United States General Accounting Office

GAO Report to the Chairman, Subcommittee

on the Postal Service, Committee on

Government Reform and Oversight,

House of Representatives

April 1998 U.S. POSTAL SERVICE

Progress Made in

Implementing

Automated Letter

Sequencing, but Some

Issues Remain

GAO/GGD-98-73

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-276743 

April 17, 1998

The Honorable John M. McHugh

Chairman, Subcommittee on the

 Postal Service

Committee on Government Reform

 and Oversight

House of Representatives

Dear Mr. Chairman:

This report responds to your request that we provide information on the

status of the U. S. Postal Service’s efforts to implement Delivery Point

Sequencing (DPS), which is the automated rather than manual sorting of

letters in the exact order carriers deliver them. Manual sorting of letters by

carriers is one of the Service’s most costly letter distribution operations.

As agreed with your office, our objectives in this report were to

(1) determine the Service’s goals for DPS implementation, its projected

letter carrier workhour savings, and the extent to which the Service has

achieved these and (2) identify any remaining issues that may affect the

Service’s ability to achieve its 1998 DPS goals, including any actions that the

Service has taken to address these issues.

DPS is the final phase of the Service’s letter mail automation program,

which began in 1982. DPS entails the automated sorting of letters that have

been barcoded by either business customers or the Service. These

barcodes represent the specific delivery points1

 and are to enable DPS

equipment to sort the letters to carriers in delivery point sequence. In

March 1993, the Service began implementing DPS on its letter carrier routes

where it was expected to save time that carriers use to sort letters

manually while in the office. The workhours saved by automatically

sorting these letters in delivery point sequence were intended to reduce

carrier overtime and increase the time available for carriers on the street

so that they could deliver more mail. Throughout the report, we use the

term “delivery sequence” when referring to letters that have been

automatically sorted to carriers in delivery point sequence.

Results in Brief In its 1992 Corporate Automation Plan (Plan), the Service initially

scheduled DPS implementation to be completed by fiscal-year-end 1995.

The 1992 Plan included DPS goals and benchmarks (interim targets) for

(1) DPS equipment deployment, (2) barcoded letter volume, and

1

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

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(3) delivery zone2 and carrier route implementation nationwide through

fiscal year 1995. In addition, the Service based its decision analyses that

supported investments in DPS sorting equipment on achieving (1) a certain

DPS letter volume to carrier routes and (2) specific carrier workhour

savings. However, implementation fell behind schedule, and the Service

acknowledged that it had been overly optimistic in its DPS expectations. In

April 1994, the Postmaster General announced that the barcoding goal had

slipped from 1995 to fiscal-year-end 1997. In its 1996 Plan, the Service

extended the DPS completion date to the end of fiscal year 1998 and revised

associated goals and benchmarks.

Specifically, the established DPS goals, benchmarks, letter volume, and

projected carrier workhour savings and the Service’s progress towards

achieving them were the following:

• DPS equipment deployment: The goal was to deploy over 8,500 pieces of

DPS sorting equipment nationwide by November 1997. The Service

deployed all of this equipment on time.

• Barcoded letter volume: The Service’s fiscal year 1997 benchmarks were

to barcode 85 percent of all letters. By the end of fiscal year 1997,

81 percent of all letters were barcoded. The fiscal year 1998 goal is to

barcode 88 percent of all letters.

• Delivery zone and carrier route implementation: Although the Service did

not set a fiscal year 1997 benchmark for implementing DPS in specific

delivery zones, the Service has implemented DPS in over 7,600 zones,

surpassing its fiscal year 1998 goal of 6,300 zones. The Service set a fiscal

year 1997 benchmark that about 149,200 carrier routes were to receive

letters in delivery sequence. According to Service data, through fiscal year

1997, over 142,500 carrier routes were receiving letters in delivery

sequence, or about 96 percent of the benchmark. The fiscal year 1998 goal

is that 154,000 carrier routes are to receive letters in delivery sequence.

• DPS letter volume to carrier routes: The Service’s decision analyses that

supported the DPS equipment investment assumed that 70 to 85 percent of

letters going to certain carrier routes would be delivery sequenced. As of

October 31, 1997, Service officials estimated city carrier routes received an

average of between 50 to 59 percent of letters in delivery sequence.

• Carrier workhour savings: The Service projected that DPS would

cumulatively save 27.2 million city and rural carrier workhours during

fiscal years 1994 through 1997. To achieve these savings during this 4-year

period, the Service cumulatively reduced its budget by 26.5 million carrier

2

A delivery zone is a small geographic area represented by a 5-digit Zone Improvement Plan (ZIP) code

and each zone contains a number of carrier routes. It also identifies the post office or delivery unit that

will deliver a given letter.

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workhours. For this period, actual reductions of carrier workhours were

22.5 million, resulting in a shortfall of 4.0 million, as compared with the

budgeted amount. Although in fiscal year 1994, actual carrier workhours

increased by 5.6 million, between fiscal years 1995 and 1997, the Service

reduced actual carrier workhours by 28.1 million. (See figures 2 and 3 for

individual yearly projections.)

The Service has identified and was addressing several issues that have

affected its efforts to achieve its DPS implementation goals, benchmarks,

and carrier workhour savings. To increase volumes of barcoded letters

and DPS letters, the Service has taken several actions. For example, in

July 1996, the Service raised the discount given to its business customers

as an incentive to increase barcoding. To increase DPS letter volume, the

Service is trying to improve its mail processing operations to prevent

letters from bypassing automation equipment and plans to implement a

new method for delivery sequencing letters to units in multioccupancy

buildings, which account for about 19 percent of total deliveries.3

 To

achieve workhour savings, the Service is working to improve both city

carrier delivery efficiency while on the street and frequency of route

adjustments to capture DPS-related carrier workhour savings.

While the Service has achieved some success in addressing issues

affecting DPS implementation and achievement of DPS goals, it has been

less successful in resolving its disagreements with the National

Association of Letter Carriers (NALC), the labor union representing city

carriers, regarding DPS implementation. In 1992, the Service and NALC

agreed to work together to implement DPS and signed six memoranda of

understanding, which were to resolve past disputes and provide a plan for

DPS implementation. Not long after the memoranda were signed,

disagreements developed between the Service and NALC regarding certain

aspects of the memoranda. Many grievances were filed at the national and

local levels. Although most grievances were resolved through settlement,

two went to national level arbitration. In one case, a national level

arbitrator decided in favor of the Service. In the second case, a national

level arbitrator decided in favor of NALC and instructed the parties to work

together to resolve their differences. Other disagreements also arose as

the parties gained experience with DPS implementation. The parties

determined that the memoranda needed modification; but their

negotiations failed, and the Service issued instructions to implement DPS

that NALC believed were inconsistent with certain aspects of the

memoranda. These instructions generated many grievances at the national

3

Multioccupancy addresses include apartments and office buildings, among others.

Page 3 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

and local levels, and the parties settled most of these grievances. However,

one grievance went to national level arbitration, and the arbitrator decided

in NALC’s favor and instructed the parties to work together to resolve their

differences.

In addition, many city carriers we spoke with said that although they

generally saw benefits in DPS, they were concerned about its effect on their

daily work. For example, because city carriers must deliver DPS letters

without either manually sorting or inspecting them, they believed

customer service was affected by their having to identify and sort out

undeliverable letters during delivery and then bring them back to the

office at the end of the day. In contrast, Service officials said that while DPS

has changed the way carriers deliver mail, the changes have not adversely

affected customer service.

Background The Postal Service’s letter mail automation program was designed to

increase productivity, reduce postal costs, and provide postal customers

with more consistent delivery service. The program relies on optical

character readers and barcode sorters to automate the mechanized and

manual sorting of letter mail, and curb the Service’s costs by reducing the

number of workhours clerks and letter carriers would need to sort letters.

In 1980, the Service’s Board of Governors approved the initial

procurement of this equipment, which became operational in 1982 and

began the $4.4 billion automation program. These early optical character

readers (1) read the last line of the address; (2) verified the city, state, and

5-digit ZIP code against a computer address directory; (3) printed a

corresponding barcode on the envelope; and (4) did an initial sort. The

companion barcode sorters read the applied 5-digit barcode, enabling the

equipment to automatically sort letters to the post offices that were to

make delivery. In 1983, the Service introduced the 9-digit, or ZIP+4 code,

which enabled the equipment to automatically sort letters not only to the

post offices but also to sort down to the carrier routes, post office boxes,

buildings, or large business firms. While the 5-digit ZIP code with

automation reduced mail processing costs, the 9-digit code further

reduced these costs and lowered the number of missorted letters, which

improved the consistency of delivery service.

During 1987 and 1988, the Service took three key actions regarding letter

mail automation. First, the Service began deploying a newer generation of

optical character readers that could read and interpret multiple lines of

address information and did not need the 9-digit code to print the barcode

Page 4 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

on the envelope. Second, the Service implemented its first rate incentive to

encourage business customers to apply barcodes and improve both the

address accuracy and print quality of their letter mail. Third, the Service

developed its initial Corporate Automation Plan, which spelled out the

letter mail automation goals and strategies for achieving them. The

primary goal was to barcode virtually all letter mail by the end of 1995,

which was to result in substantial savings.

To achieve this goal, the Service’s strategy was that mailers, encouraged

by rate incentives, would barcode about 40 percent of the letter mail. The

Service would barcode the remainder using its optical character readers

and remote barcoding systems, which it began in 1992. Remote barcoding

systems provide the Service a means of barcoding letter mail containing

addresses that its optical character readers cannot read and barcode

because the addresses are either handwritten, poorly printed, or have

other readability problems. These systems entail making electronic images

of these addresses. The images are initially processed by a remote

computer-reading device, which attempts to read these addresses and

barcode the corresponding letters. Those images that cannot be read are

electronically transmitted to off-site locations where operators read and

key in enough address information from the images to allow the

equipment to barcode the letters.

After the Service had developed the capability to automatically sort letters

down to the carrier route level, it began studying the feasibility of

automating carriers’ manual sequencing of letters into delivery order. In

the office, carriers received their letter mail in random order each morning

mail was delivered, manually sequenced this mail by inserting each letter

into the appropriate pigeonhole of the letter case, removed the mail from

the case, and bundled it for delivery.4

 The Service reported that continued

mail volume growth had increased the average carrier’s in-office time from

about 2 to 3 hours in 1978 to about 4 hours in 1988. As a result, the time

that carriers spent on the street decreased, and the average number of

delivery points per route decreased from 520 to 470. Because of these

factors, more carriers were needed to deliver the daily mail volume.

The Service developed delivery sequencing using an 11-digit barcode that

must be applied to letter mail before delivery sequencing will work. The

11-digit barcode combines the 9-digit ZIP code with the last two digits of

the street address number, which enables barcode sorters to automatically

4

Carriers are expected to manually sequence the mail at a standard rate of 18 letters per minute. They

are expected to remove the mail from the case and bundle it for delivery at a standard rate of 70 letters

per minute. The combined rate for both these activities is expected to be 859 pieces per hour.

Page 5 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

sequence letters into the order carriers deliver them. Both mailers and the

Service can apply the 11-digit barcode. The Service estimated that delivery

sequencing would reduce the average time carriers spend in the office

preparing mail for delivery by about 80 minutes per day based on standard

letter sorting rates and mail volume. This reduction was expected to allow

a commensurate increase in the time carriers spend on the street and the

number of delivery points per route.

Two types of barcode sorters are used to delivery sequence letters. The

Delivery Bar Code Sorter is the larger of the two machines and is deployed

primarily in mail processing plants. Two clerks operate the larger

machine, which is designed to delivery sequence multiple routes at the

same time and process 25,000 letters per hour. The Carrier Sequence Bar

Code Sorter is the smaller machine and is deployed in delivery units that

meet certain minimum floor space and letter mail volume requirements.

The smaller machine requires one clerk to operate and is designed to

delivery sequence one route at a time and process over 19,000 letters per

hour.

After letters are delivery sequenced, city carriers are to take them to the

street without manually preparing them for delivery within the office.

However, all letters cannot be delivery sequenced. As a result, carriers

receive and must manually sequence that portion of their letters that were

not delivery sequenced. The Service expects that there will always be

letters that cannot be delivery sequenced because these letters (1) have

characteristics, such as size and shape, that are incompatible with

automation equipment; (2) have addresses or barcodes that are incorrect;

or (3) originate in, or are destined for, areas with insufficient mail volume

to justify investment in automated processing equipment. In addition,

carriers receive and must manually sequence flats (large envelopes,

magazines, and catalogs), which accounted for about 30 percent of total

mail volume in fiscal year 1997.

In fiscal year 1997, the Service reported processing about 191 billion

pieces of mail, including about 131 billion letters. The Service also

reported that its automation equipment sorted about 76.5 billion, or 58

percent, of these letters. In addition, delivery points have grown at the rate

of about 1 percent per year; and in fiscal year 1997, the Service delivered

mail to 128 million addresses.

