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OIG Report  "... potential preferential treatment given to a large... (DVD) mailer" costs MILLIONS of dollars.

November 14, 2007

Report by the Office of Inspector General USPS

PDF OIG Report

An overview of the report:

This report can be accessed by clicking on the above link.  For a quick synopsis there is a two page introductory letter highlighting the report.  The entire report should be read to comprehend the enormity of the relationship between one customer and the USPS marketing department.

The report looks at just the return portion of the disk rental process.  Using their own cost differential between automated and manual processing, the OIG says over the last two years the Postal Service has spent more than $40 million in additional costs processing the return portion of one company's mail pieces.  The reason for the increased processing costs is due to the non-machinable characteristics of their mail piece design.  The OIG has projected over $60 million in additional processing costs over the next two years if changes are not made.  Using the USPS numbers contained in the report the costs are much higher.  Processing units are telling people that the outbound pieces of this customer are manually processed also, so it's reasonable to double the above costs for a more accurate accounting.

The OIG report says that due to the non-machinable nature of the return mail piece, the (current) $0.17 surcharge should be applied to the postage assessed this company if changes aren't made in their design.  Based on an OIG stated volume of 1.6 million pieces per day, the rental company may be saving $272,000 per day on their return mail postage bill.  Since their outbound piece is reported to be non-machinable you could double this savings to $544,000 per day.
 
The OIG report also states that other companies have requested approval to use a similar mail piece design but were denied its use because the design isn’t machine compatible.   Several of those letters are posted on this site.  The OIG says that this could be viewed as Postal favoritism.  The OIG goes on to say that this rental company was told in 2002 that their current design wasn’t acceptable. The USPS marketing department later provided their own letter to the company over riding the engineering department's determination.
 
This seems like more than favoritism.  It sounds more like malfeasance or even corruption.  This isn’t about a company leveraging its size and influence; it’s about postal officials not being held accountable for the ethical administration of their duties.  The USPS response seems to be that since the volume of this customer is so insignificant to the total volume in the First Class mail stream there is no need to make changes.
 
Additional processing costs, special handling and lost revenue running into the millions for just one customer?  No wonder postage rates are going up!

 [Two earlier articles on non-compatible disk mailers are posted on this web site. Check out Turf Wars and Turf Wars 11]



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