U.S. Postal Service: Field Offices' Role in Cost-Reduction and Revenue-Generation Efforts
Published: 2012-04-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: USPS has lost $25.3 billion over the last 5 years and expects to lose another $83.2 billion through fiscal year 2016 unless it takes action to reduce its costs and improve its operational efficiency. USPS has cut costs in its retail, mail processing, and delivery networks, as well as in its field office structure, which includes 7 area offices and 67 district offices, and plans other cost-cutting actions throughout the organization. As requested, this report discusses (1) the role of area and district employees in implementing USPSs cost-savings and revenue-generation efforts and (2) USPSs actions to consolidate its field office structure in 2011, and the impact of this consolidation.
GAO analyzed USPS documents describing the role of field staff in carrying out USPSs cost-saving and revenue-generation efforts; information on the impact of the 2011 consolidation, including anticipated cost savings; and USPSs plan, issued in December 2011, for evaluating and implementing possible field office consolidations. GAO also interviewed USPS officials at headquarters and at four area and six district offices selected based on several factors, including geographic dispersion throughout the U.S.
section_title: What GAO Found
paragraphs: Field employees have key roles in the U.S. Postal Services (USPS) efforts to reduce costs and generate revenue. For example, these employees evaluate the feasibility of closing or consolidating facilities, such as post offices and mail- processing facilities; carry out the closures and consolidations of these facilities; and evaluate and consolidate delivery routes. These roles support USPSs plans to save, by 2016, about $9 billion annually by improving its operational efficiency and realigning its retail, mail processing, and delivery networks with declining mail use. These plans include evaluating about half of its approximately 31,000 post offices to identify cost-reduction opportunities, closing or reducing operations at about half of its 461 mail-processing facilities, and consolidating about 20,000 of its 144,000 city delivery routes. Area and district employees also have a significant role in USPSs efforts to generate additional revenue by (1) promoting the value of mail to businesses, (2) maintaining and increasing its customer base through customer service, and (3) growing the package business.
In 2011, USPS consolidated its field office structure by, among other actions, closing one area office and seven district offices and eliminating 1,946 positionsactions that it estimated would save about $150 million annually. However, several area and district officials expressed concern that this consolidation could lessen their ability to carry out ongoing and future cost-savings and revenue-generation initiatives, and to recruit and retain future managers. In December 2011, USPS issued a plan on how it would evaluate additional field offices for possible consolidation and address concerns that the USPS Office of Inspector General identified in past field office consolidations. These concerns included the need to develop a plan to guide future field office consolidations and to consider factors such as workload and proximity to other offices. According to USPS officials, the plan also addressed past concerns about inadequate documentation and transparency and will lead to post-consolidation reviews to assess lessons learned and measure actual savings. Although USPS has a plan to guide future consolidations, according to USPS officials, it does not plan additional field office consolidations until it has completed ongoing cost-reduction efforts in its retail, mail processing, and delivery networks.
section_title: What GAO Recommends
paragraphs: GAO is not making recommendations in this report. USPS had no comments on a draft of this report.

section_title: Letter
paragraphs: The U.S. Postal Service (USPS) continues to face a dire financial  situation and does not have sufficient revenues to cover its expenses,  putting its mission to provide prompt, reliable, and efficient postal services  at risk. As customers increasingly turn to digital communications and  online payment methods, mail volume has decreased precipitously, falling  almost 21 percent from fiscal years 2007 through 2011. During this  period, USPS experienced a cumulative loss of $25.3 billion and between  2012 and 2016 it expects to lose another $83.2 billion unless it takes  action to dramatically reduce its costs and improve its operational  efficiency.
To address its dire financial circumstances, USPS has initiated several  efforts intended to reduce its costs and improve the efficiency of its retail,  mail-processing, and delivery networks as well as its field office  structure—which currently includes 7 area offices and 67 district offices.  For example, by 2016, USPS plans to review about half of its 31,000 post  offices to identify opportunities to, among other things, close facilities  and reduce work hours, closing or consolidating at least 223 of its 461  mail-processing facilities. We and others, including Members of  Congress, have raised questions about whether USPS’s field offices are  appropriately organized and staffed for USPS’s operational needs. As  early as 2003, for example, a presidential commission recommended that  USPS fully review its field office structure to determine whether and, to  what extent, each office was needed. More recently, in April 2010, we  reported on the importance of analyzing USPS’s organizational footprint,  including its field offices, to reduce costs and improve operational  efficiency. We also testified that USPS cannot continue providing  services at current levels without dramatic changes in its cost structure.In response to your request, this report describes: (1) the role of area and  district office employees in implementing USPS’s cost-savings and  revenue-generation efforts and (2) USPS’s actions to consolidate its field  office structure in 2011, and the impact of these actions. USPS’s actions  to consolidate its field offices and to centralize selected administrative  services previously conducted at these offices are described in appendix I  of this report.
