Summary

GAO reported in 2005 on major changes in the mailing industry that have reinforced the need for the U.S. Postal Service (USPS) to reduce costs and increase efficiency. To address these changes and become more efficient, USPS is implementing initiatives aimed at realigning its mail processing network. In a follow-up review, GAO recently reported that USPS has made progress in implementing these initiatives, yet challenges such as maintaining delivery standards and addressing stakeholder and community resistance remain. In July 2006, GAO also reported on USPS's progress in improving delivery performance information. This testimony describes (1) the changes that have affected USPS's processing network, (2) GAO's concerns related to USPS's strategy for realigning its mail processing network and implementing its area mail processing consolidations, and (3) GAO's concerns related to USPS's progress in improving delivery performance information. This testimony is based on prior GAO reports.

Several major changes have affected USPS's mail processing operations, including marketplace changes, declining First-Class Mail volume, increased competition, increased mail processing by mailers, automated operations, and population shifts. These changes have led to excess capacity in USPS's mail processing network and variations in productivity among plants. GAO's 2005 report concluded that USPS's strategy for realigning its mail processing network lacked clarity, sufficient transparency and accountability, excluded stakeholder input, and lacked performance measures for results. Since then, USPS has developed several initiatives that are at varying stages of development to address these issues and major changes with an overall goal of reducing costs while maintaining service. In 2007, GAO reported that while USPS has made progress in implementing its realignment initiatives, (1) USPS still did not have answers to important questions about how it intended to realign its network, (2) it remains unclear how various USPS initiatives are individually and collectively contributing to achieving its goals, and (3) the area mail processing (AMP) consolidation initiative, to which USPS attributes most of its progress in reducing excess machine capacity, still presents significant issues. These issues include unclear criteria used in selecting potential AMP consolidations, inconsistent data calculations, limited measures of the effects of changes on delivery performance, and a lack of appropriate stakeholder and public input. USPS is developing new policies to address some of these issues. Nevertheless, questions about USPS's selection criteria continue as USPS has decided not to implement 34 of the 57 potential AMP consolidations it considered in 2005 and 2006. With limited data on the effects of changes, USPS cannot consider actual delivery performance in making consolidation decisions or in evaluating results. GAO reported in 2006 that USPS does not measure and report its delivery performance for most types of mail and that its progress to improve delivery performance information has been slow and inadequate despite numerous USPS and mailer efforts. Postal reform legislation enacted in December 2006 requires USPS to submit a plan to Congress describing its strategy, criteria, and processes for realigning its network and provide performance measures for most types of mail. USPS is preparing its response to these requirements.