oversight

U.S. Postal Service: Field Offices' Role in Cost-Reduction and Revenue-Generation Efforts

Published by the Government Accountability Office on 2012-04-25.

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

             United States Government Accountability Office

GAO          Report to Congressional Requesters




April 2012
             U.S. POSTAL
             SERVICE
             Field Offices’ Role in
             Cost-Reduction and
             Revenue-Generation
             Efforts




GAO-12-506
                                                 April 2012

                                                 U.S. POSTAL SERVICE
                                                 Field Offices’ Role in Cost-Reduction and Revenue-
                                                 Generation Efforts
Highlights of GAO-12-506, a report to
congressional requesters




Why GAO Did This Study                           What GAO Found
USPS has lost $25.3 billion over the             Field employees have key roles in the U.S. Postal Service’s (USPS) efforts to
last 5 years and expects to lose                 reduce costs and generate revenue. For example, these employees evaluate the
another $83.2 billion through fiscal             feasibility of closing or consolidating facilities, such as post offices and mail-
year 2016 unless it takes action to              processing facilities; carry out the closures and consolidations of these facilities;
reduce its costs and improve its                 and evaluate and consolidate delivery routes. These roles support USPS’s plans
operational efficiency. USPS has cut             to save, by 2016, about $9 billion annually by improving its operational efficiency
costs in its retail, mail processing, and        and realigning its retail, mail processing, and delivery networks with declining
delivery networks, as well as in its field       mail use. These plans include evaluating about half of its approximately 31,000
office structure, which includes 7 area
                                                 post offices to identify cost-reduction opportunities, closing or reducing
offices and 67 district offices, and
                                                 operations at about half of its 461 mail-processing facilities, and consolidating
plans other cost-cutting actions
throughout the organization. As
                                                 about 20,000 of its 144,000 city delivery routes. Area and district employees also
requested, this report discusses (1) the         have a significant role in USPS’s efforts to generate additional revenue by (1)
role of area and district employees in           promoting the value of mail to businesses, (2) maintaining and increasing its
implementing USPS’s cost-savings                 customer base through customer service, and (3) growing the package business.
and revenue-generation efforts and (2)           In 2011, USPS consolidated its field office structure by, among other actions,
USPS’s actions to consolidate its field          closing one area office and seven district offices and eliminating 1,946
office structure in 2011, and the impact         positions—actions that it estimated would save about $150 million annually.
of this consolidation.
                                                 However, several area and district officials expressed concern that this
GAO analyzed USPS documents                      consolidation could lessen their ability to carry out ongoing and future cost-
describing the role of field staff in            savings and revenue-generation initiatives, and to recruit and retain future
carrying out USPS’s cost-saving and              managers. In December 2011, USPS issued a plan on how it would evaluate
revenue-generation efforts; information          additional field offices for possible consolidation and address concerns that the
on the impact of the 2011                        USPS Office of Inspector General identified in past field office consolidations.
consolidation, including anticipated             These concerns included the need to develop a plan to guide future field office
cost savings; and USPS’s plan, issued            consolidations and to consider factors such as workload and proximity to other
in December 2011, for evaluating and             offices. According to USPS officials, the plan also addressed past concerns
implementing possible field office               about inadequate documentation and transparency and will lead to post-
consolidations. GAO also interviewed
                                                 consolidation reviews to assess lessons learned and measure actual savings.
USPS officials at headquarters and at
                                                 Although USPS has a plan to guide future consolidations, according to USPS
four area and six district offices
selected based on several factors,               officials, it does not plan additional field office consolidations until it has
including geographic dispersion                  completed ongoing cost-reduction efforts in its retail, mail processing, and
throughout the U.S.                              delivery networks.

What GAO Recommends
GAO is not making recommendations
in this report. USPS had no comments
on a draft of this report.




View GAO-12-506. For more information,
contact Lorelei St. James at (202) 512-2834 or
stjamesl@gao.gov.

                                                                                          United States Government Accountability Office
Contents


Letter                                                                                     1
               Background                                                                  3
               Field Employees Have a Key Role in USPS’s Cost-Reduction and
                  Revenue-Generation Efforts                                               8
               In 2011 USPS Closed Field Offices and Eliminated Field Positions,
                  Resulting in $150 Million in Estimated Annual Savings                  19
               Concluding Observations                                                   25
               Agency Comments                                                           25

Appendix I     Timeline of Recent Field Office Consolidations and Information
               on Selected Centralizations of Administrative Services                    28



Appendix II    Objectives, Scope, and Methodology                                        31



Appendix III   GAO Contact and Staff Acknowledgments                                     33



Tables
               Table 1: 2011 Area and District Position Reductions, by
                        Department                                                       20
               Table 2: Baseline of USPS’s Field Structure (1992) and Subsequent
                        Field-Office Consolidations Between 2002 and 2011                28


Figures
               Figure 1: Location of Field Offices and Information on the Number
                        of Post Offices and Mail-Processing Facilities in Each
                        USPS Area                                                          4
               Figure 2: Change in Number of Area and District Office Employees,
                        2002–2011                                                         6
               Figure 3: Key Steps in USPS’s Retail Facility Review Process              10
               Figure 4: Key Steps in USPS’s Mail-Processing Review Process              13




               Page i                                          GAO-12-506 U.S. Postal Service
Abbreviations

USPS              U.S. Postal Service
OIG               Office of Inspector General




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Page ii                                                     GAO-12-506 U.S. Postal Service
United States Government Accountability Office
Washington, DC 20548




                                   April 25, 2012

                                   Congressional Requesters:

                                   The U.S. Postal Service (USPS) continues to face a dire financial
                                   situation and does not have sufficient revenues to cover its expenses,
                                   putting its mission to provide prompt, reliable, and efficient postal services
                                   at risk. As customers increasingly turn to digital communications and
                                   online payment methods, mail volume has decreased precipitously, falling
                                   almost 21 percent from fiscal years 2007 through 2011. During this
                                   period, USPS experienced a cumulative loss of $25.3 billion and between
                                   2012 and 2016 it expects to lose another $83.2 billion unless it takes
                                   action to dramatically reduce its costs and improve its operational
                                   efficiency.

                                   To address its dire financial circumstances, USPS has initiated several
                                   efforts intended to reduce its costs and improve the efficiency of its retail,
                                   mail-processing, and delivery networks as well as its field office
                                   structure—which currently includes 7 area offices and 67 district offices.
                                   For example, by 2016, USPS plans to review about half of its 31,000 post
                                   offices 1 to identify opportunities to, among other things, close facilities
                                   and reduce work hours, closing or consolidating at least 223 of its 461
                                   mail-processing facilities. We and others, including Members of
                                   Congress, have raised questions about whether USPS’s field offices are
                                   appropriately organized and staffed for USPS’s operational needs. As
                                   early as 2003, for example, a presidential commission recommended that
                                   USPS fully review its field office structure to determine whether and, to
                                   what extent, each office was needed. 2 More recently, in April 2010, we
                                   reported on the importance of analyzing USPS’s organizational footprint,
                                   including its field offices, to reduce costs and improve operational
                                   efficiency. 3 We also testified that USPS cannot continue providing


                                   1
                                    In this report, we refer to all USPS retail offices, including post offices, stations, and
                                   branches operated by USPS where customers can access postal products and services,
                                   as post offices.
                                   2
                                    Report of the President’s Commission on the United States Postal Service, Embracing
                                   the Future: Making the Tough Choices to Preserve Universal Mail Service (Washington,
                                   D.C.: July 31, 2003).
                                   3
                                    GAO, U.S. Postal Service: Strategies and Options to Facilitate Progress Toward
                                   Financial Viability, GAO-10-455 (Washington, D.C.: April 2010).




