U.S. Postal Service: USPS Has Taken Steps to Strengthen Network Realignment Planning and Accountability and Improve Communication
Published: 2008-07-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: GAO has issued reports on the U.S. Postal Service's (USPS) strategy for realigning its mail processing network and improving delivery performance information. These reports recommended that the Postmaster General (1) strengthen planning and the overall integration of its realignment efforts, and enhance accountability by establishing measurable targets and evaluating results, (2) improve delivery service standards and performance measures, and (3) improve communication with stakeholders by revising its Area Mail Processing (AMP) Communication Plan to improve public notice, engagement, and transparency. The 2006 postal reform act required USPS to develop a network plan by June 2008 that described its vision and strategy for realigning its network; the anticipated costs, cost savings, and other benefits of its realignment initiatives; performance measures for its delivery service standards, and its communication procedures for consolidating AMP operations. This testimony discusses USPS's actions toward addressing GAO recommendations to (1) strengthen network realignment planning and accountability, (2) improve delivery performance information, and (3) improve communication with stakeholders. This testimony is based on prior GAO work, a review of USPS's 2008 Network Plan and revised AMP Communication Plan, and updated information from USPS officials. USPS did not have comments on this testimony.
section_title: What GAO Found
paragraphs: USPS has taken steps to respond to most of GAO's prior recommendations to strengthen planning and accountability for its network realignment efforts. In its June 2008 Network Plan, USPS clarified how it makes realignment decisions, and generally addressed how it integrates its realignment initiatives. However, USPS has not established measurable performance targets for its realignment initiatives. USPS believes that its budgeting process accounts for the cost reductions achieved through these initiatives. The Deputy Postmaster General explained that such performance targets are captured in USPS's overall annual goal of achieving $1 billion in savings. While these measures are not as explicit or transparent as GAO had recommended, USPS is required to report annually by the end of December to Congress on, among other matters, its realignment costs and savings. Also, USPS's annual compliance reports to the Postal Regulatory Commission (PRC) will provide opportunities for further transparency of performance targets and results. USPS's Network Plan notes that to respond to declining mail volumes, USPS must increase efficiency and decrease costs across all its operations. Given USPS's challenging financial situation, effective implementation of network realignment is needed; and USPS's annual reports could help inform Congress about the effectiveness of its realignment efforts. USPS has partially responded to GAO's recommendations to improve its delivery performance standards, measurement, and reporting, but full implementation of performance measures and reporting is not yet completed. USPS established delivery performance standards in December 2007. USPS's Network Plan stated that USPS would develop targets and measures to assess performance against these standards by fiscal year 2009. In addition, USPS has recently submitted a proposal for measuring and reporting on delivery service performance to the PRC. The PRC has requested public comment on USPS's proposal, which depends upon USPS and mailers implementing new technology. Delivery service performance is a critical area that may be affected by the implementation of the realignment initiatives. USPS has also taken steps to address GAO's recommendations to improve communication with its stakeholders as it consolidates its AMP operations by modifying its Communication Plan to improve public notification and engagement, increasing transparency by clarifying its processes for addressing public comments, and making additional information available on its Web site. Going forward, it will be crucial that USPS establishes and maintains an ongoing and open dialogue with stakeholders, including congressional oversight committees and Members of Congress who have questions or are concerned about proposed realignment changes

section_title: Letter
paragraphs: I am pleased today to participate in this oversight hearing on actions taken  by the U.S. Postal Service (USPS) to address concerns about its network  realignment initiatives and communication with stakeholders. In July 2007,  we testified before this committee on issues we identified and  recommendations we made regarding USPS’s strategy for realigning its  mail processing operations. We previously recommended that the  Postmaster General  1.  strengthen planning and accountability by ensuring that USPS’s    a discussion of how the various network realignment initiatives will  be integrated with each other to achieve network realignment goals  and    measurable targets for the anticipated cost savings and benefits  associated with network rationalization; and  2. improve the way USPS communicates with stakeholders about its  realignment plans and proposals, particularly its proposals for  consolidating Area Mail Processing (AMP) operations, by ensuring  that its revised communication plan includes steps to  improve public engagement, and  increase transparency.
