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entitled 'United States Postal Service: Opportunities to Strengthen IT 
Investment Management Capabilities' which was released on October 15, 
2002.



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Report to Congressional Committees:



October 2002:



United states Postal Service:



Opportunities to Strengthen IT Investment Management Capabilities:



GAO-03-3:



United States General Accounting Office Highlights:



U.S. POSTAL SERVICE:



Opportunities to Strengthen IT 

Investment Management Capabilities:



Highlights of GAO-03-3, a report to the Senate Committee on 

Governmental Affairs and the Subcommittee on International Security, 

Proliferation, and Federal Services:



Why GAO Did This Study:



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.



What GAO Found:



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 “best-in-class” 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.



The Five Stages of Maturity within GAO’s IT Investment Management 

Framework:



[See PDF for image]



Source: GAO:



[End of figure]



What GAO Recommends:



GAO recommends that the Postmaster General take several actions, 

including the following: (1) using a portfolio approach to IT 

investment management, including establishing explicit cost, benefit, 

schedule, and risk criteria; and (2) evaluating the performance of 

investments as a whole in order to capture and institutionalize 

“lessons learned” to improve the investment process.



The full report, including GAO’s objectives, scope, methodology, and 

analysis is available at www.gao.gov/cgi-bin/getrpt?GAO-03-3. For 

additional information about the report, contact Joel C. Willemssen 

(202-512-6408), WillemssenJ@gao.gov:



Table of Contents:



Letter:



Executive Summary:



Purpose:



Background:



Results in Brief:



Principal Findings:



Recommendations for Executive Action:



Agency Comments and Our Evaluation:



Chapter 1:

Introduction:



Postal Service’s Mission and Organization:



Postal Service’s Information Technology Environment:



Weaknesses in the Postal Service’s Investment Management 

Process:



Postal Service’s Approach to Investment Management:



IT Investment Management Framework:



Objective, Scope, and Methodology:



Chapter 2:

Postal Service Executes Most Key Foundational Practices:



Boards Are Established but Operating without a Complete Process Guide:



CTO Organization Oversees IT Investments:



IT Project and System Information Is Maintained to Support Project 

Management:



Processes Ensure That IT Investments Support Business Needs and Meet 

User Needs:



Structures Are in Place for Selecting IT Investment Proposals:



Chapter 3:

Postal Service Shows Mixed Progress in Managing Its IT Investments as

a Portfolio:



Portfolio Selection Criteria Are Defined, but Do Not Adequately Address 

All Factors:



IT Investments Are Not Consistently Analyzed and Prioritized within the 

Context of a Portfolio:



An IT Investment Portfolio Is Developed, but Project Expectations Are 

Not Routinely Revised:



Portfolio Performance Oversight Is Performed, but without Comprehensive 

Guidance:



Chapter 4:

Postal Service Has Yet to Implement Processes to Better Meet Strategic

Goals:



Policies and Procedures Are Defined, but Post-Implementation Review 

Process Is Not Institutionalized:



IT Investments Are Not Evaluated from the Perspective of Portfolio 

Performance:



Process for Managing Succession of Systems and Technology 

Is Not Established:



Activities for Benchmarking the Investment Process Are Not 

Institutionalized:



Potential Impacts of Leading Technologies Are Not Routinely Considered 

in Strategic Planning Efforts:



Chapter 5:

Conclusions, Recommendations, and Agency Comments:



Conclusions:



Recommendations for Executive Action:



Agency Comments and Our Evaluation:



Appendixes:



Appendix I: Postal Service Projects with Major IT Components in 
Development

or Deployment:



Appendix II: Postal Service IT Projects that GAO Reviewed:



Enhanced Security Capability Program:



Organization Structure, Staffing and Management:



Point of Service ONE System:



Surface-Air Management System:



Appendix III: Comments from the United States Postal Service:



Appendix IV: GAO Contact and Staff Acknowledgements:



GAO Contact:



Acknowledgments:



Tables:



Table 1: Stage Two--Critical Processes Required for Building the 

Investment Foundation:



Table 2: Summary of Results for Stage Two Critical Processes and Key 

Practices:



Table 3: IT Investment Board Operation:



Table 4: IT Project Oversight:



Table 5: IT Project and System Identification:



Table 6: Business Needs Identification:



Table 7: Proposal Selection:



Table 8: Stage Three--Critical Processes Required for Developing a 

Complete Investment Portfolio:



Table 9: Summary of Results for Stage Three Critical Processes and Key 

Practices:



Table 10: Portfolio Selection Criteria Definition:



Table 11: Investment Analysis:



Table 12: Portfolio Development:



Table 13: Portfolio Performance Oversight:



Table 14: Stages Four and Five--Critical Processes Required for 

Improving the Investment Process and Leveraging IT for Strategic 

Outcomes:



Table 15: Summary of Results for Stages Four and Five Critical 
Processes 

and Key Practices:



Table 16: Post-Implementation Reviews and Feedback:



Table 17: Portfolio Performance Evaluation and Improvement:



Table 18: Systems and Technology Succession Management:



Table 19: Investment Process Benchmarking:



Table 20: IT-Driven Strategic Business Change:



Table 21: Postal Service IT Projects in Development or Deployment:



Table 22: Postal Service IT Projects Selected by GAO for Review:



Table 23: POS ONE DARs:



Figures:



Figure 1: The Five Stages of Maturity within ITIM:



Figure 2: Overview of the Organizational Structure of the Postal 
Service:



Figure 3: Capital Planning and Budgeting Cycle:



Figure 4: Process for Approving Major New Projects:



Figure 5: Project Control and Evaluation Process:



Figure 6: The Five Stages of Maturity with Critical Processes:



Abbreviations:



ACDCS: Air Contract Data Collection System:



B&FA: Budget and Financial Analysis:



BCS: Business Case System:



CAPE: Capital and Program Evaluation:



CFO: Chief Financial Officer:



CIC: Capital Investment Committee:



CIO: Chief Information Officer:



CPC: Capital Projects Committee:



CPS: Corporate Planning System:



CTO : Chief Technology Officer:



DAR: Decision Analysis Report:



EIR: Enterprise Information Repository:



ESC: Enhanced Security Capability :



IRB: Investment Review Board:



IT: information technology:



ITIM: information technology investment management:



OSS&M: Organization Structure, Staffing and Management:



POS ONE: Point of Service ONE:



PTRS: Program Tracking and Reporting System:



SAMS: Surface-Air Management System:



Letter October 15, 2002:



The Honorable Joseph I. Lieberman

Chairman

The Honorable Fred Thompson

Ranking Minority Member

Committee on Governmental Affairs

United States Senate:



The Honorable Daniel K. Akaka

Chairman

The Honorable Thad Cochran

Ranking Minority Member

Subcommittee on International Security, 

 Proliferation and Federal Services

Committee on Governmental Affairs

United States Senate:



In response to your request, this report addresses the Postal Service’s 

capabilities in information technology (IT) investment management. The 

Postal Service invests hundreds of millions of dollars each year in 

information technology to provide prompt, reliable, and efficient mail 

service to all areas of the country. Our evaluation determined that the 

Postal Service is executing many of the foundational practices 

necessary for managing these investments, but the Postal Service has 

additional opportunities to implement more mature and effective 

processes. We are making recommendations to strengthen the Postal 

Service’s investment management capabilities.



We are sending copies of this report to the Chairman and Ranking 

Minority Member of the House Committee on Government Reform, the 

Chairmen and Ranking Minority Members of the House and Senate 

Committees on Appropriations, the Postal Service’s Postmaster General/

Chief Executive Officer, and the Postal Service’s Chief Financial 

Officer. We will also make copies available to others on request. In 

addition, the report will be available at no charge on the GAO Web site 

at http://www.gao.gov.



Staff acknowledgments are included in appendix IV. If you have any 

questions about this report, please contact me by telephone at (202) 

512-6408 or by E-mail at WillemssenJ@gao.gov.



Joel C. Willemssen

Managing Director, Information Technology Issues:

Signed by Joel C. Willemssen:



Executive Summary:



Purpose:



The United States Postal Service invests hundreds of millions of 

dollars each year in information technology (IT) to provide prompt, 

reliable, and efficient mail service to all areas of the country. The 

Postal Service is intended to be self-supporting from postal operations 

and is mandated to break even over time. Yet the Postal Service is 

currently facing a financial crisis brought about by declining revenues 

and growing operating expenses and capital needs. In April 2001, GAO 

designated the Postal Service’s transformational efforts and long-term 

outlook as High Risk,[Footnote 1]noting that the Postal Service is at 

growing risk of not being able to continue its mission of providing the 

current level of universal service throughout the nation while 

maintaining reasonable rates and remaining largely self-supporting 

through postal revenues.



A successful method of helping to improve operational effectiveness and 

efficiency is to implement a structured process for maximizing the 

value and minimizing the risk of IT investments. GAO’s research into 

the management practices of leading organizations demonstrates that 

effective management of investments requires the use of disciplined, 

structured investment management processes. Given the Postal Service’s 

large expenditures for IT and its deteriorating financial position, the 

Chairmen and Ranking Minority Members of the Senate Committee on 

Governmental Affairs and its Subcommittee on International Security, 

Proliferation, and Federal Services requested that GAO assess the 

Postal Service’s IT investment management capabilities. In addressing 

this request, GAO used its IT Investment Management Framework[Footnote 

2] and assessed the Postal Service against the different stages of this 

framework.



Background:



With nearly 800,000 career employees, the Postal Service is the second 

largest U.S. employer compared with U.S. private sector organizations, 

with a mission that remains vital to the nation’s communication and 

commerce even in an age of overnight delivery services and electronic 

communications. It maintains an extensive infrastructure, consisting of 

over 38,000 post offices, branches, and stations and 350 major mail 

processing and distribution facilities. The Postal Service relies 

heavily on IT throughout its operations and management processes to run 

the machines that process and sort mail, efficiently assign long-

distance transportation of mail to alternative surface and air 

carriers, support point-of-service terminals, collect and analyze 

inventory and sales information, process payroll and accounts payable, 

and perform other activities. Communication networks also play a vital 

role in linking together various elements of the Postal Service’s 

infrastructure and transmitting information to various locations for 

storage, processing, and analysis. For fiscal year 2002, the Postal 

Service approved approximately $583 million for IT, including funds for 

both capital investments and operating expenses.



The Postal Service has reported that it is providing customers with 

added value; improving the efficiency of operations; containing costs; 

fostering a performance-based culture; and improving management of 

enabling functions, such as financial management, purchasing, and 

IT.[Footnote 3] The Postal Service has established the specific goal of 

obtaining organizationwide connectivity through IT to enable it to 

enhance security, add valuable product features, and manage its 

operations in real time.



Based on research into the IT investment management practices of 

leading private-and public-sector organizations, GAO has developed an 

information technology investment management maturity (ITIM) 

framework. This framework identifies critical processes for successful 

IT investment organized into a framework of five increasingly mature 

stages. The ITIM is intended to be used both as a management tool for 

implementing these processes incrementally and as an evaluation tool 

for determining an organization’s current level of maturity. The 

overriding purpose of the framework is to encourage investment 

processes that increase business value and mission performance, reduce 

risk, and increase accountability and transparency in the decision 

process. This framework has been used in several GAO evaluations

[Footnote 4]and has been adopted by a number of agencies.



These agencies have used ITIM for purposes ranging from self-assessment 

to redesign of their IT investment management processes.The five stages 

of the framework represent increasing levels of maturity in managing IT 

investments. Stages two, three, four, and five each build on the 

preceding one and represent steps toward achieving more stable and 

effective processes for managing IT investments. With the exception of 

the first stage--characterized by the general absence of investment 

management processes--each maturity stage consists of critical 

processes that must be implemented and institutionalized for the 

organization to satisfy the requirements of that stage and be able to 

advance to the next stage. These critical processes are further broken 

down into key practices--the specific tasks and conditions that must be 

in place for an organization to effectively implement the necessary 

critical processes. Figure 1 shows ITIM’s five stages of maturity.



Figure 1: The Five Stages of Maturity within ITIM:



[See PDF for image]



Source: GAO.



[End of figure]



Results in Brief:



The Postal Service has established significant capabilities for 

managing its IT investments. It has in place numerous foundational 

practices for selection and control, such as a detailed review and 

approval process for new projects, tracking of project cost and 

schedule data, and identification of its business needs, and it 

involves users in project development. These stage two processes 

provide assurance that the projects selected meet the Service’s 

organizational needs and will be completed on time and within budget. 

However, the Postal Service has yet to develop comprehensive guidance 

to address all aspects of the investment management process. Such 

guidance would allow the Service to better coordinate its IT investment 

management process and ensure that the process is performed 

consistently throughout the organization.



The Postal Service performs many of the practices that are key to a 

stage three level of maturity, such as managing a portfolio of IT 

investments. For example, the Service performs many of the activities 

for developing a portfolio of investments and overseeing these 

investments. However, the processes for annually selecting and 

overseeing the investment portfolio are not documented. Further, the 

Postal Service does not analyze, prioritize, or select its portfolio 

using criteria that adequately address cost, benefit, schedule, and 

risk. Accordingly, the Postal Service cannot ensure that it is 

selecting the investments that will maximize returns to the 

organization, taking into account the appropriate level of risk.



Finally, the Postal Service has a number of steps to take before it has 

attained the maturity of a stage four or five organization--

systematically improving the investment process and using IT to achieve 

business outcomes. For example, the Postal Service does not either 

regularly evaluate the performance of completed projects or have a 

process to evaluate its investment portfolio or to manage the 

succession of its IT investments. Further, the Service does not have a 

process to measure itself against other organizations and is not yet in 

a position to use evaluation techniques to continually improve both the 

investment portfolio and the investment process to better achieve 

strategic outcomes.



Principal Findings:



Postal Service Executes Most Key Foundational Practices:



To develop sound capabilities in investment management, an organization 

must first be capable of controlling its investments so that they 

finish predictably within established cost and schedule expectations, 

and it must have in place basic capabilities for selecting new IT 

investments. An organization must also have an established investment 

board that is responsible for managing its investments and investment 

processes.



The Postal Service has established many basic investment selection and 

control capabilities. At the enterprise level, it manages all capital 

investments through a consistent set of management processes. Still, 

opportunities exist to strengthen aspects of core enterprisewide 

practices for IT investment management. For example, the Postal Service 

has not developed organizationwide policies and procedures to guide the 

different enterprise-level management entities involved in the 

investment process. Nor has it developed guidance for management 

oversight of IT projects. As a result, it may not reap the benefits of 

a consistent and coordinated approach to investment management to be 

gained by institutionalizing those practices that it is performing.



