfled
       as being disadvantaged by CEPor by the State Employment Service.
       The certlflcatlon  1s intended to ensure that all persons taken into
       the program meet the prescribed ellglblllty  crlterla
       Noncontract employers customarily self-certify  trainees as being dls-
       advantaged--a practice which lacks the control that results from hav-
       ing an independent agent, knowledgeable of the ellglblllty   crlterla
       and experienced in ldentlfylng  the disadvantaged, performlng the cer-
       tification  function.
     --Under the contract component, an employer 1s required to define his
       proposed on-the-Job trarnlng program in some detail, 1s required to

                                          9
       provide in the program for counseling,   and 1s encouraged to provide
       other supportive services
       Noncontract employers cannot, of course, be requrred either   to
       define their programs In wrltlng or to provrde any specrfic   train-
       rng or supportive services
      The JOBSprogram is administered by the Hanpower Administration of the
Department of Labor in cooperation with NAB. Within the Manpower Administra-
tion, the program 1s under the Jurisdiction   of the U S Training and Employ-
ment Service and 10 regional manpower administrators      The regional manpower
administrators  are responsible for the evaluation of JOBSprogram training
proposals submitted by prospective contractors,    for the negotiation and
award of JOBSprogram contracts, and for the monitoring of the contracts.
The prlnclpal officials  of the Department having responslbillties    for the
JOBSprogram are listed In appendix V
National Alliance   of Businessmen
      NABwas es&bllshed as a private, independent, nonprofit corporation
(with headquarters in Washington, D C ) for the purpose of stimulating prl-
vate business firms to hire and train disadvantaged persons    NAB seeks to
attain this obJectlve by creating awareness, Involvement, and commitment of
the business community to provide Jobs and training for such persons, NAB
also advises the Secretary of Labor on how the Government can facilitate
this employment and training process
      In October 1970 NAB's field organlzatlon consisted of 10 regional of-
flees and 150 metropolitan offices    In addition, NABplans to establish by
June 30, 1971, offices in 31 additional cities to accommodatethe natlonmde
expansion of the program
       NAB's board of directors is composedof the top executives of 17 maJor
companies. NAB reports that a signlflcant   number of parsons are on loan
from private industry and the Government and that such substantial adminis-
trative resources as space, furniture,  and travel have been donated by par-
ticipating   companies and the Government. In addition to these donated ser-
vices and resources, the Department has awarded three contracts to NAB
totaling about $15.1 million to finance its administrative  costs through
June 30, 1971
      NAB's national and regional offices are concerned primarily with JOBS
program organizing, planning, counseling, and troubleshooting,   its metropol-
itan offices, under the direction of the metropolitan chairmen, are con-
cerned with obtaining Job commitments from private employers and assisting
the Government in implementing the JOBSprogram
     Each metropolitan chairman, who is selected from the top business
leadership in his cormnunity, is assrsted by a team comprlslng (1) a manager
of recruiting and Government programs , who is provided by the State Employ-
ment Service, (2) a manager of job procurement and placement, who is pro-
vided by local firms, and (3) a metro director who is designated by the
metropolitan chairman   The main task of the team is to contact companies,


                                      10
drrectly or through exlstlng organlzatlons,  to secure pledges to provide
jobs to the disadvantaged, and to work with local, publrc, and private orga-
nlzatlons to ldentlfy and recruit disadvantaged persons to fLl1 available
Jobs.
      The initial goals for the JOBSprogram were the employment in the na-
tion's 50 largest cltles of 100,000 hard-core unemployed at June 30, 1969,
and 500,000 at June 30, 1971 In March 1969 the goals, as reestabllshed,
were the employment in 125 crtles of 338,000 of the hard-core unemployed at
June 30, 1970, and 614,000 at June 30, 1971 In November 1969 the program
was expanded from 125 cities to natronwlde coverage, however, the 1970 and
1971 goals were not changed
     NABencourages industry to use Its own resources and creatrvrty   to pro-
vide employment opportunrtles for persons that would not ordlnarlly  be em-
ployed   Where this requires special effort and expense, NAB encourages the
companies to avail themselves of Government support through a contract with
the Department
      The JOtiS program has gone through a series of changes since It was
conceived early in 1968. It has been developed and implemented by a series
of lndlvldual manpower assistance programs-- speczflcally  designated as MA-3
through MA-6 Programs desqnated as MA-l and MA-2 preceded the JOBSpro-
gram and were experlmental pilot programs designed to define and verify the
concepts on which the contracting format was to be based The JOBSprogram
therefore began with the MA-3 phase
      The basic characterlstlcs   of the MA-3 through MA-6 programs are as
follow:
     --MA-3 was operated In the Nation's 50 largest cltles under the Joint
        spon-orshlp of the Department and NAB Ihe program consisted of both
        contract and noncontract components. Contracts were awarded between
       May and November 1968 They provided for the hlrlng and tralnlng of
       a speclfled number of disadvantaged persons for permanent employment
     --MA-4 was an extension of the MA-3 program. The prlnclpal change from
       the earlier program was the addltlon of a new short-form-type con-
       tract and the allowance, under certain contracts, of a flxed amount
       for supportive services   Contracts were awarded from September 1968
        through July 1969
     --MA-5 was a contlnuatlon of the MA-3 and MA-4 phases Major changes
       were the expansion of the program to 125 major cities and the addl-
        tion of upgrading training  Contracts were awarded begrnnlng In May
        1969 Program was operational at the close of our fieldwork
      --MA-6,more popularly known as JOBS-70, continued the hlrlng, tralnlng,
        and retention obJectives of the earlier phases of the program and ex-
        tended the program to nationwide coverage      The maJor changes were in
        the procedures for proposal development and evaluation and for the
        negotiation and award of contracts    The lnltlal   date for submissron
        of JOBS-70 proposals was November 15, 1969. Program was operational
        at the close of our fieldwork

                                        11
      In addltlon to our review   of JOBS, three other   comprehensive reviews
have been made of the program      A brief descrlptlon   of the three reviews 1s
presented as appendix II.




                                       12
                                              CHAPTER2

                              RESULTSOF JOBSPRBGRps/I
                                                  OPERATIONS
      The JOBSprogram generally has been effective in focusing the atten-
tion of businessmen on the employment problems of disadvantaged persons
and in eliciting  a broad response and conrmnitmentby many private employers
to hire, tram, and retain the disadvantaged. Accurate data, however,
has not been compiled by the Department of Labor and NABon the results of
JOBSprogram operations, and reports on program accomplishments generally
tend to be overstated.
       This chapter deals with the results of JOBSprogram operations as we
have been able to ascertam them on the basis of data availabYe at the De-
partment of Labor and NAB headquarters and certain field offices and within
the five cities where we made our review      Succeeding chapters deal with
certain problems in the conceptual basis and design of the JOBSprogram
and the need for various improvements in its implementation and adminis-
tration     Our analysis of various data on trainees, Jobs, and earnings is
presented as appendix I.
ANALYSISOF PROGRAM
                 RESULTSREPORTED
                               BY
NABAND THE DEPARTMENT
                   OF LABOR
      Our analysis of reports by the Departmat of Labor and NAB showed that
only limited amounts of data had been collected on JOBSprogram operations
and that the data which was collected had been obtained frequently on a
very informal basis and, for the most part, had not been verified.    Our W+
view in the five metropolitan areas showed also that some of the reported
data was inaccurate or misleading.    In the early part of 1970, the Depart-
ment revised its management information system to provide for obtaining the
additional data needed for evaluating the program. (See p 20.)
     The following table suhnanrsrizes
                                     the results of JOBSprogram operations
from inception through June 30, 1970, for both contract and noncontract com-
ponents, as reported by NAB and the Department of Labor.


                                                                      Contract          Noncontract
                                                     Total            component          coln~onMt
         Jobs  pledged
         Trainees   hired (note a)                  445,187
                                                    494,710          129,169             316.018
         Trainees terminated                        264.720          127,210             367,500
         Trainees on board                          229,990           70,859             185,861
                                                                      48,351             181,639
         Retention rate (percent>                         47                38                  49
         Nuder of companies pledging   jobs          26,671              Not                 NOtr
                                                                     availeble           tavailable
         lJlrmberofcompanieshiring                   15,501              Not                 Not
                                                                     available           available
         %der th e contract conponant, job pledges incorporated   into JOBS contracts represent le-
          gal commitments to provide jobs and services to specific nmbers of persons      However.
          economic or business  conditions, as well as problem in program operation,  can result in
          nonfulfillment




                                                    13
      Our comments on the composatlon of thz~s data, the sources and methods
by which It was obtalned,  and the quakfrcatlons    that attach thereto are
presented below

Jobs pledges--445,187

      Job pledges are estrmates by businesses of the number of meaningful
Jobs for which they are wllllng   to hire, train, and retarn disadvantaged
persons    Obtalnxng such pledges 1s one of NAB's most unportant functions              m
~mplementrng the JOBS program.

      The reported number of pledges IS accumulated from xnformation      on
pledge cards submitted to NAB by partlclpatlng   companies      The pledge cards
serve to enroll   companaes In the JOBS program and to stipulate    the number of
Jobs pledged by them

       Although many busmess estabhxshments undoubtedly made pledges which
were fully     consxstent with the ObJectlves of the JOBS program, the cumula-
txve number of pledges reported by the Department and NAB as of June 30,
1970, appeared to us to be somewhat questionable,         since the reports showed
that about 60 percent of the companies which had made pledges had actually
hired any trainees        Also our review revealed a nmber of instances where
Job pledges by companies were unrealastically        high and were not always con-
slstent    wath their ability   or intentzon  to perform

       Under the contract  component, the disparity  between the number of job
pledges and the number of persons hired m many cases has resulted       in a sub-
stantial   amount of funds' being tied up 1x1unllquldated   contract obllga-
tlons for long periods

       In commenting on our draft report,        the Department advised us that the
Lnablllty    of contractors     to fulfill  their Job commitments had on occasion
resulted   in obligated     funds ' being unllqudated    over long periods of time
The Department stated that it had shortened the scheduled employee-hiring
period to alleviate      this problem and that It was conslderlng       other steps
to effect    a more trmely use of available       funds   The Department concluded
that the shortened hiring         period combined wrth a more effective    monitoring
system should effect the needed xmprovements.

      We noted that the reported number of pledges was not regularly      ad-
Justed downward on the basxs of pledgors'  revised estxmates of their needs
as a result of such factors as economic reverses      Also, in many instances,
companies' pledges were for Jobs which offered little     opportunity  for ad-
vancement or whach pabd low wages, and the companies' pledges therefore
should not have been accepted because such Jobs fall     short of meeting the
ObJectives of the program

      NAB uses pledge figures prlmarlly  as management lnformatlon    to assist
rn the lmplementatlon   of Its program and reports progress principally    U-I
terms of trainees hired and on board

     Further comments on Jobs pledges, the types of Jobs offered by private
employers pursuant to their pledges, and the need for certain   correctrve ac-
tion in this area are presented beginning at pages 41 and 47

                                           14
Trainees hired--494,710
      The number of trarnees reported as hired represents the cumulative
number of persons who were placed m lobs under the JOBSprogram from its
inception.   About 75 percent of these persons represents hires under the
noncontract component, and the remainder represents hares under the con-
tract component
      The total reportedklres  of 494,710 persons was greater than the nlpn-
ber of Jobs pledged, because in many mstances, as a result of terminations,
more than one person was reported as hired to fill  the same Job pledge.
In other instances persons were reported as hired when they were actually
rehired for the same job after company lay offs    Because of these factors
a meaningful comparison cannot be made of the number of trainees hired and
the number of fobs pledged
     The total number of trainees hired is based on data obtained by NAB
from employers under a "tally card" reportzng procedure. In most cities
the local NAB staff maintains tally cards for each participatrng  JOBSa-
ployer    Each employer's tally cards are updated quarterly to show on a
current basis the number of persons hired m the JOBSprogram, terminated
from the JOBSprogram, terminated after having been on board for more than
6 months,and currently on board
      In some cities the tally card information 1s obtained by telephone
In other cities NAB representatives leave blank tally cards with the em-
ployers and request that a card be filled out for each reporting period
and returned to the local NAB office     Under both procedures the local NAB
offices forward the completed tally cards to NABheadquarters where the
data is compiled to provide a national total of trainees hired, terminated,
and on board
      In four of the five cltles where we made our review, we found that,
for many of the noncontract companies, the number of hires accumulated on
the basis of the tally count reporting procedure exceeded the number of per-
sons actually hired, according to mformatlon we obtained from the compa-
nies' officrals    For example, in one crty the NAB tally card data included
about 5,000 persons who had been employed by the reporting companybefore
the JOBSprogram began
      In two other cltles, for 35 randomly selected noncontract companres,
the tally card data showed that 382 persons had been hired      Information
provided by officials    of the 35 companies, however, showed that the number
of persons hired by seven of the companies was either overstated or under-
stated    The information furnished showed that 337 persons had been hired,
or about 12 percent less than the number reported by NAB
      For another five randomly selected noncontract companies in two citlesp
NAB reported that 422 persons had been hired     Offlclals   of each of these
companies, however, told us that there were no records or infonnatlon avail-
able to substantiate the reported number of persons hired       The NABMetro
Directors in both of the titles advlsed us that NABdid not have the manpower
to verify the reported data and that they realized that there could be er-
rors in the tally cards submitted by the participating     companies

                                       15
       The information     obtained by us at these five companies appeared to be
indicative    of a condition     whrch previously had been brought to NAB's atten-
tion      A public accounting firm engaged by NAB to conduct audit tests of
the validity      of data produced by the tally   card procedure reported in Octo-
ber 1969 that there was a need for better recordkeeping          and reporting   by
the participating      employers, if the reported data was to be relied upon
with full    confidence      The publrc accounting firm stated that, although its
tests in 10 cities       showed that some of the employers had maintalned      good
records of JOBS employees which provided information          comparable to that
produced under the tally        card procedure, a slgniflcant   number of noncontract
employers kept only informal        records, or no records, to support the mforma-
tion reported to NAB

      We were unable to verify the data reported under the tally   card report-
mg procedure for some companies      The officials  of these companies told us
that they did not have any information   on the status or ntrmber of JOBS em-
ployees

       In addition    to submitting      the tally  card, employers are required to
submit a 'hire card" for each trainee hrred               The hire cards serve to sub-
stantiate     the elrgiblllty      of trainees hired and contain demographic mforma-
tron and other information          on each trainee      We found that employers had
submitted hire cards for only 216,668, or 44 percent of the 494,710 trainees
reportedly     hired      Therefore neither NAB nor the Department had such spe-
cific    information    as the name and eligibility       status of the 278,042 mndlvid-
uals for whom hire cards had not been submitted

        Also the reported number of trainees hired is misleading    to the extent
that the number includes persons from outside the established       target popula-
tion.      A significant  number  of the persons hired under both contract and
noncontract      components of the JOBS program were from outside the target pop-
ulation
       Our frndrngs were based on lnformatlon contained on hrre cards submrt-
ted to NAB by employers and on other rnformatron    we obtarned.  These find-
ings, whrch are drscussed on page 51 rndrcate that more careful screening
of JOBS trarnees is needed. Also our findings     indrcate the need for re-
qulrrng employers to submit a hire card for each trarnee hlred so that NAB
and the Department can determine whether the persons enrolled    rn the program
are from the target population.



      In commenting on our draft report,    the Department advised us that nei-
ther the tally  card nor the hirIng card systems had, in the past, operated
with optimum success and that, since no mcentlves        for better recordkeeping
and reporting  were provided to noncontract    employers, it would be unrealis-
tic to expect these employers to respond timely unless some funds could be
made available  to offset their costs

      In addition,    errors in the reporting    of trainees hired and terminated,
as previously    discussed,   affects  the accuracy of the number of trainees re-
ported as on board        These factors must be considered in weighing the valid-
ity of the on board count as a measure of program accomplishment

                                            16
Trarnees   terminated--264,720

      The number of trarnees reported as termrnated represents the cumulative
number of persons who were hrred under the JOBS program but who were no
longer employed by their JOBS employer.

      NAB obtains    lnformatlon      on the number of trainee termlnatlons         through
Its tally   card reporting      procedure      Also, prior to February 1970, employers
were required to submit a "termmnatlon            card" for each trarnee leaving the
program, or 2 years after enrollment,           showrng the length of time he worked,
the type of termlnatlon        (quit,   drscharged,    lay-off),   and the reason for the
termrnarlon    (to take other employment , excessrve absenteeism,             etc > Revr-
srons made in February 1970 to the management lnformatron                system require
employers to submit a "completlon/termmatlon               card" for trainees    hlred under
the program.      The purpose of this card IS to provide the Department and NAB
with the number of trainees who completed tralnlng               under the program and
the number of trainees who left the program before completrng training.

      As of June 30, 1970, termlnatlon     cards had been submltted for about
36 percent of the termrnees reported under the tally        card procedure--about
49 percent for the contract     component and about 30 percent for the noncon-
tract component      The percentage of termination    cards submrtted by employers
varred slgnlfrcantly    from city to city.     For example, under the contract
component, employers had submitted termlnatlon       cards for about 18 percent
of the termrnees rn Detrort in contrast      to about 76 percent of the termlnees
in San Francrsco

      Moreover, the cards that were submitted quite often drd not show how
long a trarnee had been employed or why he had been terminated     For in-
stance, lnformatron  on the length of employment was available at NAB for
about 24 percent of the 264,720 termlnees --33 percent for the contract    com-
ponent and 20 percent for the noncontract    component.

      NAB reports as of June 30, 1970, categorized  termlnatlons    under the
contract  component, as follows   52 percent quit, 32 percent discharged,
5 percent laid off, 11 percent retired,   incurred permanent dlsabllrty,     or
died, or the company dropped out of the program     NAB reports also provided
data on the reasons for 56 percent of the termlnatlons,       Data reported 1s
shown rn the following  table.

                                 Reason                            Percent

                Personal reasons                                      23
                Rxcesslve absenteeism                                 15
                Other employment                                       9
                Unsatisfactory    Job performance                      5
                Dlsclpllnary   reasons                                 3
                Armed forces and school                                1

      Also, the NAB reports as of June 30, 1970, categorized      termlnatlons
under the noncontract   component, as follows*    47 percent quit; 30 percent
drscharged,   7 percent lard off; 16 percent retrred,    incurred permanent



                                            17
dlsablllty    or died, or the company dropped out of the program The NAB re-
ports also provided some data on the reasons for 48 percent of the termlna-
tlons      Data reported 1s shown in the following table

                               Reason                         Percent
               Personal reasons                                  19
               Excessive absenteeism                             13
               Other employment                                   7
               Unsatisfactory   Job performance                   5
               Dlsclpllnary   reasons                             3
               Armed forces and school                            1



      In commenting on our draft report,     the Department stated that no ac-
tlon to dlfferentlate    between those completing tralnlng    and termlnees was
taken until   the management lnformatlon    system was revised in February 1970,
and therefore    the data related to termlnatlons   reported before that date 1s
mlsleadlng,   since they lnclud, 0 some persons who had completed the tralnlng
program

     NAB stated that an Important area of underreportlng    of JOBS accomplrsh-
ments may exist with regard to termlnees     NAB stated that a substantial
number of those persons reported as terminated remalned on the Job long
enough to receive tralnlng  and work experience which would enable them to
move to better Jobs than they had held before entering the JOBS program.

        It seems reasonable to us to presume, as NAB has done, that persons
partlclpatlng    in the JOBS program for short periods may be helped to some
degree in moving to better Jobs         As previously   lndlcated,   an adequate man-
agement lnformatlon     system could provide more factual       data on program re-
sults and could mlnlmlze the need for Judgmental assessments concerning the
effectiveness    of the JOBS program.      For example, NAB's summary report on
JOBS program actlvltles      through June 30, 1970, shows that mformatlon        on
reasons for termrnatlons      were known for about 18 percent of the 264,720
persons who were terminated       up to that date.

Trainees   on board--229,990

      The 229,990 trainees   reported as on board were Intended to represent
those who were still    employed by their JOBS employer    These trainees rep-
resent 68 percent of the goal of 338,000 hard-core unemployed In Jobs at
June 30, 1970

       The number of trarnees on board was obtained through the tally     card
reporting   procedure and, because of incomplete reporting   on tennlnatrons,
includes some trainees who had terminated    their employment

       The on-board count does not include persons who terminated   during
tralnlng   with their JOBS employer and who are employed elsewhere      For ex-
ample, about 8 percent of the reported reasons for termlnatrng     was attrl-
buted to trainees'    qulttlng to take other employment.



                                         18
Average retention    rate--47     percent
     The average retention rate represents the percentage of trarnees who
had been hired and who were still  employed by their orlglnal JOBS employer
at June 30, 1970. The retention rate for the contract component was about
38 percent and for the noncontract component was about 49 percent.
      Because data furnlshed by employers on hires and termlnatlons under
the contract component 1s required to be supported by appropriate records,
more reliable retention rates are available for that component. As of
June 30, 1970, the retention rate for each of the four phases of the con-
tract component 1s shown m the following table.
   Contract phase                                                                Retention
     and period           Contract                                     On           rate
      covered            positrons          Hires     Termlnatxons   board       (percent)
MA-3 (Mar. 1968 to
 Nov. 1968)                     25,813      49) 292      36,017      13,275         26.9
MA-4 (Sept. 1968 to
 June 1969)                     33,999      42,140       27,760      14,380         34.1
MA-5 (May 1969 to
 June 1970) (note a)            39,269      26,108       11,903      14,205         54.4
MA-6 (Nov. 1969 to
 June 1970) (note a>            30,088        9,670       3,179          6,491      67.1
    Total                   129,169         127,210      78,859      48,351         38.0

aContractlng   under the MA-5 and MA-6 phases of the program and hlrxng under
 MA-4, W-5,    and MA-6 contracts were still m effect at June 30, 1970.
      Under each successxve phase of the JOBSprogram, the percentage of
trainees still  employed by their JOBS employer at June 30, 1970, has in-
creased; an expected zesultslncepersons   hired more recently are more likely
to still be employed than persons hired earlier.
     The rate of retention of trainees by JOBS employers under the contract
component of the program varied from city to city.  The average retention
rates as of June 30, 1970, for the five cltles and the nation, based on data
in Department reports, are shown In the following table.
                                                            Retention rate
                                                              (percent)
                    The five cxties
                        Detroit                                   31.5
                        Oakland                                   22.9
                        Portland                                  33.6
                        San Francisco                             49.4
                        Seattle                                   11.5
                    Natlonwrde                                    38.0




                                               19
      The higher retentron    rate In San Francisco appeared to be due, rn part,
to generally   higher startrng    wages and a greater number of avarlable Jobs rn
whrte-collar   occupatrons,    such as bank tellers  and office workers.

      The low-retention rate rn Seattle was attrrbutable   to a severe decrease
rn the manpower requirements  of one large company whrch domrnated the Seattle
area economy and which was experrencrng   a reductron rn rts actlvltres.

      On the basrs of NAB reports,  cumulatrve terminatrons     as of June 30, 1970,
because of lay offs under the contract    component In Seattle,    were 32 percent
of the cumulatrve reported hares --more than double the 14.4 percent rate as
of March 31, 1970. As of January 31, 1970, NAB reports showed that there
were no termrnatrons  rn Seattle because of lay offs.

       The following    table shows the natronwlde retention    rates by various
occupatronal     groups under the contract   component.    The rates were based on
the Department's      report of rndrvrduals  who had been hired and who were cur-
rently   In tralnrng     and those who had completed tralnlng   and who were still
employed as of July 31, 1970. Comparable lenformatlon was not avallable            for
the noncontract      component.

                                                            Retention rate
                       Occupational    group                  (percent)

           Professional,    technrcal,     and managerial         50.5
           Clerical   and sales                                   50.7
           Servxe                                                 45.6
           Farming, fishery,     forestry,    and related         32.7
           Processing                                             47.6
           Machine trades                                         37.7
           Benchwork                                              35.3
           Structural    work                                     41.2
           Miscellaneous                                          33.8

      The table shows that the natronwrde retentron    rates rn white-collar
occupations   were over 50 percent --the hrghest of all occupatronal    groupings.
Thus was consrstent   with our flndlngs  regardrng the retentron   rates rn the
five cltres visited.

Revlsron   to management lnformatlon       system

       The Department and NAB issued revised rnstructrons       rn February 1970 for
reporting     on JOBS program activltles     The revised lnstructlons    require com-
panres rn the contract      component of the program to submrt with     each monthly
rnvoice,     for payment under their contracts,   a hire card for each new trarnee
and a termination      card for each trainee leaving the program.      The instruc-
tions provide for the Department to reconcile        the number of trainees     on a
contractor's     rnvolce wrth the number of trainees    as determined from the hrre
and termrnatlon      cards submitted by the contractor   and to notify   the contrac-
tor of any drscrepancles.

     The hire card has been revrsed to provide addltronal rnformatron rnclud-
rng the occupation for which the trarnee was hired and the hourly wage rate.


                                               20
Tne termlnatlon  card has been revised to function as a completlonltermlnatlon
card, and it provides for showing why an employee terminated   and whether he
had completed trarnlng

Conclusions

      Reports by the Department of Labor and NAB on program results and prog-
ress of the JOBS program were not based on reliable  data and tended to over-
state program accomplishments

      The successful   management of the JOBS program depends, in substantial
part,  on the timeliness,    accuracy, and comprehensiveness     of data supplied
through the Department's management lnformatlon       system     Such data 1s needed
also for evaluating    program results  and for lnformlng    the Congress of accom-
plxshments and other factors relevant     to declslonmaklng     on program design
and funding

       Although the revlslons    to the management lnformatlon  system In February
1970 provide for the needed data, more effort      should be devoted to obtalnlng
compliance by both contract      and noncontract employers with reporting  require-
ments and to ensuring that data reported by each JOBS employer on Job pledges,
hirings,    termlnatrons,  and trarnees on board 1s accurate,   complete, and rep-
resent the true status of the JOBS program,

Recommendations     to the Secretary   of Labor

      We recommend that     the Department perlodlcally reexamine     the management
lnformatlon   system for    the JOBS program to ensure that

      --the system provides all the data necessary for program management
         and evaluation and for meaningful, accurate reporting,

      --employers    of trainees   are reporting   program data accurately   and timely,

      --statlstlcal    reports on program operatrons are approprrately      quallfled
         to describe the llmltatlons    under which the reports must be considered
         when data 1s known to be Incomplete,     or has not been verlfled,    or 1s
         only estimated.



