Mail delivery  is USPS’s largest cost area, comprising 41 percent of total costs in fiscal  year 2013. 2). USPS is required to provide prompt, reliable, and efficient services to  patrons in all areas. USPS Data Have Limitations, but USPS Estimates Large Potential Savings from Large- Scale Delivery Mode Conversions

USPS estimates of delivery mode costs and potential savings from  converting to less costly modes have limitations because they rely on cost  estimates and data from a 1994 USPS study. USPS Delivery Mode Cost and Savings Estimates Have Limitations

USPS estimates of delivery mode costs and potential savings from  converting to less costly modes have limitations because they rely on cost  estimates and data from a 1994 USPS study.on the time postal employees used to prepare and deliver mail for each  mode of delivery. In lieu of current data,  USPS increased these 1994 cost estimates for each mode of delivery by   The study collected data  55 percent, based on the total percent change in the Consumer Price  Index for All Urban Consumers (CPI-U) from fiscal year 1994 to 2012. Because CPI-U is a measure of inflation for the U.S.  economy, changes in CPI-U over this period of time may not have been  the same as changes in USPS delivery costs, which are affected by  factors such as postal wage rates, postal benefit costs, and gasoline  prices. Without such information on costs  of modes and on potential savings through delivery conversions, USPS  and lawmakers may not have an accurate understanding of the impact of  delivery mode changes on which to base their decisions. Specifically, USPS estimated that its  delivery costs in fiscal year 2012 ranged from about $380 annually for the  average door delivery point to about $240 for curbline delivery and about  $170 for centralized delivery such as cluster boxes and apartment house  mailboxes (see fig. USPS Estimates Large Potential Savings from Mandatory Conversion of Residential and Business Delivery Points to Less Costly Modes

Based on the differences in delivery mode costs, USPS provided us with  estimates showing that it could realize large savings from large-scale  mandatory conversions of both residential and business delivery points  from costly door delivery even as it continues to add new delivery points  every year. USPS Has Taken Some Actions to Shift to Less Costly Delivery Modes but Faces Impediments

		USPS Actions Include Changes in Delivery Policy and a Voluntary Conversion Program for Existing Business Delivery

In April 2012, USPS updated its policy regarding assigning delivery  modes to new addresses. USPS revised its Postal Operations Manual—a  —to  regulation of the USPS pursuant to the Code of Federal Regulationsspecify that USPS determines the mode of delivery for new addresses. USPS achieved 43,333 such conversions, about 15 percent of  its goal—or about 0.8 percent—of the about 5.6 million business door  delivery points. USPS officials explained that based on the fiscal year  2013 results, they set a lower goal of 34,652 voluntary business  conversions for fiscal year 2014. USPS did achieve some voluntary residential conversions in fiscal year  2013. USPS reported 36,302 out of about 32.2 million residential door  delivery points—or about 0.1 percent—were converted to centralized  delivery. However, according to USPS officials, USPS has been reluctant to  mandate conversions. Under the voluntary conversion process,  customers on a route may choose to maintain door delivery, or a high  number of customers may request and receive hardship exemptions for  elderly persons or those with special needs, which would allow them to  keep door delivery service, thus reducing the number of conversions and  lowering potential savings. USPS Faces Stakeholder Resistance and Other Impediments to Conversions

Large-scale mandatory conversions have the potential to achieve large  savings, but USPS faces impediments, such as customer inconvenience  and safety and security concerns. Recommendation for Executive Action

To improve information needed for USPS and congressional decision  making as well as transparency for all stakeholders, we recommend that  the Postmaster General and USPS’s executive leaders collect and  analyze updated data on delivery mode costs and the potential savings  from converting delivery points to less costly modes of delivery and  establish a time frame for publicly reporting the results. Appendix I: Scope and Methodology

