The United States Postal Service needs to replace its aging fleet of vehicles, but experts say its plan to replace all of them at once is downright foolish.
At a hearing held Thursday by the House Committee on Oversight and Government Reform, witnesses representing government agencies and the private sector testified that while the USPS undoubtedly needs to modernize its fleet, it would be better off doing so incrementally, which would be far less costly in the long term.
Currently, the USPS has a fleet of more than 200,000 “Long Life Vehicles” (LLV’s) with an average age of 23 years, just shy of their 24-year operational lifespan. Replacing the outdated trucks, USPS Chief Financial Officer and Executive Vice President Joseph Corbett told lawmakers at the hearing, “will not only help to reduce vehicle operating and repair costs, it will also improve efficiency of delivery operations.” (RELATED: ‘Spending Billions to Save Millions’: USPS to Get New Trucks)
To accomplish those goals, the Postal Service plans to purchase 180,000 “Next Generation Delivery Vehicles” (NGDV’s), and is currently accepting proposals from potential suppliers. The vehicles are projected to cost between $25,000 and $35,000 each, which corresponds with a total cost of between $4.5 billion and $6.3 billion.
It is unclear how the USPS expects to pay for the upgrade, though, because it does not have the liquidity to cover the full expense. Its congressionally authorized credit line with the government is maxed. Moreover, the agency has run consistent deficits in recent years, posting a loss of over $5 billion last year and running over $2 billion in the red so far this year. (RELATED: Postal Service Posts $1.5 BILLION Loss in Second Quarter)
However, according to Katherine Vigneau, Director of Professional Development for NAFA Fleet Management Association, the USPS could accomplish the same objectives, and at less expense, by following best practices pioneered in the private sector, which call for an incremental replacement strategy based on “lifecycle cost analysis.”
Spreading the purchases out, she explained, makes capital requirements for vehicle replacement more predictable from year to year, and ensures that vehicles can be replaced at the most cost-effective point in their life cycle.
Perhaps more importantly, the massive costs that the Postal Service currently envisions—roughly equivalent to the agency’s annual deficit—stem from the fact that all of its vehicles are becoming obsolete simultaneously. A multi-year replacement strategy would ensure that the agency does not face the same conundrum again 25 years from now.
Republican Rep. Mark Meadows concurred with her assessment, saying it is “puzzling” to him that the USPS would “essentially put all of its eggs in one basket.” (RELATED: USPS Gets $18 Billion in Subsidies and Special Privileges)
The problem would not be so severe, though, if the USPS had heeded recommendations offered by the Government Accountability Office in 2011, according to Lori Rectanus, Director of Physical Infrastructure for the GAO.
“We found in 2011 that the Postal Service elected to not replace its delivery fleet—about 175,000 vehicles at that time—largely because it would cost about $5 billion,” Rectanus observed. The agency “also chose to not refurbish the vehicles, which would have cost about $3.5 billion,” but would have extended vehicle life by 15 years, allowing enough flexibility to implement an incremental replacement strategy.
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