U.S. Postal Service: Progress Made in Implementing Automated Letter
Sequencing, but Some Issues Remain (Letter Report, 04/17/98,
GAO/GGD-98-73).

Pursuant to a congressional request, GAO provided information on the
status of the Postal Service's (USPS) efforts to implement Delivery
Point Sequencing (DPS), focusing on: (1) USPS goals for DPS
implementation, its projected letter carrier workhour savings, and the
extent to which the Service has achieved these; and (2) issues that may
affect USPS's ability to achieve its 1998 DPS goals, including any
actions that USPS has taken to address these issues.

GAO noted that: (1) in its 1992 Corporate Automation Plan, USPS
initially scheduled DPS implementation to be completed by
fiscal-year-end 1995; (2) the 1992 Plan included DPS goals and
benchmarks for: (a) DPS equipment deployment; (b) barcoded letter
volume; and (c) delivery zone and carrier route implementation
nationwide through fiscal year (FY) 1995; (3) in addition, USPS based
its analyses that supported investments in DPS sorting equipment on
achieving: (a) a certain DPS letter volume to carrier routes; and (b)
specific carrier workhour savings; (4) however, implementation fell
behind schedule, and USPS acknowledged that it had been overly
optimistic in its DPS expectations; (5) in April 1994, the Postmaster
General announced that the barcoding goal had slipped from 1995 to
fiscal-year-end 1997; (6) in its 1996 Plan, USPS extended the DPS
completion date to the end of FY 1998 and revised associated goals and
benchmarks; (7) USPS has identified and was addressing several issues
that have affected its efforts to achieve its DPS implementation goals,
benchmarks, and carrier workhour savings; (8) to increase volumes of
barcoded letters and letters sorted in delivery sequence, USPS has taken
several actions; (9) while USPS has achieved some success in addressing
issues affecting DPS implementation and achievement of DPS goals, it has
been less successful in resolving its disagreements with the National
Association of Letter Carriers (NALC), the labor union representing city
carriers, regarding DPS implementation; (10) in 1992, USPS and NALC
agreed to work together to implement DPS and signed six memoranda of
understanding, which were to resolve past disputes and provided a plan
for DPS implementation; (11) not long after the memoranda were signed,
disagreements developed between USPS and NALC regarding certain aspects
of the memoranda; (12) NALC filed national level grievances regarding
DPS implementation instructions, and the parties settled most of their
disagreements; (13) however, one disagreement went to national
arbitration, and the arbitrator decided in NALC's favor and instructed
the parties to work together to resolve their differences; (14) in
addition, many city carriers GAO spoke with said that although they
generally saw benefits in DPS, they were concerned about its effect on
their daily work; and (15) in contrast, USPS officials said that while
DPS has changed the way carriers deliver mail, the changes have not
adversely affected customer service.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-98-73
     TITLE:  U.S. Postal Service: Progress Made in Implementing 
             Automated Letter Sequencing, but Some Issues Remain
      DATE:  04/17/98
   SUBJECT:  Federal agency reorganization
             Collective bargaining
             Postal service
             Government employee unions
             Mechanization
             Cost control
             Postal service employees
IDENTIFIER:  USPS Computerized Forwarding System
             USPS 1992 Corporate Automation Plan
             USPS 1996 Corporate Automation Plan
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on the Postal Service, Committee
on Government Reform and Oversight, House of Representatives

April 1998

U.S.  POSTAL SERVICE - PROGRESS
MADE IN IMPLEMENTING AUTOMATED
LETTER SEQUENCING, BUT SOME ISSUES
REMAIN

GAO/GGD-98-73

Automated Letter Sequencing

(240241)


Abbreviations
=============================================================== ABBREV

  APWU - American Postal Workers Union
  CFS - Service's Computerized Forwarding System
  DPS - Delivery Point Sequence
  NALC - National Association of Letter Carriers
  NAPS - National Association of Postal Supervisors
  NAPUS - National Association of Postmasters of the United States
  ZIP - Zone Improvement Plan

Letter
=============================================================== LETTER


B-276743

April 17, 1998

The Honorable John M.  McHugh
Chairman, Subcommittee on the
 Postal Service
Committee on Government Reform
 and Oversight
House of Representatives

Dear Mr.  Chairman: 

This report responds to your request that we provide information on
the status of the U.  S.  Postal Service's efforts to implement
Delivery Point Sequencing (DPS), which is the automated rather than
manual sorting of letters in the exact order carriers deliver them. 
Manual sorting of letters by carriers is one of the Service's most
costly letter distribution operations.  As agreed with your office,
our objectives in this report were to (1) determine the Service's
goals for DPS implementation, its projected letter carrier workhour
savings, and the extent to which the Service has achieved these and
(2) identify any remaining issues that may affect the Service's
ability to achieve its 1998 DPS goals, including any actions that the
Service has taken to address these issues. 

DPS is the final phase of the Service's letter mail automation
program, which began in 1982.  DPS entails the automated sorting of
letters that have been barcoded by either business customers or the
Service.  These barcodes represent the specific delivery points\1 and
are to enable DPS equipment to sort the letters to carriers in
delivery point sequence.  In March 1993, the Service began
implementing DPS on its letter carrier routes where it was expected
to save time that carriers use to sort letters manually while in the
office.  The workhours saved by automatically sorting these letters
in delivery point sequence were intended to reduce carrier overtime
and increase the time available for carriers on the street so that
they could deliver more mail.  Throughout the report, we use the term
"delivery sequence" when referring to letters that have been
automatically sorted to carriers in delivery point sequence. 


--------------------
\1 A delivery point is a specific street address, for example, a
building or a residence. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

In its 1992 Corporate Automation Plan (Plan), the Service initially
scheduled DPS implementation to be completed by fiscal-year-end 1995. 
The 1992 Plan included DPS goals and benchmarks (interim targets) for
(1) DPS equipment deployment, (2) barcoded letter volume, and (3)
delivery zone\2 and carrier route implementation nationwide through
fiscal year 1995.  In addition, the Service based its decision
analyses that supported investments in DPS sorting equipment on
achieving (1) a certain DPS letter volume to carrier routes and (2)
specific carrier workhour savings.  However, implementation fell
behind schedule, and the Service acknowledged that it had been overly
optimistic in its DPS expectations.  In April 1994, the Postmaster
General announced that the barcoding goal had slipped from 1995 to
fiscal-year-end 1997.  In its 1996 Plan, the Service extended the DPS
completion date to the end of fiscal year 1998 and revised associated
goals and benchmarks. 

Specifically, the established DPS goals, benchmarks, letter volume,
and projected carrier workhour savings and the Service's progress
towards achieving them were the following: 

  -- DPS equipment deployment:  The goal was to deploy over 8,500
     pieces of DPS sorting equipment nationwide by November 1997. 
     The Service deployed all of this equipment on time. 

  -- Barcoded letter volume:  The Service's fiscal year 1997
     benchmarks were to barcode 85 percent of all letters.  By the
     end of fiscal year 1997, 81 percent of all letters were
     barcoded.  The fiscal year 1998 goal is to barcode 88 percent of
     all letters. 

  -- Delivery zone and carrier route implementation:  Although the
     Service did not set a fiscal year 1997 benchmark for
     implementing DPS in specific delivery zones, the Service has
     implemented DPS in over 7,600 zones, surpassing its fiscal year
     1998 goal of 6,300 zones.  The Service set a fiscal year 1997
     benchmark that about 149,200 carrier routes were to receive
     letters in delivery sequence.  According to Service data,
     through fiscal year 1997, over 142,500 carrier routes were
     receiving letters in delivery sequence, or about 96 percent of
     the benchmark.  The fiscal year 1998 goal is that 154,000
     carrier routes are to receive letters in delivery sequence. 

  -- DPS letter volume to carrier routes:  The Service's decision
     analyses that supported the DPS equipment investment assumed
     that 70 to 85 percent of letters going to certain carrier routes
     would be delivery sequenced.  As of October 31, 1997, Service
     officials estimated city carrier routes received an average of
     between 50 to 59 percent of letters in delivery sequence. 

  -- Carrier workhour savings:  The Service projected that DPS would
     cumulatively save 27.2 million city and rural carrier workhours
     during fiscal years 1994 through 1997.  To achieve these savings
     during this 4-year period, the Service cumulatively reduced its
     budget by 26.5 million carrier workhours.  For this period,
     actual reductions of carrier workhours were 22.5 million,
     resulting in a shortfall of 4.0 million, as compared with the
     budgeted amount.  Although in fiscal year 1994, actual carrier
     workhours increased by 5.6 million, between fiscal years 1995
     and 1997, the Service reduced actual carrier workhours by 28.1
     million.  (See figures 2 and 3 for individual yearly
     projections.)

The Service has identified and was addressing several issues that
have affected its efforts to achieve its DPS implementation goals,
benchmarks, and carrier workhour savings.  To increase volumes of
barcoded letters and DPS letters, the Service has taken several
actions.  For example, in July 1996, the Service raised the discount
given to its business customers as an incentive to increase
barcoding.  To increase DPS letter volume, the Service is trying to
improve its mail processing operations to prevent letters from
bypassing automation equipment and plans to implement a new method
for delivery sequencing letters to units in multioccupancy buildings,
which account for about 19 percent of total deliveries.\3 To achieve
workhour savings, the Service is working to improve both city carrier
delivery efficiency while on the street and frequency of route
adjustments to capture DPS-related carrier workhour savings. 

While the Service has achieved some success in addressing issues
affecting DPS implementation and achievement of DPS goals, it has
been less successful in resolving its disagreements with the National
Association of Letter Carriers (NALC), the labor union representing
city carriers, regarding DPS implementation.  In 1992, the Service
and NALC agreed to work together to implement DPS and signed six
memoranda of understanding, which were to resolve past disputes and
provide a plan for DPS implementation.  Not long after the memoranda
were signed, disagreements developed between the Service and NALC
regarding certain aspects of the memoranda.  Many grievances were
filed at the national and local levels.  Although most grievances
were resolved through settlement, two went to national level
arbitration.  In one case, a national level arbitrator decided in
favor of the Service.  In the second case, a national level
arbitrator decided in favor of NALC and instructed the parties to
work together to resolve their differences.  Other disagreements also
arose as the parties gained experience with DPS implementation.  The
parties determined that the memoranda needed modification; but their
negotiations failed, and the Service issued instructions to implement
DPS that NALC believed were inconsistent with certain aspects of the
memoranda.  These instructions generated many grievances at the
national and local levels, and the parties settled most of these
grievances.  However, one grievance went to national level
arbitration, and the arbitrator decided in NALC's favor and
instructed the parties to work together to resolve their differences. 

In addition, many city carriers we spoke with said that although they
generally saw benefits in DPS, they were concerned about its effect
on their daily work.  For example, because city carriers must deliver
DPS letters without either manually sorting or inspecting them, they
believed customer service was affected by their having to identify
and sort out undeliverable letters during delivery and then bring
them back to the office at the end of the day.  In contrast, Service
officials said that while DPS has changed the way carriers deliver
mail, the changes have not adversely affected customer service. 


--------------------
\2 A delivery zone is a small geographic area represented by a
5-digit Zone Improvement Plan (ZIP) code and each zone contains a
number of carrier routes.  It also identifies the post office or
delivery unit that will deliver a given letter. 

\3 Multioccupancy addresses include apartments and office buildings,
among others. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Postal Service's letter mail automation program was designed to
increase productivity, reduce postal costs, and provide postal
customers with more consistent delivery service.  The program relies
on optical character readers and barcode sorters to automate the
mechanized and manual sorting of letter mail, and curb the Service's
costs by reducing the number of workhours clerks and letter carriers
would need to sort letters.  In 1980, the Service's Board of
Governors approved the initial procurement of this equipment, which
became operational in 1982 and began the $4.4 billion automation
program.  These early optical character readers (1) read the last
line of the address; (2) verified the city, state, and 5-digit ZIP
code against a computer address directory; (3) printed a
corresponding barcode on the envelope; and (4) did an initial sort. 
The companion barcode sorters read the applied 5-digit barcode,
enabling the equipment to automatically sort letters to the post
offices that were to make delivery.  In 1983, the Service introduced
the 9-digit, or ZIP+4 code, which enabled the equipment to
automatically sort letters not only to the post offices but also to
sort down to the carrier routes, post office boxes, buildings, or
large business firms.  While the 5-digit ZIP code with automation
reduced mail processing costs, the 9-digit code further reduced these
costs and lowered the number of missorted letters, which improved the
consistency of delivery service. 

During 1987 and 1988, the Service took three key actions regarding
letter mail automation.  First, the Service began deploying a newer
generation of optical character readers that could read and interpret
multiple lines of address information and did not need the 9-digit
code to print the barcode on the envelope.  Second, the Service
implemented its first rate incentive to encourage business customers
to apply barcodes and improve both the address accuracy and print
quality of their letter mail.  Third, the Service developed its
initial Corporate Automation Plan, which spelled out the letter mail
automation goals and strategies for achieving them.  The primary goal
was to barcode virtually all letter mail by the end of 1995, which
was to result in substantial savings. 

To achieve this goal, the Service's strategy was that mailers,
encouraged by rate incentives, would barcode about 40 percent of the
letter mail.  The Service would barcode the remainder using its
optical character readers and remote barcoding systems, which it
began in 1992.  Remote barcoding systems provide the Service a means
of barcoding letter mail containing addresses that its optical
character readers cannot read and barcode because the addresses are
either handwritten, poorly printed, or have other readability
problems.  These systems entail making electronic images of these
addresses.  The images are initially processed by a remote
computer-reading device, which attempts to read these addresses and
barcode the corresponding letters.  Those images that cannot be read
are electronically transmitted to off-site locations where operators
read and key in enough address information from the images to allow
the equipment to barcode the letters. 

After the Service had developed the capability to automatically sort
letters down to the carrier route level, it began studying the
feasibility of automating carriers' manual sequencing of letters into
delivery order.  In the office, carriers received their letter mail
in random order each morning mail was delivered, manually sequenced
this mail by inserting each letter into the appropriate pigeonhole of
the letter case, removed the mail from the case, and bundled it for
delivery.\4 The Service reported that continued mail volume growth
had increased the average carrier's in-office time from about 2 to 3
hours in 1978 to about 4 hours in 1988.  As a result, the time that
carriers spent on the street decreased, and the average number of
delivery points per route decreased from 520 to 470.  Because of
these factors, more carriers were needed to deliver the daily mail
volume. 

