General REBH. That is correct, sir.

Mr. WRIGHT. That source essentially seems to be the Postmaster General, and the Chair would like to state for the record that this committee has been endeavoring to secure an audience in the committee with the Postmaster General. The Postmaster General has replied, not directly but through his liaison officers, that he has speaking engagements for the time that we want him here, and he otherwise is quite busy with a variety of other things. When those persons designated by him to respond to requests from this committee are asked when he might come, those persons reply, well, we do not make his schedule.

So the committee has had quite considerable difficulty getting information from anyone, but what we might call the horse's mouth, and the committee has had very great difficulty in gaining access to the horse's mouth.

Thank you very much. I will not burden the record further, I think the record is clear.

There has been a deliberate, purposeful element of secrecy cast about the entire program, both prior to the passage by Congress of the Postal Reform Act and subsequent thereto.

Mr. Grover has a question.

Mr. GROVER. Just one question, Mr. Chairman.

Since our efforts have been blunted, I will use that point again, to get through the Post Office, we will continue, but on the last page of your statement, you make reference again, and this reference was made by the chairman a short time ago, and I believe by GSA to a spreading of overhead costs, because you have very, very broad base construction effort, which you indicate is volume sensitive, which includes civil works, Air Force and Army. I can understand how in private enterprise a large construction firm can gain a great deal of advantage through the spreading of its expertise, and it is not necessarily cost accountable, because it goes into a public bid and it is going to do first-class work for the first-class dollar on the basis and the terms of its bid. How can you justify spreading overhead costs for the postal construction program over a broad program involving civil works, Air Force and Army, which of course are extremely sensitive to getting the best value out of your efforts for funds in their budget, which I presume in some way are transferred to you for your effort. It would seem to me that there would be some room for accomplishing your target or ceiling of 5.5, some at the expense of some of these other works.

Is that a fair rationality? I know you will say "No," but I want to make a record.

General REBH. No, sir. You have to understand what overhead costs mean. The overhead cost is a part of the total corps cost. The overhead costs are costs of the administrative and advisory services in support of the technical people who will be either engaged on the construction site, managing and inspecting the work, or they will be in their offices reviewing the design, which has been submitted by an architect engineer.

So the overhead are those costs, advisory and administrative, such as a lawyer in handling claims. Another example is the controller who

keeps the books or the safety office which inspects the site for safety, the personnel office who has to recruit the people. These are the overhead costs.

Now, if you bring on, for example, in a district an extra project you do not have to hire an extra lawyer or extra personnel man to handle the records because it is not so great an increase in volume of work that additional people are required. But that man is still going to be on that job 8 hours a day, so you take that overhead cost and you distribute it among the programs in accordance with the size of the programs.

Mr. GROVER. Now, there is one point in the prior testimony where it was indicated that the mission of the corps and the effort exerted was going to be insubstantial, and then we find out it was going to be 25 percent increased in your effort, in the effort required to accomplish this program. That is a very substantial increase in the construction effort.

As the chairman pointed out, it would seem to me-seem to him and to me that perhaps you are overstaffed before you go into this, or you are going to be overburdened after you go into this?

General REBH. One has to understand that the reason the Postmaster General came to the corps was because of its dispersed organization, the variety of talent that it has and the great experience of its personnel. It was not on the basis that we had the people in the field at the time to take on his program. Otherwise, what you say is true.

All of us, in fact you will find I think back in the January 1970 letter words to the effect that the Post Office would have to help us in getting spaces to bring on people for this program. It is much easier to take on a big program if you have the nucleus, as we have, the 36 districts spread throughout the United States, and all you have to do is add a few technical people. You do not have to reconstitute or form an office that has to have lawyers, personnel people for recruiting,

et cetera.

Mr. GROVER. You are going to give us your assurance that the spreading overhead costs on a broad basis that you will not be taking away or neglecting any other projects in any shape or form?

