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

Transportation Rates and Procurement; Transportation of Mail by Motor Vehicle Common Carrier."

I have been employed in my present position for the past 61⁄2 years, and prior to that was under civil service in the Bureau of Transportation, Post Office Department, for more than 37 years. I served as a clerk, and an official in the Postal Field Service, and prior to my retirement I was Director, Railway Transportation, Post Office Department, here in Washington. I believe that my 43 years of experience in postal transportation qualifies me as an expert in this field of service, and my statements are being made in the interest of all concerned. Section 9(a) of the bill proposes that the head of an agency or such persons as he may designate may negotiate the provisions and prices of contracts, agreements, or other instruments for the purpose of procuring transportation, including mail transportation services performed by common carriers by motor vehicle service.

This would, in my opinion, result in discrimination since it affords the Postmaster General, or his duly appointed agents, the right to spend public funds without any control and would modify section 3709 of the revised statutes, as amended (41 U.S.C. 5), which reads:

"All purchases and contracts for supplies or service, in any of the departments of Government, except for personal services, shall be made by advertising a sufficient time previously for proposals respecting the same, when the public exigencies do not require the immediate delivery of the articles, or performance of the service. When immediate delivery or performance is required by the public exigency, the articles or service required may be secured by open purchase or contract, at the places and in the manner in which such articles are usually bought and sold, or such services engaged, between individuals.”

Congress has determined, beyond a doubt, that the Post Office Department is obligated to provide service to the people of this great country of ours. Such service must be provided in an efficient and economical manner and by whatever means the Postmaster General considers to be in the public interest.

This is being done at the present time under existing star route laws. Officials of the Post Office Department cannot point out a single instance where the individual contractor has not been able to provide the required services, and under conditions outlined by postal officials.

Mail transportation over the highway is now being handled on a fixed schedule set by the Post Office Department. The common carrier controls and sets the schedules of their vehicles. Therefore the Post Office Department would place itself in the position of dispatching mail over an undesirable schedule of the common carrier, or paying a premium for the service on a schedule of their choosing. This could mean the stockpiling of mail to be carried as top loading with shipments of freight, etc. Furthermore there would be need for additional time in the schedule, since the common carrier would need time to exchange his freight, in addition to the mail, and this would result in delay to the mail.

The record will show that during the 85th and 86th Congresses, the Postmaster General supported legislation known as the Motor Vehicle Carrier Mail Act, attempting to get authority to award mail contracts to certificated carriers without advertising for bid. The price for such service to be determined by the Postmaster General. Such authority, in my opinion, could displace some 5,000 of the 10,000 star route contractors, who are now regarded by the Post Office Department as small businessmen.

Furthermore, I do not see how such a law coould be properly administered, without favoritism being shown. There are some 30 to 35 certificated carriers operating between Washington, D.C. and New York City. Which one will be selected to do the mail job, and on what basis will he be chosen? Would this not establish a private system of Government, within the agency, beholden to

no one.

It must be pointed out that the Interstate Commerce Commission has disclaimed jurisdiction under the Motor Carrier Act of employees engaged in the transportation of mail under contract with the Post Office Department in vehicles used for that purpose.

Such a ruling has enabled the Postmaster General to route mail without [restriction, and in any manner he thought to be in the public interest. This is the way it should be, and the future policy should be as at present-first, service; second, economy; and third, competition.

The volume of mail fluctuates very substantially from day to day, and that differs somewhat from the movement of freight or other traffic. However, if the Post Office Department could guarantee full loads, no doubt the common carrier

would gladly furnish a schedule satisfactory to the Postmaster General. Yet, as I understand it, most of the common carriers have a certificate to operate over certain routes and between certain points. This, in my opinion, further justifies the need of continuing our present system of competitive bidding. Exclusive mail routes may operate over any highway and between any points authorized by the Postmaster General. Many common carriers are now contractors on mail routes, and members of the association, and we are not opposing the motor common carrier, but we do oppose any law that would give them exclusive rights without competitive bidding. This we believe would be discrimination.

Since the motor common carrier, as a rule, has not been able to compete with the private carrier, through competitive bidding, how can it be stated that section 9(a) of bill, H.R. 11584, would give the Post Office Department broader authority in obtaining over-the-highway service it needs under certain circumstances, except by paying a premium price?

All the Post Office Department needs to do to obtain over-the-highway service required is to follow present laws and advertise for bid. There are always several interested and competent parties who will submit a bid to provide the required service, and at a reasonable price.