Postal Service Shows Mixed Progress in Managing Its IT Investments as a 

Portfolio:



Organizations need to create a complete investment portfolio--

consisting of projects that are proposed, under development, and in 

operation--and continuously assess and manage their investments on the 

basis of expected and actual cost, benefit, schedule, and risk data. 

Taking such a portfolio perspective enables organizations to assess 

their investments comprehensively, considering proposals along with 

previously funded investments and selecting the mix of investments that 

best meets their mission needs. The perspective of the portfolio 

enables organizations to rise above selecting and controlling projects 

that best meet the objectives of narrow program areas to selecting and 

controlling projects that best meet the organization’s overall goals.



The Postal Service performs a number of practices that are key to 

developing and managing a complete investment portfolio. For example, 

it provides adequate resources for analyzing investments and developing 

the portfolio. The Service validates the cost, benefit, schedule, and 

risk data it uses in analyzing investments. The Service also assigns 

its IT investments to logical categories and distributes its portfolio 

selection criteria throughout the organization.



The Postal Service has not established organizationwide policies and 

procedures for selecting, analyzing, and overseeing its IT portfolio. 

While the Service selects its annual investment portfolio using 

established criteria, these criteria do not adequately address cost, 

benefit, schedule, and risk factors. Senior executives do not receive 

sufficient information to aid them in selecting and overseeing the 

portfolio. For example, the quarterly Investment Highlights provides 

information on the status of projects, but it does not include complete 

information on costs. Further, the Postal Service does not have a 

defined process for reporting problems in a project’s performance to 

senior executives.



Because the Postal Service lacks established policies and procedures 

for selecting, analyzing, and overseeing its investment portfolio, and 

because its selection criteria are inadequate, it risks choosing 

individual investments in an ad hoc fashion. A portfolio developed in 

this way may not best meet the Service’s needs. In addition, because 

information they need for oversight is incomplete, senior executives 

may be unable to determine whether the investment portfolio is 

performing as expected.



Postal Service Has Yet to Implement Higher Level Processes to Better 

Meet Strategic Goals:



As an organization builds its investment management capabilities, it 

should begin using evaluation techniques to improve its investment 

processes and its portfolio while maintaining mature control and 

selection processes. The post-implementation review is a key tool for 

comparing the outcome of a completed investment with the expectations 

described in its business case. Another higher level process is 

planning for the retirement of systems and their replacements, so that 

low-value systems are retired to make way for higher-value systems, and 

the transition between systems is smooth. Finally, an organization that 

completes the implementation of its selection, control, and evaluation 

processes should seek to continuously improve its capabilities for 

using IT investments to support and improve business outcomes.



Within these higher-level processes, the Postal Service has developed 

guidance and training for performing post-implementation reviews. In 

addition, the Postal Service prepares an integrated financial plan that 

includes an estimate of overall return on investment. It has also 

allocated resources for identifying strategic uses for emerging 

technologies.



The Postal Service, however, is not regularly performing post-

implementation reviews of completed investments to determine whether 

they have achieved the expected benefits at the estimated cost or to 

determine if investment management processes should be revised. Nor has 

the Postal Service evaluated the performance of its investment 

portfolio beyond determining the return on investment. While the Postal 

Service has developed guidance for the retirement of systems, it does 

not have a process for routinely identifying and analyzing investments 

for succession and planning for their migration to their successors. 

The Postal Service also lacks a process for benchmarking other 

organizations’ investment management approaches with the intention of 

improving its own internal processes. Finally, the Postal Service does 

not have a process for identifying, evaluating, and implementing 

leading-edge IT products and processes to achieve strategic changes to 

the business.



Although these weaknesses are associated with high-level maturity 

processes, performing additional key practices in these areas will help 

the Postal Service to better evaluate and continuously improve its 

management processes and its investment and portfolio performance, 

learn from other organizations, and use breakthrough technologies to 

improve strategic outcomes.



Recommendations for Executive Action:



To strengthen the Postal Service’s capabilities for investment 

management and address the weaknesses discussed in this report, we 

recommend that the Postmaster General 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;



* 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;



* 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; and:



* 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.



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 for review, and that 

post-implementation reviews are conducted on all appropriate systems,



* establish a process for evaluating and improving portfolio 

performance,



* establish a process for managing the succession of systems and 

technology,



* establish a process to benchmark the investment processes of leading 

organizations to identify opportunities for improvement, and:



* establish a process to employ IT investments strategically to improve 

business outcomes.



Agency Comments and Our Evaluation:



The Postal Service’s Chief Financial Officer provided written comments 

on a draft of this report (reprinted in app. III). In these comments, 

the Postal Service stated that the report offered an opportunity to 

consider changes and improvements in its IT investment management 

processes. The Service added that it would carefully evaluate each of 

the report’s recommendations to determine the necessary actions for 

adopting and integrating key practices outlined in the GAO ITIM model 

that are appropriate for the Postal Service.



The Postal Service identified a few key points where it differed from 

GAO’s IT investment management framework. In succession planning, the 

Postal Service stated that it uses an institutionalized portfolio 

approach to address the succession of its IT hardware, software, and 

systems. While this approach may be appropriate as part of a succession 

management process, our evaluation found that the Postal Service does 

not have a process for regularly reviewing the performance of existing 

systems against established criteria.



The Postal Service also provided comments pertaining to post-

implementation reviews that describe cost studies, the budget process, 

and the activities of the Office of Inspector General as satisfying 

this critical process. We disagree with the Postal Service in this 

matter. While guidance for cost studies does exist, budget activities 

and Inspector General evaluations do not satisfactorily address the 

requirements of this critical process, and the Service provided 

evidence of only three post-implementation cost studies having been 

conducted since 1990.



[End of section]



Chapter 1 Introduction:



Postal Service’s Mission and Organization:



The Postal Reorganization Act of 1970 (P.L. 91-375) created the United 

States Postal Service, an independent, self-supporting organization, 

replacing the former United States Post Office Department. The act 

charges the Postal Service with binding the nation together through the 

personal, educational, literary, and business correspondence of the 

people and providing reliable and efficient mail services to all areas 

of the country. The Postal Service is intended to be self-supporting 

from postal operations and is mandated to break even over time. With 

nearly 800,000 career employees, the Postal Service is the second 

largest employer compared with U.S. private sector organizations. It 

has an extensive infrastructure, consisting of more than 38,000 post 

offices, branches, and stations; 240,000 delivery routes to over 137 

million delivery addresses; a fleet of 215,000 vehicles; 350 major 

processing and distribution facilities; and nearly 800,000 career 

employees.



The Postal Service is now facing a financial crisis brought about by 

declining revenues and growing operating expenses and capital needs, 

including the cost of existing and new investments in information 

technology (IT). In February 2002, we reported significant declines in 

the Postal Service’s net income from fiscal year 1995 to fiscal year 

2001 and a net loss of $1.68 billion in fiscal year 2001 alone, 

resulting in part from declining mail volumes and from terrorist 

incidents.[Footnote 5] In April 2001, we placed the Postal Service’s 

transformational efforts and long-term outlook on our High-Risk list, 

noting that the Postal Service is at growing risk of not being able to 

continue its mission of providing the current level of universal 

service throughout the nation while maintaining reasonable rates and 

remaining largely self-supporting through postal revenues.



The Postal Service has acknowledged the need for a new business model 

in light of these events and various trends now shaping the delivery 

services marketplace, such as consumer interest in new service types 

and increasing security concerns. Other increases in the cost of doing 

business, such as the rising costs of retirement and health benefits, 

heighten the need for action. To conserve cash and limit debt, the 

Postal Service has continued its freeze on capital spending for most 

facility projects, and its total budgeted capital outlays have declined 

in fiscal year 2002 for the third consecutive year to $2.2 billion.



The Postal Service has reported that it plans to respond to these 

trends by providing customers with added value, improving the 

efficiency of operations, containing costs, fostering a performance-

based culture, and improving its management of enabling functions such 

as financial management, purchasing, and IT.[Footnote 6] The Postal 

Service has established the specific goal of connecting all of its 

components through IT, to enable it to enhance security, add valuable 

product features, and manage its operations in real time.



The Postal Service accounts for its expenditures in separate expense 

and capital accounts, according to Generally Accepted Accounting 

Principles to which public financial reporting by U.S. corporations 

must conform. Expenditures categorized as “expense” generally comprise 

operating costs and are primarily funded through a general operating 

budget. Expenditures categorized as “capital” are for one-time costs, 

are project-specific, and are depreciated.



The Postal Reorganization Act vested direction of the Postal Service in 

an eleven-member Board of Governors, including nine appointed by the 

President. The nine governors appoint the Postmaster General, who is 

the Chief Executive Officer, and who, with the nine governors, appoints 

the Deputy Postmaster General. The Postal Service’s executive vice 

presidents are the Chief Operating Officer and the Chief Financial 

Officer. The Postal Service has senior vice presidents for Government 

Relations and Public Policy, Human Resources, Operations, Office of the 

Chief Marketing Officer, and Office of the Chief Technology Officer. 

Figure 2 shows an overview of the Postal Service’s current 

organizational structure.



Figure 2: Overview of the Organizational Structure of the Postal 

Service:



[See PDF for image]



Source: U.S. Postal Service.



[End of figure]



Postal Service’s Information Technology Environment:



The Postal Service has come to rely increasingly on IT. In the early 

1980s, it used data centers and mainframe computers to support 

administrative functions such as personnel, accounting, and payroll 

processing. In the mid-1980s, the Postal Service began to incorporate 

IT into its core business activities by interconnecting various 

components of its mail processing system through telecommunications and 

automation. Today, the organization relies on IT throughout the full 

range of its operations and management processes to run the machines 

that process and sort mail, assign mail efficiently to alternative 

surface and air carriers, support point-of-service terminals, collect 

and analyze inventory and sales information, process payroll and other 

accounts payable, and perform other activities. Communication networks 

also play a vital role in linking together various elements of the 

Postal Service’s infrastructure and transmitting information to various 

locations for storage, processing, and analysis. The Postal Service 

expended approximately $700 million for IT in fiscal year 2002 and 

plans to spend about $1 billion for IT in fiscal year 2003.



The Postal Service currently manages almost 650 IT systems and 

applications that operate in support of postal functions. It has 24 IT-

related projects in development or recently completed, each estimated 

to cost at least $10 million. The total investment cost estimated for 

these projects since 1997 is more than $2 billion, ranging from about 

$10 million to about $404 million per project. (See app. I for a list 

of the Postal Service’s IT-related projects currently in progress.) 

Projects with major IT components in development or implementation 

phases include the following:



* Point of Service ONE--A retail point-of-sale information system that 

is intended to replace outdated retail terminals at postal retail 

windows and provide more timely and accurate information.



* Associate Office Infrastructure--Expected to support a common 

information system for retail, delivery, and administrative operations 

in post offices.



* Delivery Operations Information System--Scheduled to replace three 

current information systems and assist delivery unit supervisors in 

managing office activities, planning street activities, and managing 

route inspection and adjustment activities.



* Time and Attendance Collection System--Expected to replace five 

existing time and attendance systems and enable labor resources to be 

more efficiently allocated by providing supervisors with accurate, 

real-time labor data by type of work being performed.



* Advanced Computing Environment--A major infrastructure modernization 

initiative that is expected to replace existing workstations and 

transitions applications to a Web-based environment.



Weaknesses in the Postal Service’s Investment Management Process:



Given the challenges the Postal Service currently faces, effective 

management of its existing and new IT investments is crucial if it is 

to provide the service expected while remaining self-supporting. 

However, recent reviews, performed by the Postal Service’s Office of 

Inspector General (OIG) and by us, have raised some concerns regarding 

the Service’s investment management. The OIG has identified weaknesses 

in the management of some investments in recent years. For example, in 

September 2001, the OIG reported that projects have been proposed to 

the Board of Governors for approval without adequate documentation and 

analyses and that other projects may not achieve anticipated 

performance and financial results.[Footnote 7]In March 2001, the OIG’s 

review of the Delivery Operations Information System found weaknesses 

in the methods and assumptions that were used to derive figures on 

estimated savings and return on investment.[Footnote 8] In September 

1999, the OIG found that Point of Service ONE was not achieving the 

results outlined in its business case.[Footnote 9] The Postal Service 

has made enhancements to its investment policies and procedures to 

address the issues the OIG raised. In September 2000, we identified a 

number of issues with the management of the Postal Service’s e-commerce 

program, including inconsistencies in reviewing and approving e-

commerce initiatives and deficiencies in the financial data reported. 

We made several recommendations to the Postal Service that addressed 

these issues. This program was subsequently scaled back by the Postal 

Service, as both revenues and customer response fell below 

expectations.[Footnote 10]



Postal Service’s Approach to Investment Management:



Several individuals and oversight boards are involved in managing IT 

investments, from reviewing and approving a proposed IT project, 

through the process of budgeting for it and monitoring it once it is 

implemented, and evaluating it at its conclusion. These individuals and 

oversight boards and their roles are described below.



* Board of Governors--Eleven-member board that governs the Postal 

Service; comprises the Postmaster General, the Deputy Postmaster 

General, and nine Presidential appointees; expected to approve any 

project with capital and “expense investment”[Footnote 11] costs of $10 

million or more.



* Capital Projects Committee (CPC)--Three members of the Board of 

Governors who are to review proposals for any new project with capital 

and expense investment costs of $10 million or more and make 

recommendations to the full Board on whether to approve it.



* Postmaster General--Chief Executive Officer of the Postal Service and 

a member of the Board of Governors; expected to approve or review any 

project with capital and expense investment costs of $7.5 million or 

more.



* Establish Team--Comprises the Deputy Postmaster General, the Chief 

Financial Officer, the Chief Operating Officer, the Chief Marketing 

Officer, the Senior Vice Presidents of Operations and Human Resources, 

the Controller, and a field vice president; is to set financial and 

nonfinancial goals for the Postal Service at the start of its annual 

planning and budgeting process and determine funding for existing and 

proposed IT projects as part of the budget formulation process.



* Capital Investment Committee (CIC)--Comprises the Chief Technology 

Officer (CTO) and other senior executives. Is to review proposals for 

any project with capital and expense investment costs of $7.5 million 

or more.



