U.S. Postal Service: Chicago Main Post Office Cost Overruns and Graceland
Station Mail Service (Letter Report, 10/31/97, GAO/GGD-98-11).

Pursuant to a congressional request, GAO reviewed: (1) the reasons for
the $133 million in cost overruns incurred at the new Chicago Main Post
Office; (2) the list of procedures the United States Postal Service
(USPS) has established to prevent a recurrence of cost overruns
experienced with the new Chicago Main Post Office in similar, future
capital investment projects; (3) why the USPS Board of Governors
approved some of the budget increases for the new Chicago Main Post
Office in closed, rather than open, meetings; (4) the performance
indicators for the Graceland postal station in Chicago, as compared to
those at a similar station in another city with a higher first-class,
overnight delivery (EXFC) score; and (5) the results of a 1997 USPS
survey of the physical condition of postal facilities in the ninth
congressional district of Illinois.

GAO noted that: (1) the cost overruns that were incurred in the
construction of the new Chicago Main Post Office appeared to be due
primarily to inadequate planning; (2) USPS has implemented procedures
aimed at reducing the likelihood of cost overruns occurring in similar,
future capital investment projects, including earlier notification of
problems to the Board of Governors and more Inspection Service
involvement with review of facilities construction; (3) USPS officials
indicated that budget increases for the new Chicago Main Post Office
were approved in closed meetings because it would not have been in USPS'
best interest to disclose the amounts requested while negotiating change
orders with contractors and because the Postal Inspection Service was
investigating the project; (4) comparison of performance data between
the Graceland station in Chicago and the Brookline station in Boston,
Massachusetts, confirmed that differences existed in terms of
performance indicator results, and also showed that the data provided
were not informative about the causes of problems with mail service at
Graceland or in Chicago; (5) analysis of this performance data did not
suggest that Brookline's performance would be informative for Graceland;
(6) this was compounded by the high number of variables affecting the
performance indicators, such as the differences in the types of
deliveries made by both stations and uncertainty about whether the total
number of complaints was accurately reported; and (7) the 1997 USPS
review of postal facilities in the ninth congressional district of
Illinois indicated that the facilities were meeting operational needs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-98-11
     TITLE:  U.S. Postal Service: Chicago Main Post Office Cost Overruns 
             and Graceland Station Mail Service
      DATE:  10/31/97
   SUBJECT:  Postal service
             Mail delivery problems
             Postal facilities
             Government facility construction
             Customer service
             Work measurement standards
             Construction costs
             Cost overruns
             Comparative analysis
IDENTIFIER:  Chicago (IL)
             Boston (MA)
             
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Cover
================================================================ COVER


Report to the Honorable
Sidney R.  Yates, House of Representatives

October 1997

U.S.  POSTAL SERVICE - CHICAGO
MAIN POST OFFICE COST OVERRUNS AND
GRACELAND STATION MAIL SERVICE

GAO/GGD-98-11

Chicago Mail Service

(240232)


Abbreviations
=============================================================== ABBREV

  DAR - Decision Analysis Report
  EXFC - External First-Class Measurement System
  USPS - United States Postal Service

Letter
=============================================================== LETTER


B-276037

October 31, 1997

The Honorable Sidney R.  Yates
House of Representatives

Dear Mr.  Yates: 

In recent years, the United States Postal Service (USPS) has
attempted to improve the mail service in Chicago, IL, which has
experienced some of the lowest ratings in the nation on the
percentage of overnight mail delivered on time.  One action USPS took
was to construct a new main post office in Chicago, a project that
experienced a $133 million cost overrun during construction. 

This report responds to your request that we (1) determine the
reasons for the $133 million in cost overruns incurred at the new
Chicago Main Post Office; (2) provide a list of procedures that USPS
has established to prevent a recurrence of cost overruns experienced
with the new Chicago Main Post Office in similar, future capital
investment projects; and (3) inquire why the USPS Board of Governors
approved some of the budget increases for the new Chicago Main Post
Office in closed, rather than open, meetings.  You also asked us to
review issues relating to complaints you have received regarding mail
service in your district (the Ninth Congressional District of
Illinois). 

With regard to service, you specifically asked us to (1) compare the
Postal Service's performance indicators for the Graceland postal
station in Chicago to those at a similar station in another city with
a higher First-Class, overnight delivery (EXFC) score\1

than Chicago's; and (2) report the results of a 1997 Postal Service
survey of the physical condition of postal facilities in your
district.  Graceland station's customer service was particularly
problematic in the Chicago District.  Your objective in having us
compare the performance indicators of the two stations was to attempt
to determine potential causes of problems at Graceland. 


--------------------
\1 The Postal Service currently uses a measurement known as External
First-Class Measurement System (EXFC) as a means of indicating how
well it is serving its customers.  The quarterly EXFC, administered
by Price Waterhouse, measures the delivery time of First-Class mail
from deposit to delivery (collection box to mail slot). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Based on our review of the events that occurred and the results of an
investigation conducted by the Postal Inspection Service, the $133
million in cost overruns that were incurred in the construction of
the new Chicago Main Post Office appeared to be due primarily to
inadequate planning.  The Postal Service approved construction on a
site that was opposed by the city of Chicago and then used a cost
estimate for an alternative site that did not adequately reflect the
complexity and cost of building over active railroad tracks and other
factors.  Further, management's incorporation of increased automation
plans into the facility while it was being constructed resulted in
costly design changes.  The Postal Service has implemented procedures
aimed at reducing the likelihood of cost overruns occurring in
similar, future capital investment projects, including earlier
notification of problems to the Board of Governors and more
Inspection Service involvement with review of facilities
construction. 

Postal officials indicated that the USPS Board of Governors approved
some of the budget increases for the new Chicago Main Post Office in
closed, rather than open, meetings, because it would not have been in
the Postal Service's best interest to disclose the amounts requested
while negotiating change orders with contractors.  An additional
reason cited was that the Postal Inspection Service was investigating
the project. 

At your request, we asked the Postal Service to provide performance
data on Chicago's Graceland station, which has been the focus of
constituent complaints, and on a station in another city with a
higher EXFC score than Chicago's that also served a densely populated
area with many high-rise residential units.  The Postal Service
identified Boston's Brookline station and provided data for
performance indicators that the USPS maintains on workload,
workforce, timeliness, and complaints during two, 1-week periods in
September 1996 and January 1997 for the Graceland and Brookline
stations.  Those two periods were chosen to compare whether the
performance had changed over time, starting with the week that a new
manager started working at Graceland and 4 months later. 

Our comparison of data provided for the two stations confirmed that
differences existed in terms of the performance indicator results,
and it also showed that the data provided were not informative about
the causes of problems with mail service at Graceland or in Chicago. 
Postal Service records showed that Graceland delivered about 20
percent more mail than Brookline during the week reviewed in
September 1996, but both stations delivered about the same amount of
mail during the week reviewed in January 1997.  Regarding workforce
issues, from September 1996 through January 1997, the number of
part-time and temporary carriers increased from 17 to 37, or 118
percent, at Graceland; the number increased from 17 to 20 at
Brookline, or 18 percent.  In September 1996, Graceland incurred more
carrier overtime and sick leave than Brookline, but it incurred less
than Brookline in January 1997. 

With respect to the timeliness indicators provided, for both time
periods, Graceland station had more bulk business mail\2 that was
delayed (which occurs when bulk business mail takes more than 48
hours to leave the station) and curtailed (which is mail that is not
yet scheduled for delivery) than Brookline.  More carriers at
Graceland left the station late (foot carriers leaving more than 10
minutes after their scheduled departure times) during the week in
September 1996 than at Brookline (17 vs.  9).  However, during the
week in January 1997, considerably more carriers at Brookline left
the station late than at Graceland (48 vs.  15).  For the quarter
that included the week in September 1996 in our review, Boston's EXFC
scores were 3 percentage points higher than in Chicago (87 vs.  84),
but Boston's score was only 1 percentage point higher than Chicago's
for the quarter that included the week in January 1997 that we
reviewed (91 vs.  90). 

Brookline received more delivery-related customer complaints than
Graceland for the quarters that included the two, 1-week periods
reviewed in September 1996 and January 1997.  However, Postal
officials cautioned that the number of complaints reported may not be
reliable and could have been affected by several factors not related
to actual performance, such as the availability of customer complaint
cards in the station lobbies. 

Our analysis of the performance data provided by the Postal Service
on the two stations did not suggest that Brookline's performance
would be informative for Graceland.  This was compounded by the high
number of variables affecting the performance indicators, such as the
differences in the types of deliveries made by both stations and
uncertainty about whether the total number of complaints was
accurately reported. 

The 1997 USPS review of postal facilities in the Ninth Congressional
District of Illinois indicated that the facilities were meeting
operational needs. 


