According to USPS data, in fiscal year 2013, USPS delivered mail to a network of more than 150 million delivery points, including 133 million delivery points served by more than 230,000 career carriers that comprised almost half of the career workforce. In addition, USPS employed more than 75,000 non-career carriers who were mostly part- time employees, such as substitute carriers on rural routes. Mail delivery is USPS’s largest cost area, comprising 41 percent of total costs in fiscal year 2013. The extent to which USPS uses each mode of delivery and the mode’s associated costs play a substantial role in USPS’s overall financial condition. USPS uses three basic modes for residential and business mail delivery: Door delivery includes delivery to mail slots in the door as well as mailboxes attached to houses and delivery made to businesses such as delivery to mail slots in the door, mailboxes attached to the business near the door, or locations within office buildings. Door delivery is the most costly because the carrier must walk from door to door, which is often the case on foot routes or park-and-loop routes. Curbline delivery (also referred to as curbside delivery) includes delivery to curbline mailboxes that are commonly used on routes serving residential customers, such as those living in rural and suburban areas. Curbline mailboxes are typically unlocked mail receptacles on a post. USPS regulations require curbline mailboxes to be located at the curb where they can be efficiently, safely, and conveniently served by the carrier from the carrier’s vehicle, and so that customers have reasonable and safe access. Curbline delivery is less costly than door delivery, as it takes less time for the carrier to move between curbline mailboxes, particularly when the carrier can load mail into the mailbox directly from the delivery vehicle. Centralized delivery is provided to centrally-located mail receptacles, such as apartment house mailboxes and cluster box units. Both wall mounted and cluster box units can be installed to service both residential and business delivery. Cluster boxes are generally pedestal-mounted units located outdoors with individually locked mail receptacles for each delivery point. Cluster boxes and apartment house mailboxes have become more secure over time, as USPS developed and implemented regulations for higher security standards for manufacturers. The newer Cluster Box Units (CBUs) also include locked receptacles for parcels and outgoing mail, unlike older Neighborhood Delivery and Cluster Box Units (NDCBU). This mode of delivery is also less costly than door delivery as it takes less time to service a cluster box than to walk from door to door, particularly when the carrier can drive between cluster boxes. Figure 1 shows the types of mail receptacles commonly used for each major mode of delivery. According to USPS data, in fiscal year 2013 about 41 percent of existing delivery points received curbline delivery, about 30 percent received centralized, and about 28 percent had other modes, which primarily consist of door delivery. These percentages have changed little over the past 5 years (see fig. 2). From fiscal years 2008 to 2013, the total number of door delivery points declined by about 308,000—including about 287,000 residential door delivery points, and about 21,000 business door delivery points—leaving about 32.2 million residential door delivery points and about 5.6 million business delivery points (see fig. 3). According to a USPS official, these changes mostly reflect redevelopment, such as replacement of older homes that had door delivery with new apartment buildings with centralized delivery, and new business developments such as office parks and strip malls. While the number of door delivery points declined by 1.2 percent from fiscal years 2008 to 2013, the number of curbline and centralized delivery points—the primary modes of delivery—increased by 0.1 percent and 1.1 percent respectively. From fiscal years 2008 to 2013, the number of centralized delivery points increased by 2.8 million, while the number of curbline delivery points increased by 1.9 million. See appendix II for details on the number of delivery points for each mode in fiscal years 2008 through 2013. USPS is required to provide prompt, reliable, and efficient services to patrons in all areas. USPS has the flexibility to revise its regulations to convert delivery points from more costly to less costly modes of delivery, and postal statutory provisions provide that USPS is required to fulfill its mission by operating an efficient delivery network. USPS is specifically required to plan, develop, promote, and provide adequate and efficient postal services at fair and reasonable rates and fees. USPS estimates of delivery mode costs and potential savings from converting to less costly modes have limitations because they rely on cost estimates and data from a 1994 USPS study. USPS increased these 1994 cost estimates for each mode of delivery by 55 percent, based on the total percent change in the Consumer Price Index for All Urban Consumers (CPI-U) from