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TESTIMONY OF ROD KREGER, ACTING ADMINISTRATOR, GENERAL

SERVICES ADMINISTRATION, ACCOMPANIED BY HERMAN BARTH, DEPUTY GENERAL COUNSEL, GENERAL SERVICES ADMINISTRATION

Mr. KREGER. Mr. Chairman, if it is agreeable with you. I think we would like to read the statement because it does give, I think, a background of some of the problems that will come up later.

Mr. WRIGHT. Very well.

Mr. KREGER. Mr. Chairman and members of the subcommittee, the subcommittee has asked us to limit our testimony today to the impact of the Postal Service's withdrawal from several pending GSA building projects and to the transfer of certain public buildings to the Postal Service pursuant to the Postal Reorganization Act.

GSA will again appear before this subcommittee on July 20 to review GSA's overall relationships with the Postal Service.

I would like to thank the chairman and the subcommittee for its courtesy in narrowing the scope of today's hearings. As the chairman knows, Administrator Kunzig and Public Buildings Service Commissioner Sampson are out of town fulfilling longstanding commitments.

In October 1970, recognizing the problems GSA would have to work out with the newly created Postal Service, Administrator Kunzig created a special task force to work with Post Office officials.

This task force was directed to determine just what services formerly performed by GSA would, under the broad new authority of the Postal Reorganization Act, be performed by the Postal Service. Since Administrator Kunzig expected that the major impact upon GSA would be in the public buildings area, he appointed Commissioner Arthur F. Sampson, who also serves as Deputy Administrator for Special projects, to head GSA's task force. I know Mr. Sampson will be pleased to discuss further questions the subcommittee may have on July 20.

I think it would be appropriate, Mr. Chairman, for me to review some of the background of GSA's construction authority as it relates to the construction of postal facilities.

Under the Public Buildings Act of 1959, GSA is generally authorized to construct office or other facilities for executive agencies. In the interest of economy and efficiency, the Administrator may delegate this authority to any executive agency. Since this law was enacted, GSA has constructed 389 buildings at a cost of nearly $1.1 billion.

By law, GSA must take several specific steps before a public building becomes a reality. For example, GSA must submit a prospectus to the House and Senate Committees on Public Works for their approval. This prospectus outlines the need for a particular project and its size, scope, and cost.

Following prospectus approval, GSA must request and receive a series of appropriations to acquire the site, perform the design, and, ultimately, construct the facility.

As Administrator Kunzig testified on June 22 before this subcommittee, GSA's average project delivery time for a $13 million project has been 67 months-a little over 512 years.

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This is not to say, Mr. Chairman, that it takes this long for every $13 million building. Some may be a shorter period of time, and some may be even longer.

We have made many significant management changes within GSA's Public Buildings Service during the last 2 years, all directed at reducing the amount of time it takes GSA to construct a building.

Nonetheless, as Administrator Kunzig stated, there are certain statutory requirements imposed upon GSA which militate against a reduction in project completion time. The Administrator discussed at length some of the necessary legislative reforms.

Those delays were undoubtedly a factor when, in 1966, the Post Office Department requested, and the Administrator granted, a delegation of authority to the Post Office Department to construct facilities which were primarily postal related. The delegation permitted redelegation.

To my knowledge, however, this delegation of authority has never been redelegated by the Post Office Department to any Federal or non-Federal agency,

. In general, the delegation provided that GSA would submit a prospectus to the House and Senate Public Works Committees and, following committee approval, all design and construction of the project would be funded and performed by the Post Office Department.

Standards set by the Administrator, pursuant to the Public Buildings Act, were made applicable to postal construction under the delegation, but the Post Office Department was free to execute its building program within its own time frame so long as GSA's standards were met.

With respect to facilities to house the Post Office Department and other Federal agencies, GSA retained the authority to develop and submit a prospectus, request appropriations, and build the project. In these facilities, the Post Office Department was like any other Federal tenant.

Although Federal agencies usually remain as permanent tenants in GSA facilities, GSA does not enter into lease agreements with them. Thus, if the need for that particular agency to operate in that location ends, the agency moves out. GSA is then faced with the task of reassigning that space to another Federal agency.

