USPS ships out its telecom

USPS ships out its telecom

Despite the General Services Administration's best intentions of providing agencies with low-cost local telecommunications services through the Metropolitan Area Acquisitions, agencies are looking elsewhere for better deals.

The Postal Service is taking its chances with SBC Communications Inc. USPS is betting that the San Antonio company can save it more than $15 million on local telecom services over the next two years'more than the Federal Technology Service's MAA could have cut costs.

USPS gave SBC a gain-share contract for managed services, under which the company will earn a portion of whatever it saves above the $15 million.

The company will centralize management of local voice service for more than 37,000 postal offices, negotiating volume discounts where possible.

'We get a break, and they get a cut of the savings,' USPS program manager Tom Nicolosi said. '$15 million is the minimum. We expect to shatter that number.'

'Between $15 million and $25 million is where we think it will end,' said Doug Dangremond, executive director of SBC's federal solutions group.

The program began in January, and SBC will deliver a $5 million check on Sept. 1, Dangremond said. The contract runs for three years with two one-year options. Savings targets have not been set past the first two years.

The contract is part of the Postal Service's Breakthrough Productivity Initiative. The BPI cost-cutting effort saved $138 million last year by centralizing procurement of commodities such as tires, fuel oil and copiers, Nicolosi said.

Losing money

USPS' five-year business plan, which runs through 2005, counts on BPI to save $3 billion to $4 billion. The General Accounting Office in May put USPS on its high-risk list, estimating the Postal Service will lose up to $2.4 billion in this fiscal year and up to $2.5 billion next year, despite postal rate increases.

Dangremond said SBC has smaller gain-share contracts in the commercial sector, but none so large and none for the government. He said the Postal Service's willingness to take a hard look at its communications services made the deal attractive.

'It really isn't much of a gamble,' Dangremond said. 'They identified the savings; we're just helping to achieve them.'

A staff of about 20 employees at SBC's Chicago managed services organization is monitoring phone use at 2,000 USPS locations to optimize connections to the public switched network. New technology is converging the incoming lines in some cases.

'We eventually will get to all postal locations,' Dangremond said.

Local telephone service in the past has been managed in 85 separate districts, reducing leverage. Now SBC is seeking volume discounts with fewer carriers.

'We're looking at it across larger business models,' Dangremond said.

SBC will use the MAA contracts in New York City, but it expects to get some rates better than the program offers.

'We are looking to use MAA where it fits,' Nicolosi said, because MAA is available only in selected cities. 'We have much greater buying power. We are not cherry picking our cities.'

MAA contracts were attractive, for instance, in the Indianapolis area, Nicolosi said, but statewide it made more sense to negotiate outside deals.

'We don't look at this as outsourcing but as paying for outside expertise,' he said. 'It gives the Postal Service a chance to learn for ourselves.'

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