* Deploy Team--Comprises several vice presidents; with the Establish 

Team, is to determine funding for IT projects as part of the Postal 

Service’s annual planning and budgeting process.



* Vice President of Finance (Controller)--Is to review and validate 

proposals for any project with capital and expense investment costs of 

$5 million or more.



* Capital and Program Evaluation (CAPE)--Group within the Finance 

Department under the Controller. During the review process for new 

projects, is expected to validate the assumptions and cost, benefit, 

and schedule estimates; prepare the Postal Service’s 5-year Capital 

Investment Plan (CIP); monitor projects with capital and expense 

investment costs of $5 million or more; and perform cost studies of 

selected completed projects.



* Chief Technology Officer (CTO) Organization--Comprises the Office of 

the CTO and the Information Technology Department headed by the Chief 

Information Officer (CIO). The CTO organization assists other 

functional units in developing business cases for projects that have an 

IT component. It is also involved in the project concurrence process, 

where feedback on a project is given to the sponsoring organization by 

functional areas and relevant field units. The CTO organization is also 

responsible for developing systems standards and requirements for 

organizationwide compliance. At the strategic level, the CTO and CIO 

recommend and present corporatewide IT projects before the Establish 

Team during the annual capital planning cycle.



* CTO Investment Review Board--Three-member board comprises the CTO, 

CIO, and Manager of IT Value; is to manage the process of selecting 

projects within the CTO organization, review the performance of all IT 

projects in development, and conduct detailed reviews of selected IT 

projects on a monthly basis.



The Postal Service has established a number of capital planning, 

investment control, and budgeting processes to manage its IT 

investments. These include processes for (1) developing the investment 

portfolio, (2) approving major new projects, and (3) controlling and 

evaluating projects.



Process for Developing the Investment Portfolio:



The Postal Service’s annual capital planning and budgeting cycle begins 

in January with a process called the CustomerPerfect! management cycle. 

The Establish Team and the Deploy Team, composed of Postal Service 

executives, manage this annual organizationwide direction-setting 

process, led by Operations and aided by the Budget and Financial 

Analysis (B&FA) and the Capital and Program Evaluation (CAPE) groups 

within the Finance Department. The Establish Team is expected to align 

the organization’s targets and goals with its commitment to listen to 

the three “voices” that represent aspects of its mission: the Voice of 

the Business (financial benefits), the Voice of the Customer (customer 

satisfaction), and the Voice of the Employee (employee satisfaction). 

The Establish Team is to review project and program funding requests 

and make preliminary selection and funding decisions on the basis of 

how the requests fit the organization’s mission and budget. This 

process sets the Postal Service’s financial and nonfinancial goals for 

the year. Figure 3 provides detail on the Postal Service’s capital 

planning and budgeting cycle.



Figure 3: Capital Planning and Budgeting Cycle:



[See PDF for image]



Source: U.S. Postal Service documents.



[End of figure]



Process for Approving Major New Projects:



The process for approving major new IT projects is the same as for any 

other new projects with capital costs of $5 million or more. These 

major projects are to proceed through the formal approval process and 

are monitored by the Finance Department in conjunction with the program 

sponsors when they are in development and implementation phases.



The process for approving proposed capital investments is defined in 

the Postal Service’s F-66 manual.[Footnote 12] The process begins with 

the sponsoring unit preparing a Decision Analysis Report (DAR), which 

presents the business case for the proposed project. Figure 4 provides 

detail on the process for approving major new projects.



Figure 4: Process for Approving Major New Projects:



[See PDF for image]



Source: US. Postal Service.



[End of figure]



Control and Evaluation Process:



During a capital project’s life cycle, control and evaluation are 

accomplished through two processes. Project sponsors are to produce 

quarterly compliance reports that summarize the project’s status. These 

reports are to be used by CAPE, along with other financial information, 

to produce the quarterly Investment Highlights that are distributed to 

the Board of Governors and others to present the status of Board-

approved projects. This project oversight process continues for 18 

months beyond a project’s initial implementation. The Program 

Performance Group, part of CAPE, studies selected projects that are 

still in development to determine whether they remain on track to 

achieve cost goals. The Program Performance Group may also conduct cost 

studies, after implementation, to determine whether cost goals have 

been met. Changes in scope, schedule, or total capital funding needed 

for a project trigger the requirement for a modified DAR, which must be 

reviewed and approved through the same process as the original DAR.



At the operational level, the CTO organization’s project managers and 

portfolio managers conduct the day-to-day oversight of IT projects, 

including those sponsored outside of the CTO organization, by tracking 

performance of IT projects in the Program Tracking and Reporting System 

(PTRS) and reporting project status every month to the CTO Investment 

Review Board. When problems are identified, they are addressed through 

interaction with the sponsoring organization, which may choose to bring 

the issue to senior executives if the problem is likely to affect their 

ability to meet their objectives.



IT investments that are not funded by capital funds are controlled and 

evaluated through the annual budget process. Executive-level oversight 

is performed through annual reviews of program descriptions called 

“program narratives,” which provide input to the budget decision. At 

the operational level, ongoing oversight is performed through routine 

tracking of system operation. Figure 5 shows the Postal Service’s 

project control and evaluation process.



Figure 5: Project Control and Evaluation Process:



[See PDF for image]



Source: U.S. Postal Service.



[End of figure]



IT Investment Management Framework:



Based on research into the IT investment management practices of 

leading private-and public-sector organizations, we have developed an 

information technology investment management maturity (ITIM) 

framework. This framework identifies critical processes for successful 

IT investment organized into a framework of five increasingly mature 

stages.[Footnote 13] The ITIM is intended to be used both as a 
management 

tool for implementing these processes incrementally and as an 
evaluation 

tool for determining an organization’s current level of maturity. The 

overriding purpose of the framework is to encourage investment 

processes that increase business value and mission performance, reduce 

risk, and increase accountability and transparency in the decision 

process. This framework has been used in several GAO 

evaluations[Footnote 14]and has been adopted by a number of agencies. 

These agencies have used ITIM for purposes ranging from self-assessment 

to redesign of their IT investment management processes.



ITIM is a hierarchical model comprising five “maturity stages.” These 

maturity stages represent steps toward achieving stable and mature 

processes for managing IT investments. Each stage builds upon the lower 

stages; the successful achievement of each stage leads to improvement 

in the organization’s ability to manage its investments. With the 

exception of the first stage, each maturity stage is composed of 

“critical processes” that must be implemented and institutionalized for 

the organization to achieve that stage. These critical processes are 

further broken down into key practices that describe the types of 

activities an organization should be performing to successfully 

implement each critical process. An organization may be performing key 

practices from more than one maturity stage at one time. This is not 

unusual, but efforts to improve investment management capabilities 

should focus on becoming compliant with lower stage practices before 

addressing higher stage practices.



Stage two in the ITIM framework encompasses building a sound investment 

management process--by developing the capability to control projects so 

they finish predictably within established cost and schedule 

expectations--and establishing basic capabilities for selecting new IT 

projects. Stage three requires that an organization continually assess 

proposed and ongoing projects as parts of a complete investment 

portfolio: an integrated and competing set of investment options. This 

approach enables the organization to consider the relative cost, 

benefit, and risk of newly proposed investments along with those 

previously funded and to identify the optimal mix of IT investments to 

meet its mission, strategies, and goals. Stages four and five require 

the use of evaluation techniques to continuously improve both the 

investment portfolio and investment processes to better achieve 

strategic outcomes. Figure 6 shows the five maturity stages and the 

associated critical processes.



Figure 6: The Five Stages of Maturity with Critical Processes:



[See PDF for image]



Source: GAO.



[End of figure]



As defined by the model, each critical process consists of “core 

elements” that indicate whether the implementation and 

institutionalization of a process can be effective and repeated. Key 

practices must be executed to fulfill the core elements and implement 

the critical process. The core elements are as follows:



* Organizational commitments--Actions taken by management to ensure 

that the critical process is established and will endure. Key practices 

typically involve establishing organizational policies and engaging the 

sponsorship of senior management.



* Prerequisites--Conditions that must exist within an organization to 

enable it to successfully implement a critical process. Key practices 

typically involve allocating resources, establishing organizational 

structures, and providing training.



* Activities--Actions that must be taken to implement a critical 

process. An activity occurs over time and has recognizable results. Key 

practices typically involve establishing procedures, performing and 

tracking work, and taking corrective actions as necessary.



Objective, Scope, and Methodology:



The objective of our review was to assess the Postal Service’s 

capabilities for effectively managing its IT investments. To determine 

these capabilities and the organization’s level of maturity in managing 

its IT investments, we applied our ITIM framework and the associated 

assessment method. As a part of the ITIM assessment method, we obtained 

documentary and testimonial evidence and observed demonstrations of 

several internal systems showing the organization’s execution of 

various key practices. We evaluated the Postal Service against 14 

critical processes in maturity stages two, three, four, and five. We 

did not evaluate the Postal Service on key practices for one critical 

process in stage three--Authority Alignment of IT Investment Boards--

because major IT capital investments are managed by the same oversight 

entities, and we determined that this critical process was not 

applicable.



To determine whether the Postal Service had implemented the 14 critical 

processes we assessed, we first reviewed documentation relating to the 

organization’s IT investment management practices, including written 

policies, procedures, and guidance that it had developed, and other 

forms of documentation that provided evidence that these practices had 

been executed. Documents included the Postal Service’s F-66 manual, 

Investment Highlights reports, executive memoranda, program narratives 

required for the annual budget formulation, DARs, performance 

indicators, and the minutes from meetings of the CIC, the CPC, and the 

Board of Governors. We also reviewed a variety of administrative and 

system documents from the CTO organization, including evidence of its 

formulation process for IT investment proposals and its oversight 

process for IT investments.



We interviewed a number of senior officials, including the Chief 

Financial Officer (CFO), the CTO, and the CIO. Within the Office of the 

CFO, we also spoke with the Manager of Capital and Program Evaluation 

and the Manager of Corporate Budget. Within the Office of the CTO, we 

interviewed the Manager of IT Value and a representative from the 

Enterprise Architecture Office. We also spoke with senior officials 

from the functional units, such as the Manager of Logistics Systems, 

the Manager for Human Resources Technology Management, and the Manager 

of Customer Service Operations.



As part of the analysis, we selected four projects, representing a 

range of functional units, stages of development, and sizes, and 

examined them to determine the extent to which the Postal Service’s 

policies and procedures for IT investment management were being 

implemented. The projects we selected for review were (1) Enhanced 

Security Capability, (2) Organization Structure, Staffing and 

Management, (3) Point of Service ONE, and (4) Surface-Air Management 

System. Appendix II contains additional information on each of the 

projects we reviewed. To perform the project reviews, we reviewed 

project management documentation such as DARs, project management 

plans, and PTRS reports. To clarify information in these documents and 

gain further insight we also interviewed managers in the sponsoring 

functional units, project managers, and the members of the project 

management teams. The teams included staff who had been assigned 

responsibility for project oversight within the Office of the Chief 

Technology Officer.



We compared the evidence we collected through document reviews and 

interviews to the detailed requirements for each key practice and 

critical process that is specified in the ITIM. In accordance with the 

ITIM assessment method, we considered a key practice to have been 

“executed” when we determined, by team consensus, that sufficient 

evidence existed to confirm that the Postal Service was executing the 

practice in accordance with stated ITIM criteria. When we determined 

that there were significant weaknesses in the Postal Service’s 

execution of a practice or found insufficient evidence of its 

execution, we concluded that the practice was not executed. Once the 

key practices were assessed, we determined which of the 14 critical 

processes had been implemented. A critical process was determined to be 

“implemented” when all related key practices were designated as 

executed. Otherwise, according to the ITIM assessment method, the 

critical process would not be considered to have been implemented.



We conducted our work at the Postal Service’s headquarters offices in 

Washington, D.C., from October 2001 through July 2002, in accordance 

with generally accepted government auditing standards.



[End of section]



Chapter 2: Postal Service Executes Most Key Foundational Practices:



At the stage two level of maturity in the IT investment management 

framework, an organization has attained repeatable, basic selection and 

control processes and successful IT investment control processes at the 

project level. In other words, the organization can select projects 

that meet established selection criteria and can identify expectation 

gaps early and take appropriate steps to address them. According to 

ITIM, critical processes at this stage include (1) defining investment 

review board operations, (2) developing processes to determine the 

progress of individual IT projects, (3) creating an inventory of IT 

investments, (4) identifying IT project and systems business needs, and 

(5) developing a basic process for selecting new IT proposals. Table 1 

shows the purpose of each critical process in stage two.



Table 1: Stage Two--Critical Processes Required for Building the 

Investment Foundation:



Critical process: IT investment board operation; Description: To define 

and establish the governing board(s) responsible for selecting, 

controlling, and evaluating investments..



Critical process: IT project oversight; Description: To regularly 

determine each IT project’s progress toward cost and schedule 

milestones using established criteria, and take corrective actions when 

milestones are not achieved..



Critical process: IT project and system identification; Description: To 

create and maintain an IT project and system inventory to assist in 

managerial decision-making..



Critical process: Business needs identification; Description: To ensure 

that each IT program and project supports the organization’s business 

needs and meets users’ needs..



Critical process: Proposal selection; Description: To ensure that an 

established, structured process is used to select new IT proposals..



Source: GAO.



[End of table]



The Postal Service is executing nearly 90 percent of the key practices 

associated with stage two critical processes. Specifically, the Postal 

Service is carrying out all of the key practices associated with 

selecting proposals that meet established criteria, aligning IT 

projects with the organization’s business needs, and maintaining 

information on IT projects and systems in an inventory.



The Postal Service has yet to execute a few key practices associated 

with establishing an IT investment management foundation. For example, 

the Postal Service does not have guidance defining the overall 

framework for its IT investment management process, and policies and 

procedures for project oversight are not documented. When the Postal 

Service implements the remaining critical processes associated with 

stage two, it will acquire the additional key controls needed to fully 

implement basic control processes. For example, with an investment 

management process guide, the Postal Service will gain assurance that 

IT investment activities will be performed in a consistent and cost-

effective manner.



Table 2 summarizes the status of the Postal Service’s critical 

processes for stage two, showing how many associated key practices it 

has executed.



