Calling the Voyager fuel card program unmanageable and uneconomic, the USPS Office of Inspector General recommends that the Postal Service use another method to manage fuel under its HCR contracts. In its advisory report dated September 30, 2014, the OIG concludes that the Voyager fuel card program has cost more money that it saved and discourages fuel efficiency. The Postal Service spent $5.1 billion for 1.6 billion gallons of fuel for Highway Contract Route (HCR) contracts under the program over the last nine years.
Under the Voyager program, an HCR contractor is allotted an annual amount of fuel, which the Postal Service pays for when the contractor buys it with a Voyager card. The contractor must pay for all fuel used above its allotment, but the Postal Service keeps all savings if the contractor uses less than its allotment. Most other buyers of transportation services either share responsibility for fuel or assign responsibility to transportation providers. They also establish a mechanism to adjust contract prices based on fuel price fluctuations.
OIG found that the HCR Voyager program is “not manageable,” has weak controls and processes, and is not consistent with industry best practices. The program also contains no incentives for contractors to obtain the lowest price fuel, maximize fuel efficiency, and use fuel for postal purposes only.
The report takes issue with USPS management’s contention that the program saves $50 million per year ($17 million from unused gallons and $33 million from discounts and rebates). OIG contended that the Postal Service spent more in program costs than it expected to save, but its report does not explain how it came to this conclusion.
The Voyager program has led to 72 investigations of contractors and postal employees over the last nine years. Investigations by the OIG’s Special Inquiries Division have led to disciplinary actions against postal employees for unethical conduct, lack of candor, poor judgment, violation of post-employment restrictions, and failure to act promptly on OIG reports of contractor fraud.
USPS management agreed with the OIG’s recommendations and is considering alternatives to the current fuel program. USPS intends to take action no later than March 2015.
OIG issued a separate report critical of fuel pooling arrangements under the Voyager program. Under a pooling arrangement, fuel from multiple contracts are aggregated into one net amount to calculate any fuel overages. OIG contended that pooling was originally intended to be used in “rare cases” when a supplier uses the same equipment on multiple contracts in the same geographic location. Over time, however, the Postal Service relaxed these requirements and allowed all contractors with multiple contracts to pool their gallons. As a result, in the 2012 – 2013 fuel year, the Postal Service allowed all 407 HCR contractors with multiple HCR contracts to pool their gallons (168 million gallons in total).
OIG contends that relaxing pooling eligibility prevented the Postal Service from back-charging HCR contractors for 11 million gallons of excess fuel in 2012 – 2013, worth $42.5 million. Management disagreed, but did not state why. The likely explanation is that contractors who pool their fuel do not always attribute their purchases to the particular contract associated with the purchase. Fuel purchases associated with particular contracts are thus unlikely to be accurate assessments.
HCR seminar at Las Vegas meeting
Want to learn about the most important board and court decisions impacting HCR contractors? Then sign up for the HCR seminar I will be presenting on January 13, 2015 in conjunction with the National Star Route Mail Contractor Association’s meeting at the Golden Nugget Hotel in Las Vegas. Registration is discounted for Star Route members and additional attendees from the same company. To sign up or obtain more information go to www.huschblackwell.com/hcrseminar.