U.S. POSTAL

SERVICE

Deficiencies Continue

While Antelope Valley

Project Status

Remains Uncertain

United States General Accounting Office

GAO Report to the Honorable William M.

Thomas, House of Representatives

August 1999

GAO/GGD-99-147

United States General Accounting Office General Government Division

Washington, D.C. 20548

Page 1 GAO/GGD-99-147 Status of Antelope Valley Project

B-282078

August 31, 1999

The Honorable William M. Thomas

House of Representatives

Dear Mr. Thomas:

This report responds to your December 1, 1998, request to evaluate the

project approval process the Postal Service used in proposing to relocate

postal operations for the Antelope Valley area from the Main Post Office

(MPO) in Mojave, CA, to a new facility in Lancaster, CA. Your request

stemmed from concerns over whether the Service appropriately acquired

land in Lancaster and properly considered project costs. To address your

concerns, we evaluated whether the Service followed its capital project

approval process for the purchase of land in Lancaster. In addition,

because of the incomplete status of the project, we identified the reasons

for the project delays and the effects of those delays on postal operations,

project costs, and affected communities.

The Antelope Valley is composed of 16 communities in northern Los

Angeles County and eastern Kern County. Mojave is located in the

Antelope Valley approximately 100 miles north of downtown Los Angeles,

and Lancaster is located 23 miles south of Mojave. In 1989, the Service

began planning for a new facility to address operational processing and

delivery deficiencies it had identified in the Antelope Valley area. The rapid

growth in the population and resultant mail volumes in the Antelope Valley

led to space deficiencies for mail processing operations at the Mojave

MPO. The growth also led to space deficiencies for carrier operations in

four of the five affected post offices.

In October 1991, while the overall project was still under development and

review, the Service acquired a 25-acre site in the city of Lancaster, CA, at a

cost of $6.5 million using its advance site acquisition procedures. The

proposed project was suspended in 1992, shortly after the site was

acquired, reinstated in 1995 as a fiscal year 1998 new-construction project

and suspended again in March 1999 during the headquarters review

process. The project was recently reclassified from an area-funded project

to a headquarters-funded project. The project is now waiting to be

included in the next 5-year prioritization process for ranking and funding

capital projects, and this process is anticipated to be completed by August
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Page 2 GAO/GGD-99-147 Status of Antelope Valley Project

2000. The total cost of the project, including land acquisition costs, is

currently estimated at about $35 million.

The Service followed most of its key requirements for acquiring a site in

Lancaster in 1991 prior to obtaining approval for the proposed Antelope

Valley project, although some requirements were vague. One major

exception was that review and approval of the proposed project

justification and alternatives by the Headquarters Capital Investment

Committee (CIC) did not take place prior to the advance site acquisition in

Lancaster, as required by Service policies. Service guidance was unclear

because it required that alternatives be identified and analyzed before a

project could qualify for advance site acquisition, but it did not clearly

state the type or depth of analysis required. At the time of the Lancaster

site acquisition, the analysis to support the decision was incomplete. More

detailed analyses, such as the space requirements and cost estimates of

project alternatives, were still under development.

Moreover, we could not determine from available documentation why the

alternative to construct a new facility in Lancaster was preferred over

other alternatives that had been proposed or why various alternatives were

not considered viable. For example, it is not clear why an alternative that

was recently under consideration—the expansion of the existing Mojave

facility—was not considered a viable alternative before the site in

Lancaster was acquired. We could not determine whether additional

justification of this proposed project or more detailed analyses of the

alternatives would have been required if this project had been reviewed

and approved by the Headquarters CIC or whether more justification and

analysis would have affected the Service’s decision to purchase the

Lancaster site.

In addition, the Lancaster site purchased for $6.5 million in 1991 has

remained unused since that time due to the Service’s failure to decide how

and when it will resolve the long-standing problems that the proposed

Antelope Valley project was to address. In particular, continuing negative

effects have resulted from the incomplete status of the project for almost

10 years. Project approval and funding of the project remain uncertain due

to delays resulting from two suspensions, limits on capital spending, and

changes in project classification. Consequently, it is unclear how the

Service intends to address the space deficiencies that have contributed to

operational processing and delivery deficiencies in the Antelope Valley

area.

Results in Brief
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Page 3 GAO/GGD-99-147 Status of Antelope Valley Project

Because of continued space deficiencies, automated equipment was sitting

unused in warehouses, some mail delivery was being delayed, and the

projected operating efficiencies and savings have not been realized. In

addition, the Service has invested $6.5 million in land that has been unused

for nearly 8 years; such an investment has a substantial annual interest

cost estimated at over $300,000. It has also incurred additional costs to

update documents required for project approval and may incur more costs

if some of these documents again have to be updated when the project is

reviewed for approval. Finally, the Lancaster and Mojave communities

have faced uncertainty over business development opportunities as a

result of the project delays.

While a determination of the most appropriate course of action was

beyond the scope of our review, it remains unclear after nearly a decade

how the Service intends to address the long-standing mail processing and

service delivery deficiencies in the Antelope Valley area that prompted the

development of this proposed project. As of July 1, 1999, the project was

on hold; these deficiencies could continue, and the land could remain

unused for several more years unless action is taken. Accordingly, we are

making recommendations to the Service to address the concerns we

identified.

