U.S. Postal Service: New Delivery Performance Measures Could Enhance Managers' Pay for Performance Program
Published: 2008-09-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The U.S. Postal Service (USPS) pay for performance (PFP) program for managers includes quantitative performance indicators. PFP ratings are the basis for salary increases and lump sum awards for nearly 750 Postal Career Executive Service (PCES) executives and about 71,700 other participants, mostly Executive and Administrative Schedule (EAS) employees. GAO was requested to provide information about USPS's PFP system. This report (1) describes the key features of USPS's PFP system, (2) provides information on the weight of its performance indicators in determining PFP ratings, and (3) identifies opportunities for USPS to incorporate delivery performance indicators into its PFP system. GAO obtained USPS documents and data, interviewed USPS officials, and primarily based its assessment on laws related to timely delivery and interviews with senior USPS officials.
section_title: What GAO Found
paragraphs: Key features of the PFP program are quantitative corporate and unit indicators of performance and individual performance elements that are used to rate participants and provide the basis for awards. Quantitative performance targets are established for corporate and unit indicators. Corporate indicators apply to all participants and include measures of timely delivery, productivity, revenue, and net income, among others. Unit indicators apply to selected groups of participants and vary according to the groups' responsibilities and span of control. Individual performance elements are tailored to the participant group and, within some groups, to individuals. Individual performance elements may be defined by narrative standards or may be quantitative indicators defined with specific target performance levels. The overall PFP rating is based on results of corporate and unit indicators and individual performance elements and is used to determine the salary adjustment and any lump sum award. PFP indicators related to three USPS strategic goals--increasing efficiency, improving service, and generating revenues--collectively account for two-thirds of the average participant's rating (see fig.). However, indicator weights vary considerably by participant group, based on the responsibilities and span of control of various positions. As USPS implements requirements of the postal reform law for measuring delivery performance, it will have opportunities to incorporate new indicators into its PFP program, notably for timely delivery of Standard Mail (49 percent of mail volume in fiscal year 2007) and bulk First-Class Mail (25 percent of volume). Once new delivery performance measurement systems are fully implemented and mailers' participation is sufficient to generate representative data, USPS will be able to incorporate new delivery performance indicators into its PFP program. These new indicators would create a more "balanced scorecard" that uses service performance metrics for the mail that is measured to support personal and unit accountability.

section_title: Letter
paragraphs: To help accomplish its mission of providing prompt, reliable, and efficient  universal service, the U.S. Postal Service (USPS) has adopted a pay for  performance (PFP) program for managers that includes a number of  quantitative performance indicators. PFP ratings are the basis for USPS’s  annual salary increases and lump sum awards for nearly 750 Postal Career  Executive Service (PCES) executives and about 71,700 other participants,  most of whom are members on the Executive and Administrative Schedule  (EAS), which includes postmasters, supervisors, managers, as well as  others who are ineligible for membership in a postal labor union. USPS  implemented its current PFP program for PCES executives in fiscal year  2003 and for EAS employees in fiscal year 2004. Participants rely on the  PFP program for their annual salary increase, since they do not receive  cost-of-living adjustments, step increases, or other automatic increases to  their salaries. PFP participants also do not receive locality pay. (See app. I  for data on the number of USPS PFP participants by employee type.)
According to USPS, the foundation of the PFP program is a “balanced  scorecard” of independently verifiable performance indicators in several  areas—such as service, revenue generation, and efficiency—to align  compensation with individual performance and organizational results.  USPS uses this approach to help balance the need to keep postal rates  affordable, address increasing financial pressure, and maintain quality  delivery service for different types of mail. Specifically, according to  USPS, the PFP program is a mechanism to help manage the organization  and its employees; align organizational, unit, and individual objectives; link  individual contributions to organizational success; compare individual  performance with established targets; recognize and reward individual  successes; and ensure accountability at all levels of the organization. You  requested that we provide information about USPS’s PFP program.  Accordingly, this report (1) describes the key features of USPS’s PFP  program, (2) provides information on the weight of the PFP program’s  performance indicators in determining participants’ ratings, and (3)  identifies opportunities for USPS to incorporate new indicators of delivery  performance into its PFP program.
