U.S. Postal Service
Dire Financial Outlook and Changing Mail Use Require Network Restructuring
Gao ID: GAO-11-759T June 15, 2011
The U.S. Postal Service (USPS) recently reported that its financial results for the first half of this fiscal year--a net loss of $2.6 billion--are worse than projected. USPS expects continued financial challenges as mail volume continues to decline. Most notable is the decline of First-Class Mail (its most profitable mail) by over 25 billion pieces, or about 25 percent, over the past decade. GAO has reported on proposals to revise USPS pension and retiree health obligations, but such actions alone will not be sufficient to address the accelerating volume decline and changing use of the mail. This statement discusses (1) why it is important to restructure USPS's networks and (2) what actions are needed to facilitate additional progress. This statement is based primarily on past and ongoing GAO work.
USPS urgently needs to restructure its networks and operations as its financial condition and outlook are reaching a crisis. USPS has been experiencing billion-dollar losses and cash shortfalls over the last 5 years, and expects to reach its $15 billion borrowing limit this year. USPS officials have stated that USPS may default on its retiree health payments owed to the federal government in September 2011. These financial problems are due to declining mail volume brought on by customers' shift to electronic alternatives and USPS's difficulty in reducing costs and eliminating excess network capacity. USPS faces restructuring challenges in three areas: (1) Retail--Although USPS has provided alternatives to post offices, it has been slow to modernize its network. As customer visits to, and revenue generated at, post offices have declined, USPS has not made commensurate reductions in its number of retail facilities. (2) Mail processing--USPS has improved operational efficiency and reduced employee work hours, but excess capacity remains as large mail volume declines continue. (3) Delivery--USPS has adjusted routes and deployed new sorting equipment to make delivery more efficient, but additional efforts are needed, since delivery is USPS's most costly activity. Restructuring decisions involve key public policy questions. For example, what postal services are needed and what is affordable? In order for USPS to be self-sustaining, it needs to significantly reduce its costs to match its revenues. Change is needed to facilitate restructuring postal networks and operations. GAO has suggested the following changes: (1) Revise legal requirements to facilitate network-wide restructuring, perhaps similar to the Defense Base Closure and Realignment Commission approach. (2) Improve outreach and the transparency of information used to make decisions. (3) Enhance public input by simplifying rules and requirements so that they are consistent, timely, and easy for the public to understand. GAO is not making new recommendations in this statement. Recently, GAO has reported that Congress, the administration, and USPS urgently need to reach agreement on a package of actions that will address constraints and legal restrictions to facilitate progress in rightsizing USPS's operations, networks, and workforce. GAO has also recommended that Congress consider providing USPS with financial relief, and in doing so, consider all options available to reduce costs.
GAO-11-759T, U.S. Postal Service: Dire Financial Outlook and Changing Mail Use Require Network Restructuring
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United States Government Accountability Office:
GAO:
Testimony:
Before the Subcommittee on Federal Workforce, U.S. Postal Service and
Labor Policy, Committee on Oversight and Government Reform, House of
Representatives:
For Release on Delivery:
Expected at 1:30 p.m. EDT:
Wednesday, June 15, 2011:
U.S. Postal Service:
Dire Financial Outlook and Changing Mail Use Require Network
Restructuring:
Statement of Phillip Herr, Director:
Physical Infrastructure Issues:
GAO-11-759T:
GAO Highlights:
Highlights of GAO-11-759T, a testimony before the Subcommittee on
Federal Workforce, U.S. Postal Service and Labor Policy, Committee on
Oversight and Government Reform, House of Representatives.
Why GAO Did This Study:
The U.S. Postal Service (USPS) recently reported that its financial
results for the first half of this fiscal year”a net loss of $2.6
billion”are worse than projected. USPS expects continued financial
challenges as mail volume continues to decline. Most notable is the
decline of First-Class Mail (its most profitable mail) by over 25
billion pieces, or about 25 percent, over the past decade. GAO has
reported on proposals to revise USPS pension and retiree health
obligations, but such actions alone will not be sufficient to address
the accelerating volume decline and changing use of the mail.