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Scope and

Methodology

To determine the Service’s DPS goals and status of its implementation, we

analyzed our prior reports and Postal Inspection Service audit reports on

DPS. We reviewed the Service’s Decision Analysis Reports, which

supported acquisition of DPS related automation equipment and projected

automation savings, the Service’s DPS guidance and training materials, and

six 1992 Joint Memoranda of Understanding on DPS published by the

Service and NALC. We reviewed the Service’s 1990, 1992, and 1996

Corporate Automation Plans, which describe the activities, benchmarks,

goals, and associated time frames necessary to complete the Service’s

automation program and achieve projected savings. In addition, we

interviewed Postal Service headquarters delivery and operations support

officials, who are responsible for the overall implementation and

management of DPS. We reviewed the Service’s DPS tracking data on DPS

implementation, such as number of delivery units and routes that receive

DPS letters. We reviewed the Service’s national data on delivery workhours,

volume, city and rural carrier routes, and productivity from fiscal year

1993 through 1997. With these data, we compared DPS performance with

the Service’s benchmarks and analyzed performance indicators to report

trends in workhours, number of deliveries, letter mail volume, and number

of carrier routes. However, we did not verify the accuracy of these data.

To identify any remaining issues that may affect the Service’s ability to

achieve its DPS goals, we reviewed and analyzed the Service’s 1996 Plan,

which highlights ongoing and planned actions necessary to meet the 1998

DPS goals. We interviewed Postal Service headquarters officials with lead

responsibility for completing ongoing and planned DPS related tasks. We

also did some preliminary work, which indicated that the Service was

experiencing labor-management relations problems over DPS

implementation. On the basis of that work and our knowledge of

persistent labor-management relations problems in the Service from our

past work, we interviewed national representatives of the Service’s four

major labor unions and three management associations to identify

whether they were aware of any labor-management relations issues that

may affect the Service achieving its DPS goals.5

To observe any issues that the Service and its unions and management

associations identified, we selected a judgmental sample of 3 districts and

6 delivery units in 3 of the 11 Postal Areas, which included Capital Metro

Operations. Among other considerations, we selected (1) two districts that

had fully implemented DPS on all city routes and one district to obtain

5

U.S. Postal Service: Little Progress Made in Addressing Persistent Labor-Management Problems

(GAO/GGD-98-1, Oct. 1, 1997).

Page 7 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

additional geographic dispersion because it was located in close proximity

to our staff in Denver, which did the field work and (2) two delivery

units—within each selected district—with both high-office efficiency and

declining street efficiency. We conducted site visits to these locations to

observe delivery operations and interviewed responsible area, district, and

delivery unit officials. We also judgmentally selected 142 city and rural

carriers at the delivery units we visited to obtain their experience and

views about DPS implementation. These carriers were selected on the basis

of their availability at the time of our visit to the units where they were

located. These selected sites, managers, and carriers are not statistically

representative; therefore, we cannot generalize from our sample to the

universe of all carriers. We do, however, use the results of these interviews

to present illustrative examples of DPS-related issues from the points of

view of the carriers and managers.

We requested comments on a draft of this report from the Postmaster

General and the presidents of the seven labor unions and management

associations including the American Postal Workers Union (APWU); NALC;

National Postal Mail Handlers Union; National Rural Letter Carriers’

Association (Rural Carriers); National Association of Postal Supervisors

(NAPS); National Association of Postmasters of the United States; and

National League of Postmasters of the United States. The Service and NALC

provided written comments, which are reprinted in appendixes IV and V,

respectively. APWU and NAPS provided oral comments. The comments of

these four organizations are discussed in appropriate sections throughout

the report and at the end of the report. The remaining organizations did

not provide comments. We conducted our review from June 1997 through

February 1998 in accordance with generally accepted government auditing

standards (see app. I for additional detail).

Page 8 GAO/GGD-98-73 Automated Letter Sequencing
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Progress Made

Toward Achieving

DPS Goals

By November 1997, the Service was making progress toward meeting its

fiscal year 1998 goal for completion of letter automation through DPS

implementation. Since March 1993, DPS has been implemented at

increasing numbers of delivery units as equipment was deployed and DPS

volume grew. The letter automation program suffered initial slippages,

which caused DPS implementation to fall behind schedule. The 1996 Plan

revised the benchmarks set in the 1992 Plan, extending the automation

program completion date from fiscal-year-end 1995 to 1998. While the

Service has not achieved all its DPS implementation benchmarks, it has

deployed all authorized DPS equipment and exceeded the goal for number

of delivery zones to receive DPS letters. It is making progress in meeting its

benchmarks for numbers of barcoded letters and DPS routes. While the

Service did not have complete data to measure total DPS volume or

percentage on the routes, it estimated that carriers were receiving an

average of about half their letters sorted in delivery sequence compared

with the 70 to 85 percent, which the Service expects to achieve by the end

of fiscal year 1998 when DPS is scheduled to be fully implemented.

Page 9 GAO/GGD-98-73 Automated Letter Sequencing
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DPS Implementation Is an

Ongoing Process

DPS implementation has been an ongoing process since it began in

March 1993. The 1992 Plan called for implementation of DPS in delivery

zones that have an equivalent mail volume of 10 or more city routes and

rural routes with city-style addresses.6

 The 1992 Plan did not call for

implementation in small offices and in many rural areas; and the 1996 Plan

equated to implementing DPS on 154,000 routes, or about 63 percent of the

number of city and rural carrier routes existing at fiscal-year-end 1997. As

the volume of barcoded letters increased, the Service purchased and

deployed automation equipment needed to delivery sequence the letters

and gradually increased the number of delivery units and carrier routes

that receive a portion of their letters delivery sequenced.

DPS implementation is achieved through a team effort among local

delivery, processing, address management, and logistics operations to

extend DPS to increasing numbers of delivery units, such as post offices,

stations, or branches where letter carriers prepare mail for delivery and

then deliver it to addresses along regularly scheduled routes.7

 The key DPS

implementation steps are as follows:

6

In response to 911 emergency requirements, rural-style addresses are being converted to descriptive

city-style street name and numbered addresses.

7

The workload on a route is to be adjusted so that mail is sorted, prepared for delivery, and delivered

within 8 hours.

Page 10 GAO/GGD-98-73 Automated Letter Sequencing
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• Select delivery units for DPS that generally have 10 or more city routes or

rural routes with city-style addressing;

• Deploy Delivery Bar Code Sorters and Carrier Sequence Bar Code Sorters

at mail processing plants and delivery units, respectively, to provide

delivery sequenced letters;

• Before DPS is implemented in each delivery unit, analyze route alignments

and plan for future DPS realignments by taking the appropriate actions

authorized in the 1992 joint agreements’ training guide;

• Determine each unit’s target DPS percentage of total letters that, when

achieved, triggers DPS route adjustments. Targets are set using either the

Unilateral or X-Route process8

 authorized in the Service-NALC 1992 joint

agreements. Targets are to be set at 70 to 85 percent under the X-route

process and at management discretion under the unilateral process.

According to Service guidance, interim adjustments can and should be

made when DPS volume reaches 40 percent;

• Manually sort DPS letters and correct any automated sort errors until

98 percent sort accuracy is achieved for 3 consecutive days, after which,

DPS letters are taken to the street without manually sorting them; and

• Add delivery points and increase street time on routes to capture in-office

workhours that are saved by carriers not manually sorting DPS letters prior

to delivery.

Figure 1 presents highlights of events in the implementation of the letter

automation program and DPS, which we will discuss throughout this

report.

8

Under the Unilateral process, Service managers set DPS target percentages and plan for route

adjustments to capture DPS savings. The X-route process is an alternative in which local NALC and

Service representatives can jointly plan to adjust and realign city carrier routes when target

percentages are met.

Page 11 GAO/GGD-98-73 Automated Letter Sequencing
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Figure 1: Implementation of Postal Service’s Letter Automation Program

Page 12 GAO/GGD-98-73 Automated Letter Sequencing
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Note: Equipment deployment was an ongoing process until 1997, when all DPS and DPS-related

equipment was fully deployed. DPS equipment is Delivery Barcode Sorters and Carrier Sequence

Barcode Sorters.

Source: Postal Service.

Initial DPS Implementation Fell

Behind Schedule

In its 1992 Plan, the Service scheduled DPS implementation for completion

by fiscal-year-end 1995. The 1992 Plan included DPS goals and benchmarks

for (1) deploying all needed barcode sorters, (2) barcoding virtually all

letter mail, and (3) implementing DPS for specific delivery zones and

carrier routes. However, the Service was unable to achieve these goals by

1995 as planned, due to several delays in completing the automation

program. In August 1992, the Service’s Board of Governors postponed

approval of the next phase of automated equipment procurement affecting

DPS, pending a thorough review and evaluation of the supporting decision

analysis report by the newly appointed Postmaster General. Then, in

April 1994, the Postmaster General announced that the barcoding goal

would have to slip from 1995 to the end of fiscal year 1997. The initial

program slippages were primarily due to a shortfall in volume of barcoded

letters caused by a delay in deploying remote barcoding and

lower-than-anticipated barcoding performance by Service Optical

Character Readers. In its 1996 Plan, the Service extended the DPS

completion date to the end of fiscal year 1998 and revised associated goals

and benchmarks.

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In fiscal year 1995, the second full year of DPS implementation, we reported

DPS had fallen behind schedule and that the Service would have to

overcome difficult obstacles to complete the automation program by the

target date, fiscal-year-end 1998.9

 The Postal Inspection Service also found

that the Service experienced initial difficulties implementing DPS and

capturing projected savings due to, among other things, low DPS volume

and carriers’ distrust of sorting accuracy.10

The Inspection Service also reported that DPS implementation was

hindered by, among other things, field units’ noncompliance with the

Service’s national DPS guidelines as well as inefficient flow of letters

through automated processing operations or letters totally bypassing

automation. In addition, carriers did not always gain the efficiencies the

Service needed to capture workhour savings. For example, many carriers

wanted and were allowed to manually sort DPS letters before delivery, in

part because of low percentages of DPS letters, compared with non-DPS and

lack of confidence in sort accuracy.

Shortly after introducing DPS, the Service also lowered its estimate of the

amount of office time each carrier would save by not manually sorting DPS

mail. Initially, office time was to decrease from the existing 4 hours per

day to 2 hours per day, and street time was to increase from 4 hours per

day to 6 hours per day. Office workhours were to decrease as the amount

of DPS mail provided to the carriers increased. Theoretically, when DPS

volume received by each delivery unit met preestablished targets, the DPS

routes were to be adjusted to add deliveries and street time. However, as

the Service gained experience with DPS implementation, it became clear

that target DPS volumes had been set too high and could not be achieved.

As a result, the Service lowered its expectation of in-office savings to 80

minutes per day, based on lower targets and standard sorting rates and

volumes.

DPS Implementation Was

Extended to 1998 and

Goals Were Revised

The Service prepared the 1996 Plan to revise automation goals and

benchmarks following initial delays in capturing letter automation savings.

The 1996 Plan extended the DPS implementation completion date to

fiscal-year-end 1998. Achieving the revised implementation benchmarks

required that automation equipment be purchased, deployed, and used

9

Postal Service: Automation Is Taking Longer and Producing Less Than Expected

(GAO/GGD-95-89BR).

10U.S. Postal Inspection Service Delivery Point Sequencing Audit Reports. Case No. 019-1128091-AX(1),

Apr. 1994; Case No. 022-1144192-AO(1), Nov. 1994; and Case No. 025-1165775-PA(1), Feb. 1996.

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effectively to achieve barcoded and DPS letter volumes. By November 1997,

the Service had deployed all authorized DPS equipment—4,784 Delivery Bar

Code Sorters and 3,726 Carrier Sequence Bar Code Sorters—at a total cost

of about $1.3 billion. Table 1 shows the letter automation goals that were

to be achieved for fiscal years 1995 through 1998, when the program is

scheduled to be fully implemented.

Table 1: Letter Automation

Implementation Goals and

Benchmarks, Fiscal Years 1995

Through 1998

Fiscal year benchmarks

Fiscal year

goal

Barcoded Letters 1995 1996 1997 1998

Percentage of total letters

to be barcoded

60% 68% 85% 88%

DPS Implementation

Zones in which DPS is to

be implemented

No

benchmark

No

benchmark

No

benchmark

6,300

Carrier routes to receive

DPS letters

72,500 120,090 149,190 154,000

Source: Postal Service.

The 1996 Plan did not include specific goals for DPS volume or percentage

of DPS letters on carrier routes. However, the Service’s analyses of

projected carrier workhour savings and its 1992 joint agreements with

NALC assumed that as DPS was implemented in delivery units at least 70 to

85 percent of letters arriving in these units for carrier routes would be

sorted to DPS. After fiscal year 1998, the Service plans to continue with

efforts to further increase barcoded and DPS volumes in order to sequence

as many letters as possible.

Some Fiscal Year 1997

Implementation Benchmarks

Were Not Achieved

By November 1997, the Service was making progress but had not met all

the automation and DPS implementation benchmarks designated in its 1996

Plan for fiscal year 1997. Reported barcoded volume and the number of

routes on DPS were slightly below the 1997 benchmarks, despite having

exceeded the goal for the number of zones where DPS was scheduled to be

implemented. Further, the Service did not obtain data from its field offices

sufficient to accurately measure total DPS volume or the percentage of DPS

letters going to city and rural routes where DPS had been implemented. In

lieu of complete DPS volume data, Service officials estimated that over half

of letters given to carriers were sorted in delivery sequence.

Percentage of total letters barcoded. Nationally, the percentage of total

letters barcoded increased from about 52 percent in 1993 to about 81

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percent in 1997, or about a 29 percentage-point increase. After achieving

its fiscal years 1995 and 1996 benchmarks at the end of fiscal year 1997,

the Service reported barcoding 106.8 billion, or 81 percent, of total letters

compared with the 85-percent benchmark for that year, as shown in table

2. This 4-percentage point shortfall represents about 4.6 billion letters.

However, Service officials said they believe they will reach the 1998

barcoding goal of 88 percent of letters as Classification Reform11

encourages more customer barcoding and the Service continues its efforts

to increase its own barcoding using Optical Character Readers and remote

barcoding.

