Audit Shows Inefficiencies with USPS Insourcing

The Postal Service didn’t always insource Highway Contract Route (HCR) contracts to provide a lower cost, nor were the actual cost savings assessed, according to a recent audit. 

These insights were shown in a March 27 report from the USPS Office of Inspector General (OIG) titled “Postal Vehicle Service Operations,” which studied the pilot program to create a new position for American Postal Workers Union drivers. 

Insourced contracts were one focus of the overall audit, as contracts were insourced to facilitate the pilot. The report found that “management did not always limit insourcing of HCR contracts to those that were economically advantageous” and that “cost was not a driving factor in the decision-making process.” 

Of the 41 contracts insourced under the pilot, 13 saved money totaling $15.2 million annually. The remaining 28 contracts cost USPS an additional $18.4 million annually to insource. 

In the report, OIG recommended the Postal Service “implement a waiver process when cost is not a factor to insource.” In response, USPS management stated, “there are many other factors that determine how and when they will insource HCR contracts, and that cost is not always the deciding factor.” Thus, no waiver process will be implemented. 

OIG also found that USPS “did not assess the actual cost savings or efficiencies realized” from using union drivers. While the Postal Service said in response that it has a process to evaluate insourced contracts, OIG said this data was not provided as part of the audit.