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Further on, at the end of fiscal year 1972 and each succeeding fiscal year, while this agreement is in effect, the U.S. Post Office Department and the corps will conduct a joint analysis of the costs, specified in paragraphs 1 and 2, to include the status of the corps, costs in not exceeding the 5.5 percent program limitation, with particular emphasis on problem areas, if any, and to consider the need for any adjustments as appropriate.

Mr.WRIGHT. I am not speaking with reference to future decisions. I am speaking with reference to the existing agreement. The question still remains in my mind, and perhaps I am a little thick, and I have difficulty understanding the answer to the question, but in the event an overrun should occur, as for example the General Accounting Office has testified that by these accounting procedures that would be here applicable and other work conducted by the corps, the overhead may have been approximately 8 percent. There is no intent here to derogate the splendid work of the Corps of Engineers. This committee is fully aware of the competency of the Corps of Engineers, and I am not attempting here to raise questions as to your capabilities in any manner whatsoever, but simply in the light of that fact, that in certain other work your overhead has been close to 8 percent, and the possibility that it might in this occasion exceed 5.5 percent, who pays?

General REBH. If I may just say one thing, the reason I brought these latter points regarding the 5.5 is to indicate that the 5.5 is not a sacred established figure, that it can be adjusted if certain conditions prevail.

Mr. Wright. It can be adjusted in the future. Can it be adjusted retroactively with respect to work already performed ?

General REBH. Yes, sir. It would have to be, because we have no other funds to pay for costs in excess of it.

Mr.WRIGHT. So, what you are saying, then, is that the 5.5-percent figure is not a ceiling, but a target?

General REBH. No, sir. It is a ceiling, but it can be adjusted in the event the Post Office does not meet its commitments under the agreement. Mr. WRIGHT. It can be adjusted only if the Post Office is agreeable?

General REBH. If we submit evidence to them, and in this case one of the conditions is they do not meet the schedules provided 6 months in advance, this is quite clear cut. There is no judgment involved. And if they do not give us a $250 million program annually, this is quite obvious, no judgment is involved on their part that will they met the conditions.

Mr. WRIGHT. You would concede that it is at least possible that for any one, or a combination of a variety of reasons, the 5.5-percent ceiling might be exceeded ?

General REBH. Yes, sir. I think that is covered by the general agreement between the Post Office Department and the Department of the Army which was signed on March 11.

It says the costs of design, construction, site selection, and real estate acquisition, or other real estate services undertaken by the corps at the request of POD will be funded by the U.S. POD on the basis of total project costs.

It seems to me no doubt that in the event corps costs do exceed 5.5 that the Post Office will cover the costs.

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Mr. WRIGHT. All right.

Do you interpret this, then, to mean in the event the 5.5-percent ceiling should be overrun, and in the event this could be attributed to failure of the Post Office to live up to its terms of the agreement with respect to the volume of work and advanced notice, that, under those circumstances, the Post Office Department would have to pick up the tab?

General REBH. There is no doubt in our mind, sir, that.

Mr. WRIGHT. With respect to any other questions which might not be directly attributable to a failure of the Post Office Department to live up to its agreement concerning volume of work and advanced notice, you would then depend upon the Post Office Department to sit down and negotiate with you, or arrive at some agreement with you; is that correct?

General REBH. That is correct. This is the way we interpret the agreement that was signed between the Secretary of the Army and the Postmaster General.

Mr. WRIGHT. But, in that latter case, any payment to the corps by the Postal Corporation for any overhead would have to depend upon the willingness of the Postal Corporation to pay it; would it not?

General REBH. We will say they have committed themselves to this by the wording of the agreement.

Mr. WRIGHT. That is very interesting. This is the first time we have had that sort of interpretation placed upon that portion of the agreement, and it is, of course, very important that the corps does interpret it in the way you have described.

General REHB. That is very important, because the corps has no other funds except on a program basis. We do not intend that any of these other programs will subsidize the Post Office Department work.

