The U.S. Postal Service’s Use of Contractors to Deliver Mail

The U.S. Postal Service’s Use of Contractors to Deliver Mail

Order Code RS22813
Updated October 30, 2008
The U.S. Postal Service’s Use of Contractors
to Deliver Mail
Kevin R. Kosar
Analyst in American National Government
Government and Finance Division
Summary
During the 110th Congress, three measures, H.Res. 282, S. 1457, and H.R. 4236,
have been introduced to address the U.S. Postal Service’s (USPS’s) use of private
contractors to deliver mail. This report provides information on the USPS’s authority
to contract and data on the USPS’s use of private contractors to deliver mail. It notes
that the USPS has statutory authority to contract, although the extent of that authority
has been contested. It also shows that the USPS has increased its use of contractors in
recent years, but that the USPS employees continue to serve more than 98% of all U.S.
homes and businesses. This report will be updated as developments warrant.
Recent Concerns and Legislation
Some members of the 110th Congress have expressed concern about the USPS’s
practice of contracting with private individuals and firms, often called “contractors” and
“subcontractors,” for the collection and delivery of mail.1
Contractors have transported mail between postal facilities since at least 1792 (1
Stat. 233), and according to the USPS, contractors have delivered mail to homes since
1900.2 Today, contractors transport mail between postal facilities via land, air, water, and
rail.3 One type of land (i.e., “surface”) mail transportation contract is the “highway
1 For example, see the Statement of Representative Albio Sires, U.S. Congress, House Committee
on Oversight and Government Reform, Subcommittee on Federal Workforce, Postal Service, and
the District of Columbia, Inquiring Minds Want to Know: What Is the Postal Service Contracting
Out?, hearing, 110th Cong., 1st sess., July 19, 2007, p. 1, available at
[http://federalworkforce.oversight.house.gov/documents/20070719145045.pdf].
2 USPS, “Contracting by the U.S. Postal Service — Not New!,” press release, Apr. 2007.
3 USPS, Mail Transportation Contracting Guide (Washington: USPS, June 2004).

CRS-2
contract route” (HCR).4 HCR contracts come in three subtypes. Under “transportation”
contracts, private “suppliers”5 transport mail between postal facilities. “Combination”
contracts require suppliers to make a small number of mail deliveries in the course of
transporting mail between the USPS’s facilities. “Contract delivery service” (CDS)
contracts compensate suppliers for collecting and delivering mail in rural areas.6 This
latter subtype of contract has been the focus of recent controversy.
In 2007, the leaders of some of the USPS employee unions suggested that the USPS
was expanding its use of CDS carriers. For example, John Hegarty, National President
of the National Postal Mail Handlers Union (NPMHU), claimed that, “From all
indications, there is a contracting-out virus that seems to be infecting Postal Service
Headquarters.”7 William Young, President of the National Association of Letter Carriers
(NALC), which represents city carriers, called upon Congress to “stop the cancer of
contracting out before it spreads.”8 Both the NALC and the National Rural Letter Carriers
Association (NRLCA) alleged that contractors cannot be trusted to deliver the mail.9 The
unions also claimed that CDS carriers were delivering mail in suburban and urban
locales.10
4 HCR contractors are sometimes called “star contractors.” In 1845, Congress first mandated that
the Postmaster General openly bid mail transportation contracts and award them to the lowest
bidders who tendered “sufficient guarantees for faithful performance, without other reference to
the mode of such transportation than may be necessary to provide for the due celerity, certainty,
and security of such transportation” (5 Stat. 738). To save time and effort, postal clerks often
substituted asterisks for the words “celerity, certainty, and security” when they recorded these
postal contracts in ledgers; hence, the terms “star contracts” and “star contractors.” National
Postal Museum, “What Is a Star Route?” available at [http://www.postalmuseum.si.edu/starroute/
sr_02.html].
5 A “supplier” is a person or private firm that has a contract with USPS.
6 USPS, Highway Contract Routes — Box Delivery Service, Handbook P-5 (Washington: USPS,
Oct. 2004).
7 Statement of John Hegarty, National President, National Postal Mail Handlers Union, U.S.
Congress, House Committee on Oversight and Government Reform, Subcommittee on Federal
Workforce, Postal Service, and the District of Columbia, The U.S. Postal Service: 101, hearing,
110th Cong., 1st sess., Apr. 17, 2007, p. 4, available at [http://oversight.house.gov/documents/
20070504093407.pdf].
8 NALC, “Young Urges Congress to Block USPS Policy of ‘Contracting Out,’” NALC Bulletin,
Apr. 20, 2007, p.1.
9 See Statement of Donnie Pitts, President, National Rural Letter Carriers Association, U.S.
Congress, House Committee on Oversight and Government Reform, Subcommittee on Federal
Workforce, Postal Service, and the District of Columbia, The U.S. Postal Service 101, pp. 4-5,
available at [http://federalworkforce.oversight.house.gov/documents/20070504093314.pdf]. CRS
has not located any data to substantiate this claim. On the USPS’s screening and oversight of its
employees and contractors, see U.S. Government Accountability Office, U.S. Postal Service:
Data Needed to Assess the Effectiveness of Outsourcing, GAO-08-787 (Washington: GAO, July
2008), pp. 24-30.
10 Statement of William H. Young, President, National Association of Letter Carriers, House
Committee on Oversight and Government Reform, Subcommittee on Federal Workforce, Postal
Service, and the District of Columbia, Inquiring Minds Want to Know: What Is the Postal Service
(continued...)

