U.S. POSTAL 

SERVICE

Mail Processing 

Network Exceeds 

What Is Needed for 

Declining Mail Volume

Report to Congressional Requesters

April 2012

GAO-12-470

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12- , a report to 

congressional requesters 

470

April 2012 

U.S. POSTAL SERVICE

Mail Processing Network Exceeds What Is Needed 

for Declining Mail Volume 

Why GAO Did This Study

Since 2006, the U.S. Postal Service 

has taken actions to reduce its excess 

capacity. Such actions have made 

progress toward consolidating the mail

processing network to increase 

efficiency and reduce costs while 

meeting delivery standards. However, 

since 2006, the gap between USPS 

expenses and revenues has grown 

significantly. In February 2012, USPS 

projected that its net losses would

reach $21 billion by 2016. 

As requested, this report addresses 

(1) actions USPS has taken since 2006 

to reduce excess capacity— 

in facilities, staff, equipment, and

transportation; (2) USPS plans to 

consolidate its mail processing 

network; and (3) key stakeholder 

issues and challenges related to 

USPS’s plans. GAO reviewed relevant 

documents and data, interviewed 

USPS officials, reviewed proposed 

legislation, and reviewed stakeholder 

comments to USPS plans for changing 

delivery service standards. 

What GAO Recommends

GAO is not making new 

recommendations in this report, as it 

has previously reported to Congress 

on the urgent need for a 

comprehensive package of actions to 

improve USPS’s financial viability and 

has provided Congress with strategies 

and options to consider. USPS had no

comments on a draft of this report. 

What GAO Found

Since 2006, the U.S. Postal Service (USPS) has closed redundant facilities and

consolidated mail processing operations and transportation to reduce excess 

capacity in its network, resulting in reported cost savings of about $2.4 billion. 

Excess capacity remains, however, because of continuing and accelerating 

declines in First-Class Mail volume, automation improvements that sort mail 

faster and more efficiently, and increasing mail preparation and transportation by 

business mailers, much of whose mail now bypasses most of USPS’s processing 

network.

In December 2011, USPS issued a proposal for consolidating its mail processing

network, which is based on proposed changes to overnight delivery service 

standards for First-Class Mail and Periodicals. Consolidating its network is one 

of several initiatives, including moving from a 6-day to a 5-day delivery schedule

and reducing compensation and benefits, that USPS has proposed to meet a 

savings goal of $22.5 billion by 2016. This goal includes saving $4 billion by 

consolidating its mail processing and transportation network and reducing excess 

capacity as indicated in the table below. The Postal Regulatory Commission is 

currently reviewing USPS’s proposal to change delivery service standards. 

2011 USPS Estimate of Mail Processing Excess Capacity to Be Eliminated by Proposed

Changes in First-Class and Periodical Delivery Standards

2011 processing network Excess capacity

Facilities 461 processing facilities 223 processing facilities

Workforce 154,325 positions Up to 35,000 positions

Equipment About 8,000 pieces of mail 

processing equipment

3,000 pieces of mail processing 

equipment

Transportation 1.5 billion trips between processing 

facilities

376 million trips between 

processing facilities 

Source: USPS. 

Stakeholder issues and other challenges could prevent USPS from implementing 

its plan for consolidating its mail processing network or achieving its cost savings 

goals. Although some business mailers and Members of Congress have 

expressed support for consolidating mail processing facilities, other mailers, 

Members of Congress, affected communities, and employee organizations have 

raised issues. Key issues raised by business mailers are that closing facilities

could increase their transportation costs and decrease service. Employee 

associations are concerned that reducing service could result in a greater loss of 

mail volume and revenue that could worsen USPS’s financial condition. USPS 

has said that given its huge deficits, capturing cost savings wherever possible will 

be vital. USPS has asked Congress to address its challenges, and Congress is 

considering legislation that would include different approaches to addressing 

USPS’s financial problems. A bill originating in the Senate provides for employee 

buyouts but delays moving to 5-day delivery, while a House bill creates a 

commission to make operational decisions such as facility closures and permits 

USPS to reduce delivery days. If Congress prefers to retain the current delivery 

service standards and associated network, decisions will need to be made about

how USPS’s costs for providing these services will be paid, including additional

cost reductions or revenue sources. 

View GAO-12- . For more information, 

contact Lorelei St. James at (202) 512-2834 or 

470

stjamesl@gao.gov. 
Page i GAO-12-470 U.S. Postal Service 

Letter 1 

Background 4

Past Actions to Reduce Excess Capacity 9

USPS Plan to Consolidate Its Mail Processing Network 13

Stakeholder Issues and USPS Challenges 17

Concluding Observations 24

Agency Comments 25

Appendix I Objectives, Scope, and Methodology 26

Appendix II GAO Contact and Staff Acknowledgments 28

Tables

Table 1: Reported Decrease in Mail Processing Work Hours, 

Facilities, Employees, and Costs, from Fiscal Years 2006 to 

2011 9

Table 2: Proportion of First-Class Mail Volume by Delivery Service 

Standard as Proposed by USPS 13

Table 3: 2011 USPS Estimate of Mail Processing Excess Capacity 

Based on Proposed Changes in First-Class and Periodical 

Delivery Standards 15

Table 4: Summary of Key Pending Legislation Related to 

Optimizing Mail Processing Network 23

Figures 

Figure 1: USPS Net Operating Profit and Loss, Fiscal Years 2006 to 

2011 2

Figure 2: Mail Flow through the National Infrastructure 5

Figure 3: USPS First-Class Mail Volume Data and Forecast, Billions 

of Pieces, Fiscal Years 2010-2020 12

Contents
Page ii GAO-12-470 U.S. Postal Service 

Abbreviations

AMP Area Mail Processing

BRAC Base Realignment and Closure

DPS Delivery Point Sequencing

OIG Office of Inspector General

PAEA Postal Accountability and Enhancement Act

PRC Postal Regulatory Commission

USPS U.S. Postal Service

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Page 1 GAO-12-470 U.S. Postal Service 

United States Government Accountability Office 

Washington, DC 20548

April 12, 2012

The Honorable Susan M. Collins

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Thomas R. Carper

Chairman

Subcommittee on Federal Financial Management, Government

Information, Federal Services, and International Security

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Darrell E. Issa

Chairman

Committee on Oversight and Government Reform

House of Representatives

The U.S. Postal Service’s (USPS) dire financial situation has increased 

the urgency for agreement on an effective strategy to better align USPS’s 

postal services with its costs and revenues. USPS has noted that the 

decline in First-Class Mail volume accelerated more than expected and 

predicted that volume will continue to fall. By fiscal year 2020, USPS 

expects to lose over 60 percent of the First-Class Mail volume that it had 

in fiscal year 2006.1

 

1

Mail that is processed in USPS’s network includes two broad categories: marketdominant and competitive. Market-dominant products primarily include First-Class Mail 

(e.g., correspondence, bills, payments, and statements), Standard Mail (mainly bulk 

advertising and direct mail solicitations), Periodicals (mainly magazines and local 

newspapers), and some types of Package Services (primarily single-piece Parcel Post, 

Media Mail, library mail, and bound printed matter). Market-dominant mail and services 

represent about 86 percent of USPS’s revenue. Competitive mail refers to Priority Mail 

and Express Mail that compete with delivery services offered by private businesses.