In 1989, the Pacific Area Office, then called the Western Regional Office,

identified several deficiencies in the 935 ZIP1

 Code area and proposed

relocating the distribution operations for five post offices in the area into a

new facility. The key deficiencies identified by postal officials included the

following:

• space deficiencies for mail processing operations in the Mojave MPO,

which is responsible for mail processing operations for all of the post

offices in the Antelope Valley;

• space deficiencies in carrier delivery operations in four of the five post

offices affected by the proposed project; and

• space deficiencies in the Lancaster MPO limited the ability to meet

demand for post office boxes, and parking for customers, employees, and

postal vehicles.

Figure 1 shows the locations of the five affected post offices in the cities of

Lancaster, Mojave, Palmdale, Tehachapi, and Ridgecrest located in the

southern portion of the Antelope Valley.

 

1

Zone Improvement Plan.

Background
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Kern County

Los Angeles

(downtown) and 

Los Angeles airport (LAX)

5

5

14

405

Tehachapi

MPO

Palmdale

MPO

Proposed Antelope

Valley Facility Los Angeles

County

Lancaster

MPO

14

Ridgecrest

MPO

Mojave

MPO

The location of Kern

and Los Angeles

counties

Los Angeles

(city)

Shading indicates 935

ZIP Code area

Shaded area indicates 935 ZIP Code area. 

Source: U.S. Postal Service.

Figure 1: Locations of the Five Post Offices Affected by the Proposed Antelope Valley Area Project
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Page 5 GAO/GGD-99-147 Status of Antelope Valley Project

Since the 1980 census, the Antelope Valley area, also known as the 935 ZIP

Code area, has more than doubled its population. The growth in mail

volume has paralleled the population growth. As shown in table 1, growth

in this area was somewhat slower in the 1990s than in the 1980s. However,

current projections expect that population and mail growth will accelerate

again over the next decade.

Year Population

Percent

change Households

Percent

change

Total mail

volume

Percent

change

1980a 184,435 65,471 100,487

1989 317,441 72% 106,695 63% 205,374 104%

1999b 485,073 53% 161,528 51% 295,204 44%

2009b 623,761 29% 215,335 33% 452,841 53%

a

The 1980 originating mail volume excludes third-class mail, for which data were not available.

b

Data for 1999 and 2009 are estimates.

Source: U.S. Postal Service data acquired from Standard & Poors.

Over half of the population growth in the 935 ZIP Code area occurred in

two cities, Lancaster and Palmdale. From 1980 to 1990, Lancaster’s

population grew from about 48,000 to 97,300, and Palmdale’s population

grew from about 12,300 to 68,900. During this same period, Mojave’s

population grew from about 2,900 to 3,800. The Southern California

Association of Governments has projected that the Lancaster-Palmdale

population would increase again over 200 percent by 2010.

Mail scheduled for final delivery in the Antelope Valley originates from all

over the United States and the rest of the world and is transported to the

Los Angeles Processing and Distribution center located near Los Angeles

International Airport. There, the mail undergoes a first-level sort by the

first three digits of the ZIP Code. The mail is then transported to smaller

mail processing facilities, such as the Mojave MPO, where secondary

operations are performed on automated equipment to sort the mail to the

five-digit ZIP Code level. Generally at this stage, some of the mail would

also be automatically sorted to the carrier-route level and sequenced in the

order that carriers deliver it. However, in Mojave, the necessary automated

equipment is not available for sorting mail down to the carriers’ delivery

sequence order. Thus, the mail is transported to the postal facilities

responsible for mail delivery, such as Lancaster, where the mail carriers

manually sort the mail into delivery sequence order.

Administrative support and mail processing functions for mail to be

delivered in the 935 ZIP Code area, as well as local retail and delivery

functions, are housed at the MPO in Mojave. According to available postal

Table 1: Population, Households, and

Mail Volume Data for the 935 Zip Code

Area in 1980, 1989, 1999, and 2009
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Page 6 GAO/GGD-99-147 Status of Antelope Valley Project

documents, the Mojave MPO was functioning at its maximum capacity in

1990. Mail processing and customer service operations competed for space

in the crowded facility. Operational efficiency was beginning to suffer due

to the continual shifting of equipment to allow adequate space for

processing operations. More recently, postal documents noted that some

automated sorting equipment intended for Mojave processing operations

was being stored in warehouses due to insufficient space.

Postal documents from 1990 also reported that the Lancaster MPO had

reached its maximum capacity and could not accommodate the future

growth anticipated in Lancaster. Carrier operations had spread onto the

loading platform, where mail was being placed to await distribution. Both

employees and mail were exposed to weather conditions. There was a

demand for additional post office boxes at the MPO, but there was no

room to expand the box section. According to the Service, employee

support facilities were inadequate; and parking facilities for customer,

employee, and postal vehicles were also inadequate. Similar conditions

reportedly existed in the Palmdale MPO, and a facility replacement was

included in the Western Region’s Five-Year Facility plan. The MPOs in

Ridgecrest and Tehachapi were also reported to be experiencing space

deficiencies but not to the extent of the problems in Lancaster, Mojave,

and Palmdale.

