Inspector General: USPS Wasted $17.8 Million on FedEx Contract

An audit by the USPS Office of the Inspector General (OIG) has concluded that during Fiscal Years 2005 and 2006, the Postal Service’s Pacific Area incurred approximately $17.8 million in unnecessary costs by the use of “expensive FedEx transportation to move mail that could have been moved on low-priced surface transportation or on less costly passenger airlines.

“The Postal Service also paid FedEx to sort mail when they could have avoided those costs by sorting the mail or properly preparing it for transport before giving it to FedEx,” the audit [NL-AR-08-002, Feb. 2008] found. The report estimated that the Pacific Area USPS could save approximately $45 million over the next 10 years by eliminating the unnecessary expenditures.

The Postal Service first entered into a contract with FedEx to provide air transportation in 2001. On Aug. 2, 2006, the USPS announced that it had truncated the original contract and signed a new seven-year agreement that included an “immediate price reduction in all contract categories.” The revised contract allowed the Postal Service to continue outsourcing Terminal Handling Services (THS), which sort and prepare mail for FedEx.

“This is another example of the wasteful, inefficient use of subcontractors by the Postal Service,” said APWU President William Burrus. “It demonstrates the importance of passing H.R. 4236.”

The bill, known as the Mail Network Protection Act, would require the USPS to negotiate with the unions before engaging in significant subcontracting. “This legislation would protect the Postal Service and the American people from such detrimental policies.

“I urge APWU members to continue to solicit support for the bill by contacting their legislators and asking them to sign on as co-sponsors.” 

For more information about the Mail Network Protection Act and the union’s effort to gather support for it, click here.