U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

45–593 cc 1998

S. Hrg. 105–296

ANNUAL REPORT OF THE POSTMASTER GENERAL

HEARING

BEFORE THE

SUBCOMMITTEE ON INTERNATIONAL SECURITY,

PROLIFERATION, AND FEDERAL SERVICES

OF THE

COMMITTEE ON

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

NOVEMBER 3, 1997

Printed for the use of the Committee on Governmental Affairs

(

For sale by the Superintendent of Documents, Congressional Sales Office

U.S. Government Printing Office, Washington, DC 20402
(II)

44–720

COMMITTEE ON GOVERNMENTAL AFFAIRS

FRED THOMPSON, Tennessee, Chairman

SUSAN M. COLLINS, Maine

SAM BROWNBACK, Kansas

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

DON NICKLES, Oklahoma

ARLEN SPECTER, Pennsylvania

BOB SMITH, New Hampshire

ROBERT F. BENNETT, Utah

JOHN GLENN, Ohio

CARL LEVIN, Michigan

JOSEPH I. LIEBERMAN, Connecticut

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

Hannah S. Sistare, Staff Director and Counsel

Leonard Weiss, Minority Staff Director

Michal Sue Prosser, Chief Clerk

SUBCOMMITTEE ON INTERNATIONAL SECURITY, PROLIFERATION AND

FEDERAL SERVICES

THAD COCHRAN, Mississippi, Chairman

SUSAN M. COLLINS, Maine

PETE V. DOMENICI, New Mexico

DON NICKLES, Oklahoma

ARLEN SPECTER, Pennsylvania

BOB SMITH, New Hampshire

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

Mitchel B. Kugler, Staff Director

Linda Gustitus, Minority Staff Director

Julie Sander, Chief Clerk
(III)

C O N T E N T S

Opening statements: Page

Senator Cochran ............................................................................................... 1

Senator Domenici ............................................................................................. 10

Senator Levin .................................................................................................... 14

Senator Cleland ................................................................................................ 18

WITNESSES

MONDAY, NOVEMBER 3, 1997

Hon. Marvin Runyon, Postmaster General and Chief Executive Officer, U.S.

Postal Service, accompanied by Michael S. Coughlin, Deputy Postmast General ........................................................................................................................ 2

APPENDIX

Additional questions submitted for the record regarding USPS plans to centralize employee uniform purchasing ................................................................. 31

Additional questions for the U.S. Postal Service submitted for the record

by Sen. Domenici .................................................................................................. 31
(1)

ANNUAL REPORT OF THE POSTMASTER

GENERAL

MONDAY, NOVEMBER 3, 1997

U.S. SENATE,

SUBCOMMITTEE ON INTERNATIONAL SECURITY,

PROLIFERATION, AND FEDERAL SERVICES,

OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS,

Washington, DC.

The Subcommittee met, pursuant to notice, at 2:31 p.m., in room

SD–342, Dirksen Senate Office Building, Hon. Thad Cochran,

Chairman of the Subcommittee, presiding.

Present: Senators Cochran, Domenici, Levin and Cleland.

OPENING STATEMENT OF SENATOR COCHRAN

Senator COCHRAN. The Subcommittee will please come to order.

Today we welcome Postmaster General Marvin Runyon, who is

accompanied by Deputy Postmaster General Mike Coughlin, to our

Subcommittee’s hearing on the annual report of the Postmaster

General.

This hearing offers the Postmaster General the opportunity to report publicly on the state of the U.S. Postal Service. Congress

passed the Postal Reorganization Act of 1970 for the purpose of

transforming the old Post Office Department from a taxpayer-subsidized executive department to a self-sustaining new entity that

would use modern business practices and procedures and operate

in an efficient and economical manner.

With approximately 800,000 employees and more than $56 billion in annual revenues, today’s Postal Service far exceeds the size

and scope of most U.S. industries. Its management is a tremendous

challenge.

Since becoming Postmaster General in 1992, Mr. Runyon has

sought to improve service quality and customer satisfaction while

improving the financial health of the Postal Service. Under his

leadership, the Postal Service has experienced 3 remarkably profitable years. In fiscal year 95, the Postal Services’ profit was $1.8 billion; in fiscal year 96, it was $1.6 billion; and in fiscal year 97, the

profit is expected to be $1 billion.

Also, Postmaster General Runyon has made impressive progress

in helping meet the emerging needs of the users of the Postal Service. According to the most recent annual report, service quality improved during 1996, with an independent accounting firm reporting

a national performance average of 91 percent for overnight, ontime, local first-class deliveries.
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While these results are encouraging, other performance data suggest that problems remain. For example, last year’s delivery of 2-

day mail was only 80 percent on time, and 3-day mail deliveries

were only 83 percent on time—though it appears some improvements have been made in 1997. And, according to a recent report

from the General Accounting Office, the Postal Service and its

major labor unions have made little progress resolving their problems.

Earlier this summer, the Postal Service Board of Governors filed

a request with the Postal Rate Commission for the third increase

in postal rates this decade. The new rates if approved could take

effect as early as June 1998. The new increase would average 4.5

percent across all domestic services. This proposed rate hike coincides with recordbreaking profits and makes us wonder whether

the increases are justified.

This Subcommittee understands that the Postal Service requires

a sophisticated distribution network for collecting, processing,

transporting and delivering America’s mail, and maintaining this

network is a costly enterprise. However, the Postal Service should

be able to manage its costs to meet its mandate of universal, customer-friendly service at reasonable and affordable prices.

Mr. Runyon, we welcome you, and we look forward to hearing

your report on the state of the U.S. Postal Service. We have a copy

of your statement which we appreciate very much, and we will

make that part of our hearing record in full and encourage you to

make whatever comments in addition to that you may care to.

You may proceed.

TESTIMONY OF HON. MARVIN RUNYON, POSTMASTER GENERAL AND CHIEF EXECUTIVE OFFICER, U.S. POSTAL SERVICE, ACCOMPANIED BY MICHAEL S. COUGHLIN, DEPUTY

POSTMASTER GENERAL

Mr. RUNYON. Thank you, Mr. Chairman, and good afternoon, everyone. With me is Deputy Postmaster General Mike Coughlin, and

we are glad to have this opportunity to talk with you today.

The Postal Service is working harder than ever to shoulder the

responsibility of delivering America’s mail faithfully and effectively.

We are squarely focused on our congressional charter to be a ‘‘basic

and fundamental service to the people,’’ to bind the Nation together

with prompt, affordable, and reliable communication services, to

serve everyone, everywhere, every day.

I am pleased to say that we are fulfilling this mandate in record

fashion. We have just finished another strong year, and I have

some positive performance numbers to report this afternoon.

For the third straight year, the employees of the Postal Service

have lifted overnight service scores for First-Class Mail to record

levels. Over the summer, we achieved a national average of 92 percent for the second straight quarter. That meets our goal for the

year and represents the 11th straight quarter of improvement.

Since the winter of 1994, we have improved this important service

indicator 13 points overall and achieved a national score of 90 percent or better for six straight quarters. We are raising the bar.
3

In 1998, our goal is to achieve an overnight mark of at least 92

percent while improving service scores for Priority Mail and

second- and third-day delivery of First-Class Mail.

In 1997, the Postal Service also achieved its highest ratings ever

for residential customer satisfaction—a score of 91 percent in each

quarter. This improvement reflects not only our rising delivery

scores, but also the many steps we are taking to address our customers’ needs for quality and convenience.

In recent years, we have expanded hours of business in many locations. We have provided training in interpersonal skills for

100,000 employees who deal directly with customers. We have

equipped post offices nationwide to accept credit and debit cards,

recently expanding that convenience to a total of 32,000 locations.

And we have now opened more than 500 postal stores, the most

customer-friendly retail experience in the Postal Service. In the

coming year, we will be using a new ‘‘Ease of Use’’ index to focus

managers and employees more squarely on improving key service

indicators.

We are also addressing the service needs of our business customers. We are phasing in a new Business Service Network that

combines customer resources at the district, area, and headquarters levels. It sets up a central point of contact for resolving

service issues that our customers face day to day, and it establishes

a two-way dialogue, giving us a link back to customers to find out

how well we are meeting their needs.

We have also set up more than a dozen work groups with customers to address and improve some key areas of service. They include the delivery consistency of advertising mail, the needs of

small business mailers, the electronic tracking of containers, service issues for publications, and state-of-the-art payment and manifesting systems.

This past year, our employees proved once again that quality

service and financial success go hand-in-hand. We had expected to

end the fiscal year with a modest surplus of $55 million. As the

year progressed, we also found that revenues were below budget.

The employees of the Postal Service responded, driving down

costs without impacting service quality. Mail volume increased

more than 3 percent, more than doubling last year’s growth rate.

And we achieved historic reductions in accidents and injuries, not

only creating a safer workplace for our employees, but saving hundreds of millions of dollars for our customers in the process.

The auditors are still reviewing our finances, but we expect to

end the year with a net income of $1.2 billion. That will give us

3 straight years with a surplus of $1 billion or more—an unprecedented achievement.

These financial gains have done several important things for us.

First, they have helped us substantially restore the financial health

of the Postal Service. In its first 23 years as a self-supporting entity, this organization posted accumulated losses of $9 billion. In the

last 3 years, we have erased half of that amount.

Second, they have allowed us to make historic investments to improve service quality and increase the efficiency of our operations.

In both 1996 and 1997, the Postal Service committed $3 billion in

capital investments for the first time ever. Over the next 5 years,
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we are planning to invest $17 billion, our largest amount ever. This

includes $5.9 billion for new technologies, $6.4 billion for new facilities and delivery vehicles, and $4.7 billion for service and revenuebuilding initiatives.

