arbitrate in that we would come to some decision about what the corps could or could not do under those conditions, which position would then be depending on how it was decided-referred to the Congress for its determination as to whether that reprograming, if it was a reprograming, or amendment to the budget, if it was an amendment to the budget, was an action with which the Congress would concur. I think that pressed to the wall, so to speak, through our budget responsibilities as it involves the Corps of Engineers we would play along with the Congress an arbitrating role, but we would hope that the parties would not bring matters to us in that form, and we always try to avoid that.

I should not say "always" but frequently.

Mr. TERRY. What I interpret your statement to mean is that you would not require the head of the Postal Service Corporation to come in and sit down by virtue of your high capacity as Office of Management and Budget.

Mr. NATHAN. Mr. Benton feels that the act reads that if there was a cost overrun which could be attributed to the action of the Postal Service, that we would be in a position to say that the law should be enforced in terms of their absorbing that cost overrun for which they are responsible.

Now, that does add, I think, Mr. Terry, to the extent that that provision of the law should be read in that way—and I have not reviewed that specific provision myself that that would put us in a position of really arbitrating, because we would be able to make a choice between the two.

Mr. Benton's statement to me is the way that our counsel would act. I would want to say in a matter like this our counsel would be called in. But if our counsel did rule in a way Mr. Benton suggested he might, we would be able to arbitrate and could go either way, and the Congress would have to then consider the matter and decide if they could in effect review our arbitration ruling.

Mr. WRIGHT. Would the gentleman yield at that point?
Mr. TERRY. Yes, Mr. Chairman.

Mr. WRIGHT. The Chair observes we have consumed approximately an hour and have proceeded to the top of page 2 of the prepared statement that consists of nine pages. The members of the committee now have had the opportunity rather well to review the contents, and I think in fairness to the position of the Office of Management and Budget and their witnesses, that we should make certain that the totality of the statement is included in the record of hearings, and for that purpose, I ask unanimous consent that the total statement, beginning with the second paragraph of page 2-at which point we began questioning the witness-may appear in the record at this point as though spoken into the record, and we will thus get the entirety of the statement represented fairly in the record.

Mr. NATHAN. In light of the fact that you had a chance to review our position, you do not feel it is necessary for me to read the rest of it? Mr. WRIGHT. I think not. If there is no objection-and the Chair hears none it is so ordered, and the entirety of the statement will appear in the record as if spoken at this point.

Mr. NATHAN. Second, the only restrictions on financing of capital assets for the Postal Service are a total dollar limitation on bonded

indebtedness and a requirement for coordination with the Treasury before bonds are sold publicly.

Third, from 1954 to 1968, buildings used solely for postal purposes were constructed under lease arrangements negotiated by the Post Office; from 1954 to the present, GSA has constructed postal space when such space is in multitenant office buildings.

Fourth, since 1968 the Post Office Department had been handling the Federal construction of major facilities to be used solely for postal purposes similar to those to be handled by the Corps of Engineersunder a delegation of Public Buildings Act authority from the General Services Administration.

As you know, on March 27, 1971, we asked the Postmaster General and the Secretary of Defense to advise us concerning the circumstances and rationale leading to agreement that the Corps of Engineers serve as a construction agency for the Post Office Department. It was, of course, quite natural for us to be concerned with the potential implications of this agreement as a part of our overall management and budget responsibilities. Pending our review of the agreement, we felt that the best course for all concerned was to ask that the agreement be suspended.

After completing our review of the agreement and the information submitted by the affected agencies, we found no overriding objection which would impel us to prevent the corps from proceeding under the agreement entered into with the Post Office Department.

In reaching this conclusion we were cognizant of the considerable freedom of the Postal Service as intended by the Congress and the executive branch. Under the Postal Reorganization Act, the Postal Service is not restricted to the use of either GSA or the corps as its construction agent. The Service could, if it chose, build up its own staff or contract with a private firm.

