Mr. CONSTANDY. I'm not really talking about custodial services. Little irritants that keep coming up, like the air conditioning stopped, or the rope on the flagpole broke-and it is amazing how often people bring up the fact that the rope on the flagpole broke-and similar issues that get involved.

Whose responsibility is that?

Mr. BERGE. On that type of thing, if I may address that, as I understand it, if the Postal Service has the lease the same as one of our leases, and the owner of the building has to service it, and it was leased with an air-conditioning unit, normally it would be the maintenance responsibility of the lessor.

Now, true if it did not work in administering the lease, the Corps of Engineers will have to go to the lessor and say, "Look, this is not working, and under the lease contract you must repair it."

Mr. CONSTANDY. It may work out. They have had those problems right along. In the past-well, there was in each instance a relatively close regional office which was staffed with the kind of people who could give backup service, whether they are legal or administrative or engineering, to a postmaster who simply wants to put the rope back up on the flagpole, and the owner will not do it, or will not repair the air conditioning.

Now, with the change in the Post Office structure, they have done away with the regional office concept as it existed earlier.

Is there any indication that these postmasters hereafter will be dealing with you to provide those services that he no longer can go to the regional office?

Mr. BERGE. Our district engineer in administering the lease will now come to us, if it is a lessor's responsibility, but again he would come, as you realize, to our district engineer, in lieu of the old regional setup of the Post Office.

Mr. CONSTANDY. He is going to come to you

General REBH. To the district engineer.

Mr. BERGE. Yes.

Mr. CONSTANDY. You will provide whatever services that used to be provided by the regional office?

General REBH. That is correct.

Mr. CONSTANDY. This is even for those matters under $2,000?

Mr. BERGE. Where it is the responsibility of the lessor, yes; we will have to go to him. But this is over $2,000 under the agreement.

Mr. CONSTANDY. Just on those over $2,000. Then the problem still exists relative to the work that will be under $2,000 where he used to go to the regional office. You do not know what provisions have been made to handle that?

General REBH. The local postmaster is supposed to handle that.

Mr. CONSTANDY. Assuming that he has the kind of problem that we are talking about, where the owner will not make the repair-it is a minor thing, but a big irritation to him. He has to go to somebody to get a lawyer. He has to go to somebody to be able to negotiate the change in rental payment. As I understand it, you are going to submit to the Post Office a list of checks that should be made out for the payment of rent, is that right?

Mr. BERGE. The Postal Service will pay the rent.

Mr. CONSTANDY. But based on information that you give them?
Mr. BERGE. That is correct, sir.

Mr. CONSTANDY. If a local postmaster has the problem of getting an air-conditioning unit repaired, and it is under $2,000, I am trying to see how he will end up with you if there need be a reduction in the rent because of the failure of the owner to provide that maintenance which he contracted to provide; does it not come back to you if it is under $2,000?

Mr. BERGE. That is correct. In that type of situation, we would have to advise the Postal Service to withhold the rental.

Mr. CONSTANDY. You will be dealing with the postmasters, even on things under $2,000?

Mr. BERGE. In the illustration you gave where the lessor will not do it, and he is obligated to, yes, we would have to, and if the lessor refuses to do it, to do this minor repair, or repair the air-conditioning unit, and if he refuses to do it, yes, the Corps of Engineers would have to advise him that it was his responsibility, and we will withhold rent, that is

correct.

Mr. CONSTANDY. Are you aware at times an employee of the U.S. Government in the Post Office Department has been employed at the, same time by the owner of the building for the maintenance?

Mr. BERGE. I was not aware of that, sir; no.

Mr. CONSTANDY. How does that concept strike you?

Mr. BERGE. Where the Postal employee was

Mr. CONSTANDY. Was also an employee of the owner of the building charged with the responsibility of resolving minor maintenance problems.

Mr. BERGE. Well, we do not operate that way, I will say that.

Mr. CONSTANDY. I am only bringing it up to suggest that you are undertaking something, the ramifications of which have not really been clear to you. I will read you from an internal audit report of the Post Office Department dated July 19, 1969. It is No. 846, and it is an audit of the St. Louis region.

