[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
ISSUES FACING CIVILIAN AND POSTAL SERVICE VEHICLE FLEET PROCUREMENT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
GOVERNMENT OPERATIONS
OF THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
MAY 21, 2015
__________
Serial No. 114-28
__________
Printed for the use of the Committee on Oversight and Government Reform
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U.S. GOVERNMENT PUBLISHING OFFICE
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
JASON CHAFFETZ, Utah, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, Jr., Tennessee CAROLYN B. MALONEY, New York
JIM JORDAN, Ohio ELEANOR HOLMES NORTON, District of
TIM WALBERG, Michigan Columbia
JUSTIN AMASH, Michigan WM. LACY CLAY, Missouri
PAUL A. GOSAR, Arizona STEPHEN F. LYNCH, Massachusetts
SCOTT DesJARLAIS, Tennessee JIM COOPER, Tennessee
TREY GOWDY, South Carolina GERALD E. CONNOLLY, Virginia
BLAKE FARENTHOLD, Texas MATT CARTWRIGHT, Pennsylvania
CYNTHIA M. LUMMIS, Wyoming TAMMY DUCKWORTH, Illinois
THOMAS MASSIE, Kentucky ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina BRENDA L. LAWRENCE, Michigan
RON DeSANTIS, Florida TED LIEU, California
MICK MULVANEY, South Carolina BONNIE WATSON COLEMAN, New Jersey
KEN BUCK, Colorado STACEY E. PLASKETT, Virgin Islands
MARK WALKER, North Carolina MARK DeSAULNIER, California
ROD BLUM, Iowa BRENDAN F. BOYLE, Pennsylvania
JODY B. HICE, Georgia PETER WELCH, Vermont
STEVE RUSSELL, Oklahoma MICHELLE LUJAN GRISHAM, New Mexico
EARL L. ``BUDDY'' CARTER, Georgia
GLENN GROTHMAN, Wisconsin
WILL HURD, Texas
GARY J. PALMER, Alabama
Sean McLaughlin, Staff Director
David Rapallo, Minority Staff Director
Jeffrey Post, Deputy Staff Director of the Subcommittee on Government
Operations
Alexa Armstrong, Professional Staff Member
Julie Dunne, Senior Counsel
Melissa Beaumont, Clerk
Subcommittee on Government Operations
MARK MEADOWS, North Carolina, Chairman
JIM JORDAN, Ohio GERALD E. CONNOLLY, Virginia,
TIM WALBERG, Michigan, Vice Chair Ranking Minority Member
TREY GOWDY, South Carolina CAROLYN B. MALONEY, New York
THOMAS MASSIE, Kentucky ELEANOR HOLMES NORTON, District of
MICK MULVANEY, South Carolina Columbia
KEN BUCK, Colorado WM. LACY CLAY, Missouri
EARL L. ``BUDDY'' CARTER, Georgia STACEY E. PLASKETT, Virgin Islands
GLENN GROTHMAN, Wisconsin STEPHEN F. LYNCH, Massachusetts
C O N T E N T S
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Page
Hearing held on May 21, 2015..................................... 1
WITNESSES
Mr. Joseph Corbett, Chief Financial Officer and Executive Vice
President, U.S. Postal Service
Oral Statement............................................... 3
Written Statement............................................ 5
Mr. William Toth, Jr., Director, Office of Motor Vehicle
Management, General Services Administration
Oral Statement............................................... 9
Written Statement............................................ 11
Ms. Kate M. Viganeau, Director of Professional Development, NAFA
Fleet Management Association
Oral Statement............................................... 16
Written Statement............................................ 18
Mr. Lori Rectanus, Director, Physical Infrastructure Issues, U.S.
Government Accountability Office
Oral Statement............................................... 25
Written Statement............................................ 27
APPENDIX
Responses from Mr. Joseph Corbett, USPS to questions for the
record from Chairman Mark Meadows.............................. 62
ISSUES FACING CIVILIAN AND POSTAL SERVICE VEHICLE FLEET PROCUREMENT
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Thursday, May 21, 2015
House of Representatives,
Subcommittee on Government Operations,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 10:05 a.m., in
Room 2154, Rayburn House Office Building, Hon. Mark Meadows
[chairman of the subcommittee] presiding.
Present: Representatives Meadows, Jordan, Walberg,
Mulvaney, Buck, Carter, Grothman, Connolly, Norton, Plaskett.
Also Present: Representatives Huffman and Lawrence.
Mr. Meadows. The Subcommittee on Government Operations will
come to order.
And, without objection, the chair is authorized to declare
a recess at any time.
The Federal Government spends more than $4 billion per year
on its 650,000-vehicle fleet. With a responsibility to deliver
more than 150 million addresses, 6 days a week, the Postal
Service relies on a fleet of nearly 200,000 vehicles to deliver
mail and parcels.
Even small changes in the fleet management practices can
save significant amounts of money. Private and public fleet
management best practices seem to support a rolling replacement
of vehicles as the most cost-effective strategy in the long
term. The goal of a rolling replacement strategy is to make
incremental improvements to a fleet so that technical, safety,
and energy-efficiency upgrades are made more frequently than
once every other decade or once every 20 years.
Additionally, technologies like telematics are enabling
organizations to better track vehicle use. The use of these
best practices and new technologies has already enabled the
government to save millions in costs, but there is still much
more to do. That is why it's puzzling to me in a recently
issued request for information, the Postal Service seems to
suggest that it has planned to eventually select one supplier
to build 180,000 identical new vehicles over the next 5 to 7
years, putting essentially all their eggs in one basket, so to
speak.
So to help put this in perspective. The UPS operates the
second largest commercial fleet in the Nation with about 90,000
vehicles. And despite a fleet of less than half the size of the
Postal Service, UPS is able to successfully secure favorable
pricing terms using a rolling replacement model, despite only
procuring less than 10,000 vehicles per year.
By any measure, the Postal Service must begin to replace
its vehicle fleet. I think we all understand that. The Postal
Service has 140,000 older models, right-hand drive delivery
vehicles with an average age of about 23 years, and at the end
of--most of them and certainly are at the end of their useful
service life.
According to the Postal Service inspector general, 22
percent of these delivery vehicles require annual maintenance
worth about $8,300 or more. A new fleet is expected to cost in
excess of $5.4 billion if the Postal Service lacks the
liquidity to fully fund this cost.
Even without a new vehicle fleet, the agency projects its
cash flow position to grow worse over the next several years.
And so another hurdle is the diversity of the Postal Service's
business. Some mail delivery routes are hundreds of miles long,
others less than 10 miles, some routes have dozens of packages
per day, while others only a few. Does this mean that it makes
sense to have multiple new vehicles, or does volume pricing
make one vehicle the better choice?
I'm pleased to see that Mr. Corbett's testimony suggests a
greater sense of flexibility, Mr. Corbett, on the part of the
Postal Service. I appreciate that.
This flexibility, as well as an increased reliance on the
lifecycle cost analysis will be vital in ensuring that the
Postal Service makes the best long-term choices for its fleet.
I hope that today we will be able to hear the lessons that
the private and public sector have learned about fleet
management and how those lessons can be applied to achieve
incremental improvements through the GSA and transformational
improvements for the Postal Service.
Finally, I would like to thank the witnesses for their time
today. I look forward to your testimony.
Mr. Meadows. And as we are about to embark, what I'm going
to do is reserve the time for the gentleman from Virginia, the
ranking member, for his opening statement when he gets here.
I would ask unanimous consent that our colleagues Mr.
Huffman and Ms. Lawrence be allowed to fully participate in
today's hearing.
Without objection, so ordered.
I will hold the record open for 5 legislative days for any
members who would like to submit a written statement. We will
now recognize our panel of witnesses.
I'm pleased to welcome Mr. Joe Corbett, Chief Financial
Officer of the United States Postal Service, welcome; Mr.
William Toth, Jr., the Director of the Office of Motor Vehicle
Management at the GSA or General Services Administration; and
Ms. Kate Vigneau, director of professional development at NAFA
Fleet Management Association; and Ms. Lori Rectanus, Director
of Physical Infrastructure Issues at the GAO as well.
Welcome to you all.
Pursuant to committee rules, all witnesses will be sworn in
before they testify. So if you would please rise and raise your
right hand.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
Let the record reflect that all the witnesses have answered
in the affirmative.
And thank you. You may be seated.
In order to allow time for discussion, please limit your
testimony, your oral testimony to 5 minutes. Your entire
written statement will be made part of the record.
So I will go ahead and recognize our first witness, Mr.
Corbett, for 5 minutes.
WITNESS STATEMENTS
STATEMENT OF JOSEPH CORBETT
Mr. Corbett. Good morning, Chairman Meadows, and Members of
the Subcommittee, and thank you for calling this hearing.
Again, my name is Joe Corbett, and I'm Chief Financial Officer
and Executive Vice President of the Postal Service. I'm pleased
to be here today to discuss our next-generation delivery
vehicle acquisition program and to explain why upgrading the
vehicle fleet is considered an investment necessary to the
organization's future.
We currently maintain a diverse fleet of vehicles including
long-life vehicles as well as delivery vans and light trucks.
Going forward, the Postal Service continues to require vehicles
capable of operating in a full range of climates, regions, and
operational conditions.
The planned useful life of the existing long-life vehicles
when acquired was 24 years. The fleet has continued to provide
needed delivery service but at very high maintenance costs and
increasing risk of part shortages and structural fatigue.
Replacing the aging delivery fleet, which is on average over
23-years-old, will not only help to reduce operating and repair
costs; it will also improve delivery operations efficiencies.
In fact, both the Postal Regulatory Commission and the GAO
have recognized our immediate need to invest in a new delivery
fleet. The goal of this acquisition program is to secure new
purpose-built, right-hand drive delivery vehicles that will
accommodate a diverse mail mix, enhance safety, improve
service, reduce emissions, and produce savings.
Letter carriers and vehicle maintenance employees were
asked to submit their ideas for improved vehicle features and
design, and feedback informed the proposed specifications.
Additionally, a comprehensive third-party requirements analysis
was conducted, and we solicited input from perspective
suppliers through the request for information process.
Specifications were updated based on vehicle industry feedback.
We arrived at a general layout which would meet the
delivery demands on 99 percent of our existing routes. However,
our business and available vehicle technology are changing and
will continue to change. Our process is to designed to allow us
to remain flexible and to make adjustments as our needs evolve.
Prospective suppliers were required to submit their
qualifications and capabilities to develop vehicle prototypes
and to produce, deliver and provide for national deployment up
to 180,000 vehicles.
The Postal Service pre-qualified suppliers, including both
traditional and alternative fuel manufacturers, who responded
to the open request for information. Pre-qualified suppliers
are eligible to receive the request for proposal for a
competitive prototype development.
We were inclusive in our process, pre-qualifying firms with
a range of power train expertise in order to evaluate wide
product offerings from the market. The list of pre-qualified
suppliers includes firms that specialize in unleaded fuel,
electric, compressed natural gas, flex-fuel and hybrid
vehicles.
