Mr. Nix. Our last witness is Mr. H. F. Faught, Senior Assistant Postmaster General, U.S. Postal Service. Mr. Faught, we welcome you again. It's nice to see you.

Mr. FAUGHT. Thank you, Mr. Chairman.

Mr. Nix. Would you please introduce your associate?

Mr. FAUGHT. Yes, Mr. Chairman. With me today is Mr. Robert H. Coven of the Office of Program Management from the U.S. Postal Service.

Mr. Nix. You may proceed, sir.

STATEMENT OF HON. H. F. FAUGHT, SENIOR ASSISTANT POSTMASTER GENERAL, U.S. POSTAL SERVICE, ACCOMPANIED BY ROBERT COVEN, OFFICE OF PROGRAM MANAGEMENT, U.S. POSTAL SERVICE

Mr. FAUGHT. Yes. Mr. Chairman, I do have a prepared statement which I would like to read if it's agreeable.

Mr. Nix. Certainly.

Mr. FAUGHT. I am pleased to have this opportunity to report in accordance with your invitation, on our progress and costs incurred to date in implementing the Postal Service's plans for the specialized bulk mail processing system and in planning for the continuous flow, mechanized, preferential mail processing system. Since the subcommittee has kindly consented to my presentation of some slides describing the bulk system, I will confine this statement to a brief recitation of the pertinent data.

Our present plans call for construction of 21 major bulk mail centers and the utilization of 12 satellite facilities as auxiliary service plants. Each will play a key role in the national bulk mail system. We expect to have the entire system, all 33 units, in full operation during fiscal year 1975.

The total cost of the bulk mail system will be about $950 million according to our present estimates. The return on that investment will be impressive. Our studies indicate that this construction will enable us to operate the postal system for about $310 million a year less than it would cost us if we continued to handle this type of mail in the way we are doing it today.

The major bulk mail processing facilities will be of modular design, with basically two standard designs covering 19 of the 21. These designs will allow for future expansion of building and mechanization with minimal cost, time, and disruption to ongoing operations.

Three of the 21 bulk mail processing facilities presently are under construction. These are at New York-Secaucus, N.J.-Chicago, and Washington, D.C. The Secaucus facility is approximately 36 percent complete; Chicago stands at about 4.5 percent; and Washington is, roughly, at 3 percent of completion.

The site for the Secaucus facility cost $2,680,000, the building contracts total $25 million, and the mechanization contract cost totals $44 million.

I might just at this point indicate this is for the bulk-mail part of that facility. There is, in addition, facilities on that site for the foreign-surface mail.

The Chicago facility site costs $3 million, the building's contract cost is $23,007,000, and the mechanization contract cost is $37,400,000. The Washington, D.C., facility's site cost $3.294,000. The building contract cost is $21,720,000, and the mechanization contract cost is $21.800,000.

The building contract costs which I just gave you include the design contract costs. In addition, there have been obligated to date to cover Corps of Engineers support costs $4.520,000 for the Secaucus facility, $1,698,500 for Chicago, and $146,000 for Washington, D.C.

With regard to the 18 remaining bulk-mail processing facilities, the sites for all of them have been selected, with the site for the Pitts

burgh facility having been recently acquired and the site for the Los Angeles facility, which is Government owned and committed for our use. The remaining sites will be acquired as rapidly as is feasible. I understand that the site for the Springfield, Mass., facility which is under option, will be acquired very shortly. We presently estimate that the sites for all of these 18 remaining facilities will cost a total of approximately $55 million.

Contracts were awarded on March 6, 1972, for the adaptation of our standard processing building plans to the sites, and for the design of the ancillary buildings such as gatehouses and vehicle maintenance facilities, for the Atlanta, Ga., and Jacksonville, Fla., facilities. Contracts are expected to be awarded for similar design work for all of the remaining facilities by the end of the first week of next month. The Corps of Engineers is presently screening, selecting and negotiating with architect-engineer firms for this work. The advertising for construction and mechanization contract will begin as quickly as is feasible for each facility.

We presently estimate the total contract cost of the remaining 18 facilities to be approximately $429,310,000 for the buildings, including foundations and design, and about $282,880,000 for the mechanization. Amounts obligated to date to cover Corps of Engineers support costs for these facilities total $3,368,600.

As you know, our plans for the preferential mail processing system are not nearly so far along. Present plans call for deployment of the letter mail code sort system (LMCSS) among 177 preferential mail processing centers (PMC's) strategically located throughout the country. Our current assessment indicates that about 80 of these PMC's can be readied by July of 1976, and that these 80 centers can process about 40 percent of the 1976 preferential mail volume. The remaining PMC's are expected to be in operation by July of 1978, or if slippage occurs in the prototype systems development, systems production, or construction, by July 1979.

The cost of developing and deploying the PMC network including planning and research and development costs, are estimated preliminarily to be about $3.9 billion. The system is forecast to yield operating cost savings on the order of $1 billion annually by fiscal year 1978.

This system is perhaps the first total change in the concept of mechanized letter mail handling. While over the years some very fine equipments have been developed and deployed to improve letter mail processing, in general each has been an island of mechanization substantially independent of other letter mail processing functions and equipments. The results of this noncontinuous mail flow are costly manual handlings between these various pieces of equipment. The letter mail code sort system is a state-of-the-art integrated electronic/electromechanical continuous flow processing system, drawing heavily upon the advanced technologies of optical character readers, computers, coding and code readers, and specialized materials handling systems.

By strategically deploying a network of letter mail code sort systems throughout the Nation and concentrating the letter mail processing function therein, we will provide rapid and reliable service to our customers. We will also bring to bear on our ever-growing volume of letter mail-forecast to reach approximately 78.9 billion pieces by 1982-computer assisted, continuous industrial-type processing techniques for efficient and economic letter mail processing.

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