U.S. Postal Service: Deficiencies Continue While Antelope Valley Project
Status Remains Uncertain (Letter Report, 08/31/1999, GAO/GGD-99-147).

Pursuant to a congressional request, GAO reviewed the project approval
process the Postal Service used in proposing to relocate postal
operations for the Antelope Valley, California, area from the Main Post
Office in Mojave, California, to a new facility in Lancaster,
California.

GAO noted that: (1) the Service followed most of its key requirements
for acquiring a site in Lancaster in 1991 prior to obtaining approval
for the proposed Antelope Valley project, although some requirements
were vague; (2) one major exception was that review and approval of the
proposed project justification and alternatives by the Headquarters
Capital Investment Committee did not take place prior to the advance
site acquisition in Lancaster, as required by Service policies; (3)
Service guidance was unclear because it required that alternatives be
identified and analyzed before a project could qualify for advance site
acquisition, but it did not clearly state the type or depth of analysis
required; (4) at the time of the Lancaster site acquisition, the
analysis to support the decision was incomplete; (5) more detailed
analyses were still under development; (6) GAO could not determine from
available documentation why the alternative to construct a new facility
in Lancaster was preferred over other alternatives that had been
proposed or why various alternatives were not considered viable; (7) the
Lancaster site purchased for $6.5 million in 1991 has remained unused
since that time due to the Service's failure to decide how and when it
will resolve the long-standing problems that the proposed Antelope
Valley project was to address; (8) continuing negative effects have
resulted from the incomplete status of the project for almost 10 years;
(9) project approval and funding of the project remain uncertain due to
delays resulting from two suspensions, limits on capital spending, and
changes in project classification; (10) it is unclear how the Service
intends to address the space deficiencies that have contributed to
operational processing and delivery deficiencies in the Antelope Valley
area; (11) because of continued space deficiencies, automated equipment
was sitting unused in warehouses, some mail delivery was being delayed,
and the projected operating efficiencies and savings have not been
realized; (12) the Service has invested $6.5 million in land that has
been unused for nearly 8 years; such an investment has a substantial
annual interest cost estimated at over $300,000; (13) it has also
incurred additional costs to update documents required for project
approval and may incur more costs if some of these documents again have
to be updated when the project is reviewed for approval; and (14) the
Lancaster and Mojave communities have faced uncertainty over business
development opportunities as a result of the project delays.

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

 REPORTNUM:  GGD-99-147
     TITLE:  U.S. Postal Service: Deficiencies Continue While Antelope
	     Valley Project Status Remains Uncertain
      DATE:  08/31/1999
   SUBJECT:  Postal facilities
	     Cost effectiveness analysis
	     Federal facility relocation
	     Federal procurement policy
	     Government facility construction
	     Real estate purchases
	     Mail delivery problems
IDENTIFIER:  USPS Five-Year Major Facilities Priority List
	     Antelope Valley (CA)
	     Lancaster County (CA)
	     Mojave (CA)

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO report.  This text was extracted from a PDF file.        **
** Delineations within the text indicating chapter titles,      **
** headings, and bullets have not been preserved, and in some   **
** cases heading text has been incorrectly merged into          **
** body text in the adjacent column.  Graphic images have       **
** not been reproduced, but figure captions are included.       **
** Tables are included, but column deliniations have not been   **
** preserved.                                                   **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************
U.S. POSTAL SERVICE: Deficiencies Continue While Antelope Valley
Project Status Remains Uncertain (GAO/GGD-99-147) U. S. POSTAL
SERVICE

Deficiencies Continue While Antelope Valley Project Status Remains
Uncertain

United States General Accounting Office

GAO Report to the Honorable William M. Thomas, House of
Representatives

August 1999 

GAO/GGD-99-147

August 1999   GAO/GGD-99-147

United States General Accounting Office General Government
Division Washington, D. C. 20548

Page 1 GAO/GGD-99-147 Status of Antelope Valley Project

B-282078 August 31, 1999 The Honorable William M. Thomas House of
Representatives

Dear Mr. Thomas: This report responds to your December 1, 1998,
request to evaluate the project approval process the Postal
Service used in proposing to relocate postal operations for the
Antelope Valley area from the Main Post Office (MPO) in Mojave,
CA, to a new facility in Lancaster, CA. Your request stemmed from
concerns over whether the Service appropriately acquired land in
Lancaster and properly considered project costs. To address your
concerns, we evaluated whether the Service followed its capital
project approval process for the purchase of land in Lancaster. In
addition, because of the incomplete status of the project, we
identified the reasons for the project delays and the effects of
those delays on postal operations, project costs, and affected
communities.

The Antelope Valley is composed of 16 communities in northern Los
Angeles County and eastern Kern County. Mojave is located in the
Antelope Valley approximately 100 miles north of downtown Los
Angeles, and Lancaster is located 23 miles south of Mojave. In
1989, the Service began planning for a new facility to address
operational processing and delivery deficiencies it had identified
in the Antelope Valley area. The rapid growth in the population
and resultant mail volumes in the Antelope Valley led to space
deficiencies for mail processing operations at the Mojave MPO. The
growth also led to space deficiencies for carrier operations in
four of the five affected post offices.

In October 1991, while the overall project was still under
development and review, the Service acquired a 25- acre site in
the city of Lancaster, CA, at a cost of $6.5 million using its
advance site acquisition procedures. The proposed project was
suspended in 1992, shortly after the site was acquired, reinstated
in 1995 as a fiscal year 1998 new- construction project and
suspended again in March 1999 during the headquarters review
process. The project was recently reclassified from an area-
funded project to a headquarters- funded project. The project is
now waiting to be included in the next 5- year prioritization
process for ranking and funding capital projects, and this process
is anticipated to be completed by August

B-282078 Page 2 GAO/GGD-99-147 Status of Antelope Valley Project

2000. The total cost of the project, including land acquisition
costs, is currently estimated at about $35 million.

The Service followed most of its key requirements for acquiring a
site in Lancaster in 1991 prior to obtaining approval for the
proposed Antelope Valley project, although some requirements were
vague. One major exception was that review and approval of the
proposed project justification and alternatives by the
Headquarters Capital Investment Committee (CIC) did not take place
prior to the advance site acquisition in Lancaster, as required by
Service policies. Service guidance was unclear because it required
that alternatives be identified and analyzed before a project
could qualify for advance site acquisition, but it did not clearly
state the type or depth of analysis required. At the time of the
Lancaster site acquisition, the analysis to support the decision
was incomplete. More detailed analyses, such as the space
requirements and cost estimates of project alternatives, were
still under development.

