[Federal Register Volume 87, Number 151 (Monday, August 8, 2022)]
[Proposed Rules]
[Pages 48127-48128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-16879]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2022-11; Order No. 6242]


Periodic Reporting

AGENCY: Postal Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is acknowledging a recent filing requesting the 
Commission initiate a rulemaking proceeding to consider changes to 
analytical principles relating to periodic reports (Proposal Five). 
This document informs the public of the filing, invites public comment, 
and takes other administrative steps.

DATES: Comments are due: September 20, 2022.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov. Those who cannot submit comments 
electronically should contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section by telephone for advice on filing 
alternatives.

FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 
202-789-6820.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Proposal Five
III. Notice and Comment
IV. Ordering Paragraphs

I. Introduction

    On July 29, 2022, the Postal Service filed a petition pursuant to 
39 CFR 3050.11 requesting that the Commission initiate a rulemaking 
proceeding to consider changes to analytical principles relating to 
periodic reports.\1\ The Petition identifies the proposed analytical 
changes filed in this docket as Proposal Five.
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    \1\ Petition of the United States Postal Service for the 
Initiation of a Proceeding to Consider Proposed Changes in 
Analytical Principles (Proposal Five), July 29, 2022 (Petition). The 
Petition was accompanied by a report supporting its proposal. See 
Report on Contract Delivery Service Cost Attribution Accrued Cost 
and Distribution Key, July 29, 2022. The Postal Service also filed a 
notice of filing of public and non-public materials relating to 
Proposal Five. Notice of Filing of USPS-RM2022-11-1 and USPS-RM2022-
11-NP1 and Application for Nonpublic Treatment, July 29, 2022.
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II. Proposal Five

    Background. Contract Delivery Services (CDS) suppliers are 
independent contractors who provide delivery on specific routes that 
are not serviced by city or rural carriers. Petition, Proposal Five at 
1. The Postal Service initiated research into the estimation of accrued 
costs and product costs of CDS in response to USPS Office of Inspector 
General (OIG) Report No. 20-313-R21. Id. That report recommended that 
the Postal Service: (1) reevaluate the cost proportion percentages used 
to estimate accrued CDS costs and assess the possibility of using 
actual CDS payment data to calculate product costs; and (2) conduct a 
study to whether the mail volumes delivered on CDS and rural routes are 
similar and consider an update to the distribution keys used to 
attribute CDS costs. Id. at 1-2.
    CDS costs are not separately identified in the Postal Service's 
general ledger (GL). Id. at 2. Instead, CDS accrued costs are included 
as a portion of different GL expense accounts contained in cost segment 
14 (purchased transportation), components 143 (Highway) and 145 
(Domestic Water) and reported in GL Account No. 53605--Intra-CSD 
Regular (Intra-District)--and Account No. 53601--Intra-processing & 
distribution center (P&DC) Regular. Id. The Postal Service states that 
costs in these two accounts ``comprise the overwhelming majority of all 
CDS costs and have a distinct treatment.'' Id.
    Currently, the Postal Service calculates the CDS volume variability 
by developing a cost-to-capacity variability and a capacity-to-volume 
variability and then multiplying these variabilities together to 
produce an overall volume variability for the contract costs. Id. at 2-
3. The calculation of volume variable Intra-sectional center facility 
(SCF) costs relies upon two econometric analyses, approved in Docket 
Nos. RM2016-12 and RM2021-1, which updated the capacity-to-volume and 
cost-to-capacity variabilities, respectively. Id. at 3.
    The Intra-P&DC and Intra-District account categories are made up of 
four transportation technologies and route types, including box, city, 
van, and tractor trailer. Id. Within each type, the costs are summed to 
form the account category's cost proportions. Id. The Postal Service 
individually estimates the cost-to-capacity volume variabilities for 
the Intra-District and the Intra-P&DC accounts as the cost-weighted 
averages of the variabilities of the four transportation/route types. 
Id.
    The CDS costs in Intra-SCF accounts are distributed based on the 
Intra-SCF distribution factors estimated by the Transportation Cost 
System (TRACS) on a quarterly basis as a proxy because CDS routes are 
not sampled in TRACS. Id.
    Proposal. The Postal Service proposes two revisions to analytical 
principles related to CDS costs based on its investigation into the 
OIG's recommendations.
    First, the Postal Service proposes to update the Intra-P&DC and 
Intra-District cost proportions annually using Transportation Contract 
Support System (TCSS) data. More specifically, to update the cost 
proportions used for the GL accounts that it states comprise the 
majority of CDS costs, GL Account Nos. 53605 and 53601, using TCSS 
data. Id. at 4.
    The Postal Service states that it assessed the feasibility of using 
CDS