The proposed new Antelope Valley facility would include mail-processing

operations and support functions that are currently located at the Mojave

MPO, and the secondary mail-processing operations would be relocated

from the Palmdale, Ridgecrest, Mojave, and Tehachapi MPOs to the new

facility. The Mojave MPO would be retained and would continue to provide

retail and delivery services for the area and serve as a transfer point for

those areas north and west of Mojave. The existing Lancaster MPO would

be retained to serve as a carrier annex for carrier delivery operations. The

Palmdale, Tehachapi, and Ridgecrest MPOs would be retained to provide

full retail and delivery services for their areas.

To evaluate the Service’s approval process for this project, we performed

the following:

• obtained and reviewed Service policies and guidance in effect when the

project began and the policies and guidance currently in effect for facility

planning, site acquisition, and project approval;

• obtained and analyzed Service documents related to the proposed

Antelope Valley project and project approval process;

Scope and

Methodology
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Page 7 GAO/GGD-99-147 Status of Antelope Valley Project

• discussed the proposed project and the review process with Service

officials in Headquarters, the Pacific Area Office, the Van Nuys District,

and the Lancaster and Mojave MPOs;

• observed operating conditions at the existing Lancaster and Mojave postal

facilities and visited the postal-owned site in Lancaster that was purchased

in 1991;

• reviewed cost estimates for the two alternatives under consideration prior

to the project being placed on hold in March 1999; these cost estimates

were included in draft project approval documents that were submitted for

headquarters review in February 1999; and

• discussed the impact of the proposed project with community officials in

Mojave, Kern County, and Lancaster, CA.

We did not evaluate whether this project should be approved or funded.

The Service has a process and criteria for assessing and ranking capital

facility projects for funding. However, we only reviewed this particular

project and, therefore, did not have a basis for comparing its merits with

those of other capital projects competing for approval and funding. We

also did not independently verify the accuracy of the financial data

included in the Postal Service’s analyses of the cost of various alternatives

under consideration. Postal officials acknowledged that these preliminary

cost estimates might need corrections and revisions because they had not

completed their review of the project approval documents. Due to the

incomplete status of this project, our assessment generally covered the

requirements followed and actions taken by the Service during the period

(1) from project initiation in 1989 until the first suspension in 1992 and (2)

since its reinstatement in 1995 to August 1999.

We conducted our review between December 1998 and August 1999 in

accordance with generally accepted government auditing standards. We

requested comments on a draft of this report from the Postmaster General.

We received written comments from the Postmaster General, which we

have included in appendix I. His comments are discussed near the end of

this report.
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Page 8 GAO/GGD-99-147 Status of Antelope Valley Project

The Service followed most of its key requirements for acquiring a site in

Lancaster prior to obtaining approval for the proposed Antelope Valley

project, although some requirements were vague. One major exception

was that the Headquarters CIC did not review and approve the proposed

project justification and alternatives under consideration prior to advance

site acquisition, as required by Service policies. The Service’s guidance

allowed advance site acquisition before all analyses that were required for

final project approval were completed if, among other requirements, the

Service believed that the preferred site would not be available when

project approval was anticipated.

Table 2 presents the key requirements in the Service’s major facility

project approval process and the actions taken by the Service to meet

those requirements prior to project suspension in 1992. The key

requirements of this project approval process include formal

documentation, and the dates provided are based on available

documentation.

The Service Followed

Most of its Key

Requirements for

Advance Site

Acquisition
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Stage Requirements

Date action taken

by Service

Initial Planning • Identify need for facility project and include project in Five-Year Major Facility Priority process for

prioritization and funding approval

• Develop preliminary Facility Planning Concept document outlining functions to be performed in

proposed facility and how functions will affect other postal facilities

• Hold Planning Parameters meeting to finalize Facility Planning Concept and agree upon project

alternatives

• Hold Headquarters CIC meeting to obtain Advance Project Review approval of project

justification and alternatives

• May 1989

• April 1990

• June 1990

• Not held

Site selection • Define preferred site area

• Advertise for suitable sites

• Prepare environmental assessment as required under National Environmental Policy Acta

• Hold Site Selection Committee meeting to choose a suitable site

• February 1990

• August 1990

• December 1990

• December 1990

Advance site

acquisition

• Submit a request to purchase the site and certify that the following conditions have been met:

 — site control cannot be reasonably obtained through the period required for project approval,

specify offer expiration date;

 — failure to control the property would result in either higher costs or the loss of the preferred

site;

 — project is under way, alternatives have been identified and analyzed

 — site acquisition cost does not exceed $10 million, and funds are available in the capital budget

 — project is scheduled for presentation to Headquarters CIC or Board of Governors

 — Planning Parameters and Advance Project Review stages must have been completed

• Obtain approval from Senior Assistant Postmaster General, Administrative Services Group,

Headquarters

• Purchase site

• June 1991

• Signed, but

undated

• October 1991

Space

requirements

• Develop space requirements for proposed Facility Planning Concept alternatives to determine

sizes of buildings and site requirements needed to meet operational needs

• September 1991

Project approval • Develop Decision Analysis Report (DAR) detailing economic analyses, including costs and

benefits, of proposed project and alternatives under consideration to provide information

necessary for approving authorities to make informed decisions and obtain all necessary

approvals of DAR from Headquarters and Area CICs, Financial Investment Committees, and

Board of Governors

• No action, project

suspended in July

1992

a

National Environmental Policy Act of 1969, as amended, 42 U.S.C. section 4321, et. seq.