                                   Page 1                                                       GAO-12-506 U.S. Postal Service
services at current levels without dramatic changes in its cost structure. 4
In response to your request, this report describes: (1) the role of area and
district office employees in implementing USPS’s cost-savings and
revenue-generation efforts and (2) USPS’s actions to consolidate its field
office structure in 2011, and the impact of these actions. USPS’s actions
to consolidate its field offices and to centralize selected administrative
services previously conducted at these offices are described in appendix I
of this report.

To address these objectives, we reviewed documents, including prior
GAO reports, USPS documents, and the September 6, 2011,
congressional testimony of the Postmaster General. We also interviewed
USPS officials from headquarters, area, and district offices; USPS’s
Office of Inspector General (OIG); and selected USPS shared services
centers used to provide human resources, accounting, and other
services. We interviewed managers at four area and six district offices
that we selected based on, among other factors, geographic dispersion
and whether the office had recently absorbed responsibilities previously
performed by other field offices following a consolidation. To describe the
role of area and district office employees in implementing cost-savings
and revenue-generation efforts, we reviewed USPS documents
describing its strategic goals for these efforts and the role of area and
district employees in implementing these efforts. To describe actions to
consolidate the field office structure in 2011 and the impacts of these
efforts, we reviewed USPS documentation including USPS’s December
2011 plan entitled Area and District Office Structure Evaluations Strategy,
Policy and Process. 5 Finally, we analyzed USPS financial data on the
2011 consolidations as well as cost-savings estimates for this
consolidation and for the centralization efforts undertaken between 2002
and 2005 and determined that these estimates were sufficiently reliable
for the purposes of our report.

We conducted this performance audit from April 2011 to April 2012 in
accordance with generally accepted government auditing standards.


4
 GAO, U.S. Postal Service: Financial Crisis Demands Aggressive Action, GAO-10-538T
(Washington, D.C.: Mar. 18, 2010).
5
 USPS, Area and District Office Structure Evaluations Strategy, Policy and Process,
(Washington, D.C.: September 2011). According to USPS officials, this document was
completed in September 2011 but was not issued until the completion of internal reviews
on December 7, 2011.




Page 2                                                    GAO-12-506 U.S. Postal Service
             Those standards require that we plan and perform the audit to obtain
             sufficient, appropriate evidence to provide a reasonable basis for our
             findings and conclusions based on our audit objectives. We believe that
             the evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives. Appendix II contains a detailed
             discussion of our objectives, scope, and methodology.


             USPS’s current field-office structure includes 7 area offices and 67 district
Background   offices. USPS’s management structure is decentralized, with the area and
             district offices overseeing a vast network of facilities, which, as of
             December 19, 2011, included 31,060 post offices and 461 mail-
             processing facilities (see fig. 1). According to USPS data, the operating
             cost of its field offices in fiscal year 2011 totaled about $1.2 billion—the
             majority of which (about $1 billion) was spent operating district offices.
             The total operating costs of USPS’s field offices represented less than 2
             percent of its approximately $71 billion fiscal year 2011 operating
             expenses.




             Page 3                                            GAO-12-506 U.S. Postal Service
Figure 1: Location of Field Offices and Information on the Number of Post Offices and Mail-Processing Facilities in Each
USPS Area




                                         Page 4                                                  GAO-12-506 U.S. Postal Service
Significant policy and operational decisions are made at USPS
headquarters and disseminated through the managerial hierarchy,
including area and district offices. Each of the 67 district offices reports to
a designated area office, which, in turn, reports to headquarters.
Employees in the area offices are generally responsible for overseeing
district offices and facilities that have an area-wide impact, such as mail-
processing facilities, while employees in district offices are typically
responsible for overseeing post offices and other facilities that serve a
particular district. For example, as of December 19, 2011, the Southwest
Area office was responsible for overseeing 90 mail-processing facilities,
while the 12 district offices in the Southwest Area were responsible for
overseeing operations at about 5,600 post offices—an average of about
470 post offices per district. Each area and district office is organized into
departments, which include operations support, human resources,
finance, and marketing.

In 2011, USPS had 4,985 field office employees (806 area and 4,179
district employees), who comprised less than 1 percent of USPS’s
workforce of about 557,000 career employees. About 85 percent of
USPS’s career workforce, including most mail carriers and mail-
processing staff, is covered by collective bargaining agreements with
employment protections, such as no lay-off provisions. In contrast, most
USPS field employees, which include area and district office managers,
are not covered by collective bargaining agreements.

From 2002 to 2011, USPS reduced the number of employees in area and
district offices by almost 56 percent (see fig. 2) by, among other actions,
closing 4 area offices and 18 district offices and centralizing some
accounting, human resources, and other services. (App. I provides
additional information on these office closures and selected
centralizations of administrative services previously performed in field
offices.)




Page 5                                              GAO-12-506 U.S. Postal Service
Figure 2: Change in Number of Area and District Office Employees, 2002–2011




In September 2011, the Postmaster General testified before Congress
that due to USPS’s urgent need to address its financial situation, USPS
was undertaking or planning several efforts intended to improve the
efficiency in its retail, mail-processing, and delivery networks. 6 In
February 2012, USPS issued a 5-year business plan in which it estimated
that these efforts and others, such as reducing Saturday deliveries, could
restore USPS to profitability. USPS estimates that it could save $9.1
billion annually, the majority of which will be achieved by 2016, through
changes in the following areas:




6
 Statement of the Postmaster General before the Committee on Homeland Security and
Governmental Affairs, United States Senate, September 6, 2011.




Page 6                                                 GAO-12-506 U.S. Postal Service
•   Retail network: USPS plans to downsize its retail network for
    potential savings of $2 billion annually beginning in 2016. 7 As part of
    this effort, USPS plans to review about half of its post offices to
    identify opportunities to close facilities, reduce work hours, and
    expand the use of lower-cost alternatives, such as self-service kiosks,
    and partnerships with retailers. 8

•   Mail-processing network: USPS plans to downsize its mail-
    processing network and reduce costs in its transportation network for
    potential savings of $4.1 billion annually beginning in 2016. 9 As part of
    this effort, USPS anticipates closing or consolidating about half of its
    mail-processing facilities and reducing the number of its employees.

•   Delivery network: USPS is realigning its delivery routes for potential
    savings of $3 billion annually beginning in 2016. As part of this effort,
    USPS plans to eliminate and consolidate approximately 20,000 out of
    its 144,000 city routes.

While reducing USPS’s network costs is essential, the Postmaster
General testified that USPS also must generate additional revenue to
deal with its financial crisis. To help accomplish this, he said he
implemented a variety of “core business strategies” to, among other
things, (1) strengthen the value of mail to businesses, (2) improve its
customers’ experience using USPS’s services, and (3) compete with
private sector firms for the package business. USPS’s fourth core
business strategy—becoming a “leaner, faster, and smarter”
organization—relates to reducing its network costs and includes the
actions described above.



