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Covid’s Negative Impact On USPS Performance Detailed

The PRC’s Public Representative Kenneth E. Richardson submitted the following comments on the current status of the U.S. Postal Service:

PUBLIC REP REPORT TABLE V-1

PUBLIC REP REPORT TABLE VII-2

CONCLUSION:  After the challenging year of FY 2020, it was hoped FY 2021 would be a year of return to normalcy. Rather, as COVID-19 unfolded, FY 2021 can best be described as a year of transition. It certainly was not the anticipated year of return to normalcy.

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COVID-19 and its variations continued to plague attempts to return to normalcy. Mail volumes recovered somewhat, but labor shortages, business closings, and cost inflation all prevented the return to the levels expected.

During Quarter 4 of FY 2021, new rates authorized pursuant to the Commission’s 10-year review were implemented in August, 2021, although, at the time, the 10 year review order remained subject to appeal in the court. The Commission’s 10-year review order was subsequently upheld on appeal in November, 2021 after the close of FY 2021. The impact of the transition to the authorized 10-year review rate levels somewhat above the prior more restricted rates has yet to be determined. And if COVID-19 variations continue to arise, causing challenges, this past transition period may become the new normal and each year may look like the last.

With this backdrop, the Postal Service initiated its 10-year plan in March, 2021, in the middle of the fiscal year as an attempt to position the Postal Service to comply with the PAEA and other laws that oversee its performance. Although rates have necessarily continued to rise with inflationary costs while most volumes are declining, structurally the Postal Service’s attempts to initiate steps to assure longer term compliance with the law are heartening and appear likely to have some success.

New emphasis is being placed on right-sizing equipment and leased space as well as service performance. There has been some improvement in the overall level of compliance, but much more is planned and necessary to be done during the remaining years of the Postal Service’s ten-year plan.

The recent adjustments to delivery performance standards extending the expected days for delivery affecting a limited portion of First-Class Mail is regrettable and perhaps necessary for some segments. Arguably it may not comply with the spirit of the law, but it was not rejected by the Commission.

Yet, upward adjustments in delivery days for performance purposes are not unique. It is necessary to better align service expectations with the realities of the changing operational environment, particularly the nation’s transportation network, traffic patterns, highways, airlines, railroads, realistic and modernized equipment and, as well as, perhaps most notably, identified consumer preferences.

So, as a transition year with a recently appointed Postmaster General and the 10-year plan, the Postal Service has moved forward. Some areas of compliance that are of concern to the Commission have improved, but, In general, cost coverages have not improved. Compared to the year of COVID-19, FY 2020, service performance has improved somewhat, but not to levels that comply satisfactorily with service performance standards.

Of utmost importance are the Postal Service’s efforts to contain costs.

Throughout FY 2021, the Postal Service has provided responses to Commission and Chairman’s information requests about its efforts to improve efficiency and reduce costs. The Postal Service reports several programs to improve efficiency across several operations. The Commission has targeted for review pinch points where costs efficiencies might be improved.

The Postal Service has reported on its operations for FY 2021 indicating its degree of compliance with the PAEA and outstanding Commission directives. The question of compliance is in many cases objective. Either the Postal Service’s products covered their attributable costs or an appropriate share or they did not. Service performance met the percentage standards or not. Workshare passthroughs met the Commission’s 100 percent passthrough policy or fell within the allowable range for compliance or they did not.

Other measures of compliance are subjective. Postal Service leadership is attempting to improve productivity and service in the short run and longer run. In these, the Postal Service may not be strictly out of compliance, but upon review it may be reasonably concluded either that management is or that it is not complying with its responsibility to improve its financial and service performance in particular areas. It is particularly difficult for a regulator or others responsible for oversight, or the public representative or the public generally to second guess management’s efforts.

Expressions of concern and directives recommending that greater effort should be directed toward reducing costs overall or at pinch points in operations and improving service performance are a part of the Commission’s oversight, but regulators cannot do the job for the Postal Service’s management. In the end, the Public Representative looks forward to and hopes that much needed improvements can be demonstrated in next year’s Annual Compliance Report.

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