PRC rejects Discover NSA and the Postal Service's "subjective intuition"

March 25, 2015

For the first time since they were created in 2002, a Negotiated Service Agreement (NSA) has been rejected by the Postal Regulatory Commission.  Yesterday the PRC turned down the Postal Service’s request to add a NSA with Discover Financial Services to its market-dominant list.

This is quite an unusual event.  Since the 2006 Postal Accountability and Enhancement Act, the PRC has reviewed about 500 NSA requests.  (According to this PRC presentation about NSAs, as of May 2014, that number included 446 competitive and 24 market-dominant NSAs.) 

Every one of the requests was approved, including previous NSAs with Discover.  In yesterday's order on the Discover NSA, the Commission pointed out that this was the first NSA it had been unable to approve, “and it is not a decision the Commission takes lightly.”

As the order notes, while PAEA granted new flexibility to the Postal Service in setting postal prices, “it also made clear that only NSAs that improve the net financial position of the Postal Service or enhance the performance of certain postal operations may be approved.” 

According to the Commission’s analysis, the Discover NSA “would not improve the net finances of the Postal Service.”  In other words, it would lose money. 

The Postal Service disagreed.  It said that the problem was not that the deal would lose money but that Commission was using the wrong methodology to analyze the finances.  Using an appropriate alternate methodology, argued the Postal Service, the deal would in fact yield a significant profit.

Under the “accepted methodology” previously used by the Commission, the Postal Service calculated that the net benefit from the Discover NSA would be a negative $6,180,863 in the first year of the Agreement.  Over its three-year term, the deal would cost the Postal Service $18 million.

The only scenario within the proposal that provided a positive impact on net contribution was if Discover missed the NSA’s volume threshold and paid a penalty.  The Commission concluded that this was unlikely.

The Postal Service, along with Discover, criticized the accepted methodology for analyzing the finances and argued that an alternative approach was in order.  The criticisms are too complicated to explain here, but they involve issues of price elasticities and the potential impact of the incentives offered by the discount on how much mail Discover sent. 

The Postal Service’s alternative approach to analyzing the deal came up with completely different results.  Rather than losing money, the NSA would have a net positive value of over $25 million in the first year and over $91 million over three years.

The Commission was not persuaded.  It could not accept the Postal Service’s alternative approach as a viable methodology, and it stuck by the accepted methodology. 

According to the Commission’s analysis, “the Postal Service’s calculation of the net benefit of the Agreement was based on a number that neither the Postal Service can justify nor the Commission can verify.”

“Without acceptable objective data,” the order proceeds to state, “the Commission must conclude that the Postal Service’s analysis relies on subjective intuition.”

The Commission’s concerns about this proposed NSA with Discover were exacerbated by its analysis of a previous Discover NSA approved in 2011, which resulted in a net loss of $25 million to the Postal Service over the three years of the contract. 

This prior NSA was similar to the proposed NSA in that in both deals Discover received rebates for all volume mailed, provided that a revenue threshold was reached.  (There's an analysis of the prior NSA with Discover in the PRC's 2013 Annual Compliance Report.)

As yesterday’s ruling noted, the Commission had approved the prior NSA partly on “the premise that the Postal Service would use the experience as an opportunity to observe and attempt to measure the specific factors affecting Discover’s mailing behavior.”  In the Commission’s estimation, however, the Postal Service “does not appear to have availed itself of this opportunity.”

At some point during the proceedings, when it was becoming clear that the NSA was in trouble, the Commission says it “proactively solicited potential additional rationales under which the Discover NSA could be approved under existing statutory and regulatory requirements.” 

Nineteen information requests were issued by the Commission and its Chairman, asking the Postal Service to offer different rationales for the benefits of the Discover NSA.  No fewer than seven such rationales were proposed by the Commission.  “Each was rejected by the Postal Service,” observes the order.

Overall, it seems that the Commission was rather frustrated with the Postal Service.  The PRC filed numerous information requests trying seeking clarification of various elements of the deal, and it even looked for ways to help the Postal Service find a rationale upon which the deal could be approved.  Apparently the Postal Service wanted the NSA approved on its own terms.

It’s not clear what will happen next, but given how unusual it is for the PRC to reject a NSA request, and given the nature of the Postal Service’s arguments, the case may well end up in court.