Moreover, we could not determine from available documentation why
the alternative to construct a new facility in Lancaster was
preferred over other alternatives that had been proposed or why
various alternatives were not considered viable. For example, it
is not clear why an alternative that was recently under
consideration the expansion of the existing Mojave facility was
not considered a viable alternative before the site in Lancaster
was acquired. We could not determine whether additional
justification of this proposed project or more detailed analyses
of the alternatives would have been required if this project had
been reviewed and approved by the Headquarters CIC or whether more
justification and analysis would have affected the Service's
decision to purchase the Lancaster site.

In addition, the Lancaster site purchased for $6.5 million in 1991
has remained unused since that time due to the Service's failure
to decide how and when it will resolve the long- standing problems
that the proposed Antelope Valley project was to address. In
particular, continuing negative effects have resulted from the
incomplete status of the project for almost 10 years. Project
approval and funding of the project remain uncertain due to delays
resulting from two suspensions, limits on capital spending, and
changes in project classification. Consequently, it is unclear how
the Service intends to address the space deficiencies that have
contributed to operational processing and delivery deficiencies in
the Antelope Valley area. Results in Brief

B-282078 Page 3 GAO/GGD-99-147 Status of Antelope Valley Project

Because of continued space deficiencies, automated equipment was
sitting unused in warehouses, some mail delivery was being
delayed, and the projected operating efficiencies and savings have
not been realized. In addition, the Service has invested $6.5
million in land that has been unused for nearly 8 years; such an
investment has a substantial annual interest cost estimated at
over $300,000. It has also incurred additional costs to update
documents required for project approval and may incur more costs
if some of these documents again have to be updated when the
project is reviewed for approval. Finally, the Lancaster and
Mojave communities have faced uncertainty over business
development opportunities as a result of the project delays.

While a determination of the most appropriate course of action was
beyond the scope of our review, it remains unclear after nearly a
decade how the Service intends to address the long- standing mail
processing and service delivery deficiencies in the Antelope
Valley area that prompted the development of this proposed
project. As of July 1, 1999, the project was on hold; these
deficiencies could continue, and the land could remain unused for
several more years unless action is taken. Accordingly, we are
making recommendations to the Service to address the concerns we
identified.

In 1989, the Pacific Area Office, then called the Western Regional
Office, identified several deficiencies in the 935 ZIP 1 Code area
and proposed relocating the distribution operations for five post
offices in the area into a new facility. The key deficiencies
identified by postal officials included the following:

 space deficiencies for mail processing operations in the Mojave
MPO, which is responsible for mail processing operations for all
of the post offices in the Antelope Valley;

 space deficiencies in carrier delivery operations in four of the
five post offices affected by the proposed project; and

 space deficiencies in the Lancaster MPO limited the ability to
meet demand for post office boxes, and parking for customers,
employees, and postal vehicles.

Figure 1 shows the locations of the five affected post offices in
the cities of Lancaster, Mojave, Palmdale, Tehachapi, and
Ridgecrest located in the southern portion of the Antelope Valley.

1 Zone Improvement Plan. Background

B-282078 Page 4 GAO/GGD-99-147 Status of Antelope Valley Project

Kern County Los Angeles (downtown) and Los Angeles airport (LAX)

5 5

14 405

Tehachapi MPO

Palmdale MPO

Proposed Antelope Valley Facility Los Angeles

County Lancaster

MPO

14

Ridgecrest MPO

Mojave MPO

The location of Kern and Los Angeles counties Los Angeles

(city) Shading indicates 935 ZIP Code area

Shaded area indicates 935 ZIP Code area. Source: U. S. Postal
Service.

Figure 1: Locations of the Five Post Offices Affected by the
Proposed Antelope Valley Area Project

B-282078 Page 5 GAO/GGD-99-147 Status of Antelope Valley Project

Since the 1980 census, the Antelope Valley area, also known as the
935 ZIP Code area, has more than doubled its population. The
growth in mail volume has paralleled the population growth. As
shown in table 1, growth in this area was somewhat slower in the
1990s than in the 1980s. However, current projections expect that
population and mail growth will accelerate again over the next
decade.

Year Population Percent change Households Percent

change Total mail volume Percent

change

1980 a 184,435 65,471 100,487 1989 317,441 72% 106,695 63% 205,374
104% 1999 b 485,073 53% 161,528 51% 295,204 44% 2009 b 623,761 29%
215,335 33% 452,841 53% a The 1980 originating mail volume
excludes third- class mail, for which data were not available.

b Data for 1999 and 2009 are estimates. Source: U. S. Postal
Service data acquired from Standard & Poors.

Over half of the population growth in the 935 ZIP Code area
occurred in two cities, Lancaster and Palmdale. From 1980 to 1990,
Lancaster's population grew from about 48,000 to 97,300, and
Palmdale's population grew from about 12,300 to 68,900. During
this same period, Mojave's population grew from about 2,900 to
3,800. The Southern California Association of Governments has
projected that the Lancaster- Palmdale population would increase
again over 200 percent by 2010.

