Summary
Over the past 2 years, the Postal Service has experienced growing financial difficulties. In an effort to transform the organization to reduce costs and increase productivity, the Postal Service awarded a national-level office supply contract to Boise Corporation. In addition, the Postal Service required Boise to submit a subcontracting plan, which outlines how small, minority-, and woman-owned businesses will be reached through the contract. GAO was asked to assess the status of the Postal Service's implementation of the Boise contract and Boise's achievement of its subcontracting plan. GAO also reviewed the extent to which the Postal Service is buying office supplies directly from small, minority-, and woman-owned businesses.
The Postal Service has not been successful in implementing its national-level contract to purchase most office supplies from Boise. Although the national contract was intended to be a mandatory source of office supplies, the Postal Service purchased less than 40 percent of its office supplies from Boise in 2001. GAO found that the Postal Service did not perform as planned under the contract because it did not take sufficient actions to ensure that the contract would be used. As a result, the Postal Service has not been able to realize its estimated annual savings of $28 million. In fact, it was only able to provide documentation for $1 million in savings for 2001. Boise and the Postal Service have not paid sufficient attention to the subcontracting plan. The plan contains obvious ambiguities, and, in fact, Postal Service and Boise officials disagree on its goals. The Postal Service maintains that the goal is 30 percent of Boise's annual revenue from the contract. Boise has fallen far short of this goal, reporting that only 2.6 percent of subcontracting dollars were awarded to small, minority-, and woman-owned businesses in fiscal year 2001. Postal Service and Boise officials recognize that the performance on the subcontracting plan is not satisfactory and are taking a number of steps to achieve the plan's goals. Nevertheless, it is highly unlikely that the current subcontracting goals will be met. The Postal Service reported that its small, minority-, and woman-owned business achievements have declined from fiscal years 1999 to 2001. Despite the Postal Service's reported statistics, we could not determine the extent to which it is buying directly from these businesses because the data are unreliable.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
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Recommendations for Executive Action
Recommendation: The Postmaster General of the United States should determine why the national contract is not being used as a mandatory source of office supplies.
Agency Affected: United States Postal Service
Status: Not Implemented
Comments: Postal Service headquarters officials indicated that they have taken action to implement the recommendation. The documentation provided declares that the Postal Service is in compliance with mandatory use of the national office supply contract. GAO and the Postal Service agree to disagree.
Recommendation: The Postmaster General of the United States should reassess the cost effectiveness of a national office supply contract and measure actual savings from using the contract rather than applying the outdated estimating formulas initially established.
Agency Affected: United States Postal Service
Status: Implemented
Comments: The Postal Service indicated it is making progress and provided documentation of its validated savings figures. The Postal Service Office of the Inspector General issued a report (report number CA-MA-05-002) recommending that the Vice President, Supply Management report a revised savings of $3.4 million in FY 2004 supply chain management impact associated with the Boise contract, rather than the estimated annual savings on $28 million.
Recommendation: The Postmaster General of the United States should develop mechanisms to track employees' compliance with the mandatory use of the contract, if analysis indicates that the national-level contract is beneficial.
Agency Affected: United States Postal Service
Status: Implemented
Comments: Postal Service headquarters officials indicated that they have taken action to implement the recommendation. The Postal Service provided a copy of the Boise "MOVE" report that tracks credit card spending compliance with the national office supply contract by area and district spending.
Recommendation: The Postmaster General of the United States should direct that the contract be modified to include a revised subcontracting plan that accurately and clearly reflects realistic goals for small, minority, and woman-owned businesses, consistent with the Postal Service's supplier diversity program.
Agency Affected: United States Postal Service
Status: Implemented
Comments: Boise's subcontracting plan has been renegotiated to reflect realistic goals. GAO received documentation of the revised Boise Office Solutions Small, Minority, and Woman-Owned Business Subcontracting Plan for CY 2003 & CY 2004 for the National Strategic Office Supply Contract. In addition we have the Postal Service office products Subcontracting Plan dated March 29, 2005 for CY 2005.
