mental was based on this premise which was justified by the conditions then existing. The general business recession that has since developed came earlier than we expected and our volume estimates for 1958 may therefore not be reached. However, the Interstate Commerce Commission, on December 30, 1957, authorized rail rate increases estimated at $14 million annually for the western and southern railroads retroactive to July 1, 1957. The request of the eastern roads for an increase is still before the Commission. We have already been able to earmark for this purpose $9 million of our 1958 appropriation (as shown in the budget document) and hope that we may be able to cover the entire liability for the western and southern roads without a supplemental appropriation before the year end.

FISCAL 1959 ESTIMATES

The 1959 estimates were based on the assumption that the normal growth in mail volume would continue through fiscal 1958 at an annual increase rate of 4 percent and that in fiscal 1959 this rate would fall off to 3.4 percent. In the light of what unexpectantly happened in the last 4 or 5 months in the business world, it is possible that the situation may be just about reversed; i. e., that the increase in 1958 may be around 3.4 percent and in 1959 about 4 percent.

No one, I am sure, knows better than this committee the difficulties with which the Department is faced in trying to anticipate its workload and related fund requirements so far in advance. Our operating requirements are not of our own choosing but are the result of economic forces and the personal habits of 170 million people. In view of the extensive nature and wide variety of actions being taken to invigorate the national economy, we believe that it is still possible that the estimated mail volume of 63.53 billion pieces may be achieved in 1959.

Nothing has been provided in the appropriation request for fiscal 1959 to cover the general increases in railway mail pay, which were pending before the Interstate Commerce Commission when the budget estimates were developed. The President's budget specified that a supplemental request for this purpose, estimated at that time to be $25 million, would be submitted at a later date. Since then, as we indicated, the Interstate Commerce Commission has awarded increases to the western and southern railroads which will cost the Department about $14 million annually. The award to the eastern railroads is still before the Commission.

Supplemental funds for 1959 will also be required for any pay increase that may be enacted into law. The President's legislative program calls for increases in basic salaries of Government employees generally. The cost of pay increases added to H. R. 5836 by the recent Senate action would approximate $320 million for fiscal 1959.

REALINEMENT OF APPROPRIATIONS

In report No. 68 submitted by the House Committee on Appropriations on February 15, 1957, the Department was directed to include all expenses for administration, regional operation, and research in one appropriation. In complance with that request we are proposing in this budget the transfer of headquarters expenses of the Bureau of Operations, Transportation, Finance, and Facilities to the appropriation for administration, together with the cost of regional officers in the field. In order to make the appropriation title more descriptive, it has been changed to "Administration, regional operation, and research." The change in alinement will permit the elimination of the appropriation "Finance," the former finance function of procuring stamps and other accountable paper having been transferred to be Bureau of Facilities in 1958.

ADMINISTRATIVE REORGANIZATION

For the purposes of effecting better coordination and control of all postal installations as well as providing a more logical arrangement with respect to responsibilities, several major changes were made in our organization structure in fiscal 1958.

Transfers of appropriated funds, where necessary, corresponding to this functional realinement were effected as at the beginning of fiscal year 1958, with the approval of the Bureau of the Budget, under the authority of our current appropriation act. Positions, and in most cases personnel, were also transferred with the transfer of the responsibilities. For comparative purposes

the actual costs incurred for the activities concerned have been restated in the 1957 fiscal year figures under the appropriations and accounts where the same functions are now carried.

Most of these changes have been referred to in the opening statements of the various bureau heads concerned or will be brought out in the testimony concerning the budget estimates. I shall therefore simply list them for reference purposes at this point:

Mr. Chairman and members of the committee, Since I appeared before your committee last year, there have been several changes in the three programs of the Bureau of Facilities-the vehicle service, the supply service, and realproperty management. These changes are reflected in this budget estimate presentation, and include the transfer to the Bureau of Operations of the fieldservice costs of the vehicle service, and payments to the Federal Reserve banks for processing money orders; the transfer from the Bureau of Finance of the procurement of stamps and accountable paper; and the transfer of facilities headquarters costs to the departmental administration account.

