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Mr. ZIMMERMAN. They are going to invoke this clause, performance of work or responsibility of

Mr. CONSTANDY. If mistakes are made, the A-E firm has to, at their own expense, correct them. The second part of the sentence says:

And provide less technical review of the design than furnished past of projects in military construction.

Who was going to discover it?

Mr. AHART. This might require some clarification on somebody's part because I am not sure I understand it. But it would seem if you were going to require the architect-engineer to correct a mistake, you first have to find the mistakes. This would require a pretty thorough review of the design documents themselves, unless you are going to wait until the mistake shows up during the course of construction and take care of it at that time.

Mr. ZIMMERMAN. We had a little difficulty with the rationale the same way you do. If you are going to require more of the A-E you have to make some determination that he is achieving this, and this is going to require more review on your part to see that he is doing his job. The rationale escapes me at the moment as to how this is going to be accomplished.

Mr. CONSTANDY. Have they suggested that they will increase the level of their technical review of the design when he finishes with it!

Mr. ZIMMERMAN. This is something they expect to do. I might point out, since the program is new, they have not really had an opportunity to determine how well this approach is going to work. This is an idea they have in mind as a way of keeping their costs down. Nr. CONSTANDY. It is a hope? Mr. ZIMMERMAN. It is a hope.

Mr. CONSTANDY. It should not be such a hope that they are predicting its functioning to keep the 5.5 percent down then. If I read the sentence that you have on the top of page 35, they are going to rely more on his doing his work properly as they are paying him to do it, and incur the expenses involved when he makes a mistake, but at the same time, they are going to reduce the technical review of his work.

Mr. AHART. I am not sure just what they did mean by that, Mr. Constandy. It may be and I am speculating now—that in the past the work which they spent in correcting the mistake of the architectengineer would be charged as a supervision and review cost rather than in-house design cost, so it may be that by making a more thorough review of the plans and getting him to correct his mistakes himself, they could still achieve some savings. I just do not know.

Mr. WRIGHT. If they are charged as a supervision and review cost, who pays them? Who pays the cost !

Mr. AHART. This would be within the 5.5-percent cost reimbursement limitation from the Postal Service.

Mr. WRIGHT. It would have to be absorbed within the 5.5-percent ceiling.

Mr. AHART. That is correct.
Mr. WRIGHT. Thank you.

Mr. CONSTANDY. Is this not actually simply transferring overhead costs to construction? If I am an A-E, and they tell me I am going to

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work on this basis, I probably have to take that into account when in fact I negotiate with them for the price I am going to do the work at.

Mr. AHART. You are correct. We would take it out of in-house cost and put it in the construction cost base.

Mr. CONSTANDY. Assuming the dollar amount is the same, all we have succeeded in doing is transferring some of the dollars from overhead which would not be operative against the 5.5 percent, moving them accross the line and charging them as direct costs on contract with the A-E.

Mr. AHART. That would be correct. Mr. CONSTANDY. Mr. Zimmerman, do you have any knowledge as to whether the overhead cost elements as used by the Corps of Engineers have diminished as result of like transference of items which formerly had been in overhead items to construction. Maybe I can clarify that. As an example, it was my understanding that at sometime the overheads costs included the production of "as built plans” for the building and that would be included in the corps' overhead cost, and there was a subsequent change to the charge of the "as built plans" as a construction item, that would have the logical effect of making the overhead cost lower, as it would make the construction cost higher.

Mr. ZIMMERMAN. I believe in 1968 a decision was made in the Department of Defense that costs incurred during military construction work by the Corps of Engineers and the Naval Facilities Engineers Command, such as "as built plans,” would be considered as construction costs rather than design costs.

Mr. CONSTANDY. This would account to some extent for the historical drop in the Corps of Engineers' overhead costs, would it not?

Mr. ZIMMERMAN. It would have an effect. In the past if they were considering those costs as design costs, and now they are being considered as construction costs, this would decrease the design cost.

Mr. CONSTANDY. Okay. We have only three other items, one of them on slippage, and I think you have some additional information on that. If you could give us the detail on the material that you had pertaining to the slippage. You have, I believe a May 28, 1971, Post Office Department summary report, do you not?

Mr. AHART. Mr. Zimmerman will respond.

Mr. ZIMMERMAN. We have a summary report, as you have just stated, and I would like to read the introduction to this report: The major facilities summary report provides current data on major milestone status and costs, status of the approved project schedules developed in accordance with headquarters circular 70–12, and status of the Corps of Engineers support activities with respect to the major postal facilities program. This report has a limited distribution. It directs itself to the needs of top management by analyzing major performance trends and highlighting current critical developments pertaining to the program.

This, of course, is a post office document.

On page 8 there's a chart which is called fiscal year 1971 major postal facilities program, comparison of planned versus actual accomplishments as of May 28, 1971.