One section reads, under the heading conflict of interest, which is a term a person could use for such a thing:

An apparent conflict of interest exists where Post Office maintenance employee is also part time maintenance employee of the lessor. Postal Manual 742.621A states that an employee shall not engage in outside employment or other outside activity not compatible with the full and proper discharge of the duties and responsibilities of the Government employment or otherwise prohibited by the law. The Post Office maintenance employee

I do not think it is necessary to mention the name of the place, Mr. Chairman

was a part time employee of the building lessor.

The Postal employee's basic duties included maintenance and cleaning of the building. As part time employee of the lessor, he made necessary repairs which were the lessor's responsibility under the lease provisions. We believe that the region should review the circumstances cited above, and a possible conflict of interest. If ruled there was no conflict of interest, the determination should be made a matter of record.

Under the heading recommendation:

We recommend that the region review the circumstances cited above to resolve the apparent conflict of interest.

Regional officials told us they have several employees in different locations who are performing in a similar manner. By having employees perform in dual type capacities, regional officials feel it is advantageous to the Post Office Department. Any equipment failure is definitely a liability of the lessor.

The Post Office Department employee when maintaining the lessor equipment is a lessor part-time employee acting as agent for the lessor. Under these procedures the Post Office Department has no responsibility or liability for lessor equipment failure.

In the past, postal employees have performed some preventive maintenance on lessor equipment. Regional officials believe that under those circumstances, the lessor could have a possible claim against the Post Office Department if the equipment failure developed.

It may seem like a small area, but we are talking about remote post offices among the 27,000. We are talking about the kind of things that can develop where an employee charged for his time to the Federal Government performs services for somebody else. That is to say nothing of the problems and relationships that can develop between himself and his postmaster, or himself and other employees who perhaps would be jealous of the additional income that he has. But I think on the face of it a person could conclude that there are problems in such an arrangement.

And I only call attention to the matter to you because we get down to some fairly small things that would be concerning you. If this system has worked heretofore, because it was predicated on the post office employee on the scene being available to perform the maintenance, as you suggested, it may not be compatible with the corps procedures on those things.

We have records that I hope we will be able to get to before we conclude that suggest that of the 27,000 properties some 12,000 are lease construction projects, and that the owners of those 12,000 lease construction projects frequently are people far removed from that part of the country in which the post office is situated. They are investors. Some little old lady in Idaho can own a post office in Rhode Island, and the only connection she has with that building is her part-time employee, who happens to be an employee of the Post Office Depart

ment.

You are going to have to address yourself to those problems, problems of that kind.

We could go into a lot of others that would seem to stem from the provisions contained in the June 28 agreement. It will suffice for the moment to recognize that this June 28 agreement does get the Corps of Engineers into some activities which perhaps have been foreign to its past practices.

We will go on to something else.

Mr. BERGE. I would like to comment a minute. I am not sure that I would fully agree that it was foreign. On the report, the audit, yes, we have not had that problem or those types of problems in our own leas ing programs. But from the standpoint of being foreign, aside from the standpoint of volume, most of these things are inherent in any leasing program.

Again I am not addressing from the standpoint of volume, I agree Mr. CONSTANDY. I do not think we can dismiss that, Mr. Berge, and

another thing I do not think we can dismiss is that perhaps unlike some of the buildings you have been maintaining and operating within the 7,000 or 8,000 in the past, these are functioning facilities. They have an activity contained within them which is quite different from the activity contained in the buildings which you do manage. I think that is fair to say, do you not?

Mr. BERGE. I would say that is fair to say, yes.

Mr. CONSTANDY. And with those different activities are going to come many situations stemming from them which will be foreign to you?

General REBH. I cannot understand what you mean by foreign. It is a matter of analyzing a problem and working it out. The one you indicated, it seems to me that is a Post Office problem, not a Corps of Engineers problem. It is up to the Post Office to determine whether they want that man to stay on their rolls or not. If he is moonlighting, and they do not

Mr. CONSTANDY. He may be moonlighting during the period he is being paid by the Post Office.

