The Committee is aware, of course, that service cuts were made in order to reduce costs. As to other motives, the Committee took note of the testimony of Frederick C. Belen, a Washington, D.C., attorney and a former Assistant Postmaster General for Operations and the Deputy Postmaster General from March, 1964 to January, 1969. He said:

In my judgment, what happened had nothing whatever to do with whether there was a corporation to carry mail, or not. It was a deliberate, determined effort to slow the mail and to reverse the pressure of urgency and to "manage" the mail service and people. Again, this was, in my judgment, based on the false premise that the public did not need or want (or shouldn't have) next-day delivery of mail, or, in the case of a large amount of the mail, the availability of same-day delivery. It was related primarily to a desire to assemble large volumes of mail for mechanical processing. Here's the way it went.

Air star routes for overnight service within a State were abandoned.

ABCD went down the drain.

Air lift became managed mail; that is, held over to be worked the next day.

Local mails became merged with area mail.

Three deliveries in the business area were abandoned.
Neighborhood mail pick-up all but dried up.

Then came the budget crunch, wherein the budgeters were really deciding the service levels.

With no recourse to higher authority, no one could get the message through.

Congressional channels had been dried up.

In despair, the supervisory forces in many large post offices retired en masse.

Congressional Committees finally came to the fore, and national attention was directed to the problem.

Current Service-Standard Measurements

The Committee, on the basis of its own inquiries, supported by testimony and studies by the General Accounting Office, concludes that the Postal Service's performance has, at least with regard to firstclass mail, tended to improve of late, after a serious deterioration immediately following the enactment of the Reorganization Act. It suffered, however, a setback of considerable proportion in late calendar 1972. The underlying reasons for these periods of poor performance are dealt with elsewhere.

It is difficult to determine the exact degree of improvement, or of deterioration for that matter, in part because the system of measuring performance has been so significantly altered and has not always proven adequate.

Prior to 1967, the former Post Office Department used test letters to measure service quality, but found this system unsatisfactory. In November, 1967, the Post Office Department developed a system for measuring mail delivery time by sampling, on a continuous basis, every tenth piece of first-class mail at 2,500 selected delivery points and determining the time between postmarking and receipt at the delivery point.

The results of these tests were published quarterly in the National Service Index (NSI) Reports inaugurated by Mr. Nicholson, as reported above. In July, 1970, the Department implemented what it calls the Origin-Destination Information System, under which the number of delivery points used to sample mail has been increased to about 75,000, including some at all first- and second-class post offices. ODIS assumes that most mail is postmarked the same day it is mailed and that a carrier also delivers it the day he receives it.

Furthermore, ODIS itself has been changed to eliminate Sundays and holidays in computing mail delivery time, included in the old NSI Reports. This results, of course, in understanding the time elapsing between the postmarking of a letter and its receipt at a delivery point in many instances.

ODIS also is used currently to measure the delivery time for airmail letters. This was not always the case. In April 1971, shortly after the Service's Airmail Improvement Program was established, it started weekly tests called Airmail Service Tests (AST), to measure actual delivery time against the established goal of next-day delivery of 95 percent of the airmail addressed to designated cities within a 600-mile radius of the post office of origin. Reports for the 12-month period ended September, 1972, showed next-day delivery being achieved almost 95 percent of the time, but because AST used marked test letters which were given priority processing, it did not provide an accurate measurement.

ODIS reports, for instance, show that, for the last four months in calendar year 1972-a period of considerable difficulty for the Postal Service 48 to 79 percent of the letters that qualified received next-day delivery, according to a GAO report on the Airmail Improvement Program Objectives.

National averages, furthermore, cannot speak to performance in specific geographical areas. And, understandably, independent tests run for the Congress also show that timeliness of delivery also is related to the places of origin and destination. Service, in short, is better between large cities than it is between cities and rural areas or between two rural areas.

