CONTRACT POSTAL 

UNITS

Analysis of Location, 

Service, and Financial 

Characteristics

Report to the Chairman, Committee on 

Oversight and Government Reform, 

House of Representatives

November 2012

GAO-13-41

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-13-41, a report to the 

Chairman, Committee on Oversight and 

Government Reform, House of 

Representatives

November 2012

CONTRACT POSTAL UNITS 

Analysis of Location, Service, and Financial 

Characteristics 

Why GAO Did This Study

USPS’s declining revenues have 

become insufficient to cover its costs. 

Its strategies to address losses include 

reducing hours of service at many post 

offices and expanding the use of post 

office alternatives, including CPUs. 

CPUs are independent businesses

compensated by USPS to sell most of 

the same products and services as 

post offices at the same price. 

Although CPUs can provide important 

benefits, the number of CPUs has 

fallen from 5,290 in fiscal year 2002 to 

3,619 in fiscal year 2011. As 

requested, this report discusses: 

(1) how CPUs supplement USPS’s 

post office network, (2) USPS’s 

revenue from CPUs and compensation

to them from fiscal years 2007 to 2011, 

and (3) challenges USPS might face if 

it increases its use of CPUs. GAO

analyzed USPS data on CPU 

locations, revenues, compensation, 

and hours of operation as well as on 

post office locations and hours of 

operation. GAO interviewed CPU 

owners and USPS staff in charge of 

managing CPUs.

What GAO Recommends

GAO previously recommended that

USPS develop and implement a plan 

to modernize its retail network. GAO is 

not making any new recommendations 

at this time, but believes that it is 

important for USPS to consider the 

role of CPUs as USPS works to 

develop and implement its retail

network plan and control costs. In 

commenting on a draft of this report, 

USPS provided information on its 

efforts to provide convenient access to 

its products and services.

What GAO Found

Although contract postal units (CPUs) have declined in number, their nationwide 

presence in urban and rural areas supplements the U.S. Postal Service’s (USPS)

network of post offices by providing additional locations and hours of service. 

More than 60 percent of CPUs are in urban areas where they can provide 

customers nearby alternatives for postal services when they face long lines at 

local post offices. Over one-half of CPUs are located less than 2 miles from the 

nearest post office. Urban CPUs are, on average, closer to post offices than rural 

CPUs. CPUs are also sometimes located in remote or fast-growing areas where 

post offices are not conveniently located or may not be cost effective. CPUs 

further supplement post offices by providing expanded hours of service. On 

average, CPUs are open 54 hours per week, compared to 41 hours for post 

offices. In addition, a greater proportion of CPUs than post offices are open after 

6 p.m. and on Sundays. These factors are important as USPS considers 

expanding the use of post office alternatives to cut costs and maintain access to 

its products and services.

Total USPS revenues from CPUs fell from fiscal years 2007 to 2011, while 

USPS’s compensation to them increased during this period; nonetheless, CPUs 

generated high revenues relative to USPS’s compensation to CPUs. Declines in 

mail volumes and the number of CPUs drove revenues down 9 percent, from 

$672 million to $611 million from fiscal years 2007 to 2011. USPS total 

compensation to CPUs increased 6 percent during this period, from $76 million to 

$80 million; however, after increasing from fiscal year 2007 to 2008, 

compensation decreased every fiscal year from 2008 to 2011. According to 

USPS officials, the overall increase was because of increased compensation to 

individual CPUs and decreasing numbers of less expensive CPUs. In fiscal year 

2011, after compensating CPUs, USPS retained 87 cents of every dollar of CPU 

revenue. USPS has a target to retain 80 cents for every dollar in revenue for 

individual CPUs. USPS did not meet this target at many individual CPUs—

especially ones in rural areas. In fact, 49 percent of CPUs that USPS 

compensates a fixed amount regardless of their sales in small-town rural areas—

where CPUs may serve as the de facto post office—generated less postal 

revenue than the CPUs received in compensation from USPS. CPU revenues 

and compensation are important factors as USPS seeks a more sustainable cost 

structure. 

Limited interest from potential partners, competing demands on USPS staff 

resources, and changes to USPS’s retail network may pose challenges to 

USPS’s use of CPUs. USPS has no current plans to strategically increase the 

number of CPUs as part of its retail network transformation. However, a number 

of district USPS staff charged with identifying the need for CPUs told us they see 

a larger role for CPUs. Nevertheless, USPS may face limited interest from 

potential partners as many may not want to operate CPUs because of concerns 

over CPU contract requirements such as space requirements and prohibitions on 

selling products and services that compete with USPS. Many USPS district retail 

managers we spoke with in charge of opening CPUs said that finding partners to 

operate CPUs could be difficult. Furthermore, many of these managers said that 

they now have fewer staff and less time and, as a result, do not have the 

resources to manage opening CPUs to meet the need they have identified. 

View GAO-13-41. For more information, 

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

stjamesl@gao.gov. 
Page i GAO-13-41 USPS Contract Postal Units

Letter 1 

Background 4

USPS Uses CPUs to Provide Retail Services at Additional Locations 

and Hours 10

Trends in CPU Contract Types, Revenues, and Compensation 17

USPS’s Future Use of CPUs May Pose Challenges 24

Concluding Observations 26

Agency Comments 27

Appendix I Scope and Methodology 28

Appendix II Number of Contract Postal Units and Post Offices by State 32

Appendix III Comments from the U.S. Postal Service 34

Appendix IV GAO Contact and Staff Acknowledgments 37

Tables

Table 1: New and Closed CPUs, Fiscal Years 2007 to 2011 11

Table 2: Distribution of CPUs by Distance to Closest Post Office, as 

of March 30, 2012 12

Table 3: Distribution of Post Offices Being Considered for Reduced 

Hours of Service by Distance to Closest CPU, as of March 

30, 2012 15

Table 4: Hours and Days of Service for CPUs and Post Offices 17

Table 5: Number of CPUs and Post Offices by State 32

Figures

Figure 1: USPS Retail and Retail Alternatives’ Revenues, Fiscal 

Years 2007 to 2011 5

Figure 2: Products and Services Available at Post Offices and CPUs 6

Figure 3: CPU Window in a Dallas, Texas, Medical Center 7

Contents
Page ii GAO-13-41 USPS Contract Postal Units

Figure 4: Percentage of CPUs by Location Type, as of March 30, 

2012 13

Figure 5: Average Distance from CPU to Closest Post Office by 

Location Type, as of March 30, 2012 14

Figure 6: CPU Locations, as of March 30, 2012 16

Figure 7: Number of CPUs by Contract Type, 2002 and 2011 18

Figure 8: Total USPS Revenues from CPUs, Fiscal Years 2007 to 

2011 19

Figure 9: Distribution of CPU Revenues, Fiscal Year 2011 20

Figure 10: Total USPS Compensation to CPUs, Fiscal Years 2007 to 

2011 21

Figure 11: Distribution of USPS Compensation to CPUs, Fiscal 

Year 2011 22

Figure 12: Distribution of Revenue Retained by USPS per Dollar of 

Revenue for CPUs with Fixed-Price Contracts, Fiscal Year 

2011 24

Abbreviations

CAMS Contract Authoring Management System 

CPU contract postal unit 

CPUT contract postal unit technology 

FDB facilities database 

RUCA Rural-Urban Commuting Area 

USPS U.S. Postal Service

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Page 1 GAO-13-41 USPS Contract Postal Units

United States Government Accountability Office

Washington, DC 20548

November 14, 2012

The Honorable Darrell E. Issa

Chairman

Committee on Oversight and Government Reform

House of Representatives

Dear Mr. Chairman:

The U.S. Postal Service’s (USPS) cost structure has become 

unsustainable in part because its declining revenue is insufficient to cover 

the costs of operating USPS’s vast network of post offices and mailprocessing centers. USPS reached its statutory $15 billion borrowing limit

in September, 2012,

1 and USPS’s cash resources are so low that it is 

unable to meet all of its retiree health care prefunding obligations.2 To 

reverse this course, USPS has stated that it must better align its 

operational network with the realities of declining mail volume through a 

number of actions, including reducing the costs of operating post offices.3

Over the past year, GAO has issued a series of reports examining how 

aspects of USPS’s current operations and financial obligations affect its 

costs and financial condition.4

 

1

USPS is authorized to borrow $3 billion annually and a maximum of $15 billion. 39 U.S.C. 

