November 10, 2015
The Postal Service has released its on-time performance reports for the fourth quarter of the fiscal year (July 1 – Sept. 30, 2015).
Compared to the third quarter, on-time performance for most types of mail has improved, but performance remains significantly down from the same period last year (SPLY) — before the changes in service standards and operations at processing plants went into effect on January 5, 2015.
For example, during the third quarter of FY 2015, single-piece First Class mail (SPFC) had an on-time performance record of 78.1 percent for 3-to-5 day mail. During the fourth quarter, 81.9 percent of this mail was delivered on time, an improvement of almost 5 percent.
But compared to the same period last year, on-time performance for single-piece First Class mail with a 3-to-5 day delivery standard declined from 91.3 percent to 81.9 percent, a drop of 9.4 percent. That’s also well short of the target of 95.3 percent.
As seen on this table comparing Q4 2014 and Q4 2015 for 3-to-5 day SPFC mail, the districts with the biggest drop were Triboro (23.8%), Caribbean (22.6%), Colorado-Wyoming (15.2%), Houston (13.7%), and Northern New England (13.1%).
For presort First Class Mail with a 3-to-5 day service standard, performance is down from 94.8 percent for the SPLY to 91 percent for the fourth quarter of this year. Periodicals are down from 83.3 percent for the SPLY to 77.5 percent for Q4 2015. Periodicals and Package Services are also down from the third quarter, an indication that things aren't getting better for all types of mail.
Here’s a table summarizing the performance reports released yesterday:
|Service Performance: Percent On Time|
|Category||Q4 2015||Q3 2015||SPLY (Q4 2014)||FY 2015 Annual Target|
|Single Piece First Class|
|Presort First Class|
While the general public may not be looking at the numbers themselves, many people have been complaining that the mail is moving more slowly. The drop in performance results has also received a lot of attention from the media, the mailers, members of Congress, and the unions (the APWU has taken the PRC to court over the issue).
The watchdog agencies are also taking note. In August 2015, the USPS OIG issued a thorough report about the service problems and recommended a halt to plant closures until performance improves. A more recent GAO report also addressed the service performance issues.
The concerns about delivery speed have led the Postal Service to slow down the plant consolidations, and it’s even possible that Congress will tell the Postal Service to roll back the changes in service standards that took place at the beginning of this year. The House has already approved an amendment to restore the interim service standards that were in effect from July 2012 to January 2015. That would restore overnight delivery to local mail and shave a day off of some 3-5 day mail.
The Congressional Budget Office has estimated that it would cost $1 billion to restore the service standards, but that estimate seems to be mistaken, as explained in this previous post. The CBO apparently based its calculations on the notion that the House amendment would require the Postal Service to restore service standards to where they were before July 2012, which would mean reopening plants that closed in 2012 and 2013.
But the legislation would only restore the interim standards, which would simply mean returning to the way the plants were operating before January 5, 2015. Very few plants have closed since January, and it would probably be possible to restore the interim service standards with the current infrastructure and at a relatively modest cost. It's not as if the changes are saving very much money, since the estimated savings — about $750 million — were based on closing over 80 more plants and eliminating thousands of additional jobs, neither of which has happened, at least not yet.
Senator Carper's iPOST bill (Improving Postal Operations, Service, and Transparency Act of 2015) also has a provision (section 201) that would explore the feasibility of rolling back the service standards, and it seems to address the cost issues raised by the CBO. It directs the PRC to commission a study that would examine, among other things, "the resources needed, structural and operational changes needed, and market demand" for a return to the interim service standards.
The new performance reports can be found in pdf format on the USPS website here, and a more complete data set in spreadsheets can be downloaded from the PRC website here. (Previous reports can be found on the PRC website here.) For easier viewing, we’ve uploaded the PRC version of the Q4 reports to Google Docs, here.
It should be noted that the numbers in the two data sets aren’t exactly the same. For example, for single-piece First Class, the pdf version says 3-5 day mail had a performance of 81.9 percent; in the spreadsheet version shared with the PRC, it says 83.1 percent. It’s not clear why these discrepancies occur.