This statement discusses (1) why it is important to restructure USPS‘s
networks and (2) what actions are needed to facilitate additional
progress. This statement is based primarily on past and ongoing GAO
work.
GAO is not making new recommendations in this statement. Recently, GAO
has reported that Congress, the administration, and USPS urgently need
to reach agreement on a package of actions that will address
constraints and legal restrictions to facilitate progress in
rightsizing USPS‘s operations, networks, and workforce. GAO has also
recommended that Congress consider providing USPS with financial
relief, and in doing so, consider all options available to reduce
costs.
What GAO Found:
USPS urgently needs to restructure its networks and operations as its
financial condition and outlook are reaching a crisis. USPS has been
experiencing billion-dollar losses and cash shortfalls over the last 5
years, and expects to reach its $15 billion borrowing limit this year.
USPS officials have stated that USPS may default on its retiree health
payments owed to the federal government in September 2011. These
financial problems are due to declining mail volume brought on by
customers‘ shift to electronic alternatives and USPS‘s difficulty in
reducing costs and eliminating excess network capacity. USPS faces
restructuring challenges in three areas:
* Retail”-Although USPS has provided alternatives to post offices, it
has been slow to modernize its network. As customer visits to, and
revenue generated at, post offices have declined, USPS has not made
commensurate reductions in its number of retail facilities (see
figure).
* Mail processing-”USPS has improved operational efficiency and
reduced employee work hours, but excess capacity remains as large mail
volume declines continue.
* Delivery-”USPS has adjusted routes and deployed new sorting
equipment to make delivery more efficient, but additional efforts are
needed, since delivery is USPS‘s most costly activity.
Figure: Postal Retail Facilities, Fiscal Years 2001-2010:
[Refer to PDF for image: vertical bar graph]
Total:
2001: 38,123;
2010: 36,222.
USPS-operated facilities:
2001: 33,711;
2010: 32,538.
Non-USPS-operated facilities:
2001: 4,412;
2010: 3,694.
Source: GAO analysis of USPS data.
[End of figure]
Restructuring decisions involve key public policy questions. For
example, what postal services are needed and what is affordable? In
order for USPS to be self-sustaining, it needs to significantly reduce
its costs to match its revenues. Change is needed to facilitate
restructuring postal networks and operations. GAO has suggested the
following changes:
* Revise legal requirements to facilitate network-wide restructuring,
perhaps similar to the Defense Base Closure and Realignment Commission
approach.
* Improve outreach and the transparency of information used to make
decisions.
* Enhance public input by simplifying rules and requirements so that
they are consistent, timely, and easy for the public to understand.
View [hyperlink, http://www.gao.gov/products/GAO-11-759T] or key
components. For more information, contact Phillip Herr at (202) 512-
2834 or herrp@gao.gov.
[End of section]
June 15, 2011:
Chairman Ross, Ranking Member Lynch, and Members of the Subcommittee:
I am pleased to be here today to participate in this hearing to
address the challenges facing the U.S. Postal Service (USPS). USPS is
in a serious financial crisis, and as mail volume continues to
decline, it has not generated sufficient revenue to cover its expenses
and financial obligations. At the end of this fiscal year, USPS
officials project a substantial cash shortfall and report that USPS
may default on its retiree health payments owed to the federal
government. Within the next 4 months, critical decisions by Congress
and USPS are needed to avoid its projected default and set USPS on a
path to financial solvency.
My statement today focuses on the urgent need for USPS to rightsize
its operations and infrastructure in light of the current and
projected decrease in demand for its services. This means downsizing
and modernizing its networks to reflect the accelerating decline in
mail volume resulting from changing mail use by businesses and the
public. Specifically, my statement addresses (1) why it is important
to restructure USPS's networks and (2) what actions are needed to
facilitate progress in restructuring.
