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As I indicated in my answer, at one stage which I recollect in this process, Mr. Kunzig indicated that he understood the law to be written in such a way that it would be appropriate for the post office to make an agreement of this kind with the corps, and he did not see that that necessarily should not be the outcome.

Now, he had an interest in discussions
Mr. CONSTANDY. To what do you refer there! To what point in time?

Mr. NATHAN. Oh, this is probably in February or March, when his thinking was made known to me.

Mr. CONSTANDY. Of this year?
Mr. NATHAN. Yes.

Mr. CONSTANDY. In his letter to you, that is not what he says. You are referring to the April 17, 1969 letter.

Mr. NATHAN. Maybe my recollection needs to be sharpened up by the staff, and they suggest that this may have gone back further in time.

Mr. CONSTANDY. Two years.
Mr. NATHAN. I think that is right.

Mr. CONSTANDY. He had just come into office. The proposition was put to him whether he could interpose an objection to it. We are talking about the Administrator of ĜSA speaking to the White House and a Cabinet officer, as to how they interpreted the delegation of authority. He could not see how he could interpose.

Mr. NATHAN. It does not change my point, which is that the President does have to rely on the expertise of his designated chief policy officials on matters of detail of this character, and they often disagree, and when they disagree the decisions that we make that come to the President typically involve matters of policy, not so much matters of technique.

There is no question that that is a hard line to draw. The details of administration in a matter like this and the techniques involved are an important part of the question that was put to us as a policy question. We did the best we could. We did what we consider through our program experts the kind of a job that is appropriate for us to do in analyzing which of several courses of action we should take in this


We made our decision. But I do want to suggest by that that there are some matters of implementation of these agreements now entered into in terms of detail and day-to-day activities that are more fully the responsibility of the agency heads whom the President has appointed than surely they would be of the Office of Management and Budget.

Mr. CONSTANDY. In the final analysis, the OMB finds itself in the position of a judge; does it not?

Mr. NATHAN. We often have to make determinations as between parties.

Mr. CONSTANDY. And the judge has to consider the evidence available; does he not?

Mr. NATHAN. Yes.

Mr. CONSTANDY. Was there any other evidence available to OMB excluding its own expertise that came from any of the agencies other than what was contained in the letters?

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Mr. NATHAN. As I indicated in my testimony, our experts are
Mr. CONSTANDY. Exclusive of them.
Mr. NATHAN. I was going to add something. Our experts-

Mr. CONSTANDY. This is a very simple question. Did you get anything directly from the Post Office or the Department of Defense or from the General Services Administration other than the letters which were in answer to your March 27 letter?

Mr. NATHAN. My answer to that question is that our experts did obtain information from the agency staff experts, and that was considered, and that was in addition to what they themselves knew at the beginning of their consideration of this matter.

Mr. CONSTANDY. We have to recognize they were not yet to the point where they were able to have the discussion and the review prior to the signing of the agreement. It was not that expert. Your review took place 16 days after the agreement was signed.

Mr. NATHAN. I never denied that.

Mr. CONSTANDY. I think it is very significant. You are limited then to reviewing something that already happened.

Mr. NATHAN. We could have changed it if we thought it was an incorrect decision.

We decided that it was not, and we did not change it. It seems to me we had much the same interest that the committee does. We needed to look at this. We did. We made a decision. We are here now to explain to you what that decision is, to the best of our knowledge, how it was made, and what was taken into account.

Mr. CONSTANDY. I have no further questions, Mr. Chairman. I would like to ask if the correspondence from the OMB to Mr. Blount, Mr. Laird and Mr. Kunzig be made exhibit 27, and their answers to him, Mr. Blount, and Mr. Packard's letter to Mr. Shultz and his answer to all of them could be made exhibit 28.

Mr. WRIGHT. Without objection, this compendium of correspondence will become exhibits No. 27 and 28 in the record.)

(The documents referred to were marked for identification as Exhibits 27 and 28. They are as follows.)


Washington, D.C., March 27, 1971.
Postmaster General,
Washington, D.C.

DEAR MR. PosTMASTER GENERAL: This has reference to the recent agreement between the Department of the Army and the Post Office Department which provides for the Corps of Engineers to serve as a construction agency for the Post Office Department.

In view of the size and nature of the Post Office Department construction program, this agreement would result in a major change in the role and mission of the Corps of Engineers. It also has implications affecting the role of the General Services Administration as the primary agent for the construction of buildings to house the civilian agencies of the Federal Government. Therefore, I request that the agreement be suspended and that no action be taken to operate pursuant to its terms until this Office completes a review of the desirability of using the Corps of Engineers for this purpose, and the implications of such action with respect to the organization and management of the executive branch.

