Plant and equipment, 1962—Analysis of estimated increase or decrease in obligations

NOTE.-Amounts shown for 1960 and 1961 have been adjusted for comparability with the 1962 estimate.

REQUEST FOR RESTORATION OF AMOUNTS REDUCED IN H.R. 5954, FISCAL YEAR 1962, AS PASSED BY HOUSE OF REPRESENTATIVES

REQUEST FOR CERTAIN CHANGES IN APPROPRIATION LANGUAGE OF H.R. 5954 AS PASSED BY THE HOUSE

(1) Administration, regional operation, and research, 1962.-Page 10 of the bl as passed by the House, lines 12 and 13, strike out the words "(including current increases made as a result of changes in plans in prior year contracts thereunder" and insert in lieu thereof the following: "(including not to exceed $3,000,000 for current increases in prior year contracts thereunder in addition to current increases made as a result of changes in plans).'

(2) Plant and equipment, 1962.-Page 13 of the bill as passed by the House, lines 9, 10, and 11, strike out the words "including current increases made as a result of changes in plans in prior year contracts therefor, $110,000,000:" and insert in lieu thereof "including not to exceed $3,000,000 for current increases in prior year contracts or orders therefor in addition to increases made as a result of changes in plans, $122,000,000 of which $35,000,000 shall remain available until expended." (House hearings, pp. 62-64, 66–77, 263–264)

HOUSE REPORT

The committee made only passing reference to the language changes in the report. However, in the bill as reported to the House, the committee has added the phrase "made as result of changes in plans" following the provisions for current increases, in the "Administration, regional operation, and research," and "Plant and equipment" appropriations. Also in the plant and equipment appropriation the committee deleted the phrase "to remain available until expended." The effect of the inclusion of the former phrase is to limit or preclude any obligation of current year funds against prior year contracts unless there is an actual change in plans, specifications, or a change in scope of a program under contract.

JUSTIFICATION

In the appropriation act for the Post Office Department for the fiscal year 1960 the appropriation for "Administration, regional operation, and research" included, at the request of the Department, a newly added phrase reading "includ ing current increases in prior year contracts thereunder" which followed that part of the language_authorizing the conducting of the research and development program. The Department found that this was of assistance in the administration of its research and development contracts. As previously explained in the justification for that language, many of these contracts cannot be completed within the year and a provision is needed to cover subsequent cost increases not foreseen at the time the contract was negotiated. The language inserted in the 1960 act made it unnecessary, if sufficient prior year funds were not available, to negotiate a new contract with someone else in order to complete the work on the project.

The same language was requested in the 1961 budget submission. Instead, the Congress changed the language to limit the financing of increases in prior year contracts entirely to those resulting from changes in plans, and thereby nullified the effect of the language previously included in the 1960 act. The Department has always had the legal right to pay increases resulting from changes in plans regardless of the year in which the change occurred.

In the submission of the 1962 budget justifications the Department requested that the phrase "made as a result of changes in plans" be deleted and that language identical with that authorized by the 1960 appropriation act be approved for the "Administration, regional operation, and research" appropriation and the new "Plant and equipment" appropriation. In the appropriation for plant and equipment the Department also included a phrase "to remain available until expended."

In the discussions with the House subcommittee the Department explained its need for each of the three proposals. The subcommittee suggested during the hearings that the Department submit alternative language placing definite limitations on the amount that could be used to increase prior-year contracts and on the amount of plant and equipment unobligated funds that could be carried forward into future fiscal years.

On pages 263 and 264 of the House hearing the modified language proposed by the Department is shown. Under the revised proposals current-year increases in prior-year contracts could not exceed $3 million in either of the two approriations and not to exceed $35 million of the amount appropriated for plant and

equipment could be carried forward into future years if not obligated prior to June 30 of the appropriation year. The proposed language retains the Houseadded phrase "made as a result of changes in plans."

These language changes are important to the Department in the efficient and effective administration of the research and capital programs. Without them delays and additional expense can be incurred when there are not sufficient funds left in a prior-year appropriation to complete some project or to permit General Services Administration to award some contract for improving a postal facility where the low bid proves to be more than the amount originally obligated.

The plant and equipment appropriation provides funds for the modernization of the field postal plants as well as ordinary capital replacements. The authority to carry over not to exceed $35 million in unobligated funds requested for this appropriation is for the purpose of assuring the Department ample time for the orderly placement of orders for such capital items, particularly that involving the modernization of buildings. These are often projects of many months' duration involving extensive engineering and design and coordination with the procurement of large items of tailormade equipment. Such projects cannot be rushed into merely because the money programed for the project expires at the end of the fiscal year.

The ability to carry over a limited sum would adequately meet the Department's needs without permitting an unlimited buildup of funds over the years. There are no operating expenses of any kind in the plant and equipment appropriation as it provides only for capital expenditures.

The Department strongly urges the support of this committee in obtaining these helpful changes in appropriation language.

(1) Page 9, after line 17 of the House bill insert the heading "Current authorizations out of general fund" and the following language: "For payment into the postal revenues for public services, in accordance with section 104 of the Postal Policy Act of 1958 (39 U.S.C. 2303), for the loss resulting from the transmission of matter in the mails free of postage or at reduced rates, and for the additional cost of transporting mail by foreign air carriers, $62,700,000."

HOUSE REPORT

"The committee has not provided an appropriation for public services for 1962. When an appropriation for this purpose was first requested in the Second Supplemental Appropriation Act, 1959, the House stood in opposition, the Senate concurred, and the request was denied. In its report No. 238, denying that request, the committee stated in part as follows:

""This is a new item whlch has the effect of making part of the postal deficit an annual definite appropriation.'

"In the regular appropriation bill for 1960, the House again denied the request for such an appropriation. That request amounted to $172 million. When the Senate substituted the much lower figure of $37,400,000 for this item, the House acquiesced in a compromise agreement in the committee of conference between the two Houses.

"This is a subject of widespread disagreement and misunderstanding. The Postal Policy Act of 1958 only served to heighten the areas of disagreement. The committee considers that an appropriation for public services is merely given another name to a portion of the postal deficit, is strictly a bookkeeping transaction, and serves no useful purpose."

JUSTIFICATION

Section 104 of the Postal Policy Act of 1958 places upon the Congress the responsibility for determining the measure of the public services in the appropriation act.

The estimates submitted to the House in the President's budget of January 16, 1961, were limited to the two items of public services specified by the Congress in the 1960 and 1961 appropriation acts. These items, the "Revenue loss on free