    Postal Service: Employee Issues Associated with the Potential
    Closure of the San Mateo IT Center (31-JAN-03, GAO-03-205).

    While the U.S. Postal Service (USPS) rationalizes its
    infrastructure, it is weighing a proposal to close and sell its
    Information Technology (IT) center located in San Mateo,
    California. According to USPS, closing the IT center and selling
    the facility should save USPS about $74 million over the next 10
    years and result in increased efficiency. All IT union employees
    and about half of IT management employees will be offered the
    opportunity to relocate with their jobs to other postal IT
    centers. The San Mateo IT Center also houses an Accounting
    Service Center whose functions and staff are to be moved into
    leased space in the San Francisco Bay Area. GAO undertook this
    study to, among other things, identify the process USPS is
    following in making its decision about closing the IT center and
    determine the impact such a closure would have on IT employees at
    the center.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-03-205
        ACCNO:   A06016
      TITLE:     Postal Service: Employee Issues Associated with the
    Potential Closure of the San Mateo IT Center
         DATE:   01/31/2003
      SUBJECT:   Economic analysis
    	     Employee transfers
    	     Information technology
    	     Postal service employees
    	     Federal facilities
    	     Personnel management
    	     Facility management
    	     New York (NY)
    	     San Mateo (CA)

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    GAO-03-205

    Report to Congressional Requesters

    United States General Accounting Office

    GAO

    January 2003 POSTAL SERVICE Employee Issues Associated with the Potential
    Closure of the San Mateo IT Center

    GAO- 03- 205

    USPS is following its Investment Review and Approval Process in reaching a
    decision about closing the San Mateo IT Center. To support the investment
    needed to close the IT center, the process requires and USPS prepared*
    analyses based on prevailing economic and other conditions. However, these
    conditions have changed since USPS prepared the analyses in 2000. In 2001,
    USPS announced plans to automate and reengineer its field accounting
    activity, which will result in USPS closing its 85 district accounting
    offices and consolidating the residual activities into its 3 Accounting
    Service Centers. USPS has not updated its analyses to reflect the changed
    conditions, but said that it planned to do so.

    San Mateo IT employees anticipate mostly negative social impacts if they
    relocate and mostly negative economic impacts if they stay in the Bay
    Area. Of the 213 San Mateo IT employees who responded to our survey, 36
    (17 percent) indicated they would likely relocate, although most would be
    offered jobs at other postal IT centers. In 2000, USPS* economic analyses
    included an assumption* and San Mateo IT employees believed* that local
    jobs would be available for those individuals who did not want to
    relocate.

    However, local postal jobs are no longer available, and nonpostal IT job
    opportunities have tightened considerably in the Bay Area.

    GAO has previously noted that progressive organizations that are
    restructuring often provide job placement assistance to employees faced
    with losing their jobs. USPS plans to offer job assistance to management
    employees seeking nonpostal jobs. However, USPS does not plan to offer job
    assistance to union employees because such assistance is not covered by
    their collective bargaining agreement. Because the employment outlook in

    the Bay Area has changed dramatically, union employees who decide not to
    relocate may encounter difficulty finding employment in the Bay Area.

    San Mateo IT Center

    POSTAL SERVICE

    Employee Issues Associated with the Potential Closure of the San Mateo IT
    Center

    www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 205. To view the full report,
    including the scope and methodology, click on the link above. For more
    information, contact Bernard L. Ungar on (202) 512- 2834 or at ungarb@
    gao. gov. Highlights of GAO- 03- 205, a report to

    the Ranking Minority Member, House Committee on Government Reform and
    Other Requesters

    January 2003

    While the U. S. Postal Service (USPS) rationalizes its infrastructure, it
    is weighing a proposal to close and sell its Information Technology (IT)
    center located in San Mateo, California. According to USPS, closing the IT
    center and selling the facility should save USPS about $74

    million over the next 10 years and result in increased efficiency. All IT
    union employees and about half of IT management employees will be offered
    the opportunity to relocate with their jobs to other postal IT centers.
    The San Mateo IT Center also houses an Accounting

    Service Center whose functions and staff are to be moved into leased space
    in the San Francisco Bay Area. GAO undertook this study to, among other
    things, identify the process USPS is following in making its decision

    about closing the IT center and determine the impact such a closure would
    have on IT employees at the center. GAO recommends that USPS

    review and update, if appropriate, the analyses used in support of closing
    the San Mateo IT Center to

    better reflect current conditions before making its final decision about
    closing the center. GAO also recommends that if USPS decides to close the
    IT center, it should consider offering to help union employees find local
    jobs if they decide not to relocate. USPS did

    not comment on GAO*s findings, but it agreed with GAO*s recommendations.

    Page i GAO- 03- 205 Postal Service Letter 1 Results in Brief 3

    Background 7 Scope and Methodology 11 The Service Is Following Its
    Investment Review and Approval

    Process 14 Relocation Experts Report that Negative Economic and Social

    Impacts Generally Accompany Plant and Facility Closures 21 New York IT
    Center Employees Reported Economic and Social

    Impacts as a Result of the Closure 28 San Mateo IT Center Employees
    Anticipate Mostly Economic

    Impacts if they Opt to Stay in the Bay Area and Social Impacts if they Opt
    to Relocate to Another Postal IT Center 36 Conclusions 46 Recommendations
    for Executive Action 47 Agency Comments and Our Evaluation 47

    Appendix I Comparative Demographic Data and Options for San Mateo and
    Displaced New York IT Center Employees 50

    Appendix II Comments from the U. S. Postal Service 55

    Tables

    Table 1: Demographic Data for San Mateo Employees Compared with Displaced
    New York Employees* Demographic Data 51 Table 2: Likely Options/
    Opportunities for San Mateo IT Employees

    Compared with Options/ Opportunities that Were Available for Displaced New
    York IT Employees 52

    Figures

    Figure 1: The San Mateo IT Center 9 Figure 2: Overview of Postal Service*s
    Investment Review and Approval Process 18

    Figure 3: Options Selected by Displaced New York IT Center Employees in
    1993 30 Contents

    Page ii GAO- 03- 205 Postal Service

    Figure 4: Options San Mateo Employees Expect to Pursue if Staying in the
    Bay Area 40

    Abbreviations

    APWU American Postal Workers Union BLS Bureau of Labor Statistics CIC
    Capital Investment Committee COO Chief Operating Officer CPC Capital
    Projects Committee

    DAR Decision Analysis Report EAS Executive and Administrative Schedule ERC
    Employee Relocation Council HQ Headquarters IT Information Technology

    IT Department Information Technology Department NYC New York City OIG
    Office of Inspector General PCES Postal Career Executive Service PMG
    Postmaster General VP Vice President

    Page 1 GAO- 03- 205 Postal Service

    January 31, 2003 The Honorable Henry Waxman Ranking Minority Member
    Committee on Government Reform House of Representatives

    The Honorable Chaka Fattah The Honorable Tom Lantos House of
    Representatives

    This report responds to your request for information about the U. S.
    Postal Service*s Department of Information Technology (IT Department)
    proposal to close its San Mateo, California, Information Service Center,
    including the social and economic impacts that the closure would have on
    affected postal employees and their families. As you know, the Service has
    experienced significant financial difficulties in the past few years, and
    the Service is in need of transformation. Rationalizing the Service*s vast
    infrastructure will be critical to its success in addressing its financial
    difficulties, which means the Service may have to close or consolidate
    certain postal facilities. Within this context, the Service is considering
    closing the San Mateo Information Technology (IT) Center.

    In 2000, the Service*s IT Department proposed closing the San Mateo IT
    Center and transferring IT functions performed at the center to other
    postal IT centers in order to reduce costs and make operations more
    efficient. The proposed closure would affect about 240 employees* about
    170 bargaining unit and about 70 Executive and Administrative Schedule
    (EAS) employees. 1 Closing and consolidating IT functions are not new
    activities for the Postal Service. For example, in 1993, the Service
    closed its New York IT Center and transferred functions performed at that
    center to other postal IT centers.

    Under the IT Department*s closure proposal, most of the IT functions being
    performed by the San Mateo IT Center are to be transferred to the

    1 Generally, at the San Mateo IT Center, bargaining unit employees are
    computer operations and programming employees who are represented by the
    American Postal Workers Union, which bargains collectively with postal
    management over pay and conditions of employment. EAS employees are
    nonbargaining employees, which include employees such as supervisors,
    mangers, and professional and technical specialists.

    United States General Accounting Office Washington, DC 20548

    Page 2 GAO- 03- 205 Postal Service

    Service*s other Information Service Center located in Eagan, Minnesota.
    The remaining IT functions are to be transferred to the Service*s
    Integrated Business Systems Solutions Centers located in St. Louis,
    Missouri and Wilkes- Barre, Pennsylvania. 2 The San Mateo IT Center also
    houses an Accounting Service Center whose functions and staff are to be
    moved into leased space in the San Francisco Bay Area (Bay Area) if the

    Service decides to close the IT center. Because closing postal facilities
    is controversial, the Service said it would postpone making a final
    decision regarding the closure of the San Mateo IT Center until after we
    have issued this report and postal management has had a chance to review
    the results of our study.

    To provide you information on the impact that closing the San Mateo IT
    Center would have on postal employees working at that facility* and their
    families* we agreed with your offices to address the following objectives:

     Describe the process the Service is following in deciding whether to
    close the San Mateo IT Center and consolidate its functions into other
    postal IT centers.  Determine experts* views on the social and economic
    impacts that plant

    and facility consolidations and closures have on affected employees and
    their families.  Determine the social and economic impacts that affected
    postal

    employees and their families encountered when the Service closed its New
    York IT Center in 1993.  Determine affected postal employees* views on
    the social and economic

    impacts that they and their families would likely encounter if the Service
    closes the San Mateo IT Center.

    We also provide information on how selected organizations have assisted
    affected employees during downsizing.

    To meet these objectives, among other things, we administered a
    questionnaire to 243 San Mateo IT Center employees and received 213
    responses, resulting in an 88 percent response rate. We also administered
    two separate questionnaires to 145 current postal employees who were

    2 Henceforth, for simplicity and readability, we refer to the IT
    Department*s Information Service Centers and its Integrated Business
    Systems Solutions Centers as IT centers.

    Page 3 GAO- 03- 205 Postal Service

    displaced by the 1993 closure of the New York IT Center. 3 One
    questionnaire was mailed to 66 displaced employees of the New York IT
    Center who had relocated to similar positions at other postal IT centers
    outside the New York City area. We received 49 responses from this group,
    resulting in a 74 percent response rate. Another questionnaire was mailed
    to 79 displaced employees who had transferred to other postal positions in
    the New York City area following the IT center*s 1993 closure. We received
    46 responses from this group, resulting in a 58 percent response rate. We

    did not attempt to locate displaced employees of the New York IT Center
    who no longer work for the Service. Additionally, we identified and
    reviewed (1) the IT Department*s economic analyses and assumptions, (2)
    the U. S. Postal Service Office of Inspector General*s (OIG) November 2000
    audit report on the IT Department*s proposal and economic analyses, (3)
    applicable Postal Service policies and procedures relating to facility
    closures and capital investments, (4) our prior reports on restructuring
    and downsizing, (5) available private sector relocation studies, and (6)
    applicable portions of the U. S. Code and the

    Service*s collective bargaining agreement with the American Postal Workers
    Union (APWU) to identify legal requirements and entitlements associated
    with a postal facility closure. We also interviewed key stakeholders
    familiar with the closure, including (1) various postal officials at
    Headquarters and at the San Mateo IT Center and (2) national and local
    representatives of the APWU. Finally, we interviewed eight experts
    familiar with relocations. We identified these experts from available
    studies, articles, and referrals.

    The Postal Service is following its Investment Review and Approval Process
    in making its decision regarding the IT Department*s proposal to close the
    San Mateo IT Center, because the Service will need to make an investment
    of $8 million to support the closure. The Investment Review and Approval
    Process requires that a Decision Analysis Report (DAR) be prepared as
    support for the investment. 4 Additionally, the process requires that key
    senior postal executives approve the DAR. The IT Department

    3 The Bureau of Labor Statistics defines displaced employees as persons
    who lost or left jobs because their plant or company closed or moved,
    there was insufficient work, or their position or shift was abolished. 4 A
    DAR details the economic analyses, including costs and benefits, of the
    proposed investment and alternatives being considered. Results in Brief

    Page 4 GAO- 03- 205 Postal Service

    prepared a DAR for closing the San Mateo IT Center; and in early November
    2000 the Finance Department validated the accuracy and integrity of the
    DAR*s assumptions and economic analyses, and the former vice president for
    IT approved the DAR. Separate from the Investment Review and Approval
    Process, the OIG reviewed the DAR in 2000 and concurred that the proposed
    closure would save the Service about $74 million over 10 years. The
    savings would accrue from the sale of the San Mateo facility, staffing
    reductions, and operating efficiencies. Approval by the Postmaster General
    (PMG) and the Service*s Capital Investment Committee* which reviews
    projects of $7.5 million or more in capital and expense investments* has
    not yet occurred. According to the Service, these approvals are the final
    steps in its Investment Review and Approval Process and will take place
    after our report is issued if the Service decides

    to pursue closing the San Mateo IT Center. The San Mateo DAR has not been
    updated since 2000, although economic conditions have changed since that
    time. In addition, the DAR does not reflect the impact that the Service*s
    2001 announced plans to automate and reengineer its field accounting
    activity could have on projected savings associated with the closure
    proposal. Those plans involve closing the Service*s 85 district accounting
    offices and consolidating residual activity into its 3 Accounting Service
    Centers. However, postal officials said that the key assumptions used in
    preparing the DAR would be updated before the Service makes its closure
    decision.

    Relocation experts we interviewed reported that plant and facility
    closures occur throughout the nation and generally result in negative
    economic and social impacts on employees and their families. They said
    that following a closure, displaced employees typically experience
    economic impacts, such as lost income, loss of retirement benefits, and
    lower income after finding a new job. Employees who relocate with their
    jobs are likely to encounter social impacts, such as marital stress,
    separations from family members, and the loss of social ties. The experts
    also noted that dual- income families who relocate can face negative
    economic impacts when trailing spouses have to give up their jobs in order
    to relocate. The experts further noted that closures tend to have a
    greater negative impact on older employees. Older employees are less
    likely than younger employees to be reemployed and are more prone to
    social difficulties if they relocate to a

    new area. The experts indicated, however, that some employees might view
    closures positively because closures can afford workers the opportunity to
    redirect their careers, develop new competencies, or leave unsatisfying
    jobs.