        The Department advlsed us that it agreed that the tlmellness,     accuracy,
and comprehensiveness     of data were extremely Important and that slgnlflcant
actlvltles    had already been undertaken to Improve program design and analy-
SlS.     The Department advised us also that It recognized the need to rmprove
rts own data-gathering     capabllrtles  and that, In cooperation  with NAB, It had
developed and Implemented a revamped management lnformatlon       system which
would effect    a better response rate from partlclpatlng    JOBS employers,

     The Department stated that the management lnformatlon  system, as revised
in February 1970, would be monitored very closely during the next 6 months
to ensure accurate and meaningful program data.



                                             21
      NAB advlsed us that several GAO recommendations would require elabo-
rate and costly procedures for verlfylng    xnformatlon.    NAB stated that It
was extremely Important,    partxularly  in the noncontract   component of the
program, to avoid encumbering the program with time-consuming       and costly
admlnlstratlve   procedures which would discourage employers from partlclpat-
ing.

      We are not recommending that either costly or elaborate reporting   re-
quirements be imposed upon partxlpatlng     employers. We do, however, consider
it essential   that employers be required to report the employment status of
each person hired or terminated under the JOBS program on an accurate and
current basis.




                                        22
                                        CHAPTER 3

                      OBSERVATIONSON CERTAIN PROBLEMSIN THE

                 CONCEPTUALBASIS AND DESIGN OF THE JOBS PROGRAM

       Our review of the JOBS program results    and its administration     in&-
cated certain     problems in the conceptual basis and design of the program
which we believe merrt some reexamination.        These problems, whrch bear
slgnrflcantly     on the program's potential  for effectiveness   in achieving
statutory     ObJectives,  concern‘

      1, Inherent llmrtations      of the program durrng      periods   of economic
         downturn.

      2. The possiblllty    that, under certarn circumstances,  the program may
         simply shift    the burden of unemployment from the disadvantaged  to
         other persons not so categorized.

      3. The inclusion     of many persons III the defined target population,           who
         have no clear     or legltrmate  need for the JOBS program.

      4. The inappropriateness   in many rnstances of contractrng  with employers
         on a fixed-unit-price   basis to provide tralnlng  and supportive ser-
         vices to program trainees.

      5. The deemphasrs on monitoring        contractors'    performance    under the pro-
         gram.

     Items 1, 2, and 3 are discussed on pages 23 to 28, item 4 is discussed
on pages 31 to 40, and item 5 1s discussed on pages 73 to 77

INHERENT LIMITATIONS OF THE JOBS PROGRAM
DURING PERIODS OF ECONOMICDOWNTURN

       The JOBS program, as presently     conceived, provrdes for achieving     the
ObJective of helping the disadvantaged       to obtain meaningful    employment
creditably     well during periods of high or rising     employment levels but not
durmg periods of high or increasrng        unemployment.    The program was ini-
tiated    during a period of high employment, and 1-t appears that adequate
consideration      may not have been given to what would happen during periods
of declining     labor demand.

      A basic concept of the JOBS program is that it is m the public                  in-
terest to increase the supply of trained labor by rermbursrng private                  busr-
ness organizations        for the cost of hiring,    training,     and retaining   disad-
vantaged persons whom they otherwise would not have hired.                 A mayor problem
with this concept is that the successful          placement of such persons depends
on labor demand. Durrng perrods of rlsrng unemployment it becomes in-
creasrngly     difficult     to interest employers rn the JOBS program, partrcularly
if well-qualified        persons who need no further      training   are available    for
employment or if employers are experiencing            cutbacks rn their operatrons
and a part of their regular work force 1s on furlough.


                                            23
      Of perhaps greater concern in a declrnlng  economy is the fact that
JOBS trainees   are frequently the frrst ones to be laid off, leaving them no
better off, and perhaps worse off, than they were before enterrng the pro-
gram.
      For fiscal year 1970, in recognrtlon      of the increasing  difficulty     of
awarding JOBS contracts    because of rising    unemployment and other factors,
the amount, included in appropriations,      for the JOBS program was reduced
from the Department's   lnltral   request of $420 million    to $280 million,     and
the Department later reprogrammed about $105 million        of the appropriated
funds for the JOBS program to other types of manpower training          programs.

       We believe that the inherent limltatlons    of the JOBS program during
perrods of rrslng unemployment need to be more fully       recognrzed.      We believe
further    that the Department of Labor has a particularly     difficult    challenge
U-I assistrng    furloughed JOBS trainees to prevent tralnlng      gains from berng
dlssrpated.

POSSIBLE SHIFTING OF THE BURDEN OF UNEMPLOYMENT

     The JOBS program is not a Job-creation     program, ordlnarrly    it does not
mcrease the number of existing    Job openings,     Job pledges by employers, for
example, typically  pertain to existing   or prospective    Job openings.

      Durmg periods of high or rising    employment levels,  the JOBS program
appears to be a valuable ald to both private    employers and disadvantaged
persons, it enables such persons to obtain Jobs that they otherwise may not
be able to obtain, and it relieves    employers of the costs of training   such
persons to transform  them into acceptable employees.

       Although ~II certain    instances  it appeared to us that private         employers
participating      in the JOBS program were allocating       existrng     Job openings for
disadvantaged     persons rather than for persons who would have been hired
normally,     we found no extensrve rndicatlons     that the JOBS program had re-
sulted m a shlftlng       of the burden of unemployment from disadvantaged            per-
sons to others (1) because, m the early stages of the JOBS program, employ-
ment levels and demand for labor were relatively            hrgh and (2) because of
various deficiencies      III other aspects of program implementation,          namely,
that many JOBS enrollees       were not perceptibly    different      from normal hires,
were being offered Jobs that they could ordlnarrly             get without the JOBS
program, or were from outside the target population.               These matters are
drscussed fully      m subsequent sections of this report.

      In this connection,    Greenleigh Associates--a    management consultant
firm under contract wrth the Department-- found that 1n the 10 metropolitan
areas where Its review was made, employers reported no change in the number
of persons recrulted    through gate-hiring   as a result   of the JOBS program
and attributed   It to the fact that the program had been drrected more to
the types of persons normally hired than to the truly disadvantaged.

       Conversely,   in periods of decllnrng   or relatively   stable labor demand,
for an employer to participate     in the JOBS program, he would have to grve
preferences    to disadvantaged  person8 in filling     Job openings over persons he
would have hired normally.      When this happens, the program appears to supply

                                            24
shift the burden of unemployment from disadvantaged persons to other per-
sons.
      It appeared to us that, to avoid having the JOBSprogram compete for
JObS  with either the existing work force or available trained labor, It
should be directed more specifically   to those segments of the economy which
are growing and in which labor shortages exist.    The Department has sought
to malntaln a certain momentum111the JOBSprogram, despite increasing un-
employment, by shifting emphasis to those occupational and industrial   cate-
gories which are growing 111the present economy.
Agency comments and our evaluation
      In our draft report, we proposed that the Department direct the JOBS
program more specifically  to filling skill-shortage Jobs rather than having
it compete for Jobs for which there is already an ample supply of travled
persons.
      In comment- on our proposal, the Department stated that the JOBS
program was designed specifically    to prepare disadvantaged people for exist-
mg Jobs as quickly as possible and to provide assistance through special
on-the-Job trainrng and supportive services.     The Department stated also that
the preparation for most skill-shortage    occupations of merit usually en-
talled an extended tralnlng tune that had been shown to be less effective
zn meetmg the needs of the disadvantaged. The Department stated further
that our proposal would, 111effect, ask for a repeat of earlier failures in
dealing with the severely disadvantaged unemployed.
      It was not the intent of our proposal that the Department undertake a
program of tralnlng or otherwnse prepare disadvantaged persons to fill posi-
tions requirtng extensive skills.   Rather it was our Intention that the De-
partment direct Its Job-trainmg efforts to those segments of the economy
where labor shortages exut and avozd competltlon in areas where there 1s
already an ample supply of tralned labor.    Therefore our recommendation to
the Department has been rephrased to clarify this intent.
Recommendation to the Secretary of Labor
      We recommendthat the Department direct the JOBSprogram more speclfl-
tally to helping the disadvantaged obtain employment in those segments of
the economywhere labor shortages exist and thereby avoid competltlon III
those segments where there already 1s an ample supply of tralned labor.




                                       25
TARGET POPULATION FOR THE JOBS PROGRAM
NEEDS TO BE REDEFINED

      The target population    for the JOBS program, as for most other manpower
programs, 1s the so-called     disadvantaged  segment of the population  The De-
partment has defined this     segment as lncludlng  persons

      --whose net annual family   Incomes are less than amounts speclfled In
         the Offlce of Economic Opportunity  Poverty GuIdelines and who do not
         have sultable employment and

      --who are either school dropouts, under 22 years of age, 45 years         of
         age or over, handicapped, or members of a mlnorlty.

       Although the JOBS program 1s dlrected prlmarlly     to the lndlvlduals     de-
scribed,    the total target population    for the program has been enlarged some-
what to Include poor persons with special obstacles to employment             These
persons are defined as (1) unskilled      workers who have had two or more spells
of unemployment totalrng      15 weeks or more durmng the past year, (2) workers
whose last Jobs were in occupations      of significantly  lower skill   than their
previous fobs,     (3) workers who have family histories   of dependence on wel-
fare, and (4) workers who have been permanently laid off from Jobs in mdus-
tries which are declining,      for example, agriculture  and coal mining.

       We believe that the Department's    deflnltlon   1s far too broad and encom-
passes many persons who have no clear and legitimate        need for assistance
under the JOBS program.      Many persons enrolled    in the program under the pres-
ent ellglblllty     crlterla  appeared to us to require only placement assistance
and not the costly on-the-Job training      and supportive    services that are also
integral     parts of the program.

      For example, we observed that a number of well-motivated     recent high
school graduates, whom their employers acknowledged were no different       than
their normal hires, were enrolled   in the JOBS program     We also noted in-
stances where college students and graduates were emolled       In the JOBS pro-
gram In full  accordance with the aforestated  criteria,   1 e., they were from
poor famllles  and were under 22 years of age

       A fundamental shortcoming in the Department's    deflnltlon    of dlsadvan-
taged, when used as the crlterlon     for enrollment  m the JOBS program, 1s
that It does not provide for considering      the Job readiness of a prospective
enrollee.     Within the very broad range of dlsadvantagement      encompassed In
the foregoing     deflnltlon, it IS possible for a person to be fully Job-ready
and to need nothing more than ordinary placement assistance.

        The Department of Labor and NAB, m reporting       on the accomplishments  of
the JOBS program, frequently        describe persons hired under the program as a
somewhat homogeneous group who lack the necessary skills,          attitude, and mo-
tlvatlon     to successfully   compete in the fob market.    We belleve that such
characterizations      are misleading.     Our observation has been that many en-
rollees    in the JOBS program are well motivated and Job-ready and, as prevl-
ously stated, need only placement assistance



                                          26
      Notwlthstandlng  the exlstlng ellglblllty crlterla   for enrollment   1.n the
JOBS program, we found that many of the persons In the program had been en-
rolled from outsrde the designated target population     due to laxltles  In
screening on the part of the State employment service,     admlnlstrators  of CEP,
and the employers.    Thus matter 1s dlscussed further   beglnnlng on page 51.

      Although the exact number of persons ellglble             for the JOBS propam UT&Z
the exlstlng     criteria    1s not known precisely,      estimates  range from 7 mllllon
to 12 millaon.        Approprlatlons      for the JOBS program for fiscal    year 1970 were
estimated    to be sufflclent        for enrollment   In the program of about 140,000
persons under the contract           component, or about 1 to 2 percent of the total
estimated    target population.          The number of persons enrolled   In fiscal  year
1970 under the noncontract           component totaled about 232,000

        In the Interest    of lmprovlng program effectiveness    and economy, we be-
lleve that, because various estimates         show that the present target population
eligible    for enrollment    ln the JOBS program includes many more persons than
can be enrolled,     more restrlctlve   ellglbll.~Lty  criteria are needed to better
ensure that Federal funds are used only to train and otherwise prepare for
fobs those persons who could not reasonably be expected to secure suitable
employment without      such assistance

Recommendations      to the Secretary    of Labor

      We recommend that       the Department

      --redefine   the parameters of the disadvantaged  segment of the population
         and focus the program resources on those persons who are not Job-ready
         and who require the costly on-the-Job training   and supportive services
         that are provided under the program

      --provide   fob counselors and placement officials       with detailed      Instruc-
         tlons for screening prospective    enrollees    in the JOBS program and re-
         quire,  In the case of each applicant,     a written   Justlflcatlon      concern-
         ing how the JOBS program 1s to fulfill       an applicant's     specific    needs



        The   Department of Labor stated that JOBS ellgfblllty       criteria   were es-
sentlally      similar   to those of other manpower programs and to make them more
restrictive       would put them in disagreement with the other programs.           The De-
partment      stated also that it was necessary to allow for broad lndlvldual
differences       among those persons who could be classlfled      as needing special
assistance       and that the prlnclpal     task was to ensure that the ellglbll-Lty
standards      are properly    admlnlstered

      The Department has noted that 50 percent          of all JOBS enployees are
under 22 years of age, that the average JOBS           employee 1s a young black male
who has been unemployed for a lengthy period           of time and has not graduated
from high school, and that this latter   group         comprises one of the maJor
social concerns of the country,   and the JOBS         program IS clearly  reaching
them.



                                               27
       The Department agreed that an addltlonal          Job-readiness    determlnatlon
should be added to the basx ellglblllty           requirements     and stated that It
tentatively       planned to Incorporate   thx change In the JOBS handbook and
related     lnstructlonal   material   now undergolng revlslon

       The Department was not specific          as to how or when It may make fob
readiness a factor      in determlnlng     ellglblllty   for the JOBS program       We be-
lieve,   however,  that   the   crux   of our   recommendations could be  satisfied
through an appropriate       tlghtenlng    up in this respect




                                            28
                                        CHAPTER4

                     NEEDEDIMPROVEMEWS
                                     IN PROGRAM
                                              OPERATIONS

       Our review has indicated that there 1s a need for improvements In
various aspects of the admlnlstration of the JOBSprogram to Increase its
effectiveness and economy. SpecifIcally,    there 1s a need for improvements
1n
     --contracting     for on-the-Job    tralnlng   (see p. 31),
     --evaluating prospective       employers' ablllty     to provrde the Jobs
       pledged (see p. 41),
     --obtaining more meaningful employment for disadvantaged persons
        (see p. 47),
     --ascertaining and documenting the ellglbillty           of persons for partlc-
        lpatlng m the program (see p. 50,
     --coordlnatlon with CEP In recruiting          persons to fill   employers' Job
        openings (see p. 58),
     --ensuring that contractors provide trainees with required            supportive
        services (see p. 63), and
     --verifying     contractors'   requests for payment (see p. 71).
        Cur findings regarding the need for the above improvements in the ad-
mlnlstratlon     of the JOBSprogram generally were based on a review of pro-
gramwlde instructions     and procedures and their appllcatlon to (1) program
actlvltles     of 62 of 215 employers under 31 contracts, as shown In the
table below, (2) program actlvltles     of 79 noncontract employers, and (3) el-
lglblllty     of about 46,000 trainees for partlclpatlon  rn the program.

                      MA-3 and MA-4 contracts               Number of employers
                              Number reviewed          Participating  in
                      Total        by GAO             contracts reviewed     Visited

Detroit                 45              11                      44               16
Oakland                 25               9                      62               18     "
Portland                 5               3                       3                3
San Francisco           12               5                     103               22
Seattle                 -8               2                       3               -3


      The contracts selected for review were In our oplnlon, representative
of the contracts awarded ln the five cltles.   The contracts were selected
without prior knowledge of the existence of any problems. The following
speclflc conslderatlons went into our selectlon of the contracts in the
five cities.



                                             29
      In Detroit we selected the three largest contracts in the total amount
of about $9.5 mllllon, because they represented about 36 percent of the
total contract obllgatlons,  the other erght contracts represented an addl-
tlonal 9 percent of the contract obligations.   These eight contracts,whxh
were selected at random, provided coverage of varxous types and sizes of
businesses.
      In Seattle and Portland we selected six contracts which represented
about 85 percent of the total contract obllgatlons.    Our selection provided
for audit coverage of the largest contract dollar amount possible and en-
abled us to review the programs of large, medium, and small businesses
dealing in different  types of actlvxties.
      In San Francisco and Oakland our selection of 14 contracts represented
about 75 percent of the total contract obllgatlons.   The 14 contracts in-
cluded several contracts with consortlums-- two of these involved some of the
largest companies in the San Francisco-Oakland area--a contract with a
large regional company, and several contracts wath medium and small size
businesses. Someof the selected contracts provided for high-skill     training
and relatively  high hourly wages
      We selected most of the 79 noncontract employers on a random basis.   In
certain cases, noncontract employers were speclflcally   chosen for review of
their program actlvltles  because they had srmultaneously participated under
the contract component of the program or had hued a large number of traln-
ees or because of the nature of their businesses.




                                      30
SUBSTANTIAL IMPROVEMENTSNEEDED IN
?ZCRA~TING FORON-THE-JOB TRAINING

      Many JOBS program contracts          included In our review provided for exces-
sive payments to contractors         for on-the-Job training      given to trainees   un-
der the program.       Thus was due prlmarrly         to the fundamental drfflculty   of
negotlatlng    frxed-unit-prrce      contracts     when nerther the amount of tralnrng
required nor the antlclpated         costs of provrdrng the tralnlng       were known by
the contracting     parties     and secondarily     to the Department's   contracting
procedures which precluded the analyzing and evaluating               of contractors'  es-
tlmates of their antlclpated         costs

       From the Inception  of the JOBS program, the contract     component of the
program has been operated under flxed-unit-price       contracts  negotrated with
rndlvldual    employers, or wrth employer consortiums,     which provide for the
payment of their extraordinary    costs of providing    tralnlng  and various sup-
portrve services to the trainees

        The Department's    declslon to contract     on a flxed-unit-price     basis,
rather than on a cost-rermbursement          basis , was made on the premise that
(1) contractrng     on a flxed-unit-price      basis would result      In fewer admlnls-
tratrve    problems assocrated with recordkeeping        and cost ascertainment       when
postaudlts     of contractors'     records were made and (2) the JOBS program could
be promoted much more readily          with employers under frxed-unit-price       con-
tracts because they would mlnlmlze Government red tape

      The Department's    request for proposals by prospective  contractors
placed very little     emphasis on the need for data in support of trarnlng
cost estimates,    and its contracting  procedures speclflcally  directed   its
contract  negotiators    not to analyze or evaluate the cost data or to other-
wise determine the basrs for proposed trarnrng      costs

        To arrive at contract  amounts, the negotiators     generally   (1) compared
a contractor's    total proposed costs for each occupation with a predeter-
mined range of costs set forth in the departmental         guldellnes  and ac-
cepted costs that were wlthln     this prescribed   range or (2) allowed the con-
tractor    an amount computed on a formula basrs       Although these contractrng
procedures shorten the time required to negotiate         contracts,  their effect
In many instances has been to provide for excessive payments to contractors
for both on-the-Job training     costs and supportive     services

       Leglslatlve   authorrty to reimburse employers 1s set forth In section
123(a)(8)     of the 1967 amendments to the Economrc Opportunity  Act (EOA), as
follows

           "The Dlrector       [OEO] may provrde flnanclal    assrstance    In ur-
     ban and rural areas for comprehensive work and trarnlng             programs
     or components of such programs, Including          *** programs to pro-
     vide lncentlves       to private   employers *** to train or employ un-
     employed or low-income persons, rncludlng          arrangements by dl-
     rect contract,       reimbursements   to employers for unusual tralnlng
     costs for a lrmlted        period when an employee might not be fully
     productrve,    ***."



                                             31
      OEO delegated this authority  to the Department of Labor for the JOBS
program     In the December 1967 House Conference Report accompanying the
bill  which amended the EOA, It was stated that.

     I'*** In order to prevent abuse It 1s expected that appropriate
     admlnlstratlve   steps shall be taken to assure that relmburse-
     ments paid to an employer under section 123(a)(8) should cover
     only such costs as are incurred because the particular    worker
     or workers are not able to perform on the Job In the manner
     the employer previously   expected of his new hires for the same
     or a slmllar   occupation "

       In lmplementlng    the JOBS program, the Department requested employers
deslrlng   to obtain JOBS contracts      to submit proposals descrlblng  their
tralnlng   and supportive     services program and an estimate of the extraordl-
nary costs of their proposed programs          The Department's procedures pro-
vlded for Its regional       staff to review such proposals,   conduct negotlatlons
with the employers, during which proposals might be changed, and award con-
tracts to the employers, as warranted

      To expedite Implementing the JOBS program, the Department established
teams of regional  contract negotiators to evaluate and negotiate  contracts
The teams, which were headed by departmental   personnel, Included staff on
loan from the State Employment Services and other governmental agencies

       Departmental guldellnes    require that a reglonal team evaluate and ne-
gotlate each element of an employer's         proposed tralnlng     program before an
evaluation    1s made of the proposed tralnlng        costs     The guldellnes     provide
that, in evaluating     and negotlatlng    the proposed costs, the negotiators
not press for too much detail          The guldellnes     stated that, since the costs
of each program element, such as orlentatlon,werenot              to be negotiated,
time spent In face-to-face     cost negotlatlon       beyond an average of half an
hour ordlnarlly    would not be an effectlve       use of a negotiator's       time

      Two basic methods were used, with varlatlons,        by the Department In the
MA-3, MA-4, MA-5, and MA-6 phases of the JOBS program to determlne the
basis on which the contractors       would be paid     However, neither method re-
qulres the negotiators      to evaluate whether the costs proposed for on-the-
Job tralnlng    and for supportive     services are reasonable and represent only
the extraordlnary     costs incurred rn tralnlng    disadvantaged persons.

       Under the first  method, used for MA-3, MA-4 option A, and MA-5, the
total proposed cost for tralnlng    a person In each Job was evaluated by de-
termlnlng   whether the cost fell within a predetermined   range as set forth
In the departmental    guldellnes

      The second method, involves the use of a standardized              formula      Under
MA-4 optlon B phase,      this method  provided   for  the   payment   to   a contractor
of a predetermined      amount for supportrve   services;     on-the-Job tralnlng
costs, however, were based on the use of guldellnes            as In the MA-4 option
A phase    Slmllarly,     under MA-6 , a standardized     formula was used for de-
termining  the cost of each program element, such as on-the-Job tralnlng,
basic education,      and counseling.


                                             32
       Under both methods, the guIdelInes   Instructed the negotiators    that the
maximum or predetermined    dollar amounts (market costs) were the sole-cost
crlterron   which the negotiator   was to use In his dellberatlons   with employ-
ers

     The MA-3 and MA-4 guldellnes        stated

     "*Jr market cost bears no necessary relatlonshlp          to actual pro-
     gram performance cost          It may represent somethlng more or some-
     thing less than program performance cost in any given case
     Therefore,    the contractor's     estimated program performance costs
     In toto or In part are not relevant         to market cost evaluation
     and negotlatlon       Accordingly,     they shall not be consldered In
     the *** prlclng    procedure "

The MA-5 and MA-6 guIdelInes      contain   baslcally   identical    language

      With regard to the employers'    cost of provldlng        tralnlng   and supportive
services , the Department's guidelines     stated that

     I'*** Although the contractor    may have ample supporting    cost data
     to Justify   his position,  the evaluator/negotiator    must make It
     clear to the contractor    that the Government 1s not concerned with
     the cost of the program       In other words, the evaluator/negotiator
     IS concerned maze with the Government's obJectlve to buy at market
     cost than he 1s with the contractor's       costs (as reasonable or as
     unreasonable as they may be)."

        We revlewed the basis for paying contractors       under the 31 contracts
included In our review and examined the proposals,          contracts,   records of
evaluation     and negotlatlon     and discussed pertinent  aspects of the negotla-
tlons and subsequent cost experience with the contractors            and Department
officials       We also examined into the manner in which the negotiators         ap-
plied the Department's        guidelines

       Of the 31 contracts,      17 provided for excessive payments to the con-
tractors      Of the 17 contracts,      10 were based on the acceptance, without
questlon,    of the contractor's      (1) estimate that trainees      would require more
weeks of training     than It normally took to learn the skill          necessary to
perform the Job according to the departmental          guldellnes     and (2) estimates
of Its productlvlty      loss during the training     period      Also, nine of the
contracts    provided for the payment of on-the-Job training           costs that ex-
ceeded the Department's      predetermined     range of allowable     costs

       Although it 1s a basic tenet of the JOBS program that a contractor
be reimbursed only for his extraordlnary         costs of training     disadvantaged
persons--that      is, the costs In excess of those normally       incurred    In pro-
viding training       and supportive  services to its regular employees--the          De-
partment's     request for proposals did not require prospective          contractors
to disclose     their regular training     costs   As a result,    prospective      con-
tractors    frequently    proposed and were awarded contracts      providing     for pay-
ment of the total       cost for on-the-Job tralnlng   and supportive      services
rather than the extraordinary        costs


                                            33
       The excessive payments occurred to a      greater degree under those con-
tracts   provldlng  for payment on the basis     of the standardized   formula
method of determlnlng    allowable  costs for    supportive  services.    Under this
method, a contractor    was allowed $850 for     provldlng  supportive   services to
a trainee

       The Department did not conduct any preaward contract        surveys of the
31 contractors'     plants to ascertain  the speclflc  nature and requirements
of the Jobs berng offered and the plans the contractors         had for provldlng
tralnlng.    The contract negotiators    advised us,111 general,as     noted In
other sections of this report,      that they were under constant pressure to
negotiate   contracts    as quickly as possible.

       Following    are three examples of contracts     which,   we belleve,    provided
for   excessive    payments for on-the-Job tralnlng     costs.

