DI’XKET SECTION
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, D.C. 20266-6001
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POSTAL RATE AND FEE
CHANGES,1997
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RESPONSE OF THE UNITED STATES POSTAL SERVICE
TO PRESIDING OFFICERS INFORMATION REQUEST NO. 5,
ITEMS 1-14, 17-20
The United States Postal Service hereby provides responses to the following
items of Presiding Officer’s Information Request No. 5. filed on November 6, 1997:
l-14, 17-20.
Each question is stated verbatim and is followed by the response. Responses to
items 15-16 were unexpectedly delayed, but it is anticipated that they will be filed
shortly.
Respectfully submitted,
UNITED STATES POSTAL SERVICE
By its attorneys:
Daniel J. Foucheaux, Jr.
Chief Counsel, Ratemaking
475 L’Enfant Plaza West, S.W.
Washington, D.C. 20266-l 157
(202) 266-2992; Fax -5402
November 20, 1997
‘97
RESPONSE OF POSTAL SERVICE WITNESS MUSGRAVE
‘TO PRESIDING OFFICERS INFORMATION REQUEST NC. 5
Please refer to the following table which presents witness Musgrave’s volume
1.
forecasts for Priority Mail and the annual growth rates implied by those forecasts.
Explain why the forecast growth rate for Priority Mail drops from 13.08
percenk GFY 1997 to 6.72 percent in JYBR (GFY 1998).
b.
Also explain the low Priority Mail growth rates of 3.31 percent and 3.71
percent forecasted for JYAR (GFY 1998) and GFY 1999 respectively.
Priority Mail Volume Forecasts and
Annual Growth Rates
Volume
Percent
Item
(Thousands)
Change
GM 1998 (Base Year)
937,273 2
GFY 1997 (Before Rates)
1,059,882 y
13.08%
GFY 1998 (TYBR)
1,131,156~
6.72%
1,094,946 2,
GM 1998 (P/AR)
3.31%
GFY 1999 (After Rates)
1,135,563 31
3.71%
11 FY 1998 RPW
y USPS-T-8, Table 1 (Revised s/18/97)
3 LR-H-125, “Before Rates and After Rates Forecasts
for Priority Mail and Express Mail,” page 9
(Revised 8/l 8197)
RESPONSE:
1. While the forecasted growth in Priority Mail depends on the values of each of the
individual Postal quarterly multipliers, combining the multipliers into annual values for
Postal rates, UPS rates, Economic, and Demographic impacts can be used to answer the
question. The answer is based on the multipliers presented in Library Reference H-125.
The accompanying spreadsheet (Library Reference H-306) shows the detailed
calculations. The calculations I cite, in this response, are color coded in the spreadsheet.
Multipliers are based on Postal quarters and it should be remembered that the total
annual effect is obtained by multiplying the multipliers together. Converting the impact of
the multipliers from Postal Fiscal Years to Governmental Fiscal Years results in rounding
and averaging differences in the range of 0.02 to 0.05 (0.0002 to 0.0005) percent. The
Base Year used to produce the forecasts in the testimony are Postal quarters 96:3
through 97:2 equaling 991.266 million pieces, (See USPS-J-8, Table 1, Revised 8/18/97)
rather than the PM 1996 equaling 937.273, presented above in the POIR.
la. Government Fiscal Years 1996 to 1997 Before Rates Volume
From the Base Year used in the testimony to GM 1997 before rates, lower
real Postal rates (Priority Mail and Parcel Post) resulted in,increased volume of 1.09
percent. Short-run and long-run economic conditions resulted in a 2.51 percent increase
In volume with population adding an additional 0.70 percent. UPS price increases
resulted in a 1.86 percent increase In volume. The net result is an increase of 6.95
percent in GFY 1997 volume over the actual Base Year period used to produce forecasts
in the testimony. The difference in Base Year periods accounts for the difference
between 13.08% and 6.95%.
GFY 1997 Before-Rates to GM 1998 (TYBR) Volume
The volume growth in the before-rates environment is approximately the same
at 6.74 percent. From GFY 1997 before rates to GPI 1998 before rates, lower real
Postal rates (Priority Mail and Parcel Post) would result in an increase in volume of 1.77
percent. Short-run and long-run economic conditions would result in a 2.05 percent
increase in volume with population adding an additional 0.82 percent. UPS price
increases would resulted in a 1.59 percent increase In volume. The net lresult would be a
6.74 percent increase in 1998 volume over 1997, if Postal rates did not increase.
1b. GFY 1997 Before-Rates to 1998 After-Rates Volume
From GFY 1997 before-rates to GFY 1998 after-rates, higher real Postal rates
(Priority Mail and Parcel Post) would result in a decrease in volume of 1.38 percent.
2
Short-run and long-run economic conditions would result in a 2.01 percent increase in
volume with population adding an additional 0.78 percent. Combining the economic and
demographic impacts would result in a 2.81 percent impact. UPS price increases would
result in a 1.55 percent increase in volume. The net result would be a 3.3 percent
increase in GFY 1998 after-rates volume over GFY 1997, if rates proposed by the Postal
Service were adopted. The decrease in growth is prtmarily the result of the proposed
Postal rate increases.
GFY 1998 After-Rates to 1999 After-Rates Volume
From GFY 1998 after-rates to GFY 1999 after-rates, lower real Postal
Rates (Priority Mail and Parcel Post) would result in an increase in volume of 0.47
percent. The small net impact results from the lagged effect of the previous price
increases. Short-run and long-run economic conditions would result in a 1.I9 percent
increase in volume with population adding an additional 0.94 percent. Combining the
economic and demographic impacts would result in a 2.14 percent impact. UPS price
increases would also result in a 1.08 percent increase in volume. The net result would be
approximately the same growth, at a 3.72 percent increase in GFY 1999.
In summary, the growth of GFY 1997 over the Base Year Period is 6.95 percent
and is approximately the same as the GM 1998 before-rates over GFY ‘1997 growth of
6.74 percent. The difference from 13.08 %, results from using the Base Year Period in
the testimony rather than GFY 1996, as listed in the POIR. The reduced volume growth in
the after-rates environment at 3.3 percent for GFY 1998 and 3.7 percent in GFY 1999 is
primarily due to the proposed increase in Postal rates.
3
I, Gerald L. Musgrave, declare under penalty of perjury that the foregoing
answers are true and correct, to the best of my knowledge, information, and belief.
RESPONSE OF POSTAL SERVICE WITNESS NEEDHAM JO
PRESIDING OFFICERS INFORMATION REQUEST NO. 5
2. Please reconcile the FY 1996 volume for Certified Mail (269,730,120
transactions) listed in USPS LR-H-145, “FY 1996 Billing Determinants,”
Section K, Table 1, with the FY 1996 volume for Certified Mail (270,832,OOO
transactions) listed in FY 1996 RPW (revised 4/18/97).
