This audit may impact U.S. PostalService purchasing policies with regardto the McNamara-
ServiceContract Act (SCA) of 1965.
The report responds to a request fromRepresentative Darrell E. Issa. Our
objective was to review Postal Service’s
market research to determine if potentialsavings could be realized if they did nothave to comply with the SCA. Inaddition, we identified positions for which Postal Service labor ratesexceeded the SCA rates and barriers tooutsourcing those positions.
Postal Service market researchindicated that opportunities exist for costsavings if the agency did not have tocomply with the SCA. In addition, our analysis showed that Postal Servicewages for cleaning/janitorial and postalvehicle service (PVS) driver positionswere higher than SCA rates. Weestimate the Postal Service could saveapproximately $675 million annually if itoutsourced cleaning/janitorial and PVSdriver positions. Barriers to outsourcingthe positions include labor unionagreements, concerns that new unionswill be formed, workforce retentionissues, fluctuations in market or economic conditions, and the potentialfor congressional constituencyconcerns.
We recommended the Postal Serviceseek exemption from the SCA to allowflexibility to negotiate contract ratescloser to market rates. We alsorecommended the Postal Service reviewthe benefits of outsourcingcleaning/janitorial service positions andPostal Service vehicle driver positionsand restructure those positions toachieve the most cost effective solution.Lastly, we recommended that the PostalService ensure that appropriate financialdata is collected to aid in making in-sourcing/outsourcing decisions.
Management agreed to implement apolicy change if Congress exempts thePostal Service from the SCA. Inaddition, management stated thatrecommendation 2 accurately describeswhat the Postal Service has alreadydone and is continuing to do and statedthat it is not clear from the report theOIG found any deficiencies to correct.
Management needs to develop and fullyimplement plans to work with Congressto seek exemption from the SCA, for reviewing the benefits of outsourcingcleaning/janitorial and PVS driver positions, and to collect the financialdata needed for insourcing/outsourcingdecisions.
November 2, 2011
Contracting Opportunities and Impact of the Service Contract Act
Report Number CA-AR-12-001