Trailer Lease Reduction Projects
Background
In fiscal year (FY) 2015, the U.S. Postal Service’s annual network transportation costs were about $6.6 billion and they are projected to be $7 billion in FY 2016. After employee compensation and benefits, transportation costs are the Postal Service’s largest operating expense.
Since FY 2014, the Postal Service has leased more than 8,000 trailers nationwide, with an annual cost of over $36 million. The trailers transport mail and mail transport equipment between network distribution centers, processing and distribution centers, associate offices, material transport equipment service centers, and major mailers. Trailers are also used as dock extensions and mail transport equipment storage.
The Postal Service’s trailer lease reduction plans for FYs 2014, 2015, 2016, and Quarter (Q)1 FY 2017, consisted of 20 projects related to quarterly submission of trailer lease reduction savings, validating the lease trailer fleet, renumbering trailers, monitoring trailer use with a global positioning system (GPS), making trailer management enhancements in Solutions for Enterprise Asset Management, and identifying underused leased trailers for return every month.
The projects were projected to save the Postal Service over $24.5 million in FYs 2014 through 2016, by improving the overall management of leased trailers, right-sizing the leased trailer fleet through increased use, and returning unneeded leased trailers.
Our objective was to determine whether the Postal Service’s trailer lease reduction projects are increasing use and right-sizing the leased trailer fleet while reducing costs.
What the OIG Found
The Postal Service can improve its overall plan for trailer lease reduction projects to increase leased trailer use, right-size the leased trailer fleet, and reduce costs.
We found that 15 of the 20 projects we reviewed (or 75 percent) were supposed to be completed by Q3, FY 2016. Three projects were completed on time, one was closed because it was not needed, and 11 projects (or 73 percent) were incomplete as of Q3, FY 2016.
For example, not all leased trailers had operational GPS units as of December 10, 2015. During the audit we determined about 600 leased trailers that needed their GPS units replaced and almost 2,000 leased trailers that needed to have GPS units installed. All leased trailers were not renumbered for current accountability as of January 25, 2016, because of ongoing contract revisions.
In addition, trailer management enhancements for Solutions for Enterprise Asset Management were not completed as of January 15, 2016. Also, in February 2016, the monthly identification of underused leased trailers for return was inconsistent and not in a standard format.
Management stated that the projects were not complete due to staff changes, inadequate global positioning system information, and ongoing trailer lease contracts revisions. Consequently, the Postal Service is not currently able to effectively manage and reduce the number of leased trailers and achieve the projected savings. We estimate a savings shortfall of over $2.2 million for Qs 1 and 2, FY 2016; and over $1.5 million in funds put to better use for Qs 3 and 4, FY 2016, and Qs 1 through 4, FY 2017, if the projects are completed as planned.
What the OIG Recommended
We recommended the vice president, Network Operations, finish the 11 remaining trailer lease reduction projects as planned, by addressing staff changes, inadequate GPS information, and ongoing trailer lease contracts revisions.