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43–746 CC 1997

OVERSIGHT OF THE U.S. POSTAL SERVICE:

INSPECTOR GENERAL OF THE U.S. POSTAL

SERVICE, GOVERNORS OF THE U.S. POSTAL

SERVICE

HEARING

BEFORE THE

SUBCOMMITTEE ON THE POSTAL SERVICE

OF THE

COMMITTEE ON

GOVERNMENT REFORM

AND OVERSIGHT

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

MARCH 19, 1997

Serial No. 105–39

Printed for the use of the Committee on Government Reform and Oversight

(

(II)

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

J. DENNIS HASTERT, Illinois

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

STEVEN SCHIFF, New Mexico

CHRISTOPHER COX, California

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

JOHN B. SHADEGG, Arizona

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

JOHN E. SUNUNU, New Hampshire

PETE SESSIONS, Texas

MICHAEL PAPPAS, New Jersey

VINCE SNOWBARGER, Kansas

BOB BARR, Georgia

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

GARY A. CONDIT, California

CAROLYN B. MALONEY, New York

THOMAS M. BARRETT, Wisconsin

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

TIM HOLDEN, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

JUDITH MCCOY, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON THE POSTAL SERVICE

JOHN M. MCHUGH, New York, Chairman

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BENJAMIN A. GILMAN, New York

STEVEN C. LATOURETTE, Ohio

PETE SESSIONS, Texas

CHAKA FATTAH, Pennsylvania

MAJOR R. OWENS, New York

DANNY K. DAVIS, Illinois

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

DAN BLAIR, Staff Director

HEEA VAZIRANI-FALES, Professional Staff Member

ROBERT TAUB, Professional Staff Member

STEVE WILLIAMS, Professional Staff Member

JANE HATCHERSON, Professional Staff Member

JENNIFER TRACEY, Clerk

CEDRIC HENDRICKS, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on March 19, 1997 ............................................................................ 1

Statement of:

Corcoran, Karla W., Inspector General, U.S. Postal Service, accompanied

by Thomas Coogan, Acting Counsel, U.S. Postal Service; and Sylvia

Owens, Deputy Assistant Inspector General for Investigations, U.S.

Postal Service ................................................................................................ 11

Del Junco, Tirso, M.D., chairman, Board of Governors, U.S. Postal Service; Susan E. Alvarado, Governor, U.S. Postal Service; Bert H. Mackie,

Governor, U.S. Postal Service; Einar V. Dyhrkopp, Governor, U.S. Postal Service; and S. David Fineman, Governor, U.S. Postal Service ........... 59

Letters, statements, etc., submitted for the record by:

Corcoran, Karla W., Inspector General, U.S. Postal Service:

Followup questions and responses ........................................................... 34

Prepared statement of ............................................................................... 14

Del Junco, Tirso, M.D., chairman, Board of Governors, U.S. Postal Service, prepared statement of ............................................................................ 62

Fattah, Hon. Chaka, a Representative in Congress from the State of

Pennsylvania, prepared statement of .......................................................... 9

Gilman, Hon. Benjamin A., a Representative in Congress from the State

of New York, prepared statement of ........................................................... 79

McHugh, Hon. John M., a Representative in Congress from the State

of New York, prepared statement of ........................................................... 4

(1)

OVERSIGHT OF THE U.S. POSTAL SERVICE:

INSPECTOR GENERAL OF THE U.S. POSTAL

SERVICE, GOVERNORS OF THE U.S. POSTAL

SERVICE

WEDNESDAY, MARCH 19, 1997

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON THE POSTAL SERVICE,

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,

Washington, DC.

The subcommittee met, pursuant to notice, at 2:05 p.m., in room

2154, Rayburn House Office Building, Hon. John McHugh (chairman of the subcommittee) presiding.

Present: Representatives McHugh, Fattah, and Davis.

Staff present: Dan Blair, staff director; Robert Taub, Heea

Vazirani-Fales, Steve Williams, and Jane Hatcherson, professional

staff members; Jennifer Tracey, clerk; and Cedric Hendricks, minority professional staff member.

Mr. MCHUGH. The hearing will come to order. Good afternoon. I

want to welcome you to the first oversight hearing of the Subcommittee on the Postal Service for the 105th Congress. At the outset, I want to pay particular welcome to our new ranking member,

the gentleman from Pennsylvania, Mr. Chaka Fattah. I have no

doubt that it’s due to his great influence that we have been elevated to the full committee room and we appreciate that.

This is an exciting opportunity for us. We do have, I think, a

good mix and balance of people who have been involved on the subcommittee in prior years and those who are joining us for the first

time. Those of you who have suffered through these hearings in the

past may recall that I tried to repeatedly say that, while some of

us may not have had a great length of service in this subcommittee, we’re trying to make lemonade out of lemons and use

our lack of intelligence, per se, forge it into an asset, and bring a

fresh perspective.

I think that that has been helpful and has added to the process.

And I feel very strongly about those who are joining the subcommittee for the first time. I look forward to their participation.

I have a formal statement that I’d like to have submitted for the

full record. But I would like to open up, with an abbreviated statement. As I mentioned, today does represent our first hearing in the

105th Congress.

Unfortunately, our prior session was rescheduled from last

Wednesday due to the Postmaster General’s unexpected illness. We

certainly extend to him our best wishes for a full and speedy recovVerDate 11-MAY-2000 08:57 Aug 05, 2002 Jkt 080370 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 W:\DISC\43746 pfrm12 PsN: 43746
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ery. We look forward to hearing from the Postmaster General at a

later date, hopefully very soon. This afternoon we are pleased to

welcome the new Postal Service Inspector General, Ms. Karla Corcoran, and the Governors of the Postal Service.

We all recognize that this is Ms. Corcoran’s first appearance before the subcommittee, and it is our first opportunity to talk with

her. The new office that Ms. Corcoran holds is the product of efforts

to establish an independent Office of the Inspector General for the

Postal Service that really came to a conclusion during the final session of the 104th Congress.

Ms. Corcoran was appointed to her position by the Governors

this past January and has been working, I understand, very diligently on establishing the parameters of her new office. We all recognize that she is starting from scratch in terms of defining needed

resources and areas of responsibility. I would want the record to

show that she has this subcommittee, certainly this chairman’s,

full support as she proceeds with this complex and, probably, very

delicate task.

Recognizing that Ms. Corcoran’s time has truly been monopolized

by the responsibilities of setting up her new shop, I hope she can

highlight here today those areas she intends to review, including

any investigative initiatives she might have made so far. We’re also

interested in hearing from Ms. Corcoran regarding her thoughts on

ways her office can better facilitate labor and management relations in the Postal Service in the days ahead.

I also want to welcome our second panel of witnesses, the Governors of the Postal Service. As the governing body of that organization, ladies and gentlemen, you have tremendous responsibilities

for helping to shape the course and direction of the largest agency

in the Federal Government. And your job, I understand, is often a

thankless one. Some of us on this subcommittee can relate to that

at times.

Up until recently, you were reimbursed at the same level of compensation as your predecessors first appointed in 1970. So I think

it’s fair to note that, for whatever else may be said, no one can

charge you with being in it for the money. We appreciate your interest in what we all know is an important activity in this great

country. We also look forward to hearing from the Governors and

the Inspector General detailing, for the subcommittee, the recently

approved designation of functions between the Inspection Service

and the IG.

I also understand that the Governors approved an interim budget for the IG, which will enable the office to employ the necessary

personnel as well as equip itself appropriately. For the Governors,

we hope that they, as well as the IG, can comment regarding ways

to strengthen the ethics environment for the Postal Service. Recent

news articles have, unfortunately, cast a shadow on the enforcement provisions regarding procurement and compliance with conflict of interest procedures.

Where we fail to observe these important requirements, there is

an understandable loss of confidence on the part of the public and

the institutions that wrongly divert attention and resources from

the need to strengthen the ability of the Postal Service to perform

its core mission. We all are aware of the tremendous crossroads at

3

which the Postal Service finds itself. The institution envisioned by

the 1970 Postal Reform Act finds itself at an increasing disadvantage as the marketplace in which it operates dramatically changes

and continues to change.

While this hearing is devoted to questions of oversight, the issue

of postal reform is obviously inherent in determining what course

the service shall take in the years to come. We urge the Governors

today to give us their sense of the direction the Postal Service is

going and what they believe the future may hold for this valued institution should the current statutory structure remain, and if Congress fails to consider what I, at least, believe are needed reforms.

So with that, we’d like to proceed with the hearing. But before

doing that, I welcome the opportunity to yield to our new ranking

member, the gentleman from Pennsylvania, for any comments he

may wish to make at this time. Mr. Fattah.

[The prepared statement of Hon. John M. McHugh follows:]

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5

6

7

8

Mr. FATTAH. Well, let me thank you, Mr. Chairman. And I do

look forward, as do the other members of the minority on this subcommittee, to working with you as we seek to perform our role in

terms of oversight. I want to welcome today’s witnesses. I have a

formal statement that I will have entered into the record. But I

look forward to hearing from both the Inspector General and from

the chairman and members of the Board of Governors.

This is a very important function that affects the everyday lives

of Americans throughout our country. And it is an issue of extraordinary importance, I think, to Members of the Congress, that we

provide a framework that’s necessary for the Postal Service to continue to do its job and to do it well. Thank you.

[The prepared statement of Hon. Chaka Fattah follows:]

9

10

11

Mr. MCHUGH. Well, I thank the gentleman, certainly. There will

be no objection, I know, in having his full statement placed in the

record. Let me restate how happy I am that you have joined us and

how we’re all looking forward to working with you toward the common good. We thank you for your comments.

With that, I would call forward Ms. Corcoran. Under the rules

of the full committee, it’s required that every witness except Members of Congress have to take an oath that they will present testimony that’s truthful. So if you will raise your right hand and repeat after me.

