This is the accessible text file for GAO report number GAO-09-696 
entitled 'U.S. Postal Service: Mail Delivery Efficiency Has Improved, 
but Additional Actions Needed to Achieve Further Gains' which was 
released on July 30, 2009. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to Congressional Requesters: 

United States Government Accountability Office: 
GAO: 

July 2009: 

U.S. Postal Service: 

Mail Delivery Efficiency Has Improved, but Additional Actions Needed to 
Achieve Further Gains: 

GAO-09-696: 

GAO Highlights: 

Highlights of GAO-09-696, a report to congressional requesters. 

Why GAO Did This Study: 

The U.S. Postal Service (USPS) is facing significant financial problems 
as mail volume is declining, 4.5 percent in fiscal year 2008 and 11 
percent projected for fiscal year 2009. USPS lost $2.8 billion in 
fiscal year 2008 and projects a $6.4 billion loss in fiscal year 2009 
(possibly more if it cannot cut an ambitious $5.9 billion in costs). As 
one way to cut costs, USPS is trying to improve the efficiency of mail 
delivery, which generates close to one-third of USPS’s $78 billion in 
expenses. 

Recognizing the sizeable impact of delivery on USPS’s finances and 
operations, you requested a GAO review. This report addresses (1) how 
USPS monitors delivery efficiency; (2) characteristics of delivery 
units that affect their efficiency; and (3) the status and results of 
USPS’s actions to improve delivery efficiency, in particular USPS’s 
Flats Sequencing System (FSS). To address these objectives, GAO 
interviewed stakeholders and USPS officials, reviewed delivery 
documentation, conducted fieldwork, and analyzed delivery data. 

What GAO Found: 

USPS delivery managers have written guidance and information systems to 
help them monitor delivery efficiency—determining whether units and 
carriers are using the best work practices. These tools help set 
carrier and unit expectations and evaluate performance. Specifically, 
written guidance provides a monitoring framework and information 
systems track different metrics, such as deliveries and overtime, used 
for evaluation. However, there is no single measure of delivery 
efficiency, and managers use various metrics (e.g., carrier office and 
street efficiency indicators) to measure effectiveness. 

Through visits, interviews, and analysis of city delivery operations, 
GAO found efficiency varies by delivery unit, and certain factors 
affect a unit’s efficiency. These factors can include the experience, 
training, and local knowledge of a delivery manager; timing of mail 
received from the processing plant; availability of qualified carriers; 
unit size or location; and how recently routes were adjusted. In the 
less efficient delivery units (as determined by USPS’s rankings), USPS 
was taking actions to alleviate some issues, including replacing 
managers, allocating additional resources, and providing training. 

Although USPS has taken actions to improve delivery efficiency, the 
agency has limited information to measure the results. These actions 
include: 

* Flat Sequencing System—this cornerstone effort is a $1.5 billion 
investment in equipment for sorting flat mail (e.g., large envelopes, 
catalogs, circulars, and magazines) into the correct sequence for 
delivery; 

* Adjusting City Carrier Routes—aligning carrier routes to match 
changing workload, including using technology to set an optimal route 
structure; 

* City Delivery Pivoting Opportunity Model—a scheduling tool that helps 
delivery managers deal with daily unstaffed routes by aligning 
available staff and resources with delivery needs; and; 

* Others—such as managing its delivery vehicle fleet and utilizing a 
tool to manage growth in the number of addresses in a cost-effective 
way. 

These actions, combined with recent mail volume declines, have helped 
USPS eliminate nearly 10 million delivery workhours while absorbing 2.7 
million additional deliveries between fiscal years 2006 and 2008. USPS 
expects to eliminate 37 million delivery workhours in fiscal year 2009 
(saving approximately $1.4 billion) compared to the previous year. The 
future savings, however, may be limited by USPS’s lack of specific cost-
saving targets and results for most of these actions (USPS officials 
report it is too difficult to isolate the results of actions). Without 
such information, USPS is unable to assess the contribution and 
performance of each action and focus on those with the greatest savings 
potential. Also, while we are encouraged by USPS’s efforts to 
coordinate with employees, their unions, and mailers to promote more 
efficient delivery, continued focus will be needed to help address 
ongoing challenges related to declining volumes, technical issues 
(e.g., FSS failed a key engineering test), and financial and 
operational issues (e.g., the impact of these actions on postal 
stakeholders and future USPS investment decisions, particularly if 
delivery frequency is reduced to 5 days a week). 

What GAO Recommends: 

GAO recommends that the Postmaster General establish cost-saving 
targets and track results for each of the major USPS initiatives to 
improve delivery efficiency. In commenting on a draft of this report, 
USPS generally agreed with GAO’s findings. However, USPS did not agree 
to fully implement GAO’s recommendation for all major USPS delivery 
initiatives. 

View [hyperlink, http://www.gao.gov/products/GAO-09-696] or key 
components. For more information, contact Phillip Herr at (202) 512-
2834 or herrp@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

USPS Has a Variety of Tools for Monitoring Delivery Efficiency: 

Differences in Management and Operations Result in Varying Degrees of 
Efficiency throughout USPS's Delivery Network: 

USPS Actions Have Improved Delivery Efficiency, but Lack of Performance 
Information and Implementation Challenges May Limit Future Savings: 

Conclusions: 

Recommendations: 

Agency Comments and Our Evaluation: 

Appendix I: Objective, Scope, and Methodology: 

Appendix II: Comments from the U.S. Postal Service: 

Appendix III: Geographic Coverage of USPS's Nine Area Offices: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Cost and Delivery Information for City, Rural, and Contract 
Delivery Routes, 2008: 

Table 2: Tools and Systems for USPS Delivery Managers to Use in 
Monitoring Delivery Efficiency: 

Table 3: Key Delivery Metrics USPS Uses to Monitor Delivery Efficiency: 

Table 4: Key FSS Developments: 

Table 5: Changes in Carrier Delivery Routes and Modes, 2000-2008: 

Figures: 

Figure 1: Overview of Mail Flow: 

Figure 2: Total Mail Volume, by Year: 

Figure 3: Selected USPS Carrier Activities: 

Figure 4: Office Efficiency Indicator for Select City Delivery Units, 
2008: 

Figure 5: Delivery Sequenced Letter Mail Volume Trends for City 
Delivery: 

Figure 6: Differences in Average Daily Flat Mail Volumes That Will Need 
to be Manually Sorted on City Carrier Routes Receiving FSS Mail: 

Figure 7: Annual Percent Change in Volume of Domestic Flat Mail, 2003- 
2008: 

Figure 8: Summary of the Interim and Modified Interim Alternate Route 
Adjustment Processes: 

Figure 9: Hypothetical Example of City Carrier "Undertime": 

Figure 10: Mean Overtime Workhours as a Percentage of Total Workhours, 
by Year, for Selected City Delivery Units: 

Figure 11: Mean Office Efficiency Indicator Performance, by Year, for 
Selected City Delivery Units: 

Figure 12: USPS's 9 Area Offices: 

Abbreviations: 

CDPOM: City Delivery Pivoting Opportunity Model: 

COR: Carrier Optimal Routing: 

DOIS: Delivery Operations Information System: 

DPS: Delivery Point Sequence: 

FSS: Flats Sequencing System: 

GPS: Global Positioning System: 

IARAP: Interim Alternate Route Adjustment Process: 

MIARAP: Modified Interim Alternate Route Adjustment Process: 

NALC: National Association of Letter Carriers: 

NDCBU: Neighborhood Delivery Collection Box Unit: 

NRLCA: National Rural Letter Carriers' Association: 

OEI: Office Efficiency Indicator: 

OIG: Office of Inspector General: 

PRC: Postal Regulatory Commission: 

SEI: Street Efficiency Indicator: 

USPS: U.S. Postal Service: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

July 15, 2009: 

The Honorable Thomas R. Carper: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Subcommittee on Federal Financial Management, Government Information, 
Federal Services, and International Security: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Stephen F. Lynch: 
Chairman: 
The Honorable Jason Chaffetz: 
Ranking Member: 
Subcommittee on Federal Workforce, Postal Service, and the District of 
Columbia: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable Danny Davis: 
House of Representatives: 

The U.S. Postal Service (USPS) is facing significant financial problems 
because mail volume is declining significantly--by 9.5 billion pieces, 
or 4.5 percent, in fiscal year 2008[Footnote 1] and a projected 22.7 
billion pieces, or 11 percent in 2009. As a result, USPS lost $2.8 
billion in 2008 and expects to lose over $6 billion in 2009, although 
this number could be higher if USPS does not achieve its ambitious cost-
cutting goal of $5.9 billion--or over two-and-a-half times more than it 
reported cutting in 2008. We have recently testified on multiple 
occasions regarding USPS's escalating financial problems.[Footnote 2] 

A key portion of USPS's cost reduction efforts are linked to delivering 
mail more efficiently--which USPS defines as using the best work 
practices and least amount of time. Mail delivery is USPS's largest 
cost segment and generated close to one-third of its nearly $78 billion 
in total expenses in 2008. That year, over 350,000 full-and part-time 
mail carriers accounted for approximately 45 percent of USPS's salary 
and benefit expenses. Delivery is labor intensive and includes carriers 
manually sorting certain mail into the sequence that it will be 
delivered, and delivering mail to and collecting it from most of the 
nation's 149 million residential and business addresses 6 days a week. 
[Footnote 3] Moreover, this delivery network is growing by more than 1 
million addresses each year, resulting in additional personnel, fuel, 
and vehicle costs. Declines in volumes, however, have put additional 
pressure on USPS's ability to contain its costs because USPS has high 
overhead costs that are hard to reduce the in short term when volumes 
decline. The Postal Regulatory Commission (PRC) recently testified that 
only half of USPS's delivery costs vary with volume. As such, when 
volumes decline, mail delivery costs are harder to reduce compared to 
other USPS costs that vary more with mail volume. USPS has recently 
testified that it cannot afford to continue delivering mail 6 days a 
week and has requested that Congress eliminate the long-standing 
appropriation provision mandating 6-day delivery so USPS can shift to 5-
day delivery. 

USPS has taken steps to deliver mail more efficiently, including 
adjusting delivery routes to reflect declining volumes and investing in 
more efficient mail-sorting technologies. Specifically, USPS has 
approved $1.5 billion to acquire and deploy 100 machines--called the 
Flats Sequencing System (FSS)--that will automatically sort flats 
(e.g., large envelopes, catalogs, circulars, and magazines) and 
sequence them in the exact order of carrier delivery (USPS currently 
has equipment that does this for letter mail).[Footnote 4] This 
investment is expected to reduce the time carriers would otherwise 
spend manually sorting mail in the office--a labor-intensive and costly 
activity--and enable them to spend more time delivering mail. USPS has 
begun deploying FSS machines and expects the first phase to be 
completed by October 2010. 

Because of concerns about USPS's financial condition, you asked us to 
report on USPS's delivery efficiency, recognizing the sizeable impact 
of delivery on USPS's finances and operations. This report addresses 
(1) how USPS monitors delivery efficiency; (2) characteristics of 
delivery units that affect their efficiency; and (3) the status and 
results of USPS's actions to improve delivery efficiency, in particular 
FSS. We also briefly discuss USPS's proposal to reduce delivery to 5 
days each week. 

To address these objectives, we reviewed USPS documentation and 
interviewed USPS headquarters officials on issues related to USPS's 
delivery operations, monitoring processes, efficiency initiatives, and 
problems, as well as FSS implementation. We analyzed a broad range of 
delivery performance data to determine the extent to which (1) 
variation existed in efficiency across delivery units, (2) meaningful 
trends existed within these data, and (3) route adjustments were 
performed and whether savings were achieved. We assessed the 
reliability of the data used in our analysis of delivery efficiency and 
found it sufficiently reliable for our purposes. We focused our work 
primarily on city delivery, rather than rural delivery, because city 
delivery accounts for 75 percent of delivery operations' salary and 
benefit cost. To gain a better understanding of delivery, we visited 2 
area offices, 7 district offices, and 21 delivery units, which 
encompassed 7 states plus Washington, D.C., providing geographic 
dispersion.[Footnote 5] As part of this analysis and USPS delivery 
performance indicators, we selected: 

* the highest, middle, and lowest performing areas; 

* the highest and lowest performing districts within each area; and: 

* the highest and lowest performing delivery units within each 
district. 

We consulted with USPS to ensure that the delivery units we selected 
had a sufficient number of city carrier routes to do meaningful 
fieldwork, and made adjustments based on this information and other 
travel considerations. We interviewed USPS officials at each location 
who managed delivery operations to obtain insights into the 
performance, monitoring, and management of delivery units as well as 
their views on the effectiveness of major delivery efficiency 
initiatives which USPS identified. In addition to these locations, we 
visited the first USPS mail processing facility to install an FSS 
machine and two delivery units that receive FSS delivery sequenced 
flats. We interviewed responsible USPS mail processing and delivery 
officials regarding FSS operations and its impact on delivery 
efficiency. To obtain stakeholder views regarding USPS's efforts to 
improve delivery efficiency, we interviewed officials from PRC, 
National Association of Letter Carriers (NALC), National Rural Letter 
Carriers' Association (NRLCA), and major mailers--who have collaborated 
with USPS on technical matters associated with FSS implementation, such 
as rules for preparing flat mail that will be sorted on FSS machines. 

We conducted this performance audit from July 2008 to July 2009, in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. Appendix I contains a 
detailed discussion of our scope and methodology. We requested comments 
on a draft of this report from USPS, and its comments, which are 
reproduced in appendix II, are discussed later in this report. 

