DOCKET SECTION
UPS-T-4
BEFORE THE
POSTAL RATE COMMISSION
POSTAL RATE AND FEE CHANGES,
1997
:
DOCKET NC). R97-1
DIRECT TESTIMONY OF
RALPH L. LUCIANI
ON BEHALF OF
UNITED PARCEL SERVICE
TABLE OF CONTENTS
INTRODUCTION
PURPOSE
.................................................. 1
OF TESTIMONY
AND SUMMARY
OF CONCLUSIONS’
THE POSTAL SERVICE HAS OVERSTATED THE COSTS
AVOIDED BY PARCEL POST WORKSHARING
.
A.
3
.
.
.
4
DBMCEntry..............................................
4
1. Mr. Crum overstates the pool of costs
that DBMC entry avoids
.
.
.
..
6
2. Mr. Crum fails to adjust DBMC avoided
costs for ASF costs
.
8
3. Revised DBMC entry avoided cost
.
10
B.
OBMCEntry
. . . . . . . . . . . . ..___._____._.._................
C.
DSCFEntry.............................................
11
12
1. The number of DSCF entry parcels
per container is overstated
.
..
12
2. The Postal Service’s analysis ignores the
cost of Postal Service assistance in unloading
DSCF entry parcels .
. . .
3. The Postal Service overstates the transportation
cost avoided by DSCF entry
.
.
4. Revised DSCF Avoided Costs
D.
DDUEntry
E.
Prebarcoding
F.
Summary of Revisions
. . .
.
.
. ..
__........._........._._..........._.___.....
. .
16
.
. 18
18
. . . . . .._.......__......_............_____..
. .
15
20
.
THE POSTAL SERVICE’S EXCESSIVELY HIGH PASSTHROUGHS
FAIL TO REFLECT THE UNCERTAINTY OF THE AVOIDED COST
ESTIMATES . . . . . . . . .._.....__......._...........................
22
22
THE POSTAL SERVICE HAS FAILED TO FOLLOW COMMISSION
POLICY IN THE DERIVATION OF WORKSHARED RATES .
. . . . . 31
A.
The DBMC Rates Are Based on a Reduction in
DBMC’s Institutional Cost Contribution, Not Just
AvoidedCosts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
B.
DDU Rates Are Not Computed off of the Correct
BaseRate
. . .._....._...__.__.........................
C.
Failure to Follow Commission Policy on Rate
Cell Decreases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
THE POSTAL SERVICES NEW TRANSPORTATION
ANALYSIS LEADS TO RATE ANOMALIES . . . .
NON-TRANSPORTATION
COST
. .
WEIGHT RELATED COSTS
MAIL COSTING AND RATE DESIGN
A. Separate
ALASKAAIR
......................................
.....................................................
CONCLUSIONS..
.
Rate Treatment for Parcels ..........................
B. Delivery Confirmation
................................................
.
.
.
34
..
RECOMMENDED
DISCOUNTS AND RATES USING 100%
VARIABILITY FOR MAIL PROCESSING
. . . . .
PRIORITY
32
39
..
.
41
.
42
42
45
48
49
LIST OF TABI PS
Table 1
-- Postal Service Calculation
Table 2
--
Table 3
-- Revised DBMC Entry Avoided Mail Processing
Table 4
-- DSCF Transportation
Table 5
-- Revised DSCF Avoided Costs
Table 6
--
Postal Service Derivation of Prebarcode
Table 7
--
Revised Parcel Post Worksharing
Table 8
-- Percentage Changes in Parcel Post Rates for Existirlg
Volume by Rate Category, Including Impact of New
Rate Discounts
. . . .
. .......
24
Table 9
-- Proposed
27
Table 10
-- Highway Capacity Utilization
..
28
Table 11
-- Revised Parcel Post Worksharing Avoided Costs
and Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31
Revised Calculation
of DBMC Entry Avoided Costs
of DBMC Entry Avoided Costs
Cost
Parcel Post Worksharing
Table 12 -- Relationship
. .
..
.
.
7
.
Costs
8
.
11
.
. ..
18
. ...
.
18
.
20
Savings
.
Avoided Costs
.
Avoided Costs
Factors, FY 1996
Between Distance Traveled and GCD
.
.
Table 13 -- Breakdown of Non-Transportation
Discounts for
DBMC, DSCF, and DDU Entry into Per Piece and
Per Pound Components
.
.
.
Table 14
Table 16 -- Allocation
Table 17
Costs and Proposed
. .
of Costs of Scanners, TY 1998.
Charges
. . ..
.. .
42
45
.
.
-- Recommended Attributable Cost by Subclass for Capital
Cost of New Scanners.
.. . . .
.
...
-UP
36
40
-- Revised Parcel Post Worksharing Avoided Costs
and Discounts with 100% Mail Processing Labor
Variability
....................................
Table 15 - Delivery Confirmation
in Priority Mail
22
..
47
48
BEFORE THE
POSTAL RATE COMMISSION
POSTAL RATE AND FEE CHANGES,
1997
;
DOCKET NfD. R97-1
DIRECT TESTIMONY OF
RALPH L. LUCIANI
ON BEHALF OF
UNITED PARCEL SERVICE
1
MRODUCTION
2
My name is Ralph L. Luciani.
I am a Director of Putnam, Hayes &
3
Bartlett, Inc., an economic and management
4
Washington,
5
California;
6
Kingdom affiliate, Putnam, Hayes & Bartlett, Ltd., with an office in London,
7
more than twelve years of consulting
experience
8
issues affecting regulated
industries,
including costing, ratemaking,
9
planning,
strategy issues.
D.C.; Cambridge,
Massachusetts;
a New Zealand subsidiary
and competitive
10
serve as the Director of Professional
11
Inc.
Los Angeles and Palo Alto,
and an Australian
subsidiary;
analyzing
and a United
economic and financial
business
In addition to my consulting
Development
I have
duties, I
at Putnam, Ha:yes & Bartlett,
Since 1990, I have directed Putnam, Hayes & Bartlett, Inc.‘s analytic
12
13
consulting firm with offices in
investigations
of United States Postal Service (“Postal Service”) c,osting and rate
1
design issues.
In Docket No. R90-1 and again in Docket No. R94-1, I assisted Dr.
2
George R. Hall in the preparation
3
attributable
4
Express Mail,. In Docket No. R94-1, I assisted Dr. Colin C. Blaydon in the
5
preparation
6
in the In-Office Cost System (“IOCV).
7
testimony
8
Service in First Class and Standard (A) Mail. I also presented
9
testimony
costs, cost coverages,
of analyses and testimony regarding
and rate design of Parcel Post, Priority Mail, and
of analyses and testimony concerning
regarding
the treatment of mixed mail costs
In Docket No. MC95-1, I presented
the costs associated
with parcels handled by 1:he Postal
in Docket No. MC95-1 regarding
supplemental
rate design for Standard (A) parcels.
Since 1995, I have visited and observed the operations
10
the
11
of Postal Service facilities,
including the Washington
12
occasions,
13
HASP (“Hub and Spoke Project”) facility, and an Air Mail Center.
at a number
BMC on two (different
two Sectional Center Facilities, two Associate
Offices/Delivery
I hold a B.S. with University Honors in Electrical Engineering
14
Units, a
and
15
Economics from Carnegie Mellon University.
I also hold an M.S. with Distinction
16
from the Graduate
17
University.
18
Edison engineer at General Electric Company and as a financial analyst at IBM
19
Corporation.
School of Industrial Administration
at Carnegie Mellon
Prior to joining Putnam, Hayes & Bartlett, Inc. in 1985, I worked as an
-2-
1
2
PURPOSE OF TESTIMONY
sUMMY AR
3
I have been asked to investigate
4
proposals
5
part of this investigation,
6
Service witnesses
7
Mayes (USPS-T-37),
8
(USPS-T-22).
I reviewed the testimony and workpapers
Crum (USPS-T-28),
Daniel (USPS-T-29),
Plunkett (USPS-T-40)
of Postal
Hatfield (USPS-T-16)
Sharkey (USPS-T-33),
Based on my review, I have reached the following
and Treworgy
conclusions
with
respect to the Postal Service’s proposals:
1.
11
12
the costing and rate design
of the Postal Service as they pertain to Parcel Post and Priority Mail. As
9
10
AND
underlying
The Postal Service has overstated the avoided costs
the proposed
2.
13
Parcel Post worksharing
The passthroughs
14
discounts
15
estimates and should be reduced.
proposed for the Parcel Post worksharing
do not reflect the uncertainties
3.
16
The methodology
discounts.
associated
with the avoided cost
used to derive the rates for workshared
17
Parcel Post mail deviates from prior Postal Service and Commission
18
should be modified.
4.
19
The Postal Service’s treatment of intermediate
20
transportation
costs should be refined.
21
needed to minimize rate inconsistencies
22
transportation
practice and
Parcel Post
In addition, rate design changes are
resulting from the proposed
costing.
-3-
change in
5.
The cost of processing
higher than the cost of processing
Priority Mail parcels is significantly
Priority Mail flats. As a result, separate
rate
treatment for Priority Mail parcels is required.
6.
confirmation
The Postal Service’s treatment of Priority Mail delivery
costs is inequitable
7.
Alaska non-preferential
However, if the Commission
non-preferential
and should be revised.
air costs should be fully attributed.
does not do so, at a minimum all non-bypass
Parcel Post air transportation
costs should be attributed
Alaska
to Parcel
Post.
THE POSTAL SERVICE HAS OVERSTATED
THE COSTS AVOIDED BY PARCEL
POST WORKSHARING
10
11
12
13
In addition to the existing DBMC discount, the Postal Service
14
proposes five new discounts for: (1) Inter-BMC presorting,
15
DSCF entry, (4) DDU entry, and (5) Prebarcoding.
16
five of these six worksharing
17
avoided costs.
19
20
As discussed
discounts are based on overstated
A.
18
(2) OBhnC entry, (3)
in detail below,
estimates of
DBMCEntry
Mr. Crum estimates that DBMC entry saves 9.2 cents per piece in
window and acceptance
costs and 37.7 cents per piece in mail processing
-4-
costs,
1
for a total non-transportation
avoided cost of 46.9 cents per piece,.’ The estimate
2
of 37.7 cents per piece in avoided mail processing
3
increase from the (pre-passthrough)
4
11.3 cents per piece and 13.4 cents per piece determined
5
Docket Nos. R90-1 and R94-1, respectively.*
6
avoided costs actually passed through by the Commission
7
difference
8
cents in this case compared
9
R94-1, respectively.
costs represents
a dramatic
estimated avoided mail processing
costs of
by the Commission
in
When compared to the estimated
in those cases, the
is even more dramatic -- a proposed mail processing
discount of 37.7
to 8.7 cents and 10.3 cents in Docket Nos. R90-1 and
3
This dramatic increase in estimated avoided costs ralises questions
10
11
about the validity of the Postal Service’s estimates in this case.
12
computing
13
failed to follow past Postal Service and Commission
14
significant
estimated avoided mail processing
III fact, in
costs for DBMC entry, Mr. Crum
practice in at least two
ways.
1.
USPS-T-28,
p. 3.
2.
Docket No. R90-1, PRC-LR-7, DBMC Calculations, p. 2; Docket No. R94-1,
PRC-LR-12, Development of Parcel Post Rates, p. 18.
3.
Id.
-5-
1
2
1. Mr. Crum overstates the pool of costs
that DBMC entry avoids
DBMC entry avoids outgoing mail processing
mail processing
costs ;at non-BMCs,
k,
costs incurred at the origin A0 and the origin SCF. In the past, the
Postal Service has not counted as part of the costs avoided by DBMC entry any of
the costs of the mail preparation
and platform acceptance
operations.4
In addition,
7
the Postal Service also made a premium pay adjustment to the costs avoided.’
8
Mr. Crum removed the costs of these two operations
9
premium pay adjustment
in his derivation
and also made a
of the avoided cost for DBMC entry in
10
Docket No. MC97-2.6
However, in this proceeding
Mr. Crum has not removed the
11
costs of these operations
from his avoided cost estimate, nor did he make a
12
premium pay adjustment.
As can be seen from Table 1, adjusting for the costs of
13
these excluded operations
and for premium.pay
14
avoided costs significantly
in Docket Nos. R90-1 and MC97-2.
reduced the estimated DBMC entry
4.
Mail preparation is the operation in which mail is prepared ,for distribution,
including the rewrapping of damaged pieces; platform acceptance is the
operation in which mail is accepted at the platform. LR-H-‘I , pages 3-3, 3-2.
In the past, the Postal Service (and the Commission) also did not count the
costs of the postage due and central mail markup operations as avoided
costs. However, in FY 1996 there are no outgoing costs fo’r the postage due
and central mail markup operations.
5.
Docket No. R90-1, USPS-T-12, Exhibit L. A premium pay adjustment takes
into account differences in the extent to which individual subclasses incur
night and Sunday labor costs.
6.
Docket No. MC97-2, USPS-T-7,
p. 1.1.
Exhibit C; j&, USPS-LR-PCR-39,
Table 1,
1
Table 1: Postal Service Calculation
of DBMC Entry Avoided
Costa
(Thousands of Base Year Dollars)
2
Sources: Docket No. R90-1, USPS-T-12, Exhibit L; Docket No. MC97-2, IJSPS-LR-PCR-39,
Table 1, p. I. 1; LR-H-144, Table 1, p. 5.
