• on Oct 16th, 2012 in Strategy & Public Policy | 13 comments
    There has been a surplus in the U.S. Postal Service’s Federal Employees’ Retirement System (FERS) pension program since 1992. Most recently, the FERS surplus was projected to be $11.4 billion, accounting for most of the Postal Service’s total $13.1 billion pension surplus. The Office of Inspector General (OIG) asked Hay Group, an actuarial firm, to examine the causes of the FERS surplus, and a new OIG white paper presents the results of Hay Group’s work. Hay Group found that the main reason for the surplus was differences between the Postal Service and the rest of the federal government. In particular, postal salary growth was lower than the assumptions made in the liability estimates. The surplus grew as actual postal experience replaced the initial assumptions used for the entire FERS population. Hay Group recommends using Postal Service-specific assumptions to provide a more accurate estimate of the liability. When Postal Service-specific assumptions are used to measure the Postal Service’s liability, the surplus increases from $11.4 billion to $24 billion. Given the Postal Service’s current financial health, the existence of the FERS surplus raises some questions. What should be done about the postal FERS surplus? Right now, there is no mechanism to return a FERS surplus once it occurs. Also, what about the contribution rate? The Postal Service currently pays the same FERS contribution rate as other federal agencies, 11.9 percent of payroll for most employees. This contribution rate has increased twice in the past 3 years despite the existence of a surplus for the Postal Service. Should the Postal Service’s contributions be adjusted to reflect its specific characteristics? What do you think? Share your thoughts in the comments below.
  • 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 Oct 8th, 2012 in Delivery & Collection | 10 comments
    The digital revolution has changed communications, and with it, the operations and finances of the U.S. Postal Service. It also has brought deep changes in the way we design networks and analyze systems. Many organizations rely on mathematical modeling to test ideas before they become operational, conserving money and time. The Postal Service, facing limited capital and resources, has also adopted this practice. It is discovering how important these tools are for assessing strategies for designing the future mail network. The Office of Inspector General has explored some of the main components of the postal supply chain - retail, mail processing and transportation, and delivery – using a systems modeling approach. This approach has allowed the OIG to use objective methods to determine how the network could be redesigned to meet current needs and future demands. This research also helps us to understand some of the challenges in developing information-based decision models for the Postal Service. A primary challenge in any modeling effort is collecting the necessary information. Without this data, the model cannot fully assess the efficiency of the operations it is modeling, and develop an optimal network solution. Postal information systems can be a complex array of the hundreds of highly varied and specialized information systems that are often developed and maintained under separate contracts. Simplifying this landscape also could enable more insightful analyses to better guide decision makers. As the Postal Service considers how it can best serve the public through its products and services, modeling efforts can help it to evaluate different proposals for change. As we develop better efficiency standards with more rich data sources, we can not only better evaluate the efficiency of operations and system design, but we can better explore how operations may be changed to meet the needs of new environments.

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