U.S. Postal Service: Performance Progress Has Been Made, But Continued
Attention to Challenges Is Needed (Testimony, 06/10/98,
GAO/T-GGD-98-142).

GAO discussed: (1) the Postal Service's overall performance during
fiscal year (FY) 1997, including the Service's reported successes and
remaining challenges; (2) work that GAO has completed since the spring
of 1997; and (3) information on ongoing work, which relates primarily to
the issues of competition and diversity.

GAO noted that: (1) as the Postal Service stands ready to enter the 21st
century, it faces significant challenges that call for vigilance and
attention as it strives to sustain and expand on reported performance
improvements; (2) in FY 1997, the Postal Service ended another year of
overall high performance in some of its operational areas, sustaining 3
years of encouraging results; (3) with reported net income of over $1
billion and increasing on-time delivery scores for first-class mail, the
Service has shown that it can maintain a high income level while
providing its customers with improved service; (4) also, in some
management areas, such as automation of mail processes and
labor-management relations, GAO acknowledges that some progress has been
made; (5) however, challenges remain for the Service to sustain
performance and continue on a progressive path toward accomplishing
established goals and objectives and improving operations; and (6)
sustaining and expanding on recent progress will be dependent upon the
extent to which Congress, the Service, and other major postal
stakeholders continue to focus attention on key issues, particularly:
(a) labor-management relations, in which efforts to address persistent
problems continue, although the sometimes adversarial nature of the
relationships among the Service and many of its labor unions can affect
progress in implementing improvements; (b) postal reform, in which
fundamental issues are still being considered, such as defining
universal service obligations and the scope of the postal monopoly; (c)
competition, in which the Service is continually striving to deal with
competitors so that it can maintain a firm position in a dynamic
communications environment; and (d) the effectiveness with which the
Service implements the Government Performance and Results Act,
particularly with respect to the implementation of its strategic plan
and the development and execution of its 1999 and beyond annual
performance plans.

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

 REPORTNUM:  T-GGD-98-142
     TITLE:  U.S. Postal Service: Performance Progress Has Been Made, 
             But Continued Attention to Challenges Is Needed
      DATE:  06/10/98
   SUBJECT:  Government employee unions
             Postal service
             Mechanization
             Competition
             Postal facilities
             Uniforms
             Employment of minorities
             Customer service
IDENTIFIER:  GPRA
             Government Performance and Results Act
             ZIP Code System
             USPS Centralized Uniform Purchasing Program
             USPS Global Package Link
             Equal Employment Opportunity Program
             
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Cover
================================================================ COVER


Before the Subcommittee on the Postal Service,
House Committee on Government Reform and Oversight

For Release on Delivery
Expected at
10:00 a.m., EDT
Wednesday
June 10, 1998

U.S.  POSTAL SERVICE - PERFORMANCE
PROGRESS HAS BEEN MADE, BUT
CONTINUED ATTENTION TO CHALLENGES
IS NEEDED

Statement of Bernard L.  Unger
Director, Government Business
Operations Issues

GAO/T-GGD-98-142

GAO/GGD-98-142T


(240308)


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

  APWU - American Postal Workers Union
  DPS - Delivery Point Sequencing
  EEO - equal employment opportunity
  EEOC - Equal Employment Opportunity Commission
  FMCS - Federal Mediation and Conciliation Service
  GAO - General Accounting Office
  GPL - Global Package Link
  NALC - National Association of Letter Carriers
  NAPS - National Association of Postal Supervisors
  NAPUS - National Association of Postmasters of the United States
  UPU - Universal Postal Union
  ZIP - Zoning Improvement Plan

U.S.  POSTAL SERVICE:  PERFORMANCE
PROGRESS HAS BEEN MADE, BUT
CONTINUED ATTENTION TO CHALLENGES
IS NEEDED
====================================================== Chapter SUMMARY

As the Postal Service stands ready to enter the 21st century, it
faces significant challenges that call for vigilance and attention as
it strives to sustain and expand on reported performance
improvements.  In fiscal year 1997, the Postal Service ended another
year of overall high performance in some of its operational areas,
sustaining 3 years of encouraging results.  With reported net income
of over $1 billion and increasing on-time delivery scores for
First-Class Mail, the Service has shown that it can maintain a high
income level while providing its customers with improved service. 
Also, in some management areas, such as automation of mail processes
and labor-management relations, GAO acknowledges that some progress
has been made.  For example, the Service has overcome many of the
initial obstacles it encountered in its efforts to automate letter
sequencing and is making substantial progress toward accomplishing
its goals in that area.  In addition, the Service has also recently
made some progress in addressing its labor-management relations
problems and has made a good start in developing its strategic and
1999 annual performance plans required under the Government
Performance and Results Act (Results Act). 

