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GAO Testimony To Subcommittee On USPS Finances

GAO Testimony To Subcommittee On USPS Finances

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gao, postal, postal news, Phil Herr, usps
gao, postal, postal news, Phil Herr, usps

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Published by: PostalReporter.com on May 17, 2011
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TestimonyBefore the Subcommittee on Federal Financial Management,Government Information, Federal Services, andInternational Security, Committee on Homeland Securityand Governmental Affairs, U.S. Senate
 
For Release on DeliveryExpected at 10:30 a.m. EDTTuesday, May 17, 2011
UNITED STATES POSTALSERVICEStrategy Needed to Address Aging Delivery Fleet
Statement of Phillip Herr, DirectorPhysical Infrastructure Issues
GAO-11-671TUnited States Government Accountability Office
GAO
 
 
United States Government Accountability Office
Accountability • Integrity • Reliability
Highlights ofGAO-11-671T, a testimonybefore the Subcommittee on Federal FinancialManagement, Government Information,Federal Services, and International Security,Committee on Homeland Security andGovernmental Affairs, U.S. Senate
May 17, 2011
UNITED STATES POSTAL SERVICE
Strate
g
y Needed to Address A
g
in
g
Delivery Fleet
Why GAO Did This Study
The United States Postal Service(USPS) is in financial crisis. It alsohas the world’s largest civilian fleet,with many of its delivery vehiclesreaching the end of their expected 24- year operational lives. USPS issubject to certain legislativerequirements governing the federalfleet, including a requirement that 75 percent of USPS’s vehicleacquisitions be capable of operatingon an alternative fuel other thangasoline. This testimony addresses(1) USPS’s financial condition; (2)USPS’s delivery fleet profile,including how USPS has respondedto alternative fuel vehiclerequirements and its experienceswith these vehicles; (3) trade-offs of USPS’s approach for addressing itsdelivery fleet needs; and (4) optionsto fund a major acquisition of delivery vehicles.This testimony is primarily based onGAO-11-386, which is being releasedtoday. For that report, GAO analyzedUSPS data, visited USPS facilities,and interviewed USPS and otherofficials. GAO recommended in thatreport that USPS should develop astrategy for addressing its deliveryfleet needs that considers the effectsof likely operational changes,legislative fleet requirements, andother factors. USPS agreed with therecommendation. For this testimony,GAO also drew upon past andongoing work on USPS’s financialcondition and updated USPSfinancial information.
What GAO Found
USPS’s financial condition continues to deteriorate. For the first 6 months of fiscal year 2011, USPS reported a net loss of $2.6 billion—worse than itexpected—and that, absent legislative change, it will have to default on payments to the government, including a $5.5 billion payment for its retireehealth benefits. GAO has reported that Congress and USPS need to reachagreement on a package of actions to move USPS toward financial viability.USPS’s delivery fleet is largely composed of custom-built, right-hand-drive vehicles designed to last for 24 years, including about 141,000 gasoline- powered vehicles (16 to 23 years old) and 21,000 flex-fuel vehicles capable of running on gasoline or 85-percent ethanol (E85) (about 10 years old). Its flex-fuel vehicles and many of its 22,000 left-hand-drive minivans, which are alsocapable of running on E85, were purchased to comply with the 75 percentacquisition requirement for alternative fuel vehicles. Delivery vehicles travelabout 17 miles and use the equivalent of about 2 gallons of gasoline onaverage per day. USPS has a variety of limited experiences with otheralternative fuel vehicles, such as compressed natural gas and plug-in electric vehicles, most of which have higher life-cycle costs than gasoline vehicles.
Delivery Vehicles at a USPS Maintenance Facility (left) and Post Office (ri
g
ht)
USPS’s approach for addressing its delivery fleet needs is to maintain itscurrent fleet until it determines how to address its longer term needs. USPShas incurred small increases in direct maintenance costs over the last 4 years,which were about $2,600 per vehicle in fiscal year 2010. However, it isincreasingly incurring costs for unscheduled maintenance because of breakdowns, which can disrupt operations and increase costs. In fiscal year2010, at least 31 percent of USPS’s vehicle maintenance costs were forunscheduled maintenance, 11 percentage points over USPS’s 20 percent goal.USPS’s financial challenges limit options to fund a major delivery vehiclereplacement or refurbishment, estimated to cost $5.8 billion and (in 2005) $3.5billion, respectively. USPS and other federal and nonfederal officials see little potential to finance a fleet replacement through grants or partnerships. If Congress and USPS reach agreement on a package of actions to move USPStoward financial viability, such an agreement could potentially enhanceUSPS’s ability to invest in new delivery vehicles.
ViewGAO-11-671Tor key components.For more information, contact Phillip Herr at(202) 512-2834 orherrp@gao.gov.
 
 Page 1 GAO-11-671T
Chairman Carper, Ranking Member Brown, and Members of theSubcommittee:I am pleased to be here today to participate in this hearing to address theU.S. Postal Service’s (USPS) financial crisis and the challenges it faces inmodernizing its delivery vehicle fleet. USPS operates the world’s largestcivilian vehicle fleet—comprising more than 215,000 vehicles—of whichabout 192,000 are light-duty delivery vehicles
1
used to deliver mail to about131 million residential and business addresses, in most cases, 6 days aweek.
2
My statement addresses (1) USPS’s financial condition; (2) the profile of its delivery fleet, including how USPS has responded toalternative fuel vehicle requirements and its experiences with alternativefuel vehicles; (3) trade-offs of USPS’s approach for addressing its deliveryfleet needs; and (4) options to fund a major acquisition of delivery vehicles.This statement is primarily based on our report, being released today, onUSPS’s delivery fleet.
3
For that report, we visited USPS facilities, heldinterviews with USPS and other officials, and analyzed data from USPS’s Vehicle Management Accounting System. We determined that these datawere sufficiently reliable for the purposes of our review. This statement isalso based, in part, on our prior and ongoing work on USPS’s financialcondition
4
and documents and a May 2011 interview with USPS officialsregarding the agency’s financial performance for the first 6 months of fiscal year 2011. Our work for this statement was conducted in accordancewith generally accepted government auditing standards. Those standardsrequire that we plan and perform the audit to obtain sufficient, appropriateevidence to provide a reasonable basis for our findings and conclusionsbased on our objectives. We believe that the evidence obtained provides areasonable basis for our findings and conclusions based on our objectives. Additional information on our scope and methodology is available in ourissued products.
1
In addition to delivery vehicles, USPS’s fleet includes other vehicles, such asadministrative vehicles used for sales, accident investigations, and other purposes, andlarger trucks used for hauling mail.
2
USPS also delivers to another 20 million addresses as part of its post office box service.
3
See GAO,
United States Postal Service: Strategy Needed to Address Aging Delivery Fleet
,GAO-11-386 (Washington, D.C.: May 5, 2011).
4
See GAO,
U.S. Postal Service: Modernization and Restructuring Needed to Address Financial Challenges
,GAO-11-428T(Washington, D.C.: Mar. 2, 2011).

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