U.S. Postal Service: Delivery Mode Conversions Could Yield Large Savings, but More Current Data Are Needed
Published: 2014-05-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: USPS is expected to provide prompt, reliable and efficient nationwide service while remaining self-supporting, but it is facing serious fiscal challenges with insufficient revenues to cover its expenses. Mail delivery is USPS's largest cost area, totaling about $30 billion annually. Although USPS lacks authority to make certain changes that could reduce costs, it does have the authority to convert from more expensive to less expensive delivery modes.
GAO was asked to examine potential cost savings and issues related to delivery conversion. This report discusses: (1) the estimated costs of each delivery mode and potential savings associated with converting to less costly modes and (2) USPS actions to convert to less costly delivery modes and any impediments to conversions. GAO obtained and analyzed USPS estimates from fiscal years 1994 through 2012 on delivery mode costs as well as potential savings from conversions to less costly modes and determined that the estimates have limitations, which we discuss in the report. GAO also interviewed officials from USPS and mailing industry stakeholders.
section_title: What GAO Found
paragraphs: The U.S. Postal Service (USPS) estimates of delivery mode costs and potential savings from converting to less costly modes show that door-to-door delivery is much more costly than delivery to a curbside or centralized mailbox and that USPS could achieve large savings by mandating large-scale conversions from door delivery to other modes. For fiscal year 2012, USPS estimated average annual costs of about $380 per delivery point for door delivery, compared with about $240 for delivery to the curb, and about $170 for delivery to a central location. USPS also estimated potential ongoing savings of over $2 billion annually from mandating conversion of about one-third of door deliveries to other modes. However, USPS's estimates of these specific costs and savings have limitations, in part because they rely on data from a 1994 USPS study. In lieu of current data, USPS adjusted the 1994 data according to increases in the Consumer Price Index—an adjustment that may not have been the same as changes in USPS delivery costs, which are affected by factors such as increases in postal wage rates, postal benefit costs, and gasoline prices. USPS officials estimate a new study could be conducted to replace the 1994 study for a total of about $100,000 to $750,000, depending on the extent of the study. Without current information on costs of delivery modes and on potential savings through delivery conversions, USPS and lawmakers may not have an accurate understanding of the impact of delivery mode changes on which to base their decisions.
USPS has taken some actions to shift door deliveries to less costly delivery modes on a voluntary basis, but it faces stakeholder resistance and other impediments to mandatory conversions. USPS revised its regulations in April 2012 specifying that USPS determines the mode of delivery for new addresses and that new addresses must receive less costly modes, such as centralized delivery, unless USPS approves an exception. Additionally, USPS implemented voluntary business conversions in fiscal year 2013. USPS reported that 43,333 out of about 5.6 million business door delivery points—or about 0.8 percent—were voluntarily converted in fiscal year 2013. USPS has set a modest goal of about 35,000 additional voluntary business conversion goals for fiscal year 2014. USPS also converted about 36,302 out of about 32.2 million residential door delivery points—or about 0.1 percent—to centralized delivery on a voluntary basis in fiscal year 2013. Through the voluntary conversion process, customers on a route may choose to maintain door delivery, reducing the number of conversions and lowering potential savings. Large-scale mandatory conversions have the potential to achieve large savings. However, USPS is reluctant to mandate conversions. There is some evidence that USPS would face resistance from customers, USPS employees, and mailing industry stakeholders if it were to implement mandatory conversion of delivery to less costly modes. Stakeholder concerns include personal safety, mail security, and difficulty finding suitable urban locations for boxes to deliver mail to a curbside or centralized location.
section_title: What GAO Recommends
paragraphs: GAO recommends that USPS collect updated data on delivery mode costs and the potential savings of converting to less costly modes of delivery and establish a time frame for publicly reporting the results. USPS agreed with the recommendation.

