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OIG Report Criticizes Pasadena Consolidation

Web News Article #: 
61-2006

10/23/2006 - A report by the USPS Office of the Inspector General concluded that the cost savings projected by the Postal Service for the consolidation of a California mail processing facility “may be significantly overstated, and the service impacts are not fully described.”

The report on the Area Mail Processing (AMP) plan for the Pasadena Processing and Distribution Center, dated Sept. 26, 2006, also found that “the approval process was not consistently followed, notifications to stakeholders were not issued in a timely manner, and the implementation of the AMP differed from the proposal” that postal managers had approved.

“Postal Service management did not always comply with the processes outlined in policy and some AMP proposal data was inaccurate, incomplete, or unsupported,” wrote Colleen A. McAntee, Deputy Assistant Inspector General for Core Operations.

Despite these findings, McAntee wrote, “We concluded the workhour cost analysis included in the AMP proposal was supported,” and additional OIG analyses provided “confirming evidence for the consolidation.”

The USPS notified the APWU of the consolidation of some operations at the Pasadena facility and eight others on Oct. 19, 2005. It was the first USPS notification to the union about a series of consolidations or studies of the “feasibility” of consolidations that are part of management’s network realignment plan, also known as Evolutionary Network Development (END).

“The failures and missteps outlined in the OIG report are typical of the USPS network realignment plan,” said APWU President William Burrus. “Although this audit barely skims the surface of what is wrong with management’s consolidation procedures, it is a stunning indictment.”

Discrepancies Abound 

The OIG report “found discrepancies with the AMP proposal in the areas of transportation costs, the number of employees affected, and changes in service standards.”

The Postal Service projected that moving outgoing mail from Pasadena to Santa Clarita (35 miles away) and the City of Industry (25 miles away) would result in cost savings of nearly $1.3 million per year, primarily from reductions in labor costs. Service was projected to improve slightly, the report said.

But the costs involved in the proposal appeared to be significantly understated, the OIG report concluded. Additional transportation costs associated with implementation of the AMP proposal were projected at $12,500 annually; however, estimated costs increased by more than $550,000 annually.

The report also concluded that, “The number of employees needed to process the mail transferred to the Industry P&DC may be understated.” AMP documentation indicated that six additional employees were needed, but work hours equal to 13 full-time employees were needed to process the mail. “As a result, the Industry P&DC could be understaffed for processing the mail it received.”

Service Standards 

Regarding changes to service, the study found that “management did not completely document all changes in service standards resulting from the consolidation in the AMP proposal.”

“The service analysis identified 33 service upgrades, including 25 upgrades not documented in the AMP proposal,” the report noted, “along with four service downgrades for Standard Mail where delivery was changed from three to four days.”

“Although degradations to service standards were limited, management needs the correct data for making decisions as the AMP is approved,” the audit said.

Economist Kathryn Kobe critiqued the examination of service standards. “The audit failed to measure actual changes in service,” she said. “The OIG audit examined only whether service standards were revised. It looked at whether the Postal Service changed its goal of delivering mail from Point A to Point B from two days to three days, for example, but not how long delivery actually took following consolidation.

“Unfortunately, the audit reflects the USPS policy regarding AMPs. Does it really take first-class mail two days to get there now? Is that different from before? The Postal Service can’t answer those questions because they do not collect data on them,” she said. Kobe is the Director of Price, Wage and Productivity Analysis at Economic Consultants, Inc. and serves as an APWU consultant.

Notification to Stakeholders 

“Letters notifying key stakeholders of intent to conduct an AMP feasibility study were issued late,” the report found, including letters to members of Congress and union officials. “The letters were sent in early September 2005, over two months after it had been approved by the district and over one month after it had been approved at the area level.” When notices were issued, they “implied that the process was beginning.”

Several factors contributed to the discrepancies in the AMP data and the approval process, the report found: “The Postal Service made a significant effort to implement 10 AMP consolidations, which included the Pasadena AMP, early in FY 2006, so that some early successes would be experienced to support future efforts. Thus, the AMP progressed through the approval process, even though some of the analysis had not been finalized.

The report also concluded that “The district received pressure to complete the consolidation and had little experience with the AMP process,” and “reviews did not appear to be thorough.”

The OIG report recommended that the manager of the Van Nuys District and the Pacific Area vice president revise the AMP proposal to accurately document all service standard changes and transportation costs; establish central files for approved AMP proposals and supporting documentation to facilitate post-implementation reviews; and update AMP guidelines.

USPS management informed OIG inspectors that it plans to revise Handbook PO-408, which provides guidelines for implementing Area Mail Processing plans