GAO: Scant Savings From Postal Service Office Supply Contract The Postal Service should re-assess its strategy of buying office supplies through a single national contract, because the contract has achieved nowhere near the savings or the small business participation that was promised, the General Accounting Office said. GAO said, “The Postal Service has not yet been successful in implementing” the three-year-old-old contract with Boise Office Solutions, which replaced longstanding arrangements with many small, local firms. In response to the report, the Postal Service said it is committed to the national contract and is working to improve management of it. Rep. Nydia Velazquez (D-NY), ranking minority member of the House Small Business Committee, called on the Postal Service to cancel the contract. “This contract has largely eliminated small business opportunities of any kind with the Postal Service,” she said in a statement. The Postal Service said Boise awarded only 2.6% of its subcontracts to small, minority and woman-owned firms in fiscal 2001, although the contract sets a 30% small business subcontracting goal. GAO said that goal appears to be unrealistically high. The Postal Service bundled its office supply purchases into a single contract, expected to be worth about $50 million a year, and awarded the contract to Boise (then known as Boise Cascade) in January, 2000. Before that, individual post offices bought supplies locally, often from small firms. The Postal Service said its purchases of office supplies from small, minority and woman-owned businesses declined from 50% of the total in 1999 to 18% to 2001, but GAO said that figure is unreliable and may be overstated. The Postal Service estimated it would save $28 million a year by using the national contract. GAO said the service was able to document only $1 million in savings during fiscal 2001. The Postal Service said savings in fiscal 2002 amounted to $5.3 million. The Postal Service agreed with GAO’s recommendation that it re-assess the contract and rewrite the subcontracting plan. But it defended the national contract. “The business benefits of supply chain management and strategic sourcing hold much promise for organizations like the Postal Service which face continuing financial and competitive pressures,” Keith Strange, vice president for supply management, wrote in response to the report. GAO concluded, “In fact, the Postal Service has no assurance that the national strategy is effective because it has not adequately tracked its employees’ office supply purchases.” The service said it has already increased management oversight. GAO found that less than 40% of the Postal Service’s office supplies were bought through the national contract in 2001; many local and district offices continued to use purchase cards and local contracts. A major advantage cited by the Postal Service was the capability of local offices to place orders with Boise through a Web-based system known as eBuy, reducing transaction costs. But Rep. Velazquez said, “Big businesses are not the only ones that can offer electronic buying – small businesses can, too.” The Postal Service said it has started negotiations with Boise to renegotiate the subcontracting plan, and lower the goals, in case it exercises an option on the contract. Boise said it has conducted meetings with Postal Service district offices to stress the importance of buying from small, minority and woman-owned businesses and has distributed a catalog highlighting products available from those businesses. The report, “Contract Management: Postal Service’s National Office Supply Contract Has Not Been Effectively Implemented” (GAO-03-230), is available at www.gao.gov.