[[Page 48128]]

payment data from the Accounts Payable Excellence System (APEX) to form 
the cost proportions for the Intra-P&DC and Intra-District account 
categories, as the OIG recommended, but determined that APEX data does 
not contain the information necessary on vehicle capacity necessary to 
apportion payments between the four transportation/route types. Id.
    Second, the Postal Service proposes using the rural cost 
distribution key (CS10, component 260) to attribute CDS costs to 
products. Id. at 6. The Postal Service states ``that both operational 
protocols and field observations support the hypothesis that similar 
mail volumes are delivered on CDS routes and rural routes.'' Id. 
Furthermore, the Postal Service contends that ``support for the 
similarities between CDS contractors and rural carriers is found in the 
process that exists for the conversion of CDS routes to rural routes in 
comparable offices.'' Id. at 7.
    Impact. The Postal Service states that applying an initial update 
to the Intra-P&DC and Intra-District cost proportions, the first 
proposed revision, would result in an increase in volume variable 
highway costs by 0.03 percent. Id. at 9. The Postal Service reports 
that applying the rural cost distribution key to CDS costs, the second 
proposed change, would result in an increase ``by $33.7 M, or 0.9 
percent'' in volume variable highway costs. Id.
    The Postal Service states that implementing both of the proposed 
revisions would have resulted ``in a shift of $42.6 M, or 1.2 percent, 
in highway costs from institutional to volume variable costs'' using FY 
2021 data. Id. at 11. The Postal Service reports that Competitive 
highway costs would decrease by 0.02 percent under this proposal while 
Market Dominant costs would increase by 2.5 percent. Id. The Postal 
Service acknowledges that highway costs for High Density and Saturation 
Flats/Parcels increase ``significantly'' on a percentage basis but 
states that the proposed changes result in less than a $0.01 increase 
on a unit cost basis. Id. The Postal Service states that the proposed 
methodology would result in approximately 0.2 percent of the volume 
variable costs for highway transportation being attributed to Total 
Domestic Market Dominant Services. Id.

III. Notice and Comment

    The Commission establishes Docket No. RM2022-11 for consideration 
of matters raised by the Petition. More information on the Petition may 
be accessed via the Commission's website at http://www.prc.gov. 
Interested persons may submit comments on the Petition and Proposal 
Five no later than September 20, 2022. Pursuant to 39 U.S.C. 505, 
Almaroof Agoro is designated as an officer of the Commission (Public 
Representative) to represent the interests of the general public in 
this proceeding.

IV. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. RM2022-11 for 
consideration of the matters raised by the Petition of the United 
States Postal Service for the Initiation of a Proceeding to Consider 
Proposed Changes in Analytical Principles (Proposal Five), filed July 
29, 2022.
    2. Comments by interested persons in this proceeding are due no 
later than September 20, 2022.
    3. Pursuant to 39 U.S.C. 505, the Commission appoints Almaroof 
Agoro to serve as an officer of the Commission (Public Representative) 
to represent the interests of the general public in this docket.
    4. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Jennie L. Jbara,
Alternate Certifying Officer.
[FR Doc. 2022-16879 Filed 8-5-22; 8:45 am]
BILLING CODE 7710-FW-P