PRIVATIZATION: COMING TO A POST OFFICE NEAR YOU?
by Andrew C. Kubat, Lehigh Valley APWU, February 2008
A BIT OF HISTORY
Many of my 20 years at the Post Office have been contemplating postal privatization and what impact it would have on me and my co-workers. No other word, except maybe "excessing," causes more stress in a postal employee than does "privatization."
Postal privatization, the wholesale transfer of all postal operations from the United States Postal Service to a private corporation, has been a long-debated topic. Ever since the USPS showed that it can generate a profit, the corporate jackals have been gathering, each wanting to take a piece.
Since 1990, Congress has taken up several Postal Reform bills that would have dismantled the post office. Thankfully, each was defeated before reaching the President. Still, lobbyists for large mailers and competitors spend their time, and money, cajoling congressional representatives to have another go at it.
Perhaps the worst period was the mid 1990's when threats of Postal Reform and privatization hung over our head like Damocles' Sword. By mobilizing the public and members of Congress, we were able to defeat these bills, thus securing our postal future. Then came President Bush's Commission of the Postal Service and, once again, we all held our collective breath.
Bush's commission led to the introduction of the Postal Accountability and Enhancement Act of 2006. All things considered, this bill wasn't as bad as it could have been. There were some negative aspects, but it did not privatize the USPS. Once the bill was passed into law, it appeared the Postal Reform proponents would be satiated.
So there you have it. We faced the privatization demons and won. We saved the USPS from falling into the hands of greedy corporations. No longer would we have to fear some money-grubbing company stealing our jobs and our livelihood. We took their best shot and we were still standing!
PRIVATIZATION...WOULD YOU BELIEVE...?
Would you believe me if I said privatization was not merely a threat on the horizon? What would you think if I said it's already happening?
The fact is that the USPS has been giving away work for many years now. They call it "contracting" or "outsourcing." I call it piece-meal privatization. I have been saying for a long time that the postal service will never be privatized because the American public would not allow it. End of story? Not by a long shot.
Postmaster General Potter, and his predecessors, have systematically given away bits and pieces of postal work. Eventually we will get to the point where there is nothing left. The NALC loves to promote " The Last Mile." They have declared that the USPS should outsource all operations, except delivery. The delivery, or " The Last Mile," would be done by NALC-represented letter carriers.
Well, that position changed dramatically when, in 2007, the USPS began hiring private contractors to deliver city carrier routes. The NALC quickly changed its tune, going as far as to negotiate, as part of their contract, a six-month moratorium on the hiring of new contract carriers.
Make no mistake, the USPS is being privatized. It is being done piece by piece, right under our noses. The obvious question is, "Why?" Why would they do this? The competitors can't offer better service. They are not cheaper. Why would top postal officials actively seek to give work away? Can you say, "Money?"
All of our recent Postmaster Generals took private industry jobs upon their retirement from the USPS. They took high paying consultant jobs with companies directly related to the mailing industry. Former PMGs Runyon and Henderson catered to large mailers during their tenure. Henderson, who left the post office in 2001, became the Chief Operating Officer at NetFlix. I'm sure current PMG John Potter has similar ideas.
If you don't believe that the USPS is privatizing the postal service, check out these examples and then decide.
1993: REMOTE ENCODING CENTERS1993 marked the Postal Service's first attempt to contract out a major mail processing operation. The Remote Encoding Centers were established to replace the LSM. The REC would remotely attach barcode information to a mailpiece not readable by automated machinery.
Initially, the USPS had contracted out to do this work to several non-union companies which paid low wages. In fact, one of the contractors had sub-contracted his work to a company that was planning to open two REC sites in Mexico. Imagine United States mail being processed by slave-wage workers in Mexico!
The APWU took up the fight and was successful in convincing an arbitrator that the REC work belonged to the bargaining unit and should not be contracted out. All REC work was brought back into the Postal Service, where it remains today. This work is performed by APWU-represented postal employees.
1997: EMERY TAKES PRIORITY MAIL
In 1994, the USPS began a three-year study on the feasibility of outsourcing Priority Mail processing and transportation. The end result of the study was a $1.7 billion contract which awarded the Priority Mail work to Emery Worldwide Airlines.
Under the agreement, Emery would obtain, equip, staff and operate 10 Priority Mail Centers (PMC) across the country. Emery would take direct control over air transportation, ground transportation, and processing.
Less than four years into the agreement, it was clear that things weren't going as planned. Not only was Emery not meeting delivery goals, but a Postal Inspector General audit revealed that "Priority Mail processed through the (Emery) network cost 23% more than Priority mail processed by the Postal Service."
