oversight

Postal Service: Employee Issues Associated with the Potential Closure of the San Mateo IT Center

Published by the Government Accountability Office on 2003-01-31.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

               United States General Accounting Office

GAO            Report to Congressional Requesters




January 2003
               POSTAL SERVICE

               Employee Issues
               Associated with the
               Potential Closure of
               the San Mateo IT
               Center




GAO-03-205
                                               January 2003


                                               POSTAL SERVICE

                                               Employee Issues Associated with the
Highlights of GAO-03-205, a report to          Potential Closure of the San Mateo IT
the Ranking Minority Member,
House Committee on Government Reform           Center
and Other Requesters




While the U.S. Postal Service
(USPS) rationalizes its
                                               USPS is following its Investment Review and Approval Process in reaching a
infrastructure, it is weighing a               decision about closing the San Mateo IT Center. To support the investment
proposal to close and sell its                 needed to close the IT center, the process requiresand USPS prepared—
Information Technology (IT) center             analyses based on prevailing economic and other conditions. However, these
located in San Mateo, California.              conditions have changed since USPS prepared the analyses in 2000. In 2001,
According to USPS, closing the IT              USPS announced plans to automate and reengineer its field accounting
center and selling the facility                activity, which will result in USPS closing its 85 district accounting offices
should save USPS about $74                     and consolidating the residual activities into its 3 Accounting Service
million over the next 10 years and             Centers. USPS has not updated its analyses to reflect the changed
result in increased efficiency. All            conditions, but said that it planned to do so.
IT union employees and about half
of IT management employees will
be offered the opportunity to                  San Mateo IT employees anticipate mostly negative social impacts if they
relocate with their jobs to other              relocate and mostly negative economic impacts if they stay in the Bay Area.
postal IT centers. The San Mateo IT            Of the 213 San Mateo IT employees who responded to our survey, 36 (17
Center also houses an Accounting               percent) indicated they would likely relocate, although most would be
Service Center whose functions                 offered jobs at other postal IT centers. In 2000, USPS’ economic analyses
and staff are to be moved into                 included an assumption—and San Mateo IT employees believed—that local
leased space in the San Francisco              jobs would be available for those individuals who did not want to relocate.
Bay Area. GAO undertook this                   However, local postal jobs are no longer available, and nonpostal IT job
study to, among other things,                  opportunities have tightened considerably in the Bay Area.
identify the process USPS is
following in making its decision
                                               GAO has previously noted that progressive organizations that are
about closing the IT center and
determine the impact such a                    restructuring often provide job placement assistance to employees faced
closure would have on IT                       with losing their jobs. USPS plans to offer job assistance to management
employees at the center.                       employees seeking nonpostal jobs. However, USPS does not plan to offer
                                               job assistance to union employees because such assistance is not covered by
                                               their collective bargaining agreement. Because the employment outlook in
                                               the Bay Area has changed dramatically, union employees who decide not to
GAO recommends that USPS                       relocate may encounter difficulty finding employment in the Bay Area.
review and update, if appropriate,
the analyses used in support of
                                               San Mateo IT Center
closing the San Mateo IT Center to
better reflect current conditions
before making its final decision
about closing the center. GAO also
recommends that if USPS decides
to close the IT center, it should
consider offering to help union
employees find local jobs if they
decide not to relocate. USPS did
not comment on GAO’s findings,
but it agreed with GAO’s
recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-03-205.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Bernard L.
Ungar on (202) 512-2834 or at
ungarb@gao.gov.
Contents


Letter                                                                                    1
              Results in Brief                                                           3
              Background                                                                 7
              Scope and Methodology                                                     11
              The Service Is Following Its Investment Review and Approval
                Process                                                                 14
              Relocation Experts Report that Negative Economic and Social
                Impacts Generally Accompany Plant and Facility Closures                 21
              New York IT Center Employees Reported Economic and Social
                Impacts as a Result of the Closure                                      28
              San Mateo IT Center Employees Anticipate Mostly Economic
                Impacts if they Opt to Stay in the Bay Area and Social Impacts if
                they Opt to Relocate to Another Postal IT Center                        36
              Conclusions                                                               46
              Recommendations for Executive Action                                      47
              Agency Comments and Our Evaluation                                        47

Appendix I    Comparative Demographic Data and Options for
              San Mateo and Displaced New York IT Center
              Employees                                                                 50



Appendix II   Comments from the U.S. Postal Service                                     55



Tables
              Table 1: Demographic Data for San Mateo Employees Compared
                       with Displaced New York Employees’ Demographic Data              51
              Table 2: Likely Options/Opportunities for San Mateo IT Employees
                       Compared with Options/Opportunities that Were Available
                       for Displaced New York IT Employees                              52


Figures
              Figure 1: The San Mateo IT Center                                           9
              Figure 2: Overview of Postal Service’s Investment Review and
                       Approval Process                                                 18
              Figure 3: Options Selected by Displaced New York IT Center
                       Employees in 1993                                                30



              Page i                                              GAO-03-205 Postal Service
Figure 4: Options San Mateo Employees Expect to Pursue if
         Staying in the Bay Area                                       40




Abbreviations

APWU                 American Postal Workers Union
BLS                  Bureau of Labor Statistics
CIC                  Capital Investment Committee
COO                  Chief Operating Officer
CPC                  Capital Projects Committee
DAR                  Decision Analysis Report
EAS                  Executive and Administrative Schedule
ERC                  Employee Relocation Council
HQ                   Headquarters
IT                   Information Technology
IT Department        Information Technology Department
NYC                  New York City
OIG                  Office of Inspector General
PCES                 Postal Career Executive Service
PMG                  Postmaster General
VP                   Vice President



Page ii                                          GAO-03-205 Postal Service
United States General Accounting Office
Washington, DC 20548




                                   January 31, 2003

                                   The Honorable Henry Waxman
                                   Ranking Minority Member
                                   Committee on Government Reform
                                   House of Representatives

                                   The Honorable Chaka Fattah
                                   The Honorable Tom Lantos
                                   House of Representatives

                                   This report responds to your request for information about the U.S. Postal
                                   Service’s Department of Information Technology (IT Department)
                                   proposal to close its San Mateo, California, Information Service Center,
                                   including the social and economic impacts that the closure would have on
                                   affected postal employees and their families. As you know, the Service has
                                   experienced significant financial difficulties in the past few years, and the
                                   Service is in need of transformation. Rationalizing the Service’s vast
                                   infrastructure will be critical to its success in addressing its financial
                                   difficulties, which means the Service may have to close or consolidate
                                   certain postal facilities. Within this context, the Service is considering
                                   closing the San Mateo Information Technology (IT) Center.

                                   In 2000, the Service’s IT Department proposed closing the San Mateo IT
                                   Center and transferring IT functions performed at the center to other
                                   postal IT centers in order to reduce costs and make operations more
                                   efficient. The proposed closure would affect about 240 employees—about
                                   170 bargaining unit and about 70 Executive and Administrative Schedule
                                   (EAS) employees.1 Closing and consolidating IT functions are not new
                                   activities for the Postal Service. For example, in 1993, the Service closed
                                   its New York IT Center and transferred functions performed at that center
                                   to other postal IT centers.

                                   Under the IT Department’s closure proposal, most of the IT functions
                                   being performed by the San Mateo IT Center are to be transferred to the


                                   1
                                    Generally, at the San Mateo IT Center, bargaining unit employees are computer operations
                                   and programming employees who are represented by the American Postal Workers Union,
                                   which bargains collectively with postal management over pay and conditions of
                                   employment. EAS employees are nonbargaining employees, which include employees such
                                   as supervisors, mangers, and professional and technical specialists.



                                   Page 1                                                       GAO-03-205 Postal Service
    Service’s other Information Service Center located in Eagan, Minnesota.
    The remaining IT functions are to be transferred to the Service’s
    Integrated Business Systems Solutions Centers located in St. Louis,
    Missouri and Wilkes-Barre, Pennsylvania.2 The San Mateo IT Center also
    houses an Accounting Service Center whose functions and staff are to be
    moved into leased space in the San Francisco Bay Area (Bay Area) if the
    Service decides to close the IT center. Because closing postal facilities is
    controversial, the Service said it would postpone making a final decision
    regarding the closure of the San Mateo IT Center until after we have issued
    this report and postal management has had a chance to review the results
    of our study.

    To provide you information on the impact that closing the San Mateo IT
    Center would have on postal employees working at that facility—and their
    families—we agreed with your offices to address the following objectives:

•   Describe the process the Service is following in deciding whether to close
    the San Mateo IT Center and consolidate its functions into other postal IT
    centers.
•   Determine experts’ views on the social and economic impacts that plant
    and facility consolidations and closures have on affected employees and
    their families.
•   Determine the social and economic impacts that affected postal
    employees and their families encountered when the Service closed its New
    York IT Center in 1993.
•   Determine affected postal employees’ views on the social and economic
    impacts that they and their families would likely encounter if the Service
    closes the San Mateo IT Center.

    We also provide information on how selected organizations have assisted
    affected employees during downsizing.

    To meet these objectives, among other things, we administered a
    questionnaire to 243 San Mateo IT Center employees and received 213
    responses, resulting in an 88 percent response rate. We also administered
    two separate questionnaires to 145 current postal employees who were




    2
     Henceforth, for simplicity and readability, we refer to the IT Department’s Information
    Service Centers and its Integrated Business Systems Solutions Centers as IT centers.




    Page 2                                                          GAO-03-205 Postal Service
                   displaced by the 1993 closure of the New York IT Center. 3 One
                   questionnaire was mailed to 66 displaced employees of the New York IT
                   Center who had relocated to similar positions at other postal IT centers
                   outside the New York City area. We received 49 responses from this group,
                   resulting in a 74 percent response rate. Another questionnaire was mailed
                   to 79 displaced employees who had transferred to other postal positions in
                   the New York City area following the IT center’s 1993 closure. We received
                   46 responses from this group, resulting in a 58 percent response rate. We
                   did not attempt to locate displaced employees of the New York IT Center
                   who no longer work for the Service.

                   Additionally, we identified and reviewed (1) the IT Department’s economic
                   analyses and assumptions, (2) the U. S. Postal Service Office of Inspector
                   General’s (OIG) November 2000 audit report on the IT Department’s
                   proposal and economic analyses, (3) applicable Postal Service policies and
                   procedures relating to facility closures and capital investments, (4) our
                   prior reports on restructuring and downsizing, (5) available private sector
                   relocation studies, and (6) applicable portions of the U.S. Code and the
                   Service’s collective bargaining agreement with the American Postal
                   Workers Union (APWU) to identify legal requirements and entitlements
                   associated with a postal facility closure. We also interviewed key
                   stakeholders familiar with the closure, including (1) various postal
                   officials at Headquarters and at the San Mateo IT Center and (2) national
                   and local representatives of the APWU. Finally, we interviewed eight
                   experts familiar with relocations. We identified these experts from
                   available studies, articles, and referrals.


                   The Postal Service is following its Investment Review and Approval
Results in Brief   Process in making its decision regarding the IT Department’s proposal to
                   close the San Mateo IT Center, because the Service will need to make an
                   investment of $8 million to support the closure. The Investment Review
                   and Approval Process requires that a Decision Analysis Report (DAR) be
                   prepared as support for the investment.4 Additionally, the process requires
                   that key senior postal executives approve the DAR. The IT Department



                   3
                    The Bureau of Labor Statistics defines displaced employees as persons who lost or left
                   jobs because their plant or company closed or moved, there was insufficient work, or their
                   position or shift was abolished.
                   4
                    A DAR details the economic analyses, including costs and benefits, of the proposed
                   investment and alternatives being considered.




                   Page 3                                                        GAO-03-205 Postal Service
prepared a DAR for closing the San Mateo IT Center; and in early
November 2000 the Finance Department validated the accuracy and
integrity of the DAR’s assumptions and economic analyses, and the former
vice president for IT approved the DAR. Separate from the Investment
Review and Approval Process, the OIG reviewed the DAR in 2000 and
concurred that the proposed closure would save the Service about $74
million over 10 years. The savings would accrue from the sale of the San
Mateo facility, staffing reductions, and operating efficiencies. Approval by
the Postmaster General (PMG) and the Service’s Capital Investment
Committee—which reviews projects of $7.5 million or more in capital and
expense investments—has not yet occurred. According to the Service,
these approvals are the final steps in its Investment Review and Approval
Process and will take place after our report is issued if the Service decides
to pursue closing the San Mateo IT Center. The San Mateo DAR has not
been updated since 2000, although economic conditions have changed
since that time. In addition, the DAR does not reflect the impact that the
Service’s 2001 announced plans to automate and reengineer its field
accounting activity could have on projected savings associated with the
closure proposal. Those plans involve closing the Service’s 85 district
accounting offices and consolidating residual activity into its 3 Accounting
Service Centers. However, postal officials said that the key assumptions
used in preparing the DAR would be updated before the Service makes its
closure decision.

Relocation experts we interviewed reported that plant and facility closures
occur throughout the nation and generally result in negative economic and
social impacts on employees and their families. They said that following a
closure, displaced employees typically experience economic impacts, such
as lost income, loss of retirement benefits, and lower income after finding
a new job. Employees who relocate with their jobs are likely to encounter
social impacts, such as marital stress, separations from family members,
and the loss of social ties. The experts also noted that dual-income
families who relocate can face negative economic impacts when trailing
spouses have to give up their jobs in order to relocate. The experts further
noted that closures tend to have a greater negative impact on older
employees. Older employees are less likely than younger employees to be
reemployed and are more prone to social difficulties if they relocate to a
new area. The experts indicated, however, that some employees might
view closures positively because closures can afford workers the
opportunity to redirect their careers, develop new competencies, or leave
unsatisfying jobs.




Page 4                                               GAO-03-205 Postal Service
Employees affected by the New York IT Center closure in 1993 whom we
surveyed reported that they experienced negative economic and social
impacts from the closure. Our analysis of the salary data provided by the
Service on employees displaced by the New York IT Center closure
showed that employees who remained with the Service in the New York
City area fared worse economically than those who relocated to other
postal IT centers. According to the Service’s salary data, 9 years after the
closure, the average salary of postal employees who relocated to other
postal IT centers had increased about 11 percent (in constant 2001
dollars), while the average salary of employees who remained with the
Service in the New York City area had decreased about 1 percent (in
constant 2001 dollars). However, survey respondents who relocated to
other postal IT centers reported encountering more negative social
impacts than respondents who remained with the Service in the New York
City area. For example, 23 of the 49 relocated employees responding to
our survey reported that they found it difficult (1) adjusting to the new
geographic area, work environment, and local culture; (2) maintaining or
establishing social, community, and cultural ties or finding supporting
communities where they could get involved; and (3) being away from
family and friends and missing out on important family events. Some
relocated respondents also reported that since relocating, their spouses
had found it very difficult to maintain or secure jobs, benefits, and
retirement security.

