Postal contracts awarded to DeJoy-run company were questioned in 2001 Postal Service audit

The Postal Service audit found that the company may have cost taxpayers $53 million more than had the contracts gone through a bidding process.
Image: Postmaster General Louis DeJoy testifies during a House Oversight and Reform Committee hearing on the Postal Service on Capitol Hill.
Postmaster General Louis DeJoy testifies during a House Oversight and Reform Committee hearing on the Postal Service on Capitol Hill.Tom Williams / AP file

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By Heidi Przybyla

WASHINGTON — A two-decade-old audit of mail equipment transport contracts by the U.S. Postal Service's inspector general found that a company previously run by Postmaster General Louis DeJoy was awarded multiple noncompetitive contracts by the Postal Service that may have cost consumers as much as $53 million more than if they'd been competitively bid.

The 2001 audit found that New Breed Logistics, a supply chain services provider based in North Carolina, was awarded more than $300 million in Postal Service mail equipment transport contracts that could have come in at a much lower price had they been shopped competitively to a range of vendors.

The audit, reviewed by NBC News, made it clear that the premise for awarding any noncompetitive contracts to a single vendor, such as New Breed, "did not fully meet Postal Service requirements" and "potentially exposed the Postal Service to cost and performance risks."

The contracts awarded to New Breed, beginning in 1992, were to operate a pilot mail transport equipment service center in Greensboro, North Carolina. DeJoy was chief executive of New Breed from 1983 to 2014.

The audit concluded by saying all of the Postal Service contracts with New Breed "could have been awarded competitively, resulting in more fair and reasonable contract prices overall."

The audit raises questions about whether New Breed knowingly overbilled the Postal Service, and it renews scrutiny of the background and qualifications of DeJoy, a prolific Republican Party fundraiser and donor who was appointed to lead the Postal Service over objections from many officials involved in the selection process.

"It's puzzling why it was not referred for investigation," said former Postal Service Inspector General Dave Williams, referring to the conclusions reached by the audit. Williams was inspector general from 2003 to 2016.

DeJoy said through a spokesman that the report was a review of Postal Service contracting and not of New Breed. "There was no finding in the review that the company did not fulfill the terms and conditions of the contract," he said.

And the Postal Service disputed some of the inspector general's findings about the company's proposed pricing, "which it indicated was a reflection of operating in high-cost labor regions of the country that the company was required to serve," the spokesman said. The company was sold in 2015 to XPO Logistics, which didn't immediately respond to a request for comment.

Williams, who also was vice chairman of the Postal Service Board of Governors from 2018 until he quit days before DeJoy was appointed in May, has publicly questioned DeJoy's qualifications and the changes underway at the Postal Service under his direction.

Postal Service spokesman David Partenheimer referred NBC News to a letter from former postal officials to the inspector general dated Dec. 29, 2000, supporting the conclusions of the audit while suggesting that the contracts may have led to other cost savings that weren't considered. "We generally agree with the finding," wrote Paul Vogel, then the Postal Service's vice president of operations.

A separate letter from Postal Service officials to the inspector general on the same date said the New Breed contracts helped "provide the basis" for future competitive contracts and were awarded in accordance with Postal Service guidelines.

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The audit adds to a broader narrative about DeJoy's business practices, which are under scrutiny in Congress. The Washington Post recently reported that at least five employees said DeJoy or his aides urged staff members to attend campaign fundraisers at his mansion and then reimbursed them for donations through bonuses. DeJoy told The Post through a spokesperson that he was unaware any employees had felt pressured to make donations, The Post reported.

The House Oversight Committee has scheduled a hearing Monday to delve further into DeJoy's business history and qualifications to run the Postal Service.

DeJoy is under subpoena to provide records by Wednesday about operational changes leading to widespread delays in mail delivery since he assumed his position. The changes made during his tenure — including the removal of public mailboxes and sorting machines at postal centers around the country — are being investigated by the Postal Service's current inspector general.

Agapi Doulaveris, chief of staff to the Postal Service's inspector general, declined to comment on the audit, citing its age and the absence of additional documentation.

New Breed's financial practices have also been cited in reports to Congress. In a semiannual report in March 1999, the Postal Service inspector general flagged New Breed leasing contracts, saying $33 million paid to New Breed could have been "put to better use." A report in September of that year flagged $9 million more paid to New Breed that could have been "put to better use."

The irregularities cited in the audit, Williams said, underscore why he pressed for a full background check when DeJoy he was nominated for postmaster general.

"I don't understand how an offer could have been extended before a background check was completed," Williams said.

The postmaster general at the time of the New Breed overpayments was William J. Henderson, a former Postal Service official from Greensboro, North Carolina, who was appointed in 1998. Henderson said he didn't recall ever having seen the audit.

"We had tons of logistics partners while I was in the Postal Service, and I really didn't get into selecting particular partners or reviewing those sorts of things since they were done by purchasing," Henderson said. The inspector general at the time, Karla Corcoran, retired in 2003 after a federal investigation found that she had abused her authority, wasted public money and promoted questionable personnel practices. Corcoran's job was to root out waste and fraud.

What happened after the audit is unclear, in part because the Postal Service's inspector general at the time failed to maintain effective indices of audits and investigations, Williams said — a practice Williams said he had spent time trying to turn around.

During testimony last month before the House Oversight Committee, Rep. Jamie Raskin, D-Md., questioned DeJoy about why he hadn't undergone a background check.

"One of the reasons that we have background checks," he said, "is that we identify patterns of misconduct or potential conflicts of interest that are out there."

DeJoy responded: "Sir, I have no patterns of misconduct."