Postal Service Should Consider Larger Role for Private Sector, Report Says

An outside proposal to cut the U.S. Postal Service’s operational expenses in half by outsourcing many services to the private sector is worth considering, a non-profit organization said in a report. But many outstanding concerns must first be addressed.

The National Academy of Public Administration -- a congressionally chartered, independent organization -- analyzed a white paper by four experts on the operations of the postal system and found several potential roadblocks to implementation and integration of the proposal. While major cost savings are possible under the plan, more analysis must be conducted to fully understand the implications, NAPA said.

NAPA received funding to conduct its review of the white paper from Pitney Bowes, a maker of postal equipment.

The experts' white paper calls for the private sector to take over collection, transportation and processing of mail -- or “upstream” functions -- while the Postal Service would focus solely on the final stage of delivery -- “the last mile” or “downstream” functions. Currently, USPS primarily uses the private sector for long-distance transportation and, to a lesser extent, for processing.

The paper said the plan would reduce the Postal Service’s annual operating costs to $30 billion, down from $67 billion in 2012. The paper did not identify details of these savings, however, and NAPA explored the suggested overhaul in more depth.

In its report, NAPA’s panel -- headed by former Government Accountability Office head David Walker -- disputed the white paper’s claim that its plan was “tested, readily available and politically feasible,” citing nearly 100 interviews with affected parties.

One concern the panel raised was the Postal Service’s legal authority to implement the changes the white paper suggested, as the combination of strict laws dictating when USPS can close postal facilities and congressional oversight severely mitigate the agency’s ability to overhaul itself. The white paper also did not factor transition costs and complex management changes into its analysis, NAPA found. 

While Walker said in a conference call job losses at the Postal Service could be offset by hiring at private sector companies, labor groups raised concerns that unionized jobs would be replaced with non-unionized positions.

NAPA questioned whether private industry would be interested in taking on some of the tasks the Postal Service conducts, as it may deem certain aspects as not profitable or poor investments in the face of declining mail volume.

The Postal Service holds certain advantages in making this transition, the NAPA panel found, as it would allow the agency to focus solely on delivery, the area in which it has the largest comparative advantage over the rest of the industry. Additionally, about half of USPS employees are eligible for retirement, easing the process of right-sizing its workforce through attrition.

The Postal Service must follow up on the financial, labor, integration and roles of various postal entities, the NAPA panel concluded, to fully assess the viability of a public-private hybrid. The panel also said even if USPS opted to adopt the white paper's recommendations, it would only be part of a larger reform effort, instituted primarily through Congress.

Correction: The original version of this article incorrectly said the white paper NAPA reviewed was produced by Pitney Bowes. It was completed by four independent experts and Pitney Bowes provided a grant to NAPA to conduct a review. The article has been updated to correct the error.