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
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)