7
 Our April 17, 2012, report examines USPS’s efforts to improve efficiency in USPS’s retail
network. GAO, U.S. Postal Service: Challenges Related to Restructuring the Postal
Service’s Retail Network, GAO-12-433 (Washington, D.C.: April 2012)
8
 USPS operates about 2,500 self-service kiosks that allow customers to buy stamps and
send mail. Partnerships with retailers include, among other things, contract postal units,
which are operated and managed by privately operated businesses, such as pharmacies
and convenience stores. In addition, USPS is also exploring other options to reduce its
retail facility costs by, for example, reducing employee work hours and shortening
operating hours at selected retail facilities.
9
  On April 12, 2012 we issued a report examining USPS’s efforts to increase efficiency in
its mail-processing network. GAO, U.S. Postal Service: Mail Processing Network Exceeds
What Is Needed for Declining Mail Volume, GAO-12-470 (Washington, D.C.: April 2012).




Page 7                                                      GAO-12-506 U.S. Postal Service
                         To address USPS’s financial problems, several Members of the 112th
                         Congress have introduced postal reform legislation which, if enacted,
                         would likely impact USPS’s downsizing plans, including its ability to close
                         retail and mail-processing facilities. Certain legislative proposals also
                         include provisions requiring USPS to develop and submit to Congress
                         plans for further consolidating its field offices. 10 While USPS needs
                         authority from Congress to make some of its planned network changes, it
                         currently has the flexibility to continue consolidating area and district
                         offices. In December 2011, USPS announced a moratorium on closing its
                         post offices and mail-processing facilities until May 15, 2012. The
                         moratorium was established in response to congressional requests for
                         additional time to enact comprehensive postal reform legislation. In the
                         interim, USPS is continuing to review the feasibility of closing retail
                         facilities and recently completed studies of mail-processing facilities for
                         consolidation and possible closure.



Field Employees Have
a Key Role in USPS’s
Cost-Reduction and
Revenue-Generation
Efforts

Cost-Reduction Efforts   Field employees have key roles in USPS’s efforts to reduce costs in its
                         retail, mail-processing, and delivery networks. The extent of area and
                         district employees’ involvement in specific cost-reduction efforts varies,
                         however. For example, area employees, who comprise 16 percent of the
                         field employees, generally provide guidance and oversee the
                         implementation of all cost-reduction efforts in their area to ensure
                         consistency in how these efforts are implemented. In addition, area
                         employees prepare proposals for headquarters on potential


                         10
                           For example, the U.S. Postal Service Improvement Act of 2011 requires USPS,
                         consistent with its consolidation plan, to begin consolidating area and district offices within
                         one year. S. 353.112th Cong. (2012). The Postal Reform Act of 2011 creates an
                         independent commission responsible for recommending postal facilities, including area
                         and district offices, for closure or consolidation. USPS would be required to close or
                         consolidate postal facilities recommended by the independent commission unless
                         Congress enacts a joint resolution of disapproval. H.R. 2309, 112th Cong. (2012).




                         Page 8                                                         GAO-12-506 U.S. Postal Service
                           consolidations of mail-processing operations, based on information
                           gathered and presented by district employees. On the other hand, district
                           employees, who account for the remainder of field employees, are directly
                           responsible for carrying out both the retail and mail-processing facility
                           reviews and other cost-reduction efforts, such as consolidating delivery
                           routes.

Reducing Costs in USPS’s   Since 2006, USPS has reviewed over 3,000 retail facilities and closed
Retail Network             686—about 23 percent of those reviewed. In 2011, as part of USPS’s
                           Retail Access Optimization Initiative, the agency announced plans to
                           review another 3,650 retail facilities for possible closure. Reviewing retail
                           facilities for possible closure generally involves one to three stages,
                           depending on the outcome of each stage. Area officials oversee activities
                           related to each stage to ensure compliance with USPS’s requirements.
                           District employees are involved in completing work required for each of
                           these stages. For example, in the first stage, district employees study and
                           prepare a report on the feasibility of closing a particular facility and
                           examine the potential effects on (1) services, (2) customers, and (3)
                           USPS employees, as well as the potential economic savings associated
                           with closing a particular retail facility. To identify these effects, district
                           employees collect and analyze operational, financial, and delivery data
                           related to the facility. District employees also distribute questionnaires to
                           potentially affected customers about the customers’ service needs and
                           access to postal services in their vicinity and hold community meetings to
                           discuss, among other matters, the reason for the proposed change in
                           service and to respond to customer inquiries and concerns. According to
                           USPS officials, these questionnaires and community meetings provide
                           USPS with local information that headquarters might not otherwise have
                           available during its decision-making process. (Fig. 3 provides more
                           information on USPS’s process for reviewing retail facilities for possible
                           closure.)




                           Page 9                                             GAO-12-506 U.S. Postal Service
Figure 3: Key Steps in USPS’s Retail Facility Review Process




When headquarters officials decide to close a retail facility, district
employees carry out a variety of activities related to the closure. For
example, district employees must move equipment, realign any affected
delivery routes, and transfer mail carriers and other employees into other
locations. Related to this, district employees also are responsible for
identifying potential positions for staff affected by the closure.




Page 10                                               GAO-12-506 U.S. Postal Service
                                 None of the 3,650 facilities USPS identified for review in 2011 had been
                                 closed at the completion of our review. USPS is continuing to review
                                 these facilities and could decide to close some of them after the
                                 moratorium on facility closures expires on May 15, 2012. USPS officials
                                 acknowledge that closing retail postal facilities is highly contentious. As a
                                 result, according to USPS officials, USPS is exploring additional options
                                 to reduce its retail facility costs by, for example, reducing employee work
                                 hours and shortening operating hours at selected facilities. 11

Reducing Costs in USPS’s Mail-   Since 2006, USPS has taken several actions to reduce its costs by
Processing Network               improving the operational efficiency of its mail-processing network. As
                                 discussed in our April 2012 report, these actions included consolidating
                                 operations at various types of mail-processing facilities and closing
                                 unneeded facilities, which, according to USPS, resulted in about $2.4
                                 billion in cost savings. 12 In February 2011, USPS announced it had
                                 completed Area Mail Processing reviews of 264 of its mail-processing
                                 facilities to examine the feasibility of consolidating mail-processing
                                 operations from one or more postal facilities to other facilities to improve
                                 USPS’s operational efficiency. Of the 264 facilities that were reviewed, 35
                                 will remain open, 6 are on hold for further study, and 223 have been
                                 found feasible for consolidation, according to USPS. Area and district
                                 employees completed these reviews, which examined opportunities to
                                 consolidate mail origination and destination operations.

                                 USPS headquarters employees identified mail-processing facilities for
                                 review and possible consolidation with input from area and district
                                 employees. 13 Area and district employees reviewed and validated
                                 headquarters’ data and provided headquarters with additional information
                                 about each facility, such as anomalies in a facility’s configuration that
                                 might affect a consolidation decision. After headquarters selected mail-


                                 11
                                   According to USPS officials, USPS has reduced employee work hours at retail facilities
                                 by 21 percent since 2006 through employee attrition and work hour changes.
                                 12
                                   As discussed in our April 2012 report, these savings derive from actions in three areas:
                                 Specifically, USPS (1) closed nearly all of its Remote Encoding Centers (10 of 12) and
                                 Airport Mail Centers (76 of 77) between 2006 and 2011, (2) moved all of the operations
                                 previously performed at 21 Bulk Mail Centers into its Network Distribution Centers, and (3)
                                 completed 100 mail-processing consolidations. GAO-12-470.
                                 13
                                   According to USPS, it considered a variety of criteria in identifying the 264 facilities for
                                 possible consolidation, including, projected savings, service issues, and capacity within
                                 processing plants.




