U.S. Postal Service: Delivery Performance Standards, Measurement, and Reporting Need Improvement
Released: 2006-07-27T00:00:00

Letter

Background

USPS is an independent establishment of the executive branch mandated by law to provide postal services to “bind the nation together through the personal, educational, literary, and business correspondence of the people.” Established by the Postal Reorganization Act of 1970, USPS is a vital part of the nation’s communications network, delivering more than 200 billion pieces of mail each year. USPS is required to provide “prompt, reliable, and efficient services to patrons in all areas” and “postal services to all communities,” including “a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining.” In determining all policies for postal services, USPS is mandated to “give the highest consideration to the requirement for the most expeditious collection, transportation, and delivery of important letter mail.” Also, in selecting modes of transportation, USPS is mandated to “give highest consideration to the prompt and economical delivery of all mail.” More generally, USPS is mandated to provide adequate and efficient postal services that meet the needs of different categories of mail and mail users.

USPS has designated improving service as one of its four goals in its Strategic Transformation Plan. USPS’s strategy to improve service is to “provide timely, reliable delivery, and improved customer service across all access points.” Specifically, USPS plans to improve the quality of postal services by continuing to focus on the end-to-end service performance of all mail. The quality of mail delivery service has many dimensions, including the delivery of mail to the correct address within a time frame that meets standards USPS has established for timely delivery. USPS also plans to ensure that postal products and services meet customer expectations and that all customer services and forms of access are responsive, consistent, and easy to use. USPS has long recognized the importance of customer satisfaction and measures the satisfaction of its residential and business customers on a quarterly basis. USPS reports that its customer satisfaction measurement, which is conducted by the Gallup Organization, provides actionable information to USPS managers by identifying opportunities to improve overall customer satisfaction. In addition to gauging overall customer satisfaction, USPS measures customer satisfaction related to specific postal functions such as mail delivery and retail service. As USPS recognizes, dissatisfied customers can seek and find alternatives to using the mail. USPS faces growing competition from electronic alternatives to mailed communications and payments as well as private delivery companies. In this challenging environment, establishing and maintaining consistently high levels of delivery service are critical to success.

Recognizing the importance of the timely delivery of mail, USPS has integrated performance targets and results for some types of mail into its performance management system. This system is used to establish pay-for- performance incentives for postal management employees. As we have reported, high-performing organizations use effective performance management systems as a strategic tool to drive change and achieve desired results. Among the key practices used is aligning individual performance expectations with organizational goals by seeking to create pay, incentive, and reward systems that clearly link employee knowledge, skills, and contributions to organizational results. Further, high- performing organizations often must fundamentally change their cultures so that they are more results oriented, customer focused, and collaborative in nature. As we have reported, the benefit of collecting performance information is only fully realized when this information is actually used by managers to make decisions oriented toward improving results. Performance information can be used to identify problems and take corrective action; develop strategy and allocate resources; recognize and reward performance; and identify and share effective approaches. Practices that can contribute to greater use of performance information include demonstrating management commitment; aligning agencywide goals, objectives, and measures; improving the usefulness of performance information; developing capacity to use performance information; and communicating performance information clearly and effectively.

Some USPS Delivery Standards Are Not Useful and Transparent and Do Not Reflect Current Mail Operations

Some USPS standards for timely mail delivery are inadequate because of limited usefulness and transparency. In general, these standards have not kept up with changes in the way that USPS and mailers prepare and process mail for delivery. Outdated standards are unsuitable as benchmarks for setting realistic expectations for timely mail delivery, measuring delivery performance, or improving service, oversight, and accountability.

According to USPS, service standards represent the level of service that USPS strives to provide to customers. These standards are considered to be one of the primary operational goals, or benchmarks against which service performance is to be compared in measurement systems. USPS has established standards for the timely delivery of each type of mail; these specify the maximum number of days for “on-time” delivery based on the time of day, the location at which USPS receives the mail, and the mail’s final destination. For example, USPS standards for 1-day delivery require the mail to be received by a specified cutoff time on the day that the mail is accepted, which varies depending on geographic location and where the mail is deposited (e.g., in a collection box, at a post office, or at a mail processing facility). In most cases, 1-day mail deposited before the cutoff time is considered to be delivered on time if it is delivered on the next delivery day, which generally excludes Sundays and holidays. USPS delivery standards vary according to the priority of delivery. Express Mail has the highest priority, followed by Priority Mail, other First-Class Mail, Periodicals, Package Services (e.g., packages sent via Parcel Post), and Standard Mail.

Postal officials, including the Postmaster General, told us that differences in postage rates for different types of mail reflect differences in delivery standards and priority. The Postmaster General noted that variability in the delivery standards and timing of delivery is built into USPS’s pricing structure. He noted that lower-priced mail with lower delivery priority receives more variable delivery; this includes mail such as Standard Mail which receives discounts for presorting by ZIP Code and destination entry that is generally closer to where the mail is delivered. For example, USPS can defer the handling of Standard Mail as it moves through its mail processing, transportation, and delivery networks. Thus, some pieces of a large mailing of Standard Mail may be delivered faster than others. The Postmaster General explained that this variability of delivery is consistent with the relatively low rates afforded to mailers of Standard Mail, who pay lower rates than mailers of First-Class Mail.

In addition, standards for types of mail within each class can vary. For example, Parcel Select, a type of Package Service, has a faster delivery standard than other Package Services because it is made up of bulk shipments of packages entered into USPS’s system close to the final destination. Delivery standards for each class and type of mail are summarized in table 1 and described in greater detail in appendix II.

Some USPS Delivery Standards Have Limited Usefulness

Some USPS delivery standards lack usefulness—notably, the delivery standards for Standard Mail, Periodicals, and most Package Services mail—because they have not been systematically updated in many years and do not reflect USPS’s operations or intended service. These standards are loosely based on distance and have tended to remain static despite changes in USPS networks, operations, and operational priorities.

Delivery Standards for Standard Mail

The delivery standards for Standard Mail are outdated. Although delivery standards are supposed to represent the level of delivery service USPS strives to provide to customers, differences between delivery standards and operational policies and practices for delivery service are evident for Standard Mail. For example, USPS operational policies state that Standard Mail entered at the delivery unit, where carriers pick up mail for final delivery, should be delivered in 2 days, whereas the standards call for such delivery in 3 days. Also, depending on mail preparation, such as presorting and destination entry, mail can be delivered faster than the standard. These differences can impede clear communication to mailers concerned with setting realistic expectations for when Standard Mail will be delivered and determining how to maximize the value of their mail. Correctly anticipating when advertising mail will be delivered is important to business planning and profitability. For example: Local retailers, ranging from department stores to restaurants, need realistic expectations as to when advertising mail will be delivered in order to effectively promote sales and plan for the appropriate level of staffing and inventory. To maximize customer response, retailers send advertising mail so that it will be received shortly before a sale—soon enough for potential customers to plan to shop during the sale, but not so early that they will forget about the sale. Also, if the advertising is delivered far in advance of a weekly sale, it can generate demand that is difficult to meet with available resources.

Catalog companies also need realistic expectations about when catalogs will be delivered in order to plan for call center staffing and inventory.

Thus, reliable and predictable delivery of advertising mail helps businesses efficiently schedule staff and inventory to respond to fluctuations in demand. Anticipating the level of inventory has become more important over time with the trend toward just-in-time inventory that helps minimize storage and financing costs. However, the delivery standards for Standard Mail are not adequate for advertisers to set realistic expectations for mail delivery, in part because these standards do not reflect some operational policies and practices that can lead to mail being delivered faster or slower than the standards call for.

Substantial changes have occurred in how mailers prepare Standard Mail and how USPS processes it, but these changes are not reflected in the standards. Today, most Standard Mail is presorted and entered into the postal system close to its destination. The degree of presorting and destination entry alters the amount of handling it receives by USPS and potentially speeds or slows delivery. For example: Presorting: Beginning in 1979, USPS provided discounts to mailers who reduce USPS’s processing costs by presorting their Standard Mail to the level of carrier delivery routes—discounts extended in 1981 to Standard Mail presorted to the level of individual ZIP Codes. In fiscal year 2005, most Standard Mail was presorted by carrier routes (35 percent) or by individual ZIP Codes or ZIP Codes starting with the first three digits (57 percent). Mail that is presorted by carrier route can move through USPS’s system faster than mail that is presorted by groups of ZIP Codes because it does not need as much handling by USPS. However, the delivery standards for Standard Mail do not take presorting into account.

Destination entry: Starting in 1991, USPS gave destination entry discounts for mailers that deliver their Standard Mail to a postal facility that generally is closer to the mail’s destination, such as the delivery unit facility where carriers pick up their mail or the local mail processing center that forwards mail to these facilities. Mail that is entered at a destination facility is delivered faster than other Standard Mail because it avoids some USPS handling and USPS assigns a low priority to handling Standard Mail. However, the impact of destination entry is not reflected in the delivery standards. For example, the delivery standards continue to call for delivering all Standard Mail in 3 days or more, whereas the Postal Operations Manual states that Standard Mail that mailers enter at delivery units should be delivered in 2 days.

USPS also works with mailers to deliver their Standard Mail within a range of dates that they request. Advertising mailers can request that their advertising be delivered within this range—known as the “in home” dates. As mentioned earlier, predictable delivery helps advertisers to plan their resources and inventory. Requesting “in home” dates may result in delivery that is faster or slower than the standard. The Postal Operations Manual states that in such cases, delivery units should attempt to meet the “in home” dates rather than the delivery standards. According to USPS, its delivery standards are supposed to be the benchmark against which delivery performance is compared and reflects the level of service that USPS strives to provide. In this case, however, the delivery standards for Standard Mail would not be a suitable benchmark for measuring delivery performance, because they do not reflect USPS operations.

USPS provided mailers with guidelines in 2000 that recognized that Standard Mail can be delivered faster than the standard, depending on its level of presorting, and on whether the mailers deliver it closer to its destination. The guidelines presented a table for the speed of Standard Mail delivery depending on how the mail was presorted and where it entered the mail processing network. However, USPS did not consider these guidelines to be part of its delivery standards for Standard Mail, and according to USPS, these guidelines are now obsolete. Nevertheless, USPS officials told us that USPS continues to maintain internal guidelines for the desired delivery speed for Standard Mail, depending on its level of presorting and where it enters the postal network.