Declining First-Class Mail volumes, development of 

automated mail processing equipment, and “workshare” initiatives (e.g., 

mailers applying bar codes, presorting the mail, and entering mail into the 

postal network closer to its final delivery point) have led to a mail 

processing network—including postal facilities, staff, equipment, and 

transportation resources—that is larger than needed to process and 

distribute current and projected levels of mail.

 
 

Page 2 GAO-12-470 U.S. Postal Service 

Over the past decade, USPS has taken steps to reduce its excess capacity 

to move toward optimizing its mail processing network—one where 

processing facilities are located to maximize revenues, increase efficiency, 

and minimize costs while meeting delivery standards. Since 2006, the gap 

between USPS expenses and revenues has grown significantly (see fig. 1). 

At the end of fiscal year 2011, USPS had a net loss of $5.1 billion and $2 

billion remaining on its $15 billion statutory borrowing limit.2 In February 

2012, USPS issued a 5-year plan that projected its net loss to increase to 

over $21 billion by 2016 and set a goal to reduce annual costs by at least 

$22.5 billion by 2016. The Postmaster General has stated that maintaining 

a vast national postal infrastructure is no longer realistic. We have testified 

that USPS cannot continue providing services at current levels without 

dramatic changes in its cost structure.3

Figure 1: USPS Net Operating Profit and Loss, Fiscal Years 2006 to 2011

Optimizing USPS’s mail processing

network would help USPS by bringing down costs related to excess and 

inefficient network resources.

 

2

39 U.S.C. § 2005(a)(2).

3

GAO, U.S. Postal Service: Actions Needed to Stave Off Financial Insolvency, 

GAO-11-926T (Washington, D.C.: Sept. 6, 2011). 
 

Page 3 GAO-12-470 U.S. Postal Service 

You requested that we study opportunities for USPS to reduce excess 

capacity in its mail processing network. This report addresses (1) past 

actions USPS has taken to reduce excess capacity, (2) USPS’s plan to 

consolidate its mail processing network, and (3) key stakeholder issues 

and challenges USPS faces in consolidating its mail processing network.

To describe what actions USPS has taken to reduce excess capacity and 

its reported results of these actions, we obtained data from USPS related 

to changes in its mail processing network, workforce, and costs as well as 

an updated forecast for First-Class Mail volume to 2020. To calculate the 

5-year cost savings that USPS achieved, we took the difference of the 

network costs for fiscal years 2006 and 2011 that USPS reported to us. 

We also obtained data from USPS and USPS Office of Inspector General 

(OIG) reports regarding cost savings related to USPS initiatives to reduce 

excess capacity. Further, we reviewed USPS annual reports to Congress 

and its network plans as section 302 of the Postal Accountability and 

Enhancement Act of 2006 requires USPS to submit; related GAO and 

USPS OIG reports; as well as other relevant studies relating to reducing 

excess capacity in USPS’s mail processing network. To examine USPS’s 

future plans to consolidate its mail processing network, we reviewed 

USPS’s December 2011 plan to change delivery service standards and 

consolidate its mail processing network by reducing facilities, staff, 

equipment, and transportation resources. We also reviewed USPS’s 5-

year business plan to profitability issued in February 2012. We 

interviewed USPS senior management and local facility mangers in 

Illinois about the current processing network and future plans for that 

network. We also reviewed documents in the ongoing Postal Regulatory 

Commission (PRC) proceeding of USPS’s proposed changes in service 

standards and its plan for consolidating its mail processing network. PRC 

is reviewing USPS’s estimated cost savings, service impacts, and public 

input on the network consolidation plan and expects to complete its 

review sometime after July 2012.

To determine key issues and challenges USPS officials face in 

consolidating its mail processing network, we reviewed and summarized 

concerns from postal stakeholders responding to USPS’s September 

2011 Federal Register notice on its proposed changes to service 

standards for First-Class Mail, Periodicals, and Standard Mail. We also 

interviewed USPS officials, and reviewed stakeholder testimonies and 

published letters from Members of Congress commenting on USPS plans 

to change delivery service standards and close facilities. Further, we 

reviewed pending legislative proposals that could affect USPS’s efforts to 
 

Page 4 GAO-12-470 U.S. Postal Service 

address excess capacity and consolidate its mail processing network. For 

more information on our scope and methodology, see appendix I.

We conducted this performance audit from April 2011 through April 2012 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

USPS has a vast mail processing network consisting of multiple facilities 

with different functions, as shown in figure 2. In fiscal year 2011, 

according to USPS, it had a nationwide mail processing network that 

included 461 facilities, 154,325 full-time employees, and about 8,000 

pieces of mail processing equipment. This network transports mail from 

where it is entered into USPS’s network, sorts it for carriers to deliver, and 

distributes it to a location near its destination in accordance with specific 

delivery standards. USPS receives mail into its processing network from 

different sources such as mail carriers, post offices, and commercial 

entities. Once USPS receives mail from the public and commercial 

entities, it uses automated equipment to sort and prepare mail for 

distribution. The mail is then transported between processing facilities 

where it will be further processed for mail carriers to pick up for delivery.

Background
 

Page 5 GAO-12-470 U.S. Postal Service 

Figure 2: Mail Flow through the National Infrastructure

Note: Originating mail refers to outgoing and local mail that enters the point of origin for mail 

processing. Local mail remains within the facility and is combined with destinating mail from other 

origin facilities. Destinating mail refers to mail arriving at the point of entry for distribution and dispatch 

to a post office for delivery. Some mail moves from one Processing Distribution Center to another 

without going through the Network Distribution Center, Surface Transfer Center, or Logistics and 

Distribution Center. 

Trends in mail use underscore the need for fundamental changes to 

USPS’s business model. First-Class Mail volume peaked in fiscal year 

2001 at nearly 104 billion pieces and has fallen about 29 percent, or 30 

billion pieces, as of fiscal year 2011. Although First-Class Mail volume 

accounted for 44 percent of total mail volume in fiscal year 2011, it 

generated about 49 percent of USPS’s revenue. In comparison, Standard 

Mail (primarily advertising) accounted for 51 percent of total mail volume 
 

Page 6 GAO-12-470 U.S. Postal Service 

but generated only about 27 percent of USPS’s revenue. Further, it takes 

about three pieces of Standard Mail, on average, to equal the financial 

contribution from one piece of First-Class Mail. Looking forward, USPS 

projects that First-Class Mail will decline significantly between now and 

2020. For the first time, in 2010, less than 50 percent of all bills were paid 

by mail as consumers continue to switch to electronic alternatives. USPS 

projects that Standard Mail volume will remain roughly flat between now 

and 2020, thereby increasing its share of revenues generated. Almost 60 

percent of mail received by households in 2010 was advertising.