One of our most significant investments has been a $1.7 billion

contract awarded earlier this year. It will create separate processing facilities and dedicated air transportation for Priority Mail

packages traveling along the East Coast. We expect this effort to

pay big dividends to customers, helping us drive service scores for

this growth product to historic levels.

Third, these financial gains have made it possible to put forward

the lowest rate request in modern times. Our proposal to add a

penny to the price of a First-Class stamp and increase overall rates

by just 4.5 percent continues our trend of keeping price changes

well below inflation. The new rates will not take effect until at

least June 1998, giving the Nation 31⁄2 years of stable postage

rates, the second longest period in three decades.

There is one more important highlight from the year that I want

to mention. For 16 days in August, the Postal Service’s ability to

deliver was put to the test. When the Nation’s largest parcel shipper went on strike, many of its customers came to us. The result

was a virtual ‘‘Christmas in August’’—20 percent more parcels and

more than double the usual amount of expedited packages.

Our employees came through. They handled the extra mail effectively, coordinated operations with new and existing customers,

and even made deliveries on Sundays. Many customers were pleasantly surprised by our performance and our attitude of service during the strike. Some were so impressed that they have continued

giving us their business.

As I told our employees after the strike, I have never witnessed

a more superior level of dedication and commitment during my entire career in business and government. I am proud of the way employees have taken our performance up a notch these past 3 years.

Even more satisfying and encouraging to me is the new, cohesive

approach we are taking to managing the Postal Service that is

helping us deliver these results. It is called CustomerPerfect.

CustomerPerfect is based on the most effective principles of performance excellence around—the Baldrige criteria. It is instilling a

sense of focus and discipline in how we go about serving the Nation. CustomerPerfect is helping to integrate the many different aspects of our operations—planning, goal-setting, budgeting, training,

compensation, product innovation, and the continuous improvement processes from the board room to plants to the most distant

post offices. It is giving us clear targets for improvements each year

and putting us firmly on the path to excellence.

Over the past 3 years, we have used the CustomerPerfect process

to listen to one of our most important voices—that of our employees. We have made significant strides in the key target areas of

training and safety. In the coming months, we will be expanding

this focus to address workplace relationships on a broader scale. At

the same time, we are sitting down with representatives of our

unions and management associations to explore innovative ways to

resolve disputes and address the issues that divide us.
5

Clearly, we have some work to do, but I am confident that we

are headed in the right direction. Tomorrow I will speak at length

on workplace relationships with Chairman John McHugh and his

House Oversight Subcommittee.

By now, each of you should also have received a copy of our new

5-year Strategic Plan. It provides more detailed information on the

CustomerPerfect approach, the challenging goals we have set for

ourselves, and the strategies that will enable us to succeed in the

complex and fast-changing communications environment.

As the plan indicates, several external challenges will affect our

success in the coming years. The most significant is competition.

Today, dozens of competitors are siphoning mail out of our system.

Other delivery firms provide high-quality, end-to-end service in

specialized markets. Private mailing centers serve as alternative

post offices. New technologies allow individuals and businesses to

send messages and money electronically, bypassing hard copy mail.

These growing alternatives are challenging our ability to realize

the economies of scale that are so vital to improving productivity

and holding postage rates down. Worse yet, they are calling into

question the very future of universal mail service, a network that

includes thousands of small-town post offices and rural delivery

routes that no private business would want to operate.

It may seem like we are crying ‘‘Wolf’’ when you consider that

mail volumes have risen 48 of the last 50 years. But some of the

our most profitable products are now at risk. First-Class Mail—

nearly half of our entire revenue base—is increasingly vulnerable

to electronic diversion. That is especially true in the area of bills,

payments and statements, where one-quarter of our business may

be up-for-grabs if—and probably—when PC banking and bill-paying takes firm hold. As the speed and security of the Internet is

improved, the Postal Service and many other forms of mass communication may also see a sizeable hunk of their advertising revenues go on-line.

We cannot predict with any great certainty where the communications marketplace will go or how fast. But we do know this.

Even the slightest deviation could have a disastrous effect on the

Postal Service. At today’s levels, a 5 percent drop in postal revenue

would amount to $3 billion. Just a 2 percent decrease would represent more than a $1 billion decline in revenue. With our ever-expanding network of deliveries and our massive infrastructure, it is

difficult for us to shed large amounts of costs quickly. And that

makes us vulnerable to dramatic shifts in the communications marketplace.

Given this scenario, it is imperative that we manage our costs

aggressively. We are now exploring some innovative approaches.

They include process management, performance-based pay, strategic alliances with the private sector, and sophisticated technologies like robotics and a highly automated plant of the future.

We are also getting much more serious about designing a modern-day lineup of products and services. With the growing array of

communications choices, the Postal Service is only going to be as

viable as its products. They must be able to stand their ground in

the marketplace, serving as valuable tools for personal and professional success.
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That is why the Postal Service is putting greater focus today on

finding new markets and new ways to meet emerging needs. We

are working with our customers to build on our current range of

products. For example, we are exploring services that blend hard

copy and electronics. We are adding product features, like delivery

confirmation, that customers want, and we are working to leverage

our existing retail network like many businesses do.

These efforts are not only helping us better serve our customers,

they are giving us additional revenues that offset rising costs and

help us keep postage rates low.

I also believe that it is important for the Postal Service to have

the right management tools to get the job done for the 21st century. The time is ripe for postal reform. Our legislative framework

is more than a quarter-century old. It is clearly out of sync with

the fast-paced communications marketplace and modern-day needs

of our customers. Key members of the mailing community support

reform. This includes the CEOs and executives of some of the Nation’s most prominent businesses and members of a Blue Ribbon

Committee who recently gave us their recommendations on the future of the Postal Service. We have an historic opportunity before

us. Together, I hope that we will seize it.

Mr. Chairman, I appreciate your leadership in this area. You

have taken an important, prudent step in this direction by introducing the Postal Financing Reform Act, S. 1296, which would give

the Postal Service greater flexibility in banking, borrowing and investing.

However, we are disappointed at the turn it has taken. The concepts in this bill are not new. They have been debated for the better part of a decade and were included in postal reform legislation

introduced last year in the House that has been widely disseminated and discussed.

Now, competitors and special interest groups have raised issues

that go far beyond the intent of the legislation. Even though you

addressed their basic concerns by revising the bill, their complaints

have persisted. Their objections are unjustified. As you know, the

purpose of this legislation is to give the Postal Service greater

speed, flexibility and innovation in meeting its financial needs. It

would allow us to deposit operating funds in Federal Reserve or

commercial banks and to borrow from capital markets. At the same

time, this bill would strengthen market accountability. It would

limit our investments in the open market to government-guaranteed securities, while maintaining the requirement that all other

investments be approved by the Secretary of the Treasury.

I do not understand why competitors object. The bill would have

no effect on their businesses. But it could save postal customers

millions of dollars each year—money they will not have to pay in

the form of higher postage rates.

The only special interest this bill serves is the pocketbooks of the

American people. We hope that you will continue to pursue this

legislation in the coming months and that all who have a sincere

interest in a healthy Postal Service will step forward to support

your actions.

Our competitors’ efforts to block this bill are yet another attempt

on their part to derail our drive to modernize the Postal Service.
7

They are now opposing virtually everything we do—every new service or legislative change that would make us more effective and responsive to the American people. When we move forward an inch,

they want to push us back a mile.

I understand that those who have built their businesses by taking away our business may not want to see a strong, effective Postal Service. But our customers do. They want us to do everything

we can to improve service and hold down prices. Most of all, they

want us to preserve our national network of mail delivery. They

recognize, as we do, that no other organization or technology today

can satisfy this need, and that universal mail service brings benefits to our Nation that no balance sheet can measure.

The Postal Service will continue to press forward. Our commitment to delivering superior levels of service and fulfilling our historic mandate of universal mail delivery, at uniform prices, will not

waver.

Our seriousness is shown in the way we are transforming this organization using the Baldrige principles of business excellence. And

the historic results we are achieving are proof that we are on the

right path. Many challenges await us in the 21st Century, but I

have great faith that together, the employees of the Postal Service,

our customers, and this Congress can ensure the continuing viability of the mail and protect the great legacy of mail delivery to every

home and business in America.

Thank you, Mr. Chairman. That concludes my remarks.

Senator COCHRAN. Thank you, Mr. Postmaster General.

I appreciate the complete review of many of the issues that face

the Postal Service and the challenges that you have to keep postal

rates reasonably priced and service at a high quality, and I also appreciate very much your comments about the recent legislation

which I introduced to try to help control those costs and make it

possible to continue to provide higher quality service at reasonable

rates by cutting down the cost of borrowing and relieving the Postal Service of some of the expensive burdens that come with having

to look to the Treasury Department whenever you want to obtain

securities or do any banking activity at all.

As it was initially explained to me, there are some GovernmentSponsored Enterprises (GSEs), such as Fannie Mae and Freddie

Mac, the Tennessee Valley Authority, which you once headed up,

which have access to private market entities for investment and

banking. Is it your understanding that the request that was made

for legislation of this kind is based primarily on the experiences of

those GSEs, and what would be the dangers to the Treasury or to

the general public if the Postal Service were given this new authority?

Mr. RUNYON. Well, I believe you are right that those agencies

you have named do have that authority today, and I am not aware

of any real problems that that has caused, but it has, in most

cases, reduced the cost of that service. I am not aware of any dangers to the American public or to the Congress of the United states

that would be presented if we had that opportunity.

Senator COCHRAN. There was some indication that the Postal

Service might intend to use this new investing authority to purchase controlling shares of some of its competitors. Would that be
8

something that would be permitted under this law as it has been

amended?

Mr. RUNYON. No, it would not be permitted in the law as it has

been amended. We would have no intention of acquiring our competitors, as we said, but the law as it is now written says that the

Treasury has to approve purchase of interest in a company before

we do it.