To address these objectives, we reviewed documents, including prior  GAO reports, USPS documents, and the September 6, 2011,  congressional testimony of the Postmaster General. We also interviewed  USPS officials from headquarters, area, and district offices; USPS’s  Office of Inspector General (OIG); and selected USPS shared services  centers used to provide human resources, accounting, and other  services. We interviewed managers at four area and six district offices  that we selected based on, among other factors, geographic dispersion  and whether the office had recently absorbed responsibilities previously  performed by other field offices following a consolidation. To describe the  role of area and district office employees in implementing cost-savings  and revenue-generation efforts, we reviewed USPS documents  describing its strategic goals for these efforts and the role of area and  district employees in implementing these efforts. To describe actions to  consolidate the field office structure in 2011 and the impacts of these  efforts, we reviewed USPS documentation including USPS’s December  2011 plan entitled Area and District Office Structure Evaluations Strategy,  Policy and Process. 2011 consolidations as well as cost-savings estimates for this  consolidation and for the centralization efforts undertaken between 2002  and 2005 and determined that these estimates were sufficiently reliable  for the purposes of our report.
Finally, we analyzed USPS financial data on the  We conducted this performance audit from April 2011 to April 2012 in  accordance with generally accepted government auditing standards.
USPS, Area and District Office Structure Evaluations Strategy, Policy and Process,  (Washington, D.C.: September 2011). According to USPS officials, this document was  completed in September 2011 but was not issued until the completion of internal reviews  on December 7, 2011.
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. Appendix II contains a detailed  discussion of our objectives, scope, and methodology.
subsections: section_title: Background
paragraphs: USPS’s current field-office structure includes 7 area offices and 67 district  offices. USPS’s management structure is decentralized, with the area and  district offices overseeing a vast network of facilities, which, as of  December 19, 2011, included 31,060 post offices and 461 mail- processing facilities (see fig. 1). According to USPS data, the operating  cost of its field offices in fiscal year 2011 totaled about $1.2 billion—the  majority of which (about $1 billion) was spent operating district offices.  The total operating costs of USPS’s field offices represented less than 2  percent of its approximately $71 billion fiscal year 2011 operating  expenses.
Significant policy and operational decisions are made at USPS  headquarters and disseminated through the managerial hierarchy,  including area and district offices. Each of the 67 district offices reports to  a designated area office, which, in turn, reports to headquarters.  Employees in the area offices are generally responsible for overseeing  district offices and facilities that have an area-wide impact, such as mail- processing facilities, while employees in district offices are typically  responsible for overseeing post offices and other facilities that serve a  particular district. For example, as of December 19, 2011, the Southwest  Area office was responsible for overseeing 90 mail-processing facilities,  while the 12 district offices in the Southwest Area were responsible for  overseeing operations at about 5,600 post offices—an average of about  470 post offices per district. Each area and district office is organized into  departments, which include operations support, human resources,  finance, and marketing.
In 2011, USPS had 4,985 field office employees (806 area and 4,179  district employees), who comprised less than 1 percent of USPS’s  workforce of about 557,000 career employees. About 85 percent of  USPS’s career workforce, including most mail carriers and mail- processing staff, is covered by collective bargaining agreements with  employment protections, such as no lay-off provisions. In contrast, most  USPS field employees, which include area and district office managers,  are not covered by collective bargaining agreements.
From 2002 to 2011, USPS reduced the number of employees in area and  district offices by almost 56 percent (see fig. 2) by, among other actions,  closing 4 area offices and 18 district offices and centralizing some  accounting, human resources, and other services. (App. I provides  additional information on these office closures and selected  centralizations of administrative services previously performed in field  offices.)
In September 2011, the Postmaster General testified before Congress  that due to USPS’s urgent need to address its financial situation, USPS  was undertaking or planning several efforts intended to improve the  efficiency in its retail, mail-processing, and delivery networks.February 2012, USPS issued a 5-year business plan in which it estimated  that these efforts and others, such as reducing Saturday deliveries, could  restore USPS to profitability. USPS estimates that it could save $9.1  billion annually, the majority of which will be achieved by 2016, through  changes in the following areas:   In
Retail network: USPS plans to downsize its retail network for  potential savings of $2 billion annually beginning in 2016. As part of  this effort, USPS plans to review about half of its post offices to  identify opportunities to close facilities, reduce work hours, and  expand the use of lower-cost alternatives, such as self-service kiosks,  and partnerships with retailers.
Mail-processing network: USPS plans to downsize its mail- processing network and reduce costs in its transportation network for  potential savings of $4.1 billion annually beginning in 2016.this effort, USPS anticipates closing or consolidating about half of its  mail-processing facilities and reducing the number of its employees.
Delivery network: USPS is realigning its delivery routes for potential  savings of $3 billion annually beginning in 2016. As part of this effort,  USPS plans to eliminate and consolidate approximately 20,000 out of  its 144,000 city routes.
While reducing USPS’s network costs is essential, the Postmaster  General testified that USPS also must generate additional revenue to  deal with its financial crisis. To help accomplish this, he said he  implemented a variety of “core business strategies” to, among other  things, (1) strengthen the value of mail to businesses, (2) improve its  customers’ experience using USPS’s services, and (3) compete with  private sector firms for the package business. USPS’s fourth core  business strategy—becoming a “leaner, faster, and smarter”  organization—relates to reducing its network costs and includes the  actions described above.
