United States Postal Service:

Opportunities to Strengthen IT Investment Management Capabilities

GAO-03-3: Published: Oct 15, 2002. Publicly Released: Oct 15, 2002.

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The U.S. Postal Service invests hundreds of millions of dollars in information technology (IT) each year to support its mission of providing prompt, reliable, and efficient mail service to all areas of the country. It must support these operations through the revenues it earns for its services. Growing operating expenses and capital needs in the face of reduced revenues highlight the need for the Postal Service to invest its IT dollars wisely. Accordingly, the Senate Committee on Governmental Affairs and its Subcommittee on International Security, Proliferation, and Federal Services asked GAO to evaluate how well the Postal Service manages its IT investments.

The Postal Service has in place many of the foundational capabilities required for managing IT investments described in GAO's IT Investment Management framework, illustrated below. Proposed major projects go through established review processes and must be approved at a high level before being implemented. Control processes also are in place. Although the Postal Service evaluates proposed IT projects before investing in them, it does not fully manage these investments from a portfolio perspective by assessing projects on the basis of indicators that clearly link performance to initial selection criteria. Such a portfolio approach would enable the Postal Service to consider proposed projects along with those that have already been funded and to select the mix of investments that best meets its mission needs. The Postal Service has not yet attained the key attributes associated with most capable organizations, such as evaluating the performance of investments as a whole, capturing "lessons learned," and institutionalizing these lessons to benefit the organization. Until it addresses areas such as these, the Postal Service will not be in a position to continually improve its investment process and leverage its IT capabilities for strategic outcomes.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In December 2005, USPS published a new version of its Handbook F-66, General Investment Policies and Procedures. This handbook updates the policies and procedures for Postal Service investments to ensure that projects adhere to the agency's Strategic Transformation Plan 2006-2010. It is intended to be used in conjunction with several companion handbooks, identified as Handbooks F-66A through F-66E, each of which focuses on investment policies and procedures for a specific investment type such as Postal Support and Information Systems or Major Equipment. This collection of manuals provides comprehensive guidance on the Postal Service's investment management process.

    Recommendation: To strengthen the Postal Service's capabilities for investment management and address the weaknesses discussed in this report, the Postmaster General should develop a plan that initially focuses on correcting the weaknesses in critical processes associated with maturity stages two and three before addressing the weaknesses at maturity stages four and five, because critical processes at the lower stages provide the foundation for building those at higher maturity stages. The plan should be developed within 6 months. At a minimum, the plan should specify an approach to develop comprehensive guidance that defines and describes the complete investment management process, unifies existing processes enterprisewide, and reflects changes in processes as they occur.

    Agency Affected: United States Postal Service

  2. Status: Closed - Implemented

    Comments: The Postal Service has largely implemented this recommendation. Specifically, in December 2005, the U.S. Postal Service issued an updated version of Handbook F-66, General Investment Policies and Procedures. This handbook updates the policies and procedures for Postal Service investments to ensure that projects adhere to the agency's "Strategic Transformation Plan 2006-2010." The Handbook is designed to be used in conjunction with several companion handbooks, identified as Handbooks F-66A through F-66E, each of which focuses on investment policies and procedures for a specific investment type such as Postal Support and Information Systems or Major Equipment. These handbooks identify the various entities involved in managing IT investments, including the Capital Investment Committee, the Capital Projects Committee, and the Board of Governors, and the responsibilities of and relationships between these groups. The handbooks also provide high-level information on the decision-making processes of these groups.

    Recommendation: To strengthen the Postal Service's capabilities for investment management and address the weaknesses discussed in this report, the Postmaster General should develop a plan that initially focuses on correcting the weaknesses in critical processes associated with maturity stages two and three before addressing the weaknesses at maturity stages four and five, because critical processes at the lower stages provide the foundation for building those at higher maturity stages. The plan should be developed within 6 months. At a minimum, the plan should specify an approach to develop additional process guidance, as needed, to completely define the operations and decision-making processes of investment boards and other management entities involved in managing IT investments.

    Agency Affected: United States Postal Service

  3. Status: Closed - Implemented

    Comments: In December 2005, the U.S. Postal Service published an updated version of Handbook F-66, General Investment Policies and Procedures along with several companion handbooks, identified as Handbooks F-66A through F-66E, each of which focuses on policies and procedures for a specific investment type such as Postal Support and Information Systems or Major Equipment. These handbooks document the information required to be included in a Decision Analysis Report (DAR), which the Postal Service uses as the business case for its major investments. Although the different types of investments require different information to be submitted, all require that an investment proposal include information on cost, benefit, schedule, and risk. All approved investments are required to prepare a quarterly compliance report, which must contain detailed information on progress against metrics related to cost, benefits, schedule, and risks. Depending on the level of investment funding, these quarterly reports are reported to either the Board of Governors (funding more than $25 million), senior management (funding more than $7.5 million, but less than $25 million), the project sponsor/vice president (funding more than $5 million, but less than $7.5 million), or the area finance manager (funding less than $5 million).

    Recommendation: To strengthen the Postal Service's capabilities for investment management and address the weaknesses discussed in this report, the Postmaster General should develop a plan that initially focuses on correcting the weaknesses in critical processes associated with maturity stages two and three before addressing the weaknesses at maturity stages four and five, because critical processes at the lower stages provide the foundation for building those at higher maturity stages. The plan should be developed within 6 months. At a minimum, the plan should specify an approach to ensure that cost, benefit, schedule, and risk expectations are set and approved in the original business case for each investment; that accurate and complete actual cost, benefit, schedule, and risk data are tracked against these expectations; and that status information on these four criteria is periodically reported to executive-level investment boards.

