The executive order stated that the commission’s  mission shall be to examine the state of USPS and submit a report to the  President by July 31, 2003, that articulates a proposed vision for USPS,  along with recommendations for the legislative and administrative reforms  needed to ensure the viability of postal services. Worksharing Involves Activities Mailers Must Perform to Qualify for Lower Rates

Postal worksharing activities generally involve mailers preparing,  barcoding, sorting, or transporting mail to qualify for reduced postage  rates, that is, worksharing rates. Worksharing rates are based on what are  commonly referred to as worksharing discounts because the rates are  reduced based on the costs that USPS is estimated to avoid as a result of  mailer worksharing activities. Key worksharing activities include   (1) barcoding and preparing mail so it can be sorted by USPS automated  equipment, which reduces manual sorting and other USPS handling of the  mail; (2) presorting mail, such as by ZIP Code or specific delivery location,  to reduce the number of times USPS must sort the mail to route it to the  addressee; and (3) entering mail at a USPS facility that is generally closer to  the final destination of the mail, which is commonly referred as entering  the mail deeper into USPS’s network used to move the mail. Mailers must also perform  numerous other worksharing activities. In fiscal year 2002, nearly three- quarters of domestic mail received worksharing rates (see fig. Second, they credit worksharing with benefiting mailers and  the mailing industry. While stakeholders generally support the concept of worksharing, they  have raised differing concerns in this area. Worksharing Is Credited with Benefiting USPS

According to USPS and PRC, worksharing benefits USPS by enabling it to  improve its operations and help minimize its workforce and infrastructure,  and by stimulating mail volume growth. As we have  reported, USPS’s business model relies on growth in mail volume to  generate revenues to help cover rising costs. Worksharing Is Credited with Benefiting the Nation

According to USPS and PRC, worksharing benefits the nation, in part by  lowering business costs, and in part by creating associated benefits that  consumers can realize. For  example, APWU has asserted that worksharing discounts are too large, but  some members of the mailing industry have asserted that worksharing  discounts are not large enough (see table 3). Specifically, the act requires that, in recommending changes to  postage rates, PRC consider nine factors, including “the degree of  preparation of mail for delivery into the postal system performed by the  mailer and its effect upon reducing costs to USPS.” The nine factors that  PRC must consider when recommending domestic postage rates and fees  are as follows:   the establishment and maintenance of a fair and equitable schedule;  the value of mail service actually provided each class of mail or type of  mail service to both the sender and the recipient, including, but not  limited to, the collection, mode of transportation, and priority of  delivery;  the requirement that each class of mail or type of mail service bear the  direct and indirect postal costs attributable to that class or type plus  that portion of all other costs of USPS reasonably assignable to such  class or type;  the effect of rate increases upon the general public, business mail users,  and enterprises in the private sector of the economy engaged in the  delivery of mail matter other than letters;  the available alternative means of sending and receiving letters and  other mail matter at reasonable costs;  the degree of preparation of mail for delivery into the postal system  performed by the mailer and its effect upon reducing costs to USPS;  simplicity of structure for the entire schedule and simple, identifiable  relationships between the rates or fees charged the various classes of  mail for postal services;  the educational, cultural, scientific, and informational value to the  recipient of mail matter; and  such other factors as PRC deems appropriate. These proceedings have established  precedents that have further clarified the legal basis for worksharing rates. (2) What is the rationale for worksharing, according to the  U.S. We did not assess the benefits that USPS and  PRC claimed are derived from worksharing. To obtain information on the legal basis for worksharing, we reviewed  pertinent laws, decisions in postal rate cases interpreting legal criteria for  worksharing rates, and pertinent USPS and PRC regulations.
Why GAO Did This Study

The U.S. Postal Service (USPS) faces major financial, operational, and human capital challenges that call for a transformation if USPS is to remain viable in the 21st century. Given these challenges, the President established a commission to examine the state of USPS and submit a report by July 31, 2003, with a proposed vision for USPS and recommendations to ensure the viability of postal services. The presidential commission has addressed worksharing (activities that mailers perform to obtain lower postage rates) in the course of its work. About three-quarters of domestic mail volume is workshared. Worksharing is fundamental to USPS operations, but is not well understood by a general audience. To help Congress and others better understand worksharing, GAO was asked to provide information on the key activities and the rationale for worksharing and the legal basis for worksharing rates. GAO discusses USPS's and the Postal Rate Commission's rationale for worksharing but did not assess the benefits that they claimed for worksharing. GAO will issue a second report later this year on worksharing issues raised by stakeholders. In commenting on this report, USPS and the Postal Rate Commission reemphasized the benefits of worksharing.

What GAO Found

Postal worksharing activities generally involve mailers preparing, sorting, or transporting mail to qualify for reduced postage rates, that is, worksharing rates. These rates are based on what are referred to as worksharing discounts because the rates are reduced based on the costs that USPS is estimated to avoid as a result of mailer worksharing activities. Key activities include (1) barcoding and preparing mail to be sorted by USPS automated equipment, which reduces manual sorting; (2) presorting mail by ZIP Code or specific delivery location, which reduces USPS sorting; and (3) entering mail at a USPS facility that generally is closer to the final destination of the mail. Worksharing also requires mailers to perform numerous other activities, such as updating addresses to improve their accuracy. According to USPS and the Postal Rate Commission, the rationale for worksharing is that it benefits USPS, mailers and the mailing industry, and the nation. They said worksharing benefits (1) USPS by enabling it to improve its operations and thereby help minimize its workforce and infrastructure, and by stimulating mail volume growth that generates revenues to cover rising costs; (2) mailers by reducing mail-related costs and improving delivery service, and the mailing industry that performs worksharing activities; and (3) the nation, in part by lowering business costs, and in part by the associated benefits that consumers can realize. While stakeholders generally support the concept of worksharing, they have raised differing concerns in this area. For example, the American Postal Workers Union has asserted that worksharing discounts are too large, but some mailers and members of the mailing industry have asserted that the worksharing discounts are not large enough. The primary legal basis for worksharing rates is the requirement in law that, when recommending postage rates, the Postal Rate Commission consider mail preparation and its effect upon reducing USPS costs. Postal rate cases have established precedents clarifying the basis for worksharing rates.