San Mateo IT employees who responded to our survey anticipated mostly
economic impacts if they opt to stay in the Bay Area and social impacts if
they opt to relocate to another postal IT center. Respondents anticipated
economic impacts, varying from retiring earlier than planned to being
unemployed. They anticipated social impacts, varying from short-term to
long-term family separations. Under the IT Department’s proposal to close
the San Mateo IT Center, all bargaining unit and about half of the EAS
employees would be offered the opportunity to relocate with their jobs to
another postal IT center. However, only 36 (17 percent) of the 213 San
Mateo employees responding to our survey indicated they would likely
relocate. Of the remaining respondents, 167 (78 percent) indicated they
would likely stay in the Bay Area; and 10 (5 percent) indicated they were
unsure what they would do if the Service decided to close the IT center.
However, the actual decisions of the San Mateo IT Center employees may
be different from their responses to our survey because certain factors
have changed since they responded to our survey. At the time the
employees completed our survey, the Service anticipated that postal
positions would be available in the Bay Area for bargaining unit employees
who did not want to relocate. Since that time, conditions have changed,


Page 5                                               GAO-03-205 Postal Service
and the Service no longer anticipates that postal positions will be available
in the Bay Area. Additionally, outside employment opportunities in the
Bay Area for employees with IT skills have tightened considerably. To help
minimize the potential impact a closure could have on EAS employees, the
Service has said it will make available the services of a private job search
firm.

One hundred thirty four of the 167 San Mateo respondents who indicated
they would likely stay in the Bay Area provided reasons for not relocating.
Of the respondents who provided reasons, 79 (59 percent) identified
concerns with spouses’ careers as a primary motivator in their decision
not to relocate. The Service has indicated that it will work with trailing
spouses who are postal employees to find postal employment at the new
location, but it does not anticipate providing assistance to trailing spouses
who are not postal employees. Because the Service is not providing
assistance to all trailing spouses, the Service may not have as many
employees relocating as it anticipates. In preparing the DAR, the IT
Department estimated that 33 percent of San Mateo IT employees would
relocate to other postal IT centers. However, only 17 percent of survey
respondents indicated they would likely relocate. Relocation experts have
noted that employees who must make a relocation choice often base their
decisions on whether their trailing spouses can find suitable employment
at the new location. Given this dilemma, relocation experts report more
companies are providing employment assistance to trailing spouses, such
as assisting with finding employment. By providing trailing spouses
assistance–such as resume preparation and review services—the Service
may encourage more employees to relocate.

The employment outlook for San Mateo IT employees has diminished
since 2000. Postal positions are no longer expected to be available in the
Bay Area, and nonpostal IT positions are significantly more limited than 2
years ago. To help employees through such difficult times, we have
previously reported that employers and employees both benefit when the
employer proactively works with employees to minimize the impacts of
relocation or job loss. Employers frequently provide relocation assistance,
employee and family counseling, and job placement assistance. To its
credit, the Service plans to provide some assistance in these areas.
However, the Service does not anticipate offering job placement
assistance to bargaining unit employees who decide not to relocate,
although bargaining unit employees will have the opportunity to relocate
with their jobs to other postal IT centers because of the no-layoff
provision in the collective bargaining agreement with APWU. Without the
benefit of job placement assistance, bargaining unit employees who do not


Page 6                                               GAO-03-205 Postal Service
             relocate might encounter difficulty in finding employment in the Bay Area.
             Should the Service decide to close the San Mateo IT Center, it could offer
             job placement assistance during closure discussions with the APWU.
             These discussions have historically resulted in additional provisions for
             affected bargaining unit employees.

             We are recommending that before the Service makes its decision about
             closing the San Mateo IT Center, it should review and update, if
             appropriate, its economic analyses and assumptions. Should the Service
             decide to close the San Mateo IT Center, we are also recommending that it
             consider (1) offering to help bargaining unit employees find jobs if they
             decide to stay in the Bay Area and (2) providing some assistance—such as
             resume preparation and review services—to working spouses of
             employees who decide to relocate. In commenting on a draft of this report,
             the Service did not comment on our findings. However, the Service did
             indicate agreement with our recommendations. The Service said that
             before reaching a decision regarding the closure of the San Mateo IT
             Center, it would update the information that will be used in making its
             decision. The Service also indicated that it would adhere to the provisions
             of its bargaining unit agreements and will attempt to mitigate the negative
             impacts that relocations might have on employees and their families.


             During the 1970s, the Postal Service invested in data centers and
Background   mainframe computers to support administrative functions, such as
             personnel, accounting, and payroll processing. During the 1980s, the
             Service expanded its IT technology network to cover essentially all facets
             of postal operations. However, as networking technology improved, the
             Service realized that it no longer needed to colocate some of its IT
             functions with the hardware processors. This presented the Service with
             the opportunity to reduce costs and improve efficiencies by consolidating
             some of its IT functions. The practice of consolidating IT functions is
             consistent with industry trends, as companies strive to utilize new
             technologies to improve operations at less cost.

             Before 1993, the Service had six computer centers, each with a mainframe
             computer, located in New York City, New York; St. Louis, Missouri;
             Raleigh, North Carolina; Wilkes-Barre, Pennsylvania; San Mateo,
             California; and Minneapolis, Minneapolis.5 In 1993, the Service closed its IT


             5
             In 1998, IT functions performed at various sites in Minneapolis were consolidated and
             moved into a new postal IT center in Eagan.



             Page 7                                                        GAO-03-205 Postal Service
center located in New York and transferred all functions performed at the
center to its postal IT centers located in San Mateo and Eagan. Some
employees affected by the New York IT Center closure relocated to San
Mateo and now face the prospects of being affected by yet another postal
IT center closure. Additionally, since 1993, the Service has transferred
mainframe computer operations performed in St. Louis, Raleigh, and
Wilkes-Barre to the San Mateo and Eagan IT Centers. Other IT functions
continue to be performed at the Service’s IT centers located in St. Louis,
Raleigh, and Wilkes-Barre.

The Service’s current IT structure includes two Information Service
Centers located in Eagan and San Mateo. Each of these Information
Service Centers houses a Computer Operations Service Center, a
Management Support Center, an Accounting Service Center, and an
Integrated Business Systems Solutions Center.6 The Computer Operations
Service Centers operate the Service’s mainframe computers supporting
various postal activities. The Integrated Business Systems Solutions
Centers maintain and enhance software applications for postal business
systems. The Management Support Service Centers provide facility
support to the other centers. The Accounting Service Centers are operated
by the Service’s Finance Department and provide national accounting
services. The Accounting Service Centers are not included as part of the IT
Department’s proposed consolidation of the San Mateo IT Center.

Figure 1 shows the San Mateo IT Center, which is located at 2700 Campus
Drive, San Mateo, CA, in the Bay Area. The building is a three-story
structure plus a basement, contains approximately 160,000 square feet of
space, and is located on 12.4 acres. The building was constructed in 1976
and was purchased by the Service in 1983 for about $13 million. After
purchasing the building, the Service spent an additional $14 million on
renovations, and during the last 10 years has spent an additional $3.7
million on major upgrades.




6
 The Service also has three other Integrated Business Systems Solutions Centers, located in
Raleigh, St. Louis, and Wilkes-Barre. Raleigh also serves as the Service’s disaster recovery
center.




Page 8                                                         GAO-03-205 Postal Service
Figure 1: The San Mateo IT Center




The consolidation plan currently under consideration provides that San
Mateo’s computer operations, management support functions, and some of
its software functions would be transferred to Eagan, along with some
employees. The plan further provides that San Mateo’s remaining software
support functions would be transferred to postal IT centers located in St.
Louis and Wilkes-Barre, along with some employees. As previously stated,
the consolidation plan currently under consideration does not include
transferring the accounting functions currently performed at San Mateo.
Instead, the accounting functions, along with their complement of 102
employees, are to be relocated into leased space in the Bay Area.

In October 2000, San Mateo’s IT functions had an authorized complement
of 282, comprising 80 EAS positions, 200 bargaining-unit positions, and 2
Postal Career Executive Service (PCES) positions. 7 Seventy-two EAS and
172 bargaining-unit positions were filled as of March 2002. Six of the IT
bargaining unit employees are to be transferred to the Accounting Service
Center and would not be immediately affected if the Service decides to
close the San Mateo IT Center. The remaining 166 bargaining unit



7
 PCES employees are senior-level officers and executives in such postal positions as area
vice presidents and IT center managers. The PCES is comparable with the Civil Service’s
Senior Executive Service. EAS employees are paid under the Service’s Executive and
Administrative Schedule. IT bargaining unit employees’ pay and benefits are established by
a collective bargaining agreement between the Postal Service and the APWU.




Page 9                                                        GAO-03-205 Postal Service
employees and all EAS employees would be directly affected by the
closure. Under the proposed consolidation, all 166 bargaining unit
employees would be offered relocation to another postal IT center, in
keeping with the no-layoff clause in their collective bargaining agreement.
About half of the EAS employees will be offered jobs at another postal IT
center.

For the employees who relocate, the Service will cover basic relocation
costs. However, covered costs differ for bargaining-unit and EAS
employees. Relocation benefits for bargaining-unit employees are
specified in the negotiated collective bargaining agreement between the
Service and the APWU. Examples of covered expenses include the cost of
one advance house-hunting trip, the movement and storage of household
goods, and 30 days of temporary quarters. For EAS employees the Service
covers the cost of 3 house-hunting trips, the movement and storage of
household goods, and 60 days of temporary quarters. Additionally, the
Service provides EAS employees a more generous expense allowance and
assistance in selling and purchasing their homes.

Employees, who do not have the option of relocating or choose not to do
so, may choose to retire, provided they meet the minimum age and service
requirements for retirement.8 Additionally, postal officials have indicated
that if the decision is made to close the San Mateo IT Center, the Service
will seek early retirement authority from the Office of Personnel
Management. If this authority is granted, the Service plans to make the
option of voluntary early retirement available to all eligible employees.9
Employees who do not relocate, retire, or find other employment on their
own will likely be involuntarily separated from the Service. Employees


8
 The minimum age and service requirements for retirement under the Civil Service
Retirement System are age 55 with 30 years of service, age 60 with 20 years of service, or
age 62 with 5 years of service. The minimum requirements for retirement under the Federal
Employees’ Retirement System are “minimum retirement age” with 30 years of service, age
60 with 20 years of service, age 62 with 5 years of service, or “minimum retirement age”
with 10 years of service. An employee’s minimum retirement age is based on his/her date of
birth and ranges between 55 and 57 years.
9
 Early retirement allows eligible employees to retire with immediate annuities before
meeting the age and service requirements for regular retirement. The minimum
requirements for early retirement under the Civil Service Retirement System are age 50
with 20 years of service, or any age with 25 years of service. The annuity is reduced by 2
percent for each year that the employee is under age 55. The Federal Employees’
Retirement System has the same minimum requirements for early retirement as the Civil
Service Retirement System. However, annuities for employees retiring under the early
retirement provisions of the Federal Employees’ Retirement System are not reduced.




Page 10                                                         GAO-03-205 Postal Service
              who are involuntarily separated from the Service will be eligible for
              severance pay.

              The Service has experienced financial problems in recent years that have
              been exacerbated by the recent economic slowdown and the use of mail to
              transmit anthrax. In April 2001, we placed the Service’s transformation
              efforts and long-term outlook on our high-risk list. We included the Service
              on our high-risk list to focus attention on the dilemmas facing the Service
              before the situation escalates into a crisis in which the options for action
              may be more limited and costly. While the Service recently developed a
              transformation plan to address its financial difficulties and has been able
              to cut costs, it has a significant amount of fixed costs due to its vast
              infrastructure that are difficult to cut in the short term. Rationalizing the
              Service’s infrastructure will be key as it strives to ameliorate its fiscal
              situation. This means that the Service may have to close or consolidate
              certain retail, mail processing, and administrative facilities if necessary to
              cut costs and improve performance. These closures and consolidations
              will undoubtedly lead to public concerns about the economic effects such
              actions will have on communities and employees. The Service is weighing
              these difficult issues as it considers whether to close the San Mateo IT
              Center.


              To describe the process that the Service is following to decide whether to
Scope and     close the San Mateo IT Center and consolidate its functions into other
Methodology   postal IT centers, we interviewed postal managers and reviewed available
              supporting reports and documents. We reviewed the Service’s investment
              policies and procedures manual, which provides guidance for preparing,
              reviewing, and approving a DAR. We also reviewed the Service’s DAR,
              prepared by the IT Department, which included economic analyses and
              justification of the proposal to close the San Mateo IT Center, as well as an
              alternative proposal that the IT Department considered and subsequently
              rejected. Further, we reviewed the OIG’s November 2000 audit report on
              the IT Department’s proposal and economic analysis. For contrast, we
              reviewed (1) the DAR the IT Department prepared in support of the
              decision to build a new IT facility in Eagan that would allow the Service to
              consolidate IT functions performed at various sites in the Minneapolis area
              and provide for future incorporation of IT functions and (2)
              documentation the Service used to support its decision to close the New
              York IT Center in 1993. We discussed the steps the Postal Service followed
              in preparing its proposal to close the San Mateo IT Center with the
              Service’s vice president, IT; discussed the Service’s management process
              for reviewing the proposal with the Service’s manager, Capital and


              Page 11                                               GAO-03-205 Postal Service
Program Evaluation, and manager, Facilities, Headquarters; and met with
representatives from the OIG to discuss the audit they did of the Service’s
proposal and economic analyses. We also reviewed sections of the Postal
Service’s Transformation Plan that discuss procedures the Service follows
in closing postal facilities, and we explored those procedures in greater
detail with postal officials.

To determine experts’ views on the social and economic impacts that
corporate downsizing and reorganizations can have on employees and
their families, we identified and interviewed eight relocation experts from
our literature review and discussions with authors of articles on the
impacts of closures and relocations on employees. These relocation
experts provide a wide variety of relocation services to several hundred
companies throughout the United States. We also interviewed two
university researchers knowledgable of worksite closures and employee
displacements, and we gathered available data from the Bureau of Labor
Statistics (BLS) on nationwide and regional worksite closures and
employee separations for calendar years 2001 and 2002. To further
broaden our perspective on how closures and relocations typically affect
employees and their families, we conducted Internet research to identify
reports, studies, and other sources of information that examined the
impacts of closing facilities similar to the San Mateo IT Center. We also
conducted literature searches and gathered information on the social and
economic impacts of facility closures and relocations.