[Witnesses sworn.]

Mr. MCHUGH. Let the record show that Ms. Corcoran and her

two associates have responded in the positive. I will refer to Ms.

Corcoran for the purposes of introduction as she may see fit. But

before we do that, we do have another Member who has joined us,

the gentleman from Illinois, the Hon. Danny Davis. I would happily

defer to him for any opening comments if he chooses to make them

at this time.

Mr. DAVIS. Thank you very much.

Mr. MCHUGH. We said awful nice things about you. We’re sorry

you missed it. But we thank the gentleman and welcome him to

the subcommittee. And we’re looking forward to working with you.

So with that, Ms. Corcoran, the attention of the full room is yours.

We look forward to your comments.

STATEMENTS OF KARLA W. CORCORAN, INSPECTOR GENERAL,

U.S. POSTAL SERVICE, ACCOMPANIED BY THOMAS COOGAN,

ACTING COUNSEL, U.S. POSTAL SERVICE; AND SYLVIA

OWENS, DEPUTY ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS, U.S. POSTAL SERVICE

Ms. CORCORAN. Mr. Chairman and members of the committee, I

appreciate the opportunity to appear before you today to discuss

our progress in implementing the Inspector General legislation for

the U.S. Postal Service. Joining me are Tom Coogan, my acting

counsel, and Sylvia Owens, my Deputy Assistant Inspector General

for Investigations.

With your permission, I would like to submit my full statement

for the record and take this opportunity to briefly discuss our major

accomplishments.

Mr. MCHUGH. Without objection. So ordered.

Ms. CORCORAN. Thank you, Mr. Chairman. Since 1988, the Postal Inspection Service has performed the functions of the Inspector

General. However, late last year, Congress enacted legislation creating a new Office of Inspector General within the Postal Service.

The law required the Postal Service Governors to appoint an independent Inspector General within 90 days. Further, the requirements necessary to establish an OIG were to occur no later than

60 days after the Inspector General’s appointment.

I am proud to report that we met these challenging requirements. I was sworn in as Inspector General on January 6, 1997.

One month later, I presented, and the Governors approved, a pay

and benefits package for the organization. This was a necessary

first step to begin recruiting and hiring qualified candidates. At the

March Governors’ meeting, I presented, and the Governors apVerDate 11-MAY-2000 08:57 Aug 05, 2002 Jkt 080370 PO 00000 Frm 00015 Fmt 6633 Sfmt 6602 W:\DISC\43746 pfrm12 PsN: 43746
12

proved, our designation of audit and investigative functions. During

this period, I also assembled a transition team of 12 people with

diverse professional experiences from other Federal agencies and

the Postal Service.

Our first priority was to enter into an interim Memorandum of

Understanding with the Chief Postal Inspector. This ensured that

the Inspection Service would continue to perform the responsibilities under the Inspector General Act. The agreement provides that

these functions are to be assumed by my office as positions are

filled. As directed in the legislation, we developed a pay and benefits package that is comparable to other OIGs.

Additionally, we decided to use pay bands similar to those used

by the General Accounting Office. The use of pay bands was recognized by the National Performance Review as a better way to tie

compensation to performance. Next, a transition team identified

the functions to be performed by the OIG. We discussed Postal

Service issues with congressional staff, General Accounting Office

representatives and the Postal Service community, to obtain their

perspectives.

We identified current Inspection Service functions that should be

performed by the OIG. We also identified additional work, including oversight of the Inspection Service, that we will perform to

meet the requirements of the Inspector General Act. The OIG will

focus on functions that lend themselves to service-wide reviews.

For example, the OIG will conduct all financial statement audit activities above the district level.

This allows the OIG to focus on key events leading to the consolidated annual financial statement. Additionally, the OIG will audit

postal-wide performance issues, systems development, contract administration, and new facilities construction over $10 million. With

respect to investigations, the OIG will have primary responsibility

for bribery, kickback, conflict of interest and service-wide investigations.

We will also be actively involved in the workers’ compensation

program by issuing subpoenas, conducting investigations of health

care providers, and partnering with the Inspection Service. In addition, we will conduct or partner significant embezzlement cases. All

investigations involving Postal Service executives will be performed

by the OIG.

We also identified a number of program areas where additional

or expanded work is necessary. For example, the OIG will review

the Postal Service’s ratemaking processes, revenue generation initiatives and labor-management issues. Further, we will have a separate division responsible for overseeing the Inspection Service.

This designation of functions meets the requirements and goals of

the Inspector General Act.

It results in three categories of work: Inspector General work, Inspection Service work, and shared, but not duplicated work. Also,

the designation of functions leverages resources and minimizes adverse impact on Inspection Service employees. We are now developing a Memorandum of Understanding with the Chief Postal Inspector to implement our individual and shared responsibilities.

My goal for the OIG is to have sufficient positions filled by June

so we can initiate our own audits and investigations. To date, I

13

have hired the Deputy Assistant Inspector General for Investigations, Sylvia Owens, and the Director of Contract Audits, among

others. In addition, we are giving priority to hiring staff that will

enable us to issue subpoenas and staff the hotline.

Our next area of progress has been the development of an organizational structure to quickly implement the OIG’s functions. We

have developed an organizational structure with Assistant Inspectors General for Audit and Investigations. This complies with the

Inspector General Act. The structure also supports the primary

goals of the Postal Service. Now, I would like to turn to our

progress in developing a budget for the OIG.

We used the designation of functions as the basis for developing

our budget estimates. We are now refining these estimates and will

provide a budget for the Governors’ approval at their April meeting. The Governors recognized at the March meeting the need to

fund operations in the interim, and approved a 60-day budget of $5

million. Additionally, at the March meeting, the Governors approved a resolution authorizing the office to conduct investigations

of postal crimes, carry firearms, serve subpoenas and warrants,

and make arrests.

In closing, I would like to acknowledge the support of the House

and Senate staff, the Governors, and the employees of the Postal

Service. In particular, I would like to thank Chief Inspector Ken

Hunter and the employees of the Inspection Service for their assistance in helping us gain an understanding of the programs, activities, and functions of the Postal Service.

Thank you, Mr. Chairman. I would be happy to respond to your

questions.

[The prepared statement of Ms. Corcoran follows:]

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Mr. MCHUGH. Thank you, Ms Corcoran. We’re looking forward to

that opportunity. In consultation with the ranking member—as you

heard the bells—we thought it would be best if we just recessed,

hopefully for a brief period, while we go cast these votes, and then

come back. So I apologize, but if you can bear with us, we’ll try to

return as quickly as possible.

[Recess.]

Mr. MCHUGH. We’re going to reconvene the hearing. I apologize

beforehand, the Murphy’s law of legislation and votes is the minute

you try to do something, they have votes. And we have two 10-

minute votes coming up. So we’re going to be off and on. It’s just

a fact of life. So if we could proceed with the permission of Mr.

Fattah. I appreciate that. First of all, welcome.

Ms. CORCORAN. Thank you.

Mr. MCHUGH. The provision of this office was a part of the original Postal Reform Act that we introduced last year. We felt it was

important enough to try to pursue an initiative separately along

with some other questions that we feel very appropriately and very

fortunately were passed. And we’re very much looking forward to

your office being established and going forward with what we think

is some very important work.

And I want to state, again, what I tried to make clear last year.

Our interest in creating this new office was not in any way intended to be a slight toward, particularly those individuals—Mr.

Hunter, especially—involved in the combined office of years past.

Quite the contrary, that particular gentleman has amassed an exemplary record in service to the post office and now the Postal

Service. That is to be commended.

But we do feel that there are some important functions and some

impressions of heightened propriety that the creation of your office—and, now, with you in that position—can further. I was very

pleased to hear, both in your abbreviated statement and in your

full statement that I had the opportunity to read several nights

ago, what I take as a spirit of cooperation between the Inspection

Service and your office as you try to work your way through what

I intended to indicate in my opening statement must be a rather

challenging chore, to draw lines of demarcation as to who does

what.

You mentioned in your comments that you’re working on an

MOU with Mr. Hunter. We’d be pleased to hear how you’re progressing with that. Have you encountered any difficulties to this

point that may seem insoluble or of particularly difficult dimensions, and, also, when you think that MOU will be completed and

executed?

Ms. CORCORAN. I expect the MOU to be completed about the time

of the next board meeting, so, hopefully, we can present it to the

board at the same time that we present the budget. We have not

come across any problems in drafting the MOU thus far, mainly because we had worked out so many of the issues in the MOU while

doing our designation of functions.

What we are doing with the MOU is just putting a lot of meat

around the bones that is shown in the chart that is in the longer

statement concerning the designation of functions. We’re also outVerDate 11-MAY-2000 08:57 Aug 05, 2002 Jkt 080370 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 W:\DISC\43746 pfrm12 PsN: 43746
25

lining some notification requirements which will just make smooth

operation between the two offices.

Mr. MCHUGH. When you say the next board meeting, you mean

the April meeting?

Ms. CORCORAN. Yes, sir.

Mr. MCHUGH. So this is pretty fast track, then?

Ms. CORCORAN. We’re hoping that it will be on a fairly fast track

so that we can keep things moving.

Mr. MCHUGH. For the record, it’s certainly not my intention to

involve ourselves as a subcommittee directly in the issues that

you’re trying to resolve. But I would say that we are obviously very

interested in ensuring that this new office is empowered to do

those things that are consistent with the Inspector General Act,

that we think are consistent with the objective of a Postal Service

that is running as efficiently and smoothly as it can.

A part of that function, obviously, is your office’s ability to operate as unfettered as possible. We’re going to be very interested and

paying close attention to these developments as they go forward.

And so, I would say to you that if you ever feel there is a need for

our having information on any matter, we would greatly appreciate

that information, just as an open offer and not as a challenge or

as a demand. But we think this is important work.

Ms. CORCORAN. Thank you. I appreciate that.