§ 2005(a).

This report addresses USPS’s use of 

contract postal units (CPUs)—independent retailers that, under contract 

with USPS, provide customers with a broad range of the same products 

and services as post offices at the same prices, but at a potentially lower 

2

Originally due at the end of fiscal year 2011, USPS’s $5.5 billion prefunding payment to 

the Postal Service Retiree Health Benefit Fund was delayed until August 1, 2012. Pub. L. 

No. 112-74 (Dec. 23, 2011). However, USPS missed that payment as well as the $5.6 

billion prefunding payment that was due by September 30, 2012. 

3

See United States Postal Service, Plan to Profitability: 5 Year Business Plan, (Feb. 16, 

2012). 

4

See GAO, U.S. Postal Service: Field Offices’ Role in Cost-Reduction and RevenueGeneration Efforts, GAO-12-506, (Washington, D.C.: Apr. 25, 2012); GAO, U.S. Postal 

Service: Challenges Related to Restructuring the Postal Service’s Retail Network, 

GAO-12-433 (Washington, D.C.: Apr. 17, 2012); GAO, U.S. Postal Service: Mail 

Processing network Exceeds What is Needed for Declining Mail Volume, GAO-12-470 

(Washington, D.C.: Apr. 12, 2012); and GAO, U.S. Postal Service: Allocation of 

Responsibility for Pension Benefits between the Postal Service and the Federal 

Government, GAO-12-146 (Washington, D.C.: Oct. 13, 2011). 

 
 

Page 2 GAO-13-41 USPS Contract Postal Units

cost to USPS. CPUs are one component of USPS’s broader efforts to 

expand access to USPS products and services outside of traditional post 

offices.

USPS has reported that many of its roughly 32,000 post offices5 do not 

generate sufficient revenue to cover their costs. To better control retail 

costs, USPS has examined expanding retail access to postal services in 

locations other than post offices, including CPUs.6 Our past work has 

shown that replacing postal-owned and -operated facilities with privately 

owned and operated facilities is a strategy some foreign posts have used 

to restructure their retail networks to reduce facility and labor costs.7

The role of CPUs is also addressed in postal reform legislation pending in 

both chambers of Congress. A bill passed in the Senate would require 

USPS to consider CPUs as a replacement for post offices as it makes 

post office closure decisions.

Despite these potential benefits, the number of CPUs in the United States 

has declined, from 5,290 in 2002 to 3,619 in 2011. In a recent effort to 

reduce costs, USPS announced plans in May 2012 to reduce the hours of 

service to as little as 2 hours a day at over 13,000 underutilized post 

offices. USPS estimates potential savings of $500 million a year from 

these reduced hours. Given the potential for service reductions at post 

offices, expanding access through retail alternatives such as CPUs takes 

on increased relevance.

8

 

5

USPS retail facilities include post offices, stations, and branches. While they have 

different classification meanings to USPS, they are all brick-and-mortar retail locations 

operated by USPS where customers can access postal products and services by 

conducting transactions with a USPS window clerk. In this report, we refer to these 

traditional places of access to USPS retail products and service simply as post offices. 

USPS also operates facilities known as carrier annexes that have delivery, but not retail, 

operations.

A bill passed by the House of 

Representatives Committee on Oversight and Government Reform would 

6

USPS, Ensuring a Viable Postal Service for America: An Action Plan for the Future

(Washington, D.C.: March 2010).

7

GAO, U.S. Postal Service: Foreign Posts’ Strategies Could Inform U.S. Postal Service’s 

Efforts to Modernize, GAO-11-282 (Washington, D.C.: Feb. 16, 2011) 

8

21st Century Postal Service Act of 2011, S. 1789, 112th Cong. (2011).
 

Page 3 GAO-13-41 USPS Contract Postal Units

prohibit appeals of certain post office closures when a CPU is located 

within 2 miles.9

Given the retail service decisions facing USPS and the potential USPS 

reforms that Congress is considering, you asked us to provide you with 

information on CPUs. This report describes:

1. how CPUs supplement USPS’s post office network,

2. USPS revenue from CPUs and compensation to them from fiscal 

years 2007 to 2011, and

3. challenges USPS might face if it increases its use of CPUs.

To answer these objectives, we reviewed relevant laws and USPS 

documents related to CPUs. We analyzed data from fiscal years 2007 to 

2011 on CPU locations, dates of CPU closures, and CPU revenues and 

USPS compensation to CPUs. This data comes from USPS’s contract 

postal unit technology (CPUT) database. We analyzed data from USPS’s 

Contract Authoring Management System (CAMS) on dates of CPU 

openings from fiscal years 2007 to 2011.10 We classified CPU locations 

as urban, suburban, large-town rural, or small-town rural based on RuralUrban Commuting Area codes.11 We used data on post office locations 

from USPS’s facilities database (FDB) to determine CPU locations 

relative to post offices. We also analyzed FDB data on CPU and post 

office hours of service. We interviewed USPS officials and reviewed 

documentation regarding the procedures and controls used to ensure the 

reliability of data contained in CPUT, FDB, and CAMS and determined 

that they were sufficiently reliable for our purposes.12

 

9

Postal Reform Act of 2011, H.R. 2309, 112th Cong. (2011).

In addition, we 

10We used data on CPU contract start dates. According to USPS officials, there is usually 

a 4 to 6 month lag between the start of soliciting for a new CPU and the CPU’s opening 

date. We determined CPU contract start dates to be a reasonable approximation for CPU 

openings.

11The Rural-Urban Commuting Area (RUCA) codes developed by the Department of 

Agriculture’s Economic Research Service are based on patterns of urbanization, 

population density, and daily commuting patterns. For more information on RUCAs, see 

http://www.ers.usda.gov/data-products/rural-urban-commuting-area-codes.aspx. 

12However, as noted in our report, we found some inconsistencies between the number of 

CPU records in CPUT and FDB, as well as some duplicate records in CPUT. We do not 

believe that these problems affected the reliability of the data for our intended purposes.
 

Page 4 GAO-13-41 USPS Contract Postal Units

interviewed CPU operators at 10 CPUs in the Chicago, Illinois; DallasFort Worth, Texas; Southern California; and Washington, D.C., regions. 

We selected CPUs to achieve diversity in the location type, the type of 

CPU contract, and the level of revenues. We also interviewed USPS

officials in headquarters who manage the CPU program and staff in 

USPS districts responsible for managing the CPUs that we visited. See 

appendix I for a more detailed description of our scope and methodology.

