    U.S. Postal Service: Mail Processing Realignment Efforts Under
    Way Need Better Integration and Explanation (21-JUN-07,
    GAO-07-717).

    Major changes in the mailing industry have reinforced the need
    for the U.S. Postal Service (USPS) to reduce costs and increase
    efficiency. In its 2002 Transformation Plan, USPS proposed doing
    so by realigning its mail processing network. The objectives of
    this requested report are to (1) describe the status of the
    initiatives USPS has developed for realignment; (2) evaluate how
    the planning, impacts, and results of these initiatives align
    with realignment goals; and (3) evaluate USPS's communication
    practices with stakeholders in making realignment decisions.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-717
        ACCNO:   A71188
      TITLE:     U.S. Postal Service: Mail Processing Realignment Efforts
    Under Way Need Better Integration and Explanation
         DATE:   06/21/2007
      SUBJECT:   Communication
    	     Cost control
    	     Decision making
    	     Federal agency reorganization
    	     Government information dissemination
    	     Performance measures
    	     Postal facilities
    	     Postal service
    	     Productivity in government
    	     Program evaluation
    	     Strategic planning
    	     Consolidation
    	     Mail processing operations
    	     Program goals or objectives
    	     Program implementation
    	     Transparency

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    GAO-07-717

         * [1]Results in Brief
         * [2]Background
         * [3]USPS Initiatives for Realigning Its Processing Network Are a

              * [4]AMP Consolidations Are Under Way but Taking Longer Than Anti

                   * [5]Status of AMP Consolidations Initiated in 2005 and 2006
                   * [6]AMP Consolidations Are Intended to Reduce Excess Capacity

              * [7]Implementation of the Regional Distribution Center Initiativ
              * [8]USPS Plans to Begin Deploying Machines to Enhance Automation
              * [9]The Surface and Air Network Development Initiative Is Nearly

         * [10]It Is Unclear if Network Realignment Initiatives Are Meeting

              * [11]USPS's Network Realignment Goals Lack Measurable Targets, an
              * [12]Concerns with the AMP Consolidation Process Make it Unclear

                   * [13]Criteria USPS Uses in Selecting Facilities as
                     Opportunities
                   * [14]USPS Does Not Use Consistent Data Calculations in Making
                     AMP

              * [15]Inconsistent Data Calculations Result in Differences in Proj

                   * [16]USPS Does Not Have a Mechanism for Determining AMP
                     Consolida
                   * [17]USPS Is Addressing Several of these Issues through
                     Revised A

         * [18]USPS AMP Communication Practices Do Not Ensure Appropriate S

              * [19]Communication Requirements Have Focused on Post Offices and
              * [20]AMP Consolidation Communication Processes Lack Transparency

                   * [21]Inconsistent Identification of Stakeholders
                   * [22]Unclear Content in Notification Letters
                   * [23]Limited Public Input Process
                   * [24]Lack of Information to Public

         * [25]Conclusion
         * [26]Recommendations for Executive Action
         * [27]Agency Comments and Our Evaluation
         * [28]Appendix I: Objectives, Scope, and Methodology
         * [29]Appendix II: Overview of AMP Consolidation Process

              * [30]Study and Proposal

                   * [31]Evaluation of Proposal
                   * [32]Implementation of Consolidation
                   * [33]Review of Consolidation

         * [34]Appendix III: Status of USPS 2005 and 2006 AMP Consolidation
         * [35]Appendix IV: USPS Notification to Stakeholders as Identified
         * [36]Appendix V: Comments from the U.S. Postal Service
         * [37]Appendix VI: GAO Contact and Staff Acknowledgments

              * [38]GAO Contact
              * [39]Staff Acknowledgments

                   * [40]Order by Mail or Phone

         * [41]PDF6-Ordering Information.pdf

              * [42]Order by Mail or Phone

    Report to Congressional Requesters

    United States Government Accountability Office

    GAO

    June 2007

    U.S. POSTAL SERVICE

    Mail Processing Realignment Efforts Under Way Need Better Integration and
    Explanation

    GAO-07-717

    This report was modified on September 18, 2007, to remove procurement
    sensitive information.

    Contents

    Letter 1

    Results in Brief 3
    Background 6
    USPS Initiatives for Realigning Its Processing Network Are at Different
    Stages of Development and Implementation 12
    It Is Unclear if Network Realignment Initiatives Are Meeting USPS END
    Goals, and Problems Exist with USPS's AMP Consolidation Initiative 20
    USPS AMP Communication Practices Do Not Ensure Appropriate Stakeholder
    Engagement in Realignment Decisions 32
    Conclusion 44
    Recommendations for Executive Action 45
    Agency Comments and Our Evaluation 46
    Appendix I Objectives, Scope, and Methodology 51
    Appendix II Overview of AMP Consolidation Process 53
    Appendix III Status of USPS 2005 and 2006 AMP Consolidations and PIRs 56
    Appendix IV USPS Notification to Stakeholders as Identified in AMP
    Communication Documentation 59
    Appendix V Comments from the U.S. Postal Service 61
    Appendix VI GAO Contact and Staff Acknowledgments 63

    Tables

    Table 1: Status and Purpose of Central Realignment Initiatives 12
    Table 2: Implementation Status of AMP Consolidations Approved in 2005 15
    Table 3: Status of 46 AMP Consolidations Initiated in 2006 16
    Table 4: Semiannual Post-Implementation Projected Annualized Savings
    Versus Estimated Annualized Savings in AMP Studies Approved in 2005 26
    Table 5: Semiannual Post-Implementation Projected Annualized Savings
    Versus Estimated Annualized Savings in AMP Studies Approved in 2005,
    Excluding Fully Consolidated Facility 26
    Table 6: Summary of Major Changes to AMP Consolidation Process Included in
    Draft Revised Guidelines 30
    Table 7: USPS Area Mail Processing Consolidation Notification and Public
    Input Requirements 42
    Table 8: Implementation and PIR Status of AMP Consolidations Approved In
    2005 (as of May 2007) 56
    Table 9: Status of 46 AMP Proposed Consolidations Initiated in 2006 (as of
    May 2007) 56

    Figures

    Figure 1: USPS's Originating and Destinating Mail Processing Network 8
    Figure 2: USPS's Area Mail Processing Consolidation Process and Time Line
    14
    Figure 3: USPS Notification Letter to Waterbury Republican Newspaper,
    Waterbury, Connecticut 37

    Abbreviations

    AMP area mail processing
    APWU American Postal Workers Union
    END Evolutionary Network Development
    EXFC External First-Class Measurement System
    FSS flat sequencing system
    HASP Hub and Spoke Program
    MODS Management Operating Data Systems
    ODIS Origin-Destination Information System
    PIR post-implementation review
    PRC Postal Regulatory Commission
    RDC regional distribution center
    STC Surface Transportation Center
    USPS U.S. Postal Service

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. The published product may be reproduced
    and distributed in its entirety without further permission from GAO.
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    wish to reproduce this material separately.

    United States Government Accountability Office
    Washington, DC 20548

    June 21, 2007

    Congressional Requesters

    Major changes affecting the U.S. Postal Service (USPS), including changes
    in mail volumes, increasing compensation benefits and costs, and a more
    competitive marketplace, have reinforced the need for USPS to increase
    efficiency and reduce expenses, and one area of focus is in its mail
    processing network. The mail processing network includes over 600
    processing facilities that are responsible for sorting mail once it has
    entered the mail system and preparing it for transportation and delivery.
    USPS's processing network historically focused on the processing of
    First-Class Mail. First-Class Mail volumes have been experiencing
    declines. This trend is expected to continue, which raises concerns
    because traditionally this mail has provided USPS with high
    revenue-per-piece. It also helps USPS cover its operational costs. While
    trends in First-Class Mail volume have been declining, trends in the use
    of worksharing by mailers have increased. Worksharing provides mailers
    with opportunities to earn discounts in postage rates for sorting,
    processing, and transporting their mail to a destination based on a level
    of mail preparation. Increases in the use of worksharing have resulted in
    a large volume of mail bypassing most of USPS's processing network,
    creating excess capacity on the equipment USPS uses to process mail. Major
    changes affecting the U.S. Postal Service (USPS), including changes in
    mail volumes, increasing compensation benefits and costs, and a more
    competitive marketplace, have reinforced the need for USPS to increase
    efficiency and reduce expenses, and one area of focus is in its mail
    processing network. The mail processing network includes over 600
    processing facilities that are responsible for sorting mail once it has
    entered the mail system and preparing it for transportation and delivery.
    USPS's processing network historically focused on the processing of
    First-Class Mail. First-Class Mail volumes have been experiencing
    declines. This trend is expected to continue, which raises concerns
    because traditionally this mail has provided USPS with high
    revenue-per-piece. It also helps USPS cover its operational costs. While
    trends in First-Class Mail volume have been declining, trends in the use
    of worksharing by mailers have increased. Worksharing provides mailers
    with opportunities to earn discounts in postage rates for sorting,
    processing, and transporting their mail to a destination based on a level
    of mail preparation. Increases in the use of worksharing have resulted in
    a large volume of mail bypassing most of USPS's processing network,
    creating excess capacity on the equipment USPS uses to process mail.

    To address these trends and other major changes affecting its processing
    network, USPS developed a Transformation Plan in 2002 that outlined its
    vision for the future. In USPS's Strategic Transformation Plan Update
    2006-2010, USPS stated its commitment to removing $1 billion from its cost
    base each year. These plans describe how USPS intends to reduce costs and
    increase efficiency by making changes to its mail processing network. USPS
    has undertaken initiatives aimed at developing a processing network suited
    to current and future processing needs, reducing inefficiencies and
    redundancies, and increasing flexibility in its processing operations
    without impacting service. One such initiative focuses on consolidating
    mail processing among facilities in order to make the best use of
    processing equipment and reducing the excess machine capacity that has
    been created by volume and worksharing trends in mail processing, in
    addition to reducing some processing costs. As this consolidation effort
    continues, it assists USPS in positioning itself to better address these
    trends in the future. To address these trends and other major changes
    affecting its processing network, USPS developed a Transformation Plan in
    2002 that outlined its vision for the future. In USPS's Strategic
    Transformation Plan Update 2006-2010, USPS stated its commitment to
    removing $1 billion from its cost base each year. These plans describe how
    USPS intends to reduce costs and increase efficiency by making changes to
    its mail processing network. USPS has undertaken initiatives aimed at
    developing a processing network suited to current and future processing
    needs, reducing inefficiencies and redundancies, and increasing
    flexibility in its processing operations without impacting service. One
    such initiative focuses on consolidating mail processing among facilities
    in order to make the best use of processing equipment and reducing the
    excess machine capacity that has been created by volume and worksharing
    trends in mail processing, in addition to reducing some processing costs.
    As this consolidation effort continues, it assists USPS in positioning
    itself to better address these trends in the future.

    Congress, the President's Commission on the United States Postal
    Service,^1 GAO, and others have supported USPS's need to realign its
    processing network, yet concerns still exist about how USPS intends to
    achieve results. In April 2005, we issued a report in response to a
    request that we evaluate USPS's plan for realigning its network,
    concluding that questions remain about how USPS intends to realign its
    processing network.^2 We found that the strategy at the time lacked
    clarity, criteria, and accountability, as well as excluding mechanisms for
    stakeholder input (i.e., employees, mailers, locally elected officials,
    and affected communities) and performance measures for results. In
    December 2006, Congress passed the Postal Accountability and Enhancement
    Act and an advisory opinion was issued by the Postal Regulatory Commission
    (PRC),^3 both of which expressed concern with the lack of transparency
    USPS provides on its realignment efforts, and made recommendations to USPS
    to better inform its stakeholders and the public of its plans and how
    those plans will affect them.

    Several Members of Congress requested that we follow up on our 2005 report
    regarding the USPS's mail processing realignment efforts. In response,
    this report addresses three key objectives. First, it describes the
    initiatives USPS has undertaken since 2002 aimed at realigning its
    processing network and the status of these initiatives. Second, it
    evaluates how the planning, impacts, and results to date of these
    initiatives align with the goals of USPS's processing network realignment.
    Finally, it evaluates USPS's communications practices with stakeholders in
    making network realignment decisions and the challenges and leading
    practices associated with public engagement.

    ^1President's Commission on the United States Postal Service, Embracing
    the Future: Making the Tough Choices to Preserve Universal Mail Service
    (Washington, D.C.: July 31, 2003).

    ^2GAO, U.S. Postal Service: The Service's Strategy for Realigning Its Mail
    Processing Infrastructure Lacks Clarity, Criteria, and Accountability,
    [43]GAO-05-261 (Washington, D.C.: Apr. 8, 2005).

    ^3The Postal Regulatory Commission was previously named the Postal Rate
    Commission. Section 604 of the Postal Accountability and Enhancement Act
    (Pub. L. No. 109-435), enacted on December 20, 2006, redesignated the
    Postal Rate Commission as the Postal Regulatory Commission.