The Service developed delivery sequencing using an 11-digit barcode
that must be applied to letter mail before delivery sequencing will
work.  The 11-digit barcode combines the 9-digit ZIP code with the
last two digits of the street address number, which enables barcode
sorters to automatically sequence letters into the order carriers
deliver them.  Both mailers and the Service can apply the 11-digit
barcode.  The Service estimated that delivery sequencing would reduce
the average time carriers spend in the office preparing mail for
delivery by about 80 minutes per day based on standard letter sorting
rates and mail volume.  This reduction was expected to allow a
commensurate increase in the time carriers spend on the street and
the number of delivery points per route. 

Two types of barcode sorters are used to delivery sequence letters. 
The Delivery Bar Code Sorter is the larger of the two machines and is
deployed primarily in mail processing plants.  Two clerks operate the
larger machine, which is designed to delivery sequence multiple
routes at the same time and process 25,000 letters per hour.  The
Carrier Sequence Bar Code Sorter is the smaller machine and is
deployed in delivery units that meet certain minimum floor space and
letter mail volume requirements.  The smaller machine requires one
clerk to operate and is designed to delivery sequence one route at a
time and process over 19,000 letters per hour. 

After letters are delivery sequenced, city carriers are to take them
to the street without manually preparing them for delivery within the
office.  However, all letters cannot be delivery sequenced.  As a
result, carriers receive and must manually sequence that portion of
their letters that were not delivery sequenced.  The Service expects
that there will always be letters that cannot be delivery sequenced
because these letters (1) have characteristics, such as size and
shape, that are incompatible with automation equipment; (2) have
addresses or barcodes that are incorrect; or (3) originate in, or are
destined for, areas with insufficient mail volume to justify
investment in automated processing equipment.  In addition, carriers
receive and must manually sequence flats (large envelopes, magazines,
and catalogs), which accounted for about 30 percent of total mail
volume in fiscal year 1997. 

In fiscal year 1997, the Service reported processing about 191
billion pieces of mail, including about 131 billion letters.  The
Service also reported that its automation equipment sorted about 76.5
billion, or 58 percent, of these letters.  In addition, delivery
points have grown at the rate of about 1 percent per year; and in
fiscal year 1997, the Service delivered mail to 128 million
addresses. 


--------------------
\4 Carriers are expected to manually sequence the mail at a standard
rate of 18 letters per minute.  They are expected to remove the mail
from the case and bundle it for delivery at a standard rate of 70
letters per minute.  The combined rate for both these activities is
expected to be 859 pieces per hour. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

To determine the Service's DPS goals and status of its
implementation, we analyzed our prior reports and Postal Inspection
Service audit reports on DPS.  We reviewed the Service's Decision
Analysis Reports, which supported acquisition of DPS related
automation equipment and projected automation savings, the Service's
DPS guidance and training materials, and six 1992 Joint Memoranda of
Understanding on DPS published by the Service and NALC.  We reviewed
the Service's 1990, 1992, and 1996 Corporate Automation Plans, which
describe the activities, benchmarks, goals, and associated time
frames necessary to complete the Service's automation program and
achieve projected savings.  In addition, we interviewed Postal
Service headquarters delivery and operations support officials, who
are responsible for the overall implementation and management of DPS. 
We reviewed the Service's DPS tracking data on DPS implementation,
such as number of delivery units and routes that receive DPS letters. 
We reviewed the Service's national data on delivery workhours,
volume, city and rural carrier routes, and productivity from fiscal
year 1993 through 1997.  With these data, we compared DPS performance
with the Service's benchmarks and analyzed performance indicators to
report trends in workhours, number of deliveries, letter mail volume,
and number of carrier routes.  However, we did not verify the
accuracy of these data. 

To identify any remaining issues that may affect the Service's
ability to achieve its DPS goals, we reviewed and analyzed the
Service's 1996 Plan, which highlights ongoing and planned actions
necessary to meet the 1998 DPS goals.  We interviewed Postal Service
headquarters officials with lead responsibility for completing
ongoing and planned DPS related tasks.  We also did some preliminary
work, which indicated that the Service was experiencing
labor-management relations problems over DPS implementation.  On the
basis of that work and our knowledge of persistent labor-management
relations problems in the Service from our past work, we interviewed
national representatives of the Service's four major labor unions and
three management associations to identify whether they were aware of
any labor-management relations issues that may affect the Service
achieving its DPS goals.\5

To observe any issues that the Service and its unions and management
associations identified, we selected a judgmental sample of 3
districts and 6 delivery units in 3 of the 11 Postal Areas, which
included Capital Metro Operations.  Among other considerations, we
selected (1) two districts that had fully implemented DPS on all city
routes and one district to obtain additional geographic dispersion
because it was located in close proximity to our staff in Denver,
which did the field work and (2) two delivery units--within each
selected district--with both high-office efficiency and declining
street efficiency.  We conducted site visits to these locations to
observe delivery operations and interviewed responsible area,
district, and delivery unit officials.  We also judgmentally selected
142 city and rural carriers at the delivery units we visited to
obtain their experience and views about DPS implementation.  These
carriers were selected on the basis of their availability at the time
of our visit to the units where they were located.  These selected
sites, managers, and carriers are not statistically representative;
therefore, we cannot generalize from our sample to the universe of
all carriers.  We do, however, use the results of these interviews to
present illustrative examples of DPS-related issues from the points
of view of the carriers and managers. 

We requested comments on a draft of this report from the Postmaster
General and the presidents of the seven labor unions and management
associations including the American Postal Workers Union (APWU);
NALC; National Postal Mail Handlers Union; National Rural Letter
Carriers' Association (Rural Carriers); National Association of
Postal Supervisors (NAPS); National Association of Postmasters of the
United States; and National League of Postmasters of the United
States.  The Service and NALC provided written comments, which are
reprinted in appendixes IV and V, respectively.  APWU and NAPS
provided oral comments.  The comments of these four organizations are
discussed in appropriate sections throughout the report and at the
end of the report.  The remaining organizations did not provide
comments.  We conducted our review from June 1997 through February
1998 in accordance with generally accepted government auditing
standards (see app.  I for additional detail). 


--------------------
\5 U.S.  Postal Service:  Little Progress Made in Addressing
Persistent Labor-Management Problems (GAO/GGD-98-1, Oct.  1, 1997). 


   PROGRESS MADE TOWARD ACHIEVING
   DPS GOALS
------------------------------------------------------------ Letter :4

By November 1997, the Service was making progress toward meeting its
fiscal year 1998 goal for completion of letter automation through DPS
implementation.  Since March 1993, DPS has been implemented at
increasing numbers of delivery units as equipment was deployed and
DPS volume grew.  The letter automation program suffered initial
slippages, which caused DPS implementation to fall behind schedule. 
The 1996 Plan revised the benchmarks set in the 1992 Plan, extending
the automation program completion date from fiscal-year-end 1995 to
1998.  While the Service has not achieved all its DPS implementation
benchmarks, it has deployed all authorized DPS equipment and exceeded
the goal for number of delivery zones to receive DPS letters.  It is
making progress in meeting its benchmarks for numbers of barcoded
letters and DPS routes.  While the Service did not have complete data
to measure total DPS volume or percentage on the routes, it estimated
that carriers were receiving an average of about half their letters
sorted in delivery sequence compared with the 70 to 85 percent, which
the Service expects to achieve by the end of fiscal year 1998 when
DPS is scheduled to be fully implemented. 


      DPS IMPLEMENTATION IS AN
      ONGOING PROCESS
---------------------------------------------------------- Letter :4.1

DPS implementation has been an ongoing process since it began in
March 1993.  The 1992 Plan called for implementation of DPS in
delivery zones that have an equivalent mail volume of 10 or more city
routes and rural routes with city-style addresses.\6 The 1992 Plan
did not call for implementation in small offices and in many rural
areas; and the 1996 Plan equated to implementing DPS on 154,000
routes, or about 63 percent of the number of city and rural carrier
routes existing at fiscal-year-end 1997.  As the volume of barcoded
letters increased, the Service purchased and deployed automation
equipment needed to delivery sequence the letters and gradually
increased the number of delivery units and carrier routes that
receive a portion of their letters delivery sequenced. 

DPS implementation is achieved through a team effort among local
delivery, processing, address management, and logistics operations to
extend DPS to increasing numbers of delivery units, such as post
offices, stations, or branches where letter carriers prepare mail for
delivery and then deliver it to addresses along regularly scheduled
routes.\7 The key DPS implementation steps are as follows: 

  -- Select delivery units for DPS that generally have 10 or more
     city routes or rural routes with city-style addressing;

  -- Deploy Delivery Bar Code Sorters and Carrier Sequence Bar Code
     Sorters at mail processing plants and delivery units,
     respectively, to provide delivery sequenced letters;

  -- Before DPS is implemented in each delivery unit, analyze route
     alignments and plan for future DPS realignments by taking the
     appropriate actions authorized in the 1992 joint agreements'
     training guide;

  -- Determine each unit's target DPS percentage of total letters
     that, when achieved, triggers DPS route adjustments.  Targets
     are set using either the Unilateral or X-Route process\8
     authorized in the Service-NALC 1992 joint agreements.  Targets
     are to be set at 70 to 85 percent under the X-route process and
     at management discretion under the unilateral process. 
     According to Service guidance, interim adjustments can and
     should be made when DPS volume reaches 40 percent;

  -- Manually sort DPS letters and correct any automated sort errors
     until 98 percent sort accuracy is achieved for 3 consecutive
     days, after which, DPS letters are taken to the street without
     manually sorting them; and

  -- Add delivery points and increase street time on routes to
     capture in-office workhours that are saved by carriers not
     manually sorting DPS letters prior to delivery. 

Figure 1 presents highlights of events in the implementation of the
letter automation program and DPS, which we will discuss throughout
this report. 


   Figure 1:  Implementation of
   Postal Service's Letter
   Automation Program

   (See figure in printed
   edition.)



   (See figure in printed
   edition.)

Note:  Equipment deployment was an ongoing process until 1997, when
all DPS and DPS-related equipment was fully deployed.  DPS equipment
is Delivery Barcode Sorters and Carrier Sequence Barcode Sorters. 

Source:  Postal Service. 


--------------------
\6 In response to 911 emergency requirements, rural-style addresses
are being converted to descriptive city-style street name and
numbered addresses. 

\7 The workload on a route is to be adjusted so that mail is sorted,
prepared for delivery, and delivered within 8 hours. 

\8 Under the Unilateral process, Service managers set DPS target
percentages and plan for route adjustments to capture DPS savings. 
The X-route process is an alternative in which local NALC and Service
representatives can jointly plan to adjust and realign city carrier
routes when target percentages are met. 


         INITIAL DPS
         IMPLEMENTATION FELL
         BEHIND SCHEDULE
-------------------------------------------------------- Letter :4.1.1

In its 1992 Plan, the Service scheduled DPS implementation for
completion by fiscal-year-end 1995.  The 1992 Plan included DPS goals
and benchmarks for (1) deploying all needed barcode sorters, (2)
barcoding virtually all letter mail, and (3) implementing DPS for
specific delivery zones and carrier routes.  However, the Service was
unable to achieve these goals by 1995 as planned, due to several
delays in completing the automation program.  In August 1992, the
Service's Board of Governors postponed approval of the next phase of
automated equipment procurement affecting DPS, pending a thorough
review and evaluation of the supporting decision analysis report by
the newly appointed Postmaster General.  Then, in April 1994, the
Postmaster General announced that the barcoding goal would have to
slip from 1995 to the end of fiscal year 1997.  The initial program
slippages were primarily due to a shortfall in volume of barcoded
letters caused by a delay in deploying remote barcoding and
lower-than-anticipated barcoding performance by Service Optical
Character Readers.  In its 1996 Plan, the Service extended the DPS
completion date to the end of fiscal year 1998 and revised associated
goals and benchmarks. 

In fiscal year 1995, the second full year of DPS implementation, we
reported DPS had fallen behind schedule and that the Service would
have to overcome difficult obstacles to complete the automation
program by the target date, fiscal-year-end 1998.\9 The Postal
Inspection Service also found that the Service experienced initial
difficulties implementing DPS and capturing projected savings due to,
among other things, low DPS volume and carriers' distrust of sorting
accuracy.\10

The Inspection Service also reported that DPS implementation was
hindered by, among other things, field units' noncompliance with the
Service's national DPS guidelines as well as inefficient flow of
letters through automated processing operations or letters totally
bypassing automation.  In addition, carriers did not always gain the
efficiencies the Service needed to capture workhour savings.  For
example, many carriers wanted and were allowed to manually sort DPS
letters before delivery, in part because of low percentages of DPS
letters, compared with non-DPS and lack of confidence in sort
accuracy. 

Shortly after introducing DPS, the Service also lowered its estimate
of the amount of office time each carrier would save by not manually
sorting DPS mail.  Initially, office time was to decrease from the
existing 4 hours per day to 2 hours per day, and street time was to
increase from 4 hours per day to 6 hours per day.  Office workhours
were to decrease as the amount of DPS mail provided to the carriers
increased.  Theoretically, when DPS volume received by each delivery
unit met preestablished targets, the DPS routes were to be adjusted
to add deliveries and street time.  However, as the Service gained
experience with DPS implementation, it became clear that target DPS
volumes had been set too high and could not be achieved.  As a
result, the Service lowered its expectation of in-office savings to
80 minutes per day, based on lower targets and standard sorting rates
and volumes. 


--------------------
\9 Postal Service:  Automation Is Taking Longer and Producing Less
Than Expected (GAO/GGD-95-89BR). 

\10 U.S.  Postal Inspection Service Delivery Point Sequencing Audit
Reports.  Case No.  019-1128091-AX(1), Apr.  1994; Case No. 
022-1144192-AO(1), Nov.  1994; and Case No.  025-1165775-PA(1), Feb. 
1996. 