--------------------
\2 The Postal Service refers to bulk business mail as periodical
mail; "Standard A" mail (letters, flats, and parcels that do not
require the security of First-Class mail or the speed of Priority
Mail); and "Standard B" mail (parcels and bound printed matter),
formerly called second-, third-, and fourth-class mail. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Chicago's new Main Post Office, located at 433 W.  Harrison Street,
opened in May 1996.\3 The Main Post Office contains a two-floor mail
processing facility, seven floors of office space, and a retail sales
operation.  It replaced the old Main Post Office, which was located
across the street from the new facility.  The old Main Post Office
was completed in 1932 and consisted of nine floors of workroom space. 
In 1990, the USPS Board of Governors approved a plan to construct the
new Main Post Office as a means of improving mail service in Chicago,
which until this year had EXFC scores that were significantly below
the national average. 

The new Main Post Office was part of the Postal Service's 1987
Greater Chicago Area Facility Plan, which called for decentralizing
postal operations in the Chicago area to accommodate population and
mail volume shifts from the city to the suburbs.  The new Main Post
Office was to be a state-of-the-art mail processing facility, which
would be supplemented by six new or expanded mail processing
facilities throughout the Chicago area.\4 Although construction of
the new Post Office originally was estimated to be complete by April
1993, the new facility did not open until May 1996.  In addition, in
September 1997, renovation of an annex called the "Sugar House" was
completed--work that was done after the Postal Service discovered
that the new Main Post Office would not be large enough to house all
operations that the Postal Service planned to move into the new
facility and that the new facility would not meet operational needs. 

About 5,300 employees work at the new Main Post Office, including
about 4,900 mail processing and distribution staff, 300 district
support staff, and about 100 Postal Inspection Service employees. 
The new Main Post Office has automated mail handling equipment and
occupies about 900,000 square feet of space, compared to about 2.3
million square feet of space at the old facility. 

In March 1990, the USPS Board of Governors initially approved $199.7
million for construction of the new Main Post Office.  From December
1991 through February 1996, the Board of Governors approved four
additional funding requests totaling $133.2 million.  The facility's
final projected cost was $332.9 million, including the annex
renovation.\5

Your congressional district, which consists of the northern part of
Chicago and adjacent suburbs, is served by both the Chicago and
Northern Illinois postal districts, 2 of 85 nationwide postal
districts.\6 The Chicago Postal District, headquartered in the new
Main Post Office, serves ZIP Codes beginning with 606, 607, and 608,
including the Chicago portion of your congressional district and part
of Niles, IL.  The Northern Illinois Postal District, headquartered
in Carol Stream, IL, serves ZIP Codes beginning with 600, 601, 602,
603, 610, and 611, including the cities of Evanston, Golf,
Lincolnwood, Morton Grove, and Skokie and parts of Harwood Heights
and Glenview.  Appendix I shows which ZIP Codes are served by the two
postal districts in the Ninth Illinois Congressional District. 
Figure 1.1 shows which portions of the Ninth Congressional District
are served by the Northern Illinois and Chicago postal districts. 

   Figure 1.1:  Postal Service
   Provided by the Chicago and
   Northern Illinois Postal
   Districts Within the Ninth
   Congressional District of
   Illinois

   (See figure in printed
   edition.)

   Source:  USPS.

   (See figure in printed
   edition.)

Mail for your constituents who are served by the Chicago Postal
District is processed by the Irving Park Road facility in Chicago,
rather than by the new Main Post Office.  The Irving Park Road
facility, which opened in 1994,\7 handles an average of 3.5 million
pieces of mail a day, and the Main Post Office handles an average of
5.1 million pieces of mail a day.  Constituents who are served by the
Northern Illinois Postal District receive mail processed in Palatine,
IL, which processes about 5.5 million pieces of mail a day. 

You indicated that your constituents have complained about mail
service in your district for many years.  In conversations with your
office, we were told that many of the complaints focused on service
provided by the Graceland postal station in Chicago.  The complaints
related to the delivery of mail, including misdelivery and
nondelivery, as well as problems with forwarding of mail.  Graceland
station serves a densely populated area of Chicago that contains many
high-rise residential units.  According to the Postal Service,
Graceland station handles the second-highest volume of mail in
Chicago and makes about 40,000 deliveries daily. 

Complaints about mail service in Chicago were discussed during USPS
appropriations hearings before Congress in 1987 and were the subject
of a separate congressional hearing in 1996.  In 1990, at your
request, we reviewed Postal Service management and operations in your
district.  This work involved reviewing a lengthy record of
correspondence between you and the Postal Service.  Letters from the
Postal Service contained descriptions of numerous commitments and
promised actions that were unfulfilled or did not have a lasting
impact on the mail delivery problems.  At that time, mail service
problems focused on the high-growth areas of your district, such as
Lincoln Park.  We identified three potential causes of the problems: 
inadequate postal facilities; improper mail processing and delivery
practices; and incomplete addresses on mail, coupled with incomplete
information on customers' mail boxes.\8 In response to our work, the
Postmaster General provided a list of corrective steps that we
believed at the time would address the problems if they were properly
implemented.\9

However, in 1994, continuing complaints about mail service in Chicago
prompted the Postmaster General to visit the city and establish a
task force to address the problems.  The task force found mail that
was late, lost, or had been thrown away; a "bunker mentality" when it
came to interacting with customers; and facilities without telephone
service for customers and staff ill-equipped to answer and respond to
simple inquiries.  The task force worked to address these problems by
helping management staffs plan their daily workloads; hiring
additional carriers; streamlining processes; and increasing employee
training.  In addition, a new management team was installed in
Chicago. 

EXFC scores for Chicago have improved considerably in recent years. 
The percentage of First-Class, overnight mail delivered on time
increased from 66 percent in the second quarter of fiscal year 1994
to 90 percent in the third quarter of fiscal year 1997, 2 percent
below the national average.  The Chicago Postal District Manager said
the improved EXFC scores were the result of (1) more automation, (2)
new and expanded facilities throughout the Chicago area, (3) more and
better training of employees, (4) better management and more
accountability, and (5) dismissal of poor performers and recognition
of good employees. 

In recent years, the Postal Service has also undertaken a major
effort to automate its operations and reduce labor costs, including
using more temporary and part-time employees. 


--------------------
\3 The new Main Post Office is formally called the Chicago Central
Processing and Distribution Center.  The move into the new facility
began in May 1996 and was completed in September 1996. 

\4 These included new Processing and Distribution Centers in
Palatine, IL; Carol Stream, IL; Aurora, IL; and at Irving Park Road
in Chicago, plus expansions of the Chicago Bulk Mail Center in Forest
Park, IL; and the Processing and Distribution Center in Bedford Park,
IL. 

\5 The Postal Service recovered $5 million of this amount from the
Chicago Union Station Company. 

\6 In addition to 85 districts, the Postal Service is further
organized into 95 "performance clusters," which are organizational
units used to track performance data.  In Boston and Chicago, the
postal districts are also performance clusters. 

\7 The move into the Irving Park Road facility began in June 1994 and
was completed in September 1996. 

\8 Letters from GAO to the Postmaster General, dated February 26,
1990, and March 27, 1990. 

\9 Letter dated March 15, 1990, from the Postmaster General to GAO. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

In June 1996, you requested that we review the reasons for the cost
overruns at the new Chicago Main Post Office.  You also indicated
that Chicago has been heavily criticized for its poor mail service. 
In December 1996, we briefed your office on the results of our work
to date.  At that time, you requested that we perform additional work
regarding Graceland station, which is located in your congressional
district. 

To obtain information on the reasons for the cost overruns at the new
Chicago Main Post Office, we interviewed USPS officials; submitted
written questions to the Postal Service; reviewed documentation of
the cost estimates for the facility, including justifications for
cost increases, project planning documents, and Board of Governors
meeting minutes; and reviewed Postal Inspection Service reports on
the project.\10 We also met with Chicago postal officials, including
the Great Lakes Area Operations Vice President, Chicago District
Manager, Chicago District Senior Plant Manager, and a Postal
Inspection Service official; and we toured the new Main Post Office. 
We questioned Postal officials about the sequence of events regarding
the project and related issues, but we did not repeat work that had
already been done by the Inspection Service. 

We obtained information on the policies and procedures that the
Postal Service implemented to prevent a recurrence of cost overruns
in similar, future capital investment projects.  We did this by
reviewing recommendations made by the Inspection Service and Board of
Governors' Capital Improvement Committee and by interviewing Postal
officials. 

To determine why the USPS Board of Governors approved some of the
budget increases for the new Chicago Main Post Office in closed,
rather than open, meetings, we questioned Postal officials and
submitted written questions to the Postal Service. 

During the course of our review, Chicago Postal Service officials
offered to review the physical condition of postal facilities within
your congressional district.  This review was performed from February
to May 1997 by two teams of operational, retail, and administrative
staff from the Chicago and Northern Illinois postal districts serving
the Ninth Illinois Congressional District.  The teams were supported
by a real estate specialist, a design and construction specialist,
and an operations analyst from the Chicago Facilities Service Office. 
In addition, an outside architectural/engineering firm was retained
to assist in the review.  We reviewed the report that resulted from
this facility survey. 

