Further, provisions in annual USPS  appropriations since 1984 mandate 6-day-a-week delivery and rural mail  delivery at certain levels. USPS estimated that if 5-day delivery had been in effect in fiscal year 2009,  it would have realized $3.1 billion in net savings—including $3.3 billion in  gross savings less $0.2 billion in revenue losses due to a slight volume  decline. USPS plans to achieve these work-hour  reductions by attrition, involuntary separations, or other strategies to  reduce work hours. USPS  has not reported how many years this transition would take, but has noted  that it would include realigning USPS’s workforce through attrition and  other changes. USPS Should Achieve Significant Cost Savings from 5-Day Delivery, but the Extent of Savings Will Depend on How Well the Change Is Implemented

		Cost Savings from 5-Day Delivery Are Likely to Be Significant, but Some Savings Will Depend on Increasing City-Carriers’ Productivity

USPS is likely to achieve significant cost savings by reducing delivery from  6 days to 5 days because it would eliminate costs associated with carriers  traversing their routes on Saturday. During the PRC proceeding, however,  stakeholders raised a variety of criticisms about the assumptions,  methodology, and conclusions USPS used to determine its cost-savings  estimate. Concerns have been raised, however, that USPS may  have understated the potential volume losses based on questions about the  methodology USPS used to develop its estimate and the impact of other  factors that can affect mail volumes. PS’s ability to implement these plans and achieve its  Stakeholders have raised a variety of operational issues about USPS’s proposal, such as the extent to which USPS will be able to maintain high- quality service; align its processing, retail, and delivery network with  changes in workload; and communicate changes with stakeholders. Key benefits would include improving USPS’s financial condition by  reducing costs; reducing the size of its workforce; and increasing  efficiency by better aligning delivery operations with reduced mail  volumes. On the minus side, it would reduce service; put mail volumes and  revenues at risk; eliminate jobs; decrease USPS advantages over  competitors that do not have Saturday delivery; and, by itself, be  insufficient to solve USPS’s financial challenges. Twenty-eight percent  opposed USPS’s proposal, often stating it would reduce mail volume and  harm USPS’s business. Action by Congress and USPS is urgently  needed to comprehensively restructure USPS’s operations, networks, and  workforce and to modernize its organization. We recently reported that  Congress and USPS urgently need to reach agreement on a package of  actions to restore USPS’s financial viability and enable it to begin making  necessary changes. Additional uncertainties remain as factors other than delivery frequency— e.g., price increases—can also affect mail volumes and revenues. USPS’s  role in providing universal postal services can affect all American  households and businesses, so fundamental changes to universal postal  services involve key public policy issues for Congress to decide. If Congress decides 5- day delivery is necessary, Congress and USPS could factor the savings  from 5-day delivery into deliberations about what package of actions  should be taken to restore USPS’s financial viability. Conversely, if  Congress maintains the mandate for 6-day delivery, Congress and USPS  would need to find other ways for USPS to achieve other substantial  financial savings. This would entail difficult decisions with implications  for USPS’s infrastructure, workforce, and service. Because GAO previously recommended that Congress consider providing  USPS with financial relief, and in doing so, consider all options available  to reduce costs, this report contains no new recommendations. USPS generally agreed with our findings,  but provided additional context for these findings. Postal Service’s  (USPS) cost and volume estimates and the operational impacts associated  with its 5-day delivery proposal and (2) the trade-offs and other  implications associated with this proposal. Much of this  information was submitted as part of PRC’s review of USPS’s proposal to  move to 5-day delivery. After applying these criteria, we further analyzed two issues that may  significantly affect USPS’s net financial savings estimate—(1) USPS’s  assumption and judgment that most of the Saturday workload transferred  to weekdays would be absorbed through more efficient city delivery  operations and (2) USPS’s methodology for estimating the effect of its 5- day delivery proposal on mail volume, including reducing mailers’  estimates based on their responses to the question asking about the  likelihood that their mail volumes would change if USPS implemented its  proposal. March 18, 2010. U.S.
Why GAO Did This Study

The U.S. Postal Service's (USPS) financial outlook has deteriorated as customers have shifted to electronic alternatives. Mail volumes have declined over 20 percent since fiscal year 2006 and are expected to continue declining. To help its financial outlook, in March 2010, USPS presented a detailed proposal to the Postal Regulatory Commission (PRC) to move from a 6-day to a 5-day delivery schedule. USPS projected this would save about $3 billion annually and reduce mail volume by less than l percent. This proposal factors in widespread changes to USPS's workforce and networks. USPS has also asked Congress to not include language in its annual appropriation requiring 6 day-a-week delivery. As requested, GAO assessed (1) USPS's cost and volume estimates and the operational impacts associated with its 5-day delivery proposal and (2) the trade-offs and other implications associated with this proposal. GAO reviewed USPS's proposal (including its assumptions, methodologies, and conclusions) and other information from the PRC's 5-day delivery proceeding, surveyed postal employee and mailer groups, and interviewed USPS officials and postal employee groups. Because GAO previously recommended that Congress consider providing financial relief to USPS, as well as other cost-saving options, this report contains no new recommendations. USPS generally agreed with GAO's findings and provided additional context on its proposed change to end Saturday delivery.

What GAO Found

USPS's proposal to move to 5-day delivery by ending Saturday delivery would likely result in substantial savings; however, the extent to which it would achieve these savings depends on how effectively this proposal is implemented. USPS's $3.1 billion net cost-savings estimate is primarily based on eliminating city- and rural-carrier work hours and costs through attrition, involuntary separations, or other strategies. USPS also estimated that 5-day delivery would result in minimal mail volume decline. However, stakeholders have raised a variety of concerns about USPS's estimates, including, (1) First, USPS's cost-savings estimate assumed that most of the Saturday workload transferred to weekdays would be absorbed through more efficient delivery operations. If certain city-carrier workload would not be absorbed, USPS estimated that up to $500 million in annual savings would not be realized. (2) Second, USPS may have understated the size of the potential mail volume loss due to questions about the methodology USPS used to develop its estimates of how 5-day delivery may affect mail volumes. The extent to which USPS can achieve cost savings and mitigate volume and revenue loss depends on how well and how quickly it can realign its operations, workforce, and networks; maintain service quality; and communicate with stakeholders. USPS has spent considerable time and resources developing plans to facilitate this transition. Nevertheless, risks and uncertainties remain, such as how quickly it can realign its workforce through attrition; how effectively it can modify certain finance systems that cannot be changed until congressional approval for 5-day delivery is granted; and how mailers will respond to this change in service. Further, uncertainties remain as factors other than delivery frequency--e.g., price increases--can also affect mail volumes and revenues. USPS's proposal involves several factors that need to be considered. It would improve USPS's financial condition by reducing costs, increasing efficiency, and better aligning its delivery operations with reduced mail volumes. However, it would also reduce service; put mail volumes and revenues at risk; eliminate jobs; and, by itself, be insufficient to solve USPS's financial challenges. USPS's role in providing universal postal services can affect all American households and businesses, so fundamental changes involve key public policy decisions for Congress. If Congress decides 5-day delivery is necessary, then Congress and USPS could factor the savings into deliberations about what package of actions should be taken to restore USPS's financial viability. Conversely, if Congress maintains the mandate for 6-day delivery, Congress and USPS would need to find other ways to achieve equivalent financial savings, so that the package is sufficient to restore USPS's financial viability. This would likely entail difficult decisions with broad implications for USPS's infrastructure, workforce, and service. As GAO has reported, a package of actions by Congress and USPS is urgently needed to modernize USPS's operations, networks, and workforce.