In 1992, 1997, and 1999, various committees composed of USPS officials and mailers recommended that delivery standards be improved for Standard Mail and other types of mail. In 1999, a working group of USPS officials and mailers recommended that the delivery standards for Standard Mail be updated to reflect how it is presorted and where the mail enters the postal system. USPS did not implement these 1999 recommendations and offered no explanation on why it did not. Then, when we met with Postmaster General in June 2006, he told us that it would be difficult for USPS to update its standards to reflect the wide variety of differences in mail preparation and processing, and that it might have an impact on the rates for some types of mail, to which he believes the mailers would object. In contrast, the Association for Postal Commerce (PostCom), a major mailer group, wrote the following to us in March 2006: “It is PostCom’s belief that the development and publication of service standards based on existing USPS operations and networks is a critical first step toward the development of any service performance measurement system. There is no barrier to moving forward with defining service standards for all classes of mail.” PostCom noted it actively supported the efforts of the 1999 working group, and said its recommendations—which included calling for standards based on existing mail processing and transportation environments, which for bulk mail would also reflect mail preparation and entry point—“largely still apply.”

Because outdated delivery standards are an impediment to measuring and improving delivery performance, updating these standards could help increase the value of Standard Mail to businesses that mail advertising. As previously noted, understanding when Standard Mail will be delivered helps mailers send this mail so it will be delivered at what they consider to be the optimum time and helps them to plan for staff and inventory. In addition, updating the delivery standards for Standard Mail would provide an appropriate benchmark for measuring Standard Mail delivery performance.

Delivery Standards for Package Services

For some of the same reasons as Standard Mail, delivery standards are likewise outdated for most Package Services mail. Delivery standards for most Package Services also date to the 1970s and are generally distance- based. These standards are predicated on USPS’s national network of Bulk Mail Centers (BMCs) that accept and handle packages. USPS told us that the delivery standards for Package Services “are changed infrequently since the BMC network has not been appreciably altered since its inception in the 1970s.” Since the 1970s, USPS has implemented many changes regarding the handling of packages, including discounts for presorting Package Services items to the carrier route or ZIP Code, as well as discounts for destination entry. However, these changes have not been reflected in changes to the Package Services standards.

A noteworthy exception involves useful delivery standards that USPS created for a specific type of Package Services mail called Parcel Select, when it was introduced in 1999. These standards were updated in 2002. USPS’s standards for Parcel Select differentiate speed of delivery by point of entry, e.g., 1 day for entry at the destination delivery facility or 2 days for entry at the mail processing center that forwards the parcels to the delivery facility. These standards were intended to provide an appropriate benchmark for delivery performance measurement in order to facilitate efforts to improve the delivery performance for this mail. USPS subsequently collaborated with officials of the Parcel Shippers Association (PSA) to implement delivery performance measurement for Parcel Select against these standards, and the results are factored into individual pay- for-performance incentives for many USPS managers.

Both USPS and PSA officials told us that incorporating delivery performance results into these incentives—which was possible due to useful performance standards and measures—was a primary reason why on-time delivery performance has improved for Parcel Select. They said that as a result of improved delivery performance, Parcel Select has been able to maintain its viability as a low-cost alternative for lightweight packages within the competitive packages market. In this regard, we have also reported that both establishing and maintaining consistently high levels of delivery service are critical to USPS’s success in an increasingly competitive marketplace. Further, we have noted that USPS had lost Parcel Post business to private carriers, who had come to dominate the profitable business-to-business segment of the market because they offered cheaper and faster service.

Parcel Select provides destination entry discounts for bulk mailings of Parcel Post. Most of Parcel Select’s volume is tendered to USPS by a handful of third-party consolidators who receive packages from multiple companies and consolidate their volume to enable cost-effective destination entry. By entering parcels closer to their destination, the consolidators speed delivery and narrow the delivery window. However, prior to measuring and improving the delivery performance of Parcel Select, mailers considered Parcel Select to be a low-cost service with a reputation for low quality delivery. The delivery performance data has been used to identify delivery problems in a timely manner, such as problems in timely delivery of Parcel Select in specific geographic areas, so that corrective action could be taken to maintain and improve delivery performance. USPS actions to improve the performance of Parcel Select are consistent with practices we have reported are used by high- performing organizations: using performance information and performance management systems to become more results oriented, customer focused, and collaborative in nature; identify problems and take corrective action; and improve effectiveness and achieve desired results.

Delivery Standards for Periodicals

As with Standard Mail and most Package Services, delivery standards are outdated for Periodicals that are delivered outside the local area from which they are mailed. The distance-based concept for Periodicals standards has remained the same since the 1980s and does not reflect mailers presorting mail by carrier route or ZIP Code or destination entry of mail at destination facilities. Like Standard Mail, USPS told us that the Periodicals delivery standards are meant to represent the maximum service standard targets for mail that is not presorted. However, the impact of presorting has not been incorporated into the Periodicals delivery standards.

In contrast, to USPS’s credit, it has updated its 1-day delivery standards for Periodicals delivered within the local area where they are mailed. Further, it generally updates the standards at the same time for Periodicals and First-Class Mail that originate and destinate in the same local area so that the scope of 1-day delivery remains the same for both types of mail.

Looking forward, USPS plans to change the way its mail processing and transportation networks handle Periodicals mail this summer, which USPS officials said will lead to changes in some Periodicals delivery standards so that they reflect current operations. They said that Periodicals that are moved via ground transportation, which make up a majority of all Periodicals volume, will be combined with First-Class Mail. As a result, these Periodicals should receive comparable handling and faster delivery times than is currently the case. According to Periodicals mailers, inconsistent delivery performance that does not meet customer expectations causes renewal rates to decline and leads to customer service calls that are costly to handle. According to USPS officials, implementation of these planned changes to postal operations and standards can be expected to result in updating many of the specific standards for Periodicals mailed between specific pairs of ZIP Codes.

Delivery Standards for Priority Mail

Some of the specific delivery standards for Priority Mail may also need to be updated because they do not reflect USPS’s operations. According to the Deputy Postmaster General, some Priority Mail delivery standards call for on-time delivery of Priority Mail in 2 days, but it is often physically impossible for USPS to meet these standards when that requires moving the mail across the country. As we reported in 1993, officials of the Postal Inspection Service questioned whether Priority Mail could be delivered everywhere within the continental United States within 2 days, which was then the delivery standard. USPS has since established 3-day delivery standards for some Priority Mail, but these standards cover less than 5 percent of Priority Mail volume. USPS officials told us that USPS may make changes to some of the specific Priority Mail standards for mail sent between specific pairs of ZIP Codes so that the standards reflect USPS operations.

Delivery Standards for First- Class Mail

USPS has updated its standards for First-Class Mail over the years with the intent of reflecting its operations. However, questions have been raised in PRC proceedings and advisory opinions about some of the changes. By way of background, when USPS decides on a change in the nature of postal services that will generally affect service on a nationwide or substantially nationwide basis, USPS is required by law to submit a proposal, within a reasonable time frame prior to its effective date, to PRC requesting an advisory opinion on the change. In 1989, USPS submitted a proposal to PRC for an advisory opinion that involved a national realignment of the delivery standards for First-Class Mail. This realignment involved downgrading the delivery standards for an estimated 10 to 25 percent of First-Class Mail volume, so that these standards would reflect actual operations or planned changes to operations. In general, these delivery standards were proposed to be downgraded by reducing the size of 1-day delivery areas, thereby downgrading some mail to 2-day service, and likewise reducing the scope of 2-day delivery, thereby downgrading some mail to 3-day service. USPS also stated that it would make changes to its operations, including moving some First-Class Mail by truck instead of by air, and that it expected to provide more reliable service as a result.

PRC advised against adoption of USPS’s proposed national realignment, explaining that its review suggested the realignment may be an excessive reaction to what may be localized problems on a limited scale. PRC questioned if the proposed realignment could bring about significant improvement in delivery service commensurate with its effect on mail users. However, PRC agreed that existing delivery standards could not be met in certain areas, such as the New York City metropolitan area, and on that basis, said that some specific localized changes to the service standards to correct anomalies and major problem areas would be a sensible path for USPS to pursue. USPS proceeded to implement a national realignment to its First-Class Mail standards from 1990 to 1992.

In 2000 and 2001, USPS again changed many of its First-Class Mail standards in a manner that USPS said would have a nationwide impact on service, including downgrading some standards from 2 days to 3 days in the western United States and upgrading other standards. USPS reported that these changes were intended to provide consistent and timely delivery service for 2-day and 3-day mail. USPS also reported that the changes reflected a general trend toward making 2-day zones more contiguous, more consistent with the “reasonable reach” of surface transportation from each originating mail processing facility, and potentially less dependent on air transportation—which had lacked reliability. USPS did not seek a PRC opinion on these changes in the year before implementation.

After a lengthy proceeding regarding the 2000 and 2001 changes, PRC issued an advisory report earlier this year that suggested that USPS reconsider its First-Class Mail standards, stating that the service resulting from the realignment cannot be said to be sufficient to meet the needs of postal patrons in all areas as required by law and that USPS did not consistently adhere to the statutory requirement to give highest consideration to expeditious transportation of important letter mail. PRC urged USPS to give more effective public notice about First-Class Mail delivery standards, such as through Web-site postings and collection box labels. More generally, PRC also urged USPS to actively engage the public in major policy decisions and fully inform the public about matters of direct interest that affect USPS operations. PRC said that USPS, as a government monopoly, has a positive obligation to learn the needs and desires of its customers and to structure its products to meet them where doing so is not inconsistent with reasonably feasible and efficient operations.

In February 2006, USPS sought a PRC advisory opinion, which is pending, in connection with USPS’s realignment of its mail processing and transportation networks. USPS is currently planning and implementing a nationwide realignment of its mail processing and transportation networks. According to USPS, its long-term operational needs will be met best if its mail processing network evolves into one in which excess capacity is reduced and redundant operations and transportation are eliminated. USPS stated that it is not proposing to change the long- standing delivery standard ranges for any particular mail class; however, any changes to delivery standards that affect the expected delivery times from origin to destination between particular 3-digit ZIP Code pairs will be made incrementally as USPS implements changes to its networks. USPS also stated that the overall magnitude and scope of potential service standard upgrades and downgrades for any particular mail class cannot be known until numerous feasibility reviews have been conducted and operational changes implemented over the next several years. However, USPS stated that it expected that changes to its delivery standards are likely to be most pronounced for First-Class Mail and Priority Mail.