Mail scheduled for final delivery in the Antelope Valley
originates from all over the United States and the rest of the
world and is transported to the Los Angeles Processing and
Distribution center located near Los Angeles International
Airport. There, the mail undergoes a first- level sort by the
first three digits of the ZIP Code. The mail is then transported
to smaller mail processing facilities, such as the Mojave MPO,
where secondary operations are performed on automated equipment to
sort the mail to the five- digit ZIP Code level. Generally at this
stage, some of the mail would also be automatically sorted to the
carrier- route level and sequenced in the order that carriers
deliver it. However, in Mojave, the necessary automated equipment
is not available for sorting mail down to the carriers' delivery
sequence order. Thus, the mail is transported to the postal
facilities responsible for mail delivery, such as Lancaster, where
the mail carriers manually sort the mail into delivery sequence
order.

Administrative support and mail processing functions for mail to
be delivered in the 935 ZIP Code area, as well as local retail and
delivery functions, are housed at the MPO in Mojave. According to
available postal

Table 1: Population, Households, and Mail Volume Data for the 935
Zip Code Area in 1980, 1989, 1999, and 2009

B-282078 Page 6 GAO/GGD-99-147 Status of Antelope Valley Project

documents, the Mojave MPO was functioning at its maximum capacity
in 1990. Mail processing and customer service operations competed
for space in the crowded facility. Operational efficiency was
beginning to suffer due to the continual shifting of equipment to
allow adequate space for processing operations. More recently,
postal documents noted that some automated sorting equipment
intended for Mojave processing operations was being stored in
warehouses due to insufficient space.

Postal documents from 1990 also reported that the Lancaster MPO
had reached its maximum capacity and could not accommodate the
future growth anticipated in Lancaster. Carrier operations had
spread onto the loading platform, where mail was being placed to
await distribution. Both employees and mail were exposed to
weather conditions. There was a demand for additional post office
boxes at the MPO, but there was no room to expand the box section.
According to the Service, employee support facilities were
inadequate; and parking facilities for customer, employee, and
postal vehicles were also inadequate. Similar conditions
reportedly existed in the Palmdale MPO, and a facility replacement
was included in the Western Region's Five- Year Facility plan. The
MPOs in Ridgecrest and Tehachapi were also reported to be
experiencing space deficiencies but not to the extent of the
problems in Lancaster, Mojave, and Palmdale.

The proposed new Antelope Valley facility would include mail-
processing operations and support functions that are currently
located at the Mojave MPO, and the secondary mail- processing
operations would be relocated from the Palmdale, Ridgecrest,
Mojave, and Tehachapi MPOs to the new facility. The Mojave MPO
would be retained and would continue to provide retail and
delivery services for the area and serve as a transfer point for
those areas north and west of Mojave. The existing Lancaster MPO
would be retained to serve as a carrier annex for carrier delivery
operations. The Palmdale, Tehachapi, and Ridgecrest MPOs would be
retained to provide full retail and delivery services for their
areas.

To evaluate the Service's approval process for this project, we
performed the following:

 obtained and reviewed Service policies and guidance in effect
when the project began and the policies and guidance currently in
effect for facility planning, site acquisition, and project
approval;

 obtained and analyzed Service documents related to the proposed
Antelope Valley project and project approval process; Scope and

Methodology

B-282078 Page 7 GAO/GGD-99-147 Status of Antelope Valley Project

 discussed the proposed project and the review process with
Service officials in Headquarters, the Pacific Area Office, the
Van Nuys District, and the Lancaster and Mojave MPOs;

 observed operating conditions at the existing Lancaster and
Mojave postal facilities and visited the postal- owned site in
Lancaster that was purchased in 1991;

 reviewed cost estimates for the two alternatives under
consideration prior to the project being placed on hold in March
1999; these cost estimates were included in draft project approval
documents that were submitted for headquarters review in February
1999; and

 discussed the impact of the proposed project with community
officials in Mojave, Kern County, and Lancaster, CA.

We did not evaluate whether this project should be approved or
funded. The Service has a process and criteria for assessing and
ranking capital facility projects for funding. However, we only
reviewed this particular project and, therefore, did not have a
basis for comparing its merits with those of other capital
projects competing for approval and funding. We also did not
independently verify the accuracy of the financial data included
in the Postal Service's analyses of the cost of various
alternatives under consideration. Postal officials acknowledged
that these preliminary cost estimates might need corrections and
revisions because they had not completed their review of the
project approval documents. Due to the incomplete status of this
project, our assessment generally covered the requirements
followed and actions taken by the Service during the period (1)
from project initiation in 1989 until the first suspension in 1992
and (2) since its reinstatement in 1995 to August 1999.

We conducted our review between December 1998 and August 1999 in
accordance with generally accepted government auditing standards.
We requested comments on a draft of this report from the
Postmaster General. We received written comments from the
Postmaster General, which we have included in appendix I. His
comments are discussed near the end of this report.

B-282078 Page 8 GAO/GGD-99-147 Status of Antelope Valley Project

The Service followed most of its key requirements for acquiring a
site in Lancaster prior to obtaining approval for the proposed
Antelope Valley project, although some requirements were vague.
One major exception was that the Headquarters CIC did not review
and approve the proposed project justification and alternatives
under consideration prior to advance site acquisition, as required
by Service policies. The Service's guidance allowed advance site
acquisition before all analyses that were required for final
project approval were completed if, among other requirements, the
Service believed that the preferred site would not be available
when project approval was anticipated.