RESPONSE:
The FY 1996 billing determinant volume for certified mail includes incoming
certified pieces (260,108,209), incoming certified agency pieces (7,706,567),
incoming certified congressional franked pieces (0) and certified USPS pieces
(1,915,344), equaling 269,730,120. The FY 1996 RPW Report does not include
the USPS pieces, but does include return receipt for merchandise volume
(3,017,237).
RESPONSE OF POSTAL SERVICE WITNESS NEEDHAM TO
PRESIDING OFFICERS INFORMATION REQUEST NO. 5
3. Please identify the source of the FY 1996 COD transactions shown in column
1, m-5, USPS LR-H-206, “Diskettes of Witness Needham’s (USPS-T-39)
Testimony and Workpapers.”
RESPONSE:
The “FY 1996 C.O.D. transactions” in WP-5 are from the FY 1993 C0.D. billing
determinants. Please see the attached revised workpaper which us,es the FY
1996 billing determinants.
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RESPONSE OF POSTAL SERVICE WITNESS NEEDHAM TO
PRESIDING OFFICERS INFORMATION REQUEST NO. 5
4. Refer to USPS LR-H-206, “Diskettes of Witness Needham’s (USPS-T-39)
Testimony and Workpapers,” WP-15, “Stamped Envelopes Test Year
Volumes and Revenues.”
a. Please explain why the P/AR volume (25605,102 envelopes) for Printed
6 % Regular, Window, Precanceled Regular and Precanceled [sic]
Window [sic] is different from the TYBR volume (26,033,975 envelopes).
b. Refer to column 4. Please explain why the number of Test Year box lots
for Plain 6 % banded (62,713 boxes) and Plain 10 banded (87,699 boxes)
envelopes are calculated by dividing the number of total envelopes by 50.
rather than 500.
c. Refer to column 1, which lists FY 1996 total envelope sales aldjusted to
account for the difference between GFY 1996 and PFY 1996 workdays.
Please explain why Plain IO inch Hologram FY 1996 total envelope sales
(11,889,500 envelopes) is the only number in this column thalt has not
been multiplied by the ratio of GFY 1996 workdays to PFY 1996
workdays.
RESPONSE:
a. The test year after rates volume was incorrectly calculated by multiplying the
test year before rates volume by the before rates volume factor (test year
before rates volume divided by the base year volume). The calculation
should have been the base year volume multiplied by the test year after rates
volume factor (test year after rates volume divided by the base year volume).
The resulting test year before rates volume and test year after rates volume
are the same, as presented in the attached revised workpaper.
RESPONSE OF POSTAL SERVICE WITNESS NEEDHAM TO
PRESIDING OFFICER’S INFORMATION REQUEST NO. 5
4. Continued
b. The total number of banded stamped envelopes for the 6 % inch and 10 inch
sizes should have been divided by 500 instead of 50 to calculate the number
of box lots. The attached revised workpaper reflects the corrections.
c. When the plain hologram volume was extracted for purposes of ;a proposed
separate fee, the adjustment from PFY to GFY was inadvertently omitted.
The correct volume is 12,383,357, as presented in the attached revised
workpaper.
mtacnment
to Response to POIR No. 5, Question
4
RESPONSE OF POSTAL SERVICE WITNESS NEEDHA,M TO
PRESIDING OFFICER’S INFORMATION REQUEST NO. 5
5. Refer to USPS LR-H-206, “Diskettes of Witness Needham’s (U,SPS-T-39)
Testimony and Workpapers, WP 9. ‘Parcel Airlift Test Year Volumes and
Revenues,” column 5. Please explain why the Library Rate TY.AR volume
(28,728 units) is excluded from the total TYAR volume for Primiary Services
(1,009.913 units) used to forecast Parcel Airlift Mail TYAR volumes.
RESPONSE:
The test year after rates Standard Mail B volumes used in calculating the test
year after rates parcel airlift volume were entered into WP-9 one line below
where they should have been entered. Since the library rate volume is the last
entry in this group of volumes, the addition of this volume was omitted in the
equation for the total Standard Mail B volume. The revised total Standard Mail B
volume is 1038.64053 which represents the 1009.91296 total without the library
rate volume plus the 28.728 library rate volume. With respect to parcel airlift, the
Standard Mail B volume revisions result in a new total test year after rates parcel
airlift volume of 73,283 and a revised corresponding revenue of $76,447, as
shown in the attached revised workpaper WP 9.
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RESPONSE OF POSTAL SERVICE WITNESS NEEDHAM TO
PRESIDING OFFICERS INFORMATION REQUEST NO. 5
6. Refer to USPS LR-H-206, ‘Diskettes of Witness Needham’s (USPS-T-39)
Testimony and Workpapers, “WP 8. “On-Site Meter Settings Te:st Year
Volumes and Revenues.” Please show, step-by-step, the calculation of the
number (0.52932) entered in the cell named “RATIO” which is located at
A038 on the spreadsheet “onsmeter.wk3.”
RESPONSE:
No calculation of this number is available. The number 0.52932 was first used in
Docket No. R90-1 and was an adjustment based on an anticipated overall
volume decline given the introduction of first and additional meter fees, as
opposed to one fee for meter company settings. Given the available data, the
meter setting volumes were adjusted by the same factor in Dockets No. R94-1
and R97-1.
RESPONSE OF POSTAL SERVICE WITNESS NEEDHAM TO
PRESIDING OFFICERS INFORMATION REQUEST ND. 5
7. Refer to USPS LR-H-206, ‘Diskettes of Witness Needham’s (USPS-T-39)
Testimony and Workpapers, ‘WP 13, ‘Special Handling.’ Please identify the
source of the FY 1996 Primary Services volumes for Special Ra,te (190,072
pieces) and Library Rate (30,191 pieces).
RESPONSE:
The source of the FY 1996 volumes for special rate and library rate underlying
the special handling workpaper. as filed, is an early version of the FY 1996
volumes. The special rate and library rate volumes in this workpaper were not
updated to reflect the final numbers. I am now correcting the special rate
volume from 190,072 to 189,793 pieces and the library rate volume from 30,191
to 30,133 pieces, to reflect the billing determinants (LR-H-145 at H-4, H-5). The
resulting total test year before rates special handling volume is corrected from
74,598 to 74,625, and the total test year after rates special handling volume is
corrected from 68,899 to 68,926. The total test year before rates revenue is
corrected from $441,631 to $441,784 and the total test year after rates revenue
is corrected from $1,309,676 to $I,31 0,158. A revised workpaper WP 13 is
attached. A revised summary workpaper, WP 17 (pages I, 2, and 4) reflecting
the changes discussed in my responses to questions 3, 4, 5, and 7, is also
attached.
