# Presentation: 079154

## USPS Response to Hill RequestOverview

**The Request ****– USPS to “submit a workable plan to fund the key capital investments needed to ensure long-term viability of the Postal Service”**
**Environment**
**Capital Investment Plan**
**Financing the Capital Plan**
**Cost Reduction Efforts**
**Traditional Approaches**
**Network Rationalization**
**Workforce Implications**
**Current Success**

## Environment

**Declining FCM volume and contribution**
**1.9 new delivery points per year**
**Volume has become more difficult to forecast – less dependent on economy, more diversion.**
**Worksharing has increased bringing more mail to destination, bypassing origin processing and transportation**

## Capital Investment Plan

**Total Draft Capital Plan 2004-2010 -****details to GAO**
**$2.4 – 3.2B per year, almost $19B over 7 years**
**Categories:**
**Auto/Mech – letters, flats, parcels, material handling, and infrastructure support (IT) sub-categories**
**Vehicles – maintain existing fleet**
**Retail Equip – POS and Automated Postal Centers**
**Facilities – customer service/admin, building improvement, major processing sub-categories**
**Postal Support and Emergency Preparedness – IT**

## Financing the Capital Plan

**Depreciation is primary source **
**Part of test year revenue requirement**
**Capital freeze focused on facilities due to volume and workload declines, not generative capital**
**Limited Options:**
**Sell Assets ****– ****Many smaller facilities are leased. C****onsistently selling assets. Yet need facilities where the mail and people are.  Any one want to buy Chicago?**
**Borrow – statutory annual limits**

## Cost Reduction Efforts 	Traditional Approaches 

**Capital Equipment ****– PARS, OCR replacement, auto tray handling systems, etc.**
**BPI and standardization that does not require capital**
**The type of equipment is not dependent upon the network – shape related**

## Cost Reduction Efforts     Network Optimization and Rationalization

**80% of large facilities are **_**< **_**30 years old**
**Networks have changed many times over the years as mechanization / automation have improved ****– MSCs, BMCs, SDCs, ADCs, AADCs, PMPCs**
**Need for Change – multiple shape-based networks**
**A Promising Alternative – one network from many**
**Validate model – ****IG suggested**** ****review**
**Stakeholder input**
**Test concept(s) ****– those w/ and w/o facility changes**
**Incremental approach ****– do not want a PMPC repeat**

## Cost Reduction Efforts	Workforce Flexibility

**Attrition Rates: 5.8 - 4.4 percent/year**
**Retirement Eligibility**
**110,000 now, another 125,000 by 2007**
**Down over 80,000 career from 1999 peak - down 10,000 this year so far**
**Flexibility from OT usage and 11,000 plant casuals**

## Current Success

**Committed to $1 billion per year in savings with BPI and Transformation **
**$11.8 billion in cumulative savings since end of 1999**
**Service improvements**
**Closed over 70 RECs and annexes**
**Reduced over 80,000 career employees**
**USPS outstanding debt down to $2.25 billion**

## Summary

**USPS can continue to reduce costs, moderate rate increases, and further improve service while generating funds through traditional means. **
**The escrow requirement should be repealed.**