USPS making slow progress downsizing network, OIG warns

The US Postal Service has been “slow” to right-size its network in the face of declining mail volumes, the Office of the Inspector General (OIG) told Congress this week. Making its latest semi-annual update to Capitol Hill on its activities rooting out waste, fraud and abuse in the USPS, the OIG noted the pressing need to tackle multi-billion dollar overpayments into federal pension and benefit funds.

But Inspector General David Williams said the other “primary cause” of USPS financial troubles was the 20% decline in mail volumes since 2007, which has seen 40bn fewer mailpieces flowing through the network.

Williams, whose department has audited USPS efforts to consolidate facilities and tackle its costs, said in the report: “The Postal
Service has taken steps toward rightsizing its network and aligning its workhours to the ebb and flow of mail, but progress has been slow.”

The report from the OIG came just days after 2,429 Reduction in Force notices were sent out to mid-level USPS staff warning that they could lose their jobs by September. A further 2,000 administrative and supervisory staff have accepted $20,000 buyouts this year.

The Postmaster General is currently seeking 7,500 job cuts to go along with an expected attrition of more than 20,000 staff. Along with plans to reduce the number of area and district offices, the move is expected to bring savings of $750m a year.

Some 130,000 USPS staff members have lost their jobs in the last three years, leaving a work force of around 575,000. The OIG report noted that reliance on overtime has increased in the last year, however, with $2.9bn paid out to those working outside normal hours in 2010, compared to $2.4bn in 2009, a 17.2% rise.

Management was not effectively planning for overtime usage, the OIG warned, exceeding planned overtime hours by 67.8%.

This week’s OIG report did acknowledge the “aggressive” cost-cutting measures at the USPS in the last two years, which have seen costs reduced by $9bn since 2009.

But as the Postal Service faces hitting a concrete debt ceiling in September, with projected losses of $8.3bn this year to follow last year’s $8.5bn loss, the OIG warned that the USPS needs to continue to optimise to cope with the digital age.

The Inspector General’s audits have identified $500m worth of costs that could be saved from the Postal Service disposing of its excess facility space “in a timelier manner”.

Unused property could be sold or leased out, or turned into real estate investments, said the OIG, which recommended better guidance for department heads to monitor and report excess space.

However, the OIG said Postal Service had not agreed with its findings on the amount of excess space in the network.

Customer access

A complication of USPS efforts to downsize its network has been the need to keep Congressmen on side.

While they need US lawmakers’ support to address pension overpayments estimated at more than $50bn, Congressmen representing communities across the US have been warning against the closure and consolidation of postal facilities, and the associated loss of jobs.

The issue is particularly high-profile in rural areas, with the USPS planning on closing around 2,000 least-used branches of its 38,000-strong post office network.

But while some Congressmen have urged the avoidance of facility closures in meetings this year with Postmaster General Pat Donahoe, others – notably leading Republicans on the powerful House Oversight Committee – have criticised staff costs, with wages and benefits representing 80% of USPS outgoings.

This summer the USPS has mounted a public campaign with a more positive outlook, emphasise to its customers the benefits of alternative access points such as the internet, automated kiosks and new postal counters operated by partner retailers, rather than the need to close under-used postal facilities.

The new USPS vice president of Channel Access, Kelly Sigmon, taking over from the retiring Linda Kingsley, said this week that a particular effort was underway to update internet access and improve mobile access to postal services at the moment.

A new website – www.uspseverywhere.com – has been launched to point customers to their nearest postal facilities, while the next few months should see major upgrades to the main usps.com website, which Sigmon told Post&Parcel was an “exciting” prospect for the Postal Service.

“Nearly one and a half million customers each day go online to usps.com or on the postal smart phone applications,” she said.

“Whether it’s online or on smart phones, we’re creating easy, more convenient access to postal products and services when and where our customers want them.”