FedEx Express has signed a seven-year, $10.5 billion contract to provide airport-to-airport domestic transport of mail for the U.S. Postal Service.
USPS officials conducted a competitive search before awarding the contract to FedEx, which has been its express partner for the past 12 years. During the process, officials evaluated the pricing and technical capabilities, among other things, of the candidate firms. According to USPS, the new agreement will provide capacity flexibility and operation and service improvements to postal customers.
The new contract starts in October.
“This contract provides enhanced value and additional flexibility allowing the USPS to respond to possible changes,” FedEx Express’ David J. Bronczek said in a statement. “We look forward to continuing our successful business relationship with the USPS.”
This contract renewal comes at a precarious time for the postal service, which is trying to dig itself out from under crippling debt that has forced the closure of retail stores, among other cutbacks. In a speech last week to the National Press Club, Postmaster General Patrick Donahoe said even though USPS is still facing a financial crisis and he’s been frustrated by the lack of movement on postal-reform legislation, he expressed optimism for the future.
One huge barrier, he said, is Congress, which must approve every change in the postal service’s business plan; he does think, however, they will ultimately let USPS enact a proposed delivery schedule. Earlier in the year, USPS officials proposed removing Saturday from the mail-delivery schedule, a change that would save an estimated $2 billion each year.
“Congress faces a simple choice. It can decide to start appropriating a lot of money to prop up a broken Postal Service. Or, it can give the organization the flexibility to operate more effectively,” he said during the speech. “In case you’re wondering, the cost of propping up our broken business model – including resolving the debts and defaults we can’t currently afford to pay – might be in the neighborhood of $58 billion dollars. And that’s just through 2017.” - Jon Ross