Table 2: Letter Barcoding Benchmarks as Percentage of Total Letters and Percentage Barcoded by Service and Customers,

Fiscal Years 1995 Through 1998

Percentage of letters barcoded by source

Fiscal year

Benchmark for total

letters barcoded Customers Service

Total letters

barcoded by

customers/Service

Difference between

benchmark and

percentage barcoded

1995 60% 32% 28% 60% 0 %

1996 68 36 34 70 +2

1997 85 45 36 81 –4

1998 88 N/A N/A N/A N/A

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

Source: GAO analysis of Postal Service data.

Percentage of letters sorted to DPS. Data on actual DPS volume were not

aggregated nationally, but Service officials estimated that, on average,

carriers received over half their letters sorted to DPS. DPS savings

projections are based on achieving at least 70 to 85 percent DPS volume on

carrier routes as DPS is implemented in each delivery unit. The Service’s

requirements for data to be aggregated nationally resulted in reporting of

only a portion of DPS volume. Nationally, data were aggregated only for

city routes and letters sorted on Delivery Bar Code Sorters in the

processing plants, and excluded DPS letters sorted on Carrier Sequenced

Bar Code Sorters deployed in delivery units and all DPS letters on rural

routes. The Service also did not aggregate data on total letter volume sent

to DPS routes. In the absence of complete data to calculate actual DPS

percentage of total letters received by delivery units and routes, Service

11Classification Reform, which was approved by the Postal Rate Commission and Postal Service Board

of Governors, was implemented in July 1996 and features a market-based rate structure that provides

for low-cost mail by charging rates based on how business mailers prepare their mail for the Service to

handle. For example, the Service will give lower rates to mailers who provide full trays of barcoded

and sorted letters to a processing center or ZIP code, while charging higher rates for mailers who only

sort their letters.

Page 16 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

officials arrived at an estimate using average daily mail volumes on city

routes. As of October 1997, these routes received an estimated daily

average of 1,700 to 2,000 total letters and 1,000 DPS letters. Thus, the

officials estimated that DPS routes received, on average, about 50 to

59 percent DPS letters compared with the Service’s expectation of 70 to

85 percent when implementation is completed.

DPS percentages varied among delivery units and carriers we visited, but

the average generally appeared to be close to the Service’s estimated

average. At the time of our visits, the six delivery units reported DPS

percentages ranging from 35 to 80, with an average of 57 percent but did

not have data on DPS percentages for their individual routes. Of 139

carriers we interviewed at these units who provided estimates, 81 percent

estimated that their DPS volume was 50 percent or more of total letters. For

the 139 carriers, individual estimates ranged from a low of 5 percent to a

high of 87 percent.

DPS Zones and Carrier Routes. The Service has surpassed its goal for the

number of zones that will receive DPS letters. Better than anticipated

performance of the smaller barcode sorters in delivery units has allowed

the Service to deploy equipment to more small zones than originally

planned; for example, those with mail volume equivalent to less than 10

routes. The 1996 Plan did not establish yearly goals for the number of

zones to receive DPS letters but called for 6,300 zones to receive DPS letters

by the end of fiscal year 1998. By the end of fiscal year 1997, 7,632 zones

were reported as receiving DPS letters.

The Service reported achieving about 96 percent of its fiscal year 1997

benchmark for the number of carrier routes receiving delivery sequenced

letters. As shown in table 3, by the end of fiscal year 1997, the Service had

reported implementing DPS on 142,557 city and rural routes. Service

officials said that as implementation progresses and more addresses are

delivery sequenced, they believe they will achieve their goal of 154,000 DPS

routes in a fully operational DPS environment.

Page 17 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

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

Type of DPS Routes

Total routes

Fiscal year

Plan benchmarks for

total DPS routes City DPS Rural DPS Total city/rural DPS

Total

(DPS/non-DPS)a

1995 72,500 67,608 3,296 70,904 226,317

1996 120,000 99,487 9,088 108,575 228,671

1997 149,190 124,705 17,852 142,557 226,254

1998 154,000 N/A N/A N/A N/A

aTotal includes city routes (city street and distribution routes) and rural routes.

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

Source: Postal Service.

Budget Process Is

Used to Help Capture

Projected Workhour

Savings

The Service is capturing projected city carrier workhour savings through

its budget process. The Service’s decision analyses projected total carrier

savings of 27.2 million workhours through fiscal year 1997 and total

savings of 56.7 million workhours by the end of fiscal year 2001. Since

1994, the Service has annually reduced city carrier workhour budgets to

capture the projected savings. Despite reported budgeted reductions of

26.5 million workhours through fiscal year 1997, actual carrier workhours

reported decreased by a total of 22.5 million through fiscal year 1997.

However, during fiscal years 1996 and 1997, the Service reported that field

offices achieved actual carrier workhour reductions that exceeded their

budgeted workhour reductions by 5.8 million. The Service believes these

workhour reductions and reductions in number of city routes can be

attributed to DPS. However, they acknowledge that some workhour

reductions might have been achieved through managers’ efforts to

increase efficiency that were not related to DPS.

Investment Analyses

Project Carrier Workhour

Savings

The Service’s projections of carrier in-office workhour savings to be

achieved by DPS were established in its decision analysis reports, which

were used to justify automation equipment investments. Service officials

identified six reports that were used to justify investments totaling over

$1.7 billion in barcode sorting equipment (Delivery Bar Code Sorters and

Carrier Sequence Bar Code Sorters) needed to implement DPS. These

analyses contained assumptions about factors such as equipment

deployment and performance, growth in mail volume and delivery points,

the pace of DPS implementation, and DPS letter volume. The in-office

Page 18 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

workhour savings were to reduce overtime on routes, extend street time,

and ultimately restrain the rate of growth in routes and carrier positions.

The Board approved these investments between fiscal years 1992 and

1996, and equipment deployment proceeded in stages during that period.

Together, these analyses projected yearly benchmarks for carrier

workhour savings. About 56.7 million carrier workhours are projected to

be saved through fiscal year 2001.12 By the end of fiscal year 1997, the total

cost of this investment was $1.3 billion.

Actual Workhour

Reductions Fell Short

of Those Budgeted

and Projected

The Service has budgeted almost all the city carrier workhours that the

decision analyses projected would be saved through the end of fiscal year

1997. As shown in figure 2, by the end of fiscal year 1997, budgeted

workhour reductions totaled 26.5 million, or over 97 percent of the

projected 27.2 million workhour reductions. In fiscal year 1998, DPS is

projected to save an additional 14.9 million workhours; and the Service

has budgeted 12.6 million. To capture savings in city carrier workhours,

Headquarters staff are to adjust the 11 postal areas’ annual budgets by

reducing carrier office workhours to reflect the projected savings for the

coming year. The areas then are to incorporate the budgeted reductions

into their districts’ budgets. By reducing the city carrier workhour budgets

in this manner, Headquarters staff said they believe the projected DPS

savings will be captured (see figure 2).

12In addition to all the budgeted workhour reductions, the decision analyses projected that additional

savings from cost avoidance would accrue for the remainder of the 10-year analysis period. Total net

savings after deducting program costs were estimated to be $6.3 billion.

Page 19 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

Figure 2: Cumulative Workhour

Reductions, Fiscal Years 1994

Through 2001

(10)

0

10

20

30

40

50

60

1994 1995 1996 1997

Cumulative workhour reductions (workhours in millions)

Actual hours

Budgeted hours

Projected hours

1998 1999 2000 2001

Fiscal years

22.5

26.5

27.2

Source: GAO analysis of Postal Service data.

Actual total reductions in aggregate city and rural carrier workhours fell

short of the amount budgeted between fiscal years 1994 and 1997. As

shown in figure 2, by the end of fiscal year 1997, actual carrier workhours

had been reduced by 22.5 million, or 85 percent of the budgeted reduction

of 26.5 million workhours. Service officials said they believe the workhour

reductions achieved are due to DPS because there is no other program that

could account for them. However, the officials said that some managers

might have achieved some workhour reductions through individual

initiatives that were unrelated to DPS. For example, one delivery unit we

visited was not achieving all the workhour savings expected from DPS

because DPS volume was only 60 percent of total letters, but the manager

said the unit was able to increase its savings by implementing suggestions

Page 20 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

made by carriers for changes, not related to DPS, that would make their

jobs easier. Although Service managers praised DPS’ ability to save carrier

workhours, they said that individual delivery units may not achieve

expected savings due to certain conditions—such as volume mix and

growth, staffing levels, labor-management relations, and management

quality.

Actual Workhour

Reductions Achieved in

Recent Years Offset Early

Increases

Even though aggregate actual workhour reductions lagged behind those

projected and budgeted for fiscal years 1994 through 1997, actual

workhour reductions in each of the last 2 years of this period exceeded

those budgeted. In fiscal years 1996 and 1997, as shown in figure 3, actual

workhour reductions exceeded the budgeted amounts by 1 and 4.8 million,

respectively. These reductions helped offset an initial workhour increase

in fiscal year 1994. Service officials said this unanticipated increase in

workhours was due to a national level arbitrator finding in favor of NALC in

a case regarding the Service’s establishment of city carrier routes that

required more than 8 hours to complete, which the arbitrator determined

violated the parties’ labor agreement. This decision caused the Service to

hire about 18,000 career city carriers between fiscal years 1993 and 1994.

As a result, as shown in figure 3, not only were there no workhour

reductions in fiscal year 1994, but workhours increased by 5.6 million.

Furthermore, Service officials said that growth in volume and delivery

points during the period exceeded their expectations, which also affected

the field units’ ability to achieve projected savings. Even when allowing for

this growth, the officials said that they believe the Service had avoided

more costs than was evidenced by their workhour reductions alone. For

example, the eight-tenths of 1 percent annual growth in number of delivery

points on city routes, without DPS, would require adding 1,300 city routes

per year. These officials said that DPS had allowed them to avoid much of

the cost of this growth and also reduce the number of city routes that were

needed. Factoring in the additional workload resulting from this growth, if

DPS had not been implemented, the Service calculated that it would have

used 30.4 million more city carrier workhours between fiscal years 1993

and 1997 than it actually used.

As a result of this cost avoidance, Service officials reported that city

carrier routes increased by 267 in fiscal year 1995 and decreased in fiscal

years 1996 and 1997 by 858 and 2,561, respectively, which resulted in an

overall decrease of 1.8 percent since fiscal year 1994. These officials

estimated that the number of city routes will continue to decline through

Page 21 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

fiscal year 2000. In contrast, the number of rural routes increased by 5,938,

or 11.5 percent, during the same period. The officials said that one reason

for this growth is that delivery points on rural routes have grown by an

average of 3.84 percent annually since fiscal year 1994. In addition, the

cost per delivery is lower for rural routes than for city routes, so when

new routes become necessary due to growth, delivery managers tend to

establish rural routes where feasible and cost effective.

In commenting on a draft of this report, the President of NAPS told us that

he believed the Service establishes rural routes over city routes, not

because rural routes were less costly, but because rural carriers do not

present as many labor relations problems as do city carriers. He also

believed that rural routes are not really less costly to the Service than city

routes because the rural carrier compensation system is too liberal. Under

this system, rural carriers are salaried employees who are paid for a full

8-hour workday or 40-hour workweek with some overtime built into their

salaries. However, this system allows rural carriers to go home early and

receive a full day’s pay if they complete their work in less than 8 hours.

Page 22 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

Figure 3: Annual Changes in Budgeted

and Actual Carrier Workhours

151050

-5-10

15 10 5 0 5 10

Increase in workhours

(hours in millions)

Reduction in workhours

(hours in millions)

Actual workhour change from the previous year

Budgeted workhour change from the previous year

1994

1995

1996

1997

1998

Fiscal years

a

1.8

5.6

6.5

4.1

10.3

11.3

7.9

12.7

12.6

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

22.5 million.

aActual workhours for fiscal year 1998 were not available.

Source: GAO analysis of Postal Service data.

Page 23 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

Rural routes reportedly contributed an estimated 4.5 million workhours in

direct DPS savings valued at about $100 million. In contrast to city routes,

on which carriers are paid by the hour for 8-hour routes plus any

authorized overtime, rural carriers bid on their routes and are paid salaries

that represent the value of the routes established through annual

evaluations of mail volume and time required to manually sort mail and

make deliveries. As a result, DPS savings from rural routes are to be

captured annually by reducing the value of the routes and carriers’ pay

commensurate with the volume of DPS letters that the carriers do not have

to sort. Because the savings were already extracted from rural carriers’

salaries, there was no need to manage and track rural carriers’ hourly

savings. As a result, the Service allows rural carriers to manually sort DPS

letters if they wish. However, city carriers must capture savings each day

in hourly increments by not manually sorting DPS letters. As a result, the

Service does not allow city carriers to sort DPS letters.

The Service Is

Addressing Identified

Operational Issues

The Service has been addressing remaining issues it believes have affected

its efforts to achieve its fiscal year 1998 DPS goals and benchmarks and

maximize carrier workhour savings resulting from DPS. These issues

include both operational and labor-management relations issues. The

Service has made considerable progress in its efforts to address

operational issues, although it has been less successful with those

concerning labor-management relations. Table 4 presents an overview of

the operational issues and the Service’s efforts to address them.

