USPS-RT-10
RECCIVE:D
bug 14
5 23 Pi’! ‘00
BEFORE THE
POSTAL RATE COMMISSION
POSTAL RATE AND FEE CHANGES,
2000
Docket No. R2000-1
REBUTTAL
TESTIMONY
OF
JAMES D. YOUNG
ON BEHALF OF THE
UNITED STATES
POSTAL
SERVICE
USPS-RT-10
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Table of Contents
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Sketch . . .. . .. . .. . .. . . .. . .. . . .. . . .. . . .. . .. . .. . . .. . . . . .. . . .. . .. . . .. . .. . . .. . . .. . . .. . . .. . .. . .. . .. .i
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Autobiographical
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Purpose and Scope . .. . .. . .. . .. .. . .. . . .. . . .. . .. . .. . . . .. . . .. . .. . .. . . .. . . . .. . . . .. . .. . .. . . .. . . .. . . .. . . .. . .. . . .. . .. . . 1
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1. The Postal Service’s highway contractors provide a fundamentally different
..
service than that available in the private sector. . . . . . . .. . . . . . . . . .
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2. Mr. Nelson’s characterizations
regarding freight railroads and the Postal
Service are at odds with my experience and expectations. .. . .. . . . .. . .. . . ..._.............. 5
2
Autobiographical
My name is James D. Young.
Main Post Office as a distribution
Sketch
My postal career began in the Chicago
clerk in November
1970. During the 30+ years
since 1970, I have held various staff and management
Processing,
Examples
Transportation
and Purchasing
Mail
and Materials.
include the following:
Position
Facility
Title
l
Transportation
Dock Clerk
Washington
BMC
l
Transportation
Analyst
Washington
BMC
l
Transportation
Specialist
Washington
TMSC
l
Senior, Transportation
Washington
TMSC
l
Transportation
l
l
Specialist
Specialist
Postal Headquarters
Program Manager, Transportation
Planning
Postal Headquarters
Manager,
Postal Headquarters
Transportation
Policies
Manager, National Mail Transportation
Purchasing
l
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Operations,
positions throughout
In my current position as Manager,
my group has responsibility
National Mail Transportation
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Purchasing,
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management
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annually.
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delivery), boats, even mules and wheelbarrows
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situations.
for approximately
Purchasing and Materials, Postal
Headquarters
for the purchasing
and contract
$4 billion worth of transportation
The modes of transportation
services
include air, rail, highway (transport and
that are used in specialized
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2
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Purpose
The purpose of my testimony
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transportation
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address the following:
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1)
purchasing
and Scope
is to rebut certain representations
made by witness Nelson (MPA-T-3).
Nelson’s comparisons
regarding
Specifically,
I will
of postal contract highway transportation
to
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private sector highway are overly simplistic and do not comport with
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my experience.
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2)
Nelson’s expectations
mail transportation
regarding the use of freight rail service for
are’overly
optimistic.
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-~
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2
3
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1. The Postal Service’s highway contractors
provide a fundamentally
different service than that available in the private sector.
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“unnecessary”
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his understanding
Mr. Nelson (Tr. 28/l 3416 to 13417) finds that the Postal Service pays an
premium for highway transportation.
is based on
that
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12
As James Orlando (Docket No. R84-I,
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USPS-RT-3)
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significant
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Postal Service requires its highway transportation
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consistent,
“For the trucking industry, however, the security and processing
requirements of the Postal Service are not unlike those of many private
sector shippers of high-value, expedited and just-in-time shipments that
are handled successfully every day.” (Tr. 28/l 3416-I 3417.)
USPS-RTS)
and I (Docket No. R97-1,
pointed out very clearly, such comparisons
differences
between our operations
Precise scheduling
18
efficient use of postal employees,
19
operating
20
and night, year-round.
21
times. As I discussed
22
schedules
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motor freight industry.
costs.
fail to take into account
and private sector carriers.
reliable and secure service everywhere,
17
24
This conclusion
of postal transportation
contractors
The
to provide
every day.
is required in order to make
who account for about 75 percent of postal
Our highway contract routes operate at all hours of the day
Our schedules
include time-definite
dispatch and arrival
in Docket No. R97-1 and repeat in detail below, these
are considerably
Another characteristic
more demanding
than those generally
of our contract transportation
used in the
system that differs
25
from the private sector is our commitment
to keep mail secure. Unlike many
26
products carried by motor freight providers, mail is not replaceable.
And we
2
1
must have confidence
2
Postal Service requires security clearances
3
drivers.
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that it is kept secure at all times. For this reason, the
for its contractors
The Postal Service makes extraordinary
demands
and contract
on our highway
5
contractors.
In return, the Postal Service includes certain provisions
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highway contracts to ensure the viability of the carriers we use. Our contracts
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provide competitive
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secure income will be forthcoming
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assurances
compensation
with assurances
to the contractor
for the life of the contract.
is our standard indemnification
in the event the contract is canceled.
We also provide some protection
11
symbiotic relationship
12
assures that we ‘maintain the most economical,
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transportation
14
manner suggested
15
the stability and reliability of postal contract highway transportation.
against fuel and wage inflation.
