here this morning, and to join the other members in complimenting you on the fine presentation you have made on this highly important question.

Secretary HODGES. Thank you, Mr. Chairman.

The CHAIRMAN. The committee is adjourned.

(Whereupon, at 12:30 p.m., the committee adjourned, to reconvene at 10 a.m., Wednesday, June 27, 1962.)

TRANSPORTATION ACTS AMENDMENTS-1962

THURSDAY, JUNE 28, 1962

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C.

The committee met, pursuant to notice, at 10:10 a.m., in room 1334, New House Office Building, Hon. Oren Harris (chairman of the committee) presiding.

The CHAIRMAN. The committee will come to order.

The first witness this morning will be the Honorable Robert B. Conrad, Commissioner of Transportation and Communications Services of the General Services Administration.

Mr. Conrad, we will be glad to have your presentation. I believe you have with you Mr. Malcolm D. Miller, assistant to the Commis

sioner.

Mr. CONRAD. Yes, sir.

The CHAIRMAN. We are pleased to have him appear with you.

STATEMENT OF HON. ROBERT B. CONRAD, COMMISSIONER OF TRANSPORTATION AND COMMUNICATIONS SERVICES, GENERAL SERVICES ADMINISTRATION; ACCOMPANIED BY MALCOLM D. MILLER, ASSISTANT TO THE COMMISSIONER

Mr. CONRAD. Mr. Chairman and members of the committee: My name is Robert B. Conrad, Commissioner of Transportation and Communications Services of the General Services Administration. I am accompanied by the Deputy Commissioner of the Transportation and Communications Services, Mr. Malcolm D. Miller.

Under the Federal Property and Administrative Services Act of 1949 (63 Stat. 383; 40 U.S.C. 481), the General Services Administration is interested in transportation and traffic management on behalf of executive agencies from the viewpoint of a user of transportation services.

Therefore, the Administrator of General Services, Mr. Bernard L. Boutin, had planned to appear before your committee in support of H.R. 11583 and H.R. 11584, bills which would implement certain recommendations contained in the President's message to the Congress of April 5, 1962, concerning the transportation system of our Nation. However, unforeseen circumstances have prevented him from doing so and he has asked me to represent him at today's hearing and express for him the views and comments of the General Services Administration on these two bills.

Before I do so, however, Mr. Chairman, I wish to convey to you the Administrator's regrets for not being able to appear before your

committee today and to express to you our mutual appreciation for allowing me to testify in his behalf.

In discussing the administration's proposed transportation legislation now under consideration by your committee, I shall deal with the two bills in the order of their numbers, first H.R. 11583, and then H.R. 11584.

As you know, H.R. 11583 would exempt carriers from minimum rate regulation for transportation services which are competitive with those furnished by nonregulated carriers, particularly in movement of agricultural and bulk commodities. The General Services Administration is in complete accord with the objectives of this proposal and recommends its enactment for the following reasons:

First: Consumers, including the Government as a user of transportation services, would benefit both directly and indirectly from reduced rates which should result from competition and freedom of enterprise under the proposed exemptions. We estimate that about 76 percent of the Government's rail carload shipments, or about 642,700 cars of freight per year, with freight charges of about $134 million per year, would come within the proposed exemptions. Additionally, the Government and other consumers would benefit from price reductions in products manufactured from the exempt commodities to the extent that transportation rate reductions would enable sellers to reduce costs and prices. The Government is particularly able to obtain such reductions in prices through its use of advertised bid procedures and procurement in large quantities.

Second: Existing rate regulation is burdensome, unfair, and tends to be impractical for regulated carriers which face competition from exempt transportation. The most harmful effect upon regulated carriers is diversion of freight to exempt carriers. In turn, this diversion of traffic affects consumers which use regulated carriers, thereby leading them to seek general revenue rate increases which consumers such as the Government must pay.

With respect to H.R. 11584, which would provide specific actions for strengthening of the common carrier system and improving competitive conditions, the General Services Administration has a special interest in section 9 of the bill.

This section would authorize negotiation and contracting for a system of simplified rates. Such a system would be highly advantageous to the Government in terms of economy, efficiency, and service for the following reasons:

(1) Need to change slow and costly procedures.-The complications of commercial tariffs make rate determinations slow and expensive, with the result that traffic management is not used as fully as is desirable in Government procurement and use of common carrier services. Simplified rates would enable Federal agencies to unite broad traffic management procedures with procurement practices, thereby resulting in savings to the Government.

(2) Need for use in automated procedures.-The present tariff structure is unsuited for automatic data processing (ADP) because there is lacking a "system" which would enable use of the computer ability of machine data processing. Present complications limit use of rates in computers to memory storage of the rates, and to recall of the data when needed. The numerous and frequent changes in tariff rates by

the carriers make impractical the use of ADP procedures to supply rate information.