Mr. MCHUGH. If I could take it one step further. You are evolving a budget. I think the Governors acted very responsibly in

issuing you the $5 million 60-day budget. But in terms of resource

allocation—and I’m speaking for the Governors where I have no

right to—but let me try to put myself in their position. Were I to

ever be able to aspire to such high and lofty positions, I would be

very concerned about the cost of the entire operation of the administration of the Postal Service.

This is a new function, and it’s going to cost money. I would

imagine they’re trying to see what they can do to try and limit the

increase of costs, vis-a-vis the old combined service. I’ve heard talk,

for example, about the contemplation of a dollar for dollar tradeoff.

In other words, every dollar that goes to your operation somehow,

by necessity, has to be a dollar coming out of the old Inspection

Service.

Have those kinds of issues been resolved as you work toward a

full budget? Because, before you answer, let me say, I haven’t aspired to such a lofty position. While I understand and even laud

what I suspect is their intention to hold that down, it is certainly

not the intention of this chairman to have such a dollar for dollar

tradeoff, because I don’t think that’s possible.

I think your testimony states fairly clearly, in assigned percentages, the amount of new work that you’re going to be doing, hopefully. So how is your budget talk going? Are we in a dollar-for-dollar tradeoff situation? And believe me—some of the Governors are

shaking their heads. No, you’ll get the chance to answer those. But

I was curious as to Ms. Corcoran’s observations.

Ms. CORCORAN. The way that my team has gone about putting

together the budget has been to actually take a look at what we

need to run our operation without real consideration of what the

Inspection Service is doing. Because I work for the Governors and

26

the Inspection Service is working for management and the PMG,

I have taken what I need to set up this operation and make it operate efficiently.

The thing we have done with the Inspection Service, and we are

continuing to do, is try to look to see how we can minimize the impact on the Inspection Service by phasing in our budget over a 5-

year period. But we do have a lot of startup cost and just things

that you need to get an office running that will make it very hard

to keep costs down a lot in terms of making it budget-neutral.

Mr. MCHUGH. Thank you for that. As I indicated prior to the

gentleman from Pennsylvania’s return, we understand there are

going to be votes. He and his staff have been very gracious about

allowing us to proceed under less than ideal conditions. So I don’t

want to hog this time. I’d be happy to yield to the gentleman for

any questions he may have at this time, and, with that, say

thanks, as well, for his cooperation.

Mr. FATTAH. Let me thank the chairman. I note that in your abbreviated testimony, you refer to the fact there were—it’s on page

6 at the bottom—additional program areas where expanded work

would be necessary. And one of them that you identify is labormanagement issues, which is also indicated on your chart. If you

could expound upon that for the benefit of the committee as to

where you see, in terms of the program area, meaningful work

being done?

Ms. CORCORAN. The Postal Service, with approximately 850,000

employees, certainly has the nucleus for looking for new ways to

do things and different ways to do things. There has been talk over

years by GAO and other people that there needs to be improvement

in many of the processes. In the past, the Inspection Service has

dealt with labor-management issues mainly through hotline inquiries. The purpose of this group will be to actually take an independent look at what is going on in the workplace, to try to see

whether or not there are improvements that can be made to the environment.

Mr. FATTAH. Your previous service was with the Air Force. Is

that correct?

Ms. CORCORAN. That is correct.

Mr. FATTAH. It’s a very large organization in and of itself.

Ms. CORCORAN. That is correct.

Mr. FATTAH. And one of the things that the armed services have

been quite successful at is to affirmatively include people into leadership ranks. One of the labor-management issues that I have

some concerns—or questions, really—not concerns, because I don’t

know enough yet about the whole issue of affirmative inclusion in

the operation, the leadership elements in the police station.

So hopefully, that will be one of the areas that you will give that

you have some expertise from the Air Force—be able to follow suit

with. Let me go back to the question about the budget that the

chairman raised, the $5 million for the 60-day budget. Do you have

any—I know that you’re in the budget preparation process—but do

you have any sense of what the outer limits are of what is going

to be necessary for you to be fully staffed and at what point—I

know that you suggest that in maybe 60 percent of the workload

27

by 2001—when do you plan on being fully engaged and at what

round ballpark figure are we talking about?

Ms. CORCORAN. I plan to present that information to the Governors April 6th and 7th at their meeting. We are in the process

of still formulating the information. I’d be more than happy to provide it to you at that time. We are in the process of trying to make

sure that we have included everything. When you have a startup

operation, it’s fairly difficult to know exactly what numbers you

need for some of these operations, because you don’t have any history to base them on—like the labor-management area. So we’re

still trying to resolve some of those issues. And as soon as we have

them resolved and presented to the Governors, I’d be more than

happy to present them to you, as well.

Mr. FATTAH. Let me ask you one more question on this labormanagement side, which is a big issue with the Postal Service as

I’ve come to understand. One of the issues is that there’s a significant case load backlog in the grievance procedures. And perhaps

that’s an area where some new thinking could apply itself to how

that could be fast tracked in a way in which legitimate grievances

could be heard over some reasonable period of time and resolved.

That might be an area where there could be some usefulness for

your office to engage itself in early on in this process.

Ms. CORCORAN. Thank you. We’ll certainly put that on our list.

Mr. FATTAH. Mr. Chairman, I heard the bells go off again, so I’ll

yield back to you to get a few more—— Mr. MCHUGH. Thank you. I thank the gentleman. Let me take

one of the things the ranking member brought up and pose it a little bit further, because you also mentioned in your comments about

involving yourself in rate setting. How might such a function work

in your estimation? What do you view as your role in the rate setting process?

Ms. CORCORAN. Much of the information that comes and is used

by the Postal Rate Commission is actually generated within the

Postal Service. In the 21⁄2 months that I’ve been at the Postal Service, I’ve heard much discussion that there’s not a lot of confidence

that the data that they receive is valid, accurate, that the estimates and the modeling used is appropriate. So I see that within

the four walls of the Postal Service, we will be looking at the data

to ensure that it is valid and it is usable for—useful for what it

needs to be used for.

Mr. MCHUGH. Listening to you, I almost thought that I gave you

that answer. I want the record to show that I didn’t. Because one

of the things I, certainly, have been most concerned about—or, let

me rephrase that—one of the things that I believe has been a primary obstacle to a better-running system from all sides—whether

it be the Postal Service, whether it be the PRC, whether it be the

customers—is that there is a great deal of question as to the veracity, validity, verifiability of data that are used in various processes.

If you can help us through that one and uplift the acceptability by

all parties interested in the process, you’ve made all of our efforts

worthwhile.

So certainly this subcommittee is very supportive of your efforts

in that regard. I think it’s an important one and I’m delighted that

you responded that way. As I said, we are going to be interrupted.

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We’re down to a 10-minute vote. So with the ranking member’s

agreement, we’ll recess yet again and beg your indulgence. We’ll be

back as soon as we can. Thank you.

[Recess.]

Mr. MCHUGH. If we could come back to order, please. Just so everyone is aware, we have about another 10 minutes before a vote.

So we’ll be doing this again, because I know it’s so much fun. It’s

hard to have any sense of continuity here. Ms. Corcoran, I apologize for the interruptions, but let’s talk about your function as I expect there will be, to ensure that the contracting procedures with

the Postal Service are proper. How do you view your—for lack of

a better term—power to follow the money? In other words, do you

see your duties stopping—as to questions of propriety—at the post

office door, or do you feel that you have, where there are problems

of questionable contracts, the power to go into those interests that

were actually contracted with the Postal Service, as well?

Ms. CORCORAN. I see that it goes beyond the doors of the Postal

Service. But Ms. Owens is an expert in contracting, which is one

of the reasons I brought her on. So maybe you’d like to address the

question?

Ms. OWENS. Sure. I don’t know if I can say I’m an expert. I always try and shy away from that title. But I think in the area of

contracting, certainly, there has been, historically, a lot of fraud, a

lot of fraudulent things, a lot of product substitution. And because

of that, I think we have to move, sometimes, outside of the doors

of the post office to make sure that the customer is getting what

we’ve contracted for as well as the right product at the right price.

So I think there could be a lot of work outside the door, looking

at the contracting process.

Mr. MCHUGH. Let us create a hypothetical where it may not be

the question of where the contract with the Postal Service is receiving the product they envisioned, but, rather, where there was a

contract between the Postal Service and an outside source that

may have been questionable from both sides. In other words, there

may have been—did you use the word ‘‘fraud?’’

Ms. OWENS. I think I did.

Mr. MCHUGH. Well, let’s use your word. That, rather than mine.

Where there may be fraud or collusion. I’m not suggesting any circumstance, and I do not know of any, but I’m just saying, do you

have the opportunity, the power and the prerogatives to pursue

that outside contractor who may be involved in complicity or fraud

of some nature?

Ms. OWENS. Yes, sir. We would. If it was—as long as it was on

a contract with the post office—with the Postal Service. And certainly, if not, we would have the ability to refer it to some agency

which would be able to follow it to its logical conclusion. But we

would be able to. Yes.

Mr. MCHUGH. I appreciate your response. On an attendant issue,

there have been over the years—and I suspect there will be into

the future, as there are with all Federal agencies—reports by, for

example, GAO and others, that have found problems with, if not

accountability problems, with efficient use of resources to maximize

results. The GAO issued a report, for example, raising what I think

any reasonable person would agree were some serious concerns

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about lost revenues on bulk mail. Would it be the role of this office,

as you envision it, to followup on those kinds of reports—No. 1—

and No. 2, to ensure that, even down the road where you may have

taken remedial action, that standards continue to be maintained?

Ms. CORCORAN. Absolutely. That would be part of our role. It is

management’s job to take the corrective actions, but it is within the

Office of the Inspector General’s role to assure that those changes

are appropriate and that they really fix the problem that was identified.

