USPS's Latest Billion Dollar Boondoggle
The United States Postal Service (USPS) is set to start off the New Year with a financially ill-advised bang, by announcing plans to purchase a fleet of new vehicles with a price tag of up to $6.3 billion. At first glance one might assume this fleet to be a to be a beneficial new asset to the USPS, however the multi-billion dollar purchase comes at a time when the financially beleaguered Postal Service is struggling to keep its head above water.
There are two issues with the Postal Service’s purchase of the new fleet that raise concerns. First, the purchase comes on the heels of the USPS’s posting of $5.1 billion dollars in losses for fiscal year 2015. Additionally, studies show that there are alternative options the Postal Service could use instead of purchasing an entire new fleet of vehicles that would be fiscally advantageous and save billions.
As mentioned, the Postal Service’s decision to spend $6.3 billion dollars on the new fleet comes at a time when the USPS should be looking to cut costs instead of creating new financial challenges. The fact is last November the USPS reported a $5.1 billion loss for fiscal year 2015, marking its 9th consecutive year of multi-billion dollar losses. Since 2007, the USPS has accumulated $56.8 billion in losses. The Postal Service has also experienced a five-year decline in first-class mail, leading to a hit in annual revenue that is cause for concern given the magnitude of this planned purchase.
A recently released study by the advocacy group Securing America’s Future Energy (SAFE) examined the USPS’s decision to throw billions away on a new fleet, finding that the problem could be addressed through cheaper, alternative means. The study also highlights issues with USPS’s inability to incorporate new technologies once the purchase is made.
USPS plans to use the new fleet of 180,000 “Next Generation Delivery Vehicles” (NGDVs) over the next 20-25 years. Yet one issue pointed out in the SAFE study is that committing to such a massive one-time purchase locks USPS into a vehicle fleet that will have “no ability to incorporate new technologies over time” and these 180,000 vehicles will have little resale value given they are custom made for USPS.
Conversely, the study suggested that instead USPS could look too a cheaper more efficient approach that would allow the vehicles to evolve with technology and stave off such a massive investment. For instance the study found “an alternative approach using a mix of lightly modified off-the-shelf vehicles could generate nearly $2 billion in savings for USPS.”
While it is clear the Postal Service has consistently struggled financially, posting annual losses for almost a decade, now is not the time for USPS to be making large scale, billion dollar purchases. What isn’t clear though is why USPS would decide to throw billions on another billion-dollar boondoggle when clear, cheaper alternatives exist.
Photo credit: Sanden