injury to the Chicago market would be twofold, affecting those engaged in the receiving and forwarding of corn in its natural state, and affecting those engaged in the business of processing or manufacturing corn products for sale in New England. The board also said it had been unable to perceive the existence of water competition referred to by the respondents, and also asserted that the navigation limitation was meaningless.

In its reply, the railroads said the proposed rate was designed to return to rail movement traffic that had been directed to an unregulated water carrier, that it had been set at a level no lower than necessary to meet the water cost, that it would not introduce any new competitive factor into the grain rate structure, and that the rate was fully compensatory.

Comparative traffic of surface common carriers potentially subject to proposed exemption from minimum rate regulation, 1960

A Comparison of Present Railway
Traffic in Exempt Agricultural
and Bulk Commodities

With Potential Traffic Under

a 10% Reduction in Rates

Analysis based on data available for rail, water, and class I
motor carrier commodity statistics.

STATEMENT OF FREDERICK E. BATRUS, ACTING ASSISTANT POSTMASTER GENERAL, BUREAU OF TRANSPORTATION, POST OFFICE DEPARTMENT

Mr. Chairman, my name in Frederick E. Batrus. I am Acting Assistant Postmaster General, Bureau of Transportation, Post Office Department, and am accompanied by Adam G. Wenchel, Associate General Counsel, Post Office Department. I appreciate the opportunity to appear before your committee to discuss one of the provisions of H.R. 11584.

H.R. 11584 is one of the two bills designed to effectuate the recommendation of the President's message on transportation. The bill as a whole, if enacted, should do much to strengthen the national transportation system.

The Post Office Department's primary interest, however, is in section 9(a) which is the provision to which I will direct my comments.

Section 65 of title 49 (sec. 321 (a) of the Transportation Act of 1940), dealing with rates on U.S. Government transportation, provides: "That sec

tion 5 of title 41 shall not after September 18, 1940, be construed as requiring advertising for bids in connection with the procurement of transportation services when the services required can be procured from any common carrier lawfully operating in the territory where such services are to be performed." While the literal language of the existing law does not exclude mail transportation, the Comptroller General has held (B-141203, dated Dec. 30, 1959) mail transportation to be excluded from this provision of law. Section 9(a) of H.R. 11584 rearranges the language of the second proviso and adds explicit references to accessorial services. In addition, it would expand the meaning of the word "transportation" by adding the phrase "including mail transportation services performed by common carriers by motor vehicles." The purpose of this latter addition is to give the Postmaster General the same authority to negotiate with highway common carriers for mail transportation that other Government agencies have with respect to transportation of persons and property. This amendment would place the postal service in the same position as other Government agencies in its traffic management insofar as dealings with highway common carriers are concerned.

By way of background, I would like to describe briefly the postal transportation service. As you know, we are a major user of all forms of transportation, both domestic and international. This includes rail, motor, air, and steamship operations. Our payments to all carriers for the transportation of mail in the current fiscal year will approach $600 million.

Every type of transportation service must be used for mail, including local cartage-type operations between postal installations and transportation terminals within cities and metropolitan areas, and short, intermediate, and long-haul services. Predominantly, mail transportation is provided by common carriers. A substantial number of contract or star routes are used, however, in services established exclusively for mail.

The vehicles used include almost every available kind. In motor carrier services, they range from the ordinary passenger automobile to the largest tractor-trailer motor truck and passenger buses. In railroad transportation, local and through passenger trains, fast freight trains, and piggyback operations are used. Mail moves in railway storage cars, as well as in Railway Post Office cars specially equipped to permit the sorting of mail by postal clerks while the train is moving. All types of aircraft are used in transportation of mail, ranging from the helicopter to the largest passenger and cargo aircraft. Small powerboats, freight and passenger steamships of all sizes move mail in water transportation. The President's transportation message stressed the need for greater flexibility for the Post Office Department in obtaining highway mail transportation services. Section 9(a) of H.R. 11584 would give the Department somewhat broader authority in obtaining the kind of over-the-highway service it needs under certain circumstances. It would enable the Department to take advantage of already existing highway common carrier operations which would be beneficial to the postal service.

