[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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              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

                              ----------                              
                                                                   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

                              ----------                              


                         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:]
    


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    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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