Page 24 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

Table 4: Operational Issues Affecting

DPS Goals and Service Efforts to

Address Them

Operational issues Service efforts

Less than expected barcoded letter

volume

—Implement better rate incentives to

encourage business customers to increase

barcoding and improve address accuracy

and quality

—Improve management of mail flow

through automated barcoding operations

Low DPS letter volume —Improve management of mail flow

through automated sorting operations

—Implement method to sequence letters

addressed to units within multioccupancy

buildings

Insufficient delivery management and

carrier street efficiency

—Improve timeliness of route adjustments

—Increase supervision and monitoring of

city carrier street operations

—Test alternative delivery methods and

new carrier performance standards

Source: Postal Service.

The operational issues shown in table 4 were identified by the Service as

impeding its efforts to achieve DPS goals and benchmarks and maximize

DPS savings. The Service has efforts under way to increase barcoded and

DPS letter volumes by encouraging business customers to apply barcodes

and improve address quality through rate incentives. The Service has also

begun efforts to improve the management of mail flow through its

automated barcoding operations by providing more training to employees

as well as enhancing the capabilities of its optical character readers.

Further, to improve management of mail flow through its automated

sorting operations, the Service is attempting to determine causes of

problems and then resolve them. Also, DPS implementation teams have

been designated to, among other things, serve as links between mail

processing and delivery unit operations regarding DPS issues. Finally, the

Service has developed, and is in the process of implementing, a method to

sort in delivery sequence letters that are addressed to units in

multioccupancy buildings, which account for about 19 percent of total

deliveries.

Regarding city carriers’ declining street efficiency, the Service is focusing

efforts on improving delivery management to reverse this trend and

enhancing its ability to adjust routes to capture DPS savings. To increase

Page 25 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

workhour savings, additional funds have been provided by the Service so

that route inspections can be conducted and carriers’ routes can then be

adjusted to capture DPS savings. The use of contractors to perform route

inspections has also been authorized by the Service. In addition, it is

working to improve supervision of city carriers’ street operations and

testing both alternative delivery methods and new city carrier

performance standards. For a more detailed discussion of the operational

issues and the Service’s actions to address them, see appendix II.

Labor-Management

Relations Issues Have

Been Problematic

Although the Service has made progress toward resolving its operational

issues, it has been less successful in resolving those involving

labor-management relations. Labor-management relations issues also have

been affecting the Service’s efforts to reach its fiscal year 1998 goals and

benchmarks. These issues also affect the Service’s ability to maximize DPS

savings. Labor-management relations issues include disagreements with

NALC over DPS implementation and the need to gain the support of city

carriers who are dissatisfied with DPS work methods. Table 5 presents an

overview of the labor-management relations issues we identified and the

Service’s efforts to address them.

Table 5: Labor-Management Relations

Issues Affecting DPS Goals and

Service Efforts to Address Them

Labor-management relations issues Service efforts

Poor working relationship with NALC over

DPS implementation and other concerns

—The Service and NALC, in October 1997,

jointly signed an agreement to test a

revised dispute resolution process aimed

at narrowing dispute areas and resolving

disagreements

Insufficient city carrier support for DPS work

methods

—The Service and NALC agreed to

conduct a joint study to determine the

most efficient method for handling

unaddressed flats in response to

arbitrator’s ruling

Source: Postal Service, NALC, and city carriers.

The Service has had problematic relations with three of the four major

labor unions that represent postal employees, including NALC, which

represents city carriers, over a variety of issues for a long period.13 DPS

implementation has been one of the contentious issues between the

Service and NALC and its city carriers. The DPS conflicts revolved around

13GAO/GGD-98-1.

Page 26 GAO/GGD-98-73 Automated Letter Sequencing
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three areas: (1) the work methods that should be used by city carriers to

implement DPS; (2) the manner in which the Service implemented DPS,

which NALC viewed as inconsistent with the agreements it had reached

with the Service; and (3) DPS’ effect on city carrier street efficiency. Many

city letter carriers said that they believe DPS work methods adversely

affected their efficiency and, in some cases, service to their customers.

City carriers were particularly concerned about not being able to manually

sort DPS letters to combine them with the non-DPS bundle or to identify DPS

sort errors and other undeliverable letters before going to the street. Many

of the city carriers’ disagreements with DPS resulted in grievances, filed at

the national and local levels. Although most grievances were resolved

through settlement, three went to national level arbitration.

In 1996, a national level arbitrator ruled on one of the cases. The arbitrator

found that the Service had not violated the rules relating to transitional

employees from prior agreements. During 1997, another national level

arbitrator ruled on the two remaining cases and determined that the

Service had violated either provisions of existing labor agreements or the

1992 joint agreements. The arbitrator instructed the Service and NALC to

jointly determine alternative methods to resolve the problems. In one case,

the parties agreed to conduct a joint study of the issues involved and

complete the study by April 1998. In the second case, the parties have met

to discuss the issue; but as of March 1998, they had not yet reached

agreement on how to proceed to resolve the issue. In addition, to improve

their overall working relationship, on October 20, 1997, the Service and

NALC signed an agreement to test a revised dispute resolution process

aimed at narrowing areas of dispute and effectively and constructively

resolving their disagreements.

Regardless of how one views the Service’s and NALC’s positions, the

disagreements between them have resulted in adverse consequences.

These consequences include delays in capturing early DPS savings from

route adjustments, dissatisfaction among many city carriers, and

additional contentions between the Service and NALC. In part, due to the

arbitrator’s decisions, the Service and NALC have begun to jointly work on

some of the areas of disagreement. Unlike the situation with NALC and city

carriers, the Service has not had a contentious relationship with its rural

letter carriers or their union, the Rural Carriers. This is largely due to the

agreement the Service reached with the Rural Carriers regarding a new

manual sorting standard for delivery sequenced letters. For a more

detailed discussion of labor-management relations issues and the Service’s

actions to address them, see appendix III.

Page 27 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

Comments From the

Postal Service, Labor

Unions, and

Management

Associations and Our

Evaluation

We provided a draft of our report to eight organizations for their review

and comment. The eight organizations were

• the Postal Service;

• the four labor unions, including APWU, NALC, National Postal Mail Handlers

Union, and Rural Carriers; and

• the three management associations, including, NAPS, National Association

of Postmasters of the United States, and National League of Postmasters

of the United States.

We received written comments from the Service and NALC. We obtained

oral comments from NAPS and APWU. The remaining organizations said they

did not wish to comment on the draft report. Service officials also

provided written and oral technical comments to clarify and update some

information in the draft report.

Overall, the Service and NALC expressed diverse views regarding the effects

of DPS and its related labor-management relations issues. The Service said

that our report gave an accurate summary of the letter mail automation

programs. The Service reiterated the extent of DPS implementation on

carrier routes and workhour savings, which it noted was more successful

than anticipated. The Service also acknowledged that it and NALC have had

numerous disagreements regarding DPS implementation, but that the

disputes over DPS have either been resolved or are in the process of being

resolved, and that the parties are engaged in a number of cooperative

ventures that they expect will have a beneficial effect on

labor-management relationships. We have reprinted the Service’s

comments in appendix IV.

In its comments, NALC reaffirmed its support for DPS and noted that

automation would enhance the Service’s long-term viability and

employment of the letter carrier craft. NALC criticized the methodology we

used to gather information, including our reliance on (1) data provided by

the Service without verifying its accuracy, (2) interviews with and

observations of a relatively small number of letter carriers, and (3) Service

managers’ opinions about the success of DPS.

While we recognize and take special care to adhere to the limitations

associated with our scope and methodology, we do not agree with NALC’s

critical characterization of the report. The report clearly laid out our

objectives, scope, and methodology, including the limitations, so as to

fully inform the reader of the basis and context surrounding the

Page 28 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

information in the report. Due to limited resources and the technical

difficulties inherent in verifying the Service’s data, which are aggregated

from its vast field network, we disclosed in the report that we used the

Service’s data on carrier workhours without verifying it. We also clearly

disclosed that we interviewed a relatively small number of city carriers in

three postal districts to obtain their opinions about DPS issues. We

discussed in the report, several types of data that the Service did not have

or that were not sufficient to produce accurate measures, such as DPS sort

accuracy and percentage of DPS letters on carrier routes. To supplement

the available data and to discern the Service’s position on DPS

implementation history and labor relations issues, we obtained the views

and opinions of Service delivery managers. Further, to provide balance, we

obtained views and opinions about these same issues from national

leaders of NALC and included both parties’ opinions in the report.

NALC also commented on several specific issues discussed in the report.

We considered these comments and made changes to the report where

appropriate. We also have included a reprint of NALC’s comments and our

additional comments on specific issues, where appropriate, as appendix V.

The oral comments we received from APWU and NAPS primarily sought

clarification of points based on their positions and knowledge of historical

events regarding letter mail automation and carrier delivery operations.

The Assistant Director of APWU’s Clerk Division told us that postal

clerks—which APWU represents—have made various contributions to

assist the Service’s letter mail automation efforts, which the report should

mention. He pointed out that APWU clerks have always cooperated with the

Service to implement automation and entered into agreements with the

Service that have facilitated the Service’s capture of savings. We agree that

the postal clerks have made contributions in reducing workhours in the

Service’s processing plants as automation was implemented.

The President of NAPS gave us his views about the Service’s difficulties in

managing city carrier delivery operations and the need for city carriers to

support DPS. He said that the Service’s curtailment of route inspections

between about 1975 and 1990 marked the beginning of the Service’s

difficulties in managing city delivery operations. Without route

inspections, normal mail volume growth and new addresses resulted in

routes that were out of adjustment. These routes had workloads that could

not be completed within 8 hours, which led to significant amounts of

overtime each day to deliver mail. City carriers serving these routes were

required to negotiate daily with their supervisors for overtime. Overall, he

Page 29 GAO/GGD-98-73 Automated Letter Sequencing
B-276743 

said that this condition triggered the conflict between city carriers and

their supervisors that continues today.

The President of NAPS said that some incentives are needed to encourage

carriers to support DPS. For example, he suggested that if routes could be

accurately evaluated each day, the daily overtime negotiations would be

eliminated and carriers could be allowed to go home after completing their

duties, even if they finish in less than 8 hours. The President said that he

believed this would be possible when DPS is fully implemented, including

the automated sorting of flats. That is, every morning, delivery unit

supervisors could obtain exact mail counts from the automation

equipment and use these data to evaluate workload requirements on each

route. This would allow the supervisors to determine exactly how much

time individual carriers would need to sort and deliver their mail on that

day. The President believes these daily evaluations could replace the

periodic city route inspections now conducted and would be superior to

the annual evaluations now conducted on rural routes to determine rural

carriers’ salaries. However, he said that if incentives are unsuccessful and

carriers do not cooperate, supervisors cannot be expected to watch all the

carriers while they deliver mail to ensure they are working efficiently. For

this reason, the President said that he would support the use of a global

satellite system, which is now being tested, to monitor carriers while they

deliver mail. He also provided other comments about the information

presented in the draft report, which have been incorporated into the

report where appropriate.

We are providing copies of this report to the Subcommittee’s Ranking

Minority Member; the Chairman and Ranking Minority Member of the

Senate Committee on Governmental Affairs, the Postal Service, APWU,

NALC, National Postal Mail Handlers Union, Rural Carriers, NAPS, National

Association of Postmasters of the United States, and National League of

Postmasters of the United States, and other interested parties. We will also

make copies available to others on request.

Page 30 GAO/GGD-98-73 Automated Letter Sequencing
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Major contributors to the report are listed in appendix VI. If you have any

questions, please call me on (202) 512-8387.

Sincerely yours,

Bernard L. Ungar

Director, Government Business

 Operations Issues

Page 31 GAO/GGD-98-73 Automated Letter Sequencing
Contents

Letter 1

Appendix I 

Objectives, Scope,

and Methodology

34

Appendix II 

Operational Issues

Affecting

Achievement of Fiscal

Year 1998 DPS Goals

38

Appendix III 

Labor-Management

Relations Issues

Affecting

Achievement of Fiscal

Year 1998 DPS Goals

49

Appendix IV 

Comments From the

Postal Service

58

Appendix V 

Comments From the

National Association

of Letter Carriers

59

GAO Comments 64

Appendix VI 

Major Contributors to

This Report

66

General Government Division 66

Denver Field Office 66

Page 32 GAO/GGD-98-73 Automated Letter Sequencing
Contents

Tables Table 1: Letter Automation Implementation Goals and

Benchmarks, Fiscal Years 1995 Through 1998

15

Table 2: Letter Barcoding Benchmarks as Percentage of Total

Letters and Percentage Barcoded by Service and Customers,

Fiscal Years 1995 Through 1998

16

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

1998

18

Table 4: Operational Issues Affecting DPS Goals and Service

Efforts to Address Them

25

Table 5: Labor-Management Relations Issues Affecting DPS Goals

and Service Efforts to Address Them

26

Figures Figure 1: Implementation of Postal Service’s Letter Automation

Program

12

Figure 2: Cumulative Workhour Reductions, Fiscal Years 1994

Through 2001

20

Figure 3: Annual Changes in Budgeted and Actual Carrier

Workhours

23

Abbreviations

APWU American Postal Workers Union

CFS Service’s Computerized Forwarding System

DPS Delivery Point Sequence

NALC National Association of Letter Carriers

NAPS National Association of Postal Supervisors

NAPUS National Association of Postmasters of the United States

ZIP Zone Improvement Plan

Page 33 GAO/GGD-98-73 Automated Letter Sequencing
Appendix I 

Objectives, Scope, and Methodology

In a June 9, 1997, letter, the Chairman of the Subcommittee on the Postal

Service, House Committee on Government Reform and Oversight, asked

us to provide information on the status of the U.S. Postal Service’s efforts

to implement Delivery Point Sequencing (DPS). As agreed with the

Chairman’s office, our objectives were to (1) determine the U.S. Postal

Service goals for DPS implementation, its projected letter carrier workhour

savings, and the extent to which the Service has achieved these; and

(2) identify any remaining issues that the Service and others believe must

be addressed for the Service to achieve its 1998 DPS goals and the actions,

if any, that the Service has taken to address these issues.