However, challenges remain for the Service to sustain performance and
continue on a progressive path toward accomplishing established goals
and objectives and improving operations.  GAO believes that
sustaining and expanding on recent progress will be dependent upon
the extent to which Congress, the Service, and other major postal
stakeholders continue to focus attention on key issues, particularly: 

  -- labor-management relations, in which efforts to address
     persistent problems continue, although the sometimes adversarial
     nature of the relationships among the Service and many of its
     labor unions can affect progress in implementing improvements;

  -- postal reform, in which fundamental issues are still being
     considered, such as defining universal service obligations and
     the scope of the postal monopoly;

  -- competition, in which the Service is continually striving to
     deal with competitors so that it can maintain a firm position in
     a dynamic communications environment; and

  -- the effectiveness with which the Service implements the Results
     Act, particularly with respect to the implementation of its
     strategic plan and the development and execution of its 1999 and
     beyond annual performance plans. 

GAO is providing information on recently completed work that relates
primarily to postal management and reform issues and ongoing work
that relates in large part to the issues of competition and
diversity. 


U.S.  POSTAL SERVICE:  PERFORMANCE
PROGRESS HAS BEEN MADE, BUT
CONTINUED ATTENTION TO CHALLENGES
IS NEEDED
==================================================== Chapter STATEMENT

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to be here today to participate in the Subcommittee's
oversight hearing on the U.S.  Postal Service.  In my testimony, I
shall briefly discuss the Service's overall performance during fiscal
year 1997, including the Service's reported successes and remaining
challenges.  Also, I will discuss work that we have completed since
the spring of 1997, when we last testified at the Subcommittee's
Postal Service oversight hearing.  Much of this work was done at the
Subcommittee's request and addresses issues related to postal
management and reform.  In addition, I shall provide information on
our ongoing work, which relates primarily to the issues of
competition and diversity. 


   SERVICE PERFORMANCE HAS
   CONTINUED TO IMPROVE IN SOME
   AREAS, BUT CHALLENGES REMAIN
-------------------------------------------------- Chapter STATEMENT:1

First, I would like to briefly discuss the continuation of the
Service's reported performance successes and mention some areas of
concern and challenges that still remain.  For the third year in a
row, the Service has reported increases in net income, certain mail
delivery services, overall mail volume, and revenue.  Net income for
fiscal year 1997 was about $1.3 billion, which marks the third
straight year that the Service has reported net income in excess of
$1 billion per year.  In fiscal year 1997, the overall delivery score
for the on-time delivery of overnight mail reached a 3-year high of
92 percent, and total mail volume increased to about 191 billion
pieces.  This volume helped generate more than $58 billion in revenue
during fiscal year 1997, the highest revenue figure reported by the
Service in the most recent 3 fiscal years. 

Although such performance results appear to be encouraging, other
information suggests that some areas of concern and challenges
remain.  For example, the delivery scores of 2-day and 3-day mail for
fiscal year 1997--reported by the Service to be 76 and 77 percent,
respectively--were less than the score for overnight mail.  In
addition, the fiscal year 1997 scores for delivering 2-day and 3-day
mail had declined from levels previously reported for fiscal years
1995 and 1996.\1 Such declines may reinforce concerns previously
expressed by some postal customers that the Service's emphasis on
overnight mail delivery has been at the expense of 2-day and 3-day
mail delivery efforts. 

Also, despite a reported increase in overall mail volume, the Service
has acknowledged that due in large part to increased competition, its
participation in delivering some types of mail has declined or
suffered slow growth.  For instance, the Service's delivery of
Express Mail packages\2 has declined due, in part, to its inability
to offer volume discounts to large business mailers and its poor
coverage of Zoning Improvement Plan (ZIP) codes for next-day
delivery.  In addition, the Service reported that the increased use
of electronic alternatives to First- Class Mail, such as electronic
mail and banking functions, has contributed to a lower growth rate
than expected for this type of mail--around 1.5 percent for fiscal
year 1997-- rather than the 2.5 percent initially anticipated.  The
Service expects that this trend will continue in future years and
will result in significant losses in First-Class Mail revenues.  In
addition, continued aggressive efforts by various competitors have
challenged the Service's ability to participate in the international
mail market, participation that the Service acknowledged has declined
in recent years. 

Also, in light of the Service's reported net income of over $1
billion in each of the last 3 fiscal years, questions have been
raised concerning the appropriateness of the Service's recently
approved request for increases in various postage rates.  Questions
have also been raised about the means by which the Service determines
the need for such increases, including the use of specific data to
justify the rate increase request. 


--------------------
\1 For fiscal years 1995 and 1996, the Service reported that the
scores for the delivery of 2-day mail were about 78 and 79 percent,
respectively.  The score for delivering 3-day mail in both fiscal
years 1995 and 1996 was about 80 percent. 

\2 The Service's Express Mail package delivery service is intended to
deliver documents and merchandise packages weighing up to 70 pounds
within a specified period of time, usually by the next business day. 
Both domestic and international services are offered. 


