The nationwide effort to consolidate stations and branches is NOT over.
156 Stations and Branches Remain Under Review For Possible Consolidation Under the Stations and Branches Optimization and Consolidation Initiative as of March 2010. 144 Stations and Branches were reported by USPS in February 2010.
Top five states with facilities on possible consolidation list:
Ohio – 25
Pennsylvania – 11
New York – 11
“Both federal law and postal policies prescribe a Post Office discontinuance process. In contrast, the Postal Service uses an expedited process to close stations and branches, which is not specifically covered by statute. Absent future legislative changes, the two discontinuance processes are warranted to promote a flexible, agile Postal Service to adapt to changing mailing preferences and to increase the opportunity to consolidate redundant retail facilities.”
“While the Postal Service developed an expedited process for closing stations and branches, it is primarily subjective and qualitative in nature. Management stated they are developing a decision tree-based retail discontinuance model to mitigate the inconsistency and subjectivity identified in our review. The project is currently in the design phase. Management plans to complete and deploy this model in FY 2011.”
OIG Audit Report – Stations and Branches Optimization and Consolidation Initiative (excerpts)
This report presents the results of our review of the U.S. Postal Service’s efforts to optimize the retail network (Project Number 10XG021EN000). Our objective was to
assess the Stations and Branches Optimization and Consolidation (SBOC) Initiative for discontinuance of classified stations and branches.1 This self-initiated audit addresses strategic, financial, and operational risks. This is the first in a series of retail optimization reviews. See Appendix A for additional information about this audit.
The Postal Service’s current retail network of approximately 32,000 facilities reflects a time when practically all retail revenue was generated through window transactions at
“brick and mortar” Postal Service facilities, mail volume was robust, and there was less alternate access to postal services. Congress recognized in the Postal Accountability
and Enhancement Act of 20062 that the Postal Service has more facilities than it needs and strongly encouraged streamlining the network. These factors, combined with its
current financial challenges, have made it incumbent upon the Postal Service to review the number and location of stations and branches to determine whether or not there is
excess capacity in the network.
While a station or branch is similar in many ways to a PO, there are some meaningful differences, particularly from the Postal Service’s perspective and administrative
standpoint. POs are established and maintained at locations to ensure that complete postal services are available to all customers within specified boundaries of named
geographic places. Stations and branches are subordinate units within the service area of POs. Operations at stations and branches are directed by each facility’s supervising
The SBOC Initiative is a viable option for the Postal Service to reduce costs in the retail network, but opportunities exist to improve the process. The Postal Service could have
enhanced the planning and management of the initiative by improving communication and coordination with stakeholders3 and developing accurate and reliable data on its
facilities. In addition, the Postal Service needs to raise stakeholders’ confidence that it will make decisions in a transparent, equitable, and fact-based manner by integrating a
strategic approach (top-down) and establishing clear criteria for evaluating discontinuance decisions.
The Postal Service has not posted a status update on the SBOC Initiative on its external website (usps.com) since February 2010. Postal Service Headquarters (HQ) did provide
an updated list (dated March 2010) showing that 156 facilities remained under consideration for discontinuance. Based on our fieldwork, we determined that district
offices forwarded 144 proposals6 recommending discontinuance of operations to HQ. However, management has made no decisions regarding which, if any, of these
facilities it will close through the time of our report. Management stated other initiatives, including 5-day delivery,7 have taken priority over the SBOC Initiative. As a result, the Postal Service spends about $425,000 per month to maintain operations at 28 of the 144 facilities we randomly selected for review. The Postal Service could realize cost
savings of over $1.7 million in fiscal year (FY) 2010 if they approve discontinuance of operations for the 28 facilities after HQ Retail Operations has completed its predecisional
review of the proposals.
Postal Service Actions – Management stated they are developing a decision tree-based retail discontinuance model to mitigate the inconsistency and subjectivity identified in
our review. The project is currently in the design phase. Management plans to complete and deploy this model in FY 2011.
Management added that they have initiated, in coordination with the Continuous Improvement Office, a Lean Six Sigma8 (LSS) study of the discontinuance process for
POs and other retail facilities. The project scope, milestones, and completion date had not been established at the time of our report.
Station and Branch Discontinuance Process Issues
While the station and branch discontinuance process was developed to provide the Postal Service with greater flexibility to aid in decision-making, postal policies do not
contain detailed procedures to ensure the process is fairly and consistently applied. This is partially because the SBOC Initiative was a unique project the Postal Service
implemented quickly. Management used PowerPoint presentations to document, communicate, and train its employees on the SBOC Initiative discontinuance process. Appendix F provides a timeline showing the SBOC Initiative from concept development to current status. Appendix G provides a flowchart of the SBOC Initiative discontinuance
While presentations provide a swift means to communicate changes and updates to the existing process, we believe they should not be a substitute for formal policies and
procedures. On April 6, 2010, during an interview with the OIG, the former program manager for the Post Office Discontinuance Program acknowledged that Handbook PO-
101 should have step-by-step instructions. During other interviews, field managers expressed a need for detailed discontinuance instructions.
Resistance to Retail Network Changes
The Postal Service faces strong resistance to closing and consolidating retail facilities from local communities, employees, and lawmakers. While alternate access channels
are more widely available, some customers resist changing long-standing habits. Management needs to improve communication strategies and work with stakeholders to
overcome resistance. These strategies should include adding an alternate retail access channel expansion plan and educating stakeholders on the availability of these
convenient services. The Postal Service must explain its plans and decisions to stakeholders in an open, transparent, and timely manner
The Post Office Discontinuance Tracking System (PODTS) tracked PO and other retail unit discontinuance. However, management stated in the September 30, 2009 Official Transcript of Proceeding Before the PRC that the data in the system was inaccurate. Based on PODTS data, management reported to the PRC that they closed a total of 96 stations and branches between FYs 2005 and 2008. Management later found a number of data entry errors in PODTS, including misidentification of facilities. Subsequently, management filed a
correction and revised the number of closures from 96 to 21 for the same period.
APPENDIX C: MONETARY IMPACT
The OIG identified $2,773,043 in funds put to better use17 related to untimely discontinuance decisions and missed opportunity to reduce lease costs. The Postal
Service spends about $425,000 per month to maintain operations at 28 facilities we randomly selected for review. District management forwarded proposals recommending
discontinuance of operations for these 28 facilities to HQ. Although HQ Retail Operations completed pre-decisional reviews of the 28 proposals in February 2010, no
final agency decisions have been made through the time of our report due to other priorities. We estimated the Postal Service could realize cost savings of over $1.7
million from March 1 to September 30, 2010, if they approved discontinuance of operations for the 28 facilities after completing pre-decisional reviews18 (see Table 5).
In addition, the amount the Postal Service could save should it terminate leases at the Atlanta Civic Center, Tower Grove, and Southwest Stations is $1,055,320.19 District
management removed these stations from discontinuance consideration and cited “no termination clause” as the only non-feasible justification. However, the OIG review
found that lease agreements for these stations contain termination clauses that provide the Postal Service the option to terminate the leases with proper written notice. We
estimated the present value using October 1, 2010, as the start date to begin the termination notice period for each facility (see Table 6).