Yesterday, the Postal Service issued a press release responding to revelations about a market research survey it commissioned last summer but chose not to tell anyone about. The press release contains several misleading statements that only serve to compound the Postal Service’s bad faith in keeping the survey secret.
One wonders why they even bothered issuing a press release, rather than ignoring the story and hoping it went away. But the Postal Service was probably getting inquiries from the media, and someone decided it would be best to refer reporters to a press release.
The press release will probably raise more questions than it answers, as you can already see in the way Government Executive handled it. In an article entitled “Postal Service steers attention away from ‘flawed’ revenue study,” GE rehashes the press release but then quotes a staffer for Congressman Gerald Connolly saying that the real reason they abandoned the study was that “they didn’t like the results because they would be very inconvenient for them.”
The two phases of the market research
The market research was conducted by Opinion Research Corporation (ORC) to determine how mailers would respond to the change in service standards on which the Network Rationalization plan is premised. The survey showed that slowing down First-Class and periodical mail would cause First-Class to drop by over 10%, periodical mail by nearly 20%, total mail volumes by nearly 8%, and revenues by over $5 billion a year.
When the folks in postal headquarters saw those results, they decided the survey instrument was “seriously flawed” and ordered a second phase of research, this time making sure the questionnaire and concept statement (the prompt used to initiate the questioning) were constructed in a way to get better, more “reliable” results.
The results for the phase-2 survey were much more palatable, and this is the research that became part of the Postal Service’s testimony to the Postal Regulatory Commission (PRC) in December as part of the Request for an Advisory Opinion. Below are the results of the two phases of the market research.
|
Product
|
Volume
change
|
Revenue
Change
|
Net contribution
change
|
|
PHASE-1 RESEARCH
|
|||
|
Total Single Piece FCM
|
-10.3%
|
-$1,885,906,135
|
-$751,110,892
|
|
Total Presort FCM
|
-8.2%
|
-$1,313,212,398
|
-$867,862,107
|
|
Total First-Class Mail
|
-9.1%
|
-$3,199,118,533
|
-$1,618,972,998
|
|
Total Standard Mail
|
-5.3%
|
-$918,489,304
|
-$293,014,826
|
|
Total Periodicals
|
-19.7%
|
$369,478,082
|
$121,727,275
|
|
Priority/Express
|
-14.4%
|
-$773,756,417
|
-$172,990,046
|
|
Totals
|
-7.7%
|
-$5,260,842,336
|
-$1,963,277,595
|
|
PHASE-2 RESEARCH
|
|||
|
Total Single Piece FCM
|
-2.8%
|
-$505,382,239
|
-$201,281,547
|
|
Total Presort FCM
|
-1.4%
|
-$222,734,587
|
-$147,198,510
|
|
Total First-Class Mail
|
-1.9%
|
-$728,116,826
|
-$348,480,056
|
|
Total Standard Mail
|
-1.4%
|
-$244,555,898
|
-$78,024,977
|
|
Total Periodicals
|
-2.1%
|
-$40,209,556
|
$13,247,334
|
|
Priority/Express
|
-5.3%
|
-$326,947,426
|
-$85,396,035
|
|
Totals
|
-1.7%
|
-$1,339,829,706
|
-$498,653,734
|
The Postal Service presented two witnesses to provide testimony about the market research — Rebecca Elmore-Yalch, a VP at ORC, and Gregory Whiteman, Manager of Market Research at the Postal Service. Their initial testimony was extensive, but neither mentioned the existence of an earlier phase of research that had been abandoned. During the “discovery” part of the PRC’s Advisory Opinion process, several interrogatories were posed that could have provided an opportunity to mention the phase-1 research, but no one did.
Eventually, the questions became so direct, it was impossible to avoid acknowledging the existence of the phase-1 research, and the Postal Service turned over some data to the PRC, but classified it as “non-public.” It took some pressure from members of Congress, the postal worker unions, and perhaps others, but finally, on Thursday, the results of the research were made public. The rest of the materials submitted to the PRC remains “non-public,” and one wonders if the other shoe is yet to drop.
The Postal Service issues a press release
Needless to say, yesterday’s press release doesn’t provide any of this background. Instead, the press release begins as follows: “The Postal Service conducted market survey research related to potential service standard changes. A questionnaire used in the fall of 2011 asked business customer respondents about a scenario that would never be implemented at the same time.”
The survey was actually conducted in late summer, during August, but that’s a minor error. It simply reveals that the person who wrote the press release had very little knowledge about what actually happened.