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DECLARATION
I, SusanW. Needham, declare under penalty of pejury that the foregoing answers
are true and correct, to the best of my knowledge, information, and belief.
RESPONSE OF POSTAL SERVICE WITNESS PLUNKEl-T TO
PRESIDING OFFICERS INFORMATION REQUEST NC. 5
8. Refer to USPS LR-H-207, “Diskette of Witness Plunkett’s (USPS-T-40) Testimony
and Workpapers,” WP 2, “Insurance,” columns 2 and 3. Please provide the source
of TYBR (18,000) and TYAR (17,000) transactions for indemnity of $2,000.01 $5,000.
8. Response:
In Docket No. MC96-3 (see Commission’s Decision, Appendix D Schedule 3, p. 8), the
Commission based its recommended decision on a projection of 17,274 transactions in
this indemnity range. Having no actual base year volumes I used this number as a
starting point and projected the TYBR and TYAR numbers therefrom using my own
judgement. Because the projected transaction volume in this range is too small to have
any significant impact on cost. coverage I used rounded numbers for the sake of
simplicity.
RESPONSE OF POSTAL SERVICE WITNESS PLUNKETT TO
PRESIDING OFFICER’S INFORMATION REQUEST NO. 5
9.
Refer to USPS LR-H-207, “Diskette of Witness Plunkett’s (USPS-T-40)
Testimony and Workpapers,” WP 3, “Restricted Delivery,” and WP 4, “Return
Receipts.” Please identify the source of the Primary Service TYAR volume
(289,956 pieces) for Certified Mail.
9. Response:
The TYAR Certified Mail volume used in my workpapers is the TYAR volume of
293.118 million pieces (Ex. USPS-GA, p.7) adjusted by -3.469 million and 0.307 million
for Delivery Confirmation and Packaging Service respectively. For the reason
explained in the response to question 11, the adjustment for Packaging Service should
have been 0.004 million, which would result in TYAR Certified volume of 289.653
million pieces. Revised workpapers WP 3 and WP 4 are attached.
OLl’SPl’ll
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RESPONSE OF POSTAL SERVICE WITNESS PLUNKElm TO
PRESIDING OFFICER’S INFORMATION REQUEST NO. 5
10.
Refer to USPS LR-H-207, “Diskette of Witness Plunkett’s (USPS-T-40)
Testimony and Workpapers,” WP-4, “Return Receipts,” columns 2 and 3.
a.
Please explain why the TYBR and TYAR transactions fair Registry with
Return Receipt are forecast using Insurance volume, instead of Registry
volume.
b.
Also, please explain why the TYBR and TYAR transactions for Insurance
with Return Receipt are forecast using COD volume, instead of Insurance
volume.
10 Response:
The cell references for these forecasts are incorrect and should be corrected as follows.
In worksheet WP 4 “Return Receipts” cells AGI 7, Al 17, and AK1 7 should be changed
to refer to X48, 248, and AB48 respectively, and cells AG21, Al21, arrd AK21 should be
changed to refer to X49, 249, and AB49 respectively. A revised workpaper WP 4 is
attached to my response to question 9.
RESPONSE OF POSTAL SERVICE WITNESS PLUNKETT TO
PRESIDING OFFICERS INFORMATION REQUEST NO. 5
11.
Refer to USPS LR-H-207, “Diskette of Witness Plunkett’s (USPS-T-40)
Testimony and Workpapers.” Please identify the source of the adjustments for
Packaging Service in the following workpapers: WP 1, “Cettific.ate of Mailing”
(2,457 transactions); WP 2, “Insurance” (427,034 transactions); and WP 4,
‘Return Receipts” (8,598 insurance and 5,118 merchandise transactions).
11 Response:
These adjustments were inadvertently copied from an earlier discarded version of the
worksheets used to develop Exhibit USPS9D in Docket No. MC97-5, USPS-T-3. The
adjustments should have been as follows: WP 1, “Certificate of Mailing” (3,012
transactions); WP 2, “Insurance” (523,589 transactions); and WP 4, “Return Receipts”
(10,542 insurance and 6,275 merchandise transactions). As noted in ‘my response to
question 9, this resulted in an incorrect adjustment to TYAR certified mail volumes
which were used as inputs to WP 3 and WP 4. Revised workpapers VVP 1 and WP 2
are attached, and revised workpaper WP 4 is attached to my response to question 9.
As a result of these changes, workpapers WP 13 and WP 15, which summarize special
services and adjust insurance costs respectively, have been revised and are attached.
Attachment
to Response to
POIR No. 5, Question 11
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SPECIAL SERVICES
INSUfiANCE
____
TRANSACTIONS (DC”,)
_ ..__..
- ._ ..---..-...TEST YEAR
TEST YEAR
AFTER
BEFORE
RATES
RATES
--
PROPOSED
--
e)
w
(5)
,2.605
wo8
3.846
1.4%
616
647
520
1.011
17
I.028 I,
13.315
6,882
4.063
1,464
545
663
550
1.069
16
1.067
so75
1.60
2.54
3.40
4.34
5.20
6.10
12.66
32.65
13.16
10.95
l.w
2.90
3.90
4.90
5.90
6.90
14.40
36.40
14.75
26.976
30,609
2.06
2.40
(1)
loo
200
300
400
6%
s6moY% 0%
*.oooo1~ s;.m
%00.01 - swoo Y
TOTAL 6’
ADDTTIONM SERVICES 2,
RETURN RECEIPTS 778,315
RESTRICTED
OEWERY
9,666
TOTAL
IKTERNATH)NAL 31
CANADA
OTHER
RETURN RECEIPTS
TOTAL
ORAND TOTAL
FEES (8
CtJRRENT
---..-
Ml996
---
REVENUES (W,)
.-.-.....--....-----.-. .. . .._
BEFORE RATES
AFTER RATES
VOLUME
VOLUME
CURRENT FEE
PROPOSED FEE
---(6)
-
82.17,
10.424
30,301
613.B46
,O,%?O
766.163
624‘256
161
605
0
169
533
0
7%
621
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31.123
---
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19.986
14.211
10.157
5.046
2,346
s12522
16,705
11,665
5,734
2,645
3.554
3.354
13.741
588
14.328
.--.-..62.962
z
15.230
619
15.64*
__-__
.- --.--
--
VI
PERCEM
CHANGE 4,
7u66
26.67%
16.75%
16.00%
14.71%
13.95%
13.46%
13.11%
12.06%
11.49%
11.92%
205.76%
---
-----------
$2.29
2.19
12.29
2.19
---
2.06
2.40
-.-
-------.---.