In addition to higher costs and service delays, the Inspector General found that mail destined for Alaska had been abandoned in Seattle. A Department of Justice investigation found Emery employees guilty of misclassifying mail, double-weighing and inaccurate weighing. As a settlement, Emery agreed to repay $10 million to the USPS as a result of knowingly inflated billing.
In November 2000, Emery attempted to charge 40% more than the deal warranted. Both the USPS and Emery agreed to terminate the contract and part ways. However, the USPS was forced to pay Emery $66 million in termination fees and another $235 million for alleged underpayments.
1998: MAIL TRANS. EQUIPMENT CENTERS
In 1998, the USPS contracted out Clerk, Maintenance and mailhandler work at Mail Transportation Equipment Service Centers (MTESC). The MTESC supply plants with sacks, trays, sleeves, hampers, etc. By 2000, there were 22 privately owned MTESC in operation.
In 2001, an Inspector General audit found poor performance and excessive costs running rampant in the MTESC network. The Inspectors concluded that the USPS had already paid one contractor $1.9 million for "work not properly authorized" and could wind up paying an additional $11.2 million for other "unauthorized" work.
The USPS awarded over $53 million in no-bid contracts during this alleged cost-saving move. However, the Inspector General's audit concluded that the contracting out this work, rather than keeping it in-house, would cost the USPS more than $1.1 billion.
2001: FEDEX STRIKES GOLD AFTER 9/11
After 9/11, the Department of Transportation decreed that no mail weighing over 16 ounces could travel in a commercial plane. Lacking its own air fleet, the USPS scrambled to find a solution. That solution was FedEx. In 2001, the USPS entered a contract with FedEx in which FedEx would become the primary transporter of Express and Priority mail. Since the inception of this deal, one thing has become clear; FedEx is robbing us blind! That is not a knock on FedEx. They negotiated one heck of a deal. The blame lies with the USPS for agreeing to such an atrocity.
Under the terms of the agreement, the USPS promises to privde FedEx with guaranteed quantities of mail. Those guaranteed volumes increase as time goes by. The initial volume of 430,000 cubic feet of mail has increased to 810,000 cubic feet. The guarantee mandates that if the USPS does not provide the promised volume, they must still pay for the promised volume. If the deal calls for 810,000 cubic feet of mail and the USPS only has 500,000 cubic feet available, it must still pay for the full 810,000.
To meet these contractual obligations, the USPS is shifting more and more mail from commercial passenger planes and giving it to FedEx. This is a double-whammy! Commercial airlines charge 38 cents per pound to transport mail while FedEx charges 80 cents. So we are literally taking mail off the cheaper plane and putting it on the more expensive one.
The switch to FedEx has also resulted in slower delivery times. Where commercial airlines have many flights to select from, FedEx has only one flight per day. If the USPS misses this dispatch, the mail must wait until the next day. Also, if the plane is full, the USPS is the first mail left behind. Since the inception of this deal, the average delivery time for priority mail has increased from 2.15 days to 2.69 days.
There are rumors, within the cargo industry, that FedEx is negotiating with the USPS on a deal involving ground transportation. This would be most ironic in that 10 years ago, FedEx did not have sufficient resources to make such a deal. Since then, they have taken the money the USPS has paid them and used it to upgrade their ground network. Now, FedEx is using that upgraded network, which the USPS paid for, to take more work away from the USPS.
2004: HALLMARK'S BID FOR CPUs
In an attempt to reduce window operations, the USPS embarked on a pilot program with Hallmark Gold Crown stores in 2004. The Hallmark deal would allow the store to operate and staff a Contract Postal Unit (CPU). Is this new? I can buy stamps at drug stores, contract stations, and even ATMs. The important difference here is that the Hallmark CPUs would not only sell stamps, they would also offer all other services currently available at the window. The Hallmark program was designed to establish 972 Hallmark CPUs with each one acting as a "satellite" post office.
Sears department stores attempted a similar move in 1989. The APWU responded with calls to boycott Sears and members cut up their Sears credit cards. Afraid of losing customers or perhaps the public backlash, Sears backed out of the deal as quickly as possible.
Different store...different year...same result. In September 2004, the USPS notified the APWU that it was terminating the Hallmark Gold Crown program.
2006: UPS GETS IN ON THE ACT
June 2006 - The USPS and UPS enter into an agreement which will result in UPS providing air transportation of Priority and First class mail to and from 98 cities. The three-year deal, with a possible two-year extension, is expected to cost the USPS $100 million, annually.
This move was prompted by the expiration of contracts the USPS had with commercial airlines. According to USPS spokesman David Partenheimer, some commercial airlines chose not to bid on new contracts. "In some cases," he added, "the agency decided not to solicit airlines."
United Airlines, which flies the most mail, was not offered a contract for domestic mail, but will still carry international mail. United has transported US mail for over 75 years.