10
The platform acceptance
cost savings are reflected in Mr. Crum’s
11
avoided mow
12
acceptance
13
DBMC entry, Mr. Crum counts these same costs as avoided twice. This clear
14
double-count
and acceotance
operation
costs for DBMC entry. By not excluding
costs in deriving the avoided mail processing
Mr. Crum stated that he did not exclude the
16
costs of these operations
17
he was no longer able to separately
18
However, UPS witness Sellick (UPS-T-2)
19
IOCS database
20
programs.’
21
proposed
from his avoided cost calculations
in this, case because
break out these costs. Tr. 5/2285, 2294.
has done so using the P’ostal Service’s
and modified versions of Postal Service witness Degen’s computer
Table 2 compares the avoided costs underlying
the Postal Service’s
discount with the avoided costs resulting from the established
22
7.
costs for
inflates the proposed discount.
On cross-examination,
15
platform
UPS-T-2, p. 21, Table 6.
Table 2: Revised
1
Calculation
of DBMC Entry Avoided
Costs
(Thousands of Base Year Dollars)
2
Sources: LR-H-144,
Table 1, p. 5; UPS-T-2, p. 21, Table 6.
As shown in Exhibit UPS-T-4A,
9
10
operations
from the avoided cost calculation
11
decreases
the non-transportation
12
piece.
removing the costs of these
and making a premium pay adjustment
avoided cost for DBMC entry by 6.3 cents per
2. Mr. Crum fails to adjust
costs for ASF costs
13
14
Contrary to prior Commission
15
DBMC avoided
rulings,8 Mr. Crum also failed to
16
exclude any ASF costs from the pool of outgoing mail processing
17
DBMC entry.
18
that the exclusion of ASF data from the avoided mail processing
19
this proceeding
20
Commission’s
8.
On cross-examination
costs avoided by
he stated, without giving any analytic basis,
would make little or no difference.
Tr. 5/2297.
cost calculation
However, the
exclusion of ASF costs from the pool of mail processing
Ooinion and Recommended
costs
Decrsron, Docket No. R96-1, P. v-349.
-8-
in
1
avoided by DBMC entry decreased
2
Nos. R90-1 and R94-I.’
3
the DBMC discount considerably
in both Docket
ASFs are unique facilities that act as SCFs and also as BMCs. Tr.
5/2297.
The In-Office Cost System classifies a substantial
outgoing mail processing
unloading
amount of m
costs as
costs. These costs are incurred in two operations:
(1)
at the BMC’s platform through the primary sort for DBMC and intra-BMC
parcels, and (2) all processing
activities for inter-BMC parcels at the origin BMC.”
8
Thus, ASFs incur outgoing costs when acting as SCFs and also when acting as
9
BMCs.
10
Mr. Crum treats outgoing mail costs at BMCs as not avoided by
11
DBMC parcels.
12
ASFs when the ASF is acting as a BMC also should not be treated1 as avoided by
13
DBMC parcels.”
14
ASF is acting as a BMC should therefore be removed from Mr. Crum’s DBMC entry
15
cost savings.
16
17
Under similar logic, those outgoing mail costs which are incurred at
Those outgoing
mail costs which are incurred at ASFs when the
I used Ms. Daniel’s model of Parcel Post BMC operations
the mail processing
to derive
costs in cents per piece that are classified as “outgoing”
at the
9.
Docket No. R90-1, PRC-LR-7, DBMC Calculations, p. 2; Dclcket No. R94-1,
PRC-LR-12, Development of Parcel Post Rates, p. 18.
10.
LR-H-49, Appendix
11.
DBMC and intra-BMC parcels originating and destinating in the same ASF
area are generally not handled at a BMC. Tr. 19/9591. Thus, outgoing
costs at ASFs include the costs of processing DBMC parcels that are
dropped at the ASF and never handled at a BMC. Yet, Mr. Crum assumes
that these outgoing costs at ASFs, which are clearly incurred by DBMC
parcels, are avoided by DBMC parcels. This simply cannot, be the case.
B, p. 144
-9-
1
I used Ms. Daniel’s model of Parcel Post BMC operations
to derive
2
the mail processing
costs in cents per piece that are classified as “outgoing”
3
BMC. I then applied these average outgoing BMC mail processinig costs per piece
4
to the ASF Parcel Post volumes supplied by Ms. Mayes (Tr. 814121-31) in order to
5
estimate the outgoing mail processing
6
acting as a BMC. This yields an estimate of $3.4 million.
7
This is a conservatively
8
is almost certainly lower -- and therefore the ASF costs are almost certainly higher -
9
- than what Ms. Daniel derives for the fully-mechanized
See Exhibit UPS-T-4B.
low estimate, since the parcel sorting productivity
11
Crum’s avoided mail processing
12
DBMC non-transportation
13
Exhibit UPS-T-4B.
costs from Mr.
DBMC entry avoided
Table 3.
-lO-
lowers the
5.4 cents per piece. See
cost
The combined effect of the revisions discussed
15
at ASFs
BMCs.
costs for DBMC entry. This correction
discount by an additional
3. Revised
14
16
costs incurred at ASFs when an ASF is
I then deducted these ASF outgoing mail processing
10
at the
above is shown in
1
Table 3: Revised
DBMC Entry Avoided
Mail Processing
Costs
(Thousands of Base Year Dollars)
2
Crum R97-1
Revised
56,744
4,250
31,666
665
3,372
El
7
10
11
Sources: Docket No. R90-1, USPS-T-12; Docket No. MC97-2, USPS-LR-PCR-39;
LR-H-144; UPS-T-2; Exhibit UPS-T-4B.
12
These changes
13
cents per piece, yielding a revised DBMC mail processing
14
cents per piece. Adding the window and acceptance
15
piece yields a total revised non-transportation
16
cents per piece.
reduce the DBMC mail processing
16,551
26.0
avoided cost estimate by 11.7
avoided cost of 26.0
cost savings of 9.2 cents per
avoided cost for DBMC entry of 35.2
B. OBMC
17
The OBMC entry avoided cost (which is deducted from the inter-BMC
18
19
rates) is calculated
20
plus additional
21
for the OBMC discount).”
12.
as the sum of the DBMC entry non-transportation
costs saved at the OBMC itself (due to the presorting
Thus, the 11.7 cents per piece decrease
avoided cost
requirement
in avoided
USPS-T-28, p. 4. Mr. Crum estimates OBMC entry avoided costs to be 57.6
cents per piece.
-ll-
costs for DBMC entry derived above also reduces the avoided costs for OBMC
entry by 11.7 cents per piece. This yields a revised OBMC entry atvoided cost of
45.9 cents per piece.
4
C.
DSCF Entry
The Postal Service overstates the avoided costs for DSCF entry in
three ways:
(1) it overstates
the number of DSCF parcels per container;
(2) it fails
to include in the cost of DSCF parcels the cost of Postal Service assistance
unloading
DSCF parcels; and (3) it overestimates
the transportation
in
costs avoided
by DSCF entry.
10
11
1. The number of DSCF entry parcels
per container is overstated
In deriving the non-transportation
12
cost avoided by DSCF entry, Mr.
13
Crum assumed that, on average, sacks would contain IO machinable
14
parcels and GPMCs would contain 25 non-machinable
15
examination,
16
Mail Manual, Quick Service Guide 700 (machinable
17
However, that document cannot be used to determine the number of machinable
18
parcels that will, on average, w
19
sack contain, at a minimum, 10 pieces or 20 pounds gt 1000 cubic inches.
20
Consequently,
13.
DSCF parc:els.‘3 On cross-
Mr. Crum stated that the source of his assumption
parcels).
is the Domestic
Tr. 512290.
be in a sack. It merely requi,res that each
a sack could contain one 20-pound
USPS-T-28,
DSCF
page 5.
-12-
parcel, or two *IO-pound parcels,
1
or four 5-pound parcels (for example).
2
on sacksI
Moreover, there is a 70 pound weight limit
Thus, no more than three 20-pound
parcels are allowed in a sack.
Rather than assuminq how many machinable
3
parcels would be in a
4
sack, Ms. Daniel uses actual data to derive the average number of machinable
5
parcels per sack for Parcel Post as a whole.
6
Service studies and current Postal Service data, Ms. Daniel arrives at an average
7
of 5.8 machinable
8
per sack figure throughout
9
machinable
parcels per sack. Tr. 5/2649.
Based on prior Postal
Ms. Daniel applies this 5.8 pieces
her Parcel Post cost analysis, including her analysis of
DBMC entry parcels.
Moreover,
10
Tr. 5/2649.
Ms. Daniel bases her Parcel Post cost analysis on the
11
assumption
that, on average, parcels will comprise 85% of the effective cubic
12
capacity of a container,
13
mail.15 She assumes that parcels will comprise a slightly higher percentage
14
-- of the effective cubic capacity of the gaylords used for OBMC entry parcels.‘”
15
be conservative,
16
of the effective cubic capacity of GPMCs.
17
machinable
including containers
DBMC entry
-- 88%
To
I similarly assumed that DSCF entry parcels would comprise 88%
DSCF pieces per GPMC.
On cross-examination
18
used for non-machinable
This yields an average of 17.4 non-
See Exhibit UPS-T-4C.
Mr. Crum suggested
- again without relying on
19
any data -- that while the Postal Service may, on occasion, transport
20
loaded sacks or containers,
less than fully
DSCF mailers would likely fill their sacks and GPMC
14.
Docket No. MC97-2, response to OCAIUSPS-T18-11.
15.
USPS-T-29,
AppendixV,
p. 17.
16.
USPS-T-29,
AppendixV,
page 17.
-13-
1
containers
completely.
Mr. Crum’s assertion has no analytic basis, as there has
2
been no special study performed of DSCF entry parcels.
3
that the last DSCF sack to a 5-digit area is unlikely to be fully loaded. Tr. 5/2291.
4
Moreover,
5
mail than for Parcel Post as a whole.
6
DBMC entry mail --which
Mr. Crum acknowledged
the data indicate that there will be fewer pieces per container for DSCF
In particular, Mr. Hatheld’s clata shows that
includes DSCF entry mail -- is significantly
than Parcel Post as a whole.”
less dense
Thus, a sack of DSCF parcels will, on average,
contain fewer pieces than a sack of regular Parcel Post, Ms. Daniel’s derivation
5.8 machinable
of
pieces per sack is based on data for all of Parcel Post and
10
therefore
likely overstates
the number of DSCF pieces in a sack. Similarly, fewer
11
non-machinable
12
derived using Ms. Daniel’s methodology,
13
pieces.
DSCF pieces will fit in a GPMC than the 17.4 pieces per GPMC
which also is based on all Parcel Post
14
In short, there is substantial
15
GPMCs entered at a DSCF will have fm
16
Parcel Post as a whole.
17
should be based on no more than the average number of pieces per container for
18
Parcel Post as a whole -- 5.8 machinable
19
pieces per GPMC.
20
cents per piece, as shown in Exhibit UPS-T-4C.
17.
USPS-T-16,
reason to believe that 5-digit sacks and
pieces, on average, than is the case for
As such, the derivation
of the avoided cost for DBMC mail
pieces per sack and 17.4 non-machinable
This lowers the non-transportation
page 14, and Appendix
-14-
DSCF cost savings by4.8
II thereto, page 9 of 9.
1
2
2. The Postal Service’s analysis ignores the cost of Postal
Service assistance in unloading DSCF entry parc’els
3
In deriving the costs avoided by DSCF entry, Mr. Crum assumes that
4
the shipper will unload the dropshipped
5
Tr. 512271.
6
current Postal Service DSCF dropshipment
7
procedures
8
containers
9
Tr. 5/2400.
On cross-examination,
parcels without Postal Service assistance.
he agreed that this assumptioln is contrary to
procedures.
Tr. 5/2282-83.
Those
explicitly provide that the Postal Service will unload dropshipped
at the DSCF and will assist in unloading
dropshipped
bedloaded
mail.
There is no reason to believe that the Postal Service will not follow its
10
current procedures
at SCFs for DSCF Parcel Post volume.
11
Crum’s revision to his initial testimony on this point, the Postal Service apparently
12
has no intention of changing
13
Tr. 512398.
Consistent
14
its current SCF dropshipment
Indeed, given Mr.
unloading
procedures.
with this Postal Service policy, DSCF costs should include
15
100% of the cost of unloading
DSCF entry GPMC containers
16
Service should be assumed to incur 50% of the cost of unloading
17
entry Parcel Post sacks for “assisting”
18
decreases
19
cents per piece.
in unloading
the DSCF entry non-transportation
See Exhibit UPS-T-4D.
-15-
bedloaded
and ithe Postal
bedloaded
DSCF
maiil. This
avoided cost by an .additional 1.9
1
2
3. The Postal Service overstates
cost avoided by DSCF entry
3
According
the transportat:ion
to Mr. Hatfield, DSCF parcels will incur local transportation
costs of $0.3997 per cubic foot, of which $0.3337 is from the DSCF to the DDU
and $0.0660 is for transportation
below the level of the DDU.”
In deriving these
costs, Mr. Hatfield simply assumes that DSCF parcels will have the same local
transportation
However, as Ms. Daniel and Mr. Crum agree, only 8:7.7% of Parcel
8
9
cost as DBMC parcels.
Post volume travels from a DSCF to the DDU.19 The remaining
li!.3% travels
10
directly from the DBMC to the DDU; these parcels currently do not incur any local
11
transportation
12
parcels that travel on the DSCF to DDU leg -which
13
- is 12.3% higher than Mr. Hatfield calculates.
