USPS says it’s too early to determine cost savings from Retail Alternatives to Post Offices
Filed under: GAO, politics, post office closings, postal, postal news, usps
GAO Report: Action Needed to Maximize Cost-Saving Potential of Alternatives to Post Offices
Highlights:
USPS has expanded access to its services through alternatives to post offices in support of its goals to improve service and financial performance. Retail alternatives offer service in more locations and for longer hours, enhancing convenience for many customers, but certain characteristics of these alternatives could be problematic for others. For example, services obtained from some alternatives cost more because of additional fees, which could deter use by price-sensitive customers. Furthermore, although about $5 billion of its $18 billion in fiscal year 2010 retail revenue came from alternatives, USPS officials said it is too early to realize related cost savings. USPS also lacks the performance measures and data needed to show how alternatives have affected its financial performance. A data-driven plan to guide its retail network restructuring could provide a clear path for achieving goals. Without such a plan, USPS may miss opportunities to achieve cost savings and identify which alternatives hold the most promise. USPS has sought to raise customers’ awareness by developing media campaigns, enhancing its online tools for locating postal access points, and creating standard symbols for post offices and retail alternatives to show which products and services they offer. However, USPS has not assessed whether its message is reaching its customers, such as by using one of its existing customer surveys, and therefore does not know to what extent customers are aware of and willing to use its various retail alternatives. Read more
GAO: Restructuring USPS Business Model Could Eliminate Prefunding for Retirees Health Benefits
In a report release yesterday GAO wrote:
Restructuring USPS’s business model to adapt to decreased mail use could follow one of three primary models: a government-subsidized federal agency, the current structure with additional flexibility, or a private-sector business. See table 2 for key actions and decisions associated with each model.
Financial obligations
government-subsidized federal agency: Allow USPS to fund its obligations like other federal agencies and eliminate prefunding for retiree health benefit obligations.
the current structure with additional flexibility: Restructure funding for retiree health benefit obligations in a fiscally responsible manner.
private-sector business: Establish new pension, retiree health, and workers’ compensation programs and determine obligations, in accordance with applicable laws and regulation.
Labor-related requirements
Revise requirements to reflect those used by federal agencies
Require binding arbitration for labor contracts to consider USPS’s financial condition
Revise requirements to reflect those applicable to private firms
U.S. POSTAL SERVICE: Mail Trends Highlight Need to Fundamentally Change Business Model
Summary
By the end of fiscal year 2011, with a projected net loss of about $10 billion, the U.S. Postal Service (USPS) was expected to become insolvent. To mitigate this, Congress temporarily deferred USPS’s required $5.5 billion retiree health benefit payment. Over the previous 4 years, USPS experienced a cumulative net loss of just over $20 billion. USPS expects its revenue to decline further as First-Class Mail is projected to decline nearly 7 percent annually through 2020. Consequently, decisions need to be made to determine how USPS should be restructured to put it on a path to financial viability. GAO was asked to summarize (1) long-term trends related to the demand for and use of mail, and (2) options for restructuring USPS’s business model to adjust to changing mail trends. This summary is based on GAO’s past work, including GAO-11-278 (High-Risk Series: An Update) and GAO-10-455 (USPS: Strategies and Options to Facilitate Progress toward Financial Viability), both of which found that USPS urgently needs to restructure its networks and workforce to achieve and sustain financial viability. In addition, GAO also used data and related studies from USPS. GAO performed this work from September 2011 to October 2011 in accordance with generally accepted government auditing standards. GAO provided a draft of this report to USPS for comment and incorporated technical comments provided by USPS as appropriate.
Long-term trends–highlighted in the data below–strongly suggest that the use of mail will continue to diminish as online communication and e-commerce expand. By 2020, USPS projects mail volume will decline to levels not seen since the 1980s: Total mail volume is projected to decrease by 25 percent, First-Class Mail is expected to decrease by 50 percent, and Standard Mail volume is projected to remain flat. While dire, USPS’s projections could prove optimistic if communication continues to move to digital technologies as quickly as in the recent past. For the first time, in 2010, fewer than 50 percent of all bills were paid by mail. Almost 60 percent of mail received by households in 2010 was advertising, while bills and financial statements comprised 22 percent. These trends underscore the need for USPS’s business model to undergo fundamental changes to reduce personnel and network-related costs. Restructuring USPS’s business model to adapt to decreased mail use could follow one of three primary models: a government-subsidized federal agency, the current structure with additional flexibility, or a private-sector business.
