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entitled 'U.S. Postal Service: Progress Made Toward Implementing GAO's 
Recommendations to Strengthen Network Realignment Planning and 
Accountability and Improve Communication' which was released on 
September 25, 2008. 

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United States Government Accountability Office: 
Washington, DC 20548: 

September 25, 2008: 

The Honorable Richard J. Durbin:
The Honorable Sam Brownback:
Ranking Member:
Subcommittee on Financial Services and General Government: 
Committee on Appropriations:
United States Senate: 

The Honorable José E. Serrano:
The Honorable Ralph S. Regula:
Ranking Member:
Subcommittee on Financial Services and General Government: 
Committee on Appropriations:
House of Representatives: 

Subject: U.S. Postal Service: Progress Made Toward Implementing GAO's 
Recommendations to Strengthen Network Realignment Planning and 
Accountability and Improve Communication: 

Major changes affecting the U.S. Postal Service (USPS)--including 
declining mail volumes, increasing operating expenses such as rising 
fuel costs, and a more competitive marketplace--have reinforced the 
need for USPS to increase efficiency and reduce expenses in its mail 
processing network. This network includes over 600 facilities that sort 
mail and prepare it for transportation and delivery. First-Class Mail 
provides USPS with high revenue per piece and has traditionally helped 
USPS cover its overhead costs. However, First-Class Mail volumes have 
been declining since 2001 and this downward trend is expected to 
continue. Furthermore, while First-Class Mail volumes have been 
declining, worksharing by mailers has increased. Worksharing allows 
mailers to earn discounts on postage rates by presorting, preparing, 
and transporting their mail to a postal facility near the mail's 
destination. As worksharing has increased, ever-larger volumes of mail 
have bypassed most of USPS's processing activities, creating excess 
network capacity. 

To address these trends affecting its mail processing network, USPS has 
developed several initiatives to reduce costs and increase efficiency. 
One such initiative, area mail processing, is designed to consolidate 
operations at facilities with excess machine capacity, and thereby 
increase the use of automation in mail processing. In 2005 and 2007, we 
issued reports that evaluated USPS's network realignment plans and 
included recommendations for improvement.[Footnote 1] This report 
responds to a directive from the House and Senate Committees on 
Appropriations and assesses the progress USPS has made toward 
implementing our recommendations to (1) improve realignment planning 
and accountability by establishing criteria for decision making and a 
process for evaluating savings and benefits; addressing how the various 
realignment initiatives are integrated; and establishing measurable 
performance targets; and (2) improve communication related to 
realignment plans and proposals by ensuring that its revised Area Mail 
Processing (AMP) Communication Plan includes steps to improve public 
notice and engagement and increase transparency. 

Our April 2005 report found that USPS did not establish criteria to 
select facilities for potential AMP consolidations or to make decisions 
about implementing consolidations. As a result, it was unclear whether 
USPS was making decisions fairly and efficiently or whether USPS was 
targeting the best consolidation opportunities. In 2005, we also found 
that it was unclear how USPS's strategy would provide accountability 
for realignment decisions because there was no process for evaluating 
the results of these decisions and no stated policy for making managers 
accountable. Accordingly, we recommended that USPS establish criteria 
for evaluating realignment decisions and develop a process to evaluate 
and measure the results. 

In June 2007, we issued a follow-up report on USPS's realignment 
efforts. We found little transparency in USPS's process for integrating 
its realignment efforts and determined that USPS could not demonstrate 
the costs and benefits associated with its network realignment 
initiatives because it lacked measurable performance targets to track 
its realignment goals. We also found that the AMP consolidation 
communication processes did not provide clear and useful notification 
to stakeholders, did not provide for meaningful public input or 
engagement, and lacked transparency regarding how USPS makes AMP 
consolidation decisions. Table 1 describes the recommendations we made 
to the Postmaster General in our 2007 report. 