USPS has said that its mail processing network is configured primarily so 

that it can meet the First-Class Mail delivery standards within a 1- to 5-day 

window, depending on where the mail is entered into the postal system and 

where it will be delivered. Most First-Class Mail is to be delivered in 1 day 

when it is sent within the local area served by the destinating mail 

processing center; 2 days when it is sent within reasonable driving 

distance, which USPS considers within a 12-hour drive time; 3 days for 

other mail, such as mail transported over long distances by air; and 4 to 5 

days if delivery is from the 48 contiguous states to the noncontiguous 

states, Puerto Rico, the U.S. Virgin Islands, or Guam. Delivery service 

standards within the contiguous 48 states generally range from 1 to 10 

days for other types of mail. Delivery service standards help USPS, 

mailers, and customers set realistic expectations for the number of days 

mail takes to be delivered, and to plan their activities accordingly. USPS 

requires a certain level of facilities, staff, equipment, and transportation 

resources to consistently meet First-Class Mail and other delivery service 

standards as expected by its customers. The USPS processing and 

transportation networks were developed during a time of growing mail 

volume, largely to achieve service standards for First-Class Mail and 

Periodicals, particularly the overnight service standards.

To revise service standards, USPS can propose changes, such as 

elimination of overnight delivery for First-Class Mail, through a regulatory 

proceeding that includes the consideration of public comments.4

 

4

The Postal Accountability and Enhancement Act of 2006 (PAEA) required USPS to 

establish a set of modern service standards for its market-dominant products by regulation 

in consultation with PRC. Pub. L. No. 109-435, § 301 (Dec. 20, 2006). Once these 

standards were established, PAEA directed USPS to begin to measure and publicly report 

on its service performance for all market-dominant products. In December 2007, USPS 

finalized regulations establishing service standards for market-dominant products. 72 

Fed. Reg. 72216 (Dec. 19, 2007).

Further, 
 

Page 7 GAO-12-470 U.S. Postal Service 

whenever USPS proposes a change in the nature of postal services that 

affects service on a nationwide basis, USPS must request an advisory 

opinion on the change from PRC.5 In addition, USPS annual 

appropriations have mandated 6-day delivery and rural mail delivery at 

certain levels.6

USPS and other stakeholders have long recognized the need for USPS to 

reduce excess capacity in its mail processing network.

USPS has asked Congress to allow it to change the 

delivery standard from 6- to 5-day-a-week delivery.

• In 2002, USPS released a Transformation Plan that provided a 

comprehensive strategy to adapt the mail processing and delivery 

networks to changing customer demands, eroding mail volumes, and 

rising costs.7

• In 2003, a presidential commission examining USPS’s future issued a 

report recommending several actions that would facilitate USPS 

efforts to consolidate its mail processing network.

One key goal cited in the plan was for USPS to become 

more efficient by standardizing operations and reducing excess 

capacity in its mail processing and distribution infrastructure.

8 The commission 

determined that USPS had far more facilities than it needed and those 

facilities that it did require often were not used in the most efficient 

manner. The commission recommended that Congress create a 

Postal Network Optimization Commission modeled in part on the 

Department of Defense’s Base Realignment and Closure (BRAC) 

Commission, to make recommendations relating to the consolidation 

and rationalization of USPS’s mail processing and distribution 

infrastructure. We reported in 2010 that Congress has considered 

BRAC-type approaches to assist in restructuring organizations that 

are facing key financial challenges.9

 

5

39 U.S.C. § 3661(b). 

These commissions have gained 

6

These provisions have specified that “6-day delivery and rural delivery of mail shall 

continue at not less than the 1983 level.” See, e.g., Pub. L. No. 112-74, 125 Stat. 786 

(Dec. 23, 2011). 

7

USPS, United States Postal Service Transformation Plan (April 2002). 

8

President’s Commission on the United States Postal Service, Embracing the Future: 

Making the Tough Choices to Preserve Universal Mail Service (Washington, D.C.: July 31, 

2003). 

9

GAO, U.S. Postal Service: Strategies and Options to Facilitate Progress toward Financial 

Viability, GAO-10-455 (Washington, D.C.: Apr. 12, 2010). 
 

Page 8 GAO-12-470 U.S. Postal Service 

consensus and developed proposed legislative or other changes to 

address difficult public policy issues. The 2003 presidential 

commission also recommended that USPS exercise discipline in its 

hiring practices to “rightsize” and realign its workforce with minimal 

displacement. 

• The Postal Accountability and Enhancement Act (PAEA), enacted in 

2006, encouraged USPS to expeditiously move forward in its 

streamlining efforts and required USPS to develop a network plan 

describing its long-term vision for rationalizing its infrastructure and 

workforce. The plan was to include a strategy to consolidate its mail 

processing network by eliminating excess capacity and identifying 

cost savings.10

• In 2009, GAO added USPS to its list of high-risk areas needing 

attention by Congress and the executive branch to achieve broadbased transformation.

In June 2008, USPS provided its Network Plan to 

Congress, which we describe in more detail later in the report.

11 Given the decline in mail volume and 

revenue, we suggested that USPS develop and implement a broad 

restructuring plan—with input from PRC and other stakeholders and 

approval by Congress and the administration. We added that this plan 

should address how USPS plans to realign postal services (such as 

delivery frequency and delivery standards); better align its costs and 

revenues; optimize its operations, network, and workforce; increase 

mail volume and revenue; and retain earnings so that it can finance 

needed capital investments and repay its growing debt. In 2009, we 

testified that maintaining USPS’s financial viability as the provider of 

affordable, high-quality universal postal services would require actions 

in a number of areas, such as rightsizing its retail and mail processing

networks by consolidating operations and closing unnecessary 

facilities.12 Furthermore, in 2010 we provided strategies and options 

that Congress could consider to better align USPS costs with 

revenues and address constraints and legal restrictions that limit 

USPS’s ability to reduce costs and improve efficiency.13

 

10Pub. L. No. 109-435, § 302.

We reported 

11GAO, High-Risk Series: Restructuring the U.S. Postal Service to Achieve Sustainable 

Financial Viability, GAO-09-937SP (Washington, D.C.: July 2009). 

12GAO, U.S. Postal Service: Network Rightsizing Needed to Help Keep USPS Financially 

Viable, GAO-09-674T (Washington, D.C.: May 20, 2009).

13GAO-10-455. 
 

Page 9 GAO-12-470 U.S. Postal Service 

that USPS could close major mail processing facilities and relax 

delivery standards to facilitate consolidations and closures of mail 

processing facilities as options for reducing network costs.

From fiscal years 2006 through 2011, USPS data showed that it reduced 

mail processing and transportation costs by $2.4 billion—or 16 percent—

by reducing the number of mail processing work hours, facilities, and 

employees as shown in table 1. Specifically, USPS data show that it 

eliminated about 35 percent of its total mail processing work hours, 32 

percent of its mail processing facilities, and 20 percent of its full-time mail 

processing employees.

Table 1: Reported Decrease in Mail Processing Work Hours, Facilities, Employees, 

and Costs, from Fiscal Years 2006 to 2011 

2006 2011

Change from 

2006 to 2011

Percentage change 

from 2006 to 2011

Mail processing work 

hours (thousands) 

332,269 215,283 -116,986 -35 

Facilities 673 461 -212 -32

Full-time employees 192,411 154,325 -38,086 -20

Mail processing and 

transportation-related 

costsa

(dollars in billions) 

$15.6 $13.2 -$2.4 -16

Source: USPS data.

a

Mail processing costs include facility-, employee-, and transportation-related expenses. 