Table 2: Summary of Results for Stage Two Critical Processes and Key 

Practices:



Critical process: IT investment board operation; Key practices 

executed: 4; Total required

by critical process: 6; Percentage of key practices executed: 67%.



Critical process: IT project oversight; Key practices executed: 9; 

Total required

by critical process: 11; Percentage of key practices executed: 82.



Critical process: IT project and system identification; Key practices 

executed: 7; Total required

by critical process: 7; Percentage of key practices executed: 100.



Critical process: Business needs identification; Key practices 

executed: 8; Total required

by critical process: 8; Percentage of key practices executed: 100.



Critical process: Proposal selection; Key practices executed: 6; Total 

required

by critical process: 6; Percentage of key practices executed: 100.



Critical process: Totals; Key practices executed: 34; Total required

by critical process: 38; Percentage of key practices executed: 89%.



Source: GAO.



[End of table]



The following discussion provides information on steps the Postal 

Service has taken to implement each of these critical processes.



Boards Are Established but Operating without a Complete Process Guide:



The creation of decision-making bodies or boards is central to the IT 

investment management process. At the stage two level of maturity, 

organizations define one or more boards, provide resources to support 

their operations, and appoint members who have expertise in both 

operational and technical aspects of proposed investments. Resources 

provided to support the operations of IT investment boards typically 

include top management’s participation in creating the board(s) and 

defining their scope and formal evidence acknowledging management’s 

support for board decisions. The boards operate according to a written 

IT investment process guide tailored to the organization’s unique 

characteristics, thus ensuring that consistent and effective 

management practices are implemented across the organization.

[Footnote 15]Once board members are selected, the organization ensures 

that they are knowledgeable about policies and procedures for managing 

investments. Organizations at the stage two level of maturity also take 

steps to ensure that executives and line managers support and carry out 
the 

decisions of the IT investment board. According to ITIM, an IT 

investment management process guide should be a key authoritative 

document that the organization uses to initiate and manage IT 

investment processes and should provide a comprehensive foundation for 

policies and procedures developed for all other related processes.



The Postal Service has executed four of the six key practices for this 

critical process by establishing investment boards; providing adequate 

resources for related activities; appointing experienced senior-level 

executives to the boards; and implementing policies, procedures, and 

processes to ensure that executives and line managers support and carry 

out decisions made by the boards.



However, the Postal Service has yet to develop a written, organization-

specific process guide to direct the operations of the investment 

boards. While the F-66 manual provides general guidance on the 

organization’s investment management process, it does not constitute an 

IT investment process guide because it does not sufficiently define the 

investment process. Specifically, the manual does not include 

information on the roles of the Establish Team and the CTO Investment 

Review Board. In addition, it does not provide detail on the processes 

followed by other boards involved in the investment management process 

(e.g., the CIC and CPC). Finally, the manual does not identify the 

manner in which investment boards’ processes are to be coordinated with 

other key organizational plans and processes (such as the budget 

formulation process). Without an investment management process guide, 

the Postal Service lacks the assurance that IT investment activities 

will be coordinated and performed in a consistent and cost-effective 

manner.



Table 3 shows the rating for each key practice required to implement 

the critical process for establishing IT investment board operation at 

the stage two level of maturity. Each of the “executed” ratings shown 

below represents an instance where, based on the evidence provided by 

Postal Service officials, we concluded that a specific key practice was 

currently being executed by the organization.



Table 3: IT Investment Board Operation:



Type of practice: Organizational commitments; Key practice: 1. An 

organization-specific IT investment process guide is created to direct 

each board’s operations.; Rating: Not executed.; Summary of evidence: 

The Postal Service has not developed an investment process guide to 

direct its board operations. While the F-66 manual provides general 

guidance on the organization’s investment management process, it does 

not constitute an investment management process guide in that it does 

not (1) include information on the roles of the Establish Team and the 

CTO Investment Review Board, which are responsible for selecting IT 

investments to be funded in the budget formulation process and 

performing project oversight functions; (2) provide detail on the 

processes followed by other boards involved in the investment 

management process (e.g., the CIC and the CPC); or (3) identify the 

manner in which investment boards’ processes are to be coordinated with 

other key organizational plans and processes (such as the budget 

formulation process)..



Key practice: Type of practice : 2. Organization executives and line 

managers support and carry out IT investment board decisions.; Rating: 

Type of practice : Executed.; Summary of evidence: Type of practice : 

The Postal Service has several processes in place to ensure that 

executives and line managers support and carry out decisions made by 

the oversight boards with investment management responsibility. For 

example, the Postal Service uses “accountability letters” similar to 

Senior Executive Service contracts to ensure that the executives and 

line managers support the decisions of the investment boards..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided for operating each IT investment board.; Rating: 

Executed.; Summary of evidence: Adequate resources, such as supporting 

staff, are available for investment board operations..



Key practice: Type of practice : 2. Board members understand the 

investment board’s policies and procedures and exhibit core 

competencies in using the IT investment approach via training, 

education, or experience.; Rating: Type of practice : Executed.; 

Summary of evidence: Type of practice : Members of Postal Service 

investment boards are senior-level executives who have extensive 

experience with the organization’s operations and IT investment 

management approach..



Type of practice: Activities; Key practice: 1. Each IT investment board 

is created and defined with board membership integrating both IT and 

business knowledge.; Rating: Executed.; Summary of evidence: The CPC, 

CIC, and Establish Team include members who have extensive knowledge 

and experience of business and IT investment management. The CFO or CTO 

are members of the boards and contribute IT knowledge and expertise..



Key practice: Type of practice : 2. Each IT investment board operates 

according to written policies and procedures in the organization-

specific IT investment process guide.; Rating: Type of practice : Not 

executed.; Summary of evidence: Type of practice : The Postal Service 

has not developed a written organization-specific process guide for IT 

investment management. As a result, the Postal Service’s enterprise-

level investment boards are operating without documented policies and 

procedures..



Source: GAO.



[End of table]



CTO Organization Oversees IT Investments:



Investment boards should effectively oversee IT projects throughout all 

life-cycle phases (concept, design, testing, implementation, and 

operations/maintenance). At the stage two level of maturity, investment 

boards should review each project’s progress toward predefined cost and 

schedule expectations, using established criteria and performance 

measures, and should take corrective actions to address cost and 

milestone variances.



According to ITIM, effective project oversight requires, among other 

things, (1) having written polices and procedures for project 

management; (2) developing and maintaining an approved management plan 

for each IT project; (3) making up-to-date cost and schedule data for 

each project available to the oversight boards; (4) reviewing each 

project’s performance by regularly comparing actual cost and schedule 

data with expectations; (5) ensuring that corrective actions for each 

under-performing project are documented, agreed to, implemented, and 

tracked until the desired outcome is achieved; and (6) having written 

policies and procedures for oversight of IT projects.



The Postal Service has executed most of the key practices in the area 

of project oversight. For example, the Postal Service has developed 

several policies and procedures for project management, including the 

Program Management Process Guidelines, which are high-level project 

management guidelines used for all projects; the more-detailed Software 

Process Standards and Procedures used by the Postal Service’s business 

solution centers to develop and maintain systems; and the recently-

issued Integrated Solutions Methodology, which provides a process for 

managing a system’s development throughout the life-cycle phases. In 

addition, IT projects have an approved, up-to-date project management 

plan, in accordance with project management guidelines. Data on a 

project’s actual cost and schedule are provided to the CTO Investment 

Review Board,[Footnote 16]which is responsible for overseeing the 

performance of IT projects, and to other oversight groups as 

appropriate. Actual cost and schedule data for the four projects we 

reviewed were provided to (1) the CTO Investment Review Board in the 

form of PTRS reports, (2) the Board of Governors through quarterly 

Investment Highlights reports featuring capital expenditures and 

schedule data, and (3) field and headquarters offices through 

accounting and management reports featuring data on projects’ actual 

capital and expense costs.[Footnote 17]



Finally, the CTO Investment Review Board regularly oversees the 

performance of projects by comparing actual cost and schedule data to 

expectations and performs special reviews of projects that do not meet 

expectations. When these reviews are performed, corrective actions are 

defined, documented, agreed to by the program manager and the CTO 

Investment Review Board, and tracked until the desired outcome is 

achieved. According to the IT program manager for Organization 

Structure, Staffing and Management (OSS&M), special meetings were held 

for this project to address schedule performance issues. Also, 

officials from the CTO organization stated that the office generates 

reports listing projects that are not meeting cost, schedule, or 

customer satisfaction expectations and brings them to management’s 

attention so that “special reviews” can be performed. These reports 

identify the manager and group responsible for the project, provide a 

summary of the problem, the status of the resolution, and a target date 

for resolving the problem. The CTO Investment Review Board tracks 

action items to resolve the problem until they are completed.



Notwithstanding these strengths, the Postal Service has a few 

weaknesses in its oversight of IT projects. First, while the Postal 

Service has written policies and procedures addressing how the CTO 

Investment Review Board is to oversee IT investments, it does not have 

any that sufficiently define the Establish Team’s role in the oversight 

process. The F-66 manual, for example, notes that senior management is 

to continually review the performance of capital projects and discusses 

some mechanisms that could be used for this purpose (e.g., compliance 

reports). However, it does not provide specifics on the role of the 

Establish Team or define processes for oversight of projects beyond the 

initial deployment phase. Without adequate policies and procedures, 

project oversight may not be performed consistently. In addition, 

without these policies and procedures, the Postal Service lacks the 

transparency that is helpful in both communicating and demonstrating 

how project oversight is performed.



Second, the Postal Service’s investment boards do not adequately 

oversee project performance by comparing actual cost data to 

expectations. Specifically, while the Establish Team and CTO Investment 

Review Board each compare actual cost data to annual budget 

expectations, the Postal Service could not demonstrate that these 

boards compared the data to original expectations established in the 

DAR. In addition, while the Investment Highlights used by executives to 

monitor project performance contains schedule information, it does not 

contain complete information on actual project costs because it does 

not report operating expenses. Without comparisons of complete actual 

cost data to original expectations, Postal Service executives may not 

be able to easily determine whether the projects they have selected are 

progressing as planned or whether corrective actions are needed.



Table 4 shows the rating for each key practice required to implement 

the critical process for project oversight at the stage two level of 

maturity and summarizes the evidence that supports these ratings.



Table 4: IT Project Oversight:



Type of practice: Organizational commitments; Key practice: 1. The 

organization has written policies and procedures for project 

management.; Rating: Executed.; Summary of evidence: The Postal Service 

has developed written policies and procedures for project management, 

including Program Management Process Guidelines, Software Process 

Standards and Procedures, and an Integrated Solutions Methodology..



Key practice: Type of practice : 2. The organization has written 

policies and procedures for management oversight of IT projects.; 

Rating: Type of practice : Not executed.; Summary of evidence: Type of 

practice : The CTO Investment Review Board has written policies and 

procedures for overseeing projects. However, there are no written 

policies and procedures that sufficiently address how the Establish 

Team is to oversee projects. For example, the F-66 manual does not 

provide specifics on the role of the Establish Team or on how this team 

is to oversee capital projects that have been deployed for over 18 

months or ongoing infrastructure-type projects..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided to assist the board(s) in overseeing IT projects.; Rating: 

Executed.; Summary of evidence: The Postal Service has adequate 

resources for performing IT project oversight, including managers and 

staff assigned responsibility for this activity, and systems that 

capture information on actual costs, schedule, and risk..



Key practice: Type of practice : 2. Each IT project has and maintains 

an approved project management plan that includes cost and schedule 

controls.; Rating: Type of practice : Executed.; Summary of evidence: 

Type of practice : The Postal Service’s project management procedures 

require that an approved project management plan be maintained for each 

IT project. In addition, cost and schedule controls are applied during 

project reviews. Approved project management plans were maintained for 

the four projects we reviewed, and cost and schedule controls were 

applied during project reviews..



Key practice: Type of practice : 3. An IT investment board is 

operating.; Rating: Type of practice : Executed.; Summary of evidence: 

Type of practice : The Postal Service has a number of oversight boards 

with responsibility for managing IT investments, including the 

Establish Team, the CIC, the CPC, the Board of Governors, and the CTO 

Investment Review Board..



Key practice: Type of practice : 4. Information from the IT project and 

system inventory is used by the IT investment board as applicable.; 

Rating: Type of practice : Executed.; Summary of evidence: Type of 

practice : IT project and system information is used by the CTO 

Investment Review Board to support executive management’s project 

management responsibilities..



Type of practice: Activities; Key practice: 1. Each project’s up-to-

date cost and schedule data are provided to the appropriate IT 

investment board.; Rating: Executed.; Summary of evidence: Projects’ 

up-to-date cost and schedule data are provided to the CTO Investment 

Review Board, the Establish Team, and other oversight groups as 

appropriate. Actual cost and schedule data for the four projects we 

reviewed were provided to (1) the CTO Investment Review Board through 

the Program Tracking and Reporting System (PTRS), a tool used by the 

Board to monitor IT project performance, and (2) other oversight groups 

through quarterly reports featuring capital expenditures and schedule 

data and monthly financial reports featuring actual capital and expense 

cost data of projects..



Key practice: Type of practice : 2. Using established criteria, the IT 

investment board oversees each IT project’s performance regularly by 

comparing actual cost and schedule data to expectations.; Rating: Type 

of practice : Not executed.; Summary of evidence: Type of practice : 

The Postal Service’s investment boards do not adequately oversee 

project performance by comparing actual cost data to expectations. 

Specifically, while the Establish Team and CTO Investment Review Board 

each compare actual cost data to annual budget expectations, the Postal 

Service could not demonstrate that these boards compared the data to 

original expectations established in the DAR. In addition, while the 

Investment Highlights used by executives to monitor project performance 

contains schedule information, it does not contain complete information 

on actual project costs in that it does not report operating expenses..



Key practice: Type of practice : 3. The IT investment board performs 

special reviews of projects that have not met predetermined performance 

standards.; Rating: Type of practice : Executed.; Summary of evidence: 

Type of practice : Special reviews of projects that have not met 

predetermined standards are performed. According to the IT program 

manager for OSS&M, special meetings were held for this project to 

address schedule performance issues..



Key practice: Type of practice : 4. Appropriate corrective actions for 

each under-performing project are defined, documented, and agreed to by 

the IT investment board and the project manager.; Rating: Type of 

practice : Executed.; Summary of evidence: Type of practice : 

Appropriate corrective actions for each under-performing project are 

defined, documented, and agreed to by the oversight board and the 

project manager..