To obtain performance data on the Graceland station, we first
interviewed postal officials to determine what performance data and
indicators are maintained by the Postal Service.  We then asked
Postal officials to provide data pertaining to workload/workforce
issues (the number of deliveries, routes, and carriers, volume of
mail delivered, amount of carrier sick leave and overtime);
timeliness (EXFC scores, the number of routes with delayed mail,
amount of curtailed and delayed mail, and the number of carriers
leaving the station late); and the number of delivery-related
complaints received during the weeks of September 14 through 20,
1996, and January 18 through 24, 1997.\11 We chose these 2 weeks to
compare Graceland station's performance when a new station manager
began working there and its performance 4 months later\12 to
determine whether change had occurred.  According to the Postal
Service, the data provided were the best performance measures
available on the two stations. 

To compare Graceland's performance with a similar station in another
city with a higher EXFC score than Chicago's, we reviewed the EXFC
scores for 1996 in other U.S.  cities and contacted the Postal
District Managers in three Northern cities (Philadelphia, New York,
and Boston) where the weather conditions and population densities
were similar to those in Chicago.  We provided the Postal District
Managers in those three cities with data on the volume of mail
processed and the number of business and residential deliveries at
Graceland station and asked them to identify any similar stations in
their districts serving densely populated areas with many high-rise
residential units.  The Boston Postal District Manager identified the
Brookline, MA, station and provided performance data on that station
for the two time periods in our review.  The Postal District Managers
in Philadelphia and New York did not identify any stations in their
districts that were comparable to Graceland.\13

We recognized certain limitations of comparing performance data on
two stations.  These limitations included the number of variables
that affect mail delivery, such as the makeup of residential,
business, and curbside deliveries being made and the type of terrain
covered.  We attempted to minimize these limitations by selecting a
station similar to Graceland that also served a densely populated
area serving many high-rise residential units and, to approximate
weather conditions, was located in another northern city. 

We also interviewed the Graceland station manager and the Chicago
Postal District Manager about mail service complaints and plans for
improvement and questioned the Northern Illinois Postal District
Manager about mail service in his district. 

We did not verify the station workload, workforce, timeliness, and
complaint data provided by the Postal Service and the results of its
facility review or validate the EXFC scoring system and data. 

We did our work in Washington, D.C., and Chicago, IL, in accordance
with generally accepted government auditing standards.  We did our
work from September 1996 through July 1997. 

On September 11, 1997, we requested comments on a draft of this
report from the Postmaster General.  On October 17, 1997, he provided
written comments, which are contained in appendix VI and discussed on
page 25. 


--------------------
\10 From November 1994 to May 1995, the Postal Inspection Service
conducted an extensive review of the Chicago Main Post Office project
and presented it to the Board of Governors on May 1, 1995.  In
addition, from 1993 through 1994, the Chicago Division of the
Inspection Service prepared six reports on different aspects of the
project. 

\11 The Postal Service compiles complaints received by quarter,
rather than by week. 

\12 Graceland's current station manager was detailed to the station
on September 14, 1996.  She was promoted to permanent station manager
on March 4, 1997. 

\13 Although the New York Postal District Manager identified a
station in his district that was similar to Graceland, we determined
that it was not comparable, since Graceland had about 10 times the
volume of delivered mail as the New York station. 


   COST OVERRUNS AT THE NEW
   CHICAGO MAIN POST OFFICE
------------------------------------------------------------ Letter :4

In March 1990, the USPS Board of Governors approved $199.7 million
for the construction of a new Chicago Main Post Office.  The Board
also approved four subsequent funding requests totaling $133.2
million, for a total authorization of $332.9 million.\14 Appendix II
summarizes the changes in funding for the facility and the reasons
provided to the Board of Governors for making the requests. 


--------------------
\14 The Postal Service recovered $5 million of this amount from the
Chicago Union Station Company. 


      INITIAL FUNDING
---------------------------------------------------------- Letter :4.1

When the Board approved initial funding in March 1990, it authorized
the facility to be built at either a developer-owned site on Clark
Street in Chicago at a cost of $211.6 million or at an alternative
USPS-owned site on Harrison Street at a cost of $199.7 million.  The
estimates for the two sites differed because the developer-owned
Clark Street site included $39 million for land, while the Harrison
Street site had no land acquisition costs because it was owned by the
Postal Service.  However, compared to the Clark Street site,
construction costs were higher on Harrison Street because it was a
smaller site,\15 and the structure had to be built on piers above the
railroad tracks. 

The Postal Service preferred constructing on the Clark Street site
and only considered the Harrison Street site as an alternative. 
However, the city of Chicago was opposed to constructing the postal
facility on the Clark Street site because it conflicted with the
city's long-range plans for the area.  Postal officials said that the
Board was aware of the city's opposition to constructing on the Clark
Street site when it approved the initial funding, but the Board was
informed by the Assistant Postmaster General for Facilities that he
hoped the Postal Service could solve its problems with the city and
conclude negotiations on the Clark Street site. 


--------------------
\15 The Harrison Street site was about 16 acres in size, and the
Clark Street site was over 37 acres. 


      DECEMBER 1991 INCREASE
---------------------------------------------------------- Letter :4.2

In December 1991, the Postal Service approved an additional $41.7
million in funding for the new Main Post Office to cover increased
costs associated with constructing the facility on the alternative,
Harrison Street site, rather than on Clark Street.  According to the
USPS Decision Analysis Report (DAR) that was used to justify the
funding increase to the Board, negotiations with the city to
construct the facility on the Clark Street site were unsuccessful,
forcing the Postal Service to build on Harrison Street.  The $41.7
million in additional funding increased the total cost of the project
from $199.7 million, which the Board had approved for the Harrison
Street site in March 1990, to $241.4 million.  The December 1991 DAR
indicated that an additional $41.7 million was needed to cover
construction costs at the Harrison Street site that were not
considered adequately in the initial estimate.  The DAR stated: 

     "While the building planned for the Harrison Street site is
     functionally very similar to the facility planned on Clark
     Street, there is a marked difference in the site conditions and,
     therefore, the structure of the building and associated docks,
     maneuvering area, and parking.  The Harrison Street site is
     interlaced with active railroad tracks, located in the middle of
     the property.  The tracks in question are located two blocks
     south of Union Station, which handle all commuter rail lines
     serving the southern and western portions of the city and
     suburbs.  Amtrak also uses the same tracks for interstate
     passenger service.  While we were cognizant that construction on
     the Harrison Street site would pose some constraints on our
     ability to keep costs within budget, the extent to which the
     tracks and overall railroad operation would impact construction
     was not fully appreciated when initial estimates were made."

Further, the Harrison Street site was located next to the Chicago
River.  The DAR indicated that the city opposed constructing the new
postal facility along the waterfront portion of the site at Harrison
Street to permit space for future high-rise retail and office
buildings along the river. 

The December 1991 DAR did not break out the additional costs at the
Harrison Street site associated with constructing over railroad
tracks and away from the riverfront.  However, it indicated that
construction over the tracks was prohibited during peak rail traffic
times, adding an estimated 11 months to the overall length of
construction.  Further, the DAR indicated that building the facility
away from the waterfront increased the complexity of the building
structure and therefore its construction cost. 


      APRIL 1994 INCREASE
---------------------------------------------------------- Letter :4.3

In April 1994, the Board approved another funding increase, raising
the total project budget from $241.4 million to $286.8 million. 
According to the DAR, $45.4 million more was needed to complete
construction:  (1) $14.3 million for operational changes to
accommodate the relocation of mail processing for 17 ZIP Code areas
of South Chicago; (2) $14 million in construction changes resulting
from solicitation of bids prior to design completion; (3) $7.8
million to repair the adjacent Polk Street bridge; and (4) $9.3
million in contingency and other fees needed to complete
construction. 

The Postal Service's 1987 Greater Chicago Area Facility Plan called
for 17 ZIP Code areas to be transferred from downtown Chicago to the
South Suburban facility in Bedford Park, IL.  However, in December
1993, the Postal Service decided to retain mail processing for the 17
ZIP Codes in the new Main Post Office because of political concerns
about moving jobs out of the city.  According to the April 1994 DAR,
about 60 percent of the new Post Office's construction was complete
at that time.  The DAR indicated that the decision to incorporate
processing for the 17 ZIP Codes and automated mail processing
plans\16 into the new facility required a complete redesign of the
workroom layout.  Further, the DAR said that because of incomplete
and poor quality contract drawings, the project's structural,
mechanical, and electrical costs significantly exceeded original
estimates.\17 Other unanticipated costs involved dealing with a water
tunnel and an abandoned freight tunnel under the site that were found
after construction began. 

