The United States Postal Service (USPS) occupies a prominent place in the daily life of our republic. Delivering billions of pieces of mail and packages every year and with hundreds of thousands of employees, Americans interact with the postal service on a daily basis. The image of a mail person delivering mail to a mailbox is indelibly etched in our minds. People depend on this service to receive critical communications, packages containing vital medicines, compensation and the products of the country’s commerce.
What most people don’t know is USPS relies heavily on private contractors to assist it to move the mail and packages across the country and locally. These companies form the backbone of the USPS logistics system and there are several thousand of them. In this time of pandemic, these companies are even more critical to USPS infrastructure as receipt of goods and packages to home delivery is increasing and the vital role of the mail in ballot delivery for the upcoming election is front and center in the news.
These postal contractors employ tens of thousands and operate on razor thin margins. The system of contracting that seeks to ensure the government is getting the best price for services also often locks these private companies into arrangements that are not economic and which jeopardize the ability of these companies to survive. A failure of a company results in lost jobs, service disruption to the postal service and poor service to citizens. We all can attest to the severe slowdown and often never received mail, especially since COVID-19.
For example, the federally mandated wage rate paid to drivers often lags behind local market conditions, so the private contractor must pay the local rate to attract drivers but is compensated based on the lower mandated rate. A more significant issue is the often glaring differences between the contract specifications as bid by the contractor and the actual routes and trips run by the postal distribution centers in the field. A contract may call for 1 million miles of delivery on an annual basis and was bid that way, but then is run with 20, 30 for 40% more miles due to local requirements and timing needs. These extra miles go unreimbursed. When these variances occur, the contractor runs more unpaid miles and absorbs more unreimbursed costs. Failure to operate the contract as requested can jeopardize the contractor’s status with the postal service, so often the contractor will continue to perform an uneconomic contract in order to maintain postal relations.
This system can lead to devastating financial consequences not only for the workers who lose jobs when a company fails, but also for the postal service who then has to go out and seek new providers to cover the services. Usually the new provider comes at a higher cost to the postal service.
A failure of one of the larger private contractors during this time of pandemic and with the upcoming election presents a threat to national security if ballots are not delivered or vital medicines do not reach their destination on a timely basis.
Headlines regarding the postal service focus on President Trump, the funding needs, and changes in mail volumes. The politics pit the usual liberal versus conservative talking points. Liberals favor strong union contracts with funded benefits, universal service and low first class mail prices. Conservatives favor a profitable postal service with workers paid by market competitive rates rather than union mandated wages, privatization of service and less regulation of pricing policy. In the time of pandemic with related concerns about group gatherings for voting, there is an ongoing debate on the use of mail in ballots beyond the traditional absentee ballot.
While these headlines and billion dollar deficits attract attention, the reality is that the postal service’s need for private contractors to fulfill its mission and the often uneconomic way in which it imposes its requirements on these contractors is likely to result in a continued disruption in the ordinarily reliable mail service Americans rely upon.
What can be done to address this? First, Congress needs to fund the postal service so it can meet the obligations Congress itself has imposed on the postal service. Second, postal service regulations need more flexibility to reform existing contracts with private contractors to make them economic rather than cumbersome bidding processes that incent companies to under-bid the actual cost of delivering service. Third, postal service efficiency programs must be implemented in the field and not just in Washington think tanks. Contracts which are designed to operate in one efficient way and then are run in another inefficient way must get reformed.
With these steps, Americans will be able to continue to rely upon the postal service as a trusted and reliable delivery system.