U.S. Postal Service
Data Needed to Assess the Effectiveness of Outsourcing
Gao ID: GAO-08-787 July 24, 2008
The U.S. Postal Service (the Service) has a long history of contracting out postal functions, such as mail transportation, mail delivery in rural areas, vehicle and equipment maintenance, and retail postal services. However, postal employees also perform many of these same functions and unions representing these employees have concerns about the scope and impact of outsourcing. The objectives of this requested report are to assess (1) the circumstances under which the Service can outsource postal functions, how it decides to outsource, and the extent to which it has outsourced; (2) how the Service's management processes compare for contractors and postal employees; and (3) the results, including any savings, and key challenges related to the Service's outsourcing activities. GAO reviewed applicable statutes, collective bargaining agreements, postal processes and outsourcing data, and interviewed postal union and management officials.
The Service has no statutory restrictions on the type of work it may outsource, but collective bargaining agreements with its unions impose some process requirements and limitations. When evaluating outsourcing proposals, the Service must consider five factors--public interest, cost, efficiency, availability of equipment, and qualification of employees--and determine whether outsourcing will have a "significant impact" on work performed by postal employees covered by collective bargaining agreements. If so, it must compare the costs of performing proposed work with postal employees and with a contractor, notify the affected union that it is considering outsourcing, and consider union input before making a decision. We could not determine the Service's total outsourcing contracts related to bargaining unit work, because the Service does not separately track these contracts. It did provide data on some outsourcing that has impacted work by employees of its four major unions in the areas of retail, processing, transportation, and delivery. The Service evaluates contractors and postal employees using similar suitability and performance standards, but uses different management processes. The Service recently revised its drug screening procedures so they are now similar for both groups. The Service manages contractors through specific performance requirements, as compared to Service policies and collective bargaining agreements for postal employees. Finally, the Service has mechanisms to evaluate performance and take actions related to performance problems for both, but does not compile performance data to permit comparisons between contractors and postal employees. The Service does not have a comprehensive mechanism for measuring results, including any actual savings; therefore, it could not provide information on the effectiveness of its outsourcing. Without cost-savings data, postal managers, stakeholders and Congress cannot assess the risk and value of outsourcing. Also, accountability for results is limited. The Service has stated that it will explore outsourcing opportunities, and postal unions are concerned that the Service's use of contractors for delivery service is growing as shown below. Proposed legislation to limit the Service's outsourcing is pending in Congress, which the Service says could limit its ability to contain costs. Key challenges include whether the Service and its unions can reach agreement on outsourcing issues through collective bargaining and whether the Service can provide analysis to substantiate the benefits of outsourcing.
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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GAO-08-787, U.S. Postal Service: Data Needed to Assess the Effectiveness of Outsourcing
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
July 2008:
U.S. Postal Service:
Data Needed to Assess the Effectiveness of Outsourcing:
GAO-08-787:
GAO Highlights:
Highlights of GAO-08-787, a report to congressional requesters.
Why GAO Did This Study:
The U.S. Postal Service (the Service) has a long history of contracting
out postal functions, such as mail transportation, mail delivery in
rural areas, vehicle and equipment maintenance, and retail postal
services. However, postal employees also perform many of these same
functions and unions representing these employees have concerns about
the scope and impact of outsourcing. The objectives of this requested
report are to assess (1) the circumstances under which the Service can
outsource postal functions, how it decides to outsource, and the extent
to which it has outsourced; (2) how the Service‘s management processes
compare for contractors and postal employees; and (3) the results,
including any savings, and key challenges related to the Service‘s
outsourcing activities. GAO reviewed applicable statutes, collective
bargaining agreements, postal processes and outsourcing data, and
interviewed postal union and management officials.
What GAO Found:
The Service has no statutory restrictions on the type of work it may
outsource, but collective bargaining agreements with its unions impose
some process requirements and limitations. When evaluating outsourcing
proposals, the Service must consider five factors”public interest,
cost, efficiency, availability of equipment, and qualification of
employees”and determine whether outsourcing will have a ’significant
impact“ on work performed by postal employees covered by collective
bargaining agreements. If so, it must compare the costs of performing
proposed work with postal employees and with a contractor, notify the
affected union that it is considering outsourcing, and consider union
input before making a decision. We could not determine the Service‘s
total outsourcing contracts related to bargaining unit work, because
the Service does not separately track these contracts. It did provide
data on some outsourcing that has impacted work by employees of its
four major unions in the areas of retail, processing, transportation,
and delivery.
The Service evaluates contractors and postal employees using similar
suitability and performance standards, but uses different management
processes. The Service recently revised its drug screening procedures
so they are now similar for both groups. The Service manages
contractors through specific performance requirements, as compared to
Service policies and collective bargaining agreements for postal
employees. Finally, the Service has mechanisms to evaluate performance
and take actions related to performance problems for both, but does not
compile performance data to permit comparisons between contractors and
postal employees.
The Service does not have a comprehensive mechanism for measuring
results, including any actual savings; therefore, it could not provide
information on the effectiveness of its outsourcing. Without cost-
savings data, postal managers, stakeholders and Congress cannot assess
the risk and value of outsourcing. Also, accountability for results is
limited. The Service has stated that it will explore outsourcing
opportunities, and postal unions are concerned that the Service‘s use
of contractors for delivery service is growing as shown below.
Proposed legislation to limit the Service‘s outsourcing is pending in
Congress, which the Service says could limit its ability to contain
costs. Key challenges include whether the Service and its unions can
reach agreement on outsourcing issues through collective bargaining and
whether the Service can provide analysis to substantiate the benefits
of outsourcing.
Table: Comparison of Portion of Total Number and Growth in Delivery
Routes Serviced by City, Rural, and Contract Letter Carriers, Fiscal
Years 1998 and 2007:
Carrier type: City;
Percentage of total routes, 1998: 71.2%; Percentage of total routes,
2007: 66.3%; Percentage of growth in total routes, 1998 to 2007: -2.3%.
Carrier type: Rural;
Percentage of total routes, 1998: 26.5%; Percentage of total routes,
2007: 31.0%; Percentage of growth in total routes, 1998 to 2007: 22.5%.
Carrier type: Contractor;
Percentage of total routes, 1998: 2.3%; Percentage of total routes,
2007: 2.7%; Percentage of growth in total routes, 1998 to 2007: 22.9%.
Source: GAO analysis of Service data.
[End of table]
What GAO Recommends:
To determine the effectiveness of postal outsourcing, improve
management accountability, and support congressional oversight, GAO
recommends that the Postmaster General should establish a process to
track the results of outsourcing activities that are subject to
collective bargaining and report these results to Congress. The Service
generally agreed with our findings and first recommendation, but not to
provide Congress with information about outsourcing results.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-787]. For more
information, contact Katherine Siggerud at (202) 512-2834 or
siggerudk@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
The Key Requirements Related to Postal Outsourcing, the Service's
Process for Making Outsourcing Decisions, and the Extent of Its
Outsourcing:
The Service Holds Both Contractors and Postal Employees to Similar
Standards but Uses Different Processes to Manage Them:
The Service Lacks Data to Demonstrate the Results of Outsourcing and
Address Challenges That May Limit Further Outsourcing:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: National Outsourcing Initiatives Since 1996 That Did Not
Have a Significant Impact on Postal Unions:
Appendix III: Comments from the U.S. Postal Service:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Change in Total Numbers of Bargaining Unit and Career Postal
Service Employees from 1998 through 2007:
Table 2: Comparison of Fiscal Year 2007 Average Delivery and
Transportation Costs for Postal and Contracted Providers:
Table 3: Comparison of National-and Field-Level Outsourcing Processes:
Table 4: Five National Outsourcing Initiatives Having a Significant
Impact on Postal Unions:
Table 5: Comparison of Number and Growth in Deliveries and Routes for
City, Rural, and Contract Letter Carriers, Fiscal Years 1998 and 2007:
Table 6: Comparison of Suitability Standards for Potential Contractors
and Service Employees:
Abbreviations:
AMC: Air Mail Center:
APWU: American Postal Workers Union:
CDS: Contract Delivery Service:
OIG: U.S. Postal Service Office of Inspector General:
SIAG: Strategic Initiatives Action Group:
[End of section]
United States Government Accountability Office: Washington, DC 20548:
July 24, 2008:
The Honorable Tom Carper:
Chairman:
The Honorable Tom Coburn, M.D.
Ranking Member:
Subcommittee on Federal Financial Management, Government Information,
Federal Services, and International Security: Committee on Homeland
Security and Governmental Affairs: United States Senate:
The Honorable Danny K. Davis:
Chairman:
The Honorable Kenny Marchant:
Ranking Member:
Subcommittee on Federal Workforce, Postal Service, and the District of
Columbia: Committee on Oversight and Government Reform: House of
Representatives:
The United States Postal Service (Service) continues to face the
challenge of generating sufficient revenue from a changing, less
profitable mix of mail while operating under a cap that limits price
increases for certain classes of mail to the rate of inflation.
Obligations stemming from the Service's universal service mandate, to
provide postal services to all parts of the country, continue to
increase the number of deliveries by about 1.7 million new addresses
per year. Meanwhile, since fiscal year 2000, the number of mail pieces
delivered to each address and the average revenue per delivery have
decreased. To address these challenges, the Service stated in its 2002
Transformation Plan that it planned to achieve cost savings of $5
billion over 5 years, partly by improving operational efficiency. Since
then, the Service has reported achieving billions in cost-savings,
improving productivity, and reducing its workforce by more than 100,000
employees. The Service set a goal to cut another $5 billion in costs
during fiscal years 2006 through 2010 by continuing to increase
productivity and improve operations. To achieve this goal, it has
initiatives under way to further reduce manual mail handling, increase
the number of deliveries for each mail route, and optimize its
transportation and mail processing networks.
Some of the Service's efforts to control costs involve outsourcing.
Service officials have stated that through outsourcing, the Service
seeks to improve its operations and customer service as well as save
money. In this report, we use the term "outsourcing" to refer to
services that are purchased from external entities and that are also,
or may be, performed by postal employees covered by collective
bargaining agreements, which, as of the end of fiscal year 2007,
included about 85 percent of the Service's 685,000 career postal
employees. The Service has a long history of outsourcing postal
functions, such as mail transportation services, mail delivery in rural
areas, contract stations for retail services, and vehicle and equipment
maintenance. However, postal employees also perform many of these same
functions and unions representing these employees have had long-
standing concerns about the impact of outsourcing on job security.
[Footnote 1] Current collective bargaining agreements, and accompanying
memoranda of understanding, between the Service and unions contain
clauses that specifically address outsourcing.[Footnote 2] At
congressional hearings in 2007, the unions representing city and rural
carriers raised concerns about the Service's expanded use of
outsourcing to provide delivery services, including concerns about the
Service's oversight of these services and the quality of services
provided. Subsequently, the Service and its carrier unions agreed to
discuss the scope of the Service's outsourcing. Currently, the parties
plan to complete these discussions by the end of September 2008. In
2007, bills were introduced in the House and the Senate that could
limit the Service's ability to outsource.[Footnote 3] Service officials
have said that these bills, if enacted, could significantly impede
their efforts to reduce costs.
To assist Congress in understanding the Service's outsourcing
activities, this report assesses (1) the circumstances under which the
Service can outsource postal functions, how it decides to outsource,
and the extent to which it has outsourced; (2) how the Service's
management processes, including suitability (hiring and screening
procedures) and performance evaluation, for contractors compare to
those for postal employees; and (3) the results--including any costs,
savings, or other outcomes--of the Service's outsourcing efforts and
the challenges facing the Service related to outsourcing.