                                 Page 11                                                        GAO-12-506 U.S. Postal Service
processing facilities for review, district employees analyzed, among other
things, the facility’s mail volumes, work hours, and services, as well as
the estimated costs and savings of a potential consolidation and prepared
a report on their findings that was reviewed by headquarters and area
managers. After considering the results of the feasibility study
headquarters made a final determination on whether to consolidate one
or more aspects of the facility’s operations. Figure 4 provides more
information on USPS’s process for reviewing mail-processing facilities for
possible closure or consolidation.




Page 12                                          GAO-12-506 U.S. Postal Service
Figure 4: Key Steps in USPS’s Mail-Processing Review Process




                                       Page 13                 GAO-12-506 U.S. Postal Service
                           a
                            USPS has service standards for delivering each of its major types of mail. For example, currently,
                           local First-Class mail generally has to be delivered overnight, while mail that has a destination beyond
                           the contiguous 48 states can take up to 4 days for delivery. USPS has proposed revising its service
                           standards, including overnight mail.

                           b
                            If as a result of this process, USPS is able to consolidate all of the operational functions performed at
                           the facility, USPS officials complete a separate study, referred to as a node study, to decide whether
                           to close the facility.


                           If headquarters approves the consolidation of operations at a facility, area
                           and district employees perform those activities. For example, area
                           employees must move mail-processing equipment and transfer the
                           facility’s mail operations and transportation network to other USPS
                           facilities. In addition, area and district employees must coordinate on
                           repositioning employees into new positions as specified by their collective
                           bargaining agreement. 14 After the consolidation has been completed,
                           area employees conduct—with input from district employees—post-
                           implementation reviews to evaluate, among other matters, the impacts of
                           the consolidation and actual cost savings.

Reducing Costs in USPS’s   A key portion of USPS’s cost reduction efforts is linked to its delivery
Delivery Network           network (i.e., delivering its mail more efficiently). Mail delivery is USPS’s
                           largest category of costs and generated close to $30 billion in total
                           expenses in 2011. The majority of these costs—$21 billion—were for city
                           routes, which use mail carriers who are generally expected to work 8
                           hours per day. 15 Declining mail volumes and the introduction of
                           technologies that automatically sort most mail for delivery directly reduce
                           the amount of time carriers need to manually prepare mail for delivery.
                           Consequently, over time, these factors have, in some locations, resulted



                           14
                             For example, under the terms of USPS’s current agreement with the American Postal
                           Workers Union, USPS is prohibited from, among other things, (1) terminating employees
                           who work in mail-processing facilities and (2) transferring these employees to an
                           installation further than 50 miles from the employees’ prior duty station. According to an
                           area official, mail-processing facility consolidations can be challenging, given the large
                           number of employees who work at these facilities. Another area official stated that as
                           more mail-processing facilities are closed, the task of finding positions for employees will
                           be increasingly challenging. If USPS cannot find appropriate positions for these
                           employees, they could be placed on “stand by” status (i.e., idled, but receiving their full
                           salaries).
                           15
                             USPS uses a variety of routes to deliver its mail, but the two principle route types are
                           “city” and “rural.” City and rural carriers have different collective bargaining agreements
                           and compensation systems. Generally, city carriers are paid by the hour with overtime, as
                           applicable, while rural carriers are salaried employees.




                           Page 14                                                               GAO-12-506 U.S. Postal Service
in routes that city carriers can complete in less than 8 hours. 16
Recognizing that these factors cause inefficiencies in USPS’s city delivery
network, 17 in 2008, USPS and the National Association of Letter
Carriers—the union that represents city carriers—entered into an
agreement that permits USPS to conduct city route inspections and to
realign routes that no longer reflect 8 hours of work into more efficient
routes. In fiscal year 2011, USPS eliminated 6,821 of its 224,485 city and
rural delivery routes (about 3 percent). In addition, USPS recently
announced plans to eliminate another 20,000 city routes (about 9 percent
of current routes) for an estimated $2 billion in annual savings. 18
According to USPS officials, realigning delivery routes likely will continue
well into the future given expected mail volume declines and annual
increases in addresses receiving mail which, until recently, have
historically increased by about 1 million addresses per year.

Area and district employees have key roles in realigning city delivery
routes. Specifically, area employees oversee the city route realignment
process to ensure consistency across districts in their area, while district
employees directly carry out the realignments. To do so, district
employees (1) gather and analyze information on the factors that affect
delivery time; (2) observe the time a mail carrier spends servicing his or
her route and, if the route is determined to represent less than a full 8-
hour work day; (3) reconfigure the route so that it is more efficient. To
evaluate the factors that affect delivery time, district managers consider a
variety of factors, including the number of addresses and mail volume on
a particular route, the distance between addresses, the geographic
location of the route (e.g., the downtown of a major metropolitan area
versus a small town), and the mode of delivery (e.g., mail delivered to a
curbside mailbox, a mail slot in a door, or a cluster box). In addition,



16
  Our July 2009 report provides additional information about USPS’s efforts to increase
mail delivery efficiencies. See GAO, U.S. Postal Service: Mail Delivery Efficiency Has
Improved, but Additional Actions Needed to Achieve Further Gains, GAO-09-696
(Washington, D.C.: July 15, 2009).
17
  According to USPS officials, the annual method for measuring and adjusting rural carrier
routes helps provide a more efficient structure for these routes.
18
  According to USPS, realigning its delivery routes creates opportunities to reduce its
personnel costs for carriers, carrier work hours, and overtime. In addition, because USPS
assigns vehicles to most of its routes, when routes are consolidated or eliminated, USPS
requires fewer delivery vehicles and uses less fuel. Similarly, with less mail for carriers to
sort manually, USPS needs less equipment and facility space.




Page 15                                                       GAO-12-506 U.S. Postal Service
                                  district employees physically observe a mail carrier’s daily activities, both
                                  in the office preparing mail for delivery and transporting and delivering the
                                  mail, to determine whether the route represents a full 8-hour day. 19 If after
                                  conducting these activities, district employees determine that the
                                  workload does not fill an 8-hour day, specially trained district employees
                                  use a computerized management tool—called the Carrier Optimal
                                  Routing system—to redesign routes. This system uses digital mapping,
                                  algorithms, and route inspection data to create efficient city carrier routes
                                  that are more compact and contiguous. As a result, USPS could, for
                                  example, consolidate portions of other city routes, such as routes that
                                  necessitate carrier overtime, to complete or augment the prior
                                  reconfigured route, thereby eliminating the need for overtime. Because
                                  route realignments reorder mail deliveries along city routes, the
                                  realignments result in major changes to USPS’s database for managing
                                  addresses that, according to district managers, requires district Address
                                  Management Systems Specialists to update the database on an ongoing
                                  basis. According to USPS field officials, if updates to the database are not
                                  made in a timely manner, delivery efficiency and customer service would
                                  be degraded. 20


Revenue-Generating                As with USPS’s cost reduction efforts, area and district employees have a
Efforts                           significant role in several aspects of USPS’s efforts to generate additional
                                  revenue through three of the Postmaster General’s four core business
                                  strategies: (1) strengthening the value of mail to businesses, (2)
                                  improving its retail customers’ experience, and (3) competing for the
                                  package business.

