Highway contract routes (HCR) are the largest single group of contracts in the U.S. Postal Service, with about $3.5 billion spent in fiscal year (FY) 2018. HCR drivers move mail between post offices and other designated stops.

Given the large amount of money the Postal Service spends on HCR contracts, the program is one we regularly audit. In the past few years, we’ve looked at management of the HCR contracts, as well as risk mitigation in the diesel fuel program.

Recently, we audited a program USPS instituted a few years ago to reduce surface transportation costs by identifying, adjusting, and eliminating unnecessary HCR trips, or what is known as HCR Optimization.

The Postal Service sets the HCR cost-reduction goal annually based on total HCR costs. In FY 2017, USPS reported national savings of about $67 million for that year, exceeding its planned savings goal of $44.4 million by a full 50 percent.

However, our audit report found the methodology used to calculate the HCR optimization cost-savings was inconsistently followed, inadequate, and not documented. We analyzed the calculations, service-change requests, and HCR contract termination data files. We compared that data to the Postal Service’s reported savings and found that the methodology the Postal Service used for calculating savings included errors, ultimately overstating reported savings in some areas and understating them in others. We determined that this resulted in a net overstatement of $82 million for FY 2017.

We recommended management reevaluate the continuation of the HCR optimization cost-savings calculation. If the program is continued, USPS should develop standard operating procedures and automate the methodology for calculating and validating the savings calculation.

What opportunities do you see to reduce HCR costs?

Comments (2)

  • anon

    HCR contracts are a joke. We store there trailers for free...!!! Which dosen't happen anywhere else ? Let alone move there Trailers to there dispatch stalls so they can be loaded for dispatch and then there drivers just need to show up and hook and go. Really...??? All that free service? And that barely scratches the surface of the fares that are HCR routes.

    Apr 19, 2019
  • anon

    We can run utilization analysis tool by using heat map to recognize low utilization HCRs and eliminating those routes finding alternative methods to move the mail with out impacting any customer services. I had been using this method to save close to million dollars this year so far.

    Mar 26, 2019

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