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Mr. KIEB. So that today-back in these days—
Mr. KIEB. No, I am trying to explain our figures to you so you will understand.
Mr. MOLLOHAN. Certainly, you came in here this morning and knew the purpose of this hearing. You have several men from here, from the Post Office Department. I suppose these men are from the Post Office Department. Certainly, your industrial relations or yourwhatever your-your industrial engineering department is represented here, aren't they?
Mr. KIEB. Yes.
Mr. MOLLOHAN. Well, isn't there somebody here to answer these questions?
Mr. KIEB. Let's stick to these figures because I think they prove the point.
Mr. MOLLOHAN. Well, let's get to it.
Mr. KIEB. You have a reduction in vehicle hire costs of about 81/2 million.
Mr. MOLLOHAN. Yes, that is the only thing that we have heard.
Mr. KIEB. We are still using the same total number of trucks of 85,000. But, we have increased the Government-owned fleet from 18,000 to 25,000.
Mr. MOLLOHAN. That is right.
Mr. KIEB. So that in our Government-owned fleet costs of operations we have an additional 7,000 vehicles. Now, we have reduced those on an average cost by 30 cents. I do not have those figures here. I know they are not in the room. And I will get them for you; because it will illustrate to you that the total cost of operating our vehicle hire account as stated here and the cost of operating the Government-owned fleet will show a substantial reduction.
Mr. MEADER. Won't it cost you at least $812 million to operate 7,000 trucks?
Mr. KIEB. No.
Mr. MOLLOHAN. It will cost you $812 million to buy them to start with.
Mr. KIEB. That is right.
Mr. YOUNGER. Mr. Chairman, if I gather this correctly, if you will take the total cost to the Government of the hire, for-hire trucks and cost of operating the trucks operating in 1953, the owned trucks and the for-hire trucks as X dollars; now the total cost of for-hire trucks and cost of operating the Government-operated trucks is today Y dollars. The difference between X and Y is today $8,000 as I get the figure. And, they now have 7,000 trucks that they own that they rented before. But, the 7,000 additional trucks are operated at the exact same cost as they operated the 18,000 before; now isn't that correct?
Mr. KIEB. Not exactly.
Mr. KIEB. Mr. Chairman, Congressman Younger is correct except that you can't take it down to the exact dollar figure. But it will be close in percentages.
Mr. PLAPINGER. Did you say there was a standoff, that there probably wasn't any savings in dollars per vehicle?
Mr. KIEB. I am adding another factor which you must understand.
In the meantime the Bureau of Operations has increased our number of routes. We have increased our number of deliveries by truck, We have extended the use of our trucks and services.
Mr. PLAPINGER. But in dollars it is virtually the same.
Mr. KIEB. But the operations of the truck fleet costwise is virtually the same; that is correct.
Mr. GOFF. Let me see if I understand this correctly.
Then, in other words, the $8,500,000 that you have been paying out for hire is a clear profit because one offsets the other in the cost of the fleet.
Mr. KIEB. And has given us the money to extend our services without adding to our budget, yes.
Mr. GOFF. And, there is the saving there because you're not paying this $8,500,000 for hire vehicles !
Mr. KIEB. That is right.
Mr. GOFF. You have got the same size fleet and the increased costs of the fleet
Mr. KIEB. Larger fleet.
Mr. GOFF. The operation is the same. That is what he testified to. You missed that in his statement.
Mr. PLAPINGER. Certainly, you are paying depreciation here where you weren't paying depreciation for hire.
Mr. KIEB. Just a minute. Depreciation has never been considered as a cost in the operation of the Government-owned fleet until we put in a cost accounting system.
Mr. PLAPINGER. It is considered now?
Mr. KIEB. The application of fixed charges which is the administrative overhead of the garages, and Mr. Schlegel's salaries are included in those fixed charges. They have never been applied against trucks until we put this cost accounting system in. Now, we have a basis for comparison that—a sound basis of comparison, that we can carry on from year to year. In the meantime, the only figure we can develop for comparative costs is the 17.3 cents per mile. And we know that depreciation and fixed charges were not included in that. Therefore, when I want to compare the 17.3 cents, which is the only figure we have had in our bookkeeping system, the only thing I can compare it with is the 7 cents.
