8330 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Proposed Rules 

1Public Law 109–435, 201, 120 Stat. 3198, 3204 

(2006). 

2See Docket No. RM2017–3, Order Adopting 

Final Rules for the System of Regulating Rates and 

Classes for Market Dominant Products, November 

30, 2020, at 2 (Order No. 5763); see also Docket No. 

RM2017–3, Revised Notice of Proposed 

Rulemaking, December 5, 2019, at 7 (Order No. 

5337); Docket No. RM2017–3, Notice of Proposed 

Rulemaking for the System for Regulating Rates and 

Classes for Market Dominant Products, December 1, 

2017, at 26 (Order No. 4258); Docket No. RM2017– 

3, Order on the Findings and Determination of the 

39 U.S.C. 3622 Review, December 1, 2017, at 3–5, 

274–275 (Order No. 4257). 

3See Order No. 4257 at 171–172 (describing how 

the consecutive net losses resulted in an 

accumulated deficit). 

4The Postal Service lacks shareholders and 

instead must finance capital investments through 

revenue or through borrowing. Order No. 4258 at 

48–49. Therefore, as consecutive years of net losses 

resulted in an accumulated deficit, the Postal 

Service relied heavily on its borrowing authority, 

deferred capital investments, and increased its cash 

reserves. See id. at 46–52. 

5Order No. 4257 at 222, 274–275 (summarizing 

that while some cost reductions and efficiency 

gains were achieved post-PAEA, they were 

insufficient to achieve financial stability in the 

medium term and long term). 

6 Id. at 273. The two major service standard 

changes in the first 10 years after the passage of the 

PAEA were reviewed by the Commission, prior to 

implementation, in Docket Nos. N2012–1 and 

N2014–1. The ‘‘Network Rationalization’’ initiative 

implemented by the Postal Service included 

changes to the service standards for First-Class 

Mail, Periodicals, USPS Marketing Mail, and 

Package Services. The ‘‘Load Leveling’’ initiative 

included changes to the service standards for USPS 

Marketing Mail. Id. at 264–273. 

(2) Jet skis and vessels without 

mechanical propulsion are prohibited 

from the parade route. 

(3) Vessels less than 10 feet in length 

are prohibited from the parade route 

unless capable of safely participating. 

(4) Vessels found to be unsafe to 

participate at the discretion of a present 

law enforcement officer are prohibited 

from the parade route. 

(5) Northbound vessels in excess of 65 

feet in length without mooring 

arrangement made prior to the date of 

the event are prohibited from entering 

Seddon Channel, unless the vessel is 

officially entered in the Gasparilla 

Marine Parade. 

(6) Vessels not officially entered in 

the Gasparilla Marine Parade may not 

enter the parade staging area box within 

the following coordinates: 27°53′53′′ N, 

082°27′47′′ W; 27°53′22′′ N, 082°27′10′′ 

W; 27°52′36′′ N, 082°27′55′′ W; 

27°53′02′′ N, 082°28′31′′ W. 

(7) Designated representatives may 

control vessel traffic throughout the 

enforcement area as determined by the 

prevailing conditions. 

(8) Persons and vessels may request 

authorization to enter, transit through, 

anchor in, or remain within the 

regulated areas by contacting the COTP 

St. Petersburg by telephone at (727) 

824–7506, or a designated 

representative via VHF radio on channel 

16. If authorization is granted, all 

persons and vessels receiving such 

authorization must comply with the 

instructions of the COTP St. Petersburg 

or a designated representative. 

(d) Enforcement Period. This rule will 

be enforced from 9 a.m. to 6 p.m. on 

April 17, 2021. 

Dated: January 13, 2021. 

Matthew A. Thompson, 

Captain, U.S. Coast Guard, Captain of the 

Port St. Petersburg. 

[FR Doc. 2021–02172 Filed 2–4–21; 8:45 am] 

BILLING CODE 9110–04–P 

POSTAL REGULATORY COMMISSION 

39 CFR Part 3030 

[Docket No. RM2021–2; Order No. 5816] 

Market Dominant Products 

AGENCY: Postal Regulatory Commission. 

ACTION: Advance notice of proposed 

rulemaking. 

SUMMARY: The Commission is initiating 

a review seeking input from the public 

about what additional regulations 

promulgated by the Commission may be 

necessary to achieve the objectives of 

the Postal Accountability and 

Enhancement Act (PAEA) particularly 

related to maximizing incentives to 

increase efficiency and reduce costs, 

maintaining high-quality service 

standards, and assuring financial 

stability (including retained earnings). 

This advance notice informs the public 

of the docket’s initiation, invites public 

comment, and takes other 

administrative steps. 

DATES: 

Comments are due: April 15, 2021. 