The Bureau of Facilities budget presentation now consists of costs for realproperty management, exclusive of administrative staffs; the cost for the supply service, exclusive of Washington administrative staff; and the capital program, including procurement for the vehicle service.

VEHICLE SERVICE

The major change affected the funds for the field operation of the vehicle service. Formerly handled under an allotment system, forced by a divided situation since 1955, with line control under regional directors, but budget responsibility under the Bureau of Facilities, these funds were transferred to the Bureau of Operations as of July 1, 1957. This change marks the completion of the planned reorganization begun in 1953 by the Bureau of Facilities of the administration of the Post Office Department fleet.

During fiscal year 1957, the Department moved closer toward its goal of converting the composition of its fleet, wherever possible, to lighter, less costly, and more maneuverable trucks. At the end of the fiscal year, about 40 percent of the fleet consisted of standard, commercial, production-line vehicles. Experience to date shows lower capital and operating costs, and the resultant interchangeability of parts has helped the Department to service more vehicles with fewer parts and materials in inventory, and, further, that it will be of great advantage in the event of national-emergency conditions.

The procurement planned in this budget presentation provides for replacement of deteriorated, obsolete, or unsuitable vehicles in line with this policy, plus the planned expansion and extension by the Bureau of Operations of the program to mechanize and extend foot routes.

Although the field line administration costs of operating the vehicle service have been transferred to the Bureau of Operations, certain minor elements remain in the Bureau of Facilities budget. The buildings operations expense for vehicle maintenance facilities is included as a separate item in real-property management and remains about the same as last year.

The procurement costs for new vehicles and garage equipment, plus the capitalized costs for reconditioning of heavy trucks, remain, with some offset for salvage on disposal.

It is planned to continue the program of reconditioning certain classes of heavier trucks. This method of extending the life of the heavy trucks has proved to be economically sound and acts as a stopgap in the fleet transition program until a new standard 2-ton chassis has been found to accommodate 2 body sizes. There is no advantage to the replacement of heavy trucks when economic life expectancy can be extended, when disposal value is low, and new models which offer little in the way of functional improvements cost more and particularly when their work will soon be handled by either a dual purpose lighter standard chassis or a semitrailer.

REAL-PROPERTY MANAGEMENT AND CAPITAL PROGRAM

The costs for the real-property-management program of the Department included in our budget estimate are shown as "buildings operation expense." The costs included are for leases, month-to-month rentals, and the operations of these buildings, plus the housekeeping costs, other than custodial personnel, for the Government-owned buildings operated by the Department.

During fiscal year 1957, our leased space increased about 10 percent, and fiscal year 1958 should show about the same result. We have been able to keep pace with our normal commercial leasing program. This budget estimate covers our regular, planned, day-to-day operating program, and should not be confused with the proposed rehabilitation program, which is a part of H. R. 5836 as amended by the Senate and now being considered by the Congress.

So far, fiscal year 1958 contracts for about 400 new leased buildings have been entered into under this program. Costs per square foot for leased space, at least for the present, have become pretty well stabilized for several reasons. There are well-qualified professional real-estate men, trained in post-office needs, applying modern real-estate techniques in the field.

Increased use of functional-type buildings, which have been built for our occupancy, while better suited to mail-handling operations, also are less expensive. We have been able to obtain greater public competition through the use of assignable site-option procedures and widespread advertisement for bids. Buildings management costs, such as fuel and utilities, building supplies, and services, will increase in fiscal year 1959, due to the greater space occupied and increased procurement cost, particularly for fuels.

Our obsolete and inadequate Federal buildings continue to be a major obstacle in moving the mails. We are vigorously attacking this problem with the resources we have available.