       Contractor  A--Contractor   A was awarded a natlonal   MA-3 contract  dated
June 11, 1968, In the amount of $1,227,674 to hire and train 258 grocery
check-out clerks In SIX cltles        We examined into that part of the con-
tract that provided $495,530 for tralnlng       100 persons m the contractor's
supermarkets m two cities--      $311,485 for on-the-Job tralnlng    ($3,115 per
trainee)    and $184,045 for supportive   services  ($1,840 per trainee).    As of
June 10, 1970, the contractor      had been pald $451,809, of which about
$284,600 was for on-the-Job training.

      The contract provided for each trainee to receive 47 weeks of on-the-
Job tralnlng   and 5 weeks of classroom tralnlng    in grocery checking--2  weeks
at the beglnnlng of the trainee's     employment and 1 week in each of the
second, third,    and fourth quarters of the trainee's    first year of employ-
ment.

     The contractor's    proposal showed that the antlclpated          tralnrng costs
were based on estimates     of the amount of time the trainees         would not be
doing productive    work while berng paid, as shown below
                                                                  Percent of
                                                 Training        unproductive
                                                  weeks               time

              Time spent In training
                 classes                               5               100
              Time spent working in
                 supermarket
                    1st quarter                         8              100
                    2d      11                        13                50
                    3d      "                         13                30
                    4th    "                          13
                                                      -                 20



     We vlslted       eight supermarkets,    seleetea from the 44 supermarkets In
the two cstles      to which trainees     had been &%igned,   for iwqulry as to



                                           34
whether the above estimates were reasonable          As of June 30, 1970, 143traln-
ees had been hlred by the 44 supermarkets

       Store managers at the eight supermarkets advlsed us that the JOBS
trainees assigned to their stores had been productive       from the first     day
that they started to work      They advlsed us further   that the 17 trainees
whom they could recall   as having worked compared favorably     1.n productlvlty
with regular new employees      With regard to the trainees'    work readiness
and capablllty,   they said that, of the 17 trainees,    six were better than
their regular new employees, six were average, and five were below average

       As previously   noted, the Department's       contract  provided for paying the
contractor    for on-the-Job tralnlng      on the basis of the assumption that the
trainees   would be totally     unproductive    during the first    quarter of the year
On the basis of lnformatlon       obtalned from the store managers regarding the
trainees'   actual productlvlty     , we concluded that a large part of the pay-
ments to the contractor      was unJustlfled

      In questlonlng     an official    of the contractor  about how the proposed
productlvlty   dlfferentlals      were developed, he informed us that the company's
estimates were arbitrary,        because, at the time that the proposal was de-
veloped, the company did not know the extent to which disadvantaged           persons
might be unproductsve.       He informed us also that for this reason the estl-
mates were open to negotiation        but that the Department's negotiators    had
not questloned the basis or reasonableness          of the estimates

       We noted that the negotiators   allowed an amount for on-the-Job traln-
lng In excess of the maximum amount shown In the departmental       guidelines   as
allowable      This excess allowance occurred because the negotiators      did not
question the proposed costs for each element so long as the total proposed
costs did not exceed the total amount allowable      for all elements      As a re-
sult, the contract    amount of $770,719 allowed for providing    on-the-Job
tralnlng   in the six cltles   was $129,169 In excess of the maximum amount al-
lowable for this element under the departmental      guidelines    Also under
the guldellnes,only    26 weeks of on-the-Job tralnlng    should have been al-
lowed rather than the 52 weeks that were allowed

        We inquired    of the negotiators    as to why they had not questioned the
reasonableness       of the contractor's    assumption that the trainees   would be
100 percent unproductive         during their first   quarter of the year and only
partially     productive    for the remainder of the year and why the contractor's
costs of unproductive        time for regular new employees had not been ascer-
tained.      The negotiators     stated that no analysis    had been made of the lndl-
vldual elements of the cost proposal for this contract            or any other con-
tract and that, if the total proposed costs were wlthln the total             of the
predetermined      range of costs, they were accepted wlthout question

      Contractor   B--Contractor    B, a consortium , was awarded an MA-3 contract
on August 8, 1968, rn the amount of about $3 1 mllllon         to provide 970 Jobs
to disadvantaged persons         At the time the contract was awarded, 31 dlffer-
ent business establishments,       which were members of the consortium,     provided
Jobs, such as cleaning orderlies,       material   handlers, general clerks,    and
warehouse helpers.


                                           35
      Aslde from supportive    services, the consortium proposed a tralnlng
program which conslsted     of 10 weeks of pretrarnrng   and 20 weeks of on-the-
Job training   at a cost of about $1 1 million,     or an average $1,200 per Job
As of June 30, 1970, 649 persons had been hired and the consortium had
claimed reimbursements    of about $2 4 mllllon,    of which about $792,000 was
for on-the-Job training

       According to departmental   guidelines, costs for on-the-Job trarnlng
should have been allowed at about $900 per trarnee for the types of Jobs
offered by the consortium       Because the negotiators drd not adhere to the
departmental    gurdellnes, the amount allowed for the on-the-Job tralnrng
portion   of the contract was about $300,000 In excess of the maximum amount
allowable under the guIdelines

       Records of negotlatlons     between the Department's contract negotrators
and the consortium      offlclals  were not avallable,  and the negotiators   were
unable to explain why the contract was awarded on the basis of on-the-Job
trarnrng    costs that greatly    exceeded the amount allowable under the gulde-
lines      A Department associate    regional manpower admlnlstrator    said that,
in his oplnlon,     this contract   should not have been awarded at such a high
unrt cost and that he did not know why the negotiator        had accepted It.      The
negotiator    1s no longer employed by the Department

       We visited    four of the companies in the consortium to ascertain      the
type of on-the-Job training         program that was provided to the trainees
Since the companies were not slmllar,          the fobs differed greatly,  however,
all were low-skilled        Jobs    We found that one company provided 3 days of
pre-on-the-Job     tralnlng     and that another company provrded 4 weeks of such
training       The other    two  companies did not provide any pre-on-the-Job
training

       Offlclals     at the four companies told us that no special on-the-Job
training     was provided by their companies           They explained that the on-the-
Job training      program consists    of assigning a trainee to a Job, explaining
what 1s requrred,         showing him how to do it , and provldlng     him with some su-
pervision.       Offlcrals    of two companies stated that 1.t took about 20 minutes
to show a trainee how to do the Job            Officials    of another company stated
that entry-level        Jobs require minimal Job training         Most of the trainees
we talked to at the four companies said that it took them from a few days
to 2 weeks to learn to do their Jobs as well as regular employees

      On the basis of our review and dlscussron with company offlclals       and
JOBS trainees,  we believe that the on-the-Job tralnlng    costs allowed this
consortium weregreatly    In excess of the training  costs actually   incurred.

      Contractor  C--Contractor    C, a small contractor,  was awarded an MA-4
contract   on November 22, 1968, in the amount of about $41,000 to provide
15 Jobs to disadvantaged     persons as automatic drill   and screw machrne
loaders

       The contractor  proposed an on-the-Job training  program for a period of
20 weeks, under which qualified    instructors  would spend 1 hour a day In
provldlng   special lnstructlon  to each trainee and 7 hours a day in careful



                                           36
supervlslon    of each trainee.   To accomplish the on-the-Job training    program,
the contractor    proposed , and Department negotrators  accepted, a cost of
$9,000, or $600 per trainee       As of May 31, 1970, the contractor    had clarmed
rermbursements of $24,423, of which $5,373 was for on-the-Job trarnlng

       The general manager of the company advised us that these Jobs were un-
skrlled    and that the company drd not have a formal on-the-Job training  pro-
gram. He said that the lnrtlal     tralnrng lasted less than 1 week and that
addltlonal    training was grven as needed.

       According to the none trainees we rntervlewed,       it took from a few hours
to a month to learn to operate the machines for whrch no special tools or
skills   were required.    One trainee said that, after recelvlng      some lnstruc-
tlons,   rt took her about 2 hours to learn to operate her machine.           Another
trainee said that she had operated both the automatic screw and drill             ma-
chines and that all the machines were quite srmllar         and little  lnstructlon
was required to operate them         We estrmated that the contractor     Incurred
costs of about $1,500 for on-the-Job trarnlng,        although he claimed relm-
bursements totaling     about $5,400.



        We were advised repeatedly      by the Department's regIona         contract   nego-
tlators    that they relied     completely   on departmental    guldelrnes    which did
not require an analysrs or evaluation          of lndlvldual    cost elements of con-
tractors'     proposals     They advised us also that, in most Instances,            they
did not have time for any lengthy evaluations            of proposals,     srnce therr ob-
Jectlve In the early stages of the program was to negotiate                and award as
many contracts,      and in as short a time, as possrble.         A Department regional
offrcral     also advised us that the lack of well-tralned,          experienced con-
tract negotiators       had affected   the quality   of negotlatrons

       Department regional    offlclals    also advised us that the pressure to
award contracts     had drmlnrshed and that they were makrng more thorough
evaluations   of prospective     contractors'    proposals   They advised us also
that, rn their oplnlon,      negotlatrons     under the MA-6 guidelines  had resulted
In contracts    being awarded at more reasonable costs because the proposed
cost for each program element was required to be shown and evaluated sep-
arately.




                                             37
Conclusions
      The Department has not adequately implemented the legislative       require-
ment that contractors     be reimbursed only for the unusual and extraordrnary
costs of hiring and training      the disadvantaged.  Many of the contractswhich
we reviewed authorized      payments rn circumstances where the contractors    had
no extraordinary    costs or where the authorized payments significantly      ex-
ceeded the training     costs actually   incurred.

        The Department had not required prospective    contractors to disclose
the basis for their cost estimates,     nor had It required its contract nego-
tiators    to analyze and evaluate the cost estimates to ascertain    whether
they represented regular or extraordinary     training   costs.

         In our opinion, fixed-unit-price  contracting        generally   1s not appro-
priate     for the JOBS program for several reasons.

         --Prospective      contractors  and departmental  contract negotiators,       in
            many instances,      arrive at firm fixed prices for training      and sup-
            portive    services before the employers have had any cost experience
            in training     disadvantaged persons, as a result     contracts   have pro-
            vided for excessive reimbursements for both training           and supportive
            services.

         --Fixed-unit-price        contracts  for training   and supportive   services were
            invariably      agreed upon before the persons to be provided the trarn-
            rng and supportive       services were selected.     Since there is a great
            variation     in need by disadvantaged persons for training        and support-
            Ive services,       the persons subsequently   selected for JOBS training
            frequently      did not require either the quantity      or the type of train-
            ing and supportive       services provided for in the contracts*

         --In the many instances where either the contractors             did not provide
            or the trainees     did not need the amount of training        and/or supportive
             services specified     in the fixed-unit-price    contracts,    it did not ap-
            pear to be either practicable        or feasible to recover the excessive
            payments,

Recommendations       to the Secretary    of Labor

     We recommend that the Department contract for on-the-Job training           and
supportive     services
                     .
     --on a cost-reimbursable        basis when the services to be provided cannot
         be adequately defined or when sufficient       cost experience is not
         available     to enable a realistic  estimate of the costs of providing
         the services and

         --on a fixed-price    basis for the contlnuatlon     of a tralnlng   proJect
            for which lnformatlon    on the extent and cost of the services to be
            provided 1s available    or where similar   information   1s available
            prior to award of a contract.




                                               38
     We recommend further     that   the Department

     --require  contractors,    under cost-reimbursable    contracts, to adequately
        document training    and supportive   services provided and costs incurred
        and

     --review  contractors'    costs and performances to ensure that             the Covern-
        ment 1s paying for    services actually  provided.



      Both the Department and NAB stated that they were opposed to contract-
ing on a cost-reimbursement      basis.   They said that this contracting      method
did not appear to be feasible      or practicable.      The Department referred   to a
section of the Code of Federal Regulations         which states that for cost-
reimbursement contracts     it is essential    that a contractor's    cost accounting
system be adequate for the determination         of costs applicable   to the contract.

      Both the Department and NAB indicated         that the use of cost-reimbursement
contracts    would severely limit    the number of companies that could participate
In the program.     The Department stated that, with the advent of the JOBS
program nationwide     and the participation      of a growing number of smaller com-
panies in the program, a suitable        internal   accounting procedure would be
very difficult    to find and that the ObJectives of the program could be
thwarted by the lack of an ancillary         accounting procedure.

       The Department recounted Its early problems in contracting   for the JOBS
program and acknowledged that these early methods contained flaws.       The De-
partment stated, however, that in November 1969 a new contracting      method was
established   for the MA-6, or JOBS-70 series, and that this new method was
being used for approximately     92 percent of the contracts that had been
awarded so far in fiscal    year 1971.
      In describing    Its new contracting    method, the Department stated,     in es-
sence, that the extent of training        and supportive  services to be provided by
the contractor    1s clearly  defined in the contract     by lndlvldual  cost com-
ponent and that the total cost is developed from costs established           for cer-
tain training    components on the basis of the skill      level or hourly wage rate
of the Jobs offered and for other training         components on the basis of estab-
lished amounts with maximum limitations.         The Department stated, however,
that the measure of contract      performance was not based on actual expenditures
by the contractor    but was based on the provision      of certain contract    elements
to benefit    the JOBS employee, for which the contract had set forth an
agreed-upon prxe.

      The Department stated that effective          implementation      of this contracting
process requires a satisfactorily     explicit       training   plan    and a suitable
monitoring  effort  to ensure compliance.          The Department      stated further   that
the burden remains with its field     staff      to evaluate and       negotiate  proposals
and to determine that contract    elements       are adequate to       meet the needs of
the Job and that they are not excessive          to those needs.




                                            39
      The Department stated that the determinations        of    fair and reasonable
cost levels for each contractual   element in the MA-6          contracts  are being
based on prior experience in earlier   contract     series      and concluded that this
procedure meets the requirements   for fixed-unit-price          contracts   that fair
and reasonable prices be established   at the outset of          the contract.

      We believe that, although the modifications    made by the Department in
November 1969 to its earlier   contracting  procedures may represent some im-
provement, the basic problems concerning contracting     on a fixed-unit-price
basis have not been overcome.

      Prospective    contractors   and departmental     contract negotiators   operat-
ing under the new contracting       method may still     arrive at firm fixed-unit
prices for training     and supportive    services before the contractors      have had
any cost experience in training       disadvantaged persons and before the persons
to be provided the training       and supportive    services are selected.     Since
there 1s a great variation       in need by disadvantaged persons for training         and
supportive   services,    the persons subsequently selected for JOBS training          may
not require either the quantity        or the type of training    and supportive    ser-
vices provided for in the contracts.

       Also, where either the contractors  do not provide or the trainees   do
not need the amount of training    and/or supportive  services specified  in the
fixed-unit-price   contracts, recovery of excessive payments 1s both cumbersome
and uncertain.

       We are not advocating the lmposltlon      of costly or elaborate cost ac-
counting requirements      on JOBS program contractors.      Also, we do not believe
that smaller companies should be precluded from participation            in the JOBS
program because they lack sophisticated        cost accounting systems.       We do be-
lieve,   however, that all contractors     should be prepared, in connection with
submitting    monthly invoices    to the Department for payment, to make some
reasonably specific     representation   as to the extraordinary    costs they in-
curred by reason of employing JOBS trainees.         This seems to be particularly
Important    in view of the basic concept of the JOBS program       that   only  ex-
traordlnary    costs incurred by employers be reimbursed by the Government.

       The Department acknowledged that wide variations       exist among JOBS
trainees   with respect to their need for training       and supportive  services.
Similarly,    our review has shown, in a number of instances,       that the needs
of JOBS trainees     for training    and supportive services have been no different
than the needs of regularly       hired employees.

        It is essential      in negotiating  fixed-unit-price   contracts  that suffl-
clent cost information         be available  to arrive at fair and reasonable unit
prices.      In establishing     fixed-unit  prices under its new contracting    method
(see p* 391, the Department is relying           on prices which it paid for services
under earlier      contracts,    rather than on actual cost experience in providing
such services.       On the basis of our review findings,       we believe that this
procedure does not provide           the Department with adequate cost data on which
to establish     fair and reasonable contract unit prices.




                                          40
REEDTO EVALUATE ABILITY OF
PROSPECTIVEEMPLOYERS
TO PROVIDETHE JOBSPLEDGED
       As noted in &apter 2 (p. 141, the number of Job pledges by some pro-
spective employers were unrealistically   high and not always consistent with
their ability or intention to provide the Jobs. Our reviews showed that,
in four of the five cities included in our review, the Department had en-
tered into a number of JOBScontracts which committed the contractors to
hire more persons than they could reasonably be expected to absorb in their
operations.    As a result, information on JOBSprogram activities  available
to the Congress and others did not provide a realistic   picture of industry
participation   in the program.
      Under the contract component, unrealistic Job pledges and the award of
the related contracts resulted in the obligation of funds which were not
subsequently used or were not used timely and which may have precluded the
reprogramming of the funds for use in other manpower programs.
     The Department's instructions  to its contract negotiators stress that
the contract was designed as a mechanism to achieve the stated JOBSprogram
goals of providing Jobs and related training and supportive services for
disadvantaged persons.
      The Department's contracts with employers, however, dad not require
that the stated numbex of persons be actually hired,   Therefore the contracts
provided that payments to the contractor be computed by applying the fixed
unit rate for each Job to the number of days the trainees worked in each Job.
Success in attaining program goals is dependent, in part, on the contrac-
tors' ability to hire and absorb into their businesses the number of trarn-
ees stated in their contracts.
      Departmental guidelines stress the need for contract negotiators to
carefully evaluate the ability of potential contractors to hire and train
the proposed number of trainees.    Prior to the MA-6 phase of the program,
however, the departmental guidelines did not requrre that such evaluations
be based on onsite surveys of potential contractors'   plants prior to the
award of contracts.   Specifically,  the guidelines required the negotiators
to make the following general analyses of a potential contractor's    proposal,
     --Identify   the number of persons the firm permanently employs. The
        guidelines stated that the number of trainees ordinarily     should not
        be more than 25 percent of the total number of employees. The gulde-
        lines did not clarify what was meant by llordrnarllyl' or explain the
        circumstances under which the rule could be waived. A regional De-
        partment official   advised us that the purpose of this one-fourth rule
        was to lrmlt the trainees to a number which an employer could absorb
        without seriously disrupting the productrvlty   of his firm.
     --Consider whether the firm has or ~111 have a continuum of business or
       contracts during the contract period to enable the providing of Jobs
       for the proposed number of trainees.



                                       41
       --Evaluate   the firm's   fInancEa   condltlon    and business      trend    by obtaln-
          lng a credit-rating    report.

      The guldellnes    pointed out further    that, If a contractor     should fall
substantially    to hire the number of persons speclfled      in his contract,      the
Governmeht would Incur addltlonal      admlnlstratlve   costs and would have funds
tied up which otherwise could be applied in productive          training   efforts.

        We examined the Department's   records relating   to the negotlatlon     of the
31 contracts     included In our review to ascertain    whether the contractors'
abllrty    to hire and train the proposed number of trainees had been adequately
evaluated prior to award of the contracts.

       Our evaluation      of each contractors'    actual performance toward meeting
the contract-hlrlng       goals showed that (1) two consortium contracts        totaling
$3.4 mllllon     contained unreallstlc      hlrlng goals; however, after substantial
delays in meeting the goals, changes In the consortiums'             membership resulted
In the consortiums'       being able to meet a substantial      part of their goals,
and (2) seven contracts        totaling  $6.2 mllllon    also contained hiring    goals
which were based on unreallstlc         assumptions by the contractors     as to the
number of trainees       they could hire and absorb Into their businesses,         as a
result   they fell    far short of meeting their contract-hlrlng        goals.

       At the time of our review, the contract   terms and the contractors'                   ac-
tual   performance under the seven contracts   were as follows

                                                      MA-3                        MA-4
                                                 (one contract)         (six     contracts1

Contract terms
     Number of Jobs to be filled                        100                    1,545
     Contract amounts                             $437,432               $5,764,555
     Contract periods                                    24 mos.                  24 mos.
Actual performance
     Number of trainees hlred                            25                         563
     Percent of trainees hired to Jobs
       to be filled                                      25                           37
     Number of trainees  terminated                      21                          309
     Number of trainees  still   employed                                            254
     Total contract payments                       $28,07:                     $345,028
     Average contract period elapsed                     18 mos.                      13 mos.

      As shown above, over a year (more than one half of the contract periods)
elapsed, on the average, before about one third of the trainees were hired.

      Under the MA-3 and MA-4 programs, a contractor      could be fully  reun-
bursed only for the number of trainees hlred during the first        12 months of
the contract period.   For trainees hired after the 12th month, the relm-
bursements had to be reduced to the fractxonal      part of the second 12-month
contract period that remaIned.     The departmental   guldellnes  stated that
these basx compensation arrangements were designed to encourage employers
'I*** to hire employees early UI the contract period and UI no event to hire
beyond the first  day of the 13th month."     For MA-3 and MA-4 contracts     the
contract period was 24 months.


                                            42
       Under the arrangements,     a contractor's    monetary incentive    was reduced
at the halfway point of the contract         period, because it would be only par-
tially    reimbursed for trainees    hired beyond that point.      Since the contract-
reimbursement procedure tended to discourage contractors           from hiring    after
the first     year of the contract   period,    there appeared to be little    likelihood
of full performance under the seven contracts.

      With regard to the evaluation     of the contractors'      ability  to train the
proposed number of persons, it seemed to us that the Department's            contract
negotiators   had not obtained sufficient     information   from the contractors
regarding the basis for the number of trainees         they proposed to hire.       For
example, under some contracts,     the number of trainees      to be hired was not
based on the contractors'    current levels of business activity         but on antics-
pated new business and plant expansions which drd not subsequently             occur,

      The contract  negotiators,     in our opinion,    did not obtain enough infor-
mation prior to the award of the contracts         to Judge whether the contractors'
proJected business increases were reasonable or whether their expansion
plans were reasonably firm.       Also contract    negotiators   did not make preaward
contract  survey inspections     at the contractors'     plants,  even though such in-
spections would have given them a much better understanding           of the contrac-
tors' businesses and the reasonableness         of their proposed hiring    goals.

      In the case of certain   consortiums,    the contract negotiators      did not
meet with the members but held all discussions         with the consortium agent,
which in some cases was a member, a separate organization,           such as a trade
organization,  or a subcontractor.      In our discussions     with certain   indlvid-
ual members who had not hired any trainees        regarding the basis for their
Job pledges, we were told that the Job pledges had been assigned to them by
the consortium agent, without a clear understanding         as to how many trainees
they could or would hire.     In one case, a member stated that he had made a
Job pledge to "go along with the group" without really          intending   to hire
any trainees.

      In some cases, proposals were accepted in which the number of trainees
exceeded '25 percent of the employer's     regular work force.    The Department
negotiators    acceptedonesuch    proposal because they did not accurately      deter-
mine the number of permanent employees at the employer's plant.            In other
cases, the Department's     records did not show why the negotiators      had waived
the one-fourth    rule.   We could not readily    interview the negotiators    in
question because they had left the Department.

      The   following    examples Illustrate  JOBS contracts having what we con-
sider to    be unrealistic    hiring   goals, In these cases, it did not appear
that the    Department adequately evaluated the employer's      ability to meet
proposed    hiring    goals.

      Contractor   A--This contractor     was awarded an MA-4 JOBS contract    in the
amount of $541,800 to hire and train disadvantaged          persons in 155 Jobs dur-
ing the period April 1, 1969, through March 31, 1971. As of December 31,
1969, after 9 months of the contract        period had elapsed, 78 trarnees had
been hired,    55 had terminated    before completing  training,    and 23 were still
employed.    Of the contract     amount, $17,730 had been paid to the contractor.


                                            43
Because of poor performance,   the contract was modified on January 19, 1970,
to reduce the number of trainees   to be hired to 74 and the contract amount
to $249,888

      In its proposal,       the contractor   stated that It had 65 regular employees,
about one half of whom were trainees          under a previous MA-3 JOBS contract.
Even if all the 65 employees had been considered as the employer's permanent
work force, under the Department's          one-fourth  rule the contract      should have
provided for hiring       only 16, rather than 155, trainees.          A Department
regional   office  official     advised us that the guidelines      were relaxed because
the contractor's    company represented an experimental         effort    to develop minor-
ity entrepreneurship.

       The company was established       in May 1968 as a minority      owned and oper-
ated company with initial      financing    consisting    of grants and loans from the
Small Business Admlnlstratlon,        Office of Economic Opportunzty,       and other
Federal agencies.       The company's sales consisted       prznarlly   of sales under
short-term     Government procurement contracts        and a few commercial orders.
As Justification     for the proposed number of trainees,          the company in a let-
ter transmitting     Its proposal stated that:

      "We are further       working on designs for approval and anticipated
      contracts     for 10,000 to 100,000 Fiberglass       Storage Bins, Lamlnar
      Flow Hoods, and 26' FIberglass        Whaleboats for possible national
      distribution      to Sea Scout Organizations.       This MA-4 Proposal re-
      flects     the additional    work and training   required in our fiberglass
      and boat area."        (Underscoring  supplied.)

        The proposal indicated      that substantially     all the expanded production
was to be performed with JOBS trainees.             The president     of the company told
us that It was a mistake to have attempted to train a large number of JOBS
trainees    with a small number of Journeymen who also had to malntaln             an on-
going production     effort.     He said that both efforts        suffered from this sit-
uation.     A visit  to the company by Department representatives            in December
1969 to negotiate      a modlflcatlon     of the contract     showed that 90 percent of
the work force consisted        of trainees.
      Contractor    B--Thus contractor--a     consortium   consisting    of 31 member
companies--was     awarded an MA-=3 contract    in the amount of about $3.1 million
($3,200 per trainee)      to hrre and train 970 persons during the period Au-
gust 15, 1968, to August 15, 1970. Nearly half of the contract                goal, 450
Jobs,  represented     a commitment  by   one company,   a large   department   store.

       Six months after     the award of the contract,       this company had hired only
53 trainees,    and after     12 months it had hired only 142, of which 86 had ter-
minated.     According to     the hiring     schedule in the contract,   the company
should have hired 362       trainees     during the first   6-month period and the 450
trainees   by the end of      the 12 months.

