Five Day Mail Delivery? GAO Weighs In

By on March 29, 2011 in Current Events with 12 Comments

GAO Report Summary

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.

Read the full GAO report on the USPS ending Saturday mail delivery

 

Postmaster General Patrick R. Donahoe Comments On GAO Report

The Government Accountability Office (GAO) has produced a thorough and comprehensive review of the Postal Service proposal to move to a five day per week delivery schedule. We are pleased to see they agree that the Postal Service is likely to achieve significant cost savings if this change were to be effected and that much of its success depends on how efficiently it is implemented. We agree and believe that having completed a lengthy planning process; we are prepared to make that happen.

We are aware of the concerns certain stakeholders have expressed to GAO. We consulted extensively with our customers as we developed our operating plans. They can be assured that any decision to go to a five-day schedule will carefully balance our universal service responsibility and our statutory duty to operate in an efficient manner in light of prevailing volume, cost and revenue trends. Consideration of such matters will help ensure the financial stability of the Postal Service well into the future.

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