Reply comments are due: May 17, 

2021. 

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. Background 

III. Substantive Areas for Further Refinement 

IV. Administrative Actions 

V. Ordering Paragraphs 

I. Introduction 

Pursuant to 39 U.S.C. 3622(d)(3), the 

Commission issues this advance notice 

of proposed rulemaking to seek input 

from the public about what additional 

regulations promulgated by the 

Commission may be necessary to 

achieve the objectives of the Postal 

Accountability and Enhancement Act 

(PAEA) 1 over the longer-term, 

particularly related to maximizing 

incentives to increase efficiency and 

reduce costs, maintaining high-quality 

service standards, and assuring financial 

stability (including retained earnings). 

II. Background 

In Docket No. RM2017–3, the 

Commission found that the existing 

Market Dominant ratemaking system 

did not achieve the PAEA’s objectives 

during the 10 years following the 

PAEA’s enactment.2 The Commission’s 

findings were premised in part on the 

existing ratemaking system’s inability to 

assure financial stability (including 

retained earnings), maximize incentives 

to reduce costs and increase efficiency, 

and maintain high-quality service 

standards. See Order No. 4257 at 3–5, 

274–275. During the PAEA era, the 

existing ratemaking system was 

inadequate, which resulted in an 

accumulated deficit,3 maximum use of 

the Postal Service’s borrowing authority 

and a sharp decline in capital 

investments,4 operational efficiency 

increases and cost reductions that were 

insufficient to achieve overall financial 

stability and/or retained earnings,5 and 

reduction of the high-quality service 

standards that were set in 2007.6

In response, the Commission 

modified the ratemaking system’s 

design to encourage and enable the 

Postal Service to address its complex 

challenges by making prudent pricing 

and operational decisions. See Order 

No. 5763 at 285. Among other changes 

made, the modified rules provide 

additional rate authority to address two 

underlying drivers of the Postal 

Service’s net losses that are largely 

outside of its direct and near-term 

control: (1) The increase in per-unit cost 

resulting from the decline in mail 

density for each fiscal year under 

subpart D of 39 CFR part 3030 of this 

chapter; and (2) the statutorily 

mandated amortization payments for 

particular retirement costs under 

subpart E of 39 CFR part 3030 of this 

chapter. See id. These principled 

adjustments to the price cap made by 

the Commission in Docket No. RM2017– 


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7See William Zarakas, A New Face for PBR: 

Aligning Incentives in the Electric Utility 

Ecosystem, PUB. UTILS. FORT., December 2017 

(Zarakas), available at: https://www.fortnightly.com/ 

fortnightly/2017/12/new-face-pbr?authkey

=e0a4230ee85eb602f123c1e633c0e5b5260f9bd3f

297c094c055e7868e5a4589. 

8See Nat’l Ass’n of Broadcasters v. F.C.C., 740 

F.2d 1190, 1210 (D.C. Cir. 1984) (‘‘But 

administrative action generally occurs against a 

shifting background in which facts, predictions, and 

policies are in flux and in which an agency would 

be paralyzed if all the necessary answers had to be 

in before any action at all could be taken.’’). 

9See Synapse Energy Economics, Inc., Melissa 

Whited, Tim Woolf, & Alice Napoleon, Utility 

Performance Incentive Mechanisms: A Handbook 

for Regulators, Prepared for the Western Interstate 

Energy Board, March 9, 2015 (2015 PIM Handbook), 

at 43–44 (demonstrating quadratic versus step 

functions). 

10See 2015 PIM Handbook at 38; Paul L. Joskow, 

Incentive Regulation in Theory & Practice: 

Electricity Distribution & Transmission Networks, 

January 21, 2006 (2006 Joskow), at 8, available at: 

https://economics.mit.edu/files/1181. 

11See 2015 PIM Handbook at 38; see also 2006 

Joskow, supra at 8. 

3 are necessary to achieve the objectives 

of the PAEA, in conjunction with each 

other, and are focused on vital near-term 

improvements. 

However, the objectives of the PAEA 

related to maximizing incentives to 

increase efficiency and reducing costs as 

well as assuring financial stability 

(including retained earnings) set forth 

ambitious goals that are difficult to 

achieve instantaneously or 

simultaneously. See 39 U.S.C. 

3622(b)(1) and (5). These goals must 

also be achieved in conjunction with 

other priorities over time, such as 

maintaining high-quality service 

standards. See id. section 3622(b)(3). 

Consistent with the Commission’s 

findings in Docket No. RM2017–3, 

Docket No. RM2021–2 is initiated to 

explore whether additional regulatory 

changes may be necessary to promote 

longer-term financial stability, increased 

efficiency and cost reductions, while 

maintaining high-quality service 

standards, and if so, how to best design 

these potential changes. See Order No. 

