United States Postal Service: Strategy Needed to Address Aging Delivery Fleet

In 2011, GAO reported that U.S. Postal Service (USPS) faces severe financial challenges and, for the foreseeable future, cannot afford to replace or refurbish a large portion of its aging fleet. This approach 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. Therefore, GAO recommended that USPS develop a strategy and timeline that addressed its delivery fleet need and considered the effect of any operational changes and continuing changes in customers' use of the mail, the range of strategic options available, and other factors including legislative fleet requirements. In January 2015, USPS documented its fleet strategy and timeline for procurement in its Next Generation Delivery Vehicle (NGDV) acquisition program. The long-term NGDV acquisition strategy will replace the aging fleet over time, with the oldest, highest mileage, and most expensive to maintain vehicles being replaced first. USPS anticipates making a single award for up to 180,000 NGDVs with an estimated total cost ranging from $4.5 billion to $6.3 billion. In developing its strategy and draft specifications for the NGDV, USPS assessed its projected needs based on changing mail volumes and the mix of types of mail. According to USPS, the specifications for the new vehicles address the reduction in traditional letter and flat volume mail and will result in a vehicle that will be more ergonomically correct than previous carrier vehicles; allow for more space to organize and stow parcels, which USPS projects will grow at 6 percent annually; and meet delivery demands on 99 percent of existing routes. USPS also reported considering a range of strategic options for vehicle replacement before settling on the NGDV acquisition strategy. These options included foreign manufactured right hand drive commercial vehicles, refurbishment of previous carrier route vehicles, and domestic manufactured vehicles converted to right hand drive. USPS found these options to be cost prohibitive or impractical. To help it comply with federal fleet requirements to purchase alternative fuel vehicles and use alternative fuel in them, USPS researched alternative fuel powertrains such as electric, hybrid electric, and compressed natural gas. USPS considered several factors in its evaluation including purchase price, fuel cost, available infrastructure for refueling or charging, maintenance costs, and the maturity of the technology and number of vendors. According to USPS officials, they plan to encourage potential suppliers to propose a flexible design that may accommodate different powertrain configurations as technologies evolve. While we have not evaluated the quality of the strategy developed by USPS to address its fleet needs, the strategy is an important step for USPS to enhance its ability to replace its current vehicles, which are rapidly nearing the end of their useful life, with new delivery vehicles that will allow USPS to better meet the needs of its customers and maintain USPS's legal mandate to purchase alternative fuel vehicles and use alternative fuel in them.