Senator COCHRAN. There was also some question about how

much money you would actually go into the market and borrow.

Would the Postal Service be borrowing large sums of money each

year under this new authority? Could you give us an idea of what

your expectations would be as to what the volume of borrowing

would be?

Mr. RUNYON. I could give you for the record—I do not have it

with me right now—what we think our borrowing will be for the

next 5 years, but Congress had put a borrowing limit on the U.S.

Postal Service, so our debt cannot go above $15 billion——

Mr. COUGHLIN. A total of $15 billion.

Mr. RUNYON. A total of $15 billion is the limit that Congress has

set, so we could not borrow more than that, and it would not be

our intention at any rate to do that.

Senator COCHRAN. The legislation, as amended, does not contain

any lifting of that limitation or any modification of that limitation

at all.

Mr. RUNYON. No, sir, it does not address it at all to my knowledge.

Senator COCHRAN. Let me ask you this. There has been a great

deal of attention paid to the fact that you have turned around the

Postal Service from an entity that was losing money every year,

year in and year out. Even though it was designed to be self-supporting, there were many difficulties in achieving that goal. Now,

however, in the last 3 years, according to your testimony and the

information we have received here in this Committee, the Postal

Service has made over $1 billion in profit for each of the last 3

years. Why, then, is it necessary to ask for a postal rate increase

after you have had that kind of economic success?

Mr. RUNYON. Well, even if you consider all of that economic success that we have had—and by the way, I might go back and give

you a little bit of history about how postal rates used to be set. It

used to be that we had to lose about $2 billion. Then we would go

in for a rate increase, and we would get the rate increase; the first

year, we would make money, the second year, we would break

even, and the third year, we would lose money and go back to raise

rates again. We tried to reverse that, and as you recall, in 1994,

we had a rate increase of 10.3 percent, which was less than the

price of inflation. That was after 4 years without a rate increase.

Now it has been 31⁄2 years, and we are asking for 41⁄2 percent,

which is less than half the rate of inflation. So we have really

changed the way we operate.

Now, at the time we filed for that rate increase, it was our notion

that we would probably, in the year just past, have somewhere between $600 and $700 million of profit, or surplus. In fact, we have

$1.2 billion, which is about $600 million more. And the fact is that

even with that increase if we do it in June, we would still lose $228
9

million, based on our budget numbers for this year. With no rate

increase, we would lose over $2 billion in the following year, 1999.

So we feel that the increase is necessary, and we think that by

going now with one penny is the right thing to do. Because if we

were to wait for another year and make our filing based on another

year of economic progressions, it would be something like a 3-cent

increase that we would have to make in the following year. And we

are trying not to do that, because people who use the mail do not

like to be hit with 10, 15, or 20 percent, every 3 years, because it

is very hard to calculate your business.

What people would like to see is a small increase if there has to

be one, and have it more often than to come along every third year

with a big increase.

So I think the answer to your question is, even with the increase,

we would probably lose a little money next year; without the increase, we would lose a lot of money next year and more the following year.

Senator COCHRAN. One way that you have increased revenues is

to offer new services and new products to those who use the Postal

Service and buy those services and products. That has brought

with it, though, some criticism from others in the private sector

who operate businesses similar to those that you are now operating

in effect in the Postal Service—selling greeting cards, selling other

services—there is a long list. What is your answer to those who say

that you have a great advantage because you do not have to pay

taxes, you do not have to pay rent, in effect, to private building

owners?

You have a lot of different benefits because you are a government

entity, even though you are operating as a business—trying to

break even or make a profit. What is your answer to that? Are you

unfairly using these characteristics to compete unfairly with the

private businesses?

Mr. RUNYON. We do not think we are. First, when you talk about

rent, a lot of the buildings that we have are leased, not owned, by

the Postal Service. I do not know the volume of that—maybe Mike

would know that better—but the fact is we do lease a lot of those

buildings.

Second, a lot of the products that we are offering now are things

that our customers want. For example, we started a service on the

West Coast called ‘‘Pack and Send,’’ at about 270 post offices. As

you may know, we have carried packing supplies in post offices for

a long time—boxes, wrapping paper, tape, things of that nature.

People come in and say they forgot to wrap a package, and so they

buy these things. So we ask, would you like us to wrap the package, and they say yes. So we put up a service called ‘‘Pack and

Send’’ on the West Coast, and it is a very popular product.

Now, people who are also wrapping packages did not think that

was such a neat idea, and they went to the Postal Rate Commission, which said, well, you started doing this, and this is something

that is going to get mailed, and therefore, we should have set the

rates. They did not say we should not have done it; they just said

we should set the rates. So at that time, we dropped that service,

and now we have filed with the Postal Rate Commission a case as
10

to how much our rates should be for this ‘‘Pack and Send,’’ because

it is something our customers want. So there are things like that that our customers are really actively seeking, and we are trying to supply their needs. Service is

what we supply. We are a service business, and we provide service

to the citizens of the United States.

Senator COCHRAN. Mr. Deputy?

Mr. COUGHLIN. Could I add, Mr. Chairman, that the products

you talked about are, in almost all cases, directly related to the

basic business we perform as additional services or products made

available to customers, services they have asked for. It is related

to the stamp art that we own.

But another point relates to the benefits that we have, that others have alleged we have here. There are also significant obligations that go along with those benefits that are conferred on us—

the most important of which is the obligation to provide universal

service. We maintain a widespread network of facilities around the

country—totalling almost 40,000—facilities that would not be there

if we were a straightforward, tax-paying private entity.

So it is important to keep those two things in balance, the benefits and the obligations.

Senator COCHRAN. Senator Domenici.

OPENING STATEMENT OF SENATOR DOMENICI

Senator DOMENICI. Thank you, Mr. Chairman.

I am learning all the time about the wonderful jurisdiction of

this little Subcommittee. I have been getting along with Mr. Runyon famously; now I will not even be able to categorize how well

I am going to be getting along with him—isn’t that right, Mr. Runyon? We get along pretty well. Now, think about this—I am on this

Subcommittee, and that means we can get along even better; right?

Mr. RUNYON. I would hope so. [Laughter.]

Senator DOMENICI. I came today on a parochial issue, and I will

raise it shortly, but I will let the Chairman do his second line of

questioning, and then I will raise on the 400th anniversary of

On ̃ ate’s arrival in America and why we cannot do something about

that.

But I would like to ask you just a couple questions about service.

First of all, I think that we have all learned that things are changing very fast, and the service industries here and around the world

are just changing and growing, and innovation rampant. But I

think that we have got to every now and then step back and ask

what is our Postal Service for. And I get kind of worried when I

hear people say they want to take bits and pieces of your business,

because I have not heard any of them offer to take all the rural

post offices in New Mexico and service them, and I have not heard

them offer to serve all the post offices in rural Mississippi.

Maybe I have not been listening, but I have been hearing that

people want to take all the business between some major cities,

some huge companies, and obviously, if we let that disappear, then

not only will we have rural rates that are outrageous for our rural

people, but we will have to subsidize you at an enormous rate.

So I am interested in permitting you to sufficiently serve the

general population in the area of postal delivery, delivery of mes11

sages, in whatever mode fits the changing times, provided that is

necessary to continue the universal delivery that we have chartered you with doing.

I saw you 1 day and complimented you on the advertisement

that you had on national television with reference to the new product to compete with rapid delivery—what was it—overnight?

Mr. RUNYON. Priority Mail.

Senator DOMENICI. Priority Mail. I looked at it, and I said, gee,

the post office is doing something pretty neat; they are about as

good as any private sector company in advertising this service.

Did it work?

Mr. RUNYON. Yes, sir, it is working. Our Priority Mail is up 13

to 15 percent this year, and it is working.

I would just like to comment—you said something about letters.

A lot of that Priority Mail is parcels.

Senator DOMENICI. Oh, I understand.

Mr. RUNYON. You included parcels in that statement, I assume.

Senator DOMENICI. I should not have said just messages—messages and parcels.

Mr. RUNYON. Yes.

Senator DOMENICI. But is anybody saying you should not be running that kind of advertisement with respect to this priority service?

Mr. RUNYON. There is somebody who is unhappy with one of our

ads—is that the one that they are unhappy with?

Mr. COUGHLIN. Some of our competitors have filed complaints—

one has even sued us—about the content of the advertising. It has

been before an advertising review board, and they found the ads

to be acceptable. In addition, before they were ever shown, they

were vetted through the internal television advertising system, our

own attorneys and their attorneys as well.

Senator DOMENICI. Well, I do not know what your competitors’

complaints are, but I repeat that if you are going to stay in the

business that we have charged you with being in, and there can be

other businesses competing—and there probably are more today

than there ever have been; you stated that in your statement—

clearly, you have got to do what must be done to stay alive and deliver the universal delivery which we ask you to do for all of our

people.

Let me ask you this. Ten years ago—and I have been here longer

than that—but 10 years ago, we were receiving huge amounts of

mail in our offices complaining about the service of the post office.

Now, I have not checked in the last week, but I have checked in

the last year, and we are not getting very many complaints. Does

that mean people have just stopped complaining to me, or is the

service better?

Mr. RUNYON. It means the service is better. We have statistics

that are taken by outside consultants who tell us the service is better. For overnight service—right now, we are shooting for an ontime overnight goal of 92 percent. For the past month, we have

been at almost 93 percent. So we are improving that.

We are not doing as well as we should be doing on 2- and 3-day

service standards. We need to work on that, and another one of our

prime objectives this year is to get that up from where it is.
12

Senator DOMENICI. Now, Mr. Runyon, it seems to me that this

in sustained period of recovery that we are having in the United

States, people are really trying to find out how are we doing that

with such low inflation, and what is really the prime mover; and

I guess, depending upon whom you talk to, there are three or four

different reasons. But I think one that is there in everybody’s assessment is the increased productivity of the American service and

manufacturing industry, which is based upon a decade or so of new

technology, new equipment and innovation, and it has finally

caught on, and it is producing per unit of man or woman’s time

more goods and services of value than they were producing 10

years ago, and much more than 20 years ago.

