DeJoy rebuffs USPS regulator considering more ‘proactive’ role in postal oversight

The Postal Service’s financial losses are deepening, and more than double what the agency expected so far this fiscal year.

The Postal Service’s financial losses are deepening, and more than double what the agency expected so far this fiscal year.

But Postmaster General Louis DeJoy said USPS isn’t the same organization he started leading nearly three years ago, which was on the verge of running out of cash.

DeJoy said USPS, when he took office in 2020, was on track to lose $20 billion that year and was going to run out of cash in 50 days.

“It was obvious that the Postal Service faced a clear and present danger, that its existence as a viable agency was nearly over,” DeJoy said. “This was at a time in history when it was needed most, in the beginning of a pandemic. Yet there were no meaningful solutions offered either inside or outside the organization.”

USPS is falling short of some of its financial goals, as part of a broader vision for the agency to “break even” by 2030, as outlined in its 10-year Delivering for America Plan.

But DeJoy, speaking Monday at the National Postal Forum in Charlotte, North Carolina, said USPS has cut projected losses for the decade by more than half, and is no longer the “haphazard, bureaucratic organization” he saw on his first few days on the job.

“The Delivering for America Plan is not a plan for the unachievable. It is a plan for dramatic change in how we perform our service, that if executed in time and with care, will lead to long-term success for the organization,” DeJoy said.

DeJoy said USPS, to keep its reform goals within reach, must implement dramatic changes to correct for years of inaction on postal issues from its regulator, the Postal Regulatory Commission, and Congress.

He said this inaction has “made it difficult, if not impossible, for our employees to serve effectively.”

“We must implement dramatic change, because the time for more subtle or incremental change has long ago passed, necessitating the transformational changes we need today,” DeJoy said.

“These dramatic changes must be done at a pace, and with a tenacity that is rarely seen, and rarely necessary, in government or private industry,” he added.

USPS doesn’t expect to break even this year, as it previously expected in its 10-year reform plan, but has cut its projected losses for the decade by more than half — from $160 billion to $70 billion.

USPS told the PRC in a recent filing it saw a $641 million net loss in April, and a more than $4 billion net loss so far in fiscal 2023. That’s more than double what USPS projected it would lose at this point in the year.

USPS in April saw more than a 9% decrease in first-class mail volume and a nearly 5% decrease in package volume, compared to the same period last year.

To cut transportation and operating costs, USPS is bringing mail processing and delivery operations under one roof by creating Sorting and Delivery Centers across the country. DeJoy plans to deploy over 400 Sorting and Delivery Centers over the next three years.

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.

DeJoy said USPS will create 300 S&DCs by repurposing previously vacated mail processing plants, and retrofitting them for package processing, mail transfer operations, electric vehicle charging and delivery operations.

USPS will co-locate another 100 S&DCs within existing Local Processing Centers.

In addition to S&DCs, DeJoy also plans to eliminate 200 “small and wasteful” annexes and absorb those operations into 60 Regional Processing and Distribution Centers.

USPS will establish 45 of these centers in existing postal plants, and will build 15 new centers in areas experiencing growth.

DeJoy called this network configuration “the Great Unwind,” and said eliminating these “half-implemented” temporary annexes would put an end to poor working conditions for employees, as well as cut costs and delays.

“This is not a consolidation. It is an aggregation of randomly deployed functionality spread out across a local area because of ill-planned deployments,” DeJoy said.

USPS said it won’t lay off employees as part of its S&DC plans, and won’t result in post office closures, even at post offices that will no longer serve as outposts for letter carrier operations.

DeJoy is also looking to cut costs across the USPS delivery network, which consists of 250,000 carrier routes, reaching 165 million delivery points six days a week. He said the USPS delivery network makes up more than half of its annual operating budget.

“While this delivery system is spectacular, it is also the costliest part of our business,” he said. “We have carrier routes that have not been adjusted in years, even though significant changes in mail volume, mail profile and residential development have been incessant.”

The PRC launched a public-inquiry proceeding in April on USPS’s S&DC plans, after it rejected a broader proposal to review the agency’s 10-year reform plan in its entirety.

DeJoy, however, told lawmakers earlier this month the PRC has “overstepped their authority” by calling for a review of USPS plans to consolidate facilities across its delivery network. He added that USPS “could move a lot faster, without the PRC scrutinizing its plans, and blamed the commission for the agency’s financial predicament.