In a Texas test, GAO found, however, that at least 95 percent of the intrastate mail it dispatched met delivery standards, except when posted from one rural area to another rural area. Of 111 test letters mailed between rural areas in Texas, 93.7 percent met the standards. Less acceptable was performance on interstate mail. The same test showed that the three-day delivery standard for interstate mail was met only 62 percent of the time for mail posted at Miami, ranging to 87 percent for mail originating at San Francisco. Outgoing interstate mail from Texas achieved a worse record, with only mail dispatched at Forth Worth for destinations in Illinois meeting the delivery standard of delivery within three days.

POSTAL MECHANIZATION

The success of the Postal Service will ultimately stand upon two accomplishments, financial self-sufficiency and public confidence. Thus far, efforts to achieve these goals have been insubstantial, at least when

compared with the general expectations of Congress and the const ituency it represents. There is much to be done if the independent Postal Service concept is to survive, and it is for this reason that the future of the Postal Service is closely bound to its ability to mechanize a labor-intensive operation.

The Service must increase its productivity; that is, handle more mail per labor and operational dollar spent. In the last several years, labor costs and the more non-specific impacts of erosive inflation have seriously set back the economic progress the Postal Service might have hoped to make. Mechanization offers the promise of faster mail processing at greater volumes and with less cost.

The United States is a hesitant late-comer to the field of postal mechanization, beginning as much as twenty years behind some European nations in making a deliberate attempt to improve mail service by the application of technology to its problems. The first program for technical improvement in American mail service was begun in the early 1950's under the old Post Office Department, the brain-child of the then-Postmaster General, Arthur E. Summerfield. Despite his enthusiasm for the project, it was underfunded and failed to make any astounding progress. Until the last years of the Post Office Department, the program was starved and nonproductive. Out of this program came Operation Turnkey, described as a fully automated post office opened in Providence, R.I., in 1960, but this project, known to its detractors as Operation Turnkey, failed.

With the inception of the United States Postal Service, a new and sorely needed emphasis was placed on the research, development, and application of mechanized mail processing technology. It was the thinking of the new leadership that the old Post Office Department had failed in its modernization and mechanization effort. Postmaster General Klassen noted in testimony before this Committee, "Prior to reorganization, the cumulative investment in equipment and facilities to support the operation came to $1.100 per employee, while the other giant of the communications industry-A.T. & T.-had investments upward of $35,000 per employee for the same purpose." From 1957 until 1967, the Post Office Department spent a total of $100 million for mechanization. By 1970, the annual budget for this program had climbed to $86 million, and according to U.S. Postal Service figures, $472 million was to be expended during 1973 on mechanization.

There is no question that the Postal Service has calculated the advantages of mechanized mail processing and has made a commitment to the program. But the direction in which the program is headed concerns many. It must be within the terms of three factors; cost, mail volume, and service, that this direction should be evaluated. Mechanization Costs

The Postal Service has estimated that of its $10.4 billion of costs for fiscal year 1973, $8.6 billion was earmarked for labor. It is not difficult to understand, therefore, why the Service views the mechanization of mail processing as the best opportunity to effect major cost reductions.

But the substantial investments in development, procurement, and integration of this technology can be lost because of other costs not accounted for. As an example, the costs of the most ambitious mail mechanization project ever proposed in the United States is the Prefer

ential Mail System. The overall intended cost of the program is approximately $4 billion; $1.9 billion for mechanization, $1.4 billion for development and systems integration. The Postal Service expected the preferential mail system to provide a saving of $1 billion annually, but the actual implementation of the System has been, at least temporarily, deferred pending a feasibility demonstration. Perhaps the Postal Service is now comparing the estimated saving with both tangible and intangible costs.

While the Service cannot be faulted for its boldness in research and development, the fact that a $4 billion mail handling system hinged upon the successful development of unproven equipment presented a risky decision that could result in a financial disaster. Under the old Post Office Department the following policy statement was made to guard against just such a situation:

Mail handling operations to be mechanized are committed to proven mechanization. Proven mechanization is that which has demonstrated its effectiveness under operating conditions. This provides the only reasonable position from which to judge the potential of postal mechanization, while avoiding the hazards of full commitment without full knowledge.