14
calculation
15
16
17
Average cost incurred
from DSCF to DDU
= 87.7%
foot
18
Therefore,
19
Actual cost incurred from DSCF to DDU = $0.3337 per cubic foot 167.7% = $0.3605 per cubic foot.
cost for the DSCF to DDU leg. Thus, the actual cost incurred by
all DSCF entry parcels will do -
Mathematically,
the proper
is as follows:
Actual cost incurred
l
from DSCFto DDU
+ 12.3% ‘Zero
= $0.3337~~
cubic
using simple algebra,
18.
USPS-T-16,
of 9.
p. 24; Exhibit USPS-16A;
19.
USPS-T-28,
p. 5; USPS-T-29,
and Appendix
Appendix V, p.1.
-16-
Ill to USPS-T-16,
p. 9
This 12.3% upward adjustment
1
to DSCF transportation
costs has
2
exactly the same basis as the 12.3% upward adjustment
that Mr. Crum makes to
3
Ms. Daniel’s Parcel Post costs in deriving the DSCF non-transportation
4
Since 100% of DSCF mail will inevitably travel from the DSCF to tlhe DDU, the
5
transportation
6
$0.3805 per cubic foot, not $0.3337 per cubic foot. ” This yields a revised total
7
DSCF transportation
discountzO
cost incurred by DSCF mail from the DSCF to the DlDU must be
cost of $0.4465 per cubic foot, as shown in Table 4.
20.
See USPS-T-28,
Exhibit G. page 2 of 3.
21.
On cross-examination,
Mr. Hatfield admitted that the transportation cost from
the DSCF to the DDU would be higher for DSCF mail than for DBMC mail,
except when the DSCF is co-located with the DDU. Tr. 8/3957-58. On
follow-up, the Postal Service stated that parcels dropshipped to a co-located
DSCFlDDU which destinate within the DDU’s service area Iwould qualify for
the DDU discount, not the DSCF discount. Tr. 19/9555. This means that
100% of the parcels receiving the DSCF discount will travel to a non-colocated DDU. In other words, Mr. Hatfield’s co-location point is not relevant
to the proper calculation of DSCF costs.
-17-
1
Table 4: DSCF Transportation
($ per cubic foof)
2
Transportation
Segment
Postal Service
Reviised
0.3337
0.0660
0.31305
0.0660
0.3997
0.4465
3
DSCF to DDU Leg
Below the level of the DDU
Total
7
Sources:
Exhibit USPS-16A;
4. Revised
8
9
10
17
18
19
20
Appendix
DSCF Avoided
Costs
avoided costs resulting from the revisions discussed
Table 5: Revised
III, p, 9 of 9.
above.
DSCF Avoided
Costs
DSCF Avoided Non-Transportation Cost (off of DBMC
costs)
DSCF Transportation Cost
DSCF Avoided Transportation Cost (off of DBMC
Zone YJ costs)
Sources: Exhibit UPS-T-4C; Exhibit UPS-T-4D; Exhibit USPS-16A.; USPS-T-28,
p. 6. DBMC Zone % transportation cost is $0.7135 per cubic foot, per
Exhibit USPS-16A; therefore, DSCF avoided transportat:ion cost =
$0.7135 - $0.4465, or $0.2670.
0.
21
22
USPS-T-16,
Table 5 compares the Postal Service’s DSCF avoided costs to the
11
12
13
14
15
16
Cost
DDU Entty
The Postal Service made no effort to determine the container
23
of DDU entry parcels.
On cross-examination,
24
need to know anything about the containerization
-18-
profile
Mr. Crum stated thalt he does not
of DDU parcels, since the mailer
1
will unload the parcels. Tr. 542263. However, Mr. Crum admitted ,that in deriving
the non-transportation
cost avoided by DDU entry, he simply assumed that the
mailer will shake out the DDU entry sacks after unloading
them. Tr. 5/2316.
Under current Postal Service policy, there is no requirement
for DDU
5
entry mailers to shake out sacks (Tr. 5/2310), and it is highly unlikely that they will
6
do so. It is unclear where the sacks would be shaken out by the mailer.
7
take place on the platform?
8
sacks?
9
parcel sortation area?
Would this
If so, would this be an efficient place to shake out the
Or would the mailer actually enter the DDU and shake out the sacks in the
10
That is unlikely.
On cross-examination,
Mr. Crum had no specific answer.
Tr. 5/2316.
11
In the absence of any evidence that the practice will be contrary to current policy, it
12
is more likely that the sacks would merely be unloaded onto the platform by the
13
DDU entry mailer and left for the Postal Service to shake out once the sacks reach
14
the manual parcel sortation area.
The percentage
15
of sacks in DDU entry mail is unknown.
would be consistent
Assuming
16
that the number of sacks in these dropshipments
with the
17
percentage
18
discount by 1 .l cents per piece.
19
special study of the costs incurred through different containerization
20
the 1 .I cents per piece of sack shakeout costs should be eliminat’ed from the
arriving at the DDU for Parcel Post as a whole reduces the DDU
See Exhibit UPS-T-QE.
-19-
In the absence of a
for DDU entry,
1
estimate of the costs avoided by DDU entry. This lowers the avoided cost for DDU
2
entry as compared
to DBMC mail to 44.8 cents per piece. See Ezdhibit UPS-T-4E.=
3
E.
Prebarcodinq
In deriving the prebarcode
discount, Ms. Daniel computes a cost
savings (including
piggybacked
costs) of 2.16 cents per piece.
She then applies a
1.621 “adjustment”
factor that increases this amount to 3.50 cents, and adds 0.5
cents per piece in ribbon costs to derive an estimated savings of 4 cents per piece,
as shown below.
9
10
Table 6: Postal Service
Derivation
of Prebarcode
Savings
(cents per piece)
11
12
13
14
15
16
17
Source:
18
Exhibit USPS-29E,
p. 6 of 6.
Ms. Daniel’s adjustment factor attempts to adjust for costs that were
19
20
not explicitly captured in her Parcel Post processing
21
a non-modeled
22.
flow models.
cost factor may arguably be appropriate
While the use of
when determining
a cost
Correcting the rounding errors in Mr. Crum’s analysis yield:s a DDU discount
of 45.9 cents per piece, rather than the 46.0 cents per piece he shows. The
1 .l cents per piece reduction noted above is in addition to that correction.
-2o-
1
differential
2
between
3
multiplier in the derivation
4
one operation
across a broad range of numerous processing
inter-BMC and intra-BMC
5
activities (such as that
Parcel Post), the use of this highly aggregate
of the narrowly focused prebarcode
savings, where only
is involved, inflates the modeled cost savings.
Prebarcoding
simply replaces one key punch with a scan. Ms. Daniel
6
has derived the exact cost difference
7
difference
8
costs. To say that this very small and specific difference should then be grossed
9
up by an additional
10
between these two actions.
That cost
is 2.16 cents per piece and includes the impact of piggybacked
indirect
62% because Ms. Daniel has missed 38% of the cost she
expected to find in her analyses for Parcel Post in its entirety is erroneous.
Ms. Daniel stated that non-modeled
11
12
could be comprised
13
and running out of labels. Tr. 5/2556.
14
that non-modeled
15
prebarcoded
16
otherwise
17
other words, there is no difference
18
barcoded
costs in the PSM key/scan area
of such activities as miskeying, the barcode label peeling off,
However, one could just as easily presume
costs could include the prebarcoded
label being incorrect, the prebarcoded
unreadable,
or the prebarcoded
label falling off, the
label being olostructed or
piece being inadvertenitly
In
in these respects between Postal Service
pieces and mailer prebarcoded
pieces.
Ms. Daniel has not shown that there are non-modeled
19
keyed.
20
in comparison
to scanning that are proportional
21
of any evidence that there are non-modeled
22
relationship
to modeled costs.
In the absence
costs which have a proportional
to the cost of scanning in comparison
-21-
costs for keying
to keying, the computation
of the
1
prebarcode
2
factor.
avoided cost should exclude Ms. Daniel’s highly aggregate
F.
3
Su
Table 7 shows revised avoided cost estimates for Parcel Post
4
5
adjustment
worksharing
resulting from the corrections
Table 7: Revised
discussed
above.
Parcel Post Worksharing
(cents perpiece,
Avoided
Costa
unless noted)
8
9
10
11
12
13
14
15
16
17
18
$02670/cubit foot
Sources:
USPS-T-37,
USPS-16A;
WP I.I., page 1; USPS-T-29,
USPS-T-28, p. 8.
Exhibit 29E, p. 1; Exhibit
19
20
21
THE POSTAL SERVICE’S EXCESSIVELY HIGH
PASSTHROUGHS
FAIL TO REFLECT THE
UNCERTAINTY OF THE AVOIDED COST ESTIMATE
22
The Postal Service passes through 98% to 100% of i:he estimated
23
mail processing
24
savings for all but one of the proposed discounts. 23 These high parssthroughs fail
25
to reflect the significant
23.
cost savings and 100% of the estimated transportation
The passthrough
uncertainty
surrounding
for the machinable
-22-
cost
the estimated cost savings,
BMC presort discount is 90%.
1
especially
for the new discounts.
2
No. R94-1 the Commission
3
transportation
4
In fact, in Docket No. R90-1 and again in Docket
passed through only 77% of the identiiied
cost savings.24
As outlined below, the same 77% passthrough
5
transportation
6
cost savings estimated
7
worksharing
program has not diminished.
8
passthrough
should be applied for both the transportation
9
avoided costs.
for DDMC non-
savings applied in prior cases should also be applied to the DBMC
in this case, since the uncertainty
surrounding
this
For the five new discounts,
The first reason for using 77% passthroughs
10
DBMC non-
a 77%
and non-transportation
for the new discounts
decision in Docket No. R90-1 regarding
is
11
based on the Commission’s
12
passthroughs
13
proposed
in that case for what was then Third Class mail. The Po:stal Service there
14
proposed
70% passthroughs
15
savings for these new discounts.
16
cost estimates and noting that a passthrough
17
accepted the discounts
18
passthroughs
19
destination
for the new DBMC, DDU, and DSCF destination
of both transportation
The Commission,
the
entry discounts
and non-transportation
after correcting
the avoided
as high as 80% could be applied,
proposed by the Postal Service.
This yielcled effective
of 76% to 60%.25 These Docket No. R90-1 passthrclughs
entry discounts
are consistent with the 77% passthrough
24.
Opinion and Recommended
25.
Doinion and Recommended
284.
cost
for new
applied by the
.
Decrsron, Docket No. R94-1, page V-l 18.
Decision, Docket NO. R90-1, pages V-263 to V-
-23-
1
Commission
to the DBMC Parcel Post worksharing
savings estimated
in Docket
Nos. R90-1 and R94-1.
The second reason for limiting the passthroughs
of the new worksharing
programs on non-worksharing
mailers.
to 77% is the impact
The Postal Service
5
proposes a 10.2 percent increase in Parcel Post rates as a whole.:=
6
average rate increase are significantly
7
rate categories
8
shows.
larger rate increases for the non-workshared
of Parcel Post than for the workshared
Table 8:
9
10
11
Hidden in this
rate categories,
as Table 8
Percentage Changes in Parcel Post Rates
for Existing Volume by Rate Category,
Including Impact of New Rate Discounts
12
13
14
15
16
17
18
19
20
21
Source: UPS-Luciani-WP-1.
Workshared
prebarcode discount.
The overall percentage
22
categories
increase declines from 10.296 to 8.5% when
23
the new rate discounts
24
large mailers would decrease significantly.
26.
also include impact of
are taken into consideration.
Exhibit USPS90D.
-24-
In fact, the rates for many
The larger increases for single piece
and small volume mailers result from the fact that all of the proposed
yield revenue losses significantly
in excess of the additional
cost savings that
would be realized because many shippers are already performing
worksharing
activities in the absence of a discount.
volume that will qualify for the prebarcode
Tr. E/4139-40.
new discounts
these same
For example, 96% of the
discount is already being prebarcoded.
The resulting revenue loss from offering the prebalrcode
without additional
discount
offsetting cost savings would be recovered from Parcel Post as a
8
whole.”
9
changes for non-worksharing
Lower passthroughs
would mitigate these differentials
between the rate
mailers compared to worksharing
mailers.
The third and perhaps the most important reason for using 77%
10
11
passthroughs
is simply uncertainty
about the amount of the costs avoided.
12
uncertainty
is particularly
13
specifically
stated in Docket No. R90-1,
great in the case of the new discounts.
“We are reluctant to recommend
passthrough for a ‘new discount.
record to use to assure ourselves
will be realized fully, and revenue
14
15
16
17
That
The Commission
any 100 percent
There is no track
that projected savings
shortfall avoided.“28
18
Certainly,
in a subclass with a cost coverage as low as that for Palrcel Post,
19
protecting
against uncertainty
is even more important, since an over-estimated
cost
27.
Based on the rate increases shown in Table 8, it is no surprise that the
Postal Service projects that intra-BMC and inter-BMC volume will decrease
significantly in the Test Year After Rates, but that DBMC volume will actually
increase. USPS-T-6, p. 6.
28.
Doinion and Recommended
Decision, Docket No. R90-1, page V-l 34.
-25-
1
avoidance
passed through at 100% can lead to significant volumes of parcels
2
being carried at below cost rates.”
Outlined below are nine uncertainties
3
associated
4
cost savings in Parcel Post. Many of these uncertainties
5
DBMC worksharing
1.
6
with the estimated
also apply to the existing
discount.
lmoerfect Execution.
in implementing
The Postal Service presumes perfect
7
execution
the new worksharing
programs.
For example, if inter-
8
BMC presort or OBMC entry parcels are not merely cross-docked
9
rather are inadvertently
at the OBMC but
sent through OBMC sortation, cost savings would be
10
eliminated.
