In its never ending search for ways to cut costs and reduce the deficit, the Postal Service may have come up with a real money-saver: stop delivering the mail.
One of the biggest expenses incurred by the Postal Service is delivering the mail to your door or your curb. It would be a lot cheaper if they just put the mail in a centralized location, like a neighborhood cluster box, and had you go fetch it yourself.
This great new idea for saving money came up in a debate last week on the Laura Ingraham show. Congressman Dennis Ross (R-FL) and NALC president Fred Rolando were on the show to talk about plight of the Postal Service. Ross made the usual argument that labor costs are too high and the Internet and email are driving down volumes, while Rolando explained that it was all a manufactured crisis caused by the $5.6 billion a year that Congress requires the Postal Service to pay into its retiree health care fund.
In the course of the debate, Congressman Ross explained that he and his co-sponsor on the House bill, Darrell Issa, did not want to dismantle or privatize the Postal Service. “We want to save this institution,” said Ross. “There are many ways we can do this. We don’t have to cut rural post offices. We don’t have to reduce the service delivery.”
Ross even seemed to back off of the plan to eliminate Saturday delivery, although, he noted, “moving from six-to-five day is overwhelmingly favored by the public,” as indicated by a recent NY Times survey. (12 minutes into the tape)
“But before we go to six-to-five,” suggested Ross, “let’s go from door-to-door to curb. That will save anywhere from $3.5 to $5 billion a year. Only 25% of postal recipients receive their mail door-to-door. The rest of them receive it either in cluster boxes, PO boxes, or at the curb. That right there is a tremendous savings that I think is a good way to go about it.”
Ross thus put closing post offices and five-day delivery on the back burner and moved the delivery point issue right to the front. The days of having your mail delivered to your door or even your curb may be coming to an end. The future is in cluster boxes.
It’s a different version of “the last mile” strategy — that’s when FedEx and UPS don’t want to incur the expense of delivering right to your home, so they hand off the parcel to the Postal Service. The difference is, with this new “last mile” strategy, it’s the Postal Service who’s doing the hand-off, and guess who’s going to be covering the last stretch of getting the mail to your house?
The OIG report on “Modes of Delivery”
According to the new plan, instead of bringing the mail to your door, the Postal Service would drop it at a curbside mailbox. If you already have a curbside box, the Postal Service would shift you over to cluster box units, the way they’ve been doing it with new construction for apartment and condo complexes. Ultimately, the big savings would be if everyone got the mail delivered to a cluster box.
While the Postal Service has not exactly embraced the idea, the whole plan is described in detail in a USPS OIG audit report entitled “Modes of Delivery.” The OIG explains how the mail is currently delivered, breaks down the costs, and shows how much might be saved by making some big changes.
While people will inevitably be resistant to change, the OIG notes that the Post Office didn’t always deliver the mail. In the early nineteenth century, citizens had to pick up the mail at the post office, and if you wanted the mail delivered to your house, you needed to pay an extra fee or use a private company. In 1863, the Post Office started free city delivery, and in 1903, rural free delivery. It wasn’t until 1923 that the Postal Service began requiring every home to have a mail slot or mailbox. Curbside delivery started in the 1930s, and really took off when the suburbs boomed after WWII. Cluster boxes came on the scene in 1967.
There are now basically three modes of delivery — right to your door (to a box on the side of the door or a slot in the door itself), to a mailbox at your curb, or to a centralized location, either a group of mailboxes in an apartment building or a neighborhood cluster box unit.
As the OIG report explains, “Curbside delivery is more cost effective [than door-to-door], because it allows the carrier to remain in the vehicle and deliver mail from the street to a mailbox or grouping of mailboxes.” Centralized is even less expensive because the carrier doesn’t have to go to each residence. Saving a little time at every delivery point adds up to millions of hours of delivery time.
The Postal Service currently spends about $25 billion to deliver mail to more than 150 million homes and businesses. The average annual costs for city delivery are $353 for door delivery, $224 for curbside, and about $160 for centralized. For rural delivery, the costs are $278, $176, and $126, respectively.
In terms of number of delivery points, it breaks down to about 28% for deliveries to the door, 42% to the curb, and 30% to a centralized location.