Last year, we also reported on USPS’s progress in improving delivery  performance information. We recommended to the Postmaster General  that USPS develop complete delivery performance information for all  major types of mail by:    committing to developing delivery performance measures,  implementing representative delivery performance measures, and  improving the transparency of delivery performance standards,  measures, and results.
Congress has also addressed USPS’s network realignment efforts, as  reflected in the Postal Accountability and Enhancement Act of 2006  (PAEA), which required USPS to develop a comprehensive Facilities Plan.  This plan was to include USPS’s long-term vision and strategy for  realigning its network; a description of the anticipated costs, costs savings,  and other benefits associated with the infrastructure realignment  alternatives discussed in the plan; and USPS’s communication procedures  related to AMP consolidations. In response, USPS issued a plan in June  2008 titled “Postal Accountability and Enhancement Act §302 Network  Plan,” which we refer to as USPS’s “Network Plan” in this testimony.  PAEA also required USPS to report to Congress 90 days after the end of  each fiscal year on how postal decisions or actions taken during the  preceding year have impacted or will impact rationalization plans,  including overall estimated costs and cost savings. Further, PAEA required  USPS to establish modern delivery service standards by December 20,  2007, and submit annual reports to the Postal Regulatory Commission  (PRC) on the quality of service provided, including the speed and  reliability of delivery for most types of mail (market-dominant products),  according to specific requirements to be established by the PRC.
My comments today will focus on USPS’s actions toward addressing our  prior recommendations related to network realignment and delivery  performance. Specifically, I will cover USPS’s progress in (1)  strengthening planning and the overall integration of USPS’s realignment  efforts, and enhancing accountability by establishing measurable targets  and evaluating results, (2) improving delivery service standards and  performance measures, and (3) improving communication with  stakeholders by revising its AMP Communication Plan to improve public  notice, engagement, and transparency. My statement is based on our prior  work, listed at the end of this document, and updated information on the  actions USPS has taken related to our recommendations. We reviewed the  Network Plan USPS issued in June 2008 and the revised AMP guidelines  and revised Communication Plan issued in March 2008. We also met with  the Deputy Postmaster General and Acting Senior Vice President for  Operations to discuss USPS’s Network Plan and its decision-making  process related to its network realignment initiatives. We asked USPS to  comment on the results of our new work and USPS officials did not have  any comments. We conducted this performance audit 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: USPS Has Taken Steps to Improve Realignment Planning and Accountability, but Measurement of Most Realignment Efforts Is Limited to the Budget Process
paragraphs: USPS has taken steps to respond to most of our prior recommendations to  strengthen planning and accountability for its network realignment efforts.  It has clarified how it makes realignment decisions and generally  addressed how it integrates its realignment initiatives, but it has not  established measurable performance targets for these initiatives. USPS  believes that its budgeting process accounts for the cost reductions  achieved through these initiatives.
subsections: section_title: Realignment Measures Are Generally Limited to USPS’s Budget Process
paragraphs: In our 2007 report we stated that without measurable performance targets  for achieving its realignment goals, USPS remains unable to demonstrate  to Congress and other stakeholders the costs and benefits associated with  its network realignment initiatives. We also reported that although USPS  had made progress on several of its realignment initiatives, it remained  unclear how the various initiatives were individually and collectively  contributing to the achievement of realignment goals because the  initiatives lacked measurable targets. Appendix I provides a brief  description and identifies the status of USPS’s key realignment initiatives.  Appendix II provides updated status information for all AMP  consolidations through July 2008.
PAEA calls for USPS to, among other matters, establish performance goals  and identify anticipated costs, cost savings, and other benefits associated  with the infrastructure realignment alternatives in its Network Plan. The  Network Plan describes an overall goal to create an efficient and flexible  network that results in lower costs for both the Postal Service and its  customers, improves the consistency of mail service, and reduces the  Postal Service’s overall environmental footprint. In addition, the plan  states that USPS’s goals are continuous improvement and savings of $1  billion per year through realignment and other efforts. According to the  plan, USPS will achieve these savings, in part, through three core  realignment initiatives, including Airport Mail Center (AMC) closures,  AMP consolidations, and Bulk Mail Center (BMC) transformations. The  specificity of the expected savings and other benefits related to the core  initiatives varies in the plan’s discussion of measurable goals, targets, and  results achieved.
