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Mr. NATHAN. Yes.

Mr. WRIGHT. This is a matter distinct from the subsidy provided in law. A new determination would have to be made as to who paid

the money.

As I read the agreement, the U.S. Army Corps of Engineers would have to absorb that cost out of its operating expenses. Do you read it that way?

Mr. NATHAN. Mr. Chairman, I would say this: the way the Postal Service uses its funds for all different kinds of expenditures, it is a matter for determination by the Postal Service. I am not, as I indicated in the beginning of my testimony, sufficiently expert in the details of the agreement to say how it would be interpreted under those conditions.

I think that again I would have to reply that there is going to be a relationship that will be structured by the agreement between the Postal Service and the U.S. Army Corps of Engineers, and they would have to determine what is the procedure to use under those kinds of contingencies and those kinds of conditions.

If at that time we felt there was some appropriate role for the Executive Office through the Office of Management and Budget to review the matter again, we would review the matter again. But I would not want to be on the record at this time as interpreting the agreement on the point that you indicate.

Mr. WRIGHT. Are you trying to state to me you do not know what the agreement provides?

Mr. NATHAN. I would say we read the agreement. As indicated, we spent a lot of time, as your committee has determined, reviewing the agreement.

Mr. WRIGHT. I asked you for an interpretation of what it provides, and

you have not given me an answer. Mr. NATHAN. That is right.

Mr. WRIGHT. What does it provide in the event the Army Corps of Engineers is not able to build these buildings within the 5.5-percent overhead? Who pays?

Mr. NATHAN. Let me ask Mr. Benton to respond since he is closer to it than I.

Mr. Benton. The agreement provides for the corps to limit its overhead expenses to 5.5 percent. It provides for an annual review by a team of Corps and Postal Service people to see how well they are conforming to this agreement.

The Postmaster General has, I think, taken in the agreement a very stiff position in regard to not exceeding this 5.5 percent.

Mr. WRIGHT. Are you saying that the Postmaster General has taken a position that the Postal Service will not pay above 5.5 percent?

Mr. BENTON. I do not see how the Postal Service-I do not read the agreement-put it this way: I do not read the agreement to require the Corps of Engineers to accept any overrun in cost above the 5.5 percent, to absorb it.

Mr. WRIGHT. Let us be clear on what we are saying. You do not read the agreement in such a way that it would require the Corps of Engineers to absorb any overrun above 5.5 percent?

Mr. BENTON. I do not understand it to say that, yes.

Mr. WRIGHT. We had testimony yesterday to the effect that the
Mr. BENTON. That is my interpretation.

Mr. NATHAN. Mr. Benton said he does not think that that is stipulated or required by any terms of the agreement.

I would point out on page 4 of the agreement it is made quite clear there will be a review process and that the agreement may be modified or amended by written agreement between the two parties at any time during its course.

I would think, Mr. Chairman, that a matter of this magnitudethat is, the inability of the corps to, despite its very large system which permits it to spread these overhead costs on a wide basis—if it were to be determined that they could not operate within this 5.5 percent overhead cost condition, this would be a matter that would be opened up again by the parties.

At the time the Office of Management and Budget would make a determination as to whether we needed to again enter into the situation as we did in the one instance which your committee is aware of.

I do not think that we are prepared at this time to say what would happen at that time. No agreement can deal with every contingency. There will clearly be matters of interpretation and further discussion that we are not able to comment on.

I think it would not be useful for us to interpret for the record at this time how the parties would operate under different kinds of conditions.

Mr. WRIGHT. Now, it might be possible for Congress to assume a position of saying that income from taxes each year will meet or exceed expenditures of the Federal Government, but then income from taxes might not meet or exceed the appropriated amounts. We have encountered that on numerous occasions. Do you not think it is a responsibility then of Congress to anticipate those contingencies?

Mr. NATHAN. As I indicated earlier in my testimony, Mr. Chairman, I think we only want to speak for the Executive. Surely Congress has every right in a new area such as this where the Postal Service is just getting off the ground, it seems to me important that the relevant and interested committees of the Congress to be closely advised of what is happening, so I would certainly say that there is every reason for the Congress to consider this matter if it thinks it is an important matter.