fiscal year 1994 to 2012, which may not have been the same as changes in USPS delivery costs. USPS estimates updated through fiscal year 2012 based on the 1994 data show door delivery costs greatly exceed costs for other modes of delivery. USPS officials stated that although many aspects of postal operations have changed over the past 20 years, the manner in which a carrier delivers mail on the street has changed little. USPS’s estimated costs of door delivery were about 160 percent higher than curbline delivery and estimated door delivery costs were more than double that of centralized delivery. Based on the differences in delivery mode costs, USPS estimates that it could realize large savings from large-scale mandatory conversions of both residential and business delivery points from costly door delivery. We determined that these were the only data available and have limitations for estimating delivery costs and potential savings. However, these estimates may not be the best source to inform decisions about conversion approaches, as estimates based on updated data may yield differing results. USPS estimates of delivery mode costs and potential savings from converting to less costly modes have limitations because they rely on cost estimates and data from a 1994 USPS study.on the time postal employees used to prepare and deliver mail for each mode of delivery. These data were then combined with postal wage and benefit cost data, as well as other data (e.g., delivery vehicle costs), to estimate the costs for each mode of delivery. In lieu of current data, USPS increased these 1994 cost estimates for each mode of delivery by The study collected data 55 percent, based on the total percent change in the Consumer Price Index for All Urban Consumers (CPI-U) from fiscal year 1994 to 2012. (See app. III for further details on USPS’s methodology for conducting this study.) Because CPI-U is a measure of inflation for the U.S. economy, changes in CPI-U over this period of time may not have been the same as changes in USPS delivery costs, which are affected by factors such as postal wage rates, postal benefit costs, and gasoline prices. In fact, according to USPS officials, key delivery-related costs increased more than inflation from 1994 to 2012. These cost increases may have been offset by gains in postal productivity, such as automated mail sorting by delivery sequence, which reduces the amount of carrier time needed for manual sorting,estimates are generally understated or overstated. so it is unclear whether USPS’s Another potential weakness in the estimates is USPS’s application of the same 55 percent increase in the 1994 data for the cost of each delivery mode—a method that assumes that the cost for each delivery mode increased at the same rate from fiscal years 1994 to 2012. Available evidence suggests this assumption may not be correct. According to USPS, since the original study was conducted, it has adopted work rules that disproportionately increase the cost of door delivery. For example, to comply with current collective bargaining agreement work rules, city postal carriers must manually collate some advertising mailing before loading it into satchels to carry on foot routes and park-and-loop routes, This work rule does which are largely door delivery, according to USPS. not apply to motorized routes, such as curbline routes where carriers load mailboxes from the delivery vehicle. In addition, to the extent that some modes of delivery are more labor intensive than others, the actual increase in USPS wage and benefit costs from fiscal years 1994 to 2012 may have affected the costs of some delivery modes more than others. The work rule specifies that city letter carriers on foot routes and park-and-loop routes will not be required to carry more than three bundles of mail pursuant to USPS’s collective bargaining agreement with the National Association of Letter Carriers, which represents city carriers. Government auditing standards state that managers are responsible for providing reliable, useful, and timely information for transparency and accountability of programs and their operations. Legislators, oversight bodies, and the public need to know whether or not government services are provided effectively, efficiently, and economically. This standard is particularly relevant because pending postal reform legislation in the House and Senate would mandate the conversion of some delivery points from door delivery to centralized or curbline delivery. Furthermore, the administration’s budget for fiscal year 2015 also proposes “allowing the Postal Service to begin shifting to centralized and curbside delivery where appropriate.” Internal controls for federal agencies state that financial information is needed to support operating decisions, monitor performance, and allocate resources. Without such information on costs of modes and on potential savings through delivery conversions, USPS and lawmakers may not have an accurate understanding of the impact of delivery mode changes on which to base their decisions. USPS officials told us that its estimates