section_title: Letter
paragraphs: The U.S. Postal Service (USPS) is required to fulfill its mission of  providing prompt, reliable, and efficient nationwide service to the public  while remaining financially self-sustaining. However, for the past several  years, USPS has been facing serious fiscal challenges, has insufficient  revenues to cover its expenses, and has stated that it must continue to  cut costs and improve efficiency to remain viable. In fiscal year 2013,  USPS delivered mail to a network of more than 150 million delivery  points; mail delivery represents USPS’s largest cost area, totaling about  $30 billion annually out of its total expenses of about $72 billion in fiscal  year 2013, while consuming about half of its work hours. Delivery  expenses are subject to cost pressures from increasing postal wage  rates, rising costs of employee benefits, and continued growth in the  number of delivery points in USPS’s network, according to USPS data.  USPS is bound by specific legal and other restrictions that limit its ability  to make certain business decisions to reduce its delivery expenses, such  as moving from 6-day delivery to 5-day mail delivery with 6-day package  delivery—a change USPS estimated could reduce its annual expenses by   However, it does have the flexibility  about $2 billion on an ongoing basis.to revise its regulations to make changes from more costly to less costly  modes of delivery. The most expensive delivery mode is directly to the  customer’s door, primarily because of the added personnel expense  when compared to USPS’s other modes, such as to a customer’s  curbside mailbox. To capture potential savings, proposed postal reform  legislation has included provisions to reduce door delivery.you asked us to examine potential cost savings and related delivery  conversion issues. This report discusses (1) the estimated costs of each  delivery mode and potential savings associated with converting to less  costly delivery modes, and (2) USPS actions to convert delivery modes to  less costly modes, and any impediments to conversions.
To ascertain the cost of each delivery mode and the potential savings  from delivery mode conversions, we obtained USPS data and supporting  documentation on the costs of different mail delivery modes from fiscal  years 2008 through 2012. In addition to the cost data, USPS generated  several scenarios with estimates of potential savings from converting  specific numbers of delivery points from door delivery to less costly  modes. We obtained USPS documentation and interviewed USPS about  the methodology used to develop the estimates and asked specific  questions about reliability and limitations of the data used to calculate the  estimates. We determined that these were the only data available and  have limitations for estimating delivery costs and potential savings, which  we discuss in the report. To determine USPS’s actions to convert delivery  modes to less costly modes, we obtained USPS data from fiscal years  2008 through 2013 and the number of delivery points using each mode of  delivery and the number of conversions in fiscal year 2013. To determine  any impediments to increased reliance on these delivery modes, we  obtained USPS documentation related to its conversion efforts, and  interviewed its headquarters and field officials, postal unions representing  city and rural letter carriers, and a broad cross-section of organizations  representing the mailing industry. We also interviewed U.S. Postal  Inspection Service officials to obtain information on mail security issues.  Further details on our scope and methodology appear in appendix I.
We conducted this performance audit from June 2013 to May 2014 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.
subsections: section_title: Background
paragraphs: According to USPS data, in fiscal year 2013, USPS delivered mail to a  network of more than 150 million delivery points, including 133 million  delivery points served by more than 230,000 career carriers that  comprised almost half of the career workforce. In addition, USPS  employed more than 75,000 non-career carriers who were mostly part- time employees, such as substitute carriers on rural routes. Mail delivery  is USPS’s largest cost area, comprising 41 percent of total costs in fiscal  year 2013. The extent to which USPS uses each mode of delivery and  the mode’s associated costs play a substantial role in USPS’s overall  financial condition.
USPS uses three basic modes for residential and business mail delivery:
Door delivery includes delivery to mail slots in the door as well as  mailboxes attached to houses and delivery made to businesses such  as delivery to mail slots in the door, mailboxes attached to the  business near the door, or locations within office buildings. Door  delivery is the most costly because the carrier must walk from door to  door, which is often the case on foot routes or park-and-loop routes.
Curbline delivery (also referred to as curbside delivery) includes  delivery to curbline mailboxes that are commonly used on routes  serving residential customers, such as those living in rural and  suburban areas. Curbline mailboxes are typically unlocked mail  receptacles on a post. USPS regulations require curbline mailboxes  to be located at the curb where they can be efficiently, safely, and  conveniently served by the carrier from the carrier’s vehicle, and so  that customers have reasonable and safe access. Curbline delivery is  less costly than door delivery, as it takes less time for the carrier to  move between curbline mailboxes, particularly when the carrier can  load mail into the mailbox directly from the delivery vehicle.
Centralized delivery is provided to centrally-located mail receptacles,  such as apartment house mailboxes and cluster box units. Both wall  mounted and cluster box units can be installed to service both  residential and business delivery. Cluster boxes are generally  pedestal-mounted units located outdoors with individually locked mail  receptacles for each delivery point. Cluster boxes and apartment  house mailboxes have become more secure over time, as USPS  developed and implemented regulations for higher security standards  for manufacturers. The newer Cluster Box Units (CBUs) also include  locked receptacles for parcels and outgoing mail, unlike older  Neighborhood Delivery and Cluster Box Units (NDCBU). This mode of  delivery is also less costly than door delivery as it takes less time to  service a cluster box than to walk from door to door, particularly when  the carrier can drive between cluster boxes.
Figure 1 shows the types of mail receptacles commonly used for each  major mode of delivery.