Source: GAO analysis of Postal Service guidance and project documents.

The Postal Service’s guidance detailing its investment policies and

procedures for major facilities explains that its purpose is to ensure that

major facility investments support the strategic objectives of the Postal

Service, make the best use of available resources, and establish

Table 2: Key Requirements and Actions Taken by the Postal Service for Project Approval Prior to 1992
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Page 10 GAO/GGD-99-147 Status of Antelope Valley Project

management accountability for investment decisions. Postal Service

policies also specify the delegation of authority for approving capital

facility projects based on total project costs. All capital projects exceeding

$10 million in total project costs are considered major facility projects and

are required to obtain final approval from the Postal Service’s Board of

Governors after being approved through appropriate area and

headquarters officials, including the Headquarters CIC. Some facility

projects may be funded from the area’s budget. To obtain funding from

headquarters capital investment funds, these proposed major capital

facility projects must be prioritized along with proposed projects from all

other regions/areas and included by headquarters officials in the Postal

Service’s Five-Year Major Facilities Priority List. This list is to be updated

annually and included as part of the Service’s annual budget, which is then

reviewed and approved by postal management and the Board of

Governors.

As shown in table 2, the Service generally followed its approval process for

advance site acquisition. However, one major requirement that was not

completed before the advance site acquisition was the Advance Project

Review, which involves the review and approval of the project justification

and alternatives by the Headquarters CIC. Postal officials told us that the

project had met all of the Service’s requirements prior to approval for

advance site acquisition. However, the Service could not provide a date for

when the Headquarters CIC meeting occurred or any documentation of the

completion of the Advance Project Review stage. The purpose of the

Advance Project Review by the Headquarters CIC, according to postal

guidance, is “to be sure that the Headquarters CIC concurs with the scope

(especially the justification, alternatives, and strategic compatibility)

before the expenditure of substantial planning resources.”

According to the Service’s requirements that were in effect in 1991,

advance site acquisition was permitted prior to completion of the project

approval process with the approval of the headquarters senior official

responsible for facilities.2

 The regional postmaster general requested site

acquisition in advance of project approval for the site in Lancaster on June

25, 1991. The request noted that Western Region officials had approved

funding from the region’s budget for site acquisition in fiscal year 1991. In

addition, the request noted that the project was a headquarters-funded

project scheduled to be presented to the Headquarters CIC for review in

 2

In 1991, advance site acquisition for facility projects with a total cost exceeding $5 million and sites

costing $10 million or less were to be approved by a headquarters official, the Senior Assistant

Postmaster General, Administrative Services Group.

Site Acquisition Permitted

Prior to Final Project

Approval
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Page 11 GAO/GGD-99-147 Status of Antelope Valley Project

mid 1992, go to the Board of Governors for review and approval in August

1992, and begin construction in fiscal year 1992.

The request also noted that control of the site3

 expired on June 30, 1991,

and that failure to acquire the site as an advance site acquisition may result

in its loss. The total project cost was estimated at just over $31 million,

with site purchase in the amount of $6,534,000, and site support costs of

$100,000 for a total funding request of $6,634,000 for advance site

acquisition. The request also noted that the property-owner had offered the

Postal Service an additional saving of $250,000, which would reduce the

sales price to $6,284,000, if the site acquisition were approved and closing

occurred prior to August 1, 1991. The funding request was approved by the

appropriate headquarters official, and the site was purchased for

$6,534,000 on October 25, 1991.

Service guidance required that alternatives be identified and analyzed

before a project could qualify for advance site acquisition but did not

clearly state the type or depth of analyses required. At the time of the

Lancaster site acquisition, some analyses, such as the space requirements

(which determine sizes of buildings and site requirements for operational

needs) as well as the cost estimates of project alternatives (which provide

information on projected cash flows and return on investment) were still

under development. Only the estimated project costs associated with the

preferred alternative—construction of a new processing facility in

Lancaster—were available prior to site acquisition. Moreover, the available

documentation did not explain why this alternative was preferred over the

other alternatives considered.

According to documentation provided to us, four alternatives were

presented at the project planning meeting held in June 1990. The four

alternatives, with the key differences underscored, were as follows:

(A) a new area mail processing center in Lancaster for relocated mail

processing operations, distribution operations, and delivery services for

the 93535 ZIP Code area; the existing Lancaster MPO would retain its retail

and delivery services;

(B) a new general mail facility in Lancaster for relocated mail processing

operations, distribution operations, and delivery services for the 93535 ZIP

 3

According to Postal officials, site control means “keeping the property off the market.” Site control

can be achieved by different means, (e.g. a down payment, good faith agreement, or monthly payment).

The type of site control would have to be negotiated with the seller.

Available Analyses to

Support Advance Site

Acquisition Decisions Were

Incomplete and

Documentation Was

Inadequate
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Page 12 GAO/GGD-99-147 Status of Antelope Valley Project

Code area; the existing Lancaster MPO would retain its delivery services

and retail services would be relocated in the area;

(C) new area mail processing center in the vicinity of Mojave and

Lancaster for relocated mail processing operations and distribution

operations; the existing Mojave and Lancaster MPOs would retain retail

and delivery services for their respective communities and a new facility

would be constructed in Lancaster for delivery services; and

(D) lease and modify an existing building for use as a Mail Handling Annex

for relocated mail processing operations and distribution operations; the

existing Mojave MPO would retain its retail and delivery services.

