oversight

Site Selection and Contract Awards for Construction and Mechanization of the New York Bulk and Foreign Mail Facility

Published by the Government Accountability Office on 1971-10-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

-    7   '   /   IMSTRICTED -     Not to be released outside the     erl \ /
                 Aeoounting Office exeept on the bash of specificl1ppr*o
                 by the Offle. of Leglslhetve Liaison, a record of which bt
                 by the Distribut.on Section, Puhlications Branch, OA




    Site Selection And Contract
    Awards For Construction
    And Mechanization
    Of The New York Bulk
    And Foreign Mail Facility..-,.,.
    United States Postal Service




                   BYTHECOMPTROLLER
                    'G::,ENERALS%


    BY THE COMPTROLLER GENERAL
    OF' THE UNI TED S TATES



                                             OCT. 29, 19 7       1
QUi.Z1~~.         COr..'TROLLER GENERAL OF THE UNITED STATWS
                               WASHINGTON. D.C. 0




B-171594



Dear Mr. Gross:

       In response to your request of December 17, 1970, and in accor-
 dance with subsequent arrangements with your office, we have made a
 review of the site selection and contract awards for the construction
 and mechanization of the United States Postal Serrice' s New York
Bulk and Foreign Mail Facility located in Jersey City, New Jersey.
We have given emphasis to cer ain allegations regarding cost overruns
on the construction contract and the selection of the property owned by
the Penn Central Railroad as the site for the postal facility. The re-
sults of our review are presented in detail in the accompanying report
and are summarized in the digest.

       We have not requested the Postal Service, the firms, or the in-
dividualr, mentioned in the report to review or formally comment on
the information in the report.

      As agreed to by your office, we are transmitting a copy of this
report to Congressmen Kenneth J. Gray, George H. Mahon, and
Robert N. C. Nix.

                                          Sincerely yours,




                                         Comptrollez General
                                         of the United States

The Honorable H. R. Gross
House of Representatives




                    50TH ANNIVERSARY      1921-1971
COMPTROLLER GENERAL 'S REPORT TO           SITE SELECTION AND CONTRACT AWARDS
THE HONORABLE H. R. GROSS                  FOR CONSTRUCTION AND MECHANIZATION OF
HOJ$'E OF REPRESENTATIVES                  THE NEW YORK B;'K AND FOREIGN MAIL
                                           FACILITY
                                           United States Postal Service   B-171594

DIGEST

WHY THE REVIEW WAS MADE

     At the request of Congressman H. R. Gross, the General Accounting Office
     (GAO) reviewed the selection of the site and the contract awards for the
     construction of and procurement of equipment for the New York Bulk and
     Foreign Mail Facility (New York bulk facility) located in Jersey City,
     New Jersey. Of particular interest to the Congressman were allegations
     that the cost of the project would significantly exceed the initial cost
     estimates and matters relating to the selection of property owned by the
     Penn Central Railroad as the site for the postal facility.
     The New York bulk facility is part of the United States Postal Service's
     planned National Bulk Mail System consisting of 21 bulk mail centers nd
     12 service facilities. Only bulk mail, such as parcels and newspaper ,
     will be processed in these facilities. The Postal Service believes that
     such facilities will permit it to use modern machine-sorting techniques
     to process mail, consolidate mail for long-distance transportation, im-
     prove service to customers, and lower overall costs. The Postal Service
     plans to spend about $1 billion to build this network. The Postal Ser-
     vice has estimated that the use of the New York bulk facility will re-
     sult in annual operational cost reductions of about $33.9 million.
     In February 1971 the Postal Service gae the U.S. Army Corps of Engineers
     responsibility for construction of the project.
     Because of the lack of documentation to support the Postal Service's ac-
     tions on matters involving the New York bulk facility, GAO had to rely,
     to a great extent, on interviews with postal officials and others in-
     volved in the project to obtain information pertinent to its review.
     In accordance with arrangem*nts made with Congressman Gross' office, we
     have not requested the Postal Service or the firms and other individuals
     mentioned in the report to review or comment on the information in this
     report.

FINDINGS AND CONC.rUSIONS

     Site seelecton

     GAO believes that the Postal Service eliminated alternative properties
     from consideration as potential sites for the postal facility before
     Tear Sheet                        1              OCT. 29,1 9 7 1
sufficient data had been obtained to form a reasonable judgment that the
property acquired was the most feasible site under corsideration.
The site requirement was increased from 80 acres to 110 acres without ade-
quate evaluation by the Postal Service of the architect and engineering
firms' recommendations for the increase. The increase in acreage size
eliminated one site of 80 acres from consideration.
Another parcel, comprising 260 actvs, was eliminated from consideration
without obtaining adequate data on subsoil conditions, price, and accessi-
bility for operational purposes. A real estate consultant, who formerly
worked for the Post Office Department as Assistant Postmaster General for
Facilities, was hired by the Postal Service to help locate land for the
facility. The consultant participated in the site selection and acquisi-
tion process.
Site preparation
The Postal Service awarded a contract for piling, amounting to about
$4.2 million, without obtaining more information on soil conditions to
better estimate pile lengths. The contract provided for a fixed price
for sinking about 6,500 piles on the site at an average depth of 110 feet
and for unit prices for adjusting the contract price if piles were sunk
at depths of either more or less than 1lO'feet.
After the piling work began, itwas discovered that, because of soil condi-
tions, design of the piles had to be changed and that 162,000 additional
lineal feet of piling had to be driven. Therefore the Postal Service's
costs of piling increased by about $2.1 million, or more than 50 percent
over the initial contract amount. The Postal Service's desire to quickly
get the project completed appears to have been the overriding consider-
ation in not making a more complete study of soil conditions.
GAO believes that the Postal Service should have obtained additional data
on soil conditions to assist it in preparing bid specifications for pil-
ing. GAO believes also that the Postal Service should have required bids
on the basis cf the price for piling each foot, which would have provided
more assurance that the most economical bid was selected than did the
basis on which the contract was awarded.
Selection of contractors for architect
and engineering services
Two architect and engineering firms were selected b.' the Postal Service to
compete for the final design contract for the New York bulk facility. The
firm selected for the final design had a contract totaling about $4.2 mil-
lion, and the unsuccessful firm was paid $640,000 fc:'
                                                     its preliminary de-
sign work.
GAO believes that the actions taken by the Postal Service in selecting
the firms to compete for the design contract and in making the award were
not adequate.

                                 2
Project costs and bid p otest

The $42.6 million estimate of the general construction contract costs of
the project by the architect and engineering firm was accepted by the
Postal Servi-e without sufficient evaluation, and, when the lowest bid
received amounted to about $105 million, the bid was rejected because it
was too high in relation to the estimate. The sizable underestimation
of costs was attributed largely to not recognizing that many labor over-
time hours would be required to meet the Postal Service's compressed
time s .edule for completion of the project.
Revised estimates then were made, and, after readvertisement, contracts
totaling $85.5 million were awarded. The total project ccsts (site, ae-
sign, construction, and mechanization) originally were estimated at
$62.3 million, and the latest estimate amounts to $130.1 million--rep-
resenting an increase of $67.8 million, or about 109 percent.
GAO believes that, if the Postal Service had obtained information that
was available on the construction activities and on the labor market in
the New Jersey area, it could have prepared initially more reliable esti-
mates of construction costs and more realistic construction time sched-
ules. Such information could have provided the Postal Service with a
better basis for soliciting bids and might have expedited the completion
of construction.
The second lowest bidder filed a protest with the Comptroller General of
the United States because the successful bidder did not comply with per-
formance bond requirements. GAO presently is considering the protest.
Sole-source procurement of
parceZ-sorting machines
 A contract amounting to $8.4 million for equipment critical to the eco-
 nomical operation of the facility was awarded on a sole-source noncompeti-
 tive basis, primarily because the contractor was the only known source
 of the equipment which could be supplied without any development work.
 The Postal Service's records indicate, however, that Postal Service offi-
 cials were aware before the contract was awarded that development work
 was necessary. As of September 1971, the equipment would not work effi-
 ciently and further devel?,ment work was necessary.

 A preaward survey was not made to determine the prospective contractor's
 capability to satisfactorily perform, and GAO believes that adequate mea-
 sures were not taken to evaluate the contract price.
 A Postal Service official who participated in the decision to award the
 contract to the company was employed formerly by the company as a con-
 sultant.




  Tear Sheet
                                   3
                          Con tents
                                                        Page
DIGEST                                                   1
CHAPTER

   1       INTRODUCTION                                  4
   2       SITE SELECTION                                6
   3       CONTRACTS RELATING TO SITE PREPARATION       14
   4       SELECTION OF CONTRACTORS FOR ARCHITECT AND
             ENGINEERING SERVICES                       21
   5       PROJECT COSTS AND BID PROTEST                27
               Project costs                            27
               Bid protest                              32
   6       SOLE-SOURCE PROCUREMENT OF PARCEL-SORTING
             MACHINES                                   33
   7       SCOPE OF REVIEW                              41
APPENDIX

   I       Letter dated December 17, 1970, from Con-
             gressman H. R. Gross to the Comptroller
             General of the Uniited States              43
  II       Map showing preferred area for the postal
             facility                                   44

 III       Map showing the general location of site
             selected                                   45
  IV       Map showing the principal sites considered
             by the Postal Service                      46
  V        Schedule of estimated total cost by con-
             tract and type of work for the New York
             Bulk and Foreign Mail Facility project
             as of September 30, 1971                   47
APPENDIX                                                    Pane

  VI       Current site plan                                 48

 VII       Building configuration                            49

VIII       Aerial view of the facility at September
             1971                                            50


                         ABBREVIATIONS


ACME       Association of Consulting Management Engineers

A-E        Architect and engineering

DS/SD      Drake Sheahan/Stewart Dougall, Inc.