To address USPS’s financial problems, several Members of the 112th  Congress have introduced postal reform legislation which, if enacted,  would likely impact USPS’s downsizing plans, including its ability to close  retail and mail-processing facilities. Certain legislative proposals also  include provisions requiring USPS to develop and submit to Congress  plans for further consolidating its field offices. While USPS needs  authority from Congress to make some of its planned network changes, it  currently has the flexibility to continue consolidating area and district  offices. In December 2011, USPS announced a moratorium on closing its  post offices and mail-processing facilities until May 15, 2012. The  moratorium was established in response to congressional requests for  additional time to enact comprehensive postal reform legislation. In the  interim, USPS is continuing to review the feasibility of closing retail  facilities and recently completed studies of mail-processing facilities for  consolidation and possible closure.
section_title: Field Employees Have a Key Role in USPS’s Cost-Reduction and Revenue-Generation Efforts
subsections: section_title: Cost-Reduction Efforts
paragraphs: Field employees have key roles in USPS’s efforts to reduce costs in its  retail, mail-processing, and delivery networks. The extent of area and  district employees’ involvement in specific cost-reduction efforts varies,  however. For example, area employees, who comprise 16 percent of the  field employees, generally provide guidance and oversee the  implementation of all cost-reduction efforts in their area to ensure  consistency in how these efforts are implemented. In addition, area  employees prepare proposals for headquarters on potential  consolidations of mail-processing operations, based on information  gathered and presented by district employees. On the other hand, district  employees, who account for the remainder of field employees, are directly  responsible for carrying out both the retail and mail-processing facility  reviews and other cost-reduction efforts, such as consolidating delivery  routes.
Since 2006, USPS has reviewed over 3,000 retail facilities and closed  686—about 23 percent of those reviewed. In 2011, as part of USPS’s  Retail Access Optimization Initiative, the agency announced plans to  review another 3,650 retail facilities for possible closure. Reviewing retail  facilities for possible closure generally involves one to three stages,  depending on the outcome of each stage. Area officials oversee activities  related to each stage to ensure compliance with USPS’s requirements.  District employees are involved in completing work required for each of  these stages. For example, in the first stage, district employees study and  prepare a report on the feasibility of closing a particular facility and  examine the potential effects on (1) services, (2) customers, and (3)  USPS employees, as well as the potential economic savings associated  with closing a particular retail facility. To identify these effects, district  employees collect and analyze operational, financial, and delivery data  related to the facility. District employees also distribute questionnaires to  potentially affected customers about the customers’ service needs and  access to postal services in their vicinity and hold community meetings to  discuss, among other matters, the reason for the proposed change in  service and to respond to customer inquiries and concerns. According to  USPS officials, these questionnaires and community meetings provide  USPS with local information that headquarters might not otherwise have  available during its decision-making process. (Fig. 3 provides more  information on USPS’s process for reviewing retail facilities for possible  closure.)
When headquarters officials decide to close a retail facility, district  employees carry out a variety of activities related to the closure. For  example, district employees must move equipment, realign any affected  delivery routes, and transfer mail carriers and other employees into other  locations. Related to this, district employees also are responsible for  identifying potential positions for staff affected by the closure.
None of the 3,650 facilities USPS identified for review in 2011 had been  closed at the completion of our review. USPS is continuing to review  these facilities and could decide to close some of them after the  moratorium on facility closures expires on May 15, 2012. USPS officials  acknowledge that closing retail postal facilities is highly contentious. As a  result, according to USPS officials, USPS is exploring additional options  to reduce its retail facility costs by, for example, reducing employee work  hours and shortening operating hours at selected facilities.
Since 2006, USPS has taken several actions to reduce its costs by  improving the operational efficiency of its mail-processing network. As  discussed in our April 2012 report, these actions included consolidating  operations at various types of mail-processing facilities and closing  unneeded facilities, which, according to USPS, resulted in about $2.4  billion in cost savings. completed Area Mail Processing reviews of 264 of its mail-processing  facilities to examine the feasibility of consolidating mail-processing  operations from one or more postal facilities to other facilities to improve  USPS’s operational efficiency. Of the 264 facilities that were reviewed, 35  will remain open, 6 are on hold for further study, and 223 have been  found feasible for consolidation, according to USPS. Area and district  employees completed these reviews, which examined opportunities to  consolidate mail origination and destination operations.
As discussed in our April 2012 report, these savings derive from actions in three areas:  Specifically, USPS (1) closed nearly all of its Remote Encoding Centers (10 of 12) and  Airport Mail Centers (76 of 77) between 2006 and 2011, (2) moved all of the operations  previously performed at 21 Bulk Mail Centers into its Network Distribution Centers, and (3)  completed 100 mail-processing consolidations. GAO-12-470.