Strengthening the Value of Mail   Area and district employees promote and oversee a variety of efforts
to Businesses                     intended to strengthen the value of mail to businesses. Collectively, these
                                  efforts are intended to enhance how U.S. businesses contact their
                                  customers to deliver billing statements and notifications (using First-Class
                                  Mail) and advertisements and offers (using Standard Mail). For example,
                                  area and district Business Service Network employees (marketing
                                  employees) provide direct and ongoing customer service to business



                                  19
                                    This entails district employees counting and recording the mail that the carrier handled,
                                  and recording the time the carrier used for each activity.
                                  20
                                    Business mailers also rely on USPS’s updated address data to prepare and organize
                                  their mail for acceptance at mail-processing facilities.




                                  Page 16                                                      GAO-12-506 U.S. Postal Service
                        mailers to, among other things, help the mailers conveniently process
                        their mail and to correct any mailing problems, such as shipment delays,
                        that may arise. In 2011, USPS generated about $50 billion (76 percent of
                        its total operating revenue) from business mailers. Of this amount, $40
                        billion (60 percent of its total operating revenue) came from business
                        mailers that area and district Business Service Network employees
                        directly serviced.

                        Area and district employees also have a role in promoting the value of
                        mail with new business mailers. According to the Postmaster General’s
                        speech in May 2011, three quarters of U.S. businesses are not using the
                        mail to market their businesses to potential customers. Thus, he said
                        encouraging these businesses to do so represents an opportunity to
                        increase USPS’s revenue. In January 2011, USPS introduced a new
                        initiative called Every Door Direct Mail to (1) make it easier for small and
                        medium-sized businesses to advertise through the mail, and (2) enable
                        local businesses to target potential customers by street, as opposed to
                        specific mailing addresses. Area employees oversee the implementation
                        of this initiative in districts within their area, and monitor performance
                        metrics and revenue earned. Similarly, district employees promote the
                        initiative in their districts to attract new customers in their locations.
                        According to USPS, this initiative generated over $92 million in revenue in
                        the 9 months following its introduction in January 2011.

Improving the Retail    Improving the retail customer experience means maintaining and growing
Customers’ Experience   the customer base through improved customer service. 21 Area employees
                        have a key role in monitoring the quality of customer interactions and
                        resolving any performance problems identified. For example, area
                        employees told us that they regularly monitor the results of, among other
                        things, customer surveys in specific post offices as well as in districts as a
                        whole. 22 When these data identify specific performance problems, area
                        employees share the results with district employees who are then
                        expected to work with particular facilities and individuals to correct the


                        21
                          Specifically, according to USPS’s 2011 Annual Report to the Congress, improving the
                        customers’ experience means creating uniformly positive experiences—easier
                        transactions, helpful solutions, and friendly exchanges—whenever a customer conducts
                        business with USPS.
                        22
                          The surveys pose questions on the customers’ experience (1) sending and receiving
                        mail, (2) during their last contact with a USPS employee, and (3) during their last visit to a
                        retail facility, among other topics.




                        Page 17                                                       GAO-12-506 U.S. Postal Service
                            identified service-related problems. District employees also track the
                            performance and revenue generated by third parties who provide
                            alternative access to postal products through contract postal units and
                            work with local postmasters, who most directly oversee these facilities, to
                            improve service and maximize revenue.

Competing for the Package   USPS’s field employees also have key roles in helping the USPS
Business                    successfully compete for and grow its package business. Overall,
                            according to USPS, its package deliveries have increased from 12.7
                            percent of its revenue in fiscal year 2006 to 16.1 percent in fiscal year
                            2011. District employees work directly with employees at post offices and
                            mail-processing facilities to train employees on how to properly scan
                            packages for delivery—a key factor in growing USPS’s package
                            business. Proper scanning helps ensure that packages travel through its
                            delivery network efficiently and that customers and USPS can track the
                            packages to determine their current location. USPS’s competitors offer
                            this service, and USPS hopes to improve the reliability of its package-
                            tracking services to capture portions of its competitors’ business. In
                            addition, field employees we interviewed in one of the four areas we
                            selected for our review developed a program to generate additional
                            revenue by targeting small businesses that are not currently using
                            USPS’s services. Specifically, in the Southwest Area, area employees
                            worked with employees of their Dallas district office to collaborate on
                            ways to identify and contact small businesses that generate less than
                            $10,000 annually in postage sales and that currently use USPS
                            competitors, such as the United Parcel Service, to persuade these
                            companies to use USPS for their package mailing needs. 23 According to
                            USPS from August 1, 2011, through February 10, 2012, this initiative
                            generated about $11.9 million in revenue from new small business
                            customers. USPS headquarters officials stated that USPS is currently
                            considering whether to implement similar revenue-generating efforts
                            elsewhere.




                            23
                              The Dallas District initiated this program—referred to as “Revenue Drivers”—in the
                            spring of 2011 and subsequently collaborated with the Southwest area to further develop
                            the program. The area expanded this program to all of its districts in August 2011.




                            Page 18                                                   GAO-12-506 U.S. Postal Service
                           In 2011 USPS consolidated its field offices by closing eight offices,
In 2011 USPS Closed        centralizing support services, and eliminating field positions for an
Field Offices and          estimated $150 million in annual savings. However, USPS field
                           employees we interviewed were concerned that the staffing reductions
Eliminated Field           could negatively affect their ability to carry out additional cost-savings and
Positions, Resulting in    revenue-generating efforts. USPS issued a plan in December 2011 to
$150 Million in            evaluate area and district offices for possible consolidation but, according
                           to headquarters officials, USPS does not anticipate initiating these
Estimated Annual           evaluations until after the completion of cost-reduction efforts in its retail,
Savings                    mail-processing, and delivery networks.


USPS’s 2011 Field-Office   Prior to the consolidation, USPS estimated that the 2011 consolidation
Consolidation              would result in an estimated annual cost savings of $150 million through
                           December 2011. 24 According to USPS, the goals of this consolidation
                           were to, among other things, enhance and strengthen customer service
                           and allow USPS to more quickly adapt to changing market forces, such
                           as continuing mail volume declines. USPS closed its Southeast area
                           office and seven district offices, 25 and assigned functions previously
                           performed at these locations to other area and district offices within close
                           proximity. According to USPS headquarters officials, USPS considered a
                           variety of factors in deciding which field offices to close and which
                           positions to eliminate, including mail volume, number of customers
                           served, population density, number of delivery routes, and revenue
                           generated. Overall, USPS reduced its field offices positions by 1,946, or
                           26 percent. At the conclusion of the consolidation in September 2011,
                           USPS had 817 area and 4,698 district office positions, totaling 5,515 field
                           positions. 26 Of the four departments that we selected for review, most of
                           the field position reductions were in operations support (35 percent) and
                           human resources (35 percent). The smallest reductions (14 percent) were
                           in marketing (see table 1).




                           24
                             USPS has not evaluated its actual cost savings or the operational impacts of its 2011
                           consolidation. However according to USPS officials, it intends to do so.
                           25
                            In addition to the Southeast area office, USPS closed the Albuquerque, NM; Big Sky,
                           MT; Columbus, OH; Southeast Michigan; Southeast New England, RI; South Georgia; and
                           Northern Illinois district offices.
                           26
                                This data reflects number of authorized positions rather than total personnel.