According to USPS data, in fiscal year 2013 about 41 percent of existing  delivery points received curbline delivery, about 30 percent received  centralized, and about 28 percent had other modes, which primarily  consist of door delivery. These percentages have changed little over the  past 5 years (see fig. 2).
From fiscal years 2008 to 2013, the total number of door delivery points  declined by about 308,000—including about 287,000 residential door  delivery points, and about 21,000 business door delivery points—leaving  about 32.2 million residential door delivery points and about 5.6 million  business delivery points (see fig. 3). According to a USPS official, these  changes mostly reflect redevelopment, such as replacement of older  homes that had door delivery with new apartment buildings with  centralized delivery, and new business developments such as office  parks and strip malls. While the number of door delivery points declined  by 1.2 percent from fiscal years 2008 to 2013, the number of curbline and  centralized delivery points—the primary modes of delivery—increased by  0.1 percent and 1.1 percent respectively. From fiscal years 2008 to 2013,  the number of centralized delivery points increased by 2.8 million, while  the number of curbline delivery points increased by 1.9 million. See  appendix II for details on the number of delivery points for each mode in  fiscal years 2008 through 2013.
USPS is required to provide prompt, reliable, and efficient services to  patrons in all areas. USPS has the flexibility to revise its regulations to  convert delivery points from more costly to less costly modes of delivery,  and postal statutory provisions provide that USPS is required to fulfill its  mission by operating an efficient delivery network. USPS is specifically  required to plan, develop, promote, and provide adequate and efficient  postal services at fair and reasonable rates and fees.
section_title: USPS Data Have Limitations, but USPS Estimates Large Potential Savings from Large- Scale Delivery Mode Conversions
paragraphs: USPS estimates of delivery mode costs and potential savings from  converting to less costly modes have limitations because they rely on cost  estimates and data from a 1994 USPS study. USPS increased these  1994 cost estimates for each mode of delivery by 55 percent, based on  the total percent change in the Consumer Price Index for All Urban  Consumers (CPI-U) from fiscal year 1994 to 2012, which may not have  been the same as changes in USPS delivery costs. USPS estimates  updated through fiscal year 2012 based on the 1994 data show door  delivery costs greatly exceed costs for other modes of delivery. USPS  officials stated that although many aspects of postal operations have  changed over the past 20 years, the manner in which a carrier delivers  mail on the street has changed little. USPS’s estimated costs of door  delivery were about 160 percent higher than curbline delivery and  estimated door delivery costs were more than double that of centralized  delivery. Based on the differences in delivery mode costs, USPS  estimates that it could realize large savings from large-scale mandatory  conversions of both residential and business delivery points from costly  door delivery. We determined that these were the only data available and  have limitations for estimating delivery costs and potential savings.  However, these estimates may not be the best source to inform decisions  about conversion approaches, as estimates based on updated data may  yield differing results.
subsections: section_title: USPS Delivery Mode Cost and Savings Estimates Have Limitations
paragraphs: USPS estimates of delivery mode costs and potential savings from  converting to less costly modes have limitations because they rely on cost  estimates and data from a 1994 USPS study.on the time postal employees used to prepare and deliver mail for each  mode of delivery. These data were then combined with postal wage and  benefit cost data, as well as other data (e.g., delivery vehicle costs), to  estimate the costs for each mode of delivery. In lieu of current data,  USPS increased these 1994 cost estimates for each mode of delivery by   The study collected data  55 percent, based on the total percent change in the Consumer Price  Index for All Urban Consumers (CPI-U) from fiscal year 1994 to 2012.  (See app. III for further details on USPS’s methodology for conducting  this study.) Because CPI-U is a measure of inflation for the U.S.  economy, changes in CPI-U over this period of time may not have been  the same as changes in USPS delivery costs, which are affected by  factors such as postal wage rates, postal benefit costs, and gasoline  prices. In fact, according to USPS officials, key delivery-related costs  increased more than inflation from 1994 to 2012. These cost increases  may have been offset by gains in postal productivity, such as automated  mail sorting by delivery sequence, which reduces the amount of carrier  time needed for manual sorting,estimates are generally understated or overstated.   so it is unclear whether USPS’s  Another potential weakness in the estimates is USPS’s application of the  same 55 percent increase in the 1994 data for the cost of each delivery  mode—a method that assumes that the cost for each delivery mode  increased at the same rate from fiscal years 1994 to 2012. Available  evidence suggests this assumption may not be correct. According to  USPS, since the original study was conducted, it has adopted work rules  that disproportionately increase the cost of door delivery. For example, to  comply with current collective bargaining agreement work rules, city  postal carriers must manually collate some advertising mailing before  loading it into satchels to carry on foot routes and park-and-loop routes,   This work rule does  which are largely door delivery, according to USPS. not apply to motorized routes, such as curbline routes where carriers load  mailboxes from the delivery vehicle. In addition, to the extent that some  modes of delivery are more labor intensive than others, the actual  increase in USPS wage and benefit costs from fiscal years 1994 to 2012  may have affected the costs of some delivery modes more than others.