(Photo credit: Discover sign)

Epic Fail for the Postal Service: The wrong model and the wrong BOG

March 23, 2015


In 2001 Postmaster General Bill Henderson submitted the first blueprints for a transformation of the Postal Service into a sleeker, more efficient business entity.  To justify the transformation, the rhetoric has repeated one mantra: the problem with the Postal Service is its outmoded and defective business model.  

A great deal of our speech with public policy is often coded — for example, “makers and takers” can often sound a lot like “black and white” — but in this case Henderson and his successor Jack Potter were pretty clear about their goal.  The way forward for the Postal Service, they said, would include cuts to the workforce, post office closings, a smaller postal infrastructure, and a general retreat from the idea of the Postal Service as a universal service provider.

The big mailers talk about the “failed business model.”  Postal commentators going back to Murray Comorow and through Alan Robinson have talked about the ‘failed business model.”  The folks in Congress, Republicans particularly but also Democrats like Tom Carper, all bemoan the “failed business model.” 

In focusing on the idea of a “failed business model,” these voices were able to elude facts like the billions siphoned out of the Postal Service to support payments to the Retiree Healthcare Benefit Fund that were essentially unnecessary.   Any discussion of rationalizing rates in ways that didn’t involve simply handing over postal revenues to narrow interests in the mailing community was avoided.  The idea of supporting universal service and postal infrastructure with modest budget contributions from the federal government was rejected. 

Instead, everyone seemed to agree that the nation’s postal infrastructure must be totally self-sufficient.  That was the preference of postal management as well, since money from Congress never comes with no strings attached.  Management takes every opportunity to remind people of this.  At the end of every press release is this sentence: “The Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations.”


The real problem

Assertions that the postal business model had failed reflected nothing other than a wish to apply a corporate model to a basic government service and function.  It didn’t matter that we had the most effective postal system in the world, a system that delivered more mail to more addresses at cheaper rates than virtually anywhere else.  It didn’t matter that our network of postal plants and post offices were the hearts of American communities.  It didn’t matter that the Postal Service provided 800,000 good jobs with good benefits, or that the income from these jobs flowed throughout local communities, supporting businesses large and small.

The sad fact is that none of the things that did matter to the average person mattered to those who set postal policy.  They had imbibed from the well that had transformed the American economy from an engine of shared growth and prosperity to a shell game that enriched the few at the expense of the many.  

In a little more than two generations we have watched as all the burdens of the economy have been shifted to those who work for a living.  We have seen the end of defined benefit pension systems, deteriorating access to employer-paid health insurance, and the rise of a model that eschews full-time work for part-time contract labor.  A successful postal business model has thus come to involve cheap labor, reduced service, and the privatization or outsourcing of public infrastructures.

But here’s a thought.  What if the problem with the Postal Service isn’t a failed business model at all? What if the real problem is a corporate structure that is ill suited to manage a fundamental infrastructure?  What if the problems of the Postal Service lay in a hidebound incestuous postal management system that has little accountability or oversight?  Could it be that our problems are related to a failure to properly distinguish between the management of government and the management of business?  What if the supposed failures of our postal system really reflect the failure of our society to value people, community, and basic public goods and infrastructures?

Congresswoman Barbara Lee proposes moratorium on sale of historic post offices

March 20, 2015

Congresswoman Barbara Lee 
of California (13th District) has introduced legislation to halt the sale and consolidation of historic Postal Service facilities. The Moratorium on US Historic Postal Buildings Act would prevent the Postal Service from selling any facility until all buildings listed or eligible for listing on the National Register of Historic Places are removed from the auction block.  

“These historic post offices are an irreplaceable part of our nation’s history. They belong to the American people,” said Congresswoman Lee in a press release. “Historic post office buildings are an integral part of our cultural heritage and should not be used as a bargaining chip to resolve the Postal Service’s financial woes.”

“In my district, the Berkeley post office is cherished by the East Bay community,” Congresswoman Lee added. “I’m calling on Congress to stop these callous attempts to auction off our heritage. My bill would ensure that historic post offices across the country, including the Berkeley Post office, remain as a cornerstone of our community.”

If enacted, Lee’s legislation would require the Postal Service to develop an inventory of post offices currently on the National Register and eligible for it. 

Section 110 of the National Historic Preservation Act already requires federal agencies to establish a program for the identification, evaluation, and nomination of properties in their ownership or control to the National Register.

The Postal Service, however, has not fulfilled this obligation, and it has not produced a comprehensive inventory of its historic properties.  The Postal Service may not even know what it owns.

