With USPS plant consolidations on pause, PRC preps for an advisory opinion: A preview of what’s ahead

Steve HutkinsBlog, Featured

[UPDATE MAY 21, 2024: The Postal Service has posted a letter (dated May 20) from Postmaster General DeJoy to Senator Gary Peters clarifying which operational changes are on pause and which are not. The letter includes four lists: (1) 59 MPFR studies and their current status; (2) 13 RPDCs underway; (3) 20 LPCs operational or soon to be operational, and hence not part of the pause; and (4) 28 S&DCs that will launch in June and September, which are also not included in the pause. (Our spreadsheet with all the latest update lists is on Google Docs here; note the various tabs at the bottom. Our version of the MPFR study list, along with related lists discussed below, is here.)

The letter indicates that of the 56 consolidations approved by MPFR studies, all are on pause except for those already implemented — Augusta and Macon to Atlanta, and Medford and Eugene to Portland — plus Fort Wayne to Indianapolis, to be implemented soon. Several other consolidations have already been implemented or will be implemented despite the pause, but the Postal Servicer says these were not subject to the MPFR process (they’re included in the LPC list). The new MPFR list includes the “level of investment” for the 56 consolidations that were approved after a MPFR review (see below). The total investment is between $430 and $550 million.]

THIS WEEK the Postal Service announced that it was putting the plant consolidations on hold, at least until January 1, 2025. In a letter to Senator Gary Peters (on May 9), Postmaster General DeJoy said he would slow down implementation of his “Delivering for America” plan and consult with Congress and the Postal Regulatory Commission as he moved forward.

In his letter, DeJoy continued to defend his 10-year plan, saying that it would improve working conditions and lead to significant cost reductions, and it would not involve layoffs or be “consequential to service.” He acknowledged that he’d been unable to convince Congress of all this, but blamed that on “misconceptions” based on how consolidations were done in the past.

DeJoy did not say he would also pause the other network changes now underway, but he did tell Peters that he would continue “to evaluate any additional changes we have underway and will advise you of our approach to satisfy any of your concerns regarding their engagement or any filing that might be warranted with the PRC.”

The Postmaster General thus seems to be softening his position about the need for a PRC advisory opinion on DFA. It’s a big step. For months, he has been complaining that the PRC was acting outside of its authority by initiating a Public Inquiry docket on DFA and by asking inappropriate questions about it. The Postal Service has repeatedly told the PRC that an advisory opinion is not required for the DFA initiatives now underway. That position may no longer be tenable.

Proposed legislation

Some members of Congress do not appear to be satisfied with simply a pause on plant consolidations. There are currently four pieces of proposed legislation that would further restrict the consolidations:

  • HR 8000 (Rep. Golden) “Timely Mail Delivery and Postal Services Protection” Act prohibits consolidations of mail process facilities until the PRC issues an advisory opinion;
  • HR 8045 (Rep. Hageman) “Postal Operations Stay Timely and Local” Act prevents the Postal Service from closing, consolidating or downgrading any processing and distribution center in a State “if such action would result in no such center being located in that State or negatively impact mail delivery”;
  • HR 8040 (Rep. Budzinski) “To limit the closure or consolidation of any United States Postal Service processing and distribution center in Postal Service regions that have failed to meet certain delivery standards, and for other purposes” prohibits consolidations in regions where service performance during the preceding year falls below 93 percent for 2-day mail and 90.3 percent for 3-5 day mail;
  • (Sen. Tester) “Protecting Access to Rural Carriers for Every Location (PARCEL) Act)” would permit a consolidation only if does not result in processing operations being relocated outside of state boundaries or harming local mail delivery and only after a geographical review is completed and public input reflects favorably on the decision to move operations.

The proposed bills are identified in a petition against DeJoy’s modernization plan, sponsored by Communities and Postal Workers United, here.

USPS shows cause

Earlier this week, the Postal Service responded to the Postal Regulatory Commission’s order directing the USPS to “show cause” why it hasn’t requested an advisory opinion on initiatives under the Delivering for America plan. (The Response is on the PRC website here, accessible directly here.)