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We have already advised you that the start of construction was contemplated on 33 projects and only four construction starts were achieved as of May 28. Other points which reflect milestone accomplishments are the complete functional designs specification. As of May 28 they expected to have 35 accomplished and they achieved 27. Also, with respect to site selection, they expected to have 36 sites selected, and they have only selected 33.

With respect to site acquisition, they expected to have 30 sites acquired and they had acquired 16. With respect to starting detailed design, they had planned to start 36 project designs and they had started on 24.

Mr. CONSTANDY. Now, before we become too objective—I do not know if you can become too objective-before we put too much emphasis on the fact that it is a new program, and as a consequence you can reasonably expect that it will not get off the ground in the way you hope it will be running a year or 2 years later, they set the dates, did they not? They set the targets for those periods?

Nr. ZIMMERMAN. These are their target dates.
Mr. CONSTANDY. They have not met them to the extent you indicated! ?
Mr. ZIMMERMAN. That is correct.

Mr. CONSTANDY. If it is a new program, and they anticipated a new program not functioning as well as an old program, it would behoove them to have taken that into consideration when they established those items as target dates, would it not?

Mr. ZIMMERMAN. Yes.

Mr. CONSTANDY. They were at liberty to choose any program schedule they wanted to?

Mr. AHART. Yes; I think this is correct.

Mr. CONSTANDY. With the full realization of where they were at the time they established them. They failed to meet them to the extent you have shown.

Mr. AHART. I might add a little bit to what Mr. Zimmerman has pointed out. There are other statistics in this report which may give a different perspective to this or amplify it somewhat. The figures he just gave you were in terms of the time to get things done. I think the existing indication of when construction will be completed on these projects is probably relevant here also. Out of the 36 projects we are talking about, 23 of them had slippage construction dates ranging up to 20 months.

In other words, the construction dates as such, the completion dates. The completion dates for seven of the projects were not known as of that time. In other words, they had not reestablished completion dates, and there are three of the projects that are on or ahead of schedule out of the 36.

Mr. CONSTANDY. Thirty-three are behind schedule to varying degrees?

Mr. AHART. I just have information on 30 of them.

Mr. CONSTANDY. Keeping in mind that the anticipated saving leased to bulk mail facility network of $310 million a year is predicated on, as has been expressed repeatedly by the Post Office Department and the corps, bringing these projects to fruition and on line by the expected delivery date, they are going to be a little bit disappointed when they reach that date.

Mr. AHART. Of course, any slippage in the actual bringing them on line is going to cut into expected savings resulting from it.

Mr. CONSTANDY. It may be worse than that if you have part of a system completed and you have part of it partially done; you may be incurring additional costs because of the partially completed system that is not functioning correctly, and you may not realize any savings until it is all completed!

Mr. AHART. This is a possibility. I am not that familiar with the makeup of the estimated savings.

Mr. CONSTANDY. Do you have any idea what the anticipated completion date for the bulk mail system was?

Mr. Ahart. I believe the Postmaster General expects them to be on line in 1975.

Mr. CONSTANDY. Some of these projects are for that network, are they not?

Mr. AHART. That is correct.
Mr. CONSTANDY. Some of them are behind as much as almost 2

years now?

Mr. AHART. Some of them have slipped as much as 20 months, almost 2 years; yes.

Mr. CONSTANDY. Are there any other particulars pertaining to that section?

Mr. AHART. I do not believe on that particular matter, Mr. Constandy.

Mr. CONSTANDY. May we make that document exhibit No. 23 ?

Mr. WRIGHT. Yes, without objection, this document becomes exhibit 23.

(Exhibit No. 23 was marked for identification and is retained in the subcommittee's files.)

Mr. CONSTANDY. We have two other things.

One of them is the 12-month estimated construction periods. I think you have some material on that, do

Mr. AHART. Yes; we do. I would like for Mr. Zimmerman to respond. You are referring to the estimated construction periods for projects that have been transferred to the corps?

Mr. CONSTANDY. Yes; on page 36, the top of the page.

Mr. AHART. Yes; I have some information here on fiscal year 1971 and 1972 for projects which have been transferred, for which some kind of service, which had construction periods of approximately 12 months.

As of May 28, the corps had been requested to provide services for 20 fiscal year 1971 projects and two fiscal year 1972 projects. Fourteen of the 22 projects have construction periods of 12 months, plus or minus a few days, and these projects range in value from a low of about $570,000, which happens to have only 6 months construction time, to one in Stamford, Conn., of $11.7 million value, which has the construction time of 12 months.

Mr. CONSTANDY. Can you give any indication of how many had construction times of 13 months, if

Mr. AHART. I think out of the total of the 22 projects, there were only three that had construction periods of more than 13 months. One of these had a 15-month period, and one had a 24-month period, and one had 26

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