Key practice: Type of practice : 5. Corrective actions are implemented 

and tracked until the desired outcome is achieved.; Rating: Type of 

practice : Executed.; Summary of evidence: Type of practice : 

Corrective actions are implemented and tracked to help ensure that an 

agreed-upon outcome is achieved..



Source: GAO.



[End of table]



IT Project and System Information Is Maintained to Support Project 

Management:



To make good management decisions, an organization must know how funds 

are being expended toward acquiring, maintaining, and deploying its IT 

investments. Implementing this critical process requires an 

organization to identify all projects and systems within the 

organization and create one or more repositories or inventories of 

information about them. This information is required to track the 

organization’s IT resources to provide a basis for analyses showing 

major cost and management factors and trends. An IT project and systems 

inventory can take many forms and does not have to be centrally located 

or consolidated. The guiding principles for developing the inventory 

are that the information maintained should be accessible where it is of 

the most value to investment decision makers and relevant to the 

management processes and decisions that are being made.



According to ITIM, organizations at the stage two level of maturity 

provide adequate resources for tracking IT projects and systems, 

designate responsibility for managing the project and system 

identification process, and develop related written policies and 

procedures. Resources required for this purpose typically include 

managerial attention to the process; staff; supporting tools; an 

inventory database; inventory reporting, updating and query tools; and 

a method for communicating inventory changes to affected parties. Stage 

two organizations develop and maintain information on their IT projects 

and systems in one or more inventories according to written procedures, 

recording changes in data as required, and maintaining historical 

records. Access to this information is provided on demand to decision 

makers and other affected parties.



The Postal Service has executed all of the key practices for this 

critical process. The Service has established a number of repositories 

of information on its IT projects and systems in the form of the 

Enterprise Information Repository (EIR), and automated systems such as 

PTRS that track actual cost, schedule, benefit, and risk associated 

with the Postal Service’s IT programs and projects. Members of the 

Postal Service’s investment boards have access to the systems used to 

maintain information on the organization’s IT programs and projects. 

Information is maintained in these databases because they are also used 

for other purposes. For example, project managers input up-to-date 

systems and project status information to PTRS; the Corporate Planning 

System (CPS) and PTRS are updated automatically as financial 

transactions are processed. Finally, the Postal Service retains records 

showing changes in the information maintained on each IT investment 

over time and provides these records to its investment boards.



Table 5 shows the rating for each key practice required to implement 

the critical process for IT project and system identification at the 

stage two level of maturity and summarizes the evidence that supports 

these ratings.



Table 5: IT Project and System Identification:



Type of practice: Organizational commitments; Key practice: 1. The 

organization has written policies and procedures for identifying its IT 

projects and systems and collecting, in an inventory, information about 

the IT projects and systems which is relevant to the investment 

management process.; Rating: Executed.; Summary of evidence: The Postal 

Service has written policies and procedures for the Program Tracking 

and Reporting System PTRS and EIR. Information captured in these 

systems is relevant to the investment management process..



Key practice: Type of practice : 2. An official is assigned 

responsibility for managing the IT project and system identification 

process and ensuring the inventory meets the needs of the investment 

management process.; Rating: Type of practice : Executed.; Summary of 

evidence: Type of practice : The CTO organization is responsible for 

maintaining PTRS and EIR..



Type of practice: Prerequisite; Key practice: 1. Adequate resources are 

provided for identifying IT projects and systems and collecting 

relevant information into an inventory.; Rating: Executed.; Summary of 

evidence: Postal Service officials stated that adequate staff support 

is available to identify programs, projects, and systems, and provided 

evidence of staffing levels in key units including IT Value and the CTO 

organization..



Type of practice: Activities; Key practice: 1. The organization’s IT 

projects and systems are identified and specific information about them 

is collected in an inventory.; Rating: Executed.; Summary of evidence: 

Information on IT projects and systems is maintained in PTRS and EIR..



Key practice: Type of practice : 2. Changes to IT projects and systems 

are identified, and change information is maintained in the inventory.; 

Rating: Type of practice : Executed.; Summary of evidence: Type of 

practice : Project managers ensure that systems and project status 

information is kept up to date in PTRS and that cost amounts captured 

in financial and corporate planning systems are updated automatically 

as financial transactions are processed..



Key practice: Type of practice : 3. Information from the inventory is 

available on demand to decision makers and other affected parties.; 

Rating: Type of practice : Executed.; Summary of evidence: Type of 

practice : IT investment decision makers and other affected parties 

have access to the various systems used to capture IT project and 

system information. Although this information is available on demand, a 

number of systems must be accessed in order to obtain complete 

information on expected and actual costs, benefits, schedule, and 

risks..



Key practice: Type of practice : 4. The IT project and system inventory 

and its information records are maintained to contribute to future 

investment selections and assessments.; Rating: Type of practice : 

Executed.; Summary of evidence: Type of practice : Historical records 

are maintained for the primary systems that contain IT project and 

system information, PTRS and EIR. Project managers also input up-to-

date systems and project status information to EIR and PTRS, and the 

CPS and PTRS are updated automatically as financial transactions are 

processed. Finally, the Postal Service is retaining records that show 

changes in the information maintained on each IT investment over time 

and providing these records to its investment boards..



Source: GAO.



[End of table]



Processes Ensure That IT Investments Support Business Needs and Meet 

User Needs:



Defining business needs for IT projects helps ensure that projects 

support the organization’s mission goals and meet users’ needs. This 

critical process creates the link between the organization’s business 

objectives and its IT management strategy. According to ITIM, 

effectively identifying business needs requires, among other things, 

(1) developing policies and procedures for identifying business needs 

and associated users for IT projects, (2) defining the organization’s 

business needs or stated mission goals, (3) defining business needs for 

projects, and (4) identifying users for projects who will participate 

in the project’s development and implementation.



The Postal Service has executed all of the key practices for this 

critical process. The Service’s business needs are defined in a number 

of documents, including the organization’s strategic plan and recent 

Transformation Plan. Business needs and project users are being 

identified and defined in accordance with policies and procedures, and 

users are involved in project management throughout a project’s life 

cycle. For example, the project management team for Point of Service 

ONE conducts interviews to ensure that the system is providing the 

information needed for decision making, and staff working in field 

locations tested Point of Service ONE software to provide input on 

modifications required to support their needs. The business needs and 

associated users of the four projects we reviewed were clearly 

identified and defined in the DARs used to obtain project approval and 

in other project justification documentation. In addition, users of 

these projects were involved in project development activities through 

direct collaboration with CTO staff, user groups, and/or change control 

groups. Because the Postal Service is executing all the key practices 

associated with identifying business needs, it has increased confidence 

that its IT projects will meet both business needs and users’ needs.



Table 6 shows the rating for each key practice required to implement 

the critical process for business needs identification at the stage two 

level of maturity and summarizes the evidence that supports these 

ratings.



Table 6: Business Needs Identification:



Type of practice: Organizational commitment; Key practice: 1. The 

organization has written policies and procedures for identifying the 

business needs (and the associated users) of each IT project.; Rating: 

Executed.; Summary of evidence: The Postal Service has written policies 

and procedures for identifying business needs (and the associated 

users) in its F-66 manual, Program Management Process Guide, and 

Integrated Solutions Methodology..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided for identifying business needs and associated users.; 

Rating: Executed.; Summary of evidence: According to Postal Service 

officials, adequate resources are provided for identifying business 

needs and associated users. Program managers in the CTO organization 

also have methods and tools for analyzing business needs, identifying 

users, and converting business needs into statements of technical 

requirements..



Key practice: Type of practice : 2. The organization has defined 

business needs or stated mission goals.; Rating: Type of practice : 

Executed.; Summary of evidence: Type of practice : Business needs are 

defined in the Postal Service’s strategic plans, integrated financial 

plan, annual performance plans and reports, and Postal Service 

Transformation Plan..



Key practice: Type of practice : 3. IT staff are trained in business 

needs identification.; Rating: Type of practice : Executed.; Summary of 

evidence: Type of practice : CTO organization staff with assigned 

project management responsibilities are trained and experienced in the 

process of identifying business needs and developing technical 

solutions to meet these needs. In addition, they collaborate with 

business units in developing solutions to ensure that business needs 

are met. Business units are directly involved in this process..



Key practice: Type of practice : 4. IT projects and systems are 

identified in the IT project and system inventory.; Rating: Type of 

practice : Executed.; Summary of evidence: Type of practice : 

Information on IT systems and projects is maintained in a number of 

systems, including PTRS and EIR..



Type of practice: Activities; Key practice: 1. The business needs for 

each IT project are clearly identified and defined.; Rating: Executed.; 

Summary of evidence: Policies and procedures require that the business 

needs for each IT project be clearly identified and defined. The 

business needs for the four projects we reviewed were clearly 

identified and defined..



Key practice: Type of practice : 2. Specific users are identified for 

each IT project.; Rating: Type of practice : Executed.; Summary of 

evidence: Type of practice : Policies and procedures require that the 

specific users be identified for each IT project. Specific users were 

identified for the four IT projects we reviewed..



Source: GAO.



[End of table]



Structures Are in Place for Selecting IT Investment Proposals:



As a basic step in the direction of implementing mature stage two 

processes, an organization must develop a sound process for selecting 

IT proposals and projects. Once adequate resources are provided and an 

official is designated with responsibility for selecting proposals, 

stage two organizations establish a structured selection process. 

Resources required for selecting proposals typically include managerial 

time and attention, staff, and supporting tools and methodologies. 

Executives analyze and prioritize the proposals and make related 

funding decisions according to an established, structured process.



The Postal Service has executed all of the key practices pertaining to 

selecting IT proposals: executives and managers follow established 

selection processes, the CFO has been designated with responsibility 

for the organization’s budget formulation process, adequate resources 

are being provided to support related activities, a structured process 

is in place for developing new IT proposals, and executives analyze and 

prioritize the proposals according to established selection criteria.



Postal Service executives and managers follow established processes for 

selecting IT investments. Specifically, functional units, the Finance 

Department’s CAPE group, the Establish Team, and the organization’s 

enterprise-level investment boards all follow established processes for 

proposing, prioritizing, and selecting IT investments. Officials 

reported that the Establish Team operates in accordance with 

established management cycle processes supported by the organization’s 

CPS and that these processes, although not documented, are generally 

understood by members of the team. Finally, the CTO organization has 

developed selection criteria for that unit’s proposed IT investments 

that are incorporated in its new Business Case System (BCS).



Table 7 shows the rating for each key practice required to implement 

the critical process for proposal selection at the stage two level of 

maturity and summarizes the evidence that supports these ratings.



Table 7: Proposal Selection:



Type of practice: Organizational commitments; Key practice: 1. 

Executives and managers follow an established selection process.; 

Rating: Executed.; Summary of evidence: Executives and managers follow 

established processes for selecting IT investments that are embodied in 

the Service’s capital planning and budget formulation processes..



Key practice: Type of practice : 2. An official is designated to manage 

the proposal selection process.; Rating: Type of practice : Executed.; 

Summary of evidence: Type of practice : The Postal Service has formally 

designated responsibility for the annual budget formulation process to 

the CFO..



Type of practice: Prerequisite; Key practice: 1. Adequate resources are 

provided for proposal selection activities.; Rating: Executed.; Summary 

of evidence: Adequate resources are available to support proposal 

selection activities in the functional units, the Finance Department, 

the CTO organization, and the Establish Team..



Type of practice: Activities; Key practice: 1. The organization uses a 

structured process to develop new IT proposals.; Rating: Executed.; 

Summary of evidence: Proposals for new investments are developed by the 

functional units, and the CTO organization has a structured process for 

supporting the development of IT-related proposals..



Key practice: Type of practice : 2. Executives analyze and prioritize 

new IT proposals according to established selection criteria.; Rating: 

Type of practice : Executed.; Summary of evidence: Type of practice : 

Vice presidents of the Postal Service’s functional units develop and 

rank proposals for new IT investments, and the Establish Team analyzes 

and prioritizes the proposals annually, along with existing IT 

investments, according to established criteria..



Key practice: Type of practice : 3. Executives make funding decisions 

for new IT proposals according to an established process.; Rating: Type 

of practice : Executed.; Summary of evidence: Type of practice : The 

Establish Team makes funding decisions for new IT proposals according 

to an established process as part of the Postal Service’s budget 

formulation activities. Team members are executive-level officers..



Source: GAO.



[End of section]



Chapter 3: Postal Service Shows Mixed Progress in Managing Its IT 

Investments as a Portfolio:



An IT investment portfolio is an integrated, enterprisewide collection 

of investments that are assessed and managed collectively based on 

common criteria. Managing investments within the context of such a 

portfolio is a conscious, continuous, and proactive approach to 

expending limited resources on an organization’s competing initiatives 

in light of the relative benefits expected from these investments. 

Taking an enterprisewide perspective enables an organization to 

consider its investments comprehensively so that the collective 

investments optimally address its mission, strategic goals, and 

objectives. This portfolio approach also allows an organization to 

determine priorities and make decisions about which projects to fund 

based on analyses of the relative organizational value and risks of all 

projects, including projects that are proposed, under development, and 

in operation.



According to ITIM, critical processes performed by organizations at the 

stage three level of maturity include (1) defining portfolio selection 

criteria, (2) engaging in project-level investment analysis, 

(3) developing a complete portfolio based on the investment analysis, 

and (4) maintaining oversight over the investment performance of the 

portfolio. In addition, organizations with more than one board that 

selects IT projects for funding must align the authority of their IT 

investment boards. Although authority alignment is a critical process 

for the stage three level of maturity, we did not assess it in this 

study, because the Postal Service has a single set of organizationwide 

investment processes that apply to IT investments. Table 8 shows the 

purpose of each critical process in stage three.



Table 8: Stage Three--Critical Processes Required for Developing a 

Complete Investment Portfolio:



Critical process: Portfolio selection criteria definition; 

Description: To ensure that the organization develops and maintains IT 

portfolio selection criteria that support its mission, organizational 

strategies, and business priorities..



Critical process: Investment analysis; Description: To ensure that all 

IT investments are consistently analyzed and prioritized according to 

the organization’s portfolio selection criteria..



Critical process: Portfolio development; Description: To ensure that an 

optimal IT investment portfolio with manageable risks and returns is 

selected and funded..