According to USPS, it considered a variety of criteria in identifying the 264 facilities for  possible consolidation, including, projected savings, service issues, and capacity within  processing plants. processing facilities for review, district employees analyzed, among other  things, the facility’s mail volumes, work hours, and services, as well as  the estimated costs and savings of a potential consolidation and prepared  a report on their findings that was reviewed by headquarters and area  managers. After considering the results of the feasibility study  headquarters made a final determination on whether to consolidate one  or more aspects of the facility’s operations. Figure 4 provides more  information on USPS’s process for reviewing mail-processing facilities for  possible closure or consolidation.
If headquarters approves the consolidation of operations at a facility, area  and district employees perform those activities. For example, area  employees must move mail-processing equipment and transfer the  facility’s mail operations and transportation network to other USPS  facilities. In addition, area and district employees must coordinate on  repositioning employees into new positions as specified by their collective  bargaining agreement. After the consolidation has been completed,  area employees conduct—with input from district employees—post- implementation reviews to evaluate, among other matters, the impacts of  the consolidation and actual cost savings.
USPS uses a variety of routes to deliver its mail, but the two principle route types are  “city” and “rural.” City and rural carriers have different collective bargaining agreements  and compensation systems. Generally, city carriers are paid by the hour with overtime, as  applicable, while rural carriers are salaried employees. in routes that city carriers can complete in less than 8 hours.  Recognizing that these factors cause inefficiencies in USPS’s city delivery  network, in 2008, USPS and the National Association of Letter  Carriers—the union that represents city carriers—entered into an  agreement that permits USPS to conduct city route inspections and to  realign routes that no longer reflect 8 hours of work into more efficient  routes. In fiscal year 2011, USPS eliminated 6,821 of its 224,485 city and  rural delivery routes (about 3 percent). In addition, USPS recently  announced plans to eliminate another 20,000 city routes (about 9 percent  of current routes) for an estimated $2 billion in annual savings.  According to USPS officials, realigning delivery routes likely will continue  well into the future given expected mail volume declines and annual  increases in addresses receiving mail which, until recently, have  historically increased by about 1 million addresses per year.
Area and district employees have key roles in realigning city delivery  routes. Specifically, area employees oversee the city route realignment  process to ensure consistency across districts in their area, while district  employees directly carry out the realignments. To do so, district  employees (1) gather and analyze information on the factors that affect  delivery time; (2) observe the time a mail carrier spends servicing his or  her route and, if the route is determined to represent less than a full 8- hour work day; (3) reconfigure the route so that it is more efficient. To  evaluate the factors that affect delivery time, district managers consider a  variety of factors, including the number of addresses and mail volume on  a particular route, the distance between addresses, the geographic  location of the route (e.g., the downtown of a major metropolitan area  versus a small town), and the mode of delivery (e.g., mail delivered to a  curbside mailbox, a mail slot in a door, or a cluster box). In addition,  district employees physically observe a mail carrier’s daily activities, both  in the office preparing mail for delivery and transporting and delivering the  mail, to determine whether the route represents a full 8-hour day. If after  conducting these activities, district employees determine that the  workload does not fill an 8-hour day, specially trained district employees  use a computerized management tool—called the Carrier Optimal  Routing system—to redesign routes. This system uses digital mapping,  algorithms, and route inspection data to create efficient city carrier routes  that are more compact and contiguous. As a result, USPS could, for  example, consolidate portions of other city routes, such as routes that  necessitate carrier overtime, to complete or augment the prior  reconfigured route, thereby eliminating the need for overtime. Because  route realignments reorder mail deliveries along city routes, the  realignments result in major changes to USPS’s database for managing  addresses that, according to district managers, requires district Address  Management Systems Specialists to update the database on an ongoing  basis. According to USPS field officials, if updates to the database are not  made in a timely manner, delivery efficiency and customer service would  be degraded.
section_title: Revenue-Generating Efforts
paragraphs: As with USPS’s cost reduction efforts, area and district employees have a  significant role in several aspects of USPS’s efforts to generate additional  revenue through three of the Postmaster General’s four core business  strategies: (1) strengthening the value of mail to businesses, (2)  improving its retail customers’ experience, and (3) competing for the  package business.
Area and district employees promote and oversee a variety of efforts  intended to strengthen the value of mail to businesses. Collectively, these  efforts are intended to enhance how U.S. businesses contact their  customers to deliver billing statements and notifications (using First-Class  Mail) and advertisements and offers (using Standard Mail). For example,  area and district Business Service Network employees (marketing  employees) provide direct and ongoing customer service to business  mailers to, among other things, help the mailers conveniently process  their mail and to correct any mailing problems, such as shipment delays,  that may arise. In 2011, USPS generated about $50 billion (76 percent of  its total operating revenue) from business mailers. Of this amount, $40  billion (60 percent of its total operating revenue) came from business  mailers that area and district Business Service Network employees  directly serviced.