CRS-3
USPS, meanwhile, denied that it was greatly expanding the use of CDS carriers and
argued that contract mail delivery was “not new.” According to the USPS, contractors
collect and deliver mail mostly in rural areas. The USPS noted that contractors are less
expensive to employ than career delivery carriers, and that using them makes business
sense.11 The USPS also declared that it is not replacing career carriers with contractors.
Rather, the USPS reported that it considers assigning only new delivery routes to
contractors.12
On March 28, 2007, Representative Albio Sires introduced H.Res. 282, which
expressed “the sense of the House of Representatives that the United States Postal Service
should discontinue the practice of contracting out mail delivery services.” H.Res. 282
was referred to the House Committee on Oversight and Government Reform (HCOGR).
Nearly two months later, the first of two bills that would limit the USPS’s authority to
contract for mail delivery appeared. S. 1457, introduced by Senator Tom Harkin on May
23, 2007, would forbid the USPS from entering “into any contract ... with any motor
carrier or other person for the delivery of mail on any route with 1 or more families per
mile.” The bill would permit all existing CDS contracts to remain in effect and to be
renewed. S. 1457 was referred to the Senate Committee on Homeland Security and
Governmental Affairs. A second bill, H.R. 4236, was introduced by Representative
Stephen F. Lynch on November 15, 2007. The bill would curtail the USPS’s contracting
authority by requiring it to bargain with postal unions before entering into any “contract
providing for mail processing, mail handling, or surface transportation of mail, if such
contract would, for any 12-month period, involve the equivalent of 50 or more workyears
of work that would otherwise be performed by career postal employees.”13 H.R. 4236 was
referred to the HCOGR’s Subcommittee on Federal Workforce, Postal Service, and the
District of Columbia, which held a hearing to examine the issue on July 19, 2007.14
The controversy over the USPS’s contracting of mail delivery raises two basic
questions: (1) by what authority may the USPS contract for mail delivery; and (2) to what
extent is the USPS using CDS carriers to deliver mail? The answers follow in the next
sections.
10 (...continued)
Contracting Out? p. 4, available at [http://federalworkforce.oversight.house.gov/documents/
20070719145523.pdf].
11 In 2007, the average annual cost of delivery by a city carrier was nearly twice that of a CDS
carrier. U.S. Government Accountability Office, U.S. Postal Service: Data Needed to Assess the
Effectiveness of Outsourcing, p. 10.
12 Statement of Alan Kessler, Vice Chairman, Board of Governors, U.S. Postal Service, ibid.,
available at [http://federalworkforce.oversight.house.gov/documents/20070719145301.pdf]. See
also Statement of Postmaster John E. Potter, U.S. Postal Service, ibid., p. 3, available at
[http://federalworkforce.oversight.house.gov/documents/20070719145344.pdf].
13 A “workyear” is the number of hours a full-time worker works in one year. A workyear is
tabulated as 2080 hours, or 40 hours per week for 52 weeks.
14 U.S. Congress, House Committee on Oversight and Government Reform, Subcommittee on
Federal Workforce, Postal Service, and the District of Columbia, Inquiring Minds Want to
Know: What Is the Postal Service Contracting Out? Witnesses’ submitted statements, available
at [http://federalworkforce.oversight.house.gov/story.asp?ID=1416].