Although most of USPS’s cost savings during fiscal years 2006 through 

2011 came from reducing its work hours and workforce, USPS also took 

some actions to consolidate or close facilities and realign its 

transportation network. During this period, USPS reported that it focused 

on three core initiatives that together saved about $414 million.14

 

14USPS is required to prepare and submit to Congress a report on how postal decisions 

have affected or will affect its rationalization plans no later than 90 days after the end of 

each fiscal year. Pub. L. No. 109-435, § 302(c)(4) (Dec. 20, 2006). USPS has submitted 

these annual reports for fiscal years 2008 through 2011.

Past Actions to 

Reduce Excess 

Capacity
 

Page 10 GAO-12-470 U.S. Postal Service 

• Closed excess Remote Encoding Centers and Airport Mail Centers: 

USPS established Remote Encoding Centers to apply address bar 

codes to letters that the automated equipment in mail processing

plants could not read. As automated equipment improved, USPS 

relied less on Remote Encoding Centers. In fiscal year 2006, USPS 

reported that it had 12 Remote Encoding Centers, but only 2 by fiscal 

year 2011, resulting in savings of $10.3 million.15

• Consolidated Area Mail Processing (AMP) operations: According to a 

January 2012, USPS OIG report, USPS used its AMP study process 

to complete 100 consolidations from fiscal years 2006 through 2011.

USPS established 

Airport Mail Centers to expedite the transfer of mail to and from 

commercial air carriers. Excess capacity existed in these facilities 

because of declining mail volumes and because USPS transferred 

some mail from air transportation to its surface transportation network. 

To reduce excess capacity, USPS began transferring Airport Mail 

Center operations to processing and distribution facilities. This 

enabled USPS to reduce costs at Airport Mail Centers by closing or 

outsourcing operations and repurposing facilities. In fiscal year 2006, 

USPS reported that it had 77 Airport Mail Centers, but only 1 remains.

These closures resulted in savings of $108 million according to USPS.

16

 

15Data from USPS fiscal year 2006 and 2011 annual reports.

An AMP study examines the feasibility of consolidating some mail 

processing operations from one or more postal facilities to other 

facilities to improve operational efficiency. An AMP study that has 

been implemented may involve consolidating origination mail, or 

destinating mail, or both, to increase mail processing efficiency and 

reduce excess capacity on equipment, facilities, and work hours. 

USPS officials at headquarters used a nationwide model to identify 

opportunities for consolidating operations and used input from local 

area and district officials for an in-depth analysis of the feasibility of 

such consolidations, which informed the final decision on whether or 

16USPS’s OIG report determined that a valid business case existed for 31 of the 32 

implemented AMP studies (97 percent) reviewed, and that those cases were supported by 

adequate capacity, increased efficiency, reduced work hours, and mail processing costs, 

and improved service standards. United States Postal Service, Office of Inspector 

General, U.S. Postal Service Past Network Optimization Initiatives, CI-AR-12-003 

(Arlington, VA: Jan. 9, 2012). 
 

Page 11 GAO-12-470 U.S. Postal Service 

not to approve the AMP study.17

• Transformed the Bulk Mail Center network: In the past, mailers 

dropped their bulk mail at a network of 21 Bulk Mail Centers. USPS 

would then process and transport the bulk mail to its final destinations. 

By 2007, however, a significant portion of this mail bypassed the Bulk 

Mail Center network and was dropped at a processing plant closer to 

its final delivery point. In fiscal year 2009, USPS reported that it had 

begun transforming its 21 Bulk Mail Centers into Network Distribution 

Centers and completed the transformation in fiscal year 2010.

According to USPS data, it achieved 

savings of $167 million from AMP consolidations in fiscal years 2010 

and 2011.

18

Even after taking these actions to reduce excess capacity, USPS stated 

that excess capacity continues and structural changes are necessary to 

eliminate it. Three major reasons for continued excess capacity include 

the following:

According to USPS, this was designed to better align work hours with 

workload and improve transportation utilization, resulting in cost 

savings of $129 million.

• Accelerating declines in mail volume: Since 2006, declines in mail 

volume have continued to worsen. For example, single-piece FirstClass Mail has dropped by almost 19 billion pieces. Furthermore, 

USPS’s volume forecasts to 2020 indicate that the decline in FirstClass Mail volume will not abate going forward but instead will

continue—from 73 billion pieces in 2011 to 39 billion pieces in 2020—

further exacerbating the problem of costly excess capacity (see fig. 3).

Declining First-Class Mail volume is primarily attributed to the 

increasing number of electronic communications and transactions.

The recent recession and other economic difficulties have further 

accelerated mail volume decline.

 

17In 2010, we analyzed 32 AMP studies that were implemented, approved, or not 

approved since the beginning of fiscal year 2009, and determined that USPS had followed 

its realignment guidance by completing each step of the process and consistently applying 

its criteria in its reviews. GAO, Mail Processing Network Initiatives Progressing, and 

Guidance for Consolidating Area Mail Processing Operations Being Followed, 

GAO-10-731 (Washington, D.C.: June 16, 2010). 

18United States Postal Service, Meeting the Challenge: The Power of the Mail, fiscal year 

2009 annual report.
 

Page 12 GAO-12-470 U.S. Postal Service 

Figure 3: USPS First-Class Mail Volume Data and Forecast, Billions of Pieces, 

Fiscal Years 2010-2020

• Continuing automation improvements: These improvements have 

enabled USPS to sort mail faster and more efficiently. For example, 

USPS’s Flats Sequencing System machines automatically sort larger 

mail pieces (e.g., magazines and catalogs) into the order that they will 

be delivered. At the end of fiscal year 2011, USPS reported that it had 

deployed 100 flats sequencing machines to 46 sites and the Flats 

Sequencing System covered nearly 43,000 delivery routes and 

processed an average of almost 60 percent of flats at more than half 

of those sites.

• Increasing mail preparation and transportation by mailers: While most 

First-Class Mail goes through USPS’s entire mail processing network, 

around 83 percent of Standard Mail is destination entered—that is, 

business mailers enter mail within a local area where it will be 

delivered, bypassing most of USPS’s mail processing network and 
 

Page 13 GAO-12-470 U.S. Postal Service 

long-distance transportation.19 The percentage of mail that is 

destination entered has increased 16 percent over the last decade.

On December 15, 2011, USPS asked PRC to review and provide an 

advisory opinion on its proposal to change its delivery service standards, 

primarily by changing its delivery standards to eliminate overnight delivery 

service for most First-Class Mail and Periodicals.20

Table 2: Proportion of First-Class Mail Volume by Delivery Service Standard as 

Proposed by USPS

USPS has stated that 

these changes in delivery service standards are a necessary part of its 

plan to consolidate its mail processing operations, workforce, and 

facilities. Under this plan, the 42 percent of First-Class Mail that is 

currently delivered within 1 day would be delivered within 2 to 3 days. See 

table 2 for the percentage of First-Class Mail volume that is intended to 

be delivered within the current and proposed delivery service standards.

Service standard Current percentage Proposed percentage

1-day 42 0 

2-day 27 51

3-day 32 49

4-day 0.3 0.3

Source: USPS.

Note: Totals do not add to 100 percent because of rounding. 

USPS’s plan included details on facilities, staff, equipment, and 

transportation that USPS would eliminate as a result of the change in 

delivery service standards and the estimated cost savings from these 

changes. On the basis of an analysis of fiscal year 2010 costs, USPS 

estimated that service standard changes centered on eliminating 

overnight service for significant portions of First-Class Mail and 

 

19Mail that is destination entered is sorted and transported by mailers to USPS facilities 

that are generally closer to the final destination where the mail will be delivered. 