Area and district employees also have a role in promoting the value of  mail with new business mailers. According to the Postmaster General’s  speech in May 2011, three quarters of U.S. businesses are not using the  mail to market their businesses to potential customers. Thus, he said  encouraging these businesses to do so represents an opportunity to  increase USPS’s revenue. In January 2011, USPS introduced a new  initiative called Every Door Direct Mail to (1) make it easier for small and  medium-sized businesses to advertise through the mail, and (2) enable  local businesses to target potential customers by street, as opposed to  specific mailing addresses. Area employees oversee the implementation  of this initiative in districts within their area, and monitor performance  metrics and revenue earned. Similarly, district employees promote the  initiative in their districts to attract new customers in their locations.  According to USPS, this initiative generated over $92 million in revenue in  the 9 months following its introduction in January 2011.
Improving the retail customer experience means maintaining and growing  the customer base through improved customer service. Area employees  have a key role in monitoring the quality of customer interactions and  resolving any performance problems identified. For example, area  employees told us that they regularly monitor the results of, among other  things, customer surveys in specific post offices as well as in districts as a  whole. When these data identify specific performance problems, area  employees share the results with district employees who are then  expected to work with particular facilities and individuals to correct the  identified service-related problems. District employees also track the  performance and revenue generated by third parties who provide  alternative access to postal products through contract postal units and  work with local postmasters, who most directly oversee these facilities, to  improve service and maximize revenue.
USPS’s field employees also have key roles in helping the USPS  successfully compete for and grow its package business. Overall,  according to USPS, its package deliveries have increased from 12.7  percent of its revenue in fiscal year 2006 to 16.1 percent in fiscal year  2011. District employees work directly with employees at post offices and  mail-processing facilities to train employees on how to properly scan  packages for delivery—a key factor in growing USPS’s package  business. Proper scanning helps ensure that packages travel through its  delivery network efficiently and that customers and USPS can track the  packages to determine their current location. USPS’s competitors offer  this service, and USPS hopes to improve the reliability of its package- tracking services to capture portions of its competitors’ business. In  addition, field employees we interviewed in one of the four areas we  selected for our review developed a program to generate additional  revenue by targeting small businesses that are not currently using  USPS’s services. Specifically, in the Southwest Area, area employees  worked with employees of their Dallas district office to collaborate on  ways to identify and contact small businesses that generate less than  $10,000 annually in postage sales and that currently use USPS  competitors, such as the United Parcel Service, to persuade these  companies to use USPS for their package mailing needs. According to  USPS from August 1, 2011, through February 10, 2012, this initiative  generated about $11.9 million in revenue from new small business  customers. USPS headquarters officials stated that USPS is currently  considering whether to implement similar revenue-generating efforts  elsewhere.
section_title: In 2011 USPS Closed Field Offices and Eliminated Field Positions, Resulting in $150 Million in Estimated Annual Savings
paragraphs: In 2011 USPS consolidated its field offices by closing eight offices,  centralizing support services, and eliminating field positions for an  estimated $150 million in annual savings. However, USPS field  employees we interviewed were concerned that the staffing reductions  could negatively affect their ability to carry out additional cost-savings and  revenue-generating efforts. USPS issued a plan in December 2011 to  evaluate area and district offices for possible consolidation but, according  to headquarters officials, USPS does not anticipate initiating these  evaluations until after the completion of cost-reduction efforts in its retail,  mail-processing, and delivery networks.
subsections: section_title: USPS’s 2011 Field-Office Consolidation
paragraphs: Prior to the consolidation, USPS estimated that the 2011 consolidation  would result in an estimated annual cost savings of $150 million through  December 2011. According to USPS, the goals of this consolidation  were to, among other things, enhance and strengthen customer service  and allow USPS to more quickly adapt to changing market forces, such  as continuing mail volume declines. USPS closed its Southeast area  office and seven district offices, and assigned functions previously  performed at these locations to other area and district offices within close  proximity. According to USPS headquarters officials, USPS considered a  variety of factors in deciding which field offices to close and which  positions to eliminate, including mail volume, number of customers  served, population density, number of delivery routes, and revenue  generated. Overall, USPS reduced its field offices positions by 1,946, or  26 percent. At the conclusion of the consolidation in September 2011,  USPS had 817 area and 4,698 district office positions, totaling 5,515 field  positions. Of the four departments that we selected for review, most of  the field position reductions were in operations support (35 percent) and  human resources (35 percent). The smallest reductions (14 percent) were  in marketing (see table 1).
As part of this consolidation, USPS also centralized several district  support services positions, including the following, into other locations  which resulted in a net reduction of 247 positions.
USPS centralized Family and Medical Leave Act Coordinators from  district offices to its Human Resources Shared Services Center in  Greensboro, North Carolina. Overall, USPS eliminated 106 district  positions and, according to officials at the center, created 45 positions  to handle the work previously carried out by the districts’  coordinators—a net reduction of 61 positions.
USPS centralized responsibilities for allocating budgets from district to  area offices. As part of this change, it eliminated 154 of its 221 district  budget positions and created 11 positions in its area offices—a net  reduction of 143 positions. According to area officials, moving this  responsibility to area offices will help ensure that all facilities within an  area have standardized and comparable budgets.
USPS also eliminated 43 of the 78 district Mailpiece Design Analyst  positions and centralized the remaining 35 positions at area offices.