Background: 

Providing mail delivery service is central to USPS's mission and role 
in providing postal services to "bind the nation together through the 
personal, educational, literary, and business correspondence of the 
people."[Footnote 6] USPS is required by law to provide prompt, 
reliable, and efficient services to, as nearly as practicable, the 
entire U.S. population.[Footnote 7] USPS is further required to 
maintain an efficient mail collection system. Provisions in USPS 
appropriations mandate 6-day-a-week delivery and certain levels of 
rural mail delivery.[Footnote 8] USPS establishes delivery service 
within this framework and manages the associated facilities, 
transportation, and employee network. Figure 1 illustrates some of the 
key steps in the flow of mail from collection to delivery. 

Figure 1: Overview of Mail Flow: 

[Refer to PDF for image: illustration] 

Mail collection: 
Delivery Unit: 
Inter-plant processing and distribution[A]: 
* Mail is sorted and processed; 
Delivery Unit: 
* Carriers perform in-office functions, mostly sorting mail; 
Delivery: 
* Carriers perform on-street duties including delivering and collecting 
mail. 

Source: GAO analysis of USPS operations. 

[End of figure] 

AA significant portion of mail is deposited by mailers directly at 
delivery units or processing and distribution facilities. 

The efficiency and cost of delivery operations depicted in figure 1 
depend on a variety of factors, including the following: 

* Mail volume and type. The amount of mail and type (e.g., letters 
versus packages), including the extent to which mail is compatible with 
USPS's automation equipment or needs to be manually sorted by carriers 
prior to being taken to the street for delivery. 

* The type of carrier route. Most customers receive their mail via one 
of three different types of carrier routes: city, rural, or contract 
carrier. Carriers in each type of route have their own roles, 
responsibilities, and compensation systems. For example, most city and 
rural carriers are USPS employees but members of different unions, 
while contract carriers are not USPS employees, but can perform 
delivery services as part of their contractual agreement with USPS. 
[Footnote 9] Table 1 illustrates how the type of carrier route can 
affect delivery costs. 

Table 1: Cost and Delivery Information for City, Rural, and Contract 
Delivery Routes, 2008: 

Type of route: City delivery; 
Salary and benefits (billions): $17.4; 
Number of routes: 161,648; 
Possible deliveries (millions): 87.3; 
Average deliveries per route: 540; 
Number of carriers: Career[B]: 211,661; Noncareer[C]: 14,758; 
Average annual national cost per address (estimate)[A]: $209. 

Type of route: Rural delivery; 
Salary and benefits (billions): $5.9; 
Number of routes: 76,575; 
Possible deliveries (millions): 39.1; 
Average deliveries per route: 511; 
Number of carriers: Career: 68,900; Noncareer: 58,072; 
Average annual national cost per address (estimate)[A]: 161. 

Type of route: Contract delivery; 
Salary and benefits (billions): $0.3[D]; 
Number of routes: 7,889[E]; 
Possible deliveries (millions): 2.6; 
Average deliveries per route: 330; 
Number of carriers: n/a; 
Average annual national cost per address (estimate)[A]: 115. 

Type of route: Total; 
Salary and benefits (billions): $23.6; 
Number of routes: 246,122; 
Possible deliveries (millions): 129.0[F]; 
Average deliveries per route: 524; 
Number of carriers: n/a; 
Average annual national cost per address (estimate)[A]: n/a. 

Source: USPS. 

Note: n/a stands for not applicable. 

[A] According to USPS, these data are updated annually based in part on 
a 1995 cost-of-delivery study. 

[B] Career employees include full-time city and rural carriers and 
certain part-time city carriers. 

[C] Noncareer employees include certain transitional city carriers and 
supplemental/substitute rural carriers. 

[D] These costs represent the entire contractual rate, and may involve 
costs for transportation services provided as part of these contracts. 
According to USPS officials, most of these routes strictly provide 
delivery service, but the remaining routes incorporate other mail 
transportation services such as trucking mail from one USPS facility to 
another (deliveries are made to addresses along the line of travel). 

[E] This number represents the number of contract delivery routes on 
which delivery service is provided for at least one address. 

[F] There are about 129 million addresses served by letter carriers. 
Another 20 million addresses are provided delivery as part of USPS Post 
Office box service (for a total of 149 million addresses). These 
deliveries are made by USPS clerks. 

[End of table] 

* The number, location, and mode of delivery. The number of addresses 
on a particular route; the distance between addresses; the geographic 
location of the route (e.g., the downtown of a major metropolitan area 
versus a small town); and the mode of delivery (e.g., mail delivered to 
a curbline mailbox, a mail slot in a door, or a clusterbox[Footnote 10] 
at the end of the street). For example, on city carrier routes, the 
current annual cost for door delivery is $354, curbline delivery is 
$225, and centralized delivery[Footnote 11] is $161. 

* Transportation. The length of a carrier route, the need for a 
vehicle, and vehicle costs (e.g., for fuel and maintenance). 

* Other factors. Weather conditions, terrain, sick leave usage, and 
carrier turnover. 

* Declining volume reduces USPS's revenue, but it does not necessarily 
reduce costs commensurately. Many of the costs associated with its 
delivery network are fixed, and these fixed costs are difficult to 
reduce as volumes decline. USPS incurs facility, equipment, 
transportation, and personnel costs associated with providing mail 
delivery to over 149 million addresses 6 days a week, regardless if 20 
or 1 piece(s) of mail needs to be delivered to a particular address. 
Mail volumes have declined over the last 2 years and USPS is projecting 
even lower volumes in 2009 and 2010 (see figure 2). Even so, USPS's 
delivery network increases by more than 1 million addresses each year. 
This trend poses a challenge to reducing delivery costs because as the 
network expands, so do some of USPS's overhead costs. 

Figure 2: Total Mail Volume, by Year: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 1994; 
Mail volume (billions of pieces): 178. 

Fiscal year: 1995; 
Mail volume (billions of pieces): 180.7. 

Fiscal year: 1996; 
Mail volume (billions of pieces): 183.4. 

Fiscal year: 1997; 
Mail volume (billions of pieces): 190.9. 

Fiscal year: 1998; 
Mail volume (billions of pieces): 196.9. 

Fiscal year: 1999; 
Mail volume (billions of pieces): 201.6. 

Fiscal year: 2000; 
Mail volume (billions of pieces): 207.9. 

Fiscal year: 2001; 
Mail volume (billions of pieces): 207.5. 

Fiscal year: 2002; 
Mail volume (billions of pieces): 202.8. 

Fiscal year: 2003; 
Mail volume (billions of pieces): 202.2. 

Fiscal year: 2004; 
Mail volume (billions of pieces): 206.1. 

Fiscal year: 2005; 
Mail volume (billions of pieces): 211.7. 

Fiscal year: 2006; 
Mail volume (billions of pieces): 213.1. 

Fiscal year: 2007; 
Mail volume (billions of pieces): 212.2. 

Fiscal year: 2008; 
Mail volume (billions of pieces): 202.7. 

Fiscal year: 2009 (projected); 
Mail volume (billions of pieces): 180. 

Fiscal year: 2010 (projected); 
Mail volume (billions of pieces): 170. 

Source: USPS. 

[End of figure] 

One of USPS's core strengths is what is referred to as "the last mile" 
of mail delivery--that is, its carrier delivery network reaches 
millions of business and residential addresses 6 days a week. Carriers 
perform a variety of activities each workday to support this delivery 
network, some of which are illustrated in figure 3. 

Figure 3: Selected USPS Carrier Activities: 

[Refer to PDF for image: eight photographs] 

Manually sorting mail; 
Filling out paperwork; 
Scanning mail before leaving the delivery unit; 
Taking mail to the delivery vehicle; 
Loading delivery vehicle; 
Delivering parcels; 
Loading a mailbox; 
Unloading a collection box. 

Source: © 2009 USPS. Used with permission. All rights reserved. 

[End of figure] 

These activities are divided between the office and the street. During 
office time each morning, carriers organize their mail for delivery. 
First, carriers manually sequence unsorted letter and flat mail into 
delivery order by inserting each piece into the pigeonhole in their 
case[Footnote 12] that corresponds to the address on the route. The 
sorted mail is removed from the case, bundled for delivery, and placed 
into trays. Carriers then pick up and organize their parcels and 
accountable mail (e.g., Certified Mail and Registered Mail) for 
delivery. Carriers also conduct safety inspections of their postal 
vehicles. During street time, carriers load mail into their vehicles 
and proceed to their routes. Carriers then deliver and collect mail, 
traversing their routes by foot, vehicle, or a combination of both. 
They also perform various other tasks such as scanning mail with 
Delivery Confirmation, obtaining signed receipts for Registered Mail, 
and picking up parcels. After traversing their routes, carriers return 
to their delivery units and complete various administrative duties such 
as depositing collected mail, handing in receipts and money collected, 
and sorting mail for the next day. 

USPS Has a Variety of Tools for Monitoring Delivery Efficiency: 

USPS headquarters and field officials noted that monitoring delivery 
efficiency--that is, determining the extent that mail is delivered 
using best work practices in the least amount of time--is a complex 
endeavor. They have a variety of tools and systems to help them monitor 
delivery efficiency. These include written guidance, as well as 
information systems that capture various delivery-related operational 
data (see table 2). 

Table 2: Tools and Systems for USPS Delivery Managers to Use in 
Monitoring Delivery Efficiency: 

Written guidance: 

Policy Handbooks: 
* M-38, Management of Rural Delivery Services (Rural Carriers); 
* M-39, Management of Delivery Services (City Carriers); 
* M-41, City Delivery Carriers Duties and Responsibilities; 
* Postal Operations Manual 603, Rural Carrier Duties and 
Responsibilities; 

Operating Procedures: 
* Morning Standard Operating Procedures; 
* Rural Delivery Standard Operating Procedures; 

Collective Bargaining Agreements: 
* 2006-2010 Agreement between the U.S. Postal Service and the National 
Rural Letter Carriers' Association and other related documents; 
* 2006-2011 National Agreement between the National Association of 
Letter Carriers and the U.S. Postal Service and other related 
documents. 

Information systems and associated operating data: 
* Flash System: Tracks system-wide delivery operational and budgetary 
information; 
* Delivery Operations Information System: A national database system 
which contains delivery information for 97 percent of city delivery 
routes (almost 8,600 delivery units) that is used by postal managers to 
manage delivery operations. This database incorporates the Managed 
Service Point system that collects information from carriers as they 
scan bar-coded labels placed at various points throughout their route; 
* Rural System: Tracks performance information on rural delivery 
routes; 
* My Post Office: A tool used to track and report on the number and 
resolution of delivery-related issues raised primarily by small local 
businesses and residents; 
* Business Service Network System: Tracks customer information 
including complaints and problems for large mailers; 
* Mail History Tracking System: Provides information on local letter 
mail-processing operations and helps identify problems with the 
sequencing of this mail before delivery; 
* Miscellaneous Service Systems: USPS systems for monitoring delivery 
performance measurement for Express Mail and some single-piece and bulk 
First-Class Mail, a Priority Mail, Package Services, and International 
Mail; may provide data on areas experiencing poor delivery performance. 

Source: USPS. 

[A] The External First-Class Measurement System, administered by a 
contractor, measures when test mail pieces are deposited in collection 
boxes and received at various addresses. 

[End of table] 

The tools--the written guidance and operational data--assist delivery 
managers in conducting effective monitoring by helping them in setting 
carriers' expectations and evaluating their performance (compared to 
those expectations). The expectations can include how much time 
carriers should need to prepare the mail for delivery and when carriers 
should depart for and return from their respective routes. The tools 
provide the policies, processes, and data that are used to evaluate the 
delivery efficiency of a particular carrier or delivery unit. The data 
provide managers with information on a variety of factors such as mail 
volumes, addresses, or amounts of mail that need to be manually sorted. 
Managers supplement these data with other information as appropriate, 
such as whether any carriers called in sick, or if weather conditions 
or road construction are likely to affect delivery. 

When evaluating delivery efficiency, these managers stated that while 
they use many efficiency indicators (such as those included in table 
3), there is no single, clear-cut measure of delivery efficiency across 
all postal units. They also noted that: 

* the systems supporting these metrics allow for data to be analyzed in 
many different ways (e.g., the systems allow for data to be tracked at 
the national, area, district, delivery unit, route, and carrier level, 
and over specific periods of time) and: 

* some indicators track factors external to the delivery unit that can 
affect a carrier's delivery efficiency. For example, the metric used to 
calculate "Delivery Point Sequence (DPS) Percentages" tracks the 
percentage of letter mail that has been sorted into delivery sequence 
using automated equipment. This percentage can directly impact the 
amount of time carriers spend in the office, because the higher the DPS 
percentage, the less time carriers will need in the office to manually 
sequence their letter mail into delivery order. 

Table 3: Key Delivery Metrics USPS Uses to Monitor Delivery Efficiency: 

Metric: Deliveries per hour; 
Description: The number of addresses delivered for each workhour used. 

Metric: Total cased[A] volumes; 
Description: The volume of mail that needs to be manually cased by 
carriers. 

Metric: Delivery Point Sequence (DPS) percentages; 
Description: In the delivery units that receive DPS letters, this is 
calculated by dividing DPS letters by total letter volumes (DPS letters 
+ cased letters) multiplied by 100. 

Metric: City carrier workhours; 
Description: The number of workhours used by city carriers. 

Metric: City deliveries per route; 
Description: The number of addresses delivered to on a particular city 
delivery route. 

