and employees. The Postal Service commits capital funds when it signs a contract with a vendor.

Each year the Board of Governors decides upon and approves a capital commitment plan that is itself an essential element of the Integrated Financial Plan. The Postal Service employs an internal review process that ensures each proposed investment is fiscally sound. Investments valued at $10 million or more must be reviewed by the Board of Governors Capital Projects Committee who may then recommend the proposed investment for approval by the Board of Governors.

Capital commitments of $2.1 billion were made in 2004 on a plan of $3.2 billion. The difference between the plan and actual commitments resulted primarily from the rescheduling of three major projects. These include Postal Automated Redirection System (PARS) Phase II for Letters, PARS for Flats and Optical Character Reader (OCR) Enhancements. The two PARS projects, which identify undeliverable-as-addressed mail at the first automated handling and redirect that mailpiece to the proper destination, will be submitted for approval in 2005. The PARS projects were delayed awaiting successful conclusion of the First Article Test. The OCR Enhancements program adds optical character reading capability to existing advanced facer cancellers. Commitments for this project were split between 2004 and 2005 and were reduced as a result of a negotiated price reduction.

The following table summarizes the 2004 capital commitment plan and actual commitments by category of investment.

*Numbers may not add due to rounding.

Mail Processing Equipment commitments totaled $797 million and included 3 main projects, OCR Enhancements, Automated Flats Sorting Machine — 100 Automatic Induction System (AFSM 100 — AI), and Integrated Dispatch and Receipt System (IDRS). The AFSM — 100 AI automates the preparation and

feeding of flats on AFSM — 100 machines. The IDRS system reduces allied labor in postal processing facilities by integrating automated dispatch and receipt machines in the material handling systems.

Over $500 million of the Facilities commitments in 2004 were for repair and alteration projects performed at thousands of postal facilities. The remainder of the Facilities commitments were for restoration of the Trenton, New Jersey, Processing and Distribution Center, construction of the Arlington, Virginia, Main Post Office, and various other customer service facilities.

Commitments of $474 million for Infrastructure and Support were made in 2004, and included funding for: the Biohazard Detection System that detects anthrax and other substances on mail pieces entering the Advanced Facer Canceller; the Human Capital Enterprise/Human Resources Shared Services to capitalize on the efficiencies of a centralized shared service center; the Mail Processing Infrastructure Phase II for state-of-the-art structured wiring of our network to support increased data transmissions; the Surface Visibility, Surface-Air Support System Phase III that uses an enhanced distribution label to track sacks, trays, and tubs of mail throughout the network.

Retail commitments of $29 million were primarily for Automated Postal Center units, the self-service kiosks that provide a full range of on-demand postal products and services. These units reduce customer wait time and Postal Service retail costs.

Commitments for Vehicles totaled $185 million in 2004. Most of these funds were for replacement Cargo Vans and for tow trucks and administrative vehicles.

Success of the Letter Mail Automation Program

In July 2004, Postal Service management briefed the Board of Governors on the 44 letter automation programs implemented over the course of 17 years. Thirty-six of these programs required approval of the Board of Governors; more than 14,000 pieces of equipment were deployed and more than 1,200 contracts were issued to purchase and install this equipment.

The actual investment for the 44 letter automation programs was $5.6 billion, compared to an approved investment of $6.3 billion. The return on investment in these programs is estimated at 90 percent. In today's dollars, sortation cost per thousand pieces of mail was reduced from $20.20 in 1989 to $7.42 in 2003. This is equivalent to a reduction of 75,000 full-time positions and an annual cost savings of $5 billion. Customers benefited with reduced costs and improved service as measured by the independently administered External