In addition, under the Postal Service’s assumptions,
11
piece would never be inadvertently
12
back to the BMC for rerouting, DDU entry pieces would never be sent back to the
13
DSCF or BMC for rerouting, and the Postal Service would never alssist in the
14
unloading
15
simply not possible, particularly
in the case of new programs.
16
2.
Jnewlicable
Chanaes from Prior Cases.
of DDU entry pieces.
keyed, DSCF entry pieces would never be sent
Common sense suggests that such perfection
is
The change in the
17
estimated
18
No. R90-1 and 13.4 cents per piece in Docket No. R94-1 to 37.7 cents in this case
19
(26.0 cents with my corrections)
20
estimated cost savings is unexplained.
21
DSCF, and DDU discounts.
29.
mail processing
a prebarcoded
DBMC entry savings from 11.3 cents pser piece in Docket
On cross-examination,
of error” in subclasses
is significant.
The magnitude
of this increase in
This increase affects the OBMC, DBMC,
Moreover, just a few months before ,this proceeding
Ms. Mayes agreed that there was a “smaller margin
with very low cost coverages. Tr. E/4099.
1
was filed, the Postal Service’s estimates of avoided costs were significantly
different from those presented
3
Table 9: Proposed
4
here, as shown in Table 9.
Parcel Post Worksharing
Avoided
Costs
(cents per piece, unless noted)
5
6
7
8
9
10
11
12
13
14
15
16
Sources: USPS-T-37, W 1.1,p. 1; USPS-T-29, Exhibit 29E, p. 1; Docket
No. MC97-2, USPS-T-13, WP 1.1,p. 1; Docket No. MC97-2,
Exhibit USPS-GA.
3.
17
DBMC Parcels Are Different from Other Parcels.
As a result, for those operations
DBMC is less
18
dense than Parcel Post as a whole.
DBMC
19
parcels undergo,
20
fewer pieces per container.
21
transportation
22
Parcel Post as a whole.
23
Service’s estimates of DBMC costs. Given the lower density of DBMC mail, DBMC
24
mail must have higher unit processing
25
onward.
it costs more per piece to process DBMC parcel:s since there are
Yet, in the Postal Service’s derivatiorl
of non-
costs, DBMC Parcel Post is assumed to have the average density of
This difference
This assumption
inevitably understates
costs than intra-BMC
the Postal
mail from the BMC
in density in and of itsetf justifies retaining a 77%
-27-
1
passthrough
2
supports a conservative
3
for DBMC entry. This difference
passthrough
mail
for the other entry discounts’ as well.
Plant Load Clerks.
4.
in density for dropshipped
Some DBMC mail is verified by Postal
4
Service clerks at the mailer’s plant, but these costs are simply attributed to Parcel
5
Post as a whole, not to DBMC specifically.
6
cost is not allocated
7
supports
The fact that this special
to the DBMC, OBMC, DSCF, and DDU mail which causes it
lowering the passthrough.
5.
8
9
Tr. 19/9585.
Emotv Inbound Trucks.
Increased
amount of empty space in highway transportation
dropshippiing
increases the
on inbound rout:es. This is
10
evident from Table 10, which compares capacity utilization for inbound and
11
outbound
routes.
12
Table 10: Highway
Capacity
Utilization
Factors,
F‘I 1996
Intra-SCF Transportation
13
14
15
16
PQl
PQ2
PQ3
PQ4
17
Source:
Inbound SCF
Outbound SCF
33%
42%
35%
29%
52%
56%
51%
52%
Tr. 7/3260.
Clearly, dropshipping
18
Inbound SCF
causes capacity imbalances.
Fairness requires
19
that dropshipped
mail should bear an extra portion of the cost of l:he unused
20
capacity it causes on the inbound legs. This decreases
21
avoided for DBMC, DDU, and DSCF entry from the levels estimal:ed by the Postal
22
Service.
-28-
the transportation
costs
1
2
6.
percentage
Intra-SCF Transoortation
Below the DDU Lev&
of Parcel Post intra-SCF transportation
The
cost assumed to be avoided by
DDU mail (84%) is based on an analysis of total intra-SCF transportation
Parcel Post intra-SCF transportation
Moreover, the percentage
costs. Tr. 8/3964.
is based on intra-SCF data that excludes Postal Owned Vehicles
6
Parcel Post transportation
7
Thus, there is significant
8
for DDU entry mail.
7.
9
but is applied to
costs that include Postal Owned Vehicles.
uncertainty
Containerization
surrounding
costs, not
Tr. 8/3954.
the avoided transportation
of DDU Parcels.
cost
DDU entry mail could very
10
well arrive in containers
11
sortation area than Parcel Post arriving from the DSCF or the DBMC.
12
currently 27% of the machinable
13
than 27% of DDU entry parcels were sacked, sack shakeout costs; would increase.
8.
14
that are more costly to handle in the manual parcel
Anecdotal,
For example,
parcels arriving at DDUs are sac’ked.30 If more
lanored. and lncomolete
Survey.
The survey
15
performed
by the Postal Service to estimate the volume of mail that already is
16
performing
each worksharing
17
would perform each worksharing
18
words of the survey itself, based on ‘summary anecdotal
19
In addition, Ms. Mayes simply ignored the survey data for companies
20
mall for other companies.
21
surrounding
activity and to estimate the additional volume that
activity if a discount were offerecl was, in the
Tr. 8/4140.
customer information.“3’
Thus, there is considerable
the volumes that will respond to the new worksharing
30.
USPS-T-29,
31.
LR-H-163,
AppendixV,
p. 2.
Overview.
-29-
that deposit
uncertainty
discounts.
This
1
in turn creates significant
2
Moreover,
there was no survey to estimate DDU volume in light of the new
3
discount.
Tr. E/4152.
4
associated
5
uncertainty
about the revenue losses that will result.
This creates extreme uncertainty
about the revenue losses
with offering the DDU discount.
9.
Simolistic
Flomath
Study. Mr. Hatfield used a flowpath study
6
that did not take into account eight of the 13 flowpaths
7
system that were used by Mr. Acheson
8
for Third Class mail in Docket No. R90-1.
9
impact of inter-SCF (k,
in the postal transportation
in his study of avoided transportation
costs
In particular, Mr. Hatfield ignored the
SCF to SCF) travel. Tr. E/3940.
Mr. Acheson
sketched
10
out the same 5-path flowpath version used by Mr. Hatfield for Parcel Post, but
11
rejected using it because it was “simplistic.“32
12
illustrative flowpaths
13
used by Mr. Acheson will incur fewer transportation
14
that there is more opportunity
15
than there is for a parcel entered midway into the postal network, such as a DBMC
16
parcel.
17
inter-BMC
18
costs.
used by Mr. Hafield
Parcels that “skip around” the five
onto one of the other eight flowpaths
legs. Common sense suggests
for an intra-BMC or inter-BMC parcel to “skip around”
Thus, taking into account these other eight flowpaths would likely lower
and intra-BMC transportation
costs, and increase DBMC transportation
For the reasons outlined above, the DBMC non-transportation
19
20
passthrough
should be set at 77% as in prior cases, and all Parcel Post
21
worksharing
cost avoidances
32.
for new discounts should have a 77% passthrough
Docket No. R90-1, USPS-T-12,
p. 7.
-3o-
for
1
both transportation
2
applying a 77% passthrough
3
and non-transportation
Table 11: Revised
avoided costs. The effect of uniformly
is shown in Table 11.
Parcel Post Worksharing
Avoided
Costs and Discounts
(cents per piece, unless noted)
4
5
6
7
8
9
10
11
12
13
THE POSTAL SERVICE HAS FAILED TO
FOLLOW COMMISSION POLICY IN THE
jX=RlVATlON OF WORKSHARED
RATES
14
15
16
17
The Postal Service has failed to follow Commission
18
19
derivation
policy in the
of Parcel Post rates in three particular instances,
A. The DBMC Rates Are Based on a Reduction
in DBMC’s Institutional
Cost Contribution,
Not Just Avoided Costs.
20
21
22
In the past, DBMC rates have always been derived directly as a
23
24
worksharing
discount off of the intra-BMC Parcel Post rates. Ms. Mayes has
25
abandoned
26
Instead, Ms. Mayes uses the separate derivation of DBMC transportation
this past Postal Service and Commission
-3l-
practice in her rate design.
costs
provided by Mr. Hatfield to build this part of DBMC’s costs from the ground up,
rather than from intra-BMC
down. Tr. 8/4116-17.
not only 100% of DBMC entry transportation
This implicitly passes through
cost savings, but also a 15 percent
“markup factor” on those savings.
This is a significant
practice.
On cross-examination,
analytic convenience
8
recommend
9
as a worksharing
departure from well-established
Ms. Mayes could supply no real reason -- beyond
--to depart from the normal procedure.
that the Commission
Commission
Tr. O/4116-17.
continue, as in the past, to derive the DBMC rates
discount off of the intra-BMC rates, by simply subtracting
10
passed through avoided DBMC costs off of the intra-BMC rates, a:; follows:
11
DBMC Rats = Intro-EMC Rate - DBMC Non-Jranspmtation
Discount
- DBMC Jransportation
Since intra-BMC and DBMC transportation
12
I
the
Discoumt.
costs have been
13
separately
estimated by Mr. Hatfield (taking into account the differsent densities
14
intra-BMC
and DBMC mail), the DBMC transportation
15
difference
between the intra-BMC transportation
16
DBMC transportation
discount would be the
cost in each rate cell minus the
cost in the same rate cell.
B. DDU Rates Are Not Computed
of the Correct Base Rate
17
18
of
off
19
DSCF entry and DDU entry represent additional worksharing
20
DBMC entry. Ms. Mayes quite logically derives DSCF rates by subtracting
21
costs avoided by DSCF entry from the DBMC rates (albeit with passthroughs
22
are too high).
However, inexplicably,
beyond
the
that
Ms. Mayes derives DDU rates by subtracting
-32-
1
cost avoidances
2
rates.
from j&a-BMC
local rates rather than from the DBMC zone l/2
On cross-examination,
3
Ms. Mayes stated that since the DDU volume
4
estimate was obtained by using bulk entered local zone intra-BMC, volume, the
5
DDU rates should be based on intra-BMC local zone rates rather than on the
6
DBMC or DSCF rates. Tr. 814171-72.
7
deriving the cost of DDU transportation,
8
density profile as DSCF and DBMC, since he uses the local transportation
9
the DSCF and DBMC categories
This is a non-sequitur.
Mr. Hatfield, in
implicitly assumes that DDU has the same
to derive the DDU transportation
10
Despite this, Ms. Mayes’ procedure
11
same density as intra-BMC
12
logical.
costs for
cost avoidance.33
assumes that DDU entry mail lwill have the
Parcel Post. Mr. Hatfield’s approach
is much more
The use of intra-BMC local rates as the base is also highly
13
14
problematic
because it is the least certain of the Parcel Post rates. Mr. Hatfield
15
simply assumes because he has no data that 50% of intra-BMC
16
travel to the BMC. Tr. 813941.
local parcels would
Based on the above, I recommend that the Commission
17
calculate
18
rates for DDU entry in the same manner as Ms. Mayes does for DSCF entry, k,
19
subtracting
33.
the DDU avoided costs from the zone I/2 DBMC rates.
USPS-T-16,
page 24, and Appendix
-33-
Ill thereto, page 9.
by
1
2
C. Failure to Follow Commission
on Rate Cell Decreases
Policy
In her rate design, Ms. Mayes allows the DBMC rates in zones l/2 to
3
4
decrease from current rates. Tr. 814118. The practical effect of Ms. Mayes’
5
approach
6
examination,
7
the Commission
8
decrease when an overall rate increase is applied to the subclass. Tr. 8/4106.
9
Commission
10
is to decrease
rates for 41% of DBMC volume.
she agreed that this is inconsistent
On cross-
with past Commission
has not allowed rates for individual
should apply its long-standing
Tr. 8/4245.
practice;
Parcel Post ralte cells to
practice of not decreasing
rates in any
Parcel Post rate cells when the class as a whole is facing a rate increase.
THE POSTAL SERVICE’S NEW TRANSPORTATION
COST ANALYSIS I FADS TO RATE ANOMALIES
11
12
Mr. Hatfield departs from the Commission’s
13
14
Parcel Post transportation
15
However, his treatment of intra-BMC
16
distance related is counter-intuitive
traditional
treatment of
costs. In large part, his analysis is an improvement.
intermediate
transportation
closts as not
and creates serious rate anomialies.
Mr. Hatfield’s position is based on the argument that intra-BMC
17
18
intermediate
19
should never increase as zone increases. Tr. 8/3930.
20
DBMC intermediate
21
increase as zone increases. 34 Accepting
34.
transportation
USPS-T-16,
costs are not necessarily
transportation
distance-relalted,
and thus
Yet, he also argues that
costs 6~ distance related, and thus should
Mr. Hatheld’s argument at face value
page 11.
-34-
The
1
leads to the conclusion
2
transport than do zone 4 and zone 5 DBMC entry parcels.35 In other words,
3
additional
4
zone 4 or zone 5 DBMC parcel.
worksharing
that zone 4 and zone 5 intra-BMC
yields jjn increa
in transportation
This leads the Commission
5
to a dilemma.
parcels cost less to
costs in the case of a
Should the Commission
6
permit a workshared
category to have rates which exceed the non-workshared
7
category on which it is based?
