U.S. Postal Service: New Delivery Performance Measures Could	 
Enhance Managers' Pay for Performance Program (10-SEP-08,	 
GAO-08-996).							 
                                                                 
The U.S. Postal Service (USPS) pay for performance (PFP) program 
for managers includes quantitative performance indicators. PFP	 
ratings are the basis for salary increases and lump sum awards	 
for nearly 750 Postal Career Executive Service (PCES) executives 
and about 71,700 other participants, mostly Executive and	 
Administrative Schedule (EAS) employees. GAO was requested to	 
provide information about USPS's PFP system. This report (1)	 
describes the key features of USPS's PFP system, (2) provides	 
information on the weight of its performance indicators in	 
determining PFP ratings, and (3) identifies opportunities for	 
USPS to incorporate delivery performance indicators into its PFP 
system. GAO obtained USPS documents and data, interviewed USPS	 
officials, and primarily based its assessment on laws related to 
timely delivery and interviews with senior USPS officials.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-996 					        
    ACCNO:   A84097						        
  TITLE:     U.S. Postal Service: New Delivery Performance Measures   
Could Enhance Managers' Pay for Performance Program		 
     DATE:   09/10/2008 
  SUBJECT:   Accountability					 
	     Customer service					 
	     Employee incentives				 
	     Employee promotions				 
	     Executive compensation				 
	     Internal controls					 
	     Pay for performance				 
	     Performance appraisal				 
	     Performance measures				 
	     Postal service					 
	     Postal service employees				 
	     Program evaluation 				 
	     Program management 				 
	     Quality improvement				 
	     Salary increases					 
	     Strategic planning 				 
	     Mail transportation operations			 
	     Senior Executive Service				 
	     USPS Pay for Performace Program			 

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GAO-08-996

   

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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

September 2008: 

U.S. Postal Service: 

New Delivery Performance Measures Could Enhance Managers' Pay for 
Performance Program: 

USPS Pay for Performance Program: 

GAO-08-996: 

GAO Highlights: 

Highlights of GAO-08-996, a report to congressional requesters. 

Why GAO Did This Study: 

The U.S. Postal Service (USPS) pay for performance (PFP) program for 
managers includes quantitative performance indicators. PFP ratings are 
the basis for salary increases and lump sum awards for nearly 750 
Postal Career Executive Service (PCES) executives and about 71,700 
other participants, mostly Executive and Administrative Schedule (EAS) 
employees. GAO was requested to provide information about USPSï¿½s PFP 
system. This report (1) describes the key features of USPSï¿½s PFP 
system, (2) provides information on the weight of its performance 
indicators in determining PFP ratings, and (3) identifies opportunities 
for USPS to incorporate delivery performance indicators into its PFP 
system. GAO obtained USPS documents and data, interviewed USPS 
officials, and primarily based its assessment on laws related to timely 
delivery and interviews with senior USPS officials. 

What GAO Found: 

Key features of the PFP program are quantitative corporate and unit 
indicators of performance and individual performance elements that are 
used to rate participants and provide the basis for awards. 
Quantitative performance targets are established for corporate and unit 
indicators. Corporate indicators apply to all participants and include 
measures of timely delivery, productivity, revenue, and net income, 
among others. Unit indicators apply to selected groups of participants 
and vary according to the groupsï¿½ responsibilities and span of control. 
Individual performance elements are tailored to the participant group 
and, within some groups, to individuals. Individual performance 
elements may be defined by narrative standards or may be quantitative 
indicators defined with specific target performance levels. The overall 
PFP rating is based on results of corporate and unit indicators and 
individual performance elements and is used to determine the salary 
adjustment and any lump sum award. 

PFP indicators related to three USPS strategic goalsï¿½increasing 
efficiency, improving service, and generating revenuesï¿½collectively 
account for two-thirds of the average participantï¿½s rating (see fig.) 
However, indicator weights vary considerably by participant group, 
based on the responsibilities and span of control of various positions. 

Figure: Percentage of Overall PFP Rating, by Type of Indicator: Average 
for All PFP Participants, Fiscal Year 2008: 

This figure is a pie chart showing the percentage of overall RFP 
rating, by type of indicator, average for all PFP participants. 

Efficieny-related: 27%; 
Individual performance elements: 24%; 
Service-related: 22%; 
Revenue generation: 17%; 
Customer-focused culture: 10%. 

[See PDF for image] 

Source: USPS. 

[End of figure] 

As USPS implements requirements of the postal reform law for measuring 
delivery performance, it will have opportunities to incorporate new 
indicators into its PFP program, notably for timely delivery of 
Standard Mail (49 percent of mail volume in fiscal year 2007) and bulk 
First-Class Mail (25 percent of volume). Once new delivery performance 
measurement systems are fully implemented and mailersï¿½ participation is 
sufficient to generate representative data, USPS will be able to 
incorporate new delivery performance indicators into its PFP program. 
These new indicators would create a more ï¿½balanced scorecardï¿½ that uses 
service performance metrics for the mail that is measured to support 
personal and unit accountability. 

What GAO Recommends: 

The Postmaster General should incorporate new delivery performance 
indicators into its PFP programï¿½such as indicators that cover Standard 
Mail and bulk First-Class Mailï¿½once the necessary measurement systems 
are successfully implemented, including the actions that mailers must 
take to permit meaningful performance measurement. USPS agreed with the 
recommendation and stated that it is committed to incorporating new 
delivery performance measures into PFP. 

To view the full product, including the scope and methodology, click on 
[http://www.gao.gov/cgi-bin/getrpt?GAO-08-996]. For more information, 
contact Phillip R. Herr at (202) 512-2834 or [email protected]. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Key Features of USPS's PFP Program Include Quantitative Performance 
Indicators and Individual Performance Elements: 

Overall PFP Ratings Primarily Depend on Results for Indicators Related 
to Efficiency, Service, and Revenues: 

Opportunities to Incorporate New Delivery Performance Indicators into 
USPS's PFP Program Will Follow Implementation of Delivery Measurement 
Systems: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Number of U.S. Postal Service Pay for Performance 
Participants, by Employee Type, as of December 5, 2007: 

Appendix II: Objectives, Scope, and Methodology: 

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

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Percentage Increase in Salary for PCES Executives Based on 
Overall PFP Rating and Current Salary, Fiscal Year 2008: 

Table 2: PCES Executive PFP Lump Sum Awards Based on Overall PFP 
Rating, Fiscal Year 2008: 

Figures: 

Figure 1: Percentage of Overall PFP Rating, by Type of Performance 
Indicator: Average of All PFP Participants, Fiscal Year 2008: 

Figure 2: Percentage Increase in Salary for EAS Participants Based on 
Overall PFP Rating, Fiscal Year 2008: 

Figure 3: Average PFP Awards for EAS and Other Non-PCES Participants, 
Fiscal Years 2004 through 2007: 

Figure 4: Average PFP Awards for PCES Participants, Fiscal Years 2003 
through 2007: 

Figure 5: Percentage of Overall PFP Rating, by Type of Performance 
Indicator: Average of All PFP Participants, Fiscal Year 2008: 

Figure 6: Percentage of Overall PFP Rating, by Performance Indicator: 
Average of All PFP Participants, Fiscal Year 2008: 

Figure 7: Percentage of Overall PFP Rating, by Type of Performance 
Indicator: Full-Time Postmasters in EAS Levels 11 through 16, Fiscal 
Year 2008: 

Figure 8: Percentage of Overall PFP Rating, by Type of Performance 
Indicator: Postmasters in EAS Levels 21 through 26, Fiscal Year 2008: 

Abbreviations: 

EAS: Executive and Administrative Schedule: 

EEO: equal employment opportunity: 

EXFC: External First-Class Measurement System: 

PCES: Postal Career Executive Service: 

PFP: pay for performance: 

USPS: U.S. Postal Service: 

United States Government Accountability Office: 

Washington, DC 20548: 

September 10, 2008: 

The Honorable Susan M. Collins: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

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

To help accomplish its mission of providing prompt, reliable, and 
efficient universal service, the U.S. Postal Service (USPS) has adopted 
a pay for performance (PFP) program for managers that includes a number 
of quantitative performance indicators. PFP ratings are the basis for 
USPS's annual salary increases and lump sum awards for nearly 750 
Postal Career Executive Service (PCES) executives and about 71,700 
other participants, most of whom are members on the Executive and 
Administrative Schedule (EAS), which includes postmasters, supervisors, 
managers, as well as others who are ineligible for membership in a 
postal labor union.[Footnote 1] USPS implemented its current PFP 
program for PCES executives in fiscal year 2003 and for EAS employees 
in fiscal year 2004.[Footnote 2] Participants rely on the PFP program 
for their annual salary increase, since they do not receive cost-of-
living adjustments, step increases, or other automatic increases to 
their salaries. PFP participants also do not receive locality pay. (See 
app. I for data on the number of USPS PFP participants by employee 
type.) 