We plan to release our request for proposal for the
prototypes in the near future. The design, build, and testing
of vehicle prototypes will take over 2 years to complete. A
second request for proposal planned for 2017 will solicit our
production requirements and explore our financing options. We
remain open to and encourage innovative designs and the
potential for a mixed delivery-vehicle fleet.
While economies of scale and operational benefits
associated with a large standardized fleet point toward the
selection of only one supplier. We remain open to all
possibilities. Also, as we finalize the production
requirements, we are open to considering leasing or other
financing proposals. Our business case analysis will address
and evaluate the best value for the Postal Service relative to
all aspects of the program.
Questions regarding our decision to pursue a new fleet,
given our finance challenges, continue to surface. We believe
the correct question is, how can we afford not to make this
investment as we fight to ensure that we remain viable and
fully able to perform our obligation to provide prompt,
reliable, and efficient Postal Services for the Nation? Of
course, given we are a self-funded organization we must be
fiscally responsible. Therefore, the lifecycle operating costs
of the new fleet are an important consideration.
Thank you, Mr. Chairman, for this opportunity to testify.
I welcome any questions that you and committee members may
have.
[Prepared statement of Mr. Corbett follows:]
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Mr. Meadows. Thank you, Mr. Corbett.
Mr. Toth.
STATEMENT OF WILLIAM TOTH, JR.
Mr. Toth. Good morning, Chairman Meadows, Ranking Member
Connolly, and members of the subcommittee. I appreciate the
opportunity to speak with you today regarding the General
Services Administration's role----
Mr. Meadows. Is your mic on?
Mr. Toth. It says----
Mr. Meadows. Move it a little closer to you then, pull the
whole box there.
Mr. Toth. How's that?
Mr. Meadows. Ah.
Mr. Toth. My name is Bill Toth and I am the Director of the
GSA's Office of Motor Vehicle Management. I've been the
Director for the past 8 years and with GSA for 25 years. The
mission of GSA's Office of Motor Vehicle Management is to
deliver safe, reliable, and low-cost vehicle solutions that
allow Federal agencies to effectively and efficiently meet
their missions.
The Federal fleet can be broken down into three categories
of roughly equal size: One-third is owned by GSA and leased to
eligible entities; a second third is owned and maintained by
the United States Postal Service; and the final third is owned
and maintained by non-Postal Service Federal agencies.
GSA's status as a mandatory source for vehicle purchasing,
with the exception of the Postal Service, guarantees that all
Federal agencies benefit from the government's buying power
inherent in having a single strategically sourced point of
purchase. In fact, in fiscal year 2014, GSA's negotiated
discount on these vehicles averaged 17.6 percent below dealer
invoice. Given GSA's fiscal year 2014 procurement of 58,050
vehicles, this discount saved the American taxpayer an
estimated $315 million.
As a full-service vehicle leasing option for Federal
agencies GSA drives down costs for Federal customers by
providing end-to-end fleet management services at an all-
inclusive rate. The leasing program has demonstrated savings
year after year by leveraging the government's buying power and
consolidating redundant fleet management functions duplicated
in many different agencies.
GSA's motor vehicle program provides customers with a
comprehensive fleet solution that includes vehicle acquisition;
maintenance and accident management; a fleet services car with
a dedicated waste, fraud and abuse protection team; and many
other solutions as outlined in my written testimony.
GSA fleet leasing supports over 15,000 unique customers who
collectively lease over 204,000 vehicles. To demonstrate our
commitment to provide customers with the best possible value,
GSA decreased its leasing rates over the past 2 fiscal years by
1 percent and 2 percent respectively.
In addition to the leveraged buying power and
governmentwide administrative cost savings inherent in a
centralized fleet management program, GSA prioritizes helping
customers make smart decisions about the composition and size
of their leased fleet.
While GSA is proud of the progress it has helped customers
make in optimizing a fleet size and composition, Federal
agencies themselves are empowered to analyze their mission
needs and, accordingly, make the final decision about how many
vehicles they need to successfully fill the mission tasked to
them by Congress. Ultimately, authority for vehicle purchasing
and operating decisions remain with each Federal agency.
GSA partners with its customer agencies to help them
stretch limited resources and maximize their mission impact.
Each year, GSA replaces eligible vehicles in its leased fleet
with new, safe, fuel-efficient vehicles. Vehicles added to the
lease fleet in fiscal year 2014 had an average of 20.5 percent
higher miles per gallon rating than the vehicles they replaced.
In addition, GSA launched hybrid and electric initiatives
and to date has funded over 7,000 hybrid sedans and 300
electric vehicles. Two other unique solutions available to all
Federal customers include GSA's short-term rental program for
vehicle and equipment rentals and GSA's dispatch and
reservation module, which is an electronic car-sharing program
for scheduling vehicle reservations and generating utilization
reports.
As a motor vehicle leasing provider, GSA assumes
responsibility for providing solutions that save the American
taxpayer money. Our strategy for meeting these goals involves
maintaining vehicles in superior condition, thus decreasing the
need for costly maintenance and repair and vehicle down time.
GSA replaces vehicles on schedules designed to maintain a
safe, modern, dependable, and fuel-efficient fleet while taking
advantage of manufacturer warranties to minimize maintenance
costs. Used vehicles are actively remarketed to the public to
ensure highest possible proceeds are captured upon the sale of
each vehicle. Through these and other solutions outlined in my
written testimony GSA is able to reduce the need for
administrative overhead across the government by centralizing
operational and administrative fleet support functions.
We also offer the opportunity to consolidate agency-owned
vehicles and commercially leased vehicle requirements into the
GSA fleet to reduce governmentwide costs and redundancies.
I appreciate your support of GSA's concerted efforts to
drive continuous improvements in the Federal fleet and your
partnership in delivering best value to the American taxpayer.
Thank you for the opportunity to testify today. I look forward
to answering your questions.
Thank you.
[Prepared statement of Mr. Toth follows:]
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Mr. Meadows. Thank you, Mr. Toth.
Ms. Vigneau.
STATEMENT OF KATE M. VIGNEAU
Ms. Vigneau. Good morning, Chairman Meadows, and
subcommittee members. My name is Katherine Vigneau. And I'll be
testifying on behalf the NAFA Fleet Management Association,
which is the world's primary not-for-profit association for
professionals who manage fleets of all types of vehicles around
the globe.
I'm going to concentrate my testimony today in five areas,
lifecycle costs, long-term capital replacement planning,
centralization of fleet management functions, the use of the
vehicle selector lists and alternate fuels and sustainability.
So, first, lifecycle cost analysis, which we have already
heard mentioned from the chairman. Vehicles and equipment
should be replaced at various points in their service lives
depending on vehicle type, nature, and intensity of use and a
variety of other factors.
The optimal point at which to replace any vehicle asset
from an economic perspective is when the total cost of owning
that asset is at its lowest. That is when the combined cost of
ownership or depreciation, capital costs, and operating costs,
particularly maintenance are at a minimum just before those
costs begin to increase significantly.
So these lifecycle costs analysis should be used not only
to choose the optimal replacement point of a vehicle but also
for lease-versus-buy analysis, for alternate-fuels analysis,
and for any decision whether to go with a custom or off-the-
shelf solution.
In terms of capital replacement planning, all fleets should
create multiple-year replacement vehicle capital forecasts.
And, from this, they should have capital budget approved and
centralized capital funds created solely for vehicle
acquisition. Best practice in replacement planning is to smooth
the peaks and valleys of fleet replacement so there is a
predictable annual requirement allocated for vehicle
replacement.
In terms of centralization, a dominant trend over the past
25 years is the consolidation of fleet management functions
into a centralized service-like organization. This move toward
centralization in the industry can be traced to the increasing
cost and complexity of fleet management as well as an increase
in emphasis on savings and efficiency. Not only that, there is
a recognition that fleet management requires training and
expertise to do well, and there are also liability concerns.
Vehicle selectors, organizations should use a formal
process to decide what type of vehicle best meets all
requirements. In order to avoid a lengthy selection process for
every vehicle replacement decision, they should have an
approved selector list of frequently purchased assets.
Finally, the fleet industry in general has a unique to make
considerable environmental impact. In fact, NAFA has recently
released a sustainable fleet accreditation program to track
improvements in environmental impact for individual
organizations' fleets. But sustainability does not mean only
alternative fuel sources, it can also be achieved through a
host of other initiatives, including purchasing smaller
vehicles, reducing speed, better route planning, smaller engine
sizes, and driver behavior encouraging ecofriendly driving. In
all alternative-fuel decisions the cost-benefit analysis using
total cost or lifecycle costs should always be undertaken.
In looking at the OIG report and a variety of public
documents available, lifecycle costs analysis has definitely
been used by the Postal Service to demonstrate that they are
operating costs are rising significantly. This methodology
should further be extended to analyze custom versus commercial
purchase options and alternate fuel options.
The OIG report also mentions weaknesses in long-term
replacement strategies. The strategy should envision a smooth
replacement cycle with regular predictable capital
requirements. This should also look to provide a long-term
solution to avoid being in this position we are in now at the
end of these vehicles' lifecycle in 25 or 30 years.
Fleet management should be centralized. Individuals
responsible should be trained in best practice. A selector list
should be built that considers lifecycle costs as well as
safety and the environment, and finally, alternative fuels and
other sustainable initiatives should be considered in the
acquisition decision and throughout the life of the vehicle.
Thank you for your attention. That concludes my testimony
today.
[Prepared statement of Ms. Vigneau follows:]
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Mr. Meadows. Thank you, Ms. Vigneau.
Ms. Rectanus, you are recognized for 5 minutes.
STATEMENT OF LORI RECTANUS
Ms. Rectanus. Thank you.
Chairman Meadows and members of the subcommittee, I'm
pleased to be here today to discuss Federal fleet management
practices.
As the chairman noted, fleet investment is significant.
Given this investment, there's continued focus on making sure
Federal fleets are managed effectively. In that respect, in
2011 the President issued a memo that called for executive
agencies to determine their optimal fleet size and achieve
those targets by this year.
Today, I will highlight our past work that identified
leading practices for effective fleet management as well as
some specific challenges the Postal Service has faced for
replacing its aging delivery vehicles. The first leading
practice entails having a comprehensive fleet management
information system that allows managers to monitor fleet
performance. Among other information, this system should
include data on direct costs, such as fuel, repairs and vehicle
depreciation, as well as indirect costs, such as personnel,
office supplies, building rental and utilities. The system
should also include utilization information, such as vehicle
milage or whatever metric the agency is using to justify the
vehicle.
The second leading practice involves lifecycle costs to
inform procurement decisions. Lifecycle analysis captures
vehicle costs from the beginning to the end of vehicle
ownership and can help agencies make the best investment
decisions. For example, lifecycle analysis can show if an
agency can extend the use of a vehicle without causing
operational problems or whether it would be better to replace
that vehicle, such as when maintenance costs begin to outweigh
the retail value. It could also show whether an agency should
own or lease the vehicle.
