Mr. FAZIO. Well, it says as part of this, restrictions that apply regardless of any contrary language in the prior 1996 FEHB brochures. It seems that people could have retained a previous health care plan, but it wasn't made clear. I wondered why we didn't make it clear in the memo that this was still available to them, that they still could actually retroactively take some action to maintain the benefit.

Do you know why it was unclear?

Mr. FAULKNER. I would defer to Kay Ford again, who is the Associate Administrator for Human Resources. Again, our role is to disseminate information as accurately and as timely as possible. If the memo was not clear, we can certainly issue continued clarifications. We can try to time line it.

Mr. FAZIO. But you say the holdup was in the House Oversight Committee?

Mr. FAULKNER. Again, I would have to go back and look at the time line, but I know part of it, something like that we submit to Oversight for review, and the date that we have on it was the date that we were ready to go with it.

Mr. FAZIO. So you were prepared to go on the 5th, but it wasn't until 2 months later because other people were reviewing it; is that correct?

Mr. FAULKNER. That is correct.

Mr. FAZIO. OK. Well, we can maybe follow this up outside the hearing here, if need be.

I have one other area that I wanted to get into, and, Mr. Chairman, I apologize, this was basically an issue that occurred in the purview of the Oversight Committee, but I think sometimes it is worth bringing up here because it does go to how we are proceeding on contracting out and privatization.

POSTAL CONTRACT DISCUSSION

We, in December 1995, on the House Oversight Committee, acting on the recommendation of Mr. Faulkner, went forward to award Pitney Bowes Management Services the contract to provide internal postal operations to the House. This was, by the way, encouraged by Price Waterhouse and the comprehensive audit of the House. So after we went through an RFP process, the CAO recommended that we go with Pitney Bowes. We were provided with some information by the CAO in support of the contract that indicated that we would be not only benefiting from better services, but also substantial cost savings.

Following the award, we entered into some discussion, there was some controversy, surrounding the question of the extent to which we would reduce the wages of the House postal operations employees who would be retained by the subsequent contractor, Pitney Bowes. Because the audit of the House had concluded that our postal operations employees were in some cases paid a good deal more than the market, you know, $14 an hour versus something between $11.60 and $11.90, it was assumed that there would be some reduction in the wages to necessarily end up with a result that would justify the outsourcing of the services. It is a very complicated issue, but there is a continuing controversy around the information we got as to how we justify moving forward in this gard.

WAGE COMPARISONS

At the time we brought this up to the committee for consid ation, the CAO initially indicated that the average labor wa under the Pitney Bowes contract would be $11.93, as compa with the $14.04, which would be a reduction of about 15 perce Then later on, on January 19 we got some information that in cated that the average pay reduction would be somewhere in neighborhood of 21 percent. Then thereafter, this CAO provide new status report in which it was stated that the earlier data b indicated a 20.1 percent reduction, which proved to be inaccur in the majority of cases, and they went on to document for furt review, and I think that was by the CAO, that prior to the comm tee's approval, it was a projected decrease of 24.7 percent, but t the actual percentage reduction was now calculated to be 26.4 p

cent.

ESTIMATES ON FORMER POSTAL EMPLOYEE WAGE REDUCTION

I think we got about six different estimates here of what the duction would amount to. And of course it was pretty controvers because you are asking essentially these same people to ret their employment, but to get a reduction of a sizable amount, cluding of course implications for their retirement and other be fits.

I just was wondering why we were all over the lot on this, cause this was a very high profile, significant decision to do so thing that is just absolutely essential to what we do here and we handle the mail. That is our contact with the public.

I wonder if you could indicate to us why we were originally gi a 15 percent reduction, which may now be 26.4 percent, becaus terms of its impact on the employees, that is a pretty signific difference, and one that might have caused members of the c mittee to look at this somewhat differently?

Mr. FAULKNER. I think that, first of all, from the moment w the committee approved the contract of Pitney Bowes Managem Services in December to the point where Pitney Bowes took on February 13th, it was obviously conducting active salary n tiations and job offers occurring to not only the employees were part of the postal operations, but also to some of the for Folding Room employees who were still seeking employment you had shifts because in some cases you had people who v being offered similar amounts of money and then either chose o jobs or chose retirement. One of those databases was based on postal employees; another one includes Folding Room employ So there were a number of those kinds of issues that, as the ployee-base kept shifting, because we had originally, you had employees affected in the postal operations, 107 were intervie Sixty-six accepted positions, 24 declined. You then-and so dep ing on what Polaroid picture you take through that period, start into that kind of moving number. We then had a numbe the Folding Room employees also interviewed.