Critical process: Portfolio performance oversight; Description: To 

ensure that each IT investment portfolio achieves its cost, benefit, 

schedule, and risk (CBSR) expectations..



Source: GAO:



[End of table]



The Postal Service has executed many of the key practices associated 

with stage three critical processes. For example, the organization’s 

portfolio selection criteria are distributed throughout the 

organization, and they are reviewed and modified as appropriate. In 

addition, executives examine the mix of proposals and investments 

across portfolio categories in making funding selections. However, many 

key practices still need to be executed before the Postal Service can 

effectively manage its IT investments from a portfolio perspective. For 

example, the Postal Service has not defined the policies and procedures 

for any of the stage three critical processes. In addition, the Service 

has not developed portfolio selection criteria that adequately address 

cost, benefit, schedule, and risk. Until the Service fully implements 

critical processes associated with managing investments as a complete 

portfolio, it will not have ready access to the data needed to make 

informed decisions about competing investments.



Table 9 summarizes the status of the Postal Service’s stage three 

critical processes, showing how many associated key practices it has 

executed.



Table 9: Summary of Results for Stage Three Critical Processes and Key 

Practices:



Critical process: Portfolio selection criteria definition; Key 

practices executed: 4; Total required

by critical process: 6; Percentage of key practices executed: 67%.



Critical process: Investment analysis; Key practices executed: 2; Total 

required

by critical process: 7; Percentage of key practices executed: 29.



Critical process: Portfolio development; Key practices executed: 6; 

Total required

by critical process: 9; Percentage of key practices executed: 67.



Critical process: Portfolio performance oversight; Key practices 

executed: 6; Total required

by critical process: 9; Percentage of key practices executed: 67.



Critical process: Totals; Key practices executed: 18; Total required

by critical process: 31; Percentage of key practices executed: 58%.



Source: GAO.



[End of table]



The following discussion provides information on the steps the Postal 

Service has taken toward implementing each of the critical processes.



Portfolio Selection Criteria Are Defined, but Do Not Adequately Address 

All Factors:



To manage IT investments effectively, an organization needs to 

establish rules or “selection criteria” for determining how to allocate 

scarce funding to existing and proposed investments. Thus, the process 

of developing an IT investment portfolio necessarily involves defining 

appropriate cost, benefit, schedule, and risk criteria for evaluating 

individual proposals for investments. To ensure that the organization’s 

strategic goals, objectives, and mission will be satisfied by the 

investments, the criteria should have an enterprisewide focus that 

reflects these strategic goals. Further, if an organization’s mission 

or business needs and strategies change, criteria for selecting 

investments should be reexamined at the portfolio level. Portfolio 

selection criteria should be disseminated throughout the organization 

to ensure that decisions concerning investments are made in a 

consistent manner and that this critical process is institutionalized. 

To achieve this result, project managers, organizational planners, and 

other decision makers should receive information on the organization’s 

selection criteria and address the criteria in IT proposals and 

business cases, project oversight activities, and strategic and 

business planning processes. Resources required for this critical 

process typically include the time and attention of executives involved 

in the process, adequate staff, and supporting tools.



The Postal Service has executed four of the six key practices for this 

critical process. First, adequate resources are available to conduct 

portfolio selection criteria definition activities. Second, several 

working groups, including the Establish Team, are tasked with creating 

and modifying portfolio selection criteria. Third, portfolio selection 

criteria in the form of performance indicators and targets and program 

narratives that are required for budget formulation are distributed 

throughout the organization. Fourth, the Establish Team performs 

periodic reviews of the portfolio selection criteria and, in doing so, 

considers the organization’s current strategic goals and objectives, 

changing the criteria from year to year as required by current 

circumstances and priorities.



Nonetheless, the Postal Service has yet to develop written guidance 

establishing procedures to be followed in creating, modifying, and 

using criteria for selecting a portfolio. Postal Service officials use 

annual performance plans, performance indicators and targets, and 

program narrative requirements as portfolio selection criteria. While 

these criteria are based on the Postal Service’s mission, goals, 

strategies, and priorities, they are not adequate because they do not 

address cost, benefit, schedule, and risk considerations in a manner 

that (1) provides sufficient and meaningful cost, benefit, schedule, 

and risk information to effectively assess investments and (2) would 

allow the Service to compare them against one another, prioritize them, 

and select those that best meet its needs and priorities. For example, 

program narratives do not include complete cost information. While 

expected capital costs are reported for the next 6 years, expense is 

only reported through the end of the current fiscal year. Further, the 

criteria do not include a weighting schema or other method that would 

allow the Establish Team to compare the risk-adjusted returns of 

competing investments. The CTO organization uses such criteria to 

prioritize investments and assist in making selection decisions. 

Without portfolio selection criteria that adequately address cost, 

benefit, schedule, and risk considerations, Postal Service officials 

have less assurance that they are selecting the mix of investments that 

best meets the organization’s needs and priorities.



Table 10 shows the rating for each key practice required to implement 

the critical process for defining proposal selection criteria at the 

stage three level of maturity and summarizes the evidence that supports 

these ratings.



Table 10: Portfolio Selection Criteria Definition:



Type of practice: Organizational commitment; Key practice: 1. The 

organization has written policies and procedures for creating and 

modifying IT portfolio selection criteria.; Rating: Not executed.; 

Summary of evidence: The Postal Service does not have written policies 

and procedures for creating and modifying IT portfolio selection 

criteria..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided for selection criteria definition activities.; Rating: 

Executed.; Summary of evidence: Adequate resources are available to 

conduct IT proposal selection criteria definition activities, including 

the Establish Team, which develops portfolio selection criteria each 

year as part of the budget formulation process..



Key practice: Type of practice : 2. A working group is designated to be 

responsible for creating and modifying the IT portfolio selection 

criteria.; Rating: Type of practice : Executed.; Summary of evidence: 

Type of practice : The Establish Team is responsible for creating and 

modifying the Postal Service’s IT portfolio selection criteria..



Type of practice: Activities; Key practice: 1. The enterprisewide IT 

investment board approves the core IT portfolio selection criteria, 

including cost, benefit, schedule, and risk criteria, based on the 

organization’s mission, goals, strategies, and priorities.; Rating: Not 

executed.; Summary of evidence: While the Establish Team approves 

portfolio selection criteria based on the Postal Service’s mission, 

goals, strategies, and priorities, these criteria are not adequate 

because they do not address CBSR considerations in a manner that (1) 

provides sufficient and meaningful information to effectively assess 

investments and (2) would allow the Postal Service to compare 

investments against one another, prioritize them, and select those that 

best meet the Service’s needs and priorities..



Key practice: Type of practice : 2. The IT portfolio selection criteria 

are distributed throughout the organization.; Rating: Type of practice 

: Executed.; Summary of evidence: Type of practice : The Postal Service 

distributes portfolio selection criteria in the form of strategic and 

annual performance plans, performance indicators and targets, and 

program narrative requirements used for budget formulation..



Key practice: Type of practice : 3. The IT portfolio selection criteria 

are reviewed using cumulative experience and event-driven data and 

modified, as appropriate.; Rating: Type of practice : Executed.; 

Summary of evidence: Type of practice : The Establish Team reviews the 

Postal Service’s IT portfolio selection criteria each year. In these 

reviews, the Team considers the organization’s strategic goals and 

objectives, changing the criteria that it uses from year to year as 

required by current circumstances and priorities..



Source: GAO.



[End of table]



IT Investments Are Not Consistently Analyzed and Prioritized within the 

Context of a Portfolio:



This critical process ensures that all IT investments are consistently 

analyzed and prioritized according to the organization’s portfolio 

selection criteria, which should include cost, benefit, schedule, and 

risk considerations. According to ITIM, effective investment analysis 

requires, among other things, that (1) portfolio selection criteria 

have been developed; (2) cost, benefit, schedule, and risk data are 

assessed and validated for each investment; (3) the investment review 

board compares each investment against the organization’s portfolio 

selection criteria; and (4) the investment review board creates a 

ranked list of investments using the portfolio selection criteria.



The Postal Service has executed two of the key practices in this area. 

First, the Postal Service has adequate resources for analyzing 

investments, including CAPE and other dedicated staff. Second, the 

Postal Service ensures that cost, benefit, schedule, and risk data 

concerning IT investments are validated. The Service does this in two 

particular instances: (1) during the development of the DAR, the 

document for approving capital projects, there is a validation step in 

which Finance Department staff independently verify the accuracy and 

integrity of the data presented and a validation memo is signed by the 

Controller to confirm that the data are correct; (2) as part of the 

annual budget formulation process, the data submitted on the various 

budget proposals are reviewed, and thus validated, by various levels of 

management up to the senior vice president of the functional unit 

sponsoring a proposal.



Nevertheless, the Postal Service has a number of weaknesses in the way 

it analyzes investments for portfolio management. First, it does not 

have policies and procedures that sufficiently address this critical 

process. Its 

F-66 manual includes some procedures for analyzing proposed 

investments; however, it does not specify an approach for analyzing 

existing investments to make portfolio selection decisions. Nor does it 

describe a process to establish portfolio selection criteria that 

adequately incorporate cost, benefit, schedule, and risk 

considerations. In addition, it does not address capital projects that 

have been deployed for more than 18 months or ongoing infrastructure-

type projects.



Second, while investments are analyzed by executives during the 

approval process, through the review of quarterly status reports, and 

during the annual budget formulation activities, these investments are 

not assessed against portfolio selection criteria that adequately 

consider cost, benefit, schedule, and risk factors. The F-66 manual 

does not explicitly require the preparation of a risk assessment when 

the DAR is developed for a new investment. Further, when the Establish 

Team reviews budget documents as part of the annual budget formulation 

process, these documents do not provide sufficient information on cost, 

benefit, and risk to determine whether investments are progressing 

according to the approved DAR parameters.



Table 11 shows the rating for each key practice required to implement 

the critical process for analyzing investments at the stage three level 

of maturity and summarizes the evidence that supports these ratings.



Table 11: Investment Analysis:



Type of practice: Organizational commitment; Key practice: 1. The 

organization has written policies and procedures for analyzing IT 

investments.; Rating: Not executed.; Summary of evidence: The Postal 

Service does not have policies and procedures that sufficiently address 

this critical process. The F-66 manual includes procedures for 

analyzing investments, for example, by validating DAR information. 

However, these guidelines do not (1) specify how the Establish Team is 

to analyze investments or use investment analysis data to make 

portfolio selection decisions; (2) recommend the use of portfolio 

selection criteria that adequately incorporate CBSR considerations; 

(3) apply to capital projects that have been deployed more than 18 

months or to ongoing infrastructure-type projects; or (4) provide 

guidance on how projects are to be evaluated against one another (e.g., 

there are no specific provisions for dealing with projects that are 

conflicting, overlapping, or redundant)..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided for investment analysis activities.; Rating: Executed.; 

Summary of evidence: The Postal Service has adequate resources for 

analyzing investments, including dedicated staff (e.g., CAPE staff who 

validate DARs) and tools..



Key practice: Type of practice : 2. IT investment portfolio selection 

criteria have been developed.; Rating: Type of practice : Not 

executed.; Summary of evidence: Type of practice : While the Postal 

Service has developed portfolio selection criteria, these criteria are 

not adequate because they do not address CBSR considerations in a 

manner that (1) provides sufficient and meaningful information to 

effectively assess investments and (2) would allow the Service to 

compare investments against one another, prioritize them, and select 

those that best meet the Service’s needs and priorities..



Key practice: Type of practice : 3. Information from the IT project and 

system inventory is used by the IT investment board.; Rating: Type of 

practice : Not executed.; Summary of evidence: Type of practice : The 

Postal Service’s investment boards with management responsibility do 

not use information from the IT project and system inventory for 

analyzing investments in the context of portfolio management..



Type of practice: Activities; Key practice: 1. Each IT investment board 

ensures that the CBSR data and other required data are validated for 

each investment within its span of control.; Rating: Executed.; Summary 

of evidence: The Postal Service ensures that CBSR data for IT 

investments are validated through the DAR process and management’s 

review of CBSR data submitted during the budget formulation cycle..



Key practice: Type of practice : 2. Each IT investment board assesses 

each of its IT investments with respect to the IT portfolio selection 

criteria.; Rating: Type of practice : Not executed.; Summary of 

evidence: Type of practice : While the Establish Team analyzes all IT 

investments, it does so with portfolio selection criteria that are not 

adequate because they do not address CBSR considerations in a manner 

that (1) provides sufficient and meaningful information to effectively 

assess investments and (2) would allow the Postal Service to compare 

investments against one another, prioritize them, and select those that 

best meet the Service’s needs and priorities..



Key practice: Type of practice : 3. Each IT investment board 

prioritizes its full portfolio of IT investments using the portfolio 

selection criteria.; Rating: Type of practice : Not executed.; Summary 

of evidence: Type of practice : While the Postal Service’s Establish 

Team evaluates and ranks the organization’s full portfolio of existing 

and new IT investments, it does so with criteria that do not adequately 

address cost, benefit, schedule, and risk..



Source: GAO.



[End of table]



An IT Investment Portfolio Is Developed, but Project Expectations Are 

Not Routinely Revised:



At the stage three level of maturity, organizations design processes 

for developing an IT portfolio and develop written policies and 

procedures to ensure that projects are selected that best fit their 

strategic business direction, needs, and priorities. Each organization 

has practical limits on funding, the risks it is willing to take, and 

the length of time for which it will incur costs on a given investment 

before benefits are realized. To address these limits, stage three 

organizations group existing and proposed IT investments into 

predefined logical categories, for example, by cost or by type of 

investment (i.e., facilities or equipment). Once this is accomplished, 

organizations can compare investments and proposals within and across 

the portfolio categories and select the best overall portfolio for 

funding.



According to ITIM, the portfolio development process cannot be 

performed well unless certain conditions are first satisfied, including 

(1) providing adequate resources for a portfolio development process; 

(2) appointing to IT investment boards people who exhibit core 

competencies in developing portfolios; (3) analyzing individual IT 

investments, including validating associated cost, benefit, schedule, 

and risk data; and (4) defining investment categories. Organizations 

should also create written policies and procedures for establishing and 

maintaining the portfolio development process. Assuming that this 

foundation is in place, the IT investment boards of stage three 

organizations assign each investment to a portfolio category, examine 

the mix of existing and proposed investments across these categories, 

and make selections for funding. Each IT investment board also 

establishes annual cost, benefit, schedule, and risk expectations for 

individual IT projects and gathers and validates data on actual 

performance. A repository of information on developing portfolios is 

established, updated, and maintained. Resources required for this 

critical process typically include staff, supporting tools for 

developing portfolios, and managerial time and attention to portfolio 

development.



