Postal Perils and Promise: A Primer on Reform
Taxpayers Protection Alliance
February 4, 2019
The United States Postal Service (USPS) faces growing problems in managing essential services and keeping costs under control, amidst shifting consumer preferences, flawed management, and outdated pricing models leading to staggering losses of nearly $4 billion annually. Unfortunately USPS leadership has so far refused to enact any fundamental structural reform, preferring price increases such as the January 27 rate hike – the largest increase since the Civil War.
In this report, the Taxpayers Protection Alliance (TPA) identifies some of the largest cost drivers faced by the USPS, which lead to large annual losses despite the USPS’s approximate $3.7 billion in taxpayer subsidies identified in this report. Cost drivers include:
- Highway Contract Rate (HCR) Inflation: Despite spending more than $3.6 billion for in excess of 8,000 HCR contracts, the USPS demonstrated little oversight over these agreements. Contractors often failed to satisfactorily perform a service requested by the USPS due to easily avoidable mistakes, costing the agency more than $1 billion annually.
- Inconsistent Use of Scheduler Tools: To determine which workers will do which tasks at which locations, the USPS has created a “F1” Scheduling tool, which relies on inputs such as productivity, mail volume, and mail processing machine availability to solve the jigsaw puzzle of employee assignment and roles. However many facilities simply do not use their F1 Scheduler to determine work hour budgets, costing the agency $420 million annually in labor costs.
- Unnecessary Vehicle Purchase Preferences: USPS will soon need to replace the majority of its aging fleet, and is currently in the midst of deciding amongst competing bids for new truck designs. Unfortunately, the stated choice to prefer “green vehicles” and domestic manufacturers will cost the agency more than $220 million over and above the $821 million annual increase in capital spending to purchase the new fleet.
- Redundant Facilities Still Open: Thousands of Post Offices operate at a loss and remain open despite being within 10 miles of another Post Office. The slowed pace of closures cost the agency more than $20 million annually.
- Outdated Pricing Formulas and Flawed Reselling Program: The USPS chronically underestimates how much package deliveries contribute to agency costs, to the tune of nearly $1.50 per package. The agency also allows small Postage buyers access to discounts reserved for bulk buyers. These flawed pricing systems cost the agency at least $1.6 billion annually.
- Total Potential Savings for Reform: If the USPS follows the recommendations of this report to reign in wasteful spending and reform its pricing systems, the agency can save a total of at least $3.2 billion annually averting the need for any future taxpayer bailout.