    Page 5 GAO- 03- 205 Postal Service

    Employees affected by the New York IT Center closure in 1993 whom we
    surveyed reported that they experienced negative economic and social
    impacts from the closure. Our analysis of the salary data provided by the
    Service on employees displaced by the New York IT Center closure showed
    that employees who remained with the Service in the New York City area
    fared worse economically than those who relocated to other postal IT
    centers. According to the Service*s salary data, 9 years after the
    closure, the average salary of postal employees who relocated to other
    postal IT centers had increased about 11 percent (in constant 2001
    dollars), while the average salary of employees who remained with the

    Service in the New York City area had decreased about 1 percent (in
    constant 2001 dollars). However, survey respondents who relocated to other
    postal IT centers reported encountering more negative social impacts than
    respondents who remained with the Service in the New York City area. For
    example, 23 of the 49 relocated employees responding to our survey
    reported that they found it difficult (1) adjusting to the new geographic
    area, work environment, and local culture; (2) maintaining or establishing
    social, community, and cultural ties or finding supporting communities
    where they could get involved; and (3) being away from family and friends
    and missing out on important family events. Some

    relocated respondents also reported that since relocating, their spouses
    had found it very difficult to maintain or secure jobs, benefits, and
    retirement security.

    San Mateo IT employees who responded to our survey anticipated mostly
    economic impacts if they opt to stay in the Bay Area and social impacts if
    they opt to relocate to another postal IT center. Respondents anticipated
    economic impacts, varying from retiring earlier than planned to being
    unemployed. They anticipated social impacts, varying from short- term to
    long- term family separations. Under the IT Department*s proposal to close
    the San Mateo IT Center, all bargaining unit and about half of the EAS
    employees would be offered the opportunity to relocate with their jobs to
    another postal IT center. However, only 36 (17 percent) of the 213 San
    Mateo employees responding to our survey indicated they would likely
    relocate. Of the remaining respondents, 167 (78 percent) indicated they
    would likely stay in the Bay Area; and 10 (5 percent) indicated they were
    unsure what they would do if the Service decided to close the IT center.
    However, the actual decisions of the San Mateo IT Center employees may be
    different from their responses to our survey because certain factors

    have changed since they responded to our survey. At the time the employees
    completed our survey, the Service anticipated that postal positions would
    be available in the Bay Area for bargaining unit employees who did not
    want to relocate. Since that time, conditions have changed,

    Page 6 GAO- 03- 205 Postal Service

    and the Service no longer anticipates that postal positions will be
    available in the Bay Area. Additionally, outside employment opportunities
    in the Bay Area for employees with IT skills have tightened considerably.
    To help minimize the potential impact a closure could have on EAS
    employees, the

    Service has said it will make available the services of a private job
    search firm.

    One hundred thirty four of the 167 San Mateo respondents who indicated
    they would likely stay in the Bay Area provided reasons for not
    relocating. Of the respondents who provided reasons, 79 (59 percent)
    identified concerns with spouses* careers as a primary motivator in their
    decision not to relocate. The Service has indicated that it will work with
    trailing spouses who are postal employees to find postal employment at the
    new location, but it does not anticipate providing assistance to trailing
    spouses who are not postal employees. Because the Service is not providing
    assistance to all trailing spouses, the Service may not have as many
    employees relocating as it anticipates. In preparing the DAR, the IT
    Department estimated that 33 percent of San Mateo IT employees would
    relocate to other postal IT centers. However, only 17 percent of survey
    respondents indicated they would likely relocate. Relocation experts have
    noted that employees who must make a relocation choice often base their
    decisions on whether their trailing spouses can find suitable employment
    at the new location. Given this dilemma, relocation experts report more
    companies are providing employment assistance to trailing spouses, such as
    assisting with finding employment. By providing trailing spouses
    assistance* such as resume preparation and review services* the Service
    may encourage more employees to relocate.

    The employment outlook for San Mateo IT employees has diminished since
    2000. Postal positions are no longer expected to be available in the Bay
    Area, and nonpostal IT positions are significantly more limited than 2
    years ago. To help employees through such difficult times, we have
    previously reported that employers and employees both benefit when the

    employer proactively works with employees to minimize the impacts of
    relocation or job loss. Employers frequently provide relocation
    assistance, employee and family counseling, and job placement assistance.
    To its

    credit, the Service plans to provide some assistance in these areas.
    However, the Service does not anticipate offering job placement assistance
    to bargaining unit employees who decide not to relocate, although
    bargaining unit employees will have the opportunity to relocate with their
    jobs to other postal IT centers because of the no- layoff provision in the
    collective bargaining agreement with APWU. Without the benefit of job
    placement assistance, bargaining unit employees who do not

    Page 7 GAO- 03- 205 Postal Service

    relocate might encounter difficulty in finding employment in the Bay Area.
    Should the Service decide to close the San Mateo IT Center, it could offer
    job placement assistance during closure discussions with the APWU. These
    discussions have historically resulted in additional provisions for
    affected bargaining unit employees.

    We are recommending that before the Service makes its decision about
    closing the San Mateo IT Center, it should review and update, if
    appropriate, its economic analyses and assumptions. Should the Service
    decide to close the San Mateo IT Center, we are also recommending that it
    consider (1) offering to help bargaining unit employees find jobs if they
    decide to stay in the Bay Area and (2) providing some assistance* such as
    resume preparation and review services* to working spouses of

    employees who decide to relocate. In commenting on a draft of this report,
    the Service did not comment on our findings. However, the Service did
    indicate agreement with our recommendations. The Service said that

    before reaching a decision regarding the closure of the San Mateo IT
    Center, it would update the information that will be used in making its
    decision. The Service also indicated that it would adhere to the
    provisions of its bargaining unit agreements and will attempt to mitigate
    the negative impacts that relocations might have on employees and their
    families.

    During the 1970s, the Postal Service invested in data centers and
    mainframe computers to support administrative functions, such as
    personnel, accounting, and payroll processing. During the 1980s, the
    Service expanded its IT technology network to cover essentially all facets
    of postal operations. However, as networking technology improved, the
    Service realized that it no longer needed to colocate some of its IT
    functions with the hardware processors. This presented the Service with
    the opportunity to reduce costs and improve efficiencies by consolidating
    some of its IT functions. The practice of consolidating IT functions is
    consistent with industry trends, as companies strive to utilize new
    technologies to improve operations at less cost.

    Before 1993, the Service had six computer centers, each with a mainframe
    computer, located in New York City, New York; St. Louis, Missouri;
    Raleigh, North Carolina; Wilkes- Barre, Pennsylvania; San Mateo,
    California; and Minneapolis, Minneapolis. 5 In 1993, the Service closed
    its IT 5 In 1998, IT functions performed at various sites in Minneapolis
    were consolidated and

    moved into a new postal IT center in Eagan. Background

    Page 8 GAO- 03- 205 Postal Service

    center located in New York and transferred all functions performed at the
    center to its postal IT centers located in San Mateo and Eagan. Some
    employees affected by the New York IT Center closure relocated to San
    Mateo and now face the prospects of being affected by yet another postal
    IT center closure. Additionally, since 1993, the Service has transferred
    mainframe computer operations performed in St. Louis, Raleigh, and Wilkes-
    Barre to the San Mateo and Eagan IT Centers. Other IT functions continue
    to be performed at the Service*s IT centers located in St. Louis, Raleigh,
    and Wilkes- Barre.

    The Service*s current IT structure includes two Information Service
    Centers located in Eagan and San Mateo. Each of these Information Service
    Centers houses a Computer Operations Service Center, a Management Support
    Center, an Accounting Service Center, and an Integrated Business Systems
    Solutions Center. 6 The Computer Operations Service Centers operate the
    Service*s mainframe computers supporting various postal activities. The
    Integrated Business Systems Solutions Centers maintain and enhance
    software applications for postal business systems. The Management Support
    Service Centers provide facility support to the other centers. The
    Accounting Service Centers are operated by the Service*s Finance
    Department and provide national accounting services. The Accounting
    Service Centers are not included as part of the IT Department*s proposed
    consolidation of the San Mateo IT Center.

    Figure 1 shows the San Mateo IT Center, which is located at 2700 Campus
    Drive, San Mateo, CA, in the Bay Area. The building is a three- story
    structure plus a basement, contains approximately 160,000 square feet of
    space, and is located on 12.4 acres. The building was constructed in 1976
    and was purchased by the Service in 1983 for about $13 million. After

    purchasing the building, the Service spent an additional $14 million on
    renovations, and during the last 10 years has spent an additional $3.7
    million on major upgrades.

    6 The Service also has three other Integrated Business Systems Solutions
    Centers, located in Raleigh, St. Louis, and Wilkes- Barre. Raleigh also
    serves as the Service*s disaster recovery center.

    Page 9 GAO- 03- 205 Postal Service

    Figure 1: The San Mateo IT Center The consolidation plan currently under
    consideration provides that San Mateo*s computer operations, management
    support functions, and some of its software functions would be transferred
    to Eagan, along with some employees. The plan further provides that San
    Mateo*s remaining software support functions would be transferred to
    postal IT centers located in St. Louis and Wilkes- Barre, along with some
    employees. As previously stated, the consolidation plan currently under
    consideration does not include

    transferring the accounting functions currently performed at San Mateo.
    Instead, the accounting functions, along with their complement of 102
    employees, are to be relocated into leased space in the Bay Area.

    In October 2000, San Mateo*s IT functions had an authorized complement of
    282, comprising 80 EAS positions, 200 bargaining- unit positions, and 2
    Postal Career Executive Service (PCES) positions. 7 Seventy- two EAS and
    172 bargaining- unit positions were filled as of March 2002. Six of the IT
    bargaining unit employees are to be transferred to the Accounting Service
    Center and would not be immediately affected if the Service decides to
    close the San Mateo IT Center. The remaining 166 bargaining unit

    7 PCES employees are senior- level officers and executives in such postal
    positions as area vice presidents and IT center managers. The PCES is
    comparable with the Civil Service*s Senior Executive Service. EAS
    employees are paid under the Service*s Executive and Administrative
    Schedule. IT bargaining unit employees* pay and benefits are established
    by a collective bargaining agreement between the Postal Service and the
    APWU.

    Page 10 GAO- 03- 205 Postal Service

    employees and all EAS employees would be directly affected by the closure.
    Under the proposed consolidation, all 166 bargaining unit employees would
    be offered relocation to another postal IT center, in keeping with the no-
    layoff clause in their collective bargaining agreement. About half of the
    EAS employees will be offered jobs at another postal IT center.

    For the employees who relocate, the Service will cover basic relocation
    costs. However, covered costs differ for bargaining- unit and EAS
    employees. Relocation benefits for bargaining- unit employees are
    specified in the negotiated collective bargaining agreement between the
    Service and the APWU. Examples of covered expenses include the cost of one
    advance house- hunting trip, the movement and storage of household goods,
    and 30 days of temporary quarters. For EAS employees the Service covers
    the cost of 3 house- hunting trips, the movement and storage of household
    goods, and 60 days of temporary quarters. Additionally, the Service
    provides EAS employees a more generous expense allowance and assistance in
    selling and purchasing their homes.

    Employees, who do not have the option of relocating or choose not to do
    so, may choose to retire, provided they meet the minimum age and service
    requirements for retirement. 8 Additionally, postal officials have
    indicated that if the decision is made to close the San Mateo IT Center,
    the Service will seek early retirement authority from the Office of
    Personnel Management. If this authority is granted, the Service plans to
    make the option of voluntary early retirement available to all eligible
    employees. 9 Employees who do not relocate, retire, or find other
    employment on their

    own will likely be involuntarily separated from the Service. Employees 8
    The minimum age and service requirements for retirement under the Civil
    Service Retirement System are age 55 with 30 years of service, age 60 with
    20 years of service, or age 62 with 5 years of service. The minimum
    requirements for retirement under the Federal Employees* Retirement System
    are *minimum retirement age* with 30 years of service, age 60 with 20
    years of service, age 62 with 5 years of service, or *minimum retirement
    age*

    with 10 years of service. An employee*s minimum retirement age is based on
    his/ her date of birth and ranges between 55 and 57 years.

    9 Early retirement allows eligible employees to retire with immediate
    annuities before meeting the age and service requirements for regular
    retirement. The minimum requirements for early retirement under the Civil
    Service Retirement System are age 50 with 20 years of service, or any age
    with 25 years of service. The annuity is reduced by 2 percent for each
    year that the employee is under age 55. The Federal Employees*

    Retirement System has the same minimum requirements for early retirement
    as the Civil Service Retirement System. However, annuities for employees
    retiring under the early retirement provisions of the Federal Employees*
    Retirement System are not reduced.

    Page 11 GAO- 03- 205 Postal Service

    who are involuntarily separated from the Service will be eligible for
    severance pay.

    The Service has experienced financial problems in recent years that have
    been exacerbated by the recent economic slowdown and the use of mail to
    transmit anthrax. In April 2001, we placed the Service*s transformation
    efforts and long- term outlook on our high- risk list. We included the
    Service on our high- risk list to focus attention on the dilemmas facing
    the Service before the situation escalates into a crisis in which the
    options for action may be more limited and costly. While the Service
    recently developed a transformation plan to address its financial
    difficulties and has been able to cut costs, it has a significant amount
    of fixed costs due to its vast infrastructure that are difficult to cut in
    the short term. Rationalizing the Service*s infrastructure will be key as
    it strives to ameliorate its fiscal situation. This means that the Service
    may have to close or consolidate certain retail, mail processing, and
    administrative facilities if necessary to cut costs and improve
    performance. These closures and consolidations

    will undoubtedly lead to public concerns about the economic effects such
    actions will have on communities and employees. The Service is weighing
    these difficult issues as it considers whether to close the San Mateo IT

    Center. To describe the process that the Service is following to decide
    whether to close the San Mateo IT Center and consolidate its functions
    into other postal IT centers, we interviewed postal managers and reviewed
    available supporting reports and documents. We reviewed the Service*s
    investment

    policies and procedures manual, which provides guidance for preparing,
    reviewing, and approving a DAR. We also reviewed the Service*s DAR,
    prepared by the IT Department, which included economic analyses and
    justification of the proposal to close the San Mateo IT Center, as well as
    an alternative proposal that the IT Department considered and subsequently

    rejected. Further, we reviewed the OIG*s November 2000 audit report on the
    IT Department*s proposal and economic analysis. For contrast, we reviewed
    (1) the DAR the IT Department prepared in support of the decision to build
    a new IT facility in Eagan that would allow the Service to consolidate IT
    functions performed at various sites in the Minneapolis area and provide
    for future incorporation of IT functions and (2)

    documentation the Service used to support its decision to close the New
    York IT Center in 1993. We discussed the steps the Postal Service followed
    in preparing its proposal to close the San Mateo IT Center with the
    Service*s vice president, IT; discussed the Service*s management process
    for reviewing the proposal with the Service*s manager, Capital and Scope
    and

    Methodology

    Page 12 GAO- 03- 205 Postal Service

    Program Evaluation, and manager, Facilities, Headquarters; and met with
    representatives from the OIG to discuss the audit they did of the
    Service*s proposal and economic analyses. We also reviewed sections of the
    Postal Service*s Transformation Plan that discuss procedures the Service
    follows in closing postal facilities, and we explored those procedures in
    greater detail with postal officials.

