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INQUIRING MINDS WANT TO KNOW: WHAT IS

THE POSTAL SERVICE CONTRACTING OUT?

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERAL WORKFORCE,

POSTAL SERVICE, AND THE DISTRICT

OF COLUMBIA

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JULY 19, 2007

Serial No. 110–198

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

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

HENRY A. WAXMAN, California, Chairman

TOM LANTOS, California

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

BRIAN HIGGINS, New York

JOHN A. YARMUTH, Kentucky

BRUCE L. BRALEY, Iowa

ELEANOR HOLMES NORTON, District of

Columbia

BETTY MCCOLLUM, Minnesota

JIM COOPER, Tennessee

CHRIS VAN HOLLEN, Maryland

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

JOHN P. SARBANES, Maryland

PETER WELCH, Vermont

TOM DAVIS, Virginia

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

VIRGINIA FOXX, North Carolina

BRIAN P. BILBRAY, California

BILL SALI, Idaho

JIM JORDAN, Ohio

PHIL SCHILIRO, Chief of Staff

PHIL BARNETT, Staff Director

EARLEY GREEN, Chief Clerk

DAVID MARIN, Minority Staff Director

SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL SERVICE, AND THE DISTRICT OF

COLUMBIA

DANNY K. DAVIS, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JOHN P. SARBANES, Maryland

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio, Chairman

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

KENNY MARCHANT, Texas

JOHN M. MCHUGH, NEW YORK

JOHN L. MICA, Florida

DARRELL E. ISSA, California

JIM JORDAN, Ohio

TANIA SHAND, Staff Director

(III)

C O N T E N T S

Page

Hearing held on July 19, 2007 ............................................................................... 1

Statement of:

Burrus, William, president, American Postal Workers Union, AFL–CIO;

William Young, president, National Association of Letter Carriers;

Donnie Pitts, president, National Rural Letter Carriers’ Association;

and John Hegarty, president, National Postal Mail Handlers Union ...... 56

Burrus, William ......................................................................................... 56

Hegarty, John ............................................................................................ 77

Pitts, Donnie .............................................................................................. 72

Young, William .......................................................................................... 61

Kessler, Alan, vice chairman, U.S. Postal Service Board of Governors;

John Potter, Postmaster General/CEO, U.S. Postal Service; and David

Williams, inspector general, U.S. Postal Service ....................................... 17

Kessler, Alan .............................................................................................. 17

Potter, John ............................................................................................... 30

Williams, David ......................................................................................... 36

Sires, Hon. Albio, a Representative in Congress from the State of New

Jersey ............................................................................................................. 9

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

Burrus, William, president, American Postal Workers Union, AFL–CIO,

prepared statement of ................................................................................... 58

Davis, Hon. Danny K., a Representative in Congress from the State

of Illinois, prepared statement of ................................................................ 3

Hegarty, John, president, National Postal Mail Handlers Union, prepared

statement of ................................................................................................... 79

Kessler, Alan, vice chairman, U.S. Postal Service Board of Governors,

prepared statement of ................................................................................... 20

Pitts, Donnie, president, National Rural Letter Carriers’ Association, prepared statement of ........................................................................................ 74

Potter, John, Postmaster General/CEO, U.S. Postal Service, prepared

statement of ................................................................................................... 32

Sires, Hon. Albio, a Representative in Congress from the State of New

Jersey, prepared statement of ...................................................................... 12

Williams, David, inspector general, U.S. Postal Service, prepared statement of ........................................................................................................... 38

Young, William, president, National Association of Letter Carriers, prepared statement of ........................................................................................ 64

(1)

INQUIRING MINDS WANT TO KNOW: WHAT IS

THE POSTAL SERVICE CONTRACTING OUT?

THURSDAY, JULY 19, 2007

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL

SERVICE, AND THE DISTRICT OF COLUMBIA, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 2:37 p.m., in room

2154, Rayburn House Office Building, Hon. Danny K. Davis (chairman of the subcommittee) presiding.

Present: Representatives Davis, Norton, Sarbanes, Cummings,

Clay, Lynch, Marchant, and McHugh.

Staff present: Tania Shand, staff director; Caleb Gilchrist, professional staff member; Lori Hayman, counsel; Cecelia Morton, clerk;

Ashley Buxton, intern; John Brosnan, minority senior procurement

counsel; Ed Puccerella, minority professional staff member; Patrick

Lyden, minority parliamentarian and Member services coordinator;

Brian McNicoll, minority communications director; and Benjamin

Chance, minority clerk.

Mr. DAVIS. The committee will come to order.

Let me, first of all, apologize for the delay. Of course, we say that

this is one of the most worked rooms in the Capitol, the Committee

on Oversight and Government Refrom. There are a lot of things to

oversee. But let me thank you all for your patience and for being

here.

Welcome, Ranking Member Marchant, members of the subcommittee, hearing witnesses and all of those in attendance. Welcome to the Federal Workforce, Postal Service, and the District of

Columbia Subcommittee hearing entitled, ‘‘Inquiring Minds Want

to Know: What is the Postal Service contracting out?’’

Hearing no objection, the Chair, ranking member and subcommittee members will each have 5 minutes to make opening

statements; and all Members will have 3 days to submit statements for the record. I will begin.

Mr. Marchant, members of the subcommittee and hearing witnesses, welcome to the subcommittee’s hearing on contracting out

services within the U.S. Postal Service. Today’s hearing will examine the Postal Service’s use of private contractors to deliver and collect mail and the Postal Service’s plans to contract out future services.

At the first postal oversight hearing on April 17, 2007, many of

the labor unions expressed concerns about the contracting out of

the Postal Services. This hearing is to engage the postal commuVerDate 11-MAY-2000 11:12 Nov 16, 2009 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 U:\DOCS\52715.TXT KATIE PsN: KATIE
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nity in a discussion about outsourcing new mail delivery routes to

contractors rather than career postal employees.

It has been long established and accepted that highway contract

routes are performed by contractors for bulk mail and delivery

services in rural areas. What is less established is the Postal Service’s use of contractors to deliver the mail to suburban and rural

areas and whether or not this practice is good public policy. In addition, the subcommittee would like to know generally what current and future services the Postal Service intends to contract out.

In discussions with the Postal Service, I have been assured that

only new postal routes will be considered for outsourcing and that

established routes would be given to postal employees. The Postal

Service and the National Association of Letter Carriers, as part of

the collective bargaining process, have agreed that existing city

routes will no longer be contracted out. For example, an abandoned

building in the middle of the Bronx, New York, was renovated and

converted into apartments. It was classified as a new route by the

Postal Service, and a contractor was assigned to deliver the mail,

even though this building had been within an established route

that could have been divided among current letter carriers.

Postal unions were concerned that the practice of contracting out

is being extended into what, up until a year ago, would have been

city routes serviced by career, uniformed, unionized letter carriers.

Due to the new collective bargaining agreement, the Bronx and

similarly awarded contracts have been canceled and are now being

divided amongst the existing city carriers.

The President, as part of his management agenda, championed

the idea of privatization and contracting out government services,

but at what cost? Currently, contractors are only 2.6 percent of all

city and rural routes, but that number is increasing, especially in

the Midwest where neighborhoods are growing the fastest.

Where does it stop? Is a 50 percent contractor rate acceptable?

Do we want all letter carriers to be contractors in order to save on

mail delivery? What other services would be contracted out and

what assurances do we have that contract staff would be held accountable for their actions and that the mail is secure?

As part of its mission, the Postal Service states that it shall provide prompt, reliable and efficient services to patrons in all areas

and shall render postal services to all communities. Mail delivery

in the United States is, for the most part, affordable and reliable.

Outsourcing postal services is a tool among many that could be

used to keep postal costs down while maintaining efficient and reliable mail delivery.

I am pleased that the Postal Service and the National Association of Letter Carriers have reached an agreement on how existing

city routes will be serviced. However, this subcommittee intends to

engage the postal communities in discussions to answer the broader question policy of what postal services are ‘‘inherently postal’’

and whether or not they should be contracted out.

I thank you very much for coming and look forward to the testimony of the witnesses.

[The prepared statement of Hon. Danny K. Davis follows:]

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Mr. DAVIS. Now I would like to yield to the ranking member, Mr.

Marchant.

Mr. MARCHANT. Thank you, Chairman Davis, and good afternoon. I would like to commend Chairman Davis for holding this

hearing on the Postal Service’s ongoing ability to contract out certain postal functions. The operations of the Postal Service and its

ability to contract cost and be more efficient are important oversight issues for this committee.

First, I was pleased to hear that the Postal Service and the National Association of Letter Carriers reached a tentative labor

agreement on July 12th for the 222,000 city delivery letter carriers.

The Postal Service performs a national service, and its workers are

among the hardest working of all working employees in this country.

As we begin to review the use of contractors by the Postal Service today, I remind my colleagues that the Postal Service has been

using contractors to deliver the mail since the late 1700’s. The

Postal Service gains roughly 1.8 million new deliveries each year,

with the vast majority of these deliveries being assigned to Postal

Service employees.

This should be an informative hearing today, and I look forward

to hearing from our colleague from New Jersey and as well as our

two panels of witnesses. Thank you, Mr. Chairman.

Mr. DAVIS. Thank you very much, Mr. Marchant.

I will ask if any of the Members have any opening remarks they

would like to make, and beginning with Mr. Lynch.

Mr. LYNCH. Thank you, Mr. Chairman. I want to thank you for

holding this very important hearing. I also want to thank all of the

panelists who have come here, including Mr. Sires, to help us with

our work.

I usually begin my statement in this committee with a little disclosure. As most people know by now, my mom was a 30-year employee of the Post Office. My 2 sisters are currently employed at

the general mail facility in Boston; and I have a brother-in-law, 4

aunts and 12 members of my extended family, my cousins, all employed at the Postal Service either with the mail handlers, the

clerks or the letter carriers. None are supervisors yet. But I have

to make that general disclosure, because if people think that somehow makes me biased, they are probably correct.

Mr. Chairman, I would like to thank you for holding this hearing. As a former union president, I afford the greatest deference to

the collective bargaining process as the primary avenue through

which workplace concerns should be resolved. Accordingly, I am

greatly encouraged that the main issue before us today, the

outsourcing of postal delivery work, has been I think meaningfully

addressed via the tentative 5-year collective bargaining agreement

between the U.S. Postal Service and the National Association of

Letter Carriers; and I assume that will also be addressed in agreements with the letter—not only the letter carriers but the mail

handlers and the clerks as well.

However, as a Member of Congress and a member of the Oversight Committee, in particular, I also believe that the contracting

out of basic postal service functions bears much broader policy implications than just the allocation of that work; and from speaking

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to a lot of the postal workers, mail handlers and others in my district, there is general agreement from those workers who actually

work at the Post Office. Many postal workers, mail handlers, city

and rural letter carriers serving in my congressional district have

great concerns about the contracting out of their work.

Albert Einstein defined insanity as doing the same thing over

and over and expecting different results. And as this administration has learned time and time again, whether it be from the

outsourcing of patient care at Walter Reed Army Medical Center

or the outsourcing of what was normally considered public work to

private entities during the Katrina recovery effort or the

outsourcing to private industry or logistical operations in Iraq, such

as to Halliburton, or the outsourcing of core governmental functions in general, it simply has had a very poor record, at least for

very core functions.

