• on Oct 15th, 2012 in Finances: Cost & Revenue | 1 comment
    The U.S. Postal Service spent $12.3 billion on supplies and services in FY 2011, which made up about 17 percent of its total operating expenses. Suppliers to the Postal Service range from large integrators, such as FedEx and UPS, to individuals responsible for cleaning offices and transporting mail between postal locations. With thousands of suppliers, the Postal Service needs a procurement process that is agile, yet transparent and secure. When the Postal Reorganization Act created a self-supporting Postal Service, it exempted it from many federal purchasing laws, including the Federal Acquisition Regulation, which most other federal agencies must follow. Since then, the Postal Service’s purchasing policies have gone through many changes and iterations in an effort to follow the procurement developments of the private sector, streamline its acquisition process, and reduce purchasing costs. In 2005, the Postal Service implemented the Supplying Principles and Practices, which are not legally binding and allow it to make purchasing decisions based on best value rather than rigid factors. Postal contracting officials have much greater discretion than their counterparts at other federal agencies. The streamlined process was designed to create a more efficient businesslike approach, but it has also opened the door for potential problems, especially in the area of non-competitive contract awards. A 2010 audit by the Office of Inspector General on the Postal Service’s noncompetitive contracts said the Postal Service needed to put in additional controls to make sure its interests are protected. Among the suggestions were to strengthen oversight of noncompetitive contracting, maximize competition, and avoid any potential conflicts of interest. The streamlining of purchasing procedures also created a new process for resolving supplier disagreements. Previously, suppliers filed disagreements with the Postal Service’s general counsel and decisions could be appealed to a federal court. Under the new process, suppliers file disagreements with a Postal Service manager, designated as the supplier disagreement resolution official, whose decisions are final and cannot be appealed by the supplier. Do you think streamlining of the purchasing procedures has positively or negatively affected the Postal Service? What is working particularly well in the current procurement process? What could be improved? Should the Postal Service follow procurement developments of the private sector, or should it be required to follow more federal procurement rules? Share your thoughts below.
  • on Sep 17th, 2012 in Finances: Cost & Revenue | 9 comments
    Many international postal operators pay corporate income taxes to their national treasuries. Similar to a private company, these payments appear in the postal operators’ financial statements. Countries whose postal operators pay corporate income tax have essentially made a policy decision: They want their postal service to behave like a private business. This may not be surprising in solidly capitalist countries, such as the United Kingdom, Japan, or Taiwan, but many of these posts are from countries with long histories of centrally controlled economies, such as Armenia, Slovakia, and Croatia. The concept of a corporate income tax is not entirely foreign to the U. S. Postal Service. The Postal Accountability and Enhancement Act requires the Postal Service to compute its assumed federal income tax on the income earned from its competitive products each year. Rather than paying that income tax to the Treasury, however, the Postal Service essentially pays itself. The money is transferred from the Competitive Products Fund to the Postal Service Fund, and can be used to fund the postal network as a whole. Corporate income tax does not necessarily imply privatization either. The postal operators of Germany, the Netherlands, Malta, and Singapore all pay corporate income tax and all are publicly traded corporations. The remaining operators that pay corporate income taxes are, in essence, state-owned. One advantage of the use of corporate income taxes is that the payments to the national treasury are tied to the financial performance of the postal operator. Corporate income tax payments decline during downturns in the business cycle and increase during periods of prosperity. Another advantage is the fact that these national governments have a stake in the sound financial management of their postal operators. In short, they have skin in the game. What do you think? Should the Postal Service pay a corporate tax? Would such a tax encourage a more business-like approach to managing the Postal Service? Or does its public service mission and its current universal service obligations make a corporate income tax unworkable?
  • on Aug 6th, 2012 in Finances: Cost & Revenue | 10 comments
    The Postal Service has built a strong brand name around service, trust, and security. Few other organizations can lay claim to such a strong brand, one with more than 200 years of history and cultivated by the Postal Service’s consistent fulfillment of its mission to securely deliver mail to every American, regardless of location, at a reasonable price. For 6 straight years, the Ponemon Institute has named the Postal Service the most trusted government agency and one of the top 10 most trusted businesses in the nation. Many postal observers have encouraged the Postal Service to leverage this “trusted brand” to expand its offerings in the digital market. But a steady drumbeat of bad news over the past few years around its financial situation, potential cuts in service, and uncertainty over its retail and network downsizing plans has unsettled stakeholders. The question many of them ask is whether the ongoing negative news coverage could be hurting the overall brand. Even the PMG noted earlier this year that the mailing industry is experiencing a “crisis in confidence.” Lingering uncertainty about the Postal Service’s future could further erode confidence. Further, competitors can use the turmoil to their advantage, touting their own services as easy and reliable in the face of uncertainty. What do you think? Have the ongoing news reports about the Postal Service’s finances and uncertain future affected your view of the organization? Do you think these reports hurt the Postal Service brand? Or is the Postal Service doing the best it can under the circumstances?

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