5763 at 166. The Commission invites 

any interested party to submit 

comments on the following topics and 

asks the following questions to initiate 

a meaningful dialogue with 

stakeholders. 

III. Substantive Areas for Further 

Refinement 

A. Incentive Regulation 

Performance-based regulation is a 

broad concept referring to a regulatory 

system that applies incentives to 

promote targeted behavior by the 

regulated entity.7 More specifically, a 

performance incentive mechanism 

(PIM), also referred to as a targeted 

performance incentive (TPI), is used by 

regulators to set a target for acceptable 

performance by the regulated entity in 

a specific area and attach financial 

consequences to ensure compliance. See 

Zarakas, supra. This rulemaking is 

initiated to explore whether and how to 

introduce any potential modifications to 

the design of the ratemaking system that 

would further enhance (i.e., maximize 

over the longer-term) the Postal 

Service’s incentives to increase 

efficiency and reduce costs. Achieving 

such efficiencies could benefit the 

Postal Service by improving its longerterm financial viability and could 

benefit the ratepayers by leading to 

improved service performance. At the 

same time, the Commission remains 

mindful that further enhancing the 

Postal Service’s incentives to increase 

efficiency and reduce costs may weaken 

the incentive to maintain high-quality 

service standards. The Commission also 

acknowledges that ratepayers may have 

different preferences with respect to the 

speed and/or the consistency of delivery 

service for Market Dominant products. 

Accordingly, to explore possible 

enhancements to the Market Dominant 

ratemaking system overall, through the 

introduction of direct financial 

consequences (such as an upward or 

downward adjustment to rate authority) 

using a PIM or a different method, the 

Commission raises the following 

discussion points: 

1. Whether additional regulatory 

changes are needed to further enhance 

the Postal Service’s incentives to 

increase efficiency and reduce costs 

while maintaining high-quality service 

standards. Why or why not? 

2. How to identify and evaluate 

potential types of regulatory changes 

that would introduce direct financial 

consequences that would further 

enhance the Postal Service’s incentives 

to increase efficiency and reduce costs 

while maintaining high-quality service 

standards? Are there any financial 

consequences that can be drawn from 

other postal systems or other regulated 

industries that should be considered? 

3. How to identify and evaluate 

potential types of regulatory changes 

other than the connection of direct 

financial consequences that would 

further enhance the Postal Service’s 

incentives to increase efficiency and 

reduce costs while maintaining highquality service standards? Are there any 

non-financial incentives that can be 

drawn from other postal systems or 

other regulated industries that should be 

considered? 

B. Mechanism for a Financial Incentive 

The Commission is interested in 

exploring whether a regulatory 

mechanism connecting direct financial 

consequences with increasing efficiency 

and reducing costs and maintaining 

high-quality service standards would 

benefit the Market Dominant ratemaking 

system, and how to connect the Postal 

Service’s behavior with the financial 

incentive introduced. The Commission 

acknowledges that every proposal has 

tradeoffs and that it is impossible to 

refine the connection to a level of 

absolute precision.8 This rulemaking 

does not aim for this level of precision. 

Generally, the Commission seeks to 

identify an amount of a financial 

incentive that is both meaningful to the 

Postal Service (i.e., would actually 

motivate it to engage in the desired 

behavior) and would neither be 

excessive to the ratepayers nor threaten 

the financial integrity of the Postal 

Service. 

Preliminarily, the Commission is 

interested in exploring whether and 

how to introduce a financial incentive 

by modifying the Postal Service’s 

authority to adjust its rates. Adjustments 

to rate authority could be upwards 

(increase rate authority), downwards 

(reduce rate authority), or both. See 

Zarakas, supra. An upward PIM would 

reward superior performance, whereas a 

downward PIM would penalize 

unsatisfactory performance. The PIM 

may be designed to operate 

simplistically: For instance, a specific 

upward or downward incentive is either 

provided or not provided, based on the 

observed performance. On the other 

hand, a more nuanced PIM could be 

designed to provide a particular tier of 

financial incentive based on the 

observed performance: For instance, 

progressively increasing rewards or 

penalties.9 If any commenters have a 

basis for connecting particular 

requirement(s) with particular 

amount(s), they may include such 

proposals in their response to this 

Order. 

One potential method to develop a 

PIM for both upward and downward 

adjustments would be to set a ‘‘deadband’’ around historical performance.10

This type of PIM would trigger a penalty 

when actual performance falls below the 

lower target (unsatisfactory 

performance) and trigger a reward when 

actual performance exceeds the upper 

target (superior performance).11 The 

lower and upper targets could be 

derived by measuring the standard 

deviation(s) from historical 


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12See 2015 PIM Handbook at 38; see also 2006 

Joskow, supra at 8. 