And make no mistake about it, it is a responsibility of our government to ensure the free flow of information, communication and

commerce through the U.S. Postal Service. This was never more

evident I think to all of us than in the weeks following September

11th during which a series of anthrax attacks—this was my first

week in Congress. I was elected in the primary on September 11th;

and when I arrived here, a number of the buildings had been contaminated by anthrax, including one of our mail facilities. Tragically, two employees of the Brentwood mail sorting facility here in

Washington, DC, Mr. Joseph Curseen, Jr., and Thomas Morris, Jr.,

were among the victims of those attacks.

At that time, I know that every one of our postal workers, every

clerk, every carrier, every mail handler, was faced with a very difficult choice between continuing to come to work in contaminated

environments every day under very difficult and dangerous conditions, not only for themselves but for their families, or the choice

of staying home, thereby risking the stability of our own economy

in stopping the flow of mail and upsetting the flow of commerce

and probably shaking the confidence of the American people.

The burden heavily fell upon the shoulders of the union leaders

of those unions that I mentioned, the mail handlers, the letter carriers and the clerks. And, as we all know, in the end, America’s

postal union leaders and their workers chose to come to work because they considered their—they considered it their patriotic duty

to do so.

Accordingly, the continued prospect of contracting out our postal

delivery work and other work to private employees who possess significantly less experience, significantly less training and very likely

considerably less dedication and commitment and responsibility in

a governmental sense greatly concerns me.

Mr. Chairman, I thank you for holding this hearing. I welcome

our panelists and their testimony regarding this very important

issue, and I yield back the balance of my time.

Mr. DAVIS. Thank you very much, Mr. Lynch.

Mr. McHugh.

Mr. MCHUGH. Thank you, Mr. Chairman. I don’t have a prepared

statement, but that never got in my way before, and it won’t now.

Let me just say a few words.

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First of all, I want to add words of welcome to my colleague from

New Jersey. We look forward to his comments and appreciate the

leadership that he has shown on this issue in the introduction of

the bill that I am sure he will go into depth about. But I want to

thank you as well, Mr. Chairman, and to the distinguished ranking

member.

As you noted, Mr. Chairman, this is an issue that has importance still. As we learned in our inaugural oversight hearing this

year, there is far from unanimity of agreement of how to approach

the issue, even amongst the workers, representative organizations.

There is some disagreement. But that, if anything, argues at our

continued attention.

I want to give a tip of the hat to the Postmaster General and to

the NALC president, Bill Young, for reaching out, working together, bringing the two sides together and I think coming up with

a contract agreement that establishes a 6-month moratorium that

is going to have a joint union/management task force to look at a

way to develop an approach to this in the future. And that truly

is the definition of leadership.

But it seems to me, Mr. Chairman, it also argues for our continued oversight; and I know we will be working with you and the

ranking member to try to ensure that when that joint task force

comes out with its recommendations we have the opportunity to review those as well in our continuing oversight. So thank you for

calling this hearing.

I welcome so many friends that I have had the opportunity of

knowing them, most of them pretty happily—not all, but most of

them—pretty happily over the past 15 years or so and yield back,

Mr. Chairman.

Mr. DAVIS. Thank you very much, Mr. McHugh.

Delegate Norton.

Ms. NORTON. Thank you, Mr. Chairman.

I want to, first, commend the postal unions and postal management for trying to deal with this very important issue through the

collective bargaining process. The very grown-up way in which the

promise they have already made, it seems to me, is itself an indication of the wisdom of congressional decision to make sure that collective bargaining remains in place.

When the Post Office turned over in the early 1970’s, the joint

committee tried to deal with this problem, the problem of the existing practices of contracting out. Their 6-month moratorium, that is

how grown-up labor management relationships occur and how

problem solving through collective bargaining occurs.

This hearing, however, is appropriate, consistent with collective

bargaining; and the reason is is that there is a mandate from this

Congress that the Postal Service better deliver to every little place

in the United States of America and it better do it cheaply. So here

they are put in an almost impossible position unless we make it

clear that we support their efforts and that we do not intend to see

the Postal Service privatized or outsourced through the back door.

The challenge of the Post Office is to some time, some how assure a healthy Postal Service, fully competitive with all of the private actors, most of whom, by the way, have a much freer hand,

no mandate from us, be competitive with these private sector folks,

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and deliver the mail cheaply everywhere in the United States. Now

hearing, for example, complaints to publications because they don’t

want their fees raised.

This is a unique entity. It is the only private entity I know that

has an ironclad public mandate while being forced to operate precisely as if it were 100 percent private business.

Understanding that, if we simply allow privatization of much of

the Postal Service business and the outsourcing of business as our

country expands, we will wake up 1 day and find that the mandate

to deliver the mail is completely inconsistent with the mandate we

have given the Postal Service to operate like a private business.

That means that everybody has to pull this ore, and I must say

that I think management and labor and the Postal Service are pulling us in the right direction. And if they are able, beginning with

their 6-month moratorium, to figure this out, I think you will find

the U.S. Congress pulling back.

But one thing we will never pull back from is the universality

of the Post Office’s mandate, and we will never leave the Post Office with its business so shriveled that it cannot meet that mandate. Thank you very much, Mr. Chairman.

Mr. DAVIS. Thank you very much, Delegate Norton.

Mr. Clay.

Mr. CLAY. Thank you, Mr. Chairman. Thank you for calling the

hearing today. I also want to thank my colleague from New Jersey

for coming forward and giving testimony today.

The topic of the hearing, ‘‘Inquiring Minds Want to Know: What

is the Postal Service Contracting Out,’’ is very fitting because I am

very inquisitive about the testimony that will come today as far as

what the benefits are to contracting out and what the drawbacks

are to postal customers.

I am also pleased to hear that our colleague’s family has full employment because of the Postal Service, the gentleman from Massachusetts. We are glad to know that, Mr. Lynch.

But what will be the differences in comparison to the hourly

postal workers serving the postal customers as compared to the

contracted employee? As the chairman mentioned in his opening

statement, the Midwest is expanding rapidly into the suburbs. I

think about an area around St. Louis, Belleville, IL, to be exact,

right around Scott Air Force Base, new subdivisions are popping

up; and I had a conversation recently with the gateway district director of the Postal Service who explained to me that, after several

members from that area had complained to me, as well as people

who live there or are going to move there and had complained

about the fact that their postal services will be done by contracted

employees, and they complained that they wanted the same services that their neighbors were getting from the hourly postal worker. So I am interested to hear that explanation. The gateway district director told us that it was a cost savings, and I would like

to hear more about what the cost savings are and how effective

those savings would be.

So, Mr. Chairman, I will yield back the balance of my time and

await the testimony.

Mr. DAVIS. Thank you very much, Mr. Clay.

Mr. Sarbanes.

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Mr. SARBANES. Thank you very much, Mr. Chairman, for calling

the hearing.

I also want to congratulate the parties on reaching an agreement

but agree that the continued oversight on this issue from the committee makes a lot of sense. To me, it is very easily put, which is

that if it is not broken, don’t fix it. And the history of the Postal

Service working hand in hand with a work force by which they are

doing the right thing is one of an organization that works and

works well, and I think there is a certain arbitrary nature or there

has been in this move to contract services out, and we are right to

push back against that and ask tough questions.

The Postal Service, again, working in combination with its incredible work force, is really a unique infrastructure and a unique

distribution system, because it is built fundamentally on a set of

relationships, human relationships, and that is what makes it so

different. And I think we tamper with that when we move aggressively or arguably at all into the area of contracting these services

out. So I think the hearing is certainly warranted.

I want to salute Congressman Sires for gathering up the sense

of the House as he is trying to do on this issue and exercising leadership. Thank you.

Mr. DAVIS. Thank you very much.

We are very pleased that our first witness is seated. He is Representative Albio Sires, who is elected to serve the 13th Congressional District of New Jersey in the United States of America,

served two terms as New Jersey’s speaker of the general assembly.

Mr. Sires was serving his fourth term as an assemblyman from the

33rd District in New Jersey when he was elected to Congress. Albio

Sires is the first legislator of Hispanic origin to be named assembly

speaker and the first Cuban to be named assembly speaker in the

Nation. We welcome you, Representative Sires.

It is the custom of this committee to swear all witnesses. So even

though you were sworn in as a Member of Congress, if you would

stand and raise your right hand.

[Witness sworn.]

Mr. DAVIS. The record will show that the witness answered in

the affirmative. Representative, you know the drill for these in

terms of the 5 minutes. If you would proceed, and we would be delighted to hear your testimony.

STATEMENT OF HON. ALBIO SIRES, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEW JERSEY

Mr. SIRES. Mr. Chairman, ranking member, members of the subcommittee, I would like to thank you for allowing me to testify before you today regarding a resolution I introduced, H. Res. 282,

conveying the sense of Congress that the U.S. Postal Service should

discontinue its practice of contracting out mail delivery services.

This resolution has been cosponsored by 225 Members of the House

of Representatives. It has been endorsed by the National Association of Letter Carriers.

Today, the U.S. Postal Service provides mail delivery services to

over 144 million homes and businesses across the Nation and adds

about 1.8 million new delivery addresses each year. With this unfettered access, the U.S. Postal Service has been shifting away from

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allowing letter carriers to deliver and collect the mail to contracting

with private individuals or firms.

Traditionally, the U.S. Postal Service has used contractors along

highway contract routes to transport mail in bulk and to deliver

along sparsely populated rural areas. These are well accepted and

legitimate uses of contractors. This past year, however, the Postal

Service has expanded its use of contractors to establish contract

routes in areas where there is new development in both urban and

suburban communities. This practice is endangering the quality

and security of our Nation’s mail.

By contracting out mail delivery services, the U.S. Postal Service

is bypassing the hiring processes that ensure only qualified individuals handle the mail. The checks performed by the Postal Service

for career employees include criminal history and outstanding warrant checks, fingerprinting, application reviews, driving record reviews and drug screenings. Most of these checks are performed for

contractors, but according to the U.S. Postal Service the drug

screening were not conducted on all of its contractors. According to

the Postal Service, they will begin to perform drug screenings on

all its contractors beginning July 31, 2007.

Performing background checks on contractors is one thing, but

we encounter a real problem when contractors subcontract. Postal

Service contractors often subcontract the delivery work to individuals who go through minimal or no background screening procedures. Independent contractors do not use the same extensive recruiting and screening process that the U.S. Postal Service uses

when it hires and trains its mail carriers. This practice can open

the door to felons, identity thieves and terrorists to gain access to

the mail and mailboxes of millions of Americans.

Our Nation’s mail workers handle bills, credit card statements,

medical records, personal correspondence and other secure and

vital information. Our letter carriers also have access to almost

every home and business 6 days a week. Granting this type of access to low-paid contract workers who receive no benefits, no potential for career advancement and who have no incentive to provide

first-class service comprises the security of our mail system.

I was pleased to have learned this last weekend that the Postal

Service and Letter Carriers Union had reached an agreement during their contract negotiations not to assign new urban routes to

contractors for at least the next 6 months. This agreement would

ensure that the new residential and business developments in my

district and districts across the country would not be assigned to

contractors but would remain in the hands of our trusted letter carriers. This is an initiative, however, that must be addressed by

Congress. We must permanently stop this practice.

The contracting out by the Postal Service of its functions is a

broad issue that has been gaining momentum. It was recently

brought to my attention that the Postal Service has contracted out

the processing of military mail at the New Jersey International and

Bulk Mail Center located in Jersey City, NJ, which is my district.