Presently, the Department obtains most of its over-the-highway mail transportation by formal term contracts entered into after advertising. It is also permitted to and does make temporary contracts without formal advertising pending the letting of a regular contract. These contracts usually outline rather specifically the service which is expected for the term. Changes in the service during the term are sometimes necessary because of altered postal needs, but the extent of changes which can be made is limited by statute.

However, situations do arise where it is impracticable to advertise for the services desired.

For example, we may find a common carrier operating on a regular and desirable schedule between two points with excess capacity which we could use. Even if we should advertise for this service, we have found in the past that the common carrier often does not wish to bind itself for a substantial period to a particular schedule for mail traffic alone because of a possible shift in the pattern of its commercial business. The obvious solution is an arrangement with the carrier to carry the mail so long as the conditions remain mutually agreeable. Section 9(a) of H.R. 11584 would free the Department from restrictions which preclude our negotiating for such an arrangement.

A recent development is the contracting with buslines in a way which makes their systemwide schedules available for mail transportation. This involves use of a portion of the baggage compartments of buses for transportation of mail between the various points in the system, and is most useful for letter mail where volume does not justify the cost for vehicles dedicated exclusively to mail

transportation. No matter on what terms the Department advertises its requirements, usually only one company would be able to bid, since no two bus companies would have service and comparable schedules between all of the same points. Furthermore, bus companies do not like to freeze their schedules to mail requirements which would normally be the case in using formal advertising procedures.

While the Department has been able to enter into a few contracts of this type where special circumstances have existed, applicable Comptroller General decisions have left our authority to proceed in this field extremely doubtful. As a result we are unable to expand this principle to take care of our needs. This service is not a substitute for basic bulk mail transportation obtained by contract, but is a highly desirable service for transportation of small amounts of letter and other preferential mails.

Another use of this authority arises from the decentralization of some large mailers, who create heavy outbound movements from off-rail plants at irregular intervals to points all over the country. It is sometimes difficult to obtain effective bids through advertising because of the complexities and extensiveness of the movements. For this reason, arrangements through direct negotiations may be in the best interest of the postal service.

Additionally, if the Department is to take advantage of one of the newer techniques in transportation, it needs the type of flexibility this bill would provide. I refer to the combined rail-highway operation with trailers or containers on flat cars for the rail portion of the movement. The Department would like to be able to work jointly with the railroads and motor carriers in development of the use of this service to points not on the railroads. Under present law, the off-rail transportation must be obtained by advertising and competitive bidding. Since specialized and coordinated services, including separations of the mail and use of terminals, are involved, arrangements should be worked out jointly with the specific carriers who are to perform the services. Here is a situation where, with this legislation, the Department, railroad, and carrier could work together to provide effective through service, in line with the public policy proposed in section 4 (a) of this bill.

With respect to rail and ocean transportation, the Department is not faced with the same type of limitations as in the case of highway transportation. In the latter instance the Department must follow formal advertising procedures. I should like to emphasize the point that the Department needs this extra flexibility to supplement the highway service procured in the normal manner through advertising and bidding. There is no intention of using this authority in lieu of normal star route contracting. The Department does not believe that there will be any real effect on the star route contractors. Instead, this legislation is intended to cover the special situations, fairly new to the postal service, where common carriers are best fitted to give the Department efficient and economic service.

It should be pointed out also that in most cases negotiations would be undertaken with several common carriers, thus obtaining the benefits of competition where available.

STATEMENT OF LAWRENCE E. ERNST, GENERAL MANAGER, NATIONAL STAR ROUTE MAIL CARRIERS ASSOCIATION

Mr. Chairman and members of the committee, I am Lawrence E. Ernest, general manager, National Star Route Mail Carriers Association, with headquarters at 301 East Capitol Street, in Washington, D.C. I am accompanied today by Mr. Charles D. Ablard, partner in the law firm of Ablard & Harrison, Washington, D.C., counsel to the association.

First, I wish to thank you for giving me this opportunity to appear before this committee to express the views of the Mail Contractors' Association, with respect to enactment of a new law to be known as

TRANSPORTATION ACT OF 1962

This proposed legislation was introduced by the chairman under date of May 3, 1962, as H.R. 11584 and proposes to provide for strengthening and improving the national transportation system, and for other purposes.

The testimony of the National Star Route Mail Carriers Association will be restricted to section 9(a) of the bill, headed "Simplification of Government