PROJECTS FOR WHICH PROJECT AUTHORIZATIONS ISSUED TO CORPS BEFORE JULY 1, 1971

1 As of June 30, 1971, the construction contract for this project has been awarded.

2 The construction contract for the extension, estimated to cost $875,000 of this amount, has not been awarded as of June 30, 1971.

3 This project changed from combined facility to bulk facility.

4 Both chairmen of the Appropriations Committees were advised on Dec. 31, 1970, of the increased construction cost

1 As of June 1, 1971, the construction contract for this project has been awarded.

Status:

2 This project changed from combined facility to bulk facility.

No congressional approval:

Boston, Mass. (south postal)1

Fresno, Calif..

Kearny, N.J.1

Indianapolis, Ind..

Jacksonville, Fla. (Bulk).

Being constructed under POD leasing authority in accordance with lease agreement executed Apr. 28, 1967.

USPS contemplated construction of this facility under a lease agreement Design is completed.

Being constructed under POD leasing authority in accordance with lease agreement executed June 24, 1968.

Building construction is completed. The corps is supervising installation of mechanization.

This project will be constructed for USPS ownership. The corps has been requested to provide site selection investigation report.

ITEMS NO. 36

Question. How will the facilities section retained in USPS function under the agreement? What actions and decisions will be made within USPS? Will any of the decision making process formerly performed by the POD now be performed by COE?

Answer. The facilities section retained in USPS will be responsible for policy determination and program management in respect to all aspects of existing and future requirements for leased and postal-owned facilities. As managers, they will be responsible for coordination of all phases of planning, programming, organizing, budgeting and controlling of postal facility resources with the goal of maximizing the improvement of the mail service within realistic schedule and budget limitations.

The actions and decisions of the USPS personnel will involve :

1. General:

(a) Establishment of policies, procedures and criteria pertaining to postal facilities leasing, new construction, maintenance, building and equipment modernization and modifications to existing facilities.

(b) Establishment and operation of a control systém to insure that standardization and maximum benefits are achieved in the facilities area.

(c) Determination of long range facility needs to best satisfy the Postal Service requirements.

2. Specific (for each facility):

(a) Analysis and determination of the building and mechanization functional requirements to satisfy postal needs.

(b) Determination of the general site location, desirable site characteristics and final selection of the site.

(c) Perform or verify economic analyses and budget accordingly. (d) Insure that operational and maintenance personnel are hired and properly trained prior to acceptance of completed facility.

(e) Perform periodic and final inspection and testing of a facility to insure that it meets postal criteria and functional requirements.

(f) Investigate all problem areas that arise relative to the functional requirements, real estate acquisition, leasing, design, and construction that are outside of the controls placed on the Corps of Engineers by the current agreements between the Corps and USPS.

(g) Communication and coordination with the Corps as necessary to satisfy the provision of Postal Service's facility acquisition services as identified in the agreements between the Corps and USPS.

As readily seen by the above outline of procedures and actions that are to be undertaken by USPS, only those decision-making processes connected with the technical or mechanical aspects of acquiring postal facilities have been transferred to the Corps. The majority of the decision-making processes formerly performed by the POD are retained by the USPS.

ITEM NO. 37

Question. On March 27, 1971, Mr. Shultz, Director, OMB, addressed letters to the PMG, Secretary of Defense and Administrator of GSA requesting the views of each relative to the POD-COE agreements. Were the March 11 agreements cleared with OMB before being signed?

Answer. No.

ITEM NO. 38

Question. Has the May 20, 1971, agreement been cleared with OMB?
Answer. No.

ITEM NO. 39.

Question. Mr. Shultz requested the agreement be suspended March 27, 1971, and that no action be taken to operate pursuant to its terms until his office completed a review of it. Was it suspended and were any actions taken between that date and his May 5, 1971, letter terminating the suspension?

Answer. It was not suspended, and actions were taken. By March 27, 1971, the Corps was managing a substantial number of large, on-going construction projects. To have suspended work on these projects would have produced chaotic conditions and enormous cost to the Government.

ITEM NO. 40

Question. Mr. Schultz requested that material relating to costs and efficiency be forwarded to him to facilitate the review. Were any other data developed by POD relative to the cost factors that was (sic) not included in the PMG reply? Answer. No.

