Correspondence Course

Nick Gillespie from the February 1997 issue

Question: You have to send an eight-ounce letter or two-pound package overnight. Do you pick a) the service that charges $3.75 to $3.99 and is on time for close to 97 percent of deliveries, or b) the service that costs $10.75 to $15.00 and has a worse delivery performance?

When we're talking about the federal government, you might assume they'd pick b, especially since that's the United States Postal Service. But in a rare display of efficiency, the government's procurement arm, the General Services Administration, has signed a new six-year contract with Federal Express, the Memphis-based private mail carrier (the first contract was inked in 1990). The good news gets better, says the General Accounting Office in a recent report on "issues relevant to changing restrictions on private letter delivery": Under the new contract, FedEx's minimum rates have dropped to $3.45 for an overnight letter and $3.57 for a two-pound package.

The GAO points out that the Postal Service is partly a victim of the same laws that grant its monopoly on first-class letter delivery. The Private Express Statutes forbid the service from offering negotiated or volume rate discounts to individual customers. As a result, the Postal Service corners less than 15 percent of the lucrative market in overnight letters and packages.

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