National Association of Postal Supervisors Legislative and Regulatory Update – August 7, 2008

In this Issue:

* NAPS Challenges USPS Network Plan, Questions USPS Outsourcing
* Preserve Universal Service and the Mailbox Monopoly, NAPS Tells the PRC
* USPS Announces Greater Quarterly Loss Than Expected

NAPS Challenges USPS Network Plan, Questions USPS Outsourcing

The National Association of Postal Supervisors has questioned the Postal Service’s plans for the use of contracting out in realigning its mail processing and distribution network and has encouraged Congress to ask the Postal Service where it’s headed in its reliance on private contractors to process and transport mail.

In an August 5 letter to Rep. Danny Davis (D-IL), chairman of the House panel that oversees the Postal Service, NAPS President Ted Keating challenged the Network Plan the Postal Service recently sent to Congress and the Service’s lack of explanation of the role it intends outsourcing to play in modernizing mail processing and transportation activity. Keating pointed to USPS efforts to contract-out processing and transportation operations at its Bulk Mail Centers as raising significant policy concerns that “could represent a significant step toward the privatization of postal operations.”

The Postal Service on July 1 issued a draft Request for Proposal to create a “Time Definite Surface Network” (TDSN) that envisions outsourcing all mail processing and transportation activity currently performed by the 21 BMCs within the USPS mail network, starting with those in Chicago, Cincinnati, Detroit, St. Paul, Atlanta and Seattle. Bulk Mail Centers are highly mechanized mail processing plants that distribute parcel post, media mail, standard mail and periodicals in bulk form.

“If BMC activity is ultimately outsourced through the TDSN initiative, does the Postal Service intend to extend outsourcing to all of its Processing and Distribution Centers and related transportation activities?” Keating asked Congress. “What is the ultimate goal? Is this the first phase of wider reliance on privatization of mail processing and distribution? Does the Service ultimately intend to contract out all processing and distribution of mail, if it believes that service standards and customer service can be maintained at acceptable levels?”

Keating also took aim at the USPS Network Plan itself, criticizing USPS for providing few new details to Congress, which mandated in the 2006 postal reform law that the Postal Service provide a comprehensive report on how intended to modernize the processing/transportation backbone of the postal network. Keating called the plan the USPS sent to Congress a “strategy without a destination.” “The Postal Service’s faith in a ‘fluid approach’ toward network realignment, as evidenced in the Network Plan,” Keating said, “is largely a continuation of the zig-zagging we have witnessed since 2001, from the Network Integration and Alignment program, to the Evolutionary Network Development program, to the most recent efforts involving ill-fated Regional Distribution Centers.”

“There is one potentially distinct difference in the latest iteration, however,” Keating warned. “The single-most important development in the Network Plan is the one whose possible consequences are left the most unaddressed. Left unanswered is the role of outsourcing in the Postal Service’s vision of network realignment and whether the Service intends to apply outsourcing toward the entirety of its processing and distribution operations …” “We regard these omissions as flaws in the transparency and completeness of the Network Plan, as well as the creation of understanding by the Postal Service stakeholders and the public of the implications of these steps.”

Keating encouraged the Postal Service to provide answers to the Congress and postal stakeholders, including the Postal Regulatory Commission, and explain the relationship between the TDSN outsourcing initiative and future efforts to modernize and cut costs in USPS processing and distribution centers and other facilities in the mail network.

The potential for USPS outsourcing to private contractors of the responsibility for processing and distribution of mail, in light of stalled USPS efforts to privatize mail delivery, holds huge implications — both financial and political — for the USPS, not to mention its 700,000 employee workforce. There are well over 300 processing and distribution plants in the Postal Service’s mail network, providing jobs to tens of thousands of postal workers and economic heft to the surrounding communities in which the plants are located. At the same time, considerable excess capacity in many plants exists, worsened by the continued decline in mail volume, likely necessitating further facility consolidations and closures, even if the work continues to remain within the Postal Service.

