The Postal Regulatory Commission is currently conducting a Public Inquiry into the Delivering for America plan, and the Postal Service is preparing its response to the Commission’s first information request. The response was due June 28th, but the Postal Service asked for, and was granted, a three-week extension, so we’ll have to wait until July 19th to see what the Postal Service has to say.

The fact that the Postal Service asked for an extension is significant in that it shows that the case is not headed for the DC Circuit. That has seemed like a very real possibility since May 5th, when the Postal Service filed a motion asking the Commission to withdraw its order initiating the inquiry. The motion argued that the Commission lacked the legal authority to initiate such an inquiry, and it made a not-so-veiled threat to take the matter to court.

On June 21, the Commission denied the motion, affirmed its authority to conduct the inquiry, and issued its first information request. On June 27, the Postal Service filed a motion asking for a three-week extension. It’s not clear why the Postal Service backed down on bringing a lawsuit.

In its motion for an extension, the Postal Service said it needs an extra three weeks to prepare responses because of the “breadth and detail” of the questions. And since the Commission’s inquiry is “intended only to garner information” and the initiatives will be implemented over a period of several years, the Postal Service said that a three-week delay shouldn’t matter much.

Unless the Postal Service is planning to provide a substantial amount of detail in its responses, the questions are not all that hard to answer. The Postal Service has been working on the DFA plan for over two years, and it’s been aware of most of the questions in the first information request for two months — since April 28, when PostCom submitted a motion for an information request that contains many of the questions posed by the Commission.

The first information request contains questions concerning four main areas: which facilities will be impacted, how will the plan cut costs, what are the plans for closing post offices, and why hasn’t the Postal Service requested an advisory opinion. Here’s a preview of what the Postal Service may have to say about these topics.

A schedule of facility activations

The first set of questions in the information request asks the Postal Service to provide a schedule of planned facility activations, including Sort and Delivery Centers (S&DCs), Regional Processing & Distribution Centers (RPDCs), Local Processing Centers (LPCs), Destination Hubs (DHUBs), and any other facility contemplated as part of the DFA Plan, with the location, facility type, planned date of activation, and existing facilities that will be affected and how.

At this point, the Postal Service has already shared with the unions and management associations the locations of about 150 facilities that will be impacted by the plan — 11 that will become RPDCs and 33 that will become LPCs (as discussed in this post and USPS presentation); 25 that will become, or have already become, S&DCs (listed in this USPS presentation); and 82 post offices that will become “spoke” offices and send their carriers to an S&DC (discussed here).

Here’s a list of these 150 facilities, in roughly the same format requested by the Commission, along with a map showing all 150 facilities. (View list on Google Docs.)

In its response to the information request, the Postal Service will probably share a list something like this and say everything else is still in the planning stage and not ready for public disclosure. Or perhaps the Postal Service will surprise us and share more with the PRC than it has previously shared with other stakeholders. It could, for example, provide a list of all 60 RPDCs and all 220 LPCs.

The Postal Service could also produce a list of the 414 “candidate sites” that it used to analyze the environmental impacts of its purchase of new vehicles for the supplemental EIS released a few days ago. These sites average 100 vehicles and would presumably include many, perhaps mostly, S&DCs. In a footnote, the Postal Service explains that the SEIS does not include a list of the sites because they “are subject to change (if, for example, a site-specific analysis should find a particular site uneconomical or unavailable for lease renewal) and have not been announced publicly or within the Postal Service.”

Given that these candidate sites are not listed in the SEIS (even though they’re referenced a hundred times), the Postal Service is not likely to provide the Commission with a comprehensive list of all the potential S&DCs — there could be as many as a thousand — 400 at processing facilities and 600 at post offices. It is even less likely that the Postal Service will provide a list of the 4,000 to 8,000 post offices that may lose their carriers to an S&DC. That would set off too many alarm bells and — as the Postmaster General has warned — it could “put this whole plan in jeopardy.”