On several occasions prior to July 1, 1971, the Post Office Department has withdrawn from certain GSA projects on the grounds that a single postal facility, rather than a joint Federal building, would be more appropriate for its needs.

In addition, the Post Office Department believed that certain postal facilities were so urgently needed that these projects should be built under its delegation of authority from GSA or its statutory authority to lease-construct its own buildings, or that there should be authority granted under the Postal Reorganization Act.

For example, prior to the enactment of the Postal Reorganization Act, the Post Office Department withdrew from three projects—Honolulu, Hawaii; Manchester, N.H.; and Charlotte Amalie, V.I. Despite this withdrawal, GSA plans to proceed with these projects at a reduced scope.

As the subcommittee knows, on August 12, 1970, the new Postal Reorganization Act was signed into law. This act of Congress gives to the

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new U.S. Postal Service virtually unlimited authority to construct its facilities in any manner it determines appropriate.

The urgent need for new postal facilities led the Postal Service, in a series of decisions from October 1970 through May 1971, to withdraw from an additional 23 projects which were planned for joint Federal occupancy.

The new Postal Service has the statutory authority to acquire its facilities in any manner it determines appropriate. Until passage of the Postal Reorganization Act, GSA could have withdrawn the 1966 delegation of authority and, thus, exercised control over the construction needs of the Post Office Department.

As a matter of fact, however, the Postal Reorganization Act gives the Postal Service every right to withdraw from any or all GSA projects and proceed on its own.

The decision to withdraw from some of these projects does have a serious impact on GSA's planning for future space for nonpostal agencies. With regard to these 26 withdrawals, we have, in some cases, determined that there is a sufficient nonpostal requirement to proceed with a reduced project.

On all but two of these, GSA will be required to prepare and submit to the Congress a new prospectus reflecting this reduced scope. In many of these cases, GSA will also be required to redesign the project. In other cases, the project may be canceled.

Mr. Chairman, I might add that, in view of the time it takes GSA to complete a federally-financed building under present procedures, the Postal Service's decision to withdraw from these projects and to exercise its broad new authority under the Postal Reorganization Act is understandable. I am sure the chairman is concerned, just as we are, however, that the Federal Government does not find itself in the position of building two separate facilities where only one is economically justified.

GSA and the Postal Service are working toward the resolution of this problem.

Mr. Chairman, this concludes my prepared statement. I would be happy to answer any questions the subcommittee might have.

Mr. WRIGHT. Thank you very much, Mr. Kreger.

I understand that there are a total of some 26 projects previously authorized by the Congress for multipurpose occupancy by Federal agencies, including the Post Office Department, now called the Postal Service, and that the Post Office has withdrawn from these 26 such projects.

In your statement you say that on some of these the General Services Administration was planning to go ahead on a smaller scope and try to construct a building to house other agencies which are your tenants, and in others, the whole project may have to be abandoned.

In how many of the 26 do you imagine that the project may have to be abandoned ?

Mr. KREGER. Mr. Chairman, I believe that five projects may have to be abandoned of the 26.

Mr. WRIGHT. Would you name those five?

Mr. KREGER. Bronx, N.Y., that is the Charles Buckley Building in the Bronx, N.Y.; Westerly, R.I.; Houston, Tex.; Purcell, Tex.; and Essex Junction, Vt.

Mr. Wright. How much money has been spent heretofore in proceeding to the present state on the Buckley Building in the Bronx?

Mr. KREGER. Mr. Chairman, for the site, $2,067,815 has been expended. An additional $817,000 has been expended for design, for a total of $2,884,853.

Mr. WRIGHT. Would this money be wasted?
Mr. KREGER. No, Mr. Chairman. I would not say that.

The greatest expenditure here is the $2,067,000 for the site, and there is a good chance that we could recover at least that much, if not more, from the sale of that site.

Mr. Wright. Meanwhile, what is going to happen to the Federal agencies that you had hoped to house in this building?

Mr. KREGER. GSA will have to resurvey, restudy an economic study, to consider one of several choices. We have the option of leasing space, lease-construction space, or going on later for a smaller building.

Mr. WRIGHT. Meanwhile, what is happening? Are those agencies presently paying rent to private landlords?