READ FULL GAO REPORT (PDF)
GAO Reportedly Says Labor Costs Is Reason For USPS Current Financial Condition
Although the full report has not been released, is this really a surprise GAO Supports Issa-Ross Arguments on USPS Overpayment –
According to the Federal Eye
Washington Post – Transferring tens of billions of dollars in federal worker retirement accounts back to the U.S. Postal Service would not address its long-term debt problems and would force unfunded liabilities on to taxpayers, according to a new government report. The conclusions set for release Thursday by the Government Accountability Office run counter to the opinions of postal regulators, the postal inspector general and congressional Democrats, who say Congress should refund as much as $75 billion to the Postal Service for improperly overpaying federal retirement accounts since the 1970s. GAO concluded otherwise, writing in its report that “We have not found evidence of error of these types. Any attempt to refund money to USPS “would be a significant change from a policy” in place since the 1970s, it said. Returning money to the Postal Service for past and future retirement payments would cause as much as $85 billion in losses for taxpayers “which must then be paid by the federal government through tax revenue or borrowing,” GAO said. And any refund “would not be sufficient to repay all of USPS’s debt and address current and future operating deficits.”
In the Senate, Thomas Carper (D-Del.), a longtime proponent of postal reforms, appeared to agree with Issa, calling on lawmakers to table discussions of CSRS refunds and to focus instead on areas of agreement, including paying back the $6.9 billion from the FERS.
GAO Recommends Recruiting Mail Carriers, Postal Retirees As Temporary Takers For 2020 Census
GAO Report: Census Bureau and Postal Service Should Pursue Opportunities to Further Enhance Collaboration
Highlights
The Bureau and USPS are expanding collaborative efforts for the 2020 Census. The collaborative efforts include a new Bureau initiative to continuously update its master address list using USPS and local address information. This could allow the Bureau to limit the size of field operations needed to develop an accurate and complete address list for the 2020 Census.
The Bureau and USPS also plan to update their 1995 memorandum of understanding to, among other matters, help ensure that both agencies benefit from their collaborative efforts. The revised memorandum of understanding is expected to be approved later this year.
Additional opportunities exist for the Bureau to take advantage of the knowledge and experience of USPS mail carriers, including retirees…
Opportunities exist for the Bureau to take advantage of the knowledge and experience of USPS mail carriers, including retirees. Bureau and USPS officials agree that USPS city and rural mail carriers are familiar with the local living conditions in their communities and that this knowledge could help the Bureau conduct aspects of the 2020 Census more effectively. Mail carriers have experience and knowledge about the dwellings on their routes and could help find unconventional and hidden housing units (e.g., converted basements and attics) and identify single versus multi-unit homes. Residents of these households are often more difficult to find and count. Additionally, in some communities, mail carriers have information about hazardous locations along delivery routes (e.g., houses with an unchained dog or other dangers such as structurally unsafe porches), which could make census workers’ jobs safer and easier. Read more
GAO seeking public help in finding Employees abusing Federal Workers’ Comp Program
Filed under: GAO, Injured On Duty, owcp, postal, postal news, press releases
GAO issued the following press release:
Believe You’ve Seen Evidence of Workers’ Compensation Fraud? Contact GAO
Abuse of benefits by federal employees can be reported anonymously
WASHINGTON, DC (July 14, 2011) – The U.S. Government Accountability Office (GAO) is investigating fraud and abuse in the Federal Employees’ Compensation Act (FECA) program. Specifically, GAO is looking for information on cases in which federal employees are currently abusing workers compensation benefits.
For example, fraud schemes might include a beneficiary working a second job, overstating their workers’ compensation claim, or collecting benefits for a deceased individual. Anyone with information regarding fraud or abuse of the FECA program by federal employees is encouraged to contact us at workerscompfraud@gao.gov. All information about individuals who contact us will be kept confidential.
For media inquiries about this announcement, contact Chuck Young, Managing Director of Public Affairs, at 202-512-4800.
PMG Comments On GAO Report on Five-Day Mail Delivery Readiness
Filed under: delivery, GAO, postal, postal news, press releases, usps
The Government Accountability Office (GAO) has produced a thorough and comprehensive review of the Postal Service proposal to move to a five day per week delivery schedule. We are pleased to see they agree that the Postal Service is likely to achieve significant cost savings if this change were to be effected and that much of its success depends on how efficiently it is implemented. We agree and believe that having completed a lengthy planning process; we are prepared to make that happen.