We conducted this performance audit from January 2012 to November 

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 universal service obligation, part of which requires it to 

provide access to retail services.13 It is required to serve the public and 

provide a maximum degree of effective and regular postal services to 

rural areas, communities, and small towns where post offices are not selfsustaining.14 USPS is intended to be a financially self-sufficient entity that 

covers its expenses almost entirely through postal revenues.15 USPS 

receives virtually no annual appropriations16

 

1339 U.S.C. § 101(a).

but instead generates 

revenue through selling postage and other postal products and services.

1439 U.S.C. § 101(b). In addition, no small post office shall be closed solely for operating 

at a deficit, §101(b), and USPS’s annual appropriations acts has provided that none of the 

appropriated funds provided by the act may be used to consolidate or close small rural 

and other small post offices. 

15The Postal Reorganization Act of 1970 stated that “[p]ostal rates and fees shall provide 

sufficient revenue so that the total estimated income and appropriations to the Postal 

Service will equal as nearly as practicable total estimated costs of the Postal Service.” 

Pub. L. No. 91-375, 84 Stat. 760 (Aug. 12, 1970) (formerly U.S.C. 39 § 3621). See also, 

Payments on Unfunded Liability by the U.S. Postal Service to Civil Service Retirement 

Fund: Hearing Before the Committee on Post Office and Civil Service, United States 

Senate, on H.R. 29, 93rd Cong. 73-74 (statement by Post Office and Civil Service 

Committee Chairman Gale McGee). 

16USPS does receive an annual appropriation for revenue foregone on free and reduced 

rate mail.

Background 
 

Page 5 GAO-13-41 USPS Contract Postal Units

Retail alternatives are increasingly important to USPS; revenues from all 

retail alternatives—including self-service kiosks in post offices, USPS’s 

website, and CPUs, among others—increased by about $1.6 billion from 

fiscal years 2007 to 2011 while post office revenues decreased by $3 

billion. (See fig. 1.) During this same period, USPS’s share of total retail 

revenues from all retail alternatives increased from about 24 percent to 35 

percent. USPS projects that by 2020, retail alternatives will account for 60 

percent of its retail revenues. Given this growing importance and USPS’s 

planned-retail-network restructuring, we recommended in November 2011 

that USPS implement a strategy to guide efforts to modernize its retail 

network that addresses both post offices and retail alternatives.17

Figure 1: USPS Retail and Retail Alternatives’ Revenues, Fiscal Years 2007 to 2011

According to USPS officials, USPS is currently in the process of finalizing 

its retail strategy.

 

17GAO, U.S. Postal Service: Action Needed to Maximize Cost-Saving Potential of 

Alternatives to Post Offices, GAO-12-100, (Washington, D.C.: November 2011). 
 

Page 6 GAO-13-41 USPS Contract Postal Units

The retail alternatives most similar to post offices are CPUs. They are 

privately owned, operated, and staffed and are usually colocated with a 

primary business, such as a convenience store or supermarket. They 

provide most of the same products and services as post offices (see fig. 

2) at the same prices.18

Figure 2: Products and Services Available at Post Offices and CPUs

CPUs typically have a counter with prominently displayed official USPS 

signage, provided by USPS, giving the CPU the look of a post office. (See 

fig. 3.)

 

18Other USPS retail alternatives, however, do not necessarily sell postal products and 

services at the same prices as post offices. For example, USPS does not place any 

restrictions on what Approved Shippers—retailers that offer shipping services from 

multiple providers including USPS—are allowed to charge for USPS products and 

services.
 

Page 7 GAO-13-41 USPS Contract Postal Units

Figure 3: CPU Window in a Dallas, Texas, Medical Center

According to USPS, CPUs offer potential service and financial benefits, 

and, as we have previously reported, some foreign posts have 

successfully used private partnerships similar to CPUs to realize such 

benefits.19

 

19

CPUs can enhance service by being located closer to 

customers’ homes and workplaces and operating at hours when post 

offices may not be open. They can alleviate long lines at existing post 

offices and provide postal services to areas with rapid population growth 

GAO-11-282. 
 

Page 8 GAO-13-41 USPS Contract Postal Units

or where opening new post offices may be cost prohibitive.20 Regarding 

financial benefits, USPS has reported that the costs it incurs for CPUs are 

less than those it incurs for post offices, relative to revenue earned. USPS 

estimated that in fiscal year 2011, it incurred $0.17 in costs for each dollar 

of revenue at CPUs and $0.51 in costs for each dollar of revenue at post 

offices.21

CPUs provide all their revenues from postal products and services to 

USPS, and USPS compensates CPUs for providing postal services under 

the terms of their contracts. The amount of compensation USPS pays to a 

CPU operator depends in large part on the type of contract the CPU 

operates under. Currently there are two basic types of contracts:

Costs are lower, in part because CPU operators, and not USPS, 

are responsible for their operating costs, such as rent, utilities, and wages 

for their employees.

• fixed-price, under which USPS compensates the CPU a contractually 

determined amount regardless of sales, and

• performance-based, under which USPS compensates the CPU a 

contractually determined percentage of sales.

USPS’s compensation to CPUs—either the amount under a fixed-price 

contract or the percentage under a performance-based contract—is 

specific for each CPU contract and the result of negotiation between 

USPS and the CPU operator. CPU hours of service are also negotiated 

for each contract, although USPS guidance on CPUs, in line with USPS’s 

goal for CPUs to provide increased access and convenience, states that 

their days and hours of service should exceed those at post offices. Other 

terms and conditions are standardized in all contracts. For example, all 

CPUs are required to offer the same basic set of products and services 

such as stamps, Priority Mail, Express Mail, and Certified Mail.22

 

20When considering placement of a new CPU, USPS assesses the needs of an area to 

determine the demand for and viability of a potential CPU. Some factors that USPS uses 

in this assessment include projected growth in an area and feedback from customers 

suggesting that access to services should be expanded. 

In 

addition, all CPUs are contractually prohibited from selling services, 

21According to USPS, cost per revenue dollar of post offices is not a perfect comparison to 

cost per revenue dollar for CPUs, because it does not reflect certain other costs 

associated with CPUs such as the costs of package pick-up by postal carriers.

22There are a limited number of products and services—such as post office boxes and 

global express guaranteed service—not available at all CPUs. 
 

Page 9 GAO-13-41 USPS Contract Postal Units

including private mailboxes and others, that are competitive with USPS’s 

products,23 and all CPU contracts specify USPS’s rights to inspect the 

CPU at any time during operating hours. CPU contracts are valid for an 

indefinite period, but CPU contracts specify that the CPU operator or 

USPS can terminate a contract and close the CPU at any time with 120 

days notice.24

USPS management and oversight of CPUs, including identifying and 

justifying the need for new CPUs, is done at the district25 and local levels. 

Staff at the district and local levels oversee day-to-day operations of 

CPUs and identify the need for new CPUs. When a district identifies the 

need for a new CPU, it approaches local businesses in the targeted area 

as potential partners and engages in a competitive application process.26

USPS has other partnerships with private entities to provide retail postal 

services, similar to CPUs. USPS launched a retail partnership called the 

Village Post Office in July 2011 in which existing small businesses 

provide a limited range of postal products and services in small 

communities where underutilized yet costly post offices may close, be 

consolidated with another nearby post office, or have their hours of 

service reduced.27

 

23Some CPUs that predate this requirement sell such services even though new CPU 

contracts forbid them. 

In addition, USPS is in the early stages of planning for 

partnerships with national and regional retailers to provide postal 

services. These partnerships differ from CPUs in that they will not be 

subject to the same prohibitions as CPUs on selling competing services, 

and with them, USPS is attempting to expand access at a national or 

regional level as opposed to addressing specific local needs as CPUs do. 