of delivery mode costs and potential savings “have validity” despite the use of the inflation adjustment in lieu of updated data. USPS officials stated that although many aspects of postal operations have changed over the past 20 years, the manner in which a carrier delivers mail on the street has changed little. However, USPS officials also acknowledge the weakness of USPS’s delivery mode data. USPS estimates the cost of a new delivery study using ongoing operational data at $75,000 to $100,000, and the cost of a more extensive study collecting new data at $250,000 to $750,000. Mail delivery represents the largest cost area relative to USPS’s annual expenses of approximately $72 billion, and updating the 1994 study would be relatively low cost compared to those expenses. Without a current delivery cost study, USPS may be less able to determine accurate cost savings from various delivery mode conversion scenarios. USPS estimates updated through fiscal year 2012 based on the 1994 data show door delivery costs greatly exceed costs for other modes of delivery. Estimated costs of door delivery were about 160 percent higher than curbline delivery and estimated door delivery costs were more than double that of centralized delivery. Specifically, USPS estimated that its delivery costs in fiscal year 2012 ranged from about $380 annually for the average door delivery point to about $240 for curbline delivery and about $170 for centralized delivery such as cluster boxes and apartment house mailboxes (see fig. 4). Based on the differences in delivery mode costs, USPS provided us with estimates showing that it could realize large savings from large-scale mandatory conversions of both residential and business delivery points from costly door delivery even as it continues to add new delivery points every year. For example, there were about 770,000 new delivery points added in fiscal year 2013, an increase of about half of 1 percent from fiscal year 2012 levels. Specifically, USPS estimates that potential ongoing annual savings exceeding $2 billion could be achieved by mandatory conversion of 12.2 million door delivery points over the next decade to a mix of centralized and curbline boxes (see fig. 5). This level of conversion is about one-third of the 38 million door delivery points and would still provide future opportunities to realize savings from additional conversions. About 85 percent of these conversions would be residential and 15 percent would be business delivery points. Based on USPS’s schedule for these conversions, the potential savings would be realized in the first full fiscal year after full implementation—fiscal year 2024—and every following fiscal year. USPS also estimated proportionately smaller savings from less extensive mandatory conversions (see fig. 5). We determined that these were the only data available and have limitations for estimating delivery costs and potential savings. However, these estimates may not be the best source to inform decisions about conversion approaches, as estimates based on updated data may yield differing results. According to USPS officials, its estimates are based on what they could reasonably accomplish with a deliberate pace of mandatory conversions that would be feasible for postal operations and customers. USPS officials told us that this pace—converting up to 1.5 million delivery points annually—would enable them to realign delivery routes to achieve ongoing savings from modes of delivery that are less labor intensive. Based on this pace, USPS officials said they could achieve sufficient savings to recoup costs to buy and install cluster boxes within the same year. To understand how USPS estimates it could realize these savings, it is important to understand how the changes would reduce USPS’s workload and how this would translate into lower USPS costs. Conversion of delivery points from door to curbline and centralized delivery would reduce the time required to organize and deliver the mail. Motorized routes with centralized and curbline delivery require less of a carrier’s time than walking from door to door. Reducing carrier workload through mandatory conversions could enable USPS to reorganize delivery into smaller numbers of routes, with each route including a larger number of delivery points. The resulting decrease in the number of routes could help reduce the number of carriers needed to fulfill delivery needs. USPS has historically reduced its workforce through attrition and has no-layoff provisions in its collective bargaining agreements with its four major postal unions. In this regard, large numbers of career carriers are expected to retire in the coming years. In addition to realigning delivery routes, our prior work has found that USPS can use established work methods for accomplishing delivery to a given geographic area with fewer carriers. reducing overtime as well as the number of hours worked by carriers with flexible schedules. In this regard, most door delivery is made to city delivery routes served by city carriers. The average hourly wage and benefit costs of all city