GAO says Action Needed to Improve Credibility of USPS Cost Assumptions for Next Generation Delivery Vehicles

Steve HutkinsBlog, News

GAO: The United States Postal Service’s (USPS) cost estimate for acquiring the next generation delivery vehicle followed most leading practices for a comprehensive, well documented, and accurate estimate. However, USPS did not fully use practices related to credibility from GAO’s Cost Estimating and Assessment Guide, such as including a sensitivity analysis of how different assumptions affected the underlying cost estimate. USPS officials said they use internal policies and are not subject to the Cost Guide. However, this guide reflects leading practices used by government and industry. Using these practices can strengthen the estimate’s credibility and ensure effective cost management.

GAO’s analysis of the purchasing model USPS created to inform its vehicle order in 2022 found that two cost factors—the price of gas and the cost of installing charging infrastructure—could considerably affect the model’s recommendations. For example, changing the gas price by $1.00 in a selected range resulted in the model recommending that almost 90 percent of the delivery vehicles be electric, instead of 10 percent (see figure). Thus, it is important for USPS to consider this sensitivity and monitor fuel costs as it evaluates the mix for its vehicle order.

GAO’s analysis of the capital request report USPS used for its March 2022 vehicle order found USPS did not clearly explain the basis for all cost assumptions. Specifically, USPS used $2.71 as the gas price. The report stated that costs reflected current market conditions and updated pricing in March 2022. However, USPS did not describe the methodology it used to calculate the gas price—a fiscal year average—or disclose that the methodology excluded the increase in the national average gas price from $3.19 in October 2021 to $4.24 in March 2022. Clearly explaining changes to cost assumptions, including important methodological details, better positions decision makers to determine whether the information supporting the proposed number and mix of vehicles to purchase is reasonable, accurate, and valid.

Read the full report.