Now, I would assume if you are going to stay in business and not

be up here with very large subsidies and having competitors who

are really up here saying, ‘‘We ought to take it over because we can

do it a lot better,’’ that you have to have productivity increases; is

that correct?

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

Senator DOMENICI. Do you have productivity increases that you

could share with the Committee?

Mr. RUNYON. Yes, sir. We had a productivity increase last year

of roughly one percent, and we have in our budget this year I think

another one percent in productivity. So we are making progress.

We were not doing very well a few years back, but we are making

progress in productivity now.

I might add that a lot of the automation that we have been buying over the years is now beginning to be installed, put in place,

and is starting to yield the productivity that we have been trying

to get.

I mentioned in my opening remarks that we have increased our

capital expenditure plan to $17 billion. It was $14 billion the previous 5 years, but we have revised that to $17 billion for the next

5 years. A lot of the reason for that was for the automation that

is available, that we know works, that we can buy and put in place

and improve our productivity. So, yes sir, we are doing that, and

it is paying off.

Senator DOMENICI. Could I ask this to you another way? Generally speaking, if you tried to measure productivity in an industry

like yours, you would try to determine how much total service you

are presenting to the American people year over year, and then you

would try to determine whether you are able to do it with the same

manpower, or whether you have to have a lot more manpower. It

does not mean you have to lay off people, but as you increase productivity, I assume you are also bucking up against more service

needed as postal delivery is going up.

Mr. RUNYON. Right.

Senator DOMENICI. What is the status of your employment in

terms of how many people you have working full-time at things

that really effectuate the delivery of packages and messages?

Mr. RUNYON. I do not have the exact numbers with me—I will

supply them for the record.

Senator DOMENICI. Will you, please?

Mr. RUNYON. We have more people today than we did 5 years

ago, but the fact is our volume has increased by about 11 percent,
13

and the number of places that we deliver to has increased several

percentage points. So we have to provide the necessary people to

do that.

However, had we provided and hired people just to take care of

those increases, we would have had to hire twice as many people

as we did. So the productivity is showing itself there, even though

our total numbers today are higher than they were. What I am saying is they would be about 60,000 people higher today if we had

not had productivity plans in place.

Senator DOMENICI. OK. So what you are saying is that you could

chart for us if we asked over the last 5 years and your projections

for the next 5, how much service increased each year and how

many employees increased, and you wold be able to say proportionately, based on prior years, we have only had to hire half as many

people as we would have but for innovation?

Mr. RUNYON. Yes, sir. I have those numbers. I should have

brought them with me, but I do not have them with me.

Senator DOMENICI. Could you give us for the record, please?

Mr. RUNYON. Yes, sir.

Senator DOMENICI. In due course, whenever you want them, Mr.

Chairman—a week, 2 weeks, whatever is your wish.

Senator COCHRAN. In a timely fashion, I think is what we would

ask for.

Senator DOMENICI. Thank you.

[Information follows:]

INSERT RESPONDING TO SENATOR DOMENICI’S REQUEST

FOR WORKLOAD AND STAFFING INFORMATION

Following is a chart of annual employee complement and growth in mail volume

and delivery points for the last five fiscal years:

Year Complement Mail Volume Delivery Points

1997 .......................................................................................... 824,578 4.1% 1.3%

1996 .......................................................................................... 818,728 1.5% 1.5%

1995 .......................................................................................... 811,320 1.5% 1.5%

1994 .......................................................................................... 791,218 4.0% 1.4%

1993 .......................................................................................... 758,734 2.9% 1.3%

Following is a chart of projected employee complement and growth in mail volume

and delivery points for the next five years:

Year Complement Mail Volume Delivery Points

1998 .......................................................................................... 829,500 2.0% 1.4%

1999 .......................................................................................... 837,700 2.0% 1.4%

2000 .......................................................................................... 846,000 2.0% 1.4%

2001 .......................................................................................... 854,300 2.0% 1.4%

2002 .......................................................................................... 862,800 2.0% 1.4%

Complement does not include Postmaster Relief, Rural Carrier Substitutes, or nonbargaining temporaries.

Itemized below are major changes in equivalent complement for workload and

programs since restructuring in July 1992. The list identifies complement needed

because of increased workload in mail volume, delivery points, and other miscellaneous workload. Major program changes are for Remote Encoding sites, our emphasis on better customer service through increased window service, and better utilization of rehabilitated Postal Service employees who were on the Department of Labor’s compensation rolls due to injuries. Finally, the reductions from the 1992 restructuring and the net savings from operational programs between 1992 and 1997

are identified.
14

MAJOR CHANGES SINCE FY 1992

Employee Percent Change Equivalents

Workload:

Mail Volume Workload ......................................................................... 10.8% 37,700

Delivery Points Workload ..................................................................... 7.7% 32,600

Other Workload .................................................................................... 9.4% 5,000

Programs:

Remote Encoding Sites ....................................................................... 25,235

Customer Focus-Retail ........................................................................ 4,000

Rehabilitation Programs ..................................................................... 6,231

Overhead Reduction ............................................................................ (22,691)

Operations Programs ........................................................................... (35,679)

Senator DOMENICI. Mr. Chairman, I am going to yield. I have a couple of parochial questions at the end, but I would like you to

go ahead.

Senator COCHRAN. Thank you, Senator. Senator Cleland.

OPENING STATEMENT OF SENATOR CLELAND

Senator CLELAND. Thank you, Mr. Chairman. It is good to be with you today, and my dear friend, Senator Domenici. I have to

agree with him on so many points, and certainly, I am learning

about the dimensions of this Committee as well—International Security, Proliferation and Federal Services. I came in here 1 day

thinking it was an oversight hearing on a government agency and

found out it was dealing with arms from China to Iran and nuclear

proliferation, so that was a shock.

But I will tell you, when you try to close down a Postal Service

operation in my home town, that is nuclear proliferation. [Laughter.]

Senator CLELAND. So we are covering the waterfront here.

I want to thank you and your wonderful staff for being responsive to some of the parochial questions I did have up front. I am

very pleased with the Postal Service’s recent decision to build a

new post office in an emerging and evolving county, Gwinnett

County, outside Atlanta, to serve the Snellville-Centerville area in

my home State of Georgia. This proposal will address many of the

needs of a lot of those new residents who want to have their mailing address and post office changed to a more convenient location.

I thank you and your staff for working that out.

I especially want to thank you for working out the idea of keeping the Postal Service operation in my home town of Lithonia alive

and well, and not only to keep it, but to expand it and almost double it. That means an awful lot to me and to the people who are

served thereby. I understand that the contract is virtually let and

that that expansion will be completed by the end of 1998. So thank

you very, very much.

Mr. Robert Sheehan, the Atlanta District Manager of the U.S.

Postal Service, has been very cooperative in this regard. I have just

a small technical question here. Concerning the proposal for a new

Centerville-Snellville Postal Service office, while keeping the

Lithonia office where it is and actually expanding it. What is the

current thinking, if you know it—would that also involve keeping

the existing Snellville Post Office, or would it be closed? Has there

been any real decision on that at this point?
15

Mr. RUNYON. I am not aware. I would be glad to supply that to

you for the record, though.

Senator CLELAND. All right. Thank you very much.

[Information follows:]

INSERT RESPONDING TO SENATOR CLELAND’S QUESTION

ABOUT THE SNELLVILLE POST OFFICE

The construction of a new Centerville Branch postal facility will allow us

to relocate delivery routes in the 30039 and 30058 ZIP Code areas under

one roof. These are currently housed in the Snellville and Lithonia Post Offices. The relocation of Snellville carrier operations to a new building will

not affect retail operations at the existing Snellville postal facility.

Senator CLELAND. One question about S. 1296, the Postal Financing Reform Act, introduced by my dear friend and colleague,

Senator Cochran. As you know, Senator Cochran has modified

some of the language of the bill in an effort to address some of the

concerns that have been raised. The revision strikes the language

that would have allowed the Postal Service to invest excess funds

in the open market provided that ‘‘such investment is closely related to Postal Service operations as determined by the Board of

Governors.’’

This change addresses two of my concerns. First, it allays fears

that the Postal Service would buy out its competitors. Second, the

new language limits USPS investments in the open market to government-guaranteed securities while maintaining the requirement

in current law that all the other investments be approved by the

Secretary of the Treasury.

I am among the number of people who had concerns with the

bill’s original language, which gave the Postal Service a broad spectrum for portfolio investments. I am reminded of what happened to

Orange County, California just a few years ago, where the treasurer of Orange County pursued a risky investment strategy in

order to maximize investment returns. It was an investment policy

based on the county’s forecast of what would happen to interest

rates. The rest is history—contrary to the county’s forecast, interest

rates began to rise, the market turned against them, and Orange

County was forced into bankruptcy. They lost their shirts. So I am

pleased that the revised section provides for third party approval

in those cases where the Postal Service wants to invest in securities which are not government-guaranteed.

I do, however, have a concern about the borrowing authority

which S. 1296 gives the Postal Service. First let me say, Mr. Runyon, that I understand the Postal Service must offer its debt to

Treasury for first refusal before it can go elsewhere for financing,

and I understand the bind this can put you in when you must wait

up to 15 days to find out if the Treasury has approved your financing request. I know that time often means money; in this case, it

can mean lots of money, lots of money lost. But I also have a concern with this section. The Treasury Department states that about

99 percent of the time, borrowing from Treasury is actually less expensive for the Postal Service than borrowing from the private

markets. Just playing devil’s advocate here, how would you respond and address the repercussions that would arise if it were

found that the Postal Service lost millions of taxpayer dollars be16

cause of borrowing from the private market, which is often at a

higher interest rate than you could have gotten from Treasury? Are

there any comments you would like to make on that?