Overall program targets: USPS estimated total savings of $117 million  for AMC closures—including savings of $57 million in 2008 and $21  million in 2009—but provided no such figure for the AMP  consolidations. Postal officials told us USPS is developing an overall  program target for transforming the BMCs.
Evaluation of results: USPS has measured the results of its AMP  consolidations through a post-implementation review. In 2007, we  identified data consistency problems with this review. USPS has  addressed these problems in an updated handbook issued in 2008, by  revising its data calculation worksheets. No analogous process exists  for measuring the results of USPS’s AMC closures, which included  outsourcing some operations conducted at these facilities, relocating  some operations to other postal facilities, and closing some facilities.  We are issuing a report today on USPS’s outsourcing activities, which  discusses USPS’s realignment decisions related to its AMCs. As part of  this review, we concluded that USPS does not track and could not  quantify the results of its outsourcing activities. We recommended that  USPS establish a process to measure the results and effectiveness of  those outsourcing activities that are subject to collective bargaining,  including the AMCs. USPS agreed to establish a process for future  outsourcing initiatives subject to collective bargaining, in which it  would compare the financial assumptions that supported its  outsourcing decision with actual contract award data 1 year after  project implementation.
When we met with USPS officials in June 2008, we asked why they did not  have measurable performance goals and targets for the individual  realignment initiatives. The Deputy Postmaster General explained that the  realignment targets are captured in USPS’s goal of saving $1 billion per  year. Specifically, he explained that USPS will present its overall goals and  targets in more detail as part of its internal budget, which will be  presented to the Board of Governors in July 2008. USPS will have  additional opportunities to provide information about its estimated costs  and cost savings related to its realignment efforts in its annual report to  Congress, which is required by the end of December. Developing and  implementing more transparent performance targets and results can help  inform Congress about the effectiveness of USPS’s realignment efforts.
section_title: USPS Has Generally Addressed the Integration of Its Various Network Realignment Initiatives
paragraphs: In 2007, we found there was little transparency into how USPS’s efforts  were integrated with each other. We recommended that USPS explain how  it will integrate the various initiatives that it will use in realigning the  postal facilities network. In its Network Plan, USPS identifies three major  realignment efforts: (1) Airport Mail Center closures, (2) consolidations of  Area Mail Processing operations and (3) transformations of Bulk Mail  Centers. USPS briefly addresses the integration of its network initiatives,  stating that their overall impact and execution are tightly integrated, and  provides a few examples, but little contextual information about what its  future network will look like and how its realignment goals are being met.
In a recent meeting, senior USPS officials provided more information that  helps to put the integration of USPS’s three network realignment  initiatives in context. They said this integration is expected to reduce  USPS’s network and shrink its mail processing operations. After  integrating these three efforts, they said, USPS will continue to be the  “first and last mile”—the “first mile” being the point of entry for mail into  the system, and the “last mile” being the delivery of mail to customers  nationwide, as required to meet USPS’s universal service mission. They  expect to lower costs and achieve savings by reducing excess processing  capacity and fuel consumption, as well as by working with the mailing  industry to implement new technologies such as delivery point  sequencing, flats sequencing, and Intelligent Mail.® Going forward, USPS  has opportunities, in its annual report to Congress and in other reports and  strategic plans, to further articulate how it plans to integrate these three  initiatives and to what extent they are helping USPS meet its goals.
section_title: USPS Has Established Delivery Service Standards
paragraphs: USPS has partially responded to our prior recommendations related to  improving delivery performance information by establishing delivery  performance standards and committing to develop performance targets  against these standards and provide them to the PRC in August. However,   full implementation of performance measures and reporting is not yet  completed. Delivery service performance is a critical area that may be  affected by the implementation of the realignment initiatives. Delivery  standards are essential for setting realistic expectations for mail delivery  so that USPS and mailers can plan their mailing activities accordingly.  Delivery performance information is critical for stakeholders to  understand how USPS is achieving its mission of providing universal  postal service, including requirements for the prompt, expeditious, and  reliable delivery of mail throughout the nation. Delivery performance data  are also necessary for USPS and its customers to identify and address  delivery problems and to enable Congress, the PRC, and others to hold  management accountable for results and to conduct independent  oversight.
