The Postal Service first entered into a contract with FedEx to provide air transportation in 2001 for $6.3 billion. On Aug. 2, 2006, the USPS announced that it had ‘truncated the original contract and signed a new seven-year agreement that included an “immediate price reduction in all contract categories.” The revised contract allowed the Postal Service to continue outsourcing Terminal Handling Services (THS), which sort and prepare mail for FedEx.”
Air Networks – Federal Express Transportation Agreement
OIG audited Three of Nine USPS Areas (Southwest, Pacific and Western) to determine whether selected transportation operations were effective and economical. the Southwest was the most recent USPS Area audited.
The OIG found that USPS incurred over $50 million in unnecessary costs by the use of “expensive FedEx transportation to move mail that could have been moved on low-priced surface transportation or on less costly passenger airlines. The OIG also concluded that USPS could save at least $267 million over a 10-year period if management used “ground transportation and domestic air carriers, and to sort mail at U.S. Postal Service plants in some cases, than to use FedEx to perform these functions.” Of course these figures could increase if OIG audits the remaining six USPS areas (Eastern,Great Lakes, New York Metro,Northeast, Southeast and Capital Metro) .
Here’s an overview of the costs on the three USPS areas:
Southwest (PDF) – $9 million in unnecessary costs, save $44.3 million over 10-year period =$53.3 (recent audit)
Pacific (PDF) – $17.8 in unnecessary costs, save $45 million over 10-year period = $62.8 million
Western – $23.7 in unnecessary costs, save $117.6 million over 10-year period = $141.3 million