United States Postal Service:
Strategy Needed to Address Aging Delivery Fleet
GAO-11-386: Published: May 5, 2011. Publicly Released: May 17, 2011.
The United States Postal Service (USPS) has the world's largest civilian fleet, with many of its delivery vehicles reaching the end of their expected 24-year operational lives. USPS is subject to legislative requirements governing the federal fleet, including a requirement in the Energy Policy Act of 1992, which provides that 75 percent of USPS's vehicle acquisitions be alternative fuel vehicles, capable of operating on a fuel other than gasoline. USPS is also facing serious cost pressures in maintaining a national network of processing and retail operations. Asked to review USPS's delivery fleet, GAO (1) profiled the fleet; (2) assessed USPS's response to alternative fuel vehicle requirements and described its experiences with these vehicles; (3) identified USPS's approach for addressing its delivery fleet needs, including trade-offs; and (4) determined options to fund a major acquisition of delivery vehicles. GAO analyzed USPS data; visited USPS facilities in three locations; and interviewed officials from USPS, the Department of Energy, and other organizations, including fleet operators and manufacturers.
USPS's delivery fleet is largely composed of custom-built, right-hand-drive vehicles designed to last for 24 years, including about 141,000 gasoline-powered vehicles 16 to 23 years old and 21,000 flex-fuel vehicles capable of running on gasoline or 85-percent ethanol (E85) that are about 10 years old. The fleet also includes 22,000 left-hand-drive minivans, many of which are also capable of running on E85, and 3,490 delivery vehicles capable of running on other alternative fuels. Delivery vehicles are driven an average of about 17 miles per day and cost about $1 billion to maintain and fuel in fiscal year 2010. USPS met the 75 percent acquisition requirement for alternative fuel vehicles by purchasing about 40,000 flex-fuel vehicles and minivans that can operate on E85 or gasoline. However, USPS does not always use E85 in these vehicles because E85 is not readily available and can cost more to use due to less fuel efficiency, according to USPS officials. USPS has a variety of limited experiences with other alternative fuel vehicles, such as compressed natural gas and plug-in electric vehicles, most of which have higher life-cycle costs than gasoline vehicles. USPS's approach for addressing its delivery fleet needs is to maintain its current fleet until it determines how to address its longer term needs. USPS has incurred small increases in direct maintenance costs over the last 5 years, which were about $2,600 per vehicle in fiscal year 2010. However, it is increasingly incurring costs for unscheduled maintenance because of breakdowns, which can disrupt operations and increase costs. In fiscal year 2010, at least 31 percent of USPS's vehicle maintenance costs were for unscheduled maintenance, 11 percentage points over USPS's 20 percent goal. USPS's financial challenges pose a significant barrier to a major delivery vehicle replacement or refurbishment, estimated to cost $5.8 billion and (in 2005) $3.5 billion, respectively. USPS and other federal and nonfederal officials see little potential to finance a fleet replacement through grants or partnerships. GAO has reported that Congress and USPS need to reach agreement on a package of actions to move USPS toward financial viability. Depending on the specific actions adopted, USPS's follow-up, and the results, such an agreement could enhance its ability to invest in new delivery vehicles. USPS should develop a strategy for addressing its delivery fleet needs that considers the effects of likely operational changes, legislative fleet requirements, and other factors. USPS agreed with GAO's recommendation.
Recommendation for Executive Action
Status: Closed - Implemented
Comments: In 2011, GAO reported that U.S. Postal Service (USPS) faces severe financial challenges and, for the foreseeable future, cannot afford to replace or refurbish a large portion of its aging fleet. This approach has been reasonable given its pressing need to defer an estimated $5.8 billion capital outlay for a major vehicle replacement or a major refurbishment, estimated at $3.5 billion in 2005. However, the time soon will come when the cost and operational consequences of this approach will not allow further delays. When that time comes, USPS will need to know how it can best comply with federal requirements for acquiring alternative fuel vehicles while also meeting its operational requirements. Therefore, GAO recommended that USPS develop a strategy and timeline that addressed its delivery fleet need and considered the effect of any operational changes and continuing changes in customers' use of the mail, the range of strategic options available, and other factors including legislative fleet requirements. In January 2015, USPS documented its fleet strategy and timeline for procurement in its Next Generation Delivery Vehicle (NGDV) acquisition program. The long-term NGDV acquisition strategy will replace the aging fleet over time, with the oldest, highest mileage, and most expensive to maintain vehicles being replaced first. USPS anticipates making a single award for up to 180,000 NGDVs with an estimated total cost ranging from $4.5 billion to $6.3 billion. In developing its strategy and draft specifications for the NGDV, USPS assessed its projected needs based on changing mail volumes and the mix of types of mail. According to USPS, the specifications for the new vehicles address the reduction in traditional letter and flat volume mail and will result in a vehicle that will be more ergonomically correct than previous carrier vehicles; allow for more space to organize and stow parcels, which USPS projects will grow at 6 percent annually; and meet delivery demands on 99 percent of existing routes. USPS also reported considering a range of strategic options for vehicle replacement before settling on the NGDV acquisition strategy. These options included foreign manufactured right hand drive commercial vehicles, refurbishment of previous carrier route vehicles, and domestic manufactured vehicles converted to right hand drive. USPS found these options to be cost prohibitive or impractical. To help it comply with federal fleet requirements to purchase alternative fuel vehicles and use alternative fuel in them, USPS researched alternative fuel powertrains such as electric, hybrid electric, and compressed natural gas. USPS considered several factors in its evaluation including purchase price, fuel cost, available infrastructure for refueling or charging, maintenance costs, and the maturity of the technology and number of vendors. According to USPS officials, they plan to encourage potential suppliers to propose a flexible design that may accommodate different powertrain configurations as technologies evolve. While we have not evaluated the quality of the strategy developed by USPS to address its fleet needs, the strategy is an important step for USPS to enhance its ability to replace its current vehicles, which are rapidly nearing the end of their useful life, with new delivery vehicles that will allow USPS to better meet the needs of its customers and maintain USPS's legal mandate to purchase alternative fuel vehicles and use alternative fuel in them.
Recommendation: Given USPS's need to ensure that its delivery fleet remains operationally viable and maintain its legal mandate to purchase alternative fuel vehicles and use alternative fuel in them, the Postmaster General should develop a strategy and timeline for addressing USPS's delivery fleet needs. This effort should address: (1) the effects of USPS's planned operational changes and continuing changes in customers' use of the mail on future delivery fleet requirements; (2) the range of strategic options available (including continuing to maintain, not replace, its fleet), as well as the costs and time frames for these options; (3) an analysis of any safety consequences associated with extending the vehicles' operational lives; and (4) alternative ways to comply with federal fleet requirements, including an analysis of how USPS can best meet these requirements, given its budget constraints.
Agency Affected: United States Postal Service