To determine the social and economic impacts encountered by postal
employees and their families who were affected by the Service’s closure of
its New York IT Center in 1993, we interviewed postal officials as well as
displaced New York IT Center employees who relocated to the San Mateo
IT Center. We also obtained and analyzed salary data, for the period 1992
to 2001, on displaced New York IT Center employees who are still
employed by the Service. We designed, pretested, and administered survey
questionnaires to displaced New York IT Center employees (1) who
relocated to other postal IT centers and (2) who continued employment
with the Service in the New York City area. For those employees who
relocated, we received responses from 49 of 66, for a 74 percent response
rate. For those who stayed with the Service in the New York City area, we
received responses from 46 of 79 for a 58 percent response rate. We
analyzed the survey responses, including open-ended comments, and
conducted a number of follow-up interviews. We did not gather data on
displaced New York IT Center employees who left the Service following
the center’s closure in 1993 because the Service was unable to provide
recent mailing addresses for these employees.


Page 12                                             GAO-03-205 Postal Service
To determine the social and economic impacts that the San Mateo IT
Center postal employees and their families would likely encounter if the
Service closes that center, we obtained and reviewed relevant Postal
Service documents regarding personnel policies and consolidation plans.
We also interviewed cognizant postal and APWU officials and various San
Mateo employees regarding these policies and plans and their potential
impacts on employees. We obtained and analyzed San Mateo employee
personnel data; and, on the basis of information from closure/relocation
studies and experts and our interviews with postal officials and
employees, we designed, pretested and administered a survey
questionnaire to obtain information about how closing the San Mateo IT
Center would likely affect employees and their families. We received
survey responses from 213 of 243 employees, for an 88 percent response
rate. We analyzed the survey responses, including open-ended comments,
and conducted follow-up interviews.

To provide information on how selected organizations, during downsizing,
have assisted affected employees, we identified and reviewed our prior
reports on restructuring and downsizing. We incorporated information on
those organizations where appropriate.

Because our three surveys did not make use of probability sampling, there
are no sampling errors. However, the practical difficulties of conducting
any survey may introduce other types of errors, commonly referred to as
nonsampling errors. For example, differences in how a particular question
is interpreted, the sources of information available to respondents, or the
types of people who do not respond can introduce unwanted variability
into the survey results. We included steps in both the data collection and
data analysis stages for the purpose of minimizing such nonsampling
errors. For example, our data collection instruments were designed by
survey specialists in combination with subject matter specialists and
pretested to ensure that questions were clear and were understood by
respondents. To increase our response rate, a follow-up mailing was made
to those who did not respond in a reasonable time period.

We conducted our review at Postal Service Headquarters in Washington,
D.C., and at the Service’s IT center located in San Mateo, CA, from August
2001 through October 2002, in accordance with generally accepted
government auditing standards.

We requested comments on a draft of this report from the Postmaster
General. The Service’s comments are discussed at the end of this letter
and are reprinted in appendix II.


Page 13                                             GAO-03-205 Postal Service
                       The Service is following its Investment Review and Approval Process in
The Service Is         deciding whether or not to close the San Mateo IT Center, because it will
Following Its          require an investment of $8 million to support the closure. Events leading
                       to the IT Department’s proposal to close the San Mateo IT Center began in
Investment Review      1996. At that time, the IT Department started making long-range plans to
and Approval Process   consolidate the San Mateo IT Center’s mainframe computer operations
                       into a new IT center the Service was building in Eagan. Other IT functions
                       performed at the San Mateo IT Center were to be unaffected by the
                       consolidation plans under development at that time. However, in 2000, the
                       PMG called on postal managers to find savings by eliminating work,
                       working more efficiently, and consolidating functions. In response to that
                       call, the IT Department proposed closing the San Mateo IT Center and
                       transferring its IT functions to Eagan and other postal IT centers. That
                       proposal has yet to be approved by the Service, and the PMG has said that
                       such a decision will not be made until after we have issued our report.

                       As required by the Service’s Investment Review and Approval Process, the
                       IT Department prepared a DAR in 2000 to support the $8 million
                       investment needed for the proposed closure of the San Mateo IT Center.
                       The Service’s Investment Review and Approval Process establishes the
                       review/approval process, procedures, and responsibilities for capital
                       investments made by the Service. Major capital investments, generally
                       defined as $5 million or more, require a DAR, which is justification to
                       recommend an investment for approval.

                       In 2000, OIG reviewed the San Mateo DAR and concurred with the IT
                       Department’s analysis that money could be saved and efficiencies gained
                       by closing the San Mateo IT Center and transferring its IT functions to the
                       Eagan IT Center and other postal IT centers. However, since the DAR was
                       prepared in 2000, some of the economic assumptions, which were based
                       on the economic conditions at that time, have changed. Additionally, the
                       Service recently announced plans to consolidate its accounting functions
                       in 85 postal districts into the Service’s 3 Accounting Service Centers
                       located in Eagan, St. Louis, and San Mateo. Given this, before the Service
                       makes its decision about closing the San Mateo IT Center, the IT
                       Department’s DAR may need to be reviewed and updated, if appropriate,
                       to better reflect current economic conditions and recent plans to
                       consolidate accounting functions.




                       Page 14                                             GAO-03-205 Postal Service
The IT Department’s         Events leading to the IT Department’s proposal to close the San Mateo IT
Proposal to Close the San   Center began in 1996 when the IT Department initiated development of a
Mateo IT Center             long-range plan to consolidate the San Mateo IT Center’s mainframe
                            computer operations into a new IT center that the Service was building in
Originated in 1996          Eagan. The IT Department’s proposal called for consolidating San Mateo’s
                            mainframe computer operations into a new 352,000-square-foot postal IT
                            center, located on 28 acres in Eagan. The new Eagan IT Center was to
                            serve as the Service’s primary financial center, meet the Service’s long-
                            term computer operational requirements, and have the flexibility to adjust
                            to IT changes and provide room for growth. The Eagan IT Center was
                            designed to absorb the San Mateo IT Center’s mainframe computer
                            operations. At the time the IT Department was preparing its original
                            consolidation proposal, it projected that the San Mateo IT Center’s
                            mainframe computer operations could be consolidated into the new Eagan
                            IT Center sometime around 2000. However, before that consolidation
                            occurred, the PMG called on postal managers in 2000 to review their
                            operations and find savings by eliminating work, working more efficiently,
                            and consolidating functions. The PMG did this in response to the Service’s
                            declining financial condition: shrinking net income, operating expense
                            growth outpacing operating revenue growth, the threat of declining mail
                            volumes, and stagnating productivity.

                            Heeding the PMG’s call to find savings, the IT Department decided to
                            expand its plans for the San Mateo IT Center. Instead of just consolidating
                            the San Mateo IT Center’s mainframe computer operations into the Eagan
                            IT Center, the IT Department decided to propose closing and selling the
                            San Mateo IT Center and consolidating all of its IT functions into other
                            postal IT centers located in Eagan, St. Louis and Wilkes-Barre.


The Primary Document        According to IT Department officials, once a decision was made in early
Supporting the Closure      2000 to propose closing the San Mateo IT Center, the proposal’s
Proposal Is the DAR         sponsoring unit (the IT Department), per the Service’s Investment Review
                            and Approval Process, prepared a DAR in support of the closure proposal.
                            The DAR details the economic analyses and assumptions, including costs
                            and benefits, of the proposed investment and alternatives being
                            considered so that approving authorities will have the information
                            necessary to make informed decisions. The Service requires that a DAR be
                            prepared, validated, and approved for planned capital and expense
                            investments of $5 million or more. The IT Department provided us with
                            copies of (1) documentation and an internal paper prepared in support of
                            the proposal to consolidate the San Mateo IT Center’s mainframe
                            computer operations into Eagan and (2) the DAR supporting the closure


                            Page 15                                             GAO-03-205 Postal Service
proposal. However, the IT Department was unable to provide us
documentation explaining the basis for expanding the mainframe
consolidation proposal into a proposal to close the San Mateo IT Center
entirely and transfer all of its IT functions to other postal IT centers.
Additionally, according to postal officials, the two individuals most
familiar with the closure proposal, the vice president, Information
Technology; and the manager, Information Systems Support, are no longer
with the Service.

According to postal officials, there are no detailed policies or rigorous
procedures that must be followed when a department proposes closing a
postal facility other than a post office or mail processing facility. They said
that references, in the Service’s Transformation Plan, to detailed
procedures for closing facilities apply only to post offices and mail
processing facilities, not to administrative offices such as the San Mateo IT
Center. They said the DAR is the primary document being used to support
the IT Department’s proposal to close the San Mateo IT Center.

The San Mateo DAR prepared by the IT Department included (1) the
objectives, justification, and details of the proposed closure/consolidation;
(2) economic analyses and financial justification for the proposed closure;
and (3) information on an alternative to the closure that was considered,
analyzed, and eliminated. According to the DAR, closing the San Mateo IT
Center and consolidating all of its IT functions at other postal IT centers
would be justified because (1) consolidating IT and support operations
would provide the Service savings, over a 10-year period, of approximately
$25 million in staffing, utilities, maintenance, and contractor systems
software support and (2) consolidating IT functions would allow the
Service to sell the San Mateo facility for approximately $49 million. The
DAR also noted that the San Mateo area had become one of the highest
cost-of-living areas in the nation, and the San Mateo IT Center was finding
it increasingly difficult to retain its executives and the top technical staff
needed to operate the center. The DAR further noted that the cost of
contractors in the San Mateo area was higher than in other areas where
postal IT centers were located.

Before finalizing the DAR to close the San Mateo IT Center, the IT
Department considered one alternative proposal which, consisted of the
Service selling the San Mateo facility and leasing it back from the new
owner, with all of the postal functions remaining in the leased facility. The
Service rejected that alternative for two reasons. The IT Department
determined that (1) the annual lease cost would exceed the current
depreciation cost of the San Mateo facility and (2) the Service would not


Page 16                                               GAO-03-205 Postal Service
realize the savings and operational efficiencies that would accrue from
consolidating San Mateo IT functions at other postal IT centers.

According to postal officials, the IT Department—following the Service’s
Investment Review and Approval Process—prepared the San Mateo DAR
and forwarded it to the Service’s Finance Department for validation and to
the Facilities Department for review and concurrence. By early November
2000, the Finance Department had completed its validation of the accuracy
and integrity of the San Mateo DAR’s assumptions and economic analyses;
the Facilities Department had concurred with the DAR; and the sponsoring
vice president, IT, had signed the DAR. Next, the senior vice
president/chief technology officer and the chief financial officer/executive
vice president reviewed and approved the DAR. In late November 2000,
the chief financial officer/executive vice president prepared and signed a
validation memorandum and executive summary, which was forwarded to
the PMG, stating that the DAR proposing to close the San Mateo IT Center
had been reviewed and validated. According to postal officials, before the
San Mateo IT Center can be closed, approval must be obtained from the
Headquarters (HQ) Capital Investment Committee and the PMG.10 The OIG
has also reviewed the DAR. (See fig. 2 for an overview of the Service’s
Investment Review and Approval Process.)




10
  The Capital Investment Committee voting members include the deputy postmaster
general; chief operating officer and executive vice president; senior vice president and
general counsel; chief marketing officer and senior vice president; senior vice president,
chief technology officer; senior vice president, Operations; vice president, Strategic
Initiatives; and chief financial officer and senior vice president (chair). The Committee’s
nonvoting members include the vice president, Engineering; vice president, Finance;
controller; vice president, Purchasing and Materials; and vice president, Facilities.




Page 17                                                          GAO-03-205 Postal Service
Figure 2: Overview of Postal Service’s Investment Review and Approval Process




OIG Reviewed the IT                     Prior to our review, postal management asked the OIG to evaluate the
Department’s Proposal and               potential benefits, costs, and operational issues surrounding the IT
Concurred that Closing the              Department’s proposal to close the San Mateo IT Center and transfer its IT
                                        functions to other postal IT centers. The OIG did this evaluation between
San Mateo IT Center                     May and late November 2000. The OIG agreed with the IT Department that
Would Save Money                        consolidating the San Mateo IT Center’s IT functions into the Eagan and
                                        other postal IT centers would produce savings in staffing, utilities,
                                        maintenance, and contractor systems software support. However, among



                                        Page 18                                            GAO-03-205 Postal Service
                          other things, the OIG noted that the IT Department’s projected savings in
                          the San Mateo DAR might be overstated by $4 to $8 million because the
                          cost of leasing space for the Accounting Service Center in the Bay Area
                          may have been underestimated. Also, the OIG questioned the Service’s
                          support for $6.3 million in capital expenditures for hardware and software
                          upgrades associated with the consolidation. The Service subsequently
                          provided justification for the capital expenditures, which the OIG found to
                          be generally responsive to its concerns.

                          According to the OIG’s November 24, 2000, report, postal management
                          revised its lease cost estimates for the Accounting Service Center. This
                          revision reduced estimated savings from $78 million to the current
                          estimate of $74 million. The OIG concluded that this and other actions the
                          Postal Service was planning were responsive to the OIG’s concerns and
                          concurred with the IT Department’s analyses that consolidating the San
                          Mateo IT Center’s IT functions into other postal IT centers would result in
                          savings.


Economic and Other        In 2000, when the Service’s IT Department prepared the DAR to support its
Conditions Have Changed   proposal to close the San Mateo IT Center, general economic conditions
Since the DAR Was         were noticeably better than they are currently; and the Service had not yet
                          made plans to automate and reengineer its field accounting activity, which
Prepared in 2000          involves closing its 85 district accounting offices and consolidating
                          residual activity into its 3 Accounting Service Centers. The IT
                          Department’s proposal to close the San Mateo IT Center was based on
                          several major economic assumptions that have since changed. First, when
                          the IT Department prepared the San Mateo DAR, it noted that the job
                          market in the Bay Area was very good and that employees with IT skills
                          were in great demand, thereby making it difficult to recruit and retain IT
                          employees at the San Mateo IT Center. Since then, however, the general
                          job market has declined significantly. For example, in the Bay Area, from
                          2000 to 2002, the unemployment rate increased from 2.2 percent to 5.4
                          percent. Even more dramatic was the reversal in employment growth.
                          From 1999 to 2000, the number of Bay Area employees grew by 3.8
                          percent.11 In contrast, the number of these employees contracted by 5.9
                          percent from 2000 to 2002. Given the increase in unemployment and the
                          shrinking employment growth in the Bay Area, current IT labor costs may




                          11
                           BLS data.




                          Page 19                                             GAO-03-205 Postal Service
not be as high as they were in 2000, thereby creating a more favorable
recruiting environment for the Service.