While the Postal Service probably won’t be sharing much in the way of lists, you can find lists of 60 potential RPDCs, 150 potential LPCs, 400 potential S&DCs, and 600 of the largest post offices, which could become S&DCs, here, as discussed in this previous post.

$34 billion in cost savings 

The second set of questions asks the Postal Service to provide details about the $34 billion in cost savings promised in the DFA plan, with “documentation with any analysis or study the Postal Service prepared to estimate the cost savings associated with that initiative.

This is the one question in the information request that could require some extra time to answer, particularly if the Postal Service is going to provide a lot of detail. An overview of the cost savings in the DFA plan shows five initiatives and three or four elements for each, though not all of the elements involve cost savings.

The total for cost savings ranges from $28 to $40 billion; the $34 billion referenced in the question splits the difference. These cost reduction numbers originally covered ten years, but almost none of the savings have been realized so far, so they would need to be achieved over the remaining eight years.

Putting aside cost reductions for outsourcing transportation and other work, the DFA plan would cut $18 to $28 billion in costs over eight years, nearly all of it in personnel costs. The workforce reductions will be phased in, so most of the savings will come in the later years. By 2030, something on the order of 50,000 jobs would need to be eliminated. That comes as no surprise. As the Postmaster General revealed at a forum sponsored by AEI last July, “To get to break even I think we may need to get 50,000 people out of the organization.”

Here’s a chart showing the Postal Service workforce by function (estimates based on workhour report filed with the annual compliance report, USPS-FY22-7).

 

More than half the workforce of 650,000 consists of city and rural letter carriers, whose numbers will probably increase under the S&DC initiative due to the longer distance between S&DCs and routes. The job cuts will therefore hit the customer service function the hardest, with mail processing also experiencing big reductions.

The $10 to $14 billion in savings for delivery include two elements that won’t save anything (six-day delivery and the new fleet), and the third is “optimize office and street efficiencies.” If street efficiencies refers to moving carriers to S&DCs, it’s hard to see how that will save money. As stated in a July 2022 USPS presentation, the system will require 5 to 10 percent more routes. So most of the delivery savings will involve “optimizing” post office efficiencies, i.e., reducing the staffing at post offices.

When they’re not helping customers at the window, clerks support the carrier operation, so when carriers go to the S&DC, there’s less work for clerks, and for the postmasters and supervisors as well. A 2012 OIG report about decoupling delivery and retail operations says one clerk is required to support about five carrier routes. Moving 100,000 routes to S&DCs could thus end up eliminating 15,000, maybe 20,000 clerk jobs — an average of about three per office for 6,000 offices. And that’s just about how many positions would need to be eliminated to save $10 to $14 billion over the next eight years.

The $5 to $7 billion in mail processing savings will come mostly from consolidating operations, like combining 250 P&DCs into 60 RPDCs and eliminating a couple of hundred annexes and “accessorial functional locations.” This will reduce the number of mail handlers, machine operators, maintenance workers, and all the other workers who staff the plants — maybe 10,000 jobs in all.

The $7 to $10 billion in transportation savings will involve shifting First Class mail from air to ground, reducing the number of miles driven (by consolidating facilities), and using more postal employees (Postal Vehicle Service) instead of private contractors (Highway Contract Routes). The Postal Service currently spends about $10 billion annually on transportation, and costs have been increasing by more than a half billion a year. The DFA plan promises to eliminate these increases and hold costs at current levels or less. It won’t be easy. The projected savings on shifting from air to ground have not materialized so far, and in general it costs more to use postal employees for transportation than non-union HCR drivers.

The $3 to $5 billion savings for administrative costs will involve eliminating some management positions like the logistics staffing cuts announced last week (details here) and cutting back on outsourcing. (A list of the top 150 suppliers is here; most are for transportation, but others involve IT work, consulting, etc.)

The $3 to $4 billion in savings for retail initiatives will mean reducing the staffing at post offices, cutting window hours, and closing stations and branches. Perhaps another 4,000 clerk and postmaster positions would be eliminated — on top of those being excessed due directly to the S&DC initiative.

