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United States Government Accountability Office: 
GAO: 

Testimony: 

Before the Subcommittee on Federal Financial Management, Government 
Information, Federal Services, and International Security, Committee 
on Homeland Security and Governmental Affairs, U.S. Senate. 

May 17, 2011: 

United States Postal Service: 

Strategy Needed to Address Aging Delivery Fleet: 

Statement of Phillip Herr, Director: 
Physical Infrastructure Issues: 

GAO-11-671T: 

GAO Highlights: 

Highlights of GAO-11-671T, a testimony before the Subcommittee on 
Federal Financial Management, Government Information, Federal 
Services, and International Security, Committee on Homeland Security 
and Governmental Affairs, U.S. Senate. 

Why GAO Did This Study: 

The United States Postal Service (USPS) is in financial crisis. It 
also has the worldís largest civilian fleet, with many of its delivery 
vehicles reaching the end of their expected 24-year operational lives. 
USPS is subject to certain legislative requirements governing the 
federal fleet, including a requirement that 75 percent of USPSís 
vehicle acquisitions be capable of operating on an alternative fuel 
other than gasoline. This testimony addresses (1) USPSís financial 
condition; (2) USPSís delivery fleet profile, including how USPS has 
responded to alternative fuel vehicle requirements and its experiences 
with these vehicles; (3) trade-offs of USPSís approach for addressing 
its delivery fleet needs; and (4) options to fund a major acquisition 
of delivery vehicles. 

This testimony is primarily based on GAO-11-386, which is being 
released today. For that report, GAO analyzed USPS data, visited USPS 
facilities, and interviewed USPS and other officials. GAO recommended 
in that report that USPS should develop a strategy for addressing its 
delivery fleet needs that considers the effects of likely operational 
changes, legislative fleet requirements, and other factors. USPS 
agreed with the recommendation. For this testimony, GAO also drew upon 
past and ongoing work on USPSís financial condition and updated USPS 
financial information. 

What GAO Found: 

USPSís financial condition continues to deteriorate. For the first 6 
months of fiscal year 2011, USPS reported a net loss of $2.6 billionó-
worse than it expectedó-and that, absent legislative change, it will 
have to default on payments to the government, including a $5.5 
billion payment for its retiree health benefits. GAO has reported that 
Congress and USPS need to reach agreement on a package of actions to 
move USPS toward financial viability. 

USPSís 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 also capable of running on E85, 
were purchased to comply with the 75 percent acquisition requirement 
for alternative fuel vehicles. Delivery vehicles travel about 17 miles 
and use the equivalent of about 2 gallons of gasoline on average per 
day. USPS has a variety of limited experiences with other alternative 
fuel vehicles, such as compressed natural gas and plug-in electric 
vehicles, most of which have higher life-cycle costs than gasoline 
vehicles. 

Figure: Delivery Vehicles at a USPS Maintenance Facility (left) and 
Post Office (right): 

[Refer to PDF: 2 photographs] 

Source: GAO. 

[End of figure] 

USPSís approach for addressing its delivery fleet needs is to maintain 
its current fleet until it determines how to address its longer term 
needs. USPS has 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 is increasingly incurring costs for unscheduled 
maintenance because of breakdowns, which can disrupt operations and 
increase costs. In fiscal year 2010, at least 31 percent of USPSís 
vehicle maintenance costs were for unscheduled maintenance, 11 
percentage points over USPSís 20 percent goal. 

USPSís financial challenges limit options to fund a major delivery 
vehicle replacement or refurbishment, estimated to cost $5.8 billion 
and (in 2005) $3.5 billion, 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 USPS toward financial 
viability, such an agreement could potentially enhance USPSís ability 
to invest in new delivery vehicles. 

View [hyperlink, http://www.gao.gov/products/GAO-11-671T] or key 
components. For more information, contact Phillip Herr at (202) 512-
2834 or herrp@gao.gov. 