GAO        General Accounting Office

GSA        General Services Administration
rOMPtOLLER GENERAL S REPORT TO              SITE SELECTION AND CONTRACT AWARDS
THE HONORABLE H. R. GROSS                   FOR CONSTRUCTION AND MECHANIZATION OF
HOUSE OF REPRESENTATIVES                    THE NEW YORK BULK AND FOREIGN MAIL
                                            FACILITY
                                            United States Postal Service B-171594

DIGEST

WHY :"HE REVIEW WAS MAD'

     At the request of Congressman H. R. Gross, the General Accounting Office
     (GAO) reviewed the selection of the site and the contract awards for the
     construction of and procurement of equipment for the New York Bulk and
     Foreign Mail Facility (New York bulk facility) located in Jersey City,
     New Jersey. Of particular interest to the Congressman were allegations
     that the cost of the project would significantly exceed the initial cost
     estimates and matters relating to the selection of property owned by the
     Penn Central Railroad as the site for the postal facility.
     The New York bulk facility is part of the United States Postal Service's
     planned National Bulk Mail System consisting of 21 bulk mail centers and
     12 service facilities. Only bulk mail, such as parcels and newspapers,
     will be processed in these facilities. The Postal Service believes that
     such facilities will permit it to use modern machine-sorting techniques
     to process mail, consolidate mail for long-distance transportation, im-
     prove service to customers, and lower overall costs. The Postal Service
     plans to spend about $1 billion to build this network. The Postal Ser-
     vice has estimated that the use of the New York bulk facility will re-
     sult in annual operational cost reductions of about $33.9 million.
     In February 1971 the Postal Service gave the U.S. Army Corps of Engineers
     responsibility for construction of the project.
     Because of the lack of documentation to support the Postal Service's ac-
     tions on matters involving the New York bulk facility, GAO had to rely,
     to a great extent, on interviews with postal officials and others in-
     volved in the project to obtain information pertinent to its review.
     In accordance with arrangements made with Congressman Gross' of'ice, we
     have noc requested the Postal Service or the firms and other in\'ividuals
     mentioned in the report to review or comment on the information in this
     report.

FINDINGS AND CONCLUSIONS

     Site sel, ction

     GAO believes that the Postal Service eliminated alternative properties
     from consideration as potential sites for the postal facility before

                                        I
sufficient data had been obtained to form a reasonable judgment that the
property acquired was the most feasible site under consideration.
The site requirement was increased from 80 acres to 110 acres without ade-
quate evaluation by the Postal Service of the architect and engineering
firms' recommendations for the increase. The increase in acreage size
eliminated one site of 80 acres from consideration.
Another parcel, comprising 260 acres, was eliminated from consideration
withoJt obtaining adequate data on subsoil conditions, price, and accessi-
bility for operational purposes. A real estate consultant, who formerly
worked for the Post Office Department as Assistant Postmaster General for
Facilities, was hired by the Postal Service to help locate land for the
facility. The consultant participated in the site selection and acquisi-
tion process.
Site preparation
The Postal Service awarded a contract for piling, amounting to about
$4.2 million, without obtaining more information on soil conditions to
better estimate pile lengths. The contract provided for a fixed price
for sinking about 6,500 piles on the site at an average depth of 110 feet
and for unit prices for adjusting the contract price if piles were sunk
at depths of either more or less than 1lO'feet.
After the piling work began, it was discovered that, because of soil condi-
tions, design of the piles had to be changed and that 162,000 additional
lineal feet of piling had to be driven. Therefore the Postal Service's
costs of piling increased by aDout $2.1 million, or more than 50 percent
over the initial contract amount. The Postal Service's desire to quickly
get the project completed appears to have been the overriding consider-
ation in riot making a more complete study of soil conditions.
GAO believes that the Postal Service should have obtained additional data
on soil conditions to assist it in preparing bid specifications for pil-
ing. GAO believes also that the Postal Service should have required bids
on the basis of the price for piling each foot, which would have provided
more assurance that the most economical bid was selected than did the
basis on which the contract was awarded.
Selection of contractors for architect
and engineering services
Two architect and engineering firms were selected   by the Postal Service to
compete for the final design contract for the New   York bulk facility. The
firm selected for the final design had a contract   totaling about $4.2 mil-
lion, and the unsuccessful firm was paid $640,000   for 4 ts preliminary de-
sign work.
GAO believes that the actions taken by the Postal Service in selecting
the firms to compete for the design contract and in making the award were
not adequate.

                                  2
Project costs and bid protest
The $42.6 million estimate of the general construction contract costs of
the project by the architect and engineering firm was accepted by the
Postal Service without sufficient evaluation, and, when the lowest bid
received amounted to about $105 million, the bid was rejected because it
was too high in relation to the estimate. The sizable underestimation
of costs was attributed largely to not recognizing that many labor over-
time hours would be required to meet the Postal Service's compressed
time schedule for completion of the project.
Revised estimates then were made, and, after readvertisement, contracts
totaling $85.5 million were awarded. The total project costs (site, de-
sign, construction, and mechanization) originally were estimated at
$62.3 million, and the latest estimate amounts to $130.1 million--rep-
resenting an increase of $67.8 million, or about 109 percent.
GAO believes that, if the Postal Service had obtained information that
was available on the construction activities and on the labor market in
the New Jersey area, it could have prepared initially more reliable esti-
mates of construction costs and more realistic construction time sched-
ules. Such information could have provided the Postal Service with a
better basis for soliciting bids and might have expedited the completion
of construction.
The second lowest bidder filed a protest with the Comptroller General of
the United States because the successful bidder did not comply with per-
formance bond requirements. GAO presently is considering the protest.
Sole-source procurement of
parcei-sorting machines
A contract amounting to $8.4 million for equipment critical to the eco-
nomical operation of the facility was awarded on a sole-source noncompeti-
tive basis, primarily because the contractor was the only known source
of the equipment which could be supplied without any development work.
The Postal Service's records indicate, however, that Postal Service offi-
cials were aware before the contract was awarded that development work
was necessary. As of September 1971, the equipment would not work effi-
ciently and further development work was necessary.
A preaward survey was not made to determine the prospective contractor's
capability to satisfactorily perform, and GAO believes that adequate mea-
sures were not taken to evaluate the contract price.
A Postal Service official who participated in the decision to award the
contract to the company was employed formerly by the company as a con-
sultant.




                                 3
                         CHAPTER 1

                       INTRODUCTION
     In December 1967 Morgan Postal Station in New York City
was damaged significantly by fire, which caused the Post Of-
fice Department (Postal Service) to plan major renovation to
the station. Ihis station handled bulk mail and other
classes of mail.

     On April 8, 1969, the Postal Service awarded a contract
to the marketing and physical distribution consulting firm
of Drake Sheahan/Stewart Dougall, Inc. (DS/SD), to conduct
a study of present and projected mail flow in the New York
metropolitan area. The primary objective of the study was
to determine whether a reasonable alternative to the pro-
posed Morgan Station renovation was available for handling
bulk mail. This determination was to take into considera-
tion cost, service, and employee working conditions. The
resulting report, dated May 22, 1969, recommended that an
alternative plan for a new bulk-mail facility be developed.

     On June 2, 1969, DS/SD was retained by the Postal Ser-
vice to study the mail flow in the iHew York metropolitan
area and to make specific recommendations for improving
postal operations. This study resulted in recommendations
by DS/SD that separate specialized facilities be established
in a specified area of northern New Jersey (see map, app. II)
to handle foreign-surface and bulk mail, respectively.
DS/SD's reports dated July 31, 1969, recommended site sizes
of about 4.0 and 36 acres for a foreign surface mail facility
and a bulk mail facility, respectively.

     The New York bulk facility in Jersey City, which is un-
der construction, is part of the Postal Service's planned
National Eilk Mail System consistirg of 21 bulk mail centers
and 12 service facilities. Only bulk mail, such as parcels
and newspapers, will be processed in these facilities. The
Postal Service believes that such facilities will permit it
to use modern machine-sorting techniques to process mail,
consolidate mail for long-distance transportation, improve
service to customers, and lower overall costs. The Postal
Service plans to spend about $1 billion to build this net-
work. It also expects to reduce operational costs by about
$300 million annually when the network is completed.
                             4
     The prospectus for the New York bulk facility was ap-
proved by the Senate and House Committees on Pxblic Works on
May 26, 1970, and June 23, 1970,respectively. The Frospec-
tus estimated that site, design, and construction costs
would total $53.8 million.

     Because of the lack of documentation to support the
Postal Service's actions on matters included in this report,
we had to rely, to a great extent, or, interviews with postal
officials and others involved in this project to obtain in-
formation pertinent to our review.




                             S
                          CHAPTER 2

                       SITE SELECTION

      We believe that the Postal Service did not obtain
 ficient data on the sites being considered for the     suf-
                                                    New York
 bulk facility before purchasing the Penn Central site.

     Postal Service records showed that, between April
                                                         and
September 1969, site investigations were made to
                                                  determine
the availability of two 30-acre tracts or one 6 0-acre
                                                        tract
of land as suitable sites for a foreign surface mail
                                                       facility
and a bulk mail facility. During this period 20
                                                  sites, which
each contained a minimum of 60 acres, were studied
                                                    by the
Postal Service. These sites were owned by either
                                                   municipal-
ities or private parties. Some were part of industrial-
park complexes.

     The records showed also that the Postal Service
reviewed the suitability of these sites on the basis had
                                                     of
"location, mileage, time, transportation, and availability
for immediate use to construct postal facilities."

     Late in September 1969 the Assistant Postmaster
                                                      General
for Facilities determined that a consolidated site
                                                    should
be used and that an 80-acre site would be needed
                                                 to build a
facility for processing bulk and foreign surface
                                                 mail. He
told us that his determination was based on DS/SD's
                                                     recom-
mendation that site sizes of 40 and 36 acres would
                                                    be needed
for a foreign surface mail facility and a bulk
                                               mail facility,
respectively.