    To address these objectives, we interviewed postal officials at USPS
    headquarters and two USPS Area offices,^4 as well as representatives of
    national mailing industry associations, and national employee union
    representatives to learn about USPS's realignment initiatives, how the
    initiatives are impacting the mail processing network, and to understand
    how network changes have been communicated to stakeholders. We conducted
    site visits in two states, Connecticut and Washington, which have
    facilities that have recently consolidated mail processing operations. In
    these states, we met with local and regional USPS officials, local
    mailers, business community leaders, and local employee union
    representatives to learn about how these consolidations were implemented,
    the communication practices that took place during the process, and what
    the impacts of the consolidations have been. We reviewed documents filed
    in a PRC advisory hearing, by USPS and other industry stakeholders, and
    the PRC's resulting advisory opinion, to gain an understanding of what
    USPS's plans and processes for its future processing network entailed, and
    to identify industry and stakeholder concerns with these plans and
    processes. We reviewed USPS documents and data pertaining to its
    processing operations consolidations and overall realignment strategy, and
    discussed this information with USPS's Senior Vice President, Operations,
    and Vice President, Network Operations, as well as other officials
    involved in the development and implementation of these activities. We
    conducted our review between July 2006 and March 2007 in accordance with
    generally accepted government auditing standards. A more detailed
    discussion of our objectives, scope, and methodology is included in
    appendix I. We requested comments on a draft of this report from USPS, and
    its comments are discussed later in this report and reproduced in appendix
    V.

    Results in Brief

    USPS has developed several initiatives to achieve its overall goal of
    reducing costs while maintaining service. Four initiatives, which vary in
    the degree to which they have been implemented, play central roles in the
    realignment of the processing and distribution network. These four
    initiatives are as follows:

               o The area mail processing (AMP) consolidation initiative is
               designed to better use the network's capacity by consolidating
               mail processing operations into facilities with excess machine
               capacity, thereby increasing the use of automation in mail
               processing. Since 2005, USPS has studied 57 opportunities for
               potential AMP consolidations and implemented 10 consolidations.
               Most of the remainder have not been approved for implementation.
               All but 1 of the 10 completed consolidations involved moving
               operations, not closing facilities entirely.

    4USPS has nine Area offices each responsible for different geographic
    regions of the country.

               o The regional distribution center initiative, which is still in
               development, is designed to create new or remodeled distribution
               centers to serve as the foundation of USPS's processing network.
               USPS is reconsidering whether to proceed with this initiative in
               light of requirements in recent postal reform legislation for the
               Postal Service to submit a plan to Congress describing its
               long-term vision for realigning its mail processing and other
               networks, as well as the deployment of new automation equipment.
               o A set of automation initiatives designed to reduce costs,
               standardize operations, and raise productivity of the processing
               network is being continued with an effort to deploy machines for
               automated sorting of mail flats (large envelopes, magazines, or
               catalogs). USPS expects to obtain and install these machines from
               2008 through 2010.
               o The surface transportation network development initiative is
               designed to improve distribution network flexibility and
               efficiency by increasing the use of less expensive surface
               transportation vehicles in place of air transportation,
               eliminating redundant surface transportation, and maximizing
               vehicle capacity. The implementation of this initiative is nearly
               complete.

               While USPS has made varying progress in the development and
               implementation of its network realignment initiatives, it is not
               apparent if these initiatives will meet its network realignment
               goals. These goals include (1) developing mail processing and
               transportation networks suited to current and future operational
               needs, (2) reducing inefficiency and redundancy, (3) making
               operations flexible, and, (4) reducing costs. USPS stated that it
               plans on achieving its goals without degrading service to
               customers. First, USPS's realignment goals have evolved over time
               and do not have targets for measuring USPS's progress, making it
               unclear how USPS is progressing in achieving these goals. Second,
               it is unclear how USPS's realignment initiatives are integrated
               with each other. That is, how the individual and collective costs
               and benefits of these initiatives impact the overall goal of
               network realignment. Third, significant issues still need to be
               resolved with the initiative to which USPS attributes most of its
               progress in reducing excess machine capacity, AMP consolidations.
               In particular, the AMP consolidation process raises the following
               three major concerns:

               o Criteria used in identifying consolidation opportunities and
               deciding whether to implement an AMP consolidation are unclear
               and, therefore, it is uncertain whether USPS is identifying the
               best possible opportunities in selecting facilities for AMP
               consolidation studies.
               o USPS does not use consistent data calculations when determining
               impacts and costs of AMP consolidations. Without the use of
               consistent data calculations in the feasibility studies, USPS's
               ability to identify all of the foreseeable impacts of the
               consolidation may be limited, and the accuracy of projected and
               actual savings and impacts in its post-implementation evaluations
               remains questionable.
               o USPS does not have a comprehensive mechanism for measuring mail
               delivery performance so it cannot include actual delivery
               performance in its AMP consolidation studies or
               post-implementation evaluations. Therefore, USPS does not have
               data that can accurately capture expected or actual impacts that
               the AMP consolidations have had on delivery performance.

               While USPS is in the process of changing its AMP consolidation
               process, our review of a draft of its revised consolidation
               procedures indicates that issues related to the standardization of
               data sources are being addressed, but other issues continue. The
               revised procedures still do not clarify the criteria USPS is using
               in making facility selection decisions or deciding whether to
               implement an AMP consolidation, although USPS officials told us
               that they will begin to prioritize implementation of AMP
               consolidations that are expected to yield $1 million or more in
               cost savings annually. Without better data and improved
               evaluations, USPS does not know whether its AMP consolidations are
               resulting in increased efficiency and a reduction in excess
               capacity as intended.

               USPS also made some improvements to its communication practices,
               but these practices continue to have gaps related to engaging its
               stakeholders--mailers, employees, elected officials, the business
               community, and the media--and the public in the realignment
               process and effectively communicating decisions. AMP communication
               processes, which have evolved since 1995, do not provide clear and
               useful notification to stakeholders, lack transparency into how
               stakeholder and public input is considered when USPS makes AMP
               decisions, and provide limited information to stakeholders and the
               public after decisions are made. For example, notification letters
               to stakeholders are largely form letters that do not clearly state
               the changes USPS is studying or the possible outcomes that may
               result. Although AMP guidance requires USPS to fully consider both
               service and other impacts on the community, mailers and others we
               spoke with expressed concern about the lack of transparency in
               consolidation decisions. A town hall meeting is the only formal
               requirement for public input during the AMP process. Stakeholders
               and others, such as the PRC, have criticized the timing of these
               meetings as occurring too late in the process, after USPS has
               already made major decisions. To help remedy problems with
               providing information and seeking public input, Congress required
               USPS to improve its public notice processes, make more information
               available to communities, allow affected persons opportunity to
               provide input to USPS, and to take that input into account in
               decision making. USPS's planned improvements would generally limit
               changes to internal processes such as clarifying USPS roles and
               responsibilities for the public meeting and making arrangements
               for the meeting. USPS would provide notice of its decisions to
               stakeholders more frequently, but the content of notification
               letters would generally remain the same, and the timing of the
               town hall meeting would not change. Our review of USPS's revised
               guidance indicates that proposed improvements would neither
               substantively change information provided to the public, nor
               substantially improve the public input process.

               To strengthen planning and accountability for USPS's realignment
               efforts, we are recommending that the Postmaster General ensure
               that the Facilities Plan required by the Postal Accountability and
               Enhancement Act explains the integration of realignment
               initiatives and establishes measurable targets to track USPS's
               progress in meeting realignment goals. To help improve
               communication about realignment with stakeholders, we are
               recommending that the Postmaster General modify USPS's
               communication strategy to improve the quality of public notices
               and engagement, and increase transparency in decision making. USPS
               generally agreed with our findings and recommendations and stated
               that its compliance with the Postal Accountability and Enhancement
               Act will satisfy our recommendations related to the Facilities
               Plan, and that it will take steps to improve communication about
               its realignment and increase transparency.

    			  Background

               As part of its 2002 Transformation Plan, USPS announced plans to
               review and realign its processing and transportation networks to
               better align with trends in the marketplace that include

               o changing customer needs,
               o eroding mail volumes, and
               o rising costs.

               At this time, USPS began plans for comprehensively realigning its
               processing network and outlined a strategy^5 to create a flexible
               logistics network that would reduce both USPS's and its customers'
               costs, increase overall operational effectiveness, and improve
               consistency of service. This strategy would employ computer
               modeling to provide USPS with the analytical means to evaluate a
               variety of future network alternatives that could be used in
               redesigning its existing network.

               USPS operates a complex processing network for letters, flats, and
               parcels. Most mail is sorted by automated equipment in USPS
               processing facilities and then dispatched for delivery. The
               processing network is interdependent with the transportation
               network where operations in one part affect operations throughout.

               In summer 2003, a report issued by the President's Commission on
               the United States Postal Service reiterated the need for USPS to
               realign its processing network. In January 2004, USPS submitted a
               report to the House Committee on Government Reform stating that,
               based on the outputs of the model, it would realign its network
               using a hub and spoke concept. This report proposed focusing its
               network on two types of "spoke" facilities--those that would
               process mail at its origin, when the sender enters the mail into
               USPS's network, and those that would process mail at its
               destination, preparing it for delivery. Figure 1 depicts a basic
               overview of these two types of facilities.^6

    ^5As outlined in the Transformation Plan, this strategy was called Network
    Integration and Alignment.

    ^6Some mail bypasses the originating USPS processing facility that
    otherwise would initially receive and sort mail and instead be transported
    by the mailers to a USPS facility that generally is closer to the final
    destination of the mail.

    Figure 1: USPS's Originating and Destinating Mail Processing Network

    According to the report, the hub and spoke system would create a uniform
    network unlike the existing system that had been developed over time and
    had resulted in wide variations in productivity and capacity among
    processing facilities. In fall of 2004 at the National Postal Forum, the
    Postmaster General announced that USPS would realign its network through
    an evolutionary process. He explained that because future mail volumes and
    advances in technology are not predictable, USPS will need to continuously
    rationalize and optimize its security, plants, processing systems,
    transportation, and workforce in order to keep its networks efficient and
    systems affordable. Accordingly, this evolutionary process would have no
    definitive completion date and would continuously examine the processing
    network for inefficiencies and redundancies and standardize the best
    operational practices.

    In April 2005 we reported on this evolutionary strategy, U.S. Postal
    Service: The Service's Strategy for Realigning Its Mail Processing
    Infrastructure Lacks Clarity, Criteria, and Accountability (
    [44]GAO-05-261 ). This report outlined several major changes that have
    affected USPS's mail processing and distribution operations over time,
    including changes in the marketplace, evolution of infrastructure,
    developments in automation and worksharing, and shifts in national
    demographics. In evaluating USPS's strategy to address these changes, we
    found that it

               o lacked clarity--since USPS announced its intent to realign, it
               had developed several different realignment strategies,
               o lacked criteria and processes for eliminating excess capacity in
               its network,
               o excluded stakeholder input in its decision-making processes,
               o was not sufficiently transparent and accountable, and
               o lacked performance measures for results.

               To address these findings, we recommended that USPS establish a
               set of criteria for evaluating realignment decisions, develop a
               mechanism for informing stakeholders as decisions are made, and
               develop a process for implementing these decisions that includes
               evaluating and measuring the results, as well as the actual costs
               and savings resulting from the decisions. In response to our
               report, USPS concurred with our description of its mail processing
               and distribution infrastructure and the major business and
               demographic changes that have affected its operations but did not
               respond directly to our conclusions or recommendations.

               In 2006, USPS reiterated its commitment to the evolutionary
               strategy, and in February 2006 USPS sought out an advisory opinion
               from the PRC on anticipated changes in the application of current
               service standards that may result from a systemwide review and
               realignment of its mail processing and transportation networks.^7
               In its filing, USPS stated that the goals of its evolutionary
               network realignment strategy are to

               o develop mail processing and transportation networks suited to
               current and future operational needs,
               o reduce inefficiency and redundancy,
               o make operations flexible, and
               o reduce postal costs.

    ^7PRC Docket No. N2006-1, Evolutionary Network Development Service
    Changes, 2006. USPS requested the Postal Regulatory Commission issue an
    advisory opinion to determine whether or not changes resulting from
    network realignment would be in violation of the law.

               USPS also reiterated that the evolutionary strategy would be
               implemented incrementally and that it would likely take several
               years to review all major components of the mail processing
               network and to implement any resulting operational changes.
               Progress in implementing these changes, primarily with respect to
               USPS's initiative to consolidate mail processing operations among
               facilities, has been slow going due to several factors. In some
               cases, USPS was not ready to proceed with the consolidation. For
               example, some locations had preexisting service issues that needed
               to be resolved before the consolidation was implemented.
               Additionally, external factors have slowed the process.
               Consolidations have been met with union and community resistance.
               Also, language in the Senate Committee on Appropriations report on
               fiscal year 2007 appropriations directed USPS to suspend its
               consolidation efforts in three locations until this GAO report is
               released.^8

               In December 2006, the PRC issued its advisory opinion and found
               that the goals USPS established for its network realignment were
               fully consistent with the policies and criteria of the Postal
               Reorganization Act and endorsed them. While the PRC found the
               goals of USPS's realignment strategy laudable, it found no
               assurance that the proposed realignment program, as currently
               envisaged, would meet these declared goals. In particular, it
               found that it contained flawed or incomplete information on
               certain crucial aspects of USPS's plan for network realignment,
               specifically

               o questionable or incomplete cost and service estimates,
               o inadequate review of local impacts, and
               o insufficient provisions for public participation.