I wish to submit some of our considerations involved in reviewing this matter:

In view of the options available, there was nothing to be gained by prohibiting the corps from providing construction services to the Post Office Department on a reimbursable basis. We did not believe that the agreement would lead to any adverse impact on the management and financing of the executive branch. Since most of the work to be done by the corps will be a substitution of work previously performed by the Post Office Department, we see no significant proliferation of construction service activities.

The corps has an existing nationwide organizational capability into which it can integrate such additional staff as may be required to handle the Postal Service workload.

The $2 billion a year program of the corps allows it to spread overhead costs and thus provide the Postal Service with a very low marginal cost for the additional work.

The $250 to $500 million annual construction program anticipated by the Postal Service would represent no more than a possible 25-percent increase in construction work for the corps and thus would represent no major change in its role and mission. The corps already has authority to perform such services for other agencies and has, in the past, provided services to many Federal agencies and to GSA, including provision of space for postal facilities.

The light industrial and mechanized nature of postal facilities is closer to the type of construction work performed by the corps in its work on defense plants, arsenals, and other facilities, than the general purpose multitenant Federal buildings which constitute most of the GSA construction program.

The agreement reached between the corps and the Post Office on May 20, 1971, is a working document to implement the March 11 agreement. There is nothing in this implementing document which is inconsistent with our findings and conclusions concerning the basic agreement which we had reviewed. This working memorandum was, of course, executed after the Director had advised the Secretary of Defense and the Postmaster General that we had no objection to the agreement and were terminating its suspension.

Responsibility for the coordination of construction plans does not rest, of course, with the Corps of Engineers-which will only serve as an agent for project contracting and supervision-but with the Postal Service and the General Services Administration as the principal operating agencies with their policy responsibilities for their public facilities programs. Since the Postal Service will continue to determine whether its space needs can be satisfied in a proposed GSA multitenant building, the agreement with the corps does not lead to any encroachment on GSA's planning role.

While in many areas, particularly larger cities, the specialized nature of postal facilities will make their location and characteristics incompatible with GSA's requirements for new office space for other Federal facilities, we recognize that in other locations a single building may best serve the Government's interest by providing both postal and nonpostal space.

In order to plan for the future construction of joint GSA-Postal Service projects, we have asked GSA, in cooperation with the Postal Service, to propose policy guidelines for such joint facilities. We plan to consider such proposals during our 1973 budget review and expect to consider such questions as which agency should undertake the project and provide for construction financing.

We will, of course, want to carefully consider the Post Office suggestion that in some cases it might be feasible for them to construct the buildings and lease the nonpostal space to GSA for use by other agencies.

Where the Postal Service will be the dominant user, such an arrangement might be an effective way to assure that postal service projects provide for appropriate recognition of other requirements of the Federal Government.

Conversely, in other situations in which GSA is the predominant user of space, I would expect that the GSA would construct the facility and the Postal Service would pay for use of any space occupied.

In view of present uncertainties concerning future postal requirements in Federal office buildings, GSA has, at our request, suspended the award of site and design contracts for projects with postal space pending a confirmation of plans from the Post Office and a determination of whether the project should proceed as planned, be redesigned, or abandoned for other alternatives in meeting Federal space require

ments.

I am confident that together the Postal Service and GSA will be able to complete this review and work out a process which will serve the best interests of the Government.

On May 19, 1971, the Director approved the transfer to the Postal Service of 2,780 buildings which were under the jurisdiction of GSA, but occupied by the Post Office as the dominant user. Under the provisions of the Postal Reorganization Act, we were not permitted to set conditions on these transfers and thus were precluded from considering such factors as: (a) appropriateness of the Postal Service charging rent to Federal agencies for space facilities which had been transferred free of cost; (b) policy concerning use of space by GSA which may be vacated by the Postal Service, particularly any requirements that GSA use general revenues to "buy back" such space; and (c) ultimate disposition of such property when no longer required by GSA or the Postal Service.

As I am sure you understand, these are difficult questions which involve various interests and objectives of the Government-not the least of which is to bring about early improvements in our mail service. It is for this reason that the Congress and the executive branch provided the Postal Service with these unencumbered assets.