Metric: City delivery percentage to standard; 
Description: This metric compares city carrier office performance to 
"standard" rates.[B] 

Metric: City delivery--Office Efficiency Indicator (OEI); 
Description: A calculation of cumulative deliveries divided over the 
total carrier office workhours. 

Metric: City delivery--Street Efficiency Indicator (SEI); 
Description: A calculation of cumulative deliveries divided by the 
total carrier street workhours. 

Metric: City carrier overtime; 
Description: The number of overtime workhours used by city carriers. 

Metric: City carrier penalty overtime; 
Description: The number of penalty overtime workhours used by city 
carriers. Penalty overtime workhours are paid at a rate of twice the 
base hourly straight time rate for overtime work. 

Metric: Carriers back by 1700; 
Description: The number of city carriers who arrive back into the 
office from their route by 1700 (i.e., 5:00 p.m.). 

Metric: Rural carrier workhours; 
Description: The number of workhours used by rural carriers. 

Metric: Rural carrier overtime; 
Description: The number of overtime workhours used by rural carriers. 

Metric: Rural percentage to standard; 
Description: A calculation of the number of workhours used by rural 
carriers divided by the expected contractual number of rural carriers. 

Source: USPS. 

[A] Casing is the manually sorting mail into delivery order. 

[B] The established standards specify, among other things, that city 
carriers are to manually case 8 flats or 18 letters per minute. 

[End of table] 

These officials stated there are major differences in how efficiency is 
monitored, depending on whether routes are being served by city or 
rural carriers. According to USPS officials, due to the nature of city 
routes (they account for the majority of delivery workhours and costs 
and city carriers' compensation is based on an "hourly" system), far 
more data are collected and analyzed for city routes compared to rural 
routes. For example, USPS has implemented the Delivery Operations 
Information System (DOIS) national database, which collects significant 
amounts of delivery-related data, to assist city delivery unit 
supervisors in (1) managing office activities, (2) planning street 
activities, and (3) tracking and monitoring delivery performance. DOIS 
receives constant data feeds from various systems including the Managed 
Service Point program, which collects information from city carriers as 
they scan bar-coded labels placed at various points throughout their 
route (e.g., on mailboxes). This system provides USPS a tool for 
monitoring the consistency of delivery time, and, in doing so, can help 
hold carriers accountable for their performance: if a carrier's scans 
differ significantly from the norm or are otherwise divergent (e.g., a 
point was not scanned), the delivery manager is to review these 
instances with the carrier. 

Differences in Management and Operations Result in Varying Degrees of 
Efficiency throughout USPS's Delivery Network: 

Using USPS's delivery metrics and rankings and the results of our own 
analysis of USPS's delivery operations, we found that the efficiency of 
USPS's delivery units varied. For example, figure 4 shows the 
distribution of Office Efficiency Indicator (OEI) across selected 
delivery units. OEI measures the number of addresses a delivery unit 
handles per hour of office time--units with higher OEI scores handle 
more addresses per office workhour than those with lower OEI scores 
(thus, other things being equal, higher values indicate more efficient 
use of carrier office time). As can be seen in figure 4, there is 
considerable variation in the indicator across delivery units, with 
many offices showing a considerably lower value of OEI than the average 
score of 286.[Footnote 13] 

Figure 4: Office Efficiency Indicator for Select City Delivery Units, 
2008: 

[Refer to PDF for image: vertical bar graph] 

2008 Office Efficiency Indicator: 0 to 25; 	
Frequency (of delivery units): 3. 

2008 Office Efficiency Indicator: 25 to 50; 
Frequency (of delivery units): 7. 

2008 Office Efficiency Indicator: 50 to 75; 
Frequency (of delivery units): 29. 

2008 Office Efficiency Indicator: 75 to 100; 
Frequency (of delivery units): 106. 

2008 Office Efficiency Indicator: 100 to 125; 
Frequency (of delivery units): 245. 

2008 Office Efficiency Indicator: 125 to 150; 
Frequency (of delivery units): 327. 

2008 Office Efficiency Indicator: 150 to 175; 
Frequency (of delivery units): 512. 

2008 Office Efficiency Indicator: 175 to 200; 
Frequency (of delivery units): 590. 

2008 Office Efficiency Indicator: 200 to 225; 
Frequency (of delivery units): 587. 

2008 Office Efficiency Indicator: 225 to 250; 
Frequency (of delivery units): 663. 

2008 Office Efficiency Indicator: 250 to 275; 
Frequency (of delivery units): 711. 

2008 Office Efficiency Indicator: 275 to 300; 
Frequency (of delivery units): 653. 

2008 Office Efficiency Indicator: 300 to 325; 
Frequency (of delivery units): 556. 

2008 Office Efficiency Indicator: 325 to 350; 
Frequency (of delivery units): 512. 

2008 Office Efficiency Indicator: 350 to 375; 
Frequency (of delivery units): 379. 

2008 Office Efficiency Indicator: 375 to 400; 
Frequency (of delivery units): 317. 

2008 Office Efficiency Indicator: 400 to 425; 
Frequency (of delivery units): 200. 

2008 Office Efficiency Indicator: 425 to 450; 
Frequency (of delivery units): 192. 

2008 Office Efficiency Indicator: 450 to 475; 
Frequency (of delivery units): 150. 

2008 Office Efficiency Indicator: 475 to 500; 
Frequency (of delivery units): 117. 

2008 Office Efficiency Indicator: 500 to 525; 
Frequency (of delivery units): 97. 

2008 Office Efficiency Indicator: 525 to 550; 
Frequency (of delivery units): 76. 

2008 Office Efficiency Indicator: 550 to 575; 
Frequency (of delivery units): 47. 

2008 Office Efficiency Indicator: 575 to 600; 
Frequency (of delivery units): 40. 

2008 Office Efficiency Indicator: 600 to 625; 
Frequency (of delivery units): 39. 

2008 Office Efficiency Indicator: 625 to 650; 
Frequency (of delivery units): 26. 

2008 Office Efficiency Indicator: 650 to 675; 
Frequency (of delivery units): 23. 

2008 Office Efficiency Indicator: 675 to 700; 
Frequency (of delivery units): 15. 

2008 Office Efficiency Indicator: 700 to 725; 
Frequency (of delivery units): 15. 

2008 Office Efficiency Indicator: 725 to 750; 
Frequency (of delivery units): 8. 

2008 Office Efficiency Indicator: 750 to 775; 
Frequency (of delivery units): 11. 

2008 Office Efficiency Indicator: 775 to 800; 
Frequency (of delivery units): 3. 

2008 Office Efficiency Indicator: 800 to 825; 
Frequency (of delivery units): 8. 

2008 Office Efficiency Indicator: 825 to 850; 
Frequency (of delivery units): 4. 

2008 Office Efficiency Indicator: 850 to 875; 
Frequency (of delivery units): 4. 

2008 Office Efficiency Indicator: 875 to 900; 
Frequency (of delivery units): 4. 

2008 Office Efficiency Indicator: 900 to 925; 
Frequency (of delivery units): 5. 

2008 Office Efficiency Indicator: 925 to 950; 
Frequency (of delivery units): 2. 

2008 Office Efficiency Indicator: 950 to 975; 
Frequency (of delivery units): 1. 

2008 Office Efficiency Indicator: 975 to 1000; 
Frequency (of delivery units): 1. 

Source: GAO analysis of USPS data. 

Note: Data cover approximately 7,300 city delivery unit finance numbers 
that are tracked in DOIS. The Office Efficiency Indicator is a 
calculation of the cumulative possible deliveries divided by the total 
office workhours. 

[End of figure] 

Furthermore, during our site visits and interviews with USPS delivery 
officials in headquarters, areas, districts, and local delivery units 
and our analysis of city delivery operations, we found that certain 
factors can affect the efficiency of a particular delivery unit, 
including the following: 

* Delivery manager quality, experience, and local knowledge. Delivery 
officials stated that delivery managers who are not familiar with the 
local unit's office and street operations and either do not effectively 
use or are not trained to use tools such as DOIS for monitoring 
delivery efficiency will struggle to achieve efficient operations. 
These problems appeared in most of the lower-ranked units we visited, 
where the delivery managers had generally held that position in that 
particular unit for less than 1 year. In certain delivery units, these 
managers were not familiar with the intricacies of local delivery 
operations and had not yet conducted comprehensive street observations 
of carriers. Furthermore, officials from the NALC and NRLCA emphasized 
that delivery managers' knowledge of the policies and procedures of 
their respective carriers can help to facilitate efficient operations 
within that delivery unit. 

* Mail processing activities. These officials stated that the extent to 
which delivery units receive mail dispatched from the processing plant 
in a timely and consistent manner--including a higher percentage of DPS 
letters--can promote more efficient operations. For example, receiving 
mail at the early segment of the dispatch from the processing plant can 
increase a delivery unit's efficiency. Conversely, officials at lower- 
performing delivery units, whose units were near the end of the 
dispatch queue, told us that any delays earlier in the queue would mean 
their mail would arrive late. Delays could ripple throughout the 
affected delivery units as carriers waited in their units for mail to 
arrive and could not start their respective routes. These sentiments 
were echoed by officials at the NALC and NRLCA, who stated that having 
carriers wait at certain delivery units (sometimes as long as a couple 
of hours) for their mail to arrive from the processing plant is 
detrimental to carrier efficiency. 

* Carrier and other support staff. These officials stated that the 
extent to which they have an appropriate complement of experienced 
carriers and support staff also can affect the efficiency of delivery 
operations. In particular, officials at the lowest-performing delivery 
unit we visited indicated that frequent carrier turnover (e.g., where 
carriers can "bid-out" and transfer to other delivery units for reasons 
such as their route was located in a "bad neighborhood" or the delivery 
unit lacked parking for their personal vehicle) was a significant 
problem requiring considerable resources to train new carriers. 
Furthermore, officials at other delivery units stated that other 
problems such as not having enough clerks to perform key mail 
preparation tasks, experiencing attendance-related issues, and having 
many carriers placed on work restrictions[Footnote 14] also could 
negatively affect a unit's efficiency. 

* Size of the delivery unit. These officials stated that achieving 
delivery efficiency is much more difficult in larger urban delivery 
units than in smaller suburban units. They stated that delivery 
managers in these urban units typically have larger carrier staffs and 
higher mail volumes, traffic congestion, and more frequent address 
changes to contend with. In performing our own analysis of USPS 
delivery data, we found that mail volume in a unit was correlated with 
measures of efficiency and workload. In particular, we found that in 
units with higher volume, the OEI tended to be lower. Similarly, in 
those units, overtime levels tended to be higher. It appears, 
therefore, that managing workload and improving efficiency is more 
difficult in units with larger mail volumes. 

* Route structure. These officials stated that the inability of certain 
delivery units to align their city carrier route structure with 
changing mail volumes would cause inefficiencies in their delivery 
operations.[Footnote 15] These officials indicated that some units were 
unable to make route adjustments for reasons such as poor delivery 
data; the time-consuming and costly nature of the route adjustment 
process (covered in greater detail later in this report); or 
ineffective relationships with the local NALC representatives. For 
example, in most higher-ranked units we visited, city carrier routes 
had been adjusted within the last calendar year (when mail volume was 
declining), while in other lower-ranked units, officials stated that 
some city carrier routes had not been adjusted in over 10 years. 

* Delivery unit location. These officials also stated that other 
factors including geography, local climate, transportation network, and 
roads also can affect delivery efficiency. For example, officials noted 
that delivery units located in areas that regularly receive substantial 
snowfall or experience major road construction can have more difficulty 
achieving efficiencies than areas that are not facing such challenges. 

According to USPS officials, it is difficult to compare efficiency 
across delivery units because units vary so much in terms of size, 
location, weather, and other factors. Moreover, the officials said 
variation is to be expected when dealing with a delivery network the 
size and scope of USPS's. They stated, and we observed during our site 
visits, that delivery managers in the field (e.g., at the area, 
district, and delivery unit levels) are very familiar with those 
factors. This familiarity provides them useful insight into efficiency 
across units and aids them in determining the courses of actions for 
less-efficient units. Specifically, in all of the lower-ranked units we 
visited, USPS had begun taking actions to increase delivery efficiency. 
These actions included having delivery managers follow unit-specific 
checklists, bringing in managers from other parts of the country to 
train or replace the managers of lower-ranked units, having district 
and area officials provide support, and conducting training. For 
example: 

* One of the districts we visited had replaced the entire management 
team at certain low-performing units and assigned district delivery 
managers to these units for months to guide and train the new 
management teams. District officials reported that this additional 
effort was starting to increase the efficiency of these units, 
including significant improvements in street efficiency and workhours 
used. District officials stated that at one low-performing unit that 
was running 300 to 400 hours over projected amounts each month, the 
efforts of the district delivery manager and new management team over a 
9-month span resulted in the delivery unit operating at about 100 to 
150 hours below projected amounts. 

* In low-performing delivery units in another district, new delivery 
managers from other parts of the country were brought in to replace 
poor-performing managers, and the district provided DOIS refresher 
training to the delivery supervisors in these units. According to 
officials in this district and the lowest-performing unit in that 
district, these actions have increased managers' use of and confidence 
in DOIS, which is facilitating more efficient delivery. 

Our analysis of USPS delivery data and observations at delivery units 
we visited were consistent with results of work performed by the USPS 
Office of Inspector General (OIG). A report in February 2009[Footnote 
16] found inconsistencies in the use of some of these delivery tools 
and that supervisors were not monitoring street performance in 
accordance with USPS policies, for example: 

* USPS policies on the number of DOIS reports supervisors must review 
daily were inconsistent. 

