Looking forward, USPS  projects that First-Class Mail will decline significantly between now and  2020. Past Actions to Reduce Excess Capacity

From fiscal years 2006 through 2011, USPS data showed that it reduced  mail processing and transportation costs by $2.4 billion—or 16 percent— by reducing the number of mail processing work hours, facilities, and  employees as shown in table 1. United States Postal Service, Office of Inspector  General, U.S. Continuing automation improvements: These improvements have  enabled USPS to sort mail faster and more efficiently. USPS Plan to Consolidate Its Mail Processing Network

On December 15, 2011, USPS asked PRC to review and provide an  advisory opinion on its proposal to change its delivery service standards,  primarily by changing its delivery standards to eliminate overnight delivery  service for most First-Class Mail and Periodicals. $5 billion in compensation and benefits; and  3. In March 2010, USPS  presented a detailed proposal to PRC to move from a 6-day to a 5-day  delivery schedule to achieve its workforce and cost savings reduction  goals. Stakeholder Issues and USPS Challenges

		Stakeholder Issues with Mail Processing Changes

Some business mailers have expressed concern that reducing processing  facilities as a result of eliminating overnight delivery service could  increase costs for business mailers who will have to travel farther to drop  off their mail. Employee associations have expressed concern that USPS’s proposed  changes may result in even greater losses in mail volume and revenue,  which would further harm USPS financially. In contrast, however, other business mailers and Members of Congress  have expressed support for consolidating the mail processing network to  reduce costs. USPS  responded that given the multibillion-dollar deficits that it has experienced in  each of the last 5 years, and given the over $14 billion loss it expects in fiscal  year 2012, capturing cost savings wherever possible will be vital to USPS’s  financial viability. Pending legislation originating in the Senate (S.1789) includes provisions  that would affect USPS’s ability to consolidate its networks by delaying  USPS’s move to 5-day delivery by 2 years and requiring USPS to  consider downsizing rather than closing facilities. Moreover, we have  previously reported that Congress and USPS need to reach agreement  on a comprehensive package of actions to improve USPS’s financial  viability. Consequently, we are not making  new recommendations or presenting a matter for Congress to consider at  this time. If Congress prefers to retain the current delivery service standards and  associated network, decisions will be needed about how USPS’s costs for  providing these services will be paid, including additional cost reductions  or revenue sources. Agency Comments

We provided a draft of this report to USPS for review and comment. Appendix I: Objectives, Scope, and Methodology

This report addresses (1) past actions the U.S. Postal Service (USPS)  has taken to reduce excess capacity, (2) USPS’s plans to consolidate its  mail processing network, and (3) key stakeholder issues and challenges  USPS faces in consolidating its mail processing network. Further, we reviewed USPS annual reports to Congress and its  network plans as section 302 of the Postal Accountability and  Enhancement Act of 2006 requires USPS to submit; related GAO and  USPS OIG reports, as well as other relevant studies relating to reducing  excess capacity in USPS’s mail processing network. To examine USPS’s future plans to consolidate its mail processing  network, we reviewed USPS’s December 2011 proposal to change  delivery service standards and its plan to consolidate its mail processing  network by reducing facilities, staff, equipment, and transportation  resources. We also interviewed USPS  officials, and reviewed stakeholder testimonies and published letters from  Members of Congress commenting on USPS plans to change delivery  service standards and close facilities.
Why GAO Did This Study

Since 2006, the U.S. Postal Service has taken actions to reduce its excess capacity. Such actions have made progress toward consolidating the mail processing network to increase efficiency and reduce costs while meeting delivery standards. However, since 2006, the gap between USPS expenses and revenues has grown significantly. In February 2012, USPS projected that its net losses would reach $21 billion by 2016.
As requested, this report addresses (1) actions USPS has taken since 2006 to reduce excess capacity in facilities, staff, equipment, and transportation; (2) USPS plans to consolidate its mail processing network; and (3) key stakeholder issues and challenges related to USPSs plans. GAO reviewed relevant documents and data, interviewed USPS officials, reviewed proposed legislation, and reviewed stakeholder comments to USPS plans for changing delivery service standards.

What GAO Found

Since 2006, the U.S. Postal Service (USPS) has closed redundant facilities and consolidated mail processing operations and transportation to reduce excess capacity in its network, resulting in reported cost savings of about $2.4 billion. Excess capacity remains, however, because of continuing and accelerating declines in First-Class Mail volume, automation improvements that sort mail faster and more efficiently, and increasing mail preparation and transportation by business mailers, much of whose mail now bypasses most of USPSs processing network.
In December 2011, USPS issued a proposal for consolidating its mail processing network, which is based on proposed changes to overnight delivery service standards for First-Class Mail and Periodicals. Consolidating its network is one of several initiatives, including moving from a 6-day to a 5-day delivery schedule and reducing compensation and benefits, that USPS has proposed to meet a savings goal of $22.5 billion by 2016. This goal includes saving $4 billion by consolidating its mail processing and transportation network and reducing excess capacity as indicated in the table below. The Postal Regulatory Commission is currently reviewing USPSs proposal to change delivery service standards.
Stakeholder issues and other challenges could prevent USPS from implementing its plan for consolidating its mail processing network or achieving its cost savings goals. Although some business mailers and Members of Congress have expressed support for consolidating mail processing facilities, other mailers, Members of Congress, affected communities, and employee organizations have raised issues. Key issues raised by business mailers are that closing facilities could increase their transportation costs and decrease service. Employee associations are concerned that reducing service could result in a greater loss of mail volume and revenue that could worsen USPSs financial condition. USPS has said that given its huge deficits, capturing cost savings wherever possible will be vital. USPS has asked Congress to address its challenges, and Congress is considering legislation that would include different approaches to addressing USPSs financial problems. A bill originating in the Senate provides for employee buyouts but delays moving to 5-day delivery, while a House bill creates a commission to make operational decisions such as facility closures and permits USPS to reduce delivery days. If Congress prefers to retain the current delivery service standards and associated network, decisions will need to be made about how USPSs costs for providing these services will be paid, including additional cost reductions or revenue sources.

What GAO Recommends

GAO is not making new recommendations in this report, as it has previously reported to Congress on the urgent need for a comprehensive package of actions to improve USPSs financial viability and has provided Congress with strategies and options to consider. USPS had no comments on a draft of this report.