Second, the IT Department received an appraisal in 2000, indicating that it
could reasonably expect to sell its San Mateo facility within 6 months for a
minimum price of $49 million. However, according to real estate experts,
office-building values in the San Mateo area are currently depressed. From
the 4th quarter of 2000 to the 2nd quarter of 2002, average asking rents fell
by about 60 percent, and office vacancy rates increased nearly sixfold,
from less than 4 percent to 22 percent. As a result of this depressed real
estate market, the time and value estimates that the IT Department
received in 2000 for the San Mateo facility may be out of date.

In view of what might be significant changes in some of the economic
assumptions used in the San Mateo DAR, we asked the Service about
updating (1) the estimate of the fair-market value of the San Mateo
building and property and (2) the estimate of rental rates for office space
in the Bay Area. The Service said that it was too costly to have a
commercial real estate broker update this information before the Service
was ready to make a decision about closing the San Mateo IT Center.
However, the Service acknowledged that the commercial office market in
the Bay Area has changed since the DAR was prepared in 2000. Postal
officials said that the key assumptions used in preparing the DAR would
be updated before the Service makes a decision about closing the San
Mateo IT Center. Until these data are updated, it is uncertain how much
the Service would save by closing the San Mateo IT Center.

Another significant change indicating the need to update the San Mateo
DAR is the Service’s plans to revamp its accounting functions. In 2001, the
Service announced plans to automate and reengineer its field accounting
activity. These changes will result in the Service closing its 85 district
accounting offices; eliminating 1,063 field accounting technicians in these
offices; and consolidating the residual activities into its 3 Accounting
Service Centers located in Eagan, St. Louis, and San Mateo. Postal officials
stated that this would result in about 350 more accounting technician and
finance positions at these 3 centers. As noted earlier, the San Mateo DAR
includes a plan to move the accounting functions and its 102 employees
into leased space in the Bay Area. The DAR included $2.1 million as the 3-
year estimated cost for this leased space. As a result of the planned
consolidation of district accounting functions, the Service’s estimated cost
of leased space may no longer be accurate for its accounting functions in
the Bay Area and could affect projected savings associated with closing
the San Mateo IT Center. Given this possibility, before the Service makes


Page 20                                              GAO-03-205 Postal Service
                       its decision about closing the San Mateo IT Center, the DAR may also need
                       to be reviewed and updated, if appropriate, to reflect the cost associated
                       with obtaining the leased space necessary to accommodate about 40
                       additional accounting technician and finance positions.


                       Relocation experts we interviewed reported that plant and facility closings
Relocation Experts     generally have negative economic and social impacts on displaced
Report that Negative   employees and their families. Typically, some employees experience
                       negative economic impacts, others experience negative social impacts,
Economic and Social    and some experience both when the plant or facility where they work
Impacts Generally      closes. The experts told us that employees who do not relocate with their
                       jobs typically experience economic impacts, such as lost income, loss of
Accompany Plant and    retirement benefits, and lower paying jobs upon reemployment. Experts
Facility Closures      also noted that employees who relocate with their jobs are likely to
                       encounter social impacts, such as marital stress, separations from family
                       members, and the loss of social ties. In addition to the negative social
                       impacts, the experts noted that dual-income families who relocate may
                       face negative economic impacts when the trailing spouse has to give up
                       employment in order to relocate.

                       Experts’ opinion and research done on plant and facility closures indicate
                       that such events have a greater negative impact on older employees than
                       on younger employees. Older employees are less likely than younger
                       employees to be reemployed and are more likely to experience social
                       difficulties when relocating. Research also indicates that an increasing
                       percentage of employees are declining relocation offers because they want
                       to avoid the social and economic impacts associated with moving to a new
                       geographic location, particularly the disruptions to family ties that often
                       ensue. Research further shows that elder care is playing an increasingly
                       important role in employee relocation decisions.

                       Notwithstanding the negative impacts closures can have on employees and
                       their families, closures occur across the nation and are done for a variety
                       of business reasons and purposes. Research also indicates that in the final
                       analysis, all affected employees may not view plant and facility closures
                       negatively. Some employees may actually come to view their experience
                       with a plant or facility closure as positive because it affords them the
                       opportunity to redirect their careers, develop new competencies, or leave
                       unsatisfying jobs.




                       Page 21                                             GAO-03-205 Postal Service
Displaced Employees       According to the relocation experts we interviewed, studies have shown
Typically Face Economic   that the economic impacts on employees displaced by a plant or facility
Impacts                   closure include the loss of earnings due to periods of unemployment, loss
                          of retirement benefits, and lower wages upon reemployment. For example,
                          a 1999 study on job displacement stated that about 20 percent of displaced
                          employees who found employment did so at greatly reduced wages,
                          earning one-half or less than they did previously.12 The study also found
                          that between one-fourth and one-third of displaced employees remained
                          unemployed a year or more after displacement. Similarly, another study of
                          displaced employees found that about 30 percent remained unemployed
                          for a year or more.13 Studies also indicated that the longer displaced
                          employees remained unemployed, the greater the drop in their wages
                          when reemployed, with some displaced employees becoming so
                          discouraged that they stop looking for work altogether.

                          Similar findings were echoed in a survey of employees displaced by a New
                          York plant closure in 1998.14 Survey respondents reported several impacts
                          they experienced as a result of the worksite closure, including earnings
                          losses, declines in job quality, and financial difficulties. The survey
                          disclosed that most displaced plant employees had held two or more jobs
                          since the closure, with some holding as many as eight jobs in 3 years. The
                          survey results, published in a 2001 report, indicated that as a result of the
                          closure, employees experienced a 17 percent decline in median income
                          and a 33 percent increase in commuting distances. The researcher also
                          found precipitous declines in job quality, in terms of regular raises,
                          sufficient income, promotions, and skill development. In addition, the
                          report stated that many of the displaced employees experienced financial
                          difficulties, such as having to sell their homes.




                          12
                            Paul Attewell, The Annals of the American Academy of Political and Social Sciences, The
                          Impact of Family on Job Displacement and Recovery, (Mar. 1999).
                          13
                            Michael Podgursky and Paul Swaim, Duration of Joblessness Following Displacement,
                          Industrial Relations 26(3): pp. 213-226 (1987).
                          14
                           Jennifer S. Tiffany, Insights from a Plant Closing: Dislocated Workers and Economic
                          Development Planning, Planners Network, Hunter College Dept. of Urban Planning No.
                          148, (July/August 2001).




                          Page 22                                                       GAO-03-205 Postal Service
Relocated Employees         Relocation experts we interviewed told us that families commonly
Typically Face Social and   experience social difficulties when relocating, including disruptions of
Economic Impacts            their children’s education and social well-being, increased marital stress,
                            and a sense of loss caused by separations from family members.
                            Relocation experts and available studies also point out that in addition to
                            social adjustments, trailing spouses in dual-income households may face
                            economic impacts due to the loss of employment and income. Research
                            indicates that in over 50 percent of married households, both spouses are
                            employed. This prevalence of dual-income households in the workforce is
                            prompting companies to provide employment assistance to trailing
                            spouses in order to reduce family stress during relocation transitions,
                            according to studies and experts. For example, employers assist trailing
                            spouses in a variety of ways, including paying a job-finders fee, assisting
                            with finding employment either within or outside the company, and
                            reimbursing the spouse for lost income while seeking employment at the
                            new location. Examples of other types of assistance provided trailing
                            spouses include resume preparation and review, development of job
                            search strategies, and career counseling. According to the experts we
                            interviewed, until and unless a trailing spouse finds comparable
                            employment at the new location, a dual-income household might lose 30
                            percent to 50 percent of its income when it relocates.

                            The impacts of relocation on trailing spouses have also been known to
                            include emotional and cultural adjustments. For example, relocation
                            experts noted that trailing spouses might be natives of the originating city
                            and could experience a sense of loss at the new location. According to
                            experts, trailing spouses may experience difficulties in adjusting to less
                            culturally diverse regions of the country where there may be fewer
                            opportunities associated with their culture, religion, or language. Trailing
                            spouses may also find it difficult to transition from large urban areas
                            where they have access to ethnic activities, with which they have an
                            affinity, to small rural areas where they may feel isolated. Experts also
                            stated that career development for trailing spouses who worked may be
                            negatively affected, and they might have difficulty finding comparable
                            employment. In addition, according to a 1998 study, relocation can lead to
                            loss of continuity of training and skill development, as the new location
                            may not have the same career opportunities.15 For these reasons, trailing



                            15
                             Lillian T. Eby and Tammy D. Allen, Perceptions of Relocation Services in Relocation
                            Decision Making: An Exploratory Field Study, Group and Organizational Management,
                            Vol. 23 No. 4 (Dec. 1998).




                            Page 23                                                     GAO-03-205 Postal Service
                          spouses may be dissatisfied with their new jobs, according to experts.
                          Experts also told us that the difficulty associated with finding comparable
                          employment is compounded when people move from large urban areas,
                          such as the Bay Area, to smaller communities that traditionally have fewer
                          employment and career prospects.


Older Employees Often     Research and relocation experts report that when a plant or facility closes,
Face Greater Economic     older employees tend to encounter greater economic and social difficulties
and Social Impacts than   than younger employees. While there is no consensus among studies and
                          experts regarding the age at which individuals encounter greater
Younger Employees         difficulties due to job loss, there is general agreement that as workers age,
                          the impacts of job displacement become increasingly severe. In particular,
                          research and industry experts state that workers in their mid-40s begin to
                          face economic impacts attributable to age because they face more
                          obstacles than younger employees in obtaining new employment. Experts
                          also noted that these older employees potentially experience greater
                          economic losses as they are typically vested in their retirement systems
                          and could potentially lose their retirement benefits due to job
                          displacement. Additionally, according to relocation experts, workers in
                          their mid-40s and older who relocate generally face greater social impacts
                          than younger employees.

                          In November 2001, we reported that although employees age 55 and older
                          are not more likely to lose their jobs than younger workers, a job loss for
                          these older employees potentially has more severe consequences.16 For
                          example, we noted that employees age 55 and older may experience larger
                          losses in earnings upon reemployment, compared with younger
                          employees. We also reported that such employees were significantly less
                          likely than younger employees to be reemployed. In addition, we stated
                          that the potential loss of health care benefits following a job loss could be
                          more problematic for employees who are age 55 and older because they
                          tend to have more health problems than younger employees. Other studies
                          on job loss reported similar findings regarding older workers.

                          Similar to the greater economic impacts older employees may experience
                          due to job displacement, relocation experts we interviewed also told us
                          that employees in their mid-40s and older are more likely to face greater



                          16
                           Older Workers: Demographic Trends Pose Challenges for Employers and Workers,
                          GAO-02-85 (Washington, D.C.: Nov. 16, 2001).




                          Page 24                                                  GAO-03-205 Postal Service
                        social difficulties in relocating than younger individuals. For example,
                        according to experts, employees in their mid 40s and older are more likely
                        to have elderly parents, grandchildren, or existing health conditions.
                        Experts also told us that these employees are more likely to have high
                        school or college-aged children who are often reluctant to relocate.
                        Moreover, employees who are in their mid-40s and older are typically less
                        inclined to move than younger individuals. For example, one relocation
                        expert we contacted noted that older employees feel that relocating to a
                        new community requires that they sacrifice social networks, long-time
                        friendships, and family relationships that took years to establish. In
                        addition, experts pointed out that trailing spouses of older employees
                        might also experience more difficulties in finding new jobs because of age
                        discrimination.


Employees Decline       Given the wide range of potential impacts from relocation, in particular
Relocation Offers for   the impacts on families, studies indicate that a growing number of
Various Reasons         employees are declining to relocate. According to survey results published
                        by Atlas Van Lines in 2001, the number of companies reporting that
                        employees rejected relocation offers increased from 39 percent in 1999 to
                        50 percent in 2001.17 The most frequently cited reason for declining to
                        relocate was “family ties” (81 percent). Other reasons cited included
                        “personal reasons” (73 percent), “no desire to move” (67 percent), and
                        “spouse employment” (48 percent).

                        The Employee Relocation Council (ERC) reported in 2001 that family-
                        related considerations, such as elder care, child care, and schools played a
                        crucial role in employees’ relocation decisions.18 Elder care was
                        specifically identified as an area of increasing importance in employees’
                        relocation decisions. The report estimates that 80 percent of elderly
                        persons have lived alone or with a family member, rather than in nursing
                        homes. As a result, according to ERC, more employees and their families
                        will be increasingly responsible for helping elderly relatives who need
                        assistance with the activities of daily living, including shopping,


                        17
                         Atlas Van lines, Inc., Corporate Relocation Survey 2001, 34th Annual Results, (Memphis,
                        TN: Apr. 2001). Atlas Van Lines, Inc., is a nationwide motor carrier that provides relocation
                        services and publishes relocation-related publications, including its Survey of Corporate
                        Relocation Policies document.
                        18
                         Employee Relocation Council, Family Issues Research Report, (2001). The Employee
                        Relocation Council is a professional membership association that conducts research on
                        emerging trends in employee relocation assistance.




                        Page 25                                                         GAO-03-205 Postal Service
                          transportation, personal care, paying bills, preparing meals, walking, and
                          house cleaning. The ERC report also noted that employers offer various
                          types of elder care assistance, such as paying to move elderly relatives,
                          providing lists of elder care facilities and programs, and providing written
                          materials on elder care needs. ERC further reported that similar services
                          are provided for relocating families needing child care services or help in
                          finding schools for their children.


Business Closures Occur   Plant and facility closures are the result of business decisions made for a
and Sometimes Create      variety of reasons and purposes. Notwithstanding their potential impact
Opportunities for         on employees and their families, business closures occur and affect
                          thousands of employees annually. Research indicates that in the final
Employees to Make Life    analysis, not all affected employees view plant and facility closures
and Career Changes        negatively.

                          According to experts, closures, accompanied by employee displacements
                          are largely fueled by corporate downsizing. For example, the BLS reported
                          that there were 1,253 worksite closures that resulted in nearly 380,000
                          employee layoffs throughout the United States in calendar year 2001.19 BLS
                          data also show that in the Bay Area, where the San Mateo IT Center is
                          located, there were 22 worksite closures that resulted in over 5,800
                          employee layoffs in calendar year 2001. According to studies and
                          relocation experts, businesses make decisions to downsize, restructure, or
                          close facilities for a wide variety of reasons, primarily driven by business
                          needs. According to unemployment research, for example, plant
                          relocations are organizational changes that are commonly taken to pursue
                          company development or to solve financial and operational problems.
                          Experts told us that companies often implement different reorganization
                          strategies to increase profits and competitiveness and to respond to
                          various business factors, such as the economy, the stock market, business
                          competition, the availability of skilled workers, and the cost of labor. For
                          example, according to one expert we contacted, companies typically move
                          facilities to reduce costs, often relocating to regions of the country where
                          labor costs are lower.




