Do you think he would pay the Post Office the same $10 million if he cannot get you out of the space before the sale? It would spoil the sale, would it not?

Mr. SAMPSON. That is correct. It would spoil the sale.

But, it would seem to me again the hypothetical case, my looking into the future is not typical of what I see happening.

Mr. CONSTANDY. I am not saying it is typical. We are looking for extreme cases to point up the reality of it.

You are only going to get a test of it in cases where you cannot come to resolution.

It goes without saying that if you can sit down and come to some mutually satisfactory agreement, you will do it. What we are trying to do here is define the relationship.

Mr. BARTH. If I could add one thing. I think in the example that you

gave

Mr. CONSTANDY. Is it unfair?

Mr. BARTH. No. I was not about to say that at all.

If we do have a continuing need for those top three floors, and we have looked at it and decided there is no other suitable alternative available, and the threat of condemnation would lay over the sale, not to condemn it while it was in the hands of the Post Office, but condemnation proceeding after they sell it, that in itself may lead to some mutually satisfactory arrangement with the Post Office with respect to that building.

Mr. CONSTANDY. Yes. But, let us look at this thing from their standpoint.

They anticipate a yield of $10 million from the sale, and they find out that your needs dictate retention of the space, and they can now only get somebody to agree to buy the building for some lesser figure, let us just say arbitrarily $7 million.

Can they afford to take the position with their bondholders that they are willing to accept $7 million for a building instead of $10 million? Can they afford to take it just in the light of their own commitment to function in the most economical way possible?

Mr. BARTH. I think at that stage the Postal Service has a problem as to what they are going to do with respect to that building in your example. I only used this from the standpoint that this would be one situation where maybe we would have a little bit of leverage in negotiations as to what happens in our requirements for space.

Mr. CONSTANDY. I am not suggesting that that is a poor method or relationship to predicate the business you will have between the two of you. They make it even for you on another building, and you can get even with them on this one. That does not suggest the interests of either their bondholders or your taxpayers are going to be served. It will have to be a compromise.

It strikes me that in the final analysis we can go through a number of different circumstances which will develop the same point really, where you come to a point where your interests are different than theirs, and once you reach that point, each of you has to thereafter serve your own master. Yours is the taxpayer and theirs is the taxpayer in a different way, as they are concerned with the taxpayer.

I am not suggesting they are not. But I do suggest that they are

obliged to follow through in prudent business practices in the operation of the Post Office, because if they do not, it is going to be manifested in a deficit that they will have to come to Congress and ask for money for, or it is going to be manifest in a reduction of the security the bondholders are loking to for their investment, and I do not think that they will be permitted to do it.

This is speculation. We have not seen the bond indenture. But, the general nature of those things is they are very restrictive and impose on the borrower a great many things that limit his freedom of action in the dealings that he has with other people as it pertains to the conservation of assets; is that not true?

Mr. BARTH. Yes. Generally speaking, I have no quarrel with your

statement.

Mr. CONSTANDY. OK. We agree, then, that there will be some situations over which there is no legal solution, is that true? Mr. SAMPSON. There is no legal solution.

Mr. BARTH. Yes. You were down in the final analysis again working out the best deal you are going to be able to work out in negotiations under the circumstances as they exist at the time. I cannot see any way around that.

Mr. CONSTANDY. What we are left with is the good intentions on both sides as each of them have to serve different interests.

Mr. SAMPSON. I think one of the factors that has come to my mind, and aagin I am trying to prognosticate the future, is something that you mentioned, and that is that we feel that the Post Office is going to have to be very prudent about everything it does. It will not be able to promiscuously toss Federal agencies out of buildings.

Mr. CONSTANDY. But as they become more prudent, can you afford to become less prudent?

Mr. SAMPSON. If they become more prudent, then they must cooperate more with us.

Mr. CONSTANDY. No. You see, you are looking at this after-and I know this is a fact-there had been negotiations with them for 7 months, probably by now 8 months, in attempting to anticipate and resolve some of these very real problems, and I only suggest to you, Mr. Sampson, that you are doing it within the constraints that you recognize in your relative positions.

