Federal Eye: GAO: Postal Service business 'not viable'

By Ed O'Keefe
Washington Post Staff Writer
Monday, April 12, 2010; 8:39 AM

Happy Monday! The U.S. Postal Service's current business model "is not viable" and the mail agency should make deeper job and wage cuts, hire more part-time staff and consider outsourcing operations, according to a draft of a government audit acquired by The Federal Eye.

Auditors also urge Congress to remove restrictions on the Postal Service's ability to cut Saturday mail delivery and close post offices, according to the report, which offers recommendations similar to the USPS's own proposed 10-year business plan.

Lawmakers requested the Government Accountability Office report, set for a Monday release, as they prepare to consider the USPS plan, which was introduced last month. The proposals call for an end to six-day delivery and ask Congress to give the mail agency the ability to raise prices beyond the rate of inflation and close post offices if necessary.

The report's conclusions pleased top postal officials who are gathered this week in Nashville for the annual National Postal Forum, a convention for the mail agency's largest customers.

Postmaster General John E. Potter said Sunday he was pleased with the GAO's general conclusions, but concerned with suggestions in the report that further study of the issue is required.

"We've studied this significantly, the time for study is over, now's the time for action," he said.

Potter and his colleagues estimate the Postal Service will lose a record $7 billion in the fiscal year that ends in September and could lose at least $238 billion in the next decade if Congress fails to act.

Auditors appeared to push beyond the USPS proposal. "If no action is taken, risks of larger USPS losses, rate increases and taxpayer subsides will increase," GAO said.

The Postal Service should provide more lucrative incentive packages to potential retirees to try to accelerate attrition, auditors said. They also recommended USPS consider outsourcing more delivery routes and mail services to contractors and seek concessions on wage and benefits from its labor unions during negotiations later this year.

Lawmakers also should consider establishing a panel similar to the Base Realignment and Closure Commission to independently recommend changes, the report said. Auditors suggested that more details are needed about potential delivery cuts and post office closures.

Most lawmakers and regulators have reacted tepidly to proposed changes. Potter's meetings in Nashville will be mostly with customers who could suffer from proposed cuts and price increases.

GAO concluded that the recession served as the "tipping point" that accelerated a shift away from traditional snail mail for most of the Postal Service's biggest customers, including insurance and banking companies.

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