The U.S. Postal Service, required to send congressional letters at reduced rates, can’t win regular business from the federal government, according to an inspector general’s report.
Private sector competitors led by FedEx Corp. and United Parcel Service Inc. “consistently” have more than 98 percent of the $337 million annual shipping spending by federal agencies, according to the Jan. 18 report.
“The Postal Service faces challenges to growing its share of this market,” the Postal Service’s inspector general said in the report. “Major challenges include pricing flexibility and the lack of 2- and 3-day guaranteed express delivery products.”
Having lacked a sales force, the Postal Service was late to enter bidding for U.S. General Services Administration contracts for federal agencies. UPS, based in Atlanta, and FedEx, based in Memphis, Tennessee, have been official suppliers since 2001, while the Postal Service only began participating in 2009, according to the report.
In fiscal 2012, which ended Sept. 30, the Postal Service got $4.8 million of the almost $337 million that U.S. agencies spent through GSA contracts on shipping, the report shows.
The government would have spent more to ship via the Postal Service than UPS and FedEx, both of which can undercut competitors’ prices to gain business, according to the report. Postal Service rates must cover costs as well as a share of the organization’s overhead, and are regulated by the Postal Regulatory Commission and overseen by Congress. The service can’t price express and priority mail, the fastest two ways to ship through the system, at a loss in order to attract customers, the report shows.
$15.9 Billion Loss
Lawmakers in the House of Representatives and Senate held hearings in the previous legislative session calling on the Postal Service to improve its finances. The service lost $15.9 billion in fiscal 2012, and has said the losses will mount until Congress lets it cut costs faster and restructure a required payment for future retiree health benefits.
Senate Majority Leader Harry Reid, a Nevada Democrat, said yesterday that postal legislation is one of the proposals he plans to take up this year.
Postal Service spokesmen didn’t immediately respond to an e-mail sent after regular business hours seeking comment on the inspector general’s report.
© Copyright 2013 Bloomberg News. All rights reserved.