October 30, 2015
After trying to dispose of it for over four years, the Postal Service has finally sold the historic 1937 Saunders Station post office at 1625 Broad Street in Richmond, Virginia. The Postal Service apparently got ahead of itself and began renting space for the new location of the post office back in 2011, when it originally expected to sell the building. The delay may have cost the Postal Service over $200,000 in lease expenses — which takes a big bite out of the revenues brought in by the sale.
The sale is also more cause for concern about how the Postal Service is managing its legacy of historic properties — the subject of a critical report released last year by the Advisory Council on Historic Preservation — and about how the Postal Service goes about relocating retail services — the subject of another critical report last year by the USPS Office of Inspector General.
The Postal Service first indicated that it wanted to sell the New Deal building back in February 2011, when it posted a solicitation for proposals for a new space.
The property was listed for sale on the USPS-CBRE Properties for Sale website when the website was launched in October 2011, and it's mentioned in a November 2011 Washington Post article about the new site.
The listing was on-again, off-again over the next few years, but then this week a sale was finally announced. The new owner is a startup software company named Mobelux.
Mobelux co-founder and President Jeff Rock would not reveal the sale price, and the Postal Service isn't obliged to say either. Neither the CBRE listing for the property nor the sales brochure mentions an asking price.
According to Richmond BizSense, however, the property was recently assessed at $1.45 million, and a listing from 2013 on PropertyShark.com says the value of the land and building was $1.2 million. The sale price was probably in that ballpark.
Because of the building’s history, the new owners will get a historic tax credit worth 45% of their financial investment, according to an interesting piece on RVA News.
Retail postal services have been moved to a new location just a few doors away, at 1643 W. Broad Street. According to the USPS Leased Facilities Report, the Postal Service is paying an annual rent of $55,000. (The report is easier to access here.)
The facilities report says the lease on the new space began on September 1, 2011, just about the time the property was first listed on the CBRE website. The lease runs ten years, until August 31, 2021.
According to BizSense, the relocation took place just a few weeks ago. The hours of operation don't even appear yet on the USPS Find Locations webpage.
It would appear, then, that the Postal Service has paid rent on the unoccuppied space for four years — from September 2011 until just a few weeks ago. That’s about $220,000 in rent, and it represents a significant portion of the revenue the Postal Service ended up bringing in with the disposal — over 18 percent, if the price was around $1.2 million.
These costs don't include the cost of renovating the new space. Plus, over the next ten years, the Postal Service will pay out $550,000 in lease costs, when before it owned the building outright and just had maintenance costs. One has to wonder just how wise it was to sell the building in the first place.
October 26, 2015
BY MARK JAMISON
The United Parcel Service is very concerned that you might be paying too much for a postage stamp.
If you’re wondering why UPS would be worried about something like that, it has to do with the way postal rates are set. According to the law, each USPS product is supposed to cover its share of the Postal Service’s operating costs, which includes costs attributable to that product as well as a share of total institutional costs.
UPS believes that market-dominant products — First Class mail, Standard mail, and periodicals — are covering more than their fair share of the Postal Service’s operating costs, while competitive products — Priority and most shipping services — are not paying enough.
As a result, argues UPS, the average customer who buys a First-Class stamp is paying too much because part of the stamp’s price is being used to subsidize competitive products. UPS wants the cost allocation methodology changed so that competitive products pay a larger share of the Postal Service’s operating costs.
Then the Postal Service will to have to raise the prices of the products that UPS competes with, which will put UPS in a better competitive position and increase its profits. UPS doesn't really care that some USPS customers are paying too much for postage. UPS cares about UPS.
The UPS petition
UPS has been complaining about the costing methodology for many years, but in recent weeks it has intensified its efforts to get the Postal Regulatory Commission to do something about the problem. In a petition recently filed with the PRC, UPS argues that the costing methodology used by the Postal Service and PRC is seriously flawed, and it recommends several changes that are intended to make the system fairer and bring it into compliance with the law. (The UPS filing is in PRC Docket Number RM2016-2.)
Under the current system, says UPS, the Postal Service is using its monopoly powers to gain an unfair competitive advantage in the parcel delivery market. UPS argues that the Postal Service should be allocating a larger share of its operating costs to competitive products, the products that compete with UPS.
If the PRC were to approve the UPS proposals, the Postal Service would need to raise the prices of its competitive products significantly — much more than the 9.5 percent increase announced a few days ago. UPS would find itself in a much more competitive position. It could raise its own prices and/or grab a larger share of the parcels market. That would be good for UPS’s bottom line, but it would come at the expense of the Postal Service.