To address these objectives, we obtained USPS documentation for the  PFP program and interviewed officials responsible for the PFP program.  We also obtained data and information on PFP indicators, including their  weight. We primarily based our assessment of opportunities for USPS to  incorporate new delivery performance indicators into its PFP program on  statutes related to timely mail delivery and interviews with senior USPS  officials. We conducted a data reliability assessment of USPS’s PFP  information and determined that the information was sufficiently reliable  for the purposes of our report. More details on our objectives, scope, and  methodology appear in appendix II. We conducted this performance audit  from October 2007 to September 2008 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: Delivering more than 210 billion pieces of mail each year, USPS has a  mission vital to the nation’s communications and commerce. To meet its  statutory universal service obligation, which requires it to “serve as nearly  as practicable the entire population of the United States,” USPS must  “provide prompt, reliable, and efficient services to patrons in all areas” and  “render postal services to all communities.” In selecting modes of  transportation, USPS is required to “give highest consideration to the  prompt and economical delivery of all mail.” Although USPS is authorized  by law to receive appropriations for reimbursement of public service costs  incurred by it in providing a maximum degree of effective and regular  postal service nationwide, in communities where post offices may not be  deemed self-sustaining, USPS has neither requested nor received such  appropriations since 1982. USPS receives only minimal appropriations for  reimbursement for providing free mail for the blind and overseas voting,  which USPS refers to as “revenue foregone,” that, in fiscal year 2007,  represented less than 0.2 percent of its total revenues. USPS generated  99.8 percent of its total revenues from products and services, with mail  revenues accounting for the vast majority (94.8 percent of total revenues).
However, USPS faces an increasingly competitive environment. As some  communications and payments have migrated to electronic alternatives,  including the Internet, First-Class Mail, which historically has covered  most overhead costs, has declined in volume, and more declines are  expected. According to USPS, “The projected decline of First-Class Mail  impacts the Postal Service’s ability to continue to finance the growing  universal service network. This is the single greatest challenge facing the  Postal Service.” Although Standard Mail (primarily advertising) is USPS’s  largest class of mail and key growth product, it is more price sensitive.  Standard Mail volume has recently declined in the wake of postal rate  increases and the economic downturn, and its future prospects are unclear  as advertising expenditures continue to shift to the Internet. In this regard,  a joint USPS-mailer work group recently reported that “Standard Mail  must be delivered in a timely and consistent manner to the end customer  according to published standards, in order to remain a viable growth  product for its users and the Postal Service, and to remain competitive  with alternative advertising media.” Standard Mail growth will be critical  to offset rising costs, primarily rising compensation and benefits costs that  have consistently represented nearly 80 percent of USPS’s expenses.
USPS has restrained cost growth in recent years, in part through  automation and other productivity initiatives that helped reduce the  number of career employees from a peak of nearly 800,000 in September  1999 to fewer than 670,000 in September 2007. However, as USPS has  recognized, continued productivity gains are needed in the face of the  changing mail mix, sustained and evolving competition, and a challenging  economic environment. USPS has recognized that given its workforce  costs, continued work hour reductions are necessary to achieve  productivity gains.
The 2006 postal reform act generally limits rate increases for most mail to  an inflationary price cap. The reform act also abolished the statutory  mandate to break even financially over time. As a result, USPS generally  cannot address financial losses with above-inflation rate increases, which  underscores the need to remain financially viable by sufficiently growing  revenues, restraining costs, or both. However, USPS recently reported that  fiscal year 2008 revenues have not been covering costs, which have grown  faster than the price cap.
section_title: Key Features of USPS’s PFP Program Include Quantitative Performance Indicators and Individual Performance Elements
paragraphs: The PFP program includes quantitative corporate and unit indicators of  performance and individual performance elements, both of which are used  to rate PFP participants. According to USPS, the PFP program places  emphasis on performance indicators that are objective and measurable. To  this end, target levels of performance, expressed in quantitative terms, are  established for the corporate and unit indicators, and PFP participants  receive higher ratings as higher targets are achieved. In fiscal year 2008, 12  corporate indicators apply to all PFP participants, including measures of  timely mail delivery, productivity, revenue, and net income, among other  things. A total of 53 unit indicators apply to selected groups of  participants, such as groups of postmasters and managers at various mail  processing facilities, depending on their responsibilities and spans of  control. Some unit indicators apply to most participants, such as the  indicator of total operating expenses. Other indicators apply to relatively  few participants, such as indicators of international mail delivery, which  apply exclusively to managers at USPS International Service Centers.