436
1.339
432
1,516
1.835
1,616
664.617
s74m3
O.w%
0.004:
REVISED 1 l/M/97
USPS T-40
WP-13
TEST YEAR AFTER RATES
SPECIAL SERVICES COST COVERAGES AND PERCENTAGE INCREASES
AtIer Rates
cost Per
piece 2l
6)
c __-_-I____-.__-- __--__.______-__-_______
_____
___. -_____.____
(21
(11
:
; CERTIFICATEDF MAILING
z
3 INSURANCE
?
; RESTRICTED DELIVERY
RETURN RECEIPTS
DELIVERY CONFIRMATION
MAILING FEES
Firsl-Ctass Presoned Maitii
Pmicdkx& Apptiitkm
Fee
Fees
SIadard (A) Sulk Mailing Fee
Standard (8) Special Mail Prasotl I
Authorization to Use Permit lmprin
Me&ndt%
Return Pantt Fee
Destination Bulk Mail Center Fee
Total
cost 31
AIM Rates
Revenue II
Cd
coverage
(Co1 4/COl3)
__._.___....._
_._
(3)
(4)
(5)
Per Piece
(Cal 4/c&l 1)
___._..__.__..___
(6)
Before Rates
Revenue II
.____
..__..__-_
Beiom Rates
volume II
._____.-__._.-
Before Rates
ReVFJIlUe
Par Piece
(Co1 71COl6)
____
.____..._____
CI)
@I
(9)
Alter Rates
Percantage
w
Ilam
0.29
3,4w.529
4.599.704
132.2%
0.39
4,013,043
11.691,493
0.337
15.2%
31,122,766
1.56
46549.042
74.452,911
153.4%
2.33
64,617
32,526
1.993
16.6%
4.Ll56.765
1.71
7,W6,473
11.156,156
159.2%
2.75
11.754.W2
4.274.162
2.756
0.0%
244.274.066
1.00
243,556.272
356,080,557
147.0%
1.47
269.941
260.356
1.114
31.6%
66.608.086
0.33
22.139.260
23,563,212
106.4%
0.35
NA
NA
NA
SD.689
67.73
5377,516
6,068,931
112.9%
1W.W
5,163,405
60.961
65.Wo
17.6%
9,764
61.12
596,621
767,249
126.6%
76.56
775,024
9,764
79.372
-1.0%
790,662
67.73
70,077,696
79.066,175
112.9%
1W.W
67,79Q.460
797,535
65.wD
17.6%
908
67.73
60,413
90.752
112.9%
1OO.W
77,159
908
65.m
17.6%
91,966
07.73
6,146,693
112.9%
1W.W
7.617,143
91,966
35.wo
17.6%
1,307
67.73
115,799
139,666
112.9%
1OO.W
111,665
1,307
65.Dw
17.6%
67.73
15.066
17025.88
112.9%
1W.W
amDo
17.6%
170
9.196639
14472.00
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apew aJe pue uo!lsanb Jnor( u! 01Ja4aJnoA JellI quawlsn!pe leuo!l!ppe o~q aql
ZENOdS3tl
uo!leluawn3op pas!AaJhe ap!AoJd aseald
‘&.js JadedyJoM ‘8E-l-S&n)
pJepuelS iepads 104awnloA papo3Jequn 40 ISO:,
lyn al(l40 luawdolaAap aL# u! papnpu! IOU s! $UaLU)Sn!pe
JeI!w!s e ARMu!eldxa
aseald ‘paygsn! s! awnloA apomeq leuo!l!ppe aQ ~04luawisn[pe aql41
‘(I a6ed ‘8 q!-l ‘8E-l-S&n) aleI heJq!l Jo4
awnloh papo3Jequn 40 ISO:,$un aql Gu!dolaAap IJ! papnpu! $0~ aJe sluawlsn[pe
Jel!w!s KIM u!eldxa aseald ‘wdg ~04paylsn! aJe sluawpn!pe 04. asaul 41
‘lUaWlSn!pe paJJO3 aq$ ap!AOJd
aseald ‘OS41~$00~KCJM‘$0~ 41i(~szzzr.r$) spunod 01 Jan0 awnloh Mau 40 ~s.03
yun aq$ol apew aq $IJaWlSn[peue p(noqs ‘paygSn[ SI spunod (]L JaAOawnloh
Mau ~04luawysnfpe ay 41.sluawisn!pe ieuoyppe om asaql A4gsnlaseaid
.spunod 0 c JaAo awnloA Malu
pue :awnioA papo3Jeq leuog!ppe
-
(,,:siuawtsn!pe ieuki,, laaqsyroim uo 6~1 iia3) ISOD
gun palSn[pe tf\dh~ au140 &IaWdOlaAap atg u! apew aJe SlUaWlSn[pe leuo!$!ppe
0~1 ‘papo3Jeq @JasaJd awnloA luaJJn3 ~04luawlsnfpe ue apnpu! qlog
f9~6609’0$) rmn!pv w,h~ 01 kzi~sss~os) l=aJoj
wu
w wo~4sa6uew
awnloA papo3Jequn ~04huaf%!luo3 U~!Mis03 lyn aql ‘~~wdg JadedyJoM ‘8c
-l-sdsn u! padolaAap aJe Mdg ~04sluawlsn!pe anuaAaJ pue IS:00ieu! j
s)uewsn!pv
mav
enuaAea pus ISOD leu! j
ZC NOIlS3lld ‘0 ‘ON MOd 01
SS~NIIM 331ht13s ivuod
s3ivis
axiNn
do 3sNods3ti
‘Zl
‘papaau aJe suo!paJJo:, Jo/pue sluawlsn[pe
Jel!w!s ou ‘snql vaJJo3 aJe heJq!i pue pJepuels lepads 104suo!lelmle:, aql
‘~mda-&Qf JadedyJoM pas!AaJ alli pay3effe osle aheq
I ‘Snql ‘a6eJaAO3ISO3aql pedw! SUO!lDaJJO3
aSall
‘ZEwdg dM ‘LEN&l dM
:SJadedyJOMpaS!AaJaql ll! paleJOdJO%J!aJe SUO!lDaJJO3
IIV ‘(QZl IlaD U! ‘Sql
0 c Jaho awnloA Mau ~04aDaid Jad anuahal v()ZL c$ aqi ‘a.!) ap!s ,anuaAaJaql uo
(P~“u!Wo:J) 3SNOdS3tl
ZC NOIlS3llb ‘0 ‘ON WOd 01
VUaV SS3NlIM 33lAElS 1VlSOd S31VlS Q31lNll JO 3SNOdS3’tl
Standard (6) Bound Printed Matter
Financial Summary
nue Including Fees
PI
I21
R
Vdurne - BPM8 ; Revenues - BPM12; Cost - USPS-T-15, WP-E, Table E
Volume - BPM26 ; Revenues - BPM30; Cost - USPS-T-15, WP-G. Table E
BPM31
Revised
l?Hov-97
USPS-T-39
WP BPMI
NAR Costs [1]
NAR Cost and Revenue per piece [3]
RRllSED
I
cost
w
1.5
Per Piece
$0.5276
Revenue
Per Piece
$0.8141
2
3
$0.5567
$0.6148
$0.8588
$0.9482
1.54 Nontransportation
1.54 Nontransportation
4
5
$0.6730
$0.7312
$1.0375
$1.1268
1.54 Unadjusted Non-Weight Related Costs
1.54 Cost savings due to newly barcoded volume [4]
5264641.901
-$7.307.90(
6
7
8
9
10
11
11.5
12
$0.7893
$0.8475
$0.9057
$0.9638
$1.0220
$1.0802
1.64 Adjusted Non-Weight Related Costs
1.54 Weight-Related Costs
5247.333,995
77.949.079
$1.1383
$1.2162
$1.3055
$1.3949
$1.4842
$1.5735
$1.6629
$1.7076
$1.7522
1.64
1.54
1.54 ,Adjusted Piece-Related Revenue [5]
1.54 Pound-Related Revenue
5382,041,562
5119,724,842
13
14
15
$1.1965
$1.2547
$1.3128
$1.8416
$1.9309
$2.0203
1.54
1.54 NAR
1.54 NAR
561.718,090
1.340.074,352
$1.1092
I
Cost
Coverace
Total before Final Adjustments
1.54 Cost Segment 14
Costs
Weight-Rebted
WP BPM32
Page 1 of 2
$332390,980
64.237.333
$268,353.647
13,711,746
Costs
1.54
1.54
Pieces
Pounds
Calcufation of MAR Nontransportation Weight-Related Coete [2]
1
Nontransn.
