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inspection services that we must have if we are to get the tools we need to do our job.

The fourth option—i.e., utilizing the services of other construction agencies, such as the Naval Facilities Engineering Command and the Bureau of Reclamation—is one that did not particularly commend itself to me because of the size and geographical dispersion of our projected construction program.

The fifth option-i.e., turning to the private sector—is one to which I gave serious thought. Several members of the House Post Office Committee have suggested that this option may have merit, and I am not unsympathetic to their point of view. It is a fact, however, that no private organization comparable to the Corps of Engineers is in existence today, and while private enterprise could undoubtedly put together the kind of construction team we need faster than either the Postal Service or GSA could, it would take time and it would not be inexpensive. The Corps, to be sure, will need to augment its strength somewhat in order to fulfill the mission we have given it, but basically the Corps already has precisely the kind of work force we need, located where we need it, in-being and ready to go to work for us right now.

The Corps has been winding up its work for NASA-work that entailed the construction of highly complex facilities that cost around $1.3 billion-and is thus in a position to make available to us, at relatively low cost, the services of a construction team that has few peers in terms of quality, and is unequaled in terms of size and geographic distribution.

Our agreement with the Corps imposes a relatively low ceiling on the Corps' in-house costs; assuming a Post Office program in the range of $250 to $500 million annually, the Corps is under a firm commitment to see that its overhead and inspection costs will not exceed 5.5 percent of the total program payments to contractors for design, construction, and mechanization, plus any in-house Corps design costs. General Clarke has promised me, moreover, that the Corps will utilize aggressive management techniques aimed at carrying out the program at a figure below the 5.5% ceiling.

The Corps' construction program has been running at a level of about $2 billion per year, split roughly 50-50 between the civil works and military programs. Since 1959, GSA's construction budget has averaged around $115 million a year, and I think the figure is about $180 million for FY 1972. As between the Corps and GSA, therefore, and bearing in mind the broad geographical coverage of the Corps' organization, there can be no question as to which agency is in a better position to assimilate an additional construction burden of $250 to $500 million per year.

III,

99

Some of the assumptions underlying your review of our agreement with the Corps may merit discussion at this point.

I am not sure it is true, for example, that “this agreement would result in a major change in the role and mission of the Corps of Engineers.” Mel Laird can speak for himself on this point, but my belief is that the type of job that we have assigned to the Corps of Engineers is in no way foreign to the Corps' role and mission. The Chief of Engineers, under the supervision of the Secretary of the Army, is authorized by statute “to accept orders from other Federal departments and agencies for work or services

(Section 219 of P. L. 89-298, Title II, 79 Stat. 1089.) In recent years the Corps of Engineers has performed specialized construction services——the same kind of specialized construction services that we need—for such agencies as the State Department, USIA, AID, DOT, Interior, HEW, and NASA. Since January of 1967, I understand that the Corps has completed some 17 construction and modernization projects, totaling $37 million in cost. for GSA. In addition, the Corps has, of course, provided construction services for various constituent agencies of the Department of Defense, and, since the Fall of 1968, has built postal facilities on various Army and Air Force installations at a total cost of about $4 million.

I am somewhat puzzled, similarly, by your reference to the implications of our agreement with the Corps with regard to "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.” I had supposed that GSA's primary role involved construction of the kind of general purpose buildings in which nonrevenue producing agencies of the Federal Government are customarily housed. As noted above, the highly mechanized special purpose facilities needed by the Post Office Department bear little resemblance to the facilities that GSA builds—and that is one of the major reasons why it was agreed years ago that GSA should get out of the postal construction business.

IV.

I deeply appreciate your expression of willingness to try to complete your review as expeditiously as possible. On April 25 the Corps will receive bids on the highly important New York bulk and foreign mail facility. (Bids on this project were originally solicited by the Post Office Department, and we had to reject all bids because of the fact that the lowest bid—which exceeded $100 million—was far in excess of the amount available under our appropriation.) The Corps has half a dozen other postal projects under actual construction and about 13 additional postal projects under design right now. The Corps is planning to issue an invitation for bids on a preferential mail facility at Tuscon, Arizona, on April 7, and there are a number of other projects throughout the country that I am anxious to assign to the Corps as soon as practicable.

