The Postal Service's sole-source contracts with associates of former executive Robert F. Bernstock had the tacit approval of Postmaster General Jack Potter, according to documents published last night.
"Potter stated he was aware of Bernstock bringing in outside contractors to the Postal Service 'almost from the start because he needed to get an infusion of new thinking and talent as quickly as possible,'" says an investigators' report of a Feb. 4 interview with Potter. "Bernstock informed Potter 'he was considering using people he was aware of as consultants, who he personally knew.'"
The report and related documents from the USPS Office of Inspector General were made public last night by The Washington Times as part of its ongoing investigation into Bernstock's brief and controversial stint as head of marketing for USPS. The Times article published last night focuses on discrepancies among the accounts given by Potter and other key officials regarding Bernstock's outside work.
"Potter advised Bernstock 'the bottom line was to follow the Postal Service procurement rules, have lawyers review the contracts, and do not circumvent the Postal Service rules and regulations,'" the OIG report said.
"Regarding whether Bernstock hired friends as contractors, Potter thinks the term 'friends' is too strong of a word. He said, "'Of course Bernstock is going to go back to his pool of resources, like former colleagues, people he worked with and thought had good skill sets.'
"Potter said it is normal for 'some people to trail each other their whole career.' He believes Bernstock reached out to people with the skills he needed and does not have a problem with Bernstock hiring former colleagues."
Potter also said some of the contracts were turning out to be excellent deals for the Postal Service because it would have cost far more to use either USPS employees or traditional contractors like McKinsey to accomplish the tasks.
Related articles:
Thursday, August 26, 2010
Tuesday, August 24, 2010
Congress and Paper Companies Covet 'Son of Black Liquor' Funds
The “Son of Black Liquor” tax credits will probably cost American taxpayers hundreds of millions, if not billions, of additional dollars, but Congress might grab the money without paper manufacturers getting a dime.
Seven publicly traded paper companies have estimated that they will net about $570 million from the IRS’ recent ruling that made black liquor eligible for Cellulosic Biofuel Producer credits (CBPC), reports the Press-Register of Mobile, Alabama. Leading the way are Weyerhaeuser with $240 million (pre-tax) and Domtar with $200 million.
The other 14 publicly traded producers of black liquor, including the largest (International Paper), have not released such projections, partly because of uncertainty about exactly what the June 28 ruling means. (See Pulp Manufacturers Scratching Their Heads Over Son of Black Liquor Ruling for more information about these uncertainties.)
Meanwhile, the IRS’ “generosity” toward companies that produce, and burn, black liquor as part of their pulp-making operations has caught the eye of Congress, writes Jeremiah Coder for Tax Analysts. “The agency’s administrative largesse appears to be prompting members of Congress to consider legislation to retroactively disallow biofuel credits for black liquor claims.”
Sen. Charles Grassley of Iowa, the ranking Republican of Iowa, has asked the Joint Committee on Taxation for a “revenue estimate” on such a move, Coder reports. That is significant in at least three ways:
1) JCT’s estimate of revenue (actually, avoided costs) from overturning the IRS ruling is “likely to immediately become an attractive add-on to any legislation in need of pay-fors,” Coder writes. In other words, Congress could use the savings to pay for a new program and claim that it is not increasing the federal deficit (though it would be, because no money has been budgeted to subsidize the use of black liquor).
2) The JCT blew a previous estimate regarding Son of Black Liquor, saying that disallowing CBPC credits for black liquor from 2010 forward would save only about $25 billion when it could have set the number at $50 billion or more. (See How Google Could Help the Democrats By Buying a Pulp Mill and Black Liquor Bonanza: Earnings Exceeding Projections of Experts and Congress for details.) Congress certainly won’t be happy if the JCT low-balls this opportunity to create some funny money, this time by blocking the issuance of CBPC credits for black liquor used in 2009.
3) To back up its calculation, the JCT may reveal how much was paid out to paper companies from the original black liquor tax credit program. The 21 publicly traded companies reported receiving $6.5 billion from that program, but some big pulp makers like Georgia Pacific are privately held and therefore do not have to real what they received.
The JCT will also need to take a stab at some questions that are bedeviling the pulp makers about how to interpret the IRS ruling. Here’s a look at recent statements from some of the companies about those questions and how Son of Black Liquor might affect them:
Seven publicly traded paper companies have estimated that they will net about $570 million from the IRS’ recent ruling that made black liquor eligible for Cellulosic Biofuel Producer credits (CBPC), reports the Press-Register of Mobile, Alabama. Leading the way are Weyerhaeuser with $240 million (pre-tax) and Domtar with $200 million.