Table 1: Recommendations to the Postmaster General in GAO-07-717: 

Planning and Accountability: 
Strengthen planning and accountability by ensuring that USPS's network 
realignment plans include; 
* a discussion of how the various network realignment initiatives will 
be integrated with each other to achieve network realignment goals, 
* measurable targets for the anticipated cost savings and benefits 
associated with network rationalization; 

Improve the way USPS communicates with stakeholders about its 
realignment plans and proposals, particularly its proposals for 
consolidating AMP operations, by ensuring that its revised 
communication plan includes steps to; 
* improve public notice; 
* improve public engagement, and; 
* increase transparency. 

Source: GAO: 

[End of table] 

To strengthen its planning and communication, in June 2008, USPS issued 
its Network Plan.[Footnote 2] This plan, mandated by the Postal 
Accountability and Enhancement Act of 2006 (PAEA),[Footnote 3] was to 
include USPS's long-term vision and strategy for realigning its 
network; a description of the anticipated costs, cost savings, and 
other benefits associated with the infrastructure realignment 
alternatives; and USPS's communication procedures for AMP 
consolidations. USPS has additional legislative requirements to meet 
before moving forward with AMP consolidations. Moreover, the previously 
mentioned congressional directive that called for this report, which 
appeared in the joint explanatory statement accompanying the 
Consolidated Appropriations Act for fiscal year 2008, restricts USPS 
from implementing additional AMP consolidations until we have issued 
this report to the Committees on Appropriations.[Footnote 4] 

To describe USPS's progress in implementing our recommendations on 
improving network realignment planning and accountability, we reviewed 
the Network Plan USPS issued in June 2008 and our work on USPS's 
realignment initiatives.[Footnote 5] We also met with the Deputy 
Postmaster General and Acting Senior Vice President for Operations to 
discuss USPS's Network Plan and decision-making process for realignment 
initiatives. To describe USPS's progress in implementing our 
recommendations on better communicating its realignment plans and 
proposals to stakeholders, we reviewed USPS's revised AMP guidelines 
and revised Communication Plan, both issued in March 2008, along with 
our related realignment products and USPS's June 2008 Network Plan. We 
also met with USPS's Manager of Processing Operations and the Manager 
of Network Alignment Implementation to discuss the changes USPS has 
made to improve its AMP process. We conducted this performance audit 
from June 2008 through September 2008 in accordance with generally 
accepted government auditing standards. Those standards require that we 
plan and perform the audit to obtain sufficient, appropriate evidence 
to provide a reasonable basis for our findings and conclusions based on 
our audit objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 

Results in Brief: 

USPS has taken steps to address our prior recommendations to strengthen 
planning and accountability for its network realignment efforts, which 
are important as USPS moves from planning to implementing its network 
realignment initiatives. Its 2008 Network Plan identifies three major 
realignment efforts: (1) closures of Airport Mail Centers (AMC), (2) 
consolidations of AMP operations, and (3) the transformation of the 
Bulk Mail Center (BMC) network. USPS's Network Plan includes criteria 
for evaluating realignment decisions, the three most important of 
which, according to postal officials, are cost, service, and capacity. 

USPS has established a process for evaluating and measuring the results 
of its AMP consolidations, is developing an analogous process for AMC 
closures, and has yet to implement the BMC initiative as this strategy 
is still under consideration. USPS's AMP guidelines require semiannual 
and annual postimplementation reviews of AMP consolidations. These 
reviews assess whether planned savings, work hours, and levels of 
service have been met and ensure that management is held accountable 
for implementing an approved AMP proposal. Additionally, we found that 
USPS's Network Plan generally describes how USPS's key realignment 
efforts are integrated and provides a few examples. Regarding 
performance targets, we found that the Network Plan contains limited 
specific information on performance targets or on the costs and savings 
attributable to USPS's various realignment initiatives. The only 
specific reference in the Plan was the statement that USPS would 
establish fiscal year 2009 service standards targets before the 
conclusion of fiscal year 2008. The Deputy Postmaster General explained 
that USPS's performance targets are captured in more detail in its 
budget. However, limited information on performance targets, 
particularity related to its realignment initiatives, is available to 
Congress and the public. USPS provides Congress with highlights of its 
budget as part of its annual appropriation request, but not its 
detailed internal budget. Since USPS is self-sustaining, its 
appropriations requests to Congress are limited.[Footnote 6] We 
recognize USPS's need to increase efficiency and decrease costs across 
all its operations in light of declining mail volumes. In addition, 
USPS's financial report for the third quarter of this fiscal year 
states that slow economic growth will continue to negatively affect 
revenue and volume, especially if fuel prices remain at their current 
high levels and inflation in other sectors of the economy begins to 
increase. As USPS pursues its network realignment under these 
challenging financial conditions, it will have an opportunity, in its 
annual reports to Congress, to provide ongoing information about its 
realignment targets and the costs and benefits of its realignment 
initiatives.[Footnote 7] 

