Joe Schick
Director of Postal Affairs

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Worksharing - USPS OIG Releases Its Assessment

Saturday 7/24/2010

Lost in all the headlines related to the exigent price increase was the publishing of a report on July 12 by the USPS Office of the Inspector General (OIG). That report is titled “Assessment of Worksharing.” The OIG has been working on this report for quite a while. In conducting the research on worksharing (postal discounts), the OIG interviewed stakeholders (USPS, Postal Regulatory Commission, unions, mailers, mail service providers and congressional staffers) and did their own analysis. They also visited our Sussex plant as well as other printers and Mail Service Providers (MSPs) facilities to better understand the impact that worksharing has on us and our clients.

Why is this report important? Since worksharing began in 1976, it has grown to represent +80% of the mail. In 2008 (data used by OIG), mailers earned about $15 billion in worksharing discounts. Our clients depend on us to do the work needed to be able to claim postal discounts, helping to reduce overall postage and facilitating more consistent and predictable delivery. We have made huge investments in technology, processes and distribution to meet the requirements to qualify for discounts. The Postal Service depends on mailers and MSPs to continue to provide workshare mail as it is the most efficient mail to process, helping the USPS to control their costs and manage their business. Needless to say, we’ve all grown dependent on the value those discounts provide.

Other stakeholders may not have the same opinions. USPS labor unions have questioned the level of worksharing for years as they view many of the discounts as competition for jobs. The Postal Regulatory Commission (PRC) has concerns since they are tasked with the responsibility for ensuring that the discounts do not exceed the avoided costs for the Postal Service. (Note: There are some exceptions where that is allowed.) USPS competitors may not favor worksharing because it lowers the price for a product and makes it more competitive. Congress is concerned with the level and scope of worksharing because the unions are concerned, and that resulted in hearings on the subject earlier this year.

As the report states, “While the mandate of the former postal law (PRA - Postal Reorganization Act of 1970) was to break even, the mandate of the current law (PAEA - Postal Accountability & Enhancement Act of 2006) is to retain earnings. Recent theoretical research sponsored by the OIG revealed that under PAEA the Postal service may find it profitable to reduce discounts below avoided cost. If this result receives empirical support, the postal Service may be able to improve its net income by reducing discounts.”

That is a statement that should get your attention. Reduced discounts = higher postage. I would hope that the Postal Service will not consider tinkering with worksharing discounts in that manner, but financial pressures can create unusual actions … look no further than the exigent price increase. The report makes no recommendations, but does infer that the time may be right to reexamine/reevaluate the principles of worksharing. I have not heard any response from the USPS so far. We’ll keep our focus on the exigent proceeding in the short term, but we’ll also be paying close attention to any activity involving workshare discounts going forward.

If you are interested in reading the report, you can access it on the OIG website (www.uspsoig.gov).