General REBH. That is correct, sir. If we need additional people, which we will in some districts, take for example, the New York District, they are going to have a tremendous increase in the workload as a result of the Post Office program they are going to have to hire an extra lawyer, extra personnel man, et cetera.

Mr. GROVER. It is not pertinent to the discussion right now, Mr. Chairman, but I think sometime in the record we should elicit whatever planning there is there are going to be a thousand people transferred here and this is not a long range, it is just a couple of years, they are going to have to be transferred back someplace. I think we should elicit what the planning is personnel wise for these temporary assignments.

Mr. WRIGHT. Do you have in mind a broad ballpark figure of how many additional personnel it is going to be necessary for the corps to take on?

General REBH. Yes, sir. For the big program, we are thinking in terms of around 600. Others will be required on the small program.

Mr. WRIGHT. How many will be involved in the small program? By that you do not mean small in total dollar volume, but size in regard to small buildings

General REBH. Small post offices.

Mr. WRIGHT. This will require a greater dispersal of personnel in that the cities wherein those smaller projects will be constructed are scattered throughout the United States and farther removed from your district offices; is that not correct?

General REBH. No. They will be in district offices. For the small program, they will be managed out of the district offices.

Mr. WRIGHT. But the fact they will be in communities in some cases geographically removed from your district offices, this will involve taking on additional number of personnel, would it not?

General REBI. The total figure we estimate at the peak of the program will be 1,000 people.

Mr. WRIGHT. A thousand people?

General REBI. Yes, sir.

Mr. WRIGHT. This is 1,000 people whom the corps must employ for a relatively short period of time?

General REBH. This is one of the reasons why the corps can undertake a program without detriment to itself, as it has done in the past with the ICBM and NASA programs, we have people retiring, and there is the attrition rate, and it is very easy for us to absorb additional people. The 1,000 refers to spaces. This does not mean we will have to take on necessarily 1,000 new people, because some of our programs are dynamic in nature.

In the case of certain districts, where a program in that particular district has dropped off, they will be able to utilize people that are currently assigned there, but all they need is a space to justify the man's existence on the payroll.

Mr. WRIGHT. Otherwise, the man might not be needed on the payroll, were it not for this new program?

General REBH. That is right.

Mr. WRIGHT. What we are saying is the program itself requires the services of approximately 1,000 people more than the corps otherwise would require?

General REBH. That is correct, sir.

Mr. WRIGHT. And it will require this additional 1,000 for a relatively short period of time unless the agreements are expanded and the program takes longer than is anticipated?

General REBH. Relatively, the big program would be 3 to 5 years, I believe. That takes care of 600. The other program, the leasing program is something that is continuing on into the future, so that I would assume then the 400 would stay in that capacity. The short-term one is around 3 to 4 years.

Mr. WRIGHT. You were saying to the committee, General Rebh, that you would be able to absorb these people that you have taken on into the normal work of the corps so as to minimize the undesirable effect of reductions in force?

General REBH. That is correct.

Mr. WRIGHT. But you cannot assure the committee that nobody is going to be let out of a job because of a reduction in force?

General REBH. I would say the higher probability-and again I do it on the basis of past experience, because of the ICBM and the NASA program-is they will be transferred within the corps. As you say, there is a possibility, and I am sure there could be a few cases of reduction in force, but the cases would be those wherein a man would not want to be transferred to another location.

Mr. WRIGHT. There appears additionally or there appears to me an additional possibility that persons who have become highly proficient in administering construction or leasing management of a public building might not necessarily be so useful in the prosecution of a civil works program involving dams and levees and things of that kind. Does that seem illogical to you?

General REBH. I think most people who have a firm grounding in a discipline, electrical engineering, mechanical, structural, well, they do in fact transfer occasionally from one to another. There may be a little bit of on-the-job training required, but such a transfer can be made.

Mr. WRIGHT. If you would, let us proceed to the statement you make concerning the Office of Management and Budget letters.