                          19
                           BLS defines “worksite closures” as the full closure of either multiunit or single-unit
                          establishments or the partial closure of a multiunit establishment where entire worksites
                          affected by layoffs are closed or planned to be closed.




                          Page 26                                                        GAO-03-205 Postal Service
Recent Bay Area worksite closures have resulted in employee layoffs.
While specific data on the number of employee layoffs by Bay Area
companies are not available, media reports indicate that several thousand
employees have lost their jobs over the past year. For example, in May
2002, it was reported that a San Francisco based financial services
company implemented its first large-scale employee layoff since 1987,
reducing its workforce by approximately 4,500 employees in order to keep
the company’s total complement under 20,000. In addition, another report
indicated that as a result of a Bay Area based corporate merger in the
technology sector, an estimated 15,000 positions would be eliminated
worldwide over the next 2 years, including many in the Bay Area. Another
event that may affect the Bay Area economy was reported in June 2002,
when a major air carrier announced that as a result of the September 11,
2001, terrorist attacks, it had applied for federal assistance to aid its
recovery from these events. The air carrier also plans to increase its
viability by reducing costs, such as through salary cuts from pilots,
managers, and administrative employees. However, if these efforts are
unsuccessful, the jobs of approximately 18,000 Bay Area employees may
be affected.

Experts also told us that companies make decisions to displace or relocate
employees according to, among other things, business needs, economic
conditions, competition, company size, acquisitions and mergers, and the
number of employees on the payroll. For example, a relocation expert we
interviewed told us her company, which employs approximately 2,800
employees, recently downsized by closing two of its office locations. While
some employees were retained and relocated, others lost their jobs and
their employee benefits.

Despite the negative social and economic impacts that closures have on
employees, unemployment researchers have suggested that a job loss
sometimes creates opportunities for individuals to change careers and life
directions. Additional research also indicates that after a period of time,
some employees may actually come to view their experiences with a plant
or facility closure as positive because it gave them the opportunity to
redirect their careers, develop new competencies, or leave unsatisfying
jobs. Research and relocation literature also indicates that families differ
in their abilities to adapt to change. Moreover, relocation experts stated
that in many cases, families adapt well and make very successful
transitions.




Page 27                                              GAO-03-205 Postal Service
                            Ninety-five displaced New York IT Center employees responded to our
New York IT Center          survey and reported economic impacts, such as diminished earnings; and
Employees Reported          social impacts, such as broken family ties. Of these 95 respondents, 46
                            remained with the Service in the New York City area and reported facing
Economic and Social         more economic impacts than social impacts. The remaining 49 employees
Impacts as a Result of      relocated to postal IT centers in other geographic areas and reported more
                            social impacts than economic impacts.
the Closure
                            Several options were available to displaced New York IT Center
                            employees, including working for the Postal Service in the New York City
                            area—though most likely not in an IT job; relocating to another postal IT
                            center; retiring with a buyout; or leaving the Service. Employees most
                            concerned about social issues, such as maintaining close family ties,
                            tended to remain in the New York City area and deal with the resulting
                            economic impacts, such as diminished earnings. Our survey results
                            indicate that employees most concerned about economic issues, such as
                            maintaining their level of earnings and career potential, relocated to other
                            postal IT centers and dealt with the ensuing social impacts, such as
                            diminished ties with family and friends left behind in the New York City
                            area. Still other employees opted to retire or leave Postal Service
                            employment altogether. Retiring or leaving the Service at the time of the
                            New York IT Center closure may have been particularly appealing to some
                            employees because as part of a nationwide restructuring occurring at that
                            time, the Service was offering a monetary incentive of 6 months’ pay to all
                            eligible employees who opted to retire or take an early out. In total, 104 of
                            the 283 displaced New York IT Center employees chose to remain with the
                            Service in the New York City area; 82 relocated to postal IT centers in
                            other geographic areas. The remaining 97 displaced employees retired,
                            separated from the Service, or found other jobs with the Service outside
                            the New York City area.


Postal Employees Had        From August to November of 1992, the PMG restructured the Service. To
Several Options When the    minimize the impact on employees, an early-out option was offered to
New York IT Center Closed   permit most employees to retire at age 50 with 20 years of service or any
                            age with 25 years of service. A monetary incentive was offered to
                            encourage eligible employees to retire. This incentive was a lump-sum
                            payment equal to 6 months’ pay. According to postal officials, when the
                            Service closed its New York IT Center in 1993, the restructuring had
                            resulted in numerous retirements and an abundance of non-IT jobs in the
                            New York City area to offer displaced IT center employees. Postal officials
                            said the Service was therefore in the position to offer displaced IT center
                            employees—both EAS and bargaining unit—various options that included


                            Page 28                                              GAO-03-205 Postal Service
(1) taking an available Service job in the New York City area that had
become vacant as a result of the restructuring, (2) relocating to another
postal IT center in a different geographic area, or (3) retiring with a
buyout—if eligible. Some employees chose none of these options and
decided to independently find other Service employment outside the New
York City area. Still others opted to leave Service employment altogether.

EAS employees who opted to relocate to other postal IT centers were able
to continue working in the IT field at their same grade and pay. EAS
employees who decided to stay in the New York City area were initially
offered saved-pay for 2 years, but the Service later made saved-pay
permanent for these employees.20 According to some EAS survey
respondents, the Service made its offer of permanent saved-pay for EAS
employees after some EAS employees had already relocated to other
postal IT centers. Some EAS survey respondents reported that they based
their decisions to relocate on their belief that if they stayed in the New
York City area in a lesser graded position, they would receive saved-pay
for only 2 years. Some EAS survey respondents said that if they had
known the Service would make saved-pay protection permanent, they
would have taken a non-IT job and stayed in the New York City area.
Bargaining unit employees who took lower paying Service jobs in the New
York City area were to receive saved-pay protection for 1 year. 21 In many
instances, however, the actual reduction in pay did not occur until about 2
years after the closure because the time that employees spent in a trial
employment status did not count against the 1-year limit. Also, the Service
experienced some delay in making the pay changes in its computerized
payroll system. Figure 3 shows the number and percent of displaced New
York IT Center employees who chose each option.




20
 Saved-pay allows an employee reassigned to a lower paying job to retain the pay of
his/her former position.
21
  A Memorandum of Understanding between the Postal Service and the APWU provided
that bargaining unit employees relocating to lower paying postal jobs in the New York City
area would have saved-pay protection for 1 year.




Page 29                                                        GAO-03-205 Postal Service
                            Figure 3: Options Selected by Displaced New York IT Center Employees in 1993




Postal Employees Who        For many displaced New York IT Center employees, the decision to accept
Took Available Jobs with    other postal employment in the New York City area meant that they fared
the Postal Service in the   worse economically in the long run than those who chose to relocate to
                            postal IT centers in other geographic areas. According to a postal official,
New York City Area Faced    when the Service closed the New York IT Center, the Service had
More Economic Impacts       numerous vacancies in the New York City area because it had recently
than Social Impacts         gone through a major restructuring that saw many employees leave the
                            Service through retirement or separation. As a result of the numerous
                            vacancies in the New York City area, the Service was able to offer jobs to
                            displaced New York IT Center employees who did not wish to relocate to
                            postal IT centers in other geographic areas. However, the vacant postal
                            jobs in the New York City area were frequently lower paying, non-IT
                            positions.

                            Using salary data on the 147 displaced New York IT Center employees still
                            employed by the Service at other postal IT centers or postal facilities in



                            Page 30                                                GAO-03-205 Postal Service
the New York City area, we determined that the 68 employees who
relocated (44 bargaining unit and 24 EAS employees) generally fared
better economically than those who remained in the New York City area.
Nine years after the closure, salary data provided by the Service showed
that the average salary of employees who relocated had increased about
11 percent (in constant 2001 dollars); in comparison, the average salary of
employees who remained with the Service in the New York City area had
decreased about 1 percent (in constant 2001 dollars). The impact on salary
between displaced employees who relocated and those who remained in
the New York City area was greater for bargaining unit employees than for
EAS employees. Our analysis of the Service’s salary data shows that the 44
displaced bargaining unit employees who relocated to other postal IT
centers were, 9 years later, earning salaries that averaged about 14 percent
more (in constant 2001 dollars) than they had been earning when the New
York IT Center closed. In contrast, the 43 displaced bargaining unit
employees who remained in the New York City area were earning salaries
that averaged about 6 percent less (in constant 2001 dollars) than the
salaries they were earning at the time of closure. Almost all of the 43
displaced bargaining unit employees who remained in the New York City
area after the closure took lower paying mail clerk positions.

No EAS employees took pay cuts (in actual dollars) as a result of the
closure.22 Nine years after the New York IT Center closed, the 36 displaced
EAS employees working in the New York City area were earning an
average of about 2 percent more (in constant 2001 dollars) than they had
been at the time the center closed. In contrast, the salaries of the 24
displaced EAS employees who relocated to other postal IT centers saw
their salaries increase an average of about 8 percent (in constant 2001
dollars). Displaced EAS employees who relocated, however, fared worse,
on average, than displaced bargaining unit employees who relocated.

Generally, survey respondents who took postal jobs in the New York City
area indicated they did so because they were concerned about the social
impacts they believed they would face if they left the New York City area.
For example, 34 of the 46 survey respondents who remained in the New
York City area believed it was very important to remain in the area in
order to maintain family ties with parents and other relatives—ties that



22
 Typically, displaced EAS employees took non-IT management positions in such areas as
customer service, maintenance, financial services, purchasing, and human resources. Two
displaced EAS employees took jobs as local postmasters.




Page 31                                                      GAO-03-205 Postal Service
would otherwise be strained by relocating to a new geographic area. One
respondent who took a postal job in the New York City area commented
that he could not relocate because he was the only person able to provide
care for his aged parents. Another respondent commented that she was
unable to relocate to another postal IT center because her parents’ health
was such that they would not be able to accompany her. A third
respondent who took a postal job in the New York City area commented
that she was unable to relocate for several reasons, one being that she
could not relocate her mother, who lived close by and was about to
undergo surgery. Respondents remaining in the New York City area were
also concerned that relocating to another geographic area could alienate
relationships with their children and grandchildren. Twenty-five of the 46
respondents remaining in the New York City area stated that it was very
important that they remain in close proximity to their children and
grandchildren.

Respondents who remained with the Service in the New York City area
indicated that concerns related to their spouses weighed heavily in their
decisions not to relocate. For example, 24 of the 46 respondents remaining
in the New York City area said that a very important concern they had was
that relocating would strain the relationship they had with their spouse.
One EAS employee decided against relocating because his wife was
pregnant at the time and did not want to sever the close relationship she
had with her physician. Another EAS employee stated that he did not
relocate primarily for family reasons—his spouse was working, and it
would have been very hard to ask her to give up her job and pension and
move across the country to a new location. Twenty-three of the 46
respondents remaining with the Service in the New York City area also
indicated that in reaching their decisions not to relocate, it was very
important to them not to lose social, community, and cultural ties to the
New York City area.

Given that so many of the 46 survey respondents who remained with the
Service in the New York City area did so to minimize the social impacts
they believed relocating would involve, it is not surprising that most had
strong family and cultural ties to the area. Forty-one of the 46 respondents
had parents, grandchildren, or relatives living in the New York City area.
Thirty-six of the 46 respondents had a spouse/partner living with them,
and 34 had children. Most of the respondents who remained in the New
York City area also tended to be more senior employees with many years
of postal service. Forty of the 46 respondents were 40 years old or older,
and 30 of the 46 respondents had over 15 years of postal service at the
time the New York IT Center closed.


Page 32                                              GAO-03-205 Postal Service
                           Several survey respondents who accepted postal jobs in the New York City
                           area, rather than relocate, furnished written comments describing the
                           economic impacts they experienced following the closure of the New York
                           IT Center. In general, they believe that they suffered financially by staying
                           with the Service in the New York City area. As indicated earlier, our
                           analysis of the Service’s salary data confirmed that employees who
                           relocated generally fared better economically than those who did not.
                           Some said that their salaries would have been progressively higher; and
                           their chances for advancement would have been better, if they had
                           relocated to another postal IT center.


Postal Employees           For many displaced New York IT Center employees, the decision to move
Relocating to Postal IT    to another postal IT center in another geographic area was accompanied
Centers in Other           by more social impacts than economic impacts. When the Service closed
                           the New York IT Center in 1993, it offered displaced employees the
Geographic Areas Faced     opportunity to relocate to other postal IT centers, such as Eagan and San
More Social Impacts than   Mateo. By relocating to other postal IT centers, employees were able to
Economic Impacts           continue working in the IT field with no pay cut. Eighty-two of the 283
                           displaced New York IT Center employees chose to relocate to a postal IT
                           center in another geographic area.

                           Survey respondents who relocated to postal IT centers in other geographic
                           areas often reported encountering very significant social impacts as a
                           result of their moves. For example, 23 of the 49 relocated postal
                           employees who responded to our survey reported that they had found it
                           very difficult to adjust to the new geographic area, work environment, and
                           local culture. The same number of respondents also reported finding it
                           very difficult to maintain or establish social, community, and cultural ties
                           or find supporting communities where they could get involved. One
                           respondent who relocated to the Eagan IT Center reported that her family,
                           coming from New York City, found it difficult to assimilate into the
                           midwestern culture. Another respondent found it difficult being away from
                           family and friends and missing out on important family events. She noted
                           that relocating had strained her marriage and forced her to give up a
                           private business she had been running in New York City.

                           Many survey respondents who relocated reported that they had been
                           greatly affected by concerns related to their spouse/partner. For example,
                           18 of the 49 respondents reported that since relocating, their
                           spouse/partner had found it very difficult to maintain or secure a
                           job/career, benefits, and retirement security. Nineteen respondents also
                           indicated that the relocation had been very difficult because of the strains


                           Page 33                                              GAO-03-205 Postal Service
it had placed on relationships with spouses/partners. One respondent who
relocated commented that it had been emotionally difficult for his wife to
relocate and leave her family behind.

Twenty-two of the 49 relocated respondents reported that relocating from
the New York City area to another geographic area had put strains on
family relationships; and 20 respondents reported that as a result of the
relocation, it had been very difficult to keep their families together. One
respondent noted that it had been difficult for him and his wife to leave
the New York City area because they had children working and going to
school there, and they were also leaving elderly parents behind.