The resulting
between the Postal Service and its highway carriers
reliable and secure highway
available. In my opinion, eliminating
contract renewals
by witness Nelson would be foolhardy
Mr. Nelson’s comparison
providers working in a just-in-time
inventory environment
18
equally flawed.
19
(Docket No. R97-I, Tr. 35/18922-18924),
20
to take into account the more stringent scheduling
21
Service places on its contractors:
in the
and would endanger
of postal highway transportation
17
22
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that a
Included in these
10
16
in its
to private sector
(Tr. 28/13417)
is
As I discussed with counsel for McGraw Hill in the last rate case
this is a simplistic comparison
requirements
that fails
the Postal
“Now, some people think about just in time,...a concept that’s
been talked about a lot in the last few years and been implemented in
the private sector, but even in a just-in-time environment, based on
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.c
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3
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15
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my knowledge of it anyway, we’re not talking about an environment
where, if a truck is late 15 minutes, there’s an irregularity issued to the
truck driver, which is what’s true in the Postal Service’s transportation
network.
Just in time typically refers to the fact that...“l’ll get it to you
on Friday afternoon not later than five o’clock and you have that
window of time, but with our transportation network, every truck that’s
moving moves on a time-definite schedule with the minor exception of
a plant load movement that might have a bit more flexibility in it
because the mailer may want that kind of flexibility.
But all our normal transportation, scheduled transportation,
moves on a time-definite schedule down to the minute, and so, I see
that as being very, very different from what you will see in the
transportation of freight in the private sector.”
What I said then still holds today.
17
Mr. Nelson claims that Postal Service purchased
18
costs are growing at rates much faster than the private sector.
(Tr. 28/13407).
19
disagree.
costs are
20
relatively low, particularly
in light of the demands we place on our contractors.
21
Our overall expenditures
on highway transportation
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rate of inflation, because we are buying more transportation
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needs of our customers,
including the Periodicals
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the inherent differences
in what is being purchased,
25
private sector highway operators
26
sector less-than-truckload
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postal contracts. As a rule, they are not.
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highway transportation
On a cost per mile basis, our highway transportation
invalid.
and just-in-time
I am satisfied that on a cost-per-mile
are increasing
mailers.
I
faster than the
service to meet the
Furthermore,
given
I find broad comparisons
to
If Mr. Nelson were correct, private
carriers would be actively seeking
basis the Postal Service is getting
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good value for the dollar. This does not mean however that the Postal Service is
30
not seeking to reduce highway contract costs in other ways.
My office is leading
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c
1
a systematic
2
understanding
that this effort is already reflected in the case as $100 million in
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transportation
cost reductions
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2. Mr. Nelson’s characterizations
regarding freight railroads
Service are at odds with my experience
and expectations.
7
review of all high cost-per-mile
highway contracts.
included in the Breakthrough
Mr. Nelson’s descriptions
It is my
Productivity
effort.
and the Postal
of the market for freight rail transportation
are
8
unrealistic and simply do not comport with my understanding.
9
freight rail rates for the traffic formerly moved by Conrail will fall by 10 percent.
10
(Tr. 28/13421.)
11
wishful thinking. Ongoing
12
Conrail-successor
13
rail rates.
14
gone up.
15
He asserts that
While I certainly wish this were true, I believe that this is, at best,
negotiations
between the Postal Service and the
railroads give no indication
In fact, rates generally,
of an impending decline in freight
and as a result of fuel price increases,
I also disagree with Mr. Nelson (Tr. 28/13421)
have
that other freight railroads
16
are likely to give the Postal Service volume discounts for mail transportation.
17
believe the Postal Service would have to shift considerable
18
railroads as a prerequisite
19
service received from many freight railroads, further dependence
20
carriers would not be satisfactory
21
expected in the foreseeable
22
Mr. Nelson disagrees
for such volume discounts.
to our customers,
I
volumes to the freight
Given the relatively poor
on rail freight
and accordingly
is not
future.
with the Postal Service’s expectations,
expressed
in
.23
response to MPALJSPS-31
b, regarding freight rail transportation:
5
“The cost of transportation typically used to transport products
moving on rail is likely to increase...The ontime performance provided by
rail carriers has declined and this has necessitated a transfer of volumes
from rail to higher cost HCR contracts.” (Tr. 21/8934)
Mr. Nelson expects these problems to “dissipate
7
need to convert freight rail traffic to highway.
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experience
9
disappointing.
by the Test Year, removing any
(Tr. 28/l 3422.)
The recent
of the Postal Service with the freight railroads has been quite
Service is slow and inconsistent
in many areas of the country.
10
Whether this is caused by mergers and acquisitions,
11
(such as equipment
12
disagree with the characterization
13
MPAAJSPS-31 b. I am not optimistic that the Postal Service can increase its
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dependence
15
the quality of service.
16
that would result.
shortages
or trackage
problems),
or other systemic problems
I see no reason to
made the Postal Service in response to
on the freight railroads unless dramatic steps are taken to improve
Our customers
would simply not tolerate the poor service
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