On March 27, the Director of OMB sent letters to the Secretary of Defense, Postmaster General and Administrator of General Services Administration, declaring that a review was being undertaken of this agreement and requesting that the agreement be suspended until such time as the review had been completed. And no action was taken under the agreement. These are not your words, but I believe these are the words that come from the letter of the Director of OMB.

Now, in his letter it requested that no action be taken under the agreement. However, you have said that the suspension was interpreted to apply to the start of new contracts, in other words that the corps would not advertise nor award any new design or construction contracts during the time when the Office of Management and Budget was reviewing the agreement. Otherwise, it was interpreted not to apply to work under way. By whom was it so interpreted?

General REBH. By the Chief of Engineers, General Clarke.

Mr. WRIGHT. As far as you know, this was a unilateral decision made by General Clarke, that the suspension by the Office of Management and Budget did not apply to work already under way?

General REBH. When we received a copy of the letter to the Secretary of Defense, we had a meeting, General Clarke, General Raymond, myself, and General Dunn and others, to discuss this, and we felt this was in the best interest of the Government, the practical thing to do, allow the work under way to continue. General Clarke, after we reached the decision, informed Mr. Jordan, General Counsel, Department of the Army, that this is what we were going to do.

Mr. WRIGHT. So the assumption underlying it all is that after the review, the Office of Management and Budget would agree to the agreement, and you would be able to proceed?

General REBH. That is not correct, sir. It seemed to us that whichever way the Office of Management and Budget decided, that the course of action of continuing the work was in the best interest of the Government. In the same sense in which we had assumed the work from the Post Office, in terms of ongoing projects, we would be able to pass on

to any successor agent, who was to take over the construction. If we were to continue, work would not be interrupted. Any time you stop projects, as I indicated in the statement, it is very costly for paying the contractor, either design or construction, in terms of suspension of work, plus the fact that you delay bringing the installation on stream. Because the Post Office is a profit-and-loss type of organization now, it would have meant the loss of savings to be derived through the increased operational efficiencies.

Mr. WRIGHT. General Clarke made this decision?

General REBH. General Clarke made the decision; yes, sir.

Mr. WRIGHT. I do not know that the committee could quarrel with the decision from the standpoint of its economy or its efficiency. It does seem to the committee rather irregular that it was handled in the way that it was. A representative of the Office of Management and Budget testifying to this committee earlier said that the effect of the suspension was simply to hold up on the award of new contracts.

There seems to be some further light shed on this, and on May 4 the Postmaster General wrote to the Office of Management and Budget again and said in effect since we have not heard anything further, we are going to go ahead with this project. The Corps of Engineers does not operate that way with the Office of Management and Budget, does it?

General REBH. No, sir; not to the best of my knowledge.

Mr. WRIGHT. In other words, when the Office of Management and Budget asks the Corps of Engineers to suspend work on a project until it has decided, the Corps of Engineers suspends work on a project until it hears from the Office of Management and Budget?

General REBH. It depends on what you mean. On this project we really did not suspend, because we thought it was in the best interest of the Government, but we felt we should not continue to commit the Government to anything further.

Mr. WRIGHT. The Office of Management and Budget being an arm of the Presidency says to the Army or the Corps of Engineers, look, we want you to hold up on this until we have decided whether it is in keeping with the program at present, and the Corps of Engineers does not normally write back to the Office of Management and Budget and say since we have not heard from you we are going to go ahead. To your knowledge that has not happened, has it?

General REBI. What you say is correct, sir. I do not know of any case. I cannot conceive of a case.

Mr. WRIGHT. Thank you. Mr. Constandy.

Mr. CONSTANDY. I think Mr. Blount's letter of April 2 to Mr. Schultz perhaps would enlighten us a little bit on this.

I would like to point to the fact that GAO in their testimony on last Wednesday put into the record a list of projects, which during the same period were assigned by the Post Office Department to the Corps of Engineers. I would like for us to bear in mind as I read a section of the letter from Mr. Blount to Mr. Schultz:

I deeply appreciate your expression of willingness to try to complete your review as expeditiously as possible. On April 28 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.)