CRS-4
The USPS’s Authority to Contract
The Postal Reorganization Act of 1970 (PRA; P.L. 91-375; 84 Stat. 725) replaced
the U.S. Post Office Department with the U.S. Postal Service, an independent
establishment of the executive branch (39 U.S.C. 201). PRA requires the USPS to
“maintain an efficient system of collection, sorting, and delivery of the mail nationwide”
(39 U.S.C. 403(b)(1)). PRA provides the USPS with considerable discretion over its
operations. Among its many authorities, the USPS has the power to (1) “enter into and
perform contracts” (39 U.S.C. 401); (2) “provide for the collection, handling,
transportation, delivery, forwarding, returning, and holding of mail” (39 U.S.C.
404(a)(1)); and (3) “establish mail routes and authorize mail transportation service
thereon” (39 U.S.C. 5203(a)).15
Some postal unions have contended that the USPS’s use of CDS instead of career
delivery carriers “violates the spirit of the nation’s basic postal law.”16 PRA states,
It shall be the policy of the Postal Service to maintain compensation and benefits for
all officers and employees on a standard of comparability to the compensation and
benefits paid for comparable levels of work in the private sector of the economy (39
U.S.C. 1003(a)).
Career delivery carriers are civil servants and, under PRA, are entitled to wages
established through contracts collectively bargained by the USPS and postal unions (39
U.S.C. 1001(b) and 39 U.S.C. 1201 et seq.). Using contractors, the unions argue,
circumvents the collective bargaining process and opens the door for the USPS to replace
all career delivery carriers with contractors. The USPS has responded that its contracts
with the postal unions recognize USPS’s authority to use contractors.17
The Extent of the USPS’s Use of CDS Carriers
to Deliver Mail

Between 1998 and 2007, the number of carrier routes18 served by CDS carriers rose
from 5,424 to 6,531, or 20.4% (Table 1). However, throughout this period, the USPS
career city and rural carriers delivered mail on the vast majority of postal carrier routes
(Table 1 and Table 2). Similarly, between 1997 and 2006, the USPS city and rural
delivery carriers served the vast majority of delivery points (Table 3 and Table 4). Thus,
although the USPS has increased its use of CDS carriers to deliver mail, these contractors
15 On USPS’s power to contract with private carriers for the transportation of mail, see 39 U.S.C.
5001 et seq. and 39 U.S.C. 5201 et seq.
16 NALC, “Contracting Out, Collective Bargaining and the NALC Contract,” press release, Apr.
18, 2007.
17 USPS, “Contracting by the U.S. Postal Service — Not New!,” press release, April 2007, p. 1.
For example, see Collective Bargaining Agreement between American Postal Workers Union
AFL-CIO, and U.S. Postal Service, November 21, 2006-November 20, 2010 (Washington:
APWU, 2006), pp. 148, 152.
18 A “carrier route” consists of the addresses to which a delivery carrier delivers mail.