To address the circumstances under which the Service can outsource
postal functions, we reviewed statutory and regulatory requirements and
the Service's most recent collective bargaining agreements with its
four major unions.[Footnote 4] We focused our review on the Service's
outsourcing activities related to major postal functional areas and the
bargaining unit work of its four major unions, including
transportation, delivery, mail processing, and retail functions. To
determine how the Service decides to outsource, we interviewed postal
officials at Service headquarters and the Southwest Area,[Footnote 5]
employee union representatives, management association representatives,
and representatives of the National Star Route Mail Contractors
Association and reviewed relevant postal documents. To evaluate the
extent to which the Service has outsourced, we interviewed Service
officials at headquarters and in the Southwest Area and obtained and
reviewed documents related to the Service's outsourcing efforts,
including 46 national-level outsourcing initiatives since 1996, as well
as proposed initiatives. In addition, we obtained, reviewed, and
analyzed information on outsourced transportation and delivery,
including data pertaining to routes and delivery points for the three
types of carriers--city, rural, and contract delivery service. To
compare the Service's management processes for suitability and
performance evaluation of contractors and postal employees, we reviewed
the Service's policies and procedures related to hiring qualifications,
screening requirements, and performance evaluation for contractors and
postal employees. To evaluate the results, including any costs,
savings, and other outcomes of its outsourcing activities, we also
reviewed the Service's cost estimates, relevant budget information, and
available performance data for the outsourcing projects initiated from
1996 through 2007. We requested comments on a draft of this report from
the Service and we discuss its comments, which appear in appendix III,
later in the report. We conducted this performance audit from August
2007 through July 2008 in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Results in Brief:
The Service has no statutory limitations on the type of work that it
can outsource and has processes and procedures for making outsourcing
decisions, including a specific process to comply with the collective
bargaining agreements with its unions, but we could not determine the
extent of the Service's total outsourcing activities. Applicable
statutes contain no specific restriction on outsourcing and
specifically authorize the Service to enter into contracts for
transportation services.[Footnote 6] However, the Service's collective
bargaining agreements with the postal unions may include provisions
that restrict outsourcing in certain areas. For example, in its most
recent agreement with the City Carriers, the Service and the union
agreed to specific restrictions on outsourcing delivery services in
areas where delivery is provided exclusively by city carriers.
Additionally, Article 32 of the collective bargaining agreements
defines procedural steps that the Service must follow when considering
an outsourcing decision, which both the Service and unions say do not
restrict the Service from outsourcing. Article 32 provisions require
the Service to consider five factors--public interest, cost,
efficiency, availability of equipment, and qualification of employees-
-when evaluating the need to outsource. In addition, the Service must
determine whether the proposed outsourcing will have a significant
impact on the bargaining unit and, if so, it must notify the union and
allow it to provide input into the decision-making process. Service
officials told us that when making these evaluations, they do not use
formal criteria but consider such information as the numbers of
employees and facilities affected, the number of work hours at issue,
and the geographic distribution of the employees and sites affected.
Postal employee unions have disagreed with a number of the Service's
decisions related to outsourcing and grieved them but have also reached
agreement with the Service through collective bargaining to some
changes in its outsourcing decision-making process. Overall, the
Service could not provide information on the total extent of its
outsourcing activities that have impacted bargaining unit work, because
some contracts related to bargaining unit work are not separately
tracked. Since 1996, the Service has evaluated and implemented 46
national-level outsourcing proposals under the requirements of Article
32 and determined that 5, which involved retail and mail processing
functions, had a significant impact on bargaining unit work.[Footnote
7] Most of the information provided by the Service on its outsourcing
activities was related to these five proposals. In addition, the
Service provided information related to its total contract costs for
transportation of about $6.5 billion in fiscal year 2007, but could not
separately report on the subset of transportation contracts that have
an impact on bargaining unit work. Outsourced delivery service accounts
for approximately 2 percent of all deliveries, and all contracts for
delivery service have an impact on bargaining unit work. The Postmaster
General has testified that the Service has been exploring the expanded
use of contracted delivery services since, according to the Service, it
is one of the most cost-effective delivery modes available.
The Service evaluates contractors and postal employees using similar
suitability and performance standards, while holding them accountable
using different management processes.[Footnote 8] For example, to
determine suitability for employment, both potential contractors who
would come into contact with the mail and applicants for Service
employment are required to undergo background checks. In the fall of
2007, the Service revised its drug screening procedures so that it had
similar criteria to evaluate both potential delivery service
contractors and applicants. The performance criteria in contracts are
similar to standards applied to postal employees or are designed to
achieve the same goals. For example, both delivery service contractors
and postal rural carriers have similar responsibilities for sorting and
delivering mail to their routes within established time frames. Once
the Service has contracted for an outsourced function or hired an
individual as a full-time Service employee, the Service manages the
contractor and the employee differently. The Service manages
contractors through the terms of a contract, which generally includes
specific performance requirements, while it manages employees through
various policies and provisions in the collective bargaining
agreements. The Service has mechanisms to monitor and take actions
related to performance problems for both contractors and postal
employees. Furthermore, the Service has established procedures for
actions it can take if a contractor deviates from or fails to achieve
performance criteria, up to and including contract termination.
Similarly, the Service has established procedures that employees are
required to follow and can discipline employees for failure to comply.
However, the Service does not know how the performance of postal
employees compares to that of contractors since it does not centrally
collect data on performance.
The Service lacks information and data about the results of its
outsourcing efforts that could be used to determine whether they are
effective and to support future outsourcing in the face of possible
challenges. For example, the Service does not know the savings related
to its outsourcing efforts because it does not have a process to
evaluate the impact of outsourcing or to track actual savings. Instead,
officials told us that the Service projects savings from a wide range
of efforts and initiatives, including outsourcing, and reduces its
budget accordingly. Postal employee unions have expressed skepticism
about the value of outsourcing and have raised questions about the
reality of cost savings and implications of outsourcing. Without
information on results, such as costs, savings, or efficiency gains,
Service managers, stakeholders, and Congress are not able to assess the
risk and value of outsourcing and accountability for results is
limited. Looking forward, the Service is considering another major
outsourcing initiative involving its bulk mail processing network. This
initiative is related to work covered by collective bargaining
agreements with two unions. However, the Service faces a number of
challenges related to outsourcing, including differing messages from
pending legislation and the Administration on outsourcing and the
potential impact of outsourcing on its relations with its employee
unions. For example, the current and previous administrations have
advanced proposals to promote more efficient and effective government
operations, including by outsourcing. On the other hand, two bills
pending in Congress would limit the Service's ability to outsource
delivery service or require the Service to bargain with postal employee
unions before entering into certain contracts. The Service has stated
that these bills would constrain its ability to achieve cost reductions
and that contractors may operate more efficiently than the Service in a
number of ways including by compensating its employees at lower rates
than the Postal Service and by employing more part-time workers. Postal
unions have testified recently about their concerns related to the
Service's expanded use of contractors for delivery service. Both the
Postmaster General and postal union representatives have stated that
issues related to outsourcing should be resolved within the context of
collective bargaining agreements. The Service continues discussions
with the City and Rural Carriers to reach agreement on how to define
the scope of its delivery outsourcing activities. As Congress continues
to debate the value of outsourcing, the Service lacks data to
substantiate the results, including cost savings, it says it has
achieved through outsourcing and to support its position that
restrictions on outsourcing could constrain its efforts to reduce
costs.
To determine the effectiveness of postal outsourcing, improve
management accountability and support congressional oversight in this
area, we are recommending that the Postmaster General should establish
a mechanism to measure the results, including any savings, of
outsourcing initiatives that are subject to its collective bargaining
agreements and better inform Congress by including these results in its
annual operations report to Congress. The Service generally agreed with
our findings and our first recommendation. However, it did not commit
to implementing our second recommendation to provide Congress with
information about the results of its outsourcing initiatives, which we
continue to believe is necessary to support congressional oversight.
Background:
The Service has a long history of contracting for mail transportation
dating back to the beginning of the Post Office in 1775. Since then,
the Service has contracted for mail to be carried by steamship,
stagecoach, horse, rail, airplane, motor vehicle, boat, snowmobile, and
even mule train into the Grand Canyon. In 1845, Congress passed
legislation to reduce mail transportation costs by moving from
contracts with stagecoach companies to contracts with individuals to
transport mail by horseback. The routes these individuals took became
known as star routes. Most star route carriers had 4-year contracts and
traveled by horse or horse-drawn vehicle until the early 20th century.
In 1948, Congress allowed the Postmaster General to renew 4-year
contracts to star route carriers with satisfactory service rather than
requiring the contracts to be competitively bid. Between 1960 and 1970,
star route miles more than doubled. In the 1970s, star routes
officially became known as highway contract routes.
There are three different types of highway contract routes:
* Transportation routes: Contractors transport mail between postal
facilities.
* Contract delivery service (CDS) (commonly referred to as box routes):
Contractors deliver mail and provide services similar to those provided
by postal rural carriers.
* Combination routes: Contractors provide a combination of mail
transportation between postal facilities and mail delivery services to
individual addresses along their routes.
In 2007, the Service had nearly 17,000 highway contract routes,
including 8,968 transportation routes, 6,708 CDS delivery routes, and
1,218 combination routes. The Service also contracts for air mail
transportation services with private contractors, including FedEx and
seven commercial airlines. In addition, it contracts for mail to be
transported by rail and boat.
The Service's outsourcing of mail transportation and some delivery
services predates the ability of postal employee unions to collectively
bargain. The Service established city delivery services provided by
postal letter carriers on designated city routes in 1863, but did not
initially extend delivery services to rural areas. Eventually, the
Service set up permanent rural routes with postal rural letter carriers
in 1902. The 1970 Postal Reorganization Ac[Footnote 9]t authorized
postal unions to collectively bargain with the Service on employee
wages, hours, and other terms and conditions of employment.
Subsequently, the unions negotiated for protection from layoffs. The
act provided for binding arbitration if an impasse persists 180 days
after the start of bargaining, unless parties agree to an alternate
process. Four postal unions represent most non-management postal
employees and negotiate for them during collective bargaining:
* The American Postal Workers Union represents various employees
including clerks, building and equipment maintenance employees, motor
vehicle operators, motor vehicle maintenance employees, and nurses;
* The National Association of Letter Carriers represents carriers who
deliver mail on city routes;
* The National Rural Letter Carriers' Association represents carriers
who deliver mail on rural routes; and:
* The National Postal Mail Handlers Union represents mail handlers who
work in postal processing facilities.
The Service has separate bargaining agreements with each union and in
2006 or 2007 signed agreements with all four unions that expire in
either 2010 or 2011.[Footnote 10]
The total number of career postal employees, as well as the number of
bargaining unit employees, declined 14 percent from 1998 through 2007
through attrition, as shown in table 1.
Table 1: Change in Total Numbers of Bargaining Unit and Career Postal
Service Employees from 1998 through 2007:
Bargaining unit: City Carriers;
1998 Employees: 240,813;
2007 Employees: 222,132;
Percentage of change: -8%.
Bargaining unit: Rural Carriers[A];
1998 Employees: 52,241; 2007
Employees: 67,584;
Percentage of change: 29%.
Bargaining unit: Mail Handlers;
1998 Employees: 62,247;
2007 Employees: 57,882;
Percentage of change: -7%.
Bargaining unit: APWU;
1998 Employees: 349,629;
2007 Employees: 258,384;
Percentage of change: -26%.
Bargaining unit: Total bargaining unit employment;
1998 Employees: 704,930;
2007 Employees: 605,982;
Percentage of change: -14%.
Bargaining unit: Total career Postal Service employment;
1998 Employees: 792,041;
2007 Employees: 684,762;
Percentage of change: -14%.
Source: GAO analysis of Service data.
[A] Includes only full-time rural carriers.
[End of table]
The Service achieved these reductions without layoffs but improved its
operational efficiency and productivity through increased automation
and other initiatives. These efficiency gains allowed the Service to
operate with fewer employees. According to the Service, there are
significant cost advantages to contracting for transportation services.
For example, although the service provided by the three different types
of delivery--city, rural and contract--is generally similar, the
Service states that there are significant cost differences between
them, primarily due to differences in each of the carriers'
compensation systems. The systems for city and rural carriers are
collectively bargained between the Service and its associated unions.
Generally speaking, city carriers are compensated on an hourly basis,
which can include overtime; rural carriers are compensated on a salary
basis; and contract carriers are compensated via a contract. Similarly,
there are significant cost differences between transportation provided
by Service employees and highway contract routes. According to the
Service, its fiscal year 2007 costs for delivery and transportation
services provided by postal employees and contractors are shown in
table 2.
Table 2: Comparison of Fiscal Year 2007 Average Delivery and
Transportation Costs for Postal and Contracted Providers:
Delivery: City carrier;
Average annual cost per delivery: Delivery: $211.00.
Delivery: Rural carrier;
Average annual cost per delivery: Delivery: $175.00.
Delivery: Contract delivery service;
Average annual cost per delivery: $109.00.
Transportation: Postal Service;
Average cost per mile: 7.59.
Transportation: Highway contract route;
Average cost per mile: 1.91.
Source: GAO presentation of Service data.
