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new U.S. Postal Service virtually unlimited authority to construct its facilities in any manner it determines appropriate.

The urgent need for new postal facilities led the Postal Service, in a series of decisions from October 1970 through May 1971, to withdraw from an additional 23 projects which were planned for joint Federal occupancy.

The new Postal Service has the statutory authority to acquire its facilities in any manner it determines appropriate. Until passage of the Postal Reorganization Act, GSA could have withdrawn the 1966 delegation of authority and, thus, exercised control over the construction needs of the Post Office Department.

As a matter of fact, however, the Postal Reorganization Act gives the Postal Service every right to withdraw from any or all GSA projects and proceed on its own.

The decision to withdraw from some of these projects does have a serious impact on GSA's planning for future space for nonpostal agencies. With regard to these 26 withdrawals, we have, in some cases, determined that there is a sufficient nonpostal requirement to proceed with a reduced project.

On all but two of these, GSA will be required to prepare and submit to the Congress a new prospectus reflecting this reduced scope. In many of these cases, GSA will also be required to redesign the project. In other cases, the project may be canceled.

Mr. Chairman, I might add that, in view of the time it takes GSA to complete a federally-financed building under present procedures, the Postal Service's decision to withdraw from these projects and to exercise its broad new authority under the Postal Reorganization Act is understandable. I am sure the chairman is concerned, just as we are, however, that the Federal Government does not find itself in the position of building two separate facilities where only one is economically justified.

GSA and the Postal Service are working toward the resolution of this problem.

Mr. Chairman, this concludes my prepared statement. I would be happy to answer any questions the subcommittee might have.

Mr. WRIGHT. Thank you very much, Mr. Kreger.

I understand that there are a total of some 26 projects previously authorized by the Congress for multipurpose occupancy by Federal agencies, including the Post Office Department, now called the Postal Service; and that the Post Office has withdrawn from these 26 such projects.

In your statement you say that on some of these the General Services Administration was planning to go ahead on a smaller scope and try to construct a building to house other agencies which are your tenants, and in others, the whole project may have to be abandoned.

In how many of the 26 do you imagine that the project may have to be abandoned?

Mr. KREGER. Mr. Chairman, I believe that five projects may have to be abandoned of the 26.

Mr. WRIGHT. Would you name those five?

Mr. KREGER. Bronx, N.Y., that is the Charles Buckley Building in the Bronx, N.Y.; Westerly, R.I.; Houston, Tex.; Purcell, Tex.; and Essex Junction, Vt.

Mr. WRIGHT. How much money has been spent heretofore in proceeding to the present state on the Buckley Building in the Bronx?

Mr. KREGER. Mr. Chairman, for the site, $2,067,815 has been expended. An additional $817,000 has been expended for design, for a total of $2,884,853.

Mr. WRIGHT. Would this money be wasted?
Mr. KREGER. No, Mr. Chairman. I would not say that.

. The greatest expenditure here is the $2,067,000 for the site, and there is a good chance that we could recover at least that much, if not more, from the sale of that site.

Mr. WRIGHT. Meanwhile, what is going to happen to the Federal agencies that you had hoped to house in this building?

Mr. KREGER. GSA will have to resurvey, restudy an economic study, to consider one of several choices. We have the option of leasing space, lease-construction space, or going on later for a smaller building.

Mr. WRIGHT. Meanwhile, what is happening? Are those agencies presently paying rent to private landlords? Mr. KREGER. Yes, sir;

they are. They would continue to pay rent to the same or new landlords.

Mr. Wright. The $817,000 that was paid for design of the building cannot be recouped, I suppose ?

Mr. KREGER. Most likely, most of it would not. None of it would.
Mr. WRIGHT. None of it, in fact, would be recoverable!
Mr. KREGER. Right.

Mr. WRIGHT. So, we have spent $817,000 for a design that the Government cannot use? Mr. KREGER. That is right.

Mr. WRIGHT. Now, on how many of the other projects had we proceeded as far as the design stage?

Mr. KREGER. Are you talking now about the five, sir?
Mr. WRIGHT. I am talking now about the 26.

Mr. KREGER. Mr. Chairman, I think we may have proceeded into the design stage on most of them. I have the information here on a projectby-project basis. I could run through them.