               Also in December 2006, the Postal Accountability and Enhancement
               Act^9 was signed into law in order to address long-standing issues
               with USPS's business model. In addition to addressing issues
               related to USPS's financial challenges, this act also included
               provisions related to the realignment of USPS's processing and
               distribution network. Specifically the act requires USPS to

               o establish a set of modern service standards for market dominant
               products, one objective of the standards is to provide a system of
               objective external performance measurements for each
               market-dominant product as a basis for measuring USPS's
               performance, and some factors USPS must take into account include
               the actual level of service that its customers receive under any
               service guidelines previously established by USPS and the degree
               of customer satisfaction with USPS's performance in the
               acceptance, processing, and delivery of mail.
               o develop a Facilities Plan that includes

                            o a strategy for how USPS intends to rationalize the
                            postal facilities network and remove excess
                            processing capacity and space from the network,
                            including estimated time frames, criteria, and
                            processes to be used for making changes to the
                            facilities network, and the process for engaging
                            policymakers and the public in related decisions;
                            o a discussion of what impact any facility changes
                            will have on the workforce and whether USPS has
                            sufficient flexibility to make needed workforce
                            changes;
                            o an identification of anticipated costs, costs
                            savings, and other benefits associated with the
                            infrastructure rationalization alternatives discussed
                            in the plan; and
                            o procedures USPS will use to provide adequate public
                            notice to communities potentially affected by a
                            proposed rationalization decision; make available
                            information regarding any service changes in the
                            affected communities, any other effects on customers,
                            any effects on postal employees, and any cost
                            savings; afford affected persons ample opportunity to
                            provide input on the proposed decision; and take such
                            comments into account in making a final decision.

    ^8S. Rept. No. 109-293, at 228 (2006).The three consolidations put on hold
    were: Sioux City, IA; Aberdeen, SD; and Yakima, WA.

    ^9Pub. L. No. 109-435.

               USPS Initiatives for Realigning Its Processing Network Are at
    			  Different Stages of Development and Implementation

               Congress strongly encouraged USPS to expeditiously move forward in
               its streamlining efforts and keep unions, management associations,
               and local elected officials informed as an essential part of this
               effort and abide by any procedural requirements contained in the
               national bargaining agreements. With respect to existing efforts,
               USPS was directed that effective on the date of enactment of the
               act (December 20, 2006), it may not close or consolidate any
               processing or logistics facilities without using procedures for
               public notice and input consistent with those required to be
               included in the Facilities Plan.

               USPS is using an approach called Evolutionary Network Development
               (END) to realign its processing and transportation networks.
               According to USPS, END is evolutionary, meaning the approach will
               continually examine processing and transportation networks for
               opportunities to increase their efficiency. END involves several
               initiatives that are at varying stages of development and
               implementation. Four of these initiatives play central roles in
               network realignment: AMP consolidations, regional distribution
               center (RDC) development, flats sequencing system, and surface and
               air network development, as summarized in table 1.

    Table 1: Status and Purpose of Central Realignment Initiatives

    Source: GAO presentation of USPS data.

    USPS is facilitating the development of the four central network
    realignment initiatives with a computer model that simulates its
    processing and transportation facility networks to identify opportunities
    for reducing costs, increasing transportation efficiency, and allowing the
    network to better adapt to changing conditions and workloads. While the
    model supplies the basis for general planning related to these
    initiatives, it is not designed to incorporate all possible variables
    necessary for future network planning. As a result, USPS managers conduct
    additional analysis to make USPS realignment decisions.

    AMP Consolidations Are Under Way but Taking Longer Than Anticipated to Complete

    In 2005 and 2006, USPS initiated 57 studies of opportunities for AMP
    consolidations, but has decided not to implement 34 of these. While USPS
    has carried out AMP consolidations for more than 30 years, in 2002 it
    recognized them as a tool to rightsize the network and has since focused
    on expanding their implementation and updating their implementation
    guidelines.

      Status of AMP Consolidations Initiated in 2005 and 2006

    In 2005 and 2006, most USPS decisions about whether to implement AMP
    consolidation opportunities lagged behind the decision-making time frames
    set forth by its guidelines. According to USPS's 1995 AMP guidelines,
    local offices should not take more than 6 months to complete a formal
    study of the feasibility of a consolidation opportunity, after which Area
    offices and headquarters have 2 months to review the study and make a
    final decision about implementation of the consolidation (see fig. 2).^10
    The majority of the consolidation studies and implementation decisions
    made by USPS in 2005 and 2006 exceeded these time frames. For further
    description of the consolidation process stipulated by USPS AMP
    guidelines, see appendix II.

    ^10USPS has divided its national network into nine geographic areas, each
    of which is overseen by an Area Vice President. Areas are composed of
    several districts that oversee local offices.

    Figure 2: USPS's Area Mail Processing Consolidation Process and Time Line

    The majority of the AMP consolidations that have been implemented since
    END was initiated in 2002 were approved in 2005. As summarized in table 2,
    USPS officials told us that in 2005 USPS approved 11 consolidations, 9 of
    which it has implemented. USPS area and headquarters officials took an
    average of 4 months to decide to implement these 11 consolidations, 2
    months longer than prescribed by AMP guidelines. USPS later decided not to
    implement one consolidation because, following a modification in USPS area
    boundaries that changed the Area office responsible for oversight of the
    facilities involved, the new Area Vice President requested that the AMP
    not be implemented due to concerns about service issues. The final
    consolidation has not yet occurred due to delay in the acquisition and
    installation of equipment needed in the facility that will process the
    increased mail volumes. It is now expected to be fully implemented by the
    summer of 2007.

    Table 2: Implementation Status of AMP Consolidations Approved in 2005

    Source: GAO presentation of USPS data.

    Note: Status numbers are from AMPs approved in calendar year 2005.

    Studies of consolidation opportunities undertaken in 2006 took longer than
    prescribed by USPS guidelines and so far have produced fewer decisions to
    consolidate than in 2005. As summarized in table 3, in 2006 USPS initiated
    46 AMP consolidation studies. As of May 2007, it had implemented 1
    consolidation, approved but not yet implemented 1 consolidation, decided
    not to implement 33 studies (5 placed on indefinite "hold"), continued to
    consider 10 consolidations, and was still completing the study of 1
    consolidation. The majority of USPS decisions about whether to implement
    the studies lagged behind the 8 month time frame prescribed by its AMP
    guidelines. USPS officials explained that decisions to place 5 AMP
    consolidation studies on indefinite hold were made by Area offices in
    light of their observation of existing service issues in these facilities,
    which they wished to resolve before considering implementation. USPS
    officials said that the remaining 28 of the 33 decisions not to implement
    the consolidations were made for reasons that included study findings that
    implementation would result in negligible savings or degrade existing
    service. For further detail about the specific facilities involved in 2006
    consolidations, see appendix III. USPS anticipates making final decisions
    for all 10 feasibility studies still under consideration by summer of
    2007.

    Table 3: Status of 46 AMP Consolidations Initiated in 2006

    Source: GAO presentation of USPS data.

    Note: Status numbers are from AMPs initiated in calendar year 2006.

    aDecisions not to implement proposed AMP consolidations include five
    consolidations USPS has placed on indefinite "hold."

      AMP Consolidations Are Intended to Reduce Excess Capacity

    AMP consolidations are intended to reduce costs and increase efficiency
    through reducing excess capacity. According to USPS officials, declining
    mail volumes have resulted in excess capacity, including excess machine
    and workhours. Excess machine hours occur when machines sit idle because
    declining amounts of mail are being processed on the same amount of
    equipment, and excess workhours occur when more workhours are used than
    necessary for mail processing. One way to reduce excess capacity is to
    consolidate mail-processing operations from one or more facilities into
    one or more plants. This increases the amount of mail processed on
    machines and decreases workhours used in mail processing by reducing the
    number of staffed machines. AMP consolidations are designed to provide
    machine and workhour efficiency and/or improve service for all originating
    and/or destinating operations through transferring the responsibility for
    processing mostly single-piece First-Class Mail from one or more
    facilities into a facility with excess machine capacity.^11 Single-piece
    First-Class Mail is mailable matter, 13 ounces or less, including personal
    correspondence, bills, statements of accounts, or handwritten matter and
    comprises a small and decreasing portion of USPS mail volumes--21 percent
    in fiscal year 2006 compared with 26 percent in fiscal year 2000.
    Meanwhile, postal worksharing, in which mailers prepare, barcode, sort,
    and/or transport mail closer to its destination location to qualify for
    reduced postage rates, is increasing. As mailers enter mail into the
    mailstream closer to its destination location, USPS receives less mail to
    process at the locations where mail originates. By decreasing the number
    of machines used to process remaining single-piece First-Class Mail, and
    thereby the workhours required for its processing, AMP consolidations can
    reduce postal costs.

    ^11AMP consolidations handle more than just First-Class Mail.

    Most AMP consolidations have been of processing operations for originating
    mail. Originating mail is mail that was collected in the local area and
    brought to the local USPS facility for processing. By definition, AMP
    consolidations can also consolidate processing operations for destinating
    mail (mail that is prepared for delivery at its final destination). Since
    2005, however, consolidations of processing operations for originating
    mail have been more common than those of destinating processing
    operations. Only 6 out of 57 feasibility studies initiated from 2005-2006
    were of destinating mail processing operations. This may be due to the
    continued growth in delivery points (approximately 1.8 million per year)
    serviced by USPS. Another factor is that more mail is entering the system
    at its destination, resulting in less excess capacity in processing
    operations for destinating mail than for originating mail.

    Although AMP consolidations transfer specific processing operations out of
    facilities and relocate associated mail processing employees, they do not
    generally lead to facility closures. The facilities from which operations
    were transferred still need to process mail in the remaining operations
    and conduct retail operations for which they are responsible. Officials
    told us that USPS generally only considers closing a facility if an AMP
    consolidation transfers out all operations, and USPS determines that there
    is no need for the facility. To date, only one AMP consolidation
    implemented in 2005 has led to a facility closure.

    Implementation of the Regional Distribution Center Initiative Has Not Begun and
    Is Being Reconsidered

    USPS testified to the PRC in February 2006 that it would be undertaking an
    initiative to develop a network of distribution centers to serve as the
    foundation of its processing network, but to date progress in developing
    the RDC initiative has been limited, and USPS has not determined if it
    will proceed with this initiative. USPS's mail processing and distribution
    network, whereby mail is prepared for sorting on automation equipment and
    transported between plants, has evolved over time and presently consists
    of overlapping networks, each of which functions to process and distribute
    a specific class of mail.^12 Some facilities in these networks are
    responsible for processing a particular type of mail (for example flats,
    parcels, or automated letters), each of which is transported on a separate
    transportation network. USPS explained that the RDC initiative would allow
    USPS to merge these multiple, "single-class" networks into a network
    capable of handling multiple classes of mail. RDCs would serve as
    consolidation centers for mail of the same shape (for example, letters,
    flats, or parcels), which would allow mailers to bring various classes of
    mail to one facility and facilitate the transportation of multiple mail
    classes on a single transportation network. When USPS first introduced the
    concept of RDCs to serve as the foundation of its processing network, it
    projected it would need between 28 and 100 RDCs nationally.

    ^12Different classes of mail dictate the rate the customer is charged to
    send the mail and the amount of time it should take for the mail to be
    delivered from the time it is sent.

    Various developments have caused USPS to reexamine whether it will proceed
    with the RDC initiative. In February 2007, officials told us they would be
    reevaluating processing and transportation network plans in light of the
    December 2006 Postal Accountability and Enhancement Act, the PRC opinion,
    and the deployment of new flat automation equipment. In March 2007, USPS's
    Senior Vice President, Operations, told us that USPS is still determining
    the structure of its processing network foundation. He said that similar
    to the current network, the future network would still be designed around
    USPS's processing and distribution centers, but how USPS will make
    determinations about these facilities appears largely uncertain.

    USPS Plans to Begin Deploying Machines to Enhance Automation of Flat Sorting in
    2008

    As part of ongoing efforts to automate mail processing, one current
    initiative calls for new equipment to further automate sorting of flat
    mail (larger envelopes, catalogs, circulars, newspapers, and magazines).
    In 2002, USPS introduced high-speed equipment that automated the sorting
    of many--but not all--kinds of flat mail. Mail that cannot be handled by
    these machines must be manually sorted, which increases USPS expenses
    considerably as it costs approximately three times as much in labor to
    process flats manually. A new machine called the flat sequencing system
    (FSS) has the potential to greatly reduce the need for manual flat
    sorting. USPS estimates that this equipment will handle approximately 8.5
    billion pieces of flat mail per year (16 percent of total current flat
    volumes).

    In October of 2006, the Board of Governors^13 approved the purchase of 100
    FSS machines, which USPS plans to deploy between October of 2008 and
    October of 2010. USPS plans to place the 100 FSS in 33 facilities, each of
    which will house at least two systems. Although 13 existing facilities
    will house systems, due to their large size (each FSS has a footprint of
    approximately 30,000 square feet), USPS plans to expand 15 facilities and
    construct 5 new facilities to house the systems.