The DAR also indicated that the adjacent Polk Street bridge, which
was closed by the city in 1993 because of safety concerns, was needed
to provide access to the new facility.  Postal officials believed
that the Chicago Union Station Company, an Amtrak subsidiary, took
responsibility for maintaining the bridge when it acquired the
property.  The DAR indicated that the Postal Service was in the
process of negotiating an agreement for repairing the Polk Street
bridge, that it was confident of recovering the repair costs from the
Chicago Union Station Company, and that work on repairing the bridge
should proceed to ensure truck access to the new Main Post Office by
the time the facility was completed.\18


--------------------
\16 The Postal Service's Corporate Automation Plan, issued in January
1990, set a goal of barcoding all mail by 1995. 

\17 The solicitation for construction contract was issued in July
1991 and was based on scope documents with incomplete design and
allowances.  The construction contract was awarded in March 1992. 

\18 According to the Postal Service's Facility Manager in Chicago, in
1996, the Postal Service recovered $5 million from the Chicago Union
Station Company in reimbursement for the bridge repair costs. 


      JUNE 1995 INCREASE
---------------------------------------------------------- Letter :4.4

In June 1995, the Board approved a third cost increase for the new
Main Post Office.  The Board approved an additional $30.1 million for
the project, increasing the total budget from $286.8 million to
$316.9 million.\19 According to the June 1995 additional funding
request, the costs of incorporating automation plans and mail
processing for 17 postal stations into the facility, which required
changes and redesign of the workroom and building systems, were
underestimated.  The funding request said that the workroom changes
in turn affected the layout of office and support space that had to
be relocated to provide additional workroom space.  The changes
required revisions to the heating, ventilation and air-conditioning,
lighting, and electrical systems.  The request also included about $7
million for a conveyor system and related mail processing equipment. 
The June 1995 funding request also said that in retrospect, the April
1994 DAR should not have been submitted until operational systems
layout, design, and definitive construction cost estimates had been
completed, but the request also said if that had been done,
construction would have stopped, and greater delay claims would have
been incurred. 

The June 1995 funding request also noted that a special task force
had identified a 141,000-square-foot deficiency in the new Main Post
Office, which was attributed to the decision to include mail
processing for the 17 ZIP Code areas and to incorporate automation
plans.  As a result, the funding request said that space planned for
use in the new Post Office for carriers and parcel post operations
would need to be identified and relocated. 


--------------------
\19 The Board approved $30.1 million of $40.9 million requested. 


      FEBRUARY 1996 INCREASE
---------------------------------------------------------- Letter :4.5

Finally, in February 1996, the Board approved an additional $16
million to renovate an aging postal annex adjacent to the old Main
Post Office called the "Sugar House" to house space for carriers and
parcel post operations originally planned for the new Post Office. 
The Sugar House renovation was needed to accommodate the
141,000-square-foot space deficiency identified in the June 1995
funding request.  The renovated Sugar House facility, which was
completed in September 1997, is also to contain operations that were
not originally intended for the Main Post Office, including the
Inspection Service Forensic Laboratory and stamp depository
functions.  The Postal Service also decided to retain the
second-class and third-class mail transfer operations and stamp
registry located in the Sugar House. 


      POSTAL INSPECTION SERVICE
      REVIEW FOUND MANY REASONS
      FOR COST OVERRUNS
---------------------------------------------------------- Letter :4.6

In November 1994, at the request of the Board of Governors, the
Postal Inspection Service began a review of the cost overruns at the
new Chicago Main Post Office.  The purpose of the review was to
determine whether there was any evidence of fraudulent activity
connected with the project; identify process deviations or
questionable decisions made by USPS officials in connection with the
project; and to make recommendations for improvement.  According to
the Inspection Service, its review involved over 8,000 investigative
hours and interviews with 114 individuals; as well as the review of 6
prior Chicago Division Inspection Service reports on the project and
contracts, architect/engineering files, and related documents. 

In May 1995, the Inspection Service presented the results of its
review to the Board of Governors.  Although the Inspection Service
found no evidence of fraud concerning the project, it identified
several reasons for the overruns.  These reasons included (1) the
city of Chicago's opposition to allowing construction on the
preferred site and the lack of a separate DAR for the alternative
site; (2) increased costs resulting from having the Postal Service
build over active railroad tracks at the alternative site; (3)
construction during major changes in Postal Service structure,
operations, and management personnel; (4) proceeding with
construction despite incomplete designs and automation plans; and (5)
an overall lack of coordination between USPS headquarters and the
field. 

In addition, the Inspection Service reported that continuous turnover
of decisionmakers at the Postal Service diminished overall
accountability for the project.  It also indicated that automation
requirements developed by USPS headquarters were not incorporated in
the new facility in a timely manner.  Further, the Inspection Service
said information that had been presented to the Board of Governors in
budget requests was inadequate and minimized negative aspects of the
project. 

In its May 1995 presentation to the Board, the Inspection Service
made the following four recommendations\20 about future major capital
projects:  (1) an on-site Project Manager should be assigned
responsibility for all aspects of projects from start to finish; (2)
the validation process for large projects should include a thorough
review and approval by personnel familiar with operations, equipment,
and fixed mechanization issues; (3) recommendations made by the Board
of Governors' Capital Improvement Committee should be followed;\21
and (4) the Inspection Service should selectively review projects
costing under $10 million. 

The Postal Service indicated that in response to the report, it has
made the following changes:  (1) a Facility Activation Manager was
selected to oversee large projects; (2) the review and validation
process for large projects has been enhanced through meetings with
operating managers, functional staff, and headquarters executives;
and (3) the Postal Service is adhering to the recommendations made by
the Board of Governors' Capital Improvement Committee (see app. 
III).  With regard to the fourth recommendation, the inspector in
charge of the review told us that the Inspection Service began
selectively reviewing projects costing under $10 million in fiscal
year 1997 and is now more involved in monitoring major capital
projects early in the process, such as by reviewing preliminary DARs,
than it was during the new Chicago Main Post Office project. 

We asked the Postal Service why the additional funding requests in
April 1994 and June 1995 were presented in closed, rather than open,
sessions of the Board of Governors.  The Postal Service responded
that at the time of those two meetings, USPS was negotiating with the
architectural firm and general contractor on change orders, and it
would not have been in the Postal Service's best interest to disclose
the amounts being requested for various changes.  An additional
reason cited by the Postal Service for closing the meetings was that
the Inspection Service was conducting an ongoing investigation of the
project. 

We also asked Postal officials whether they believed they would have
proceeded with the project or pursued an alternative, such as
renovating the old Main Post Office, had they initially known the new
facility's final cost.  An official who was involved in the
facility's planning said that the old Main Post Office was too old
and large to be feasibly renovated.  In a written response, the
Postal Service said that it could not speculate what alternatives
management and the Board would have chosen in 1990 had the final
costs been known at the time.  However, USPS indicated that there
were not many alternatives, and it could be assumed that the
renovation costs for the old Main Post Office, estimated at $250
million in the March 1990 DAR, were understated, since full
engineering studies had not been done. 


--------------------
\20 According to the Postal Service, the first three recommendations
were management recommendations that were already under way and
subsequently reported by the Inspection Service. 

\21 In 1993, the Board of Governors formed the Capital Improvement
Committee to examine the review and approval process for capital
investment projects.  In February 1995, the committee made 10 process
improvement recommendations and 4 accountability improvement
recommendations, which are listed in appendix III.  A postal official
said that two of those recommendations had the greatest potential for
preventing cost overruns similar to those experienced with the
Chicago Main Post Office in future projects-- (1) more frequent
project updates on capital investment projects and (2) the
implementation of an "early warning system" that provides the Board
of Governors with prompt and early notification of problems to avoid
surprises.  The Postal Service's Office of Inspector General also has
been given authority to audit facilities construction projects
costing over $10 million. 


   MAIL SERVICE IN THE NINTH
   ILLINOIS CONGRESSIONAL DISTRICT
------------------------------------------------------------ Letter :5

Your request also concerned complaints from constituents about the
quality of mail service in your district for many years.  Your office
indicated that service provided by the Graceland station, which is
part of the Chicago Postal District, was particularly problematic and
asked us to compare the performance of Graceland station to that of a
similar station in another city with a higher EXFC score than
Chicago's to attempt to determine the causes of problems at
Graceland.  The Postal District Manager for Boston identified the
Brookline, MA, station as being similar to Graceland in terms of the
type of area served (a densely populated area with many high-rise
residences) and volume of mail delivered. 

We asked the Postal Service to identify what indicators it compiles
regarding the performance of postal stations.  Postal Service
officials said they did not measure the accuracy of mail delivery. 
It provided what data it did have on workload/workforce issues (the
number of deliveries, routes, carriers, volume of mail delivered,
amount of carrier sick leave and overtime); timeliness (EXFC scores,
the number of routes with delayed mail, amount of curtailed and
delayed mail, and the number of carriers leaving the station late);
and the number of delivery-related complaints received.  However, the
Postal Service's Manager of Delivery Policies and Programs, who
provided some of the data, said that measuring the performance of one
station against another was affected by variables other than the
actual performance of the stations.  These other variables include
the differences between the makeup of residential, business, and
curbside deliveries made and the type of terrain covered.  Appendix
IV compares the performance measures between Graceland and Brookline
stations. 


