Postal Service

In response to a congressional request, GAO reviewed the Postal Service (USPS) Board of Governors' most recent actions in connection with the ZIP-Plus-4 program concerning the switch from single-line to multiline optical character readers (OCR), specifically: (1) how much savings USPS forgoes each workday it operates without multiline OCR; (2) whether USPS will end up with a suitable single-line-converted-to-multiline machine; (3) what use USPS will make of the single-line OCR that are not converted to multiline technology; and (4) whether the latest USPS estimate of future ZIP-Plus-4 use is realistic.

As a result of its reevaluation of the ZIP-Plus-4 program, the Board decided to acquire multiline OCR by converting the single-line OCR purchased in the Phase II contract to multiline and by purchasing up to 250 new Phase III multiline OCR to replace the Phase I machines. The Board estimated that delaying installation of multiline OCR could cost as much as $1.6 million per day. GAO estimated that multiline OCR could bring savings of from $497,000 to $1 million per day, depending on the level of ZIP-Plus-4 usage and the bar-coding rate. GAO noted that: (1) since the two companies competing for the conversion contract are also the only competitors for the Phase III contract, the technology used for the new machines should also apply to the conversion kit, ensuring that the kits will meet USPS needs; (2) USPS is examining several options for using Phase I single-line OCR, including processing collection mail, bar-code sorting, and processing mail at smaller post offices not scheduled for automation; (3) USPS is committed to having businesses use ZIP-Plus-4 address codes and plans to extend its eventual use to all classes of mail by changing basic postage rates and incentives; and (4) current USPS estimates of ZIP-Plus-4 usage through 1989 appear realistic, although the introduction of multiline OCR could generate confusion among businesses as to whether they should adopt ZIP-Plus-4, especially if OCR lessen its discount value.