    The Surface and Air Network Development Initiative Is Nearly Complete

    USPS also has taken steps to develop a more flexible transportation
    network that is intended to allow it to move greater mail volumes more
    efficiently and at a lower cost. To this end, it has nearly completed a
    surface transportation network designed to maximize its geographic
    coverage, optimize its use of vehicle space, and to dispatch the ideal
    number of vehicles on transportation routes.

    Surface Transportation Centers (STC)^14 provide the foundation for the new
    surface and air network by serving as concentration points where mail
    containers from multiple facilities are consolidated and transferred to
    other postal facilities in the same vehicles. By enabling USPS to dispatch
    full vehicles on expanded routes, STCs permit mail formerly transported by
    air to be carried at less cost on ground transportation. The revised
    network will have a total of 23 STCs. There are currently 20 STCs in the
    network, and 3 additional ones are expected to be opened in 2007.

    USPS reported that it has increased its air transportation reliability and
    flexibility by making air transport contract decisions based on
    performance assessments of its carriers. In 2006, USPS awarded United
    Parcel Service a 3-year contract to provide domestic transport for
    primarily Priority Mail and First-Class Mail, and FedEx a 7- year contract
    that replaced its existing contract to transport Express Mail, Priority
    Mail, and First-Class Mail.^15 In efforts to increase the efficiency and
    dependability of its air transportation, USPS awarded 5-year contract
    extensions to seven commercial air carriers that met on-time provisions of
    previous contracts and eliminated nonperforming commercial air carriers
    from transporting mail.

    ^13The USPS Board of Governors is comparable to a board of directors of a
    private corporation and includes nine Governors who are appointed by the
    President. The board directs the exercise of the powers and expenditures
    of USPS, conducts long-range planning, and sets policies on all postal
    matters.

    ^14STCs are virtually identical to what were formerly referred to as Hub
    and Spoke Program (HASP) facilities.

    ^15Express Mail is mail sent by the fastest mail service offered by USPS.
    Priority Mail is First-Class Mail that weighs over 13 ounces.

    USPS is also developing a tool called the Transportation Optimization
    Planning and Scheduling System to help improve efficiency through
    identifying optimal mail routes and mail volumes for different
    transportation networks. The system will help analyze alternative
    scenarios to determine the lowest cost transportation network given USPS
    mail delivery obligations.

    It Is Unclear if Network Realignment Initiatives Are Meeting USPS END Goals, and
    Problems Exist with USPS's AMP Consolidation Initiative

    While USPS has made varying degrees of progress in the development and
    implementation of its realignment initiatives, it is unclear if the
    results of these initiatives are meeting its network realignment goals.
    Because the goals lack measurable targets and there is little transparency
    in how USPS's network realignment initiatives are integrated with each
    other, it is not apparent to what extent these initiatives are achieving
    USPS's END goals. Additionally, concerns with the AMP consolidation
    process further illustrate the lack of clarity in determining whether this
    initiative is meeting USPS's realignment goals. USPS is taking actions to
    address the AMP consolidation process, but concerns with criteria and
    USPS's limited ability to measure delivery performance still exist.

    USPS's Network Realignment Goals Lack Measurable Targets, and It Is Unclear How
    Initiatives Are Integrated with Each Other

    USPS has continuously developed initiatives to facilitate realignment of
    its processing network, but it is not clear based on the plans that USPS
    has developed if these initiatives are meeting its END goals. USPS has
    established goals for its END infrastructure realignment initiative and is
    making changes to its processing network with the aim of meeting these
    goals while still maintaining current levels of service. Goals are as
    follows:

               o developing mail processing and transportation networks suited to
               current and future operational needs,
               o reducing inefficiency and redundancy,
               o making operations flexible, and
               o reducing postal costs.

               While these goals have been supported by GAO, the PRC, and the
               President's Commission, USPS has yet to develop measurable targets
               for achieving these goals.^16 With no measurable targets, there is
               no way to determine how much of an impact USPS's network
               realignment initiatives are making on achieving these goals. For
               example, USPS's Senior Vice President, Operations, told us that
               there are no actual targets for cost savings in network
               realignment, but an indicator of success will be the
               implementation of more AMP consolidations.

               USPS's inability to measure its success in meeting END goals is
               accompanied by the lack of clear information available to
               stakeholders about how USPS is integrating its initiatives. For
               example, when USPS testified in the PRC proceedings in 2006 that
               it planned to develop RDCs as the backbone of its processing
               network, it had not yet taken into consideration the deployment of
               new processing equipment, the FSS, that is expected to result in
               major changes to how and where flat mail is processed even though
               plans for making a major change to USPS's Corporate Flats Strategy
               was published in May 2003.^17 Consequently, USPS has put its plans
               for the RDCs on hold as it reconsiders their feasibility as the
               backbone for the processing network. In its Advisory Opinion, the
               PRC reinforced that it is not clear how the network plan USPS
               proposed would meet END goals. After the decision to approve the
               FSS was made, PRC advised USPS to take precautions to ensure that
               changes it makes to its network will be able to accommodate
               deployment of the FSS without incurring unnecessary expense. The
               PRC has also stated that this piece of equipment is an important
               aspect of USPS's future network and should be given careful
               consideration. At this point, it is unclear how USPS is
               integrating the new equipment into its future network realignment
               planning. To address these concerns, USPS is incorporating the FSS
               into its network modeling and is reevaluating its plans but has
               not said when it expects to complete its updated plans for
               establishing a backbone for its network.

               In addition to the PRC Advisory Opinion, the Postal Accountability
               and Enhancement Act, passed in December 2006, addressed the lack
               of clarity in understanding how network realignment initiatives
               are integrated with each other. The legislation requires USPS to
               develop a comprehensive Facilities Plan that includes a strategy
               for how USPS intends to rationalize its network and an
               identification of anticipated costs, costs savings, and other
               benefits associated with the infrastructure rationalization
               alternatives discussed in the plan.

    ^16In July 2003, the President's Commission provided recommendations on
    ensuring efficient operation of USPS, while minimizing financial exposure
    to the American taxpayers. These recommendations supported USPS's
    realignment of it processing network.

    ^17While plans have been in development since 2002, the USPS Board of
    Governors did not approve plans to move forward with the FSS equipment
    until February 2006.

               In light of the recent changes in legislation and the deployment
               of FSS machines, USPS will be reevaluating its processing and
               transportation network plans. USPS is still determining what its
               backbone infrastructure will look like, but it will still be
               designed around USPS's processing and distribution centers and
               will be composed of processing and operations facilities and a
               surface and air network. While USPS officials have repeatedly
               stated that the design of its future processing network is
               evolutionary in nature, it is unclear--5 years after its initial
               announcement--what USPS intends its processing network to evolve
               into.

    			  Concerns with the AMP Consolidation Process Make it Unclear How
    			  his Initiative Is Meeting Network Realignment Goals

               AMP consolidations are the initiative that most clearly address
               USPS's reduction of excess machine capacity due to increased
               worksharing and declining First-Class Mail volumes, yet the
               limited transparency in the AMP consolidation process makes it
               unclear to what extent this initiative is meeting END goals. Many
               of the concerns about this lack of transparency in the planning
               and evaluation processes are primarily related to what criteria
               USPS used in selecting facilities as opportunities for AMP
               consolidations, the lack of consistent data calculations used in
               the decision making and evaluation processes, and the lack of the
               AMP consolidation's evaluation of impact on service performance.
               USPS is taking steps to address these areas by revising its AMP
               consolidation guidelines, but concerns still exist.

    			    Criteria USPS Uses in Selecting Facilities as Opportunities for
    				 AMP Consolidations and Deciding to Implement an AMP Consolidation
    				 Are Unclear

               It is neither clear what criteria USPS uses in selecting
               facilities that may serve as potential opportunities for AMP
               consolidations, nor is it clear what criteria USPS uses in
               deciding whether or not to implement a consolidation. Therefore,
               it is not clear if USPS is targeting the best opportunities for
               consolidation. Before 2005, USPS conducted AMP consolidations at
               the suggestion of local officials who identified opportunities for
               consolidation and were then responsible for presenting these
               opportunities to district and area management. USPS supplemented
               this bottom-up approach in identifying AMP consolidation
               opportunities. With the development of its END model, USPS also
               began using a top-down approach. While USPS officials have
               acknowledged that the opportunities identified by the model may
               not always be feasible in reality, they are now going to use
               modeling and analysis at the national level to identify
               opportunities in which operations could be consolidated. A USPS
               headquarters official we met with said one reason for this is
               because plant managers should not be held responsible for
               identifying their own plant as an opportunity for reduction or
               potential closure.

               In 2005, USPS reported that the END model identified 139 sets of
               facilities that could potentially be consolidated. Of these, 46
               sets of facilities were deemed feasible for initiating AMP
               consolidation studies and, of these studies, so far 2 AMP
               consolidations have been approved, and 33 of these 46 sets have
               been either rejected or put on hold. The effectiveness of the use
               of the END model in identifying opportunities for AMP
               consolidations was called into question in the PRC's Advisory
               Opinion, and the USPS Inspector General is current reviewing the
               AMP consolidation facility selection process. The PRC's concerns
               are related to the fact that the END model does not entirely use
               facility-specific data in identifying opportunities for
               consolidation. Instead the model uses some facility specific data
               and some national productivity averages, which may not adequately
               target facilities that provide the best opportunities for
               consolidations.

               In addition to unclear criteria in selecting facilities with
               potential for consolidation, USPS does not have specific criteria
               for deciding whether or not to implement an AMP consolidation
               after the study has been completed. USPS's Senior Vice President,
               Operations, told us they are currently prioritizing consolidations
               of facilities that are expected to achieve $1 million or more in
               cost savings annually. Currently, no such threshold exists, and
               neither do any other definitive thresholds or principles in
               deciding whether or not to implement an AMP consolidation. In its
               Advisory Opinion, the PRC found that the AMP consolidation process
               lacks criteria for approval and stated that "without set criteria
               or guidelines, the decision-making process can lose objectivity
               [and that] both the Office of the Consumer Advocate^18 and the
               American Postal Workers Union found the lack of criteria to be
               troublesome. The Office of the Consumer Advocate suggested that
               the PRC should recommend USPS implement decision rules and
               guidelines, and the PRC concurred stating that USPS should
               "establish a set of criteria, or at a minimum, guiding principles
               for making realignment decisions."

    ^18The Office of the Consumer Advocate is an office within the PRC whose
    mission is to be a vigorous, responsive, and effective advocate for
    reasonable and equitable treatment of the general public in proceedings
    before the PRC.

                 USPS Does Not Use Consistent Data Calculations in Making AMP
    				 Consolidation Decisions and Evaluating Results

               In addition to the lack of clarity in the facility selection
               process, USPS does not use consistent data calculations in
               determining impacts and savings of these consolidations, resulting
               in the potential for foreseeable impacts to go unnoticed and
               inconsistency in anticipated savings. USPS bases AMP consolidation
               impacts on projections determined through these calculations. As a
               result, some facilities may have difficulty in handling and
               processing the additional mail they receive through the
               consolidation. For example, in one of our site visits, local and
               district USPS officials told us that they were concerned that the
               gaining facility would not be able to process the additional mail
               volume that it would be receiving because it was already having
               problems processing its existing volume on time. The projections
               calculated by district managers supported this concern, yet the
               projections calculated by Area managers showed that the AMP
               consolidation was feasible, and it was approved and implemented.
               Several months later, the consolidation was suspended because
               additional equipment was needed at the receiving facility in order
               to accommodate the additional mail volume. A USPS official told us
               that this was primarily due to lack of standardized data
               calculations used in the study and lack of understanding of the
               study guidelines by officials that completed the study. Examples
               such as these, in which foreseeable impacts could have been
               avoided, may be mitigated through the use of consistent data
               calculations in the AMP consolidation study.

    			  Inconsistent Data Calculations Result in Differences in Projected
    			  Cost Savings

               Inconsistency in data calculations also impacts the ability of
               USPS to accurately determine the expected cost savings of the AMP
               consolidations. The current AMP guidelines neither prescribe
               standardized sources for the data used in completing the
               worksheets, nor is there a standardized methodology for
               calculating some of the data in the worksheets. For example, in
               its Advisory Opinion, the PRC found that work-hour savings in the
               AMP consolidation studies were calculated differently in various
               studies and that, in some cases, the PRC could not determine how
               the savings were calculated. In our review of the pre- and
               post-implementation data for nine consolidations implemented in
               2005, we also found that the calculations used in determining the
               projected savings were inconsistent, making it unclear what the
               baseline should be for evaluating actual cost savings. Concerns
               with data calculations used in USPS's AMP consolidation process
               have also been addressed by USPS's Inspector General. For example,
               during a review of one AMP consolidation, the Inspector General
               found discrepancies in the projected cost savings in the AMP
               consolidation study, resulting in savings that may have been
               significantly overstated.

               AMP consolidation guidelines require semiannual and annual
               post-implementation reviews (PIR) of AMP consolidations, which
               ensure management's accountability for implementing an AMP plan.
               USPS's post-implementation review process essentially replicates
               the AMP consolidation study process and compares the estimated
               annual savings submitted in the approved AMP consolidation study
               against the actual savings after 6 months, which is then projected
               to annualized savings. PIRs are completed by local managers,
               approved by Area Offices and subject to final review by
               headquarters. As of January 30, 2007, PIRs for the nine fully
               implemented consolidations were due to USPS headquarters and, as
               of March 2007, USPS headquarters officials had received all of
               them, and in May 2007 had completed its review of three.