The third leading practice involves optimizing fleet size
and composition, which means reducing a fleet size to the
fewest number of the right type of vehicles needed to meet the
agency's mission. To support this, GSA recommended that
agencies establish specific utilization criteria for each
vehicle and assess actual utilization against that criteria.
Through this process, agencies can determine the optimal number
and type of vehicles they need and identify underutilized
vehicles. One of the ways agencies can get the needed
information is by using telematics, which can monitor vehicle
locations, idle time, and miles traveled, among other things.
For example, when installed in a vehicle, telematics can show
that a vehicle is being driven fewer miles each year than the
criteria would require, thus allowing the manager to
potentially eliminate that vehicle.
Turning to the Postal Service, as we reported in 2011, the
Postal Service's delivery fleet was aging well beyond its 24-
year expected operational life. However, the negative financial
condition for the Postal Service prevented it from replacing or
refurbishing those vehicles.
The Postal Service selected not to replace its fleet as
that would cost about $5 billion. It also chose not refurbished
the vehicles, which would have cost about $3.5 billion,
although that may have extended vehicle life by 15 years.
Instead, the agency chose to focus on maintenance while
planning how to address its longer term needs.
While understandable, this approach has had tradeoffs. For
example, there have been high yearly maintenance costs, about
$750 million at the time of our review, and it is about $1
billion today. There have also been operational costs such as
overtime costs when vehicles broke down and needed to be
repaired. We recommended that the Postal Service develop a
strategy that addressed its fleet needs in light of operational
and legal requirements.
As noted, earlier this year, the Postal Service issued a
request for information for its new-generation delivery
vehicle. For potential purchase of about 180,000 vehicles, the
Postal Service could spend between $4.5 billion and $6.3
billion. While we are encouraged to see this effort, it would
be critical for the Postal Service to conduct the necessary
work to ensure this investment is sound.
In summary, effective fleet management relies on a complete
and integrated information system, the use of lifecycle cost
analysis and appropriate decisions about fleet size and
composition. When these practices are done well, agencies can
make sound decisions about their fleets and provide assurance
that the fleets are meeting missions in the most cost-efficient
manner possible.
Chairman Meadows and Members of the subcommittee, this
concludes my prepared statement. I'm pleased to respond to any
questions.
[Prepared statement of Ms. Rectanus follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you so much.
Thank all of you for your testimony. I'd like to recognize
the gentleman from Virginia, the ranking member, Mr. Connolly,
for his opening remarks.
Mr. Connolly. Thank you, Mr. Chairman.
And forgive me for being late, but we had multiple
commitments at the same time, and I do not have the gift of bi-
location, though I pray for it. Thanks so much for calling this
hearing to examine the Postal Service's next-generation
delivery vehicle acquisition program. The United States Postal
Service owns and operates one of the largest vehicle fleets in
the country, approximately 190,000 vehicles collecting and
delivering mail across all 50 States.
Many Americans are no doubt familiar with the flagship USPS
delivery vehicle as the 142,000 Grumman long-life vehicles have
been ubiquitous in American communities since 1986. In many
respects, these custom vehicles have been a success, enabling
letter carriers to fulfill the universal service obligation at
what had been a reasonable cost, but that has to come to an
end.
As the USPS Office of Inspector General's recent audit on
fleet replacement warned, our analysis of the delivery vehicle
inventory and motorized routes showed the Postal Service could
sustain delivery operations nationwide until fiscal year 2017.
That's a year away.
As these vehicles begin to exceed their expected service
life, it's neither cost effective nor sustainable to operate
them without some kind of timetable in mind. I'm disappointed
that, under the prior leadership, the Postal Service repeatedly
delayed making critical long-term capital investments such as
replacing its antiquated fleet. In fact, I recall a
conversation spurred by Ruth Goldway, the head of the Postal
Regulatory Commission back in 2009, in which we sat down with
the Postmaster General to discuss the possible replacement of
the fleet by using some of the economic recovery money. We
could have looked at, at that time a budget of about $3 billion
to purchase hybrid and electric vehicles primarily. It could
have been a win-win. We could have infused the capital the
Postal Service didn't have. We could have helped jump-start the
electric car market here in the United States, and we could
have saved a lot on the cost Ms. Rectanus just talked about in
terms of maintenance.
And in what I'm afraid was a typical response to any kind
of innovative thought the Postmaster General Donahue at that
time said, ``Well, we don't want to go into that; we don't went
to be guinea pigs,'' even though the competition UPS and FedEx
are in fact exploring and using those vehicles. The Postal
Service hardly would have been a guinea pig, and we lost that
opportunity if we, in, fact, have had it. So now we have to
look at how we find the capital. One of the things we have to
do it seems to me in Congress if we're going to unlock some
capital is to get rid of the onerous prepayment burden that
Congress back in 2006 put on the Postal Service. It is a $5
billion sword of Damocles over our head. It is actually more
than that; the sword comes down actually. And only Congress can
really address that. We have a scoring problem that's a
technical problem, but a real one. But that prepayment makes no
sense. It's is terrible burden that is unique to the Postal
Service, and it distorts the ledger page. And, it actually is
an opportunity cost because we could figure out some capital
here to address in a more accelerated way than needs of the
Postal Service in terms of its vehicular fleet.
So I thank the witnesses for being here today. Mr.
Chairman, I know you share my concern about innovation and
making the Postal Service more efficient. This hearing is very
useful in that regard, and I look forward to working with you.
I'm and trying to find common ground for solutions. Thank you.
Mr. Meadows. I thank the gentleman.
The chair now recognizes the vice chair of the
subcommittee, the gentleman from Michigan, Mr. Walberg.
Mr. Walberg. Mr. Chairman, I thank the witnesses for being
here today. I always like to make a statement when we look at
the Postal Service, having experienced the lack of ability to
have good postal service at other places in the world, we have
become accustomed to a Postal Service that, to a great degree,
works. Our letters get there. Our packages get there--generally
not squashed unless you let the gorilla out for a day. But
generally it makes it there. We put checks, we put cash,
valuable things in the mail. It gets there.
We have postal workers that take their job seriously.
Surely my rural postal carrier takes it very seriously even
taking time--I hope I don't get her in trouble--for attending
to my mother, my elderly mother's needs at times in special
ways. So we appreciate that fact. I also know that Shirley
right now does not like the postal vehicle she has been
assigned. As a rural carrier, taking away her four-wheel-drive
vehicle that was her own vehicle and giving her that little
mini box truck that causes her to be stuck along the postal
routes many times these past several winters. So I appreciate
the fact you're looking at something new. How we get it done is
the question. That's why I am glad you are all here today.
Let me start with a question to Mr. Corbett. Initially, it
seemed like it was almost a done idea that you were going to go
for a purchase of 180,000 vehicles in one solid, put-together
purchase agreement. Now it appears that you have some deviation
from that to allow some flexibility and consideration. Why was
that, and why is that now?
Mr. Corbett. Thank you, Congressman.
The request for information that we put out in January
specked an initial vehicle that would accommodate up to almost
99 percent of our existing routes. It was never our intention
to go and buy 180,000 vehicles at that time, but we wanted to
make sure that whoever responded to the RFI and who was pre-
qualified to respond to the RFP had the ability to go up to the
maximum number of vehicles that we would----
Mr. Walberg. Even if ultimately it was leased, is that what
you're saying? That they could produce those vehicles, but if
there was a lease agreement or some other arrangement, you are
concerned that the vehicles would be theirs? Is that what
you're saying?
Mr. Corbett. Yes. Mostly on a production side, the ability
to actually have the facilities, the management and track
record to produce that number of vehicles, as that would be the
outside maximum number of vehicles we would purchase under this
procurement.
Mr. Walberg. Was there in that RFI, was there a request to
show that they could upgrade and keep up with technology during
the course of that production so that the starting vehicle may
have been the best the industry has to offer, but you would be
assured that in future years, there would be a vehicle that had
been upgraded technologically, electronically, power train, and
all of that?
Mr. Corbett. The RFI did not focus on that. The RFP, which
will go out for the prototype vehicles, will focus very much on
those aspects, the ability to continually keep pace with
technology and make the changes necessary.
Mr. Walberg. Okay.
Ms. Vigneau--close, I hope-- is it standard practice in the
private sector to use the same vehicle for every delivery
service throughout the country? And, in other words, do
companies look to match the type of vehicle with geographic
demands?
Ms. Vigneau. Yes.
Mr. Walberg. We'll go on then.
Ms. Vigneau. Certainly. You have to balance the benefits of
fleet standardization, which are many, which come from driver
training, mechanic training, spare parts delivery, overall cost
efficiency, with the unique demands and requirements. So what
you see a lot of large fleets doing is going for some kind of
common chassis, common vehicle type with variance that take
into account the need for four-wheel drive, for example, left
hand versus right hand. Working with the United Nations on
common specifications for agencies around the world. This is
exactly what they have pursued.
Mr. Walberg. So it doesn't necessarily mean that the one
vehicle would work in Boston or in Tipton, Michigan, but it
would have the variance that makes sense for the place that
it's at.
Ms. Vigneau. In a best case situation, that----
Mr. Walberg. Can most users of these vehicles, including
the Postal Service, could we assume that that would work, that
type of approach of having multiple platforms or a platform
with multiple uses and multiple component parts to make it
useful in varied areas, would work even for the Postal Service?
Ms. Vigneau. I have not looked in detail at the specific
requirements of the U.S. Postal Service so my testimony is
really on industry best practice. So I'd like to say that for
large fleets operating in North America, that that solution can
be very successful.
Mr. Walberg. Thank you.
My time has expired.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from Virginia, the
ranking member for 5 minutes of questioning.
Mr. Connolly. Mr. Chairman, some of my colleagues got here
before me, and I would like to defer to them.
Mr. Meadows. All right.
Well, the chair would recognize Ms. Plaskett from the
Virgin Islands.
Ms. Plaskett. Thank you. Thank you, Mr. Chairman.
Mr. Ranking Member, you're so gracious. Good morning
everyone.
Mr. Connolly. I just want a free trip to the Virgin
Islands.
Ms. Plaskett. Always, it is America's paradise, your
paradise.
Good morning, everyone. I heard a number of concerns about
the Postal Service's RFI, and I wanted to talk a little bit
with you, Mr. Corbett, right.
Mr. Corbett. Correct.
Ms. Plaskett. About the financial challenges that the
Postal Service is facing as a result of its aging fleet. You
talk a little bit about the extremely high maintenance cost to
a fleet at the Postal Service. Can you give us a rough estimate
on how much the Postal Service spends a year on maintenance and
repair costs?
Mr. Corbett. Yes, as it relates to our long-life vehicles,
the vehicles we are looking to replace, the annual maintenance
cost is approximately $700 million, and that has grown over
$200 million over the last 7 years. And the line is just like
this so that we've got to replace them quickly because the cost
continues to escalate.
