An inspector general report found that the USPS has paid approximately $31.5 million for unused air transport capacity to one supplier between January 2022 and March 2023. Leonsbox / Getty Images
USPS paid for unused air mail transport due to incorrect forecasts, OIG says
The Postal Service didn’t accurately plan the weight capacity of its operations with one air transport supplier, according to a new report, often paying shipping costs for unused capacity on flights.
According to a report from the U.S. Postal Service’s inspector general, the service has paid millions to an aviation supplier for unused capacity because it did not meet minimum weight requirements for shipping.
The Nov. 30 report details how the service calculates the costs of its air shipping capacity, analyzing 10 operating periods from a single aviation supplier between January 2022 and May 2023, finding that in 67% of the periods studied, flights contained less mail than their minimum weight requirements.
USPS paid $3.5 billion in air transportation costs in fiscal 2022, up $106 million from the prior year, but is currently seeing reductions in its usage under a 10-year reform plan by Postmaster General Louis DeJoy.
The partially redacted OIG report focused on an aviation supplier that accounted for 11% of total fiscal 2022 air transport expenditures, or $403 million. The report found that USPS officials forecasted the amount of mail the supplier would fly was ultimately too high, as portions of it were actually slated to be shipped through the service’s surface networks.
The USPS’ Air Network Modeling team forecasts mail volume demand, while its Air Transportation Operations team makes its request for capacity to a supplier 190 days prior to the designated operation period based on that forecast.
Because USPS can’t make additional modifications to its supplier request once it’s been made, if the actual amount of mail tendered is below a certain percentage of its planned weight, it still pays a portion of the contract known as the minimum.
According to the OIG, the mail tendered for the aviation supplier fell short of the contracted minimum, partly because of the elevated forecast and partly because portions of the forecast were not ultimately assigned to the supplier.
“These things occurred, in part, because the air demand forecasting model was not updated to reflect transportation network changes and additional network changes occurred after the planned capacity had been submitted and accepted by the aviation supplier,” the report said.
As a result, between Jan. 1, 2022, and March 24, 2023, USPS paid approximately $31.5 million in what the OIG called questioned costs — which it defines as costs unnecessary, unreasonable or an alleged violation of the contract — for unused capacity.
The report does note that even if USPS had tendered all of the mail assigned to the request, it still would have paid $15.5 million in contract minimums.
USPS officials also have a process to reconcile the actual weight capacities of an operating period, meeting with the supplier no more than 60 days after the period and sending scan data to a postal service transportation contract analyst to match the capacity data between the supplier and the postal service.
However, the OIG said USPS wasn’t using its own calculation to reconcile the tendered weights to the supplier, but rather using the supplier’s calculations without verifying their accuracy.
“This occurred because the transportation contract analyst did not have updated standard procedures to guide the reconciliation process,” the report said. “While the Postal Service developed aviation supplier reconciliation procedures in 2017, the procedures have not been updated and do not contain a process for validating data received from the aviation supplier.”
The OIG offered four recommendations to the USPS, including to develop a process to communicate and confirm future air-to-surface transportation changes are incorporated into the air weight capacity forecast model, to reissue guidance and conduct training around tendering mail to aviation suppliers, to update instructions around the aviation supplier reconciliation process to include validation and to reassess or redefine the duties and responsibilities USPS employees in the reconciliation process.
USPS officials agreed with three of the recommendations, but disagreed with the OIG on confirming changes to the forecast model, claiming that the ANM team already has such a process and that in four of the 10 operation periods examined, “there was a known impact and strategic decision to move forward with the air to surface changes during that time.
“Management subsequently provided standard operating procedures that include a process to communicate and confirm future air-to-surface transportation changes are incorporated into the forecast model when planning air weight capacity,” the report said and considered the recommendation resolved as a result.