The proposed preferred alternative presented at the June 1990 meeting

was alternative A, a newly constructed area mail processing facility

located in Lancaster. The analysis related to the four alternatives consisted

of brief descriptions of each alternative. However, the documentation does

not explain why the recommended alternative was preferred over the

other alternatives considered. The only explanation provided was included

in the minutes of the June 1990 meeting as follows;

“The alternatives were discussed at length. Alternative A, B, and C were discussed. It was

agreed upon that these alternatives will solve the major operating needs of the Antelope

Valley, but will not address all of our needs for delivery and retail facilities. A reassessment

of the proposed concept and the requirements for Lancaster and Palmdale Main Post

Offices will be conducted following site selection to ascertain whether the specific site is

conducive to delivery or retail activities as a result of its location.”

Further, documentation prepared for the site selection meeting held in

December 1990, stated that

“The existing facilities in Lancaster, Palmdale, and Mojave could not be expanded to

provide sufficient space to accommodate the current and projected growth in the Antelope

Valley. Continuation of mail processing operations at the Mojave MPO will not meet

corporate goals for improved delivery times and efficiencies.”

However, since the proposed project was revised in 1998, expansion of the

existing Mojave facility was one of two alternatives under consideration,

along with the preferred alternative to construct a new facility on the

Service-owned site in Lancaster. Available documentation did not explain

why expansion of the existing Mojave facility was not considered viable in

1990 but was considered a viable alternative in 1998.
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The problem of inadequate documentation of the Service’s real estate

acquisition decisions is not a new issue. In 1989, we reviewed the Service’s

real estate acquisition process. At that time, we reviewed a sample of 246

sites purchased during fiscal year 1987 and made recommendations to

improve the Service’s real estate acquisition program.4

 Our 1989 report

found that the Service usually purchased sites that exceeded both its

operational needs and advertised size requirements. When alternative sites

were available for purchase, the Service generally selected the larger, more

costly sites without requiring site selection committees to document why

less expensive alternative sites were less desirable. The report raised

concerns, based on the Service’s requirements for advertising and

purchasing practices, that the Service might be spending more than was

necessary for land and accumulating an unnecessarily large real estate

inventory. The report also recognized that sometimes larger, more costly

sites may best meet the Service’s operational requirements but that

justification for such selections should be required when smaller, less

costly contending sites were available.

In the Service’s letter dated August 25, 1989, responding to a draft of that

report, the Postmaster General agreed with our recommendation relating

to more complete documentation of the selection process. He stated, “The

Postal Service is concerned only with the best value and will make sure

that the reasoning behind the determination of best value is more carefully

documented in the future.”

However, improvement in documentation was not evident in the

documentation related to the proposed Antelope Valley area project,

which was prepared soon after our report was issued. We identified

inconsistencies in internal postal memorandums related to the required

site size and disposition of any excess land. The region’s June 25, 1991,

memorandum requesting approval for advance site acquisition in

Lancaster stated, “No excess land is expected to remain.” Another internal

memorandum dated October 25, 1991—the date of final settlement for the

purchase of the Lancaster site—discussed preparation of the final cost

estimates for the proposed Antelope Valley Area project and stated “Please

note that the required site is considerably less than the selected site.”

Further, a February 1992 internal memorandum noted that the Lancaster

site was purchased in late 1991 and that the site area exceeded Service

requirements by 296,000 square feet (about 6.8 acres). The reason for the

purchase of a site that was larger than needed was not explained in any

 

4

See Postal Service: Sites for New Post Offices May Be Larger Than Needed (GAO/GGD-89-130, Sept.

1989).

Need to Improve Inadequate

Documentation Previously

Identified
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Page 14 GAO/GGD-99-147 Status of Antelope Valley Project

available documents. More recent documents related to the proposed

project alternatives also noted that the Service-owned site in Lancaster

exceeds project requirements, but the alternatives do not discuss how the

excess property would be disposed of.

As of the beginning of July 1999, the Service’s consideration of the

proposed Antelope Valley project had been put on hold, and a decision

may not be made for some time. Consequently, the status and funding of

the proposed project remains uncertain almost 10 years after it was

initiated. Consideration of the project has been delayed due to two

suspensions, reductions in capital investment spending, and a recent

reclassification of the proposed facility. As a result, processing and

delivery deficiencies that were identified as critical for this area in 1989

continue to exist, and the Service has not determined how it plans to

address these operational deficiencies. In addition, the Service has

incurred additional costs that have resulted from the need to repeat

analyses and update documents required for final project approval. With

the project currently on hold, further costs may be incurred to again

update required analyses. Finally, the delays have prolonged the

uncertainty related to business development opportunities for the affected

communities of Mojave and Lancaster.

Initiated in 1989, with an expectation that the project would be funded in

fiscal year 1992, the proposed Antelope Valley project was suspended in

1992, while the Service was undergoing a reorganization and had reduced

its funding for capital facility projects. Table 3 shows that between 1991

and 1995, the Service committed $999 million less to its facilities

improvement program than it had originally authorized in its 1991 to 1995

Capital Improvement Plan.