Postmaster General John Potter claims that in light of the similarity of our operations "it only makes sense for the postal service to take advantage of the extensive reach of the UPS network."
2006: AIR MAIL CENTERS ARE GROUNDED
"In these days of heightened attention to our nation's security, it is unconscionable for the Postal Service to even consider replacing postal workers with employees hiring by subcontractors." This was President Burrus' response to the July 2006 announcement that the USPS was considering subcontracting work at 43 Air Mail Centers (AMC).
Of the 79 AMCs in existence, the USPS had, in 2005, subcontracted work at the Boston (MA) AMC as well as six others, including the Pittsburgh (PA) AMC.
Burrus warned that this "ill-advised venture" would not only slash the postal workforce, but it would also jeopardize security and service to the US public. "Once again, management is succumbing to the demands of the big advertising mailers," Burrus said, adding, "The Postal Service should be reminded of the Emery debacle."
2007: NOT JUST AN APWU ISSUE
The NALC has learned this lesson the hard way. When Bush appointed his committee to examine the USPS and propose legislative reforms, the NALC got on board. At the outset, the USPS promised that delivery would not suffer. They promised that delivery, or "The Last Mile" as NALC calls it, would always be performed by a postal service employee. To that end, NALC President Bill Young pledged his support for Postal Reform. Young even went so far as to tell his members that "We have a friend in the White House," referring, of course, to George W. Bush.
The NALC sided with the USPS on privatization and publicly stated that all processing and transportation should be contracted out. Of course, this did not sit well with the other unions.
Once the final bill was presented, it was clear that there would be language protecting letter carriers from outsourcing. In fact, the USPS had been hiring private contract letter carriers in Florida and the Northwest. These contractors were paid a flat fee based upon the number of stops on their route. In some cases, a single individual would apply for and be awarded several routes. He or she would then sub-contract those routes, paying the contractor half of what the USPS paid.
In 2007, the NALC realized they had been tricked and sought contractual language which would prohibit contracting out city routes. They were not successful in this endeavor. The best they could accomplish was a six-month halt on the hiring of any new contract carriers.
2008: BULK MAIL CENTER GIVEAWAY
On January 18, 2008, the USPS announced it was issuing a "Request for Proposals" for the outsourcing of work being performed at the Bulk Mail Centers (BMC). The postal service is looking to contract out the distribution and sortation of bulk mail to private companies. FedEx, UPS and Allan Ritchey have been mentioned as possible suitors.
In an attempt to minimize the impact on postal workers, President Burrus has discussed the possibility of "in-sourcing" some work currently performed by contract workers. There is also the possibility that once the BMC is emptied of work and equipment, it will make the perfect home for the Flat Sequencing Sort (FSS). The USPS says it will make an announcement in mid-February.
ARTICLE 32 - THE CONTRACTING ACHILLES HEEL
Article 32 of the National Agreement governs the contracting out of postal work to non-postal companies. With the exception of Highway Contract Routes in the Motor Vehicle Craft, the language on contracting is very basic. Article 32 requires that the USPS give "due consideration" to keeping the work in-house before making the decision to sub-contract.
The USPS must complete a Comparative Analysis which will outline all of the factors involved in the decision, such as cost savings, labor savings, impact on delivery, etc.
The terrible truth is that even if a proposed contract will lose money, the USPS can still enter into such an agreement. Take the recent deal with Bank of America. All parties involved knew the deal would cost the USPS $45 million in lost revenue. Yet the deal was approved anyway. All they have to say is, "We gave due consideration to the APWU's position," then they can do whatever they want.
President Burrus would love to negotiate language which required the USPS to negotiate over these changes. The Union has been able to add provisions to Article 32 which require the USPS to notify the APWU of planned subcontracting, however, Burrus says, "we have been unable to achieve real bargaining over whether or not specific activities will be subcontracted."
WHAT CAN I DO?
You can contact your Congressional Representative and ask them to support H.R. 4236, the "Mail Network Protection Act of 2007." Representative Lynch (MA) introduced this legislation on behalf of the APWU. The bill, which currently has 26 co-sponsors, has been sent to the House Committee on Government Oversight and Reform.
I won't spend much time on the text of the bill; that will be covered in another part of this newsletter. Suffice to say, passage of this bill would make it much more difficult for the USPS to contract out our work.
Of the 26 co-sponsors, Rep. Patrick Murphy (PA-8) is the only Pennsylvania representative to sign on. To pass, this bill will need more support. Representatives Dent (PA-15), Gerlach (PA-6) and Kanjorski (PA-11) have yet to take a position on this bill.
Contact your representative. Ask them to support this legislation. The member on the floor may feel "out of the loop" during the contract negotiations process, but this is an opportunity where your direct involvement can lead to change.