Besides being rated on results for corporate and unit indicators, each PFP  participant is rated on individual performance elements that vary  depending on the participant group and, within some groups, are tailored  to each participant. Some individual performance elements have target  levels of performance defined by narrative standards that are centrally  established by USPS. For example, EAS postmasters have two individual  performance elements that are defined by narrative standards: (1) fiscal  management and (2) leadership and communication. Alternatively, other  individual performance elements may be selected from a predefined list  and then defined more specifically with target performance levels, based  on a discussion that involves the participant and the participant’s rater.  For example, some individual performance elements for a field operations  manager must be selected from a list, which includes, among other things,  operational productivity, the rate of scanning barcodes on mail pieces, and  overtime usage. If an individual performance element involving  operational productivity is selected, it is then defined with target  performance levels for specific mail processing, delivery, maintenance,  and customer service operations, depending on the responsibilities of the  field operations manager.
subsections: section_title: Corporate and Unit Indicators
paragraphs: Corporate and unit indicators are weighted to reflect organizational  priorities. More heavily weighted indicators play a larger role in  determining the overall PFP rating, while less heavily weighted indicators  play a smaller role. To the extent that indicator weights vary—which can  be substantial, depending on the indicator and the participant’s position— the indicator makes a different contribution to the overall PFP rating and  the resulting salary adjustments and any lump sum awards.
USPS establishes 15 target performance levels for each corporate and unit  indicator. As more challenging targets (i.e., higher levels of performance)  are reached, the indicator increases the overall PFP rating and the  associated PFP award. Thus, indicator targets create incentives for PFP  participants to maximize results for each indicator.
Targets for some indicators are based on actual results achieved for the  current fiscal year (e.g., the percentage of a specified type of mail  delivered on time), while others are based on year-to-year improvement  (e.g., the reduction in formal equal employment opportunity complaints).  In some cases, targets are based on the USPS budget. For example, unit  indicator targets are defined for total operating expenses relative to the  final budget. To the extent that operating expenses are reduced below the  budgeted level, higher target levels are achieved. These targets can be  adjusted by various levels of management throughout the fiscal year,  depending on numerous factors, such as changes in USPS’s overall  financial condition, increases in fuel prices, changes in local mailing  volumes, and unexpected local expenses, among other things.
Corporate and unit indicators are measured against targets at various  levels of geographic aggregation, depending on the indicator and the  participant’s group. For example, some corporate indicators are measured  at the national level, such as indicators of productivity, revenue, and net  income. Other indicators are measured at different geographic levels. For  example, for a postmaster of a small post office, the unit’s total operating  expense indicator is defined as the total expenses of that post office. For a  district executive, the unit operating expense indicator is defined as the  total expenses of the entire district.
In some instances, USPS permits “mitigation” adjustments to the data used  to measure achievement against targets. Some individual mitigation  adjustments are intended to take into account events that are outside the  control of the participant, such as a fire that results in the temporary  suspension of a post office’s operations. Other mitigation adjustments are  processed in batches for multiple units and participants, such as  adjustments that were made after postal operations were disrupted by  Hurricane Katrina.
section_title: Administration of the PFP Program
paragraphs: USPS has established a structured process for administering the PFP  program. Each participant is assigned a rater, who is generally the  participant’s immediate supervisor. At the beginning of the fiscal year, the  rater is required to discuss PFP indicators and targets with the participant,  including goals for corporate and unit indicators and individual  performance elements. During the year, a midyear PFP review is used for  the participant to record accomplishments to date, and the rater meets  with the participant to review progress toward PFP targets. At the end of  the year, the participant records accomplishments, and the rater meets  with the participant and rates the participant on individual performance  elements. USPS then calculates the overall PFP rating for each participant  based on the results of corporate and unit indicators and ratings for  individual performance elements; this rating is used to determine  adjustments to the participant’s salary and any lump sum award.
section_title: PFP Awards
paragraphs: The overall PFP rating is used to determine salary increases and any lump  sum awards based on separate schedules that apply to EAS and PCES  participants. First, for each participant, an overall rating is calculated  based on the weighted outcomes for corporate and unit indicators and  individual performance elements. Since each indicator and individual  performance element produces an outcome ranging from 1 to 15, the  overall rating also ranges from 1 to 15. The rating is rounded to the nearest  whole number for the purpose of determining the PFP award.
