Our objective was to assess the Postal Service’s use of the “as needed” transportation on Highway Contract Routes (HCR).
The Postal Service uses contracted, supplier-operated routes to transport mail and equipment between plants, post offices, and other designated points. These routes include “as needed” services that allow suppliers to travel anywhere within the continental U.S. “As needed” routes are on-demand services that operate infrequently, are generally more expensive than dedicated scheduled services, and involve multiple cost segments. The national “as needed” routes are paid a combination of a per trip rate and rate per mile, including miles driven in excess of the minimum guaranteed mileage. The locally serviced “as needed” routes are paid a per trip or per mile rate. The Postal Service spent about $21 million in fiscal year (FY) 2019 and $167 million in FY 2020 on “as needed” services.
The Postal Service uses the Transportation Contract Support System (TCSS) for overall management of transportation contracts. It also uses the electronic Service Change Request (eSCR) system to request changes in service when needed and process payments as specified in the contracts.
The Postal Service’s process for executing an extra trip is also used for “as needed” trips. For example, Postal Service (PS) Form 5397, Contract Route Extra Trip Authorization, is used to initiate the trip. This form includes trip details such as time, date, mileage, trip justification, and the approving signature. Employees input trip information into Surface Visibility (SV), which helps the Postal Service optimize its surface transportation network by improving dock productivity tracking and performance. Once the trip is completed, the designated administrative official (AO) is required to verify the accuracy and completeness of the form and reconcile trip information against SV records.
Every month the network specialists or their designees enter all “as needed” trip information into the electronic PS Form 5429 (e5429) — a component in the eSCR system — for payment processing and approval. They are also required to upload all supporting documentation, including the trip authorization form, into the system. AOs review all supporting documentation for completeness and accuracy and approve the e5429 for payment.
Management informed us on March 31, 2021, that they are replacing the existing TCSS and eSCR systems with the Transportation Management System.
We found the Postal Service increased its reliance from FY 2019 to FY 2020 on “as needed” contracts to transport increased package volume and to mitigate COVID-19 impacts. While we recognize the necessity for “as needed” services, we determined the Postal Service could improve its management of “as needed” transportation services and compliance with existing policy and procedures for the trip usage and payment processes.
Specifically, of the 17,027 invoice transactions for FYs 2019 and 2020, we reviewed a statistical sample of 198 transactions representing 1,334 “as needed” trip payments and found that 171 (86.4 percent) transactions consisting of 1,278 trips were not in compliance with processing and payment requirements. The remaining 27 (13.6 percent) transactions consisting of 56 trips were compliant. Of the 1,278 trips not in compliance:
- 713 trip authorization forms were missing and 301 of the available forms were incomplete.
- 189 trips were not recorded in SV and 297 trips could not be verified due to conflicting information between trip information recorded in SV and supporting documentation in e5429.
- 780 trips were incorrectly paid because of incorrect cost segments and mileage rates.
- 712 trips inconsistently reported mileage for payment.
This occurred because management did not review trip payment information to detect and correct errors and ensure required forms were complete, accurate, and uploaded in the eSCR system; and did not oversee the recording and reconciliation of trip information in SV. In addition, the complexity of the rate structure used by AOs to determine the state of origin, trip mileage, rate per trip, and rate per mile for selecting the cost segment resulted in input errors and incorrect payments under the e5429 payment process. Further, the Postal Service did not have policy or guidance for determining trip mileage for payment purposes.
During our audit, management implemented a simplified rate structure and provided training for administering “as needed” contracts established as of April 1, 2021. Additionally, they issued a Letter of Accountability to AOs on December 15, 2020, addressing the need to reconcile exceptional service trips against SV transportation records before submitting the request for payment approval; therefore, we will not make a recommendation for reconciling trip information in SV. However, when trips are not recorded in SV, the Postal Service loses visibility of the mail, is unable to track trailer utilization, and may make decisions based on incomplete data. As such, we estimate the Postal Service incurred about $81.2 million in unsupported questioned costs annually.
Additionally, we found opportunities exist for management to convert these trips to less expensive dedicated services. We identified 234 trips that operated the same day each week, or over 20 times during March 2021. While the Postal Service is monitoring trip usage, it did not have an established process for determining when to take action by evaluating the continuation of these highly utilized “as needed” trips and converting them to dedicated services as appropriate. Converting these trips would reduce usage of the more expensive “as needed” services. Therefore, we estimated the Postal Service would save about $68.1 million annually in funds that could be put to better use.
Finally, we identified that the Postal Service established improper pay types for “as needed” trips. Specifically, 141 trips were categorized in TCSS as an annual pay type in error, resulting in incorrect supplier payments. We also identified that these errors occurred as far back as 1993. Postal Service management was not aware of the pay type errors until we notified them for correction. Due to our audit work, management took corrective action for 129 trips as of May 2021 by updating the pay types. They are also in the process of implementing a system check to avoid future errors. We estimate the Postal Service incurred about $900,000 in questioned costs annually. Implementing corrective actions as identified in this report will enhance the Postal Service’s ability to efficiently and effectively implement a fully optimized surface transportation network as defined in its Delivering for America ten-year plan.
We recommended management:
- Develop and implement periodic reviews to ensure timely detection and correction of payment errors and verify that Postal Service Forms 5397, Contract Route Extra Trip Authorization, are complete, accurate, and included in the electronic Service Change Request system.
- Develop requirements for the Postal Service Form 5397, Contract Route Extra Trip Authorization, to be automated in the new Transportation Management System so that all trip information is complete and visible, including the automation of the trip mileage determination.
- Develop a plan to monitor compliance with the requirements for recording “as needed” trips in the Surface Visibility system.
- Establish a process to review and identify opportunities to convert highly utilized “as needed” trips to dedicated services.
- Correct the remaining 12 pay type errors for “as needed” trips, detect and correct any errors that may have occurred for active contracts entered after October 1, 2020, and ensure the system check feature to avoid pay type errors in the Transportation Contract Support System is functioning, documented, and communicated to all users.
- Identify the actual incorrect trip payments from the inception of the errors, initiate recovery, and maintain all supporting documentation either in the Transportation Contract Support System or the new Transportation Management System.