24This is the case with all contracts that USPS now enters into. Some older contracts may 

allow for less than 120 days notice.

25District offices are responsible for overseeing post offices and other facilities in their 

districts. There are currently 67 USPS district offices. District offices report to USPS’s 

seven area offices, which report to headquarters.

26In rare cases, such as when there is a strong documented need for a CPU and limited 

potential partners, USPS may enter into a noncompetitive solicitation for a new CPU.

27Village Post Offices sell a more limited range of USPS products and services than CPUs 

do. Local USPS staff solicit a local business for a Village Post Office opportunity and a 

USPS contracting officer agrees to enter into a contract if they believe that the terms and 

conditions of that Village Post Office present a best value to USPS. 
 

Page 10 GAO-13-41 USPS Contract Postal Units

USPS plans to launch these partnerships in test markets in early 2013 

and will evaluate the effectiveness of these partnerships before making 

decisions whether to expand the program.

Although total number of CPUs has decreased in recent years, USPS 

continues to use CPUs to provide customers with access to postal 

services at additional locations and for more hours of service. CPUs are 

located in a variety of locations, both urban and rural, and range from 

very close to far from post offices, demonstrating how USPS uses CPUs 

to provide customers with alternatives located near crowded post 

offices—which are often found in urban areas— and to provide service 

where post offices are not conveniently located or may not be cost 

effective for USPS, often in rural areas. In addition, CPUs allow USPS to 

provide customer access at times often beyond the hours of service at 

post offices.

According to USPS data, the number of CPUs fell from 5,290 in 2002 to 

3,619 in 2011. During the past 5 fiscal years, USPS has opened new 

CPUs, but a higher number of CPUs have closed. (See table 1.) 

According to USPS headquarters officials who manage the CPU program, 

economic conditions forced many businesses that operated CPUs to 

close and declining mail volume and sales of postal products have been 

the primary factors behind the decrease in the number of CPUs. Although 

USPS does not track specific reasons for CPU closures in its contract 

postal unit technology (CPUT) database, retail managers in eight USPS 

districts that we met with cited specific local issues resulting in CPU 

closures, including the following:

• The CPU operator retired or otherwise stopped working. For example, 

an Indiana CPU operator closed his primary business and moved out 

of the area.

• The CPU operator moved the primary business to a new location and 

did not retain the CPU. For example, the operator of a CPU in Texas 

moved his primary business across the street, but the new space was 

too small to host a CPU.

• The CPU operator sold the primary business. For example, a 

California CPU operator sold his self-storage business, and the new 

operators were not interested in maintaining the CPU.

• The CPU operator chose to close for financial considerations. For 

example, a CPU operator in Virginia closed the CPU because he felt it 

did not help his primary business.

USPS Uses CPUs to 

Provide Retail 

Services at Additional 

Locations and Hours

Decrease in Number of 

CPUs
 

Page 11 GAO-13-41 USPS Contract Postal Units

• USPS initiated the closure because the CPU failed to meet the terms 

of the contract or USPS determined that the CPU was not cost 

effective. For example, USPS determined that a Maryland CPU that

operated out of a private residence no longer brought in enough 

revenue to justify USPS’s compensation to the CPU, so USPS closed 

the CPU.

Table 1: New and Closed CPUs, Fiscal Years 2007 to 2011

2007 2008 2009 2010 2011

New CPUs 283 a 308 154 139 101

Closed CPUs 415 374 399 282 202

Source: GAO analysis of USPS data.

a

We identified “new” CPUs using USPS data on the dates CPU contracts. According to USPS 

officials, there is, on average, about a 4 to 6 month time lag from when USPS initiates a CPU 

solicitation to when a CPU opens for business. We determined that the data on contract start dates 

provided an approximate estimation of when CPUs opened.

Consistent with USPS’s goal to use CPUs to absorb excess demand at 

post offices, our analysis of the distance between CPUs and post offices 

shows that more than 56 percent of CPUs are less than 2 miles from the 

nearest post office and 26 percent are less than 1 mile. (See table 2.) For 

example, USPS opened a CPU in Frederick, Maryland, to better meet 

demand and reduce customer wait times in lines at the local post office 

about one-half mile away. Conversely, about 14 percent of CPUs are 

located 5 miles or more from the nearest post office, showing how CPUs 

can be used to provide services where post offices are not conveniently 

located, such as a CPU in rural Vigo Park, Texas, that is located 16 miles 

from the nearest post office. Similarly, USPS opened a CPU in Aubrey, 

Texas, located about 5 miles from the nearest post office, in order to 

serve customers in a fast growing area.

CPUs Are Concentrated in 

Urban Areas and Close to 

Post Offices
 

Page 12 GAO-13-41 USPS Contract Postal Units

Table 2: Distribution of CPUs by Distance to Closest Post Office, as of March 30, 

2012

Distance to nearest post office (in miles) Percentage of CPUs

10 or more 4 

5 to <10 10

3 to <5 13

2 to <3 17

1 to <2 30

Less than 1 26

Source: GAO analysis of USPS data.

Note: This analysis uses straight-line calculation of distances between two points resulting in actual 

driving distances that could be longer.

Consistent with the majority of CPUs’ being within 2 miles of a post office, 

CPUs are also more likely to be in urban than rural areas, and recent 

CPU openings further demonstrate this pattern. As shown in figure 4, 

more than 60 percent of CPUs active as of March 30, 2012, were in urban 

areas, as defined by the Rural-Urban Commuting Area codes we used for 

this analysis.28

 

28We used the Rural-Urban Commuting Area (RUCA) codes developed by the 

Department of Agriculture’s Economic Research Service to classify CPU locations as 

urban, suburban, large-town rural, and small-town rural. RUCA classifications are based 

on patterns of urbanization, population density, and daily commuting patterns. For more 

information on RUCAs, see http://www.ers.usda.gov/data-products/rural-urbancommuting-area-codes.aspx.

This pattern is consistent with USPS’s intention to use 

CPUs to reduce the time customers have to wait in line at a post office, 

more often in urban areas. Furthermore, more than three-fourths of new 

CPUs in fiscal year 2011 were in urban locations. This suggests that 

CPUs may be most viable in urban areas with higher populations and 

customer traffic. Our analysis shows that CPUs are rarer in suburban, 

large-town rural, and small-town rural locations.
 

Page 13 GAO-13-41 USPS Contract Postal Units

Figure 4: Percentage of CPUs by Location Type, as of March 30, 2012

Note: Because of data limitations, we could not determine the location types for 138 CPUs. As a 

result, the percentages in the figure do not sum to 100.

When considering both CPU location type and distance from the nearest 

post office, on average, urban CPUs are located closer to post offices 

than rural CPUs. (See fig. 5.) This is consistent with USPS’s use of CPUs 

in urban areas to alleviate crowds at existing post offices and in rural 

areas to provide access where post offices are not conveniently located

and may be cost prohibitive to operate. 
 

Page 14 GAO-13-41 USPS Contract Postal Units

Figure 5: Average Distance from CPU to Closest Post Office by Location Type, as of 

March 30, 2012 

Note: Distances are straight-line calculations between two points. Driving distances could be longer. 

We were unable to determine location type for 138 CPUs and, as a result, they were not included in 

this analysis.

The relatively limited number of CPUs in rural areas could limit access to 

postal services for rural customers as USPS also reduces hours at 

underutilized post offices. As mentioned earlier, to reduce expenses, 

USPS is planning to reduce the hours of service at more than 13,000 

underutilized post offices—which are primarily in rural areas. However, as 

stated by USPS officials and as shown in table 3, almost 80 percent of 

these post offices are at least 10 miles from the nearest CPU. As a result, 

existing CPUs may not provide alternate access to customers of these 

post offices.
 