The remaining coordinators now provide design services to USPS  customers through a centralized hotline.
Appendix I provides additional information on selected centralization  actions between 2002 and 2005.
section_title: Area and District Officials’ Concerns about the 2011 Consolidation
subsections: section_title: Concerns about the Ability to Carry Out Key USPS Efforts
paragraphs: Several area and district officials expressed concern about how staff  reductions and the allocation of field resources could affect their ability to  manage ongoing and planned cost-reduction and revenue-generation  efforts. Such concerns include the following:
Four of the six district operations support managers whom we  interviewed raised concerns about the number of Address  Management Systems Specialist positions that USPS eliminated in  the 2011 consolidation. According to these officials, the loss of these  positions could limit their ability to perform future route realignments.  Overall, USPS reduced the number of these district positions from  624 positions to 427—a 32 percent reduction. As discussed,  according to field officials, Address Management Systems Specialists  are critical to USPS’s ongoing efforts to update its address  management database following route realignments.
Seven of the 10 area and district marketing managers we interviewed  also raised concerns about the number of marketing positions  eliminated in the 2011 consolidation. Of these reductions, 38 percent  were area and district Business Service Network positions. These  reductions may have been particularly difficult in the Capital Metro  Area office because the area gained responsibility for managing 25  additional business mailer accounts previously handled by the  Southeast Area office. Several field officials told us that given USPS’s  increased focus on generating revenue, it is important that area and  district offices be staffed appropriately to oversee the range of  marketing activities and to maintain business mailer customers. A  district marketing manager reiterated this point, indicating that most  business mailers expect personal service to resolve any mailing  issues and that consequently, USPS should ensure that these  business mailers receive consistent and reliable service to reduce the  possibility of losing their business to competitors. As we have  reported, businesses that publish mail Periodicals, such as daily or  weekly news magazines, have expressed concern about USPS’s  ability to provide reliable service. According to these business  mailers, they will likely (1) accelerate their efforts to shift subscribers  from hard copy mail to electronic communication or (2) otherwise stop  using USPS if it is unable to provide reliable service.
In addition, 12 of the 30 district managers we interviewed expressed  concern that when USPS allocated resources for the 2011  consolidation, it did not fully consider that some offices would be  picking up additional work from the field office closures. For example,  several district managers told us that during this consolidation, several  field position reductions were made that, in their view, did not reflect  office workload variations. The managers said that their departments  are now understaffed. For example, the District Manager at the  Connecticut Valley District told us that following the 2011  consolidation, her district is now one of the largest districts in the  country, both with respect to the number of USPS employees and  geographic size. Specifically, she said her district grew from 11,939  employees to 15,421—an increase of 29 percent and added over 100  facilities, while losing 20 district positions. She expressed concern that  despite overseeing one of the largest districts, she experienced the  same number of staffing reductions as other districts with smaller  workloads.
Eight field officials told us that long work hours resulting from the 2011  consolidation combined with other factors, such as employee uncertainty  about their future employment, have made it difficult to recruit and retain  area and district employees for management positions. For example, one  district office manager told us that employees in her department have  been seeking management opportunities outside USPS because of these  concerns. Another district manager commented that he has seen a  decrease in the number of employees willing to move into managerial  positions because of uncertainty about future promotional opportunities  and the stress associated with these positions. In addition, 17 field  officials we talked to expressed concern that the loss of a significant  number of senior, experienced area and district employees during the  2011 consolidation might negatively affect USPS’s ability to manage field  operations.
USPS headquarters officials stated that while they understand the  concerns expressed by area and district employees, the changes  undertaken as part of the 2011 consolidation were intended to align with  other actions that USPS has taken to standardize and streamline support  services. For example, according to these officials, USPS has developed  several Web-based systems to automate and standardize administrative  tasks that were previously conducted by district staff. As these tasks are  streamlined, fewer district resources are needed. In addition, as  discussed, USPS headquarters officials told us that USPS considered a  variety of factors in deciding its 2011 consolidation, including mail volume,  number of customers, population density, number of delivery routes, and  revenue generated. In addition, according to USPS headquarters officials,  USPS also intends to consider workload impacts in its future field-office  consolidations.
section_title: Issuance of Plan and Decision to Hold Off on Future Field-Office Consolidations
paragraphs: In December 2011, USPS issued a plan for evaluating area and district  offices for possible consolidation and for carrying out future  consolidations. According to the OIG, this plan addresses its  recommendations related to USPS’s 2009 consolidation. In particular,  OIG officials told us that the document addresses recommendations to  USPS to develop a plan which (1) periodically evaluates area and district  offices for possible consolidation, (2) guides decisions on future field- office consolidations, and (3) considers factors such as an office’s mail  volume, workload, and proximity to other offices. In addition, OIG officials  told us that the plan addresses the agency’s recommendation that USPS  develop procedures for maintaining adequate documentation of its field  office evaluations and consolidation decisions.
