National-Level Office Supply Contract Has Not Been Fully Implemented

The Postal Service has not been successful in implementing its national-level contract to purchase most office supplies from Boise. As shown in figure 1, during fiscal year 2001 less than 40 percent of the $125 million in office supplies was purchased from the contract. Postal Service Did Not Take Sufficient Actions to Ensure Contract Would Be Used

Although the Postal Service conducted market research that supported the implementation of a national-level contract for office supplies, it did not take sufficient actions to ensure that the contract would be used as anticipated. The Postal Service claimed savings of up to $28 million for fiscal year 2001 using these estimates. Boise Is Not Achieving Subcontracting Plan Goals

Boise and the Postal Service have not paid sufficient attention to the subcontracting goals under the national office supply contract. The subcontracting plan was carelessly constructed, and it contains obvious ambiguities. In fact, Postal Service and Boise officials do not agree on the basic subcontracting goals. Boise has fallen far short of achieving the 30 percent goal. In fiscal year 2001, Boise reported achievements of only 2.6 percent. Boise has also fallen short of its specific goals for minority and woman-owned businesses. The language in the plan includes goals for “small, disadvantaged businesses” and “small, woman-owned businesses.” In practice, however, the Postal Service and Boise report achievements for “minority” and “woman-owned” firms, which may be small or large. Actions to Improve Subcontracting Performance

The Postal Service and Boise recognize that the performance on the subcontracting plan is not satisfactory and have started to take some actions to improve Boise’s achievements under the current contract. Despite the Postal Service’s reported statistics, we could not determine the extent to which the Postal Service is buying from SMW businesses. While Boise and the Postal Service have taken some actions to address SMW achievement, it is highly unlikely that Boise will be able to reach its subcontracting goal. Recommendations

We recommend that the Postmaster General of the United States   determine why the national contract is not being used as a mandatory source of office supplies; reassess the cost effectiveness of a national office supply contract and measure actual savings from using the contract rather than applying the outdated estimating formulas initially established;   develop mechanisms to track employees’ compliance with the mandatory use of the contract, if analysis indicates that the national-level contract is beneficial; and   direct that the contract be modified to include a revised subcontracting plan that accurately and clearly reflects realistic goals for small, minority, and woman-owned businesses, consistent with the Postal Service’s supplier diversity program. Boise also noted that sales to SMW businesses with the Postal Service increased from fiscal year 1999 to fiscal year 2001. To assess the extent to which the Postal Service is buying office supplies directly from SMW businesses, we reviewed Postal Service supplier diversity policy and guidance.
Why GAO Did This Study

Over the past 2 years, the Postal Service has experienced growing financial difficulties. In an effort to transform the organization to reduce costs and increase productivity, the Postal Service awarded a national-level office supply contract to Boise Corporation. In addition, the Postal Service required Boise to submit a subcontracting plan, which outlines how small, minority-, and woman-owned businesses will be reached through the contract. GAO was asked to assess the status of the Postal Service's implementation of the Boise contract and Boise's achievement of its subcontracting plan. GAO also reviewed the extent to which the Postal Service is buying office supplies directly from small, minority-, and woman-owned businesses.

What GAO Found

The Postal Service has not been successful in implementing its national-level contract to purchase most office supplies from Boise. Although the national contract was intended to be a mandatory source of office supplies, the Postal Service purchased less than 40 percent of its office supplies from Boise in 2001. GAO found that the Postal Service did not perform as planned under the contract because it did not take sufficient actions to ensure that the contract would be used. As a result, the Postal Service has not been able to realize its estimated annual savings of $28 million. In fact, it was only able to provide documentation for $1 million in savings for 2001. Boise and the Postal Service have not paid sufficient attention to the subcontracting plan. The plan contains obvious ambiguities, and, in fact, Postal Service and Boise officials disagree on its goals. The Postal Service maintains that the goal is 30 percent of Boise's annual revenue from the contract. Boise has fallen far short of this goal, reporting that only 2.6 percent of subcontracting dollars were awarded to small, minority-, and woman-owned businesses in fiscal year 2001. Postal Service and Boise officials recognize that the performance on the subcontracting plan is not satisfactory and are taking a number of steps to achieve the plan's goals. Nevertheless, it is highly unlikely that the current subcontracting goals will be met. The Postal Service reported that its small, minority-, and woman-owned business achievements have declined from fiscal years 1999 to 2001. Despite the Postal Service's reported statistics, we could not determine the extent to which it is buying directly from these businesses because the data are unreliable.