Dollars in thousands

Postal

fiscal year

Funds authorized for

facility projects

Funds committed for

facility projects Difference

1991 $1,334 $1,118 $216

1992 1,170 940 230

1993 1,112 403 709

1994 1,048 1,048 0

1995 895 1,051 (156)

Total $5,559 $4,560 $999

Source: Postal Service Comprehensive Statements for 1991 through 1995.

Postal Service officials could not explain why the classification of this

project, as a processing facility or other type of capital facility, has been

Project Delays and

Resulting Negative

Effects Remain

Unresolved

Reduced Funding and

Classification

Inconsistencies Contributed

to Project Delays

Table 3: Comparison of Funds

Authorized and Funds Committed For

Facility Projects, Between Fiscal Years

1991 and 1995
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Page 15 GAO/GGD-99-147 Status of Antelope Valley Project

changed several times and why it has not yet been submitted for

consideration in the headquarters capital facility projects prioritization and

funding process. All major mail processing facilities must be funded from

the headquarters capital facility budget, while other types of processing

and delivery facilities may be funded from regional/area budgets. At the

time that the proposed project was suspended in 1992, it was classified as

a mail processing facility in the Western Region/Pacific Area Major Facility

Priority List. It had also been submitted for headquarters funding

consideration in the Five-Year Major Facilities Priority List for fiscal years

1991 to 1995. The project was reinstated and reclassified in 1995 as a

Delivery and Distribution Center (DDC), with the expectation that it would

be funded out of area funds in fiscal year 1998. The Service suspended the

project a second time in March 1999, while it was undergoing review by

headquarters officials. Based upon the headquarters review, the project

was again reclassified from a DDC to a Processing and Distribution Center.

The latest reclassification meant that the project would have to be funded

by headquarters rather than the Pacific Area Office, and it would have to

compete nationally for funding. This means that the project will have to

await placement on the next headquarters Five-Year Major Facilities

Priority List, which is scheduled to be completed by August 2000.

It is also not clear why the proposed project was reinstated and

reclassified in 1995 as a DDC when the major purpose and design of this

project had not fundamentally changed. Postal officials in the Pacific Area

Office and Van Nuys District said that the recently proposed Antelope

Valley project is essentially the same as the project that was being planned

when the Service acquired the 25-acre Lancaster site in 1991. The major

differences in the two projects are in nonmail processing areas.5

 As

previously mentioned, the proposed project had not had an Advance

Project Review by the Headquarters CIC prior to the suspension in 1992.

Such a review might have prevented the unexplained reclassifications of

this project that have contributed to delays in its funding.

Ten years after this project began, the operational processing and delivery

deficiencies that were identified as critical for this area in 1989 still remain.

Because of continued space deficiencies, automated equipment has not

been deployed as scheduled, and the projected operating efficiencies and

savings have not been realized. The District projected that one of the

 

5

The recent proposal no longer includes a vehicle maintenance facility on the site because the District

recently decided that it was more economical to contract for vehicle maintenance with the local

communities as opposed to in-house maintenance. A retail operation has been added to the recent

proposed Lancaster alternative to eliminate the deficiencies of limited post office boxes and customer

parking in the Lancaster MPO.

Operational Processing And

Delivery Deficiencies

Remain Unaddressed
B-282078

Page 16 GAO/GGD-99-147 Status of Antelope Valley Project

benefits from automated sorting of the mail to the carriers in delivery walk

sequence would be to improve delivery performance by 4.25 percent

annually. This additional sorting would decrease the time that the carriers

spend in the delivery units preparing the mail for delivery and increase the

amount of time the carriers would have to deliver the mail. Another

negative effect of the space deficiencies in Mojave was that some of the

mail originating in the 935 ZIP Code area (approximately 130,000 pieces

per day) was diverted from processing in Mojave to the processing facility

in Santa Clarita. According to local postal officials, the effect of this

diversion was to delay by 1 day the delivery of some mail that was to be

delivered in the 935 ZIP Code area. The local area First-Class mail was

supposed to be delivered within 1 day to meet overnight delivery standards

for First-Class mail.

Since this project was initiated in 1989, the Service has taken several

actions to address mail processing and delivery deficiencies in the

Antelope Valley. The Service added 2,417 square feet of interior space to

the Palmdale MPO by relocating the post office into a larger leased facility.

Some relief was provided to the cramped carrier operations at the

Lancaster MPO by relocating 15 of the 89 carrier routes serving Lancaster

to the Lancaster Cedar Station. However, as we observed on our visit to

the Lancaster facilities, conditions in Lancaster were still very congested.

Mail that was waiting to be processed and workroom operations spilled

out of the building onto the platform, exposing both employees and the

mail to weather conditions.

In an effort to provide the Mojave MPO with more mail-processing space, a

2,400 square foot tent was installed in 1998, at a cost of $30,000, next to the

loading platform. The tent provided additional space for processing

operations and for holding mail that was waiting to be processed, but it did

not allow for deployment of any automated equipment scheduled for use in

the 935 mail-processing functions. Also, we observed that the tent would

not provide adequate shelter from high winds or other weather-related

conditions. Some of the equipment was stored at district warehouses.

Although these efforts have allowed the district to continue to provide

processing and delivery service, it is not clear how the Service intends to

meet the operational processing and delivery deficiencies while decisions

related to the proposed facility are pending.