To determine the Service’s goals for DPS implementation, we reviewed the

Service’s 1990, 1992, and 1996 Corporate Automation Plans, which among

other things described the DPS related activities, annual benchmarks, goals,

and associated timeframes for completing the letter mail automation

program. We reviewed the Decision Analysis Reports, which justified the

DPS-related automated equipment investment, to identify the (1) assumed

DPS letter volume that carrier routes were to receive and (2) projected

carrier workhour savings that were to be achieved from DPS

implementation. To determine the progress the Service has made toward

achieving its goals, we obtained the Service’s fiscal years 1993 through

1997 national data on actual carrier workhour savings; barcoded and DPS

letter volumes; productivity; and the number of delivery zones, delivery

units, and carrier routes that receive DPS letters. We compared these actual

data with the appropriate DPS benchmarks, goals, assumptions, and

projected workhour savings in the 1996 Corporate Automation Plan

(Plan). We discussed with responsible Postal Service headquarters

officials these benchmarks, goals, assumptions, and projected carrier

workhour savings to assist us in determining the progress the Service has

made toward achieving them. We also discussed with these officials how

the Service (1) used its budget process to capture carrier workhours

savings and (2) determine the cost avoidance associated with DPS

implementation. We did not verify the operational and budget data that the

Service provided.

To identify any remaining issues that may affect the Service’s ability to

achieve its 1998 DPS goals, we considered the findings from our prior audit

reports and those of the Postal Inspection Service on letter mail

automation. We analyzed the ongoing and planned DPS implementation

tasks described in the 1996 Plan, which the Service plans to complete to

achieve its 1998 DPS goals. We discussed these findings and tasks with

responsible Postal Service headquarters officials and asked them to

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Appendix I 

Objectives, Scope, and Methodology

identify the key issues that remain, which the Service must address. We

also asked the officials to identify any actions the Service has taken to

address any remaining issues and the current status of these actions.

Our preliminary work indicated that the Service was experiencing

labor-management relations problems with its city carriers over DPS

implementation. On the basis of that work and our knowledge of

persistent labor-management relation problems in the Service from our

past work,14 we contacted the Service’s four major labor unions and three

management associations to identify whether these organizations believed

that there were any labor-management relations issues that the Service

must address to achieve its 1998 DPS goals. We interviewed national

representatives of these organizations located in the Washington, D.C.

metropolitan area to obtain their views on the impact DPS implementation

has had on postal operations and the working conditions of the postal

employees they represent. The four labor unions contacted were (1) the

American Postal Workers Union (APWU), (2) the National Association of

Letter Carriers (NALC), (3) the National Postal Mail Handlers Union (Mail

Handlers), and (4) the National Rural Letter Carriers’ Association (Rural

Carriers). The three management associations contacted were (1) the

National Association of Postal Supervisors (NAPS), (2) the National

Association of Postmasters of the United States (NAPUS), and (3) the

National League of Postmasters of the United States (the League). We also

discussed the identified labor-management relations issues with

responsible Postal Service headquarters officials. To gain an

understanding of labor-management relations issues within the Service,

we reviewed relevant documents, including our prior reports, Service and

NALC 1992 joint agreements, national arbitration cases regarding city

carrier grievances associated with DPS, and city carrier DPS training

materials.

To observe any issues that the Service and its unions and management

associations identified, we selected a judgmental sample of 3 districts and

6 delivery units located within 3 of the 11 Postal Areas, which included

Capital Metro Operations (Capital Area).15 We selected the Northern

Virginia District in the Capital Area and the Suncoast District in the

Southeast Area because these two districts had fully implemented DPS on

14GAO/GGD-98-1.

15There are 10 Postal Areas, each led by a vice president in addition to Capital Metro Operations led by

a manager of operations who reports to postal headquarters as do the 10 Postal Area vice presidents.

For purposes of management responsibility and data development and tracking, Capital Metro

Operations is equivalent to a postal area.

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Objectives, Scope, and Methodology

all city routes, which meant that carriers on these routes were receiving

and taking delivery sequenced letters directly to the street. We also

selected the Denver District in the Western Area because it gave us

additional geographic dispersion and was located in close proximity to our

staff in Denver. Within each district, we selected two units that reported

both the highest office efficiency16 and declining street efficiency,17

compared to the same period last year, and were located within 2 hours

driving distance of the district office. We used these efficiency measures

as selection criteria because according to the Service (1) office efficiency

was expected to increase with DPS implementation and (2) street efficiency

had declined on both DPS and non-DPS routes, and the Service reported that

this decline had offset some DPS savings. We limited the number of

districts and delivery units selected to three and six, respectively, because

gathering DPS related information from these offices was a time-consuming

effort that involved examining records and interviewing managers, carrier

supervisors, and carriers at several geographically dispersed locations.

We interviewed responsible Service officials from the three district offices

to obtain their views on DPS implementation within the district. We

discussed the DPS implementation process, its effect on mail processing

and delivery operations, carriers’ concerns with DPS work methods, and

ongoing efforts to identify and resolve DPS related problems. In addition,

we interviewed responsible Service officials in the three area offices to

obtain an area-wide perspective on DPS implementation, capturing DPS

savings through the budget process and route adjustments, and carriers’

concerns with DPS work methods.

At each of the six delivery units we visited, we interviewed the managers,

carrier supervisors, and carriers to obtain their views on DPS

implementation and related concerns about DPS work methods. Because

carriers generally are to spend most of their workday on the street

delivering mail, the best time to interview them is in the morning while

they are in the office. To maximize the number of carriers who could be

interviewed by our available staff, we arrived at each delivery unit about

the time the carriers reported for work and began interviewing them. We

judgmentally selected the carriers that were interviewed on the basis of

their availability at the time of our visit. In order not to disrupt delivery

operations, we interviewed carriers individually while they prepared their

mail for delivery. Each interview required 5 to 10 minutes to complete. We

16Office efficiency is the number of possible deliveries for a route divided by the office workhours

required to manually sort the mail prior to delivery.

17Street efficiency is the number of possible deliveries for a route divided by the street workhours

required to deliver the mail.

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Objectives, Scope, and Methodology

continued interviewing the carriers until they departed the office to deliver

the mail. In total, we interviewed 111 city and 31 rural carriers at the 6

delivery units. We then met with unit management to discuss the progress

and problems associated with DPS implementation within the unit. We

reviewed each unit’s operational data, which included detailed information

on the carrier workforce, mail volume, possible deliveries, and route

adjustments. At two delivery units, one of our staff members accompanied

a carrier on the route to observe DPS work methods.

The selected units and carriers are not statistically representative;

therefore, we cannot generalize from our sample to the universe of all

carriers. We do, however, use the results of these interviews to present

illustrative examples of DPS-related issues from the carriers’ points of view.

While we most likely did not identify every possible DPS related issue that

could exist within the universe of delivery units, according to district

officials, the units we visited were not atypical of others within the

districts.

In addition, we visited two mail processing plants in Denver, CO, and

Tampa, FL, and a remote barcoding site in Tampa. We toured each facility

and observed its DPS-related operations. We met with responsible Service

officials at each facility and discussed various DPS-related issues, including

DPS equipment deployment, operation, and enhancement; mail flows;

barcoding; and problem identification and resolution.

We did our work from June 1997 through February 1998 in accordance

with generally accepted government auditing standards. We requested

comments on a draft of this report from the Postmaster General; the

presidents of the four labor unions (APWU, NALC, Mail Handlers, and Rural

Carriers); and the three management associations (NAPS, NAPUS, and the

League). We received written comments from the Service and NALC, which

are reprinted in appendixes IV and V, and obtained oral comments from

APWU and NAPS. The comments of these four organizations are discussed in

appropriate sections throughout the report and at the end of the report.

The remaining organizations did not provide comments.

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Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

The Service was addressing operational issues that it believed impeded its

efforts to achieve DPS goals and benchmarks and maximize DPS savings.

These issues include (1) less than expected barcoded letter volume,

(2) low DPS letter volume, and (3) declining street efficiency. These issues

and the Postal Service’s efforts to address them are discussed as follows.

Efforts to Increase

Barcoded Letter Volume

The Service is attempting to achieve a 7-percentage point increase in

barcoded letters to meet its 1998 DPS implementation goal of 88 percent.

Service officials said they believe they will achieve this goal through better

rate incentives for customer barcoding and resolving mail flow and

readability problems. In anticipation of implementing better rates for

customer barcoding, the Service revised its barcoding strategy from about

40 percent of barcodes to be supplied by customers to 50 percent, by

fiscal-year-end 1998. In July 1996, the Service implemented better rates for

customer barcoded letters that meet new requirements for barcode quality

and address accuracy, which is critical to achieving accurate 11-digit

barcoding. The officials believe these better rates were a major factor in

customer barcoding increasing over 9-percentage points during fiscal year

1997, compared with increases of about 3.5-percentage points during each

of the 2 previous years.

The Service is also trying to increase the number of letters it barcodes in

its mail processing plants. Since fiscal year 1993, Service data show it has

increased its barcoding by only 11-percentage points. Service managers

said that mail processing plants were neither barcoding all the letters that

could be barcoded nor upgrading all letters that have 5- or 9-digit barcodes

to 11-digit barcodes. The managers said that many letters were not being

barcoded or upgraded because mail processing personnel did not route

these letters to the appropriate optical character readers or remote

barcoding systems for processing. According to Service officials, local

mail processing managers have taken various actions to correct these mail

flow problems. These actions include (1) enhancing mail processing

employees’ knowledge of the types and quality of letters that can be

barcoded through classroom and on-the-job training, (2) obtaining

feedback from delivery unit managers to identify batches of letters that

bypassed automation and developing ways to prevent similar batches of

letters from bypassing automation in the future, and (3) working with local

business mailers to increase their volume of automation-compatible

letters.

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Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

Poor address quality hampers the Service’s barcoding success; and, as

customers succeed in barcoding more letters, this problem will be

exacerbated because the remaining letters fed to the Service’s optical

character readers will be of lower quality and more difficult to

successfully barcode. The remaining letters may have addresses that the

Service’s optical character readers cannot read due to factors such as poor

print quality, style of type, or color or composition of the paper used to

make the envelope. To increase barcoding, the Service recently completed

the deployment of remote barcoding systems and optical character reader

enhancements. One component of this system is a remote computer

reader that uses advanced computer technology to read images of problem

addresses and determine the appropriate barcode to be applied to the

letter. Some of the optical character reader enhancements include

updating the address recognition modules to read additional characters

and dot-matrix print and installing wide-area barcode readers to locate

and read a barcode virtually anywhere on an envelope. As these systems

and enhancements become fully operational, the Service expects that its

barcoding capability will improve.

Efforts to Increase DPS

Letter Volume

The Service is also trying to achieve 70 to 85 percent of carriers’ letters

delivery sequenced, the percentage assumed in its decision analyses.

However, Service officials told us that the Service must overcome various

mail flow problems that have impeded increasing the number of delivery

sequenced letters. They said that these mail flow problems include not

capturing all letters that could have been delivery sequenced, underused

mail processing resources, automated equipment not yet deployed, and

barcode readability and accuracy problems.

In a 1996 report, the Inspection Service identified that mail processing

plants were not capturing all of the letters that could be delivery

sequenced because mail processing employees were not following

standard operating procedures and proper mail flows. For example,

employees misdirected letters to operations that bypassed automated

equipment; or they did not run letters that were initially rejected a second

time through automated equipment, which may have resulted in these

letters not being delivery sequenced. The Inspection Service attributed

these problems to supervisors not properly monitoring employee work

habits and inadequate employee training. Also, the Inspection Service

identified a lack of coordination between mail processing plants and

delivery units to resolve DPS-related mail processing problems.

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Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

Service officials at headquarters and the field locations we visited

identified other mail flow problems. The officials said that mail processing

resources, such as automated equipment, were not always fully utilized. At

the time of our review, some mail processing plants had not yet received

scheduled deployments of remote barcode systems and optical character

reader enhancements, which resulted in some plants not generating

sufficient numbers of delivery sequenced letters. However, as of

November 1997, all remote barcoding systems and optical character reader

enhancements were deployed, which should help alleviate this problem.

While deploying automated systems, equipment, and enhancements, the

Service has reduced its number of mechanized letter sorting machines

from about 850 in 1994 to 100 in the first quarter of fiscal year 1998. A

Service official said that removing these machines increases the letter

volume available to be processed on automated equipment, which leads to

increased DPS volume. Also, the Service reported that plants were

experiencing barcode readability or accuracy problems caused by factors

such as envelope design, print quality, incorrect barcodes, or mechanical

problems, which caused barcode sorters to reject more letters than

expected.

At the locations we visited, Service officials have taken steps to determine

the cause of these problems. For example, one district identified 100

DPS-candidate letters and then tracked the processing of these letters,

which district officials believed should have arrived at delivery units in

delivery sequence. Of the 100 letters, the officials found that only 72

arrived at the units in delivery sequence. The officials were attempting to

identify the reason(s) why the 28 other letters did not arrive at the units in

delivery sequence so they could take corrective action. At another district,

local officials found that delivery units were not receiving about 5,000 to

10,000 letters early enough each morning for these letters to be delivery

sequenced on the units’ carrier sequence barcode sorters. The letters that

were not delivery sequenced had to be manually sorted by carriers, which

the Service said increased their office time and adversely affected DPS

savings.