      WORKLOAD/WORKFORCE MEASURES
---------------------------------------------------------- Letter :5.1

As of May 1997, Graceland station had 37,981 possible daily
residential deliveries and 2,026 possible daily business deliveries,
or a total of about 40,000 possible daily deliveries.  Also as of May
1997, Brookline had 26,085 possible daily residential deliveries and
1,549 possible daily business deliveries, or a total of about 27,600
possible daily deliveries.\22

We asked USPS to provide workload and performance data on the two
stations as of September 14 though 20, 1996, and January 18 through
24, 1997.  For both time periods, Graceland had 81 mail routes and
Brookline had 80.  During the week of September 14 through 20, 1996,
Graceland delivered about 8,000 feet of mail, or about 20 percent
more than Brookline, which delivered about 6,700 feet of mail. 
Graceland delivered about the same amount of mail as Brookline during
the week of January 18 through 24, 1997 (about 6,500 feet vs.  about
6,400 feet).  During the week reviewed in September 1996, Graceland
employed 108 full-time carriers and 17 part-time and temporary
carriers, compared to 128 full-time and 17 part-time and temporary
carriers at Brookline.  From September 1996 through January 1997, the
number of permanent carriers increased by two at Graceland and by
eight at Brookline.  However, from September 1996 to January 1997,
the number of part-time and temporary carriers working at Graceland
increased from 17 to 37, or 118 percent; the number of part-time and
temporary carriers at Brookline increased from 17 to 20, or 18
percent. 

In response to our request for performance data, the Postal Service
also provided data on the amount of carrier overtime and sick leave
incurred for the two time periods at Graceland and Brookline.\23

During the week of September 14 through 20, 1996, daily overtime
averaged about 15 percent of workhours at Graceland, compared to 12
percent at Brookline.  For the week of January 18 through 24, 1997,
daily overtime averaged about 10 percent at Graceland and 19 percent
at Brookline. 

During the week of September 14 through 20, 1996, the amount of daily
average sick leave incurred at Graceland was about 2 percent,
compared to about one-half of 1 percent at Brookline.  For the week
of January 18 through 24, the amount of daily average sick leave
incurred was about 1 percent at Graceland and nearly 4 percent at
Brookline. 


--------------------
\22 The Postal Service does not maintain historical data on the
number of possible deliveries, so we could not obtain data for the
two periods we selected for review.  The Chicago and Boston Postal
Districts provided data on the number of possible deliveries in May
1997. 

\23 According to a Postal Service headquarters official, standards
for sick leave and overtime usage are set at the postal district
level.  In Chicago, the standard is 3.86 percent of total workhours
for sick leave and 7.5 percent for overtime at postal stations.  In
Boston, the standard is 3.5 percent for sick leave and less than 10
percent for overtime usage. 


      TIMELINESS MEASURES
---------------------------------------------------------- Letter :5.2

The Postal Service collects data on on-time delivery of First-Class,
overnight mail in 95 major U.S.  metropolitan areas, including
Chicago and Boston, and assigns EXFC scores, but it does not break
down the scores by ZIP Code.  Therefore, the Postal Service could not
provide EXFC scores for individual ZIP Codes within the Ninth
Congressional District of Illinois.  For both time periods reviewed,
Boston had a higher EXFC score than Chicago.  For the first quarter
of fiscal year 1997, Chicago had an EXFC score of 84 and Boston had a
score of 87, compared to the national average of 91.\24 For the
second quarter of fiscal year 1997, Chicago had an EXFC score of 90
and Boston had a score of 91, compared to the national average of
91.\25

Nearly half of the ZIP Codes within the Ninth Congressional District
of Illinois are served by the Northern Illinois Postal District.  The
Northern Illinois Postal District had an EXFC score of 86 for both
the first and second quarters of fiscal year 1997. 

In recent years, EXFC scores for the Chicago and Northern Illinois
postal districts have improved considerably, as has the national
average.  For Chicago, EXFC scores increased from a low of 66 in the
second quarter of fiscal year 1994 to 90 in the third quarter of
fiscal year 1997.  For the Northern Illinois Postal District, the
scores increased from 77 in the second quarter of fiscal year 1994 to
91 in the third quarter of fiscal year 1997.  The national average
also increased from 79 in the second quarter of fiscal year 1994 to
92 for the third quarter of fiscal year 1997. 

Since 1994, Boston's EXFC scores have been an average of 3 percentage
points higher than Chicago's.  As shown in table 1.1, Boston had a
higher EXFC score than Chicago in 13 of the last 15 quarters
surveyed. 



                                    Table 1.1
                     
                      Overnight EXFC Scores for the Boston,
                      Chicago, and Northern Illinois Postal
                     Districts and the National Average From
                     FY 1994 Through the Third Quarter of FY
                                       1997

        Q1   Q2   Q3   Q4   Q1   Q2   Q3   Q4   Q1   Q2   Q3   Q4   Q1   Q2   Q3
        FY   FY   FY   FY   FY   FY   FY   FY   FY   FY   FY   FY   FY   FY   FY
        94   94   94   94   95   95   95   95   96   96   96   96   97   97   97
-----  ---  ---  ---  ---  ---  ---  ---  ---  ---  ---  ---  ---  ---  ---  ---
Bosto   81   73   81   81   82   82   86   83   83   80   87   88   87   91   88
 n
Chica   76   66   75   71   78   79   82   82   81   85   86  80\   84   90   90
 go                                                             a
No.     81   77   80   82   82   82   82   84   83   85   89   90   86   86   91
 IL
Natio   84   79   83   83   84   85   87   87   88   87   90   91   91   91   92
 nal
 aver
 age
--------------------------------------------------------------------------------
\a Chicago Postal officials attributed the 6 percentage point decline
in the EXFC score for the fourth quarter of fiscal year 1996 to the
impact of moving into the new Main Post Office from May through
September 1996. 

Figure 1.2 shows the EXFC scores from fiscal year 1994 through the
third quarter of fiscal year 1997 for the Boston, Chicago, and
Northern Illinois Postal Districts and the national average. 

   Figure 1.2:  Overnight EXFC
   scores for the Boston, Chicago,
   and Northern Illinois Postal
   Districts and the National
   Average From FY 1994 Through
   the Third Quarter of FY 1997

   (See figure in printed
   edition.)

Source:  USPS. 

The Chicago Postal District Manager said the improved EXFC scores
were the result of (1) more automation, (2) new and expanded
facilities throughout the Chicago area, (3) more and better training
of employees, (4) better management and more accountability, and (5)
dismissal of poor performers\26 and recognition of good employees. 

In response to our request for performance indicators on Graceland
and Brookline stations, the Postal Service provided data on the
number of routes with delayed mail, amount of curtailed and delayed
mail, and number of carriers leaving the station late.  For both time
periods in our review, Graceland had more routes with delayed mail
than Brookline.  Bulk business mail is considered delayed if it takes
more than 48 hours to leave the station.  First-Class mail is
considered to be delayed if it does not leave the station on the same
day it arrives.  During the week of September 14 through 20, 1996,
Graceland had a daily average of 26 routes with delayed mail and
Brookline had 1.  During the week of January 18 through 24, 1997,
Graceland had a daily average of six routes with delayed mail, and
Brookline had none.  For both time periods, Graceland station had
more curtailed or delayed bulk business mail than Brookline.  Mail is
curtailed if it is not yet scheduled for delivery--for example, to
coincide with a mailing advertiser's sale, or if the workload is
heavy on a particular day.  During the week of September 14 through
20, 1996, Graceland had a daily average of 135 feet of curtailed bulk
business mail and 171 feet of delayed bulk business mail, compared to
a daily average of 120 feet of curtailed mail and no delayed mail at
Brookline.  During the week of January 18 through 24, 1997, Graceland
had a daily average of 211 feet of curtailed bulk business mail and
93 feet of delayed bulk business mail, compared to no curtailed or
delayed bulk business mail at Brookline. 

Graceland averaged more carriers leaving the station late during the
week of September 14 through 20, 1996, than Brookline (17 vs.  9). 
However, during the week of January 18 through 24, 1997, Brookline
averaged considerably more carriers leaving the station late than
Graceland (48 vs.  15).  A carrier is considered leaving the station
late when a foot carrier leaves more than 10 minutes after the
scheduled departure time or a motorized carrier leaves the station
more than 20 minutes late. 


--------------------
\24 The Postal Service's first quarter of fiscal year 1997 ran from
September 14, 1996, through December 6, 1996. 

\25 The Postal Service's second quarter of fiscal year 1997 ran from
December 7, 1996, through February 28, 1997. 

\26 The Postal Service provided data showing that in 1996, 122 of its
13,397 Chicago Postal District career employees were dismissed, or
about 0.9 percent of its workforce.  In Boston, 27 of 8,645 career
employees were dismissed in 1996, or 0.3 percent.  Nationally, 2,181
career employees were dismissed in 1996 out of 755,475 employees, or
0.3 percent. 