8
having a constraint
in her “final” rate iteration that caps DBMC rates at the final
9
rates for intra-BMC
parcels of the same weight and zone. A review of the final
Ms. Mayes sweeps this problem under the rug by
10
DBMC rates shows that nearly 150 DBMC rates are decreased
11
Her “solution”
12
rates in zone 4 are identical to the zone 4 intra-BMC rates even though the DBMC
13
mailer takes the parcel all the way to the BMC and, in doing so, supposedly
14
over 25 cents of processing
still yields a non-intuitive
by this treatment.
rate design for DBMC (QL
solely by capping
16
the rates, I suggest a minor modification
17
that mitigates the crossover problem.
18
that he has not fully justiiied his position that no intra-BMC intermediate
19
transportation
20
suggests,
35.
to Mr. Hatfield’s transportation
USPS-T-16,
intermediate
analysis
My review of Mr. Hatfield’s analysis indicates
costs should be treated as distance related.
intra-BMC
saves
costs).
Rather than attempting to correct these anomalies
15
the DBMC
transportation
Exhibit A.
-35-
As Mr. Hatfield
costs sometimes
are linked to
distance as measured
by Great Circle Distance (“GCD”), and sometimes
The greater the difference
in the distance from the origin SCF to the BMC and the
distance from the BMC to the destination
transportation
are not.”
SCF, the more likely that ,the intermediate
distance traveled b linked to GCD.
This is illustrated
in Table 12, which shows four possible cases in
which there are two “close” SCFs, located 10 miles from the BMC, and two “far”
SCFs, located 160 miles from the BMC.
Table 12: Relationship
8
Between
Distance
Traveled
Distance from OSCF
and GCD
Distance from
Distance from
OSCF to DSCF
9
10
11
12
13
As can be seen from Table 12, when the OSCF and the DSCF are equidistant
14
the BMC (cases 1 and 4) transportation
15
However, when the OSCF and the DSCF are not equidistant
16
2 and 3) intermediate
Moreover,
17
transportation
from
distance and GCD are not related.
from the BMC (cases
& related to GCD.
Parcel Post can travel in a circuitous
route (from SCF to
18
SCF to BMC, for example) rather than the direct routes that Mr. Hatfield uses in his
19
examples.
36.
The impact of these types of routes on the relationship
GCD is the distance from the origin SCF to the destination
to determine zone. USPS-T-16, pp. 5-6.
-36-
between GCD
SCF and is used
1
and distance is unknown.
2
is to determine the real relationship
3
Consideration
of these types of routes is needed if one
between distance traveled and CCD.
In the absence of a more complete analysis, one cannot say whether
4
intra-BMC
intermediate
5
non-distance-related.
6
intra-BMC
7
no doubt that intra-BMC
8
distance related.
transportation
Mr. Hatfield has not made a convincing
intermediate
transportation
as comoletely
intermediate
Considering
9
is more fully distance-related
transportation
case for treating
non-distance
related. There is
costs are at least partially
all of the relevant issues from both a costing and a rate
10
design perspective,
11
costs as partially distance-related.
12
intra-BMC
13
equal amount (in dollars per cubic foot) below the corresponding
14
transportation
15
intra-BMC
rates and DBMC rates, yields comprehensible
16
intra-BMC
rates and inter-BMC
17
a cost causation
18
with historical
19
would increase as a function of zone.
20
transportation
37.
or more fully
I recommend
treating intra-BMC intermediate
transportation
To do this, I adjust the transportation
Parcel Post so that total intra-BMC transportation
costs for
costs, by zone are an
total of inter-BMC
costs by zone. ” This helps solve the crossover problem between
standpoint
rate differentials
between
rates in all zones, and is as likely ‘to be correct from
as Mr. Hatfield’s approach.
practice, in that transportation
costs for intra-BMC
Moreover,
it is consistent
costs for all Parcel Post categories
In Exhibit UPS-T-4F,
I have calculated
based on this method.
Increasing intra-BMC transportation costs by zone at a greater rate than
inter-BMC transportation costs could yield a crossover problem between
inter-BMC rates and intra-BMC rates.
-37-
the
1
Treating
intra-BMC
intermediate
transportation
costs as distance
2
related helps to alleviate the crossover problem between intra-BMC
3
DBMC rates.
4
capping DBMC rates at the final intra-BMC rates for the same rate cells, has two
5
infirmities.
6
Post rate cells. That is unfair to the single-piece
7
recovered
8
cells. Second, Ms. Mayes’ approach results in intra-BMC rates that are equal to
9
DBMC rates in some rate cells. A more logical rate design would be to set the
However, some crossovers
remain.
rates and
Ms. Mayes’ approach,
&.,
First, Ms. Mayes recovers the lost DBMC revenue frorn all other Parcel
mailer.
Ms. Mayes should have
the revenue loss by increasing the rates in the unaffected DBMC rate
10
DBMC rate to be no higher than the corresponding
11
non-transportation
12
means that the DBMC rates would always be lower than the corresponding
13
BMC rates by the amount of the non-transportation
14
This is similar to the logic of setting Parcel Post rates to be at least 5 cents below
15
the corresponding
16
affected cells should be recovered from the unaffected D&IC
17
Leaving Mr. Hatfield’s underlying
discount.
intra-BMC rate minus the DBMC
Capping the affected DBMC rates in this manner
intra-
cost avoided by DBMC entry.
Priority Mail rates. The recovery of the revenue lost from the
rate cells.
costs and Ms. Mayes’ crossover
18
treatment
unchanged
would leave the Commission
19
crossover
issue between intra-BMC and DBMC rates, and a permanent
20
intuitive rate design for DBMC.
21
concerns.
My recommendations
-38-
with a permanent
severe
non-
alleviate both of those
1
2
NON-TRANSPORTATION
!M=lGHT RELATED COSTS
In the past, the Postal Service and the Commission
3
have added 2
4
cents per pound to Parcel Post rates to account for the effect of weight on non-
5
transportation
costs.
6
pound figure.
However,
7
disruptions
its complete removal at this time would result in serious
to the rate chart.
On the other hand, with the advent of significant worksharing
8
9
I am not aware of any empirical basis for the 2 cents per
programs
in Parcel Post, the 2 cents per pound charge probably overstates
10
impact of weight on non-transportation
costs for workshared
11
the weight-related
mail processing
cost for intra-BMC
12
the weight-related
mail processing
costs for DDU mail must be substantially
13
than 2 cents per pound because there are fewer mail processing
14
case of DDU parcels.
15
cost per pound.
The more worksharing,
mail. For example, if
parcels is 2 cents per pound,
operations
categories
with the Commission’s
18
different non-transportation
19
categories. 38 I propose that the non-transportation
20
DBMC, DSCF, and DDU entry Parcel Post similarly reflect the diminishing
21
weight for workshared
22
components
mon
in the
would be consistent
17
38.
less
the lower the net non-transportation
Reducing the adder for workshared
16
the
rate design for Bound Printed Matter, which includes a
cost per pound for each of the workshlaring
categories
for non-transportation
and Recommended
worksharing
discounts forimpact of
by using separate per piece and per pound
costs. The 2 cents per pound nonDecision, Docket NO. R87-1, page 725.
-39-
1
transportation
charge would continue to be applicable
mail. The non-transportation
worksharing
to inter-BMC and intra-BMC
discounts for DBMC, D,SCF, and DDU
would have a pro rata share of this 2 cents per pound charge applied.
The
discount then would reflect the portion of the 2 cents per pound charge that is
5
“avoided”
by the worksharing
category.
Afler subtracting
the discount, the resulting
6
rates for DBMC, DSCF, and DDU mail would have a lower cent per pound non-
7
transportation
8
processing
charge embodied within them, reflecting the lower number of
operations
that mail in these categories
undergoes.
Using this logic, the per piece and per pound components
9
10
recommend
for the DBMC, DSCF, and DDU non-transportation
11
shown in Table 13.
Table 13:
12
13
14
that I
di!scounts are
Breakdown
of Non-Transportation
Discounts for DBMC,
DSCF, and DDU Entry into Per Piece and Per Pound
Components
Transportation
15
16
17
18
19
20
21
22
Source:
Exhibit UPS-T-QG.
The workshared
with a new component.
rates would be computed in the normal way, albeit
For example, DBMC rates would be computed
-4o-
as:
1
2
DBMC Rata = Intra-BMC Rate - DBMC Non-Transportation Discount per Piece DBMC Non-Transportation Discount per Pound - DBMC Transportation Discount.
In principle, this breakdown
could be performed for all worksharing
into per piece and per pound components
discounts.
BMC presort and OBMC entry discounts
6
pound components
7
per piece discount.
8
9
For simplicity,
I suggest that the
not be broken into per piece and per
in order to allow these rates to be applied as a straightfomrd
RECOMMENDED
DISCOUNTS AND RATES USING
100% VARIABILITY FOR MAIL PROCESSING
I have also computed revised worksharing
10
labor costs are 100% volume variable.
discounts
assuming that
11
mail processing
12
Ms. Daniel’s and Mr. Crum’s models, with adjusted productivity
13
piggyback
factors supplied by Mr. Sellick, as well as making the corrections
14
discussed
above.
rales and corrected
See UPS-Luciani-WP-4.
In general, the non-transportation
15
This required replicating
16
mail processing
17
are avoided by workshared
18
discounts
discounts are highter, since more
costs are now attributed and therefore a greater amount of costs
categories,
as shown in Table 14. The transportation
are unchanged.
-41-
Table 14:
1
2
3
Revised Parcel Post Worksharing
Avoided Costs and
Discounts with 100% Mail Processing
Labor Variability
(cents per piece, unless noted)
4
5
6
7
8
9
10
11
12
13
14
15
Source:
UPS-Luciani-w-4.
I have derived Parcel Post rates using Ms. Mayes’ ralte design model
16
modified to incorporate
17
impact of the costing and pricing changes recommended
18
and Dr. Henderson.
19
20
21
the above changes.
In addition, this derivation
The results are contained
PRIORITY
includes the
by Dr. Neels, Mr. Sellick,
in my Exhibit UPS-T-4H.
MAIL COSTING AND RATE DESIGN
A. Seoarate
Rate Treatment
for Parcels
In Docket No. MC95-1, the Commission
found that it costs the Postal
22
Service more to process Standard (A) parcels than Standard (A) flats.
23
this finding, we investigated
24
between Priority Mail parcels and Priority Mail flats.
whether there are also processing
-42-
In light of
cost differences
1
AS shown by Mr. Sellick in UPS-T-2, Priority Mail parcels cost 19.5
2
cents per piece more to process than do Priority Mail flats in the test year.3g This
3
analysis does not consider the impact of the Priority Mail Processing
4
(“PMPC”) contract.
5
Service shows that in the PMPC network there will also be a price difference
6
between what the Postal Service will pay for handling flats and what it will pay for
7
handling parcels.
8
this difference
A review of the PMPC contract data produced
Tr. 4/2140-41.
On cross-examination,
likely reflected cost differences.
by the Postal
Mr. Sharkey agreed that
Tr. 4/2145-46.
The PMPC contract requires the contractor
9
Center
to separate flats from
10
parcels and deliver these different shapes back to the Postal Service in different
11
types of containers.
12
Postal Service’s system, the Priority Mail in flat trays can be sorted more easily
13
(perhaps
using a FSM 1000) than in the case of the laborious manual sorting of
14
parcels.
Moreover,
15
retail units segregate
16
4/2086.
17
parcels that exists in the Postal Service’s network also exists in the PMPC network.
Tr. 412143. It seems obvious that once received back into the
to assist the contractor,
Priority Mail by shape prior to transfer to the PMPC.
Thus, the difference
19
parcels represent
20
Mail flats observed
that its
Tr.
in costs between Priority Mail flats alnd Priority Mail
There is a significant
18
the Postal Service is requesting
number of parcels in Priority Mail. In fact,
63% of Priority Mail volume. ‘O The average weight of the Priority
in IOCS was 1.02 pounds, and the average weight of the
39.
The difference is 12.7 cents per piece using Mr. Bradley’s recommended
mail processing variabilities. UPS-Sellick-WP-I-III-A,
p. 2.
40.
UPS-T-2, p. 19, Table 5.
-43-
1
Priority Mail parcels observed in IOCS was 3.34 pounds.4’
According
to IOCS,
2
then, Priority Mail parcels weigh 2.32 pounds more on average than Priority Mail
3
flats.
4
is because increased weight increases transportation
5
per piece difference
6
mail processing
7
costs does not capture the mail processing
8
parcels.
In the Priority Mail rate design, Priority Mail rates increase with weight.
costs. Sincls the 19.4 cents
in cost between parcels and flats affects only the difference
costs, the impact of increasing
cost difference
between flats and
costs in the
10
Priority Mail rate design becomes 4.0 cents per pound with the colntingency
11
allowance
12
yields an additional
13
Mail parcel in comparison
14
multiplied by the 2.32 pound weight difference between parcels and flats)
15
additional
16
cost difference
and the institutional
cost markup included.
USPS-33N.
This adder
9.3 cents per piece in the rates charged for the average Priority
to the average Priority Mail flat (4.0 cents per pound
charge is significantly
This
less than the 19.5 cents per piece mail processing
between flats and parcels.
I recommend
17
in
rates by weight for transportation
The 2.0 cents per pound adder for non-transportation
9
This
that the Commission
adopt a surcharge
18
piece (19.5 cent cost difference
19
cost) for Priority Mail parcels.
20
Service to keep track in the future of the separate costs it incurs for parcels and for
21
flats, A parcel surcharge
22
between Parcel Post rates and Priority Mail rates. The crossover check would be
41.
minus 9.3 cent non-transportation
of ten cents per
Use of a surcharge would encourage
weight related
the Postal
would also mitigate the mystifying crossover
UPS-Sellick-WP-I-III-A.
