USPS explains “flawed” estimate of losses from mail plant

USPS explains “flawed” estimate of losses from mail plant closures

Friday, March 23rd, 2012

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The US Postal Service said today that estimates suggesting it would lose more than $5bn in revenues from plans to close half its processing network were based on “seriously flawed” research.

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The Postal Service commissioned customer surveys last autumn as it prepared plans to downsize its network of 461 Area Mail Processing plants to save $2.6bn in annual operating costs.

But it has come to light that it had to abandon an initial version of the research after it brought back alarming numbers on how many customers would abandon the mail with all the service changes being proposed.

Yesterday saw Senator Susan Collins and Representative Gerry Connolly pushing USPS to release the figures from the initial, cancelled survey, through the Postal Regulatory Commission.

The lawmakers said the $5.2bn revenue loss suggested by that abandoned research supported their arguments that closing so many mail plants would not be worth the job losses and service standard reductions involved.

Today, the Postal Service came back to dismiss that original version of its survey. The second version of the research suggested that mailers would reduce their mailing by $1.35bn of revenue.

A statement from the Postal Service said that the first survey had asked business customers about a scenario that “would never be implemented at the same time”.

“Specifically, the survey asked whether business customer respondents would lessen their use of the mail if the Postal Service immediately imposed price increases, service standard changes, altered delivery frequency, realigned its network of mail processing facilities and other actions,” said the USPS statement.

USPS stressed that rather than taking place all at once, as the initial survey had suggested, implementation of the measures would occur “over a phased, five-year time horizon, providing adequate time for planning”.

“Flawed”

The Postal Service added that it had also failed to include any control questions in the initial version of its customer survey last year, asking whether mailers were planning on reducing their mail usage even if no changes were made to the service by USPS.

“Upon review of the initial results, the study’s design was deemed to be seriously flawed,” said USPS. “The research project was cancelled at that time and a new survey was conducted.”

With its planned closure and relocation of mail plants, USPS aims to reduce its annual operating costs by a net $2.1bn, but the measures would also see 35,000 mail processing jobs lost, whether by attrition or reduction in force.

The Postal Regulatory Commission is currently hearing testimony on the proposal to downgrade end-to-end First Class Mail from a 1-3 day service to a 2-3 day service, a move necessary for the mail plant consolidation plan to succeed.

Details emerging from the testimony suggest USPS plans would reduce its costs each year by $1.4bn through reduced mail processing labour, by $455m through reduced equipment maintenance and parts, by 373m through reduced building costs and $268m through a reduction in transport including a 24.4% reduction in its plant-to-plant transport network.

The USPS plant consolidation plan could go ahead this summer, and does not need the Commission’s approval to begin, although the regulator’s views could prove important in Congress, particularly with the ill-feeling among lawmakers regarding plant closures in their home states.

Senate Bill

Meanwhile, Senate Majority Leader Harry Reid has now scheduled the postal reform bill S.1789 for a potential vote on the Senate floor on Monday evening.

This would be a cloture vote – a vote on preventing a filibuster of the bill – requiring 60 of the 100 Senators to vote in favour to pass.

Monday’s cloture vote could be put back depending on the result of a previous cloture vote on an oil subsidies bill, but would be needed to stop a Senator protesting the closing of a local mail plant from blocking debate of the bill.

Yesterday, a Senator from Maryland, Barbara Mikulski, said she was aiming to block the bill from debate on the Senate floor because of her opposition to closure of a mail plant across the Chesapeake Bay from Baltimore.

The bill S.1789 – the 21st Century Postal Service Act – passed out of committee last September with its proposals for restructuring USPS pension and healthcare payment arrangements, providing incentives for downsizing the postal workforce, allowing abandonment of Saturday deliveries after a two-year moratorium, and freeing up USPS to provide a broader range of postal and non-postal services.

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