U.S. Postal Service:

Action Needed to Maximize Cost-Saving Potential of Alternatives to Post Offices

GAO-12-100: Published: Nov 17, 2011. Publicly Released: Nov 17, 2011.

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Phillip R. Herr
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Declines in mail volume have brought the U.S. Postal Service (USPS) to the brink of financial insolvency. Action to ensure its financial viability is urgently needed. Visits to post offices have also declined, and in an effort to cut costs, USPS is considering closing nearly half of its 32,000 post offices by 2015. In their place, alternatives to post offices, such as the Internet, self-service kiosks, and partnerships with retailers, are increasingly important for providing access to postal services. Retail alternatives also hold potential to help improve financial performance by providing services at a lower cost than post offices. As requested, this report discusses how (1) USPS's efforts to expand access through retail alternatives support its service and financial performance goals, (2) USPS communicates with the public about retail alternatives, and (3) USPS oversees its retail partners. To conduct this work, GAO analyzed USPS documents and data and interviewed USPS officials and stakeholders. GAO also interviewed operators of postal retail partnerships.

USPS has expanded access to its services through alternatives to post offices in support of its goals to improve service and financial performance. Retail alternatives offer service in more locations and for longer hours, enhancing convenience for many customers, but certain characteristics of these alternatives could be problematic for others. For example, services obtained from some alternatives cost more because of additional fees, which could deter use by price-sensitive customers. Furthermore, although about $5 billion of its $18 billion in fiscal year 2010 retail revenue came from alternatives, USPS officials said it is too early to realize related cost savings. USPS also lacks the performance measures and data needed to show how alternatives have affected its financial performance. A data-driven plan to guide its retail network restructuring could provide a clear path for achieving goals. Without such a plan, USPS may miss opportunities to achieve cost savings and identify which alternatives hold the most promise. USPS has sought to raise customers' awareness by developing media campaigns, enhancing its online tools for locating postal access points, and creating standard symbols for post offices and retail alternatives to show which products and services they offer. However, USPS has not assessed whether its message is reaching its customers, such as by using one of its existing customer surveys, and therefore does not know to what extent customers are aware of and willing to use its various retail alternatives. Although the public increasingly uses postal retail alternatives, more widespread adoption will be needed if USPS is to close thousands of post offices as planned in the next few years. USPS has projected that by 2020 alternatives to post offices will account for 60 percent of its retail revenue. USPS's oversight of its retail partners, which includes entering into written agreements with them and providing training and guidance, could be improved if USPS modified its approach to monitoring compliance with its procedures. Local USPS officials are supposed to conduct quarterly reviews of retail partners to make sure they are following mailing procedures, but according to retail partners and USPS officials in field and local offices, these reviews do not always occur as often as intended because of resource constraints. A risk-based monitoring approach would allow targeting limited USPS oversight resources to areas of concern and thus address issues that could otherwise discourage customers from adopting retail alternatives, such as inadequate service. USPS should develop a plan to guide its retail network restructuring that is supported by relevant performance measures and data and includes a method to assess the effectiveness of its public communication strategy. USPS should also implement a risk-based approach to monitoring retail partners. USPS reviewed a draft of this report and stated it is developing a plan to guide its retail network restructuring and agreed to review how it monitors retail partners.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Although USPS did not disagree with the recommendation when it was made, it reports that its overall approach for retail services has changed. USPS maintains that its strategy for providing retail access continually evolves in response to changing customer demands and other factors and is therefore not documented in a single comprehensive plan. We acknowledge USPS's need to adapt to changing conditions and that it has taken some steps to address the issues we identified. However, we still believe that a plan would provide USPS a clear path for optimizing its retail network. Given the length of time that has elapsed and the fact that USPS has neither developed a plan nor documented a strategy for optimizing its retail network, we believe it is appropriate to close this recommendation as not implemented.

    Recommendation: To better ensure that USPS's efforts to expand access through retail alternatives support its strategic goals to improve its service and financial performance, the Postmaster General should develop and implement a plan with a timeline to guide efforts to modernize USPS's retail network that addresses both traditional post offices and retail alternatives. This plan should also include: (1) criteria for ensuring the retail network continues to provide adequate access for customers as it is restructured; (2) procedures for obtaining reliable retail revenue and cost data to measure progress and inform future decision making; and (3) a method to assess whether USPS's communications strategy is effectively reaching customers, particularly those customers in areas where post offices may close.

    Agency Affected: United States Postal Service

  2. Status: Closed - Implemented

    Comments: Declines in mail volume brought USPS to the brink of financial insolvency. In an effort to bring costs in line with revenue, USPS was considering closing nearly half of its 32,000 post offices by 2015 and replacing them with alternatives to post offices, including self-service options and partnerships with retailers to contain costs while providing access to service. One type of alternative access is the contract postal unit (CPU), which is most comparable to post offices, and is operated and managed by independent retailers-retail partners-that USPS contracts with. In 2011, GAO reported that as USPS expanded its use of retail partners, USPS established procedures for monitoring their performance. USPS's guidance for overseeing CPUs stated that local USPS officials are supposed to conduct quarterly reviews of every CPU-which in 2010 numbered around 3,600-to make sure they are following USPS procedures. According to retail partners and USPS officials, these reviews did not always occur as often as intended because of resource constraints. Cuts in USPS's management-level staffing may contribute to lapses in oversight of retail partners. GAO previously reported that a risk-based approach to oversight can help agencies effectively target constrained resources to better address potential problem areas. Such an approach could help USPS identify which retail partners should be monitored more closely and would give managers flexibility to conduct reviews more or less frequently as warranted by available resources and assessments of risks. Therefore, GAO recommended that USPS should establish procedures to focus monitoring of retail partners on those determined to be at a greater risk of not complying with its requirements and procedures. In 2018, GAO confirmed that USPS had developed a risk-based approach to monitoring CPUs based on their revenue. Under this approach, CPUs that have greater revenue will be monitored more frequently than those with lower revenue. As a result, USPS is in a better position to more efficiently use its constrained management resources and effectively monitor its retail partners to help ensure they follow USPS procedures and provide quality service.

    Recommendation: To help ensure contract postal units and Approved Shippers provide postal products and services in accordance with USPS policies, while making efficient use of its constrained resources, the Postmaster General should establish procedures to focus monitoring of retail partners on those determined to be at a greater risk of not complying with its requirements and procedures.

    Agency Affected: United States Postal Service


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