* Supervisors did not always discuss performance issues with carriers, 
conduct street observations, or take corrective action when misconduct 
occurred. 

* Increases in the number of routes and the size of the geographical 
area covered reduced supervisors' ability to provide effective "real- 
time" monitoring through street observations. 

The OIG made a corresponding recommendation, and USPS delivery managers 
in headquarters stated they are taking actions to address it. 

USPS Actions Have Improved Delivery Efficiency, but Lack of Performance 
Information and Implementation Challenges May Limit Future Savings: 

USPS has implemented a broad range of actions to improve delivery 
efficiency. These include billion dollar automation investments such as 
FSS, processes to expedite the adjustment of city carrier routes to 
respond to declining mail volumes, information systems that will 
support adjusting routes on a daily and long-term basis, and other 
programs to efficiently deal with new addresses and USPS delivery 
vehicles. These actions, along with other actions to address declining 
mail volumes, have helped USPS generate efficiencies in the delivery 
network, and USPS is relying on these actions to generate additional 
savings in the future. These future savings, however, may be limited by 
USPS's lack of performance information and implementation challenges 
for each of these actions. 

Individual Actions May Continue Generating Efficiencies and Savings, 
although They May Be Limited by Implementation Challenges: 

Flat Sequencing System: 

Description: USPS's FSS is the cornerstone of its efforts to improve 
delivery efficiency. FSS machines delivery sequence flat mail (mainly 
large envelopes, catalogs, circulars, and magazines). FSS is based on 
the success USPS has achieved deploying DPS equipment, which delivery 
sequences letter mail, thus avoiding timely and costly manual sorting. 
USPS began implementing DPS on its carrier routes in 1993, and reports 
annual cost avoidance of about $5 billion through this effort. DPS 
percentages have continued to rise over the years. Figure 5 shows that 
for city delivery routes, about 90 percent of letters are delivery 
sequenced. Like DPS, the percentage of carrier routes that receive 
delivery sequenced letters have grown. At the end of 2008, 99 percent 
of all city delivery routes and 86.5 percent of all rural routes 
received delivery sequenced letter mail. 

Figure 5: Delivery Sequenced Letter Mail Volume Trends for City 
Delivery: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 1993; 	
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 0.4%. 

Fiscal year: 1994; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 6.3%. 

Fiscal year: 1995; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 12.3%. 

Fiscal year: 1996; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 21.4%. 

Fiscal year: 1997; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 35.3%. 

Fiscal year: 1998; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 43.8%. 

Fiscal year: 1999; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 49.6%. 

Fiscal year: 2000; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 55.6%. 

Fiscal year: 2001; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 61.5%. 

Fiscal year: 2002; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 62.1%. 

Fiscal year: 2003; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 65.7%. 

Fiscal year: 2004; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 71.4%. 

Fiscal year: 2005; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 74.5%. 

Fiscal year: 2006; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 78.4%. 

Fiscal year: 2007; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 82.9%. 

Fiscal year: 2008; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 87.6%. 

Fiscal year: 2009; 
Percentage of letter mail sorted using Delivery Point Sequencing 
equipment: 90.2%. 

Source: USPS. 

[End of figure] 

Prior to FSS, approximately 80 percent of all flat mail (46.6 billion 
pieces in 2008) was manually sorted into delivery order by carriers in 
the delivery unit. USPS has found that replacing manual mail processing 
with automation is the largest factor in improving operational 
efficiency and service performance. USPS expects FSS to increase in-
office productivities by eliminating inefficiencies associated with the 
manual sorting of flat mail by carriers. Figure 6 illustrates that on 
an average route, a city carrier would manually sort nearly 500 less 
flat mail pieces each day once FSS automation is implemented. Thus, in 
addition to reducing the amount of flat mail that carriers would need 
to manually sort each morning, FSS would sort flat mail more quickly 
and accurately, and improve the consistency and timeliness of delivery. 
Based on lessons learned from DPS (it has taken USPS 15 years to 
achieve a DPS percentage of about 90 percent for letter mail), USPS 
expects it will take less time for FSS to achieve high percentages 
(i.e., about 80 percent) of delivery sequence flats than occurred with 
letters. 

Figure 6: Differences in Average Daily Flat Mail Volumes That Will Need 
to be Manually Sorted on City Carrier Routes Receiving FSS Mail: 

[Refer to PDF for image: illustration] 

Manually sorted without FSS: 615 pieces (5.3 feet); 
Manually sorted with FSS: 123 pieces (1 foot). 

Source: GAO graphic based on USPS data. 

Note: On FSS routes, city carriers, on average, will be manually 
sorting nearly 500 less flat mail pieces (the equivalent of 4 feet of 
flat mail) each day. 

[End of figure] 

Because carriers will have less mail to manually sort, they will have 
more available time to deliver mail. According to USPS, this will 
create opportunities to consolidate or realign delivery routes, thereby 
reducing the need for carriers, carrier workhours, and overtime. These 
cumulative changes could then also reduce the need for delivery 
vehicles and facility space. Since a vehicle is assigned to most 
carrier routes, if certain routes were consolidated, fewer delivery 
vehicles and less fuel would be needed. With less mail to sort 
manually, carriers would also need less casing equipment and facility 
space. USPS officials also noted that route adjustments may change the 
time customers receive their mail and collection service (i.e., they 
may receive mail earlier or later in the day). 

Status: USPS has been planning and testing FSS for years and has 
recently begun deploying these machines. In December 2006, USPS 
committed $1.5 billion to test and purchase FSS machines, and prepare 
mail processing facilities for these machines. These efforts have 
included renovating and expanding plants and equipment to house and 
operate future FSS machines (each machine has a large footprint and is 
expected to need approximately 30,000 square feet). USPS also has taken 
extensive action to prepare delivery units to receive FSS mail-- 
including working with delivery units that will receive FSS mail to 
ensure that they are certified according to USPS standard operating 
procedures and collecting data to assist delivery unit managers 
effectively inspect and adjust FSS-impacted carrier routes. USPS has 
coordinated its FSS efforts with carriers and their bargaining units 
and modified work rules and practices to incorporate FSS mail. In 
particular, agreements with the NALC and NRCLA have been signed to 
develop appropriate work rules and route inspection and adjustment 
procedures. In addition, USPS has taken steps to keep all stakeholders 
informed about FSS, such as posting material to a new FSS Web page, 
[Footnote 17] and making public presentations. 

Currently, USPS is in Phase I of FSS deployment (see table 4 for an FSS 
timeline). Three FSS machines are operating in the Processing and 
Distribution Center in Dulles, Virginia, and, as of the end of June 
2009, are processing flat mail for 17 delivery units and 571 carrier 
routes in Northern Virginia.[Footnote 18] The final FSS machine slated 
for Dulles is currently being tested and installed. Installations in 
the next three FSS sites (Columbus - three machines, Phoenix - five 
machines, and Kansas City - two machines) will continue in a limited 
capacity due to an unsuccessful first article test[Footnote 19] from 
December 2008 (see table 4). 

Table 4: Key FSS Developments: 

Date: Oct. 2003; 
Action: Contract awarded for development of FSS prototype machine. 

Date: Apr. 2006; 
Action: Testing of FSS prototype machine in Indianapolis, Ind. 

Date: Dec. 2006; 
Action: Board of Governors approved purchase of 100 machines for Phase 
I to be installed at USPS facilities throughout the country (areas with 
high flat mail volumes) that will cover 1,300 delivery zones.[A] 

Date: Sept. 2007; 
Action: FSS preproduction machine installed at Dulles Processing and 
Distribution Center. 

Date: Dec. 2007; 
Action: FSS preproduction machine begins live mail testing. 

Date: Feb. 2008; 
Action: FSS preproduction machine fully operational--live mail is being 
processed. 

Date: Apr. 2008; 
Action: Following declining mail volumes, number of delivery zones 
covered in Phase I increased to 1,800. 

Date: May 2008; 
Action: First production FSS machine was installed in Dulles, Va. 

Date: Dec. 2008; 
Action: First-article acceptance test on production FSS machine in 
Dulles, Va, was unsuccessful due to issues with throughput and system 
reliability. Actions are being taken to alleviate these issues and 
schedule another test. 

Date: Feb. 2009; 
Action: Two FSS machines are processing flat mail in Dulles, Va.--the 
preproduction machine and the first production machine. Because of 
volume declines (7.2 billion flats since 2006), USPS increased the 
number of zones expected to support FSS to 1,993 and is reconsidering 
where the 100 FSS machines are to be deployed. 

Date: June 2009; 
Action: Three production FSS machines are processing flat mail in 
Dulles, Va. The first phase of the first article retesting was 
completed, with the second phase scheduled for August 2009. 

Date: Oct. 2010; 
Action: One hundred FSS machines for Phase I to be fully deployed. 

Source: USPS. 

[A] A delivery zone is a small geographic area represented by the five 
digits of a ZIP Code, and each zone contains a number of carrier 
routes. 

[End of table] 

Throughout this process, USPS has actively worked with members of the 
mailing industry to facilitate FSS implementation. Business mailers are 
the key source of flat mail and play a major role in preparing, 
transporting, and addressing flats. Incorporating FSS requirements into 
mailer's operations may require them to make significant investments in 
equipment and transportation so that their mail preparation activities 
are compatible with FSS. During a forum we hosted with mailer 
representatives in fall of 2008 and in more recent conversations, these 
representatives stated that USPS has done a good job of communicating 
and coordinating with them regarding FSS developments and challenges. 
Specifically, they recognized the following efforts: 

* A joint USPS-mailer workgroup developed a communications plan to keep 
mailers and others informed of FSS developments. 

* A joint USPS-mailer workgroup established rules for where the address 
must be placed on flat mail. 

* A joint USPS-mailer workgroup is developing new methods for bundling 
flat mail. 

* USPS has implemented processes for communicating FSS developments, 
which include the use of multiple channels such as USPS publications, 
the newly created FSS Web page, and presentations to mailers. 

* USPS management has taken actions to respond to flat mail volume 
declines by, among other things, reconsidering where the 100 FSS 
machines are to be deployed. 

Reported performance/opportunities for additional efficiencies: USPS 
has set financial and operational targets for FSS implementation and 
deployment. As part of the FSS's project justification, USPS estimated 
annual cost savings and productivity improvements.[Footnote 20] These 
savings levels were predicated on USPS meeting the various operational 
targets; for example, each day FSS machines are expected to operate for 
17 hours and delivery sequence over 280,000 flat mail pieces. 

USPS has been tracking the results and performance of the current FSS 
machines in the Dulles facility. Delivery managers in headquarters and 
the Capital Metro Area--which has responsibility for the Dulles 
facility--have reported positive benefits. They noted in delivery units 
that have received FSS-delivery-sequenced flats for 2009, workhours are 
down compared with the same period in 2008, and carriers have been able 
to get to the street earlier in the day and handle more deliveries. 
Although these officials recognize that lower mail volumes factor into 
some of these savings, they noted that FSS helped USPS more effectively 
manage this decrease in workload. For example, in the Reston, Virginia, 
Delivery Annex, FSS implementation has resulted in: 

* eliminating nine full-time routes and two rotating carrier positions, 
and adding two auxiliary routes;[Footnote 21] 

* reducing seven full-time regular positions and one transitional 
position from city carrier employment rolls; 

* reducing one full-time regular clerk position; 

* reallocating seven vehicles from city routes to rural routes; and: 

* removing 56 pieces of casing equipment, freeing up space in the annex 
for other purposes. 

Challenges: Several challenges threaten USPS's ability to meet its FSS 
deployment milestones and cost-saving targets. The most pressing 
challenge is declining flat volumes, which have required USPS to re- 
evaluate its deployment plans (see figure 7). 

Figure 7: Annual Percent Change in Volume of Domestic Flat Mail, 2003- 
2008: 

[Refer to PDF for image: vertical bar graph] 

Fiscal year: 2003; 
Percent change in flat mail volume from previous year: 0.1%. 

Fiscal year: 2004; 
Percent change in flat mail volume from previous year: 1.9%. 

Fiscal year: 2005; 
Percent change in flat mail volume from previous year: 2.9%. 

Fiscal year: 2006; 
Percent change in flat mail volume from previous year: -0.3%. 

Fiscal year: 2007; 
Percent change in flat mail volume from previous year: -2.6%. 

Fiscal year: 2008; 
Percent change in flat mail volume from previous year: -11.1%. 

Source: GAO analysis of USPS data. 

[End of figure] 

USPS has reported flat volumes have declined by 7.2 billion pieces 
since 2006 (a 13 percent reduction), and USPS is projecting 2009 
volumes to be the lowest in nearly 15 years. Taking these developments 
into account, USPS has already begun refocusing its FSS deployment 
through the following actions: 

* Expanding the geographic reach of certain FSS machines. Previously, 
USPS estimated that the 100 FSS machines deployed as part of Phase I 
would serve 1,300 delivery zones. With flat volume declines and the 
need for the FSS machines to sort enough flats for USPS to gain 
appropriate return on its FSS investment, USPS increased the number of 
delivery zones to 1,993. In making these changes, USPS understands that 
other factors will affect USPS's operations based on revised 
deployment, such as transportation times to and from mail processing 
facilities to delivery units in the added zones, as well as FSS's 
ability to handle additional delivery zones.[Footnote 22] 

* Adjusting deployment locations. Because of significant flat volume 
declines, USPS is performing additional analyses to prevent over 
deployment of FSS machines and is developing an FSS Redirection Plan. 
Originally, each mail processing facility designated as an FSS site was 
slated to receive two to five FSS machines. USPS is also considering 
deploying fewer machines in certain sites (and in some cases, deploying 
single machines) and adding alternative FSS sites to optimize 
deployment. 