     On the basis of the increased site size, three sites
were designated by postal personnel for further
                                                 considera-
tion. The three sites were a 300-acre tract located
                                                       at the
Caven Point Army Terminal in Jersey City; a 2 60-acre
                                                       tract
located in Secaucus, New Jersey, and known as the
                                                   Mori-
Galbreath property; and an 8 0-acre tract also located
                                                        in
Secaucus and known as the Bigley property. A survey
                                                       team
of postal personnel found the Caven Point Army
                                                Terminal
site to be unacceptable because of serious transportation
access problems and possible flooding problems,
                                                 and it was
questionable whether soil conditions would support
                                                    heavy
industrial construction.


                             6
     By memorandum dated September 22, 1969, a Postal Service
Field Liaison Officer, who was a member of the site survey
team, recommended the 80-acre tract owned by William J. Bigley
Corporation as the best of the three sites. This recommen-
dation was based on information provided by the Postal Ser-
vice Regional Real Estate Officer assigned to the site
investigating team.

     The Postal Service Washington Headquarters Director,
Office of Real Estate, in a memorandum to the Assistant
Postmaster General for Facilities, stated that the Bigley
property appeared to be the best of the available sites.
Postal Service records indicated an asking price for this
property of $75,000 an acre, subject to negotiation. This
asking price subsequently was reduced by Bigley to $55,000
an acre. The Postal Service did not enter into price nego-
tiations with Bigley; therefore we did not have information
to show what the selling price might have been.

     On September 19, 1969, the Assistant Postmaster General
for Facilities retained the services of Mr, Ormonde A. Kieb
(formerly Assistant Postmaster General, Bureau of Facilities,
1953-59) as an expert consultant in real estate to assist
the Postal Service in obtaining a site for the proposed fa-
cility. Mr Kieb was presedent of Kieb, Turnbull & Jewett
Corporation, Newark, New Jersey, a real estate consultant
firm. Mr. Kieb was employed on a "per day basis" and was
paid at a rate of $107.92 a day when actually employed dur-
ing the period September 19, 1969, through January 13, 1971.

     In an October 2, 1969, memorandum, the Postal Service
Field Liaison Officer stated that he had teen directed by
the Assistant Postmaster General for Facilities to meet
with Mr. Kieb to view two property sites which had not been
considered previously as contending sites by the Postal Ser-
vice and that selection and control of a site had to meet
a deadline of October 15, 1969.

     One of the properties was rejected, but the other prop-
erty was added to the list of possible sites. This site,
consisting of more than 200 acres, was owned by Manor Real
Estate Company, a wholly owned subsidiary of the Penn Central
Railroad. We were informed by Mr. Kieb that he had been in
contact with Penn Central officials who had informed him that
the property was available.

                             7
     On October 3, 1969, Mr. Kieb and the Postal Service
Field Liaison Officer visited the Bigley property to make
an onsite inspection. A memorandum on the visit showed
that, on the basis of their visual inspection of the prop-
erty, they believed it to be a suitable site for postal use.

     The October 2, 1969, memorandum stated also that
Mr. Kieb, acting as a consultant, was to obtain information,
such as aerial photographs, on the Mori-Galbreath and Penn
Central sites for use by the Postal Service in deciding on
a site.

      A Mori-Galbreath internal memorandum of a telephone
conversation with Mr. Kieb, dated October 2, 1969, stated
that:

     "A rail siding to connect with Penn Central is a
     requirement as is access via several streets.
     Public transportation is important, since 9,000
     employees (maniy coming from New York City) will be
     employed. A separate study is being made to deter-
     mine if direct bus service from P.A. [Port Author-
     ity] Bus Terminal to facility is warranted."

     We did not find any evidence that indicated that the
Postal Service was requiring that sites for the New York
bulk facility have rail sidings connected to the Penn Central
Railroad and access via several streets. In response to
Mr. Kieb's request, Mori-Galbreath furnished, on October 8,
1969, certain infoimation about the property, such as aerial
photographs and topography maps.

     On October 10, 1969, the Postal Service Field Liaison
Officer described the features and pros and cons of the
three sites under consideration to the Postal Site Committee
which was composed of Mr. Kieb and interested members of
the Bureau of Research and Engineering and the Bureau of
Facilities. (See apps. III and IV for general location of
sites.) The meeting resulted in the elimination by the
Assistant Postmaster General for Facilities of the Mori-
Galbreath property from further consideration as a possible
location for the project.




                              8
     On the basis of our review of Postal Service records,
we could not deternine why the Mori-Galbreath property had
been eliminated from further consideration. The Postal
Service Field Liaison Officer told us that the site had
been eliminated because of several disadvantages, such as
unfavorable soil conditions, limited accessibility, and
indications of a high asking price for the property.

     It appears to us that these potential disadvantages
were not adequately examined into by postal officials be-
fore making a decision to drop the property from con.idera-
tion. Neither a survey of the soil condition nor a study
of accessibility was made. Concerning the possibility of
a high asking price, we were informed by a representative
of the property owner that:

     "*** no price was ever quoted [to the Postal Ser-
     vice] for the sale or lease of the property. We
     anticipated *** that this would be a matter of
     discussion and negotiation."

     Mr. Kieb wrote a letter to the owners of the Mori-
Galbreath property on October 21, 1969, informing them. that
the Postal Service was no longer interested in their prop-
erty. Mr. Kieb told us that this advice had been given as
a matter of business courtesy.

     By eliminating the Mori-Galbreath property, the Postal
Service was limiting its attention, on the basis of an 80-
acre requirement, to the two remaining tracts of land--the
Bigley property and the Penn Central property.

     On October 17, 1969, the Postal Service retained the
firm of Woodward-Clyde & Associates, Inc., consulting engi-
neers and geologists, at a fee of $750, to perform a soil
study of the Bigley and Penn Central properties to determine
which property would provide the best subsoil conditions
for constructing the facility   The survey report, dated
October 24, 1969, concluded tlat the Penn Central property
was more suited for the proposed postal use than the Bigley
property. The report, however, cited certain severe limi-
tations to the scope of the study, as follows:




                             9
     "The opinions and conclusions presented in this
     report are based on a review of information in
     our files and that furnished by the Post Office
     Department. Some of this information is very old
     and a large percentage of this old data was not
     verified in the field for this preliminary report.
     A preliminary site visit was made, but time re-
     quirements precluded anything more than a cursory
     visual examination of the surficial site condition."
     (Underscoring supplied.)

     It appears to us that the above qualifications on the
scope of the survey work cast serious doubts on the reli-
ability and usefulness of the conclusions. Nevertheless it
seems that the Postal Service made no further efforts to
determine the relative desirability of the Bigley property,
since all subsequent significant matters on site selection,
such as appraisals and soil tests, were limited to the
Penn Central property. On the basis of our examination of
Postal Service records and interviews with postal officials,
we ccAld not determine conclusively who had made the deci-
sion to single out Penn Central property as the most desir-
able site.

     Records of the Postal Service showed that, on or about
October 20, 1969, the architect and engineering (A-E) firms
of Lester B. Knight & Associates, Inc., and A. T. Kearney &
Company, Inc., in oral presentations to the Postal Service,
recommended an area larger than 80 acres.  These A-E firms
had been hired about a month earlier to compete for the
design contract for the project.

     The Postal Service Field Liaison Officer told us that
Kearney and Knight each had provided the Postal Service
with preliminary plans using 90 and 110 acres, respectively.
Officials of the A-E firms informed us that, during the
October 20, 1969, meeting, postal officials expressed a
preference for the Penn Central site for the New York bulk
facility.

     Knight's site plan provided for a 300-foot easement for
use as the location of a future elevated highway which ran
the full length of the property. The site plan used most
of this area, about 25 acres, for parking since the highway

                             10
was to be elevated. Postal real estate officials told us,
however, that an easement did not exist and that the area
was merely reserved for future highway use, at the request
of a State of New Jersey Department of Transportation offi-
cial.

     According to postal officials no detailed evaluation
was made of the site plans presented by the A-E firms to
determine the need for increasing the acreage from 80 acres
to the 90 and 110 acres. They told us that reliance had
been placed on the A-E firms' judgment. Increasing the size
of the site to more than 80 acres would eliminate the Bigley
property because it was only 80 acres.

     It appears to us that the need for a larger site should
have been questioned by the Postal Service in view of the
data developed earlier by DS/SD and in view of the decision
by the Assistant Postmaster General for Facilities that 80
acres would be adequate for the project. (See p. 6 .)

     For example, there was no significant change in the
size of the structures proposed by DS/SD, Knight, and Kearney.
Knight and Kearney estimated that the number of employees
would be about half the number estimated by DS/SD, and re-
lated parking space requirements were reduced substantially.
One of the A-E firms, however, provided one parkir,, space
for each employee, which may have been unrealistic because
some employees probably would use public transportation or
would enter into carpool arrangements.

     On October 17, 1969, the realty appraisal firm of
Charles F. Evans & Associates was retained by the Postal
Service to appraise the Penn Central property. The agree-
ment called for a preliminary estimate by the firm; the es-
timate would be subject to refinement in a full and detailed
formal appraisal report to follow. The preliminary appraisal
report dated October 29, 1969, stated that:

    "*** Expensive site preparation would be necessary
    including large volumes of fill and probable re-
    sort to piling, and such costs could average as
    much as $30,000 to $50,000 per acre overall ***."




                              11
No appraisal was obtained by the Postal Service on the
Bigley property.

     In a memorandum dated November 6, 1969, to the Assistant
Postmaster General for Facilities, the Director, Realty Di-
vision, said that estimated costs for pilings, foundations,
and fill on the 9 0-acre portion of the Penn Central site
would cost about $9 million. He also stated that the site-
development cost estimates had been prepared on the basis
of very limited topographic information and that, to more
accurately determine the development costs for these sites,
topographic surveys must be obtained. Records showed that
such a survey had been made only of the Penn Central prop-
erty.

