USPS slams "flawed" PRC analysis of five-day delivery plan

US Postmaster General Pat Donahoe wrote to Congressional leaders today, once again urging them to allow the US Postal Service to make the biggest single action it could take to cut its operational expenses – cutting Saturday deliveries. The USPS, which is making annual losses at the moment of more than $8bn and is rapidly approaching its $15bn credit limit, has said it cannot survive without action from lawmakers in the US Congress to make changes to its business model.

Donahoe, the USPS chief executive, today called on Senators Joe Lieberman and Thomas Carper to give the Postal Service the power to cut Saturdays from the delivery schedule.

“The Postal Service is nearing a point at which we will not have the cash to meet all of our financial obligation,” Donahoe told Lieberman, who chairs the Senate committee on government affairs, and Carper, chairman of the federal financial management subcommittee.

The USPS said today of the reduction in delivery frequency that “no other single action the Postal Service could take operationally will result in such large annual cost savings”.

Donahoe told lawmakers: “Eliminating Saturday delivery to street addresses and related service changes will generate $3.1bn in annual net savings for the Postal Service and will address the fact that there is no longer sufficient mail volume to sustain a six-day delivery schedule.”

The Postmaster General has been urging Congress to allow five-day-a-week delivery since he took office at the start of the year, with the proposal forming a key part of his predecessor John Potter’s plans to rebalance the USPS books.

Today, the Postmaster General issued a report slamming calculations by regulators at the Postal Regulatory Commission, published in March, that suggested cutting Saturday deliveries would generate half the cost savings being claimed by the Postal Service.

The Commission, which did not express a unanimous view from its five Commissioners, and did not express clear support for or opposition to five-day deliveries, said the USPS would save “only” $1.7bn a year from the move to five-day delivery.

Although two of the five Commissioners said in March that they actually supported the move to five-day deliveries, the overall Commission view cast doubt on the USPS cost-saving estimates, and has been seen by many observers as hindering the Postal Service’s case in Congress.

“Flawed”

The USPS said today that the Commission’s key findings were “flawed”.

The Commission “improperly” assumed there would be no improvements in Postal Service productivity and efficiencies when Saturday deliveries are cut, said the USPS, adding: “With all due respect, this makes little sense.”

The Postal Service has said its carriers could generate $760m in savings through better efficiency and $260m would come in transportation and processing savings.

The Commission also “dismisses unrefuted expert testimony” on the amount USPS would lose in mail volume reductions stemming from cutting Saturday deliveries, said the USPS report, saying that Commissioners had tripled the Postal Service’s estimate for losses from mail volume reduction to $600m a year.

“This conclusion is not supported by the weight of the expert testimony in the evidentiary record,” said the USPS report.

Importantly with time running out for the loss-making USPS, the Postal Service claimed today that the Commission had downplayed the immediacy of cost-savings from cutting Saturday deliveries in its calculations, promoting the idea that the major cost savings could take up to three years to emerge. The USPS believes “most” cost savings could be achieved in the first year of its proposals.

And, today the Postal Service also sought to address a particular concern within Capitol Hill, that cutting a day’s delivery would adversely affect communities in rural or remote areas.

It hit back at the suggestion from the Commission that its research on the impact of five-day deliveries was based on responses from people in urban and suburban areas.

USPS insisted its research had included those living in rural areas, and attacked the Commission’s warning that communities in remote areas would be adversely affected by USPS proposals for being based “almost entirely” from lobbying by members of Congress and the public, rather than meeting US legal standards for evidence.