General REBH. It is still a Post Office problem.

Mr. CONSTANDY. On one side it is. I simply suggest to you, General, that that kind of arrangement is going to bring problems for you that you have in post offices.

General REBH. There are problems in life. I see nothing difficult on this one.

Mr. CONSTANDY. I appreciate your enthusiasm for the project.
General REBH. It is not a matter of my enthusiasm.

Mr. WRIGHT. I think basically the point is that you now have some 7,000, perhaps as many as 8,000 buildings for which you perform lease servicing work. You are taking on under this agreement of June 28, in addition to your construction work under the May 20 agreement and March agreement some 27,000 additional buildings for which you will provide lease services. This will have to be regarded in its broad perspective as a very substantial increase in the workload of the corps, would it not?

General REBH. No, sir. Mr. Berge, what are the number of people involved that we are going to pick up

Mr. BERGE. If I may address that, about 230 or 240 spaces. General REBH. This is not a big program in terms-well, the estimate is we are only going to use 232 people for this function.

Mr. WRIGHT. You are going to have three and a half times as many buildings for which you provide lease servicing as you have had in the past?

General REBH. That is correct.

Mr. WRIGHT. That fact alone seems to me to imply a rather substantial increase in the workload of the corps insofar as lease servicing is concerned.

General REBH. Again the corps is the biggest real estate agent in the Federal Government. We have 2,000 people involved in real estate. I cannot conceive that this is a major increase. If you want to compare structures—yes, when you talk about total real estate function, it is

not.

Mr. WRIGHT. I do not think anyone, least of all the chairman, would attempt to draw any conclusion that the activities of the corps

as a real estate agent have been insubstantial in any respect. It seems prima facie clear to me, however, that when you multiply the number of buildings for which you perform this kind of service by approximately three and one half times, that this represents what I would regard to be a substantial increase in the workload of the corps insofar as lease servicing is concerned.

General REBH. That is correct, with respect to lease servicing, but not the total program.

Mr. TERRY. Mr. Chairman, might I back up for a moment to testimony offered earlier in the morning with respect to the letter read to General Rebh, March 27, directed to the Secretary of Defense, wherein there is a proviso that they request that the agreement, referring to the prior agreement entered into between the corps and the then Post Office Department, be suspended and that no action be taken to operate pursuant to its term until this Office-this Office meaning the Office of Management and Budget-completes a review of the desirability, and so forth?

General, can you tell me whether or not General Clarke and the other generals who were referred to this morning as to making a decision to proceed despite the terms of that embargo, whether or not there was any conversation with Mr. Shultz, as Director of Office of Management and Budget, or any of the personnel in his office eliciting their comment on your decision and that of the other generals to proceed despite the terms of this embargo?

General REBH. No, sir. There were no conversations with the director of personnel in his office on that one.

Mr. TERRY. Can you tell me, is that a customary procedure? The word "request" is used, but in effect when that comes from the Office of Management and Budget, I would term that in military language an order.

General REBH. As we interpreted it, in the best interest of the Government, we should not suspend the work because it is a very costly matter in terms of suspending a contract.

Mr. TERRY. Can that decision be made by what is in effect a subordinate of the Office of the President, in the person in this instance of the Office of Management and Budget, saying suspend?

General REBH. I cannot see any practical reason for suspending the work, because if the agreements had been abrogated, somebody else would have had to continue the work. So it was in the best interest of the Government to permit the work to continue because the schedules have to be met and the post offices are to be brought into being. So from two standpoints, one was additional cost, and they are heavy when you suspend contracts, and the other one is you still want to get the post offices in operation as soon as possible, because being a profit and loss organization there are operational savings to be gained from the increased efficiency of the new facility.

Mr. TERRY. I have no quarrel with that statement, except that there are many times where at the direction of the President certain changes take place, and were there continued operations this would require a further back up. In this particular situation, would it not have been a courtesy normally extended by the corps that when a person in the capacity of Mr. Shultz having signed this letter personally, under date