Postage Stamp Production

Producing postage stamps is big business. In fiscal year 1991, the U.S. Postal Service spent $124 million for about 54 billion stamps. Concerns have been raised about the Postal Service's efforts to acquire stamps from private sector suppliers. Even though private industry can produce most stamps for less cost than the Bureau of Engraving and Printing, the Postal Service should maintain the Bureau's role as a major stamp producer because it is immune to union strikes, bankruptcies, and other problems that beset the private sector. GAO compared costs on pairs of comparable stamps produced by the Bureau and the private sector and found that for seven of eight selected pairs, the costs of private sector products were lower. Although the Postal Service monitors the quality of private sector and Bureau products differently, quality deficiencies have been discovered in stamps produced by both groups. The relationship between the Bureau and the Postal Service has greatly improved since the late 1980s, mainly because of a formal interagency agreement that put the relationship between the Postal Service and the Bureau on a businesslike basis. The Postal Service now expects the Bureau to remain the main source of postage stamps.

GAO found that: (1) the private sector had sufficient postage stamp production capacity to provide adequate competition; (2) the number of companies competing for postage stamp contracts has increased, and private-sector stamp production capability and capacity has expanded; (3) sufficient overlap in similar products existed between the government and private sector which made cost comparisons possible; (4) since 1987, all 21 stamp procurements have had two or more competing contractors; (5) in 1992, the Postal Service estimated that 57 billion stamps will be purchased; (6) private-sector limitations included complex printing and stamp finishing capacities; (7) the adjusted cost of procuring stamps from the private sector ranged from $.13 to $8.18 per 1,000 stamps; (8) the Bureau will continue to play a signigicant role in postage stamp production because of its work-force stability and experience; (9) the private sector and the Bureau had similar quality deficiency rates; and (10) due to a formal interagency agreement, the business relationship between the Postal Service and the Bureau has improved, and the Bureau will remain the principal provider of postage stamps.