August 28, 2020

In case you haven’t noticed, the U.S. Postal Service has been at the center of attention in recent days.  There is a mixture of fact and fiction, but we believe some things are pretty clear.  Of course, surprises always happen, so there are no guarantees.

The focus is on Postmaster General Louis DeJoy, who has been in office for about 10 weeks.  As the government version of an aircraft carrier, it takes a lot of effort and time to turn the USPS, and most significant change takes much longer than two and a half months.

What PMG DeJoy has done

1. Reorganized senior management of the Postal Service–This is something that all new Postmasters General have done in modern times. DeJoy’s initial reorg looks very standard, moving around seasoned postal executives.  No new team or group of consultants was brought in.
2. Begun work on a longer-term strategic plan—The main goal is to bring USPS back to financial stability. This is necessary, expected, and something previous PMG Megan Brennan and the Board of Governors had been working on for some time.  Also, members of Congress have been asking for a plan upon which to base reform legislation.
3. Attempted to stick to the operating plans–Working with his management team, agreed to adhere more closely to existing operating plans to process and transport mail on time and on budget. This is much needed, something we and other mailers have been urging for some time, and a strong recommendation by the USPS Office of Inspector General on DeJoy’s second day in office.  The goal is to both reduce costs by several billion dollars and to better meet on time mail delivery standards.
4. Done a poor job of communicating—PMG DeJoy lost control of his message, because he really communicated no message to customers, the mailing industry, Congress, and the general public. DeJoy’s one actual initiative was first described in a leaked PowerPoint put together by a mid-level manager in the field.  We reported it on July 14.  The message then spun out of control, culminating (so far) in contentious hearings by the Senate and House this past Friday and Monday.
5. Used poor judgement—The Postal Service has needed to tighten up its operations for years. Attempting to do so in his first month, with no public communications, in the midst of a pandemic, three months before an election, was not a good decision.  Apparently, DeJoy’s management team couldn’t or wouldn’t convince him to wait a bit.

What PMG DeJoy has not done

1. Removed blue mail collection boxes—This process has been in place for years to measure mail in box and remove those that get very little. DeJoy likely didn’t know about it until he was accused of it.
2. Removed mail sorting equipment—Again, as mail volume dropped for 213 billion in 2006 to 142 billion last year, letter and flat sorting equipment has been downsized and moved around regularly for a long time. DeJoy likely didn’t know about this regular process either.  The need for this network rationalization is even greater as mail volume dropped more this year and packages have skyrocketed.  Space taken up with letter and flat machines is needed for packages.
3. Closed post offices—A long-term program with lots of regulatory oversight was very likely not on DeJoy’s radar the first two months. USPS had 34,613 retail post offices in FY 2019, down 4 percent from 36,222 in 2010.  Many do not even cover their own costs.
4. Banned overtime—DeJoy stated that in his brief tenure USPS has kept the 13 percent OT rate, paying employees $700 million.
5. Banned extra transportation—Saying you would like to run the trucks on time doesn’t mean you ban extra trips when needed.
6. Told the field to hold mail until tomorrow–This was the local manager’s personal interpretation expressed in one sentence in his slides. It was denied by USPS senior management.
7. Warned states USPS will not deliver election mail on time–The USPS general counsel sent a letter to states in May before DeJoy arrived. It laid out specific instructions to get voting be mail right and on time.  While USPS has extensive experience with five states that vote 100 percent by mail, the prospect of 40 plus states ramping up their own mailings in two to three months because of the pandemic presents new risks.  But the risk is not that USPS will deliver mail according to its standards.

What’s next?

1. Programs on hold–Dejoy has put all of the programs and initiatives listed above on hold until after the election. This is in spite of the fact that all but one was not new, and none would have a negative effect on delivering election mail.
2. Election mail will be delivered as quickly as possible–Amounting to 2 percent of one month’s normal volume, election mail does not strain USPS capacity at all. As always, the Postal Service will give special attention to election mail, with special markings, clearing it out of every facility every day, and treating Marketing Mail as First Class.
3. OIG will verify information—Letters from oversight committee members of both houses have asked the USPS Office of Inspector General to provide verified information on what’s going on. The requests include:
4. What specific operational changes were put in place by Mr. DeJoy?
5. What was the rationale for these changes? What analyses of their impact did he or other Postal Service officials conduct before putting them in place?
6. How have these changes affected the quality of mail delivery? Have they caused delays in mail service, and if so, what has been the extent of these delays? To the extent there have been delays or degradations of service, are these expected to have an adverse impact on the Postal Service’s ability to provide services needed for the 2020 elections?
7. Was Mr. DeJoy’s implementation of these changes consistent with the Postal Service’s internal policies and procedures and applicable legal requirements, including requirements governing consultation with the U.S. Postal Regulatory Commission and postal employees and customers?
8. Has the Postal Service provided complete and accurate information to Congress and the public about the extent of and impacts of these changes in polies and procedures?
9. Considering that “DeJoy and his wife, … who is [President Trump’s] nominee to be the U.S. ambassador to Canada, own $30.1 million to $75.3 million in assets in Postal Service competitors or contractors, like UPS and the trucking company J.B. Hunt,” 9 has Mr. DeJoy met all ethics requirements regarding disclosure, divestment, and recusal from decisions in which he may have a conflict?
10. We need a flash report to inform our urgent work.
11. USPS is likely to release service data—While it normally tells the public how well it has met its service standards quarterly; the Postal Service likely will start releasing more real-time data as early as next week. Such a “flash report” is urgently needed at this point.  Mailers and service providers have been coming to the aid of the reputation of the mail; it’s past time for USPS to step up.
12. If Congress passes another COVID aid bill, it might include a check for the Postal Service—Democrats have been urging $25 billion, Republicans have said they might agree to $10 billion, and DeJoy said he would like a $10 billion grant plus the authority to use the $10 billion line of credit for long-term capital investments including trucks.
13. Real postal reform will have to wait until after the election—That’s okay because USPS has over $14 billion cash, over $10 billion borrowing authority, and projects sufficient liquidity well into 2021 and maybe beyond.
14. Postal Regulatory Commission proposal still looming—The regulator’s proposal to make mailers cover the USPS financial gap with huge surcharges above inflation over the next five years or more remains a sword of Damocles hanging over the nonprofit sector, the mailing industry, and all businesses and organizations that are captive customers of USPS market dominant mail. PMG DeJoy publicly complained about how long the PRC has taken to give USPS what it considers “necessary relief.”