Ms. Plaskett. Now the cost escalating, what is attributing
to that?
Mr. Corbett. As the vehicles gets older, of course, just
like your personal cars, they continue to break down. You have
to replace parts to keep them in service.
Ms. Plaskett. But this is not a cost that is incrementally
higher than it would have been 10 years ago or something, this
is just a cost because the size and the depth of the Postal
Service, that it continues to grow or is there something
happening that causes that number to change?
Mr. Corbett. Yes, the wear and tear on the vehicles
causes--has caused that number to continue to increase each
year, on a per-vehicle basis as well as fleet wide. As the
vehicles get older, they require more maintenance, more parts
being replaced, et cetera. That contributed to the $200 million
increase we've seen since 2007 in the overall cost.
Ms. Plaskett. I'm going to get back to that statement. But
you discussed supply problems and structural fatigue. What are
you referring to by that?
Mr. Corbett. In terms of continuing to maintain a fleet,
which is on average 23-years-old, it's becoming more expensive.
And to get suppliers to continue manufacturing those parts,
they know we are going to replace them and so they don't invest
in their own business to be able to manufacturer the parts that
we ideally need to maintain the older vehicles.
In terms of fatigue, we're really referring to not just
engine parts and transmission parts but also the fatigue in
terms of the actual frame of the vehicle and chassis of the
vehicle, which after running for over 100,000 miles can tend to
crack, and it is very difficult with an aluminum body to
actually fix that.
Ms. Plaskett. Okay, that's very interesting. You know, of
course, this goes back maybe to our investment in our roads as
well as our transportation and our infrastructure, which
probably causes a lot more wear and tear on the road--on the
vehicles themselves that are traversing the roads here in the
United States.
Do you find that there is more wear and tear on the--how do
you distribute that? My question is, is there more wear and
tear on those vehicles which are in rural areas as opposed to
those that are primarily within cities or urban areas or those
areas that have better roads, per se? How do you determine
which areas get that? And do you find--have you done in
analysis of the rural areas to determine whether or not that
wear and tear is more on them?
Mr. Corbett. I don't have that information broken down.
Ms. Plaskett. Do you think that's been done?
Mr. Corbett. Excuse me?
Ms. Plaskett. Do you think that has been done? You don't
have it with you, but do you know if this is an analysis which
has been done?
Mr. Corbett. I don't know, actually, but I am glad to look
into it and bring that back to the committee or to you.
Ms. Plaskett. Okay. And the reason I'm asking, of course,
it is for self information for my own district's information.
Because we are a rural area, our roads are not that great. But,
more importantly, we also have issues, environmental issues,
like salt blasts, which affects our vehicles probably at a
higher rate in terms of corrosion of the metals because of
those wonderful beaches and the sand and sea that we face that
we have structural damage. And, you know, before this hearing,
I went and called our postal unions and others, and we have not
had a purchase of a new vehicle in over 10 years.
And so I was wondering how you determine which areas--my
next question then would be which areas then get the new
vehicles, and how is that distribution done? What's the
analysis that's done in determining which areas get new
vehicles?
Mr. Corbett. We have not purchased new vehicles, new
delivery vehicles, for quite some time now. And so it actually
precedes when I joined the Postal Service. I actually couldn't
answer what the policy was.
Ms. Plaskett. Well how long have you been there? What does
that time mean?
Mr. Corbett. Six years.
Ms. Plaskett. Okay.
Mr. Corbett. So but what we're doing--and we agree with all
the experts here that it's been too long. We have to get on
with the purchase of new vehicles. We clearly have not done
this in a best-practice way. In 2009 alone, the Postal Service
lost $7 billion in revenue. We nearly ran out of cash, and we
clawed our way back to a point now where we can begin replacing
the vehicles.
In terms of the allocation of resources today, we're
essentially replacing the vehicles as they deteriorate and just
keeping them maintained. We're not putting new vehicles out--
right-hand-drive vehicles out-- anywhere in the country.
Mr. Meadows. I thank the gentlewoman for her questions.
The chair recognizes the gentleman from South Carolina, Mr.
Mulvaney.
Mr. Mulvaney. Mr. Chairman, thank you.
I thank all of the panelists for doing this. It is very
helpful. I'm going to follow up on a line of questioning that
Mr. Walberg started regarding, Mr. Corbett, the type of
vehicles. Did I hear you correctly say that you're going to put
out a request for proposal on a single type of vehicle that
would meet 99 percent of your needs? Are you going to
essentially going to have one standardized vehicle nationwide?
Mr. Corbett. No. Sorry, if that's what I said, I apologize.
Absolutely not. But we did put in the RFI very specific
specifications of a vehicle that would satisfy 99 percent of
our delivery routes.
Mr. Mulvaney. Okay, I think we're saying the same thing. So
I guess to Mr. Walberg's question, do you intend to use the
same vehicle in New York City as you do in suburban South
Carolina as you do for rural Colorado?
Mr. Corbett. We haven't made a determination. That will
be--the next phase will be a request for proposal for prototype
vehicles. We will encourage manufacturers to look at, for
example, four-wheel-drive versus two-wheel-drive vehicles. For
example, your flex-fuel, your CNG, hybrid vehicles, and
unleaded vehicles, et cetera.
Mr. Mulvaney. So you're open to the concept of a different
type of vehicle in different service areas.
Mr. Corbett. We absolutely are, yes.
Mr. Mulvaney. Okay.
And Ms. Vigneau mentioned, and I think it makes perfect
sense, that one of the things you analyze when you are making
these type of fleet decisions is the benefits of having a
specific use or a tailored use versus the cost savings that
come from a uniform platform, from an identical platform.
Let me ask you, Ms. Vigneau, you mentioned large fleets.
When you managing a large fleet, that's one of the things you
look at. How big is a typical--how big do you have to be to be
a large fleet?
Ms. Vigneau. NAFA has different bans that classifies fleets
as small fleet. First of all, to be a fleet, you have to have
more than five vehicles.
Mr. Mulvaney. Okay, we are pretty much beyond that.
Ms. Vigneau. We are definitely beyond that. I think our
large fleet designation is actually 500 vehicles or more.
Mr. Mulvaney. So I guess my point is this, and I would
encourage Mr. Corbett to consider this, as they look at the
weigh in the benefits of having a somewhat tailored vehicle
versus the cost savings of the economies of scale, it sounds
like you might be able to get some of the economies at the
fleet of 500 vehicles or more and that the post offices can
have such a large fleet, they could have seven different types
of vehicle that qualify by themselves as large fleets, right?
Ms. Vigneau. Yes. But then you still have a disadvantage of
the multiple training programs for mechanics, for drivers,
multiple parts----
Mr. Mulvaney. Sure, you do, but if all vehicles in New York
City are a particular type, yeah, you might not be able to send
them to Colorado to get their training, but you are still big
enough at 500 vehicles to get some economies of scale. Yet, I'm
not trying to micromanage what you pick. I'm glad to hear Mr.
Corbett is openminded to the possibility of having different
types of vehicles in different areas. I just don't think makes
sense to have the same vehicle that serves such Colorado, South
Carolina, and New York City, but again, maybe the cost savings
are there.
I want to talk to you, Mr. Corbett, about finances, if I
can, because I don't understand very much about how the post
office works. You all are buying a lot of vehicles. How are you
going to pay for them?
Mr. Corbett. That's yet to be determined because we have
not gotten to the stage where we will be evaluating financing
proposals. Again, the next stage is a request for proposal for
prototype vehicles.
Mr. Mulvaney. Right. When do you expect to start taking
delivery on these? In a best case scenario, what is your ball
park, 2017?
Mr. Corbett. Early 2018.
Mr. Mulvaney. And yet you tell me you haven't decided yet
whether you will pay for them out of operating revenues or
debt. How do you all typically pay?
Mr. Corbett. We would typically--again, we haven't bought
vehicles, this level of vehicles, in the past, in the recent
past anyway--typically we finance from our own cash and
borrowings.
Mr. Mulvaney. Okay. Quick question, again, I very little
about the Postal Service. When you all borrow money, is it
guaranteed by the government?
Mr. Corbett. Excuse me?
Mr. Mulvaney. Is it guaranteed by the Federal Government?
When you go to the bank and say, would you please lend us
$20,000 to buy this truck, does that carry an implicit or
explicit government guarantee, or are you just standing on your
own balance sheet when you borrow that money?
Mr. Corbett. The government does not guarantee. We also do
not have any third-party borrowings. All of our borrowings to
date have been from the Federal Finance Bank of the U.S.
Treasury.
Mr. Mulvaney. Okay, all right. Okay. I've got some other
questions, but maybe I'll wait on the other ones.
Thank you very much, Mr. Chairman.
Mr. Meadows. Mr. Corbett.
Mr. Connolly. I am so sorry. I was just going to ask my
friend, Mr. Mulvaney, if you would yield for a second.
Mr. Mulvaney. I would be happy to.
Mr. Connolly. I think both the chairman and I would love to
work with you on this because I think there is concern that too
much uniformity can actually, with the best of intentions,
actually not work out all that well. We would like to work with
you in making sure that as we replace the fleet, which is a
huge fleet, we're taking into account the differences in
routes, urban, rural, suburban, et cetera. And to make sure
that we also are getting the best bang for our buck from an
environmental point of view as well.
Mr. Mulvaney. If the gentleman will yield, my followup
questions--I do want to continue this conversation about
whether or not--how many companies can deliver 180,000 of the
same type of thing? Does it open up for more competition if we
have three or four different types of vehicles. Maybe we can
explore that later.
Mr. Meadows. The chair recognizes the gentlewoman from
Michigan, Ms. Lawrence, for 5 minutes.
Mr. Connolly. Mr. Chairman, before her time starts, I
believe Ms. Lawrence knows more about this than anybody. She is
a 30-year veteran of the U.S. Postal Service and retired 7
years ago as a letter carrier so----
Mr. Meadows. Welcome.
Mr. Connolly. She's our expert.
Mr. Meadows. It's good to have an expert. Sometimes we lack
that here on the dais. So you go ahead with your 5 minutes of
questioning.
Mrs. Lawrence. Thank you.
Mr. Corbett, I have a number of questions. As stated, I
started my career in the Postal Service as a letter carrier so
I've driven a number of the vehicles, 1 tons, LLVs, the minivan
thing; I went through that with Chrysler. So while you've been
there 6 years, I actually have driven some of those vehicles.
The concern I have in having lived through the deployment
when we brought in the LLV vehicles, there was this massive
movement of old vehicles moving from one station to another.
You bring in the new ones, and then you move them down the
road. So we're talking about starting in 2018, and I'm very
concerned when you say you have not--you don't have the numbers
because to incorporate a new fleet of vehicles, there are
costs--and Ms. Vigneau--that she stated. There is the
mechanical training. There is the actual impact on moving
vehicles in, moving vehicles out. So there's some major
questions I have for you.