Page 15 GAO-13-41 USPS Contract Postal Units

Table 3: Distribution of Post Offices Being Considered for Reduced Hours of 

Service by Distance to Closest CPU, as of March 30, 2012

Distance to closest CPU (in 

miles)

Percentage of post offices being considered for 

hours-of-service reduction

10 or more 79

5 to <10 16

3 to <5 3 

2 to <3 1 

Less than 2 1 

Source: GAO analysis of USPS data.

Note: Distances are straight-line calculations between two points. Driving distances could be longer. 

This data includes the 13,000 post offices at which USPS is planning to reduce hours of service.

Changes that USPS makes to its CPU program, such as any that may 

arise out of its retail network restructuring, could affect certain states 

more than others. Although CPUs are in all 50 states, the District of 

Columbia, and 4 territories, they are concentrated in certain parts of the 

country, as shown in figure 6.29 Some states rely more on CPUs for 

providing access to USPS’s products and services than others. USPS 

has opened many CPUs in states like Arizona, where the existing post 

office network may not be adequate to meet rapid population growth and 

where opening new post offices would be cost prohibitive. As a result, 

there are 141 CPUs in Arizona and 276 post offices. By contrast, states 

with limited population growth and a large existing network of post offices 

are generally less reliant on CPUs. For example, Pennsylvania has 90 

CPUs supplementing its 1,786 post offices. Appendix II provides data on 

the number of CPUs and post offices in each state.

 

29Based on CPUs that were active on March 30, 2012.
 

Page 16 GAO-13-41 USPS Contract Postal Units

Figure 6: CPU Locations, as of March 30, 2012

CPUs currently provide more hours of service, on average, than post 

offices do, consistent with USPS’s goal for CPUs to expand access to 

postal services. On average, CPUs operate more hours per day and per 

week than post offices and more are open at night and on Sundays. (See 

table 4.) However, slightly fewer CPUs are open on Saturdays than post 

offices.

CPUs Provide, on Average, 

More Hours of Service 

than Post Offices Do
 

Page 17 GAO-13-41 USPS Contract Postal Units

Table 4: Hours and Days of Service for CPUs and Post Offices

CPUs Post offices a

Average hours of service per week 54 41

Average hours of service per weekday 9.1 7.7

Average hours of service on Saturdays 7.6 b 3.4

Average hours of service on Sundays 12.5 b 12.1

Open on Sundays 22.3% 1.7%

Open on Saturdays 76% 83%

Open after 6 pm 29% 4%

Open 24 hours a day 1% 0.1%

Source: GAO analysis of USPS data.

Note: For the purposes of this analysis, hours of service are those during which a post office’s or 

CPU’s windows or counters are open to customers. This analysis includes 25,660 post offices with 

window hours as listed in USPS’s facility database (FDB) on June 27, 2012.

a

We found that USPS’s facilities database, which tracks hours of service for both CPUs and post 

offices, included hours of service data for 3,328 CPUs as of June 7, 2012. However, our analysis of 

USPS’s contract postal unit technology database (CPUT), which USPS uses to track data on CPU 

locations and finances, indicated that there were 3,542 CPUs as of March 30, 2012. According to 

USPS officials, this difference is because field staff responsible for entering CPU data into FDB do 

not always do so. However, officials added that USPS is planning to request in early fiscal year 2013 

that all relevant staff review FDB records to ensure completeness of CPUs and input any CPUs not 

already in FDB.

b

Average only includes those CPUs or post offices open on those days. While about 3 percent of 

CPUs open on Sundays are open for 24 hours, about 5 percent of post offices open on Sundays are 

open for 24 hours, according to FDB.

In recent years, USPS has intentionally shifted its means of 

compensating CPUs from fixed-price contracts—in which compensation 

to CPUs is a fixed amount regardless of sales—to performance-based 

contracts—under which compensation to CPUs is a percentage of the 

CPU’s postal sales—resulting in potentially greater revenue and less

financial exposure to USPS. (See fig. 7.) According to USPS officials, 

since 2002, USPS has entered into performance-based contracts for 

most new CPUs and has converted many fixed-price contracts to 

performance-based. The purpose of the shift is to incentivize CPU 

operators to market postal products and services to increase postal 

Trends in CPU 

Contract Types, 

Revenues, and 

Compensation 

Use of the PerformanceBased Contract Type 

Increased
 

Page 18 GAO-13-41 USPS Contract Postal Units

revenues. CPUs with fixed-price contracts have limited incentive to sell 

more postal products, since their compensation is the same regardless of 

their sales. Furthermore, since USPS compensates CPUs with 

performance-based contracts a percentage of the CPU’s sales, USPS 

does not compensate these CPUs more than it receives in revenues, a 

situation that can happen with CPUs with fixed-price contracts.

Figure 7: Number of CPUs by Contract Type, 2002 and 2011

The total revenues USPS received from sales of postal products and 

services at CPUs30

 

30As mentioned earlier, CPUs provide all revenues from their postal sales to USPS.

USPS, in turn, provides compensation to the CPU as dictated by the terms of that CPU’s 

contract.

declined about 9 percent from $672 million in fiscal 

year 2007 to $611 million in fiscal year 2011, as shown in figure 8. 

However, as mentioned earlier, USPS’s revenues from post offices 

declined about 22 percent during this period. The decline in CPU 

revenues is part because of the decrease in the number of CPUs, as 

average CPU revenues decreased only 2 percent during this time. The 

downward trend in mail volume was also a factor, according to USPS 

officials. Several CPUs we visited experienced declining sales in recent 

years. For example, a CPU in Cedar Lake, Indiana, saw CPU revenues 

decline 17 percent from fiscal year 2007 to 2011. Several USPS district 

retail managers cited CPUs that closed because of low sales. For 

example, a CPU in Texas closed because neither the CPU nor the 

primary business generated sufficient revenue for the operator to stay in 

business. Our analysis of USPS data found that CPUs with lower than 

USPS Revenues from 

CPUs Decreased from 

Fiscal Years 2007 to 2011
 

Page 19 GAO-13-41 USPS Contract Postal Units

average revenues were more likely to close than were those with higher 

revenues. On average, CPUs that closed from fiscal years 2008 to 2011 

generated roughly 26 percent less revenue on average in the year prior to 

closure than the average CPU revenue for that year.

Figure 8: Total USPS Revenues from CPUs, Fiscal Years 2007 to 2011

Individual CPU revenues vary widely, as shown in figure 9. On average, 

USPS’s revenue from individual CPUs averaged about $160,000 in 

revenue in fiscal year 2011, but a substantial number (41 percent) 

generated less than $50,000. Moreover, low revenue CPUs are more 

likely to be located in rural areas where population is sparse and demand 

for services is lower; 22 percent of small-town rural and large-town rural 

CPUs had revenues under $5,000 in fiscal year 2011. High-revenue 

CPUs—such as the 7 percent that earned $500,000 or more in fiscal year 

2011—are mostly located in urban areas where demand is likely higher 

and post offices are more likely to have long wait times. For instance, we 

visited one CPU in downtown Los Angeles with $1.8 million in revenues in 

fiscal year 2011. The ability to generate high revenues at this CPU led it 
 

Page 20 GAO-13-41 USPS Contract Postal Units

to increase capacity by adding postal windows to keep pace with 

demand.31

Figure 9: Distribution of CPU Revenues, Fiscal Year 2011

Note: This data includes all CPUs that reported any financial data for any part of the fiscal year.

