The U.S. Postal Service is spending more than intended to fly mail around the country because minimum volume commitments under its new air cargo contract with United Parcel Service prevent the agency from following a policy to shift more pieces to cheaper surface transportation to save money, the agency’s watchdog organization said.
Postal officials failed to align the UPS contract with projections for declining parcel volumes and a new strategy that prioritizes use of motor carriers over more expensive air shipping, the Office of Inspector General said in a report publicly released on Tuesday. To make up for fewer packages, the national post handed UPS more First-Class mail and marketing mail to avoid significant penalties for failing to meet minimum volume thresholds.
If the USPS didn’t supplement package volumes with mail, it would have paid an extra $127 million for unused air capacity.
The Inspector General urged logistics officers to consider early termination of the UPS air contract and pursue a deal with better conditions.
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