Postal Contracts Look Better by Daylight

Federal decisionmakers are feeling considerable pressure to take action to rescue the Postal Service from its desperate financial situation.  But decades of Congressional interference has been a major reason the Service’s business plan is so broken, and the danger persists that, despite projections of $200 billion in cumulative losses if Congress fails to act, any major missteps now could make matters even worse.

Tightening postal contracting provisions would seem like an obvious and noncontroversial fix, especially in light of some widely-reported scandals and pointed criticism regarding noncompetitive contracts.  Best practices in federal contracting are, after all, not so difficult to find.  And continued improvements in Postal Service business practices that ensure adequate transparency and competition will be essential to returning it to viability.

But it is unclear how the reforms currently being discussed in this area would be improvements over positive changes already being implemented by the Postal Service.  A January 2011 postal purchasing manual, called Supplying Principles and Practices, established new rules for noncompetitive contracts.  These included defining four specific scenarios under which they are appropriate, and the creation of an independent competition advocate with regular responsibilities for evaluating and publicizing proposed purchases.

It seems sensible that elected officials would seek to codify contracting reforms into law.  But recent, legislative versions of the plan, despite their bipartisan support, appear to lack the clarity, detail and rigor of the new agency policies they would replace.  And it is not clear that entrusting these vital details to the legislative process in the current environment can be counted on to produce them.

With the 11 largest suppliers to the Postal Service each paid over $100 million in FY 2010, the stakes for the Service are high.  Last year’s contracting changes were made amid numerous reports of problems in this area.  One 2010 audit by the Postal Service Inspector General found that more than one-third of noncompetitive contracts reviewed were insufficiently supported.  These included 17 recent contracts awarded noncompetitively to former Postal Service executives.

In fact, the Inspector General has noted that Postal Service sole-source contracts incurred hundreds of millions of dollars in unnecessary costs in recent years.  Increased oversight and monitoring in specific areas were among the recommendations regularly issued by the IG to avoid incurring unnecessary future costs.  Such continued scrutiny will be important. But any new reforms that undermine the progress already made could prove costly and ill-timed.

Don Soifer is executive director of the Consumer Postal Council in Arlington, Va.