Aside from these volume concerns, other challenges exist that will 
affect FSS deployment. In December 2008, the first FSS production 
machine did not pass its first article test at the Dulles facility; 
this key engineering test was originally scheduled for November 2008, 
but was pushed back due to machine performance issues. Although USPS 
has taken actions to coordinate with the manufacturer to resolve these 
issues, as of June 2009, FSS has not yet been passed this engineering 
test. Considering that the FSS contract schedule required that five FSS 
machines be operational at this time, nationwide deployment has been 
delayed and revised. These delays could hinder USPS's ability to fully 
realize efficiencies under FSS, particularly as the PRC recently 
testified that it took nearly a decade for DPS efficiencies to be fully 
realized.[Footnote 23] USPS is taking actions to minimize the effects 
of this delay, including having the manufacturer continue installation 
of FSS machines at the initial deployment sites and accelerating the 
installation schedule. Also, the USPS OIG has reported on the flats 
volume and FSS engineering challenges facing USPS. The OIG has issued 
multiple reports on the status of FSS, including a December 2008 report 
that outlined the risks associated with these challenges.[Footnote 24] 

FSS is also going to have a noticeable impact on its carriers, postal 
customers, and mailers, as USPS will need to make operational 
adjustments to effectively achieve savings. In terms of the carriers, 
they will need to adjust to a change in their office and street times, 
as well as route adjustments based on FSS operations, which may result 
in changes in the number or deployment of full-and part-time carriers. 
Furthermore, customers may also be impacted by FSS operations in that 
due to more efficient sorting, their flat mail should be delivered in a 
timelier, more consistent manner. However, the potential route 
adjustments may impact the time customers receive their mail delivery 
and collection service each day (i.e., earlier or later). Furthermore, 
while mailers expressed optimism that the FSS program would reduce USPS 
costs, they also noted that challenges remain. For example, they noted 
USPS's deteriorating financial condition could impact its ability to 
acquire the capital funds needed to purchase newly developed equipment 
that will support FSS operations. Specifically, they stated that USPS 
equipment to handle flat mail bundles will be essential for them to 
prepare flat mail in a cost-effective manner. These mailers also stated 
that uncertainty remains regarding the pricing of FSS mail--as FSS 
reduces costs for USPS, postal rates for flat mail will need to be 
lower than they would have been if FSS had not been implemented for 
mailers to benefit from FSS. 

Considering the impact that FSS is projected to have on postal 
stakeholders, including employees, mailers, and the public, 
communicating with these parties regarding the status of FSS is 
crucial. USPS has already taken actions, including establishing a 
Communications Plan to notify stakeholders of FSS developments; working 
with mailers as part of the Mailers Technical Advisory Committee; and 
coordinating with employees, the NALC, and the NRLCA, to find ways 
incorporate FSS into carrier operations. 

City Carrier Route Inspections, Adjustments, and Carrier Optimal 
Routing: 

Description[Footnote 25]: City carrier routes--which may include time 
spent in the delivery unit preparing mail for delivery (e.g., office 
time) and then time spent delivering mail (e.g., street time)--are set 
to take as close to 8 hours of daily work as possible, which USPS 
considers an efficient route. This determination is based on multiple 
factors, including mail volumes and types, number of deliveries, and 
travel times. If either USPS or a carrier identifies a significant 
change in one or more of these variables (for example, if mail volumes 
and the number of deliveries increase), these parties have collectively 
bargained agreements that provide procedures to have the route 
inspected to determine if the route needs to be adjusted to fit an 8- 
hour workday. 

Historically, USPS and the NALC have had three agreed-upon processes 
for adjusting city carrier routes: 

* Formal Route Inspection is management initiated and involves 
observing a carrier's office and street activities for 1 or more days, 
counting and recording the mail that the carrier handled, and recording 
the time the carrier uses for each activity. A formal inspection is 
conducted on every carrier route within the delivery zone. 

* Minor Route Adjustment is management initiated and involves using a 
carrier's office and street time data, number of addresses where mail 
is delivered, and latest route inspection data. 

* Special Route Inspection is carrier or management initiated and 
conducted in the same manner as a formal route inspection, and may only 
involve one or more carrier routes. A special inspection may be 
required if the carrier is experiencing conditions such as excessive 
overtime, consistently leaving or returning to the office late, or 
significant change in number of deliveries. 

USPS does not have strict policies on the timing and frequency of city 
carrier route inspections. Rather, delivery managers are to continually 
monitor routes to identify when route inspections and adjustments are 
needed. Consequently, the timing and frequency of city carrier route 
inspections and adjustments vary throughout the country. According to 
USPS's system for tracking route inspections and adjustments (the 
National Route Adjustment System), between 2006 and 2008, USPS 
conducted formal route inspections of 90,697 city carrier 
routes.[Footnote 26] During these 3 years, the annual number of formal 
route inspections has fluctuated from a low of 17,633 inspections in 
2007 to a high of 46,498 inspections in 2006. 

In making route adjustment decisions--mainly determining how to 
restructure city carrier routes--USPS has developed the Carrier Optimal 
Routing (COR) system. COR is a computerized management tool that uses 
digital mapping, algorithms, and route inspection data to create 
efficient city carrier routes that are more compact and contiguous. 
Among COR's benefits are reduced vehicle-related expenses, minimized 
street time, and enhanced carrier safety through better lines of 
travel. Since COR's introduction in 2004, USPS headquarters has trained 
over 250 employees nationwide to develop COR's database, which is 
fundamental to its success. These employees were trained to collect 
detailed delivery and geographic data for the database including, among 
other things, street address ranges, street prefixes and suffixes, 
street names, directionals, one-way streets, traffic signs, and parking 
restrictions. 

Status: Due to its increasing financial challenges brought on by the 
declines in mail volume, USPS delivery managers were concerned that 
certain city carrier routes were not aligned properly (that the 
expected workload on the routes from declining volumes did not 
necessitate 8 hours of work). USPS initiated conversations with the 
NALC to discuss options for conducting route inspections and adjusting 
routes. Both parties recognized the cost and time associated with the 
three aforementioned options limited the number of routes that could be 
inspected and adjusted; therefore, they agreed to make significant 
modifications to the process. In October 2008, USPS and the NALC 
reached a historic agreement on an Interim Alternate Route Adjustment 
Process (IARAP) aimed at enhancing USPS's ability to quickly respond to 
declining mail volumes and improve the efficiency of carrier 
operations. IARAP was developed to be expeditious, less contentious, 
data driven, and jointly administered. USPS and the NALC began 
evaluating routes using this process in October 2008. Joint USPS and 
NALC route evaluation teams were established in each district to work 
with delivery unit managers and union representatives to evaluate and 
adjust routes. Through this effort, 90,000 routes were evaluated and 
adjustments were implemented between January and May 2009, with 2,500 
routes being eliminated. 

USPS and the NALC jointly evaluated IARAP between November 2008 and 
March 2009, and, because opportunities for improvement were identified, 
the process was modified. A Modified Interim Alternate Route Adjustment 
Process (MIARAP) was agreed to by both parties and signed in early 
April 2009, and included, among other things, a formal dispute 
resolution process (a diagram of both processes is illustrated in 
figure 8). 

Figure 8: Summary of the Interim and Modified Interim Alternate Route 
Adjustment Processes: 

[Refer to PDF for image: illustration] 

Interim Alternate Route Adjustment Process: 
Signed: October 2008; 
Routes adjusted: November 2008 - May 2009; 

Total city carrier routes: 160,000; 
Routes not evaluated: 70,000; 
Routes evaluated: 90,000; 
Adjustments implemented. 

Modified Interim Alternate Route Adjustment Process: 
Signed: April 2009; 
Routes adjusted: June 2009 - February 2010. 

Routes to be evaluated: 70,000; 
Possibility of routes being eliminated[A]; 

Routes to be reevaluated: 87,500; 
Possibility of routes being eliminated[A]; 

Adjustments to be implemented; 

All remaining routes to be evaluated again: Up to 157,500; 
Possibility of routes eliminated[A]. 

Adjustments to be implemented. 

Source: GAO analysis of USPS operations. 

[A] Depending on the results of the route evaluations, a segment of 
these routes could be eliminated. 

[End of figure] 

Under MIARAP, all 157,500 city carrier routes are to be evaluated. 
Starting in June 2009, the 70,000 routes that were not evaluated under 
IARAP are to be evaluated and the remaining 87,500 routes that were 
evaluated under IARAP are to be re-evaluated. By the end of June 2009, 
MIRAP had eliminated an additional 1,800 routes. Starting in the fall 
of 2009, all routes will be re-evaluated using the latest mail volume 
data and adjusted if necessary. 

USPS also has taken actions to keep stakeholders such as its employees, 
unions, mailing industry, and customers informed of these developments. 
These actions include listing the potential routes to be included in 
the IARAP adjustments on its Web site, having address updates available 
for the mailers at the end of each month, and establishing policies and 
procedures for notifying customers if they will be affected by these 
changes. 

As these route adjustment developments have taken place, so too has COR 
implementation. Currently, COR is focused on delivery zones (1) where 
FSS will be deployed and/or (2) that contain 10 or more city carrier 
routes. As of March 2009, the COR database is complete for 2,904 (47.5 
percent) delivery zones, and 3,216 (52.5 percent) remain to be 
completed. Of the FSS delivery zones, the COR database is completed for 
1,318 (81.5 percent); 299 (18.5 percent) remain to be completed. 
According to USPS, about 45 of its 74 district offices used COR to 
perform route adjustments during IARAP. USPS attributed this low 
percentage to the very time-consuming and technical nature of making 
route adjustments using COR. USPS and the NALC have since agreed that 
the route evaluation team will jointly use COR, where it is available, 
to optimize and adjust routes under MIARAP. USPS also plans to 
establish a network of COR subject matter experts. Each area office is 
to identify 4 COR users to become subject matter experts (36 
nationwide). Headquarters will train these employees and keep them 
updated on the latest COR developments. The COR subject matter experts 
are to train, assist, and update others within their respective area 
offices. 

Reported performance/potential opportunity for additional efficiencies: 
USPS stated that significant savings should be derived after inspecting 
and adjusting routes based on the agreements with the NALC. According 
to USPS, these efforts could result in annualized savings of nearly $1 
billion, and result in more consistent delivery service; increased 
employee satisfaction; and reduced facility space needs, miles driven, 
and fuel use. Some of the expected savings will be achieved in 2009, 
but the majority of the savings will not be realized until 2010. 

The goal of COR is to create an optimal routing scheme that would 
reduce workhours, vehicle mileage, fuel, and energy costs; and improve 
carrier safety and service. According to USPS delivery officials, 811 
city carrier zones (13.3 percent of all city delivery zones) and over 
16,000 routes (about 10 percent of all city carrier routes) have been 
adjusted using COR. USPS stated that COR will continue to be a 
significant part of its delivery strategy for 2009 and 2010. 

Challenges: Challenges remain regarding route inspections and 
adjustments, as well as the use of COR when doing so. USPS will be 
challenged to effectively implement and monitor the vast numbers of 
route inspections and adjustments made as part of its agreements with 
the NALC. Achieving savings will require major efforts from not only 
USPS, the carriers, and the NALC, but also from mailers who will need 
to update their address lists with the route adjustments. In terms of 
COR, USPS area and district officials cited shortages in COR-trained 
personnel to input route and volume data and perform the route 
adjustments. Area officials we spoke to said that the timeline mandated 
by headquarters to fully implement COR for all delivery units was not 
sufficient given the amount of time it takes to collect and input the 
data, and many units still do not have complete data inputted into COR. 
As USPS continues to expand the reach of its route adjustment process, 
it will need to keep stakeholders informed of these developments, 
particularly as these changes result in different delivery times for 
customers and modifications to mailer operations. 

The City Delivery Pivoting Opportunity Model (CDPOM): 

Description: CDPOM is a scheduling tool that local delivery managers 
can use to align available staffing and resources with delivery needs. 
As we mentioned previously, each carrier route is established so that 
on an average day, the expected workload will approximate 8 total hours 
of office and street time. CDPOM helps city delivery managers make 
daily adjustments (called pivots) to deal with daily unstaffed routes. 
This may involve transitioning other carriers who (1) may not have 
enough volume to support 8 hours of work on their own routes (i.e., the 
concept of "undertime" which is illustrated in figure 9) or (2) may 
have volumes that support 8 hours of work on their own routes, but will 
work overtime to assist on the unstaffed routes. Delivery managers 
stated that in many instances it is more cost effective to incur 
overtime in these instances rather than incur the costs associated with 
bringing in a substitute carrier for the day. 

Figure 9: Hypothetical Example of City Carrier "Undertime": 

[Refer to PDF for image: stacked horizontal bar graph] 

Normal volumes: 
Time carrier spends in office: 2 hours; 
Time carrier spends on street: 6 hours; 
Total: 8 hours. 

Low volumes: 
Time carrier spends in office: 1.5 hours; 
Time carrier spends on street: 5.5 hours; 
Undertime: 1 hour; 
Total: 8 hours. 

Source: GAO analysis of USPS operations. 

Note: The above chart shows how undertime may arise due to lower-than- 
expected mail volumes. This example assumes a normal 8-hour workday and 
that other factors on the route such as number of deliveries and 
mileage traveled (everything except for mail volume) remain constant. 