In his message to the Congress of April 16, 1970, the President stressed that the new Postal Service should be "insulated from direct control by the President, the Bureau of the Budget and the Congress.” As to Congress, I think it is fair to say that most of the Members are not unaware of the enthusiasm with which we have embraced the proposition that the Postal Service must be free of direct Congressional control. Congress is probably somewhat sensitive about this subject right now, indeed, and because of that fact I suspect there are some on Capitol Hill who would not be averse to trying to make political capital out of any action that might conceivably be constructed as a failure on the part of your Office to honor the President's commitment that the New Postal Service will be a truly independent establishment.

I fully appreciate the fact that you have no intention of compromising our independence, and I know that you have very important responsibilities insofar as the Corps and the Department of Defense are concerned. My experience has been that important details can sometimes get lost in the heat of Congressional debate, however, and it could well be that a hold up in the Corps' agreement would be greeted with charges that the President's postal reform bill has a simply transferred the Postal Service out of the frying pan of Congressional politics and into the fire of executive branch politics. Such charges could only be damaging to the cause that all of us are trying to serve.

If the services of the Corps are not to be available to us, we shall, of course, have to reconsider our position as to going to the private sector or developing our own geographically dispersed construction force. Either course would be costly in terms of both money and time.

As I read the temper of our customers, the time available for making good on our promises of better mail service is precariously short. Any delay in the implementation of our construction program would be damaging, and I hope that your review can be completed very promptly indeed. Sincerely,

WINTON M. BLOUNT,

EXECUTIVE OFFICE OF THE PRESIDENT,
OFFICE OF MANAGEMENT AND BUDGET,

Washington, D.C., March 27, 1971,
Hon. ROBERT L. KUNZIG,
General Services Administration,
Washington, D.C.

DEAR MR. KUNZIG : The Post Office Department and the Department of the Army have entered into an agreement under which the Corps of Engineers will assume responsibility for supervising the construction of postal facilities. I have asked both parties to suspend any action under the agreement until this Office has completed a review of the effect this agreement may have on the mission of the Corps of Engineers and on the organization and management of the functions of the executive branch.

I would appreciate receiving your views with respect to this agreement, particularly as they pertain to the role of your agency vis-a-vis that of the Corps of Engineers in the construction of buildings to house civilian agencies of the Federal Government. It would also be helpful to have data with respect to the cost to the

Federal Government if the General Services Administration were to provide the type of services covered by the agreement. Your views would also be appreciated on the ability of GSA to meet the schedule and requirements of the Postal Service.

Since we hope to complete our review of the matter as expeditiously as possible, an early response to this letter would be helpful.

A copy of our letter to the Secretary of Defense and the Postmaster General is enclosed. Sincerely,

GEORGE P. SHULTZ, Director.

EXHIBIT 28

THE SECRETARY OF DEFENSE,

Washington, D.C., April 12, 1971. Hon. GEORGE PRATT SHULTZ, Director, Office of Management and Budget, Washington, D.C.

DEAR GEORGE: This letter responds to yours of 27 March 1971 regarding the agreement between the Department of the Army and the Post Office Department whereby the U.S. Army Corps of Engineers will serve as the construction agency for the Post Office Department.

When we first began looking at this possible program, Red Blount described to me the new concept for handling mail, the kinds of facilities required to be designed and constructed, the accelerated schedule he had in mind for the system to be operational, and his desire to use the Army Corps of Engineers as the construction agency for the Post Office. I thought his proposal served the best interests of the country, the Postal Service and the Department of Defense. The Corps, with its nationwide organization and demonstrated competence in managing large scale, complex construction programs, such as the ICBM systems and NASA. has an existing capability to complete this system of sophisticated mail handling facilities on the kind of schedule Red seeks and at acceptable costs. Accordingly, I asked Stan Resor to work out an agreement with Red Blount for the Corps to provide the requested real estate, design, and construction services on a reimbursable basis. They did so, and publicly signed the agreement on 11 March 1971.

