USPS OIG Audit Report – Flats Sequencing System: Program Status and Projected Cash Flow
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
Two Congressional Panels Approve Bills to Continue Six-Day Mail Delivery
Two Congressional Panels Support Six-Day Service
APWU Web News Article 074-2010, July 30, 2010
Two congressional panels voted on July 29 to approve spending bills that would require the Postal Service to continue to provide mail delivery six days per week. The two bills — one in the Senate and one in the House — still have a long way to go before they could become law, however.
“These are important steps, but we must clear many more hurdles in order to stop the Postal Service from eliminating Saturday delivery,” said APWU Legislative & Political Director Myke Reid. “The full Senate and House would have to approve the bills, and then the two versions would have to be reconciled to resolve any differences between them.” Spending bills are traditionally very difficult to pass, he said.
The Senate Appropriations Committee voted 18-12 to approve a spending bill for Fiscal Year 2011 that would prevent the U.S. Postal Service from reducing mail delivery from six days to five. The House Financial Services and General Government Subcommittee voted by voice.
On July 28, Sen. Jon Tester (D-MT), a member of the Senate Subcommittee on Financial Services and General Government, announced that he had persuaded the members of the Senate panel to reject the USPS proposal. Sen. Tester explained the importance of six-day mail delivery to rural America.
“Folks in rural and frontier communities often rely on their Saturday mail to bring them the things they need to live. Unlike in urban areas where folks can walk down the block to the local drug store, many Montanans live long distances from the nearest pharmacy or newsstand. Getting mail six days per week is part of what keeps rural America strong and thriving.”
The bill notes the crucial role of six-day service. It says, “The Committee believes that six-day mail delivery is one of the most important services provided by the Federal Government to its citizens. Especially in rural and small-town America, this critical service is the linchpin that serves to bind the Nation together.”
PMG Potter’s Response To White House On Pilot Test For Five-Day Delivery
Excerpts from PMG John Potter letter regarding Pilot test on Five-Day Delivery:
From an operational standpoint a pilot test conducted on a regional basis would increase some of our costs in the short term. For example, we either would have to make manual changes to mail processing sorting schemes and payroll or utilize information technology to program such changes for a limited time or geographic area. We believe that our information technology programming changes, estimated to cost $10 million-$12 million for a national, full-time implementation, would grow significantly to accommodate a test, as would administrative costs if we decided to forego programming changes in favor of performing manual processing for the defined test period. We also would have to communicate the pilot’s parameters to the public and employees. During such a test we would be unable to make the permanent, necessary changes to our delivery workforce, transportation networks, and mail processing operations that would yield the projected $3.1 billion savings. The largest financial impact of a pilot would be the fact that many career employees in the pilot area would have to be paid not to work or be relocated, white many of our non-career and part-time employees would see their wages reduced or eliminated. Any savings in wages that the Postal Service would realize during the test would immediately disappear at the test’s conclusion.
It may be helpful for me to offer a distinct example of the internal challenges that a test would present. In City Letter Carrier operations, full -time, regular City Carriers generally are assigned to a single delivery route that they service five days per week. These Carriers are scheduled to have Sunday off as well as one other day of the week. A category of full-time Carriers, known as Carrier Technicians. also are scheduled to work five days per week; but instead of servicing the same route each day, they cover the day off- and the route–of five different carriers. The five-day delivery proposal anticipates the reduction of approximately 25,000 full-time City Carrier assignments and $2.2 billion in annual savings in City Carrier operations. The savings are generated primarily by the fact that under a five-day delivery model, regular Carriers assigned to a single route would have Saturday and Sunday off, eliminating the need for the Carrier Technician and Relief Carrier assignments. We plan to transition full-time Carrier Technician assignments into Carrier positions (that cover a single route) that become available through attrition (a significant percentage of our current workforce is eligible for retirement between now and 2014). Under a pilot test we would be unable to carry out this Carrier alignment, and during the test itself, we would have a surplus of Letter Carriers for whom we would have to find productive work within their craft, and if unsuccessful, pay them to perform no work because our contract with the National Association of Letter Carriers guarantees full-time, regular Carriers a 40-hour work week. Under our national proposal for five-day delivery we Intend to preserve the employment of our career City Carriers.