The most recent issue of Postal Facts, which came out a few weeks ago, states that 1,527 postal facilities are on the National Register.  But this number includes hundreds of postal buildings that aren’t owned by the Postal Service anymore.  It’s derived simply from a search of the National Register’s database, which doesn’t indicate the current owner of the property.

The Postal Service's 2011 report to the Advisory Council on Historic Preservation stated that that there were 523 postal facilities on the National Register.  In an addendum to the report submitted in 2014, the Postal Service indicated that 61 post offices listed in its database were on the National Register.  The earlier number is closer to the truth, but the Postal Service does not have a list of these historic facilities, as I learned from filing a FOIA request last year. 

As for how many post offices might be eligible for the National Register, one of the criteria is that a building be at least 50 years old.  The 2011 USPS report to the ACHP said that in addition to the 523 already on the National Register, there were 1,968 post offices that meet this criterion.  The Postal Service has not published an official list of these historic post offices.

In its report on historic post offices last year, the ACHP recommended that the Postal Service develop an accurate inventory of its historic properties before proceeding with the sales.  The recommendation states the following:

The USPS should suspend any further actions to relocate services out of historic postal facilities and dispose of those historic facilities until such time as it fully implements the recommendations of this report. If the USPS fails to suspend such actions, the ACHP recommends that Congress direct the USPS to suspend all relocation of service decisions and disposal actions for postal facilities that are listed or eligible for listing on the National Register of Historic Places until such time as the USPS fully implements the recommendations of this report directed to it.

The Postal Service has ignored this and many other recommendations in the ACHP report.  Instead, it has simply proceeded with the sales. 

Over the past few months, the Postal Service has sold several post offices: the Bronx General Post Office in New York City, the Union Square post office in Somerville, Massachusetts, and the Kingston Branch post office in Wilkes-Barre, Pennsylvania.  

In November, the Postal Service also closed on the sale of the historic post office in Stamford, Connecticut — the day after a judge dismissed the long, hard-fought challenge to the sale brought by the National Post Office Collaborate and the Center for Art and Mindfulness.  

According to the CBRE-USPS Properties for Sale website, sales are “in contract” or “negotiating” for several other historic post offices, including the Palmer Square in Princeton, New Jersey; Villa Park, Illinois; and Reading, Massachusetts. 

The post office in Berkeley, California, was also "in contract' late last year, but the buyer chose to back out of the sale, perhaps because of a legal challenge brought by the City of Berkeley and the National Trust for Historic Preservation.

Several other post offices are currently listed for sale on the CBRE website, including the post offices in Norristown, Pennsylvania; Derby, Connecticut; and Topeka, Kansas.  

All told, since 2009, the Postal Service has sold more than 50 historic post offices, and nearly 50 others have been approved and/or listed for sale.  (An unofficial list is here.)

Barbara Lee’s proposed legislation goes further than just asking for an inventory of historic properties.  It would put a stop to the disposal program altogether.

Unfortunately, it’s not likely that the Republican-controlled Congress will pass such a moratorium.  But it’s a welcome sign that at least some people in Congress are paying attention.

(Photo credit: Protest over sale of Berkeley, CA post office; Congresswoman Lee at Berkeley postal rallyPost office in Stamford, Conn.)

Who Remembers the Nationwide Postal Wildcat Strike of 1970 (and Why Does That Matter)?

March 20, 2015


Philip F. Rubio is author of There’s Always Work at the Post Office: African American Postal Workers and the Fight for Jobs, Justice, and Equality.  Rubio, a historian and former postal worker, brings to life the important but neglected story of African American postal workers and the critical role they played in the U.S. labor and black freedom movements. Having fought their way into postal positions and unions, black postal workers—often college-educated military veterans—became a critical force for social change. Centered on New York City and Washington, D.C., the book chronicles a struggle of national significance through its examination of the post office, a workplace with facilities and unions serving every city and town in the United States.

In this post, which originally appeared on the UNC Press Blog, Rubio marks the anniversary of the U.S. postal strike of 1970 by looking at its importance in both the lives of employees as well as the history of the postal service itself. 


Who Remembers the Nationwide Postal Wildcat Strike of 1970 (and Why Does That Matter)?

