Such cost attribution is  critical because USPS personnel costs represent more than three-quarters  of USPS costs. USPS  generally agreed with the Study’s findings. Over the past decade, Congress has debated comprehensive proposals to  reform the nation’s postal laws that would, among other things, transform  the ratemaking structure and mechanisms for oversight of ratemaking data  quality. USPS Took Action to Improve the Quality of Ratemaking Data

USPS took several key actions that it reported were responsive to the  Study’s findings. USPS reported that these actions increased the accuracy  and precision of ratemaking data. Fourth, USPS revised and expanded its documentation of TRACS, which  the Study had criticized as inadequate. Therefore,  USPS designed CCSTS as a single study to collect more complete and  consistent data on all city carrier street activities. 22 and S. 662, 109th Cong., 1st Sess.) would create new oversight  mechanisms and enhanced regulatory authority over the quality of  ratemaking data. The postal regulator would be required to prescribe what  ratemaking data USPS must annually report and review that data in order  to determine whether USPS had complied with the requirements of the  new ratemaking structure. The postal regulator would be provided with  the authority to initiate proceedings to improve the quality of ratemaking  data; the authority to subpoena USPS documents and officials; the  authority to order USPS to take appropriate actions to comply with laws  and its regulations; and the authority to impose sanctions for  noncompliance, including fines for deliberate noncompliance. However, if postal reform legislation is  enacted, the outcome would likely depend on how the postal regulator  would use its discretion to define and implement the new ratemaking  structure. Key implementation questions would remain, including what  regulatory criteria and requirements would apply to ratemaking data. Under the existing statute the Commission does not have the  authority to compel USPS to collect specific data or perform needed studies.”

		Possible Implications of Proposed Postal Reform Legislation for the Quality of Ratemaking Data

The proposed legislative changes previously described would address  persistent problems under the existing statutory structure, which, as we  have reported, has enabled long-standing deficiencies in ratemaking data  quality and unresolved methodological issues to persist. Under the  current structure, regulatory oversight is conducted during rate cases that  only USPS can initiate, which has limited the frequency, scope, and depth  of oversight of USPS ratemaking data and its data collection systems that  generate these data. The legislation would eliminate key disincentives for  ratemaking data quality, including the litigious ratemaking process (which  provides incentives for USPS and others to gain an advantage through the  collection and analysis of ratemaking data), the break-even requirement  that creates incentives to shift costs from one subclass of mail to another,  and the lack of adequate oversight mechanisms to address data quality  issues. The legislation also would enhance regulatory authority so that the  necessary transparency, oversight, and accountability can take place  regarding ratemaking data quality. Thus, the proposed legislative changes  would likely lead to improvements in the quality of ratemaking data over  time and at some cost. Indeed, some foreign countries that are implementing  postal reform are grappling with the need to improve ratemaking data  quality. Third, regarding USPS’s views about achieving “breakthrough  improvements” in ratemaking data quality, in our view, the proposed  legislative changes would likely lead to improvements in the quality of  ratemaking data over time and at some cost. Postal Service (USPS) actions  that were responsive to the 1999 Data Quality Study (the Study) to  improve the quality of ratemaking data and (2) discuss possible  implications of postal reform legislation for ratemaking data quality. The three systems include the In-Office  Cost System (IOCS), which produces data on the time that postal  employees spend handling each subclass of mail in postal facilities; the  Revenue, Pieces, and Weight (RPW) system, which produces data on the  revenue, volume, and weight of each subclass of mail; and the  Transportation Cost System (TRACS), which produces data on long- distance transportation of mail subclasses using trucks, airplanes, and  freight trains. We did not assess the extent to which  USPS’s actions affected the quality of these ratemaking data. Worksharing discounts: The Commission shall establish rules for worksharing discounts  as part of its regulations for regulating market-dominant products that shall ensure that  discounts do not exceed the cost that USPS avoids as a result of worksharing activity,  unless  the discount is (1) associated with a new postal service, a change to an existing postal  service, or a new workshare initiative related to an existing postal service and (2)  necessary to induce mailer behavior that furthers the economically efficient operation of  the Postal Service and the portion of the discount in excess of the cost that the Postal  Service avoids as a result of the workshare activity will be phased out over a limited  period of time;    a reduction in the discount would (1) lead to a loss of volume in the affected category or  subclass of mail and reduce the aggregate contribution to the institutional costs of the  Postal Service from the category or subclass subject to the discount below what it  otherwise would have been if the discount had not been reduced to costs avoided, (2)  result in a further increase in the rates paid by mailers not able to take advantage of the  discount, or (3) impede the efficient operation of the Postal Service;  the amount of the discount above costs avoided (1) is necessary to mitigate rate shock  and (2) will be phased out over time; or  the discount is provided in connection with subclasses of mail consisting exclusively of  mail matter of educational, cultural, scientific, or informational value.
Why GAO Did This Study