      Cur inquiries as to why the department store had not met Its goal re-
vealed that it apparently   had never intended to hire 450 trainees.    Corre-
spondence from one consortium official    to another stated that the store
had



                                            44
     I*** pledged 450 Job slots with the understandrng   that as many of
     these slots as possible would be grven to other companies who wrll
     want to enroll in the Consortrum after the deadline."

The consortium eventually  solved its performance problem by reducrng the de-
partmentstore's job slots from 450 to 76 and by brlnglng  into the consortium
new companies which pledged to hire persons for the remarnrng 374 slots.



      Department offlclals     in Detroit     and San Francisco acknowledged that
they had not adequately evaluated the reasonableness            of Job pledges for the
MA-3 and MA-4 contracts,      because of a lrmlted      number of contract    negotiators
and because of the Department's       policy,    at that time, of entering     into as
many JOBS contracts,     and In as short a time, as possible.          Department offl-
clals in San Francisco advrsed us that, beginning rn February 1970, they
had implemented new procedures for evaluating           the reasonableness    of the num-
ber of trainees   that a prospective       contractor   proposed to hire,     They sard
that conferences were held with contractors           and members of consortiums,      to
determlne their ability     to absorb the number of proposed trainees          Into their
businesses.

       These Department officials   stated, however, that, in their oplnron,
entering into contracts    with optlmlstlc    hlrrng goals was not always undeslr-
able, since in some cases the contracts       were with Industries which had not
previously   hired the disadvantaged.      They stated that in such cases the con-
tracts would be continued in force to take advantage of the posslblllty       that
the contractors    might perform and that, rf they did not perform, no real
harm was done as no money had been spent.

      Department   offlclals   in Seattle   also   concurred   in our findings.
Conclusions

      The success of the JOBS program in meeting its stated goals 1s depen-
dent, rn part, on awarding contracts         that result    in the hrrlng of the number
of trainees   that 1s provrded for in the contracts             As discussed previously,
however, a number of the contracts         we reviewed contained hiring        goals which
(1) commltted the contractors        to hire more trainees      than they could reason-
ably be expected to absorb in their busrnesses and (2) resulted                In the De-
partment's   obllgatlng     funds for the contracts      at unreallstlc    levels.      Thns
result could have been avoided by a more strrngent            lmplementatlon       of the
departmental    guidelines.

        The acceptance of unreallstlc     Job pledges and the award of JOBS con-
tracts     that provrde for the hiring    of an unreallstlc     number of trainees
has resulted      in (1) rnformatlon   on program activities     available    to the Con-
gress and others that does not provide a realrstlc           picture    of industry  par-
tlcrpatlon      in the JOBS program and (2) the oblrgatlon       of funds for the JOBS
program that were not subsequently used and whrch may have precluded the re-
programmIng of the funds for use in other manpower programs




                                             45
Recommendation   to the Secretary   of Labor

      We recommend that the Department monitor closely the lmplementatlon     of
Its guidelines    for evaluating prospective contractors' present and planned
capacity   to perform in accordance with their JOBS pledges.




                                        46
NEF,D FOR MORE MEANINGFUL EMPLOYMENT
OPPORTUNITIES FOR JOBS TRAINEES

       A slgnlflcant    number of the fobs provided by contractors           under the
JOBS program paid low wages and appeared to afford little                or no opportunity
for advancement, often they were the types of Jobs that tradltlonally                 were
fllled   with unskilled      or low-skilled      persons    In these cases it appeared
to us that very little        was being accomplished for the funds expended under
the JOBS program        This same condltlon        existed,  but to a lesser degree, un-
der the noncontract      component of the program           This condltlon   appeared to
have been caused, In substantial            part, by the lack of appropriate      depart-
mental guidelines      defining   the elements of meaningful employment for use
by JOBS program administrators.
        In October 1970 the Department, In collaboration     with NAB, promulgated
an extensive     Occupational   Opportunltles Rating System for use by contract
negotiators    in evaluating    JOBS program proposals    These new guldellnes,   If
properly implemented,      should provide for substantial   Improvement in the
quality    of Job opportunltles    provided under the JOBS program.

      The House Committee on Education and Labor's Report 866, dated Octo-
ber 27, 1967, on the Economic Opportunity  Amendments of 1967, in commenting
on the types of JObS that should be excluded from Federal manpower programs,
stated:

           "It is not intended that these programs should provide assls-
     tance which would be supportive        of firms or Industries      which have
     high rates of turnover of labor because of low wages, seasonallty
     or other factors,     Jr**   It would not, therefore,       be In keeping
     with the purposes of the act to make avallable           financial   assls-
     tance or other lncentlves       for work, tralnlng     and related programs
     for industries    which are highly mobile, labor lntenslve,          and vlg-
     orously competltlve      on a national    basis which have high labor
     turnover,    and In which the prior possession of a speclflc           skill
     or training    is not typically     a prerequisite   for employment "

      According to the departmental  guidelines  in effect during the period
covered by our review, the JOBS program was to provide disadvantaged      per-
sons with steady and suitable   employment through meaningful   full-time  per-
manent positions.

       The Department, however, had not developed a comprehensive gob-rating
system for use by the contract       negotiators   and NAB The guidelines    coun-
seled contract     negotiators  to consider wage rates and advancement posslbll-
Lties, but they provided little       guidance as to how these elements were to
be evaluated,     other than that acceptable occupations must require a specrflc
training   period,    involve a present and proJected marketable    skill,  and pay
no less than $1 60 an hour.       The negotiators,    therefore, had to rely for the
most part on their own Judgment to determine whether Job offers were accept-
able.

     In the five cities covered by our review, we analyzed the wage rates
for Jobs pledged by the 215 employers partlclpatlng in the JOBS program


                                            47
under the 31 contracts   we revlewed and by the 79 noncontract  employers we
vlslted.    We also made onsite reviews of the types of fobs pledged by a ran-
dom selection   of 62 of the 215 contract employers and obtained mformatxon
from the 79 noncontract   employers on the types of fobs they had pledged

     Our analysis  showed that, of the 6,300 fobs   pledged by the 215 contrac-
tors and of the 25,700 Jobs pledged by the 79 noncontract       employers, about
3,300 (52 percent) and about 2,000 (8 percent),   respectively,     offered start-
ing wages of $2 an hour or less.

       The high percentage of Jobs pledged by the noncontract      employers that
offered starting    wages in excess of $2 an hour was attributable      to about
21,300 Jobs that were primarily     for assembly line work in the automotive in-
dustry.    These Jobs, which offered starting   wages of from $3 to $3 50 an
hour, were pledged by three large companies        About 900 other Jobs, pledged
by contract    and noncontract employers, although offering    starting   wages in
excess of $2 an hour, provided little     or no opportunity  for an employee to
advance beyond the entry level.

      About 80 percent of the 32,000 Jobs analyzed offered both wages of $2
an hour or more and an opportunity     for advancement     This condition,  hoFever,
varied by area.    In the San Francisco-Oakland     area, about 3.5 percent of the
Jobs offered good wages and an opportunity      for advancement, compared to
about 78 percent in the Seattle area and about 85 percent in the Detroit
area.

       Analysis of the types of Jobs being offered that paid $2 or less an
hour showed that many historically   had a high rate of turnover, did not pro-
vide for permanent employment, and were the type of fobs normally filled   by
unskilled    or low-skilled persons

       For example, in San Francisco,    NAD's files   on 158 noncontract     employers
that pledged fobs in 1968 and 324 noncontract        employers that pledged fobs        in
1969 showed that 26 (16 4 percent) and 33 (10.2 percent),         respectively,      were
offering    margrnal Jobs which appeared to be In high-turnover       occupations     in-
volving minimum skills    and low wages     These included lobs as janitors,         mes-
sengers, maids, porters,    dlshwashers,   busboys, potwashers, and bar assis-
tants, many of which were at wage rates of less than $2 an hour              Similar
Jobs were also being offered by noncontract        employers in the other four
titles   included in our review.

       The effect   of accepting pledges for low-wage Jobs was pointed out to
the Department 1~ a letter       dated February 28, 1970, from the Director,  Call-
fornla Department of Human Resources Development, to the Regional Manpower
Administrator     in San Francisco     The letter stated, In pertinent  part, as
follows
     "Several of our field     offlces have expressed concern about the
     number of NAB Jobs which offer a low entry wage. The offlces            re-
     port that many of these Jobs are duplicates       of traditionally    low
     paying occupations    that have been unacceptable    for training    pur-
     poses.   There is a basis for this concern when you consider the
     volume of MA-4 and MA-5 contracts     that have been awarded in
     which all or part of the occupations have a starting          wage of less

                                            48
     than     $2.00 per hour       A recent check showed that of 100 MA-4 con-
     tracts      awarded to train 6,548 trainees,     26 contracts   to train
     1,124     trainees   listed   an entry wage below the $2 level,    and of 30
     MA-5     contracts   awarded to train 1,397 trainees,     10 contracts   to
     train     517 trainees     showed a similar low entry wage

     "A large proportion   of disadvantaged people now enrolled   rn our
     employability  programs are from families   depending upon welfare
     for their subsistence     The state average size of a family on
     welfare is 5.7 people     If you apply this average family size to
     the NAB-JOBS income criteria,    you arrive at a poverty level fig-
     ure of $4,200 per year.

     "Based on a 40-hour work week, an hourly wage of $2 00 would al-
     low an annual income of $4,160.     It would seem that an entry wage
     at or below $4,200 per year would not be solving the problem of
     poverty for a large number of disadvantaged     persons, but on the
     contrary,  would be only perpetuating   the problem     When you con-
     sider that the employer receives full reimbursement for wage
     loss during the time the trainee is not on CUT [on-the-Job-
     training]  training, and 50 percent of the wage loss while
     trainee is on OJI, it would appear reasonable to insist      upon an
     entry level wage which exceeds the poverty level as defined in
     the NAB-JOBS Income criteria."
       A Department    of Labor letter      dated October 5, 1970, to State Employment
Security   Agencies    stated that a review had been made of 277 JOB5 contracts
(13 percent of all      fiscal    year 1970 JOBS contracts     awarded through June 5,
1970)     The letter     indicated    that, had the new guidelines    for rating Job
proposals (see p       47) been in effect       at the time the 277 contracts   were pro-
posed, 22 percent      of the occupations      would have been found unacceptable    and
another 15 percent      would have been considered marginal.



       Officials   of the Manpower Administration   rn Seattle stated that in
their opinion there were no "dead end" Jobs; every job could motivate         an in-
dividual     to want to better himself    The Regional Manpower Administrator    in
Seattle advised us that only seasonal Jobs were specifically        excluded under
Department criteria.

      The Associate Regional Manpower Administrator        in Chicago agreed that
during the early part of the JOBS program many contracts         were awarded for
low-skill  Jobs offering    low wages. He stated also that during 1970 the re-
gion had established     $2 an hour as the minimum wage for trainees under JOBS
program contracts,    and, therefore,  contracts  offering    low wages, such as
those previously   entered into, would no longer be awarded.

       The Assistant Regional Manpower Administrator            in San Francisco   advised
us that the regional    contract   negotiators'      evaluation    of the acceptability
of a Job was based on the departmental          guidelines    which stated that a Job
should not pay less than $1 60 an hour             He stated, however, that some low-
paying Jobs represented     a breakthrough      for mlnorltles     Into certain  lndus-
tries,   this made their placement in such Jobs desirable


                                             49
      NAB officials    in Detroit    commented that they did not believe NAB should
be selective     in accepting Job pledges by an employer and that, as long as
the employer was paying the going wage, the amount did not matter              In San
Francisco NAB officials      stated that any Job pledge which offered the mini-
mum wage of $1 60 an hour was acceptable.           In Oakland NAB offlclals   stated
that Job pledges were not screened to eliminate          low-wage or low-skill   Jobs
which were traditionally      filled   by disadvantaged persons

Conclusions
       The Department's    and NAB's acceptance of employers' Job pledges which
do not provide meaningful       employment opportunities      in terms of wages and
advancement possibllitles       does little to assist disadvantaged      persons In
obtaining   meaningful    employment-- the objective     of the JOB3 program

      We recognize that many of the Jobs on the labor market paying less than
$2 an hour are essential      and provide employment for large numbers of persons.
Many of these, however, are the types of Jobs which traditionally        are filled
by unskilled   or low-skrlled    persons   Accordingly,  in our oplnlon,  the use
of Federal funds to fxnance tralnlng      in such Jobs does not accomplish the
stated obJectives   of the JOBS program and does not appear to be Justified.

      On the basis of the comments we received from certain    local offxxals
of the Department and NAB, it appears to us that there 1s a need for the
Secretary of Labor to reemphasize to all local offlclals    that the goal of
the JOBS program is to assist disadvantaged persons in obtaining     meaningful
Jobs.
       The newly developed guidelines  for rating Job pledges by prospective
contract   employers, if properly implemented,   should aid materially in ob-
taining meaningful Jobs for disadvantaged persons.
Recommendation   to the Secretary   of Labor

      To upgrade the quality  of fobs pledged by prospective  noncontract  em-
ployers,  we recommend that the Department adopt guidelines   for rating Jobs,
offered by noncontract  employers, similar   to those adopted for contract  em-
ployers.
      The Department advised us that NAB had endorsed the 'Job-ratlng-system
guidelInes  for the noncontract  pledged Jobs and stated that the implementa-
tion of the Job-rating   system (see p. 47) would have an upgradlng effect on
the total program.




                                         50
IMPROVEMENTSNEEDED IN PROCEDURES
AND PRACTICES FOR ASCERTAINING AND
DOCUMENTINGELIGIBILITY OF PERSONS
FOR ENROLLMENTIN THE JOBS PROGRAM

      Substantial     improvements are needed in the procedures and practices             for
ascertaining    and documenting the eligibility         of persons for enrollment       m
the JOBS program.         Our tests of eligibility     of trainees reported as hires 111
the JOBS program showed that a substantial            number of the trainees     either did
not meet the eligibility         criteria established    by the Department or could not
be identified     readily    as having met the criteria,       because pertinent    lnforma-
tion either had not been obtained from them or had not been reported to NAB.

       Even where the trainees'     eligibility        appeared to be documented in the
files,   there was no reasonable assurance of its accuracy, because the De-
partment's    enrollment   procedures did not provide for any verificatron                of the
information    provided by prospective         enrollees   regarding   their eligibility,
Also, the enroll%        of persons in the program from outside the target popula-
tion diverted     Job opportunities    from the disadvantaged         and, in the case of
the contract    component, resulted      in dissipating       Federal funds.

       The established  eligibility      criteria for enrollment  in the JOBS program
provide that persons must be poor, do not have suitable          employment, and are
either   (1) school dropouts,       (2) under 22 or at least 45 years of age, (3)
handicapped,    or (4) subJect to special obstacles to employment.

        Persons who are subJect to special         obstacles to employment are (1) un-
skilled    workers who have had two or more spells of unemployment totaling
15 weeks or more during the past year, (2) workers whose last Jobs were m
occupations     of significantly       lower skill  than their previous Jobs, (3)
workers who have family histories           of dependence on welfare,    (4) workers who
have been permanently laid off from Jobs in industries             which are declining
m their region (e.g.,          agriculture   and coal mmmng),and (5) members of ml-
nority    groups.

     Poor persons are defined as those whose families   receive cash welfare
payments or whose net incomes in relation  to family sizes and locations    do
not exceed specific  income levels defined in the OEO Poverty Guidelmes.

        The following   were our specific      findings   for   the contract    and noncon-
tract    components.

Contract    component

       In the five cities         covered by our review, we selected for a review of
their eligibility          for enrollment     III the JOBS program 7,700 trainees       from the
15,890 trainees        reported as hired from the inception          of the program through
March 20, 1970. The 7,700 trainees                included 7,278 trainees    for whom the
contract   employers had submitted hire cards to NAB and 422 trainees                   selected
on a random-sample basis from the 8,612 trainees                 for whom the contract       em-
ployers had not submitted hire cards.                 Our review was directed    specifically
toward determining           whether the persons hired were poor as defined in the
Department's      eligibility       criteria.



                                               51
      We reviewed the information    on trainees ' family incomes as shown on
the hire cards submitted by the employers, and we supplemented that mforma-
tion by examining,    on a test basis, information    contained in the certifica-
tion documents on file     at CEP and the State Employment Service offices.
Also, we interviewed    various tramees,     examined personnel folders, and re-
viewed certain   State payroll   tax and welfare agency records.

         Of the 7,700 trainees covered by our review, we could not ascertain    the
eligibility     of 3,882, or about 50 percent,  because the hire cards submitted
by the employers did not show family      rncomes or sizes.   Related records at
CEP and the State Employment Service offices      either did not show family In-
comes or size, or were not available,      or had been destroyed,

        For the remaining 3,818 tramees,       our review showed that 535 had family
incomes which clearly         exceeded those permissible  for their inclusion m the
disadvantaged     category and that 3,283 appeared to meet the income eligibility
criteria    on the basis of data which they had given either to their employers
or to certifying      officials    at CEP and the State Employment Service offices.

       The following      table   presents     a summary of our findings           concerning
trainee eligibility.

                                                                      GAOflndings      on
                                    Selected                       eligibility     status
                   Trainees          by GAO                                            Insufficient
   city             hired         for review           Eligible         Ineligible       information

Detroit             12,501           5,215                1,624             232             3,359
Oakland                 819             555                 307              51               197
Portland                352             224                 137              27                60
San Fran-
  ClSCO                1,571         1,068                   682            200                 186
Seattle                   647           638                  533             25                  80

      Total         15.89Cj          7,700                3,283             535             3,882
      The Department's      policy does not provide for any verification           of
statements by an applicant         regarding family income or other information         fur-
nished to establish      his eligibility       for enrollment    in the program.    The De-
partment's  instructions       state that applicants       generally   will be able to
provide only estimates       of their family       incomes and, in some cases, may not
know their family     incomes.       The instructions     state further    that.

          "As investigations will     not be appropriate,     or 'proof' required,
          the Judgment and skill     of the interviewer   will be controlling."

      Department officials   advised us that the policy of not verifying  m-
formation   supplied by prospective  trainees was intended to preclude giving
the JOBS program the appearance of a welfare program.

      In each of the five cities,   we found instances where CEP's or State
Employment Service's   records clearly  showed that applicants      were ineligible.
This was particularly   prevalent  in San Francisco,   Oakland, and Detroit.         In
San Francisco and Oakland, some local officials      were following    State


                                                  52
rnstructions --which were at varrance      with   the Department's    mstructlons--m
screening prospective  tramees.
       The California     Department of Human Resources Development had Issued to
the local offices      mstructlons         which drffered  m varrous aspects from the
JOBS program elrglbrllty         crlterra.      The most slgnrflcant difference  was the
lnstructron    to its local certrfyrng          officrals to use net wages, or take-home
pay, for determlnxng family income rather than gross wages, as specrfled               m
the Department's      rnstructrons,

     In addltlon,    records avallable  m San Francrsco and Oakland often did
not show the basis on which applicants    had been certlfled  for enrollment   ln
the program,    Also, records for many applicants   were not available,  because,
under the State's policy,    such records were destroyed after one year.

       An offlclal      of the Calrfornla    Department of Human Resources Development
stated that his office had followed           the Department of Labor's policy     of not
requlrrng    verlfrcatlon       of the mformatron    furnlshed by applicants.    Moreover,
he said that his office          did not want to malntaln records of ellglbrllty      de-
termmations,       because such records would facilitate       auditing   and would permit
the certlfylng       officials'     Judgments to be "second guessed" by others.

       Our examrnatlon of certlflcatlon          records on file at the Michigan Em-
ployment Security        Commlsslon rn Detroit      showed a number of instances where
applicants   had been certlfred       as ellglble     for enrollment m the JOBS pro-
gram, even though the records showed that their famrly incomes exceeded the
prescribed   ellglblllty     criteria   mcome levels.

       The JOBS coordrnator   for the Cormnlsslon informed us that, at the' start
of the JOBS program, his office      had not recerved any ellglblllty      guidelines
and, therefore,     drd not assume any responsrblllty     for improper certlflca-
tlons durrng the MA-3 program.       He also stated that the State Employment
Service was not phllosophrcally      attuned to lnvestlgatmg     and verifying
statements made by clients      and, therefore,  might not have been as critical
III Its lntervlewlng    under the JOBS program as rt should have been.




                                            53
Noncontract     component

       Our review showed that rt was highly uncertarn what proportion                    of the
trarnees enrolled    in the noncontract  component were drsadvantaged,                  even
considerrng    the Department's very broad defrnltlon  of that term

       The eligrbllity      criterra    applicable     to the contract   component are
equally applicable        to the noncontract       component.   Noncontract     employers,
however, are permitted         to self-certify      trainees--i   e , they make eligrblllty
determinations       rather than obtain a certification         of eligrbllity     from the       h
local Employment Service office            or from CEP administrators        as must be done
under the contract        component

       In its instructions     to noncontract    employers, NAB advised them that
they were not expected to use costly,         elaborate,   or probing verrfrcatlon     for
self-certrficatron      and that prehirlng    screening techniques needed to be no
more extensive     than those normally applied for other Job applicants            NAB
accepts the hrre cards submitted by the employers as notification              that the
trainees meet the elrgibllity       criteria

      Noncontract  employers in the five crtres covered in our review reported
that 63,709 trainees had been hired under the JOBS program through March
1970    They had submitted,  however, only 38,193 hire cards to NAB Of these,
only 7,237 (19 percent) contained sufficient     information  to enable us to de-
termine whether the trainees were eligible     to participate   in the program

      Of the 7,237 trainees    for whom adequate information      was available,
2,042 (28 percent) had reported family incomes to their employers which
exceeded those permissible     for their inclusion     in the disadvantaged     cate-
gory 0  A  summary   of the number  of trainees  hired,   hiring  cards  submitted,
and trainee eligibility     as determined by us 1s shown in the following         table.

                                                            Ellglbllrty      status as
                                                            shown on the hire card
                   Trainees     Hire cards                                         Insufficient
     City           -hired      submrtted          Eligible       Ineligible       lnformatlon

Detroit             46,849         34,169            4,193            1,704            28,272
Oakland              5,643          1,884               243              109            1,532
Portland             4,269             479              314               17               148
San Francisco        3,770             928              235              135               558
Seattle              3,178             733              210               77               446
     Total          63,709                           5,195                             30,956
        In the San Francisco and Oakland areas, from the 1,010 employers who
had pledged Jobs under the noncontract    component, we selected 27 on a random-
sample basis and discussed with them their procedures for determining    the
elrgibllrty    of JOBS trainees

       Of the 27 employers,    17 told us that they had followed no speclfrc    pro-
cedures in determining     the eligibility   of the trainees  that they had re-
ported as hrred under the JOBS program, five told us that they considered
trainees   to be eligible   if they met any one of the several elements of the


                                              54
poverty crrterla,  such as berng from a mrnorrty group, regardless  of whether
or not they were poor, and the remanning five told us that they had followed
the Department's  prescrxbed procedures for determlnrng ellglbllrty

        In Detroit,   of 22 randomly selected noncontract employers whom we In-
tervrewed,     16 stated that they consldered all new employees to be elrglble
for the JOBS program and that they had made no attempt to determine whether
newly hlred employees were disadvantaged under the Department's       ellglbrlxty
criteria       'Ihe remalnrng SIX employers stated that they had screened ap-
pllcants    In accordance with the prescrrbed crlterra

      In Seattle and Portland,          of 17 noncontract     employers whom we inter-
viewed,   10  stated   that   they   had   determined   the  elrgrblllty    of JOBS trainees
by using the Department's          prescribed    family srze and Income crxterla       as
provided by NAB,      SIX   stated    that  they   had obtained    trainees  from CEP,   the
State Employment Servrce, and other local agencxes and therefore                  did not do
any certifying,      and the remaining employer said that he decided whether per-
sons were drsadvantaged by ascertarnlng              whether or not they could write and
speak good English



       Representatives  of the Department's regronal         offices  in Chicago, San
Francrsco, and Seattle agreed that some lnellglble            persons had been en-
rolled   in the JOBS program

       A Seattle regional  offxral   advised us that CEP In Portland did not do
an adequate Job in screening applicants      and that CEP intended to conduct
tralnrng   sessions concerning elrglbllrty    certlflcatlon

      Offlclals   of the Callfornla     Department of Human Resources Development
agreed that some local Employment Service offices           were using Improper cri-
terra for certlfylng    the ellglblllty     of persons for partlclpatlng     In the
JOBS program.     They stated that rnstructrons      settrng forth the proper crl-
terra for use would be issued to the local Employment Service offices

      Offlcrals  of the Mrchlgan Employment Securrty Commrssron and the De-
troit  CEP commented that the departmental   gurdellnes were ambrguous and
caused confusron     They stated, for example, that the guldellnes   were not
clear as to whether gross or net incomes should be used for determrning
whether persons' family incomes were wrthrn the prescribed     income limita-
tions

        The drrector   of the NAB metro offxe       in Oakland told us in August 1970
that the office had recently      become aware      that private  employers were sub-
mitting    hire cards whrch showed that some        trainees were lnelrgrble   for en-
rollment     in the program    He said that the       hire cards previously  had been
sent directly      to NAB rn Washington.

       The director  also   informed us that lnelrglble        trainees had been in-
cluded in the number of       trainees hrred m reporting         on program accompllsh-
merits    He also stated    that noncontract      employers frequently     did not under-
stand the Department's      ellgrblllty   crlterla     or that they assumed that the


                                              55
agency that referred   an applicant       had determlned    that   he was ellglble    for
enrollment  In the program

Conclusions

      As noted rn a previous sectlon of this report (see p 261, we believe
that the Department's   prescribed  ellglbrllty    crlterla       for the JOBS program
are far too broad and encompass many persons who have no clear and legltl-
mate need for the type of assistance      provided under the program.           Apart
from this, however, our review has shown that a number of persons from out-
si.de the designated target population      have been enrolled        In the program as
a result  of laxltles  in applying the prescribed       criteria.       Thus, the effec-
tiveness of the JOBS program In asslstlng       the disadvantaged        In obtaining
employment appears to have been llmlted.