The OIG figured the Postal Service could save more than $4.5 billion a year by shifting 35 million homes and businesses from door-to-door to curbside. It could save another $2.8 billion by shifting 52 million homes and businesses from curbside to a centralized location. If the door-to-door delivery points were shifted to centralized instead of curbside, it would save another $2.2 billion.
All together, if 87 million delivery points were converted to centralized delivery, the Postal Service could save nearly $10 billion a year.
There are other benefits as well. Curbside delivery, for example, allows the carrier to remain in the vehicle and lessens the possibility of injuries, like a fall, stress from carrying the mail bag, and dog bites.
In addition, there’s an argument to be made that the current system — with some people enjoying delivery to the door, while others have to go out to the curb or even several blocks to a centralized unit — is just unfair. “Some customers receive a premium service for which others are paying,” notes the OIG.
Obstacles to change
The shift from home and curbside delivery to cluster boxes is well underway, but so far it’s been confined mostly to new developments. It’s become standard practice to require subdivision developers to install the cluster box units. The OIG figured that of the 345,501 new delivery points in FY 2009, the Postal Service centralized 195,856 of them (57 percent), leaving the remaining 149,645 to other modes.
The only reason more of the new points weren’t centralized is that existing policies and procedures allow districts to determine the delivery mode. If the Postal Service mandated centralized delivery for all new delivery points, says the OIG, it could save $35 million a year.
Focusing just on new construction doesn’t do much in the overall scheme of things, however. The big savings would come from changing delivery for nearly 90 million current addresses.
But it’s a lot more complicated to change service for current customers. It doesn’t require Congressional approval like eliminating Saturday delivery does, but it would require an advisory opinion from the PRC, and there are many other obstacles as well.
The first and most obvious is that customers won’t like it. If you’re used to having the mail delivered to your door, you probably won’t like having to walk down the driveway to the curb, especially if it’s a long driveway, the weather is bad, or you’re a senior.
If you’re being shifted from a curbside mailbox to a cluster box, you may appreciate the added security of a locked box, but you won’t like not being able to walk down the driveway to get your mail. The cluster box could be quite a distance from your home, especially in rural areas.
If you’re receiving a parcel and the cluster box isn’t big enough, you’ll get a notice to pick it up at the post office. That may not be very convenient, especially if you have a POStPlan post office open only a few hours a day. With home and curb delivery, the mailman would probably bring the package right to your door.
Another downside is that letter carriers keep an eye on the neighborhood, especially vulnerable populations. It’s not an official part of their job, but they check regularly on the welfare of the elderly. That won’t be happening if the carrier isn’t going to the door.
In urban areas, there are issues with easements and right-of-way, and just finding a suitable location for a cluster box unit can be a problem.
The Postal Service is also concerned, as it told the GAO, that people would pick up their mail less frequently, “which could delay remittances and lower the value of advertising mail.”
Then there’s the issue of costs. The Postal Service does not purchase or maintain curbside boxes. If you’re required to shift from doorside to curbside delivery, you’ll need to buy a new mailbox and hire someone to install it. They’re not cheap. Figure $100 for the box, plus installation.
Installing cluster boxes is also expensive. The Postal Service estimated that converting 35 million addresses to cluster box units would cost $1.74 billion. Who’s going to cover those costs?
With new construction, the responsibility for installing and maintaining the cluster boxes falls to the developer. But when the Postal Service makes the conversion to a cluster box, it assumes the costs, negotiates with customers to share the costs, or requires customers to pay the entire cost, all depending on the circumstances. It would get very complicated negotiating cost sharing as tens of millions of people move to a different mode of delivery.
One other obstacle to change is the Postal Service’s own Postal Operations Manual (POM), which has an “agreement clause” (section 631.6) stating that customer signatures must be obtained before conversion from one mode of delivery to another. In other words, the resident’s permission is required before the Postal Service can make a change, even if the home is being sold to a new resident.
As the OIG report puts it, “Historically, converting delivery points has been difficult, because the language in the POM regarding conversions has been long established and is not designed to actively encourage conversion of existing delivery points.”
