Postal Service, FedEx form alliance

The U.S. Postal Service and FedEx Corp. have announced a unique business alliance that will allow the Postal Service to use FedEx's vast air transportation network and let FedEx take advantage of the Postal Service's many retail outlets. Deputy Postmaster John Nolan may have been joking when he said the Postal Service and FedEx Corp. are "interchangeable now," but few of his competitors are laughing. Nor are some members of Congress. Nolan made the remark at a press conference Wednesday to announce the partnership. The Postal Service will pay FedEx nearly $6.3 billion over seven years to fly Express and Priority Mail. The alliance could save the agency more than $1 billion. The Postal Service currently leases planes and rents space on commercial airlines to move mail. The Postal Service will continue to use space on commercial airlines, but will stop leasing an aging fleet of planes. "This should help in terms of cost savings and help [the Postal Service] in terms of efficiencies," said Robert McLean, executive director of the Mailers Council, an Arlington, Va.-based trade group. "They are getting a reliable network that is very productive. We are hoping it will result in more efficiencies." The alliance is scheduled to roll out in August, but it must first clear a legal challenge. Emery Worldwide Airlines sued USPS in federal court to block the contract. Emery, which last year sued to get out of a failed partnership to process and transport Postal Service Priority Mail, claims that the contract violates procurement regulations. The agency, Emery claims, is required to put up for bid any contracts exceeding $10,000. Nolan says the agency did an exhaustive analysis of potential business partners and found that FedEx was the best fit. A ruling on the case is expected by early spring. The retail part of the alliance is also sure to come under heavy scrutiny. FedEx will put collection boxes at post offices nationwide. It's the first private-sector company to gain such a privilege. FedEx expects to deploy 10,000 boxes during the first 18 months of the contract. Depending on the total number of boxes deployed, the deal will generate between $126 million and $232 million in revenue for the Postal Service. The added revenue and cost savings will come in handy for the agency, which lost money last fiscal year and is expected to finish in the red again this year. Private sector competitors, mainly United Parcel Service, questioned the arrangement, claiming it violates antitrust laws. "The retail arrangement is not exclusive," countered Nolan, adding that it was open to any company. When news of a possible alliance first leaked last summer, high-ranking Republicans raised questions about antitrust issues. Now that the deal is final, Hill sources speculate that members will take a close look at the details.
Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care


When you download a report, your information may be shared with the underwriters of that document.