     Postal Service records indicated that, during the next
few months, the size of the site required for the facility
increased, primarily on the basis of recommendations from
the A-E firm which had prepared the preliminary design plan
of the facility for the Penn Central property.

     During this period Postal Service officials, accompanied
by Mr. Kieb, conducted negotiations with the owners of the
Penn Central property. Because the State of New Jersey
claimed tidal water rights to portions of land in the area,
including the Penn Central property, postal officials de-
cided to acquire the site by a condemnation action which
would eliminate the State's interest in the Penn Central
property.

     Mr. Kieb told us, in response to our inquiries, that,
subsequent to leaving the Post Office Department in 1959,
he served for sometime as a broker for the Erie-Lackawanna
Railroad to dispose of excess properties.

     He stated that he had never worked for the Penn Central
Railroad. He also said that he had not received any fee or
commission from the Penn Central Railroad in connection with
the site selected for the New York bulk facility.

     On March 11, 1970, a deposit in the amount of $2,167,500,
or $15,000 an acre for 144.5 acres, was made with the U.S.
District Court, Newark, in connection with a Filing of
Declaration of Taking by the Department of Justice. The


                             12
date of possession was March 16, 1970. The estate acquired
was fee simple title, subject to existing easements for
public roads and highways, public utilities, railroads, and
pipelines.

     The final appraisal report and Department of Justice
records described the land acquired as follows:

    Parcel          Acres                    Owner
A and B             134 17        Penn Central Railroad
C, D, E, and F        8.44        Erie-Lackawanna Railroad
G                      .54        Public Service Electric
                                    Gas Company
H                     1.35        Jersey City and Union City,
                                    New Jersey
                    144.50

     The Postal Service paid $3.1 million for fill on the
site and $6.2 million for piling to support the planned
building. We were informed by a Corps of Engineers official
that, as of September 1971, about 26 acres had not been
filled and were not being used. At that time the t.S. Dis-
trict Court had not ruled on the final price that the Postal
Service should pay for the land.

     We believe that the Postal Service eliminated the Bigley
and Mori-Galbreath properties from consideration as poten-
tial sites for the facility before sufficient data had been
obtained to form a reasonable judgment that the Penn Central
property was the most feasible site under consideration.




                             13
                           CHAPTER 3

          CONTRACTS RELATING TO SITE PREPARATION

     The Postal Service awarded a contract for piling,
amounting to about $4.2 million, without obtaining more in-
formation on soil conditions to better estimate pile
lengths. Also the contract provided for a fixed price for
sinking about 6,500 piles on the site at an average depth
of 110 feet and for unit prices for adjusting the contract
price if piles were sunk at depths of either more or less
than 110 feet. Because of problems resulting from soil
conditions encountered after piling work began, the Postal
Service significantly increased the scope of th, contract
for the piling work. The Postal Service negotiated the
price for the additional work which increased the cost of
the contract by about $2.1 million, or more than 50 percent
over the initial contract amount, and which brought the
total cost to about $6.3 million.

     We believe that the Postal Service should have obtained
additional data on soil conditions to assist it in preparing
bid specifications for piling and should have required
bids on the basis of the price for piling each foot, which
would have provided more assurance that the most economical
bid was selected than did the basis on which the contract
was awarded.

     A contract dated November 24, 1969, was awarded by the
Postal Service to Woodward-Clyde & Associates, Inc., to
perform soil tests to be used by the A-E firm of Lester B.
Knight & Associates, Inc., in designing the land-fill and
piling specifications for preparation of the project site
for construction of the facility. The cost of these soil
tests was about $44,000.

     On January 16, 1970i the soil engineer contractor sub-
mitted to the Postal Service a report on findings pertain-
ing to the Penn Central property, including geology and
subsurface conditions, an analysis of subsurface materials
and foundation treatment data. The report suggested three
possible methods for preparing the site for construction of
the facilities.


                              14
     1. Excavation and backfill--This method requires the
        excavation of the existing fill and the underlying
        tidal marsh deposit and the replacement with com-
        pacted load-bearing fill to the design-subfloor
        grade.
     2. Excavation, backfill, and surcharze--This method
        involves preloading or surcharging the newly exca-
        vated and backfilled building areas with additional
        fill above that necessary to bring the building
        areas to the subfloor grade. Surcharging is de-
        signed to cause settlement of the fill prior to con-
        struction; settlement ordinarily occurs sometime
        after construction.
     3. Piles--This method involves the driving of lengths
        of steel beams or steel pipes to various depths so
        that they terminate in the dense to very dense sand
        and silt stratum underlying the clays. The piles
        would be strategically placed to support the struc-
        ture and the floor of the building.

     The contractor's soil test report included the follow-
ing paragraph.

         "Of the various foundation methods studied,
     it is oair opinion that only long end-bearing
    piles or excavation and backfill with surcharge
    are feasible solutions at this site. Piling the
    building, including floors, is the most positive
    and expeditious solution although very costly.
    The surcharge method is also feasible, in our
    opinion, but could involve some time delay, as
    well as some long-time differential settlement
    of the building and floors. However, the effects
    of the differential settlement can b_ greatly
    reduced by proper design." (underscoring supplied.)
The report showed that, even if the pile method was used,
a large quantity of fill would be necessary to form the
base for the floors and to being the general site and park-
ing areas to a proper grade level. In addition, the report
stated:




                             15
           "Further study and/or testing may be neces-
      sary *** so that more detailed recommendations
      and design criteria can be established.
                                               The ex-
      tent of additional field and/or laboratory
                                                 in-
      vestigations will depend upon the final founda-
      tion method adopted for the project.

           "If the pile solution is used, there is
      probably no necessity for further exploration
      unless more information is desired for better
      estimating of pile lengths." (Underscoring
                                                  sup-
      plied.)

      On the basis of the report of Woodward-Clyde,
 Postal Service chose the piling method, apparently the
 it had an early target date for the start          because
                                           of foundation and
 building construction work.

     Pursuant to the Postal Service's decision
                                                 to use the
piling method of site preparation, contractors
quested to submit bids for the piling work.     were re-
                                              The piling
work was required to meet specifications
                                         prepared by
Lester B. Knight & Associates, Inc., on the
                                             basis of the
findings of the soil engineers--Woodward-Clyde.
                                                   Specifica-
tions for the piling work provided that the
                                             contractor fur-
nish and install 6,322 piles at an average
                                            depth of 110 feet
each, or a total of 695,420 lineal feet.

     We were informed by a Postal Service official
further testing had been done at the site           that no
                                          after the
Woodward-Clyde study had been completed because
not have been economical to do further testing. it would
ion was justified on the basis that test borings This opin-
only what subsoil conditions existed at the      showed
                                            spot where the
borings were actually taken and might not
                                          be indicative of
the existing condition several yards in any
                                            direction.

      An official of Woodward-Clyde told us
Service had imposed a severe time limitationthat the Postal
                                              on the soil-
testing work. He said that usually more detailed
ploration work should be done and that more        soil ex-
should be made for such a project as the New test borings
                                              York bulk fa-
cility.


                             16
     The Woodward-Clyde official said that , because the
A-E firm had not completed design work, Woodward-Clyde did
not know the precise location planned for the building at
the time the 14 test boring3 were made. Some of the test
borings made fell outside the area of the building, and,
consequently, the information obtained from such test bor-
ings did not apply to areas where the piles would be placed
to support the building.

     The Woodward-Clyde official said also that additional
work might have cost about $40,000, would have given more
reliable information on estimated pile lengths, and prob-
ably would have resulted in a recommendation to use a
tapered pile instead of the straight-pipe pile which was
used. He said that the piling work probably would have cost
substantially less if it had been determined from additional
soil analysis that the tapered piles should be used, because
shorter piles would be needed.
     The General Services Administration (GSA) requirements
concerning soil test borings state:

           "Borings shall be located to straddle the
     proposed building location and permit interpola-
     tion.   There shall be no fewer than four borings
     on each site. The spacing of borings shall be no
     more than 50 feet apart where strata is expected
     to vary considerably, no more than 200 feet apart
     where conditions are uniform, and about 100 feet
     apart for all other sites."

We estimate that, if the GSA requirements had been applied
to the New York bulk facility, a minimum of about 120 test
borings would have been made at 50-foot interval_ and about
60 test borings at 100-foot intervals.

      In addition, a Corps of Engineers' official said that
the 14 test borings were inadequate for a facility of this
size.

     On May 1, 1970, Raymond Concrete Pile Division of Ray-
mond International, Inc., submitted a bid of $4,189,770 for
the piling work, the lowest of the five bids received. The
other bids ranged in amounts from $4,683,250 to $6,277,000.
On June 24, 1970, the Postal Service awarded a fixed-price

                             17
 contract to Raymond in the amount of $4,189,770.
 tract required work to start immediately after      The con-
 received a notice to proceed, which was issued  Lhe  contractor
                                                to Raymond by
 the Postal Service on August 3, 1970.

      As required by the solicitation, the following
 in addition to the basic bid amount, were submitted prices,
 mond and were incorporated into the contract        by Ray-
                                              but were not
 considered in determining the lowest bidder.

      1. For total length of piling in excess of
                                                 110 feet,
         times the actual number of piles--add $11.77
                                                      for
         each lineal foot.

      2. For total lengith of -ililr- ess than 110
                                                   feet,
         times the actual number of piles--deduct $1
                                                      for
         each lineal foot.