DEPARTMENT OF LABOR ANALYSIS PRESENTED

I have, for the record, an analysis showing Department of Labor figures on prevailing wage rates in the D.C. area for postal-related employment. Let me give a few of these copies out here.

What you will see on this is that I can give more to the committee for the other Members who are not here at the moment-but as you will see, the Department of Labor rates that when you start to look at site, technical site representatives, Department of Labor rate is $8.39, Pitney Bowes was offering $9.52; site representative, $7.13 is Department of Labor rates, $7.65 is Pitney Bowes; and the same thing, technical service rep for the p.m. shift, again, $8.63, Pitney Bowes was $9.52. Again, site rep in the afternoon shift, $7.13 for, prevailing wage rate for the Department of Labor, $7.65, Pitney Bowes. The only one where Pitney Bowes comes out lower is the account clerk which is $8.50 prevailing wage, $8.27, Pitney Bowes rate.

So again, yes, these are all lower than what was provided in the House postal operations. In part, House salaries were way above prevailing labor rates for a variety of reasons.

Mr. FAZIO. I am not second guessing the decision so much as I am just trying to point out that when we make these judgments we need as much as possible to have information that we can count on that is calculated with some certainty. If there are variables and questions about those numbers, we ought to be presented with them so that they can be on the record for us.

For example, the 15 percent number we were given initially, I don't know where it came from. Was Pitney Bowes the source of that number?

Mr. FAULKNER. Again, they were looking at the entire pool of 107 employees, and as you start to say employee "A" makes this amount, he or she is offered wage rate "B," and they choose it, that difference might be 15 percent. Employee "A" chooses not to take it, so they go to employee "С."

Mr. FAZIO. So what you are saying is there was no way initially to know.

Mr. FAULKNER. They did averages, taking the current pool versus the current structure of what

Mr. FAZIO. Was that misleading, do you think, or were you misled or were we misled indirectly? Was there a way for us to have anticipated these kinds of variations here?

Mr. FAULKNER. At the time it was kind of looking at the macro picture in the first one. So-I mean macro versus point by point. I wouldn't say misleading, I would say that they were kind of maybe apples and oranges, and we maybe should have gone into more detail in December on looking at maybe specific scenarios playing out. But again, until we were allowed to go into the postal operation and begin having Pitney Bowes interview employees and make specific letters of job offers, that point by point would have all been hypothetical and it would have played out into a best case or worst case scenario. So it might have been very speculative.

FORMER POSTAL EMPLOYEE FINAL WAGE REDUCTION

Mr. FAZIO. What is it now, as we have kind of come to the end of this, what is the reduction in the rate of pay that we are

Mr. FAULKNER. I think the final document that you have there is the final

Mr. FAZIO. Twenty-six point four?

Mr. FAULKNER. That is the final submission to the committee as of 3 weeks ago, then that would be the most accurate.

Mr. FAZIO. Well, I think there are lots of complications here, but all I can say is it would seem to me that we ought to have explored the variety of apples and oranges, rather than have given the committee the impression we had a 15 percent reduction when it was 26.4. That is a very significant difference in terms of how those individuals are treated, and the Congress may have come to some other conclusion about it.

I am not saying the contract isn't being well administered or that Pitney Bowes isn't doing a good job; I just think that these are very controversial decisions and when we make them, we probably made them for at least for most of us-forever. It seems to me we need to have more explicit information up front about some of the variations that we really are trying to evaluate.

SALARY RATE INCREASES CURRENTLY CONSIDERED

Mr. FAULKNER. I toured the facility yesterday and talked to their site manager, and after a few weeks of operation they are already looking at offering some increases to several of the employees, either here or at other sites. So the numbers will probably start refining back in a different direction as they get to know the employees and realize the type of professionals that many of them are and begin absorbing them, not only into the structure as it evolves here, but into the Pitney Bowes Management Services throughout the D.C. area that, as we have seen in other organizations where Pitney Bowes has absorbed employees, many of the better performers start moving up throughout the broader corporate structure, not just stay at that one level.