USPS has taken steps to address our recommendations to improve 
communication with its stakeholders as it consolidates its AMP 
operations. USPS has modified its AMP Communication Plan to improve 
public notification, engagement, and transparency. Notably, USPS has 
improved the content of its notification letters and notifies 
stakeholders earlier of the public meeting during which AMP 
consolidations are discussed. USPS also has moved the meeting to an 
earlier point in the AMP process and plans to post a meeting agenda, 
summary brief, and presentation slides on its Web site 1 week before 
the public meeting. To increase transparency, USPS has clarified its 
processes for addressing public comments and plans to make additional 
information about AMP consolidations available on its Web site. As USPS 
implements AMP consolidations, it will have the opportunity to gather 
stakeholders' feedback on the updated Communication Plan and assess the 
effectiveness of these modifications. 

We provided USPS with a draft of this report, and we have incorporated 
its technical comments, as appropriate. 

USPS Has Made Progress toward Implementing GAO's Recommendations to the 
Postal Service to Improve Realignment Planning and Accountability: 

In its 2008 Network Plan, USPS has clarified how it makes realignment 
decisions and evaluates results and generally addressed how it 
integrates its realignment initiatives, but it has not established 
measurable performance targets for these initiatives. USPS believes 
that its budgeting process accounts for the cost reductions achieved 
through these initiatives. 

USPS Has Clarified Its Criteria for Making Realignment Decisions and 
Its Process for Evaluating AMP Proposals: 

According to postal officials, USPS uses three primary criteria for 
evaluating realignment decisions--cost, service, and capacity. Its 2008 
Network Plan states that opportunities for consolidation are judged 
against the same criteria, regardless of whether proposals to conduct 
AMP feasibility studies are initiated from the "top down" or from the 
"bottom up."[Footnote 8] The Plan lists these criteria as: 

* changes in service quality, as measured by service performance 

* upgrades or downgrades in service standards for First-Class Mail and 
other mail classes; 

* changes in collection box pick-up times and retail service 

* changes in location and hours for business mail acceptance at mail 
entry units and for drop shipments; 

* operating plans at the gaining and consolidated mail processing 

* future needs for deploying mail processing equipment and for floor 
space; and: 

* potential savings and efficiencies, including reductions in utility 

In 2007, USPS officials told us they were prioritizing AMP 
consolidations that were expected to achieve $1 million or more in cost 
savings annually. In June 2008, they told us that USPS plans on 
considering consolidations that are expected to achieve less than $1 
million in annual cost savings. Furthermore, they explained that USPS 
plans to focus on those consolidations that will result in minimal, if 
any, degradation of First-Class service standards. 

In addition, USPS has established a process for evaluating the savings 
and benefits resulting from AMP consolidations, is developing a process 
to evaluate the results of its AMC closures, and has not yet 
implemented its BMC transformation. USPS's AMP guidelines require that 
approved AMP consolidations be reviewed twice after a consolidation has 
been implemented to assess whether planned savings, work hours, and 
levels of service have been met and to ensure management's 
accountability for implementing an approved AMP proposal. The first 
review, which covers the first and second full quarters following 
implementation, indicates whether the AMP consolidation is on track for 
achieving the expected savings and determines whether the AMP 
consolidation achieved the necessary training, relocations, 
transportation, operational changes, and work hour adjustments. The 
second review compares the initial estimates against actual data to 
determine the viability of the consolidation and allows management the 
opportunity to analyze the decisions it made in implementing the 
approved AMP proposal. In 2007 we reported that the guidance for this 
process did not prescribe standardized sources for the data used or 
standardized methodologies for analyzing some of the data. USPS updated 
its AMP guidance in 2008 and has standardized its AMP data sources and 
analytical methodologies to achieve more consistent results, for 
example, by locking in formulas to be used in postimplementation 