For new delivery points, the Postal Service has somewhat more flexibility. The POM says the Postal Service can establish pretty much whatever mode of delivery it likes for new delivery points, but it mentions all three options and does not mandate centralized delivery. Builders and developers don’t always go for a centralized unit, especially in high-income neighborhoods, where centralized delivery is seen as devaluing property.
The OIG suggests that one approach would be to give people the option, but to charge a fee. That might be fairer than the current system, in which some customers basically subsidize others. But asking people to pay a fee for something they’re getting for free won’t be very popular. It could also be inefficient if some residences on a route opted for the fee-based door-side delivery while others did not.
Congress likes the idea
While the Postal Service has been reluctant to change the mode of delivery for current addresses, the bills in Congress are not shy about pushing for changes. Both the House and Senate bills include provisions encouraging changes in modes of delivery.
The House bill, H.2309, virtually mandates the change. Section 214, “Delivery Point Modernization,” would cut costs by moving from door delivery to curb or cluster boxes for nearly everyone.
The House bill establishes an Authority to oversee Postal Service operations in the event of a default. It would consist of five members appointed by the President. If, after two years, the Postal Service continued to run annual deficits of $2 billion or more, the Authority would take control of the Postal Service and engage in a number of cost-cutting initiatives, like closing facilities and eliminating door delivery.
The Authority would ensure that within two years the total number of door delivery points would be no more than 25% of the current number, and within four years, no more than 10%. In other words, within four years, 90% of the homes and businesses that currently enjoy door-to-door delivery would be shifted over to curbside or centralized delivery.
In most cases, it would be centralized delivery. The only cases where door delivery would be replaced by curbside is when a cluster box is impractical or “in order to avoid causing significant physical hardship to a postal patron.”
The House bill does acknowledge some exceptions. The Authority “shall consider rates of poverty, population density, historical value, whether such locality is in a registered historic district.”
The bill also recognizes that the shift will cost homeowners and landlords money, so it sets up a voucher system to help defray the costs of shifting to centralized delivery.
In the Senate bill, S. 1789, section 3692 (“Conversion of door delivery points”) says that by September 30, 2015, the Postal Service “may, where feasible, convert door delivery points to(1) curbline delivery points; (2) sidewalk delivery points; or (3) centralized delivery points.”
The Senate bill says “may,” not “must,” which seems to leave things in the hands of the Postal Service, but the passage about exceptions seems to suggest that in most cases, the Postal Service will convert to a more economical mode of delivery. The bill says, “The Postal Service may allow for the continuation of door delivery due to (A) a physical hardship of a customer; (B) weather, in a geographic area where snow removal efforts could obstruct access to mailboxes near a road; (C) circumstances in an urban area that preclude efficient use of curbside delivery points; (D) other exceptional circumstances, as determined in accordance with regulations issued by the Postal Service; or (E) other circumstances in which the Postal Service determines that alternatives to door delivery would not be practical or cost effective. ‘‘ That may seem like a lot of exceptions, but it would mean tens of millions of people would eventually be shifted to less expensive modes of delivery.
Active stakeholder resistance ahead
While each of the Postal Service’s plans to save money has been greeted with resistance and often anger, this new initiative promises to be especially controversial. A lot of people will be affected in a very direct way.
The impact of closing 3,700 post offices under the Retail Access Optimization Initiative would have been limited to the customers in those towns, and 3,000 of them were very small (which is why their post office was on the list). Under POStPlan, 13,000 small towns will be affected, but the impact will be limited since the post office is having its hours reduced and not closing completely.
The Network Rationalization plan to consolidate mail processing plants means huge job losses, but they’re confined to 230 cities. The change in service standards means slower mail for the entire country, but most people probably don’t know how quickly mail is delivered and won’t notice the slowdown too much. Eliminating Saturday delivery affects the whole country too, but surveys suggest that most people would prefer to give up Saturday than experience other cutbacks.
Changing how the mail is delivered to your home or business is a completely different matter. It could affect nearly 90 million addresses, and not many people are going to find the changes an improvement.
The Postal Service itself has been reluctant to push for the idea, and it barely mentions the proposal in any of its cost-saving reports. The Postal Service also had several issues with the OIG report.