Mr. WRIGHT. This is another matter very vitally important to the committee, inasmuch as the corps is deeply involved in civil works and matters of other kinds, approval legislatively under the jurisdiction of this committee.

We should certainly not want those programs to be diminished by reason of any necessary cost absorption for the postal bulding program.

In the agreements with the corps and the Postal Service, exhibit No. 17 of the committee's records, reference is made to congressional contacts. There is spelled out a rather elaborate procedure under which the corps is to receive any congressional question concerning any of this building program with courtesy, but not to give an answer.

Under that agreement, as I interpret it, the corps is obliged to refer any such question that might arise from Congress to the Postal Corporation, and they, then, are given the right to fashion the answer to a Memeber of Congress. That is a fair summation of the agreement, is it not?

General REBH. Yes, sir.

Mr. WRIGHT. Now, I think the committee is curious to know, was this your idea or the idea of the corps, General Rebh, or was it accepted by you at the insistence of Mr. Blount?

General Rebh. We prefer to have our normal relations with Congress as we do with our other programs, military construction, civil

works, and the like. However, it was at the insistence of the Post Office that this clause exist in the agreements, and they wanted it handled this way. Since we are working for the Post Office, we will try to make it work as best we can.

Mr. WRIGHT. I think it is significant that you have characterized the relationship as working for them. It seems to the Chair very significant.

You have in this program and the agreements reached place the corps in a somewhat subordinate position to the Postal Corporation. You are indeed working for them in this instance, are you not?

General REBH. We are their construction agent-client.

However, all conditions for the agreement were freely arrived at, and none of them were imposed upon us.

Mr. WRIGHT. You have just said that you would have preferred to work with Congress in the course of your normal procedure.

General REBI. That is correct.

Mr. WRIGHT. Your normal procedures certainly do not encompass anything of this kind, do they?

General REBH. No, sir.

Mr. WRIGHT. Normally in the process of the work that you undertake, you respond openly, candidly, fully, to any question presented to you by the Congress, do you not?

General REBH. That is correct, sir.

Mr. Wright. You respond directly to any questions presented to you by the Congress or by a Member of Congress?

General REBH. Yes, sir. Mr. WRIGHT. And you would have preferred to conduct this busiin that

you

not? General REBH. Yes, sir.

Mr. WRIGHT. And yet you have said it was at the insistence of the Postal Corporation that you incorporated into the agreements this elaborate procedure for refraining from divulging any information directly to the Congress?

General REBH. That is correct, sir.

Mr. WRIGHT. The procedure does inhibit you from divulging any information directly to a Member of Congress?

General REBH. Yes, sir.

Mr. WRIGHT. In other words, any information that a Member of Congress may receive, regarding the conduct, the progress or the plans of this building program, he has to receive from the Postal Corporation?

General REBH. That is correct, sir; yes, sir.

Mr. WRIGIIT. And we have had further evidence that the Postal Corporation has ordered a gag rule upon its employees so that a Member of Congress seeking information with respect to this program cannot get it from anyone other than the congressional liaison Office established by the Postal Corporation. You would not be expected to speak knowledgeably of that, but the Chair states it for a fact.

As a consequence, the Congress in seeking information as to the progress or plans of this whole building program is inhibited to the extent that it must go to one source for any information it may obtain.

General REBH. That is correct, sir.

Mr. WRIGHT. That source essentially seems to be the Postmaster General, and the Chair would like to state for the record that this committee has been endeavoring to secure an audience in the committee with the Postmaster General. The Postmaster General has replied, not directly but through his liaison officers, that he has speaking engagements for the time that we want him here, and he otherwise is quite busy with a variety of other things. When those persons designated by him to respond to requests from this committee are asked when he might come, those persons reply, well, we do not make his schedule.

So the committee has had quite considerable difficulty getting information from anyone, but what we might call the horse's mouth, and the committee has had very great difficulty in gaining access to the horse's mouth.

Thank you very much. I will not burden the record further, I think the record is clear.