This statement is primarily based on our extensive body of work on
USPS's activities including our reviews over the past several years of
USPS's business model, financial condition, networks, and service;
foreign posts; and postal reform. In addition, it draws on interviews
with senior USPS officials conducted in May and June 2011. We
conducted the performance audit work that supports this statement in
accordance with generally accepted government auditing standards.
Additional information on our scope and methodology is available in
each issued report.
USPS's Dire Financial Outlook and Changing Mail Use Require Network
Restructuring:
USPS urgently needs to restructure its networks and operations as its
financial condition and outlook reach a crisis level. USPS has
experienced a cumulative net loss of nearly $20 billion over the last
5 fiscal years and has already reported a net loss of $2.6 billion
through the first 6 months of fiscal year 2011. By the end of this
fiscal year, USPS projects that it will incur a $8.3 billion
loss[Footnote 1], experience a substantial cash shortfall, reach its
$15 billion borrowing limit, and be unable to make its scheduled
retiree health benefits payment to the federal government. USPS's
financial problems have been building, as customers' mail use has been
changing--that is, mail volume is declining as customers shift to
electronic communications and payment alternatives. Total mail volume
peaked in fiscal year 2006 at 213 billion pieces and declined by about
20 percent by the end of fiscal year 2010, to about 170 billion
pieces. In the first 2 quarters of this fiscal year, the volume for
First-Class Mail--USPS's most profitable product that accounted for 44
percent of USPS total volume--has declined by almost 7 percent. USPS
has projected a further drop in total mail volume to 150 billion
pieces or less by 2020.
Declining mail volume exposes fundamental weaknesses in USPS's
business model, which has historically relied on mail volume growth to
help cover the costs associated with national retail, processing, and
delivery networks. USPS does not have sufficient revenue to cover the
growing costs of expanding delivery service to roughly 1 million new
residences and businesses each year while maintaining about 33,000
USPS-operated retail[Footnote 2] and processing facilities.
Furthermore, USPS faces a variety of challenges in trying to reduce
costs, including an inflexible cost structure; legal and regulatory
restrictions; stakeholder resistance; difficulty reducing compensation
and benefit costs, which comprise 80 percent of USPS's total expenses;
and increasing difficulty in achieving work hour savings. For these
reasons and more, we placed USPS's financial condition and outlook on
our 2011 list of high-risk programs and agencies.[Footnote 3]
Retail:
USPS currently operates about 32,500 retail facilities. Customers can
also purchase some USPS products or services at over 70,000 locations,
including about 3,700 contract postal units and community post offices
[Footnote 4] and through partnerships with retailers, as well as
through usps.com. In fiscal year 2010, about 31 percent of retail
revenue from USPS products and services was generated through retail
alternatives, and USPS estimates that by 2020, these alternatives may
account for nearly 60 percent of retail sales. Meanwhile, fewer
customers are visiting USPS-operated retail locations. According to
USPS, customer visits have declined over the last decade by about 21
percent and retail revenue generated at USPS-operated retail locations
has dropped by about 16 percent, yet the number of USPS-operated
facilities has remained largely unchanged since fiscal year 2001.
Although the number of channels through which customers can access
USPS's products and services is expanding, USPS has been slow to
modernize its legacy retail network. Figure 1 compares the number of
selected groups of postal retail facilities--USPS-operated facilities
and non-USPS-operated[Footnote 5]--in fiscal years 2001 and 2010. Non-
USPS facilities may be operated by partners and are therefore less
costly for USPS and may be more conveniently located where there is
higher customer traffic. While USPS has slightly reduced the total
number of USPS-operated and non-USPS-operated retail facilities over
the last 10 years, the ratio of USPS-operated versus non-USPS-operated
facilities has barely changed (88 percent in fiscal year 2001 compared
with 90 percent in fiscal year 2010). Foreign postal operators we
studied have modernized their legacy brick-and-mortar retail networks
by drastically reducing the proportion of facilities they operate
relative to the proportion of those operated by others.[Footnote 6]
Figure 1: Postal Retail Facilities, Fiscal Years 2001 and 2010:
[Refer to PDF for image: vertical bar graph]
Total:
2001: 38,123;
2010: 36,222.
