• on Jun 24th, 2013 in Strategy & Public Policy | 5 comments

    The U.S. Postal Service is in the middle of a difficult transition to position itself as a 21st century communications provider. The Postal Service sees new opportunities, but its current cash shortage makes it difficult to invest in modernizing aging facilities and vehicles, or developing new products to serve changing communications and delivery needs. Public-private partnerships (PPPs) are an increasingly popular way for governments to achieve policy goals and develop infrastructure, while shifting short-term financial burdens away from taxpayers and strained government coffers. 

    Unlike a traditional procurement, in a PPP the private sector partner usually shares in the risks and benefits of the project. For example, a company could build and manage a toll road under a contract with a government transportation agency, and recoup its investment by collecting tolls. In the postal sector, a common PPP is for entrepreneurs to manage post offices. The Postal Service has entered into similar partnerships through its contract postal unit program and agreements with several retailers. Some foreign postal operators have gone further by having all or almost all of their post offices run by private partners. If the post office ends up earning less revenue than projected, the postal operator avoids being stuck with a money-losing facility.

    The Postal Service Office of Inspector (OIG) recently released a white paper entitled Public Private Partnerships: Best Practices and Opportunities for the Postal Service. The white paper recommends that the Postal Service consider opportunities for new PPPs to generate cash, reduce costs, make spending flexible so it varies along with volume, and leverage private sector expertise in developing new products for the digital age.

    This white paper reviews lessons learned from PPPs in the international postal sector and from nonpostal U.S. government agencies. Despite PPP’s potential benefits, government agencies should perform careful analysis before entering into one, as they usually involve higher long-term project finance costs in exchange for increased flexibility and risk-sharing. Over the years, government agencies have developed a set of best practices to ensure that a PPP is a good deal for the public. One common lesson is that there are significant benefits to creating a central office to facilitate PPPs, coordinate with private entities, and to collect and share best practices throughout an agency.

    Do you think these types of partnerships would benefit the Postal Service? From your experience and observations, which partnerships have been helpful to the Postal Service and its customers? What specific opportunities exist for additional partnerships between the Postal Service and the private sector? Are there any downsides to such partnerships? 

  • on Jun 17th, 2013 in Strategy & Public Policy | 12 comments

    A recent study from a Washington think tank argues the U.S. Postal Service should provide only last-mile delivery of mail and open all other aspects of the mail system to competition. The report from the non-partisan Information Technology and Innovation Foundation came to a similar conclusion as an earlier proposal from a group of four mailing industry leaders who released a concept paper that also proposed a public-private partnership with the Postal Service focusing on final delivery. Those authors envisioned that this so-called hybrid model would encourage innovation and efficiency.

    A panel of fellows from the National Academy of Public Administrators (NAPA), a nonprofit and non-partisan organization providing expert advice to government leaders, reviewed the earlier paper and concluded that many of the ideas represent expansions of current public-private partnerships already employed by the Postal Service, i.e., worksharing. The panel recommended further study around a host of related areas, including financial, labor-related, operational integration and regulatory issues – all of which could pose a range of new challenges.

    Critics note a number of shortcomings with these hybrid model proposals. First, the papers don’t provide a full cost-benefit analysis of privatizing parts of the system. Revenue could be lost if service were reduced, which could occur with numerous service providers involved in mail transportation and processing. Further, the papers don’t indicate what would become of the Postal Service’s infrastructure of buildings and equipment.

    Papers and studies proposing new business models for the Postal Service are nothing new. Think tanks and academic conferences regularly churned out suggestions for rethinking the Postal Service model, ranging from a return to an appropriated government agency to privatization. Last year, the Postal Service put forward its own business plan for returning to solvency, which it called its Plan to Profitability. Recently, the Board of Governors asked the Postal Service to accelerate many of the action items in that plan.

    The Postal Service’s 5-year plan requires a number of legislative actions from Congress and does not effectively change the current governance model. That is, the Postal Service would remain a self-supporting government entity funded through its own revenues. The plan calls for some greater freedoms around offering new products, greater control of its healthcare costs, and closing facilities but it does not abandon its public service or universal service roles.

    We would like to hear your thoughts. Do you think a hybrid model, like the one considered in the recent papers, has merit? Would such a model add efficiencies or would it merely shift work away from postal workers, as some have claimed? In an era of shrinking mail volume and changing communications, what business model would work best for the Postal Service? How does the Postal Service continue to support its universal service obligation under a new model?

  • on May 31st, 2013 in Strategy & Public Policy | 0 comments

    This is the fourth and final blog in our week-long series on What America Wants from the Postal Service.

    Nowhere has the digital revolution been more disruptive than in communications. The rapid evolution in Internet-based technologies has changed the way businesses and individuals communicate and transact. They now rely on both digital and physical communications. This dramatic shift has certainly challenged the Postal Service, but also created opportunities for it to expand into digital services to meet customers’ needs.

    What digital services might the Postal Service offer to serve customers and potentially generate new revenue? In the paper What America Wants from the Postal Service, our web survey of 5,000 Internet-connected Americans aged 18 years and older asked respondents to consider the Postal Service as a provider of digital services and to weigh in with their preferences of potential new digital services it could offer.

    Interestingly, an overwhelming majority of respondents (especially younger respondents) are comfortable with the Postal Service as a provider of digital services. Only 12 percent of respondents indicated they would not trust the Postal Service to provide any digital services. More than 80 percent of respondents trust the Postal Service for providing package tracking, followed by e-government services (34 percent), and identity verification services (nearly 30 percent). More than 40 percent of respondents expressed interest in having a digital mailbox service, while more than 55 percent of respondents see value in the Postal Service providing a delivery preference management system.

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