It would facilitate our review if the Post Office Department would furnish information setting forth circumstances leading to the agreement and the rationale supporting it, including such factors as alternatives considered and the reasons for their rejection, and the cost and efficiency of accomplishing Post Office construction by this alternative compared to other possible alternatives. We would also appreciate receiving the views of the Department of Defense with respect to the anticipated effect on current programs of the Corps of Engineers as well as the desirability of extending the role and mission of the Corps to the area of postal construction, including particularly the way the Department views its responsibilities, vis-a-vis that of the General Services Administration, for the construction of buildings to house the civilian agencies of the Federal Government.

For your information, the views of the General Services Administration also are being requested. A letter identical to this one has also been sent to the Secretary of Defense.

Wtih your cooperation, we shall try to complete our review as expeditiously as possible.


(Signed) GEORGE P. SHULTZ, Director.


Washington, D.C. April 2, 1971. HONORABLE GEORGE P. SHULTZ, Director, Office of Management and Budget, Washington, D.C.

DEAR GEORGE: This is in response to your letter of March 27, concerning a review by your Office of the recently announced agreement under which the Corps of Engineers will serve as a construction agency for the Post Office Department.


Let me deal with your request for information on the circumstances leading up to the agreement.

Some years ago, as you may be aware, the post offices that we acquired under our postal public building program were not constructed by the Post Office Department, but by the General Services Administration. (This has never been true with respect to facilities acquired under our lease-construction program; that program has always been administered solely by the Post Office Department.)

During the last decade, as mail transportation patterns underwent dramatic changes and suburban areas mushroomed, it became apparent that we could not possibly cope with the steadily growing volume of mail unless the emphasis of our construction program were shifted away from multi-storied buildings located in downtown areas, and toward special purpose industrial-type facilities located in areas with convenient access to airports and interstate highways. Most competent observers recognized that the characteristics of the special purpose buildings needed by the Post Office Department differed significantly from those of the office buildings that house many of the civilian agencies of the Federal Government. In recognition of those differences, I understand that as early as 1964 the Bureau of the Budget raised the possibility that insofar as postal buildings were concerned, the construction authority vested in GSA under the Public Buildings Act of 1959 might be delegated to the Post Office Department. President Johnson thought that it would be worthwhile to have the matter considered by a committee of businessmen with construction backgrounds, and this committee unanimously supported the independent construction approach. (Although it was finally stricken from the report, sereral members of the committee favored a positive statement that GSA should have absolutely no part in post office construction.) I believe that the report of the businessmen's committee was submitted to the Bureau of the Budget in July of 1965.

In 1966, the Administrator of GSA delegated to the Postmaster General authority to "acquire, design, construct, and alter public buildings to be devoted primarily to postal purposes." Under this authority—which was expressly made "with authority to redelegate"—the Post Office Department has been constructing postal public buildings ever since.

Soon after I became Postmaster General and began to dig into the problems facing this Department, I concluded that if we are ever to do the job that our customers are expecting of us, we are going to have to make a fairly substantial investment in new plant and equipment. Our mail volume will soon be approaching 100 billion pieces per year. What we need to move that mail efficiently is a network of light industrial one-story buildings, located in the right places and equipped with modern materials-handling machinery. No such network exists today.

It was obvious to me that the Post Office Department did not have a construction organization capable of completing, within a reasonable span of time, the kind of facilities network that we needed. Accordingly, in the Spring of 1969 I began discussing our problem with the Corps of Engineers and GSA, among others. Under date of March 27, 1969, General Clarke, who was then the Acting Chief of Engineers, sent me a brief description of the specific capabilities that the Corps could bring to the task of providing design, construction and real estate services to the Post Office Department. A copy of that material is attached at Tab A.

Bob Kunzig, the Administrator of GSA, was thoroughly familiar with our problem and was extremely cooperative in helping us think our way through to a solution that would best serve the public interest. In a memorandum dated April 17, 1969, Bob told Peter Flanigan, at the White House, that “Since the White House and Red Blount feel the Corps of Engineers for many reasons will be best able to handle specified new Post Office construction, we have agreed that the delegation will continue and there is nothing to stop POD from using the Corps of Engineers at once." copy of Bob's memorandum is attached at Tab B.

We all recognized that the use of the Corps might conceivably ruffle a few feathers on Capitol Hill. This caused me some concern, because the President had asked me to give top priority to the task of securing passage of the postal reform bill. As you will recall, the AFL-CIO and all of the postal unions were presenting a united front in opposition to the bill, and as a result, the reform proposal met with a somewhat chilly reception in Congress. Because the construction freeze imposed by the President during that period made it necessary to defer a major expansion of our postal construction program, and because I was confident that we could get the reform legislation through Congress within a reasonable period of time if we did not try to fight too many battles simultaneously, I put the Corps of Engineers projection on the back burner pending passage of the bill. I did, however, make arrangements for the Corps to take over supervision of several construction projects that we had under way, and I must say that we found the Corps' performance on these projects quite satisfactroy.