      DPS IMPLEMENTATION WAS
      EXTENDED TO 1998 AND GOALS
      WERE REVISED
---------------------------------------------------------- Letter :4.2

The Service prepared the 1996 Plan to revise automation goals and
benchmarks following initial delays in capturing letter automation
savings.  The 1996 Plan extended the DPS implementation completion
date to fiscal-year-end 1998.  Achieving the revised implementation
benchmarks required that automation equipment be purchased, deployed,
and used effectively to achieve barcoded and DPS letter volumes.  By
November 1997, the Service had deployed all authorized DPS
equipment--4,784 Delivery Bar Code Sorters and 3,726 Carrier Sequence
Bar Code Sorters--at a total cost of about $1.3 billion.  Table 1
shows the letter automation goals that were to be achieved for fiscal
years 1995 through 1998, when the program is scheduled to be fully
implemented. 



                                Table 1
                
                 Letter Automation Implementation Goals
                   and Benchmarks, Fiscal Years 1995
                              Through 1998

                                                               Fiscal
                                                                year
                                   Fiscal year benchmarks       goal
                                ----------------------------  --------
Barcoded Letters                1995      1996      1997          1998
------------------------------  --------  --------  --------  --------
Percentage of total letters to  60%       68%       85%            88%
be barcoded


DPS Implementation
----------------------------------------------------------------------
Zones in which DPS is to be     No        No        No           6,300
implemented                     benchmar  benchmar  benchmar
                                k         k         k

Carrier routes to receive DPS   72,500    120,090   149,190    154,000
letters
----------------------------------------------------------------------
Source:  Postal Service. 

The 1996 Plan did not include specific goals for DPS volume or
percentage of DPS letters on carrier routes.  However, the Service's
analyses of projected carrier workhour savings and its 1992 joint
agreements with NALC assumed that as DPS was implemented in delivery
units at least 70 to 85 percent of letters arriving in these units
for carrier routes would be sorted to DPS.  After fiscal year 1998,
the Service plans to continue with efforts to further increase
barcoded and DPS volumes in order to sequence as many letters as
possible. 


         SOME FISCAL YEAR 1997
         IMPLEMENTATION BENCHMARKS
         WERE NOT ACHIEVED
-------------------------------------------------------- Letter :4.2.1

By November 1997, the Service was making progress but had not met all
the automation and DPS implementation benchmarks designated in its
1996 Plan for fiscal year 1997.  Reported barcoded volume and the
number of routes on DPS were slightly below the 1997 benchmarks,
despite having exceeded the goal for the number of zones where DPS
was scheduled to be implemented.  Further, the Service did not obtain
data from its field offices sufficient to accurately measure total
DPS volume or the percentage of DPS letters going to city and rural
routes where DPS had been implemented.  In lieu of complete DPS
volume data, Service officials estimated that over half of letters
given to carriers were sorted in delivery sequence. 

Percentage of total letters barcoded.  Nationally, the percentage of
total letters barcoded increased from about 52 percent in 1993 to
about 81 percent in 1997, or about a 29 percentage-point increase. 
After achieving its fiscal years 1995 and 1996 benchmarks at the end
of fiscal year 1997, the Service reported barcoding 106.8 billion, or
81 percent, of total letters compared with the 85-percent benchmark
for that year, as shown in table 2.  This 4-percentage point
shortfall represents about 4.6 billion letters.  However, Service
officials said they believe they will reach the 1998 barcoding goal
of 88 percent of letters as Classification Reform\11 encourages more
customer barcoding and the Service continues its efforts to increase
its own barcoding using Optical Character Readers and remote
barcoding. 



                                      Table 2
                      
                           Letter Barcoding Benchmarks as
                          Percentage of Total Letters and
                         Percentage Barcoded by Service and
                        Customers, Fiscal Years 1995 Through
                                        1998

                    Percentage of letters barcoded
                              by source
                    ------------------------------
Fi                                                                      Difference
sc                                                   Total letters         between
al   Benchmark for                                     barcoded by   benchmark and
ye   total letters                                      customers/      percentage
ar        barcoded       Customers         Service         Service        barcoded
--  --------------  --------------  --------------  --------------  --------------
19             60%             32%             28%             60%             0 %
 95
19              68              36              34              70              +2
 96
19              85              45              36              81              -4
 97
19              88             N/A             N/A             N/A             N/A
 98
----------------------------------------------------------------------------------
Note:  N/A represents no data available (future). 

Source:  GAO analysis of Postal Service data. 

Percentage of letters sorted to DPS.  Data on actual DPS volume were
not aggregated nationally, but Service officials estimated that, on
average, carriers received over half their letters sorted to DPS. 
DPS savings projections are based on achieving at least 70 to 85
percent DPS volume on carrier routes as DPS is implemented in each
delivery unit.  The Service's requirements for data to be aggregated
nationally resulted in reporting of only a portion of DPS volume. 
Nationally, data were aggregated only for city routes and letters
sorted on Delivery Bar Code Sorters in the processing plants, and
excluded DPS letters sorted on Carrier Sequenced Bar Code Sorters
deployed in delivery units and all DPS letters on rural routes.  The
Service also did not aggregate data on total letter volume sent to
DPS routes.  In the absence of complete data to calculate actual DPS
percentage of total letters received by delivery units and routes,
Service officials arrived at an estimate using average daily mail
volumes on city routes.  As of October 1997, these routes received an
estimated daily average of 1,700 to 2,000 total letters and 1,000 DPS
letters.  Thus, the officials estimated that DPS routes received, on
average, about 50 to 59 percent DPS letters compared with the
Service's expectation of 70 to 85 percent when implementation is
completed. 

DPS percentages varied among delivery units and carriers we visited,
but the average generally appeared to be close to the Service's
estimated average.  At the time of our visits, the six delivery units
reported DPS percentages ranging from 35 to 80, with an average of 57
percent but did not have data on DPS percentages for their individual
routes.  Of 139 carriers we interviewed at these units who provided
estimates, 81 percent estimated that their DPS volume was 50 percent
or more of total letters.  For the 139 carriers, individual estimates
ranged from a low of 5 percent to a high of 87 percent. 

DPS Zones and Carrier Routes.  The Service has surpassed its goal for
the number of zones that will receive DPS letters.  Better than
anticipated performance of the smaller barcode sorters in delivery
units has allowed the Service to deploy equipment to more small zones
than originally planned; for example, those with mail volume
equivalent to less than 10 routes.  The 1996 Plan did not establish
yearly goals for the number of zones to receive DPS letters but
called for 6,300 zones to receive DPS letters by the end of fiscal
year 1998.  By the end of fiscal year 1997, 7,632 zones were reported
as receiving DPS letters. 

The Service reported achieving about 96 percent of its fiscal year
1997 benchmark for the number of carrier routes receiving delivery
sequenced letters.  As shown in table 3, by the end of fiscal year
1997, the Service had reported implementing DPS on 142,557 city and
rural routes.  Service officials said that as implementation
progresses and more addresses are delivery sequenced, they believe
they will achieve their goal of 154,000 DPS routes in a fully
operational DPS environment. 



                                     Table 3
                     
                     Benchmarks and DPS Routes, Fiscal Years
                                1995 Through 1998

                          Type of DPS Routes               Total routes
                      --------------------------  ------------------------------
                Plan
Fisc  benchmarks for                                                       Total
al         total DPS                                 Total city/       (DPS/non-
year          routes      City DPS     Rural DPS       rural DPS          DPS)\a
----  --------------  ------------  ------------  --------------  --------------
1995          72,500        67,608         3,296          70,904         226,317
1996         120,000        99,487         9,088         108,575         228,671
1997         149,190       124,705        17,852         142,557         226,254
1998         154,000           N/A           N/A             N/A             N/A
--------------------------------------------------------------------------------
\a Total includes city routes (city street and distribution routes)
and rural routes. 

Note:  N/A represents no data available (future). 

Source:  Postal Service. 


--------------------
\11 Classification Reform, which was approved by the Postal Rate
Commission and Postal Service Board of Governors, was implemented in
July 1996 and features a market-based rate structure that provides
for low-cost mail by charging rates based on how business mailers
prepare their mail for the Service to handle.  For example, the
Service will give lower rates to mailers who provide full trays of
barcoded and sorted letters to a processing center or ZIP code, while
charging higher rates for mailers who only sort their letters. 


   BUDGET PROCESS IS USED TO HELP
   CAPTURE PROJECTED WORKHOUR
   SAVINGS
------------------------------------------------------------ Letter :5

The Service is capturing projected city carrier workhour savings
through its budget process.  The Service's decision analyses
projected total carrier savings of 27.2 million workhours through
fiscal year 1997 and total savings of 56.7 million workhours by the
end of fiscal year 2001.  Since 1994, the Service has annually
reduced city carrier workhour budgets to capture the projected
savings.  Despite reported budgeted reductions of 26.5 million
workhours through fiscal year 1997, actual carrier workhours reported
decreased by a total of 22.5 million through fiscal year 1997. 
However, during fiscal years 1996 and 1997, the Service reported that
field offices achieved actual carrier workhour reductions that
exceeded their budgeted workhour reductions by 5.8 million.  The
Service believes these workhour reductions and reductions in number
of city routes can be attributed to DPS.  However, they acknowledge
that some workhour reductions might have been achieved through
managers' efforts to increase efficiency that were not related to
DPS. 


      INVESTMENT ANALYSES PROJECT
      CARRIER WORKHOUR SAVINGS
---------------------------------------------------------- Letter :5.1

The Service's projections of carrier in-office workhour savings to be
achieved by DPS were established in its decision analysis reports,
which were used to justify automation equipment investments.  Service
officials identified six reports that were used to justify
investments totaling over $1.7 billion in barcode sorting equipment
(Delivery Bar Code Sorters and Carrier Sequence Bar Code Sorters)
needed to implement DPS.  These analyses contained assumptions about
factors such as equipment deployment and performance, growth in mail
volume and delivery points, the pace of DPS implementation, and DPS
letter volume.  The in-office workhour savings were to reduce
overtime on routes, extend street time, and ultimately restrain the
rate of growth in routes and carrier positions.  The Board approved
these investments between fiscal years 1992 and 1996, and equipment
deployment proceeded in stages during that period.  Together, these
analyses projected yearly benchmarks for carrier workhour savings. 
About 56.7 million carrier workhours are projected to be saved
through fiscal year 2001.\12 By the end of fiscal year 1997, the
total cost of this investment was $1.3 billion. 


--------------------
\12 In addition to all the budgeted workhour reductions, the decision
analyses projected that additional savings from cost avoidance would
accrue for the remainder of the 10-year analysis period.  Total net
savings after deducting program costs were estimated to be $6.3
billion. 


   ACTUAL WORKHOUR REDUCTIONS FELL
   SHORT OF THOSE BUDGETED AND
   PROJECTED
------------------------------------------------------------ Letter :6

The Service has budgeted almost all the city carrier workhours that
the decision analyses projected would be saved through the end of
fiscal year 1997.  As shown in figure 2, by the end of fiscal year
1997, budgeted workhour reductions totaled 26.5 million, or over 97
percent of the projected 27.2 million workhour reductions.  In fiscal
year 1998, DPS is projected to save an additional 14.9 million
workhours; and the Service has budgeted 12.6 million.  To capture
savings in city carrier workhours, Headquarters staff are to adjust
the 11 postal areas' annual budgets by reducing carrier office
workhours to reflect the projected savings for the coming year.  The
areas then are to incorporate the budgeted reductions into their
districts' budgets.  By reducing the city carrier workhour budgets in
this manner, Headquarters staff said they believe the projected DPS
savings will be captured (see figure 2). 

   Figure 2:  Cumulative Workhour
   Reductions, Fiscal Years 1994
   Through 2001

   (See figure in printed
   edition.)

Source:  GAO analysis of Postal Service data. 

Actual total reductions in aggregate city and rural carrier workhours
fell short of the amount budgeted between fiscal years 1994 and 1997. 
As shown in figure 2, by the end of fiscal year 1997, actual carrier
workhours had been reduced by 22.5 million, or 85 percent of the
budgeted reduction of 26.5 million workhours.  Service officials said
they believe the workhour reductions achieved are due to DPS because
there is no other program that could account for them.  However, the
officials said that some managers might have achieved some workhour
reductions through individual initiatives that were unrelated to DPS. 
For example, one delivery unit we visited was not achieving all the
workhour savings expected from DPS because DPS volume was only 60
percent of total letters, but the manager said the unit was able to
increase its savings by implementing suggestions made by carriers for
changes, not related to DPS, that would make their jobs easier. 
Although Service managers praised DPS' ability to save carrier
workhours, they said that individual delivery units may not achieve
expected savings due to certain conditions--such as volume mix and
growth, staffing levels, labor-management relations, and management
quality. 


      ACTUAL WORKHOUR REDUCTIONS
      ACHIEVED IN RECENT YEARS
      OFFSET EARLY INCREASES
---------------------------------------------------------- Letter :6.1

Even though aggregate actual workhour reductions lagged behind those
projected and budgeted for fiscal years 1994 through 1997, actual
workhour reductions in each of the last 2 years of this period
exceeded those budgeted.  In fiscal years 1996 and 1997, as shown in
figure 3, actual workhour reductions exceeded the budgeted amounts by
1 and 4.8 million, respectively.  These reductions helped offset an
initial workhour increase in fiscal year 1994.  Service officials
said this unanticipated increase in workhours was due to a national
level arbitrator finding in favor of NALC in a case regarding the
Service's establishment of city carrier routes that required more
than 8 hours to complete, which the arbitrator determined violated
the parties' labor agreement.  This decision caused the Service to
hire about 18,000 career city carriers between fiscal years 1993 and
1994.  As a result, as shown in figure 3, not only were there no
workhour reductions in fiscal year 1994, but workhours increased by
5.6 million. 