The large backlog of necessary alterations and improvements to existing Federal buildings is being approached through a planned survey program on a priority basis, because of the modest funds available to General Services Administration for this purpose.

Mechanization of postal operations is essential, and these required alterations are coordinated with the installation of new automatic equipment.

The Post Office Department's light, color, and ventilation program has been very effective in the limited number of installations where it has been completed. It is estimated that, from the beginning of this program in 1953 through the end of fiscal year 1959, including the sum asked for in this budget, 132 million square feet of the 40 million square feet in the original estimated backlog will have been improved. The program is moving slowly, however; where work has been completed for each dollar expended, value has been received in terms of improved working conditions, better morale, and improved efficiency.

For the first time, capital or investment items are clearly distinguished in this presentation from operating or recurring costs.

The capital program remains at about the same level as comparable figures in fiscal year 1958.

Funds for postal equipment, including the replacement of old, wornout, and obsolete items and for new, complete installations, such as modern lowtype counterline, lockboxes, and workroom furniture, necessary to meet the building program, will slightly increase.

SUPPLY SERVICE

The Supply Service has continued to meet the supplies and equipment requirements of the operating bureaus in a timely and efficient manner. With the new concept of supply responsibilities and the availability of many new modern and

labor-saving items of equipment and supplies, as well as the increase in commonuse items, this program has continued to expand. The new procedures under decentralization are now fairly well understood throughout the Department, and thus supplies and service requirements show improved control and programing. The program of the Bureau of Facilities, as represented in this budget estimate, provides for improved vehicle, supply, and real-estate support for the 1959 program of the postal establishment. Some of the specific line items have been increased in fund requirements, others through improved applications have been reduced. The net result is a budget of slightly over 2.5 percent above the 1958 level, which we feel is not only justified, but is a minimum requirement.

ASSISTANT POSTMASTER GENERAL LYONS

BUREAU OF PERSONNEL

Mr. Chairman and members of the committee, we believe we are making steady progress in bringing a better understanding of progressive personnel management to the postal service. Our major efforts during the coming fiscal year will be directed toward developing supervisors in their responsibilities for personnel management including particularly safety, relationship with employee organizations, and training of subordinate employees in on-the-job skills. In implementing such a program our task primarily is one of communication and education.

This problem of providing training for each of 525,000 postal workers at more than 38,000 locations throughout the Nation is not easy and will require years of effort. Continuing work to provide written policy guidance, training, and personnel tools has substantially advanced the development of our supervisors. Similar efforts are helping to improve employees' skills. These efforts will be extended in the year ahead. Through improved supervision and development of employees we hope to weld postal field management and postal workers into a fully productive team.

Specifically our training program includes management development seminars and supervisory training courses sponsored by regional directors, and numerous courses and visual aids for on-the-job skills training. Particularly noteworthy has been the increasing use of scheme instructions with a noticeable drop in mail distribution errors where such training has been given. Instruction in facing mail, apprentice training in motor-vehicle maintenance, and makeup and dispatch of mail have been effectively utilized. Guides for supervisors in orienting new employees and in the proper administration of sick leave have been recently issued. New training films now in use or in production include mail facing, lift safely, and semiautomatic parcel sorting. Publications covering management-development-conference techniques and a guide for window clerks are other examples of our efforts to supply effective management tools directed at specific needs suggested by regional staffs and postmasters.

Judicious use of training outside the postal service has contributed to our efforts toward management improvements. The 15 regional directors participated in the American Management Association's management course along with representatives of leading business organizations. The results have been gratifying. The participants were enthusiastic in their praise of this training and we have noted considerable improvement in the utilization of available staff services by the regional directors since attending the AMA course. Other specialized instruction outside the postal service included courses in accounting procedures, traffic management and improved supervisory practices.

