i?ECE,IVEl~
BEFORE THE
POSTAL RATE COMMISSION SEP s q, 59 pi
WASHINGTON, D.C. 20268-000
PO!jThiRdi!: ~oHHl;:>:GII
97
OFF,CE DF TEE SEi'ltErhRY
POSTAL RATE AND FEE CHANGES, 1997
Docket No. R97-1
i
RESPONSE OF UNITED STATES POSTAL SERVICE
WITNESS DEGEN TO INTERROGATORIES
OF
ADVO, INC.
(ADVOIUSPS-T12-l-6)
The United States Postal Service hereby provides responses of witness Degen to
the following interrogatories
of Advo, Inc.: ADVOlUSPS-T12-14,
filed on August
22, 1997.
Each interrogatory
is stated verbatim and is followed by the response.
Respectfully
submitted,
UNITED STATES POSTAL SERVICE
By its attorneys:
Daniel J. Foucheaux, Jr.
Chief Counsel, Ratemaking
Eric P. Koetting
475 L’Enfant Plaza West, S.W.
Washington, DC. 20260-l 137
(202) 268-2992; Fax -5402
September 5, 1997
Response
ADVOIUSPS-T12-1.
relating to FY 1996
of United States Postal Service Witness
to Interrogatories
of Advo, Inc.
Degen
Please refer to Tables 2 and 6 of your testirnony,
Clerk/Mailhandler
Mail Processing costs.
(a) Please confirm that the only difference between the estimateld costs by
subclass shown in these tables is that Table 2 shows results using the “old
methodology”
while Table 6 shows results using the “new methodology.”
If
not, please explain any other differences that affect these estimated costs.
(b) Both Tables 2 and 6 show separate costs for “mixed mail” and “other”
that are not distributed
to the subclasses.
Please explain separately what
these costs represent.
(c) Do the “mixed mail” and “other” mail processing costs in Table 2 and 6
represent the totality of “mixed mail” and “other” costs, or just a portion of
such costs? If the latter,
mail”
(1) Specifically
describe and quantify what portions of total
and “other” costs are and are not reflected in these figures.
“mixed
(2) Are some portions of total “mixed mail” and “other” ciosts already
distributed
to the subclasses in these tables? If so, specifically
describe and
quantify the type and amounts of such distributed
costs, explain how such
costs were distributed,
and quantify the amounts so distributed
by
subclass/rate
category.
(d) Please confirm that combined “mixed mail” and “other” cosl:s constitute
49.6 percent of the total costs shown in Table 2 (old methodolo’gy)
and 50.3
percent of total costs shown in Table 6 (new methodology).
If not
confirmed,
please provide the correct percentages and explain h’ow they were
derived.
ADVONSPS-T12-1
a. Confirmed,
methodology”
Response.
however
should
the “old methodology”
the terms
be clarified
“old methodology”
as follows.
in the following
way:
and “new
The costs
in T;able 2 reflect
Response
of United States Postal Service Witness
to Interrogatories
of Advo, Inc.
.
Mail processing
l
Costs are determined
(which
is defined
are “rolled
Mixed-mail
.
Costs for variable
by summing
of IOCS operation
tally dollar weights
up” to the cost categories
The costs do not reflect
l
in terms
the following
is not distributed
elements
Degen
codes
by activity
code
shown)
of the old me!thodology:
to subclass
and institutional
overhead
activities
are not identified
as such
The costs
in Table 6 reflect
l
Mail processing
l
Costs are determined
the “new
is defined
methodology”
in terms
Volume
The costs
variable
by distributing
volume
variable
costs to activity
by cost pool
costs by cost pool are from Table 4, USPS-T-l
in Table 6 do not reflect
way:
of new cost pools
code using IOCS tally dollar distribution
.
in the following
the following
elements
2
of the new
methodology:
.
“Mixed-mail”
the mixed-mail
.
The distribution
handling-mail
costs
It should
1996
is defined
in terms
of the same IOCS activity
codes as
line of Table 2
keys do not reflect
tallies
(with the exception
in the BMC and non-MODS
be noted that neither
or BY 1996 CRA.
distributions
of mixecl-mail
of certain
activit’y
and not-
code 6521
pools).
table is employed
as an input: to the FY
Response
of United States Postal Service Witness
to Interrogatories
of Advo, Inc.
b. Please see my response
LR-H-219
to TWNSPS-T12-3,
for a detailed
list of the activity
mail and other categories.