If we are already in a crisis mode and you gave us the
numbers, how can we sustain our fleet until 2018? Because
understand, this is bigger than fleet; this is delivery
standards. And, in the morning, I can tell you in Michigan,
where I live, those cold mornings and those old trucks do not
start. And that is an immediate impact on delivery standards
because you're trying to find ways to get trucks from other
places so that you can get the mail out of the door. So how are
we going to be able to survive between now and 2018? What is
the plan?
Mr. Corbett. Thank you for your question, Congresswoman.
The same way we're surviving today, and we will get through it.
We will continue to repair and, in some cases, overhaul our
existing vehicles until such time as we have a replacement
vehicle for it. In your example, that's very common in cold-
weather States to have vehicles with either aging batteries or
problems with the starter, and we will replace that if those
problems occur. We also do maintain spares to the extent that
it takes longer than a day to repair a vehicle.
Mrs. Lawrence. I was a delivery supervisor. I'm very much
aware of that.
So we're saying that we--the current conditions of our
142,000 LLVs have extended their service life, but you're
saying that between now, 2015, 3 more years, we will be able to
continue to just repair them and maintain standards?
Mr. Corbett. That's correct. Everything on the vehicle--
other than the frame really, which is aluminum and is very
difficult, if it cracks, to replace--can be replaced or
repaired as we sit here today. In terms of the overall aluminum
frames, our analysis and assisted by an outside party also
indicates that those frames should last for another 10 years on
average.
Mrs. Lawrence. I am--I heard the number 2007 until now has
been a critical period for our vehicles. And we are constantly
hounded by our delivery standards that that is the ultimate
goal of the Postal Service is to have a standard that we can
maintain. And these vehicles and I can tell you as they age
becomes a critical, critical deterrent to getting to that
point. And I won't even go into the discussion of how we can
say that we keep kicking the can down the road when we know
that it is having an impact on our delivery standards?
I am very concerned that when you as a chief financial
officer, you're challenged with the numbers that it would take.
You have not reached that point of, what would it cost to be
able to replace the fleet? It seems like--and I know how the
government works--so if we're still at the point we haven't
designed the vehicle, we don't know what it's going to cost and
there's additional internal costs that would immediately come
on to the Postal Service when we bring in these fleets, how can
you sit here today and say that we can purchase these vehicles?
Because when we went through this crisis before--and I was
there--we literally had to stop purchasing vehicles because we
ran out of money, when we did the minivan thing. And we had
this whole plan, and we couldn't implement it.
Mr. Corbett?
Mr. Meadows. The gentlewoman is out of time, but you can,
please, answer that question.
Mr. Corbett. Yes, Congresswoman.
We, as we sit here today, the Postal Service from nearly a
zero balance just 6 years ago in terms of cash and with all our
borrowing capacity taken up, we now sit here today with about
$6 billion of cash. It's gotten to the point where the
replacement of the vehicles has got to start now. I believe
there is almost universal agreement of that. We have got to
move as quickly as we possibly can to do that, and we have to
make it a priority to fund that from the cash that's available
and from operating cash in the future.
Mrs. Lawrence. When will you have numbers?
I'm sorry, Mr. Chairman, when will you have a budget, and
when will you have numbers that you can actually talk about?
Mr. Corbett. Well, I can tell you now that we've done the
analysis, and we're looking at somewhere in the neighborhood of
$4.5 billion to $6.5 billion depending upon the nature of the
vehicles that we buy.
Mrs. Lawrence. Thank you, Mr. Chair.
Mr. Meadows. I thank the gentlewoman.
The chair recognizes the gentleman from Colorado, Mr. Buck.
Mr. Buck. Thank you, Mr. Chairman.
Mr. Corbett, I haven't been here this long, but let me give
you a warning, never tell Members of Congress that you have $6
billion in reserves because that money will be spent in some
other way.
I have a question for you, every time I hear the prices are
going up at the post office, I hear folks from the post office
and also analysts talk about that if Congress just allowed the
post office to compete in the free market, the post office
would do much better. If you were made king tomorrow, what
regulations, what laws, what would we take off, what burdens
would we take off the post office to allow you to compete in a
way that would really encourage the purchase of these vehicles
more quickly or give you the flexibility you need to deliver
the kind of service--and I have to tell you, I have worked in
the Federal Government and have been very impressed that postal
inspectors I worked with as a prosecutor and very impressed
with the post office personally and professionally. So I'm big
fan. I just would like to know what can we do to help you in
the area of competition?
Mr. Corbett. Thank you, Mr. Congressman.
Mr. Meadows. Please hit your mic.
Mr. Corbett. Let me, please, first put the $6 billion in
perspective. The Postal Service spends almost $3 million a day.
So you can see that this is just a less than a month of
operating cash. Having said that, we have got to prioritize our
expenditures and our priority has go to be to invest in these
vehicles; we cannot wait any longer.
Now, in terms of the additional flexibility the Postal
Service seeks, for 4 years now, we've been working on
comprehensive legislation and many of the asks if you were have
been embedded in the previous Senate bill, et cetera. But the
largest, by far, combination we need is to integrate Medicare
with our retiree health benefit plan, which would save almost
$5 billion a year in terms of the required payments for the
Postal Service.
In addition to that, we seek a refund and a reduction in
the amount we pay into to the Federal Employee Retirement
System. Our account overfunded, and we are looking for that.
Third, in terms of priority most likely is pricing
flexibility. As many of the members probably know today, we
have a price increase back in January of 2014, and our
regulator has determined that we need to roll back our prices,
even though we're continuing to lose money, that we need to
roll back that price increase beginning some time toward the
end of July or early August. That date has not yet been
determined.
In addition to help with the exigent price increase, we
need more pricing flexibility. Also the ability to go into new
products and services that may be related to our delivery
business--and most cases are--or maybe something different. For
example, just a shipment of beer, wine and spirits. There are
hundreds of millions of dollars that can be earned from that,
but we are precluded by law from doing that today. And so those
are some of the main items that we seek help with.
Mr. Buck. I represent a rural district. I'm just wondering
what the burden is. I have four members of the Postal Service
in my office right now talking about the need to maintain post
offices in rural areas.
Is that a burden compared to the issues that you've just
mentioned? Where does it fit on the sort of the cost analysis?
Mr. Corbett. First, let me say, we have no plans to close
any post offices that we've been discussing internally, so I'm
not sure the nature of the discussions you're having.
And so we are planning on keeping those open. So the things
I mentioned are--all of them are worth more in terms of dollar
value in terms of getting us back to financial stability than
closing post offices, for example.
Mr. Buck. Thank you.
I yield back, Mr. Chairman.
Mr. Meadows. I thank the gentleman.
Mr. Corbett, I want to verify one thing, because we've
talked about a cash-on-hand and then you talked about
prefunding just now. But it's my understanding that the reason
you have so much cash on hand is because you haven't been
paying the prefunding. Is that correct?
Mr. Corbett. That is correct.
Mr. Meadows. So to say we've got cash just means that you
haven't been paying an obligation you're required to. And the
ranking member and I are willing--I'm willing to invest
political capital in terms of prefunding. You know, as we start
to look at this, I really am willing to invest, but I think we
need to be transparent to indicate that you have this cash,
really it's because you haven't been paying for 4 years on
other obligations. Is that correct?
Mr. Corbett. That's correct, chairman. In fact, let me even
underscore that more. It's not just the fact that we've been
missing that payment. On our balance sheet and off our balance
sheet, we have a--our liabilities and underfunded--our
liabilities recorded on our balance sheet and underfunding of
our retirement and health plans, the liabilities exceed our
assets by $90 billion. So by no stretch was I trying to imply
that our balance sheet is in good shape and this cash has been
generated through peer profits.
Mr. Meadows. So if you were CFO in the private sector, your
company would be in deep trouble?
Mr. Corbett. Correct.
Mr. Meadows. All right. Thank you.
I recognize the gentleman from California, Mr. Huffman, for
5 minutes.
Mr. Huffman. Thank you, Mr. Chairman, and Mr. Ranking
Member, for allowing me to participate in this hearing.
I especially want to thank Ranking Member Connolly, who has
been a champion on this issue. Almost 2 years ago, he and I
started working together on a bill that came to be called the
FLEET Act, Federal Leadership and Energy Efficient
Transportation. We introduced that bill because the need for
modernization of the postal fleet was very obvious as we looked
at the age of the vehicles, as we looked at this snowballing
cost for maintenance, as we looked at the embarrassing fuel
economy of this fleet, one of the largest fleets in the Nation.
And we also were interested because we know you only have
the opportunity to replace a fleet like this once a generation
or so. And so we wanted to get it right. We wanted to be a
model for this country and for the world.
And so, Mr. Corbett, it sounds like you're hearing a chorus
of guidance from both parties that this one-size-fits-all
approach that some of us bristled at a little bit from the RFI
should evolve to a more nimble, flexible approach, and I was
really pleased to hear your openness to looking at different
vehicle types to meet different needs throughout your service
areas.
I just want to ask you in that regard, since your
competitors are certainly fielding very nimble fleets with
different types of vehicles for different purposes, what you
are going to be doing to sort of identify your opportunities in
that regard? You could come up with lots of different
scenarios, but one that comes immediately to my mind are
concentrated, densely populated urban areas where an electric
vehicle would seem to be well within its range and could meet
your needs. Now, that might not be, you know, a standardized
vehicle, and conventional wisdom might say that you would have
to train people to handle special maintenance costs, but anyone
who has an electric vehicle knows they require almost no
maintenance. You pretty much put air in the tires and
windshield wiper fluid in that part of it, and you don't have
to do a lot of maintenance on these vehicles. They're
wonderfully economical.
So, tell me, if you could, what you're doing to think about
the ways in which you could have a nimble fleet that could be
opportunistic in taking advantages of technologies like that.
Mr. Corbett. Sure. Thank you, Congressman.
Yes. There's a number of things we're doing. We have a
number of ongoing programs, and also I also will comment on
what we're doing in the RFP, in order to gather more
information as to the prospects for alternative-fuel vehicles.
We have, today, alternative-fuel vehicles in our fleet. We
have 43 electric vehicles. We have been testing vehicles along
with five manufacturers. Three have dropped out. They didn't
have the ability to continue with our testing. We have over
41,000 flex-fuel vehicles. We have almost 600 compressed-
national-gas vehicles. We have about a thousand hybrid
vehicles, and we even have one fuel-cell-hydrogen vehicle we're
testing out. So we continue to look at the possibility of
alternative-fuel vehicles.
And one of the principle aspects of our RFP for the
prototype vehicles is going to be to encourage the industry to
be creative and to propose to us how they can work with us to
bring the most efficient vehicle, also keeping in mind our
requirements on emissions and greenhouse gas, et cetera. We
have various different things we need to balance here.
At the end of the day, we'll balance those all against the
lifecycle cost of replacing a substantial percentage of our
180,000 vehicles. I don't have that information right now, so I
really can't tell you what our response would be, but we'll
evaluate it again against the criteria of lifecycle total cost,
including the cost of the infrastructure and the maintenance
cost, both near term and long term, and also balance that out
against emissions standards and greenhouse standards.