Mechanization is expensive for reasons other than R and D costs and the purchase price of new equipment. Outdated facilities, for example, can be a major barrier to the useful implementation of new technology. In may cases, mechanized equipment simply requires more space than is currently available, particularly for those operations where different types of machinery, linked by conveyor systems, are required to make efficient use of new equipment.

Noise created by the machinery can also be a problem, especially where the concentration of the operator becomes an important element in the efficient use of the equipment. This is a problem which the Committee found in the Philadelphia Main Post Office, created primarily by the Multi-Position Letter Sorting Machines (LSM). These semiautomatic, operator-controlled machines, capable of distributing letters at high speeds to more than 200 separations, create a considerable clatter as the letters pass along metal rollers and electric gates. In some cases a solution has been sought by hiring deaf employees. In Seattle, headphones supplying music were being used to isolate the operators from their noisy environment.

Training operators and maintaining the equipment are additional costs to be considered. Letter Sorting Machine operators handle an average of 2,340 letters an hour, but these are of varying degrees of speed and accuracy, depending upon the skill of the operator. Thus training programs must be established whose cost must be included in calculating the rate of return on the investment in the machines. The equipment needed to process mail in large volumes and at high speeds is both complex and sophisticated. In addition to routine maintenance, a well-trained staff is kept busy trying to keep the machines on line. The multi-position LSM may have as many as 12 operator-controlled consoles and 277 bins for processing and receiving mail, any one of which is susceptible to break-down.

Volume

Mechanization costs must be balanced against increases in the volumes processed. The decisions to make a capital investment in

S. Rept. 93-727- -4

equipment must be based on the amount of work it will accomplish as opposed to the work which might be done by some other piece of equipment or human labor. The Postal Service's turn to technology capable of large-volume processing of mail is a realistic response to a growing rate of mail volume which at some point in the future threatens to engulf mail service. As Gerald Cullinan graphically portrayed the situation in his book. The United States Postal Service: .. at some point in the twenty-first century, half the citizens of the United States would be delivering mail to the other half. At the present time, however, the volumes of mail flowing through post offices throughout the United States are insufficient to justify the cost of the more sophisticated highspeed mail processing equipment. The Postal Service's response to this low ratio of out-put to expenditure has been to alter artificially the flow of mail, concentrating the volume in fewer though proportionately more remote, processing centers. In the Report of the Board of Governors of the United States Postal Service on the Restrictions on the Private Carriage of Mail, the following economic reasoning is set forth:

With the investment of funds in new plants and equipment, it is now possible to reap economies of scale from increases in volumes. As volume increases, hand-propelled trucks can be replaced, at lower cost, by a conveyor-belt system. Advanced materialshandling equipment can be used to separate letter mail, mechanically, from larger or bulkier kinds of mail to be separately processed. Other materials-handling equipment can expedite truck loading and unloading. There is equipment that will automatically stack piles of mail and speed it through a machine that senses where the postage stamp is, and then cancel it. A hierarchy of sorting equipment is available, corresponding to different savings in per-piece operating cost and different volume and investment requirements. The most expensive machines provide the lowest total sorting cost per piece, provided there is sufficient volume to make the high cost per machine a low cost per letter.

All the foregoing kinds of equipment exist, and are being deployed in the larger post offices. Associated with this deployment has been a reorganization of mail routing, to concentrate processing in those larger offices. When a small post office sends it originating mail to a larger office for processing, the transportation to the larger office takes time and money. The savings in faster and lower-cost handling, however, have proven sufficient to postal system designers to justify the added transportation burden.

New technology has thus expanded significantly the scale of operation required to obtain least-cost processing. With even more volume going through the system, a larger number of post offices would be able to use the best present technology economically. Transportation for the sake of concentration would then become even less a burden and further service improvement would become possible.

This statement is essentially the justification for the Preferential Mail System, whose implementation has been deferred.

Despite this decision, the massing of mail to create mail volume is occurring throughout the United States. While Committee investigators were studying the prototype Letter Mail Code Sort System