Postal Business Plan: The Good, Lame, and Up in Flames

Ross Marchand

January 16, 2020

Well, it was certainly a late delivery, but the five-year United States Postal Service (USPS) business plan is finally here. Weighing in at 43 pages, it’s less ambitious than the ten-year plan that Postmaster General Megan Brennan promised to release to the American people…last summer. But reform suggestions are welcome, as the USPS hemorrhages red ink and teeters on the brink of insolvency and a potential, costly taxpayer bailout. In its business plan, the USPS discusses promising technological investments that could lead to greater digital engagement with consumers and improve workplace efficiency. The agency, however, fails to provide a satisfactory narrative about its dysfunctional pricing process. But the real dumpster (or mail truck) fire is the USPS’ refusal to think outside the box in order to achieve real cost-savings. Without further ado, the Taxpayers Protection Alliance (TPA) presents “the Good, Lame, and Up in Flames.”

The Good: Postal Technology Investments

In its five-year plan, the USPS resolves to “transform our services from only providing a physical delivery into a service that also enables a digital connection and provides other value-added services.” This could be accomplished via a variety of means, ranging from expanding out current digital offerings to embarking on new ventures altogether. Currently, the agency runs a service called “Informed Delivery,” which scans the outside of all letters to be delivered to the consumer that day and emails them the collection of scans (typically before 9 am). TheUSPS states that it wants to use Informed Delivery as a springboard for further digital integration, including, “providing carriers instructions on where to leave or pick up packages, notifying the Postal Service to hold mail, or scheduling redelivery of packages.”

But before the USPS embarks on further digitization, it must first shore up flaws in its existing offerings. In its report, the agency fails to mention data vulnerabilities in its program that have enabled identity thieves to use the service to divert mail from individuals and households. Cybersecurity specialist Marc Weber Tobias describes that, in a test to gain access to a colleague’s mail, “All I needed was a name, address, cell number, and email…USPS instantly verified the information and activated Informed Delivery. There were no questions relating to personal information as a security check and I am now receiving images of all her incoming mail.” In 2018, the Secret Service noted, “Fraudsters were…observed on criminal forums discussing using the Informed Delivery service to surveil potential identity theft victims,” shortly after the arrest of seven people for stealing credit cards using the service. The agency must acknowledge these significant issues and ensure that cybersecurity safeguards are in place to keep digital systems safe before further “digitization.” It must also have sufficient resources to make all of these investments, which brings us to…

Lame: Postal Pricing Issues

Reading the USPS’ five-year business plan, it is clear that the agency refuses to accept responsibility for its multiple failures, and instead believes itself to be a victim of forces beyond its control. Analysts lament that, “statutory and regulatory constraints have limited our ability to respond to market forces…[including]…a Consumer Price Index-based price cap for mail products, representing 67 percent of revenues.” The USPS blames this “lack of pricing flexibility” in large part for losing more than 6 cents on every piece delivered in 2019. Theagency jealously peers across the Atlantic and cites countries such as Germany and the U.K., which both allow their postal carriers to charge 79 cents per letter delivery (adjusted for purchasing parity) compared to America’s 55 cent rate. Never mind that organizations such as the Deutsche Post and Royal Mail have to pay federal taxes, something that the USPS mustonly nominally do (revenues are funneled back to the agency post-payment). And, competitive market dynamics in countries such as Germany and the U.K. are completely absent in the U.S., making the agency’s comparison apples-to-oranges.

Instead of looking overseas at what other posts are charging, the USPS should examine peculiarities in its own pricing structure that result in lost revenue and higher general stamp prices. The agency failed to mention in its business plan its failure to eliminate the reseller program, which allows independent stamp sellers to sell USPS postage to buyers at artificially low prices ostensibly to lure in new consumers that wouldn’t have done business with the agency otherwise. But as many analysts have pointed out, the USPS offers the lowest rates of any major shipper anyway, and their justification for extending further discounts at a cost of more than $200 million per year is dubious at best.

And these aren’t even bulk discounts; a 2017 Capitol Forum analysis found that companies were offered steeply-discountedprices by Stamps.com and other resellers even after emphasizing how small their product volumes are. Stamps.com then took a steep mark-up, resulting in hundreds of millions of dollars of forgone USPS business for deals that would’ve likely happened anyway without the middleman. In February 2019, the USPS took the laudable step of divorcing itself from a lopsided “exclusive” partnership with Stamps.com, but far more needs to be done to end the reseller program and recoup lost revenues. The agency should pursue these pricing reforms instead of stamp price hikes that would impact millions of vulnerable households across the country.

Up in Flames: Lack of Reform Ideas

Often times, the worst part of government reform initiatives is what they don’t include. There’s no shortage of cookie-cutter goals in the USPS’ five-year plan, but actual, implementable reforms take a back-seat to platitudes such as “Deliver world-class services and customer experiences.” The truth is, the USPS has largely succeeded already in winning the hearts and minds of the American people as the most admired agency in the country. But as former President Barack Obama learned, celebrity status doesn’t make it any easier to balance the books. When the USPS runs out of cash in 2024 (if not before) taxpayers will be forced to foot the bill for Postal problemsregardless of marginal consumer metric improvements.

Nowhere in the five-year business plan is a proposal to rein in runaway spending by middle-mile contractors, who cost the agency more than $1 billion per year in missed deadlines and irregularities in how they charge the USPS. The agency also fails to mention the impact of “green” preferences on its ongoing fleet procurement process, which will likely lead to 20 percent-higher costs on top of an already-astronomical $6 billion contract. If anything, the agency indicated in its report that it intends to further prioritize “green” initiatives, stating that it’s focused on, “Climate change adaptation and mitigation planning efforts” and “Lean green team employee engagement.” Instead of tacking on more, useless programs, the agency should focus on reforming existing operations and cutting costs wherever possible. Only a sustained, agency-wide effort to lower costs and reform pricing can bring the USPS back into the black. TPA remains committed to offering recommendations to the agency on how it can reform existing operations and avert a costly taxpayer bailout.

Our report, which offers more than $3 billion in common-sense, easily-implementable annual savings for the agency, can be found here.

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