It is my understanding that the Postal Service has moved all the

processing of military mail from a site that already had adequate

personnel and infrastructure to conduct these services to a completely different location. This action not only pose national secuVerDate 11-MAY-2000 11:12 Nov 16, 2009 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 U:\DOCS\52715.TXT KATIE PsN: KATIE
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rity questions but also a concern of why the Postal Service would

remove the processing of military mail from its career employees,

many of whom are veterans that have a personal interest in seeing

that this mail is properly and efficiently processed.

I understand that others on this panel will be going into greater

details concerning this particular issue, and I thank the subcommittee for looking into what I consider to be a major problem.

The protecting of our mail delivery service is a vital component

of our national security. At a time when our country wages a war

against terror and security precautions at an all-time high, we

must not allow the U.S. Postal Service to jeopardize the safety and

security of mail delivery to our homes and our business. The issue

of contracting out mail delivery services is a legitimate public policy and a national security issue that we as Members of Congress

shall decide.

I want to take this time and thank the chairman for allowing me

5 minutes.

Mr. DAVIS. Thank you very much, Representative Sires.

[The prepared statement of Hon. Albio Sires follows:]

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Mr. DAVIS. Let me just ask you one question. I was impressed

with the more than 200 signatures that you collected. In the process of doing so, are there any comments that you recall from any

of the Members that would give one a greater sense of how the

Members of Congress expressed a feeling about your resolution?

Mr. SIRES. Well, chairman, the comment that I received or went

over again is the concern for security and the concern that this is

something that has worked for many years, why are we looking to

change it? And many Members expressed that.

Mr. DAVIS. Thank you very much. I have no further questions.

Mr. Marchant.

Mr. MARCHANT. Thank you very much for your testimony. I admire your hard work on this subject. I don’t have any questions at

this time, though. Thank you.

Mr. DAVIS. Are there other Members with questions of the witness?

Mr. LYNCH. Mr. Chairman, thank you. No questions. Just a comment.

I noted that my name was not on that resolution; and I would

just ask you if I could please, with all due respect, be added to that

resolution.

Mr. SIRES. If I may enter a comment, I was a mayor before I was

speaker, and I represented a town that was 9/10 of a square mile

and had 50,000 people according to the census. In my 12 years as

mayor, I never received a complaint regarding the mail. I received

a lot of complaints about something else, but I think that says

something about the Postal Service of this country.

Thank you.

Mr. DAVIS. Any other questions of the witness?

Thank you very much. We appreciate you coming and certainly

appreciate your having introduced the resolution.

We would ask our second panel if they would be seated: Mr. Alan

Kessler and Mr. John Potter and Mr. David C. Williams.

Mr. Alan Kessler, vice chairman of the Board of Governors, is a

Philadelphia attorney and partner in the firm of Wolf, Block,

Schorr and Solis-Cohen, LLP, with substantial experience in the

defense of class-action litigation, including securities, antitrust, tort

and civil rights cases. He was appointed the Governor of the U.S.

Postal Service in November 2000 for a term that expires in December 2008. Governor Kessler also serves as chairman of the Board

of Governors and Strategic Planning Committee.

Mr. John Potter was named the 72nd Postmaster General of the

United States of America on June 1, 2001. He has led the Postal

Service to record levels of service, efficiency and financial performance. He has served as chief operating officer, vice president of

labor relations and in a number of other senior operational positions both at postal headquarters and in the field.

Mr. David C. Williams was sworn in as the second independent

Inspector General for the U.S. Postal Service on August 20, 2003.

Mr. Williams is responsible for a staff of more than 1,100 employees located in major offices nationwide that conducts independent

audits and investigations for a work force of about 700,000 career

employees and nearly 37,000 retail facilities.

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Gentlemen, let me thank you so much for coming; and, as is the

custom of this subcommittee, we swear in the witnesses. If you

would stand, raise your right hands.

[Witnesses sworn.]

Mr. DAVIS. The record will show that each of the witnesses answered in the affirmative.

We will begin with you, Mr. Kessler. All of you have done this

a number of times. You know the 5-minute rule as well as the

meaning of the signal lights, and of course we try and observe

these sometimes.

STATEMENTS OF ALAN KESSLER, VICE CHAIRMAN, U.S. POSTAL SERVICE BOARD OF GOVERNORS; JOHN POTTER, POSTMASTER GENERAL/CEO, U.S. POSTAL SERVICE; AND DAVID

WILLIAMS, INSPECTOR GENERAL, U.S. POSTAL SERVICE

STATEMENT OF ALAN KESSLER

Mr. KESSLER. Good afternoon, Chairman Davis and members of

the subcommittee. I appreciate the opportunity to testify today on

behalf of the Board of Governors and the U.S. Postal Service about

the use of contract delivery services. I have to say that while I’m

here representing all of the Governors, by way of background, I’m

an active resident from a city steeped in the tradition of labor,

Philadelphia, with many good friends in and of the organized labor

movement, including my good friend who did some introductions at

the outset, Congressman Brady from Philadelphia. On a personal

level, I recognize therefore the importance and the impact that contracting has on employees, and I believe that I understand the concerns that has been have been expressed.

But while the issue being discussed here today is contracting, the

real issue for the Governors and the Postal Service is broader and

more fundamental. That is, we respectfully submit that the Postal

Service must retain its ability to collectively bargain on a level

playing field and know that the agreements that are reached in

good faith after good-faith negotiations, and the subject of those negotiations and agreements, will not be altered as a result of legislative action.

I thank Congresswoman Norton for understanding our challenges

and for the fundamental role of the collective bargaining process.

I’ve had the honor of serving on the board for almost 7 years, and

I’ve seen firsthand the financial, operational and human capital

challenges confronting the Postal Service continue to mount. I’ve

lived through competition from the Internet, as was referred to earlier, the Internet, the 9/11 anthrax in the mail and escalating gas

prices.

The business model for the Postal Service, where steady growth

in first-class mail finances the expansion of our delivery network,

adding almost 2 million new delivery points a year to allow for affordable universal service, and with the utmost respect to Congressman Sarbanes’s comments, simply is no longer working.

The trend is clear: First-class mail, particularly single-piece firstclass mail, is no longer growing steadily. Standard mail, which contributes significantly less than first-class mail to the Postal Service

institutional cost, now comprises the majority of our volume. The

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Postal Service is seeing a decline as a result of this per delivery

point from $469 in 2003—this is per delivery point—to $433 in

2006, a $36 drop per delivery point in just 6 years; and this drop

has occurred notwithstanding or despite a 21 percent increase in

postal rates over the same period.

I do want to applaud postal employees who have made this possible. By increasing—with the efforts of our management, senior

management—productivity, our employees have allowed the Postal

Service to remain financially sound.

Governors are also aware of the new responsibility placed upon

the Postal Service by the Postal Act of 2006 which mandated that

the Postal Service accelerate the funding of its retiree health benefits. Because of this, the Postal Service reported a $3.8 billion loss

at the end of the second quarter of fiscal year 2007, with a projected loss of $5.7 billion by the end of the fiscal year.

That same act also broke the link between cost and prices by imposing a Consumer Price Index price cap on 90 percent of postal

revenues. Now we know this change was intended to encourage

further cost reductions and efficiencies. However, in mandating a

price gap, the new law did not provide the Board of Governors with

any new cost controls. Consequently, productivity improvements,

automation investments and cost control measures remain critical

elements in controlling rapidly escalating delivery costs.

We would stress that the Postal Service is not considering taking

work away from career carriers who perform such an outstanding

job. Nor is what is being discussed contracting out all new deliveries. Ninety-two percent of all new deliveries continue to be assigned to Postal Service employees represented by unions.

The Postal Service is facing significant growing cost pressures. If

Congress were to completely eliminate the ability of the Postal

Service to even consider the option of selectively using contract delivery service, its ability to effectively manage its vast delivery operations and associated costs would be significantly restricted. I was on the Board when the Postal Service had more than $11

billion in debt. That was a huge burden to carry. I think currently

our debt is a fraction of that, $1.5 billion.

As Governors again, respectfully, we have to be very concerned

about the precedent of legislative action in collective bargaining

agreements. It is not hard to imagine a future Congress with a different composition tilting the playing field dramatically in a different direction.

Since the mid-1970’s, the collective bargaining agreements with

the four major postal unions have contained provisions that govern

contracting out, including the adjustment in contracting out of delivery routes. I would like to emphasize that these same collective

bargaining agreements protect the vast majority of union-represented postal employees from layoffs. No career carrier is being

laid off or will be laid off so that we can contract out his or her

job.

Now, I should just add quickly that the Governors provide policy

guidance to senior management of the Postal Service but do not engage in negotiations. That’s the responsibility of our management.

Just last week, after a positive briefing on the subject, however,

with the Board, the Postal Service reached an agreement with the

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National Association of Letter Carriers that, among other things,

included a provision dealing with contract delivery services.

In short, our responsibility as Governors is to ensure the Postal

Service provides universal service at a reasonable rate. We must

balance the provision of that service with the cost of providing the

service. We, as a group, are committed to providing a high level of

service to the American people. Our mandate is to achieve this goal

under the requirements of the new law and our collective bargaining agreements.

Mr. Chairman, I would again like to thank you for holding this

hearing on a very important topic and would be happy to answer

any questions that you or any others may have.

Mr. DAVIS. Thank you very much, Mr. Kessler.

[The prepared statement of Mr. Kessler follows:]

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Mr. DAVIS. We will proceed to Mr. Potter.

STATEMENT OF JOHN POTTER

Mr. POTTER. Good afternoon, Mr. Chairman and members of the

subcommittee. I’m pleased to be with you this afternoon to discuss

one of the most difficult challenges faced by the U.S. Postal Service

today, the need to balance rising costs with a rate structure defined

by a rate cap.

By law, we are required to keep price adjustments at or below

the rate of inflation for market-dominant products, which is over

90 percent of our revenue base. Unfortunately, our costs are not

governed by the same standard, and many have been rising faster

than the consumer price index.

Like other employers, we have been affected by sharp increases

in the costs of energy and health benefits; and, for the Postal Service, costs per work hour for our career employees have been growing at a rate above inflation. At the same time, first-class mail volume, which represents over 50 percent of our revenue base, is declining. The number of addresses we serve is increasing by almost

2 million new households and businesses each year. This means on

average, even with the recent rate change, we are delivering fewer

pieces of mail to each address and average revenue per delivery is

decreasing.

This is not a formula for long-term success. The challenge is to

close the gap between prices and costs while maintaining and rather improving quality service. The question is, how do you do that?

As I see it, management can proceed along any of three paths.

First, we can continue to operate as we’ve been operating for

more than three decades. After all, that brought us a level of success that no one could have imagined when the modern Postal

Service was created in 1970. Service rose to record heights. We

achieved our statutory ‘‘break-even’’ mandate, and we reached unprecedented levels of efficiency.

But the environment in which we operated and achieved this

success has changed and is continuing to change. The business

model that was created in 1970 is broken. We can no longer depend

on mail volume growth to produce the revenue needed to cover the

costs of a growing delivery network. That model helped us to limit

increases in postage to the rate of inflation since 1970. But the

mail volume growth necessary to do this going forward is no longer

there.

To proceed along the path of business as usual would be inconsistent with our obligations under the Postal Accountability and

Enhancement Act of 2006. With the statutory rate cap imposed by

the act, we no longer have the option of adjusting rates to balance

costs. We are experiencing competition in all product categories, including first-class mail. We have to do more, much more if we are

going to keep our costs in check with overall growth and prices no

higher than the rate of inflation and continue to provide universal

service to the American public.