What we are trying to do is go beyond that and suggest that the problems are going to be resolved ultimately to somebody's dissatisfaction and to somebody's loss.

Mr. SAMPSON. Well, that is how you and I see the future a little differently, I think, because it would be imprudent that the Postal Service 3 years from now would throw a courtroom out of a building.

Mr. CONSTANDY. I do not know how sometimes they can avoid it. Mr. SAMPSON. I think it can be avoided through proper planning of what each agency has to do.

Mr. CONSTANDY. You are talking in terms of being an agency.
Mr. SAMPSON. That is probably the wrong nomenclature.

Mr. WRIGHT. Would you not agree, Mr. Sampson, that it would be imprudent generally for the Postal Service or any other agency to decline to give information to the Congress, would that not come under the general characterization?

Mr. SAMPSON. How can I say anything but yes to that?

Mr. WRIGHT. In looking some months back, one might have said that would have been terribly imprudent; do you not agree?

Mr. SAMPSON. Yes, sir.

Mr. WRIGHT. Therefore, I am not certain we can predicate our judg ment as to what might happen in the future on the assumption everyone is going to act in a prudent manner.

Mr. SAMPSON. No, and perhaps that was a bad generalization. My own feeling is that the Postal Service is going to have to operate in such a manner that it obtains the objectives for which it was established, and if it does that, it remains a Postal Service; if it does not, it will go out of existence.

Mr. WRIGHT. Let me ask a couple of questions in this regard.

Is it anticipated that the General Services Administration and other agencies of the Government for which it is the landlord or the real estate agency, will occupy space to any degree in newly created postal buildings, those to be created hereafter?

Mr. SAMPSON. I would again, looking to the future, think that there will be instances where the Postal Service will build facilities in communities where we will want space.

In other words, we may have a small space requirement to be filled. If we know they are putting up a building in a community, we may ask them to build space for us in that particular building, rather than do it ourselves.

Mr. WRIGHT. You characterize this as a small space requirement. Do you anticipate any situation in which occupancy by the General Services Administration or another Federal agency would make that building feasible, whereas it may otherwise not be feasible?

Mr. SAMPSON. Yes. There will be some instances, again based on buildings that we have constructed or about to construct where the combination of the two would make the building feasible and the separation of the two would make both buildings uneconomical.

Mr. WRIGHT. So we, then, get into an area in which there is a reversal of the historic relationship. The General Services Administration, rather than being the landlord, becomes the tenant.

Mr. SAMPSON. Depending upon the space requirements in the building.

Mr. WRIGHT. The Postal Service, rather than being the tenant, becomes the landlord.

Mr. SAMPSON. You are going to have the reverse, too. Mr. Chairman. There will be instances where we are building buildings in communities

Mr. WRIGHT. We have always had that, have we not?

Mr. SAMPSON. Not on a landlord-tenant basis, however.

Mr. WRIGHT. Not on paying the landlord-tenant basis. But, on the landlord-tenant basis in which the General Services Administration is responsible for the construction and management of the building. Mr. SAMPSON. Yes, sir.

Mr. WRIGHT. And now, for the first time, we see the prospect of a reversal of this historic relationship in which in some cases the Postal Corporation will become the landlord and the General Services Administration, acting for itself and other agencies, will become the tenant.

Mr. SAMPSON. Yes, sir.

Mr. WRIGHT. So, the relationship that has historically existed as the General Services Administration vis-a-vis the Post Office Department is now somewhat radically altered; is it not?

Mr. SAMPSON. Yes.

Mr. WRIGHT. Mr. Constandy.

Mr. CONSTANDY. I think this is even deeper than we have suggested. You people are rational in the development of your program for the next year, yes? And you give projects that you anticipate having a need for some considerable thought before you put them at some point on your priority.

Is it not true that forever after here in any of those buildings, the 1,252 which will be a tenant, you are going to be faced with the prospect of having to react to decisions made unilaterally within the Post Office Department with those things which are in its own interests. and will not that have the effect if they choose to vacate the building in which you are a large tenant in having to reorder your priorities and have to change the plans that you have in the future?