[End of figure] 

Historical and projected volume and workhour data from DOIS is fed into 
CDPOM, which in turn provides output on the expected workload and 
workhours needed that day for each carrier route in a particular 
delivery unit. Local delivery managers use the output from CDPOM, along 
with other data such as the number of available employees, weather, and 
accountable mail volume[Footnote 27] to determine the extent to which 
pivoting is needed a particular day. The supervisor discusses potential 
pivoting opportunities with the potentially impacted carriers and then 
sets the route schedule and pivoting plan for the day. CDPOM then 
tracks how closely delivery units are able to take full advantage of 
pivoting opportunities. 

Status: Pivoting began primarily as a "seasonal" tool to manage vacant 
routes, such as during summer, when carriers often take vacation and 
mail volume is lower than other times of the year. However, as overall 
mail volumes have dropped in the past 2 years, delivery units have 
significantly expanded the use of pivoting from a seasonal to a daily 
management tool. 

Reported performance/potential opportunity for additional efficiencies: 
According to USPS delivery managers, the use of CDPOM has resulted in 
more efficient delivery operations. USPS reported that organization-
wide use of CDPOM has contributed to significant gains in the number of 
deliveries per route and reductions in overtime hours. Specifically, in 
2008, USPS reported that CDPOM helped increase the number of deliveries 
per hour by over 4 percent (to nearly 63 deliveries per hour) while 
reducing city carrier overtime hours by more than 25 percent. Although 
USPS expects continued efficiency gains from the use of CDPOM, no 
performance targets or savings have been reported for 2009. It is 
important to note, however, that fewer pivoting opportunities may be 
available in the future based on the vast number of potential route 
adjustments, particularly if volumes continue to decline or trend back 
up. 

Challenges: Despite its success, the program still faces some 
challenges. During our site visits, we found that employee acceptance 
of pivoting varied across delivery units. According to NALC officials, 
carriers would generally rather not pivot since they feel a sense of 
ownership of their particular routes. USPS delivery managers we met 
with indicated some resistance in delivery units where carriers were 
used to working overtime and said it can be difficult to pivot carriers 
onto unstaffed routes when the projected undertime on their route is 
only slightly less than 8 hours for that day. While it is possible to 
capture 30 or 45 minutes of undertime from carriers, it is much more 
challenging to capture 15 minutes or less. 

Delivery Point Growth Management Program: 

Description: Growth in USPS's delivery network presents another 
important challenge to improving efficiency of carrier delivery 
operations. As noted, although overall mail volume has been decreasing, 
USPS's delivery network grows by more than 1 million addresses each 
year. USPS uses a Growth Management Tool to provide delivery managers 
with (1) procedures for contacting local developers to plan for growth 
and (2) standardized guidance for determining an appropriate route type 
and delivery mode when establishing delivery for new addresses. The 
Growth Management Tool identifies key criteria for making decisions, 
such as considering low-cost means of delivery. As stated earlier, 
delivery costs vary with the type of carrier route (city, rural, or 
contract) and delivery mode. 

Status: USPS has increased the number of lower-cost delivery routes and 
modes as it has taken on more addresses. Table 5 shows how USPS managed 
the net increase of 12.6 million new delivery points between 2000 and 
2008 by adding only 1,633 routes. USPS made a concerted effort to 
promote the use of rural and highway contract routes (which, as 
described earlier, are less costly than city routes), while also 
promoting the use of more efficient delivery modes, like centralized 
delivery, wherein mail is delivered to a limited number of locations 
rather than to every business and residence. 

Table 5: Changes in Carrier Delivery Routes and Modes, 2000-2008: 

Summary: Routes[A] (net); 
Change from 2000 to 2008: 1,633; 
Other information: See below. 

Summary: Delivery points[B] (net); 
Change from 2000 to 2008: 12.6 million; 
Other information: See below. 

City: Routes (net); 
Change from 2000 to 2008: -6,876; 
Other information: This decline was primarily due to a reduction in the 
number of foot and park and loop routes. 

City: Delivery points (net); 
Change from 2000 to 2008: 3.9 million; 
Other information: USPS reduced over 1 million costly door deliveries, 
while adding 5.2 million curbline, centralized, and Neighborhood 
Delivery Collection Box Unit (NDCBU) deliveries[B]. 

Rural: Routes (net); 
Change from 2000 to 2008: 7,589; 
Other information: Most of this increase was comprised of additional 
curbline and dismount routes. 

Rural: Delivery points (net); 
Change from 2000 to 2008: 8.1 million; 
Other information: Half of these were curbline deliveries, and the use 
of centralized and NDCBU deliveries increased by over 63 percent. 

Contract delivery: Routes (net); 
Change from 2000 to 2008: 920; 
Other information: Similar to rural routes, most of this increase was 
attributable to increasing numbers of curbline and dismount routes. 

Contract delivery: Delivery points (net); 
Change from 2000 to 2008: 0.6 million; 
Other information: Most new deliveries are to curbline mailboxes, but 
the use of centralized delivery more than tripled. 

Source: GAO analysis of USPS data. 

Note: Numbers may not add due to rounding. 

[A] USPS has four main carrier delivery route categories: (1) foot 
routes (4 percent of carrier routes in 2008) limited to city carriers--
for this type of route, the carrier walks to deliver mail and does not 
drive a vehicle; (2) park and loop routes (34 percent) when a letter 
carrier parks the vehicle and walks out and back over one or more 
streets, delivering mail away from and looping back to the vehicle; (3) 
curbline routes (49 percent) when a letter carrier (walking or in a 
vehicle) delivers to customer mailboxes at the curb; and (4) dismount 
routes (12 percent) when a letter carrier leaves a vehicle for one or 
more deliveries and then returns to move the vehicle to the next 
address. 

[B] USPS has four main modes of carrier delivery: (1) other (30 percent 
of addresses in 2008), which are primarily door deliveries; (2) 
curbline (41 percent); (3) centralized (16 percent); and (4) NDCBU (13 
percent), which are centralized units of more than eight individually 
locked compartments that receive mail. 

[End of table] 

Recent developments may impact the manner in which USPS manages growth 
in the future. Members of Congress have raised concerns about USPS's 
use of outsourcing, which includes contract delivery service, and we 
have reported that USPS did not have a comprehensive mechanism for 
measuring results or actual savings of these actions.[Footnote 28] 
Without cost-savings data, USPS managers, stakeholders, and Congress 
cannot assess the value and risk of outsourcing. Furthermore, tied to 
the joint USPS/NALC Interim Alternative Route Adjustment Process, these 
parties entered into a Memorandum of Understanding on the Assignment of 
City Delivery in October 2008 that limits USPS's use of contract 
delivery service by stating that, absent a boundary agreement between 
the rural and city letter carrier unions, all new growth will go to 
city routes unless such growth would create inefficiencies. 

Reported performance/opportunities for additional efficiencies: USPS 
has not reported on past or projected savings and has not established 
performance targets. 

Challenges: USPS will continue to be challenged by customers and 
employees in promoting these lower-cost forms of delivery. For example, 
centralized delivery is often unpopular with residents in new 
residential developments, and developers may be unwilling or unable to 
work with the local postmasters to utilize centralized delivery. 
Furthermore, USPS efforts to advocate lower-cost forms of delivery may 
need to incorporate the changes related to the use of contract delivery 
service and the requirement that new delivery points adjacent to 
existing city routes will be served by city carriers. USPS delivery 
managers in headquarters stated they are in the process of revising the 
Growth Management Tool to account for these new factors. 

Manage Vehicle Fleet: 

Description: USPS owns and operates about 198,000 vehicles that support 
USPS's delivery and collection operations. To improve delivery 
efficiency, USPS is taking actions to reduce, reallocate, and install 
Global Positioning Systems (GPS) in its delivery fleet. Specifically, 
USPS is taking the following actions: 

* Reallocating vehicles to rural routes. USPS is reallocating USPS- 
owned vehicles used on city carrier routes to rural routes pursuant to 
an agreement with the NRLCA. USPS officials have stated that in certain 
geographic areas, it is more cost effective for USPS to own these 
vehicles than to reimburse rural carriers for the use of their private 
vehicles. USPS is coordinating these efforts with IARAP and MIARAP, as 
they may result in excess vehicles due to the elimination of motorized 
city delivery routes. 

* Reducing delivery vehicle fleet. USPS is attempting to reduce its 
delivery vehicle fleet through such actions as its route reduction and 
optimization strategies and its Growth Management Program. This 
includes attempting to increase the number of foot delivery routes, 
particularly for routes that are adjacent to USPS delivery units. 

* Testing use of GPS. USPS is testing the use of GPS in USPS-owned 
delivery vehicles. These systems collect information on miles traveled, 
deviations from routes, idle time (with the engine on or off), and 
numbers of stops or park points, thereby providing delivery managers 
with a "breadcrumb trail of vehicle activity." 

Status: In 2008, USPS purchased over 1,350 delivery vehicles to replace 
vehicles used on existing city delivery routes and redeployed the older 
vehicles to selected rural routes. USPS also installed GPSs (each unit 
costs about $250) in 500 delivery vehicles in Chicago as a pilot 
program. Due to the positive response associated with these systems, 
they are being deployed in the Albuquerque, New Mexico, and Northern 
Virginia districts. 

Reported performance/opportunities for additional efficiencies: 
Although USPS estimated that reallocating USPS-owned delivery vehicles 
will save about $1.3 million each year, a USPS Vehicle Operations 
Manager stated that no actual cost savings have been achieved to date, 
but that intangible benefits related to carrier safety and retention 
have been realized. USPS did not report cost-saving information or 
targets for the efforts focused on reducing the delivery fleet or 
installing the GPSs. 

Challenges: The extent that USPS will achieve these savings will depend 
on its ability to overcome certain challenges related to improving its 
vehicle fleet. For example, many of the delivery vehicles being 
transferred to rural carriers are older vehicles that may require 
additional maintenance and incur related costs. Furthermore, 
successfully implementing these actions will require cooperation 
between USPS, the carriers, and NALC representatives because of the 
potential impact on carrier operations (e.g., changing from vehicle to 
foot routes or using the GPSs). 

USPS's Actions Have Collectively Helped Improve Delivery Efficiency, 
but Lack of Performance Targets and Results May Hinder Future Savings: 

The actions USPS has taken to improve delivery efficiency, along with 
reductions in workload from declining mail volumes, have led to savings 
in regular and overtime workhours and their related costs. For its 
rural and city delivery operations between 2006 and 2008, USPS reported 
reducing nearly 10 million workhours while absorbing 2.7 million 
additional addresses. These reductions were the result of city and 
rural carriers needing fewer workhours to complete their routes and 
USPS being able to pivot or adjust the carrier routes to capture the 
undertime associated with increased DPS percentages and declines in 
mail volume. USPS also reported reducing its complement by 10,000 full- 
time city carriers through attrition. 

Specific to city delivery operations, USPS reported saving over 17 
million city delivery workhours (nearly $680 million) in 2008 while 
absorbing an additional 1 million addresses and cutting overtime hours 
and overtime costs each by about 29 percent. As figure 10 shows, 
overtime workhours as a percentage of total workhours have been reduced 
during this time for city delivery units tracked by DOIS--a trend 
likely related to the drop in mail volumes during these years. 

Figure 10: Mean Overtime Workhours as a Percentage of Total Workhours, 
by Year, for Selected City Delivery Units: 

[Refer to PDF for image: vertical bar graph] 

Year: 2006; 
Percentage of total workhours that are overtime workhours: 13%. 

Year: 2007; 
Percentage of total workhours that are overtime workhours: 12%. 

Year: 2008; 
Percentage of total workhours that are overtime workhours: 9%. 

Source: GAO analysis of USPS data. 

Note: Data cover approximately 7,300 city delivery unit finance numbers 
that are tracked in DOIS. 

[End of figure] 

USPS has also achieved a steady increase in the efficiency of its 
delivery operations in the office as measured by USPS's OEI since 2006 
(see figure 11). 

Figure 11: Mean Office Efficiency Indicator Performance, by Year, for 
Selected City Delivery Units: 

[Refer to PDF for image: vertical bar graph] 

Year: 2006; 
Office Efficiency Indicator: 243. 

Year: 2007; 
Office Efficiency Indicator: 257%. 

Year: 2008; 
Office Efficiency Indicator: 286. 

Source: GAO analysis of USPS data. 

Note: Data cover approximately 7,300 city delivery unit finance numbers 
that are tracked in DOIS. The Office Efficiency Indicator is a 
calculation of cumulative deliveries divided over the total office 
workhours. USPS prefers to track a measure of aggregate OEI, but the 
trend over the last few years is the same. 

[End of figure] 

Currently, USPS is projecting for 2009 that its delivery operations 
will eliminate about 37 million workhours (reducing costs by 
approximately $1.4 billion[Footnote 29]) compared to 2008. 
Specifically, USPS is projecting a 27.9 million workhour reduction 
($1.1 billion in savings) from city delivery operations and an 8.8 
million workhour reduction ($285 million in savings) from rural 
delivery operations. These savings are predicated on reducing the 
number of city carrier workhours through attrition and the nonrenewal 
of transition workforce. USPS has made progress in achieving this goal, 
as it has already reported saving almost 26 million city and rural 
delivery workhours between October 2008 and mid-May 2009, compared with 
the same period last year. 

