The POStPlan Initiative

In May 2012, USPS announced the POStPlan initiative. Through this analysis, USPS  determined that it could reduce hours at 13,167 of these offices from 8- to  2-, 4-, or 6-hours of retail service a day. Regarding the staffing arrangements at these offices, USPS planned to  replace career postmasters in the POStPlan post offices with less costly  non-career or part-time employees, as shown in fig. USPS Had Largely Completed POStPlan Implementation Prior to the Arbitration Decision and Expected Total Cost Savings of $500 Million Annually

		USPS Took Steps to Modify Retail Hours and Staffing at Most POStPlan Post Offices

Prior to the issuance of the POStPlan arbitration decision in September  2014, USPS had taken steps to reduce hours at almost three-quarters of  POStPlan post offices. As a result, USPS projected that  POStPlan will now result in total annual labor cost savings of about $337  million. This  resulted in a difference of $181 million. USPS officials told us that while the arbitration decision reduced the cost  savings it expected to achieve, POStPlan was still the correct operational  decision for USPS and its stakeholders. Limitations Affect the Reliability of USPS’s POStPlan Cost- Savings Estimates and the Accuracy of Actual Savings Achieved

		USPS Estimates of Expected Cost Savings Have Limitations That Affect Reliability, Including Data Errors That Affect the Accuracy of Calculations of Actual Savings Achieved

We reviewed USPS’s 2012 original POStPlan cost-savings estimate and  2015 estimate of the arbitration decision’s impact on cost savings and  found that while POStPlan most likely resulted in some cost savings, the  estimates have limitations that affect their reliability. Specifically, the  limitations include: (1) imprecise and incomplete labor costs, including  errors in the underlying data that affect the accuracy of calculations of  actual savings achieved; (2) lack of a sensitivity review; and (3) the  exclusion of other factors that would be necessary to consider the net  cost savings of the POStPlan initiative, particularly the potential impact of  reduced hours on retail revenue. Internal control standards  adopted by USPS also state that program managers and decision makers  need complete and accurate data to determine whether they are meeting  their goals, and that they should use quality information to make informed  decisions and evaluate an entity’s performance in achieving key  objectives and addressing risks. USPS’s post-arbitration decision estimate of $337 million in expected  annual cost savings relies, in part, on USPS calculations of actual  savings achieved due to POStPlan, but the accuracy of these actual  savings calculations may be limited by errors in the underlying  salaries and benefits data used to develop them. USPS’s calculation of labor costs in both its original and post-arbitration  decision estimates was also incomplete. As of March 14,  2016, USPS officials were continuing to assess this issue, but USPS’s  time frame for identifying the scope and resolving the issue remains  unclear, and it is also unclear if USPS subsequently intends to update its  calculations of actual savings achieved. Having reliable data and  quality methods for calculating the potential savings USPS expects to  achieve through these initiatives, the actual savings they achieve, and the  potential effects they have on revenue are critical. Even the preliminary analysis of changes in revenue that  USPS later conducted was limited because it was not consistent with  USPS’s definition of what constitutes POStPlan post offices. Recommendations for Executive Action

The Postmaster General should direct executive leaders to: establish guidance that clarifies when USPS should develop cost- savings estimates using a rigorous approach that includes, for  example, a sensitivity analysis and consideration of other factors that  could affect net costs and savings, versus when it is sufficient to  develop a rough estimate; continue to take steps to assess and resolve the salaries and benefits  data errors and, subsequently, update calculations of actual cost  savings achieved due to POStPlan as appropriate; and verify that calculations of changes in revenue at POStPlan post  offices in USPS’s revenue analyses are consistent with USPS’s  definition of POStPlan post offices and take steps to consider when it  may be appropriate to develop an approach for these analyses that  will allow USPS to more fully consider the effects of POStPlan on  retail revenue across USPS. Additionally, as we  note in our report, we believe such guidance will be helpful to USPS and  its oversight bodies as it considers future initiatives. Finally, USPS disagreed with some of the specific examples we use in  our report. Postal Service (USPS) took  to implement the Post Office Structure Plan (POStPlan) before the  September 2014 arbitration decision and the savings USPS estimated  POStPlan would achieve, (2) the effect USPS determined the arbitration  decision had on POStPlan staffing and cost savings, and (3) whether  USPS’s POStPlan cost-savings estimates are reliable and any limitations  of the estimates. Appendix II: Comments from the U.S.
Why GAO Did This Study