Mr. MOLLOHAN. Now, let me just get myself straightened out. I hope it will be helpful to everybody else, but I know it will be helpful to me. We have here in 1954 a cost for vehicle hire of 131,2 million dollars. Now, the only other figure in relation to that that we have is a projected figure going into 1957. Now, your 30 percent that you are talking about, that is a positive figure. You have arrived at that by an analysis of your costs?
Mr. KIEB. Yes.
Mr. MOLLOHAN. Let's be a little realistic about this, and not too ambitious in trying to project a favorable picture into the future. Don't you have a comparable, positive figure for a like period insofar as vehicle hire costs? You said here that we have a 30 percent savings. And I suppose you mean for the immediate past fiscal year.
Mr. KIEB. No. When I say a 30-percent savings, I am talking about the average cost per mile that has
been reduced by 30 percent. The average cost per mìle of the entire Government-owned fleet.
Mr. MOLLOHAN. Yes. I understand that. But, haven't you reduced—haven't you reduced that to dollars and cents in the overall cost of operations?
Mr. KIEB. I do it here when I compare 17.3 cents in 1953 with 7 cents in 1956.
Mr. MOLLOHAN. Mr. Kieb, just for me, now you understand I may be a little bit more difficult to explain this to than some of the other people—but we are talking about a savings of $81,2 million in vehicle ħire. But, we have to go into 1957 to find it.
Mr. KIEB. I just testified, Mr. Congressman, that in 1956, with the trucks that have been delivered to date and I say also that counting 25,000 trucks in the fleet, counting local procurement on which we have not yet taken delivery, I point out that in 1956 our budgeted estimate was $712 million. Those figures are not yet in for the year.
Mr. MOLLOHAN. $712 million?
Mr. MOLLOHAN. In other words, we had a saving in 1956 of approxiinately, did you say seven and a half!
Mr. KIEB. That is correct.
Mr. KIEB. That is correct; but with the trucks now on procurement and obligated, upon which delivery will be taken, which will be used to replace hire vehicles, our 1957 figure will be reduced to $5 million. Now, the procurement is already in.
Mr. MOLLOHAN. I realize that.
Mr. MOLLOHAN. The only thing you can put before us now on a actual comparative basis with the end result of dollars and centsI am not talking about cents per mile; I am talking about the total cost of operating all the vehicles owned by the Department-would be the figures you have for fiscal year 1956; is that not true?
Mr. Kies. Those are the only actual figures we can give you. We can't give you 1956 yet. We will give it to you in another month, perhaps. Because 1956 ends in June. And, all we can tell you is that on our $71/2 million budgeted figure we are going to come close to that one.
Mr. MOLLOHAN. But you can tell me that you are having a $6 million saving in vehicle hire in 1956?
Mr. Kies. We have a projected saving of the difference between $13.5 million and $5 million in the fiscal year 1957 as a result of these experments and these vehicles that have been procured.
Mr. MOLLOHAN. Well, of course, that is projected. A while ago we were talking about $41 million that the Heller Associates had projected as a saving on the basis of this operation. I think you were the first to say that you didn't expect to realize that $41 million savings.
Mr. KIEB. That was a potential savings. But just to show you the validity of what I tell you here, this is what we asked Congress to limit our spending to. And, Congress has agreed to that. So, that we are committed to this.
Mr. MOLLOHAN. Well, I appreciate that.
Mr. KIEB. I mean we believe in it—we believe it is sound enough to come to Congress and say that is all we need for this purpose.
Mr. MOLLOHAN. I am not trying at all, Mr. Kieb, to confuse this record. It just seems to me that we ought to have something very positive in relation to this $6 million saving of vehicle hire if we are going to accept that that is a real figure. Then you ought to have a comparable figure for a similar period on your actual costs of the vehicles owned by the Government for this period over 1954; because those are the periods that we are concerned with.
Mr. KIEB. I will be pleased to submit that to you. I will be pleased to get it for you.
Mr. MOLLOHAN. That will be this period here over 1954?
