Procurement spending by the U.S. Postal Service declined slightly in 2011, but capital spending was anemic, according to the agency's recently released Form 10-K report. Capital expenditures experienced a 15% drop from 2010 levels. This comes on top of a 24% decline in capital spending a year ago.  Transportation spending was once again the leading procurement category, totaling $6,389 million -- an increase of $511 million, or 8.7%, compared to 2010.  More expensive fuel accounted for much of this increase, as diesel fuel prices rose 26.6% from a year ago.

The majority of transportation spending was for highway transportation, which increased 4.3% from $3,205 million in 2010 to $3,343 million in 2011. Total highway mileage for 2011 actually declined by 5.4%, but fuel price increases trumped mileage reductions. Spending on air transportation also increased, from $1,977 to $2,110 million -- a 6.7% increase. Once again, fuel costs were to blame. Spending on international transportation rose from $641 to $886 million, primarily because of increased fees the Postal Service must pay other posts to deliver its mail. Rail transportation was practically non-existent, shrinking from $55 to $50 million in FY 2011.

Outside of transportation, Supplies and Services was the next biggest category of Postal Service spending. Spending in this category declined by 1.1%, totaling $2,260 million. Rent and utility expense remained relatively stable, coming in at $1,682 million. The Postal Service remains the nation's largest tenant. Information Technology and Communication expense increased by 4.7% to $695 million.

As the postal fleet continues to age, and fuel prices soar, vehicle maintenance expense increased 7.9% to $974 million. That's a substantial increase from $760 million spent just two years ago.

Capital investments

The Postal Service's capital investments continue to be anemic. Only two new capital investment projects were approved in FY 2011, totaling $200 million in new capital funding commitments. This is the same level as FY 2010. Less than a decade ago, USPS's five-year capital spending plan (1998 - 2002) was $17 billion, or an average of $3.4 billion per year in new capital commitments. The Postal Service's new capital projects for FY 2011 was just 6% of that number.

While funding for a project is authorized in one year, the commitment or contract to purchase or build may take place over several years. At the end of FY 2011, the Postal Service had 11 open projects amounting to $3.1 billion in approved capital spending. Of that amount, approximately $2.3 billion has been paid for, leaving $0.9 billion left to be paid over the life of these projects. (Numbers do not add up due to rounding errors.)