20Whenever USPS proposes a change in the nature of postal services that affects service 

on a nationwide basis, USPS must request a nonbinding advisory opinion on the change 

from PRC. 39 U.S.C. § 3661(b). First-Class Mail and Periodicals that meet specified mail 

preparation requirements and originate and destinate within designated areas may still be 

eligible for overnight service. 

USPS Plan to 

Consolidate Its Mail 

Processing Network
 

Page 14 GAO-12-470 U.S. Postal Service 

Periodicals could save approximately $2 billion annually when fully 

implemented. To save this amount, USPS stated that it plans to use the 

already established AMP study process, which was designed to achieve 

cost savings through the consolidation of operations and facilities with 

excess capacity. USPS has stated that the AMP process provides 

opportunities for USPS to reduce costs, improve service, and operate as 

a leaner, more efficient organization by making better use of resources, 

space, staffing, processing equipment, and transportation. In a February 

2012 press release, USPS announced that it would begin consolidating or 

closing 223 processing facilities during the summer and fall of 2012—

contingent on a final decision to change service standards, which it said it 

expects to complete sometime in March.21 USPS added that it will not 

close any facilities prior to May 15, 2012, as agreed upon with some 

Members of Congress. PRC is currently reviewing the details of USPS’s 

proposal to revise service standards, the estimated cost savings, the 

potential impacts on both senders and recipients, and USPS’s justification 

for the change to advise USPS and Congress on the merits of USPS’s 

proposal. PRC procedures enable interested stakeholders, including the 

public, to file questions and comments to PRC regarding USPS’s 

proposal.22

USPS has stated that consolidating its networks is unachievable without 

relaxing delivery service standards. The Postmaster General testified last 

September that such a change would allow for a longer operating window 

to process mail, which would enable USPS to reduce unneeded facilities, 

work hours, workforce positions, and equipment. USPS identified 

scenarios looking at how constraints within the mail processing network 

affected excess capacity and found that if the current standard for 

overnight First-Class Mail service was relaxed, plant consolidation could 

occur, which would more fully maximize the use of facilities, labor, and 

equipment. USPS estimates of excess capacity it wants to eliminate 

based on proposed changes to its overnight delivery service standards 

are shown in table 3.

PRC expects to issue its advisory opinion on USPS’s proposal 

after the time for obtaining public input is concluded in July 2012.

 

21USPS’s website lists these specific processing facilities. See 

http://about.usps.com/what-we-are-doing/our-future-network/assets/pdf/communications-li

st-022212.pdf. 

22Since PRC is examining USPS’s proposal and cost estimates for revising its delivery 

service standards, we did not assess the reliability of USPS’s database used for 

estimating the cost savings. 
 

Page 15 GAO-12-470 U.S. Postal Service 

Table 3: 2011 USPS Estimate of Mail Processing Excess Capacity Based on 

Proposed Changes in First-Class and Periodical Delivery Standards

Processing network 

element 2011 network Excess capacity

Facilities 461 processing facilities 223 processing facilities

Workforce 154,325 positions Up to 35,000 positions

Equipment About 8,000 pieces of mail 

processing equipment

3,000 pieces of mail 

processing equipment

Transportation 1.5 billion trips between 

processing facilities

376 million trips between 

processing facilities 

Source: USPS.

USPS estimated that it could consolidate, all or in part, 223 processing 

facilities based on its proposed changes in First-Class and Periodical 

delivery service standards. USPS has also specified that changing 

delivery service standards would enable it to remove up to 35,000 mail 

processing positions as it consolidates operations into fewer facilities. The 

number of employees per facility ranges from 50 to 2,000. Reducing work 

hours and the size and cost of its workforce will be key for USPS, since 

its workforce generates about 80 percent of its costs. In addition, USPS 

entered into a collective bargaining agreement with the American Postal 

Workers Union in April 2011 that established a two-tier career pay 

schedule for new employees that is 10.2 percent lower than the existing 

pay schedule. This labor agreement also allowed USPS to increase its 

use of noncareer employees from 5.9 percent to 20 percent, thereby 

enabling USPS to hire more lower-paid noncareer employees when 

replacing full-time career employees.

USPS has also pointed out that it has about 8,000 pieces of equipment 

used for processing mail, but could function with as few as 5,000 pieces if 

it adopts the proposed delivery service standards. Declining mail volume 

has resulted in a reduced need for machines that sort mail using Delivery 

Point Sequencing (DPS) programs, on a national level, by approximately 

one-half.23

 

23DPS enables USPS to sort the next day’s destination letter- and flat-shaped mail pieces 

into the precise order in which they will be delivered on carrier routes. After mail is run 

through DPS, it is transported to delivery units, where carriers take it for delivery. 

According to USPS, however, a reduction of Delivery Point 

Sequencing machinery use would allow for greater reliance on machinery 

that incurs lower maintenance costs. In addition, much of this equipment 

Facilities and Workforce

Equipment
 

Page 16 GAO-12-470 U.S. Postal Service 

is currently used to sort mail only 4 to 6 hours per day. USPS plans to 

optimize the use of its remaining equipment to sort mail by increasing its 

maximum usage up to 20 hours per day.

USPS estimates that it makes more transportation trips than are currently 

necessary. USPS’s transportation network includes the movement of mail 

between origin and destination processing plants. USPS, however, has 

estimated that changing its delivery service standards as proposed in 

December 2011 would enable it to reduce these facility-to-facility trips by 

about 25 percent, or 376 million trips.

Relaxing delivery standards and consolidating its mail processing network 

is just one part of USPS’s overall strategy to achieve financial stability. On 

the revenue side, USPS has noted that it cannot increase mail prices 

beyond the Consumer Price Index cap, and price increases cannot remedy 

the revenue loss resulting from First-Class Mail volume loss. USPS has 

also reported that it faces restrictions on entering new lines of business and 

does not see any revenue growth solution to its current financial problems. 

In February 2012, USPS announced a 5-year business plan to achieve 

financial stability that included a goal of achieving $22.5 billion in annual 

cost savings by the end of fiscal year 2016. USPS’s proposed changes in 

its mail processing and transportation networks are included in its 5-year 

business plan, as are initiatives to save 

1. $9 billion in network operations, of which $4 billion would come from 

consolidating its mail processing and transportation networks;

2. $5 billion in compensation and benefits; and

3. $8.5 billion through legislative changes, such as moving to a 5-day 

delivery schedule, and resolving funding issues associated with 

USPS’s retiree health benefits.

At the same time, USPS’s 5-year plan would also reduce the overall size 

of the postal workforce by roughly 155,000 career employees, of which up 

to 35,000 would come from consolidating the mail processing network, 

with many of those reductions expected to result from attrition. According 

to the 5-year plan, half of USPS’s career employees—283,000 

employees—will be retirement eligible by 2016. In March 2010, USPS 

presented a detailed proposal to PRC to move from a 6-day to a 5-day 

Transportation
 

Page 17 GAO-12-470 U.S. Postal Service 

delivery schedule to achieve its workforce and cost savings reduction 

goals.24 USPS projected that its proposal to move to 5-day delivery by 

ending Saturday delivery would save about $3 billion annually and would 

reduce mail volume by less than 1 percent. However, on the basis of its 

review, PRC estimated a lower annual net savings—about $1.7 billion 

after a 3-year phase-in period—as it noted that higher revenue losses 

were possible.25 In February 2012, USPS updated its projected net 

savings to $2.7 billion after a 3-year implementation period. Implementing 

5-day delivery would require USPS to realign its operations network to 

increase efficiency, maintain service, and address operational issues.