A second path to choose to closing the gap between rates and cost

would be the absolute expansion of the outsourcing work now performed by Postal Service employees, whenever and wherever it

would help the bottom line. But I believe there’s more at stake

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than simply reducing costs. Pursuing the strategy would undermine the strong relationship we have with our craft employees who

were on the front line doing a great job serving America day in and

day out. We do not want to affect this relationship by breaking that

bond. In addition, this could potentially affect service that we provide and damage our brand.

That is why I prefer a third path, working directly with our

unions to confront the critical issues that we are facing as an organization to address the demands of growing our business, the needs

of our customers to better serve America and to protect universal

service for the next generation.

I’m personally committed to the process of collective bargaining

as an important tool in achieving these goals, and I have seen time

and again that it works. The latest example is a tentative collective

bargaining agreement we reached last week with the National Association of Letter Carriers. It keeps the most important focus

where it must be, on our customers, by helping us to improve service and operational efficiency; and it provides our employees with

a fair wage. This is more important than ever as we operate in a

competitive environment in which customers vote with their feet,

no longer bound by a monopoly that is meaningless in today’s

world.

We were successful in reaching negotiated agreements with each

of our major unions in this year’s round of bargaining. We do not

expect that we can agree on every issue every time, but we have

demonstrated our ability to overcome our differences, confront our

shared challenges and negotiate working agreements that benefit

the Postal Service, our employees and the people we serve. I

strongly believe that we should continue to rely on the collective

bargaining process to do this and that the parties should be challenged to make the collective bargaining process work.

I appreciate the opportunity to share the Postal Service’s views

on this very important subject, and I would be pleased to respond

to any questions that you might have.

Mr. DAVIS. Thank you very much, Mr. Potter.

[The prepared statement of Mr. Potter follows:]

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Mr. DAVIS. Mr. Williams.

STATEMENT OF DAVID WILLIAMS

Mr. WILLIAMS. Mr. Chairman and Mr. Marchant and members of

the subcommittee, I appreciate the opportunity to appear today to

discuss the Postal Service’s contracting out of services. As you

know, the Postal Accountability and Enhancement Act directs the

Postal Service to adopt an optimization plan to increase the efficiency and effectiveness of its mail delivery systems and facilities,

while doing business in the new postage rate environment constrained by the Consumer Price Index. With key elements of current labor costs rising much faster than the CPI, the Postal Service

has no alternative than to consider lower labor costs in order to

comply with the new law.

The Clinton and Bush administrations have favored public sector

outsourcing. It was previously part of the Reinventing Government

Initiative and is now one of the four Presidential Management Initiatives, to move functions not inherently governmental to the private sector where possible. The President’s Commission on the

Postal Service also recommended outsourcing functions, believing

that the private sector can perform services better on a lower cost.

It’s an idea less aggressive than the White House.

Historically, the Postal Service has relied heavily on contractors,

outsourcing most long-haul mail transportation to commercial airlines and package shippers and trucking companies and contracting out most research and development and major automation development projects. The Postal Service has more than 3,000 contract post offices operated and staffed by contractors. In sparsely

populated areas of the country, contractors have traditionally performed some of the delivery functions.

By offering mailers discounts to perform postal processing and

transportation functions, the Postal Service is engaging in a form

of outsourcing through work sharing. Today, 75 percent of all mail

has a work share discount, savings resulting to the Post Office in

over $11 billion.

The Postal Service is not required to comply with OMB circular

A–76 regarding outsourcing requirements. Negotiations between

the Postal Service and its unions traditionally determine

outsourcing decisions as anticipated in the Postal Reorganization

Act of 1970. Today, the policy question before Congress is whether

to take outsourcing of delivery off the bargaining table.

Annually, the Postal Service manages a contract portfolio valued in excess of $40 billion. The integrity of contract awards and contract management are essential for such a major portfolio. The

Postal Service uses commercial purchasing procedures rather than

the government’s Federal Accusation Regulation. As a result, the

Postal Service and its stakeholders are unusually dependent on the

OIG for assuring the integrity of contract awards, since court challenges are more restricted. Misconduct by contractors also represents a significant area of concern.

My office dedicates considerable resources to reviewing and investigating contractual activities. Audits of contract administration

over the past several years have allowed for increased management

action to reduce costs and recoup funds. Our audit work in 2007

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identified more than $300 million in questionable costs for management’s action. Contract investigations resulted in cost recoveries as

large as $10 million. We’ve also investigated individual contractors,

such as contract postal units and highway contract routes. In the

last 12 months, we’ve conducted 47 contract postal unit embezzlement cases, resulting in the termination of contracts and arrests.

In one case, OIG agents arrested a contract Post Office operator for

embezzling over $100,000 in postal money orders to finance a gambling habit.

To present a balanced picture, the OIG has also apprehended

substantial numbers of letter carriers, postmasters and clerks for

theft, embezzlement and misconduct. The process of contract worker and postal employee investigations is virtually the same by my

office.

To conclude, Congress is demanding a leaner and more efficient

Postal Service. The Postal Service will need to employ all the tools

at its disposal to meet this demand. There are opportunities to find

efficiencies through additional outsourcing. However, the Postal

Service is faced with powerful and contradictory imperatives from

its stakeholders regarding such cost control measures.

There are compelling calls for lean networks for mail processing

and delivery to keep postage as inexpensive as possible. Conversely, stakeholders also exert pressure for legislation to maintain

a large public work force and unneeded facilities. The challenge of

the Postal Service is to find a way to navigate through this difficult

environment of contradicting imperatives while fulfilling the requirements of the new postal law.

Thank you.

[The prepared statement of Mr. Williams follows:]

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Mr. DAVIS. Thank you, gentlemen, very much. We all appreciate

your testimony.

Mr. Kessler, perhaps I would begin with you. Does the Board of

Governors view contracting out as a cost-containment policy or a

management tool to promote efficiency. Or is there some other

something maybe in between that it looks at in terms of a policy

for its contracting out?

Mr. KESSLER. Thank you, Mr. Chairman. I think I can speak on

behalf of the Board of Governors. And this is an issue that I would

suggest or submit recently has been one that we have spent a little

more time on simply because it was an issue that came up in the

most recent round of negotiations.

I would submit that the Board probably use it both ways, but

more importantly it uses it as a—I don’t mean to not answer your

question, but more importantly, it sees it as a fundamental issue

of collective bargaining. And we understand the issues that have

been created fiscally for us. We understand what the new act has

done, and all we have tried to do is give management where possible the most flexibility in dealing with that issue in a responsible

way. And I think we did that when we briefed the Postmaster General a few weeks ago on the status of negotiations. We were concerned about the issue. But we have also been satisfied that it still

represents a relatively minor, small number of—even on new

routes. So we do see it as one of those tools. If we told management

that you have to find ways of being more productive, this is part

of the charge to you in terms of finding that productivity, but at

least preserving it as one of the issues for collective bargaining.

Mr. DAVIS. In your testimony you talked a great deal about the

economic climate, about the environment in which the Postal Service has to operate. Some changes which have occurred during the

last decade and the decade before that have actually impacted

greatly on the Service and how the Service does service. Do you see

anything on the horizon that will perhaps lighten in any kind of

way the economic pressures that currently exist on the Postal Service or any changes in competition that might alter the way the

Service operates?

Mr. KESSLER. Mr. Chairman, let me say as probably, I guess, the

member of our Board that has been on the Board the longest, I do

remember my first Board meeting, and I was almost blown out of

my seat by hearing that the Postal Service at that time was facing,

I guess, a $2 billion deficit a year. It has been one of the greatest

challenges that I have ever encountered because of the competition

from the Internet, competition from other competitors who don’t

play—or don’t have to play by the same rules that the Postal Service has to play by, and, you know, very circumscribed, the process

on rates that has been approved by the act last year. But until that

time, you know, gas prices went through the roof. We had to go

through a 10-month, 11-month rate process to try to catch up

where our competitors didn’t.

I wish I could say that, you know, the sun is shining over the

horizon. Postmaster General, senior management and our great

employees have worked hard through productivity savings to help

keep this a viable and healthy organization. And I guess the greatest sense I have as I approach almost the end of my term on the

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Board is an absolute commitment by senior management, by all of

our 700,000 employees to do what is necessary to make a mandate

for universal service one that continues on for the future.

So I am optimistic, but at the same time I will say the challenges

will continue. And we meet almost monthly. From month to month

and year to year, the challenges are daunting. I am just very appreciative that we have people that are willing to put the effort

into it that they have.

Mr. DAVIS. Thank you, very much.

And we will go to you, Mr. Marchant.

Mr. MARCHANT. Thank you, Mr. Chairman.

Mr. Potter, what are the biggest hurdles that remain in the 2006

through 2010——

Mr. POTTER. I think the biggest hurdle that this organization has

in general is what are our sources of revenue going forward. And

I am excited about the fact that the new law, the Postal Enhancement Accountability Act of 2006, gives us greater flexibility when

it comes to pricing of products just as a company, but we have the

latitude to use the room under the cap to make the right room and

behavior to make mail more efficient.

I am excited about the opportunity to compete with others when

it comes to package services and the flexibility that is inherent in

that bill, but the only way that we are going to be successful in

overcoming the challenges to the revenue base for first class mail

is to have all 700,000 people in the Postal Service begin to focus

on revenue and begin to—not that we haven’t been, but rising them

higher than we have to meet the demanding and changing needs

of our customers going forward.

So I am excited about the NALC agreement as an agreement if

it includes an agreement that we are going to work together to

have the carriers through the Customer Connect Program continue

to grow revenue for the Postal Service, because I view that as the

No. 1 challenge. Cutting costs is not the way to ultimate success

here. We have to be relevant to the American public. We have to

have products and services that they want to use and will use so

that we can remain viable going forward. And I am happy with the

fact that we have some new freedoms. We have to test those freedoms, push those freedoms, but collectively we have to work together to take advantage as best we can of the changes we are

making.

Mr. MARCHANT. What consequences could you foresee that would

be a result of the passing of this resolution?

Mr. POTTER. Well, I think that there are some consequences in

terms of if the Senate bill were to pass and said we have to roll

back the seven or so thousand routes that we currently have and

bring them and make them be delivered by contract employees, the

cost to us over a 10-year period would be over $1 billion. So there

is a direct economic hit if that were to come into play.

Mr. MARCHANT. I am talking about the gentleman’s resolution

presented today.

Mr. POTTER. The resolution would be sent to the House, and I

think we responded to the Senate. To the House we would be able

to reach agreement on with the National Association of——

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Mr. MARCHANT. If we adopted this resolution, it would have no

impact whatsoever on what you already decided to do?

Mr. POTTER. Again, I think what we have decided to do speaks

for itself. The fact that we have made a commitment for the life

of this agreement not to contract out any city delivery in big cities

and to work on those suburban and rural areas through a task

force over the next 6 months, I think that speaks for itself. It says

that we are aware of the issue. We are trying to respond to the

issue, but our focus is more on how we are going to run the business, and how can we do that in a cooperative manner that addresses our need for efficiency, and built into the contract our mutual agreement on how we are going to handle the deployment of

a future piece of equipment called the flat sequencer to make sure

we get the efficiencies out of it that we can that gives people the

confidence about their jobs through a no-contracting-out provision.

And that helps the Postal Service grow the business through an

agreement to work on revenue generation.

So, you know, I think that we have already reacted to the sense

of the House. We don’t have to wait for something to be passed.