   OUR COMPLETED WORK RELATED TO
   KEY MANAGEMENT ISSUES
-------------------------------------------------- Chapter STATEMENT:2

I would now like to highlight for you some of the work that we
completed during the past year, in which we reported on topics
involving key management issues that have received a great deal of
attention from Congress and various postal stakeholders.  The topics
we addressed included (1) labor-management relations; (2) automated
letter sequencing, also known as Delivery Point Sequencing (DPS); and
(3) the Service's plans prepared in response to the Government
Performance and Results Act (Results Act). 


      LABOR-MANAGEMENT RELATIONS
------------------------------------------------ Chapter STATEMENT:2.1

During recent years, our work has shown that the poor state of
labor-management relations within the Postal Service represents one
of the most significant internal operational and managerial problems
facing the Service.  When we issued our most recent report in October
1997 on labor-management relations in the Service,\3 little progress
appeared to have been made in improving relations among the Service
and three of its four major postal labor unions.\4 We reported that
although some improvement efforts, known as initiatives, had been
established, difficulties existed in reporting on the initiatives'
results because, in some cases, initiatives had only recently been
implemented or had been discontinued.  Also, disagreements among the
parties prevented the full implementation of some initiatives.  In
our 1997 report, we included various indicators, such as a growing
number of employee grievances, which showed that problems on the
workroom floor of various postal locations appeared to have continued
since 1994 when we initially reported on the existence of these
problems.\5 In the 1994 report, we mentioned that in many instances,
labor-management relations problems resulted from autocratic
management styles; the sometimes adversarial attitudes of employees,
unions, and postal management; and an inappropriate and inadequate
performance management system. 

Subsequent to the issuance of our 1997 report, we have seen some
progress in the parties' efforts to address such problems.  For
example, in late October 1997, Service officials along with
representatives from the four major postal labor unions, the three
management associations,\6 and officials from the Federal Mediation
and Conciliation Service (FMCS) began convening summit meetings, one
of the initiatives that we had discussed in our 1997 report. 
According to FMCS, which helped facilitate the summits, progress has
been made and continues to be made in addressing labor-management
relations problems that have plagued the Service for years, including
issues related to employee grievances.  We are encouraged by the
recent reported progress as well as the new Postmaster General's
emphasis on the importance of addressing labor-management relations
problems.  We support the parties' use of summit meetings as an
opportunity to try to reach agreement on approaches to solving
long-standing labor-management relations problems.  However, the
underlying problems that have hampered good relationships between the
Service and most of its labor unions remain and pose significant
challenges to the Service and its unions. 

This year, events are scheduled that may affect the state of
labor-management relations within the Service.  For example,
elections for officers in the two largest of the four major postal
labor unions--APWU and NALC--are set to occur in the summer of 1998. 
Such officers can play an important part in the overall relationship
that the organizations have with the Service.  In addition,
collective bargaining negotiations are expected to begin in August
1998, shortly after the elections of new union officers for these two
unions.  Also, the newly appointed Postal Service Vice President for
Labor Relations should become involved with the negotiations.  In the
past, negotiations between the Service and three of the four major
postal labor unions have sometimes been marked by controversy and
disagreements that have in some cases required arbitration.  The
conduct of the negotiations and the extent to which settlements can
be agreed upon instead of relying on arbitration can be highly
dependent on the attitudes and approaches that Service officials and
union representatives bring to the bargaining table. 


--------------------
\3 U.S.  Postal Service:  Little Progress Made in Addressing
Persistent Labor-Management Problems (GAO/GGD-98-1, Oct.  1, 1997). 

\4 The four major postal labor unions include (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).  In many instances, the Service's labor-management
problems and concerns have involved three of the four major
unions--APWU, NALC, and Mail Handlers.  The Rural Carriers have
generally had a more cooperative relationship with the Service. 

\5 U.S.  Postal Service:  Labor-Management Problems Persist on the
Workroom Floor (GAO/GGD-94-201A/B, Sept.  29, 1994). 

\6 The three management associations include (1) the National
Association of Postal Supervisors (NAPS), (2) the National
Association of Postmasters of the United States (NAPUS), and (3) the
League of Postmasters of the United States (the League). 


      AUTOMATED LETTER SEQUENCING
------------------------------------------------ Chapter STATEMENT:2.2

In April 1998, we reported on the implementation of the process known
as DPS,\7 the final phase of the Service's letter automation program. 
As part of the overall automation program, DPS, which began in 1993,
entails the automated sorting of letters that have been barcoded by
either business customers or the Service.  DPS was designed to
provide letter carriers with letters already sequenced into delivery
order, so that carriers would spend less time in the office manually
sorting letters and more time on the street delivering mail.  In
doing so, DPS was expected to save letter carrier workhours, thus
reducing overtime costs and improving productivity. 