      3. For test piles in excess of the 12 specified--add
         $7,700 for each load test.

       4. For piles in excess of the number shown in
                                                         the
          drawings--add $770 for each pile.
      Shortly after the piling work began--on or about
                                                             Au-
 gust 19, 1 9 70--Raymond reported that it was
                                                necessary to
 drive some piles below the average 110-foot
                                                level stated
 in the specifications. Also boulders were encountered
 depths of 90 to 110 feet, which caused damage                at
                                                  to or failure
 of 36 piles out cf the first 167 driven. Raymond
 claimed that the soil test borings previously         thereupon
                                                  made by
Woodward-Clyde had indicated that sand and silt
                                                     conditions
existed at depths of 90 to 110 feet but that
                                                 actual condi-
tions were different. As a result of the actual
                                                      subsoil
conditions encountered, Raymond recommended
                                               that a 75-foot
section of pipe pile first be driven and filled
                                                    with con-
crete; that, after the concrete had hardened,
                                                  a second sec-
tion be connected to the first section; and
                                               that the two
sections then be driven into th- ground as
                                              one. The orig-
inal method was to drive a continuous ll0-foot
                                                   section into
place and to fill it with concrete. The changed
                                                     method was
accepted by the Postal Service and was put into
                                                    use.




                              18
     Representatives of the Postal Service and Raymond met
on October 30, 1970, to revise the contract. The revised
contract was to provid"e an equitable adjustment for such
items as the 162,003    .ditional lineal feet of piling to
be driven and the revised method of pile driving. A re-
vised contract price of $6,343,250 was negotiated, repre-
senting an increase of $2,153,480, or 51 percent, over the
original basic contract price of $4,189,770.

       The prices for increases or decreases to the scope of
work, shown on page 18, were adjusted during negotiations
without the benefit of a review by the Postal Service's
4 iternal auditors.   Federal Procurement Regulations require
     ependent review of prices of any negotiated contract
     nges or modifications involving an amount in excess of
  0LO0,000.  These regulations allow contracting officers to
waive the requirement under certain circumstances. In a
December 1970 memorandum, however, the Postal Service's
Direct ,r of Internal Audit stated that "The contract files
examined in the Facilities Department did not include doc-
umentation to support a waiver." In addition, we interviewed
postal officials who could not produce documentation concern-
ing the waiver.

     The following prices, in addition to the basic bid
amount, were submitted by the second lowest bidder.

     1. For total length of piling in excess of 110 feet,
        times the actual number of piles--add $4 for each
        lineal foot.

     2. For total length of piling less than 11.0 feet, times
        the actual number of piles--deduct $2 for each lin-
        eal foot.

     3. For load tLst piles in excess of the 12 specified--
        add $10,500 for each load test.

     4, For piles in excess of the number shown in the draw-
        ings--add $600 for each pile.




                            19
Although the second lowest bidder's basic bid price of
$4,683,250 was $493,480 more than Raykownd's, its prices for
additional work generally were significantly less than those
submitted by Raymond. Invitations to bid, such as those is-
sued for this procurement, which include both definite and
unknown quantities at fixed prices may not provide assurance
that the most economical bids are selected. For example, on
the basis of the revised piling work done, the total cost
of the piling work would have been about $800,000 less if
the second lowest bidder had done the work, because its
prices for the additional work generally were significantly
lower than those of the contractor.
     We believe that, if the additional soil investigation
work had been done by the soil engineers, more precise infor-
mation on the scope of piling work would have been obtained
and could have been used by the Postal Service as the basis
for preparing piling specifications more consistent with
actual soil conditions.

     We believe also that the invitations to bid should have
required bid prices on the basis of the price for piling each
foot, which would have precluded bids at one price for the
specified amount of work and a different price for possible
additional work of an unknown amount. In addition, we be-
lieve that the Postal Service should not have waived the
Federal Procurement Regulation requirement of an independent
review of the proposed price changes.




                             20
                         CHAPTER 4

               SELECTION OF CONTRACTORS FOR

            ARCHITECT AND ENGINEERING SERVICES

     The Postal Service deviated from its normal procedures
in selecting the A-E firm for designing the New York bulk
facility.

     Two A-E firms (A. T. Kearney & Company, Inc., and
Lester B. Knight & Associates, Inc.), were chosen to compete
for the design contract for the New York bulk facility. On
the basis of the Postal Service's evaluation of preliminary
design reports submitted by the two A-E firms in December
1969 and January 1970, the Postal Service retained Knight
to perform the final design work and to prepare the specifi-
cations to be used in the bid packages.

     As of September 30, 1971, Knight's contract called for
a total estimated cost of $4.2 million, comprising Knight's
estimated cost of about $3.9 million and a fixed fee of
about $226,000. Kearney was paid about $640,000 (cost--
$603,000 and fee--$37,000) for its preliminary design work.
The program manager for the New York bulk facility told us
that several of Kearney's design concepts, such as those
relating to roof framing, spacing of interior columns, and
location of employees' facilities, were considered better
than those designed by Knight. These concepts were adopted
by the Postal Service and were incorporated by Knight into
the final design. (See apps. VI and VII for site layout and
building configuration.)

     We were told that the following procedures were typical
of those normally used by the Postal Service in selecting
A-E firms for other postal facilities.

     1. Firms are requested to submit a completed Standard
        Form 251, "U.S. Government Architect-Engineer Ques-
        tionnaire," which requires information about the
        A-E firms, such as the specialties of key employees;
        personal histories of principals and associates;



                            21
        types of projects the firms specialize in; scope
        of services provided; and descriptions of work done
        by the firms during the last 10 years, including
        photographs and exhibits.
     2. A'irms responding to the request are evaluated inde-
        pendently by at least three Postal Service archi-
        tects, primarily on the basis of the professional
        disciplines in each organization and the size, ex-
        perience, and availability of staff in the project
        area.

     3. Several c' the top firms are visited by postal offi-
        cials wT suggest, on the basis of discussions with
        management and inspections of physical plants, that
        one specific firm be selected.

     4. The firm selected is sent tentative drawings and
        building requirements and is requested to submit
        cost estimates which are compared with the Postal
        Service's estimated cost.

     5. The selected firm and postal officials then negoti-
        ate a fixed-price contract.

     The Postal Service was unable to provide us with doc,-
mentation showing the evaluation made in selecting the A-E
firms for the New York bulk facility. In a memorandum to
the files dated April 4, 1971, however, which was prepared
as the result of our inquiries, the Postal Service's Director,
Office of Contract Programs (contracting officer), stated
that, in selecting a contractor for the A-E work on the
project, it was decided that the A-E firm would have to pos-
sess a combination of capabilities and experience in the
following fields.

     1. Industrial engineering.
     2. Plant layout.
     3. Materials handling.
     4. Building and mechanization design.
     5. Manpower planning.
     6. Facility planning.
     7. Site investigation.
     8. Long-range facilities planning.

                             22
      The contracting officer told us that, in assessing en-
gineering capabilities of A-E firms, the Postal Service had
relied heavily on an earlier survey of industrial-
engineering firms, which included A-E firms. The survey was
made in conjunction with proposals received from firms under
the Postal Service's Field Industrial Engineering Improve-
ment Program. This program involved studies of physical
operations and employee working conditions in selected post
offices and concentrated primarily on safety, environment,
and productivity. The purpose of the program was to improve
employee working conditions and productivity within the
present system until such time as new systems became avail-
able.

     The survey evaluated the industrial-engineering capa-
bilities and qualifications of 21 firms. In evaluating the
proposals from these 21 firms, the Postal Service's Contract
Award Review Board assigned numerical ratings to each firm
and then selected the top eight firms for participation in
the Field Industrial Engineering Improvement Program. The
numerical ratings were based on evaluating each firm's pro-
posal by considering various factors relating to the general
quality and responsiveness of the proposal, organization,
personnel and facilities, and technical approach. Knight
ranked seventh in the numerical ratings and was one of the
eight firms selected to participate in that program.
Kearney, on the other hand, ranked 12th in the scoring and
was not selected for the industrial-engineering program.

     It appears to us that the scope of the work required
for the industrial-engineering program was significantly
different and far more limited than that required of A-E
firms in developing plans and designs for a totally new
mail-processing system and facility layout under a bulk-
mail-distribution concept.

     We were told that, in addition to using the above in-
dustrial-engineering information, the Postal Service had
reviewed a directory of the Association of Consulting Man-
agement Engineers (ACME) in selecting the A-E firms to com-
pete for the design of the New York bulk facility. The
directory contained a brief description of the services of-
fered by ACME members. We were informed by the contracting
officer that the ACME directory had been consulted to

                             23
identify any of the firms ranking high in industrial engi-
neering which were shown in the directory as also having
strong capabilities in the seven other fields (previously
mentioned), primarily in building and mechanization design.
     The directory indicated that Knight had capabilities
in all eight of the desired fields but did not indicate
that Kearney had capabilities in five of the eight fields,
particularly in the stated important fields of building and
mechanization design.

     Three of the top eight industrial-engineering firms
previously selected for the Field Industrial Engineering
Improvement Program were not listed in the ACME directory.
      In the aforementioned April 1971 memorandum to the file,
the contracting officer stated that the Postal Service re-
view:

     "*** indicated that A. T. Kearney and Company,
     Inc. and Lester B. Knight and Associates, Inc.
     were highly qualified because of their industrial
     engineering background and capabilities, and in
     addition possessed the mechanization and building
     design, methods and process engineering, materials
     handling, construction management, and integrated
     facilities engineering capabilities required.

     The ACME directory indicated that Knight possessed the
additional capabilities mentioned above, except "methods
and process engineering." The ACME directory, however, did
not show that Kearney possessed capabilities in the fields
of "mechanization and building design, construction manage-
ment, and integrated facilities engineering."




                             24
     The contracting officer, in his April 1971 memorandum,
also stated that:
     "*** Additionally, both of these firms had done
     satisfactory work for the Po. t Office Department
     in the past. Capability and qualification state-
     ments were obtained from these two firms and fur-
     ther evaluated, and a decision was made to seek
     proposals from these two firms for the New York
     bulk and foreign mail facilities development pro-
     gram, on a design competition basis."