[End of section] 

Chairman Carper, Ranking Member Brown, and Members of the Subcommittee: 

I am pleased to be here today to participate in this hearing to 
address the U.S. Postal Service's (USPS) financial crisis and the 
challenges it faces in modernizing its delivery vehicle fleet. USPS 
operates the world's largest civilian vehicle fleet--comprising more 
than 215,000 vehicles--of which about 192,000 are light-duty delivery 
vehicles[Footnote 1] used to deliver mail to about 131 million 
residential and business addresses, in most cases, 6 days a week. 
[Footnote 2] My statement addresses (1) USPS's financial condition; 
(2) the profile of its delivery fleet, including how USPS has 
responded to alternative fuel vehicle requirements and its experiences 
with alternative fuel vehicles; (3) trade-offs of USPS's approach for 
addressing its delivery fleet needs; and (4) options to fund a major 
acquisition of delivery vehicles. 

This statement is primarily based on our report, being released today, 
on USPS's delivery fleet.[Footnote 3] For that report, we visited USPS 
facilities, held interviews with USPS and other officials, and 
analyzed data from USPS's Vehicle Management Accounting System. We 
determined that these data were sufficiently reliable for the purposes 
of our review. This statement is also based, in part, on our prior and 
ongoing work on USPS's financial condition[Footnote 4] and documents 
and a May 2011 interview with USPS officials regarding the agency's 
financial performance for the first 6 months of fiscal year 2011. Our 
work for this statement was conducted in accordance with generally 
accepted government auditing standards. Those standards require that 
we plan and perform the audit to obtain sufficient, appropriate 
evidence to provide a reasonable basis for our findings and 
conclusions based on our objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our objectives. Additional information on our scope and 
methodology is available in our issued products. 

USPS's Financial Condition Continues to Deteriorate, and USPS 
Anticipates a Substantial Cash Shortfall This Fiscal Year: 

USPS's financial condition has deteriorated significantly since fiscal 
year 2006, and its financial outlook is grim in both the short and 
long term. In July 2009, we added USPS's financial condition and 
outlook to our high-risk list because USPS was incurring billion-
dollar deficits and the amount of debt it incurred was increasing as 
revenues declined and costs rose. USPS's financial condition has been 
negatively affected by decreasing mail volumes as customers have 
increasingly shifted to electronic communications and payment 
alternatives, a trend that is expected to continue. USPS reported that 
total mail volume decreased 3 percent in the second quarter of fiscal 
year 2011, while First-Class Mail declined by 7.6 percent compared 
with the same period last year, negatively affecting revenue as First-
Class Mail is USPS's most profitable mail. Half way through fiscal 
year 2011, USPS reported a net loss of $2.6 billion. 

USPS has reported achieving some cost savings in the last 5 years--for 
example, it eliminated about 137,000 full-and part-time positions. 
However, USPS has had difficulty reducing its compensation and 
benefits costs and has struggled to optimize its workforce and its 
retail, mail processing, and delivery networks to reflect declining 
mail volume. USPS has relied increasingly on debt to fund its 
operations and has increased its net borrowing by nearly $12 billion 
over the last 5 years. USPS recently reported that its financial 
performance for the first 6 months of fiscal year 2011 was worse than 
expected, and that, not only will it reach its $15 billion statutory 
debt limit by the end of the fiscal year, it now projects a 
substantial cash shortfall and that it will be unable to pay all of 
its financial obligations. Specifically, USPS said that absent 
legislative change it will be forced to default on payments to the 
federal government, including a $5.5 billion pre-funding payment for 
retiree health benefits due on September 30, 2011. 

While USPS's financial condition continues to deteriorate, we and USPS 
have presented options to improve the agency's financial condition. 
Specifically, we have reported that Congress and USPS need to reach 
agreement on a package of actions to restore USPS's financial 
viability, which will enable USPS to align its costs with revenues, 
manage its growing debt, and generate sufficient funding for capital 
investment.[Footnote 5] Proposed legislation, including S. 
353[Footnote 6] and draft legislation expected to be introduced by 
Senator Carper, provide a starting point for considering key issues 
where congressional decisions are needed to help USPS undertake needed 
reforms. As we have previously reported,[Footnote 7] to address USPS's 
viability in the short-term, Congress should consider modifying the 
funding requirements for USPS's retiree health benefits in a fiscally 
responsible manner. For long-term stability, Congress should address 
constraints and legal restrictions, such as those related to closing 
facilities, so that USPS can take more aggressive action to reduce 
costs. Action is urgently needed as mail delivery is a vital part of 
this nation's economy. 

The USPS Postmaster General has also presented strategies for 
improving USPS's financial viability, recently stating that the 
agency's focus should be on its core function of delivery, growing the 
package business, and aggressively controlling costs and consolidating 
postal networks to increase efficiency. Clearly, USPS's delivery fleet 
is a vital component of a strategy focused on delivery. 

