USPS Stands By Five-Day Delivery Savings

WASHINGTON, DC—In a report delivered to Congress, the U.S. Postal Service (USPS) asserted that the Postal Regulatory Commission (PRC) based a recent advisory opinion on a questionable analysis of the potential cost savings that could be achieved by implementing a five-day delivery schedule to street addresses.

The USPS has estimated that making the move would yield a net annual cost reduction of $3.1 billion based on extensive market research and financial estimates provided to the PRC on March 30, 2010. The PRC issued a nonbinding advisory opinion March 24, 2011, concluding that transitioning from a six-day delivery schedule to a five-day street delivery schedule would only achieve $1.7 billion in net annual savings.

The USPS believes the $1.4 billion discrepancy between the respective estimates results from:

• The PRC’s “unwillingness” to recognize about $760 million in savings from increased city carrier productivity and efficiency under a five-day schedule;

• the PRC’s “failure” to account for more than $260 million in highway transportation and mail processing economies associated with one less day of street delivery; and

• the PRC’s summary dismissal of the testimony of market research experts to reach its conclusion that the USPS estimate of annual revenue loss resulting from the change was understated by $386 million.

On the variances between the agency’s cost savings estimates, the Postal Service report questions the PRC assumption that “little, if any, efficiencies and increases in productivity would be realized in certain city carrier activities by delivering the same volume Monday through Friday instead of Monday through Saturday.” The PRC revenue loss estimate “is contradicted by the overwhelming weight of expert testimony…[and] falls short of the requirement that it be based on substantial record evidence.”