       With regard to the noncontract      component of the JOBS program, we are
of the view that the Department and NAB have a very llmlted          basis for con-
fidence that employers are hiring        only those persons who are disadvantaged
under the Department's     defznltlon    of that term    We also are of the view
that the Department and NAB should take steps to reasonably ensure that ap-
plicants   under the noncontract      component are screened on a basis comparable
with those In the contract      component      In the absence of such assurance, re-
ported hlrlngs    under the noncontract      component should be clearly   labeled as
unverlfled

Recornnendatrons    to the Secretary     of Labor

       We recommend that the Department develop more exacting procedures for
screening prospective      trainees.      Such procedures should provide for reason-
able substantlatlon      of those elements upon which eliglblllty            determinations
are based, particularly       applicants'    statements as to their family incomes
In our opinion,     It 1s not realistic      to accept such lnformatlon        wrthout verlfy-
lng It, at least on a test basis            The necessity      for confirmIng,    through ap-
propriate   tests and other means, lnformatlon            that provides the basis for
Federal benefits      1s a well established      practice

      With regard to the noncontract   component, we recommend that the Depart-
ment and NAB take the necessary steps to ensure that trainees hired by non-
contract  employers are comparable to trainees hired by contract employers
We recommend also that the Department explore the feaslblllty       of having NAB
request noncontract  employers to hire trainees    only through CEP, WIN, and
the local Employment Service offices    and to report as hires only those per-
sons who have been  certlfled  as disadvantaged   by those agencies
                  .
       In commenting on our recommendation the Department stated that the
State Employment Service agencies were responsible         for certlfylng the ellgl-
blllty   of JOBS partlclpants,     that the caliber  of work performed by these
agencies varied widely,       and that efforts  to upgrade performance were contin-
uing

      With regard to the noncontract  component, the Department has stated
that, In the selection  of employees, there 1s clearly  a llmlt  to the amount
of persuasion that can be applied to an employer who 1s partlclpatxng    rn the
program on a voluntary  basis

                                              56
      The Department advlsed us that, wlthln        existing  procedures,  It   might
request veriflcatlon     of family income data,     but that this presented     other
human problems, and that It was prepared to         discuss with appropriate     counsel-
ing and placement officials       the possibility   of developing additional     criteria
to indicate    Job readiness

       The Department further     stated that our observations      regarding the ef-
fectlveness     of certlflcatlon   were contrary to the most recently        collected
information     regarding enrollee    characteristics     for both the contract     and
noncontract     components of the program         In support of its position,      the
Department cited certain reports of overall           average data on the demographic
characteristxs,       such as years of education,      family sizes, and incomes, of
enrollees inthe MA-5 and MA-6 phases of the program

       In our opinion the use of overall         average data to evaluate persons'
individual   ellgibllity      for the JOBS program does not provide an appropriate
means for testing        the effectiveness    of ellglblllty certlflcatlon    The same
data would show that about 40 percent of the persons enrolled had at least
high school educations and that data on ages, numbers in family,           and family
incomes varied slgnlflcantly           among the enrollees

      Our evaluation of the effectiveness    of certification   was made on the
basis of lndlvldual  ellglblllty   and thereby avoided the use of average data
on demographic characterlstlcs    which tended to be misleading    when used for
that purpose




                                            57
BETTER COORDINATIONWITH THE
CONCENTRATEDEMPLOYMENTPROGRAM
NEEDED TO FILL JOBS OPENINGS

        Our review showed that enrollees     in CEP were not always given first
priority    in filling openings in the JOBS program.        The Department's   policy
statements and related    instructions   provide that, beginning with the MA-4
program, CEP should be given first      priority   rn referring   disadvantaged per-
sons for enrollment    in the JOBS program

       Both the CEP and JOBS programs were expected to benefit from such coor-
dination     The JOBS program would have a source of trainees   from an agency
that worked with persons having the greatest need for training      and employment,
and CEP would solve a long-standing   problem of finding   Jobs for the popula-
tion it was serving.

       CEP is a manpower program designed to help those most in need of assis-
tance to become employable and to obtain employment        The program is focused
mainly on specific   target areas in the inner-city   ghettoes of the Nation's
largest   cities.  Enrollees  in CEP are provided with a variety    of supportive
services and skill   training

     The Department and NAB have clearly        stated the benefits    to be derived
by a close linkage of the JOBS program and CEP. A letter           dated May 27, 1968,
by the Department's  headquarters    office   to its Regional Manpower Administra-
tors explained the intended relationship        between CEP and the JOBS program
and stated that the local CEP staffs       should be made fully    aware of the abun-
dant possibilities  available   through close coordination      of CEP and NAB In
commenting on the advantage of using CEP, the letter        stated.

     "The CEP can best identify,         recruit,   refer and certify    the eligi-
     bility  of individuals     for participation       in the NAB/JOBS program.
     *** The coordination     of the CEP and NAB/JOBS programs can yield
     maJor benefits    to each       CEP programs have been plagued by diffi-
     cultres  in finding    suitable     outlets  for enrollees    after the orien-
     tation periods or they have been placed in a holding status.                 The
     NAB Job development effort        can be an important      source of employ-
     ment for these enrollees.         -k-k-k"

     The letter   went on to state     that.

     I**** the existence   of a recruiting     mechanism and a well-rounded
     package of supportive    services offered by the CEP can insure a
     smooth flow of hard-core unemployed persons into NAB Job openings
     and help increase the retention       rate for such placements.'I

      The above-mentioned  letter    followed a letter    dated May 15, 1968, by
the Department's  headquarters    office    to its Regional Manpower Administrators
which stated that the language in the MA-3 request for proposal,         regarding
the need for employers to use CEP, was very weak and open to interpretation
The letter  recommended that, as a part of the review and evaluation         of these
JOBS proposals,  the Regional Manpower Administrators.




                                               58
     Ir*** require contractors        to agree that the CEP's will be the primary
     source of recruitment        for employee-trainees.   Only after the CEP
     has certified      m writing     that it is unable to supply the recruits
     within the appropriate        period of time should the contractor   be
     permitted     to recruit   through the Employment Service."

       The Department's   MA-3 program instructions     had specified  that CEP and
the State local Employment Service offices        would be the primary source of
trainees,    however, the Department's   MA-3 request for proposal stated that
employers would be allowed to directly       recruit   persons for program partici-
pation,   the only requirement    being that recruits    had to be certified  as
elzgible   by CEP or the State Employment Service.

       Because of the provision   in the MA-3 request for proposal allowing    con-
tractors   to recruit   trainees directly,   Department regional officials  in
San Francisco advised us that they were unable to require MA-3 contractors
to obtain trainees    from CEP on a priority    basis

      Under MA-4 contracting   procedures which became effective   in September
1968, the contractors    were required to use CEP, where operational,      as the
first  referral service for trainees      Use of any source for referrals,     other
than CEP or the State Employment Service, had to be approved in writing          by
a Beglonal Manpower Administrator

     NAB guidelines,   dated December 1968 stated     that

     "The CEP 1s an ideal source of hard-core unemployed persons seek-
     ing work, as well as a supplier of support services, for the Job
     openings obtained by the NAB "

     The reference to CEP, however, was in the nature        of a suggestion   to the
noncontract  employers and not a firm requirement

       In March 1969 the Department issued to the State Employment Services
instructions,   applicable   to contract and noncontract   components, which
stated that CEP should have a 48-hour preference       in referral  of persons to
the JOBS program.      On January 23, 1970, WIN was ranked along with CEP as
having the 48-hour preference.

        We examined the 31 contracts    included In our review to determine the
referral    sources that the contractors     were required to use, and we visited
62 contract    employers and 79 noncontract     employers to determine the referral
sources that they had used to obtain trainees            We also discussed Job re-
ferrals    and placements with representatives      of CEP in the five cities
covered by our review and reviewed CEP's procedures for referring           persons
to the JOBS program

      CEP referrals   of persons to the contract    and noncontract  components of
the JOBS program consisted      of two groups:   (1) persons who had been enrolled
in CEP for preJob training      and (2) persons who needed Job referral     assis-
tance only.     CEP records indicated   that the number of enrollees    actually
hired under the JOBS program was small.        A comparison of CEP placements in
the JOBS program with total estamated JOBS hires at the time of our reviews
in the five cities     follows,

                                           59
                                             Estimated      CEP referrals   hrred
                             Period          number of          CEP        Other
                             covered       JOBS trainees    enrollees     persons

       San Francisco       11/68-   l/70         3,696          283           216
       Oakland and
         Richmond          11/68- l/70           6,231          214            343
       Detroit             12/68- 4/70          37,025           35a        1,935a
       Seattle             10/68- 3/70           2,843          186            276
       Portland            10/68-12/69           3,367          281             20

aRepresents the number of referrals;        records   were not available    on number of
 persons hired

       The reasons why CEP was not used to a greater degree as a referral
source varied from city to city.           The most slgnlfxant    reason, however, was
that the noncontract       employers, who employed about 75 percent of JOBS
trainees   on a nationwlde     basis, did not as a general practice       choose to use
CEP as a referral     source      NAB officials    advised us that there was no prac-
tical   way to require them to use CEP. Our discussions           with the 79 noncon-
tract employers in the five titles           showed that they used various sources to
obtain trainees    to fill    Job pledges, such as gate hires and referrals        by
employment agencies and various community action agencies.

        To implement the contract    reqrurement that MA-4 contractors     obtain re-
ferrals    from CEP or the State Employment Service, Department procedures pro-
vided that the State Employment Service contact contractor          employers soon
after JOBS contracts     were awarded and obtain Job orders for trainees.         At
the time that a contractor      indicates    that he is ready to interview   and hire
persons, the State Employment Service is to allow CEP a 48-hour priority             to
fill    the order    If CEP waives   the  priority  or  cannot fill the  Job order,    it
is to be sent through the regular State Employment Service channels

      We found that MA-4 JOBS contractors   bypassed this system, or partially
bypassed it, by selecting   applicants  for trainee positions    from other
sources, such as gate applications,    and by referring   them to the Employment
Service to be certified    Under this procedure, CEP played no part in fill-
ing the Job orders

       The contractors   who obtained their trainees    in the manner described
above advised us that they did so for one of the following         reasons.   (1)
they had previously     agreed with a subcontractor    that he could supply the
trainees;    (2) they wanted to use the referral     sources that they had used rn
the past, particularly      community programs, such as Youth for Service,     so
that they could protect      their image in their neighborhood,    and (3) they were
dissatisfied    with the referrals    from CEP and the Employment Service.



      Offxials     of the Department's regional offices      in Chicago, San Fran-
cisco, and Seattle agreed that there was a need for          more coordination and
cooperation    between JOBS program and CEP




                                           6G
      California     Department of Human Resources Development offrclals        at the
headquarters     level said that they drd not like employers'       direct  selections
of trainees     because thus practrce    resulted   In a "rubber stamping" at CEP
whrch would be required to certify         those selected     They said also that the
local CEP offices       should take every advantage of the JOBS program to place
therr enrollee      graduates

Conclusions

         Improved controls        and procedures are needed for effective   coordination
between the JOBS program and CEP. It appeared to us that contract                employers
were, 1.n certain         Instances,   seeking to mlnlmlze the dlfflculties   involved   in
fulfilling       their contract      commitments by carefully  screening and selecting
trainees      from the broadly defined eligible        target population--a  process
frequently       referred     to as creaming

      Although we recognize that adequate consideration       must be given to
JOBS contractors'   problems in hlrlng    disadvantaged  persons and to their
desire to preserve relatlonshlps     with other community assistance     organlza-
tlons, we are of the oplnlon that real progress under the JOBS program de-
pends on the hiring    of truly disadvantaged    persons

Recommendation    to the Secretary     of Labor

      We recommend that     the Department.

      --Take the necessary steps to ensure that contract            employers under the
         JOBS program give CEP and WIN the highest priority           in filling train-
         ing openings

      --Instruct  CEP and the Employment Service to refrain    from certifying
         persons selected in advance by the contractors,    or subcontractors,
         unless there is adequate Justification  that the trainee    openings
         could not have been filled by referral  from CEP or WIN.

       The Department did not comment on the second part of our recommendation.
With regard to the first   part, the Department acknowledged that there had
been some difficulty   in effective   coordination    between JOBS employers,  local
CEPs, and other federally    financed programs, such as WIN, which might have
been able to refer disadvantaged     applicants    to JOBS openings.   The Depart-
ment stated that the maJor factor contributing        to this problem was the loca-
tion of the CEP target area in relatxon       to the location   of the JOBS con-
tractors

       The Department stated that the CEP target community was often restricted
to a small Inner-city         area which might be a considerable       distance from the
areas in which JOBS openings were located;             that urban-suburban     public trans-
portation    facilities      were frequently     poor and private  transportation     to the
Job site was not always available,            and that, although the JOBS contract
package includes        transportation    assistance,   these monies could be used only
for relatively        short periods untrl the JOBS employees were able to arrange
for their transportation.




                                              61
      The Department stated also that a number of JOBSemployers had estab-
lished transportation  networks to alleviate the problem and that, In these
instances, the employers could reallstxally   make use of CEPapplicants.




                                     62
    NEED TO ENSURE THAT CONTRACTORS
    PROVIDE REQUIRED SUPPORTIVE SERVICES

           In our opmlon, one of the more significant    problems in the contract
    component of the JOBS program was the failure     of certain   contractors    to
    provide trainees with supportive  services.     Our review of contractors'       per-
    formances under the 31 contracts  III the five crties    that were covered rn
    our review revealed that 17 of the contractors     were providing    substantially
    fewer services than were required by the contracts.       Each of the 17 contrac-
    tors, however, was being pald as rf the services had been provided.

          Under the JOBS contract component, employers generally               are required to
    provide supportive      services,    along with on-the-Job trammng,          to tramees.
    Supportive services are directed          to lncreasmg     the trainees'    employability
    and stability     so that they become fully       productive    employees.     The range of
    supportive    services typically      provided for,    as  described   in  the  Department's
    request for proposal,       lnclude-

r         --Initial   orientation    and counseling,    rncludrng employee orientatron
             111program ob-jectives,    and prellmlnary   assessment of the vocational
             and personal attitudes     and potential   of each rndrvldual.

          --Job-related       basic    education,   uzcludmg     basic     reading   and wrltmg
             skills.

          --Special       counseling   and Job coaching,        related     to inplant,      Job-related
             actlvltles      and problems.

          --Medical       and dental    services,   including    initial     examinations.

          --Supervisory  and human relations   tralnlng             for    the tramees'       supervl-
             sors and other regular employees.

          --Transportation.

          --Day care.

          The Department's   contractuzg  procedures            provide for a prospective    em-
    ployer to develop and submit an lndlvldually                tailored  JOBS program proposal
    which includes a brief narrative     descrrptlon            of the training   and supportive
    services to be provided.

          The procedures require the Department's           contract    negotiators    to (1) de-
    termine whether a proposal demonstrates a clear understanding                 of each pro-
    gram element and describes a reasonable method for providing                 the training
    and other services during the contract           period and (2) evaluate each of the
    elements for sufficiency      and acceptability.        For example, when a proposal
    provides for transportation      assistance      to tramees,     the Department's      con-
    tract negotiator    1s required to determine whether the proposal is based on
    a realxtrc    assessment of the adequacy of public transportation               and whether
    the special assistance     proposed is sufflclent.

           The contract negotiator   1s also required to make an analysrs                     of a pro-
    spective contractor's    capacity to provide the proposed supportive                      services.


                                                     63
The handboolc for the JOBS program states that a contract employer's person-
nel responsible     for providing   supportive   services should possess the neces-
sary training     or experience qual1ficatlons.       For example, the negotiation
guidelines    state that specialized     counseling    usually requires the profes-
sional qualifications      of personnel managers, psychologists,       or lawyers, as
appropriate.

      The handbook provides that contract       employers may arrange for outside
organizations    to provide the supportive    services on a subcontract     basis.
Such organizations     include CEP, Opportunities     Industrialization   Centers,
Skill   Centers, and others which have the capability         to provide the needed
services .

        The MA-4 negotiation   guidelines    stated that a contractor's      proposal,    as
finally    accepted, must be included as part of the contract         in order to bind
the contractor      to perform in accordance with his proposal.         The guidelines
stated also that, If a contractor         was required to provide certain       supportr.ve
services , mandatory language, such as the contractor         shall,    should be used,
if providing     these services was optional with the contractor         then permissive
language should be used, such as the contractor          may.
        We reviewed the negotiation          records for the 31 contracts          to determine
whether the proposals had been adequately evaluated and visited                      contract
employers and their subcontractors              to determine whether the required ser-
vices had been provided.            One of the 31 contracts        did not require the con-
tractor     to provide any supportrve services to the tramees.                    The contract
employers, under 17 other contracts,               were either provldlng      none of the con-
tractually      required supportive        servrces or substantially        fewer services
than    required by the contracts.            Of the 17 contracts,      12 were small compa-
nies (fewer than 500 employees) and five were large companies or consortiums.
Although the contractors           did not provide the required services,            they were
paid as rf the servrces had been provided.
        The contracts      often contained permissive         language in describing       when,
how, and to whom a specific            service was to be provided or contained general
and vague language concerning the services to be provided,                     thus giving the
contractors       extensive latitude       as to what constituted       performance under the
contracts.        For example, a contract         stated that remedial education would be
given to trainees         as needed, and other contracts          stated that minor medical
services would be given and that counseling would be available.                         In these
cases, the contracts          provided for payment for the services for all trainees,
even though such permissive            language was used.

      We also no&d instances where a contractor      had no written   agreements
with its subcontractors    specifying the supportive   services that were to be
provided or how they were to be provided.      As a result,    there were misunder-
standsngs regarding what services would be provided to traulees,        how they
were to be provided,    and who was to provide them.

      We also found that some small employers had not provided the required
supportive     services,  because they did not have the in-house capability    to
do so and had not made arrangements for the services to be provided by other
organizations.       For example, the manager of one company told us that under
the contract he would have had to give orientation,        co~sellng,    and basic
education to the trainees,       arrange for their medical examinations,

                                               64
transportation,       and the like,   and at the same tune manage the busmess.          He
said that he sunply drd not have the tune to do SO* We found also that cer-
taln small employers did not appear to fully            understand the purpose of sup-
portlve     servrces.    This  was  particularly   true   In the case of short-form   con-
tracts    Issued under the MA-4 program.         Under  these   contracts the employers
were automatrcally       allowed $850 to provrde a designated range of supportive
servrces.

      We also noted rnstances where contractors     provided substantrally     fewer
supportive    services than required by their contracts,    because, III their
opmlon,    It was not necessary to provide the services m the manner or to the
extent requzred by the contracts,      In these cases the changes concerning what
would be provrded were made unilaterally      by the contractors   wlthout prior
approval of the Department or wrthout modlflcatlon       of the contracts.
      For example, certain contracts required that orientation     and basic edu-
catzon be given in a classroom (nonwork) envrronment.     These contractors
told us, however, that they had put the trainees    to work the first   day and
then provided them with whatever orlentatlon   and basic education they be-
lieved necessary as the trarnees worked (production    environment).    Most of
the trainees we talked to, who were to have been provided orrentatlon       and
basic education III this manner,sald eltner that they could not recall      that
these services had been provrded or that they were certain that they had not
been provrded.                                                               I   /
     Followrng    are examples of our flndrngs      wrth respect    to certarn   specrflc
employers,

      Contractor  l--This    contractor     was awarded a short-form    MA-4 contract
coverrng the perrod April 28, 1969, through April 27, 1971, XL the amount
of $34,900 for hlrlng     and trarnlng      disadvantaged persons m 10 landscape
gardener positrons --a cost of $3,490 per trainee.          As of June 30, 1970,
after  14 months of the contract        period had elapsed, 53 trainees had been
hired and 52 had been termulated.           None of rhe 53 lndlvLdu.als   hired had com-
pleted the tralnlng     perrod.

      The contract provided for the payment of $850 per trainee for the
standard range of supportive   services specIEled zn all short-form     contracts.
As of June 30, 1970, the contractor    had billed   the Government about $10,200,
of which about $2,500 was for supportive    services.

       We could find no evidence that any supportive        services,   other than nor-
mal first-day     orlentatlon    and some counseling,    had been provided to the
trainees.      A contractor   offlclal  informed us that the supportive      services had
not been provided because of a mlsunderstandrng          among the contractor,     NAB,
and the Department regarding how the services were to be provided.               He in-
formed us also that, as manager of the firm's         local office,   it was never his
lntentlon     to personally   provrde the services because he dsd not have the
tune and that there was no other person avallable          who could do so.

       Although not provided for m the contract,        he told us that It was his
lntentron     at the time the contract was negotiated     to have a local community
organlzatlon,     the Opportunltres   Industrlallzatzon   Center, provide bun wrth
trainees who had been provided wrth most of the required supportive         services

                                             65
and who were ready for work.     He stated that only after he had entered Into
the contract was he told by a State Employment Servxe offrclal            on loan to
NAB that he would have to obtain trainees from the State Employment Servxe
and not from the Center.     He therefore    obtalned all trainees    from the Em-
ployment Servrce but essentrally     provided no supportive     servrces even though
he contrnued to accept payment for such services.         Departmental reglonal     of-
flclals   advlsed us that they would discuss the possible recovery of funds
with offlclals    m the Washlngton headquarters.

      Contractor   Z--Thus contractor,    a consortrum conslstlng   of 31 hotels,
through a hotel association       acting as the consortium agent, was awarded an
MA-4 contract    covering the period February 28, 1969, through February 27,
1971, 111 the amount of $274,785 for trarnlng        dxsadvantaged persons for 100
desk clerk and offlce     Jobs --an average cost of about $2,748 a tramee,

       As of June 30, 1970, 55 trainees had been hired, 24 had been terminated,
and seven had completed tralnlng     and were still  employed. The contractor
had billed     the Government about $45,700, of which about $27,400 was for sup-
portive    servrces.

      The contract provided for the payment of an average of $1,624 a trarnee
for the full range of supportive       services,   such as 1 week of lnxtral     orlenta-
tlon and counselrng,    4 to 6 weeks of Job related basic education,         special
counselmg    and Job coachmg, medical and dental services,        supervisory     and
human relations   tramlng,    transportation,     and day care.  The lnltlal     orienta-
tion and 2 to 3 weeks of the Job-related         basrc education were to be gxven to
the trainees    m a classroom, before they reported to indrvrdual         hotels for
work.   Under the contract,     these, as well as the other supportive       servrces,
were to be provided by a subcontractor.

       We found that the subcontractor    was a one-man organrzatlon     that had no
capxtal or income other than a salary from the consortrum agent and that
there was no written    agreement between the consortium agent and the subcon-
tractor.    Consortrum offlclals   advised us, however, that there was an oral
agreement between the consortxum agent and the subcontractor         which required
the subcontractor    to provide the servrces specified   III the consortrum's    con-
tract with the Department.

        The subcontractor   informed us that, although he had prepared the con-
sortium's    proposal and had done much of the plannmg,          funds had not been
made available     to set up the preJob tralnlng      classes and that he had not had
the tune to provrde trainees with the other supportive             services specrfled
m the contract.        The subcontractor    said that the trarnees were hrred and
directly    put to work at the hotels.       Except for some counselrng      and occa-
sional transportation      assistance,   the subcontractor    did not provide any of
the supportive     services repurred by the consortrum's       contract.




                                           66
          Contractors   3, 4. and 5--These   three   contractors   were awarded MA-4 con-
tracts,      as follows

                   Amount of contract            lrammng                   Period
Contractor        Total     Per trainee         positions                of contract

      3         $119,200        $2,980          40 detail             Nov. 21, 1968, to
                                                  draftsmen             Nov. 21, 1970
      4           40,950         2,730          15 machine            Nov. 22, 1968, to
                                                  operators             Nov. 22, 1970
      5          738,200         3,691         200 machine            Dec. 6, 1968, to
                                                 operators              Dec. 6, 1970

      Each of these contracts    provided that supportive     services,     lncludlng
Job OrLentatlon,   Job related basic education,       counsel%ng, medlcal and den-
tal examlnatlons   and services,    supervisory  and human relations      trammg,     and
transportation   assistance,   were to be provided to tramees.          The average
costs for the trainees for the supportive       services were $2,080, $2,130, and
$2,651 for contractors     3, 4, and 5, respectrvely.

       The three contractors , prior to the award of the MA-4 contracts,          en-
tered into separate oral agreements with the same subcontractor           to (1) pre-
pare and negotiate    their proposals,  (2) recruit  and certify    trainees,     (3)
provide supportive    services to tramees,    and (4) prepare the monthly lnvolces
to the Department for payment under the contracts.        The first    contractor
agreed to pay the subcontractor     50 percent of the payment received from the
Department and each of the other two contractors      agreed to pay the subcon-
tractor   25 percent of such payments.

        Me found that the subcontractor      had not provided the supportive         ser-
vices to the traLnees.      In addition     the subcontractor      caused lnellglble
trainees to be recruited     and certified,       and it prepared erroneous monthly
lnvolces for the contractors.         This latter    problem 1s discussed on pages
71 and 72.      None of the three contractors        had a written    agreement with the
subcontractor.      In our option,     the lack of written      subcontracts    contributed
signlflcantly    to the confusion and mlsunderstandlngs          which existed between
the contractors     and subcontractor     concerning the extent to which supportive
services were to have been provided to tramees.

        As of January 31, 1970, the three contractors      had provided their tram-
ees with considerably      fewer supportive   services than required by their con-
tracts.      Trainees of two contractors    were provided Job orlentatlon    lasting
about one day, trainees       of the other contractor   were not provided any Job
orlentatlon.       Only s1x trainees  of one contractor   were provided Job-related
basic education.

      Trainees of two contractors    were provided lunrted     counseling,     and only
one trainee of the other contractor     was provided    counselmg.      Trainees of
the three contractors   were not provided transportation      assistance,    It ap-
peared that such assistance might have resulted       UI lncreasmg     one contrac-
tor's trainee retention   rate because its plant was not located on a public
transportation   route.  Also, supervisory    personnel of the three contractors
were not provided supervisory     and human development training.