The Service has taken actions to address these mail flow problems. Some

of the more significant actions include the establishment of DPS

implementation teams to, among other things, serve as links between mail

processing and delivery unit operations regarding DPS issues. District

managers have scheduled regular meetings between mail processing and

delivery unit managers to improve their communication and coordination,

resolve problems, and increase DPS volumes. For example, in one district,

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Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

teams of mail processing and delivery unit managers have discussed

operating goals, identified initiatives to achieve these goals, set joint

targets for DPS percentages, and raised their percentages over the previous

year. Service headquarters officials have developed a training course to

familiarize mail processing employees with the new mail flows that remote

barcoding systems create.

In addition, in 1994, about 23 million delivery points (i.e., apartments,

offices, or suites) within multioccupancy buildings, which account for

about 19 percent of the total deliveries, could not be delivery sequenced

using the current barcoding rules. Since the 11-digit barcode enables the

delivery sequencing of letters to the street address of multioccupancy

buildings, letters with secondary address information such as apartment,

office, or suite number require additional carrier handling to manually sort

these letters to the appropriate units within the same building. As a result,

DPS has not been implemented on many routes that have high densities of

multioccupancy buildings in urban areas such as New York City and

Chicago or other areas that have similar style addresses. For example, at a

delivery unit we visited, DPS was not implemented on some of the unit’s

carrier routes due to the large number of apartment buildings and trailer

parks that these routes served. When it initially implemented DPS, the

Service deferred the delivery sequencing of letters addressed to units

within multioccupancy buildings due to the complexity involved in

interpreting secondary address information and because it believed that

implementing DPS for these units would not be cost effective.

The Service now plans to revise its barcoding rules that business mailers

must follow to receive the automation discount. The Service estimates that

this change will enable the delivery sequencing of up to 95 percent of the

apartments, offices, and suites in multioccupancy buildings in 1998 to

1999. To make the change to enable multioccupancy delivery sequencing,

both the Service and mailers will, among other things, need to modify the

software that they use to barcode letters. Also, mailers are to be required

to update their address files with complete and accurate secondary

address information. Although the Service has initiated efforts to

implement the revised rules, actual implementation of these rules will

depend upon whether mailers accept these rules and potential technical

problems associated with these revisions can be resolved.

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Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

Efforts to Improve Route

Adjustments and

Otherwise Improve Street

Efficiency

The Service justified its investment in DPS on the basis that the automated

sorting of letters in delivery sequence would reduce the time carriers

would have to spend in the office manually sorting letters and increase the

proportion of their time on the street actually delivering the mail. This

increase in street time was to expand the size of carrier routes and

ultimately reduce the number of routes that would be needed. The Service

recognized that DPS would likely increase the time carriers needed to

perform some operations on the street, which were formerly done in the

office. However, the Service believed this increase would be minimal and

that DPS would not otherwise have a significant adverse effect on carrier

street efficiency—the number of deliveries carriers make per hour—and

DPS savings.

Decline in City Carrier Street

Efficiency Affects DPS Savings

The Service has achieved in-office carrier workhour savings with DPS

implementation. However, part of these in-office savings were offset by a

nationwide decline in city carrier street efficiency. On DPS routes, the

Service believes that the decline in street efficiency was (1) greater than it

had anticipated from DPS work methods and (2) at least partially due to

route adjustments that were less timely and accurate than expected. While

the Service believes that other factors, not related to DPS, have primarily

caused declining city carrier street efficiency, NALC officials believe that

much of this decline is caused by DPS work methods. The Service has

initiated efforts to improve the timeliness and accuracy of route

adjustments, and address what it believes to be the causes of declining

street efficiency.

In some cases, additional street time was needed to handle DPS mail during

delivery. Service Headquarters officials said that DPS should have only a

minor impact on carriers street time. According to field officials, carriers

needed an additional 10 to 15 minutes to deliver DPS mail. The additional

street time was needed because of the handling and preparing of DPS

letters on the street, tasks that carriers formerly had done in the office.

For example, prior to DPS, carriers sorted letters addressed to units within

certain multioccupancy buildings in the office. But under DPS, they

typically sort these letters while they are on the street. Therefore, some

additional time was both accounted for in its projected DPS savings and

factored into the carrier route adjustments made to implement DPS.

Despite the additional time that was factored in, the Service reported that

while all 11 postal areas’ in-office efficiencies increased during fiscal year

1997, their street efficiencies all decreased. This decline occurred on both

DPS and non-DPS routes. In June 1997, the Service estimated that nationally

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Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

for every hour gained in office efficiency due to DPS, about 20 minutes

were lost in street efficiency. The Service is concerned about the effects

this unexpected decline in street efficiency is having on DPS savings. For

example, the Service said that in-office savings are eroded to the extent

that carrier street time is not efficiently used delivering mail. Further, the

decrease in street efficiency reduces the opportunity to expand the size of

DPS routes to offset the growth in deliveries as originally intended.

Timely and Accurate Route

Adjustments Not Always Made

According to the Service, timely and accurate route adjustments have not

always been made to city carrier routes to capture the in-office time DPS

saves by increasing the number of deliveries. For example, one district

manager told us that the lack of timely and accurate route adjustments has

been one of the most significant problems affecting the district’s ability to

capture DPS savings. The Service attributes this problem to the lack of

resources or expertise to perform route inspections, data problems, or

lack of management initiative at the local level.

According to Service guidance, a route adjustment generally involves

changing a carrier’s route workload through proportionate increases or

decreases in office and street time to produce an efficient route that has a

workday as close to 8 hours as possible. The guidance allows route

adjustments to be made with and without route inspections. Route

adjustments based on a route inspection normally involve a manager

observing the carrier’s in-office and street work for 1 day or more,

counting and recording the mail that the carrier handles, and recording the

time the carrier uses to perform each function. Service officials said that

route inspections are difficult to schedule and perform because these

inspections require the skilled personnel who usually must be diverted

from their normal duties and take about 30 hours to perform per route.

Route adjustments made without route inspections are referred to as

minor route adjustments. Service guidance allows managers to make route

adjustments as often as necessary to, among other things, provide

assistance or add deliveries. Managers make minor route adjustments

using in-office and street-time data, numbers of possible deliveries, and the

latest route inspection data.

The lack of route adjustments prior to DPS implementation was considered

a problem. Service officials said that from about 1975 through 1990, the

Service performed few route inspections due largely to the unavailability

of staff resources. In commenting on our draft report, the President of

NAPS did not agree that the lack of resources was the reason why few route

inspections were done. Rather, he believed that the Service curtailed route

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Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

inspections for two reasons. First, multiple position letter sorting

machines were being heavily used at that time to process letters and relied

on the clerks who operated these machines to memorize carrier-route

schemes, which contained a significant amount of address information.

Route inspections led to route adjustments and scheme changes. These

changes required clerks to relearn portions of the schemes, which were

both complicated and expensive. Second, scheme changes were also

expensive for business customers who presorted their mail to bypass the

Service’s mail processing operations.

In preparation for DPS implementation in 1993, the Service and NALC agreed

that initial route adjustments would be based on current route inspection

data, which were generally collected within the previous 18 months.

According to the agreement, route inspections were to be performed on

each route to provide data on city carriers’ in-office and street

performance and mail volume to prepare for DPS implementation in a

delivery zone. However, as DPS implementation proceeded, the Service

said that field offices had continuous difficulty performing and funding the

required route inspections. The Service acted to address this problem.

According to Service officials, in 1995, the Service made funds available to

its field offices to perform about 50,000 route inspections, provided more

training to managers on performing inspections, and allowed field offices

to hire contractors to perform inspections.

Although the required inspections were eventually performed and route

adjustments were made to implement DPS, according to Service officials,

some route adjustments were not accurate. Service officials also said that

DPS route adjustments that were made did not always result in accurate

assessments of workload requirements because the adjustments were

based on potential in-office savings before carriers had experience with

DPS. To illustrate this situation, the Service recently gathered preliminary

data on many routes, indicating that DPS route adjustments had not added

enough deliveries to routes to increase street time and compensate for

reductions in office time. A Service official said that these routes with

insufficient workloads contribute to the decline in street efficiency as

carriers naturally use all the time they have available in delivering the mail.

According to the Service, once DPS is implemented within a delivery unit,

minor route adjustments are critical in capturing potential DPS savings

because as DPS volume increases, route workload should be adjusted by

removing office time and proportionally increasing street time by adding

deliveries. Area, district, and local managers said that whenever possible,

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Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

delivery unit managers should take the initiative to make minor route

adjustments, which can be made without a route inspection. If this is not

done, they said that the benefit of the office savings can evaporate as

carriers expand their street time to fill their 8-hour workdays.

The Service Believes That

Other Factors Besides Route

Adjustments Affect City

Carriers’ Street Efficiency

The Service believes that several factors in addition to route adjustments

have contributed to the decline in city carrier street efficiency (the number

of deliveries carriers make per hour). However, the Service does not

believe that DPS work methods have caused a decline in city carrier street

efficiency because the additional time needed to handle and prepare DPS

letters on the street was to be factored in when routes were adjusted to

implement DPS. According to Service officials, part of the decline in city

carrier street efficiency is due to the work habits of many city carriers that

have no direct connection with DPS. The officials believe that many

carriers are not using the most efficient work methods and need closer

supervision. The officials do believe, however, that DPS has had an indirect

effect on the decline in street efficiency. In their view, some city carriers,

who did not fully support DPS, slowed down their delivery or did not take

advantage of opportunities to increase efficiency afforded them by DPS.

For example, some city carriers did not use the sorting method that would

make mail easier to carry on their individual routes. Further, the officials

believe that factors unrelated to carrier work habits, such as increases in

the volume of priority packages and longer driving distances to high

growth areas, also are contributing to the decline in carrier street

efficiency.

However, NALC officials do not fully agree with the Service on the extent to

which carrier work habits contribute to declining street efficiency.

Further, NALC officials believe that much of the decline is attributable to

DPS work methods. NALC officials and many city carriers believe that street

efficiency is being adversely affected by DPS work methods, such as not

being able to manually sort DPS mail in the office and the additional time

needed to handle the extra bundle associated with DPS, which slows city

carrier delivery. The fact that city carrier street efficiency is declining on

both DPS and non-DPS city carrier routes would suggest that factors other

than DPS are contributing to the decline. However, definitive data on the

causes of the decline are not available to determine whether DPS work

methods are adversely affecting city carrier street efficiency greater than

the Service initially anticipated.

Notwithstanding the NALC’s views, the Service has several efforts under

way to deal with city carrier street efficiency. These efforts are intended to

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Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

increase the street supervision and monitoring of city carriers to ensure

that carriers deliver mail at an appropriate pace and do not waste time

during delivery. Service officials said that to improve supervision, each

accounting period, headquarters delivery managers prepared a list of each

area’s post offices with the lowest street efficiency and requested that

these be targeted for management attention. The officials also requested

that area and district managers implement street management programs

to, among other things, identify the most inefficient carriers at each

delivery unit and develop corrective action plans. In 1995, the Service

initiated the enhanced street performance program to improve delivery

service through the use of data collection and communication

technologies on the street. Among other benefits, these technologies are to

assist in the overall management of street performance for consistency of

delivery times and verification of carrier street times. One of the

technologies being used is a satellite monitoring system installed in

carriers’ delivery vehicles to enable supervisors to track carriers’

locations. In 1996, the Service began testing this program at 11 locations.

The Service also began the Delivery Redesign initiative in 1995 to improve

delivery efficiency and city carriers’ work environment. One aspect of the

initiative is to provide greater incentives for city carriers to work

efficiently by changing the way they are compensated. However, the

Service is to obtain NALC’s agreement to test compensation alternatives,

and NALC has not yet agreed to a test because it considers compensation an

issue that is better addressed in the collective bargaining process. Other

aspects of the initiative include revising the city carrier delivery process

and developing new performance standards for city carriers. According to

Service officials, under article 34 of the National Agreement, the Service

has the authority to test these changes. Accordingly, in 1997, the Service

began testing two approaches:

• city carrier delivery process changes, such as a team delivery concept that

separates the manual sorting and delivering of mail among a group of city

carriers. Under this concept, carriers would elect to either sort the mail or

deliver it, according to their abilities and preference; and

• new carrier performance standards that consist of standard time

allowances for city carrier office and street activities. The new standards

would be used to structure routes and monitor city carrier performance.

The Service is conducting these tests at 19 locations and expects them to

be completed by the spring of 1999.

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Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

Many City Carriers Want to

Manually Sort DPS Letters

Like rural carriers, city carriers said that they want the option to manually

sort their DPS letters with non-DPS letters and flats while in the office. Of

the 111 city carriers we interviewed 57, or about 51 percent, said that they

were satisfied with the concept of less sorting, which DPS provides.

However, 86 city carriers, or about 77 percent, said that they believed not

being allowed to sort DPS letters in the office decreased their street

efficiency.

NALC officials said that in some situations, especially where DPS volume is

no higher than 50 percent, city carriers want to sort DPS letters in the office

to improve street efficiency by eliminating the extra bundle and reducing

sorting and handling of undeliverable letters while on the street. These

officials said that on routes with large numbers of multioccupancy

deliveries, carriers’ efficiency was also reduced by having to manually

sequence the DPS letters for individual apartments or suites while on the

street. These officials also said that substitute carriers, who are not as

familiar with the customers and addresses as are the regular carriers on

the route, have more of a tendency to incorrectly deliver DPS letters

because they do not easily recognize undeliverable letters during delivery.