Mr. MCHUGH. One of the things that we were talking about the

other night—and it has come up in discussions that we’ve had on

the issue before—is that the Whistleblower Protection Acts, as it

applies to the Postal Service, are not universal. It is our understanding, for example, that whistleblower protection in law is not

extended to some administrative personnel. Has that been something you’ve had a chance to look at? And if it is, do you envision

that to be a potential problem in terms of people feeling unfettered

to come to you and share with you, without fear of recrimination,

issues that they feel are just not right?

Ms. CORCORAN. We have had some discussions with the legal department about the Whistleblower Protection Act. I’m going to ask

Mr. Coogan to address this issue further.

Mr. COOGAN. My understanding, Mr. Chairman, is that you are

correct. The Whistleblower Protection Act that covers most other

Federal agency employees does not cover Postal Service employees.

Well, that may be a question that we can address, again, through

the Law Department. However, the Inspector General Act itself has

a provision that provides for whistleblower protection in cases of

employee complainants. And certainly, the Inspector General’s Office would treat all complaints as confidential to the extent possible

and would look into allegations of reprisal and retaliation as a result of bringing those matters to the attention of the Inspector General.

Mr. MCHUGH. So your analysis is that, while there may not be

specific protection, there are, perhaps, cross-references that protect

certain employees because of their inclusion under other provisions

of an act, and even if they’re not, you’re going to act in a way that

would protect their interest?

Mr. COOGAN. Yes.

Mr. MCHUGH. I appreciate that. May I put before you a suggestion that, if I were an employee, I think I’d be less than anxious

to come forward if I felt my only shelter would be found in a cross

reference as legally appropriate as that might be? I am not an attorney, nor I suspect would I be one if I were over in the Postal

Service. I would urge you to re-examine the coverage under Whistleblower Protection, particularly as it applies to what I understand

are some of the administrative positions, and see if it might not be

helpful to you. Also, if it might not be the right thing to do, as a

matter of equity, to extend those acts to the employees on a primary reference so there aren’t cross references.

This is not contained, for example, in the Postal Reform Act that

we drew up. But we discussed it the other night, and it may be.

I’d like to have your input on that, because we don’t want to be

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going down a road that’s totally unnecessary. I think it merits

some examination, so I’d appreciate that.

Ms. CORCORAN. We’ll certainly go back and take a look at that

and get back with the committee to let you know what needs to be

done.

Mr. MCHUGH. Thank you. I yield back to the gentleman from

Pennsylvania, the ranking member, Mr. Fattah.

Mr. FATTAH. Just a few more followup questions. The Inspection

Service, as it relates to its on-going functions under the Memorandum of Understanding, to the degree that there are going to be

functions phased out and picked up by your office, how is that

going to effect present employees in the Inspection Service?

Ms. CORCORAN. That’s probably a question that’s really better

addressed to the Chief Inspector and, perhaps, even the Governors.

In part, it will depend on what they do concerning their budget and

how they relate to that. There has been an agreement made that

we will consider inspectors for positions. If they are the best person

for that particular position, they will be brought on board with us.

But we are not necessarily responsible for hiring those people. So

how the transition will take place is something that’s still being

worked out.

Mr. FATTAH. Well, at the end of this road, there’s still going to

be an Inspection Service carrying out certain functions?

Ms. CORCORAN. Absolutely.

Mr. FATTAH. Right.

Ms. CORCORAN. They have program responsibility that includes

mail theft, burglaries, homicides, much of the security of the postal

buildings, as well as the people who are carrying the mail, and the

mails themselves. And they still have all those program responsibilities that they need to handle.

Mr. FATTAH. Now, the auditing functions that they have now,

you would not envision that they would have any of those?

Ms. CORCORAN. They are going to maintain some of their auditing functions as indicated in the designation of functions exhibit.

Those are going to be at individual facilities. For example, under

the financial statement audits, they are going to continue to do

about 200 of those audits where they will be looking at individual

post offices to see how well their internal controls work and the effectiveness of financial operations within those individual operations. Those will then be rolled up, and we will use them in our

overall scope to look at how postal-wide operations are doing financially.

Mr. FATTAH. Let me thank you for your appearance here today.

And let me also, just for the purposes of the record, give a mention

of the fact that Congressman Clay, in earlier sessions of the Congress, had promoted this notion—he’s the ranking member for the

overall committee—of an independent IG. And it was through the

good efforts of the chairman, the gentleman from New York, that

in last year’s Congress, we were able to get this accomplished. So

I want to wish you well. And I’m sure that we’ll be seeing each

other again as we go down this road. Thank you.

Ms. CORCORAN. Thank you.

Mr. MCHUGH. I thank the gentleman for his comments. Indeed,

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gressman Clay’s IG bill at one point. We’re following some pretty

vague and ill-defined footsteps, and we appreciate the assist that

Congressman Clay’s earlier work lent us.

Let me return to try to better understand where you may be

headed on your duties. I mentioned in my opening statement the

question of ethics. The issue that comes to mind, at least when we

were preparing that portion of the statement, specifically, was recently—in March—the Office of Government Ethics sent of letter to

the Governors—to the General Counsel, Mary Elcano, stating that

they—the office, OGE—viewed the Postal Service in compliance

now with ethic standards.

That was an important development. Because it’s also my understanding that prior to that there had been some serious concerns

raised about the implementation of clearly defined, well understood, and rigorously conveyed ethical standards, particularly in

the procurement area, raised by OGE. And indeed, while OGE normally reviews departmental ethics program once every 5 years,

they felt it was necessary to review the ethical practices and standards of the Postal Service some six times in the last 6 years.

I think that demonstrates a prior level of concern. I commend the

Postal Service for apparently, at least as of March, meeting that.

I think it’s fair to say that any program, be it one of Government

ethic standards or be it one of work shop safety standards, needs

oversight on a continuing basis to ensure that whatever is attained

now is attained in the future as well. Is it your intention to monitor the ethics standards and practices as they apply through the

concerns raised by OGE in the future, or is that something that

you don’t think you’re going to be looking at?

Ms. CORCORAN. The General Counsel Office, as I understand it,

is the responsible ethics official within the department. We may

look at that in an overall, systemic type look within the Postal

Service. However, it is OGE that routinely comes in and does these

types of reviews and where ethics violations would be reported.

Generally, they are the ones that would be coming in and doing

these types of things. With the many issues that we have to deal

with, that would probably not be one we’d deal with right now because of how the Office of Government Ethics has dealt with it.

Mr. MCHUGH. Yes? You wish to add anything, Mr. Coogan?

Mr. COOGAN. Well, Mr. Chairman, what I would add, also, is, as

I’m sure you know, the President’s Council on Integrity and Efficiency and the Executive Council work with the Office of Government Ethics. The IG’s office also works closely with the Justice Department Public Integrity Section, and is very sensitive, of course,

to these ethics issues. But in general, the IG’s roles are not to be

the program administrators of an ethics program, but rather to

oversee the process and the procedures that should be followed in

those programs.

Mr. MCHUGH. And you will be doing that latter function? Good.

Well, let’s go to something that probably is more in your line. Or,

I should say, is it more in your line? Another instance was one of

recent times where there were dramatic overexpenditures in the

advertising accounts. One of the more frustrating parts of that scenario to those of us on this side of the room was that it became

so significant before it was apparent that many up the line were

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aware of it. Would it be your function to monitor expenditure accounts to ensure that, whether it’s inadvertent, purposeful, whether the ends were totally justifiable or not, but that you do have

dramatic over-expenditures occurring or any over-expenditures before they become dramatic? Is that a function that you’d be into or

is that not more universal? Is that too specific?

Ms. CORCORAN. Again, we will be looking more at service-wide

issues. Along with that, though, we certainly will be monitoring for

trends or changes in data that would cause a question, and try to

determine what are the reasons for those changes. So hopefully we

would be aware of those before they became a problem. But like

many other things, as you’re auditing, if you’re not in the right

place at the right time, you don’t necessarily find it. We would

monitor and try to pick up on those types of things. I’m not aware

of all the circumstances involved around that particular situation.

And I’d need to look at that particular situation to see what could

be done to improve the overall system. And once we get our people

on board, we certainly will be looking at that.

Mr. MCHUGH. Thank you. Current law, as I understand it, requires that the Postal Service receive an independent certification

of its financial statement, that that has been done for many years,

as far as I’m aware, by Ernst and Young. I’m not suggesting that

my comment is meant to indicate that there was any problem with

Ernst and Young, that they have done anything but a credible job,

but the requirement was placed in law for the Postal Service prior

to that because there was no independent audit function, I assume.

Well, now there is, obviously. So is it your intention? Do you think

you meet the test of the law if you certified that financial statement, thereby internalizing that somewhat more?

Ms. CORCORAN. That certainly is what the CFO Act has done for

the other IGs throughout Government. It’s given them the opportunity to either certify it internally or to have an external CPA

firm certify it. But certainly I will have the people on board doing

the work, and they could certify the statements.

Mr. MCHUGH. I know professionally you could. I want to make

sure I understand your meaning of the word ‘‘could.’’ You could legally, you believe, meet the test of the law, as currently written,

by certifying?

Ms. CORCORAN. No, sir. As it’s currently written, my understanding of the law is that it must be by an independent certified

public accounting firm.

Mr. MCHUGH. OK.

Ms. CORCORAN. Which, obviously, we are an internal independent organization.

Mr. MCHUGH. OK. However, were the law to be changed, it

would merely put you in conformity with other agencies that have

an audit verification mandate, and do it with an independent IG.

Yes?

Ms. CORCORAN. Yes, sir.