                           Page 19                                                        GAO-12-506 U.S. Postal Service
Table 1: 2011 Area and District Position Reductions, by Department

                                                                   Total field-   Total percentage
                                     Area office   District office      office       of field-office
                                       position          position    position              position
    Departments                      reductions      reductions reductions              reductions
    Operations Support                      166              519           685                    35%
    Human Resources                          99              575           674                    35%
    Finance                                  27              262           289                    15%
    Marketing                                41              239           280                    14%
    Othera                                    5               13            18                     1%
    Total area and district
    office position
    reductions                              338            1,608         1,946                  100%
Source: GAO analysis of USPS data.

a
 USPS also eliminated positions in other field-office departments. Collectively, these positions, which
included secretarial positions, account for 1 percent of the total positions eliminated.

As part of this consolidation, USPS also centralized several district
support services positions, including the following, into other locations
which resulted in a net reduction of 247 positions.

•      USPS centralized Family and Medical Leave Act Coordinators from
       district offices to its Human Resources Shared Services Center in
       Greensboro, North Carolina. Overall, USPS eliminated 106 district
       positions and, according to officials at the center, created 45 positions
       to handle the work previously carried out by the districts’
       coordinators—a net reduction of 61 positions.

•      USPS centralized responsibilities for allocating budgets from district to
       area offices. As part of this change, it eliminated 154 of its 221 district
       budget positions and created 11 positions in its area offices—a net
       reduction of 143 positions. According to area officials, moving this
       responsibility to area offices will help ensure that all facilities within an
       area have standardized and comparable budgets.

•      USPS also eliminated 43 of the 78 district Mailpiece Design Analyst
       positions and centralized the remaining 35 positions at area offices. 27



27
 Prior to the centralization, each of the district offices had at least one Mailpiece Design
Analyst.




Page 20                                                              GAO-12-506 U.S. Postal Service
                                    The remaining coordinators now provide design services to USPS
                                    customers through a centralized hotline.

                                Appendix I provides additional information on selected centralization
                                actions between 2002 and 2005.


Area and District Officials’
Concerns about the 2011
Consolidation
Concerns about the Ability to   Several area and district officials expressed concern about how staff
Carry Out Key USPS Efforts      reductions and the allocation of field resources could affect their ability to
                                manage ongoing and planned cost-reduction and revenue-generation
                                efforts. Such concerns include the following:

                                •   Four of the six district operations support managers whom we
                                    interviewed raised concerns about the number of Address
                                    Management Systems Specialist positions that USPS eliminated in
                                    the 2011 consolidation. According to these officials, the loss of these
                                    positions could limit their ability to perform future route realignments.
                                    Overall, USPS reduced the number of these district positions from
                                    624 positions to 427—a 32 percent reduction. As discussed,
                                    according to field officials, Address Management Systems Specialists
                                    are critical to USPS’s ongoing efforts to update its address
                                    management database following route realignments.

                                •   Seven of the 10 area and district marketing managers we interviewed
                                    also raised concerns about the number of marketing positions
                                    eliminated in the 2011 consolidation. Of these reductions, 38 percent
                                    were area and district Business Service Network positions. These
                                    reductions may have been particularly difficult in the Capital Metro
                                    Area office because the area gained responsibility for managing 25
                                    additional business mailer accounts previously handled by the
                                    Southeast Area office. Several field officials told us that given USPS’s
                                    increased focus on generating revenue, it is important that area and
                                    district offices be staffed appropriately to oversee the range of
                                    marketing activities and to maintain business mailer customers. A
                                    district marketing manager reiterated this point, indicating that most
                                    business mailers expect personal service to resolve any mailing
                                    issues and that consequently, USPS should ensure that these
                                    business mailers receive consistent and reliable service to reduce the
                                    possibility of losing their business to competitors. As we have



                                Page 21                                             GAO-12-506 U.S. Postal Service
                                      reported, businesses that publish mail Periodicals, such as daily or
                                      weekly news magazines, have expressed concern about USPS’s
                                      ability to provide reliable service. 28 According to these business
                                      mailers, they will likely (1) accelerate their efforts to shift subscribers
                                      from hard copy mail to electronic communication or (2) otherwise stop
                                      using USPS if it is unable to provide reliable service.

                                •     In addition, 12 of the 30 district managers we interviewed expressed
                                      concern that when USPS allocated resources for the 2011
                                      consolidation, it did not fully consider that some offices would be
                                      picking up additional work from the field office closures. For example,
                                      several district managers told us that during this consolidation, several
                                      field position reductions were made that, in their view, did not reflect
                                      office workload variations. The managers said that their departments
                                      are now understaffed. For example, the District Manager at the
                                      Connecticut Valley District told us that following the 2011
                                      consolidation, her district is now one of the largest districts in the
                                      country, both with respect to the number of USPS employees and
                                      geographic size. Specifically, she said her district grew from 11,939
                                      employees to 15,421—an increase of 29 percent and added over 100
                                      facilities, while losing 20 district positions. She expressed concern that
                                      despite overseeing one of the largest districts, she experienced the
                                      same number of staffing reductions as other districts with smaller
                                      workloads.

Concerns about Recruiting and   Eight field officials told us that long work hours resulting from the 2011
Retaining Future Managers:      consolidation combined with other factors, such as employee uncertainty
                                about their future employment, have made it difficult to recruit and retain
                                area and district employees for management positions. For example, one
                                district office manager told us that employees in her department have
                                been seeking management opportunities outside USPS because of these
                                concerns. Another district manager commented that he has seen a
                                decrease in the number of employees willing to move into managerial
                                positions because of uncertainty about future promotional opportunities
                                and the stress associated with these positions. In addition, 17 field
                                officials we talked to expressed concern that the loss of a significant
                                number of senior, experienced area and district employees during the
                                2011 consolidation might negatively affect USPS’s ability to manage field
                                operations.


                                28
                                    GAO-12-470.




                                Page 22                                               GAO-12-506 U.S. Postal Service
                          USPS headquarters officials stated that while they understand the
                          concerns expressed by area and district employees, the changes
                          undertaken as part of the 2011 consolidation were intended to align with
                          other actions that USPS has taken to standardize and streamline support
                          services. For example, according to these officials, USPS has developed
                          several Web-based systems to automate and standardize administrative
                          tasks that were previously conducted by district staff. As these tasks are
                          streamlined, fewer district resources are needed. In addition, as
                          discussed, USPS headquarters officials told us that USPS considered a
                          variety of factors in deciding its 2011 consolidation, including mail volume,
                          number of customers, population density, number of delivery routes, and
                          revenue generated. In addition, according to USPS headquarters officials,
                          USPS also intends to consider workload impacts in its future field-office
                          consolidations.


Issuance of Plan and      In December 2011, USPS issued a plan for evaluating area and district
Decision to Hold Off on   offices for possible consolidation and for carrying out future
Future Field-Office       consolidations. According to the OIG, this plan addresses its
                          recommendations related to USPS’s 2009 consolidation. 29 In particular,
Consolidations
                          OIG officials told us that the document addresses recommendations to
                          USPS to develop a plan which (1) periodically evaluates area and district
                          offices for possible consolidation, (2) guides decisions on future field-
                          office consolidations, and (3) considers factors such as an office’s mail
                          volume, workload, and proximity to other offices. In addition, OIG officials
                          told us that the plan addresses the agency’s recommendation that USPS
                          develop procedures for maintaining adequate documentation of its field
                          office evaluations and consolidation decisions.

