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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

May 2011: 

United States Postal Service: 

Strategy Needed to Address Aging Delivery Fleet: 

GAO-11-386: 

GAO Highlights: 

Highlights of GAO-11-386, a report to congressional requesters. 

Why GAO Did This Study: 

The United States Postal Service (USPS) has the world’s largest 
civilian fleet, with many of its delivery vehicles reaching the end of 
their expected 24-year operational lives. USPS is subject to 
legislative requirements governing the federal fleet, including a 
requirement in the Energy Policy Act of 1992, which provides that 75 
percent of USPS’s vehicle acquisitions be alternative fuel vehicles, 
capable of operating on a fuel other than gasoline. USPS is also 
facing serious cost pressures in maintaining a national network of 
processing and retail operations. 

Asked to review USPS’s delivery fleet, GAO (1) profiled the fleet; 
(2) assessed USPS’s response to alternative fuel vehicle requirements 
and described its experiences with these vehicles; (3) identified 
USPS’s approach for addressing its delivery fleet needs, including 
trade-offs; and (4) determined options to fund a major acquisition of 
delivery vehicles. GAO analyzed USPS data; visited USPS facilities in 
three locations; and interviewed officials from USPS, the Department 
of Energy, and other organizations, including fleet operators and 
manufacturers. 

What GAO Found: 

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) 
that are about 10 years old. The fleet also includes 22,000 left-hand-
drive minivans, many of which are also capable of running on E85, and 
3,490 delivery vehicles capable of running on other alternative fuels. 
Delivery vehicles are driven an average of about 17 miles per day and 
cost about $1 billion to maintain and fuel in fiscal year 2010. 

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

[Refer to PDF for image: 2 photographs] 

Source: GAO. 

[End of figure] 

USPS met the 75 percent acquisition requirement for alternative fuel 
vehicles by purchasing about 40,000 flex-fuel vehicles and minivans 
that can operate on E85 or gasoline. However, USPS does not always use 
E85 in these vehicles because E85 is not readily available and can 
cost more to use due to less fuel efficiency, according to USPS 
officials. 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. 

USPS’s 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 5 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 USPS’s 
vehicle maintenance costs were for unscheduled maintenance, 11 
percentage points over USPS’s 20 percent goal. 

USPS’s financial challenges pose a significant barrier to 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. GAO has reported 
that Congress and USPS need to 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 its ability to invest in new delivery vehicles. 

What GAO Recommends: 

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 GAO’s 
recommendation. 

View [hyperlink, http://www.gao.gov/products/GAO-11-386] or key 
components. For more information, contact Phil Herr at (202) 512-2834 
or herrp@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

USPS's Delivery Fleet Primarily Consists of LLVs That Are Approaching 
the End of Their 24-Year Expected Operational Lives: 

USPS Has Acquired Alternative Fuel Vehicles in Response to 
Requirements, but Has Experienced Challenges: 

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

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

Conclusions: 

Recommendation for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: USPS's Experiences with Non-E85-Capable Alternative Fuel 
Vehicles: 

Appendix III: Comments from the United States Postal Service: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Types of Delivery Routes and Number of USPS Vehicles Used for 
Each Route, as of September 30, 2010: 

Table 2: Profile of the Three Main Categories of USPS Delivery 
Vehicles, as of September 30, 2010: 

Table 3: Number of USPS Delivery Vehicles, by Alternative Fuel 
Capability, as of September 30, 2010: 

Table 4: Nonfederal Organizations Interviewed: 

Figures: 

Figure 1: USPS LLVs, 2010: 

Figure 2: Example of an LLV and FFV, 2010: 

Figure 3: USPS Minivan Used for Delivering Mail, 2010: 

Figure 4: Number of Gas Stations that Sell E85 in Each State, as of 
December 31, 2010: 

Figure 5: Gas Station Sign Advertising E85 near a Minnesota Post 
Office with E85-Capable Delivery Vehicles in September 2010, and 
Decals on the Fuel Cap Door of a USPS Delivery Minivan Indicating That 
It Is E85 Capable: 

Figure 6: Average USPS Price for E85 and Gasoline in Fiscal Year 2010 
and the Fuels' Relative Efficiency: 

Figure 7: Annual Average Maintenance Cost Per Vehicle for USPS's 
Delivery Fleet over the Past 5 Fiscal Years: 

Figure 8: Proportion of USPS's Delivery Vehicles in Each Maintenance 
Cost Range, Fiscal Year 2010: 

Figure 9: New LLV Frames Awaiting Installation (left), and an LLV 
Being Reassembled after a Frame Replacement (right), 2010: 

Figure 10: Example of Rust in Lower Half of Body Mount at a Post 
Office in Florida, 2010: 

Figure 11: Rusted Frame with Holes Being Replaced in a USPS Vehicle 
Maintenance Facility in New York State, 2010: 

Figure 12: A Ford Windstar Minivan Being Repaired at a Postal Vehicle 
Maintenance Facility (left) and a Nonoperational Minivan Up on Blocks 
Being Used for Parts (right), 2010: 

Figure 13: Example of an Unused Compressed Natural Gas Fuel Pump at a 
Post Office in Huntington, New York, 2010: 

Figure 14: T-3 Electric Personal Mobility Delivery Vehicle, 2010: 

Figure 15: One of Two Hybrid 2-Ton Delivery Vehicles in Huntington, 
New York, 2010: 

Abbreviations: 

DOE: Department of Energy: 

EPAct 1992: Energy Policy Act of 1992: 

FFV: flex-fuel vehicles: 

GSA: General Services Administration: 

LLV: long-life vehicles: 

UPS: United Parcel Service: 

USPS: United States Postal Service: 

VMAS: Vehicle Management Accounting System: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

May 5, 2011: 

The Honorable Joseph Lieberman:
Chairman:
The Honorable Susan Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate: 

The Honorable Tom Carper:
Chairman:
The Honorable Scott Brown:
Ranking Member:
Subcommittee on Federal Financial Management, Government Information, 
Federal Services, and International Security:
Committee on Homeland Security and Governmental Affairs:
United States Senate: 

The Honorable John McCain:
United States Senate: 

The United States Postal Service (USPS) operates the world's largest 
civilian vehicle fleet, with more than 215,000 vehicles, of which 
about 192,000 are delivery vehicles.[Footnote 1] These vehicles are 
vital to accomplishing USPS's mission of delivering mail to about 131 
million residential and business addresses, in most cases, 6 days a 
week.[Footnote 2] The majority of USPS's delivery fleet is composed of 
custom-built, right-hand-drive, light-duty delivery trucks that it 
refers to as "long-life vehicles" (LLV)--vehicles built with an 
aluminum body and other features intended to permit an extended 
operational life of 24 years (see figure 1). Purchased from 1987 to 
1994, the LLVs are now approaching the end of their expected 
operational lives. 

Figure 1: USPS LLVs, 2010: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

USPS is required to provide efficient mail service and is expected to 
pay for its operations through the revenue it receives.[Footnote 3] 
USPS also is required to comply with 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.[Footnote 4] 

As we previously reported, USPS's business model is not viable because 
it has been unable to reduce costs sufficiently in response to 
continuing declines in mail volumes and revenue, and it faces growing 
financial challenges for the foreseeable future.[Footnote 5] 
Specifically, mail volumes have declined about 20 percent over the 
last 4 fiscal years because of the economic downturn and the public's 
changing use of the mail. In addition, over the same period, USPS's 
financial condition has deteriorated, with cumulative losses of more 
than $20 billion and rising debt. For fiscal year 2011, USPS projects 
a $6.4 billion loss and expects to reach the $15 billion statutory 
limit on its debt. USPS's ongoing financial challenges led us to place 
USPS's financial condition and outlook on our high-risk list in July 
2009.[Footnote 6] We have reported that action by Congress and USPS is 
needed on a package of actions that will allow USPS to move toward 
financial viability by reducing costs, increasing efficiency, and 
generating revenues.[Footnote 7] 

In view of USPS's difficult financial condition, you asked us to 
review matters related to USPS's aging delivery fleet. To do so, we 
addressed the following key questions: (1) What is the profile of 
USPS's delivery fleet? (2) How has USPS responded to requirements for 
alternative fuel vehicles, what experiences has it had with 
alternative fuel vehicles, and what has it learned from its 
experiences? (3) What, if any, approach has USPS adopted to address 
its delivery fleet needs, and what are the trade-offs of this 
approach? (4) What options exist to help USPS fund a major acquisition 
of delivery vehicles? 

To address our reporting objectives, we collected and analyzed data on 
USPS's delivery fleet for fiscal years 2006 through 2010, using data 
from a custom query of USPS's Vehicle Management Accounting System 
(VMAS). To supplement this information, we also reviewed data from 
reports generated by VMAS (VMAS reports) that USPS officials regularly 
use to track the agency's vehicle maintenance and fuel costs. The VMAS 
reports categorize vehicles somewhat differently than our custom 
query, and therefore the numbers of vehicles identified in these two 
sources cannot be compared directly. Through these two sources, we 
developed a profile of USPS's delivery fleet from fiscal years 2006 
through 2010, including most direct costs related to the vehicles' 
maintenance, excluding costs related to accidents. Based in part on 
electronic testing and interviews with USPS officials knowledgeable 
about VMAS system controls and vehicle data procedures, we determined 
that the VMAS data were sufficiently reliable for the purposes of this 
report. In addition, we worked with USPS Finance and Vehicle Programs 
officials to obtain a USPS estimate of the total maintenance and fuel 
costs for the agency's delivery fleet in fiscal year 2010. We compared 
this estimate with cost summaries and other information provided by 
USPS finance officials that supported amounts reported in USPS's 
audited financial statements for fiscal year 2010 and determined that 
the agency's estimate was reasonable. We also conducted site visits to 
three states (Florida, Minnesota, and New York), chosen because they 
represent a variety of climates and operating conditions and because 
USPS operates various types of alternative fuel delivery vehicles in 
these locations. During our site visits, we interviewed a variety of 
USPS personnel, including facility managers, maintenance technicians, 
and letter carriers. We also reviewed prior studies on USPS's 
financial challenges, federal fleet alternative fuel vehicle 
requirements and agencies' experiences with these technologies, 
federal principles for capital planning, and documentation on USPS's 
environmental sustainability goals. Finally, we interviewed USPS, 
Department of Energy (DOE), and General Services Administration (GSA) 
officials and a wide range of officials from companies with large 
vehicle fleets, such as FedEx Express and United Parcel Service (UPS); 
automobile manufacturers; alternative fuel associations; and 
environmental organizations. 

We conducted this performance audit from February 2010 to May 2011 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 audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. Appendix I 
provides additional information on our scope and methodology. 

Background: 

USPS's mission is to provide reliable, affordable, and universal mail 
delivery and postal retail services to the entire U.S. population as 
nearly as practicable, regardless of where people live. In the past 5 
years, USPS's delivery workload has increased on average by about 1 
million delivery points, or addresses, per year--from 126 million in 
fiscal year 2006 to about 131 million in fiscal year 2010.[Footnote 8] 
USPS organizes its delivery points into city and rural routes. Most 
city routes fall into one of three main types, as shown in table 1. 

Table 1: Types of Delivery Routes and Number of USPS Vehicles Used for 
Each Route, as of September 30, 2010: 

Route type[A]: City; 
Definition: A route designated as serving city locations, rather than 
rural areas. USPS provides vehicles for all motorized city routes; 
Number of USPS vehicles used for each route type: 160,006. 

Route type[A]: City: Park and loop; 
Definition: The letter carrier drives the vehicle to a designated 
parking location. The carrier then walks a segment of the route before 
driving to the next location and walking another segment of the route; 
Number of USPS vehicles used for each route type: 80,564. 

Route type[A]: City: Curbline; 
Definition: The letter carrier delivers to mailboxes at the curb, 
typically without leaving the vehicle; 
Number of USPS vehicles used for each route type: 50,517. 

Route type[A]: City: Dismount; 
Definition: The letter carrier exits the vehicle and delivers mail to 
the door. Dismount routes include carrier pick-ups at collection boxes; 
Number of USPS vehicles used for each route type: 14,058. 

Route type[A]: City: Other; 
Definition: This category includes walking, bicycle, and express 
package routes; 
Number of USPS vehicles used for each route type: 14,867. 

Route type[A]: Rural[B]; 
Definition: A route designated as serving rural areas. Such routes 
typically involve curbline delivery. Because of suburban development, 
over time, many rural routes now resemble city curbline routes; 
Number of USPS vehicles used for each route type: 32,299. 

Route type[A]: Total; 
Number of USPS vehicles used for each route type: 192,305. 

Source: GAO analysis of a custom query of VMAS data. 

Note: USPS also has highway contract routes. These routes are not 
included in this table because USPS does not provide vehicles for 
these routes. 

[A] USPS characterizes routes based on the type of delivery for the 
majority of each route. According to Vehicle Programs officials, many 
routes involve more than one type of delivery. 

[B] Many rural routes are operated with privately owned vehicles. 

[End of table] 

In its two most recent contracts with the National Rural Letter 
Carriers Association,[Footnote 9] USPS agreed to provide about 40,000 
right-hand-drive vehicles for many of its rural routes from 2004 to 
2013. As of December 31, 2010, USPS had provided rural letter carriers 
with 33,060 of the contractually required vehicles. According to USPS 
officials, USPS expects to provide the remaining vehicles by the end 
of December 2013. According to USPS officials, USPS provides the 
vehicles to rural carriers with low mileage routes and based on other 
considerations, such as the vehicle's proximity to fuel and a USPS 
vehicle maintenance facility and the adequacy of security for the 
vehicle. While these agreements significantly expanded the number of 
rural letter carriers who operated USPS vehicles, as of March 11, 
2011, 41,026 rural letter carriers still used their personal vehicles 
for USPS mail deliveries. 

USPS is an independent establishment of the federal government, with a 
Board of Governors, which has responsibilities similar to a 
corporation's board of directors, that oversees its operations and 
expenditures, including those for major capital investments. Over the 
past 4 years, capital investments declined from $2.7 billion in fiscal 
year 2007 to $1.4 billion in fiscal year 2010. According to USPS 
officials, most capital expenditures since fiscal year 2008 have been 
for investments that are expected to provide cost savings, such as 
automated mail sorting equipment, and none of these expenditures have 
been for delivery vehicles. However, as a result of appropriations to 
GSA under the American Recovery and Reinvestment Act of 2009, USPS 
received about 6,500 new, more fuel-efficient vehicles from GSA in 
2009 and 2010 in a one-for-one exchange for older, less fuel-efficient 
USPS vehicles.[Footnote 10] 

To help address its financial challenges, in March 2010, USPS issued a 
10-year action plan, or strategy, in which it proposed, among other 
things, reducing mail delivery from 6 days to 5 days a week and 
enhancing its ability to close underutilized postal offices. The plan 
did not include a strategy for addressing the agency's delivery fleet 
needs. USPS also has made operational changes to reduce costs, such as 
deploying a new system that automatically sorts and sequences large 
envelopes and magazines into the order in which they are to be 
delivered. According to USPS, this system reduces the time letter 
carriers must spend preparing mail for delivery and allows for 
consolidation of delivery routes into fewer, but longer, routes. 
[Footnote 11] USPS is also working to enhance its revenues through 
initiatives such as the introduction of flat-rate boxes for Priority 
Mail and volume-based rate incentives to stimulate additional mail 
use. Operational changes will affect USPS's future fleet needs. 