The Service has made substantial progress in implementing DPS,
despite initial obstacles.  For instance, DPS implementation, which
was initially scheduled for completion by the end of fiscal year
1995, fell behind schedule due to delays in procuring automated
equipment and a shortfall in the volume of barcoded letters.  The
Service acknowledged that it had been overly optimistic in its DPS
expectations.  Subsequently, it revised goals and benchmarks for the
implementation of DPS to be completed by the end of fiscal year 1998. 
The progress that the Service has made toward achieving these goals
and benchmarks included the deployment of all the automated equipment
needed to support DPS, the implementation of DPS in more delivery
zones than expected, and annual increases in carrier workhour
savings. 

Although the Service achieved carrier workhour savings through DPS
implementation, part of these savings was offset by a nationwide
decline in city carrier street efficiency, which involves the number
of deliveries carriers made per hour.  On DPS routes, the Service
believed that the decline was greater than it had anticipated from
DPS work methods and was due in part to route adjustments that were
less timely and accurate than expected.  NALC believed that much of
the decline in efficiency was caused by DPS work methods, such as the
additional time carriers needed to handle and prepare some DPS
letters on the street, work that was formerly done by carriers in the
office.  The Service is working to improve city carrier efficiency
through various efforts.  For example, the Service has made
additional funds available so that inspections can be made prior to
implementing DPS on specific routes, and routes can be adjusted to
capture DPS savings.  Also, the Service is working to improve
supervision of city carriers' street operations and is testing both
alternative delivery methods and new city carrier performance
standards. 

Although the Service has achieved some success in addressing
operational issues, it has been less successful in resolving
disagreements about DPS implementation with NALC, the postal labor
union that represents about 234,000 city carriers.  Such
disagreements generated the filing of many grievances.  Most of the
grievances were resolved through settlement while several had to be
resolved through national arbitration.  In many cases, the grievances
involved employee concerns about specific DPS implementation
procedures that were established in various memoranda signed by the
Service and NALC.  Although many city carriers we spoke with said
that they saw benefits to DPS, they also said that they were
concerned about its effects on their daily work, particularly their
ability to serve customers efficiently. 


--------------------
\7 U.S.  Postal Service:  Progress Made in Implementing Automated
Letter Sequencing, but Some Issues Remain (GAO/GGD-98-73, Apr.  17,
1998). 


      STRATEGIC AND PERFORMANCE
      PLANS
------------------------------------------------ Chapter STATEMENT:2.3

In July 1997, we issued our observations on a draft of the Service's
5-year strategic plan that was developed in response to the
requirements of the Results Act.\8 We found that the draft plan had
various strengths, the most significant of which was the substantial
emphasis that the plan placed on the achievement of performance
results.  This emphasis was generally consistent with the Results
Act's concept of a systematic management process that used
results-oriented goals and strategies as well as quantitative
performance indicators to measure progress toward these goals.\9

The plan generally addressed the six major components required by the
Results Act, including a mission statement, general goals and
objectives, strategies to achieve the goals and objectives, and
performance measures of the goals and objectives.  In doing so, the
plan provided useful information on the Service's vision of its
future and how the Service planned to achieve its desired results. 
However, we believed that for some of the components, such as the
Service's mission statement, the information could have been
strengthened so that it could have been more complete and more
clearly conveyed.  When the Service's final strategic plan was issued
at the end of September 1997, we found that improvements had been
included in the plan that made it a clearer and more complete
document. 

In its 1997 Comprehensive Statement on Postal Operations, the Service
included a preliminary version of the Annual Performance Plan for
fiscal year 1999.  The plan is intended to provide a yearly update of
and more detailed information on the goals and targets to be achieved
and establish performance indicators to be used in determining how
progress is being made toward achieving the goals and targets.  We
are currently reviewing the plan and are finding that, overall, it
did an effective job of articulating performance goals that defined
expected performance and were quantifiable and results-oriented. 
Also, the plan did a good job of discussing how the Service plans to
measure and review results, and it recognizes the role of management
and some stakeholders, such as the Inspector General, in reviewing
and evaluating programs.  However, although the plan broadly
discussed the strategies and resources necessary to achieve its
goals, we believe that the plan could better link particular
strategies and resources with particular performance goals.  Without
such linkage, it may be difficult for stakeholders reviewing the plan
to understand how the Service intends to achieve its goals. 


--------------------
\8 The Results Act:  Observations on the Postal Service's June 1997
Draft Strategic Plan (GAO/GGD-97-163R, July 31, 1997). 

\9 According to the Service, strategic planning has been in place
since 1995 when it established its current management system called
CustomerPerfect!\sm , a system of continuous assessment and
improvement of postal operations so that the Service can better
provide postal products and services to its customers in a
competitive environment. 


   OUR COMPLETED WORK RELATED TO
   OTHER POSTAL MANAGEMENT ISSUES
-------------------------------------------------- Chapter STATEMENT:3

I would now like to provide you with a brief summary of work we
completed since the spring of 1997 on other issues related to the
Service's overall management and operations.  This work resulted in
reports on (1) cost overruns at the Chicago Post Office, (2) the
procurement of postal uniforms, and (3) emergency suspensions of
operations at post offices. 