    To determine experts* views on the social and economic impacts that
    corporate downsizing and reorganizations can have on employees and their
    families, we identified and interviewed eight relocation experts from

    our literature review and discussions with authors of articles on the
    impacts of closures and relocations on employees. These relocation experts
    provide a wide variety of relocation services to several hundred companies
    throughout the United States. We also interviewed two university
    researchers knowledgable of worksite closures and employee displacements,
    and we gathered available data from the Bureau of Labor Statistics (BLS)
    on nationwide and regional worksite closures and employee separations for
    calendar years 2001 and 2002. To further broaden our perspective on how
    closures and relocations typically affect employees and their families, we
    conducted Internet research to identify reports, studies, and other
    sources of information that examined the impacts of closing facilities
    similar to the San Mateo IT Center. We also conducted literature searches
    and gathered information on the social and economic impacts of facility
    closures and relocations.

    To determine the social and economic impacts encountered by postal
    employees and their families who were affected by the Service*s closure of
    its New York IT Center in 1993, we interviewed postal officials as well as

    displaced New York IT Center employees who relocated to the San Mateo IT
    Center. We also obtained and analyzed salary data, for the period 1992 to
    2001, on displaced New York IT Center employees who are still employed by
    the Service. We designed, pretested, and administered survey
    questionnaires to displaced New York IT Center employees (1) who relocated
    to other postal IT centers and (2) who continued employment with the
    Service in the New York City area. For those employees who relocated, we
    received responses from 49 of 66, for a 74 percent response rate. For
    those who stayed with the Service in the New York City area, we received
    responses from 46 of 79 for a 58 percent response rate. We

    analyzed the survey responses, including open- ended comments, and
    conducted a number of follow- up interviews. We did not gather data on
    displaced New York IT Center employees who left the Service following the
    center*s closure in 1993 because the Service was unable to provide

    recent mailing addresses for these employees.

    Page 13 GAO- 03- 205 Postal Service

    To determine the social and economic impacts that the San Mateo IT Center
    postal employees and their families would likely encounter if the Service
    closes that center, we obtained and reviewed relevant Postal Service
    documents regarding personnel policies and consolidation plans. We also
    interviewed cognizant postal and APWU officials and various San Mateo
    employees regarding these policies and plans and their potential

    impacts on employees. We obtained and analyzed San Mateo employee
    personnel data; and, on the basis of information from closure/ relocation
    studies and experts and our interviews with postal officials and
    employees, we designed, pretested and administered a survey questionnaire
    to obtain information about how closing the San Mateo IT

    Center would likely affect employees and their families. We received
    survey responses from 213 of 243 employees, for an 88 percent response
    rate. We analyzed the survey responses, including open- ended comments,
    and conducted follow- up interviews.

    To provide information on how selected organizations, during downsizing,
    have assisted affected employees, we identified and reviewed our prior
    reports on restructuring and downsizing. We incorporated information on
    those organizations where appropriate.

    Because our three surveys did not make use of probability sampling, there
    are no sampling errors. However, the practical difficulties of conducting
    any survey may introduce other types of errors, commonly referred to as
    nonsampling errors. For example, differences in how a particular question
    is interpreted, the sources of information available to respondents, or
    the

    types of people who do not respond can introduce unwanted variability into
    the survey results. We included steps in both the data collection and data
    analysis stages for the purpose of minimizing such nonsampling errors. For
    example, our data collection instruments were designed by survey
    specialists in combination with subject matter specialists and pretested
    to ensure that questions were clear and were understood by respondents. To
    increase our response rate, a follow- up mailing was made to those who did
    not respond in a reasonable time period.

    We conducted our review at Postal Service Headquarters in Washington, D.
    C., and at the Service*s IT center located in San Mateo, CA, from August
    2001 through October 2002, in accordance with generally accepted
    government auditing standards.

    We requested comments on a draft of this report from the Postmaster
    General. The Service*s comments are discussed at the end of this letter
    and are reprinted in appendix II.

    Page 14 GAO- 03- 205 Postal Service

    The Service is following its Investment Review and Approval Process in
    deciding whether or not to close the San Mateo IT Center, because it will
    require an investment of $8 million to support the closure. Events leading
    to the IT Department*s proposal to close the San Mateo IT Center began in
    1996. At that time, the IT Department started making long- range plans to

    consolidate the San Mateo IT Center*s mainframe computer operations into a
    new IT center the Service was building in Eagan. Other IT functions
    performed at the San Mateo IT Center were to be unaffected by the
    consolidation plans under development at that time. However, in 2000, the
    PMG called on postal managers to find savings by eliminating work, working
    more efficiently, and consolidating functions. In response to that call,
    the IT Department proposed closing the San Mateo IT Center and
    transferring its IT functions to Eagan and other postal IT centers. That
    proposal has yet to be approved by the Service, and the PMG has said that
    such a decision will not be made until after we have issued our report.

    As required by the Service*s Investment Review and Approval Process, the
    IT Department prepared a DAR in 2000 to support the $8 million investment
    needed for the proposed closure of the San Mateo IT Center. The Service*s
    Investment Review and Approval Process establishes the review/ approval
    process, procedures, and responsibilities for capital investments made by
    the Service. Major capital investments, generally defined as $5 million or
    more, require a DAR, which is justification to recommend an investment for
    approval.

    In 2000, OIG reviewed the San Mateo DAR and concurred with the IT
    Department*s analysis that money could be saved and efficiencies gained by
    closing the San Mateo IT Center and transferring its IT functions to the
    Eagan IT Center and other postal IT centers. However, since the DAR was
    prepared in 2000, some of the economic assumptions, which were based on
    the economic conditions at that time, have changed. Additionally, the
    Service recently announced plans to consolidate its accounting functions
    in 85 postal districts into the Service*s 3 Accounting Service Centers

    located in Eagan, St. Louis, and San Mateo. Given this, before the Service
    makes its decision about closing the San Mateo IT Center, the IT
    Department*s DAR may need to be reviewed and updated, if appropriate, to
    better reflect current economic conditions and recent plans to

    consolidate accounting functions. The Service Is

    Following Its Investment Review and Approval Process

    Page 15 GAO- 03- 205 Postal Service

    Events leading to the IT Department*s proposal to close the San Mateo IT
    Center began in 1996 when the IT Department initiated development of a
    long- range plan to consolidate the San Mateo IT Center*s mainframe
    computer operations into a new IT center that the Service was building in
    Eagan. The IT Department*s proposal called for consolidating San Mateo*s
    mainframe computer operations into a new 352,000- square- foot postal IT

    center, located on 28 acres in Eagan. The new Eagan IT Center was to serve
    as the Service*s primary financial center, meet the Service*s longterm
    computer operational requirements, and have the flexibility to adjust to
    IT changes and provide room for growth. The Eagan IT Center was

    designed to absorb the San Mateo IT Center*s mainframe computer
    operations. At the time the IT Department was preparing its original
    consolidation proposal, it projected that the San Mateo IT Center*s
    mainframe computer operations could be consolidated into the new Eagan IT
    Center sometime around 2000. However, before that consolidation

    occurred, the PMG called on postal managers in 2000 to review their
    operations and find savings by eliminating work, working more efficiently,
    and consolidating functions. The PMG did this in response to the Service*s
    declining financial condition: shrinking net income, operating expense

    growth outpacing operating revenue growth, the threat of declining mail
    volumes, and stagnating productivity.

    Heeding the PMG*s call to find savings, the IT Department decided to
    expand its plans for the San Mateo IT Center. Instead of just
    consolidating the San Mateo IT Center*s mainframe computer operations into
    the Eagan IT Center, the IT Department decided to propose closing and
    selling the San Mateo IT Center and consolidating all of its IT functions
    into other postal IT centers located in Eagan, St. Louis and Wilkes-
    Barre.

    According to IT Department officials, once a decision was made in early
    2000 to propose closing the San Mateo IT Center, the proposal*s sponsoring
    unit (the IT Department), per the Service*s Investment Review and Approval
    Process, prepared a DAR in support of the closure proposal. The DAR
    details the economic analyses and assumptions, including costs and
    benefits, of the proposed investment and alternatives being considered so
    that approving authorities will have the information necessary to make
    informed decisions. The Service requires that a DAR be prepared,
    validated, and approved for planned capital and expense investments of $5
    million or more. The IT Department provided us with copies of (1)
    documentation and an internal paper prepared in support of the proposal to
    consolidate the San Mateo IT Center*s mainframe computer operations into
    Eagan and (2) the DAR supporting the closure The IT Department*s Proposal
    to Close the San

    Mateo IT Center Originated in 1996

    The Primary Document Supporting the Closure Proposal Is the DAR

    Page 16 GAO- 03- 205 Postal Service

    proposal. However, the IT Department was unable to provide us
    documentation explaining the basis for expanding the mainframe
    consolidation proposal into a proposal to close the San Mateo IT Center
    entirely and transfer all of its IT functions to other postal IT centers.
    Additionally, according to postal officials, the two individuals most
    familiar with the closure proposal, the vice president, Information
    Technology; and the manager, Information Systems Support, are no longer
    with the Service.

    According to postal officials, there are no detailed policies or rigorous
    procedures that must be followed when a department proposes closing a
    postal facility other than a post office or mail processing facility. They
    said that references, in the Service*s Transformation Plan, to detailed

    procedures for closing facilities apply only to post offices and mail
    processing facilities, not to administrative offices such as the San Mateo
    IT Center. They said the DAR is the primary document being used to support

    the IT Department*s proposal to close the San Mateo IT Center. The San
    Mateo DAR prepared by the IT Department included (1) the objectives,
    justification, and details of the proposed closure/ consolidation; (2)
    economic analyses and financial justification for the proposed closure;
    and (3) information on an alternative to the closure that was considered,
    analyzed, and eliminated. According to the DAR, closing the San Mateo IT
    Center and consolidating all of its IT functions at other postal IT
    centers would be justified because (1) consolidating IT and support
    operations would provide the Service savings, over a 10- year period, of
    approximately $25 million in staffing, utilities, maintenance, and
    contractor systems software support and (2) consolidating IT functions
    would allow the Service to sell the San Mateo facility for approximately
    $49 million. The DAR also noted that the San Mateo area had become one of
    the highest cost- of- living areas in the nation, and the San Mateo IT
    Center was finding it increasingly difficult to retain its executives and
    the top technical staff needed to operate the center. The DAR further
    noted that the cost of contractors in the San Mateo area was higher than
    in other areas where postal IT centers were located.

    Before finalizing the DAR to close the San Mateo IT Center, the IT
    Department considered one alternative proposal which, consisted of the
    Service selling the San Mateo facility and leasing it back from the new
    owner, with all of the postal functions remaining in the leased facility.
    The Service rejected that alternative for two reasons. The IT Department
    determined that (1) the annual lease cost would exceed the current
    depreciation cost of the San Mateo facility and (2) the Service would not

    Page 17 GAO- 03- 205 Postal Service

    realize the savings and operational efficiencies that would accrue from
    consolidating San Mateo IT functions at other postal IT centers. According
    to postal officials, the IT Department* following the Service*s Investment
    Review and Approval Process* prepared the San Mateo DAR and forwarded it
    to the Service*s Finance Department for validation and to the Facilities
    Department for review and concurrence. By early November 2000, the Finance
    Department had completed its validation of the accuracy and integrity of
    the San Mateo DAR*s assumptions and economic analyses; the Facilities
    Department had concurred with the DAR; and the sponsoring vice president,
    IT, had signed the DAR. Next, the senior vice president/ chief technology
    officer and the chief financial officer/ executive vice president reviewed
    and approved the DAR. In late November 2000, the chief financial officer/
    executive vice president prepared and signed a validation memorandum and
    executive summary, which was forwarded to

    the PMG, stating that the DAR proposing to close the San Mateo IT Center
    had been reviewed and validated. According to postal officials, before the
    San Mateo IT Center can be closed, approval must be obtained from the
    Headquarters (HQ) Capital Investment Committee and the PMG. 10 The OIG has
    also reviewed the DAR. (See fig. 2 for an overview of the Service*s
    Investment Review and Approval Process.)

    10 The Capital Investment Committee voting members include the deputy
    postmaster general; chief operating officer and executive vice president;
    senior vice president and general counsel; chief marketing officer and
    senior vice president; senior vice president, chief technology officer;
    senior vice president, Operations; vice president, Strategic

    Initiatives; and chief financial officer and senior vice president
    (chair). The Committee*s nonvoting members include the vice president,
    Engineering; vice president, Finance; controller; vice president,
    Purchasing and Materials; and vice president, Facilities.

    Page 18 GAO- 03- 205 Postal Service

    Figure 2: Overview of Postal Service*s Investment Review and Approval
    Process

    Prior to our review, postal management asked the OIG to evaluate the
    potential benefits, costs, and operational issues surrounding the IT
    Department*s proposal to close the San Mateo IT Center and transfer its IT
    functions to other postal IT centers. The OIG did this evaluation between
    May and late November 2000. The OIG agreed with the IT Department that
    consolidating the San Mateo IT Center*s IT functions into the Eagan and
    other postal IT centers would produce savings in staffing, utilities,

    maintenance, and contractor systems software support. However, among OIG
    Reviewed the IT

    Department*s Proposal and Concurred that Closing the San Mateo IT Center
    Would Save Money

    Page 19 GAO- 03- 205 Postal Service

    other things, the OIG noted that the IT Department*s projected savings in
    the San Mateo DAR might be overstated by $4 to $8 million because the cost
    of leasing space for the Accounting Service Center in the Bay Area may
    have been underestimated. Also, the OIG questioned the Service*s support
    for $6.3 million in capital expenditures for hardware and software
    upgrades associated with the consolidation. The Service subsequently
    provided justification for the capital expenditures, which the OIG found
    to be generally responsive to its concerns.

    According to the OIG*s November 24, 2000, report, postal management
    revised its lease cost estimates for the Accounting Service Center. This
    revision reduced estimated savings from $78 million to the current
    estimate of $74 million. The OIG concluded that this and other actions the
    Postal Service was planning were responsive to the OIG*s concerns and
    concurred with the IT Department*s analyses that consolidating the San
    Mateo IT Center*s IT functions into other postal IT centers would result
    in savings.