[End of table]
Furthermore, in the retail area, the Service establishes contract
postal units because they can provide the same service as a post office
but at less cost, since the Service does not incur building and
operating expenses associated with maintaining post offices. In 2007,
4,026 of the Service's 36,721 post offices, stations, and branches--or
11 percent--were contract postal units.[Footnote 11]
The Key Requirements Related to Postal Outsourcing, the Service's
Process for Making Outsourcing Decisions, and the Extent of Its
Outsourcing:
The Service has no statutory restrictions on the type of work it may
outsource, but union collective bargaining agreements impose some
limitations. Additionally, statutes and regulations authorize and guide
the Service's outsourcing process. The Service follows its normal
purchasing procedures for all outsourced services but additional
procedural steps are required to comply with collective bargaining
agreements in some outsourcing cases. Through the collective bargaining
process, employee unions have reached agreement with the Service that
resulted in changes to its outsourcing decision-making process.
However, the unions have also grieved a number of the Service's
decisions to outsource. Overall, we could not determine the extent of
the Service's outsourcing that has impacted bargaining unit work
because the Service does not separately track the subset of
transportation contracts that impact bargaining unit work. The Service
did provide data related to some of its outsourcing, including in its
retail, processing, and delivery functions. Since 1996, the Service
evaluated 46 national-level outsourcing proposals under the
requirements of Article 32 and determined that 5 had a significant
impact on bargaining unit work. The Service also provided data showing
that outsourced delivery service accounts for approximately 2 percent
of all deliveries.
Statutory Requirements and Collective Bargaining Provisions Related to
the Service's Outsourcing:
Outsourcing is accomplished through the Service's purchasing function
and statutes and regulations that apply to the Service's purchasing
function also apply to outsourcing.[Footnote 12] Applicable statutes
contain no specific restriction on outsourcing, and specifically, 39
U.S.C § 5005 authorizes the Service to enter into contracts for
transportation services. Additionally, the Service may negotiate or
enter into certain contracts without competition.[Footnote 13] For
example, the Service negotiated and awarded a contract without
competition to FedEx for air transportation services and can renew
highway transportation contracts without competition. In addition,
Congress has applied certain purchasing-related requirements to the
Service that apply to other federal government agencies but are not
applicable to private entities. For example, the Service Contract Act
of 1965 requires some Service contractors to pay minimum prevailing
wages and benefits to employees.
Collective bargaining agreements with the postal employee unions may
impose limitations on outsourcing in certain areas. For example, the
most recent City Carrier's collective bargaining agreement restricts
the Service from outsourcing delivery services in areas where only city
carriers provide mail delivery. Similarly, APWU's collective bargaining
agreement restricts some contracts for custodial services based on the
size of the area to be maintained.
The Service's collective bargaining agreements also each contain a
provision, Article 32, which establishes certain procedural
requirements to be conducted when making an outsourcing decision, but
does not, according to the Service and the unions, restrict the type of
work that can be outsourced. For example, Article 32 requires the
Service to evaluate how outsourcing proposals would affect bargaining
unit employees and, under certain circumstances, to notify the unions
of its intent to consider outsourcing and allow the unions to have
input into the decision-making process.
According to the Service, neither its purchasing regulations nor the
collective bargaining agreements restrict or limit a contractor's
ability to subcontract work it is contractually required to perform or
provide to the Service. However, the Service may include provisions in
a contract that govern subcontracting. For example, a contract may
require a contractor to notify the Service of its intent to
subcontract, thereby allowing it to assess the qualifications of the
proposed subcontractor with the same criteria used to assess the
contractor's qualifications.
The Service's Process for Making Outsourcing Decisions:
The Service uses its purchasing process for implementing outsourcing
decisions and performs additional steps when required to comply with
procedures in Article 32 of the collective bargaining agreements.
Outsourcing is formalized through a contractual relationship between
the Service and the service provider, whether the provider is a large
corporation or an individual. The Service recently changed its
purchasing regulations and procedures to streamline its purchasing
process and create a more flexible, efficient, businesslike approach to
purchasing.[Footnote 14] The revised process covers all purchasing,
including outsourcing, and is divided into six general steps:
* Identify needs.
* Evaluate sources. This step includes developing a request for
proposals and soliciting bids.
* Select suppliers. This step includes awarding a contract.
* Deliver and receive requirements.
* Measure and manage supply. This step includes managing contract
performance.
* End of life.
GAO reviewed these changes in a report issued in December 2005 and
found them generally consistent with the principles and practices of
leading organizations.[Footnote 15] Accordingly, in this review, we
limit our discussions to portions of the purchasing process that are
relevant to outsourcing.
In addition to these purchasing steps, to comply with the Article 32
provisions, the Service must conduct two evaluations of outsourcing
initiatives under consideration. First, it must address five factors--
public interest, cost, efficiency, availability of equipment, and
qualification of employees--when evaluating the need to outsource.
Second, it must determine whether the outsourcing will have a
"significant impact" on work performed by bargaining unit employees.
Service officials told us that when making these evaluations, they do
not use formal criteria and none of the five factors carries more
weight than the others. Further, officials said that the five factor
evaluation is similar to the type of analysis performed to make other
business decisions and that the collective bargaining agreements do not
contain specific guidance for performing the evaluations and do not
define the term "significant impact." However, the Service said that
when determining whether a proposal has a significant impact, at a
minimum, the initiative must be national in scope. In addition, the
Service considers the material aspects of the initiative, including,
but not limited to, the number of employees, work hours and facilities
affected, the geographic distribution of the employees and sites
affected, and any other factor that provides insight to the particular
determination. Further, the Service said that no one factor will
necessarily be determinative and not all factors will necessarily shed
light on every project. If the Service determines that outsourcing will
have a significant impact, Article 32 contains additional requirements.
Although the specific requirements vary by agreement, the Service must
always notify the affected union of its intent to consider outsourcing
and must consider union input before making a decision. Conversely, if
the Service determines the outsourcing will not have a significant
impact, the Service may still have further actions it must take. Under
its agreement with APWU, the Service has certain notification
requirements for highway contract routes. In addition, if requested by
the City or Rural Carriers, the Service must provide information on
contracted delivery routes in certain circumstances.
We identified two different categories of outsourcing initiatives: (1)
outsourcing that was approved at the national level, was unique and
infrequent--occurring only 5 times since 1996, and had a significant
impact on bargaining unit work; and (2) outsourcing that was approved
at the field level, was purchased frequently and repeatedly, and,
according to the Service, did not have a significant impact on
bargaining unit work.
National-Level Decision-Making Process:
The Service has established guidelines for evaluating proposed
outsourcing initiatives and ensuring that certain factors are
considered, such as whether an initiative is consistent with
organizational goals, security, and integrity; offers a cost or service
advantage; and will maintain quality levels. Additionally, the
guidelines provide a framework for complying with Article 32
requirements. Overall responsibility for outsourcing proposals lies
with a sponsor, typically a Service Headquarters Vice President. The
sponsor's responsibilities include developing and presenting the
outsourcing concept, conducting financial and cost analyses, securing
the necessary approvals, and ensuring compliance with all labor
agreements.
The sponsor presents the proposed outsourcing initiative to a Strategic
Initiatives Action Group (SIAG), an internal cross-functional group
formed to facilitate concept review and approval and ensure conformance
with Article 32 requirements. The SIAG includes representatives from
Service departments, including Labor Relations, Legal, Finance,
Operations, Supply Management and Communications, who assist sponsors
of proposed outsourcing initiatives with the various procedural steps
required for outsourcing at the national level. SIAG evaluates the
level of impact expected from the proposed outsourcing initiative by
scrutinizing the functions to be performed in the initiative. If the
SIAG determines that an outsourcing initiative will have a significant
impact on work performed by bargaining unit employees, the affected
unions must be notified and allowed to provide input into the analysis
considered when comparing the performance of proposed work by postal
employees and by a contractor. The final approval for an outsourcing
initiative with a significant impact on bargaining unit work, supported
by an evaluation of the five factors, must come from an approval board
consisting of the Deputy Postmaster General/Chief Operating Officer,
Chief Financial Officer, and Chief Human Resources Officer. If SIAG
determines that national-level outsourcing will not have a significant
impact, the Service will still perform the cost analysis that is part
of the normal purchasing process; however, union notification and input
are not required. The final decision to outsource a national
outsourcing initiative that will not have a significant impact on the
bargaining units is based on an evaluation of the five factors
mentioned above and is made by management within the group that
proposed the initiative.
One example of a national-level outsourcing proposal that the Service
approved is a proposal to outsource certain functions previously
performed by postal employees at AMCs across the country. Under the
proposal, the AMC facilities would be closed and outsourcing would
occur in contractor facilities. In the process of making the
outsourcing decisions, the Service:
* determined that the proposal would have a significant impact on
bargaining unit work,
* prepared a comparative analysis to document its consideration of the
five factors,
* notified the affected unions at major milestones,
* solicited and incorporated union input or responded in writing as to
why specific concerns were not incorporated, and:
* decided to proceed with the outsourcing proposal.
In providing input to this AMC proposal, the union disagreed with
assumptions underlying the Service's estimates of several factors that
could affect the outcome of the analysis, including wage rates and
experience levels for both contractors and postal employees, and the
level of overtime required to perform the job.
Field-Level Decision-Making Process:
Most outsourcing is performed at the field level using established
processes that include steps to comply with Article 32 requirements.
Service officials told us that field-level outsourcing typically is for
contract delivery, highway transportation, custodial and vehicle
maintenance services, and involves thousands of contracts. Generally,
outsourcing at the field level does not have a significant impact on
bargaining unit work, according to the Service,[Footnote 16] and
consequently does not require consideration of union input. For
example, the Service has an established process for contracting out
delivery service that includes consideration of the five factors but
does not require union notification or input. However, the City and
Rural Carrier's collective bargaining agreements require the Service to
provide cost information on contracted delivery routes in certain
circumstances if requested by the union. Further, APWU's collective
bargaining agreement with the Service has additional requirements the
Service must meet when contracting out for highway transportation
services. In this case, the Service has an established process set
forth in a Service handbook, which incorporates steps required under
Article 32 for transportation routes that meet certain criteria.
[Footnote 17] When contracting initially or renewing a contract for a
transportation route that meets the criteria, the Service must perform
a five factor evaluation, including a cost comparison, notify the
union, and allow the union to have input into the outsourcing decision.
The final decision to outsource is made at the field level.
Table 3 summarizes the national and field-level outsourcing processes,
compares the requirements, and includes examples of outsourcing.
Table 3: Comparison of National-and Field-Level Outsourcing Processes:
Outsourcing decision level: National;
Outsourcing examples: Commercial air contracts FedEx contract Contract
renewals;
Would the outsourcing have a significant impact on bargaining unit
work?: No;
Is five factor consideration required?: No;
Is union notification required?: No;
Is union input required?: No.
Outsourcing decision level: National;
Outsourcing examples: Site preparation Equipment installation;
Would the outsourcing have a significant impact on bargaining unit
work?: No;
Is five factor consideration required?: Yes;
Is union notification required?: No;
Is union input required?: No.
Outsourcing decision level: National;
Outsourcing examples: Air mail centers Corporate call centers;
Would the outsourcing have a significant impact on bargaining unit
work?: Yes;
Is five factor consideration required?: Yes;
Is union notification required?: Yes;
Is union input required?: Yes.
Outsourcing decision level: Field;
Outsourcing examples: Contract postal units, Most highway contracts;
Would the outsourcing have a significant impact on bargaining unit
work?: No;
Is five factor consideration required?: No;
Is union notification required?: No;
Is union input required?: No.
Outsourcing decision level: Field;
Outsourcing examples: Contract delivery service, Vehicle maintenance;
Would the outsourcing have a significant impact on bargaining unit
work?: No;
Is five factor consideration required?: Yes;
Is union notification required?: No[A];
Is union input required?: No.
Outsourcing decision level: Field;
Outsourcing examples: Specific highway contract routes and contract
renewals;
Would the outsourcing have a significant impact on bargaining unit
work?: No;
Is five factor consideration required?: Yes;
Is union notification required?: Yes;
Is union input required?: Yes.
Source: GAO analysis of Service procedural documents and union
collective bargaining agreements.
[A] Unless requested by the City or Rural Carriers.