Mr. RUNYON. I think that the history of government agencies

that have that ability today indicates that they do very well in the

market; they are not losing money. If at any point in time, you say

can you borrow it cheaper, the answer is yes, you can borrow it

cheaper from Treasury because they will give it to you for oneeighth over prime—is that right, Mike?

Mr. COUGHLIN. One-eighth over Treasury’s cost of borrowing.

Mr. RUNYON. Yes, one-eighth over the average. They will do that,

but the problem is—there are other important factors. One is the

15 days you are talking about. It may be that at the end of 15

days, the market is not in such good shape, and one-eighth over

Treasury’s rate is not so good because Treasury rates are too high,

and you would like to wait for 3 days or wait until the market

drops. If you wait, then you do better than what you were going

to do at Treasury. So that is one important point.

Senator CLELAND. So in terms of borrowing, not particularly in

terms of investment—and I think we have got that pretty much

straightened out——

Mr. RUNYON. Right.

Senator CLELAND [contining]. But in terms of borrowing, you

would like to have that capability.

Mr. RUNYON. Right. The other thing is that when we first came

to the Postal Service, we did not have the ability to have any kind

of provisions other than just borrowing at fixed rates and without

call features on our debt. Now Treasury has changed—and they are

to be commended for changing—to allow us to call debt after a certain number of years. Now they have changed that for any government borrower so they can have call provisions. And call provisions

are very important. If you borrow for 30 years, and you cannot pay

it back for 30 years without incurring a penalty, that is not a good

way to do it. And that is the way it used to be until just a few

years ago, when we said to Treasury, look, we really need to have

this, and they gave it to us.

So there are those kinds of things that you need to talk about,

and it makes it much better for us in being able to deal with people

who deal with this on the hour. Treasury really is not into the

lending business.

Mr. COUGHLIN. If I might add on that, on the issue of call features that Mr. Runyon talked about, call features in the public

markets have been available for a number of years. They had not

been available from the Treasury Department to any of its clients

up to that point in 1992, and the Postal Service, after some fairly

tough negotiations with the Treasury Department at that time, finally succeeded with a lot of help from Mr. Runyon to get the

Treasury Department to agree to call provisions on our debt.

The particular issuance of debt at that time and those call provisions—which I think we are about to call the last one—has saved

us a significant amount of money on our interest expense.

The point here is that one of the things that is missing because

our banker today is the Treasury, which is really not set up to

service a customer like us. They do everything else well, but they
17

are just not set up to do that. As a result, we forego the opportunity to get timely access to a lot of the innovations going on in

the public markets that can really have a big impact on how we

effectively finance this organization.

Senator CLELAND. And in terms of borrowing, you would like

that access?

Mr. COUGHLIN. Yes, very much so.

Senator CLELAND. Thank you.

Just a couple of quick questions, Mr. Chairman, concerning the

Postal Service’s decision to centralize the procurement of uniforms.

I understand that under the current system, your employees buy

their uniforms from a network of some 700 retail vendors who establish their own pricing. Under the proposed system as I understand it, uniform purchasing would be limited to a relatively small

number of businesses, and contracts would be awarded through a

competitive bidding process that you hope will achieve cost savings.

I understand that the postal unions have signed off on the proposed uniform procurement program; however, I have heard concerns that this new system may leave thousands of hardworking

Americans without jobs. Is there any reason why the Postal Service

cannot sit down with the affected parties, the representatives from

industry and concerned unions, to work out some solutions before

sending out the bid, just to ensure that the uniform program will

not destroy some small businesses and good jobs?

For instance, the Postal Service has stated that it will not allow

subcontracted work to be performed in so-called sweatshops; however, I have been told that one of the companies that wants to bid

for centralized procurement of uniforms, Lyon Apparel in Kentucky, has been accused of paying its workers so little wages that

many of its long-term employees must turn to welfare, food stamps

and Medicaid to care for their families.

I would just like you to comment on the allegation. We do not

want to get into the business of encouraging sweatshops here just

to provide uniforms.

Mr. RUNYON. I would like to comment, and then I will ask Mr.

Coughlin to comment. First, we are probably the only large user of

uniforms that does not do the purchasing this way. All the other

government agencies, large companies like General Motors and

Ford, that use uniforms do it this way. It is an economical way of

doing it. It is a better way of controlling the quality. When you

have several hundred manufacturers out there, it is hard to control

the quality—it is hard to control sizes and all that kind of thing.

We do have, and we have recently put out a new communication,

to the effect that uniforms will be made of American material and

by American labor. So we have got that all covered. And if you are

a supplier to the government, you have got to meet certain laws,

and these people that you are talking about I think would have a

little problem complying with the laws they would have to meet in

order to supply our contract.

I think Mike has some numbers that would be interesting to you.

Mr. COUGHLIN. As of about a year ago at this time, which is the

latest data we have, we had a little over 900 licensees to either

manufacture or vend these postal uniforms for our employees. Interestingly enough, over half of those do less than $5,000 a year
18

business on this program. This is a $75 million-a-year program. A

little over 90 percent of that business is done by about one-fifth of

the licensees.

As we have looked at it—and our purposes in the program are,

first of all, to try to lower our cost, to improve the quality of the

uniforms we are providing our employees, and to comply with a collective bargaining agreement. This is a provision of the collective

bargaining agreement with three of our individual unions that

have agreed across the table with us that this is an issue that

needs to be addressed.

We have tried to take into account some of the concerns that

have been expressed through the Congress, both in the Senate and

the House, through the provisions that Mr. Runyon just described.

We have tried first of all to preclude any possibility of sweatshop

activity here through the provisions of the contract, to go to a virtual 100 percent domestic source requirement. So we cannot go

overseas for it, and we are going to try to structure the request for

proposal so that it is possible that we have more than one vendor,

that we have perhaps as many as two or three or four.

Unfortunately, the greater the number of vendors, the more you

tend to affect negatively the benefits of this effort. But we have

agreed to try to do that, and it will be in our Request for Proposals.

Senator CLELAND. Thank you very much, Mr. Coughlin, Mr. Runyon. Nice to see you.

Thank you very much, Mr. Chairman.

Senator COCHRAN. Thank you, Senator Cleland, for your contribution to the hearing.

Senator Levin.

OPENING STATEMENT OF SENATOR LEVIN

Senator LEVIN. Thank you, Mr. Chairman. Let me add my welcome to our witnesses.

About 3 years ago, Mr. Runyon, you appeared at a hearing here

to address and respond to a 1994 GAO report that described the

relationship between the Postal Service and its employees, and

that report of the General Accounting Office described numerous

problems that existed in the Postal Service’s relations with its employees and detailed a general climate of mistrust and hostility.

During that hearing, as a matter of fact, you agreed that too

often there were combative relationships between management and

employees in the Postal Service and pledged to address those

issues.

Last month, the General Accounting Office issued a follow-up report, reviewing the Postal Service’s efforts to improve both overall

performance at the Postal Service, but also postal employees’ working conditions. And with respect to postal performance, the report

stated that in the past few years, the Postal Service has made

some significant improvements in its overall financial performance,

in mail delivery, noting both what your net income was for 1995

and 1996, your on-time delivery record which was at an all-time

high of, I believe, 89 percent for fiscal year 1996 for overnight

First-Class Mail. So you really made some significant performance

improvements, and you and your staff and all the employees of the

Postal Service are entitled to a lot of credit for those.
19

But in the area of labor-management relations, the GAO report

indicates that some problems continue to plague the Postal Service,

and specifically, the report said that little progress had been made

in improving the persistent labor-management relations problems

that have resulted from autocratic management styles or poor management attitudes and programs. I noted the number of grievances

which had been filed and that had not been settled in the first two

steps of the grievance procedures, that they had increased from

65,000 in 1994 to about 90,000 in 1996, and that there also was

a significant increase in the number of grievances that await arbitration. Also, it was noted that the labor-management summit

which you had hoped to convene at a meeting here in 1994 has not

been convened.

So I would be interested in asking you a number of questions in

that area. First, let us talk about the summit issue. I gather that

it has not been convened, and maybe you can tell us why that is.

Mr. RUNYON. I am very pleased to report that on the 29th of last

month, the summit was convened——

Senator LEVIN. Oh, good.

Mr. RUNYON [contining]. And even prior to that, we had been

meeting with individual unions along with the Federal Mediation

Service. We have reached agreement with the APWU and with the

NALC on methods to look at these grievances that you are talking

about, the 90,000 you mentioned, that are there. I know that in one

particular instance, we have reduced a group by 12,000. So we are

doing very well at that.

We are looking at the process by which we do grievances. We

need to go back and change the process, because we can all get together, look at the grievances that are there and resolve them, but

that does not help. That is like pulling the plug on the bathtub,

and it all drains out. But if you put the plug back in, you have got

a problem.

What we are looking at now is the process of how we do grievances. My personal reaction is that we should get that down as low

as possible so that we have accountability at the lowest level possible to resolve those grievances, and stop having them come all

the way up. That makes more people understand that, really, they

have the responsibility to settle it, rather than pass it on. So that

is one thing that we are doing, and I think we are working very

well with those two unions to resolve it.

We have also reached an agreement with the Letter Carriers

Union that we are going to look at the way the letter carriers deliver the mail. The way the system is set up, it is sort of

adversarially designed. A letter carrier and his supervisor decide

each day how many hours it takes to do so much mail, and that

is on their minds, and if it does not go one way or the other, there

is a grievance about that. So we are looking at how we do that, and

I might say this is the most encouraging news I have had: We are

sitting down, working together, to try to figure out how to resolve

the cause of the grievances. If we can resolve the causes, then the

grievances are not going to be there. That is another thing that we

have done.

