OIG Report: HCR Survey Compliance – Southern Transportation Category Management Team

Background

The U.S. Postal Service uses highway contract routes (HCR) to transport mail between plants, post offices, or other designated points where mail is received or dispatched. This includes contract delivery service (CDS) route contracts, which are contracts with individuals or companies to deliver and collect mail from homes and businesses. As of January 2016, the Surface Transportation CMC had responsibility for 14,000 contracts and costing over $3.3 billion.

Administrative officials (AOs), such as transportation and network specialists and postmasters, develop the HCR schedules to meet operational requirements, perform administrative functions, and conduct HCR surveys.

Contracting officers (CO) and the transportation category management teams (TCMT) administer HCR contracts. The TCMTs are in Largo, MD; Windsor, CT; Denver, CO; Memphis, TN; and Tacoma, WA; with a satellite office in San Juan, PR.

Postal Service Management Instruction SP-CS-2009-1 requires AOs to conduct HCR surveys so that COs and TCMT specialists can determine route continuations and adjustments, truck requirements, and operational changes that affect HCR costs.

Our objective was to determine the effective use and management of HCR surveys by the Southern TCMT. This is the second in a series of projects on HCR oversight.

What the OIG Found

We found that the Southern TCMT did not effectively use HCR surveys to manage HCR contract renewals.

We statistically selected 177 of the 1,118 renewed HCR contracts for calendar years (CY) 2015 and 2016 for the Southern TCMT. We were able to locate only three HCR surveys, or 2 percent, in the contract files we reviewed.

Subsequently, we contacted the 112 AOs responsible for the sampled contracts, who reported that 21 HCR surveys were completed, but provided documentation to support only five completed HCR surveys, or 3 percent. However, these five surveys were not located in the HCR contract files. Therefore, the Southern TCMT renewed 174 of the 177 HCR contracts (or over 98 percent) without using HCR surveys.

This occurred because 37 percent of the AOs said they were not familiar with the requirement or the process and 46 percent said they were not conducting HCR surveys due to a lack of training and management oversight. In addition, there is no central management tool to track completion of HCR surveys by the COs or the TCMTs.

The Postal Service has not updated the HCR survey policy to accurately reflect current organizational structure, job titles, roles, or responsibilities. Therefore, there is no clear guidance for conducting HCR surveys.

As a result, we estimated that the Postal Service incurred unsupported questioned costs for HCR contracts of about $233 million in CY 2015 and $72 million in CY 2016 because the required contract renewal HCR surveys were not completed.

We are not making recommendations concerning training, survey tracking, or updating HCR survey policies and procedures because a previous OIG report (Highway Contract Route Survey Compliance – Eastern Transportation Category Management Team, Report Number NL-AR-16-005, dated

September 28, 2016) still has open recommendations concerning these issues. Management said they would continue using HCR surveys through FY 2017.

What the OIG Recommended

We recommended management ensure completion of surveys for all HCR contract renewals until management institutes a new HCR survey process.

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Source: USPS OIG

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