Legislative

GAO Finds US Postal Service Lacks Funds for Fleet Overhaul

May 19, 2011

WASHINGTON – The U.S. Government Accountability Office (GAO) issued a report that found the U.S. Postal Service’s (USPS) fleet of vehicles is aging, seeing higher maintenance costs as a result, and needs new vehicles to meet federal sustainability standards. Unfortunately, the USPS is facing a grim financial situation, despite eliminating 137,000 positions over the last five years.

The USPS’ fleet consists of more than 215,000 vehicles, 192,000 of which are light-duty mail delivery vehicles that operate six days per week. Out of this 192,000, 141,000 are “long-life vehicles” (LLVs), which average 500 stops and starts per delivery route per day. Other vehicles include 21,000 flex-fuel vehicles (FFVs), and 22,000 left-hand drive minivans. The average age for the LLVs is 16 to 23 years old, out of a 24-year lifespan. The FFVs are 9-10 years old, out of a 24-year lifespan, and the minivans range from 2-13 years in age, with a lifespan of 10 years for the vehicle model.

The GAO report said the USPS estimates the cost to replace 185,000 delivery vehicles in the fleet would be $5.8 billion for new fuel-efficient gasoline-powered right-hand-drive models (the USPS estimated an up-front cost of $31,000 per vehicle), but the USPS’ poor financial health makes this unfeasible.

The USPS has borrowed nearly $12 billion during the last five years to cover its costs, but with the organization facing decreasing mail volumes as customers as increasingly use electronic forms of communication, the USPS will reach its debt limit of $15 billion by the end of the fiscal year. The USPS expects a net loss of $2.6 billion during the first half of the year, and the organization said that without legislative changes, it will have to default on payments to the federal government, including a $5.5 billion pre-funding payment for retiree health benefits due on September 30, 2011.

One problem caused by this lack of funding is the inability to replace vehicles, which has led to long vehicle lifecycles and increasing maintenance costs. The GAO found the direct maintenance costs for the delivery vehicles average about $2,450 per vehicle in fiscal year 2007 and just under $2,600 per vehicle in fiscal year 2010. In addition the GAO report said although the majority of the fleet, 77 percent, required less than $3,500 in direct maintenance costs each year, 3 percent required more than $7,000 per year, and 662 vehicles required more than $10,500 to maintain.

The USPS’ goal, according to the report, is to keep the percentage of its total annual maintenance costs due to unscheduled maintenance to less than 20 percent, but in FY 2010, 31 percent of costs resulted from unscheduled maintenance.

Beyond the USPS’ financial situation, the federal government’s rules, and vehicle design requirements, are making it tough to overhaul the fleet. The 1992 EPAct requires 75 percent of the light-duty vehicles used by the USPS to be able to use alternative fuels. The USPS has been purchasing E-85 dual-fuel vehicles since 2000 to keep up-front costs down while meeting this guideline. The organization has been unable to consistently fuel these vehicles with E-85, though. As of Dec. 2009, the fuel was not available at 99 percent of U.S. fueling stations. Instead, the USPS has received waivers from the DOE to run these vehicles on gasoline. In FY 2010, the USPS reported that 54 percent of its E-85-capable vehicles received waivers to operate solely on gasoline.

The need for custom, right-hand-drive delivery vehicles has kept the organization unable to enter into a joint procurement contract with private companies (such as UPS, which doesn’t use this type of vehicle).

The DOE and USPS also don't believe they can attract private investment to fund vehicle purchases through an energy savings performance contract due to the fleet’s low average mileage. The up-front cost of alternative-fuel, or more fuel-efficient vehicles is the largest barrier to purchasing more fuel-efficient vehicles to enter into this sort of contract.

For now, the USPS’ plan is to purchase a small number of minivans for delivery and continue its policy of maintaining the fleet rather than purchasing new vehicles. The GAO recommended the USPS develop a strategy and timeline for addressing its fleet’s needs, taking into account the change from a 6- to a 5-day delivery schedule, consolidating facilities, meeting federal requirements, and continuing to deliver mail to 131 million residential and business addresses nationwide.

The GAO report said the USPS is developing its strategy now and plans to deliver this, along with a timeline for addressing the fleet’s needs, by December of this year.

By Greg Basich

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