USPS Office of Inspector General Audit Report: Award of the Diebold, Inc. Contract
This report presents the results of our audit of the award of the Diebold, Inc. (Diebold) contract (Project Number 13YG007SM000). The report responds to a request from Senator Charles E. Grassley to review the U.S. Postal Service’s award of the Diebold contract. Our objective was to determine whether the Postal Service awarded the contract in accordance with appropriate policies and procedures. See Appendix A for additional information about this audit.
Postal Service maintenance mechanics traditionally have repaired and changed locks for Postal Service-owned mailboxes. To reallocate maintenance mechanics from the field, Western Area Maintenance Operations asked Supply Management to contract this work. The Postal Service awarded a contract to Diebold on September 22, 2010, to repair and change locks in the Western Area (see Figure 1). On November 10, 2011, the American Postal Workers Union (APWU) filed a grievance with the Postal Service (PR added the link) , which was denied and arbitrated on July 6, 2012. The arbitrator found in favor of the APWU and ordered the Postal Service to terminate the Diebold contract, which it did on December 31, 2013, having paid Diebold $18,399,448 between January 2012 and November 2013.
Conclusion
The Postal Service did not award the Diebold contract in accordance with Postal Service policies and procedures. Officials did not develop a purchase plan1 or conduct a price analysis2 before awarding the contract. As a result, contracting officials did not assess price reasonableness or obtain higher level review and approval as required. We found the Postal Service did not conduct an analysis to establish the contract payments of $18,399,448 provided the best value, 3 although this does not necessarily indicate the Postal Service incurred losses. See Appendix B for monetary impact details.
Further, officials inadequately analyzed Postal Service internal lock repair and maintenance costs. Based on our calculations, they overestimated the annual cost savings by $6,839,456 per year4 and outsourced the work to Diebold based on this inflated cost savings assumption.
Contract Planning
Postal Service officials did not adequately plan the Diebold contract award. Contracting officials did not prepare a purchase plan even though they are required to do so for awards anticipated to be $1 million or more. The purchase plan should contain the rationale for the proposed purchase, define the best value to the Postal Service, and have a higher level review and approval5 by the appropriate authority.
Contracting officials stated they did not develop a purchase plan — believing that the CSSP satisfied the purchase plan elements — and they did not expect the purchase to exceed $1 million. However, the intent of the CSSP is to achieve supply chain management goals for a specific commodity. It does not contain many of the elements of a purchase plan and contracting officials did not address major purchase plan elements in the CSSP, such as budgeting, cost drivers, or best value. Further, had contracting officials compiled their historical spend data during the contract planning process, they would have determined the yearly estimated cost of Postal Service personnel repairing locks was about $10 million, exceeding the $1 million threshold for developing a purchase plan.
By not determining that lock repair costs would exceed $1 million and not developing a purchase plan for the repairs, contracting officials did not define best value or make an effective contracting determination. Also, because the purchase plan would have required a higher level review, the Postal Service awarded the contract without proper approval.
Recommendations
We recommend the vice president, Supply Management, direct the manager, Customer Products and Fulfillment, to:
1. Train contracting officials to develop a purchase plan for purchases exceeding
$1 million and conduct a price analysis prior to awarding supplier contracts.
We recommend the vice president, Western Area, direct the manager, Western Area Maintenance Operations, to:
2. Develop a process to capture and analyze applicable data to support internal cost estimates when considering outsourcing in the future.
1 A
Wouldn’t the whole USPS privatized be a wonderful thing ? ISSA not likely twould be !
Can’t wait to see how much the unions win the mechanics for lost overtime wages. Guaranteed to be in the millions. Makes me wish I was back in the circus, but retirement is too good.
I worked in this postion for 25 years , the manager in western region was a phoenix stupervisor before leaving to denver, totally incompetent person .we told management there numbers were wrong, they contracted our work out anyway , postal service doesn’t want to save money.and would never listen to a craft employee , this took a year just to mediate, ,incompetence all the way around.
How come management is never disciplined when they violate regulations? Management tried to give me a letter of warning for not scanning a parcel on my day off! The management lazy employees involved will be promoted. They are never treated like the slaves!
Now all you hard working craft employees, go out and work your butts-off so we can get that money back.
who’s going to get a PDI!
How about take all the money over 1 million out of their combined salaries….probably will only take a few months to pay it back.
I thought the custodians were doing that while delivering mail an getting us some pizza?
Accountability!!
Heads must roll! Fire the new PSE or whatever it’s called.
Now where were we my dear? Oh yes I could use a cute little 240B around the house, I mean the office to take care of some business. Interested?
Oh the fun never stops around here.
Kickback ?
And some dummy still keeps his job.
Donahoe and his henchmen are the epitome of slime.
how about some accountability for the “contracting officials” who
awarded the contract.
More blatant theft from mgmt ranks that will go unpunished.