Furthermore, Service officials said that growth in volume and
delivery points during the period exceeded their expectations, which
also affected the field units' ability to achieve projected savings. 
Even when allowing for this growth, the officials said that they
believe the Service had avoided more costs than was evidenced by
their workhour reductions alone.  For example, the eight-tenths of 1
percent annual growth in number of delivery points on city routes,
without DPS, would require adding 1,300 city routes per year.  These
officials said that DPS had allowed them to avoid much of the cost of
this growth and also reduce the number of city routes that were
needed.  Factoring in the additional workload resulting from this
growth, if DPS had not been implemented, the Service calculated that
it would have used 30.4 million more city carrier workhours between
fiscal years 1993 and 1997 than it actually used. 

As a result of this cost avoidance, Service officials reported that
city carrier routes increased by 267 in fiscal year 1995 and
decreased in fiscal years 1996 and 1997 by 858 and 2,561,
respectively, which resulted in an overall decrease of 1.8 percent
since fiscal year 1994.  These officials estimated that the number of
city routes will continue to decline through fiscal year 2000.  In
contrast, the number of rural routes increased by 5,938, or 11.5
percent, during the same period.  The officials said that one reason
for this growth is that delivery points on rural routes have grown by
an average of 3.84 percent annually since fiscal year 1994.  In
addition, the cost per delivery is lower for rural routes than for
city routes, so when new routes become necessary due to growth,
delivery managers tend to establish rural routes where feasible and
cost effective. 

In commenting on a draft of this report, the President of NAPS told
us that he believed the Service establishes rural routes over city
routes, not because rural routes were less costly, but because rural
carriers do not present as many labor relations problems as do city
carriers.  He also believed that rural routes are not really less
costly to the Service than city routes because the rural carrier
compensation system is too liberal.  Under this system, rural
carriers are salaried employees who are paid for a full 8-hour
workday or 40-hour workweek with some overtime built into their
salaries.  However, this system allows rural carriers to go home
early and receive a full day's pay if they complete their work in
less than 8 hours. 

   Figure 3:  Annual Changes in
   Budgeted and Actual Carrier
   Workhours

   (See figure in printed
   edition.)

Note:  By fiscal-year-end 1997, there was a total net decrease in
actual carrier workhours of 22.5 million. 

\a Actual workhours for fiscal year 1998 were not available. 

Source:  GAO analysis of Postal Service data. 

Rural routes reportedly contributed an estimated 4.5 million
workhours in direct DPS savings valued at about $100 million.  In
contrast to city routes, on which carriers are paid by the hour for
8-hour routes plus any authorized overtime, rural carriers bid on
their routes and are paid salaries that represent the value of the
routes established through annual evaluations of mail volume and time
required to manually sort mail and make deliveries.  As a result, DPS
savings from rural routes are to be captured annually by reducing the
value of the routes and carriers' pay commensurate with the volume of
DPS letters that the carriers do not have to sort.  Because the
savings were already extracted from rural carriers' salaries, there
was no need to manage and track rural carriers' hourly savings.  As a
result, the Service allows rural carriers to manually sort DPS
letters if they wish.  However, city carriers must capture savings
each day in hourly increments by not manually sorting DPS letters. 
As a result, the Service does not allow city carriers to sort DPS
letters. 


   THE SERVICE IS ADDRESSING
   IDENTIFIED OPERATIONAL ISSUES
------------------------------------------------------------ Letter :7

The Service has been addressing remaining issues it believes have
affected its efforts to achieve its fiscal year 1998 DPS goals and
benchmarks and maximize carrier workhour savings resulting from DPS. 
These issues include both operational and labor-management relations
issues.  The Service has made considerable progress in its efforts to
address operational issues, although it has been less successful with
those concerning labor-management relations.  Table 4 presents an
overview of the operational issues and the Service's efforts to
address them. 



                                Table 4
                
                 Operational Issues Affecting DPS Goals
                  and Service Efforts to Address Them

Operational issues                  Service efforts
----------------------------------  ----------------------------------
Less than expected barcoded letter  --Implement better rate incentives
volume                              to encourage business customers to
                                    increase barcoding and improve
                                    address accuracy and quality

                                    --Improve management of mail flow
                                    through automated barcoding
                                    operations

Low DPS letter volume               --Improve management of mail flow
                                    through automated sorting
                                    operations

                                    --Implement method to sequence
                                    letters addressed to units within
                                    multioccupancy buildings

Insufficient delivery management    --Improve timeliness of route
and carrier street efficiency       adjustments

                                    --Increase supervision and
                                    monitoring of city carrier street
                                    operations

                                    --Test alternative delivery
                                    methods and new carrier
                                    performance standards
----------------------------------------------------------------------
Source:  Postal Service. 

The operational issues shown in table 4 were identified by the
Service as impeding its efforts to achieve DPS goals and benchmarks
and maximize DPS savings.  The Service has efforts under way to
increase barcoded and DPS letter volumes by encouraging business
customers to apply barcodes and improve address quality through rate
incentives.  The Service has also begun efforts to improve the
management of mail flow through its automated barcoding operations by
providing more training to employees as well as enhancing the
capabilities of its optical character readers.  Further, to improve
management of mail flow through its automated sorting operations, the
Service is attempting to determine causes of problems and then
resolve them.  Also, DPS implementation teams have been designated
to, among other things, serve as links between mail processing and
delivery unit operations regarding DPS issues.  Finally, the Service
has developed, and is in the process of implementing, a method to
sort in delivery sequence letters that are addressed to units in
multioccupancy buildings, which account for about 19 percent of total
deliveries. 

Regarding city carriers' declining street efficiency, the Service is
focusing efforts on improving delivery management to reverse this
trend and enhancing its ability to adjust routes to capture DPS
savings.  To increase workhour savings, additional funds have been
provided by the Service so that route inspections can be conducted
and carriers' routes can then be adjusted to capture DPS savings. 
The use of contractors to perform route inspections has also been
authorized by the Service.  In addition, it is working to improve
supervision of city carriers' street operations and testing both
alternative delivery methods and new city carrier performance
standards.  For a more detailed discussion of the operational issues
and the Service's actions to address them, see appendix II. 


   LABOR-MANAGEMENT RELATIONS
   ISSUES HAVE BEEN PROBLEMATIC
------------------------------------------------------------ Letter :8

Although the Service has made progress toward resolving its
operational issues, it has been less successful in resolving those
involving labor-management relations.  Labor-management relations
issues also have been affecting the Service's efforts to reach its
fiscal year 1998 goals and benchmarks.  These issues also affect the
Service's ability to maximize DPS savings.  Labor-management
relations issues include disagreements with NALC over DPS
implementation and the need to gain the support of city carriers who
are dissatisfied with DPS work methods.  Table 5 presents an overview
of the labor-management relations issues we identified and the
Service's efforts to address them. 



                                Table 5
                
                   Labor-Management Relations Issues
                Affecting DPS Goals and Service Efforts
                            to Address Them

Labor-management relations issues   Service efforts
----------------------------------  ----------------------------------
Poor working relationship with      --The Service and NALC, in October
NALC over DPS implementation and    1997, jointly signed an agreement
other concerns                      to test a revised dispute
                                    resolution process aimed at
                                    narrowing dispute areas and
                                    resolving disagreements



Insufficient city carrier support   --The Service and NALC agreed to
for DPS work methods                conduct a joint study to determine
                                    the most efficient method for
                                    handling unaddressed flats in
                                    response to arbitrator's ruling
----------------------------------------------------------------------
Source:  Postal Service, NALC, and city carriers. 

The Service has had problematic relations with three of the four
major labor unions that represent postal employees, including NALC,
which represents city carriers, over a variety of issues for a long
period.\13 DPS implementation has been one of the contentious issues
between the Service and NALC and its city carriers.  The DPS
conflicts revolved around three areas:  (1) the work methods that
should be used by city carriers to implement DPS; (2) the manner in
which the Service implemented DPS, which NALC viewed as inconsistent
with the agreements it had reached with the Service; and (3) DPS'
effect on city carrier street efficiency.  Many city letter carriers
said that they believe DPS work methods adversely affected their
efficiency and, in some cases, service to their customers.  City
carriers were particularly concerned about not being able to manually
sort DPS letters to combine them with the non-DPS bundle or to
identify DPS sort errors and other undeliverable letters before going
to the street.  Many of the city carriers' disagreements with DPS
resulted in grievances, filed at the national and local levels. 
Although most grievances were resolved through settlement, three went
to national level arbitration. 

In 1996, a national level arbitrator ruled on one of the cases.  The
arbitrator found that the Service had not violated the rules relating
to transitional employees from prior agreements.  During 1997,
another national level arbitrator ruled on the two remaining cases
and determined that the Service had violated either provisions of
existing labor agreements or the 1992 joint agreements.  The
arbitrator instructed the Service and NALC to jointly determine
alternative methods to resolve the problems.  In one case, the
parties agreed to conduct a joint study of the issues involved and
complete the study by April 1998.  In the second case, the parties
have met to discuss the issue; but as of March 1998, they had not yet
reached agreement on how to proceed to resolve the issue.  In
addition, to improve their overall working relationship, on October
20, 1997, the Service and NALC signed an agreement to test a revised
dispute resolution process aimed at narrowing areas of dispute and
effectively and constructively resolving their disagreements. 

Regardless of how one views the Service's and NALC's positions, the
disagreements between them have resulted in adverse consequences. 
These consequences include delays in capturing early DPS savings from
route adjustments, dissatisfaction among many city carriers, and
additional contentions between the Service and NALC.  In part, due to
the arbitrator's decisions, the Service and NALC have begun to
jointly work on some of the areas of disagreement.  Unlike the
situation with NALC and city carriers, the Service has not had a
contentious relationship with its rural letter carriers or their
union, the Rural Carriers.  This is largely due to the agreement the
Service reached with the Rural Carriers regarding a new manual
sorting standard for delivery sequenced letters.  For a more detailed
discussion of labor-management relations issues and the Service's
actions to address them, see appendix III. 


--------------------
\13 GAO/GGD-98-1. 


   COMMENTS FROM THE POSTAL
   SERVICE, LABOR UNIONS, AND
   MANAGEMENT ASSOCIATIONS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :9

We provided a draft of our report to eight organizations for their
review and comment.  The eight organizations were

  -- the Postal Service;

  -- the four labor unions, including APWU, NALC, National Postal
     Mail Handlers Union, and Rural Carriers; and

  -- the three management associations, including, NAPS, National
     Association of Postmasters of the United States, and National
     League of Postmasters of the United States. 

We received written comments from the Service and NALC.  We obtained
oral comments from NAPS and APWU.  The remaining organizations said
they did not wish to comment on the draft report.  Service officials
also provided written and oral technical comments to clarify and
update some information in the draft report. 

Overall, the Service and NALC expressed diverse views regarding the
effects of DPS and its related labor-management relations issues. 
The Service said that our report gave an accurate summary of the
letter mail automation programs.  The Service reiterated the extent
of DPS implementation on carrier routes and workhour savings, which
it noted was more successful than anticipated.  The Service also
acknowledged that it and NALC have had numerous disagreements
regarding DPS implementation, but that the disputes over DPS have
either been resolved or are in the process of being resolved, and
that the parties are engaged in a number of cooperative ventures that
they expect will have a beneficial effect on labor-management
relationships.  We have reprinted the Service's comments in appendix
IV. 

In its comments, NALC reaffirmed its support for DPS and noted that
automation would enhance the Service's long-term viability and
employment of the letter carrier craft.  NALC criticized the
methodology we used to gather information, including our reliance on
(1) data provided by the Service without verifying its accuracy, (2)
interviews with and observations of a relatively small number of
letter carriers, and (3) Service managers' opinions about the success
of DPS. 

While we recognize and take special care to adhere to the limitations
associated with our scope and methodology, we do not agree with
NALC's critical characterization of the report.  The report clearly
laid out our objectives, scope, and methodology, including the
limitations, so as to fully inform the reader of the basis and
context surrounding the information in the report.  Due to limited
resources and the technical difficulties inherent in verifying the
Service's data, which are aggregated from its vast field network, we
disclosed in the report that we used the Service's data on carrier
workhours without verifying it.  We also clearly disclosed that we
interviewed a relatively small number of city carriers in three
postal districts to obtain their opinions about DPS issues.  We
discussed in the report, several types of data that the Service did
not have or that were not sufficient to produce accurate measures,
such as DPS sort accuracy and percentage of DPS letters on carrier
routes.  To supplement the available data and to discern the
Service's position on DPS implementation history and labor relations
issues, we obtained the views and opinions of Service delivery
managers.  Further, to provide balance, we obtained views and
opinions about these same issues from national leaders of NALC and
included both parties' opinions in the report. 

NALC also commented on several specific issues discussed in the
report.  We considered these comments and made changes to the report
where appropriate.  We also have included a reprint of NALC's
comments and our additional comments on specific issues, where
appropriate, as appendix V. 

The oral comments we received from APWU and NAPS primarily sought
clarification of points based on their positions and knowledge of
historical events regarding letter mail automation and carrier
delivery operations.  The Assistant Director of APWU's Clerk Division
told us that postal clerks--which APWU represents--have made various
contributions to assist the Service's letter mail automation efforts,
which the report should mention.  He pointed out that APWU clerks
have always cooperated with the Service to implement automation and
entered into agreements with the Service that have facilitated the
Service's capture of savings.  We agree that the postal clerks have
made contributions in reducing workhours in the Service's processing
plants as automation was implemented. 

The President of NAPS gave us his views about the Service's
difficulties in managing city carrier delivery operations and the
need for city carriers to support DPS.  He said that the Service's
curtailment of route inspections between about 1975 and 1990 marked
the beginning of the Service's difficulties in managing city delivery
operations.  Without route inspections, normal mail volume growth and
new addresses resulted in routes that were out of adjustment.  These
routes had workloads that could not be completed within 8 hours,
which led to significant amounts of overtime each day to deliver
mail.  City carriers serving these routes were required to negotiate
daily with their supervisors for overtime.  Overall, he said that
this condition triggered the conflict between city carriers and their
supervisors that continues today. 