Our July 2006 report found that USPS’s delivery performance standards,  measurement, and reporting needed improvement. We recommended  that USPS update its outdated delivery standards, which did not reflect  postal operations and thus were unsuitable for setting realistic  expectations and measuring performance. We also recommended that the  Service implement representative measures of delivery performance for all  major types of mail because only one-fifth of mail volume was being  measured and there were no representative measures for Standard Mail,  bulk First-Class Mail, Periodicals, and most Package Services.  Furthermore, we recommended that USPS improve the transparency of its  delivery standards, measurement, and reporting. In December 2006,  Congress enacted postal reform legislation that required USPS to  modernize its delivery standards and measure and report to the PRC on  the speed and reliability of delivery for each market-dominant product.  Collectively, market-dominant products represent 99 percent of mail  volume.
In December 2007, USPS issued its new delivery standards and has  committed to measuring and reporting on delivery performance for  market-dominant products starting in fiscal year 2009. Moreover, USPS  provided a specific proposal for measuring and reporting its delivery  performance to the PRC, which has requested public comment on USPS’s  proposal. Full implementation of delivery performance measures and  reporting for all major types of mail will require both mailers and USPS to  take actions to barcode mail and track its progress—a system referred to  as Intelligent Mail®.
section_title: USPS Has Improved Its AMP Communication Plan
paragraphs: USPS has taken steps to respond to our recommendations that it improve  its communication of realignment plans and proposals with stakeholders.  For key realignment efforts such as AMP consolidations, we found it is  critical for USPS to communicate with and engage the public. Stakeholder  input can help USPS understand and address customer concerns, reach  informed decisions, and achieve buy-in. In our 2007 report, we concluded  that USPS was not effectively engaging stakeholders and the public in its  AMP consolidation process and effectively communicating decisions. For  example, USPS was not clearly communicating to stakeholders what it  was planning to study, why studies were necessary, and what study  outcomes might be. In addition, USPS did not provide stakeholders with  adequate notice of the public input meeting or materials to review in  preparation for the meeting. Furthermore, according to stakeholders,  USPS offered no explanation as to how it evaluates and weighs public  input in its decision-making process.
To help resolve these and other issues concerning how USPS  communicates its realignment plans with stakeholders, we recommended  that USPS take the following actions:  Improve public notice. Clarify notification letters by explaining  whether USPS is considering closing the facility under study or  consolidating operations with another facility, explaining the next  decision point, and providing a date for the required public meeting.
Improve public engagement. Hold the public meeting during the data- gathering phase of the study and make an agenda and background  information, such as briefing slides, available to the public in advance.
Increase transparency. Update AMP guidelines to explain how public  input is considered in the decision-making process.
USPS has incorporated into its 2008 AMP Communication Plan several  modifications aimed at improving public notification and engagement.  Most notably, USPS has moved the public input meeting to an earlier point  in the AMP process and plans posts a meeting agenda, summary brief, and  presentation slides on its Web site 1 week before the public meeting. USPS  has increased transparency, largely by clarifying its processes for  addressing public comments and plans to make additional information  available to the public on its Web site.
subsections: section_title: Improving Public Notice
paragraphs: In 2007, we found that stakeholders potentially affected by AMP  consolidations could not discern from USPS’s initial notification letters  what USPS was planning to study and what the outcomes of the study  might be. This lack of clarification led to speculation on the part of  stakeholders, which in turn increased public resistance to USPS’s  realignment efforts. The initial notification letters were also confusing to  stakeholders because they contained jargon and lacked adequate context  to understand the purpose of the study. Furthermore, in 2007 we reported  that stakeholders were not given enough notice about the public meeting,  and we recommended that USPS improve public notice by providing  stakeholders with a date for the public meeting earlier in the AMP process.