We also agreed at the summit that we would set up another committee to discuss union-management issues, so that unions can un20

derstand more about management issues. And also so that management can understand more about union issues. We can get all of

those things out on the table and talk about them, and how we can

resolve them.

So I think that what has happened from the summit is really

good news. We have had it, and we have agreed that we will meet

every quarter—the whole group: And everybody has bought into

following up on what we are doing. As I said, we have a Committee

on the process of how we handle grievances; we have a committee

set up to handle this union-management business relationship; and

we have set up another group to talk about the strategies of the

Postal Service. It is very important not only to the management

but to the employees what our strategies are. It is their jobs that

we are talking about. So those are three different working groups

that we have set up as a result of this summit.

So I think we are making progress. We are going to be going to

another Subcommittee hearing tomorrow, John McHugh’s oversight

subcommittee, focusing only on that subject. He will be having the

unions, the Federal Mediation Council, GAO, ourselves, and management associations all testifying at that hearing.

Senator LEVIN. That union-management working group that is

going to address the business relationships, is that what is going

to take the place of what you described in 1994 as the regular

weekly or biweekly meetings between your district and your plant

managers and their counterparts in the unions? It sounds like it

really does not address that issue, that it is much more of a lower

level. What happened to that plan to have those weekly meetings

between your managers and their employee representative counterparts?

Mr. RUNYON. That is working very well in some locations and not

well at all in other locations. There again, we do not have a simple

formula where we can say, ‘‘Go and do it like that.’’

Senator LEVIN. Are the meetings taking place everywhere?

Mr. RUNYON. Not everywhere, no, sir.

Senator LEVIN. Is there a directive from you to your managers

to convene those meetings everywhere?

Mr. RUNYON. No, I do not have a directive that says you will

meet every week, no, sir.

Senator LEVIN. Or biweekly?

Mr. COUGHLIN. I might add, Senator, that there is a contractual

requirement that we have regular labor-management meetings in

certain locations throughout the system, in district offices and

plants. Those are going on by contractual requirement.

Senator LEVIN. Can you take a look at the places where they are

not taking place and reach a conclusion as to whether they should,

and if not, whether a directive would not get that on track and let

us know what happens on that?

Mr. COUGHLIN. Sure.

Senator LEVIN. Senator Cleland as I came in was asking you

about the purchase of postal uniforms. I had some similar concerns

I believe to his, and I wrote you a letter with those concerns, and

you gave me a response which really was not specifically responsive. What I would appreciate you doing is going back and looking

at my letter and addressing the specifics in the letter. I got a very
21

general response. If you would do that, I would also appreciate

that.

Mr. RUNYON. I would be glad to do that.

[Information follows:]

INSERT RESPONDING TO SEN. LEVIN’S REQUEST FOR INFORMATION REGARDING THE STATUS OF REGULAR LABOR-MANAGEMENT MEETINGS

AT FIELD POSTAL INSTALLATIONS

As explained by Mr. Coughlin in response to your inquiry, local labor officials are

entitled to participate in regularly scheduled Joint Labor-Management Committee

meetings pursuant to a provision in the collective bargaining agreements with our

unions. The regularity and frequency of such labor-management meetings are set

by agreement at the local level. Because this is a local responsibility, we at the national level do not actively track whether or not such meetings are being held.

Therefore, with respect to the information you requested, we are surveying the field

to determine the locations where meetings are being held and, if they are not occurring, we will remind them of the responsibility to do so.

Also, as stated in my testimony, we have made progress in our national summits

and continue to actively work with the unions at the national level to come to understandings of the shortfalls of the systems we have in place to attempt to reach

agreement on how to best fix them. As we told you in the hearing, we are looking

to establish more accountability at the local level to ensure that the responsibility

for the resolution of grievances stays at that level and is not passed up through the

system to others. Better communication between local managers and local union officials is a tool that can help us to achieve this goal.

Once we have compiled the information and taken appropriate follow-up actions,

we will advise you of the results.

INSERT RESPONDING TO SENATOR LEVIN’S REQUEST FOR A MORE DETAILED RESPONSE TO HIS LETTER REGARDING THE POSTAL SERVICE’S

EMPLOYEE UNIFORM PROGRAM.

November 14 letter to Senator Levin is attached.

UNITED STATES POSTAL SERVICE,

November 14,1997

HON. CARL LEVIN

U.S. Senate

Washington, DC

DEAR SENATOR LEVIN: This responds to your August 1 letter regarding the Postal

Service’s proposal to centralize the purchasing of employee uniforms. I regret that

our earlier reply did not fully address your concerns.

I should explain that the uniform allowance program is not being abolished. Uniform allowances are employee benefits that have been negotiated through the collective bargaining agreements with our unions. In fact, the Postal Service and its

unions have signed memorandums of understanding that call for a centralized system of purchasing and distributing uniforms and work clothes.

Centralizing the purchase of uniforms can provide better and more consistent

quality in uniform items, as well as standard pricing features that will benefit uniformed employees. In addition, simplified administrative and purchasing processes

can offer savings to the Postal Service and, ultimately, our customers who actually

underwrite the costs of our uniform program.

While we recognize that changing the way we provide uniforms to our employees

will affect existing retail vendors, our experience has shown that a relatively small

number of businesses account for the majority of sales. In 1996, employees obtained

authorized uniform items through more than 928 retail vendors. Ninety-three of

those vendors—10 percent—accounted for 83 percent of employee purchases, with

the top 10 firms accounting for 54 percent of sales. At the other end of the scale,

293 firms, about one-third of the total, did less than $1,000 in postal sales. Another

180, one-fifth, sold between $1,000 and $5,000 worth of postal uniform items.

Very few of our vendors limit their business to postal sales; most sell postal uniforms as a part of a broader retail apparel activity or as part of a business supplying

uniforms to other professions and trades, such as public safety and health care

workers. Four of the top seven vendors have submitted pre-qualification packages

for the first phase of this two-phase initiative.
22

We expect to implement this program over a period of at least 3 years. This will

provide vendors time to adjust to the changes that will result. As the system

changes over, contractors will be required to submit plans for buying existing inventories from current vendors to minimize any loss on their investment. In addition,

our solicitation will call for pricing proposals that allow for sales persons and/or

stores in addition to mail order. Under the current system, most uniform orders are

delivered to employees by mail.

The Postal Service presently spends some $75 million annually on employee uniforms and work clothes. Savings can be achieved both through the simplification of

the uniform program’s administration, which involves processing more than one-million individual invoices each year, and through the economies of scale made possible

by working through a limited number of suppliers. However, until we have published a public solicitation and reviewed the offers it generates, we are unable to

provide specific savings we could expect to realize.

In the interim, we believe that commenting on estimated savings would be counterproductive, having the potential to direct bids toward the range of the savings

we project rather than reflecting the costs of satisfying the solicitation’s requirements. However, if the offers we receive do not provide clear savings and benefits,

there is no requirement that we make a contract award.

We believe, however, the experiences of other uniform purchasers support our conclusion that centralization can result in cost savings. When the National Forest

Service changed from a vendor system to a contractor system, its savings were 15

percent on a program of less than $2 million a year. A study of inventory practices

in the Canadian government found that when Canada Post went to a contractor system, cost reductions of 25 percent were achieved. The Department of Defense, in

comparing a selection of postal uniform items against comparable Air Force items

purchased under the prime vendor concept, found that our current costs are 25 to

70 percent higher.

We are very aware of concerns regarding subcontracting to overseas firms and

manufacturers that may operate under ‘‘sweatshop’’ conditions. To prevent this, we

have gone beyond domestic source standards by requiring that virtually all products

be manufactured in the United States using domestic materials. Our standard contract clauses require contractors to comply with the Fair Labor Standards Act, the

applicable standards promulgated by the Occupational Safety and Health Administration, and the National Labor Relations Act. A third-party quality assurance contract will monitor contractor and subcontractor plants, referring any possible violations to the appropriate enforcement agency. Our contracts also require the use of

small business and minority- and women-owned businesses.

Through this change, the Postal Service’s uniform purchasing program will reflect

common industry practice and bring added value to our expenditures. It makes good

sense for the Postal Service, its employees and its customers.

Best regards,

Marvin Runyon

Senator LEVIN. There has been some discussion here today about

the bill our chairman has introduced, S. 1296, and I just want to

ask you one question on that. We are really just getting into that

issue. You and I spoke very briefly on the telephone about it, and

I indicated we had not been briefed on it by the Postal Service, so

I did not even know what was in the bill. But I did have a process

question on that, and we are looking into it, as I mentioned to the

chairman in a letter which I dropped to you, Senator Cochran, the

other day, that we would look into the specifics of the bill as quickly as possible and get back with you on it.

But the question that I have is a process question on that bill,

as to whether or not the Postal Service consulted with the Treasury

Department or with business groups prior to that bill being introduced. Is that a process which you engaged in—because we are getting a lot of response from some of your customers and from the

Treasury Department on that bill, and a lot of concerns have been

raised. I am just wondering whether or not they were aired early

in this process and whether you had dialogue and discussion with

the Treasury Department and with business groups.
23

Mr. RUNYON. I did not specifically have a discussion with Treasury at the time this bill went forward. I did, however, some time

ago, have a couple of meetings with the Secretary about those concerns and asked him to please look at them.

Senator LEVIN. The Secretary of the Treasury?

Mr. RUNYON. Yes, sir, Secretary Rubin. We have had those discussions, and Mr. Coughlin was there with me.

Mike, maybe you could talk about other meetings we have had

with Treasury.

Mr. COUGHLIN. Senator, as a result of the reform bill that Congressman McHugh introduced last year, we have had regular, ongoing discussions with numerous stakeholder groups who have an interest and a stake in the outcome of that piece of proposed legislation.