    In 2000, when the Service*s IT Department prepared the DAR to support its
    proposal to close the San Mateo IT Center, general economic conditions
    were noticeably better than they are currently; and the Service had not
    yet

    made plans to automate and reengineer its field accounting activity, which
    involves closing its 85 district accounting offices and consolidating
    residual activity into its 3 Accounting Service Centers. The IT
    Department*s proposal to close the San Mateo IT Center was based on

    several major economic assumptions that have since changed. First, when
    the IT Department prepared the San Mateo DAR, it noted that the job market
    in the Bay Area was very good and that employees with IT skills were in
    great demand, thereby making it difficult to recruit and retain IT
    employees at the San Mateo IT Center. Since then, however, the general job
    market has declined significantly. For example, in the Bay Area, from 2000
    to 2002, the unemployment rate increased from 2.2 percent to 5.4

    percent. Even more dramatic was the reversal in employment growth. From
    1999 to 2000, the number of Bay Area employees grew by 3.8 percent. 11 In
    contrast, the number of these employees contracted by 5. 9

    percent from 2000 to 2002. Given the increase in unemployment and the
    shrinking employment growth in the Bay Area, current IT labor costs may

    11 BLS data. Economic and Other

    Conditions Have Changed Since the DAR Was Prepared in 2000

    Page 20 GAO- 03- 205 Postal Service

    not be as high as they were in 2000, thereby creating a more favorable
    recruiting environment for the Service.

    Second, the IT Department received an appraisal in 2000, indicating that
    it could reasonably expect to sell its San Mateo facility within 6 months
    for a minimum price of $49 million. However, according to real estate
    experts, office- building values in the San Mateo area are currently
    depressed. From the 4th quarter of 2000 to the 2nd quarter of 2002,
    average asking rents fell

    by about 60 percent, and office vacancy rates increased nearly sixfold,
    from less than 4 percent to 22 percent. As a result of this depressed real
    estate market, the time and value estimates that the IT Department
    received in 2000 for the San Mateo facility may be out of date. In view of
    what might be significant changes in some of the economic

    assumptions used in the San Mateo DAR, we asked the Service about updating
    (1) the estimate of the fair- market value of the San Mateo building and
    property and (2) the estimate of rental rates for office space in the Bay
    Area. The Service said that it was too costly to have a

    commercial real estate broker update this information before the Service
    was ready to make a decision about closing the San Mateo IT Center.
    However, the Service acknowledged that the commercial office market in the
    Bay Area has changed since the DAR was prepared in 2000. Postal

    officials said that the key assumptions used in preparing the DAR would be
    updated before the Service makes a decision about closing the San Mateo IT
    Center. Until these data are updated, it is uncertain how much the Service
    would save by closing the San Mateo IT Center.

    Another significant change indicating the need to update the San Mateo DAR
    is the Service*s plans to revamp its accounting functions. In 2001, the
    Service announced plans to automate and reengineer its field accounting
    activity. These changes will result in the Service closing its 85 district
    accounting offices; eliminating 1,063 field accounting technicians in
    these offices; and consolidating the residual activities into its 3
    Accounting Service Centers located in Eagan, St. Louis, and San Mateo.
    Postal officials stated that this would result in about 350 more
    accounting technician and finance positions at these 3 centers. As noted
    earlier, the San Mateo DAR includes a plan to move the accounting
    functions and its 102 employees into leased space in the Bay Area. The DAR
    included $2.1 million as the 3- year estimated cost for this leased space.
    As a result of the planned consolidation of district accounting functions,
    the Service*s estimated cost of leased space may no longer be accurate for
    its accounting functions in the Bay Area and could affect projected
    savings associated with closing the San Mateo IT Center. Given this
    possibility, before the Service makes

    Page 21 GAO- 03- 205 Postal Service

    its decision about closing the San Mateo IT Center, the DAR may also need
    to be reviewed and updated, if appropriate, to reflect the cost associated
    with obtaining the leased space necessary to accommodate about 40
    additional accounting technician and finance positions.

    Relocation experts we interviewed reported that plant and facility
    closings generally have negative economic and social impacts on displaced
    employees and their families. Typically, some employees experience
    negative economic impacts, others experience negative social impacts, and
    some experience both when the plant or facility where they work closes.
    The experts told us that employees who do not relocate with their jobs
    typically experience economic impacts, such as lost income, loss of
    retirement benefits, and lower paying jobs upon reemployment. Experts also
    noted that employees who relocate with their jobs are likely to encounter
    social impacts, such as marital stress, separations from family members,
    and the loss of social ties. In addition to the negative social impacts,
    the experts noted that dual- income families who relocate may face
    negative economic impacts when the trailing spouse has to give up
    employment in order to relocate.

    Experts* opinion and research done on plant and facility closures indicate
    that such events have a greater negative impact on older employees than on
    younger employees. Older employees are less likely than younger

    employees to be reemployed and are more likely to experience social
    difficulties when relocating. Research also indicates that an increasing
    percentage of employees are declining relocation offers because they want
    to avoid the social and economic impacts associated with moving to a new
    geographic location, particularly the disruptions to family ties that
    often ensue. Research further shows that elder care is playing an
    increasingly important role in employee relocation decisions.
    Notwithstanding the negative impacts closures can have on employees and

    their families, closures occur across the nation and are done for a
    variety of business reasons and purposes. Research also indicates that in
    the final analysis, all affected employees may not view plant and facility
    closures negatively. Some employees may actually come to view their
    experience with a plant or facility closure as positive because it affords
    them the

    opportunity to redirect their careers, develop new competencies, or leave
    unsatisfying jobs. Relocation Experts

    Report that Negative Economic and Social Impacts Generally Accompany Plant
    and Facility Closures

    Page 22 GAO- 03- 205 Postal Service

    According to the relocation experts we interviewed, studies have shown
    that the economic impacts on employees displaced by a plant or facility
    closure include the loss of earnings due to periods of unemployment, loss
    of retirement benefits, and lower wages upon reemployment. For example, a
    1999 study on job displacement stated that about 20 percent of displaced
    employees who found employment did so at greatly reduced wages, earning
    one- half or less than they did previously. 12 The study also found that
    between one- fourth and one- third of displaced employees remained
    unemployed a year or more after displacement. Similarly, another study of
    displaced employees found that about 30 percent remained unemployed for a
    year or more. 13 Studies also indicated that the longer displaced
    employees remained unemployed, the greater the drop in their wages when
    reemployed, with some displaced employees becoming so discouraged that
    they stop looking for work altogether.

    Similar findings were echoed in a survey of employees displaced by a New
    York plant closure in 1998. 14 Survey respondents reported several impacts
    they experienced as a result of the worksite closure, including earnings
    losses, declines in job quality, and financial difficulties. The survey
    disclosed that most displaced plant employees had held two or more jobs
    since the closure, with some holding as many as eight jobs in 3 years. The
    survey results, published in a 2001 report, indicated that as a result of
    the

    closure, employees experienced a 17 percent decline in median income and a
    33 percent increase in commuting distances. The researcher also found
    precipitous declines in job quality, in terms of regular raises,
    sufficient income, promotions, and skill development. In addition, the
    report stated that many of the displaced employees experienced financial
    difficulties, such as having to sell their homes.

    12 Paul Attewell, The Annals of the American Academy of Political and
    Social Sciences, The Impact of Family on Job Displacement and Recovery,
    (Mar. 1999). 13 Michael Podgursky and Paul Swaim, Duration of Joblessness
    Following Displacement, Industrial Relations 26( 3): pp. 213- 226 (1987).
    14 Jennifer S. Tiffany, Insights from a Plant Closing: Dislocated Workers
    and Economic Development Planning, Planners Network, Hunter College Dept.
    of Urban Planning No. 148, (July/ August 2001). Displaced Employees

    Typically Face Economic Impacts

    Page 23 GAO- 03- 205 Postal Service

    Relocation experts we interviewed told us that families commonly
    experience social difficulties when relocating, including disruptions of
    their children*s education and social well- being, increased marital
    stress, and a sense of loss caused by separations from family members.
    Relocation experts and available studies also point out that in addition
    to social adjustments, trailing spouses in dual- income households may
    face economic impacts due to the loss of employment and income. Research
    indicates that in over 50 percent of married households, both spouses are
    employed. This prevalence of dual- income households in the workforce is
    prompting companies to provide employment assistance to trailing spouses
    in order to reduce family stress during relocation transitions, according
    to studies and experts. For example, employers assist trailing spouses in
    a variety of ways, including paying a job- finders fee, assisting with
    finding employment either within or outside the company, and reimbursing
    the spouse for lost income while seeking employment at the new location.
    Examples of other types of assistance provided trailing spouses include
    resume preparation and review, development of job search strategies, and
    career counseling. According to the experts we interviewed, until and
    unless a trailing spouse finds comparable employment at the new location,
    a dual- income household might lose 30 percent to 50 percent of its income
    when it relocates.

    The impacts of relocation on trailing spouses have also been known to
    include emotional and cultural adjustments. For example, relocation
    experts noted that trailing spouses might be natives of the originating
    city and could experience a sense of loss at the new location. According
    to experts, trailing spouses may experience difficulties in adjusting to
    less culturally diverse regions of the country where there may be fewer
    opportunities associated with their culture, religion, or language.
    Trailing spouses may also find it difficult to transition from large urban
    areas where they have access to ethnic activities, with which they have an
    affinity, to small rural areas where they may feel isolated. Experts also
    stated that career development for trailing spouses who worked may be
    negatively affected, and they might have difficulty finding comparable
    employment. In addition, according to a 1998 study, relocation can lead to
    loss of continuity of training and skill development, as the new location

    may not have the same career opportunities. 15 For these reasons, trailing
    15 Lillian T. Eby and Tammy D. Allen, Perceptions of Relocation Services
    in Relocation Decision Making: An Exploratory Field Study, Group and
    Organizational Management, Vol. 23 No. 4 (Dec. 1998). Relocated Employees

    Typically Face Social and Economic Impacts

    Page 24 GAO- 03- 205 Postal Service

    spouses may be dissatisfied with their new jobs, according to experts.
    Experts also told us that the difficulty associated with finding
    comparable employment is compounded when people move from large urban
    areas,

    such as the Bay Area, to smaller communities that traditionally have fewer
    employment and career prospects.

    Research and relocation experts report that when a plant or facility
    closes, older employees tend to encounter greater economic and social
    difficulties than younger employees. While there is no consensus among
    studies and experts regarding the age at which individuals encounter
    greater difficulties due to job loss, there is general agreement that as
    workers age, the impacts of job displacement become increasingly severe.
    In particular, research and industry experts state that workers in their
    mid- 40s begin to face economic impacts attributable to age because they
    face more

    obstacles than younger employees in obtaining new employment. Experts also
    noted that these older employees potentially experience greater economic
    losses as they are typically vested in their retirement systems and could
    potentially lose their retirement benefits due to job displacement.
    Additionally, according to relocation experts, workers in their mid- 40s
    and older who relocate generally face greater social impacts than younger
    employees.

    In November 2001, we reported that although employees age 55 and older are
    not more likely to lose their jobs than younger workers, a job loss for
    these older employees potentially has more severe consequences. 16 For
    example, we noted that employees age 55 and older may experience larger
    losses in earnings upon reemployment, compared with younger employees. We
    also reported that such employees were significantly less likely than
    younger employees to be reemployed. In addition, we stated that the
    potential loss of health care benefits following a job loss could be more
    problematic for employees who are age 55 and older because they tend to
    have more health problems than younger employees. Other studies on job
    loss reported similar findings regarding older workers.

    Similar to the greater economic impacts older employees may experience due
    to job displacement, relocation experts we interviewed also told us that
    employees in their mid- 40s and older are more likely to face greater

    16 Older Workers: Demographic Trends Pose Challenges for Employers and
    Workers,

    GAO- 02- 85 (Washington, D. C.: Nov. 16, 2001). Older Employees Often

    Face Greater Economic and Social Impacts than Younger Employees

    Page 25 GAO- 03- 205 Postal Service

    social difficulties in relocating than younger individuals. For example,
    according to experts, employees in their mid 40s and older are more likely
    to have elderly parents, grandchildren, or existing health conditions.
    Experts also told us that these employees are more likely to have high
    school or college- aged children who are often reluctant to relocate.
    Moreover, employees who are in their mid- 40s and older are typically less
    inclined to move than younger individuals. For example, one relocation

    expert we contacted noted that older employees feel that relocating to a
    new community requires that they sacrifice social networks, long- time
    friendships, and family relationships that took years to establish. In
    addition, experts pointed out that trailing spouses of older employees
    might also experience more difficulties in finding new jobs because of age
    discrimination.

    Given the wide range of potential impacts from relocation, in particular
    the impacts on families, studies indicate that a growing number of
    employees are declining to relocate. According to survey results published
    by Atlas Van Lines in 2001, the number of companies reporting that
    employees rejected relocation offers increased from 39 percent in 1999 to
    50 percent in 2001. 17 The most frequently cited reason for declining to

    relocate was *family ties* (81 percent). Other reasons cited included
    *personal reasons* (73 percent), *no desire to move* (67 percent), and
    *spouse employment* (48 percent).

    The Employee Relocation Council (ERC) reported in 2001 that familyrelated
    considerations, such as elder care, child care, and schools played a
    crucial role in employees* relocation decisions. 18 Elder care was
    specifically identified as an area of increasing importance in employees*
    relocation decisions. The report estimates that 80 percent of elderly
    persons have lived alone or with a family member, rather than in nursing
    homes. As a result, according to ERC, more employees and their families
    will be increasingly responsible for helping elderly relatives who need
    assistance with the activities of daily living, including shopping,

    17 Atlas Van lines, Inc., Corporate Relocation Survey 2001, 34th Annual
    Results, (Memphis, TN: Apr. 2001). Atlas Van Lines, Inc., is a nationwide
    motor carrier that provides relocation services and publishes relocation-
    related publications, including its Survey of Corporate Relocation
    Policies document. 18 Employee Relocation Council, Family Issues Research
    Report, (2001). The Employee Relocation Council is a professional
    membership association that conducts research on emerging trends in
    employee relocation assistance. Employees Decline

    Relocation Offers for Various Reasons

    Page 26 GAO- 03- 205 Postal Service

    transportation, personal care, paying bills, preparing meals, walking, and
    house cleaning. The ERC report also noted that employers offer various
    types of elder care assistance, such as paying to move elderly relatives,
    providing lists of elder care facilities and programs, and providing
    written materials on elder care needs. ERC further reported that similar
    services are provided for relocating families needing child care services
    or help in finding schools for their children.

    Plant and facility closures are the result of business decisions made for
    a variety of reasons and purposes. Notwithstanding their potential impact
    on employees and their families, business closures occur and affect
    thousands of employees annually. Research indicates that in the final
    analysis, not all affected employees view plant and facility closures
    negatively.