[End of table]
Increased Emphasis on Delivery Outsourcing:
With the overall number of deliveries growing each year, on average, by
about 1.7 million deliveries, the Service has taken steps to minimize
the impact of these additional deliveries. For example, area and
district managers are expected to have a growth planning process in
place, conduct cost analyses on the type of delivery to provide, and
examine the feasibility of offering CDS service in lieu of rural or
city delivery service, consistent with the Service's contractual
obligations. However, the Service must consider a variety of factors
before assigning new deliveries to a particular type of delivery,
including the type of carrier historically used in the area, Article 32
requirements, including cost, and projected population growth. To
ensure that these policies are consistently applied and the appropriate
factors are considered, the Service introduced a computerized growth
management tool. This tool standardizes the process that field
officials use to determine whether new deliveries should be assigned to
city, rural or contract carriers. For example, if a new delivery is in
an area served by city carriers, the address will likely be assigned to
a city carrier route. Conversely, if a new delivery is in an area that
does not have existing delivery service, the Service must compare the
costs of each different delivery type to comply with Article 32. The
Postmaster General has testified that the Service has been exploring
the expanded use of CDS, because it is one of the most cost-effective
delivery modes available.
Postal Unions Have Disagreed with Some Postal Service Outsourcing
Decisions:
Postal employee unions have disagreed with the Service's outsourcing
decisions including those related to the impact of proposed outsourcing
on bargaining unit work. To address disagreements with the Service,
unions have two options: formally grieving decisions using the process
defined in collective bargaining agreements or addressing concerns in
subsequent rounds of collective bargaining.[Footnote 18] For example,
according to a union official, the Mail Handlers grieved the Service's
determination that outsourcing the processing of some military parcels
did not have a significant impact on bargaining unit work.[Footnote 19]
In this case, the Service notified the affected union at the local
level, but not at the national level. The grievance was eventually
settled by an arbitrator, who, according to the Service, decided that
the initiative did have a significant impact but did not reverse the
Service's outsourcing decision. In another example, APWU grieved the
Service's 1991 decision to outsource certain jobs in remote encoding
centers, where employees manually read and enter address information
for addresses on letters that cannot be read by automated mail
processing equipment. A 1993 arbitration decision determined that the
Service did not violate Article 32 because the Service had considered
the five factors but also required the Service to offer jobs at these
centers to postal employees before contracting out such work.
The unions have also addressed concerns about outsourcing through
collective bargaining. The City Carriers' current collective bargaining
agreement restricts the Service from outsourcing delivery services in
areas where only city carriers deliver mail. Previously, APWU and the
Mail Handlers agreed in a memorandum of understanding, applicable from
1998 through 2000, to a moratorium on most new, national-level
outsourcing that would affect their bargaining unit. In addition, the
collective bargaining process has resulted in modifications to Article
32 procedures. For example, arbitration proceedings that followed
collective bargaining negotiations in 2000 changed Article 32 in each
union's collective bargaining agreement to include a provision that the
Service would meet with the unions while developing its initial
comparative analysis for outsourcing proposals and include a statement
of the unions' views and proposals in this analysis.
The Extent of the Postal Service's Outsourcing Is Unknown:
Overall, the Service could not provide information on the total extent
of its outsourcing activities that have impacted bargaining unit work
because the contracts related to bargaining unit work are not
separately tracked. Since 1996, the Service reviewed 46 outsourcing
initiatives using its national-level decision-making process and
determined that 5 impacted bargaining unit work, primarily related to
retail and processing functions. The Service approved and implemented
all five initiatives but terminated one in 2001. The Service did
provide fiscal year 2007 expenditure data related to the remaining four
outsourcing initiatives, as indicated in table 4. In addition, the
Service provided information related to its total contract costs for
transportation, but could not separately report on the subset of
transportation contracts that have an impact on bargaining unit work.
The Service's expenditures for transportation contracts totaled about
$6.5 billion in fiscal year 2007, which was about 8 percent of its
total operating expenses, while expenditures for outsourced delivery
services totaled about $220 million. Finally, the Service also provided
information related to the number of deliveries made by contractors.
The Service said that, through outsourcing, it seeks to improve its
operations and customer service, as well as save money, though not
every initiative is expected to achieve every goal. For example, it may
be sufficient for a contract to improve service, but not save money.
Further, it said that contractors may operate more efficiently than the
Service in a number of ways including by compensating its employees at
lower rates than the Service and by employing more part-time workers.
The Service cited these reasons for outsourcing in each of the five
national outsourcing initiatives, as follows.
Table 4: Five National Outsourcing Initiatives Having a Significant
Impact on Postal Unions:
Initiative: Corporate Call Management;
Description: National customer call centers;
Outsource time frame: 1996-ongoing;
Contract expenditures for 2007: $74,357,493.
Initiative: Mail Transport Equipment Service Centers;
Description: National service network for handling equipment, carts,
pouches, trays, and other items;
Outsource time frame: 1997-ongoing;
Contract expenditures for 2007: $208,083,454.
Initiative: Air Mail Centers;
Description: Centers closed and terminal handling services provided
from contractor facilities;
Outsource time frame: 2005-ongoing;
Contract expenditures for 2007: $978,953.
Initiative: Terminal Handling Service;
Description: Handling services associated with the FedEx transportation
agreement;
Outsource time frame: 2001-ongoing;
Contract expenditures for 2007: $108,498,278.
Initiative: Priority Mail Processing Network;
Description: Priority mail network along the East Coast;
Outsource time frame: 1997-2001;
Contract expenditures for 2007: Not applicable.
Source: GAO analysis of Service documents.
[End of table]
Retail and Processing Outsourcing:
The Service implemented two of the five initiatives that impacted
retail and processing functions, Mail Transport Equipment Service
Centers and Corporate Call Management, about 10 years ago. The Mail
Transport Equipment Service Centers initiative was intended to
establish a national network of service centers for processing,
repairing, and storing equipment and supplies used to move mail, such
as mailbags, trays, and carts. The Service anticipated improving the
availability and management of the mail equipment, saving money, and
improving efficiency at mail processing facilities by reducing mail
equipment administrative responsibility. The Corporate Call Management
initiative was intended to establish national call centers to provide a
single toll-free number that would give customers access to postal
services and information. The Service anticipated improving customer
satisfaction, saving money, and improving efficiency by contracting
with companies with demonstrated success in call center operations.
According to the Service, these functions were previously decentralized
and inefficient when they were performed by postal employees at mail
processing plants or at post offices.
Two other initiatives, Terminal Handling Services and AMCs, were
implemented more recently and impacted work in the processing function.
Mail that is transported by air needs to be delivered for a departing
flight operated under a contract with either a commercial airline or
FedEx, or picked up from an arriving flight. These activities are
generally known as terminal handling services. The Service outsourced
these services to various suppliers at about 60 airports where FedEx
was providing air mail transportation services under a contract with
the Service. The Service anticipated saving money, deferring large
capital expenditures for facilities and equipment, and improving
efficiency by contracting with companies that had demonstrated success
in terminal handling operations. Similarly, for the AMC initiatives,
the Service outsourced, or plans to outsource, for terminal handling
services for mail transported by commercial carrier flights at 20
airports. In 2004, the Service had about 70 AMCs located across the
country that processed mail arriving at and departing from airports and
performed terminal handling operations. However, the need for these
functions has decreased over time because of reductions in mail
volumes, excess processing capacity at other processing facilities, and
a reduction in the number of commercial air carrier contracts. The
Service scrutinized the functions performed at each of its AMCs and, as
of June 2008, decided to close 20 and outsource the required terminal
handling services, retain 6 and continue operations with postal
employees, and close the remaining AMCs. The Service anticipated saving
money, closing facilities and improving efficiency by outsourcing with
companies that had demonstrated success in terminal handling services.
The final initiative listed in table 4, Priority Mail Processing
Network, was intended to be a pilot project to test whether the Service
could improve Priority Mail delivery performance by using a dedicated
processing and transportation network. The Service contracted with
Emery Worldwide to operate a network of 10 Priority Mail processing
centers located along the East Coast. The Service anticipated saving
money and improving efficiency by allowing the contractor to structure
its workforce outside the rules of the collective bargaining
agreements. The Service ultimately cancelled the contract because of
problems with the contractor's performance and cost overruns and
brought these functions back in-house to be performed by postal
employees.
The Service reviewed 41 other national-level outsourcing proposals and
determined they did not have a significant impact on bargaining unit
work. According to Service officials, many of these initiatives involve
one time activities such as preparing sites for installing and testing
mail processing equipment--activities required to obtain warranty
coverage for the equipment. For example, the Service contracted for
site preparation, installation, and testing of equipment for the
Automated Package Processing System, as part of the deployment of this
system. Additionally, the Service contracted with multiple suppliers
for inspection, design, and construction services to bring 27,000
leased postal facilities into compliance with the Architectural
Barriers Act,[Footnote 20] which requires equal access for persons with
disabilities.[Footnote 21] See appendix II for a list of the 41
outsourcing proposals that the Service determined did not have a
significant impact on bargaining unit work. Finally, the Service
explained that it has consistently maintained that contract postal
units do not constitute outsourcing because they are not referenced in
Article 32 or in any other provision of the collective bargaining
agreements.
Mail Transportation Outsourcing:
Although the Service contracts for most of its mail transportation
needs, only some contracted transportation services affect bargaining
unit work and are thus considered outsourcing; however, the Service was
not able to determine the actual value or number of these outsourced
contracts. The Service moves mail around the country using both
contracted services, such as highway contract routes and commercial air
carriers, and Service-owned vehicles driven by postal employees. Only a
portion of the more than 17,000 contracts for transportation services
are subject to the provisions of Article 32 in the Service's collective
bargaining agreement with APWU, which represents postal employees who
are truck drivers. As previously discussed, these Article 32 provisions
apply only to contracts for highway transportation routes that meet
certain criteria: a value of more than $100,000 per year for a fixed
annual rate contract and not more than 350 miles in round-trip length;
an annual or non-annual rate contract where estimated annual
compensation will exceed $45,000; and no more than 8 hours in operating
time.
According to the Service, in fiscal year 2007 it spent about $3.15
billion on contracts for highway transportation. However, to obtain the
value or number of contracts affected by Article 32, it would be
necessary to review each contract to determine the Service's actual
costs, which may exceed the contracted costs if the contractor
provides, for example, extra trips or services.
Delivery Service Outsourcing:
Data provided by the Service showed that outsourced deliveries
represent less than 2 percent of all deliveries. The Service contracts
for delivery services and all delivery contracts have an impact on
bargaining unit work and are thus outsourcing. The Service delivers
mail to residential and business addresses using employees, either city
carriers or rural carriers, or CDS contractors. The Service has data on
the number of deliveries it makes and the number of delivery routes. In
general, the average number of deliveries per route is greatest for
city carrier routes and lowest for CDS routes.
Since 1998, the number of deliveries made by all three delivery types
(city, rural, and contractor) has increased, but the proportion of
deliveries made by contractors has remained about the same, at 2
percent or less, as shown in table 5. However, over the past decade,
the number of deliveries grew more for contractors, (39 percent) than
for city carriers, (6 percent) and rural carriers, (34 percent).
Similar trends are evident in the number and growth of routes. Over the
past decade, the proportion of routes serviced by contractors has
remained about the same, at less than 3 percent. However, the number of
CDS routes grew about 23 percent, while city routes declined by 2
percent and rural routes also grew by 23 percent. A union official has
expressed concern that, while contract delivery service is a relatively
small percentage of deliveries now, it could expand rapidly because of
continued new delivery growth. Table 5 compares the change in total
number and growth in deliveries and routes by type of carrier for 1998
and 2007.
Table 5: Comparison of Number and Growth in Deliveries and Routes for
City, Rural, and Contract Letter Carriers, Fiscal Years 1998 and 2007:
Carrier type: City;
Number of deliveries (Percentage of total): 1998: 82,253,861 (73.0%);
Number of deliveries (Percentage of total): 2007: 86,880,556 (68.0%);
Percentage of growth in deliveries: 1998 to 2007: 5.6%;
Number of routes (Percentage of total): 1998: 167,262 (71.2%);
Number of routes (Percentage of total): 2007: 163,479 (66.3%);
Percentage of growth in routes: 1998 to 2007: -2.3%.
Carrier type: Rural;
Number of deliveries (Percentage of total): 1998: 28,584,565 (25.4%);
Number of deliveries (Percentage of total): 2007: 38,407,244 (30.0%);
Percentage of growth in deliveries: 1998 to 2007: 34.4%;
Number of routes (Percentage of total): 1998: 62,338 (26.5%);
Number of routes (Percentage of total): 2007: 76,390 (31.0%);
Percentage of growth in routes: 1998 to 2007: 22.5%.
Carrier type: Contractor;
Number of deliveries (Percentage of total): 1998: 1,828,257 (1.6%);
Number of deliveries (Percentage of total): 2007: 2,545,687 (2.0%);
Percentage of growth in deliveries: 1998 to 2007: 39.2%;
Number of routes (Percentage of total): 1998: 5,424 (2.3%);
Number of routes (Percentage of total): 2007: 6,666 (2.7%);
Percentage of growth in routes: 1998 to 2007: 22.9%.
