USPS previews ‘massive-scale’ changes, but regulator demands more details

The Postal Service is outlining sweeping changes to its transportation and delivery network across the country, with a focus on growing its shipping and package business.

But its regulator, the Postal Regulatory Commission, is insisting USPS shed more light on changes to its facilities and operations, including how these changes may impact its level of service to the public.

Postmaster General Louis DeJoy said in a recent video message that USPS is “implementing positive changes on a massive scale throughout the Postal Service,” with a current focus on overhauling its nationwide network of facilities and cutting transportation costs.

“I am confident that the men and women of the United States Postal Service will raise their game to overcome the obstacles and thinking of the past, to continue to improve our operational performance and capture our fair share of the competitive, but growing, package delivery business,” DeJoy said. “Achieving this goal will set the Postal Service on the path to a bright future.”

DeJoy said USPS is currently looking to overhaul approximately 250 facilities as part of the agency’s 10-year “Delivering for America” reform plan to streamline its processing and transportation network.

“They will be highly automated, with logically sequenced and precise workflows,” he said. “Once fully deployed, we will have world-class network operations that, combined with our delivery network, will enable us to become the preferred delivery provider in the nation.”

Congress passed the Postal Service Reform Act last year in the hopes of improving the agency’s long-term financial health. The legislation eliminated a mandate from a 2006 law that required USPS to pre-fund retiree health benefits.

Lawmakers expected the legislation would save USPS a total of $107 billion — with more than half of those savings going into effect immediately, by forgiving $57 billion in deferred payments to its retiree health benefits fund.

The Postal Service Reform Act is the Postal Service’s only legislative request to Congress in its reform plan, and has deferred some of the agency’s liabilities for about seven years.

“However, our requirement to pay those liabilities will again be upon us, and we have a lot to do to get in position to fund them,” DeJoy said.

DeJoy said USPS needs to bring in more revenue to its competitive package business in order to grow its revenue. Lawmakers, he pointed out, included a provision in the recent postal reform legislation requiring USPS to institute an integrated mail and package delivery system.

“This requirement reinforces that we compete with private companies in the package delivery business for significant funding to cover our costs,” DeJoy said. “In essence, Congress again mandated that we must control our costs and grow our revenue. So that is what we will do.”

USPS package volume remains higher than pre-pandemic levels, but the agency wrote in its fiscal 2023 Integrated Financial Plan that the “surge in revenue from consumer behavior changes during the COVID-19 pandemic will continue to subside in 2023.”

USPS, in a recent filing to the PRC, reported a more than $4.7 billion net loss for the fiscal year so far — nearly double the $2.4 billion loss USPS projected for this point in the year.

USPS’s ongoing network changes include standing up Sorting and Delivery Centers (S&DCs), which are large facilities that bring mail processing and mail delivery operations all under one roof.

Six S&DCs are already open across the country. USPS expects to have 30 S&DCs running by the end of this year, and about 100 S&DCs running by the end of 2024.

As part of the consolidation, USPS will relocate letter carriers who previously worked out of hundreds of “spoke” post offices to S&DCs, which will serve as the “hub” of regional mail operations.

However, the Postal Regulatory Commission is calling on USPS to better explain its rationale for its network changes, as well as whether such changes will help USPS cut costs, or whether the changes would impact its level of service to the public.

The commission recently rejected a motion from USPS to withdraw its public-inquiry proceeding to better understand how the S&DC plans will impact USPS costs and performance.

DeJoy recently told House lawmakers that the regulator’s probe would “put this whole plan in jeopardy.”

The commission, in its response, said USPS’s objections to its probe are “premature,” and that the inquiry won’t prevent the agency from implementing its reform plans.

“The commission has merely opened a docket, creating a forum to learn more about strategic plan initiatives that may have a significant impact on the postal community,” the PRC wrote. “By opening this inquiry, the commission has not required the Postal Service to delay the implementation of any DFA Plan initiatives or required the Postal Service to postpone further strategic planning.”

The commission is asking USPS to provide a schedule of planned facilities — including S&DCs, Regional Processing & Distribution Centers and Local Processing Centers.

“These changes may already be impacting the postal community. Further, it is unclear how these changes would impact costs or services, or if they implicate the Postal Service’s compliance with certain statutory provisions such as those relating to service performance or the requirement to seek an advisory opinion,” the PRC wrote.

The commission is asking USPS to provide details about the $34 billion in cost savings estimated in its 10-year reform plan.

The regulator is also asking USPS to confirm that it won’t close any post offices as part of the 10-year reform plan and that “customers will not experience any changes to their local post office retail operations.”

The commission wrote that its inquiry is not intended as an advisory opinion process on the entire 10-year reform plan. The PRC noted that some USPS workforce-related initiatives and legislative proposals fall outside its jurisdiction.

Postal unions so far have gone along with USPS’s network modernization plans, including the creation of S&DCs. Union leaders, however, are calling on USPS not to implement changes that would have an adverse impact on the workforce, and are pressing USPS management for more details about the plan.

The American Postal Workers Union recently signed a memo with USPS promising the ongoing network consolidation won’t lead to a reduction in retail operations.

The memo, however, states that discussions over staffing, job duties, job postings and local negotiations remain ongoing.

USPS said in a recent report that the S&DC effort won’t result in post office closures, even at post offices that will no longer serve as outposts for letter carrier operations.

APWU National President Mark Dimondstein said in a recent interview that the memo addresses the union’s concerns about USPS’s level of service to the public and offers job protection for its members.

“We want to have the best retail services. We want to be in every community. We don’t want any of these places closed. And obviously, our jobs are tied to that as well. So on both of those points, it certainly helps the people in this country to reiterate in writing that this is the agreement,” Dimondstein said.

USPS spokesman David Partenheimer said customers will see no changes to their local post office retail operations, and no post offices will be closed as part of the agency’s ongoing network changes. PO Box service, he added, will also not be changed.

“Our employees will benefit from this new model through new, modern workplaces. There will be no employee lay-offs as part of this effort. Any movement of employees will be done in accordance with the respective collective bargaining agreement,” Partenheimer said.

Partenheimer added that the USPS network transformation “is necessary and fundamental to our continuation as an organization and service to the American people and our business customers.”

“For decades, our outmoded network has created significant financial losses, increased deferred maintenance costs, deteriorated workplace conditions for our employees, and failed to efficiently integrate mail and package processing and delivery,” he said.

The National Association of Letter Carriers says it’s also cooperating with USPS management as it implements its network consolidation.

“We’re working with the Postal Service to try to figure out what the best fit is. We understand the Postal Service, like any organization, they have to move forward and adjust to economic changes and that sort of thing,” NALC Executive Vice President Paul Barner told reporters in May. “We understand that. We just want to make sure that it’s being done in a considerate and collaborative manner.”

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