The USPS Response argues that the Commission doesn’t have the authority to order the Postal Service to request an opinion or “show cause” why it won’t. According to the statute (3661(b)), the Postal Service, not the Commission, has discretion over the timing and scope of a request for an advisory opinion.

The only circumstances under which the Commission could compel the Postal Service to request an opinion would be after the PRC had the opportunity to carefully review and consider the information provided by the Postal Service. In the current case, however, the Postal Service says the Commission has pre-judged the issue.

The Postal Service also takes exception to the Commission’s order saying that if the Postal Service chooses to request an advisory opinion, it must do so within 40 days. That time frame, says the Postal Service, is arbitrary and insufficient to produce a reasoned plan. In any case, says the Response, if the Commission believes the Postal Service is not in compliance with relevant statutes, it can file a formal complaint through a designated officer.

All that said, the Postal Service proceeds to acknowledge that it is “actively considering the scope and contents for a request for an advisory opinion.” But before doing so, it needs “to understand the issues that are leading to disconnects between the DFA Plan and its execution.” In other words, to what extent are the spikes in delivery problems of the past few months being caused by initiatives like the plant consolidations and to what extent are other factors causing the problems, like the bankruptcy of a supplier that operated numerous contract-operated facilities (STCs).

The Response reviews the four DFA initiatives underway that have become matters of concern to the Commission, as expressed in numerous PRC Information Requests:

  1. consolidating facilities by downgrading some P&DCs to Local Processing Centers (LPCs) that handle only incoming local mail, while upgrading other P&DCs to Regional Processing & Distribution Centers (RPDCs) that handle all incoming and outgoing mail for the region;
  2. eliminating evening collections at thousands of post offices, generally small, rural offices (Local Transportation Optimization);
  3. consolidating letter carriers from post offices to Sorting & Delivery Centers (S&DCs); and
  4. insourcing some Highway Contract Route transportation between facilities.

The Postal Service argues that S&DCs and insourcing will not have an impact on postal services that would require a request for an advisory opinion, while the first two may. With that in mind, the Postal Service now says that the plant consolidations and LTO implementations that have taken place so far are essentially just “pilot testing” and they are “best conceived as probative tests that will reveal whether such a request is necessary and will help determine the contents of such a request.”

The Response concludes, “The Postal Service will continue its evaluation of the RPDC/LPC network and LTO initiatives and will request an advisory opinion, at such time and in such manner as required by Section 3661(b).”

The Commission quickly responded to the Postal Service’s filing by posting a notice on its website saying it’s reviewing the Response. The Commission is likely to say that an opinion is necessary, and it may give the Postal Service more time to file a request.

Beyond that, the Commission may also argue all the components of the plan are interrelated (the Postmaster General has said as much), so it’s insufficient to submit some initiatives to an advisory opinion review and not others. We’ll have to see how that issue plays out. The Commission is already continuing to ask more questions about the insourcing, as indicated by an Information Request posted this week.

By the way, there’s an excellent interview, hosted by Bob Levi, NAPS Director of Legislative and Political Affairs, with PRC Chairman Michael Kubayanda about the advisory opinion issues on NAPS Chat.

What’s not on pause?

Unless the Postal Service broadens its pause on DFA initiatives, only the plant consolidations will be on hold.

The S&DC plan will apparently proceed in June, when nine new S&DCs are scheduled to launch, and in September, when another ten S&DCs will go active. About two dozen “spoke” post offices are set to lose their carriers over the coming months to some of these S&DCs.

On the other hand, the launch date for twenty post offices that had been scheduled to lose their carriers to S&DCs in September has been canceled or postponed, so perhaps this initiative is slowing down too.

Overall, by the end of September, there may be about 70 S&DCs and 225 spoke offices, with 3,750 routes being relocated — a long way from the goal of creating several hundred S&DCs and thousands of spoke offices, and consolidating 100,000 routes to the S&DCs. (For a list of S&DCs and spokes along with their implementation dates, see our network update page here, and note the tab for “Recent changes 4/19/24.”)

It’s not clear how far along the transportation insourcing has proceeded, but it’s probably been restricted to those places where the Local Transportation Optimization has been implemented, since they seem to be complementary initiatives.