Mr. WRIGHT. Now, with respect to the executive branch and its position in this matter, and that of the Office of Management and Budget in particular, as I understand it, the two of you are saying to the committee first that you have read the agreement and studied it, but you do not really know what happens or who pays, assuming

Mr. NATHAN. Mr. Chairman-
Mr. WRIGHT. Please let me finish.

You do not really know what happens or who pays assuming the corps is incapable of operating within a 5.5-percent overhead, is that correct?

Mr. NATHAN. I think it is fair to say we have read the agreement, studied it rather carefully at the time that it was under consideration, and in fact, for a period before it went into effect—and as my testimony at a later point indicates, we had no reason to object to the

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agreement. It was also reasonable for one to say about our position
that it is not possible for us at this time to predict how the parties
would operate under conditions that may arise at a later time under
this agreement.
Mr.

Wright. And therefore you do not really know who would pay in the event of a contingency such as I mentioned, is that correct?

Mr. NATHAN. My point, as I stated it, is that if there were such a contingency, I expect that the parties would examine it and open up the question if it was necessary to do so for modification of the

agreement, and that we are not able at this time to anticipate what kind of decision will be made.

Now let me say, Mr. Chairman

Mr. WRIGHT. Do you know who would pay under those circumstances ? Mr. NATHAN. May I make another point, Mr. Chairman?

I think this is a question that most appropriately ought to be asked of the parties to the agreement.

Mr. WRIGHT. The committee intends to ask the parties to the agreement, Mr. Nathan.

Mr. NATHAN. I appreciate that.

Mr. WRIGHT. In this connection, I ask you one question : do you know who would pay under those circumstances?

Mr. NATHAN. I think it is fair to say that we are not able to say at this time how those agreements would be modified to take into account these

Mr. WRIGHT. Under the agreement, assuming no modification do you know who would pay?

Mr. NATHAN. Mr. Benton suggests that one of the things that would have to be considered when this occurs for the first time, is: what is the reason for the overrun? It really depends--there have been cases in postal construction programs where modifications have been made rather frequently in the structure and equipment in postal buildings, as they develop new technology, and

Mr. WRIGHT. We are not speaking of an overrun in cost of construction brought about by increased size of the building. We are speaking rather of an overrun in overhead management costs.

Now, the question is: under the present agreement, assuming no change or modification, who would pay?

Mr. NATHAN. The answer, Mr. Chairman, is as we have stated. It would depend upon the circumstances and the view of the parties. We cannot give a categorical and flat answer to that question at this time. I regret that because I would like to satisfy you and provide the information that your committee feels that it needs, but I am unable

Mr. WRIGHT. You are saying you do not know; are you not?

Mr. NATHAN. No; I think we are saying in many areas of Government activity you cannot project how certain matters will develop and how they will be handled. There are many questions as to things that will happen in the future that we could not at this time state a definitive answer to in terms of how they would be handled.

Mr. WRIGHT. If you cannot project, then why do you state a fixed figure?

Mr. NATHAN. Well, projections are made all the time, and have to be made, Mr. Chairman, in order to determine all kinds of expecta

tions about governmental behavior and the behavior of the public, but those projections, because they look to the future I am familiar with tax projections—and very often we base those projections on information that later proves to change for reasons that we could not anticipate.

Mr. WRIGHT. Yes; it happens all the time. It happens in my private financial affairs, and in those of every Government agency. I think what you are saying is that with respect to this kind of a contingency, if the 5.5-percent overrun projection proves, for whatever reason, to be unrealistic, that what happens and who pays the difference will have to be decided at that time between the Postal Service and the U.S. Army Corps of Engineers.

Mr. Nathan. That is correct, exactly correct.

Mr. WRIGHT. All right. Now, you stated earlier, Mr. Benton, that Mr. Blount was very strong and affirmative in his insistence that the Postal Service does not expect to make any more than that, so we will just leave it up to the Army at that time if that occurs which we hope does not occur, to try to persuade Mr. Blount to another point of view.

