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Mr. CONSTANDY. Okay. As you accepted those, you were anticipating some reimbursement for the services that you performed?

General REBH. There is a project authorization that accompanies each request for services, and it contains money for the project as well as for corps services.

Mr. CONSTANDY. On what basis?

General REBH. I understand that the Post Office in sending these to us is calculating the corps' services based upon 5.5. We have accepted them. However, we have indicated to them that this is simply interim financing

Mr. CONSTANDY. There is no provision in the agreement for repayment, is that correct?

General REBH. What do you mean repayment?

Mr. CONSTANDY. For the cost of your services. You will be paid, but the agreement itself does not make any provision for the basis of payment?

General REBH. That is correct.

Mr. CONSTANDY. It neither spells out a fixed figure, nor does it say you will receive actual costs, does it!

General REBH. That is correct.

Mr. CONSTANDY. So to the extent you begin undertaking that work, you are a little vulnerable as to coming to terms with the Post Office as to how you will be paid for it? Your basic premise being you are going to be reimbursed for your cost?

General REBH. No. They are giving us sufficient money to carry the project forward. It is not that we are committing funds that we do not have, because this we do not do.

Mr. CONSTANDY. You are not talking about construction costs?

General REBH. No, support costs. There are funds, and no funds have been spent on them yet, because we have just received the request for services and it is a matter of passing them out to the field.

Mr. CONSTANDY. To the extent you have received them, they have been on the basis of a working arrangement of some 5.5 percent until you do negotiate a figure?

General REBH. That is correct. This has not been uncommon that they have given us interim funding which is enough to get the project moving, and then later provide for additional funds after that amount has been determined.

Mr. CONSTANDY. Has any rate been set in the negotiation that

General REBH. Not yet. No, I think that when we start, we will start looking at the 5.5 as a basis of discussion, but I do not anticipate that it is going to be at the 5.5 level.

Mr. CONSTANDY. Will your services generally cost more for these projects, or will it be larger or less on a percentage basis?

General REBH. It is going to cost more on a percentage basis. In fact, this is one of the reasons why we think we can do the big construction programs for 5.5 because the projects are so large.

Mr. CONSTANDY. And then we have the agreement of June 28, which again is a major departure from either the March 11 agreement or the May 20 agreement, insofar as it relates to services not contemplated in either of those.

General REBH. It is contained, comprehended within the May 20 agreement when it talks in terms of real estate services. The June 28

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agreement simply spells out and covers the condition of leasing and the servicing of leases. It is comprehended within the May 20 agreement.

Mr. CONSTANDY. So we do not spend too much time with it, I believe the June 28 agreement lists a number of types of services that you will be performing.

General REBH. That is correct, within the concept of leasing.
Mr. CONSTANDY. And certain maintenance services that you provide ?

General REBH. We have to differentiate here in maintenance. It is not custodial maintenance. This is repair and improvement type construction.

Mr. CONSTANDY. We must recognize that we are talking in terms there of some 27,000 leases, are we not?

General REBH. Yes.

Mr. CONSTANDY. How many leases does the corps service itself on its own basis?

General REBH. Between 9,000 and 10,000.

Mr. CONSTANDY. Is it not true that much of that is for land, rather than for structures and buildings?

Mr. BERGE. If I may answer, a lot of that is for buildings.

Mr. CONSTANDY. Do you have any idea of the approximate number that are for buildings?

Mr. BERGE. I do not have that exact figure, although I would, if I may say off the top of my head, the great majority is for building space, outside of the General Services Administration areas.

Mr. CONSTANDY. Are we talking about 6,000 or 7,000, something in that area?

Mr. BERGE. As to distinguish between bare land and buildings? I would say on the order of some 6,000 or 7,000, or possibly 8,000 on building space. This is reserved space and this type of thing.

Mr. WRIGHT. The corps presently conducts a lease servicing program for approximately 6,000 to 8,000 buildings?

Mr. BERGE. For building space, yes, sir.

Mr. WRIGHT. This is essentially with regard to services provided to the Military Establishment ?

