Postal Service seeks flexibility in closing facilities

Facing falling mail volume and limited control over its prices or costs, the U.S. Postal Service is relying on post office consolidation to stem losses, but the effort faces stiff political resistance.

The self-supporting agency on June 19 sent Congress an outline of how it hopes to save money by streamlining a network of 37,000 post offices and 400 large mail-processing plants.

The outline did not provide any details indicating how many facilities the Postal Service might consider closing or consolidating.

Sharp declines in first class mail leave the network larger than needed, allowing the agency to eliminate facilities -- and related maintenance costs -- without sacrificing service, Deputy Postmaster General Patrick Donahoe told the House Oversight and Government Reform Postal Service Subcommittee Thursday.

The Postal Service is largely blocked from laying off employees, but an effort that involves considering closing facilities in hundreds of congressional districts nevertheless draws opposition from lawmakers, postal unions and other stakeholders.

Members have regularly used appropriations bills to protect individual postal facilities from closing.

Acknowledging that challenge, Donahoe asked the subcommittee for help.

"We ask you to understand that operational consolidations or mail processing facility closures are a component of a strategy designed to serve the overall needs of the postal system and its customers nationwide," he said.

"Bills right now are holding us up from doing some consolidations that we know are the right thing to do," he added later. "What we are asking for is to let us have that flexibility."

Donahoe said the network consolidation plan has particular urgency now because the economic downturn is socking the service with losses that could total more than $1.5 billion this year.

Laws requiring mandatory arbitration in contract disputes leave the Postal Service's labor costs fixed at about 80 percent and the recent postal reform act put inflation-based caps on mailing rates. That means the agency can change its bottom line only through increasing market share or cutting operational costs, witnesses said Thursday.

Without dramatic cost reforms "there will be serious and rapid financial consequences for the nation's mail system," Postal Service Inspector General David Williams testified.

Williams warned the agency might have to "borrow substantial funds if [it] cannot generate substantial savings." He noted the agency is likely to borrow heavily this year.

Williams and Phil Herr, Government Accountability Office director for physical infrastructure issues, urged the agency to improve communications about the network plan with affected parties, though they noted recent improvement.

Acknowledging that stakeholder resistance regularly derails Postal Service plans to close facilities, Herr said "part of the problem [has] stemmed from USPS's limited communication with the public."

Oversight and Government Reform Federal Workforce Subcommittee Chairman Danny Davis, D-Ill., pressed the agency to avoid service problems.

"Poor mail delivery ... will anger the public and trigger political considerations," Davis said.

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