Paralleling the development of employees, techniques for the selection and advancement of those qualified to perform more difficult work have been placed in operation. For the first time in the history of the postal service, apprentice examinations have been developed and conducted to select employees for training in mechcanical skills. A third series of the examination is now being given to obtain apprentices for several of the largest motor-vehicle installations. Paralleling the Department's mechcanization efforts, an examination for selecting machine operators for letter-sorting machines was developed and administered. The job performance of those selected indicates this method is highly successful. A methods and standards officer examination was used at 18 installations with 888 employees applying. An additional 1,000 employees are expected to participate in this examination in additional offices by the end of fiscal year 1958.

Qualification standards for internal selection of candidates for motor vehicle and custodial positions have been developed. Similar standards for promotion and reassignment in other specialized categories are under consideration. Conversions of employees serving on temporary appointments to career status, made possible by Public Law 836, 84th Congress, were effected during the past year. These actions benefited several thousand employees, facilitated the filling of regular complements in many offices, and provided greater stability in the work force.

An agreement was negotiated with the Civil Service Commission to establish Civil Service boards of examiners in areas where recruitment needs are critical. These boards directly recruit, examine, and certify applicants to entrance-level positions in the postal field service. This method of operation eliminates excessive delays occasioned by the previous method of recruitment through Civil Service Commission regional offices. Better selections are possible since qualified applicants may be offered appointment shortly after taking the examination. Tie-in publicity is now provided through recruiting posters, spot radio and television announcements and use of free newspaper publicity by local and regional postal officials.

The establishment of written position descriptions under Public Law 68, 84th Congress, has permitted systematic job audits and reviews to determine the correctness of rankings made by postmasters and to keep the classification of positions abreast of significant changes in job content. Greater emphasis is now being placed on the auditing program as one of the principal means available of insuring maintenance of the principle of equal pay for equal work under Public Law 68. We hope that any new salary legislation enacted will not destroy the proper relationship now maintained between salary and level of responsibility and difficulty of the job.

Specific guidelines have been developed and placed into effect for evaulating performance in connection with the granting of merit-step increases. These are provided in Public Law 68 for eligible employees who have reached the midpoint step of their level in salary level PFS-10 or above. A vastly improved understanding of the techniques and importance of performance evaluation has resulted, with a minimum of paperwork. Approximately 1,500 step increases have been granted under this program based on superior performance.

Fiscal year 1957 produced greater activity in the incentive awards program than in any prior year. There was an increase of 17 percent in the number of suggestions received over fiscal year 1956 while the number of suggestions adopted nearly doubled, raising the adoption rate from 5.4 to 9.8 percent, an indication of the improvement in the quality of suggestions. Recognition of employees who performed their duties in an outstanding or superior manner also increased during the past year, although this program is only 2 years old. With a better understanding of the suggestions and awards program apparent among operating supervisors, the Postal Manual instructions have been revised to place greater emphasis on the establishment and use of local committees at post offices and other postal installations. This delegation moves the operation of the program closer to the suggester, encourages increased cooperation between employees and supervisors, and stimulates recognition of employees at the local level.

Continuing efforts to improve the Department's motor vehicle safety record resulted in a further reduction in accident frequency during the past year. The latest figures show our vehicle accident rate for metropolitan and rural operations is down to 2.24 accidents per 100,000 miles driven-a new low in the postal service.

Over 90,000 safe driver awards have been earned for from 1 to 26 years of accident-free driving since January 1, 1955, when these awards were first given. For the third consecutive year in 1957 the Department received the National Safety Council's citation award for outstanding service to traffic safety. The national certificate of achievement was also awarded to the Department in 1957. Action was taken during the past year to apply the same successful techniques to industrial safety. An awareness of the importance of safe work practices in all activities, as well as in driving, has been fostered by articles in the Postal Bulletin and Postal Service News; by the use of posters; and by incorporating instructions on safety in technical handbooks and training courses. A safety newsletter is being distributed to all supervisors and arrangements have been completed to participate in the National Safety Council's annual industrial safety contest.