USPS-operated facilities:
2001: 33,711;
2010: 32,538.
Non-USPS-operated facilities:
2001: 4,412;
2010: 3,694.
Source: GAO analysis of USPS data.
Note: USPS-operated facilities include post offices, stations, and
branches. Non-USPS-operated facilities include community post offices
and contract postal units.
[End of figure]
Several factors have constrained USPS's efforts to make significant
changes to its retail network:
* Legal requirements: USPS officials have stated that the legal
process has hindered USPS's ability to make progress in retail
realignment. Statutory requirements prohibit USPS from closing small
post offices solely for operating at a deficit,[Footnote 7] and,
therefore, certain retail facilities cannot be closed based on
financial performance alone. USPS has reported that about 80 percent
of postal retail facilities do not generate sufficient revenue to
cover their costs. Additionally, the Postal Regulatory Commission
(PRC) has authority to hear appeals on "post office" closures.
[Footnote 8] However, USPS and the PRC have differed in their
interpretation of the PRC's statutory authority to review appeals of
USPS decisions to close stations and branches. Further, when USPS
proposes changes in the nature of postal services that will generally
affect service on a nationwide or substantially nationwide basis, it
must request an advisory opinion from the PRC.[Footnote 9]
* According to USPS officials, the amount of time taken to complete
the required statutory process for closing facilities has hindered
USPS from timely realignment of its retail network. USPS is required
to provide 60 days advance notice of closing a post office, and any
person served by the facility may appeal the closure decision. The PRC
has 120 days after receiving an appeal to make a determination, which
is made on a case-by-case basis. So far this fiscal year, the PRC has
received more appeals of retail facility closures than it did in the
last decade combined (18 in 2011 compared with 8 in fiscal years 2001
through 2010). Of these 18 appeals, 10 involved stations and branches.
The PRC may affirm USPS's decision or require USPS to reconsider its
closure decisions, but the ultimate authority to close a post office
rests with USPS. Currently, after the PRC's determination, USPS must
wait at least 90 days to take action after posting a final closure
determination.[Footnote 10]
* In its filings with the PRC, USPS has asserted that, in cases where
the closing involves a station or branch, the PRC lacks subject matter
jurisdiction to hear appeals that do not involve a "post office."
Nevertheless, the PRC issues determinations on appeals of USPS
decisions to close retail facilities, including stations and branches.
This issue remains unresolved.
* In 2009, USPS filed a request for a PRC advisory opinion of its
analysis of over 4,000 stations and branches for possible closure,
which resulted in the closure of about 145 facilities from this
proceeding. The PRC's opinion advised USPS to improve public notice
and input prior to making closure decisions.[Footnote 11] It also
suggested that USPS implement uniform procedures for closing or
consolidating all types of retail facilities--post offices, stations,
or branches. Since then, USPS officials have told us that they plan
additional closings of certain retail facilities.
* Stakeholder resistance: USPS has often faced formidable resistance
from employees, affected communities, and Members of Congress when it
has attempted to close post offices because of concerns about possible
effects on service, employees, and communities. Although USPS is
taking steps to improve its communication for making these retail
changes, stakeholders continue to protest the closure of postal
facilities.
The foreign posts we recently studied have also experienced declining
mail volume and revenue. Their solutions to addressing stakeholder
resistance involved regular engagement with stakeholders, including
strategic communication and outreach efforts. These posts emphasized
that although a neighborhood post office would be closing, retail
alternatives were available with local merchants who had extended
operating hours and were located where customers frequently visit--
such as grocery, convenience, and drug stores. For example, when
modernizing its retail network, the Swedish postal operator launched a
nationwide campaign that focused on the post as "a service" instead of
"a place" and proactively informed customers about how and where they
could access postal services. The Swedish Post reported that customers
adapted to the change and preferred the expanded service options.
