Postal regulator questions USPS consolidation efforts

By Bernie Becker - 09/28/12 05:40 PM ET

The Postal Service’s own regulator is questioning how much the cash-strapped agency says it will be able to save from its plan to consolidate mail processing centers.

The Postal Regulatory Commission said Friday that its models showed the savings could be much lower than the $2.1 billion predicted by USPS, and that the Postal Service could make consolidations that would not delay by as much when mail is delivered.

In its Friday advisory opinion, the PRC said that the consolidation process could save as little as $46 million a year, with $2 billion in savings possible if all of USPS’s assumptions bear out.

Ruth Goldway, chairwoman of the PRC, said in a Friday statement that the implementation of the consolidation plans “provides an excellent opportunity for the Postal Service to study the effects of service standard changes; to inform its decisions on how to preserve as much of the current services as possible; and to make adjustments before full implementation.”

USPS announced in May that it would start consolidating processing facilities over the summer, with a second phase beginning in early 2014. The fully implemented consolidation plan would affect 229 plants in all.

Postmaster General Patrick Donahoe has said the changes were necessary because of the drop in mail volume that those centers are processing. But the consolidation plan will also limit how often first-class mail is delivered overnight, which USPS said this year now happens 42 percent of the time.

A spokeswoman for the Postal Service said Friday afternoon that the agency was reviewing the PRC opinion, but was not yet able to comment.

In its opinion, the PRC also said that the Postal Service had rejected much of its own modeling on which plants should be consolidated, and said that the agency needed to seek out more information on what changing its proposed delivery changes might need.

The regulator, in calling out USPS for being too rosy with its assumptions, also said that the Postal Service would need to improve its overall productivity by 20 percent for its projections to come true.

“The commission cautions that improvements of this magnitude are remarkably ambitious and involve some risk,” the opinion said.

Over the summer, the Postal Regulatory Commission rejected a request from the American Postal Workers Union to stop the Postal Service from moving ahead with the consolidation efforts.

The PRC has also questioned the Postal Service’s push to scrap Saturday delivery and to close post offices, an idea USPS has now backed away from.