USPS presentations indicate that so far about 1,130 post offices have lost their evening collection under the LTO initiative: 319 in Virginia and North Carolina in October; 390 in Wisconsin and parts of Michigan in January; 226 in Oregon and southern Washington in February; and perhaps 200 in New York’s Mid-Hudson region on May 6.

The next LTO implementation is supposed to occur in Columbus, SC, in mid-June, with as many as 270 post offices losing the evening pickup. Maybe that will happen, or maybe it will be postponed. Either way, the implementation schedule is turning out to be much less aggressive than announced back in January, when it seemed that over 10,000 thousand post offices would lose their evening collections by the end of September.

All of which is to say it may not be necessary to issue a formal statement pausing these other initiatives. They seem to be moving ahead much more slowly than originally planned.

Unpacking the MPFRs

It was just a couple of weeks ago that the Postal Service completed the Mail Processing Facility Review (MPRF) process on 58 of the 59 processing facilities it had been reviewing for consolidation. Until DeJoy announced the pause, it appeared all but certain that the implementation of these consolidations was imminent.

According to the list of MPFRs and accompanying documentation posted on the USPS website, 56 of the 59 studies ended with a final determination to proceed with the consolidation.

There were three exceptions: The MPFR for Bemidji, MN, hasn’t progressed past the initial notice stage, the decision to consolidate the South Suburban P&DC to the Chicago South RPDC was not implemented (South Suburban will instead take some operations from Peoria), and the review of the Buffalo facility ended with a decision not to implement a consolidation to the Rochester P&DC.

For each of the 56 consolidations that were approved to proceed, the losing facility would remain open as a Local Processing Center that handles incoming mail to local ZIP codes. The outgoing mail from these areas will be transported to the “gaining” P&DC for processing. In most cases, the losing P&DC will also co-house a S&DC, with carriers and probably a parcel sorting machine using the space freed up by removing the outgoing operations.

Nearly all of the 41 gaining P&DCs on the list will eventually be designated as one of the 60 Regional Processing & Distribution Centers (RPDCs) in the new network. The final MPFR reports, however, usually do not identify a gaining P&DC as an RPDC. The RPDCs identified as such in the MPFRs include Jacksonville, Chicago South (Forest Park), Greensboro, Atlanta (Palmetto), Charlotte, Portland (OR), St. Louis, St. Paul, and the new facility in Indianapolis. (A few others have been made public in notifications to stakeholders, including Houston, Santa Clarita, Boise, and Richmond.) For all the other MPFR studies , the Postal Service apparently considers it premature to identify which gaining P&DCs will become RPDCs.

The final determination report confirms, by the way, that the location of the new Indianapolis RPDC is the Indianapolis Central Logistics Park on Brookville Road (shown above).

The list on the USPS website, it should be noted, doesn’t include all the consolidations that have been implemented. The Richmond RPDC took over operations from Norfolk and Rocky Mount with no MPFR. Similarly, the Atlanta RPDC took over operations from Atlanta (Crown Road) and North Metro (Boggs Road), again without doing a RPDC. The Postal Service has told the OIG that some consolidations do not fall within the scope of the agreements with unions to conduct a MPFR (as discussed in this OIG report on the Richmond RPDC).

In his letter to Senator Peters, the Postmaster General says that “with one or two exceptions,” the consolidations have not yet been implemented. In its responses to the “show cause” order filed with the PRC this week, the Postal Service said that implementation has occurred at four P&DCs: Augusta and Macon to Atlanta, Eugene and Medford to Portland. A list prepared by the APWU back in February shows completed implementation for those four but also Provo to Salt Lake City, Trenton to Philadelphia, and Minneapolis to St. Paul.

Overall, it’s not exactly clear which of the plant consolidations will be impacted by the pause. Some have already been implemented, some are well along in the pipeline, and some fall outside the requirement to conduct a MPFR and aren’t included in the 59 studies . The APWU has consequently “initiated a detailed information request to obtain the full and accurate list of consolidations that will be put on hold as well as any potential impact on excessing of employees from one facility to another.” The PRC may ask for a similar list just to clarify what’s on pause and what is not.

Here’s a map of the losing and gaining facilities in the MPFR list.