carriers, including career and non-career employees, exceeds $41 per hour, according to USPS data. For example, USPS often divides up an unstaffed route among multiple carriers who each cover a part of this route in addition to their regular route—a work method that is used to augment the work of some carriers with less than 8 hours of workload on their route. See GAO-09-696. According to USPS officials, conversions from door delivery would also decrease the time and costs associated with organizing mail for delivery. For example, the organization of mail for delivery would take less time as it would no longer involve strapping bundles of mail to help keep it organized for carriers. The officials also said that, in cases in which delivery mode conversion enabled a foot route to convert to a motorized route, mail would no longer be prepositioned along those routes. Additionally, USPS could avoid manual handling of some advertising mail for routes converted to motorized delivery. In April 2012, USPS updated its policy regarding assigning delivery modes to new addresses. USPS revised its Postal Operations Manual—a —to regulation of the USPS pursuant to the Code of Federal Regulationsspecify that USPS determines the mode of delivery for new addresses. According to USPS officials, USPS used to provide for customer preferences as a factor in deciding on the mode of delivery. The revised Postal Operations Manual states that new business addresses must receive centralized delivery unless USPS approves an exception, and the modes approved for new residential delivery are curbline delivery, centralized delivery, and sidewalk delivery, unless an exception is granted or the new address area is a continuation of an existing block. The manual continues to provide that customers can request changes to their mode of delivery on a hardship basis, which USPS considers “where service by existing methods would impose an extreme physical hardship on an individual customer.”USPS to implement delivery mode conversions on a mandatory basis. Instead USPS is required to obtain customer signatures to document that a delivery mode conversion is made on a voluntary basis before the delivery mode is changed. Finally, the manual does not authorize In 2013, USPS implemented voluntary conversion for businesses as part of its Delivering Results, Innovation, Value and Efficiency (DRIVE) initiative. In this effort, USPS provides conversion goals to its field officials who then identify specific businesses as candidates for conversion from door delivery to centralized delivery. USPS field officials told us that strip malls and high-rise office buildings receiving door delivery are good candidates for conversion because these delivery routes are labor intensive and the facilities could have suitable space to install a centralized mail receptacle. For example, in Chicago, USPS converted a high-rise office building, with mail delivered individually to all 50 tenant suites and twice a day mail pick-up, to centralized delivery and pickup. However, the DRIVE program has not converted as many businesses from door delivery as originally expected, and large savings are not likely due to the low number of conversions that have occurred. According to a USPS official, USPS set an overall goal for the total number of conversions for each fiscal year starting with fiscal year 2013. For the first year, USPS set a nationwide goal of voluntary conversions of 279,718 of the approximately 5.6 million business door delivery points to centralized delivery. USPS achieved 43,333 such conversions, about 15 percent of its goal—or about 0.8 percent—of the about 5.6 million business door delivery points. USPS officials explained that based on the fiscal year 2013 results, they set a lower goal of 34,652 voluntary business conversions for fiscal year 2014. They reported 11,488 conversions in the first quarter—about 33 percent of their goal. This initiative is solely focused on business conversions, and USPS has not set any goals for converting residential door delivery points to different modes of delivery. USPS did achieve some voluntary residential conversions in fiscal year 2013. USPS reported 36,302 out of about 32.2 million residential door delivery points—or about 0.1 percent—were converted to centralized delivery. As stated above, USPS’s potential savings estimates show that achieving large savings would require large-scale door delivery conversions. However, according to USPS officials, USPS has been reluctant to mandate conversions. Under the voluntary conversion process, customers on a route may choose to maintain door delivery, or a high number of customers may request and receive hardship exemptions for elderly persons or those with special needs, which would allow them to keep door delivery service, thus reducing the number of conversions and lowering potential savings. Furthermore, field officials we spoke with said that voluntary conversions are time consuming and labor intensive due to the amount of direct outreach and follow-up required, and a short-term cost increase may result from undertaking