According to USPS, the foundation of the PFP program is a "balanced 
scorecard" of independently verifiable performance indicators in 
several areas--such as service, revenue generation, and efficiency--to 
align compensation with individual performance and organizational 
results. USPS uses this approach to help balance the need to keep 
postal rates affordable, address increasing financial pressure, and 
maintain quality delivery service for different types of mail. 
Specifically, according to USPS, the PFP program is a mechanism to help 
manage the organization and its employees; align organizational, unit, 
and individual objectives; link individual contributions to 
organizational success; compare individual performance with established 
targets; recognize and reward individual successes; and ensure 
accountability at all levels of the organization. You requested that we 
provide information about USPS's PFP program. Accordingly, this report 
(1) describes the key features of USPS's PFP program, (2) provides 
information on the weight of the PFP program's performance indicators 
in determining participants' ratings, and (3) identifies opportunities 
for USPS to incorporate new indicators of delivery performance into its 
PFP program. 

To address these objectives, we obtained USPS documentation for the PFP 
program and interviewed officials responsible for the PFP program. We 
also obtained data and information on PFP indicators, including their 
weight. We primarily based our assessment of opportunities for USPS to 
incorporate new delivery performance indicators into its PFP program on 
statutes related to timely mail delivery and interviews with senior 
USPS officials. We conducted a data reliability assessment of USPS's 
PFP information and determined that the information was sufficiently 
reliable for the purposes of our report. More details on our 
objectives, scope, and methodology appear in appendix II. We conducted 
this performance audit from October 2007 to September 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Results in Brief: 

Key features of the PFP program are quantitative corporate and unit 
indicators of performance and individual performance elements, which 
are used to rate participants and provide the basis for awards. 
Quantitative performance targets are established for the corporate and 
unit indicators, and the individual performance elements are tailored 
to the participant group and, within some groups, to individuals. 
Corporate indicators apply to all participants and include measures of 
timely delivery, productivity, revenue, and net income, among others. 
The unit indicators apply to selected groups of participants, such as 
postmasters and managers at various mail processing facilities and vary 
according to the groups' responsibilities and spans of control. Some 
unit indicators apply to most participants, such as the indicator of 
the unit's total operating expenses, while others apply to relatively 
few participants, such as indicators of international mail delivery, 
which apply exclusively to managers at USPS's International Service 
Centers. Individual performance elements, such as leadership and 
communication, may have target performance levels defined by narrative 
standards. Alternatively, the individual performance elements may be 
selected from a predefined list, such as a list of indicators of 
operational effectiveness, and then defined more specifically with 
target performance levels, based on a discussion that involves the 
participant and the participant's rater. USPS then calculates the 
overall PFP rating for each participant based on the results of 
corporate and unit indicators and ratings for individual performance 
elements; this rating is used to determine adjustments to the 
participant's salary and any lump sum award. 

Corporate and unit indicators related to three strategic goals in 
USPS's updated Strategic Transformation Plan[Footnote 3]--increasing 
efficiency, improving service, and generating revenues--collectively 
account for two-thirds of the average participant's rating. More 
specifically, results for efficiency-related indicators, such as USPS's 
overall productivity and unit expenses, account for 27 percent of the 
average participant's PFP rating; results for service-related 
indicators, such as the timeliness of delivery for certain types of 
mail, represent 22 percent of the average rating; and results for 
revenue-generation indicators, such as national and unit revenues, 
account for 17 percent of the average rating (see fig. 1). However, the 
weight of PFP indicators varies considerably by participant group, 
based on the responsibilities and spans of control of various 
managerial and executive positions. 

Figure 1: Percentage of Overall PFP Rating, by Type of Performance 
Indicator: Average of All PFP Participants, Fiscal Year 2008: 

This figure is a pie chart showing the percentage of overall RFP 
rating, by type of indicator, average for all PFP participants. 

Efficieny-related: 27%; 
Individual performance elements: 24%; Service-related: 22%; 
Revenue generation: 17%; 
Customer-focused culture: 10%. 

[See PDF for image] 

Source: USPS. 

Note: Results are rounded to the nearest percent. 

[End of figure] 

As USPS implements the postal reform law's requirements to measure and 
report to the Postal Regulatory Commission delivery performance for all 
market-dominant products, which collectively represent 99 percent of 
mail volume, USPS will have opportunities to incorporate new indicators 
into its PFP program. These new indicators would create a more 
"balanced scorecard" that uses service performance metrics for the mail 
that is measured to support personal and unit accountability. 
Currently, PFP indicators of timely delivery apply to less than one- 
fifth of mail volume. USPS is in the process of implementing required 
measurement of delivery performance for market-dominant mail, including 
new delivery performance measurement systems for mail that is not being 
measured--such as Standard Mail, bulk First-Class Mail, and 
Periodicals.[Footnote 4] Together, these three mail types constitute 78 
percent of mail volume, including 49 percent for Standard Mail, 25 
percent for bulk First-Class Mail, and 4 percent for Periodicals. USPS 
has recognized that the successful implementation of these new 
measurement systems will depend, in part, on actions by mailers. USPS 
expects these actions--including barcoding mail and containers, as well 
as providing electronic information on mailings--to become more 
widespread over the next several years. Once the new delivery 
performance measurement systems are fully implemented and mailers' 
participation is sufficient to generate representative data, USPS will 
have the opportunity to incorporate new delivery performance indicators 
into its PFP program. Such action would be consistent with USPS's 
actions in the past to implement delivery performance measurement 
systems for Parcel Select and some types of International Mail, 
establish targets, identify opportunities to improve service, and to 
incorporate the measurement data into the PFP program to hold managers 
accountable for results. These actions have been credited with 
improving timely delivery performance for these types of mail, both of 
which operate in a highly competitive marketplace. Accordingly, we are 
recommending that the Postmaster General incorporate new delivery 
performance indicators into the PFP program--such as indicators that 
cover Standard Mail and bulk First-Class Mail--once the necessary 
measurement systems are successfully implemented, including the actions 
that mailers must take to permit meaningful performance measurement. In 
its comments on our draft report, USPS concurred with the 
recommendation and said it was committed to incorporating new delivery 
performance measures into its PFP program. 

Background: 

Delivering more than 210 billion pieces of mail each year, USPS has a 
mission vital to the nation's communications and commerce. To meet its 
statutory universal service obligation, which requires it to "serve as 
nearly as practicable the entire population of the United States," USPS 
must "provide prompt, reliable, and efficient services to patrons in 
all areas" and "render postal services to all communities."[Footnote 5] 
In selecting modes of transportation, USPS is required to "give highest 
consideration to the prompt and economical delivery of all 
mail."[Footnote 6] Although USPS is authorized by law to receive 
appropriations for reimbursement of public service costs incurred by it 
in providing a maximum degree of effective and regular postal service 
nationwide, in communities where post offices may not be deemed self- 
sustaining, USPS has neither requested nor received such appropriations 
since 1982.[Footnote 7] USPS receives only minimal appropriations for 
reimbursement for providing free mail for the blind and overseas 
voting, which USPS refers to as "revenue foregone," that, in fiscal 
year 2007, represented less than 0.2 percent of its total 
revenues.[Footnote 8] USPS generated 99.8 percent of its total revenues 
from products and services, with mail revenues accounting for the vast 
majority (94.8 percent of total revenues). 