Mr. SAMPSON. There is no question about that. But, again, I think I should point out this happens with other agencies also.

Mr. CONSTANDY. In a reverse way. I understand what you mean when you say that.

But, in your normal relationship with other Federal agencies, you are their landlord, and you are trying to satisfy their needs. I know you have mentioned this before. But if this program or their programs changed, they may have a reduction in space requirement.

Mr. SAMPSON. Or they may change locations.

Mr. CONSTANDY. Or may have an increase. We are talking about these situations which are developing in that strange area that has not got the usual agency-to-agency relationship, but those that relate now to the Postal Service in its unique capacity and in yours.

Are you not always going to have to be reacting to their plans?
Mr. SAMPSON. Yes, and they will have to react to some of ours.
Mr. CONSTANDY. Yes, I imagine that may be true.

By definition, those 1,252 projects that they got are properties in which they have at least 55 percent of the space, sometimes appreciably more. They are sometimes very big buildings.

Even though you hold a smaller percentage, the complexities of the space that you use insofar as it relates to allocated space to different tenants are quite large; are they not? If you receive notification from them on a building which you designed and built to handle your particular problem, you cannot say that is exactly the same as having dealt with acquiring space from a private owner on the chance condition that existed when you agreed to take it.

In other words, if you received that kind of notice, you face the prospect of securing other space on the chance conditions that exist at that time in the marketplace for space.

Faced with the problem of what that space is, as it relates to where you want the Federal agencies to be, you are going to have to face the problem of securing space of the kind and of the size that you need it for. These are all problems, I realize, that you contend with in the normal business that you are in. I suggest further because they are routine to you, you have taken a view in your relationship with

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the Post Office that does not really recognize the difference between the two of you.

Mr. SAMPSON. We recognize that, you know, our authority over the Postal Service has been radically changed. We do not have the same

power.

Mr. CONSTANDY. Is it more or less desirable, this present relationship?

Mr. SAMPSON. That is a very difficult question to answer.

Mr. CONSTANDY. We both know what the answer is, do we not? It is less desirable, obviously, is it not?

Mr. SAMPSON. Well

Mr. CONSTANDY. The landlord is a private owner, and you have a lease and, to that extent, it is less desirable?

Mr. SAMPSON. Dealing now with Government-owned space, forget leasing as far as that is concerned; as far as Government-owned space is concerned

Mr. CONSTANDY. Let me put it another way.

Are you glad or sorry that this thing happened the way it did? Glad or sorry?

Would you rather it did not happen?

Mr. SAMPSON. I do not know how to answer. A personal opinion? Mr. CONSTANDY. In your capacity as Commissioner.

my position

Mr. SAMPSON. There is no question about the fact that in as Commissioner, my job would be a little more complexMr. CONSTANDY. Since it has happened?

Mr. SAMPSON. Sure.

Mr. WRIGHT. I think the record reflects that the Administrator of the General Services Administration attempted to alter and change the situation from the consummation it now has reached. We might draw from that the clear assumption that the General Services Administration officially would have preferred another arrangement.

Mr. CONSTANDY. I dare say.

When and how did the GSA officials learn of the March 11, 1971, agreement between the Post Office and the corps?

Mr. SAMPSON. The first time we knew about it was when it was in the newspapers.

Mr. CONSTANDY. That is the truth?

Mr. SAMPSON. That is the first time I knew about it. I do not know if anybody else had any personal knowledge.

Mr. CONSTANDY. Keeping that in mind, you still feel you are going to be able to deal with the Post Office on these problems as they come up on an open, forthright basis, where both of you are looking to the best interests of each other?

Mr. SAMPSON. Well, I have to answer that again on the basis of negotiations we had, and except in the area of new construction, they have been very good. We have arrived at what I feel are good agree

ments.

Mr. CONSTANDY. We have to review the whole transcript.

The Corps of Engineers developed its foundation for a range of 5.5- to 6.98-percent overhead cost. They went into the negotiations, assuming that that was going to be a goal, that they would work very hard to get that. A day later, they came out and they are fixed at 5.5