USPS is subject to certain provisions of EPAct 1992 related to federal 
agency vehicle fleets. The act--designed to improve energy efficiency--
requires that 75 percent of light-duty vehicles acquired for federal 
fleets in major metropolitan areas be capable of using alternative 
fuels. Alternative fuel vehicles must be capable of using one of a 
variety of fuel types, such as ethanol, natural gas, propane, 
biodiesel, electricity, or hydrogen. Legislation subsequently expanded 
the definition of alternative fuel vehicles to include hybrid vehicles 
and any other type of vehicle that can achieve a significant reduction 
in petroleum consumption, as demonstrated by the Administrator of the 
U.S. Environmental Protection Agency. Legislation also subsequently 
required that all dual-fuel vehicles use alternative fuel unless they 
have received a waiver from DOE.[Footnote 12] DOE grants waivers to 
agencies that operate vehicles in areas where alternative fuel is 
unavailable, not available within 5 miles or 15 minutes of travel, or 
more expensive per gallon than gasoline at the same fuel station. 
[Footnote 13] 

In February 2011, USPS had 306 vehicle maintenance facilities 
distributed among its seven area offices.[Footnote 14] According to 
USPS officials, the agency also uses contractors at private 
maintenance facilities, such as garages, to perform some of its 
vehicle maintenance, and their use has increased in recent years, 
partly because the number of USPS technicians has declined under a 
hiring freeze. USPS tracks its vehicles' performance and costs, 
including maintenance work and costs, through VMAS, according to USPS 
officials. Field and headquarters offices get periodic VMAS reports on 
various vehicle performance indicators, and data on vehicle accidents 
are kept in a separate database. 

USPS's Office of Vehicle Programs, which is under the Vice President 
of Delivery and Post Office Operations, is responsible for fleet 
management, leasing, maintenance policies and procedures, parts, 
vehicle research, development and testing, and new vehicle 
acquisitions. In addition, USPS's Office of Sustainability coordinates 
and establishes energy and environmental goals for the fleet. 
Consistent with legislative requirements, by fiscal year 2015 
(compared with a fiscal year 2005 baseline), USPS's goals are to 
reduce petroleum fuel use by 20 percent and increase alternative fuel 
use by 10 percent annually (for an overall increase of 100 percent 
over the 10-year period).[Footnote 15] 

In its fiscal year 2010 Strategic Sustainability Performance Plan, 
USPS reported that it did not expect to meet its 2015 petroleum 
reduction goal. Specifically, USPS reported that from fiscal years 
2005 through 2009, its delivery fleet's use of petroleum increased 
because of growth in the number of its delivery addresses. According 
to USPS, its proposal to reduce delivery from 6 days to 5 days a week 
has the largest petroleum reduction potential, but even if Congress 
approves the proposal, it would not be likely to meet its fiscal year 
2015 goal. In contrast, USPS reported that it had already met its 
second goal because, from fiscal years 2005 through 2009, its use of 
alternative fuel increased by 114 percent. 

USPS's Delivery Fleet Primarily Consists of LLVs That Are Approaching 
the End of Their 24-Year Expected Operational Lives: 

LLVs, Flex-Fuel Vehicles, and Minivans Are the Principal Components of 
USPS's Delivery Fleet: 

The number of half ton and smaller vehicles in USPS's delivery fleet-- 
mostly LLVs, flex-fuel vehicles (FFV), and minivans--has remained 
relatively constant over the past 5 fiscal years, ranging from 182,517 
to 189,712 vehicles,[Footnote 16] despite about 13,400 fewer delivery 
routes. The number of delivery vehicles peaked in fiscal year 2008, 
before falling slightly, and grew overall by 3,487 vehicles, or about 
2 percent, over the 5-year period. 

Despite some recent vehicle purchases, the majority of USPS's fleet 
consists of LLVs, which are approaching the end of their 24-year 
expected operational lives. Produced by Grumman, the LLVs were 
acquired from 1987 through 1994, before EPAct 1992's light-duty 
vehicle acquisition percentage requirements went into effect in fiscal 
year 1996.[Footnote 17] The LLVs have light-weight and long-lasting 
aluminum bodies mounted on a General Motors chassis and are powered by 
a 4-cylinder gasoline engine. USPS acquired the second major segment 
of the delivery fleet, FFVs, in 2000 and 2001, after EPAct 1992's 
acquisition requirements went into effect. The FFVs have an aluminum 
body that is similar to that of the LLV. According to USPS officials, 
FFVs are mounted on a Ford Explorer platform and are powered by a 6-
cylinder engine that is "flex-fuel" capable, meaning that it can use 
gasoline or E85, a mixture of gasoline and ethanol (85 percent). 

LLVs and FFVs, which together make up about 84 percent of USPS's 
delivery fleet, are easily identifiable as mail delivery vehicles (see 
figure 2). These vehicles are built on a light truck chassis (light-
duty vehicles) and have a cargo capacity of 1,000 pounds with 108 
cubic feet of cargo space. Key features of both include right-hand 
drive, an open interior for storing mail, and sliding doors. According 
to USPS, right-hand-drive vehicles are necessary for curbline delivery 
so that letter carriers can safely deliver mail directly to mail boxes 
without leaving their vehicles. Because right-hand-drive vehicles can 
be used for all routes, they also provide operational flexibility, 
allowing managers to move them to any route when, for example, another 
right-hand-drive vehicle is out of service for maintenance. In 
addition, Vehicle Programs officials told us that a standardized 
design minimizes training requirements and facilitates the 
establishment of partnerships with part suppliers. 

Figure 2: Example of an LLV and FFV, 2010: 

[Refer to PDF for image: 2 photographs] 

LLV: 
FFVs have an extra window behind the door for improved visibility. 

Source: GAO. 

[End of figure] 

The LLVs' and FFVs' bodies were made to withstand harsh operating 
conditions. USPS officials explained that the typical delivery 
operating cycle is extremely hard on vehicles because of the large 
number of stops and starts each day (an average of about 500 stops and 
starts per delivery route). In addition, when the letter carrier 
frequently exits and re-enters the vehicle, doors are opened and 
closed, and keys are turned in the door locks and ignition far more 
often than in a typical personal vehicle. 

The third major segment of the delivery fleet, shown in figure 3, 
consists of commercially available minivans. While USPS modified these 
minivans for use as delivery vehicles,[Footnote 18] according to USPS 
officials, they do not have right-hand drive and therefore cannot be 
used on all routes, reducing operational flexibility. In addition, 
commercially available vehicles are not built to withstand the harsh 
operating conditions of mail delivery and, consequently, the minivans 
have an expected operating life of 10 years. Most of USPS's minivans 
are E85-capable, meaning that they can operate on either E85 or 
gasoline. 

Figure 3: USPS Minivan Used for Delivering Mail, 2010: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

Table 2 provides a profile of the three main types of delivery 
vehicles that collectively account for about 96 percent of USPS's 
192,305 delivery vehicles. Other types of vehicles are used to deliver 
mail in certain areas. These vehicles include sport utility vehicles 
and larger 2-ton trucks, which typically are used for mail collection, 
not deliveries. 

Table 2: Profile of the Three Main Categories of USPS Delivery 
Vehicles, as of September 30, 2010: 

Vehicle type: LLV; 
Acquisition years: 1987-1994; 
Vehicle acquisition costs[A] (adjusted for inflation): $20,009[B]; 
Mean age (years): 20; 
Age range (years): 16-23; 
Estimated vehicle life (years): 24; 
Average miles driven per day/year: 18/5,388; 
Number in fleet: 141,319. 

Vehicle type: FFV; 
Acquisition years: 2000-2001; 
Vehicle acquisition costs[A] (adjusted for inflation): 25,070[C]; 
Mean age (years): 9; 
Age range (years): 9-10; 
Estimated vehicle life (years): 24; 
Average miles driven per day/year: 17/5,079; 
Number in fleet: 21,137. 

Vehicle type: Minivan: Ford Aerostars and Windstars; 
Acquisition years: 1997-1998; 
Vehicle acquisition costs[A] (adjusted for inflation): 23,155[D]; 
Mean age (years): 12; 
Age range (years): 12-13; 
Estimated vehicle life (years): 10; 
Average miles driven per day/year: 11/3,369; 
Number in fleet: 5,351. 

Vehicle type: Minivan: Chrysler Caravans and Ford Windstars; 
Acquisition years: 2003; 
Vehicle acquisition costs[A] (adjusted for inflation): 22,875[E]; 
Mean age (years): 7; 
Age range (years): 7; 
Estimated vehicle life (years): 10; 
Average miles driven per day/year: 15/4,639; 
Number in fleet: 6,563. 

Vehicle type: Minivan: Chrysler Caravans, Dodge Caravans, and 
Chevrolet Uplanders; 
Acquisition years: 2006-2008; 
Vehicle acquisition costs[A] (adjusted for inflation): 17,500[F]; 
Mean age (years): 2.6; 
Age range (years): 2-4; 
Estimated vehicle life (years): 10; 
Average miles driven per day/year: 14/4,203; 
Number in fleet: 10,186. 

Vehicle type: Subtotal: 
Number in fleet: 184,556. 

Vehicle type: Other; 
Number in fleet: 7,749. 

Vehicle type: Total; 
Number in fleet: 192,305. 

Source: GAO analysis of a custom query of USPS's VMAS data (number in 
fleet) and information provided by USPS from VMAS reports. 

[A] Acquisition costs have been adjusted for inflation using a Gross 
Domestic Product Price Index, base year 2010. 

[B] USPS acquired the LLVs from 1987 to 1994. Because relatively 
consistent quantities of LLVs were purchased each year, USPS provided 
us with the per-unit cost for 1990--the approximate mid-point of the 
acquisitions--of $13,057 as the base year from which to adjust the 
vehicles' cost for inflation. 

[C] USPS acquired the FFVs from 2000 to 2001 at a per-unit cost of 
$20,537. We chose 2001 as the base year to adjust the vehicles' cost 
for inflation because, according to a Vehicle Programs official, most 
of USPS's payments for these vehicles occurred in that year. 

[D] This minivan category comprises two vehicle types with different 
costs that USPS acquired during 1997 and 1998. The per-unit costs for 
these vehicles were $21,069 for the Ford Aerostars and $17,558 for the 
Ford Windstars. To obtain a single cost figure, we first adjusted the 
per-unit costs of each model for inflation. We chose 1998 as the base 
year to adjust the vehicles' cost for inflation because, according to 
a Vehicle Programs official, most of USPS's payments for these 
vehicles occurred in that year. We then calculated a weighted average 
based on the number of each model (Aerostars and Windstars) acquired. 

[E] This minivan category comprises two types of vehicles, Chrysler 
Caravans, acquired in 2003 at a per-unit cost of $19,451, and Ford 
Windstars. According to USPS officials, the Ford Motor Company 
provided the Windstars free of charge to USPS. Ford provided the 
Windstars to USPS in exchange for 500 electric vehicles that Ford 
recalled when the vehicles' battery manufacturer when out of business. 
(This matter is discussed later in the report.) As a result, the 
$22,875 shown reflects only the per-unit cost for the Chrysler 
Caravans, adjusted for inflation. 

[F] Acquired from 2006 to 2008, this minivan category comprises three 
vehicle types with different acquisition costs. The per-unit costs of 
these vehicles were $18,861 for the Chrysler Caravans, $17,261 for the 
Dodge Caravans, and $15,616 for the Chevrolet Uplanders. To obtain a 
single cost figure, we adjusted the per-unit costs of each model for 
inflation. We chose the middle year of acquisition, 2007, as the base 
year to adjust the vehicles' cost for inflation. We then calculated a 
weighted average based on the number of each vehicle type (Chrysler 
Caravans, Dodge Caravans, and Chevrolet Uplanders) acquired. 

[End of table] 

According to Vehicle Programs officials, USPS leased some delivery 
vehicles (minivans) in the past, but it now owns all of its delivery 
vehicles. In part, this is because USPS's custom-built LLVs and FFVs 
are not commercially available through leasing programs. However, even 
when vehicles are commercially available, Vehicle Programs officials 
stated that, according to USPS's lease-versus-buy analyses for recent 
purchases, such as its fiscal year 2008 acquisition of minivans, 
purchasing these vehicles has been more cost-effective than leasing 
them because USPS intends to own the vehicles for a long time. 
[Footnote 19] 

Some of USPS's Delivery Vehicles Are Capable of Using Alternative 
Fuels: 

About 78 percent of USPS's delivery vehicles use gasoline or diesel 
exclusively, while the other 22 percent are capable of operating with 
an alternative fuel.[Footnote 20] As shown in table 3, E85-capable 
vehicles (FFVs and minivans) make up about 20 percent of the delivery 
fleet while, collectively, the other alternative fuel vehicles-- 
typically, converted LLVs--account for about 2 percent of the delivery 
fleet. According to Vehicle Programs officials, a typical LLV uses an 
equivalent of about two gasoline gallons of fuel a day. According to 
USPS officials, while USPS has a variety of pilot programs underway to 
explore other alternative fuel vehicle technologies (other than E85- 
capable vehicles), almost all of its other alternative fuel vehicles 
are capable of using compressed natural gas in addition to gasoline. 

Table 3: 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; 
Number of vehicles: 39,149[A]; 
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; 
Number of vehicles: 3,401[B]; 
Percentage of delivery fleet: 2%. 

Alternative fuel capability: Propane; 
Description of fuel type: Propane is naturally occurring and is 
derived from a process of separating petroleum from crude oil or 
natural gas; 
Number of vehicles: 34[C]; 
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; 
Number of vehicles: 42[D]; 
Percentage of delivery fleet: less than 1%. 

Alternative fuel capability: Conventional hybrid; 
Description of fuel type: Uses both gasoline and stored energy in a 
battery to power the vehicle; 
Number of vehicles: 11[E]; 
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; 
Number of vehicles: 2[F]; 
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 VMAS report. 

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

[A] These vehicles consist of FFVs and E85-capable minivans. 

[B] These vehicles consist of 3,372 converted LLVs and 29 2-ton trucks 
that run on compressed natural gas. 

[C] These vehicles are LLVs that have been converted to operate on 
propane. 

[D] USPS has 30 electric 2-ton trucks and 12 T-3s--three-wheeled 
vehicles equipped with a small trailer for more storage capacity. 

[E] Ten of these hybrids are sports utility vehicles that operate on 
gasoline. The remaining hybrid is a 2-ton truck that uses diesel. 

[F] Each of these vehicles is a GM Chevrolet Equinox sports utility 
vehicle. 