Delivery Standards for Express Mail

USPS has also made changes to its delivery standards for Express Mail to reflect changes in operations. Similar to the delivery standards for First- Class Mail, those for Express Mail were discussed in a PRC proceeding after USPS implemented changes to them. In April 2001, USPS reduced the scope of the overnight delivery network for Express Mail sent on Saturdays and the eve of holidays. According to USPS, it had contracted with FedEx to provide more reliable air transportation for Express Mail; but, because FedEx provided no service on Saturday or Sunday nights and some federal holidays, USPS changed its delivery plans for mail pieces accepted on Saturdays and the eve of holidays. Earlier this year, PRC issued an advisory report that found the changes to the Express Mail network had affected service on a substantially nationwide basis in 2001. PRC criticized the lack of public notice before the changes were made, but unlike its advisory opinions on changes to First-Class Mail standards, did not criticize the changes that USPS made to its Express Mail standards.

Proposed Postal Reform Legislation and Delivery Standards

Over the past year, the House and Senate have passed postal reform legislation that would clarify USPS’s delivery standards. The House-passed legislation would require USPS to annually report its delivery standards for most types of mail and the level of delivery service provided in terms of speed and reliability. The Senate-passed legislation included more detailed requirements regarding delivery service standards. This bill would require USPS to establish “modern service standards” within 1 year after the bill is enacted. These standards would have four statutory objectives: (1) to enhance the value of postal services to both senders and recipients; (2) to preserve regular and effective access to postal services in all communities, including those in rural areas or where post offices are not self-sustaining; (3) to reasonably assure USPS customers of the reliability, speed, and frequency of mail delivery that is consistent with reasonable rates and best business practices; and (4) to provide a system of objective external performance measurements for each market-dominant product (e.g., mail covered by the postal monopoly) as a basis for measuring USPS’s performance. In addition, USPS would be required to take into account eight statutory factors in establishing or revising its standards: (1) the actual level of service that USPS customers receive under any service guidelines previously established by USPS or service standards established under the new statutory system; (2) the degree of customer satisfaction with USPS’s performance in the acceptance, processing, and delivery of mail; (3) the needs of USPS customers, including those with physical impairments; (4) mail volume and revenues projected for future years; (5) the projected growth in the number of addresses USPS will be required to serve in future years; (6) the current and projected future costs of serving USPS customers; (7) the effect of changes in technology, demographics, and population distribution on the efficient and reliable operation of the postal delivery system; and (8) the policies of Title 39 (i.e., the postal laws) and such other factors as USPS determines appropriate. Like the House-passed bill, the Senate-passed bill would require USPS to annually report on the speed and reliability of delivery of most types of mail.

In explaining the rationale for these requirements regarding delivery standards and service, sponsors of the Senate bill stated that the new standards would improve service, be used by USPS to establish performance goals, and continue to ensure daily delivery to every address, thereby preserving universal service. A Senate committee report on an earlier version of these requirements stated that they were intended to ensure that the service USPS provides is consistent with the statutory definition of universal service, as well as preserving and enhancing the value of postal products. In this regard, the report expressed concern that USPS may be tempted to erode service quality in an effort to cut costs, and stated that the reporting requirements would provide information to enable the postal regulator and all interested parties to evaluate the provision of service, with the service standards serving as a benchmark for measuring USPS’s performance.

USPS Delivery Standards Lack Adequate Transparency

Although USPS has recently provided information related to its delivery standards in ongoing PRC proceedings, USPS has not made all of this information easily accessible to all business mailers and the public. As a result, some customers are hindered from making informed decisions about different mailing options with varying rates and service, as well as from assessing USPS’s delivery performance. Although USPS does have a CD-ROM with information about its delivery standards that is freely available to those who are aware of its existence, information about how to order the CD-ROM is not easily accessible on its Web site. The CD-ROM contains delivery standards for some types of mail, such as Standard Mail and Periodicals, which are not available on its Web site. Looking forward, USPS has the opportunity to further expand the accessibility of information on its delivery standards, much as USPS has done to improve the transparency of its financial information in recent years. For example, in an ongoing PRC proceeding, USPS provided new narrative summaries that explain its detailed standards; these summaries are posted on the PRC Web site, but not on the USPS Web site.

USPS Measurement and Reporting Of Delivery Performance Information Is Inadequate

USPS’s delivery performance measurement and reporting is inadequate— in part because its delivery performance information is incomplete, since representative measures of delivery performance do not cover most mail, and in part because its reporting of this delivery performance information is deficient (see table 2). USPS tracks some mail pieces for diagnostic purposes, and plans to have more data available as it deploys automated equipment to sort flat-sized mail into the order it is delivered. However, a number of impediments have limited USPS’s ability to track mail. The diagnostic data is not representative and does not amount to delivery performance measurement. Although USPS recently added a section on domestic delivery performance to its Web site, it does not provide complete performance information for some types of mail. Without complete information, USPS and mailers are unable to diagnose delivery problems so that corrective action can be implemented. In addition, stakeholders cannot understand how well USPS is fulfilling its basic mission, nor can they understand delivery performance results and trends. Deficiencies in measurement and reporting also impair oversight and accountability by PRC and Congress.

USPS Delivery Performance Measurement Is Not Complete

USPS has not established a complete set of quantitative measures for delivery performance, largely because its delivery performance measurement covers less than one-fifth of its total mail volume—that is, only Express Mail and parts of First-Class Mail, Priority Mail, Package Services, and International Mail. USPS does not measure delivery performance for the remaining volume, which includes Standard Mail, bulk First-Class Mail, Periodicals, and most Package Services. In addition, the External First-Class Measurement System (EXFC) is limited to single- piece First-Class Mail deposited in collection boxes in selected areas of the country (see fig. 1). Thus, as USPS has reported, EXFC is not a systemwide measurement of all First-Class Mail performance. USPS has stated that it has strong business and operational reasons for using this EXFC methodology and that the areas selected for testing ensure coverage of its highest-volume areas. These reasons include EXFC covering areas from which most First-Class Mail originates and destinates, the ability of EXFC to provide results for specific geographic areas, and practical advantages for collecting data from fewer areas of the nation.

Similarly, delivery performance data for Priority Mail are limited because they only cover Priority Mail volume entered at post offices and other retail facilities, and for which mailers purchase Delivery Confirmation Service. Such mail constitutes only 4 percent of all Priority Mail volume. According to USPS officials, USPS expects the volume of this Priority Mail to increase, which would increase the scope of delivery performance measurement. They said that this measure, which replaced the former Priority End-to-End (PETE) measurement system at the beginning of fiscal year 2006, covers all types of Priority Mail, including letters, flat-sized mail, and parcels. However, USPS officials also told us that USPS cannot currently measure the delivery performance for bulk quantities of Priority Mail with Delivery Confirmation, such as business mailings of merchandise, because USPS does not have accurate data on when the mail entered into its system.

On the positive side, USPS has implemented delivery performance measurement for Parcel Select and some types of International Mail, both of which operate in a highly competitive marketplace. It has used this measurement to establish targets and identify opportunities to improve service. Although these products are a small fraction of mail volume, USPS has developed delivery performance measures to address customer needs for timely delivery. Highlights for measurement of major types of mail are listed in table 3.

As a result of the measurement gaps listed above, measurement is not sufficiently complete to understand how well USPS is achieving the following: performing its statutory mission of providing prompt and reliable service to patrons in all areas, including prompt delivery of all mail; delivering mail with different delivery standards, which helps fulfill the requirement that USPS provide mail service to meet the needs of different categories of mail and mail users; providing expeditious handling of important letter mail, such as bills and statements sent via First-Class Mail; fulfilling its statutory requirement to provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining; and identifying delivery problems, understanding the causes, and improving performance.

The lack of any representative delivery performance data for most mail volume increases the financial risk to USPS, which faces increasing competition. If mailers are not satisfied with USPS’s delivery service, they could take their business elsewhere. For example, Standard Mail and bulk First-Class Mail are the largest segments not measured, collectively accounting for close to three-quarters of mail volume and half of mail revenues. Standard Mail is USPS’s key growth product, but it must compete against multiple advertising media in a dynamic and highly competitive marketplace. Bulk First-Class Mail covers a significant share of USPS’s overhead costs—including maintaining the retail and delivery networks—but is vulnerable to electronic communications and payment alternatives. In addition, USPS does not have representative delivery performance measures for Periodicals, which help USPS fulfill its statutory mandate to provide postal services to “bind the nation together” through business, educational, and literary correspondence; and for Package Services, such as Parcel Post, which provides the public with a low-cost option for sending packages.

Incomplete information also impedes USPS’s potential for holding its managers accountable for delivery performance of all types of mail and for balancing increasing financial pressures with the need to maintain quality delivery service. Because delivery performance is measured for only some types of mail, and individual performance incentives are linked to the results, some mailers are concerned that in practice, this may skew delivery priorities and performance so that timely delivery is more important for the mail whose performance is measured than mail whose performance is not measured. For example, as we have reported, soon after USPS implemented its EXFC measurement system for First-Class Mail deposited into collection boxes, USPS increased its emphasis on timely First-Class Mail service. USPS managers at the local post office level were instructed to concentrate on particular activities that could improve EXFC scores, and more emphasis was placed on picking up mail from collection boxes on schedule.

Conversely, measurement gaps may impede effective collaborative efforts with mailers to quickly identify and resolve delivery problems, because both USPS officials and mailers have limited information for diagnostic purposes. In addition, measurement gaps impede the ability of external stakeholders, including Congress and PRC, to monitor accountability and exercise oversight. Measurement gaps cause PRC to consider proposed postal rates without adequate information on the actual value of the service provided for each class of mail, which PRC by law must consider when recommending postal rates. In addition, PRC is hindered in considering USPS’s proposals for changes in the nature of postal services that are nationwide or substantially nationwide in scope, including the ongoing proceeding related to USPS’s network realignment.