      COST OVERRUNS AT THE CHICAGO
      POST OFFICE
------------------------------------------------ Chapter STATEMENT:3.1

In October 1997, we reported on the cost overruns that occurred in
the construction of the new Chicago Main Post Office.\10 We found
that based on our review of the events that occurred and an
investigation by the Postal Inspection Service, the overruns, which
totaled about $133 million, appeared to be due primarily to
inadequate planning.  The Service implemented procedures aimed at
reducing the likelihood of cost overruns occurring in similar future
capital investment projects, including earlier notification of
problems to the Board of Governors and more Postal Inspection Service
involvement with review of facilities construction.  Also, we were
asked to review mail service performance data on Chicago's Graceland
postal station, which had been the focus of constituent complaints. 
We compared performance data from the Graceland station with another
postal station--Boston's Brookline station--that had achieved higher
data results and yet functioned in an environment similar to the
Graceland station.  Our analysis of the data confirmed that there
were differences in the performance of the two stations, but it also
showed that the data were not informative about the causes of the
problems with mail service in Graceland or in Chicago. 


--------------------
\10 U.S.  Postal Service:  Chicago Main Post Office Cost Overruns and
Graceland Station Mail Service (GAO/GGD-98-11, Oct.  31, 1997). 


      PROCUREMENT OF POSTAL
      UNIFORMS
------------------------------------------------ Chapter STATEMENT:3.2

In January 1998, we provided information on the Service's efforts to
centralize its procurement of postal uniforms.\11 Congressional
concerns about this issue involved the extent to which a centralized
program might adversely affect American companies currently
participating in the Service's decentralized system for procuring
uniforms.  We reported that to help minimize the overall effect on
American companies, the Service was planning to implement various
oversight efforts to ensure that contractors under the Centralized
Uniform Purchasing program (1) produced uniforms exclusively using
American materials and labor and (2) adhered to the Apparel Industry
Partnership's "Work Place Code of Conduct" designed to ensure that
goods are not produced under sweatshop conditions.  Also, the Service
met with the National Association of Uniform Manufacturers and
Distributors, which represented some of the Service's retail vendors,
in an effort to address their concerns about the Service's planned
move to centralized uniform purchasing.  Notwithstanding these
actions, however, the number of retail vendors selling postal
uniforms under a centralized program was expected to decrease from
more than 800 to 6 or less. 

The Service estimated that it could save about $13 million to $17
million annually through centralized uniform procurement.  However,
according to the Secretary for the Board of Governors, the decision
to move forward to implement the program was not based on anticipated
savings but on the need to comply with existing memoranda of
understanding with postal labor unions.  The memoranda anticipated
that, through centralized purchasing, employees would be supplied
with a greater number of uniform items of a higher quality with an
overall reduction in costs to the Service.  Nevertheless, the Postal
Service recently decided to delay plans to implement the Centralized
Uniform Purchasing program pending further discussions with affected
unions.  Postal officials do not see any movement toward program
implementation before 1999 at the earliest. 


--------------------
\11 U.S.  Postal Service:  Information on Centralized Procurement of
Uniforms (GAO/GGD-98-58R, Jan.  28, 1998). 


      EMERGENCY SUSPENSIONS OF
      POST OFFICES
------------------------------------------------ Chapter STATEMENT:3.3

In April 1997, we issued a report on information involving emergency
suspensions of post offices,\12 which are temporary closures that the
Service may initiate under conditions that constitute a threat to the
safety and health of postal employees or customers or to the security
of the mail, such as natural disasters, or other conditions, such as
the termination of a lease.  In our earlier report on post office
closures,\13 we briefly described emergency suspensions and as you
requested, in our April 1997 report, we followed up on that work to
provide you with additional information related to such suspensions. 
Among other things, we reported to you that between the beginning of
fiscal year 1992 and March 31, 1997, the operations of 651 post
offices had been suspended for various reasons, half of which
involved lease or rental agreement terminations.  Recently, we
obtained from the Service updated information on post offices under
emergency suspension, which showed that as of March 13, 1998, 470
post offices were under emergency suspension.  Also, we were told
that 311 of these offices were undergoing a feasibility study by the
Service to determine whether they should be permanently closed.  In
addition, in March 1998, the previous Postmaster General announced a
nationwide moratorium on post office closings initiated by postal
management.  However, this moratorium did not affect the Service's
program for suspending operations at specific post offices due to
emergency situations. 


--------------------
\12 U.S.  Postal Service:  Information on Emergency Suspensions of
Operations at Post Offices (GAO/GGD-97-70R, Apr.  23, 1997). 

\13 U.S.  Postal Service:  Information on Post Office Closures,
Appeals, and Affected Communities (GAO/GGD-97-38BR, Mar.  11, 1997). 


   OUR COMPLETED WORK RELATED TO
   POSTAL REFORM
-------------------------------------------------- Chapter STATEMENT:4

At this time, Mr.  Chairman, I would like to discuss some of our
completed work efforts that relate mainly to postal reform, a
significant issue that has been the subject of much debate in
Congress and among postal stakeholders.  Since April 1997, we have
reported on the mail box restriction law and issues concerning the
governance of the Service.  We also provided you with our views on
proposed revisions to your postal reform legislation. 