For EAS participants, all PFP awards are in the form of percentage  increases to their salaries. For fiscal year 2008, the PFP award can range  from 0 to 12 percent of the EAS participant’s salary, as shown in figure 1.
For PCES executives, PFP awards take the form of salary increases and  lump sum awards. Salary increases depend on the overall PFP rating, as  well as each executive’s current salary relative to the maximum of his or  her salary range, as shown in table 1. However, no salary increases are  converted to lump sum awards, as they may be for EAS participants.
In addition to a salary increase, a PCES executive may receive a PFP lump  sum award that is based on his or her overall rating. This lump sum award  is paid as a percentage of the executive’s salary, as shown in table 2, for  individuals with an overall rating of 4 and above, which is considered to be  a minimum threshold for a lump sum award.
Average PFP awards as a percentage of salary for EAS and other non- PCES participants are shown in figure 2, from fiscal year 2004—the first  year of the current PFP program for EAS participants—through fiscal year  2007.
Average PFP awards for PCES participants are shown in figure 3, from  fiscal year 2003—the first year of the current PFP program for PCES  participants—through fiscal year 2007.
section_title: Overall PFP Ratings Primarily Depend on Results for Indicators Related to Efficiency, Service, and Revenues
paragraphs: Overall PFP ratings primarily depend on results for corporate and unit  indicators related to USPS’s strategic goals of increasing efficiency,  improving service, and generating revenue. Collectively, these indicators  are weighted so that they account for two-thirds (66 percent) of the PFP  rating for the average PFP participant in fiscal year 2008 (see fig. 4).
Figure 4 shows that for fiscal year 2008, results for efficiency-related  indicators, which are corporate and unit indicators, such as USPS’s overall  productivity and total unit expenses, make up 27 percent of the PFP rating  for the average participant. Results for service-related indicators, such as  corporate and unit indicators for timely delivery of different types of mail,  represent 22 percent of the average rating. Results for corporate and unit  revenue-generation indicators, such as national and unit revenues, account  for 17 percent of the average rating. An additional 10 percent of the rating  consists of results for corporate and unit indicators related to USPS’s  strategic goal of creating a more customer-focused culture. The  remaining 24 percent of the rating reflects the results for individual  performance elements, such as oral communication and other quantitative  indicators, some of which were tailored to the individual.
USPS officials have stated that indicators are weighted to reflect their  relative importance to accomplishing USPS’s strategic goals, as well as  their applicability to individual positions based on the individual’s  responsibilities and span of control. According to USPS, the PFP program  thereby recognizes and rewards individual performance that improves  corporate and unit performance, particularly in high-priority areas.
Consistent with this approach, some indicators are more heavily weighted  than others. Among efficiency-related indicators, two indicators make the  largest contribution to the overall PFP rating: total unit expenses (16  percent of the overall rating) and national productivity (5.6 percent of the  rating) (see fig. 5). The 22 other efficiency-related indicators account for 5  percent of the overall rating, in part because some of these indicators  measure results for specific USPS operations and, thus, are applicable to  relatively few PFP participants. However, these indicators can have a  significant weight for the participants they apply to. Among service-related  indicators, the 13 indicators measuring timely delivery of the various mail  types account for 16.4 percent of the overall rating. The 10 other service- related indicators account for 5.4 percent of the rating. Among revenue- generation indicators, the two most heavily weighted indicators are unit  retail revenue (e.g., revenue from individual pieces of mail deposited at a  post office), which represents 7.7 percent of the overall rating, and  national revenue, which represents 5.7 percent of the rating. Five other  revenue-generation indicators account for 3.9 percent of the overall rating.