As explained
the IOCS tally dollars for tallies
while
the mixed-mail
costs
to tallies
c. The totality
totality
with
code 6521
costs
and non-MODS
MPA/USPS-T12-2
without
d. Confirmed.
increase
the &
volume
definitions
underlying
the redistribution
costs
of mail processing.
in Table 6,
Sjome activity
codes in the BMC
Table 6. Please see Attachment
breakdown
of the 6521
some “other”
costs
are assigned
(e.g., clocking
administrative
1 to
of the BMC arld non-MODS
costs.
other things
equal.
service
to mail
components
since some tallies
codes.
of
representing
in or out of a mail processing
IOCS operation
costs
For instance,
must be redistribcrted
and window
3 in the CRA worksheets,
work
variable
in Table 2 and the
is reflected
to other activity
from the administrative
mail processing
codes,
of volume
Please note that this does not imply that mixed-mail
Cost Segment
operation)
in Table 2 are
and other acl:ivity
is reflected
variable
for an alternate
methodology,
in
the mixed-
in part a, the costs
tally costs
under the new methodology,
processing
TW-3e
codes in each of the cost pools.
were redistributed
costs
codes underlying
in Table 6 are a distribution
of mail processing
to the respective
and spreadsheet
with mixed-mail
mixed-mail
of mail processing
according
costs
costs
Degen
in
Response
of United States Postal Service Witness
to Interrogatories
of Advo, Inc.
Dagan
ADVO/USPS-T12-2.
Please confirm that the following
table acc:urataly
reflects, subject to rounding, the differences
between the estimated costs
shown in your Table 2 (old methodology)
and Table 6 (new methodology).
If
you cannot confirm, please provide a table in comparable format that shows
the correct differences.
ADVOIUSPS-T12-2
Confirmed.
Response.
Response
of United States Postal Service Witness
to Interrogatories
of Advo, Inc.
ADVOIUSPS-T12-3.’
Please refer to Tables
Daggan
5 and 6 of your testimony.
(a) Please confirm that the estimated costs by subclass in Table 6 reflect
distributed
volume-variable
costs by subclass under the “new m’athodology,”
before distribution
of “mixed mail” and “other” costs to the subclass.
(b) Please confirm that the “Total” column in the last page of your Table 5
reflects distributed
volume-variable
costs by subclass under the “new
”
after
distribution
of
“mixed
mail” and “other” costs to the
methodology,
subclasses.
(c) Please confirm that the only difference between the estimated total costs
by subclass in these two tables is that Table 5 reflects the distribution
to the
subclasses of the “mixed mail” and “other” costs shown in Table 6. If you
cannot confirm, please explain fully why not.
ADVONSPS-T12-3
a. Confirmed
Response
with the addition
cost categories
corresponding
(“mixed
that the costs
mail” and “other”)
to subclasses
in Table 6 are distributed
in addition
to
to those
of mail or special services,
b. Confirmed,
c.
Confirmed,
programs
however
note that the data in Table 6 are not an input to the
in LR-H-146,
other costs
so it is not literally
from Table 6 are redistributed
Table 5 is based on distribution
handling-mail
tallies
on distribution
(generally)
to obtain Table 5.
keys in which
have bean distributed
keys in which
true that the mixad-mail
mixed-mail
have not bean distributed
mixed-mail
to subclass.
and not-handling
to subclass.
and
Rather,
and not.
Table 6 is based
mail tallies
Response
of United States Postal Service Witness
to Interrogatories
of Advo, Inc.
Dagan
ADVONSPS-T12-4.
Tables 2 fold methodology)
and 6 (new methodology)
show estimated costs by subclass before distribution
to the subclasses of
the “mixed mail” and “other” costs listed at the bottom of those tables.