But I think we have responded already, and I would hope that the

Members would view it as not necessary, given the fact that we

have responded already, and we are committed to working with our

unions to again make sure that the Postal Service is around for a

long time to come delivering high levels of service to everyone, regardless of where they are in America.

Mr. MARCHANT. Thank you, Mr. Potter.

Mr. LYNCH. Again, I want to thank you, Mr. Kessler, Mr. Potter

and Mr. Williams, for coming before us and trying to help us with

the work. I appreciate the complexity of what you are doing. There

are some real challenges here. And even though, obviously, my

sympathies lie with the workers here, I do appreciate that you

have to induce change.

Sometimes when folks have been at the job a long time, there is

a resistance to change, but I want to point out sometimes we rush

into ideas, like privatization. And as we have seen at Walter Reed

and the contract there, they went from 400 government employees

doing a great job to 130 contract privatized employees doing a horrible job. They have a horror show over there because of that.

We had some examples right in the Post Office. For example, the

largest subcontract on mail handler work ever signed by the Postal

Service was implemented 10 years ago. I think you recall at the

time the Postal Service decided to contract with Emery Worldwide

Airlines to process priority mail at a network of 10 facilities along

the eastern seaboard. Nearly 1,000 mail handler jobs were

privatized. Today the work of those facilities in terms of mail

handers and other career—but not before the Postal Service suffered severe losses in the hundreds of millions of dollars.

At a meeting of the USPS Board of Governors, one Governor

stated publicly that the Emery subcontract was one of the worst

decisions that the Board ever made, and this was not just idle speculation, because in September 1999, the Postal Service Office of the

Inspector General audited the priority processing work, and they

reached a conclusion—and I quote this—we disclosed that priority

mail processed through the network, Emery using private workers

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cost 23 percent more than priority mail processed by career employees. In the Postal Service, without—in addition, we found that

priority mail processing network was, ‘‘not meeting overall delivery

rate goals referenced in contract.’’

Now, to its credit, the postal management eventually recognized

the mistake and concluded that—again I am quoting from the report—an early end to the Emery private contract would limit the

Postal Service’s financial exposure. As noted, the work of processing priority mail was returned to mail handlers and other career

postal employees, but not before postal consumers suffered a significant loss.

So I am just asking—you know, I negotiated a number of collective bargaining agreements as the chairman of the union collective

bargaining side with the ironworkers. I was there for 18 years. I

was their president, and I know a whole lot about prospective

agreements, and I know the one you have right now is somewhat

prospective in terms of this task force in the next 6 months trying

to work something out for the rural folks. But I just ask you, try

to use some innovation. Don’t just be lockstep with this privatization idea.

I think you have some very, very talented folks over there in the

Post Office. You know, you have a great reputation in my district

and the communities. Folks love their clerks, they love their letter

carriers, they love their mail handlers. You have a good branding

out there. You know, for a little bit, you are closing down some

local post offices during noon hour when everyone was going to

their mail. I don’t know who came up with that idea. But I think

you have a lot of positive things.

What was that, Mr. Potter?

Mr. POTTER. He is no longer with us.

Mr. LYNCH. As long as it wasn’t one of my family.

I just urge you—look, again, I go back to the fact I appreciate

the complexity. I appreciate the way you are working on this problem. I really do. I think it is positive, and I think it has been reflected a lot in the workers who are, you know, working under you,

and just saying anything we can do here—we understand about the

collective bargaining process, although I have to say that given

that the employees don’t have the right to strike, I don’t really

think that it is genuine to say that it is a somehow tilted playing

field because the employees can come to their congressional representatives to try to get grievances addressed and to petition their

government. I think that is their constitutional right to come before

Congress and have me and other Members of this Congress address

their problems because we have taken away their right to strike.

So that is why they have the petitions.

And I know you are going to say something about the binding arbitration, the wonderful binding arbitration process they have.

They have to keep working while they complain. That is not such

a great argument when you are working and in some cases throwing mail and delivering sacks of mail, and you are carrying around

big packages.

But anyway, I appreciate your good effort. It is in good faith, and

I just want to see it continue. Thank you.

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Mr. POTTER. If I can comment just on the Emery contracting out.

I was the one who went to the Board and said we had to pull the

plug on it. I am not the one that contracted it out. I am the one

that brought it back in house.

But I do want to say that when it came to why it failed—because

we created a separate network, not because the cost per hour or

different fact that it was much less expensive to process the mail,

but the network would not work the way it had been set up, and

there was no incentive for the contractor to become more productive. We are incentivized collectively, management and labor, to be

more productive to keep costs under control. With my commitment,

we will work together to try to do the best we can. We do have

challenges. You know, if you want to help us, use the mail. That

is the best way one can help the Postal Service. Use the mail and

provide an opportunity for us to show you how good we can do.

Mr. DAVIS. Thank you very much, Mr. Lynch.

Mr. McHugh.

Mr. MCHUGH. Thank you, Mr. Chairman.

Gentlemen, welcome, and thank you for your continued efforts.

Mr. Williams, in your testimony you said in the last 12 months,

it conducted 47 contract postal embezzlement cases resulting in

termination of contracts and arrests. Then you went on to say they

also presented a substantial number of letter carriers, postmasters,

etc. We have a definitive number on the contracts, 47 in 12

months. What is the balance of the picture in terms of the employees? How many cases?

Mr. WILLIAMS. There are 992 of those investigations.

Mr. MCHUGH. How many contract employees versus how many

postal employees?

Mr. WILLIAMS. There were 47 contract employees that were investigated for embezzlement, which represent about 8 percent—I

am sorry, 5 percent of the total. And so 95 percent of the total were

represented in the nearly 1,000 investigations. It is about the

same. It is a little lower, but it is not significantly lower.

Mr. MCHUGH. Which is lower?

Mr. WILLIAMS. The contract of the investigations are a little

lower pound for pound, but it is not that significant. It is about the

same.

Mr. MCHUGH. Mr. Postmaster General, can you—I assume we go

through this because you are trying to save money. I mean, is that

your theory?

Mr. POTTER. The theory is you are always trying to test things

to see if there is a better way to do it to save money and improve

service.

Mr. MCHUGH. So there is an assumption here?

Mr. POTTER. It is more than an assumption.

Mr. MCHUGH. Back to my previous statement. You are saving

money?

Mr. POTTER. We are.

Mr. MCHUGH. Can you tell us how much?

Mr. POTTER. It depends on the contract, but it depends on the

cost of dealing with a career employee.

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Mr. MCHUGH. Let us talk about these so-called new numbers instead of under contracts that have been up and running for a

while. Is that a 50 percent savings?

Mr. POTTER. Congressman, it depends on the individual contract

and the productivity of the local unit. But in terms of how high can

it go, it can be as high as that, and I would say it is a minimum

of a 25 percent savings.

Mr. MCHUGH. So you have a real incentive.

Mr. POTTER. We have a real incentive to change the way we are

doing business and focus on doing things a better way.

Mr. MCHUGH. Mr. Williams, back to you. You made a comment

in your testimony again that the Postal Service is not required to

comply with the 76 and also some of the contracting requirements

that are in the normal Federal contracting program. This conduct

by contractors also represents a significant area of concern. Do you

think there is any efficacy in imposing those Federal standards of

contract negotiation?

Mr. WILLIAMS. I would not recommend it. If there is an advantage, I will address that in a moment. The concerns I would have

is that it would be the only—it would be the only instance in which

the Postal Service aligned itself to offset management and budget

directives. That would be problematic. We sort of have a mixed relationship with them.

Second, the entire budget directive refers and aligns itself to the

Federal acquisition regulation, and we no longer have that regulation, so we would need to somehow think how we would adapt it

to ourselves.

Mr. MCHUGH. So apples and oranges kind of?

Mr. WILLIAMS. It wouldn’t, now that we introduced the more

modern acquisition——

Mr. MCHUGH. I am running out of time here. I just want to

throw out one more to the Postmaster General. Mr. Potter, you

have heard, I think understandably, a lot of concern about the

sanctity of the mail and the consideration of new contractors to

provide the same kind of sanctity. I would certainly have that concern. I think it is a very real one in the issues about drug testing,

etc. Do you want to talk a little bit about what you do to screen

these so-called contractors in a way that you feel ensures the sanctity of the mail? As I would argue clearly——

Mr. POTTER. As Congressman Sires pointed out in his testimony,

with the exception of drug testing, the contractors go through the

same screening that our postal employees go through and by law

are held to the same accountability through the OIG, and the same

Federal laws that apply to our employees apply to contractors as

well. So granted, with the exception of drug screening, you know,

we have in effect and will have beginning next month the same

rules in effect for both contractors as well as for employees.

Mr. MCHUGH. Mr. Chairman, if I may, with the exception of drug

screening, it reminds me of, ‘‘Well, other than that, Mrs. Lincoln,

how did you like the play?’’

Mr. POTTER. Let me just say this. If you think about our experience with contractors and our experience with our career employees, the way I look at it, we have human beings. Human beings

make mistakes on both sides of the aisle. There is no evidence that

49

I have that suggests that a human being who is a contractor is any

worse than a human being who is a career employee.

Mr. MCHUGH. My question that my rather flippant remark was

intended to say, why didn’t we do drug screening from the get-go?

Mr. POTTER. I have no idea.

Mr. MCHUGH. Could you maybe find out for us and get that?

Mr. POTTER. Sure.

Mr. DAVIS. Thank you very much, Mr. McHugh.

Ms. Norton.

Ms. NORTON. Thank you, Mr. Chairman.

I wanted to be sure I understand something first in Mr. Kessler’s

testimony. I had a set-to with Mr. Potter last time on some difference in the information I had about the contracting out and

what he had testified to, so I want to make sure I am understanding.

Now, you say, Mr. Kessler, Postal Service is not considering taking work away from career carriers. You go on to say it is important to note that 92 percent of all new deliveries in 2007 continue

to be assigned to Postal Service employees represented by—let

me—are you referring to new people on the same routes that career

employees already serve, or are you referring to in this 92 percent—to entirely new routes when you say there was a——

Mr. KESSLER. Referring to entirely new routes, new deliveries.

Ms. NORTON. So you are here testifying that new routes and new

deliveries are being given to career postal workers, and that is the

policy of the Postal Service?

Mr. KESSLER. What I am saying is that 92 percent of those go

to career postal employees, that——

Ms. NORTON. Ninety-two percent of all new deliveries—I am trying to find the definition of the words ‘‘new deliveries,’’ whether we

are talking about people or routes.

Mr. KESSLER. Routes.

Ms. NORTON. Mr. Potter.

Mr. POTTER. We have deliveries of some 140 million. Every year

there are 2 million new deliveries. That is construction of a new

building, of a new home or residence. We consider a physical address to be a new delivery. So it is new physical addresses that we

are talking about. If we have some—I believe it is somewhere

around 11⁄2 percent of Americans move every month, so you have

over 20 million people move every year. And so we are not talking

about those people that move. We are talking about the physical

address and who performs delivery at a physical address.

Ms. NORTON. At an entirely new location that wasn’t there before, right? A new suburb? Like a new condo in the District of Columbia?

Mr. POTTER. Exactly. Last year we were saying there were 2 million, and 92 percent—or 1.8 billion or so were delivered by career

employees.