Now then, on the question of these flexible appropriations that go, I think, through fiscal 1984, who determines the amount of the actual appropriations for subsidy? Is that the Office of Management and Budget?

Mr. NATHAN. Let me describe the process this way: The Post Office makes a determination which they propose be included in the budget, and then the Congress makes the final and ultimate decisions as to how much subsidy will be provided.

At one point in the process, the Office of Management and Budget can print, if it should choose to do so, in the budget a different figure from that which is determined by the Post Office, but it is quite clear from our experience already this year that the Post Office's determination would be on the public record, and would be presented to the Congress at the time that the Congress considered that appropriation, as was done this year.

Mr. WRIGHT. Are there other agencies of the Government which present budget requests contrary to those approved by the Office of Management and Budget?

Mr. NATHAN. Every agency submits to us, Mr. Chairman

Mr. WRIGHT. No. The question is: Are there other agencies of Government which submit to the Congress budget requests different from those approved by the Office of Management and Budget?

Mr. NATHAN. I think, Mr. Chairman, it is accurate—I did not mean to deflect your question onto another point to say that this is a quite unique arrangement. I cannot think of any case like this.

Mr. Benton may be able to think of an analogous case.

Mr. WRIGHT. That is the point I was trying to make. This is indeed a unique arrangement which vests in this newly created Postal Corporation a greater latitude of freedom from any governmental restraint than exists with respect to any other independent agency of the executive branch, is that not true?

Mr. Nathan. I think it is fair to say that in the development of postal reform legislation this year, it was the intention of the Congress and the aim of the executive branch, to permit the Post Office to operate on an independent comprehensive basis as regards its own operations,

and for that reason the legislation that was enacted by the Congress does give unique flexibility in operation to this new corporation, or to the new agency, I should say.

Mr. WRIGHT. Would you not say that the newly created Postal Corporation possesses more power and greater latitude to act without regard to any governmental restraint by the Executive than any other independent agency of the executive branch of Government?

Mr. Nathan. Mr. Chairman, I really could not answer that question, because there are many kinds of matters on which an agency can be independent.

Now, take the so-called independent regulatory agencies. They have considerable independence of a different character, but still independent on a policy basis from the rest of the executive branch.

There are other cases where we have set up corporations which have considerable powers of their own. The TVA is the first and the most notable. We also recently established the Public Broadcasting Corporation. There is discussion now of a new corporation for legal services. There are many cases in which the Government chooses to give different kinds of operating activities and policy processes a certain autonomy from the overall decision process of the executive branch.

Now, I would not want, at this hearing—without considerable study and staff work on our part—to characterize the Post Office as being more or less autonomous in what kinds of different ways from other agencies that have similar characteristics, but it was intended that the Post Office be able to determine in a large measure its own affairs, and the spirit and the lettter of the law clearly does move in that direction.

Mr. WRIGHT. With regard then in a more narrow sense to the ability to come to Congress with a respect for money independent of, or different from a request approved by the Office of Management and Budget, would you say that the Postal Service has greater latitude than any other

Mr. NATHAN. I would be willing to say—though I want to examine the matter further and I may find it necessary to submit a letter to you on this point, but I would be willing to say that the inference of your question is true.

The Post Office, on the fiscal side of the equation—the new Postal Service-does have more authority to submit its own appropriation than any other case I can think of as I sit here and respond to your questions.

Mr. WRIGHT. Fine. I think we may have explored this long enough, unless there are other questions from other members of the subcommittee.

Just a minute.

Mr. GROVER. Let me suggest this: you are reflecting on the independence, the fiscal independence, of the new Postal Corporation. Of course, the Corps of Engineers is not fiscally independent. I know in the argreement you have some study periods, interim study periods, and the only thing that directs itself directly to this point of cost overrun over 5.5 is an agreement to agree.

Now, the Engineers have a budgetary restraint from the House Appropriations Committee and the Senate Finance Committee, of course,

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