Links to the resources mentioned in the podcast.
Hi everyone. I'm Chris Lien, welcome to Industry Corner, a podcast where I discuss postal industry news to help you stay informed.
On today's podcast I take a moment to clarify some of the information and in some cases, misinformation regarding the United States Postal Service, the Postmaster General congressional oversight and vote-by-mail.
Welcome to the podcast, everyone. I thought I'd take a moment just to talk a little bit about the history of the Postal Service and to sort of clarify a few things about the Postmaster General and how the United States Postal Service, our postal partners, work. And I want to take you back through memory lane, actually going all the way back to the 1970s. You see the United States Postal Service is not the United States post office department, the department, you know, the post office department that was created back in the foundation of our country here. And you hear about Benjamin Franklin, you know, being the first Postmaster General and things like that. There's some trivia around that, but I won't bore you with that. The important point is that we no longer have a post office department. This is the United States Postal Service. This is all part of the postal reorganization act of 1970, a law that was passed and signed by then President Nixon, really in response to a strike that had occurred with postal workers beginning in New York city lasted for eight days, included over 210,000 postal workers around the country, really crippled the United States postal network at that time.
And so President Nixon and Congress came together and transformed the office of the post office department into the United States Postal Service, creating sort of a quasi government entity, a corporation like independent agency with an official monopoly on the delivery of mail in the United States and President Nixon again, signed this act into law in August 12th, 1970. It also helped to establish what was understood, but now codified in the law of the Universal Service Obligation for the United States Postal Service. And unfortunately there's not enough specificity with what that actually means. And so we're still hoping that the Postal Regulatory Commission and the Board of Governors and the industry can kind of come together to help clarify that. What's important about the USPS though for our listeners, is that it is not funded by taxpayer dollars. That changed as part of that act. The people that fund the United States Postal Service are the postage payers, many of which are customers of BCC Software or their customers.
And that's really the vast majority of where the Postal Service collects their money is from the bulk rate first-class and predominantly marketing mail. So those are really the areas where the Postal Service is making their money. And in a lot of cases, we look at the United States Postal Service and the mailing industry as a public private partnership, a 3-P that relies heavily upon an ecosystem of mail service providers, software and data providers, and third-party logistics companies that all come together to help them prepare and deliver the mail by leveraging what are called workshare discounts. By the way, it's important to note that the Postal Regulatory Commission back 1999, employed four different economists to take a real comprehensive look at the workshare system. And what they found is that if workshare were ended, the USPS would have to add 187,000 new employees to perform the same activities that were being done by the private sector. So it's really important for our listeners to understand that there is this whole ecosystem, this public private partnership, working together to help control costs for the Postal Service and continue to improve the value of the mail for delivery.
Let's talk a little bit about the Postmaster General. First of all, the Postmaster General is not selected by the President of the United States. That changed again with the passing of the postal reorganization act. Instead, the PMG is selected by a Board of Governors, and this is all codified under title 39, section 202, which states the exercise of the power of the Postal Service shall be directed by a Board of Governors composed of 11 members appointed in accordance with that section nine of the members to be known as governors shall be appointed by the President by and with advice and consent of the Senate. Not more than five of whom may be of adherence to the same political party. The governor shall elect a chairman from among the members of the board and the governor shall represent the public interest generally and shall be chosen solely based on their experience in the field of public service law or accounting, or on their demonstrated ability and managing organizations or corporations in either the public or private sector of substantial size, except that at least four of the governors should be chosen solely on the basis of their demonstrated ability and managing organizations or corporations. Again, either in the public or private sector that employ at least 50,000 employees and the governor shall not be representatives of specific interests using the Postal Service and may be removed only for cause.
It's a really important paragraph. It's a lot of words there, but quite simply it states that the Board of Governors, like a board of directors for a corporation, are appointed by the President and confirmed by the Senate. Just like what we have with justices and so forth, but that these governors can't just be anybody. They have to be somebody that's got proven experience running large corporations.