Ms. NORTON. Before if you were a business and you didn’t have

the right—or in this case denied the right to yourself, not the new

business, not someone on a block before a house that may have

been in the delivery room before abandoning it and it comes back—

I am talking about where the growth in America is, Mr. Potter and

Mr. Kessler. The growth in America is not replacement houses on

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delivery routes. The growth in America are new suburbs, new parts

of the District of Columbia altogether. Are you saying for those new

parts of America, the growth parts of America, new deliveries, 92

percent of those new deliveries are going to career—to career Postal Service employees?

Mr. POTTER. Unfortunately I don’t have a way of differentiating.

Ms. NORTON. That is a problem. That is why the statistics are

misleading, because all this does is probably replace a delivery that

a postal worker may have had last year or 10 years ago and is not

where the growth of new business is. So essentially what you are

saying is new business is for contracted employees, and our regular

employees are lucky enough to have somebody revive a building on

the delivery route, well, of course, we are not going to bring somebody in to put into the middle of that block, which, of course, would

be inefficient in the first place. So you are doing nobody any favors.

Mr. POTTER. Let me say this. We have never contracted out delivery in Washington, DC.

Ms. NORTON. Mr. Potter, you are going to have to aggregate this

figure to be credible with this committee. We are interested in only

one issue, and that is whether the new parts of America that

spring up every day—there are new towns, new subdivisions—

whether those parts of America are closed off to career Postal Service employees.

Mr. POTTER. And the answer is no.

Ms. NORTON. Well, in fact——

Mr. POTTER. We have an agreement with the NALC that says for

the next 5 years we won’t consider it in offices that are served by

city delivery. So we have a commitment from——

Ms. NORTON. Not city delivery. I wish I could say the growth in

America was in Chicago and the District of Columbia. But the fact

is the growth is outside of the cities, and that is where we got into

trouble last time, Mr. Potter. You were sworn. That is why I am

telling you this time I am doing my cross examination more carefully.

Mr. Kessler, for example, says something that is more hopeful.

We are prudently evaluating and debating—this is page 4 again,

Mr. Kessler—whether it makes sense to assign distinct new work.

By that I think you mean subdivisions. You are going to correct me

if I am wrong. He says you are considering that. And then you say,

Mr. Kessler, it is a valid and responsible business consideration.

Would you explain the considerations of that goal in deciding

whether some new work should be assigned to career employees?

Mr. KESSLER. Congresswoman, let me, if I can, try to answer

your question by first stepping back. And I certainly don’t mean to

lecture anybody, but we are the Board of Governors. We are there

to, you know, discuss broad policy, not that this might not be a

broad decision. We don’t get into micromanaging. We don’t get into

day-to-day operations.

Ms. NORTON. You consider whether new work goes to new parts

of America micromanagement?

Mr. KESSLER. No.

Ms. NORTON. Micromanaging would be whether on my block a

contractor gets it or a Postal Service worker gets it. This is about

whole new definitions and new towns that come up in America

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every day, new towns, whole new towns that are revived. Is that

under your jurisdiction, or is that left to Mr. Potter to decide on

a case-by-case basis?

Mr. KESSLER. In terms of the broad issue as you presented it,

yes, that would be inappropriate for obviously this issue to discuss.

In terms of specifics and how it applies, no, I don’t think it is a

Board decision. But in all honesty, Congresswoman——

Ms. NORTON. What are the relevant considerations you decided?

That seems to be the rational way to look at it. We are going to

at least look at this, see if it is efficient, see if it makes sense. All

I am trying to get is some sense of consideration that might make

you say this new business is going to go to career employees, because what I am otherwise divining is that no new business is

going to go to career employees, in contradiction to what it seems

to say on page 4, which is the policy of the Postal Service, not the

folks who carry it out, but the folks who make the policy.

Mr. KESSLER. I appreciate the way you have looked at what exactly constitutes a new delivery, and I think, quite frankly, it is

something that I can take back to the Board and we can discuss.

I do want to be careful in saying that this is a new subject for

us as a Board as well. It is not a new subject in terms of—you

probably know this Board is, you know, Presidentially appointed,

five members of one party, four members of another party. And

over the last few years, the party that occupies the White House

is the party that represents the majority on that Board.

Ms. NORTON. What does that have to do with this?

Mr. KESSLER. What I am trying to tell the Congresswoman, we

have looked at this broadly, should there be contracting out or no

contracting out, should it be an issue.

Ms. NORTON. You are considering whether new work should be

assigned to humanize postal employees or not is what you say on

page 4, correct or not? Are you at least considering it?

Mr. KESSLER. We at this point have not reached a decision on the

Board, our consensus as to what constitutes, ‘‘new delivery.’’

Ms. NORTON. It says we are evaluating. I am only trying to understand whether the policy is under consideration, sir.

Mr. KESSLER. Congresswoman, I can’t tell you any more than

what I just said.

Ms. NORTON. That is why you see me engaging in cross examination. The words say, we are prudently evaluating and debating.

Something is happening right now whether it makes sense to assign distinct new work to career employees or to contractors. I can

read the English language. You wrote it. I am trying to clarify

whether it means what it says in black and white here. That would

help this committee.

Mr. KESSLER. Let me try to clarify beyond that. ‘‘We’’ is the Postal Service, Congresswoman. It has not reached the Board at the

level of Governors as a body. I can’t be clearer than that.

Ms. NORTON. Don’t come before this committee again saying you

are evaluating and that is not what you are doing. I have to say

to you here before this committee, we do not need to be hoodwinked

here. You say you are evaluating and debating in good faith. That

would mean at least, well, we are deciding it. You just said you are

not.

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Here is what I want you to report to the chairman. He will tell

you within what period of time. Should some new work, depending

on the circumstances—you can set any criteria you want to—

should some new work be assigned to career employees, would it

be efficient, would it be prudent? On page 4 you said you are doing

it. Would you get that information to the chairman?

Mr. KESSLER. Madame Congresswoman, I can assure you we will

take back your comments and address this issue.

Ms. NORTON. Thank you very much.

Where the future lies here—I am very much into the issues you

face. I am not sitting here saying why don’t you just make due and

act as if you are an old-fashioned government union. I regard your

bottom-line problem as one of the most challenging, if not the most

challenging, in the United States. So if we look out and say, well,

where is the future of the Postal Service—to the credit of Mr.

Kessler, he notes and gives credit to unions the increase in productivity that you yourselves have achieved for which you deserve congratulations of this subcommittee service. Are not productivity increases rather than outsourcing the future of the Postal Service

just as important? Don’t you simply have to continue through collective bargaining to find ways to increase productivity in order to

compete rather than outsourcing little by little of the Postal Service

and cutting yourself off at one end in order to make yourself competitive at the other?

Mr. POTTER. Is that addressed to me?

Ms. NORTON. Yeah. I guess you will be the man in charge of increasing productivity, but Mr. Kessler gave credit to the unions

in——

Mr. POTTER. That is the preferred path, as I said in my testimony. We would like to work with the unions that do produce revenue because it is not just productivity; where is the source of revenue going to be going forward as well as the efficiency. I think it

is incumbent upon the entire mail community to do, including the

mailers who produce mail. The better quality we get for mail, the

more efficient we can be. I think it is a combination of all of that.

Ms. NORTON. Mr. Potter, traditionally in collective bargaining

with sufficient tradeoffs, you can get workers to do things.

Mr. POTTER. That is what I believe in the contracts we have——

Ms. NORTON. The people aren’t going to make you more productive if you don’t make them more productive. That is why bargaining is such a beautiful market-based system. Everybody has to get

something for it to work.

Mr. POTTER. Congresswoman, as you just said, the Postal Service

has a very difficult challenge going forward, and I believe that we

need to work together to meet that challenge. And so, yes, you do

have to work together, but there has to be a reality about what the

challenges are, and there has to be a meeting of the minds.

In my opinion, all of our futures are at stake. I don’t really worry

about the people who are, you know, in my age category, 50 years

old. I think about the people that are 20, 30 years old with the expectation that they will have and enjoy a career in the Postal Service much like my father and I did. I can guarantee you that if we

don’t change—and the best way to do it is to do it collectively and

53

to do it the right way. If we don’t change, we will not be able to

assure those people a future and assure their careers.

Mr. DAVIS. We need to——

Ms. NORTON. Yes, sir. Could I ask one question of Mr. Williams?

Mr. DAVIS. Yes.

Ms. NORTON. Just one question. But he does say that on page 2

of our contract, it represents a significant area of concern. And I

would just like to know—I would like to elaborate. Couldn’t the

self-screening process that we require for Postal Service workers be

required for contractors? And should there not be some—shouldn’t

the Postal Service be held accountable to stop the outsourcing of

outsourcing so that we have some guarantee that the same rigorous process a Postal Service worker has to go through is the exact

same process—in terms of screening, there may be other ways to

cut corners—but the exact same process that a privately hired postal worker has to go through?

Mr. WILLIAMS. The plan is that on July 31st, those two background programs will become identical. They have not been in the

past as far as drug testing, as we were talking about earlier, and

that has been added into the line.

Ms. NORTON. If that is the only difference, I congratulate the

Postal Service, but we can be looking to see that they line up identically and that—understand my concern. My concern is the contractor then outsources himself. That means somebody at home has

to make sure that those things are lining up not only as a policy,

but who—thank you, Mr. Chairman.

Mr. DAVIS. Thank you very much, Ms. Norton.

Mr. Clay.

Mr. CLAY. Mr. Chairman, can I get 5 minutes?

Mr. DAVIS. Yes; 41⁄2. Mr. CLAY. Thank you.

Mr. Potter, I have heard in opening statements that the Postal

Service has been contracting out since its creation and in more recent times. Tell me what positive improvements have been reported

by the U.S. Postal Service as a result of the contracting out.

Mr. POTTER. Well, let me point to one. We have contracted out

to transportation of mail across the country. Our largest supplier

is Federal Express, who flies our mail across the country and

throughout our great Nation. As a result of our movement to that

in 2001, the service that we have provided and do provide on a dayto-day basis has reached record levels for 2- and 3-day performance. So there is a situation where we contract out.

We contract out $14 billion worth of goods and services in terms

of, you know, your institution. So there are many people performing all types of work for the U.S. Postal Service. The building of

machines has helped us to become more productive, so we use contractors to supply those machines, to update software. So we use

contract personnel, mostly on a limited-term basis. But we use contract personnel to provide, you know, some very basic services to

America.

Mr. CLAY. As far as daily delivery, do you get any complaints

about the contract worker versus the regular hourly wage?

Mr. POTTER. We hear about contract workers, but I would say on

balance it is about equal.

54

Mr. CLAY. You say it is equal?

Mr. POTTER. In my opinion. I don’t have data to support it. It is

not something I have statistics on.

Mr. CLAY. Thank you for that response.

Mr. Kessler, besides contracting out mail delivery service, what

other steps is the Postal Service taking to address your financial

situation?

Mr. KESSLER. Congressman Clay, would you mind if I refer that

to the Postmaster General and give you more detail concerning the

actions we have taken?

Mr. POTTER. First of all, we have worked hard to improve productivity in different operations by standardizing the operations.

We continue to invest in equipment to drive more productive processing of mail. We are constantly looking at the quality of the sort

that is done by our mailers, again with the notion, you know, that

we don’t want to handle it multiple times, and the quality sort of

our machines. We are constantly looking at our manual operations

to look around the country to see what processes are the best.

When we find people who have innovated and done things correctly, we document and share it with folks throughout the country.

If you look back since 1999, what has been remarkable is the

way our people—and I am talking about all of the people who have

responded to the challenges that we face. Today we are doing more

work than ever, delivering to more addresses than ever. We have

added about 12 million addresses since 2001, and we are doing that

with 100,000 fewer employees than we did in 1999.