[End of table] 

USPS Has Acquired Alternative Fuel Vehicles in Response to 
Requirements, but Has Experienced Challenges: 

USPS Has Acquired E85-Capable Vehicles and Increased E85 Use, but Has 
Not Always Used E85 because of Logistical and Cost Issues: 

Since 2000, USPS has consistently purchased E85-capable delivery 
vehicles to satisfy the legislative requirement that at least 75 
percent of its vehicle acquisitions be alternative fuel vehicles, and 
it had a total of 39,149 E85-capable vehicles in its delivery fleet as 
of September 30, 2010. According to Vehicle Programs officials, USPS 
purchased E85-capable vehicles because even though prior to 2004 each 
vehicle cost about $300 to $500 more than a comparable gasoline-only 
vehicle when they were acquired, purchasing E85-capable vehicles 
allowed USPS to meet the requirements of EPAct 1992 for less than it 
would have had to spend to acquire other types of alternative fuel 
vehicles. In addition, according to Vehicle Programs officials, the 
agency expected that E85 eventually would be widely available 
throughout the United States. However, according to DOE data, E85 
suppliers are concentrated in a few regions of the country (see figure 
4.) and, as of December 2009,[Footnote 21] E85 was not available at 99 
percent of U.S. fueling stations. 

Figure 4: Number of Gas Stations that Sell E85 in Each State, as of 
December 31, 2010: 

[Refer to PDF for image: illustrated U.S. map] 

Alabama: 17; 
Alaska: 0; 
Arizona: 31; 
Arkansas: 13; 
California: 57; 
Colorado: 86; 
Connecticut: 1; 
Delaware: 1; 
District of Columbia: 3; 
Florida: 41; 
Georgia: 47; 
Hawaii: 1; 
Idaho: 7; 
Illinois: 209; 
Indiana: 139; 
Iowa: 145; 
Kansas: 38; 
Kentucky: 24; 
Louisiana: 5; 
Maine: 0; 
Maryland: 19; 
Massachusetts: 3; 
Michigan: 109; 
Minnesota: 361; 
Mississippi: 4; 
Missouri: 105; 
Montana: 2; 
Nebraska: 59; 
Nevada: 26; 
New Hampshire: 0; 
New Jersey: 5; 
New Mexico: 11; 
New York: 75; 
North Carolina: 20; 
North Dakota: 56; 
Ohio: 69; 
Oklahoma: 13; 
Oregon: 8; 
Pennsylvania: 36; 
Rhode Island: 0; 
South Carolina: 104; 
South Dakota: 104; 
Tennessee: 38; 
Texas: 52; 
Utah: 5; 
Vermont: 0; 
Virginia: 11; 
Washington: 15; 
West Virginia: 3; 
Wisconsin: 134; 
Wyoming: 6. 

Sources: DOE (data); Map Resources (map). 

[End of figure] 

USPS increased its use of E85 from about 324,000 gasoline gallon 
equivalents in fiscal year 2005 to about 822,000 gasoline gallon 
equivalents in fiscal year 2009--an increase of about 154 percent--but 
the limited availability of E85 nationwide has hindered its greater 
use of this fuel. For example, according to USPS officials, letter 
carriers who drive the 720 E85-capable vehicles USPS deployed around 
Minneapolis and St. Paul, Minnesota, face few problems because E85 is 
widely available there (see figure 5). However, because of operational 
requirements, many E85-capable delivery vehicles are used in other 
areas, such as New England, that currently have very limited E85 
availability. According to Vehicle Programs officials, to increase E85 
use, USPS has redeployed some E85-capable vehicles within local areas 
so that they could be fueled with E85. However, Vehicle Programs 
officials said that USPS has not undertaken large-scale redeployments 
of these vehicles because a cross-country move costs about $1,500 to 
$2,500 per vehicle.[Footnote 22] 

Figure 5: Gas Station Sign Advertising E85 near a Minnesota Post 
Office with E85-Capable Delivery Vehicles in September 2010, and 
Decals on the Fuel Cap Door of a USPS Delivery Minivan Indicating That 
It Is E85 Capable: 

[Refer to PDF for image: 2 photographs] 

Source: GAO. 

[End of figure] 

Because of E85's limited availability, USPS has sought annual waivers 
from DOE and, according to USPS data for fiscal year 2010, obtained 
waivers that permit it to operate 21,495 of its 40,072 E85-capable 
vehicles--or about 54 percent--exclusively on gasoline.[Footnote 23] 
The remaining 18,577 E85-capable vehicles operate without waivers 
(unwaived vehicles) and, thus, are expected to operate exclusively on 
E85. However, as described below, because operational costs are higher 
for using E85 than for using gasoline, even when E85-capable vehicles 
are located in areas where E85 is available, USPS does not always use 
E85, as acknowledged by Vehicle Programs officials. According to DOE 
officials, apart from cost considerations, DOE will not grant a waiver 
to the requirement to use alternative fuel when E85 is available 
within 5 miles or 15 minutes of travel. In January 2009, USPS issued a 
policy stating that vehicles should be fueled with E85 when (1) E85 is 
available either to an entire delivery unit or on a specific route 
when no deviation from the route or no additional travel time is 
required to acquire E85 and (2) E85 costs the same or less than 
gasoline.[Footnote 24] In July 2009, based on DOE's draft guidance on 
E85 waivers, USPS issued a related memo requesting delivery programs 
managers to determine where E85 was located within 15 minutes or 5 
miles of E85-capable vehicles and priced equal to or less than regular 
unleaded gas. The memo advised the managers that E85 must be used if 
these conditions were met. However, Vehicle Programs officials 
acknowledged that, due to operational requirements and cost issues, 
this latter requirement is not always followed. Instead, according to 
a USPS official, managers are expected to take into account the 
language in both the January 2009 policy and July 2009 memo while 
considering operational requirements, such as additional labor costs, 
that may be incurred by letter carriers who must deviate from their 
routes to fuel with E85.[Footnote 25] 

DOE officials are aware that USPS's E85 policy varies from DOE's 
criteria for approving waivers and that USPS is not fully complying 
with legislative requirements to fuel unwaived E85-capable vehicles 
with E85.[Footnote 26] However, they acknowledged that, unlike other 
agencies that receive appropriations for fuel expenditures, USPS must 
pay for its fuel costs through income earned from its operations. 

USPS's Use of E85-Capable Vehicles Has Resulted in Higher Fuel Costs: 

USPS's use of E85-capable vehicles has resulted in higher operating 
costs regardless of whether the vehicles are fueled with E85 or 
gasoline. First, when USPS contracted to purchase its FFVs in 2000, 
E85 capability was available only in vehicles with 6-cylinder engines. 
According to USPS officials, the FFVs' 6-cylinder engines are heavier 
and less fuel efficient than the LLVs' 4-cylinder engines, resulting 
in higher fuel consumption and costs--regardless of the type of fuel 
used. Second, because of E85's lower energy density, USPS's FFVs are 
about 27 to 30 percent less fuel efficient when fueled with E85 than 
when fueled with gasoline, according to Vehicle Programs officials. 
Thus, it takes more gallons of E85 than gasoline to drive the same 
number of miles. Furthermore, although E85 generally costs less per 
gallon than gasoline, the difference in cost generally has not been 
sufficient to offset the higher costs associated with E85's lower fuel 
efficiency (see figure 6). Based on USPS's information that it 
consumed about 587,000 gallons of E85 in fiscal year 2010, we estimate 
that USPS incurred about $135,700 more in costs in fiscal year 2010 by 
using E85, instead of gasoline. 

Figure 6: Average USPS Price for E85 and Gasoline in Fiscal Year 2010 
and the Fuels' Relative Efficiency: 

[Refer to PDF for image: illustrated table] 

Fuel type: Gasoline, 1 gallon: 
Average price per gallon[A]: $2.62; 
Miles per gallon[B]: 10 miles; 
Cost per mile: $0.26. 

Fuel type: E-85, 1 gallon: 
Average price per gallon[A]: $2.27; 
Miles per gallon[B]: 7.15 miles; 
Cost per mile: $0.32. 

Sources: GAO analysis of USPS data. 

[A] Average fiscal year 2010 USPS fuel price for gasoline and E85, 
according to a Vehicle Programs official. 

[B] This figure represents a hypothetical example of the difference in 
fuel efficiency between gasoline and E85. It is based on USPS's (1) 
estimate of a 27 percent to 30 percent fuel efficiency difference when 
using E85, compared to gasoline, and (2) the average cost for these 
fuels in fiscal year 2010. We used 28.5 percent--the mid-point of 
USPS's estimated fuel efficiency difference--to calculate the 
difference in USPS's estimate of fuel efficiency between gasoline and 
E85. However, this figure does not necessarily reflect actual fuel 
efficiencies realized by USPS. 

[End of figure] 

The reasons that USPS decided to purchase E85-capable vehicles to meet 
legislative requirements and the challenges it faces in fueling these 
vehicles with E85 are similar to those of many other federal agencies. 
For example, according to DOE data, 87 percent of federal alternative 
fuel vehicles acquired to meet EPAct 1992 requirements in fiscal year 
2009 were E85-capable vehicles. Furthermore, in fiscal year 2010, 
approximately 55 percent of E85-capable vehicles acquired to meet 
EPAct 1992 requirements in all federal fleets received a waiver, 
allowing them to operate exclusively on gasoline, according to DOE. In 
addition, according to DOE officials, a recent DOE analysis--currently 
in draft--has found that the majority of federal agencies are not in 
compliance with the requirement to fuel unwaived E85-capable vehicles 
with E85.[Footnote 27] 

Officials from UPS and FedEx Express--companies with missions similar 
to USPS's--told us that they see few benefits to owning and operating 
E85-capable vehicles and, as a result, they have not purchased any E85-
capable vehicles. Instead, they said that despite higher acquisition 
costs, their companies have purchased small numbers of other 
alternative fuel vehicles--electric, hybrid, and compressed-natural-
gas-capable vehicles--to lower their companies' fuel costs, reduce 
their emissions, and enhance their corporate image. 

USPS's Experiences with Other Types of Alternative Fuel Vehicles 
Demonstrate Cost and Infrastructure Challenges: 

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. These vehicles include 3,401 LLVs and 2-ton trucks converted to 
run on compressed natural gas,[Footnote 28] 34 LLVs converted to run 
on propane, 11 conventional hybrid electric vehicles, 42 plug-in 
electric vehicles, and 2 hydrogen fuel cell vehicles. 

According to Vehicle Programs officials, while USPS has integrated 
these alternative fuel vehicles into its delivery fleet, it has not 
invested more heavily in alternative technologies for several reasons. 
First, the officials stated that USPS is the only U.S. agency that 
requires right-hand-drive vehicles to fulfill its mission and, because 
these vehicles are not available commercially, the requirement limits 
vehicle choices, regardless of how the vehicles are fueled.[Footnote 
29] Second, USPS officials and other experts explained that purchasing 
alternative fuel vehicles instead of gasoline-powered vehicles likely 
would result in higher estimated lifecycle costs, largely because 
their acquisition costs would be significantly higher. While 
purchasing some types of alternative fuel vehicles could reduce USPS's 
fuel costs, they said, the fuel savings would be unlikely to offset 
the higher acquisition costs of the vehicles over their operating 
lives because, on average, USPS's delivery vehicles travel only about 
17 miles a day. Third, Vehicle Programs officials told us that the 
limited availability of alternative fuels and the high costs of 
installing fueling infrastructure for them--such as on-site charging 
stations for electric vehicles--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 
alternative fuel vehicles. For example: 

* High acquisition costs have prohibited larger purchases of hybrid 
vehicles. When we conducted our site visits, USPS had 12 hybrid 
vehicles in its delivery fleet: two 2-ton hybrid trucks in New York 
state that were converted to a hybrid power train that USPS received 
in 2009, and 10 Ford Escape hybrids in California that were purchased 
in 2005. The 2-ton vehicles were converted to hybrid vehicles through 
partnerships with manufacturers at no cost to USPS, and it was able to 
purchase the 10 Ford Escape hybrids at a cost of about $27,700 in 2010 
dollars.[Footnote 30] According to USPS officials, all of these 
vehicles have significantly better fuel economy than similar nonhybrid 
vehicles in its delivery fleet. However, Vehicle Programs officials 
stated that because hybrid vehicles typically cost more to acquire-- 
$9,000 more in the case of a 2011 Ford Escape hybrid compared to the 
nonhyrid version of the same vehicle[Footnote 31]--USPS has not 
invested heavily in these vehicles. 

* Limited fueling infrastructure and difficulty obtaining parts have 
caused USPS to scale back its use of compressed natural gas in 
delivery vehicles. In the 1990s, USPS converted about 7,300 LLVs to 
operate on compressed natural gas. However, because of fueling 
infrastructure issues and parts supply challenges, as of September 30, 
2010, USPS had removed this capability from all but 3,372 of these 
vehicles. At the conclusion of our review, 42 of these vehicles were 
being operated in Corpus Christi, Texas, where the city, to increase 
the use of this fuel, helped install needed fueling infrastructure and 
provided $400 of fuel for each of these 42 compressed-natural-gas-
capable vehicles (about 200 days of fuel per vehicle, according to 
Vehicle Programs officials). The manager of the local vehicle 
maintenance facility told us that operating these vehicles on 
compressed natural gas has reduced USPS's fuel costs and, 
consequently, in January 2011, he was in the process of obtaining 37 
additional compressed-natural-gas-capable vehicles from other 
locations in Texas. In contrast, USPS's experience in Huntington, New 
York, illustrates what Vehicle Programs officials described as more 
typical challenges related to USPS's use of compressed natural gas. 
Specifically, in the mid-1990s, all of the LLVs at the Huntington post 
office were converted to run on compressed natural gas. USPS officials 
said the vehicles were run on this fuel for only about 6 months 
because--almost immediately--the vehicles had reliability issues and 
they faced challenges obtaining replacement parts. 

* Parts supply issues caused Ford to recall 500 electric vehicles soon 
after their deployment as USPS delivery vehicles. In 1999, USPS, 
through a partnership with DOE and several regional and local agencies 
in California and New York state, acquired 500 plug-in electric 
vehicles from Ford. However, Ford recalled the vehicles soon 
afterwards because the vehicle battery manufacturer stopped making the 
needed batteries. Ford replaced them with gasoline-powered minivans. 

For additional information on USPS's experiences with various types of 
alternative fuel vehicles, see appendix II. 

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

USPS's Approach Is to Maintain Its Current Vehicles While Planning How 
to Address Its Longer Term Delivery Fleet Needs: 

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. 
The current approach also anticipates purchasing limited numbers of 
new, commercially available minivans, as necessary, to meet its 
operational requirements. According to Vehicle Programs officials, 
USPS adopted its current approach in December 2005 after senior 
management and a Board of Governors subcommittee decided not to 
initiate a major replacement or refurbishment of the delivery fleet. 
At that time, USPS estimated that fleet replacement--one of the five 
options considered--would cost $5 billion for about 175,000 vehicles. 
[Footnote 32] 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 deploying the vehicles, according to Vehicle Programs 
officials. USPS also elected not to refurbish its fleet, another 
option considered. According to a USPS contractor, the agency could 
have delayed purchasing new vehicles for at least 15 years if it 
refurbished its existing LLVs and FFVs (i.e., replaced nearly all 
vehicle parts subject to the effects of wear and aging) over a 10-year 
period. In 2005, the contractor estimated that refurbishing these 
vehicles would cost $20,000 per vehicle--a total cost of about $3.5 
billion, assuming that 175,000 vehicles were refurbished. According to 
Vehicle Programs officials, USPS chose to sustain its operations 
through continued vehicle maintenance pending operational and 
financial developments and evolving advancements in vehicle 
technologies. Several senior USPS officials told us the agency does 
not intend to begin a major vehicle acquisition until 2018 at the 
earliest, largely because of financial constraints. 

