Watchdogs question US Post Office outsourcing system

The US Postal Service's outsourcing tactics are questionable and accountability is spotty. Those were the major conclusions of a Government Accountability Office report issued to Congress this week that specifically said the USPS does not have a comprehensive mechanism for measuring outsourcing results, including any actual savings; therefore, it could not provide information on the effectiveness of its outsourcing programs.

Without cost-savings data, postal managers, stakeholders and Congress cannot assess the risk and value of outsourcing. For example, the USPS does not know the savings related to its outsourcing efforts because it does not have a process to evaluate the impact of outsourcing or to track actual savings. Instead, officials told us that the Service projects savings from a wide range of efforts and initiatives, including outsourcing, and reduces its budget accordingly, the GAO stated.

And the USPS uses outsourcing extensively for such activities as call centers mail transportation services, rural mail delivery, contract stations for retail services, and vehicle and equipment maintenance. In 2007, the only year the USPS had number on, it spent $74.4 million on National Call Center outsourcing and $208 million Mail Transport Equipment Service Centers, the GAO stated. However, postal employees also perform many of these same functions and unions representing these employees have had long-standing concerns about the impact of outsourcing on job security, the GAO stated.

The USPS said it has used outsourcing to improve its operational efficiency in the face of dwindling revenue and increased costs. For example, since fiscal year 2000, the number of mail pieces delivered to each address and the average revenue per delivery have decreased. The USPS stated in its 2002 Transformation Plan that it planned to achieve cost savings of $5 billion over 5 years, partly by improving operational efficiency. Since then, the Service has reported achieving billions in cost-savings, improving productivity, and reducing its workforce by more than 100,000 employees, but has nothing to prove such statements. The Service set a goal to cut another $5 billion in costs during fiscal years 2006 through 2010 by continuing to increase productivity and improve operations. To achieve this goal, it has initiatives under way to further reduce manual mail handling, increase the number of deliveries for each mail route, and optimize its transportation and mail processing networks, the GAO stated.

And yet the USPS is now considering another major outsourcing initiative involving its bulk mail processing network. This initiative is related to work covered by collective bargaining agreements with two unions. However, the USPS faces a number of challenges related to outsourcing, including differing messages from pending legislation and the Administration on outsourcing and the potential impact of outsourcing on its relations with its employee unions. For example, the current and previous administrations have advanced proposals to promote more efficient and effective government operations, including by outsourcing. On the other hand, two bills pending in Congress would limit the Service's ability to outsource delivery service or require the Service to bargain with postal employee unions before entering into certain contracts, the GAO stated.

The USPS says these bills would constrain its ability to achieve cost reductions and that contractors may operate more efficiently than the USPS in a number of ways including by compensating its employees at lower rates than the Postal Service and by employing more part-time workers. Postal unions have testified recently about their concerns related to the Service's expanded use of contractors for delivery service. Both the Postmaster General and postal union representatives have stated that issues related to outsourcing should be resolved within the context of collective bargaining agreements.

In response to the GAO's report, the USPS agreed that it does not separately track the results of its outsourcing activities and with that a process should be established to measure the results and effectiveness of Service outsourcing initiatives. The Service agreed to establish a process, for future national-level outsourcing initiatives approved after July 2008, to compare the final financial comparative analysis assumptions with actual contract award data 1 year after project implementation.

However, the USPS did not agree to disclose any findings from that tracking report to Congress and proposed instead to retain information it collects on its outsourcing efforts internally.

Obligations stemming from the Service's universal service mandate, to provide postal services to all parts of the country, continue to increase the number of deliveries by about 1.7 million new addresses per year - a proposal the GAO did not agree with.

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