USPS FedEx Reach Pact That Competitors Call Unfair

USPS, FedEx Reach Pact That Competitors Call Unfair

By Larry Riggs

Amidst complaints by competitors, the U.S. Postal Service and FedEx Express formed a seven-year alliance to share certain services. The deal is worth $7 billion.

Under the agreement, the USPS will buy space on FedEx airplanes to transport Express Mail, Priority Mail and First Class Mail. FedEx will place overnight service collection boxes at post offices nationwide.

Emery Worldwide Airlines, a unit of CSF Inc., is going ahead with a lawsuit filed last Friday in the U.S. Court of Federal Claims. Emory was unsuccessful in trying to get the court to issue a restraining order that would keep the deal from moving forward.

USPS spokeswoman Rita Peer said the court did not say the deal couldn't move forward. "If postal management thought there was any chance this wouldn't go through, they would not have made the alliance with FedEx," she said.

The Emery complaint alleges that a sole source contract with FedEx would violate the Postal Service's own procurement regulations. Those regulations require that all purchases over $10,000 "must be made on the basis of adequate competition whenever feasible or appropriate," and that such a contract would violate the Postal Service's regulatory requirement to provide " fair and equal treatment" to all potential suppliers.

The United Parcel Service plans to ask Postmaster General William Henderson to let it review the FedEx/USPS contracts, which the Postal Service said were not competitively bid, it was reported. The contracts met criteria for sole-provider agreements, the USPS said.

The USPS will pay the Memphis, TN-based FedEx approximately $6.3 billion over seven years for access to the FedEx national air transportation network. The pact will provide one integrated national air transportation network for the Postal Service. The agreement goes into effect in August.

After announcing its pact with the USPS, FedEx said it plans to add 500 pilots and 1,000 mechanics and handlers to its work force. FedEx said it would need the pilots to handle the increased traffic created by the deal.

The retail portion of the alliance lets FedEx place self-service collection boxes on postal property. It will be launched as a test in February. The estimated value of this part of the agreement could reach $232 million. This non-exclusive business concept will be open to any company that offers overnight package service with a national reach.

FedEx and the Postal Service plan to keep competing and maintain separate services. USPS won't handle FedEx shipments, nor will FedEx take care of U.S. mail.