from the initial terminal an excessively longer or an excessively shorter period than was required in the advertised schedule; (d) where it is found after full investigation that the compensation of such contractors is wholly inadequate and that the continuation of the contract would impose undue hardship upon the contractor: Provided, That provision (d) shall be effective only upon the giving by the contractor of 90 days' advance notice of his desire to be released: And provided further, That such contractor shall waive the 1 month's extra pay authorized by law where contracts are canceled under section (d)."

Under the present law the Post Office Department is required to accept the lowest bid, the only restriction being that the Postmaster General shall not be bound to consider the bid of any person who has willfully or negligently failed to perform a former contract and that a contract shall not be made with any person who has entered into a combination of bidders to fix the rate of Star Route Service. In order that the Department may be relieved of the necessity of accepting the low bid where circumstances justify the conclusion that it is highly probable the bidder will not be a satisfactory contractor, the amendment of exsiting law in this particular is considered desirable. Accordingly the inclusion in section 2 of the bill of the two following paragraphs is recommended:

Section 1 of the act of July 26, 1892 (27 Stat. 268; title 39, sec. 422, U. S. C.) is amended to read as follows:

"After providing by general advertisement for the transportation of the mails in any State or Territory as authorized by law, the Postmaster General may secure any mail service that may become necessary before the next general advertisement for said State or Territory by posting notices, for a period of not less than 10 days, in the post offices at the termini of any route to be let, and upon a bulletin board in the Post Office Department, inviting proposals, in such form and with such guaranty as may be prescribed by the Postmaster General, for the performance of the proposed service. The contract for such service shall be made to run to the end of the contract term under the general advertisement, shall be made with the lowest responsible bidder whose proposal is in due form, and who, under the law, is eligible as a bidder for such postal service."

Section 3949 of the Revised Statutes, as amended (title 39, sec. 429, U. S. C.) is amended to read as follows:

"All contracts for carrying the mail shall be in the name of the United States and shall be awarded to the lowest responsible bidder tendering sufficient guaranties for faithful performance in accordance with the terms of the advertisement. Such contracts shall require due celerity, certainty, and security in the perfomance of the service; but the Postmaster General shall not be bound to consider the bid of any person who has willfully or negligently failed to perform a former contract.”

It has been ascertained from the Bureau of the Budget that if section 1 (a) and the first paragraph of section 2 are stricken from this bill and it is otherwise amended as hereinabove suggested, it would not be in conflict with the program of the President.

Very truly yours,

JAMES A. FARLEY,
Postmaster General.

STATEMENT OF FRANK RUSSELL, NATIONAL STAR ROUTE

CARRIERS' ASSOCIATION

The CHAIRMAN. We have met this morning for consideration of S. 1214, which is a bill to provide for a more permanent tenure for persons carrying the mail on star routes.

As gentlemen of the committee will remember, both the House and the Senate have held very complete hearings concerning this subject, therefore we do not this morning wish to rehash everything that has gone before. Mr. Russell, the representative of the starroute carriers, is here and we will hear from him first.

Mr. RUSSELL. Mr. Chairman and gentlemen of the committee, I have not very much to say this morning, inasmuch as this subject. has been so thoroughly covered, as has been stated by your chairman. The star-route carriers and their representatives have been before the committee with this legislation several times and, having the pleasure of knowing most of the gentlemen of the committee personally, and their views in regard to this matter, I know they recognize the need for some remedial legislation.

The fact that the legislation which has been before the committee in this regard heretofore is not law, is not at all the fault of this committee, because you passed it. You gentlemen know that story too well to require repetition.

In discussing this matter over a period of considerable time with the Post Office Department, they also recognized the necessity, in the interest of justice, for some change in the present law. That, of course, is a matter for determination by gentlemen of the committee and the other Members of the Congress.

I understand that the Department has made a statement of the things to which it will agree, and we are in agreement with that proposal. A representative of the Department is here this morning to submit the Department's proposal, and I think it probably would be well to hear him at this time. I think that procedure would expedite this matter. There is no use of my going into details that are perfectly familiar to the committee.

After you have heard the representative of the Post Office Department, if I can be of any service or help to the committee in any way, I shall be very glad to extend it.

The CHAIRMAN. Who is here from the Post Office Department?