Mr. MCHUGH. Thank you. Well, because of how we’ve gone we’ve

taken up almost 11⁄2 hours of your time and, as you’ve heard, we

have another interruption. I’m not going to ask you to stay any further. We do appreciate that and Mr. Fattah agrees that we should

dismiss you. It sounds so funny, doesn’t it. But thank you for being

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here. As I indicated earlier, we’re looking forward to working with

you, are anxious to work with you in helping you to meet any challenges that may arise, if it is appropriate in your view. We try not

to get on the wrong side of an IG, despite of what you read in the

newspapers. So, thank you and with that we will recess once again.

When we return we will move on to the Board of Governors, who

have all been waiting very patiently and we appreciate that. So

we’ll stand in recess. Thank you very much.

Ms. CORCORAN. Thank you.

[Recess.]

[Followup questions and responses follow:]

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Mr. MCHUGH. We’ll come back to order. The chairman of the

Board of Governors tells me that, understandably, some of the Governors have time constraints because of scheduled airlines and

such. We’ll try to move as quickly as we can. The good news is that

we now have about an hour before our next vote, so we should be

able to make some progress. Again, let me welcome you all here

today. As we started with the first panel and, I believe, as all of

you are aware from prior appearances, it is the rule of the full committee that all witnesses presenting testimony are required to

swear to an oath. So if you would rise, please.

[Witnesses sworn.]

Mr. MCHUGH. Thank you. The record will show that all five witnesses responded in the affirmative. With that and without further

delay, I happily yield the microphone and the attention of the subcommittee to the chairman of the Board of Governors, the Honorable Tirso del Junco. Mr. Chairman, welcome.

STATEMENTS OF TIRSO DEL JUNCO, M.D., CHAIRMAN, BOARD

OF GOVERNORS, U.S. POSTAL SERVICE; SUSAN E. ALVARADO, GOVERNOR, U.S. POSTAL SERVICE; BERT H. MACKIE,

GOVERNOR, U.S. POSTAL SERVICE; EINAR V. DYHRKOPP,

GOVERNOR, U.S. POSTAL SERVICE; AND S. DAVID FINEMAN,

GOVERNOR, U.S. POSTAL SERVICE

Dr. DEL JUNCO. Thank you very much, Mr. Chairman. And good

afternoon to you and all the Members. I’m Tirso del Junco, the

chairman of the Board of Governors of the Postal Service. Joining

me here today are Governor Alvarado, Governor Dyhrkopp, Governor Fineman and Governor Mackie. We are very pleased to be

here to talk to you about the performance of the Postal Service over

the last year. As the governing body of the Postal Service, the

Board of Governors is comparable to the board of directors of a private corporation.

Nine members of the board are appointed by the President and

confirmed by the Senate. The two other members of the Board are

the Postmaster General and the Deputy Postmaster General. The

Governors are chosen to represent the public interest in general,

and not as representatives for a specific interest in using the Postal

Service. They bring a wide variety of backgrounds and viewpoints

to the service on this board. I would believe that this diversity

helps us to guide the management of this unique and vital public

establishment.

Even more than the typical outside directors of a private corporation, the Governors oversee the activities of executives and operating management within the organization. The board reviews

business practices, directs and controls expenditures, and conducts

long range planning and sets major policy on all postal matters.

This, we believe, is an important public service. It requires each

Governor to invest many hours each month in postal work. Serving

as a Governor is, in a sense, a part-time job that requires full time

attention.

In return, quite apart from financial compensation, we experience the satisfaction and the occasional frustration of guiding the

operation of a complex organization with revenues in excess of $56

billion and more than 760,000 full-time employees. To help us meet

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this obligation, the board is organized into four key committees

dealing with audits, compensation, strategic planning and capital

projects. Over time, we have continued to improve our by-laws, to

sharpen the focus of these standing committees and, indeed, enhance the level of oversight we can bring to these crucial areas. We

believe that in many areas our efforts have contributed to some notable successes.

The Postal Service has just completed its two best financial years in postal history with a total of about $3.4 billion of net income in

these 2 past years. To put that figure into perspective, it is more

than the total net income of all previous years of Postal Service operations. And in accordance with our directions—and I want to emphasize that—postal management has devoted a large chunk of

that net income to the restoration of equity and recovery of prior

years’ losses.

Last year we reduced our negative equity by 37.4 percent, down to $2.6 billion. Together with previous gains, that means we have

reduced our negative equity by more than half in 2 years. We have

also directed management to proceed with the most ambitious capital investment program in postal history, totaling $14 billion over

the next 5 years.

That’s $14 billion with a ‘‘B.’’ We are banking on these investments in facilities, technology and equipment. Together, with sustained efforts to control labor and transportation costs over time,

we will bring a financially stable and productive Postal Service into

the next century. And if our efforts continue to succeed, we will be

able to keep postal rates stable and affordable while we do all this.

With all our efforts to secure the financial health of the Postal

Service, we cannot allow ourselves to lose site of the basic reason

for the creation of this institution: to provide a maximum level of

fundamental, universal public service.

For that reason we take particular pleasure in the fact that overnight delivery scores have been hitting record highs over the past

2 years, and we are well underway to meeting this year’s goals of

92 percent on time performance. These achievements are particularly remarkable in light of the Postal Service’s mind boggling work

load; 603 million pieces of mail per day delivered to 128 million addresses 6 days per week, totaling more than 182 billion pieces of

mail per year.

Or to put it another way, about 43 percent of the world entire

mail volume. We recognize in the words of an old folk saying that

‘‘no condition is permanent.’’ Simply maintaining recent levels of financial and service success will require constant vigilance and

much more hard work. And improving upon them will require even

a greater effort at all levels of the postal management.

There are two areas that will require our particular attention in

the coming year. One is the improvement of 2 and 3 day services

levels where improvement, indeed, is long overdue. The other is establishing long-term control over the more than 80 percent of postal costs that are linked to labor. But for today and the immediate

future, we can report that the Postal Service is moving in the right

direction. Over the next few years, the board will have even more

tools to monitor and, when necessary, correct the actions of postal

management. One of those tools, the Government Performance and

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Results Act of 1993 will be coming into effect at the end of this fiscal year.

We will carefully scrutinize the strategic and performance plans

that are being prepared under that legislation to help us direct the

course of the postal management. In addition, over the coming

months, we will be working with the new Inspector General of the

Postal Service as she begins the operation of her office. The appointment of the new Inspector General, the approval of a pay and

benefit package for her office, and the initial designation of functions between the inspection service and the Inspector General are

only the beginning.

Establishing an office of such importance is by no means a turnkey operation, but, indeed, much more of a developmental process.

We are very pleased with the progress of our new Inspector General, and want to make it clear that she will have our utmost confidence and support in this matter. I also want to say, Mr. Chairman, that the Governors remain committed to working with you,

with the subcommittee, the Congress, the administration, postal

management, and all the many and varied groups who have a

stake in the continued health of the postal system as we approach

this next century.

Thank you very much, Mr. Chairman. That concludes my prepared statement.

[The prepared statement of Dr. del Junco follows:]

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Mr. MCHUGH. Thank you, Mr. Chairman. I would, as I hope

would be a minimum act of courtesy, extend the opportunity for

any of the other Governors to make a statement at this time, if

they choose. Hearing none, we’ll move on. Well, why don’t we just

start with the easy stuff. Can you update the subcommittee on any

plans you might have to file a universal rate increase this year?

Dr. DEL JUNCO. Well, we are currently studying this very closely,

and we have had presentations about the methodology procedures

and the current financial situation. And we expect to address this

in a pretty definite manner within the next 60 or 90 days. And it

is indeed true that we’re committed not to have a postal rate increase through 1997. But at the present time, until we review

those figures, we can’t commit any further.

Mr. MCHUGH. The record will show that Mr. del Junco exercised

his vast ability in Republican politics and didn’t really answer the

question.

Dr. DEL JUNCO. I apologize—— Mr. MCHUGH. No, no. I understand what you’re saying and—— Dr. DEL JUNCO. I would love to tell you it’s going to be 1999, year

2000. But I do not want to mislead the committee or the public.

Mr. MCHUGH. Well, respecting the process you’re in, and I do, I

understand your response. I don’t mean to be too facetious. Let me

move to a subset of the question. You noted very accurately that

your revenue picture over the last 2 years has been on the plus

side, to say the least. You have made decisions, as you are required, to allocate those resources on the one hand, I presume, to

consider forestalling a rate increase. On the other hand, as your

testimony noted, to make, I think, very appreciable cuts into your

negative equity and your fund balance’s prior years’ losses.

How do you decide which to do? How do you come about the process of saying, ‘‘Well, we’re going to reduce prior years’ losses and

our negative net equity versus putting the money toward forestalling a rate increase?’’ Obviously you know. This is a subject of

much debate amongst the postal community, as it should be. And

it would be interesting, as well as helpful, to have you comment on

that process because I know it’s not an easy one.

Dr. DEL JUNCO. Congressman, this is a very complex issue—that

is, the issue of negative equity and the restoration of that negative

equity. I’ll try to be as succinct as possible, and my fellow Governors probably will have to come in and help. But in 1994, we had

reached a negative income of some $9 point plus billion. The Postal

Rate Commission was pressing us very severely because this had

come to very high figures.

We then entered into an agreement with the Postal Rate Commission that we would retire this negative income—equity over a

period of 9 years. And therefore, this means that we must retire

according to the agreement and because the law requires that we

do not have a permanent negative equity at the rate of $900 million. And we’ve been doing so since 1994.

Our revenues have allowed us to do such a retirement. But as

you proceed ahead, since the revenue remains stable and the cost

increases because of commitments through our labor negotiations,

our commitments to capital, and, indeed, the $900 million that we

must pay back, this has been drawing progressively to the degree

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that we cannot continue unless—and this is what, by the way—it

brings us into the postal rate issue.

And this is why I cannot tell you exactly until those figures are

presented to us, when and where the decision is going to be made.

I think the impression is out there that we—No. 1—can engage

into a negative equity ad infinitum, and—No. 2—that we don’t— are not, and do not have to, by law, retire that negative equity. We

are, right now, complying with the commitment that this board

made to the Postal Rate Commission in 1994. I hope that answers

the question.