subsections: section_title: The Weight of PFP Indicators Varies Considerably by Participant Group
paragraphs: The weight of PFP indicators varies considerably by participant group,  based on the responsibilities and spans of control of various managerial  and executive positions. For example, for the 14,754 full-time postmasters  in EAS levels 11 through 16, who generally head small post offices, 33  percent of the overall PFP rating is based on the total unit expenses  indicator (see fig. 6). In contrast, this indicator accounts for 12 percent of  the rating for the 2,365 postmasters in EAS levels 21 through 26 (see fig. 7),  who generally head larger post offices. The overall rating of postmasters  in EAS levels 21 through 26 is more dependent on a variety of other  indicators related to efficiency, timely mail delivery, and revenue  generation.
Additional examples of how indicator weights vary for participants in  different positions include the following:    The retail revenues indicator is most heavily weighted for upper-level EAS  postmasters. This indicator accounts for 35 percent of the overall PFP  rating for the 6,853 postmasters in EAS levels 18 through 20 and 28 percent  of the rating for the 2,365 postmasters in EAS levels 21 through 26; it  makes up 5.5 percent of the rating for the 14,754 postmasters in EAS levels  11 through 16 and does not factor into the overall PFP rating for the 1,126  part-time EAS postmasters of small post offices (i.e., Cost Ascertainment  Grouping levels A through E). To put the use of this indicator into context,  USPS is looking to generate revenues through postmaster and other  employee outreach to households and small businesses and has multiple  programs for outreach to small business customers to promote the  convenience and value of postal services.
Three indicators related to equal employment opportunity (EEO) account  for 35 percent of the overall PFP rating for the 167 managers with  responsibilities in this area. These indicators measure outcomes of EEO  complaints, including the percentage of informal complaints that become  formal complaints, the number of formal complaints, and the processing  time for complaints that are mediated. These indicators support USPS’s  emphasis on improving EEO processes and processing EEO complaints in  a timely manner, and USPS classified these indicators as related to its  strategic goal of creating a more customer-focused culture. USPS has  provided training to supervisors and managers on the importance of EEO,  open communication, and the benefits of resolving complaints at the  lowest possible level.
Various unit indicators apply to the 13,458 EAS field managers who work  in the mail processing area, such as indicators of the efficient use and  maintenance of mail processing equipment. These indicators support  USPS’s efforts to improve efficiency and service, and for some field  managers, represent 21 percent of their rating. Other mail processing  indicators measure the scanning of barcodes on mail containers and  equipment used in mail processing operations—an activity that is critical  to USPS’s efforts to track mail, thereby improving service and efficiency.
section_title: Opportunities to Incorporate New Delivery Performance Indicators into USPS’s PFP Program Will Follow Implementation of Delivery Measurement Systems
paragraphs: As USPS implements the postal reform law’s requirements for measuring  and reporting its delivery performance for all market-dominant products,  which collectively make up nearly 99 percent of mail volume, USPS will  have opportunities to incorporate new indicators into its PFP program,  notably for Standard Mail and bulk First-Class Mail.
PFP indicators of timely delivery apply to only some types of mail  because, as we reported in July 2006, USPS measures timely delivery for  less than one-fifth of mail volume, with no representative measures for  Standard Mail (48.8 percent of volume), bulk First-Class Mail (25.3 percent  of volume), Periodicals (4.1 percent of volume), and most types of  Package Services (0.5 percent of volume). However, in December 2006,  Congress enacted postal reform legislation that requires USPS to measure  and report to the Postal Regulatory Commission on the delivery  performance of market-dominant products, which include mail such as  Standard Mail, bulk and single-piece First-Class Mail, and Periodicals.
USPS is in the process of implementing new delivery performance  measurement systems for market-dominant mail types that are not  currently being measured—such as Standard Mail, bulk First-Class Mail,  and Periodicals. Together, these three mail types constitute 78 percent of  mail volume, including 49 percent for Standard Mail, 25 percent for bulk  First-Class Mail, and 4 percent for Periodicals. USPS has recognized that  the successful implementation of these new measurement systems will  depend, in part, on mailers’ barcoding mail and containers, as well as  providing electronic information on mailings. USPS expects these  activities to become more widespread over the next several years. Once  such systems are fully implemented and mailers’ participation is sufficient  to generate representative data, USPS will have the opportunity to  incorporate new delivery performance indicators into its PFP program.  Such action would be consistent with the approach USPS has taken in  recent years to incorporate new performance indicators into its PFP  program.