Mr. BERGE. That is correct, sir, very little leasing on the civil works side.

Mr. CONSTANDY. On page 2 of that agreement there is reference made in the last two items:

In negotiating and executing supplemental lease agreements under which lessors accomplish Post Office approved leasehold alterations and improvements and repairs which are the obligation of the Post Office Department, of which the total cost including all lessor charges is $2,000 or more

And the one below thatawarding, executing, administering, supervising contracts with third parties for the design and construction of Post Office Department approved leasehold improvements, alterations, and repairs of which the estimated construction cost is $2,000 or more or for which architectural-engineering services are required.

How would the corps approach the handling of a job of that kind, the job that is as small as $2,000 ?

Mír. BERGE. Normally, sir, we would approach it on the basis of a preliminary design, whatever is required by the Postal Service, whether it is adding a platform or whatever it may be, to the lease facility. We would, on the assumption that it would not be the lessor's obligation. If the lessor would do it, we would ask him to do the repair and renegotiate the lease. If he does not have to do it or will not do it, then the Army Corps of Engineers would have to make our own contract.

Mr. CONSTANDY. Are you not here embarking with 27,000 projects on a program that is going to be relatively small potatoes for what you have been doing prior to this?

Mr. BERGE. You mean the leasing program being the small potatoes?

Mr. CONSTANDY. These $2,000, $2,500, $3,000, those smaller repair jobs that will be required, get to be kind of small things; do they not, for the corps ?

Mr. BERGE. Yes. I believe I would have to say yes.

Mr. CONSTANDY. Up until now we have been talking about $2 million projects and $100 million projects, and we come all the way to the other end for a $2,000 repair job.

Mr. BERGE. The answer, sir, would be yes, it would be much smaller types of contracts.

General REBH. Again on that you would attempt to put them together in packages so that they would be larger than the smallest one in order to get a better bid on your contract, and also involve less effort on our part.

Mr. CONSTANDY. You may do a number of post offices that require that service at one time, with one contractor?

General REBH. I was thinking more of work within the same building.

Mr. CONSTANDY. A number of different items that need to be done?

General REBH. Yes. If you add air conditioning, plumbing, you would try to lump them together in one package.

Mr. CONSTANDY. I am very apprehensive about this agreement and these provisions. We have had some contact with people who own post offices and some contact with people who are postmasters, and some contact with people who have handled post offices for the Post Office Department.

The impression that we have from conversations with them is that this is perhaps one of the largest headaches the post offices have in taking care of the minor renovations and repairs to the structure. It uses a disproportionate amount of time for the personnel handling the administration of it. It seems to be a very tough thing, and it raises another question.

Who is going to do the work under $2,000, do you know?
General Rebi. The Post Office. The postmaster of the post office.
Mr. CONSTANDY. The Postmaster ?
General Repu. That is correct.

Mr. CONSTANDY. That is very interesting. He has been hired because he has a particular skill, hopefully, in operating a post office and performing those functions that have to do with the collection and distribution of mail, sorting of it. He has now become the building manager in the 27,000 locations, true ?

General REBH. I would just assume that it was his responsibility before, that he was responsible for the custodial services.

Mr. CONSTANDY. I'm not really talking about custodial services. Little irritants that keep coming up, like the air conditioning stopped, or the rope on the flagpole broke—and it is amazing how often people bring up the fact that the rope on the flagpole broke—and similar issues that get involved.

Whose responsibility is that?

Mr. BERGE. On that type of thing, if I may address that, as I understand it, if the Postal Service has the lease the same as one of our leases, and the owner of the building has to service it, and it was leased with an air-conditioning unit, normally it would be the maintenance responsibility of the lessor.

Now, true if it did not work in administering the lease, the Corps of Engineers will have to go to the lessor and say, “Look, this is not working, and under the lease contract you must repair it.”

Mr. CONSTANDY. It may work out. They have had those problems right along. In the past-well, there was in each instance a relatively close regional office which was staffed with the kind of people who could give backup service, whether they are legal or administrative or engineering, to a postmaster who simply wants to put the rope back up on the flagpole, and the owner will not do it, or will not repair the air conditioning

Now, with the change in the Post Office structure, they have done away with the regional office concept as it existed earlier.

