USPS OIG Report: Terminal Handling Services – Phoenix, AZ


The Postal Service uses Terminal Handling Services (THS) to load mail into air containers and deliver them to the air supplier for transportation. As part of its Delivering for America plan to achieve financial stability and service excellence and meet the evolving mailing and shipping needs of the American public and business customers, the U.S. Postal Service is discontinuing contracted services for THS and bringing operations in-house. On August 22, 2022, the West Valley Processing and Distribution Center (P&DC) in Phoenix, AZ, was selected as the first site to transition its THS operations from the contracted service to in-house Postal Service operations. Through the transition, they maintained existing key performance indicators, policies and procedures, and plant management oversight, and hired former contracted personnel as Postal Service employees. The THS duties include maximizing container utilization and timely delivery of containers to reduce transportation costs and avoid delayed mail – both key to the Postal Service’s goals of financial stability and service excellence.

What We Did

Our objective was to assess the effectiveness of the THS operations at the West Valley P&DC. To assess the effectiveness of THS operations, we reviewed three key performance indicators including air container utilization, bypass utilization, and timely tendering of mail to the air supplier. In addition, we analyzed air container data from October 2021 to May 2023, and further supported our analysis with a site visit to the West Valley P&DC during the week of May 22, 2023, to review the THS operations.

What We Found

The THS operations at the West Valley P&DC were less effective since transitioning from contracted supplier services to in-house Postal Service operations, based on evaluation of the three key performance indicators. Specifically, Postal Service management did not effectively monitor the THS operations to ensure the performance indicators were achieved for container utilization, bypass utilization, and timely tendering of mail to the air supplier. As a result, we estimated the Postal Service incurred $11 million in questioned costs from October 2021 through May 2023, due to missed opportunities to increase container and bypass utilization.


We recommended management (1) refine and reissue key performance indicators for in-house THS operations; (2) perform periodic review of the density goal and communicate updated goals as needed; (3) monitor daily operations and processing of mail to meet the THS goals; (4) re-evaluate the operating windows for timely arrival of mail at the THS; (5) perform periodic reviews to verify the scale is functional, and the THS personnel are accurately weighing and recording container weights; and (6) conduct an after-action review and implement lessons learned in future transitions.

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Source: USPS OIG

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