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

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