Twenty-three of the 49 respondents who relocated stated that as a result of
their relocation, they had a very difficult time maintaining social ties with
parents and other relatives. One respondent commented that the
relocation meant not being there for his mother when she passed away
and not being able to be with his relatives. Twenty-two respondents stated
that as a result of relocating to another geographic area, they had a very
difficult time assisting with the physical care of their parents or other
relatives. One employee commented that relocating had placed
tremendous stress on him as well as his wife, children, parents, and other
relatives.

Finally, survey respondents who relocated typically reported that they had
experienced significant social impacts associated with the relocation
itself. Twenty of the 49 relocated respondents reported that they had
experienced a very difficult time dealing with the cost, time, and energy
involved in relocating from the New York City area to their new homes in
another geographic area. Fourteen respondents also noted that they had a
very difficult time selling their homes in the New York City area or buying
homes in their new geographic area. One respondent who was a
bargaining unit employee stated that the Service did not help him sell his
house in the New York City area or assist with the costs associated with
the sale. Another survey respondent stated that he lost money relocating
because he had just refinanced his home in the New York City area when
the Service announced the closure of the New York IT Center. He believed
it would have been better if postal officials had given employees more lead
time to plan their affairs before the Service closed the New York IT Center.
Another respondent believed that relocating workers needed more time
than the Service provided to research housing options, schools, and
medical facilities. He believed that because employees had insufficient
time to research these things, it created a social hardship on them and
their families that could have been avoided. According to postal officials,


Page 34                                              GAO-03-205 Postal Service
the Service provides bargaining unit employees about 7 months’ notice of
planned closures.

Most survey respondents who relocated to other postal IT centers
indicated that they did so because they were concerned about the
economic impacts they believed they would face if they remained in the
New York City area. Forty-four of the 49 respondents who relocated
reported that keeping their jobs for economic/financial well-being had
been very important to them when deciding whether or not to relocate to
another postal IT center. Forty of the 49 respondents said that concerns
about maintaining their pension plan and retirement security had been a
very important factor in deciding to relocate. One respondent indicated
that he and his colleagues who relocated to Eagan felt that they had no
real choice but to relocate if they wanted to maintain their financial well-
being. He stated that the only option the Service offered him besides
relocating to another postal IT center was to remain in the New York City
area as a mail clerk or letter carrier with temporary saved-pay. Another
respondent who relocated also stated that she didn’t believe she had any
other viable choice besides relocating. She stated that she was too old to
look for a nonpostal job and didn’t believe she could afford to remain with
the Service in the New York City area in a non-IT position and take a
reduction in pay when her saved pay expired. As previously noted, our
analysis of the Service’s salary data for displaced New York IT Center
employees confirmed that employees who relocated generally fared better
economically than those who remained in the New York City area.

Twenty-two of the 49 relocated survey respondents also reported that in
deciding to relocate, they had considered it very important that they keep
their IT jobs for career advancement purposes. Twenty respondents also
reported that they had been very concerned that as older workers, they
would have found it very difficult to find satisfactory jobs if they had not
relocated to other postal IT centers and kept their IT jobs. A respondent
who relocated to another postal IT center stated that he had no other
choice but to relocate if he wanted to continue working with the Service in
an IT position.

Most of the 49 survey respondents who relocated to postal IT centers in
other geographic areas tended to have fewer years of service than the 46
respondents who remained in the New York City area. Only 16 of the 49
respondents who relocated to another postal IT center had 15 years or
more service, whereas 30 of the 46 respondents who stayed with the
Service in the New York City area had 15 years of service or more.
Otherwise, the demographics of those who relocated to a postal IT center


Page 35                                              GAO-03-205 Postal Service
                         in another geographic area were similar to those of the respondents who
                         stayed in the New York City area. Thirty-eight of the 49 relocated survey
                         respondents were 40 years of age or older at the time the New York IT
                         Center closed; 42 had parents, grandchildren, or relatives living in the New
                         York City area; and 39 had a spouse/partner living with them. In contrast,
                         40 of the 46 respondents who remained with the Service in the New York
                         City area were 40 years of age or older at the time the New York IT Center
                         closed; 41 had parents, grandchildren, or relatives living in the New York
                         City area; and 36 had a spouse/partner living with them.


                         San Mateo IT Center employees responding to our survey anticipate more
San Mateo IT Center      economic impacts than social impacts if they choose to remain in the Bay
Employees Anticipate     Area and more social impacts if they relocate with the Service to another
                         postal IT center. If the Service closes the San Mateo IT Center, the options
Mostly Economic          available to San Mateo IT employees to minimize their economic and
Impacts if they Opt to   social impacts vary, depending on individual circumstances and job status.
                         Some affected employees will likely seek other employment in the Bay
Stay in the Bay Area     Area, some will likely retire, and others will likely relocate to another
and Social Impacts if    postal IT center in order to keep their IT jobs.
they Opt to Relocate     On the basis of the best information they had available at the time, 167 (78
to Another Postal IT     percent) of the 213 San Mateo IT employees responding to our survey
Center                   indicated that they would likely stay in the Bay Area if the Postal Service
                         closes the San Mateo IT Center. Under such circumstances, they said they
                         would expect to face more economic impacts than social impacts. Many
                         anticipate that their decision to stay in the Bay Area could result in them
                         losing their Postal Service jobs. According to postal officials, affected San
                         Mateo IT employees will be able to apply for vacant postal positions,
                         provided they meet the minimum qualifications; however, the Service does
                         not anticipate holding open vacant positions in the Bay Area for these
                         employees. Furthermore, the Service no longer anticipates that it will have
                         many job vacancies in the Bay Area.

                         Thirty-six (17 percent) of the employees responding to our survey
                         indicated that if the San Mateo IT Center closes, they would probably
                         relocate to another postal IT center. Moreover, they anticipate facing more
                         social impacts than economic impacts from their decisions. Survey
                         respondents indicating they would likely relocate reported that they were
                         doing so primarily for their financial well-being and retirement security.
                         Many provided narrative comments in their survey responses describing
                         how relocations would probably lead to family separations for at least a
                         few years. Some of the married respondents indicated they would


                         Page 36                                              GAO-03-205 Postal Service
                           probably experience some economic impacts from their relocation
                           decision because they would have trailing spouses who would be leaving
                           their jobs in the Bay Area. The remaining 10 survey respondents (5
                           percent) indicated they were unsure what they would do if the Service
                           closed the San Mateo IT Center.


Options Available to San   All San Mateo IT Center employees meeting the minimum age and service
Mateo IT Center            requirements have the option of retiring. According to postal officials, the
Employees                  Service anticipates offering early retirements to all eligible employees
                           provided that the Office of Personnel Management approves the Service’s
                           request, but the Service does not anticipate offering buy-outs. Other
                           options available to San Mateo IT Center employees depend, in part, on
                           whether they are bargaining unit or EAS employees. Bargaining unit
                           employees are covered by a collective bargaining agreement with a no-
                           layoff provision and are therefore guaranteed a job at another postal IT
                           center. EAS employees are not guaranteed a job at another postal IT
                           center. According to postal officials, about half of the EAS employees will
                           be offered jobs at other postal IT centers. Bargaining unit and EAS
                           employees who do not retire, relocate to another postal IT center, or find
                           another postal job on their own will likely be separated from the Service.

                           Two years ago, when the IT Department first announced its proposal to
                           close the San Mateo IT Center, postal officials indicated that the Service
                           could likely find postal jobs for bargaining unit employees who wanted to
                           stay in the Bay Area rather than relocate to another postal IT center. For
                           most bargaining unit employees, this would have involved a downgrade to
                           a mail clerk position. However, according to postal officials, most affected
                           employees would have retained their IT pay for up to 2 years, after which
                           their pay would have been reduced to the pay of their new positions.
                           However, in July 2002, postal officials told us that conditions had changed
                           and that the Service was no longer in a position to accommodate
                           bargaining unit employees who want to stay in the Bay Area. San Mateo IT
                           Center employees can still apply for any postal job vacancies, provided
                           they meet the minimum qualifications; however, few vacancies are
                           anticipated for the Bay Area. Postal officials said that because of recent
                           drops in mail volumes and advances in automated mail processing, the
                           Service now has an excess of mail clerks in the Bay Area. Nevertheless,
                           postal officials indicated that in keeping with the Service’s collective
                           bargaining agreement with APWU, all bargaining unit employees would be
                           offered jobs in one of its other postal IT centers—although most of the job
                           offers would probably be for positions in its Eagan IT Center.



                           Page 37                                              GAO-03-205 Postal Service
                           The Service has indicated that it also plans to make available to all EAS
                           employees the services of a private job search firm to help them find
                           employment outside the Service. However, according to postal officials,
                           the Service has no plans at this time to extend these services to its
                           bargaining unit employees because of their no-layoff clause, which EAS
                           employees do not have. Postal officials said that the benefits provided San
                           Mateo bargaining unit employees are specifically governed by its collective
                           bargaining agreement with the APWU. In appendix I, we present (1)
                           demographic data for San Mateo IT Center employees and displaced New
                           York IT Center employees who responded to our survey and (2) the likely
                           options/opportunities for San Mateo employees and options/opportunities
                           that were available for displaced New York employees.


San Mateo IT Center        Essentially all of the 167 San Mateo survey respondents who indicated that
Employees Planning to      they would likely stay in the Bay Area reported that they anticipate their
Stay in the Bay Area       decisions will result in more economic impacts than social impacts.
                           According to postal officials, those staying in the Bay Area will likely lose
Anticipate More Economic   their postal IT jobs and will not likely find other jobs with the Postal
than Social Impacts        Service because of its efforts to downsize. Further, the respondents were
                           concerned that because of the tight job market in the technology sector,
                           they might be unable to find nonpostal IT jobs in the Bay Area. Of the 167
                           respondents, 140 (84 percent) anticipated difficulty finding jobs to
                           adequately support their families. Finally, respondents said they were
                           concerned that if they could not find satisfactory jobs with the Postal
                           Service or the federal government, they would lose their ties to the federal
                           retirement and health care systems. Respondents planning to stay in the
                           Bay Area generally anticipate a range of outcomes that include retiring
                           earlier than planned to adjusting to a reduced standard of living.

                           San Mateo respondents who indicated that they planned to stay in the Bay
                           Area cited a number of reasons for their decisions, including age, longevity
                           in the Bay Area, extensive family and social ties in the area, and working
                           spouses with substantial time invested in their careers. Three-fourths of
                           the respondents planning to stay are over 45 years old; have lived in the
                           Bay Area for more than 20 years; and indicated that they have extensive
                           family ties, social ties, and other responsibilities in the area. These older
                           respondents also typically have working spouses who are reluctant to
                           leave their jobs and lose their pension benefits. For example, 79 of the 134
                           respondents (59 percent) who provided reasons for not relocating
                           identified concerns with spouses’ careers as a primary motivator in their
                           decision not to relocate. This is not surprising since 49 of the 79



                           Page 38                                              GAO-03-205 Postal Service
respondents (62 percent) reported that their spouses contributed at least
50 percent to the household income.

San Mateo respondents who indicated they would not likely relocate also
reported having high school and college age children reluctant or
unwilling to relocate and aging parents in need of assistance who would
be left behind. Of the 60 respondents with high school and college age
students, 58 (97 percent) said keeping their family together was a very
important factor in deciding not to relocate. In addition, 78 percent of
those deciding not to relocate cited maintaining social and community ties
as an important factor in their decision. Over 70 percent also cited health
issues and a reluctance to sell their homes as factors in deciding not to
relocate. A similar percentage were also concerned that maintaining their
health care coverage might become difficult should they lose their postal
IT jobs–a particular concern if family members have serious health
conditions and continuity of care and coverage for preexisting conditions
becomes critical.

Under the Service’s collective bargaining agreement with APWU, San
Mateo IT Center bargaining unit employees are guaranteed jobs at other
postal IT centers. Thus, these employees have the option of relocating
with their jobs to other postal IT centers and continuing employment with
the Service. Conversely, EAS employees are not guaranteed jobs, and
some San Mateo EAS employees will likely not have the option of
relocating and continuing employment with the Service. According to the
Service, the option to relocate will likely be extended to about half of the
EAS employees. One respondent who was an EAS employee, age 49 with
15 years of service, commented that not having the assurance of being able
to relocate to another postal IT center has increased his anxiety about the
potential closure. He reported that he is not eligible for retirement and
doubts that he will be offered other employment with the Service. He
indicated that he essentially has no option but to find a nonpostal job
because he is the primary breadwinner and has many years to go on his
mortgage payments. He indicated that the Service will pay him severance
pay equal to 4 or 5 months’ salary, but he anticipates much difficulty
finding another IT job in the Bay Area because of the tight labor market
for technology positions.

The majority of the 167 San Mateo respondents who anticipate staying in
the Bay Area reported that they will likely seek whatever postal
employment that may be available in the Bay Area, although many
indicated in their narrative responses that such job prospects do not look
good. The remaining respondents who anticipate staying in the Bay Area


Page 39                                             GAO-03-205 Postal Service
reported that they would likely retire or seek nonpostal employment in the
Bay Area. (See fig. 4 for details.)

Figure 4: Options San Mateo Employees Expect to Pursue if Staying in the Bay Area




Note: San Mateo IT Center employees who responded to GAO survey.


San Mateo respondents indicating that they would likely seek other
employment in the Bay Area were skeptical about finding such
employment. According to postal officials, finding other postal
employment is unlikely because of Servicewide downsizing. Some
respondents thought they might qualify for other postal management or
administrative positions, but they were not optimistic about the
availability of such positions. Both EAS and bargaining unit respondents
seeking nonpostal employment anticipated difficulties because of the
current slump in IT employment and the added difficulty faced by older
workers in finding new employment. Additionally, those anticipating
seeking new employment were concerned that their earnings would likely
be less and that they would lose current health and retirement benefits.

Some San Mateo respondents indicated they would be willing to take a
non-IT job if it would mean continued employment with the Service in the
Bay Area. For example, one younger respondent said she would be willing
to transfer from her computer programmer/analyst job to other kinds of
postal work in order to stay in the Bay Area because both her and her



Page 40                                                        GAO-03-205 Postal Service
husband’s families live nearby, her mother cares for her baby while she is
at work, and her husband’s parents are in frail health and need constant
assistance. Other respondents indicated they wanted to stay in the Bay
Area but did not want to take a non-IT job. For example, one senior
systems analyst, making $67,000 per year, said he would rather take early
retirement and try to find a nonpostal job in his field than take a mail clerk
job at $40,000 per year.