Now, the question becomes how far can you go? At some point

in time, you are running out of room when it comes to that productivity. So we don’t want to be in a position where we are placing,

you know, irrational demands on people. So we are constantly looking to innovate on better processes and do things again in a different way that enables people to be more productive.

Mr. CLAY. Let me ask you about your health care and benefit

costs and retirement costs. How has that gone since 1999?

Mr. POTTER. I don’t know the exact data, but it is up dramatically. We had numerous years of double-digit increase since 2002.

I am lucky to have the inspector general next to me. Our costs

have risen by 27 percent for health care. The growth there is similar to the Federal Government. We are part of the FEBP, Federal

Employee Benefit Program. So our costs have gone up. I would like

to commend our unions, though, because part of the collective bargaining process, the contracts that we have reflect the fact that our

employees understand the concern of the business for health benefit costs, and there is actually a reduction in employer contribution

to health benefits in each of these contracts. Another example

where we put an issue on the table, and we bargain in good faith,

we can get agreements that will help the bottom line.

Mr. CLAY. Thank you all for the responses. I appreciate it.

Mr. Chairman, I yield back.

Mr. DAVIS. Thank you very much.

Mr. Marchant, do you have a question?

Mr. MARCHANT. No, thank you.

55

Mr. DAVIS. Thank you all very much. Let me just say it has always been my experience that if you have to spend more than you

are taking in, somehow or another you have to figure out a way

to do something. You have either got to cut something or find some

way to reduce the cost, or you have to produce more, or you have

to do some of both. And while I don’t think there is any simple solution to the very complex scenario that we face, I, too, trust the

collective bargaining process. And I actually hope that management and the unions will be able to come to an agreement that will

keep our system intact, that will continue to provide universal

service, that will continue to allow individuals to receive first class

mail.

Hopefully we can continue the delivery rates, but I am afraid

that something is going to have to give in some way at some point

and at some time. I am not an expert on the postal operations. I

am just an individual who knows a little bit about collecting and

spending. And if you spend any more than you collect, you have a

problem somewhat, somehow.

Thank you very much. I really appreciate it.

Mr. DAVIS. Let me thank our last group again for your patience

and the fact that you have stayed the course with it.

I am going to go ahead and give the introductions of our witnesses while we are being seated.

Panel III. Mr. William Burrus is president of the American Postal Workers Union. The American Postal Workers represents the

largest single bargaining union in the United States, which consists of more than 330,000 clerks, maintenance and motor vehicle

employees working in 38,000 facilities of the U.S. Postal Service.

Mr. William Young is the 17th national president of the National

Association of Letter Carriers.

Mr. Donnie Pitts is president of the National Rural Letter Carriers’ Association. He has 37 years of experience with the Postal

Service in both the State and national levels.

And Mr. John Hegarty, who was sworn into office on July 1,

2002, for the National Postal Mail Handlers Union and was reelected to that position in 2004. For the 10 years prior to becoming

national president, Mr. Hegarty served as president of the second

largest union affiliated with the National Postal Mail Handlers

Union.

Thank you, gentlemen, so much for being here. It is our custom

to swear in witnesses.

[Witnesses sworn.]

Mr. DAVIS. The record will show that the witnesses each answered in the affirmative.

Thank you very much, Mr. Burrus. We begin with you.

56

STATEMENTS OF WILLIAM BURRUS, PRESIDENT, AMERICAN

POSTAL WORKERS UNION, AFL–CIO; WILLIAM YOUNG,

PRESIDENT, NATIONAL ASSOCIATION OF LETTER CARRIERS; DONNIE PITTS, PRESIDENT, NATIONAL RURAL LETTER CARRIERS’ ASSOCIATION; AND JOHN HEGARTY, PRESIDENT, NATIONAL POSTAL MAIL HANDLERS UNION

STATEMENT OF WILLIAM BURRUS

Mr. BURRUS. Thank you, Mr. Chairman. Thank you for providing

me this opportunity to testify on behalf of the dedicated postal employees our union represents. I commend the committee through

your leadership, Mr. Chairman, for convening this hearing on the

important subject of subcontracting in the U.S. Postal Service. This

hearing is being called at a time that the American postal workers

are here for our hearing-impaired members, and I am pleased to

have the leaders of the task force representing those employees

joining me here today. I’d like to put their names in the record:

Marshall, Mike Clifton, Patsy, and Marie Adams.

This hearing is convened at the appropriate time, given the

events of the past several months. Recently the U.S. Postal Service

made significant changes to its subcontracting initiatives, including

some which were vigorously opposed by the national association,

who sought your intervention. This resulted in legislative proposals

by Members of Congress and the subsequent announcement that a

tentative agreement had been reached within the collective bargaining arena on the subject in dispute. While that dispute has

been addressed, the fundamental USPS policy that seeks to subcontract postal activities at every opportunity remains, and it must

be addressed.

I previously testified before this committee on April 17th and offered the following, ‘‘In this new world of postal reform, each institution must now find its rightful place. When these responsibilities

overlap, and they do, the system can break, and more often than

not service and workers suffer. As vital as it may seem when you

are asked to intervene with legislative action in areas best left to

the parties, I request that you resist the temptation to do so. To

borrow a phase, we ask that you stick to your knitting.’’

I asked that Congress avoid substituting its judgment for the

judgment of the parties who are directly involved. The Postal Service and its unions have a long history of addressing thorny issues

affecting every aspect of the mail service. We write the words of

our agreements; we interpret their intent, and submit our disputes

and agree on arbitration.

In light of the recent agreement between NALC and the U.S.

Postal Service, my words seem prophetic. When given the opportunity and the appropriate forum, the collective bargaining process

works. The letter carriers union is to be commended for finding a

creative approach to a major problem.

The question must be asked why did the dispute reach the point

where bargaining did not work and legislative relief appeared necessary? I submit that the reason is that no real bargaining began

on this important subject until you, the Congress of the United

States, became involved. That is because under current procedures,

the Postal Service will not bargain over subcontractors. We have

57

been successful in negotiating requirements that the Postal Service

notify and consult with the union and civil contractor that is contemplated, but we have been unable to achieve real bargaining over

whether or not specific activities will be subcontracted.

I am certain that the Congress of the United States does not

wish to be called upon each time subcontracting is threatened. But

to prevent the continuous participation of your involvement, a clear

provision must be enacted requiring the USPS and its labor unions

to bargain when subcontracting is proposed. Congress has previously enacted provisions requiring bargaining, so this would not

represent a significant departure from your current policy.

As we enter this new world where management continually seeks

to reduce costs through the use of nonunion, noncareer cheap labor,

we will repeatedly seek your involvement unless you adopt legislation requiring the parties to negotiate.

We will return again and again asking for your help as the Postal Service embarks on this journey for privatization one piece at a

time.

I thank you, Mr. Chairman, for your leadership, and the members of this committee. Thank you for your efforts. And I will be

pleased to respond to any questions that you may have.

Mr. DAVIS. Thank you very much, Mr. Young.

[The prepared statement of Mr. Burrus follows:]

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60

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STATEMENT OF WILLIAM H. YOUNG

Mr. YOUNG. Good morning. I’d like to ask a question if I could.

Could I get an agreement just to have my remarks submitted in

the record? Because I’d like not to use the remarks at all.

Mr. DAVIS. You can do that.

Mr. YOUNG. I have never tried that before. Is it acceptable?

Mr. DAVIS. It is certainly acceptable.

Mr. YOUNG. In the last area, we were in total disagreement. This

afternoon we are in total agreement.

I agree with Mr. Burrus that the only reason they were able to

negotiate a contract with the Postal Service that included protections in subcontracting was because of the interest of the Congress

that the United States took in the issue. And I also agree with him

that a mandate to require collective bargaining is a good approach.

I hadn’t thought about it before coming up with it.

I want to address a few issues that came out here this morning

because I want this Congress, if they are going to consider this in

this committee, to reflect on a few of these matters that were

brought up here by the panel that received this.

Let me just talk for a few minutes about the contract employees.

I want to make sure that the Congress understands the difference

between a contract employee who delivers bulk quantities of mail

going between post offices—say, post office A and B—and maybe

delivers one or two addresses on the way from A to B. This person

is delivering mail that is locked up in sacks. He is not individually

going through people’s personal mail like letter carriers and rural

carriers do when they make the final delivery of mail at the door.

The mail that they are delivering, the mail that FedEx is delivering that the Postmaster General is talking about is all locked and

secured. Nobody can go in there. If they did, we would know it.

So I think there is a little attempt here to confuse the Congress

as to the fact that—yes, we have always used contractors. There

are no grievances over the use of bulk drivers that deliver the bulk

mail. I don’t know if any of the other unions have that or not. They

can speak for themselves. But to make the clear distinction, I don’t

know if the American public worries so much whether it is FedEx

or American Airlines that flies their mail. They might have a different scenario if it is somebody that has been drug-screened or

somebody who hasn’t.

The second point, I think Congresswoman Holmes brought this

out and I want to remind you about, it is the subcontracting that

scares me. They can screen the private contractors the same as us.

What are they doing about the subcontractors—and it is my understanding, and I hope I am not wrong about this—in some cases

they don’t even know who these people are. In other words, they

give the contract to me, and maybe I have my 10-year-old kid delivering the mail. I don’t know if that is known or not. But it is the

secondary part of this that poses in my mind the greatest concern.

I also want the Congress to look at a couple of other things that

they care to examine. Look at nepotism. Do the nepotism laws

apply to private contractors? I don’t think so. I think if you look

at this, you will find out that a lot of these private contractors are

relatives of postal officials around the country. And I think that is

worth looking at.

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The other thing that you should consider when you are thinking

about private contractors, in my judgment, is—I know that nobody

gets preference when they hire a private contractor. It is all based

on the bottom line, and the Congress wanted the Postal Service to

give a preference to America’s veterans. This is a way that will reduce the number of positions that are available to these veterans

as they return from these places that we sent them to fight these

wars that we got them in.

The big debate last time was this public policy or collective bargaining. I said it was public policy; others said it was collective bargaining. It turns out everybody was right. It was collective bargaining once the Congress gave the sense to the Postal Service and got

them into a position to sit down and discuss the matter rationally

with me and the representatives on the union, but they acknowledged it is public policy. And I ask you to read the memo, and I

will make sure the committee has it. It has words right in there

acknowledging that the parties understand there is a public policy

consideration to the use of private contractors.

I am encouraged. I told the Congress I wasn’t being arrogant. I

didn’t need your help to negotiate a contract, I just needed somebody to negotiate with. You, the Members of Congress, in your infinite wisdom have the Postal Service to perform for the members

of my union and now have a contract. I am very hopeful that the

person that speaks right after me—he is the one person without a

contract yet, and I hope that he and the Postal Service get together

and he includes one for him and his members as soon as possible.

A couple of other things I wanted to mention. Potter’s scenario

is that he has only got three choices. He acknowledged the fourth

choice. I know you didn’t miss it when he talked about revenue. We

have already $300 million of additional revenue in the U.S. Postal

Service in the last 2 years through a program. We upped this program for another 5 years. And remember, the first 2 years was just

the infancy of it. We have less than 10 percent of our members involved in this. I hope they have a substantially greater number,

and that should translate into a substantially greater revenue increase for the U.S. Postal Service.