Converting 87 million delivery points to centralized delivery, said the Postal Service, “would constitute a fundamental change in the provision of service to the public and would likely trigger active stakeholder resistance.” The Postal Service told the OIG that it “has long understood how protective customers are where home delivery is involved…. For instance, when surveyed, our customers indicated that they would rather lose a day of delivery service than have their mailbox moved from a door or curbside locations to a centralized delivery.”
The Postal Service also challenged the OIG’s cost-savings analysis and said the projected savings of $10 billion was “unrealistic, unattainable, and without sound foundation.”
Big mailers have also indicated that if such changes were implemented, they would end up sending less mail, so the cost savings analysis would also need to take into consideration revenue losses. Advertising mail could fall significantly, perhaps to the tune of $1.5 billion a year, or more.
In a related news article on the subject, David Van Allen, USPS corporate communications officer in Cleveland, clarified that the move from door-to-door delivery to curbside is not a Postal Service idea.
“This is not something we’re proposing. It’s just part of the current U.S. House resolution, but it’s all an effort to keep the Postal Service viable into the future and meeting the needs of the public,” he explained.
It may turn out that despite its reservations, the Postal Service will choose to pursue the idea and request an Advisory Opinion from the Postal Regulatory Commission anyway. But in its response to the OIG report, the Postal Service says that requesting the Advisory Opinion “does not guarantee that the Postal Service may take action to change service.”
It’s not clear why the Postal Service would take the trouble to request an Advisory Opinion on a cost-saving plan it can’t fully endorse. Maybe it’s a way to show Congress how unpopular and infeasible the idea is, or maybe something else would come out of the process, like new language for the Postal Operations Manual that would give the Postal Service more leverage to shift customers to less expensive modes of delivery on a case-by-case basis. Or perhaps the Postal Service would like to make some big changes but just doesn’t want to own the idea quite yet.
Post Office 101
There’s a new student residence facility at the University of South Alabama in Mobile. It’s called Campus Quarters, and the university describes it as an “apartment complex” that will “focus on college student occupancy.” Leases coincide with the school year, and the apartments are fully loaded with furniture, appliances, and Internet. There’s also a pool, exercise facility, the works.
It looks just like your normal apartment-condo complex, and it’s got just about everything a student – or anyone — would want, except for one thing: mail service.
According to a news report a few days ago, the property management company went to all the trouble of installing a USPS-approved cluster box unit, only to learn that the Postal Service wouldn’t deliver to individual students, even at off-campus apartments. The Postal Service says that because each student in an apartment has a separate lease, the Campus Quarters are essentially a dorm, and the Postal Service doesn’t distribute mail to dorms or “transient housing complexes.”
A similar issue arose last year, when the Postal Service refused to deliver the mail to individual mailboxes at a single-room-occupancy building in San Francisco. The city and three housing rights groups took the Postal Service to court, arguing that residents were losing Social Security checks and other crucial mail. The judge ruled in favor of the Postal Service, saying it was within its rights and needed to save money in a time of tight budgets.
According to the POM (631.5), the Postal Service doesn’t deliver to individual students at a university; rather, it’s delivered in bulk to the school, dorm, or residence hall, and the administration must deliver the mail to students. The POM states that it doesn’t matter whether the residence is single-room or multi-room with kitchen and common areas, and it doesn’t matter if it’s on or off campus. “Post Office personnel do not distribute mail into apartment-type mailboxes for dormitories or residence halls.”
The Postal Service says it will deliver the mail to the university or to the Campus Quarters apartment manager, but it’s up to them to distribute the mail to students.
Since the residences are off-campus, it’s not likely the university will send someone over every day to put the mail in each box, and the property manager for Campus Quarters says their attorney has advised them not to take on the liability of being a middle man with the mail.
Asked how students are expected to get their mail, the Postal Service says they can rent a post office box — the nearest post office is five miles away — or pick up their mail at the office in downtown Mobile — about nine miles away.
Thus does the Postal Service instruct the young on what to expect in life when it comes to mail services.
(Photo credits: “Waiting for the Mail,” by Gran Christian (1938), Nappannee, IN post office; curb delivery; old mail truck with sign; door delivery; mailboxes in Montana; cluster box delivery; rural route wagon; Campus Quarters in Mobile)