FedEx Takes Over

FedEx Takes Over

Exclusive postal contract puts several services at risk

By Stephen P. Prentice

May/June 2001

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.