Mr. Huffman. Thank you. I'll just leave you with two quick
questions. If you're able to tell us anything you're beginning
to learn from those pilots, I would appreciate it. The flex
fuel, I'm aware you've got a lot of vehicles, but the
information I've received is that you're not really using the
alternative fuel. So I don't know really what we're gaining by
having that flex-fuel technology that doesn't get used.
I just want to, last, end by asking you about California.
Now, our Air Resources Board has all sorts of incentives in
California to work with fleets. They are working with local
government fleets to put in hydrogen charging stations, for
example, where the economies of scale can make that work. And
if ever there's a fleet big enough where they might qualify as
a partner for the State of California to do something like
that, it would be the Postal Service.
Have you reached out to the State or other States to see if
there may be partnering opportunities like that that could be a
win-win for you?
Mr. Corbett. Yes, we definitely have. I cannot comment on
the conversations because I don't have that knowledge. But we
have a sustainability office. They work with various State
administrations in terms of ways that we can, again, reduce our
emissions or greenhouse gases and other nonvehicle-related
ecology things.
Mr. Huffman. Thank you, Mr. Chairman.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from Georgia, Mr.
Carter.
Mr. Carter. Thank you, Mr. Chairman.
And thank all of you for being here today. Mr. Corbett, I
spent all last night preparing these questions, and then you
say something that arouses my curiosity here.
I'm a pharmacist. The number one drug problem we have in
the country right now is prescription drug abuse. If you can
mail prescriptions, and you can send controlled substances, but
you cannot send beer, wine, and spirits through the mail?
Mr. Corbett. That's correct.
Mr. Carter. Amazing. Amazing.
Okay. I'll get on to the questions that I prepared last
night.
I want to talk, just briefly, about the maintenance part of
this. And let me preface this by saying that I was a mayor at
one time, and I had to manage fleets. And we used the best
practices. We made sure that we were buying so many fleet
vehicles every year, so many maintenance vehicles every year,
so that we weren't hit with this kind of situation, and I
understand that. But we also found that sometimes it was better
for us to go to the private sector to have maintenance and
repairs done on our vehicles.
How do you handle repairs and maintenance on your vehicles?
Mr. Corbett. Yes. Of the $700 million a year for our long-
life vehicles maintenance costs, about $200 million of that is
spent in private industry for parts and service, and the
remainder of that is done internally by our folks.
Mr. Carter. So you do utilize some private sector
facilities?
Mr. Corbett. Yes, we do.
Mr. Carter. How many maintenance facilities does the post
office operate?
Mr. Corbett. I'm afraid I can't give you that number. I
believe it's in the neighborhood of 500 across the country.
Mr. Carter. Okay. That's close enough to what I've got. How
many employees do you have in those facilities?
Mr. Corbett. I'm sorry. I also don't have that information.
Mr. Carter. Okay. Can you get that for me?
Mr. Corbett. I'll be glad to get it to you.
Mr. Carter. Okay. I appreciate that. Do you ever put RFPs
out to see if the private sector can do the maintenance for
you?
Mr. Corbett. Yeah. We looked at this very carefully. And
the--one area of our business where it's fully competitive,
really, with the private sector is the wages paid for
mechanics. Mechanics are paid quite a high wage in the private
sector, and so in--on balance, we're actually, assuming all
other things are equal, we are better using internal labor in a
lot of cases rather than----
Mr. Carter. Okay. So you're saying that the laborers in the
post office that are employed by the post office are not paid
comparable wages?
Mr. Corbett. What I'm saying is--and, again, it does vary
by market, and that's why we spend some on the outside and some
on the inside. But we actually have found that in a number of
cases when we evaluate whether we should outsource versus
continue to use our union labor, that the union wages that we
pay are consistent with, or in a lot of cases, competitive----
Mr. Carter. The $700 million that you gave us as a figure,
does that include labor cost?
Mr. Corbett. Yes. That's all labor, parts, both internal
and external, for the maintenance----
Mr. Carter. And it includes employee benefits and
everything else?
Mr. Corbett. Correct.
Mr. Carter. Obviously, because you haven't bought any new
vehicles lately, you're having an increase in the amount that
you're having to spend on maintenance, and that is
understandable because you haven't used best practices to buy
vehicles and to try to keep your fleet up to date. Do you have
any idea how much per vehicle you're spending now?
Mr. Corbett. Yes. I think, in 2014, we spent an average of
about $4,200 per vehicle, for the long-life vehicles, in
maintenance, which is way too high.
Mr. Carter. As you've been going through this process of
trying to get your financial affairs in order, have you looked
at possibly doing away with your maintenance facilities and
going to the private sector, how much that might save you and
how much it might work more efficiently?
Mr. Corbett. Again, on a market-by-market basis, we have
looked at this. And it's relatively neutral as to where you
will save money versus pay more. And it's, again, market by
market.
Mr. Carter. So you have looked at this? So you've got facts
and figures. Can you provide that to us? Do you mind doing
that?
Mr. Corbett. Sure. I'd be happy to provide that
information.
Mr. Carter. Okay. Well, that's essentially all I had on
that line of questions. But, again, I want to end with what I
started with. I find it highly hypocritical that you cannot
spend beer, wine, and spirits through the mail, yet you send
controlled substances through the mail every day. And the
number one growing problem in our Nation is prescription drug
abuse.
Thank you, Mr. Chairman.
Mr. Meadows. I thank the gentleman.
The chair recognizes the ranking member for 5 minutes.
Mr. Connolly. I thank the chair.
Ms. Rectanus, if I can begin with you. In 2011, GAO issued
a report on the Postal Service's delivery fleet. Are you
familiar with that report? The report stated that 54 percent of
the Postal Service's flex-fuel vehicles run exclusively,
however, on gasoline. So, in other words, even though the
vehicles had the capability to run on alternative fuels, many
of them were still running exclusively on gasoline. Is that
correct?
Ms. Rectanus. Yes.
Mr. Connolly. Can you explain how that could be the case?
Ms. Rectanus. What we found in our report is the Department
of Energy does a lot of waivers to agencies if they are unable
to use their alternative-fuel vehicles with alternative fuel.
And so the Postal Service had gotten a waiver from DOE because
they met the criteria. In other words, there was not sufficient
fueling stations available, or they were not available within a
certain mileage. And so they were able to get a waiver for that
54 percent.
Mr. Connolly. Do you think circumstances have improved with
regard to that since that 2011 report was issued?
Ms. Rectanus. We have not looked at it since that point, so
I don't have an answer to that.
Mr. Connolly. We would welcome an update.
Ms. Rectanus. Okay. Sure.
Mr. Connolly. Mr. Corbett, based on my reading of the
request for information, the next-generation delivery vehicles
should be an alternative-fuel vehicle either dedicated or dual-
fuel vehicle, as defined in 42 U.S.C. 13211. Is that correct?
Mr. Corbett. Excuse me, Congressman.
Mr. Connolly. You have to turn on your mic.
Mr. Corbett. Excuse me, Congressman. I'm not familiar with
the exact cite you just read. But, yes, in general that is
the----
Mr. Connolly. I'm quoting from the RFI.
Mr. Corbett. Okay.
Mr. Connolly. My concern here is that's a noble goal, but
in light of the exchange I just had with Ms. Rectanus, I'm
concerned that you are going to continue--those new vehicles
would continue--if they are dual-use vehicles, would continue
to run on gasoline. What are we doing to try to take advantage
of the technology to use alternative fuels, including hybrids
and electric? Because, right now, even with vehicles that are
designed to use alternative fuels, 54 percent of them are
exclusively or mostly using gasoline in your current fleet.
Mr. Corbett. That's correct, at least at the time of the
study. And, again, I'll underscore, the reason for that was
that there was not a filling station within a reasonable
distance in order to drive those vehicles to get the flex fuel.
So, in other words, you'd be using more fuel and more emissions
to go fuel up with flex fuel, and that was contrary to our
overall goal. So we wouldn't do that.
In terms of the evaluation for the new vehicles, whether it
would be electric, flex, CNG, et cetera, or hybrids, that is
still open. We're open to all proposals that we receive. I
would point out, as with the flex fuels, the biggest hurdle
with the flexible-fuel vehicles is not the vehicles themselves
but, rather, the infrastructure to maintain those vehicles at
an added cost. So we're looking for people to be creative,
aggressive, and to give us proposals that make sense from a
lifecycle cost perspective.
Mr. Connolly. And that gets back to the idea of not having
one size fits all because there may be places where alternative
fuels are readily available, and the infrastructure exists;
there may be other parts of the country where that's a much
more difficult proposition. You would agree?
Mr. Corbett. Yes. Absolutely.
Mr. Connolly. I would bring to your attention a letter that
I circulated, along with Mr. Huffman, on this very subject, and
it's signed by a number of Members of Congress, dated May 6.
It's addressed to the Postmaster General on the process of
replacing the aging mail-delivery vehicle fleet, and it talks
about the RFI and the need for looking at--well, avoiding the
one size fits all with respect to vehicles. Have you seen this
letter? Are you aware of it?
Mr. Corbett. Yes, I am, Congressman.
Mr. Connolly. Any idea when the Postmaster General intends
to respond to it?
Mr. Corbett. I'm afraid I don't know the status of that.
Mr. Connolly. Okay. We'd ask, for the record, if you could
bring back the request. I understand it's only been a little
over a week, but we think it's kind of important and very
relevant to the subject at hand. So, yeah.
Mr. Corbett. Out of all respect, we had our National Postal
Forum this year, which is an annual event. It's in California,
and so most of--the Postmaster General and the senior team have
been out on the West Coast this week.
Mr. Connolly. Okay. Well, especially in light of this
hearing, perhaps this hearing could help inform the response. I
thank you.
And, with that, I yield back, Mr. Chairman.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentleman from Wisconsin, Mr.
Grothman, for 5 minutes.
Mr. Grothman. Thank you.
And, Mr. Corbett, I recently did a drive-along with some of
the local Postal Service guys--at least in Wisconsin, becoming
more widespread nationwide--collecting food for the local food
pantries along with the regular route. And I'd like to thank
you guys for doing that, and there's certainly hard-working
guys and gals, and it was a very enjoyable experience.
One of the things you said to Congressman Carter, just--my
hearing a little bit now. We're talking about buying another
180,000 vehicles. Are most of those the type of vehicles--or
how many of those the types of vehicles that you use, you know,
the kind of small vehicles that you see driving around the
streets all the time?
Mr. Corbett. Actually, again, it's unlikely we'll buy
180,000 of the same vehicle, but up to was the specification.
And it actually is a vehicle that we expect--at least the body;
the drivetrain is still wide open--but there are certain
aspects of this that will enhance safety and improve service
and reliability. And as it relates to our employees, the safety
aspect is critical. So this vehicle will be taller than our
existing vehicles. It will be longer than our existing
vehicles. It will allow the letter carriers to actually walk
between the shelving where they pick the mail and the packages
off so they're not bending over and having accidents, et
cetera.
