Objective

Our objective was to determine whether the U.S. Postal Service’s Extended Capacity Left-Hand Drive (LHD) delivery vehicles acquisition achieved performance metrics, costs, and savings.

The Postal Service has experienced package volume growth that has created the need for increased vehicle cargo-handling capacity. Additionally, the existing fleet of LHD vehicles in service have exceeded their end-of-life projections and have ongoing operating costs that are higher than their value.

To address these issues, the Postal Service made investments to replace 12,472 vehicles. As part of the investment review process, in 2014 and 2015, the Postal Service approved two Vehicle Acquisition Extended Capacity LHD Delivery Decision Analysis Reports (DAR) — referred to as DAR 1 and DAR 2 throughout this report — totaling [redacted] million.

The deployment of DAR 1 and DAR 2 were completed in September 2016 and February 2017, respectively. Each DAR contained four performance metrics to measure the success of the program.

The Postal Service deployed the LHD vehicles as planned; however, it retained 7,688 vehicles originally slated for replacement to sustain delivery service due to continued growth in package volume and an increase in delivery points beyond projections.

What the OIG found

We found the Postal Service spent [redacted] million less than the original projected [redacted] million to acquire the new vehicles. Management obtained a lower price for the vehicles during contract negotiations and did not use contingency funding.

We found the Postal Service did not fully achieve the expected net savings for DAR 1. The Postal Service realized [redacted] million for DAR 1 in fiscal years (FY) 2016 and 2017; however, it realized full net savings of [redacted] million for DAR 2 in FY 2017. This occurred because the DAR program manager did not coordinate with Finance and Planning to reduce the savings from annual field budgets to accurately reflect the total savings stated in the DAR. As a result, management did not realize [redacted] million savings for DAR 1.

Management retained 7,688 vehicles originally slated for replacement to sustain delivery service due to continued growth in package volume and an increase in delivery points beyond projections. As a result, the actual operating cost of [redacted] million for FYs 2016 and 2017 continued to exist for the retained vehicles.

The Postal Service did not update both DARs’ cash flow throughout the investment to account for costs and savings realized. This occurred because there was no established process or oversight to instruct the program manager to update cash flow data. When cash flows are not updated, management does not have information to evaluate achieved results.

The Postal Service did not track and report the performance metrics for DAR 1. This occurred due to ineffective management oversight. Our analysis of performance metrics determined that the Postal Service did not achieve three of the four (75 percent) performance metrics for each DAR. This occurred because management did not always accurately project FY 2016 and 2017 operating costs of the new vehicles during development of the DARs.

Without oversight management cannot evaluate achieved benefits and savings and stakeholders may lose confidence in the value of the program when goals are not met.

What the OIG Recommended

We recommended management:

  • Reduce annual field budget net savings moving forward in future DARs;
  • Establish a review process for program managers to update cash flows and report on operating changes that will impact the investment; and
  • Develop and implement a review process to ensure the performance metrics are tracked and reported throughout the progress of the investment and implement corrective action when performance goals are not met.

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Comments (1)

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  • anon

    postal service kept vehicles in service rather than leasing vehicles for Christmas as it had done in previous years. shouldn't that cost savings have been reflected?

    May 24, 2018