USPS, however, has not identified specific cost-saving targets and 
results for many of the aforementioned delivery efficiency actions, 
including IARAP, MIARAP, CDPOM, delivery point growth management, or 
vehicle fleet management. USPS headquarters delivery officials stated 
they do not have specific cost-saving targets or results for many of 
their initiatives because it is difficult to isolate the impact of one 
initiative from the influence of other factors that can affect 
delivery, many of which occur outside the purview of delivery managers 
(e.g., declining mail volumes, staffing changes, and delays in 
receiving mail from the processing plant). Although we recognize that 
isolating the impact of an initiative from other factors can be 
difficult, we note that USPS has done so in other areas. For example, 
USPS has estimated annual cost savings and productivity improvements 
for FSS. However, without targets in place against which to measure 
performance, USPS has no way to assess and report on the progress of 
its major delivery initiatives, determine whether changes should be 
made, and hold managers accountable for achieving targets. As a result, 
USPS lacks a key management tool for tracking the savings associated 
with each initiative. 

We have previously reported on the importance of cost-saving targets 
and their benefits for selected USPS operations.[Footnote 30] 
Furthermore, provisions in the Postal Accountability and Enhancement 
Act required USPS to, among other things, track cost savings and 
benefits for its network realignment actions and establish goals for 
delivery service performance.[Footnote 31] Developing and implementing 
performance targets and results can help inform stakeholders such as 
USPS senior management, local delivery managers, employees, unions, 
mailers, customers, and Congress, about the effectiveness of these 
actions, as well as help postal managers allocate increasingly scarce 
resources as efficiently and effectively as possible. 

USPS Has Proposed Moving to 5-Day-a-Week Delivery: 

USPS has proposed moving to 5-day delivery to help it address its 
financial problems. By way of background, in January, the Postmaster 
General asked Congress to eliminate the long standing appropriation 
provision mandating 6-day delivery. He stated that if 6-day-a-week 
delivery became unaffordable, it could become necessary to temporarily 
reduce mail delivery to only 5 days a week. In May 2009, USPS testified 
that it can no longer afford the costs of 6-day delivery and advocated 
the move to 5-day delivery. Specifically, USPS testified that it is 
proposing to eliminate delivery on Saturday because delivery volume is 
generally lighter on Saturdays and that most business, professional, 
and government offices operate on a traditional 5-day week from Monday 
through Friday. USPS stated that it is studying this proposal and 
engaging with customers to understand their needs and concerns, 
recognizing that reducing the frequency of delivery would have an 
impact on service. 

This study is an opportunity to begin identifying and addressing some 
of the challenges that would be associated with such a major change. 
For example, in 2008, USPS estimated that eliminating delivery on 
Saturday would save $3.5 billion annually, assuming that this reduction 
would have no effect on mail volume. Also in 2008, a PRC study 
estimated that USPS could annually save $1.9 billion by reducing 
delivery to 5 days, based on some different assumptions, such as 
assuming that this reduction would lead to a 2 percent volume decline. 
[Footnote 32] This year, PRC testified that because changing to 5-day 
delivery would result in a nationwide change of service, USPS would be 
required to bring it before the PRC, which then would conduct a review, 
solicit public input, and issue an advisory opinion on the proposed 
change.[Footnote 33] 

To date, there are divergent views on the merits of 5-day delivery. For 
example, the Association of Postal Commerce (a national group of 
businesses and organizations using the mail) recently testified that 
USPS will not be able to remain financially self-sustaining for much 
longer under its current model unless it is given freedom to make 
changes in this and other areas. This association explained that 
"desperate times call for desperate measures and the time has come to 
match delivery days to mail volume" even though many of its members 
have business plans that depend on 6-day delivery. In contrast, the 
Mailers Council (a group of mailers that collectively generate 70 
percent of mail volume) testified that it opposed 5-day delivery on the 
basis that USPS has not explained how it would be implemented. Postal 
labor union officials have also opposed 5-day delivery. For example, 
the President of the NALC expressed strong opposition to 5-day 
delivery, stating that "This is not the time to undercut public and 
mailer respect for, and reliance on, the Postal Service by reducing 
service drastically and counterproductively to 5 days a week." He 
explained that "The nation's mailers have diverse needs and business is 
conducted 6 days a week in America. In general they want 6-day delivery 
- need 6-day delivery - and expect 6-day delivery." At a May 2009 
hearing, USPS announced that it has a new study under way regarding 5- 
day delivery, which USPS expects to release in the summer of 2009. 

Conclusions: 

USPS is facing a number of financial challenges as mail volumes have 
declined significantly. As such, USPS has stated that actions to 
increase efficiency will become increasingly important throughout its 
entire network, particularly in the delivery area. USPS has worked with 
its mailers, employees, and unions to take significant actions aimed at 
promoting more efficient delivery operations. These actions resulted in 
almost $765 million dollars in reported savings from workhour 
reductions between 2006 and 2008, with more potentially on the horizon. 
Achieving future progress, however, may be difficult. Uncertainties 
remain, for example, if volumes continue to fall, will USPS be able to 
continue cutting delivery-related costs without severely reducing the 
quality of delivery service? Or, if volumes rise, will USPS be able to 
absorb the additional volumes without incurring significant additional 
costs? We are encouraged by the efforts USPS has taken with its carrier 
employees and their unions to promote more efficient delivery 
operations. The lack of specific performance measures for some of these 
actions, however, limits USPS's understanding of which specific 
initiatives achieve the greatest savings or the extent to which others 
may not have achieved intended results--information that is 
particularly important in a time of financial constraints and limited 
resources. 

Recommendations: 

We recommend that the Postmaster General establish cost-saving targets 
and track results for each of the major USPS initiatives to improve 
delivery efficiency. 

Agency Comments and Our Evaluation: 

The U.S. Postal Service provided written comments on a draft of this 
report in a letter from the Acting Senior Vice President, Delivery 
Operations, dated June 18, 2009. These comments are reproduced in 
appendix II, and our evaluation of them is summarized below. USPS also 
provided technical comments, which we incorporated where appropriate. 

USPS generally agrees with our assessment of mail delivery operations 
and reiterated the challenges it faces in an environment of declining 
volumes and expanding delivery network. USPS stated it has taken 
actions to improve delivery efficiency, and realizes that in spite of 
these accomplishments, further efficiencies are both needed and 
achievable. USPS did not agree, however, to fully implement our 
recommendation for establishing and tracking cost-saving targets for 
its major delivery initiatives. Specifically, USPS stated it adheres to 
our recommendation for its major capital investment initiatives (e.g., 
FSS), all of which go through a rigorous process to establish an 
expected return on investment. For other major delivery initiatives, 
such as the Interim Alternative Route Adjustment Process, City Delivery 
Pivoting Opportunity Model, and Delivery Point Growth Management which 
deal with a particular work practice or address an unforeseen situation 
such as the current severe economic recession, USPS does not set formal 
cost-saving targets and does not measure specific cost savings. USPS 
stated that for these initiatives, (1) management does expect that 
results will be achieved, (2) expected savings for these and major 
initiatives are built into the operating budget, and (3) steps are 
taken to measure success in other ways such as tool usage and number of 
employees trained. 

We recognize that USPS has already established cost saving targets for 
its major delivery initiatives that are also significant capital 
investments, such as FSS. Our recommendation, however, extends the 
establishment of cost-savings targets to all major delivery 
initiatives. In making our recommendation, we did not envision that 
establishing cost-savings targets for its major delivery initiatives 
would require a highly formalized process, such as the one used for 
USPS's capital investment initiatives. We are neither prescribing nor 
suggesting how USPS should establish cost-savings targets for its major 
delivery initiatives. USPS can use either an existing process or 
develop a new one for establishing these cost-savings targets. Once 
established, these targets will provide USPS with benchmarks to 
evaluate the performance of major delivery initiatives, assist managers 
in understanding which initiatives achieved the greatest savings or the 
extent to which other initiatives may not have achieved intended 
results, and hold managers accountable for achieving these targets. 
While we recognize the value of USPS measuring the success of its 
initiatives in other ways, due to its escalating financial problems, 
USPS will increasingly need to identify opportunities to aggressively 
cut costs and improve efficiency in the delivery area. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution of it until 14 
days from the date of this letter. At that time, we will send copies of 
this report to the Postmaster General and other interested parties. In 
addition, this report will be available at no charge on GAO's Web site 
at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-2834 or herrp@gao.gov. Contact points for our 
Office of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions to 
this report are listed in appendix IV. 

Signed by: 

Phillip Herr: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: Objective, Scope, and Methodology: 

This report addresses (1) how the U.S. Postal Service (USPS) monitors 
delivery efficiency; (2) characteristics of delivery units that affect 
their efficiency; and (3) the status and results of USPS's actions to 
improve delivery efficiency, in particular, USPS's Flats Sequencing 
System (FSS). 

To gather information relevant to all three objectives, we interviewed 
USPS delivery managers at headquarters, 2 areas, 7 districts, and 21 
delivery units, which encompassed 7 states plus Washington, D.C. 
[Footnote 34] 

To address the first objective, how USPS monitors efficiency, we also 
obtained documentation from various officials about their processes, 
operating procedures, information systems, and operating data for 
monitoring delivery efficiency. This included interviewing headquarters 
officials responsible for (1) the nationwide management of city 
delivery and rural delivery, (2) delivery-related information systems, 
and (3) customer complaint systems focused on the public, smaller 
mailers (My Post Office system), and larger mailers (the Business 
Service Network). We reviewed USPS internal policies and operating 
procedures; its manuals for managing city delivery (M-39, Management of 
Delivery Services) and rural delivery (M-38, Management of Rural 
Delivery Services); and the collectively bargained agreements between 
USPS and its rural carrier and city carrier unions (the 2006-2010 
Agreement between the U.S. Postal Service and the National Rural Letter 
Carriers' Association and the 2006-2011 National Agreement between the 
U.S. Postal Service and the National Association of Letter Carriers). 
We also discussed USPS efforts to monitor delivery efficiency with 
officials from the USPS Office of Inspector General (OIG) and the 
Postal Regulatory Commission. 

To address the second objective, identifying characteristics of 
delivery units that affect their efficiency, we conducted a multistep 
process to identify a range of higher-and lower-ranked units for site 
visits. 

1. Delivery officials provided us with efficiency rankings of its nine 
area offices--which are the nine USPS geographic regions of the 
country--for the entire nation. These rankings were based on eight 
delivery-related metrics that provide insight into the most and least 
efficient delivery organizational units. (Delivery officials stated 
that they primarily focus on monitoring delivery efficiency for the 
larger city delivery units because they account for the majority of 
USPS delivery costs,[Footnote 35] and, in doing so, they rely 
significantly on the data provided in the Delivery Operations 
Information System (DOIS)). 

2. From those nine areas, we identified the top-, middle-, and lowest- 
ranked areas. 

3. Within those three areas, we then collected rankings on each of the 
districts. We identified the top-and bottom-ranked districts within 
each area, which narrowed our focus to six districts. 

4. Within those six districts, we then collected rankings on each of 
the delivery units. We identified the top-and bottom-ranked delivery 
units within each of these six districts, which narrowed our focus to 
12 delivery units for our potential site visits. 

5. We then discussed these 12 delivery units with USPS and considered 
other factors, such as potential travel considerations and ratio of 
city routes to rural routes in the office, and made revisions as 
appropriate. For example, if the two top-(or bottom-) ranked offices 
were located close to one another and could easily be incorporated into 
our travel, we visited the extra unit(s) to gather additional 
information. 

During these visits, we observed carrier operations and met with area, 
district, and delivery unit officials to discuss delivery operations. 

We supplemented this information by collecting data on over 40 delivery-
related metrics including workhours, volumes, office efficiency, and 
street efficiency for about 8,000 delivery units throughout the country 
(offices that have at least five city delivery routes) from various 
USPS delivery information systems, including the DOIS, Flash, Address 
Management System, and National Route Adjustment System. We examined 
different efficiency measures, how they varied across delivery units, 
and how they related to each other. We studied time trends for various 
delivery measures and factors that potentially drive those outcomes. We 
also reviewed nationwide city and rural carrier information on 
workhours, salaries and benefit costs, overtime workhours and costs, 
penalty overtime workhours, and sick leave hours. We discussed the 
reliability of the data from these systems with delivery officials and 
found them sufficiently reliable for our review. In assessing the 
reliability of the data, we interviewed delivery officials how the data 
were collected, managed, quality tested, and corrected. We also spoke 
to delivery data specialists about potential issues with the data and 
how they should be resolved. Additionally, we conducted electronic 
tests for completeness and accuracy, and to detect potential outliers. 
A small number of outliers were excluded from some of the figures. We 
also examined data regarding the route adjustment process and reviewed 
USPS OIG work on delivery issues. 

To address the third objective, determining the status of USPS's 
actions to improve delivery efficiency, including FSS, we conducted the 
following activities: 

* In addition to the aforementioned delivery officials, we met with 
officials who managed and implemented the various initiatives, 
including the program manager for FSS. We discussed actions to improve 
efficiencies--including their reported savings, further savings 
opportunities, and challenges associated with these initiatives. We 
also discussed USPS actions with representatives from the National 
Association of Letter Carriers (NALC), who represent over 214,000 
active city delivery letter carriers employed by USPS, and the National 
Rural Letter Carriers' Association (NRCLA), who represent nearly 90,000 
full-and part-time rural carriers. In fall of 2008, we convened a 
roundtable of major mailers to discuss these initiatives, how they may 
impact their members, and future challenges, and then followed up with 
some of these mailer representatives again in June 2009. 