Carrier type: Total;
Number of deliveries (Percentage of total): 1998: 112,666,683;
Number of deliveries (Percentage of total): 2007: 127,833,487;
Percentage of growth in deliveries: 1998 to 2007: 13.5%;
Number of routes (Percentage of total): 1998: 235,024;
Number of routes (Percentage of total): 2007: 246,535;
Percentage of growth in routes: 1998 to 2007: 4.9%.
Source: GAO analysis of Service data.
[End of table]
The Service Holds Both Contractors and Postal Employees to Similar
Standards but Uses Different Processes to Manage Them:
The Service evaluates contractors and postal employees using similar
suitability and performance standards, while holding them accountable
using different management processes.[Footnote 22] A key concern of
some stakeholders who may be affected by the Service's outsourcing
decisions is whether contractors and subcontractors must have the same
qualifications or meet the same suitability and performance standards
as postal employees. To ensure that personnel are suitable to perform
postal work, the Service uses similar screening criteria to evaluate
both contractors and applicants for postal employment. Likewise,
contractors and postal employees performing the same type of work
generally have similar performance standards although the Service
manages contractors differently from postal employees.
The Service Uses Similar Criteria When Screening Potential Contractors
and Applicants for Postal Employment:
The Service uses similar criteria to evaluate the suitability of both
potential contractors and applicants for postal employment. The Service
is responsible for ensuring the security and sanctity of the mail and
ensuring a safe workplace for its employees. One way the Service meets
this responsibility is by evaluating the suitability of potential
contractors and applicants for postal employment. To do so, it
investigates and verifies their employment, criminal, and driving
histories and requires them to undergo an initial screening for drug
use. In the fall of 2007, the Service revised its drug screening
procedures so that it had similar criteria to evaluate both potential
delivery service contractors and applicants. To be considered for a
contract or postal employment, individuals must meet each of the
applicable suitability standards shown in table 6.
Table 6: Comparison of Suitability Standards for Potential Contractors
and Service Employees:
Suitability standards: Employment history disclosed;
Contract applicants: Yes[A];
Employment applicants: Yes[B].
Suitability standards: Employment history verified;
Contract applicants: Yes;
Employment applicants: Yes.
Suitability standards: Background check;
Contract applicants: Yes;
Employment applicants: Yes.
Suitability standards: Criminal conviction history disclosed;
Contract applicants: Yes;
Employment applicants: Yes.
Suitability standards: Criminal history verified;
Contract applicants: Yes;
Employment applicants: Yes.
Suitability standards: Drug screening[C];
Contract applicants: Yes;
Employment applicants: Yes.
Suitability standards: Driving record verified;
Contract applicants: Yes;
Employment applicants: Yes.
Source: GAO analysis of Service documents.
[A] The Service requires a 5-year employment history for all contract
applicants.
[B] The Service requires a 10-year employment history for all
employment applicants.
[C] Truck drivers with a commercial driver's license, including both
contractors and postal employees, are required to be screened under the
Department of Transportation drug screening process. CDS carriers are
required to provide proof of a negative drug screening. Currently,
there is no drug screening requirement for truck drivers who do not
hold a commercial license and are not CDS carriers.
[End of table]
In general, these suitability standards apply to contractors and their
employees or subcontractors who will have access to the mail or to
postal facilities. For example, if an individual CDS contractor
delegates his or her delivery responsibility to another person, such as
a relative or an employee, the contractor is required to notify the
Service and this other person is required to undergo the same screening
process. However, not all employees of a contractor are required to be
screened. For example, the Service requires companies providing
terminal handling services to ensure that all employees who have access
to the mail are screened and that measures are in place to limit access
to areas where mail is stored or sorted but does not require that all
employees be screened. In addition to these initial screening
requirements, contractors who come into contact with the mail are
periodically re-screened. For example, CDS contractors must be re-
screened when their contract is renewed, which is typically every 4
years. Once hired, most postal employees are not re-screened, except
for holders of commercial driver's licenses.
Contractors and Postal Employees Have Similar Performance Standards:
The Service holds both contractors and postal employees to similar
performance standards. In many instances, contractors are performing
essentially the same work as postal employees. For example, CDS,
highway contract route, and custodial contractors perform essentially
the same tasks as postal rural carriers, motor vehicle operators, and
maintenance employees. In these cases, where the work is directly
comparable, the Service expects the same level of performance
regardless of whether the function is done by a contractor or a postal
employee. In other instances, however, the work is not directly
comparable, because contractors are performing the work differently
from postal employees. A Service official told us that in these
outsourcing cases, the Service establishes performance criteria in its
contracts, such as processing air mail within specified time frames, to
help it achieve overall goals, such as delivering mail on time. For
example, the Service contracted with terminal handling service
providers for work previously performed by postal employees at AMCs. In
its contracts, the Service establishes performance criteria but does
not specify how the contractor is to achieve them. To further
illustrate these performance standards, we compare the work performed
by CDS contractors and rural carriers, as well as by terminal handling
service contractors and AMC employees below.
CDS Contractors and Rural Letter Carriers Have Similar Performance
Standards:
Both CDS contractors and rural carriers perform similar delivery
service functions and serve similar geographical areas in meeting the
requirements of their respective positions. Upon reporting for work,
CDS contractors and rural carriers are expected to prepare and sequence
the mail for delivery to customers on their routes. Next, the CDS
contractors and rural carriers take the mail to their delivery
vehicles. Both CDS contractors and rural carriers furnish and maintain
the vehicle equipment necessary for mail delivery unless specifically
assigned a Service-owned or leased vehicle. CDS contractors and rural
carriers proceed to deliver and collect the mail along their assigned
routes while meeting pre-designated time delivery standards. Finally,
CDS contractors and rural carriers return to their respective postal
facilities to hand-off the mail collected on their routes. Both CDS
contractors and rural carriers are expected to follow all traffic
safety laws and regulations while ensuring protection of the mail from
theft, mishandling, or damage.
Contractors and Air Mail Center Mail Handlers Have Similar Performance
Goals in Terminal Handling Operations:
As previously discussed, the Service outsourced some terminal handling
services to contractors. Formerly, postal employees performed these
services at selected AMCs across the country. After the terminal
handling responsibility moved to contractors, the performance
expectations remained the same, but the performance standards differ.
Prior to outsourcing, AMC postal employees were expected to carry out
activities, such as receiving, sorting and delivering mail to the
appropriate air carrier, to help the Service achieve overall delivery
goals. Under the new arrangement, contract workers perform similar
activities with similar performance expectations. Although the Service
does not specify the processes that contractors must employ to achieve
these expectations, it does set specific performance standards. For
example in one contract, the Service requires that the contractor
receive mail from an air carrier and make it available to postal
employees within 1 hour. In another contract, the Service requires the
contractor to reach an on-time performance standard 98 percent of the
time. The Service includes similar performance standards in its
contracts with all terminal handling service providers.
The Service Manages Contractors and Postal Employees Differently:
The Service manages and conducts oversight of both contractors and
postal employees, but uses different mechanisms. The Service manages
contractors through the terms of a contract, which generally includes
specific performance requirements, while the Service manages postal
employees according to established policies in handbooks and provisions
in collective bargaining agreements. Both methods provide specific
disciplinary procedures, including termination. Although some
stakeholders have raised concerns about the extent to which
disciplinary problems or criminal behavior may be an issue with
contractors, data are not available to allow a comparison between
contractors and postal employees.
The Service Manages Contractors through the Terms of a Contract:
The Service uses contracts to define work requirements and performance
standards to monitor performance. Common categories for measuring
supplier performance are cost, quality, delivery, responsiveness, and
technology. To provide oversight, the Service administers contracts
using contracting officers and administrative officials. A contracting
officer is authorized to award, alter, and terminate contracts and
ensures that the contractor provides the services required under the
terms of the contract. An administrative official is responsible for
ongoing contractor oversight and monitoring, including:
* screening all contractors before hiring,
* supervising the contractor's operations daily,
* investigating irregularities and complaints, and:
* recommending establishment, discontinuance, or modifications in
existing routes.
For example, an administrative official, such as a Postmaster, is
required to document highway contract route performance, including
contract delivery service, on a daily basis and monitor such metrics as
reporting and departure times (for mail delivery) and deviations from
the terms of the contract, such as safety deficiencies and operational
failures. If the terms of the contract are not being met, the
administrative official can take the following disciplinary actions as
needed:
1. Review: the official reviews the irregularities, consults with the
contractor, and takes appropriate action.
2. Conference: the official arranges a conference with the contractor
and contracting officer to discuss irregularities of a serious nature
and the need to immediately take corrective action.
3. Written Warning: If the conference does not rectify the service
problem, the official warns the contractor in writing that the case
will be forwarded to the contracting officer if service does not
improve within 3 days.
4. Recommendation: If service has not improved within 3 days, the
official forwards the case to the contracting officer with
recommendations on actions to take, which could include a
recommendation to terminate the contract.
The contracting officer has the sole authority to terminate the
contract if the terms of the contract are not being met.
The Service Manages Employees through Various Policies and Agreements:
The Service manages employees in accordance with applicable collective
bargaining agreements, statutes, regulations, policies, and handbooks.
To discipline an employee, a supervisor must follow disciplinary
procedures set forth in each of the respective collective bargaining
agreements.[Footnote 23] The agreements state that no postal employee
may be disciplined or discharged except for just cause such as, but not
limited to, insubordination, pilferage, intoxication (drugs or
alcohol), incompetence, failure to perform work as requested, violation
of the terms of the collective bargaining agreement, or failure to
observe safety rules and regulations. The collective bargaining
agreements set forth disciplinary actions that the service may take
when disciplining a postal employee, including:
1. Discussion: a supervisor discusses minor offenses; these discussions
are not disciplinary actions and are not grievable.
2. Letter of Warning: a supervisor gives an employee a disciplinary
notice in writing explaining the deficiency.
3. Suspension of 14 Days or Less: an employee may be suspended for up
to 14 days.[Footnote 24]
4.
Suspensions of More Than 14 Days or Discharge: an employee may be
suspended without pay for more than 14 days or may be terminated.
5. Indefinite Suspension Crime Situation: an employee may be suspended
indefinitely if the Service has reasonable cause to believe the
employee committed a crime for which imprisonment could be imposed.
6. Emergency Procedure: an employee may immediately be placed in off-
duty status when an allegation involves intoxication, pilferage,
failure to observe safety rules and regulations, or where retaining the
postal employee on duty may result in damage to USPS property, loss of
mail or funds, or where the employee may be injurious to self or
others.
Any Service disciplinary actions initiated against postal employees are
subject to the grievance-arbitration process provided for in their
respective collective bargaining agreements. Furthermore, if a
disciplinary action is later overturned, the Service may have to
reinstate the employee and provide restitution in the form of back pay.
The Extent of Disciplinary Problems or Illegal Activity by Contractors
and Postal Employees Is Not Known:
Although employee union officials have raised concerns about
contractors' trustworthiness, we were not able to compare the extent to
which contractors and postal employees have had disciplinary problems,
because the Service does not centrally collect data related to
disciplinary actions. Unions have cited examples of irresponsible or
illegal activity by contractors that resulted in arrests or
convictions, which they said could undermine the public's trust in the
Service. But similar postal employee activity has also led to arrest or
conviction. Contracting officers document disciplinary actions in
individual contractor files and Service personnel, likewise, document
disciplinary actions in records for each postal employee. These
employee records are maintained at the facility where the employee
works and any disciplinary documents are removed from an employee's
file after 2 years, unless the disciplinary case has not yet been
resolved or the employee has been cited in subsequent disciplinary
actions. However, the Service does not maintain a comprehensive
database of actions that have been taken against either contractors or
postal employees.
For disciplinary actions of a more serious nature, such as criminal
investigations, the Service investigates both contractors and postal
employees in a similar manner. For example, the Service treats the
theft of mail as a serious matter to be investigated regardless of
whether the crime is committed by a contractor or a postal employee. A
contractor or postal employee, if found guilty of mail theft, can be
fined, imprisoned, or both.