Project delays have also contributed to higher costs, incurred to repeat

and update some of the analyses and cost data needed for final project

approval. Given that the process is not completed, additional costs may be

incurred to further update required analyses. The Service has incurred

Delays Incur Additional

Costs
B-282078

Page 17 GAO/GGD-99-147 Status of Antelope Valley Project

additional costs related to developing a second set of documents required

for project approval, including Facility Planning Concept documents,

appraisals, space requirements, environmental assessments, and DARs.

Generally, the Service uses contractors to develop the environmental and

engineering studies. Although the total cost of document preparation has

not been quantified, available documentation indicates that the Service has

incurred about $254,000 for costs related to previous design efforts for this

project.

In addition, costs that have not been quantified include staff time and

travel costs associated with this project. The Area Office Operations

Analyst who was responsible for preparing the DAR told us that it took

him approximately a year to develop a DAR and the supporting documents

and analysis. This did not include the time of the other individuals who

provided him with various information needed to complete the analyses or

the time of officials responsible for reviewing and approving the project.

The Service has also incurred additional costs for travel associated with

project reviews, such as the Planning Parameters Meeting, which involved

the travel of at least three headquarters officials.

It is difficult at this stage to determine what additional analyses may be

needed because the Antelope Valley project has been suspended and,

according to Service officials, no further action is being taken on reviewing

the project until it is submitted by Pacific area officials for prioritization.

We reviewed the cost estimates for the two alternatives that were included

in the draft DAR that had been submitted to headquarters for review in

February 1999. We found some deficiencies in the information presented.

Postal officials stated that these types of deficiencies would be identified

during their review process that includes reviews by officials in three

separate headquarters departments—Facilities, Operations, and Finance.

They also said that the cost estimates in the DAR were too preliminary to

use as a basis for assessing which of the two alternatives under

consideration were more cost effective. The officials noted that significant

changes could be made to the cost estimates as the project documentation

completes the review process.

In addition, the Service has not realized any return on its investment in the

site in Lancaster, which has remained unused since 1991. This unrealized

investment has an interest cost associated with the Service’s use of funds

to purchase the Lancaster site in October 1991. We estimated that the

interest cost associated with the Service’s $6.5 million investment totaled

about $2.9 million from the time that the site was purchased in October
B-282078

Page 18 GAO/GGD-99-147 Status of Antelope Valley Project

1991 through June 1999 and that it would likely increase by over $300,000

each year.6

The uncertainty of this project over such a long period has also created

difficulties, particularly related to business development planning, for the

affected Lancaster and Mojave communities. Mojave community officials

have raised concerns about the effect that relocating the postal operations

would have on their community. They expressed specific concerns relating

to the potential lost job opportunities to the Mojave and nearby California

City residents and the impact that losing the postal processing operations

would have on their effort to attract new homes and retail services. Postal

documents indicated that while none of the Mojave employees would lose

their jobs, approximately 80 employees working the evening and night shift

would be relocated if distribution operations were to be relocated to a new

facility in Lancaster. The Service projects that the proposed expanded

Mojave Facility would create 10 additional jobs at the facility when it

opens.

The project delay has also affected the business development

opportunities in Lancaster. After the Service selected the Lancaster site in

1991, the Mayor of Lancaster stated in a letter to the Postal Service that he

welcomed the new facility and that the facility would anchor the new 160-

acre Lancaster Business Park Project. Shortly after the Postal Service

selected the 25-acre site, a major mailer, Deluxe Check Printing, acquired a

12-acre site adjacent to the postal property. Recently, the Lancaster City

Manager noted that not having the Postal Service facility has made

marketing the Business Park to potential developers very difficult. In

addition, Lancaster officials stated that the city has spent over $20 million

to provide improvements to the business park. These improvements were

conditions of sale when the Postal Service acquired the site in 1991.

The Service followed most of its key requirements when it purchased a site

in Lancaster in 1991 for the proposed Antelope Valley project before it had

obtained overall project approval, although some requirements were

vague. One major exception was that the Headquarters CIC did not review

and approve the proposed project justification and alternatives under

consideration prior to advance site acquisition as required by Service

guidance. The Service’s requirements for advance site acquisition were

unclear because they did not specify the types or depth of analyses

required. The Service’s analyses of alternatives were incomplete because

 

6

To develop a rough estimate of the interest cost, we used the average yield on Treasury securities at

constant maturity of 1 year prevailing in December each year from 1991 through 1998.

Delays Create Uncertainty

for Affected Communities

Conclusion
B-282078

Page 19 GAO/GGD-99-147 Status of Antelope Valley Project

estimated costs of the alternatives and space requirements were still under

development. Also, it was not clear why an alternative that was recently

under consideration, the expansion of the existing Mojave MPO, was not

considered a viable alternative before the site in Lancaster was acquired.

We could not determine whether review and approval of the proposed

project justification and alternatives by the Headquarters CIC would have

resulted in changes in the proposed project justification and alternatives or

more in-depth analysis of the alternatives. Such a review may have

prevented the unexplained inconsistencies in the classifications of this

project that have contributed to delays in its funding. Likewise, it is not

known whether the Committee’s review would have suggested a course of

action other than acquisition of the Lancaster site. Further, the more

recent analysis of the alternative to expand the Mojave MPO is too

preliminary to assess or draw any conclusions from because the

headquarters review of the proposed project has been suspended.