Officials we interviewed at Australia Post discussed the importance of
involving local communities in deciding, for example, whether to
contract with a local retail partner or close a post office.
Mail Processing:
USPS has taken actions to reduce excess capacity and improve
operational efficiency throughout its mail processing network for
sorting and transporting mail, but has had difficulty comprehensively
adjusting its network to respond to the unprecedented mail volume
decline since fiscal year 2006. As a result, costly excess capacity
remains.[Footnote 12] USPS's mail processing network comprises over
500 mail processing facilities and corresponding transportation
services, equipment, and staff. USPS has made some progress in
streamlining its processing network, such as by closing smaller
facilities like Airport Mail Centers and Remote Encoding Centers.
[Footnote 13] These and other actions have helped USPS eliminate
nearly 108 million workhours from its processing network over the last
5 years (or nearly 40 percent of its total workhour reduction over
that time).
Costly excess mail processing capacity remains for several reasons:
* Mail volume has declined, particularly single-piece First-Class
Mail, which has dropped by about 23 billion pieces over the past
decade. As a result, less mail is processed end-to-end through USPS's
processing network. In 2009, for example, a USPS official testified
that USPS had 50 percent excess plant capacity in its First-Class Mail
processing operations.
* Continuing automation improvements enable USPS to sort mail faster
and more efficiently. Some space once needed for manual sorting is now
excess.
* Eighty-three percent of Standard Mail in fiscal year 2010 was
destination entered by mailers,[Footnote 14] meaning that it bypassed
most of USPS's mail processing network and long-distance
transportation. This increase--16 percent over the last decade--has
left USPS with excess processing capacity.
As a result of these factors, USPS's mail processing network could
handle significantly more mail than is currently going through the
system. USPS has often faced resistance from employees, affected
communities, and Members of Congress when it has attempted to
consolidate its processing operations and networks, close mail
processing facilities, or both because of concerns about possible
effects on service, employees, and communities. In particular, we have
reported that stakeholders have concerns about USPS's ongoing efforts
to consolidate its Area Mail Processing (AMP) facilities.[Footnote 15]
Proposals to consolidate these processing operations and facilities
are intended to reduce costs and increase efficiency by making better
use of excess capacity or underused resources. The AMP proposals
consist of consolidating operations from one mail processing facility
that downsizes its mail processing operations to other facilities
nearby that gain the processing operations. USPS has improved its
processes for communicating and implementing its AMP consolidation
plans and is currently evaluating over 130 proposals for
consolidations.
Delivery:
USPS has ongoing efforts to increase the efficiency of mail delivery,
which is its most costly activity and involves more than 310,000
carriers accounting for approximately 47 percent ($23 billion) of
USPS's total salary and benefit expenses in fiscal year 2010. Two key
efforts are underway:
* Realignment of city delivery routes to remove excess capacity and
improve efficiency. USPS expects this effort to generate nearly $1
billion in annual savings by reducing space needs in post offices and
other facilities and helping provide more consistent delivery service.
* Installation of new automated systems to sort certain mail, such as
catalogs and magazines, into delivery order so that costly manual
sorting by carriers is no longer needed. USPS expects this effort to
improve delivery accuracy, consistency, and timeliness.
These efforts, along with other actions and declines in volumes, have
helped USPS eliminate approximately 70 million delivery work hours
over the last 5 fiscal years (or nearly a quarter of USPS's total
workhour reduction over that time). USPS has attempted to further
reduce delivery costs by asking Congress not to include the language
in its annual appropriations legislation that requires it to deliver
mail 6 days a week. USPS officials have stated that moving to 5-day
delivery would result in annual savings of about $3 billion once the
change would be fully implemented.
Because USPS expects mail volume to continue declining, it will need
to continue working to improve delivery efficiency. According to USPS,
it generated $1.80 in daily revenue contribution for each delivery
point in fiscal year 2000; by fiscal year 2009, that number had shrunk
to $1.40, and by fiscal year 2020, USPS estimates that it could
decline to about $1.00. While moving to 5-day delivery would not, by
itself, resolve USPS's considerable financial challenges, this and
other restructuring strategies will need to be considered to adapt to
changes in mail use and achieve financial viability.