The President of NAPS said that some incentives are needed to
encourage carriers to support DPS.  For example, he suggested that if
routes could be accurately evaluated each day, the daily overtime
negotiations would be eliminated and carriers could be allowed to go
home after completing their duties, even if they finish in less than
8 hours.  The President said that he believed this would be possible
when DPS is fully implemented, including the automated sorting of
flats.  That is, every morning, delivery unit supervisors could
obtain exact mail counts from the automation equipment and use these
data to evaluate workload requirements on each route.  This would
allow the supervisors to determine exactly how much time individual
carriers would need to sort and deliver their mail on that day.  The
President believes these daily evaluations could replace the periodic
city route inspections now conducted and would be superior to the
annual evaluations now conducted on rural routes to determine rural
carriers' salaries.  However, he said that if incentives are
unsuccessful and carriers do not cooperate, supervisors cannot be
expected to watch all the carriers while they deliver mail to ensure
they are working efficiently.  For this reason, the President said
that he would support the use of a global satellite system, which is
now being tested, to monitor carriers while they deliver mail.  He
also provided other comments about the information presented in the
draft report, which have been incorporated into the report where
appropriate. 


---------------------------------------------------------- Letter :9.1

We are providing copies of this report to the Subcommittee's Ranking
Minority Member; the Chairman and Ranking Minority Member of the
Senate Committee on Governmental Affairs, the Postal Service, APWU,
NALC, National Postal Mail Handlers Union, Rural Carriers, NAPS,
National Association of Postmasters of the United States, and
National League of Postmasters of the United States, and other
interested parties.  We will also make copies available to others on
request. 


Major contributors to the report are listed in appendix VI.  If you
have any questions, please call me on (202) 512-8387. 

Sincerely yours,

Bernard L.  Ungar
Director, Government Business
 Operations Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

In a June 9, 1997, letter, the Chairman of the Subcommittee on the
Postal Service, House Committee on Government Reform and Oversight,
asked us to provide information on the status of the U.S.  Postal
Service's efforts to implement Delivery Point Sequencing (DPS).  As
agreed with the Chairman's office, our objectives were to (1)
determine the U.S.  Postal Service goals for DPS implementation, its
projected letter carrier workhour savings, and the extent to which
the Service has achieved these; and (2) identify any remaining issues
that the Service and others believe must be addressed for the Service
to achieve its 1998 DPS goals and the actions, if any, that the
Service has taken to address these issues. 

To determine the Service's goals for DPS implementation, we reviewed
the Service's 1990, 1992, and 1996 Corporate Automation Plans, which
among other things described the DPS related activities, annual
benchmarks, goals, and associated timeframes for completing the
letter mail automation program.  We reviewed the Decision Analysis
Reports, which justified the DPS-related automated equipment
investment, to identify the (1) assumed DPS letter volume that
carrier routes were to receive and (2) projected carrier workhour
savings that were to be achieved from DPS implementation.  To
determine the progress the Service has made toward achieving its
goals, we obtained the Service's fiscal years 1993 through 1997
national data on actual carrier workhour savings; barcoded and DPS
letter volumes; productivity; and the number of delivery zones,
delivery units, and carrier routes that receive DPS letters.  We
compared these actual data with the appropriate DPS benchmarks,
goals, assumptions, and projected workhour savings in the 1996
Corporate Automation Plan (Plan).  We discussed with responsible
Postal Service headquarters officials these benchmarks, goals,
assumptions, and projected carrier workhour savings to assist us in
determining the progress the Service has made toward achieving them. 
We also discussed with these officials how the Service (1) used its
budget process to capture carrier workhours savings and (2) determine
the cost avoidance associated with DPS implementation.  We did not
verify the operational and budget data that the Service provided. 

To identify any remaining issues that may affect the Service's
ability to achieve its 1998 DPS goals, we considered the findings
from our prior audit reports and those of the Postal Inspection
Service on letter mail automation.  We analyzed the ongoing and
planned DPS implementation tasks described in the 1996 Plan, which
the Service plans to complete to achieve its 1998 DPS goals.  We
discussed these findings and tasks with responsible Postal Service
headquarters officials and asked them to identify the key issues that
remain, which the Service must address.  We also asked the officials
to identify any actions the Service has taken to address any
remaining issues and the current status of these actions. 

Our preliminary work indicated that the Service was experiencing
labor-management relations problems with its city carriers over DPS
implementation.  On the basis of that work and our knowledge of
persistent labor-management relation problems in the Service from our
past work,\14 we contacted the Service's four major labor unions and
three management associations to identify whether these organizations
believed that there were any labor-management relations issues that
the Service must address to achieve its 1998 DPS goals.  We
interviewed national representatives of these organizations located
in the Washington, D.C.  metropolitan area to obtain their views on
the impact DPS implementation has had on postal operations and the
working conditions of the postal employees they represent.  The four
labor unions contacted were (1) the American Postal Workers Union
(APWU), (2) the National Association of Letter Carriers (NALC), (3)
the National Postal Mail Handlers Union (Mail Handlers), and (4) the
National Rural Letter Carriers' Association (Rural Carriers).  The
three management associations contacted were (1) the National
Association of Postal Supervisors (NAPS), (2) the National
Association of Postmasters of the United States (NAPUS), and (3) the
National League of Postmasters of the United States (the League).  We
also discussed the identified labor-management relations issues with
responsible Postal Service headquarters officials.  To gain an
understanding of labor-management relations issues within the
Service, we reviewed relevant documents, including our prior reports,
Service and NALC 1992 joint agreements, national arbitration cases
regarding city carrier grievances associated with DPS, and city
carrier DPS training materials. 

To observe any issues that the Service and its unions and management
associations identified, we selected a judgmental sample of 3
districts and 6 delivery units located within 3 of the 11 Postal
Areas, which included Capital Metro Operations (Capital Area).\15 We
selected the Northern Virginia District in the Capital Area and the
Suncoast District in the Southeast Area because these two districts
had fully implemented DPS on all city routes, which meant that
carriers on these routes were receiving and taking delivery sequenced
letters directly to the street.  We also selected the Denver District
in the Western Area because it gave us additional geographic
dispersion and was located in close proximity to our staff in Denver. 
Within each district, we selected two units that reported both the
highest office efficiency\16 and declining street efficiency,\17
compared to the same period last year, and were located within 2
hours driving distance of the district office.  We used these
efficiency measures as selection criteria because according to the
Service (1) office efficiency was expected to increase with DPS
implementation and (2) street efficiency had declined on both DPS and
non-DPS routes, and the Service reported that this decline had offset
some DPS savings.  We limited the number of districts and delivery
units selected to three and six, respectively, because gathering DPS
related information from these offices was a time-consuming effort
that involved examining records and interviewing managers, carrier
supervisors, and carriers at several geographically dispersed
locations. 

We interviewed responsible Service officials from the three district
offices to obtain their views on DPS implementation within the
district.  We discussed the DPS implementation process, its effect on
mail processing and delivery operations, carriers' concerns with DPS
work methods, and ongoing efforts to identify and resolve DPS related
problems.  In addition, we interviewed responsible Service officials
in the three area offices to obtain an area-wide perspective on DPS
implementation, capturing DPS savings through the budget process and
route adjustments, and carriers' concerns with DPS work methods. 

At each of the six delivery units we visited, we interviewed the
managers, carrier supervisors, and carriers to obtain their views on
DPS implementation and related concerns about DPS work methods. 
Because carriers generally are to spend most of their workday on the
street delivering mail, the best time to interview them is in the
morning while they are in the office.  To maximize the number of
carriers who could be interviewed by our available staff, we arrived
at each delivery unit about the time the carriers reported for work
and began interviewing them.  We judgmentally selected the carriers
that were interviewed on the basis of their availability at the time
of our visit.  In order not to disrupt delivery operations, we
interviewed carriers individually while they prepared their mail for
delivery.  Each interview required 5 to 10 minutes to complete.  We
continued interviewing the carriers until they departed the office to
deliver the mail.  In total, we interviewed 111 city and 31 rural
carriers at the 6 delivery units.  We then met with unit management
to discuss the progress and problems associated with DPS
implementation within the unit.  We reviewed each unit's operational
data, which included detailed information on the carrier workforce,
mail volume, possible deliveries, and route adjustments.  At two
delivery units, one of our staff members accompanied a carrier on the
route to observe DPS work methods. 

The selected units and carriers are not statistically representative;
therefore, we cannot generalize from our sample to the universe of
all carriers.  We do, however, use the results of these interviews to
present illustrative examples of DPS-related issues from the
carriers' points of view.  While we most likely did not identify
every possible DPS related issue that could exist within the universe
of delivery units, according to district officials, the units we
visited were not atypical of others within the districts. 

In addition, we visited two mail processing plants in Denver, CO, and
Tampa, FL, and a remote barcoding site in Tampa.  We toured each
facility and observed its DPS-related operations.  We met with
responsible Service officials at each facility and discussed various
DPS-related issues, including DPS equipment deployment, operation,
and enhancement; mail flows; barcoding; and problem identification
and resolution. 

We did our work from June 1997 through February 1998 in accordance
with generally accepted government auditing standards.  We requested
comments on a draft of this report from the Postmaster General; the
presidents of the four labor unions (APWU, NALC, Mail Handlers, and
Rural Carriers); and the three management associations (NAPS, NAPUS,
and the League).  We received written comments from the Service and
NALC, which are reprinted in appendixes IV and V, and obtained oral
comments from APWU and NAPS.  The comments of these four
organizations are discussed in appropriate sections throughout the
report and at the end of the report.  The remaining organizations did
not provide comments. 


--------------------
\14 GAO/GGD-98-1. 

\15 There are 10 Postal Areas, each led by a vice president in
addition to Capital Metro Operations led by a manager of operations
who reports to postal headquarters as do the 10 Postal Area vice
presidents.  For purposes of management responsibility and data
development and tracking, Capital Metro Operations is equivalent to a
postal area. 

\16 Office efficiency is the number of possible deliveries for a
route divided by the office workhours required to manually sort the
mail prior to delivery. 

\17 Street efficiency is the number of possible deliveries for a
route divided by the street workhours required to deliver the mail. 


OPERATIONAL ISSUES AFFECTING
ACHIEVEMENT OF FISCAL YEAR 1998
DPS GOALS
========================================================== Appendix II

The Service was addressing operational issues that it believed
impeded its efforts to achieve DPS goals and benchmarks and maximize
DPS savings.  These issues include (1) less than expected barcoded
letter volume, (2) low DPS letter volume, and (3) declining street
efficiency.  These issues and the Postal Service's efforts to address
them are discussed as follows. 


      EFFORTS TO INCREASE BARCODED
      LETTER VOLUME
------------------------------------------------------ Appendix II:0.1

The Service is attempting to achieve a 7-percentage point increase in
barcoded letters to meet its 1998 DPS implementation goal of 88
percent.  Service officials said they believe they will achieve this
goal through better rate incentives for customer barcoding and
resolving mail flow and readability problems.  In anticipation of
implementing better rates for customer barcoding, the Service revised
its barcoding strategy from about 40 percent of barcodes to be
supplied by customers to 50 percent, by fiscal-year-end 1998.  In
July 1996, the Service implemented better rates for customer barcoded
letters that meet new requirements for barcode quality and address
accuracy, which is critical to achieving accurate 11-digit barcoding. 
The officials believe these better rates were a major factor in
customer barcoding increasing over 9-percentage points during fiscal
year 1997, compared with increases of about 3.5- percentage points
during each of the 2 previous years. 

The Service is also trying to increase the number of letters it
barcodes in its mail processing plants.  Since fiscal year 1993,
Service data show it has increased its barcoding by only
11-percentage points.  Service managers said that mail processing
plants were neither barcoding all the letters that could be barcoded
nor upgrading all letters that have 5- or 9-digit barcodes to
11-digit barcodes.  The managers said that many letters were not
being barcoded or upgraded because mail processing personnel did not
route these letters to the appropriate optical character readers or
remote barcoding systems for processing.  According to Service
officials, local mail processing managers have taken various actions
to correct these mail flow problems.  These actions include (1)
enhancing mail processing employees' knowledge of the types and
quality of letters that can be barcoded through classroom and
on-the-job training, (2) obtaining feedback from delivery unit
managers to identify batches of letters that bypassed automation and
developing ways to prevent similar batches of letters from bypassing
automation in the future, and (3) working with local business mailers
to increase their volume of automation-compatible letters. 

Poor address quality hampers the Service's barcoding success; and, as
customers succeed in barcoding more letters, this problem will be
exacerbated because the remaining letters fed to the Service's
optical character readers will be of lower quality and more difficult
to successfully barcode.  The remaining letters may have addresses
that the Service's optical character readers cannot read due to
factors such as poor print quality, style of type, or color or
composition of the paper used to make the envelope.  To increase
barcoding, the Service recently completed the deployment of remote
barcoding systems and optical character reader enhancements.  One
component of this system is a remote computer reader that uses
advanced computer technology to read images of problem addresses and
determine the appropriate barcode to be applied to the letter.  Some
of the optical character reader enhancements include updating the
address recognition modules to read additional characters and
dot-matrix print and installing wide-area barcode readers to locate
and read a barcode virtually anywhere on an envelope.  As these
systems and enhancements become fully operational, the Service
expects that its barcoding capability will improve. 


      EFFORTS TO INCREASE DPS
      LETTER VOLUME
------------------------------------------------------ Appendix II:0.2

The Service is also trying to achieve 70 to 85 percent of carriers'
letters delivery sequenced, the percentage assumed in its decision
analyses.  However, Service officials told us that the Service must
overcome various mail flow problems that have impeded increasing the
number of delivery sequenced letters.  They said that these mail flow
problems include not capturing all letters that could have been
delivery sequenced, underused mail processing resources, automated
equipment not yet deployed, and barcode readability and accuracy
problems. 

In a 1996 report, the Inspection Service identified that mail
processing plants were not capturing all of the letters that could be
delivery sequenced because mail processing employees were not
following standard operating procedures and proper mail flows.  For
example, employees misdirected letters to operations that bypassed
automated equipment; or they did not run letters that were initially
rejected a second time through automated equipment, which may have
resulted in these letters not being delivery sequenced.  The
Inspection Service attributed these problems to supervisors not
properly monitoring employee work habits and inadequate employee
training.  Also, the Inspection Service identified a lack of
coordination between mail processing plants and delivery units to
resolve DPS-related mail processing problems. 

