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Postal Service told to work more with business

Inspector general urges more public-private partnerships

By Michael Dresser, The Baltimore Sun

11:21 PM EDT, July 11, 2013

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The inspector general of the U.S. Postal Service is urging the agency to take a cue from the port of Baltimore and expand its partnerships with private businesses to cut costs and modernize its infrastructure.

In a report released last month, Inspector General David C. Williams recommended that the Postal Service adopt a cohesive strategy for forging more public-private partnerships with businesses as a way of bringing needed cash into the system, which posted a $15.9 billion loss in 2012.

Among the examples of successful partnerships the inspector general cited is the long-term contract Maryland signed with Ports America to build a new container berth and to operate the port's Seagirt Marine Terminal. Williams uses Seagirt as an example of a private company financing public infrastructure in return for a long-term revenue stream.

The General Assembly passed legislation proposed by the O'Malley administration this year to increase the state's use of such partnerships.

Williams said the Postal Service needs to step up its efforts to tap into the resources of the private sector.

"Given the depth of the financial problems of the U.S. Postal Service, the time is right to consider greater use of" public-private partnerships, he wrote. "When designed and executed well, PPPs can be a useful instrument for the Postal Service to manage costs, secure capital needed to modernize its infrastructure, and acquire new know-how to spur product innovation."

Toni DeLancey, a spokeswoman for the Postal Service, said the agency is reviewing the inspector general's recommendations.

But Sally Davidow, a spokeswoman for the American Postal Workers Union, blamed the Postal Service's budget problems on Congress' requirement that the agency fund retirees' health benefits 75 years ahead. She said public-private partnerships are not the solution.

They "seem to be all the rage these days, but it's really just a pretty way of saying 'contracting out the Postal Service's operations,'" Davidow said.

She said such partnerships would invite businesses to scoop up the profitable parts of the business while leaving behind such unprofitable services as delivery to rural areas.

The Postal Service is no stranger to agreements under which it contracts out some of its work to private businesses on a small scale. For years, it has located operations in retail outlets known as Village Post Offices, which provide basic services such as stamp sales and mail drop-off, and Contract Post Offices, which offer a broader range of services.

In Maryland, the Postal Service operates 11 village offices — mostly in small, rural communities — and nearly two dozen contract offices.

Two of the latter have an especially sweet location: inside stores operated by Wockenfuss Candies.

Owner Paul Wockenfuss said the company's store on Harford Road in Baltimore is relatively new, but his Ocean City outlet has a track record of six or seven years of successful operation.

"It brings people into your store," Wockenfuss said. "If only four out of 40 buy something in the course of a week, you have 28 more sales than you did last year."

The inspector general recommended that the Postal Service build on partnerships such as the one with Wockenfuss — though on a grander scale and with a more systematic approach.

The report pointed to the postal system of the Netherlands, which closed its entire network of more than 2,000 post offices and replaced them with franchises in retail stores.

Michael Kubayanda, a public policy specialist with the inspector general's office, said large downtown post offices such as the facility on Fayette Street in Baltimore could be candidates for sale-leaseback deals with private companies.

"That's the type of property that should be evaluated," he said.

Freda Sauter, a spokeswoman for the Postal Service's Baltimore District, said the agency wants to expand its use of privately operated outlets.

"In the coming years we want to dramatically increase the number of retail partner locations we offer," she said. "We think there is a huge opportunity for small businesses to operate Village Post Offices or Contract Postal Units."

But there are limits. Congress has imposed restrictions on how the Postal Service may operate, and the lines of businesses it can enter.

"We are expected to operate like a business, but we do not have the flexibility to do so," Sauter said. Expanding partnerships with private businesses, she said, will only happen if Congress develops a simple, straightforward piece of legislation that provides key areas of flexibility."

michael.dresser@baltsun.com