Background
In fiscal year 2023, Parcel Select was the largest volume U.S. Postal Service package offering – about 3.6 billion packages and over $10 billion in revenue – the vast majority coming through custom pricing contracts with large shippers. All Parcel Select shippers must comply with various policies, including weight and size limits. Parcel Select requires shippers to aggregate and drop large volumes of packages close to the delivery point to bypass Postal Service processing and handling costs. Packages dropped at incorrect locations are considered “mis-shipped” and require additional postage, and overweight or oversized packages may require additional fees. To safeguard Parcel Select revenue, the Postal Service must enforce policy and contracts.
What We Did
Our objective was to evaluate the Postal Service’s oversight of contractual and policy requirements and revenue collection for Parcel Select. We interviewed staff, conducted site visits, and analyzed 9 billion Parcel Select packages shipped from October 2021 to July 2024.
What We Found
Although the Postal Service audited contractual postage rates and reviewed whether shippers met contractual volume requirements, it failed to identify 45.4 million packages dropped at the wrong location – packages that should not have received Parcel Select pricing. This occurred because the Postal Service did not automate processes or systems to successfully monitor location-based compliance. As a result, the Postal Service did not collect owed postage. Additionally, the Postal Service delivered more than 80,000 Parcel Select overweight or oversized packages, rather than hold them as required, mostly without collecting the penalty fee. The Postal Service lost approximately $7.6 million in revenue and created safety risks for the employees who delivered these packages. Looking forward, the Postal Service should enhance its contractual oversight to incorporate some product policies to confirm that its largest customers use the Parcel Select product as it was designed.
Recommendations and Management’s Comments
We made eight recommendations to improve Parcel Select oversight. We consider management’s comments responsive to recommendations 1, 3, 4, 5, 6, 7, and 8, as corrective actions should resolve the issues identified, with recommendations 3 and 7 closed upon issuance of this report. Management disagreed with recommendation 2, and we will work with the Postal Service through the formal audit resolution process. Management’s comments and our evaluation are at the end of the findings and recommendations.