CRS-5
serve on fewer than 3% of all routes and deposit mail at fewer than 2% of all delivery
points.19
Table 1. Who Delivers on Postal Carrier Routes, 1998-2007
Year
City Carriers Rural Carriers CDS Carriers
Total
1998
167,262
62,338
5,424
235,024
1999
166,455
64,706
5,500
236,661
2000
167,470
67,372
5,648
240,490
2001
167,762
69,066
5,760
242,588
2002
165,816
69,361
5,857
241,034
2003
164,652
69,697
5,953
240,302
2004
164,412
70,792
6,026
241,230
2005
164,419
72,658
6,127
243,204
2006
163,412
74,937
6,346
244,695
2007
163,530
76,008
6,531
246,069
Source: CRS analysis of data provided by the USPS.
Table 2. Who Delivers on Postal Carrier Routes (%), 1998-2007
Year
City Carriers Rural Carriers CDS Carriers
Total
1998
71.2%
26.5%
2.3%
100%
1999
70.3%
27.3%
2.3%
100%
2000
69.6%
28.0%
2.3%
100%
2001
69.2%
28.5%
2.4%
100%
2002
68.8%
28.8%
2.4%
100%
2003
68.5%
29.0%
2.5%
100%
2004
68.2%
29.3%
2.5%
100%
2005
67.6%
29.9%
2.5%
100%
2006
66.8%
30.6%
2.6%
100%
2007
66.5%
30.9%
2.7%
100%
Source: CRS analysis of data provided by the USPS.
Table 3. Who Serves Delivery Points, 1997-2006
Year
City Carriers Rural Carriers CDS Carriers
Total
1997
81,795,164
27,557,772
1,743,651
111,096,587
1998
82,253,861
28,584,565
1,828,257
112,666,683
1999
82,751,573
29,710,113
1,903,926
114,365,612
2000
83,329,025
30,928,654
1,987,629
116,245,308
2001
83,761,600
32,075,719
2,057,084
117,894,403
2002
84,211,501
33,273,630
2,128,507
119,613,638
2003
84,698,811
34,516,943
2,211,395
121,427,149
2004
85,152,346
34,990,114
2,220,856
122,363,316
2005
85,804,626
36,189,631
2,304,748
124,299,005
2006
86,292,173
37,365,860
2,410,317
126,068,350
Source: CRS analysis of data provided by the USPS.
19 These figures comport with GAO’s analysis. See U.S. Government Accountability Office,
U.S. Postal Service: Data Needed to Assess the Effectiveness of Outsourcing, pp. 22-23. A
“delivery point” is the address or location of a dwelling or place of business to which mail is
delivered.

CRS-6
Table 4. Who Serves Delivery Points (%), 1997-2006
Year
City Carriers Rural Carriers CDS Carriers
Total
1997
73.6%
24.8%
1.6%
100%
1998
73.0%
25.4%
1.6%
100%
1999
72.4%
26.0%
1.7%
100%
2000
71.7%
26.6%
1.7%
100%
2001
71.0%
27.2%
1.7%
100%
2002
70.4%
27.8%
1.8%
100%
2003
69.8%
28.4%
1.8%
100%
2004
69.6%
28.6%
1.8%
100%
2005
69.0%
29.1%
1.9%
100%
2006
68.4%
29.6%
1.9%
100%
Source: CRS analysis of data provided by USPS.
Outlook
For the time being, it appears that the USPS and the NALC have settled their dispute
over the use of contractors to deliver mail.
On October 9, 2007, the NALC and the USPS signed a new collective bargaining
agreement. The agreement included memoranda of understanding that instituted a six-
month moratorium “on any new subcontracting of delivery in offices in which city letter
carriers are currently employed.” The agreement also committed the USPS and the
NALC to establishing a “joint committee” to study “the problems” of the contracting out
of mail delivery that will lead “towards a meaningful evolutionary approach to the issue
of subcontracting.”20 The NALC has reported that it and the USPS drew up a list of 3,600
post offices that will be “protected” from contracting. According to the NALC, the USPS
is obliged to terminate any CDS contracts at these offices.21
The moratorium was extended by the two parties until September 30, 2008. The
next month, the USPS and the NALC announced that they had signed two memoranda of
agreement that extend the moratorium until 2011 and set up processes by which the two
parties can reach decisions over the use of contractors in some areas.22
20 For example, see Agreement between United States Postal Service and National Association
of Letter Carriers AFL-CIO 2006-2011 (Washington: NALC, 2007), pp. 125-126.
21 Frederic V. Rolando, “CDS, DOIS and Intervention,” Postal Record (Washington: NALC, May
2008), p. 34.
22 “Memoranda of Understanding Between the United States Postal Service and the National
Association of Letters Carriers, AFL-CIO, M-01694 and M-01695,” Oct. 22, 2008.