Service officials at headquarters and the field locations we visited
identified other mail flow problems.  The officials said that mail
processing resources, such as automated equipment, were not always
fully utilized.  At the time of our review, some mail processing
plants had not yet received scheduled deployments of remote barcode
systems and optical character reader enhancements, which resulted in
some plants not generating sufficient numbers of delivery sequenced
letters.  However, as of November 1997, all remote barcoding systems
and optical character reader enhancements were deployed, which should
help alleviate this problem.  While deploying automated systems,
equipment, and enhancements, the Service has reduced its number of
mechanized letter sorting machines from about 850 in 1994 to 100 in
the first quarter of fiscal year 1998.  A Service official said that
removing these machines increases the letter volume available to be
processed on automated equipment, which leads to increased DPS
volume.  Also, the Service reported that plants were experiencing
barcode readability or accuracy problems caused by factors such as
envelope design, print quality, incorrect barcodes, or mechanical
problems, which caused barcode sorters to reject more letters than
expected. 

At the locations we visited, Service officials have taken steps to
determine the cause of these problems.  For example, one district
identified 100 DPS-candidate letters and then tracked the processing
of these letters, which district officials believed should have
arrived at delivery units in delivery sequence.  Of the 100 letters,
the officials found that only 72 arrived at the units in delivery
sequence.  The officials were attempting to identify the reason(s)
why the 28 other letters did not arrive at the units in delivery
sequence so they could take corrective action.  At another district,
local officials found that delivery units were not receiving about
5,000 to 10,000 letters early enough each morning for these letters
to be delivery sequenced on the units' carrier sequence barcode
sorters.  The letters that were not delivery sequenced had to be
manually sorted by carriers, which the Service said increased their
office time and adversely affected DPS savings. 

The Service has taken actions to address these mail flow problems. 
Some of the more significant actions include the establishment of DPS
implementation teams to, among other things, serve as links between
mail processing and delivery unit operations regarding DPS issues. 
District managers have scheduled regular meetings between mail
processing and delivery unit managers to improve their communication
and coordination, resolve problems, and increase DPS volumes.  For
example, in one district, teams of mail processing and delivery unit
managers have discussed operating goals, identified initiatives to
achieve these goals, set joint targets for DPS percentages, and
raised their percentages over the previous year.  Service
headquarters officials have developed a training course to
familiarize mail processing employees with the new mail flows that
remote barcoding systems create. 

In addition, in 1994, about 23 million delivery points (i.e.,
apartments, offices, or suites) within multioccupancy buildings,
which account for about 19 percent of the total deliveries, could not
be delivery sequenced using the current barcoding rules.  Since the
11-digit barcode enables the delivery sequencing of letters to the
street address of multioccupancy buildings, letters with secondary
address information such as apartment, office, or suite number
require additional carrier handling to manually sort these letters to
the appropriate units within the same building.  As a result, DPS has
not been implemented on many routes that have high densities of
multioccupancy buildings in urban areas such as New York City and
Chicago or other areas that have similar style addresses.  For
example, at a delivery unit we visited, DPS was not implemented on
some of the unit's carrier routes due to the large number of
apartment buildings and trailer parks that these routes served.  When
it initially implemented DPS, the Service deferred the delivery
sequencing of letters addressed to units within multioccupancy
buildings due to the complexity involved in interpreting secondary
address information and because it believed that implementing DPS for
these units would not be cost effective. 

The Service now plans to revise its barcoding rules that business
mailers must follow to receive the automation discount.  The Service
estimates that this change will enable the delivery sequencing of up
to 95 percent of the apartments, offices, and suites in
multioccupancy buildings in 1998 to 1999.  To make the change to
enable multioccupancy delivery sequencing, both the Service and
mailers will, among other things, need to modify the software that
they use to barcode letters.  Also, mailers are to be required to
update their address files with complete and accurate secondary
address information.  Although the Service has initiated efforts to
implement the revised rules, actual implementation of these rules
will depend upon whether mailers accept these rules and potential
technical problems associated with these revisions can be resolved. 


      EFFORTS TO IMPROVE ROUTE
      ADJUSTMENTS AND OTHERWISE
      IMPROVE STREET EFFICIENCY
------------------------------------------------------ Appendix II:0.3

The Service justified its investment in DPS on the basis that the
automated sorting of letters in delivery sequence would reduce the
time carriers would have to spend in the office manually sorting
letters and increase the proportion of their time on the street
actually delivering the mail.  This increase in street time was to
expand the size of carrier routes and ultimately reduce the number of
routes that would be needed.  The Service recognized that DPS would
likely increase the time carriers needed to perform some operations
on the street, which were formerly done in the office.  However, the
Service believed this increase would be minimal and that DPS would
not otherwise have a significant adverse effect on carrier street
efficiency--the number of deliveries carriers make per hour--and DPS
savings. 


         DECLINE IN CITY CARRIER
         STREET EFFICIENCY AFFECTS
         DPS SAVINGS
---------------------------------------------------- Appendix II:0.3.1

The Service has achieved in-office carrier workhour savings with DPS
implementation.  However, part of these in-office savings were offset
by a nationwide decline in city carrier street efficiency.  On DPS
routes, the Service believes that the decline in street efficiency
was (1) greater than it had anticipated from DPS work methods and (2)
at least partially due to route adjustments that were less timely and
accurate than expected.  While the Service believes that other
factors, not related to DPS, have primarily caused declining city
carrier street efficiency, NALC officials believe that much of this
decline is caused by DPS work methods.  The Service has initiated
efforts to improve the timeliness and accuracy of route adjustments,
and address what it believes to be the causes of declining street
efficiency. 

In some cases, additional street time was needed to handle DPS mail
during delivery.  Service Headquarters officials said that DPS should
have only a minor impact on carriers street time.  According to field
officials, carriers needed an additional 10 to 15 minutes to deliver
DPS mail.  The additional street time was needed because of the
handling and preparing of DPS letters on the street, tasks that
carriers formerly had done in the office.  For example, prior to DPS,
carriers sorted letters addressed to units within certain
multioccupancy buildings in the office.  But under DPS, they
typically sort these letters while they are on the street. 
Therefore, some additional time was both accounted for in its
projected DPS savings and factored into the carrier route adjustments
made to implement DPS. 

Despite the additional time that was factored in, the Service
reported that while all 11 postal areas' in-office efficiencies
increased during fiscal year 1997, their street efficiencies all
decreased.  This decline occurred on both DPS and non-DPS routes.  In
June 1997, the Service estimated that nationally for every hour
gained in office efficiency due to DPS, about 20 minutes were lost in
street efficiency.  The Service is concerned about the effects this
unexpected decline in street efficiency is having on DPS savings. 
For example, the Service said that in-office savings are eroded to
the extent that carrier street time is not efficiently used
delivering mail.  Further, the decrease in street efficiency reduces
the opportunity to expand the size of DPS routes to offset the growth
in deliveries as originally intended. 


         TIMELY AND ACCURATE ROUTE
         ADJUSTMENTS NOT ALWAYS
         MADE
---------------------------------------------------- Appendix II:0.3.2

According to the Service, timely and accurate route adjustments have
not always been made to city carrier routes to capture the in-office
time DPS saves by increasing the number of deliveries.  For example,
one district manager told us that the lack of timely and accurate
route adjustments has been one of the most significant problems
affecting the district's ability to capture DPS savings.  The Service
attributes this problem to the lack of resources or expertise to
perform route inspections, data problems, or lack of management
initiative at the local level. 

According to Service guidance, a route adjustment generally involves
changing a carrier's route workload through proportionate increases
or decreases in office and street time to produce an efficient route
that has a workday as close to 8 hours as possible.  The guidance
allows route adjustments to be made with and without route
inspections.  Route adjustments based on a route inspection normally
involve a manager observing the carrier's in-office and street work
for 1 day or more, counting and recording the mail that the carrier
handles, and recording the time the carrier uses to perform each
function.  Service officials said that route inspections are
difficult to schedule and perform because these inspections require
the skilled personnel who usually must be diverted from their normal
duties and take about 30 hours to perform per route.  Route
adjustments made without route inspections are referred to as minor
route adjustments.  Service guidance allows managers to make route
adjustments as often as necessary to, among other things, provide
assistance or add deliveries.  Managers make minor route adjustments
using in-office and street-time data, numbers of possible deliveries,
and the latest route inspection data. 

The lack of route adjustments prior to DPS implementation was
considered a problem.  Service officials said that from about 1975
through 1990, the Service performed few route inspections due largely
to the unavailability of staff resources.  In commenting on our draft
report, the President of NAPS did not agree that the lack of
resources was the reason why few route inspections were done. 
Rather, he believed that the Service curtailed route inspections for
two reasons.  First, multiple position letter sorting machines were
being heavily used at that time to process letters and relied on the
clerks who operated these machines to memorize carrier-route schemes,
which contained a significant amount of address information.  Route
inspections led to route adjustments and scheme changes.  These
changes required clerks to relearn portions of the schemes, which
were both complicated and expensive.  Second, scheme changes were
also expensive for business customers who presorted their mail to
bypass the Service's mail processing operations. 

In preparation for DPS implementation in 1993, the Service and NALC
agreed that initial route adjustments would be based on current route
inspection data, which were generally collected within the previous
18 months.  According to the agreement, route inspections were to be
performed on each route to provide data on city carriers' in-office
and street performance and mail volume to prepare for DPS
implementation in a delivery zone.  However, as DPS implementation
proceeded, the Service said that field offices had continuous
difficulty performing and funding the required route inspections. 
The Service acted to address this problem.  According to Service
officials, in 1995, the Service made funds available to its field
offices to perform about 50,000 route inspections, provided more
training to managers on performing inspections, and allowed field
offices to hire contractors to perform inspections. 

Although the required inspections were eventually performed and route
adjustments were made to implement DPS, according to Service
officials, some route adjustments were not accurate.  Service
officials also said that DPS route adjustments that were made did not
always result in accurate assessments of workload requirements
because the adjustments were based on potential in-office savings
before carriers had experience with DPS.  To illustrate this
situation, the Service recently gathered preliminary data on many
routes, indicating that DPS route adjustments had not added enough
deliveries to routes to increase street time and compensate for
reductions in office time.  A Service official said that these routes
with insufficient workloads contribute to the decline in street
efficiency as carriers naturally use all the time they have available
in delivering the mail. 

According to the Service, once DPS is implemented within a delivery
unit, minor route adjustments are critical in capturing potential DPS
savings because as DPS volume increases, route workload should be
adjusted by removing office time and proportionally increasing street
time by adding deliveries.  Area, district, and local managers said
that whenever possible, delivery unit managers should take the
initiative to make minor route adjustments, which can be made without
a route inspection.  If this is not done, they said that the benefit
of the office savings can evaporate as carriers expand their street
time to fill their 8-hour workdays. 


         THE SERVICE BELIEVES THAT
         OTHER FACTORS BESIDES
         ROUTE ADJUSTMENTS AFFECT
         CITY CARRIERS' STREET
         EFFICIENCY
---------------------------------------------------- Appendix II:0.3.3

The Service believes that several factors in addition to route
adjustments have contributed to the decline in city carrier street
efficiency (the number of deliveries carriers make per hour). 
However, the Service does not believe that DPS work methods have
caused a decline in city carrier street efficiency because the
additional time needed to handle and prepare DPS letters on the
street was to be factored in when routes were adjusted to implement
DPS.  According to Service officials, part of the decline in city
carrier street efficiency is due to the work habits of many city
carriers that have no direct connection with DPS.  The officials
believe that many carriers are not using the most efficient work
methods and need closer supervision.  The officials do believe,
however, that DPS has had an indirect effect on the decline in street
efficiency.  In their view, some city carriers, who did not fully
support DPS, slowed down their delivery or did not take advantage of
opportunities to increase efficiency afforded them by DPS.  For
example, some city carriers did not use the sorting method that would
make mail easier to carry on their individual routes.  Further, the
officials believe that factors unrelated to carrier work habits, such
as increases in the volume of priority packages and longer driving
distances to high growth areas, also are contributing to the decline
in carrier street efficiency. 

However, NALC officials do not fully agree with the Service on the
extent to which carrier work habits contribute to declining street
efficiency.  Further, NALC officials believe that much of the decline
is attributable to DPS work methods.  NALC officials and many city
carriers believe that street efficiency is being adversely affected
by DPS work methods, such as not being able to manually sort DPS mail
in the office and the additional time needed to handle the extra
bundle associated with DPS, which slows city carrier delivery.  The
fact that city carrier street efficiency is declining on both DPS and
non-DPS city carrier routes would suggest that factors other than DPS
are contributing to the decline.  However, definitive data on the
causes of the decline are not available to determine whether DPS work
methods are adversely affecting city carrier street efficiency
greater than the Service initially anticipated. 

Notwithstanding the NALC's views, the Service has several efforts
under way to deal with city carrier street efficiency.  These efforts
are intended to increase the street supervision and monitoring of
city carriers to ensure that carriers deliver mail at an appropriate
pace and do not waste time during delivery.  Service officials said
that to improve supervision, each accounting period, headquarters
delivery managers prepared a list of each area's post offices with
the lowest street efficiency and requested that these be targeted for
management attention.  The officials also requested that area and
district managers implement street management programs to, among
other things, identify the most inefficient carriers at each delivery
unit and develop corrective action plans.  In 1995, the Service
initiated the enhanced street performance program to improve delivery
service through the use of data collection and communication
technologies on the street.  Among other benefits, these technologies
are to assist in the overall management of street performance for
consistency of delivery times and verification of carrier street
times.  One of the technologies being used is a satellite monitoring
system installed in carriers' delivery vehicles to enable supervisors
to track carriers' locations.  In 1996, the Service began testing
this program at 11 locations. 

The Service also began the Delivery Redesign initiative in 1995 to
improve delivery efficiency and city carriers' work environment.  One
aspect of the initiative is to provide greater incentives for city
carriers to work efficiently by changing the way they are
compensated.  However, the Service is to obtain NALC's agreement to
test compensation alternatives, and NALC has not yet agreed to a test
because it considers compensation an issue that is better addressed
in the collective bargaining process.  Other aspects of the
initiative include revising the city carrier delivery process and
developing new performance standards for city carriers.  According to
Service officials, under article 34 of the National Agreement, the
Service has the authority to test these changes.  Accordingly, in
1997, the Service began testing two approaches: 

  -- city carrier delivery process changes, such as a team delivery
     concept that separates the manual sorting and delivering of mail
     among a group of city carriers.  Under this concept, carriers
     would elect to either sort the mail or deliver it, according to
     their abilities and preference; and

  -- new carrier performance standards that consist of standard time
     allowances for city carrier office and street activities.  The
     new standards would be used to structure routes and monitor city
     carrier performance. 