Now it's important to understand that the terms of the nine governors shall be for seven years and that no person may serve more than two terms as a governor. Okay. So you have to have these new governors. They serve for seven years, and there's a rotational basis with that. The governors shall appoint and shall have the power to remove the Postmaster General, who shall be a voting member of the board. So you've got nine governors. Now you have the Postmaster General whom the governor select that makes 10 now and then the governors and the Postmaster General together will appoint and shall have the power to remove the Deputy Postmaster General who shall be a voting member of the board. So that's how you get to your 11, right? So nine governors appointed by the President confirmed by the Senate, and then those governors select the Postmaster General. And then together they select a deputy Postmaster General. So no direct involvement from the President on this at all. Now also it's worth noting too, that the governors themselves, not the Postmaster General, not the deputy – they are the ones that select the Inspector General. So this is how the whole structure is set up.
Now, I want to take you back to 2015. Okay. This is prior to President Trump. This is back when President Obama was in office and President Obama had nominated five people to serve on the USPS Board of Governors. Back at that time in 2015, however, Senator Bernie Sanders from Vermont held up those confirmation hearings in a manner that prevented a quorum from being established to hear those and in, so doing, unfortunately those seated the governors at the time, their terms expired, leaving only Postmaster General, Megan Brennan, and deputy Postmaster General, Ron Stroman remaining on the board.
And that was not sufficient to be able to pass rates and so forth. And it really wasn't until President Trump took office that Congress and the President began to look at the situation with the Postal Service, namely, that there were no governors seated. And so President Trump appointed six governors, four Republican, and two Democrat affiliated. They were appointed and confirmed by the Senate and governor Robert Duncan, who is currently the chairman of the Board of Governors it's worth noting. He was unanimously confirmed by the Senate and currently serves as the chairman of the Board of Governors.
Now those six governors are who selected Postmaster General Louis DeJoy. And he was selected as the 75th Postmaster General by those Board of Governors. And he was selected unanimously by the way, began serving as Postmaster General and chief executive officer on June 15th. And that included a transition period with former Postmaster General, Megan Brennan.
Now the PMG and the Board of Governors, or what we often call BOG, have not yet named a Deputy Postmaster General. We're still waiting to see who they're going to select, but we do have the United States Postal Service Inspector General, and that's Tammy Whitcomb. She's the third Inspector General of the United States Postal Service, again, not the post office, but the United States Postal Service. And she began serving on November 29, 2018. And Tammy has a long history of dedicated service. And she's an outstanding individual high integrity, which is why I'm certain that the Board of Governors selected her as the inspector.
Now the Postmaster General leadership group that was reorganized on August 7th, just recently. So the PMG DeJoy announced a reorganization of that senior leadership. And, and during that, he promoted into an acting chief position, a number of individuals, including Steve Monteith, who is currently the United States Postal Service Chairman of MTAC.
There's an industry chair and a postal chair. So Steve is the postal chair for MTAC. Bob Shimek is the industry chair of MTAC. And Steve, by the way, was recently on a panel for BCC Software, a webinar that we did on August 12th. So if you want to see Steve and actually, or hear from him, you can tune into a recording of the August 12th webinar. Steve's a great guy. I've known him a long time and really excited about that acting promotion for him.
And I want to be clear to our listeners, this is a normal course of action for a Postmaster General to, you know, as come in, that's new to the position they're going to change the leadership. That's, that's normal with that, particularly for somebody that is coming to the Postal Service from the outside. PMG DeJoy was selected from outside the mailing industry, by the Board of Governors and probably for a good reason that they haven't overtly shared, but they selected PMG DeJoy.
And he does have years of experience successfully running logistics company. So he does have some familiarity with the industry. Now, a couple of changes that he did do that were interesting is he sort of bifurcated a couple of key areas.
One area in particular that we're watching closely is what used to be a single position of a Chief Operating Officer. And that role now seems to be split between a Chief Retail and Delivery Officer and a Chief Logistics and Operations officer. And so it'll be interesting to kind of look at the two different parts. There's a retail and delivery side, and then logistics and processing. And I think that that's probably reflective of the fact that the Postal Service is really servicing two different large groups.
You've got the public with what we often call Aunt Minnie mail, the letters and cards and so forth where people rely on that. Maybe it's pharmaceuticals as well, but then you also have a business side. And that's actually what a lot of BCC Software customers and their customers are processing these bulk first-class marketing mail, periodical type mail with that.