-44-
problem
between
Priority Mail rates including the parcel surcharge
With the Priority Mail parcel surcharge,
and Parcel Post rates.
Parcel Post rates are less likely to exceed
Priority Mail rates for the same rate cell.
B. Deliverv Confirmation
4
All of the cost of Priority Mail electronic delivery confirmation,
5
6
designed for large volume users, is included in the base cost of all Priority Mail. A
7
portion of the cost of delivery confirmation
8
users (i.e., manual delivery confirmation
9
base rates. This yields a cost coverage for Priority Mail delivery confirmation
10
11
incurred for single-piece
Priority Mail
service) is also included in Priority Mail
of
69%, as shown in Table 15.
Table 15:
12
13
Delivery Confirmation
Costs and Proposed
Charges in Priority Mail
(thousands of dollars, unless noted)
1 Electronic Service
Total
Fairness requires that the cost of the delivery confirmation
activity be
1 ManualService
14
15
16
17
18
19
20
21
22
Sources:
USPS-T-40,
WP 5; USPS-33N.
23
borne solely by those who will use it. Stated differently,
24
delivery confirmation
those who do not use the
service should not pay for the costs incurred in providing
-45.
it.
1
The Postal Service does attribute delivery confirmation
2
service in Standard (B), but not for Priority Mail.
3
costs to th’ose who use the
Mr. Plunkett argues that offering delivery confirmation
4
customers
5
pfferinq a delivery confirmation
6
attributable
cost for Priority Mail electronic
7
attributable
cost of Standard (B) electronic delivery confirmation
8
311028-29.
I recommend
that the Commission
9
transaction
for electronic
Priority Mail delivery confirmation,
10
proposed
11
Similarly, the fee for Priority Mail manual delivery confirmation
12
cents per transaction,
will attract new
and maintain the existing customer base.4z While this is a rationale for
service, it is not a defense for subsidizing
service is essentially
by the Postal Service for electronic
it. The
equal to the
service.
Tr.
impose a fee of 25 cents per
which is the same fee
Standard (B) delivery confirmation.
service should be 60
the same as for Standard (B) manual delivery confirmation.
With respect to the capital cost of the scanners to be used for delivery
13
14
confirmation,
15
shown in Table 16.
42.
less than 0.5% finds its way to Priority Mail and Standard (B), as
USPS-T-40,
p. 19.
-46-
1
Table 16: Allocation
TY 1998
(millions of dollars)
2
Non-Volume Variable
TOTAL
9
of Costa of Scanners,
Sources:
USPS-T-22,
10
133.7
1
72.0%
100.0%
Worksheets
Mr. Treworgy
11
purposes
12
has performed
13
significant
14
reflecting the informational
1 131.1
1 166.2
100.0%
C-l and C-2, and Tr. 3/1254-57.
argues that the scanners will be used for a multitude of
and thus their costs should be spread among all classes,,43 However, he
no analysis showing the relative value of these other purposes,
The
share of the scanner cost that is not volume variable cali be viewed as
uses of the scanners.
It is clear that the onset of delivery confirmation
15
1
As such, I recommend
the
16
purchase
17
of the scanners that Mr. Treworgy finds to be volume variable be allocated to only
18
Priority Mail and Standard (B) in proportion
19
use of revenue to allocate the volume variable costs between Priority Mail and
20
Standard
43.
of the scanners.
precipitated
that the entire portion of the cost
to revenue, as shown in Table 17. The
(B) takes into account both the higher volume of Priority Mail and its
One of those purposes applies only to Priority Mail and Stalndard (B) mail.
Tr. 3/1312.
-47-
1
higher value (and the resulting greater likelihood that Priority Mail users will use
2
delivery confirmation
service).
Table 17: Recommended
Attributable
Cost by Subclass
Capital Cost of New Scanners
for
(millions of dollars)
6
7
8
9
10
11
12
Source:
Exhibit USPS9OA.
ALASKA AIR
13
14
The Alaska air program has two components:
15
Post that travels by air only because ground transportation
16
Alaska or is more expensive than air travel, and (2) “bypass” mail i.hat is not
17
handled by the Postal Service’s clerks or mailhandlers.
18
mail is a special program.
19
W4059.
It represents
58.8% of Alaska air non-preferential
air costs between attributable
Parcel
is not available
in
POIR No. 4-8. Bypass
Bypass mail is charged intra-BMC
Since Docket No. R90-1, the Commission
20
(1) standard
Parcel Post rates. Tr
costs.
POIR No. 4-8.
has allocated all Alaska
21
non-preferential
22
basis of the cost that would have been incurred had the parcels been transported
-48-
and non-attributabbe
costs on the
via ground transportation.
This results in about 20% of Alaska non-preferential
costs being counted as attributable
air
Parcel Post costs.
The Postal Service continues to treat nearly 100% of Alaska nonpreferential
5
air costs as attributable
to Parcel Post. Since these casts are incurred
to handle Parcel Post mail, Tr. 8/4228, 4259, they meet the definition
of attributable
costs and should be attributed to Parcel Post. At the very least, all of the standard
non-bwass
Parcel Post air expense (41.2% of total Alaska non-preferential
costs) should be attributed.
In this way, all of the non-bypass
expenses
air
associated
with standard Parcel Post would be attributed to Parcel Post.
10
11
CONCI USIONS
12
The proposed
13
estimates of worksharing
14
(3) fail to follow Commission
15
rate anomalies
16
transportation
17
problems.
rates for Parcel Post (1) are based on overstated
avoided costs, (2) reflect passthroughs
policy in deriving workshared
resulting from the implementation
costing analysis.
19
significantly
higher than the costs of processing
20
separate
21
of delivery confirmation
22
Alaska air costs should be fully attributed;
23
costs should be attributed.
rate treatment for Priority Mail parcels.
costs is inequitable
rates, and (4) exhibit
of a new and imprecise
I suggest appropriate
In addition, the costs of processing
18
that are too high,
corrections
for each of these
Priority Mail parcels are
Priority Mail flats. This requires
Moreover, the proposed
and should be revisecl.
Finally, all
at a minimum, all non-bypass
-49-
treatment
Alaska air
Exhibit UPS-T4A
Page 1 of 1
OUTGOING MAIL PROCESSING
COSTS AT NON-BMC
FACILITIES AVOIDED BY DBMC PARCEL POST
(Revised to Exclude Costs of Platform Acceptance and Mail Preparatbn
Operations and to Adjust for Premium Pay)
A. Casts Avoided
1. FY 1996 Processing Costs
2. Base Year 1996 Parcel Post
Mail Processing “Piggyback” Factor
source
519,922,713
0.665
LR-UPS-Sellick-l-IV-A
Library Reference H-77
3. Indirect Attributable Costs
$13.647,059
Line 1 * Line 2
4. Total
833.569.772
Line 1 + Line 3
1. FY 1996 Parcel Post volume
entered upstream of BMC/ASF
112.736.479
USPS-T-26. Exhibit 8, Line 11
C. Unit Costs
1. Unit Costs Avoided
SO.296
CostsNolume
(LineA4Rine Bl)
D. Test Year/Base Year Adiustment
1. TY/BY Wage Rate Adjustment Factor
2. 1996 Estimated Test Year Costs Avoided
1.053
$0.314
Library Reference H-146
Line Cl * Line Dl
Note: See USPS-T-26, Exhibit C. for the Postal Service exhibit upon which this exhibit is based.
Exhibit UPS-T-46
Page 1 of 2
OUTGOING
MAIL PROCESSING
FACILITIES
Revised
to:
AVOIDED
COSTS AT NON-BMC
BY DBMC
SOW2
FY 1996 Processing
$19,922.713
Costs
1A. FY 1996 ASF Outgoing Mail Processing
Costs When ASF Acts as BMC
1B. Corrected
2.
POST
(1) Exclude Costs of Platfom, Acceptance
and Mail Preparation
Operations
and to Adjust for Premium Pay
(2) Remove ASF Outgoing Costs When ASF Acts as a BMC
A. Costs Avoided
1.
PARCEL
FY 1996 Processing
Costs
Base Year 1996 Parcel Post Mail
Processing “Piggyback” Factor
3.
Indirect Attribirtable
4.
Total
Costs
$3,371,726
$16,550,966
LR-UPS-Sellick-l-l‘\
UPS-T-4, Exhibit B, page 2
Line 1 -Line
1A
0.665
Library Reference
5i 1.337.425
Line tB * Line 2
527.888,411
Line 3 + Line 1B
112.736,479
USPS-T-26,
14-77
B. VoIumes
1.
FY 1996 Parcel Post volume
entered upstream of q MWASF
Exhibit B, Line 11
C. Unit Cosls
1.
Unit Costs Avoided
D. Test YewBase
50.247
CostsNolume
(Line A4ILine Bl)
1.053
Library Reference
50.260
Line Cl * Line Dl
Year Adiustment
1,
W/BY Wage Rate Adjustment
2.
1996 Estimated Test Year Costs Avoided
Note: See USPS-T-26,
Factor
Exhibit C. for the Postal Service exhibit upon which this exhibit is based.
H-146
Exhibit UPS-T-W
Page 2 of 2
(1) Calculation of ASF Outgoing Costs When Operating as a BMC for Inter-IBMC Volume
Machinable Outgoing Inter-BMC Costs at Origin BMC (~/PC)
Nonmachinable Outgoing Inter-BMC Costs at Origin BMC ($/PC)
Percent of Inter-BMC that is machinable
Percent of Inter-BMC that is nonmachinable
Average Inter-BMC Outgoing Costs at Origin EMC
FY 1996 Inter-RMC Volume with ASF as Origin BMC
Total ASF Outgoing Costs When Operating as a BMC for Inter-BMC
111
50.3406
50.6429
PI
91.25%
6.75%
[31
[41
$0.3672
PI
$1.635.745
[61
[71
4.454.622
(2) Calculation of ASF Outgoing Costs When Operating es a BMC for Intra-BMC Volume
Machinable Outgoing Ink-BMC
ASF Costs at BMC (~/PC)
Nonmachinable Outgoing Intra-BMC ASF Costs at BMC (f/p@
Percent of Intra-BMC that is machinable
Percent of Intra-EMC that is nanmachinable
Average Intra-BMC Outgoing ASF Costs at BMC
FY 1996 Intra-BMC Volume with ASF as BMC
Total ASF Outgoing Costs When Operating as a BMC for Intra-BMC
(3)
PI
1101
vu
91.30%
6.70%
50.2490
3.676.595
$915,649
1121
I131
[I41
Calculation of ASF Outgoing Costs When Operating as a BMC for DBMC Volume
Machinable Outgoing DBMC ASF Costs at BMC ($/PC)
Nonmachinable Outgoing DBMC ASF Costs at BMC ($/PC)
Percent of Intra-BMC
Percent of Intra-BMC
that is machinable
that is nonmachinable
Average DBMC Outgoing ASF Costs at BMC
FY 1996 DBMC Volume with ASF as BMC
Total ASF Outgoing Costs When Operating as a BMC for DBMC
(4)
bl
$0.2264
$0.4670
Total ASF Outgoing Costs When Operating as a BMC
$0.1322
50.6695
v51
V61
92.99%
7.01%
1171
II4
50.1698
USI
3620,333
1201
1211
4.630.403
53,371,728
1, UPS-Lutiani-w-2 page 1, line 5
2. UPS-Luuani-w-2 page ,.,inse
3. LR-H-135. ,895 WY TOM MachinablsInteFeMC Parcel PC4 (6o.a52,osz,rrolal Inter-BMCPBMl POIl W.257.881,
4~ LR-H-135. ,886 WY TOM No”machinablaInter-BMCParcel Pm, (5.795.914)ITolalInter-BMCPmce Pod ,56.257.981)
5. (Row I31*ROW,,I) + @.v,4] ‘Row(ZI,
6. UPS-L”dani-r.%2. page 5
I. RGW(51. Row ,o,
8. “PS-L”ciani-vw2 page 1, Ihe 5
9, “PSL”ciani-vwZ. page 1, line 5
10. LR-H-135. ,998 OF” TO181
MachinableIhue-BMCParce PO%,(41.992.369jrrolalblra-BMC PaMI Post l45.986.280,
1,. U-H-135. ,996 OF” TIBI NmmachinableInVa-eMCPanel Pod cwo3.921vr0la~ InVa-eMCPOMl Poll w.996.iw
,*.(ROW[,0,.RawW,*tRowI1~I’Row,~,~
13. “PsL”“a”i-w-*.
page 9
1,.nml,~2]‘nmv1131
15. “PSLvdani-w-2. page 1. lines
18, “PS-L”dani.w-Z. page 1. line 6
17. LR-H-135. ,986 GFY Total MachinableDBMC Parcel Part (89.624.307,frO81DBMC Pmce Post l98.381.217,
18. LR-H-135. 19% GFY Total Nonmamnabls DBMC PBM! Pod (5.756.973vlOlalDBMC PaMI Post l96.381.277)
19. (now[17,‘Rwrl15l,*lRowt18,‘Rw,,161,
20. “Ps-L”“a”i-nP-*. page 13
21~ROW,I 9, . Row ,201
2*,ROwP,+Ra,,lq+Row,Zl,
WI
Exhibit UPS-T4C
Page 1 of 2
Calculation of DSCF Savings with Modified Conversion Factor
Proportion
Machinable
93%
of DBMC Parcel Post
(1) DBMC Mail Processing Costs Awtded
Parcel Post Deposited at DSCFs
(2) After-BMC Downstream
Postal Network
DSCF Mail
Total
100%
PI
$0.275
$0.544
$0.294
[Z]
$0.159
$0.193
$0.496
$0.433
$0.163
$0.210
I31
141
($0.034)
50.065
@0.027)
[51
$0.241
$0.609
$0.266
161
Costs
DSCF Costs avoided at the DSCF
(3) Total Savings
by
Nonmachinabtp
7%
Assumptions
for DSCF Dropship
Exhibit UPS-T-4C
Page 2 Of 2
After BMC downstream costs of DSCF prepared parcel post
Test Year ,998 Wage Rate
Platform Non-BMC Indirect Attributable Cost (Piggyback Factor)
Operation Productivities (pieces per hour)
5
Machinable
25.45
1.844
[II
PI
Nonmachinable
&&
12.6
325.8
275.1
184.1
GE!@2
12.6
18.6
37.2
5.8
39.2
17.37
Cost per Handling
Operation
Crossdock at SCF
Load at SCF
Unload at Delivery Unit
Dump Sacks at Delivery Unit
0.0953
0.0248
0.0294
0.0439
0.2150
0.1454
0.0726
131
[31
I31
[31
TOM
0.1833
0.4330
[41
Crossdock
Load
Unload
Dump
Pieces per Container (Conversion
Sacks (Crossdock Only)
Factor)
Derivation of the GPMC Conversion Factor
PI
[II
VI
M
VI
Exhibit UPS-TAD
Page 1 of 1
Adjustment to DSCF Dropship Savings to Account
for Postal Service Assistance In Unloading at the SCF
DBMC Parcel Post
Machinable
Nonmachinable
PI
93%
7%
[ll
[Al
14
# handlings
I, Machinable Parcel Post
Unload Bedload Sacks at DSCF
m
[Cl
conversion
PI
piqqvback
[El
Fl
$ per Oper 4 per facilitv
1
275.1
5.8
1.844
$0.0294
9.