13See 2015 PIM Handbook at 38. 

14See Docket No. RM2017–3, Northwest Postal 

Consulting (NWPC) for the Postal Regulatory 

Commission, Report 1, Adequacy of the Postal 

Service’s TFP Model, Final Report, March 27, 2017, 

at 2 (NWPC Report 1) (opining that the Postal 

Service’s TFP Model contains significant levels of 

detail regarding different aspects of Labor, Capital, 

Materials, Mail Volume, and Possible Deliveries). 

15Compare, e.g., United States Postal Service, 

USPS Annual Tables, FY 2017 TFP (Total Factor 

Productivity), February 28, 2018, Excel file ‘‘table 

annual 2017 public (2017 cra).xlsx,’’ tab ‘‘Tfp–52’’ 

(updating FY 2016 TFP result to 1.262) with United 

States Postal Service, USPS Annual Tables, FY 2016 

TFP (Total Factor Productivity), March 1, 2017, 

Excel file ‘‘table annual 2016 public (2016 

cra).xlsx,’’ tab ‘‘Tfp–52’’ (reporting FY 2016 TFP 

result as 1.260). While the Postal Service did not 

provide an explanation for the updated FY 2016 

TFP result, Commission analysis identified updated 

source data for FY 2016. Additional technical 

changes to the TFP are detailed in the NWPC Report 

2 filed by the Commission in conjunction with 

Order No. 5337. See generally Docket No. RM2017– 

3, Northwest Postal Consulting (NWPC) for the 

Postal Regulatory Commission, Report 2, 

Comparison of Postal Service Productivity 

Measurement: Before and After PAEA Enactment, 

March 27, 2017, at 8–11 (NWPC Report 2). 

16By way of background, the TFP workpapers 

filed by the Postal Service contain hardcoded 

inputs and outputs rather than displaying the 

formulae used and links to related spreadsheets. 

Compare, e.g., United States Postal Service, USPS 

Annual Tables, FY 2019 TFP (Total Factor 

Productivity), February 27, 2020 with 39 CFR 

3050.2(c). 

17See Docket No. ACR2019, Library Reference 

USPS–FY19–17, December 27, 2019, United States 

Postal Service FY 2019 Annual Report to Congress, 

at 34 (FY 2019 Annual Report). DPTWH is 

calculated by multiplying the total possible 

deliveries by the number of delivery days and 

dividing that product by total work hours. FY 2019 

Annual Report at 34. ‘‘Starting in FY 2021, the 

DPTWH metric will no longer be tracked as a 

corporate indicator.’’ Docket No. ACR2020, Library 

Reference USPS–FY20–17, December 29, 2020, 

United States Postal Service FY 2020 Annual 

Report to Congress, at 52 (FY 2020 Annual Report). 

18See Docket No. ACR2010, Annual Compliance 

Determination, March 29, 2011, at 39; see also 

Docket No. ACR2013, Review of Postal Service FY 

2013 Performance Report and FY 2014 Performance 

Plan, July 7, 2014, at 25. 

19Extremely detailed discussions of issues related 

to specific processing (referred to as pinch-points) 

may be found in a number of other proceedings. 

See, e.g., Docket No. ACR2015, Annual Compliance 

Determination, March 28, 2016, at 165–180; Docket 

No. ACR2016, Annual Compliance Determination, 

March 28, 2017, at 165–170; Docket No. ACR2017, 

Annual Compliance Determination, March 29, 

2018, at 175–181; Docket No. ACR2018, Annual 

Compliance Determination, April 12, 2019, at 215– 

222; Docket No. ACR2019, Annual Compliance 

Determination, March 25, 2020, at 161–174 (FY 

2019 ACD). 

20See, e.g., Docket No. ACR2019, Library 

Reference USPS–FY19–29, December 27, 2019, PDF 

file ‘‘FY19–29 Service Performance Report.pdf,’’ at 

7, 30. 

21Tour 1 is from 11:00 p.m. to 07:00 a.m.; Tour 

2 is from 07:00 a.m. to 3:00 p.m.; Tour 3 is from 

3:00 p.m. to 11:00 p.m. United States Postal Service, 

Office of the Inspector General, Report No. 20–144– 

performance.12 Actual performance 

within the dead-band (a neutral zone) 

would not result in a direct financial 

consequence.13

Therefore, to develop a mechanism 

that would balance simplicity with 

optimal refinement, the Commission 

raises the following discussion points: 

1. How to identify the percentage of 

rate authority that would provide a 

meaningful incentive(s) to the Postal 

Service, while also not leading to 

excessive rate increases for mailers nor 

threatening the financial integrity of the 

Postal Service? 

