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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  43. http://www.gao.gov/cgi-bin/getrpt?GAO-05-261
  44. http://www.gao.gov/cgi-bin/getrpt?GAO-05-261
  45. http://www.gao.gov/cgi-bin/getrpt?GAO-06-733
  46. http://www.usps.com/
  47. http://www.gao.gov/
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  50. http://www.gao.gov/cgi-bin/getrpt?GAO-07-717
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