                          USPS’s December 2011 plan specifies that it will take numerous steps to
                          evaluate field offices for possible consolidation, including:

                          •   conducting periodic evaluations of area and district offices to assess
                              the need for consolidations;




                          29
                            United States Postal Service Office of Inspector General, Postal Service Area and
                          District Office Field Structure, United States Postal Service Office of Inspector General,
                          FF-AR-10-224(R) (Arlington, VA: Sept. 20, 2010).




                          Page 23                                                      GAO-12-506 U.S. Postal Service
•    developing a business case, which includes expected cost savings
     and benefits, for proposed field-office consolidations:

•    using reliable data sources to evaluate area and district offices for
     potential consolidation;

•    adequately documenting all analyses and data used to make
     consolidation decisions; and

•    conducting post-consolidation reviews to identify key achievements
     and actual cost savings, and document lessons learned. 30

USPS’s past area and district consolidations have lacked documentation
and transparency. For example, despite numerous requests, USPS did
not provide us with any documentation of the analyses it used or the
approval process for its decision to consolidate field operations in 2011.
Similarly, in 2010, the OIG reported that USPS could not always provide
documentation supporting its 2009 and earlier field-office consolidations.
In addition, USPS has not completed postconsolidation reviews to assess
either its lessons learned or its actual cost savings. Headquarters officials
told us that the plan it issued in December 2011 should address these
past concerns. These officials also said that USPS intends to ensure that
its future evaluations consider the operational impacts of potential field-
office consolidations on ongoing and planned initiatives, such as those
related to downsizing its retail, mail-processing, and delivery networks.

While USPS’s recent plan indicates that it intends to periodically evaluate
its field office structure for possible consolidation, it does not specify when
it will initiate these evaluations. According to headquarters officials, USPS
does not plan to initiate these evaluations until after the completion of
cost-reduction efforts in its retail, mail-processing, and delivery networks,
efforts that USPS intends to complete in 2016. These officials also told us
that further consolidation of field offices would be counterproductive at
this time because field employees are key to the successful
accomplishment of these cost-reduction efforts. In addition, the
headquarters officials noted that cost savings from future field
consolidations would be minimal compared to the roughly $9 billion USPS
estimates can be saved by streamlining its retail, mail-processing, and


30
   According to USPS officials, USPS also intends to conduct a postconsolidation review of
its 2011 area and district consolidation actions.




Page 24                                                    GAO-12-506 U.S. Postal Service
                  delivery networks. Thus, according to these officials, for the time being,
                  USPS needs its current field-office structure to focus on other efforts that
                  will result in the largest potential cost savings.


                  USPS’s dire financial outlook necessitates urgent action to align its total
Concluding        network and reduce its costs as mail volume continues to decline. To
Observations      reduce costs, USPS reduced the number of employees in its area and
                  district offices by almost 56 percent from 2002 to 2011. And, in 2011, it
                  announced additional USPS-wide initiatives to save an estimated $9.1
                  billion annually by 2016. USPS also recently issued a plan for evaluating
                  area and district offices for future consolidations; however, USPS has
                  chosen to hold off on future field-office consolidations until after the
                  USPS-wide initiatives are complete, which should allow USPS to make
                  additional field- office changes, if needed, based on a network that is
                  aligned with the reduced mail volume. This decision seems appropriate in
                  view of the importance of area and district offices in implementing and
                  managing these initiatives. If USPS decides to move forward with future
                  field-office evaluations, its plan for doing so should address past concerns
                  about inadequate documentation and transparency and lead to
                  postconsolidation reviews to assess lessons learned and to measure
                  actual savings.


                  We provided a draft of this report to USPS for review and comment.
Agency Comments   USPS had no comments.


                  We are sending copies of this report to the appropriate congressional
                  committees, the Postmaster General, and other interested parties. In
                  addition, the report will be available at no charge on GAO’s Web site at
                  http://www.gao.gov.




                  Page 25                                            GAO-12-506 U.S. Postal Service
If you or your staffs have any questions on this report, please contact me
at (202) 512-2834 or stjamesl@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. Contact information and key contributors to the report are
listed in appendix III.




Lorelei St. James
Director, Physical Infrastructure Issues




Page 26                                         GAO-12-506 U.S. Postal Service
List of Congressional Requesters

The Honorable Susan Collins
Ranking Member
Committee on Homeland Security
  and Governmental Affairs
United States Senate

The Honorable Tom Carper
Chairman
Subcommittee on Federal Financial Management,
Government Information,
Federal Services and International Security
Committee on Homeland Security
  and Governmental Affairs
United States Senate

The Honorable Darrell Issa
Chairman
Committee on Oversight and Government Reform
House of Representatives




Page 27                                    GAO-12-506 U.S. Postal Service
Appendix I: Timeline of Recent Field Office
                                            Appendix I: Timeline of Recent Field Office
                                            Consolidations and Information on Selected
                                            Centralizations of Administrative Services


Consolidations and Information on Selected
Centralizations of Administrative Services
Table 2: Baseline of USPS’s Field Structure (1992) and Subsequent Field-Office Consolidations Between 2002 and 2011

                                                                                                                              Area         District
Year          Office Consolidation Actions                                                                                  Offices        Offices
1992          USPS replaced its prior field structure with 10 area offices and 85 district offices.ª                              10            85
2002          USPS closed the Midwest and Mid-Atlantic Area offices.                                                                8           85
2003          USPS closed five district offices—Springfield, MA; Akron, OH; Lancaster, PA; Long Beach,                              8           80
              CA; and San Jose, CA.
2006          USPS opened the Capital Metro Area office.                                                                            9           80
2009          USPS closed the New York, NY Metro Area office and six district offices—Central Florida,                              8           74
              FL; Central New Jersey, NJ; Erie, PA; Massachusetts, MA; Spokane WA; and New
              Hampshire/Vermont (located in Manchester, NH) offices.
2011          USPS closed the Southeast Area office and seven district offices—Albuquerque, NM; Big                                 7           67
              Sky, MT; Columbus, OH; Southeast Michigan; Southeast New England, RI; South Georgia;
              and Northern Illinois.
                                            Source: GAO presentation of OIG and USPS data.

                                            a
                                            Prior to 1992, USPS’s field-office structure consisted of 5 regions, 73 field divisions, and 144
                                            management sectional centers.


Selected Centralizations of                 Between 2002 and 2005, USPS centralized numerous support services,
Administrative Services                     including accounting, equal opportunity employment investigations, and
Previously Performed by Area                human resources into shared service centers. These services were
and District Offices                        conducted by employees in area and district offices before the
                                            centralizations. According to USPS headquarters officials, these
                                            centralization efforts are most noteworthy in terms of cost savings and
                                            reductions in area and district employee staffing.


Centralization of                           USPS centralized some of its accounting services in 2002 and 2003. As
Accounting Services                         part of this effort, USPS replaced its prior information technology systems
                                            with a new computer system—the Standard Accounting for Retail
                                            System. In addition, USPS reviewed the range of accounting services
                                            performed at its district offices to identify services that could be
                                            standardized and streamlined and, as a result of this effort, eliminated
                                            1,063 district accounting positions. To handle work previously performed
                                            by district employees, USPS created 295 positions at three accounting
                                            shared service centers in Eagan, Minnesota; St. Louis, Missouri; and San
                                            Mateo, California—a net reduction of 768 USPS positions. In fiscal year
                                            2005, USPS completed a postcentralization review and determined that
                                            its actions had resulted in cost savings of $56.8 million.




