Cost Reduction Initiatives for Mail Products

The Postal Accountability and Enhancement Act of 2006 requires that each class of mail or type of mail service covers their direct and indirect costs. Over the past 10 years, several U.S. Postal Service market dominant products continuously failed to cover their attributable costs. Currently there are six market dominant products that are not covering their direct and indirect costs (underwater products). In fiscal year (FY) 2019, total loss from these underwater products was about $1.6 billion. Further, some market dominant mail products have had notable declines in cost coverage over the last 10 years. Unlike competitive products, market dominant product price increases are restricted to the Consumer Price Index, with a price cap applied to each mail class. Our objective was to evaluate opportunities to reduce mail product costs. This audit was initiated to review cost reduction initiatives specific to underwater products; however, the issues we identified impacted more than just underwater products.