As discussed earlier, USPS's financial condition has since declined 
substantially and although USPS issued a 10-year action plan in March 
2010 for improving its financial viability, the plan did not describe 
a strategy for addressing its delivery vehicle needs. Federal capital 
planning principles emphasize the importance of: 

* strategically linking agency goals and objectives, such as those 
outlined in USPS's action plan, to an agency's capital investment 
needs; 

* evaluating the capacity of existing agency assets; and: 

* identifying alternatives to bridge gaps between current and needed 
capabilities.[Footnote 33] 

USPS has not analyzed how operational changes proposed in its 10-year 
plan, including a potential shift in delivery from 6 days a week to 5 
days, would affect its fleet needs or the consequences of its decision 
to delay the fleet's replacement or refurbishment. In addition, it has 
not developed a plan for financing the strategy it eventually chooses. 
However, without the inclusion of this major capital investment need 
in its action plan or other documented analysis, USPS's future fleet 
needs are unclear, as is USPS's assessment of how urgently it should 
replace, or refurbish, much of its aging delivery fleet and how it can 
finance such a major capital investment. 

According to Vehicle Programs and senior USPS officials, the Vehicle 
Programs office is in the early stages of developing a new proposal 
for addressing the agency's delivery fleet needs. These officials 
stated that the proposal will likely explore several alternatives, 
including continuing to maintain the current fleet, refurbishing the 
LLVs and FFVs, or, possibly, undertaking a major acquisition of new 
vehicles. The proposal also is expected to address a June 2010 USPS 
Office of Inspector General recommendation that USPS replace about 
20,000 delivery vehicles whose maintenance costs exceeded $5,600 
during each of 2 consecutive fiscal years.[Footnote 34] Furthermore, 
Vehicle Programs officials stated that the proposal will discuss 
strategies for incorporating alternative fuel capabilities into USPS's 
next major fleet acquisition. According to Vehicle Programs officials, 
USPS expects to present its proposal for consideration by the USPS 
Capital Investment Committee later this fiscal year. 

USPS Is Uncertain How Best to Incorporate Alternative Fuel Vehicles 
into Its Next Major Delivery Fleet Acquisition: 

While USPS intends to examine ways to comply with EPAct 1992's 
acquisition requirements in its next large-scale acquisition of 
vehicles, according to Vehicle Programs officials, life-cycle costs 
are significantly higher for nearly all currently available 
alternative fuel vehicles than for gasoline-powered vehicles. This is 
largely because, given the delivery fleet's low annual mileage, the 
savings on fuel associated with alternative fuel vehicles would not be 
sufficient to offset the vehicles' higher acquisition costs. 
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 for USPS. In addition, as discussed 
earlier, USPS has concerns about undertaking a large-scale acquisition 
of most alternative fuel vehicles because of their potentially higher 
infrastructure and operating costs and uncertainties about the 
availability of parts and long-term support for rapidly evolving 
alternative vehicle technologies. For example, USPS expressed concern 
about two recent bills introduced in Congress. One of these bills 
would have authorized about $2 billion for, among other purposes, the 
purchase of at least 20,000 electric delivery vehicles and the 
installation of 24,000 charging stations,[Footnote 35] while the other 
bill would have required USPS to ensure that within 5 years at least 
75 percent of its fleet would consist of electric vehicles but did not 
authorize funding.[Footnote 36] USPS stated that it is concerned about 
operating a large portion of its fleet exclusively on electricity 
because of the potential for mail delivery disruptions if local 
electric grids fail. In addition, USPS expressed concerns about the 
availability of parts and potentially high vehicle acquisition, 
infrastructure, and battery-replacement costs. Because of these 
concerns, USPS commented that if legislation related to the 
electrification of its fleet is enacted, it would prefer funding for a 
pilot program of roughly 1,000 electric vehicles that it would conduct 
in consultation with DOE. 

USPS may be able to meet EPAct 1992's light-duty vehicle acquisition 
requirements in future vehicle acquisitions by purchasing E85-capable 
vehicles without incurring the additional costs that it faced in its 
previous acquisitions of these vehicles. According to DOE officials, 
more E85-capable vehicles are now available with 4-cylinder engines, 
and these engines now can be acquired commercially for little to no 
additional cost. However, as discussed earlier, USPS and other federal 
agencies often have faced challenges fueling vehicles with E85. 

Other federal agencies also face challenges complying with fleet 
requirements. As we recently reported, conflicting statutes limit 
federal fleet managers' flexibility to reduce their fleets' petroleum 
use and greenhouse gas emissions.[Footnote 37] For example, we 
reported that federal requirements to purchase alternative fuel 
vehicles can undermine the requirement to reduce petroleum consumption 
because the fuels' limited availability results in agencies using 
gasoline to fuel alternative fuel vehicles. In other work, we reported 
that federal fleet requirements do not provide agencies with a means 
to set priorities between conflicting requirements. As a result, we 
recommended that the Secretary of Energy, in consultation with other 
federal agencies, propose legislative changes to resolve the conflicts 
and set priorities for complying with the multiple federal fleet 
requirements and goals for reducing petroleum consumption, reducing 
emissions, managing costs, and acquiring advanced technology vehicles. 
[Footnote 38] DOE and GSA are working with other federal agencies to 
create a broader, performance-based approach to improve fuel 
efficiency and thereby reduce petroleum consumption and greenhouse gas 
emissions. The new performance-based approach is intended to provide 
federal managers with greater flexibility in improving the fuel 
efficiency of their agencies' vehicle fleets. 

Vehicle Programs officials stated that, in their view, the best way 
for USPS 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 for future USPS delivery fleet acquisitions given 
increased legislative flexibility in the definition of what 
constitutes an alternative fuel vehicle. Specifically, the National 
Defense Authorization Act of 2008 expanded this definition by 
permitting federal agencies to meet EPAct 1992's fleet acquisition 
requirements for light-duty-alternative-fuel vehicles by purchasing 
vehicles that the Environmental Protection Agency has demonstrated 
would achieve a significant reduction in petroleum consumption. 
[Footnote 39] Based on the agency's demonstration, any low-greenhouse-
gas-emitting vehicle in locations that qualify for a DOE waiver would 
be considered an alternative fuel vehicle. 

According to manufacturers, environmental organizations, and other 
experts we interviewed, gasoline-powered vehicles are becoming more 
fuel efficient and producing fewer emissions. As a result, newer 
gasoline-powered vehicles are likely to be more fuel-efficient than 
USPS's LLVs and FFVs. In addition, purchasing highly efficient 
gasoline vehicles would eliminate the fueling infrastructure and parts 
supply challenges USPS has faced with some alternative fuel vehicles. 
However, because the Environmental Protection Agency 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.[Footnote 40] Consequently, if USPS decides to 
pursue such a vehicle in its next acquisition of custom-built delivery 
vehicles, it would need to work with the manufacturer and the 
Environmental Protection Agency to determine if such a vehicle could 
meet its operational needs while being considered a low-greenhouse-gas-
emitting vehicle. 

Recognizing that vehicles have become more fuel efficient, in February 
2011, USPS issued two solicitations to "repower" two existing LLVs by 
installing new fuel efficient engines; new transmissions; and all 
related equipment, such as new cooling and exhaust systems. One of the 
solicitations is for the repowerment of an existing LLV with a fuel- 
efficient gasoline engine, while the other is to replace another LLV's 
existing gasoline engine with a fuel-efficient diesel engine. 
According to the solicitations, each of the two repowered vehicles 
must have (1) one of the best fuel economy ratings possible compared 
to similar commercially available vehicles and (2) operate on 
commercially available fuel. A Vehicle Programs official told us that 
USPS expects to award these contracts in April 2011 and to receive the 
vehicles in late 2011. According to a Vehicle Programs official, 
through operating these vehicles, USPS hopes to gain experience on how 
new, more fuel efficient engines would affect the agency's fuel 
efficiency and delivery operations. 

Current Approach Allows USPS to Defer a Major Capital Investment but 
Entails Some High Maintenance Costs, Operational Challenges, and 
Delayed Improvements: 

USPS's Maintenance Program and Parts Supply Have Enabled USPS to Meet 
Its Delivery Mission While Avoiding Capital Costs: 

USPS's well-established maintenance program has allowed it to continue 
to meet its delivery mission with its current fleet of delivery 
vehicles. The program requires a minimum of two preventive maintenance 
inspections annually for each of USPS's delivery vehicles. Parts that 
are determined to be sufficiently worn or are not expected to last 
until the next inspection are expected to be replaced. In addition to 
regularly scheduled maintenance, unscheduled maintenance occurs on the 
vehicles when needed to (1) resolve problems discovered when letter 
carriers perform daily inspections of vehicles prior to beginning 
their routes or (2) fix vehicles that break down while carriers are 
delivering mail. So that letter carriers have vehicles available to 
use while their vehicle is being serviced, about 3 percent of USPS's 
delivery vehicles are held in a maintenance reserve. According to USPS 
Finance officials, USPS incurred about $1.05 billion in maintenance 
and fuel costs for its delivery fleet in fiscal year 2010--which comes 
to about $18 per vehicle per day.[Footnote 41] This estimate includes 
about $750 million in maintenance costs and about $300 million in fuel 
costs. 

The USPS Office of Inspector General, which frequently reports on the 
vehicle maintenance program, recently reported that USPS's approach of 
continuing to maintain its current delivery fleet is operationally 
viable and generally cost-effective, given USPS's financial 
circumstances.[Footnote 42] Similarly, our custom query of USPS's VMAS 
found that delivery vehicles' direct maintenance costs (costs that can 
be directly attributed to work on a particular vehicle) have risen 
only slightly over the past 5 fiscal years, from a low of about $2,453 
per vehicle in fiscal year 2007 to a high of $2,587 per vehicle in 
fiscal year 2010 (see figure 7).[Footnote 43] These direct maintenance 
costs are somewhat understated because, according to USPS data, about 
6 percent of USPS's total maintenance costs--all due to maintenance 
performed by contractors--are not entered into VMAS.[Footnote 44] 

Figure 7: Annual Average Maintenance Cost Per Vehicle for USPS's 
Delivery Fleet over the Past 5 Fiscal Years: 

[Refer to PDF for image: line graph] 

Fiscal year: 2006; 
Average Maintenance Cost Per Vehicle: $2,513. 

Fiscal year: 2007; 
Average Maintenance Cost Per Vehicle: $2,453. 

Fiscal year: 2008; 
Average Maintenance Cost Per Vehicle: $2,556. 

Fiscal year: 2009; 
Average Maintenance Cost Per Vehicle: $2,584. 

Fiscal year: 2010; 
Average Maintenance Cost Per Vehicle: $2,587. 

Source: GAO analysis of USPS data. 

Note: The data in this figure are based on our custom query of VMAS. 

[End of figure] 

USPS's success in keeping its aging delivery fleet operational is also 
due to a steady supply of parts for its LLVs and FFVs, according to 
Vehicle Programs officials. Since USPS owns more than 160,000 of these 
vehicles, it has worked with suppliers to ensure that parts for these 
vehicles continue to be available. During our site visits, USPS's 
vehicle maintenance managers and technicians routinely informed us 
that this steady parts supply will enable them to maintain both types 
of vehicles well into the future. According to Vehicle Programs 
officials, because of the age of the vehicles, nearly all the LLVs 
have had their engines and transmissions replaced at least once, and 
often twice, and some of the LLVs have had nearly all their parts 
replaced, including their frames. USPS officials stated that it is 
more cost-effective to replace delivery vehicle parts as they are 
needed than to undertake a general vehicle refurbishment, in which all 
major parts are replaced at one time, because replacing parts as 
needed avoids costs resulting from premature replacements. While none 
of the other fleet operators we spoke with keep their vehicles as long 
as USPS plans to keep its LLVs and FFVs, most agreed that replacing 
parts as needed can keep vehicles operational at less cost than 
purchasing new vehicles. 

According to numerous USPS headquarters and field officials at vehicle 
maintenance facilities and post offices, as well as letter carriers, 
USPS's vehicle maintenance program has thus far supported USPS's 
requirements to deliver mail 6 days a week. In part this is because, 
according to officials at a number of vehicle maintenance facilities, 
the LLV is a well-designed, highly functional vehicle that is easy for 
mechanics to work on, and its long-lived aluminum body has held up 
well. While some vehicle maintenance facility officials noted problems 
with the FFVs--such as engine issues that led to the early replacement 
of some engines--in general, they stated that the FFVs also continue 
to be reliable and operational. USPS employees at a majority of the 
eight vehicle maintenance facilities and some post offices we visited 
told us that the delivery vehicles in their locations are in good 
condition and that, in their view, the vehicles can continue to 
deliver mail without major operational interruptions for at least 
several more years. Vehicle maintenance facility managers, 
technicians, and letter carriers routinely stressed that they had no 
safety concerns about the vehicles despite their advanced age. 
[Footnote 45] 

One Trade-off of Current Approach Is High Maintenance Costs for Some 
Vehicles: 

The primary advantage of USPS's current approach for addressing its 
delivery fleet needs is that it has allowed USPS to avoid a near-term, 
major capital expenditure that it cannot afford. However, this 
approach has a number of trade-offs. One trade-off is that USPS has 
incurred high costs to maintain some of its delivery vehicles. Our 
custom query of VMAS showed that, while most delivery vehicles (about 
77 percent) incurred less than $3,500 in annual maintenance costs in 
fiscal year 2010,[Footnote 46] about 3 percent (or 5,349) of these 
vehicles had more than $7,000 in maintenance costs. In addition, 662 
vehicles had more than $10,500 in maintenance costs in fiscal year 
2010[Footnote 47]--more than one-third the $31,000 per vehicle 
replacement cost USPS currently estimates (see figure 8). According to 
USPS officials, in most cases, they repair an LLV or FFV rather than 
replace it with a commercially available minivan because of the 
continuing need for right-hand-drive vehicles, which are not 
commercially available. 

Figure 8: Proportion of USPS's Delivery Vehicles in Each Maintenance 
Cost Range, Fiscal Year 2010: 

[Refer to PDF for image: pie-chart] 

Under $3,500: 76.5%; 
$3,500 to $6,999: 20.7%; 
$7,000 to $10,499: 2.4%; 
$10,500 and higher: 0.3%. 

Source: GAO analysis of USPS data. 

Note: The data in this figure are based on our custom query of VMAS. 

