USPS Q & A On Plans For Small Footprint Flat Sequencing System (FSS Lite)

May 6, 2011 by postal · 2 Comments
Filed under: fedbizopp, flat sequencing system, postal, postal news, usps

USPS posted a notice last month on Federal Business Opportunities website seeking vendors for Small Footprint Flat Sequencing System (FSS Lite). Following are questions asked with regard to the Small Footprint Flat Sequencing System (FSS Lite) Sources Sought Notice and the USPS responses:

The United States Postal Service (USPS) is currently conducting market research and seeking to identify potential sources for a Phase II of our Flat Sequencing System (FSS) Program. Our Phase I designed machine currently in deployment is a large system that was primarily intended to accommodate high mail volume processing runs and targeted for our most highly populated flats mailing markets. Phase II is seeking and envisions a smaller footprint FSS (FSS Lite) machine as a solution to efficiently, reliably, and accurately sort and sequence flat mail to the order in which the mail is delivered on a letter carrier’s route (Delivery Point Sequence or DPS). The USPS seeks a system which can be deployed nationally and incrementally to provide maximum flexibility and efficiency in the DPS of flat mail within the existing and future Postal Service infrastructure.
1) Question: Are there any preliminary size requirements. What would be too big?
USPS Response: The current FSS phase 1 requires 15,000 sq ft. There is no defined requirement for phase 2 machines but the USPS anticipates a footprint less than 10,000 sq ft.

2) Question: Are there any preliminary volume/time requirements?
USPS Response: The current FSS Phase 1 effective (both passes) throughput is 16,500 pieces per hour. Due to mail volume declines, the USPS is seeking FSS Lite solutions that can handle a larger number of delivery points but with a lower average volume per delivery point.

3) Question: How sequenced will the mail be that enters this potential process? Is it going to be a 1,2 or 3 pass process?
USPS Response: It is anticipated that mail entering will be sorted to a 5 digit zone level. Depending on the solution proposed, other levels of sorting would be possible with potential price/performance impacts.

4) Question: Is there any requirement for mixed letters/flats sequencing?

USPS Response: Mixed letters and flats processing is not a requirement for the FSS Lite machine.

5) Question: Is there anything against mixed letters/flats sequencing?
USPS Response: Mixed letters and flats is not anticipated for the FSS Lite solution

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USPS OIG Audit Report – Flats Sequencing System: Program Status and Projected Cash Flow

July 30, 2010 by postal · 1 Comment
Filed under: audits, FSS, usps

This report discusses the Flats Sequencing System (FSS) program status and its projected financial impact and addresses both operational and financial risks (Project Number 09YG052DA000). The objective of this audit was to assess procedures for reporting of FSS performance and program savings shortfalls. See Appendix A for additional information about this audit.

In December 2006, the U.S. Postal Service approved a (redacted) project to develop,purchase, and deploy 100 FSS machines, which are designed to sort flat mail in the precise order in which it is delivered. The first two contract requirements tests of FSS machines (designed to ensure functionality, quality, and compliance with specifications) have shown shortfalls in expected performance. Typically, when there is a First Article Test (FAT) failure, Postal Service acquisition guidelines call for retests before beginning deployment. However, in this case, the Postal Service has decided to deploy FSS machines despite major performance shortfalls in order to capture savings earlier; however, deploying FSS machines that do not meet contract requirements could reduce
expected savings. Although the Postal Service has adjusted its savings expectations and project assumptions have changed, it has remained optimistic when communicating expected financial outlooks.

Conclusion
The Postal Service’s revised performance projections in Quarter 1 (Q1) of fiscal year (FY) 2010’s Investment Highlights report do not use current actual machine performance and its projection of a gain of at least $872 million from FSS appear optimistic. In addition,there have been significant changes in assumptions for FSS machines and measurement criteria since the 2006 approval of the original investment. For example, flats volumes have decreased significantly, expected throughput rates have not been met, planned FSS sites have increased, the program schedule has changed by a year, and additional savings for transitional employees (TE) have been introduced to the investment return.These changes make it challenging for the Postal Service to measure project success as initially defined.

Particularly, we believe adding TE savings to the evaluation of FSS program success is questionable for several reasons. First, these savings were never considered as part of the original investment decision. Second, 44 percent of TEs are not in districts that will eventually host FSS machines. Lastly, management claimed these savings prior to FSS deployment and has the option of reducing TE complements for volume declines irrespective of the FSS program’s success. Thus, much of the savings from these employees will likely not be associated with FSS deployment.The Postal Service’s Q1, FY 2010 Investment Highlights report shows a projected gain for the FSS program of at least $872 million and a return of at least 27 percent. Using current actual performance data for the highest performing machine and operational target metrics, we calculated four financial scenarios for measuring program status and progress
against program goals. These scenarios were at least $431 million lower than the scenarios the Postal Service presented. Such a large difference exists because the Postal Service used more optimistic performance assumptions rather than actual machine performance or operational target results.
Our analysis shows that using current FSS performance data to calculate projected savings results in a net present value (NPV) of $215 million (a rate of return of 14.49 percent). If we remove the questionable TE savings, the NPV decreases to a negative $311 million (a rate of return of 5.18 percent). Assuming the FSS machines reach the operational target metrics, we calculate gains from FSS to be $441 million (rate of return of 19.26 percent). If we remove the questionable TE savings, there is a projected NPV of a negative $85 million (a rate of return of 8.54 percent).

The Postal Service’s Handbook F-661 requires accurate analysis and reporting of program impact. One purpose of the Investment Highlights report is to show the progress of large-scale programs within the Postal Service. Reporting program performance based on actual and operational target data is critical so that key decision-makers (such as the Board of Governors) have sufficient information to monitor program progress on projects of significant duration. See Appendix B for our detailed analysis of this topic.

We recommend the vice president, Engineering:
1. Use actual machine performance and operational target data to more accurately report the progress of the Flats Sequencing System program’s financial outcomes in compliance reports such as the Investment Highlights report.

1 General Investment Policies and Procedures (November 2005, updated with Postal Bulletin revisions through October 11, 2007) provides a single source overview of investment projects.

Management’s Comments
While management agreed with the recommendation to use actual machine performance data for compliance reports, they took exception to certain findings and our recommendation to use operational target data. Specifically, the Postal Service will include an additional FSS financial scenario when reporting outcomes in Investment Highlights reports. Management will take this action in time for the Q3, FY 2010 Investment Highlights report. The reported scenario will represent the Postal Service’s most current assessment of actual machine performance. In reference to using operational target data,the Postal Service does not believe they are representative of long-term expectations and elected not to present them in future Investment Highlights reports.

Management also said the financial outcomes presented in the report do not recognize:
- Throughput improvements demonstrated during tests in November 2009 and April 2010.
- Performance improvements over the 10-year program life and performance levels already achieved by the first article machine.
- Over 17 hours of daily runtime for unconstrained machines.

- The relevance of TEs, their strategic use, and the resulting savings attributable to the FSS program.
- Scheduling adjustments that address lower mail volumes.
- Additional savings related to delivery unit space reductions and vehicle capital investment and maintenance avoidance.
Thus their lower bound outcomes represent the likely worst case scenario. We have included management’s comments, in their entirety, in Appendix D.

full report from the USPS Office Of Inspector General

Tags: audits, flat sequencing system, postal, usps, USPS OIG