The Postal Service has executed six of the nine key practices for this 

critical process by providing adequate resources to implement this 

critical process; assigning competent managers to the board responsible 

for the portfolio development process; developing common portfolio 

categories; assigning IT programs and projects to portfolio categories 

on the basis of established criteria; examining the mix of proposals 

and investments across the common portfolio categories and making 

selection decisions for funding; and establishing, updating, and 

maintaining repositories of portfolio information.



Postal Service officials reported that adequate management time and 

staff resources are available for this critical process. In addition, 

several systems are in use that support portfolio development 

activities, including PTRS, BCS, and CPS. Postal Service officials 

stated that the organization provides training in the use of these 

systems. Moreover, members of the Postal Service’s enterprise-level 

investment boards are senior-level executives who have had many years 

of experience in the organization and in working with the IT investment 

management process. The Postal Service also has defined common IT 

investment portfolio categories for the organization. The Postal 

Service’s IT investments are considered to relate either to 

corporatewide or functional unit activities and are further classified 

by funding type (capital or expense) and investment type (facilities, 

equipment, field, or other), as provided for in the organization’s F-66 

manual and budget instructions.



Postal Service programs and projects are now being assigned to 

portfolio categories based on the criteria described above. Further, 

the Establish Team examines the organization’s entire portfolio of IT 

investments annually and then selects programs and projects for 

funding. The Postal Service collects and stores information relating to 

the portfolio development process in a variety of forms ranging from IT 

project and systems inventories and finance/budget and corporate 

planning systems to manual backup books maintained by the Finance 

Department.



Even though these important steps in stage three portfolio development 

have been taken, some weaknesses remain. The Postal Service has yet to 

develop written policies and procedures for establishing and 

maintaining portfolio information on its IT investments. The Postal 

Service has defined investment categories in its F-66 manual[Footnote 

18] but has not developed written policies and procedures for 

establishing and maintaining portfolio information on IT investments. 

Moreover, even though the CTO organization monitors data on the 

performance of IT projects, the Establish Team does not perform 

complete analyses of the performance of individual investments or 

establish cost, benefit, schedule, and risk expectations for each 

investment annually.



While the Establish Team reviews investments each year from a strategic 

planning and funding perspective, neither the analyses it performs nor 

the Investment Highlights reports on the projects provided to the Board 

of Governors adequately consider actual benefit and risk or contain 

complete information on cost. For example, the business case for the 

Surface-Air Management System includes information on over a dozen 

different types of qualitative benefits expected to be obtained by 

investing in that project.However, Investment Highlights reports 

provided to the Board of Governors only include information on the 

number of installations completed to date. In addition, although 

information on projects’ capital costs is included in Investment 

Highlights, information on operating expenses is not. As a result, 

information on these aspects of project performance is not routinely 

provided to the Board of Governors. Without complete cost, benefit, 

schedule, and risk data, Postal Service executives do not have the 

information needed to analyze and compare all investments and select 

those that best fit with the strategic business direction, needs, and 

priorities, of the organization.



Table 12 shows the rating for each key practice required to implement 

the critical process for portfolio development at the stage three level 

of maturity and summarizes the evidence that supports these ratings.



Table 12: Portfolio Development:



Type of practice: Organizational commitment; Key practice: 1. The 

organization has written policies and procedures for establishing and 

maintaining the portfolio development process.; Rating: Not executed.; 

Summary of evidence: The Postal Service has not developed written 

policies and procedures for establishing and maintaining an IT 

portfolio development process..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided for executing the portfolio development process.; Rating: 

Executed.; Summary of evidence: Adequate management time, staff 

resources, and training are available to perform this critical process, 

and various automated systems capture information on the Postal 

Service’s IT investment portfolio..



Key practice: Type of practice : 2. Board members exhibit core 

competencies in portfolio development.; Rating: Type of practice : 

Executed.; Summary of evidence: Type of practice : Members of the 

Postal Service’s Capital Investment Committee and Establish Team are 

senior-level executives who have extensive experience with the 

organization’s operations and the IT investment management process..



Key practice: Type of practice : 3. Individual IT investments have been 

analyzed and their cost, benefit, schedule, and risk data have been 

validated.; Rating: Type of practice : Not executed.; Summary of 

evidence: Type of practice : The Postal Service ensures that IT 

investments’ CBSR data are validated. However, the Establish Team 

analyzes IT investments using portfolio selection criteria that do not 

adequately address cost, benefit, schedule, and risk..



Key practice: Type of practice : 4. The organization has defined its 

common portfolio categories.; Rating: Type of practice : Executed.; 

Summary of evidence: Type of practice : The Postal Service investment 

categories in its F-66 manual are based on type of expenditure (capital 

or expense), type of investment (facilities, equipment, field, other), 

and expected total cost (under $5 million, $5 million to under $7.5 

million, $7.5 million to under $10 million, and $10 million or more)..



Type of practice: Activities; Key practice: 1. Each IT investment board 

assigns investment proposals to a portfolio category.; Rating: 

Executed.; Summary of evidence: The Postal Service assigns IT programs 

and projects to portfolio categories on the basis of established 

criteria contained in its F-66 manual..



Key practice: Type of practice : 2. Each IT investment board examines 

the mix of proposals and investments across the common portfolio 

categories and makes selections for funding.; Rating: Type of practice 

: Executed.; Summary of evidence: Type of practice : The Establish Team 

examines portfolios of investments categorized based on total expected 

capital costs and makes selections for funding..



Key practice: Type of practice : 3. Each IT investment board approves 

or modifies the annual CBSR expectations for each of its selected IT 

investments.; Rating: Type of practice : Not executed.; Summary of 

evidence: Type of practice : Although, according to Finance Department 

officials, management may approve or modify project expectations at any 

time, there is no process for routinely doing so. The Establish Team 

does not routinely approve or modify cost, benefit, schedule and risk 

expectations for each existing and new IT investment on an annual 

basis. However, the CTO Investment Review Board does evaluate CBSR data 

for all projects with IT components..



Key practice: Type of practice : 4. A repository of portfolio 

development information is established, updated, and maintained.; 

Rating: Type of practice : Executed.; Summary of evidence: Type of 

practice : The Postal Service collects and stores information relating 

to the portfolio development process in multiple repositories ranging 

from IT project and systems inventories and financial and corporate 

planning systems to project managers’ records and manual backup books 

maintained by the Finance Department for Board of Governors programs 

and projects..



Source: GAO.



[End of table]



Portfolio Performance Oversight Is Performed, but without Comprehensive 

Guidance:



The purpose of this critical process is to ensure that each IT 

investment achieves its cost, benefit, schedule, and risk expectations. 

It builds on the critical process for IT project oversight at stage two 

by adding elements of benefit measurement and risk management to an 

organization’s investment control capability. Executive-level 

oversight of project-level risk and benefit management activities 

provides the organization with increased assurance that each investment 

will achieve the desired cost, benefit, schedule, and risk 

expectations.



According to ITIM, effective oversight of portfolio performance 

requires, among other things, that the investment board (1) has access 

to up-to-date cost, benefit, schedule, and risk data; (2) monitors the 

performance of each investment in its portfolio by comparing actual 

project-level cost, benefit, schedule, and risk data to the predefined 

expectations for the project; and (3) corrects poorly performing 

projects.



The Postal Service is executing six of the nine key practices for this 

critical process by providing adequate resources for monitoring and 

controlling IT project performance and giving investment boards access 

to data on actual and expected cost, benefit, schedule, and risk that 

are maintained in the organization’s IT project and system inventory. 

In addition, the CTO Investment Review Board provides oversight for all 

IT projects by monitoring these data and providing feedback on 

performance to sponsoring organizations. These oversight activities 

include working with IT project management teams to identify and 

address any development and deployment issues that may arise.



Despite these strengths, however, the Postal Service has yet to develop 

policies and procedures that address performance oversight from a 

portfolio perspective. Moreover, while expectations are established in 

DARs or business cases that include cost, benefit, schedule, and risk, 

and the CTO organization monitors actual performance results, the 

Postal Service has not established a mechanism for revising expected 

benefit and risk expectations after its boards approve the investments 

or for notifying the Establish Team when an investment has not met 

cost, benefit, schedule, and risk expectations. Until the Postal 

Service executes all key practices associated with this critical 

process, senior executives will be less likely to determine whether the 

investments they have selected are delivering mission value at the 

expected cost and risk.



Table 13 shows the rating for each key practice required to implement 

the critical process for portfolio performance oversight at the stage 

three level of maturity and summarizes the evidence that supports these 

ratings.



Table 13: Portfolio Performance Oversight:



Type of practice: Organizational commitment; Key practice: 1. The 

organization has written policies and procedures for monitoring and 

controlling portfolio performance.; Rating: Not executed.; Summary of 

evidence: The Postal Service does not have policies and procedures that 

address portfolio performance oversight..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided for monitoring and controlling the portfolio’s 

performance.; Rating: Executed.; Summary of evidence: The Postal 

Service has adequate resources for monitoring and controlling the 

portfolio’s performance. They include the CTO Investment Review Board, 

portfolio managers, and PTRS..



Key practice: Type of practice : 2. Annual CBSR expectations are agreed 

upon for each IT investment.; Rating: Type of practice : Not executed.; 

Summary of evidence: Type of practice : Cost, benefit, schedule, and 

risk expectations are established in projects’ DARs or business cases. 

While benefit and risk expectations may be revised through the annual 

budget process or a DAR modification, they are not reviewed and revised 

on an annual basis..



Key practice: Type of practice : 3. The IT investment board has access 

to up-to-date actual and expected CBSR data in a repository.; Rating: 

Type of practice : Executed.; Summary of evidence: Type of practice : 

The Postal Service has systems and reports that capture up-to-date 

actual and expected cost, benefit, schedule, and risk. They include 

PTRS, used by the CTO Investment Review Board to monitor program 

performance; the program narratives developed for budget formulation 

purposes; and the DARs that define CBSR expectations..



Type of practice: Activities; Key practice: 1. Each IT investment board 

monitors the performance of each investment in its portfolio by 

comparing actual CBSR data to expectations.; Rating: Executed.; Summary 

of evidence: The CTO Investment Review Board monitors each project’s 

performance by regularly comparing actual CBSR data to expectations. 

The Establish Team also does this through the program review it 

performs as part of the budget formulation activities..



Key practice: Type of practice : 2. Using established criteria, the IT 

investment board identifies its investments that have not met 

predetermined CBSR performance expectations.; Rating: Type of practice 

: Not executed.; Summary of evidence: Type of practice : Using 

established criteria, the CTO Investment Review Board identifies 

investments that have not met CBSR criteria. However, the Postal 

Service does not have a defined process for notifying the Establish 

Team that an investment is not on track..



Key practice: Type of practice : 3. The IT investment board and the 

project manager determine the root cause of the poor performance.; 

Rating: Type of practice : Executed.; Summary of evidence: Type of 

practice : The CTO Investment Review Board and project manager 

determine the root cause of poor project performance during project 

reviews..



Key practice: Type of practice : 4. The IT investment board and the 

project manager develop an action plan designed to remedy the 

identified cause(s) of poor performance.; Rating: Type of practice : 

Executed.; Summary of evidence: Type of practice : The CTO Investment 

Review Board and project manager develop an action plan designed to 

remedy the identified cause(s) of poor performance..



Key practice: Type of practice : 5. Corrective actions are initiated 

and outcomes are tracked.; Rating: Type of practice : Executed.; 

Summary of evidence: Type of practice : The CTO Investment Review Board 

tracks corrective actions until they are completed..



Source: GAO.



[End of section]



Chapter 4: Postal Service Has Yet to Implement Processes to Better Meet 

Strategic Goals:



Organizations that achieve the stage four level of maturity evaluate 

their IT investment processes and portfolios to identify opportunities 

for improvement. At the same time, these organizations are able to 

maintain the mature control and selection processes that are 

characteristic of stage three in the ITIM model. A key tool for 

accomplishing this critical process is the post-implementation review, 

in which outcomes of individual IT investments are compared to the 

organization’s plans and expectations. This review typically results in 

identifying lessons learned from the investment experience that are 

used by the organization to improve its understanding of the key 

variables in the investment’s business case. Analyzing a number of 

post-implementation reviews can also provide insights into the 

organization’s overall IT investment management process. This analysis 

is facilitated by classifying individual investments into logical 

categories and using the lessons learned to fine-tune associated 

processes, as well as aspects of the portfolio. In addition, at stage 

four maturity, organizations are capable of systematically planning for 

and implementing decisions to discontinue or deselect obsolete, high-

cost, and low-value IT investments and planning for successor 

investments that better support strategic goals and business needs.



Organizations acquire stage five capabilities when they create 

opportunities to shape strategic outcomes by learning from other 

organizations and continuously improving the manner in which they use 

IT to support and improve business outcomes. Thus, organizations at the 

stage five level of maturity benchmark their IT investment processes 

relative to other best-in-class organizations and conduct proactive 

monitoring for breakthrough information technologies that will allow 

them to significantly improve business performance. Table 14 shows the 

purpose of each critical process in stages four and five.



Table 14: Stages Four and Five--Critical Processes Required for 

Improving the Investment Process and Leveraging IT for Strategic 

Outcomes:



Critical process: Stage 4--Improving the Investment Process.



Critical process: Post-implementation reviews and feedback; 

Description: Stage 4--Improving the Investment Process: To compare 

outcomes of recently implemented investments to the expectations for 

them and develop a set of lessons learned from these reviews..



Critical process: Portfolio performance evaluation and improvement; 

Description: Stage 4--Improving the Investment Process: To assess and 

improve overall IT investment portfolio performance and the investment 

management process..



Critical process: Systems and technology succession management; 

Description: Stage 4--Improving the Investment Process: To ensure that 

IT investments in operation are periodically evaluated and determine 

whether they should be retained, modified, replaced, or otherwise 

disposed..



Critical process: Stage 5--Leveraging Information Technology for 

Strategic Outcomes.



Critical process: Investment process benchmarking; Description: Stage 

4--Improving the Investment Process: To identify and implement 

measurable improvements in the IT investment management processes so 

that the processes meet or exceed those used by best-in-class 

organizations..