In its 2008 AMP Communication Plan, USPS has eliminated most of the  jargon from its notification letters and has generally provided more  context as to why it is necessary for USPS to conduct the feasibility  studies. For example, letters now name both facilities that would be  affected by a proposed consolidation, whereas previously, only one facility  was named. USPS also added a requirement that the public be notified at  least 15 days in advance of a public meeting.
section_title: Improving Public Engagement
paragraphs: In 2007, we found that public meetings required for AMP consolidations  were occurring too late in the decision-making process for the public to  become engaged in this process in any meaningful way. At that time, the  meetings were held after the area office and headquarters had completed  their reviews of the AMP consolidation studies and just before  headquarters had made its final consolidation decisions. Stakeholders we  spoke with were not satisfied with the public input process and told us  that USPS solicited their input only when it considered the AMP  consolidation a “done deal.” We also found that USPS did not publish  agendas in advance of public meetings or provide the public with much  information about the proposed studies. The only information available  was a series of bullet points posted on USPS’s Web site several days  before the meetings. This lack of timely and complete information further  inhibited the public’s ability to meaningfully participate in the process. To  make the meetings more focused and productive, and to give the public an  opportunity to adequately prepare for them, we recommended that USPS  make an agenda and background information available to the public in  advance of the public meetings.
Although USPS still holds the public meetings after the data-gathering  phase of the study has been completed, the meeting now occurs earlier in  the AMP review process. Currently, before the meeting, the study has been  approved only at the district level—the area office and headquarters have  not yet completed their reviews or validated the data by the time of the  meeting. When we asked USPS why it did not move the meeting to the  data-gathering phase of the study, USPS officials responded that it would  be difficult to hold the meeting during the data-gathering phase because at  that point, they do not know what operations could potentially be  consolidated. However, to ensure that the public meeting is held within a  reasonable amount of time after the study’s completion, USPS included a  requirement in its 2008 AMP Communication Plan that the public meeting  take place within 45 days after the District Manager forwards the study to  the area office and headquarters. In addition, the initial notification letter  now includes contact information for the local Consumer Affairs Manager,  to whom the public can submit written comments up to 15 days after the  public meeting; previously, this contact information appeared in the  second notification letter. To help stakeholders better prepare for the  public meeting, USPS plans to post a meeting agenda, presentation slides,  and a summary brief of the AMP proposal on its Web site 1 week before  the meeting. In addition, USPS plans to inform stakeholders in the public  meeting notification letter that these materials will be posted on its Web  site 1 week before the meeting.
section_title: Improving Transparency
paragraphs: In our 2007 report, we found that stakeholders and the public were unclear  as to how public input factored into USPS’s consolidation decisions. They  wanted to know precisely how USPS took their input—letters, phone calls,  public meeting results—into consideration when it made its decisions. We  recommended that USPS increase the transparency of its decision-making  process by explaining how it considers public input in the decision-making  process.
In a recent interview, senior USPS officials identified two additions to the  2008 AMP Communication Plan that address stakeholders’ concerns about  how USPS considers public input. First, USPS considers written  comments from stakeholders before the public input meetings and  addresses these comments as part of the public input meetings. Second,  USPS has modified its public input review process so that officials at the  district, area, and headquarters levels consider, and are responsive to,  public concerns. Senior USPS officials told us that they weigh public input  primarily by considering the impact of any consolidations on customer  services and service standards. Additionally, USPS officials told us that as  AMP consolidations go forward, USPS will post standard information  about each consolidation on its Web site and update this information  regularly. Specifically, USPS plans to post initial notifications, a summary  brief of the proposed AMP consolidation, specifics about the scheduled  public meeting, a summary of written and verbal public input, and the final  decision and implementation plans if an AMP consolidation is approved.