[End of figure] 

Another reason that some vehicles are incurring high maintenance costs 
is that USPS is replacing the frames of LLVs that have significantly 
corroded, especially in locations with severe winter weather, such as 
the Midwest. In 2008, USPS began requiring that the frames of all LLVs 
in high-corrosion locations be visually inspected and measured 
annually, using an ultrasonic device that determines the thickness of 
the frames at certain points. Frames with holes through the metal were 
to be replaced immediately, while frames with less than a desired 
thickness at certain key points were expected to be replaced within 6 
months. According to Vehicle Programs officials, at least 4,489 LLV 
frames have been replaced from fiscal years 2008 through 2010. 
Replacing a frame is relatively expensive, not only because of the 
cost of the frame but also because a replacement is labor-intensive, 
since every part of the vehicle must be removed and reinstalled (see 
figure 9). According to Vehicle Programs officials, it typically costs 
about $5,000 to replace an LLV frame. None of the other nonpostal 
fleet managers we spoke with have replaced their vehicles' frames, and 
some of these managers suggested that the need to do so is a key 
indication that it is time to replace--not repair--a vehicle. 

Figure 9: New LLV Frames Awaiting Installation (left), and an LLV 
Being Reassembled after a Frame Replacement (right), 2010: 

[Refer to PDF for image: 2 photographs] 

Source: GAO. 

[End of figure] 

Another Trade-off of Current Approach Is Increasing Unscheduled 
Maintenance Costs, Which Can Have Operational Impacts: 

In addition to its overall maintenance costs, USPS's unscheduled 
maintenance costs have increased steadily, according to data from its 
VMAS reports. Unscheduled maintenance can result in delays in mail 
delivery and operational costs, such as overtime expenses. To reduce 
operational costs, USPS, like other fleet operators, attempts to 
minimize unscheduled maintenance. USPS's goal is to ensure that no 
more than 20 percent of its total annual maintenance costs are for 
unscheduled maintenance. However, according to a September 30, 2010, 
VMAS report, about 31 percent of USPS's annual maintenance costs were 
for unscheduled maintenance--11 percentage points more than USPS's 
goal. Furthermore, USPS has not met its unscheduled maintenance goal 
in any of the last 6 fiscal years.[Footnote 48] USPS's unscheduled 
maintenance costs also are likely to be higher than the amounts 
reflected in VMAS because, according to headquarters officials and 
some vehicle maintenance facility managers we spoke with, nearly all 
of the 6 percent of maintenance costs that are currently not captured 
in VMAS are for unscheduled maintenance.[Footnote 49] Thus, for fiscal 
year 2010, USPS's unscheduled maintenance costs could have been as 
high as about 37 percent of its total maintenance costs. During our 
site visits, several local postal officials told us they are 
experiencing more operational issues due to vehicle breakdowns, which 
can lead to increased overtime costs. USPS could not provide us with 
the costs of these operational issues because USPS's time-keeping 
systems do not link costs such as overtime incurred by postal 
supervisors and letter carriers to vehicle breakdowns. We discussed 
the feasibility of capturing these costs with Vehicle Programs 
officials. They said that VMAS performance indicator reports track 
unscheduled maintenance, and management is aware of the operational 
impacts and costs. 

In addition to the increasing rate of unscheduled maintenance, we 
identified some instances of maintenance issues during our site 
visits. For example: 

* We saw two rusted and partially missing body mounts on an LLV in 
Florida, which was on a lift when we visited in October 2010. While 
the frame bolts, which hold the frame to the vehicle, were intact, the 
lower half of the body mounts and retaining washers were missing. A 
maintenance assistant at the site indicated that, given the severity 
of the rust (see figure 10), the problem could not have occurred in 
the 5 months since the LLV's last scheduled inspection in May 2010. 
Additionally, while we did not observe this issue, this individual 
told us that nearly all 31 LLVs at his post office had bald tires when 
he assumed the maintenance assistant position in 2009.[Footnote 50] 

Figure 10: Example of Rust in Lower Half of Body Mount at a Post 
Office in Florida, 2010: 

[Refer to PDF for image: 2 photographs] 

Source: GAO. 

[End of figure] 

* When we visited a vehicle maintenance facility in New York state, 
technicians were replacing two severely corroded LLV frames with holes 
through the metal. The manager of this facility informed us that 
frames in this condition (see figure 11) should have been replaced 
during a previous preventive maintenance inspection. According to the 
manager, this did not occur, possibly because the inspections were 
done by contractors who did not follow USPS's requirements for 
inspecting frames. According to the manager, the vast majority of the 
2,800 delivery vehicles at this vehicle maintenance facility are sent 
to contractors for maintenance because he has chosen to focus his 
facility's limited resources on servicing USPS-owned tractor trailers 
used for hauling mail. 

Figure 11: Rusted Frame with Holes Being Replaced in a USPS Vehicle 
Maintenance Facility in New York State, 2010: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

* Similarly, 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; instead, they 
said, facility personnel replace frames only when they have one or 
more holes through the metal. According to officials at this facility, 
given the state's severe winter weather, the facility has a large 
number of vehicles with thin frames. While these vehicles meet USPS's 
frame replacement requirements, officials at the maintenance facility 
told us that they do not have the resources (typically $5,000 per 
vehicle) to replace them all in the short term. 

Minivan Purchases Have Provided USPS with Needed Vehicles, but Have 
Also Decreased Standardization, Resulting in Operational and Other 
Challenges: 

USPS's current approach for dealing with its aging delivery fleet has 
significantly increased the number of left-hand-drive vehicles in the 
delivery fleet over time. Specifically, because USPS does not 
currently have the funds available to acquire new custom-built, right-
hand-drive vehicles, it now has 22,100 left-hand-drive minivans in its 
delivery fleet. According to Vehicle Programs officials and officials 
at two post offices that had a mix of minivans and right-hand-drive 
vehicles, minivans can pose a problem because, since they cannot be 
effectively used on the more than 50,000 delivery routes that require 
right-hand drive, they reduce USPS's operational flexibility. 
Furthermore, during our site visits, officials at several vehicle 
maintenance facilities stated that, unlike for LLVs and FFVs, USPS has 
encountered maintenance challenges for its minivans. According to 
these officials, maintaining the older minivans--some of which have 
met or exceeded their expected 10-year operating lives--has become 
increasingly difficult, and they are experiencing problems securing 
parts. According to Vehicle Programs officials, manufacturers 
typically produce parts for commercially available vehicles for 10 
years, and officials told us that USPS does not have sufficient 
numbers of minivans to maintain its own market for parts for 
subsequent years, as it does for the LLVs and FFVs. Consequently, some 
of the older minivans are being used as salvage for parts for 
operational vehicles (see figure 12). 

Figure 12: A Ford Windstar Minivan Being Repaired at a Postal Vehicle 
Maintenance Facility (left) and a Nonoperational Minivan Up on Blocks 
Being Used for Parts (right), 2010: 

[Refer to PDF for image: 2 photographs] 

Source: GAO. 

[End of figure] 

Other Trade-offs Include Delayed Improvements in Emissions, Fuel 
Efficiency, and Design: 

While new USPS delivery vehicles could potentially provide 
environmental benefits such as reduced emissions and increased fuel 
efficiency, it is not possible to quantify these benefits because USPS 
has not decided when, what type of vehicles and how many it may 
acquire, or how many old vehicles it may replace. Furthermore, such an 
analysis would depend on other factors, such as the relative extent to 
which USPS uses these new vehicles compared to the retired vehicles. 
Nevertheless, it is likely that new delivery vehicles would (1) be 
more fuel efficient than the LLVs and FFVs, and thus to some extent 
produce lower greenhouse gas emissions, and (2) meet more stringent 
federal light-duty emissions standards for carbon monoxide and other 
particulate matter. 

According to Vehicle Programs officials, USPS's current fleet approach 
also makes it more challenging and costly to incorporate design 
improvements into its fleet that could provide operational benefits. 
Such improvements could include design features that could increase 
letter carriers' comfort and safety, such as features designed to 
reduce blind spots when the carriers merge from the right side of the 
road.[Footnote 51] 

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 Funding a 
Delivery Fleet Replacement: 

USPS's financial condition poses a significant barrier to its ability 
to fund a major acquisition of its delivery fleet[Footnote 52]--a cost 
USPS recently estimated would be about $5.8 billion to replace about 
185,000 delivery vehicles with new gasoline-powered custom-built 
vehicles, at a cost of about $31,000 per vehicle (in 2011 dollars). 
[Footnote 53] As we have reported, continuing operational losses have 
constrained funding for USPS's capital investments.[Footnote 54] 
USPS's annual purchases for property and equipment have steadily 
declined over the past 4 years, from $2.7 billion in fiscal year 2007 
to $1.4 billion in fiscal year 2010. For fiscal year 2011, USPS 
budgeted $1.3 billion for capital investments and reported that 
expenditures for these investments will continue to decline as USPS 
seeks to conserve its cash.[Footnote 55] USPS projects an end-of-year 
cash shortfall of $2.7 billion for fiscal year 2011, meaning that it 
does not expect to have sufficient cash to meet all of its financial 
obligations, jeopardizing its operations. At the same time, while 
federal capital planning principles emphasize the importance of, among 
other actions, evaluating the capacity of existing assets and 
identifying alternatives to bridge the gap between current and needed 
capacities, as discussed previously, USPS has not developed a strategy 
for how and when it will invest in a major acquisition of new delivery 
vehicles. 

In the past, USPS funded major capital investments through a 
combination of (1) net income from its earnings from postage and other 
postal products and services, (2) rate increases designed to increase 
its income, or (3) debt financing. However, these methods are likely 
to be inadequate to finance a major delivery fleet replacement in the 
foreseeable future, for the following reasons: 

* Net income. Although USPS can retain earnings that could be used to 
finance a major acquisition of delivery vehicles, such earnings appear 
unlikely because it projects a $6.4 billion loss for fiscal year 2011 
and continuing large financial losses for the foreseeable future. USPS 
expects revenues to stagnate in the next decade with losses due to 
continued declines in mail volumes--particularly for profitable First- 
Class Mail, its core product. This means that USPS can no longer rely, 
as it once did, on growth in mail volumes to help cover its costs. 
Meanwhile, USPS's progress in reducing its costs through rightsizing 
its operations and realigning its workforce is limited by a 
combination of stakeholder resistance and statutory requirements, as 
we have previously reported.[Footnote 56] 

* Rate increases. Rate increases also appear unlikely to generate 
sufficient revenues to fund a major delivery fleet replacement because 
under the Postal Accountability and Enhancement Act of 2006,[Footnote 
57] such increases are now generally limited by an inflation-based 
price cap on USPS's market-dominant products--products that generate 
close to 90 percent of its revenue.[Footnote 58] Moreover, even if the 
price cap did not constrain rate increases, large rate increases could 
be self-defeating because they could potentially trigger large, 
permanent declines in mail volumes. 

* Debt financing. USPS's outstanding debt at the end of fiscal year 
2010 was $12 billion, and it expects to use the remaining $3 billion 
of its $15 billion in borrowing authority in fiscal year 2011 to fund 
non-vehicle-related expenditures. 

USPS and Others See Little Potential to Finance a Fleet Replacement 
through Grants or Partnerships, Including Joint Procurements: 

By statute, USPS is generally not subject to federal contracting and 
budgeting laws.[Footnote 59] As a result, USPS officials told us that 
USPS has the authority to accept grant funding and to enter into joint 
procurements and other partnerships to assist in a major delivery 
fleet replacement. However, USPS's use of federal or state grants 
could have public policy implications, because USPS is supposed to be 
self-sustaining and to cover its operating costs with post-related 
revenues. In addition, fair competition issues or concerns about 
sharing sensitive procurement information could arise if USPS actively 
pursued a partnership or joint procurement. 

USPS and DOE officials stated that there are few opportunities for 
USPS to receive federal grant funding to help it purchase vehicles, in 
part because federal grants are typically targeted to state, local, or 
city governments, or to nonprofit or educational organizations. In the 
past, USPS has obtained state or local grants for limited numbers of 
alternative fuel vehicles or related infrastructure, and in one case 
it received some financial assistance from DOE. Specifically, in 1999, 
USPS partnered with a number of entities, including the California 
South Coast Air Quality Management District, DOE, and others, on an 
agreement formed to reduce air pollution in California. This agreement 
included about $9 million in funding subsidies from these entities to 
purchase 500 electric vehicles from the Ford Motor Company (Ford) as 
well as to install charging stations for these vehicles.[Footnote 60] 
USPS paid an additional $11.6 million to Ford for these vehicles. 
According to USPS officials, the $9 million in outside funding--a 
small fraction of the estimated $5.8 billion to replace the largest 
portion of its delivery fleet--is the largest amount of outside 
funding USPS has received for vehicle acquisitions. The project was 
terminated after about 2 years because of battery problems, as 
discussed previously in this report. 

Senior USPS officials also stated that there is little likelihood that 
a joint procurement arrangement could help finance a delivery fleet 
replacement. According to USPS, UPS, and FedEx Express officials, a 
primary barrier to a joint procurement is USPS's need for customized, 
right-hand-drive delivery vehicles similar in size to the LLV and FFV 
(UPS and FedEx Express typically use larger vehicles and do not need 
right-hand-drive capability). Officials from DOE, private companies 
related to vehicle manufacturing and fuel, and an environmental 
organization that works on vehicle fleet issues confirmed USPS's 
assessment, indicating that it is unlikely that USPS would be able to 
obtain financial help through existing mechanisms for acquiring new 
delivery vehicles. USPS officials also stated that they are not 
actively pursuing grants, joint acquisitions, or other partnership 
agreements. 

Finally, according to a senior USPS attorney, it is unlikely that it 
would be feasible for USPS to enter into an energy savings performance 
contract to help finance a major delivery fleet acquisition. Such 
contracts are used to privately finance improvements in energy 
efficiency.[Footnote 61] Under an energy savings performance contract, 
federal agencies enter into a long-term contract (up to 25 years) with 
a private energy services company under which the company installs 
energy-efficiency improvements financed from private funds. The agency 
then repays the company out of the estimated annual savings expected 
to be generated from the improvements. USPS officials stated that the 
agency used this type of financing for building improvements and has 
considered their applicability to a major fleet acquisition. However, 
USPS officials said that USPS has largely stopped using these 
contracts.[Footnote 62] Furthermore, 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. 

Congressional Actions to Improve USPS's Financial Condition Could Help 
USPS Fund a Delivery Fleet Replacement but Present Difficult Policy 
Issues and Trade-offs: 

In April 2010, we reported that Congress and USPS need to reach 
agreement on a package of actions so that USPS can become financially 
viable, and we recommended that in doing so, Congress consider 
providing financial relief, such as by revising its retiree health 
benefit funding and requiring any binding arbitration to take USPS's 
financial condition into account, as well as consider all cost cutting 
options.[Footnote 63] Agreeing on a package of actions will involve 
difficult public policy issues and trade-offs. However, depending on 
the specific actions adopted, USPS's follow-up, and the results, such 
an agreement could help enable the funding of a major acquisition of 
delivery vehicles. 