A feature of that legislation is very similar to what Senator

Cochran has proposed here. During the hearings last year, a number of those same groups endorsed the bill, including those provisions of it. Few if any, as I recall, expressed the kinds of concerns

we heard expressed in the last couple of weeks, either in those

hearings or in meetings that we have had with them.

Now, having said that, they expressed those concerns. Our reaction to them and certainly to the Senator was that we can accommodate those concerns, we believe.

Senator LEVIN. Good. Thank you both.

Thank you, Mr. Chairman.

Senator COCHRAN. Thank you, Senator Levin.

Senator Levin asked some questions about the labor relations

issues, some of which I was going to ask. One that I do not think

has been asked is do you see your personnel and labor-related costs

being reduced a automation increases? I mean, you can make it almost a friend or an enemy, I guess, depending on how you embrace

automation, but it seems like labor costs are coming down in many

industries, and cost savings are occurring because of automation or

new technologies. Are you finding that to be true in the Postal

Service, or not?

Mr. RUNYON. I think that as we introduce automation, there will

be fewer people. That has been discussed with the heads of the

unions; I have had that discussion. And you need to ask them yourself—I am not trying to dodge your question—but you need to hear

it from them. What they say to me, however—and I will relay this

to you—is, we understand about that, we accept that, and we know

that if we are going to be competitive, you are going to have to do

the kinds of things that are necessary for us to be competitive, and

we have to agree with that.

So I do not think there is any basic conflict here. Now, there

would be a big conflict if I brought in 5,000 machines and put 5,000

people on the street. We have no intention of doing that. Our intention as we bring in the machines—is to work with the substantial

attrition in the Postal Service. But even with all the automation we

have brought in, we still have more people now than we did before

we started because of the demand of the product. A growth of 2

percent a year or something of that nature; a growth in the number

of places we have to deliver; all of that increases people.

So I do not think we are going to have a problem with that.
24

Senator COCHRAN. There was a letter last July, written by the

president of the American Postal Workers Union, Moe Biller, in response to that GAO report that Senator Levin mentioned on labor

relations in the Postal Service, and he says this, and I quote: ‘‘It

is not its relations with its employees that is bogging down USPS

operations; it is its management of its outside contractors.’’

To what extent do you agree or disagree with Mr. Biller’s statement?

Mr. RUNYON. I do not know if I understand what he means by

‘‘management of outside contractors’’; do you understand that?

Mr. COUGHLIN. Well, I think generally speaking, the union has

been concerned about any efforts we have had to use outside labor

sources to do part of the work we do. We have had several efforts

in that area in recent years, so I am sure that is what he is referring to.

My own reaction would be that, no, I do not agree with him at

all.

Mr. RUNYON. If that is what he means, I do not agree with it,

either. He is saying that we——

Senator COCHRAN. But do you contract out labor?

Mr. RUNYON. Yes, sir.

Senator COCHRAN. Substantially, or is it a minimal amount?

Mr. RUNYON. For years, the Postal Service has contracted out.

For example, we contract 15,000 flights a day with American Airlines, United Airlines, and others, to carry our mail. They are a

contractor to us to carry mail from city to city. We have over 40,000

trucks on the highway operted by private contractors who move

mail from city to city. We have that now.

We have a lot of people who work for the Postal Service as contractors. We have recently on Priority Mail set up 10 units on the

East Coast where we have contracted with a company there—it is

about a $1.7 billion contract—where we deliver Priority Mail to

them. They, in turn, take it from that location to the location nearest the delivery point, with dedicated air. We are contracted to do

that. Mr. Biller is not happy with that—but we are doing that. And

we did not do that to save money on labor. We do not save money

on labor. What we did was buy a complete package to take that

Priority Mail and deliver it to us in another city. That is where we

are going to deliver it. They take care of the air and everything so

that we can deliver it on time. And in the contract, there is a requirement that they have to meet a certain on-time schedule.

Senator COCHRAN. There is a structure, of course, in the Postal

Service that is mandated by law in effect, and I wonder, in connection with this October 1997 GAO report about a better relationship

between Postal Service labor and management, is there anything

in the Federal statutes that you could identify that we could

change or modify that would help bring about a better working relationship between labor and management?

Mr. RUNYON. The way the statute is written now, it says that we

will participate under the National Labor Relations Act with our

unions. And we do, and there is really nothing wrong with that. We

have collective bargaining with our unions.

The only difference between us and a private sector union is that

in our collective bargaining, the unions are not allowed to strike.
25

We go to mandatory binding arbitration. And I am not prepared

today to ask you to change that.

Senator COCHRAN. Senator Domenici, I have a couple more questions, but if you are prepared to ask more questions, I will be

happy to yield to you, sir.

Senator DOMENICI. Thanks.

I have just one, Mr. Chairman, and it might interest you also,

just because it is kind of absurd, and you do not like absurd things

to be happening with government.

Mr. Runyon, as you know from our previous correspondence,

1998—that is next year—marks the 400th anniversary of the first

continuous European Hispanic settlement in North America. That

event took place in 1598, when Don Juan Onate established the

first permanent European Hispanic settlement in New Mexico just

north of the little city of Espanola, at a church known as San Gabriel. You have been kind enough to urge the Citizens’ Stamp Advisory Committee to reconsider their decision not to issue a stamp

commemorating the stamp commemorating the 400th anniversary

of this event, and I thank you for that effort. Unfortunately, the

Committee has again rejected the 400th anniversary as a proper

topic for a 1998 stamp.

I am puzzled by the process that the advisory committee uses.

For example, Mr. Chairman, the Postal Service issued a new series

of movie monster stamps for Halloween. Dracula, The Mummy,

Phantom of the Opera, Wolf Man, and the Frankenstein monster

were all honored with a stamp.

Now, I think there is some misplaced and, I might say parenthetically, monstrous, closed parentheses, values here. Dracula

gets a stamp, but the 400th anniversary of the first permanent European Hispanic settlement in the United States does not. Dracula

is about 60 years old, and Onate is 400. Dracula is a fake, a fiction;

Onate is historical fact.

The one and only Wolf Man gets a stamp, but the heritage of millions of Hispanic Americans is ignored.

The Frankenstein monster gets a stamp, but the Nation’s largest

and fastest-growing minority gets no recognition for having been

the first to settle in the uncharted waters of the United States from

Europe 400 years ago.

The Phantom of the Opera gets a stamp, a Broadway plan, but

the Postal Service will not recognize the cultural, social and economic relationships resulting from 400 years of an Hispanic settlement.

So the Mummy—who, as I see it, did darned little—he lay

around; that is all he did—gets a stamp, but Onate, who blazed the

first trade route, introduced Christianity to the whole region west

of the Mississippi, is ignored.

Bugs Bunny got a stamp. And frankly, as one who represents a

very large Hispanic community, I assume many of them should be

‘‘hopping mad’’ when Frankenstein is recognized over their 400

years of involvement in our culture and history.

I wonder what I can do about it or what we can do about it. Do

you think the advisory committee has too much authority? I should

not ask you to answer that.
26

Mr. RUNYON. I do not know that they have too much authority.

I think that you have communicated to me very well, and I think

I should go back and communicate with the Citizens’ Stamp Advisory Committee again and see what we can do about it.

Senator DOMENICI. Well, I had three more questions, but you

have answered them all by that statement, and so I have no further observations even about it.

Thank you very much. I would appreciate finding out as quickly

as you can what their response is to your very gentle and kind, yet

backed up by some very interesting facts—you could take these and

ask them whether Dracula is more important than 400 years of

Spanish history. That might be interesting.

Thank you, Mr. Chairman.

Senator COCHRAN. Senator, I commend you. You have been very

persuasive and eloquent and clever in the way you presented your

point of view on this subject.

Senator DOMENICI. Thank you.

Senator COCHRAN. I commend you. It reminded me of Silvio

Conti, the distinguished Congressman from Massachusetts, who

often would use persuasive language similar to that—but probably

not even up to that standard for Silvio.

Senator DOMENICI. I remember he did one at Christmas once,

didn’t he?

Senator COCHRAN. Yes. He would do one annually. He would occasionally pick out an agriculture issue to make fun of. I always

remember all of those. [Laughter.]

Senator COCHRAN. Let me say that I think we have had a good

discussion. I have some more questions, and I may submit a few

for the record that we have not been able to discuss. But one thing

that I wanted to raise is that the postal rate issue to me is still

one that bears some careful scrutiny.

I have heard that the Postal Rate Commission has expressed

some concern in the past over the accuracy of data that is provided

by the Postal Service that accompanies requests for increases. Are

these concerns valid, and if you have heard them, what are you

doing to try to address those concerns?

Mr. RUNYON. Mr. Chairman, I am going to let Mr. Coughlin address that since he has had more experience with the Postal Rate

Commission than I have. And I like them, but I would just as soon

not have to go for increases too often. But I think Mr. Coughlin can

answer that question better than I.

Senator COCHRAN. Mr. Coughlin.

Mr. COUGHLIN. I think that fundamentally, the data systems and

the data we provide the Commission are accurate and reliable, certainly enough to set rates in the manner they do. I think there

were a couple of instances in the last rate case, one involving incounty newspapers, and the second one I have forgotten offhand.

It was a relatively—I do not want to say unimportant—but it was

a relatively small piece of the business. We did find some data

problems there, and we corrected them during the course of that

case.

As a matter of fact, right now, at the urging of Congressman

McHugh and the GAO, we are taking a joint look with a third

party contractor at our data systems to try to see how they are op27

erating and how they might be improved. I think when we get the

results of that, we will have a better feel for how they might have

to change in the future.