USPS Has Generally Addressed the Integration of Its Various Network 
Realignment Initiatives: 

In its 2008 Network Plan, USPS identifies three major realignment 
efforts--(1) AMC closures, (2) consolidations of AMP operations, and 
(3) the transformation of the BMC network--and briefly addresses the 
integration of these network initiatives. The Network Plan states that 
the overall impact and execution are tightly integrated, and provides a 
few examples, but gives little contextual information about what USPS's 
future network will look like or how its realignment goals are being 
met. However, senior USPS officials recently provided information that 
helps to put the integration of USPS's three network realignment 
initiatives in context. They said this integration is expected to 
reduce USPS's network and shrink its mail processing operations. After 
integrating these three efforts, they said, USPS will continue to be 
the "first and last mile"--the "first mile" being the point of entry 
for mail into the system and the "last mile" being the delivery of mail 
to customers nationwide--as required to meet USPS's universal service 
mission. They expect to lower costs and achieve savings by reducing 
excess processing capacity and fuel consumption, as well as by working 
with the mailing industry to implement new technologies such as 
delivery point sequencing for flats, and Intelligent Mail®.[Footnote 9] 

Measurable Performance Targets for Realignment Initiatives Are Limited 
to USPS's Budget: 

PAEA calls for USPS to, among other matters, establish performance 
goals and identify anticipated costs, cost savings, and other benefits 
associated with the infrastructure realignment alternatives in its 
Network Plan. The Network Plan describes an overall goal to create an 
efficient and flexible network that results in lower costs for both 
USPS and its customers, improves the consistency of mail service, and 
reduces USPS's overall environmental footprint. In addition, the Plan 
states that USPS's goals are continuous improvement and savings of $1 
billion per year through realignment and other efforts. According to 
the plan, USPS will achieve these savings, in part, through its three 
core realignment initiatives. The specificity of the expected savings 
related to the core initiatives varies in the plan's discussion of 
measurable goals and targets. With respect to overall program targets, 
USPS estimated a total savings of $117 million for AMC closures-- 
including $57 million in 2008 and $21 million in 2009--but provided no 
such figures for the AMP consolidations. Postal officials told us USPS 
is developing an overall program target for the BMC transformations. 

Although USPS has estimated total savings for AMC closures, it has not 
established measurable performance goals and targets for any of the 
three individual realignment initiatives. The only specific reference 
in the Plan to targets was the statement that USPS would establish 
fiscal year 2009 service standards targets before the conclusion of 
fiscal year 2008. According to the Deputy Postmaster General, the 
realignment targets are captured in USPS's goal of saving $1 billion 
per year. Specifically, he explained that USPS includes its overall 
goals and targets in more detail as part of its internal budget. 

USPS's Network Plan notes that to address declining mail volumes, USPS 
must increase efficiency and decrease costs across all its operations. 
Furthermore, USPS's financial report for the third quarter of this 
fiscal year stated that slow economic growth will continue to 
negatively affect revenue and volume, especially if fuel prices remain 
at their current high levels and inflation in other sectors of the 
economy begins to increase. Given USPS's challenging financial 
situation, we recognize that effective implementation of network 
realignment is needed. However, limited information on USPS's 
performance targets, particularly related to its realignment 
initiatives, is available to Congress and the public. USPS provides 
Congress with highlights of its budget as part of its annual 
appropriation request, but not its detailed internal budget. Since USPS 
is self-sustaining, its appropriations requests to Congress are 
limited. USPS's annual reports to Congress, due 90 days after the end 
of the fiscal year, provide an opportunity for USPS to make its goals 
and results more transparent and provide information about the 
effectiveness of its realignment efforts. Going forward, USPS will have 
opportunities to provide information about its estimated costs and cost 
savings related to its realignment efforts in its annual report to 
Congress. Developing and implementing more transparent performance 
targets and results can help inform Congress and other stakeholders 
about the effectiveness of USPS's realignment efforts.[Footnote 10] 

USPS Has Made Progress toward Implementing GAO's Recommendations to 
Improve Communication Related to AMP Consolidation Plans and Proposals: 

USPS has taken steps to respond to our recommendations related to 
communication with stakeholders about its realignment plans and 
proposals, particularly its proposals for consolidating AMP operations. 
These steps include improving public notice, improving public 
engagement, and increasing transparency by clarifying how it considers 
public input in making its decisions. 