ITEM NO. 41

Question. The PMG in his reply, p. 2, para. 2, refers [sic] to the 1966 delegation of authority and stated, “Under this authority-which was expressly made ‘with authority to redelegate'-the Post Office Department has been constructing postal public buildings ever since." Also, p. 3, para. 1, related a quote from a memorandum dated April 27, 1969, from Mr. Kunzig to Mr. Flanigan which stated, we have agreed that the delegation will continue and there is nothing to stop POD from using the Corps of Engineers at once." Was the delegation of authority cited the legal basis to employ the COE as POD's construction agency? Was the interpretation of the delegation that it permitted the POD to redelegate that auhoriy ouside the POD?

66

Answer. The Post Office Department did interpret the 1966 delegation of authority to authorize the utilization of the Corps of Engineers, and this interpretation was confirmed by Mr. Kunzig. In addition, the Post Office Department was authorized to request, and the Corps to furnish, the services in question pursuant to the authorities contained in Public Law 89-298, title II, section 219, October 27, 1965, 79 Stat. 1089, see 10 U.S.C. § 3036 nt:, 31 U.S.C. § 686; and former section 2103 of title 39, U.S. Code, as in effect prior to the effective date of the Postal Reorganization Act.

ITEM NO. 42

Question. How was the $310 million saving expected from the bulk mail network calculated and on what study is it based?

Answer. The 310 million dollar expected savings is based on the National Bulk Network Study conducted by IBM. The savings are obtained in reduced transportation and processing costs which were calculated under the Bulk Mail Network System compared to the cost under the present system. The largest proportion of savings is obtained from reduction in processing costs. The per parcel labor cost of processing bulk mail will be reduced to approximately onefourth of the present labor processing cost, with the introduction of the National Bulk Network. This reduction in processing costs will be obtained through increased productivity which will be gained by the use of highly mechanized facilities that are concentrating on processing one type of product.

ITEM NO. 43

Question. To what extent has the preferential mail facilities program of 200-300 separate new facilities been developed? What is the approximate cost projection?

Answer. The preferential mail facilities program does not call for 200-300 separate new facilities. Previous projections for the FY 1971 through FY 1977 facilities program included requests for 185 facility projects ranging from major modernization or extension of present buildings to construction of separate new facilities (in excess of 50,000 square feet).

Preliminary analyses concerning operational aspects and the geographical location of the preferential mail facilities requirements have been completed. Final analyses of the geographical locations are expected to be completed in October 1971, along with more detailed analyses of the operational aspects, investment costs, operating costs, return on investment, and deployment schedules.

From the preliminary analyses, approximately 80 of the 185 projects could be expected to be eliminated or greatly reduced in size and 89 projects are expected to be added to the program.

The preliminary cost projection for approximately 89 new facilities not previously projected in the 1971-1977 facilities requirements is approximately $300,000,000. Savings in reduced overall construction requirements (from the elimination of projects) have not yet been estimated.

ITEM NO. 44

Question. How critical are the factors of completion of each facility by its original target date, completion of each facility within the estimated cost, and the 5.5 percent COE overhead figure?

Answer. It is important to maintain the total cost of the systems within the budget to realize our anticipated return as Investment. It is imperative to maintain schedules since the increasing construction costs which are being encountered could increase our budget and reduce our potential payback..

ITEM NO. 45

Question. To what extent was the action to employ the COE based on the belief that they could best perform in these critical areas? Answer.

1. Existing Corps of Engineer District and Division offices disbursed across the nation located primarily in or adjacent to major cities in which we propose to construct postal facilities provides the basic organization for program execution. Also this available organization, already construction oriented and trained, contains all of the professional disciplines required to design, construct and administer a construction program of this magnitude.

2. The USPS was limited in the number of personnel required to accomplish this program. The Corps of Engineers had sufficient organization to place our entire construction program on the market in a timely fashion for design, award, and construction. Both the Corps of Engineers and the USPS agree that the time required for design and construction for any one building would be the same, but by utilizing the vast resources of the Corps of Engineers, a much shorter total time would be required to provide the facilities which are needed so badly by the American public for the processing and delivery of mail.

Additionally, by and concurrently with the utilization of the Corps of Engineers for the accomplishment of this task, the USPS can concentrate its activities toward the mission of moving mail to which the USPS is dedicated to solve in the best interests of the American citizen.

