Summary: The Postal Service is on the cusp of a major transformation to improve its fiscal outlook. One part of this transformation involves procurement. The Postal Service is homing in on supply chain management, a process that has helped successful private-sector companies leverage their buying power and identify more efficient ways to procure goods and services. To assist congressional efforts to enact fundamental postal reform, GAO was asked to determine (1) the extent to which the Postal Service has been successful in implementing and realizing savings from its supply chain management initiatives and (2) whether these initiatives have had an effect on small businesses.
The Postal Service has had mixed success in implementing the supply chain management initiatives we reviewed: the bulk fuel program; reverse auctions for transportation contracts; and national contracts for boxes, custodial supplies, labels, retail packaging, and tires. The Postal Service reported over $78 million in fiscal year 2003 savings and revenue from these initiatives. However, the Postal Service has been unable to recover millions of dollars in potential savings because of implementation problems with the bulk fuel program. For other savings initiatives, baseline data used to calculate savings were, in some cases, inaccurate or could not be validated because the Postal Service lacks a system for harnessing annual spending data. Since the Postal Service started using the national contracts GAO reviewed, the number of small business suppliers has dropped dramatically. Acquisition plans for most of these contracts did not address small business participation, either at the prime or subcontractor level. GAO could not determine the effect that the bulk fuel program and reverse auctions have had on small businesses because Postal Service contracting officers and contractors have been using incorrect business size standards, and, as a result, the reported small business accomplishments are not accurate. Further, the Postal Service's new supplier diversity policy does not establish targets for contracting with small businesses. Therefore, the Postal Service will have difficulty gauging the effect of supply chain management initiatives on these businesses and holding contracting officers accountable for implementing the policy's objective of ensuring improvement in the Postal Service's relationships with small businesses.