But it will be roughly, in terms of cargo space or in terms
of internal space, about twice the size of the existing
vehicles. That would be--we would need those on certain routes,
and then we'll continue to look at other modifications as need.
Mr. Grothman. Great. About how many of those do you
anticipate buying?
Mr. Corbett. Until we will get to the RFP and complete our
analysis, I really can't specifically respond to that, what
number. One thing that I am certain is that there will be some
number of vehicles that size that we need because the majority
of our routes can be accommodated by that vehicle.
Mr. Grothman. I'm not trying to catch you on anything. It's
just the notes we have here says 180,000, but that just could
be 100, could be 50, could be 150. I don't know.
Mr. Corbett. Again, it's premature to know to how many
would be exactly at spec.
Mr. Grothman. That's fine. You just said you're spending
$4,200 bucks a year on maintenance. Is that really just on
maintenance per vehicle?
Mr. Corbett. That's correct.
Mr. Grothman. What are they doing? It just seems to me it's
kind of a high number. That's all. I wasn't planning on asking
it. Congressman Carter asked you. I don't spend $4,200 on my
car. I just wonder, what do they do for $4,200 bucks?
Mr. Corbett. Again, I want to underscore the fact that the
average vehicle is 23-years-old. So virtually every component
of that vehicle, other than the frame and the chassis, has been
replaced at some point in its life and continues to fail as
it's used longer and longer. So, yes, it is a high number. It
underscores the fact that we need to move as quickly as
possible to replace these.
Mr. Grothman. Yeah. I'm just wondering. I mean, you know, I
realize it's not like you're doing highway miles either. It's
start and stop all day long. I just wondered, for $4,200 bucks
a year, what are you doing every year on a vehicle? It just
seems to be a high number. I just wondered.
Mr. Corbett. I'm sorry. Could you repeat the question,
please?
Mr. Grothman. Yeah. You said you're spending $4,200 a year
per vehicle. Usually, I think what I spend on my vehicle each
year, I can think of things that had to be replaced, maybe you
need new tires and new brakes every year. I don't know. You're
starting and stopping all the time. I'm just saying, $4,200,
it's a kind of a high number. In an average vehicle, what are
you doing every year that you working your way up to $4,200 on
average?
Mr. Corbett. As I said, I don't have a component-by-
component answer for you. So if you are looking for that, I'd
be glad to provide that. But when you think about it, our
vehicle--some of our vehicles are turned on and off, stop and
start, 600 times a day. So you can imagine we go through, for
example, starters, very, very quickly in those vehicles, even
when they're young. And as they get older, that need continues.
Transmissions, more wear and tear in terms of start and stop.
Brakes, more wear and tear than any normal vehicle in terms of
stop and start. So pretty much every component of the vehicle
is subject to stress.
Mr. Grothman. That's what I mean. Maybe you put a new
starter in every year. I don't know. Final question I have for
you, how many miles on your average vehicle you're replacing?
And, again, I realize it's stop, starting. It's not like you're
putting a million miles on highway.
Mr. Corbett. The average right-hand drive vehicles, the
LLVs, long-life vehicles we're talking about here, drive about
19 miles per day. So they don't go very far on a daily basis.
But when you have 163,000 of them out there, that accumulates
to quite a number of mileage.
Mr. Grothman. Okay. So maybe 6,000, 7,000 miles a year?
Mr. Corbett. That's about right. Yes.
Mr. Grothman. Okay. Thanks for coming over and answering
all the questions.
Mr. Corbett. Thank you.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentlewoman from the District of
Columbia for 5 minutes.
Ms. Norton. Thank you very much, Mr. Chairman.
I thank all of the witnesses for being here.
I have a question for Mr. Corbett.
Mr. Corbett, as laymen, we are taught to buy--and the way
you appear to be buying these vehicles--bulk purpose purchase,
larger size, if you lease, you lease for longer periods of
time; that saves money; you're leasing for shorter periods. And
I'm going to say, if the reason for this bulk purpose purchase
has to do with a condition Congress has left the post office,
that would be altogether understandable. You're at the end of
one lifecycle, awful lot of vehicles, all your vehicles,
virtually.
Was it cheaper to buy bulk the last time, even when you
considered the replacement parts--what was it--that my
colleague asked for, the $4200 per vehicle? Was it cheaper? Was
the bulk purchase cheaper, all things considered, than doing
annual or some other form of purchase?
Mr. Corbett. Yes. Let me clarify. When we talk to up to
180,000 vehicles, we will be looking at procuring about 25,000
vehicles per year. So we would not receive all 180,000. So you
are talking about a 7- or 8-year effort. In addition to that,
some of those vehicles may be redesigned during that period of
time.
Ms. Norton. I'm sorry. How many are you purchasing at a
time, bulk purchase?
Mr. Corbett. In our RFP, we'll ask the suppliers for
pricing schedules based on, for example, the quantity we would
purchase from them because they need to achieve certain
economies of scale and return on the facility they put in place
to build these and the annual number of vehicles we would
actually take delivery.
Ms. Norton. At any one time? The annual number that they
would be manufactured at the same time?
Mr. Corbett. Correct. They would need to know what sort of
facility they need to put in place and what the workforce looks
like and how constant that flow of work will be so that they
can determine how to price the overall supplies.
Ms. Norton. When you decided to do another bulk purchase,
as you did last time, did you consider other forms of purchase,
compare prices, or compare other ways that might be
advantageous to the Postal Service?
Mr. Corbett. There are kind of two ways to answer your
question. One is that because we had a bulk purchase 20 years
ago, we're almost forced to have a bulk purchase this time
around. However, we're going to spread that purchase over 7 or
8 years so that it starts to elongate in terms of when you need
to replace these in the next cycle.
Ms. Norton. But does that mean that the vehicles, though,
are any different? I mean, isn't the same bulk purchase, the
same vehicles, the same technology; it's just one when you
bring them on?
Mr. Corbett. No. I'm sorry. Earlier in the hearing, we were
addressing some of the design issues. And let me go back over
it real briefly. In the RFP we were putting out for our
prototype vehicle, we were encouraging the suppliers to come
with us with innovative designs and that can, in often cases,
will differ from the specifications we put out for the main
vehicle.
Ms. Norton. So, year by year, purchase by purchase, that
come on to the Postal Service, they could be different
vehicles?
Mr. Corbett. They could be. I would expect it to be, you
know a few years one type of vehicle, and as they're developing
the next vehicle or next technology, which may or may be able
to be integrated with the platform that they have with----
Ms. Norton. And they put those in for the same price, same
costs to you because you've made a single purchase request?
Mr. Corbett. I would anticipate that if they proposed two
different vehicles or three different vehicles over a 7- or 8-
year period, that they would all be at different costs.
Ms. Norton. So you might not get a single bulk cost for all
of the vehicles because you may have to upgrade the
technologies, there may be differences in them, just like there
are differences in the cars we buy every day that cost us more?
Mr. Corbett. That's correct. I mean, I would anticipate a
large number of vehicles being from an essentially bulk
purchase over a number of years, but also with the flexibility,
for example, if they can propose this for a new drivetrain, a
new technology, a new safety method, et cetera, to be able to
integrated into the existing fleet as well as into the newer
vehicles.
Ms. Norton. Now, that's interesting. So you think you're
getting the advantages of bulk purchase along with differences,
innovations that may occur along the way as you accept these
purchases. Is that correct?
Mr. Corbett. That, for us, is utopia, and that's where
we're pushing the suppliers. How well they'll be able to
stimulate that and give us a competitive bid is yet to be seen,
but we're encouraging them to be aggressive.
Ms. Norton. Well, considering the number of vehicles you
are ordering, it seems to me you may be using the government's
advantage here to good measure.
I just want to ask one more question, Mr. Chairman, if I
could because the Office of Inspector General did indicate in
its report, apparently before you put this purchase in: Fleet
management best practices involve investing predictable and
consistent sums annually to renew the fleet continuously and
allow adoption of new technologies.
Well, your answer to me just now appears to say, you're
trying to build that into bulk purchase. Are you trying to
build what the inspector general says you get by investing in
smaller numbers into your bulk purchase because you are
investing so much that there may be an advantage in price to
the manufacturer in changing the technologies we're giving you,
at least some of the advantages of a bulk purchase?
Mr. Corbett. That's correct.
Ms. Norton. Thank you very much, Mr. Chairman.
Mr. Meadows. I thank the gentlewoman. The chair recognizes
himself for 5 minutes.
I want to go ahead and follow up and ask a few different
things, perhaps, not as much specific questions, Ms. Vigneau.
But what I would like to ask you to provide this committee,
that if you were to do this as managing a large fleet, if I
were a private individual, how would you best let me maximize
my dollar in terms of lifecycle costs and the number of
vehicles? There has to be a sweet spot in terms of the number
of vehicles that you purchase at a particular time, and so if
any of you can speak to that and submit that in writing to the
committee, it would be extremely helpful if you would do that.
Mr. Corbett, let me come back to you because one of the
concerns that I have is the ranking member and I have been in a
number of meetings with different stakeholders that have a real
interest in terms of the long-term viability of the Postal
Service. There are competing measures there, and what you've
done this morning is you've added this 180,000-vehicle
bombshell, as I would say, because it's a huge amount of money,
on top of what we're already having to do. And what I don't
want to do is look at inefficiencies in terms of vehicle
acquisitions that may affect the postal workforce. Because you
mentioned prefunding, I told you that we're more than happy to
look at that and address that. But that doesn't get us all the
way home. You're the CFO. You know the type of problems that we
have.
Your testimony today does not really align with the RFI or
potentially the RFP that you're talking about, just because you
keep talking about having multiple options, but you talk about
a prototype. And when you mention a prototype or the prototype
that you have on several occasions, it would indicate to me
that you're looking at one vehicle type with maybe three
different engines, you know, an E85 engine, an electric engine,
but it becomes one vehicle. So is that really what you're
talking about, a one size fits all to handle 99 percent of what
you're talking about with different engines or transmissions as
a prototype?
Mr. Corbett. We, again, are wide open in terms of the RFP.
We're soliciting----
Mr. Meadows. But your RFI doesn't indicate--I mean, it's
been very specific what you're asking for. You're asking for a
prototype with the potential of delivering 180,000 of those,
which would say, one vehicle 180,000 times. Am I misreading the
RFI?
Mr. Corbett. The RFI said that this is our general
specification, and we were very specific especially about the
body of the actual vehicle in terms of the square footage and
the height, et cetera.
Mr. Meadows. So, based on that square footage, what
percentage of packages would the Postal Service be delivering?
I mean, obviously, you figured for the next 20 years, Postal
Service is going to have X number of first class, X number of
packages in order to design this prototype, so what percentage
of packages did the Postal Service figure in for the size of
the vehicle?
Mr. Corbett. Currently, today, for roundtrip packages that
we pick up and deliver--rather, that go--an origin to
destination and we deliver those, we have about 20 percent of
the package market.