these efforts to generate long- term savings. Large-scale mandatory conversions have the potential to achieve large savings, but USPS faces impediments, such as customer inconvenience and safety and security concerns. USPS officials and several mailing industry stakeholders we spoke with told us that many postal customers are resistant to service changes, especially changes that might inconvenience them. USPS officials told us that some of the concerns could be addressed though hardship exceptions to continue door delivery. Stakeholders also said that service changes would particularly affect city letter carriers, by reducing the total number of carrier work hours and associated routes.concerns could diminish as they become accustomed to the new service. However, USPS officials stated some customer Among the impediments to increased use of less costly modes were concerns raised about personal safety and mail security. Several mailing industry stakeholders we met with identified the placement of CBUs in convenient, well lit and secure areas as a means to ensure customer safety when accessing mail, especially in higher crime areas. USPS officials said they take placement of centralized delivery locations into consideration, as both carriers and customers are affected when a CBU is placed in an improper or unsafe location. For example, in Chicago, USPS officials said they converted existing door delivery in some areas of the city to centralized delivery to address the personal safety concerns of residents and mail carriers generated from increased crime rates in those areas of the city. Some stakeholders also noted mail security issues, such as the potential for increases in theft of mail from people picking up their mail or break-ins to centralized mail receptacles. Others indicated that there are opportunities to increase mail security by converting the mode of delivery from unlocked mailboxes, like those affixed near doors or many curbline mail boxes, to CBUs with locked receptacles for mail and parcels. USPS officials told us that the new model CBUs are more secure than the old model NDCBUs, which are considered legacy equipment. The materials used to construct CBUs combined with design changes have improved the security of mail delivered to them. Although USPS engineering officials told us they test the security of each type of cluster box and provide some guidance on door and curbline mail receptacles, no data are available on the relative security of each receptacle type once they are put in place and in use. Data are collected on mail theft and convictions for mail theft and other mail security violations, but these data do not generally specify the type of mail receptacle involved in a mail theft or related incident. We met with officials of the U.S. Postal Inspection Service, which collects complaint data on lost or stolen mail, and they told us that while there are fields on the online form for mail receptacle type, these fields usually are not completed by the mail customer reporting the theft. Customers can also call a USPS help line or go to a post office in-person to report mail loss or theft, and often in those cases the mail receptacle data are not collected. U.S. Postal Inspection Service officials said that for their investigative purposes, the complaint does not need to include the receptacle type in order to pursue cases of lost or stolen mail. See appendix IV for available data on convictions for mail theft and other mail security violations. Finally, according to USPS officials, there are places, such as densely populated urban areas, where it is difficult to find suitable locations for CBUs. This could make converting existing door delivery to centralized or curbline boxes that meet both customer needs and USPS requirements difficult. Field officials we spoke with in Washington, D.C., and Los Angeles, California, noted this concern. For example, a field official in Washington, D.C. noted that with extensive street parking and limited common space, it can be very difficult to find a suitable location for CBU units. A USPS official noted that if public space was not available for a CBU on a delivery route, gaining access rights to install one requires working with local governments and can be cumbersome. He said that easements or other property access rights vary across localities and regions and some neighborhoods would not have sufficient or convenient space available for installation of CBUs. However, as shown in fig. 1, CBUs and other centralized delivery methods have a range of types and sizes that could be used to accommodate the available footprint and placement options. USPS cost estimates for each mode of delivery and potential savings from converting door delivery points to other delivery modes are based on a 20-year-old study and are of questionable accuracy. Although USPS extrapolated fiscal year 1994 delivery mode costs to fiscal year 2012 by applying inflationary increases to the cost of each delivery mode, it is unclear whether this extrapolation reflects the actual change in postal costs, such as changes in