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USPS to Drop Lance Armstrong Sponsorship

Watchdogs call the move a victory for consumers 


The US Postal Service (USPS) is reported by Advertising Age to be "poised to abandon its lead sponsorship of Lance Armstrong and the U.S. Pro Cycling Team" when their contract expires in December. The Postal Service began the estimated $10 million-a-year marketing initiative in 1996 and Armstrong has since led the international cycling team to five consecutive Tour de France victories.

According to a February 2003 USPS Inspector General (OIG) report, the objective of the sponsorship was to "increase revenue and sales of Postal Service's products on a global basis and to increase sales in key international markets" with a specific monetary goal of increasing [annual international] revenue by $20 million. However, despite the cycling team's outstanding performance and extremely high profile, revenues from USPS international operations in 2003 were actually $12.8 million less than four- years earlier in 1999.

Calling USPS's decision a "major victory for consumers," PostalWatch executive director Rick Merritt stated in a press release, "Talk about a government boondoggle, the pro-cycling sponsorship exemplifies just how delusional postal leadership can be. They raised domestic monopoly rates three times while forcing captive ratepayers to pay more than $50 million to sponsor a European sporting event and then, adding insult to injury, they achieved a negative result."

"This is just one more stunning example of the Postal Service indulging its misguided obsession with pretending to be a commercial enterprise, instead of what it really is; an accountability-challenged governmental bureaucracy with a statutory monopoly over domestic mail delivery," said Merritt.

The OIG report also criticized the Postal Service for its accounting procedures, lack of justification and mismanagement of sponsorships stating, "The Postal Service has not effectively managed sponsorships. We found the Postal Service was unable to verify sponsorships' financial performance ... the Postal Service does not have adequate controls and measures over the sponsorships. Therefore, it was not possible to measure the effectiveness of the program in its current state, and in our view, it is questionable whether the Postal Service could support a business case to retain the sponsorships."

Controversy over Postal Service sponsorships and its inability to perform basic cost-accounting functions is nothing new. More than a decade ago the Government Accounting Office studied the agency's $98 million sponsorship of the 1992 Olympic Games and concluded, "Given the lack of available data in key revenue and cost areas, neither we nor the Service can state with certainty whether the Olympic sponsorship had a profit or loss."

"Congress will soon consider legislation giving the Postal Service added flexibility to set prices, negotiate special pricing for specific mailers and offer additional work-sharing discounts. In order for these new flexibilities to be fairly administered, the Postal Service must be able to accurately attribute its various costs to specific functions within its operations at a highly granular level ... a cost-accounting task for which the agency is undeniably inept, as again demonstrated by the mismanagement of its sporting sponsorships. Granting additional flexibility without first fixing the agency's cost-accounting problems will only produce a more fertile environment for abuse, market distortions and unfair practices," said Merritt.

"Congress has a once-in-a-lifetime opportunity to fix the problem and compel postal accountability. It is currently holding $78 billion of reduced federal retirement contributions in escrow for the Postal Service. Congress should consider holding the bulk of that money until a qualified team of independent auditors can perform a top-to-bottom operational audit and put in place comprehensive accounting procedures to ensure the agency can accurately account and attribute is costs ... Accountability is the first order of business."

PostalWatch is a non-partisan, non-profit advocacy organization committed to a fair, efficient and accountable U.S. Postal Service. PostalWatch maintains a website at http://www.postalwatch.org.

[Source: PostalWatch press release]

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