Mr. MCHUGH. It does. I appreciate it. I believe you said you were

going to defer to the other Governors if they wanted to make a

comment.

Mr. MACKIE. Mr. Chairman, basically over the last 20 some

years, we have used our surplus income to extend rate cases. And

so, our equity continued to go more and more into the deficit. As

a banker, I won’t sleep well until we get our deficit down to even.

And as our chairman mentioned, our income is fairly level while

our expenditures continue to climb. And hopefully, this will all

work and come together, you know, before our next rate case.

Mr. FINEMAN. Mr. Chairman, I would just like to emphasize one

point, and that is, that at no time has the repayment of the negative equity been accelerated. And I think the public should understand that. We are trying to do this over a 9-year period of time,

but we haven’t accelerated the repayment of equity so that we

would, therefore, be forced to have a rate increase. We are doing

this in, what I think, would be a prudent manner.

Mr. MCHUGH. Am I correct, then, in the impression I’m getting,

that it is your opinion were you to, say, forestall for a year any

down payment on the retirement of your negative equity, that you

would be in violation with the understanding of the PRC and would

have consequences at your next rate hearing?

Dr. DEL JUNCO. Yes. You’re absolutely correct. But over and

above that, I want to point out that 8 years ago our interest, because of that negative equity, was something in the neighborhood

of $700 million. That interest that in 1996 was only $250 million.

So there is some pluses to begin to retire this equity, too. But I

think it’s essential to understand that we have made a commitment with the Postal Rate Commission, and rightfully so. I think

their demands were just, were absolutely correct. I mean, there is

a limit as to how far you can take this negative equity.

Mr. MCHUGH. Thank you for that. I appreciate the other Governor’s response as well. Let me take a break from my questioning

and yield to the gentleman from Pennsylvania, the ranking member.

Mr. FATTAH. Thank you, Mr. Chairman. Let me followup on the

negative equity question with the chairman. I note that your financing of your debt is through the Federal financing bank. Does

that represent the entirety of your debt obligations, Mr. Chairman?

Dr. DEL JUNCO. Yes. It is. I’m looking to my chief financial officer.

Mr. FATTAH. All right.

Dr. DEL JUNCO. I want to be sure that it’s not something else out

there.

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Mr. FATTAH. Is that a limitation that is upon the board in terms

of looking for debt instruments, or is that just a more useful entity?

Dr. DEL JUNCO. Well, it is my understanding that our capital ex- penditures cannot exceed $15 billion. We have tried to shrink that

down. We have made some very, very large commitments in the

last 24 months. And also, there is a limit as to how much we can

spend per year—$2 billion.

Mr. FATTAH. $2 billion a year. I’m more interested in the use of

the Federal financing bank, that entity versus, you know, some

other vehicle for debt.

Dr. DEL JUNCO. Can I refer—— Mr. FINEMAN. I believe that it is statutory.

Mr. FATTAH. My staff is whispering to me that it’s statutory.

Mr. FINEMAN. And let me just indicate to the chairman that I

know in H.R. 22, which he’s introduced, he would change that provision, I believe, and I think that that would allow—I speak for

myself about this—but would allow for freedom for that Postal

Service to do innovative financing.

Dr. DEL JUNCO. More flexibility.

Mr. FATTAH. And I also note that you have both a short-term

credit facility and an overnight credit facility, the overnight at a

higher interest, obviously, of $300 million or so. My question is— and maybe we’ll have staff deal with this at some future point

about the decision process that went into that now, let me go on.

The chairman was asking about this whole issue of the decision to

pay off debt versus other considerations that the board would

have—and I guess I should first back up a minute and recognize

my constituent, Governor Fineman, and to welcome him, and the

rest of the Governors who are here.

And you said that, while you haven’t moved the yard stick along,

that you’re paying this off within the 9 year window. Is it correct

to assume that that means that you have within the 9 year window

accelerated payments also, or just that you’re operating within this

window?

Mr. FINEMAN. I think it’s fair to say that we’re operating within

this window, but we have not accelerated payments beyond. If we

took one ninth of what that debt was at that period of time—we

went before the Postal Rate Commission—part of the case that was

presented to the Postal Rate Commission was that we would be repaying that debt. And we have, in effect, kept that pledge to repay

that debt when we went before the commission as a result of the

budget that we supplied to them.

Mr. FATTAH. Let me just say a couple things real quick—and I’m

not a financial wiz—but, clearly, if you were able to operate in

other ways in the market in terms of securing capital, you could

do it at a better interest rate than what’s represented here. But let

me move on to some broader questions. I note through the chairman’s opening statement that there’s a lot to be thankful for. I

mean, the Postal Service is doing well.

All of you should be credited for your involvement and you

should be thanked for your service to the Nation. One of the things

that is a concern, I think, for all of the Members of Congress—we

all represent some number of the employees who work for you. And

we hear form them from time to time. And one of the more pressVerDate 11-MAY-2000 08:57 Aug 05, 2002 Jkt 080370 PO 00000 Frm 00072 Fmt 6633 Sfmt 6602 W:\DISC\43746 pfrm12 PsN: 43746
69

ing issues is this whole issue of labor-management relations. And

I know that you have a tremendous enterprise that you’re engaged

in in which, in order to achieve the results that you’ve achieved

over the last 2 years, that has taken a great deal of work, principally by these hundreds of thousands of employees who work for

you.

And it has come to my attention that there is not only are there

the normal complaints that we hear about, there’s a major backlog

in the grievance procedures of some almost 60,000 cases, some of

which have been backlogged for a period of time. I see in the board

structure that you have a number of committees. I assume this

compensation committee is where most of these labor issues are

dealt with, I’m not sure, based on the semantics that are used.

But I’m interested in whether or not there are other strategies

that you have in terms of beyond making more money and working

harder at what you’re doing, to try to improve the overall relationships between the Postal Service and its employees, and whether

there is some strategic game plan that you might want to share

with this subcommittee?

Dr. DEL JUNCO. Well, we have had this on-going question about

labor-management relations for many years. I have been on this

board for 9 years, and this is an on-going attention. We have a

vice-president in charge of labor management relations. In fact, he

just addressed the board at the last board meeting. And there is— in fact, there are people on this very board who are extremely interested on the labor issue.

And I don’t mind telling you that Governor Fineman continues

to address this thing, as well as other members of the board. But

on the other hand, we do not manage the grievance committee. We

do not address individual problems of the individual labor, because

that is not the function of the board. There are established procedures, a method to carry this as far as the 60,000 remaining complaints that we have there. I would hope that I could address that

in writing and refer it to you so we could have a more concise——

Mr. FATTAH. Address it to the chairman, and he’ll make sure

that we all get it. Yes.

Dr. DEL JUNCO. Mr. Chairman, if you allow me, I would like to

present you with a more explicit answer in writing.

Mr. MCHUGH. We would welcome that opportunity.

Ms. ALVARADO. Mr. Chairman, if I—Mr. Chairman, Mr.

Chairman——

Dr. DEL JUNCO. Governor Alvarado.

Ms. ALVARADO. If I may, I would just like to say that this grievance procedure that you mentioned, Congressman Fattah, is something that the board has not been able to give adequate attention

to until recently. And part of the reason is because we’ve been focused elsewhere in all those areas that you gave accolades to us

for.

But it is not that it’s not—it is not unimportant to us. In fact,

I hope that through the compensation committee, of which I am a

member, we can take a closer look at these labor-management

issues, because our work force is our greatest resource. And happy

workers are productive workers. And the fact of the matter is, is

if there’s a grievance problem, it brings everybody down.

70

And that productivity goes down, as well. So we are really looking into the cause of these and the proliferation of them, and we

hope to get a handle on them through the compensation committee,

initially, and before the full board, eventually.

Mr. FINEMAN. If I could just add for a minute. Mr. Chairman, I

would say to you that I want to thank you for pushing the labor

summit. I know that that has been something that has been considered for a long period of time. My basic feeling is that if there

is communication between the labor unions and management,

there is an opportunity to bring about change. If that communication stops, for whatever reason, there won’t be an opportunity to

bring about change.

So I want to congratulate you and thank you for doing that. But

I’d like to—this in my own idea—I have my own feeling about this,

and that is that one of the feelings that we’ve seen labor change

particularly, municipal government change over the last 4 or 5

years—I think the Congressman would agree. And one of the reasons it has is because there’s been a communication between people.

One of the things that’s happened, when you’re considering your

omnibus legislation—I’m not sure this is the proper time, but I’ll

bring it up anyway—when you are considering that, one of the

things that’s occurred in industry, private industry, when there’s

been an endemic problem of labor-management relations, what

they’ve considered at times—this is not radical—it’s in the automobile industry, it’s in the aviation industry—they’ve actually

taken members of the labor unions and placed them on the boards.

It happens at Amtrack. In the telecommunications, as Governor

Alvarado has whispered into my ear. And I think that it’s obviously

something different, but I think it’s something that maybe this

committee should consider when you’re looking at the legislation.

Mr. FATTAH. Let me thank you for that suggestion. And it will

be something that we will work with the chairman on, as he has

an interest in getting this reform bill moved through the Congress.

But this is an issue that is obviously of import. Because, even with

the financial success you’ve had over the last 2 years, one of the

pressures on the Postal Service is from competitors who want to,

you know, continue to make headway in of your core business products.

And it would seem to me that productivity is connected to resolving some of these long-standing issues. This is not something that’s

just come up. This is something that has been with the Postal

Service for a very, very long time. And it would seem to me that

this board, since you’ve been so successful in attacking some of the

other long-standing issues, that this is something that would deserve your attention as you go forward and as we approach the

next century. I want to just thank the chairman and I’ll yield back

to him for a period of time.