(3) Need for emergency tariffs.-Simplified rates are needed to provide a system of rates readily usable in the event of national defense emergency operation of the Government from relocation sites and temporary offices which would not have access to tariff libraries and rate experts.

WHAT IS MEANT BY THE TERM "SIMPLIFIED RATES"

By the term "simplified rates," we refer to a body of common carrier prices established according to a system which is consistent and logical, which minimizes rate differences, and which is stable because frequent changes are unnecessary. Examples of simplified rates, already in existence, are the class rate systems of common carriers. While these class rates are in use, their effectiveness as simplified rates has been destroyed by the publication of numerous exceptions ratings and commodity rates, and class rates have become excessive for general application. Parcel post has a system of simplified rates. "Freight-all kinds" (FAK) rates, in a variety of forms, have been published by carriers with resulting simplification for shippers. Simplified rates were established by military services in Europe and other occupied zones as part of the World War II operations by use of simplified classifications and mileage rates for determining transportation payments.

For GSA, many motor carriers have published numerous simplified "freight—all kinds" (FAK) rates in section 22 quotaotions applicable from Federal Supply Service depots to other Federal agencies. These rates are about 30 percent lower than the class rates and carry about 70 percent of the depot outbound traffic. A primary advantage of the GSA FAK rates is the lack of complication arising from differences in transportation charges between commodities in the mixtures described on each bill of lading. Under FAK rates, transportation charges vary only by weight and distance. These rates are well adapted to the automated procedures developed for use in GSA depots, which provide for maximum consolidation of numerous commodities in the same shipment, and for machine preparation of bills of lading and other shipping papers.

NEED FOR LEGISLATION

While rate simplification for Government traffic is progressing under section 22 of the Interstate Commerce Act, that statute limits special Government rates to reductions under commercial tariff rates. There is need to extend rate simplification into greater use of "averaging" methods which would produce new rate systems making both reductions and increases of commercial tariff rates, and the proposed legislation is necessary for this purpose. Such simplified systems should not, on the average or overall, result in increases of total charges to the Government. Use of such simplified rates should produce large savings to the Government in two ways:

(1) Savings in transportation costs from broad application of traffic management principles to Government procurement and shipping, made possible by ready access to rate data and information without laborious and expensive rate research in tariffs; and

(2) Savings from reductions in overhead costs to the Government involved in handling of commercial tariff rate complications. Common carrier rate data has numerous uses for Government agencies. Rates are needed in evaluation of cost feasibility studies, such as reclamation projects. Rates enter into determination of site locations for Government warehouses and other installations, and into planning for purchase, warehousing, and distribution of supplies. Rates are used to determine values of Government property in terms of market prices at distant cities. Rates are necessary in evaluation of bids for Government contracts and determinations whether to buy f.o.b. origin or destination. Rates are utilized in determinations of economical transportation routes, lowest-cost type of carrier to be selected, and the most economical ports of entry or export. Rates form the basis for committing appropriated funds for costs of transportation involved in Government transactions. Rates must be reviewed to determine whether negotiations are justified to obtain reasonable reductions. All of these needs are in addition to determinations of the actual charges for shipments and for audit of freight bills.

The possibilities for savings in these areas are enormous. The fiscal year 1963 budget of the Federal Government shows estimated expenditures of more than $2.6 billion for "Transportation of things." This amount is only part of the Government's freight costs, because the figures do not include freight charges on commodities shipped to or from the Government by contractors which include their freight costs in delivered prices or in contract performance expenses. In addition, there are large overhead costs in Government operations involved in paperwork handling of the complicated transactions involved in transportation of Government freight. Savings in costs to the Government are possible in all these areas by means of traffic management techniques which could be applied broadly to Government operations through use of simplified rates. Savings of only 1 percent in total budget estimates for freight transportation would be more than $25 million per year. Savings to this extent are possible through full use of traffic management applied to Government use of transportation.

The bill provides that the Government may negotiate and contract for simplified rates. From this authorization simplified rates would be produced through joint efforts and negotiations of both the carriers and the Government. By the contracts, the parties would agree to charges under the simplified rate schedules, regardless of the commercial rates, thereby providing certainty in the simplified rate structure and incentive for establishment of rates advantageous to the Government.

NATIONAL DEFENSE EMERGENCY NEEDS

A national defense emergency situation could develop to a point where the complicated commercial tariff system would become an impediment to emergency transportation. Under extreme emergency conditions, the complicated commercial tariff system undoubtedly would be abandoned as unworkable. On the other hand, a simplified