However, USPS faces an increasingly competitive environment. As some 
communications and payments have migrated to electronic alternatives, 
including the Internet, First-Class Mail, which historically has 
covered most overhead costs, has declined in volume, and more declines 
are expected. According to USPS, "The projected decline of First-Class 
Mail impacts the Postal Service's ability to continue to finance the 
growing universal service network. This is the single greatest 
challenge facing the Postal Service."[Footnote 9] Although Standard 
Mail (primarily advertising) is USPS's largest class of mail and key 
growth product, it is more price sensitive. Standard Mail volume has 
recently declined in the wake of postal rate increases and the economic 
downturn, and its future prospects are unclear as advertising 
expenditures continue to shift to the Internet. In this regard, a joint 
USPS-mailer work group recently reported that "Standard Mail must be 
delivered in a timely and consistent manner to the end customer 
according to published standards, in order to remain a viable growth 
product for its users and the Postal Service, and to remain competitive 
with alternative advertising media."[Footnote 10] Standard Mail growth 
will be critical to offset rising costs, primarily rising compensation 
and benefits costs that have consistently represented nearly 80 percent 
of USPS's expenses. 

USPS has restrained cost growth in recent years, in part through 
automation and other productivity initiatives that helped reduce the 
number of career employees from a peak of nearly 800,000 in September 
1999 to fewer than 670,000 in September 2007. However, as USPS has 
recognized, continued productivity gains are needed in the face of the 
changing mail mix, sustained and evolving competition, and a 
challenging economic environment. USPS has recognized that given its 
workforce costs, continued work hour reductions are necessary to 
achieve productivity gains. 

The 2006 postal reform act generally limits rate increases for most 
mail to an inflationary price cap.[Footnote 11] The reform act also 
abolished the statutory mandate to break even financially over 
time.[Footnote 12] As a result, USPS generally cannot address financial 
losses with above-inflation rate increases, which underscores the need 
to remain financially viable by sufficiently growing revenues, 
restraining costs, or both. However, USPS recently reported that fiscal 
year 2008 revenues have not been covering costs, which have grown 
faster than the price cap. 

Key Features of USPS's PFP Program Include Quantitative Performance 
Indicators and Individual Performance Elements: 

The PFP program includes quantitative corporate and unit indicators of 
performance and individual performance elements, both of which are used 
to rate PFP participants. According to USPS, the PFP program places 
emphasis on performance indicators that are objective and measurable. 
To this end, target levels of performance, expressed in quantitative 
terms, are established for the corporate and unit indicators, and PFP 
participants receive higher ratings as higher targets are achieved. In 
fiscal year 2008, 12 corporate indicators apply to all PFP 
participants,[Footnote 13] including measures of timely mail delivery, 
productivity, revenue, and net income, among other things. A total of 
53 unit indicators apply to selected groups of participants, such as 
groups of postmasters and managers at various mail processing 
facilities, depending on their responsibilities and spans of control. 
Some unit indicators apply to most participants, such as the indicator 
of total operating expenses. Other indicators apply to relatively few 
participants, such as indicators of international mail delivery, which 
apply exclusively to managers at USPS International Service Centers. 

Besides being rated on results for corporate and unit indicators, each 
PFP participant is rated on individual performance elements that vary 
depending on the participant group and, within some groups, are 
tailored to each participant. Some individual performance elements have 
target levels of performance defined by narrative standards that are 
centrally established by USPS. For example, EAS postmasters have two 
individual performance elements that are defined by narrative 
standards: (1) fiscal management and (2) leadership and communication. 
Alternatively, other individual performance elements may be selected 
from a predefined list and then defined more specifically with target 
performance levels, based on a discussion that involves the participant 
and the participant's rater. For example, some individual performance 
elements for a field operations manager must be selected from a list, 
which includes, among other things, operational productivity, the rate 
of scanning barcodes on mail pieces, and overtime usage. If an 
individual performance element involving operational productivity is 
selected, it is then defined with target performance levels for 
specific mail processing, delivery, maintenance, and customer service 
operations, depending on the responsibilities of the field operations 
manager. 

Corporate and Unit Indicators: 

Corporate and unit indicators are weighted to reflect organizational 
priorities. More heavily weighted indicators play a larger role in 
determining the overall PFP rating, while less heavily weighted 
indicators play a smaller role. To the extent that indicator weights 
vary--which can be substantially, depending on the indicator and the 
participant's position--the indicator makes a different contribution to 
the overall PFP rating and the resulting salary adjustments and any 
lump sum awards. 

USPS establishes 15 target performance levels for each corporate and 
unit indicator. As more challenging targets (i.e., higher levels of 
performance) are reached, the indicator increases the overall PFP 
rating and the associated PFP award. Thus, indicator targets create 
incentives for PFP participants to maximize results for each indicator. 

Targets for some indicators are based on actual results achieved for 
the current fiscal year (e.g., the percentage of a specified type of 
mail delivered on time), while others are based on year-to-year 
improvement (e.g., the reduction in formal equal employment opportunity 
complaints). In some cases, targets are based on the USPS budget. For 
example, unit indicator targets are defined for total operating 
expenses relative to the final budget. To the extent that operating 
expenses are reduced below the budgeted level, higher target levels are 
achieved. These targets can be adjusted by various levels of management 
throughout the fiscal year, depending on numerous factors, such as 
changes in USPS's overall financial condition, increases in fuel 
prices, changes in local mailing volumes, and unexpected local 
expenses, among other things. 

Corporate and unit indicators are measured against targets at various 
levels of geographic aggregation, depending on the indicator and the 
participant's group. For example, some corporate indicators are 
measured at the national level, such as indicators of productivity, 
revenue, and net income. Other indicators are measured at different 
geographic levels. For example, for a postmaster of a small post 
office, the unit's total operating expense indicator is defined as the 
total expenses of that post office. For a district executive, the unit 
operating expense indicator is defined as the total expenses of the 
entire district. 

In some instances, USPS permits "mitigation" adjustments to the data 
used to measure achievement against targets. Some individual mitigation 
adjustments are intended to take into account events that are outside 
the control of the participant, such as a fire that results in the 
temporary suspension of a post office's operations. Other mitigation 
adjustments are processed in batches for multiple units and 
participants, such as adjustments that were made after postal 
operations were disrupted by Hurricane Katrina. 

Administration of the PFP Program: 

USPS has established a structured process for administering the PFP 
program. Each participant is assigned a rater, who is generally the 
participant's immediate supervisor. At the beginning of the fiscal 
year, the rater is required to discuss PFP indicators and targets with 
the participant, including goals for corporate and unit indicators and 
individual performance elements. During the year, a midyear PFP review 
is used for the participant to record accomplishments to date, and the 
rater meets with the participant to review progress toward PFP targets. 
At the end of the year, the participant records accomplishments, and 
the rater meets with the participant and assigns ratings on individual 
performance elements. USPS then calculates the overall PFP rating for 
each participant based on the results of corporate and unit indicators 
and ratings for individual performance elements; this rating is used to 
determine adjustments to the participant's salary and any lump sum 
award. 

PFP Awards: 

The overall PFP rating is used to determine salary increases and any 
lump sum awards based on separate schedules that apply to EAS and PCES 
participants. First, for each participant, an overall rating is 
calculated based on the weighted outcomes for corporate and unit 
indicators and individual performance elements. Since each indicator 
and individual performance element produces an outcome ranging from 1 
to 15, the overall rating also ranges from 1 to 15. The rating is 
rounded to the nearest whole number for the purpose of determining the 
PFP award. 

For EAS participants, all PFP awards are in the form of percentage 
increases to their salaries. For fiscal year 2008, the PFP award can 
range from 0 to 12 percent of the EAS participant's salary, as shown in 
figure 2. 

Figure 2: Percentage Increase in Salary for EAS Participants Based on 
Overall PFP Rating, Fiscal Year 2008: 

This figure is a vertical bar chart showing percentage increase in 
salary for EAS participants based on overall PFP rating, fiscal year 
2008. The X axis represents the overall rating, and the Y axis 
represents the PFP award (percent of salary). 

Overall rating: 1; 
PFP award (percent of salary): 0. 

Overall rating: 2; 
PFP award (percent of salary): 0. 

Overall rating: 3; 
PFP award (percent of salary): 0. 

Overall rating: 4; 
PFP award (percent of salary): 2.5. 

Overall rating: 5; 
PFP award (percent of salary): 3. 

Overall rating: 6; 
PFP award (percent of salary): 3.5. 

Overall rating: 7; 
PFP award (percent of salary): 5. 

Overall rating: 8; 
PFP award (percent of salary): 5.75. 

Overall rating: 9; 
PFP award (percent of salary): 6.5. 

Overall rating: 10; 
PFP award (percent of salary): 8. 

Overall rating: 11; 
PFP award (percent of salary): 8.75. 