Mr. FAZIO. I remember that was one of the strengths, the upward mobility aspect.

Could you for the record just indicate to the committee what the differences are in terms of the benefit package that they have, Pitney Bowes versus

Mr. FAULKNER. Certainly. I can go through some of it here, or I can just submit it for the record. It is several pages long.

Mr. FAZIO. You might just want to highlight and submit it for the record. I think people want to get a flavor. I have other questions for you that I will submit for the record.

[The questions of Mr. Fazio and responses follow:]

HUMAN RESOURCES PROCEDURES

Questions. I have received considerable feedback that your human resources procedures and policies for filling vacancies in the CAO's and HIR's offices-may have contributed to the high vacancy rate at HIR, cited in the testimony as 20%, and have added time-consuming steps to the procedure. For example, it took considerable time to fill the security officer position at HIR although you cite information security as one of the highest priorities. What was the cause for delay in filling the security officer position?

I also understand that the HIR receptionist was included in last year's terminations, but it was discovered almost immediately that a receptionist was needed. A temp firm had to fill the position for several months, and the position is still not filled. The HIR receptionist was terminated based on last year's HIR reorganization. Why was the HIR receptionist eliminated at that time? When was the receptionist's last day at work? On what date did a temporary receptionist begin work? What has been the total cost to employ a temporary receptionist?

In my office, even paying strict attention to Fair Labor Standards practices, it takes about a week to hire a staff assistant. Why has it taken so long to hire a fulltime receptionist at HIR and how is incurring these costs in the interim consistent with Total Quality Management?

Response. Security Officer position. -The security officer position is a critical position in the HIR organization. The position was filled in mid January and the report date was 2/20/96. In the three weeks he has been on board he has made a very positive impact.

Because this is a critical position, the right person with outstanding credentials had to be found. A highly qualified person had been found in September and the process to hire him was started but it required getting approval to offer a salary above the first step in the HS-13 grade. Although gh this took a little longer than a normal Step 1 request, the real problem was that our candidate was given a counter offer by his employer employer when they found out that he was considering resigning. The offer was a $30,000 a year increase with stock options and an officer level position in the company.

The search for a candidate of equal stature began in late October with an ad in the Washington Post. The candidate along with many others applied in November, was interviewed in early December by HIR staff and in late December by the Inspector General. The paperwork was initiated in early January and the offer was made in the middle of the month.

Receptionist position.-At the time of the HIR reorganization last year, it was determined that all incoming calls would be directed to the Technical Support Representatives in an effort to promote improved customer support. However, as the support teams became organized and with the decision to eliminate the User Assistance Office, it became apparent many offices would not know the direct number of their TSR and would need to dial a general number. Additionally, the Capitol Police indicated their plans to close the security desk so that visitors would have no place to check-in. Consequently, it was determined that a receptionist be hired.

The HIR receptionist's last day at work was June 23, 1995. A temporary receptionist began work at HIR on July 3, 1995. The total cost to date for temporary receptionists is $15,895.75.

Soon after the decision was made to reinstate the receptionist function, a position description was proposed. However, HIR's job requirements and salary range for a receptionist were not consistent with the standards for a receptionist in the rest of the CAO organization. The requirements were re-evaluated and a new position description and pay grade had to be drafted, reviewed and approved by Human Resources and the Committee on House Oversight. The vacancy was then officially posted, applicants were evaluated, and a selection has now been made. This all occurred in the midst of an HIR restructuring of a greater scope, which involved the same review and approval processes as the receptionist position, contributing to the usually long time frame.

Reversing a managerial decision that in retrospect seems inadvisable is not contrary to any principal of quality management. Unwillingness to reverse such a decision would be.

TRAINING

Question. In your testimony, you mention that 3 of your staff has attended training in quality management principles this year. Briefly describe the length of that training, the material covered, the number of participants and the overall cost of the training.

In addition to the quality management training cited, provide a list of any other training attended by CAO or HIR staff since January 1995. Include the name of the employee, title or description of course, the length of the course, and the total cost including travel, if any. It is not necessary to include training conducted by HIR. Provide the same information for any anticipated training for 1996. What is your budget for training for FY'97 and what training requirements is this request based on?

Response. Quality Management Training.-Between July 1995 and March 1, 1996 500 CAO employees attended quality management principles awareness training. In