USPS Reporting of Delivery Performance Lacks Adequate Transparency

USPS’s limited performance measurement also affects USPS’s reporting of its delivery performance and does not provide adequate transparency so that customers can understand performance results and trends. Although USPS recently made additional delivery performance information available on its Web site, it still does not communicate its delivery performance for all of its major types of mail, particularly those covered by its statutory monopoly to deliver letter mail.

The main gap in USPS’s reporting of delivery performance results, as shown in table 4, continues to be for mail entered in bulk quantities, including Standard Mail and bulk First-Class Mail, which collectively constitute most of USPS’s mail volume and revenues. USPS also does not report delivery performance results for Periodicals and most Package Services. As previously discussed, USPS generally does not collect information on delivery performance results for these types of mail.

USPS’s reporting of delivery performance information has not adequately met information needs for congressional oversight purposes. Notably, USPS’s practices for reporting delivery performance information in its annual Comprehensive Statement on Postal Operations fall short of the longstanding statutory requirement for “data on the speed and reliability of service provided for the various classes of mail and types of mail service.” This requirement was enacted due to “the need for effective oversight of postal operations to ensure that the postal services provided the public shall continue at an effective level and at reasonable rates.” Specifically, USPS has not included data on the speed and reliability of any entire class of mail in its annual Comprehensive Statement on Postal Operations. Instead, USPS has presented only national EXFC data, even though it collected data on timely delivery performance for all Express Mail, as well as some Priority Mail. The 2005 Comprehensive Statement on Postal Operations stated “while Express Mail and Priority Mail performance is tracked and has improved during the past 5 years, because these products are competitive, the data was considered proprietary and not published.” However, USPS reached an agreement with the PRC’s Office of Consumer Advocate last year to end this restriction and recently began reporting some delivery performance data on a newly created page on its Web site for some Express Mail, Priority Mail, First-Class Mail, and Package Services.

Moreover, USPS’s reporting practices under the Government Performance and Results Act (GPRA) of 1993 have provided less and less performance information for oversight purposes. USPS’s latest GPRA report, which was included in its 2005 Comprehensive Statement on Postal Operations, provided delivery performance targets (also referred to as performance goals) and results only for First-Class Mail measured by EXFC at the national level, with little accompanying explanation. For example, USPS reported that 87 percent of 3-day EXFC mail was delivered on time in fiscal year 2005, which did not meet its GPRA target of 90 percent, but USPS did not explain, as required by GPRA, why this specific target was not met. USPS also did not explain whether it considers the 90-percent goal—which remains unchanged for fiscal year 2006—impractical or unfeasible, or, alternatively, what plans USPS has for achieving this goal.

Delivery Performance Information Has Recently Improved but Remains Incomplete

USPS’s reporting of delivery performance information on its Web site has recently improved but is still incomplete because it does not include performance results for all major types of mail. In April 2006, USPS posted delivery performance information on a newly created page of its Web site, including selected results for the timely delivery of some Express Mail, Priority Mail, First-Class Mail, and Package Services. This information is oriented to members of the general public who make decisions on how to mail parcels and other items that can be sent using different types of mail. To facilitate such use, the information is linked to USPS’s Postage Rate Calculator and is accompanied by brief summaries of the applicable delivery standards for each type of mail. The new information addresses USPS’s written agreement with PRC’s Office of the Consumer Advocate in the 2005 rate case, which was implemented after further discussions between the two parties. USPS’s recent disclosures are a good step toward providing easily accessible information on delivery performance results on its Web site for key types of mail used by the public.

The information on delivery performance results, however, did not cover major types of mail that are not measured—Standard Mail, bulk First-Class Mail, Periodicals, and most Package Services. Further, the information provided to the public was limited. First, performance results covered only the most recent quarter, although results for some types of mail have varied by 7 percentage points or more from one quarter to another within the same fiscal year. Second, only partial information was provided for Priority Mail and Package Services. For example, the results for Priority Mail covered only 4 percent of total Priority Mail volume. This limited scope of measurement was not disclosed on USPS’s Web site. Without more complete reporting of delivery performance information, Congress and the American public do not have adequate information to determine how well USPS is accomplishing its mission of providing prompt and reliable delivery services.

For the future, a possible model to enhance the completeness and usefulness of USPS’s reporting of delivery performance information would be to provide some information similar to the financial information that USPS already provides on its Web site. In the financial area, USPS has instituted a dedicated USPS Web page that has links to its financial reports, related reports and data, and timely disclosure of important developments. USPS also improved the quarterly financial reports that provide explanations for results and trends, as well as its financial outlook.

Progress In Developing Complete Delivery Performance Measurement Is Unsatisfactory Due To Lack of Management Commitment and Effective Collaboration

USPS has made slow and inadequate progress in modernizing its delivery standards and in implementing delivery performance measurement for all major types of mail. USPS’s limited progress has left major gaps in each of these areas, despite numerous recommendations for improvements that have been made in these areas over the years, including those by USPS- mailer task forces and working groups, as well as some USPS initiatives to develop delivery performance measurement. Without management commitment and effective collaboration with mailers, it will be difficult for USPS to overcome technical challenges and achieve progress and results that are in the interest of both USPS and its customers in today’s competitive marketplace.

Key Recommendations from Collaboration Efforts Involving USPS and Mailers Have Not Been Implemented

Some of USPS’s and the mailers’ collaboration efforts over the years have resulted in successes; but key recommendations from these efforts have yet to be realized. A broad cross section of mailer groups and mailers who met with us shared their concerns about delivery standards and related information; delivery performance measurement and reporting; and implications of delivery performance information and gaps in this area. They expressed frustration with the slow pace of USPS’s progress in improving delivery performance information. As one mailers’ association recently wrote, “We do not expect the USPS to move tomorrow to the ultimate service performance measurement system, but the total lethargy to take any step forward is unacceptable.” Also, “the Postal Service’s lack of clockwork-like predictability is the number one reason for repeated industry calls for standards and measurements.”

Many recommendations for improving performance information were made by committees that comprised USPS and mailers, as noted in table 5 below. Some notable examples include the 1992 Competitive Services Task Force, the 1997 Blue Ribbon Committee, and the 1999 follow-up effort by a USPS-mailer working group. We asked USPS what actions, if any, it had taken on the 1999 recommendations, but we did not receive a response.

Impediments Remain to Implementing Performance Measurement for all Major Types of Mail

Multiple impediments have contributed to USPS’s slow progress toward implementing delivery performance measurement for all major types of mail. The most important impediment is the lack of management commitment and effective collaboration with the mailing industry to follow up on recommendations for improvements and to resolve issues between USPS and mailers. Additional impediments include technological limitations, limited mailer participation in providing information needed to facilitate performance measurement, data quality deficiencies, and costs.

Lack of Management Commitment and Effective Collaboration

USPS has not provided management commitment and effectively collaborated with mailers to develop delivery performance measures for all major types of mail. To achieve effective collaboration, it is necessary to build consensus among diverse mailers with different information needs, as well as between mailers and USPS. Such a challenge requires leadership and an effective process for follow up, particularly given the complexity of measurement issues and the time frame that likely will be required to overcome longstanding issues. Based on our discussions with mailers and postal officials, some of the commitment and collaboration challenges have included: USPS has lacked commitment to implementing delivery performance measurement and reporting for all major types of mail; particularly, as some mailers told us, USPS has tended to resist greater transparency, oversight, and accountability. A USPS senior vice president told us that USPS had no plans for implementing additional measures of delivery performance. A second USPS senior vice president explained that although some pieces of mail may be tracked as automated equipment reads barcodes on the mail, enabling more information for management and diagnostic purposes, these pieces are unrepresentative, and USPS has no plans for using mail tracking data to develop representative measures of delivery performance. As for major types of mail that are not measured, USPS has publicly reported that it has no system in place for measuring service performance for Standard Mail on a systemwide basis and currently has no plans for the development of such a system. Similarly, USPS officials told us that it has no plans to develop representative measures of delivery performance for bulk First-Class Mail, which, after Standard Mail, is the second-largest volume of mail that is not measured.

Further, USPS stated in its Strategic Transformation Plan that it would be prepared to extend performance measurement and reporting to additional mail classes as it achieves high levels of delivery service performance. A USPS vice president told us that USPS agreed in 2005 to begin reporting delivery performance results on its Web site for Express Mail and Priority Mail because USPS had already improved delivery performance for these types of mail to high levels, and therefore the results could help USPS promote these types of mail. This statement contrasts with a general performance principle that a major use, if not the major use, of regularly collected outcome information should be by program managers themselves to improve the effectiveness of their programs. As we have reported, the benefit of collecting performance information is only fully realized when this information is actually used by managers to make decisions oriented toward improving results.

Although many groups have issued recommendations to USPS, follow- through on key recommendations did not occur. USPS often did not officially respond to the recommendations at the time they were made and did not implement the recommendations, so it was not clear whether USPS agreed or intended to implement the recommendations. Moreover, once a group completed its report with recommendations to USPS, it disbanded, which limited the continuity that otherwise could have been helpful for follow-up.

Effective collaboration has been impeded by USPS’s resistance to sharing some diagnostic data it collected with mailers. In general, USPS has maintained that delivery performance data below the national level are proprietary, such as data on performance related to any particular mail processing facility or transportation segment. Therefore, according to USPS, it should not be required to publicly disclose these data in PRC proceedings in response to requests by any interested party. However, voluntarily sharing diagnostic delivery performance information with mailers experiencing delivery problems could be useful for both USPS and mailers to collaboratively develop an understanding of whether the problems are limited to particular mailings or are systemic—resulting from specific USPS operational problems. Such an understanding can help in identifying the cause of delivery problems and in implementing corrective action. Although USPS representatives may communicate with mailers about these problems, the mailers told us they often lack sufficient timely and actionable data on delivery problems. They have called for USPS to share more aggregate delivery performance information.

