PRC reports “failures in overall service performance” from USPS
The US Postal Regulatory Commission (PRC) has reported that the majority of US Postal Service (USPS) products failed to meet service performance targets for FY 2015. The PRC yesterday (28 March) issued its statutorily mandated Annual Compliance Determination (ACD) assessing the Postal Service’s compliance with pricing and service performance standards in fiscal year (FY) 2015.
In an official statement about the ACD, the PRC commented: “The most pointed critiques identified in this year’s ACD relate to service performance generally, and cost and service problems with flat-shaped mail (flats).”
The PRC continued: “The majority of products failed to meet service performance targets for FY 2015. In particular, service performance results for all First-Class Mail products did not meet their targets. The Commission determined that First-Class Mail Single-Piece Letters/Postcards were not in compliance in FY 2015, and directs the Postal Service to improve service performance and provide a comprehensive plan within 90 days.”
The problems associated with flats have been a source of on-going concern for the PRC.
“In its FY 2014 ACD, the Commission issued directives to the Postal Service for products comprised of flats to improve service performance results during FY 2015 or explain why efforts to improve performance were ineffective and identify further planned changes to improve those results. This year’s review of flats shows results for these products remained substantially below their targets, and in all but one case, the performance results declined,” said the PRC.
“In FY 2015 the attributable costs of two products consisting of flats, Outside County Periodicals and Standard Mail Flats, combined to exceed revenues by over $1 billion.
“The ACD further notes that the Postal Service’s related efforts to improve flats performance and profitability are ongoing. As a result, the Commission requires the Postal Service to provide a report on flats issues within 120 days that quantifies what the Commission understands to be the main drivers of these significant and ongoing service failures and cost issues.”
The PRC said that it would evaluate the report and it may use the information provided to form the basis for “establishing a new proceeding or other appropriate action”.
Some of the other principal findings of the reported included:
• Twenty-four workshare discounts were not compliant because they exceeded avoided costs and did not qualify for a statutory exception.
• USPS “failed to meaningfully address Commission FY 2014 directives related to the Periodicals class”. The PRC said that – as a result – it has issued “further directives requiring the Postal Service to file a report within 120 days outlining the cost and contribution impact of worksharing offered for 5-Digit and Carrier Route presortation and progress made in improving pricing efficiency.
• Seven noncompensatory Market Dominant products were identified: Periodicals In-County, Periodicals Outside County, Standard Flats, Standard Parcels, Media Mail/Library Mail, Inbound Letter Post, and Stamp Fulfillment Services. The PRC commented: “With respect to Periodicals In-County, Periodicals Outside County, and Standard Flats, the Postal Service is directed to provide additional information regarding costs within 120 days. For Inbound Letter Post, the Commission recommends that the Postal Service continue to develop a more compensatory Universal Postal Union terminal dues formula for the next rate cycle (CY 2018 through CY 2021) and pursue bilateral agreements with foreign postal operators that result in an improved financial position for the Postal Service. The Commission finds that the Postal Service is taking the appropriate steps to improve cost coverage for the remaining noncompensatory products.”
• Revenues for six competitive products: Priority Mail Contract 135; Parcel Return Service Contract 8; International Money Transfer Service (IMTS)—Inbound; IMTS—Outbound; Inbound Parcel Post (at UPU rates); and Inbound Air Parcel Post (at non-UPU rates) failed to cover attributable cost and therefore were non-compliant. The PRC directed USPS to take “corrective action”.
• The number of facilities under suspension increased by 80 locations from the end of
FY 2014 to the end of FY 2015. The PRC said that it “requires the Postal Service to reduce the number of facilities under suspension in FY 2016 or provide a detailed explanation in its FY 2016 Annual Compliance Report discussing why it was unable to do so”.
The full PRC report, including an executive summary, is available at www.prc.gov.
UPDATE: USPS RESPONSE
Following the publication of the PRC report, the USPS sent this statement to Post&Parcel today (30 March): “The Postal Service is committed to improving service and has deployed all available resources to achieve results and engage the public in its efforts.
“In January 2015, the Postal Service resumed implementation of its Network Rationalization initiative with the start of Phase 2.
“This second phase not only included facility consolidations, but also involved a one-time, fundamental shift in the operating window that was implemented at all mail processing sites across the entire country on the same day.
“To implement this phase of the initiative, the Postal Service was required to realign its processing complement work schedules.
“The effects of this change in the operating window had a much greater impact on service than was anticipated, but it was a one-time event that is not likely to be replicated.”
