The U.S. Postal Service’s Delivery Unit Optimization (DUO) initiative began in December 2010 to increase operational efficiencies by consolidating delivery operations into centralized facilities. Management issued revised DUO guidelines in March 2013 as a result of a December 2012 Postal Service Office of Inspector General (OIG) audit. From March to September 2013, management implemented 273 DUO consolidations.
Our objectives were to assess the adequacy of the revised DUO guidelines and determine whether Postal Service areas and districts complied with the guidelines.
What the OIG Found
The revised DUO guidelines were not adequate for processing DUO proposals with projected financial losses. Also, management did not always comply with the guidelines. Specifically, in fiscal year 2013, management approved 41 consolidations with projected financial losses of $321,550.
According to management, there may be valid business reasons to approve a DUO consolidation with a projected financial loss; however, the Postal Service did not document these reasons because the guidelines did not require it to do so.
As a result, management did not fully support a business case for implementing 41 of the DUO consolidations. Further, eight DUO proposals lacked sufficient support for $584,797 of savings reflected on the DUO worksheets and some DUO before and after cost studies were not performed as required. These shortcomings were due to insufficient management oversight and management’s belief that they needed data from a longer time period to adequately assess the consolidation. We could not validate projected savings or losses for the studies that were not performed. Consequently, we estimate questioned costs of over $906,000 because post-implementation studies were not performed. The revised DUO guidelines were not adequate for processing DUO proposals with projected financial losses.
What the OIG Recommended
We recommended the vice president, Delivery and Post Office Operations, update DUO guidelines to require a savings threshold for consolidations and justifications for DUO proposals that do not reach the threshold and reinforce to the DUO coordinators that they provide justification and support on the DUO worksheet. In addition, require the approving authority to validate cost savings calculations, compliance with guidelines to document the savings, and costs categories. We also recommended management ensure DUO coordinators perform required cost studies and revise the post-implementation cost analysis requirement to a single study conducted 1 year after consolidation.