                                              67
      As of January 31, 1970, the three contractors       bllled the Government
about $165,000, of whach about $119,000 was for supportive         services.   Of the
total amount, the subcontractor's     share was about $55,700.      Our review of
available  records and dzscusslons with contractor       and subcontractor   repre-
sentatlves   showed that the three contractors,     m addltlon   to the $55,700
payable to the subcontractor,     had Incurred costs of about $3,500 for support-
lve servrces and that the subcontractor      had incurred costs totaling     about
$14,000.
     An offlclal     of contractor  3 advised us that, I.II his oplnlon, the tram-
ees hzed were of such high caliber        that they did not require many of the
supportive   services.    He stated that truly hard-core disadvantaged persons
would require at least a year of lntenslve        tralnlng and that this was not
contemplated under the program.

      Offlclals  of contractor 4 told us that many of the supportive    services
were not provided because they were not considered necessary.       For example,
he stated that classroom training    (Job-related basic education) was not pro-
vided because zt was not considered necessary for the skill     level required
to do the Job.

       An offlclal    of contractor    5 agreed with our flndlng    that only s1x of its
166 trainees had been provided classroom trammg             and that neither the con-
tractor   nor the subcontractor      had provided trarnees with any additional     or
extraordinary      medacal or dental care.     The official   stated that she would
require the subcontractor        to "shape up" or be replaced.

      An official    of the subcontractor advlsed us that all of the supportive
services were available     but that the JOBS contractors  had not requested the
services.     We noted, however, that the subcontractor   had not prepared tram-
mng schedules or plans showing how these servzces would be provided.

      We advised the regional    officials and the Department's        Special Review
Staff of our findings   regarding the failure      of the contractors'     subcontrac-
tor to provide the supportive     services required under the three contracts.
A subsequent evaluation    of contract performance by the Department's          Special
Review Staff showed that the subcontractor        generally    had not provided the
supportive   services to the trainees of the three contractors          or to the train-
ees of 15 other contractorse      Regional officials      informed us that they had
suspended payments under these 18 contracts.



      Department officials     III San Francisco agreed, for the most part, that
the contractors    had not provided all or substantially           all of the trainee
supportive   servxces.     The offlclals      advised us, however, that, under the
JOBS program fixed-unit-price         contracts,    a contractor's    performance should
be considered as a whole.        They said that, if the contractor          was reasonably
successful   m hlrlng    and tralnlng      mdlvlduals,     the contractor    should not be
held accountable for failure        to provide each and every supportive          service.

     The Regional Manpower Administrator     in Chicago concurred with our fmd-
lngs that certain   contractors  In Detroit  were failing to provide contractu-
ally required trainee supportive    services and stated that payments to cer-
tarn contractors  had been suspended.

                                            68
      The Regional Manpower Administrator       in Seattle advised us that he was
concerned about the failure      to provide supportive    services under JOBS pro-
gram contracts.    He said that contractors      were expected to provide support-
ive servrces and that he was willing       to reduce contract     payments in cases
of substantial   nonperformance.

Conclusions

       In designing the JOBS program, the Department recognized that support-
lve services,     such as counseling,   Job related basic educatron,  and medical
and dental services,     were essentral   if the program was to be effective   in
brlnglng   disadvantaged   persons Into the labor force.

      When employers fail to provide the services called for 111their JOBS
contracts,   not only does the Government pay for services not provided,  but
disadvantaged   trainees may not be recervzng the assistance  needed to over-
come obstacles to the-Lr continued employment.

      We recognize that some of the trainees may not require each of the ser-
vices which the program offers and that, in some cases, contractors           may not
be able to provide a full range of supportive      services.    Therefore,     lt is
essential   that departmental contract negotiators     give appropriate    consldera-
tlon to services that contractors     can provide in establishing     contract    re-
qulrements and bases for paying contractors.

Recommendations    to the Secretary      of Labor

      We recommend that     the Department

      --Emphasize to rts contract         negotiators     the need for (1) adherence to
         prescribed    guidelines    111negotiating      contracts   with prospective     con-
         tractors   for trainee    supportive     services,    takrng into consideration
         the contractors'      capabzllty   to provide the services,       (2) specificity
         concernrng the nature of the services to be provided,               and (3) docu-
        mentatlon of the services actually            provided and the costs Incurred.

      --Obtain contractors'    compliance with        contract requirements for support-
         ive services or modify the contracts          to provide for payment only for
         the services actually   provided.

      --Review contractors'     actlvltles to ensure that payments are made only
         for supportive  services actually   provided and take appropriate action
         to recover payments that have been clamed mproperly,

     The Department stated that, despite the fact that negotiators  drew from
a bank of two years' experience m the JOBS program, rt was mposslble    for
them to accurately  determine the needs of each indlvldual to be hmed at the
trme of proposal development.

       The Department stated further     that It therefore     was developing        more
precise program standards relatmg        to supportme     services.    In thss       regard,
the Department has stated that the revised MA-6 or JOBS-70 standards                  wrll
requme that an employer provide all supportive           services stipulated         m his
contract   and that this ~~11 facilitate     deobllgatrons     of funds under        those

                                              69
contracts    m whxh the stxpulated     services have not been provided.   The re-
sponslbllity    for percelvlng   the need for deobligatlon will reside with the
program monitors      m accordance with a newly developed Contract Service and
Assistance    System.   (See p* 73 1




                                       70
ERRONEOUSPAYMENTS TO CONTRACTORS

       Our review of payments under 29 contracts   revealed erroneous payments--
involving   the overpayments of $24,431 and underpayments of $240--under 16 of
the contracts.     For the most part the erroneous payments appeared to be due
to misunderstandings    of the billing  procedures by contractors.

       The fixed-unit-price      contracts   provide for the payment of the contract
amount if the contractors        hire and train the agreed-upon number of trainees.
The contractors      are furnished with instructions        for claiming  progress pay-
ments.    They provide for the submission of monthly invoices            containing     in-
formation    on the number of trainees        to be hired, number of trainees       hired,
trainee-days    worked, and the amount claimed.           They provide also for comput-
ing the amount claimed by multiplying           the number of trainee-days     worked in
each occupation by the applicable          dally tralnlng    rate.

       We examined into the monthly invoices     submitted under 29 MA-3 and MA-4
contracts   to determine whether they were adequately supported by the con-
tractors'   payroll  records.  Our examination    revealed that erroneous payments
had been made to 16 contractors     as a result   of the submission of one or more
incorrect   monthly invoices-- overpayments totaling      $24,431 were made to 13
contractors   and underpayments totaling    $240 were made to three contractors.
Of the total overpayments, $21,522--about       17 percent of the total   amount
($123,736) examined--were made to eight contractors,

        The errors in the invoices were caused generally        by the manner in which
the contractors    calculated    the number of days that trainees     actually worked,
In some cases the contractors       estimated the number of days worked on the
basis of the number of work days in the month, rather than determining           from
payroll    records the number of days actually      worked.   In other cases the con-
tractors    kept no record of amounts previously      claimed for the days a trainee
worked and, as a result,      claimed amounts in excess of the maximum amount al-
lowable for the trainee.       We also noted instances where the contractors       con-
tinued to include amounts for trainees        after they had been terminated    and
for regular employees who were not trainees.

      As a result  of bringing   our findings  to the attention   of the contrac-
tors, five contractors    made full refunds of the overpayments totaling      $4,261,
and one contractor   made a partial    refund of $3,795.    The Department is ana-
lyzing the invoices    of the other 10 contractors.

       After we discussed our flndlngs      with the Department's   regional  officials
in one city,    the Department's    Special Review Staff reviewed invoices       submlt-
ted under 18 contracts.       The staff's   report on its review stated that its
samplings of the invoices had disclosed         overcharges by most of the 18 con-
tractors.     In addition   to the erroneous payments revealed by us, the report
ldentlfxed    two contractors   which had overbilled     the Government a total of
$21,125.     The Department has taken action to recover all overpayments dis-
closed by its review and is reviewing        the cases from the viewpoint    of pos-
sible fraud.




                                             71
      Department officials     in Detroit, Seattle, and San Francrsco           agreed that
erroneous payments had been made to some contractors      as a result           of the sub-
mission of incorrect     monthly invoices.

        A Department official     in San Francisco advised us that he planned to
require his staff       to more fully     explain to the contractors        the manner in
which their monthly invoices          should be prepared and the manner in which the
amounts claimed should be calculated.               He also stated that the existing
billing    lnstructlons    were inadequate,        that more detailed   in'structions  should
be provided to contractors,        and that such instructions         should be issued by
the Department's headquarters          office    to ensure unlformlty     throughout all the
regions.

       An official   in the Department's   Seattle region advised us that there
had been some misunderstandings      about the billing   procedures and that, in
addition   to having his staff explain the procedures to the contractors,      a
detailed   explanation   of the procedures was now included with the monthly In-
voice forms that were given to the contractors.

Conclusions

        The high rncldence of erroneous payments revealed by our review of pay-
ments made under the 29 contracts     indicated that the Department should place
special emphases on ensuring that contractors      submit correct monthly In-
voices.     Many of the errors appeared to be due to misunderstandings   of the
billing    procedures by contractors.
Recommendation    to the Secretary     of Labor

      We recommend that the Department revise its billing    instructions to
more clearly   inform the contractors  concerning the manner in which their
monthly invoices    should be prepared and the manner rn which the amounts
claimed should be calculated.

      The Department advised us that contract    service representatives, who
are State employees assigned to work with the Regional Manpower Admlnlstra-
tors in operating   the program, would be required to assist contractors   in
preparing  invoices where necessary.

       The Department advised us also that additional    training    of contract
service representatives    was planned for early in calendar year 1971, as soon
as revised program standards were completed and adopted.          In addition,   the
Department advised us that an automatic data processing        system would be used
to identify   accounting errors so that appropriate   action might be taken by
departmental   staff.




                                            72
                                         CHAPTER5

                         MONITORING JOBS PROGRAMCONTRACTORS

        The Department's   monitoring    of the operations   of JOBS program contrac-
tors needs to be greatly       strengthened    to ensure that the many contractors
participating      in the program are performing     in accordance with their con-
tract requirements.       Most of the problems which we observed in the admlnis-
tration     of this phase of the program were perpetuated through the Depart-
ment's Inadequate monitoring        and surveillance    of contractors'  operations.

       The Department's regulations    relating    to contracting    under manpower
programs provide that monitoring      be conducted periodically       to determine com-
pliance with contract   terms.    Various departmental      regional    officials ad-
vised us, however, that, in the early stages of the JOBS program, the empha-
sis was placed on awarding contracts        and not on monitoring

       In January 1969 the Department devised a monitoring               system which was
made operational    inltlally      in two of the nine departmental           regions In Febru-
ary 1969. Shortly       thereafter     monitoring     teams were established       in the other
seven regions.     Under this system, the monitors'           responslbillties       were lim-
lted primarily   to helping contractors           prepare their monthly lnvo1ces, expe-
ditlng   the payment of the invoices,          and providing    correct Information      for
the Manpower Admlnlstration          data system.

        In July 1969 the Department issued instructions           to the Regional Manpower
Administrators,      which required monitors to visit        every contractor       that was
delinquent     in submitting     invoices  and established    the following      monitoring
schedule.      Monitors were instructed      to visit   contractors    with (1) contracts
of $100,000 or more at least every 30 days, (2) contracts               of from $50,000 to
$100,000 at least every 60 days, and (3) contracts              of $50,000 or less at
least every 90 days          Although this instruction      emphasized the need for mon-
itoring,    it did not provide the monitors with any specific             instructions      on
what to do during these visits.           The apparent emphasis was still          on assisting
contractors      to prepare their monthly invoices

       In October 1969 the Department revised its monitoring          instructions     to
establish    a Contract Services and Assistance      System.    This system provided
for furnishing    contractors  with certain   technical    assistance    in addition     to
assistance    in preparing monthly invoices.      The instructions      prescribed   a
frequency of service visits     similar   to the frequency schedule in the
July 1969 instructions

       The instructions     also provided for the use of an observation            and ap-
praisal   schedule for planning service visits,           recording   observations    rela-
tive to contract      performance,    and indicating     the need for corrective      action
thereon, but the instructions         had not provided for the schedule's use in an
in-depth evaluation       of the quality    or effectiveness      of the program opera-
tions.    The maln thrust of the October 1969 instructions              provided services
and assistance      to the contractor       We found, however, that the instructions
had not been implemented rn the five cities             covered by our review.




                                               73
          As commented on In chapter 4, some of the problems In the operation          of
    the JOBS program that might have been dealt with, had the program been ade-
    quately monltored,   were the contractors'   (1) Inability   to meet speclflc
    hsrlng goals which resulted   In the oblngatron    of program funds whrch either
    were not subsequently used or were not timely used and which might have pre-
    cluded the reprogrammrng of the funds for other manpower programs, (2) fail-
    ure to provide required on-the-Job tralnlng     and related    supportive  services,
    and (3) submlsslon of Incorrect    lnvorces which resulted     in overpayments.

          Our comments on the extent of monitoring    by the three departmental  re-
    gronal offices    having cognizance over the operation  of the program in the
    five crtles    covered by our review follow.

    DETROIT

            An offlclal   of the Department's      Chicago region whose staff was respon-
    sible for monrtorlng      JOBS contracts     In Detroit    told us that the monitoring
    functions     had evolved because of lnvolclng        problems experienced clurlng the
    first    year of the JOBS program       He told us also that, prror to Febru-
    ary 1969, the Department concentrated           on developing JOBS contracts    and ob-
    ligating     funds, and as a result,     there was very little     monrtorlng of con-
    tractor    performance.

          A reglonal JOBS program monitor rn Chicago advrsed us that he was as-
    signed on a temporary basis, In February 1969, to assist in the preparation
    of monthly lnvolces  and that he was the only program monitor In Detroit  un-
    til  September 1969 when another person was assigned

            Another regional  offrclal  told us that, when the program first       started,
    there was tremendous pressure by NAB and other groups because they felt that
    the Department should not police the JOBS program because polrclng           would
    discourage buslnessmen from lolnlng       the program.   He told us also that, as a
    result,    the Department did not asslgn program monitors until       after It became
    evident that contract monltorrng       was needed. He said that, once monrtors
    were assigned, therr only function       was to assist contractors    In correctly
    preparing their monthly lnvorces because monrtors were never intended to
    make In-depth analyses of the effectrveness        of contractors'   programs.     He
    also stated that, because of manpower llmrtatrons,         It was not possible to
    comply with the July 1969 lnstructlons       that each contractor   ‘wwlth contracts
    totaling     $100,000 or more be visited   every 30 days.

          Reports by the monitor on each vlslt     were usually  brref and pertained
    mainly to matters related   to the preparation     of the monthly lnvolces;   the
    reports drd not lndlcate   the exrstence of any of the problems drsclosed by
    our reviews.   (See p 29.)

    SEATTLE AND PORTLAND

          The departmental   regional  offlclal   responsrble for the monltorlng   of
    JOBS contracts   In Seattle   and Portland Informed us that only three men were
    asslgned to monitor all Department of Labor contracts        in the region which
    encompasses the States of Alaska, Idaho, Oregon, and Washlngton and that,
    for that reason, only cursory reviews rather than In-depth evaluations         had
    been made of JOBS contractors'     operations

\                                             74
      In October 1969 the six contracts that we selected for review in the
cities of Seattle and Portland had been monitored     Prior to that month, how-
ever, there had been no monitoring of these contracts      In every case the
monitoring reports indicated that the contractors were generally performing
within the requirements of their respective contracts and that they generally
had an understanding of the program objectives and were knowledgeable of all
recordkeeping and lnvolclng requirements    These reports disclosed no prob-
lems of substance, in contrast to our findings that significant    problems
existed in connection with five of the six contracts.     (See p. 29.)    *
      Regional Department officials advised us in March 1970 that several ac-
tions were being taken to improve the performance of JOBS contractors includ-
ing (1) the development of self-appraisal  forms for contractors to prepare
and submit to the Department, (2) providing contractors with more detailed
instructions  on proper billing procedures, and (3) using State officials  to
assist the Department in monitoring the contracts.    In October 1970 the Re-
gronal Manpower Administrator told us that the region had contracted with a
private organization to monitor JOBS and certain other manpower programs in
fiscal year 1971.
SANFRANCISCOANDOAKLAND
      The departmental regional office monitoring program in San Francisco
and Oakland was much more extensive than In the other three cities included
in our review. The monltorlng efforts were not sufficient,   however, to
dlsclose the types of problems in contract performance noted during our re-
view.
     In Callfornla the Department awarded contracts to the State Dlvlslon   of
Apprentlceshrp Standards to provide the monltorrng of the JOBS program.
      The first contract, coverlng fiscal year 1969, contalned generalized
instructions,   such as provide operational monltorlng and servlclng and pro-
vlde periodic reports.    The primary function of the State monitors under
this contract was to verify the correctness and validity of the contractors'
monthly lnvolces     The State monitors were to visit each contractor once a
month to examine Its invoice to see that it was mathematically correct and
to discuss the program with the contractor.    The monrtors, however, did not
verify the invoices against supporting payroll records, did not determine
whether the contractors were provldrng all contractual services, and did
not make any comprehensrve evaluation of contractors'   performance.
      Departmental regional offlclals    told us that they instructed the State
Drvlslon of Apprenticeship Standards to play down the monitoring function so
as not to upset the contractors,     because the contractors had been told by
NAB that they would not be monrtored.

      Our dlscusslons with the State monitors showed that they were aware of?
some of the contract performance problems discussed in this report.    They
acknowledged that they had not always commented on these problems in report-
ing to the Department, and they attributed   this to the absence of detailed
reporting crLterra rn the State's contract with the Department and to a
State policy that monitors should try to solve contract performance prob-
lems.


                                      75
       The fiscal  year 1970 contract with the State provided for more exten-
sive monltorlng    of the program       Five in-depth visits      were to be made to each
employer in addrtion to monthly invoice verlflcatlon             visits.    The reporting
requirement    was strengthened   by requiring     that written     reports be prepared
for each in-depth visit.       Monitoring   guldellnes     for the in-depth visits      were
included in the contract.       The guldellnes     generally    stated the obJectives     to
be accomplished but did not provide guidance concerning what the monitor
should do to accomplish the ObJectives or how the monitor should approach
the task.
        Departmental    regional   offlclals    told us that they were conslderlng
strengthening      the fiscal    year 1971 contract with the State by lncludlng
stricter    reporting    requirements      and monitoring  procedures.        Subsequent to
the completion       of our review, however, a departmental          regional    offlclal  ad-
vised us that a decision had been made not to award another monitoring                    con-
tract to the State but to conduct the monltorlng              function    with regional    per-
sonnel.

Conclusions

     We believe that a need exists for a more effective       monltorlng    of the
JOBS program,   as  Implemented under   contracts  with employers,  to   ensure that
the contractors    comply with contract   requirements

      The Department's     monitoring  of the JOBS program in the five               cities
covered in our review      was not effective  because the Department

      --Did   not emphasize monitoring       during    the early       phases of the program.

      --Had not provided adequate guidance            to its   field     offices   on how to
         monitor the program.

      --Had allocated    only limited     manpower to the monitoring function                 which,
         except in California,     resulted   in a low frequency of monitoring
         visits to contractors.

      --In contracting     for monitoring   the program In Callfornla,              did not re-
         quire in-depth    reviews or detailed   reporting on contract              performance
         problems.

Recommendations     to the Secretary     of Labor

      We recommend that the Department provide for more effective      monitoring
of the JOBS program to ensure that contractors      (1) comply with contract re-
quirements regarding   eligibility   of persons for enrollment  in the program,
on-the-Job training   and supportive   services,  and Jobs to be provided and
(2) submit correct claims under their contracts

       The Department stated that adequate monitoring       of JOBS contracts  was
clearly   recognized as being essential    to the effective    operation  of the
overall   program.   The Department stated also that its JOBS monitoring        sys-
tem, which was largely    operational   in some regions, was to be more fully       lm-
plemented in others


                                              76
      The Department stated further     that (1) a comprehensive checkllst     for use
In the monltorlng    of ongoing manpower programs was being developed by the
Manpower Admlnlstratlon     and that It would be used once It has been tested In
the field  and (2) tralnlng    In applying the new monltorlng   procedures,    as
well as the new program standards,      would be provided to its field   staff    soon
atter the beginning of calendar year 1971.




                                         77
                                        CHAPTER 6

                 ADDITIONAL COMMENTSBY THE DEPARTMENTOF LABOR

                             AND NAB AND OUR EVALUATION

     Certain comments by the Department of Labor and NAB on our draft report,
which are not fully  covered in the preceding chapters, are presented below
with our evaluation.

SCOPE OF THE GAO REVIEW

      Both the Department of Labor and NAB questaoned the scope of our review.
The Department stated that our selectlon           of metropolLtan   areas and contracts
was arbitrary     and that the flndlngs     therefore   were not necessarily   representa-
tive of the areas revlewed--much        less of the JOBS program as a whole.        The
Department stated that It felt that the findings            included In the report were
applicable    only to the contracts     and contractors     reviewed and were not repre-
sentatlve    of the entire JOBS population.

      NAB questloned our selectlon   of the five cities,    stating   that they
were not well balanced geographxally      and were not representative      economl-
tally  of the Nation or of the 50 maJor cltles    in which NAB had Its largest
programs.   NAB cited various dlsparltles    In unmployment     rates between the
five cltres  selected by us and other JOBS cities     and the country as a whole.

       NAB stated that three factors relevant      to our review     were affected by
economic condltlons.       These factors were (1) an lndlvldual       employer's ablllty
to hxre the disadvantaged,       (2) the specific  quallflcatlons     of the dlsadvan-
taged workers he hires,      and (3) his ability   to keep these     workers on the Job.
NAB stated further     that conclusions   drawn from a limited      number of cases In
the five cltles,    concerning either the effect     of changing     economx condltlons
on the overall   natlonwlde    program or hlrlng   and retention     experience,  were
unlikely   to be valid for the entire country.

       With regard to the contracts     selected for review, NAB stated that the
number was small (31) and that the review appeared to be limited           to con-
tracts which were awarded In the earllest        months of the JOBS program and
which were the basis for improvements incorporated        In the JOBS-70 contracts
introduced    early in 1970. NAB stated further      that it appeared that GAO had
not made a representative      or random selection   of contracts  for study and
that   the biased nature of cltles     selected and the relatively    small number of
contracts   examined lndlcated    that many of the generalxzatlons     and recommenda-
tlons made In the report were based on samplings which might be inadequate
and which were certainly     not representative.

GAO evaluation

      We believe that the scope of our review was fully     sufflclent    to support
the conclusions  and recommendations presented in this report.         In response
to the above generallzatlons    by the Department of Labor and NAB, however,
we are restating  below, in summary form, the speclflc    work which we have
performed In achlevlng    each of our three review ObJectIves.


                                          78
         The first ObJectlve of our review was to evaluate the accuracy, reli-
ability,     and completeness of reports Issued by the Department of Labor and
NAB on JOBS program results       and accomplishments.   To achieve this obJectlve
we made an extensive examination,       coverlng a period of about 18 months, into
the design and operation      of the management information   system at NAB's Wash-
ington headquarters      and at five of its metro offices.

      Our review at the national     headquarters  took into account        all data re-
ported on a natlonwide     basis and the various internal     controls      and proce-
dures relating   to the development and analysis      of this data.       In addition,
we reviewed specrflc    procedures followed by 141 employers--62          contract   em-
ployers and 79 noncontract      employers --who were providrng data       for the manage-
ment lnformatlon   system and the report of a public accounting           firm engaged
by NAB to conduct in 10 cities      audit tests of the validity      of   data reported
In the management rnformation      system.

      On a comparable basis, we also      examined into the reports prepared by
the Department of Labor on activities       under the contract component of the
program.

      Our findings,   which are detailed     in chapter 2 of this report (see
p 13) showed, in general, that only limited          amounts of data had been col-
lected on JOBS program operatrons,       that the data which had been collected
had been obtained frequently     on a very informal      basis and, for the most
part, had not been verified;     and that, in the five metropolitan         areas which
we visited,    some of the reported data was inaccurate        or misleading,     It was
our general conclusion     that complete and accurate data had not been complled
by the Department and NAB on the results        of the JOBS program operations       and
that reports on program accomplishments        generally   tended to be overstated
      In commenting on our draft report,    the Department stated that, in coop-
eratzon with NAB, it had developed and implemented a revamped management In-
formation   system in February 1970. The Department stated also that its ac-
tion in this regard represented    departmental   action on our recommendation r
for accurate and meaningful program data.       We therefore have drfflculty  m
reconciling   the Department's comments on the scope of our review, as it re-
lates to our first   review ObJectzve, with the Department's     acknowledged need
for lmprovmg the JOBS management rnformatlon       system.

       Our second review ObJective was to evaluate the basic concepts of the
JOBS program and its prlncrpal       design characteristics.,      In this connectxoa,
we presented in chapter 3 observations          on five problems relating    to the JOBS
concept and design.     These problems concerned (1) Inherent limitations           of
the JOBS program during periods of economic downturn; (2) the possibility
that, under certain    circumstances,      the program might srmply shift the burden
of unemployment from the disadvantaged          to other persons not so categorized;
(3) the inclusion    of many persons in the defined target population           who had
no clear or legitimate     need for the JOBS program; (4) the lnapproprlateness,
In many instances,ofawardlng       fixed-unit-price      contracts   to employers for
providing   training  and supportive      services to JOBS trainees,     and (5) the
deemphasls on monitorrng     cdntractors'      performances under the JOBS program.




                                           79
      Our conclusrons       and recommendations on these fnve problems were not
based exclusively      on the freldwork        performed in the five cities       visited.
In addition     to that work, we gave careful           consideration   to the overall      In-
tent and Impact of the JOBS program as determined through (I) reviews of
the leglslatlve     hlstory    of the program, (2) reports on revrews of varrous
other evaluatrons      of JOBS program operations          by consultants   employed by the
Department of Labor, (3) extensive dlscusslons                of all Important aspects of
the program wrth responsible         officials       of NAB and the Department of Labor,
and (4) reference to the extensive             testimony presented to the Congress con-
cernang the JOBS program during its conslderatlon                 of manpower bills     in the
91st Congress.