t
Local
Non-Local
0.75
1
$0.02
0.02
1,929,864
80568,396
1.0000
1 .oooo
$28948
I,61 1,368
Non-Local
Local
0.5
0.375
0.02
0.02
1.055.843.692
201,732.399
1.0000
1.oooo
10.558,437
1,512,993 I
Bulk
I
Total
1,340,074,352
$13,711,746
‘t7-Nov-97
USPS-T-36
I
t7-Now97
USPS-T-36
WP BPM32
Page 2 uf 2
Notes:
111:
Total costs from USPS-T-15, WP-G, Table E.
Transportation costs - same % as in NBR
Non-transportation weight-related casts from [2]
Revenues - BPM30
NAR Pieces - BPM26
NAR Pounds - BPM27
Id:
Assumas 2 cents per lb for weight-retated
nontransportation
cost
[31:
Cost par piece: (non-weight related cast I NAR pieces) + weight l (weight related cost I NAR pounds)
pounds)
Revenue Per piece: (ptece r&ted revenue I NAR pieces) + weight * (pound related revenuemAR
141:
Cost savings = Newly barcoded vdurne l barcode cost savings per piece
561,718,OOO
Total volume
32.20%
Percent of New barcode
180.888,757
Newiy Barcoded Volume
0.0404
Barcode cost savings per pieca with contingency
57,307,906
Cost savings due to newly barcoded voluma
L51:
Unadjusted Piece-Related Revenue
Newly Barcnded Volume
B2mwde Dsiwunt
Barcode Adjusternent
Adjusted Piece-Retated Revenue
5389,277,113
180,888,757
-0.04
-$7.235.550
$382.041.562
CALCULATION
REVISED
17-Now97
USPS-T-38
WP BPMJl
Page 1 of 3
OF BOUND PRINTED MATTER FINAL ADJUSTMENTS
m
m
m
Unbarcoded Volume
Currently Barcoded Volume
Additional Volume Barcoded from Market Research
New Volume from Delivery Confirmation
New Volume over 10 Pounds
474,286.170
Total
567.896300
w
93,610.122
“a
na
“a
I
w
469.126289
92,591,711
“a
na
“a
288.237.534
561.718.ooo
574.741.500
92,591.711
100.806,757
a
13.023.5X
Revenue Imcect
Revenue rer Piece
m
w
m
Unbarcoded volume
$0.868143
$0~912746
_.~. .-. .-
0.872746
0.872746
0.872746
Currently Barcoded Volume
Additional Volume Barcoded from Market Research
0.868143
na
“a
New Volume from Delivery Confirmation
New Volume Over 10 Pounds
M
na
na
na
Total
0.868143
P/BR
Unbarcoded Volume
Currently Barcoded volume
Additional Volume Barcoded from Market Research
New Volume from Delivery Confwmatii
New Volume Over 10 Pounds
Total
w
$0.912746
0.906152
w
na
1.707563
0.911723
Adi@ecJ
$411,748.104
81.266,946
$428,192.948
80.809.007
$263.087.534
80.809007
“a
“a
na
493,015.052
na
na
M
509.001,955
157.869.863
0
22.238.445
524.004.849
REVtSED
li’-Now97
USPS-T-38
WP BPM31
Page 2 of 3
Cost Impact
1
ICost oer Piece with continaency
m
NBR
Unbarcoded Volume
Currently Barcodad Volume
Additional Volume Barcoded from Market Research
New Volume from Delivery Confirmation
New Volums over 10 Pounds
Total
$0.596517
0.556117
“a
na
na
0.591656
P/BR
Ilnbarcoded Volume
Currently Barcoded Volume
iAdditional Vdume Banded
from Market Research
New Volume from Delivery Confination
New Volume over 10 Pounds
Total
$263.666.440
52.245.420
na
na
M
336.113.660
w
w
$0.598755
$0.596755
$0.558355
SO.558355
na
$1.109246
0.591099
0.556355
na
na
na
0.592096
Cost with continaency
TYAR
M
$260,691.896
51.69?,082
“a
na
na
332.590960
w
$172.583,776
$51.699,062
$101,WO,214
na
$14.446.264
339.729.338
DECLARATION
I, Mohammad A. Adra, declare under penalty of perjury that the foregoing
answers are true and correct to the best of my knowledge, inforrnati’on, and
belief.
Response of Witness Mayes to Presiding Officer’s Information
Request No. 5
13. Please explain why the ‘Additional Nontransportation Costs of New Volume over 108
Inches’(Line 5. USPS-T-37, Workpaper 1.1, page 2) should have a markup applied while
the other adjustments to costs, such as ‘Prebarcode Cost Savings’ (Line 17) do not have a
markup applied.
Response:
‘Additional
Nontranspodation
Costs of New Volume over 108 Inches’ appear not at line (5). but
at line (4) of workpaper USPS-T-37,
WP I.I., page 2. Neither the ‘Additional
Costs of New Volume over 108 Inches’ nor the ‘Prebarcode
as developed
markup.
Nontransportation
Cost Savings’ adjustments
at lines (4) and (17) of workpapar USPS-T-37, WP I.I., page 2 incorporate
lo costs,
a
In the event that the question meant to refer to line (5) I would note that there is
likewise no markup incorporated
into the formula at line (5). The formula associaled with line (4)
refers to line (27). the per-piece rate element, which does include a markup.