We are aware of the concerns certain stakeholders have expressed to GAO. We consulted extensively with our customers as we developed our operating plans. They can be assured that any decision to go to a five-day schedule will carefully balance our universal service responsibility and our statutory duty to operate in an efficient manner in light of prevailing volume, cost and revenue trends. Consideration of such matters will help ensure the financial stability of the Postal Service well into the future.
source: USPS
GAO: Ending Saturday Delivery Would Reduce Costs, but Comprehensive Restructuring Is Also Needed
The United States Government Accountability Office issued the following report today:
USPS’s proposal to move to 5-day delivery by ending Saturday delivery would likely result in substantial savings; however, the extent to which it would achieve these savings depends on how effectively this proposal is implemented. USPS’s $3.1 billion net cost-savings estimate is primarily based on eliminating city- and rural-carrier work hours and costs through attrition, involuntary separations, or other strategies. USPS also estimated that 5-day delivery would result in minimal mail volume decline. However, stakeholders have raised a variety of concerns about USPS’s estimates, including,
First, USPS’s cost-savings estimate assumed that most of the Saturday workload transferred to weekdays would be absorbed through more efficient delivery operations. If certain city-carrier workload would not be absorbed, USPS estimated that up to $500 million in annual savings would not be realized.
Second, USPS may have understated the size of the potential mail volume loss due to questions about the methodology USPS used to develop its estimates of how 5-day delivery may affect mail volumes.
The extent to which USPS can achieve cost savings and mitigate volume and revenue loss depends on how well and how quickly it can realign its operations, workforce, and networks; maintain service quality; and communicate with stakeholders. USPS has spent considerable time and resources developing plans to facilitate this transition. Nevertheless, risks and uncertainties remain, such as how quickly it can realign its workforce through attrition; how effectively it can modify certain finance systems that cannot be changed until congressional approval for 5-day delivery is granted; and how mailers will respond to this change in service. Further, uncertainties remain as factors other than delivery frequency—e.g., price increases—can also affect mail volumes and revenues.
USPS’s proposal involves several factors that need to be considered. It would improve USPS’s financial condition by reducing costs, increasing efficiency, and better aligning its delivery operations with reduced mail volumes. However, it would also reduce service; put mail volumes and revenues at risk; eliminate jobs; and, by itself, be insufficient to solve USPS’s financial challenges. USPS’s role in providing universal postal services can affect all American households and businesses, so fundamental changes involve key public policy decisions for Congress. If Congress decides 5-day delivery is necessary, then Congress and USPS could factor the savings into deliberations about what package of actions should be taken to restore USPS’s financial viability. Conversely, if Congress maintains the mandate for 6-day delivery, Congress and USPS would need to find other ways to achieve equivalent financial savings, so that the package is sufficient to restore USPS’s financial viability. This would likely entail difficult decisions with broad implications for USPS’s infrastructure, workforce, and service. As GAO has reported, a package of actions by Congress and USPS is urgently needed to modernize USPS’s operations, networks, and workforce.
GAO: Ending Saturday Delivery Would Reduce Costs
GAO: Foreign Posts’ Strategies Could Inform USPS’s Efforts to Modernize
The Government Accountability Office (GAO) released the following report:
Why GAO Did This Study:
The foreign postal operators (foreign posts) in industrialized countries in GAO’s review have been experiencing declining letter mail volumes and have modernized their delivery and retail networks to address this challenge. As requested, GAO reviewed the innovations and initiatives that foreign posts are using and the lessons the U.S. Postal Service (USPS) might learn to help it address plummeting mail volumes and record financial losses.
This report examines initiatives foreign posts have implemented to improve mail delivery and retail networks and related results, and modernization strategies used by foreign posts that can inform consideration of proposals to improve USPS’s financial condition and customer service.
GAO selected foreign posts in Australia, Canada, Finland, Germany, Sweden, and Switzerland as case studies based on characteristics, such as delivery and retail changes and country size and location. GAO reviewed foreign posts’ documents, including annual reports and strategic plans related to delivery and retail network changes and innovations. GAO met with foreign post officials, toured their retail facilities, received briefings on their delivery and retail networks and other areas, and met with regulators, labor unions, and mailers to obtain their views on the effects of their posts’ modernization efforts. USPS generally agreed with GAO’s findings and mentioned both its own modernization efforts and the barriers it faces.