Although USPS is authorized to request appropriations for costs 
related to "public service,"[Footnote 64] it has not received an 
appropriation for operational costs since fiscal year 1982. USPS 
receives annual appropriations to fund statutorily required mail 
services at free or reduced rates, such as free mail for the blind and 
overseas voting, but these funds represent a very small percentage of 
its revenues.[Footnote 65] However, USPS has benefited from taxpayer 
funding in special circumstances. For example, Congress appropriated 
$587 million in 2002 and $507 million in 2004 to help pay for safety 
measures after letters containing anthrax contaminated the mail in 
2001. 

Providing appropriations would be another alternative to fund the 
multi-billion-dollar replacement of USPS's delivery fleet.[Footnote 
66] Such appropriations could ensure the future viability of USPS's 
delivery fleet, and--if alternative fuel vehicles are specified by 
legislation or chosen by USPS--could potentially yield additional 
benefits, particularly for manufacturers and suppliers of alternative 
fuel vehicles. In addition, regardless of the technology selected, new 
vehicles likely would be more fuel efficient and produce lower 
environmental emissions than USPS's current vehicles. However, this 
option also has difficult public policy trade-offs and would raise 
questions about whether the economic benefits would be sufficient to 
justify the costs. For example, appropriations would raise the federal 
budget deficit, would reduce incentives for USPS to be self-
supporting, and could further limit USPS's flexibility in determining 
the best vehicles for its fleet. 

Conclusions: 

USPS faces severe financial challenges and, for the foreseeable 
future, cannot afford to replace or refurbish a large portion of its 
aging fleet. USPS's March 2010, 10-year action plan for addressing its 
financial challenges did not (1) describe a strategy for addressing 
its delivery fleet needs or (2) identify how the operational changes 
proposed in this plan would affect its future fleet needs. 

The trade-offs of continuing to maintain USPS's delivery fleet until 
USPS decides how to address its longer term delivery fleet needs are 
numerous and include somewhat higher maintenance costs overall. For 
each of 662 delivery vehicles in fiscal year 2010, USPS incurred 
maintenance costs of more than $10,500--more than one-third the 
$31,000 per-vehicle replacement cost USPS estimates as of 2011. 
Furthermore, these high vehicle costs were experienced in each of the 
four prior fiscal years that we analyzed. These costs largely arise 
from USPS's need for right-hand-drive vehicles at a time when it 
cannot purchase these vehicles, yet remains contractually required to 
supply thousands of them to rural letter carriers. Related to this, 
delays in acquiring new delivery vehicles have caused USPS to replace 
about 4,500 thin and, in some cases, severely corroded LLV vehicle 
frames in fiscal years 2008 through 2010--at a cost of $5,000 per 
vehicle. If not for the critical need for right-hand-drive vehicles, 
the need to replace these frames may have caused USPS to replace--not 
repair--them. USPS's approach also has resulted in increasing 
unscheduled maintenance costs, which create operational difficulties. 
Finally, delays in acquiring custom-built, right-hand-drive vehicles 
have increased the number of left-hand-drive vehicles in the delivery 
fleet by more than 19,000 since 2006, even though these vehicles 
cannot effectively operate on more than a quarter of USPS's delivery 
routes. 

Despite these operational impacts, USPS's approach of continued 
maintenance has been reasonable given its pressing need to defer an 
estimated $5.8 billion capital outlay for a major vehicle replacement 
or a major refurbishment, estimated at $3.5 billion in 2005. However, 
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. Consequently, USPS must develop 
a comprehensive strategy for dealing with this inevitability. 

As we have reported, 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, including the 
inevitable replacement or refurbishment, of its delivery 
fleet.[Footnote 67] 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. 

Recommendation for Executive Action: 

Given USPS's need to ensure that its delivery fleet remains 
operationally viable and maintain its legal mandate to purchase 
alternative fuel vehicles and use alternative fuel in them, we 
recommend that the Postmaster General develop a strategy and timeline 
for addressing USPS's delivery fleet needs. This effort should address: 

* the effects of USPS's planned operational changes and continuing 
changes in customers' use of the mail on future delivery fleet 
requirements; 

* the range of strategic options available (including continuing to 
maintain, not replace, its fleet), as well as the costs and time 
frames for these options; 

* an analysis of any safety consequences associated with extending the 
vehicles' operational lives; and: 

* alternative ways to comply with federal fleet requirements, 
including an analysis of how USPS can best meet these requirements, 
given its budget constraints. 

Agency Comments: 

USPS provided written comments on a draft of this report by letter 
dated April 13, 2011. These comments are summarized below and are 
reprinted in appendix III. USPS agreed with our findings and 
recommendation to develop a strategy and timeline for addressing its 
delivery fleet needs. In commenting on our recommendation, USPS stated 
that it is developing a strategy to address the immediate and long-
term needs of its delivery fleet, and that it planned to complete the 
strategy and timeline by the end of December 2011. USPS also stated 
that, while many alternatives exist for future delivery vehicles, 
ultimately, operational requirements and the total cost of ownership-- 
including investment costs, infrastructure, life cycle maintenance, 
and support costs--will be the drivers behind any technology selection 
decision. In addition, USPS emphasized that given its current 
financial condition, the availability of capital funds also will be a 
primary factor in any investment decision. USPS also provided minor 
technical comments via email, which we incorporated as appropriate. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to appropriate 
congressional committees and USPS. We will also make copies available 
to others on request. In addition, the report will be available at no 
charge on the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at herrp@gao.gov or (202) 512-2834. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Key contributors to this report are 
listed in appendix IV. 

Signed by: 

Phillip Herr: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

In response to interest in issues related to the United States Postal 
Service's (USPS) vehicle fleet, the objectives of this report were to 
answer the following key questions: (1) What is the profile of USPS's 
delivery fleet? (2) How has USPS responded to requirements for 
alternative fuel vehicles, what experiences has it had with 
alternative fuel vehicles, and what has it learned from its 
experiences? (3) What, if any, approach has USPS adopted to address 
its delivery fleet needs, and what are the trade-offs of this 
approach? (4) What options exist to help USPS fund a major acquisition 
of delivery vehicles? 

The following sections describe the procedures we undertook to answer 
these questions. In addition, we conducted background research to 
inform our review. We reviewed prior GAO reports, including our work 
on USPS's financial condition and options Congress could consider to 
address USPS's financial condition; federal vehicle fleets; 
alternative fuel vehicles; capital planning; internal controls; and 
energy savings performance contracts. We analyzed financial and 
operating information from USPS, including its annual reports, audited 
financial reports, 10-year action plan, strategic sustainability 
performance plan, contractual obligation to provide right-hand-drive 
vehicles to rural carriers, and fleet management handbook. We reviewed 
analyses of USPS's fleet conducted by USPS officials, private 
consultants to USPS, and the USPS Office of Inspector General. In 
addition, we reviewed documents prepared by the Department of Energy 
(DOE) and the General Services Administration on issues related to 
federal vehicle fleets as well as presentations and reports provided 
at an annual federal fleet conference and at monthly meetings of 
federal fleet managers. We reviewed USPS and DOE data on the number of 
waivers USPS applied for and received exempting it from fueling its 
alternative fuel vehicles with alternative fuel. Furthermore, we 
reviewed federal legislation that establishes requirements related to 
federal fleets, including the Energy Policy Act of 1992, the Energy 
Policy Act of 2005, the Energy Independence and Security Act of 2007, 
and the National Defense Authorization Act of 2008. In addition, we 
reviewed executive orders related to federal vehicle fleets. 

Analysis of Data from USPS on Its Vehicle Fleet: 

To determine the profile of USPS's delivery fleet, the fleet's 
maintenance costs, and the trade-offs of the agency's approach for 
addressing its delivery fleet needs, we obtained and analyzed data 
from a custom query of USPS's Vehicle Management Accounting System 
(VMAS), the database the agency uses to manage its vehicle fleet. We 
assessed the reliability of the data by: 

* performing electronic testing and visual review of data elements for 
obvious errors and inconsistencies, 

* reviewing reports related to VMAS, and: 

* interviewing agency officials knowledgeable about VMAS system 
controls and vehicle data procedures. 

Through discussions with knowledgeable USPS and USPS Office of 
Inspector General officials, we learned that USPS staff enter data 
manually into VMAS and, as a result, some contractor costs for 
maintenance are not entered into VMAS, which has the effect of 
understating USPS's vehicle maintenance costs in VMAS. USPS and USPS 
Office of Inspector General officials agreed that manual data entry is 
a major limitation of VMAS. 

To identify the contractor costs that were not reported in VMAS, and 
were therefore missing from our custom query of this database, we 
compared the total contractor costs reported in VMAS with the total 
contractor costs reported in another USPS data system, the Enterprise 
Data Warehouse system. According to USPS finance officials, the 
Enterprise Data Warehouse captures data from accounts payable, feeds 
into the general ledger, and is used to supply information to the 
financial reporting system USPS uses for its audited financial 
statements. Thus, according to these officials, it provides the most 
reliable information available on USPS's costs. To assess the 
reliability of the Electronic Data Warehouse's data, we (1) 
interviewed officials knowledgeable about the data and (2) compared 
our results to those of the USPS Office of Inspector General, which 
had previously reported on discrepancies between data in the 
Electronic Data Warehouse and VMAS. Based on this assessment, we 
determined that the VMAS data were sufficiently reliable for the 
purposes of this report, as long as we clearly noted the percentage of 
maintenance costs missing from VMAS as determined by comparing the 
total maintenance costs recorded in VMAS with the total maintenance 
costs recorded in the Electronic Data Warehouse. 

Using a custom query, we obtained VMAS data for all USPS vehicles for 
fiscal years 2006 through 2010, including the vehicles' annual 
maintenance costs. To analyze information on the delivery fleet, we 
defined this fleet as all vehicles with one of eight function codes 
based on the advice of knowledgeable USPS officials.[Footnote 68] USPS 
officials agreed that the universe established through this process 
resulted in an accurate representation of its delivery fleet. 

In addition to analyzing the VMAS data we obtained through a custom 
query, we reviewed reports generated by VMAS (VMAS reports) and other 
USPS documentation, including information on the number of alternative 
fuel vehicles in USPS's delivery fleet. USPS officials stated that 
they typically use VMAS reports to manage the fleet. Because these 
reports categorize vehicles by make and model rather than by function, 
the total universe of delivery vehicles represented in these reports 
is slightly different from the universe we obtained through our 
analysis of the custom query and, thus, the numbers cannot be directly 
compared. USPS officials recommended that we use the information from 
the agency's VMAS reports, rather than our custom query, to determine 
the number of delivery vehicles in past fiscal years, because the 
accuracy of the VMAS reports has been tested over time whereas the 
custom query was a new capability. Consequently, we used data from the 
VMAS reports to analyze changes in the numbers of delivery vehicles 
for fiscal years 2006 through 2010. On the other hand, Vehicle 
Programs officials agreed that the information we obtained through the 
custom query was sufficiently reliable to develop average per vehicle 
maintenance costs over the past 5 fiscal years and to analyze the 
number and maintenance costs of delivery vehicles in fiscal year 2010. 

Using both the data obtained through our custom query and the data 
provided by USPS from its VMAS reports, we developed a profile of 
USPS's delivery fleet from fiscal years 2006 through 2010, including 
maintenance costs. To analyze maintenance costs, we excluded costs 
related to fuel and accidents. To exclude costs related to accidents, 
we obtained information on the number and causes of vehicle accidents 
from USPS's accident reporting database for fiscal years 2006 through 
2010. We assessed the reliability of these data by (1) performing 
electronic testing and visual review of data elements for errors, (2) 
reviewing existing USPS information about the accident reporting 
database, and (3) interviewing agency officials knowledgeable about 
the data. We determined that these data were sufficiently reliable for 
the purposes of this report. Because USPS's accident reporting 
database and VMAS use unique vehicle identification numbers to 
identify each vehicle, we were able to cross match these numbers in 
the two databases to identify vehicle maintenance costs due to 
accidents. We subtracted these costs from USPS's total maintenance 
costs to obtain the total maintenance costs not related to accidents, 
as reported in VMAS. 

Finally, we worked with USPS Finance and Vehicle Programs officials to 
get an agency estimate of the total costs attributable to delivery 
fleet maintenance and fuel in fiscal year 2010. USPS officials used a 
combination of VMAS reports and data in the Enterprise Data Warehouse 
to develop this estimate, which includes all direct costs and some 
indirect costs related to the delivery fleet's maintenance and fuel 
use in fiscal year 2010.[Footnote 69] We compared this estimate with 
cost summaries provided by USPS Finance officials and other USPS 
documentation supporting amounts reported in the agency's audited 
financial statements for fiscal year 2010 and determined that the 
agency's estimate of $1.05 billion in total maintenance and fuel costs 
for its delivery fleet in fiscal year 2010 was reasonable. 

USPS's estimate of $1.05 billion includes about $750 million in 
identifiable direct and indirect maintenance costs, or a total of 
about $3,900 in maintenance-related costs per vehicle.[Footnote 70] 
Our custom query of VMAS showed about $497 million in direct 
maintenance costs in fiscal year 2010, or about $2,600 per vehicle. 
Several factors account for the difference in costs between the 
agency's estimate and the results of our custom query. First, VMAS 
does not capture indirect maintenance costs and, instead, tracks only 
costs that can be directly associated with the vehicles' maintenance. 
Thus, the lower maintenance cost figure produced from our analysis 
does not include costs that can not be specifically allocated to 
maintenance on a delivery vehicle. For example, VMAS includes costs 
for parts and direct labor to inspect a vehicle and replace brakes and 
other equipment, but does not include supervisory and management labor 
costs, or the benefits it pays to these employees.[Footnote 71] 
Second, while VMAS includes a large portion of its direct labor costs 
for technicians who service delivery vehicles, unlike USPS's estimate, 
VMAS does not account for these employees' full labor costs.[Footnote 
72] Third, according to USPS data, about 6 percent of USPS's total 
maintenance costs--all due to maintenance performed by contractors--
are not entered into VMAS,[Footnote 73] but are included in the 
agency's $750 million estimate of total maintenance costs for fiscal 
year 2010. Finally, while costs related to accidents are contained in 
USPS's total cost estimate, we removed these costs from our analysis 
of maintenance costs. 

Site Visits: 

To inform our understanding of USPS's delivery fleet profile, its 
experiences with alternative fuel vehicles, and its approach to its 
aging fleet, we conducted site visits to three regions: Minneapolis 
and St. Paul, Minnesota; New York City, New York; and southern 
Florida. We judgmentally selected these regions because they are 
geographically diverse and their climates vary--two of the three 
regions experience severe winter weather. In addition, the three 
regions use different types of alternative fuel vehicles and a variety 
of gasoline-fueled delivery vehicles. During each site visit, we 
visited a combination of vehicle maintenance facilities and post 
offices. We toured facilities, observed the maintenance activities 
occurring on vehicles at the facilities, and interviewed managers, 
supervisors, mechanical technicians, and carriers about their 
experiences with the delivery fleet. Finally, while we did not visit 
the vehicle maintenance facility in Corpus Christi, Texas, we selected 
this site for a telephone interview because, according to Vehicle 
Programs officials, it is one of the few areas where compressed 
natural gas is still being used in delivery vehicles that have been 
converted to use this fuel. 

