Postal Service Reform:

Observations on Proposed Revisions to H.R. 22

GGD-98-97R: Published: Apr 7, 1998. Publicly Released: Apr 7, 1998.

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Bernard L. Ungar
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Pursuant to a congressional request, GAO provided comments on proposed revisions to H.R. 22, the Postal Reform Act of 1997.

GAO noted that: (1) because the proposed revisions contain many complex provisions that GAO has not considered in its past or ongoing reviews, GAO is generally not in a position to comment on the implications of the specific revisions being imposed; (2) therefore, GAO does not take a position on whether or not the proposed specific revisions to H.R. 22 should be adopted; (3) the proposed revisions would mandate that the concept of Universal Service be defined; (4) the $2 limit on the delivery price of items covered by the postal monopoly--the limit proposed by the revisions--would have little short-range impact on the Postal Service's (USPS) ability to provide service; (5) in GAO's view, requiring USPS to report on the quality of its delivery service would be consistent with the underlying purpose of the Government Performance and Results Act; (6) the proposed revisions would give USPS additional flexibility to set prices for its competitive products and services; (7) however, in congressional review of proposals to give USPS greater freedom to borrow and manage its finances, three considerations seem appropriate: (a) credit markets could perceive implied federal financial backing of USPS obligations even if they are explicitly not guaranteed, which may raise concerns about potential funding advantages; (b) there may be a potential risk to the taxpayer if USPS incurred losses and the government chose to repay these obligations; and (c) effective oversight could reduce the potential risk to the taxpayer related to any losses from investments made by the Competitive Products Fund; (8) the proposed revisions would give USPS additional flexibility to set prices for its competitive products and services and would subject USPS' activities to many of the same U.S. laws as the private sector; (9) in GAO's view, as long as USPS remains a federal entity protected by the postal monopoly, it is appropriate that USPS ability to compete with the private sector be balanced with oversight and legal safeguards to ensure fair competition between USPS and private competitors; and (10) further, the proposed revisions are designed to ensure fair competition for international mail.

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