USPS Struggles with Finding and Measuring Efficiencies | Citizens Against Government Waste
The WasteWatcher: The Staff Blog of Citizens Against Government Waste

USPS Struggles with Finding and Measuring Efficiencies

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


Math is hard.  Especially when it comes to the USPS and its attempts to save money.

The latest confirmation of this is contained in a June 13, 2019 United States Postal Service (USPS) Office of the Inspector General (IG) report on how badly USPS bungled the calculations of its overtime costs for mail processing, the summary of which opens with this cheeky line:

“This sounds like a math problem on a standardized test: If the amount of mail processed in fiscal year (FY) 2018 declined by 5 billion pieces and total number of workers used to process mail declined by 5,000 career employees (with workhours also dropping by 4.3 million), how much did overtime costs decrease?

“Answer: They didn’t. Overtime costs to process mail increased by $257 million (31 percent) in FY2018 from the previous year. What happened?

“Our latest audit report looked at the U.S. Postal Service’s  management of mail processing overtime in FY18 and determined that the USPS did not effectively manage mail processing overtime costs in FY 2018. It planned for total mail processing overtime costs of about $732 million, but actually incurred $1.09 billion, a difference of 49 percent.”

Hardly the dry, yawn-inducing prose one usually hears from the IG (trust us, we read a lot of IG reports).  Postal management’s inability to calculate, let alone control, overtime costs, is noteworthy for a couple of reasons.

First, this instance of accounting imprecision is only the latest in a string of reports that have revealed just how off the mark USPS can be when it comes to calculating costs in general, and particularly when implementing efficiencies and trying to squeeze savings out of its operations. 

For example, on January 5, 2015, USPS downgraded its first-class mail delivery standards by eliminating single piece overnight deliveries and moving other mail from two-day to three-day delivery, with the express purpose of saving money by using fewer machines, less facility square footage, and making transportation costs more efficient.  Postal management projected savings of $805 million annually.  Instead, the IG found that the agency achieved an anemic 5.6 percent of that estimated savings of $1.6 billion for 2016 and 2017.  The IG also concluded that it was not only “unlikely” that the USPS would ever achieve the savings, but, perhaps more importantly, that postal management never developed any way to track the savings.

In 2014, postal management embarked on an initiative to eliminate inefficient surface transportation routes and optimize highway contracting costs, which represent more than 55 percent of its $7.3 billion in domestic ground transportation costs.  But a January 30, 2019 IG report revealed that the USPS’s calculations and methodologies for that initiative were “inadequate,” “undocumented,” and “inconsistently followed.” According to the report, there were “no nationwide cost savings” from the initiative in FY 2017, and, after comparing the projected savings to actual savings, the USPS had overstated net savings by $82 million.

Postal management’s persistent struggle to identify efficiencies, and track and realize savings, matters for another reason.  In almost every official statement or testimony US Postmaster General (PMG) Megan Brennan makes a point of claiming that she and her team are managing USPS costs “aggressively.”  In her April 30, 2019 testimony before the House Oversight and Reform Committee, the PMG was once again pushing hard to have Congress relieve the agency of the statutory burden of pre-funding its retirees’ healthcare and pension liabilities, which are estimated to be $124 billion.  The agency has already defaulted on $34 billion in mandatory prefunding payments between 2012 through 2016.  

Postal management also wants Congress to integrate 88,000 of its eligible retirees into the equally fiscally-challenged Medicare program, restore a previous bump in the prices of first-class mail, and provide postal management with additional flexibility to offer new products and services.  Missing from this wish list are any details of how postal management plans to use current authority or any future authority to enact transformational changes to USPS’s business model, and any discussion of how postal management would reduce its bloated labor costs, address ongoing retiree liabilities, boost sluggish productivity, and implement efficiencies in its hugely inefficient bureaucracy.     

Similarly, during the April 30, 2019 hearing, Democrats on the committee returned again and again to the subject of the pre-funding burden, describing how onerous it was, how unfair it was that Congress included the provision in the first place during the crafting of the last postal reform bill (The 2006 Postal Accountability and Enhancement Act), and advocating its elimination.  This, in spite of the fact that the most postally-proactive Republican on the committee, Rep. Mark Meadows (R-S.C.), had already conceded that any bipartisan postal reform legislation would probably feature a provision to remove that requirement or amortize that liability in some way to lessen its financial impact.  The U.S. Treasury Department’s 2018 USPS Postal Task Force also addressed the pre-funding mandate, suggesting that those liabilities could be “restructured with the payments reamortized with a new actuarial calculation based on the population of employees at or near retirement age.” 

What Rep. Meadows, and others, are getting at is that once the bedeviling pre-funding provision is history and the USPS is allowed to shift many of its financial burdens off on others, what else does the USPS management team have in mind to fundamentally transform this lagging, sclerotic agency.  Based upon the IG reports (along with the Government Accountability Office High Risk List, which has been warning about its vulnerability to waste and mismanagement since 2009), not much. 

In fact, Rep. Meadows requested a copy of the USPS’s Ten-Year Business Plan to restore the agency to financial stability on January 4, 2019, and PMG Brennan promised it would be delivered to him in 10 days.  Nothing was furnished.  He requested it several times after that, and did so more forcefully at the April 30, 2019 hearing.  PMG Brennan said it was all but complete.  Rep. Meadows is still waiting.

USPS’s allies on the Hill shy away from discussing, and often oppose outright, many of the other proven cost-saving techniques, some of which are currently available to postal management without congressional action.  Increasing third-party partnerships with more effective private-sector companies to help with sorting and distribution is just one example. 

Instead, some members of Congress and certain vocal Democratic presidential hopefuls, like Sens. Elizabeth Warren (Mass.), Bernie Sanders (Vt.), and Kirsten Gillibrand (N.Y.), have glommed onto cockamamie ideas, like postal banking, as some sort of revenue-generating quick-fix.  Anyone reading the IG reports should balk at the idea that a financially-unstable entity that struggles with the primary functions of tracking costs and projecting savings in its core operations should be permitted to dive into a highly competitive and complex industry, like financial services, in order to generate revenue and rationalize a bloated workforce.      

Taxpayers should be concerned that postal reform is being distilled down to a series of elements which will offload the agency’s financial burdens to taxpayers and postal ratepayers and address only one side of the postal reform paradigm, as if these changes alone will salvage an agency whose business model is structurally dysfunctional.  Congress must resist this path, for it will almost guarantee that the deep cultural transformation that the USPS needs will be shunted aside in the near term and Congress will be dealing with another postal crisis before long.  And a piecemeal approach will permit postal managers to persist in the illusion that they are “aggressively” managing the business, when the data tell a very different story.       

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