read letter from Postamaster General John Potter submitted to the Postal Regulatory Commission
Georgia Congressman Says Moving Columbus To Macon Will Cause Mail Delivery Delays
Filed under: consolidations, delivery, postal, press releases, usps
Rep. Sandford D. Bishop Jr., D-Ga. , issued the following press release:
July 29 2010
Washington, DC – Congressman Sanford D. Bishop, Jr. (GA-2) today sent a letter to the Chairman of the House Committee on Oversight and Government Reform, Representative Edolphus “Ed” Towns (NY-10), regarding the U.S. Postal Service operations transfer from the Columbus Customer Service Mail Processing Center to the Macon Processing and Distribution Center. In the letter, dated July 28, 2010, Congressman Bishop stated a series of concerns about the transfer and its negative effects on the Columbus area.
“Attempts by the Postal Service to improve productivity and increase efficiency have resulted in new procedures which have severely impacted postal service in the Columbus area,” wrote Congressman Bishop. “Especially impacted is mail originating from Columbus, Georgia and destined for Columbus, Georgia.”
Congressman Bishop expressed his concern that the new system will force mail to be postmarked in Macon, 96 miles away, before it can be sent back to Columbus to be delivered, adding up to three days to delivery schedules. In addition, the transfer was approved May 26, 2010 and the process was to be completed by the first of this month.
“According to conversations with mail employees at the Columbus mail facility, there have been significantly more delays with mail, even though the Postal Service study suggested there would be an improvement in service,” wrote Congressman Bishop.
While a study of mail delivery systems in the Columbus area was conducted, it did not include Fort Benning, which is scheduled, under the BRAC process, to greatly increase in size. This increase in population, combined with the 96+ miles of mail travel distance will only further mail delivery delays.
“It appears that the Macon facility, which now has idle equipment, cannot deliver mail to Columbus in a timely fashion,” added Congressman Bishop
Rep. Chaffetz Introduces Bill Designating 12 Postal Holidays To Reduce USPS Operating Costs
Congressman Jason Chaffetz (R-Utah) issued the following press release:
Washington, DC—Today Congressman Chaffetz introduced HR 5919. This bill would grant USPS Postmaster General the authority to implement up to twelve “postal holidays” per year in order to reduce USPS operating costs. The Postmaster General would select days in which delivered mail volume is historically lower than normal. By reducing the number of delivery days, USPS will be able to achieve savings by reducing work hours.
“USPS is experiencing severe financial pressures due to competition from the Internet, reduced demand due to the recession, and large unfunded liabilities for retiree healthcare,” said Chaffetz. “While my bill will help to reform its dire financial situation, there is no silver bullet that will solve the Postal Service’s financial problems. Postal holidays are one of many steps needed to reform the Postal System. I am also supporting efforts to consolidate postal facilities by replicating the successful BRAC process that was used to close surplus military facilities.”
• In past three years, USPS has lost $12 billion and is expected to lose about $7 billion this year.
• At the end of FY 2009, USPS was $10 billion in debt and is expected to reach its maximum debt limit of $15 billion in 2011.
• USPS Postmaster General John Potter has stated that USPS could lose $238 billion over the next ten years unless significant reforms are implemented.
• The USPS retiree health benefit plan was $52 billion underfunded at the end of fiscal year 2009.
APWU: Arbitrator Denies Union’s Challenge To USPS Two-Tour Initiative
Arbitrator Issues Decision in Dispute Over Two-Tour Initiative
Arbitrator Das denied the union’s grievance challenging the Postal Service’s two-tour initiative. Das accepted the Postal Service’s argument that “Article 3 of the National Agreement grants the Postal Service the authority to unilaterally adopt and implement the … initiatives at issue, without further bargaining with the Union.” He cited language in Article 3 that states the Postal Service “‘shall have the exclusive right’ to ‘assign … employees,’ to ‘maintain the efficiency of the operations entrusted to it’ and to ‘determine the methods, means, and personnel by which such operations are to be conducted.’” Das also cited a 1977 national award in which Arbitrator Garrett stated that the Postal Service isn’t obligated “to engage in ‘collective bargaining’ as to whether or how it should exercise its authority under Article III of the National Agreement.” In addition, he referred to a 1973 national award in which Arbitrator Gamser stated that the right to change tour complements “appear[s] [to be] specifically reserved to Management under Article III of the Agreement as well as dictated in enabling legislation, Section 1001 of the Postal Reorganization Act.” (USPS #Q06C-4Q-C 09051867; 7/27/2010)
Click here for a summary and copy of the decision
OSHA Fines USPS Mail Facility in Vermont $420,000
OSHA Fines USPS Mail Facility in Vermont $420,000
Federal labor officials say they’ve cited a Vermont postal facility for a half-dozen safety violations and will seek $420,000 in fines.