Some business mailers have expressed concern that reducing processing 

facilities as a result of eliminating overnight delivery service could 

increase costs for business mailers who will have to travel farther to drop 

off their mail. In addition, business mailers have expressed concern that 

service could decline as USPS plans to close an unprecedented number 

of processing facilities in a short period. USPS employee associations 

have said that the proposed changes would reduce mail volume and 

revenue, thus making USPS’s financial condition worse.

Business mailers have commented that such a change in delivery service 

standards and postal facility locations could shift mail processing costs to 

them and reduce the value of mail for their businesses. While many of 

USPS’s customers who are business mailers indicated they would be 

willing to accept the service standard changes and understood the need 

for such a change, several mailers noted that it is never good when an 

 

24Implementing 5-day delivery would require congressional approval, since USPS’s 

annual appropriations have required USPS to provide 6-day delivery at 1983 levels. 

25PRC noted USPS improperly deflated mailers’ reported volume decline projections and 

that the reported declines should not have been reduced, and determined, based on 

USPS’s survey data, that it is likely to lose almost $600 million in net revenue because of 

mailer response to the proposal. See Postal Regulatory Commission, Advisory Opinion on 

Elimination of Saturday Delivery, Docket No. N2010-1 (Washington, D.C.: March 24, 

2011). 

Stakeholder Issues 

and USPS Challenges

Stakeholder Issues with 

Mail Processing Changes

Potential Increased Costs and 

Service Decline for Business 

Mailers
 

Page 18 GAO-12-470 U.S. Postal Service 

organization reduces services. As a result of USPS’s plan, businesses 

using bulk First-Class Mail, Standard Mail, or Periodicals may have fewer 

locations where mail can be entered and may therefore need to transport 

it to locations different from those now in use. Furthermore, businesses 

using Standard Mail may have to transport their bulk mail to other 

locations to take advantage of discounts. USPS officials told business 

mailers in February 2012, when it announced the facilities it planned to 

close, that it did not plan immediate changes to the locations where 

business mailers drop off their mail or to the associated discounts. USPS 

officials told us that they plan to retain business mail locations at their 

current locations or in close proximity. 

Additionally, businesses that publish Periodicals, like daily or weekly 

news magazines, have expressed concern over the elimination of 

overnight delivery leading to deliveries not being made in a timely fashion.

Delivery delays could result in customers canceling their subscriptions, 

thereby reducing the value of mail. These business mailers have 

indicated that they will most likely accelerate shifting their hard copy mail 

to electronic communications or otherwise stop using USPS if it is unable 

to provide reliable service as a result of these changes. Business mailers 

have also stated their concern that service could be significantly disrupted 

as a result of closing an unprecedented number of processing facilities by 

2016. If service declines, mail users stated they are likely to lose 

confidence in the medium and choose to move volume and revenue from 

the mail to other media. Business mailers have stressed the need for 

USPS to put forward and share with stakeholders a comprehensive, 

detailed plan for consolidating its network and changes in service 

standards that explains to mail users what it intends to do, what changes 

will occur, and milestones and timelines for measuring progress in how it 

is achieving its plans. In sum, a key message from USPS customers is 

that while many support efforts to consolidate the mail processing

network, it is imperative for USPS to provide consistent mail delivery and 

work with mailers to keep their costs down.

Employee associations have expressed concern that USPS’s proposed 

changes may result in even greater losses in mail volume and revenue, 

which would further harm USPS financially. The National Association of 

Letter Carriers commented that downgrading service would serve only to 

drive customers away, reduce revenue and compromise potential growth. 

Further, the American Postal Workers Union and the National Rural Letter 

Carriers’ Association commented that USPS’s proposal would degrade 

existing USPS products, limit USPS’s ability to introduce new products, 

place the USPS at a distinct competitive disadvantage, and severely 

Employee Concern That 

Proposed Changes May 

Exacerbate Financial Problems
 

Page 19 GAO-12-470 U.S. Postal Service 

hamper its ability to accommodate growth. USPS responded to these 

comments by acknowledging that its proposal would, to some degree, 

reduce the value of the mail to customers, but on balance is in the longterm interests of USPS to help maintain its viability for all customers into 

the future. USPS estimated that its proposal would result in additional 

volume decline of almost 2 percent, revenue decline of about $1.3 billion, 

with a net annual benefit of about $2 billion.

USPS faces major challenges in two areas related to consolidating its mail 

processing network and has told Congress that it needs legislative action to 

address them. Specifically, these challenges include the following:

Lack of flexibility to consolidate its workforce: USPS stated it must be able 

to reduce the size of its workforce in order to ensure that its costs are less 

than revenue. Action in this area is important since USPS’s workforce 

accounts for about 80 percent of its costs. The Postmaster General testified 

last September, however, that current collective bargaining agreements 

prevent USPS from moving swiftly enough to achieve its planned workforce 

reductions. In addition, USPS has requested legislative action to eliminate 

the layoff protections in its collective bargaining agreements. The key 

challenges in this area include the following:

• No-layoff clauses: About 85 percent of USPS’s 557,000 employees 

are covered by collective bargaining agreements that contain, among 

other provisions, employment protections such as no-layoff 

provisions. Currently, USPS’s collective bargaining agreements with 

three of its major unions contain a provision stating that postal 

bargaining unit employees who were employed as of September 15, 

1978, or, if hired after that date, have completed 6 years of continuous 

service are protected against any involuntary layoff or reduction in 

force.26

 

26USPS’s labor force is primarily represented by the American Postal Workers Union 

(about 222,000 members), National Association of Letter Carriers (about 286,000 

members), National Postal Mail Handlers Union (about 50,000 members), and National 

Rural Letter Carriers’ Association (about 110,000 members).

Furthermore, USPS’s memorandum of understanding with the 

American Postal Workers Union extends this no-layoff protection to 

cover those employed as of November 20, 2010—even if those 

employees were not otherwise eligible for no-layoff protection. The 

collective bargaining agreement with its fourth major union—the 

USPS Challenges to 

Consolidating Mail 

Processing
 

Page 20 GAO-12-470 U.S. Postal Service 

National Rural Letter Carriers’ Association—states that that no 

bargaining unit employees employed in the career workforce will be 

laid off on an involuntary basis during the period of the agreement.

The no-layoff clauses will be a challenge to USPS primarily if it cannot 

achieve its workforce reductions through attrition. With the large 

number of employees eligible for retirement, USPS has a window of 

opportunity to avoid layoffs of non-bargaining unit employees who are 

not eligible for no-layoff protection.

• Fifty-mile limits on employee transfers: In 2011, the American Postal 

Workers Union (which represents USPS clerks, maintenance 

employees, and motor vehicle service workers) and USPS 

management negotiated a 4-year agreement that limits transferring 

employees of an installation or craft to no more than 50 miles away. If 

USPS management cannot place employees within 50 miles, the 

parties are to jointly determine what steps may be taken, which 

includes putting postal employees on “standby,” which occurs when 

workers are idled but paid their full salary because of reassignments 

and reorganization efforts. USPS may face challenges in capturing 

cost savings as a result of its initiatives to reduce excess capacity 

because of its limited ability to move mail processing clerks from a 

facility where workloads no longer support the number of clerk 

positions needed to facilities with vacant positions.