Table 2 presents the key requirements in the Service's major
facility project approval process and the actions taken by the
Service to meet those requirements prior to project suspension in
1992. The key requirements of this project approval process
include formal documentation, and the dates provided are based on
available documentation. The Service Followed

Most of its Key Requirements for Advance Site Acquisition

B-282078 Page 9 GAO/GGD-99-147 Status of Antelope Valley Project

Stage Requirements Date action taken by Service

Initial Planning  Identify need for facility project and include
project in Five- Year Major Facility Priority process for
prioritization and funding approval

 Develop preliminary Facility Planning Concept document outlining
functions to be performed in proposed facility and how functions
will affect other postal facilities

 Hold Planning Parameters meeting to finalize Facility Planning
Concept and agree upon project alternatives

 Hold Headquarters CIC meeting to obtain Advance Project Review
approval of project justification and alternatives

 May 1989

 April 1990

 June 1990

 Not held Site selection  Define preferred site area

 Advertise for suitable sites

 Prepare environmental assessment as required under National
Environmental Policy Act a

 Hold Site Selection Committee meeting to choose a suitable site

 February 1990

 August 1990

 December 1990

 December 1990 Advance site acquisition  Submit a request to
purchase the site and certify that the following conditions have
been met:

 site control cannot be reasonably obtained through the period
required for project approval, specify offer expiration date;
failure to control the property would result in either higher
costs or the loss of the preferred site;  project is under way,
alternatives have been identified and analyzed  site acquisition
cost does not exceed $10 million, and funds are available in the
capital budget  project is scheduled for presentation to
Headquarters CIC or Board of Governors  Planning Parameters and
Advance Project Review stages must have been completed

 Obtain approval from Senior Assistant Postmaster General,
Administrative Services Group, Headquarters

 Purchase site

 June 1991

 Signed, but undated

 October 1991 Space requirements  Develop space requirements for
proposed Facility Planning Concept alternatives to determine

sizes of buildings and site requirements needed to meet
operational needs  September 1991 Project approval  Develop
Decision Analysis Report (DAR) detailing economic analyses,
including costs and

benefits, of proposed project and alternatives under consideration
to provide information necessary for approving authorities to make
informed decisions and obtain all necessary approvals of DAR from
Headquarters and Area CICs, Financial Investment Committees, and
Board of Governors

 No action, project suspended in July 1992

a National Environmental Policy Act of 1969, as amended, 42 U. S.
C. section 4321, et. seq. Source: GAO analysis of Postal Service
guidance and project documents.

The Postal Service's guidance detailing its investment policies
and procedures for major facilities explains that its purpose is
to ensure that major facility investments support the strategic
objectives of the Postal Service, make the best use of available
resources, and establish

Table 2: Key Requirements and Actions Taken by the Postal Service
for Project Approval Prior to 1992

B-282078 Page 10 GAO/GGD-99-147 Status of Antelope Valley Project

management accountability for investment decisions. Postal Service
policies also specify the delegation of authority for approving
capital facility projects based on total project costs. All
capital projects exceeding $10 million in total project costs are
considered major facility projects and are required to obtain
final approval from the Postal Service's Board of Governors after
being approved through appropriate area and headquarters
officials, including the Headquarters CIC. Some facility projects
may be funded from the area's budget. To obtain funding from
headquarters capital investment funds, these proposed major
capital facility projects must be prioritized along with proposed
projects from all other regions/ areas and included by
headquarters officials in the Postal Service's Five- Year Major
Facilities Priority List. This list is to be updated annually and
included as part of the Service's annual budget, which is then
reviewed and approved by postal management and the Board of
Governors.

As shown in table 2, the Service generally followed its approval
process for advance site acquisition. However, one major
requirement that was not completed before the advance site
acquisition was the Advance Project Review, which involves the
review and approval of the project justification and alternatives
by the Headquarters CIC. Postal officials told us that the project
had met all of the Service's requirements prior to approval for
advance site acquisition. However, the Service could not provide a
date for when the Headquarters CIC meeting occurred or any
documentation of the completion of the Advance Project Review
stage. The purpose of the Advance Project Review by the
Headquarters CIC, according to postal guidance, is to be sure that
the Headquarters CIC concurs with the scope (especially the
justification, alternatives, and strategic compatibility) before
the expenditure of substantial planning resources.

According to the Service's requirements that were in effect in
1991, advance site acquisition was permitted prior to completion
of the project approval process with the approval of the
headquarters senior official responsible for facilities. 2 The
regional postmaster general requested site acquisition in advance
of project approval for the site in Lancaster on June 25, 1991.
The request noted that Western Region officials had approved
funding from the region's budget for site acquisition in fiscal
year 1991. In addition, the request noted that the project was a
headquarters- funded project scheduled to be presented to the
Headquarters CIC for review in

2 In 1991, advance site acquisition for facility projects with a
total cost exceeding $5 million and sites costing $10 million or
less were to be approved by a headquarters official, the Senior
Assistant Postmaster General, Administrative Services Group. Site
Acquisition Permitted

Prior to Final Project Approval

B-282078 Page 11 GAO/GGD-99-147 Status of Antelope Valley Project

mid 1992, go to the Board of Governors for review and approval in
August 1992, and begin construction in fiscal year 1992.

The request also noted that control of the site 3 expired on June
30, 1991, and that failure to acquire the site as an advance site
acquisition may result in its loss. The total project cost was
estimated at just over $31 million, with site purchase in the
amount of $6,534,000, and site support costs of $100,000 for a
total funding request of $6,634,000 for advance site acquisition.
The request also noted that the property- owner had offered the
Postal Service an additional saving of $250,000, which would
reduce the sales price to $6,284,000, if the site acquisition were
approved and closing occurred prior to August 1, 1991. The funding
request was approved by the appropriate headquarters official, and
the site was purchased for $6,534,000 on October 25, 1991.

Service guidance required that alternatives be identified and
analyzed before a project could qualify for advance site
acquisition but did not clearly state the type or depth of
analyses required. At the time of the Lancaster site acquisition,
some analyses, such as the space requirements (which determine
sizes of buildings and site requirements for operational needs) as
well as the cost estimates of project alternatives (which provide
information on projected cash flows and return on investment) were
still under development. Only the estimated project costs
associated with the preferred alternative construction of a new
processing facility in Lancaster were available prior to site
acquisition. Moreover, the available documentation did not explain
why this alternative was preferred over the other alternatives
considered.

