The Postal Service delivers the fail, audit shows

By Paul Brennan | Iowa Watchdog

DES MOINES, Iowa — When it comes to incompetence, losing money and union muscle-flexing, the U.S. Postal Service always delivers.

A recently released audit by the USPS Office of Inspector General shows Postal Service officials failed to follow proper procedures and wildly overestimated potential savings when it awarded a contract for mailbox maintenance in 18 states to Diebold, Inc., in 2011.

The audit was done at the request of Iowa’s Sen. Charles Grassley, after Grassley was contacted by Ankeny postal worker Kirk Gardino. Gardino, whose job doing mailbox maintenance was outsourced to Diebold under the contract, was convinced outsourcing the work couldn’t possibly provide the savings the Postal Service claimed it would.

Gardino was right.

The IG determined the Postal Service had overestimated yearly savings by $6.8 million.

According to the report, the contracting officer for maintenance operations for the Postal Service’s Western Area, which encompasses all the states west of the Mississippi except California, Texas, Oklahoma and Hawaii, took bids on the work without conducting any analysis to determine what mailbox maintenance for the area should cost. The officer simply accepted Diebold’s bid as “fair and reasonable” after deciding Diebold was the only bidder that had “the technical capacity to do the work for the entire Western Area.”

How he concluded the amount the contract would save the Postal Service is unclear.

The contracting officer’s work was not reviewed by his superiors.

The Postal Service paid Diebold $18.4 million between January 2012 and December 2013, when the contract was cancelled.

The contract wasn’t canceled because it wasn’t producing the promised savings. It was canceled because the American Postal Workers Union complained about it.

The APWU filed a grievance after the contract was awarded, claiming management had not properly informed the union that some of the work performed by its members would be outsourced. The case went to arbitration and in 2013 a federal arbitrator ruled in the union’s favor.

Even though the Postal Service had informed the state and local union bargaining units affected by the outsourcing, it hadn’t formally notified the union’s national leadership. The arbitrator ruled that violated the union’s contract with the Postal Service, and ordered that the Diebold contract be canceled.

But canceling that contract hasn’t saved the Postal Service any money. Although it wouldn’t have produced millions in savings, the IG concluded outsourcing the work to Diebold would have saved the Postal Service $657,234 annually.

That savings would have happened despite the fact no maintenance workers were laid off by the Postal Service during the life of the Diebold contract. The workers were simply reassigned.

In his official statement accompanying the release of the IG report, Grassley praised Gardino as a “whistleblower,” but didn’t mention the APWU’s role in canceling the contract or the extra cost of using unionized postal workers for mailbox maintenance.

Asked by Iowa Watchdog if he favored outsourcing the work as a way for the Postal Service to save money, Grassley declined to comment directly on the issue, but said he was in favor of using contractors “provided the nature of the work is appropriate for contractors to perform and government contracting rules are followed to ensure the best deal possible.”

Stacy St. John, a spokesperson for the Postal Service, was unable to say if the maintenance work would be put up for bid again.

Contact Paul Brennan at pbrennan@watchdog.org