USPS has funds sufficient for fleet renewal, CFO tells Congress

The US Postal Service “cannot wait any longer” to replace its aging vehicle fleet, its chief financial officer told Congress yesterday. The debt-ridden Postal Service, which operates one of the largest vehicle fleets in the world, has delayed a planned renewal or even refurbishment of its 180,000 vehicles for around decade because of a lack of funds.

USPS is now in the early stages of choosing a supplier or suppliers to provide the next generation of purpose-built mail delivery trucks.

But, it could take three years to bring in new vehicles, with the current fleet comprised of vehicles averaging 23 years in age, of a planned 24 year lifespan.

Speaking at a hearing of the US House of Representatives Oversight Committee, Postal Service CFO Joseph Corbett said the federal agency now needs to prioritise the spending of around $4.5bn to $6bn to renew the fleet.

“It’s gotten to the point where the replacement of the vehicles has got to start now,” he said. “I believe there is almost universal agreement, we’ve got to move as quickly as we possibly can do, we’ve got to make it a priority to fund that.”

While Corbett said the Postal Service needed Congress to reform its retiree healthcare benefit obligations, its pension funding arrangements and pricing powers in order to tackle its current financial crisis, he told the Committee that there was now sufficient cash reserves to guarantee that the fleet renewal goes ahead.

“We at the Postal Service as we sit here today, from a nearly zero cash balance six years ago and all our borrowing capacity taken up, we now sit here today with about $6bn cash,” he said, while noting that the scale of the cash reserves did only equate to around a month’s operating expenses at the Postal Service.

RFP

During the hearing yesterday in Washington, the Committee heard that the Postal Service is about to reach the stage where shortlisted manufacturer suppliers will be asked to provide prototype vehicles to assess, having issued a Request for Information from potential manufacturers in January 2015.

The design and testing of prototype vehicles is expected to take over two years to complete, with a second Request for Proposals scheduled for 2017, seeking production phase business cases.

Corbett said the Postal Service was open to various vehicle technologies, including low-carbon options. He also confirmed that USPS is still open to having different types of vehicles for use in different areas of the United States.

The Committee expressed concerns that it will likely take until 2018 for the Postal Service to complete the renewal of its fleet with next generation vehicles.

Representative Brenda Lawrence, from the State of Michigan, said continuing to “kick the can down the road” and delay vehicle replacement was likely to impact on mail delivery standards since vehicles were “critical” to those standards being met.

Corbett insisted that the Postal Service policy of repairing existing vehicles would suffice over the next three years. He explained that everything on a vehicle except its aluminium frame could be replaced, with external studies suggesting that the average vehicles’ frames could last another 10 years.

“We will get through it,” he said. “We will continue to repair and in some cases overhaul our existing vehicles until we have a replacement.”