According to postal officials, employment opportunities may not be very
good for individuals wishing to stay in the Bay Area. Postal officials said in
July 2002 that the job market for IT positions in the Bay Area had changed
significantly in the last 2 years. They said that 2 years ago, IT jobs were
plentiful in the Bay Area and that the Service had difficulty attracting and
keeping IT personnel. More recently, however, they reported that those
conditions had changed. They said that in the current economic
environment, IT positions in the Bay Area have become difficult to find.
Additionally, postal officials indicated that they could no longer
accommodate San Mateo bargaining unit employees who might want to
stay in the Bay Area as mail clerks because the Service now has excess
employees in the Bay Area.

Fifty-two of the 167 San Mateo respondents who did not anticipate
relocating to another postal IT center reported that that they would likely
exercise their option to retire. Forty-five of those respondents said their
retirement would be earlier than planned, and 39 said they would face
financial difficulties in retirement. Of the respondents indicating that they
would likely retire, 22 said it would be very difficult to maintain or find
adequate housing on their reduced incomes. For example, one respondent
said that her reduced income would be insufficient to cover her health
benefits, mortgage payments, and other expenses and that finding
supplementary employment would be difficult at her age.

One respondent who was an EAS employee, age 50 with 25 years of
service, said he would likely take early retirement because he does not
think that the Service will offer him another job. He indicated that he must
stay in the Bay Area because his wife will not be eligible to retire for 5
years, his daughter attends a local college, and his aging parents need
regular assistance. Because retirement would considerably reduce his
income, he said he would have to find other work in order to meet his
mortgage payments and other expenses.

In discussions of the survey results with postal officials, they expressed
surprise that such a large percentage of affected San Mateo IT Center


Page 41                                               GAO-03-205 Postal Service
                            employees had indicated they would likely stay in the Bay Area and
                            compete for jobs in a tight labor market, rather than relocate and continue
                            their employment with the Postal Service. The officials said they expected
                            that more affected IT employees would eventually decide to relocate when
                            they encountered difficulty finding other suitable jobs in the Bay Area. The
                            officials also said that based on past experience, about one-third of all
                            employees would likely relocate if the Service closes the San Mateo IT
                            Center. As previously noted, the Service plans to offer all EAS employees
                            the services of a private job search firm to help them find nonpostal jobs if
                            they decide to seek outside employment. However, the Service has no
                            current plans to extend these services to bargaining unit employees
                            because they are guaranteed jobs at another postal IT center.


San Mateo IT Center         Nearly all of the 36 San Mateo survey respondents who indicated that they
Employees Who Are Likely    would likely relocate to another postal IT center anticipate social impacts
to Relocate Anticipate      if they relocate. As a group, these respondents were most concerned about
                            the impact that relocating would have on their spouses and/or other family
Primarily Social Impacts,   members.
and Some with Trailing
Spouses Also Anticipate     Twenty-nine of the 36 San Mateo respondents (81 percent) who said they
Economic Impacts            intend to relocate to other postal IT centers are over age 45, and many are
                            concerned that the relocation would split up their families. Twenty-two of
                            the 36 respondents have spouses; and 9 said that if they relocated, their
                            spouses would probably not relocate with them. The nine respondents
                            reported several reasons why they did not believe their spouses would
                            relocate:

                        •   spouse has lived in the Bay Area for 30 or more years,
                        •   spouse has aging parents in the Bay Area who need care,
                        •   spouse has children who would not be relocating, and
                        •   spouse’s job pays well (about half the family income).

                            Twelve of the 18 San Mateo respondents who had children and/or
                            grandchildren living in their households reported that at least 1 family
                            member would be left behind. One respondent commented that leaving his
                            7-year-old son with no father present could have a life-long negative
                            impact. Another said relocation would separate him from his wife and
                            three children for 5 to 6 years until he was eligible to retire. He stated that
                            the economic impacts for him would be (1) the cost of maintaining two
                            households, (2) travel costs between the Bay Area and his new job for
                            family visits, and (3) a more expensive telephone bill. Additionally, 30 of
                            the 36 respondents reported having aging parents or relatives in the Bay


                            Page 42                                               GAO-03-205 Postal Service
Area, and 25 said relocation would make current or future care for them
difficult. In some cases, the respondents reported that their parents relied
on them to assist with doctors’ appointments, aid their limited English
language skills, and be available in case of emergencies.

San Mateo respondents likely to relocate also reported concerns with
losing community and social ties and with adjusting to new communities,
cultures, and work environments. These concerns were particularly
reported among ethnic minority respondents, who accounted for more
than half of those likely to relocate. They expressed concerns about
leaving their important cultural ties in the Asian and Hispanic
communities of the Bay Area. For example, one respondent commented
that his wife, of Asian descent and with limited English language skills,
would have a difficult time leaving the Bay Area.

Three-fourths of San Mateo respondents who anticipated relocating to
another postal IT center reported that the relocation would strain their
family relationships, and one commented that it would likely lead to
divorce. Although respondents anticipated strained family relationships,
several saw the relocation as temporary, until they were eligible to retire.

Other San Mateo respondents who said they would likely relocate
reported concerns about anticipated economic impacts associated with
trailing spouses. Some reported concerns about the possible loss of
spousal income and benefits if their working spouses were to relocate and
be unable to find employment at the new location. For example, eight
respondents reported having a trailing spouse who would be looking for
employment after relocation, and seven of those thought employment
would be difficult for their spouses to find. One respondent commented
that relocating her spouse would be a major problem because her husband
is a journalist and has already learned that prospects for such jobs at the
new location are poor. Postal officials indicated that in cases where the
trailing spouse is also a postal employee, the Service would work with the
trailing spouse to find suitable postal employment at the new location.
However, officials did not anticipate that the Postal Service would offer
employment services to trailing spouses who are not postal employees.

Nearly all of the 36 San Mateo respondents who indicated that they would
likely relocate reported that the cost, time, and energy involved in moving
would be difficult for them. Twenty-three respondents reported being
homeowners who will face the prospect of selling and buying homes.
While relocating to a lower housing cost area could provide them some
financial advantage, several respondents commented that the differential


Page 43                                              GAO-03-205 Postal Service
                              costs and the loss of preferential property tax status would make it
                              difficult for them to ever move back to the Bay Area.

Experience Shows that         We have previously reported that when employees lose their jobs it can be
Providing Job-Finding         a traumatic experience; therefore, progressive organizations often work
Assistance Is Beneficial to   with employees to help them through such difficult times.23 We reported
                              that not only does job loss disrupt employees’ personal lives and plans, but
Employers and Employees       it can also cause stressful concerns about finding another job. Of 25
                              organizations we surveyed for our 1995 report on job loss issues, 23 had
                              devised programs to help employees who lost their jobs. These programs
                              included job placement assistance, employee and family counseling,
                              relocation assistance, and training. Some of the organizations surveyed
                              provided self-administered job placement assistance while others used
                              outside job assistance companies. Also, we have previously reported that
                              the Department of Defense was very successful in minimizing the impacts
                              of maintenance depot closures on employees, primarily through a
                              comprehensive outplacement effort. 24

                              Our prior work on job loss issues further showed that, in general,
                              organizations that offer job placement assistance to displaced employees
                              also benefit. Providing job placement assistance helped sponsoring
                              organizations (1) avoid lawsuits by displaced employees, (2) reduce
                              unemployment costs, and (3) enhance their reputations in the community
                              by demonstrating that they cared about their employees. Similar to other
                              organizations that have helped displaced employees, the Service has
                              indicated that it plans to provide assistance to San Mateo IT Center
                              employees to minimize the impact, if it decides to close the center. In
                              addition to providing the relocation and separation benefits mentioned
                              earlier, the Service has indicated that it plans to hold a series of meetings
                              with affected San Mateo employees and their families to provide them
                              with needed information on available options and opportunities and to
                              address employees’ questions about the closure. Additionally, as noted
                              earlier, the Service plans to provide the services of a job search firm to San
                              Mateo EAS employees, although bargaining unit employees will not
                              receive similar services because such services are not provided for by the
                              collective bargaining agreement that governs IT bargaining unit


                              23
                               Workforce Reductions: Downsizing Strategies Used in Selected Organizations,
                              GAO/GGD-95-54 (Washington, D.C.: Mar. 13, 1995).
                              24
                               Closing Maintenance Depots: Savings, Workload, and Redistribution Issues,
                              GAO/NSIAD-96-29 (Washington, D.C.: Mar. 4, 1996).




                              Page 44                                                   GAO-03-205 Postal Service
employees’ benefits. According to postal officials, services to be provided
by the job search firm are to include, among other things, seminars on
change management, skills development, resume writing, negotiation
skills, how to network, how to find a job on the Internet, and group
counseling and coaching.

In 2000, when the IT Department proposed closing the San Mateo IT
Center, it estimated that 33 percent of affected employees would likely
relocate to other postal IT centers and possibly need some relocation
assistance. The IT Department acknowledged that because it expected
that only 33 percent of affected employees would relocate, it would need
to rely on contractor support to cover for the loss of knowledgable
employees who would not be relocating from the San Mateo IT Center to
other postal IT centers. Our survey of San Mateo employees, however,
indicates that the IT Department’s estimate of relocating employees may
be overstated; and its need for contractor support could, therefore, be
greater than planned. According to our survey results, only 17 percent of
San Mateo employees currently anticipate that they would likely relocate
to another postal IT center if the Service closes the San Mateo IT Center.
Fifty-nine percent of the respondents (who indicated they would likely
stay in the Bay Area and provided reasons for not relocating) identified
concerns with their spouses’ careers as a primary motivator in their
decision not to relocate. Further, seven of the eight respondents relocating
with trailing spouses who would be looking for jobs at the new location
expressed concern that the spouses would have difficulty finding suitable
employment.

Relocation experts have noted that because of the prevalence of dual-
income households in the workforce, employees who must make a
relocation choice often base their decision on whether or not their trailing
spouses can find suitable employment at the new location. Given this,
relocation experts report more companies are providing employment
assistance to trailing spouses, such as resume preparation and review,
paying job finders-fees, assisting with finding employment, and
reimbursing trailing spouses for lost income while they seek employment
at the new location.

When the IT Department first proposed closing the San Mateo IT Center in
2000, economic conditions and the employment outlook in the Bay Area
were noticeably better than they are today; so much so that the Service
anticipated that postal positions would be available in the Bay Area for
many displaced employees who did not relocate. However, because of
changed economic conditions, recent drops in mail volumes, and advances


Page 45                                              GAO-03-205 Postal Service
              in automated mail processing, the Service no longer expects that it will
              have job openings to accommodate employees who do not relocate. As
              noted earlier, although the Service has indicated that it plans to make the
              services of a private job search firm available to San Mateo EAS
              employees, the Service has no plans at this time to extend similar services
              to San Mateo IT Center bargaining unit employees because their benefits
              are governed by the Service’s collective bargaining agreement with the
              APWU. Consequently, many bargaining unit employees will face a dilemma
              if the Service closes the San Mateo IT Center. If bargaining unit employees
              do not relocate, they will likely lose their postal employment and would
              not have the services of a private job search firm to help them find other
              employment. Additionally, bargaining unit and EAS employees with
              working spouses who are not postal employees face a dilemma concerning
              the impact a relocation would have on their trailing spouses’ careers and
              their families’ household incomes. That is, if these employees relocate, will
              their trailing spouses be able to find suitable employment at the new
              location or will household incomes and spouses’ careers suffer?

              By not addressing employees’ concerns about trailing spouses, the Service
              may be missing an opportunity to entice more of its San Mateo IT Center
              employees to relocate to other postal IT centers, thereby exposing itself to
              higher than necessary contractor costs. If the Service decides to close the
              San Mateo IT Center, it is required under its agreement with APWU to
              notify the union of its decision and offer to meet with national level
              officials to discuss the closure’s impact on affected employees.
              Historically, discussions preceding previous closures have resulted in
              additional provisions for affected bargaining unit employees, which were
              specified in Memorandums of Understanding that modified existing
              collective bargaining agreements. According to postal officials, the Service
              expects that if it decides to close the San Mateo IT Center, the APWU will
              request a meeting to discuss, among other things, additional benefits for
              affected bargaining unit employees.


              The Service is following its Investment Review and Approval Process as it
Conclusions   moves toward a decision about closing the San Mateo IT Center. However,
              economic conditions have changed significantly since 2000 when the IT
              Department prepared the DAR in support of closing the San Mateo IT
              Center. Also, the DAR does not reflect the impact that the Service’s
              announced plans to automate and reengineer its field accounting
              activity—which involves closing its 85 district accounting offices and
              consolidating the residual activities into its 3 Accounting Service
              Centers—could have on projected savings associated with the proposal to


              Page 46                                              GAO-03-205 Postal Service
                         close the San Mateo IT Center. Therefore, the Service may be using dated
                         information as it goes about making its closure decision regarding the San
                         Mateo IT Center. Finally, the employment outlook is not nearly as
                         encouraging now as it was in 2000 when employment conditions in the
                         Bay Area were better and the Service indicated it would have postal
                         positions available for bargaining unit employees who did not want to
                         relocate. Given these changed conditions, bargaining unit employees who
                         do not relocate might encounter difficulty in finding employment in the
                         Bay Area. Further, some San Mateo IT employees may be reluctant to
                         relocate because of concerns that their trailing spouses might have
                         difficulty finding jobs at the new location.


                         We recommend that before the Service makes its decision regarding
Recommendations for      whether to close the San Mateo IT Center, the PMG should direct the IT
Executive Action         Department to review and update the economic assumptions and analyses
                         used in the San Mateo DAR and make revisions, if appropriate, to better
                         reflect current economic conditions and recent plans to automate and
                         reengineer its field accounting activity.

                         If the Service decides to close the San Mateo IT Center, we recommend
                         that the PMG consider:

                     •   During discussions with APWU regarding the IT center’s closure, offering
                         to help bargaining unit employees find jobs if they decide to remain in the
                         Bay Area.
                     •   During discussions with APWU regarding the IT center’s closure, offering
                         some assistance—such as resume preparation and review services—to the
                         trailing spouses of bargaining unit employees who decide to relocate to
                         another postal IT center.
                     •   Providing some assistance–such as resume preparation and review
                         services—to the trailing spouses of EAS employees who decide to relocate
                         to another postal IT center.

                         The Postal Service provided comments on a draft of this report in a letter
Agency Comments          from the chief financial officer and executive vice president dated
and Our Evaluation       December 19, 2002. These comments are summarized below and are
                         reprinted in appendix II. Postal officials also provided technical and
                         clarifying comments, which we have incorporated into the report where
                         appropriate.

