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U.S. Govt. Skips U.S. Post Office for U.S. Mail

Washington — The U.S. Postal Service, required to send congressional letters at reduced rates, can’t win regular business from the federal government, according to an inspector general’s report.

Private-sector competitors led by FedEx and United Parcel Service “consistently” have more than 98 percent of the $337 million annual shipping spending by federal agencies, according to the Jan. 18 report.

“The Postal Service faces challenges to growing its share of this market,” the Postal Service’s inspector general said in the report. “Major challenges include pricing flexibility and the lack of 2- and 3-day guaranteed express delivery products.”

Having lacked a sales force, the Postal Service was late to enter bidding for U.S. General Services Administration contracts for federal agencies. UPS, based in Atlanta, and FedEx, based in Memphis, Tenn., have been official suppliers since 2001, while the Postal Service only began participating in 2009, according to the report.

Another handicap is the preference the Defense Department gives to carriers that have their own planes and participate in the Civil Reserve Air Fleet program, the report said. The Postal Service primarily contracts its air shipping to FedEx and doesn’t own cargo planes. The FedEx contract expires in September.

In fiscal 2012, which ended Sept. 30, the Postal Service got $4.8 million of the almost $337 million that U.S. agencies spent through GSA contracts on shipping, the report shows.

The Postal Service could gain $34.8 million in revenue this year and next year if it implements the inspector general’s recommendations to capture more of the U.S. government market, the report said.

The government would have spent more to ship via the Postal Service than UPS and FedEx, both of which can undercut competitors’ prices to gain business, according to the report. Postal Service rates must cover costs as well as a share of the organization’s overhead, and are regulated by the Postal Regulatory Commission and overseen by Congress. The service can’t price express and priority mail, the fastest two ways to ship through the system, at a loss in order to attract customers, the report shows.

Lawmakers in the House and Senate held hearings in the previous legislative session calling on the Postal Service to improve its finances. The service lost $15.9 billion in fiscal 2012.