U.S. Postal Service:
Vulnerability to Fluctuating Fuel Prices Requires Improved Tracking and Monitoring of Consumption Information
GAO-07-244: Published: Feb 16, 2007. Publicly Released: Feb 16, 2007.
The U.S. Postal Service (the Service) is dependent on fuel to support its mail delivery and transportation networks, as well as to heat and operate the over 34,000 postal facilities it occupies. The Service has been challenged by recent fuel price fluctuations, and the Postmaster General stated that gas prices were a primary reason for the proposed 2007 postal rate adjustment. Based on this challenge, Congress asked GAO to review (1) how the Service's fuel costs changed recently and the impact of these cost changes on the Service's financial and operating conditions, and (2) how the Service's actions to control fuel costs and mitigate risk compare to leading practices and federal requirements. GAO collected fuel cost and price information; interviewed Service fuel officials; and compared the Service's actions against leading practices and federal requirements.
The Service's transportation and facility fuel costs have grown in recent years as fuel prices, particularly for gasoline, diesel, and jet fuel have increased. For example, fuel cost growth for its vehicle fleet was due to rising prices rather than consumption. While fuel costs have directly pressured its financial condition, increasing compensation and benefits were the primary driver of the $3.4 billion operating expense increase in fiscal year 2006. The Service absorbed fuel cost increases through costcontainment efforts and increased revenues from the January 2006 rate increase, allowing it to achieve net income for the year. Nevertheless, the Service remains vulnerable to fuel price fluctuations, due in part to its purchasing process, which involves buying fuel as needed, often at retail locations. The Service is challenged to control fuel costs due to its expanding delivery network and inability to use surcharges. GAO found some of the Service's actions to control fuel costs to be generally consistent with procurement and consumption practices advocated by leading organizations and federal requirements for purchasing alternative fuel vehicles. However, GAO also identified areas where more actions could be taken. Taking actions to address data inconsistencies will be important, even as the Service develops a new energy strategy. These inconsistencies will limit the Service's ability to understand consumption changes and impacts and where to target potential cost-saving opportunities. Furthermore, additional progress is needed in reducing reliance on petroleum-based fuels because of the more stringent federal fuel consumption requirements that were recently passed.
Recommendation for Executive Action
Status: Closed - Implemented
Comments: The Service agreed with our recommendation to improve the tracking and monitoring of transportation and facility-related fuel consumption data and has taken actions to do so. In fiscal year 2008, the Service started the Utility Management System Pilot Project which captures consumption and cost data for electricity, natural gas, steam, propane, and fuel oil used in major USPS facilities. For the top 500 largest facilities in USPS? inventory (which account for over half of its energy consumption), this system provided detailed information including utility consumption and cost profiles, bill payment, and rate optimization. Based on the success of this initial pilot, the system is being expanded to include the next top 1,700 facilities which should result in energy consumption information for 70-80 percent of total energy consumption. On the transportation side, the Service provided us copies of reports that Vehicle Operations uses to track Postal Fleet-Bulk Fuel gallon and spend across various fuel types. The Service also started the monthly tracking of alternative fuel use (e.g., E-85, Biodiesel, and CNG) via the Voyager Card transaction data in April 2008 and continues to work with the field to improve alternative fuel data collection. The Service found a reliable source for domestic water spend data and will begin reporting this information monthly. These efforts coincide with the Service's November 2008 release of its National Energy Management Plan. This plan identifies strategies for Postal officials in managing its fleet (including maximizing use of alternative fuel vehicles); facility energy; utilities; and tracking and reporting fuel information. Specifically, the plan states that the Service will be able to begin comparing current fuel consumption and spend data to historical data and will be able to perform detailed analysis to better understand the impacts on operations of fuel-market trends and fuel-strategy implementation.
Recommendation: The Postmaster General should take actions to improve tracking and monitoring of transportation and facility-related fuel consumption data. Taking immediate actions to address the lack of consumption data will be important, even as the Service is developing a new energy strategy.
Agency Affected: United States Postal Service: Office of the Postmaster General