Now the other thing that a PMG DeJoy is focusing on right away is controlling operating expenses. And one of the things that he had stated in mid-July is that he is looking at this excessive amount of overtime, that the office of the Inspector General, who called out approximately $4 billion in overtime by postal workers that are trying to move the mail. Okay. And are not able to do that within the normal amount of time. And that's a lot of money, $4 billion in overtime. I think any organization is going to say, okay, why, you know, we have to find a way to curtail that. So that's not a new concept of behind that.
There was a leaked internal presentation. Some of you may have seen this or heard about that, where it was discussed about eliminating this overtime. And quite simply it was, if the workers cannot finish processing the mail on that particular day, there are supposed to stop and leave that for processing on the next day.
Now that's a little bit counter to the mindset in the past. In the past, it was move the mail at all costs, but now cost is something that this PMG is really focused on in part because Congress, after more than 10 years still has not done anything to ameliorate. Some of the problems financially created as a result of the Postal Accountability Enhancement Act passed in 2006. So going after overtime, not a new concept, but you know, this is a new PMG coming from the outside. It seems like a logical approach, but now we have to see how do they balance that and how does the industry respond with this potential additional day or two, or depending on the class of mail it could be even more depending on how much more time it's going to take for the Postal Service to focus on that. But there's definitely a clear signal that this PMG is focusing on reducing costs and if necessary changing the expectation of delivery service, if needed, to be able to do that. And the Postal Service has been looking at trying to improve their network for a long time.
This is why they've been employing things like Six Sigma reviews and looking at their networks and moving equipment around. This has been going on for years and years. Folks moving processing equipment from one facility to another is not a new concept. They've been doing it for a long time. It's all part of trying to right size a network that was really designed in the sixties that now has to respond to the mail volumes of a new century. So that's what's going on with that.
And I want to talk a little bit about Vote by Mail because that's getting a lot of these headlines. So I want to be clear on a couple of things. The USPS and the industry have been actively encouraging States to consider an implemented vote by mail solution. Well, before we were talking about a COVID-19 pandemic, so this is not like a recent conversation. This has been ongoing for a long time. And in fact, I can recall sitting at the August MTAC meetings and having conversations about the upcoming Presidential election year, you know, a full year before it was actually going to happen. So we were encouraging people to start talking about vote-by-mail efforts. And it's important to understand that vote-by-mail is a broad category, includes certain things that are well tested and tried and true, like absentee voting. Absentee voting is a proven and secure method whereby a registered voter can request a ballot to be completed either with an excuse or in some cases, without an excuse, depending on state requirements, the request is reviewed.
And the requester, if, if they are a valid registered voter, then a ballot is mailed out to them securely with a unique tracking identifier. And that's really important. They can uniquely track that the absentee ballot is completed. And then it's mailed by a first-class mail rates through the USPS to be counted in the election provided.
And this is key: That it's mailed at least three to five days prior to the election.
There are some States that allow absentee ballots to be requested the day before the election. And clearly that is incongruent with the processing network for the Postal Service, which is why the Postal Service has been sending out reminder letters as they've done in the past, letting election offices know that, “Hey, if you've got people requesting ballots the day before the election, it's not going to work.”
Now, there is some conversation about doing sort of a bulk mailing of ballots, you know, sending out ballots sort of like coupons, have marketing mail rate to every registered voter in the country. Well, on the surface, that might make sense, but you're going to run into some challenges with that. Let me remind our listeners every hour, more than 6,000 people, families, businesses move in the United States. That's a lot of people moving around – very hard to track somebody on a ballot to get them to the right location when we've got that level of a move rate.
It's also important to note that sadly, 2.8 million Americans die every year. This is pre-COVID by the way. So I'm sure that that number sadly is going to go up when we look at 2020, but 2.8 million Americans dying every year; you would not want to send a ballot out to somebody that's deceased. So that's a concern, as I said before -many of these ballots are mailed at marketing mail rates. And that's going to have a very wide delivery time that could present a situation where the ballot can't be counted because it didn't get a chance to be filled out and returned on time.
And then let's talk about uniquely tracking these ballots. How are you going to do that? You know, you've got the Intelligent Mail Barcode that goes on a mail piece, and that's a great vehicle to be able to track mail pieces. If you're using Informed Delivery, you can strategically time digital messages with it. But the problem is, is that the IMB is tracked only to the delivery point, not to the individuals that reside there. So in my case, we've got my wife and I, and my two sons. That's four voting people in this household. I've only got one IMB that's going to be used for that. So that's going to be a real problem.