The Service is conducting these tests at 19 locations and expects
them to be completed by the spring of 1999. 


         MANY CITY CARRIERS WANT
         TO MANUALLY SORT DPS
         LETTERS
---------------------------------------------------- Appendix II:0.3.4

Like rural carriers, city carriers said that they want the option to
manually sort their DPS letters with non-DPS letters and flats while
in the office.  Of the 111 city carriers we interviewed 57, or about
51 percent, said that they were satisfied with the concept of less
sorting, which DPS provides.  However, 86 city carriers, or about 77
percent, said that they believed not being allowed to sort DPS
letters in the office decreased their street efficiency. 

NALC officials said that in some situations, especially where DPS
volume is no higher than 50 percent, city carriers want to sort DPS
letters in the office to improve street efficiency by eliminating the
extra bundle and reducing sorting and handling of undeliverable
letters while on the street.  These officials said that on routes
with large numbers of multioccupancy deliveries, carriers' efficiency
was also reduced by having to manually sequence the DPS letters for
individual apartments or suites while on the street.  These officials
also said that substitute carriers, who are not as familiar with the
customers and addresses as are the regular carriers on the route,
have more of a tendency to incorrectly deliver DPS letters because
they do not easily recognize undeliverable letters during delivery. 
For example, the substitute carrier might not recognize that the
addressee on some DPS letters has moved. 

Service officials said that they believed efficiency would decrease
overall if city carriers were allowed to sort DPS letters while in
the office.  The officials said that they believed many city carriers
would not sort DPS letters efficiently because the existing standard
for manually sorting random letters requires city carriers to sort
only 18 letters per minute and 8 flats per minute.  While the
officials recognize that many carriers exceed these standards at
their own discretion, they are not required to do so.  The officials
also said that they do not believe DPS should make delivery more
difficult for carriers, and if carriers use the most efficient
sorting method for their routes and follow standard delivery
procedures, they should not have problems. 

Compared with city carriers, rural carriers are more satisfied with
DPS because they are allowed to manually sort DPS letters in the
office.  Of the 31 rural carriers we interviewed, 29 said that they
were satisfied with DPS primarily because sequenced letters are
easier and faster to sort or because they like having less sorting to
do.  However, seven of the rural carriers said that they believed DPS
had decreased their street efficiency.  Also, the President of the
Rural Carriers said that his members were concerned about the
reduction in their salaries due to DPS but that the Service has tried
to add deliveries to the affected routes to compensate for the office
time eliminated. 


LABOR-MANAGEMENT RELATIONS ISSUES
AFFECTING ACHIEVEMENT OF FISCAL
YEAR 1998 DPS GOALS
========================================================= Appendix III

In addition to operational issues, the Service is also addressing
those concerning labor-management relations, which also impede its
efforts to achieve DPS goals and benchmarks and maximize savings. 
These issues include poor working relationships with NALC over DPS
implementation and insufficient city carrier support for DPS work
methods.  DPS implementation involved three areas of contention:  (1)
the work methods that should be used by city carriers to implement
DPS; (2) the manner in which the Service implemented DPS, viewed by
NALC as inconsistent with the 1992 joint agreements; and (3) DPS'
effect on city carrier street efficiency.  Many of the city carriers'
disagreements with DPS resulted in grievances, some of which led to
national arbitration cases.  These issues and the Postal Service's
efforts to address them are discussed as follows. 


      NATIONAL ARBITRATION CASES
      ILLUSTRATE LABOR-MANAGEMENT
      RELATIONS PROBLEMS
----------------------------------------------------- Appendix III:0.1

In September 1992, the Service and NALC jointly reached several
agreements to resolve past disputes and implement DPS on city carrier
routes.  However, some of the 1992 joint agreements became
problematic with actual implementation of DPS, and the parties were
unable to reach agreement on solutions.  The Service subsequently
issued instructions to the field, which NALC believed were
inconsistent with the 1992 joint agreements.  Differences in opinion
over the instructions, as well as the meaning of the work methods and
transitional employee agreements, generated many grievances at the
national and local levels. 

Although most grievances were resolved through settlement, three went
to national level arbitration.  During 1996, a national arbitrator
ruled on one of the cases and found in favor of the Service.  In
1997, another national arbitrator ruled in favor of NALC on the two
remaining cases.  The arbitrator determined that the Service had
violated either provisions of existing labor agreements or the 1992
joint agreements and instructed the Service and NALC to jointly
determine alternative methods to resolve their differences.  The
parties are conducting a study to address the issues involved in one
case and are working together to reach agreement on how to proceed to
resolve the other case.  In addition, to improve their overall
working relationship, on October 20, 1997, the Service and NALC
signed an agreement to test a revised dispute resolution process
aimed at narrowing areas of dispute and effectively and
constructively resolving disagreements. 


         1992 JOINT AGREEMENTS SET
         STAGE FOR DPS
--------------------------------------------------- Appendix III:0.1.1

In 1992, the Service and NALC published six Memoranda of
Understanding, or joint agreements, which were to resolve past
disputes and set a joint course for the future.\18

The six agreements are summarized as follows: 

  -- Case Configuration - Letter Size Mail.  Defined letter-sized
     mail and authorized the use of four- or five-shelf letter cases
     and route inspections based on these cases.  (A letter case is a
     piece of equipment that contains separations or pigeonholes into
     which carriers manually sort letters and other mail (e.g.,
     magazines and papers.)

  -- Hempstead Resolution.  Remanded all pending grievances and
     selected route adjustments to the local parties for resolution
     and provided guidance for resolving the grievances.  This
     resolution was based on a national level arbitrator's finding
     that the Service improperly established city routes, which
     required more than 8 hours to complete in anticipation of future
     DPS route adjustments that would reduce these routes to 8 hours. 

  -- The Future - Unilateral Process.  Provided procedures for
     management to plan, estimate the impact of, and implement
     DPS-related route adjustments. 

  -- The Future - X-Route Process.  Provided procedures as an
     alternative to the unilateral process for local parties to
     jointly plan to adjust and realign identified routes when the
     delivery unit had achieved the final DPS target volume. 

  -- Delivery Point Sequencing Work Methods.  Authorized two methods
     carriers are to use to sort non-DPS letters and "flats" (large
     envelopes, magazines, and catalogs), and bundle them for
     delivery.\19

  -- Transitional Employees.  Resolved past disagreements regarding
     the hiring and use of transitional employees within the carrier
     craft. 

The agreements stated that successful transition to DPS is the
responsibility of local postal managers and union representatives to
collaboratively resolve problems.  The Service and NALC jointly
provided DPS training to field units to prepare carriers and local
managers for implementation.  In an October 5, 1995, instruction to
area vice presidents, the Service reiterated the importance of field
compliance with headquarters' DPS policies and the joint agreements. 
Managers were cautioned not to enter into local labor agreements that
violated the joint agreements or Service policies.  However, NALC
officials said and the Postal Inspection Service reported that as DPS
implementation proceeded, some local agreements and management
decisions violated national agreements and policies, causing large
numbers of local grievances to be filed by carriers. 


--------------------
\18 Building Our Future by Working Together.  USPS-NALC Joint
Training Guide.  Sept.  1992 Memoranda of Understanding. 

\19 Carriers form bundles by banding or tying together packages of
mail to be handled as one unit. 


         DIFFERENCES AROSE OVER
         JOINT AGREEMENTS AND THE
         SERVICE'S IMPLEMENTATION
         INSTRUCTIONS
--------------------------------------------------- Appendix III:0.1.2

As the Service gained experience with DPS in 1993 and DPS volume
remained low, the parties determined that certain aspects of these
agreements became problematic; such as, rules for establishing DPS
target volumes to trigger implementation and route adjustments. 
Although the parties agreed they should update the agreements, they
were unable to reach agreement on changes.  As a result, in 1994, the
Service issued DPS implementation instructions to the field that NALC
believed violated certain aspects of the joint agreements.  In a
March 1994 memorandum to area and district managers, a headquarters
senior vice president wrote: 

     "As you are aware, we have been unable to reach agreement with
     the NALC on updating the Memorandums of Understanding concerning
     DPS implementation.  Attached .  .  .  are instructions which
     explain how to move forward on DPS .  .  .  which are effective
     immediately."

Headquarters officials, in a subsequent plan concerning DPS
implementation, stated that failure to gain a new agreement with the
NALC had left delivery units in various stages of development in
their plans to capture savings.  For example, DPS volumes that
remained below the targets set by many units had delayed
implementation and allowed carriers to continue sorting DPS letters,
delaying capture of workhour savings. 

The Service said that its instructions to field units mirrored the
1992 joint agreements.  One of the instructions advised managers to
base calculations of DPS volume for purposes of meeting the targets
on weekly averages.  The Service believed that this aspect of the
joint agreements was not negotiated and was left open for managerial
discretion.  However, NALC contended that the joint agreements had
been reached based on an understanding that target volumes would have
to be met for 12 consecutive delivery days.  Therefore, NALC said
that the Service violated the joint agreements by unilaterally
advising its managers to use a method that the parties had not agreed
upon. 

Another disagreement arose when NALC challenged the Service's
interpretation of a 1992 joint agreement involving the DPS work
methods carriers were expected to use.  Carriers traditionally have
used one of several sorting methods to prepare mail for delivery,
resulting in either all the mail sorted together and carried as one
bundle, or letters sorted separately from larger pieces, called flats
(e.g., magazines), and carried as two bundles.  Factors--like number
and type of deliveries, such as apartments or commercial buildings or
amount of walking versus driving between deliveries--can influence
which sorting method is chosen.  The Service's DPS instructions
required carriers to pick up trays of DPS letters and load them into
their vehicles for delivery along with their trays of manually sorted
mail.  During delivery, carriers select mail from the trays of
letters and flats at each delivery point or select and carry letters
and flats in their hand as separate bundles while walking portions of
the route.  The DPS-sorting methods authorized in the joint
agreements result in either two or three bundles of mail, in addition
to certain types of unaddressed advertising mail delivered to every
address.  The following are the two authorized DPS sorting methods: 

  -- Sort non-DPS letters with the flats into the case.  Pull down
     from the case and carry the combined flats/non-DPS letters as
     one bundle and DPS letters as a second bundle. 

  -- Sort into and pull down from the case non-DPS letters separately
     from the flats, and carry DPS as a third bundle. 

Under the joint agreements, selection of the most efficient method
for each route was to be made jointly by local managers and NALC
representatives.  For example, the parties could agree that carrying
two bundles was more efficient on park and loop routes, which require
walking between deliveries, or that a third bundle is more efficient
for motorized curbside delivery.  The Service modeled carrier
efficiency using different methods and at different DPS volumes and
found that the two-bundle method generally was the most efficient to
use with relatively high DPS volume.  However, NALC and the Service
disagreed about the relative efficiency of the methods and their
impact on carriers. 

NALC officials told us that they know automation including DPS is
inevitable and necessary to increase postal efficiency.  However, the
NALC officials disagreed with the Service's proceeding to implement
DPS using the revised instructions to the field that NALC believe
violated the joint agreements.  NALC officials also said that both
the overly optimistic expectations of high DPS volumes early in the
program that did not materialize as well as managers' efforts to
implement DPS and capture savings resulted in lasting disappointment
and frustration among some carriers.  However, they agreed with
Service managers that some of the carriers concerns regarding DPS
will diminish if their DPS volume approaches higher percentages of
total letters, which the Service expects to achieve. 


         STATUS OF THREE
         ARBITRATION CASES
--------------------------------------------------- Appendix III:0.1.3

Following is a brief summary of two DPS national arbitration cases
related to the 1992 joint agreements and one national arbitration
case concerning the Service's subsequent instructions on calculating
DPS volumes. 

  -- In one case, an arbitrator ruled that, as NALC contended,
     unaddressed advertising mail, a type of flat mail, constitutes a
     fourth bundle for carriers who have elected to use the
     three-bundle sorting method on park and loop routes.  The
     parties' current labor agreement limits to three, the number of
     bundles such carriers can be required to carry.  The Service had
     maintained that if unaddressed flats were carried behind the
     flats bundle, it did not create a fourth bundle.  The arbitrator
     required the parties to reach agreement on an alternative to the
     authorized three-bundle method when unaddressed flats are
     present on the affected routes.  The parties agreed to conduct a
     joint study of the DPS work methods to determine which is the
     most efficient method and how to best handle unaddressed flats. 
     The parties agreed to complete the joint study by April 30,
     1998. 

  -- In a second case, the arbitrator decided that the Service had
     not violated the agreements on the use of transitional
     employees.  NALC believed that a ceiling existed on the number
     of hours per week these transitional employees could work and
     that the Service had ignored the ceiling.  NALC also believed
     that these employees were hired into a particular delivery unit
     and had been improperly reassigned to work in another unit.  The
     Service maintained that there was no ceiling on workhours once
     transitional employees had been properly hired, and there was no
     prohibition against reassigning them as needed. 

  -- In a third case, an arbitrator concluded that the Service had
     violated the 1992 joint agreements by not obtaining NALC's
     concurrence on revising the method for calculating DPS volumes
     that the Service advised managers to use in its DPS
     implementation instructions.  The Service began using average
     weekly--rather than daily--DPS volume because certain
     fluctuations in daily volume made it impossible to reach DPS
     percentage targets every day.  However, the arbitrator also
     found that the daily volume method in the original agreement was
     counter to achieving DPS savings and instructed the parties to
     work together to determine an alternative method.  In the
     interim, the Service was allowed to use its averaging method. 
     As of March 1998, the parties had not yet reached agreement on
     an alternative method for calculating DPS volume. 