Delivery Fleet Primarily Consists of Aging Long-Life Vehicles and 
Alternative Fuel Vehicles Acquired to Meet Requirements, Which Have 
Presented Cost and Infrastructure Challenges: 

As shown in figure 1, there are three principal components of USPS's 
delivery fleet: 

* about 141,000 "long-life vehicles" (LLV)--custom-built, right-hand- 
drive, light duty trucks with an aluminum body 16 to 23 years old, 
that are approaching the end of their expected 24-year operational 
lives; 

* about 21,000 flex-fuel vehicles (FFV), also custom-built with right- 
hand drive, 9 and 10 years old, that are approaching the mid-point of 
their expected 24-year operational lives; and: 

* about 22,000 commercially-available, left-hand drive minivans that 
range in age from 2 to 13 years and have an expected operational life 
of 10 years. 

According to USPS officials, right-hand-drive vehicles are necessary 
for curbline delivery.[Footnote 8] In addition, USPS officials told us 
that the LLVs' and FFVs' standardized design minimizes training 
requirements, increases operational flexibility, and facilitates 
partnerships with parts suppliers. Moreover, LLVs and FFVs were made 
to withstand harsh operating conditions, resulting from an average of 
about 500 stops and starts per delivery route per day. As a result, 
the LLVs and FFVs are expected to last more than twice as long as the 
minivans, which were not built to withstand these operating conditions. 

Figure 1: Examples of the LLVs, FFVs, and Minivans in USPS's Delivery 
Fleet: 

[Refer to PDF for image: 3 photographs] 

1) LLV; 
2) FFVs have an extra window behind the door for improved visibility; 
3) Minivan. 

Source: GAO. 

[End of figure] 

USPS is subject to certain legislative requirements governing the 
federal fleet. For example, under the Energy Policy Act of 1992 (EPAct 
1992), 75 percent of the light-duty vehicles that USPS acquires must 
be capable of using an alternative fuel such as ethanol, natural gas, 
propane, biodiesel, electricity, or hydrogen.[Footnote 9] Since 2000, 
USPS has consistently purchased delivery vehicles that can operate on 
gasoline or a mixture of gasoline and 85 percent ethanol (E85) to 
satisfy this requirement. These vehicles are known as dual-fueled 
vehicles. USPS officials stated that E85-capable vehicles were chosen 
because they were the least costly option for meeting federal fleet 
acquisition requirements. In addition, officials expected that E85 
eventually would be widely available throughout the United States. 
However, according to Department of Energy (DOE) data, as of December 
2009,[Footnote 10] E85 was not available at 99 percent of U.S. fueling 
stations. 

Subsequent legislation required that alternative fuel be used in all 
dual-fueled vehicles unless they have received a waiver from DOE. 
[Footnote 11] Because of E85's limited availability, USPS has sought 
and obtained annual waivers from DOE--for example, in fiscal year 
2010, about 54 percent of its E85-capable vehicles received waivers 
permitting them to be operated exclusively on gasoline. The remaining 
46 percent of its E85-capable vehicles were expected to operate 
exclusively on E85. However, USPS officials acknowledged that USPS 
does not always fuel these vehicles with E85 because using E85 
increases operational costs.[Footnote 12] 

Apart from its experiences with E85-capable vehicles, USPS has a 
variety of limited experiences with other types of alternative fuel 
delivery vehicles. Collectively, these vehicles accounted for about 2 
percent (3,490 vehicles) of its delivery fleet as of September 30, 
2010, as shown in table 1. 

Table 1: Number of USPS Delivery Vehicles, by Alternative Fuel 
Capability, as of September 30, 2010: 

Alternative fuel capability: E85; 
Description of fuel type: E85 is a blend of 85% ethanol (primarily 
derived from corn) and 15% gasoline; 
Vehicle types: FFVs and minivans; 
Number of vehicles: 39,149; 
Percentage of delivery fleet: 20%. 

Alternative fuel capability: Compressed natural gas; 
Description of fuel type: Primarily consists of methane, around 90%, 
with small amounts of ethane, propane, and other gases; 
Vehicle types: LLVs and 2-ton trucks; 
Number of vehicles: 3,401; 
Percentage of delivery fleet: 2%. 