Interviews: 

To inform all of our objectives, we interviewed a wide range of USPS 
officials as well as officials from DOE, General Services 
Administration, and the Postal Regulatory Commission. In addition, we 
interviewed representatives from 22 nonfederal entities, including 
alternative fuel associations, automobile manufacturers and 
associations, environmental groups, companies that operate large 
delivery fleets, and consulting firms with experience evaluating 
vehicle fleets. To identify appropriate parties to interview, we spoke 
with knowledgeable GAO staff, USPS officials, and others about which 
entities would have information most relevant to our objectives. Table 
4 identifies the nonfederal organizations whose representatives we 
interviewed.[Footnote 74] 

Table 4: Nonfederal Organizations Interviewed: 

Organizations: 

Association of International Automobile Manufacturers.
Azure Dynamics.
Booz Allen Hamilton.
Clean Energy Fuels Corporation.
Chrysler[A].
Eaton Corporation.
Environmental Defense Fund.
Electric Drive Transportation Association.
FedEx Express.
Ford Motor Company.
General Motors.
Growth Energy.
International Council on Clean Transportation.
Mercury Associates.
National Rural Letter Carriers' Association.
Natural Gas Vehicles for America.
Nissan Motor Company.
Pacific Gas and Electric Company.
San Diego Gas and Electric.
Southern California Edison.
United Parcel Service.
U.S. Fuel Cell Council. 

Source: GAO. 

[A] Chrysler responded to questions via e-mail, not an interview. 

[End of table] 

We conducted this performance audit from February 2010 to May 2011 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 audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: USPS's Experiences with Non-E85-Capable Alternative Fuel 
Vehicles: 

USPS has had the following experiences with alternative fuel vehicles 
(other then E85-capable vehicles). 

Compressed Natural Gas Vehicles: 

USPS currently has more compressed-natural-gas-capable vehicles than 
any other kind of alternative fuel vehicle (except E85-capable 
vehicles), but its use of these vehicles has greatly diminished in 
recent years. Beginning in 1990, USPS began converting long-life 
vehicles (LLV) in selected locations to run on both compressed natural 
gas and gasoline. USPS converted about 7,300 LLVs over 6 years at a 
cost of about $2,000 each in the 1990s. Local utility companies, DOE's 
Clean Cities program, and others installed the fueling infrastructure. 
According to a Vehicle Programs official, only in limited instances 
did USPS actually fund any portion of these costs. However, because of 
parts supply challenges, limited fuel availability, and expiring 
compressed natural gas fuel tanks,[Footnote 75] USPS removed this 
capability from all but about 3,400 of these LLVs. About 1,000 of 
these LLVs are currently running on compressed natural gas. 

According to USPS, 42 of the approximately 1,000 compressed-natural- 
gas-capable vehicles are being operated in Corpus Christi, Texas, 
because the city created the necessary fueling infrastructure and 
helped pay USPS's fuel costs. For example, according to a local 
vehicle maintenance facility official, the city built a gas line 
connecting a nearby compressed natural gas station to the city's post 
office and provided the post office with $400 worth of free compressed 
natural gas (about 200 days of fuel, according to a Vehicle Programs 
official) for each of the vehicles there. According to an official at 
the local vehicle maintenance facility, these vehicles have been 
reliable and have reduced USPS's fuel costs because (1) the city 
provided free fuel and (2) compressed natural is cheaper than gasoline 
for those vehicles that have already used their supply of free fuel. 
According to this official, because of USPS's fuel cost savings, as of 
January 2011, the official was in the process of swapping 37 of the 
facility's gasoline-only LLVs for compressed-natural-gas-capable LLVs 
(from other USPS locations) increasing the number of LLVs operating on 
this fuel to a total of 79 vehicles at two post offices in Corpus 
Christi, Texas. In contrast, USPS's experience with compressed natural 
gas in Huntington, New York, highlighted challenges that led USPS to 
abandon its use of compressed natural gas in this area. In the mid-
1990s, USPS converted all of the LLVs at the Huntington post office to 
run on compressed natural gas and installed associated fueling 
infrastructure (one pump per vehicle). However, within 6 months of 
using these vehicles, USPS experienced vehicle reliability problems, 
two of the three manufacturers of vehicle conversion kits went out of 
business, and USPS experienced difficulties in obtaining parts needed 
for maintenance and repairs. As a result the fueling infrastructure is 
unused (see figure 13). While Vehicle Programs officials recognize 
that the use of compressed natural gas has been successful in some 
parts of Texas, they stated that they see limited potential for USPS's 
future use of this fuel in delivery vehicles, largely because the 
natural gas infrastructure is not available in much of the United 
States and parts supplies remain uncertain. 

Figure 13: Example of an Unused Compressed Natural Gas Fuel Pump at a 
Post Office in Huntington, New York, 2010: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

Propane Vehicles: 

As of September 30, 2010, USPS operated 34 LLVs in Key West, Florida, 
that are capable of running on propane in addition to gasoline. 
According to USPS local officials, these vehicles have been well 
received by the community because of their reduced emissions and USPS 
has faced few challenges operating and fueling the vehicles. However, 
according to USPS officials, USPS did not expand its use of propane 
because of the lack of propane infrastructure. 

Plug-in Electric Vehicles: 

USPS has been using limited numbers of plug-in electric vehicles for 
many years. In 1999, for example, USPS entered into a partnership with 
DOE and several state, regional, and local agencies in California and 
New York state and invested $11.6 million to purchase 500 plug-in 
electric vehicles from Ford. However, Ford recalled the vehicles about 
2 years later because the vehicle battery company stopped 
manufacturing the batteries.[Footnote 76] As of September 30, 2010, 
USPS operated about 30 plug-in electric 2-ton vehicles in New York 
City, New York, as well as 12 T-3 plug-in electric personal mobility 
delivery vehicles that USPS purchased in 2008 at an average cost of 
about $11,200 in 2010 dollars (see figure 14). While USPS reports that 
the T-3 vehicles cost less than 5 cents per mile to operate, 
operational challenges, such as letter carrier exposure to the 
elements, a tendency to stall in the rain, and low operating speed 
limit their applicability on USPS routes. Furthermore, USPS is 
currently testing four neighborhood electric vehicles[Footnote 77] and 
recently initiated a program called the Electric LLV Program under 
which five suppliers are converting gasoline LLVs to plug-in electric 
LLVs that USPS intends to use for deliveries.[Footnote 78] 

Figure 14: T-3 Electric Personal Mobility Delivery Vehicle, 2010: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

Conventional Hybrid (Hybrid) Vehicles: 

When we conducted our site visits, USPS's use of hybrid vehicles was 
limited to 12 vehicles, including two 2-ton hybrid trucks[Footnote 79] 
in New York state that it had received in 2008 and 2009 at no cost to 
USPS because the manufacturers agreed to provide these vehicles to 
USPS in order to obtain information on their use on the delivery cycle 
(see figure 15).[Footnote 80] In addition, USPS had 10 Ford Escape 
hybrids in California that it purchased in 2005 at an average cost of 
about $27,700 in 2010 dollars.[Footnote 81] However, hybrid vehicles 
typically have much higher up-front costs than the nonhybrid version 
of the same vehicle--about $9,000 more in the case of a 2011 Ford 
Escape hybrid.[Footnote 82] As a result, USPS officials said that the 
increased costs that likely would be associated with acquiring a 
custom-built hybrid vehicle (compared with a comparable nonhybrid 
vehicle) would, in all likelihood, far outweigh the potential fuel 
cost savings given a delivery vehicle's low annual mileage. 

Figure 15: One of Two Hybrid 2-Ton Delivery Vehicles in Huntington, 
New York, 2010: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

Hydrogen Fuel Cell Vehicles: 

USPS is currently piloting two hydrogen fuel cell Chevrolet Equinox 
vehicles on delivery routes. Both vehicles were provided by General 
Motors in 2008 with funding from DOE. As part of the pilot program, 
USPS is assessing the vehicles' potential usefulness as delivery 
vehicles. According to USPS, the two vehicles are meeting the demands 
of USPS's daily operational drive cycle as delivery vehicles. However, 
according to Vehicle Programs officials, hydrogen fuel cell technology 
is in the early stages of its development and, consequently, it likely 
will be a number of years before such vehicles are available in large 
quantities. 

[End of section] 

Appendix III: Comments from the United States Postal Service: 

United States Postal Service: 
Dean J. Granholm: 
Vice President: 
Delivery And Post Office Operations: 
475 L'Enfant Plaza SW: 
Room 7017: 
Washington, DC 20260-7017: 
202-268-6500: 
FAX: 202-268-3831: 
[hyperlink, http://www.usps.com] 

April 13, 2011: 

Mr. Philip Herr: 
Director, Physical Infrastructure Issues: 
United States Government Accounting Office: 
411 G Street, N.W. 
Washington, DC 20548-0002: 

Dear Mr. Herr, 

We are writing to express the comments of the U.S. Postal Service 
(USPS) concerning the draft report of the United States Government 
Accountability Office (GAO) to the Senate Committee on Homeland 
Security and Governmental Affairs and the Senate Subcommittee on 
Federal Financial Management, Government Information, Federal 
Services, and International Security, entitled, "Strategy Needed to 
Address Aging Delivery Fleet." We request that our comments be 
included as an Appendix to the Report. 

We would like to commend you and your team on their professional and 
thorough approach to this audit on the status of our delivery fleet. 
In general, we agree with the findings of this report. 

The USPS travels over 1.2 billion miles per year to provide a trusted, 
affordable mail service to over 150 million addresses across our 
nation. Our vehicle fleet is critical to the successful completion of
our mission. Our fleet preventive maintenance program has been 
instrumental in allowing us to sustain all of the vehicles in our 
delivery fleet, including the 20 year old Long Life Vehicles, in a 
safe, working condition. We are now taking the next steps to gather 
data on how best to improve our fleet for the future.
The USPS has a long history of being a leader in alternative fuel 
vehicle use and we continue to maintain a strong alternative fuel 
vehicle testing program. Not only do we maintain the largest civilian 
fleet, we also have one of the largest civilian alternative fuel 
fleets. We continue to explore new technologies that offer promise for 
our fleet. We work with major vehicle manufacturers, industry experts, 
state and Federal governmental agencies to test vehicle technology 
innovations in our operations at the lowest cost possible to the 
Postal Service. 

Many alternatives exist for the Postal vehicle of the future; however, 
ultimately operational requirements and total cost of ownership 
(including investment costs, infrastructure, life cycle maintenance 
and support costs) will be the drivers behind any technology selection 
decision. As you correctly pointed out in your report, given our 
current financial conditions, the availability of capital funds will 
also be a primary factor in any investment decision. 

We concur with your recommendation and we are currently in the process 
of developing a strategy to address immediate and long term needs of 
our light duty delivery fleet. We will complete the long term strategy 
and timeline addressing the points in your recommendation by the end 
of December 2011. 

Thank you for your continued interest in the Postal Service. 

Signed by: 

Dean J. Granholm: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Phillip Herr, (202) 512-2834 or herrp@gao.gov: 

Staff Acknowledgments: 

In addition to the contact above, Kathleen Turner (Assistant 
Director), Nicola Clifford, Bess Eisenstadt, Laura Erion, Tim Guinane, 
Kenneth John, Alexander Lawrence, Joshua Ormond, Robert Owens, Matthew 
Rosenberg, Kelly Rubin, Karla Springer, James Ungvarsky, Crystal 
Wesco, and Alwynne Wilbur made key contributions to this report. 

[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] 39 U.S.C. §§ 101(a), 403(a). 

[4] Pub. L. No. 102-486, § 303, 106 Stat. 2766 (Oct. 24, 1992). 

[5] 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). 

[6] See GAO, High Risk Series: Restructuring the U.S. Postal Service 
to Achieve Sustainable Financial Viability, [hyperlink, 
http://www.gao.gov/products/GAO-09-937SP] (Washington, D.C.: July 28, 
2009). USPS's financial condition and outlook remained on our high-
risk list in 2011. See GAO, High Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: Feb. 16, 
2011). 

[7] [hyperlink, http://www.gao.gov/products/GAO-10-455]. 

[8] As noted, USPS also delivers mail to another 20 million addresses 
as part of its post office box service. 

[9] The current collective bargaining agreement between USPS and the 
National Rural Letter Carriers Association expired on November 20, 
2010. At the conclusion of our review, USPS and the association were 
in negotiations. 

[10] According to USPS officials, while a small number of these 
vehicles (minivans) are used for mail delivery, the majority are used 
for administrative purposes such as sales, accident investigation, and 
Office of Inspector General operations. 

[11] From fiscal year 2009, when USPS implemented a route reduction 
program, through fiscal year 2010, the total number of city and rural 
routes decreased by 13,423. 

[12] Pub. L. No. 109-58, § 701, 119 Stat. 594 (Aug. 8, 2005). 

[13] Gasoline is distilled from petroleum. We used the terms 
"gasoline" and "petroleum" interchangeably throughout this report. 

[14] Area offices are designated as Capital Metro, Eastern, Great 
Lakes, Northeast, Pacific, Southwest, and Western. 

[15] Pub. L. No. 110-140, § 142, 121 Stat. 492 (Dec. 19, 2007). 

[16] These data are from year-end reports for fiscal years 2006 to 
2010 that include one-half ton vehicles and smaller vehicles that 
comprise the vast majority of USPS's delivery fleet. Because vehicles 
are categorized somewhat differently in VMAS reports than in our 
custom query, the quantity of vehicles between the two data sources 
cannot be compared directly. 

[17] Specifically, in fiscal year 1996, EPAct 1992 required that 25 
percent of all federal fleet acquisitions be for alternative fuel 
vehicles. The legislation increased the percentage of alternative fuel 
vehicles required for acquisitions in each subsequent year until 
fiscal year 1999, when the 75 percent acquisition requirement was 
reached. Pub. L. No. 102-486, § 303 (b). 

[18] For example, security or safety screens were installed in the 
cargo area, the driver compartment and passenger seats were removed, 
and the vehicles were painted to identify them as USPS vehicles. 

[19] Vehicle Programs personnel told us that they perform a lease- 
versus-buy analysis for each of USPS's major vehicle acquisitions. 

[20] As discussed earlier, LLVs, which make up the majority of USPS's 
fleet, were acquired from 1987 through 1994, before EPAct 1992's light-
duty vehicle acquisition percentage requirements went into effect in 
fiscal year 1996. 

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

[22] According to Vehicle Programs officials, redeploying vehicles 
from 1,000 to 1,500 miles costs less--about $800 to $1,000 per move. 

[23] The number of E85-capable vehicles discussed here (40,072) does 
not agree with the number of E85-capable vehicles discussed previously 
in this report (39,149) in part because the larger number includes E85-
capable vehicles used for administrative purposes. USPS applies for 
E85 waivers for its entire fleet, not specifically for those vehicles 
used for deliveries. Given time constraints and the small percentage 
of USPS's entire E85-capable fleet that consists of administrative 
vehicles (about 2 percent), we did not attempt to identify the number 
of waivers received exclusively for the E85-capable delivery fleet. 
According to USPS data, USPS applied for 25,424 waivers and received 
21,495 for fiscal year 2010. While USPS could have appealed the 3,929 
waiver requests that were not approved by DOE, it did not. 