     We do not believe that more extensive work m other cltles       or wrth re-
spect to additional   contracts would have led us to any conclusions    different
from those which we expressed on the five problems.

        Although the Department has differed   with us rn its comments as to the
need for corrective     action on certain  of the five problems, nelther the De-
partment nor NAB have offered any evidence that the problems which we have
ldentlfled     are somehow unque to the crtles we vrslted    or pertain only to
the contracts     which we examined.

      Our third review obJectlve was to test the implementation               of program-
wide admrnrstratrve      procedures and instructions       m selected cltles        for the
purpose of ldentrfylng       slgnlfrcant    problem areas needing managment atten-
tion.    Our review was not directed to establishing            the full extent to which
admlnlstratlve    defrclencles      existed either m the five cities        visited    or on
a programwJde basis, although sufficient           work was performed to indicate
whether or not the matters noted represented           isolated    instances or broader
scale problems arlsrng from inadequacies           in procedures established        on a pro-
gramwlde basis.

       As described in chapters 4 and 5 of this report,                erght speclflc    problem
areas relating      to the administration        and mplernentation      of the JOBS program
were rdentlfied       during our review.        These related to (1) contracting         for
training   services,      (2) abllrty     of prospective    employers to provide the Jobs
pledged, (3) providing         meaningful    Jobs to trainees,      (4) certlficatron      of
tramee eligibility,          (5) coordrnatlon     of the JOBS program with the Concen-
trated Employment Program, (6) provldrng supportive                services to trarnees,
(7) reimbursements        of contractors,     and (8) program monitoring.           With regard
to each of these problem areas, the Department has indicated                    its concurrence
wrth us concerning the existence of the problems but has not concurred in
some instances with the full range of corrective               action which we are recom-
mending.

       As previously    Indicated,  it was not within the scope or intent of our
review to establish      the numerical extent   to which problems and admlnlstratlve
deflclencles     existed in the JOBS program as a whole, and we made no such
proJectlons    In this report.     We were able to conclude, however, that each
of these eight problems represented slgnlflcant         problems in the five cities
vzslted    and that these problems, in many cases, were of such a nature that
the need for programwide correctrve       action was strongly    indicated.




                                              80
      With regard to NAB's comment concerning the small number of contracts
selected for review, the 31 contracts which we selected represented about
33 percent of the 95 active contracts in the five cltles and accounted for
about 50 percent of the funds obligated under MA-3 and MA-4 contracts in
the five cities from inception of the program through June 30, 1970. Also,
the 31 contracts represented about 10 percent of all MA-3 and MA-4 obliga-
tions countrywide during the same period
      With regard to NAB's comment that the GAOreview was knIted to con-
tracts awarded in the earliest months of the JOBSprogram and that these
early contracts were the basis for improvements incorporated in the JOBS-70
contracts early in 1970, we believe that rt should be noted that the MA-3
and MA-4 contracts represented the predominant activity  under the JOBSpro-
gram both at the time we started our review and at June 30, 1970, the approx-
imate date of the completion of our field evaluations.
      For example, at June 30, 1970, the reported claims for reimbursements,
which represent performance by contractors,  under the MA-3 and MA-4 phases
of the program accounted for about 80 percent of the total amounts claimed
for all phases of the JOBSprogram. Further, it should be noted that we
gave appropriate consideration to the changes incorporated In the MA-6 or
JOBS-70 contracts in developing the conclusions and recommendations contained
in this report.
ACCOMPLISHMENTS
            OF THE JOBSPROGRAM
      NAB stated that our report did not adequately bring out the accompllsh-
ments of the JOBSprogram and, in particular,   presented a totally  lnade-
quate picture of the accomplishments of the noncontract component which ac-
counted for approximately 70 percent of the trainees hired.    NAB stated fur-
ther that the fact that the program provided employment for hundreds of
thousands of disadvantaged persons should not be obscured by undue emphasis
on the inevitable margin of error in data which had been compiled voluntarily
by employers who participated   without Government reimbursement or reporting
requirements in a large nationwide program.
GAOevaluation
      As stated in chapter 2 of this report (see pe 131, complete and accu-
rate information is not available on the results of JOBSprogram operations
for either the contract or the noncontract component. In the absence of
reasonably complete and reliable data, we are unable to evaluate fully NAB's
various claims concerning program effectiveness and accomplishments for the
noncontract component of the program.
      We have set forth in chapter 2, with appropriate qualifications, NAB's
reported accomplishments of the noncontract component of the program, in-
cluding the hiring of 367,500 persons through June 30, 1970 Also, we have
recognized on page 9 that the voluntary or noncontract employers are not
reimbursed by the Federal Government for any extraordinary costs which they
may incur.
      We believe, however, that the mere hiring of persons without appro-
prLate assurance that such persons are from the defined target population
1s not a reliable index of JOBS program accomplrshments

                                     81
BUSINESS CO!?lMITMENTAND SUPPORT

      NAB expressed regret that our report did not recognize financial  contrl-
butions by businesses to the JOBS program in the form of office   space and
other logistical   support, including the loan of executives.

GAO evaluation

     The draft report,   which we transmitted  to NAB for comment, recognized
that professional  staff and services were donated by private    companies.      We
have now supplemented our report to include certain additional       information
on donated services contained in NAB's second annual report which we obtained
subsequent to the preparation   of our draft report.    (See p1 10.1

CHARGESIN HIRING PRACTICES

     NAB stated that the assertions      made in several places in our report
that employers under the program were hiring       essentially the same people
as in the past were clearly    incorrect    for the program as a whole.  NAB stated
that the comments by some employers to GAO that they found no difference       be-
tween JOBS employees and those they had hired in the past might have been
based on the employers ' hesitancy     to tell Government investigators  that they
had been excluding  disadvantaged workers in the past.

GAO evaluation

        NAB's comments appear to be based largely    on the SubJective Judgment
that    there has been widespread program effectiveness    and not on specific
field    verification or documentary evidence.

       Under a contract with the Department of Labor, the consulting      firm
Greenleigh Associates,    Inc., in reporting    on its evaluation  of the JOBS pro-
gram in 10 metropolitan     areas, made the following   statements with regard to
differences   between normal hires and JOBS employees.

              Y!.   Differences    Between Normal Hires      and JOBS E3mployees

        A significant    ma.lority,    71 percent, of those willing   to hire JOBS
        employees   indicated     that there was no difference    between the work
        habits of this group and those of regular employees of the same
        level.   JOBS employees were said by 19 percent to have worse habits,
        and by 12 percent to have better habits than regular employees.@*
        (Underscoring    supplied.)
                        *           *           *            *            *

        *'Employers, when asked to describe the differences             between regular
        hires and JOBS employees,        responded as follows:       none, 55; less
        experience and need extra help, 22, difficulty             adjusting    to work
        routine,     20; less education,     16; lack self-confidence,        motivation,
        and initiative,      13, hostile    attitude,    6; better attitude,      6; and
        police records,      5. The general lack of difficulty          experienced by
        employers supports the observations           made by the field      analysts,    and
        by trainee responses in interviews,           that a needy disadvantaged


                                                82
     motrvated population was being reached, but not the truly hard-
     core unemployed. The responses of those who were not willq
     to continue to hzre this group indicated that they had found the
     same type and degree of differences between JOBSand regular em-
     ployees as those who were." (Underscormng supplied.)
     Although our examrnatlon into this aspect of the JOBSprogram was less
extensive than that performed by GreenleIgh, we believe   that our findings
(see pp. 24 and 26) are consistent with Greenleigh's to the extent that we
have concluded that JOBS employees have been no different   than normal hires
in a number of instances.




                                      83
                                          CHAPTER 7

                                      SCOPE OF REVIEW

      Our review of the JOBS program in San Francisco,        Oakland, Portland,
Seattle,  and Detroit   was directed     toward examining into the program results
and the efficiency    of adminlstratlon.

      Our fieldwork covered the period from the program's inception     in March
1968 through June 30, 1970, and zncluded a review of 13 MA-3 contracts      in the
amount of $9,873,000 for hiring   and training  4,173 persons and 18 MA-4 con-
tracts in the amount of $7,311,000 for hlrlng    and training  2,125 persons.
These 31 contracts  involved  215 employers.   We also visited  62 of these em-
ployers.

       We did not    select any MA-5 and MA-6 contracts     for review because, at
the time of our      fieldwork,   the number of persons hired under these contracts
was too limited      to permit an evaluation    of their effectiveness.   We also re-
viewed the JOBS      programs of 79 noncontract    employers who were voluntarily
participating   in     the program.

       Our review also included an examination of (1) the legislative               history
of the JOBS program and of the Department's policies           and procedures for
administering    the program and attaining      program obJectives    and (2) pertinent
records of the Department, NAB, andthe contractors.            We also interviewed
representatives     of the Department, NAB, the State Employment Services,              CEP,
trainees,    and contract-employers'     and non-contract-employers'      officials.
Our review was made primarily        at the employers' plants;     at local and re-
gional offices    of the Department, NAB, and the State Employment Services;
and at Department and NAB headquarters        in Washington, D.C.




                                            84
APPENDIXES




      85
                                                                     APPENDIX I
                                                                         Page 1
                            REPORTEDCHARACTERISTICSOF JOBS
                    TRAINEES AND TRAINING AND JOB OPPORTUNITIES

REPORTEDCHARACTERISTICSOF JOBS TRAINEES

      Demographic characterlstlcs were known by NAB for about 216,668,     or
84 percent, of the 494,710 trainees who had entered the JOBS program
through June 30, 1970
      Informatlon on the other 278,042 trainees was not available because the
employers had not completed the prescrrbed hire cards on these trainees or
had not forwarded them to NAB Many of the hire cards that had been for-
warded were incomplete in various respects     For example, income lnformatlon--
a prerequlslte   for establlshlng ellglblllty for the JOBS program--was not
shown on over half of the forms received by NAB Other mlsslng information
included such items as educational level attained, number In family, and
welfare status
       Information on the demographic characterlstlcs     of the JOBS trainees
was (1) not obtalned at random, (2) incomplete in certain respects, and
(3) not verlfled   by NAB or by us   Accordingly,     to the extent that these
factors may bias this lnformatlon,   the following data on the characterlstlcs
of JOBS trainees may not be representative
      The following lnformatron on the characterlstlcs of trainees 1s based
on the data reported to NAB by employers for 216,668 trainees In the JOBS
program

                                 Category               Percent
                 Sex'
                        Male                               71
                        Female                            29



                 Age
                        Under 22                             49
                        22 to 44                             47
                        Over 44                               4



                 Race   l



                        Black
                        White
                        American Indian
                        Oriental
                        Other




                                            87
 APPENDIX I
     Page 2
                               Category              Percent
               Family size
                    1                                  24
                    2to   4                            47
                    5to    7                           21
                    8 to 10                             6
                    Over 10                             2



               Family income
                    $     0 to $1,000                  28
                      1,001 to 2,000                   24
                      2,001 to 3,000                   20
                      3,001 to 4,000                   14
                      Over 4,000                      14



               Grades of education
                   Under 8                               6
                    8                                    7
                    9 to 11                             47
                   12                                   39
                   Over 12                               1

                                                       100

                Weeks unemployed prior    to en-
                 rollment m JOBS
                    Under 5                             29
                      5 to 14                           19
                    15 to 26                            19
                    27 to 52                            33
                    Over 52



                Handicapped persons                    E 2

                Public assistance recipient at
                  time of enrollment in JOBS

      The data on hire cards submitted also lndxate that a typical JOBS
trainee 1s about 25 years old, has three or four persons In his family, has
an average family income of $2,269, has completed 10-l/2 grades of education,
and has been unemployed about 20 weeks.
     The reported characterlstlcs of participants  varied somewhat between
the contract and voluntary component of the program and among the five
                                                                   APPENDIX I
                                                                       Page 3


metro areas Included in our revrew       For example, on a natronwrde basrs the
racial dlstrrbutlon     for the two components of the program varied--74 percent
of the partlclpants     rn the contract component were black, whereas 69 percent
of the partlclpants     rn the voluntary component were black    Also, the per-
centage of male and female partlclpants     varred slgnlfrcantly  among metro
areas      In the contract component, for example, only 58 percent of the
participants     in San Francrsco were male, whereas 95 percent of the partlci-
pants in Portland were male
TRAINING AND JOB OPPORTUNITIES
      The JOBS program offers a mde range of training    and Job opportunities
Our analysis of the trarnlng and Job data whrch was avallable for 37,645 of
the 51,485 persons who were reported as employed rn the contract component
as of July 31, 1970, showed that about 24 percent were in white-collar       oc-
cupations and an additional   31 percent were berng tralned In machine trades
and structural  work    These areas are consrdered by the Department to be oc-
cupations of proJected manpower growth
      The followrng table shows the percentage dlstrrbutlon  of employment of
the above 37,645 persons by various occupational groups     Compaxable Infor-
mation 1s not available for the noncontract component because the NAB re-
portrng system does not provide information   on the types of Jobs pledged by
noncontract employers nor on the types of occupatrons for which trainees
were hired
                                                Percentage as of
                  Occupational    group           July 31, 1970
               Professional,   technlcal,
                 and managerial                          4.3
               Clerical and sales                       19 3
               Service                                   82
               Farmrng, fishery,
                 forestry,   and related                 07
               Processing                               17.4
               Machine trades                           15.1
               Benchwork                                10 4
               Structural work                          15.6
               Mrscellaneous                             9.0
                    Total                              -100 0
APPENDIX II
    Page 1

                 OTHER STUDIES OF THE JOBS PROGRAM

Systems Development         Corporation

      The Systems Development Corporation        is a consultant
firm with headquarters     in Falls Church, Virginia.         In June
1968, the Department awarded a contract        to the corporation
to evaluate the JOBS program In nine cities--Chicago,            Illi-
nois; Kansas City, Missouri;      Los Angeles, California;       Min-
neapolis,   Minnesota;   New Orleans, Louisiana;     Pittsburgh,
Pennsylvania;    San Antonio,  Texas; Seattle;     and Tampa, Flor-
ida.    The review was conducted during the period July 1968
through June 1969 at a cost of $142,368.

        The corporation's      report dated September 1969 dis-
cussed, among other matters,           (1) the program's history;
 (2) the status of the contract           component, including     con-
tractor    performance;     (3) an appraisal      of overall   program
effectiveness,      including     impact on industry     and types of
persons hired;       (4) administrative      problems, such as con-=
tracting    methods; and (5) operational          problems,  including
recruiting     and employee turnover.         The report also presented
the contractor's        prognosis    for the program and its poten-
tial    for improvement.

Greenleigh    Associates,      Inc.

        Greenleigh Associates,       Inc.,  is a management consul-
tant firm with offices         in New York, N.Y; Chicago, San Fran-
cisco, California;       and Washington, D.C.        In June 1969 the
Department awarded a contract           to Greenleigh to make an
evaluation      of the impact of the contract        component of the
JOBS program in ten standard metropolitan             statistical
areas--Atlanta,       Georgia; Baltimore,      Maryland;    Dayton, Ohio;
Detroit,    Michigan;    Houston, Texas; Jersey City, New Jersey;
Miami, Florida;       phoenix,    Arizona;    San Diego, California;
and Tulsa, Oklahoma.

       This review was conducted during the period July 1,
1969, through June 30, 1970, at a cost of $252,792,       The
principal    areas reported on were (1) impact on the commu-
nity,    (2) impact on the job market, (3) impact on trainees,
(4) relations     of JOBS with other manpower programs and com-
munity organizations,      and (5) impact on employers.

                                      90
                                                   APPENDIX 11
                                                       Page 2

Staff of the Subcommittee on
Employment, Manpower, and Poverty
Senate Committee on Labor and Public Welfare
       The staff of the Subcommittee on tiployment, Manpower,
and Poverty, Senate Commrttee on Labor and Public Welfare,
made a study of the JOBS program which included a mail sur-
vey of the largest corporations with JOBS contracts.    The
results of its study were published in April 1970 for the
use of the Senate Committee on Labor and Publx Welfare.
The staff publication presented the results of its survey
of JOBS contractors;   comments on the JOBS program in opera
tlon; discussion of some specific contracts; and the views
of the Department of Labor on the subjects discussed
therein.




                             91
 APPENDIX III
       Page 1
                       U S DEPARTMENT         OF LABQR
                 QFFICEOPTHB ASSISTANTSECRETARY
                                             FORADMINISTRATION
                              WASHINGTON,DC 20210




 JAN 4 1971




Mr. Henry Eschwege
Associate Dxrector
Civil Division
U.S. &neralAccounting Office
Washington, D. C. 20548
Dear Mr. Eschwege:
Thank you for the opportunity to review and commenton your draft
report entitled, "Evaluatzon of Program Results and Administration
of the Job Opportunltles in the Ruslness Sector (JOBS) program in
the Metropolitan Areas of Detroit, Michagan; Oakland, California;
Portland, Oregon; San Francisco, Callfornla, and Seattle, Washington.tt
Our commentsrelative to this report are as follows:
Findlng:        reporting by the Department of Labor end the National
                Alllance of Businessmenon the total number of jobs pledged
                by businesses; total trainees hired; total trainees
                terrmnated; total trainees on board; and the trainee
                retention rate, is based in substantial part on d8t8 that
                has not been verified, and in some cases, is inaccurate
                and misleading.
The report m some instances appears to confuse the contract and
noncontract aspects of the program. It refeFs to pledges as estimates
of the numbers of jobs in which buslnessmen are willing to hire
disadvantaged individuals; however, the concept of "pledge" as
expressed in the report does not apply to the contract component.
Rather, the legal relationship establxshed under a contract obligates
the employer to provxde jobs and services as specified XKIthe contract,
Although economic or business conditions as well as problems in program
operation can result m nonfulfillment,   the contract represents a legal
COnnnitment. [See GAO note.1

GAOnote     Footnote   inserted   on page 13 to clarify   thus point.




                                        92
                                                          APPENDIX111
                                                               Page 2

InabilIty to meet contract oblfgatxons has on occasxon, resulted
in obligated funds berg unllquLdated over long periods of time.
The Department has moved to alleviate this problem by shortening
the scheduled employee intake period. Employers under the MA-5
series were required to fill alIL contracted jobs within nine
months. JOBS '70 employers were required to hire within the
first six months, and Regional ManpowerAdministrators recently
have been advised to give serious consxderation to limiting the
intake period to three months. This new funding procedure,
combinedwith the more stringent and effective monitoring system
currently under development, should effect either a more timely
use of the available funds or a more immediate deobligation of
those mds which presumably will not be expended,
In order to ensure that only those occupations which represent
significant opportunities are accepted, the Occupational
Opportunities Rating System (ORS) has been developed. The ORS,
initiated in September 1970, is used to evaluate each job
offered under contract as to its potentzal for upward mobility,
wages to be pa&d, degree of skill required, amongothers. Basic
procedures with regard to ORSand the JOBSOptional Program are
contained in General Administr&lon Letter No. 1411, which was
recently issued.
The report also deals with problems arising in reporting the
number of hires. Neither the tally nor the hiring card systems
have, zn the past, operated with optimum success. Since no
incentives for better record keeping and reporting are provided
to noncontract employers, it would be unrealistic to expect
these employers to respond in a timely fashion unless some funds
could be used to offset these animal costs.
The GAOreport cites 8 need for more careful screening of JOBS
patiic1gants,   Within the present procedures, the Department
might request verification  of family income data. This does
present other humanproblems, and the Department is prepared to
discuss with the appropriate counseling and placement officials
the possibility  of developing additlonetl crateria to indicate
job readiness.
The figures related to tennanations cited in the GAOreport are
mislead-g, for they xnclude those who have completed the training
program. Under the reporting procedures operative before
February 1970p a Termination Card was submitted for each
particapent at the end of the contract per?od. Thus, the previous
system would reflect a 100 percent ltdrop out" rate. lo sctlon to




                                  83
APPENDIXIII
    Page 3

differentiate   between those completing training and terminees was
madeuntrl the managementinformation system was revised in
February 1970. Even if the compllatlon of terrmnees was adduced
by GAOfrom an exeminatzon of the Monthly Progress Reports -
Invoices (form M& 3100-g), there would be no way of determining
which of the termznees were completom and which dropped prior
to completion of the traullng.    The invoice deals only with gross
numbers of enrollees hired, terminated or presently employed, and
does not differentiate   between the enrollees or indicate their
progress 111the program. Azrthermore, not all terminations can
be regarded as *@negatlve.ll Examples of "positivetl terminations
would be moving on to other better jobs, returning to school,
and entering the Armed Forces. The Department has provxded for
these contmgencies through the use of additional payments for
positive teWatlons.       Someof the same observations made in
reference to the dxxussion of tertnxnations naturally apply to
the description of retentfan ratss. The fact that all indivaduals
who completed the training period were counted as texminees prior
to the end of second quarter of 19'7'0adversely affects the retention
rate and presents a false picture of progFasnemrience.       Brther,
retention in entry level jobs is normally lower m industry generally,
and the levels of retentxm are comparable to the norm& work force.
It 1s agreed that the timeliaess, accuracy and comprehensiveness
of data are extremely mportant and significant activities have
already been undertaken to improve program design and analysis.
Recommendation:    reexamine the managementinfonnatzon system
                   for the JOBSprogram periodically to assure
                   that It provides all of the data necessary
                   for program managementand evaluation, and
                   for meaningful, accurate report&ng; and,
                   through appropriate monitoring, assure that
                   employers are reporting accurate and timely
                   data. Where data is known to be incomplete
                   or has not been verzfied, approprzate
                   quallfzcations should be appendedto the
                   related atatlstxal   reports describing the
                   limitations under which such reports must
                   be considered.
We recognize the need to Improve our own data gathering capabilities
and we have, in cooperation mth the Batlonal Alliance of Businessmen
(MAR), developed and implemented a revampedmanagementinformation
system which will effect a better response rate from partxipating
JOBSemployers.




                                  94
                                                           APPENDIXIII
                                                                Page 4

As it is noted in the report, a new JOBSmanagementLnformatlon
system was implemented in February 19700
Presently, Hirlng Cards are required by all employers participating
in the contract phase. Under the new system, Hiring Cards and
Completion/Termination Cards are accumulated by the employer each
month to provide a base for the monthly invoice and are subrmtted
to the Regional Qfflces along with the Monthly Progress Report/
Invoice.
This managementinformation system is producing data of generally
good quality and the constant attention of the regional office
to the problem of delinquent reporting is producmg good results.
In keeping with the changes in the JOBSmanagementinformation
system, the ManpowerAdministration has developed and 1s in the
process of implementing an Operational Planning and Control System
(OPCS)for the major programs including JOBS. The basic purpose
of the OPCSis to provide regional and national staff a timely
tool for assessing program performance. The operation of this
system requires a smoothly functionang managementmfozmation
system and provides the necessary checks in those instances where
the information system is not producing accurate and timely data,
In two regions we are also attempting to have regional staff
capture meaningfil informatIon from the basic JOBSsource documents
(invoices) rather than relying on fnformatlon produced on a national
basis. This system wzll be monitored very closely during the next
six months and represents Departmental actlon on the GAOrecommendation
for accurate and meaningful program data.
Recommendation:     direct the JOBSprogram more specifically to
                    filling  sk0Lshortage jobs rather than having
                    it compete for Jobs for which there is already
                    an ample supply of tramed persons.
Other manpoweractivities   are more concerned, by design, with preparing
people to fill skill shortage occupations. These occupations usually
require a complex or lengthy training period whYch in itself is often
a contributzng factor to the shortage. The JOBSprogram is designed
specifically to put disadvantaged people into the mainstream of
employmentas quickly as possible by preparing them for exlstlng
jobs that they can fill with the assistance of special  OJT and
supportive services. The preparatLon for most skill shortage
occupations of merit usually entails an extended training time
that has been shown to be less effective in meeting the needs
of the hardcore disadvantaged. JOBSwas intended to remedy this.
The GAOrecommendationwould 111effect ask for a repeat of earlier
fallurss in dealing with the severely disadvantaged unemployed,




                                   95
APPENDIXIII
     Page 5

The JOBSprogram has broadened the labor pool drawn upon by the
private sector. It has proven to American industry that those
individuals heretofore regarded as unacceptable for other than
nonskilled labor, could in fact, be successfully trained and
merged into the general labor pool of the country.
The JOBSprogram does not create Jobs nor was it ever intended
to do so. The creation of jobs is a function of the marketts
demandfor goods and services, and not on the availability of
able workers.
Recommendation:      implement more exacting procedures and
                     practices for screening prospective trainees.
Certification   of individuals for JOBSeligibility   is performed by
the State EmploymentService agencies. The certification       is based
on poverty criteria established by OEOand is now the measurzng
tool for all manpowerand poverty programs. The effectiveness
of the certlfxation     thus depends on the agency responsible for
certrfication.    The caliber of work performed by the State agencies
varies widely and efforts to upgrade performance are continuing.
We recognize the problem as one that goes beyond JOBS, and actually
affects all aspects of manpowerprograms involving the certification
of eligxble enrollees.
We endorse the GAOsuggestion that an additional "Job readmesslt
determination be added to the basic el_lglblllty and tentatively
plan to incorporate this change in the JOBShandbook and related
lastructional  material now undergoing revlslon.
The dlstinctlon between contract activities   and noncontract activities
should be made. The ManpowerAdmxnxstration and the IUB can provide
firm orders xn the selection process of employees enrolled in the
program on a contract basis; however, there is clearly a limit to
the amount of persuasion that can be applied to an employer who is
particlpatlng  in the program on a voluntary basis, without the use
of Federal f'unds. We understand that the GAOhas made copses of
its prelLmxnary draft available to the NA3 and thlb matter has been
brought to their attention.    We will continue to work with NABin
this regard and seek their cooperation m gettxng adherence to
prescribed eligibility   standards.




