Background
Federal, state, and local governments use mailing and shipping services to help carry out their missions and meet their diverse mailing needs. Government mailers consider price, service, and contract terms when deciding between the U.S. Postal Service and one of its competitors; and some government entities use presorting to qualify for price discounts.
The Postal Service recorded [redacted] billion in revenue from government mailers in fiscal year (FY) 2014; most of the revenue was from mailing products, such as First-Class Mail or Standard Mail. The Postal Service’s competitors have a larger share of certain government package markets – for example, competitors captured 98 percent ($302 million) of the $308 million spent on select packages purchased through General Services Administration contracts in FY 2014. While mail is useful for conducting government business, it is affected by electronic alternatives and paperwork reduction efforts. At the same time, package shipments will continue to be a necessary part of government business operations.
The Postal Service’s Sales organization has [redacted] managers who sell products and services to [redacted] federal agencies that are considered strategic accounts based on revenues and potential opportunities. Other Sales staff members sell to the remaining federal, state, and local agencies and commercial mailers in their respective territories. The Sales organization recently reduced the number of staff members dedicated to federal customers to focus on commercial growth, but it continues to look for opportunities to increase government revenue.
Our objective was to evaluate Postal Service opportunities to increase government mail revenue. We identified federal shipping challenges and opportunities in a 2013 audit report, specifically noting challenges related to price inflexibility and the lack of 2- and 3-day guaranteed express products.
What the OIG Found
The Postal Service has opportunities to increase revenue by enhancing its sales and marketing efforts to government mailers. Mailers we spoke with identified pricing, product, and service considerations that influenced them to use the Postal Service’s competitors, but we found that the Postal Service has opportunities to gain an advantage in the area of prices, products, and service performance; and could provide better value in certain instances, such as for products weighing less than one pound.
The Postal Service may also be able to capture revenue by promoting its mailing partners’ capabilities. For example, we found that 72 percent of federal agency mail was presorted. Mailing partners may be able to offer additional presorting services to lower the cost of government mailings. These partners could also offer more flexible payment options, such as paying after the service was provided. Factoring in mailing partners’ capabilities as part of Postal Service marketing efforts could be mutually beneficial: it could help the Postal Service retain government mail revenue and lower government mailers’ postage costs.
We estimate a revenue impact of [redacted] million in FY 2015 from the Postal Service enhancing its sales and marketing efforts toward government mailers.
What the OIG Recommended
We recommended the Postal Service enhance sales and marketing efforts toward governmental mailers. This could include more effectively promoting Postal Service prices, products, and service performance and promoting its mailing partners’ capabilities.