UPS is already the largest parcel delivery company in the world. According to a 2014 Forbes article, the company claims 54 percent market share in the e-commerce package delivery market, as compared to FedEx, with 34 percent, and the Postal Service, with about 16 percent — a substantial part of which is providing last-mile service for UPS and FedEx.
In its most recent annual report, UPS shows earnings of $4.39 billion and earnings per share of $2.68. The report claims that UPS will return $30 billion to investors over the next five years.
This is not the picture of a company suffering from unfair competition. But UPS apparently wants a bigger share of the pie.
The concerns that UPS raises in its petition in RM2016-2 are not wholly without merit, but they are overwrought and disingenuous. That’s not surprising. There’s a lot at stake.
The proposals presented by UPS would affect not only affect the price of nearly every postal product but also the future viability of the Postal Service. RM2016-2 promises to be a very significant docket.
October 20, 2015
Yesterday’s election in Canada may mean the end for Canada Post’s plans to convert five million addresses from door-to-door delivery to cluster boxes.
After a decade in power, the Conservatives were routed in a landslide by Justin Trudeau and the Liberal Party. The Liberals had previously vowed to end the conversions and to conduct a thorough review of Canada Post. On their website, the Liberals say this:
“We will stop the Harper Conservatives’ plan to end door-to-door mail delivery in Canada. We will begin a new review of Canada Post to ensure that the Crown Corporation is fulfilling its public mandate to provide high-quality service at a reasonable cost to Canadians — urban, suburban, and rural. We disagree strongly with the Conservative decision to ask Canadians to pay more for a reduced quality of service.”
It doesn’t look like Canada Post has gotten all that far in the conversion to cluster boxes, known euphemistically in Canada as Community Mailboxes and Super Mailboxes. According to a March 2015 progress report, about 100,000 addresses were converted in 2014, and the goal was 900,000 more in 2015.
Even if Canada Post were to achieve that goal, which seems very optimistic, it would mean only about 20 percent of the total conversions would have taken place. There will be four million more to go.
It’s been clear to the leaders of Canada Post that a Liberal victory in the election could spell trouble for its cost-cutting plans. One news report even suggested that Canada Post was trying to get as many community mailboxes installed before the election as possible, as suggested by the fact that October 19 — the day of the election — was the target date for another round of conversions. Canada Post said, however, that the scheduling was purely coincidental.
Canadians have not been happy about the conversions, and the issue probably played a role in the election. The protests have taken many forms.
In London, a city in Ontario, an internationally renowned visual artist and activist named Rob Benner has been creating garden-art installations on top of the concrete pads that Canada Post had laid for the mailboxes. He calls it an act of "guerrilla gardening."
In Hamilton residents occupied one site for several weeks this summer to stop a community mailbox from being installed. They set up a tent, camped out, sat on lawn chairs, parked cars to block off the area, and held a mini-block-party.
In Edmonton, one man camped out on his front lawn trying to keep the mailbox from being built on his property. After Canada Post had dug up the plot on his lawn where the box would sit, he covered it over and vowed to sit on his front lawn until Canada Post found a new location for the box. It wasn’t long before he received a note from Canada Post saying the box would be moved up the block onto another person’s property.
Apparently that's not unusual. According to CBC News, Canada Post has admitted that "fully 30 per cent of the mailboxes are eventually moved from their original planned locations, based on feedback from the residents and municipalities."
In Montreal, back in August, Mayor Denis Coderre took a jackhammer to a community mailbox under construction near a Montreal park, a location he claimed had been selected “without any consultation" with city officials. Coderre called on the political parties to tell the public where they stand on the future of Canada Post and its decision to halt home mail delivery.
Some Canadians are concerned that the community mailboxes are lowering property values. One realtor says he recently lost a sale because the home was next to a large super mailbox. There has even been talk of giving homeowners a tax break because of a box on their property. That actually happened back in 1998 when there was a previous push for cluster boxing.
In the meantime, here in the U.S., the Postal Service is taking more steps to install more cluster boxes. It remains USPS policy not to change a customer’s mode of delivery without permission, but the Postal Service can do other things to promote cluster boxes.