Ross Marchand: Amidst abysmal finances, postal reform is a must

[Photo Credit: Frank Duenzl | dpa via AP Photo]

The United States Postal Service (USPS) continues to bear the consequences of poor financial management to the detriment of taxpayers and consumers across the country. The agency reported yet another financial loss this week, bringing total net losses for the year to $3.9 billion, an increase of $1.2 billion compared to last year. To outside observers of this fiscal malaise, better choices at every step of the way could have averted subsidization via low-interest Treasury loans. By adapting stronger efficiency guidelines and making a greater effort to reign in crony deals, the USPS can finally tackle its mammoth debts. Despite the misleading pronouncements of senior USPS officials, taxpayers would save billions of dollars per year from a better-fun fiscal ship.

To listen to the claims of USPS top brass, the agency is doing everything it can to “put information and technology at the center of its business strategies” in delivering mail to hundreds of millions of Americans. Unfortunately, successive reports by the Office of the Inspector General (IG) shed considerable doubt on this hype. The USPS, for instance, is supposed to use a modeling tool to sort out job assignments based on mail processing volume, but regular deviations result in increased overtime and lower employee productivity. The IG estimates that a more thorough use of its own modeling tools would save the USPS $420 million in labor costs alone.

But assigning employees requires a thorough, well-documented hiring process in the first place. On this basic function, the USPS again comes up short. In the IG’s analysis of non-career employee background screening in the Los Angeles District, the IG found that HR officials were not doing their due diligence. Of the 33 hired applicants analyzed in the report, 11 had “automatic disqualifying driving eligibility factors” and 7 had “disqualifying criminal suitability factors.” Maybe bad employees slip through the cracks, but at least performance evaluation reviews can be used to hold them accountable. Too bad, then, that “13 of 13 (100 percent) 90-day performance evaluation reviews were not maintained in the electronic official personnel file, as required.”

This permissive culture and poor documentation lead to further poor behavior, contributing to the USPS’s mammoth financial problems. Too often contractors fail to satisfactorily perform a service requested by the USPS due to avoidable mistakes on the part of the contractor. These “chargeable irregularities” should result in the USPS getting refunds from contractors. But, due to the lack of necessary paperwork and complete reviews, the USPS squanders tens of millions of dollars nationwide to lost contracts. For the Chicago Network Distribution Center alone, the USPS’s IG estimates that $7 million is at risk for a mere 11 contracts renewed during the 2016 and 2017 fiscal years.

And, then, of course, there are the increased distribution and delivery costs that come with the USPS’s arrangement with Amazon. As the result of 2013 deal inked with the multi-billion dollar company, Amazon gets to use USPS to deliver packages at a far lower rate than the usual Priority Mail Express prices companies would have to use for Sunday delivery. In the five years since the approval of the deal, Sunday-related parcel delivery costs have quickly risen. Since Sunday operations are dictated by a special carveout, the result is hardly an efficient operation. The OIG finds that, in the San Francisco District, “the increased use of higher cost full-time city carriers and scheduling uncertainty” has resulted in more than $2 million in additional quarterly operating costs. Additionally, parcel volume uncertainty leads to overstaffing with employees paid at the overtime rate.

While the USPS will charge somewhat higher fees on Amazon starting in 2019, its unlikely that the privilege of lower Sunday prices will go away. USPS should reexamine this, and other deals with major companies, while committing to efficiency and spending priority reforms. Making greater use of a national, comprehensive F1 Scheduler system and keeping greater tabs on questionable contracts could save the USPS billions of dollars per year and restore the promise of one of America’s more popular government institutions.


Ross Marchand is the director of policy for the Taxpayers Protection Alliance.