GAO: Keeping six-day delivery would mean “difficult decisions” for USPS

Congressional watchdogs have said dropping Saturday deliveries would save the US Postal Service a “significant” amount – but just how much was “uncertain”. Without going as far as recommending Congress to definitely allow a five-day postal delivery week, the Governmental Accountability Office (GAO) did warn today that failing to allow the plan would mean “difficult decisions” would be needed to cut costs elsewhere in the USPS.

The GAO wrote today to Congressman Stephen Lynch, the top Democrat on the House subcommittee overseeing the USPS, saying that the Postal Service would need some significant restructuring even if plans to move to a five-day delivery week went ahead.

The USPS is facing insolvency later this year, with multi-billion dollar annual losses pushing it up against a $15bn legal limit on government borrowing.

Giving its verdict today on evidence given to the Postal Regulatory Commission (PRC) last summer, as well as from extra surveys of USPS customers and stakeholders, the GAO cast doubt on USPS estimates that it will save $3.1bn a year by cutting out Saturday deliveries.

Unlike the PRC, which estimated that the USPS would save only $1.7bn a year through its proposals, the GAO did not provide a figure it believed the proposals would achieve, but said it would be “significant”.

The GAO repeated previous recommendations that the USPS could achieve needed cost reductions through its proposals, adding its warning that if Congress does not grant the Postal Service freedom to cut Saturday deliveries, other cost-cutting measures would have to be found.

“This would entail difficult decisions with implications for USPS’s infrastructure, workforce, and service,” said the GAO report.

Proposals

The USPS proposals, put forward last year, call for no mail delivery on Saturdays, except Express Mail items and items sent to Post Office Boxes, and no mail pickups on Saturdays, although post offices would still accept mail.

Postal facilities that accept business mail at the weekend would continue doing so, but mail sorting would be cut on Saturdays aside from Express Mail and local bulk business mail, and transport of items between postal facilities would be reduced.

The GAO said a major criticism of the proposals was that the USPS would find it difficult to cut its costs without an increase in productivity among its workforce, since volumes would need to transfer to weekday delivery staff from the cancelled Saturday routes.

The GAO suggested ways to help cut costs in response to the move to a five-day delivery week could include use of more efficient collection procedures, like cluster collection boxes, and the transfer of retail services to private partners and self service locations.

It also suggested that while closing unnecessary processing facilities, the USPS could cut even “relax delivery standards to facilitate closures or consolidations”.

To a lesser extent than the PRC, the GAO also highlighted the concern that cutting Saturday deliveries would negatively affect “vulnerable” customer groups, such as rural residents, the homebound or elderly, and businesses reliant on Saturday deliveries, for example local newspapers.

Donahoe

US Postmaster General Patrick Donahoe said today that the Postal Service was “aware of the concerns” expressed to the GAO, but said that the USPS was prepared to make the changes necessary to achieve its forecast of cost reductions.

Describing the GAO report as a “thorough and comprehensive review”, Donahoe said: “We are pleased to see they agree that the Postal Service is likely to achieve significant cost savings if this change were to be effected and that much of its success depends on how efficiently it is implemented.

“We agree and believe that having completed a lengthy planning process; we are prepared to make that happen.”

Donahoe said the USPS had consulted “extensively” with its customers in drawing up its five-day plans. He said: “They can be assured that any decision to go to a five-day schedule will carefully balance our universal service responsibility and our statutory duty to operate in an efficient manner in light of prevailing volume, cost and revenue trends.”

Responding to last week’s PRC advisory opinion, the Postmaster General stressed similar points, that the Postal Service had come “well prepared” to its request for a five-day delivery week.

He said the case put before the regulators had been “compelling” in the light of the “tremendous losses” in mail volumes and revenues that is currently ongoing.

The PRC opinion, which was more on the fence than the GAO report but saw two Commissioners including chair Ruth Goldway expressing personal opinions that Congress should not allow a five-day delivery week, was dismissed by the Postmaster General as “advisory only and therefore, not a final determination on the merits of our proposal”.

“Knocked out”

Gene Del Polito, president of the mailers’ group Association for Postal Commerce, said today that having met with various members of Congress, he believed the five-day delivery proposal had “already been knocked out” in terms of what might be accepted this year.

Speaking to Post&Parcel, he said: “Eventually, it will probably have to happen, at this particular point in time I don’t see it happening.”

He said the major problem as far as the major USPS customers were concerned was that they would be getting a five-day service from the Postal Service while continuing to pay for a six-day service.

Stating that such a situation was seen as “effectively a postal rate increase”, Del Polito said: “I need to pay more for getting less? That’s the thing that’s going to ring around the nation.”