 

31The CPU started with one service window as a supplement to the owner’s primary 

business, an independent cellular phone store in a downtown area strip mall with free 

parking. According to the CPU operator, the postal business grew so much that the 

operator and USPS agreed to add windows to increase capacity, crowding out the 

operator’s primary business. The CPU is now a standalone CPU with three windows and, 

according to the operator, USPS dedicates a large truck to picking up this one CPU’s mail 

and packages each day.
 

Page 21 GAO-13-41 USPS Contract Postal Units

USPS compensation to CPUs increased about 6 percent from $75.4 

million in fiscal year 2007 to $79.9 million in fiscal year 2011.32

Figure 10: Total USPS Compensation to CPUs, Fiscal Years 2007 to 2011

However, 

USPS compensation to CPUs has decreased every fiscal year from 2008 

to 2011. (See fig. 10). According to USPS officials, the increase in 

compensation from fiscal years 2007 and 2008 was because of larger 

numbers of performance-based contracts, fewer public service contracts, 

which are generally less expensive, individual CPUs’ petitions for 

increased compensation because of increased cost of doing business, 

and economic conditions. The subsequent decline in USPS 

compensation to CPUs from fiscal years 2008 to 2011 was because of 

declining numbers of CPUs during the time.

As with CPU revenues, USPS compensation to individual CPUs varies 

widely. (See fig. 11.) For example, 326 CPUs received no more than 

 

32In addition to compensating CPUs, USPS incurs other expenses for managing the CPU 

program. According to USPS, other CPU expenses such as CPU oversight and 

management and the costs of providing the contract access retail system—a device that 

weighs mail and reports transactions to USPS—for certain CPUs totaled about $9.5 

million in fiscal year 2011.

USPS Compensation to 

CPUs Increased from 

Fiscal Years 2007 To 2011
 

Page 22 GAO-13-41 USPS Contract Postal Units

$100 in annual compensation in fiscal year 2011. On the other hand, that 

same year, 55 high-revenue CPUs with performance-based contracts 

received over $100,000 in compensation. In fiscal year 2011, USPS 

compensated CPUs an average of about $21,000, but compensated 

more than a quarter of CPUs less than $5,000.

Figure 11: Distribution of USPS Compensation to CPUs, Fiscal Year 2011

Note: This data includes all CPUs that reported any financial data for any part of the fiscal year.

As USPS undertakes actions to achieve a sustainable cost structure, it 

will be important to understand the implications of CPUs for USPS’s costs 

and revenues. Currently, USPS retains most of the revenues generated 

by CPUs, its major expense being compensation payments to CPU 

operators. As we described previously, in fiscal year 2011, USPS earned 

a total of $610.5 million in revenues from CPUs and, in return, 

compensated CPUs a total of $79.9 million, allowing USPS to retain 

$530.6 million in CPU revenues.33

 

33USPS incurred about $9.5 million of other expenses in managing the CPU program in 

fiscal year 2011.

Measured in another way, after 

After Compensating CPUs, 

USPS Retains Most CPU 

Revenues
 

Page 23 GAO-13-41 USPS Contract Postal Units

compensating CPUs, USPS retained $0.87 of every dollar of CPU 

revenues.34

However, for individual CPUs, the amount of revenues USPS retains after 

compensating the CPU varies significantly. USPS’s target for individual 

CPUs is to retain, after compensation, $0.80 for every dollar in 

revenues.35 In fiscal year 2011, USPS did not meet that target for 55 

percent of the roughly half of CPUs that have fixed-price contracts. (See 

fig. 12.) Moreover, for 23 percent of CPUs with fixed-price contracts in 

fiscal year 2011, USPS did not retain any revenues as it compensated the 

CPU an amount greater than the revenue USPS received from the CPU. 

Most of these CPUs were in rural areas. Forty-nine percent of small-town 

rural CPUs with fixed-price contracts generated less revenue for USPS 

than the compensation USPS provided in fiscal year 2011. According to 

USPS officials, while USPS does not retain any revenue from these 

CPUs after compensating them, operating a post office in the same 

locations would be more onerous from a cost perspective. Because 

USPS compensates the roughly 45 percent of CPUs with performancebased contracts with a percentage of their sales—usually between 9 and 

12 percent—USPS’s revenues from CPUs with performance-based 

contracts will, by definition, always be greater than the amount of USPS 

compensation to them.36

 

34By contrast, the ratio of revenues retained after compensating CPUs per dollar of 

revenue in fiscal year 2007—when CPU revenues were higher and USPS compensation 

to CPUs was lower—was about $0.89.

35USPS officials said that they review CPUs in which USPS retains less than $0.80 per 

dollar of revenue and attempts to take action to decrease CPU compensation or terminate 

the CPU if necessary.

36In rare cases where there is a very strong need for the CPU, USPS will compensate 

performance-based CPUs at a higher rate than 12 percent. As a result, in fiscal year 2011, 

USPS met its target of retaining $0.80 or more per dollar of revenue at 98 percent of 

performance-based CPUs.
 

Page 24 GAO-13-41 USPS Contract Postal Units

Figure 12: Distribution of Revenue Retained by USPS per Dollar of Revenue for 

CPUs with Fixed-Price Contracts, Fiscal Year 2011

Note: This data includes all CPUs that reported any financial data for any part of the fiscal year.

According to USPS officials, USPS compensation to a CPU in excess of 

revenues is to be expected in some cases, especially in small towns, 

where demand for service may be low but USPS contracts with a CPU to 

help fulfill its universal service obligation. For example, the CPU in Fields, 

Oregon, which operates under a fixed-price contract, received $4,800 in 

compensation from USPS in fiscal year 2011, but had revenues of 

$1,521. However, the nearest post office to the CPU in Fields is over 40 

miles away, demonstrating how USPS uses this CPU to provide service 

to an area where traditional retail access is not conveniently located.

USPS is embarking on a substantial makeover of its retail network, 

including reducing hours of service at thousands of underutilized post 

offices and expanding the use of retail alternatives through partnerships 

with national and regional retailers. According to USPS officials, at this 

time there are no plans to strategically increase the number of CPUs to 

help enhance service in the changing postal retail landscape. USPS 

officials said that they plan to continue to use CPUs to meet specific local 

needs identified by local and district officials. At the same time, pending 

legislation in the Senate would require USPS to consider opening CPUs 

USPS’s Future Use of 

CPUs May Pose 

Challenges 
 

Page 25 GAO-13-41 USPS Contract Postal Units

as replacements for post offices that it closes.37

• Limited Potential Business Partners. USPS may face limited 

private interest in opening CPUs in certain areas. USPS planned to 

open thousands of Village Post Offices, which, similar to CPUs, 

involve partnerships with private businesses, by the end of 2012. 

However, as of August 20, 2012, USPS has opened only 41 Village 

Post Offices in part because of a lack of interested private parties. 

USPS officials said that this lack of interested parties is because in 

some rural areas, there may not be any businesses to host a Village 

Post Offices and in other rural areas, businesses may not want to 

partner with USPS in what some communities may perceive as a 

reduction in services they receive. In addition, some district retail 

managers told us there are a number of reasons that some interested 

businesses do not become CPUs, including financial instability and 

not wanting to meet the conditions of new CPU contracts, such as 

space requirements or prohibiting sales of competitors’ products and 

services. As a result, district staff are not always able to open as 

many new CPUs as they would like.

