Conversion to Automated Mail Processing Should Continue

In response to a congressional request, GAO assessed the automatic mail processing equipment which the U.S. Postal Service (USPS) is buying and the nine-digit ZIP Code system (ZIP Plus-4) which USPS plans to implement. GAO reviewed the accuracy of USPS financial projections, the likelihood that the new equipment will perform as intended, and the potential impact of ZIP Plus-4 mailers.

Because the cost-effectiveness of ZIP Plus-4 would hinge heavily on voluntary participation by business mailers and such participation is not certain, GAO could not without qualification advise USPS to move forward with ZIP Plus-4. However, GAO believes that the incremental gain in moving to ZIP Plus-4 will be so great that the move would be more than justified. Householders' use of ZIP Plus-4 would help reduce mail processing costs but would not be critical to the cost-effectiveness of ZIP Plus-4. However, GAO endorsed the acquisition of the new equipment and its use to automate the processing of five-digit ZIP Code mail, provided that it will perform adequately. Even if the equipment performs adequately, there will still be risks associated with its use. Performance assumptions which USPS used in its economic analysis to justify the automation program were based on assumed future improvements. Furthermore, testing and evaluation procedures used during the analysis were not adequate to measure the performance of the equipment or determine the need for design changes, and USPS may have initial problems maintaining its new equipment. However, given the USPS labor intensive operations and the opportunity that automation offers to reduce labor costs, GAO considered these risks acceptable.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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