The OIG’s Oversight of the U.S. Postal Service’s Delivering for America Plan, Volume 4

The OIG’s Oversight of the U.S. Postal Service’s Delivering for America Plan

Volume 4

September 2026

U.S. Postal Service Office of Inspector General

Five years into the Delivering for America 10-year (DFA) plan, our oversight has found a mix of persistent challenges and encouraging progress, as some initiatives have advanced meaningfully, while others have slowed or shifted direction. Despite these efforts, the Postal Service’s financial condition remains dire at its plan’s midpoint.

This oversight update, Volume 4, evaluates how the plan has progressed from inception to its midpoint.

The DFA plan outlined 13 strategic initiatives, which we have grouped into four focus areas: financial performance, service, network integration, and post office and product modernization.

Financial Performance

The Postal Service has faced a long-term pattern of financial losses dating back to 2007, and if no changes were made, the Postal Service projected the losses would have reached roughly $160 billion by FY 2030. In the DFA plan, it sought to reverse these losses by making operational improvements, expanding pricing flexibility, and obtaining legislative relief.

Revenue, Pricing Strategy, and Regulatory Constraints

During the first five years of the DFA plan, the Postal Service increased rates for Market Dominant products seven times, roughly a 50% cumulative hike. While these price adjustments boosted revenue by about 9.1%, they coincided with a 16% decline in mail volume. Competitive products also experienced revenue and volume pressure, despite several price hikes and the successful introduction of USPS Ground Advantage.

Change in Revenue, Price and Volume
from Inception of the DFA plan to FY 2025

In FY 2026, the Postal Regulatory Commission limited Market Dominant price adjustments to one per year. In response to adverse market conditions, the Postal Service secured a temporary Competitive price increase until early 2027 to offset rising transportation and fuel costs and implemented a 4.8% Market Dominant increase in July 2026. The Postal Service is seeking additional pricing authority to eliminate the CPI price cap or allow a 23% rate reset. The petition is pending before the Commission.

Controllable and Noncontrollable Costs

Despite improvements and some legislative relief, the Postal Service recorded $30.8 billion in net losses from FY 2021 through FY 2025. Compensation and benefits, followed by transportation expense, were the largest controllable cost drivers.

Noncontrollable costs accounted for 68.6% of total net losses, driven by retirement-related obligations and volatile workers' compensation expenses.

Noncontrollable Portion of Workers’ Compensation and
Total Expenses Change Year Over Year

The Postal Service has sought further reforms, including greater control over the workers' compensation program, reallocation of CSRS liabilities, the ability to invest pension assets in market-based instruments, and raising the statutory debt ceiling. As of October 2026, these reforms have not passed.

Management has emphasized that further administrative and legislative actions are required to address systemic issues continuing to impede long-term sustainability.

Service

In the original DFA plan, the Postal Service set a goal to deliver at least 95% of all mail and packages on time.

The Postal Service updated its service standards in 2021 and 2025 and implemented the 2025 Regional Transportation Optimization initiative to realign service expectations with the updated network changes. The changes succeeded in decreasing costs by reducing the number of trips between post offices and mail processing facilities, but also increased nationwide delivery times, with rural communities experiencing the most significant service declines.

Despite successes in the FY 2026 peak mailing season and the 2024 general election, the Postal Service has not met its DFA plan goal of delivering at least 95% of all mail and packages on time for most products over the last five years.

First‑Class Mail and Flat Composite
Performance Indicators

Network Integration

The vision of the DFA plan was to transform the processing network from an aging, mail-centric network into a scalable, automated system adaptable to future demands. The initial plan outlined an early iteration of a modernized network, which has evolved over the last five years.

As of September 2024, the Postal Service committed $17.3 billion to redesign the processing network and improve facility conditions, resulting in the establishment of Regional Processing and Distribution Centers (RPDCs), Local Processing Centers (LPCs), and Sorting & Distribution Centers (S&DCs), as well as updating equipment and addressing deferred maintenance at existing facilities.

Activation of RPDCs, LPCs, and S&DCs has lagged behind early targets, and new components like Regional Transfer Hubs lack performance monitoring tools needed to measure transportation savings or service impacts.

Mail Processing Facilities Planned vs.
Activated as of May 2026

Mail Processing Machines

To support package processing, the Postal Service invested over $2.9 billion as of June 2026, in new equipment aimed at boosting package throughput, including more than 400 Small Delivery Unit Sorters and multiple Matrix Regional Sorters (MaRS).

Major Package Processing Machines
Purchases as of June 2026

Post Office and Product Modernization

Before the Postal Service developed the DFA plan, its facilities suffered from years of underinvestment, and the organization faced challenges in providing modern and efficient products and services.

Post Office Modernization

The DFA plan set out to modernize and transform over 31,000 retail locations, providing a broader range of services aligned with customer demand and creating postal‑centric retail hubs for local businesses. Other planned upgrades include partnerships with government entities for additional services and expanded self‑service options. However, less than 1% of facilities have been fully modernized.

From the start of the DFA plan to July 2026, the Postal Service invested about $323 million in retail modernization, representing 8% of the total amount committed in the DFA plan. Incremental investments in equipment included enhanced self‑service kiosks at around 2,600 locations and smart lockers at approximately 700 locations.

Product Modernization

The DFA plan set to launch innovative products to boost revenue and strengthen competitiveness, marked by both progress and setbacks. Some new products were introduced, while others were rebranded versions of existing offerings.

• USPS Ground Advantage consolidated several ground and First‑Class Package services into a single product. It has driven revenue gains and increased the Postal Service’s presence in the package market.

• USPS Connect Regional offers expanded geographical reach for next-day and two-day delivery. It generated nearly $1.3 billion in revenue through the first half of FY 2026.

• USPS Connect Local offers same-day or next-day delivery within the same ZIP Code. It generated only about $52,000 in revenue.

• USPS Connect eCommerce was discontinued due to low market response.

• USPS Local Xchange, launched in July 2026, enables customers to buy, sell, and swap items locally through USPS Smart Lockers. This product shows promise as parcel lockers’ use is growing worldwide, but its success is still uncertain.

Collectively, these products have broadened the Postal Service’s market presence and generated additional revenue, but the long‑term impact in a competitive environment remains unclear.

OIG Work and Recommendations

Since the DFA plan began, the OIG has conducted extensive oversight, issuing 80 reports on financial performance, service, network integration, and post office and product modernization efforts. Across these reports, the OIG made 348 recommendations, and the Postal Service has worked to implement necessary actions to close 306.

For example, in the financial performance area, we recommended that the Postal Service provide the public with updated financial projections since the DFA plan’s release, as market conditions, noncontrollable costs, and revenue have shifted dramatically. This recommendation remains open. In the service and network integration area, we reviewed new facilities and equipment, including making a recommendation to establish more realistic and attainable goals for the performance and cost savings of the MaRS machine deployed in RPDCs. The Postal Service agreed and closed this recommendation.

Conclusion

Despite the strategic initiatives introduced in the first five years of the DFA plan, the Postal Service’s financial condition continues to pose significant risk to long-term stability.

As implementation continues, maintaining operational excellence and improving its financial condition to sustain operations remains critical. We will continue our oversight as the Postal Service moves forward with the plan.