For example, the substitute carrier might not recognize that the addressee

on some DPS letters has moved.

Service officials said that they believed efficiency would decrease overall

if city carriers were allowed to sort DPS letters while in the office. The

officials said that they believed many city carriers would not sort DPS

letters efficiently because the existing standard for manually sorting

random letters requires city carriers to sort only 18 letters per minute and

8 flats per minute. While the officials recognize that many carriers exceed

these standards at their own discretion, they are not required to do so. The

officials also said that they do not believe DPS should make delivery more

difficult for carriers, and if carriers use the most efficient sorting method

for their routes and follow standard delivery procedures, they should not

have problems.

Compared with city carriers, rural carriers are more satisfied with DPS

because they are allowed to manually sort DPS letters in the office. Of the

31 rural carriers we interviewed, 29 said that they were satisfied with DPS

primarily because sequenced letters are easier and faster to sort or

because they like having less sorting to do. However, seven of the rural

carriers said that they believed DPS had decreased their street efficiency.

Also, the President of the Rural Carriers said that his members were

concerned about the reduction in their salaries due to DPS but that the

Page 47 GAO/GGD-98-73 Automated Letter Sequencing
Appendix II 

Operational Issues Affecting Achievement of

Fiscal Year 1998 DPS Goals

Service has tried to add deliveries to the affected routes to compensate for

the office time eliminated.

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Appendix III 

Labor-Management Relations Issues

Affecting Achievement of Fiscal Year 1998

DPS Goals

In addition to operational issues, the Service is also addressing those

concerning labor-management relations, which also impede its efforts to

achieve DPS goals and benchmarks and maximize savings. These issues

include poor working relationships with NALC over DPS implementation and

insufficient city carrier support for DPS work methods. DPS implementation

involved three areas of contention: (1) the work methods that should be

used by city carriers to implement DPS; (2) the manner in which the Service

implemented DPS, viewed by NALC as inconsistent with the 1992 joint

agreements; and (3) DPS’ effect on city carrier street efficiency. Many of the

city carriers’ disagreements with DPS resulted in grievances, some of which

led to national arbitration cases. These issues and the Postal Service’s

efforts to address them are discussed as follows.

National Arbitration Cases

Illustrate

Labor-Management

Relations Problems

In September 1992, the Service and NALC jointly reached several

agreements to resolve past disputes and implement DPS on city carrier

routes. However, some of the 1992 joint agreements became problematic

with actual implementation of DPS, and the parties were unable to reach

agreement on solutions. The Service subsequently issued instructions to

the field, which NALC believed were inconsistent with the 1992 joint

agreements. Differences in opinion over the instructions, as well as the

meaning of the work methods and transitional employee agreements,

generated many grievances at the national and local levels.

Although most grievances were resolved through settlement, three went to

national level arbitration. During 1996, a national arbitrator ruled on one of

the cases and found in favor of the Service. In 1997, another national

arbitrator ruled in favor of NALC on the two remaining cases. The arbitrator

determined that the Service had violated either provisions of existing labor

agreements or the 1992 joint agreements and instructed the Service and

NALC to jointly determine alternative methods to resolve their differences.

The parties are conducting a study to address the issues involved in one

case and are working together to reach agreement on how to proceed to

resolve the other case. In addition, to improve their overall working

relationship, on October 20, 1997, the Service and NALC signed an

agreement to test a revised dispute resolution process aimed at narrowing

areas of dispute and effectively and constructively resolving

disagreements.

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Labor-Management Relations Issues

Affecting Achievement of Fiscal Year 1998

DPS Goals

1992 Joint Agreements Set

Stage for DPS

In 1992, the Service and NALC published six Memoranda of Understanding,

or joint agreements, which were to resolve past disputes and set a joint

course for the future.18 The six agreements are summarized as follows:

• Case Configuration - Letter Size Mail. Defined letter-sized mail and

authorized the use of four- or five-shelf letter cases and route inspections

based on these cases. (A letter case is a piece of equipment that contains

separations or pigeonholes into which carriers manually sort letters and

other mail (e.g., magazines and papers.)

• Hempstead Resolution. Remanded all pending grievances and selected

route adjustments to the local parties for resolution and provided

guidance for resolving the grievances. This resolution was based on a

national level arbitrator’s finding that the Service improperly established

city routes, which required more than 8 hours to complete in anticipation

of future DPS route adjustments that would reduce these routes to 8 hours.

• The Future - Unilateral Process. Provided procedures for management to

plan, estimate the impact of, and implement DPS-related route adjustments.

• The Future - X-Route Process. Provided procedures as an alternative to

the unilateral process for local parties to jointly plan to adjust and realign

identified routes when the delivery unit had achieved the final DPS target

volume.

• Delivery Point Sequencing Work Methods. Authorized two methods

carriers are to use to sort non-DPS letters and “flats” (large envelopes,

magazines, and catalogs), and bundle them for delivery.19

• Transitional Employees. Resolved past disagreements regarding the hiring

and use of transitional employees within the carrier craft.

The agreements stated that successful transition to DPS is the

responsibility of local postal managers and union representatives to

collaboratively resolve problems. The Service and NALC jointly provided

DPS training to field units to prepare carriers and local managers for

implementation. In an October 5, 1995, instruction to area vice presidents,

the Service reiterated the importance of field compliance with

headquarters’ DPS policies and the joint agreements. Managers were

cautioned not to enter into local labor agreements that violated the joint

agreements or Service policies. However, NALC officials said and the Postal

Inspection Service reported that as DPS implementation proceeded, some

local agreements and management decisions violated national agreements

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

of Understanding.

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

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Labor-Management Relations Issues

Affecting Achievement of Fiscal Year 1998

DPS Goals

and policies, causing large numbers of local grievances to be filed by

carriers.

Differences Arose Over Joint

Agreements and the Service’s

Implementation Instructions

As the Service gained experience with DPS in 1993 and DPS volume

remained low, the parties determined that certain aspects of these

agreements became problematic; such as, rules for establishing DPS target

volumes to trigger implementation and route adjustments. Although the

parties agreed they should update the agreements, they were unable to

reach agreement on changes. As a result, in 1994, the Service issued DPS

implementation instructions to the field that NALC believed violated certain

aspects of the joint agreements. In a March 1994 memorandum to area and

district managers, a headquarters senior vice president wrote:

“As you are aware, we have been unable to reach agreement with the NALC on updating the

Memorandums of Understanding concerning DPS implementation. Attached . . . are

instructions which explain how to move forward on DPS . . . which are effective

immediately.”

Headquarters officials, in a subsequent plan concerning DPS

implementation, stated that failure to gain a new agreement with the NALC

had left delivery units in various stages of development in their plans to

capture savings. For example, DPS volumes that remained below the

targets set by many units had delayed implementation and allowed carriers

to continue sorting DPS letters, delaying capture of workhour savings.

The Service said that its instructions to field units mirrored the 1992 joint

agreements. One of the instructions advised managers to base calculations

of DPS volume for purposes of meeting the targets on weekly averages. The

Service believed that this aspect of the joint agreements was not

negotiated and was left open for managerial discretion. However, NALC

contended that the joint agreements had been reached based on an

understanding that target volumes would have to be met for 12

consecutive delivery days. Therefore, NALC said that the Service violated

the joint agreements by unilaterally advising its managers to use a method

that the parties had not agreed upon.

Another disagreement arose when NALC challenged the Service’s

interpretation of a 1992 joint agreement involving the DPS work methods

carriers were expected to use. Carriers traditionally have used one of

several sorting methods to prepare mail for delivery, resulting in either all

the mail sorted together and carried as one bundle, or letters sorted

separately from larger pieces, called flats (e.g., magazines), and carried as

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Labor-Management Relations Issues

Affecting Achievement of Fiscal Year 1998

DPS Goals

two bundles. Factors—like number and type of deliveries, such as

apartments or commercial buildings or amount of walking versus driving

between deliveries—can influence which sorting method is chosen. The

Service’s DPS instructions required carriers to pick up trays of DPS letters

and load them into their vehicles for delivery along with their trays of

manually sorted mail. During delivery, carriers select mail from the trays

of letters and flats at each delivery point or select and carry letters and

flats in their hand as separate bundles while walking portions of the route.

The DPS-sorting methods authorized in the joint agreements result in either

two or three bundles of mail, in addition to certain types of unaddressed

advertising mail delivered to every address. The following are the two

authorized DPS sorting methods:

• Sort non-DPS letters with the flats into the case. Pull down from the case

and carry the combined flats/non-DPS letters as one bundle and DPS letters

as a second bundle.

• Sort into and pull down from the case non-DPS letters separately from the

flats, and carry DPS as a third bundle.

Under the joint agreements, selection of the most efficient method for

each route was to be made jointly by local managers and NALC

representatives. For example, the parties could agree that carrying two

bundles was more efficient on park and loop routes, which require

walking between deliveries, or that a third bundle is more efficient for

motorized curbside delivery. The Service modeled carrier efficiency using

different methods and at different DPS volumes and found that the

two-bundle method generally was the most efficient to use with relatively

high DPS volume. However, NALC and the Service disagreed about the

relative efficiency of the methods and their impact on carriers.

NALC officials told us that they know automation including DPS is inevitable

and necessary to increase postal efficiency. However, the NALC officials

disagreed with the Service’s proceeding to implement DPS using the revised

instructions to the field that NALC believe violated the joint agreements.

NALC officials also said that both the overly optimistic expectations of high

DPS volumes early in the program that did not materialize as well as

managers’ efforts to implement DPS and capture savings resulted in lasting

disappointment and frustration among some carriers. However, they

agreed with Service managers that some of the carriers concerns regarding

DPS will diminish if their DPS volume approaches higher percentages of

total letters, which the Service expects to achieve.

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Appendix III 

Labor-Management Relations Issues

Affecting Achievement of Fiscal Year 1998

DPS Goals

Status of Three Arbitration

Cases

Following is a brief summary of two DPS national arbitration cases related

to the 1992 joint agreements and one national arbitration case concerning

the Service’s subsequent instructions on calculating DPS volumes.

• In one case, an arbitrator ruled that, as NALC contended, unaddressed

advertising mail, a type of flat mail, constitutes a fourth bundle for carriers

who have elected to use the three-bundle sorting method on park and loop

routes. The parties’ current labor agreement limits to three, the number of

bundles such carriers can be required to carry. The Service had

maintained that if unaddressed flats were carried behind the flats bundle,

it did not create a fourth bundle. The arbitrator required the parties to

reach agreement on an alternative to the authorized three-bundle method

when unaddressed flats are present on the affected routes. The parties

agreed to conduct a joint study of the DPS work methods to determine

which is the most efficient method and how to best handle unaddressed

flats. The parties agreed to complete the joint study by April 30, 1998.

• In a second case, the arbitrator decided that the Service had not violated

the agreements on the use of transitional employees. NALC believed that a

ceiling existed on the number of hours per week these transitional

employees could work and that the Service had ignored the ceiling. NALC

also believed that these employees were hired into a particular delivery

unit and had been improperly reassigned to work in another unit. The

Service maintained that there was no ceiling on workhours once

transitional employees had been properly hired, and there was no

prohibition against reassigning them as needed.

• In a third case, an arbitrator concluded that the Service had violated the

1992 joint agreements by not obtaining NALC’s concurrence on revising the

method for calculating DPS volumes that the Service advised managers to

use in its DPS implementation instructions. The Service began using

average weekly—rather than daily—DPS volume because certain

fluctuations in daily volume made it impossible to reach DPS percentage

targets every day. However, the arbitrator also found that the daily volume

method in the original agreement was counter to achieving DPS savings and

instructed the parties to work together to determine an alternative

method. In the interim, the Service was allowed to use its averaging

method. As of March 1998, the parties had not yet reached agreement on

an alternative method for calculating DPS volume.

Many City Carriers Raised

Concerns About DPS Work

Methods

In addition to their concerns about the Service’s noncompliance with

national NALC-Service labor agreements, many city letter carriers said that

they believe DPS work methods—particularly not being able to manually

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Appendix III 

Labor-Management Relations Issues

Affecting Achievement of Fiscal Year 1998

DPS Goals

sort DPS letters to (1) combine them with the non-DPS bundle and

(2) identify DPS sort errors and undeliverable letters—adversely affected

their efficiency and, in some cases, service to their customers. NALC

officials agreed with city carriers that the additional bundle of letters

created by DPS and the single bundle made up of different sized mail pieces

can be awkward for carriers to handle during delivery. Service officials we

contacted, however, believe the different work methods are necessary to

capture DPS savings and should have only minimal impact on carriers’

ability to deliver mail. The officials do not believe the concerns raised by

carriers represent a significant adverse effect on customer service.

However, rural carriers we interviewed were more satisfied with DPS work

methods than were city carriers because rural carriers were allowed to

manually sort DPS letters and combine them with non-DPS mail before

leaving the office to deliver the mail.

In commenting on our draft report, the President of NAPS said that he

believed city carriers’ concerns about DPS work methods are greatly

exaggerated because carriers have always been required to check

addresses on the mail between delivery stops to identify mail that is

undeliverable. Therefore, checking DPS letters to find undeliverables

should not be much different from the work methods used prior to DPS.