Concerning the work done by these firms for the Post Office
Department, Knight had made only a survey, over 10 years
ago, of mail handling in the Chicago Post Office and
Kearney's work for the Department was only remotely similar
to the work that would be required in connection with the
New York bulk facility. Kearney's statement of experience
in Department work included:

     1. Participation in the first Hoover Commission task-
        force study relating to the organizational struc-
        ture, financial controls, and general administra-
        tion of the Post Office Department.

     2. Review and analysis of the Department's work mea-
        surement program.

     3. Study of first- and third-class mail involving the
        need for mechanization and mail standardization.

     4. Brief study at one postal facility covering oppor-
        tunities to improve mail handling through container-
        ization.

     5. Study of janitorial work standards at post offices.

     In regard to obtaining and evaluating qualifications
statements from Knight and Kearney, we believe that suffi-
cient data was not obtained to reasonably support a decision
that the two firms had the best potential capabilities. We
believe that other A-E firms should have been given an op-
portunity to participate and that more comprehensive compar-
isons and evaluations should have been made of all

                             25
potentially qualified A-E firms.

     We were unable to determine why the Postal Service de-
viated so significantly from its normal procedures in se-
lecting the A-E firms for the New York bulk facility. We
believe, however, that the actions taken by the Postal Ser-
vice in selecting the A-E firms to compete for the design
contract were not adequate.




                            26
                            CHAPTER 5

                  PROJECT COSTS AND BID PROTEST

PROJECT COSTS

     The estimate of certain construction and mechanization
costs for the New York bulk facility, which was prepared by
Knight and which, in -ur opinion, was accepted by the Postal
Service without sufficient evaluation, was $42.6 million.
The lowest of the two bids received by the Postal Service
totaled about $105 million, or 146 percent above the esti-
mated cost. This bid was rejected by the Postal Service be-
cause it was too high in relation to the estimate. Later,
revised estimates were made, and, after readvertisement, con-
tracts totaling $85.5 million were awarded. The latest
available estimate of the total project cost was $130.1 mil-
lion (see app. V), an increase of about $67.8 million, or
109 percent, over the original total project cost estimate
of $62.3 million.

     The following tabulation shows a comparison of esti-
mated total project costs (i) prepared by the A-E firm, (2)
approved by the House and Senate Committees on Public Works,
and (3) as of September 1971.

                  Comparative Cost Estimates

                      A-E firm           Prospectus Contract cost
                    estimate at         approved at  at Sept. 30,
                   Dec. 20, 1969       June 23, 1970     1971

Site and design     $14,690,000         $13,400,000   $ 10,200,980
Building             20,603,000          40,400,000     55,441,750
Mechanization        18,927,000             (a)         54,891,114
Contingencies         8,100,000             (a)          5,114,925
Administration
  (Corps of En-
   gineers)                   _                         4,500,000

   Total            $62,320,000        $53,800,000    $130,148,769

al.ot required to be included in prospectuses submitted to
 the Committees on Public Works.

                                  27
     The following tabulation shows the A-E firm estimate,
the low bid received by the Postal Service, and the amount
of the contract awarded for general construction.

                General Construction Contract

                                      Low bid
                   A-E firm         received by    Contracts
                 estimate at        service at     awarded at
                  Oct. 1970          Oct. 1970      May 1971
Construction     $    -             $ 54,000,000   $39,858,564
Mechanization         -               51,000,000   45,683,211

   Total         $42,605,300a       $105,000,000   $85,541,775
aDetails not available.

     Details concerning project costs are as follows:

     Plans for constructing the proposed project were adver-
tised in the Commerce Business Daily issued by the U.S. De-
partment of Commerce. Also the Postal Service contacted 190
(cntractors by mail to determine their interest in bidding
on the project. This procedure resulted in requests for bid
packages from four general contractors and 21 subcontractors.
The Postal Service, however, received only two bids in the
amounts of $105 million and $107.4 million, respectively, by
the bid opening date of October 22, 1970.

     We were informed by Postal Service officials that the
Service's estimated cost range of $36 million to $42 million,
which was to be used by the Service to assess the reasonable-
ness of bids received, had been based on data provided by
Knight.

     Because of the wide variance between the bids received
and the cost estimate, the Postal Service hired a construc-
tion consulting firm at a cost of $30,000 to make a study of
the cause for the difference between the estimate and the
lowest bid. The study included a review of the Jersey City
construction market; e.g., the amount of construction being
done and the availability of labor. According to the study


                               28
report, the following major factors contributed to the large
discrepancy between the estimate and the low bid.

     '"The estimate was insufficient to support the
     scope of work required.

     'Time allowed for construction duration is too
     short for normal construction activities, espe-
     cially for the mechanization system.

     "The anticipated completion dates and activities
     of earlier contracts presented a smooth continua-
     tion of construction activities for the general
     construction package.

     "The inclusion of the mechanization equipment in
     the general construction created an unrealistic
     situation in regard to responsibility and time."

The report did not explain how each of the above factors af-
fected the cost estimates.

     The Director, Real Property Division, Postal Service,
visited the contractors which submitted the bids. As a re-
sult of these visits, he concluded that a significant amount
of the estimated costs submitted by the contractors was at-
tributed to labor overtime hours of work that would be re-
quired to meet the Postal Service's construction time sched-
ule. The schedule called for completing the project within
457 days after the Postal Service gave notice to the contrac-
tor to proceed. According to the former Assistant Postmaster
General for Facilities, one bidder indicated that, by ex-
tending the time for completing construction of the project
from about 15 months (457 days) to 21 months, about $30 mil-
lion of overtime could be eliminated. As a result of re-
views by the consultant and the Assistant Postmaster General
for Facilities, the Postal Service rejected the two bids of
$105 million and $107.4 million as being too high in rela-
tion to the estimate of $42.6 million.

     On February 22, 1971, the Postal Service transferred
responsibility for construction of the project to the Corps
of Engineers. The project authorization showed that the
Corps would be responsible for all necessary architectural,


                            29
engineering, legal, and administrative services required to
complete the project. The authorization showed also that
it might be necessary for the Corps to complete design and
specification work, in addition to advertising, awarding,
and administering the contracts. On March 11, 1971, the
Postal Service and the Department of the Army signed an
agreement which provided that postal facilities acquisition
services be performed by the Corps.

     The Postal Service, with the advice and cooperation of
the Corps, decided to make an effort to reduce the cost of
the project. Instead of having one bid package encompassing
all phases of the construction, the Postal Service and the
Corps decided that six separate bid packages for the differ-
ent phases of construction, such as building construction and
electrical installation, would provide an opportunity to get
greater participation from and competition among contractors.
Under this arrangement the Corps would serve as the adminis-
trator and coordinator of all the contracts for the project.
The Corps issued the bid invitation for the six packages on
February 24, 1971. Of the nine contractors who responded to
the invitation to bid, all bid on one or more packages.

     On May 7, 1971, the Corps awarded two contracts total-
'ng $85.5 million to the lowest bidders. The construction
contract extended the project construction period from
about 15 months to 24 months and the completion date from
November 1971 to June 1973. A general construction contract
in the amount of $84.5 million was awarded to a joint ven-
ture consisting of Terminal Construction Corp.; E. C. Ernst,
Inc.; Nager Electric Co., Inc.; the DIC Concrete Corp.; and
Underhill Construction Corp. (Tendun Constructors). The
second contract was awarded in the amount of $997,775 for
mechanization not included in the general construction con-
tract to Mechanical Handling Systems, Division of American
Chain & Cable Co., Inc. Construction is in process. (See
app. VIII.)

     The Postal Service, by revising the bid invitation pro.
cedure, however, did not achieve a reduction in the project
cost from $105 million to $85.5 million. These two amounts
do not provide for the same requirements. The new contract
terms extended the construction period by about 9 months,
and administration and coordination of the project work was

                           30
transferred to the Government whereas the earlier contract
terms would have required the general contractor to adminis-
ter and coordinate the work of certain other contractors.
The Corps is to administer these contracts at an estimated
cost of $4.5 million. A breakdown of the bid amounts was
not available to permit us to identify the items or circum-
stances accounting for the differences in the bid amounts.
With the award of the contracts totaling $85.5 million, the
cost of the project as of September 1971, according to
Postal Service records, totaled $130.1 million. (See app.
V.) The latter amount includes site acquisition and prepara-
tion, preliminary construction, and other project costs.

     In justifying the need for the project, the Postal Ser-
vice stated that significant annual operational cost reduc-
tions could result from processing bulk mail in a facility
which applied modern material-handling concepts (containers)
and machines (automatic parcel sorters). For the New York
bulk facility, the Postal Service estimated that the annual
operational cost reductions would total $33.9 million. How-
ever, because the Postal Service did not adequately consider
important factors shown on page 29 before inviting bids on
the project, the project completion date was extended and
operational cost reductions might not be realized as early
as contemplated.

     It appears reasonable to assume that Postal Service
field officials responsible for construction matters in the
New York and Philadelphia Regional Offices should have been
aware of the construction market in the New Jersey area (see
p. 28) and of the possible impact of such a large construc-
tion project as the New York bulk facility. Postal Service
officials had recent exposure to such matters because of
their association with a large facility for handling bulk
mail which is being constructed about 3 miles from the New
York bulk facility.




                            31
      We believe that the Postal Service should have obtained,
or required the A-E fi.m to obtain, information that was
available on the construction market conditions in the area
and on their effect on the construction of the New York fa-
cility, particularly in view of the planned short construc-
tion time schedule for such a large facility. Information,
such as that obtained by the construction consultant and the
Postal Service official after the receipt of bids, could have
enabled the Service, we believe, to make more reliable esti-
mates of construction costs and to establish realistic con-
struction time schedules. Such information could have pro-
vided the Postal Service with a better basis for soliciting
bids.

BID PROTEST

     The joint venture of Walter Kidde Contractors, Inc., and
Frank Briscoe Co., Inc., the second lcwest bidder on the gen-
eral construction contract, filed a protest with the Comp-
troller General of the United States and the District Engi-
neer for the United States Army Corps of Engineer District,
New York.