    According to experts, closures, accompanied by employee displacements are
    largely fueled by corporate downsizing. For example, the BLS reported that
    there were 1,253 worksite closures that resulted in nearly 380,000
    employee layoffs throughout the United States in calendar year 2001. 19
    BLS

    data also show that in the Bay Area, where the San Mateo IT Center is
    located, there were 22 worksite closures that resulted in over 5,800
    employee layoffs in calendar year 2001. According to studies and
    relocation experts, businesses make decisions to downsize, restructure, or
    close facilities for a wide variety of reasons, primarily driven by
    business needs. According to unemployment research, for example, plant
    relocations are organizational changes that are commonly taken to pursue
    company development or to solve financial and operational problems.
    Experts told us that companies often implement different reorganization
    strategies to increase profits and competitiveness and to respond to
    various business factors, such as the economy, the stock market, business
    competition, the availability of skilled workers, and the cost of labor.
    For example, according to one expert we contacted, companies typically
    move facilities to reduce costs, often relocating to regions of the
    country where labor costs are lower.

    19 BLS defines *worksite closures* as the full closure of either multiunit
    or single- unit establishments or the partial closure of a multiunit
    establishment where entire worksites affected by layoffs are closed or
    planned to be closed. Business Closures Occur and Sometimes Create

    Opportunities for Employees to Make Life and Career Changes

    Page 27 GAO- 03- 205 Postal Service

    Recent Bay Area worksite closures have resulted in employee layoffs. While
    specific data on the number of employee layoffs by Bay Area companies are
    not available, media reports indicate that several thousand employees have
    lost their jobs over the past year. For example, in May 2002, it was
    reported that a San Francisco based financial services company implemented
    its first large- scale employee layoff since 1987, reducing its workforce
    by approximately 4,500 employees in order to keep the company*s total
    complement under 20,000. In addition, another report

    indicated that as a result of a Bay Area based corporate merger in the
    technology sector, an estimated 15,000 positions would be eliminated
    worldwide over the next 2 years, including many in the Bay Area. Another
    event that may affect the Bay Area economy was reported in June 2002,

    when a major air carrier announced that as a result of the September 11,
    2001, terrorist attacks, it had applied for federal assistance to aid its
    recovery from these events. The air carrier also plans to increase its
    viability by reducing costs, such as through salary cuts from pilots,
    managers, and administrative employees. However, if these efforts are
    unsuccessful, the jobs of approximately 18, 000 Bay Area employees may be
    affected. Experts also told us that companies make decisions to displace
    or relocate employees according to, among other things, business needs,
    economic

    conditions, competition, company size, acquisitions and mergers, and the
    number of employees on the payroll. For example, a relocation expert we
    interviewed told us her company, which employs approximately 2,800
    employees, recently downsized by closing two of its office locations.
    While some employees were retained and relocated, others lost their jobs
    and their employee benefits.

    Despite the negative social and economic impacts that closures have on
    employees, unemployment researchers have suggested that a job loss
    sometimes creates opportunities for individuals to change careers and life
    directions. Additional research also indicates that after a period of
    time, some employees may actually come to view their experiences with a
    plant or facility closure as positive because it gave them the opportunity
    to

    redirect their careers, develop new competencies, or leave unsatisfying
    jobs. Research and relocation literature also indicates that families
    differ in their abilities to adapt to change. Moreover, relocation experts
    stated that in many cases, families adapt well and make very successful
    transitions.

    Page 28 GAO- 03- 205 Postal Service

    Ninety- five displaced New York IT Center employees responded to our
    survey and reported economic impacts, such as diminished earnings; and
    social impacts, such as broken family ties. Of these 95 respondents, 46
    remained with the Service in the New York City area and reported facing
    more economic impacts than social impacts. The remaining 49 employees
    relocated to postal IT centers in other geographic areas and reported more

    social impacts than economic impacts. Several options were available to
    displaced New York IT Center employees, including working for the Postal
    Service in the New York City area* though most likely not in an IT job;
    relocating to another postal IT center; retiring with a buyout; or leaving
    the Service. Employees most concerned about social issues, such as
    maintaining close family ties, tended to remain in the New York City area
    and deal with the resulting economic impacts, such as diminished earnings.
    Our survey results indicate that employees most concerned about economic
    issues, such as maintaining their level of earnings and career potential,
    relocated to other postal IT centers and dealt with the ensuing social
    impacts, such as diminished ties with family and friends left behind in
    the New York City area. Still other employees opted to retire or leave
    Postal Service employment altogether. Retiring or leaving the Service at
    the time of the New York IT Center closure may have been particularly
    appealing to some employees because as part of a nationwide restructuring
    occurring at that

    time, the Service was offering a monetary incentive of 6 months* pay to
    all eligible employees who opted to retire or take an early out. In total,
    104 of the 283 displaced New York IT Center employees chose to remain with
    the Service in the New York City area; 82 relocated to postal IT centers
    in other geographic areas. The remaining 97 displaced employees retired,
    separated from the Service, or found other jobs with the Service outside
    the New York City area.

    From August to November of 1992, the PMG restructured the Service. To
    minimize the impact on employees, an early- out option was offered to
    permit most employees to retire at age 50 with 20 years of service or any
    age with 25 years of service. A monetary incentive was offered to
    encourage eligible employees to retire. This incentive was a lump- sum
    payment equal to 6 months* pay. According to postal officials, when the

    Service closed its New York IT Center in 1993, the restructuring had
    resulted in numerous retirements and an abundance of non- IT jobs in the
    New York City area to offer displaced IT center employees. Postal
    officials said the Service was therefore in the position to offer
    displaced IT center employees* both EAS and bargaining unit* various
    options that included New York IT Center Employees Reported

    Economic and Social Impacts as a Result of the Closure

    Postal Employees Had Several Options When the New York IT Center Closed

    Page 29 GAO- 03- 205 Postal Service

    (1) taking an available Service job in the New York City area that had
    become vacant as a result of the restructuring, (2) relocating to another
    postal IT center in a different geographic area, or (3) retiring with a
    buyout* if eligible. Some employees chose none of these options and
    decided to independently find other Service employment outside the New
    York City area. Still others opted to leave Service employment altogether.

    EAS employees who opted to relocate to other postal IT centers were able
    to continue working in the IT field at their same grade and pay. EAS
    employees who decided to stay in the New York City area were initially
    offered saved- pay for 2 years, but the Service later made saved- pay
    permanent for these employees. 20 According to some EAS survey
    respondents, the Service made its offer of permanent saved- pay for EAS
    employees after some EAS employees had already relocated to other postal
    IT centers. Some EAS survey respondents reported that they based their
    decisions to relocate on their belief that if they stayed in the New York
    City area in a lesser graded position, they would receive saved- pay for
    only 2 years. Some EAS survey respondents said that if they had known the
    Service would make saved- pay protection permanent, they would have taken
    a non- IT job and stayed in the New York City area. Bargaining unit
    employees who took lower paying Service jobs in the New York City area
    were to receive saved- pay protection for 1 year. 21 In many instances,
    however, the actual reduction in pay did not occur until about 2 years
    after the closure because the time that employees spent in a trial
    employment status did not count against the 1- year limit. Also, the
    Service experienced some delay in making the pay changes in its
    computerized payroll system. Figure 3 shows the number and percent of
    displaced New York IT Center employees who chose each option.

    20 Saved- pay allows an employee reassigned to a lower paying job to
    retain the pay of his/ her former position. 21 A Memorandum of
    Understanding between the Postal Service and the APWU provided that
    bargaining unit employees relocating to lower paying postal jobs in the
    New York City area would have saved- pay protection for 1 year.

    Page 30 GAO- 03- 205 Postal Service

    Figure 3: Options Selected by Displaced New York IT Center Employees in
    1993

    For many displaced New York IT Center employees, the decision to accept
    other postal employment in the New York City area meant that they fared
    worse economically in the long run than those who chose to relocate to

    postal IT centers in other geographic areas. According to a postal
    official, when the Service closed the New York IT Center, the Service had
    numerous vacancies in the New York City area because it had recently gone
    through a major restructuring that saw many employees leave the

    Service through retirement or separation. As a result of the numerous
    vacancies in the New York City area, the Service was able to offer jobs to
    displaced New York IT Center employees who did not wish to relocate to
    postal IT centers in other geographic areas. However, the vacant postal

    jobs in the New York City area were frequently lower paying, non- IT
    positions.

    Using salary data on the 147 displaced New York IT Center employees still
    employed by the Service at other postal IT centers or postal facilities in
    Postal Employees Who

    Took Available Jobs with the Postal Service in the New York City Area
    Faced More Economic Impacts than Social Impacts

    Page 31 GAO- 03- 205 Postal Service

    the New York City area, we determined that the 68 employees who relocated
    (44 bargaining unit and 24 EAS employees) generally fared better
    economically than those who remained in the New York City area. Nine years
    after the closure, salary data provided by the Service showed that the
    average salary of employees who relocated had increased about 11 percent
    (in constant 2001 dollars); in comparison, the average salary of employees
    who remained with the Service in the New York City area had

    decreased about 1 percent (in constant 2001 dollars). The impact on salary
    between displaced employees who relocated and those who remained in the
    New York City area was greater for bargaining unit employees than for

    EAS employees. Our analysis of the Service*s salary data shows that the 44
    displaced bargaining unit employees who relocated to other postal IT
    centers were, 9 years later, earning salaries that averaged about 14
    percent more (in constant 2001 dollars) than they had been earning when
    the New York IT Center closed. In contrast, the 43 displaced bargaining
    unit employees who remained in the New York City area were earning
    salaries that averaged about 6 percent less (in constant 2001 dollars)
    than the

    salaries they were earning at the time of closure. Almost all of the 43
    displaced bargaining unit employees who remained in the New York City area
    after the closure took lower paying mail clerk positions. No EAS employees
    took pay cuts (in actual dollars) as a result of the closure. 22 Nine
    years after the New York IT Center closed, the 36 displaced EAS employees
    working in the New York City area were earning an

    average of about 2 percent more (in constant 2001 dollars) than they had
    been at the time the center closed. In contrast, the salaries of the 24
    displaced EAS employees who relocated to other postal IT centers saw their
    salaries increase an average of about 8 percent (in constant 2001
    dollars). Displaced EAS employees who relocated, however, fared worse, on
    average, than displaced bargaining unit employees who relocated.

    Generally, survey respondents who took postal jobs in the New York City
    area indicated they did so because they were concerned about the social
    impacts they believed they would face if they left the New York City area.
    For example, 34 of the 46 survey respondents who remained in the New York
    City area believed it was very important to remain in the area in order to
    maintain family ties with parents and other relatives* ties that

    22 Typically, displaced EAS employees took non- IT management positions in
    such areas as customer service, maintenance, financial services,
    purchasing, and human resources. Two displaced EAS employees took jobs as
    local postmasters.

    Page 32 GAO- 03- 205 Postal Service

    would otherwise be strained by relocating to a new geographic area. One
    respondent who took a postal job in the New York City area commented that
    he could not relocate because he was the only person able to provide care
    for his aged parents. Another respondent commented that she was unable to
    relocate to another postal IT center because her parents* health was such
    that they would not be able to accompany her. A third respondent who took
    a postal job in the New York City area commented that she was unable to
    relocate for several reasons, one being that she could not relocate her
    mother, who lived close by and was about to undergo surgery. Respondents
    remaining in the New York City area were also concerned that relocating to
    another geographic area could alienate relationships with their children
    and grandchildren. Twenty- five of the 46 respondents remaining in the New
    York City area stated that it was very important that they remain in close
    proximity to their children and grandchildren.

    Respondents who remained with the Service in the New York City area
    indicated that concerns related to their spouses weighed heavily in their
    decisions not to relocate. For example, 24 of the 46 respondents remaining
    in the New York City area said that a very important concern they had was
    that relocating would strain the relationship they had with their spouse.
    One EAS employee decided against relocating because his wife was pregnant
    at the time and did not want to sever the close relationship she had with
    her physician. Another EAS employee stated that he did not relocate
    primarily for family reasons* his spouse was working, and it would have
    been very hard to ask her to give up her job and pension and

    move across the country to a new location. Twenty- three of the 46
    respondents remaining with the Service in the New York City area also
    indicated that in reaching their decisions not to relocate, it was very
    important to them not to lose social, community, and cultural ties to the
    New York City area.

    Given that so many of the 46 survey respondents who remained with the
    Service in the New York City area did so to minimize the social impacts
    they believed relocating would involve, it is not surprising that most had
    strong family and cultural ties to the area. Forty- one of the 46
    respondents had parents, grandchildren, or relatives living in the New
    York City area. Thirty- six of the 46 respondents had a spouse/ partner
    living with them, and 34 had children. Most of the respondents who
    remained in the New York City area also tended to be more senior employees
    with many years of postal service. Forty of the 46 respondents were 40
    years old or older, and 30 of the 46 respondents had over 15 years of
    postal service at the time the New York IT Center closed.

    Page 33 GAO- 03- 205 Postal Service

    Several survey respondents who accepted postal jobs in the New York City
    area, rather than relocate, furnished written comments describing the
    economic impacts they experienced following the closure of the New York IT
    Center. In general, they believe that they suffered financially by staying
    with the Service in the New York City area. As indicated earlier, our

    analysis of the Service*s salary data confirmed that employees who
    relocated generally fared better economically than those who did not. Some
    said that their salaries would have been progressively higher; and their
    chances for advancement would have been better, if they had

    relocated to another postal IT center. For many displaced New York IT
    Center employees, the decision to move to another postal IT center in
    another geographic area was accompanied by more social impacts than
    economic impacts. When the Service closed the New York IT Center in 1993,
    it offered displaced employees the

    opportunity to relocate to other postal IT centers, such as Eagan and San
    Mateo. By relocating to other postal IT centers, employees were able to
    continue working in the IT field with no pay cut. Eighty- two of the 283

    displaced New York IT Center employees chose to relocate to a postal IT
    center in another geographic area. Survey respondents who relocated to
    postal IT centers in other geographic areas often reported encountering
    very significant social impacts as a result of their moves. For example,
    23 of the 49 relocated postal employees who responded to our survey
    reported that they had found it very difficult to adjust to the new
    geographic area, work environment, and local culture. The same number of
    respondents also reported finding it

    very difficult to maintain or establish social, community, and cultural
    ties or find supporting communities where they could get involved. One
    respondent who relocated to the Eagan IT Center reported that her family,
    coming from New York City, found it difficult to assimilate into the
    midwestern culture. Another respondent found it difficult being away from
    family and friends and missing out on important family events. She noted

    that relocating had strained her marriage and forced her to give up a
    private business she had been running in New York City. Many survey
    respondents who relocated reported that they had been greatly affected by
    concerns related to their spouse/ partner. For example, 18 of the 49
    respondents reported that since relocating, their spouse/ partner had
    found it very difficult to maintain or secure a job/ career, benefits, and
    retirement security. Nineteen respondents also indicated that the
    relocation had been very difficult because of the strains Postal Employees
    Relocating to Postal IT

    Centers in Other Geographic Areas Faced More Social Impacts than Economic
    Impacts

    Page 34 GAO- 03- 205 Postal Service

    it had placed on relationships with spouses/ partners. One respondent who
    relocated commented that it had been emotionally difficult for his wife to
    relocate and leave her family behind. Twenty- two of the 49 relocated
    respondents reported that relocating from the New York City area to
    another geographic area had put strains on

    family relationships; and 20 respondents reported that as a result of the
    relocation, it had been very difficult to keep their families together.
    One respondent noted that it had been difficult for him and his wife to
    leave the New York City area because they had children working and going
    to school there, and they were also leaving elderly parents behind.