* We viewed demonstrations of the City Delivery Pivoting Opportunity 
Model (CDPOM) and Carrier Optimal Routing (COR) programs at USPS 
headquarters. In addition to the above mentioned officials, we also 
visited and interviewed officials at a mail processing plant and 
delivery units that have or are preparing to implement FSS machines. 
Specifically, we visited the USPS Processing and Distribution Center in 
Dulles, Virginia, where the FSS preproduction machine was operating, 
and delivery units in Reston, Va., and Fairfax, Va., both of which 
received FSS-processed mail from Dulles. We also met with other mail 
processing and delivery unit managers to discuss the impact of FSS on 
their operations. This included officials in the Greater Indiana 
district who conducted the operational and performance test of the FSS 
prototype machine, as well officials in the Central Florida district 
who were preparing their district for FSS Phase I deployment. 

* We also collected and reviewed other data and documentation on these 
initiatives and other delivery-related information from such sources as 
USPS Annual Reports, Integrated Financial Plans, Comprehensive 
Statements, and Address Management System Delivery Statistics Reports. 

We conducted this performance audit from July 2008 to July 2009 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the U.S. Postal Service: 

Linda J. Welch: 
A/Vice President: 
Delivery And Post Office Operations: 
United States Postal Service: 
475 L'enfant Plaza SW: 
Washington DC 20260-7017: 

June 18, 2009: 

Mr. Phillip R. Herr: 
Director, Physical Infrastructure Issues: 
United States Government Accountability Office: 
Washington, DC 20548-0001: 

Dear Mr. Herr: 

Thank you for providing the U.S. Postal Service (USPS) with the 
opportunity to review and comment on the draft report titled U.S. 
Postal Service: Mail Delivery Efficiency Has Improved, but Further 
Action Needed to Consolidate Gains (GAO-09-696). 

The Postal Service is operating in a challenging business environment. 
The current economic climate impacts all aspects of our business and 
especially the labor intensive function of delivering mail to more than 
129 million residential and business addresses. As noted in the draft 
report. Delivery is the largest cost segment within the USPS. At the 
end of 2008, over 350,000 full and part-time letter carriers were 
engaged in the delivery of mail to customers across the country. 
Although mail volume is declining by double digit figures compared to 
fiscal year (FY) 2008, our delivery network continues to expand. The 
Government Accountability Office (GAO) mentions in the draft report 
that during the period of 2006 through 2008, the USPS absorbed nearly 
2.7 million addresses while reducing 10,000 career letter carriers. The 
management of the Postal Service is justifiably proud of these types of 
accomplishments and realizes that in spite of our significant 
accomplishments, further efficiencies are both needed and are 
achievable. 

The Postal Service management generally agrees with the GAO's 
assessment of mail delivery operations. The GAO recommends in their 
draft report that the Postmaster General establish cost-saving targets 
and track results for each of the major USPS initiatives to improve 
delivery efficiency. For major investment initiatives such as the Flats 
Sequencing System (FSS) initiative referenced in the draft report, the 
USPS currently does what the GAO recommends. Prior to the Postal 
Service making a significant investment of capital in an initiative, a 
rigorous process is followed to ensure that the investment will meet 
established return on investment hurdle rates. We establish a baseline 
and then set specific targets for reducing workhours or other expenses. 
The rationale for a major investment as well as the financial 
assumptions and expected results are all clearly defined in the 
Decision Analysis Report that supports the investment. Once the 
initiative is fully deployed, the standard practice is to conduct a 
cost study to validate that the expected savings were achieved. 

From time-to-time, the USPS launches an initiative to deal with a 
particular work practice or to address an unforeseen situation such as 
a current severe economic recession. The Interim Alternate Route 
Adjustment Process, City Delivery Pivoting Opportunity Model and 
Delivery Point Growth Management are examples of such initiatives. 
Although the target setting process is not as formalized for these 
initiatives, management does have an expectation of achieving results. 
These initiatives generally center upon tools or techniques for 
delivery managers to use in order to achieve cost savings. Often, it is 
a combination of various initiatives yielding different levels of 
results that enable the Postal Service to achieve workhour reductions. 

The common denominator for these types of initiatives and major 
initiatives such as FSS is that the expected savings are built into the 
operating budget. Performance against the approved budget provides a 
useful measurement of how effectively managers are managing the 
business. Additionally, while the Postal Service does not measure 
specific cost savings on every delivery initiative we undertake, we do 
and will continue to ensure that we measure the success of such 
programs in other ways such as the usage of the tool, number of 
employees trained, etc.
The USPS is in the process of finalizing the FY2010 operating budget. 
There is no question that we will need to continue to aggressively 
manage the business during these challenging times. I am confident that 
we will successfully navigate the Postal Service through the current 
economic crisis. 

If you or your staff wish to discuss any of these comments further, I 
am available at your convenience. 

Sincerely, 

Signed by: 

Linda J. Welch: 

cc: Mr. Donahoe: 
Mr. Galligan: 

[End of section] 

Appendix III: Geographic Coverage of USPS's Nine Area Offices: 

Figure 12: USPS's 9 Area Offices: 

[Refer to PDF for image: U.S. map] 

The map depicts the geographic coverage of the following nine offices: 

Northeast; 
Eastern; 
New York Metro; 
Capitol Metro; 
Southeast; 
Great Lakes; 
Southwest; 
Western; 
Pacific. 

Source: U.S. Postal Service. 

[End of figure] 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Phillip Herr, (202) 512-2834 or herrp@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Gerald P. Barnes, Josh 
Bartzen, Jeremy Cluchey, Emily Larson, Summer Lingard, Kenneth E. John, 
Josh Ormond, Erin Roosa Cohen, Amy Rosewarne, Amy Abramowitz, and 
Patrick Dudley made key contributions to this report. 

[End of section] 

Footnotes: 

[1] Unless otherwise noted, year references are for fiscal year. 

[2] GAO, U.S. Postal Service: Network Rightsizing Needed to Help Keep 
USPS Financially Viable, [hyperlink, 
http://www.gao.gov/products/GAO-09-674T] (Washington, D.C.: May 20, 
2009); U.S. Postal Service: Escalating Financial Problems Require Major 
Cost Reductions to Limit Losses, [hyperlink, 
http://www.gao.gov/products/GAO-09-475T] (Washington, D.C.: Mar. 25, 
2009); U.S. Postal Service: Deteriorating Postal Finances Require 
Aggressive Actions to Reduce Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-332T] (Washington, D.C.: Jan. 28, 
2009). 

[3] Some postal customers pick up their mail from the local delivery 
unit instead of waiting for USPS to deliver it. 

[4] In this report, we use the term "delivery sequenced" when referring 
to flats and letters that have been automatically sequenced in the 
exact order of carrier delivery. 

[5] A delivery unit can be a post office, station, branch, or annex 
that has mail delivery functions. A district office, of which there are 
74 nationwide, is an administrative field unit that oversees most 
operational and support functions for delivery units in a defined 
geographic area and reports to one of nine USPS area offices. A figure 
illustrating the geographic coverage of the nine area offices is 
provided in appendix III. The states visited included: Florida, 
Georgia, Illinois, Indiana, Maryland, South Carolina, and Virginia. 

[6] 39 U.S.C. §101. 

[7] 39 U.S.C. §§101 and 403. USPS is to provide a maximum degree of 
effective and regular postal services to rural areas, communities, and 
small towns where post offices are not self-sustaining. 

[8] For example, see Financial Services and General Government 
Appropriations Act, 2009, Pub. L. No. 111-8, div. D, title V (Mar. 11, 
2009). The provision states that "6-day delivery and rural delivery of 
mail shall continue at not less than the 1983 level." Appropriations 
are a small part of USPS's total budget--$109 million in 2008 for Free 
Mail for the Blind, Absentee Voting, and other adjustments and 
reconciliations. 

[9] The compensation systems for city and rural carriers are 
collectively bargained between USPS and its associated unions--the NALC 
represents city carriers, and the NRLCA represents rural carriers. 
Generally speaking, city carriers are compensated on an hourly basis, 
while rural carriers are salaried employees. Compensation for contract 
carriers is established via the contract posted by USPS. 

[10] USPS defines a clusterbox as a centralized unit of individually 
locked compartments for the delivery of mail. 

[11] Centralized delivery is defined as delivery and collection 
services to a number of businesses or residences from a centrally 
located delivery point or place, such as a group of mailboxes at an 
apartment building. 

[12] A piece of equipment that contains address separations into which 
carriers sort letters and flats. 

[13] According to USPS, this variation is expected due to varying 
levels of volumes and other characteristics that differ from office to 
office, and OEI is an indicator that can be used to measure an entity 
against itself and not another entity. 

[14] These work restrictions can result from carriers who qualify for 
limited and light duty assignments. We are currently conducting a 
review of USPS's accommodation of injured workers in limited duty and 
rehabilitation assignments and plan to issue a report on this topic 
later this year. 

[15] According to USPS officials, the annual method for measuring and 
adjusting rural carrier routes helps provide a more efficient route 
structure. 

[16] U.S. Postal Service OIG, Management Advisory - Management of City 
Letter Carriers' Street Performance, report number DR-MA-09-001 
(Arlington, Va., Feb. 23, 2009). 

[17] See [hyperlink, http://ribbs.usps.gov/index.cfm?page=flat]. 

[18] For maintenance training, two FSS machines are being installed at 
USPS's National Center for Employee Development in Norman, Okla. 

[19] The First Article Test is the installation and evaluation of the 
first production unit to determine whether it conforms to all contract 
requirements for acceptance. 

[20] Specific cost savings figures for FSS are considered proprietary 
by USPS, and are therefore not included in this report. 

[21] An auxiliary route is a carrier route that is regularly scheduled 
for completion in less than 8 hours and is not up for bid to become a 
full-time route. 

[22] For example, it is estimated that each day it will take FSS 
operators 17 minutes to update the machine for each additional delivery 
zone. Thus, as the number of delivery zones expands, so too will the 
amount of time needed daily to adjust the FSS machines to handle each 
new zone. 

[23] Statement of John Waller, Director of Office of Accountability and 
Compliance, on behalf of the Postal Regulatory Commission, Before the 
U.S. House of Representatives Subcommittee on Federal Workforce, Postal 
Service, and the District of Columbia, Committee on Oversight and 
Government Reform, May 20, 2009. 

[24] USPS OIG, Audit Report-Flats Sequencing System Contractual 
Remedies, July 1, 2009, report number CA-AR-09-006; USPS OIG, Audit 
Report-Flats Sequencing System: Program Status, December 23, 2008, 
report number DA-AR-09-001; USPS OIG, Management Advisory-Management of 
Contract Changes - Flats Sequencing System, December 1, 2008, report 
number CA-MA-09-002; USPS OIG, Audit Report - Flats Sequencing System: 
Production First Article Testing Readiness and Quality, June 4, 2008, 
report number DA-AR-08-006. 

[25] The system of route inspections and adjustments and Carrier 
Optimal Routing only pertains to city delivery carriers. As a 
comparison, rural carriers follow collectively bargained guidelines 
that require annual Mail Counts to determine the scope of each rural 
carrier's route for the upcoming year. 

[26] The same route may have been inspected more than once during this 
3-year period. 

[27] Accountable mail includes Express Mail, Certified Mail, and 
Registered Mail, and refers to mail that requires the signature of the 
addressee (or addressee agent) upon receipt to provide proof of 
delivery or indemnification for loss or damage. 

[28] GAO, U.S. Postal Service: Data Needed to Assess the Effectiveness 
of Outsourcing, [hyperlink, http://www.gao.gov/products/GAO-08-787] 
(Washington, D.C.: July 24, 2008). 

[29] According to USPS delivery officials, these estimates are based on 
workhour rates that can vary throughout the year. 

[30] GAO, U.S. Postal Service: Intelligent Mail Benefits May Not Be 
Achieved if Key Risks Are Not Addressed, [hyperlink, 
http://www.gao.gov/products/GAO-09-599] (Washington, D.C.: May 6, 
2009), and U.S. Postal Service: Mail Processing Realignment Efforts 
Under Way Need Better Integration and Explanation, [hyperlink, 
http://www.gao.gov/products/GAO-07-717] (Washington, D.C.: June 21, 
2007). 

[31] Sections 301 and 302 of the Postal Accountability and Enhancement 
Act (Pub. L. No. 109-435), enacted on December 20, 2006. 

[32] PRC, Report on Universal Postal Service and the Postal Monopoly 
(Washington, D.C., Dec. 19, 2008). 

[33] When USPS determines that there should be a change in the nature 
of postal services which will generally affect service on a nationwide 
or substantially nationwide basis, it is required to submit a proposal 
to the PRC that requests an advisory opinion on that change within a 
reasonable time period prior to the change. PRC is required to hold a 
hearing on the proposal before issuing its written opinion. 39 U.S.C. § 
3661. 

[34] A delivery unit can be a post office, station, branch, or annex. A 
district office, of which there are 74 nationwide, is an administrative 
field unit that oversees most operational and support functions for 
delivery units in a defined geographic area and reports to one of nine 
USPS area offices. A figure illustrating the geographic coverage of the 
nine area offices is provided in appendix III. In addition to visiting 
Washington, D.C., we also visited the following states: Florida, 
Georgia, Illinois, Indiana, Maryland, South Carolina, and Virginia. 

[35] We concentrated our analysis on city delivery rather than rural 
delivery because most of USPS's information on delivery efficiency is 
focused on city carrier operations and because city delivery accounts 
for nearly 75 percent of annual delivery salary and benefit expenses. 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO’s Web site, 
[hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional 
information. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: fraudnet@gao.gov: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Ralph Dawn, Managing Director, dawnr@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: