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Mr. CHRISTENSEN. How do you account for the fact that at that time you could not get the vehicles you are now procuring?

Mr. Kies. Because the specifications were different.
Mr. CHRISTENSEN. Were too restrictive; is that right?

Mr. K1EB. They were a much lighter specification. And they were restrictive in some nature.

Mr. MOLLOHAN. Do you mean by that that you found that the light vehicle that you thought originally would be the one that would be desirable and would serve the purpose has proven to be

Mr. KIEB. No.

As of a result of this very light four-wheeled vehicle, with light component parts—incidentally, all the component parts were standard manufacture and could be assembled by anyone—we found that by slight adjustments and by using slightly heavier specifications in one portion of the step and using different body and chassis, that we were able to come up with a specification that would do our job better than

any trucks we had at lower cost than we were able to develop. Mr. CHRISTENSEN. Are you saying that the Twin Coach truck is cheaper to operate than other types of trucks; that the experiment showed that?

Mr. KIEB. The Twin Coach job—I am going to ask Mr. Schlegel to use the cost accounting figures that you may have; because I do not recall them in detail.

But, generally speaking, the Twin Coach truck showed us in these experiments where there were some mistakes and where there were some errors and where there was a big volume-or a big advantage.

Mr. CHRISTENSEN. Did you find they were cheaper to operate; that your operating costs were lower?

Mr. Kies. When used on a full 8-hour comparable basis, they operated at lower cost.

Mr. PLAPINGER. Lower cost than what?
Mr. KIEB. Than our 112- and 2-ton trucks.

Mr. CHRISTENSEN. Did you compare them with new 11/2- and 2-ton trucks?

They submitted to us the comparative data that we were to compare with the Twin Coach cost figures. I do not think any of the vehicles that we have here are newer than 1952.

Mr. KIEB. They were what we had in the fleet.

Mr. CHRISTENSEN. We have been told by a lot of your people that you cannot compare an old truck with a new truck costwise ?

Mr. KIEB. You have to work somehow with the things that you have and try to do the best kind of a job you can.

Now, I do not think we would have been justified in buying a large number of 11/2- or 2-ton trucks just for the purposes of this experiment when we already knew they were heavier than we needed to have.

Mr. CHRISTENSEN. I do not believe you would have had to do that. I think you could have bought, say, 10 ?

Mr. KIEB. I do not think 10 would have given us the averages that are necessary to develop in this kind of an experiment. Because we are using it not in just one type of service; we are using it in a large number of types of service. We are using it in a large number of locations and under different conditions.

Mr. CHRISTENSEN. I am speaking now only of operating costs.
Mr. KIEB. Your operating costs will

Mr. CHRISTENSEN. On simulated routes, would you not make a comparison between the cost of operating the Twin Coach as against another standard vehicle

Mr. KIEB. Yes.
Mr. CHRISTENSEN. You could do that costwise, couldn't you?

Mr. KIEB. Yes. But we would have had to develop simulated routes, routes of all kinds. And we did work simulated routes at the beginning of this experiment.

Then we expanded this experiment into actual use routes and actual service areas.

Mr. CHRISTENSEN. Are you saying that even to date you have never made a comparison with standard vehicles ?

Mr. KIEB. Of course, we made comparison with standard vehicles. We have told you so. Because it was standard vehicles that were in the fleet.

Mr. YOUNGER. Mr. Chairman, may I interject something here?
Mr. MOLLOHAN. Yes.

Mr. YOUNGER. I am wondering if we can't get at the facts of these things and then let the committee make some conclusions.

I think that we are the ones who are responsible to make the conclusions and not the investigators. He is announcing conclusions that he has arrived at.

And let's get at the facts and then let the committee get at the conclusions. And I think we can save some time, Mr. Chairman.

That is all.

Mr. MOLLOHAN. If we can develop the facts as directly as possible, yes.

Mr. PLAPINGER. I would like to ask some questions about the Heller report.

Incidentally, for your half a million dollars, you did not pick on a very good set of mathematicians. There is a $7,500 error on page 7 of the Heller report, and also on exhibit 5.

The data that the Post Office Department has submitted indicates that the hopscotch experiment was discontinued. And with reference to the Heller exhibit No. 5, we have run some comparative cost data using the statistics furnished us by the Post Office and compared them with the Heller projections, with the hopscotch experiment being discontinued, that results in the elimination of the procurement of 12,500 vehicles listed on page 1 of exhibit 5 of the Heller report.

Also we are told by the Post Office Department that the carrier time saving has been one-half hour daily rather than 1 hour as according to the Heller report; that the hourly cost as of March of 1955 on the Twin Coach vehicles which includes operation and maintenance and depreciation was 55.6 cents per hour instead of the approximately 48 cents indicated on the Heller report.

The Heller exhibit indicates that the costs are projected on a 310day-per-year basis; whereas the Post Office indicates that they are on a 306-day-per-year basis.

The productive men-hour cost, according to the Post Office data, is $2.20 hourly rather than $2.25 hourly. That the truck is in 6 hour daily use rather than 5; as indicated in the Heller projection.

And using these changes which the Heller report- which the Post Office has furnished us, instead of $41,027,667, which is the corrected Heller figure, we come up with a total saving of $1,870,320, or $149.63 per vehicle, which is considerably different out of, I would say,

somewhere in the nature of a 95-percent error. (The information referred to is as follows:)

STAFF COMPARATIVE EXHIBIT 5

(With Heller Exhibit 5) Data submitted by the Post Office Department on the 34-ton Twin Coach experimental vehicles state that

(a) The hopscotch experiment was discontinued (resulting in elimination of 12,500 vehicles in items 2a and 2b of Heller's exhibit 5).

(6) Carrier time savings is 12-hour daily (rather than 1 hour, as per Heller).

(c) Hourly cost as of March 1955 (includes operation, maintenance, and depreciation) is 55.6 cents per hour (as of March 1956, average hourly cost was 58 cents per hour).

(d) Costs are projected on a 306-day-per-year basis (rather than 310 as per Heller).

(e) Productive man-hour cost is $2.20 hourly (rather than $2.25 per Heller).

(f) Six-hour daily truck use (rather than the 5 as per Heller). As a result of the foregoing, the potential savings of $41,022,467 forecast in Heller's exhibit 5 for both 25,000 34-ton vehicles and 7,500 14-ton vehicles (for utilization on 37,500 34-ton routes, and 7,500 14-ton routes), is grossly inaccurate,

Using Heller report figures except as indicated in (a) through (f) above, and confining the savings to the Twin Coach 34-ton vehicles, the following results (headings are as per the Heller report-revised statistics are italicized) : Mr. PLAPINGER. Now, what we are interested in is, What evaluaation was there of the Heller report by the Post Office after it was received ?

Twin Coach savings
1. Curbside and combination curbside and house delivery:

1/2 hour saving on letter mail.
1/2 hour saving on parcel post.
1 hour '(total savings) X 306 X $2.20=$673.20 sav-

ings per route.
4,000 X $673.20-

$2, 692, 800 Heller

$4, 184, 000 2. House delivery:

(a) 0.5-hour saving on letter mail.

0.8-hours saving on parcel post.
0.1-hour saving on relay collection.
1.4 hours (total saving X 306 X $2.20-$942.48

savings per route.

12,500 routes X$942.48=$11,781,000.
(6) Less annual cost of 12,500 vehicles :

$ 12,500 X 55.6 cents X 6 X 360—$12,760,200.
$11,781,000-$12,760,200

-979, 200 Heller

$35, 951, 667 3. Contract routes :

(a)
(0) Average contract cost---

$1, 060.00
Less vehicle cost, 55.6 cents X6X
306

1, 020. 82

39. 18

Savings
4,000 routes X $39.18

Heller-
Savings per vehicle, $149.63.

156, 720

$892, 000

Total savings-

1, 870, 320

Total Heller savings.

-$41, 022, 467

Mr. KIEB. I am sure there was an evaluation made.

And it was made by the industrial engineering department; and not by my own.

I do think the only comment I would make is that we oftentimes get mixed up in the use of the word "savings.”_Because where you run a projection in a department as large as the Post Office Department, actually you are setting up potential savings that must be recaptured by applying the projection of an across-the-board scale that runs into some pretty large figures, all of which are never effectively recaptured.

Now, I am not in a position to defend the mathematical calculations of the Heller Associates report. I did not write it. It was done by Heller Associates. And I think that

Mr. PLAPINGER. Sir, I am not holding you responsible for running the Heller company.

What I am interested in, is what evaluation there was of the Heller report.

And in view of the actual experience, it seems to me that the Heller report is fairly well invalidated. And you may very well have been "taken to the cleaners," so to speak, for the $79,000 fee.

Mr. KIEB. If the Heller report did nothing except give us the springboard to attack our motor vehicle hire costs and we were able to reduce our motor vehicle hire cost by $8 million per year, that experiment has paid off in substantial effected savings.

Mr. PLAPINGER. Have you been able to save $8 million a year on these trucks?

Mr. KIEB. Let me correct the figure.
We reduceed our motor vehicle hire accounts, say

in
my

statements, from 13—let me get the exact figure for you—our vehicle hire account has been reduced from approximately $13.5 million which was an annual cost in 1954, to $555 million, which is our estimated cost in 1957 fiscal year. Our 1956 figures are not entirely available to us. But, they will approach the estimated $7.5 million, which we projected for in our appropriations.

Mr. PLAPINGER. You reduced your hire cost but you have to replace vehicles.

Mr. KIEB. Well, we do replace vehicles. But in our vehicle account, our operating account-I don't have those figures here; but we can get them for the committee-we have still not substantially increased that operating cost.

Mr. PLAPINGER. That is right. What I am getting at is you might save money on hire, by cutting down your hire; but you have to replace those vehicles, so you don't have a savings of $13 million.

Mr. KIEB. What you say is we are operating more trucks.
Mr. PLAPINGER. T'he Government-owned trucks, that is right.

Mr. KIEB. We will get for you, and will get it for you this afternoon, the summary of our whole motor veliicle account, which will show a net saving in place of increased trucks.

Mr. MOLLOHAN. Certainly in evaluating this experiment and the result of it, you have not accepted that because you reduce your vehicle hire account by an estimated $81,2 million, you saved $81/2 million. You don't accept that. Certainly, you run some counterwise

as I

projects on increased costs in other departments to replacement. _So, what we are interested in is what is your overall savings to the Post Office Department?

Mr. KIEB. Let me give it to you in motor-vehicle operations. And, the Bureau of Operations and the industrial engineers can reflect on the use of personnel that handle the mail.

The fact of the matter is that we reduced our average cost of operating a truck by 30 percent because we are using lighter trucks. We are running 25,000 trucks against 18,000 trucks.

Mr. MOLLOHAN. That is right. It costs money to run 7,000 more trucks.

Mr. KIEB. That is right. But, we have increased our total number of trucks by the difference between 18 and 25, which is approximately one-third. And, we reduced the cost of operating each truck on the average by about 30 percent. So, that we have about standoff on those two costs. And, at the same time we have reduced our motorvehicle hire account by these figures.

Mr. MEADER. Mr. Kieb, I notice on page 5 of your statement under item A: Results, you give the operating costs of 17.3 cents per mile, excluding depreciation, and other fixed charges in 1953. In the next paragraph you give the 7 cents per mile costs. And, then, you have a cost including depreciation and fixed charges of 12 or 13 cents. Now, why didn't you have a similar figure in the first paragraph?

Ár. KIEB. In paragraph A-
Mr. MEADER. What was the depreciation and other fixed charges ?
Mr. KIEB. They were not calculated in those years.

In paragraph A, the cost of operating the fleet was 17.3 cents. Now, in paragraph B on a comparable basis to the 17.3, we reduced the cost to about 7 cents per mile. Then we added a charge which had never before been charged against the operation of our motor vehicles in our cost accounting system, for depreciation and fixed charges.

Mr. MEADER. You didn't have the figures in 1953!
Mr. KIEB. That is correct.
Mr. MEADER. And, you have made no estimates?
Mr. KIEB. No. The 7 cents is comparable to 17.3.
They are the comparable figures. See, I say on a comparable basis.
Mr. MEADER. Yes. Thank you.

Mr. MOLLOHAN. Mr. Kieb, can you give us a figure of savings which in your studies and your views and in your reviews and determinations you have reached after reconciling the increased costs in one department with the savings in another department? I don't think it is at all clear to say in—and certainly, it isn't revealing to say that we have reduced our vehicle hire account $812 million.

Mr. MEADER. When you have added 7.000 trucks to your ownership.

Mr. Kies. The eight and a half is not accurate. It is a reduction in our vehicle hire account from 13.5 down to

Mr. MOLLOHAN. I certainly don't accept the projection. I am sure you don't accept it either.

Mr. KIEB. We take the $8 million reduction in the vehicle hire account. And then we can take the increased cost of operating 25,000 trucks as against 18, although we are still using only the 85,000 gross number of vehicles. "You see, we haven't increased the gross number of vehicles.

Mr. MOLLOHAN. I know that.

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