Contrary to what the press release says, the phase-1 survey does not describe “a scenario that would never be implemented at the same time.” Instead, the concept statement used to initiate the interviews notes that the Postal Service is experiencing an “unsustainable” budget deficit, and it then simply enumerates the changes being considered to address the problem: seeking legislative reform to change government requirements to pre-pay health and pension benefits, eliminating Saturday delivery, and closing small post offices. The statement then outlines the revisions in service standards being proposed. (The phase-1 survey is here; the concept statement is on page 11.)
The phase-1 concept statement says nothing about implementing these changes all at once, as part of some overall “scenario.” It simply says the Postal Service is “exploring several changes.”
The press release then says, “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. Any such contemplated actions, if implemented, would be done so over a phased, five-year time horizon, providing adequate time for planning.”
The truth of the matter is that the survey questionnaire never once mentions anything about a rate increase — not in the concept statement or in the questions themselves. The words “price” and “rate” and “increase” do not appear anywhere in the survey.
The survey questionnaire also says nothing about doing everything — or anything — “immediately.” There’s nothing alarming like that in the concept statement.
As for the “five-year time horizon,” it may be true that it will take the Postal Service some time to implement everything it wants to do, and its “Plan to Profitability” does present a “five-year” business plan. But the press release makes it sound as if these changes are going to be implemented very gradually, and that is not the case at all.
At the PRC hearing on Tuesday, David Williams, Postal Service VP of Network Operations and the man in charge of the Network Rationalization plan, told the Commissioners that the Postal Service intended to file a Final Rule on the service changes in mid-April. Implementation of the Network Rationalization plan would begin immediately, and every processing facility in the country would be impacted, even those not identified as losing or gaining facilities. The implementation would continue throughout the summer, stop temporarily in September to avoid causing problems with the election and Christmas, and then resume in January. The full implementation would be completed by next summer. (You can listen to Williams’ testimony about the scheduling on the PRC webcast, at about 3:38.)
As for closing post offices, unless the Postal Service has had a change of heart about its Retail Access Optimization Initiative to close 3,600 post offices, we’ve been told by PRC Chairman Ruth Goldway that she’s been told by the Postal Service to expect announcements of “mass closures” in May, when the moratorium ends.
In terms of post offices, the only thing that may take a full five years is the Postal Service’s ultimate goal — closing half the country’s 32,000 post offices and moving the postal retail into private businesses like Walmarts. That’s a change, by the way, being advocated by Senator Tom Carper, co-sponsor of the postal reform bill that will be debated in the Senate on Monday, as noted in a NY Times piece earlier this week. (It’s another awful Times article, deservedly trashed on Going Postal, line by line.)
And finally, as for when five-day delivery might be implemented, the Senate bill says that could happen in two years, not five, and the Postal Service would like to be able to do it as soon as possible.
In other words, the Postal Service is in a big hurry to implement its plans and it’s not going to wait until the PRC completes its Advisory Opinion, probably sometime in September. But contrary to what the press release says, the questionnaire says nothing about implementing numerous changes “immediately.”
The press release goes on to say, “The survey additionally failed to ask basic questions about whether businesses were planning to change their mailing behaviors in absence of any such actions by the Postal Service.”
That explanation about why the survey was flawed did not come up in Whiteman’s testimony on Wednesday, and it too doesn’t stand up to scrutiny. If this were a problem in the first survey, you would think that the Postal Service would correct it the second time around. But the phase-2 survey asks no questions about how businesses might or might not change their mailing habits if the Postal Service decided not to change service standards. It doesn’t ask mailers anything about what they would do if things stayed the same and the Postal Service decided not to close post offices or eliminate Saturday delivery or change the service standards. (The phase-2 survey is included in Elmore-Yalch’s testimony, Appendix F.)
The research: “Seriously flawed” or “very good”?
The press release then says, “Upon review of the initial study results, the study’s design was deemed to be seriously flawed. The research project was cancelled at that time and a new survey was conducted.”
ORC’s Elmore-Yalch, the person who supervised the research, would probably take exception to seeing the study’s design characterized as “seriously flawed.” On Wednesday she told the PRC that “the research is good…. I don’t want anybody to think that this was not good research. It was very good research.” The only problem was the fact that the “concept statement” mentioned closing post offices and eliminating Saturday delivery, which had inadvertently introduced “noise” that made it difficult to “tease out” the impacts on mailing behavior due “solely” to the service-standard changes.