2. How to identify data and methods 

available to develop a connection 

between the amount of the financial 

incentive(s) at stake with the observed 

performance (i.e., the change(s) in or 

level(s) of efficiency, costs, and/or 

service standards)? 

3. How to identify the relative 

advantages of applying incentives as 

upward adjustments (increasing the 

amount of rate authority(ies)), 

downward adjustments (reducing the 

amount of rate authority(ies)), a 

combination mechanism (both), or 

another method? 

4. How best to administer the chosen 

method? 

C. Operational Efficiency-Based 

Requirement 

The Commission intends to explore 

whether and how to translate the broad 

policy goals of the PAEA—incentivizing 

the Postal Service to increase efficiency 

and reduce costs—into a specific PIM. 

For purposes of evaluating the Postal 

Service’s operational efficiency, total 

factor productivity (TFP) is a highly 

comprehensive metric.14 The 

Commission intends to further explore 

whether TFP or an alternative metric is 

capable of producing sufficiently 

reliable, accurate, and transparent 

results that would be appropriate for use 

as a potential benchmark on which to 

condition rate authority. While the 

Commission’s preliminary expectation 

is that there is not a practical way to 

refine TFP to focus on only Market 

Dominant products (see Order No. 5337 

at 134), the Commission would 

welcome any comments proposing a 

basis for doing so. There have been 

some changes in the TFP methodology 

over the years, and TFP results have 

been revised after-the-fact on 

occasion.15 Accordingly, the 

Commission intends to review how 

these changes impact reliability and 

accuracy over time. While there is not 

necessarily a reason to believe that the 

Postal Service would attempt to 

influence TFP results by making 

unreasonable business decisions (see 

Order No. 5337 at 135), the Commission 

also intends to further explore how TFP 

could be refined methodologically to 

produce results that are adequately 

safeguarded against manipulation. A 

critical step to enable this study of TFP 

is to require the Postal Service to file the 

documentation and linked workpapers 

containing all formulae for its TFP 

methodology.16 Therefore, this Order 

imposes a deadline for the Postal 

Service to file this information of 

February 16, 2021. 

The Commission intends to explore 

whether TFP can be refined to better 

focus on efficiency gains within the 

Postal Service’s control or whether an 

alternative metric should be developed. 

The Postal Service has used the 

Deliveries per Total Workhours 

(DPTWH) as an alternative efficiency 

metric in its annual reports to Congress 

and to develop its Integrated Financial 

Plan.17 The Commission has expressed 

concerns with the underlying 

methodology, finding that DPTWH is 

less comprehensive than TFP for 

purposes of measuring productivity 

because DPTWH isolates workhours 

(labor) and because DPTWH does not 

recognize a major workload component: 

The collection, processing, transporting, 

and sequencing for delivery of mail.18

However, it may be possible to develop 

an alternate methodology that is easier 

to calculate, understand, and apply than 

TFP but still comprehensive enough to 

reflect overall efficiency gains. If the 

Postal Service proposes that the 

Commission use a metric other than 

TFP for a PIM, then it shall file a 

detailed public explanation of the 

methodology along with its comments. 

Some of the sources of inefficiency 

(and the potentially resulting lost 

opportunities to reduce costs and 

improve service performance) are 

known in theory but difficult to correct 

in practice. The following examples are 

not intended to exhaustively detail 

these types of issues and instead are 

intended to promote thoughtful 

engagement and exploration of the 

potential challenges and opportunities 

to enhance the design of the Market 

Dominant ratemaking system.19

For instance, while the Postal Service 

acknowledges that it must better align 

labor with volume, it has stated that this 

has been difficult to put into practice.20

During a given day, there are periods of 

higher workload (peaks) and lower 

workload (valleys or off-peaks). More 

staff are needed to handle peaks, 

whereas, during the valleys, fewer staff 

are needed. These peaks and valleys do 

not naturally align with the traditional 

Postal Service labor structure, which 

operates in three tours, or 8-hour cycles, 

per day.21 Therefore, Postal Service 


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R20, Transportation Network Optimization and 

Service Performance, June 5, 2020, at 15, available 

at: https://www.uspsoig.gov/sites/default/files/ 

document-library-files/2020/20-144-R20.pdf (OIG 

Rep. No. 20–144–R20). 

22See Docket No. N2010–1, Advisory Opinion on 

Elimination of Saturday Delivery, March 24, 2011, 

at 115–126 (Docket No. N2010–1 Advisory 

Opinion); see also OIG Rep. No. 20–144–R20 at 15– 

16 (finding insufficient management staff working 

during Tours 1 and 3); United States Postal Service, 

Office of the Inspector General, Report No. 