(27) is incorporated
However, when line
into the formula for line (4) it is divided by line (a), which is the markup
factor. Thus, the markup is removed from the per-piece rate element, and is not included in the
calculation
of the ‘Additional
Nontransoortation
Costs of New Volume over 108 Inches.’
DECLARATION
I, Virginia J. Mayes, declare under penalty of perjury that the foregoing answers
are true and correct, to the best of my knowledge, information, and belief.
Dated:
Response of United States Postal Service Witness Patelunas
to Presiding Officer’s Information Request
Number 5.
14.
USPS Library References H-2 and H-3 are the FY 1996 Cost and Reveiue
Analysis report and the Cost Segments and Components report. These reports are the
Fiscal Year 1996 equivalent of witness Alexandrovich’s Exhibits 5A through 5C.
Please provide the following workpapers and backup material that were used to
develop the library references, above.
a.
Cost Segment workpapers, equivalent to witness Alexandrovich’s “6”
workpapers. Also, please provide the electronic version of the workpapers as was
provided for the Base Year workpapers in USPS LR-H-201.
b.
The CRA Manual Input reports, the A report, the B report, and the C
report. These are equivalent to witness Alexandrovich’s workpapers A,-1 through A-4.
Please provide an electronic version of the Manual Input report similar to that found in
USPS LR-H-6.
14. Response:
a.
The hardcopy version of the ‘73”workpapers is provided in Part I of USPS
LR-H-306. The electronic version of the “B” workpapers is provided on the disk
found at the end of Part II of USPS LR-H-306.
b.
The hardcopy version of the following reports is provided in Part II of
USPS LR-H-306: the Manual Input report, the A report, the B report, the F report
and the C report. The electronic version of the Manual Input report is provided on
the disk found at the end of Part II of USPS LR-H-306.
DECLARATION
I, Richard Patelunas, declare under penalty of perjury that the foregoing answers to
interrogatories are true and correct to the best of my knowledge, information, and
belief.
Dated: I 20
-4-b
RESPONSE OF UNITED STATES POSTAL SERVICE
WITNESS DAVID E. TREWORGY TO PRESIDING OFFICER’S
INFORMATION REQUEST NO. 5, QUESTION 17
Page 1 of 1
POIR No. 5, Question 17. USPS-T-22, page 15, states that “worksheet C-l, include costs
such as scanning equipment depreciation, information systems hardware and software
development, and training.” Please identify which of the costs in Table [sic] Cl are depreciation
costs.
RESPONSE:
All costs listed under “Capital costs” in worksheet C-l are depreciation costs
DECLARATION
1, David E. Treworgy.
answers are true and correct,
declare under penalty of perjury that the foregoing
to the best of my knowledge,
information,
belief.
~~
i. T--y,
DAVID E. TREWORGY
Dated:
II
and
RESPONSE OF U.S. POSTAL SERVICE WITNESS FRONK TO
PRESIDING OFFICER’S INFORMATION REQUEST NO. 5
POIR ND.6 QUESTION 18. Response to ABA&EEI&NAPM/USPS-T32-6 states
that bulk metered mail “has the features commonly associated with, First-Class
metered mail.” Please describe these features.
RESPONSE: The phrase quoted above was included in my response to
ABABEEI&NAPMIUSPS-T32-6 because bulk metered mail costs are developed
by starting with the costs for First-Class single-piece metered mail as a whole,
and then subtracting certain costs avoided when processing bulk metered mail
(please see USPS LR-H-106, page II-lo). The costs that remain are assumed to
apply to all single-piece metered mail, both bulk and nonbulk.
The way the response was phrased, it may suggest that I hald in mind a
specific set of mail characteristics or features, for example, whether the address
is handwritten. While this was not the case, I will try to respond to the question
as posed.
Features of First-Class metered mail include an address thal! is typically
not handwritten. According to 1996 ODIS data, 11 .I percent of metered singlepiece letters have handwritten addresses while 37.5 percent of nonmetered
single-piece letters have handwritten addresses. In addition, single-piece
metered mail carries a meter imprint or strip and typically originates from a
business. Also, single-piece metered letters typically do not have a FIM; 2.5
percent have a FIM, according to 1996 ODIS data. In general, single-piece
metered mail is fairly homogeneous.
DECLARATION
I, David R. Fronk. hereby declare, under penalty of perjury, that the foregoing
Docket No. R97-1 interrogatory responses are tnre to the best of my knowledge,
information, and belief.
I I/20
Date
-47
RESPONSE OF U.S. POSTAL SERVICE WITNESS SMITH
TO THE PRESIDING OFFICER’S INFORMATION REQUEST NO. 5
19.
Please refer to LR H-106, page 11-10.
a.
Does the calculation of the bulk metered mail benchmark assume that
bulk metered mail and non-metered mail follow the same processing path? Please
explain.
b.
What is the purpose of, and rationale for, the ‘rescaler’?
Please explain what column 2, ‘Tallies for all Indicia,’ represents.
::
Are these tallies representative of First-Class as a whole? Please
explain.
What characteristics of bulk metered mail make it more expensive to
procesz’in mods pool ocr (678 cents) than non-metered mail (.484 cents)?
f.
What characteristics of bulk metered mail make it more expensive to
process in mods pool bcs (1.766 cents) than non-metered mail (1.708 cents)?
In general, is it logical that bulk metered mail, which is presumably ‘clean’
9.
mail, is only 1.16 cents cheaper to process than non-metered mail which presumably
includes handwritten addressed mail? Please discuss.
Response:
a.
No. The bulk metered benchmark is based on the cost for metered First-Class
single-piece letters. The processing costs and presumably the process’ing path differs
between metered and non-metered letters. The attached table compares the unit costs
for First-Class single-piece metered and non-metered letters, see columns 2 to 5. The
calculation of the bulk metered benchmark does assume that the processing path is the
same for bulk metered letters and metered letters, with the exception of the costs for
mail preparation and business reply as shown in LR-H-106, page II-IO, columns 5 and
6.
1
POIR NO. 5, Question 19
RESPONSE OF U.S. POSTAL SERVICE WITNESS SMITH
TQTHE PRESIDING OFFICER’S INFORMATION REQUEST NO. 5
b.
The “resealer,” shown in the cell H62 of the spreadsheet CSTSHAPE.XLS, on
the sheet METER is the ratio of the total letter volumes (TV) to metered letters volumes
(MV) for test year First-Class single-piece. This is the ratio shown as ‘TVIMV” in the
“Sources” shown on page II-10 in column 5. The “rescalef or “TVIMV” is
49,065,223/19,065,223.