The absence of management commitment and effective collaboration matters for the future because give-and-take by both USPS and mailers will be required to achieve consensus on designing measurement systems that meet different information needs, finding ways to cover the associated USPS costs, increasing mailer participation in providing information needed to facilitate performance measurement, and overcoming remaining impediments to implementing valid measurement systems. In this regard, we are encouraged that USPS has engaged in collaborative efforts to improve performance measurement for Parcel Select, starting with the Deputy Postmaster General reaching out to the Parcel Shippers Association (PSA), which represents major Parcel Select mailers, and offering to engage in collaborative efforts. The Deputy Postmaster General assigned responsibility to a single manager for follow- up. USPS followed through by reaching consensus on standards, performance measurement, and the sharing of aggregate data, which required actions by both USPS and mailers to successfully implement. According to PSA officials, the standards, measures, and performance incentives have led to a marked improvement in delivery performance for Parcel Select; and, as a result, USPS has been able to maintain its viability within the competitive package services market. The USPS official with responsibility in this area made similar comments. In addition, USPS recently proposed requiring mailers to barcode some Parcel Select items; if this increases barcoding, it will facilitate delivery performance measurement. USPS’s Parcel Select provides a successful model for updating the delivery standards for other types of mail, implementing delivery performance measurement, and holding USPS accountable for results.

Similarly, USPS worked with other stakeholders to implement delivery performance measurement for Global Express Mail, which is managed by an international organization called the Express Mail Service (EMS) Cooperative. Timely delivery of EMS items, including Global Express Mail, has reportedly improved since delivery standards and measurement were implemented.

Other Impediments for Measuring Delivery Performance

Several other impediments have limited the development of delivery performance measures for all major types of mail. Two key impediments involve limitations in technology, which limited USPS’s ability to track mail from entry to delivery; and limited mailer participation in providing information needed to facilitate performance measurements, which limited the representativeness of the performance data collected. In addition, data quality deficiencies and cost concerns have impeded progress.

Technological limitations. USPS has not fully implemented technology that will enable it to track barcoded mail through its mail processing and transportation networks that could play a part in measuring performance when completed. Although some implementation, such as upgrading barcodes for individual mail pieces and mail containers, is under way, full implementation will take years. According to the Deputy Postmaster General, USPS expects to make substantial progress in resolving these technological limitations over the next 5 years. For example, near the end of this decade, USPS is planning to install new automated equipment to sort flat-sized mail, such as large envelopes and catalogs, into the order it is delivered, which promises to greatly expand the automatic scanning of barcodes on mail pieces. More generally, USPS officials said that USPS is working toward tracking mailings from acceptance (which they said will depend on mailers providing accurate data) through USPS’s mail processing and transportation networks. Such information is a step toward additional delivery performance measurement. In the interim, however, major gaps remain in USPS’s ability to track most types of mail.

Limited mailer participation. Mailer participation is low in applying unique barcodes to mail pieces for tracking purposes, which means that the tracking data cannot be considered representative of overall performance. Using USPS’s Confirm Service, mailers can apply unique barcodes to Standard Mail, First-Class Mail, and Periodicals, when the mail is letter or flat-sized and can be sorted on USPS automation equipment. Although these types of mail constitute most of the total mail volume, less than 2 percent of total mail volume is tracked by the Confirm program. Participation in Confirm is limited, in part because its use is voluntary, mailers must pay a fee to participate, and mailers also incur additional expenses related to their participation, such as for mail preparation. Although USPS officials expect mailer participation to increase as improved technology is implemented, they expect participation to continue to be unrepresentative, with some mailers more likely to participate than others. They explained that Confirm will continue to be of greatest interest to large mailers with well-developed capabilities to use tracking data. These mailers include large companies that track bills and remittance mail and large advertisers that track mailed catalogs in order to efficiently schedule staff and inventory.

Another factor in low participation is the mailers’ continuing use of non- USPS delivery performance measurements that they have established or paid third parties to do so, such as “seeding” their mailings with mail sent to persons who report when it is received. As long as a nonrandom group of mailers participates in Confirm—which is likely to be the case for the foreseeable future—the aggregate results will not be representative as a measure of overall systemwide performance. Thus, the main options for obtaining representative results for any given type of mail (such as bulk First-Class Mail) would appear to be (1) obtaining sufficient participation by all mailers who send that type of mail or (2) obtaining information on mail that is sent by a representative sample of mailers. For either option, USPS, mailer groups, and mailers would need to collaborate to achieve the level of mailer participation necessary to generate representative performance data that could be useful to all parties.

Data quality. According to USPS, data quality deficiencies have been another problem in measuring delivery performance, because USPS has no way to determine when it receives bulk mail, such as Standard Mail and Periodicals, which is commonly referred to as obtaining a valid “start the clock” time. At present, USPS relies on mailer-provided information submitted with each mailing, which USPS officials told us does not always include accurate information on when and where the mail was submitted. Based on their experience, USPS officials do not consider mailer-provided information to be sufficiently accurate for measuring delivery performance.

The issue of inaccurate data has persisted for years despite repeated efforts by working groups composed of USPS and mailer representatives. In this regard, USPS officials told us that resolving this issue would likely entail additional costs for mailers, which they said mailers have not been willing to pay; however, some mailers disagree with this view. On the positive side, the USPS Senior Vice President for Intelligent Mail and Address Quality told us that USPS has initiatives under way that should help ameliorate data quality deficiencies.

Costs. Senior USPS officials told us that currently, it would be too costly for USPS to create new representative performance measures for any major type of mail. They said that given current technology, USPS would incur substantial costs to implement delivery performance measurement for all major types of mail if USPS were to use bar codes to track every mail piece from when it enters the postal system to when it is delivered. A senior USPS official told us that delivery performance measurement for all mail—which would have involved tracking more than 210 billion pieces of mail in fiscal year 2005—would cost hundreds of millions of dollars and expressed doubt that mailers would want to pay those additional costs even in return for performance data. In this regard, sampling approaches could be used to obtain representative data on delivery performance that would likely be much less costly than seeking to measure delivery performance for every piece of mail.

A related cost issue is how USPS would recover the associated measurement costs from mailers and the impact of this decision on mailer participation that would be needed for USPS to measure delivery performance. As the Confirm program illustrates, a fee-based program creates a disincentive for mailers to participate. In contrast, USPS chose to build its tracking costs into the rate base for Parcel Select, so that the costs would be shared by all Parcel Select mailers. USPS officials told us they had rejected this approach for other types of mail for several reasons, including the uncertain benefits to USPS and mailers’ preference for lower rates, particularly for mailers who would not wish to pay the costs associated with collecting delivery performance data.

However, some major mailer groups disagree with USPS’s perspectives of mailer willingness to cover costs as a key impediment to implementing representative measures of delivery performance for all major types of mail. The Mailers Council, a coalition of over 50 major mailing associations, corporations, and nonprofit organizations, told us that its members would be willing to pay additional USPS costs, within reason, for delivery performance measurement, stating that such costs would be small compared to total postal costs. Until USPS commits to developing additional representative measures of delivery performance for all major types of mail and considers various approaches for measuring the delivery performance of its major types of mail, discusses their usefulness and feasibility with mailers, and estimates the associated costs, it will be difficult to get beyond USPS’s assertion that measurement is cost- prohibitive and mailers’ assertions that the costs could be relatively low and that they would be willing to bear them.

USPS Plans to Improve Service Performance, But Not to Implement Representative Measures of Delivery Performance Across All Product Lines

Although USPS plans to improve its service performance, it has no current plans to implement additional representative measures of delivery performance. USPS states in its latest Strategic Transformation Plan that it plans to improve the quality of postal services by continuing to focus on the end-to-end service performance of all mail. Further, it states that “customers expect timely, reliable mail service, and the Postal Service has delivered. Under the 2002 Transformation Plan, the Postal Service successfully improved service performance across all product lines.” We acknowledge and agree with USPS’s emphasis on improved service performance. However, we do not know whether service has improved across all product lines, nor does USPS, because as we noted earlier, USPS does not collect or provide representative delivery performance information that would be needed to support this statement. USPS has information from various operational data systems, but this information does not amount to delivery performance measurement. Gaps in delivery performance measurement information are hindering USPS and mailers in identifying opportunities to improve service across all product lines, as well as effectively addressing these opportunities by understanding whether problems are specific to a particular mailer or systemic problems in USPS’s mail processing and transportation networks. Without complete delivery performance information that is regularly reported, stakeholders must rely on the publicly available information that USPS chooses to provide, which often highlights only positive results. For example, in discussing its strategy for providing timely, reliable end-to-end delivery service, the Strategic Transformation Plan states “customer satisfaction scores have never been higher.” Although customer satisfaction information is valuable and useful to USPS and other organizations that provide products and services, it does not measure delivery performance.

USPS’s currently available delivery performance information does not provide sufficient context to determine (1) actual delivery performance results for all of its product lines, (2) how performance is changing over time through the assessment of trend information, and (3) whether USPS’s delivery performance is competitive. Timeliness is a critical factor in today’s competitive business environment, where many companies operate with just-in-time inventories and rely on timely delivery to meet their needs. It is likely to become even more important in the future. Thus, reliable delivery performance information reported in a timely manner is critical for high-performing organizations to be successful in this environment. USPS’s Strategic Transformation Plan discusses strategies for providing timely, reliable mail delivery, which include plans to improve the quantity and accuracy of service performance information collected through passive scanning and improved start-the-clock information, provide customers with information about their own mailings, and create better diagnostic data so that bottlenecks can be eliminated throughout the system. These are all positive steps needed to improve delivery performance information. However, the Plan falls short of committing to developing end-to-end delivery performance information that could be used to measure how well USPS is achieving its strategy of improving service performance across all product lines. Further, the Plan does not discuss what delivery performance information USPS plans to report publicly.

Pending legislation does address what delivery performance information Congress would like to see USPS report in the future. However, USPS could demonstrate that it wants to provide leadership in this area by not waiting for the legislation to be enacted. Instead, USPS could clearly commit to developing representative end-to-end delivery performance measures for all of its product lines. USPS could also take the lead in collaborating with mailers to implement such performance measures. As we previously stated, effective collaboration with mailers is needed to resolve the impediments that hinder progress in this area, such as data quality issues involving how to improve the accuracy of start-the-clock information. Concerns about cost could be addressed by exploring options such as sampling in collaboration with the mailers to determine how best to measure delivery performance at much less cost than attempting to track every mail piece. Such collaboration would also allow the parties to determine their information needs, explore cost trade-offs associated with various options, and resolve associated data quality issues. In its letter to us, PostCom noted that delivery performance measurement could be implemented in many ways that would not be costly. PostCom said that measurement costs could be affected by multiple factors, such as whether all mail pieces or a sample are tracked; whether tracking is to the point of delivery vs. the last automated scan plus a “predicted” time for delivery; whether data is collected automatically by equipment in a passive scan vs. other methods requiring USPS employees to scan mail; and whether USPS technology developments will be used exclusively to measure performance or primarily for processing the mail.