Alternative fuel capability: Propane; 
Description of fuel type: Both naturally occurring and derived by 
separating petroleum from crude oil or natural gas; 
Vehicle types: LLVs; 
Number of vehicles: 34; 
Percentage of delivery fleet: less than 1%. 

Alternative fuel capability: Plug-in electric; 
Description of fuel type: Electric vehicles store electricity in an 
energy storage device, such as a battery. Energy is replenished by 
plugging the vehicle into an electric source; 
Vehicle types: 2 ton trucks and 3-wheeled vehicles; 
Number of vehicles: 42; 
Percentage of delivery fleet: less than 1%. 

Alternative fuel capability: Conventional hybrid; 
Description of fuel type: Uses both gasoline and energy stored in a 
battery to power the vehicle; 
Vehicle types: sport utility vehicles and a 2-ton truck; 
Number of vehicles: 11; 
Percentage of delivery fleet: less than 1%. 

Alternative fuel capability: Hydrogen; 
Description of fuel type: A fuel cell stack in the vehicle converts 
hydrogen gas and oxygen into electricity, which drives an electric 
motor; 
Vehicle types: sport utility vehicles; 
Number of vehicles: 2; 
Percentage of delivery fleet: less than 1%. 

Alternative fuel capability: Total; 
Number of vehicles: 42,610; 
Percentage of delivery fleet: 22%. 

Source: GAO analysis of data provided by USPS from a Vehicle 
Management and Accounting System report. 

Note: Percentages do not total to 22 due to rounding. 

[End of table] 

According to USPS officials, to date, USPS has not invested more 
heavily in alternative technologies in part because alternative fuel 
vehicles likely would result in higher estimated lifecycle costs than 
gasoline-fueled vehicles. This is largely because any potential fuel 
savings from alternative fuel vehicles would be unlikely to offset 
generally higher acquisition costs over the vehicles' operating lives, 
given that USPS's delivery vehicles on average travel about 17 miles 
and its LLVs use the equivalent of about 2 gallons of gasoline per 
day. In addition, USPS officials told us that the limited availability 
of alternative fuels and the high costs of installing fueling 
infrastructure--such as on-site charging stations--have made it 
difficult to elect to invest in or operate these vehicles. Finally, 
they noted that USPS has experienced problems obtaining technological 
support and parts for its alternative fuel vehicles. 

USPS's Approach for Addressing Its Delivery Fleet Needs Has Financial 
and Environmental Trade-offs: 

USPS's current approach is to sustain operations of its delivery 
fleet--through continued maintenance--for the next several years, 
while planning how to address its longer term delivery fleet needs. 
Under this approach, USPS anticipates purchasing limited numbers of 
new, commercially available minivans. According to USPS officials, 
this approach was adopted in December 2005 after senior management and 
a Board of Governors subcommittee decided not to initiate a major 
fleet replacement or refurbishment. At that time, USPS estimated that 
it would cost $5 billion to replace about 175,000 vehicles. Planning 
and executing a custom-built vehicle acquisition would take 5 to 6 
years from initially identifying the vehicles' specifications and 
negotiating with manufacturers through testing and deployment, 
according to USPS officials. USPS also elected not to refurbish its 
fleet, another option considered. According to a USPS contractor, in 
2005, the agency could have delayed purchasing new vehicles for at 
least 15 years if it had refurbished its LLVs and FFVs (i.e., replaced 
nearly all parts subject to the effects of wear and aging) over a 10-
year period--at a cost in 2005 of about $20,000 per vehicle--or a 
total of about $3.5 billion, assuming that 175,000 vehicles were 
refurbished. USPS officials said the agency chose to maintain its 
current delivery fleet rather than make a major capital investment 
given pending operational and financial developments and uncertainty 
about evolving vehicle technologies. 

We found that USPS's maintenance program and well-established parts 
supply network have enabled it to maintain its current delivery fleet 
while avoiding the capital costs of a major vehicle replacement or 
refurbishment. The USPS Office of Inspector General recently reported 
that this approach is operationally viable and generally cost- 
effective, given USPS's financial circumstances.[Footnote 13] Our 
analysis of a custom query of USPS's vehicle database found that 
delivery vehicles' direct maintenance costs averaged about $2,450 per 
vehicle in fiscal year 2007 and just under $2,600 per vehicle in 
fiscal year 2010 (in constant 2010 dollars). However, these direct 
maintenance costs are understated, in part because, according to USPS 
data, about 6 percent of total maintenance costs--all due to 
maintenance performed by contractors--were not entered into its 
database. 