Although USPS has 

pared down its plans to close post offices by instead reducing their hours, 

to the extent that USPS closes post offices in the future, this requirement 

may put more pressure on USPS to open more CPUs. Furthermore, 

some district retail managers we spoke with said that they see a 

potentially larger role for CPUs in the future as USPS transforms its 

traditional retail network. However, we identified a number of challenges 

USPS might face in its future use of CPUs:

• Limited Staff Resources in USPS Districts. As we have previously 

mentioned, local and district-level USPS officials identify and justify 

the need for new CPUs, determining when and where to approach 

businesses as potential CPU partners. Some USPS district retail 

managers we spoke with told us that although there are unmet needs 

for CPUs in their districts, compared to prior years, they now have 

fewer staff and less time to seek out opportunities for new CPUs. 

Given the resources required to seek opportunities and open new 

CPUs, USPS may be unable to meet all local needs for CPUs with 

existing resources.

• Risk of Service Disruptions from CPU Closures. Because CPUs 

can close at any time—unlike post offices, which must undergo a 

lengthy review process including a public comment period prior to 

 

37S. 1789. 
 

Page 26 GAO-13-41 USPS Contract Postal Units

closure—there is a risk in relying on CPUs to provide service, 

especially in underserved areas where there may be a limited number 

of potential CPU partners and other post office alternatives. As 

discussed earlier, CPU operators can decide to close their CPUs for a 

variety of reasons. Although CPU contracts require CPUs to provide 

120 days notice to USPS before closing, some district retail managers 

we spoke with said that CPU operators often provide much less 

notice, often as little as one week. Given the other challenges in 

opening new CPUs, USPS may have trouble replacing the lost service 

from unexpectedly closed CPUs.

CPUs can play an important role in helping USPS provide universal 

service as it cuts costs to improve its financial condition—at times two 

conflicting goals. CPUs can help USPS reach customers in convenient 

locations during convenient hours at a potentially lower cost than through 

post offices. USPS data show that an increasing proportion of retail 

revenue is generated through channels other than post offices, which 

indicates a growing level of customer acceptance of these non-traditional 

means of accessing postal services.

While USPS plans to continue to use CPUs as one alternative to post 

offices to fill local needs for postal services, it is exploring planned 

national and regional partnerships to more broadly expand access to 

convenient retail alternatives nation-wide. As USPS develops these 

regional and national partnerships, reduces hours of service at many post 

offices, and continues to use CPUs to fill specific local needs, it is 

important for USPS to consider CPUs’ continuing role in USPS’s evolving 

national retail network. We recommended in November 2011 that USPS 

develop and implement a retail network strategy that would address 

customer access to both post offices and retail alternatives.38

 

38

USPS 

officials told us that as of July 2012, the agency is in the process of 

finalizing this retail strategy. We continue to believe, as we stated in 

November 2011, that it is important that such a strategy discuss how 

USPS plans to increase its use of retail alternatives—including CPUs—

while considering significant changes to its network of post offices and the 

means through which it provides access to USPS’s customers. As USPS 

continues to develop this retail strategy, we believe that USPS can 

capitalize on growing acceptance of retail alternatives by using 

GAO-12-100. 

Concluding 

Observations 
 

Page 27 GAO-13-41 USPS Contract Postal Units

information about CPUs to inform its decisions. For example, by 

considering factors, such as the distance of CPUs to existing post offices, 

CPU hours and days of service, and USPS’s costs of compensating 

CPUs, USPS could better inform its retail strategy in order to make better 

strategic use of CPUs in its future retail network, which will likely include 

reduced hours at thousands of post offices.

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

USPS provided a written response (see appendix III) in which they 

discussed USPS’s efforts beyond CPUs to provide customers with 

sufficient and convenient access to its products and services through 

other types of partnerships and alternatives to post offices.

We are sending copies of this report to the appropriate congressional 

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

addition, the report will be available at no charge on GAO’s Web site at 

http://www.gao.gov. 

If you or your staffs have any questions regarding 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. GAO staff who made key contributions to 

this report are listed in appendix IV.

Sincerely yours,

Lorelei St. James

Director, Physical Infrastructure Issues

Agency Comments
Appendix I: Scope and Methodology

Page 28 GAO-13-41 USPS Contract Postal Units

To determine how contract postal units (CPUs) supplement the U.S. 

Postal Service’s (USPS’s) network of post offices, we analyzed data from 

USPS’s contract postal unit technology (CPUT) database. This database 

contains information for individual CPUs, including location, contract 

number, revenues, compensation, CPU contract type (fixed-price or 

performance-based), contract termination dates, and if the CPU is in 

active service. Location data for each CPU in CPUT includes a physical 

address including city, state,1

Based on data from CPUT, we identified which CPUs closed from fiscal 

years 2007 to 2011. We identified which CPUs opened during this time 

period based on contract start dates from USPS’s Contract Authoring 

Management System (CAMS). Contract start dates generally do not 

match the date that a CPU opens because, according to USPS officials, it 

usually takes 4 to 6 months for a CPU to open after USPS initiates a 

solicitation. We determined this date to be a reasonable approximation of 

when a CPU opens. We determined the number of CPUs that opened or 

closed in each fiscal year by counting the number of contract start dates 

and closure dates for each year.

and ZIP+4 code. USPS provided us these 

data on March 30, 2012. In determining the number of active CPUs, we 

encountered some duplicate CPU records. To avoid double counting, we 

used the CPU contract number to keep the record for only the oldest 

contact associated with each CPU. Based on the physical address, 

including ZIP+4 code, we determined the location type for each CPU by 

using the Department of Agriculture’s Economic Research Service’s 

Rural-Urban Commuting Area (RUCA) codes. RUCA codes classify a 

given location based on patterns of urbanization, population density, and 

daily commuting patterns. We classified CPU locations as one of four 

types: urban, suburban, large-town rural, and small-town rural. We also 

determined how many CPUs were located in each state using the state 

data in CPUT.

In addition, we obtained data from USPS’s facilities database (FDB) on all 

post office locations including physical street address, city, state, and 

ZIP+4. USPS provided us these data on December 19, 2011. We 

determined the distance between the list of active CPUs as of March 30, 

2012, and post offices as of December 19, 2011, using the latitude and 

 

1

For the purposes of our analysis, the term “state” includes all 50 states, the District of 

Columbia, American Samoa, Guam, the Northern Mariana Islands, and Puerto Rico.

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 29 GAO-13-41 USPS Contract Postal Units

longitude for each CPU and each post office and measuring the straightline distance between the two points. We then determined which post 

office was closest to each CPU and by what distance. We also counted 

the number of post offices in each state and, along with using data on the 

number of CPUs in each state, to determine the number of CPUs per 100 

post offices in each state.

We analyzed FDB data to determine the number of hours of service per 

day and per week for each CPU and post office, and how many locations 

are open at certain times, such as on Sundays. USPS provided these 

data for CPUs on June 7, 2012, and for post offices on June 27, 2012.2

We also visited 10 CPUs in the following regions: Chicago, Illinois; DallasFort Worth, Texas; Southern California; and Washington, D.C. We 

selected those regions and the 10 CPUs to ensure diversity in geographic 

location, location type (urban, suburban, and rural), CPU revenue levels, 

and type of CPU contract (fixed-price and performance-based). We also 

selected locations close to GAO office locations in order to minimize the 

use of travel funds by GAO staff on this engagement. During our visits, 

we interviewed each CPU operator. We also interviewed district retail 

managers in each of the USPS districts responsible for managing these 

CPUs. During these interviews as well as interviews with USPS 

headquarters staff in charge of managing the CPU program, we 

discussed the reasons for and benefits from using CPUs, the reasons 

why CPUs have closed, and factors that affect CPU revenues and 

compensation. We also reviewed GAO reports and USPS documents 

detailing the CPU program, including USPS guidance on CPUs and 

standard CPU contracts.