In order to protect the Post Office Department and guarantee prompt handling of the mail, star route contractors are now required to furnish bond, either a surety bond or personal bondsmen. The proposed law would not require bond, and anytime the common carrier wanted to give up his contract, he could do so, without penalty, forcing the Post Office Department to employ a substitute carrier. This could result in delay to the mail and embarrassment to the Department.

The Post Office Department always publishes the schedule on which mail is to be transported, approximate volume to be handled, and size and type of equipment required to do the job. These requirements are always met, and what further improvement can there be in the handling of mail by the common carrier over the private contractor? Please do not overlook the fact that the private carrier is providing the required service, on a schedule authorized by the Post Office Department, and at a reduced cost to the Department.

It is my opinion there is no instance that the Post Office Department needs to employ the common carrier to do a job that cannot be done by the private contractor, and for less money. The common carrier cannot compete with the private carrier, schedulewise, or costwise, and I believe the record will bear this out.

Some 26,000 of the 36,000 post offices are now solely dependent upon highway transportation, and many of the remaining 10,000 post offices have truck service as well as railroad service. There is an old saying that we cannot mix oil and water, and in my opinion we cannot mix mail, with freight and express, for handling over the highway if the best possible service is desired, and that is as it should be.

I doubt that the Post Office Department can cite a single case in the past where the needs of the service have not been provided by the private carrier, and certainly there can be no doubt but that the private carrier can, and will, meet all the needs of the future. Thep rivate carriers have been called upon many times to take over the handling of mail due to a railroad strike. They have always met the challenge, and in many cases have provided improved mail serv ice to the areas they were called upon to serve, and at less cost.

Again, I want to point out that present laws are adequate to provide any type of mail service the Postmaster General may need over the highways. The motor common carrier, as well as the private operator, is privileged to compete for the business, the way it should be. The motor common carrier does not need a law to establish him in the mail-hauling business over the highway. All he needs to do at the present time is meet the competition of the private oper ator. Present laws permit the common carrier to bid on mail routes at any time they are advertised for bid.

To single out the motor common carrier, exclusively, to do the job, as this bill apparently intends to do, will be discriminatory in every respect. Our present laws permit the jobs for handling of mail over the highways to be distributed throughout the areas where the service is needed. Furthermore, our present laws permit the Postmaster General to seek the man for the job, rather than building a job for the man.

The proposed legislation would give the Postmaster General, in my opinion. complete control of moving the mail over the highways between all important

points throughout the country, at a price he deems fair and reasonable, and to an operator of his own choosing. The private carrier, would not have an opportunity to transport mail, even though he might do a better job and do the job for less money, unless no certificated carrier was interested.

If this session of Congress deems such a law is needed in the interest of improved postal service, then the association wishes to recommend that consideration be given to granting present star route contractors a certificate of public convenience and necessity from the Interstate Commerce Commission or State regulatory body. This would permit the star route carrier to transport general commodities by motor vehicle on public highways in intrastate, interstate, or foreign commerce for compensation over regular routes, now in effect as authorized by the Post Office Department.

Such action would be in the interest of protecting present contractors now engaged in the transportation of U.S. mail over the highways, and who have been so engaged for many years. They have considerable money invested in equipment for the sole purpose of providing the Post Office Department with required postal service. This would protect all present contractors, and should insure their continued employment.

Furthermore, many of our contractors have reached the age where it would be almost impossible for them to get employment in industry, and to have their contracts discontinued, as no doubt this proposed change would do, would certainly impose a very serious physical and financial hardship on many of them.

This proposed change could destroy the entire star route mail carrier system, which has provided the Post Office Department the means of excellent mail service for many, many years. Procurement through advertising and competitive bidding is the time-honored method employed by the Government and why should the transportation of mail over the highway be the exception.

Rates for transporting mail via railroads and airlines are fixed by a regulatory body, thereby eliminating the competing aspect of the service preformed by these carriers. The Post Office Department will contend that this authority is needed to place it in the same position in highway transportation as it is in other modes of transportation. We submit that the situation prevailing in highway transportation is entirely different and cannot be equitably adminis tered in any way other than by competitive bidding as now required by existing laws.

As a matter of information, I wish to point out that the largest single mail contract operating on the highway today is running between Cleveland, Ohio, and Pittsburgh, Pa., with C. F. Waite, Inc., of Akron, Ohio, as contractor. This contract has been in effect since February 1, 1958, and I understand the annual pay exceeds $330,000. Under the proposed law, this contract could be canceled or permitted to expire, and the services of a certificated carrier employed at any rate the Postmaster General desired to pay. Mr. Waite is providing excellent service, but he is not a common carrier.

Mr. Chairman, I am happy to have been privileged to appear before you and your committee and present the views of the National Star Route Mail Carriers Association, and we are indeed grateful for the many courtesies extended to the association during the past years.