(Note: the cell H62 is “hidden”. along with othler rows and
columns in an apparently unsuccessful attempt, to better present the calculation. The
description in the “Source” row for column 5 was intended to explain this calculation.)
The purpose or rationale for the “resealer” is to put the costs in terms of cost per
metered letter as opposed to cost per letter (in total or for all indicia). C’onsider the
following steps which are accomplished by the “rescalef and the other calculations in
column 5. Column 1 of page II-10 is the unit cost by cost pool for total f-irst-Class
single-piece letters costs. Multiplying the contents of wlumn 1 by 49,065,223 (which is
the total volume of First-Class single-piece letters) provides total costs instead of unit
costs. If we multiply this result times wlumn 4 (which is the percentage of total letter
costs that is associated with metered letters) we obtain the total costs for metered
letters. If we divide this by the metered letter volume of 19,063,454, we then obtain the
unit costs for metered letters.
cd.
Page II-10 shows column 2 to be “Tallies for Meter Mail,” while column 3 is
“Tallies for All Indicia.” Column 3 is the direct tally cost for First-Class single-piece
2
POIR NO. 5, Question 19
RESPONSE OF U.S. POSTAL SERVICE WITNESS SMITH
TO THE PRESIDING OFFICERS INFORMATION REQUEST NO. 5
letters of all indicia. Column 2 is the direct tally cost for metered First-C:lass singlepiece letters. The tallies in columns 2 and 3 are only representative of the metered
letters and all single-piece letters respectively. These wlumns are use’d to calculate
the percentage of costs associated with metered letters as done in column 4.
e.
My suspicion is that metered mail (and bulk metered mail) would likely be run on
MLOCRs more often than would non-metered letters, due to the higher percentage of
handwritten addressed pieces in non-metered letters, at least at non-RBCS sites. Nonmetered letters, as a consequence, receive more manual processing as; shown in the
attached table in columns 2 to 5, row labeled “manl.” This disparity will likely decline as
RBCS deployment is completed, though the disparity in remote enwdinlg center costs
“LD15” would then likely grow. Another explanation is that non-metered letters
contains a significant volume of FIM letters, which are generally prebarcoded. See the
response to OCA/USPS-103. Such mail would not receive MLOCR processing.
f.
The higher cost for metered letters for barcode sorter processing is consistent
with less automated processing for non-metered letters, as indicated in the response to
part e.
3
POIR NO. 5, Question 19
RESPONSE OF U.S. POSTAL SERVICE WITNESS SMlTH
TO THE PRESIDING OFFICERS INFORMATION REQUEST NO. 5
9.
The unit cost difference between all First-Class single-piece letN!rs (11.74 cents)
and bulk metered letters (10.58 cents) of 1.I6 cents and the unit cost difference
between First-Class single-piece non-metered letters (12.23 cents) and bulk metered
letters (10.58 cents) of 1.65 cents have likely been narrowed by the FIM letters that are
a significant part of non-metered letters. The low cost of FIM letters likely offsets the
cost of handwritten addressed letters.
4
POIR NO. 5, ‘Question 19
M9t*md
LdbR
(CaWPbce)
COST POOL
mods
w
l v@=
brm
M
nunl
mm,
MnP
-=
OS,,
PdOrity
*pLm 0th
IPbSPfiO
S”*R&
INTL
LD15
LD41
LW2
LM3
LD44
LD@W
LD46 cell
LD46-SSV
LO49
LD76
MAILGRAM
Registry
REWRAP
I Bulk pr
Ith”CMPP
1EEQMT
lMl6C
,OPb”lk
I ogrei
I Pwrm
~POVCHNG
16&6~h
ts.ck9Jll
1SCAN
1SUPWRT
NM0
PSM
SPS
zt:
PIa
Nwl Mod*
unn cod
M 96 Volume On mllliom)
Bourur:
1.734
0.004
0.04,
0.251
0.036
I.226
0.005
o.w3
0.559
0.039
0.012
O.W2
0.016
0.026
,.617
0.034
O.W2
0.390
0.145
O.OW
0.016
0.011
0.206
0.016
0.44
0.019
0.004
0.570
0.03,
0.116
0.099
0.469
0.573
0.402
0.046
0.024
0.049
0.115
O.OW
0.001
O.Wl
0.033
O.Wl
2.06s
11.742
1.766
O.W2
0.056
0.219
0.031
I.646
0.003
0.003
0.676
0.005
0.014
0.034
O.W7
0.014
1.722
0.057
0.002
0.426
0.163
O.Wl
0.020
0.011
0.224
0.011
0.000
0.003
0.015
0.004
0.392
0.026
0.069
0.063
0.431
0.465
0.394
0.042
0.01 I
OOSI
0.094
O.WO
O.ooO
0.001
0.001
0.002
0.002
1.611
10.960
19.083
No”-M.,.,.d
Ldt.R
(CentdPii)
1.706
0.005
0.041
0.272
0.040
1.946
0.036
O.W2
0.464
0.011
0.011
O.COl
0.025
0.033
1.676
0.026
0.002
0.368
0.133
O.wO
0.017
0.011
0.2W
0.023
O.COl
0.034
0.02,
0.004
0.663
0.044
0.146
O.lW
0.527
0.641
0.407
0.052
0.033
0.046
0.126
O.WO
O.CQO
0.001
O.WQ
O.W4
O.WO
2.130
12.227
30,002
Non-Mabred
uns cd
(CmdPiw.9)
DhbW”W
lm Each
C&Pool
0.056
-M=l2
0.014
-0.052
0.039
-0.300
Q.w3
0.001
0.194
0.006
O.WJ
O.W4
4.017
-0.019
0.155
0.030
0.030
0.057
0.030
O.Wl
o.w2
0.W
0.023
a.012
O.OW
O.Wl
4.006
0.0X
-0.202
4.017
-0.079
-0.026
0.095
0.176
0.013
0.010
0.022
o.w2
-0.035
O.OW
0.000
0.000
O.Wl
0.002
0.w2
0.316
4.67%
0.17%
-1.15%
4.21%
0.71%
24.06%
0.28%
-o.wu
-15.56%
0.49%
4.23%
-0.32%
, .Ao%
1.49%
12.53%
-2.44%
-0.01%
-4.61%
.2.44?4
0.07%
-0.19%
0.01%
-1.86%
0.97%
0.00%
0.12%
0.46%
0.03?&
23.36Y
1 .Ao%
6.34%
2.05%
7.60%
14.16%
1.01%
0.63%
1.75%
0.20%
2.76%
0.00%
0.00%
O.W%
4.12%
0.14%
0.13%
25.55%
-1.247
lW.W%
Me,wd
M.l6
(Conk/Piece)
1.766
0.002
0.056
0.219
1.646
0~003
O.Wf
0.676
O.W5
0.014
OX04
0.014
1.722
0.057
o.w2
0.426
O.l63
O.Wl
0.020
0.01 I
0.224
0.01 f
O.COl
0.003
0.015
0.034
0.026
0.069
0.083
0.431
0.465
0.364
0.042
0.011
0.051
0.094
O.WO
0.000
0.001
0.001
o.w2
o.w2
1.611
10.561
I, Marc A. Smith, hereby declare, under penalty of perjury, that the foregoing
Docket No. R97-1 interrogatory responses are true to the best of my knowledge,
information, and belief.