               In some cases, reviewing officials in USPS headquarters have made
               significant corrections and changes to the draft PIRs that were
               submitted for their review, resulting in revised projected
               annualized savings that were closer to the original estimates
               prepared for the AMP consolidation studies. As shown in table 4,
               the sum of estimated annual savings in the nine AMP consolidations
               approved in 2005, as provided in the AMP study documents, was
               about $28 million.^19 According to the initial draft PIRs for
               these nine consolidations prepared by USPS officials at the local
               level 6 months after implementation, they projected about $19
               million in annualized savings. During the review of these PIRs by
               USPS headquarters, this sum was revised to about $28 million. The
               headquarters review of the PIRs has been completed for only three
               of the nine PIRs, and additional revisions to the projected
               annualized savings may be made, but USPS officials provided us
               with the most recent data available from their ongoing reviews.

    ^19USPS headquarters officials also revised the AMP study estimated annual
    savings for two consolidations, after the consolidations were approved, to
    eliminate duplicated savings, which reduced the total AMP study estimated
    annual savings by $2.8 million. We did not include this revised AMP
    estimate in the table, so that all the data in the table would be from
    consistent sources.

    Table 4: Semiannual Post-Implementation Projected Annualized Savings
    Versus Estimated Annualized Savings in AMP Studies Approved in 2005

    Source: GAO presentation of USPS data.

    Note: The headquarters review of the PIRs has been completed for only
    three of the nine PIRs, and additional revisions to the projected
    annualized savings may be made, but USPS officials provided us with the
    most recent data available from their ongoing reviews.

    Of these projected annual savings reported in the headquarters' revised
    PIRs, 60 percent are anticipated to come from a single consolidation in
    which all mail processing operations were consolidated (both originating
    and destinating). As shown in table 5, if anticipated and realized savings
    from this consolidation are excluded, the estimated annual savings from
    the AMP studies of the remaining eight consolidations was about $10.7
    million, and the initial PIRs projected about $2.15 million would actually
    be realized. However, based on the most recently available data from the
    ongoing headquarters review of these PIRs, the revised projected
    annualized savings was about $11.25 million.

    Table 5: Semiannual Post-Implementation Projected Annualized Savings
    Versus Estimated Annualized Savings in AMP Studies Approved in 2005,
    Excluding Fully Consolidated Facility

    Source: GAO presentation of USPS data.

    Note: The headquarters review of the PIRs has been completed for only
    three of the nine PIRs, and additional revisions to the projected
    annualized savings may be made, but USPS officials provided us with the
    most recent data available from their ongoing reviews.

    While the differences in the savings from the AMP studies' estimated
    annualized savings and the revised PIR projected annualized savings are
    generally small, in the interim, drafts of the PIRs showed different
    projections before USPS headquarters officials made revisions based on
    their review. For example, one of the draft PIRs submitted to USPS
    headquarters stated that the AMP consolidation would result in a loss of
    approximately $2.6 million. Based on the ongoing PIR by USPS headquarters
    officials, the annualized projected savings for this AMP consolidation has
    been revised to just over $1 million--a difference of about $3.7 million.
    In another case, the draft PIR submitted to USPS headquarters estimated
    savings of about $820,000 and was revised during the headquarters review
    to an estimated savings of $2.3 million. USPS's Senior Vice President,
    Operations, told us that the headquarters review has shown that when PIRs
    have not been finalized, they do not always account for all of the actual
    savings achieved by the AMP consolidation. Another USPS official stated
    that the difference in the amounts reported in some PIRs and the revised
    projected annualized savings was due to the fact that unexpected events
    (e.g., changes in cost elements, such as work-hour rates) and differences
    in the methodologies used by the individuals calculating the data impact
    the results. He also stated that revised AMP consolidation guidelines,
    which will require the use of specific data and formulas for determining
    savings, should prevent such inconsistencies from happening in the future.

      USPS Does Not Have a Mechanism for Determining AMP Consolidation Impacts on
      Delivery Performance

    Another concern with the AMP consolidation process is that it does not
    evaluate potential impacts to delivery performance; therefore, there is no
    way to determine the actual impact that AMP consolidations are having on
    delivery service. Despite this, USPS has stated that it intends on
    maintaining or improving service performance while it implements
    consolidations, making it unclear how it intends on achieving this. This
    is often a concern from stakeholders in areas where consolidations are
    being considered and has also been identified as an area of concern in a
    recent report from the USPS Inspector General's Office.^20

    As we reported in 2006, USPS does not measure and report its delivery
    performance for most types of mail, and less than one-fifth of total mail
    volume is measured.^21 No representative measures of delivery performance
    exist for Standard Mail (48 percent of volume), bulk First-Class Mail (25
    percent of volume), Periodicals (4 percent of volume), and most Package
    Services (less than 1 percent of volume). While USPS is taking steps
    toward developing increased delivery performance measurements, currently
    there are limited mechanisms in place to determine how AMP consolidations
    may potentially impact delivery performance or to evaluate the actual
    impacts after implementation. For example, during one of our site visits,
    mailers we met with indicated that they had experienced extensive delays
    in mail delivery since the implementation of the AMP consolidations in
    their area and, in one case, a mailer told us these delays impacted his
    business. This mailer projected that his retail store lost revenue because
    advertising for an annual sale did not reach customers until after the
    sale was complete. (Due to limited performance measurement mechanisms, we
    cannot validate whether these complaints are related to AMP
    consolidations.) USPS has a system in place to measure the delivery
    performance of some of its First-Class Mail and Priority Mail, and if the
    evaluation of the AMP consolidation shows declines in this performance
    after implementation, the facility manager is required to create and
    submit a Service Performance Action Plan to USPS headquarters outlining
    how the facility intends on resolving the delivery performance
    declines.^22

    ^20U.S. Postal Service Office of Inspector General, Service Implications of
    Area Mail Processing Consolidations, EN-AR-07-002 (Washington, D.C.: Dec.
    5, 2006).

    ^21In July 2006, we addressed several limitations in USPS's delivery
    performance measurement. We recommended that USPS take actions to
    facilitate greater progress in developing complete delivery performance
    information. GAO, U.S. Postal Service: Delivery Performance Standards,
    Measurement, and Reporting Need Improvement, [45]GAO-06-733 (Washington,
    D.C.: July 27, 2006).

    While the AMP consolidation study does not take delivery performance into
    account, it does review impacts on service standards, which are USPS's
    official standards on the amount of time it should take for different
    classes of mail to be processed between the location where USPS receives
    the mail (originating ZIP codes) and its final destination (destinating
    ZIP codes). The AMP consolidation study considers whether standards for
    different classes of mail will be upgraded (a decrease in the amount of
    time it takes mail to travel between certain ZIP codes) or downgraded (an
    increase in the amount of time it takes mail to travel between certain ZIP
    codes) through implementation of the consolidation. While consideration of
    these service standards provides some insight into potential impacts of
    the AMP consolidation on USPS's ability to meet its internal standards,
    without service performance data or the ability to measure the AMP
    consolidation's impacts on delivery performance, it is unclear how USPS
    can accurately determine the cost and service impacts of its AMP
    consolidations.

    USPS recently implemented a "24-hour clock" program in its processing
    facilities, which will standardize the time it takes to process mail by
    holding managers at all postal facilities accountable for meeting
    nationwide targets for and indicators in managing daily mail. Some of the
    activities USPS is standardizing involve the same operations that USPS is
    consolidating. For example, managers must ensure that 80 percent of
    single-piece First-Class collection mail is cancelled^23 by 8:00 p.m. and
    that the first sort of all outgoing mail is conducted by 11:00 p.m.
    Currently, the AMP consolidation study guidelines do not require managers
    to take into account how well the facility that will be gaining mail
    volume is meeting these targets. While meeting these targets is not an
    indicator of delivery performance, they are a useful proxy because the
    inability to meet them can create delays in processing operations. It may
    be valuable for USPS to review how well these targets are currently being
    met in facilities expected to receive additional mail volume through
    consolidations as an indicator of that facility's ability to process
    additional mail volume expediently, potentially reducing delays later in
    the processing and delivery process.

    ^22This measurement system is limited in its geographic coverage;
    therefore, AMP consolidations may not always be subject to this system.

      USPS Is Addressing Several of these Issues through Revised AMP Consolidation
      Guidelines, but Concerns Still Exist

    USPS is currently in the process of revising its AMP consolidation
    procedural guidelines^24 to address the issues that have been raised.
    Drafts of these revised guidelines indicate that the new process will
    provide several changes aimed at standardizing the AMP consolidation
    process and data calculations used in studying potential consolidations.
    USPS officials stated that the revised guidelines are currently scheduled
    to be released in summer 2007.^25 Table 6 shows some of the changes to the
    AMP consolidation guidelines.

    ^23Cancellation is when USPS applies a postmark to the mail piece.

    ^24U.S. Postal Service, Area Mail Processing (AMP) Guidelines, PO-408
    (Washington, D.C.: April 1995).

    ^25USPS plans on providing a draft of the guidelines to employee unions
    for their review in May 2007. Unions are allowed 60 to 90 days for review
    and comment.

    Table 6: Summary of Major Changes to AMP Consolidation Process Included in
    Draft Revised Guidelines

    Source: GAO presentation of USPS data.

    Changes included in the draft revisions to the AMP consolidation
    guidelines indicate that data-related issues are being addressed,
    specifically those related to the standardization of data sources, but
    concerns still remain with the fact that USPS is not using
    facility-specific data in identifying facilities to consider for
    consolidation. Therefore, USPS is unable to take into account specific
    facility processing circumstances in initial selection of potential
    facilities. The use of consistent data sources should alleviate some of
    the delays that are currently experienced in the AMP consolidation
    process. The new guidelines also neither include information on what
    criteria USPS uses when deciding to approve an AMP consolidation, nor do
    they address USPS's limited ability to measure delivery performance.

    Although it may be hard to determine what cost savings and subsequent
    impacts USPS has made through AMP consolidations and, while the savings
    that have been reported may appear small, the AMP consolidation initiative
    could be an important effort on USPS's part in meeting its future network
    needs. By eliminating the excess capacity on its equipment that processes
    single-piece First-Class Mail, USPS would be addressing its goal of
    meeting the future needs of its processing network. As the volume of this
    mail declines, there would likely be less of a need for infrastructure to
    support the processing of single-piece First-Class Mail and, while flaws
    in the AMP consolidation process exist, the intent of the consolidations
    addresses this trend.

    USPS AMP Communication Practices Do Not Ensure Appropriate Stakeholder
    Engagement in Realignment Decisions

    USPS has made improvements to its communication practices, but these
    practices continue to have gaps. Namely, AMP consolidation communication
    processes (1) do not provide clear and useful notification to
    stakeholders, (2) do not provide for meaningful public input and lack
    transparency into the AMP decision-making process, and (3) provide limited
    information to the public after USPS makes AMP consolidation decisions. A
    town hall meeting is the only formal requirement for public input during
    the AMP consolidation process. Stakeholders and others have criticized the
    timing of the meeting as occurring too late in the process, after USPS has
    already made major decisions. To help remedy this and other problems,
    Congress required USPS to make improvements to its public communication
    processes. USPS's planned improvements in response to Congress would
    generally limit changes to internal processes, while notice to
    stakeholders would generally remain the same, and the timing of the public
    input meeting would not change. Our review of USPS's revised guidance
    indicates that planned improvements would neither substantively change
    information provided to the public, nor improve the public input process.

    Communication Requirements Have Focused on Post Offices and Employee
    Notification

    USPS is required to follow certain steps with regard to communicating
    changes and engaging the public as it makes realignment decisions. A
    statutory requirement for public notice for closings and consolidations of
    post offices has been in existence since 1976,^26 but it did not speak to
    the consolidation of mail processing operations--the result for most
    approved AMP consolidations. If USPS is considering closing a post office,
    USPS must provide adequate notice and regulations prescribe a formal
    comment period.^27 Any decision to close or consolidate a post office must
    include the effect on the community served and the effect on the office's
    postal employees. In addition, the following mandatory procedures apply:

               o The public must be given 60 days notice of a proposed action to
               enable the persons served by a post office to evaluate the
               proposal and provide comments.
               o USPS must take any other steps necessary to ensure that the
               persons served by the affected post office understand the nature
               and implications of the proposed action, e.g., meeting with
               community groups and following up on comments received that seem
               to be based on incorrect assumptions or information.

    ^2639 U.S.C. 404(b).

    ^2739 C.F.R. 241.3 (1998).

    			  o After public comments are received and taken into account, any
               final determination to close or consolidate a post office must be
               made in writing and must include findings covering all the
               required considerations.
               o The written determination must be made available to persons
               served by the post office at least 60 days before the
               discontinuance takes effect.
               o Within the first 30 days after the written determination is made
               available, any person regularly served by the affected post office
               may appeal the decision to the PRC.

