GAO: 5 Day Delivery won’t help without comprehensive restructuring of USPSTuesday, March 29th, 2011
The Government Accountability Office (GAO) released a report on the USPS proposal to end Saturday delivery. While the report said that cutting a delivery would save money for the USPS, it, like the PRC, questioned the USPS’s assumptions about the effects the move would have on its finances.
Here is the GAO’s summary of its findings:
USPSâ€™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. USPSâ€™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 USPSâ€™s estimates, including,
- First, USPSâ€™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.
- 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 frequencyâ€”e.g., price increasesâ€”can also affect mail volumes and revenues.
USPSâ€™s proposal involves several factors that need to be considered. It would improve USPSâ€™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 USPSâ€™s financial challenges. USPSâ€™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 USPSâ€™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 USPSâ€™s financial viability. This would likely entail difficult decisions with broad implications for USPSâ€™s infrastructure, workforce, and service. As GAO has reported, a package of actions by Congress and USPS is urgently needed to modernize USPSâ€™s operations, networks, and workforce.