Dayton Ohio Post Office Delay

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One of the U.S. Postal Service's key reform initiatives is worsening service and raising costs, a recent inspector general report found, contrasting the agency's claims about the impact of its changes.

The IG said a pilot program to test USPS' Regional Transportation Optimization plan, which requires mail to sit overnight at post offices instead of being collected each evening for transportation to a processing center, caused mail to be delivered more slowly without any associated cost savings. As Postmaster General Louis DeJoy now looks to roll out the initiative on a nationwide basis, postal regulators are expressing concerns of the potential fallout.

Only some facilities are set to be impacted by the reforms, namely those more than 50 miles from the Postal Service's new Regional Processing and Distribution Centers. USPS plans to stand up about 60 of those mega-centers, most of which will be located in urban areas. That has led to criticism that postal management's mail slowdown will disproportionately impact rural communities.

DeJoy has said the change is a key part of his 10-year plan to fix USPS' finances and operations, noting it would save between $3.6 billion and $3.7 billion annually. The initiative to allow mail to sit overnight at post offices will itself account for $651 million in savings, per USPS estimates.

In the pilot phase of the initiative, which affected 15 regions across the country, transportation costs actually increased by $7 million, the IG found. The auditors called on USPS to better track its cost savings, noting the agency had not implemented any analysis at the time of its review, and postal management agreed to do so.

USPS leadership added that it expects costs to stabilize as the initiative matures and said it had to award emergency contracts and add staff in some cases due to unexpected performance issues. DeJoy recently told Congress some hiccups along the way were expected, noting "the first rockets that went to the moon blew up."

Postal management has said the existing delivery model, in which mail is collected at every post office both in the mornings and in the evenings, is based on a "bygone era of significant single-piece letter mail volumes." While the system may have made sense in that reality, USPS said, it has "engendered costs impossible to justify in today's environment."

Service dipped in all 15 regions where the new schedule was implemented, the IG found, with on-time delivery of single-piece, first-class mail dropping by 16 percentage points on average. The changes impacted five times as many rural mailers as urban ones and complaints from postal customers spiked. Some employees even took to instructing customers to take their mail to facilities unimpacted by the changes to ensure speedy mail delivery.

The IG faulted USPS for failing to adequately notify customers of the reforms and management said they would ensure better engagement going forward. The auditors cautioned the plan could have a widespread impact on postal business.