Mr. MARTIN. I am from the Bureau of the Second Assistant Postmaster General. I am assistant general superintendent of the Division of Railway Mail Service. Unfortunately, Mr. O'Connell, Second Assistant Postmaster General, is unable to be present at this moment. He was imperatively engaged when we left the Department, but he expected to come here very soon. I had expected him here before this time. If it is agreeable to members of the committee, I think it would be well to wait until he arrives, which will be only a matter of a very short time, as I believe.

Mr. MASON. Do you know about the agreement that was arrived at between the representatives of the Post Office Department and the representatives of the star-route carriers?

Mr. MARTIN. I am not thoroughly familiar with that matter, because Mr. Cole, Deputy Second Assistant Postmaster General, and Mr. Hardy, the General Superintendent of the Division of Railway Mail Service, have handled this matter, and those gentlemen are unavoidably absent, being out of the city.

Mr. MASON. I wanted to know if somebody could tell us something about this from the Department's standpoint while we are waiting for the Second Assistant Postmaster General.

(Thereupon Mr. Ambrose O'Connell, Second Assistant Postmaster General, entered the room.)

218710-40—— -2

STATEMENT OF AMBROSE O'CONNELL, SECOND ASSISTANT POSTMASTER GENERAL

The CHAIRMAN. Mr. O'Connell, we are glad to have you with us this morning.

Mr. O'CONNELL. I am sorry that I am late in arriving, but it is unavoidable.

Mr. MASON. I am particularly interested in the compromise_that has been arrived at between the representatives of the Post Office Department and the representatives of the star-route carriers. We have the details connected with the Star Route Service, and it is unnecessary to reiterate them; but we would like to know about this agreement that you have effected.

Mr. O'CONNELL. As I understand, the Department, with the approval of the Bureau of the Budget, has agreed with the representatives of the star-route carriers upon a bill that is satisfactory to both the Department and the star-route carriers. We simply submit our report, which has been approved by the Bureau of the Budget, saying that we should like to see something remedial enacted into law.

Mr. MASON. Your report, dated last March 6, to the committee, states, in part, that—

Approval cannot be given to section 1 (a) of the measure, as it would be too great a departure from the underlying basis of this type of service which is its competitive basis.

Please explain that statement to us. The Department is withholding its approval of that particular section because it is too great a departure from the underlying basis of this type of service, which is its competitive basis. Please explain that.

Mr. O'CONNELL. That is a feature of a former bill which provided for renewal of these star-route contracts without competitive bidding.

Mr. BURCH. The report of the Department says that it is in sympathy with the last paragraph of section 1 (b) of the bill, but believes that the following substitute there for would be preferable: The Postmaster General may, in his discretion and in the interest of the postal Service, readvertise and award now contracts for the purpose of releasing contractors and their sureties under the following conditions: (a) Where a change is ordered in the service involving a material increase or decrease in the amount of service required to such extent as to impose undue hardship on the contractor; (b) where an abnormal or sustained increase in the quantity of mail develops during a contract period or after a bid has been submitted, necessitating larger capacity equipment to maintain the service; (c) where a change in schedule is ordered that will necessitate the contractor being away from the initial terminal an excessively longer or an excessively shorter period than was required in the advertised schedule; (d) where it is found after full investigation that the compensation of such contractor is wholly inadequate and that the continuation of the contract would impose undue hardship upon the contractor, provided that provision (d) shall be effective only upon the giving by the contractor of 90 days advance notice of his desire to be released, And provided further. That such contractor shall waive the one month's extra pay authorized by law where contracts are canceled under section (d).

That is an amendment suggested for inclusion in the Senate bill, as I understand.

Mr. O'CONNELL. Yes, sir; that is right.

Mr. BURCH. So that is about all there is to it.

Mr. O'CONNELL. Yes, sir.

Mr. BURCH. Is that satisfactory to you, Mr. Russell?

Mr. RUSSELL. Yes, sir; that is agreeable. We agreed to the Department's recommendation.

STATEMENT OF THOMAS QUINN BEESLEY, NATIONAL COUNCIL ON BUSINESS MAIL, INC.

The CHAIRMAN. Mr. Beesley is present and desires to be heard at this time.