At a July 24 hearing of the House Subcommittee on the Federal Workforce, Postal Service and the District of Columbia on the USPS Network Plan, Subcommittee Chairman Danny Davis in his opening remarks focused on the need for USPS to adopt a smarter approach toward downsizing the postal network, saying, “For this effort to be successful the Postal Service MUST do a better job of realigning its processing and transportation networks, improve the data used in its computerized and statistical modeling, and minimize service disruptions. Failure to prevent and predict service problems will result in poor mail delivery, which in turn will anger the public and trigger political considerations.”

Preserve Universal Service and the Mailbox Monopoly, NAPS Tells the PRC

Urging the Postal Regulatory Commission to listen to the scores of witnesses over the past two months who have urged the continuation of current national policy that guarantees postal service to all Americans, no matter where they live or work, NAPS President Ted Keating last week told the Postal Regulatory Commission that “there is broad public consensus for the preservation of the universal service obligation and the postal monopoly.”

Keating’s remarks were part of comments filed by NAPS with the Commission, in connection with the PRC’s inquiry (Pl2008-3) into the future of the universal service obligation and the USPS monopoly on First-Class Mail. The PRC is required by the 2006 postal reform law to report to Congress by December 19 on its findings and recommendations growing out of its inquiry.

Keating also encouraged the PRC to affirm the value of six-day mail delivery. “Unless the Commission finds that there are cost savings and collateral merit so significant as to convincingly demonstrate the viability of an alternative delivery schedule,” Keating said, “six-day delivery should also remain the norm.” “The public expects no less.”

Noting that FedEx and the National Newspaper Association had urged the PRC to relax the mailbox monopoly and permit homeowners to indicate whether they would like to receive unstamped mail from registered companies in their mailboxes, Keating urged the Commission to turn down that approach and “affirm and maintain the privacy and integrity of the mail through preservation of the mailbox rule.” That approach, which gives USPS exclusive access to all mailboxes, would extend the same policy that the Congress and the President embraced in enacting the 2006 postal reform law, Keating noted.

USPS Announces Greater Quarterly Loss Than Expected

A continued decline in mail volume, aggravated by a national economic slowdown and higher fuel prices, pushed the Postal Service further into the red for the last quarter, the USPS announced yesterday. The loss mirrors what’s been going on in the logistics and mailing industry and throughout the nation.

The USPS ended its third quarter (April 1 – June 30) with a greater-than-expected loss of $1.1 billion. Mail volume dropped by 5.5 percent compared to the same period last year. First-Class Mail and Standard Mail volume were each down 5.5 percent, reflecting the “challenging economic environment,” USPS said.

“When the economy does rebound, mail volume may not return to previous levels,” Postmaster General John Potter warned in a statement. “This requires that we significantly accelerate process improvements and the realignment of resources in order to achieve long-term financial success. Failure to do so will threaten our ability to meet our mission of providing universal service at affordable prices.”

While USPS operating expenses inched upward only 1 percent for the quarter, despite substantial increases in gasoline costs, operating revenue fell by nearly 2.4 percent, a decrease of $437 million compared to the same period last year.

The good news was that on-time delivery performance reached record highs for all categories of First-Class Mail tracked by the Postal Service. Overnight service was 97 percent on-time, up from 96 percent in the same period last year.

Financial uncertainties further prompted the Postal Service to refrain from announcing a pricing structure for its use of the Intelligent Mail Barcode, which USPS continues to promise will be ready for use by mailers in May, 2009. ” … [G]iven the volatility of the economy, decreasing mail volumes and our own financial situation, it would be premature for us to commit to a pricing structure for the Intelligent Mail barcode at this time,” Tom Day, Senior Vice President, Intelligent Mail and Address Quality told the Mailers’ Technical Advisory Committee yesterday.

For the Postal Service, Intelligent Mail and the underlying intelligent mail barcode is the greatest thing since sliced bread. It is expected to revolutionize the way USPS accepts, processes and transports mail, by informing mailers when a piece of mail enters the mail stream and journeys through the postal network and into the hands of the intended recipient.

Bruce Moyer
Legislative Counsel to NAPS
brumoyer@verizon.net

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