According to documentation provided to us, four alternatives were
presented at the project planning meeting held in June 1990. The
four alternatives, with the key differences underscored, were as
follows:

(A) a new area mail processing center in Lancaster for relocated
mail processing operations, distribution operations, and delivery
services for the 93535 ZIP Code area; the existing Lancaster MPO
would retain its retail and delivery services;

(B) a new general mail facility in Lancaster for relocated mail
processing operations, distribution operations, and delivery
services for the 93535 ZIP

3 According to Postal officials, site control means keeping the
property off the market. Site control can be achieved by different
means, (e. g. a down payment, good faith agreement, or monthly
payment). The type of site control would have to be negotiated
with the seller. Available Analyses to

Support Advance Site Acquisition Decisions Were Incomplete and
Documentation Was Inadequate

B-282078 Page 12 GAO/GGD-99-147 Status of Antelope Valley Project

Code area; the existing Lancaster MPO would retain its delivery
services and retail services would be relocated in the area;

(C) new area mail processing center in the vicinity of Mojave and
Lancaster for relocated mail processing operations and
distribution operations; the existing Mojave and Lancaster MPOs
would retain retail and delivery services for their respective
communities and a new facility would be constructed in Lancaster
for delivery services; and

(D) lease and modify an existing building for use as a Mail
Handling Annex for relocated mail processing operations and
distribution operations; the existing Mojave MPO would retain its
retail and delivery services.

The proposed preferred alternative presented at the June 1990
meeting was alternative A, a newly constructed area mail
processing facility located in Lancaster. The analysis related to
the four alternatives consisted of brief descriptions of each
alternative. However, the documentation does not explain why the
recommended alternative was preferred over the other alternatives
considered. The only explanation provided was included in the
minutes of the June 1990 meeting as follows;

The alternatives were discussed at length. Alternative A, B, and C
were discussed. It was agreed upon that these alternatives will
solve the major operating needs of the Antelope Valley, but will
not address all of our needs for delivery and retail facilities. A
reassessment of the proposed concept and the requirements for
Lancaster and Palmdale Main Post Offices will be conducted
following site selection to ascertain whether the specific site is
conducive to delivery or retail activities as a result of its
location.

Further, documentation prepared for the site selection meeting
held in December 1990, stated that

The existing facilities in Lancaster, Palmdale, and Mojave could
not be expanded to provide sufficient space to accommodate the
current and projected growth in the Antelope Valley. Continuation
of mail processing operations at the Mojave MPO will not meet
corporate goals for improved delivery times and efficiencies.

However, since the proposed project was revised in 1998, expansion
of the existing Mojave facility was one of two alternatives under
consideration, along with the preferred alternative to construct a
new facility on the Service- owned site in Lancaster. Available
documentation did not explain why expansion of the existing Mojave
facility was not considered viable in 1990 but was considered a
viable alternative in 1998.

B-282078 Page 13 GAO/GGD-99-147 Status of Antelope Valley Project

The problem of inadequate documentation of the Service's real
estate acquisition decisions is not a new issue. In 1989, we
reviewed the Service's real estate acquisition process. At that
time, we reviewed a sample of 246 sites purchased during fiscal
year 1987 and made recommendations to improve the Service's real
estate acquisition program. 4 Our 1989 report found that the
Service usually purchased sites that exceeded both its operational
needs and advertised size requirements. When alternative sites
were available for purchase, the Service generally selected the
larger, more costly sites without requiring site selection
committees to document why less expensive alternative sites were
less desirable. The report raised concerns, based on the Service's
requirements for advertising and purchasing practices, that the
Service might be spending more than was necessary for land and
accumulating an unnecessarily large real estate inventory. The
report also recognized that sometimes larger, more costly sites
may best meet the Service's operational requirements but that
justification for such selections should be required when smaller,
less costly contending sites were available.

In the Service's letter dated August 25, 1989, responding to a
draft of that report, the Postmaster General agreed with our
recommendation relating to more complete documentation of the
selection process. He stated, The Postal Service is concerned only
with the best value and will make sure that the reasoning behind
the determination of best value is more carefully documented in
the future.

However, improvement in documentation was not evident in the
documentation related to the proposed Antelope Valley area
project, which was prepared soon after our report was issued. We
identified inconsistencies in internal postal memorandums related
to the required site size and disposition of any excess land. The
region's June 25, 1991, memorandum requesting approval for advance
site acquisition in Lancaster stated, No excess land is expected
to remain. Another internal memorandum dated October 25, 1991 the
date of final settlement for the purchase of the Lancaster site
discussed preparation of the final cost estimates for the proposed
Antelope Valley Area project and stated Please note that the
required site is considerably less than the selected site.
Further, a February 1992 internal memorandum noted that the
Lancaster site was purchased in late 1991 and that the site area
exceeded Service requirements by 296,000 square feet (about 6.8
acres). The reason for the purchase of a site that was larger than
needed was not explained in any

4 See Postal Service: Sites for New Post Offices May Be Larger
Than Needed (GAO/GGD-89-130, Sept. 1989). Need to Improve
Inadequate

Documentation Previously Identified

B-282078 Page 14 GAO/GGD-99-147 Status of Antelope Valley Project

available documents. More recent documents related to the proposed
project alternatives also noted that the Service- owned site in
Lancaster exceeds project requirements, but the alternatives do
not discuss how the excess property would be disposed of.

As of the beginning of July 1999, the Service's consideration of
the proposed Antelope Valley project had been put on hold, and a
decision may not be made for some time. Consequently, the status
and funding of the proposed project remains uncertain almost 10
years after it was initiated. Consideration of the project has
been delayed due to two suspensions, reductions in capital
investment spending, and a recent reclassification of the proposed
facility. As a result, processing and delivery deficiencies that
were identified as critical for this area in 1989 continue to
exist, and the Service has not determined how it plans to address
these operational deficiencies. In addition, the Service has
incurred additional costs that have resulted from the need to
repeat analyses and update documents required for final project
approval. With the project currently on hold, further costs may be
incurred to again update required analyses. Finally, the delays
have prolonged the uncertainty related to business development
opportunities for the affected communities of Mojave and
Lancaster.

