US Postal Service 2005 Annual Report Download - page 39

2005 Annual Report United States Postal Service | 29
was $13 million more than 2003. Information technology
costs decreased $78 million, or 16% in 2005, this was
on top of the $66 million decrease achieved in 2004.
This reflects the continuing downward price trend in this
industry and favorable negotiations on software mainte-
nance and licensing agreements. Facility maintenance
services declined $21 million as repair projects returned to
a more normal level, in contrast to the $64 million increase
in 2004. The 2004 increase was a result of long delayed
repair projects that were undertaken. We also spent
$55 million in 2004 to decontaminate the Trenton, NJ and
Washington, DC facilities closed due to the Anthrax attack.
In 2005, we increased our provision for contingent
liabilities due to an adverse settlement of three labor-re-
lated arbitration cases. These cases which are recorded
as miscellaneous expenses contributed approximately
$115 million to the increase in Other expenses in 2005.
This was the opposite of 2004 when our contingent liability
expense decreased $32 million from 2003. These swings
are not unusual due to the unpredictable timing of these
types of cases.
In 2005, we re-evaluated our allowance for bad debt
methodology, based on our last five years of collection
history. This change in estimate reduced our bad debt
expense by $77 million over 2004. In 2004 bad debt
expense increased $25 million over 2003.
Productivity
We use two indicators to
measure our efficiency. We use
output per workhour, which
measures the change in the
relationship between workload
(mail volume and deliveries) and
the labor resources used to do
the work. We use total factor
productivity (TFP) to measure
the change in the relationship
between outputs, or workload,
and all the resources used in
producing these outputs. Our
main output is delivered mail
and special services and carrier
service to an expanding delivery
network. TFP calculations
include inputs for all resources
including labor, materials,
transportation and capital
investments.
During 2005, our output per workhour grew 1.4% and
our TFP improved 1.1%. This TFP growth is equivalent to
$749 million in expense reductions. This marks our sixth
consecutive year of TFP growth, equivalent to an expense
reduction of over $6.8 billion over this time. Our produc-
tivity growth this year was driven primarily by absorbing
workload growth. Mail volume grew by 2.7% and delivery
points grew by 1.6% contributing to a 1.8% increase
in workload. We were able to achieve TFP growth by
managing an increased workload with a smaller increase
in resource usage. We continue our policy to develop an
annual budget so that the net income target also yields
positive and sustainable TFP growth.
Capital Investments
The Board of Governors approves the budget for invest-
ments in capital property and equipment each year. The
Board also approves all major capital projects, generally
defined as projects greater than $25 million. The year
began with 49 Board-approved projects in progress,
representing $5.0 billion in approved capital. Subsequent
to the start of FY 2005, lease-only approvals not includ-
ing a capital investment are no longer tracked as capital
investments. As a result, one project was removed from
the inventory of Board-approved capital investments during
the 2005 year. During the year, the Board approved 8 new
projects and modifications to 3 existing projects, totaling
$1.9 billion in approved capital. 12 projects, represent-
ing $591 million in approved funding, were completed in
0.0
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72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Average Annual Growth (red line)
1972-1999 = 0.3%
Average Annual Growth
2000-2005 = 1.7%
TOTAL FACTOR PRODUCTIVITY
CUMULATIVE % CHANGE