The President said that while carrying more than two bundles of mail has

some detrimental effect on carriers’ ability to deliver mail, some carriers

are using DPS as an excuse to extend their street time, delay prompt return

to the office, and thus avoid having to perform additional work until their

8-hour day ends.

From a letter carrier’s standpoint, an important advantage of manually

sorting mail is to identify mail that cannot be delivered. Carriers

historically take pride in identifying and redirecting such mail for further

processing before leaving the office to begin delivery, with the knowledge

that they will deliver all the mail they take to the street each day. Since city

carriers must take DPS letters to the street without sorting or inspecting

them, they must identify and remove any undeliverable letters while

making deliveries.

DPS Sort Errors Although managers at the delivery units we visited did not know the

number of DPS sort errors carriers found each day, they said that errors

occur because of incorrect addresses, mechanical problems, or human

error. Most carriers we interviewed said that they were concerned about

DPS sort errors and their effect on street efficiency and service to

customers. However, Service officials said that while some problems do

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Appendix III 

Labor-Management Relations Issues

Affecting Achievement of Fiscal Year 1998

DPS Goals

occur, they believe only a small percentage of DPS letters experience sort

accuracy problems. Overall officials believed sort accuracy was

acceptable. While the Service does not routinely collect nationwide data

on DPS sort errors, the units we visited were starting to collect data on sort

errors on a daily basis.

Service and NALC officials we contacted agreed that DPS technology is

highly effective but that errors sometimes occur due to incorrect

addresses, mechanical problems, or employee error. Carriers said that

they usually get some sort errors. Sort accuracy was the concern most

often cited by carriers we interviewed; 55 carriers, or 39 percent of those

we interviewed, said that finding sort errors during delivery was a

problem. The number and type of sort errors can vary from day to day; and

of the 142 carriers we interviewed, 125, 131, and 136 carriers, respectively,

estimated they received an average of fewer than 10 letters a day

missorted, missequenced, and missent. However, the remaining carriers

estimated that they received 11 or more letters a day in at least 1 of the 3

sort-error categories. For example, 14, 9, and 5 carriers estimated that they

received an average of 11 to 20 letters each day missorted, missequenced,

and missent, respectively. Although it appears that sort errors represented

a small proportion of carriers total DPS letters, DPS sort errors might cause

carriers to (1) backtrack on their routes to deliver missequenced letters or

(2) bring letters back to the office at the end of the day if they cannot be

delivered. NALC officials and the carriers said that service to their

customers is sometimes delayed by at least 1 day if these letters must be

reprocessed for delivery.

After the initial 98-percent accuracy threshold was met on DPS routes,

there was no formal requirement to track subsequent accuracy; and the

Service does not collect nationwide data on DPS-sort accuracy. Rather, it

relies on carriers to report sort errors each day so that delivery units can

coordinate with mail processing operations to correct them. NALC officials

said that errors sometimes occurred despite carriers’ and delivery units’

reporting them. Some of the units we visited were beginning to record the

number and category of DPS-sort errors that carriers reported each day, so

that corrective action could be taken. One district had analyzed these data

collected over several weeks and found less than 1 percent of DPS-sort

errors. These errors were often letters missorted to the wrong route

caused by mechanical or maintenance problems or necessary changes to

computerized sort plans for routes not having been entered.

Page 55 GAO/GGD-98-73 Automated Letter Sequencing
Appendix III 

Labor-Management Relations Issues

Affecting Achievement of Fiscal Year 1998

DPS Goals

Forwarded Undeliverable

Letters

Carriers often receive DPS letters that are not deliverable. Undeliverable

mail includes forwards20 resulting from change-of-address, vacation holds,

and mail sorted incorrectly to the wrong route. The Service receives about

40 million change-of-address requests each year and forwards customers’

mail to their new addresses for 12 months. This results in carriers

receiving letters for customers who no longer live at addresses on their

routes, and these letters must then be reprocessed for delivery to each

customer’s new address. The units we visited did not track the number of

undeliverable DPS letters carriers brought back to the office each day. The

carriers we interviewed said that the number varied from day to day. Of

134 carriers who estimated their average number of undeliverable DPS

letters, 60 carriers, or about 45 percent, estimated they had up to 25

undeliverable letters a day; 41 carriers, or about 30 percent, estimated

having between 26 and 50 letters a day; and 33 carriers, or 25 percent,

estimated having more than 50 such letters a day, which includes 9

carriers, or 7 percent, having more than 100 letters a day.

We found that opinions among Service managers, NALC officials, and

carriers differed about the impact that undeliverable letters in carriers’ DPS

mail have on service. For example, NALC officials said that they and city

carriers believed in some cases DPS was delaying delivery of forwarded

letters by at least 1 day. NALC officials attributed the delay to the fact that

carriers were returning to the office too late in the day for their forwarded

letters to be transported to the Service’s Computerized Forwarding System

(CFS).21 Service delivery managers did not believe DPS delayed service and

pointed out that the First-Class on-time delivery scores—the Service’s

indicator of quality of service to customers—are now higher than they

have been in the past.22 While there was general agreement at

headquarters and field units that forwarded letters should be transported

to CFS the same day carriers received them, this was not the case at two of

the six delivery units we visited because carriers returned to the office

from their routes after that day’s final dispatch of forwarded letters to the

CFS.

20Mail that is redirected to the intended recipient’s new delivery address.

21Each day, delivery units send CFS staff data on change-of-addresses and mail to be forwarded. CFS

staff key new address information into the National Change-of-Address database and forward the mail

to the appropriate delivery unit for delivery.

22The External First-Class Mail Measurement System is used to estimate the percentage of first-class

mail that is delivered on time according to Postal Service standards. An independent contractor, Price

Waterhouse, conducts test mailings in 96 cities to measure the speed of first-class mail delivery.

Page 56 GAO/GGD-98-73 Automated Letter Sequencing
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Labor-Management Relations Issues

Affecting Achievement of Fiscal Year 1998

DPS Goals

NALC and carrier perception that a 1-day delay in forwarding letters

constituted delayed service to customers was not shared by Service

headquarters delivery and forwarding system managers. The Service said

that its First-Class mail delivery standards for 1-, 2-, or 3-day delivery do

not technically apply to forwarded letters because they must be

reprocessed for delivery. Furthermore, the standard for processing

forwards is that CFS staff is to reprocess each forwarded mail piece and

send it to the appropriate delivery unit within 24 hours, beginning when

they receive it from the original delivery unit.

The Service has a system whereby carriers can request that data be

entered into sort programs to have certain letters, including forwards, held

out of DPS so they can be identified and rerouted before delivery. Of the six

delivery units we visited, two allowed carriers to hold out forwards from

DPS for 30 days; one allowed forwards to be held out for 2 weeks; one

allowed only forwards for temporary moves to be held out, and two did

not allow any forwards to be held out of DPS. For example, one delivery

unit manager said that his unit did not hold out forwards because the data

entry process to do so is difficult; updating sort plans is complicated; and

at his unit, managers believe carriers can more efficiently identify

forwards while on the street. Likewise, headquarters delivery managers

said that they did not believe forwards should necessarily be held out of

carriers’ DPS mail and that carriers should adjust to handling forwards

during delivery. In contrast, NALC officials said that carriers do not like to

handle forwards while on the street and then bring them back to the office

for reprocessing. NALC officials said that if the Service could develop an

automated system to identify and remove change-of-address mail so that it

is not included with carriers’ DPS mail for delivery, most of the problems

with DPS would be eliminated. However, these officials recognize that the

Service, although attempting to do so, has not yet developed such a

system.

Page 57 GAO/GGD-98-73 Automated Letter Sequencing
Appendix IV 

Comments From the Postal Service

Page 58 GAO/GGD-98-73 Automated Letter Sequencing
Appendix V 

Comments From the National Association of

Letter Carriers

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

See pp. 28-29.

See comment 1.

Page 59 GAO/GGD-98-73 Automated Letter Sequencing
Appendix V 

Comments From the National Association of

Letter Carriers

See comment 2.

See comment 3.

See pp. 28-29.

See p. 27.

Page 60 GAO/GGD-98-73 Automated Letter Sequencing
Appendix V 

Comments From the National Association of

Letter Carriers

See comment 4.

Now on p. 36.

Now on p. 14.

Now on p. 9.

Now on p. 9.

Now on p. 20.

Page 61 GAO/GGD-98-73 Automated Letter Sequencing
Appendix V 

Comments From the National Association of

Letter Carriers

Now on pp. 20-21.

Now on p. 54.

Now on p. 56.

Page 62 GAO/GGD-98-73 Automated Letter Sequencing
Appendix V 

Comments From the National Association of

Letter Carriers

Page 63 GAO/GGD-98-73 Automated Letter Sequencing
Appendix V 

Comments From the National Association of

Letter Carriers

GAO Comments 1. We do not agree with NALC’s assessment that our report is a repackaging

of postal management’s excuses for missing its DPS implementation

schedule. As requested by the Subcommittee, the report describes the

status of the Service’s efforts to implement DPS, including slippages and

reasons for them. The report discusses the Service’s overly optimistic DPS

expectations, the changes the Service made to its goals and benchmarks

for completion of the program, the current shortfalls compared with the

Service’s fiscal year 1998 goals, and the issues the Service will need to

address to achieve the goals.

NALC also commented that regarding specific statements in the report

attributed to Service managers, our review lacked critical scrutiny of the

managers’ opinions, with which NALC does not agree. These statements

concerned the Service’s assertions that (1) DPS should not cause a

decrease in street efficiency, (2) the Service does not have complete data

to measure the percentage of letters carrier routes receive in delivery

sequence, (3) DPS is responsible for workhour reductions, and (4) DPS does

not adversely affect carriers’ efficiency or customer service. We disagree

with NALC’s assertion that we accepted Postal Service managers’ opinions

without scrutiny. For each area about which NALC expressed concern, we

attempted to obtain data addressing the relevant issues. However,

sufficient data were not readily available. Therefore, in addition to

obtaining and attributing the views of Postal Service headquarters

managers, we obtained and attributed the views of managers and letter

carriers at the field locations we visited as well as the views of the

Service’s major unions and management associations, including NALC.

Furthermore, we included a separate section in the report that discusses

many of the specific concerns city carriers and NALC officials conveyed to

us during interviews so that a balanced view of DPS would be presented.

2. NALC expressed the belief that in our reporting of selected city carrier

national level arbitration cases, we casually accepted the independent

arbitrators repeated findings that the Service violated its contract with

NALC during DPS implementation. We understand that NALC and the Service

have been at odds and NALC’s view that the arbitrators’ findings support its

position. However, our intent was to objectively present the events that

occurred and their effects on DPS implementation, which we believe is

reflected in the report. In the report, we noted that the Service has lost two

national arbitration cases involving DPS implementation. We explained that

the arbitrators affirmed NALC’s position that (1) unaddressed advertising

mail constitutes a fourth bundle for carriers, which violates the parties

current labor agreement and (2) the Service’s DPS instructions to the field

Page 64 GAO/GGD-98-73 Automated Letter Sequencing
Appendix V 

Comments From the National Association of

Letter Carriers

were inconsistent with certain aspects of the 1992 agreements. To further

recognize NALC’s concern, we have added language to the report explaining

that NALC filed grievances on the Service’s DPS instructions at the national

level, and most issues were settled without arbitration.

In addition, NALC questioned the draft report language, which it interpreted

as indicating that an arbitrator’s decision caused a delay in the Service

achieving DPS workhour reductions. NALC stated that the Service’s violation

of its contract with NALC was the effective cause of the delay and not the

arbitration’s remedy. We have revised the language to clarify this

information.

3. NALC suggested that our methodology was flawed because we

interviewed and observed the delivery operations of a relatively small

number of city carriers. NALC emphasized that the small number of carriers

included in our review was inadequate since carriers and their

performance were central to measuring the progress of DPS

implementation. We believe that our methodology for accomplishing our

objectives was sound and point out that evaluating carrier performance

was not an objective of our review. As discussed in the report, we

judgmentally selected and interviewed as many city carriers as possible

given our resource limitations and time constraints. Our intent was not to

interview a statistically representative sample of city carriers. Rather, we

interviewed these carriers to provide balance and illustrative examples of

their views regarding DPS implementation. We also accompanied two city

carriers on their routes to observe their handling of DPS letters and other

mail and to better understand their views regarding DPS work methods. We

supplemented these interviews and observations with the opinions and

illustrative information from NALC national level officials. Although our

interviews and observations of city carriers are not statistically

representative, their views largely mirrored those of NALC officials.

4. NALC stated that the draft report incorrectly asserts that DPS should not

cause a decline in street efficiency. We have deleted this language from the

report. However, to provide the views of the Service the report notes that,

according to the Service, DPS would cause only a minimal increase in the

time carriers would need to perform some operations on the street, which

were formerly done in the office, and that DPS should not otherwise have a

significant adverse effect on street efficiency. The report also notes that

Service field managers and supervisors as well as the carriers we

interviewed as a part of our review told us that, in general, DPS did cause

some decline in carrier street efficiency.

Page 65 GAO/GGD-98-73 Automated Letter Sequencing
Appendix VI 

Major Contributors to This Report

General Government

Division

Gerald P. Barnes, Assistant Director

Hazel J. Bailey, Evaluator (Communications Analyst)

Denver Field Office Arleen L. Alleman, Senior Evaluator

Rudolfo G. Payan, Senior Evaluator

Robert E. Kigerl, Staff Evaluator

(240241) Page 66 GAO/GGD-98-73 Automated Letter Sequencing
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