As you may know, the House Committee on Post Office and Civil Service has asked the Office of Management and Budget to comment on H.R. 9022, a bill which would place the disposal of Postal Service property under the Federal Property and Administrative Services Act. When we have completed our review of this bill, we will be happy to provide you with a copy of our report.

With regard to the transfer of future properties and facilities to the Postal Service, the Postal Reorganization Act provides in section 2002 (d) that such transfers may be with or without reimbursement as determined by the President. Since one of the principles underlying the postal reorganization is that the costs of postal operations be reflected in the rate base, we are presently of the view that in most cases the Postal Service should make full reimbursement for facilities and excess property transferred from GSA or other agencies.

In order to advise the President in carrying out his responsibilities, we have asked GSA to propose criteria for determining the amount of reimbursement which should be required. Such criteria will consider excess real property as well as those facilities which are now under construction, have already been funded for direct Federal construction, or are included in the 1972 program for direct Federal construction. With regard to the use of space by the Postal Service and GSA in each other's buildings, we assume that each will make rental payments to the other.

I hope that the above considerations will be helpful in your review of the arrangements of GSA and the Postal Service for providing public facilities. I am sure that our actions can be directed toward advancing the objectives of our various programs while, at the same time, protecting the Government's overall interest in economy and efficiency.

Mr. WRIGHT. I would like to direct a question, if Mr. Terry would yield.

Mr. TERRY. I will yield, Mr. Chairman.

Mr. WRIGHT. With regard to your statement that appears beginning at the top of page 3, you say here "as you know, on March 27, 1971, we asked the Postmaster General and the Secretary of Defense to advise us concerning the circumstances and rationale leading to the agreement.” And further in that paragraph you said, "pending our review of the agreement we felt that the best course for all concerned was to ask that the agreement be suspended."

Now, with respect to that review, did the review include any other material for consideration than the material furnished by the Postmaster General, the Secretary of Defense, and the Administrator of the General Services Administration?

Mr. NATHAN. Mr. Chairman, I could say a lot about the decision by Director Shultz to suspend, and about the chronology of events after suspension obtaining agency reviews, but it is in my testimony.

In order not to burden the committee, I will restrict myself just to a direct answer to your question.

It is this: In the way that we operate, we have, as I indicated earlier, approximately three full time equivalents in personnel devoted to General Services Administration. We have 5 to 6 man-years of expertise-full time man-years of expertise-and a very capable staff devoted to the Corps of Engineers.

We have a similar capability as regards the Postal Service.

Therefore I would want to stress to this committee that there are people in our office who are current and knowledgeable in depth about the programs, activities, budgets, and recent decisions of all of the agencies of Government. Their expertise was drawn on in reviewing this matter, so we received over a period of two and a half weeks replies from each of the three parties, and in addition to that, our program experts who know a good deal about these agencies, added to the analysis of those materials their own knowledge of those subjects, and it was on that basis that the policy officers of the Office of Management and Budget made a decision implemented in a letter later sent by Director Shultz to the parties indicating that we would remove our suspension.

Mr. WRIGHT. In other words, the answer to my question was that the review did include other material than that furnished by the Postmaster General, Secretary of Defense, and the Administrator of the General Services Administration, and the other material it includes was that supplied independently by members of the staff of the Office of Management and Budget, is that correct?

Mr. NATHAN. Out of their extensive files of materials on these several agencies, I would say that is correct.

Mr. WRIGHT. Well, it does not really answer the problem, but let me address myself to some of the statements contained in that letter of March 27 by the Director of Office of Management and Budget.

Mr. Shultz in this letter referred to implications affecting the General Services Administration as the primary agent for the construction of buildings to house the civilian agencies of the Federal Government. What were those implications, and what rationale was made? Mr. NATHAN. A simple answer is that we wanted to know what general impact this would have on GSA and its programs. As my testimony indicates, in our analysis we found that the General Serv