USPS’s December 2011 plan specifies that it will take numerous steps to  evaluate field offices for possible consolidation, including:  conducting periodic evaluations of area and district offices to assess  the need for consolidations; developing a business case, which includes expected cost savings  and benefits, for proposed field-office consolidations: using reliable data sources to evaluate area and district offices for adequately documenting all analyses and data used to make  conducting post-consolidation reviews to identify key achievements  and actual cost savings, and document lessons learned.
USPS’s past area and district consolidations have lacked documentation  and transparency. For example, despite numerous requests, USPS did  not provide us with any documentation of the analyses it used or the  approval process for its decision to consolidate field operations in 2011.  Similarly, in 2010, the OIG reported that USPS could not always provide  documentation supporting its 2009 and earlier field-office consolidations.  In addition, USPS has not completed postconsolidation reviews to assess  either its lessons learned or its actual cost savings. Headquarters officials  told us that the plan it issued in December 2011 should address these  past concerns. These officials also said that USPS intends to ensure that  its future evaluations consider the operational impacts of potential field- office consolidations on ongoing and planned initiatives, such as those  related to downsizing its retail, mail-processing, and delivery networks.
While USPS’s recent plan indicates that it intends to periodically evaluate  its field office structure for possible consolidation, it does not specify when  it will initiate these evaluations. According to headquarters officials, USPS  does not plan to initiate these evaluations until after the completion of  cost-reduction efforts in its retail, mail-processing, and delivery networks,  efforts that USPS intends to complete in 2016. These officials also told us  that further consolidation of field offices would be counterproductive at  this time because field employees are key to the successful  accomplishment of these cost-reduction efforts. In addition, the  headquarters officials noted that cost savings from future field  consolidations would be minimal compared to the roughly $9 billion USPS  estimates can be saved by streamlining its retail, mail-processing, and  delivery networks. Thus, according to these officials, for the time being,  USPS needs its current field-office structure to focus on other efforts that  will result in the largest potential cost savings.
section_title: Concluding Observations
paragraphs: USPS’s dire financial outlook necessitates urgent action to align its total  network and reduce its costs as mail volume continues to decline. To  reduce costs, USPS reduced the number of employees in its area and  district offices by almost 56 percent from 2002 to 2011. And, in 2011, it  announced additional USPS-wide initiatives to save an estimated $9.1  billion annually by 2016. USPS also recently issued a plan for evaluating  area and district offices for future consolidations; however, USPS has  chosen to hold off on future field-office consolidations until after the  USPS-wide initiatives are complete, which should allow USPS to make  additional field- office changes, if needed, based on a network that is  aligned with the reduced mail volume. This decision seems appropriate in  view of the importance of area and district offices in implementing and  managing these initiatives. If USPS decides to move forward with future  field-office evaluations, its plan for doing so should address past concerns  about inadequate documentation and transparency and lead to  postconsolidation reviews to assess lessons learned and to measure  actual savings.
section_title: Agency Comments
paragraphs: We provided a draft of this report to USPS for review and comment.  USPS had no comments.
We are sending copies of this report to the appropriate congressional  committees, the Postmaster General, and other interested parties. In  addition, the report will be available at no charge on GAO’s Web site at  http://www.gao.gov.
If you or your staffs have any questions on 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. Contact information and key contributors to the report are  listed in appendix III.
section_title: Appendix I: Timeline of Recent Field Office Consolidations and Information on Selected Centralizations of Administrative Services
paragraphs: Appendix I: Timeline of Recent Field Office  Consolidations and Information on Selected  Centralizations of Administrative Services Prior to 1992, USPS’s field-office structure consisted of 5 regions, 73 field divisions, and 144  management sectional centers.
subsections: section_title: Centralization of Accounting Services
paragraphs: USPS centralized some of its accounting services in 2002 and 2003. As  part of this effort, USPS replaced its prior information technology systems  with a new computer system—the Standard Accounting for Retail  System. In addition, USPS reviewed the range of accounting services  performed at its district offices to identify services that could be  standardized and streamlined and, as a result of this effort, eliminated  1,063 district accounting positions. To handle work previously performed  by district employees, USPS created 295 positions at three accounting  shared service centers in Eagan, Minnesota; St. Louis, Missouri; and San  Mateo, California—a net reduction of 768 USPS positions. In fiscal year  2005, USPS completed a postcentralization review and determined that  its actions had resulted in cost savings of $56.8 million.
section_title: Centralization of Equal Employment Opportunity Investigations
paragraphs: In 2004, USPS centralized activities related to its investigations of equal  employment opportunity complaints within a shared service center—the  National Equal Opportunity Employment Service Office—located in  Tampa, Florida. To accomplish this centralization, USPS eliminated 169  area and district human-resource positions and created 47 positions at  the new center to handle the complaints—a net reduction of 122  employee positions. According to USPS officials at the center, the goals  of this centralization were to (1) correct problems in USPS’s equal  employment opportunity complaint process, (2) reduce a substantial  backlog of cases, and (3) implement a consistent process for  investigating future complaints. Among other responsibilities, employees  at this center review complaints filed by USPS employees and applicants  for employment, assign complaints to contracted investigative personnel,  and review and make determinations about the investigators’ findings.  According to USPS officials at the center, centralizing this work resulted  in about $13 million in cost savings as of fiscal year 2011. In addition,  beginning in 2005, USPS began soliciting federal agencies to carry out  their agencies’ equal employment opportunity investigations through the  center. According to officials at the center, 17 agencies have entered into  interagency agreements with USPS for this purpose. From 2006 to 2011,  USPS earned about $3 million in revenue from these agreements,  according to officials at the center.