19XG013NO000–R20, U.S. Postal Service’s 

Processing Network Optimization and Service 

Impacts, October 15, 2018, at 17–18, available at: 

https://www.uspsoig.gov/sites/default/files/ 

document-library-files/2020/19XG013NO000- 

R20.pdf (OIG Rep. No. 19XG013NO000–R20) 

(finding employee availability issues contributed to 

lower productivity, higher costs, and slower service 

performance). 

23For example, if inefficient staffing leads to 

failure to complete origin processing by the 

applicable target time of day, the affected mail may 

miss its scheduled transportation. While the Postal 

Service may try to mitigate the downstream effects 

by catching-up during transit or destination 

processing, the Postal Service acknowledges that 

these types of delays often require extraordinary 

action to deliver the affected mail within the 

applicable service standard. FY 2019 ACD at 109 

(The Postal Service asserts that if a mailpiece 

misses its scheduled transportation, then generally 

that mailpiece will not be delivered within the 

expected timeframe absent ‘‘extraordinary measures 

at substantial cost, such as extra transportation 

along with clerk and carrier overtime at the delivery 

point.’’) (quoting Docket No. ACR2018, Responses 

of the United States Postal Service to Questions 1– 

9 of Chairman’s Information Request No. 13, 

February 21, 2019, question 2). 

24See, e.g., United States Postal Service, Office of 

the Inspector General, Report No. 20–088–R20, Cost 

Reduction Initiatives for Mail Products, Report 

Number, August 3, 2020, at 1, available at: https:// 

www.uspsoig.gov/sites/default/files/documentlibrary-files/2020/20-088-R20.pdf (OIG Rep. No. 20– 

008–R20) (finding that the Postal Service personnel 

did not regularly record mail preparation quality 

issues, report such issues to Postal Service 

management for updates to the guidance provided 

to mailers, or otherwise communicate with mailers 

concerning correction). 

25See, e.g., OIG Rep. No. 20–088–R20 at 5–9 

(detailing that mailpieces that are relatively thinner, 

shrink-wrapped, bundled using rubber bands or 

strings, or presented in sacks tend to break more 

often than mailpieces that are relatively thicker, not 

shrink-wrapped, bundled using polypropylene 

(plastic) straps, or presented on pallets). 

26See, e.g., OIG Rep. No. 20–088–R20 at 6 

(estimating that for FYs 2018–2019, broken bundles 

could have increased bundle processing costs by 

$96.9 million). 

27For example, if bundle breakage triggers 

manual processing of the affected mail, the affected 

mail may miss its applicable time target to clear the 

next processing operation. See, e.g., Docket No. 

ACR2019, Library Reference USPS–FY19–29, 

December 27, 2019, PDF file ‘‘FY19–29 Service 

Performance Report.pdf,’’ at 19. The Postal Service 

may try to use overtime hours to speed up manual 

processing in an effort to deliver the affected mail 

within the applicable service standard. See, e.g., 

OIG Rep. No. 20–088–R20 at 8. 

28See id. at 251–252. By way of example, there 

are three separate service standards for First-Class 

Mail: (1) 1-Day (referred to as ‘‘overnight’’); (2) 

2-Day; and (3) 3–5-Day; business rules determine 

whether an individual mailpiece will be delivered 

overnight, in 2 days, or in 3–5 days. See id. at 250– 

251. 

29Order No. 5763 at 296; Order No. 4257 at 264; 

Docket No. RM2009–11, Order Establishing Final 

Rules Concerning Periodic Reporting of Service 

Performance Measurements and Customer 

Satisfaction, May 25, 2010, at 32 (Order No. 465). 

management must plan carefully to 

minimize inefficient outcomes, such as 

insufficient staff during peaks or overstaffing during valleys.22 Additionally, 

inefficient staffing may lead to mail 

failing to clear operational checkpoints 

as expected, which may lead to other 

negative effects such as the use of 

overtime hours or additional contract 

transportation to ‘‘catch-up’’ and/or late 

delivery.23

As another example, while the Postal 

Service acknowledges that it must better 

encourage preparation of the mail by 

mailers and/or mail service providers so 

as to facilitate more efficient handling 

by the Postal Service, existing practices 

do not maximize this opportunity.24 For 

instance, certain ways of preparing mail 

for presentation to the Postal Service are 

more likely to result in bundle 

breakage.25 Increased bundle breakage 

tends to reduce the ability to process the 

affected mail using machines and 

increase the likelihood that the affected 

mail will undergo manual processing 

instead. Manual processing is less 

efficient (slower and more costly) than 

machine processing.26 Increased manual 

processing may lead to mail failing to 

clear operational checkpoints as 

expected, which may lead to other 

negative effects such as the use of 

overtime hours to ‘‘catch-up’’ and/or 

late delivery.27

Generally, the Commission aims to 

select targets that are outcome-oriented, 

consistent with the policy goals of the 

PAEA, objectively measureable and 

verifiable, readily interpretable, and 

achievable. Because the Commission is 

particularly focused on promoting the 

Postal Service’s longer-term financial 

viability, the Commission is interested 

in selecting a metric(s) and target(s) for 

the PIM that would be consistent with 

ancillary benefits such as increasing the 

opportunities for reducing costs and 

improving service performance. 