0.0294
121
1
37.2
17.37
1.844
$0.0726
9,
0.0726
[5]
Postal Service Share of Work
DSCF Costs
Il. Nonmachinable Parcel Post
Unload Containers
Postal Service Share of Work
DSCF Costs
111.Total Unloading Costs for Postal Assistance
Test Year Wage Rate
100%
0.0728
?;
with DSCF Dropship Mail
525.445
3;
0.0187
161
(71
IS]
M
Exhibit UPST4E
Page 1 of 1
DDU Dropship Savings with Sack Shakeout Costs Removed
(S per piece)
USPS Witness
Crum’s
Postal Service
using Daniel
Proportion
Proposed
DDU Dropship
Machinable
93%
Discount
Nonmachinable
7%
so.459
PI
TOtal
100%
PI
Savings at BMC
Savings at DSCF
Savings at DDU
Unload Bedload
Unload Loose in OTR
Unload OWC
50.275
SO.110
50.544
$0.369
50.294
50.128
131
[41
50.008
50.010
so.005
50.046
50.025
50.013
$0.010
50.011
50.005
[41
[41
[41
Total Savings
50.407
50.996
$0.448
[51
$0.011
El
Difference
Exhibit UPS-T-4F
Page 1 of 2
USPS WiTNESS HATFIELD’S TEST YEAR PARCEL POST UNIT TRANSPORTATION COSTS
(dOlIar
per cubic foot)
DBMC Inter-BMC
Intra-BMC
(Non-DSCF)Local
N/A
$0.940
N/A
Zone l/2
$2.103
$1.753
$0.714
Zone 3
$2.544
$1.753
$1.533
Zone 4
$3.194
$1.753
$2.276
Zone 5
$4.224
$1.753
$4.446
$5.442
Zone 6
N/A
N/A
$7.100
N/A
N/A
Zone 7
Zone8
89.842
N/A
N/A
-
PARCEL POST TEST YEAR UNIT TRANSPORTATION COSTS REVISED
TO REFLECT A CONSTANT DIFFERENCE BETWEEN INTER-BMC AND INTRA-BMC
(dollars per cubic foot)
DBMC Inter-BMC
intra-BMC
(Non-DSCF)Local
N/A
NIA
$0.940
Zone II2
$2.103
$1.877
$0.714
$2.544
Zone 3
$2.119
$1.533
$3.194
$2.768
$2.276
Zone 4
$4.446
Zone5
$4.224
$3.799
Zone 6
$5.442
NIA
N/A
Zone 7
$7.100
N/A
N/A
$9.842
N/A
NIA
Zone 8
-
DIFFERENCE
I
Local
Zone II2
Zone 3
Zone 4
Zone5
Zone 6
Zone 7
Zone8
inter-BMC
NIA
($0.000)
($0.000)
$0.000
$0.000
$0.000
$0.000
$0.000
intra-BMC
($0.000)
($0.075)
$0.366
$1.016
$2.048
N/A
N/A
N/A
Sources: USPS-T-16, Appendix Ill, pages 6 and 8 and UPS-T-4F, page 2.
DBMC (Non-DSCF)
N/A
$0.000
($0.000)
($0.000)
($0.000)
NIA
NIA
NIA
Exhibit UPS-T-4F
Page 2 of 2
Modified Version of USPS-T-16
Appendix III, page 7
Parcel Post Transportation Cost By Rate Category and Zone
Calculation
of inlra-BMC
Transportation
Costs per Pound by Zone
tntra-BMC parcel transportation costs by function and distance relation
Local transportation wsts incurred by Intra-BMC parcels (non-distance related)
Intermediate transpoltation costs incurred by Intra-BMC parcels (nondistance
related)
Long distance transportation costs incurred by Intra-BMC parcels
Total Intra-BMC parceltransporlationcosts
111
Cubic Feet
Local zone
1.460.249
Non-local zone
21.572,870
Intra-city/box route adjustment 51
Total
23.033,119
M
Average
LOCM
Intermediate
Legs
1
2
[31
[41
Average Cubic
Foot Legs
1,460,249
43.145.740
Percent
3.27%
96.73%
44.605.989
100.00%
I/
2l
3/
41
s
$
$
I
I51
LOCal
Transportation
C0St.S
407
14.398
2,942
17,828
17,828
21,355
39,182
161
Intermediate
Transportation
CO&
699
20,656
21,355
1111
Zone
LOCal
1-2
3
4
5
6
7
8
Total
Local unit ban*.
costs (S/CO
$0.4616
$0.7952
$0.7952
50.7952
$0.7952
N/A
NIA
N/A
Intermediate
unit tans.
costs (SkII
$0.4787
$0.8823
$1.3234
$1.9732
$3.0038
N/A
N/A
N/A
Total Unit
Trans. Costs
(bf)
$0.9402
$1.6774
$2.1186
$2.7684
$3.7989
N/A
N/A
N/A
WI
I
trans. costs
(000)
$1,373
$31.344
$5.050
$1,336
$79
N/A
NIA
N/A
$39,182
TY98 Cubic
Feet by Zone
1,460.249
18.685.824
minus lntra
BMC
$0.4254
Exhibit UPS-T-4G
Page 1 of 1
Average TYBR Non-Transportation
for Intra-BMC and Inter-BMC
[I] TYBR Non-Transportation Costs
[2] DBMC NT Cost Saving per Piece
[3] DBMC Volume
[4] DBMC Cost Savings
[5] DSCF NT Cost Saving per Piece
[6] DSCF Existing Volume
[7] DSCF Cost Savings
[8] DDU NT Cost Saving per Piece
f91 DDU Existina Volume
[id] DDU Cost Savings
[I I] TOTAL DBMClDSCFlDDU Cost Savings
[12] Adjusted TYBR NT Costs
1131 Parcel Post Volume
i14j Average NT Cost per Piece
$411,492,180
0.352
$
136,730,338
$ 48,129,079
0.248
$
7,978.299
$ 1.978,618
0.448
S
958.192
429;270
$
$ 50536,967
$462,029.147
241599.000
‘1.91238
$
Cost per Piece
Parcel Post
:Source
USPS-T-37 WP It., page 2.
Table 11.
USPS-T-37 WP LA.. page 1.
[2] * [3].
Table 11.
USPS-T-37 WP I.A., page 21-22.
[5] * [6].
Table 11.
USPS-T-37 WP I.A.. oaae 23
[S] l [9].
”
[4] + [7] + [lo].
[I] + [I 11.
USPS-T-37 WP I.A.. oaoe 1.
[12]/[13].
” -
Per Piece and Per Pound Components
for DBMC, DSCF, and DDU Non-Transportation
[I]
$0.02 l Contingency
[2]
[3]
14)
[5]
[6]
[7]
[S]
[9]
[lo]
[I I]
[12]
Average NT Cost per Piece
DBMC NT Discount
DBMC NT per Pound Component
DBMC NT per Piece Component
DSCF NT Discount
DSCF NT per Pound Component
DSCF NT per Piece Component
DDU NT Discount
DDU NT per Pound Component
DDU NT per Piece Component
Average Postal Pounds (Dropshipped)
l
Markup
$
0.02323
$
$
$
$
$
$
$
$
$
$
1.91238
0.27100
0.00329
0.25402
0.19100
0.00232
0.17903
0.34500
0.00419
0.32338
5.15836
Contingency = 1 .Ol. Markup Factor =
USPS-T-37, WP I.I., page 2, Line 8.
From above.
Table 11.
([l] I [2]) - [3].
[3] - ([4] * [12]).
Table 11.
([I] I [2]) l [6].
[6] - ([7) * [12]).
Table 11.
([I] I [2]) * [9].
[9] -((lo] * [12]).
USPS-T-37 WP I.E., page 2 DBMC
Total Postage Pounds I Total Volume.
Exhibit UPS-T-4H
Pagelof8
Table 1
Parcel Post
Recommended Intra-BMC Rates
(Dollars)
Weight
(Pounds)
$2.942
3
4
5
6
7
0
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
26
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
ZOlKS
Local
$2.75
$2.90
$3.04
$3.19
$3.32
$3.44
$3.55
$3.67
53.77
$3.87
$3.97
$4.07
$4.15
$4.24
$4.32
$4.40
$4.47
$4.55
$4.63
$4.70
$4.76
$4.83
$4.89
$4.95
$5.03
$5.09
$5.14
$5.20
$5.26
$5.31
$5.37
$5.42
$5.47
$5.53
$5.58
$5.63
$5.66
$5.73
$5.77
$5.82
55.86
55.91
$5.95
56.01
$6.05
56.09
$6.14
$6.18
l&2
53.20
$3.44
$3.68
$3.89
54.09
54.28
$4.45
54.62
$4.72
54.84
54.95
55.05
$5.14
55.23
55.33
55.41
55.51
$5.59
55.66
55.75
$5.83
$5.89
$5.96
56.03
56.11
$6.17
$6.24
$6.30
$6.38
$6.44
'56.50
56.56
56.62
56.68
$6.73
$6.79
$6.85
56.90
56.97
57.02
57.06
$7.12
57.17
57.23
$7.29
$7.33
57.38
Zone3
$3.30
53.68
53.96
54.23
54.47
54.71
54.92
55.14
55.33
55.52
55.70
55.87
56.04
56.19
56.34
$6.49
56.63
56.76
56.89
$7.02
57.14
57.26
57.37
57.49
$7.59
57.70
$7.60
57.90
$8.00
58.09
58.18
56.27
56.37
58.45
$8.53
$8.61
$8.69
58.77
56.85
58.93
59.00
59.07
59.14
59.22
$9.29
59.36
59.43
Zone4
$3.23
53.65
$4.03
54.39
54.73
$5.05
$5.34
55.62
55.88
56.14
56.37
56.60
56.82
57.03
$7.22
57.42
57.60
57.77
$7.95
$8.10
58.26
58.42
58.56
58.70
58.85
58.98
59.11
59.24
59.37
$9.49
59.60
59.71
$9.83
$9.94
510.04
510.14
$10.24
$10.34
510.44
510.53
510.62
510.71
$10.80
$10.89
510.97
511.05
511.13
511.21
Zone5
$3.50
54.05
$4.59
55.08
55.53
$5.95
56.35
56.74
57.12
$7.47
57.80
58.11
$8.41
56.66
58.96
59.21
59.47
59.69
59.91
510.13
$10.34
510.53
510.71
$10.90
511.07
511.23
511.40
$11.56
511.71
511.86
512.00
512.14
512.28
512.41
512.54
512.67
512.81
$12.93
513.05
513.18
513.30
513.41
513.52
513.62
513.74
513.84
513.94
$14.04
Exhibit UPS-T-4H
Page 2 of 6
Table 1
Parcel Post
Recommended Intra-BMC Rates
(Dollars)
Weight
(Pound9
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
Notes:
1
2
3
4
5
Local
$6.22
56.26
56.30
56.34
56.38
56.42
56.46
56.50
$6.54
56.56
56.62
56.65
56.69
$6.72
56.76
56.60
56.63
56.67
$6.90
56.94
56.98
Zones
l&2
57.42
57.46
57.52
57.57
$7.61
$7.66
57.72
57.76
57.61
57.65
57.90
57.96
58.00
58.03
56.06
58.12
56.18
58.22
$8.25
58.30
50.34
Zone 3
$9.49
59.56
59.62
59.68
59.74
59.80
59.67
$9.92
$9.98
510.03
$10.09
510.14
510.20
510.25
510.31
510.36
510.41
510.46
510.51
510.56
510.61
Zone 4
$11.29
511.37
511.44
511.52
511.59
511.66
$11.74
$11.60
511.87
$11.94
$12.00
512.06
512.13
$12.19
512.26
$12.32
512.38
512.44
512.49
512.55
512.61
Zone 5
514.15 514.24
514.34
514.43
514.52
514.61
514.70
514.78
$14.87
514.95
$15.03
515.12
515.19
515.27
515.35
515.42
515.49
515.57
$15.64
$15.71
515.76 :
For prebarcoded mail, deduct 50.02 per piece.