               In addition to these requirements for closing or consolidating
               post offices, USPS has a collective bargaining agreement--a
               contract--with its employees that requires a certain level of
               communication when USPS is contemplating changes in employee
               wages, hours, or working conditions at any facilities.^28 USPS has
               placed consolidations in this category because they can result in
               employees working in different locations, i.e., they can affect
               employees' working conditions. USPS is required to seek employee
               union input on handbooks or guidelines it publishes, including AMP
               consolidation guidelines. According to national union officials,
               employees may request meetings with USPS when proposed changes
               relate to wages, hours, or working conditions. Thus, USPS has
               generally provided employees more information about consolidations
               than USPS has provided to other stakeholders.

               While AMP consolidations have been taking place since the late
               1960s, and USPS established AMP consolidation guidelines in 1979,
               until 2006, USPS has had no statutory requirement to contact the
               public (other than USPS employees) concerning the consolidation of
               its operations, unless the consolidation would result in a retail
               facility closure. In the Postal Accountability and Enhancement
               Act, enacted in December 2006, Congress strongly encourages USPS
               to move forward in its streamlining efforts and keep unions,
               management associations, and local elected officials informed.
               Specifically, the law requires USPS, in its Facilities Plan, to
               include procedures that USPS will use to

               o provide adequate public notice to communities potentially
               affected by a proposed rationalization decision;
               o make available information regarding any service changes in the
               affected communities, any other effects on communities, any other
               effects on customers, any effects on postal employees, and any
               cost savings;
               o afford affected persons ample opportunity to provide input on
               the proposed decision; and
               o take such comments into account in making a final decision.

    ^282006-2010 Tentative Collective Bargaining Agreement between American
    Postal Workers Union, AFL-CIO and U.S. Postal Service. According to
    American Postal Workers Union (APWU), the agreement has been approved by
    APWU membership and the text will be official after joint review and
    agreement between USPS and APWU.

               Congress also directed USPS not to close or consolidate any
               processing or logistics facilities without using procedures
               consistent with those described above.^29

    ^29In February 2007, USPS officials told us USPS was developing a set of
    communication requirements that would be used when consolidating or
    closing other processing or "logistics" facilities that were being modeled
    after those procedures established under the Worker Adjustment and
    Retraining Notification Act, Pub. L. No. 100-379 (29 U.S.C. 210l, et
    seq.). The Worker Adjustment and Retraining Notification Act provides
    guidelines for communication requirements that are applicable to the
    private sector when a company meeting certain criteria closes a facility
    or moves out of a community.

    			  AMP Consolidation Communication Processes Lack Transparency

               USPS's AMP consolidation communication processes do not provide
               clear and useful notification to stakeholders--mailers, employees,
               elected officials, the business community, and the media--and lack
               transparency into AMP consolidation decision making. Congress
               encouraged USPS to keep employees, local elected officials, and
               the affected public informed. The PRC and others have advised or
               recommended USPS more fully communicate with and engage
               stakeholders and the public earlier in the decision-making process
               and, once USPS makes decisions, keep stakeholders and the public
               informed. While USPS is updating its communication guidance--the
               AMP Consolidation Communication Plan and Toolkit--its proposed
               improvements would neither substantively improve information
               provided to stakeholders and the public, nor improve the public
               input process. Proposed improvements would help clarify which
               stakeholders USPS notifies but would not improve the content of
               the notifications. Further, the draft AMP consolidation guidelines
               would not provide for transparency into the AMP consolidation
               decision-making process to the extent that Congress has
               encouraged, and others have recommended or advised, for example,
               by holding the public meeting earlier or explaining how USPS uses
               public input.

    			    Inconsistent Identification of Stakeholders

               USPS's AMP consolidation guidelines were updated in 1995--with new
               worksheets and instructions issued in 2004--and established, among
               other things, USPS's communication guidance. They required USPS to
               notify stakeholders only when USPS implemented an AMP
               consolidation. The guidelines did not provide a public input
               process, such as a public meeting. USPS enhanced its
               communications in 2005 by creating a communication plan that
               required notice to additional stakeholders at the point when USPS
               initiated the AMP consolidation study and identified
               responsibility for notifications by clarifying which USPS office
               had responsibility for providing the notifications. In 2006, USPS
               created additional guidance, its notifications toolkit, which
               complements the AMP guidelines and communication plan and has a
               public meeting requirement. Since the notifications toolkit did
               not go into effect until 2006, none of the AMP consolidations
               initiated in 2005 was subject to these additional requirements.
               USPS officials told us, however, that all 46 AMP studies initiated
               in 2006 are subject to the requirements as stated in the
               notifications toolkit.

               Among the AMP consolidation packages we reviewed, USPS
               inconsistently identified individual stakeholders in the impacted
               communities. USPS stakeholder categories included employee groups,
               elected officials, media, community organizations, and mailers.
               USPS guidance regarding notifications to stakeholders was unclear
               and, in some cases, mayors and governors were notified of an AMP
               consolidation study, while in others, no local elected officials
               were contacted. As shown in appendix IV, in one AMP consolidation
               study, USPS identified 158 mailers as stakeholders, while in
               others, no mailers were identified. In one case, mailers whom USPS
               did not identify as affected by the consolidation told us their
               service had been negatively impacted as a result of that
               consolidation. In another case, we spoke with officials from a
               bank in Connecticut that USPS identified as a major mailer and
               listed as a stakeholder, while the company that prepared most of
               the bank's mail and processed more mail volume than the bank was
               not considered a stakeholder.^30

               USPS has made improvements to its draft guidance by clarifying
               certain stakeholder categories and providing examples of
               "appropriate government officials," as well as establishing
               criteria for local mailers.^31 The proposed changes would likely
               help clarify stakeholder groups and would allow more consistent
               identification of stakeholders.

    			    Unclear Content in Notification Letters

               AMP consolidation notification letters sent to stakeholders were
               not meaningful and provided little detail. Notification letters we
               reviewed were largely form letters and did not simply and clearly
               state the type of change or changes being studied and provided no
               range of possible outcomes for the public to understand. Letters
               contained jargon, for example, they stated that USPS was studying
               the facility's "total mail processing," "originating/destinating
               mail processing," or "originating mail processing" and did not
               provide the name of the gaining facility. Such terms may not be
               familiar to the public. Further, USPS did not explain to
               stakeholders that "consolidating both originating and destinating
               mail" meant USPS was considering closing the facility, whereas
               consolidation of "either destinating or originating mail" meant
               potential changes only to internal mail processing. Stakeholders
               we met with told us they did not understand what USPS was planning
               or studying. For example, USPS-identified stakeholders in
               Waterbury, Connecticut, said they did not understand the context
               of the notification letter they received or the potential impact
               of the consolidation. Another stakeholder said USPS simply
               notifies stakeholders that changes will be made, without
               presenting the context for the changes or providing any
               alternatives. See figure 3 for an example of a notification letter
               sent to one of the stakeholders USPS identified in Waterbury,
               Connecticut.

    ^30USPS officials told us stakeholders are determined by local and
    district management. The mailers USPS notified are generally managed
    accounts and are identified by Business Mail Entry unit personnel.

    ^31USPS's draft AMP guidelines establish criteria for local mailers as
    being those providing annual postage revenue averaging $5,000-$156,000.
    Often large mailers use consolidators to deliver their mail. USPS guidance
    may preclude consolidators from obtaining notification about the status of
    a potential consolidation.

    Figure 3: USPS Notification Letter to Waterbury Republican Newspaper,
    Waterbury, Connecticut

    With limited information made available to the public throughout the
    process, other stakeholders have filled an information void with
    information to the public that was often not accurate. For example, in
    some cases, unions have expressed concern that employees would lose jobs
    or that postal facilities would be shut down. In fact, according to USPS,
    no layoffs have occurred, and USPS has stated that it does not intend to
    lay off any career employees due to consolidations. Also, USPS officials
    told us only one facility has been closed as a result of AMP consolidation
    studies initiated in 2005 or 2006. Mailers we spoke with identified an
    employee union Web site as their primary source of information about the
    consolidations because USPS does not provide adequate AMP
    consolidation-related information on its Web site. In some cases, citizens
    are concerned that their town's postmark will be taken away and jobs lost
    because USPS has not communicated effectively, and others have provided
    inaccurate information. In the case of the AMP consolidation process, the
    public has been frustrated, and there has been a lack of buy-in for some
    USPS decisions. When USPS has made decisions regarding AMP consolidations,
    it has not clearly communicated the progress to the public. For example,
    the USPS Office of Inspector General found that, in one case, USPS
    notified stakeholders it was beginning a review when the USPS local office
    had already approved the AMP consolidation, which the Inspector General
    said "negatively impact[ed] stakeholder relations.^32 The Inspector
    General reported that notification letters should have been modified from
    the guidance available to more accurately reflect the progress of the AMP
    consolidation.

    Under the new postal reform legislation, USPS is to provide "adequate
    public notice." USPS is revising its AMP consolidation guidelines and
    communication plan. However, the draft guidance we reviewed, complete with
    notification templates, would provide largely the same notification
    content and lacks basic information, such as the next decision points, a
    date for a public meeting, and how public input would be considered.
    Stakeholders would remain unclear as to what USPS is planning. USPS's
    notifications to the public about AMP consolidations would remain unclear
    and would not simply and clearly state the type of change or changes being
    studied. In terms of communicating the status of the AMP consolidation
    study, the guidance is unclear as to the requirement for notifying
    stakeholders in the event of no action taken, the study is placed on hold
    or resumed, or USPS does not approve the AMP consolidation study.

    With limited information made available to the public throughout the
    process, other entities might continue to fill the information void with
    data that may not be accurate. Public participation experts recognize that
    an uninformed public is likely to make up its own facts, and
    misunderstandings become new, separate conflicts that make the original
    problem more difficult to solve, which may slow down the consolidation
    process.^33

    32U.S. Postal Service Office of Inspector General, Pasadena, California
    Processing and Distribution Center Consolidation, EN-AR-07-002
    (Washington, D.C.: Sept. 26, 2006).

      Limited Public Input Process

    AMP guidance requires USPS to "fully consider" both service and "other
    impacts on the community." Since 2006, there has been a requirement for a
    town hall meeting to provide a forum to collect public input, but there
    are many flaws with that requirement. Other than a town hall meeting,
    there is no formal AMP public input requirement. To date, there have only
    been five town hall meetings open to the public, and none have been
    scheduled for 2007. USPS provided little information about the study prior
    to the meetings--a series of bullets was posted on a USPS Web site several
    days prior to the meetings, and USPS neither publicized an agenda for the
    meetings nor employed a neutral party to facilitate them. According to the
    guidance, it is not until a meeting occurs that more information, in the
    form of briefing slides and a video screening, is made available to
    attendees. Then, a USPS official prepares a summary document after a
    meeting that is to be forwarded to USPS headquarters. After a meeting, the
    stakeholders and the public are provided with the opportunity to draft and
    submit comments to USPS.^34

    Public meetings have been held after the AMP consolidation studies are
    forwarded to USPS headquarters, after USPS has gathered and analyzed most
    of its data, including those concerning customer service impacts.
    Stakeholders we spoke with were not satisfied with the public input
    process and told us that their input was only solicited when USPS
    considered the AMP consolidation a "done deal." The PRC has also
    criticized the timing of the public meeting.

    Some of the flaws stakeholders and the PRC identified with the town hall
    meetings held to date include the following:

               o meeting held too late in process, after data gathered;

               o not enough notice to public about meeting;

               o USPS presents limited data at meeting;

               o local USPS official runs meeting and may not be skilled in
               facilitating public meetings; and
               o unclear how input from meeting is used in AMP consolidation
               decision.

    ^33Susan Carpenter and W.J.D. Kennedy, Managing Public Disputes: A
    Practical Guide to Handling Conflict and Reaching Agreements, Jossey-Bass,
    San Francisco (1988).

    ^34At the time of the five meetings which have been held, USPS afforded
    stakeholders and the public 5 days to provide comments. USPS communication
    guidance has since been revised to increase the comment period to 15 days.

               USPS officials could not specifically explain how stakeholder and
               public input is used in reaching AMP consolidation decisions.
               Further, USPS has no requirement to notify or seek input from
               stakeholders or the public when evaluating completed AMP
               consolidations. However, USPS officials told us, as a matter of
               practice, USPS provides employee organizations with copies of
               approved AMP studies and completed AMP evaluations. It is unclear
               how the information collected at the meetings, or subsequent to
               them, factors into the consolidation decision. Stakeholders and
               the public wanted to know how their input to USPS--letter, phone
               calls, public meeting results--is taken into consideration when
               USPS makes its decisions. Mailers said they do not need to be
               involved in all USPS decisions; rather, they want to provide input
               when decisions may impact them, such as changing locations or
               timing for dropping off the mail.

               The Postal Accountability and Enhancement Act requires USPS to use
               procedures that afford affected persons "ample opportunity to
               provide input on the proposed decision" and to "take such comments
               into account in making a final [AMP consolidation] decision." In
               its draft communication guidance, USPS has not substantively
               revised its public meeting requirements. Proposed changes would
               generally be limited to USPS internal processes, such as
               clarifying USPS roles and responsibilities for a public meeting
               and making arrangements for a meeting. USPS has not altered the
               timing of a public meeting but has provided for earlier notice to
               the public regarding a meeting and more time for the public to
               submit comments after a meeting. Table 7 provides an overview of
               USPS AMP communication practices.