I use the checkbook because I am a simple man. When your

checkbook runs out, you have only got two choices. If you don’t

want to go to jail, either stop writing checks or put more money

in the check fund. There is a third choice, and we won’t talk about

that because we’re honorable people here, and we don’t want to

spend the rest of our lives behind bars. They can increase their revenue, too.

One last point that won’t hurt the Postal Service—but I won’t listen to what is going on without responding to this. They have already built into the rate increases—somebody asked, I think, Mr.

Kessler, is there any reason for optimism down the road? And he

gave me, no, there will always be problems.

I am not saying there always won’t be problems. Let me be the

optimist here. The Congress put a hit on the Postal Service for 10

years to pay down the expected future retiree health benefits. That

is the issue of $60 billion when we first started. I don’t know what

it is now because these numbers grow like wildfires. Whatever that

number was, that is what caused the GAO to put the Postal ServVerDate 11-MAY-2000 11:12 Nov 16, 2009 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 U:\DOCS\52715.TXT KATIE PsN: KATIE
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ice on the end when it was passed. One of the things that the Congress insisted upon—and it is included in the law they have—to

pay this down, and it must be down in 10 years. They raised the

rates once last year or maybe twice. I have lost track. But the point

is they raised the rates. At the end of the 10 years, if we can get

through the next 10 years, there ought to be a substantial amount,

$3.8 billion a year. There ought to be that hanging around for us

to deal with some of the other issues that plague the Postal Service.

On the very last issue, health benefits, both the inspector general—and the health benefits went up 27 percent since 2002. I

don’t know about that, but here is what I do know. It went up 1.8

percent last year, 2007, and 6.6 percent the year before in 2005.

That’s 6 and 5 I have given you—7 and 6, I am sorry. I don’t know

where you get this 27 percent. But for some reason, the program’s

experiencing—knock on wood—has had 3 or 4 good years because

we had at least 10 years of double-digit inflation. Like I said, 6.6

one year, 1.8 last year, and there is a lot of people who think it

will be good this year, too. So there is hope on the horizon.

I thank the committee for allowing me to testify, and I thank you

for my presentation.

Mr. DAVIS. Thank you, Mr. Young.

[The prepared statement of Mr. Young follows:]

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Mr. DAVIS. Mr. Pitts.

STATEMENT OF DONNIE PITTS

Mr. PITTS. Mr. Chairman and members of the committee, my

name is Donnie Pitts. I am president of the National Rural Letter

Carriers’ Association, and I want to thank you, Mr. Chairman, for

holding these hearings on contracting out.

As of February 2007, there are more than, 75,000 rural routes

and they drive more than 3.3 million miles a day. We sell stamps

and money orders, priority mail, certified mail in rural and suburban areas, too.

Mr. Chairman, I am pleased to report that as of July 18th, there

are 225 bipartisan cosponsors of House Resolution 282, a resolution

that is introduced by the Honorable Albio Sires, expressing the

sense of the House of Representatives that the U.S. Postal Service

should discontinue the practices of contracting out delivery services.

What I have a hard time understanding is why all 435 Representatives are not cosponsors of this important resolution. Is it

because the Postal Service has suggested that contract delivery is

a matter of collective bargaining and not a policy question? I hope

not, because contracting out most certainly raises significant policy

questions, particularly when the safety and security of the mail is

at stake.

Mr. Chairman, I am sure by now that everyone knows that the

NRLCAs that I represent in the Postal Service did not reach an

agreement between our recent contract negotiations, and we are

headed toward interest arbitration. What is less well known is that

unlike our friends in the civic aircraft, contract delivery services

were never brought forward during our union talks with the Postal

Service. We don’t see what the Postal Service is doing now as a collective bargaining issue. We see it as a policy issue.

There are a number of different policies already in place with the

Postal Service to limit what can and cannot be contracted out. Our

national agreement with the Postal Service contains an article

which addresses subcontracting, article 32. Article 32 sets the

standards and policies under which routes can be subcontracted.

The Postal Service’s P–5 handbook, which establishes a national

policy and procedures for the operation and administration of highway contract routes, that handbook language states that the route

that serves less than one family per mile may be converted to contract delivery service.

Additionally, we have grievances at the national level that challenge the improper contract and out-of-mail delivery.

Mr. Chairman, we as a union have done everything within our

power utilizing policies and agreements with the Postal Service to

stop the Postal Service from contracting out the delivery of mail.

Despite this, the Postal Service continues to ignore all these policies and agreements and continues to contract out routes. I am

asking that the House introduce legislation to stop the contract delivery services.

Mr. Chairman, in May, you held a side hearing in Chicago, IL,

regarding the slow delivery of mail. Congressmen in New Mexico

are scheduling meetings with officials from the Postal Service to

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discuss schedule concerns throughout New Mexico. When the Postal Service announces the consolidation or closing of a facility within

a congressional district, that Congressman gets involved.

During the passage of postal reform, even the initial work sharing was made into a policy issue. Every time the Postal Service enters into a work-sharing agreement with a mailer, the end result

is a postal employee not performing the work.

What I am trying to point out, using these examples, is that

when there is a problem with the mail service closing the facilities,

security or other problems, Congress gets involved to correct that

problem. My question is, why isn’t Congress getting involved in

stopping contracting out? Do they not see this as an issue just as

important as service problems or consolidations of facilities?

I have no problem telling you, this is an issue that is just as important as the others.

Letter carriers are the face of the Postal Service. We are the ones

the American public sees out on the streets every day delivering

mail. They get to know us. They become our friends, and they trust

us. This honor, for the third year in a row, has earned the Postal

Service the distinction of being named the most trusted government agency by the Ponemon Institute.

I reference this survey because the public’s perception of the

Postal Service is delivery. If the Postal Service fails to deliver because of here-today, gone-tomorrow contractors, the mail will find

another—the mailers will find another way to get their message to

the public.

I care about the future of the Postal Service. I want the Postal

Service to succeed. Hiring nonloyal and unreliable contractors is

not the way to ensure the success of the Postal Service.

Mr. Chairman, you and Mr. McHugh, Mr. Waxman and Mr.

Davis spent 15 years passing postal reform to make the Postal

Service more viable for the 21st century. I don’t believe the Postal

Service of the future you all envisioned while working on postal reform was going to be made up of contracting employees. Instead,

I think you envisioned the Postal Service of the future as a goodpaying, middle-class job with a decent health and retirement benefits.

Delivering the mail for the Postal Service of the future should be

properly trained professionals and dependable employees.

I thank you for allowing me to testify here today, and if you have

any questions of me, I will be glad to answer those.

[The prepared statement of Mr. Pitts follows:]

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STATEMENT OF JOHN HEGARTY

Mr. HEGARTY. Thank you very much. My name is John Hegarty.

I am the president of the National Postal Mail Handlers Union,

which serves as the exclusive bargaining unit for approximately

57,000 mail handlers employed by the U.S. Postal Service.

During the subcommittee and oversight hearing, I testified on

the question of whether the Postal Service should be outsourcing

some of its core functions, including the processing of mail normally handled at government centers or the processing of military

mail headed to our troops in Iraq and Afghanistan.

I will not repeat that testimony here today, but rather would ask

that my written testimony from April 17, 2007, be incorporated

into the record of these proceedings.

What I would like to focus on today is the following issue: What

is the real cost of this privatization? As this subcommittee knows,

subcontracting allows core functions of the Postal Service to be performed by low-paid, no-benefit, noncareer and often transient workers. We believe that you get what you pay for.

We believe that the processing and delivery of mail in the postal

system should be a core function of the professional work force employed by the Postal Service and should not be subject to the lowbid ideology. Surely the American people do not want some contract employee reaching into their neighborhood mailbox or handling and processing their package to a loved one either here or in

the military overseas.

The public has a trust level that is breached when privateers are

hired. Thus, the Mail Handlers Union believes that the use of lowpaid, private workers to perform core postal functions and the resulting reduction in career postal jobs is sufficient reason for the

Postal Service to stop that subcontracting.

But we also live in the 21st century and therefore we know that

some will argue that getting the work performed more cheaply is

the same as getting the work performed efficiently, safely and securely.

The Board of Governors, some members of the Board of Governors like to point out that under the recently adopted Postal Accountability and Enhancement Act of 2006, the Postal Service has

to live within the CPI for the rate of inflation, because it will be

allowed to raise rates only by increases in the Consumer Price

Index starting next year. Thus, their argument goes that the Postal

Service has to subcontract in order to save the higher cost of performing the work in-house.

The premise of their argument, however, that the Postal Service

will save money by allowing private contractors to perform the

work currently performed by mail handlers and other career postal

employees is totally false. Recent experience has shown that the

subcontracting of mail handler jobs has not worked. In fact, it has

had the opposite effect of leading to expensive inefficiencies that

have cost postal customers much more than the Postal Service expected.

I won’t reiterate in detail, but Congressman Lynch referenced

earlier to the Emery subcontract, and I would like to point that out

as an example.

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The Mail Handlers Union wishes to ensure that the ongoing debate over subcontracting is promptly focused. It is both superficial

and incorrect to assume that the wages and benefits paid to career

postal employees, which admittedly are higher than the amounts

that contractors will agree to, may, to privatized workers, automatically mean that the Postal Service is saving money when it

subcontracts. It is clear from prior OIG audits that a simple financial comparison based on wage rates is misleading and does not accurately reflect the actual costs that are borne by the Postal Service when it decides to subcontract work to the private sector.

For many years, the Mail Handlers Union has been trying to convince postal management to analyze its proposed subcontracts

more carefully with an eye on all of the actual costs that subcontracting imposes on the Postal Service, above and beyond the

savings projected by lowering hourly employment costs. That is

why I focused on these issues today.

I request that the subcommittee include in the record of this

hearing the OIG audits that I have mentioned during my testimony.

When all is said and done, each and every proposal to subcontract postal work needs to be analyzed carefully.

We certainly understand that the Board of Governors is chaired

by someone who has advocated for decades that privatization of the

Postal Service is best for America. We do not share that view. We

do not believe that the American public or many Members of Congress share the view that dismantling the Postal Service and dividing its parts into private components is a wise investment of our

Nation’s resources.

There has been some discussion about the earlier Postal Reorganization Act and the mandate that the Postal Service deliver to

each and every address every delivery day. There is also something

else in the Postal Reorganization Act that continues in the current

statute, and that is that the Postal Service is mandated, ‘‘As an

employer, the Postal Service shall place particular emphasis upon

opportunities for career advancement of all officers and employees

and the achievement of worthwhile and satisfying careers in the

U.S. Postal Service.’’

And I believe that should be adhered to as well and should be

factored into the current debate regarding subcontracting.

Again, thank you for this opportunity to testify.

If you have any questions, I would be glad to answer them.

[The prepared statement of Mr. Hegarty follows:]

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Mr. DAVIS. Well, let me thank the gentlemen for your testimony.

Unfortunately, we have 15 votes, some of which are antilabor, and

so I think I am going to have to go and cast mine.

But let me thank you for appearing. We would not dare ask you

to wait until we finish with all of those.

I am sure that the subcommittee appreciates the positions expressed by all of those who have come and testified this afternoon.

I think it has been a very worthwhile hearing that is going to help

us move ahead as we continue to develop policy; but more importantly, as we continue to try and wrestle with the role of collective

bargaining and the role that we hope it will continue to play in the

making of decisions relative to the operation of our Federal work

force.

So we thank you very much. And this hearing is adjourned.

[Whereupon, at 4:45 p.m., the subcommittee was adjourned.]

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