Mr. BEESLEY. I am president of the National Council on Business Mail, Inc., and as such I represent the patrons of the mail service to a considerable degree. In our organization we have approximately 1,000 individual users of the mails and 13 trade associations representing 49 different lines of business, who, in turn, either themselves or through customers are vitally interested in the Postal Service.

We have been very much interested in this proposed legislation for several years, or since it has been before this and the Senate committee. My appearance here is to supplement the Department's proposals, to offer for your consideration two suggestions in connection with the pending bill. The first suggestion is that, after

the contract for such service shall be made to run to the end of the contract term under the general advertisement, shall be made with the lowest responsible bidder whose proposal is in due form, and who, under the law, is eligible as a bidder for such postal service—

insert the words

Provided, That the determination by the Postmaster General shall be final and conclusive.

The CHAIRMAN. Where did you find that in the bill?

Mr. BEESLEY. It may be found at the end of the first paragraph on page 2 of the Department's report of last March 6.

Mr. BLACKNEY. Will you please repeat that suggestion?

Mr. BEESLEY. My suggestion is that, after the words

the contract for such service shall be made to run to the end of the contract term under the general advertisement, shall be made with the lowest responsible bidder whose proposal is in due form, and who, under the law, is eligible as a bidder for such postal service

insert the words

Provided, That the determination by the Postmaster General shall be final and conclusive.

That suggestion is made in order to eliminate the possibility of any confusion as to a decision by the Postmaster General being the one which determines the lowest responsible bidder; and that in turn is based on experience with other matters which you have of necessity coming before your committee after you have passed acts which you thought were clear and conclusive, only to find confusion upon review of those acts by other agencies.

Mr. MASON. Why would not the determination of the Postmaster General already be final and conclusive; who else would have anything else to say?

Mr. BEESLEY. The Comptroller General of the United States.
Mr. MASON. Another agency of government?

Mr. BEESLEY. Yes.

Mr. MASON. This is a matter of divided responsibility, would you say?

Mr. BEESLEY. I would say that, in effect, it is just that.

I think it is well to write into this section the same language which has appeared in legislation, for example, having to do with the Home Owners' Loan Corporation Act of 1933 (48 Stat. 132, sec. 4 (j)). That section provides that

The Corporation shall be entitled to the free use of the United States mails for its official business in the same manner as the executive departments of the Government, and shall determine its necessary expenditures under this act and the manner in which they shall be incurred, allowed, and paid, without regard to the provisions of any other law governing the expenditure of public funds.

Another case that I may cite is one having to do with the Federal Home Loan Bank Board. Section 6 (48 Stat. 134) provides thatTo enable the Board to encourage local thrift and local home financing and to promote, organize, and develop the associations herein provided for or similar associations organized under local laws, there is hereby authorized to be appropriated, out of money in the Treasury not otherwise appropriated, the sum of $150,000, to be immediately available and remain available until expended, subject to the call of the Board, which sum, or so much thereof as may be necessary, the Board is authorized to use in its discretion for the accomplishment of the purposes of this section without regard to the provisions of any other law governing the expenditures of public funds.

Mr. MASON. Do you cite those quotations as a precedent for your suggested amendment?

Mr. BEESLEY. Yes; I do.

Mr. MASON. Do you say that there are several precedents for your suggestion?

Mr. BEESLEY. Yes; there are many of them.

Mr. MASON. What does the representative of the Post Office Department think about this proposed amendment?

The CHAIRMAN. I think it would be agreeable to the Post Office Department.

Mr. MASON. Would the representative of the Department care to speak about the proposed amendment?

Mr. O'CONNELL. I am afraid that the provision suggested by Mr. Beesley might jeopardize the passage of the entire bill. In other words, we might encounter difficulty in seeking approval of the Bureau of the Budget for that provision. We might bring down another veto in our efforts to help the star-route carriers.

We have already conferred with representatives of the Bureau of the Budget and received the approval of the Bureau for the bill as we have finally submitted it; but this new proposal by Mr. Beesley would have to be resubmitted. It may go into the whole process of reorganization and get us into something that we feel at the moment we should not go into if we are going to help the star-route carriers

now.

Mr. MASON. Do you say that the Post Office Department has no objection to that proposed amendment but that you think its inclusion would jeopardize the enactment of the bill into law?

Mr. O'CONNELL. Yes.