From a national security standpoint, there are several benefits to be derived from this course of action. Currently, the Corps is responsible for the design and construction of industrial plants and arsenals included in the military production base. These facilities are highly automated, involving principles and techniques similar to those of the facilities included in Red's new concept for the rapid processing of letters and parcels. Under this new concept postal facilities will tend to be light industrial, one story structures located on the fringe of metropolitan areas near airports and dual highways, in marked contrast to the kind of facilities traditionally constructed for the Post Office Department. In order to reduce mailing costs, the new bulk handling facilities will be highly automated with sophisticated material handling equipment controlled by computers. The Post Office Department is devoting considerable effort toward advancing the state of the art in automated and computerized materials handling equipment. The Corps' participation in this new postal construction program will equip them to take advantage of these advances in modernizing existing plants and arsenals, and in improving our logistics system, particularly depot operations, utilizing material handling equipment.

Its involvement in the postal construction program, will also bring the Corps into closer association with architect-engineer firms engaged in industrial design and with the principal mechanization, computer, and electronic manufacturers and contractors in this country. These associations will be beneficial in peacetime military and other construction programs. They will be invaluable in the event of a rapid mobilization in providing needed military and industrial facilities. One of the great strengths of this country, during emergencies in the past, has been the rapid mobilization of its construction industry. No small share of this success has been due to the working relationships and mutual confidence and respect developed over the years between the Corps of Engineers and the many architect-engineer and general contracting firms throughout the nation.

68–528—71-21

From an economic view point, both the Department of the Army and the Post Office Department will benefit from economies of scale. A larger total program for the Corps will reduce costs in a relative sense, particularly overhead costs. This reduction will be reflected in all construction programs of the Corps, including military construction.

I do not believe that the Post Office construction program will involve a major change in the Corps' role and mission. The Corps, through the years, has accepted requests for real estate, design, and construction services from Federal agencies pursuant to authorities such as Section 219 of Public Law 89,298. The Federal agencies, other than the Department of Defense, for which the Corps has provided, and in many cases is still providing, these services include: the Departments of State, Transportation, Health, Education, and Welfare, and Interior; the General Services Administration; and NASA. Since 1967, the State Department program alone has amounted to $9.3 million. Since 1966, the Corps has assisted GSA by providing supervision and inspection services for renovation and construction of 17 facilities (including 13 post offices); with a total construction cost of $37 million. Since 1964, the HEW program has totalled $7.5 million,

The NASA program has, to date, amounted to $1.3 billion. Thus, the Corps has. performed and is performing for other Federal agencies the kinds of services requested by the Post Office Department.

We do not believe that the size of the Post Office construction program will adversely affect the Corps' other programs. The Corps, in recent years, has managed a combined civil works and military construction programs averaging annually on the order of two billion dollars. Red Blount has indicated that his program will vary from a low of $250 million to a high of $500 million in a given year. Hence, at its peak, the Post Office workload would constitute no more than 20% of the Corps' total program. Organizationally, the Corps is capable of accomplishing this program utilizing civil procedures without undergoing any basic structural change. It has an existing field organization which is already distributed on a nationwide basis and it has demonstrated design and construction competence in the kinds of facilities involved. The principal change required will be the addition of a small office in the Office of the Chief of Engineers to coordinate with the Post Office Department and to provide central management for the program. Though no change in basic organization is required, there will of course be a need for some additional staffing to accommodate the increased workload, although some of the staffing will be provided by retaining military construction personnel who would otherwise be laid off in this period of reduced military construction programs.

In your letter, you indicate that, with the Corps as the Postal construction agency, there may be a significant impact on the organization and management of the executive branch. Since the program requires no basic change in the Corps organization, I do not see the suggested impact. In particular, I see no impact on the reorganization proposed by the President, for two reasons: (1) even in the civil works side of the Corps program, the functions involved in the postal program-engineering design, construction, contract supervision—would be retained by the Corps; and (2) in any event, the postal program is, as noted above, more closely akin to the military program in terms of the skills involved.