               The PRC and others have made several suggestions to improve the
               AMP consolidation public input process. Rather than holding the
               AMP consolidation public meeting after data is collected, USPS
               could consider moving the meeting to the data-gathering phase of
               the study. USPS could share its public meeting agenda so these
               meetings are focused and productive, and the public has
               opportunity to adequately prepare for them. USPS could use a
               skilled independent, neutral facilitator to lead the meetings,
               draft the summary of public input, and explain how it will be
               used. USPS officials said that holding the meeting earlier might
               be the best thing to do.

               Public participation experts recognize that actively engaging the
               public in decision making can serve not only to educate the public
               about a policy process but can also lead to more informed
               decisions.^35 By ensuring public concerns have been heard,
               considered, and addressed, the agency can also establish a level
               of trust and accountability with the public. When making
               realignment decisions, USPS could proactively and consistently
               engage appropriate stakeholders when changes under consideration
               will affect them. In the case of the flats automation strategy,
               mailers noted that USPS solicited input regarding new equipment.
               Additionally, USPS recently provided an update to the mailing
               industry on its flats automation plans. A study on citizen
               engagement by the IBM Center for the Business of Government states
               that citizens are more satisfied with the decision-making process
               when agencies ensure that citizen input is accounted for and
               reflected in final decisions.^36 Reflecting public input in
               decisions does not necessarily translate to agreeing with the
               public but to considering citizens' concerns and including them in
               the process.

    ^35Susan L. Carpenter and W.J.D. Kennedy, Managing Public Disputes: A
    Practical Guide to Handling Conflict and Reaching Agreements, Jossey-Bass,
    San Francisco (1988).

    ^36IBM Center for the Business of Government, Public Deliberation: A
    Manager's Guide to Citizen's Engagement, Washington, D.C. (2006).

    Table 7: USPS Area Mail Processing Consolidation Notification and Public
    Input Requirements

    Source: GAO analysis of USPS and stakeholder data.

    aIncludes both 2007 draft AMP guidelines and 2007 draft communication
    plan.

      Lack of Information to Public

    USPS does not keep the public adequately informed of its decisions,
    although several mechanisms exist that USPS could employ, such as Postal
    Customer Councils,^37 USPS's Web site, and local business community
    newsletters. Stakeholders we spoke with acknowledged that USPS goals of
    efficiency and cost savings are legitimate, but they were concerned about
    the lack of transparency of the consolidation decisions. In a case where
    USPS is considering closing a facility, USPS could make that information
    available in advance and, if necessary, reveal its plans for carrying out
    a closure so that impacted parties could prepare for the change. Once
    decisions are made, stakeholders said they wanted timely information so
    they could plan accordingly, for example, to reroute their mail, advise
    their customers of any changes in service, etc. When we spoke with USPS
    officials, they told us they were in the process of developing
    communication requirements in the event of a facility closure not related
    to AMP consolidations.^38

    ^37USPS has a national Postal Customer Council and about 200 local Postal
    Customer Councils. The councils are chapters of mailers and USPS
    representatives. According to USPS, Postal Customer Councils work to
    improve communications between USPS and its customers.

    Stakeholders described USPS as unconcerned with the effect the
    consolidations could be having on its customers. One stakeholder noted
    that informing affected parties of significant changes and seeking their
    input is a good business practice. In terms of follow-up and communicating
    its decisions, USPS could improve transparency and provide information to
    stakeholders and the public by using existing mechanisms to communicate
    the status of realignment efforts, especially the status of AMP
    consolidations. In its 2006 Annual Progress Report, USPS provided only
    general information about the AMP consolidation initiative. Instead, USPS
    could use its annual reports to report on the status of individual AMP
    consolidations. USPS can employ established entities like its local Postal
    Customer Councils or local business organizations to inform the affected
    public. Both the national Postal Customer Council and local business
    organization officials we spoke with were willing to include USPS
    realignment status updates and plans in their regular communications to
    members.

    Conclusion

    In our report 2 years ago, we concluded that USPS did not have answers to
    important questions about how it intended to realign its mail processing
    networks. This conclusion still holds today. USPS has made progress on
    several of its individual initiatives, but it remains unclear how these
    various initiatives are individually and collectively contributing to
    achieving realignment goals. Also, without measurable performance targets
    for these goals, USPS remains unable to demonstrate to Congress and other
    stakeholders the costs and benefits of these initiatives. Further, data
    inconsistencies related to the AMP initiative have limited USPS's ability
    to identify potential impacts in its feasibility studies of proposed AMP
    consolidations and to accurately evaluate the results of consolidations
    after they are implemented. In the communication area, despite recent
    improvements to its communication practices, USPS continues to have gaps
    related to engaging stakeholders and the public in its AMP consolidation
    process and effectively communicating decisions. Stakeholder concerns
    related to the lack of clear and useful notification to stakeholders,
    coupled with a lack of public input and transparency into USPS's AMP
    consolidation decision making, have contributed to public frustration with
    USPS's communication regarding its AMP consolidation decisions.

    ^38According to USPS officials, communication requirements would be
    modeled after the Worker Adjustment and Retraining Notification Act, Pub.
    L. No. 100-379 (29 U.S.C. 210l, et seq.).

    USPS is currently developing a Facilities Plan, mandated in legislation
    passed in December 2006, explaining how the network will be realigned and
    outlining how USPS will interact with stakeholders in making any changes.
    It is also responding to PRC and USPS Inspector General recommendations on
    a variety of realignment issues, including communications with
    stakeholders. The quality and thoroughness of these efforts will be key in
    overcoming the concerns that stakeholders have raised. Matters that will
    require careful attention include establishing a clear relationship
    between individual initiatives and realignment goals, developing ways to
    measure progress and monitor results, and establishing effective
    communications with stakeholders in initiatives such as the AMP
    consolidation.

    Recommendations for Executive Action

    To strengthen planning and accountability efforts for USPS's realignment
    efforts, we are making two recommendations to the Postmaster General to
    ensure that the Facilities Plan required by the Postal Accountability and
    Enhancement Act includes the following:

               o A discussion of how the various initiatives that will be used in
               rationalizing the postal facilities network will be integrated
               with each other.
               o The establishment of measurable targets USPS plans on meeting
               for the anticipated cost savings and benefits associated with
               network rationalization, in conjunction with the time line for
               implementation.

               To help improve the way in which USPS communicates its realignment
               plans and proposals with stakeholders, particularly with regard to
               proposals for consolidations under the AMP consolidation
               initiative, we are making three additional recommendations to the
               Postmaster General to ensure that the following steps are included
               in USPS's communications strategy:

               o Improve public notice. Clarify notification letters by
               explaining whether USPS is considering closing the facility under
               study or consolidating operations with another facility,
               explaining the next decision point, and providing a date for the
               required public meeting.
               o Improve public engagement. Hold the public meeting during the
               data-gathering phase of the study and make an agenda and
               background information, such as briefing slides, available to the
               public in advance.

               o Increase transparency. Update AMP guidelines to explain how
               public input is considered in the decision-making process.

    			  Agency Comments and Our Evaluation

               The U.S. Postal Service provided comments on a draft of this
               report in a letter dated June 1, 2007. These comments are
               summarized below and included as appendix V. USPS concurred with
               our characterization of its network realignment goals and
               indicated that its mail processing realignment efforts have not
               wavered from the achievement of these goals. USPS noted that it
               has made progress on additional realignment initiatives that were
               not outlined in our report.

               USPS stated that its compliance with the Postal Accountability and
               Enhancement Act will satisfy our recommendations for the
               Postmaster General to ensure that the required Facilities Plan
               includes (1) a discussion of how the various initiatives that will
               be used in rationalizing the postal facilities network will be
               integrated with each other and (2) the establishment of measurable
               targets USPS plans on meeting for the anticipated cost savings and
               benefits associated with network rationalization, in conjunction
               with the time line for implementation. We agree that the required
               Facilities Plan provides an opportunity for USPS to more fully
               discuss the integration of its realignment initiatives and
               establish measurable targets for meeting the anticipated cost
               savings and benefits of network rationalization.

               In its comments, USPS generally agreed with our recommendations
               related to improving the way in which it communicates its
               realignment plans and proposals with stakeholders, particularly
               proposals for consolidations under the AMP consolidation
               initiative. However, USPS felt that it would be premature to hold
               a public meeting during the data-gathering phase of a feasibility
               study as we recommended but agreed instead to improve public
               engagement by moving the public meeting earlier in the AMP
               process. We agree that this timing will improve USPS's public
               engagement process, as well as the usefulness of public input in
               making AMP consolidation decisions. Under the updated process, the
               meeting will occur after the District Manager has approved a
               consolidation and before the Area Vice President has made a
               decision. USPS commented that the agenda and briefing slides will
               be posted on [46]www.usps.com in advance of the public meeting.

               As agreed with your office, unless you publicly announce the
               contents of this report earlier, we plan no further distribution
               until 30 days from the report date. At that time, we will send
               copies of this report to the Ranking Member of the House
               Subcommittee on the Federal Workforce, Postal Service, and the
               District of Columbia; Committee on Oversight and Government
               Reform; and the Ranking Member of the Senate Subcommittee on
               Federal Financial Management, Government Information, Federal
               Services and International Security; Committee on Homeland
               Security and Governmental Affairs; the Postmaster General; and
               other interested parties. We also will make copies available to
               others upon request. In addition, the report will be available at
               no charge on the GAO Web site at [47]http://www.gao.gov .

               If you or your staff has any questions regarding this report,
               please contact me at [48]siggerudk@gao.gov or by telephone at
               (202) 512-2834. Contact points for our Office of Congressional
               Relations and Public Affairs may be found on the last page of this
               report. GAO staff that made key contributions to this report are
               listed in appendix VI.

               Katherine Siggerud
    			  Director, Physical Infrastructure Issues

               Congressional Requesters

               The Honorable Joseph I. Lieberman
    			  Chairman
    			  The Honorable Susan M. Collins
    			  Ranking Member
    			  Committee on Homeland Security and
                 Governmental Affairs
    			  United States Senate

               The Honorable Thomas R. Carper, Chairman, Subcommittee on Federal
               Financial Management, Government Information, Federal Services and
               International Security
    			  Committee on Homeland Security and Governmental Affairs
    			  United States Senate

               The Honorable Henry A. Waxman
    			  Chairman
    			  The Honorable Tom Davis
               Ranking Member
    			  Committee on Oversight and Government Reform
    			  House of Representatives

               The Honorable Danny K. Davis, Chairman, Subcommittee on Federal
               Workforce, Postal Service, and the District of Columbia
    			  Committee on Oversight and Government Reform
    			  House of Representatives

               The Honorable Tom Harkin
    			  United States Senate

               The Honorable Bernard Sanders
    			  United States Senate

               The Honorable John Thune
    			  United States Senate

               The Honorable Brian Baird
    			  House of Representatives

               The Honorable Xavier Becerra
    			  House of Representatives

               The Honorable Marion Berry
    			  House of Representatives

               The Honorable Jerry Costello
    			  House of Representatives

               The Honorable Susan Davis
    			  House of Representatives

               The Honorable Lloyd Doggett
    			  House of Representatives

               The Honorable Chet Edwards
    			  House of Representatives

               The Honorable Barney Frank
    			  House of Representatives

               The Honorable Stephanie Herseth
    			  House of Representatives

               The Honorable Rush Holt
    			  House of Representatives

               The Honorable Ron Kind
    			  House of Representatives

               The Honorable John M. McHugh
    			  House of Representatives

               The Honorable Dennis Moore
    			  House of Representatives

               The Honorable Ted Poe
    			  House of Representatives

               The Honorable Adam Schiff
    			  House of Representatives

               The Honorable Christopher Shays
    			  House of Representatives

               The Honorable John Shimkus
    			  House of Representatives

               The Honorable Adam Smith
    			  House of Representatives

    			  Appendix I: Objectives, Scope, and Methodology

               Our objectives for this report were to (1) describe the
               initiatives the U.S. Postal Service (USPS) has undertaken since
               2002 aimed at realigning its processing network and the status of
               these initiatives; (2) evaluate how the planning, impacts, and
               results to date of these initiatives align with the goals of
               USPS's processing network realignment; and (3) evaluate USPS's
               communications practices with stakeholders in making network
               realignment decisions, and the challenges and leading practices
               associated with public engagement.

               To describe the initiatives USPS is undertaking to realign its
               mail processing network, how these initiatives are integrated, and
               the status of these initiatives we interviewed postal officials at
               USPS headquarters, including USPS's Senior Vice President,
               Operations, and Vice President, Network Operations. We interviewed
               USPS officials in the Northeastern and Western Areas. We
               interviewed American Postal Workers Union headquarters officials
               to gain their perspective about the various initiatives, as well
               as representatives from several national mailing industry
               associations representing different facets of the industry. To
               provide descriptions and status information about these
               initiatives, we reviewed documents filed by USPS, union
               representatives, and other mailing industry representatives in the
               PRC 2006 advisory hearing, as well as the PRC's resulting
               "Advisory Opinion Concerning a Proposed Change in the Nature of
               Postal Services" issued December 19, 2006.