What GAO Found:
The foreign posts GAO reviewed have developed alternative delivery choices for customers that, according to the posts, have reduced costs and improved customer satisfaction and service. All of these posts now offer digital (purely electronic) or hybrid mail (a blend of physical and digital) options. Some posts offer parcel pick up at retail facilities like grocery stores, which are open longer than post offices, and are often owned and operated by businesses that partner with the posts, thus reducing costs. One post allows customers to pick up parcels from a publicly-located machine, or parcel locker, that is available 24 hours a day.
The selected foreign posts have modernized their legacy brick and mortar retail networks in response to customers’ changing use of the mail. For example, they have expanded retail access through alternatives such as Internet sales and partnerships with retail businesses such as grocery stores or pharmacies, while reducing the number of post-owned and -operated facilities (see figure). According to all of the posts, retail modernization has either (1) improved customer service, in some cases because the partner stays open longer, or (2) reduced operating and labor costs, by closing post-owned and -operated facilities, or both.
It must be pointed out:
USPS is facing similar challenges as other industrialized nations’ posts. For example, USPS has a brick and mortar retail infrastructure it cannot afford to maintain. However, USPS currently manages more retail outlets–approximately 32,500–than all of the foreign posts we reviewed combined. In addition, USPS has twice as many delivery points as any foreign post we studied–USPS delivers to 151 million homes, businesses, and post office boxes.
USPS Still On GAO’s High Risk List
Filed under: GAO, outsourcing, postal, postal news, postal reform, usps
The Government Accountability Office’s (GAO) today released its biennial “High Risk Series” report. The report identifies those agencies most at risk of waste, fraud, abuse, mismanagement, or in need of reform. The U.S. Postal Service’s long-term outlook remains on the GAO’s high-risk list.
The GAO first placed USPS on the high-risk list in April 2001 because of the growing risk that it would be unable to continue providing universal postal service at reasonable rates while staying self-supporting through postal revenue. In 2007, GAO removed USPS from the High-Risk List in part due to its implementation of Strategic Transformation strategies and passage of the Postal Accountability and Enhancement Act of 2006. However, two years later “In July 2009, GAO added the U.S. Postal Service’s (USPS) financial condition to the list of high-risk areas needing attention by Congress and the executive branch to achieve broad-based restructuring. Amid challenging economic conditions, a changing business environment, and declining mail volumes, USPS is facing a deteriorating financial situation which it does not have sufficient revenues to cover its expenses and financial obligations.”
The report included the usual in its “Strategies and (USPS) Options to Facilitate Progress Toward Financial Viability” by: Reduce wage costs by creating a two-tiered pay system; use more part-time staff; reduce benefit costs by reducing USPS health and life insurance contribution rates for active employees to levels comparable to those paid by other federal agencies. The GAO report also listed “outsourcing” as an option for reducing USPS workforce size. But in July 2008, GAO released a report titled “Data Needed to Assess the Effectiveness of Outsourcing,” GAO noted:
“Without cost-savings data, postal managers, stakeholders and Congress cannot assess the risk and value of outsourcing.. 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.”
So, GAO was unable to justify the cost-savings of outsourcing but yet its an “option” to “Faciliate Progress Toward (USPS) Financial Viability?”
Other Highlights of the GAO report on USPS:
Mail volume has declined from 213 billion pieces in fiscal year 2006 to 1 billion pieces in fiscal year 2010—a decline of about 20 percent. USPS expects mail volume to decline further to about 150 billion pieces by 2020.This trend exposes weaknesses in USPS’s business model, which has relied on mail volume growth to help cover costs. USPS actions to improve its financial condition have been limited in part by statutory and regulatory requirements, such as those related to closing unneeded facilties.
USPS cannot fund its current level of service and operations from its revenues and urgently needs to restructure to reflect changes in mail volume, revenue, and use of the mail. Although USPS reports $12.5 billion in cost savings since fiscal year 2006, it has not been able to cut costs fast enough to offset the large decline in mail volume and revenue – particularly costs related to its workforce, retail and processing networks, and delivery services the GAO said. Further,its revenue initiatives have had limited results. USPS can borrow up to $3 billion from the Treasury annually but expects to reach its statutory $15 billion borrowing limit in fiscal year 2011. USPS must align its costs with revenues, generate sufficient funding for capital investment, and manage its growing debt.