Response of United States Postal Service Witness Degen
to Presiding Officer’s Information Request #5
20. Refer to LR H-146, pages IV-8 through IV-19. Please explain why IOCS
tallies for operations unrelated to the MODS cost pool titles are included
in the pools. For example, why are 44,877 in OCR costs found in the
mods 11 bcs cost pool?
20. Response.
I believe that the question refers to pages VI-8 through VI-19 of LR-H-146,
the crosswalk of CRA space categories to MODS-based cost pools.
The simple explanation is that the IOCS-based CRA space categories are
based on the sampled employee’s observed activity, while the MODS-based
cost pool assignment is based on the employee’s clocked-in MCDS
operation number. The data on pages VI-8 to VI-1 9 show that in cases
where there are IOCS space categories that correspond to the cost pool
title, the space category and MODS cost pool are consistent the! vast
majority of the time. However, the sampled employee’s activity does not
always correspond to the clocked-in MODS operation.
Please sae pages 6-7
of my direct testimony, USPS-T-l 2, and Tr. 12/6154 and Tr. 1216273 for
additional discussion.
Apparent discrepancies between the space category
and MODS cost pool titles can be the result of several phenomena:
1. There is not a one-to-one correspondence between IOCS space
categories and the MODS cost pools. In particular, the ‘distribution”
space categories (OCR, sorting to letter case, etc.) are defined such that
Page1 of 5
Response of United States Postal Service Witness Deglen
to Presiding Officer’s Information Request #5
they encompass both distribution and allied labor. Employee:s assigned
to allied and support operations will often be observed working in the
vicinity of the direct operations that they support. .For instance, if the
data collector observes an employee performing an allied labor activio/,
the type of allied labor being performed is recorded in question 18d, part
2, and the type of distribution operation is recorded in question 19. The
employee may be legitimately clocked into an allied labor (LDC 17)
MODS operation, but the logic of program PIGGYF96 (LR-H-146) assigns
the tallies to the space category using only the question 19 response,
i.e., to the type of distribution operation being supported.
This may
create the erroneous impression that the employee working an allied
labor MODS operation is performing distribution work.
2. The employee may be temporarily engaged in an activin/ that is different
from the clocked-in operation.
For such “incidental” activitie:s, it may be
inefficient for the employee to reclock.
In this case, I might expect
employees to be observed working operations which are physically
adjacent to their assigned operation, or which are under the same
supervisor.
So, for instance, an employee assigned to a BCS operation
might temporarily monitor an adjacent OCR as needed or directed.
OCR
and BCS are the only operations where this appears to be happening on
a widespread basis; the effect on the cost distributions is mitigated by
Paoe2 of 5
Response of United States Postal Service Witness Degen
to Presiding Officer’s Information Request #5
the similarity of the operations-i.e.,
both are letter automation
operations.
3. The employee may have switched operations for a more extended period
of time but not reclocked.
4. A few MODS operations simply do not have corresponding IDCS-based
space categories.
For instance, there is not an ‘accountables
cage”
space category to correspond to the Registry cost pool.
5. The clocked-in MODS operation number may be inaccurately recorded on
the tally. Since entering the question 18 and 19 data involves hundreds
of thousands of keystrokes, some errors are inevitable.
Suppose that the
data collector keys the MODS operation number into the CODES IOCS
software incorrectly 0.1% of the time. One would then expect there to
be about 167 errors in the MODS mail processing tallies (0.1% of
167,036). Note that there are only 1,287 cells in the MODS portion of
the crosswalk matrix (39 MODS cost pools by 33 non-BMC space
categories).
Thus, the error rate would only have to be 0.77%
(1,287/l 67,036) for there to be one tally with an erroneous MODS
operation number for every cell in the matrix. Some errors in entering
the MODS operation number will be innocuous.
If the data c:ollector
mistakenly enters operation 211 instead of 210, the tally will1still be
assigned to the ‘1 Platform” cost pool. However, transposing digits of
Page 3 of 5
Response of United States Postal Service Witness Degen
to Presiding Officer’s Information Request #5
the MODS operation number is likely to result in the assignm’ent of a
valid MODS number in a different cost pool, since there are hundreds of
valid three-digit codes. While attention has focused on the entry of the
MODS operation number, it also may be the case that the employee’s
observed activity was recorded incorrectly in questions 18 and 19. I
would expect the actual error rates to be small. The effect of these
types of errors, combined with a low error rate, would be to assign small
amounts of cost to many space category/cost pool combinations “at
random.”
6. The RBCS keying operation is not sampled in IOCS. RBCS kelying costs
account for approximately 98% of LDC 15. Thus, the distribution of
LDC 15 costs to IOCS space category should be disregarded.
Examining the data at pages VI-8 to VI-19 of LR-H-146, I conclude that the
space categories and cost pool titles are generally consistent in the letter
and flat distribution operations where the closest correspondences would be
expected to be found.
(6521-6523,
Excluding the overhead-related space categories
plus ‘00 Not Used” and ‘999999”).
I observe that the ‘worst
case” MODS distribution operation, OCR, has 76.7% of its costs; assigned
to the OCR space category, and 95.5% of its costs are assigned to letter
automation (OCR plus 8CS) space categories.
Page 4 of 5
The other letter and flat
Response of United States Postal Service Witness Degen
to Presiding Officer’s Information Request #5
distribution cost pools are significantly more homogeneous, with 87.4%
(BCS) to 95.8% (LSM) of the costs assigned to the corresponding space
category.
For the purpose of cost distribution, where homogeneous cost
pools are desirable, the MODS-based cost pools are greatly superior to
previous cost pools based on the IOCS CAG stratum and basic function,
used in the LIOCATT process. The MODS-based cost pools also avoid tally
cost weighting problems that would arise with a purely IOCS-ba:sed
approach to operational cost pools (please see my responses to DMAIUSPST12-13 and DMANSPS-T12-18
for further discussion).
Pa005 of 5
I, Carl G. Degen, declare under penalty of perjury that the foregoing
answers are true and correct to the best of my knowledge, information, and
belief.
:.
_.
CERTIFICATE OF SERVICE
I hereby certii that I have this day served the foregoing document upon all
participants of record in this proceeding in accordance with section I;! of the Rules of
Practice.
475 L’Enfant Plaza West, S.W.
Washington, D.C. 20260-I 137
November 20, IQ97