      COMPLAINTS
---------------------------------------------------------- Letter :5.3

The Postal Service compiles complaints received at the station,
district office, or USPS headquarters.  Postal Service complaint data
showed that the Brookline station received more delivery-related
customer complaints than Graceland during the quarters that included
the 2 weeks we reviewed.\27 For the first quarter of fiscal year
1997, Brookline received 71 delivery-related complaints, compared to
32 for Graceland.  For the second quarter of fiscal year 1997,
Brookline received 47 delivery-related complaints, and Graceland had
14.  Many complaints for both stations concerned delayed and
nonreceipt of mail and change of address problems.  However, Postal
officials cautioned that the number of complaints reported may not be
reliable and could be affected by several factors other than
performance, such as whether customer complaint cards in the station
lobbies were available, whether the station manager accurately
reported the number of complaints to the Postal Service, and whether
certain customers were more likely to register complaints when they
experienced problems. 


--------------------
\27 The Postal Service collects data on complaints by quarter, rather
than by week. 


      SERVICE-RELATED IMPROVEMENT
      EFFORTS AT GRACELAND
---------------------------------------------------------- Letter :5.4

We asked the Graceland station manager, who was assigned temporarily
to the station in mid-September 1996 and selected permanently for the
position in March 1997, what actions she had taken to improve mail
service.  She said that she has tried to improve customer service by
keeping the same substitute carriers on routes, implementing an
improved mail-sorting process, and soliciting feedback about service
from citizen advisory councils and local officials.  She also said
that she regularly goes out into the community on Saturdays to meet
with customers about their mail service, has established a phone
center to receive complaints, and has taken disciplinary action
against poor-performing employees.  In addition, the District Manager
said a new late-night shift to sort mail was added at Graceland in
December 1996, and two new supervisors were transferred to the
station to monitor carriers. 

In April 1997, the Chicago Postal District distributed 39,000
customer surveys to measure the level of service improvement at
Graceland during the previous 3 months.  Of the surveys delivered,
2,295 were returned, or about 6 percent.  The respondents rated the
level of improvement as follows:  major improvement, 6 percent;
significant improvement, 13 percent; some improvement, 26 percent;
little improvement, 16 percent; and no improvement, 39 percent.  The
surveys also contained 442 comments, including 90 complaints about
misdelivery; 58 about delayed delivery; 31 about nondelivery; and 18
about change of address problems.  The rest were reports of multiple
problems (92), employee compliments (11), miscellaneous matters such
as damaged or tampered mail (11), and 131 that were not identified in
the survey results. 


      FACILITIES REVIEW
---------------------------------------------------------- Letter :5.5

During the course of our review, Chicago Postal Service officials
offered to review the physical condition of postal facilities within
your congressional district.  This review was performed during the
period from February through May 1997 by two teams of operational,
retail, and administrative staff from the Chicago and Northern
Illinois Postal Districts serving the Ninth Illinois Congressional
District.  The teams were supported by a real estate specialist, a
design and construction specialist, and an operations analyst from
the Chicago Facilities Service Office.  In addition, an outside
architectural/engineering firm was retained to assist in the review. 
We reviewed the report that resulted from this facility survey. 

The report indicated that the condition of all facilities enabled
USPS to meet operational needs.  The report identified miscellaneous
repairs and alterations and items for customer convenience that could
be made at the facilities.  The report did not indicate the cost of
making the identified improvements; however, it did say that the
facilities would have to compete with other sites in the area for
very limited funds.  With regard to Graceland station, the facilities
review team said that signs in and around the station should be
replaced and that the station should be upgraded to Postal Store
standards, but with closed, rather than open, shelf merchandising of
postal products.\28

Appendix V shows the results of the review, by facility. 

Postal Service officials said that complaints regarding mail service
may not necessarily be caused by facilities problems.  They said that
the new Chicago Main Post Office, for example, would not be
responsible for misdelivery of mail.  In addition, they said that
more money would not solve problems at the Graceland station,
problems they attributed primarily to employee nonperformance. 


--------------------
\28 The Postal Store is the Postal Service's name for its new retail
operations in post offices offering a variety of postal products,
such as sheets and books of postage stamps, mailing supplies, and
postal-themed merchandise, which are displayed on open shelves for
customer pick-up and selection. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Based on our review of the events that occurred and the Postal
Inspection Service's investigation, the cost overruns at the Chicago
Main Post Office appeared to be due primarily to shortcomings in
planning the construction project.  The Postal Service approved
construction on a site that was opposed by the city of Chicago and
then used a cost estimate for an alternative site that did not
adequately reflect the complexity and cost of building over active
railroad tracks and other factors.  Further, management's
incorporation of increased automation plans into the facility while
it was being constructed resulted in costly design changes. 

The Postal Service has implemented several process changes that could
reduce the likelihood of cost overruns in future capital investment
projects, such as more Inspection Service involvement earlier in
construction projects and the establishment of an early warning
system to alert the Board of Governors to problems. 

Our comparison of data provided for the two stations confirmed that
differences existed in terms of the performance indicator results but
also showed that the data provided were not informative about the
causes of problems with mail service at Graceland or in Chicago. 
This was partly due to the differences in the types of deliveries
made by both stations and uncertainty about whether the total number
of complaints was accurately reported. 

Although recent EXFC scores suggest that mail service is improving in
Chicago, the Postal Service has no way of knowing whether this
improvement will be sustained.  Further, postal problems that have
plagued Chicago, and Graceland station in particular (which receives
the second-highest mail volume in the city), have been long-standing. 

The Postal Service has made efforts to improve mail service in
Chicago by installing a new management team, investing in new
facilities and equipment, and taking measures to improve employee
performance, and EXFC scores are improving.  However, the city of
Chicago's EXFC score still could be improved.  Further, because EXFC
scores are not compiled at the individual ZIP Code level, they do not
necessarily reflect whether the quality of service being provided
within the Ninth Congressional District of Illinois is improving. 
Also, whether the current, apparent increased performance will be
sustained remains to be seen. 

In view of the history of problems experienced at the Graceland
station and the limitations of the EXFC scores, which are compiled
for the Postal Service by an independent contractor and do not
measure individual station performance, it seems appropriate for an
entity independent of the Chicago Postal Service management to
monitor the performance of the Graceland station to ensure that
problems that may arise are identified and resolved. 


   RECOMMENDATION
------------------------------------------------------------ Letter :7

We recommend that the Postmaster General have an entity independent
of Chicago Postal Service management monitor the quality of mail
service at the Graceland station by reviewing relevant performance
data for the next 2 years.  The independent entity should
periodically report progress and any problems identified, along with
corrective actions taken, to appropriate Postal Service officials. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :8

The Postmaster General provided written comments on a draft of this
report, which are printed in appendix VI. 

The Postmaster General said that the report accurately summarized the
circumstances and actions that caused the cost overruns at the new
Chicago Main Post Office.  He also said that the Postal Service has
instituted a number of safeguards to strengthen the review process
and ensure more management involvement and accountability for
large-scale capital investment projects.  With respect to mail
service in Chicago, the Postmaster General noted that Chicago's EXFC
score for the fourth quarter of fiscal year 1997 was 92--a record
score for the city.  He also said that he will instruct the
Inspection Service, as well as postal managers in Chicago and
Washington, to periodically review Graceland station's performance
and report its findings to appropriate officials.  Other Postal
Service officials provided clarifying comments, which were
incorporated throughout the report, as appropriate. 


---------------------------------------------------------- Letter :8.1

This review was done by John S.  Baldwin, Sr., Assistant Director;
and Robert Homan, Evaluator-in-Charge.  If you have any questions
about this report, please call me on (202) 512-8387. 

Sincerely yours,

Bernard L.  Ungar
Director, Government Business
 Operations Issues


ZIP CODES AND POSTAL DISTRICTS
WITHIN THE NINTH CONGRESSIONAL
DISTRICT OF ILLINOIS
=========================================================== Appendix I

The Ninth Congressional District of Illinois is served by two USPS
districts:  the Chicago District and the Northern Illinois District. 
Table I.1 shows which ZIP Codes within the congressional district are
served by the two postal districts. 



                               Table I.1
                
                  ZIP Codes of the Ninth Congressional
                          District of Illinois

                                                     Northern Illinois
Chicago Postal District                                Postal District
----------------------------------------  ----------------------------
60613\a                                                        60025\a
60626                                                            60029
60630\a                                                          60053
60631\a                                                          60076
60640\a                                                          60077
60645                                                            60201
60646\a                                                          60202
60648\a                                                          60203
60656\a                                                          60204
60657\a                                                          60208
60659\a                                                          60209
60660                                                            60251
60701
60714\a
60799
----------------------------------------------------------------------
\a Neighboring congressional districts also include these ZIP Codes. 

Source:  USPS. 


SUMMARY OF COST OVERRUNS AT THE
NEW CHICAGO MAIN POST OFFICE
========================================================== Appendix II

From December 1991 though February 1996, the Postal Service Board of
Governors approved four requests totalling $133.2 million for
additional funding for the new Chicago Main Post Office.  Table II.1
summarizes the major reasons for the funding modifications. 