In addition, the External First-Class Measurement System (EXFC), which  is incorporated into the PFP program to measure the timely delivery of  single-piece First-Class Mail, has not been a systemwide indicator for this  type of mail, in part because EXFC has measured delivery performance for  mail deposited in collection boxes only in selected areas of the country.  USPS is expanding EXFC coverage to include nearly all geographic areas.  According to a senior USPS official, as EXFC coverage is expanded in  fiscal year 2008, the additional data are being incorporated into the fiscal  year 2008 indicators for single-piece First-Class Mail. This development is  consistent with USPS’s actions in the past to implement delivery  performance measurement systems for Parcel Select and some types of  International Mail, establish targets, identify opportunities to improve  service, and to incorporate the measurement data into the PFP program to  hold managers accountable for results. These actions have been credited  with improving timely delivery performance for these types of mail, both  of which operate in a highly competitive marketplace.
To put these developments into context, in 2006, USPS said that its goal of  improving service—which continues to be one of its primary goals—is  supported by a “balanced scorecard” that uses service performance  metrics for the mail that is measured to support personal and unit  accountability. USPS noted that goals for these metrics—which include  delivery performance indicators, as well as operational indicators that  USPS said are critical to on-time service performance—were incorporated  into the PFP program. We have agreed with USPS’s focus on improving  service and holding its managers accountable for results but noted in 2006  that USPS has not yet achieved its aim of a “balanced scorecard” for  delivery performance because its delivery performance indicators cover  less than one-fifth of mail volume, and these indicators do not cover  Standard Mail, bulk First-Class Mail, Periodicals, and most Package  Services mail. We observed that this gap in coverage has impeded USPS’s  potential for holding its managers accountable for the delivery  performance of all types of mail and for balancing increasing financial  pressures with the need to maintain quality delivery service.
In 2007, the Chairman of the USPS Board of Governors noted in  congressional testimony, “To improve service, we need better metrics on  performance. As George Mason University President Alan Merten says,  ‘What gets measured gets better.’” The delivery performance indicators  that USPS has implemented and incorporated into PFP incentives have  been credited with stimulating improved service. For example, USPS  created delivery standards and indicators for Parcel Select service in 1999,  which it then incorporated into PFP incentives. In September 2007, the  Deputy Postmaster General cited USPS’s delivery performance for Parcel  Select as an example of substantial improvement resulting from measuring  and building results into its PFP program, thereby holding managers  accountable.
section_title: Conclusions
paragraphs: To fulfill its mission of providing universal postal service, USPS is required  to provide prompt mail delivery throughout the nation. USPS can help  improve delivery service by incorporating new delivery performance  indicators for market-dominant products that represent most mail volume  into its PFP program. Incorporating new delivery indicators would hold  postal managers accountable for results. We recognize that incorporating  such indicators would depend on successful implementation of the new  measurement systems—which will depend not only on USPS but also on  mailers, who must barcode the mail and provide necessary information in  electronic format, among other things. It will take time to implement new  delivery performance measurement systems at a level that permits  meaningful performance measurement and incorporation into the PFP  program. Thus, over time, USPS will have an opportunity to incorporate  new delivery performance indicators into its PFP program—such as  indicators of timely delivery for Standard Mail and bulk First-Class Mail— to produce a more balanced scorecard of PFP indicators. As USPS has  recognized, what gets measured gets better, and PFP indicators help drive  performance improvement.
section_title: Recommendation for Executive Action
paragraphs: We are making one recommendation that the Postmaster General  incorporate new delivery performance indicators into the PFP program— such as indicators that cover Standard Mail and bulk First-Class Mail— once the necessary measurement systems are successfully implemented,  including the actions that mailers must take to permit meaningful  performance measurement.
section_title: Agency Comments and Our Evaluation
paragraphs: USPS provided written comments on a draft of this report in a letter dated  August 4, 2008, from the Senior Vice President of Operations and the Vice  President of Employee Resource Management. USPS’s comments are  summarized below and the letter is reproduced in appendix III. In separate  correspondence, USPS also provided technical comments, which we  incorporated, as appropriate.