USPS continues to experience a financial crisis and has undertaken many initiatives to reduce costs. In May 2012, USPS announced POStPlan, which aimed to reduce retail hours at post offices and use less costly labor. However, an arbitrator ruled in September 2014 that USPS must reverse several of these staffing changes. GAO was asked to review the arbitration decision's effects on POStPlan staffing and cost savings.
GAO examined: (1) USPS's actions to implement POStPlan before the decision and expected savings, (2) the decision's effects on POStPlan's staffing and savings, and (3) whether USPS's POStPlan cost-savings estimates are reliable. GAO reviewed relevant POStPlan documentation and data; compared USPS's POStPlan cost-savings estimating process to GAO's data reliability and cost- estimating guidance and internal control standards adopted by USPS; and interviewed officials from USPS, its regulatory body, and postmaster associations.

What GAO Found

The U.S. Postal Service (USPS) had largely completed Post Office Structure Plan's (POStPlan) implementation prior to a 2014 POStPlan arbitration decision and expected millions in cost savings. Specifically, under POStPlan, USPS planned to reduce hours at about 13,000 post offices (from 8- to 2-, 4-, or 6-hours of retail service a day) and to staff them with employees less costly than postmasters. Prior to the arbitration decision, USPS had reduced hours at most of these offices and taken steps to make the staffing changes. For example, it replaced many career postmasters with non-career or part-time employees by offering separation incentives or reassignments. In July 2012, USPS estimated POStPlan would result in about $500 million in annual cost savings.
USPS determined that, while the 2014 arbitration decision significantly affected planned staffing at POStPlan post offices and estimated savings, POStPlan was the correct operational decision for USPS and its stakeholders. The arbitrator ruled that many offices be staffed by bargaining-unit employees, such as clerks, rather than the generally less costly employees USPS had planned to use. As a result, USPS estimated in June 2015 that POStPlan would now result in annual savings of about $337 million or 35 percent less than the about $500 million it expected.
USPS's original and post-arbitration decision estimates of expected POStPlan cost savings have limitations that affect their reliability. USPS officials noted that they do not have strict guidance on when a rough savings estimate is adequate versus when a more rigorous analysis is appropriate. Specific limitations include:
imprecise and incomplete labor costs, including errors in underlying data;
lack of a sensitivity review; and
the exclusion of other factors that affect net cost savings, particularly the potential impact of reduced retail hours on revenue.
For example, USPS's post-arbitration-decision estimate relies, in part, on its calculations of actual savings achieved due to POStPlan. While POStPlan most likely resulted in some savings, GAO found errors in the underlying salaries and benefits data used that may understate or overstate the amount of savings achieved. Additionally, while USPS later (i.e., after it developed its savings estimates) conducted analyses of changes in revenue, GAO found these analyses were limited because USPS's calculations of changes in revenue at POStPlan and non-POStPlan post offices were inconsistent with its definition of what constitutes a POStPlan office. As of March 2016, USPS was taking steps to understand the scope and origin of the errors in its salaries and benefits data, but its time frame for resolving the issue remains unclear, as does whether USPS subsequently intends to update its calculations of actual savings achieved. Internal control standards state that program managers and decision makers need quality data and information to determine whether they are meeting their goals. Without reliable data and quality methods for calculating the potential savings USPS expects to achieve through its initiatives, the actual savings they achieve, and the effects on revenue, USPS officials and oversight bodies may lack accurate and relevant information with which to make informed decisions regarding future cost-saving efforts in a time of constrained resources.

What GAO Recommends

To ensure that USPS has quality information regarding POStPlan, GAO recommends that USPS establish guidance that clarifies when to develop savings estimates using a rigorous approach; resolve errors in labor data and, as appropriate, recalculate actual savings achieved; and take steps to improve revenue analyses. USPS disagreed with some of GAO's findings but neither agreed or disagreed with the recommendations. GAO continues to believe its recommendations are valid as discussed further in this report.