      MANY CITY CARRIERS RAISED
      CONCERNS ABOUT DPS WORK
      METHODS
----------------------------------------------------- Appendix III:0.2

In addition to their concerns about the Service's noncompliance with
national NALC-Service labor agreements, many city letter carriers
said that they believe DPS work methods--particularly not being able
to manually sort DPS letters to (1) combine them with the non-DPS
bundle and (2) identify DPS sort errors and undeliverable letters--
adversely affected their efficiency and, in some cases, service to
their customers.  NALC officials agreed with city carriers that the
additional bundle of letters created by DPS and the single bundle
made up of different sized mail pieces can be awkward for carriers to
handle during delivery.  Service officials we contacted, however,
believe the different work methods are necessary to capture DPS
savings and should have only minimal impact on carriers' ability to
deliver mail.  The officials do not believe the concerns raised by
carriers represent a significant adverse effect on customer service. 
However, rural carriers we interviewed were more satisfied with DPS
work methods than were city carriers because rural carriers were
allowed to manually sort DPS letters and combine them with non-DPS
mail before leaving the office to deliver the mail. 

In commenting on our draft report, the President of NAPS said that he
believed city carriers' concerns about DPS work methods are greatly
exaggerated because carriers have always been required to check
addresses on the mail between delivery stops to identify mail that is
undeliverable.  Therefore, checking DPS letters to find
undeliverables should not be much different from the work methods
used prior to DPS.  The President said that while carrying more than
two bundles of mail has some detrimental effect on carriers' ability
to deliver mail, some carriers are using DPS as an excuse to extend
their street time, delay prompt return to the office, and thus avoid
having to perform additional work until their 8-hour day ends. 

From a letter carrier's standpoint, an important advantage of
manually sorting mail is to identify mail that cannot be delivered. 
Carriers historically take pride in identifying and redirecting such
mail for further processing before leaving the office to begin
delivery, with the knowledge that they will deliver all the mail they
take to the street each day.  Since city carriers must take DPS
letters to the street without sorting or inspecting them, they must
identify and remove any undeliverable letters while making
deliveries. 


         DPS SORT ERRORS
--------------------------------------------------- Appendix III:0.2.1

Although managers at the delivery units we visited did not know the
number of DPS sort errors carriers found each day, they said that
errors occur because of incorrect addresses, mechanical problems, or
human error.  Most carriers we interviewed said that they were
concerned about DPS sort errors and their effect on street efficiency
and service to customers.  However, Service officials said that while
some problems do occur, they believe only a small percentage of DPS
letters experience sort accuracy problems.  Overall officials
believed sort accuracy was acceptable.  While the Service does not
routinely collect nationwide data on DPS sort errors, the units we
visited were starting to collect data on sort errors on a daily
basis. 

Service and NALC officials we contacted agreed that DPS technology is
highly effective but that errors sometimes occur due to incorrect
addresses, mechanical problems, or employee error.  Carriers said
that they usually get some sort errors.  Sort accuracy was the
concern most often cited by carriers we interviewed; 55 carriers, or
39 percent of those we interviewed, said that finding sort errors
during delivery was a problem.  The number and type of sort errors
can vary from day to day; and of the 142 carriers we interviewed,
125, 131, and 136 carriers, respectively, estimated they received an
average of fewer than 10 letters a day missorted, missequenced, and
missent.  However, the remaining carriers estimated that they
received 11 or more letters a day in at least 1 of the 3 sort-error
categories.  For example, 14, 9, and 5 carriers estimated that they
received an average of 11 to 20 letters each day missorted,
missequenced, and missent, respectively.  Although it appears that
sort errors represented a small proportion of carriers total DPS
letters, DPS sort errors might cause carriers to (1) backtrack on
their routes to deliver missequenced letters or (2) bring letters
back to the office at the end of the day if they cannot be delivered. 
NALC officials and the carriers said that service to their customers
is sometimes delayed by at least 1 day if these letters must be
reprocessed for delivery. 

After the initial 98-percent accuracy threshold was met on DPS
routes, there was no formal requirement to track subsequent accuracy;
and the Service does not collect nationwide data on DPS-sort
accuracy.  Rather, it relies on carriers to report sort errors each
day so that delivery units can coordinate with mail processing
operations to correct them.  NALC officials said that errors
sometimes occurred despite carriers' and delivery units' reporting
them.  Some of the units we visited were beginning to record the
number and category of DPS-sort errors that carriers reported each
day, so that corrective action could be taken.  One district had
analyzed these data collected over several weeks and found less than
1 percent of DPS-sort errors.  These errors were often letters
missorted to the wrong route caused by mechanical or maintenance
problems or necessary changes to computerized sort plans for routes
not having been entered. 


         FORWARDED UNDELIVERABLE
         LETTERS
--------------------------------------------------- Appendix III:0.2.2

Carriers often receive DPS letters that are not deliverable. 
Undeliverable mail includes forwards\20 resulting from
change-of-address, vacation holds, and mail sorted incorrectly to the
wrong route.  The Service receives about 40 million change-of-address
requests each year and forwards customers' mail to their new
addresses for 12 months.  This results in carriers receiving letters
for customers who no longer live at addresses on their routes, and
these letters must then be reprocessed for delivery to each
customer's new address.  The units we visited did not track the
number of undeliverable DPS letters carriers brought back to the
office each day.  The carriers we interviewed said that the number
varied from day to day.  Of 134 carriers who estimated their average
number of undeliverable DPS letters, 60 carriers, or about 45
percent, estimated they had up to 25 undeliverable letters a day; 41
carriers, or about 30 percent, estimated having between 26 and 50
letters a day; and 33 carriers, or 25 percent, estimated having more
than 50 such letters a day, which includes 9 carriers, or 7 percent,
having more than 100 letters a day. 

We found that opinions among Service managers, NALC officials, and
carriers differed about the impact that undeliverable letters in
carriers' DPS mail have on service.  For example, NALC officials said
that they and city carriers believed in some cases DPS was delaying
delivery of forwarded letters by at least 1 day.  NALC officials
attributed the delay to the fact that carriers were returning to the
office too late in the day for their forwarded letters to be
transported to the Service's Computerized Forwarding System (CFS).\21
Service delivery managers did not believe DPS delayed service and
pointed out that the First-Class on-time delivery scores--the
Service's indicator of quality of service to customers--are now
higher than they have been in the past.\22

While there was general agreement at headquarters and field units
that forwarded letters should be transported to CFS the same day
carriers received them, this was not the case at two of the six
delivery units we visited because carriers returned to the office
from their routes after that day's final dispatch of forwarded
letters to the CFS. 

NALC and carrier perception that a 1-day delay in forwarding letters
constituted delayed service to customers was not shared by Service
headquarters delivery and forwarding system managers.  The Service
said that its First-Class mail delivery standards for 1-, 2-, or
3-day delivery do not technically apply to forwarded letters because
they must be reprocessed for delivery.  Furthermore, the standard for
processing forwards is that CFS staff is to reprocess each forwarded
mail piece and send it to the appropriate delivery unit within 24
hours, beginning when they receive it from the original delivery
unit. 

The Service has a system whereby carriers can request that data be
entered into sort programs to have certain letters, including
forwards, held out of DPS so they can be identified and rerouted
before delivery.  Of the six delivery units we visited, two allowed
carriers to hold out forwards from DPS for 30 days; one allowed
forwards to be held out for 2 weeks; one allowed only forwards for
temporary moves to be held out, and two did not allow any forwards to
be held out of DPS.  For example, one delivery unit manager said that
his unit did not hold out forwards because the data entry process to
do so is difficult; updating sort plans is complicated; and at his
unit, managers believe carriers can more efficiently identify
forwards while on the street.  Likewise, headquarters delivery
managers said that they did not believe forwards should necessarily
be held out of carriers' DPS mail and that carriers should adjust to
handling forwards during delivery.  In contrast, NALC officials said
that carriers do not like to handle forwards while on the street and
then bring them back to the office for reprocessing.  NALC officials
said that if the Service could develop an automated system to
identify and remove change-of-address mail so that it is not included
with carriers' DPS mail for delivery, most of the problems with DPS
would be eliminated.  However, these officials recognize that the
Service, although attempting to do so, has not yet developed such a
system. 



(See figure in printed edition.)Appendix IV

--------------------
\20 Mail that is redirected to the intended recipient's new delivery
address. 

\21 Each day, delivery units send CFS staff data on
change-of-addresses and mail to be forwarded.  CFS staff key new
address information into the National Change-of-Address database and
forward the mail to the appropriate delivery unit for delivery. 

\22 The External First-Class Mail Measurement System is used to
estimate the percentage of first-class mail that is delivered on time
according to Postal Service standards.  An independent contractor,
Price Waterhouse, conducts test mailings in 96 cities to measure the
speed of first-class mail delivery. 


COMMENTS FROM THE POSTAL SERVICE
========================================================= Appendix III




(See figure in printed edition.)Appendix V
COMMENTS FROM THE NATIONAL
ASSOCIATION OF LETTER CARRIERS
========================================================= Appendix III

See pp.  28-29. 

See comment 1. 



(See figure in printed edition.)

See comment 2. 

See comment 3. 

See pp.  28-29. 

See p.  27. 



(See figure in printed edition.)

See comment 4. 

Now on p.  36. 

Now on p.  14. 

Now on p.  9. 

Now on p.  9. 

Now on p.  20. 



(See figure in printed edition.)

Now on pp.  20-21. 

Now on p.  54. 

Now on p.  56. 



(See figure in printed edition.)



   GAO COMMENTS
------------------------------------------------------- Appendix III:1

1.  We do not agree with NALC's assessment that our report is a
repackaging of postal management's excuses for missing its DPS
implementation schedule.  As requested by the Subcommittee, the
report describes the status of the Service's efforts to implement
DPS, including slippages and reasons for them.  The report discusses
the Service's overly optimistic DPS expectations, the changes the
Service made to its goals and benchmarks for completion of the
program, the current shortfalls compared with the Service's fiscal
year 1998 goals, and the issues the Service will need to address to
achieve the goals. 

NALC also commented that regarding specific statements in the report
attributed to Service managers, our review lacked critical scrutiny
of the managers' opinions, with which NALC does not agree.  These
statements concerned the Service's assertions that (1) DPS should not
cause a decrease in street efficiency, (2) the Service does not have
complete data to measure the percentage of letters carrier routes
receive in delivery sequence, (3) DPS is responsible for workhour
reductions, and (4) DPS does not adversely affect carriers'
efficiency or customer service.  We disagree with NALC's assertion
that we accepted Postal Service managers' opinions without scrutiny. 
For each area about which NALC expressed concern, we attempted to
obtain data addressing the relevant issues.  However, sufficient data
were not readily available.  Therefore, in addition to obtaining and
attributing the views of Postal Service headquarters managers, we
obtained and attributed the views of managers and letter carriers at
the field locations we visited as well as the views of the Service's
major unions and management associations, including NALC. 
Furthermore, we included a separate section in the report that
discusses many of the specific concerns city carriers and NALC
officials conveyed to us during interviews so that a balanced view of
DPS would be presented. 

2.  NALC expressed the belief that in our reporting of selected city
carrier national level arbitration cases, we casually accepted the
independent arbitrators repeated findings that the Service violated
its contract with NALC during DPS implementation.  We understand that
NALC and the Service have been at odds and NALC's view that the
arbitrators' findings support its position.  However, our intent was
to objectively present the events that occurred and their effects on
DPS implementation, which we believe is reflected in the report.  In
the report, we noted that the Service has lost two national
arbitration cases involving DPS implementation.  We explained that
the arbitrators affirmed NALC's position that (1) unaddressed
advertising mail constitutes a fourth bundle for carriers, which
violates the parties current labor agreement and (2) the Service's
DPS instructions to the field were inconsistent with certain aspects
of the 1992 agreements.  To further recognize NALC's concern, we have
added language to the report explaining that NALC filed grievances on
the Service's DPS instructions at the national level, and most issues
were settled without arbitration. 

In addition, NALC questioned the draft report language, which it
interpreted as indicating that an arbitrator's decision caused a
delay in the Service achieving DPS workhour reductions.  NALC stated
that the Service's violation of its contract with NALC was the
effective cause of the delay and not the arbitration's remedy.  We
have revised the language to clarify this information. 

3.  NALC suggested that our methodology was flawed because we
interviewed and observed the delivery operations of a relatively
small number of city carriers.  NALC emphasized that the small number
of carriers included in our review was inadequate since carriers and
their performance were central to measuring the progress of DPS
implementation.  We believe that our methodology for accomplishing
our objectives was sound and point out that evaluating carrier
performance was not an objective of our review.  As discussed in the
report, we judgmentally selected and interviewed as many city
carriers as possible given our resource limitations and time
constraints.  Our intent was not to interview a statistically
representative sample of city carriers.  Rather, we interviewed these
carriers to provide balance and illustrative examples of their views
regarding DPS implementation.  We also accompanied two city carriers
on their routes to observe their handling of DPS letters and other
mail and to better understand their views regarding DPS work methods. 
We supplemented these interviews and observations with the opinions
and illustrative information from NALC national level officials. 
Although our interviews and observations of city carriers are not
statistically representative, their views largely mirrored those of
NALC officials. 

4.  NALC stated that the draft report incorrectly asserts that DPS
should not cause a decline in street efficiency.  We have deleted
this language from the report.  However, to provide the views of the
Service the report notes that, according to the Service, DPS would
cause only a minimal increase in the time carriers would need to
perform some operations on the street, which were formerly done in
the office, and that DPS should not otherwise have a significant
adverse effect on street efficiency.  The report also notes that
Service field managers and supervisors as well as the carriers we
interviewed as a part of our review told us that, in general, DPS did
cause some decline in carrier street efficiency. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI


   GENERAL GOVERNMENT DIVISION
-------------------------------------------------------- Appendix VI:1

Gerald P.  Barnes, Assistant Director
Hazel J.  Bailey, Evaluator (Communications Analyst)


   DENVER FIELD OFFICE
-------------------------------------------------------- Appendix VI:2

Arleen L.  Alleman, Senior Evaluator
Rudolfo G.  Payan, Senior Evaluator
Robert E.  Kigerl, Staff Evaluator

*** End of document. ***