The work rule specifies that city letter carriers on foot routes and park-and-loop routes  will not be required to carry more than three bundles of mail pursuant to USPS’s collective  bargaining agreement with the National Association of Letter Carriers, which represents  city carriers.
Government auditing standards state that managers are responsible for  providing reliable, useful, and timely information for transparency and  accountability of programs and their operations. Legislators, oversight  bodies, and the public need to know whether or not government services  are provided effectively, efficiently, and economically. This standard is  particularly relevant because pending postal reform legislation in the  House and Senate would mandate the conversion of some delivery points  from door delivery to centralized or curbline delivery. Furthermore, the  administration’s budget for fiscal year 2015 also proposes “allowing the  Postal Service to begin shifting to centralized and curbside delivery where  appropriate.” Internal controls for federal agencies state that financial  information is needed to support operating decisions, monitor  performance, and allocate resources. Without such information on costs  of modes and on potential savings through delivery conversions, USPS  and lawmakers may not have an accurate understanding of the impact of  delivery mode changes on which to base their decisions.
USPS officials told us that its estimates of delivery mode costs and  potential savings “have validity” despite the use of the inflation adjustment  in lieu of updated data. USPS officials stated that although many aspects  of postal operations have changed over the past 20 years, the manner in  which a carrier delivers mail on the street has changed little. However,  USPS officials also acknowledge the weakness of USPS’s delivery mode  data. USPS estimates the cost of a new delivery study using ongoing  operational data at $75,000 to $100,000, and the cost of a more  extensive study collecting new data at $250,000 to $750,000. Mail  delivery represents the largest cost area relative to USPS’s annual  expenses of approximately $72 billion, and updating the 1994 study  would be relatively low cost compared to those expenses. Without a  current delivery cost study, USPS may be less able to determine accurate  cost savings from various delivery mode conversion scenarios.
section_title: USPS Estimates Large Cost Differences among Different Delivery Modes
paragraphs: USPS estimates updated through fiscal year 2012 based on the 1994  data show door delivery costs greatly exceed costs for other modes of  delivery. Estimated costs of door delivery were about 160 percent higher  than curbline delivery and estimated door delivery costs were more than  double that of centralized delivery. Specifically, USPS estimated that its  delivery costs in fiscal year 2012 ranged from about $380 annually for the  average door delivery point to about $240 for curbline delivery and about  $170 for centralized delivery such as cluster boxes and apartment house  mailboxes (see fig. 4).
section_title: USPS Estimates Large Potential Savings from Mandatory Conversion of Residential and Business Delivery Points to Less Costly Modes
paragraphs: Based on the differences in delivery mode costs, USPS provided us with  estimates showing that it could realize large savings from large-scale  mandatory conversions of both residential and business delivery points  from costly door delivery even as it continues to add new delivery points  every year. For example, there were about 770,000 new delivery points  added in fiscal year 2013, an increase of about half of 1 percent from  fiscal year 2012 levels. Specifically, USPS estimates that potential  ongoing annual savings exceeding $2 billion could be achieved by  mandatory conversion of 12.2 million door delivery points over the next  decade to a mix of centralized and curbline boxes (see fig. 5). This level  of conversion is about one-third of the 38 million door delivery points and  would still provide future opportunities to realize savings from additional  conversions. About 85 percent of these conversions would be residential  and 15 percent would be business delivery points. Based on USPS’s  schedule for these conversions, the potential savings would be realized in  the first full fiscal year after full implementation—fiscal year 2024—and  every following fiscal year. USPS also estimated proportionately smaller  savings from less extensive mandatory conversions (see fig. 5). We  determined that these were the only data available and have limitations  for estimating delivery costs and potential savings. However, these  estimates may not be the best source to inform decisions about  conversion approaches, as estimates based on updated data may yield  differing results.
According to USPS officials, its estimates are based on what they could  reasonably accomplish with a deliberate pace of mandatory conversions  that would be feasible for postal operations and customers. USPS  officials told us that this pace—converting up to 1.5 million delivery points  annually—would enable them to realign delivery routes to achieve  ongoing savings from modes of delivery that are less labor intensive.  Based on this pace, USPS officials said they could achieve sufficient  savings to recoup costs to buy and install cluster boxes within the same  year.