Overall rating: 12; 
PFP award (percent of salary): 9.5. 

Overall rating: 13; 
PFP award (percent of salary): 10.25. 

Overall rating: 14; 
PFP award (percent of salary): 11. 

Overall rating: 15; 
PFP award (percent of salary): 12. 

[See PDF for image] 

Source: USPS. 

Note: If an EAS participant is paid at or above the top of the salary 
structure, the amount of the salary increase over the maximum in the 
salary structure is converted into a PFP lump sum award. Similarly, if 
a participant's salary increase would exceed the top of the salary 
structure, the salary is increased to the maximum at that level, and 
the remaining award is converted into a lump sum award. EAS 
participants do not receive any other PFP lump sum awards. 

[End of figure] 

For PCES executives, PFP awards take the form of salary increases and 
lump sum awards. Salary increases depend on the overall PFP rating, as 
well as each executive's current salary relative to the maximum of his 
or her salary range, as shown in table 1. However, no salary increases 
are converted to lump sum awards, as they may be for EAS participants. 

Table 1: Percentage Increase in Salary for PCES Executives Based on 
Overall PFP Rating and Current Salary, Fiscal Year 2008: 

Overall rating: 1-3; 
Current salary: 30.0% or more below maximum: No increase; 
Current salary: 20.0% to 29.9% below maximum: No increase; 
Current salary: 10.0% to 19.9% below maximum: No increase; 
Current salary: 0.1% to 9.9% below maximum: No increase; 
Current salary: At maximum: No increase. 

Overall rating: 4-6; 
Current salary: 30.0% or more below maximum: Up to 7% increase; 
Current salary: 20.0% to 29.9% below maximum: Up to 5% increase; 
Current salary: 10.0% to 19.9% below maximum: Up to 3% increase; 
Current salary: 0.1% to 9.9% below maximum: Up to 3% increase; 
Current salary: At maximum: Up to new salary maximum. 

Overall rating: 7-9; 
Current salary: 30.0% or more below maximum: Up to 10% increase; 
Current salary: 20.0% to 29.9% below maximum: Up to 8% increase; 
Current salary: 10.0% to 19.9% below maximum: Up to 6% increase; 
Current salary: 0.1% to 9.9% below maximum: Up to 4% increase; 
Current salary: At maximum: Up to new salary maximum. 

Overall rating: 10-12; 
Current salary: 30.0% or more below maximum: Up to 12% increase; 
Current salary: 20.0% to 29.9% below maximum: Up to 10% increase; 
Current salary: 10.0% to 19.9% below maximum: Up to 8% increase; 
Current salary: 0.1% to 9.9% below maximum: Up to 6% increase; 
Current salary: At maximum: Up to new salary maximum. 

Overall rating: 13-15; 
Current salary: 30.0% or more below maximum: 14% increase; 
Current salary: 20.0% to 29.9% below maximum: 12% increase; 
Current salary: 10.0% to 19.9% below maximum: 10% increase; 
Current salary: 0.1% to 9.9% below maximum: Up to 8% increase; 
Current salary: At maximum: Up to new salary maximum. 

Source: USPS. 

[End of table] 

In addition to a salary increase, a PCES executive may receive a PFP 
lump sum award that is based on his or her overall rating. This lump 
sum award is paid as a percentage of the executive's salary, as shown 
in table 2, for individuals with an overall rating of 4 and above, 
which is considered to be a minimum threshold for a lump sum award. 

Table 2: PCES Executive PFP Lump Sum Awards Based on Overall PFP 
Rating, Fiscal Year 2008: 

PFP rating: 1; 
Salary increase (in percent): 0. 

PFP rating: 2; 
Salary increase (in percent): 0. 

PFP rating: 3; 
Salary increase (in percent): 0. 

PFP rating: 4; 
Salary increase (in percent): 1. 

PFP rating: 5; 
Salary increase (in percent): 2. 

PFP rating: 6; 
Salary increase (in percent): 3. 

PFP rating: 7; 
Salary increase (in percent): 4. 

PFP rating: 8; 
Salary increase (in percent): 5. 

PFP rating: 9; 
Salary increase (in percent): 6. 

PFP rating: 10; 
Salary increase (in percent): 8. 

PFP rating: 11; 
Salary increase (in percent): 9. 

PFP rating: 12; 
Salary increase (in percent): 10. 

PFP rating: 13; 
Salary increase (in percent): 12. 

PFP rating: 14; 
Salary increase (in percent): 13. 

PFP rating: 15; 
Salary increase (in percent): 14-15. 

Source: USPS. 

Note: PCES participants may receive lump sum awards in addition to the 
salary increases shown in table 1. However, no PCES salary increases 
are converted to lump sum awards, as they may be for EAS participants. 

[End of table] 

Average PFP awards as a percentage of salary for EAS and other non-PCES 
participants[Footnote 14] are shown in figure 3, from fiscal year 2004-
-the first year of the current PFP program for EAS participants-- 
through fiscal year 2007. 

Figure 3: Average PFP Awards for EAS and Other Non-PCES Participants, 
Fiscal Years 2004 through 2007: 

This figure is a combination verticle bar graph showing averge PFP 
awards for EAS and other non-PCES participants, fiscal years 2004 
through 2007. THe X axis represents the fiscal years, and the Y axis 
represents the percent of salary. 

Fiscal year: 2004; 
Average lump sum payment: 1.1; 
Average salary increase: 5.4; 
Total: 6.5. 

Fiscal year: 2005; 
Average lump sum payment: 1.0; 
Average salary increase: 4.6; 
Total: 5.6. 

Fiscal year: 2006; 
Average lump sum payment: 1.2; 
Average salary increase: 3.9; 
Total: 5.1. 

Fiscal year: 2007; 
Average lump sum payment: 1.5; 
Average salary increase: 3.7; 
Total: 5.2. 

[See PDF for image] 

Source: USPS. 

Note: Other participants include attorneys and other headquarters 
employees not in the PCES or EAS. 

[End of figure] 

Average PFP awards for PCES participants are shown in figure 4, from 
fiscal year 2003--the first year of the current PFP program for PCES 
participants--through fiscal year 2007. 

Figure 4: Average PFP Awards for PCES Participants, Fiscal Years 2003 
through 2007: 



[See PDF for image] 

Source: USPS. 

Note: Data are for participants in PCES level I. A separate PFP program 
applies to PCES level II, which consists of USPS officers. 

[End of figure] 

Overall PFP Ratings Primarily Depend on Results for Indicators Related 
to Efficiency, Service, and Revenues: 

Overall PFP ratings primarily depend on results for corporate and unit 
indicators related to USPS's strategic goals of increasing efficiency, 
improving service, and generating revenue. Collectively, these 
indicators are weighted so that they account for two-thirds (66 
percent) of the PFP rating for the average PFP participant in fiscal 
year 2008 (see fig. 5). 

Figure 5: Percentage of Overall PFP Rating, by Type of Performance 
Indicator: Average of All PFP Participants, Fiscal Year 2008: 

This figure is a pie chart showing the percentage of overall RFP 
rating, by type of indicator, average for all PFP participants. 

Efficieny-related: 27%; 
Individual performance elements: 24%; 
Service-related: 22%; 
Revenue generation: 17%; 
Customer-focused culture: 10%. 

[See PDF for image] 

Source: USPS. 

Note: Results are rounded to the nearest percent. 

[End of figure] 

Figure 5 shows that for fiscal year 2008, results for efficiency- 
related indicators, which are corporate and unit indicators, such as 
USPS's overall productivity and total unit expenses, make up 27 percent 
of the PFP rating for the average participant. Results for service- 
related indicators, such as corporate and unit indicators for timely 
delivery of different types of mail, represent 22 percent of the 
average rating. Results for corporate and unit revenue-generation 
indicators, such as national and unit revenues, account for 17 percent 
of the average rating. An additional 10 percent of the rating consists 
of results for corporate and unit indicators related to USPS's 
strategic goal of creating a more customer-focused culture.[Footnote 
15] The remaining 24 percent of the rating reflects the results for 
individual performance elements, such as oral communication and other 
quantitative indicators, some of which were tailored to the individual. 

USPS officials have stated that indicators are weighted to reflect 
their relative importance to accomplishing USPS's strategic goals, as 
well as their applicability to individual positions based on the 
individual's responsibilities and span of control. According to USPS, 
the PFP program thereby recognizes and rewards individual performance 
that improves corporate and unit performance, particularly in high- 
priority areas. 

