Postal Commission Submits Recommendations

On July 31, the President’s Commission on the U.S. Postal Service submitted to President Bush its recommendations for postal reform. The recommendations of the commission, which was established in December to reform the USPS so that it can continue providing universal delivery service at reasonable rates, aren’t much different from those that have appeared in postal reform bills during the past seven years — none of which have been passed because Congress couldn’t agree on all the facets of the bills. Among the key points of the recommendations:

  • The USPS should operate as a government entity within the executive branch and maintain its mail monopoly, subject to periodic review by a Postal Regulatory Board (PRB) that would replace the current Postal Rate Commission.
  • The agency should maintain a strong emphasis on cost control and efficient, innovative management of personnel and resources. The USPS should “right-size” and realign its workforce and its physical network by consolidating or closing unneeded facilities and outsourcing more functions to the private sector. The agency should better leverage its real estate holdings and other assets, as well as make changes in the collective-bargaining system, such as opening fringe benefits to bargaining rather than having them dictated by law.
  • The PRB should have the authority to make a “comparability determination” to private-sector compensation and put a cap on the compensation of new postal employees. The PRB should also require the Postal Service to eliminate certain bonuses that exist for current employees.
  • The USPS should use private-sector resources and partnerships to lower mail processing and transportation costs and increase efficiency while continuing to focus on its core strengths of providing “first mile” collection and “last mile” delivery services — leaving the middle stages of mail transportation to private carriers.
  • A corporate-style board of directors should be established to give senior USPS management greater flexibility; at the same time, a strengthened PRB should provide oversight and field complaints.
  • The current rate-setting process should be replaced with an incentive-based methodology and fewer pricing restrictions. In particular, it should allow for lower rates based on mailer worksharing than it currently does. But price caps should be established; these could be exceeded only with regulatory approval.
  • The USPS should continue to develop and offer worksharing discounts to mailers and be given greater flexibility to enter into negotiated service agreements for noncompetitive products.

By early fall, “my expectation is that the Senate and the House will begin calling in the commission panelists for hearings to get greater amplification on some of the issues in the report,” says Gene Del Polito, president of the Arlington, VA-based Association for Postal Commerce (PostCom). From there, he believes a postal reform bill will take shape early next year.

Beyond that, while optimistic, neither Del Polito nor others contacted care to speculate how far the commission’s efforts can go. There are certainly factors that could delay a bill’s progress. Postal rates are expected to hold steady through 2006. And although the USPS’s long-term volume shortfalls could well doom the agency as we know it, the lack of urgency could keep Congress from acting. Similarly, more-immediate economic concerns and the ongoing strife in Iraq, North Korea, and Liberia could distract lawmakers from postal reform.

Such a distraction, some in the industry worry, could be disastrous. “If we blow this opportunity, the next time we’ll get such a chance is probably three years from today,” Del Polito says, referring to when the next rate hike is likely to take place. “After all, what more can be done once the USPS cuts all the costs it can? Then what? If you haven’t fundamentally changed the dynamics of the Postal Service, you’ll have a world-class crisis on hand. And Congress never responds well in a crisis.”

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