USPS and Congress Need to Take Urgent Action to Restructure Networks:
Congress and USPS urgently need to reach agreement on a package of
actions that will address difficult constraints and legal restrictions
and allow USPS to accelerate progress on restructuring its networks.
Members of the 112th Congress have introduced legislation to promote
network restructuring, and USPS has proposed regulatory changes. We
also have recommended in prior reports that USPS realign its postal
operations, networks, and workforce with changes in mail usage and
customer behavior. As part of this work, we proposed options for
action by Congress and USPS to reduce costs and improve efficiency.
These proposals and options, which are presented in more detail below,
offer an opportunity to reconsider some of the key statutory
requirements and processes for closing postal facilities, many of
which have not changed significantly since the 1970s and may not be
conducive to the type of networkwide changes that are currently
needed. Table 1 highlights Congress's, USPS's, and GAO's key retail
proposals and options.
Table 1: Retail Proposals and Options for Restructuring:
Congress has introduced legislation that would, among other factors:
* Give USPS greater flexibility to close unneeded post offices by
eliminating the prohibition against closing small post offices solely
for operating at a deficit[A];
* Make procedures for closing or consolidating stations and branches
the same as those for post offices[B];
* Require USPS to submit a plan for the co-location of post offices at
retail facilities--that is, for moving postal services to non-USPS-
operated facilities--and to report to Congress on its progress in
implementing this plan[C];
* Require USPS to develop a plan for expanding retail alternatives and
regularly report to Congress on its progress in implementing this
plan[A];
* Permit USPS to adjust its delivery frequency notwithstanding any
other provision of the law[A].
USPS has introduced a proposed rule that would:
* Permit USPS to initiate a closure study for a facility where, among
other factors, the workload at a facility is below an established
level;
* Shorten the regulatory waiting period for closing a retail facility
from 90 days to 60 days, after a final closure determination has been
made;
* Make the retail closure processes uniform, regardless of whether the
facility is a post office, station, or branch.
GAO has presented options and strategies for restructuring USPS's
retail network including:
* Streamline USPS's retail network by consolidating and closing
unneeded retail facilities;
* Modernize customer access by providing services "where the customers
are," including increasing and enhancing customer access through less
costly alternatives, such as partnerships, kiosks, and improved online
offerings.
Source: GAO analysis.
[A] S.1010.
[B] The Post Office Transparency Act, H.R. 2024, 112th Cong. (2011).
[C] The Postal Service Improvements Act of 2011, S. 353, 112th Cong.
(2011). Reform the Postal Service for the 21st Century Act, H.R. 1262,
112th Cong. (2011).
[End of table]
In addition to options for retail networks, the following are among
the options we have previously identified for restructuring USPS's
mail processing and delivery networks:[Footnote 16]
Mail processing network options:
* Close unneeded mail processing facilities.
* Relax delivery standards[Footnote 17] to facilitate closures and
consolidations.
Delivery network options:
* Expand the use of more cost-efficient delivery methods, such as
clusterboxes and curbline delivery.[Footnote 18]
* Decrease delivery frequency from 6 to 5 days a week.
Stakeholders have raised concerns about these restructuring options
and strategies. For example, postmaster management associations and
the PRC have raised objections to USPS's proposed rule to modify its
retail structure.[Footnote 19] Similarly, USPS received a variety of
comments raising concerns about its 5-day delivery proposal.
