Our objective was to determine whether the U.S. Postal Service’s Expansion of Package Sorters capital investment achieved expected savings and performance metrics.
As ecommerce continues to grow at a rapid pace, the package delivery market has created opportunities for the Postal Service to increase revenue. The Postal Service manually processes and sorts over 1.5 billion packages each year at a cost of over $250 million annually. To improve the efficiency of package sorting, the Postal Service has approved two decision analysis reports (DAR) through their investment review process. The DARs, referred to as Phase 1 and Phase 2 throughout this report, total [redacted] million.
The DARs address expansion of bins to the automated package processing systems (APPS) and automated package and bundle sorters (APBS). The additional bins will increase the number of separations that can be made during a single run on the package sorter; therefore reducing the volume that flows to bins for manual sortation. The DARs stated that reducing manual handling of packages would produce workhour savings and improve sort quality and customer service.
Deployment of Phase 1 was completed in May 2017, and management plans to complete Phase 2 by September 2018. Phase 1 contained four performance metrics to measure the success of the investment. Because the deployment is not yet complete, we did not evaluate Phase 2 performance metrics.
We measured the expected savings and net operating various for both DARs because the annual budget was developed prior to the start of fiscal year (FY) 2017 and 2018.
What the OIG Found
The Postal Service did not fully achieve the expected net savings and performance metrics for the investment. The Postal Service achieved expected workhour savings for Phase 1, but only realized [redacted] ([redacted] percent) workhour savings for Phase 2. This occurred because Finance and Planning used an older version of the DAR, instead of the approved version, to budget workhour adjustments. As a result, the Postal Service did not realize [redacted] million savings for Phase 2, of which [redacted] million is recoverable from the FY 2018 budget.
The Postal Service is not tracking and reporting three of four performance metrics for Phase 1 throughout the investment. Our analysis determined:
- One metric was unable to be measured because Postal Service management incorrectly established the metric and later determined that it was not suitable for performance tracking. As a result, management excluded the metric from Phase 2.
- Two metrics were not tracked due to ineffective management oversight.
As a result, the Postal Service could not evaluate the success or impact of current or future investments.
What the OIG Recommended
We recommended management:
- Adjust annual budget to accurately capture the total net workhour savings in Phase 2 in FY 2018. As a result of our recommendation, management has taken corrective action to reduce the FY 2018 budget.
- Establish performance metrics that are reasonable and can be used to evaluate program performance; and
- Develop and implement a review process to ensure performance metrics are tracked and reported in accordance with policy.