The other 14 publicly traded producers of black liquor, including the largest (International Paper), have not released such projections, partly because of uncertainty about exactly what the June 28 ruling means. (See Pulp Manufacturers Scratching Their Heads Over Son of Black Liquor Ruling for more information about these uncertainties.)
Meanwhile, the IRS’ “generosity” toward companies that produce, and burn, black liquor as part of their pulp-making operations has caught the eye of Congress, writes Jeremiah Coder for Tax Analysts. “The agency’s administrative largesse appears to be prompting members of Congress to consider legislation to retroactively disallow biofuel credits for black liquor claims.”
Sen. Charles Grassley of Iowa, the ranking Republican of Iowa, has asked the Joint Committee on Taxation for a “revenue estimate” on such a move, Coder reports. That is significant in at least three ways:
1) JCT’s estimate of revenue (actually, avoided costs) from overturning the IRS ruling is “likely to immediately become an attractive add-on to any legislation in need of pay-fors,” Coder writes. In other words, Congress could use the savings to pay for a new program and claim that it is not increasing the federal deficit (though it would be, because no money has been budgeted to subsidize the use of black liquor).
2) The JCT blew a previous estimate regarding Son of Black Liquor, saying that disallowing CBPC credits for black liquor from 2010 forward would save only about $25 billion when it could have set the number at $50 billion or more. (See How Google Could Help the Democrats By Buying a Pulp Mill and Black Liquor Bonanza: Earnings Exceeding Projections of Experts and Congress for details.) Congress certainly won’t be happy if the JCT low-balls this opportunity to create some funny money, this time by blocking the issuance of CBPC credits for black liquor used in 2009.
3) To back up its calculation, the JCT may reveal how much was paid out to paper companies from the original black liquor tax credit program. The 21 publicly traded companies reported receiving $6.5 billion from that program, but some big pulp makers like Georgia Pacific are privately held and therefore do not have to real what they received.
The JCT will also need to take a stab at some questions that are bedeviling the pulp makers about how to interpret the IRS ruling. Here’s a look at recent statements from some of the companies about those questions and how Son of Black Liquor might affect them:
- Weyerhaeuser (CFO Patricia Bedient): “During the first part of 2009, we produced approximately 238 million gallons of black liquor, which did not qualify for the alternative fuel mixture credit. This equals $240 million of potential cellulosic biofuel credit at $1.01 per gallon, or $149 million net of tax. Since this credit offsets income tax liability, we could only carry the credit forward. It is still unclear whether the credit can be claimed in the same year as the alternative fuel mixture credit [the original black liquor tax credit]. For the last three quarters of 2009, we claimed $344 million of fuel mixture credit. There's a great deal of uncertainty as to the process for claiming these credits and we are evaluating both credits to determine which credit or mix of credits, if allowed, would add the most value to the company.”
- Domtar: "From January 1, 2009 until we started to claim the Alternative Fuel Tax Credits, we have approximately 200 million gallons of black liquor that may qualify for this CBPC that would represent approximately $200 million of CBPC or approximately $120 million of after tax benefit to the Corporation. In July 2010, we submitted an application with the IRS to be registered for the CBPC. There is, however, a degree of uncertainty related to this credit as we have not received our registration for the credit and we believe there is some lack of clarity with the application of the IRS rules. As such, during the period ended June 30, 2010, we have not recorded any impact related to the CBPC."
- Graphic Packaging Corp. (CFO Dan Blount): “It appears that some in the industry are considering the cellulosic biofuel credit path. We have evaluated this approach. And given our large NOL [net operating loss] position and the fact that the cellulosic biofuel credit can only be used to offset federal income taxes payable, we will not be pursuing this option.”
- Smurfit-Stone (which recently emerged from bankruptcy protection): “Cellulosic biofuel producer credits unlikely to be utilized/relevant.”
- Kapstone Paper & Packaging: "In December 2009, the Company filed its registration as a cellulosic biofuel producer for the year 2009 and is awaiting approval. ..The IRS is expected to provide guidance for converting AFTC’s to cellulosic credits for qualifying producers. … At this time, the Company estimates a $22 million potential future after-tax credit for CBTC relating to black liquor burned in 2009 prior to the Company’s AFTC registrations being approved. If the Company were to receive any tax credits related to cellulosic biofuel it would be realized by reducing income tax payable beginning in late 2010."