Realigning Postal Networks Involves Key Public Policy Questions and
Consideration of Changes:
Restructuring decisions involve key public policy questions as well as
difficult trade-offs--for example, what postal services are needed and
what is affordable? Some tension exists between USPS's role as a
federal government entity expected to provide universal postal
services, including access to retail service, while also being self-
financing through businesslike operations. As we have reported,
Congress's decisions about how to address the following questions will
shape USPS's future role, operations, networks, and ability to adapt
to changes in mail use and mail volume:
* Universal service: What aspects of universal service, including 6-
day delivery, are appropriate in light of fundamental changes in
customers' use of the mail? What, if any, changes are needed to
delivery standards? How can USPS improve customers' access to postal
services through modernizing its retail network to maximize costs
savings?
* Statutory and regulatory changes: What statutory or regulatory
changes are needed to give USPS the flexibility it needs to
restructure its operations, networks, and workforce, while also
assuring appropriate oversight? For example, what changes may be
needed to clarify whether or not the PRC has the authority to review
appeals of closures and consolidations of stations and branches?
* Stakeholder involvement: What role, if any, should Congress, the
Board of Governors,[Footnote 20] and the PRC have in developing,
approving, or reviewing decisions to modernize and realign postal
services? What input should postmasters or other postal employees and
the public have in these decisions? How and when should USPS notify
the public of its decisions to modernize and realign services?
* Accountability: What incentives and oversight mechanisms would help
to balance the public's expectations of universal service, USPS's need
for more flexibility to achieve efficiencies, and the government's
responsibility to ensure sufficient transparency, oversight, and
accountability?
In order for USPS to be self-sustaining, it needs to significantly
reduce its costs to match its revenues. Change is needed to needed to
facilitate restructuring postal networks and operations. Some changes
to consider include:
* Revise legal requirements to facilitate networkwide restructuring.
This would broaden the current focus on individual facility closures,
which are often contentious, time consuming and inefficient, to a
broader networkwide restructuring, perhaps similar to the Defense Base
Closure and Realignment and Commission (BRAC) approach. Under this
approach, expert panels have successfully informed and permitted
difficult restructuring decisions, helping to provide consensus on
intractable decisions.
* Adapt PRC review processes to changes made to facilitate networkwide
review. The current appeals process focuses on decisions USPS has made
about individual facilities closing. Another oversight approach to
facilitate networkwide restructuring would be an annual reporting and
review requirement, whereby USPS would report all service changes,
including facility closures, completed over the past year and changes
planned for the next fiscal year in its annual compliance report to
the PRC. The PRC could then review and comment on any potential
impacts on service in its annual compliance determination report.
* Improve outreach and transparency of information used to make
decisions. For example, strategically communicate and conduct outreach
with retail customers, government officials, and employee groups; use
maps and a template of specified data to show all locations of postal
facilities, alternatives, and retail partners where postal services
are available in a designated service area; indicate proposed changes
in this context; and allow the public to submit questions or comments.
* Enhance public input by simplifying rules and requirements so that
they are consistent, timely, and easy to understand. For example,
eliminate references to internal USPS terms that are not clear to the
public, such as whether a retail facility is a post office, station,
or branch, and clearly define what is meant by such terms as facility
closings, consolidations, discontinuance, conversions, or replacements.
In summary, effectively rightsizing USPS will require both
congressional support and USPS leadership to address resistance to
change. USPS senior management will need to provide leadership and
work with stakeholders for such actions to be successfully
implemented. USPS must explain its plans in an open and transparent
manner; engage with its unions, management associations, the mailing
industry, and political leaders; and then demonstrate the results of
its actions. In turn, stakeholders need to recognize that major change
is urgently needed if USPS is to be financially viable and self-
sustaining. It is time for USPS management, unions, the public,
community leaders, and Members of Congress to take a hard look at what
postal services residents and businesses need and can afford. The
status quo is no longer sustainable. Changes are necessary to ensure
that postal services remain available to all U.S. residents and
businesses by a USPS that is financially healthy and self-supporting.
Mr. Chairman, this concludes my prepared statement. I would be pleased
to answer any questions that you or other Members of the Subcommittee
may have.