Mr. Meadows. I know the numbers. I've talked to the
Postmaster General, I've talked to a number of them. I'm
saying, in your design that you're designing for the next 20
years, I guess, what percentage did you figure that to be? Say
it's 20 percent? Because nobody in the Postal Service believes
it's going to stay at 20 percent.
Mr. Corbett. We believe that our market share will grow,
and we've accommodated that in the size of these vehicles, and
we believe that the overall market will grow--although it's
growing hyper in terms of e-commerce today--we believe the
overall market will grow closer to 6 percent per year.
Mr. Meadows. All right. So your analysis says that your
packages on the Postal Service is going to grow at 6 percent?
Mr. Corbett. That's correct.
Mr. Meadows. So, again, I guess my question is, how many
packages, what percentage of the packages versus first class--I
guess what I'm saying is, are we going to buy a van that is
primarily for packages, or are we going to buy a van that is
primarily for mail? What's the mix? Is it 50-50? Is 75-25?
Where, obviously, you get in the prototype, you have to define
that.
Mr. Corbett. Well, the size of the actual body of the van
is not very price elastic. In other words, you could chop off 3
feet off the back of a 15-foot van and you would probably save
somewhere in the neighbor of $500. Plus, it's just an aluminum
wrap over the actual vehicle, working on the same chassis and
working on the same sort of internal components, whether it be
alternative vehicle or unleaded. But the reason for the
procurement is not related to package solely. It's actually
enhanced safety. We have 20,000 accidents per year--20,000
accidents per year. We've got to improve the ergonomics of the
overall vehicle so our employees are not put in harm's way. We
don't have air bags. We don't have automatic braking when you
get up off the seat. Things today that people take--we don't
have backup cameras. Things like this really need to be made
available. The service and reliability. The reliability is
impacted by this.
Mr. Meadows. Again, and I appreciate all those things, and
those are important things to look at. But if you were only
looking at those items, you would get a postal vehicle that is
very similar to the one you have today with just all those
bells and whistles on there. So I guess what I'm looking at is,
when will the design, after the prototype, be approved?
Mr. Corbett. The actual design and selection of the
vehicles from the prototype stage could be as much--almost 2
years from today when we'll make that final decision.
Mr. Meadows. All right. So I guess my question then is, how
do you do an RFP before that when you're not assured of what
the design is going to look like? You know, you've got to have
the design before you actually do an RFP. If not, you're doing
an RFP that has so many qualifiers that it's meaningless.
Mr. Corbett. The RFP, the next RFP that was----
Mr. Meadows. Is for prototypes. I've got that.
Mr. Corbett. Yes.
Mr. Meadows. So when does the postmaster, when will she
sign off on the design, the DAR?
Mr. Corbett. Before we go out with the RFP for the actual
production vehicles.
Mr. Meadows. All right. And what I'm hearing, and I want to
make sure that I'm correct, that design is actually going to be
more of a one-size-fits-all in terms of what it looks like on
the outside that may have a number of different engines. Is
that correct?
Mr. Corbett. I don't want to pre-conclude that, so I can't
confirm that.
Mr. Meadows. Okay. Let me be more specific. I live in a
rural area. When I get stuff delivered to me, I may get a big
UPS brown. I may get a small UPS brown, depending on what it is
logistically. And that's just at my one location in North
Carolina. And what I'm having a hard time with, with all the
questions that have been on both sides of this, is how we're
going to do a design for 180,000 units that may have a
different engine or this or that, but, yet, it's a one size
fits all. And I guess I want to encourage you to reevaluate
that and perhaps slow that down and do it in buckets of 40,000
or buckets of 50,000 based on needs because in Mr. Connolly's
district, you could do it with electric vehicles extremely
well. In my district, as you start to go up the mountain, I can
assure you that it won't work nearly as well as it does in Mr.
Connolly's. And both of them are 11th Congressional Districts,
but they have very different geographical components.
So I really want to encourage you to go back and look at,
perhaps, slowing down the process but also making it smaller
for two reasons: One is technology is going to change because,
really, what we're looking at here is you're going to make a
bulk purchase over the next 5 to 7 years, maybe 5 to 8 years,
based on your testimony, but the RFI says 5 to 7 years. So you
are going to make a bulk purchase. We're not going to make
another bulk purchase, then, for 20 more years. You know, based
on that, technology is changing very much. You know, I have an
iPhone in my pocket. Twenty years ago, I had a bag phone that I
put on the outside of my car to try to make it. And so we need
to understand that technology is changing rapidly, and to do
that, do I have your commitment that you're willing to relook
at that and put it in smaller buckets before the RFP goes out?
Mr. Corbett. In the prototype RFP, we're going to
encourage, again, the suppliers--and we have 15 prequalified
suppliers, so we should get a range of alternatives--to propose
not only our base vehicle but other vehicles based--and they're
going to have knowledge on our delivery routes. They are going
to have knowledge on economic data, the package growth over the
country, and other types of things. And we're going to ask them
for their input as well as input we already have that we
received from our third-party consultants. And we're going to
assimilate that and decide how many, which vehicle to put out
for the production RFP. So I think it's premature for me to
commit to tranches of 50,000 or 40,000 or some other number
because I just don't have the data to make that equipment. I'm
sorry.
Mr. Meadows. Well, if you don't have the data to make that
commitment, Mr. Corbett, then you don't have the data to make
the commitment that 180,000 is correct either because if you
can't make the commitment that a smaller one is accurate, you
don't have the same data that would say that 180,000 is
accurate. You follow my logic there? You either have it, or you
don't.
Mr. Corbett. Excuse me, Mr. Chairman. What I was saying was
that in terms of the 180,000, we know----
Mr. Meadows. You know you have to replace 180,000 vehicles.
I understand that. But what I'm saying is in terms of the needs
of those individual vehicles, you wouldn't know, if you don't
know the buckets to put it in, whether 180,000 works or whether
it's 20 or 50.
Mr. Corbett. I see what you're saying. But both of these
matters will be a lot more clear after the prototype phase,
when we actually get the data from these suppliers and are able
to assimilate that.
Mr. Meadows. Well, perhaps we just have--I don't understand
how you do a prototype for something that you're designing that
you're not sure what you're designing for other than--well,
we'll go on. I'll close with this.
I'll yield to the ranking member for his closing statement.
Mr. Connolly. Thank you, Mr. Chairman.
I just have a couple of CFO-related questions to get on the
record, if I may.
Mr. Corbett, can you name a single company in the United
States that has 100 percent health prepayment requirement?
Mr. Corbett. No, I cannot.
Mr. Connolly. Can you name a single Federal agency that has
that requirement?
Mr. Corbett. No. I'm not aware of any.
Mr. Connolly. So the requirement put upon USPS, the 100-
percent requirement, is unique?
Mr. Corbett. I believe so, yes.
Mr. Connolly. And if we had repealed that prefunding
requirement, what's the annual saving?
Mr. Corbett. Approximately $5 billion a year.
Mr. Connolly. $5 billion a year. Is it accurate that, had
we done that last year, you would have actually shown an
operating profit?
Mr. Corbett. Last year, with that and factoring in other
noncontrollable, noncash Workers' Compensation adjustments,
yes, we would have shown an operating profit.
Mr. Connolly. To the chairman's earlier questioning,
although you're not paying it--you're not meeting that
obligation. It's not like it's to an external entity. So it's a
bookkeeping matter at the moment. But, from a bookkeeping point
of view, what is the cumulative obligation with respect to
prepayment?
Mr. Corbett. I think it's approximately $27 billion.
Mr. Connolly. And there's another item, isn't there, a FERS
overpayment that's been identified?
Mr. Corbett. That's correct.
Mr. Connolly. Is that overpayment about $8 billion.
Mr. Corbett. No, I don't believe so any longer. At one
point it was, but my understanding is that OPM's actuaries have
reevaluated that, and that overpayment now stands at somewhere
in the neighborhood of $1.5 billion.
Mr. Connolly. But that could be some relief for you,
obviously, from a ledger point of view. Is that correct?
Mr. Corbett. That's correct.
Mr. Connolly. Okay. One final point. You were talking to
Ms. Lawrence about the hydraulics of certain vehicles and the
need, because of stop-and-go traffic, there's more wear and
tear on some vehicles than on others.
Were you familiar with the fact that UPS and FedEx actually
did avail themselves of some recovery money back in 2009 and
2010 and used it for sort of innovative vehicles and trucks,
and they showed a real improvement in miles per gallon,
emission reduction, and lower maintenance costs? Are you
familiar with the vehicles they purchased?
Mr. Corbett. I'm vaguely familiar, but not with the
specific vehicles, Mr. Connolly.
Mr. Connolly. This is the program I was trying to get USPS
to avail itself of. It didn't, but your competitors did. And it
apparently lived up to the promise. So it might be worth
looking at how they did it and whether we can learn from that
or not.
With that, I thank you all for being here today.
And thank you, Mr. Chairman for the hearing.
Mr. Meadows. I want to thank each of you for the testimony.
Mr. Corbett, my questioning of you being very direct is
really one out of caution. We are at a critical stage from an
investment standpoint. I think all of us want the Postal
Service and system not only to be efficient but be what we've
always--what we've grown up with it to be, is, you know,
neither rain, nor snow, nor sleet. You know, when we think of
that, I thought the Postal Service could go through almost
anything, and that's what we want to see it in the future.
Unfortunately, here, today, the real stumbling block is a
changing in the way that we do business both from first class
mail, to a tough economy, to e-commerce, and everything else,
and its managing through there.
I need you to be transparent. And the ranking member talked
about some of those prefunding issues where, you know, there
are very few other areas that would have the same requirement.
But I also need you to be transparent. There are some of those
areas where we're not funding properly. And, as a good CFO, I
need you to help me with those and be cautious in the way that
we look at this acquisition, not because of the vehicle or the
lack of the vehicle need that we have but really because there
are hundreds of thousands of postal workers that we need to
take care of.
And I'm committed to the ranking member to work diligently
to make sure that we come up with postal reform that does
exactly that. And, yet, at the same time, if you go out and
purchase 180,000 vehicles the way that it's set to do, it makes
it very constrained for us as we start to look at where do we
give, what do we do, and we need to look at technology.
So I'm asking you that today, and my pointed questions is
really one out of caution just because I've heard so many
different things from so many different groups. And we do have
some expertise here. I talked to Mr. Lynch just yesterday
because he's got a family of letter carriers and postal
workers.
And so I said: You've got real credibility. I want you to
help me on some of these other areas.
And so, with that, if your pledge to this committee is that
you're willing to be open and honest, I can tell you that you
will find a bipartisan support that you've never seen before as
we start to try to really address this in a real way.
For the others of you that have come today, I thank you for
your testimony. I know there will be followup questions that we
will ask you to respond to the committee on.
And, with that, if there is no further business, this
committee stands adjourned.
[Whereupon, at 12:00 p.m., the subcommittee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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