[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
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
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
HENRY A. WAXMAN, California, Chairman
TOM LANTOS, California TOM DAVIS, Virginia
EDOLPHUS TOWNS, New York DAN BURTON, Indiana
PAUL E. KANJORSKI, Pennsylvania CHRISTOPHER SHAYS, Connecticut
CAROLYN B. MALONEY, New York JOHN M. McHUGH, New York
ELIJAH E. CUMMINGS, Maryland JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio MARK E. SOUDER, Indiana
DANNY K. DAVIS, Illinois TODD RUSSELL PLATTS, Pennsylvania
JOHN F. TIERNEY, Massachusetts CHRIS CANNON, Utah
WM. LACY CLAY, Missouri JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts DARRELL E. ISSA, California
BRIAN HIGGINS, New York KENNY MARCHANT, Texas
JOHN A. YARMUTH, Kentucky LYNN A. WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of VIRGINIA FOXX, North Carolina
Columbia BRIAN P. BILBRAY, California
BETTY McCOLLUM, Minnesota BILL SALI, Idaho
JIM COOPER, Tennessee JIM JORDAN, Ohio
CHRIS VAN HOLLEN, Maryland
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont
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 KENNY MARCHANT, Texas
Columbia JOHN M. McHUGH, New York
JOHN P. SARBANES, Maryland JOHN L. MICA, Florida
ELIJAH E. CUMMINGS, Maryland DARRELL E. ISSA, California
DENNIS J. KUCINICH, Ohio, Chairman JIM JORDAN, Ohio
WM. LACY CLAY, Missouri
STEPHEN F. LYNCH, Massachusetts
Tania Shand, Staff Director
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
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 community 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:]
[GRAPHIC] [TIFF OMITTED] T2715.001
[GRAPHIC] [TIFF OMITTED] T2715.002
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 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.
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, 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.
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 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 security
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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[GRAPHIC] [TIFF OMITTED] T2715.006
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.
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 first-class 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 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 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 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 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 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----
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 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.
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.
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 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 1\1/2\ 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 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 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.
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 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; 4\1/2\.
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 day-to-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.
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.
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.
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 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:]
[GRAPHIC] [TIFF OMITTED] T2715.026
[GRAPHIC] [TIFF OMITTED] T2715.027
[GRAPHIC] [TIFF OMITTED] T2715.028
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.
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 Service 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 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 good-paying, 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 low-bid 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 low-paid, 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.
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.]