Mr. KREGER. Yes, sir; they are. They would continue to pay rent to the same or new landlords.

Mr. Wright. The $817,000 that was paid for design of the building cannot be recouped, I suppose ?

Mr. KREGER. Most likely, most of it would not. None of it would.
Mr. WRIGHT. None of it, in fact, would be recoverable?
Mr. KREGER. Right.

Mr. WRIGHT. So, we have spent $817,000 for a design that the Government cannot use?

Mr. KREGER. That is right.

Mr. Wright. Now, on how many of the other projects had we proceeded as far as the design stage?

Mr. KREGER. Are you talking now about the five, sir?
Mr. WRIGHT. I am talking now about the 26.

Mr. KREGER. Mr. Chairman, I think we may have proceeded into the design stage on most of them. I have the information here on a projectby-project basis. I could run through them.

Mr. WRIGHT. Well, we will get to that as we develop the testimony. I think at this time, though, your statement would be that design had been acquired on most of the 26 ?

Mr. KREGER. Design, or the beginning of a design, probably has been acquired on a great portion of the 26.

Mr. WRIGHT. Would you think that design had been ordered on 24 of the 26?

Mr. KREGER. I think probably at least on 24, and most likely all.
Mr. WRIGHT. In all of these cases, has land already been acquired?
Mr. KREGER. I have to run down through my book here.

With the chairman's permission I can turn the pages and comment on each one.

Mr. CONSTANDY. I think you will find on the spreadsheet that there are 23. The spread sheet was prepared from material furnished the staff by the GSA.

Mr. KREGER. There are 23 on which we have obligated money, and there is a question whether or not we may be able to get out of some of those obligations.

Mr. WRIGHT. You had mentioned earlier a project in Charlotte Amalie, Virgin Islands. On that project, the site had been acquired, as I understand it, and the design had been ordered. Perhaps a total of $86,000 has been spent on the design, and it is something like 28 percent complete; is that correct?

Mr. KREGER. That is correct, sir.
Mr. WRIGHT. That was on Government-owned land, was it not?
Mr. KREGER. Yes, sir.

Mr. WRIGHT. That is what accounts for there being only $1,300 spent on site?

Mr. KREGER. That land, in reality, was acquired by an exchange. The $1,300 was most likely expenses in connection with the acquisition.

Mr. WRIGHT. The Postal Service is planning a building at Charlotte Amalie, to your knowledge!

Mr. KREGER. I do not know, sir. I would guess that they would, because they had a large amount of space in this building.

Mr. WRIGHT. And in that particular building, the Postal Service would have accounted for 34 percent of the total space, and your other tenant agencies would have accounted for 66 percent; correct !

Mr. KREGER. Yes ,sir, that is correct.

Mr. WRIGHT. But, in that instance, the building design would not be suitable to accommodate the remaining 66 percent, in your opinion?

Mr. KREGER. The building would have to be redesigned.

Mr. CONSTANDY. Mr. Chairman, may I read you a paragraph from a letter from Mr. Blount on the Charlotte Amalie building, which

goes to one of your previous questions. This is the last paragraph of his letter which

says: Inasmuch as this project also has a low priority on your construction schedule, and our space requirements have increased considerably since the approval of this prospectus, your site is inadequate to accommodate the total space needs. We, therefore, plan to proceed with the construction of a new leased postal facility, but will retain a station either in the existing or in the new Federal Building to be constructed by GSA. We shall furnish you our space requirements for this station at an early date. In your statement, you state:

: To my knowledge, however, this delegation of authority has never been redelegated by the Post Office Department to any Federal or non-Federal agency.

Could you clarify that, please ?

Mr. KREGER. Mr. Constandy, from my study of the situation, I do not believe that the Post Office Department ever did redelegate this delegation of authority.

If you do not mind, I would like to have Mr. Barth from the General Counsel's office speak to that point.

Mr. BARTH. Basically, in answer to your specific question, I, too, know of no specific redelegation of authority by the Post Office Department.

This is not to say, from my standpoint, that it has not happened. I just know of none.

Mr. CONSTANDY. Are you including the agreement between the Postal Service and the Army?

Mr. BARTH. Again, from my own personal knowledge, I know nothing about any agreement between the Postal Service and the Army.

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