                                            Page 28                                                              GAO-12-506 U.S. Postal Service
                          Appendix I: Timeline of Recent Field Office
                          Consolidations and Information on Selected
                          Centralizations of Administrative Services




Centralization of Equal   In 2004, USPS centralized activities related to its investigations of equal
Employment Opportunity    employment opportunity complaints within a shared service center—the
Investigations            National Equal Opportunity Employment Service Office—located in
                          Tampa, Florida. To accomplish this centralization, USPS eliminated 169
                          area and district human-resource positions and created 47 positions at
                          the new center to handle the complaints—a net reduction of 122
                          employee positions. According to USPS officials at the center, the goals
                          of this centralization were to (1) correct problems in USPS’s equal
                          employment opportunity complaint process, (2) reduce a substantial
                          backlog of cases, and (3) implement a consistent process for
                          investigating future complaints. Among other responsibilities, employees
                          at this center review complaints filed by USPS employees and applicants
                          for employment, assign complaints to contracted investigative personnel,
                          and review and make determinations about the investigators’ findings.
                          According to USPS officials at the center, centralizing this work resulted
                          in about $13 million in cost savings as of fiscal year 2011. In addition,
                          beginning in 2005, USPS began soliciting federal agencies to carry out
                          their agencies’ equal employment opportunity investigations through the
                          center. According to officials at the center, 17 agencies have entered into
                          interagency agreements with USPS for this purpose. From 2006 to 2011,
                          USPS earned about $3 million in revenue from these agreements,
                          according to officials at the center.


Centralization of Human   In 2005, USPS established its Human Resource Shared Services Center
Resource Services         in Greensboro, North Carolina, to centralize most of its services related to
                          employee benefits; personnel actions; safety and injury compensation;
                          and employee hiring, retirements, and reassignments. According to USPS
                          officials at the center, the centralization was needed to streamline and
                          standardize its human resources services. As part of this effort, USPS
                          introduced a new information technology system—the Human Capital
                          Enterprise System—which integrated information from a variety of prior
                          human resource computer systems. According to USPS officials, the
                          introduction of the improved computer system, along with the
                          centralization, allowed USPS to reduce its district human resource staff
                          by approximately 1,300-1,400 positions. 1 While USPS eliminated well
                          over a thousand district positions, it also created 457 positions at the


                          1
                           According to USPS officials, the work associated with these human resource positions
                          largely involved data entry transactions, such as posting job positions online and
                          processing retirement and benefits documentation.




                          Page 29                                                   GAO-12-506 U.S. Postal Service
Appendix I: Timeline of Recent Field Office
Consolidations and Information on Selected
Centralizations of Administrative Services




shared services center to provide these services—a net staff reduction of
roughly 900 employee positions. 2 According to a Human Resources
official, the centralization of human resource services resulted in cost
savings of about $150 million annually from 2007 through 2011.




2
  According to officials at the Human Resource Shared Services Center, the center’s
staffing varies with workload fluctuations. For example, the officials told us that during
open seasons when employees are allowed to change their health care insurance
providers, USPS hires temporary staff to help accomplish the additional work.




Page 30                                                       GAO-12-506 U.S. Postal Service
Appendix II: Objectives, Scope, and
               Appendix II: Objectives, Scope, and
               Methodology



Methodology

               This report describes: (1) the role of area and district office employees in
               implementing the U.S. Postal Service’s (USPS) cost-savings and
               revenue-generation efforts and (2) USPS’s actions to consolidate its field
               office structure in 2011 and the impact of these actions. This report also
               describes actions taken by USPS between 2002 and 2005 to centralize
               selected services previously conducted at field offices to other USPS
               locations.

               To address these objectives, we reviewed numerous documents,
               including prior GAO and USPS Office of Inspector General (OIG) reports,
               USPS documents, and the September 6, 2011, testimony of the
               Postmaster General. We also interviewed USPS officials, including
               headquarters officials and officials in area and district offices. We
               interviewed officials at four area offices—the Capital Metro Area, the
               Northeast Area, the Southwest Area, and the Pacific Area—that we
               selected based on several factors, including geographic dispersion
               throughout the U.S. and whether the office had recently absorbed the
               responsibilities of other offices following a USPS field-office consolidation.
               We selected a mixture of area offices that had been affected by recent
               consolidations and one office that had not been affected. We also
               interviewed officials from six district offices—Connecticut Valley; Dallas;
               Fort Worth; Los Angeles; Northern Virginia; and Santa Ana—which we
               selected based on their proximity (i.e., within about 100 miles) to the four
               area offices we selected. In total, we interviewed over 50 USPS officials,
               including USPS’s Chief Human Resources Officer; Area Vice Presidents;
               District Managers; area and district officials responsible for operations
               support, human resources, finance, and marketing in their locations; and
               managers representing USPS’s accounting, equal opportunity
               employment investigations, and human resources shared services
               centers. We also interviewed representatives from the National
               Association of Postal Supervisors, which represents among others, USPS
               area and district managers.

               To describe the role of field office employees in implementing USPS’s
               cost-savings and revenue-generation efforts, we reviewed USPS
               documents describing USPS’s strategic goals and the role of area and
               district employees in carrying out potential consolidations of retail, mail-
               processing, and delivery networks. To describe USPS’s actions to
               consolidate its area and district offices in 2011 and the impact of this
               consolidation we reviewed a 2010 OIG report on the 2009 consolidation,
               which included recommendations for USPS related to future field-office
               consolidation actions, and a variety of USPS documents, including
               USPS’s (1) statements on the expectations and goals for the 2011


               Page 31                                            GAO-12-506 U.S. Postal Service
Appendix II: Objectives, Scope, and
Methodology




consolidation, (2) 2011 Annual Report, (3) Form 10-K filing with the
Securities and Exchange Commission on its 2011 Annual Report, (4) plan
issued in December 2011 entitled Area and District Office Structure
Evaluations Strategy, Policy and Process, and (5) 5-Year Business Plan
issued in February 2012. We also interviewed USPS officials to learn
about the financial and operational impacts of the 2011 consolidation. In
addition, we analyzed USPS data on the number of employee positions at
area and districts offices following the 2011 consolidation, and USPS’s
cost-savings estimates for this consolidation and for its support service
centralization efforts between 2002 to 2005. We assessed the reliability of
these data sources by, among other things, interviewing USPS officials
and reviewing USPS procedures for maintaining the data and verifying
their accuracy. Based on this information, we determined that the data
provided to us were sufficiently reliable for our reporting purposes. Finally,
we interviewed USPS headquarters officials and OIG officials to obtain
information on recommendations in the OIG’s 2010 report and USPS’s
December 2011 plan for future evaluations of area and district offices for
possible consolidations.

We conducted this performance audit from April 2011 to April 2012 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient and appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.




Page 32                                            GAO-12-506 U.S. Postal Service
Appendix III: GAO Contact and Staff
                  Appendix III: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Lorelei St. James, (202) 512-2834 or stjamesl@gao.gov
GAO Contact
                  In addition to the contact named above, Kathleen Turner, Assistant
Staff             Director; Patrick Dudley; Delwen Jones; Elke Kolodinski; James Leonard;
Acknowledgments   Maria Mercado; Sara Ann Moessbauer; Joshua Ormond; and Crystal
                  Wesco made key contributions to this report.




(544165)
                  Page 33                                        GAO-12-506 U.S. Postal Service
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