To understand how USPS estimates it could realize these savings, it is  important to understand how the changes would reduce USPS’s workload  and how this would translate into lower USPS costs. Conversion of  delivery points from door to curbline and centralized delivery would  reduce the time required to organize and deliver the mail. Motorized  routes with centralized and curbline delivery require less of a carrier’s  time than walking from door to door. Reducing carrier workload through  mandatory conversions could enable USPS to reorganize delivery into  smaller numbers of routes, with each route including a larger number of  delivery points. The resulting decrease in the number of routes could help  reduce the number of carriers needed to fulfill delivery needs. USPS has  historically reduced its workforce through attrition and has no-layoff  provisions in its collective bargaining agreements with its four major  postal unions. In this regard, large numbers of career carriers are  expected to retire in the coming years. In addition to realigning delivery  routes, our prior work has found that USPS can use established work  methods for accomplishing delivery to a given geographic area with fewer  carriers. reducing overtime as well as the number of hours worked by carriers with  flexible schedules. In this regard, most door delivery is made to city  delivery routes served by city carriers. The average hourly wage and  benefit costs of all city carriers, including career and non-career  employees, exceeds $41 per hour, according to USPS data.
For example, USPS often divides up an unstaffed route among multiple carriers who  each cover a part of this route in addition to their regular route—a work method that is  used to augment the work of some carriers with less than 8 hours of workload on their  route. See GAO-09-696.
According to USPS officials, conversions from door delivery would also  decrease the time and costs associated with organizing mail for delivery.  For example, the organization of mail for delivery would take less time as  it would no longer involve strapping bundles of mail to help keep it  organized for carriers. The officials also said that, in cases in which  delivery mode conversion enabled a foot route to convert to a motorized  route, mail would no longer be prepositioned along those routes.  Additionally, USPS could avoid manual handling of some advertising mail  for routes converted to motorized delivery.
section_title: USPS Has Taken Some Actions to Shift to Less Costly Delivery Modes but Faces Impediments
subsections: section_title: USPS Actions Include Changes in Delivery Policy and a Voluntary Conversion Program for Existing Business Delivery
paragraphs: In April 2012, USPS updated its policy regarding assigning delivery  modes to new addresses. USPS revised its Postal Operations Manual—a  —to  regulation of the USPS pursuant to the Code of Federal Regulationsspecify that USPS determines the mode of delivery for new addresses.  According to USPS officials, USPS used to provide for customer  preferences as a factor in deciding on the mode of delivery. The revised  Postal Operations Manual states that new business addresses must  receive centralized delivery unless USPS approves an exception, and the  modes approved for new residential delivery are curbline delivery,  centralized delivery, and sidewalk delivery, unless an exception is granted  or the new address area is a continuation of an existing block. The  manual continues to provide that customers can request changes to their  mode of delivery on a hardship basis, which USPS considers “where  service by existing methods would impose an extreme physical hardship  on an individual customer.”USPS to implement delivery mode conversions on a mandatory basis.  Instead USPS is required to obtain customer signatures to document that  a delivery mode conversion is made on a voluntary basis before the  delivery mode is changed.
Finally, the manual does not authorize  In 2013, USPS implemented voluntary conversion for businesses as part  of its Delivering Results, Innovation, Value and Efficiency (DRIVE)  initiative. In this effort, USPS provides conversion goals to its field  officials who then identify specific businesses as candidates for  conversion from door delivery to centralized delivery. USPS field officials  told us that strip malls and high-rise office buildings receiving door  delivery are good candidates for conversion because these delivery  routes are labor intensive and the facilities could have suitable space to  install a centralized mail receptacle. For example, in Chicago, USPS  converted a high-rise office building, with mail delivered individually to all  50 tenant suites and twice a day mail pick-up, to centralized delivery and  pickup.
However, the DRIVE program has not converted as many businesses  from door delivery as originally expected, and large savings are not likely  due to the low number of conversions that have occurred. According to a  USPS official, USPS set an overall goal for the total number of  conversions for each fiscal year starting with fiscal year 2013. For the first  year, USPS set a nationwide goal of voluntary conversions of 279,718 of  the approximately 5.6 million business door delivery points to centralized  delivery. USPS achieved 43,333 such conversions, about 15 percent of  its goal—or about 0.8 percent—of the about 5.6 million business door  delivery points. USPS officials explained that based on the fiscal year  2013 results, they set a lower goal of 34,652 voluntary business  conversions for fiscal year 2014. They reported 11,488 conversions in the  first quarter—about 33 percent of their goal. This initiative is solely  focused on business conversions, and USPS has not set any goals for  converting residential door delivery points to different modes of delivery.  USPS did achieve some voluntary residential conversions in fiscal year  2013. USPS reported 36,302 out of about 32.2 million residential door  delivery points—or about 0.1 percent—were converted to centralized  delivery.