The Service Lacks Data to Demonstrate the Results of Outsourcing and
Address Challenges That May Limit Further Outsourcing:
The Service lacks information and data about the results of its
outsourcing efforts that impact work by its bargaining unit employees,
which could be used to determine the effectiveness of its outsourcing
and support future outsourcing in the face of possible challenges. For
example, the Service does not know the savings related to its
outsourcing efforts because it does not have a process to evaluate the
impact of outsourcing or to track actual savings. Postal employee
unions have expressed skepticism about the value of outsourcing and
have raised questions about the reality of cost savings and
implications of outsourcing on a variety of public policy issues.
Without data to demonstrate results, Service management, stakeholders,
and Congress are not able to assess the risk and value of outsourcing,
accountability for results is limited, and the Service is not able to
effectively address union concerns. In addition, the Service may
encounter challenges that include resistance from its unions to new
outsourcing initiatives and from legislation pending in Congress that
could limit its ability to outsource.
The Service Lacks Data to Demonstrate Results of Outsourcing:
The Service does not collect information about the results or
effectiveness of its outsourcing efforts, which could limit its ability
to determine whether outsourcing is achieving expected efficiencies and
to generate support for future outsourcing efforts. For example,
although the Service has processes in place to measure Service-wide
performance--to capture savings and to measure operational efficiency
improvements--neither of these processes provides information about the
effectiveness of individual or aggregate outsourcing efforts or the
extent to which outsourcing is contributing to these improvements.
Further, the Service has agreed in its collective bargaining agreements
to no layoffs for career bargaining unit employees; therefore, when it
outsources functions previously performed by postal employees, those
employees are generally moved to other positions within the Postal
Service, but the specific efficiency gains related to these
reassignments are not tracked.
The Service does not track savings resulting from its outsourcing
efforts and instead tracks savings of all its cost-reduction efforts on
an aggregate, Service-wide basis. The Service said it has a process
where savings from all identified cost-reduction efforts, including
those involving outsourcing, are removed from the budget during the
planning process for the upcoming year in support of its annual $1
billion cost-reduction goal. After those budget reductions are made, if
the Service does not exceed its overall expense budget, it considers
the overall cost-reduction goal to have been achieved. The Service said
that because of the complexity and interrelationship of its many cost-
reduction initiatives, it is difficult to track actual cost savings
from individual initiatives and that it would require expenditures of
additional resources to isolate the savings from each initiative. The
Service achieved its overall annual cost-reduction goal in 4 of the
last 5 years, but could not determine the specific contribution made by
outsourcing efforts. Similarly, the Service does not measure whether
outsourcing initiatives have resulted in more efficient operations.
Instead, the Service said it uses a measure called Total Factor
Productivity to determine the change in aggregate productivity, which
is included in the Service's published quarterly financial statements
and its annual report. The Service has reported that it has increased
its Total Factor Productivity for 8 consecutive years, but could not
demonstrate the extent to which outsourcing contributed to that
improved efficiency.
The Service has used a performance measurement approach on a previous
outsourcing effort and determined that it was not achieving desired
results. In the late 1990s, the Service sought to establish, as a pilot
test, a separate processing and transportation network for its Priority
Mail business segment in order to improve service and to be more
competitive in the marketplace. Ordinarily, Priority Mail was processed
with other mail and was not achieving the level of service performance
the Service desired. The Service awarded a contract worth more than
$1.7 billion to Emery Worldwide to create and operate a network of 10
processing centers on the East Coast. In its contract, the Service
established specific performance measures, including (1) a 95 percent
on-time performance for the 2-day delivery of mail and (2) the use of a
contractor reliability index, independently verified, which measures
contractor performance on each of eight quality indicators.[Footnote
25] In 1999, the U. S. Postal Service Office of Inspector General (OIG)
reported that Emery was not achieving the on-time performance goal or
other performance measures. The Service eventually cancelled its
contract and took over operations of the facilities because Emery was
not achieving the desired results.
Despite its previous use of such measures, the Service has not used
them in its most recent national-level outsourcing effort. In February
2008, the OIG reported on its audit of the outsourcing of some
operations at the St. Louis AMC, which was part of the Service's AMC
outsourcing initiative. The OIG found that, while Service management
had generally complied with outsourcing policy, opportunities existed
to enhance guidance for measuring results. Specifically, the Service
had not established policies or procedures for determining if
outsourcing initiatives achieved intended results and did not require a
post-implementation review of outsourcing initiatives. Further, the OIG
report stated that without such a review, there was no accountability
or assurance that the outsourcing initiative achieved anticipated
results. The Service agreed with the OIG's recommendation to establish
a post-implementation review program that compares anticipated savings
with actual results and stated that such a program would be developed
by March 31, 2008. In June 2008, the Service told us it is working with
the OIG to develop a review program but added that reviews of all
outsourced AMCs would depend on the results of its initial reviews.
The Service did not indicate whether it would use a similar review for
other outsourcing initiatives, but the Service has begun to track one
indicator of outsourcing performance--cost savings. Service officials
told us that for the AMC initiative, the Service saved, or expects to
save by 2009, about $117 million by eliminating facility lease and
labor expenses at AMCs. Not all of these savings are attributable to
outsourcing activities, however, because the Service also included the
savings it realized by closing some facilities.
Without complete information about the results of its outsourcing
efforts, Service management, stakeholders, and Congress are not able to
assess the risk and value of outsourcing and accountability for results
is limited. Specifically, the Service should be able to address the
following questions:
* Does outsourcing, either of a specific function or at an aggregate
level, save money? Result in increased effectiveness? Provide some
other value?
* What are the risks associated with outsourcing?
* How cost-effective is outsourcing?
* Is the level of satisfaction of customers served by contractors
comparable to those served by postal employees?
* What impact does increased use of contractors have on the safety of
the mail, mail facilities, employees, and customers?
Looking forward, the Service is considering another major outsourcing
initiative involving its bulk mail processing network, which could
impact work done by two unions. Stakeholders may raise questions about
effectiveness, cost savings, and other anticipated outcomes. Responses
to these questions will be important to inform decision-making.
The Service Faces Challenges That May Limit Further Outsourcing:
As it considers future outsourcing, the Service faces a number of
challenges, including differing messages from Congress and the
Administration on outsourcing and the potential impact of outsourcing
on its relations with its employee unions. Two bills pending in
Congress could affect the Service's outsourcing efforts. H.R. 4236
would require the Service to bargain with postal unions before it
engages in outsourcing and S. 1457 would limit the Service's ability to
outsource. Service officials say outsourcing is a critical tool to help
the Service meet its financial goals but union officials oppose
expanded use of outsourcing. Both the Service and unions have indicated
that the appropriate way to resolve issues related to outsourcing is
through the collective bargaining process. However, most unions have
said the Service would not negotiate with them on this issue and have
therefore sought congressional intervention. The Service agreed in the
most recent collective bargaining process to try and resolve its
differences on this issue with the two carrier unions.
Public Policy Issues Related to the Scope of the Service's Outsourcing:
Legislative and administration initiatives send differing messages to
the Service on the scope of its outsourcing effort, from initiatives
that support outsourcing as a means to reduce costs, increase
efficiency, and improve quality, to initiatives that question the value
of outsourcing and propose to curtail it. Support for the Service to
operate more like a business dates back at least to 1970, when Congress
passed legislation that gave the Service unique status as an
independent establishment of the federal government and authorized it
to finance its operations through sales of its products and services
instead of appropriations.[Footnote 26] Congress also stated in the
2006 Postal Accountability and Enhancement Act[Footnote 27] that the
Postal Service should implement commercial best practices in its
purchasing policies to achieve greater efficiency and cost savings by
taking full advantage of private-sector partnerships, as recommended in
the July 2003 report by the President's Commission on the United States
Postal Service.[Footnote 28]
Similarly, the current and previous administrations have advanced
proposals to promote more efficient and effective government
operations, including outsourcing government operations. In particular,
in 2001, the Bush Administration launched the President's Management
Agenda to focus attention on ensuring that the resources entrusted to
the federal government are well-managed and wisely used. The
President's Management Agenda encourages opening federal commercial
activities to competition among public and private sector sources to
achieve increased savings and improve performance. These competitions
are guided by specific criteria in Office of Management and Budget
Circular No. A-76. Although the President's Management Agenda does not
apply to the Service, it was one of many sources of information
considered in the Service's 2002 Transformation Plan. The President's
Commission on the Postal Service further recommended that the Service
utilize outsourcing to help it accomplish cost-reduction goals and
improve efficiency.
However, as previously noted, recent legislative efforts could restrict
the Service's ability to outsource. Bills introduced in 2007, and
pending with the appropriate oversight subcommittees, address the
Service's use of outsourced mail delivery contractors. S. 1457 seeks to
limit the extent that the Service could use outsourced delivery
service, and H.R. 4236 would require the Service to bargain with postal
employee unions before entering into certain contracts. Additionally,
House Resolution 282, co-sponsored by 255 members as of July 2008,
expressed "the sense of the House of Representatives that the United
States Postal Service should discontinue the practice of contracting
out mail delivery services."
Postal employee unions have questioned whether outsourcing actually
achieves its intended results. For example, the president of the Mail
Handlers described as false the Service's assumption that it will save
money by allowing private contractors to perform work currently done by
postal employees.[Footnote 29] He further maintained that actual
experience, such as with Emery, has shown that outsourcing has the
opposite effect, costing the Service more than anticipated. In
addition, he said that evaluations by the Service that compare the
costs of performing work with contractors and with postal employees are
incomplete and do not reflect the actual costs borne by the Service.
APWU officials told us the Postal Service primarily uses wage factors
as a basis for comparison. Since postal employees are relatively well
paid, according to these officials, comparisons tend to find
outsourcing to be less costly. Also, the officials noted such
comparisons exclude the value of other factors, such as the higher
levels of efficiency provided by a well-trained, dedicated career
workforce. In addition, unions have expressed skepticism over the value
of outsourcing, raising concerns about public policy issues related to
the Service's mission or intended obligations as a government entity.
For example, the Service has not clearly defined the functions it
considers "inherently postal"-functions that should only be performed
by the Service-and whether these functions should be outsourced. All
four unions have questioned the wisdom of the Service outsourcing in
what they consider its core functional areas, such as delivery or mail
processing. Similarly, two unions expressed concerns that there are no
limits to the extent the Service could outsource: if it outsources one
delivery route, why not outsource all? They also noted that one impact
of expanding outsourcing would be to replace long-term career employees
with low-paid, no-benefit, non-career, and often transient workers.
Finally, the unions have also raised the question of whether the
Service, by hiring contractors, violates the public's trust and
expectation of safe, efficient mail delivery or violates its
responsibilities as an employer. For example, the president of the Mail
Handlers stated in recent testimony that another impact of outsourcing
is that the Service, which is currently one of the largest employers of
veterans and disabled veterans, would reduce the number of job
opportunities for veterans returning from combat and non-combat
situations.[Footnote 30]
The current uncertain economic environment serves to exacerbate the
challenges facing the Service and contributed to lower than expected
mail volumes and revenues in the first half of fiscal year 2008. The
Service faces challenges such as generating mail volumes despite rate
increases in May 2008; managing its costs in difficult economic
conditions, and improving operational efficiencies through accelerated
cost reduction strategies; maintaining, measuring, and reporting
service; and managing its workforce. In its Transformation Plans and
congressional testimony, the Service has acknowledged the value it
places on outsourcing as a means to reduce costs and increase
efficiency and its intent to continue to pursue outsourcing
opportunities. The Service has a long history of outsourcing mail
transportation, delivery services and other functions, much of which
has been carried out within the framework of the Service's collective
bargaining agreements with its employee unions.
Continued Outsourcing Could Impact the Service's Relations with Its
Employee Unions:
Continued or expanded outsourcing by the Service could lead to problems
with postal employee unions as evidenced by public statements by union
officials. For example, the president of the Mail Handlers testified
that continued outsourcing by the Service would drive a wedge between
it and hundreds of thousands of postal employees.[Footnote 31] Postal
employees are critical to providing vital postal services to the
American people and achieving a successful postal transformation. The
President's Commission on the Postal Service concluded that as valuable
as the Postal Service is to the nation, its ability to deliver that
value is only as great as the capability, motivation, and satisfaction
of the people who make possible the daily delivery of mail to American
homes and businesses. However, we and others have reported that
adversarial labor-management relations have been a challenge for the
Service and its major labor unions.
