Sale of Canada Post Services Goes Against Government’s Outsourcing Claims

Over the years, the Federal government has increasingly relied on outsourcing to private companies to get work done. While there will always be outsourcing of services that the government is ill-equipped to do themselves, the rate in which they, and by extension taxpayers, are using private firms to do government work has swelled in recent years. So much, in fact, that the Treasury Board has issued guidelines on reducing outsourcing and expensive consultancy work in recent months. It’s therefore a little frustrating, but certainly not shocking, to see Canada Post start to quietly strip out parts of their business and sell to non-governmental firms that will likely result in higher cost and poorer service in the long run.

Canada Post is a Crown Corporation, owned by the Federal government, designed to operate as our primary postal service. They operate three subsidiary companies: Innovapost Inc., responsible for their IT services; Purolator, their courier service; and SCI Group, their third-party logistics business, which includes warehousing, distribution, and transportation. Two of these subsidiaries have been sold recently. SCI Group has recently been sold to Montreal-based Metro Supply Chain Inc., and Innovapost has been sold to Deloitte Canada. As of right now, we don’t have specific details of what these deals look like, but it’s hard to imagine that taxpayers, postal workers, and service users are going to be the primary beneficiaries. Canada Post will, in the near future, need to rely on private company outsourcing to do the work they already do.

The government’s own plan in Budget 2023 proposed reducing spending on outsourcing by 15 percent, with the expectation of saving $7.1 billion over the next four years. It’s difficult to see how the government will reduce outsourcing costs when a Crown corporation sells off essential parts of its business. Spending on professional and special services are hitting record levels, $21.6 billion in 2023-2024, according to the Parliamentary Budget Officer. But it’s not a new issue, and often, the problems with outsourcing don’t become apparent until the government is stuck with those they outsource to. The Harper-era contract with IBM for the disaster known as Phoenix is perhaps the most well-known, but in the last eight years, this government has outsourced almost a billion to PricewaterhouseCoopers, and hundreds of millions of dollars to firms like McKinsey, Accenture and KPMG. However, Deloitte seems to be the biggest beneficiary, earning about $1 billion in government contracts, which only stands to grow with their purchase of Innovapost.

For its part, Canada Post has been losing money for a number of years, including half a billion dollars in 2022. Acting as if they aren’t facing financial challenges, particularly from large e-commerce giants like Amazon, serves no one. While Canada Post’s move to sell off parts of its business model may help their financial situation in the shorter term, and become more agile in the future, it also demonstrates a serious gap in this government’s push to reduce outsourcing costs. Some have argued that Canada Post must pivot quickly into e-commerce, providing that “last mile” service for packages, given the Crown corporation’s ability to reach some 16 million households. The U.S. Postal Service has made this last mile pivot to some success. The Canadian Union of Postal Workers has proposed expanding into areas such as postal banking, which could provide more financial options for people in rural, remote, and Indigenous communities.

Canada Post does provide a critical service to Canadians, and as such, should remain a Crown corporation designed to serve them, first and foremost. It's vital that the government stop selling off these services, because, in the long run, another contract with a private company for a lower standard of service will continue to be the norm. In recent years, we’ve seen it with the privatization of veteran’s mental health services with the $560-million Loblaws-owned contract with Partners in Canadian Veterans Rehabilitation Services (PCVRS). We’ve seen it with Phoenix. We must stop this cycle of taxpayers flipping the bill for increasingly worse services through outsourced contracts.