Also, I wish to assure this committee and officials of the Post Office Department, that we want to work with you and that we are always interested in legislation that will improve the position of contractors and benefit the postal service.

We respectfully urge this committee not to report this section of the bill favorably. This section of the bill is discriminatory against star route contractors and is proposed in total disregard of their best interests, and the best interests of the public.

Is not the best policy, after all, one that permits equal rights to all as guaranteed by the Constitution of the United States, which says that no person shall be deprived of life, liberty, or property, without due process of law. Thank you.

STATEMENT OF FRANK E. AIPLE, PRESIDENT, AIPLE TOWING CO., OF STILLWATER, MINN.

My name is Frank E. Aiple. I am owner and operator of Aiple Towing Co. with home offices in Stillwater, Minn. My business consists of the transportation by barge of bulk commodities exempt from regulation under section 303B

of part III of the Interstate Commerce Act. Measured in terms of equipment owned and operated and tonnage handled, I am one of the three largest carriers whose service is limited to carriage of exempt cargoes for others. In terms of area which I am equipped to serve and do continuously serve, I believe I am the largest. My statement is directed to the pending bills, namely, H.R. 11583 and H.R. 11584.

Since my 20 or more years' experience in the transportation business has been devoted primarily to matters relating to the transportation of exempt cargoes, and since ample testimony has been supplied which covers all phases of each of the bills in general, I will confine my remarks to that portion of H.R. 11583 which would exempt rail carriers from minimum rate regulation in the transportation of bulk commodities.

When the Transportation Act was adopted in 1939, Congress foresaw that exempt carriage of bulk commodities by water would be beneficial, rather than harmful to the American transportation picture. By no means can the thinking which resulted in that exemption be applied now to the exemption requested by the rails. The two modes of transportation differ widely in scope, magnitude, and geographical limitation. Criteria which apply to one, do not apply to the other. As a matter of fact, there is very little similarity between the two modes of transportation. The ratemaking policy of a water carrier (all of whose competitors must use the same thoroughfare) cannot be considered to be a satisfactory ratemaking policy for a railroad, one of whose competitors might move twice the distance to serve the same points. Railroads presently control 75 percent of all the freight traffic within the United States, as compared to the mere 8 percent controlled by water carriers. So that the railroads would be handed a tool which would enable them to exercise full and absolute control over such freight and thereby destroy the water carriers as an effective arm of interstate commerce. The exemptions which have been available to the water carriers have acted only as a leavening influence on the overall transportation rate picture.

I would like to cite two examples that are illustrative of a typical situation in which the railroads control traffic by rate manipulation and thereby keep the bargelines in a position of disadvantage: Granite City Steel Co., of Granite City, Ill., for many years purchased iron ore off the Cayuna range in north central Minnesota for shipment all rail. Since direct distance between the head of navigation of the Mississippi River in the Twin Cities area to the Cayuna range is 150 miles, and the direct distance from the Cayuna range to Granite City, Ill., is something over 600 miles (or four times the distance), sought to set up a rail-barge movement which would result in lower transportation costs for this one consumer.

One of the railroads serving the Cayuna range is the Great Northern; and one of the railroads serving Stillwater, Minn., where I proposed to put in a transfer facility, is the Northern Pacific. The two railroads use the same roadbed for a major portion of the distance between these two points. At numerous meetings with the officials of both roads (supported by a request for rail-barge service by Granite City Steel Co.) for a rail rate from the Cayuna range to Stillwater, I failed to get either road even to agree to submit a proposed rate to the rate committee.

In another case I investigated the possibility of developing a barge-rail movement of salt cake from Weeks Island and Avery Island, points approximately 150 miles west of New Orleans, La., to Jacksonville, Fla., via Tampa, Fla. This commodity now moves all rail at a rate of $11.50 per net ton. The current rail rate which salt cake would move from Tampa to Jacksonville is $10.20 per net ton. I hold no hope whatsoever that a request by me on the prospective shipper for a more favorable rail rate from Tampa to Jacksonville will meet with any

success.

I mention these two cases as being two with which I was closely associated. Every issue of transportation and traffic periodicals mention similar cases. In both cases described the commodity was one which is exempt when handled by water, and regulated when handled by rail. In each case, though operating under regulation, the railroads are able to keep the difference between the long and the short haul so low that it was impossible for me, even though not regulated, to participate in the traffic. If the rails can control traffic to this extent under regulation, it is certain that given the freedom offered under the proposed legislation would guarantee absolute control by them. The outcome would be higher rates in certain areas to cover losses where rates were lowered to force water carriers out of business, with eventual higher rates everywhere after the