section_title: Centralization of Human Resource Services
paragraphs: In 2005, USPS established its Human Resource Shared Services Center  in Greensboro, North Carolina, to centralize most of its services related to  employee benefits; personnel actions; safety and injury compensation;  and employee hiring, retirements, and reassignments. According to USPS  officials at the center, the centralization was needed to streamline and  standardize its human resources services. As part of this effort, USPS  introduced a new information technology system—the Human Capital  Enterprise System—which integrated information from a variety of prior  human resource computer systems. According to USPS officials, the  introduction of the improved computer system, along with the  centralization, allowed USPS to reduce its district human resource staff  by approximately 1,300-1,400 positions. While USPS eliminated well  over a thousand district positions, it also created 457 positions at the  shared services center to provide these services—a net staff reduction of  roughly 900 employee positions. According to a Human Resources  official, the centralization of human resource services resulted in cost  savings of about $150 million annually from 2007 through 2011.
section_title: Appendix II: Objectives, Scope, and Methodology
paragraphs: This report describes: (1) the role of area and district office employees in  implementing the U.S. Postal Service’s (USPS) cost-savings and  revenue-generation efforts and (2) USPS’s actions to consolidate its field  office structure in 2011 and the impact of these actions. This report also  describes actions taken by USPS between 2002 and 2005 to centralize  selected services previously conducted at field offices to other USPS  locations.
To address these objectives, we reviewed numerous documents,  including prior GAO and USPS Office of Inspector General (OIG) reports,  USPS documents, and the September 6, 2011, testimony of the  Postmaster General. We also interviewed USPS officials, including  headquarters officials and officials in area and district offices. We  interviewed officials at four area offices—the Capital Metro Area, the  Northeast Area, the Southwest Area, and the Pacific Area—that we  selected based on several factors, including geographic dispersion  throughout the U.S. and whether the office had recently absorbed the  responsibilities of other offices following a USPS field-office consolidation.  We selected a mixture of area offices that had been affected by recent  consolidations and one office that had not been affected. We also  interviewed officials from six district offices—Connecticut Valley; Dallas;  Fort Worth; Los Angeles; Northern Virginia; and Santa Ana—which we  selected based on their proximity (i.e., within about 100 miles) to the four  area offices we selected. In total, we interviewed over 50 USPS officials,  including USPS’s Chief Human Resources Officer; Area Vice Presidents;  District Managers; area and district officials responsible for operations  support, human resources, finance, and marketing in their locations; and  managers representing USPS’s accounting, equal opportunity  employment investigations, and human resources shared services  centers. We also interviewed representatives from the National  Association of Postal Supervisors, which represents among others, USPS  area and district managers.
To describe the role of field office employees in implementing USPS’s  cost-savings and revenue-generation efforts, we reviewed USPS  documents describing USPS’s strategic goals and the role of area and  district employees in carrying out potential consolidations of retail, mail-  processing, and delivery networks. To describe USPS’s actions to  consolidate its area and district offices in 2011 and the impact of this  consolidation we reviewed a 2010 OIG report on the 2009 consolidation,  which included recommendations for USPS related to future field-office  consolidation actions, and a variety of USPS documents, including  USPS’s (1) statements on the expectations and goals for the 2011  consolidation, (2) 2011 Annual Report, (3) Form 10-K filing with the  Securities and Exchange Commission on its 2011 Annual Report, (4) plan  issued in December 2011 entitled Area and District Office Structure  Evaluations Strategy, Policy and Process, and (5) 5-Year Business Plan  issued in February 2012. We also interviewed USPS officials to learn  about the financial and operational impacts of the 2011 consolidation. In  addition, we analyzed USPS data on the number of employee positions at  area and districts offices following the 2011 consolidation, and USPS’s  cost-savings estimates for this consolidation and for its support service  centralization efforts between 2002 to 2005. We assessed the reliability of  these data sources by, among other things, interviewing USPS officials  and reviewing USPS procedures for maintaining the data and verifying  their accuracy. Based on this information, we determined that the data  provided to us were sufficiently reliable for our reporting purposes. Finally,  we interviewed USPS headquarters officials and OIG officials to obtain  information on recommendations in the OIG’s 2010 report and USPS’s  December 2011 plan for future evaluations of area and district offices for  possible consolidations.
We conducted this performance audit from April 2011 to April 2012 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient and 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: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Kathleen Turner, Assistant  Director; Patrick Dudley; Delwen Jones; Elke Kolodinski; James Leonard;  Maria Mercado; Sara Ann Moessbauer; Joshua Ormond; and Crystal  Wesco made key contributions to this report.