                         Although the Service did not comment on our findings, it did agree with
                         our recommendations. The Service reiterated that it has not yet made a


                         Page 47                                             GAO-03-205 Postal Service
decision regarding the proposed closure of the San Mateo IT Center and
will reevaluate the proposed closure as part of its overall strategy to
rationalize its administrative infrastructure and meet its data processing
needs with the appropriate facilities, technologies, and staff. The Service
indicated that it would implement our recommendation that the DAR be
reviewed and updated before a decision is made about closing the San
Mateo IT Center. Specifically, the Service said that before making any
decisions regarding possible disposition of the building and property, it
would update the information in the DAR. The Service further stated that
it was aware that conditions in the commercial building market in the Bay
Area have changed since the San Mateo DAR was submitted. The Service
stated that it might need to revisit the proposal to sell the building in light
of an updated assessment of the building’s fair market value, the viability
of potential outlease or leaseback options, and the space needs of the
expanded Accounting Service Center.

In response to our other recommendations that the Service consider
offering to (1) help bargaining unit employees find jobs if they remain in
the Bay Area and (2) provide some assistance to help the trailing spouses
of employees who relocate find jobs, the Service indicated that it would
try to minimize the negative effects of relocation. The Service said that if it
determines that closing the San Mateo IT Center and relocating its
functions to other postal IT centers are still critical to the Service’s IT
strategy, the Service will adhere to the provisions of its bargaining unit
agreements. The Service further stated that to the extent possible,
consistent with those agreements, it will attempt to mitigate the negative
impacts that relocation may have on employees and their families.


As agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report for 30 days after the
date of this letter. At that time, we will send copies of this report to the
Chairmen and Ranking Minority Members, Senate Committee on
Governmental Affairs and its Subcommittee on International Security,
Proliferation, and Federal Services; and to the Chairman, House
Committee on Government Reform. We will also send copies of this
report to the Postmaster General and Chief Executive Officer, U.S. Postal
Service, and the President of the American Postal Workers Union. In
addition this report will be available at our Web site at http://www.gao.gov.




Page 48                                                GAO-03-205 Postal Service
Major contributors to this report included Gerald P. Barnes, Isidro L.
Gomez, Stuart M. Kaufman, Roger L. Lively, Donald J. Porteous, and
Charles F. Wicker. If you have any questions about this letter or the
appendixes, please contact me or Mr. Barnes on (202) 512-2834 or at
ungarb@gao.gov or barnesgp@gao.gov.




Bernard L. Ungar
Director, Physical Infrastructure Issues




Page 49                                             GAO-03-205 Postal Service
             Appendix I: Comparative Demographic Data
Appendix I: Comparative Demographic Data
             and Options for San Mateo and Displaced New
             York IT Center Employees


and Options for San Mateo and Displaced
New York IT Center Employees
             According to the responses to our survey, San Mateo IT employees, on
             average, are older and have more years of service than displaced New
             York IT Center employees at the time of the center’s closure. The
             demographics of San Mateo IT Center employees indicating they would
             not likely relocate and displaced New York IT Center employees who did
             not relocate were more similar than the demographics of San Mateo IT
             Center employees who indicated they would likely relocate and displaced
             New York IT employees who relocated. Table 1 provides comparative
             demographic data for San Mateo and displaced New York IT employees.
             Data are shown for employees who relocated (or are likely to relocate in
             the case of San Mateo employees) and those who did not relocate (or are
             likely not to relocate in the case of San Mateo employees). Because our
             data for New York IT Center employees do not include all displaced New
             York employees, the data may not be totally representative. For example,
             during the 9 years since the New York IT Center closed, some of its
             displaced employees may have retired and are therefore not reflected in
             our data. If data were available for this group, it would have tended to
             increase the average age and years of service of displaced New York IT
             Center employees at the time of closure.

             Additionally, displaced New York IT Center employees had more favorable
             options/opportunities to lessen the impact of the closure than San Mateo
             IT Center employees are likely to have. For example, all displaced New
             York IT Center employees had the option of relocating with their jobs to
             another postal IT center or continuing to work for the Service in the same
             geographic area (though not necessarily in an IT position), whereas San
             Mateo IT Center employees likely will not have this option. Table 2
             displays the range of options/opportunities likely to be available to San
             Mateo IT Center employees and options/opportunities that were available
             to displaced New York IT Center employees. Options/opportunities are
             similar for early retirements, assistance programs to help EAS employees
             find employment outside the Service, and help for trailing spouses who are
             postal employees and need to find suitable employment at the new
             location. Options/opportunities are not similar with regard to buy-outs,
             ability to continue employment with the Service in some capacity, saved-
             pay protections, and the availability of local postal and nonpostal jobs.




             Page 50                                            GAO-03-205 Postal Service
                                             Appendix I: Comparative Demographic Data
                                             and Options for San Mateo and Displaced New
                                             York IT Center Employees




Table 1: Demographic Data for San Mateo IT Employees Compared with Displaced New York IT Employees’ Demographic
Data

                                                                              San Mateo IT Center           Displaced New York IT Center
                                                                                                                                       a
Demographic characteristics                                                           employees                             employees
Employees indicating they would likely relocate or did relocate
to another postal IT center                                                                       36                                       49
   Ages 45 to 49                                                                             8 (22%)                                 18 (37%)
   Ages 50 to 54                                                                            10 (28%)                                   3 (6%)
   Ages 55 or older                                                                         11 (31%)                                   2 (4%)
   15 or more years of service                                                              27 (75%)                                 16 (33%)
   20 or more years of service                                                              16 (44%)                                  7 (14%)
   Living with spouse/partner                                                               22 (61%)                                 39 (80%)
   Living in dual-income household                                                          14 (39%)                                 32 (65%)
   School-ageb children living in household                                                 18 (50%)                                 30 (61%)
   Providing assistance to elderly parents/relatives in the area                            22 (61%)                                 27 (55%)
Employees indicating they would likely not relocate or did not
relocate                                                                                         167                                       46
   Ages 45 to 49                                                                            41 (25%)                                 11 (24%)
   Ages 50 to 54                                                                            44 (26%)                                  8 (17%)
   Age 55 or older                                                                          44 (26%)                                   2 (4%)
   15 or more years of service                                                             125 (75%)                                 30 (65%)
   20 or more years of service                                                              81 (49%)                                 10 (22%)
   Living with spouse/partner                                                              124 (74%)                                 36 (78%)
   Living in dual-income household                                                          99 (59%)                                 29 (63%)
   School-age children living in household                                                  78 (47%)                                 27 (59%)
   Providing assistance to elderly parents/relatives in the area                            93 (56%)                                 22 (48%)
                                             Source: GAO.

                                             Note: San Mateo IT Center and displaced New York IT Center employees who responded to GAO
                                             survey.
                                             a
                                              Responses reflect employees’ recollections of circumstances at the time the New York IT Center
                                             closed.
                                             b
                                             School age was defined as ages 5 to 22.




                                             Page 51                                                             GAO-03-205 Postal Service
                                           Appendix I: Comparative Demographic Data
                                           and Options for San Mateo and Displaced New
                                           York IT Center Employees




Table 2: Likely Options/Opportunities for San Mateo IT Employees Compared with Options/Opportunities that Were Available
for Displaced New York IT Employees

                                 Options/opportunities likely available to San       Options/opportunities that were available to
Option/opportunity               Mateo IT employees                                  New York IT employees
Take early retirement            According to postal officials, if the Service       The Service offered early retirement to all eligible
                                 decides to close the San Mateo IT Center it will    employees.
                                 offer early retirement to all eligible employees
                                 provided the Office of Personnel Management
                                 grants the Service such authority.
Receive buy-out                  According to postal officials, the Service does     At the time of the New York IT Center closure,
                                 not anticipate offering buy-outs.                   the Service was offering, as part of a nationwide
                                                                                     restructuring, a monetary incentive of 6 months’
                                                                                     pay to all eligible employees who opted to retire
                                                                                     or take an early-out.
Relocate with job
  Bargaining unit employees      San Mateo bargaining unit employees are             New York bargaining unit employees were
                                 covered by a collective bargaining agreement        covered by a collective bargaining agreement
                                 with a no-layoff provision and are guaranteed       with a no-layoff provision and were therefore
                                 the option of relocating with their jobs to other   guaranteed jobs at other postal IT centers.
                                 postal IT centers.                                  Additionally, a Memorandum of Understanding
                                                                                     between the Service and APWU concerning the
                                                                                     closure provided that bargaining unit employees
                                                                                     who wanted to continue employment with the
                                                                                     Service in the New York City area (though not
                                                                                     necessarily in IT jobs) could do so.

   EAS employees                 The Service anticipates offering only about half    All EAS employees had the option of continuing
                                 of its 72 EAS employees the opportunity to          employment with the Service. EAS employees
                                 relocate with their jobs to other postal IT         who did not want to relocate with their jobs could
                                 centers.                                            continue employment with the Service in the New
                                                                                     York City area, although not necessarily in an IT
                                                                                     position.
Assistance in helping trailing   According to postal officials, the Service will     According to postal officials, the Service worked
spouses find employment at       work with trailing spouses who are postal           with trailing spouses who were postal employees
new location                     employees to find suitable postal employment        to find suitable postal employment at the new
                                 at the new location. No special assistance is       location. No special assistance was provided to
                                 planned for trailing spouses who are not postal     trailing spouses who were not postal employees.
                                 employees.




                                           Page 52                                                          GAO-03-205 Postal Service
                                           Appendix I: Comparative Demographic Data
                                           and Options for San Mateo and Displaced New
                                           York IT Center Employees




                                 Options/opportunities likely available to San Options/opportunities that were available to
Option/opportunity               Mateo IT employees                            New York IT employees
Continue employment with the
Service in the same geographic
area
   Bargaining unit employees     Initially, the Service anticipated that it would be   A Memorandum of Understanding between the
                                 able to accommodate bargaining unit                   Service and APWU concerning the New York
                                 employees who wanted to remain in the Bay             closure provided that bargaining unit employees
                                 Area in non-IT positions. More recently, it           who wanted to continue employment with the
                                 reported that because of recent drops in mail         Service in the New York City area (though not
                                 volumes and advances in automated mail                necessarily in IT jobs) could do so.
                                 processing, it now has excess mail clerks in the
                                 Bay Area. Accordingly, the Service does not
                                 anticipate that it will be able to accommodate
                                 bargaining unit employees who want to remain
                                 in the Bay Area. Nevertheless, if the Service
                                 decides to close the San Mateo IT Center, this
                                 issue will likely be a part of the discussions
                                 between the Service and the APWU on the
                                 impact that the closure would have on
                                 employees.

  EAS employees                  According to postal officials, very few EAS           All EAS employees who wanted to continue
                                 employees will likely be able to continue             employment with the Service could do so. EAS
                                 employment with the Service in the Bay Area.          employees not wanting to relocate to other postal
                                 Employees can apply for jobs in the Bay Area          IT centers had the option of continuing
                                 provided they meet the minimum qualifications         employment with the Service in non-IT positions
                                 for the job; however, the Service does not            in the New York City area.
                                 anticipate that it will have many vacancy
                                 announcements in the Bay Area. According to
                                 postal officials, the Service currently has
                                 excess employees in the Bay Area.
Other job opportunities
  Within the Service             The Service is currently in a downsizing mode,        The Service, just prior to the closure, had
                                 and job opportunities are limited.                    undergone a major restructuring, resulting in
                                                                                       numerous vacant positions and job opportunities
                                                                                       for employees affected by the New York IT
                                                                                       Center’s closure.

  Outside the Service            According to postal officials, job opportunities      Data on the experience of New York
                                 for nonpostal IT positions are very limited in the    ITemployees seeking nonpostal jobs in the New
                                 Bay Area, unlike 2 years ago when IT positions        York City area at the time of closure are
                                 were readily available. San Mateo IT                  unknown.
                                 employees responding to our survey also
                                 indicated that, overall, job opportunities in the
                                 Bay Area were tight.




                                           Page 53                                                           GAO-03-205 Postal Service
                                          Appendix I: Comparative Demographic Data
                                          and Options for San Mateo and Displaced New
                                          York IT Center Employees




                                 Options/opportunities likely available to San Options/opportunities that were available to
Option/opportunity               Mateo IT employees                            New York IT employees
Avoid reductions in pay
  Bargaining unit employees      According to postal officials, bargaining unit      Employees who wanted to stay in the New York
                                 employees at the San Mateo IT Center will not       City area and voluntarily transferred to lower paid
                                 likely have the option of continuing employment     positions received saved- pay protection for 1
                                 with the Postal Service in the Bay Area, even in    year. This was provided for in the Memorandum
                                 non-IT positions. However, should these             of Understanding agreed to by the Service and
                                 employees find other postal employment, the         the APWU concerning the New York IT Center’s
                                 Service anticipates that such employees would       closure.
                                 likely receive saved-pay protection for up to 2
                                 years.

  EAS employees                  According to postal officials, EAS employees at     Initially, EAS employees who stayed in the New
                                 the San Mateo IT Center will not likely have the    York City area and took lower paid positions as a
                                 option of continuing employment with the            result of the closure believed they would have
                                 Postal Service in the Bay Area, even in non-IT      saved-pay protection for 2 years. However, the
                                 positions. However, should these employees          Service later announced that EAS employees
                                 be reassigned to lower paying positions, they       taking lower paid positions as a result of the
                                 would, in general, receive saved-pay for 2          closure would receive permanent saved-pay
                                 years.                                              protection.
Assistance in finding            According to postal officials, should the Service   The Service made available the services of a
employment outside the Service   decide to close the San Mateo IT Center, it will    private job search firm to any EAS employee who
                                 offer EAS employees the services of a private       wanted to find nonpostal employment.
                                 job search firm to help them find nonpostal         Bargaining unit employees were not offered such
                                 employment. Currently, the Service has no           services, as they were not provided for under the
                                 plans for extending these services to its           contract or Memorandum of Understanding
                                 bargaining unit employees whose terms of            between the Service and APWU concerning the
                                 employment are specifically provided for under      closure.
                                 the Service’s collective bargaining agreement
                                 with the APWU.
Involuntary separations          According to postal officials, EAS and              According to postal officials, there were no
                                 bargaining unit employees who do not to             involuntary separations associated with the New
                                 relocate, retire, or find other postal employment   York IT Center closure.
                                 on their own will likely be separated from the
                                 Service.
                                          Source: U.S. Postal Service.




                                          Page 54                                                           GAO-03-205 Postal Service
              Appendix II: Comments from the U.S. Postal
Appendix II: Comments from the U.S. Postal
              Service



Service




(393000)
              Page 55                                      GAO-03-205 Postal Service
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