To determine USPS revenue from CPUs and USPS’s compensation to 

them from fiscal years 2007 to 2011, we analyzed data from CPUT. We 

encountered numerous duplicate records for a single CPU address. To 

 

2

We found that FDB included hours of service data for 3,320 CPUs as of June 7, 2012. 

However, our analysis of USPS’s Contract Postal Unit Technology database (CPUT), 

which USPS uses to track data on CPU locations and finances, indicated that there were 

3,542 CPUs as of March 30, 2012. According to USPS officials, this difference is because 

field staff responsible for entering CPU data into FDB do not always do so. However, the

officials added that USPS is planning to request in early fiscal year 2013 that all relevant 

staff review FDB records to ensure completeness of CPUs and input any CPUs not 

already in FDB. We determined that given that there was no indication that this set of 

CPUs not included in FDB is unique, that the data were reliable for our purposes.
Appendix I: Scope and Methodology

Page 30 GAO-13-41 USPS Contract Postal Units

avoid double counting, we merged all financial data for a given contract 

number into a single record by summing up data for each unique contract 

number. As CPUT stores CPU revenue and compensation data on a 

monthly basis, we summed monthly data to determine the total revenues 

and USPS compensation for each CPU for each fiscal year. We 

determined the amount of revenues USPS retains after compensating 

CPUs in each fiscal year by subtracting CPU compensation from CPU 

revenues and dividing that by CPU revenues. Finally, we linked data from 

CAMS on contract start dates to this financial data from CPUT by using 

the contract number for each CPU. As a result, we were able to 

determine the revenues and USPS compensation to each CPU for CPUs 

that opened in each fiscal year. We did the same for closed CPUs by 

using CPU closure dates included in CPUT.

We assessed the reliability of each of the data sources we used by 

interviewing responsible USPS officials about procedures for entering and 

maintaining the data and verifying their accuracy. We manually reviewed 

all data provided by USPS for any obvious outlying data. After reviewing 

this information, we determined that the CPUT data were sufficiently 

reliable for evaluating revenue and compensation trends, closure dates, 

and CPU locations. We did find that CPUT reported outlying data on 

revenues in certain months for four CPUs in fiscal year 2007. To address 

these outlying data, we averaged the revenues for each of the four CPU 

in the other months, where reported revenues seemed normal, and 

assumed that the CPU earned the average level of revenue in the 

outlying months. We determined that the CAMS data were sufficiently 

reliable for evaluating CPU start dates. We determined that the FDB post 

office and CPU hours-of-service data were sufficiently reliable for overall 

comparison purposes. As previously stated, the FDB included hours-ofservice data for 3,320 CPUs as of June 27, 2012, 6.3 percent less than 

3,542 CPUs indicated by our analysis of CPUT as of March 30, 2012. In 

discussing the discrepancy with USPS officials, we determined that there 

was no indication that the CPU records missing from the FDB differed 

from the general population and were therefore unlikely to affect the 

outcome of our analysis.3

 

3

According to USPS officials, this difference is because field staff responsible for entering 

CPU data into FDB do not always do so. However, officials added that USPS is planning 

to request, in early fiscal year 2013, that all relevant staff review FDB records to ensure 

completeness of CPUs and input any CPUs not already in FDB.
Appendix I: Scope and Methodology

Page 31 GAO-13-41 USPS Contract Postal Units

To determine challenges USPS might face if it increases its use of CPUs, 

we reviewed relevant legislation, USPS documents related to managing 

CPUs, prior GAO reports, and USPS Office of Inspector General reports. 

We also interviewed USPS officials responsible for implementing the CPU 

program, CPU operators, and USPS district retail managers at the sites 

and districts discussed earlier regarding current CPU operations and 

challenges the CPU program might face going forward.
Appendix II: Number of Contract Postal Units 

and Post Offices by State

Page 32 GAO-13-41 USPS Contract Postal Units

Table 5 provides the number of Contract Postal Units (CPUs) and post 

offices in each state, as well as the number of CPUs per 100 post offices 

in each state as a measure of how reliant each state is on CPUs for 

providing access to postal services.

Table 5: Number of CPUs and Post Offices by State

 CPU

Post 

Offices a Number of CPUs per 100 Post Offices b

Alaska 75 200 37.5

Alabama 30 601 5.0

American Samoa 3 1 300.0

Arkansas 40 615 6.5

Arizona 141 276 51.1

California 285 1667 17.1

Colorado 63 444 14.2

Connecticut 24 302 7.9

Delaware 3 63 4.8

District of Columbia 6 45 13.3

Florida 241 798 30.2

Georgia 54 744 7.3

Guam 6 6 100.0

Hawaii 22 103 21.4

Iowa 104 864 12.0

Idaho 32 235 13.6

Illinois 64 1352 4.7

Indiana 62 743 8.3

Kansas 88 592 14.9

Kentucky 71 710 10.0

Louisiana 34 486 7.0

Massachusetts 35 605 5.8

Maryland 37 471 7.9

Maine 32 438 7.3

Michigan 219 929 23.6

Minnesota 100 799 12.5

Missouri 90 912 9.9

Mississippi 30 423 7.1

Montana 42 311 13.5

North Carolina 86 824 10.4

Appendix II: Number of Contract Postal Units 

and Post Offices by State
Appendix II: Number of Contract Postal Units 

and Post Offices by State

Page 33 GAO-13-41 USPS Contract Postal Units

 CPU

Post 

Offices a Number of CPUs per 

100 Post Offices b

North Dakota 36 309 11.7

Northern Mariana Islands 3 2 150.0

Nebraska 58 482 12.0

New Hampshire 17 241 7.1

New Jersey 23 708 3.2

New Mexico 51 305 16.7

Nevada 39 127 30.7

New York 105 1838 5.7

Ohio 131 1144 11.5

Oklahoma 35 595 5.9

Oregon 65 374 17.4

Pennsylvania 90 1786 5.0

Puerto Rico 19 120 15.8

Rhode Island 7 78 9.0

South Carolina 59 397 14.9

South Dakota 44 317 13.9

Tennessee 66 578 11.4

Texas 229 1666 13.7

Utah 69 195 35.4

Virginia 59 880 6.7

Vermont 13 272 4.8

Washington 74 523 14.1

Wisconsin 90 743 12.1

West Virginia 26 672 3.9

Wyoming 15 139 10.8

Source: GAO analysis of USPS data.

a

Includes CPUs that were actively operating as of March 30, 2012.

b

Includes post offices open as of December 19, 2011.
Appendix III: Comments from the U.S. Postal 

Service

Page 34 GAO-13-41 USPS Contract Postal Units

Appendix III: Comments from the U.S. Postal 

Service
Appendix III: Comments from the U.S. Postal 

Service

Page 35 GAO-13-41 USPS Contract Postal Units
Appendix III: Comments from the U.S. Postal 

Service

Page 36 GAO-13-41 USPS Contract Postal Units
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 37 GAO-13-41 USPS Contract Postal Units

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

In addition to the individual named above, Heather Halliwell, Assistant 

Director; Patrick Dudley; John Mingus; Jaclyn Nelson; Joshua Ormond; 

Matthew Rosenberg; Amy Rosewarne; Kelly Rubin; and Crystal Wesco 

made key contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Acknowledgments 

(544176)
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