Is there any indication that these postmasters hereafter will be dealing with you to provide those services that he no longer can go to the regional office?

Mr. BERGE. Our district engineer in administering the lease will now come to us, if it is a lessor's responsibility, but again he would come, as you realize, to our district engineer, in lieu of the old regional setup of the Post Office.

Mr. CONSTANDY. He is going to come to you?
General REBH. To the district engineer.
Mr. BERGE. Yes.

Mr. CONSTANDY. You will provide whatever services that used to be provided by the regional office ?

General REBH. That is correct.
Mr. CONSTANDY. This is even for those matters under $2,000 ?

Mr. BERGE. Where it is the responsibility of the lessor, yes; we will have to go to him. But this is over $2,000 under the agreement.

Mr. CONSTANDY. Just on those over $2,000. Then the problem still exists relative to the work that will be under $2,000 where he used to go to the regional office. You do not know what provisions have been made to handle that?

General Rebh. The local postmaster is supposed to handle that.

Mr. CONSTANDY. Assuming that he has the kind of problem that we are talking about, where the owner will not make the repair—it is a minor thing, but a big irritation to him. He has to go to somebody to get a lawyer. He has to go to somebody to be able to negotiate the change in rental payment. As I understand it, you are going to submit to the Post Office a list of checks that should be made out for the payment of rent, is that right?

Mr. BERGE. The Postal Service will pay the rent.

Mr. CONSTANDY. But based on information that you give them?
Mr. BERGE. That is correct, sir.

Mr. CONSTANDY. If a local postmaster has the problem of getting an air-conditioning unit repaired, and it is under $2,000, I am trying to see how he will end up with you if there need be a reduction in the rent because of the failure of the owner to provide that maintenance which he contracted to provide; does it not come back to you if it is under $2,000? Mr. BERGE.

That is correct. In that type of situation, we would have to advise the Postal Service to withhold the rental.

Mr. CONSTANDY. You will be dealing with the postmasters, even on things under $2,000?

Mr. BERGE. In the illustration you gave where the lessor will not do it, and he is obligated to, yes, we would have to, and if the lessor refuses to do it, to do this minor repair, or repair the air-conditioning unit, and if he refuses to do it, yes, the Corps of Engineers would have to advise him that it was his responsibility, and we will withhold rent, that is correct.

Mr. CONSTANDY. Are you aware at times an employee of the U.S. Government in the Post Office Department has been employed at the same time by the owner of the building for the maintenance ?

Mr. BERGE. I was not aware of that, sir; no.
Mr. CONSTANDY. How does that concept strike you?
Mr. BERGE. Where the Postal employee was

Mr. CONSTANDY. Was also an employee of the owner of the building charged with the responsibility of resolving minor maintenance problems. Mr. BERGE. Well, we do not operate that way, I will say that.

. Mr. CONSTANDY. I am only bringing it up to suggest that you are undertaking something, the ramifications of which have not really been clear to you. I will read you from an internal audit report of the Post Office Department dated July 19, 1969. It is No. 846, and it is an audit of the St. Louis region.

One section reads, under the heading conflict of interest, which is a term a person could use for such a thing:

An apparent conflict of interest exists where Post Office maintenance employee is also part time maintenance employee of the lessor. Postal Manual 742.621A states that an employee shall not engage in outside employment or other outside activity not compatible with the full and proper discharge of the duties and responsibilities of the Government employment or otherwise prohibited by the law. The Post Office maintenance employee-

I do not think it is necessary to mention the name of the place, Mr. Chairmanwas a part time employee of the building lessor.

The Postal employee's basic duties included maintenance and cleaning of the building. As part time employee of the lessor, he made necessary repairs which were the lessor's responsibility under the lease provisions. We believe that the region should review the circumstances cited above, and a possible conflict of interest. If ruled there was no conflict of interest, the determination should be made a matter of record.

Under the heading recommendation: We recommend that the region review the circumstances cited above to resolve the apparent conflict of interest.

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