      MAIL BOX RESTRICTION
------------------------------------------------ Chapter STATEMENT:4.1

At your request, Mr.  Chairman, in May 1997, we reported on issues
involving the mailbox restriction,\14 which generally referred to the
law (18 U.S.C.  1725) that essentially gives the Service exclusive
access to mailboxes.  At the time that we issued our report, proposed
postal reform legislation included a demonstration project to test
relaxing the mailbox restriction.  However, as you may recall, Mr. 
Chairman, you believed that more information was needed on this topic
before changes to this law could reasonably be considered. 

To provide you with additional information on the mailbox
restriction, among other things, we obtained the views of over 1,000
randomly selected adults in the continental United States and other
postal stakeholders, including the Service and the seven major postal
labor unions and management associations.  We reported that the vast
majority of the adults were opposed to allowing just anyone to put
mail into their mailboxes.  However, their views differed regarding
the desirability of mailbox access for particular companies or
particular items.  For example, about 60 percent of the adults
favored allowing express companies, such as Federal Express and
United Parcel Service, to put packages into mailboxes.  But less than
50 percent of the adults favored allowing companies to leave other
types of items in mailboxes, such as utility bills, magazines or
newspapers, and catalogs, coupons, or ads. 

Also, mixed views about the need for the mailbox restriction were
expressed by other postal stakeholders.  For example, the Service,
the seven major postal labor unions and management associations, and
a contractors' association believed that the mailbox restriction was
needed generally to protect postal revenue, facilitate efficient and
secure delivery of mail, and promote the privacy of postal customers. 
Other stakeholders, including the Justice Department and the Postal
Inspection Service, opposed any relaxation of the mailbox restriction
law because, among other things, it helped deter mail theft by
limiting mailbox access and made it easier to detect, investigate,
and resolve cases of mail theft.  However, Service competitors
generally believed that the law should be repealed or changed because
it was unnecessary, impeded competition, and infringed on private
property.  Also, none of the eight foreign postal administrations we
surveyed said that they needed a law restricting mailbox access and
none of these countries had ever had such a restriction.  However,
these countries' mail delivery practices generally involved less use
of mailboxes than is the case in the United States. 


--------------------
\14 U.S.  Postal Service:  Information About Restrictions on Mailbox
Access (GAO/GGD-97-85, May 30, 1997). 


      GOVERNANCE OF THE POSTAL
      SERVICE
------------------------------------------------ Chapter STATEMENT:4.2

At your request, Mr.  Chairman, in August 1997, we provided
information on issues related to the governance of the Service that
you believed could be helpful in deliberations on postal reform.\15
For our report, we obtained information on issues of concern to
current and former members of the Postal Service Board of
Governors,\16 including any areas where members indicated a need for
legislative attention.  Also, among other things, we provided
information on governance issues that was intended to provide
additional perspective in postal reform discussions.  Frequently
cited issues by current and former Board members that we interviewed
included (1) limitations on the Board's authority to establish
postage rates, (2) the inability of the Board to pay the Postmaster
General more than the highest rate permitted for a postal executive,
(3) the Board's lack of pay comparability with the private sector,
and (4) qualification requirements that were too general to ensure
that Board appointees possessed the kind of experience necessary to
oversee a major government business.  However, there was not a
consensus among the members on what legislative changes should be
considered to address their concerns. 


--------------------
\15 U.S.  Postal Service:  Issues Related to Governance of the Postal
Service (GAO/GGD- 97-141, Aug.  14, 1997). 

\16 The Postal Reorganization Act of 1970 created the Postal Service
Board of Governors to be the governing body for the Service.  The
Board consists of 11 members and is comparable to the board of
directors of a private sector corporation.  The Board directs the
Service's exercise of powers, directs and controls expenditures,
reviews Service practices, and conducts long-range planning.  Also,
among other things, the Governors participate in establishing postage
rates and take up other matters, such as mail delivery standards. 


      OBSERVATIONS ON PROPOSED
      REVISIONS TO POSTAL REFORM
      LEGISLATION
------------------------------------------------ Chapter STATEMENT:4.3

In April 1998, we communicated our observations and comments
concerning proposed revisions to H.R.  22, the Postal Reform Act of
1997, which would change current laws to give the Service greater
commercial freedom while establishing rules intended to ensure fair
competition.\17 In our letter, we offered our comments on the
principles and trade-offs relevant to congressional consideration of
the proposed revisions, and our observations on selected features of
the proposed revisions that related to our reviews of postal issues. 
For example, based on our previous work, we believe the Service could
benefit from defining the concept of universal service, which the
proposed revisions would require. 