     The protest by Kidde-Briscoe was based on the inability
of Tendun Constructors to obtain the 100-percent performance
bonding required by the invitation to bid.

     Tendun Constructors requested the contracting officer
to reduce the penal amount of the required performance bond
from 100 percent to 55 percent of the contract price in con-
sideration of a contract price reduction of $300,000. The
Corps accepted these terms and issued the Notice to Proceed
under the contract terms on June 16, 1971.

      Kidde-Briscoe brought suit in a U.S. District Court to
obtain a temporary restraining order to prevent the Corps
from allowing the Tendun Constructors to begin work undar the
general construction contract. The temporary restraining
order was denied by the court after a hearing on June 21,
1971.

     The Comptroller General presently is considering tha
protest.


                             32
                         CHAPTER 6

    SOLE-SOURCE PROCUREMENT OF PARCEL-SORTING MACHINES

     A contract for furnishing and installing parcel-sorting
machines, critical to the economical operation of the New
York bulk facility, was awarded to Speaker Sortation Sys-
tems, Division of A-T-O, Inc., on a sole-source negotiated
basis in the amount of $8,441,221, including about $1.1 mil-
lion for patent rights.

     The Postal Service plans to install like equipment in
some or all of its 20 other planned major hulk facilities
The successful performance of the parcel-sorting machines
therefore not only is importeant to the economical operation
of the facility but also is the key element: in the success
of the $1 billion nationwide bulk-mail system. A
multimillion-dollar equipment procurement program is planned
for the system.

     The procurement of this equipment on a sole-source ba-
sis was justified by the Postal Service on the basis that
Speaker was the only known source of parcel-sorting :-achines
most nearly meeting postal requirements in all detail with-
out any development work but with some minor product im-
provement. A substantial amount of development work, how-
ever, which was known to the Postal Service prior to award
of the contract, was necessary on a major component in at-
tempting to make the system economically adaptable to postal
operations. In September 1971, more than a year after the
contract was awarded, serious machine-operating problems
still existed and development work and testing of the ma-
chines was continuing.

     A survey of the capabilities of the Speaker firm was
not made before the contract was awarded, and a survey made
later bought out certain questions on the firm's capability
to handle the procurement satisfactorily in view of Speaker's
lack of depth in management, engineering, and fabrication
capacity. The Postal Service's internal auditors noted thai'
the amount of the contract was equal to about 2 1/2 times
the total sales of the firm in each of the past 2 years.



                             33
     The Postal Service made no examination of Speaker's or
its subcontractors' books and records to determine the re-
liability and reasonableness of the cost and other data used
in negotiating the contract prices. Therefore there was
little assurance that a reasonable price had been established
for this sole-source fixed-price contract.

     A Postal Service official who participated in the deci-
sion to award the contract to Speaker was employed formerly
by Speaker as a consultant.

     Details on this procurement follow.

     Postal Service and A-E firm records indicated that
Knight the A-E firm for the facility, made a survey late in
1969 and early in 1970 of the parcel-sorting industry to
determine the parcel-sorting equipment then readily avail-
able in the market. The compressed time frame for comple-
tion of the facility dictated against spending the time
which would be required to develop new parcel-sorting equip-
ment. According tc these records, Knight considered the
capabilities of four companies, in addition to Speaker, to
make the parcel sorters. The records indicated that one of
the companies considered was not interested in making the
parcel sorters and that of the remaining four companies,
only Speaker made equipment which met the parcel-sorting
speed requirements of the Postal Service. The Postal Ser-
vice could not provide us with a report or other documenta-
tion shc>wing that a comprehensive survey had been made by
the A-i irm.

     When consideration was being given to awarding a sole-
source contract, the Postal Service's Office of the General
Counsel was requested to give advice as to whether certain
documents contained sufficient facts to support a sole-
source contract with Speaker. The Assistant General Counsel
replied that the documents did not contain enough informa-
tion to support a sole-source negotiation. He said:

     "The documents do not state why it is felt that
     no other company is capable of supplying the De-
     partment's requirements. Merely stating that
     Speaker is the only company in the past that has
     provided such equipment does not mean that no


                             34
     other firm is capable of providing such require-
     ments."
The Assistant General Counsel informed us that, after re-
ceiving additional information concerning the capability of
Speaker, he signed a "Findings and Determination" statement
authorizing negotiation of a fixed-price contract with
Speaker.
     The "Findings and Determination," dated July 27, 1970,
is required by Federal Procurement Regulations (FPR 1-3.210)
which implement the statutory authority to negotiate a con-
tract without formal advertising if "for property or ser-
vices for which it is impracticable to secure competition."
The statement indicated that Speaker was the only known
source of the desired procurement.

     The "Findings and Determination" indicated that no
existing equipment precisely met all the design criteria but
that the equipment most nearly meeting this design criteria,
with some minor product improvement without any development
work, was the equipment manufactured by Speaker.

     The sole-source negotiated procurement of the parcel-
sorting machines from Speaker was justified by the Bulk Mail
Program Director on the basis that the same machines were in-
stalled and operational at two industry locations, were
available only from Speaker, and recruired no development
work. The records indicated also that only minor modifica-
tions to the parcel-sorting machines would be necessary to
meet Postal Service requirements.
     We were informed by Postal Service officials that ca-
pability solicitations had not been sent to mechanical equip-
ment companies to determine whether they could produce the
parcel-sorting machines to meet the Postal Service's require-
ments. These officials informed us that, although at least
one company claimed that it had this capability at the time
the contract was awarded to Speaker, in the judgment of these
officials, the company would not have been capable of pro-
viding the equipment.

     Contrary to the justification statements that no devel-
opment work was necessary, postal records showed that postal

                             35
officials knew before awarding the contract that develop-
ment work would be necessary. In July 1970 the Director,
Development Engineering, in commenting on a consultant's re-
port on the system design for the Chicago bulk facility,
stated that:

     "The design for a high speed induction to load
     parcels onto a tray sorter which will run at 160
     trays per minute has not been fully developed.
     The high speed parcel sorter requires a tray
     which is smaller than the trays for existing
     sorters. This tray size will dictate the par-
     cel which must be handled by the high speed in-
     duction and sorter. These factors must be con-
     sidered in the development of parcel sorting sys-
     tems for the facility." (Underscoring supplied.)

     A June 1971 report on preproduction testing of the
equipment indicated that the equipment needed improvement.
The report indicated that requirements stated in the con-
tract pertaining to the equipment's capabilities to handle
parcels of various sizes and shapes had not been met. We
were told that this problem had not been solved at Septem-
ber 1971.

     In a letter dated July 9, 1971, the District Engineer,
Corps of Engineers, stated that:

         "The Postal Service needs to continue cer-
    tain development and test operations on the sort-
    ing machines and high-speed induction units that
    are being manufactured by Speaker Sortation Sys-
    tems for installation in the New York Bulk Mail
    Facility. The performance of these items of
    equipment is the key element in the success of the
    nation-wide bulk mail system, and their performance
    needs to be improved over their present level to
    achieve the rate of mail handling which the nation-
    wide system is expected to accommodate."

     The major problem area relates to the induction system,
a component that is supposed to automatically feed parcels
onto revolving conveyor trays. In a September 1971 memo-
randum, the Manager, Bulk Mail and General Research Divi-
si n,stated that:
                           36
        "The design concept employed by Speaker *** is
        not likely to permit a 40 parcel per minute [PPM]
        keying and induction rate. It appears that a
        day-in/day-out keying rate of about 25 ppm would
        be a more realistic expected throughput. It is
        obvious that with design modifications, and with
        certain human factor improvements, the throughput
        will increase. However, a major change in
        throughput with the current system is not likely
        to occur."

     The keying and induction rate determines the speed
                                                         at
which parcels can be electronically sorted; therefore,
                                                        the
economical operation of the system depends on the
                                                  induction
unit. The A-E firm which designed the facility indicated
that an induction speed of at least 30 parcels a minute
                                                         is
needed to maintain the current equipment configuration.
Lower speeds may require more sorting machines,
                                                more employ-
ees, and an increase in the size of the building.

        The Manager also said, in his September 1971 memorandum,
that:

        "The induction system is overly complex and will
        lead to mechanical problems (as witnessed on Sep-
        tember 10) in belt tracking, photocell alignment,
        ambient lighting conditions, and in overall reli-
        ability and maintainability."

     The problems still being encountered over a year
                                                      after
the contract was awarded indicated to us that much
                                                   more than
minor modifications was necessary to the parcel-sorting
                                                         ma-
chine system. Therefore we question tie Postal Service
                                                         jus-
tification for awarding this sole-source contract
                                                  on the
basis that no development work was required.

     The contracting officer's determination that a firm-
fixed-price contract should be negotiated with Speaker
                                                        was
made on July 27, 1970. The Postal Service awarded
                                                    a letter
contract to Speaker on August 19, 1970, authorizing
                                                     Speaker
to incur obligations up to $2 million for parcel-sorting
equipment. The letter contract was to be converted
                                                     to a
definitive contract by October 1, 1970. The formal
                                                     contract


                               37
in the amount of $8.4 million was signed on November 20,
1970.

     An onsite survey to explore the capabilities of Speaker
was not made until August 20, 1970--after the letter con-
tract was awarded. The survey was made primarily to look
into Speaker's capability to perform under a proposed
$1.9 million contract for sack-sorting machines, but the
survey team appeared to be concerned also with the contrac-
tor's potential performance on the parcel-sorting machine
contract.

     The survey team was composed of Postal Service offi-
cials and representatives of the A-E firm. The report on
the survey mentioned matters indicating a potentially ad-
verse affect on Speaker's capability to perform the cor~
tracts, such as:

     1. Tooling in the production shop was very limited.

     2. The engineering staff was limited.

     3. Speaker had never installed any sortation equipment
        with computer translators which are to be used in
        the parcel- and sack-sorting equipment. Speaker
        would rely on the computer manufacturer to furnish
        the computer engineering, although at the time such
        computer manufacturer had not been selected.