As stated above, USPS’s potential savings estimates show that achieving  large savings would require large-scale door delivery conversions.  However, according to USPS officials, USPS has been reluctant to  mandate conversions. Under the voluntary conversion process,  customers on a route may choose to maintain door delivery, or a high  number of customers may request and receive hardship exemptions for  elderly persons or those with special needs, which would allow them to  keep door delivery service, thus reducing the number of conversions and  lowering potential savings. Furthermore, field officials we spoke with said  that voluntary conversions are time consuming and labor intensive due to  the amount of direct outreach and follow-up required, and a short-term  cost increase may result from undertaking these efforts to generate long- term savings.
section_title: USPS Faces Stakeholder Resistance and Other Impediments to Conversions
paragraphs: Large-scale mandatory conversions have the potential to achieve large  savings, but USPS faces impediments, such as customer inconvenience  and safety and security concerns. USPS officials and several mailing  industry stakeholders we spoke with told us that many postal customers  are resistant to service changes, especially changes that might  inconvenience them. USPS officials told us that some of the concerns  could be addressed though hardship exceptions to continue door delivery.  Stakeholders also said that service changes would particularly affect city  letter carriers, by reducing the total number of carrier work hours and  associated routes.concerns could diminish as they become accustomed to the new service.
However, USPS officials stated some customer  Among the impediments to increased use of less costly modes were  concerns raised about personal safety and mail security. Several mailing  industry stakeholders we met with identified the placement of CBUs in  convenient, well lit and secure areas as a means to ensure customer  safety when accessing mail, especially in higher crime areas. USPS  officials said they take placement of centralized delivery locations into  consideration, as both carriers and customers are affected when a CBU is  placed in an improper or unsafe location. For example, in Chicago, USPS  officials said they converted existing door delivery in some areas of the  city to centralized delivery to address the personal safety concerns of  residents and mail carriers generated from increased crime rates in those  areas of the city. Some stakeholders also noted mail security issues, such  as the potential for increases in theft of mail from people picking up their  mail or break-ins to centralized mail receptacles. Others indicated that  there are opportunities to increase mail security by converting the mode  of delivery from unlocked mailboxes, like those affixed near doors or  many curbline mail boxes, to CBUs with locked receptacles for mail and  parcels. USPS officials told us that the new model CBUs are more secure  than the old model NDCBUs, which are considered legacy equipment.  The materials used to construct CBUs combined with design changes  have improved the security of mail delivered to them.
Although USPS engineering officials told us they test the security of each  type of cluster box and provide some guidance on door and curbline mail  receptacles, no data are available on the relative security of each  receptacle type once they are put in place and in use. Data are collected  on mail theft and convictions for mail theft and other mail security  violations, but these data do not generally specify the type of mail  receptacle involved in a mail theft or related incident. We met with officials  of the U.S. Postal Inspection Service, which collects complaint data on  lost or stolen mail, and they told us that while there are fields on the  online form for mail receptacle type, these fields usually are not  completed by the mail customer reporting the theft. Customers can also  call a USPS help line or go to a post office in-person to report mail loss or  theft, and often in those cases the mail receptacle data are not collected.  U.S. Postal Inspection Service officials said that for their investigative  purposes, the complaint does not need to include the receptacle type in  order to pursue cases of lost or stolen mail. See appendix IV for available  data on convictions for mail theft and other mail security violations.
Finally, according to USPS officials, there are places, such as densely  populated urban areas, where it is difficult to find suitable locations for  CBUs. This could make converting existing door delivery to centralized or  curbline boxes that meet both customer needs and USPS requirements  difficult. Field officials we spoke with in Washington, D.C., and Los  Angeles, California, noted this concern. For example, a field official in  Washington, D.C. noted that with extensive street parking and limited  common space, it can be very difficult to find a suitable location for CBU  units. A USPS official noted that if public space was not available for a  CBU on a delivery route, gaining access rights to install one requires  working with local governments and can be cumbersome. He said that  easements or other property access rights vary across localities and  regions and some neighborhoods would not have sufficient or convenient  space available for installation of CBUs. However, as shown in fig. 1,  CBUs and other centralized delivery methods have a range of types and  sizes that could be used to accommodate the available footprint and  placement options.
section_title: Conclusions
paragraphs: USPS cost estimates for each mode of delivery and potential savings  from converting door delivery points to other delivery modes are based on  a 20-year-old study and are of questionable accuracy. Although USPS  extrapolated fiscal year 1994 delivery mode costs to fiscal year 2012 by  applying inflationary increases to the cost of each delivery mode, it is  unclear whether this extrapolation reflects the actual change in postal  costs, such as changes in carrier wage and benefits, which increased  faster than inflation over this period. Because USPS productivity also  increased, the accuracy of USPS’s fiscal year 2012 cost estimates is  unknown.