Collective bargaining agreements have expired for three of the four major 

postal unions, and because of impasses in negotiations, USPS has 

moved to arbitration with these unions. In 2011, USPS reported that it had 

no assurance that it would be able to negotiate collective bargaining 

agreements with its unions that would result in a cost structure that is 

sustainable within current and projected future mail revenue levels. It 

noted that there is no current mandate requiring an arbitrator to consider 

the financial health of USPS in its decision and an unfavorable arbitration 

decision could have significant adverse consequences on its ability to 

meet future financial obligations.

Resistance to facility closures: USPS is facing resistance to its plans to 

consolidate or close postal facilities from Members of Congress, affected 

communities, and its employees and has requested congressional action to 

enable it to consolidate and close facilities. We reviewed numerous 

comments from Members of Congress, affected communities, and 

employee organizations that have expressed opposition to closing facilities. 

Such concerns are particularly heightened for postal facilities identified for 

closure that may consolidate functions to another state, causing political 
 

Page 21 GAO-12-470 U.S. Postal Service 

leaders to oppose and potentially prevent such consolidations. For 

example, Members of Congress have resisted a recent proposal to move 

certain processing functions from its Rockford, Illinois, Processing and 

Distribution Center to a processing facility in Madison, Wisconsin. This 

proposal would eliminate the need for 82 employees (77 bargaining unit 

and 5 management staff) in Rockford that USPS would need to transfer 

into new roles or to another facility. The president of the Springfield 

Chamber of Commerce sent a letter to PRC to protest USPS’s planned 

consolidation of the Springfield, Illinois, processing facility into St. Louis, 

Missouri, stating that this move would reduce service quality and increase 

costs, affecting its members’ profitability and operations. He added that 

Springfield would lose up to 300 jobs in an area of the community that 

qualifies as an “Area of Greatest Need,” according to the U.S. Department 

of Housing and Urban Development.

In contrast, however, other business mailers and Members of Congress 

have expressed support for consolidating the mail processing network to 

reduce costs. Some business mailers have stated that USPS needs to take 

cost-saving action to reduce the need for significant postal rate increases. 

A significant postal increase would have a detrimental financial impact on 

mailers by decreasing mail’s return on investment and may also accelerate 

mailers’ shift toward electronic communication. In addition, as we discuss 

below, some Members of Congress have proposed legislation supporting 

USPS efforts to consolidate its mail processing network.

Other stakeholders, including USPS’s employee associations, have 

questioned whether USPS needs to make drastic changes by reducing 

service and the size of its networks and workforce, since they believe that 

USPS’s financial crisis is, at least in part, artificial. They point out that most of 

USPS’s losses since fiscal year 2006 are due to the requirement to prefund 

its future retiree health benefits. In 2006, PAEA established a 10-year 

schedule of USPS payments into a fund (the Postal Service Retiree Health 

Benefits Fund) that averaged $5.6 billion per year through fiscal year 2016.27

 

27Pub. L. No. 109-435, § 803(a).

Employee associations have stated that such a requirement is exceptional 

and unfair, since no other federal agency is forced to prefund its employees’ 

health benefits at this level and no company has such a mandate. They have 

suggested that instead of reducing costs, Congress should eliminate the 

prefunding requirements, return surpluses in its retirement accounts, and 
 

Page 22 GAO-12-470 U.S. Postal Service 

allow USPS to earn additional revenue by offering new services. USPS 

responded that given the multibillion-dollar deficits that it has experienced in 

each of the last 5 years, and given the over $14 billion loss it expects in fiscal 

year 2012, capturing cost savings wherever possible will be vital to USPS’s

financial viability.

If USPS cannot increase revenues enough to eliminate its net losses, it 

will have to do more to reduce costs. To address USPS prefunding 

issues, we testified that deferring some prefunding of USPS’s retiree 

health benefits would serve as short-term fiscal relief. However, deferrals 

also increase the risk that USPS will not be able to make future payments 

as its core business declines. Therefore, we concluded that it is important 

for USPS to continue funding its retiree health benefit obligations—

including prefunding these obligations—to the maximum extent that its 

finances permit.28

USPS has stated that it needs action from Congress to address 

restrictions that limit its ability to consolidate its mail processing network, 

including annual appropriations provisions that mandate 6-day delivery,29

As of April 2012, the House of Representatives and Senate committees 

with USPS oversight responsibility have passed bills to help USPS 

achieve financial viability. These bills, as well as other postal reform bills, 

include provisions that could affect USPS’s ability to consolidate its mail 

processing network. Table 4 summarizes the key provisions of the House 

of Representatives bill—H.R. 2309, the Postal Reform Act of 2011-—and 

Senate bill—S. 1789, the 21st Century Postal Service Act.

and granting USPS authority to determine delivery frequency. Some 

Members have asked USPS to postpone actions to consolidate mail 

processing facilities so it would not preempt Congress on postal reform.

In response to the Members’ request, USPS agreed last December to 

place a moratorium on closing facilities until May 15, 2012.

 

28GAO-11-926T. 

29These provisions have specified that “6-day delivery and rural delivery of mail shall 

continue at not less than the 1983 level.” See e.g., Pub. L. No. 112-74, 125 Stat. 786.

Pending Legislation to 

Address USPS Challenges
 

Page 23 GAO-12-470 U.S. Postal Service 

Table 4: Summary of Key Pending Legislation Related to Optimizing Mail 

Processing Network

Pending legislation

Legislative provisions on USPS processing network 

optimization effort

21st Century Postal 

Service Act, S. 1789, 

112th Cong. (2011) 

• Requires USPS to complete a study prior to the closure of a 

processing facility, which evaluates the option of downsizing 

rather than closing the facility.

• Prohibits USPS from implementing its plan to eliminate 

Saturday delivery for at least 2 years. The implementation 

could move forward only if certain conditions are met, 

including developing remedies for affected customers, 

making full use of its authority to increase revenue and 

reduce costs, and requiring GAO to evaluate the financial 

need for such change.

• Requires that arbitrators deciding a contract dispute between 

USPS and its labor organizations take into consideration 

USPS’s financial condition, among other considerations.

• Authorizes use of surplus funding from retirement accounts 

to offer buyouts of up to $25,000 for eligible employees.

Postal Reform Act of 

2011,

H.R. 2309, 112th 

Cong. (2011) 

• Creates the Commission on Postal Reorganization, which 

would be tasked with recommending facility closures.

• Requires USPS to develop and submit a plan to the 

Commission on Postal Reorganization for the closure of mail

processing and other facilities and offices. Requires the 

commission to transmit the plan to Congress, publish the 

report containing the commission’s findings in the Federal 

Register, and hold public hearings. Requires USPS to 

implement the closure or consolidation of postal facilities and 

offices recommended by the commission unless Congress 

enacts a joint resolution disapproving the commission’s 

recommendations.