“We have made a lot of change, and there has been a lot of noise. However, the changes that we have made so far have not caused the Earth to collide with the sun,” DeJoy said at the National Postal Forum. “Market dominant mail and packages are moving more reliably together and as fast as ever.”

The regulator in 2020 gave USPS the authority to set mail prices higher than the rate of inflation. USPS is making full use of this authority, and has settled into a rhythm of raising rates each January and July. USPS will start charging 66 cents for a first-class stamp this July.

DeJoy, however, said the regulator should have granted this pricing flexibility years ago, and said the PRC’s inaction has been at the root of the agency’s problems for more than a decade.

Postal regulator considers more ‘proactive’ role  

Several postal experts — including the PRC’s chairman —agree the commission needs to be more “proactive” on USPS oversight, and propose expanding its capacity to oversee rapidly evolving postal issues.

PRC Chairman Michael Kubayanda, in a white paper published Monday by the Consumer Postal Council, said DeJoy’s dissatisfaction with the postal regulatory system “presents challenges as well as opportunities for improvement.”

Kubayanda co-authored the white paper along with David Williams, a former USPS inspector general and a former member of the USPS Board of Governors, as well as former Rep. Tom Davis (R-Va.), who chaired the Oversight and Government Reform Committee from 2003 to 2007.

“The commission is working to be more agile in responding to these developments and there is an interest in becoming more proactive,” the authors wrote.

The commission, in its 2023-2028 strategic plan, is looking to “anticipate and adapt to an evolving postal system.”

But the white paper’s authors said the PRC needs to upgrade its IT systems and its data analytics capabilities, as well as grow its workforce to stay ahead of postal oversight issues.

“The current infrastructure is reflective of a legacy commission overseeing a relatively static postal network and industry,” they wrote.

The PRC has a workforce of 82 employees to oversee USPS and its more than 600,000-employee workforce.

Among its duties, the PRC approves USPS rate hikes and reviews negotiated service agreements USPS makes with other businesses.

The commission, in response to rapid changes in the postal industry, is looking to increase its capacity for oversight.  It added several lawyers and economists over the past few months, as well as IT, cybersecurity, and program management staff.

But the paper’s authors said the PRC also needs to modernize its IT systems to centralize data and conduct analyses of postal issues more quickly.

“The lengthy, detailed reports that the commission issues rely on the professionalism and herculean efforts of small teams of lawyers, analysts, and paralegals. These efforts are laudable, but based on manual processing of data, and they are not scalable without better use of technology.”

The PRC is working on a pilot program to enable centralized information management for its staff who produce analyses of USPS operations, and is planning to release a new public-facing docket system and updated website later this year, after receiving money from the Technology Modernization Fund. 

The white paper’s authors, however, question whether efforts to modernize the regulatory commission would temper DeJoy’s criticisms.

“The postmaster general, for his part, wondered aloud whether the Postal Regulatory Commission is necessary,” they wrote. “The comment may have been made in jest and to prod the Commission to act expeditiously, although he followed it up with scathing criticism of regulatory oversight during a congressional hearing.”

The authors are also adamant that, despite USPS objections, the commission is well within its jurisdiction to probe the agency’s network consolidation efforts.

“Throughout the postal community, including at the commission, there is renewed concern about the impact of massive, proposed changes to the network, which have the potential to affect services,” they wrote.

DeJoy has repeatedly touted his 10-year reform plan to grow the agency and cut costs amid a continued decline in mail volume.

While DeJoy said the plan has its share of critics, he said those critics have yet to provide their own counterproposal.

“All the powers that be, with all their wisdom and authorities, could never put together enough thoughtfulness and amass enough forcefulness or put aside their special interests to create a successful strategy and implement it,” DeJoy said.

DeJoy said USPS currently faces upheaval the agency hasn’t seen since 1970 — a year in which postal workers went on strike, and the Nixon administration signed the Postal Reorganization Act into law.

That legislation transformed the Post Office, then a Cabinet-level agency, into the Postal Service, an independent agency.

“Much like in 1970, we are at a crossroads. In the past, we have made only marginal changes and refused to confront the realities that face us,” DeJoy said. “The fate of the Postal Service will be decided by the decisions we make now and whether we are successful in implementing the Delivering for America plan.”

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