    Twenty- three of the 49 respondents who relocated stated that as a result
    of their relocation, they had a very difficult time maintaining social
    ties with parents and other relatives. One respondent commented that the
    relocation meant not being there for his mother when she passed away and
    not being able to be with his relatives. Twenty- two respondents stated
    that as a result of relocating to another geographic area, they had a very
    difficult time assisting with the physical care of their parents or other
    relatives. One employee commented that relocating had placed tremendous
    stress on him as well as his wife, children, parents, and other relatives.

    Finally, survey respondents who relocated typically reported that they had
    experienced significant social impacts associated with the relocation
    itself. Twenty of the 49 relocated respondents reported that they had
    experienced a very difficult time dealing with the cost, time, and energy
    involved in relocating from the New York City area to their new homes in

    another geographic area. Fourteen respondents also noted that they had a
    very difficult time selling their homes in the New York City area or
    buying homes in their new geographic area. One respondent who was a
    bargaining unit employee stated that the Service did not help him sell his
    house in the New York City area or assist with the costs associated with
    the sale. Another survey respondent stated that he lost money relocating
    because he had just refinanced his home in the New York City area when the
    Service announced the closure of the New York IT Center. He believed

    it would have been better if postal officials had given employees more
    lead time to plan their affairs before the Service closed the New York IT
    Center. Another respondent believed that relocating workers needed more
    time than the Service provided to research housing options, schools, and
    medical facilities. He believed that because employees had insufficient
    time to research these things, it created a social hardship on them and
    their families that could have been avoided. According to postal
    officials,

    Page 35 GAO- 03- 205 Postal Service

    the Service provides bargaining unit employees about 7 months* notice of
    planned closures. Most survey respondents who relocated to other postal IT
    centers indicated that they did so because they were concerned about the
    economic impacts they believed they would face if they remained in the New
    York City area. Forty- four of the 49 respondents who relocated reported
    that keeping their jobs for economic/ financial well- being had been very
    important to them when deciding whether or not to relocate to another
    postal IT center. Forty of the 49 respondents said that concerns

    about maintaining their pension plan and retirement security had been a
    very important factor in deciding to relocate. One respondent indicated
    that he and his colleagues who relocated to Eagan felt that they had no

    real choice but to relocate if they wanted to maintain their financial
    wellbeing. He stated that the only option the Service offered him besides
    relocating to another postal IT center was to remain in the New York City
    area as a mail clerk or letter carrier with temporary saved- pay. Another
    respondent who relocated also stated that she didn*t believe she had any
    other viable choice besides relocating. She stated that she was too old to
    look for a nonpostal job and didn*t believe she could afford to remain
    with the Service in the New York City area in a non- IT position and take
    a reduction in pay when her saved pay expired. As previously noted, our
    analysis of the Service*s salary data for displaced New York IT Center
    employees confirmed that employees who relocated generally fared better
    economically than those who remained in the New York City area.

    Twenty- two of the 49 relocated survey respondents also reported that in
    deciding to relocate, they had considered it very important that they keep
    their IT jobs for career advancement purposes. Twenty respondents also
    reported that they had been very concerned that as older workers, they
    would have found it very difficult to find satisfactory jobs if they had
    not relocated to other postal IT centers and kept their IT jobs. A
    respondent who relocated to another postal IT center stated that he had no
    other choice but to relocate if he wanted to continue working with the
    Service in an IT position.

    Most of the 49 survey respondents who relocated to postal IT centers in
    other geographic areas tended to have fewer years of service than the 46
    respondents who remained in the New York City area. Only 16 of the 49
    respondents who relocated to another postal IT center had 15 years or more
    service, whereas 30 of the 46 respondents who stayed with the Service in
    the New York City area had 15 years of service or more. Otherwise, the
    demographics of those who relocated to a postal IT center

    Page 36 GAO- 03- 205 Postal Service

    in another geographic area were similar to those of the respondents who
    stayed in the New York City area. Thirty- eight of the 49 relocated survey
    respondents were 40 years of age or older at the time the New York IT
    Center closed; 42 had parents, grandchildren, or relatives living in the
    New York City area; and 39 had a spouse/ partner living with them. In
    contrast, 40 of the 46 respondents who remained with the Service in the
    New York City area were 40 years of age or older at the time the New York
    IT Center closed; 41 had parents, grandchildren, or relatives living in
    the New York City area; and 36 had a spouse/ partner living with them.

    San Mateo IT Center employees responding to our survey anticipate more
    economic impacts than social impacts if they choose to remain in the Bay
    Area and more social impacts if they relocate with the Service to another
    postal IT center. If the Service closes the San Mateo IT Center, the
    options available to San Mateo IT employees to minimize their economic and

    social impacts vary, depending on individual circumstances and job status.
    Some affected employees will likely seek other employment in the Bay Area,
    some will likely retire, and others will likely relocate to another postal
    IT center in order to keep their IT jobs.

    On the basis of the best information they had available at the time, 167
    (78 percent) of the 213 San Mateo IT employees responding to our survey
    indicated that they would likely stay in the Bay Area if the Postal
    Service closes the San Mateo IT Center. Under such circumstances, they
    said they would expect to face more economic impacts than social impacts.
    Many

    anticipate that their decision to stay in the Bay Area could result in
    them losing their Postal Service jobs. According to postal officials,
    affected San Mateo IT employees will be able to apply for vacant postal
    positions, provided they meet the minimum qualifications; however, the
    Service does not anticipate holding open vacant positions in the Bay Area
    for these employees. Furthermore, the Service no longer anticipates that
    it will have many job vacancies in the Bay Area.

    Thirty- six (17 percent) of the employees responding to our survey
    indicated that if the San Mateo IT Center closes, they would probably
    relocate to another postal IT center. Moreover, they anticipate facing
    more social impacts than economic impacts from their decisions. Survey
    respondents indicating they would likely relocate reported that they were
    doing so primarily for their financial well- being and retirement
    security.

    Many provided narrative comments in their survey responses describing how
    relocations would probably lead to family separations for at least a few
    years. Some of the married respondents indicated they would San Mateo IT
    Center

    Employees Anticipate Mostly Economic Impacts if they Opt to Stay in the
    Bay Area and Social Impacts if they Opt to Relocate to Another Postal IT
    Center

    Page 37 GAO- 03- 205 Postal Service

    probably experience some economic impacts from their relocation decision
    because they would have trailing spouses who would be leaving their jobs
    in the Bay Area. The remaining 10 survey respondents (5 percent) indicated
    they were unsure what they would do if the Service closed the San Mateo IT
    Center.

    All San Mateo IT Center employees meeting the minimum age and service
    requirements have the option of retiring. According to postal officials,
    the Service anticipates offering early retirements to all eligible
    employees

    provided that the Office of Personnel Management approves the Service*s
    request, but the Service does not anticipate offering buy- outs. Other
    options available to San Mateo IT Center employees depend, in part, on
    whether they are bargaining unit or EAS employees. Bargaining unit
    employees are covered by a collective bargaining agreement with a nolayoff
    provision and are therefore guaranteed a job at another postal IT center.
    EAS employees are not guaranteed a job at another postal IT center.
    According to postal officials, about half of the EAS employees will be
    offered jobs at other postal IT centers. Bargaining unit and EAS employees
    who do not retire, relocate to another postal IT center, or find another
    postal job on their own will likely be separated from the Service.

    Two years ago, when the IT Department first announced its proposal to
    close the San Mateo IT Center, postal officials indicated that the Service
    could likely find postal jobs for bargaining unit employees who wanted to
    stay in the Bay Area rather than relocate to another postal IT center. For

    most bargaining unit employees, this would have involved a downgrade to a
    mail clerk position. However, according to postal officials, most affected
    employees would have retained their IT pay for up to 2 years, after which
    their pay would have been reduced to the pay of their new positions.
    However, in July 2002, postal officials told us that conditions had
    changed and that the Service was no longer in a position to accommodate

    bargaining unit employees who want to stay in the Bay Area. San Mateo IT
    Center employees can still apply for any postal job vacancies, provided
    they meet the minimum qualifications; however, few vacancies are
    anticipated for the Bay Area. Postal officials said that because of recent
    drops in mail volumes and advances in automated mail processing, the
    Service now has an excess of mail clerks in the Bay Area. Nevertheless,
    postal officials indicated that in keeping with the Service*s collective
    bargaining agreement with APWU, all bargaining unit employees would be

    offered jobs in one of its other postal IT centers* although most of the
    job offers would probably be for positions in its Eagan IT Center. Options
    Available to San Mateo IT Center

    Employees

    Page 38 GAO- 03- 205 Postal Service

    The Service has indicated that it also plans to make available to all EAS
    employees the services of a private job search firm to help them find
    employment outside the Service. However, according to postal officials,
    the Service has no plans at this time to extend these services to its
    bargaining unit employees because of their no- layoff clause, which EAS
    employees do not have. Postal officials said that the benefits provided
    San Mateo bargaining unit employees are specifically governed by its
    collective bargaining agreement with the APWU. In appendix I, we present
    (1) demographic data for San Mateo IT Center employees and displaced New
    York IT Center employees who responded to our survey and (2) the likely
    options/ opportunities for San Mateo employees and options/ opportunities
    that were available for displaced New York employees.

    Essentially all of the 167 San Mateo survey respondents who indicated that
    they would likely stay in the Bay Area reported that they anticipate their
    decisions will result in more economic impacts than social impacts.
    According to postal officials, those staying in the Bay Area will likely
    lose their postal IT jobs and will not likely find other jobs with the
    Postal Service because of its efforts to downsize. Further, the
    respondents were concerned that because of the tight job market in the
    technology sector, they might be unable to find nonpostal IT jobs in the
    Bay Area. Of the 167 respondents, 140 (84 percent) anticipated difficulty
    finding jobs to adequately support their families. Finally, respondents
    said they were concerned that if they could not find satisfactory jobs
    with the Postal Service or the federal government, they would lose their
    ties to the federal retirement and health care systems. Respondents
    planning to stay in the

    Bay Area generally anticipate a range of outcomes that include retiring
    earlier than planned to adjusting to a reduced standard of living.

    San Mateo respondents who indicated that they planned to stay in the Bay
    Area cited a number of reasons for their decisions, including age,
    longevity in the Bay Area, extensive family and social ties in the area,
    and working spouses with substantial time invested in their careers.
    Three- fourths of the respondents planning to stay are over 45 years old;
    have lived in the Bay Area for more than 20 years; and indicated that they
    have extensive family ties, social ties, and other responsibilities in the
    area. These older respondents also typically have working spouses who are
    reluctant to leave their jobs and lose their pension benefits. For
    example, 79 of the 134 respondents (59 percent) who provided reasons for
    not relocating

    identified concerns with spouses* careers as a primary motivator in their
    decision not to relocate. This is not surprising since 49 of the 79 San
    Mateo IT Center

    Employees Planning to Stay in the Bay Area Anticipate More Economic than
    Social Impacts

    Page 39 GAO- 03- 205 Postal Service

    respondents (62 percent) reported that their spouses contributed at least
    50 percent to the household income.

    San Mateo respondents who indicated they would not likely relocate also
    reported having high school and college age children reluctant or
    unwilling to relocate and aging parents in need of assistance who would be
    left behind. Of the 60 respondents with high school and college age
    students, 58 (97 percent) said keeping their family together was a very
    important factor in deciding not to relocate. In addition, 78 percent of
    those deciding not to relocate cited maintaining social and community ties
    as an important factor in their decision. Over 70 percent also cited
    health issues and a reluctance to sell their homes as factors in deciding
    not to

    relocate. A similar percentage were also concerned that maintaining their
    health care coverage might become difficult should they lose their postal
    IT jobs* a particular concern if family members have serious health
    conditions and continuity of care and coverage for preexisting conditions
    becomes critical.

    Under the Service*s collective bargaining agreement with APWU, San Mateo
    IT Center bargaining unit employees are guaranteed jobs at other postal IT
    centers. Thus, these employees have the option of relocating with their
    jobs to other postal IT centers and continuing employment with the
    Service. Conversely, EAS employees are not guaranteed jobs, and some San
    Mateo EAS employees will likely not have the option of relocating and
    continuing employment with the Service. According to the Service, the
    option to relocate will likely be extended to about half of the EAS
    employees. One respondent who was an EAS employee, age 49 with 15 years of
    service, commented that not having the assurance of being able to relocate
    to another postal IT center has increased his anxiety about the potential
    closure. He reported that he is not eligible for retirement and doubts
    that he will be offered other employment with the Service. He indicated
    that he essentially has no option but to find a nonpostal job because he
    is the primary breadwinner and has many years to go on his mortgage
    payments. He indicated that the Service will pay him severance pay equal
    to 4 or 5 months* salary, but he anticipates much difficulty finding
    another IT job in the Bay Area because of the tight labor market for
    technology positions. The majority of the 167 San Mateo respondents who
    anticipate staying in the Bay Area reported that they will likely seek
    whatever postal

    employment that may be available in the Bay Area, although many indicated
    in their narrative responses that such job prospects do not look good. The
    remaining respondents who anticipate staying in the Bay Area

    Page 40 GAO- 03- 205 Postal Service

    reported that they would likely retire or seek nonpostal employment in the
    Bay Area. (See fig. 4 for details.)

    Figure 4: Options San Mateo Employees Expect to Pursue if Staying in the
    Bay Area Note: San Mateo IT Center employees who responded to GAO survey.