The form act was, as you know, signed into law last August. After informal discussions with Mel Laird, I sent him a letter on September 26, 1970, confirming our desire to utilize the capabilities of the Corps, now that we were in a position to go forward with an expedited construction program. Copies of that letter and Mel's reply are set forth at TABS C and D.

Over the next few months we worked out definitive agreements with Secretary of the Army Stan Resor and General Clarke, which agreements, as specified in my letter of September 26, provided for "strict control of the costs to be incurred in carrying out our program.” Copies of these agreements, as signed at a public ceremony on March 11, 1971, are attached at TABS E and F.


Turning now to your request for information on the rationale supporting our agreement with the Corps, including such factors as the alternatives considered, the reasons for their rejection, and the relative cost and efficiency of the various possible alternatives, it seemed to me, when I began considering this problem, that the following options were open to us :

(1) We could try to create an organization within the Post Office Department capable of undertaking a construction program of the magnitude required.

(2) We could request GSA to try to build up the necessary capability. (3) We could turn the work over to the Corps of Engineers.

(4) We could utilize the services of other professional construction agencies within the Government, such as the Naval Facilities Engineering Command and the Bureau of Reclamation.

(5) We could contract the work out to private industry.

With regard to the first option, I was convinced, as one with some experience in the field, that it would be wasteful, inefficient and time consuming to try to develop the necessary construction capability in-house. The job facing us is just too big.

A significant part of that job consists of building a network of 33 geographically dispersed bulk mail handling facilities that will cost a little under one billion dollars. When completed in fiscal year 1975, this bulk mail network will enable us to perform our work at a level of penditures estimated, on the basis of 1971 costs, at about $310 million a year below the level of expenditures that would be incurred without the network. The new facilities will not only permit us to achieve a very significant avoidance of costs, moreover, but will also result in substantial improvements in the quality of our service.

In addition to the bulk mail network, we expect that within a year we shall be in a position to make a final decision on construction of a preferential mail network that could well have an even more dramatic impact upon the efficiency of our operations. If we decide to proceed with the preferential mail program—which would entail the construction of some 200 to 300 separate facilities at a cost substantially higher than that of the bulk mail program—the necessary construction will, again, have to be completed within a relatively short time span.

Over the next few years our construction program could easily exceed $500 million a year. By way of contrast, our highest level of construction during my tenure in office has been less than $120 million a year. For the Post Office Department to build, almost from scratch, the kind of organization needed to execute a construction program of these proportions, would, in my judgment, be a serious mistake. Professional construction organizations of that kind are not put together overnight, and although I am sure that we could develop such an organization, given enough time and money, we would not need it on a continuing basis. These will be a sharp drop in our construction activities once the programs I have described are finished, and unless the Postal Service is expected to serve as a major construction agency for other units of Government, it would make little sense for us to develop in-house the kind of field organization that this work requires.

To a greater or lesser degree, many of these same considerations militated strongly against a decision to dump the Post Office problem in GSA's lap. For the most part, GSA's construction experience has been confined to the erection of facilities which are basically office buildings. Its whole construction operation is oriented toward these kinds of buildings; and, as I have already noted, the facilities required by the Post Office Department are of quite a different kind.

I have no reason to suppose that GSA is any better equipped to organize itself to do this kind of job than is the Post Office Department. Like the Post Office Department, GSA maintains no significant field force to supervise and inspect construction; instead, it contracts such work out to private architect-engineer firms. Based on my own construction experience and on that of the Post Office Department, I consider this an unsatisfactory modus operandi for the kind of work we are talking about.

To an increasing degree, moreover, GSA has tbeen using the "construction manager” concept in carrying out its construction work. This concept, in my opinion, is not one that would help us get the type of facilities we need, at the lowest possible cost, and on time.

Timely completion of the construction projects for which GSA is responsible may not be terribly important to many of the agencies that utilize GSA's services, because the work performed by those agencies is not commercial in nature. The function of the Post Office Department, by way of contrast, is indistinguishable from that of any other revenue-producing public utility; and we simply cannot afford the cost that would be entailed by significant delays in our construction program.

The merit of the third option that was open to me-i.e., to utilize the Corps of Engineers—must, I think be self-evident to anyone who is familiar with Government construction work. The Corps of Engineers is the largest professional construction agency—military or civilian-in the world. It has a wider range of design and construction experience than any other agency. Unlike GSA or the Post Office Department, it has division and district construction offices located throughout the country. The men who staff these offices—many of whom I know personnally—are, by and large, competent specialists in the construction field, fully capable of providing the kind of intelligent and aggressive management and

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