Mr. WRIGHT. Well, we will get to that as we develop the testimony. I think at this time, though, your statement would be that design had been acquired on most of the 26 ?

Mr. KREGER. Design, or the beginning of a design, probably has been acquired on a great portion of the 26.

Mr. WRIGHT. Would you think that design had been ordered on 24 of the 26 ?

Mr. KREGER. I think probably at least on 24, and most likely all.
Mr. WRIGHT. In all of these cases, has land already been acquired?
Mr. KREGER. I have to run down through my book here.

With the chairman's permission I can turn the pages and comment on each one.

Mr. CONSTANDY. I think you will find on the spreadsheet that there are 23. The spread sheet was prepared from material furnished the staff by the GSA.

Mr. KREGER. There are 23 on which we have obligated money, and there is a question whether or not we may be able to get out of some of those obligations.

Mr. WRIGHT. You had mentioned earlier a project in Charlotte Amalie, Virgin Islands. On that project, the site had been acquired, as I understand it, and the design had been ordered. Perhaps a total of $86,000 has been spent on the design, and it is something like 28 percent complete; is that correct?

Mr. KREGER. That is correct, sir.
Mr. WRIGHT. That was on Government-owned land, was it not?
Mr. KREGER. Yes, sir.

Mr. Wright. That is what accounts for there being only $1,300 spent on site?

Mr. KREGER. That land, in reality, was acquired by an exchange. The $1,300 was most likely expenses in connection with the acquisition.

Mr. WRIGHT. The Postal Service is planning a building at Charlotte Amalie, to your knowledge?

Mr. KREGER. I do not know, sir. I would guess that they would, because they had a large amount of space in this building.

Mr. WRIGHT. And in that particular building, the Postal Service would have accounted for 3 percent of the total space, and your other tenant agencies would have accounted for 66 percent; correct?

Mr. KREGER. Yes ,sir, that is correct.

Mr. Wright. But, in that instance, the building design would not be suitable to accommodate the remaining 66 percent, in your opinion? Mr. KREGER. The building would have

to be redesigned. Mr. CONSTANDY. Mr. Chairman, may I read you a paragraph from a letter from Mr. Blount on the Charlotte Amalie building, which goes to one of your previous questions. This is the last paragraph of his letter which says:

Inasmuch as this project also has a low priority on your construction schedule, and our space requirements have increased considerably since the approval of this prospectus, your site is inadequate to accommodate the total space needs. We, therefore, plan to proceed with the construction of a new leased postal facility, but will retain a station either in the existing or in the new Federal Building to be constructed by GSA. We shall furnish you our space requirements for this station at an early date.

In your statement, you state: To my knowledge, however, this delegation of authority has never been redelegated by the Post Office Department to any Federal or non-Federal agency.

Could you clarify that, please?

Mr. KREGER. Mr. Constandy, from my study of the situation, I do not believe that the Post Office Department ever did redelegate this delegation of authority.

If you do not mind, I would like to have Mr. Barth from the General Counsel's office speak to that point.

Mr. BARTH. Basically, in answer to your specific question, I, too, know of no specific redelegation of authority by the Post Office Department.

This is not to say, from my standpoint, that it has not happened. I just know of none.

Mr. CONSTANDY. Are you including the agreement between the Postal Service and the Army?

Mr. BARTH. Again, from my own personal knowledge, I know nothing about any agreement between the Postal Service and the Army.

If you want to get into the question of delegation, let us say, to the Army, as opposed to the use of the Army to perform certain functions, from a legal standpoint, I think, possibly, we are in an area of semantics in that case. I know of no prohibition either under the Public Buildings Act, or the delegation itself, the 1966 delegation, to either using the Corps of Engineers as an agent for the Postal Service under the delegation, or to, in effect, delegating what authority the Post Office Department had to the Corps of Engineers.

I think legally both are permissible. Mr. CONSTANDY. I think that is an issue here. But, to just nail down what the sentence means; is the position of GSA at the moment that GSA has no knowledge of the agreement between the Post Office Department and the Army Corps of Engineers?

Mr. BARTH. I have no personal knowledge of it.

Mr. KREGER. We have no knowledge. We have just general information, no definite knowledge.