Moreover, the Commission intends to 

consider potential safeguards to 

incorporate into the PIM, to ensure that 

results are adequately safeguarded 

against manipulation and that selection 

of a shorter-term target would not 

perversely incentivize behavior that 

would be detrimental in the longerterm. 

Therefore the Commission raises the 

following discussion points: 

1. How to identify possible 

refinements to TFP to increase its 

reliability, accuracy, and 

representativeness as a measure of 

efficiency gains within the Postal 

Service’s control? 

2. How to identify alternative 

potential metric(s) other than TFP that 

could be developed or refined as an 

accurate, reliable, and representative 

measure of efficiency gains within the 

Postal Service’s control? Should the 

Commission consider industry-wide, 

economy-wide, or similar comparative 

benchmarks for efficiency? Are there 

any metrics that the Commission can 

learn from in adjacent industries, other 

sectors, or other posts? 

3. How to identify potential target(s) 

for efficiency gains? 

4. How to identify potential metric(s) 

and target(s) related to efficiency gains 

to promote the longer-term financial 

viability of the Postal Service, such as 

by increasing the opportunities for cost 

reduction and/or improved service 

performance? 

5. How to identify potential 

safeguards designed to minimize 

manipulation by the operator and 

prevent the operator from engaging in 

behavior that would be detrimental over 

the longer-term? 

D. Service Standards-Based 

Requirement 

Additionally, the Commission intends 

to explore whether and how to translate 

the policy goal of the PAEA to maintain 

high-quality service standards into a 

specific PIM. This goal is intended to 

encourage the maintenance of highquality service standards established 

pursuant to 39 U.S.C. 3691, and to hold 

the Postal Service accountable for 

consistently achieving those standards. 

See Order No. 4257 at 261. 

The first aspect underlying this goal is 

referred to as ‘‘service standards,’’ 

which are the stated days-to-delivery for 

different types of mail. See id. at 250. 

Service standards are comprised of a 

delivery day range and business rules.28

With respect to service standards, the 

Commission is interested in whether 

introducing direct financial 

consequences linked to maintenance of 

the existing service standards would 

enhance the system, and if so, how to 

calibrate that mechanism. See Order No. 

5763 at 170. 

The second aspect underlying this 

goal implicitly requires consistent 

achievement of service standards, which 

is referred to as ‘‘service performance.’’ 

See id. at 296; Order No. 4257 at 262– 

263. The existing regulatory system has 

a mechanism to hold the Postal Service 

accountable for its service performance: 

The annual compliance review 

proceeding.29 If commenters have 


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8334 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Proposed Rules 

30Order No. 4257 at 255 (citing Docket No. 

N2010–1 Advisory Opinion at 7–10). 

31See Order No. 5763 at 171 (citing Order No. 

5337 at 142, 144; Order No. 4257 at 255); see also 

2006 Joskow, supra at 8 (observing that regulatory 

mechanisms focusing on cost reductions 

exclusively may lead to the operator reducing its 

service). 

suggestions on how to improve upon 

that mechanism, they may propose 

changes in their response to this Order. 

An effective price cap system 

maintains reliable, efficient, and 

economical service.30 ‘‘The Postal 

Service cannot be permitted to degrade 

service in order to comply with the 

revenue constraints associated with the 

price cap.’’ Order No. 4257 at 255 (citing 

Docket No. N2010–1, Advisory Opinion 

at 8). ‘‘A reduction in service must be 

warranted by declining demand for the 

service, rather than to ease the 

obligation of adhering to the price cap.’’ 

Docket No. N2010–1, Advisory Opinion 

at 10. Introducing a direct financial 

incentive connected to operational 

efficiency gains and cost reductions may 

undermine the existing incentives to 

maintain high-quality service 

standards.31 Accordingly, to give due 

consideration to a potential need to 

counterbalance such unintended 

consequences, the Commission raises 

the following discussion points: 

1. How to identify potential regulatory 

changes that may be needed to 

counterbalance any perverse incentive 

to degrade service standards and/or 

service performance that may be created 

by introducing an operational-efficiency 

based requirement? 

2. How to identify the relative 

advantages of designing a system that 

creates a direct financial link to changes 

in service standards? 

3. What data and methods could be 

used to design a system that creates a 

direct financial link to changes in 

service standards? 