In 1999, the congressionally requested Data Quality Study (the Study) found opportunities to improve ratemaking data quality. The U.S. Postal Service (USPS) agreed to make improvements, but concerns remained that it is still unclear, from an overall perspective, what actions USPS has taken to improve data quality. Ratemaking data quality has also factored into congressional deliberations to reform postal laws. Thus, questions remain about USPS's actions to improve ratemaking data quality and how proposed legislation will address long-standing issues in this area. GAO was asked to (1) describe key USPS actions that were responsive to the Study to improve the quality of ratemaking data and (2) discuss possible implications of postal reform legislation for ratemaking data quality. GAO did not assess the extent to which USPS's actions affected data quality. In its comments, USPS disagreed with GAO's finding on the need to reform the ratemaking structure. USPS also differed on GAO's finding that the legislation would likely lead to improving ratemaking data quality. It said "breakthrough improvements" would be unlikely without a significant increase in costs. GAO believes reform of the ratemaking structure is needed, but the outcome would depend on its implementation. Further, the legislative changes would likely lead to data quality improvements over time and at some cost.

What GAO Found

USPS took several key actions that it reported were responsive to the Study's findings. USPS reported that these actions increased the accuracy and precision of ratemaking data. First, USPS changed the In-Office Cost System to improve the quality of data on mail handled by postal employees and the activities they are performing. Personnel costs represent more than three-quarters of USPS costs; therefore, information on postal employees' handling of mail is necessary for ratemaking purposes. USPS made similar changes to the Revenue, Pieces, and Weight System, which produces data on the revenue, volume, and weight of each type of mail. Second, replacing ratemaking data that had been collected in the 1980s, USPS conducted the City Carrier Street Time Study to gather more complete and consistent data on letter carrier activities. Third, to increase the precision of ratemaking data, USPS collected a larger quantity of data. Fourth, USPS revised documentation of the Transportation Cost System, which the Study had criticized as inadequate. Proposed postal reform legislation (H.R. 22 and S. 662) would create new oversight mechanisms and enhanced regulatory authority over the quality of ratemaking data. The legislation would transform the Postal Rate Commission into a new postal regulator that would prescribe what ratemaking data USPS must report annually, review these data, and determine whether USPS had complied with ratemaking requirements. The regulator could initiate proceedings to improve the quality of ratemaking data. To carry out its expanded duties, the regulator would have enhanced authority, including the authority to subpoena; the authority to order USPS to take actions to comply with laws and regulations; and the authority to impose sanctions for noncompliance. The legislation would address persistent problems under the existing ratemaking structure, which has enabled long-standing deficiencies in ratemaking data quality and unresolved methodological issues to persist. The legislation would eliminate key disincentives for ratemaking data quality, including the litigious ratemaking process, the break-even requirement that creates incentives to shift costs from one type of mail to another, and the lack of adequate oversight mechanisms to address data quality issues. Under the current structure, regulatory oversight is generally conducted during rate cases that only USPS can initiate. The legislation would provide mechanisms for regular oversight of ratemaking data and enhance the regulator's authority so that the necessary transparency, oversight, and accountability could take place. Thus, the legislation would likely lead to improvements in the quality of ratemaking data over time and at some cost. However, if the legislation is enacted, the outcome would likely depend on how the regulator would use its discretion to define and implement the new ratemaking structure. Key implementation questions would remain, including what regulatory criteria and requirements would apply to ratemaking data.