Consistent with this approach, some indicators are more heavily 
weighted than others. Among efficiency-related indicators, two 
indicators make the largest contribution to the overall PFP rating: 
total unit expenses (16 percent of the overall rating) and national 
productivity (5.6 percent of the rating) (see fig. 6). The 22 other 
efficiency-related indicators account for 5 percent of the overall 
rating, in part because some of these indicators measure results for 
specific USPS operations and, thus, are applicable to relatively few 
PFP participants. However, these indicators can have a significant 
weight for the participants they apply to. Among service-related 
indicators, the 13 indicators measuring timely delivery of the various 
mail types account for 16.4 percent of the overall rating. The 10 other 
service-related indicators account for 5.4 percent of the rating. Among 
revenue-generation indicators, the two most heavily weighted indicators 
are unit retail revenue (e.g., revenue from individual pieces of mail 
deposited at a post office), which represents 7.7 percent of the 
overall rating, and national revenue, which represents 5.7 percent of 
the rating. Five other revenue-generation indicators account for 3.9 
percent of the overall rating. 

Figure 6: Percentage of Overall PFP Rating, by Performance Indicator: 

Average of All PFP Participants, Fiscal Year 2008: 

This figure is a pie chart showing percentage of overall PFP rating, by 
performance indicator, average of all PFP participants, fiscal year 
2008. 

Individual performance elements: 23.9%; 
Timely mail delivery: 16.4%; 
Total unit expenses: 16%; 
Unit retail revenue: 7.7%; 
National revenue: 5.7%; 
National productivity: 5.6%; 
Other service-related: 5.4%; 
Other efficiency-related: 5%; 
Other revenue generation: 3.9%; 
Injury/illness rate: 3.8%; 
Employee survey results: 3.8%; 
Other customer-focused culture: 2.8%. 

[See PDF for image] 

Source: USPS. 

Note: Efficiency-related indicators include total unit expenses (a unit 
indicator), national productivity (a corporate indicator), and other 
efficiency-related indicators that are unit indicators. Service- 
related indicators include corporate and unit indicators for timely 
mail delivery and other corporate and unit service-related indicators. 
Revenue-generation indicators include unit retail revenue (a unit 
indicator), national revenue (a corporate indicator), and other 
corporate and unit revenue-generation indicators. Customer-focused 
culture indicators include the injury/illness rate and employee survey 
results (both corporate indicators) and other corporate and unit 
customer-focused culture indicators. Results are rounded to the nearest 
0.1 percent and add to 100 percent. 

[End of figure] 

The Weight of PFP Indicators Varies Considerably by Participant Group: 

The weight of PFP indicators varies considerably by participant group, 
based on the responsibilities and spans of control of various 
managerial and executive positions. For example, for the 14,754 full- 
time postmasters in EAS levels 11 through 16, who generally head small 
post offices,[Footnote 16] 33 percent of the overall PFP rating is 
based on the total unit expenses indicator (see fig. 7). In contrast, 
this indicator accounts for 12 percent of the rating for the 2,365 
postmasters in EAS levels 21 through 26 (see fig. 8), who generally 
head larger post offices.[Footnote 17] The overall rating of 
postmasters in EAS levels 21 through 26 is more dependent on a variety 
of other indicators related to efficiency, timely mail delivery, and 
revenue generation. 

Figure 7: Percentage of Overall PFP Rating, by Type of Performance 
Indicator: Full-Time Postmasters in EAS Levels 11 through 16, Fiscal 
Year 2008: 

This figure is a pie chart showing percentage of overall PFP rating, by 
type of performance indicator, full time postmasters in EAS levels 11 
through 16, fiscal year 2008. 

Total unit expenses: 33%; 
Individual performance elements: 20%; 
Timely mail delivery: 10%; 
Sorting mail into delivery order: 5.5%; 
Retail customer satisfaction: 5.5%; 
Morot vehicle accident rate: 5.5%; 
Unit retail revenue: 5.5%; 
National revenue: 3.75%; 
Net income: 2.5%; 
Injury/illness rate: 2.5%; 
Employee survey results: 2.5%. 

[See PDF for image] 

Source: USPS. 

Note: Post offices headed by EAS postmasters in EAS levels 11 through 
16 generally have annual revenues between $30,000 and $300,000. EAS 
levels are assigned to postmasters based on a combination of their 
responsibilities, the number of their employees, the size of the post 
office facility, and various operations performed by the post office. 
Efficiency-related indicators include total unit expenses (a unit 
indicator) and national productivity (a corporate indicator). Service- 
related indicators include corporate indicators for timely mail 
delivery and other corporate and unit service-related indicators. 
Revenue-generation indicators include corporate indicators for national 
revenue and net income. Customer-focused culture indicators include the 
injury/illness rate and employee survey results (both corporate 
indicators) and other corporate and unit customer-focused culture 
indicators. Results are not rounded and add to 100 percent. 

[End of figure] 

Figure 8: Percentage of Overall PFP Rating, by Type of Performance 
Indicator: Postmasters in EAS Levels 21 through 26, Fiscal Year 2008: 

This figure is a pie chart showing percentage of overall PFP rating, by 
type of performanc indicator: postmasters in EAS levels 21 through 26, 
fiscal year 2008. 

Unit retail revenue: 28%; 
Individual performance elements: 20%; 
Timely mail delivery: 16%; 
Total unit expenses: 12%; 
National productivity: 6%; 
National revenue: 6%; 
Net income: 4%; 
Injury/illness rate: 4%; 
Employee survey results: 4%. 

[See PDF for image] 

Source: USPS. 

Note: Post offices headed by EAS postmasters in levels 21 through 26 
generally have annual revenues between $5 million and $150 million. EAS 
levels are assigned to postmasters based on a combination of their 
responsibilities, the number of their employees, the size of the post 
office facility, and various operations performed by the post office. 
Efficiency-related indicators include total unit expenses (a unit 
indicator) and national productivity (a corporate indicator). Service- 
related indicators include corporate indicators for timely mail 
delivery. Revenue-generation indicators include corporate indicators 
for national revenue and net income. Customer-focused culture 
indicators include corporate indicators for the injury/illness rate and 
employee survey results. Results are not rounded and add to 100 
percent. 

[End of figure] 

Additional examples of how indicator weights vary for participants in 
different positions include the following: 

* The retail revenues indicator is most heavily weighted for upper- 
level EAS postmasters. This indicator accounts for 35 percent of the 
overall PFP rating for the 6,853 postmasters in EAS levels 18 through 
20 and 28 percent of the rating for the 2,365 postmasters in EAS levels 
21 through 26; it makes up 5.5 percent of the rating for the 14,754 
postmasters in EAS levels 11 through 16 and does not factor into the 
overall PFP rating for the 1,126 part-time EAS postmasters of small 
post offices (i.e., Cost Ascertainment Grouping levels A through E). To 
put the use of this indicator into context, USPS is looking to generate 
revenues through postmaster and other employee outreach to households 
and small businesses and has multiple programs for outreach to small 
business customers to promote the convenience and value of postal 
services. 

* Three indicators related to equal employment opportunity (EEO) 
account for 35 percent of the overall PFP rating for the 167 managers 
with responsibilities in this area. These indicators measure outcomes 
of EEO complaints, including the percentage of informal complaints that 
become formal complaints, the number of formal complaints, and the 
processing time for complaints that are mediated. These indicators 
support USPS's emphasis on improving EEO processes and processing EEO 
complaints in a timely manner, and USPS classified these indicators as 
related to its strategic goal of creating a more customer-focused 
culture. USPS has provided training to supervisors and managers on the 
importance of EEO, open communication, and the benefits of resolving 
complaints at the lowest possible level. 

* Various unit indicators apply to the 13,458 EAS field managers who 
work in the mail processing area, such as indicators of the efficient 
use and maintenance of mail processing equipment. These indicators 
support USPS's efforts to improve efficiency and service, and for some 
field managers, represent 21 percent of their rating. Other mail 
processing indicators measure the scanning of barcodes on mail 
containers and equipment used in mail processing operations--an 
activity that is critical to USPS's efforts to track mail, thereby 
improving service and efficiency. 

