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l

The

USPS

record

on

postal

automation

R&D

is

mixed.

USPS

continues

to

underspend on R&D compared to the U.S. industry average, and postal R&D organization

and management appear to

commitment.

Despite

20

have lacked stability, clear direction and, at times, top level years of USPS investment in optical character recognition

R&D, when USPS solicited manufacturers manufacturers previously receiving USPS withdrawn from the market, in part due to automation strategy.

in 1980 for single-line OCRs, all U.S. support for single-line OCR R&D had several years of USPS indecision on an

On the other hand, USPS has established a good track record in narrowly focused R&D on improvements to upgrade existing equipment, such as the multi-position letter sorting machine. Also, despite some variability in funding and commitment, USPS has provided enough support over the last 14 years to Recognition Equipment, Inc. (REI) such that REI has developed one of the leading multi-line OCRs on the world market.

Summary of Decision Analysis

USPS faces a decision point as to whether to continue its commitment to ZIP+4 and single-line OCR technology or to modify that commitment in some way.

OTA employed decision analysis techniques to:

identify the range of options

available to USPS; develop a probabilistic cash flow model of probability distributions for key variables such as ZIP+4 usage

each option; assign and multi-line OCR

performance; and calculate the rate of return cash flow, and annual net cash flow for each results to changes in key variables.

(ROI), option;

net present value (NPV), total and conduct sensitivity tests of

net the

Description of decision options.

o

Option A: Phase II single-line OCR is the current USPS strategy to proceed to procurement of the 403 additional single-line OCRs advertised for Phase 11 of the postal automation program, and on which bids have already been

received. multi-line

Under option A, there would be no further USPS expenditure on OCR research, development, and testing.

o

Option B: Phase 11 multi-line proposals

Multi-line OCR with ZIP+4 is single-line OCR procurement, OCRs, and as soon as possible but for multi-line rather than

a decision to cancel initiate release-loan reissue the Phase [1 single-line OCRs,

the current testing of request for meanwhile

retaining converted

the to

ZIP+4 code.

Single-line

multi-line

capability.

OCRs

already

purchased

would

be

*

OTA did not analyze the option of procuring 403 additional Phase I single-line

OCRs instead of Phase II OCRs. different from option A.

This option was judged to be not significantly

**

The release-loan testing manufacturers actually test prototype equipment on USPS premises with real mail.

8

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