Table 5 (new methodology)
shows estimated costs by subclass after
distribution
of the “mixed mail” and “other” costs. Please provide a table
corresponding
to Table 5 showing estimated costs by subclass ,aftar
distribution
of the “mixed mail” and ‘other” costs under the d
methodology.
ADVOIUSPS-Tl2-4.
mixed-mail
In the “old methodology,”
the LIOCATT
program.
data may be found
mail processing
Microsoft
Sea USPS-T-l
in the LIOCATT
functional
(or assigned
worksheets.
The closest
old methodology
the FY 1996
identically
wsO3.xls,
to institutional)
However,
to the “other”
Attachment
1 to this response,
by summing
several
appears
columns
with the overhead
to account
available
LR-H-196.
using
output
basic function
total,
in the
The “other”
costs
are
in several places in the CRA
[variable]
of the “other”
overhead
I computed
costs
(3.1)”
by the
column
of
is not constructed
3 cost components
certain
tallies
are
in the worksheets.
an “old method”
of data in the W/S 3.1.1
column
LIOCATT
electronically
line in Table 2, in part because
among the Segment
LR-H-196,
report,
this sub-component
redistributed
to subclass
The relevant
thing to a distribution
is the “mail process
CRA.
2 at 4.
ALA850P22
component,
Excel spreadsheet
distributed
costs are distributed
cost distribution
section
from the CRA report.
In
of wsO3.xls,
This computation
for most of the IOCS costs in Table 2 whicih are
Response
of United States Postal Service Witness
to Interrogatories
of Advo, Inc.
distributed
to subclass.
distribution
is included
5, which
sample
USPS-T-l
includes
In addition,
the Remote
in the attachment
to improve
REC costs via the LD15 cost pool.
RECs, there are no corresponding
2.
Encoding
Dagian
Canter
comparability
(REC) cost
with
As IOCS does not
IOCS tally costs in Table 2 of
Table
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Response
of United States Postal Service Witness
to Interrogatories
of Advo, Inc.
Degen
ADVOIUSPS-T12-5.
Column 2 of the following
table shows the total costs
by subclass after distribution
of “mixed mail” and “other” costs from the last
column of your Table 5 (new methodology).
In column 1, please provide the
comparable costs by subclass, after mixed mail/other cost distribution,
under
the d methodology.
In columns 3 and 4, please provide the absolute and
percentage differences
by subclass between the new and old methodology.
ADVOIUSPS-T12-5
Data which
Response
may be used to complete
to ADVOMSPS-T12-4,
the table are provided
in A,ttachment
1
Response
of United States Postal Service Witness
to Interrogatories
of Advo, Inc.
Degen
ADVONSPS-T12-6.
Please confirm that the following table accurately
reflects the differences
between the CRA FY 1996 and Base Year
attributable
costs by subclass for Cost Segment 3.1, ClerklMailhandler
Processing - Direct Labor. If you cannot confirm, please provide the
corrected costs and differences.
ADVOIUSPS-Tl2-6
Confirmed
1996,
Response.
subject
Cost Segment
to the following
3.1 totals
from the FY 1996
overhead
(3.1)“.
In the BY 1996
CRA report,
(3.1)”
total costs
contains
Since the definitions
has changed,
columns
the column
The data in the table are the
and BY 1996
direct
and “mail process
(3.1)”
“mail process
direct
labor
component.
that make up Cost Segment
of Cost Segment
comparison
in the FY and BY CRA reports.
For FY
sub-components.
labeled “mail process
of the cost components
“apples-to-apples”
CRAs.
labor (3.1)“.
fixed
for the mail processing
but the definition
more appropriate
03”
clarification.
this is the sum of the “mail process
[variable]
- Mail
3
3 has not, I believe that a
would
be of the “total
C/S
DECLARATION
I, Carl G. Degen. declare under penalty of perjury that the foregoing
answers
are true and correct,
to the best of my knowledge,
and belief.
j?-
5-77
Date:
-
-
information,
CERTIFICATE
OF SERVICE
I hereby certify that I have this, day served the foregoing document
participants
of record in this proceeding
in accordance with section ,112of the Rules of
Practice.
Eric P. Koetting
475 L’Enfant Plaza West, S.W.
Washington, D.C. 20260-1137
September 5, 1997
upon all