Judging from sparse media references as well as historical scholarship, the answer to that question appears to be, sadly, not a whole heck of a lot of people. But what about those who participated in it? That is a whole other story, as I continue to find out firsthand in recording strike veteran narratives. Their stories, combined with readily available evidence already out there, should help make a convincing case for why this was such an important event in United States labor history. One could even argue that it even deserves as much attention as, say, the Flint Sit-Down Strike of 1936-37, where GM autoworkers in Michigan fought for control of the work process and won union recognition for the United Auto Workers union.

In 1970 what happened in a nutshell was this: postal workers had become fed up with working for wages that had lagged so far behind over the years that many were working second and third jobs to make ends meet. In cities like New York and Washington, D.C., many postal workers were even collecting food stamps and welfare. At the time, federal government employees only enjoyed partial collective bargaining rights (provided by Executive Order 10988 in 1962). That meant they had to lobby Congress for pay raises—a process they dubbed “collective begging.”

On March 12, a rank-and-file caucus of Branch 36 (Manhattan-Bronx) of the National Association of Letter Carriers (NALC) spearheaded the demand for a branch strike vote. Striking the federal government has been illegal since 1912. But that is exactly what Branch 36 voted to do on March 17. Picket lines went up at midnight all over New York City. Other NALC branches voted to strike, spreading upstate and into New Jersey, Massachusetts, Connecticut, Pennsylvania; then west to Ohio, Illinois, Michigan, Colorado, and California. Together they shut down 671 post offices in dozens of cities and towns across the United States. Clerks, mail handlers, maintenance workers, motor vehicle operators, and other crafts from other postal unions joined what became the largest “wildcat strike ” (one not authorized by a national union) in American labor history. Over 200,000 postal workers struck for eight days. Despite the inconvenience of a total mail stoppage, strikers enjoyed the support of the majority of Americans.

Court injunctions were served on local union leaders, fines were levied, and government officials threatened to break the unions. President Richard M. Nixon called up 26,007 troops in an effort to break the strike by moving the mail—which failed. The strike ended on March 25 when strikers were convinced by union leaders to return to work after negotiations with Nixon administration officials. No one was fired or jailed. Further negotiations led to legislation signed that August by Nixon granting a 14% raise, with top pay “compressed” to 8 instead of 21 years, and full collective bargaining rights (except the right to strike) under a reorganized self-supporting hybrid government agency-corporation in 1971 called the U.S. Postal Service.

Who were these people? I’ve interviewed strike participants from New York to California, Denver to Detroit, and “almost strikers” from Miami, D.C., and Atlanta. Unfortunately, many older postal strike veterans have passed away, although some have left their recorded stories behind. But I was lucky enough to be able to interview 55 letter carrier strike participants at the 2014 NALC national convention. I had already interviewed 11 strike veterans from carrier, clerk, and mail handler crafts as part of the research for my first book on the post office, There’s Always Work at the Post Office: African American Postal Workers and the Fight for Jobs, Justice, and Equality (University of North Carolina Press, 2010).

There was a real diversity of strike experiences across the country. Participants told me of strike debates and votes held in union halls, bars, “swing rooms,” or even on the workroom floor. Some of these debates and votes started in the weeks preceding the strike, while others happened spontaneously. Once the strike started, some local union officers would have to “disappear” to avoid being served with court injunctions. Real rank-and-file leadership was being exercised by those who often had little or no experience in daily union affairs, and whose only communication was telephone, word of mouth, or news reports. I even spoke to one of the soldiers who had been called up by Nixon to move the mail in New York during the strike. He corroborated stories commonly told of troops unable to master mail-sorting in a few days but also sympathetic to strikers—some of whom had been called up as reservists and were working next to them.

The wildcat strike (really a general strike) transformed the post office and its unions. As it was itself inspired by other public sector strikes in New York during the 1960s, the 1970 nationwide postal strike in turn inspired no small amount of labor militancy and engagement. Every strike veteran I’ve interviewed or read has expressed pride in their action and the outcome despite the risks. Turnover dropped dramatically as post office work became a well-compensated, desirable career. In many ways, this strike helped revive a stagnant post office. But somehow today, forty-five years later, as it continues to grow with America, the post office has become a target for elimination or privatization.

Philip F. Rubio is associate professor of history at North Carolina A&T State University in Greensboro and author of the award-winning There’s Always Work at the Post Office: African American Postal Workers and the Fight for Jobs, Justice, and Equality. For video of his guest appearance on the Colbert Report and links to additional articles and media appearances, check out his author page.

(Photo credit: 1970 postal workers strike; letter carriers on picket lineTime cover)

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