Asked if there might not be benefits to a survey that included this “noise,” Elmore-Yalch said it depended on what the data was being used for. If the intent were to understand the full impact of the several changes, then yes, the survey would have value, and, she added, the Postal Service can use that data for that if they want. (Her judgments about the research can be heard on the PRC’s webcast at about 2:36.)
Needless to say, the press release doesn’t mention that this “very good research” showed the potential for a revenue drop of over $5 billion a year due to the changes in service standards and, to one degree or another, closing post offices and ending Saturday delivery. Whether the Postal Service decided to re-do the survey because of the magnitude of the potential losses or because it decided that the survey design was “seriously flawed” is one of those questions we’ll probably never learn the answer to.
The press release also doesn’t bother to mention that the total cost of the survey was nearly $1 million, or that the phase-1 research that was tossed because it was so flawed cost $430,000. The concept statement, by the way, which caused all the trouble was not written by ORC but by the Postal Service itself. (The contract between USPS and ORC is here.)
The press release concludes by saying, “The Postal Service clarified these issues as part of testimony delivered this week at the Postal Regulatory Commission.” It is true that Elmore-Yalch and Whiteman provided a lot more information about what happened with the two phases of the market research.
But the press release makes it sound as if there was some confusion that needed to get cleared up, and the Postal Service did the PRC a favor by offering clarifications. The truth of the matter is that the Postal Service has been hiding the phase-1 market research since September, when the results came in, and the Postal Service is still hiding things from the public.
The materials concerning the phase-1 research are still classified as “non-public” in the PRC docket. Congressman Gerald Connolly of Virginia has a filed a request with the PRC asking that the material be made public, but the PRC has not ruled on that request.
Those materials apparently do not include the raw data that ORC gathered during the phase-1 research. When the Postal Service ordered ORC to stop work on the survey, there was still a final stage of work to be done — “scrubbing” the data to eliminate outliers and correct data entry errors. Leaving the survey incomplete turns out to have been a strategic move. ORC now says it won’t release the raw data because it’s against company policy.
Mysteries remain
There a few other matters concerning the survey which remain something of a mystery.
For example, in the Phase-2 study, the concept statement eliminates the references to closing post offices and eliminating Saturday delivery that were introducing “noise” and skewing the results. That’s understandable. But the phase-2 concept statement does something else. It goes into much more detail about the changes in service standards than the phase-1 concept statement does, and among the new details are passages that reassure mailers than in some cases, service might actually improve with the consolidation plan. Why were these passages added to the phase-2 concept statement?
In the phase-2 survey, a screening question was added to ensure that any individual at a National Account (the Postal Service’s biggest customers) who had participated in Phase-1 did not participate in phase-2. Why was this question added? Was there some concern that having participated in the first round would skew one’s answers in the second round, or did the Postal Service want to make sure none of their big National Accounts knew they were doing the survey again?
The results of phase-1 came in during September, shortly before the Postal Service was to present its case to the PRC. Phase-2 took place in October. Did the Postal Service delay its Request for an Advisory Opinion until December because it needed to do the survey again?
Mr. Whiteman was the person primarily responsible for the market research, but it’s clear that other executives at the Postal Service were involved in the decision to abandon phase-1 and do a phase-2. The person overseeing the entire Network Rationalization plan is Dave Williams, but when questions about the survey came up in his cross-examination on Tuesday, Williams could provide little insight into what happened.
We still don’t know, therefore, who made the decision to quash the phase-1 survey. Did Williams’ supervisor, Chief Operating Officer Megan Brennan, make the decision? Did the Postmaster General make the decision? Did the Board of Governors know about it?
On Monday, the Senate will begin debate on S.1789, the 21st Century Postal Service Act. The bill would give postal leadership more power so that they can implement their business plan to downsize the Postal Service. As we can see from the suppressed market research — which only begins to suggest what might happen if all the components of the business plan were implemented— the Postal Service seems determined to send itself into a “death spiral” of falling volumes and revenues that will necessitate still further cuts.
Rather than giving speeches that repeat the tired rhetoric about how “dire” the financial situation of the Postal Service is and how these postal “reforms” must be quickly approved, Senators should take a look at the secret market research story. The leaders of the Postal Service are not to be trusted, and the last thing they need to be given is more power to dismantle the country’s postal system.
For more on the secret market research:
Secret market survey reveals USPS plans would cost over $5 billion in lost revenue