Opportunities to Incorporate New Delivery Performance Indicators into 
USPS's PFP Program Will Follow Implementation of Delivery Measurement 
Systems: 

As USPS implements the postal reform law's requirements for measuring 
and reporting its delivery performance for all market-dominant 
products, which collectively make up nearly 99 percent of mail volume, 
USPS will have opportunities to incorporate new indicators into its PFP 
program, notably for Standard Mail and bulk First-Class Mail. 

PFP indicators of timely delivery apply to only some types of 
mail[Footnote 18] because, as we reported in July 2006, USPS measures 
timely delivery for less than one-fifth of mail volume, with no 
representative measures for Standard Mail (48.8 percent of volume), 
bulk First-Class Mail (25.3 percent of volume), Periodicals (4.1 
percent of volume), and most types of Package Services (0.5 percent of 
volume).[Footnote 19] However, in December 2006, Congress enacted 
postal reform legislation that requires USPS to measure and report to 
the Postal Regulatory Commission on the delivery performance of market- 
dominant products, which include mail such as Standard Mail, bulk and 
single-piece First-Class Mail, and Periodicals. 

USPS is in the process of implementing new delivery performance 
measurement systems for market-dominant mail types that are not 
currently being measured--such as Standard Mail, bulk First-Class Mail, 
and Periodicals. Together, these three mail types constitute 78 percent 
of mail volume, including 49 percent for Standard Mail, 25 percent for 
bulk First-Class Mail, and 4 percent for Periodicals. USPS has 
recognized that the successful implementation of these new measurement 
systems will depend, in part, on mailers' barcoding mail and 
containers, as well as providing electronic information on mailings. 
USPS expects these activities to become more widespread over the next 
several years. Once such systems are fully implemented and mailers' 
participation is sufficient to generate representative data, USPS will 
have the opportunity to incorporate new delivery performance indicators 
into its PFP program. Such action would be consistent with the approach 
USPS has taken in recent years to incorporate new performance 
indicators into its PFP program. 

In addition, the External First-Class Measurement System (EXFC), which 
is incorporated into the PFP program to measure the timely delivery of 
single-piece First-Class Mail, has not been a systemwide indicator for 
this type of mail, in part because EXFC has measured delivery 
performance for mail deposited in collection boxes only in selected 
areas of the country.[Footnote 20] USPS is expanding EXFC coverage to 
include nearly all geographic areas. According to a senior USPS 
official, as EXFC coverage is expanded in fiscal year 2008, the 
additional data are being incorporated into the fiscal year 2008 
indicators for single-piece First-Class Mail. This development is 
consistent with USPS's actions in the past to implement delivery 
performance measurement systems for Parcel Select and some types of 
International Mail, establish targets, identify opportunities to 
improve service, and to incorporate the measurement data into the PFP 
program to hold managers accountable for results. These actions have 
been credited with improving timely delivery performance for these 
types of mail, both of which operate in a highly competitive 
marketplace. 

To put these developments into context, in 2006, USPS said that its 
goal of improving service--which continues to be one of its primary 
goals--is supported by a "balanced scorecard" that uses service 
performance metrics for the mail that is measured to support personal 
and unit accountability. USPS noted that goals for these metrics--which 
include delivery performance indicators, as well as operational 
indicators that USPS said are critical to on-time service performance-
-were incorporated into the PFP program. We have agreed with USPS's 
focus on improving service and holding its managers accountable for 
results but noted in 2006 that USPS has not yet achieved its aim of a 
"balanced scorecard" for delivery performance because its delivery 
performance indicators cover less than one-fifth of mail volume, and 
these indicators do not cover Standard Mail, bulk First-Class Mail, 
Periodicals, and most Package Services mail. We observed that this gap 
in coverage has impeded USPS's potential for holding its managers 
accountable for the delivery performance of all types of mail and for 
balancing increasing financial pressures with the need to maintain 
quality delivery service.[Footnote 21] 

In 2007, the Chairman of the USPS Board of Governors noted in 
congressional testimony, "To improve service, we need better metrics on 
performance. As George Mason University President Alan Merten says, 
'What gets measured gets better.'"[Footnote 22] The delivery 
performance indicators that USPS has implemented and incorporated into 
PFP incentives have been credited with stimulating improved service. 
For example, USPS created delivery standards and indicators for Parcel 
Select service in 1999, which it then incorporated into PFP incentives. 
In September 2007, the Deputy Postmaster General cited USPS's delivery 
performance for Parcel Select as an example of substantial improvement 
resulting from measuring and building results into its PFP program, 
thereby holding managers accountable. 

Conclusions: 

To fulfill its mission of providing universal postal service, USPS is 
required to provide prompt mail delivery throughout the nation. USPS 
can help improve delivery service by incorporating new delivery 
performance indicators for market-dominant products that represent most 
mail volume into its PFP program. Incorporating new delivery indicators 
would hold postal managers accountable for results. We recognize that 
incorporating such indicators would depend on successful implementation 
of the new measurement systems--which will depend not only on USPS but 
also on mailers, who must barcode the mail and provide necessary 
information in electronic format, among other things. It will take time 
to implement new delivery performance measurement systems at a level 
that permits meaningful performance measurement and incorporation into 
the PFP program. Thus, over time, USPS will have an opportunity to 
incorporate new delivery performance indicators into its PFP program-- 
such as indicators of timely delivery for Standard Mail and bulk First- 
Class Mail--to produce a more balanced scorecard of PFP indicators. As 
USPS has recognized, what gets measured gets better, and PFP indicators 
help drive performance improvement. 

Recommendation for Executive Action: 

We are making one recommendation that the Postmaster General 
incorporate new delivery performance indicators into the PFP program-- 
such as indicators that cover Standard Mail and bulk First-Class Mail-
-once the necessary measurement systems are successfully implemented, 
including the actions that mailers must take to permit meaningful 
performance measurement. 

Agency Comments and Our Evaluation: 

USPS provided written comments on a draft of this report in a letter 
dated August 4, 2008, from the Senior Vice President of Operations and 
the Vice President of Employee Resource Management. USPS's comments are 
summarized below and the letter is reproduced in appendix III. In 
separate correspondence, USPS also provided technical comments, which 
we incorporated, as appropriate. 

USPS concurred with our recommendation and said it was committed to 
incorporating new delivery performance measures into its PFP program. 
USPS noted that in its June 2008 response to Congress regarding the 
Postal Accountability and Enhancement Act,[Footnote 23] USPS identified 
implementing expanded measurement systems for single-piece First-Class 
Mail, new systems for bulk First-Class Mail, Standard Mail, 
Periodicals, and bulk Package Services mail and stated that 
implementation of these systems will continue through fiscal year 2009. 
USPS agreed with our draft report that successful implementation of new 
measurement systems will depend, in part, on mailers barcoding mail and 

containers, as well as providing electronic information on mailings. 
USPS said that in addition to expanding measurement systems for its 
market-dominant products during fiscal year 2009, it will also develop 
historical data to assist with the creation of future performance 
targets. USPS also provided comments on its PFP program, stating that 
the program's approach has been responsible for substantial performance 
improvements and is consistent with past efforts to ensure the proper 
balance of performance indicators. 

We are sending copies of this report to the Chairman of the Senate 
Committee on Homeland Security and Governmental Affairs; the Ranking 
Minority Member of the Subcommittee on Federal Financial Management, 
Government Information, Federal Services, and International Security, 
Senate Committee on Homeland Security and Governmental Affairs; the 
Chairman and Ranking Minority Member of the House Committee on 
Oversight and Government Reform; the Chairman and Ranking Minority 
Member of the Subcommittee on Federal Workforce, Postal Service, and 
the District of Columbia, House Committee on Oversight and Government 
Reform; the Chairman of the USPS Board of Governors; the Postmaster 
General; the USPS Inspector General; and other interested parties. We 
also will provide copies to others on request. In addition, the report 
will be available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at [email protected] or (202) 512-2834. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made key contributions to 
this report are listed in appendix IV. 

Signed by: 

Phillip R. Herr: 

Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: Number of U.S. Postal Service Pay for Performance 
Participants, by Employee Type, as of December 5, 2007: 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: EAS Postmaters: 
Postmasters, level 21-26; 
Number of participants: 2,365. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: EAS Postmaters: 
Postmasters, level 18-20; 
Number of participants: 6,853. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: EAS Postmaters: 
Postmasters, level 11-16; 
Number of participants: 14,754. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: EAS Postmaters: 
Postmasters, level A-E; 
Number of participants: 1,126. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: EAS Postmaters: 
Subtotal; 
Number of participants: 25,098. 