There has been a deliberate, purposeful element of secrecy cast about the entire program, both prior to the passage by Congress of the Postal Reform Act and subsequent thereto.

Mr. Grover has a question.
Mr. GROVER. Just one question, Mr. Chairman.

Since our efforts have been blunted, I will use that point again, to get through the Post Office, we will continue, but on the last page of your statement, you make reference again, and this reference was made by the chairman a short time ago, and I believe by GSA to a spreading of overhead costs, because you have very, very broad base construction effort, which you indicate is volume sensitive, which includes civil works, Air Force and Army. I can understand how in private enterprise a large construction firm can gain a great deal of advantage through the spreading of its expertise, and it is not necessarily cost accountable, because it goes into a public bid and it is going to do first-class work for the first-class dollar on the basis and the terms of its bid. How can you justify spreading overhead costs for the postal construction program over a broad program involving civil works, Air Force and Army, which of course are extremely sensitive to getting the best value out of your efforts for funds in their budget, which I presume in some way are transferred to you for your effort. It would seem to me that there would be some room for accomplishing your target or ceiling of 5.5, some at the expense of some of these other works.

Is that a fair rationality? I know you will say "No," but I want to make a record.

General REBH. No, sir. You have to understand what overhead costs mean. The overhead cost is a part of the total corps cost. The overhead costs are costs of the administrative and advisory services in support of the technical people who will be either engaged on the construction site, managing and inspecting the work, or they will be in their offices reviewing the design, which has been submitted by an architect engineer.

So the overhead are those costs, advisory and administrative, such as a lawyer in handling claims. Another example is the controller who

keeps the books or the safety office which inspects the site for safety, the personnel office who has to recruit the people. These are the overhead costs.

Now, if you bring on, for example, in a district an extra project you do not have to hire an extra lawyer or extra personnel man to handle the records because it is not so great an increase in volume of work that additional people are required. But that man is still going to be on that job 8 hours a day, so you take that overhead cost and you distribute it among the programs in accordance with the size of the programs.

Mr. GROVER. Now, there is one point in the prior testimony where it was indicated that the mission of the corps and the effort exerted was going to be insubstantial, and then we find out it was going to be 25 percent increased in your effort, in the effort required to accomplish this program. That is a very substantial increase in the construction effort.

As the chairman pointed out, it would seem to me—seem to him and to me—that perhaps you are overstaffed before you go into this, or you are going to be overburdened after you go into this?

General REBH. One has to understand that the reason the Postmaster General came to the corps was because of its dispersed organization, the variety of talent that it has and the great experience of its personnel. It was not on the basis that we had the people in the field at the time to take on his program. Otherwise, what you say is true. | All of us, in fact you will find I think back in the January 1970 letter words to the effect that the Post Office would have to help us in getting spaces to bring on people for this program. It is much easier to take on a big program if you have the nucleus, as we have, the 36 districts spread throughout the United States, and all you have to do is add a few technical people. You do not have to reconstitute or form an office that has to have lawyers, personnel people for recruiting; et cetera.

Mr. GROVER. You are going to give us your assurance that the spreading overhead costs on a broad basis that you will not be taking away or neglecting any other projects in any shape or form?

General REBH. That is correct, sir. If we need additional people, which we will in some districts, take for example, the New York District, they are going to have a tremendous increase in the workload as a result of the Post Office program they are going to have to hire an extra lawyer, extra personnel man, et cetera.

Mr. GROVER. It is not pertinent to the discussion right now, Mr. Chairman, but I think sometime in the record we should elicit whatever planning there is—there are going to be a thousand people transferred here—and this is not a long range, it is just a couple of years, they are going to have to be transferred back someplace. I think we should elicit what the planning is personnelwise for these temporary assignments.

Mr. Wright. Do you have in mind a broad ballpark figure of how many additional personnel it is going to be necessary for the corps to take on?

General REBH. Yes, sir. For the big program, we are thinking in terms of around 600. Others will be required on the small program.

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