However, what is known is that the Service spent about $6.5 million over 8

years ago to purchase a site that has remained unused. This site may or

may not be used by the Service in the future, and its investment has a

substantial annual interest cost associated with it. While this interest cost

continues, the mail service deficiencies identified nearly 10 years ago

remain unaddressed, and projected operating efficiencies and savings

anticipated from new equipment are unrealized as the equipment remains

in storage.

Given this situation, it is not clear why the status of this project has been

allowed to go unresolved for such a long time. It is also unclear at this time

whether funding for this project will be approved and, if so, for what year

of the next 5-year capital projects funding cycle. Thus, the Service’s site

investment in unused land and the existing operational deficiencies are

likely to continue for some time, and the Service has not determined how

it will address these issues if the project is not approved or funded for

several years.

To address the long-standing uncertainties related to the proposed

Antelope Valley project, we recommend that the Postmaster General take

the following actions:

• Resolve the internal inconsistencies in the classification of this project,

determine whether the site in Lancaster should be retained, and ensure

that the project is considered in the appropriate funding and approval

process, and

Recommendation
B-282078

Page 20 GAO/GGD-99-147 Status of Antelope Valley Project

• Require the Pacific Area office to determine whether immediate action is

needed to address the operational deficiencies identified in the Antelope

Valley area and report on planned actions and related time frames for

implementation.

We received written comments from the Postmaster General on August 20,

1999. These comments are summarized below and included as appendix I.

We also incorporated technical comments provided by Service officials

into the report where appropriate. The Postmaster General responded to

our conclusion that the Service did not follow all of its procedures in effect

at the time that approval was given to purchase a site for a proposed

facility in advance of the proposed Antelope Valley project’s review and

approval. He stated that the Service has revised its procedures for

advance site acquisition so that proposed sites are subjected to additional

review and approval. As a result, he stated that the advanced acquisition

of a site for project such as Antelope Valley now must receive approval

from the Headquarters Capital Investment Committee and the Postmaster

General.

The Postmaster General generally agreed with our recommendations to

address the unresolved status of the Antelope Valley project and the

operational deficiencies in the Antelope Valley area. In response to our

first recommendation to resolve the inconsistent classification of the

project, he stated that the Service has determined that the proposed

Antelope Valley project is properly classified as a mail processing facility.

He also stated that the proposed project would be considered for funding

along with other such projects during the next round of project review and

prioritization. While clarification of the project’s classification is a good

first step, until disposition of the entire project is completed, the status of

the project, including the use of the Lancaster site, remains unresolved.

Regarding our second recommendation to address operational deficiencies

in the Antelope Valley area, he stated that officials from the involved

Pacific Area offices have met to discuss the most workable alternatives to

sustain and improve mail service for Antelope Valley customers. However,

due to the complexity of issues, including the possibility of relocating

some operations into leased space on an interim basis, a fully developed

distribution and delivery improvement plan may take some time to

implement. He agreed to provide us with action plans and time frames as

they are finalized. If actions are taken as described by the Postmaster

General, we believe they would be responsive to our recommendations.

Agency Comments and

Our Evaluation
B-282078

Page 21 GAO/GGD-99-147 Status of Antelope Valley Project

We are sending copies of this report to Representative Howard (Buck)

McKeon; Representative John McHugh, Chairman, and Chaka Fattah,

Ranking Minority Member, Subcommittee on the Postal Service, House

Committee on Government Reform; Mr. William J. Henderson, Postmaster

General; and other interested parties. Copies will also be made available to

others upon request. The major contributors to this report are listed in

appendix II. If you have any questions about this report, please call me on

(202) 512-8387.

Sincerely yours,

Bernard L. Ungar

Director, Government Business

 Operations Issues
Page 22 GAO/GGD-99-147 Status of Antelope Valley Project

Contents

1 Letter

Appendix I 24

Comments From the

United States Postal

Service

Appendix II 26

GAO Contacts and

Staff

Acknowledgments

Table 1: Population, Households, and Mail Volume Data

for the 935 Zip Code Area in 1980, 1989, 1999, and 2009

5

Table 2: Key Requirements and Actions Taken by the

Postal Service for Project Approval Prior to 1992

9

Table 3: Comparison of Funds Authorized and Funds

Committed For Facility Projects, Between Fiscal Years

1991 and 1995

14

Tables

Figure 1: Locations of the Five Post Offices Affected by

the Proposed Antelope Valley Area Project

4 Figures

Abbreviations

CIC Capital Investment Committee

DAR Decision Analysis Report

DDC Delivery and Distribution Center

MPO Main Post Office
Page 23 GAO/GGD-99-147 Status of Antelope Valley Project
Appendix I

Comments From the United States Postal

Service

Page 24 GAO/GGD-99-147 Status of Antelope Valley Project
Appendix I

Comments From the United States Postal Service

Page 25 GAO/GGD-99-147 Status of Antelope Valley Project
Appendix II

GAO Contacts and Staff Acknowledgments

Page 26 GAO/GGD-99-147 Status of Antelope Valley Project

Bernard Ungar (202) 512-8387

Teresa Anderson, Melvin Horne, Hazel Bailey, Joshua Bartzen, and Jill

Sayre made key contributions to this report.

GAO Contacts

Acknowledgments
Page 27 GAO/GGD-99-147 Status of Antelope Valley Project
Page 28 GAO/GGD-99-147 Status of Antelope Valley Project
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