In March 2010, USPS issued a 10-year Action Plan, as suggested by GAO when it added USPS to its High-Risk List that included actions for Congress and USPS to take to achive financial viability. The plan included:
- restructuring its retiree health benefits payments,
- eliminating Saturday delivery,
- expanding access to retail services,
- establishing a more flexible workforce,
- and expanding products and services.
In April 2010, GAO reported on strategies and options for USPS to generate revenues, reduce costs, and increase efficiency (GAO-10-455). Options included
- reducing compensation and benefit costs—which constitute about 80 percent of expenses—and
- optimizing networks to eliminate excess capacity
Several bills introduced in 2010 included provisions for congressional action to restructure USPS’s benefit payments and address barriers to implementing USPS’s Action Plan. These bills were not enacted.
What Needs to Be Done
Congress needs to approve a comprehensive package of actions that would improve USPS’s financial viability by:
1. modifying its retiree health benefit cost structure in a fiscally responsible manner
2.. facilitating USPS cost reduction, such as by modernizing and optimizing postal networks and its workforce;and
3. requiring any binding arbitration in the negotiation process for USPS labor contracts to take USPS’s financial condition into account.
read the full report Restructuring the U.S. Postal Service To Achieve Sustainable Financial Viability
GAO: Mail Processing Network Initiatives Progressing, and Guidance for Consolidating Area Mail Processing Operations Being Followed
Deteriorating financial conditions and declining mail volume have reinforced the need for the U.S. Postal Service (USPS) to increase operational efficiency and reduce expenses in its mail processing network. This network consists of interdependent functions in nearly 600 facilities. USPS developed several initiatives to reduce costs and increase efficiency; however, moving forward on some initiatives has been challenging because of the complexities involved in consolidating operations. In response to a conference report directive, GAO assessed (1) the overall status and results of USPS’s efforts to realign its mail processing network and (2) the extent to which USPS has consistently followed its guidance and applied these criteria in reviewing Area Mail Processing (AMP) proposals for consolidation since the beginning of fiscal year 2009. To conduct this assessment, GAO reviewed USPS’s Network Plan, area mail processing consolidation guidance and proposals as well as other documents; compared USPS’s actions related to consolidation of area mail processing facilities with its guidance, and interviewed officials from USPS, the USPS Office of Inspector General, and employee organizations. GAO provided USPS with a draft of this report for comment. In response, USPS provided technical comments that were incorporated where appropriate.
USPS has realigned parts of its mail processing network since the beginning of fiscal year 2009 and continues to seek additional opportunities to achieve its goal of creating an efficient and flexible network and realize cost savings. Specifically, USPS:
(1) eliminated all functions of the Airport Mail Centers, closed 9 of these facilities, and now uses the remaining 12 for other purposes, resulting in a realized cost savings of about $12.2 million in fiscal year 2009;
(2) reorganized the functions of the 21 Bulk Mail Centers into newly developed Network Distribution Centers, resulting in a realized cost savings of about $17.7 million in fiscal year 2009; and
(3) implemented 23 proposals to consolidate AMP operations and facilities and approved another 6 AMP consolidation proposals. USPS estimated an annual cost savings of about $98.5 million for the 29 approved and implemented AMP proposals.
Additionally, USPS officials stated that they plan to integrate the Surface Transfer Center functions into the Network Distribution Center network to further eliminate redundancy in transporting mail. USPS has developed specific program targets for the ongoing reorganization efforts of the Network Distribution Centers and estimated a cost savings of about $233.8 million for fiscal years 2010 and 2011 from reduction in work hours and transportation costs.
On the basis of GAO’s analysis of 32 AMP proposals that were implemented, approved, or not approved since the beginning of fiscal year 2009, USPS has followed its realignment guidance by completing each step of the process and consistently applying its criteria in its reviews. GAO’s analysis found that it took about 6 months on average–a month more than USPS’s target of 5 months–to complete the review process from initiating an AMP proposal to making a decision. USPS officials noted the importance of the AMP decisions and the need to sometimes take longer than what the guidance suggests to ensure the correct decision. GAO also found that USPS consistently notified stakeholders when key steps of the AMP process were completed, such as when an AMP proposal was initiated, or public meetings were held. For each of the AMP proposals that GAO reviewed, USPS also consistently evaluated its four criteria related to AMP consolidations: (1) impacts on the service standards for all classes of mail, (2) issues important to local customers, (3) impacts to USPS staffing, and (4) savings and costs associated with moving mail processing operations.