Mr. MOLLOHAN. You are using year 1954 here for your vehicle hire comparisons, and I am perfectly willing to accept those.
Mr. KIEB. All right; so am I.
Mr. MOLLOHAN. That is 1954 over the current period or the most current period, or that period which you are using as the $6 million for vehicle hiré It seems that would give us a very positive picture of what we have done.
Mr. KIEB. That is correct. And, it will show that we are just about, despite the increase in trucks, and despite the many route extensions, we have been able to save on our vehicle hire account enough to pay for those vehicle route extensions and to still hold our fleet costs about
Mr. MOLLOHAN. Let me make it clear here that I am very hopeful that—that the Heller projects have not been overly optimistic. I hope we save the $41 million.
Mr. KIEB. I think in every one of these instances the big challenge is to try to capture such potential savings that come out of experimental work.
Mr. MOLLOHAN. Let me get back-
But, those were the figures of Heller Associates, who have been reliable and who have been of great assistance to us, believe me. They have been of great help to us. They have projected this and it is in the nature of a challenge to us to do it, and we are making every effort to do it. We hope we will do it in many other areas as well.
Mr. MOLLOHAN. Mr. Kieb, let's get back to the conversations or the negotiations which were held between you and Heller and the other representatives of the Department.
Undoubtedly when GSA reported on the results of their invitations to bid, and you had Divco with $2,264 and International Harvester with $2,379 and Twin Coach with the $2,860 unit cost, you had some discussions as to whether or not the Divco unit could be made adaptable to this experiment; could be used.
Were representatives of Divco called into conference ?
Mr. MOLLOHAN. That left you with no alternative except to go with Twin Coach. I suppose you did the same with International Harvester?
Mr. KIEB. International Harvester could not meet specifications. That is right.
Mr. MOLLOHAN. And you developed that in a conference subsequent to the report from GSA?
Mr. KIEB. Yes.
Mr. MOLLOHAN. I, of course, know that on the record when they failed to meet the specification in their first bid
Mr. KIEB. I believe that was subsequent, sir.
Mr. MOLLOHAN. But, after the receipt of their bid and the receipt of the Divco—well, after the receipt of all of the bids and the report from GSA you had further conferences with Divco, International Harvester, and Twin Coach?
Mr. KIEB. I recall specifically Divco and Twin Coach. I personally did not have any conversations with International Harvester.
But, Mr. Kallio—Mr. O'Donovan, do you recall those ?
Mr. O'DONOVAN. No.
Mr. KALLIO. Their specifications were not, in accordance with our specifications.
Mr. MOLLOHAN. I appreciate that fact. That is self-evident in their response to the invitations to bid. But, did you discuss with them any inclinations or ability on their part to develop the sort of coach which you felt that you must have?
Mr. KIEB. That was self-evident on its face too, Mr. Congressman. Because they had been given a set of specifications to bid against. And, they bid the nearest thing they could give us.
And, that is all they could give us. Because we asked them for a certain set of specifications.
Mr. MOLLOHAN. That isn't necessarily self-evident. Because what you are going into now is a negotiated proposition. I don't know what the changes were. But, there is a 600 unit cost-$601 unit cost difference between the Divco and the Marco, which makes an end result of $150,250 overall costs of 250 units. So, whether or not Divco could make
Divco could make any modification or any changes which would make their unit adaptable to your purpose.
Mr. KIEB. I recall that Divco- I personally discussed with Divcospecifiations that were built for a different purpose. It is a more or less standard in the milk industry to carry a very heavy load on shorthaul and with many stops and starts. And, it is built to carry that much heavier load. Its operating cost is higher. It is a lot more weight to carry around for the truck. Divco could not meet the specifications. They withdrew their bid.
Mr. MOLLOHAN. That was after the report from GSA?
Mr. MOLLOHAN. But, don't you recall a similar conversation or discussion with International Harvester representatives?
Mr. KIEB. I do not.
Mr. MOLLOHAN. Is it customary, Mr. Kieb, in the Post Office Department in handling contracts by negotiations to maintain some formal written report of those negotiations?