U.S. Postal Service (USPS) employee type: U.S. Postal Service (USPS) 
employee type: Executive and Administrative Schedule (EAS) and other 
non-EAS participants: * Other field EAS employees (including district 
and facility EAS): * Field customer service EAS: * Manager of Customer 
Service Operations at a post office; 
Number of participants: 447. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field customer 
service EAS: * EAS at Postal Career Executive Service (PCES) post 
office; 
Number of participants: 1,307. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field customer 
service EAS: * EAS at grade 21-26 post office; 
Number of participants: 8,258. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field customer 
service EAS: * EAS at grade 18-20 post office; 
Number of participants: 2,525. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field customer 
service EAS: * EAS level 21 and below at a station or branch; 
Number of participants: 2,766. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field customer 
service EAS: * EAS level 22 and above at a station or branch; 
Number of participants: 1,822. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field customer 
service EAS: Subtotal; 
Number of participants: 17,125. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * PCES plant; 
Number of participants: 765. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * EAS plant; 
Number of participants: 2,139. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * Distribution Operations: Processing and Distribution 
Center, Processing and Distribution Facility, Customer Service Network 
Processing Facility; 
Number of participants: 3,999. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * In-Plant Support: Processing and Distribution Center, 
Processing and Distribution Facility, Customer Service Network 
Processing Facility; 
Number of participants: 1,224. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * Maintenance: Processing and Distribution Center, 
Processing and Distribution Facility, Customer Service Network 
Processing Facility; 
Number of participants: 2,203. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * Transportation: Processing and Distribution Center, 
Processing and Distribution Facility, Customer Service Network 
Processing Facility; 
Number of participants: 810. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * Air Mail Center or Air Mail Facility; 
Number of participants: 291. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * Bulk Mail Center or Bulk Mail Facility; 
Number of participants: 1,429. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * Priority Mail Processing Center or Logistics and 
Distribution Center; 
Number of participants: 222. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * Remote Encoding Center; 
Number of participants: 127. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * Surface Transportation Center or Hub-and-Spoke 
Program; 
Number of participants: 64. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: * International Service Center; 
Number of participants: 185. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Field mail 
processing EAS: Subtotal; 
Number of participants: 13,458. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Business Mail Entry Unit; 
Number of participants: 420. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Business Service Network; 
Number of participants: 218. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Consumer Advocate; 
Number of participants: 53. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Finance; 
Number of participants: 1,062. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Human Relations; 
Number of participants: 2,951. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Marketing; 
Number of participants: 727. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
District Manager's Office; 
Number of participants: 580. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Manager of Operations Program Support; 
Number of participants: 2,205. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Manager of Post Office Operations; 
Number of participants: 461. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Retail; 
Number of participants: 184. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Stamp distribution; 
Number of participants: 57. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * 
Statistical programs; 
Number of participants: 117. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: * Time 
and Attendance Collection System; 
Number of participants: 75. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * District EAS: 
Subtotal; 
Number of participants: 9,110. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * Business 
Service Network; 
Number of participants: 58. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * 
Distribution Networks Operations; 
Number of participants: 373. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * Delivery 
Point Sequencing; 
Number of participants: 78. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * Finance; 
Number of participants: 124. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * Human 
Resources; Number of participants: 302. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * 
Maintenance; 
Number of participants: 56. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * 
Marketing; 
Number of participants: 91. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * Methods 
Improvement Program; 
Number of participants: 99. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * 
Management Operations Support; 
Number of participants: 79. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * Retail; 
Number of participants: 14. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * Small 
Business and Mail Acceptance Unit; 
Number of participants: 7. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: * Area 
Vice President's Office; 
Number of participants: 16. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Area EAS: Subtotal; 
Number of participants: 1,297. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Equal employment 
opportunity field operations EAS: * Capital Metro Area; 
Number of participants: 13. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Equal employment 
opportunity field operations EAS: * Eastern Area; 
Number of participants: 13. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Equal employment 
opportunity field operations EAS: * Great Lakes Area; 
Number of participants: 24. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Equal employment 
opportunity field operations EAS: * New York Metro Area; 
Number of participants: 17. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Equal employment 
opportunity field operations EAS: * Northeast Area; 
Number of participants: 12. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Equal employment 
opportunity field operations EAS: * Pacific Area; 
Number of participants: 18. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Equal employment 
opportunity field operations EAS: * Southeast Area; 
Number of participants: 23. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Equal employment 
opportunity field operations EAS: * Southwest Area; 
Number of participants: 26. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Equal employment 
opportunity field operations EAS: * Western Area; 
Number of participants: 21. 

U.S. Postal Service (USPS) employee type: Executive and Administrative 
Schedule (EAS) and other non-EAS participants: * Other field EAS 
employees (including district and facility EAS): * Equal employment 
opportunity field operations EAS: Subtotal; 
Number of participants: 167. 

U.S. Postal Service (USPS) employee type: * Postal Police: * 
Headquarters (HQ) and HQ- related EAS employees: * Attorneys on the 
Attorney Compensation Schedule; 
Number of participants: 183. 

U.S. Postal Service (USPS) employee type: * Postal Police: * 
Headquarters (HQ) and HQ- related EAS employees: * Sales EAS; 
Number of participants: 667. 

U.S. Postal Service (USPS) employee type: * Postal Police: * 
Headquarters (HQ) and HQ- related EAS employees: * Other HQ and HQ-
related EAS; 
Number of participants: 4,471. 

U.S. Postal Service (USPS) employee type: * Postal Police: * 
Headquarters (HQ) and HQ- related EAS employees: Subtotal; 
Number of participants: 5,321. 

U.S. Postal Service (USPS) employee type: * Postal Police: * 
Headquarters (HQ) and HQ- related EAS employees: Total; 
Number of participants: 71,702. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Air Mail Center or Air Mail Facility; 
Number of participants: 1. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Area Distribution Networks Operations; 
Number of participants: 9. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Area Delivery Point Sequencing; 
Number of participants: 10. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Area Finance; 
Number of participants: 9. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Area Human Resources; 
Number of participants: 10. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Area Maintenance; 
Number of participants: 9. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Area Marketing; 
Number of participants: 11. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Area Methods Improvement Program; 
Number of participants: 11. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Area Manager of Operations Support; 
Number of participants: 10. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Area Vice President's Office; 
Number of participants: 4. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
Bulk Mail Center or Bulk Mail Facility; 
Number of participants: 16. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
District Leadership; 
Number of participants: 116. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
International Service Center; 
Number of participants: 1. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
PCES plant; 
Number of participants: 88. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): * 
PCES post office; 
Number of participants: 37. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * PCES field executives (including PCES Postmasters): 
Subtotal; 
Number of participants: 342. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): * HQ and HQ-related PCES executives; 
Number of participants: 405. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): Total: PCES; 
Number of participants: 747. 

U.S. Postal Service (USPS) employee type: Postal Career Executive 
Service (PCES): Grand total; 
Number of participants: 72,449. 

Source: USPS. 

Note: According to USPS, on December 5, 2007, an additional 221 
individuals appeared to be PFP participants but had not confirmed their 
employee profile information in the PFP program. As a result, USPS was 
unable to categorize these employees and they were not included in this 
table. 

[End of table] 

[End of section] 

Appendix II: Objectives, Scope, and Methodology: 

Our objectives were to (1) describe the key features of the U.S. Postal 
Service's (USPS) pay for performance (PFP) program, (2) provide 
information on the weight of the PFP program's performance indicators 
in determining participants' ratings, and (3) assess opportunities for 
USPS to incorporate new indicators of delivery performance into its PFP 
program. To address these objectives, we obtained documentation from 
USPS on its PFP program and interviewed USPS officials responsible for 
the program. To assess opportunities for USPS to incorporate new 
delivery performance indicators into its PFP program, we also obtained 
documentation on USPS's plans to implement new delivery performance 
measurement systems. We primarily based our assessment on applicable 
laws--such as laws related to USPS's statutory mission of providing 
prompt, reliable, and efficient postal services to patrons in all areas 
at reasonable rates and statutory reporting requirements related to 
USPS's delivery performance--as well as on interviews with senior USPS 
officials. We also developed assessment criteria from our past work on 
other agencies' PFP programs and best practices used by high-performing 
organizations. We conducted a data reliability assessment of USPS's PFP 
information and determined that the information was sufficiently 
reliable for the purposes of our report. Our assessment was based on a 
review of the documentation and data provided, comparing the 
consistency of information provided by multiple sources and in multiple 
data files; interviews with USPS officials to discuss the 
documentation; and data, including how the data were developed; and 
follow-up questions to obtain further information. 