We recognize that it will take time to resolve impediments to implement additional delivery performance measures. However, USPS’s leadership, commitment, and effective collaboration with mailers are critical elements to implementing a complete set of delivery performance measures that will enable USPS and its customers to understand the quality of delivery services, identify opportunities for improvement, and track progress in achieving timely delivery.

Conclusions

USPS delivery standards are not as useful and transparent as they should be. Standards for key types of mail—including Standard Mail, USPS’s main growth product—are largely static, and do not fully reflect current operations. Thus, they cannot be used to set realistic expectations for mail delivery, to establish benchmarks for measuring performance, or to hold individuals accountable through pay-for-performance incentives tied to measurable results. USPS’s delivery performance measurement and reporting is not complete, because it does not cover key types of mail— including Standard Mail, bulk First-Class Mail, Periodicals, and most Package Services. Further, despite recent disclosures on its Web site for some types of mail, USPS’s reporting remains limited and has fallen short of statutory requirements to include specified delivery performance information. Because of gaps in delivery performance measurement and reporting, stakeholders, including the Congress, cannot understand how well USPS is fulfilling its basic mission, nor can they understand delivery performance results and trends. As a result, USPS and mailers are hindered in identifying and diagnosing delivery problems so that corrective action can be implemented. This situation increases the financial risk to USPS, which faces increasing competition. If mailers are not satisfied with USPS’s delivery service, they could take their business elsewhere.

Prospects for progress continue to be uncertain, in part because USPS has not committed itself to modernizing its delivery standards or developing representative performance measures for all major types of mail. USPS management commitment and more effective collaboration with mailers will be critical for resolving impediments to delivery performance measurement and reporting. Give-and-take by both parties will be required to achieve consensus on designing measurement systems that meet different information needs, increasing mailer participation in providing information needed to facilitate performance measurement, addressing data deficiencies, finding ways to cover the associated costs, and overcoming impediments.

Recommendations for Executive Action

To facilitate greater progress in developing complete delivery performance information, we recommend that the Postmaster General take the following four actions: 1. modernize delivery standards for all major types of mail so that they reflect USPS operations and can be used as benchmarks for understanding and measuring delivery performance; 2. provide a clear commitment in USPS’s Comprehensive Statement on Postal Operations to develop a complete set of delivery performance measures for each major type of mail that is representative of overall delivery performance; 3. implement representative delivery performance measures for all major types of mail by providing more effective collaboration with mailers and others to ensure effective working relationships, follow-through, accountability, and results; and 4. improve the transparency of delivery performance standards, measures, and results by publicly disclosing more information, including in its Comprehensive Statement on Postal Operations and other annual performance reports to Congress, as well as providing easily accessible information on its Web site.

Agency Comments and Our Evaluation

USPS provided comments on a draft of this report in a letter from the Postmaster General dated July 14, 2006. These comments are summarized below and included as appendix III. In addition, the Postmaster General provided oral comments in a meeting on June 26, 2006, with suggestions for further clarifying information, which were incorporated where appropriate.

USPS’s letter recognized that its delivery performance measurement and reporting are not complete and provided detailed information about its ongoing and planned efforts to ultimately measure service performance and provide transparency for all classes of mail. USPS stated that it intends to lead the efforts required to reach this goal by working collaboratively with others in the mailing industry. USPS’s letter further stated that ultimately, “the core issue is service—and according to all indicators, we are succeeding in our goal of continuous service improvement. We are not satisfied with maintaining the status quo.” USPS stated that although it recognizes the desire for aggregate service performance results for all mail categories, it believes that it serves mailers best by focusing first on providing service measurement and diagnostics to individual customers, then looking to provide aggregate results. Regarding the draft report’s findings related to service standards, USPS disagreed that some of its delivery standards are outdated and stated that its service standards are modern and up-to-date. USPS did not directly comment on three of our four recommendations. On our fourth recommendation concerning improving the transparency of delivery performance standards, measures, and results, USPS commented that its service standards should be more visible and stated that it is exploring making information related to its service standards available through additional channels, including its Web site.

We are encouraged by USPS’s commitment to ultimately measure service performance and provide transparency for all classes of mail and its intention to take the lead in working with mailers to achieve this goal. Further, we recognize in our report USPS’s ongoing efforts to implement technology that will track mail throughout USPS’s mail processing system, which is a step toward improved delivery performance measurement. We also agree, as we noted in our report, that mailer participation is necessary to generate representative delivery performance measures for all mail categories. USPS’s letter details many ongoing and planned efforts necessary to improve performance measurement, as well as specific actions that USPS calls on mailers to take to enable its vision of measurement. We agree with USPS’s emphasis on improving service, but we continue to have questions about whether USPS’s efforts will result in representative delivery performance measures for all major types of mail. For most major types of mail, USPS’s vision of service performance measurement is generally limited to tracking mail through its mail processing and transportation networks, which is not the same as measuring end-to-end delivery performance against USPS delivery standards. Considering USPS’s lack of commitment to implementing a complete set of delivery performance measures, as well as the lack of timeframes in USPS’s letter, we also have questions about how long it will take to achieve this goal. We recognize that it will take time to implement many of the ongoing and planned initiatives described in USPS’s letter. Thus, USPS’s sustained leadership is critical to ensure that effective collaboration with mailers takes place so that USPS implements and reports on representative delivery performance measures for all major types of mail. We also believe that USPS should establish specific timeframes so that timely progress can be made in this area.

USPS’s letter states that it will first provide individual mailers with delivery information before working to provide aggregate delivery performance information, stating that aggregate information on average performance may be irrelevant to mailers. We do not believe that these are mutually exclusive goals that have to be addressed sequentially, because both aggregate and individual performance information have benefits that would meet varying needs of different postal stakeholders. We recognize and agree that mailers want to have performance information related to their own mailings to determine the status of their mail as it moves through USPS’s system. However, appropriate aggregate information is needed to put mailer-specific information into context so that USPS and mailers can understand whether any delivery problems that occur are specific to particular mailers or reflect systemic issues within USPS’s processing and transportation networks. Appropriate aggregate information may need to be more specific than the average performance for a general type of mail, so that comparisons can take geographic and other variations in performance into account and thereby provide useful diagnostic information to USPS and mailers. USPS has recognized this principle in its EXFC measure of First-Class Mail deposited into collection boxes, which provides aggregate data that can be broken down by geographic area, delivery standard (e.g., results for 1-day, 2-day, and 3-day mail), and other subgroups of this mail. Moreover, USPS’s diagnostic data is not representative and does not amount to delivery performance measurement. USPS’s letter does not fully recognize the critical importance of aggregate delivery performance measurement for accountability purposes, by parties both inside and outside USPS. As USPS’s letter demonstrates, where USPS has delivery performance measures, it can report on how well it is achieving one of its primary goals to improve delivery services. However, USPS is not in a position to make such assessments for more than four-fifths of its mail volume, because it does not measure and report its delivery performance for most types of mail.

USPS’s letter also states that “we share the mutual goal of complete network transparency to provide mailers with a comprehensive view of the service they receive.” Our view of transparency is broader than providing mailers with data on their own mail. As a federal government entity with a monopoly on some delivery services, USPS is accountable to the American public, Congress, PRC, USPS’s Board of Governors, and postal customers for the delivery services it provides. However, as noted earlier, stakeholders cannot understand how well USPS is fulfilling its basic mission due to gaps in delivery performance measurement and reporting, nor can they understand delivery performance results and trends. USPS’s letter does not address what actions USPS plans to take to improve the transparency of publicly available delivery performance information. Without sufficient transparency, oversight and accountability are limited.

We disagree with USPS’s comments that its service standards are modern and up-to-date. Consistent with the input we received from numerous mailers, we believe that these standards do not work for the mailers and for USPS. As we noted in our report, some of USPS’s delivery standards, including those for Standard Mail, some Periodicals and most Package Services, do not reflect changes in how mail is prepared and delivered. These standards are unsuitable as benchmarks for setting realistic expectations for timely mail delivery, for measuring delivery performance, or improving service, oversight, and accountability.

Specific comments in the USPS letter were organized into the following six sections: (1) “Focus on Service,” (2) “Service Performance Results,” (3) “Some Areas of Concern,” (4) “Modern Service Standards,” (5) “Measurement Systems and Diagnostic Tools,” and (6) “Customer Collaboration and Reporting.” These comments are summarized below with our analysis.

Focus on Service: USPS commented that one of its primary goals in its Strategic Transformation Plan 2006-2010, is to improve service. USPS said this goal is supported by strategies that include a “balanced scorecard” that uses service performance metrics to support personal and unit accountability. Goals for these metrics, which include delivery performance measures as well as operational indicators that USPS said are critical to on-time service performance, are incorporated into USPS’s pay- for-performance incentives for its managers. We agree with USPS’s focus on improving service and holding its managers accountable for results. Our draft report noted that USPS had recognized the importance of the timely delivery of mail and integrated performance targets and results for some types of mail into its performance management system. However, USPS has not yet achieved its aim of a “balanced scorecard” for delivery performance because its delivery performance measures cover less than one-fifth of mail volume, and these measures do not cover Standard Mail, bulk First-Class Mail, Periodicals, and most Package Services mail. This gap impedes USPS’s potential for holding its managers accountable for delivery performance of all types of mail and for balancing increasing financial pressures with the need to maintain quality delivery service.

Service Performance Results: USPS stated that its focus on service has resulted in “record performance across all mail categories,” adding that its measurement systems for First-Class Mail, Priority Mail, and Express Mail show that USPS had met or exceeded the performance targets it set for them. However, we do not know whether service has improved across all mail categories, nor does USPS, because as we noted earlier, USPS does not collect or provide representative delivery performance information that would be needed to support this statement. Further, in fiscal year 2005, USPS did not achieve record delivery performance for all categories of mail that it measured, and did not meet all of the delivery performance targets it had set. For example, the 2005 Annual Performance Report included within the 2005 Statement on Comprehensive Operations reported that on-time performance for First-Class Mail with a 3-day delivery standard, as measured by EXFC, was 87 percent in fiscal year 2005, down 2 percentage points from the previous fiscal year and falling short of USPS’s goal of 90 percent. On-time delivery scores for Priority Mail also declined over the same period.