    San Mateo respondents indicating that they would likely seek other
    employment in the Bay Area were skeptical about finding such employment.
    According to postal officials, finding other postal employment is unlikely
    because of Servicewide downsizing. Some

    respondents thought they might qualify for other postal management or
    administrative positions, but they were not optimistic about the
    availability of such positions. Both EAS and bargaining unit respondents
    seeking nonpostal employment anticipated difficulties because of the
    current slump in IT employment and the added difficulty faced by older
    workers in finding new employment. Additionally, those anticipating
    seeking new employment were concerned that their earnings would likely be
    less and that they would lose current health and retirement benefits.

    Some San Mateo respondents indicated they would be willing to take a non-
    IT job if it would mean continued employment with the Service in the Bay
    Area. For example, one younger respondent said she would be willing to
    transfer from her computer programmer/ analyst job to other kinds of
    postal work in order to stay in the Bay Area because both her and her

    Page 41 GAO- 03- 205 Postal Service

    husband*s families live nearby, her mother cares for her baby while she is
    at work, and her husband*s parents are in frail health and need constant
    assistance. Other respondents indicated they wanted to stay in the Bay
    Area but did not want to take a non- IT job. For example, one senior
    systems analyst, making $67,000 per year, said he would rather take early
    retirement and try to find a nonpostal job in his field than take a mail
    clerk

    job at $40,000 per year. According to postal officials, employment
    opportunities may not be very good for individuals wishing to stay in the
    Bay Area. Postal officials said in July 2002 that the job market for IT
    positions in the Bay Area had changed

    significantly in the last 2 years. They said that 2 years ago, IT jobs
    were plentiful in the Bay Area and that the Service had difficulty
    attracting and keeping IT personnel. More recently, however, they reported
    that those

    conditions had changed. They said that in the current economic
    environment, IT positions in the Bay Area have become difficult to find.
    Additionally, postal officials indicated that they could no longer
    accommodate San Mateo bargaining unit employees who might want to stay in
    the Bay Area as mail clerks because the Service now has excess employees
    in the Bay Area.

    Fifty- two of the 167 San Mateo respondents who did not anticipate
    relocating to another postal IT center reported that that they would
    likely exercise their option to retire. Forty- five of those respondents
    said their retirement would be earlier than planned, and 39 said they
    would face financial difficulties in retirement. Of the respondents
    indicating that they would likely retire, 22 said it would be very
    difficult to maintain or find adequate housing on their reduced incomes.
    For example, one respondent said that her reduced income would be
    insufficient to cover her health

    benefits, mortgage payments, and other expenses and that finding
    supplementary employment would be difficult at her age.

    One respondent who was an EAS employee, age 50 with 25 years of service,
    said he would likely take early retirement because he does not think that
    the Service will offer him another job. He indicated that he must stay in
    the Bay Area because his wife will not be eligible to retire for 5 years,
    his daughter attends a local college, and his aging parents need regular
    assistance. Because retirement would considerably reduce his income, he
    said he would have to find other work in order to meet his mortgage
    payments and other expenses.

    In discussions of the survey results with postal officials, they expressed
    surprise that such a large percentage of affected San Mateo IT Center

    Page 42 GAO- 03- 205 Postal Service

    employees had indicated they would likely stay in the Bay Area and compete
    for jobs in a tight labor market, rather than relocate and continue their
    employment with the Postal Service. The officials said they expected that
    more affected IT employees would eventually decide to relocate when

    they encountered difficulty finding other suitable jobs in the Bay Area.
    The officials also said that based on past experience, about one- third of
    all employees would likely relocate if the Service closes the San Mateo IT
    Center. As previously noted, the Service plans to offer all EAS employees
    the services of a private job search firm to help them find nonpostal jobs
    if they decide to seek outside employment. However, the Service has no
    current plans to extend these services to bargaining unit employees
    because they are guaranteed jobs at another postal IT center. Nearly all
    of the 36 San Mateo survey respondents who indicated that they

    would likely relocate to another postal IT center anticipate social
    impacts if they relocate. As a group, these respondents were most
    concerned about the impact that relocating would have on their spouses
    and/ or other family members.

    Twenty- nine of the 36 San Mateo respondents (81 percent) who said they
    intend to relocate to other postal IT centers are over age 45, and many
    are concerned that the relocation would split up their families. Twenty-
    two of the 36 respondents have spouses; and 9 said that if they relocated,
    their spouses would probably not relocate with them. The nine respondents
    reported several reasons why they did not believe their spouses would
    relocate:

     spouse has lived in the Bay Area for 30 or more years,  spouse has
    aging parents in the Bay Area who need care,  spouse has children who
    would not be relocating, and  spouse*s job pays well (about half the
    family income).

    Twelve of the 18 San Mateo respondents who had children and/ or
    grandchildren living in their households reported that at least 1 family
    member would be left behind. One respondent commented that leaving his 7-
    year- old son with no father present could have a life- long negative
    impact. Another said relocation would separate him from his wife and three
    children for 5 to 6 years until he was eligible to retire. He stated that
    the economic impacts for him would be (1) the cost of maintaining two

    households, (2) travel costs between the Bay Area and his new job for
    family visits, and (3) a more expensive telephone bill. Additionally, 30
    of the 36 respondents reported having aging parents or relatives in the
    Bay San Mateo IT Center

    Employees Who Are Likely to Relocate Anticipate Primarily Social Impacts,
    and Some with Trailing Spouses Also Anticipate Economic Impacts

    Page 43 GAO- 03- 205 Postal Service

    Area, and 25 said relocation would make current or future care for them
    difficult. In some cases, the respondents reported that their parents
    relied on them to assist with doctors* appointments, aid their limited
    English

    language skills, and be available in case of emergencies. San Mateo
    respondents likely to relocate also reported concerns with losing
    community and social ties and with adjusting to new communities, cultures,
    and work environments. These concerns were particularly reported among
    ethnic minority respondents, who accounted for more than half of those
    likely to relocate. They expressed concerns about leaving their important
    cultural ties in the Asian and Hispanic communities of the Bay Area. For
    example, one respondent commented that his wife, of Asian descent and with
    limited English language skills, would have a difficult time leaving the
    Bay Area. Three- fourths of San Mateo respondents who anticipated
    relocating to

    another postal IT center reported that the relocation would strain their
    family relationships, and one commented that it would likely lead to
    divorce. Although respondents anticipated strained family relationships,
    several saw the relocation as temporary, until they were eligible to
    retire.

    Other San Mateo respondents who said they would likely relocate reported
    concerns about anticipated economic impacts associated with trailing
    spouses. Some reported concerns about the possible loss of spousal income
    and benefits if their working spouses were to relocate and be unable to
    find employment at the new location. For example, eight respondents
    reported having a trailing spouse who would be looking for employment
    after relocation, and seven of those thought employment would be difficult
    for their spouses to find. One respondent commented that relocating her
    spouse would be a major problem because her husband is a journalist and
    has already learned that prospects for such jobs at the

    new location are poor. Postal officials indicated that in cases where the
    trailing spouse is also a postal employee, the Service would work with the
    trailing spouse to find suitable postal employment at the new location.
    However, officials did not anticipate that the Postal Service would offer
    employment services to trailing spouses who are not postal employees.

    Nearly all of the 36 San Mateo respondents who indicated that they would
    likely relocate reported that the cost, time, and energy involved in
    moving would be difficult for them. Twenty- three respondents reported
    being

    homeowners who will face the prospect of selling and buying homes. While
    relocating to a lower housing cost area could provide them some financial
    advantage, several respondents commented that the differential

    Page 44 GAO- 03- 205 Postal Service

    costs and the loss of preferential property tax status would make it
    difficult for them to ever move back to the Bay Area.

    We have previously reported that when employees lose their jobs it can be
    a traumatic experience; therefore, progressive organizations often work
    with employees to help them through such difficult times. 23 We reported
    that not only does job loss disrupt employees* personal lives and plans,
    but it can also cause stressful concerns about finding another job. Of 25
    organizations we surveyed for our 1995 report on job loss issues, 23 had
    devised programs to help employees who lost their jobs. These programs
    included job placement assistance, employee and family counseling,

    relocation assistance, and training. Some of the organizations surveyed
    provided self- administered job placement assistance while others used
    outside job assistance companies. Also, we have previously reported that
    the Department of Defense was very successful in minimizing the impacts

    of maintenance depot closures on employees, primarily through a
    comprehensive outplacement effort. 24 Our prior work on job loss issues
    further showed that, in general,

    organizations that offer job placement assistance to displaced employees
    also benefit. Providing job placement assistance helped sponsoring
    organizations (1) avoid lawsuits by displaced employees, (2) reduce
    unemployment costs, and (3) enhance their reputations in the community by
    demonstrating that they cared about their employees. Similar to other
    organizations that have helped displaced employees, the Service has
    indicated that it plans to provide assistance to San Mateo IT Center
    employees to minimize the impact, if it decides to close the center. In
    addition to providing the relocation and separation benefits mentioned
    earlier, the Service has indicated that it plans to hold a series of
    meetings with affected San Mateo employees and their families to provide
    them with needed information on available options and opportunities and to
    address employees* questions about the closure. Additionally, as noted
    earlier, the Service plans to provide the services of a job search firm to
    San Mateo EAS employees, although bargaining unit employees will not
    receive similar services because such services are not provided for by the
    collective bargaining agreement that governs IT bargaining unit

    23 Workforce Reductions: Downsizing Strategies Used in Selected
    Organizations,

    GAO/ GGD- 95- 54 (Washington, D. C.: Mar. 13, 1995). 24 Closing
    Maintenance Depots: Savings, Workload, and Redistribution Issues, GAO/
    NSIAD- 96- 29 (Washington, D. C.: Mar. 4, 1996). Experience Shows that

    Providing Job- Finding Assistance Is Beneficial to Employers and Employees

    Page 45 GAO- 03- 205 Postal Service

    employees* benefits. According to postal officials, services to be
    provided by the job search firm are to include, among other things,
    seminars on change management, skills development, resume writing,
    negotiation skills, how to network, how to find a job on the Internet, and
    group counseling and coaching. In 2000, when the IT Department proposed
    closing the San Mateo IT

    Center, it estimated that 33 percent of affected employees would likely
    relocate to other postal IT centers and possibly need some relocation
    assistance. The IT Department acknowledged that because it expected that
    only 33 percent of affected employees would relocate, it would need to
    rely on contractor support to cover for the loss of knowledgable employees
    who would not be relocating from the San Mateo IT Center to other postal
    IT centers. Our survey of San Mateo employees, however,

    indicates that the IT Department*s estimate of relocating employees may be
    overstated; and its need for contractor support could, therefore, be
    greater than planned. According to our survey results, only 17 percent of
    San Mateo employees currently anticipate that they would likely relocate
    to another postal IT center if the Service closes the San Mateo IT Center.
    Fifty- nine percent of the respondents (who indicated they would likely
    stay in the Bay Area and provided reasons for not relocating) identified
    concerns with their spouses* careers as a primary motivator in their
    decision not to relocate. Further, seven of the eight respondents
    relocating with trailing spouses who would be looking for jobs at the new
    location expressed concern that the spouses would have difficulty finding
    suitable employment.

    Relocation experts have noted that because of the prevalence of dualincome
    households in the workforce, employees who must make a relocation choice
    often base their decision on whether or not their trailing spouses can
    find suitable employment at the new location. Given this, relocation
    experts report more companies are providing employment assistance to
    trailing spouses, such as resume preparation and review, paying job
    finders- fees, assisting with finding employment, and reimbursing trailing
    spouses for lost income while they seek employment at the new location.

    When the IT Department first proposed closing the San Mateo IT Center in
    2000, economic conditions and the employment outlook in the Bay Area were
    noticeably better than they are today; so much so that the Service
    anticipated that postal positions would be available in the Bay Area for
    many displaced employees who did not relocate. However, because of changed
    economic conditions, recent drops in mail volumes, and advances

    Page 46 GAO- 03- 205 Postal Service

    in automated mail processing, the Service no longer expects that it will
    have job openings to accommodate employees who do not relocate. As noted
    earlier, although the Service has indicated that it plans to make the
    services of a private job search firm available to San Mateo EAS
    employees, the Service has no plans at this time to extend similar
    services to San Mateo IT Center bargaining unit employees because their
    benefits are governed by the Service*s collective bargaining agreement
    with the

    APWU. Consequently, many bargaining unit employees will face a dilemma if
    the Service closes the San Mateo IT Center. If bargaining unit employees
    do not relocate, they will likely lose their postal employment and would
    not have the services of a private job search firm to help them find other
    employment. Additionally, bargaining unit and EAS employees with working
    spouses who are not postal employees face a dilemma concerning the impact
    a relocation would have on their trailing spouses* careers and their
    families* household incomes. That is, if these employees relocate, will
    their trailing spouses be able to find suitable employment at the new
    location or will household incomes and spouses* careers suffer?

    By not addressing employees* concerns about trailing spouses, the Service
    may be missing an opportunity to entice more of its San Mateo IT Center
    employees to relocate to other postal IT centers, thereby exposing itself
    to higher than necessary contractor costs. If the Service decides to close
    the San Mateo IT Center, it is required under its agreement with APWU to
    notify the union of its decision and offer to meet with national level
    officials to discuss the closure*s impact on affected employees.
    Historically, discussions preceding previous closures have resulted in
    additional provisions for affected bargaining unit employees, which were
    specified in Memorandums of Understanding that modified existing
    collective bargaining agreements. According to postal officials, the
    Service expects that if it decides to close the San Mateo IT Center, the
    APWU will request a meeting to discuss, among other things, additional
    benefits for affected bargaining unit employees.

    The Service is following its Investment Review and Approval Process as it
    moves toward a decision about closing the San Mateo IT Center. However,
    economic conditions have changed significantly since 2000 when the IT
    Department prepared the DAR in support of closing the San Mateo IT Center.
    Also, the DAR does not reflect the impact that the Service*s announced
    plans to automate and reengineer its field accounting activity* which
    involves closing its 85 district accounting offices and consolidating the
    residual activities into its 3 Accounting Service Centers* could have on
    projected savings associated with the proposal to Conclusions

    Page 47 GAO- 03- 205 Postal Service

    close the San Mateo IT Center. Therefore, the Service may be using dated
    information as it goes about making its closure decision regarding the San
    Mateo IT Center. Finally, the employment outlook is not nearly as

    encouraging now as it was in 2000 when employment conditions in the Bay
    Area were better and the Service indicated it would have postal positions
    available for bargaining unit employees who did not want to relocate.
    Given these changed conditions, bargaining unit employees who do not
    relocate might encounter difficulty in finding employment in the Bay Area.
    Further, some San Mateo IT employees may be reluctant to relocate because
    of concerns that their trailing spouses might have difficulty finding jobs
    at the new location.

    We recommend that before the Service makes its decision regarding whether
    to close the San Mateo IT Center, the PMG should direct the IT Department
    to review and update the economic assumptions and analyses used in the San
    Mateo DAR and make revisions, if appropriate, to better reflect current
    economic conditions and recent plans to automate and reengineer its field
    accounting activity.

