Evaluation of Freight Auction
Background
The U.S. Postal Service implemented Freight Auction (FA) in October 2021 to solicit bids to transport mail on an “as needed” basis with the flexibility to schedule trips without requiring contractual changes. The FA program supports the Delivering for America vision with the goal to improve financial sustainability and service performance. Implementation of FA provides the Postal Service the opportunity to use the spot freight market to get competitive market pricing on surface trips and improve trailer utilization. The Postal Service spent about $159.5 million and $385.2 million for fiscal years (FY) 2022 and 2023, respectively, for FA trips.
What We Did
Our objective was to assess the effectiveness of FA for Highway Contract Routes. We performed site observations at eight facilities between December 2023 and February 2024, covering the four Postal Service areas. We also reviewed FA trips and payment data for FYs 2022 and 2023.
What We Found
The Postal Service’s FA program could have been more effectively planned, standardized, and executed with proper internal controls. Specifically, we found the FA policies and procedures were inconsistently applied across facilities; trip bids and awards lacked effective safeguards; trip payments and the supporting documentation for proof of delivery lacked proper controls; implemented system control requirements were not effective to safeguard against inaccurate supplier payments; supplier performance was not routinely monitored; and the FA contracts were not in compliance with the Service Contract Act requirements. Consequently, we estimated the Postal Service incurred about $199.1 million in questioned costs due to the lack of a proper control environment.
Recommendations and Management’s Comments
We made 10 recommendations to reinforce driver screening, dock operations, and trailer utilization; improve the bidding process; address inaccurate supplier payments; supplier performance and compliance; and Service Contract Act compliance. Postal Service management agreed with 9 of the 10 recommendations. Management’s comments and our evaluation are at the end of each finding and recommendation. The U.S. Postal Service Office of Inspector General considers management’s comments responsive to all recommendations except for recommendation 7, which we will discuss with management during the audit resolution process. For the others, the corrective actions should resolve the issues identified in the report.