[24] In a July 2009 memorandum, USPS asked its delivery program 
managers to collect information about ethanol fuel prices and driving 
distances from USPS facilities, to determine where E85 was located 
within 15 minutes or 5 miles of E85-capable vehicle routes, and to 
find out where its price was equal to or less than that of regular 
unleaded gas. 

[25] According to USPS officials, the average hourly rate, with 
benefits, for a city letter carrier is $41.24. 

[26] According to DOE officials, DOE developed its criteria for 
waivers in consultation with other federal agencies and, although USPS 
participated in these consultations, USPS dissented from the final 
determination. 

[27] Our previous work also has identified challenges faced by 
agencies in operating E85-capable vehicles on E85. For example, in 
October 2008, we reported that, like USPS, other federal fleet 
operators often use gasoline in unwaived vehicles because of 
convenience, fuel availability, or cost considerations. See GAO, 
Federal Energy Management: Agencies Are Acquiring Alternative Fuel 
Vehicles but Face Challenges in Meeting Other Fleet Objectives, 
[hyperlink, http://www.gao.gov/products/GAO-09-75R] (Washington, D.C.: 
Oct. 22, 2008). 

[28] This figure includes compressed-natural-gas-capable vehicles 
that, according to Vehicle Programs officials, are currently fueled 
exclusively with gasoline. 

[29] Some overseas vehicle manufacturers produce right-hand-drive 
vehicles, however, the cost of adapting and shipping these vehicles 
here would be a major obstacle, according to Vehicle Programs 
officials. 

[30] USPS purchased the vehicles in 2005 for $25,026, per vehicle. 

[31] 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. 

[32] The five options considered were: (1) continuing to maintain its 
current fleet of LLVs and FFVs; (2) investing in a major acquisition 
of new right-hand-drive delivery vehicles beginning in fiscal year 
2008; (3) refurbishing the current fleet of LLVs and FFVs; (4) 
acquiring and configuring commercially available right-hand-drive 
vehicles, which were available at that time; and (5) acquiring and 
configuring commercially available left-hand-drive vehicles. 

[33] See GAO, Budget Issues: Agency Implementation of Capital Planning 
Principles is Mixed, [hyperlink, 
http://www.gao.gov/products/GAO-04-138] (Washington, D.C.: Jan. 16, 
2004) and Executive Guide: Leading Practices in Capital Decision-
making, [hyperlink, http://www.gao.gov/products/GAO/AIMD-99-32] 
(Washington, D.C.: December 1998). 

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

[35] H.R. 4399, 111th Cong. (2009). 

[36] H.R. 4711, 111th Cong. (2010). 

[37] See GAO, Opportunities to Reduce Potential Duplication in 
Government Programs, Save Tax Dollars, and Enhance Revenue, 
[hyperlink, http://www.gao.gov/products/GAO-11-318SP] (Washington, 
D.C.; Mar. 1, 2011). 

[38] See GAO, Federal Energy and Fleet Management: Plug-in Vehicles 
Offer Potential Benefits, but High Costs and Limited Information Could 
Hinder Integration into the Federal Fleet, [hyperlink, 
http://www.gao.gov/products/GAO-09-493] (Washington, D.C.; June 9, 
2009). 

[39] Pub. L. 110-181, § 2862 (Jan. 28, 2008). 

[40] In addition, very few commercially available vehicles that the 
Environmental Protection Agency has certified as low-greenhouse-gas- 
emitting vehicles are large enough for potential use for USPS mail 
deliveries. 

[41] This estimate includes direct costs for vehicle maintenance 
facility parts, direct and indirect labor costs (salaries and benefits 
for mechanical technicians, clerks, supervisors, managers, and vehicle 
operations and maintenance assistants), contractor parts and labor, 
and fuel. The estimate does not include certain other costs, such as 
those for depreciation and general agency overhead, including the cost 
of operating and maintaining the agency's vehicle maintenance 
facilities. 

[42] See United States Postal Service, Office of the Inspector 
General, Audit Report-Delivery Vehicle Replacement Strategy. 

[43] Our custom query of VMAS showed a total of about $497 million in 
direct maintenance costs in fiscal year 2010, significantly less than 
USPS's $750 million estimate for vehicle maintenance in fiscal year 
2010. Several factors account for the difference in costs between the 
agency's estimate and the results of our custom query. First, VMAS 
does not include supervisory and management labor costs, or the 
benefits it pays to these employees. Second, while VMAS includes a 
large portion of direct labor costs for technicians who service 
delivery vehicles, unlike USPS's estimate, VMAS does not account for 
these employees' full labor costs. Third, according to USPS data, 
about 6 percent of USPS's total maintenance costs--all due to 
maintenance performed by contractors--are not entered into VMAS but 
are included in the agency's $750 million estimate of total 
maintenance costs for fiscal year 2010. Finally, while costs related 
to accidents are contained in USPS's total cost estimate, we removed 
these costs from our analysis of maintenance costs. Neither the $497 
million in direct maintenance costs nor the $750 million estimate for 
direct and indirect maintenance costs include certain other costs, 
such as those for depreciation and general agency overhead, including 
the cost of operating and maintaining the agency's vehicle maintenance 
facilities. Additional information on the costs contained in USPS's 
estimate and our custom query of VMAS is provided in appendix I. 

[44] The Office of Inspector General reported on this matter in June 
2009 and recommended that USPS take action to ensure that all 
contractor costs are entered into VMAS. USPS agreed to reinforce its 
existing policy in a Vehicle Maintenance Bulletin. See United States 
Postal Service, Office of the Inspector General, Audit Report-Vehicle 
maintenance Facilities Scheduled Maintenance-National Capping Report, 
DR-AR-09-007 (Washington, D.C., June 30, 2009). 

[45] We analyzed USPS's database of accidents and identified that at 
least 95.5 percent of the reported vehicle accidents did not involve 
defective parts. While some portion of the remaining 4.5 percent of 
vehicle accidents could have involved defective equipment, we could 
not reliably determine whether they did because of limitations related 
to information contained on the form used to populate the database. 

[46] 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 the VMAS data. 

[47] Vehicle maintenance costs between fiscal years 2006 and 2009 
reflect a similar pattern, with most delivery vehicles having less 
than $3,500 in annual maintenance costs, and a small portion having 
more than $7,000, including some with more than $10,500 in maintenance 
costs. 

[48] According to VMAS end-of-fiscal-year reports, unscheduled 
maintenance accounted for the following percentages of total direct 
maintenance costs: (1) 28.9 percent in fiscal year 2005, (2) 28.8 
percent in fiscal year 2006, (3) 28.8 percent in fiscal year 2007, (4) 
29.0 percent in fiscal year 2008, (5) 29.7 percent in fiscal year 
2009, and (6) 31.3 percent in fiscal year 2010. As discussed 
previously, these percentages do not include about 6 percent of USPS's 
total maintenance costs attributable to maintenance performed by 
contractors. 

[49] According to USPS officials, vehicle maintenance facility 
managers are rated on their ability to accomplish their vehicles' 
scheduled maintenance inspections, whether the inspections are 
conducted in house or by a contractor. To get credit for these 
inspections, the vehicle maintenance facility manager must enter 
information on the inspections into VMAS. Thus, according to USPS 
officials, maintenance facility managers routinely enter this 
information into VMAS. In contrast, some unscheduled maintenance 
performed by contractors, such as when a vehicle breaks down on its 
delivery route, may be arranged and paid for by the local postmaster. 
If the postmaster does not send the itemized bill to the vehicle 
maintenance facility to be entered into VMAS, the vehicle maintenance 
facility may not learn that the repair ever took place. As a result, 
USPS officials consistently told us that the 6 percent of maintenance 
costs that are not captured in VMAS are due to unscheduled 
maintenance. As discussed, in response to a June 2009 Office of 
Inspector General recommendation that USPS take action to ensure that 
all contractor costs are entered into VMAS, USPS agreed to reinforce 
existing policy in a Vehicle Maintenance Bulletin. 

[50] We observed two bald tires on a delivery vehicle at another post 
office in Florida. The manager of the post office was unaware of the 
condition of the tires, but told us that the vehicle would be taken 
out of service immediately until the tires were replaced. 

[51] USPS had the manufacturer add a window to the left-hand side of 
the FFV to improve visibility and increase the carriers' safety when 
merging from the right side of roadways. 

[52] 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 cost about $3.5 billion to refurbish 175,000 
delivery vehicles. 

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

[54] See 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). 

[55] See United States Postal Service, Fiscal Year 2011 Integrated 
Financial Plan. 

[56] [hyperlink, http://www.gao.gov/products/GAO-10-455]. 

[57] Pub. L. No. 109-435, §201(a), 120 Stat. 3198 (Dec. 20, 2006). 

[58] Rate increases for market-dominant products are limited by an 
annual price cap based on increases in the Consumer Price Index. These 
products primarily include First-Class Mail, Standard Mail, 
Periodicals (mainly magazines and local newspapers), and some types of 
package services (primarily Single-Piece Parcel Post, Media Mail, 
Library Mail, and Bound Printed Matter). 

[59] 39 U.S.C. § 410 (a). 

[60] According to a senior USPS attorney, USPS did not receive any of 
these funds directly. Instead, the parties involved provided the funds 
directly to the manufacturer. 

[61] Congress provided agencies with an alternative mechanism for 
obtaining energy-efficiency improvements in 1986 when it authorized 
agencies to use energy savings performance contracts, a type of share- 
in-savings contract. Through share-in-savings contracting, the agency 
compensates a contractor from the financial benefits derived as a 
result of its contract performance. 

[62] In past work on issues related to financing federal capital 
projects, we have raised concerns about the value of energy savings 
performance contracts. In 2004, for example, we reported that these 
contracts may be more expensive than timely, full, and up-front agency 
appropriations. See GAO, Capital Financing: Partnerships and Energy 
Savings Performance Contracts Raise Budgeting and Monitoring Concerns, 
[hyperlink, http://www.gao.gov/products/GAO-05-55] (Washington, D.C.: 
Dec. 16, 2004.) In addition, in 2005, we questioned whether savings 
from 254 energy savings performance contracts at a number of agencies 
actually covered costs. See GAO, Energy Savings: Performance Contracts 
Offer Benefits, but Vigilance Is Needed to Protect Government 
Interests, [hyperlink, http://www.gao.gov/products/GAO-05-340] 
(Washington, D.C.: June 22, 2005). 

[63] [hyperlink, http://www.gao.gov/products/GAO-10-455]. 

[64] USPS is authorized to request reimbursement for public service 
costs incurred for providing effective and regular postal service in 
communities where post offices may not be deemed self-sustaining. See 
39 U.S.C. § 2401(b). 

[65] In fiscal year 2010, USPS recognized $113 million in revenue 
(including $24 million in imputed interest) from these appropriations, 
which was 0.2 percent of its total revenue of $67.1 billion. 

[66] As discussed, one of two recent legislative proposals would have 
authorized funding ($2 billion) to replace a portion of USPS's fleet 
with electric vehicles. The legislation was not enacted. 

[67] [hyperlink, http://www.gao.gov/products/GAO-11-244T]. 

[68] The eight codes are (1) curbline delivery; (2) dismounted route, 
city; (3) expedited delivery; (4) park and loop; (5) rural route; (6) 
maintenance reserve; (7) collection; and (8) parcel post. Through 
discussions with Vehicle Programs officials, we also learned that the 
maintenance reserve code includes some vehicles that are not used for 
delivery. To exclude these vehicles from our analysis, as these 
officials recommended, we eliminated all vehicles with the function 
code of maintenance reserve and with make-model codes that clearly 
identified them as not being part of the delivery fleet (such as 7-ton 
vehicles, which are large trucks that are not used for mail 
deliveries). 

[69] This estimate includes direct costs for vehicle maintenance 
facility parts, direct and indirect labor costs (salaries and benefits 
for mechanical technicians, clerks, supervisors, managers, and vehicle 
operations and maintenance assistants), contractor parts and labor, 
and fuel. The estimate does not include certain other costs, such as 
those for depreciation and general agency overhead, including the cost 
of operating and maintaining the agency's vehicle maintenance 
facilities. VMAS also does not include these costs. 

[70] About $300 million of the $1.05 billion costs were for fuel. This 
amounts to about $1,600 in fuel costs per vehicle. 

[71] Specifically, VMAS does not include any indirect labor costs 
related to the salaries and benefits for clerks, supervisors, 
managers, and vehicle operations, and maintenance assistants. 

[72] Costs recorded in VMAS include direct costs for vehicle 
maintenance facility parts and the labor costs of the technicians who 
service the vehicles. These labor costs are calculated based on a 
fixed hourly rate, excluding benefits, multiplied by the number of 
hours charged to complete each vehicle's servicing. According to a 
Vehicle Programs official, for fiscal year 2010, the fixed hourly rate 
recorded in VMAS was $35 for technicians--less than the actual average 
hourly labor rate of $43, including benefits, for these employees. 

[73] The Office of Inspector General reported on this matter in June 
2009 and recommended that USPS take action to ensure that all 
contractor costs are entered into VMAS. USPS agreed to reinforce its 
existing policy in a Vehicle Maintenance Bulletin. See United States 
Postal Service, Office of the Inspector General, Audit Report-Vehicle 
Maintenance Facilities Scheduled Maintenance-National Capping Report. 

[74] We attempted but were unable to obtain interviews with 
representatives from numerous organizations, including the Alliance of 
Automobile Manufacturers, the Alternative Fuel Vehicle Institute, the 
American Coalition for Ethanol, Calstart (a nonprofit organization 
that works to develop environmentally sound transportation options), 
the Electric Transportation Engineering Corporation, the National 
Association of Letter Carriers, the NAFA Fleet Management Association, 
the National Propane Gas Association, and the Propane Vehicle Council. 

[75] Compressed natural gas tanks have a service life of 15 to 25 
years and are required to be labeled with an expiration date. 

[76] Ford provided gasoline-powered minivans to USPS in response to 
this recall. 

[77] Neighborhood electric vehicles cannot be legally operated on 
highways or at speeds greater than 25 miles per hour. 

[78] DOE, on behalf of USPS, began testing these vehicles in the 
summer of 2010. At the conclusion of our review, testing had been 
completed on two of the vehicles. USPS will pay $50,000 for each 
conversion, with the remainder of the costs to be covered by the 
supplier. 

[79] Except for certain urban areas, such as New York City, New York, 
USPS does not typically use its 2-ton trucks for mail deliveries. 

[80] According to Vehicle Programs officials, one of these trucks was 
subsequently returned to the manufacturer. 

[81] USPS purchased these vehicles in 2005 for $25,026 per vehicle. 

[82] The manufacturer's suggested retail price for a 2011 Ford Escape 
hybrid was $30,045, compared with $21,215 for the nonhybrid Ford 
Escape, as of February 15, 2011. 

[End of section] 

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