With respect to reporting on its delivery performance, USPS commented in its letter that it has posted delivery performance results on its Web site, including for some of its competitive products. As our draft report stated, USPS improved its reporting of delivery performance results by starting to post information on its Web site in April 2006, including selected results for the past quarter for the timely delivery of some Express Mail, Priority Mail, First-Class Mail, and Package Services. We stated that USPS’s recent disclosures are a good step toward providing easily accessible information on delivery performance results on its Web site for key types of mail used by the public. However, we also found that the information is incomplete because it does not include delivery performance results for all major types of mail. Some major types of mail are not measured, while the information on the Web site provided limited information for mail that is measured, and did not fully disclose the limited scope of this measurement. We continue to believe that without more complete reporting of delivery performance information, Congress and the American public do not have adequate information to determine how well USPS is accomplishing its mission of providing prompt and reliable delivery services.

Some Areas of Concern: USPS stated that our draft report did not fully consider some important issues related to performance measurement. USPS commented that although our draft report did discuss data quality issues, it had not accounted for some relevant factors, including the completeness, accuracy, and validity of mailer information submitted when mail is entered. However, our draft report included a discussion of the major impediments that have contributed to USPS’s slow progress toward implementing delivery performance measures for all major types of mail, including impediments relating to the quality of mailer information submitted when mail is accepted into USPS’s system, which is needed for “start the clock” delivery information. Our draft report provided USPS’s view that mailers do not provide accurate information on its mailings that would be needed to “start the clock” for delivery performance measurement and noted that this issue has been persistent despite repeated efforts by USPS-mailer committees. In discussing measurement issues, USPS further commented that the mailing industry must embrace changes such as improved address quality and increased presort accuracy. We believe that although these outcomes would facilitate USPS handing of mail, this should not be a reason to delay measurement of delivery performance. Other federal entities routinely set performance goals and measure results for important activities that are partly outside their control, and use the results to work with their partners to improve their performance.

On another matter, USPS stated that our report’s discussion of USPS attempts to measure performance did not account for complexities unique to Standard Mail and Periodicals. USPS also stated that its experience has demonstrated that it is particularly difficult to design a broad and effective measurement system for Standard Mail and Periodicals, explaining that its previous attempts were unsuccessful for reasons including lack of information on the acceptance of this mail into USPS’s system and complexities relating to different types of mail preparation and entry. We disagree that our draft report did not adequately account for these complexities and believe USPS can address these complexities to successfully implement delivery performance measures for Standard Mail and Periodicals. As noted above, our draft report discussed issues in obtaining information needed to “start the clock” on delivery performance measurement. We also recognized that Standard Mail and Periodicals have complexities in mail preparation and entry that USPS should incorporate into its delivery performance standards so that they can serve as suitable benchmarks for measurement. Further, our draft report provided a detailed discussion of attempts to measure performance by task forces and working groups comprised of USPS and mailer representatives, who were well versed in the complexities of Standard Mail and Periodicals. These groups repeatedly recommended that USPS measure the delivery performance of Standard Mail and Periodicals, including the 1997 recommendations of the Blue Ribbon Panel and the 1999 recommendations of a follow-up USPS/mailer working group that were made years after USPS’s short-lived attempt to measure delivery performance of Standard Mail and Periodicals. The 1999 recommendations stated that USPS should implement performance measurement for Standard Mail, Periodicals, and other classes of mail in a manner that would provide aggregate performance data with breakdowns according to delivery standards, which for bulk mail such as Standard Mail and Periodicals would reflect how the mail is prepared and the type of postal facility where it enters USPS’s system. The working group asked USPS to begin working on implementing these recommendations immediately. As we concluded, gaps in performance measurement mean that stakeholders cannot understand how well USPS is fulfilling its basic mission, nor can they understand results and trends—a situation that also increases the financial risk to USPS, which faces increasing competition.

Modern Service Standards: USPS stated that our draft report did not fully acknowledge its long history of establishing and revising delivery standards. We disagree because our report provides a detailed history of delivery standards, noting that USPS has updated its standards for some mail, such as First-Class Mail and Parcel Select. Our draft report also stated that delivery standards are outdated for several types of mail, including Standard Mail, some Periodicals, and most Package Services, because they have not been updated in many years to reflect significant changes in the way mail is prepared and delivered. In addition, USPS commented that the concept of modernized delivery standards may, for some, denote upgrading service levels, warning that upgrading service would result in increased costs and prices. However, our draft report does not discuss whether service needs to be upgraded and focuses instead on the need for USPS delivery standards to reflect current USPS operations including presorting and destination entry.

Measurement Systems and Diagnostic Tools: USPS commented that the description of USPS performance measurement systems in our draft report was incomplete and unintentionally misleading. USPS commented that the draft report overlooked “the fact” that EXFC, which measures First-Class Mail deposited into collection boxes, is reflective of delivery performance for all First-Class Mail including bulk First-Class Mail. USPS stated that bulk First-Class Mail is handled in the same manner as collection box mail. USPS’s comment about EXFC is contradicted by years of USPS reporting, including in its annual Comprehensive Statement on Postal Operations and its quarterly press releases, that “EXFC is not a systemwide measure of all First-Class Mail performance.” USPS has repeatedly used this statement in response to a recommendation made in a report issued in 2000 by the USPS Office of Inspector General, which also found that EXFC does not consider the delivery performance of bulk First- Class Mail.

Customer Collaboration and Reporting: USPS commented that many of its service measurement systems and diagnostic tools were designed jointly or in collaboration with its customers. Our draft report discusses USPS’s many collaborative efforts with mailers, but, as noted previously, our concern is that USPS has not implemented key recommendations that have been made since the early 1990s by numerous USPS/mailer committees. Further, our work found that the lack of adequate and continued management commitment and effective collaboration with the mailing industry to follow through on recommendations for improvements and to resolve issues is an overall theme in understanding the slow progress being made in developing and implementing methods of measuring delivery performance. Thus, while we are encouraged that USPS presented several initiatives to develop the ability to track mail through its mail processing and transportation networks, as outlined in our report and our analysis of USPS’s comment letter, we continue to believe that there needs to be greater progress in implementing representative measures of end-to-end delivery performance.

We are sending copies of this report to the Ranking Minority Member of the Senate Committee on Homeland Security and Governmental Affairs, the Chairman and Ranking Minority Member of the House Committee on Government Reform, Rep. John M. McHugh, Rep. Danny K. Davis, the Chairman of the USPS Board of Governors, the Postmaster General, the Chairman of the Postal Rate Commission, 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 staff have any questions regarding this report, please contact me at siggerudk@gao.gov or by telephone at (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.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to assess (1) the delivery standards for the timely delivery of mail that the U.S. Postal Service (USPS) has established, (2) the delivery performance information on the timely delivery of mail that USPS measures and reports, and (3) the progress USPS has made in improving its delivery performance information.

We based our assessment of USPS’s delivery standards, measures, and reporting using the concepts of completeness, transparency, and usefulness of delivery standards, measures, and reporting (see table 6). We identified applicable laws related to USPS’s mission, ratemaking, and reporting; statutes and practices used by high-performing organizations related to delivery standards, measurement, and reporting, including practices identified through our past work. The basis of our assessment is described in greater detail in table 6.

To address the first objective, assessing delivery standards USPS has established, we obtained information from USPS on its delivery standards for the timely delivery of mail. Information consisted of USPS’s narrative description of its standards; documentation of its standards included in the Domestic Mail Manual and related policies included in the Postal Operations Manual; and written responses provided to us by USPS. We also obtained material on delivery standards that USPS provided in Postal Rate Commission (PRC) proceedings and that were posted to the PRC Web site. These proceedings included postal rate cases and “nature of service” proceedings that considered the USPS proposals expected to have an effect on the nature of postal services on a nationwide or substantially nationwide basis. We reviewed publicly available material that USPS reported on its delivery standards, which was posted on the USPS Web site, including the section of the USPS Web site devoted to the Mailers’ Technical Advisory Committee (MTAC). Our assessment of USPS’s delivery standards was also informed by the views of mailing organizations, mailers, PRC, and PRC’s Office of the Consumer Advocate (OCA), which is charged with representing the interests of the general public and the views of other postal stakeholders. Some of these views were provided in written material issued by the stakeholders, including material provided directly to us, material provided in PRC proceedings, and articles in the trade press. Other views were provided to us in interviews we conducted with these organizations.

To address the second objective, delivery performance information USPS measures and reports, we obtained documentation and related written material on USPS’s delivery performance measurement systems, which included the External First-Class Measurement System (EXFC), the Product Tracking System (PTS), the now-discontinued Priority End-to-End System (PETE), and other measurement systems for international mail. We obtained documentation on the data collection procedures and internal controls for these systems and obtained detailed explanations of these systems in interviews with USPS officials. In addition, we obtained publicly available information on these systems from USPS reports, material that USPS provided PRC in past rate cases, and published articles about these systems. We conducted a limited data reliability assessment of EXFC, PTS, and PETE. Our assessment was informed by obtaining the views of USPS officials, mailing groups, mailers, and other stakeholders, both in writing and in interviews.

To address the third objective, assessing the progress USPS has made in improving its delivery performance information, we obtained information from a variety of sources on the progress USPS has made and its opportunities for improving delivery performance information. We obtained information on the history of studies that recommended USPS improve its delivery standards, measurement, and/or reporting. These studies included joint USPS-mailer committees, some of which were ad hoc efforts and some of which were sponsored by MTAC. Information on these studies included written reports by the committees, documentation on these groups provided to us by USPS and mailers, and interviews of USPS, mailer committees, and mailers. More generally, we obtained the views of USPS officials, mailing groups, mailers, and other stakeholders on USPS’s progress and remaining opportunities in this area, both in writing and in interviews.

We requested comments on a draft of this report from USPS; these are reproduced in appendix III. We conducted our review from August 2005 to July 2006 in accordance with generally accepted government auditing standards.

Appendix II: USPS Delivery Standards

Appendix II: USPS Delivery Standards Explanation of delivery standards and available information These standards have not been systemically changed since their inception in the 1970s. As an “approximate overview,” the number of days is loosely based on the number of postal zones that mail must travel, which in turn are loosely based on a mileage radius to the destinating Sectional Center Facility (SCF).

