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
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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][email protected] 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][email protected]
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
[email protected].
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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References
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45. http://www.gao.gov/cgi-bin/getrpt?GAO-06-733
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