- Packaging Corp. of America: "As a result of the IRS guidance, PCA has filed an application to receive the required registration code to claim the cellulosic biofuel producer credit. We expect this registration to be received during the third quarter. PCA has not yet filed a claim for any black liquor credits earned in 2009, since our tax -- 2009 tax return is not due until September 15, 2010. Once the cellulosic biofuel registration is received, PCA can claim the cellulosic biofuel producer credit of $1.01 per gallon instead of the alternative fuel mixture credit of $0.50 per gallon. This would increase our total 2008 and 2009 tax credits to about $370 million or $230 million after-tax, compared to alternative fuel mixture credits of $195 million or a $45 million increase."
- Grandson of Black Liquor: Congress Milks Another Pulp Byproduct for Bogus Savings
- ObamaCare's Black Liquor Tab: $23.6 Billion
Friday, August 13, 2010
How About A Drug-Sniffing, Meter-Reading, Photo-Taking, Bug-Spraying Postal Service?
Now maybe we know what the head of the Postal Regulatory Commission means when she says the U.S. Postal Service has not pursued all of its possible business opportunities under current law.
What some view as the Postal Service’s ball and chain – the obligation to deliver to every address – could become a competitive advantage for a variety of businesses if mobile sensors were mounted on letter carriers’ trucks, according to Michael J. Ravnitzky, chief counsel to PRC chair Ruth Goldway.
“Mobile sensors mounted on postal trucks could collect and aggregate a variety of important data as a byproduct of postal delivery, taking advantage of efficiencies of scope and scale. The data collected might include, among others, air pollution levels, weather data, sensing of chemical and biological agents, and areas of weak cell phone service,” says a paper Ravnitzky recently presented.
They go everywhere
“Postal delivery trucks that go everywhere nearly every day offer a unique platform, and a valuable opportunity, to fulfill important additional national objectives. As postal trucks travel the neighborhoods of America (and other nations), they could also collect data important to the country’s safety, security, well-being and economic progress.”
Using existing technology, Ravnitzky writes, such sensors could also map potholes, sniff out methamphetamine labs and marijuana farms, read utility meters, scan license plates to identify stolen cars, take “street view” photos, and disperse “pheromones to disrupt and confuse the insect courtship and mating processes” of gypsy moths, mosquitoes, and other pests.” (Speaking of pest control, I know of some letter carriers who’d want a spray that keeps postal supervisors off their backs.)
The slide show accompanying Ravnitzky’s paper says the presentation represents his views and not those of his employer. But the paper was posted on the PRC’s Web site this week. And a previous Ravnitzky paper on electric delivery vehicles (See The United States Postal Service & Power Company?) grew out of a Goldway article and seemed to influence her statements on the subject.
What some view as the Postal Service’s ball and chain – the obligation to deliver to every address – could become a competitive advantage for a variety of businesses if mobile sensors were mounted on letter carriers’ trucks, according to Michael J. Ravnitzky, chief counsel to PRC chair Ruth Goldway.
“Mobile sensors mounted on postal trucks could collect and aggregate a variety of important data as a byproduct of postal delivery, taking advantage of efficiencies of scope and scale. The data collected might include, among others, air pollution levels, weather data, sensing of chemical and biological agents, and areas of weak cell phone service,” says a paper Ravnitzky recently presented.
They go everywhere
“Postal delivery trucks that go everywhere nearly every day offer a unique platform, and a valuable opportunity, to fulfill important additional national objectives. As postal trucks travel the neighborhoods of America (and other nations), they could also collect data important to the country’s safety, security, well-being and economic progress.”
Using existing technology, Ravnitzky writes, such sensors could also map potholes, sniff out methamphetamine labs and marijuana farms, read utility meters, scan license plates to identify stolen cars, take “street view” photos, and disperse “pheromones to disrupt and confuse the insect courtship and mating processes” of gypsy moths, mosquitoes, and other pests.” (Speaking of pest control, I know of some letter carriers who’d want a spray that keeps postal supervisors off their backs.)
The slide show accompanying Ravnitzky’s paper says the presentation represents his views and not those of his employer. But the paper was posted on the PRC’s Web site this week. And a previous Ravnitzky paper on electric delivery vehicles (See The United States Postal Service & Power Company?) grew out of a Goldway article and seemed to influence her statements on the subject.
Wednesday, August 11, 2010
Why Does USPS Make Retiring Difficult When It Has So Many Excess Employees? Tough Question #5
The U.S. Postal Service proved this week what mailers have been saying for weeks -- that it is seeking exigent rate increases without first having done everything it can to reduce costs.
Specifically, it demonstrated that it still has excess career employees – many of whom are eligible for retirement – yet is doing nothing to reduce those numbers. Before the Postal Service is granted rate increases that require bending, if not breaking, the law that governs postal rates, postal executives need to explain why they are discouraging employees from retiring when they should be encouraging early retirement.