ITEM NO. 46

Question. What requirements will bond indentures impose on USPS facilities? Is this a matter which will be a general or a specific influence on decisions relating to rental or sale of facilities?

Answer.

1. None. The proposed bond issues will be general obligations of the United States Postal Service and it is not presently contemplated that mortgages will be required on the physical properties.

2. They will impose a general influence. The program to finance the construction of capital facilities through the issuance of bonds will make funds available in sufficient quantities so that it will no longer be necessary to engage in as widespread a program of leasing facilities as has heretofore been the case. However, the alternative of leasing rather than owning facilities will still be available where it is advantageous to the Postal Service.

ITEM NO. 47

Question. What is the plan and the rationale for USPS to construct with its own funds the 18 projects which were originally proposed by GSA for government ownership and were then subsequently planned for lease construction? As example, how does USPS view the Oxford, Mississippi, project with a prospectus estimate of just under $3 million and provides only 16 percent of the space for Post Office use? How would the $475,000 already expended by GSA for site and design be treated?

Answer. The plan and rationale used by the USPS in this matter is that the USPS, at the time of planning, needed Postal space in these 18 locations. GSA to date. cannot provide firm construction and subsequent occupancy schedules for planned Postal utilization and resultant mail processing.

If the USPS were to proceed and build only Postal facilities in these 18 locations, GSA probably would reduce the building size in accordance with previously established USPS space requirements and construct a modified federal building.

However, the Postal Service is cognizant of and sympathetic to the need of other governmental agencies for space at these locations. Therefore, the Postal Service has offered to provide the funds and build the needed buildings, including space for other agencies. The terms of this offer are negotiable, and the Postal Service is confident an agreement with General Services Administration and the Office of Management and Budget can be reached in a short time.

ار

ITEM NO. 48

Question. To what extent does USPS intend to utilize the lease-construction method of providing facilities? To the extent the method is used, will there be, or are there new criteria or procedures? If so, in what way will they differ from previous procedures and criteria?

Answer. The lease-construction method of providing facilities will be used wherever and whenever it proves to be the most efficient and economical means of meeting our postal space needs. In cases where this method is not advantageous, a construction-ownership program will be followed. In furtherance of our stated objectives of providing the best possible service to our postal customers at minimum costs, we have established facility planning criteria and procedural guidelines, which will:

(a) provide for annual reviews and surveys to determine space needs to meet mail processing workload requirements; to improve service to the customer; to improve working conditions for our employees and to provide for expected postal business growth; and

(b) determine the most economical course of action to be followed in meeting these space requirements; by subjecting all feasible alternatives, i.e. acquire existing buildings or undertake new construction, etc. to economic cost/benefit analysis and reviews of the financial advantages and disadvantages of lease versus ownership construction methods.

These planning criteria do not differ, to any major extent, from procedures previously followed, except that greater emphasis has been placed upon improvement of customer services in analyzing space requirements and upon measurement of cost effectiveness in undertaking facility acquisition programs.

ITEM NO. 49

Question. Of the 11,985 leases reported for 1970 in Table 501 of the POD 1970 report, how many were lease-construction? What was the total building cost estimated to be and what annual rent is paid for them?

Answer. The answer to the above question is contained in the answer to question number 3.

ITEM NO. 50

Question. What is the average tenancy experienced by POD in lease-construction buildings?

Answer. The lease program as we know it today was initiated in 1953 and as a result our experience to determine average tenancy has not had a determination of average tenancy.

Question. The majority of leases entered into for lease-construction buildings provide for a basic ten-year term with four five-year renewable options. It is suggested that the lending institution advance money to the building owner on the basis of recovering its loan during the basic term of the lease. If this is true, why is there not a substantial reduction in rent during the option periods as is true in the commercial leasing market outside of the Government?

Answer. The suggestion, that a new building occupied under the ten-year lease term is fully amortized during the basic term and therefore the renewal option should be at a substantial reduction, is not an accurate assumption.

Only under extraordinary circumstances would an award be made where the investment is recoverable during the basic lease term. These unusual situations, with the exception of the leasing program, would usually involve construction on governmental properties, such as airports, or where only a short term ground lease or permit is available.

While each lease proposal is judged independently as to its merits; namely, through the cost, income, and market data approach, the initial bid would not