In the past, we reported that autocratic management, persistent
confrontation and conflict, and ineffective performance systems often
characterized the Service's organizational culture on the workroom
floor.[Footnote 32] These problems resulted in an underperforming
organization with major deficiencies in morale and quality of work
life; huge numbers of grievances with high costs for the Service and
its employees; and protracted, acrimonious contract negotiations. In
our past reports, we found that these conditions have existed over many
years because labor and management leadership, at both the national and
local levels, have often had difficulty working together to find
solutions to their problems. Under these circumstances, it was
difficult for the parties to develop and sustain the level of trust
necessary for maintaining a constructive working relationship and
agreeing on major changes to maximize the Service's efficiency and the
quality of work life. We are encouraged by recent progress in this
area, such as reports by union officials of better communications,
sharp reductions in the number of outstanding grievances, and three of
four major labor contracts that were successfully negotiated between
the parties without the need for binding arbitration. In addition, the
Service has improved its productivity, which the Service reported has
increased in each of the last 8 years.
However, continued or expanded outsourcing could be an impediment to
improved relationships. Recent actions by the unions continue to
indicate significant concerns about outsourcing. For example, in 2007,
the Rural Carriers filed a grievance alleging that the Service's
expanded use of contract delivery service violated the terms of its
collective bargaining agreement. Similarly, collective bargaining
agreement negotiations in 2007 between the Service and the City
Carriers initially came to an impasse, primarily because of union
concerns over increased outsourcing of delivery services. The parties
reached an agreement, which was ratified by the union membership, after
the Service agreed to limitations on its ability to outsource in
certain areas served by city carriers over the life of the 5-year
contract. In addition, the Service and union agreed to establish a
joint committee, including the Rural Carriers, to discuss a mutually
agreeable approach to the issue of outsourcing by March 2008. Because
the committee extended its reporting deadline to the end of September
2008, the results of this effort are not yet known.
The Service and employee unions have indicated that the appropriate
means for resolving outsourcing issues is through the collective
bargaining process. For example, the Postmaster General testified that,
"beyond the specific subject of contract delivery, there is a bigger
issue at stake. That is the ability of the parties, the Postal Service
and its unions, to resolve their differences through the collective
bargaining process. One of the most important accomplishments of the
Postal Reorganization Act of 1970 was the extension of full collective
bargaining rights to the postal unions. Over the course of more than 3
decades, these have served our employees, our unions and the Postal
Service well. And, as we have seen, the process can-and does-work."
While most unions agree, they also stated that the Service has not
always been willing to discuss outsourcing in collective bargaining
negotiations. Some unions have already asked Congress to pass proposed
legislation that would require the Service to collectively bargain with
the unions on outsourcing proposals before they can be approved or that
would limit the extent that the Service could use outsourced delivery
service.
Conclusions:
Although the Service has outsourced activities related to many of its
key functions, its employee unions are now challenging its ability to
expand outsourcing in areas where postal employees have performed or
could perform these activities. The Service views outsourcing as an
important strategy for achieving the cost savings it needs to operate
successfully under a regulatory price cap. But because the Service does
not track, and therefore cannot quantify, the actual results of its
outsourcing activities, it cannot document the effectiveness of its
outsourcing results for Service managers, stakeholders, and Congress.
As a result, information to assess the risk and value of outsourcing
and accountability for results is limited. Information on the
effectiveness of outsourcing, including actual results, costs, and any
savings achieved, could be useful as the Service considers additional
outsourcing initiatives. Both the Service and its unions agree that the
appropriate way to resolve outsourcing issues is through the collective
bargaining process. A key challenge for both the Service and its unions
will be to reach agreement on outsourcing issues through collective
bargaining.
Recommendations for Executive Action:
To improve management decision-making and accountability in this area,
the Postmaster General should, first, establish a process to measure
the results and effectiveness of Service outsourcing activities that
are subject to collective bargaining. This process should include
tracking actual costs and any savings, and comparing them with
estimated costs and savings. Second, to support congressional
oversight, the Postmaster General should include information on the
results and effectiveness of these ongoing outsourcing activities in
its annual operations report (Comprehensive Statement on Postal
Operations) to Congress.
Agency Comments and Our Evaluation:
The U.S. Postal Service provided written comments on a draft of this
report in a letter from the Chief Human Resources Officer and Executive
Vice President dated July 7, 2008. These comments are summarized below
and are included, in their entirety, as appendix III to this report. In
separate correspondence, the Service also provided minor technical
comments, which we incorporated, as appropriate.
The Service generally agreed with our finding that it does not
separately track the results of its outsourcing activities and with our
first recommendation that a process should be established to measure
the results and effectiveness of Service outsourcing initiatives that
are subject to collective bargaining agreements, including tracking
actual costs and any savings. However, the Service did not agree to
implement our second recommendation to provide information on the
results and effectiveness of these ongoing outsourcing initiatives in
its annual operations report to Congress.
The Service agreed to establish a process, for future national-level
outsourcing initiatives approved after July 2008, to compare the final
financial comparative analysis assumptions with actual contract award
data 1 year after project implementation. This step is commendable to
begin assessing the impact and effectiveness of outsourcing efforts,
specifically the cost savings achieved after 1 year. Our recommendation
was not limited to costs and savings associated with outsourcing, but
the Service did not commit to measuring other impacts, such as on
service, customers, or employees. We continue to believe these are also
important in a comprehensive assessment of the outsourcing efforts.
The Service did not agree to implement our second recommendation and
proposed instead to retain information it collects on its outsourcing
efforts internally. However, in order for the Service to effectively
make its case to use outsourcing as a mechanism to contain costs, we
believe that the Service must keep its stakeholders, including Members
of Congress, customers, employees, and the public-at-large, fully
informed of the merits, potential impacts, and the results of
outsourcing. Several bills are pending before Congress that would
affect the Service's ability to outsource. In conducting oversight and
making its decisions, Congress would benefit from more data about the
results and effectiveness of the Service's outsourcing activities that
are subject to collective bargaining. Without transparency regarding
its outsourcing initiatives, postal management, stakeholders and
Congress are not able to assess the risk and value of outsourcing and
accountability for results is limited. Thus, we believe that the
Service should annually provide Congress with information about the
results of outsourcing activities as discussed previously.
We are sending copies of this report to the Chairman and Ranking Member
of the House Committee on Oversight and Government Reform; the Chairman
and Ranking Member of the Senate Committee on Homeland Security and
Governmental Affairs; the Postmaster 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
[hyperlink, http://www.gao.gov].
If you or your staff has any questions regarding this report, please
contact me at siggerudk@gao.gov or by telephone at (202) 512-2834.
Contact points for our Office of Congressional Relations and Public
Affairs may be found on the last page of this report. GAO staff that
made key contributions to this report are listed in appendix IV.
Signed by:
Katherine Siggerud:
Managing Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our objectives for this report were to assess (1) the circumstances
under which the Service can outsource postal functions, how it decides
to outsource, and the extent to which it has outsourced; (2) how the
Service's management processes, including suitability (hiring and
screening procedures) and performance evaluation, for contractors
compare to those for postal employees; and (3) the results--including
any costs savings, or other outcomes--of the Service's outsourcing
efforts and the challenges facing the Service related to outsourcing.
To address the circumstances under which the Service can outsource
postal functions, we reviewed statutory and regulatory requirements and
agreements with the Service's employee unions. Specifically, we
reviewed applicable statutes and regulations pertaining to the Service,
and the Service's most recent collective bargaining agreements, and
accompanying memoranda of understanding, with its four major employee
unions--the American Postal Workers Union (APWU), the National
Association of Letter Carriers (City Carriers), the National Postal
Mail Handlers Union (Mail Handlers), and the National Rural Letter
Carriers' Association (Rural Carriers). In addition, we reviewed
information on federal laws and regulations applicable to most federal
purchasing, though not required of the Service, such as the Federal
Acquisition Regulation, the Competition in Contracting Act, and the
Office of Management and Budget's Circular No. A-76. We focused the
scope of our review on the major postal functional areas--
transportation, delivery, mail processing, and retail--that involve
outsourcing activities related to the bargaining unit work of the
Service's four major unions. To determine how the Service decides to
outsource, we interviewed postal officials at Service headquarters and
in the Southwest Area, and representatives of employee unions,
management associations, and the National Star Route Mail Contractors
Association. We reviewed the purchasing procedures the Service uses to
guide its purchasing of specific services, including contracted
services. We also interviewed the Strategic Initiatives Action Group
(SIAG), an internal cross-functional group at headquarters that guides
outsourcing through the decision-making process at the national level,
and reviewed the group's policies and procedures. Finally, we discussed
with Service officials, and obtained information on, the Growth
Management Tool, a new software tool the Service can use in assigning
delivery routes, including outsourced routes. To determine the extent
of the Service's outsourcing, we interviewed Service officials at
headquarters and in the Southwest Area and obtained and reviewed
documents related to the Service's outsourcing efforts, including 46
national-level outsourcing initiatives since 1996, as well as proposed
initiatives. In addition, we obtained, reviewed, and analyzed
information on outsourced transportation and delivery, including data
pertaining to routes and delivery points for the three types of
carriers--city, rural, and contract delivery service. We assessed the
reliability of Service data for inconsistencies and determined that the
data were sufficiently reliable for the purpose of this report.
To compare the Service's suitability, performance evaluation, and
management processes for postal employees and contractors, we reviewed
the Service's policies and procedures on qualifications, screening
requirements, and performance evaluation for contractors and postal
employees. We reviewed various Service contracts on Air Mail Centers,
highway contract routes, and contract delivery service and compared
contractual stipulations with applicable postal employee guidelines and
collective bargaining agreements by respective occupation. Finally, we
spoke with various Service national-and field-level officials about the
Service's suitability, performance evaluation and management processes
for postal employees and contractors.
To evaluate the results, including costs, savings, and other outcomes
related to outsourcing, we discussed with Service officials the
processes and procedures currently in place for evaluating outsourcing
activities. We also obtained and reviewed available cost estimates,
relevant budget information, and available performance data for the
outsourcing projects initiated between 1996 and 2007.
We conducted this performance audit from August 2007 to July 2008 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: National Outsourcing Initiatives Since1996 That Did Not
Have a Significant Impact on Postal Unions:
Initiative: Automated Package Processing System;
Description: Installation and testing of equipment.
Initiative: Singulate and Scan Induction Unit/Optical Character
Recognition Program;
Description: Equipment installation.
Initiative: Hub and Spoke (HASP) Expansion/Surface Transfer Centers
(STC);
Description: Controls the movement of mail through surface
transportation.
Initiative: Leased Space Accessibility Program;
Description: Inspection, design, and construction to bring 27,000
leased postal facilities in compliance with new Architectural Barriers
Act amendment.
Initiative: Facilities Single Source Provider Program;
Description: Program addressing local Article 32 requirements for
repairs and maintenance at field sites.
Initiative: Intelligent Mail Data Acquisition System Modification;
Description: Site preparation and electrical power issues.
Initiative: Shared Energy Savings Program;
Description: Site preparation and building retrofit issues.
Initiative: BMC Transition to RDC Concept (Regional Distribution
Center);
Description: Site preparation.
Initiative: Strategic Stocking Location (SSL);
Description: Warehousing.
Initiative: Third Party Logistics (3PL);
Description: Short-term warehousing and distribution.
Initiative: Stamp Fulfillment Center (SFS);
Description: Philatelic item order-taking.
Initiative: Homeland Security Presidential Directive 12;
Description: Employee security credentials.
Initiative: Flat Sequencing System;
Description: Installation and site preparation.
Initiative: Automated Flat Sorting Machine/Automatic Induction;
Description: Site preparation, installation, and testing.
Initiative: Automated Flats Tray Lidder (AFTL);
Description: Site preparation and installation.
Initiative: Automated Postal Centers;
Description: Site preparation, servicing, and machine relocation.
Initiative: Automated Tray Handling System (ATHS);
Description: Site preparation and installation of equipment.
Initiative: Biohazard Detection Systems (BDS);
Description: Site preparation, installation, and some maintenance.
Initiative: Delivery Bar Code System;
Description: Installation and testing.
Initiative: Distribution Quality Improvement Equipment;
Description: Installation and testing.
Initiative: Feeder Enhancer De-Stacker Retrofit (FEDR);
Description: Site preparation prior to installation of equipment.
Initiative: Flat Identification Code Sort Program (FICS);
Description: Site preparation prior to installation of equipment.
Initiative: Flat Recognition Improvement Program;
Description: Installation.
Initiative: Flat Remote Encoding System;
Description: Installation and testing.
Initiative: Hub and Spoke Facilities;
Description: Local mail transfer sites.
Initiative: Integrated Dispatch and Receipt;
Description: Site preparation and installation of equipment.
Initiative: Mail Processing Infrastructure (MPI);
Description: Plant rewiring, site preparation, and installation of
wiring.