Mr. MCHUGH. I thank the gentleman. First of all, let me respond

very briefly to Governor Fineman’s gracious comments. I appreciate

that. The principle in my eyes of the labor-management summit

was simply as you said, to talk. I’d like to believe that can’t hurt.

It should be noted, as to your suggestion about perhaps a reference

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in H.R. 22 providing for a mandated labor representative on the

board.

GAO, as I’m sure you’re aware, is currently doing a study of the

structure of the Board of Governors, looking at the wide range. I

wouldn’t be surprised if that issue were actually dealt with in that

report, which, I’m told, will probably be put out by August. So it

is an issue that is being considered. I’d like to yield to the gentleman, Mr. Davis from Illinois, if he might have any questions or

comments at this time.

Mr. DAVIS. Thank you very much, Mr. Chairman. Mr. del Junco,

let me, first of all, just commend you and the other Governors for

the outstanding public work that I think you do. Also, let me acknowledge the presence of Governor Dyhrkopp from the great State

of Illinois. And I’m delighted to see him. A few moments ago, we

had testimony from the Inspector General which indicated that

she, indeed, was on a fast rack in terms of identifying problems,

recognizing need, and establishing new structures to try and deal

with those. Are you satisfied that all of the problem areas or potential problem areas have been identified?

Dr. DEL JUNCO. There’s no doubt that the accomplishments in

these first 60 days are remarkable. I mean, to be able to put together this early days, her office. To be able to put together a budget which is going to be presented to us by—in a couple of weeks,

April 7, is remarkable. I think that the board was extremely impressed with her presentation about her initial functions. But I am

sure, as questions are brought out by the chairmen, and are

brought out by other people within the system, those functions will

be probably—will be expanded to cover other areas of great importance. So I do not want to lead anyone in this room to believe that

this is the end of the project.

Mr. DAVIS. Well, I, too, have been tremendously impressed with

that kind of success in a relatively short period of time. And it

brought to mind whether or not, and the extent to which management personnel had been cooperative. Are you in a position to comment on that or would it require commentary from——

Dr. DEL JUNCO. I believe that, in her presentation to the board

last month, and in every presentation, she has been very enthused

and complimentary to the help that she has received from the inspectors and also from management at large. And so far, I am not

aware of any major problems that have taken place.

Mr. DAVIS. I’m always interested in the level and fast pace of increased technology which we are experiencing as a Nation, and,

perhaps even, as a society. And in the area of strategic planning,

I’m wondering whether or not we feel that we’re keeping pace with

the ever-changing technology. Are we up to snuff in terms of our

planning and are we going to be in a position to make the most

effective use of that?

Dr. DEL JUNCO. The board is very sensitive to this. And if you

look at our budget, we have, now, allocated some $14 billion, precisely, to help out with our automation and with our improvement

in technology. We have an extensive R&D program in place. And

indeed, because of this ever-changing turnover in technology, this

represents an additional expense for us. Because we must keep up

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with that technology if we are going to compete in the market

place.

Mr. DAVIS. I noticed that there was a little bit of conversation

with the gentleman from Pennsylvania relative to the whole question of satisfaction, employee satisfaction, the interaction, the interrelationships. Are we finding, for example, that technology is seriously reducing the level or manpower or manperson or womanperson needs that we have? I mean, that is something. I happened

to go into a store the other night to make a purchase.

As a new Member of Congress I needed to purchase an ironing

board and an iron. And I went into this particular store and discovered that I could do the whole thing without ever coming into contact with a person. And while I was pleased with that in terms of

the efficiency, it sort of concerned me in terms of whether or not

there were going to be ample need or opportunities for people to

work.

Dr. DEL JUNCO. That’s the ever-existing question that we have

before us. I think that we must understand, as you first addressed,

that this new world of advanced technology. It’s equally necessary

so we can keep the quality of service that people expect. I think

it’s fair to say that as the U.S. Postal Service has increased its

technologies, has become more automated, and we’ve been able to

deal with a larger volume of mail, no employee has been displaced

or lost his job.

There has been some attrition. It is true that we do today—that

we deliver 200 billion pieces of mail a year with about the same

amount of personnel that we did 15 years ago. But this has not

been at the expense of displacing any employee. But it is absolutely

necessary for the Postal Service to keep up with the technology so

we can deliver the quality of services that is required from us.

Mr. DAVIS. My final question—I know that we don’t necessarily

always look at competition as the motivator or driving force in

terms of our own decisionmaking. But how do we compare, or how

would you compare the efficiency of the Postal Service with that of

those other entities that could be called competitors in this industry.

Dr. DEL JUNCO. I’m going to call—do you want to answer that?

Mr. FINEMAN. I’m not quite sure I know the numbers. But I

wanted to get some numbers that are significant to your last question.

Dr. DEL JUNCO. That’s right.

Mr. FINEMAN. And then I’ll try to answer your second question

for you.

Dr. DEL JUNCO. That’s why I asked you.

Mr. FINEMAN. When the Postal Reorganization Act started, there

were approximately 730,000 full-time employees. The volume was

approximately 80 billion pieces of mail. In September 1996, there

were approximately 760,000 full-time employees. And our volume

was 180 billion pieces. So what you’ve seen is that as the volume

has increased as a result of automation, we probably have, you

know, gained a few employees, but we almost we’re getting toward

tripling—we’re a little bit more than two and a half times what our

volume is. And I think that that’s significant. As to the so-called

people who are competitors of ours, I don’t have the numbers in

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front of me, but I remember one statistic—and maybe there are

some people here—within 1 day we deliver more mail than Federal

Express will deliver in a year.

Mr. DAVIS. Well, thank you very much, Mr. Chairman. That concludes my questions and I would yield back any additional time I

might have.

Mr. MCHUGH. Thank you very much, Mr. Davis. Let me follow

on to the question about automation productivity. Have you been

able to place a cost savings figure on the automation measures that

you’ve made? Have you made estimates as to what your accrued

savings have been?

Dr. DEL JUNCO. I don’t have those figures with me. I’d like to answer them in a written form, Mr. Chairman.

Mr. MCHUGH. Certainly.

Dr. DEL JUNCO. It’s just too specific. And I don’t have those numbers. We have our return of investments on specific projects. But

collectively, I don’t have those numbers.

Mr. MCHUGH. If you could get that to us in the future, I think

that would be of interest to the subcommittee, please. Tell me,

what’s the status of pack and send?

Dr. DEL JUNCO. Deceased. No. We have stopped the program, as

you all know—that we’ve challenged.

Mr. MCHUGH. Deceased.

Dr. DEL JUNCO. And in that challenge, we lost our appeal. And

at the present time, we have sent this back to our legal department

for consideration. But the whole project has been closed down.

Mr. MCHUGH. I just want to make sure I understand. You’re

right—as I understand it, the PRC said this was a postal service,

therefore subject to their review. This is the technical status, I believe, at least for the moment, unless you’re making an announcement here today and I guess that’s why I’m asking. Is it your intent to go before the PRC with a pack and send proposal?

Dr. DEL JUNCO. We are considering that. It’s been sent to our

lawyers, too. And if we do do anything with it, we will send it to

the PRC and follow the due process. But the decision has not been

made yet, Mr. Chairman.

Mr. MCHUGH. Will that be before or after you decide on the rate

increase.

Dr. DEL JUNCO. I beg your pardon? Let’s just not tie them together, because then we’re really in trouble.

Mr. MCHUGH. OK. You heard me with the IG say that this is an

oversight committee. You’re aware of that and it’s a responsibility

we take very seriously. We pursued some questions about ethical

reports from the Office of Government Ethics and such and she responded to that. I noted that, indeed, in March, OGE had issued

a letter to you saying that your ethics program had now met what

they feel were appropriate standards.

I commend you for that. There’s obviously another ethics situation that is outstanding with regard to the Postal Service, and that

is the questions which have arisen with respect to the awarding of

a proposed sole source contract to place soda and soft drink vending machines in postal facilities. I think it’s important for the

record to say that this subcommittee is deeply concerned about that

particular issue.

74

We also want to state that in response to that concern and in

recognition of our oversight responsibilities, we wrote to the Justice

Department asking for an update. They have responded. I think it’s

a fair summation to say that they noted to us this was an on-going

investigation and that they believed it would be inappropriate at

this time to disclose any particular information. I understand that

position.

I, as chairman, certainly don’t want to do anything to inappropriately and in an untimely fashion intrude upon a weighty matter in

an on-going Justice Department investigation. So, while we’re

aware of the situation, and, while under normal circumstances, I

think it would be an appropriate topic for discussion, given the Justice Department’s position, it’s not my intention to pursue specifics

at this time. But we will be very much involved and carefully

weighing whatever reports come out of Justice.

I am aware the Board has been advised that they are not subjects of the investigation, but that you have been or will be consulted in a witness role. I think that’s important to note as well.

But having said that, I think it, out of fairness, is appropriate to

me to offer the opportunity for any of the members of the Board

to comment on this situation should they choose. If they do not, I

understand. But I would defer to you at this moment for that opportunity, Mr. Chairman or any of the other Members.

Dr. DEL JUNCO. Mr. Chairman, I have no comment at this time.

I reserve the right to, in due time, to address the issue, too. But

it’s obvious, for very personal reasons, why I want to restrain myself from making any comments at this time.

Mr. MCHUGH. I appreciate that and I do understand. Governor

Alvarado.

Ms. ALVARADO. Mr. Chairman, thank you for providing this opportunity. I just think it’s important to point out, first of all, we

appreciate your position on this matter. I think it’s the correct one,

since the investigation is on-going. I think it’s important, though,

to point out that we are, as a board, individually, and in whatever

capacity called upon, cooperating fully with the Justice Department

and its investigation. And at the appropriate time, deemed appropriate by you or the end of the on-going process, we’d be happy to

answer any questions you have.

