PostalReporter News Blog

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.

read full report

Statement of NALC President Fred Rolando on the GAO Report
U.S. Postal Service: Strategies and Options
to Facilitate Progress toward Financial Viability
April 13, 2010

The Government Accountability Office was directed by the Congress in 2006 to produce a report by December 2011 “evaluating in-depth various options and strategies for the long-term structural and operational reforms of the United States Postal Service.” GAO was instructed by Congress in the Postal Accountability and Enhancement Act to make recommendations regarding how the “Postal Service’s business model can be maintained or transformed in an orderly manner that will minimize adverse effects on all interested parties and assure continued availability of affordable universal postal service throughout the United States.” The directive in the law also said: “The Government Accountability Office shall not consider any strategy or other course of action that would pose a significant risk to the availability of affordable, universal postal service throughout the United States.”

The Congress outlined, in detail, what it ordered GAO to do, and how to do it.

GAO ignored Congress.

Instead, it delivered an obviously hurried and haphazard audit report. GAO virtually ignored the most critical ingredient in the Postal Service’s current financial squeeze, the $5.5 billion per year payment, imposed by Congress in 2007, to pre-fund retiree health obligations. And its conclusion that the USPS business model was not viable was based on the false premise that the USPS has not been able to cut costs as much as its revenues have declined in recent years. In particular, the report states that “USPS lost $12 billion over this period [2007-2009], despite achieving billions in cost savings, reducing capital investments, and raising rates.” But this assertion is completely misleading. It glosses over the critical fact that if it were not for the excessive pre-funding payments, the USPS would have been profitable over the past three years—USPS prefunding payments totaled $12.4 billion over the past three years, more than accounting for the $11.7 billion in reported losses. In fact, the Postal Service has been able to adjust its costs to a decline in its revenue—a decline resulting from the worst recession in 80 years, which the GAO soft-pedals as a simple “economic downturn.”

Instead of the report requested by Congress, GAO has issued a full-throated attack on collective bargaining, our contractual COLA clause, our contractual limits on contracting out, our contractual protections of full-time career positions.

GAO outlines a series of disastrous future options, including moving part or all of USPS to “a private corporate model;” increasing “the percentage of part-time employees, who could work more flexible schedules” and allow the USPS to flexibly adjust to workload, “which varies greatly depending on the day of the week and the time of the year;” and changing the law’s interest arbitration rules to put a thumb on the scale for the Postal Service.

Rather than conducting the five-year “in depth” detailed review and analysis of this key national institution that Congress directed, GAO “conducted this performance audit from August 2009 to April 2010 in accordance with generally accepted government audit standards.” (p. 3). An “audit,” not an “in-depth” evaluation. But even with that crabbed green eyeshade view of its mission, GAO cut corners: “[W]e did not assess the reasonableness of these projections [retiree health valuations] or OPM’s actuarial assumptions and methodology. We utilized OPM’s valuation results to analyze the financial impacts of selected options for funding USPS’s retiree health benefit obligations. We did not assess the validity of USPS’s financial and mail volume projections due to time and resource constraints.” (p. 2).

The problem with this quick once-over approach is that it is precisely OPM’s “actuarial assumptions and methodology” that are at the heart of a dispute between the USPS Office of Inspector General and OPM over whether the USPS has been over-charged by $75 billion in pension costs—funds that could be returned and transferred to the Postal Service Retiree Health Benefits Fund to relieve the USPS of the need to make crushing pre-funding payments. If the OIG is right (and NALC believes OIG is right), that $75 billion cures USPS’ principal financial problem … and then some.

And it is precisely the validity of USPS’s “financial and mail volume projections” that define the extent of the long-term challenge facing the USPS and establish what the future needs may be. To simply accept USPS projections—notoriously and regularly off-target—due to “time and resource constraints” is simply irresponsible—not what Congress ordered, and not what the public interest requires.

The media’s appetite for news of any threatened disaster being what it is, the GAO report will make an initial big splash.

But it is Congress, not the news media or the GAO, that will decide whether the Postal Service is worth saving, and how.

And it is the NALC that will spare no effort in bringing the truth—and the real data—to the Congress for its deliberation. And it is NALC’s membership that will rise to the challenge to make sure that the real public, their patrons, and the mailers, know the facts and act on them. The country deserves nothing less.

source: National Association of Letter Carriers

WASHINGTON (April 12, 2010) – Sen. Tom Carper (D-Del.), chairman of the Senate subcommittee with oversight authority over the U.S. Postal Service, issued the following statement in response to the Government Accountability Office’s report on the Postal Service’s proposals to reduce costs and streamline operations while protecting universal service:
 
“I applaud GAO for expediting the release of this critical report on the future viability of the U.S. Postal Service.
 
“The report confirms what many of us who closely follow postal issues have learned in recent months – that major changes are needed if we expect the Postal Service to continue providing the products and services that so many Americans depend on.
 
“At one point in the report, GAO suggests that the current recession may have been a ‘tipping point’ of sorts that encouraged many of the Postal Service’s most valuable customers to more aggressively seek out alternatives to hard-copy mail. If that is true – and the volume projections that the Postal Service released at the beginning of March tell me that it just might be – it is imperative that Congress, postal management, postal employees, customers and other stakeholders give up on old fights and biases and work together to cut the Postal Service’s costs and adjust its operations to meet a changing environment. Everyone knows the steps that need to be taken. The options have been laid out again by GAO. We just need to take them.
 
“Last month, the Postal Service stated that it would suffer cumulative losses of more than $230 billion by 2020. But the truth is that the Postal Service’s finances are in such poor shape that there is a risk that it could run out of cash and borrowing room by mid-2011 – even if Congress provides last-minute financial relief this year like it did at the end of FY09.   This could result in a shutdown in mail services, something that I find completely unacceptable.
 
“It is my hope, then, that the Postal Service come forward soon with a detailed plan of the steps it plans to take in response to the GAO findings and the information it released last month. Congress and the Postal Regulatory Commission must move swiftly to deal with their part of this – starting with the Commission’s consideration of the proposal the Postal Service has already made to save more than $3 billion per year by eliminating Saturday delivery.”