Initiated in 1989, with an expectation that the project would be
funded in fiscal year 1992, the proposed Antelope Valley project
was suspended in 1992, while the Service was undergoing a
reorganization and had reduced its funding for capital facility
projects. Table 3 shows that between 1991 and 1995, the Service
committed $999 million less to its facilities improvement program
than it had originally authorized in its 1991 to 1995 Capital
Improvement Plan.

Dollars in thousands

Postal fiscal year Funds authorized for

facility projects Funds committed for facility projects Difference

1991 $1,334 $1,118 $216 1992 1,170 940 230 1993 1,112 403 709 1994
1,048 1,048 0 1995 895 1,051 (156)

Total $5,559 $4,560 $999

Source: Postal Service Comprehensive Statements for 1991 through
1995.

Postal Service officials could not explain why the classification
of this project, as a processing facility or other type of capital
facility, has been Project Delays and

Resulting Negative Effects Remain Unresolved

Reduced Funding and Classification Inconsistencies Contributed to
Project Delays

Table 3: Comparison of Funds Authorized and Funds Committed For
Facility Projects, Between Fiscal Years 1991 and 1995

B-282078 Page 15 GAO/GGD-99-147 Status of Antelope Valley Project

changed several times and why it has not yet been submitted for
consideration in the headquarters capital facility projects
prioritization and funding process. All major mail processing
facilities must be funded from the headquarters capital facility
budget, while other types of processing and delivery facilities
may be funded from regional/ area budgets. At the time that the
proposed project was suspended in 1992, it was classified as a
mail processing facility in the Western Region/ Pacific Area Major
Facility Priority List. It had also been submitted for
headquarters funding consideration in the Five- Year Major
Facilities Priority List for fiscal years 1991 to 1995. The
project was reinstated and reclassified in 1995 as a Delivery and
Distribution Center (DDC), with the expectation that it would be
funded out of area funds in fiscal year 1998. The Service
suspended the project a second time in March 1999, while it was
undergoing review by headquarters officials. Based upon the
headquarters review, the project was again reclassified from a DDC
to a Processing and Distribution Center. The latest
reclassification meant that the project would have to be funded by
headquarters rather than the Pacific Area Office, and it would
have to compete nationally for funding. This means that the
project will have to await placement on the next headquarters
Five- Year Major Facilities Priority List, which is scheduled to
be completed by August 2000.

It is also not clear why the proposed project was reinstated and
reclassified in 1995 as a DDC when the major purpose and design of
this project had not fundamentally changed. Postal officials in
the Pacific Area Office and Van Nuys District said that the
recently proposed Antelope Valley project is essentially the same
as the project that was being planned when the Service acquired
the 25- acre Lancaster site in 1991. The major differences in the
two projects are in nonmail processing areas. 5 As previously
mentioned, the proposed project had not had an Advance Project
Review by the Headquarters CIC prior to the suspension in 1992.
Such a review might have prevented the unexplained
reclassifications of this project that have contributed to delays
in its funding.

Ten years after this project began, the operational processing and
delivery deficiencies that were identified as critical for this
area in 1989 still remain. Because of continued space
deficiencies, automated equipment has not been deployed as
scheduled, and the projected operating efficiencies and savings
have not been realized. The District projected that one of the

5 The recent proposal no longer includes a vehicle maintenance
facility on the site because the District recently decided that it
was more economical to contract for vehicle maintenance with the
local communities as opposed to in- house maintenance. A retail
operation has been added to the recent proposed Lancaster
alternative to eliminate the deficiencies of limited post office
boxes and customer parking in the Lancaster MPO. Operational
Processing And

Delivery Deficiencies Remain Unaddressed

B-282078 Page 16 GAO/GGD-99-147 Status of Antelope Valley Project

benefits from automated sorting of the mail to the carriers in
delivery walk sequence would be to improve delivery performance by
4.25 percent annually. This additional sorting would decrease the
time that the carriers spend in the delivery units preparing the
mail for delivery and increase the amount of time the carriers
would have to deliver the mail. Another negative effect of the
space deficiencies in Mojave was that some of the mail originating
in the 935 ZIP Code area (approximately 130,000 pieces per day)
was diverted from processing in Mojave to the processing facility
in Santa Clarita. According to local postal officials, the effect
of this diversion was to delay by 1 day the delivery of some mail
that was to be delivered in the 935 ZIP Code area. The local area
First- Class mail was supposed to be delivered within 1 day to
meet overnight delivery standards for First- Class mail.

Since this project was initiated in 1989, the Service has taken
several actions to address mail processing and delivery
deficiencies in the Antelope Valley. The Service added 2,417
square feet of interior space to the Palmdale MPO by relocating
the post office into a larger leased facility. Some relief was
provided to the cramped carrier operations at the Lancaster MPO by
relocating 15 of the 89 carrier routes serving Lancaster to the
Lancaster Cedar Station. However, as we observed on our visit to
the Lancaster facilities, conditions in Lancaster were still very
congested. Mail that was waiting to be processed and workroom
operations spilled out of the building onto the platform, exposing
both employees and the mail to weather conditions.

In an effort to provide the Mojave MPO with more mail- processing
space, a 2,400 square foot tent was installed in 1998, at a cost
of $30,000, next to the loading platform. The tent provided
additional space for processing operations and for holding mail
that was waiting to be processed, but it did not allow for
deployment of any automated equipment scheduled for use in the 935
mail- processing functions. Also, we observed that the tent would
not provide adequate shelter from high winds or other weather-
related conditions. Some of the equipment was stored at district
warehouses. Although these efforts have allowed the district to
continue to provide processing and delivery service, it is not
clear how the Service intends to meet the operational processing
and delivery deficiencies while decisions related to the proposed
facility are pending.