Contacts and Staff Acknowledgments:
For further information about this statement, please contact Phillip
Herr at (202) 512-2834 or herrp@gao.gov. Individuals who made key
contributions to this statement include Susan Ragland, Director,
Financial Management and Assurance; Amy Abramowitz, Teresa Anderson,
Joshua Bartzen, Erin Cohen, Shelby Kain, Margaret McDavid, Sara Ann
Moessbauer, Amrita Sen, and Crystal Wesco.
[End of section]
Footnotes:
[1] The Postmaster General testified in May 2011 that USPS projects a
loss of approximately $8.3 billion in fiscal year 2011, before any non-
cash adjustments to workers' compensation liabilities.
[2] USPS-operated retail facilities include (1) main post offices,
where local postmasters oversee retail operations in the geographic
area; (2) postal stations located within a municipality's corporate
limits; and (3) postal branches located outside a municipality's
corporate limits.
[3] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February
2011).
[4] Contract postal units are operated by nonpostal employees in
privately operated businesses, such as convenience stores, grocery
stores, greeting card stores, and pharmacies. Community post offices
are contract postal units that are located in small communities and
function as main post offices.
[5] Non-USPS-operated facilities include community post offices and
contract postal units, described previously.
[6] GAO, U.S. Postal Service: Foreign Posts' Strategies Could Help
Inform U.S. Postal Service's Modernization Efforts, [hyperlink,
http://www.gao.gov/products/GAO-11-282] (Washington, D.C.: Feb. 16,
2011). We are currently conducting two reviews related to USPS's
retail network: one on retail alternatives and another on retail
closures.
[7] 39 U.S.C. §101. Also, annual appropriations provisions have
restricted post office closures. See e.g., Pub. L. No. 111-117 (Dec.
16, 2009).
[8] 39 U.S.C. § 404(d)(5).
[9] 39 U.S.C. § 3661(b).
[10] USPS has proposed reducing the waiting period from 90 days to 60
days, consistent with statutory requirements. 76 Fed. Reg. 17794 (Mar.
31, 2011).
[11] Advisory Opinion Concerning The Process For Evaluating Closing
Stations and Branches, Docket No. N2009-1, March 10, 2010.
[12] We are currently conducting a more detailed review of the excess
capacity in USPS's mail processing network.
[13] Airport Mail Centers primarily process mail to expedite its
transfer to and from different commercial passenger airlines. Remote
Encoding Centers are separate plants established to apply address
barcodes on letters that could not be read by the automated equipment
in the mail processing plants.
[14] Mail that is destination entered is sorted and transported by
mailers to USPS facilities that are generally closer to the final
destination where the mail will be delivered.
[15] GAO, U.S. Postal Service: Mail Processing Network Initiatives
Progressing, and Guidance for Consolidating Area Mail Processing
Operations Being Followed, [hyperlink,
http://www.gao.gov/products/GAO-10-731] (Washington, D.C., June 16,
2010).
[16] GAO, U.S. Postal Service: Strategies and Options to Facilitate
Progress toward Financial Viability, [hyperlink,
http://www.gao.gov/products/GAO-10-455] (Washington, D.C.: Apr. 12,
2010).
[17] Service standards are performance measures for on-time delivery
of mail. These standards help enable USPS, mailers, and customers to
set realistic expectations for delivery performance, such as the
number of days mail takes to be delivered, and to organize their
activities accordingly. To illustrate a potential reduction, in 2010
we reported that one senior USPS official estimated that about 70
processing facilities could be eliminated if local First-Class Mail
were to be delivered in 2 days instead of overnight.
[18] Curbline delivery is where mail is delivered to a curbline
mailbox and a clusterbox is a centralized unit of individually-locked
compartments for the delivery of mail.
[19] USPS expects to finalize the proposed rule in summer 2011. 76
Fed.Reg.17794 (Mar. 31, 2011).
[20] The USPS Board of Governors, which has responsibilities similar
to the board of directors of a publicly held corporation, directs the
exercise of the powers of USPS, directs and controls its expenditures,
reviews its practices, conducts long-range planning, and sets policies
on all postal matters.
[End of section]
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