Pieces with combined length and girth exceeding
84 inches and weight under 15 pounds pay the
applicable 15-pound rate.
Pieces exceeding 108 inches in combined length
and girth pay the applicable 70-pound rate.
For each pickup stop, add 58.25.
Add 50.50 per piece for hazardous medical
materials and 51 .OOper piece for other mailable
hazardous materials.
Source: UPS-Luciani-WP-3
Exhibit UPS-T-4H
Page3of8
Table 2
Parcel Post
Recommended Machinable Inter-BMC Rates
(Dollars)
Weight
(Pounds)
2
3
4
5
6
7
a
9
IO
11
12
13
14
15
16
17
16
19
20
21
22
23
24
25
26
27
26
29
30
31
32
33
34
35
36
37
36
39
40
41
42
43
44
45
46
47
46
49
Zones
l&2
$3.60
53.97
54.26
54.43
54.57
54.71
54.66
54.96
55.10
55.20
55.32
$5.42
55.53
55.62
55.71
55.61
$5.69
55.99
56.06
56.14
56.23
56.30
56.36
$6.44
$6.51
$6.59
56.65
56.72
56.76
56.65
56.91
$6.97
57.03
57.09
57.15
57.21
57.27
57.33
57.36
57.45
$7.49
57.54
57.60
57.64
57.70
57.76
57.61
57.65
Zone3
53.73
54.20
54.62
55.00
55.29
55.53
55.74
$5.95
56.14
56.33
56.51
56.66
56.64
$6.99
57.14
57.27
57.41
57.54
57.66
57.79
$7.90
56.03
56.14
56.24
56.34
56.45
58.55
58.66
$6.75
56.62
$6.93
59.01
$9.09
59.16
59.25
$9.33
$9.42
$9.49
$9.57
$9.66
59.71
59.79
59.85
$9.92
510.00
$10.06
510.13
510.19
Zone4
53.94
54.51
55.04
55.53
55.96
56.37
56.75
57.10
$7.43
57.73
56.02
56.26
56.54
56.77
$9.00
59.21
$9.42
59.61
59.79
$9.97
510.13
510.26
510.44
510.56
$10.72
510.66
510.96
511.10
511.22
511.34
511.45
511.55
511.65
511.76
511.65
511.94
512.03
$12.11
$12.19
512.26
512.36
512.44
512.51
512.56
512.65
512.73
512.79
512.65
Zone5
54.26
55.01
55.71
56.34
56.91
57.46
57.95
56.40
56.62
59.22
$9.59
$9.94
510.26
510.57
510.66
511.13
511.39
511.63
511.87
512.09
512.30
512.50
512.70
512.66
513.05
513.22
513.36
513.53
513.69
513.63
513.96
514.09
514.23
514.35
514.47
514.56
514.70
514.60
514.90
515.00
515.10
515.20
515.26
515.37
515.45
515.55
515.62
515.70
Zone6
$4.40
55.61
56.50
57.30
56.04
56.72
59.36
$9.94
510.46
510.98
511.45
511.69
512.30
512.69
513.05
513.39
513.72
514.03
514.32
514.60
514.66
515.12
515.36
515.59
515.61
516.01
516.22
516.41
516.60
516.77
516.94
517.11
$17.27
517.41
517.57
517.70
517.64
517.96
516.10
516.22
516.33
518.46
516.56
516.67
516.77
516.67
516.97
519.06
Zone7
$4.40
55.69
57.36
56.62
59.56
510.46
511.26
512.02
512.72
513.37
513.97
514.53
515.06
515.57
516.04
516.47
516.69
517.29
$17.66
516.02
516.35
516.66
516.99
519.26
519.56
519.82
520.06
520.33
520.56
520.76
521.00
521.20
521.41
$21.60
521.76
521.96
522.12
522.29
522.45
$22.60
522.75
522.69
$23.02
523.15
523.29
523.41
$23.53
523.64
Zone6
$4.40
55.69
57.36
58.67
511.65
513.33
514.44
515.47
$16.42
517.31
$16.14
518.92
$19.64
$20.33
$20.96
521.82
522.40
$23.25
523.64
$24.41
524.96
525.47
525.97
526.45
526.91
527.34
527.77
526.17
526.57
526.94
529.30
529.66
530.00
530.33
530.64
530.94
531.24
531.53
531.61
532.07
532.33
532.56
532.63
533.06
533.30
533.52
533.73
$33.95
Exhibit UPS-T-4H
Page 4 of a
Table 2
Parcel Post
Recommended Machinable Inter-BMC Rates
(Dollars)
Weight
(Pounds)
50
51
52
53
54
55
56
57
56
59
60
61
62
63
64
65
66
67
66
69
70
Notes:
1
2
3
4
5
6
7
8
Zones
1&2
$7.90
57.96
58.00
56.05
56.09
56.14
58.20
$8.24
58.26
58.33
56.37
56.43
56.46
58.51
56.55
58.60
58.66
58.70
56.73
58.76
58.62
Zone 3
510.25
510.31
510.39
510.44
510.50
510.55
510.62
510.68
510.73
510.79
510.65
510.91
510.95
511 .oi
511.06
511.12
511.18
$11.22
511.26
$11.31
511.38
Zone 4
$12.92
512.96
513.03
513.09
513.16
513.21
513.27
513.32
513.37
513.42
513.47
513.51
513.56
513.61
513.66
513.70
513.75
513.79
513.83
513.67
513.91
Zone 5
515.76
515.65
515.92
515.99
516.06
516.13
516.19
$16.25
516.31
516.37
516.43
516.46
516.55
516.60
516.65
516.70
516.75
5i6.60
516.64
516.69
516.94
Zone 6
$19.15
$19.24
$19.32
$19.41
$19.49
519.57
519.65
$19.72
519.79
$19.67
519.93
520.00
$20.06
520.12
520.16
$20.24
520.30
520.36
520.42
520.47
$20.52
Zone 7
523.76
523.66
523.97
$24.07
524.17
524.27
524.36
524.44
524.53
524.65
524.75
524.66
$24.97
525.06
525.16
525.27
525.36
525.46
525.54
525.65
525.73
Zone a
534.15
534.35
534.54
534.74
534.92
535.10
535.27
535.44
535.60
535.76
535.92
536.07
536.22
536.37
536.50
536.64
536.77
536.91
537.04
537.15
537.28
For nonmachinable inter-BMC parcels, add 51.90 per piece.
For each pickup stop, add 56.25.
For OBMC discount, deduct 50.446 per piece.
For BMC presort, deduct 50.162 per piece.
For prebarcoded mail, deduct 50.02 per piece.
Pieces with combined length and girth exceeding 64 inches and weight
under 15 pounds pay the applicable 15-pound rate.
Pieces exceeding 106 inches in combined length and girth pay the
applicable 70-pound rate.
Add 50.50 per piece for hazardous medical materials and $1 .OOper piece
for other mailable hazardous materials.
Source: UPS-Luciani-WP-3
Exhibit UPS-T-4H
Pagesofa
Table 3
Parcel Post
Recommended Destination BMC Rates
(Dollars)
Weight
(Pounds)
z
3
4
5
6
7
a
9
10
11
12
13
14
15
16
17
la
19
20
21
22
23
24
25
26
27
26
29
30
31
32
33
34
35
36
37
36
39
40
41
42
43
44
45
46
47
46
49
Zones
l&2
$2.47
$2.63
52.60
52.96
53.09
53.23
$3.36
53.47
53.56
53.70
53.60
$3.89
$3.99
54.06
54.16
54.25
54.32
54.40
54.46
54.54
54.62
$4.69
54.76
54.62
54.66
$4.94
55.00
55.07
55.13
55.17
55.23
55.26
55.33
55.39
55.44
55.46
55.54
55.56
55.63
$5.67
55.72
55.76
55.61
55.65
$5.69
$5.93
55.97
56.02
Zone3
52.72
53.05
53.35
53.63
53.90
54.14
54.36
54.59
54.61
54.99
55.16
55.35
55.53
55.66
55.62
$5.97
56.11
56.25
56.37
56.50
56.62
56.73
56.64
56.96
57.06
$7.16
57.26
57.35
57.45
57.54
57.62
57.71
$7.79
57.67
$7.96
56.03
56.10
56.16
56.25
56.31
56.40
$6.46
56.53
56.59
56.65
56.72
56.77
58.63
Zone4
52.90
53.32
53.70
$4.06
54.40
54.72
55.01
$5.29
55.55
55.61
$6.04
$6.27
56.49
56.70
56.69
57.09
57.27
57.44
57.62
57.77
$7.93
$6.09
56.23
58.37
56.52
56.65
58.78
58.91
59.04
59.16
59.27
59.36
59.50
59.61
59.71
$9.61
59.91
510.01
510.11
510.20
510.29
$10.38
510.47
510.56
$10.64
$10.72
510.80
510.66
Zone5
53.17
53.72
54.26
54.75
55.20
55.62
56.02
56.41
56.79
57.14
57.47
57.76
56.06
56.35
56.63
56.66
$9.14
$9.36
59.56
59.60
510.01
510.20
510.38
510.57
510.74
510.90
511.07
511.23
511.36
511.53
511.67
511.61
511.95
512.06
512.21
512.34
512.46
512.60
512.72
512.65
512.97
513.08
513.19
513.29
$13.41
513.51
513.61
513.71
Exhibit UPS-T-4H
Page 6 of 6
Table 3
Parcel Post
Recommended Destination BMC Rates
(Dollars)
Weight
(Pounds)
50
51
52
53
54
55
56
57
56
59
60
61
62
63
64
65
66
67
66
69
70
Notes:
1
2
3
4
Zones
l&2
56.06
56.10
56.13
56.16
56.21
56.24
56.26
56.32
56.35
56.39
56.42
56.47
56.50
56.53
56.57
56.60
56.64
56.66
56.69
56.73
56.76
Zone 3
56.90
56.96
59.01
59.07
59.12
59.19
$9.24
59.26
59.35
59.39
$9.45
59.49
59.54
$9.59
59.63
59.66
59.72
$9.76
59.61
$9.86
59.91
Zone 4
510.96
511.04
511.11
511.19
511.26
511.33
511.41
511.47
511.54
511.61
511.67
511.73
51 I .a0
511.66
511.93
511.99
512.05
512.11
512.16
512.22
512.26
Zone 5
$13.82
513.91
514.01
514.10
514.19
514.28
514.37
514.45
514.54
514.62
514.70
514.79
514.66
514.94
515.02
515.09
515.16
515.24
515.31
515.36
515.45
For prebarcoded mail, deduct 50.02 per piece.
Pieces with combined length and girth
exceeding 84 inches and weight under 15
pounds pay the applicable 15-pound rate.
Pieces exceeding 108 inches in combined
length and girth pay the applicable
70-pound rate.
Add 50.50 per piece for hazardous medical
materials and 51 .OOper piece for other
mailable hazardous materials.
Source: UPS-Luciani-WP-3
Exhibit UPS-T-4H
Page 7 of a
Table 4
Parcel Post
Recommended Destination SCF and
Destination Delivery Unit Rates
(Dollars)
Weight
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
la
19
20
21
22
23
24
25
26
27
26
29
30
31
32
33
34
35
36
37
36
39
40
41
42
43
44
45
46
47
46
DSCF Rates
$2.12
i2.25
$2.39
$2.51
52.61
52.72
52.63
52.91
53.00
53.10
53.17
53.24
53.32
53.40
53.45
53.53
53.56
53.65
53.71
53.76
53.63
53.67
53.93
53.96
54.03
54.08
54.13
54.19
54.24
$4.26
54.31
54.36
54.39
54.44
54.48
54.52
54.56
54.60
54.64
54.67
54.71
54.74
$4.79
$4.81
54.85
54.66
54.92
DDU Rates
$1.77
$1 .a5
51.93
52.01
52.07
52.14
52.21
52.25
52.31
52.37
52.43
52.47
52.53
$2.57
52.61
52.66
52.69
52.73
52.76
52.60
52.84
52.69
52.92
52.96
52.96
53.02
53.05
53.10
53.13
53.15
$3.16
53.21
53.23
53.28
53.30
53.32
53.36
53.36
53.41
53.43
53.46
53.46
53.52
53.53
$3.56
53.56
53.61
Exhibit UPS-T-4H
Page a of a
Table 4
Parcel Post
Recommended Destination SCF and
Destination Delivery Unit Rates
(Dollars)
Weight
(Pounds)
49
50
51
52
53
54
55
56
57
56
59
60
61
62
63
64
65
66
67
66
69
70
Notes:
1
2
3
Source:
DSCF Rates
54.95
54.99
55.03
55.05
55.09
55.11
55.14
55.17
55.20
55.23
55.26
55.26
55.33
55.35
55.36
55.41
55.44
55.47
55.46
55.51
$5.54
55.57
DDU Rates
53.64
$3.67
53.69
53.70
53.74
53.75
53.77
53.79
53.62
53.63
53.66
53.68
53.92
53.93
$3.95
53.97
54.00
54.02
54.02
54.05
54.07
$4.09
Pieces with combined lenght and girth
exceeding 64 inches and weight under 15
pounds pay the applicable 15.pound rate.
Pieces exceeding 106 inches in combined
length and girth pay the applicable 70-pound
rate.
Add 50.50 per piece for hazardous medical
materials and 51 .OOper piece for other
mailable hazardous materials.
UPS-Luciani-WP-3