Cost savings projections

DeJoy’s letter indicates there’s an attached list of the impacted sites that includes the status of the MPFR study, the final decision, the level of investment, and the cost savings. But for some reason the attachment hasn’t been made public.

Here’s a list with the cost savings data extracted from the final determinations posted on the USPS website. Note that some losing facilities are listed twice because they’re splitting the consolidated operations to two different gaining facilities. (Scroll to right to view the full table, or view on Google Docs here.)

In his letter to Peters, DeJoy says that consolidations would save between $133 and $177 million. The table shows almost exactly that — a total cost savings between $134,724,000 and $174,642,161.

The MFPR reports break down the cost savings for labor in terms of projected reductions in work hours. Much of the data is redacted, but overall, it appears that each eliminated position represents a cost savings of about $82,000 (that’s about 1800 hours per year at $45/hour for wages and benefits).

If one uses the average of the high and low projections, eliminating 830 positions (see below) would reduce costs by about $68 million — roughly the sum of cost savings for mail processing, management and maintenance.

Here’s a chart showing how the savings breaks down according to the various cost categories: mail processing, management, transportation, and maintenance. The chart uses the averages of the high and low projections in the final determination notices.

These consolidations represent the first phase of a process that may eventually involve consolidating operations from about 150 P&DCs to the 60 RPDCs. Extrapolating from the current data on 56 consolidations would lead to a total cost savings of about $400 million annually for 150 consolidations.

There may be more LPCs than 150, and there may be other facility consolidations in the plans that don’t involve turning the facility into an LPC, so overall the Postal Service may be figuring that consolidations could save $500 or $600 million annually.

The 10-year plan shows a total savings of $5 to $7 billion for mail processing initiatives, plus $7 to $10 billion for transportation savings, which includes both savings on plant consolidations and ending evening collections under the LTO plan.

Impacts on employees

For each of the MPFRs, the final determination notices say, “There will be no career layoffs as part of this initiative. The Postal Service is a responsible employer and will be working closely with the unions and management associations to work through this initiative. The Postal Service will follow requirements of the collective bargaining agreements where they apply and all applicable postal policies.”

While there may not be any layoffs, a large number of employees will clearly be impacted, and many will be leaving the Postal Service.

The 56 completed MPFRs show that a total of 829 positions would be eliminated — 753 craft and 76 management. Extrapolating to a possible 150 consolidations would bring the total to something on the order of 2,200 positions eliminated.

The numbers for eliminated positions represent the net changes and don’t reflect how many employees would actually be impacted. A total of 2,891 craft positions would be eliminated at the losing facilities, while 2,195 craft positions would be added at the gaining facilities.

Those losing their jobs at a losing facility will have the opportunity to take one of the positions added at a gaining facility, but for many, that will be impossible. The average distance between the gaining and losing facilities is 140 miles. In some cases, it’s over 200 miles. That’s much too far for a daily commute. The alternative is relocating to a new city, which will be impossible for many of those with families, mortgages, and a spouse with another job. Many of the added positions at the gaining facilities will thus be filled by new USPS employees.

Impacts on service

The final determinations say that the consolidations will not impact postal services. Retail and business mail acceptance services currently provided will not change, collection box times will not change, and service standards will not change. Some origin/destination pairs (SCF to SCF) will receive service performance upgrades, and there will be no service standard downgrades.

The MPFR notices do not specifically address the widespread concern that local mail that has been processed in a losing P&DC will be need to be transported to a gaining facility (soon to be an RPDC) for processing, then returned to the losing facility (soon to be an LPC) for delivery to local ZIP codes. In many cases, that would seem to add a day to delivery times.

The service standard for local First Class Mail is two days, yet the service standard for mail sent between the ZIPs of many of the losing and gaining facilities is three days. Of the 56 consolidations with a decision to proceed, there are 23 for which there’s a 3-day standard for mail sent from the ZIP of a losing facility to the ZIP of a gaining facility. (See the far-right column in the employee impact table above for the list.) Here are a few examples:

  • Grand Junction CO 81505 to Denver CO 80266 (253 miles)
  • Missoula MT 59801 to Spokane WA 99224 (204 miles)
  • Yakima WA 98903 to Seattle WA 98168 (153 miles)
  • McAllen TX 78501 to San Antonio TX 78284 (244 miles)
  • Casper WY 82609 to Billings, MT 59101 (280 miles)

If it takes three days to send a letter from Grand Junction to Denver — a one-way trip — how will the Postal Service meet a two-day standard for mail sent within the Grand Junction service area if it has to travel to Denver and then back to Grand Junction?