So a lot of things going on with vote by mail, absentee ballots, absolutely work. There are a couple of States that have implemented a complete vote by mail system. And that's great, but to be able to rush, to do something. And just a couple of months, I personally, I don't think this industry is prepared. It's not a Postal Service thing, it's the whole ecosystem to be able to have a fully prepared system in place.
Let's talk a little bit about the removal of the blue USPS collection boxes that also has been in the news lately. First of all, that's not new. The Postal Service has been removing, replacing, reallocating, their blue collection boxes for many, many years. It's in part due to mail theft where thieves unfortunately are using like cardboard strips with sticky tapes to kind of fish cards and letters from blue collection boxes to steal cash maybe, or, or worse to steal identity of individuals and then sell that on the dark web. And so the Postal Service has been working on ways to upgrade and correct some of these mailboxes, maybe move them to an area where it's a little safer.
There was a report done by the USPS Office of the Inspector General in August of 2016. That stated that between 2011 and 2016 in that five year period, more than 12,000 blue collection boxes have been removed. Now, remember this is under President Obama's administration. So this is not something new that recently happened. The Postal Service has been changing their blue collection boxes again, based on volume of mail. And to make sure that the mail is kept safe. That report by the OIG further stated that the Eastern area had 28,670 collection boxes in 2014. And that by February 29th of 2016, 353 collection boxes had been removed. So again, this was something that has been going on for quite a while. That report, again, back in August, 2016 from the OIG, estimated that if you remove all the unnecessary collection boxes throughout just the Eastern area alone, you would eliminate 73,043 work hours over the next five years for an average future cost avoidance of more than $700,000 annually. So this is a report in 2016, that is urging the Postal Service. And again, now we have a new Postmaster General, but urging the Postal Service that, Hey, if you want to control your costs by not having carriers go to these boxes, that simply aren't generating the amount of revenue that makes it worthwhile. You could save over $700,000 in doing that. So again, in summary, nothing new here. This is normal. Postal Service has been doing this for quite some time and I highly doubt that removal of the blue boxes have anything to do with voter suppression and has everything to do with controlling costs.
Finally, a recent pricing announcement, the Postal Service Postmaster General posted a suggestion on, on raising prices for packages. Again, this would be for commercial packages, not retail packages, and the Postmaster General is suggesting increasing the price. And it varies, you know, about 40 cents, 25 cents, depending on different rates, sales. No structure changes just a rate table adjustment, but the timing of it is a little bit of a problematic for the industry.
The pricing…Increased price would take effect on August 14. It would run through until December 27th. And this is all about the Postal Service being able to take advantage of what's expected to be a large volume of packages due to fall mailing season and build up to the holidays and so forth. But I want to remind our listeners, we have both market dominant products and market competitive products with the Postal Service, the market dominant products. Those are the ones like first class mail and marketing mail, periodicals. Those are capped, their prices are capped by CPI-U, the Consumer Price Index Urban rate, and very difficult to change beyond that. And of course, there's a, an annual cadence the third Sunday in January, where that changes, that's not what this is. These are prices that are being adjusted for market competitive products. And the Postmaster General with the Board of Governors has quite a bit of latitude on setting their prices with that.
So I'm not surprised. The only disappointing part is that it's going to be a little bit of a challenge, like I said, to implement these prices on and off during that time period. But we have to wait for the Postal Regulatory Commission to make sure that everything is fair and equitable. That's an important part of what the PRC does is make sure that the prices are correct.
So in conclusion folks, the United States Postal Service is the most effective mail delivery system on the planet. Quite frankly, they process nearly half of all mail in the world. The Postal Service is at the core of a $1.6 trillion mailing industry that employs more than 7.3 million people. It services over 160 million delivery points with an annual growth of those points by 1.4 million. So it's constantly growing by over a million new delivery points. And BCC Software is really proud to be part of such an essential service that binds our nation and helps support our economy.
We welcome the opportunity to continue working with our customers and our postal partners, as we explore new workshare opportunities and ways to improve the value of mail.
So I hope this clarify some of the information and again, perhaps correct some of the misinformation that's out there. And I certainly encourage you all. If you've got any questions or concerns or want to send me a note, please visit bccsoftware.com or give us a phone call because as always, we'd like to know how can we help. Have a great day everyone.