that the proposed legislation was unnecessary and ill-advised. Hearings on the proposed legislation were held on May 24, and 25, 1966, by the Senate Subcommittee on Buildings and Grounds, Committee on Public Works, but the bill was not enacted. During the summer of 1966, GSA, at the suggestion of the Bureau of the Budget (now the Office of Management and Budget (OMB)), proposed to delegate to the Postmaster General the authority to design and construct postal facilities. In November 1966 the Postmaster General agreed to the delegation of authority, subject to working out specific language of the delegation. On December 1, 1966, after negotiations between GSA and the Department, the Administrator of General Services, pursuant to Section 15 of the Public Buildings Act of 1959 delegated to the Postmaster General, with authority to redelegate, the authority to acquire sites, design, construct, and alter public buildings to be devoted primarily to postal purposes. The delegation of authority required that prospectuses be submitted by the Department to GSA for submission to OMB and the Congress, and that funds for the approved projects be obtained from the Department's appropriations. The delegation required that the facility design, conIn the struction, and alteration conform with GSA standards. December 1, 1966, letter transmitting the delegation of authority to the Postmaster General, GSA recognized, in view of the trend toward mechanized mail processing plants, that modification of the GSA standards might be necessary when applied to postal facilities. The Postal Reorganization Act approved August 12, 1970-the provisions of which became fully effective on July 1, 1971-established the Postal Service and authorized it to construct, operate, lease, and maintain buildings and facilities without regard to the Public Buildings Act of 1959. LEASING AUTHORITY The Department's leasing authority was derived from 39 U.S.C. 2102, which authorized the Postmaster General to negotiate leases for periods up to 20 years, and 39 U.S.C. 2103, which authorized the Postmaster General to enter into lease agreements for periods up to 30 years. At June 30, 1970, according to the Postmaster General's annual report for fiscal year 1970, the Department was occupying about 146 million square feet of interior space in 30,773 buildings, including about 83 million square feet in 27,722 leased and rented buildings. Of these buildings, about 12,000 were lease-constructed and accounted for about 71 million square feet of interior space. During fiscal year 1970 the annual rental expense for the leased and rented buildings amounted to approximately $140 million, of which $125 million was for lease-constructed buildings. ADMINISTRATION OF FACILITY ACQUISITION PROGRAM POSTAL BUILDINGS CONSTRUCTION PROGRAM As of April 30, 1971, 77 postal projects to be constructed under the delegation of authority from GSA at an estimated cost of about $1.2 billion had been approved by the Committees on Public Works. Based on data supplied by the Department, we identified 38 postal buildings (Governmentowned) that had either been completed or were being constructed. These 38 projects were valued at about $468 million for land acquisition, design, and construction. At April 30, 1971, only one project had been completed (Barrington Station, Los Angeles, California), seven projects were under construction and the remaining 30 projects were in various stages of completion, from site acquisition to the advertising of the construction contract. The completed project was finished in 3 months less than the time allotted for construction. The Department's latest estimates for 13 of the 38 projects exceeded the estimates shown on the approved prospectuses by about $38 million. The estimates for 7 of the 13 exceeded the amounts in the related prospectuses by more than 10 percent, the point at which a revised prospectus would have to be submitted to the Committees. they advised the Appropriation Committees of the revised cost estimates; and, therefore, in their opinion, submission of revised prospectuses to the Public Works Committees was Department officials informed us that not required. For the seven projects, Department officials stated that the increases in the cost estimates occurred because of (1) increases in size of the facilities or change in concept so as to fit into the Bulk Mail Facility and Preferential Mail Facility programs, (2) higher than anticipated cost escalations, and (3) changes in locations. Slippage in meeting target dates is discussed on page 35. USE OF GSA DESIGN AND CONSTRUCTION STANDARDS One of the conditions of the GSA December 1966 delegation of construction authority was that the Department would use GSA's standards for design and construction. The Administrator of General Services recognized that, in view of the trend toward mechanized mail processing 68-528 0-71-11 plants, modification of the standards might be necessary in their application to postal facilities. Generally, the Department had not used the GSA standards. The Department contended that the GSA standards were obsolete and that postal requirements for facilities differ substantially from those of GSA. However, the Department did use, with some modification, GSA's general provisions and conditions for construction contracts. It also used various GSA technical handbooks where applicable. LEASE VS PURCHASE Since 1962 we have issued several reports which have dealt with the issue of leasing versus Government ownership of postal facilities. In these reports we pointed out the economies achievable through Government ownership of facilities and have recommended that the Department determine on an individual facility basis whether to acquire postal space by leasing or through Government ownership, rather than follow a general policy of leasing. Summaries of our reports follow. Report to the Congress--Review of Real Estate Program Relating to Leasing of Major Problem Our review of fund requirements for 85 postal facilities with basic lease terms of 20 and 30 years showed that the total leasing costs to be incurred exceeded by approximately $148 million the Department's estimated costs of constructing these facilities. We found that, although larger Government expenditures would have been required during the period of construction if the facilities were constructed for Government ownership, the over-all fund requirements for the facilities would have been substantially less than total rent payments over the terms of the leases. In addition, under the lease arrangements the Government was committed to large annual rental expenditures for long periods of time without acquiring any equity in the leased facilities. Recommendation We recommended that, in view of the significant savings available to the Government by ownership of postal facilities, the Department consider a policy of ownership except in specific cases where the cost of leasing was clearly justified by other identified factors. Agency response The Department stated that the leasing program was a valuable instrument in providing postal facilities and that, although the costs of leasing may exceed the costs of Government ownership, the merits of leasing could not be determined solely on the basis of a cost differential. In support of this position the Department referred to certain economic and budgetary considerations and claimed certain operational advantages in regard to the leasing program. The claimed advantages included flexibility to cope with changing local postal problems and minimum lead time in acquiring necessary postal space. The Department also stated that construction costs were higher when construction was for Government ownership. |