               To describe the area mail processing (AMP) consolidation's
               process, status, impacts, and results, we reviewed AMP
               consolidation guidelines published in 1995 (Handbook PO-408) and a
               revised draft version of these guidelines that USPS is planning to
               release in the summer of 2007. We reviewed the studies conducted
               for all 57 AMP consolidations in calendar year 2005 and 2006 and
               reviewed drafts of post-implementation reviews for 9 of the 10 AMP
               consolidations that were implemented. We reviewed USPS Inspector
               General reports about the AMP consolidations, the PRC's advisory
               opinion, as well as the Postal Accountability and Enhancement Act.

               To learn about how AMP consolidations are implemented and the
               communication practices USPS employs while implementing AMP
               consolidations and providing network realignment information to
               stakeholders, we reviewed AMP consolidation guidelines, the AMP
               Communication Plan, the AMP Notification Toolkit, and revised
               drafts of these documents. We reviewed documentation of USPS
               contact with stakeholders as recorded on AMP Worksheet 3 for AMP
               consolidation packages submitted during the Postal Regulatory
               Commission (PRC) case N2006-1. We reviewed notification letters
               produced by USPS for the AMP consolidation studies that took place
               in 2005 and 2006. We reviewed the procedures USPS must follow
               under 39 U.S.C. 404(b), legislation that provides rules that must
               be applied when closing a USPS retail facility, as well as the
               Postal Accountability and Enhancement Act, which directs USPS to
               make changes to its public input process when making realignment
               decisions, and to provide a facilities plan to Congress outlining
               its infrastructure realignment strategy. We conducted site visits
               in two states, Connecticut and Washington, where AMP
               consolidations were implemented in 2005 and 2006 to learn about
               the AMP consolidation process. During these site visits, we
               interviewed USPS district and facility officials, as well as local
               union representatives to learn about the AMP consolidation process
               and its subsequent impacts and results. To learn how USPS
               communicated with stakeholders, we interviewed USPS officials,
               employees, mailers, and business community members.

               We conducted our review between July 2006 and May 2007 in
               accordance with generally accepted government auditing standards.

    			  Appendix II: Overview of AMP Consolidation Process

               USPS's 1995 AMP Guidelines outline its procedures for AMP
               consolidations. The consolidation process prescribed by the
               guidelines can be broken into four stages: (1) study and proposal,
               (2) evaluation, (3) implementation, and (4) review of
               consolidation.

    			  Study and Proposal

               AMP proposals are initiated at the local level by district
               managers, customer sales and service, and/or plant managers.
               Initiating plant managers are responsible for studying the
               feasibility of the consolidation and assembling an AMP
               consolidation package containing data to support the proposal.
               Area offices then review the feasibility of these consolidations.
               AMP guidelines specify that the local office is responsible for
               considering the foreseen impacts the consolidation will have on
               service, the community, and employees. If upon these
               considerations the local office makes the preliminary
               determination that service and efficiency can be improved through
               an AMP consolidation, it notifies the Area office of its intention
               to conduct an AMP study. The Area office then notifies
               headquarters of this intention, and managers at the facilities
               under consideration have 6 months to undertake a study to analyze
               the feasibility of relocating origination and/or destination
               operations between locations.

               The study includes 10 worksheets that collectively determine the
               expected impact the consolidation will have on USPS costs,
               workforce, and service. The worksheets calculate anticipated cost
               changes to annual workhours, transportation, and associated costs,
               as well as one-time indemnity and associated costs.^1 The
               worksheets also evaluate personnel impacts in terms of positions
               and workhours that will be gained or lost at the facilities
               involved. In regard to service, the AMP consolidation worksheets
               consider whether standards for different classes of mail will be
               upgraded (a decrease in the amount of time it takes mail to travel
               between certain ZIP codes) or downgraded (an increase in the
               amount of time it takes mail to travel between certain ZIP codes)
               through implementation of the consolidation. They also identify
               stakeholders of the consolidation with whom USPS communicates
               about its proposal. In addition to the completed worksheets, local
               managers complete the AMP consolidation proposal by providing a
               narrative justifying implementation of the consolidation. If the
               consolidation is cancelled for any reason, local managers cancel
               the study and notify Area managers of the decision. Local offices
               have 6 months to complete and submit a proposal to the Area
               office.

    ^1Examples of associated costs include training, energy, and maintenance.

    			  Evaluation of Proposal

               Upon receipt of the AMP consolidation proposal by the Area office,
               the Vice President of Area Operations evaluates the package and
               decides whether or not to approve the consolidation. First the
               Vice President reviews all aspects of the proposal, ensuring that
               it is accurate and complete. If he/she has concerns, consultations
               between the local and area offices may lead to modifications of
               the original proposal. The Area office must complete evaluation of
               the proposal within 30 days and either disapproves and returns the
               package to the local originator or recommends approval and
               forwards it to headquarters.

               USPS headquarters is responsible for making the final decision as
               to whether an AMP consolidation will be implemented. Upon receipt
               of a package from the Area office, the Headquarters
               Cross-Functional Review Team reviews the package and has 30 days
               to evaluate the study.^2 At this stage, consultations between the
               Area office and headquarters may lead to modifications to the
               proposal. A critical element of the headquarters review is the
               evaluation of potential service standard upgrades and/or
               downgrades that would result if the operational changes proposed
               by an AMP consolidation were implemented.^3 Once headquarters
               completes its review, it makes a final decision as to whether the
               AMP consolidation will be implemented.

    			  Implementation of Consolidation

               As soon as practicable following approval of an AMP consolidation
               proposal by headquarters, the area, district, and local managers
               affected by the AMP decision determine the schedule for
               implementing the consolidation. Depending on the complexity of a
               particular AMP consolidation, implementation may take up to 6
               months to complete.

    ^2In testimony before the PRC, a USPS official defined the
    "cross-functional team" as a team coordinated by the Manager, Processing
    Operations, and includes managers from several functional offices at
    headquarters including: Contract Administration, Maintenance Policies and
    Programs, Integrated Network Development, Field Communications, Operations
    Requirements, Processing Center Operations, Logistics, Operations Budget
    and Performance Management, and Network Modeling and Development. An
    Organizational Design and Management Analyst and a Government Liaison are
    also members of the team.

    ^3The guidelines state that generally a consolidation should not result in
    service degradation. However, if it is not economically wise to maintain
    service standards involving a small amount of mail, in order for any
    trade-off between service standards commitments to be approved, the study
    must clearly established that the overall service to cost relationship for
    the combined service area improves.

               Review of Consolidation

               During the first year after implementation, the AMP Guidelines
               require that semiannual and annual post-implementation reviews
               (PIR) are conducted to determine if the projected savings,
               improved operational efficiency, and management accountability for
               making decisions regarding AMPs have been accomplished. The area
               management where an AMP consolidation takes place is responsible
               for ensuring completion of PIRs, which entails completing a new
               set of AMP worksheets and comparing them with the original
               worksheets contained in the proposal in order to document the
               observed results relative to the expected outcome of the
               consolidation. Observations from this comparative analysis are
               synthesized in a narrative executive summary, which is submitted
               along with the new set of worksheets to headquarters following
               review for accuracy by the Vice President, Area Operations. Upon
               receipt by headquarters, the PIR analysis is circulated for
               assessment among the functional units that participated in the
               approval process, and headquarters notifies the Area within 30
               days after receiving the package of the final disposition of the
               PIR. The semiannual PIR, which must be completed within 30 days
               after the second full quarter following implementation, determines
               whether the implementation of an AMP is accomplishing necessary
               training, relocation, transportation, operational changes, and
               workhour adjustments. If these are not being accomplished, the
               review alerts the responsible parties of the necessity to change
               or correct any deficiencies. The annual PIR serves to determine
               the viability of the consolidation and allows management the
               opportunity for decision analysis concerning the AMP plan.

               If a local office deems it necessary to reverse implementation of
               an AMP, it must appeal to headquarters to do so. The local office
               completes a detailed narrative statement, action plan for
               reversal, and time line for intended actions and forwards it to
               the Area office. Upon concurrence, the Area office forwards the
               proposal for reversal to the Senior Vice President, Operations.
               USPS officials told us that reversals of AMP implementation are
               very rare; in the last 30 years only one consolidation
               implementation has been reversed.

    			  Appendix III: Status of USPS 2005 and 2006 AMP Consolidations and PIRs

    Table 8: Implementation and PIR Status of AMP Consolidations Approved In
    2005 (as of May 2007)

    Source: GAO presentation of USPS data.

    Table 9: Status of 46 AMP Proposed Consolidations Initiated in 2006 (as of
    May 2007)

    Source: GAO presentation of USPS data.

    Note: This table includes the facilities involved in proposed
    consolidations, both the facility losing operations and the facility
    gaining operations.

    Appendix IV: USPS Notification to Stakeholders as Identified in AMP
    Communication Documentation

    Source: GAO presentation of USPS data.

    aFor all 2005-2006 AMP consolidations, members of Congress are identified.
    Note: This table includes the facilities involved in proposed
    consolidations, both the facility losing operations and the facility
    gaining operations.

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

    Appendix VI: GAO Contact and Staff Acknowledgments

    GAO Contact

    Katherine Siggerud, (202) 512-2834, or [49]siggerudk@gao.gov

    Staff Acknowledgments

    In addition to the individual named above, Teresa Anderson, Assistant
    Director; Tida E. Barakat; Kathy Gilhooly; Brandon Haller; Taylor M.
    Matheson; Margaret B. McDavid; Josh Ormond; and Stan Stenerson made key
    contributions to this report.

    (542096)

    [50]www.gao.gov/cgi-bin/getrpt?GAO-07-717 .

    To view the full product, including the scope
    and methodology, click on the link above.

    For more information, contact Katherine Siggerud at (202) 512-2834 or
    siggerudk@gao.gov.

    Highlights of [51]GAO-07-717 , a report to congressional requesters

    June 2007

    U.S. POSTAL SERVICE

    Mail Processing Realignment Efforts Under Way Need Better Integration and
    Explanation

    Major changes in the mailing industry have reinforced the need for the
    U.S. Postal Service (USPS) to reduce costs and increase efficiency. In its
    2002 Transformation Plan, USPS proposed doing so by realigning its mail
    processing network. The objectives of this requested report are to (1)
    describe the status of the initiatives USPS has developed for realignment;
    (2) evaluate how the planning, impacts, and results of these initiatives
    align with realignment goals; and (3) evaluate USPS's communication
    practices with stakeholders in making realignment decisions.

    [52]What GAO Recommends

    To strengthen planning and accountability for USPS's realignment efforts,
    the Postmaster General should ensure that the Facilities Plan, required by
    the Postal Accountability and Enhancement, explains the integration of
    realignment initiatives and establishes measurable targets to track USPS's
    progress in meeting realignment goals. To help improve communication about
    realignment with stakeholders, the Postmaster General should modify USPS's
    communication strategy to improve the quality of public notices and
    engagement, and increase transparency in decision making.

    In response to GAO's draft report, USPS agreed with GAO's findings and
    recommendations and plans to take steps to improve its communication and
    transparency.

    USPS has developed several initiatives to achieve its overall goal of
    reducing costs while maintaining service. GAO supports USPS's goals for
    realigning its mail processing network and encourages continued progress
    in this area. Four initiatives, which vary in the degree to which they
    have been implemented to date, play central roles in the realignment of
    the processing network.

    Status and Purpose of Key Postal Initiatives

    Source: GAO presentation of USPS data.

    While USPS has made progress in implementing its realignment initiatives,
    it is not apparent if these initiatives will meet USPS network realignment
    goals. First, realignment goals do not have measurable targets, making it
    unclear how USPS initiatives are progressing toward these goals. Second,
    there is limited clarity in how the costs and benefits of each initiative
    are integrated or affected by each other. Third, significant issues still
    need to be resolved with the area mail processing (AMP) consolidation
    initiative, to which USPS attributes most of its progress in reducing
    excess machine capacity. In particular, the criteria USPS uses in
    selecting facilities for potential consolidation and making implementation
    decisions are unclear, it does not use consistent data calculations in
    making decisions and, due to data limitations, it cannot consider actual
    delivery performance in its consolidation decision-making or evaluate
    results. While USPS is in the process of making changes to its AMP
    consolidation process, our review of draft procedures indicates that some
    improvements have been made while other issues continue.

    USPS has also made some improvements to its communication practices, but
    these practices continue to have gaps related to engaging stakeholders and
    the public in the realignment process and effectively communicating
    decisions. AMP communication processes do not provide adequate
    notification to stakeholders, lack transparency into how public input is
    considered when USPS makes AMP consolidation decisions, and provide
    limited information to the public after decisions are made. Congress has
    also indicated in the recent postal reform act that it supports USPS's
    efforts to streamline its networks but required USPS to improve its public
    notice processes, make more information available to communities, allow
    affected persons opportunity to provide input to USPS, and to take that
    input into account in decision making. GAO's review of USPS's revised
    guidance indicates that proposed improvements would neither substantively
    change information provided to the public, nor improve the public input
    process.

    Report to Congressional Requesters

    United States Government Accountability Office

    GAO

    June 2007

    U.S. POSTAL SERVICE

    Mail Processing Realignment Efforts Under Way Need Better Integration and
    Explanation

    GAO-07-717

    This report was modified on September 18, 2007, to remove procurement
    sensitive information.

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