    If the Service decides to close the San Mateo IT Center, we recommend that
    the PMG consider:

     During discussions with APWU regarding the IT center*s closure, offering
    to help bargaining unit employees find jobs if they decide to remain in
    the Bay Area.  During discussions with APWU regarding the IT center*s
    closure, offering some assistance* such as resume preparation and review
    services* to the

    trailing spouses of bargaining unit employees who decide to relocate to
    another postal IT center.  Providing some assistance* such as resume
    preparation and review

    services* to the trailing spouses of EAS employees who decide to relocate
    to another postal IT center. The Postal Service provided comments on a
    draft of this report in a letter from the chief financial officer and
    executive vice president dated December 19, 2002. These comments are
    summarized below and are reprinted in appendix II. Postal officials also
    provided technical and clarifying comments, which we have incorporated
    into the report where appropriate. Although the Service did not comment on
    our findings, it did agree with our recommendations. The Service
    reiterated that it has not yet made a Recommendations for

    Executive Action Agency Comments and Our Evaluation

    Page 48 GAO- 03- 205 Postal Service

    decision regarding the proposed closure of the San Mateo IT Center and
    will reevaluate the proposed closure as part of its overall strategy to
    rationalize its administrative infrastructure and meet its data processing

    needs with the appropriate facilities, technologies, and staff. The
    Service indicated that it would implement our recommendation that the DAR
    be reviewed and updated before a decision is made about closing the San
    Mateo IT Center. Specifically, the Service said that before making any
    decisions regarding possible disposition of the building and property, it
    would update the information in the DAR. The Service further stated that
    it was aware that conditions in the commercial building market in the Bay
    Area have changed since the San Mateo DAR was submitted. The Service
    stated that it might need to revisit the proposal to sell the building in
    light of an updated assessment of the building*s fair market value, the
    viability

    of potential outlease or leaseback options, and the space needs of the
    expanded Accounting Service Center.

    In response to our other recommendations that the Service consider
    offering to (1) help bargaining unit employees find jobs if they remain in
    the Bay Area and (2) provide some assistance to help the trailing spouses

    of employees who relocate find jobs, the Service indicated that it would
    try to minimize the negative effects of relocation. The Service said that
    if it determines that closing the San Mateo IT Center and relocating its

    functions to other postal IT centers are still critical to the Service*s
    IT strategy, the Service will adhere to the provisions of its bargaining
    unit agreements. The Service further stated that to the extent possible,
    consistent with those agreements, it will attempt to mitigate the negative
    impacts that relocation may have on employees and their families.

    As agreed with your offices, unless you publicly announce its contents
    earlier, we plan no further distribution of this report for 30 days after
    the date of this letter. At that time, we will send copies of this report
    to the Chairmen and Ranking Minority Members, Senate Committee on
    Governmental Affairs and its Subcommittee on International Security,
    Proliferation, and Federal Services; and to the Chairman, House Committee
    on Government Reform. We will also send copies of this report to the
    Postmaster General and Chief Executive Officer, U. S. Postal Service, and
    the President of the American Postal Workers Union. In addition this
    report will be available at our Web site at http:// www. gao. gov.

    Page 49 GAO- 03- 205 Postal Service

    Major contributors to this report included Gerald P. Barnes, Isidro L.
    Gomez, Stuart M. Kaufman, Roger L. Lively, Donald J. Porteous, and Charles
    F. Wicker. If you have any questions about this letter or the appendixes,
    please contact me or Mr. Barnes on (202) 512- 2834 or at ungarb@ gao. gov
    or barnesgp@ gao. gov.

    Bernard L. Ungar Director, Physical Infrastructure Issues

    Appendix I: Comparative Demographic Data and Options for San Mateo and
    Displaced New York IT Center Employees

    Page 50 GAO- 03- 205 Postal Service

    According to the responses to our survey, San Mateo IT employees, on
    average, are older and have more years of service than displaced New York
    IT Center employees at the time of the center*s closure. The demographics
    of San Mateo IT Center employees indicating they would not likely relocate
    and displaced New York IT Center employees who did not relocate were more
    similar than the demographics of San Mateo IT Center employees who
    indicated they would likely relocate and displaced New York IT employees
    who relocated. Table 1 provides comparative

    demographic data for San Mateo and displaced New York IT employees. Data
    are shown for employees who relocated (or are likely to relocate in the
    case of San Mateo employees) and those who did not relocate (or are

    likely not to relocate in the case of San Mateo employees). Because our
    data for New York IT Center employees do not include all displaced New
    York employees, the data may not be totally representative. For example,
    during the 9 years since the New York IT Center closed, some of its
    displaced employees may have retired and are therefore not reflected in
    our data. If data were available for this group, it would have tended to

    increase the average age and years of service of displaced New York IT
    Center employees at the time of closure.

    Additionally, displaced New York IT Center employees had more favorable
    options/ opportunities to lessen the impact of the closure than San Mateo
    IT Center employees are likely to have. For example, all displaced New

    York IT Center employees had the option of relocating with their jobs to
    another postal IT center or continuing to work for the Service in the same
    geographic area (though not necessarily in an IT position), whereas San
    Mateo IT Center employees likely will not have this option. Table 2
    displays the range of options/ opportunities likely to be available to San
    Mateo IT Center employees and options/ opportunities that were available
    to displaced New York IT Center employees. Options/ opportunities are
    similar for early retirements, assistance programs to help EAS employees
    find employment outside the Service, and help for trailing spouses who are

    postal employees and need to find suitable employment at the new location.
    Options/ opportunities are not similar with regard to buy- outs, ability
    to continue employment with the Service in some capacity, savedpay
    protections, and the availability of local postal and nonpostal jobs.
    Appendix I: Comparative Demographic Data

    and Options for San Mateo and Displaced New York IT Center Employees

    Appendix I: Comparative Demographic Data and Options for San Mateo and
    Displaced New York IT Center Employees

    Page 51 GAO- 03- 205 Postal Service

    Table 1: Demographic Data for San Mateo IT Employees Compared with
    Displaced New York IT Employees* Demographic Data

    Demographic characteristics San Mateo IT Center employees Displaced New
    York IT Center

    employees a

    Employees indicating they would likely relocate or did relocate to another
    postal IT center 36 49 Ages 45 to 49 8 (22%) 18 (37%)

    Ages 50 to 54 10 (28%) 3 (6%) Ages 55 or older 11 (31%) 2 (4%) 15 or more
    years of service 27 (75%) 16 (33%) 20 or more years of service 16 (44%) 7
    (14%) Living with spouse/ partner 22 (61%) 39 (80%) Living in dual- income
    household 14 (39%) 32 (65%) School- age b children living in household 18
    (50%) 30 (61%) Providing assistance to elderly parents/ relatives in the
    area 22 (61%) 27 (55%) Employees indicating they would likely not relocate
    or did not relocate 167 46

    Ages 45 to 49 41 (25%) 11 (24%) Ages 50 to 54 44 (26%) 8 (17%) Age 55 or
    older 44 (26%) 2 (4%) 15 or more years of service 125 (75%) 30 (65%) 20 or
    more years of service 81 (49%) 10 (22%) Living with spouse/ partner 124
    (74%) 36 (78%) Living in dual- income household 99 (59%) 29 (63%) School-
    age children living in household 78 (47%) 27 (59%) Providing assistance to
    elderly parents/ relatives in the area 93 (56%) 22 (48%)

    Source: GAO. Note: San Mateo IT Center and displaced New York IT Center
    employees who responded to GAO survey. a Responses reflect employees*
    recollections of circumstances at the time the New York IT Center closed.

    b School age was defined as ages 5 to 22.

    Appendix I: Comparative Demographic Data and Options for San Mateo and
    Displaced New York IT Center Employees

    Page 52 GAO- 03- 205 Postal Service

    Table 2: Likely Options/ Opportunities for San Mateo IT Employees Compared
    with Options/ Opportunities that Were Available for Displaced New York IT
    Employees

    Option/ opportunity Options/ opportunities likely available to San Mateo
    IT employees Options/ opportunities that were available to

    New York IT employees

    Take early retirement According to postal officials, if the Service
    decides to close the San Mateo IT Center it will offer early retirement to
    all eligible employees provided the Office of Personnel Management

    grants the Service such authority. The Service offered early retirement to
    all eligible employees.

    Receive buy- out According to postal officials, the Service does not
    anticipate offering buy- outs. At the time of the New York IT Center
    closure,

    the Service was offering, as part of a nationwide restructuring, a
    monetary incentive of 6 months* pay to all eligible employees who opted to
    retire or take an early- out. Relocate with job Bargaining unit employees
    San Mateo bargaining unit employees are

    covered by a collective bargaining agreement with a no- layoff provision
    and are guaranteed the option of relocating with their jobs to other
    postal IT centers. New York bargaining unit employees were

    covered by a collective bargaining agreement with a no- layoff provision
    and were therefore guaranteed jobs at other postal IT centers.
    Additionally, a Memorandum of Understanding between the Service and APWU
    concerning the closure provided that bargaining unit employees who wanted
    to continue employment with the Service in the New York City area (though
    not necessarily in IT jobs) could do so.

    EAS employees The Service anticipates offering only about half of its 72
    EAS employees the opportunity to relocate with their jobs to other postal
    IT centers.

    All EAS employees had the option of continuing employment with the
    Service. EAS employees who did not want to relocate with their jobs could
    continue employment with the Service in the New York City area, although
    not necessarily in an IT position. Assistance in helping trailing spouses
    find employment at

    new location According to postal officials, the Service will work with
    trailing spouses who are postal

    employees to find suitable postal employment at the new location. No
    special assistance is planned for trailing spouses who are not postal
    employees.

    According to postal officials, the Service worked with trailing spouses
    who were postal employees to find suitable postal employment at the new
    location. No special assistance was provided to trailing spouses who were
    not postal employees.

    Appendix I: Comparative Demographic Data and Options for San Mateo and
    Displaced New York IT Center Employees

    Page 53 GAO- 03- 205 Postal Service

    Option/ opportunity Options/ opportunities likely available to San Mateo
    IT employees Options/ opportunities that were available to

    New York IT employees

    Continue employment with the Service in the same geographic area

    Bargaining unit employees Initially, the Service anticipated that it would
    be able to accommodate bargaining unit employees who wanted to remain in
    the Bay Area in non- IT positions. More recently, it reported that because
    of recent drops in mail volumes and advances in automated mail

    processing, it now has excess mail clerks in the Bay Area. Accordingly,
    the Service does not anticipate that it will be able to accommodate
    bargaining unit employees who want to remain

    A Memorandum of Understanding between the Service and APWU concerning the
    New York closure provided that bargaining unit employees who wanted to
    continue employment with the Service in the New York City area (though not
    necessarily in IT jobs) could do so.

    in the Bay Area. Nevertheless, if the Service decides to close the San
    Mateo IT Center, this issue will likely be a part of the discussions
    between the Service and the APWU on the impact that the closure would have
    on employees.

    EAS employees According to postal officials, very few EAS employees will
    likely be able to continue employment with the Service in the Bay Area.
    Employees can apply for jobs in the Bay Area provided they meet the
    minimum qualifications

    for the job; however, the Service does not anticipate that it will have
    many vacancy announcements in the Bay Area. According to postal officials,
    the Service currently has excess employees in the Bay Area.

    All EAS employees who wanted to continue employment with the Service could
    do so. EAS employees not wanting to relocate to other postal IT centers
    had the option of continuing employment with the Service in non- IT
    positions

    in the New York City area. Other job opportunities Within the Service The
    Service is currently in a downsizing mode,

    and job opportunities are limited. The Service, just prior to the closure,
    had undergone a major restructuring, resulting in

    numerous vacant positions and job opportunities for employees affected by
    the New York IT Center*s closure.

    Outside the Service According to postal officials, job opportunities for
    nonpostal IT positions are very limited in the Bay Area, unlike 2 years
    ago when IT positions were readily available. San Mateo IT employees
    responding to our survey also indicated that, overall, job opportunities
    in the Bay Area were tight.

    Data on the experience of New York ITemployees seeking nonpostal jobs in
    the New York City area at the time of closure are unknown.

    Appendix I: Comparative Demographic Data and Options for San Mateo and
    Displaced New York IT Center Employees

    Page 54 GAO- 03- 205 Postal Service

    Option/ opportunity Options/ opportunities likely available to San Mateo
    IT employees Options/ opportunities that were available to

    New York IT employees

    Avoid reductions in pay Bargaining unit employees According to postal
    officials, bargaining unit employees at the San Mateo IT Center will not
    likely have the option of continuing employment with the Postal Service in
    the Bay Area, even in non- IT positions. However, should these employees
    find other postal employment, the Service anticipates that such employees
    would likely receive saved- pay protection for up to 2 years.

    Employees who wanted to stay in the New York City area and voluntarily
    transferred to lower paid positions received saved- pay protection for 1
    year. This was provided for in the Memorandum of Understanding agreed to
    by the Service and the APWU concerning the New York IT Center*s closure.

    EAS employees According to postal officials, EAS employees at the San
    Mateo IT Center will not likely have the option of continuing employment
    with the Postal Service in the Bay Area, even in non- IT positions.
    However, should these employees be reassigned to lower paying positions,
    they

    would, in general, receive saved- pay for 2 years.

    Initially, EAS employees who stayed in the New York City area and took
    lower paid positions as a result of the closure believed they would have
    saved- pay protection for 2 years. However, the

    Service later announced that EAS employees taking lower paid positions as
    a result of the closure would receive permanent saved- pay protection.
    Assistance in finding employment outside the Service According to postal
    officials, should the Service

    decide to close the San Mateo IT Center, it will offer EAS employees the
    services of a private job search firm to help them find nonpostal
    employment. Currently, the Service has no plans for extending these
    services to its

    bargaining unit employees whose terms of employment are specifically
    provided for under the Service*s collective bargaining agreement with the
    APWU. The Service made available the services of a

    private job search firm to any EAS employee who wanted to find nonpostal
    employment. Bargaining unit employees were not offered such services, as
    they were not provided for under the contract or Memorandum of
    Understanding between the Service and APWU concerning the closure.

    Involuntary separations According to postal officials, EAS and bargaining
    unit employees who do not to relocate, retire, or find other postal
    employment on their own will likely be separated from the Service.

    According to postal officials, there were no involuntary separations
    associated with the New York IT Center closure.

    Source: U. S. Postal Service.

    Appendix II: Comments from the U. S. Postal Service

    Page 55 GAO- 03- 205 Postal Service

    Appendix II: Comments from the U. S. Postal Service

    (393000)

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