The U.S. Occupational Safety and Health Administration says worker complaints at the U.S. Postal Service’s processing center in White River Junction led to an inspection in January that found employees were exposed to deadly electrical hazards.
OSHA says untrained or unqualified workers did work on live electrical equipment without proper safety measures
Burrus: Mailers Want To Cut Postal Employees Wages At Least $18,000 Yearly
Burrus Update #13-2010, July 29, 2010
Competing Interests, Diverging Views
In many Updates and editorials on postal issues, I have criticized the influence of large mailers on the USPS — even while acknowledging that they provide much of the volume that makes it possible for the Postal Service to maintain its national network and provide middle-class employment to more than 600,000 Americans. I have frequently pointed out that the interests of these large mailers generally run counter to those of postal employees.
While some union leaders have joined forces with the mailers to achieve narrow legislative objectives, and others speak in favor of partnerships, I have counseled APWU members that the large mailers and postal workers have competing agendas.
A case in point involves the Postal Service’s recent proposal to raise the price of stamps. An association of large mailers, the Affordable Mail Alliance, vehemently opposes the rate hike and filed a protest with the Postal Regulatory Commission, which must consider the USPS proposal.
The mailers’ motion vividly exposes the lack of respect they have for postal employees and the collective bargaining process. A casual review of the document [PDF - see pages 50-62] reveals their callous desire to punish postal workers for the Postal Service’s financial difficulties — difficulties the mailers inadvertently fostered by promoting the Postal Accountability and Enhancement Act of 2006. The PAEA imposed crippling financial obligations on the USPS — obligations that are responsible for the Postal Service’s current predicament. To compensate for their colossal mistake, the major mailers wish to penalize postal workers.
In lieu of an editorial describing my reaction to this vicious attack, I invite postal employees to read the motion and draw their own conclusions.
Exercising Influence
The Affordable Mail Alliance, along with other organizations representing large mailers, influences postal policy by lobbying and applying significant resources to shape legislation. They hope to set the tone for the USPS-APWU contract negotiations scheduled for later this year.
While the opinions of these mailers are not dispositive, it is important that postal workers and their unions understand the power they have on matters affecting postal employment. The opinions expressed in this filing are a frontal attack aimed at eliminating collective bargaining as the vehicle for establishing the terms of employment in the United States Postal Service.
The major mailers wish to amend the law so that the Postal Service would have the unilateral right to set wages and benefits, leaving employees with only one option: Accept it or quit. This is the model the large mailers use with their employees; as they generated billions of dollars in profits from worksharing alone, their employees had no vehicle to demand an appropriate share. It would be interesting to review the salaries of the executives in the companies that form the Alliance and compare them with the salaries of postal employees.
The Alliance asserts that postal wages, benefits, and conditions of employment constitute a pay “premium” of more than 33.9 percent over other workers. Their “analysis” is based on USPS figures that suggest that total postal “compensation,” which includes both wages and benefits, averages more than $80,000 per year.
To put the mailers’ conclusion in context, they believe the wages of bargaining unit employees should be cut by at least $18,000 per year, with corresponding reductions in healthcare, life insurance, leave, and other benefits! The reduction they suggest would represent a loss of approximately $700 each bi-weekly pay period.
Yet the July 26 edition of Business Mailers Review, a newsletter prepared by a representative of the mailers — the very mailers who take exception to the results of free collective bargaining — reported on a study that showed mailers reaped $10.7 billion in “profits” from workshare discounts in 2008 based upon the postal costs avoided. With tongue in cheek, I ask, if postal wages were reduced arbitrarily, would the mailers suggest that workshare discounts should be reduced to the arbitrarily set “cost-avoidance” rate?
