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How the USPS came to overestimate its pandemic fallout

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The U.S. Postal Service used its professional judgment to predict massive financial losses from the pandemic which, in reality, never unfolded as dramatically as the courier agency expected, a watchdog discovered .

The processes used by USPS to perform its calculations were inherently ad hoc and based on historically unprecedented assumptions, the agency’s inspector general found in a report Wednesday. This has led the post office to forecast sharp drops in mail and parcel volume and corresponding calamitous drops in revenue. To date, however, USPS has earned more revenue than the same period before the start of the COVID-19 pandemic.

The better-than-expected results were driven in large part by the boom in parcel business, as e-commerce sales increased as Americans stayed at home, although regular mail volume did not rise. decreased as much as management expected. Mail volume was down 27% in April 2020 compared to April 2019, but the declines were less severe in the months that followed. At the start of the pandemic, the Postal Service predicted its revenue for fiscal 2020 could drop to $ 67 billion. In fact, it brought in over $ 73 billion.

While no organization can accurately estimate the total impact of the pandemic, these trends suggest that mail and parcel volume and revenue could not be permanently affected as the Postal Service has it. projected in its scenarios, said the inspector general. The watchdog added that because the pandemic is ongoing, it is still too early to draw any firm conclusions.

The IG criticized USPS for not documenting its processes to formulate its assumptions. The Postal Directorate spoke to its biggest customers who said they expected to use mail less due to the pandemic, for example, which affected the agency’s projections. He never recorded his takeaways from those conversations or indicated how they affected his forecast. Management was unable to provide a documented methodology that included specific steps and assumptions it applied to determine volume projections, the IG said.

In April, the Postal Service asked Congress for $ 75 billion in aid, citing the effects of the pandemic. Postal officials said at the time that the agency was facing liquidity issues that would soon impact its ability to operate, although they later revised those estimates. Some members of Congress have cited the agencies’ turnaround as suggesting that its handling was overly dramatic with its demands. To date, lawmakers have provided $ 10 billion, although Postmaster General Louis DeJoy has indicated he will look to invest more in the near future.

Postal management stressed that they don’t expect their luck on parcel volume to continue as Americans begin to feel more secure when they return to stores. Growing parcel volume also comes with its own set of issues as it is more labor-intensive and therefore more expensive compared to regular mail. Despite the positive news, USPS remains in dire financial straits. And while its finances have not suffered as much as expected, postal operations have suffered greatly due to employee downtime and other factors have created unprecedented mail delays.

The auditors said that in the future, USPS should create a process outlining the specific steps it will take to formulate assumptions in the event of a catastrophic or unforeseen event. Management said it had already established a process for using econometric models and qualitative information during such events, but agreed to make a more formal checklist for its forecasts. He also endorsed the IG’s recommendation to issue an after-action report after the pandemic concludes to assess its own actions.



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