Size Does Matter

Agencies might be surprised to discover the true cost of the Postal Service's rate change.

When the U.S. Postal Service implemented its latest rate change on May 14, attention focused, not surprisingly, on the 2-cent increase in the cost of a first-class stamp. The higher price could somewhat lighten the wallets of the average American, but the cost of the Postal Service's price restructuring plan will be felt most acutely by mass mailers, including federal agencies, who might find their postal bills skyrocketing by millions of dollars.

In the past, letters, flats (large envelopes) and parcels (packages) weighing more than 1 ounce had essentially the same price at every weight increment, despite the fact that the costs to process each piece vary substantially. In an attempt to better align its rates with actual costs, the Postal Service now puts a greater emphasis on the size and shape of mailings.

A 1-ounce letter, for example, is a relative bargain at 41 cents compared with a 1-ounce flat (80 cents) or parcel ($1.13), both of which have been marked up from their previous price of 52 cents. The price to deliver periodicals, meanwhile, will in-crease, in some cases significantly, on July 15. And while these costs might seem insignificant in the context of multibillion-dollar federal budgets, the pennies can add up quickly for agencies such as the Treasury and Veterans Affairs departments, which send millions of communications every year.

"A lot of mailers have not thought a lot about size or shape," says Jon Love, president of Pitney Bowes Government Solutions of Landover, Md., which supplies the lion's share of mailing systems to federal agencies. "In the past, they usually only think about weight. But, for government agencies that construct mail pieces to a million constituents, they could be in for a big shock at the end of the year."

A typical business or agency with about 1,000 employees spends about $1 million on mail delivery, Love says. The new rates would roughly double that cost, although larger agencies such as the Defense or Homeland Security departments could bear an even larger burden.

Experts point out that federal managers can take a number of fairly easy steps to mitigate the increases, however, possibly even saving money and improving services in the process. One of the easiest ways to save is to fold documents (between one and 22 pages, preferably) that previously would have been sent in flats, and repackage them into smaller, letter-shaped envelopes. Parcels thin enough to be squeezed into envelopes also could result in significant savings, although flats can be no more than three-quarters of an inch thick.

Mailers also are encouraged to "go the extra ounce" by sending a high volume of slightly heavier mail. While the price of 1-ounce first-class mail has gone up, in some cases by more than 50 percent, the Postal Service has slightly decreased the cost of sending 2- and 3-ounce letters-up to a 3.5-ounce threshold-allowing frugal consumers to actually save money by combining multiple communications into one envelope. A 2-ounce letter, for example, which costs 63 cents, now would be 5 cents cheaper while an 87-cent 3-ounce letter would drop all the way down to 75 cents.

Cost inducements also exist for those willing to presort their mail by ZIP code, modify their packages to comply with the Postal Service's processing systems or drop off letters closer to their delivery point. USPS also sells "forever stamps," which always will be valid as first-class postage on standard envelopes weighing 1 ounce or less.

These incentives, among others, have been advertised on the Postal Service's Web site and listed in the Federal Register. But some fear that federal agencies still might not be getting the message.

Pitney Bowes' Love contends there is no comprehensive effort to make government managers more aware of the rate changes. "This is not a front-of-mind issue," he says. "It doesn't grab people's attention."

But Mike Plunkett, the Postal Service's acting vice president for pricing, disputes that notion, contending that "large postal users should be aware of the changes" and will not be blindsided by the hike. "We have done more communication and outreach now than in any other previous rate increase," he says.

Alleviating the higher mailing and processing rates could be just the tip of the iceberg for agencies savvy enough to carefully scrutinize their postal budgets. As part of its plan to cut in half the amount of undelivered mail within

the next three years, the Postal Service has reduced the fees for using its Address Correction Services, an electronic database mailers can search for accurate, properly formatted addresses.

USPS says that one in every four addresses is mailed with at least one error, typically an incorrect street address or apartment number. And, while much

of that misidentified mail nonetheless reaches its intended recipient, those pieces that are returned to sender constitute a pricey-and often unnecessary-cost. Private sector estimates place the cost of returned or undeliverable mail at more than $3 per piece.

And the cost of dealing with dissatisfied customers might be impossible to calculate. For instance, the Veterans Affairs Department sends thousands of bottles of prescription medicine to ailing vets every day. One wrong number in a street address, and vital medicine could end up meandering through a processing center for days on end. "When that happens," Love says, "there's an emotional cost to the constituency."