Senator COCHRAN. One of the concerns I have heard from some

of the competitors—and I am curious to know your reaction to this,

because I do not know what the seriousness of it is—do you use

certain classes of mail to subsidize the cost of other classes, and is

that prohibited by law? Are you not allowed to do that?

Mr. RUNYON. I will answer the question the way I think it is,

and I will let the expert here tell me if I am right or wrong.

Senator COCHRAN. OK.

Mr. RUNYON. We cannot subsidize one sort of mail with the other

part of our mail. Every mail has to carry its own expenses. Is that

not right?

Mr. COUGHLIN. That is correct. Every class must cover its attributable cost.

Senator COCHRAN. You are asking for a 4.5 percent overall increase—but just a one-cent increase for First-Class Mail—is that

right?

Mr. RUNYON. Yes.

Senator COCHRAN. How do you allocate the 4.5 percent increase?

You say half your business is First-Class Mail? That sounds like

a small increase for the First-Class Mail compared with a 4.5 for

the overall increase. That means some rates are going to go up a

considerable amount, aren’t they?

Mr. RUNYON. On each class of mail that we have, there are different amounts for covering our costs. For example, we may have

a cost coverage of 110 percent on one and 180 percent on another.

Both cover their costs; one covers it better than the other. Where

we have those that are about 90 percent, they are not covering

their costs, so we have to increase more. We have one of those that

we are going to catch a lot of trouble with in this rate filing. I have

forgotten what it is, but we have one rate that is not making its

costs, and it is going to be very troublesome when people understand that. But we do have a different rate coverage, or cost coverage, in each class. We do not try to make all of them come out

the same, but they all cover their costs.

Senator COCHRAN. What about the advertising expenses? That is

another question that is similar to this. Do revenues for the advertising budget come from the general fund, supported by all mailing,

or are revenues taken from a specific mail category to pay for the

advertising and marketing of that category?

Mr. COUGHLIN. They are treated as institutional costs, Senator;

that means they are part of the general fund. Advertising is viewed

as benefitting the institution as a whole, and it may or may not

target a specific product.

Senator COCHRAN. Well, what about a minute ago when Senator

Domenici asked a question about the Priority Mail advertising and

how effective it is and is it working. Does the cost of the Priority

Mail advertising come out of the general fund, or is it attributable

to the costs of Priority Mail?

Mr. COUGHLIN. I would have to go back and check to be certain.

I think it is part of the institutional base, but I would have to

check for certain.
28

Senator COCHRAN. Another way to ask it is are the revenues

from Priority Mail used to pay for the ads that promote Priority

Mail; and similarly, are revenues from Third Class Mail used to

pay for advertisements promoting Direct Mail?

Mr. COUGHLIN. Yes—I might add, though, that the contribution

from Priority Mail, for example, the subject of the example you

gave, is almost double the attributable costs that we incur. In other

words for the $3 we get for a basic piece of Priority Mail, approximately $1.50 covers the attributable costs, and the other $1.50 contributes to the institutional costs.

On other categories of mail, that might be $1 of revenue and 5

cents of contribution. So there is quite a difference between the

products and the spread.

Senator COCHRAN. Some in the newspaper business have raised

objections to the Service’s advertising campaign—I think it is ‘‘Direct mail delivers’’—saying that a government agency should not

use revenues from the sale of postage stamps to promote direct

mail over other media such as newspapers, magazines, television

and radio and the like. What is your reaction to that?

Mr. COUGHLIN. Well, first of all, let me say that, while they do

not always believe it, newspapers are very important customers of

ours. At the same time, I believe it is appropriate for the Postal

Service to promote the use of the mail, generally, where we believe

there is an effective utilization that can be made. That would include, in our case, the use of mail for advertising purposes. Advertising in the mail is a unique medium. It has its own set of benefits

as well as disadvantages, and in fact, when you look at mail as opposed to other ways to advertise, there are clear differences. Somebody who is looking for a way to use media of any sort is going to

examine those and ask what is the best way to get my message

home. I believe it is appropriate on those occasions.

Senator COCHRAN. The question then follows, why should the

Postal Service pay for the advertising rather than leaving the advertising and promotion of direct mail to the direct mail industry?

Mr. COUGHLIN. Because the use of advertising mail or any other

product we have benefits directly the system as a whole in terms

of the contribution in revenues that it brings to the system. The

very large fixed costs we have and that expanding delivery service

requirement that Senator Domenici mentioned earlier really requires this system to have volume in it to continue to thrive financially. The bigger the network gets, the bigger that fixed cost portion of that network gets, the more volume it has to feed through

it.

Senator COCHRAN. Well, I think this has been a good hearing,

and I appreciate very much the cooperation from the Postmaster

General and the Deputy Postmaster General today.

We have had good Senator participation, we have covered a wide

range of issues and, as I said before, there may be some other questions that we will submit for answers to complete our hearing

record.

Let me end the hearing by congratulating you. I really do think

you have done an outstanding job. The management team, while

you have labor problems—in an organization this large, you are

going to have problems—but we have had some experiences in the
29

past which I think you have addressed in a very effective and

thoughtful way. Obviously, turning around the economics of the

Postal Service has been a tremendous accomplishment, and I think

the general public appreciates that, we appreciate it from a budget

point of view, making a contribution toward keeping the deficit

under control. We are reaching the point where the Federal Government is going to have a surplus, believe it or not, and that is

coming as a shock to a lot of people—even those who designed the

Balanced Budget Act. I let Senator Domenici get away before I

made a comment like that.

You were talking about unexpected revenues which came in,

‘‘Christmas in August’’ as a result of the UPS strike, in effect. Well,

the Federal Government has had some good news, too, on the financial front. But I think you have done a great job in that way

and in looking to the future. Trying to figure out ways to hold

down cost increases, I think is good for the country and good for

the general public, and I congratulate you for that.

We are going to continue to work to resolve questions about the

legislation to reform the Postal Service and to permit some new

flexibilities. We will continue to work on that and try to answer

other questions that might be raised about it.

Thank you very much. That concludes our hearing, and the Subcommittee is adjourned.

[Whereupon, at 3:59 p.m., the Subcommittee was adjourned.]

(31)

A P P E N D I X

ADDITIONAL QUESTIONS SUBMITTED FOR THE RECORD REGARDING USPS

PLANS TO CENTRALIZE EMPLOYEE UNIFORM PURCHASING

1. Has USPS consulted with the Small Business Administration and the Office of

Management and Budget in developing the uniform procurement consolidation proposal? If not, would USPS have any objection to allowing SBA and OMB to comment

before the consolidation moves forward?

The Postal Service has not consulted with these agencies. While we are aware of

no activities on the part of SBA and OMB regarding our plans to consolidate the

purchasing of employee uniforms, their comments would be considered. We do not

feel it would be prudent, however, to hold off implementation of the program.

2. Will USPS agree to suspend the uniform procurement consolidation effort while

the General Accounting Office conducts a study on the likely cost savings to be

achieved under consolidation and the potential impact on jobs in small and medium

sized uniform businesses?

We would be happy to review the results of any General Accounting Office (GAO)

study regarding uniform procurement. In fact, GAO studied uniform procurement

in the Department of Defense and published its results in April, 1994. According

to this study, ‘‘GAO maintains that the costs-benefits possible from adopting a prime

vendor arrangement for items where volume is high and demand is more predictable

appears to be substantial.’’ The Postal Service is seeking the same arrangement

under similar circumstances.

3. Deputy Postmaster General Coughlin testified that USPS intends to modify its

uniform procurement consolidation proposal from the single-vendor to a plan involving between two and four uniform vendors. In light of this change in the procurement

policy, does USPS intend to restart vendor prequalification?

There are no plans to restart vendor prequalification.

4. USPS has indicated that the president of the American Postal Workers Union

expressed support for uniform procurement consolidation. What does the Postal Service believe to be the position of the leadership of the National Postal Mail Handlers

Union and the National Association of Letter Carriers.

Each of these unions is party to a binding agreement with the Postal Service regarding these changes to our uniform program. As such, we would expect that the

leadership of each union would support its agreements.

ADDITIONAL QUESTIONS FOR THE U.S. POSTAL SERVICE SUBMITTED FOR

THE RECORD BY SEN. DOMENICI

1. Who appoints the members of the Citizens’ Stamp Advisory Committee?

The members of the Committee are appointed by the Postmaster General.

2. Do the members of the Citizens’ Stamp Advisory Committee serve for fixed terms,

or at the pleasure of some official?

The Committee’s members are appointed by and serve at the pleasure of the Postmaster General for fixed terms of 5 years, not to exceed three terms.

3. If the Committee serves at the pleasure of some official, who is that official?

See response to question 2.

4. What is the shortest period of time in which a stamp has been developed?
32

The shortest time frame for a regular commemorative stamp is the 4 month preparation for 1991’s stamp honoring the American men and women who served in Operations Desert Shield and Desert Storm.

5. What was the timeline from the date the request was made for an AIDS Awareness stamp, to the time the decision was made by the Citizens’ Stamp Advisory Committee to approve and issue the stamp?

Initial requests for an AIDS Awareness stamp were received by the Citizens’

Stamp Advisory Committee (CSAC) as early as 1988. At its December 18, 1992

meeting, the Committee approved the subject and requested that designs be developed. The design was approved by the Committee at its July, 1993 meeting, and

approved by the Postmaster General the same month. The stamp was put into immediate print production and was issued on December 1, 1993.

6. What was the timeline from the date the request was made for a Breast Cancer

Awareness stamp, to the time the decision was made for its approval and issuance?

The initial requests for a Breast Cancer Awareness stamp were received by the

CSAC in 1994. At the July, 1995 meeting, the Committee approved the subject and

requested that designs be developed. The design was approved by CSAC at its September 29, 1995 meeting and approved by the Postmaster General in November,

1995. The stamp was then put into print production and issued on June 15, 1996.

Æ