USPS Has Improved Public Notice by Clarifying Notification Letters: 

In its 2008 AMP Communication Plan, USPS has largely eliminated jargon 
from its notification letters and generally provided more contextual 
information on its reasons for conducting AMP feasibility studies. For 
example, the initial notification letters[Footnote 11] no longer 
contain jargon such as "originating mail processing" and "destinating 
mail processing" and now name both facilities that would be affected by 
a proposed consolidation, whereas previously, only one facility was 
named. Previous letters also contained little contextual information on 
the economic trends affecting USPS and on why it believes it needs AMP 
feasibility studies and consolidations. Now, the initial notification 
letters provide stakeholders with more information for understanding 
USPS's AMP process. Presenting such information to stakeholders before 
rather than during public meetings may help address the resistance that 
has often built up as stakeholders have speculated on USPS's plans in 
the absence of accurate information. Further, USPS has added a 
requirement in its 2008 Communications Plan that the public be notified 
at least 15 days in advance of a public meeting. 

USPS Has Improved Engagement by Holding the Public Meeting Earlier in 
the AMP Process and Making Informational Materials Available in Advance 
of the Meeting: 

Although USPS still holds a public meeting after completing the data- 
gathering phase of the feasibility study, the meeting now occurs 
earlier in the AMP review process. Currently, before the meeting, the 
study has been approved only at the district level--the area office and 
headquarters have not yet completed their reviews or validated the data 
by the time of the meeting. According to USPS officials, they did not 
move the meeting up even more, to the data-gathering phase of the 
study, because at that point, USPS does not know what operations could 
potentially be consolidated. However, to ensure that the public meeting 
is held within a reasonable amount of time after the study's 
completion, USPS's 2008 AMP Communication Plan requires that the public 
meeting take place within 45 days after the District Manager forwards 
the study to the area office and headquarters. In addition, the initial 
notification letter now includes contact information for the local 
Consumer Affairs Manager, to whom the public can submit written 
comments up to 15 days after the public meeting. Previously, this 
contact information appeared in the second notification letter. 

To help stakeholders better prepare for the public meeting, USPS plans 
to post a meeting agenda, presentation slides, and a summary brief of 
the AMP consolidation proposal on its Web site 1 week before the 
meeting. USPS also plans to inform stakeholders in the public meeting 
notification letter that these materials will be posted on its Web site 
1 week before the meeting. 

USPS Has Increased Transparency by Clarifying How It Considers Public 
Input in the Decision-Making Process: 

In a recent interview, senior USPS officials identified two additions 
to the 2008 AMP Communication Plan that address stakeholders' concerns 
about how USPS considers public input. First, USPS will now consider 
written comments from stakeholders before the public input meetings and 
address these comments at the public input meetings. Second, USPS has 
modified its public input review process so that officials at the 
district, area, and headquarters levels can consider, and be responsive 
to, public concerns. The Vice President, Consumer Advocate, at 
headquarters is responsible for ensuring that due consideration has 
been given to issues raised throughout the public input process before 
the proposal and summaries are sent to the SVP Operations, for final 
consideration. Senior USPS officials told us that officials weigh 
public input primarily by considering the impact of any consolidations 
on customer service and service standards. Additionally, USPS officials 
told us that as AMP consolidations go forward, USPS will post standard 
information about each consolidation on its Web site and update this 
information regularly. Specifically, USPS plans to post initial 
notifications, a brief summary of the proposed AMP consolidation, 
details about the scheduled public meeting, a summary of written and 
verbal public input, and the final decision and implementation plans if 
an AMP consolidation is approved. 