To discuss the costs and potential savings associated with converting to  less costly delivery modes, we obtained available U.S. To discuss USPS’s actions to convert delivery modes to less costly  modes and any impediments to conversion, we reviewed pertinent USPS  documentation, such as information on the Delivering Results, Innovation,  Value and Efficiency (DRIVE) initiative, and interviewed USPS delivery  operations officials and field officials, on USPS’s efforts to promote  voluntary conversion of some business addresses to less costly modes of  delivery.
Why GAO Did This Study

USPS is expected to provide prompt, reliable and efficient nationwide service while remaining self-supporting, but it is facing serious fiscal challenges with insufficient revenues to cover its expenses. Mail delivery is USPS's largest cost area, totaling about $30 billion annually. Although USPS lacks authority to make certain changes that could reduce costs, it does have the authority to convert from more expensive to less expensive delivery modes.
GAO was asked to examine potential cost savings and issues related to delivery conversion. This report discusses: (1) the estimated costs of each delivery mode and potential savings associated with converting to less costly modes and (2) USPS actions to convert to less costly delivery modes and any impediments to conversions. GAO obtained and analyzed USPS estimates from fiscal years 1994 through 2012 on delivery mode costs as well as potential savings from conversions to less costly modes and determined that the estimates have limitations, which we discuss in the report. GAO also interviewed officials from USPS and mailing industry stakeholders.

What GAO Found

The U.S. Postal Service (USPS) estimates of delivery mode costs and potential savings from converting to less costly modes show that door-to-door delivery is much more costly than delivery to a curbside or centralized mailbox and that USPS could achieve large savings by mandating large-scale conversions from door delivery to other modes. For fiscal year 2012, USPS estimated average annual costs of about $380 per delivery point for door delivery, compared with about $240 for delivery to the curb, and about $170 for delivery to a central location. USPS also estimated potential ongoing savings of over $2 billion annually from mandating conversion of about one-third of door deliveries to other modes. However, USPS's estimates of these specific costs and savings have limitations, in part because they rely on data from a 1994 USPS study. In lieu of current data, USPS adjusted the 1994 data according to increases in the Consumer Price Index—an adjustment that may not have been the same as changes in USPS delivery costs, which are affected by factors such as increases in postal wage rates, postal benefit costs, and gasoline prices. USPS officials estimate a new study could be conducted to replace the 1994 study for a total of about $100,000 to $750,000, depending on the extent of the study. Without current information on costs of delivery modes and on potential savings through delivery conversions, USPS and lawmakers may not have an accurate understanding of the impact of delivery mode changes on which to base their decisions.
USPS has taken some actions to shift door deliveries to less costly delivery modes on a voluntary basis, but it faces stakeholder resistance and other impediments to mandatory conversions. USPS revised its regulations in April 2012 specifying that USPS determines the mode of delivery for new addresses and that new addresses must receive less costly modes, such as centralized delivery, unless USPS approves an exception. Additionally, USPS implemented voluntary business conversions in fiscal year 2013. USPS reported that 43,333 out of about 5.6 million business door delivery points—or about 0.8 percent—were voluntarily converted in fiscal year 2013. USPS has set a modest goal of about 35,000 additional voluntary business conversion goals for fiscal year 2014. USPS also converted about 36,302 out of about 32.2 million residential door delivery points—or about 0.1 percent—to centralized delivery on a voluntary basis in fiscal year 2013. Through the voluntary conversion process, customers on a route may choose to maintain door delivery, reducing the number of conversions and lowering potential savings. Large-scale mandatory conversions have the potential to achieve large savings. However, USPS is reluctant to mandate conversions. There is some evidence that USPS would face resistance from customers, USPS employees, and mailing industry stakeholders if it were to implement mandatory conversion of delivery to less costly modes. Stakeholder concerns include personal safety, mail security, and difficulty finding suitable urban locations for boxes to deliver mail to a curbside or centralized location.

What GAO Recommends

GAO recommends that USPS collect updated data on delivery mode costs and the potential savings of converting to less costly modes of delivery and establish a time frame for publicly reporting the results. USPS agreed with the recommendation.