USPS concurred with our recommendation and said it was committed to  incorporating new delivery performance measures into its PFP program.  USPS noted that in its June 2008 response to Congress regarding the  Postal Accountability and Enhancement Act, USPS identified  implementing expanded measurement systems for single-piece First-Class  Mail, new systems for bulk First-Class Mail, Standard Mail, Periodicals,  and bulk Package Services mail and stated that implementation of these  systems will continue through fiscal year 2009. USPS agreed with our draft  report that successful implementation of new measurement systems will  depend, in part, on mailers barcoding mail and containers, as well as  providing electronic information on mailings. USPS said that in addition to  expanding measurement systems for its market-dominant products during  fiscal year 2009, it will also develop historical data to assist with the  creation of future performance targets. USPS also provided comments on  its PFP program, stating that the program’s approach has been responsible  for substantial performance improvements and is consistent with past  efforts to ensure the proper balance of performance indicators.
We are sending copies of this report to the Chairman of the Senate  Committee on Homeland Security and Governmental Affairs; the Ranking  Minority Member of the Subcommittee on Federal Financial Management,  Government Information, Federal Services, and International Security,  Senate Committee on Homeland Security and Governmental Affairs; the  Chairman and Ranking Minority Member of the House Committee on  Oversight and Government Reform; the Chairman and Ranking Minority  Member of the Subcommittee on Federal Workforce, Postal Service, and  the District of Columbia, House Committee on Oversight and Government  Reform; the Chairman of the USPS Board of Governors; the Postmaster  General; the USPS Inspector General; and other interested parties. We also  will provide copies to others on request. In addition, the report will be  available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at herrp@gao.gov or (202) 512-2834. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix IV.
section_title: Appendix I: Number of U.S. Postal Service Pay for Performance Participants, by Employee Type, as of December 5, 2007
subsections: section_title: Other field EAS employees (including district and facility EAS)
paragraphs: U.S. Postal Service (USPS) employee type    Headquarters (HQ) and HQ-related EAS employees  Attorneys on the Attorney Compensation Schedule     Other HQ and HQ-related EAS  Postal Career Executive Service (PCES)
PCES field executives (including PCES Postmasters)
section_title: Appendix II: Objectives, Scope, and Methodology
paragraphs: Our objectives were to (1) describe the key features of the U.S. Postal  Service’s (USPS) pay for performance (PFP) program, (2) provide  information on the weight of the PFP program’s performance indicators in  determining participants’ ratings, and (3) assess opportunities for USPS to  incorporate new indicators of delivery performance into its PFP program.  To address these objectives, we obtained documentation from USPS on its  PFP program and interviewed USPS officials responsible for the program.  To assess opportunities for USPS to incorporate new delivery  performance indicators into its PFP program, we also obtained  documentation on USPS’s plans to implement new delivery performance  measurement systems. We primarily based our assessment on applicable  laws—such as laws related to USPS’s statutory mission of providing  prompt, reliable, and efficient postal services to patrons in all areas at  reasonable rates and statutory reporting requirements related to USPS’s  delivery performance—as well as on interviews with senior USPS officials.  We also developed assessment criteria from our past work on other  agencies’ PFP programs and best practices used by high-performing  organizations. We conducted a data reliability assessment of USPS’s PFP  information and determined that the information was sufficiently reliable  for the purposes of our report. Our assessment was based on a review of  the documentation and data provided, comparing the consistency of  information provided by multiple sources and in multiple data files;  interviews with USPS officials to discuss the documentation; and data,  including how the data were developed; and follow-up questions to obtain  further information.
We conducted this performance audit from October 2007 to September  2008 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.
section_title: Appendix III: Comments from the U.S. Postal Service
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the above individuals, Gerald P. Barnes (Assistant Director),  Elizabeth Eisenstadt, Brandon Haller, David Hooper, Kenneth E. John,  Belva Martin, Laura Shumway, and Crystal Wesco made key contributions  to this report.