IV. Administrative Actions 

The Commission establishes Docket 

No. RM2021–2 for consideration of the 

matters discussed in the body of this 

advance notice of proposed rulemaking. 

The Commission will accept 

comments and reply comments 

concerning the topics identified in this 

advance notice of proposed rulemaking. 

Comments are due April 15, 2021. Reply 

comments are due May 17, 2021. 

Pursuant to 39 U.S.C. 505, Richard A. 

Oliver is designated as an officer of the 

Commission (Public Representative) to 

represent the interests of the general 

public in this proceeding. 

The Postal Service shall file the 

documentation and linked workpapers 

for its TFP methodology to aid in the 

evaluation of TFP by February 16, 2021. 

Materials filed in this docket will be 

available for review on the 

Commission’s website (http://

www.prc.gov). 

The Regulatory Flexibility Act 

requires federal agencies, in 

promulgating rules, to consider the 

impact of those rules on small entities. 

See 5 U.S.C. 601, et seq. If the proposed 

or final rules will not, if promulgated, 

have a significant economic impact on 

a substantial number of small entities, 

the head of the agency may certify that 

the initial and final regulatory flexibility 

analysis requirements of 5 U.S.C. 603 

and 604 do not apply. See 5 U.S.C. 

605(b). In the context of this 

rulemaking, the Commission’s primary 

responsibility is in the regulatory 

oversight of the United States Postal 

Service. The rules that are the subject of 

this rulemaking have a regulatory 

impact on the Postal Service, but do not 

impose any regulatory obligation upon 

any other entity. Based on these 

findings, the Chairman of the 

Commission certifies that the rules that 

are the subject of this rulemaking will 

not have a significant economic impact 

on a substantial number of small 

entities. Therefore, pursuant to 5 U.S.C. 

605(b), this rulemaking is exempt from 

the initial and final regulatory flexibility 

analysis requirements of 5 U.S.C. 603 

and 604. 

V. Ordering Paragraphs 

It is ordered: 

1. Docket No. RM2021–2 is 

established for the purpose of 

considering amendments to Chapter III 

of title 39 of the Code of Federal 

Regulations as discussed in this advance 

notice of proposed rulemaking. 

2. The Postal Service shall file the 

documentation and linked workpapers 

for its total factor productivity 

methodology, in a manner that displays 

the formulae used and links to related 

spreadsheets by February 16, 2021. 

3. If the Postal Service proposes to use 

a metric other than total factor 

productivity for a performance incentive 

mechanism, then it shall file a detailed 

public explanation of the methodology 

along with its comments. 

4. Pursuant to 39 U.S.C. 505, Richard 

A. Oliver shall serve as an officer of the 

Commission (Public Representative) to 

represent the interests of the general 

public in this proceeding. 

5. Interested persons may submit 

comments no later than April 15, 2021. 

6. Interested persons may submit 

reply comments no later than May 17, 

2021. 

7. The Secretary shall arrange for 

publication of this order in the Federal 

Register. 

By the Commission. 

Erica A. Barker, 

Secretary. 

Editorial Note: This document was 

received at the Office of the Federal Register 

on January 19, 2021. 

[FR Doc. 2021–01500 Filed 2–4–21; 8:45 am] 

BILLING CODE 7710–FW–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Federal Emergency Management 

Agency 

44 CFR Part 206 

[Docket ID FEMA–2020–0038] 

RIN 1660–AA99 

Cost of Assistance Estimates in the 

Disaster Declaration Process for the 

Public Assistance Program; Public 

Meeting 

AGENCY: Federal Emergency 

Management Agency, Department of 

Homeland Security. 

ACTION: Announcement of meeting; 

extension of comment period. 

SUMMARY: The Federal Emergency 

Management Agency (FEMA) is 

extending the public comment period 

for its proposed rule published 

December 14, 2020, and will hold a 

public meeting remotely via web 

conference to solicit feedback on the 

proposed rule. The rule proposed to 

substantively revise the ‘‘estimated cost 

of the assistance’’ disaster declaration 

factor that FEMA uses to review a 

Governor’s request for a major disaster 

under the Public Assistance Program. 

DATES: Written comments on the 

proposed rule published at 85 FR 80719 

(December 14, 2020) may be submitted 

until 11:59 p.m. ET on Friday, March 

12, 2021. 

The meeting will take place on 

Wednesday, February 24, 2021, from 1 

to 3 p.m. Eastern Time (ET). 

To register in order to make remarks 

during the meeting, contact the 

individual listed in the FOR FURTHER

INFORMATION CONTACT section below by 

12 p.m. ET on Tuesday, February 23, 

2021. 

ADDRESSES: The meeting will be held 

via web conference. Members of the 

public may view the public portion of 

the meeting online at https://

fema.zoomgov.com/s/1617851830. 


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