U.S. Postal Service Contract Labor Substitution
Background
The U.S. Postal Service’s (USPS) Supply Management function is composed of five purchasing portfolios that manage contracts for goods and services to meet USPS operational needs.
In fiscal years (FY) 2009 and 2016, the USPS awarded [redacted] two contracts and a basic ordering agreement — within the Technology Infrastructure and Commercial Products and Services portfolios — for consulting and professional information technology services.
As of March 2017, the USPS had paid [redacted] million for these services with the largest portion of the fees attributed to labor hours. When key personnel labor is deemed essential to performing work, the USPS includes a clause in the contract that requires key personnel to be defined and identified in the contract.
Labor substitution occurs when a supplier substitutes an individual designated to work on a contract with another individual. When this occurs for key personnel, the supplier must obtain written approval from the contracting officer (CO) prior to the substitution occurring. Ultimately, COs are responsible for ensuring suppliers comply with contract terms and maintaining adequate documentation in the contract file.
For FYs 2015 and 2016, we identified a universe of 2,523 [redacted] invoices paid against three contract vehicles and reviewed a statistical sample of 187 invoices.
Our objective was to determine whether COs complied with USPS policy for labor substitution on [redacted] contracts.
What the OIG Found
COs did not comply with USPS policy for labor substitution of key personnel on two of the three [redacted] contract vehicles reviewed. In FYs 2015 and 2016, for 48 percent (89 of 187) of invoices reviewed, we identified 98 contract personnel who were substituted as key personnel without written approval or supporting documentation in the contract file, as required per USPS policy.
This occurred due to poor CO contract oversight and inadequate documentation practices in managing key personnel. Without evidence of written approval, the USPS cannot substantiate that [redacted] is substituting key personnel with individuals of like experience and qualifications. This increases the risk of substandard service, project delays, and/or cost overruns. We made a referral to our Office of Investigations as appropriate.
Based on our statistical sample, we projected that 48 percent of [redacted] invoices for two contract vehicles, valued at [redacted], have unapproved and unsupported labor substitutions for key personnel.
In FY 2016, [redacted] was a top 10 vendor for the USPS in terms of fees paid at over [redacted] million. Accordingly, it is important for the USPS to ensure proper controls and oversight are in place to adequately monitor spend and manage contract data.
What the OIG Recommended
We recommended management reiterate existing policy on key personnel clauses, contract documentation practices, and use of the Contract Authoring and Management System. We also recommended management establish an oversight process to ensure proper review, approval, and documentation of labor substitution for key personnel. Finally, we recommended management revise existing policy to clarify requirements for requesting and approving key personnel labor substitution.