                                    96
                                                              APPENDIXIII
                                                                   Page 6

GAO's observations regarding the effectiveness of certification
are contrary to the most recently collected information regarding
enrollee characterlstlcs  for both the contract and noncontract
programs. Enrollee charactemstics data, through July 31, 1970,
indicate that the program is currently reaching deeper into the
ranks of the disadvantaged than it had previously.      The average
family income in the HA-~ series is $2,158, wrth the f'amily size
mnainmg approxunstely constant at 4.1 persons. This is the
lowest for any phase of the contract series. Participants have
also been unemployed for longer periods than those who were
employed under the precedxng contract series. In contrast to
implications made in the report, the average number of academic
years completed by parkclpants has dropped from an average of
10.3 years for those in the MA-5 program to 10.0 years in MA-~.
It is highly doubtful, therefore, that the number of college
graduates in the program is statistically  significant.
Recanniendation:    augment substantially the monitoring of
                    performance by JOBScontractors.
Adequate monitoring of JOBScontracts 1s clearly recognized as
being essential to the effective operation of the overall
program. To this end, a monitoring system for JOBS, which is
largely operational in some regions, and is to be more fully
implemented in others, requires the participation   of both State
 (Contract Service Representatives--CSRIs) and regional (Program
Generalist) staff.   The program generalist is responsible for
all manpowerprograms in a given geographic area. CSR's conduct
frequent visits to the contractor which will. flag significant
program problems for the generalistts attention.    The CSRls
also provide technical asslstanee for the resolution of many
simple operating problems.
Generalists have a more comprehensive responslblllty    for the
proJect. Guided by the activities   of the CSR*s, generalists
must conduct three major contract compliance visits during the
life of the contract and they implement decisions to deobligate
monies, or to terminate nonproductive contracts.     They must
likewise provide technical assistance for the resolution of
complex contractual problems. The earlier visits of the generalist
as well as the CSR*sare geared toward provldlng contract service
and assistance while subsequent vlslts are directed toward monitoring
contract compliance.




                                    97
APPENDIXIII
     Page 7

A comprehensive checklist for use in the monxtoring of ongoing
manpowerprograms 1s now berng developed by the ManpowerAdministration,
and it IS anticipated that this checklist will be utilized to assist
in JOBSmonxtorlng procedures once the document has been -eested in
the field,
Trainmg on the new monitoring procedures, as well as the new
program standards, will be presented to field staff soon after
the beginnxng of calendar year lg‘?l.
Recommendation:     obtain compliance by contractors with contract
                    requirements for suppotilve servxes, or where
                    this is not practicable, modxfy the contracts
                    to provide reimbursements only for the services
                    provided.
All contractors visited by GAOwere participating  in progragls that
have since been redesigned to provide for an adequate description
of the kind and quantity of supportive services to be provided.
tirther,  Contract Servxe Representatives are now employed in the
JOBSprogram to assist employers in preparing their proposals
and to emphasize thexr responsibllitles under contract.
Despite the fact that negotiators draw from a bank of two years'
experzence in the JOBSprogram, it is impossible for them to
accurately determine the needs of each individual to be hired
at the time of proposal development. The Department is, therefore,
currently developing more precise program standards relating to
supportxve services while retaining sufficient flexibility  to
meet the diverse needs of a heterogeneous trainee population.
The revised JOBS 170 standards will require that the employer
provide all supportive services stipulated in hi& contract.
This will facilitate  deobligatlons from those contracts in whzh
the stipulated servxes have not been provided. The responsibility
for perceiving the need for deobligatlon will resxde with the
Contract Service Representatives and the regional program generalists
in accordance with the newly developed Contract Service and Assistance
System.
E$nployerswho azx unable fndxviduallyto  provide the supportive services
necessary may, of course, secure these services through a subcontract,
through publicly supported agencies, orbyjoinmg      in a consortium
with other JOBSemployers. Contract Service Representatives have
been instructed to refer those subrmttmg proposals who do not wish
to provide any supportive services or who are offering jobs which
do not lend themselves to providing these services to the new JOBS
Optional Program. The JOBSOptional Program allows prunarily for
providing on the job tralnlng with no speclfxc requirement for
providing supportive services.


                                   98
                                                             APPENDIXIII
                                                                  Page 8

Recommendation:      with regard to both aa-the-Job training and
                     supportive services, adopt the use of cost-
                     reubumement type contracts when necessary
                     cost informat3.on is not available from whfeh
                     to negotiate fixed-price contracts.
The use of cost reimbursement contracts by the Department of Labor
for the program does not appear to be a feasible and administratively
practical idea,
The circumstances of the prog;ram p=clude the wldespread utilization
of the cost reimbursement contract.   The Code of Federal Regulations
(CFR), Title 41, Chapter 1, Section l-3.@5-l(b)   sets forth the
application of such contracts as follows:
          *The cost reimbursement type of contract is suitable
          for use only when the uncertainties involved in
          contract performance are of such magnitude that cost
          of performance cannot be estimated with sufficient
          reasonableness to pemt use of any type of fixed
          price contract.   In addition, it is essential that
          (1) the contractorts cost accounting system is
          adequate for the deteraarnation of costs applicable
          to the contract, and (2) appropriate surveillance
          by Government personnel during performance w1l.l give
          reasonable assurance that inefficient  or wasteful
          methods are not being used."
The requirement of the CFR for adequate cost accounting methods on
the part of a contractor operating under a cost reimbursement
contract would severely timit the number of companies that could
participate in the program. With the advent of the program
natlonmde and the partlcqatlon      of a growing number of smaller
companies in the program, a suitable znternal accountmg procedure
will be very difficult  to find. The purpose of the program to
find better employment possibilities    for the Nation's poor could
be thwarted by the lack of an ancillary accounting procedure.
Initially,   during the first stages of the JOBScontract series,
the costing factors for the various componentswere not easaly
definable. Reasonable estimates, based on costs of similar
services supported by public funds were made, however, and the
total possible costs for contractors providing these services,
in combination mth estimated tvne and cost factors with respect
to skill level and salary levels were developed and released to
the field.    These estimates were used as guidelines for negotiators
on a total cost basis, and it was expected that the negotiations
would range downwards from the maximumamounts depending upon the
 various componentsand the range of their use by a prospective
 contractor,

                                    99
APPENDIXIII
     Page 9

Subsequent analysis by the Department's program staff revealed
that the "market cost" method of determinmg equitable costs
contalned flawa. In November1969, a new contracting method
was establlshed in the MA-6 or JOBS 170 series.   Thus 1s the
predominant method presently being used for approximately
92 percent of the contracts awarded in fiscal year 19'71. A
former series, MA-5, 1s St111 available for extraordinary Job
opportunities that do not lend themselves to the MA-~ restrlctlons.
The MA-~ initiated the component cost method of develop-g contract
costsl    Rather than deteraunlng a proper 9narke-t value," each
componentwithin the contract was to be clearly defined, limits
were placed on the extent of the canponent relative to the skill
level, and maximumcost levels were establxshed for each component.
Instead of the bottom Lne cost perrmsslble for each skill level,
the contract was constructed on a building block basis, with the
costs of vamous componentsto be offered to a JOBSemployee
constituting a portion of the final cost. Under the new method,
specific components, clearly set forth those that are to be
included zn the tmlning program thereby provldlng the cost base,
and components that are not deemedrelevant to the overall program
are not allowed.
The requirement of specific training or services that are to be
provided has 111effect bridged the cost reimbursement concept.
The measure of contract performance is not based upon actual
expenditures by the contractor but rather the provision of certain
contract elements to benefit the JOBSemployee and for which the
contract has set forth an agreed upon price.
The effective implementation of this contractvzg process requires a
satisfactorily  expbcit training plan and a suitable monitoring
effort to insure compliance. Changes in the form of the construction
of the proposal have already gone far to enunciate the contractor's
specific obllgatlons under the contract.    Further changes in the
language of the JOBS 170 announcementand the contract instrument
are presently underway to preclude future questions of speelfic
responslblllty.   The determinatzon of fair and reasonable cost
levels for each contractual element have been madebased on prior
experience in the earlier contract series. The fixed przce contract
retains the importance of contract performance as a full responsibltity
of the contractor, for, without such performance, no funds can flow
from the Government to the contractor.




                                   100
                                                               APPENDIX   III
                                                                    Page 10


The utilization  of 8ttendance as a means of determinmg performance
provides an adequate base for measuring performance when conpared
to a fixed train-g   schedule. The schedule need not be constructed
in an absolute time frame during the training period, provided all
of the requisite support elements are concluded before the termination
of the trattnng period, The burden remains with the Department~s
field staff who are charged with the evaluation and negotiation
of the proposals to determine that these contract elements are
adequate to meet the needs of the job and that they are not excessive
to these needs. The responsibility   of the Department's monitors
is to see that the trainmg plan is in fact being implemented.
The foregoing neets the requirements for fixed przce contracts
being suftable for use when resson8bly definite design specifications
and when fair and reasonable przlces can be established at the outset
of the contract.
Recommendation:      redefise the eligible target populatzon for
                     the JO3323 program so that it is directed more
                     specifisally to persons with 8 bon8 fide need
                     for the program.
The suggestion that a more restrictive    eligibility   criteria be
developed would not appear to be in 8greement with other manpower
develomnt progrebnns. The JOBSeligibility       criteria is ersentzally
similar to that of other programs. It is necessary that we allow
for broad individual differences amongthose persons who can be
classified as needing special assistance. The principal task as
we see it fs to ensure that the eligibility      standards are properly
administered.
It is itnpotiant to note that 50 percent of all. JCR§ employees are
under 22 years of age. fn fat&, the average JOBSemployee is 8
young Negro male who has been unemployed for 8 lengthy period of
time and has not graduated f'rc~~ high school. It is this group
that comprises one of the major ~oclal concerns of the country,
and the JOBSprogram is clearly reaching them.
Recolgmendation:     effect better coordination of the JOBSprogram
                     with the Concentrated RtnploymentProgram and
                     Work Incentive Program,
We concur that there has been sac difficulty  zn effectzve coordxnation
between participating  employers and local CEPsand other Federally
financed programs such as WI18which might have been able to refer
disadvantaged applicants to JOBSopenings.




                                     101
APPENDIXIII
    Page 11

The major contributing factor to this problem has been the location
of the CEPtarget area to the location of the JOBScontractors.
There is a growxng trend of industry moving from the central city,
and these companies will include JOBSparticQants.     The majority
of CEPareas have been operating in central city locations.     Since
even the earliest JOBSctties were designated to include the
Standard Metropolitan Statistical  Areas, the outlying locations
have been included in the program.
Often the CEPtarget ccmmtanityis restrxted     to a small inner city
area which may be a considerable distarrnce from the areas in which
JOBSopenmgs are located. Urban-suburban gublac transportation
facilities  are frequently poor and it has been experienced that
CEPreferrals were not able to provide private transportation to the
job site. Although the JOBSoontx%zt package includes transportation
assistance, these monies could be used for relatively short periods
until the SOPSemployee was able to assumethe responsibility xn
this area.
In a number of instances, this has already been done effectxvely.
A number of JO135employers have also established transportation
networks to alleviate the problem, The J&i-ted amount of funds
available, however, has restrxcted many canpanies from successfully
taking a lead m a solution.    Where they have, such participatmg
employers could realistically  make use of CEPapplicants.
Recommendation:     intensify efforts to upgrade the quality   of
                    job offers by non-contract employers.
As zndicated in the report, the Department has already noted the
use of the Occupational Opportunities Rating System (ORS). Under
this system, a proposal is rated on a variety of factors lncludlng
the skill level of the employment offered; the salary level offemd
upon entrance into the program, which LS comparedto a localized
standard of prevailing wages; the degree of complexity of the
occupation as rated by the General Educataonal Development System
by the Department of Labor occupational analysts; the understanding
of the program by the proposed contractor as well as the integrity
of the proposal to achieve the deszed goals, and, if the contractor
1s making any sxgnlfxcant concessions to JOBSemployees or providing
any addltlonal support at his own expense.
The ORShas been in the field since September 1.970, and has the same
standards with relation to the JOBSOptional Program administered
by the States. The ?KB has likewise endorsed the OR5 for the
noncontract pledged jobs in its voluntary program.




                                  102
                                                             APPENDIXIII
                                                                 Page 12


The implementation of ORSwill have an upgradxng effect on the
total program. It provides for a series of ObJeCtiVe criteria
against which proposals can be measured and has nationwide
ramlficatxons on program standards.

Recommendatron:     improve lnstructzons to contractors   on the
                    preparation of monthly fnvofces.

Contract Service Representatives, who are State employees ass3gned
to work with the Regional ManpowerAdministrators m operating the
program, are to assist contractors LII frllxng out invoices where
necessary.

Additional traming for CSR's 1s planned for early in calendar
year 1971, as soon as the revised program standards are completed
and adopted, Another check wLU be the use of an automatic data
processing system to flag accounting errors so that approprfate
action may be taken by Departmental staff.

The selection of the metropolitan areas and the contracts chosen
for review was arbitrary.  The findings, therefore, are not
necessarily representatzve of the areas reviewed much less the
JOBSprogram as a whole.   We feel, therefore, that the findings
included UI the report are applicable only to the contracts and
contractors reviewed and are not representative of the entxre
JOBSpopulation.

The Department feels that the private sector continues to be a
viable vehicle for providing sob opportunities to hire, train,
and retain the disadvantaged.

la preparing a reply to this report commentsfrom the Office of
Economic Opportunity, interested employment security agencies, and
componentsof the ManpowerAdministration were considered, Let me




                                   103
APPENDIX III
    Page? 13

express my apprecxatro)x       agam    for the    opportunity  to comment on
the reoort IT its rlralt       form,     I hope   that you find the comments
construct:ve.

Suscerely,




hctrng hislstant   Secretary
for Admlnlstratlon




                                          104
                                                                                APPENDIXIV
                                                                                    Page 'L




                                                                                  no21 2434212
                   QfIBusi-
        1730   K STREET    N W    WASHINGTON,     D C 2WM

                                                 December 11, 1970



Mr Henry Eschwege
Associate   Director
U S General Accounting              Office
441 G Street,    NW
Washington,    D C 20548

Dear Mr        Eschwege
         We appreciate the opportunity           to coannent on the      GAO
draft     report on the JOBS program

      Unfortunately,       we find that the draft report given
to us for comment is based on inadequate            investigation       and
faulty methodology          As a result,   it distorts     the overall
accomplishments      of the program      In its emphasis on criticism,
the draft report       largely   ignores the accomplishments         of the
program and gives the misleading         Impression     that the examples
cited in the report are typkal             This failure      to bring out
the accomplishments        of the program gives a negative          slant which
is quite at variance with an attempt at balanced evaluation
          1    Selection      of Cities        The GAO made e faulty      and
               unrepresentative         selection     of cities   for its
               evaluation        The cities        are not well balanced
               geographically,        more important,        they are not
               representative       economically       of the nation or of
               the fifty      major cities       in which the NAB has its
               largest    programs
               These five cities    were not comparable to the nation
               or to the fifty   largest   cities in regard to unem-
               ployment in June, 1969, when the GAO selected them
               for r.ts report     This variance  has increased during
               the year of the study

               During fiscal     1970, unemployment rates in these
               five cities   rose   by 67 1 percent,     compared to an
               increase of 36 6 percent in the nation as a whole
               and 37 L percent in the fifty       major   NAB cities
               And at the end of June 1970, average unemployment
               rates in these five cities      stood at 7.1 percent,
               compared to 5 6 percent for the nation as a whole




                                 105
ah’   ,.

           APPmmX xv
,              Page 2




                            At least       three      factors       relevant         to the study
                            are affected           by economic          condltrons            an
                            individual         employer’s        ability         to hire      the
                            disadvantaged,            the specrfrc           qualifications
                            of the disadvantaged                workers        he hires,        and
                            his    ability       to keep      these      workers         on the
                            job

                            Therefore,           conclusions        drawn       from     a lrmited
                            number       of cases         m these       five      cities      about
                            either        the effect         of changing          economic        ton-
                            ditions         on the overall          nationwide           program       or
                            about      hiring       and retention            experience         are
                            unlikely          to be valid       for     the entire          country

                        2   Number       of Contracts           Reviewed         The number        of
                            contracts         studied      by GAO is small             (31)       The
                            study       appears       to be limited          to contracts         awarded
                            rn the earliest              months      of the JOBS program              and
                            which       were    the basis        for    improvements        incorpor-
                            ated      in the JOBS ‘70 contracts                  introduced        in
                            early       1970

                            Furthermore,          it appears       that     the GAO did not
                            make a representative              or random          selection           of
                            contracts       for     its study          The biased           nature        of
                            the cities        selected      and the relatively                  small
                            number       of contracts       examrned        indicates           that
                            many of the generalizations                   and recommendations
                            made in the GAO report               are based          on samplings
                            which      may be inadequate          and are certainly                   not
                            representative

                        3   Positive          Accomplishments                  The GAO report             right-
                            fully       notes      that      “the      JOBS program            has been effec-
                            tive      in focusing            the attention              of businessmen             on
                            the employment                problems       of disadvantaged               persons
                            and has effected                 a broad       response           and commitment
                            by many businesses                    to hire,       train        and retain         the
                            disadvantaged              I’ Unfortunately,                  the report,         in its
                            emphasis          on imperfections               in the data-gathering
                            system          and on the weaknesses                     in performance             under
                            some -- primarily                  the earliest,              now obsolete           -- MA
                            contracts,           distorts           the picture           of the JOBS program
                            by failing           to spell           out and give            examples      of the
                            positive          accomplishments              of the program

                            In particular,               the     GAO report   presents            a totally
                            inadequate         picture           of the accomplishments               of the




                                                           106
                                                                                               APPENDIX IV
                                                                                                   Page 3




    voluntary          program       which      accounts         for
    approxrmately             70 percent        of the hares               The
    fact      that     the NAB program            has provrded          em-
    ployment         for hundreds          of thousands            of drs-
    advantaged           parsons     at no        cost     to the
    government           should    not be obscured               by undue
    emphasis         on the lnevltable              margin       of error
    In data        on a large,         nationwide          program
    whrch       has been provided             voluntarily            by
    employers          who partrclpate            wlthout        government
    rermbursement             or reportrng          requlrements

4   Management          Information               System          We have      con-
    tinuously         maintained             that      the lnformatron
    we use from           both       contract          and voluntary
    employers         1s a reasonable                  measure        of program
    accomplishment,                although          necessarrly          not
    completely          verifiable                 As the NAB gave GAO
    Its    own study           on the imperfections                     of the
    MIS system,           the numerous               pages       whxh      the GAO
    report       spends        on this         topic      seem out of balance
    wrth      the rmportance               of the subject

    It should          be recognized            that      several        GAO
    recommendations               would     require         elaborate          and
    costly        procedures          for   verrfylng           information
    Partrcularly             In the voluntary               program,        we
    belreve         It IS extremely             important           to avord
    encumbering            the program          with      txme-consumrng
    and costly           admrnrstratrve              procedures          which
    would       discourage          employers          from partrcipatlng

    Furthermore,             the CA0 apparently                  overlooked           an
    important          area      of under-reportrng                     A substan-
    tial      number       of those        individuals             reported         as
    "terminated"             remalned         on the Job long               enough
    to receive           trarnlng         and work experrence                  which
    would       enable       them to move to better                     Jobs     than
    they      held     before       their       entry       into     the JOBS
    program            The difficulty               of quantlfylng             this
    aspect        of the program's               accomplishments               does
    not Justify            the auditor's              farlure        to take
     rt into        account             If this         factor       is considered,
    the GAO statement                 that      accomplrshments              have       been
    "overstated"             appears        to be based            on incomplete
    analysrs




                                 107
APPENDIX IV
    Page 4




              5   "Disadvantaged"              crlterla            The GAO Indicates
                  that      some percentage               -- usually        a fairly
                  small       percentage          -- of those         enrolled        under
                  both      contract        and non-contract             phases       of
                  the program            have not met the income                    or other
                  quallflcatlons             for      "dzadvantaged"              and that
                  In other          cases    the GAO was unable                 to determlne
                  whether         or not every            Lraknee     quallfled

                  Particularly                In the non-contract                  program,          we
                  belleve          It should           be less         a matter       of com-
                  plaint         that      procedures            have not always              been
                  perfectly            followed          than      of satlsfactlon               that
                  the majority               of employers              have     gone out of
                  their       way to extend                employment           and training
                  opportunltles                 to so many unskilled                  and unem-
                  ployed         workers             Furthermore             -- to take          only
                  one speclflc               omlsslon          -- the CA0 report                 also
                  fails        to note          that     over      25 percent         of all
                  non-contract               lobs,       which       require       no     certl-
                   flcatlon          at all,         have actually              been certified
                  by CEP and the ES at the initiative                                   of the
                  employer

              6   Cost-reimbursement             contracts          The relative
                  merits       of cost-reimbursement             or flxed     nrice
                  contracts       were consldered             at length   by-the
                  NAB and DOL at the time                  the JOBS '70 contracts
                  were      berng    negotiated

                  At this    time,      the NAB orlglnally              requested          that
                  the JOBS '70 contract               be a cost-reimbursement
                  contract         However,       after      dlscusslon        with      the
                  Department       of Labor,        both NAB and the Department
                  realized     that     this    would      be impractical            and
                  unworkable       from      an admlnlstratlve            standpoint
                  because    of the unmense             burden       of paperwork
                  on both    employers         and the government

                  Through        negotzatlon,            agreement         was reached            on
                  what we believed               were reasonable                levels       of
                  reimbursement             for the different                 components           of
                  the fixed         price      JOBS '70 contract                      It was
                  recognized          that     there       would     be some cases              in
                  which       the employer's             cost     would      be less         than
                  anticipated           under      the fixed         price        contract         and
                  the employer            would      therefore         benefit,          and other
                  cases      where      the employer            would      find       It necessary
                  to provide          more tralnrng              and services            than     he
                  would       be reimbursed            for     under     the contract              and
                  therefore         suffer       a loss




                                             108
                                                                                                         APPENDIX IV
                                                                                                              Page 5




    Cost-rermbursement                  contracts,           despite          their
    greater       complexrty,            would        probably          be
    acceptable          to large          employers          fsmllrar           with
    other      government           procurement            contracts                 Such
    contracts         would       assure        employers           that      all
    extraordlnary             costs       of on-the-Job               tramlng
    and support           services          would      be covered            by the
    government             Nonetheless,               we belleve           that       cost-
    reimbursement             contracts           would      result         rn an
    lmposslble          burden        on smaller           employers            which       do
    not have        the sophlstlcated                   accountrng            systems
    required        to segregate              costs       and to establish                  the
    overhead        rates       or pools           of indirect            costs
    requrred        m rmplementlng                   a government             cost-
    rermbursement             contract

    In screenrng       many smaller           employers         out of the
    JOBS program,        we believe         that     cost-reimbursement
    contracts     would    work     against        our objective            of
    flndmg      employment      and trarnrng             for    disadvantaged
    Americans

7   Business      commrtment            and support               We regret       that
    the GAO report            also      fails      to recognize          the
    ccmmntment        of businesses              in provldlng          office
    space     and other         loglstlcal           support       m many
    cities      at its     own expense             and In loaning
    thousands       of executives              to work       full    time     for
    the program         while       continuing          to pay their
    salaries

a   Changes       m hlrrng            practices                The assertrons
    made m several                places         that       employers           under       theprogram
    are hiring          essentially              the same people                   as In
    the past        are clearly              incorrect           for      the program
    as a whole              In Detroit,               for    example,            the auto-
    motive      employers           m late            1967 made drastic
    changes       m their           criteria            for    choosrng            entry-
    level      employees          and III their              efforts          to search
    out and provide               Jobs for            the disadvantaged
    The Detroit           experience             was largely               the model
    for     the NAB program                    Since        1968,        evidence
    abounds       from      all     parts        of the nation                 that
    thousands         of employers,                from maJor              corporations
    to small        enterprises,               have begun              to screen          in
    disadvantaged             workers          who would             in the past            have
    been screened             out by tradltronal                       personnel
    practices




                                        109
     t
APPENDIX IV
    Page 6




                       The responses of some employers to GAO
                       rnvestrgators       that they frnd no difference
                       between JOBS employees and those they have
                       hlred m the past appear to be based on
                       inadequate     procedures which did not protect
                       against distorted         responses      Most notably,
                       it should be obvious that an employer
                       subJect to EEOC or OFCC review would hesitate
                       to tell a government investigator            (or even an
                       investigator      from an outside firm under con-
                       tract to the government)           that he had in the
                       past been excluding          disadvantaged   workers
                       Second, comparisons between workers based
                       on physlcal     appearance or on-the-Job         per-
                       formance do not go to the heart of the changes
                       in hiring     practices      which have been made by
                       NAB employers,        indeed, one of the principal
                       accomplishments         of the program has been to
                       demonstrate      to employers that the men and
                       women they had screened out in the past can
                       become satrsfactory          and productive   employees

                    We appreciate  the opportunity to comment on the draft
              of the GAQreport    and hope our comments wrll be of use in
              makrng a correct and adequate evaluation   of the JOBS
              program

                                        Sincerely,




                                        Executive Vice President,
                                        Secretary-Treasurer




                                       110
                                                                   APPENDIX   V



                                 PRINCIPAL OFFICIALS OF
                                 THE DEPARTMENT
                                             OF LABOR
                           RESPONSIBLE
                                     FORTHE ADMINISTRATIONOF
                                   THE JOBS PROGRAM

                                                     Tenure of office
                                                     From           To
SECRETARY OF LABOR:
   James D. Hodgson                               July 1970      Present
   George P. Shultz                               Jan. 1969      June 1970
   W. Willard Wirtz                               Sept. 1962     Jan. 1970
ASSISTANTSECRETARY   FORMAN-
  POWER:
   Malcolm R. Love11                              July 1970      Present
   Arnold R. Weber                                Feb. 1969      July 1970
    Stanley H. Ruttenberg                         June 1966      Jan. 1969
MANPOWER ADMINISTRATOR:
   Paul J. Fasser, Jr.                            Oct.    1970   Present
   Malcolm R. Love11                              June    1969   Oct. 1970
   J. Nicholas Peet                               Feb.    1969   June 1969
   William Kolberg (acting)                       Jan.    1969   Feb. 1969
   Stanley H. Ruttenberg                          Jan.    1965   Jan. 1969
   John C. Donovan                                April   1964   Jan. 1965




u s   GAO   Wash   , B C

                                           111