U.S. Postal Service:

Progress Made Toward Implementing GAO's Recommendations to Strengthen Network Realignment Planning and Accountability and Improve Communication

GAO-08-1134R: Published: Sep 25, 2008. Publicly Released: Sep 25, 2008.

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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. 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.

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. 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. 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.

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