While the post offices that lose their carriers will be most at risk, these reductions could happen anywhere. Cost savings of this magnitude would mean cutting hours at thousands of offices (like POStPlan, which cut hours and eliminated postmaster positions at 12,000 offices, possibly saving $300 million a year) and closing thousands of post offices.

In responding to the Commission’s information request, the Postal Service will probably not provide many details about post office closings or about how the job cuts will work out, but it will be interesting to see what the Postal Service does choose to reveal and what it chooses to keep hidden.

Post office closings

In the third set of questions in the information request, the Commission notes the apparent contradiction in the Postal Service’s statements about post office closings and retail operations. As noted above, the DFA plan refers to closing some stations and branches and reducing hours at some low-traffic offices, but in the Second Year Progress Report, the Postmaster General’s testimony to Congress, and the recently signed MOU with the APWU, the Postal Service promised that no post offices will be closed and no offices will see changes to retail services as a result of the Sorting & Delivery Center plan.

The Commission thus asks the Postal Service to “confirm that no post offices will be closed as part of the DFA Plan” and “customers will not experience any changes to their local post office retail operations.”

The Postal Service may respond by clarifying that post office closings and changes in hours of service could occur as part of DFA, but they will not be a consequence of the S&DC plan. They will instead be caused by insufficient customer demand, lease issues, postmaster vacancies, emergency suspensions, and other justifications for a discontinuance listed in the Discontinuance Handbook.

If that’s the Postal Service’s response, it will be disingenuous. The S&DC plan and post office closings go hand in hand.

When a post office has, say, 15 carriers and 5 clerks, and the carriers all go to an S&DC and a couple of the clerks are relocated to other facilities, the post office will be left with two or three employees to do the PO boxes and retail windows, and more than half the building will be empty. It’s impossible to imagine that they will all remain open. Removing carriers makes closing post offices much easier, and it’s one of the unstated reasons for the S&DC plan in the first place. (The 2012 OIG report on decoupling retail and delivery developed its projected cost savings based on the assumption that the 10,000 post offices that gave up their carriers would be closed.)

The Second Year Progress Report also promises that the S&DC rollout will not lead to any layoffs, but it doesn’t mention that many clerks at offices losing their carriers are already being excessed — one step short of being laid off — and the reason provided in the impact statements is “due to the establishment of the Sorting and Distribution Center” (as discussed in this post).

About the advisory opinion

The Commission’s information request asks the Postal Service to explain why it has not requested an advisory opinion prior to the implementation of its new facilities and corresponding processing and logistics network realignments.

The Postal Service is likely to explain that the network changes announced thus far do not actually change postal services — one of the three criteria for determining when an advisory opinion is required. If and when it does decide to do anything that would change services — like reducing operating hours and closing a lot of post offices — it will request an advisory opinion at that time. (It might not even do so for a mass reduction in hours and instead claim there’s already been an advisory opinion on POStPlan.)

A response along those lines would be problematic because so many changes are already happening that impact the postal community. For example, the number of clerks in spoke offices is being reduced, which is eliciting complaints from patrons about losing familiar faces at the counter, longer lines, and delays getting PO box mail, undeliverable packages and certified mail.

As the rollout continues, many post offices will no longer have delivery units where mailers can drop mail to get a Delivery Destination Unit (DDU) discount; they’ll have to go to the S&DC instead. Bulk mailers who get volume discounts for dropping mail at one of 21 NDCs may soon need to use one of 60 RPDCs, which may mean breaking up their shipments and receiving smaller discounts. Mailers have many other concerns as well, like how entry and preparation requirements may change under the new network.

The questions in the first information request are just the tip of the iceberg. The massive transformations now underway will raise many more questions and require many more information requests. We’re just at the beginning of this inquiry.

— Steve Hutkins

To learn more about the DFA plan, and S&DC initiative, check out the S&DC Dashboard.

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