                                    Table II.1
                     
                      Changes in Funding for the New Chicago
                                 Main Post Office

          Additional       Total
              amount     project
Date of     approved     funding
Board            (in         (in
approval   millions)   millions)  Major reasons for modification
--------  ----------  ----------  ----------------------------------------------
March            N/A      $199.7  Original estimate
 1990
December       $41.7      $241.4  The city of Chicago opposed construction on
 1991                              the preferred site. The cost estimate for the
                                   alternative site, which involved construction
                                   over railroad tracks and restrictions on
                                   building near the waterfront, was not based
                                   on then-current and complete engineering
                                   estimates. Facilities management did not
                                   disclose to the Board of Governors that an
                                   in-depth analysis was not performed on the
                                   Harrison Street site when it was presented
                                   for approval.
April          $45.4      $286.8  USPS decided to incorporate processing for 17
 1994                              ZIP Code areas, originally planned for
                                   another facility, into the new Main Post
                                   Office, requiring a complete redesign of the
                                   workroom; and assumed responsibility for
                                   repairing the Polk Street bridge, which
                                   provided truck access to the new facility.\a
June           $30.1      $316.9  USPS underestimated the costs of adding the 17
 1995                              postal stations to the facility. USPS also
                                   noted a 141,000-square-foot deficiency in the
                                   facility caused by adding the 17 stations.
February         $16      $332.9  USPS decided to renovate the adjacent Sugar
 1996                              House building to fulfill the 141,000-
                                   square-foot space deficiency caused by adding
                                   the 17 stations to the new Main Post Office.
--------------------------------------------------------------------------------
\a Of the $7.8 million estimated cost to repair the bridge, the
Postal Service recovered $5 million in 1996 from the Chicago Union
Station Company, an Amtrak subsidiary. 

Source:  USPS. 


USPS BOARD OF GOVERNORS' CAPITAL
IMPROVEMENT COMMITTEE
RECOMMENDATIONS FOR PROCESS
IMPROVEMENTS
========================================================= Appendix III

In 1993, the USPS Board of Governors formed the Capital Improvement
Committee to examine the review and approval process for capital
investment projects.  In February 1995, the Committee made 10 process
improvement recommendations and 4 accountability improvement
recommendations, which are listed in tables III.1 and III.2.  The
Postal Service indicated that these recommendations have been
implemented. 



                              Table III.1
                
                    USPS Board of Governors' Capital
                 Improvement Committee Recommendations
                        for Process Improvements

Process improvement recommendations
----------------------------------------------------------------------
1. Management should standardize Decision Analysis Reports and improve
the quality of information provided for management and Board review.

2. Management should ensure that the facility contracting process and
contracting documents fully and consistently protect the interests of
the Postal Service.\a

3. Management should ensure that the process for participation by
minority contractors is followed.

4. The Finance Department should look at the capital investment
process in other organizations to see if any outside processes could
be applied within the Postal Service.

5. Management should continue to use the Inspection Service audit
functions to determine if the process can be strengthened in any way.

6. Project sponsors should carefully consider closed vs. open Board
meetings when presenting capital investment projects to ensure that
the procurement function is not harmed by disclosure of data.

7. Project sponsors should provide the Decision Analysis Report to the
Board for discussion in the first month and request a vote in the next
or a subsequent month.

8. Project sponsors should provide preliminary briefings to the Board
on complex projects.

9. Management should continually examine the review and approval
process for capital projects so that it can act upon continual
improvement opportunities.

10. The Board of Governors should retain the $10 million approval
authority.
----------------------------------------------------------------------
\a According to a Postal official, this recommendation was made to
address a concern about too many people being involved in facilities
contracting.  At the time, facilities contracting was done by both
the facilities and procurement offices.  As a result of this
recommendation, facilities contracting was consolidated in the
procurement office. 



                              Table III.2
                
                    USPS Board of Governors' Capital
                     Improvement Committee Capital
                 Investments Accountability Improvement
                            Recommendations

Accountability improvement recommendations
----------------------------------------------------------------------
1. Implementing managers should provide more frequent project updates
to the Board on the status of projects approved by the Board.

2. Management should ensure that an "early warning system" exists to
alert the Board of any problems that occur on projects.

3. Finance should provide data to the Board on projects costing under
$10 million and determine if any process improvements are needed for
such projects.

4. Management should reinforce procedures requiring prior approval
before funds are reallocated within a project.
----------------------------------------------------------------------
Source:  USPS Board of Governors. 


WORKLOAD AND PERFORMANCE
INDICATORS OF GRACELAND AND
BROOKLINE STATIONS
========================================================== Appendix IV

We compared the performance of Graceland station to a similar station
in another city with a higher EXFC score than Chicago's.  The Postal
Service identified Boston's Brookline station as being similar to
Graceland in terms of serving a densely populated area with many
high-rise residential units.  At our request, the Postal Service
provided workload/workforce measures (the number of deliveries,
routes, and carriers, volume of mail delivered, amount of carrier
sick leave and overtime); timeliness measures (EXFC scores, the
number of routes with delayed mail, amount of curtailed and delayed
bulk business mail, and the number of carriers leaving the station
late); and the number of delivery-related complaints received during
the weeks of September 14 through 20, 1996, and January 18 through
24, 1997, at the Graceland and Brookline stations.  We chose these 2
weeks to compare the Graceland station's performance for the week
when the new manager began working at the station and for 4 months
later.\29 Tables IV.1 and IV.2 compare the performance of the two
stations during the two time periods. 



                                    Table IV.1
                     
                       Comparison of Selected Workload and
                       Performance Indicators for Graceland
                     Station in Chicago and Brookline Station
                      in Boston for the September 14 Through
                                 20, 1996, Period

                                                       Graceland       Brookline
------------------------------------------------  --------------  --------------
Workload/workforce
Number of possible residential deliveries\ (May           37,981          26,085
 1997)
Number of possible business deliveries\ (May               2,026           1,549
 1997)
Number of routes                                              81              80
Volume of mail delivered (in feet)\                        8,012           6,701
Number of permanent carriers                                 108             128
Number of part-time and temporary carriers                    17              17
Carrier overtime (percent of workhours)\a                  15.32           11.99
Carrier sick leave (percent of workhours)\a                  2.1            0.55
Timeliness
Rate of on-time overnight delivery of First-                  84              87
 Class mail for city (EXFC score)                 (first quarter  (first quarter
                                                     FY 1997 for     FY 1997 for
                                                      Chicago)\b         Boston)
Number of routes with delayed mail\a,c                        26               1
Feet of curtailed bulk business mail\a,d                     135             120
Feet of delayed bulk business mail\a                         171               0
Number of carriers leaving the station late\a,e               17               9
Number of complaints\f (first quarter FY 1997)
Delayed mail                                                  12              22
Misdelivery                                                    4               6
General service complaints                                     4               2
Daily delivery time variation                                  1              15
Change of address problems                                     1               7
Improperly returned mail                                       3               5
Improper delivery/mode of delivery                             1               5
Nonreceipt of mail                                             6               9
Total delivery-related complaints                             32              71
--------------------------------------------------------------------------------
\a Daily average. 

\b The EXFC score for the Northern Illinois Postal District, which
serves part of the Ninth Congressional District of Illinois, was 86
for the first quarter of fiscal year 1997. 

\c First-Class mail is considered delayed if it does not leave the
station the same day it is received.  Bulk business mail is
considered delayed if it takes more than 48 hours to leave the
station. 

\d Mail is curtailed if it is not yet scheduled for delivery--for
example, to coincide with a mailing advertiser's sale, or if workload
is heavy on a particular day. 

\e A carrier is considered as leaving the station late when a foot
carrier leaves more than 10 minutes after the scheduled departure
time, or a motorized carrier leaves the station more than 20 minutes
late. 

\f Delivery-related complaints received at the postal station,
district office, or USPS headquarters.  The "delayed mail" and
"general service complaints" categories could include some other
types of complaints that are not delivery related.  Nondelivery
complaints are those concerning no delivery of any mail, whereas
nonreceipt of mail pertains to a complaint about a specific piece of
mail not being received. 

Source:  USPS. 