Project delays have also contributed to higher costs, incurred to
repeat and update some of the analyses and cost data needed for
final project approval. Given that the process is not completed,
additional costs may be incurred to further update required
analyses. The Service has incurred Delays Incur Additional

Costs

B-282078 Page 17 GAO/GGD-99-147 Status of Antelope Valley Project

additional costs related to developing a second set of documents
required for project approval, including Facility Planning Concept
documents, appraisals, space requirements, environmental
assessments, and DARs. Generally, the Service uses contractors to
develop the environmental and engineering studies. Although the
total cost of document preparation has not been quantified,
available documentation indicates that the Service has incurred
about $254,000 for costs related to previous design efforts for
this project.

In addition, costs that have not been quantified include staff
time and travel costs associated with this project. The Area
Office Operations Analyst who was responsible for preparing the
DAR told us that it took him approximately a year to develop a DAR
and the supporting documents and analysis. This did not include
the time of the other individuals who provided him with various
information needed to complete the analyses or the time of
officials responsible for reviewing and approving the project. The
Service has also incurred additional costs for travel associated
with project reviews, such as the Planning Parameters Meeting,
which involved the travel of at least three headquarters
officials.

It is difficult at this stage to determine what additional
analyses may be needed because the Antelope Valley project has
been suspended and, according to Service officials, no further
action is being taken on reviewing the project until it is
submitted by Pacific area officials for prioritization. We
reviewed the cost estimates for the two alternatives that were
included in the draft DAR that had been submitted to headquarters
for review in February 1999. We found some deficiencies in the
information presented. Postal officials stated that these types of
deficiencies would be identified during their review process that
includes reviews by officials in three separate headquarters
departments Facilities, Operations, and Finance. They also said
that the cost estimates in the DAR were too preliminary to use as
a basis for assessing which of the two alternatives under
consideration were more cost effective. The officials noted that
significant changes could be made to the cost estimates as the
project documentation completes the review process.

In addition, the Service has not realized any return on its
investment in the site in Lancaster, which has remained unused
since 1991. This unrealized investment has an interest cost
associated with the Service's use of funds to purchase the
Lancaster site in October 1991. We estimated that the interest
cost associated with the Service's $6.5 million investment totaled
about $2.9 million from the time that the site was purchased in
October

B-282078 Page 18 GAO/GGD-99-147 Status of Antelope Valley Project

1991 through June 1999 and that it would likely increase by over
$300,000 each year. 6

The uncertainty of this project over such a long period has also
created difficulties, particularly related to business development
planning, for the affected Lancaster and Mojave communities.
Mojave community officials have raised concerns about the effect
that relocating the postal operations would have on their
community. They expressed specific concerns relating to the
potential lost job opportunities to the Mojave and nearby
California City residents and the impact that losing the postal
processing operations would have on their effort to attract new
homes and retail services. Postal documents indicated that while
none of the Mojave employees would lose their jobs, approximately
80 employees working the evening and night shift would be
relocated if distribution operations were to be relocated to a new
facility in Lancaster. The Service projects that the proposed
expanded Mojave Facility would create 10 additional jobs at the
facility when it opens.

The project delay has also affected the business development
opportunities in Lancaster. After the Service selected the
Lancaster site in 1991, the Mayor of Lancaster stated in a letter
to the Postal Service that he welcomed the new facility and that
the facility would anchor the new 160- acre Lancaster Business
Park Project. Shortly after the Postal Service selected the 25-
acre site, a major mailer, Deluxe Check Printing, acquired a 12-
acre site adjacent to the postal property. Recently, the Lancaster
City Manager noted that not having the Postal Service facility has
made marketing the Business Park to potential developers very
difficult. In addition, Lancaster officials stated that the city
has spent over $20 million to provide improvements to the business
park. These improvements were conditions of sale when the Postal
Service acquired the site in 1991.

The Service followed most of its key requirements when it
purchased a site in Lancaster in 1991 for the proposed Antelope
Valley project before it had obtained overall project approval,
although some requirements were vague. One major exception was
that the Headquarters CIC did not review and approve the proposed
project justification and alternatives under consideration prior
to advance site acquisition as required by Service guidance. The
Service's requirements for advance site acquisition were unclear
because they did not specify the types or depth of analyses
required. The Service's analyses of alternatives were incomplete
because

6 To develop a rough estimate of the interest cost, we used the
average yield on Treasury securities at constant maturity of 1
year prevailing in December each year from 1991 through 1998.
Delays Create Uncertainty

for Affected Communities Conclusion

B-282078 Page 19 GAO/GGD-99-147 Status of Antelope Valley Project

estimated costs of the alternatives and space requirements were
still under development. Also, it was not clear why an alternative
that was recently under consideration, the expansion of the
existing Mojave MPO, was not considered a viable alternative
before the site in Lancaster was acquired.

We could not determine whether review and approval of the proposed
project justification and alternatives by the Headquarters CIC
would have resulted in changes in the proposed project
justification and alternatives or more in- depth analysis of the
alternatives. Such a review may have prevented the unexplained
inconsistencies in the classifications of this project that have
contributed to delays in its funding. Likewise, it is not known
whether the Committee's review would have suggested a course of
action other than acquisition of the Lancaster site. Further, the
more recent analysis of the alternative to expand the Mojave MPO
is too preliminary to assess or draw any conclusions from because
the headquarters review of the proposed project has been
suspended. However, what is known is that the Service spent about
$6.5 million over 8 years ago to purchase a site that has remained
unused. This site may or may not be used by the Service in the
future, and its investment has a substantial annual interest cost
associated with it. While this interest cost continues, the mail
service deficiencies identified nearly 10 years ago remain
unaddressed, and projected operating efficiencies and savings
anticipated from new equipment are unrealized as the equipment
remains in storage.

Given this situation, it is not clear why the status of this
project has been allowed to go unresolved for such a long time. It
is also unclear at this time whether funding for this project will
be approved and, if so, for what year of the next 5- year capital
projects funding cycle. Thus, the Service's site investment in
unused land and the existing operational deficiencies are likely
to continue for some time, and the Service has not determined how
it will address these issues if the project is not approved or
funded for several years.