We conducted this performance audit from October 2007 to September 2008 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

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

United States Postal Service: 

August 4, 2008: 

Mr. Phillip R. Herr: 
Director, Physical Infrastructure Issues: 
United States Government Accountability Office: 
Washington, DC 20548-0001: 

Dear Mr. Herr: 

Thank you for providing the U.S. Postal Service with the opportunity to 
review and comment on the draft report titled U.S. Postal Service: New 
Delivery Performance Measures Could Enhance Managers' Pay for 
Performance Program (GAO-08-996). 

Given the shift to pay-for-performance (PFP) by many agenciesï¿½including 
the GAOï¿½we had hoped the report would offer a brief opinion on the 
Postal Service's PFP program itself. We provided extensive information 
on the program's history, design, and its evolution to its current 
phase. This information included a history of performance results under 
PFP and its predecessor programs, specific design features of over 
twelve years of postal pay-for-performance programs, a history of pay 
consultations with the management associations, examples of employee 
communications and training, and independent assessments of our pay-for-
performance programs. The Postal Service's program has been cited by an 
independent entity as a model for other agencies to emulate as it links 
individual contributions to organizational success through objective, 
measurable performance indicators which are aligned at the corporate, 
functional, and individual levels. 

The complexity of managing an organization the size of the Postal 
Service requires senior managers be able to view performance in several 
areas simultaneously. The National Performance Assessment (NPA) program 
is a "balance scorecard" approach utilized by the Postal Service that 
translates the organization's strategy and mission into specific goals 
and measures, providing managers the ability to evaluate service, 
corporate culture, internal efficiencies and financial performance at a 
glance. 

In response to the GAO's recommendation that the Postal Service 
"incorporate new delivery performance indicators into the [Pay for 
Performance] PFP program," the Postal Service concurs and is committed 
to accomplishing that goal. 

In the June 2008 response to Congress regarding the Postal 
Accountability and Enhancement Act (PAEA) ï¿½ 302 Network Plan, the 
Postal Service identified "implementing expanded measurement systems 
for Single-Piece First-Class Mail; new systems for Presort First-Class 
Mail, Standard Mail, Periodicals and Presort Package 
Services...Implementation of these systems will continue through fiscal 
year (FY) 2009." 

Furthermore, as stated in the GAO report, "successful implementation of 
new measurement systems will depend, in part, on mailers' barcoding 
mail and containers, as well as providing electronic information on 
mailings." This is also identified in the Network Plan. 

In addition to expanding measurement systems for its Market-Dominant 
products during FY 2009, the Postal Service will also develop 
historical data to assist with the creation of future performance 
targets.

The performance goal of the Postal Service is one of continuous 
improvement. The NPA program incorporates continuous improvement into 
each and every indicator. This approach has been responsible for 
substantial performance improvements for the Postal Service and is 
consistent with past efforts to ensure the proper balance of NPA 
indicators. 

If you or your staff wish to discuss any of these comments further, we 
are available at your convenience. 

Sincerely,

Signed by: 

Deborah Giannoni-Jackson: 
Vice President: 
Employee Resource Management: 

Anthony M. Pajunas 

for: 

A/Senior Vice President, Operations: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Phillip R. Herr (202) 512-2834 or [email protected]: 

Staff Acknowledgments: 

In addition to the above individuals, Gerald P. Barnes (Assistant 
Director), Elizabeth Eisenstadt, Brandon Haller, David Hooper, Kenneth 
E. John, Belva Martin, Laura Shumway, and Crystal Wesco made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] PCES includes postal officers and other USPS executives. EAS 
includes most USPS managerial and administrative employees. 

[2] USPS's former PFP program included an Economic Value Added Variable 
Pay Program for lump sum payments (fiscal years 1996 through 2002) and 
a Merit Pay Program for salary increases (fiscal years 1996 through 
2003). 

[3] USPS, Strategic Transformation Plan 2006-2010: 2007 Update 
(Washington, D.C., December 2007). 

[4] The Postal Accountability and Enhancement Act, Pub. L. No. 109-435, 
ï¿½3652, 120 Stat. 3212 (Dec. 20, 2006). 

[5] 39 U.S.C. ï¿½ï¿½101(a), 403(a). 

[6] 39 U.S.C. ï¿½101(f). 

[7] 39 U.S.C. ï¿½2401(b)(1). 

[8] 39 U.S.C. ï¿½2401(c). For fiscal year 2008, Congress appropriated 
$118 million to USPS for these purposes. 

[9] USPS, Strategic Transformation Plan 2006-2010, p. 7. 

[10] Mailers Technical Advisory Committee Workgroup #114, Establish 
Service Standards and Measurement, Final Recommendations Report 
(Washington, D.C., Sept. 20, 2007), [hyperlink, 
http://postcom.org/public/WG114/WG114_Final_Report_Sept_20.pdf], p. 34. 

[11] Pub. L. No. 109-435. 

[12] Postal rates and fees shall provide sufficient revenues so that 
the total estimated income and appropriations to the Postal Service 
will equal as nearly as practicable total estimated costs of the Postal 
Service. Pub. L. No. 91-375, 84 Stat. 760 (Aug. 12, 1970). The 2006 
postal reform law eliminated this provision. Pub. L. No. 109-435, 
ï¿½201(a). 

[13] National results on the corporate indicators serve as a 
controlling factor for determining ratings for headquarters employees. 

[14] Other participants include attorneys and other headquarters 
employees not in PCES or EAS. 

[15] No corporate and unit indicators for fiscal year 2008 were 
classified as primarily related to USPS's goal of enhancing 
sustainability, which USPS added to its list of strategic goals after 
the fiscal year began (i.e., when USPS issued its updated Strategic 
Transformation Plan in December 2007). 

[16] Post offices headed by EAS postmasters in EAS levels 11 through 16 
generally have annual revenues between $30,000 and $300,000. EAS levels 
are assigned to postmasters based on a combination of their 
responsibilities, the number of their employees, the size of the post 
office facility, and various operations performed by the post office. 

[17] Post offices headed by EAS postmasters in levels 21 through 26 
generally have annual revenues between $5 million and $150 million. 

[18] The fiscal year 2008 PFP program uses several indicators of timely 
delivery for the mail types that are currently measured, which include 
single-piece First-Class Mail, Priority Mail, Express Mail, some 
Package Services Mail, and some International Mail. These indicators 
are weighted to collectively make up 16.4 percent of the average PFP 
rating, including single-piece First-Class Mail (7.6 percent of the 
average rating), Priority Mail (5.9 percent), Express Mail (1.9 
percent), Package Services (0.9 percent), and International Mail (0.1 
percent). The International Mail indicators are a very small percentage 
of the average PFP rating because they are only factored into the PFP 
ratings of managers who work in International Mail Centers. 

[19] GAO, U.S. Postal Service: Delivery Performance Standards, 
Measurement, and Reporting Need Improvement, GAO-06-733 (Washington, 
D.C.: July 27, 2006). 

[20] EXFC, administered by a contractor, measures when test mail pieces 
are deposited in collection boxes and received at various addresses. In 
recent years, EXFC has covered 463 three-digit ZIP Code areas (i.e., 
ZIP Codes with the same first three digits) judgmentally selected based 
on geographic and volume density. It does not cover remittance mail 
(i.e., bill payments) that companies pick up at USPS facilities. 

[21] GAO-06-733. 

[22] Prepared statement of James C. Miller III, Chairman, Board of 
Governors, U.S. Postal Service, before the Subcommittee on Federal 
Workforce, Postal Service, and the District of Columbia, Committee on 
Oversight and Government Reform, U.S. House of Representatives 
(Washington, D.C.: Apr. 17, 2007). 

[23] USPS, Postal Accountability and Enhancement Act ï¿½302 Network Plan 
(Washington, D.C., June 2008), required by the Postal Accountability 
and Enhancement Act (Pub. L. No. 109-435, ï¿½302). 

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