October 24, 2018

The Office of the Inspector General of the USPS recently released a report on the savings realized from the 2015 degradation in First Class mail service times.  Here is how they described the goals of the change:

On January 5, 2015, the Postal Service revised its First-Class Mail (FCM) service standards, eliminating single-piece overnight FCM service and shifting some mail from a 2-day to a 3-day service standard. These revisions enabled the Postal Service to expand its mail processing operational window to process mail on fewer machines, thus using less facility square footage. This change is known as the OWC. The OWC also required changes in mail transportation. The Postal Service projected the OWC would save over $805 million annually.

In fact, the OIG reported, the Postal Service is realizing only a small portion of the savings it projected and use to justify the reduction in service;

The Postal Service did not achieve its projected $1.61 billion OWC savings for fiscal years (FY) 2016 and 2017. Postal Service management identified savings of $275.25 million for FY 2016 and $17.22 million for FY 2017, or about 18 percent of the projected savings for both years. We could only verify about $73.43 million of the FY 2016 savings and $17.22 million of the FY 2017 savings – about $90.65 million, or 5.6 percent of the projected savings for both years.

The OIG does not think the USPS will ever reach its savings goals, and is concerned that the Postal Service is not even measuring the savings:

However, we concluded that it is unlikely the Postal Service will ever achieve the projected annual $805.5 million OWC savings. The Postal Service did not develop an annual tracking methodology for each OWC savings category and did not develop a sensitivity analysis to account for changes in mail volume, changing labor cost, and transportation costs when they projected the OWC annual savings.