Postal Service

To improve productivity, the U.S. Postal Service has begun a $5-billion automation project that will continue through 1996. Although the program is producing savings in some areas, automation is unlikely to reverse the long-standing tendency for Postal Service costs to outpace inflation. Notwithstanding the decrease in career employment and additional automation that was put in place in 1991, operating expenses for the year grew by almost seven percent and were $295 million more than expected. The decrease in career employment was offset considerably by increases in overtime and noncareer employees. More than half of the work in the Postal Service is not directly affected by automation, and savings achieved by automation are being overwhelmed by increases in labor costs. Finally, Postal Service audits of postal operations have identified inefficiencies in the use of people and equipment in automation--more than $187 million in lost savings in fiscal years 1990 and 1991 alone.

GAO found that: (1) although it provides one of the best and most needed cost savings opportunities for USPS, automation is unlikely to be a panacea that will reverse the tendency for costs to outpace inflation; (2) in fiscal year 1991, USPS operating expenses were $295 million more than expected despite a decrease in career employment and additional automation; (3) the decrease in career employment was offset by increases in overtime and noncareer employees; (4) although USPS handled less mail in 1991 than it did in the previous year, it used more work hours; (5) the number of hours worked decreased in functions most directly affected by automation, but the 1-percent reduction over the previous year was only about about 65 percent of the planned amount due to an unexpected increase in work that directly supports mail distribution and a failure to capture savings in time spent by carriers preparing the mail for delivery; (6) overhead functions and work load subject to automation had increases that offset any savings; (7) work-hour savings are also being overwhelmed by annual increases in labor costs; (8) USPS audits of postal operations identified over $187 million in potential savings that were not captured due to inefficient personnel and equipment management in automation and related operations; and (9) the magnitude of management challenges compared to the work-year savings being captured by automation makes it unlikely that the automation program represents a breakthrough in changing the upward trend of overall postal costs.