USPS's approach has trade-offs, including relatively high costs to 
maintain some delivery vehicles. Our analysis showed that while about 
77 percent of its delivery vehicles incurred less than $3,500 in 
direct annual maintenance costs in fiscal year 2010,[Footnote 14] 
about 3 percent (5,349) of these vehicles required more than $7,000--
and 662 vehicles required more than $10,500--in direct annual 
maintenance costs,[Footnote 15] or over one-third the $31,000 per 
vehicle replacement cost USPS currently estimates. USPS officials 
stated that in most cases, they repair an LLV or FFV rather than 
replace it with a minivan because of the continuing need for right-
hand-drive vehicles. One reason that some vehicles are incurring high 
direct maintenance costs is that USPS has replaced--at a minimum--
about 4,500 LLV frames in fiscal years 2008 through 2010 because of 
severe corrosion, at a cost of about $5,000 each. None of the fleet 
managers for Fed-Ex Express, United Parcel Service, or other companies 
we spoke with have replaced their vehicles' frames, and some suggested 
that the need to do so is a key indication that it is time to replace--
not repair--a vehicle. 

Another trade off of its current strategy is that USPS is increasingly 
incurring costs for unscheduled maintenance because of breakdowns. 
USPS's goal is to ensure that no more than 20 percent of its total 
annual maintenance costs are for unscheduled maintenance. However, in 
fiscal year 2010, at least 31 percent of its vehicle maintenance costs 
were for unscheduled maintenance, 11 percentage points over its 20 
percent goal. Unscheduled maintenance can result in delays in mail 
delivery and operational costs, such as overtime expenses. 

USPS employees at a majority of the eight vehicle maintenance 
facilities and some post offices we visited told us that they believe 
delivery vehicles can continue to deliver mail without major 
operational interruptions for at least several more years. At the same 
time, we identified some instances of maintenance problems during our 
site visits (our report being released today contains photographs and 
further discussion of these problems).[Footnote 16] For example, 
officials at a Minnesota vehicle maintenance facility told us that 
they are not following USPS's requirements for replacing frames whose 
thickness in key spots indicates weakness because they do not have the 
resources to do so. Instead, they said, facility personnel replace 
frames only when the frames have one or more holes through the metal. 
In addition, when we visited a vehicle maintenance facility in New 
York state, technicians were replacing two severely corroded LLV 
frames with similar holes. The manager of this facility informed us 
that frames in this condition should have been replaced during a 
previous preventive maintenance inspection. 

As discussed, USPS's financial condition has declined substantially, 
and although USPS issued a 10-year action plan in March 2010 for 
improving its financial viability, the plan did not address its fleet 
of delivery vehicles. USPS has not analyzed how operational changes 
proposed in its 10-year plan, including a potential shift in delivery 
from 6 to 5 days a week, would affect its delivery fleet needs, nor 
has it examined the consequences of its decision to delay the fleet's 
replacement or refurbishment. In addition, it has not developed a 
fleet financing strategy. 

During our review, USPS officials told us that the agency is in the 
early stages of developing a proposal for addressing its delivery 
fleet needs. These officials stated that the proposal will likely 
explore alternatives, including maintaining the current fleet, 
refurbishing the LLVs and FFVs, or, possibly, undertaking a major 
acquisition of new vehicles. Furthermore, USPS officials stated that 
the proposal will discuss strategies for incorporating additional 
alternative fuel capabilities into its fleet. USPS expects to present 
its proposal to its Capital Investment Committee later this fiscal 
year. 