The Sides
For those members and observers who have not identified the sides in this struggle, on one side we have the employees who have organized into groups (unions) that are committed to playing by the rules of democracy, negotiating the terms of employment, and resorting to binding arbitration when voluntary agreement cannot be reached. On the other side are the mailers, whose profits are affected by postal employee wages and benefits. These mailers believe in capitalism and democracy — as long as “democracy” excludes the opportunity for workers to have a meaningful voice in their place of employment. The mailers would prefer to eliminate collective bargaining entirely, but if they are forced to accept the process they favor a law that would guarantee the outcome.
I encourage postal employees to closely examine the Alliance’s document to enhance their understanding of the forces engaged in this struggle. Please note that the Alliance analysis is not craft specific. The mailers’ efforts are not targeted to a specific group of postal employees, such as clerks, letter carriers, mail handlers, etc: Their goal is to quench their insatiable thirst for profits at the expense of all postal employees.
The indecent pay and bonuses many CEOs receive do not seem to bother the Alliance; however, they put each advance by working people under a microscope for after-the-fact comparison.
William Burrus
President
EEOC Annual Report On USPS Workforce Fiscal Year 2009
From EEOC: This report covers the period from October 1, 2008, through September 30, 2009 and contains selected measures of agencies’ progress toward model EEO programs.
Targeted Disabilities
As of September 30, 2009, USPS employed 5,372 (0.76%) Individuals with Targeted Disabilities (IWTD). In order to have met the federal 2% participation rate goal, 14,158 IWTD were needed. This represents a decrease of 482 employees from FY 2008 and a decrease of 794 employees since FY 2005. The participation rate for FY 2008 was 0.77% and for FY 2005 was 0.88%. Over the 5-year period USPS had a net decrease of 0.12% in employees with targeted disabilities.
EEO Complaint Processing
I. Counseling
USPS timely processed 99.5% of the 17,054 pre-complaint counselings (without remands) completed in FY 2009.
II. Bases of Complaints Filed
The bases of alleged discrimination most often raised were: (1) Reprisal; (2) Disability (Physical); and (3) Age. Of the 5,659 complaints filed at USPS, 1,283 contained allegations of race (Black/African American) discrimination, 570 contained allegations of race (White) discrimination, 128 contained allegations of race (Asian) discrimination, 17 contained allegations of race (American Indian/Alaska Native) discrimination, 757 contained allegations of color discrimination and 2,533 contained allegations of disability discrimination.
III. Complaint Processing Times
Of the 3,014 completed investigations, 99.2% were timely. USPS’ average time for completing an investigation was 113 days. Of the agencies completing 25 or more investigations, the Tennessee Valley Authority had the lowest average of 100 days.
USPS’ average processing time for all complaint closures increased from 238 days in FY 2008 to 243 days in FY 2009. The government-wide average was 344 days.
IV. Costs
USPS agreed to pay $840,044 for 4,584 pre-complaint settlements, of which 433 were monetary settlements averaging $1,940. USPS expended a total of $4,541,324 for 3,014 complaint investigations, for an average expenditure of $1,507.
USPS agreed to pay a total of $5,631,795 plus other benefits for 598 complaint closures through settlement agreements, final agency decisions, and final agency orders fully implementing AJ decisions. For complaint closures with monetary benefits, the average award was $9,418.
See Report on USPS Workforce Composition
USPS In California To Post Combined City Carrier-Clerk Duty Assignment?
Filed under: APWU, NALC, letter carriers, postal, postal news, usps
USPS has notified a Local California APWU President of its intent ( it appears that the assignment has already been posted) to post a “combined full-time assignment” , consisting of six (6) hours of carrier duties and two (2) hours of clerk duties. The Postal Service has proposed to post this job as a City Carrier Craft assignment under the jurisdiction of NALC.
Here is a breakdown of the duties:
Manual Distribution, Breakout and Spreading: 1:59,
Office Time 1:16 and
Street Time: 4:45.
The Full-Time assignment also has a “scheme” attached along with qualifications necessary to be awarded the job.
Excerpts of the letter from USPS to the Local California President:
This is to inform you of my intent to utilize the provisions of Art 7.2A of the National Agreement to create a full-time assignment by combining duties from different crafts. The reason for establishing the combination assignment is to provide maximum full-time employment and provide necessary flexibility.
Attached you will find a copy of the combination assignment to be posted. This bid job will be designated to the NALC represented craft.