Implementation costs

The MPFR final determinations include a section on “one-time costs.” These includes Mail Processing Equipment (MPE) Relocation Costs, Building Modifications, Prep on Workroom Floor, and Employee Relocation. For four of the consolidations, the MPFRs show one-time costs for equipment relocations: Augusta, $220,000; Medford, $390,000; Greenville, $84,000; and Raleigh, $84,000. For all the other MPFRs, the line for “one-time costs” shows $0.

These one-time costs do not appear to be the “level of investment” in the consolidation that DeJoy refers to in his letter to Senator Peters. These costs could be substantial. They include costs for new high-speed sorting equipment and workplace amenities, such as new lighting, renovated bathrooms, and breakrooms.

The Postal Service has previously shared a list showing the capital investments for about 100 Sorting & Delivery Centers.  Some of these facilities are the losing P&DCs in the MPFRs, so apparently the costs for repurposing them as S&DCs is not included in the one-time costs for the consolidations.

The total capital investments for 100 S&DCs was over $460 million. Consolidating 56 processing facilities could cost even more.

In fact, the creation of the new RPDCs in Atlanta, Richmond, and Indianapolis was extremely costly. According to a report on cost reduction initiatives shared with Congress and the PRC, the Postal Service committed a total of $125.8 million to build the Atlanta RPDC, $86.7 million for the Charlotte RPDC, and $149.9 million for the  Indianapolis RPDC.

[UPDATE, 5/21/24: The Postmaster General’s letter to Sen. Peters includes the levels of investment for most of the MPFR facilities. The total for 52 facilities ranges from $430 to $550 million. See the main table, tab “levels of investment.”]

The public is heard

The fact that only a couple of the MPFRs led to a decision not to implement the consolidation suggests that the process has been mostly pro forma. The decision to proceed was made before the public phase of the process began, as those who attended the public meetings could infer from the way the meetings were held — a brief slide presentation by postal officials, with very little actual information being shared and no responses from postal officials to questions (“We’re just hear to listen”). It didn’t seem as if the Postal Service was listening at all.

The public comments made at the meetings and in writing (usually via an online survey form) do not appear to have had much impact on the final determinations. The summaries of the comments included in the MPRF final decisions list categories of comment — employee, facility review concept, post office operations, union, safety, service, and other — along with the number of comments in each category. But the content of the comments is not shared or even discussed.

Buffalo rally (photo credit Mitch Nowakowski)

It’s noteworthy that the one case where the final determination was not to proceed with the consolidation was the Buffalo P&DC, which was to be consolidated into the Rochester RPDC. The Buffalo decision was apparently the result of lobbying by Senator Chuck Schumer, who himself took credit and declared victory when the Postal Service announced it wouldn’t proceed with the consolidation.

Now that the Postal Service has put the consolidations on hold, the many elected officials who stood up for their P&DC are similarly claiming credit.

Senators and Representatives clearly deserve thanks for the Postmaster General’s decision to pause the consolidations, but they themselves were under pressure from elected officials in the impacted communities, the PRC, the OIG, industry stakeholders, postal management associations, postal unions and workers, and the public.

The last straw was probably the disastrous drop in service performance in those districts where consolidations have taken place — notably Virginia and Georgia.

On Friday of this week, DeJoy responded to a letter from Georgia’s Senator Jon Ossoff demanding an update on the situation in his state by May 17. DeJoy outlined the numerous steps being taken to address “the significant drop in performance.” Based on recent service performance scores in Georgia, it looks like will be a while before the problems are fixed.

In any case, the national scope of the mail delays has made it clear that DeJoy’s network transformation isn’t quite ready for prime time.

— Steve Hutkins

(Featured photo: Indianapolis RPDC at the Indianapolis Central Logistics Park)