     4. Speaker would have to subcontract most of the fabri-
        cation required for the parcel- and sack-sorting
        equipment.

     5. Speaker intended to subcontract both mechanical and
        electrical installation work.

The survey report concluded that:

    "The Speaker organization appears to be techni-
    cally capable, but its lack of depth in manage-
    ment, engineering, and fabrication capacity puts
    the company's ability to perform within the con-
    tract [sack sorting] time schedules to a severe
    test. The combination of the parcel sorting and


                            36
     sack sorting contracts, however, present many
     benefits to the Department which would be lack-
     ing in a split contra2t. Moreover, Speaker's
     past performance rates this company as having
     as good or better chance to successfully com-
     plete this contract [sack sorting] as any other
     company responding to the Invitation for Bids."

     The survey team therefore recommended that the sack-
sorting contract be awarded to Speaker but stated that:

     "*** However, we recommend that before making the
     award, and before completing negotiations on the
     contract for the parcel sorting machine, that the
     Contracting Officer make every effect to receive
     positive and written assurance from the A.T.O.
     management, that A.T.O. will provide such addi-
     tional engineering, management, and fabrication
     resources from other divisions of A.T.O. such as
     George J. Meyer Company and Logan Company, as
     may be needed to insure the successful performance
     of this contract.

     In regard to the latter recommendation, a letter dated
August 26, 1970, from a vice president of the Meyer Company
stated that the production facilities and manufacturing ca-
pacities of certain A.T.O. plants would be made available
to supplement Speaker's capability.

     Speaker's sales amounted to about $3 million in 1969
and $3.2 million in 1968. The contract for the parcel-
sorting machines amounted _o $8.4 million, or more than twice
Speaker's sales for each of the last 2 years. The Postal
Service's internal audit quzestioned the ability of Speaker
to handle such a large contract in the planned time span
(15 months) and indicated the need for outside help in the
manufacture and financing of this effort. No preaward sur-
vey was made, and we believe that adequate measures were not
taken to evaluate the contract prices.




                             39
     We found no documentation to support the reasonableness
of subcontract prices in the Speaker contract, which amounted
to more than $2 million, including a 15-percent fee of about
$350,000. No examination was made of Speaker's books and
records to determine the reliability of the cost and pricing
data used in Speaker's contract proposal.

     In addition, the Postal Service did not examine into
the method of computation and application of overhead ex-
pense, cost breakdowns, and trends and budgetary information
necessary to provide a basis for evaluating the price pro-
posal submitted by Speaker.

     We were informed by a postal official that no record
existed to document the engineering evaluation of the Speaker
proposal, which was a significant part of the negotiation
procedure.

     The Program Director, Bulk Mail Processing Department
(formerly Director of Non Letter Mail Programs, Research
and Engineering Department), who was responsible for recom-
mending the procurement from Speaker and for the engineering
evaluation of Speaker's proposal, had been associated with
Speaker as a management consultant during the period April
to August 1969. IIe informed us that his services to Speaker
had consisted of advising on production practices, cost ac-
counting, product pricing, and recordkeeping.




                            40
                         CHAPTER 7

                      SCOPE OF REVIEW

     Our review was made at the Postal Service headquarters,
Washington, D.C.; the Postal Service regional offices in
New York, N.Y., and Philadelphia, Pennsylvania; and the
Corps of Engineers headquarters in Washington, D.C., and
its New York District Office.

     Our review included field trips to the New York City-
New Jersey area, during which we interviewed regional Postal
Service and Corps of Engineers officials, visited the three
sites given primary consideration by the Postal Service as
possible locations for the project, examined regional files
pertaining to the project, and interviewed the owners of
the two sites not selected and the real estate consultant
hired by the Post Office Department to assist it in locat-
ing and acquiring the site for the facility.

     We made trips also to the offices and plant of the
firm that manufactured the parcel- and sack-sorting equip-
ment for the facility aid interviewed its top management
officials. We also interviewed officials of the firm re-
sponsible for the soil testing of the Penn Central property.

     We reviewed appropriation hearings for fiscal years
1968 througi 1971 pertaining to the construction of postal
facilities. We also examined contract records, correspon-
dence, and other data in the files in Washington, New York,
and Newark.




                            41
APP" NDIXES




 42
                                                                                      APPENDIX I

     H.     R. GROSS                                                                           Gou1t ADDu,
          SD El)t., low.
                                                                                              WATILLOO. IOWA

  HOUSE OFFICE BUILDING
                                                                                                 COUNTIE:
                                                                                              MLARK
                                                                                                 AWK   HAMILTON
       COMMITTEES.
      FORIIGN APFAIRS
                                       qConeBs   of tebt    niteb otatto                 HpTLERHAWDIN
                                                                                         C6RR00500     HOWARD

POST OrE     AND,CIVIL S.RVCSL     d        oute of RepratsntatibeOYD                                  WORNT

                                            lEasbington, l.C.   20515


                                                                       December 17,   1970.



                           The Honorable Elmer B. 3taats
                           Comptroller General of the United States
                           General Accounting Office Building
                           Washington, D. C.

                           Dear Mr. Staats:

                           I am enclosing a copy of a memorandum which makes a
                           number of allegations concerning the construction of
                           a building in Jersey City, New Jersey for the hand-
                           ling of bulk and foreign mail,

                           As you will note, several of the allegations involve
                           Assistant Postmasters General Henry Lehne and Harold
                           F. Faught.

                        The memorandum asks a number of seemingly valid ques-
                        tions which I would like to have answered. Of parti-
                        cular interest are the statements that the projected
                        cost of this project is more than 100 percent in ex-
                        cess of the figure presented to the Congress, and
                        that the Penn Central owned this property plus sites
                        now being considered in Ohir and near Washington, D.C.
                        for postal buildings.

                        Since the allegation that the projected cost of the
                        New Jersey project has already more than doubled
                        would be of particular interest to the Congress a
                        would appreciate it if you would ascertain wheth er
                        or not this is true as quickly as possible and    port
                        this information to me prior to the issuance of your
                        normal report.

                        Thank you for your attention to            t      reques




                                                                H. R. Gross


                                                    43
                                                    APPENDIX II


NEW YORK BULK AND FOREIGN MAIL FACILITY
   PREFERRED AREA FOR THE FACILITY



       PATERSON




                    SECAUCUs                   A%




     NEWAPK




ELIZABETH                      R     BAY9




                                   LOWER BAY


         N.Y.
         N.J.

                     44
                                        APPENDIX III




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                                 45
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                                                                                APPENDIX V



                              SCHEDULE OF ESTIMATED TOTAL COST BY

                               CONTPACT AND TYi` - OF WORI FOR THE

                        NEW YORK BULK AND FOREIGY HAIL FACILITY PROJCT

                                   AS OF SEPTrBZ        30, 1971


Date of                                                                         Estimated total
contract                                                                            osat as of
 award                          Cor ractors and description                     Sept. 30. 1971

                                           Design
 9-17-69   A. T. Kearney & Company, Inc..--preliminary design                    $      640,767
 9-17-69   Lester B. Knight & Associates, Inc.--design                                4,172,563
11- 3-70   McKee-Berger-Hinsueto, Inc.--bd evaluation                                    30.000
               Total estimated design cost as of September 30, 1971                   4.843.13)
                                            Site
   -       Total estimated compensation to owners of land                             2,167,500
10-17-69   Woodward-Clyde & Associates--preliminary soil test                                738
lO-20-69   Charles F. Evans & AasociateL--preliminary letters of appraiaa                 1,500
11-19-69   Woodward-Clyde & AsAociates--soil tests                                       43,000
12- 1-69   Hanalio & Hanalsio--land survey                                               16,900
1 -19-70   Blau-Lasser Appraisal Co.--formal appraisal                                    2,500
1 -26-70   Ch--les F. Evans & Associates--formal appraisal                                2,500
 4- 6-70   Buckley & Company, Inc.--site preparation                                  3.122.'12
               Total estsiated site cost as of September 30, 1971                     5,357.650
                                  Building conetruction
 6-24-70   Raymond Concrete Pile Division, Raymond International, Inc.--
              'ling                                                                   6,174,615
 6-30-70   G, d Iron Works, Inc.--structural steel, pile caps, and grade
             beams                                                                    6,134,408
7-24-70    Federal Pacific Electric Co.--electrical equipment                            552,926
9-18-70    H. H. Robertson Company--roofing and siding                                1,301,037
3-29 '1    Walter Kidde Construction Co. & Frank Briscoe--misoellaneous con-
             crete foundation                                                          630,60C
4-22-71    R. H. Pines Corporation--reinforcing steal                                  787,600
5- 7-71    Tendun Constructors--general construction and building                  39,858,564
  -        Contingency reserve                                                       3,160,326
           Corps of Enginears--supervision, inspection, and overhead costs        ___, 0.000
               Total estimated buildirg construction cost as of September 30,
                 1971                                                                61,102.076
                                        Equipment
 9- 2-70   Speaker Sortation Systems--sack-sorting machines                           1,A66,6S2
11-20-70   Speaver Sortation Systems--parcel-.orting machines                         7,341,221
 5- 7-71   Mechanical Ha idling System, Division of American Chain e,Cable--
             tow conveyor system                                                      S27,775
5- 7-71    Tendun Constructors--general construction and mechanization             44,685,436
  -        Contingency reserve                                                      1,934,599
           Corps of Engineers--supervision, inspection, and overhead costs                 00
                                                                                  __~,oooo
               Total estimated equipment cost as of September 30, 1971               58.845.713
           Total cost of design, site, building construction, and equipment
             for New York Bulk and Foreign Mail Facility as of September 30,
             1971                                                                $130.148,769




                                                   47
                                                                                     APPENDIX VI




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              49
                     APPENDIX VIII




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