Initiative: OCR Enhancement;
Description: Installation and testing.
Initiative: Package Detection System; Description: Site preparation,
installation, and testing.
Initiative: Postal Automated Reduction System;
Description: Installation and testing.
Initiative: Powered Industrial Vehicle Management System;
Description: Installation of equipment.
Initiative: Small Parcel and Bundle Sorter;
Description: Relocation of equipment and site preparation.
Initiative: Surface Transfer Centers;
Description: Local mail transfer site.
Initiative: Surface Visibility;
Description: Installation of wiring.
Initiative: Telephone Change of Address (TCOA);
Description: System development and installation.
Initiative: Ventilation and Filtration Systems (VFS);
Description: Site preparation, installation, warranty, extensive site
design, fire protection, power distribution, and facility structural
concerns.
Initiative: Vending Equipment;
Description: Maintenance and servicing of some machines.
Initiative: International Mail Claim Inquiries;
Description: Customer claims inquiry process.
Initiative: Point of Sale Replenishment;
Description: Initial product inventory to support activation of
automated replenishment program.
Initiative: ReadyPost;
Description: Replenishment program for commercial packaging products at
post offices.
Initiative: Mail Equipment Shops - Bag Shops;
Description: Transition from bags to trays, remaining limited need for
bags satisfied via marketplace.
Source: Postal Service.
[End of table]
[End of section]
Appendix III: Comments from the U.S. Postal Service:
Anthony J. Vegliante:
Executive Vice President and Chief Human Resources Officer:
United States Postal Service:
July 7, 2008:
Ms. Katherine A. Siggerud:
Managing Director, Physical Infrastructure Issues:
United States Government Accountability Office:
Washington, DC 20548-0001:
Dear Ms. Siggerud:
Thank you for providing the United States Postal Service the
opportunity to review and comment on the draft report, U.S. Postal
Service: Data Needed to Assess the Effectiveness of Outsourcinq Results
(GAO-08-787).
As noted in the draft, support for the Postal Service to operate more
like a business dates back at least to 1970. At that time, Congress
passed legislation that gave the Postal Service unique status as an
independent establishment of the federal government and authorized it
to finance its operations through sales of its products and services,
instead of appropriations. In addition, with the recent enactment of
the Postal Accountability and Enhancement Act of 2006, the Postal
Service is now urged to achieve greater efficiency and cost savings by
taking full advantage of private-sector relationships through
commercial best practices in purchasing.
At the same time, again as referenced in your report, we face possible
restrictions to our ability to outsource, particularly the use of mail
delivery contractors-though today such outsourced delivery service
accounts for less than two percent of all deliveries. Both the
Postmaster General and postal union representatives have stated that
issues related to outsourcing should be resolved within the context of
our collective bargaining agreements-not through legislative mandate.
We continue to believe strongly that adherence to this principle is
vital to maintaining the integrity of the collective bargaining
process.
Like, you, we are encouraged by the progress and improvements in
communications between management and unions, the "sharp reductions in
the number of grievances," and the fact that three of the four major
labor contracts were successfully negotiated this year between the
parties without the need for binding arbitration.
Together, management and unions have improved productivity over the
last eight years and achieved our annual $1 billion cost-reduction goal
in four of the last five years. Though their specific contributions to
these achievements are not segregated, outsourcing some work and
avoiding major capital expenditures are significant factors in meeting
our financial goals. At the same time, it should be noted that the
Postal Service met these corporate goals without layoffs.
The outsourcing consideration process is very deliberative with the
objective of making the best business decision for the Postal Service.
In order to meet our congressionally mandated obligations to the
American public, we need to reduce costs and increase efficiencies
while functioning as an organization with no appropriated funds from
Congress. Our business processes include constantly monitoring the
results of contractor performance. As an example of this constant
monitoring of contractor performance, as referenced in your report, the
Priority Mail program was brought back 'in-house' when it did not
achieve the desired results.
In our national labor agreements, Article 32, Subcontracting,
establishes general criteria when considering outsourcing, requiring
that due consideration be given to public interest, cost, efficiency,
availability of equipment, and qualification of employees when
evaluating the need to subcontract. Article 32.2 of the American Postal
Workers Union agreement covers the highway movement of the mail. These
provisions were negotiated and any modification should be made through
collective bargaining. In fact, during the most recent round of
negotiations, management and the National Association of Letter
Carriers agreed to establish a joint committee to discuss a mutually
agreeable approach to the issues of outsourcing and to invite the
National Rural Letter Carriers' Association to participate. The
dialogue continues today.
Notwithstanding the fact that the Postal Service does monitor
contractor performance via pertinent, defined metrics and can account
for and report on the difference in cost per delivery between city,
rural, and contract delivery service as noted throughout the draft
report, the Postal Service does not account for outsourcing contracts
separately from other contracts. All contracts contain performance
metrics and requirements which the Postal Service monitors for
performance and costs. Partnerships are managed through an ongoing
process-a continuous exchange of knowledge and communication, with
measured performance objectives.
This draft report describes the GAO's recommendations for the Postal
Service as follows:
To improve management decision-making and accountability in this area,
the Postmaster General should first, establish a process to measure the
results and effectiveness of Service outsourcing activities that are
subject to collective bargaining agreements. This process should
include tracking actual cost and any savings, and comparing them with
estimated costs and savings. Second, to support congressional
oversight, the Postmaster General should include information on the
results and effectiveness of these ongoing outsourcing activities in
its annual operations report (Comprehensive Statement on Postal
Operations) to Congress.
The Postal Service concurs with the finding that the Postal Service
does not "...separately track these contracts [total outsourcing
contracts related to bargaining unit work]...." However, we do have
data to support postal outsourcing decisions, e.g., cost differences
between contracted transportation services versus postal vehicle
services for those routes that met Article 32.2 criteria for FY2007.
Recently the U.S. Postal Service Office of Inspector General completed
audits regarding outsourcing activities and found that not only have
estimated savings been achieved, but far exceeded.
In response to the recommendations, the Postal Service will take a risk
assessment approach and establish a process to compare the assumptions
underlying the decision to outsource contained in the final financial
comparative analysis with the actual contract award one year after
implementation, with an adjustment for any ramp-up period. This data
will be sourced through the appropriate contracting officer, a
headquarters finance team, and the pertinent sponsoring organization.
Such analysis will be completed for national Article 32.1.B.
considerations approved after July 2008. The process will be monitored
by the Strategic Initiatives Action Group, the cross-functional
committee responsible for coordinating the processes involved in
reviewing, approving, and monitoring proposed outsourcing initiatives.
Findings will be presented to senior management on the outsourcing
approval board. On the second recommendation, the Postal Service
proposes to retain this information with our headquarters finance
department, rather than publish the information in the Comprehensive
Statement.
If you, or your staff, wish to discuss any of these comments further, I
am available at your convenience.
Sincerely,
Signed by:
Anthony J. Vegilante:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Katherine Siggerud (202) 512-2834 or siggerudk@gao.gov:
Acknowledgments:
In addition to the individual named above, Teresa Anderson, Lauren
Calhoun, Elizabeth Eisenstadt, Brandon Haller, David Hooper, Brian
Howell, Karen Jarzynka, and Travis Thomson made key contributions to
this report.
[End of section]
Footnotes:
[1] GAO, U.S. Postal Service: Little Progress Made in Addressing
Persistent Labor-Management Problems, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-98-1] (Washington, D.C.: Oct.
1, 1997).
[2] The clauses set forth in the collective bargaining agreements refer
to outsourcing as "subcontracting." In addition, for the purposes of
this report, when we refer to collective bargaining agreements, we are
also referring to the accompanying memoranda of understanding.
[3] See S. 1457, the Mail Delivery Protection Act of 2007, and H. R.
4236, the Mail Network Protection Act of 2007. Additionally, H. Res.
282 expresses "the sense of the House of Representatives that the
United States Postal Service should discontinue the practice of
contracting out mail delivery services."
[4] Most postal employees represented by labor unions are called
bargaining unit employees and the four major unions include the: (1)
American Postal Workers Union (APWU), (2) National Association of
Letter Carriers (City Carriers), (3) National Postal Mail Handlers
(Mail Handlers), and (4) National Rural Letter Carriers' Association
(Rural Carriers).
[5] The Service manages its field operations by dividing the nation
into nine geographic areas.
[6] 39 U.S.C. §5005.
[7] One of the five initiatives that had a significant impact,
outsourcing of the Air Mail Centers (AMC), was considered in three
separate initiatives but is counted as a single initiative in this
report.
[8] For the purposes of this report, the term contractor includes an
individual contract holder, employees of a contractor, or
subcontractors.
[9] Pub. L. No. 91-375, 84 Stat. 719, Aug. 12, 1970.
[10] Agreements with the APWU and the Rural Carriers expire in 2010;
agreements with the Mail Handlers and the City Carriers expire in 2011.
[11] Stations are units of a main post office located inside the
corporate limits of a city or town while branches are units of a main
post office located outside the corporate limits of a city or town.
[12] We discussed these statutes and regulations in GAO, U.S. Postal
Service: Purchasing Changes Seem Promising, but Ombudsman Revisions and
Continued Oversight Are Needed, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-06-190] (Washington, D.C.: Dec. 15, 2005). We note that
the Service has not been subject to most federal laws, regulations, and
directives applicable to most federal purchasing, including (1) the
Federal Acquisition Regulation, which establishes the uniform set of
policies and procedures for acquisition by all executive branch
agencies, and (2) the Competition in Contracting Act, which
establishes, among other things, the federal policy of "full and open
competition" for most federal contracts. Additionally, the Service is
not subject to the Office of Management and Budget's Circular No. A-76,
which requires agencies to identify activities that are inherently
governmental and are therefore, exempt from A-76.
[13] 39 U.S.C. §§ 5402, 5605.
[14] The Service's Supplying Principles and Practices manual provides
guidance for the entire purchase process and includes additional
guidance for purchasing specific services, such as for mail
transportation.
[15] See [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-190].
[16] If a field-level outsourcing proposal will have a significant
impact, Service guidelines require the Service to follow the national-
level process.
[17] Article 32.2 provisions apply to contracts for routes: with a
value of more than $100,000 per year for a fixed annual rate contract
and not more than 350 miles in round-trip length; an annual or non-
annual rate contract where estimated annual compensation will exceed
$45,000; and no more than 8 hours in operating time.
[18] Article 15 in the collective bargaining agreements defines the
Grievance-Arbitration Process, which ultimately could result in binding
arbitration if the parties are unable to resolve a grievance.
[19] With the onset of military activities in Afghanistan and Iraq, the
U.S. military activated its contingency zip code for processing and
delivery of packages to this region. The outsourced work includes
receiving and sorting packages, building pallets of packages, and
transporting the pallets to an aviation supplier.
[20] Pub. L. No. 90-480 (Aug. 12, 1968), codified as amended at 42
U.S.C. §4151 et seq.
[21] 42 U.S.C. §§4151, 4151a.
[22] As previously discussed, in this report, the term "contractor"
includes an individual contract holder, an employee of a contractor, or
a subcontractor.
[23] Article 16 of the collective bargaining agreements sets forth
union disciplinary procedures.
[24] The rural carrier's collective bargaining agreement does not
differentiate between suspensions greater or less than 14 days.
[25] The eight quality indicators used are for mail that is: missorted;
misrouted; delayed; late destinating to the Service; delivered to the
wrong Service plant or facility; damaged by contractor; missent between
Priority Mail processing centers; and delivered late to the Service.
[26] Postal Reorganization Act, Pub. L. No. 91-375, Section 2401, Aug.
12, 1970.
[27] Pub. L. No. 109-435, Section 1004(2), Dec. 20, 2006.
[28] President's Commission on the United States Postal Service,
Embracing the Future: Making the Tough Choices to Preserve Universal
Mail Service (Washington, D.C.: July 31, 2003). The Commission was
established by executive order in 2002 to, among other things,
recommend legislative and administrative reforms needed to ensure the
viability of postal services.
[29] Testimony of John F. Hegarty, National President of the National
Postal Mail Handlers Union, before the House Subcommittee on Federal
Workforce, Postal Service, and the District of Columbia, Committee on
Oversight and Government Reform, July 19, 2007.
[30] Testimony of John F. Hegarty, National President of the National
Postal Mail Handlers Union before the House Subcommittee on Federal
Workforce, Postal Service, and the District of Columbia, Committee on
Oversight and Government Reform, May 8, 2008.
[31] Ibid.
[32] See [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-98-1].
[End of section]
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