USPS [Finally] Delivers on 10-Year Plan

On April 30, 2019, former Postmaster General (PMG) Megan Brennan promised Congress that the struggling United States Postal Service (USPS) would release a 10-year business plan in two months. Now, almost two years and tens of billions of dollars in net losses later, America’s mail carrier finally released their comprehensive business plan.

Laid out in a 55-page blueprint, the proposed changes would dramatically change USPS operations and generate $24 billion in net revenues over the next 10 years (excluding Congressional or Postal Regulatory Commission actions). Additionally, the plan is slated to lower costs by $34 billion over the next decade via cost reductions and increased administrative efficiency. While the plan contains many commendable features, the agency ultimately fails to address key cost drivers and operational issues that continue to hamper the USPS.

The Taxpayers Protection Alliance (TPA) highlights the very best and the very worst of the USPS’ 10-year plan:

Stamp of Approval: Improving Administrative Efficiency

In the blueprint, the USPS envisions more than $3 billion per year in cost savings, a similar figure to TPA’s reform savings estimate produced in our 2019 report on postal reform. Various ideas include optimizing local truck routes, embracing performance-based highway contracting, diversifying the current mix of air carriers, and having a unified logistics program to ensure that the entire postal system is operating harmoniously. This series of changes is long overdue because inefficiencies and suboptimal transportation strategies have plagued the USPS for years.

In 2019, TPA estimated that the failure to hold middle-mile delivery contractors accountable costs the USPS at least an additional $1 billion per year, or roughly a quarter of what the agency spends on highway contacts per year. Though the USPS hasn’t seriously tried to address this issue, the agency has tried to streamline contractor routes to save money. This effort is not going well. A January 30, 2019 Inspector General report found that, “there were no nationwide cost savings from the HCR Optimization Initiative in FY 2017.” In addition, a lack of technological acumen has meant that the USPS is not designing routes efficiently as they can. A systemwide effort to increase contractor auditing and optimize logistics and transportation operations could put the USPS on the road to significant cost-savings.

Return to Sender: Embracing an Electric Fleet

When the USPS recently announced their estimated $6 billion agreement with Oshkosh Defense to produce up to 165,000 new mail trucks over the next ten years, it appeared that the prospect of a costly, all-electric fleet was off the table. But, according to the recently released blueprint, the USPS “can commit to a majority of the Postal Service’s delivery fleet being electric within ten years and a fully electric fleet by 2035…with the right level of Congressional support.” While the Oshkosh vehicles are primarily gas-powered, they are capable of being retrofitted with electric systems in the future. Unfortunately, the USPS appears intent on making the mistake of mass-retrofitting a reality…on the taxpayers’ dime.

According to PMG Louis DeJoy, the USPS would need to spend up to $4 billion extra to fully electrify its fleet. Even if Congress winds up fully footing the bill for this cost on paper, the USPS would likely expend additional resources due to large, inevitable cost overruns associated with federal projects. All of this extra spending and effort would likely have a negligible impact on greenhouse gas emissions. Even if a cleaner fleet could reduce emissions by one million metric tons of carbon dioxide each year (in itself unlikely), that would only amount to just a fraction of a percent of total U.S. annual emissions. While new mail truck investments are certainly worthwhile, the USPS should forgo 100 percent immediate electrification.

Up in Flames: Changing Service Standards and Maintaining 6-7 Day Delivery

The USPS commands the widespread respect and adoration of the American public due to their (mostly followed) pledge to quickly get mail in and out of mailboxes. The blueprint notes, “Current service standards require 3-day delivery for any destination within the continental United States, whether the distance from origin is 300 miles or 3,000 miles.” As the agency points out, the USPS has failed to meet their first-class mail service standards since fiscal year (FY) 2012 and performance has been on the decline since FY 2017. There has been a particularly pronounced decline since the start of the coronavirus pandemic.

The agency uses these metrics to argue that current standards are unattainable and makes the case for changing the current 1- to 3-day service standard to a 1- to 5-day service standard. While this may reduce some expenses over the short-term, the change would significantly erode the reputation and credibility of America’s mail carrier over the long-term. Pre-pandemic, roughly 90 percent of first-class mail was meeting service standards (figure 7 in blueprint). This performance will likely resume post-pandemic, as thousands of USPS workers emerge from quarantine and are vaccinated. Instead of ditching the service standard status-quo, the agency should seriously consider ending 6-day deliveries and 7-day package deliveries which entail significant overtime expenses. Allowing USPS workers to take a “breather” on weekends would save the agency at least $2 billion per year, while allowing Americans the option of speedy deliveries on weekdays.

To conclude…

Postal leadership deserves praise for finally releasing their 10-year plan (even though it’s two years late). The USPS can get back into the black by improving on their reform agenda and ditching 6-7-day delivery and truck electrification schemes. With the right reforms in place, PMG DeJoy can deliver a leaner, more reliable USPS and avoid costly taxpayer bailouts.