                                    Table IV.2
                     
                       Comparison of Selected Workload and
                       Performance Indicators for Graceland
                     Station in Chicago and Brookline Station
                     in Boston for the January 18 Through 24,
                                   1997, Period

                                                       Graceland       Brookline
------------------------------------------------  --------------  --------------
Workload/workforce
Number of possible residential deliveries (May            37,981          26,085
 1997)
Number of possible business deliveries (May                2,026           1,549
 1997)
Number of routes                                              81              80
Volume of mail delivered (in feet)                         6,540           6,428
Number of permanent carriers                                 110             136
Number of part-time and temporary carriers                    37              20
Carrier overtime (percent of workhours)\a                   9.84           18.66
Sick leave (percent of workhours)\a                         1.49            3.69
Timeliness
Rate of on-time overnight delivery of First-                  90              91
 Class mail for city (EXFC)                              (second         (second
                                                      quarter FY      quarter FY
                                                        1997 for        1997 for
                                                      Chicago)\b         Boston)
Number of routes with delayed mail\a,c                         6               0
Feet of curtailed bulk business mail\a,d                     211               0
Feet of delayed bulk business mail\a                          93               0
Number of carriers leaving the station late\a,e               15              48
Number of complaints\f (second quarter FY 1997)
Delayed mail                                                   2              13
Misdelivery                                                    0               3
General service complaints                                     1               1
Daily delivery time variation                                  1               3
Change of address problems                                     1               6
Improperly returned mail                                       2               4
Nondelivery                                                    0               1
Improper or attempted delivery                                 2               4
Hold order problem                                             0               2
Nonreceipt of mail                                             5              10
Total delivery-related complaints                             14              47
--------------------------------------------------------------------------------
\a Daily average. 

\b The EXFC score for the Northern Illinois Postal District, which
serves part of the Ninth Congressional District of Illinois, was 85
for the second quarter of fiscal year 1997. 

\c First-Class mail is considered delayed if it does not leave the
station the same day it is received.  Bulk business mail is
considered delayed if it takes more than 48 hours to leave the
station. 

\d Mail is curtailed if it is not yet scheduled for delivery--for
example, to coincide with a mailing advertiser's sale, or if workload
is heavy on a particular day. 

\e A carrier is considered as leaving the station late when a foot
carrier leaves more than 10 minutes after the scheduled departure
time, or a motorized carrier leaves the station more than 20 minutes
late. 

\f Delivery-related complaints received at the postal station,
district office, or USPS headquarters.  The "delayed mail" and
"general service complaints" categories could include some other
types of complaints that are not delivery related.  Nondelivery
complaints are those concerning no delivery of any mail, whereas
nonreceipt of mail pertains to a complaint about a specific piece of
mail not being received. 

Source:  USPS. 


--------------------
\29 Graceland's current station manager was assigned temporarily to
the station on September 14, 1996. 


PHYSICAL CONDITION OF POSTAL
FACILITIES IN THE NINTH ILLINOIS
CONGRESSIONAL DISTRICT
=========================================================== Appendix V

In November 1996, Postal officials offered to review the physical
condition of postal facilities in Congressman Yates' district.  This
review was performed by two teams of operational, retail, and
administrative staff from the Chicago and Northern Illinois Postal
Districts serving the Ninth Illinois Congressional District.  The
teams were supported by a real estate specialist, a design and
construction specialist, and an operations analyst from the Chicago
Facilities Service Office.  In addition, an outside
architectural/engineering firm was retained to assist in the review. 
Tables V.1 and V.2 summarize the review findings, by postal facility,
in the Chicago and Northern Illinois Postal Districts, respectively. 



                                    Table V.1
                     
                        Repairs/Alterations Identified for
                        Chicago Postal District Facilities
                     Serving the Ninth Congressional District
                                   of Illinois

Postal facility
and ZIP Code(s)     Repairs/alterations identified, comments
------------------  ------------------------------------------------------------
Niles Branch,       New signage needed to identify the facility from the
Niles, IL, 60714    street.
                    Minor repairs needed.
                    A new Postal Store is planned.\a

Harwood Heights     Recommend converting existing facility into a carrier
Branch, Chicago,    annex.\b
60656               Incorporate safety items into carrier annex conversion.
                    Recommend relocation of finance portion into a finance
                    unit\c to include a Postal Store, with open merchandising.\d

Norwood Park        Provide exterior signage to better identify facility from
Branch, Chicago,    the street.
60631               Minor interior repairs are needed.
                    New Postal Store completed in March 1995.

Edgebrook Finance   Facility is served by an adjacent carrier annex, which has
Station, Chicago,   noticeable overcrowding.
60646               Facility needs interior housekeeping.
                    New Postal Store with open merchandising was completed in
                    July 1995.

Jefferson Park      The facility is supported by a leased garage that services
Finance Station,    postal vehicles.
Chicago, 60630      Exterior repairs and remodeling are needed.
                    Facility is served by a carrier annex and a parking lot,
                    which is located across the street.
                    Customers park at the carrier annex.
                    Major remodeling for a new Postal Store with open
                    merchandising is planned for completion in the spring of
                    1998.

Ravenswood          Additional objective is to relocate post office boxes into
Station, Chicago,   this facility from the detached post office box unit,\e
60625               which is located across the street from this station.
                    Provide new exterior signage.
                    Minor interior repair and alterations.
                    This facility is also served by a second detached post
                    office box unit\ in the delivery area.
                    Consider conversion to Postal Store with open merchandising.

Station Q,          Add exterior signage.
Chicago, 60625      Minor repairs and alterations.
                    Convert to Postal Store standards with closed merchandising.

Uptown Station,     Minor roof repairs are needed.
Chicago, 60640      Add stamp vending in customer service lobby.
                    Upgrade appearance of interior customer and support areas.

Northtown Station,  Provide new exterior signage.
Chicago, 60645/59   Reconfigure post office box lobby stamp vending.
                    Reconfigure rest rooms.
                    Install modified Postal Store with open merchandising.

Rogers Park         Station recently expanded for carrier and retail
Station, Chicago,   operations.
60626/60            New Postal Store with open merchandising was completed in
                    May 1995.
                    Repairs and upgrading of the flooring and lighting are
                    currently under way in this facility.
                    Recommend working with the city to increase customer street
                    parking.
                    Make minor repairs and alterations.
                    Provide exterior signage.

Station M,          Relocate finance unit and upgrade to Postal Store standards
Chicago, 60626/60   with closed merchandising.

Station F,          Upgrade entrance accessibility.
Chicago, 60626/60   Provide exterior signage.
                    Add Postal Store with closed merchandising.

Lakeview Station,   Minor exterior and interior repair and alterations are
Chicago, 60613      needed.
                    Add Postal Store with open merchandising to the lobby.

Graceland Finance   Replace exterior signage.
Station, Chicago,   Add pylon sign at Ashland Ave.
60657               Upgrade lobby signage.
                    Upgrade to Postal Store standards with closed merchandising.

Lincoln Park        Replace exterior signage.
Finance Station,    Provide safety devices on mechanical lifts.
Chicago, 60614      Customer parking is provided by validated parking across the
                    street.
--------------------------------------------------------------------------------
\a The Postal Store is the Postal Service's name for its new retail
operations in post offices offering a variety of postal products,
such as sheets and books of postage stamps, mailing supplies, and
postal-themed merchandise, which are displayed on open shelves for
customer pick-up and selection. 

\b A carrier annex is a facility that houses the carrier routes
without a retail or post office box operation.  Retail and post
office boxes are provided at finance stations. 

\c A finance unit is a nondelivery postal branch or station for
financial services and acceptance of mail. 

\d Open merchandising refers to displaying items for sale on open
shelves, rather than behind the counter. 

\e A detached Post Office Box Unit is usually established to augment
a station or branch post office where additional post office boxes
are needed to satisfy customer demand for this service.  Stamp
vending is also provided at these locations so that customers can
purchase stamps. 



                                    Table V.2
                     
                        Repairs/Alterations Identified for
                        Northern Illinois Postal District
                           Facilities Serving the Ninth
                        Congressional District of Illinois

Postal facility
and ZIP Code(s)     Repairs/alterations identified, comments
------------------  ------------------------------------------------------------
Morton Grove, IL,   Add building signage.
Main Post Office,   Minor interior and exterior repairs needed.
60053               Asphalt repairs in parking lot and maneuvering area needed.
                    Consider conversion to Postal Store.

Golf, IL, Main      Add post office boxes.
Post Office, 60029  Consider conversion to Postal Store.

Glenview, IL, Main  Make needed safety improvements.
Post Office, 60025  Replacement facility currently in progress.
                    Facility is supported by leased parking and a detached post
                    office box unit.

Skokie, IL, Old     New Postal Store recently completed.
Orchard Branch,     Modify rear door hardware.
60077

Skokie, IL, Main    Upgrade safety items.
Post Office, 60076  Interior repairs needed.
                    This facility is supported by leased parking and a detached
                    post office box unit.
                    Consider conversion to Postal Store, which would enlarge
                    lobby.

Evanston, IL, Main  Refurbish historic lobby.
Post Office, 60201  Remodel rest rooms.
                    This facility is supported by leased parking and a detached
                    post office box unit, as well as a vehicle maintenance
                    facility.
                    Consider adding merchandising cases.

Evanston, IL,       Contact lessor to perform deferred maintenance on the
South Station,      facility.
60202               Remodel dock.
                    Make safety improvements.
                    Consider converting to Postal Store standards.

Evanston, IL,       Upgrade building systems and address deferred maintenance.
North Station,      Consider converting to Postal Store standards.
60201
--------------------------------------------------------------------------------
Source:  USPS. 




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE POSTAL SERVICE
=========================================================== Appendix V


*** End of document. ***