Mr. MCHUGH. I thank you for that. I would also note that there

have been no accusations, no findings of guilt, and no official allegations, as I said, of any kind. So I’m certainly not suggesting that

there are those kinds of circumstances there. But it is an issue that

I didn’t feel we could ignore. Yes, Mr. Chairman?

Dr. DEL JUNCO. I want to get clear for the record that the Postal

Service is fully cooperating with the on-going investigation and

that we are—we will continue to keep you informed. Our legal

counsel has been advised, I understand has met with your staff.

And he will continue on an on-going basis communicating with

your staff.

Mr. MCHUGH. I appreciate that. And yes, for the record, we do

and have welcomed that opportunity to discuss that. We look forward, most importantly, as the issue evolves, to pursue it further,

because we are concerned. I’d be happy to yield to the ranking

member for comment at this time.

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Mr. FATTAH. Well, I just want to state for the record that I join

in the chairman’s concerns as they have been raised. I do want to

draw a distinction between those remarks and my own in as much

as—you know, this is Washington, and it seems as though on most

days everybody is under investigation.

And I don’t want to have it prejudged in any way, at least in my

own mind. I think that it is a very open issue. And we should await

all of the facts before rushing to any conclusions. I’ve read a lot of

headlines, including today’s, involving our own chairman—not our

subcommittee chairman, but the chairman of the full committee— and Washington just seems to be full of headlines of people being

investigated. I think it’s very helpful to wait until the facts are in.

And I think that the board, even though, I’m sure, this brings some

level of discomfort, should in all of its actions not prejudge any of

this, and to—because everyone deserves, I think, an appropriate

presumption that they are acting in accordance with the law until

proven otherwise. And we should not let headlines ruin people’s careers. So I would just want to add my own remarks to that. I thank

the chairman.

Mr. MCHUGH. I thank the ranking member. When I was addressing the question earlier to the Inspector General with respect to

the development of a budget and the concern there is a perception

that every dollar to her new office should be a dollar out of the Inspection Service. Mr. Chairman, you were nodding your head and

I said that you’d have the opportunity to respond and this is that

opportunity.

Dr. DEL JUNCO. Well, I believe that, first of all, there are new

functions that she’s assuming which are going to have to be underwritten. But I think the focus should not be necessarily on the

budget of the IG. The board has already begun and is committed

to fund those functions. However, it should be said that up to now,

we have not had a report from the Inspection Service and we do

not know how that’s going to affect the Inspection Service function.

There is a number of audit functions that are going to be removed. And indeed, the board have talked about how would that

affect the budget of the Inspection Service. And I believe that’s

what the—really, the issue is. As we transfer functions from the

Inspection Service to IG, there is going to be a need for an adjustment. And we intend to have a report and a presentation from the

Chief Inspector in the next 90 days. But first we want to identify

the functions and the budget of the IG.

Mr. MCHUGH. I think that’s a wise approach. I encourage you to

go about this in a very prudent manner and I know you will. I just

am concerned and I never heard it from any of you. But the proverbial talk on the street were suggestions that there was a predetermined policy on a one for one trade.

Dr. DEL JUNCO. The talk in Washington is sometimes awfully

cheap.

Mr. MCHUGH. Sometimes a lot of other things, too. But that’s

true. Well, we’re comforted by your response, Mr. Chairman, and

appreciate that. Recognizing your time constraints, we won’t be too

much longer, I don’t believe. In your comprehensive statement on

postal operations for 1996, your annual report, I noted that—and

others noted—your TFP—total factory productivity—was omitted,

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and yet, as I understand it, it’s a required part of the report. I was

wondering why that oversight and omission of TFP occurred.

Dr. DEL JUNCO. This was an administrative oversight. I have addressed a letter to the Postmaster General requesting that an answer be submitted to you immediately, and that in future reports,

I can assure that that will be addressed. You should be receiving

a letter within the next 48, 72 hours. Governor Dyhrkopp wants

to——

Mr. DYHRKOPP. We have been quite concerned about the matter.

It should have been in the report. It wasn’t in the report. The audit

committee, which I’m chairman of, have asked for an investigation

of it. We want to know why it was left out. Whose responsibility

it was to have it in there. And who, if anybody, had it taken out.

We’re going to thoroughly investigate that matter and find out why

that occurred.

Mr. MCHUGH. Thank you, Governors, for that. And we’ll be looking for that letter. I’d be happy because of the time constraints of

the Governors and their airline schedules to yield to either the

ranking member or the gentleman from Illinois, if they have any

followup questions. Mr. Davis.

Mr. DAVIS. I’ve got just one. Thank you very much. I’ve got just

one followup. We talked about automation, and then it occurred to

me that just a few days ago we were discussing whether or not

we’re equipped to handle breakdowns and what happens when the

equipment doesn’t work that we have relied so much upon. Are you

satisfied with the contingency planning that you’re doing to be in

a position, should there be any equipment failure, to still have the

kind of efficiency that we’re looking for?

Dr. DEL JUNCO. It’s hard for me, not being a part of management, to answer that question. But let me just say a couple of

things. One: before any of that equipment is placed, there is a considerable amount of research, pilot programs, and subsequent to

that, they have systems to assure that our—there is not a breakdown, as you say, where we cannot deliver the mail. These are precautions that are part of the system. And it doesn’t matter what

kind of automation we’re talking—be at the level of the optical

character readers or the remote controls or whatever—there are

systems in place for that. And if you need more—a more specific

answer, I will have management address that question for you.

Mr. DAVIS. Well, let me just say, Mr. Chairman, that I really appreciate the level at which you are in terms of the satisfaction. I

know that sometimes, in some of the industries and businesses

with which I’ve been involved, I’ve seen computers kind of break

down and everything stops. And you can’t get anything done.

Dr. DEL JUNCO. We can’t afford that.

Mr. DAVIS. Thank you very much. And I certainly hope that you

don’t have that experience.

Mr. FATTAH. Mr. Chairman, I’ll take one last shot, if I could, too.

Mr. MCHUGH. Mr. Fattah.

Mr. FATTAH. There was some earlier comment about competitors.

And you referred, Governor Fineman, to FedEx. In reality, the U.S.

Postal Service, as best as I can discern, doesn’t have any competitors here domestically. There’s nobody who is in the same business

that you are in, in terms of universal service. And a part of the

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issue for many of us to wrestle with is that since you don’t have

any competitors for what your primary public function is and that

is to deliver mail to everyone no matter where they may be that

on some of those functions for which you do bring in revenue

through other activities, to what degree competition in other areas

and some of the structures, the bureaucratic structures that we’ve

set up, like ratemaking hurts your ability to offer a package are

issues, really, that do need to be grappled with, because we don’t

want to be in a circumstance which is a reality in other places in

this world, that you can’t get mail sent to anywhere in the Nation.

And so, I think there are a lot of issues for us as policymakers

to ponder. We look forward to working with you. But I’d be interested in any response from members of the Board of Governors on

this whole issue that was raised.

Dr. DEL JUNCO. You know, there is an area which there’s no competition, we have a monopoly, but there’s other areas like priority

mail and express mail and so on and packages and so on, in which

the competition is extremely, extremely heavy. Our hands are tied

down because of the price structure. We are not allowed to deduct—to any kind of portion of that fee.

And to be quite candid with you, we would love to have a greater

amount of flexibility, where we can compete in the market place.

It’s interesting to me that Federal Express has got the contract at

the White House, not only this administration. During the Republican administration they also had the contract. And the reason

they have it is because they can discount the service. There are a

lot of limitations that we have imposed upon us in the competitive

areas that really, really does not allow us to bring in the revenues

that we should be bringing in.

Mr. FINEMAN. Congressman, when you were making those remarks, I looked up at where you’re sitting, next to Congressman

McHugh, and what I said to myself is that we have to have the

ability to deliver mail to every American. And when I looked at

both of your districts—two places that are very different in America. Congressman McHugh represents one of the largest rural districts in America, and Congressman Fattah represents——

Mr. FATTAH. I’m not going to hold that against him.

Mr. FINEMAN. Right. And Congressman Fattah, obviously, represents portions of the inner city of Philadelphia. Those two places,

unless we continue to have a viable postal service, those two places

and your constituents really won’t get mail on a regular basis and

a uniform rate. And I think that that’s what we really are here to

protect.

Mr. FATTAH. Well, let me thank you for your presence. And we’ll

look forward to engaging on this and many other matters as we go

forward. Let me thank the chairman for his indulgence.

Mr. MCHUGH. Thank you, Mr. Fattah. Let me again say that

we’re really delighted you’re here and truly appreciate having both

you and Mr. Davis with us through the whole hearing. I’m not accustomed, at this point in a hearing, looking around and seeing

anybody but me. It’s a nice change and I appreciate it. It’s a wonderful change. With that, again, I understand you have airline

schedules. We do have a number of questions that we’ll be submitting for the record. I would certainly offer to the Members in atVerDate 11-MAY-2000 08:57 Aug 05, 2002 Jkt 080370 PO 00000 Frm 00081 Fmt 6633 Sfmt 6602 W:\DISC\43746 pfrm12 PsN: 43746
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tendance and others of the subcommittee that they are welcome to

submit written questions should they choose, that we would forward to you, Mr. Chairman, and the other Governors, in expectation of your response, as in the past. We thank you and echo the

ranking member’s comments about your presence here today.

Let me repeat our appreciation for the thankless task you do and

for the great way in which you do it. On behalf of all Americans,

we certainly welcome your high level of achievement and your

sense of dedication. With that, I would note that we will stand adjourned in contemplation of two upcoming hearings—the next on

April 16, involving ratemaking and after that, April 24th, where

the Postmaster General will be rescheduled to have a hearing with

him that was postponed.

So the subcommittee stands adjourned. Thank you.

[Whereupon, at 4:45 p.m., the subcommittee was adjourned.]

[The prepared statement of Hon. Benjamin A. Gilman and followup questions and responses follow:]

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