USPS officials said that the agency intends to examine ways to comply 
with EPAct 1992's acquisition requirements in its next large-scale 
acquisition of delivery vehicles, but noted that life-cycle costs are 
significantly higher for nearly all currently available alternative 
fuel vehicles than for gasoline-powered vehicles.[Footnote 17] 
Consequently, these officials told us a large-scale acquisition of 
alternative fuel vehicles (other than E85-capable vehicles) is not 
likely to be financially viable. USPS officials stated that, in their 
view, the best way to meet national sustainability requirements for 
reduced emissions without incurring significant costs may be to invest 
in highly fuel-efficient gasoline-powered vehicles. Such an outcome 
could be possible given increased legislative flexibility in the 
definition of what constitutes an alternative fuel vehicle. 
Specifically, as a result of the National Defense Authorization Act of 
2008, any vehicle determined by the Environmental Protection Agency 
(EPA) to be a low-greenhouse-gas-emitting vehicle in locations that 
qualify for a DOE waiver would be considered an alternative fuel 
vehicle.[Footnote 18] However, because EPA evaluates only commercially 
available vehicles, at present, there are no low-greenhouse-gas- 
emitting right-hand-drive vehicles available that have been determined 
to meet EPAct 1992's fleet acquisition requirements for light-duty 
vehicles. Consequently, if USPS decides to pursue such a vehicle in 
its next acquisition of custom-built delivery vehicles, it would need 
to work with vehicle manufacturers, EPA, and DOE. 

Without Significant Improvement in USPS's Financial Condition, There 
Are No Clear Options to Fund a Major Vehicle Replacement: 

USPS's financial condition poses a significant barrier to its ability 
to fund a major acquisition of its delivery fleet.[Footnote 19] 
Recently, USPS estimated that it would cost about $5.8 billion to 
replace about 185,000 delivery vehicles with new gasoline-powered 
custom-built vehicles, at about $31,000 per vehicle (in 2011 dollars). 
[Footnote 20] Further, officials from USPS, DOE, and an environmental 
organization, and operators of private fleets see little potential to 
finance a fleet replacement through grants or partnerships. A primary 
barrier to a joint procurement is USPS's need for customized, right-
hand-drive delivery vehicles (its competitors typically use larger 
vehicles that are not right-hand-drive). USPS and DOE officials also 
saw little likelihood that USPS could help finance a major delivery 
fleet acquisition through an energy savings performance contract, in 
which a federal agency enters into a long-term contract with a private 
energy company and shares energy-related cost savings. Given the low 
annual mileage of USPS's delivery fleet, USPS and DOE officials stated 
that it is unlikely that the fuel savings generated from a more 
efficient fleet (whether consisting of gasoline-only vehicles or 
alternative fuel vehicles) would be sufficient, compared with the 
acquisition cost of the vehicles, to interest a private investor. 

If Congress and USPS reach agreement on a package of actions to move 
USPS toward financial viability, depending on the specific actions 
adopted, USPS's follow-up, and the results, such an agreement could 
enhance USPS's ability to invest in new delivery vehicles. While 
USPS's efforts to maintain its current delivery fleet have worked thus 
far, the time soon will come when the cost and operational 
consequences of this approach will not allow further delays. When that 
time comes, USPS will need to know how it can best comply with federal 
requirements for acquiring alternative fuel vehicles while also 
meeting its operational requirements. However, until USPS defines its 
strategy for a major capital investment for its delivery vehicles, 
neither USPS nor Congress has sufficient information to fully consider 
its options. Consequently, USPS must develop a comprehensive strategy 
for dealing with this inevitability. 

In the report that this testimony is based on, we recommend that USPS 
develop a strategy and timeline for addressing its delivery fleet 
needs. Specifically, we recommend that this strategy address such 
issues as the effects of USPS's proposed change from 6-to 5-day 
delivery and consolidation of its facilities, as well as the effects 
of continuing changes in its customers' use of the mail on future 
delivery fleet requirements, along with an analysis of how it can best 
meet federal fleet requirements, given its budget constraints. USPS 
agreed with our findings and recommendation. USPS stated that it is 
developing a strategy to address the immediate and long-term needs of 
its delivery fleet, and that it plans to complete the strategy and 
associated timeline by the end of December 2011. 

Chairman Carper, Ranking Member Brown, and Members of the 
Subcommittee, this concludes my prepared statement. I would be pleased 
to answer any questions that you have. 

Contacts and Staff Acknowledgments: 

For further information about this statement, please contact Phillip 
Herr at (202) 512-2834 or herrp@gao.gov. Individuals who made key 
contributions to this statement include Kathleen Turner (Assistant 
Director), Teresa Anderson, Joshua Bartzen, Bess Eisenstadt, Laura 
Erion, Alexander Lawrence, Margaret McDavid, Joshua Ormond, Robert 
Owens, Matthew Rosenberg, Kelly Rubin, Karla Springer, Crystal Wesco, 
and Alwynne Wilbur. 