USPS officials acknowledge the weakness of USPS’s delivery mode data.  We believe that accurate data are needed for Congress, USPS, and other  stakeholders to understand the cost-saving potential for delivery mode  conversions as compared with other savings options to improve USPS’s  financial viability. This is particularly relevant because pending postal  reform legislation would mandate the conversion of some delivery points  from costly door delivery to other modes. USPS’s estimates of the cost of  a new delivery study using ongoing operational data at $75,000 to  $100,000, or a more extensive study at $250,000 to $750,000 do not  seem cost prohibitive given USPS’s annual expenses of about $72 billion.  Thus, we conclude that the benefits of obtaining current, reliable data on  delivery mode costs would make the cost of doing so a worthwhile  investment.
section_title: Recommendation for Executive Action
paragraphs: To improve information needed for USPS and congressional decision  making as well as transparency for all stakeholders, we recommend that  the Postmaster General and USPS’s executive leaders collect and  analyze updated data on delivery mode costs and the potential savings  from converting delivery points to less costly modes of delivery and  establish a time frame for publicly reporting the results.
section_title: Agency Comments
paragraphs: We provided a draft of this report to USPS for review and comment.  USPS provided comments, which are reprinted in appendix V. USPS  concurred with our recommendation and agreed that steps should be  taken to improve the accuracy and reliability of delivery mode cost  estimates and potential savings from converting delivery points to less  costly modes of delivery. Further, USPS plans to initiate efforts to  determine how to most efficiently capture cost data, create a project plan,  and determine a timeline to produce results.
If you or your staff have any questions about 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 making key contributions to this report are  listed in appendix VI.
section_title: Appendix I: Scope and Methodology
paragraphs: To discuss the costs and potential savings associated with converting to  less costly delivery modes, we obtained available U.S. Postal Service  (USPS) data on the cost of each delivery mode from fiscal years 1994  through 2012, the most recent year for which data are available. We  obtained USPS documentation on the assumptions and methodology  used in developing these cost data. This documentation included a USPS  report of the 1994 USPS study that measured the costs of each mode of  delivery and the USPS methodology for increasing these costs by  inflation to estimate delivery mode costs from fiscal years 1995 through  2012. We requested that USPS officials generate estimates, similar to  those they created for Congress and USPS internal use, of the potential  savings from increasing its reliance on less costly modes of delivery. We  reviewed documentation of the assumptions, methodology, calculations,  and underlying data for these estimates. We had extensive discussions  with USPS officials regarding delivery mode cost and savings data, and  obtained detailed written responses to follow-up questions regarding their  reliability. We identified concerns with the quality of available USPS  delivery mode cost and savings data. We interviewed USPS officials  about the methodology used to develop the estimates and determined  that these were the only data available and found the data to have  limitations for estimating delivery costs and potential savings, which we  discuss in the report. Further, we reviewed whether there were any  opportunities to improve the quality of these data. USPS officials provided  detailed written responses that identified such opportunities, including the  scope, methodology, and estimated costs of a new USPS study to  measure delivery mode costs, and USPS’s views on the merits of such a  study.