Congress has also addressed USPS’s communication process. PAEA  required USPS to describe its communication procedures related to AMP  consolidations in its Network Plan. In response, the Network Plan  discusses how USPS will publicly notify communities potentially affected  by realignment changes and how it will obtain and consider public input.  In addition, PAEA directed USPS to identify any statutory or regulatory  obstacles that have prevented it from taking action to realign or  consolidate facilities. Accordingly, USPS’s Network Plan identified delays  related to implementing AMP consolidations. For example, USPS was  directed not to implement certain consolidations until after GAO has  reported to Congress on whether USPS has implemented GAO  recommendations from its report issued in July 2007 to strengthen  planning and accountability in USPS’s realignment efforts. These  directions were included in the joint explanatory statement accompanying  the Consolidated Appropriations Act for fiscal year 2008. We have  previously discussed the difficulties that stakeholder resistance poses for  USPS when it tries to close facilities and how delays may affect USPS’s  ability to achieve its cost-reduction and efficiency goals. Part of the  problem stemmed from USPS’s limited communication with the public. We  believe that USPS has made significant progress toward improving its AMP  communication processes since 2005. Now, it will be crucial for USPS, in  going forward, to establish and maintain an ongoing and open dialogue  with its various stakeholders, including congressional oversight  committees and Members of Congress who have questions or are  concerned about proposed realignment changes.
Mr. Chairman, this concludes my prepared statement. I would be pleased  to respond to any questions that you or Members of the Subcommittee  may have.
section_title: Contact and Acknowledgments
paragraphs: For further information about this statement, please contact Phillip Herr,  Director, Physical Infrastructure Issues, at (202) 512-2834 or at  herrp@gao.gov. Individuals making key contributions to this statement  included Teresa Anderson, Kenneth John, Summer Lingard, Margaret  McDavid, and Jaclyn Nidoh.
section_title: Appendix I: Description and Status of USPS’s Key Realignment Initiatives as of July 2008
paragraphs: Realignment of  Airport Mail Centers (AMC)
AMCs are postal facilities  that have traditionally been  operated for the purpose of  expediting the transfer of  mail to and from commercial  passenger airlines.
USPS’s Network Plan stated  that USPS had terminated  operations at 46 AMCs  during fiscal years 2006 and  2007, and another 8 AMCs  in fiscal year 2008.
AMP consolidations of mail  processing operations are  intended to reduce costs  and increase efficiency by  eliminating excess capacity  at USPS’s more than 400  processing plants.
From 2005 through July  2008, USPS implemented  11 AMP consolidations,  decided not to implement 35  studies (5 placed on  indefinite hold), was  continuing to consider 7  consolidations, and had  closed 1 facility after  consolidation.
Because mailers have  increased their sorting and  transport of mail shipments  to postal facilities near mail  destinations, mailers have  been bypassing BMCs and  the centers are underused.  Also, increased highway  contract expenses and an  aging postal distribution  infrastructure have  prompted USPS to evaluate  its BMC network to  determine how it can best  support future postal  operations.
In July 2008, USPS issued a  Request for Proposal to  obtain input on a proposal to  outsource some of its BMC  workload so that USPS can  use its 21 BMCs for  alternative postal work.
The Regional Distribution  Centers were expected to  perform bulk processing  operations and act as  Surface Transfer Centers  and mailer entry points.
The Network Plan stated  that this initiative has been  discontinued because USPS  determined that it would not  generate the benefits  originally anticipated.
section_title: Related GAO Products
paragraphs: GAO. U.S. Postal Service: Data Needed to Assess the Effectiveness of  Outsourcing. GAO-08-787. Washington, D.C.: July 24, 2008.
GAO. U.S. Postal Service: Progress Made in Implementing Mail  Processing Realignment Efforts, but Better Integration and Performance  Measurement Still Needed. GAO-07-1083T. Washington, D.C.: July 26,  2007.
GAO. U.S. Postal Service: Mail Processing Realignment Efforts Under  Way Need Better Integration and Explanation. GAO-07-717. Washington,  D.C.: June 21, 2007.
GAO. U.S. Postal Service: Delivery Performance Standards,  Measurement, and Reporting Need Improvement. GAO-06-733.  Washington, D.C.: July 27, 2006.
GAO. U.S. Postal Service: The Service’s Strategy for Realigning Its Mail  Processing Infrastructure Lacks Clarity, Criteria, and Accountability.  GAO-05-261. Washington, D.C.: April 8, 2005.
GAO. U.S. Postal Service: USPS Needs to Clearly Communicate How  Postal Services May Be Affected by Its Retail Optimization Plans.   GAO-04-803. Washington, D.C.: July 13, 2004.
GAO. U.S. Postal Service: Bold Action Needed to Continue Progress on  Postal Transformation. GAO-04-108T. Washington, D.C.: November 5,  2003.
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