The Postal Service is about to implement slower delivery standards for nearly 40% of first-class mail and almost a third of small, lightweight packages.
USPS expects these changes will cut costs and improve efficiency, but these plans have received pushback from Congress, mailers, unions and customers. Meanwhile, its regulator doesn’t expect these slower standards will save the agency much money.
The Postal Regulatory Commission, in an advisory opinion Wednesday, warned new service standards for the Postal Service’s first-class package service (FCPS) — lightweight packages that weigh less than a pound — would not “substantially affect the Postal Service’s overall financial condition.”
These conclusions echo the commission’s non-binding advisory opinion from July, when it found plans to slow first-class mail wouldn’t result in “much improvement” to its long-term financial troubles.
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USPS will implement its slower standard for first-class mail on Oct. 1.
USPS spokesman David Partenheimer said the agency will soon make an announcement about when it will implement the new service standards for its first-class package service. USPS, he added, will not implement the changes by Oct. 1, which was the earliest date the agency had proposed.
Before changing the service standard for the first-class package service, the PRC recommends USPS set interim goals for on-time delivery, monitor customer satisfaction over the change in service and track cost savings achieved in rolling out the plan.
Partenheimer said USPS is reviewing the commission’s recommendations.
“As an initial matter, we agree with the commission’s conclusions that the changes we proposed are consistent with the applicable statutory requirements and that our stated goals for making these changes are reasonable, and we are confident in our ability to successfully implement them,” Partenheimer said. “Further, while we intend to review the commission’s recommendations, we note that they are generally consistent with our plans, and we are therefore likely to largely adopt them.”
The PRC has a more limited role overseeing USPS package services that compete with private-sector shippers, compared to the agency’s monopoly over most mail services.
USPS expects the new standard would save the agency $42 million a year and would allow it to provide more reliable and consistent package delivery. The agency expects the changes won’t significantly hurt package volume, and may actually result in modest growth.
Slower service standards for first-class packages will likely improve on-time metrics, but the PRC said USPS hasn’t given a firm estimate of when it will meet its 95% on-time delivery goal, and hasn’t set more realistic delivery goals in the interim.
USPS executives told the PRC in June that the proposed service changes to its first-class package service would cut costs by reducing the volume of packages that travel via contracted air delivery.
“Modifying select service standards will allow additional transport time for long-distance package deliveries and increased network efficiencies. The proposed new service standards for First-Class Package Service will also enable additional package volume to be transported by surface transportation, which is more reliable and affordable compared to air transportation,” Partenheimer said.
USPS expects to save money by transporting more first-class packages and mail through its ground transportation network. But the PRC determined that USPS estimates for cost savings are “potentially inaccurate and unachievable.”
Implementing these processing and transportation changes ahead of the holiday peak season, the commission wrote, could be challenging, given the COVID-19 pandemic and added stress on the logistics industry.
“The Postal Service has not demonstrated that it is operationally capable of running the complex surface network modeled to support the service standard changes it plans to implement,” the commission wrote.
While the new service standard would result in slower delivery for small packages that travel the furthest, USPS expects 5% of its first-class package volume traveling relatively short distances will arrive one day faster under these new standards.
The PRC found USPS didn’t conduct a detailed analysis of how the service standards would impact customers, such as those who rely on the first-class package service to receive prescription drugs.
USPS, however, estimates that nearly all prescription drugs currently subject to two-day delivery and the majority of prescriptions taking three days to deliver would remain unchanged under the new standards.
USPS also disputes claims that veterans or rural customers will be disproportionately affected by the new standards.
Congress, unions and the public have scrutinized these imminent service changes. The American Postal Workers Union submitted analysis during PRC proceedings that showed the new service standards would disproportionately impact the West Coast.
The National Association of Letter Carriers opposed the service standard, adding that “the Postal Service’s major customers and the American public have expressed strong opposition to downgrades in service.”
NALC warns that even if USPS models accurately predict cost savings, those savings — less than 1% of current operating costs — “do not appear to be worth the potential damage to the agency’s brand.”
A coalition of 16 states, the District of Columbia, and New York City also warn that USPS is “moving swiftly and without proper diligence to change postal operations and degrade service standards.”
Top Democrats on the House Oversight and Reform Committee, in a letter to USPS leadership earlier this month, raised concerns about the agency implementing the new standards for first-class mail, despite concerns raised by the PRC.
“It is imperative that the Postal Service takes all steps necessary to fully understand the potentially damaging ramifications of slow mail delivery. Unfortunately, it appears that the Postal Service has conducted no such comprehensive analysis,” lawmakers wrote.
In addition to slower delivery, USPS has implemented higher prices for its mail and package products. The agency on Aug. 29 increased prices on mail products by 6.8%, and increased delivery prices for magazines, newspapers, and catalogs by 8.8%
USPS will also introduce a temporary price increase for many of its package products on Sunday, in preparation for the peak holiday season. The temporary price increase will expire on Dec. 26.