Audit: Ex-Postal Service workers return as private contractors, make more money

By Ed O'Keefe
Washington Post Staff Writer
Sunday, September 26, 2010; 8:18 PM

Who says you can't go back? Apparently you can at the U.S. Postal Service.

Dozens of former top executives and hundreds of former employees have returned to the agency in recent years as private contractors, sometimes making double the salaries they made as full-time workers, according to one of three watchdog audits released late last week.

The reports said the cash-strapped Postal Service is doing a poor job tracking its use of no-bid contracts, contributes more to worker health and life insurance benefits than other federal agencies and should consider closing more of its regional offices to help address an expected $230 billion, 10-year budget gap.

The Postal Service is set to report billions of dollars in losses this week because of declining mail volume. It is also awaiting permission from regulators to raise postage rates and is locked in negotiations with two of its largest unions.

The Postal Service has awarded more than 2,700 contracts to former employees since 1991 and awarded 17 no-bid deals to former executives between 2006 and 2009, according to one of the audits. Most of those executives earned six-figure sums, the report said. One unnamed executive received a $260,000 no-bid deal in July 2009 to train his successor just two months after retiring.

"It appears unethical to hire back former executives at nearly twice their former pay to advise new executives who were placed in their position based on their expertise and years of Postal Service experience," the report said. "There is also employee morale and public image issues management must consider when the Postal Service is closing post offices and seeking a reduced delivery schedule."

Beyond employment contracts, the Postal Service improperly classified the status of 5 percent, or $910 million, of its $18 billion annual contracting costs, according to the report.

"The Postal Service, like the federal sector and private industry, will use non-competitive purchases in those instances when a non-competitive purchase is the best contracting method to meet our business needs," Postal Service spokeswoman Joanne Veto said.

The mail agency is also reviewing its deals with former employees and has instituted new policies to guard against potential conflicts of interest, Veto said.

The federal government procures about 30 percent of its goods and services through contracts, and the Postal Service has stringent approval requirements for non-competitive purchases, she said.

A separate report said the Postal Service's contribution rate to the Federal Employees Health Benefits program is 79 percent for most postal workers, higher than the 72 percent contribution rate the federal government pays for civilian workers. Postal officials involved in labor negotiations hope to win concessions from unions to reduce the rate.

But postal auditors told the office of Sen. Susan Collins (R-Maine) on Friday that the Postal Service pays 100 percent of health benefits for senior executives, some administrative staffers and directors of its Office of Inspector General.

A third report presented plans to save between $289 million and $894 million in the next decade by merging or closing dozens of administrative offices. Auditors recommended merging several offices into a central location, closing district offices with low work hours and mail volume, or moving regional offices into its Washington headquarters.

The Postal Service has trimmed $10 billion in costs since 2008, and this year it stopped hiring and promoting administrative staff. Collins and Sen. Claire McCaskill (D-Mo.) plan to use the audits to urge an additional $800 million in cuts in fiscal 2011.

Aides said the senators requested the reports after auditors in June detailed how former postal executive Robert F. Bernstock awarded millions of dollars in non-competitive employment contracts to former colleagues. Bernstock left the Postal Service in May before auditors issued their reports.

Collins called on Postmaster General John E. Potter to immediately consider the recommendations from the three reports.

"These IG reports raise extremely troubling questions about the management abilities and core decisions of the Postal Service," Collins said, adding that the mail agency "is at a crossroads in its history. The survival of this institution, which is vital to our country, depends on its regaining its financial footing."

The Maine Republican opposes a Senate bill unveiled Thursday that would give the Postal Service more flexibility to cut Saturday mail deliveries and close thousands of post offices. She also opposes plans to raise first-class stamp prices to 46 cents in January. The Postal Regulatory Commission must issue a binding decision on the rate increase by Oct. 4.


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