We have previously discussed the difficulties that stakeholder 
resistance poses for USPS when it tries to close facilities and how 
delays may affect USPS's ability to achieve its critical cost-reduction 
and efficiency goals. Part of the problem has stemmed from USPS's 
limited communication with the public. We believe that USPS has made 
significant progress toward improving its AMP communication processes 
since 2005. Going forward, it will be crucial for USPS to establish and 
maintain an ongoing and open dialogue with its various stakeholders, 
including congressional oversight committees and Members of Congress, 
who have questions or are concerned about proposed realignment changes. 

We are sending copies of this report to the Postmaster General, 
appropriate congressional committees, and other interested parties. We 
also will make copies available to others upon request. In addition, 
the report will be available at no charge on the GAO Web site at 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-2834 or Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Key contributors to this report were 
Teresa Anderson, Margaret McDavid, and Jaclyn Nidoh. 

Signed by: 
Phillip R. Herr: 
Director, Physical Infrastructure Issues: 

[End of section] 


[1] GAO, U.S. Postal Service: The Service's Strategy for Realigning Its 
Mail Processing Infrastructure Lacks Clarity, Criteria, and 
Accountability, [hyperlink,
261] (Washington, D.C.: Apr. 8, 2005); and U.S. Postal Service: Mail 
Processing Realignment Efforts Under Way Need Better Integration and 
Explanation, [hyperlink,] 
(Washington, D.C.: June 21, 2007). 

[2] Postal Accountability and Enhancement Act § 302 Network Plan. 

[3] Section 302 of the Postal Accountability and Enhancement Act (Pub. 
L. No. 109-435) was enacted on Dec. 20, 2006. Whereas the act refers to 
network "rationalization," we have previously used the term 
"realignment" for analogous purposes and continue to do so in this 

[4] See Division D, Financial Services and General Government 
Appropriations Act, 2008, of the Explanatory Statement accompanying the 
Consolidated Appropriations Act, 2008, Pub. L. No. 110-161, Dec. 26, 
2007. The Explanatory Statement is included in the Committee Print on 
H.R. 2764/Public Law 110-161, Committee on Appropriations, U.S. House 
of Representatives, January 2008. 

[5] See [hyperlink,]; 
[hyperlink,]; and U.S. 
Postal Service: USPS Has Taken Steps to Strengthen Network Realignment 
Planning and Accountability and Improve Communication, [hyperlink,] (Washington, D.C.: July 
24, 2008). 

[6] For example, in fiscal year 2008, Congress appropriated an 
estimated $89 million of USPS's total budget of an estimated $78 
billion. Congress put USPS on a self-sustaining basis in 1971, and has 
subsidized the mailing costs of certain groups, e.g., the blind and 
overseas voters, by providing an appropriation to USPS to cover the 
revenues that were given up, or "forgone," in charging below-cost rates 
to these groups. See Congressional Research Service, The Postal Revenue 
Forgone Appropriation: Overview and Current Issues (Washington, D.C., 

[7] Section 302 of PAEA requires USPS to submit a report to Congress 
within 90 days after the end of each fiscal year on the impact postal 
decisions have had or will have on realignment plans. 

[8] With the "bottom-up" AMP approach, the process begins when the 
postal District Manager or Senior Plant Manager notifies the Area Vice 
President (AVP) of the intent to conduct an AMP feasibility study. The 
AVP then informs the Senior Vice President (SVP) Operations at 
headquarters. With the "top-down" AMP approach, the SVP Operations 
contacts the AVP to initiate a feasibility study. 

[9] Delivery point sequencing is the automated rather than the manual 
sorting of letters in the exact order in which carriers deliver them. 
Flats sequencing is a system that fully automates the processing and 
delivery sequencing of flat-size mail, which generally consists of 
catalogs, envelopes, large cards, magazines, and newspapers. 
Intelligent Mail® uses barcodes which are read by scanning devices to 
allow postal managers and customers to track mail as it moves through 
the postal network. 

[10] For additional GAO work on the benefits of establishing 
performance standards and targets, see Results-Oriented Cultures: 
Implementation Steps to Assist Mergers and Organizational 
Transformations, [hyperlink,
669] (Washington, D.C.: July 2, 2003). 

[11] USPS provides for notification letters at multiple points during 
the AMP process, e.g., initial notification of intent to perform a 
study, notification of a public meeting, and notification to 
consolidate facilities. 

[End of section] 

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