We also discussed the potential impact of reducing the scope of the
letter mail monopoly to $2.  On the basis of available data, it
appeared that the short-range impact of reducing the scope of the
letter monopoly to $2 would not significantly affect the Service's
ability to provide affordable universal service.  We determined that
little of the First-Class Mail volumes that are currently protected
by the postal monopoly would become subject to competition.  In
addition, we said a variety of other factors, such as a reduction in
First-Class Mail volume due to increased use of electronic media
along with costs, inflation, and service quality, could in the long
run, in combination with any change in the scope of the postal
monopoly, have an impact on the Service's ability to provide
affordable universal service. 


--------------------
\17 Postal Service Reform:  Observations on Proposed Revisions to
H.R.  22 (GAO/GGD-98- 97R, Apr.  7, 1998). 


   ONGOING GAO WORK RELATED TO
   COMPETITION AND DIVERSITY
   ISSUES
-------------------------------------------------- Chapter STATEMENT:5

I would now like to discuss our ongoing work, most of which has been
initiated at your request, Mr.  Chairman, or at the request of
members of your Subcommittee, in which we are focusing on various
postal activities that in large part relate to the issues of
competition and diversity.  The ongoing work related to competition
includes three efforts, two of which involve issues associated with
the Service's role in the international mail market.  The three
efforts include reviews of (1) Global Package Link, one of the
Service's international parcel delivery services, (2) the Service's
role in the Universal Postal Union, and (3) the Service's development
of new postal products.  In addition, our other ongoing work
addresses the issue of diversity, with a focus on three review
efforts involving (1) the promotions of women and minorities into
higher postal management positions; (2) diversity training for postal
employees, particularly in sexual harassment and equal employment
opportunity (EEO), along with specific postal EEO-complaint related
data; and (3) trends in federal EEO complaint caseloads. 


      GLOBAL PACKAGE LINK
------------------------------------------------ Chapter STATEMENT:5.1

In response to your request, Mr.  Chairman, we performed a review of
the international parcel delivery service known as Global Package
Link (GPL), a service which began in 1995, and was designed to make
it easier and more economical for direct marketers to export bulk
shipments of merchandise internationally.  Private express carriers
had raised concerns that GPL parcels were subject to fewer customs
clearance requirements and received preferential customs treatment
overseas, thus giving the Service an unfair competitive advantage in
providing international parcel delivery service.  In reviewing issues
related to these concerns, we focused on the Service's international
GPL activities in the three countries where GPL was primarily
operating in fiscal year 1997, which included Canada, Japan, and the
United Kingdom.  During this period, nearly all GPL parcels were sent
to Japan. 

We found that differences existed in foreign customs requirements for
GPL and private express parcels, the greatest of which were in Japan
where private express carriers were subject to requirements regarding
the preparation of shipping documentation and payment of duties and
taxes on their parcels that did not apply to GPL parcels.  However,
regarding the private carriers' two major areas of concern, the
results of our work generally showed that despite differences between
the Service and the carriers in various delivery and customs
clearance processes for parcels shipped to the three countries, GPL
parcels did not appear to receive preferential treatment over private
express parcels in (1) the speed of customs clearance in any of the
three countries or (2) the assessment of duties and taxes in Canada
and the United Kingdom.  We were unable to determine whether duties
and taxes were assessed on dutiable GPL parcels shipped to Japan
because essential data were unavailable. 

In commenting on our draft report, private carriers continued to
express concerns that differences in customs clearance requirements
for postal and privately shipped parcels result in more work and
higher costs for the carriers, placing them at a disadvantage in
competing with the Service to provide international parcel delivery
service.  However, Service officials commented that it enjoyed no
customs clearance advantage over private carriers and that GPL and
the expanded business opportunity it represents is critical to the
future of the Postal Service and its customers.  Private carriers
have urged Congress to protect fair competition by enacting
legislation that would require the Service and the carriers to
compete on the same terms, particularly with regard to customs
treatment.  Issues related to fair competition involve weighing how
the Postal Service and private carriers can compete, given that
different sets of requirements and obligations currently exist. 


      UNIVERSAL POSTAL UNION
------------------------------------------------ Chapter STATEMENT:5.2

At your request, Mr.  Chairman, we have recently begun a review of
the Service's role in the Universal Postal Union (UPU), a specialized
agency of the United Nations that governs international postal
services.  Issues involved in this review cover a wide range of
concerns.  For example, some private carriers have raised concerns
about the Service's authority to represent the United States in the
UPU because in that position, the Service acts as both a participant
in developing international mail policies and a competitor with
international private carriers, thus perhaps gaining unfair
competitive advantages.  As such, a proposal has been suggested that
would designate the Office of the U.S.  Trade Representative to
participate in UPU's activities instead of the Postal Service.  At
this time, we are in the process of obtaining more information about
UPU's functions, the Service's role as a participant in UPU, and the
issues and concerns that may contribute to future discussions about
UPU's activities. 


