- Project Title:
- Cost and Pricing Strategies for Underwater Market Dominant Products
- Start Date:
- Monday, December 2, 2019
- Estimated Report Release Date:
- May 2020
When it comes to postal products that don’t cover their costs, the Postal Service finds itself in a no-win situation. The Postal Accountability and Enhancement Act (PAEA) requires the Postal Service to make sure all products cover 100 percent of their direct costs. Products that fall below costs (also known as underwater products) violate PAEA. However, attempting to increase prices above the price cap or above the rate of inflation to enable these products to cover their costs also violates PAEA.
Underwater products for fiscal year (FY) 2018 included: USPS Marketing Mail flats, Standard Mail parcels, In-County and Outside County Periodicals, and Media and Library Mail. These products have been underwater for 10 years in a row, and in FY 2018 came up short by $1.4 billion.
A prior FY 2016 OIG audit report, Strategies for Underwater Market Dominant Products (CP-AR-16-005), recommended the Postal Service develop a strategy for managing underwater products.
- How should the Postal Service improve the cost coverage of underwater products?
- How should the Postal Regulatory Commission change the rate-setting process?
- What are the benefits or risks of selling products that do not cover their costs?
- How would mailers be impacted by a price increase on underwater products?