As to how “the Department views its responsibilities, vis-a-vis that of the General Services Administration, for construction of buildings to house the civilian agencies of the Federal Governnment,” our view is this: we have no desire to infringe upon GSA's responsibilities in this area. At the same time we consider carefully any Federal agency requests for the services of the Corps since the Corps is authorized by law to undertake such work. Normally, these requests are not for the typical large office buildings used in housing civilian agencies of the Federal Government although, in the past, GSA has occasionally utilized the Corps' assistance for supervision and inspection even for these structures. In the case of the Postal construction program, I see no conflict with GSA's responsibilities because, under the new concept, the preferential mail facilities and the bulk mail facilities are light industrial, one story structures housing complicated mechanical equipment rather than the usual sort of office building.

It seems to me that there is a solid, logical basis for the Postal building program agreed to by the Army and the Postal Service. The agreement was worked out with a lot of careful negotiation, and has already been signed. As Red Blount's letter to you points out, the program is already under way and some significant contracts will be coming up for action shortly. Given Red's strong views on the subject, my own strong views that the arrangement is beneficial to the Department of Defense, and in the absence of any demonstrable significant impact on Executive Branch organization, I believe you should promptly indicate that you have no objection to the program proceeding. Sincerely,

MEL.

APRIL 15, 1971. Hon. GEORGE P. SHULTZ, Director, Office of Management and Budget, Executive Office of the President,

Washington, D.C. DEAR MR. SHULTZ: We are pleased to have the opportunity to furnish our views concerning the proposed agreement between the Post Office Department and the Department of the Army under which the Corps of Engineers would assume responsibility for supervising the construction of postal facilities.

We strongly feel that the role of the General Services Administration in the construction of buildings to house civilian agencies of the Federal Government would be seriously weakened if this agreement is implemented. Some considerations and consequencies are:

1. Implementation of the agreement would further proliferate authority to construct public buildings within the Executive Branch contrary to the intent and purpose of the Public Buildings Act of 1959. In addition, during the hearings, the President's Commission on Government Procurement has expressed concern over the erosion of the single centralized service agency concept. Senator John L. McClellan, Chairman of the Senate Committee on Government Operations, has recently expressed the concern of his Committee over possible duplication of GSA construction services and functions by the Department of Health, Education and Welfare. Other Members of Congress have expressed similar concerns.

2. Involvement by the Corps of Engineers would contribute to further confusion on GSA's role in planning, building and managing public buildings, including the acquisition and management of leased space. The Corps of Engineers would not be in a position to consider overall Government space needs with the result that two or even three buildings might be constructed where only one was justified. Unquestionably, such a situation would result in increased costs to the Federal Government.

3. Involvement by the Corps of Engineers in the Postal construction program would add further confusion to an already confusing Federal activity in the eyes of the public. The Corps of Engineers, on behalf of the Postal Service, would be involved in the selection and acquisition of sites and the design, construction and management of public buildings with the same architects and construction contractors with whom GSA would deal. Intergovernmental cooperation, interagency liaison and coordination, and interface with the private sector (re estate, architecture, engineering, and construction) would become diffused and cumbersome.

You requested our views as to the ability of GSA to meet the schedule and requirements of the Postal Service. While we do not have specific information concerning the Postal Service's complete program, it is our understanding that a construction program of approximately $300 million is anticipated in Fiscal Year 1972. We feel that we would have no difficulty in meeting the Postal Serv. ice's requirements for a program of this magnitude. In making this statement, we recognize that GSA's performance in the past undoubtedly has left something to be desired from the Post Office Department viewpoint. Although some of the performance and delivery problems in the past were due to budget restraints and Congressional approvals (which will no longer inhibit program execution in view of the Postal Service's broad authority to plan and commit resources for capital improvements), Administrator Kunzig identified as his number one priority, shortly after his appointment in March 1969, the need for vastly improved management and direction of our construction programs. As a consequence, massive changes have been made, both in organization and personnel, to strengthen the Public Buildings Service in this most critical and demanding area of GSA's mission.

There is another factor that should be considered. We began negotiations with the Postal Service about five months ago to plan the transition between GSA

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