To address the long- standing uncertainties related to the
proposed Antelope Valley project, we recommend that the Postmaster
General take the following actions:

 Resolve the internal inconsistencies in the classification of
this project, determine whether the site in Lancaster should be
retained, and ensure that the project is considered in the
appropriate funding and approval process, and Recommendation

B-282078 Page 20 GAO/GGD-99-147 Status of Antelope Valley Project

 Require the Pacific Area office to determine whether immediate
action is needed to address the operational deficiencies
identified in the Antelope Valley area and report on planned
actions and related time frames for implementation.

We received written comments from the Postmaster General on August
20, 1999. These comments are summarized below and included as
appendix I. We also incorporated technical comments provided by
Service officials into the report where appropriate. The
Postmaster General responded to our conclusion that the Service
did not follow all of its procedures in effect at the time that
approval was given to purchase a site for a proposed facility in
advance of the proposed Antelope Valley project's review and
approval. He stated that the Service has revised its procedures
for advance site acquisition so that proposed sites are subjected
to additional review and approval. As a result, he stated that the
advanced acquisition of a site for project such as Antelope Valley
now must receive approval from the Headquarters Capital Investment
Committee and the Postmaster General.

The Postmaster General generally agreed with our recommendations
to address the unresolved status of the Antelope Valley project
and the operational deficiencies in the Antelope Valley area. In
response to our first recommendation to resolve the inconsistent
classification of the project, he stated that the Service has
determined that the proposed Antelope Valley project is properly
classified as a mail processing facility. He also stated that the
proposed project would be considered for funding along with other
such projects during the next round of project review and
prioritization. While clarification of the project's
classification is a good first step, until disposition of the
entire project is completed, the status of the project, including
the use of the Lancaster site, remains unresolved.

Regarding our second recommendation to address operational
deficiencies in the Antelope Valley area, he stated that officials
from the involved Pacific Area offices have met to discuss the
most workable alternatives to sustain and improve mail service for
Antelope Valley customers. However, due to the complexity of
issues, including the possibility of relocating some operations
into leased space on an interim basis, a fully developed
distribution and delivery improvement plan may take some time to
implement. He agreed to provide us with action plans and time
frames as they are finalized. If actions are taken as described by
the Postmaster General, we believe they would be responsive to our
recommendations. Agency Comments and

Our Evaluation

B-282078 Page 21 GAO/GGD-99-147 Status of Antelope Valley Project

We are sending copies of this report to Representative Howard
(Buck) McKeon; Representative John McHugh, Chairman, and Chaka
Fattah, Ranking Minority Member, Subcommittee on the Postal
Service, House Committee on Government Reform; Mr. William J.
Henderson, Postmaster General; and other interested parties.
Copies will also be made available to others upon request. The
major contributors to this report are listed in appendix II. If
you have any questions about this report, please call me on (202)
512- 8387.

Sincerely yours, Bernard L. Ungar Director, Government Business

Operations Issues

Page 22 GAO/GGD-99-147 Status of Antelope Valley Project

Contents 1 Letter 24 Appendix I Comments From the United States
Postal Service

26 Appendix II GAO Contacts and Staff Acknowledgments

Table 1: Population, Households, and Mail Volume Data for the 935
Zip Code Area in 1980, 1989, 1999, and 2009

5 Table 2: Key Requirements and Actions Taken by the

Postal Service for Project Approval Prior to 1992 9

Table 3: Comparison of Funds Authorized and Funds Committed For
Facility Projects, Between Fiscal Years 1991 and 1995

14 Tables

Figure 1: Locations of the Five Post Offices Affected by the
Proposed Antelope Valley Area Project

4 Figures

Abbreviations

CIC Capital Investment Committee DAR Decision Analysis Report DDC
Delivery and Distribution Center MPO Main Post Office

Page 23 GAO/GGD-99-147 Status of Antelope Valley Project

Appendix I Comments From the United States Postal Service

Page 24 GAO/GGD-99-147 Status of Antelope Valley Project

Appendix I Comments From the United States Postal Service

Page 25 GAO/GGD-99-147 Status of Antelope Valley Project

Appendix II GAO Contacts and Staff Acknowledgments

Page 26 GAO/GGD-99-147 Status of Antelope Valley Project

Bernard Ungar (202) 512- 8387 Teresa Anderson, Melvin Horne, Hazel
Bailey, Joshua Bartzen, and Jill Sayre made key contributions to
this report. GAO Contacts

Acknowledgments

Page 27 GAO/GGD-99-147 Status of Antelope Valley Project

Page 28 GAO/GGD-99-147 Status of Antelope Valley Project

Ordering Information The first copy of each GAO report and
testimony is free. Additional copies are $2 each. Orders should be
sent to the following address, accompanied by a check or money
order made out to the Superintendent of Documents, when necessary.
VISA and MasterCard credit cards are accepted, also. Orders for
100 or more copies to be mailed to a single address are discounted
25 percent.

Order by mail: U. S. General Accounting Office P. O. Box 37050
Washington, DC 20013

or visit: Room 1100 700 4 th St. NW (corner of 4 th and G Sts. NW)
U. S. General Accounting Office Washington, DC

Orders may also be placed by calling (202) 512- 6000 or by using
fax number (202) 512- 6061, or TDD (202) 512- 2537.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512- 6000 using a
touch- tone phone. A recorded menu will provide information on how
to obtain these lists.

For information on how to access GAO reports on the INTERNET, send
e- mail message with info in the body to:

info@ www. gao. gov or visit GAO's World Wide Web Home Page at:
http:// www. gao. gov

United States General Accounting Office Washington, D. C. 20548-
0001

Official Business Penalty for Private Use $300

Address Correction Requested Bulk Rate

Postage & Fees Paid GAO Permit No. G100

(240339)

*** End of document. ***