To discuss USPS’s actions to convert delivery modes to less costly  modes and any impediments to conversion, we reviewed pertinent USPS  documentation, such as information on the Delivering Results, Innovation,  Value and Efficiency (DRIVE) initiative, and interviewed USPS delivery  operations officials and field officials, on USPS’s efforts to promote  voluntary conversion of some business addresses to less costly modes of  delivery. We also obtained written responses from USPS officials and  interviewed them on policies, regulations, and procedures that govern  decisions when adding new delivery points and converting existing  delivery points to a different mode of delivery. These interviews included  USPS headquarters officials in the Washington, D.C., area and USPS  field officials in Washington, D.C.; Chicago, IL; Seattle, WA; Los Angeles,  CA; and Dallas and Coppell, TX. We selected these field locations to  reflect different population densities and climates, near GAO  headquarters and field offices, and geographically dispersed in five of the  seven USPS areas.use of less costly delivery modes, we obtained USPS data on  conversions of delivery points to less costly modes of delivery for fiscal  year 2013 and the first quarter of fiscal year 2014, the only periods for  which national data were available. We also obtained and reviewed  USPS data on the number of delivery points for each mode of delivery for  fiscal years 2008 through 2013. We obtained written responses regarding  the reliability of these data, analyzed their consistency with other USPS  data, and determined that they were sufficiently reliable for the purposes  of this report. To identify any impediments to delivery mode conversions,  we obtained written USPS responses, including some made in recent  public proceedings, and interviewed USPS headquarters and field  officials. In addition, we interviewed postal stakeholders, including postal  unions representing city and rural letter carriers. We also interviewed 11  organizations representing different groups that use the mail in their  business including Alliance of Nonprofit Mailers, American Catalog  Mailers Association, Association for Magazine Media, Association of  Postal Commerce, Direct Marketing Association, Greeting Card  Association, Major Mailers Association, National Newspaper Association,  Newspaper Association of America, Parcel Shippers Association, and  Saturation Mailers Coalition. We also met with U.S. Postal Inspection  Service officials to obtain information on mail security issues and  discussed mail and identity theft generally, including complaints made to  the Inspection Service in these areas. We obtained data on convictions  for offenses related to mail theft maintained by the U.S. Postal Inspection  Service and the USPS Office of Inspector General, obtained written and  oral responses regarding data reliability, and determined the data were  sufficiently reliable for the purposes of this report.
section_title: Appendix II: USPS Delivery Points by Mode of Delivery
subsections: section_title: All Other Delivery Points Residential
paragraphs: Cluster boxes include Cluster Box Units and Neighborhood Delivery and Cluster Box Units.  Other centralized delivery includes delivery to centralized locations such as apartment house  mailboxes.  Door delivery/other includes door delivery to mail slots, mailboxes near the door, and locations within  office buildings, as well as other locations, such as along sidewalks. Most door delivery/other points  receive door delivery, according to USPS officials.
All other delivery points include various types of Post Office Boxes, delivery points where a university  or other entity then provides final delivery to the recipient, and delivery points where the recipient  picks up mail in bulk quantities such as remittance mail.
section_title: Centralized Residential
paragraphs: Cluster boxes include Cluster Box Units and Neighborhood Delivery and Cluster Box Units.  Other centralized delivery includes delivery to centralized locations such as apartment house  mailboxes.  Door delivery/other includes door delivery to mail slots, mailboxes near the door, and locations within  office buildings, as well as other locations, such as along sidewalks. Most door delivery/other points  receive door delivery, according to USPS officials.
All other delivery points include various types of Post Office Boxes, delivery points where a university  or other entity then provides final delivery to the recipient, and delivery points where the recipient  picks up mail in bulk quantities such as remittance mail.
section_title: Appendix III: USPS Methods for Estimating Delivery Costs by Mode of Delivery
paragraphs: USPS estimates of delivery mode costs rely on a 1994 study of delivery  mode costs, which is the most recent study that USPS has conducted in  this area. USPS continues to rely on this study to estimate the potential  for savings through the option of converting addresses to less costly  modes of delivery. According to a USPS report on the 1994 study, USPS  employees and retired postal managers served as data collectors who,  through direct observation, recorded the actual time to deliver mail for  each mode of delivery from July 5, 1994 to September 9, 1994 on 735   USPS also estimated the time  randomly selected city delivery routes.required for carriers to organize their mail for each mode of delivery. The  cost of delivery was computed by factoring in the compensation costs  associated with delivery times, delivery vehicle costs, as well as the costs  to purchase, install, and maintain cluster boxes. USPS subsequently  applied an inflation adjustment to the 1994 data to increase the cost for  each delivery mode according to the annual change in the Consumer  Price Index for All Urban Consumers (CPI-U), which produced cost  estimates for fiscal years 1995 through 2012 (see fig. 5 in report). This  inflation adjustment increased all delivery mode costs by the same  percentage.
section_title: Appendix IV: U.S. Postal Service (USPS) Information on Mail Security
paragraphs: (18 U.S.C. § 1705). According to the USPS Office of Inspector General, where federal prosecution is  declined and state or local prosecution is sought, charges can include variations of larceny/theft,  embezzlement, and misuse of public position/public trust based on the jurisdiction.
section_title: Appendix V: Comments from the U.S. Postal Service
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individuals named above, Amelia Shachoy, Assistant  Director; Derrick Collins; Geoffrey Hamilton; Kenneth John; Joshua  Ormond; Amy Rosewarne; Kelly Rubin; and Betsey Ward-Jenks made  key contributions to this report.