The Postal Service provided the first piece of evidence against itself on Monday when it answered the Postal Regulatory Commission’s query, “Please provide the percentage of [flats] pieces currently processed in a non-optimal fashion by manual sort.” The Postal Service’s answer: “30 percent of volume was handled manually in FY 2009.”
A surplus of equipment, a dearth of automation
The Postal Service has enough equipment – in fact, a surplus of equipment -- to avoid virtually all manual handling of flats. Mailers have been claiming for years, without refutation from the Postal Service, that the only reason for so much manual handling is to keep “automation refugees” (excess employees) busy. Imagine a farmer who kept a combine idle while having his workers harvest with machetes, or a construction company turning off its backhoe so its employees can move some dirt with shovels.
What is the Postal Service doing to reduce its excess employment levels? Nothing. Stephen J. Masse, vice president of finance and planning, told the PRC today that the Postal Service has no plans to offer early-retirement incentives and is waiting for attrition to reduce its employment levels.
In fact, the Postal Service is doing worse than nothing. Its practices discourage retirement by providing many employees with estimates of retirement benefits that are too low. Dead Tree Edition explained the problem in The Postal Service's Early-Retirement Snafu and PostalReporter documented the situation in more detail a year ago. But the Postal Service seems to have done nothing to correct the problem.
Some have told me that federal bureaucrats and regulations tie the Postal Service’s hands in this matter. If that’s true, why aren’t postal officials raising a stink with Congress? And why aren’t they communicating better with employees about the issue rather than leaving that to the unions.
It makes you wonder whether the people at L’Enfant Plaza who provide estimates of retirement benefits are the same ones who allowed the government to overcharge the Postal Service $75 billion in pension costs.
USPS officials are rightly arguing that the federal government should return those pension overpayments to the USPS. Their case would be stronger if they committed to putting some of that money aside for early-retirement incentives that would help reduce the Postal Service's workforce, which constitute 80% of its costs.
It could even get creative -- for example, letting employees in an overstaffed facility bid to retire early, with the lowest bids winning. Some employees might be more willing to retire from career positions if they could switch to part-time or on-call status without their pension benefits being harmed.
Previous articles in the “tough questions for the Postal Service” series:
Specifically, it demonstrated that it still has excess career employees – many of whom are eligible for retirement – yet is doing nothing to reduce those numbers. Before the Postal Service is granted rate increases that require bending, if not breaking, the law that governs postal rates, postal executives need to explain why they are discouraging employees from retiring when they should be encouraging early retirement.
The Postal Service provided the first piece of evidence against itself on Monday when it answered the Postal Regulatory Commission’s query, “Please provide the percentage of [flats] pieces currently processed in a non-optimal fashion by manual sort.” The Postal Service’s answer: “30 percent of volume was handled manually in FY 2009.”
A surplus of equipment, a dearth of automation
The Postal Service has enough equipment – in fact, a surplus of equipment -- to avoid virtually all manual handling of flats. Mailers have been claiming for years, without refutation from the Postal Service, that the only reason for so much manual handling is to keep “automation refugees” (excess employees) busy. Imagine a farmer who kept a combine idle while having his workers harvest with machetes, or a construction company turning off its backhoe so its employees can move some dirt with shovels.
What is the Postal Service doing to reduce its excess employment levels? Nothing. Stephen J. Masse, vice president of finance and planning, told the PRC today that the Postal Service has no plans to offer early-retirement incentives and is waiting for attrition to reduce its employment levels.
In fact, the Postal Service is doing worse than nothing. Its practices discourage retirement by providing many employees with estimates of retirement benefits that are too low. Dead Tree Edition explained the problem in The Postal Service's Early-Retirement Snafu and PostalReporter documented the situation in more detail a year ago. But the Postal Service seems to have done nothing to correct the problem.
Some have told me that federal bureaucrats and regulations tie the Postal Service’s hands in this matter. If that’s true, why aren’t postal officials raising a stink with Congress? And why aren’t they communicating better with employees about the issue rather than leaving that to the unions.
It makes you wonder whether the people at L’Enfant Plaza who provide estimates of retirement benefits are the same ones who allowed the government to overcharge the Postal Service $75 billion in pension costs.
USPS officials are rightly arguing that the federal government should return those pension overpayments to the USPS. Their case would be stronger if they committed to putting some of that money aside for early-retirement incentives that would help reduce the Postal Service's workforce, which constitute 80% of its costs.
It could even get creative -- for example, letting employees in an overstaffed facility bid to retire early, with the lowest bids winning. Some employees might be more willing to retire from career positions if they could switch to part-time or on-call status without their pension benefits being harmed.
Previous articles in the “tough questions for the Postal Service” series:
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