FedEx Takes Over

You’ve probably heard of or read the recent newspaper accounts of the contract that FedEx "Big Blue" and the U.S. Postal Service have secretly arranged. What you may not appreciate is the disruption of the technician job market that will soon occur as a result of this action.

History
For many years now, a group of air carriers has performed for the postal service in an exemplary manner. Toward the end of the former administration last year, a secret pact was completed between the Postal Service and Federal Express. So secret that it even had an internal code name of PSALMS. Talk about secrets. Only a few key personnel of the postal service and "Big Blue" even knew of the deal. So much for the rights of the taxpaying public and other potential competitors to know.
This is a BIG deal. The contract involves some 6.3 billion dollars. Needless to say, the present contractors were upset. No request for proposals, no announcement of the proposed contract and bang! — it was just there. The postal service says it’s more efficient this way.
Contrary to the postal regulations, no other carriers were allowed to bid for this work or have any knowledge of the impending deal. The postal service even knew of other carriers that wanted to make a proposal, but ignored them. The service completely disregarded other carriers who could guarantee lower per unit costs than what was proposed by "Big Blue." Ironically, technicians and other taxpayers will pay for their corporate strength.

Impact
No big deal you say? Some have estimated that at present, there are two or three thousand technicians and other support people directly involved in handling the aircraft that carry the mail. Many will be laid off and they will likely not be hired by "Big Blue." The present operators will have to fend for themselves when their work disappears. If this thing gets final approval, the fallout will be ugly. The new contract with FedEx is set to kick in this August unless a public outcry brings it to a halt and the politicians do something about it.

On the condition of exclusivity
Just think, Emery Air Freight, Ryan Airlines, Airborne, Evergreen Airlines, Kitty Hawk, Express One, Amerijet, Custom Air Freight and many others will fall by the wayside and be replaced by one big big carrier. None will be permitted to carry any of the mail because the contract is exclusive. Many companies will not survive the loss of mail contracts that are still in existence as they will shortly be summarily cancelled. Airplanes parked and mechanics, pilots, dispatchers, and loaders, all furloughed. No more mechanic shortage.
The postal service said that FedEx was the only company that could provide the service needed and there was no requirement to seek competitive bids, or even give any notice to the other carriers. This is transparently false!
The big defect in the postal service’s thinking is that their choice was not, and still is not, capable of providing the required service that is needed. In fact, the postal service already plans to give $100 million to FedEx just to get ready to do the job. They are being given a million dollars this month in order to get prepared. Such a deal!
All of the technicians involved with the aircraft now carrying the mail had better polish up their resumes as it may be necessary for them to look elsewhere for work. It is sort of sad to see a company with more than enough work of their own, take over, and effectively threaten to put a large number of technicians and others out of work.

The law
The postal service is violating its own laws and regulations. The service is required by law, except in rare circumstances, to solicit bids on contract worth over $10,000. Competitive bidding in the government setting is the cornerstone of fairness, integrity and most importantly, cost effectiveness.

The loophole
There is a sole source exception, when it is clearly justified. In this case, it certainly was not and is nothing more than an excuse for arbitrary action. This contract will be the single largest award by the postal service in its history! It must be open to the scrutiny of competitive bidding.
"The business of carrying letters and other mail belongs exclusively—to the Government. If private agencies are established—the business, which is the right and duty of Government to conduct—may be handed over to—corporations who will conduct it with the sole view of making money."
U.S. Postal Service vs Brennan

"And what will never change is our mission to—produce superior financial returns for our shareholders—"
FedEx Corp. Annual Report

It does not take a whole lot of thought to see the inherent conflict of interest that presents itself in this proposed arrangement.

The downside: your biggest competitor takes control
When this contract kicks in, FedEx will effectively control the amount of mail that can be delivered. Would you give your biggest competitor control over your business? Certainly not. You would spread the business around. As the regional carriers shut their doors, the postal service will have no alternative but to pay whatever "Big Blue" demands to carry the mail. Have you ever seen such an arrangement in the private sector?
What the postal service is doing is concentrating all of its delivery risk into the hands of its biggest competitor. You can be assured that if FedEx has a choice of picking up its own stuff or the postal services’, the choice will be obvious. They charge more than the postal service for delivery. Where will the profit lie?
FedEx has a large staff of competent technicians; however, a single series of failures – including weather, labor, or computers, with additional backup by other carriers, could drive the express mail service into chaos. Keep in mind that action by flight crews, which was threatened just last year, could shut down the express mail system.
While at the moment, the service is dispersed among many regional carriers, the FedEx contract will eliminate all competition and concentrate all the risks of failure in one basket. This is clearly not a good business practice.

A real threat – CRAF
Many of the technicians who work for the regional carriers now carrying the mail recall the lift provided by their companies during the Desert Storm emergency. The fact of the matter is that the military calls upon the civil aircraft fleet in times of emergency to perform transport of men and equipment. The system is called the Civil Reserve Aircraft Fleet (CRAF) and is comprised of all the regional carriers in our civil fleet.
This partnership between the Government and the air freight industry is a national security issue. The CRAF system creates a large reserve of strategic lift for the Government, without the necessity of purchasing, crewing or maintaining these aircraft. Two of the companies now threatened by this new contract are Emery and Evergreen; both of whom, with others, flew the lion’s share of the lift for Desert Storm. FedEx did not. Is this the way we thank those who helped out during a time of national emergency? These were missions into hostile lands with some degree of risk.
The potential shutdown of many of these carriers as a result of this sole source contract will seriously limit the available lift during any emergency need. Furthermore, it will be obviously difficult for the Government to use FedEx aircraft simply because they will be hauling all our mail. The choice will be— haul the mail or the military? Our postal service should not intentionally place itself in such a risky position.

Immediate action required
All technicians should be concerned about this turn of events. If you have a labor representative you should inquire of their position and what they are doing about it. You can also contact your local political representative for further assistance.
If you want to save your jobs and perhaps preserve the jobs of others, you may be able to affect the outcome of this contract award and perhaps turn it around or better yet, force a spread of the business among other carriers.
Many observers believe that the conduct of the postal service and their sole choice for this work violates both the letter and the spirit of the law concerned. There is nothing wrong with giving some of the business to "Big Blue," but, to give them all the business is just not good practice or for that matter, fair.

Legal proceedings
The latest attempts to turn this around in court have been disappointing. However, part of a recent ruling did find that the postal service did indeed violate their own rules in the award of this contract. Further, the court found that certain statements by the service were either not believable or not supported by the facts. They still prevailed for the time being.
By the time you read this, an Appeal will have been filed and the result may be more favorable.
On the Government administrative side, the new administration’s Department of Justice is looking into whether or not this agreement violates our anti-trust laws, among others. It clearly seems to many that this is the case and is the strongest of objections. The secret nature of the agreement is both arbitrary and capricious and many observers feel this act alone should be a sufficient basis to set it aside. Stay tuned — more to come.