Mr. CONSTANDY. OK. We will get into that later as we get to the discussion of the delegation of authority and its subsequent use. I just wanted to be very clear that the GSA is presently taking the position that, as an agency, it has no knowledge of any transaction between the Postal Service and the U.S. Army Corps of Engineers.

Mr. KREGER. We are not a party to the agreement and we have no formal knowledge.

Mr. CONSTANDY. Have you any information which suggests that there is under consideration by the Post Office or Postal Service, we will call it, any plan to have the Corps of Engineers construct any of the projects included within the 26 here? 2. Mr. KREGER. No, sir, we do not.

Mr. CONSTANDY. You do not know whether any of those projects have been included within a construction program schedule submitted by the Postal Service to the Corps of Engineers ?

Mr. KREGER. We have not seen such a program schedule.

Mr. CONSTANDY. Mr. Chairman, we are prepared to go ahead with this schedule which has the 26 projects separated in group 1 and group 2. I would like to say that the separation comes about this way.

The group 1 projects were originally considered to be built by the Federal Government for Federal ownership, and we could treat them as one class; on page 2, which is the group 2 projects, are the other 18 projects which, while they were originally considered by GSA to be built for Government ownership, have been changed to a proposal where they would be built under a lease-construction program; is that correct?

Mr. KREGER. Right.

Mr. Wright. I think we should move into that subject soon, I wanted to elicit further comment, if I could, from Mr. Kreger with respect to the statement he makes in the concluding paragraph on page 6 of his letter, in which he says: "I am sure the chairman is concerned, just as we are, however, that the Federal Government does not find itself in the position of building two separate facilities where only one is economically justified.”

What protection is it possible for the General Services Administration to offer in a situation where one building would be economically justified to accommodate all Federal agencies, and the Postal Service has withdrawn from the plan and continues to go ahead with its own construction, and GSA finds itself in a need for space for other Federal agencies. How can we avoid having two Federal buildings?

Mr. KREGER. Mr. Chairman, we have had continuous discussion and negotiations with the Post Office Department. We plan to continue close liaison and coordination with them in the future. I think there are two alternatives there.

One would be that the Post Office might reconsider coming back into some of these buildings, and they have indicated an intention to come back into two buildings which have just been funded by the Congress : Elkins, W. Va., and Oxford, Miss.

The other would be that working together with them, we would either build the building, they would

come back into it, or we might in some instances go into a building constructed by the Post Office.

Mr. WRIGHT. The Post Office would become the landlord, and you would become the tenant?

Mr. KREGER. This could happen, Mr. Chairman, in the case of a need for space-small need for space in an area where the space was not available in any quantity. All of the Post Office buildings that are now under thier control, I would say that probably 95 percent of them are in small towns, and a lot of these areas where there just is not any space available.

Mr. WRIGHT. What would happen if the General Services Administration and its tenant agencies went into a building that the Post Office might build under its bonding authority? Would you then have to pay rent to the Post Office?

Mr. KREGER. Yes, sir. We would have to pay rent to the Post Office, and we have an agreement worked out with the Post Office Department as to exactly how much rent we would pay if we were in their building, how much rent they would pay if they were in our building, and the rental rates are the same in each instance.

Mr. WRIGHT. Did you ever charge the Post Office any rent when it occupied buildings that GSA constructed in the past? Mr. KREGER. No, sir. They were the same as any other

agency. Mr. WRIGHT. But now if they were to build a building, and you were to occupy it, the Federal Government would have to pay rent to the Post Office ?

Mr. KREGER. If the case arose where the Post Office Department built a building and GSA decided to move into it, we would pay them rent at agreed-upon rates, which are close to the commercial rates for the same type of space, and the Post Office would pay us rent if they were in one of our buildings from here on out.

Mr. WRIGHT. How would it benefit Federal agencies particularly to pay rent to the Postal Corporation, rather than paying rent to private landlords?

Mr. KREGER. I do not think there would be any great benefit. It would just be a question of the Post Office Department having space, or building a building with space that the agency could utilize.

Mr. WRIGHT. As you read the Postal Reform Act of 1970, does it seem to you to include an authorization for the Postal Service to become a landlord as well as handler of the mails?

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