carrier wage and benefits, which increased faster than inflation over this period. Because USPS productivity also increased, the accuracy of USPS’s fiscal year 2012 cost estimates is unknown. USPS officials acknowledge the weakness of USPS’s delivery mode data. We believe that accurate data are needed for Congress, USPS, and other stakeholders to understand the cost-saving potential for delivery mode conversions as compared with other savings options to improve USPS’s financial viability. This is particularly relevant because pending postal reform legislation would mandate the conversion of some delivery points from costly door delivery to other modes. USPS’s estimates of the cost of a new delivery study using ongoing operational data at $75,000 to $100,000, or a more extensive study at $250,000 to $750,000 do not seem cost prohibitive given USPS’s annual expenses of about $72 billion. Thus, we conclude that the benefits of obtaining current, reliable data on delivery mode costs would make the cost of doing so a worthwhile investment. To improve information needed for USPS and congressional decision making as well as transparency for all stakeholders, we recommend that the Postmaster General and USPS’s executive leaders collect and analyze updated data on delivery mode costs and the potential savings from converting delivery points to less costly modes of delivery and establish a time frame for publicly reporting the results. We provided a draft of this report to USPS for review and comment. USPS provided comments, which are reprinted in appendix V. USPS concurred with our recommendation and agreed that steps should be taken to improve the accuracy and reliability of delivery mode cost estimates and potential savings from converting delivery points to less costly modes of delivery. Further, USPS plans to initiate efforts to determine how to most efficiently capture cost data, create a project plan, and determine a timeline to produce results. If you or your staff have any questions about this report, please contact me at 202-512-2834 or stjamesl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff making key contributions to this report are listed in appendix VI. To discuss the costs and potential savings associated with converting to less costly delivery modes, we obtained available U.S. Postal Service (USPS) data on the cost of each delivery mode from fiscal years 1994 through 2012, the most recent year for which data are available. We obtained USPS documentation on the assumptions and methodology used in developing these cost data. This documentation included a USPS report of the 1994 USPS study that measured the costs of each mode of delivery and the USPS methodology for increasing these costs by inflation to estimate delivery mode costs from fiscal years 1995 through 2012. We requested that USPS officials generate estimates, similar to those they created for Congress and USPS internal use, of the potential savings from increasing its reliance on less costly modes of delivery. We reviewed documentation of the assumptions, methodology, calculations, and underlying data for these estimates. We had extensive discussions with USPS officials regarding delivery mode cost and savings data, and obtained detailed written responses to follow-up questions regarding their reliability. We identified concerns with the quality of available USPS delivery mode cost and savings data. We interviewed USPS officials about the methodology used to develop the estimates and determined that these were the only data available and found the data to have limitations for estimating delivery costs and potential savings, which we discuss in the report. Further, we reviewed whether there were any opportunities to improve the quality of these data. USPS officials provided detailed written responses that identified such opportunities, including the scope, methodology, and estimated costs of a new USPS study to measure delivery mode costs, and USPS’s views on the merits of such a study. To discuss USPS’s actions to convert delivery modes to less costly modes and any impediments to conversion, we reviewed pertinent USPS documentation, such as information on the Delivering Results, Innovation, Value and Efficiency (DRIVE) initiative, and interviewed USPS delivery operations officials and field officials, on USPS’s efforts to promote voluntary conversion of some business addresses to less costly modes of delivery. We also obtained written responses from USPS officials and interviewed them on policies, regulations, and procedures that govern decisions when adding new delivery points and converting existing delivery points to a different mode of delivery. These interviews included USPS headquarters officials in the Washington, D.C., area and USPS field officials in Washington, D.C.; Chicago, IL; Seattle, WA; Los Angeles, CA; and Dallas and Coppell, TX. We selected these field locations to reflect different population densities and climates, near GAO headquarters and field offices, and geographically dispersed in five of the seven USPS areas.use of less costly delivery modes, we