[End of section] 

Footnotes: 

[1] In addition to delivery vehicles, USPS's fleet includes other 
vehicles, such as administrative vehicles used for sales, accident 
investigations, and other purposes, and larger 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, [hyperlink, 
http://www.gao.gov/products/GAO-11-386] (Washington, D.C.: May 5, 
2011). 

[4] See GAO, U.S. Postal Service: Modernization and Restructuring 
Needed to Address Financial Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-11-428T] (Washington, D.C.: Mar. 2, 
2011). 

[5] GAO, U.S. Postal Service: Legislation Needed to Address Key 
Challenges, [hyperlink, http://www.gao.gov/products/GAO-11-244T] 
(Washington, D.C.: Dec. 2, 2010). 

[6] S. 353, 112th Cong., (2011). 

[7] GAO, U.S. Postal Service: Strategies and Options to Facilitate 
Progress toward Financial Viability, [hyperlink, 
http://www.gao.gov/products/GAO-10-455] (Washington, D.C.: Apr. 12, 
2010). 

[8] About one-quarter of USPS's delivery vehicles are used on curbline 
routes, in which the letter carrier delivers to mailboxes at the curb, 
typically without leaving the vehicle. 

[9] Pub. L. No. 102-486, ß 303, 106 Stat. 2766 (Oct. 24, 1992). 
Legislation subsequently expanded the definition of alternative fuel 
vehicles to include hybrid vehicles. 

[10] These data were the most recent available as of December 31, 2010. 

[11] Pub. L. No. 109-58, ß 701, 119 Stat. 594 (Aug. 8, 2005). DOE 
grants waivers to agencies that operate vehicles in areas where 
alternative fuel is (1) unavailable, (2) not available within 5 miles 
or 15 minutes of travel, or (3) more expensive per gallon than 
gasoline at the same fuel station. (Gasoline is distilled from 
petroleum. We used the terms "gasoline" and "petroleum" 
interchangeably throughout our testimony.) 

[12] Because of E85's lower energy density, according to USPS 
officials, its FFVs are about 27 to 30 percent less fuel efficient 
when fueled with E85 than when fueled with gasoline, and therefore 
cost more to fuel--and USPS also may incur additional labor costs if 
letter carriers deviate from their routes to fuel with E85. 

[13] See United States Postal Service, Office of the Inspector 
General, Audit Report-Delivery Vehicle Replacement Strategy, DA-AR-10-
005 (Washington, D.C.: June 16, 2010). 

[14] USPS established $3,500 as a one-time repair threshold for 
approving expenditures for LLV maintenance. We used this threshold to 
create maintenance ranges for the purposes of analyzing USPS's vehicle 
database. 

[15] We calculated average vehicle maintenance costs for fiscal years 
2006 through 2009 and found a similar pattern. 

[16] [hyperlink, http://www.gao.gov/products/GAO-11-386]. 

[17] For example, a 2011 Ford Escape hybrid costs about $9,000 more 
than the nonhybrid version of the same vehicle. The manufacturer's 
suggested retail price for a 2011 Ford Escape hybrid was $30,045 
compared with $21,085 for the nonhybrid Ford Escape, as of February 
15, 2011. 

[18] Pub. L. 110-181, ß 2862 (Jan. 28, 2008). This legislation permits 
federal agencies to meet EPAct 1992's requirements for light-duty 
alternative fuel vehicles by purchasing vehicles that EPA has 
demonstrated to DOE would achieve a significant reduction in petroleum 
consumption. Based on a demonstration EPA made to DOE, any low- 
greenhouse-gas-emitting vehicle in locations that qualify for a DOE 
waiver would be considered an alternative fuel vehicle. 

[19] USPS's financial condition also poses a significant barrier to 
funding a major refurbishment of the delivery fleet. As discussed 
earlier, based on a USPS contractor's 2005 estimate of $20,000 per 
vehicle, it would have cost about $3.5 billion at that time to 
refurbish 175,000 delivery vehicles. 

[20] According to a USPS official, this cost would cover the vehicle, 
shipping, quality control oversight, technician training, and the 
purchase of essential repair tools. The estimate did not include the 
costs to dispose of existing vehicles, including environmental costs. 

[End of section] 

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