    Agency Affected: United States Postal Service

  4. Status: Closed - Implemented

    Comments: The Postal Service has largely implemented this recommendation. Specifically, in December 2005, the U.S. Postal Service published an updated version of Handbook F-66, General Investment Policies and Procedures. This handbook, among other things, describes the process by which the Postal Service selects its IT investment portfolio and requires projects' return on investment (i.e., costs and benefits) and schedule be considered in the process. According to officials, a Business Case System is also used to help evaluate project selection factors including risk. According to officials, this system is used by managers to prioritize projects by several factors, including financial value, risk analysis, strategic alignment, and other metrics. Another tool known as the Capital Rationing tool is reportedly used by managers to determine what combination of proposed investments is optimum given the financial and strategic goals of the organization.

    Recommendation: To strengthen the Postal Service's capabilities for investment management and address the weaknesses discussed in this report, the Postmaster General should develop a plan that initially focuses on correcting the weaknesses in critical processes associated with maturity stages two and three before addressing the weaknesses at maturity stages four and five, because critical processes at the lower stages provide the foundation for building those at higher maturity stages. The plan should be developed within 6 months. At a minimum, the plan should specify an approach to establish a structured, transparent, and documented portfolio selection process that assesses, prioritizes, selects, and funds investments according to established portfolio selection criteria, including explicit cost, benefit, schedule, and risk criteria.

    Agency Affected: United States Postal Service

  5. Status: Closed - Implemented

    Comments: The Postal Service has largely implemented this recommendation. According to Postal Service policies and procedures, all investments are required to submit a business case compliance report until 18 months after project completion. The compliance report compares expected and actual values for a number of metrics. In addition, cost studies may be performed for USPS Headquarters-approved projects using cost and other investment-related data within 2 years after final deployment. Cost studies are used to compare the actual investment-related and operating costs and benefits of a project to the planned results contained in the business case. Completed studies are expected to be distributed to various stakeholders within the Postal Service.

    Recommendation: The Postmaster General should ensure that the plan specifies measurable goals and time frames, prioritizes initiatives, designates a senior manager responsible and accountable for directing and controlling the improvements, and establishes review milestones. After addressing the stage two and three processes, the Postal Service should create processes required for stages four and five that, at a minimum, ensure that guidance for conducting post-implementation reviews is complete, including criteria for selecting systems review, and that post-implementation reviews are conducted on all appropriate systems.

    Agency Affected: United States Postal Service

  6. Status: Closed - Implemented

    Comments: The Postal Service has largely implemented this recommendation. While investment management policies and procedures do not address evaluating and improving portfolio performance, officials stated that they perform these activities. Specifically, senior management from the IT organization reportedly evaluate project performance on a monthly basis and lessons learned are recorded for each project after a significant deliverable or milestone is achieved. According to officials, the evaluation results and lessons learned are captured in a web-based application so that projects that have achieved desirable outcomes can be used as models for future work.

    Recommendation: The Postmaster General should ensure that the plan specifies measurable goals and time frames, prioritizes initiatives, designates a senior manager responsible and accountable for directing and controlling the improvements, and establishes review milestones. After addressing the stage two and three processes, the Postal Service should create processes required for stages four and five that, at a minimum, establish a process for evaluating and improving portfolio performance.

    Agency Affected: United States Postal Service

  7. Status: Closed - Implemented

    Comments: The Postal Service has largely implemented this recommendation. The Postal Service's Integrated Solutions Methodology provides a framework for conceiving, planning, developing, implementing, and tracking IT projects. It consists of 5 phases. According to officials, the last phase--Operations Management--defines a process for managing the succession of systems and technology. Specifically, according to officials, Operations Management involves maintaining a system until it is replaced or phased out by a replacement system in which case it is retired and discarded.

    Recommendation: The Postmaster General should ensure that the plan specifies measurable goals and time frames, prioritizes initiatives, designates a senior manager responsible and accountable for directing and controlling the improvements, and establishes review milestones. After addressing the stage two and three processes, the Postal Service should create processes required for stages four and five that, at a minimum, establish a process for managing the succession of systems and technology.

    Agency Affected: United States Postal Service

  8. Status: Closed - Implemented

    Comments: The Postal Service has largely implemented this recommendation. According to officials, a web-based executive information system provides a centralized set of tools for accessing performance data from Postal Service's Enterprise Data Warehouse and other sources to present and compare actual performance measures against corporate goals. The system reportedly displays about 1,800 USPS performance indicators in an organizational structure that, among other things, provides color-coded benchmarks for quick analysis of organizational performance.

    Recommendation: The Postmaster General should ensure that the plan specifies measurable goals and time frames, prioritizes initiatives, designates a senior manager responsible and accountable for directing and controlling the improvements, and establishes review milestones. After addressing the stage two and three processes, the Postal Service should create processes required for stages four and five that, at a minimum, establish a process to benchmark the investment processes of leading organizations to identify opportunities for improvement.

    Agency Affected: United States Postal Service

  9. Status: Closed - Not Implemented

    Comments: The Postal Service did not provide any information on its efforts to address this recommendation.

    Recommendation: The Postmaster General should ensure that the plan specifies measurable goals and time frames, prioritizes initiatives, designates a senior manager responsible and accountable for directing and controlling the improvements, and establishes review milestones. After addressing the stage two and three processes, the Postal Service should create processes required for stages four and five that, at a minimum, establish a process to employ IT investments strategically to improve business outcomes.

    Agency Affected: United States Postal Service

 

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