obtained USPS data on conversions of delivery points to less costly modes of delivery for fiscal year 2013 and the first quarter of fiscal year 2014, the only periods for which national data were available. We also obtained and reviewed USPS data on the number of delivery points for each mode of delivery for fiscal years 2008 through 2013. We obtained written responses regarding the reliability of these data, analyzed their consistency with other USPS data, and determined that they were sufficiently reliable for the purposes of this report. To identify any impediments to delivery mode conversions, we obtained written USPS responses, including some made in recent public proceedings, and interviewed USPS headquarters and field officials. In addition, we interviewed postal stakeholders, including postal unions representing city and rural letter carriers. We also interviewed 11 organizations representing different groups that use the mail in their business including Alliance of Nonprofit Mailers, American Catalog Mailers Association, Association for Magazine Media, Association of Postal Commerce, Direct Marketing Association, Greeting Card Association, Major Mailers Association, National Newspaper Association, Newspaper Association of America, Parcel Shippers Association, and Saturation Mailers Coalition. We also met with U.S. Postal Inspection Service officials to obtain information on mail security issues and discussed mail and identity theft generally, including complaints made to the Inspection Service in these areas. We obtained data on convictions for offenses related to mail theft maintained by the U.S. Postal Inspection Service and the USPS Office of Inspector General, obtained written and oral responses regarding data reliability, and determined the data were sufficiently reliable for the purposes of this report. Cluster boxes include Cluster Box Units and Neighborhood Delivery and Cluster Box Units. Other centralized delivery includes delivery to centralized locations such as apartment house mailboxes. Door delivery/other includes door delivery to mail slots, mailboxes near the door, and locations within office buildings, as well as other locations, such as along sidewalks. Most door delivery/other points receive door delivery, according to USPS officials. All other delivery points include various types of Post Office Boxes, delivery points where a university or other entity then provides final delivery to the recipient, and delivery points where the recipient picks up mail in bulk quantities such as remittance mail. Cluster boxes include Cluster Box Units and Neighborhood Delivery and Cluster Box Units. Other centralized delivery includes delivery to centralized locations such as apartment house mailboxes. Door delivery/other includes door delivery to mail slots, mailboxes near the door, and locations within office buildings, as well as other locations, such as along sidewalks. Most door delivery/other points receive door delivery, according to USPS officials. All other delivery points include various types of Post Office Boxes, delivery points where a university or other entity then provides final delivery to the recipient, and delivery points where the recipient picks up mail in bulk quantities such as remittance mail. USPS estimates of delivery mode costs rely on a 1994 study of delivery mode costs, which is the most recent study that USPS has conducted in this area. USPS continues to rely on this study to estimate the potential for savings through the option of converting addresses to less costly modes of delivery. According to a USPS report on the 1994 study, USPS employees and retired postal managers served as data collectors who, through direct observation, recorded the actual time to deliver mail for each mode of delivery from July 5, 1994 to September 9, 1994 on 735 USPS also estimated the time randomly selected city delivery routes.required for carriers to organize their mail for each mode of delivery. The cost of delivery was computed by factoring in the compensation costs associated with delivery times, delivery vehicle costs, as well as the costs to purchase, install, and maintain cluster boxes. USPS subsequently applied an inflation adjustment to the 1994 data to increase the cost for each delivery mode according to the annual change in the Consumer Price Index for All Urban Consumers (CPI-U), which produced cost estimates for fiscal years 1995 through 2012 (see fig. 5 in report). This inflation adjustment increased all delivery mode costs by the same percentage. (18 U.S.C. § 1705). According to the USPS Office of Inspector General, where federal prosecution is declined and state or local prosecution is sought, charges can include variations of larceny/theft, embezzlement, and misuse of public position/public trust based on the jurisdiction. In addition to the individuals named above, Amelia Shachoy, Assistant Director; Derrick Collins; Geoffrey Hamilton; Kenneth John; Joshua Ormond; Amy Rosewarne; Kelly Rubin; and Betsey Ward-Jenks made key contributions to this report.

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