Usually, 3 days for mail within the same SCF, depending on the size of the Intra-SCF area. All other non-Intra-SCF destinations are 4 days or greater.

While the 3- to 10- day range outlines the official USPS standards, USPS sometimes does have independent “programs,” or “guidelines,” outside of the Service Standards, which attempt to facilitate the delivery of Standard Mail (sometimes directly in concert with mailers). In some cases, these time frames are more ambitious or differ from the official Service Standards.

For example, the Postal Operations Manual (POM) specifies that some Standard Mail is to be delivered 2 delivery days after it is entered into the postal system. This applies to mailer-prepared carrier-route presort mail that mailers dropship to delivery units (including post offices, branches, and stations) where letter carriers pick up their mail for delivery. delivery units should make every effort to adhere to mailer-requested, in-home delivery dates. Mail should not be delivered earlier than the date the mailer has requested. If delivery units receive Standard Mail with a mailer-requested delivery date later than the USPS-scheduled delivery day, the USPS-scheduled date should be changed to match the last requested in-home delivery date, to comply with the mailer’s request. If delivery units receive Standard Mail with a mailer-requested delivery that has already been passed, the decision regarding delivery or disposition of this mail (including disposal without delivery) must be consistent with the current national policy on this subject.

If Standard Mail is mixed with a higher class of mail (e.g., First-Class Mail) in USPS’s mail processing system in such a manner as it loses its identity, it must be considered upgraded and treated as the higher class of mail. Technically, such commingled items do not become the higher mail class. However, USPS enacts this policy in order to not slow down the ultimate delivery of such pieces by not requiring that they be re-isolated and “extracted” from the higher mail class and subsequently re-entered with their “correct” mail class, a process which could possibly slow down delivery and provide worse service than was originally intended (although the re-segregation of such commingled mail, by mail class, is always an option, if operationally feasible).

There are no prohibitions against making USPS management agreements below the national level, which accelerate the delivery expectations for any Standard Mail versus national policy.

Delivery standards are 3-digit-to-3-digit ZIP Code based. Periodicals mail is a “preferential” product that travels normally by surface to all valid ZIP Codes. The standard range of 1 to 7 days is loosely equivalent to the eight Postal Zones (which are also based on a Mileage Radius), minus 1, as shown in Table 8.

In accordance with policies adopted in 1990 after the conclusion of a PRC proceeding that began in 1989, the 1-day delivery area should normally be adjusted to be the same as the overnight area for First-Class Mail, with exceptions subject to regional and headquarters concurrence. 2 to 3 day standards can be as fast as First-Class Mail but are not usually intended to be faster. Nearly all of the Service Standard pairs meet this “Mail Class Hierarchy” guideline.

The concept for these standards has not changed since the 1980s. Newly activated ZIP Codes (or ZIP Code areas that have been revised due to an Area Mail Processing Plan implementation) are “cloned” to have the same Periodical delivery standards as the other originating or destinating ZIPs served out of the same processing plant.

2 to 9 days to most ZIP Codes 2 to 9 days to all valid ZIP Codes within the contiguous 48 states.

There are no established Package Services delivery standards to Alaska, Hawaii, or offshore destinations (e.g., Guam, Puerto Rico, Virgin Islands).

The delivery standards are 3-digit-to-3-digit ZIP Code based. Package Services mail is a product that travels normally by surface to all ZIP Codes. The standards are therefore predicated on the Bulk Mail Center (BMC) network. Normally, the standards would change only if the Area Mail Processing (AMP) Plan resulted in the origin or destination ZIP Code moving to within a new BMC area because the gaining facility was located in a different BMC area than the previous facility. The concept for Package Services service standards has remained constant since the 1970s. Newly activated ZIP Codes (or revised ZIP Codes areas due to an AMP Plan implementation) are “cloned” to have the same Package Services service standards as the other originating or destinating ZIPs served out of the same BMC or Auxillary Service Facility.

Parcel Select comprises Parcel Post items that are mailed in bulk quantities; are entered by mailers at USPS facilities, including Destination Bulk Mail Centers (DBMCs), Destination Sectional Center Facilities (DSCFs), or Destination Delivery Units (DDUs); and meet other rules for mail preparation and entry. The delivery standards include: 1 day for DDU entry by 4 p.m. 2 days for DSCF entry by 3 p.m. 2 to 3 days (generally 2 days) for DBMC entry by 3 p.m. 2-day versus 3-day for DBMC entry is based on the Parcel Post standard for the 3-digit ZIP where the DBMC is physically located and the destination 3-digit ZIP of the parcel. These standards were determined as part of the Parcel Select product creation. Originally, all BMC entry was 3-day. This change to most 2-day was made in 2002.

Explanation of delivery standards and available information Delivery standards have existed for Priority Mail since its inception, when it essentially replaced Air Mail in the late 1970s. The standards currently range from 1 to 3 days to all valid ZIP Codes. However, Priority Mail is primarily a product that is targeted for delivery within 2 days. (Over 93 percent of Priority ZIP Code pairs currently have either a 1-day or 2-day standard.) These standards are determined on a case-by-case basis, depending on processing times and available transportation. Priority Mail service standards are usually equal to, or faster than, First-Class Mail standards to/from the same domestic ZIP Code pairs.

Newly activated ZIP Codes (or revised ZIP Codes areas due to an Area Mail Processing Plan implementation) are cloned to have the same Priority Service standards as the other originating or destinating ZIPs served out of the same processing plant.

First-Class Mail other than Priority Mail: 1 to 3 days, depending on the 3-digit ZIP Code of acceptance and the destination address. Standards do not vary by shape, size, or weight.

The same standard applies to all mail originating or destinating in the same 3-digit ZIP Code area.

USPS policies for First-Class Mail Service Standards are as follows: 1-day (Overnight) Delivery Standard: Overnight delivery standards must include all of the intra-SCF area. Other areas may be considered for overnight delivery if significant business/mail volume relationships exist and they are within the reasonable reach of surface transportation. 2-Day Delivery Standard: Two-day delivery standards must include all areas that currently have an overnight standard but will not, as proposed, be in the new overnight area. Two- day delivery standards must also include all SCFs with the home state and nearby states that are within the reasonable reach of surface transportation (as defined by the USPS Office of Transportation and International Services). In addition, 2-day delivery standards may include other 3-digit areas outside of the reach of surface transportation if significant business/mail volume relationships exist and if dependable and timely air transportation is available. 3-Day Delivery Standard: Three-day delivery standards should include all remaining destinations.

Service standard changes reflecting the new overnight definition were implemented in 1990 to 1992. In 2000 to 2001, in order to increase the 2-day reach but make it achievable at a consistently appropriate level, USPS expanded the 2-day reach to include non- overnight offices that were as far away as a 12-hour drive from the originating “parent” Processing and Distribution Center (P&DC) to the destinating Area Distribution Center (ADC) via surface transportation.

At the same time, the USPS determined that the existing commercial air transportation network had deteriorated and had become too unreliable for maintaining the 2-day service standard for First-Class Mail beyond the reasonable reach of surface transportation. Accordingly, USPS changed the service standards for this mail from 2 days to 3 days.

Although this deterioration and resulting unreliability of commercial air service made it infeasible for USPS to continue to apply the 2-day standard to destinations beyond the reasonable reach of surface transportation, the overall number of origin-destination pairs with 2-day standards increased in 2000-01 because of the adoption of the 12-hour drive time definition.

Explanation of delivery standards and available information Overnight and second-day service to designated areas and post offices, supported by a money-back guarantee.

Next-day Service provides overnight service to designated 3-digit and 5-digit ZIP Code delivery areas, facilities, or locations, based on the time of acceptance and available service-response air and surface transportation.

Second-day Service is offered for areas not on the next-day network, including any 3- digit or 5-digit ZIP Code destination not listed in the Express Mail Next Day Service directory, but may not be available at or between all post offices or at all times of deposit.

Second Delivery Day is not a distinct service but applies to mailings to those ZIP Codes where postal delivery is not provided on Sundays or federal holidays, and delivery is guaranteed on the next regular delivery day. This typically applies only to mailings made on Friday to a destination that lacks Sunday/holiday delivery. In that case, the piece is guaranteed for delivery on the next regular delivery day, which is a Monday, or Tuesday if Monday is a federal holiday.

Unlike most other types of mail, Express Mail service may involve delivery on Sundays.

At the point of sale, each customer is notified of the specific service standard for the mailed item. This standard is based on information in an electronic and/or hardcopy directory containing detailed information about local and destination ZIP Code acceptance and delivery capabilities. The clerk who accepts the mail annotates the customer receipt to indicate whether the mailed item was accepted for next- or second-day delivery.

Further, customers can obtain the guaranteed delivery commitments for some individual pieces of mail through the USPS Web site by entering their originating and destinating 5- digit ZIP Codes.

USPS and its overseas delivery partners establish delivery standards in conjunction with international organizations including the Universal Postal Union and the International Post Corporation.

Global Express Mail Guaranteed: 2 to 3 days with date-certain shipping to over 200 countries.

Global Express Mail: 3 to 5 days to over 190 countries with date-certain shipping to selected countries.

Global Priority Mail includes single-piece mail under 4 pounds sent from the United States to over 50 countries.

International Priority Air Mail includes mailings of items under 4 pounds, virtually worldwide, sent in bulk quantities at lower rates than Global Priority Mail.

Global Air Mail letters: 4 to 7 days, including 5 days to Europe; 4 days to Canada; and 1 to 3 days for transit within the United States. Global Economy Mail letters: 4 to 6 weeks.

Global Air Mail parcels: 4 to 10 days to virtually all countries.

Global Economy Mail parcels: 4 to 6 weeks.

Prepaid business reply postcards and letters to virtually all countries.

The number of delivery days after acceptance of the mail, which generally does not include Sundays or holidays. http://www.usps.com/global/sendpackages.htm and http://www.usps.com/global/sendmail.htm.

Appendix III: Comments from the U.S. Postal Service

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, Teresa Anderson, Cynthia Daffron, Tamera L. Dorland, Kathy Gilhooly, Brandon Haller, Kenneth E. John, Catherine S. Kim, Karen O’Conor, Jacqueline M. Nowicki, and Edda Emmanuelli-Perez made key contributions to this report.