      DEVELOPMENT OF NEW POSTAL
      PRODUCTS
------------------------------------------------ Chapter STATEMENT:5.3

We are currently addressing issues related to the Service's
development of new postal products, such as phone cards and the
electronic postmark.  Specifically, our work involves obtaining
information on (1) any statutory and regulatory authorities and
constraints governing the Service's ability to market new products;
(2) the Service's processes for developing, testing, approving, and
marketing new and electronic products; and (3) new and electronic
products that the Service marketed during fiscal years 1995 through
1997, including financial data related to such products. 


      PROMOTIONS OF WOMEN AND
      MINORITIES
------------------------------------------------ Chapter STATEMENT:5.4

At the request of Congressman Danny Davis, a member of the
Subcommittee, we are currently obtaining information on issues
related to the promotions of women and minorities into higher postal
management positions.  Concerns about this topic were raised in
response to the issuance of a contractor study on diversity that was
presented to the Postal Service Board of Governors in January 1998. 
The study generally identified relatively small numbers of women and
minorities that had been promoted into higher postal management
levels, particularly those in the Executive and Administrative
Schedule level 17 and above.  As agreed recently with Congressman
Davis' office, we are currently obtaining information related to this
issue, including the extent to which required promotion processes for
higher level postal positions are being followed in specific postal
locations and the effects that a selected number of such promotions
have had upon workforce diversity in these locations. 


      DIVERSITY TRAINING AND
      POSTAL EEO COMPLAINT DATA
------------------------------------------------ Chapter STATEMENT:5.5

At the request of the Subcommittee's Ranking Minority Member Chaka
Fattah, we are obtaining information about the extent to which the
Postal Service has provided various types of diversity training,
particularly on the topics of sexual harassment and EEO, to postal
employees.  Most recently, we learned that the Service is making
efforts to emphasize the importance of training for postal employees
through the development of a guide that provides employees
information on available training courses, including sexual
harassment and EEO.  Also, the Service has developed a draft Human
Resources Strategic Plan that, among other things, identifies
strategies for employee training and development.  In addition, as
part of our review, we are working to obtain and review specific EEO
data related to complaints that Congressman Fattah requested,
including such data as the numbers and types of complaints being
filed and the types of postal facilities that have large numbers of
pending EEO complaints. 


      TRENDS IN FEDERAL EEO
      COMPLAINT CASELOADS
------------------------------------------------ Chapter STATEMENT:5.6

In response to requests from Congressmen Elijah Cummings and Albert
Wynn, we are developing and analyzing data on unresolved EEO
complaints at federal agencies and at the Equal Employment
Opportunity Commission (EEOC), the agency that is primarily
responsible for establishing regulations that govern the processing
of employees' EEO complaints by federal agencies.  Also, EEOC
conducts hearings and adjudicates employees' appeals of agency final
decisions on their complaints.  The requesters asked that the Postal
Service be included in this work mainly because it is covered by most
of the same EEO complaint processes that apply to most federal
agencies.  Also, the Service, with over 850,000 employees, is the
largest federal civilian employer.  Information is being developed
about the inventories of EEO complaints at federal agencies and EEOC
and how trends in the number of complaints filed and the time taken
to process them have contributed to inventory levels. 


------------------------------------------------ Chapter STATEMENT:5.7

Mr.  Chairman, this concludes my prepared statement.  I have included
a list of our Postal Service products issued since April 1997 in the
appendix.  I would be pleased to respond to any questions you or the
members of the Subcommittee may have. 

GAO POSTAL RELATED PRODUCTS ISSUED SINCE APRIL 1, 1997

U.S.  Postal Service:  Progress Made in Implementing Automated Letter
Sequencing, but Some Issues Remain (GAO/GGD-98-73, Apr.  17, 1998). 

Postal Service Reform:  Observations on Proposed Revisions to H.R. 
22 (GAO/GGD-98-97R, Apr.  7, 1998). 

U.S.  Postal Service:  Information on Centralized Procurement of
Uniforms (GAO/GGD-98-58R, Jan.  28, 1998). 

U.S.  Postal Service:  Little Progress Made in Addressing Persistent
Labor-Management Problems (GAO/T-GGD-98-7, Nov.  4, 1997). 

U.S.  Postal Service:  Chicago Main Post Office Cost Overruns and
Graceland Station Mail Service (GAO/GGD-98-11, Oct.  31, 1997). 

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

U.S.  Postal Service:  Issues Related to Governance of the Postal
Service (GAO/GGD-97-141, Aug.  14, 1997). 

The Results Act:  Observations on the Postal Service's June 1997
Draft Strategic Plan (GAO/GGD-97-163R, July 31, 1997). 

U.S.  Postal Service:  Information About Restrictions on Mailbox
Access (GAO/GGD-97-85, May 30, 1997). 

U.S.  Postal Service:  Continued Challenges to Maintaining Improved
Performance (GAO/T-GGD-97-88, Apr.  24, 1997). 

U.S.  Postal Service:  Information on Emergency Suspensions of
Operations at Post Offices (GAO/GGD-97-70R; Apr.  23, 1997). 

*** End of document. ***