• Authorizes USPS to declare up to 12 non-mail delivery days 

annually so long as it is required to deliver mail 6 days per 

week.a

• Reforms the collective bargaining process to contain a 

mediation-arbitration process. Requires any arbitration 

decision to take into account both pay comparability with the 

private sector and USPS’s financial condition. Prohibits 

collective bargaining agreements from containing provisions 

that restrict the use of reduction-in-force procedures, which 

could include no-layoff clauses.

Source: GAO analysis. 

a

Within 6 months of enactment, USPS would be allowed to submit a proposal to move to a 5-day 

delivery schedule and can implement such a delivery schedule 90 days after PRC renders an 

advisory opinion, notwithstanding any other provision of law. 

Pending legislation originating in the Senate (S.1789) includes provisions 

that would affect USPS’s ability to consolidate its networks by delaying 

USPS’s move to 5-day delivery by 2 years and requiring USPS to 
 

Page 24 GAO-12-470 U.S. Postal Service 

consider downsizing rather than closing facilities. Delaying USPS’s move 

to a 5-day delivery schedule could make it difficult for USPS to save 

$22.5 billion by 2016. On the other hand, the Senate bill includes a 

requirement for arbitrators to consider USPS’s financial condition and 

could facilitate attrition by allowing USPS to use surplus pension funds to 

pay for employee buyouts of up to $25,000 for as many as 100,000 

eligible postal workers. Such buyouts may make it easier to reduce 

USPS’s workforce in facilities targeted for closure.

Another legislative proposal, originating in the House of Representatives, 

(H.R. 2309) includes provisions that would enhance USPS’s ability to 

consolidate its mail processing network by allowing changes in service 

standards and using a BRAC framework to approve a consolidation plan, 

address some of the political resistance to closing postal facilities, and 

potentially reform the collective bargaining process. The proposed 

Commission on Postal Reorganization could broaden the current focus on 

individual facility closures—which are often contentious, time–consuming, 

and inefficient—to a broader networkwide restructuring, similar to the 

BRAC approach. In other restructuring efforts where this approach has 

been used, expert panels have successfully informed and permitted 

difficult restructuring decisions, helping to provide consensus on 

intractable decisions. As previously noted, the 2003 Report of the 

President’s Commission on the USPS also recommended such an 

approach relating to the consolidation and rationalization of USPS’s mail 

processing and distribution infrastructure. We also reported in 2010 that 

Congress may want to consider this approach to assist in restructuring 

organizations that are facing key financial challenges.30 In addition, the 

House bill authorizes USPS to declare up to 12 non-mail delivery days 

annually so long as USPS is required to deliver mail 6 days per week and 

reforms the collective bargaining process, including requiring arbitrators 

to consider USPS’s financial condition.

Developing an optimal mail processing network will require both 

congressional support and USPS leadership. Moreover, we have 

previously reported that Congress and USPS need to reach agreement 

on a comprehensive package of actions to improve USPS’s financial 

viability. In these previous reports, we provided strategies and options 

 

30GAO-10-455. 

Concluding 

Observations
 

Page 25 GAO-12-470 U.S. Postal Service 

that Congress could consider to better align USPS costs with revenues 

and address constraints and legal restrictions that limit USPS’s ability to 

reduce costs and improve efficiency. Consequently, we are not making 

new recommendations or presenting a matter for Congress to consider at 

this time. Without congressional action to help USPS address its financial 

problems, USPS will be limited in the amount of rate increase it may seek 

and may fall even further into debt. USPS had $2 billion remaining on its 

$15 billion statutory borrowing limit at the end of fiscal year 2011. It is now 

abundantly clear that the postal business model must be fixed given the 

dramatic and estimated decline in volume, particularly for First-Class Mail. 

If Congress prefers to retain the current delivery service standards and 

associated network, decisions will be needed about how USPS’s costs for 

providing these services will be paid, including additional cost reductions 

or revenue sources.

We provided a draft of this report to USPS for review and comment.

USPS had no comments, but provided technical clarifications, which we 

incorporated into the report as appropriate.

We are sending copies of this report to the appropriate congressional

committees, the Postmaster General, and other interested parties. In 

addition, the report is available at no charge on GAO’s website at 

http://www.gao.gov. 

If you or your staff have any questions on this report, please contact me 

at (202) 512-2834 or stjamesl@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Contact information and key contributors to the report are 

listed in appendix II.

Lorelei St. James

Director

Physical Infrastructure Issues

Agency Comments
Appendix I: Objectives, Scope, and 

Methodology

Page 26 GAO-12-470 U.S. Postal Service 

This report addresses (1) past actions the U.S. Postal Service (USPS) 

has taken to reduce excess capacity, (2) USPS’s plans to consolidate its 

mail processing network, and (3) key stakeholder issues and challenges 

USPS faces in consolidating its mail processing network.

To describe what actions USPS has taken to reduce excess capacity, we 

obtained data from USPS related to changes in its mail processing

network, workforce, and costs as well as an updated 10-year volume 

forecast for First-Class Mail. To calculate the 5-year cost savings that 

USPS achieved, we took the difference of the network costs for fiscal 

years 2006 and 2011 that USPS reported to us. We also obtained data 

from USPS and USPS Office of Inspector General (OIG) reports 

regarding cost savings related to USPS initiatives to reduce excess 

capacity. Further, we reviewed USPS annual reports to Congress and its 

network plans as section 302 of the Postal Accountability and 

Enhancement Act of 2006 requires USPS to submit; related GAO and 

USPS OIG reports, as well as other relevant studies relating to reducing 

excess capacity in USPS’s mail processing network.

To examine USPS’s future plans to consolidate its mail processing

network, we reviewed USPS’s December 2011 proposal to change 

delivery service standards and its plan to consolidate its mail processing

network by reducing facilities, staff, equipment, and transportation 

resources. We also reviewed USPS’s 5-year business plan to profitability 

issued in February 2012. We interviewed USPS senior management and 

local facility mangers in Illinois about the current processing network and 

future plans for that network. We also reviewed documents in the ongoing 

Postal Regulatory Commission (PRC) review of USPS’s proposed 

changes in service standards and its plan for consolidating its mail 

processing network. PRC is reviewing USPS’s estimated cost savings, 

service impacts, and public input on the proposed service standard 

changes and expects to complete its review sometime after July 2012.

To determine key issues and challenges USPS faces in consolidating its 

mail processing network, we reviewed and summarized concerns from 

postal stakeholders responding to the USPS’s September 2011 Federal 

Register notice on its proposed changes to service standards for FirstClass Mail, Periodicals, and Standard Mail. We also interviewed USPS 

officials, and reviewed stakeholder testimonies and published letters from 

Members of Congress commenting on USPS plans to change delivery 

service standards and close facilities. We further reviewed pending 

legislative proposals that could affect USPS’s efforts to address excess 

capacity and consolidate its mail processing network.

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 27 GAO-12-470 U.S. Postal Service 

We conducted this performance audit from April 2011 through April 2012 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 28 GAO-12-470 U.S. Postal Service 

Lorelei St. James, (202) 512-2834 or stjamesl@gao.gov

In addition to the individual named above, Teresa Anderson (Assistant 

Director), Samer Abbas, Joshua Bartzen, Erin R. Cohen, Sara Ann 

Moessbauer, Amy Rosewarne, and Crystal Wesco made key 

contributions to this report.

Appendix II: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments

(546050)
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