Critical process: IT-driven strategic business change; Description: 

Stage 4--Improving the Investment Process: To dramatically improve 

business outcomes by strategically employing IT investments..



Source: GAO.



[End of table]



The Postal Service is executing five of the thirty-four key practices 

associated with the five critical processes in stages four and five. 

For example, it has policies and guidance for conducting post-

implementation reviews and provides training to individuals involved in 

these activities. The Postal Service also provides resources for 

identifying opportunities for IT-driven strategic business change. 

However, it does not regularly capture lessons learned from post-

implementation reviews, the performance of its portfolio, or 

benchmarking in order to improve its investment processes. In addition, 

it does not actively manage the succession of its IT systems or 

investments. Until it implements stage four and five critical 

processes, the Postal Service will not be positioned to effectively 

improve its IT investment management processes and successfully 

leverage IT to improve business outcomes.



Table 15 summarizes the status of the Postal Service’s critical 

processes for stages four and five and shows how many associated key 

practices it has executed.



Table 15: Summary of Results for Stages Four and Five Critical 

Processes and Key Practices:



Critical process: Stage 4--Improving the Investment Process.



Critical process: Post-implementation reviews & feedback; Key practices 

executed: Stage 4--Improving the Investment Process: 3; Total required 

by critical process: Stage 4--Improving the Investment Process: 6; 

Percentage of key practices executed: Stage 4--Improving the Investment 

Process: 50%.



Critical process: Portfolio performance evaluation & improvement; Key 

practices executed: Stage 4--Improving the Investment Process: 0; Total 

required by critical process: Stage 4--Improving the Investment 

Process: 6; Percentage of key practices executed: Stage 4--Improving 

the Investment Process: 0.



Critical process: Systems & technology succession management; Key 

practices executed: Stage 4--Improving the Investment Process: 0; Total 

required by critical process: Stage 4--Improving the Investment 

Process: 9; Percentage of key practices executed: Stage 4--Improving 

the Investment Process: 0.



Critical process: Totals; Key practices executed: Stage 4--Improving 

the Investment Process: 3; Total required by critical process: Stage 4-

-Improving the Investment Process: 21; Percentage of key practices 

executed: Stage 4--Improving the Investment Process: 14%.



Critical process: Stage 5--Leveraging Information Technology for 

Strategic Outcomes.



Critical process: Investment process benchmarking; Key practices 

executed: Stage 4--Improving the Investment Process: 0; Total required 

by critical process: Stage 4--Improving the Investment Process: 7; 

Percentage of key practices executed: Stage 4--Improving the Investment 

Process: 0.



Critical process: IT-driven strategic business change; Key practices 

executed: Stage 4--Improving the Investment Process: 2; Total required 

by critical process: Stage 4--Improving the Investment Process: 6; 

Percentage of key practices executed: Stage 4--Improving the Investment 

Process: 33.



Critical process: Totals; Key practices executed: Stage 4--Improving 

the Investment Process: 2; Total required by critical process: Stage 4-

-Improving the Investment Process: 13; Percentage of key practices 

executed: Stage 4--Improving the Investment Process: 15%.



Source: GAO.



[End of table]



The following discussion provides information on steps the Postal 

Service has taken to implement each of the critical processes.



Policies and Procedures Are Defined, but Post-Implementation Review 

Process Is Not Institutionalized:



Post-implementation reviews are performed (1) to examine differences 

between estimated and actual investment costs and benefits and possible 

ramifications for unplanned funding needs in the future and (2) to 

extract lessons learned about the investment selection and control 

processes that can be used as the basis for management improvements. 

Investments that have completed development and those that were 

terminated before completion should be reviewed promptly to identify 

potential management and process improvements. According to ITIM, this 

critical process involves identifying the projects to be reviewed; 

initiating reviews and developing policies and procedures for 

conducting the reviews; and ensuring that quantitative and qualitative 

data are collected, evaluated for reliability, and analyzed during the 

course of the reviews.



The Postal Service has executed three of the six key practices required 

to implement the critical process for post-implementation reviews. 

First, the CTO organization and Finance Department have each developed 

policies and procedures for performing post-implementation reviews. 

These include the CTO organization’s Program Management Process 

Guidelines and the Finance Department’s National Cost Study Process. 

Second, according to Postal Service officials, the Service has adequate 

resources to perform review activities. Third, Postal Service staff are 

trained in conducting post-implementation reviews.



The Postal Service, however, has several weaknesses in this critical 

process. First, no investment board has been assigned responsibility 

for (1) identifying projects for which post-implementation reviews are 

to be conducted and (2) ensuring that post-implementation reviews are 

initiated. Second, the Postal Service has no institutionalized process 

for routinely (1) identifying projects for which post-implementation 

reviews are to be conducted, (2) collecting quantitative and 

qualitative data while performing post-implementation reviews, and 

(3) developing lessons learned and improvement recommendations about 

the investment process and capturing them in a written product or 

knowledge base. This is evidenced by the fact that, while the Finance 

Department’s Program Performance Group is responsible for conducting 

post-implementation cost studies, only three of them have been 

performed since 1990. Until the Postal Service implements an 

institutionalized process for routinely performing post-implementation 

reviews, senior executives will lack key information needed to improve 

the performance of the IT investment portfolio as well as the 

investment management process.



Table 16 shows the rating for each key practice required to implement 

the critical process for post-implementation reviews at the stage four 

level of maturity and summarizes the evidence that supports these 

ratings.



Table 16: Post-Implementation Reviews and Feedback:



Type of practice: Organizational commitment; Key practice: 1. The 

organization has written policies and procedures for conducting post-

implementation reviews.; Rating: Executed.; Summary of evidence: The 

CTO organization and Finance Department have each developed policies 

and procedures for performing post-implementation reviews. The Postal 

Service has developed policies and procedures for performing post-

implementation reviews. These include the Software Process Standards 

and Procedures, Integrated Solutions Methodology (ISM), Project 

Management Process Guidelines, and the National Cost Study Process..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided for conducting post-implementation reviews.; Rating: 

Executed.; Summary of evidence: Postal Service officials stated that 

adequate resources are available for conducting post-implementation 

reviews..



Key practice: Type of practice : 2. Each IT investment board ensures 

that individuals conducting post-implementation reviews are trained.; 

Rating: Type of practice : Executed.; Summary of evidence: Type of 

practice : Postal Service staff have received training in conducting 

post-implementation reviews..



Type of practice: Activities; Key practice: 1. An IT investment board 

identifies the projects for which a post-implementation review will be 

conducted and a post-implementation review is initiated for each 

designated investment.; Rating: Not executed.; Summary of evidence: The 

Postal Service has not assigned any investment board with 

responsibility for identifying the projects for which a post-

implementation review will be conducted and ensuring that post-

implementation reviews are initiated..



Key practice: Type of practice : 2. Quantitative and qualitative 

investment data are collected, evaluated for reliability, and analyzed 

during the post-implementation reviews.; Rating: Type of practice : Not 

executed.; Summary of evidence: Type of practice : The Postal Service 

does not have an institutionalized process for routinely performing 

post-implementation reviews. Only three post-implementation cost-

studies have been performed since 1990..



Key practice: Type of practice : 3. Lessons learned and improvement 

recommendations about the investment process and the individual 

investment are developed, captured in a written product or knowledge 

base, and distributed to decision makers.; Rating: Type of practice : 

Not executed.; Summary of evidence: Type of practice : The Postal 

Service does not have an institutionalized process to develop and 

capture lessons learned and improvement recommendations about the 

investment process and individual investments..



Source: GAO.



[End of table]



IT Investments Are Not Evaluated from the Perspective of Portfolio 

Performance:



Stage four evaluations of portfolio performance enable organizations to 

determine what contribution their collected pools of IT investments are 

making to mission goals and needs. Evaluations of this sort are similar 

to post-implementation reviews involving individual projects, but 

different in that they apply to entire IT investment portfolios. This 

critical process seeks to determine how well IT investments are helping 

to achieve the strategic needs of the enterprise, satisfying the needs 

of individual units and users, and improving business performance 

through IT. Performance information for an organization’s entire 

portfolio of investments has to be compiled and analyzed and trends 

examined. Developing baseline performance data is critical to making 

this a meaningful exercise. According to ITIM, the process of 

addressing problems and opportunities for improving the investment 

process and the investment portfolio usually involves developing 

written policies and procedures for the investment management process, 

creating recommendations for the IT investment board, documenting the 

decision criteria used to measure portfolio performance, deciding 

whether or not to implement each recommendation, and tracking the 

progress made. Resources required for this critical process typically 

include staff support, methods and tools to aid the teams conducting 

post-implementation reviews, and current and historical portfolio data.



To advance to the stage four level of maturity, an organization must 

first ensure that all of the prerequisites, commitments, and activities 

that are characteristic of levels two and three have been put into 

place. The next step is to develop written policies and procedures for 

evaluating and improving its IT investment portfolio that include 

defining requirements for measuring performance data. Cost, benefit, 

schedule, and risk must all be fully considered to enable an 

organization to construct a picture of the overall performance of its 

IT investment portfolio.



The Postal Service is not executing any of the six key practices for 

this critical process. First, while the Establish Team reviews existing 

and proposed IT investments each year as a part of the organization’s 

budget formulation process, no evaluations are being done that are 

designed to identify opportunities for improving portfolio performance. 

Also lacking are written policies and procedures that define the 

organization’s key measures and the methods used to assess portfolio 

performance, evaluation methods, reporting requirements, and other 

applicable policies and procedures. Because the Postal Service has not 

collected data for this critical process, including baseline 

performance information on its IT portfolio, it is more difficult to 

perform evaluations that could result in recommendations for improving 

its process for selecting a portfolio.



Table 17 shows the rating for each key practice required to implement 

the critical process for evaluating and improving the performance of 

the portfolio at the stage four level of maturity and summarizes the 

evidence that supports these ratings.



Table 17: Portfolio Performance Evaluation and Improvement:



Type of practice: Organizational commitment; Key practice: 1. The 

organization has written policies and procedures for evaluating and 

improving the performance of its portfolio(s).; Rating: Not executed.; 

Summary of evidence: The Postal Service has not developed enterprise-

level written policies and procedures for evaluating and improving the 

performance of its IT investment portfolios..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided for conducting the portfolio performance evaluation and 

improvement process.; Rating: Not executed.; Summary of evidence: The 

Postal Service does not perform enterprise-level evaluations of 

portfolio performance..



Key practice: Type of practice : 2. Board members who are responsible 

for evaluating and improving the investment processes and investment 

portfolio(s) exhibit core competencies in portfolio performance 

evaluation and improvement.; Rating: Type of practice : Not executed.; 

Summary of evidence: Type of practice : The Finance Department does not 

perform enterprise-level activities to evaluate and improve portfolio 

performance..



Type of practice: Activities; Key practice: 1. Comprehensive IT 

portfolio performance measurement data are defined and collected using 

agreed upon methods.; Rating: Not executed.; Summary of evidence: The 

Postal Service has not developed comprehensive definitions of 

measurement data for IT portfolio performance or methods for collecting 

data of this sort. Moreover, data are not collected on actual 

qualitative benefits, and the risk data captured in Postal Service 

information repositories are incomplete..



Key practice: Type of practice : 2. Aggregate performance data and 

trends are analyzed.; Rating: Type of practice : Not executed.; Summary 

of evidence: Type of practice : The Postal Service does not collect the 

aggregate IT portfolio performance data required to perform analyses of 

this sort..



Key practice: Type of practice : 3. Investment process and portfolio 

improvement recommendations are developed and implemented.; Rating: 

Type of practice : Not executed.; Summary of evidence: Type of practice 

: The Postal Service has not performed the analyses required to serve 

as the basis for improving the investment and portfolio selection 

processes..



Source: GAO.



[End of table]



Process for Managing Succession of Systems and Technology 

Is Not Established:



Managing the succession of systems and technology entails periodically 

evaluating IT investments to determine whether they should be retained, 

modified, replaced, or otherwise disposed of. According to ITIM, system 

and technology succession management includes (1) defining policies and 

procedures for managing the IT succession process, (2) assigning 

responsibility for the succession management process, (3) developing 

criteria for identifying IT investments that may meet succession 

status, and (4) periodically analyzing IT investments to determine 

whether they are ready for succession. This critical process enables 

the organization to recognize low-value or high-cost IT investments and 

augments the routine replacement of systems at the end of their useful 

lives. This critical process supports the development of a forward-

looking, solution-oriented view of IT investments that anticipates 

future resource requirements and allows the organization to plan 

appropriately.



The Postal Service has not performed any of the nine key practices 

required to implement this critical process. For example, while the 

Postal Service’s project management guidelines define procedures for 

retiring investments, they do not describe how to review systems 

regularly to identify candidates for retirement. According to officials 

from the CTO organization, decisions on succession management are 

usually made between business unit managers and CTO office staff (e.g., 

portfolio managers), but no individual or group has been assigned 

responsibility for managing the succession process from an enterprise 

perspective, which would allow the Postal Service to better anticipate 

future resource requirements. Finally, the Postal Service has neither 

defined the criteria for identifying investments that may meet 

succession status nor taken steps to regularly analyze IT investments 

for possible succession.



According to CTO organization officials, the Postal Service has retired 

or replaced roughly 250 systems since 1998. However, this was not done 

within the structure of an institutionalized succession management 

process. Postal Service officials have stated that IT investments are 

reviewed, for example, during the annual budget formulation process to 

analyze them for possible succession. However, without an 

institutionalized process for succession management, the Postal Service 

may not be able to identify those IT investments that are eligible for 

succession in enough time to minimize the effect of the transition on 

their successors.



Table 18 shows the rating for each key practice required to implement 

the critical process for managing the succession of systems and 

technology at the stage four level of maturity and summarizes the 

evidence that supports these ratings.



Table 18: Systems and Technology Succession Management:



Type of practice: Organizational commitments; Key practice: 1. The 

organization has written policies and procedures for managing the IT 

succession process.; Rating: Not executed.; Summary of evidence: While 

the Postal Service has procedures in place for system retirements, it 

lacks written policies and procedures for managing the succession of 

the organization’s IT investments..



Key practice: Type of practice : 2. An official is designated to manage 

the IT succession process.; Rating: Type of practice : Not executed.; 

Summary of evidence: Type of practice : According to officials in the 

Offices of the CFO and CTO, the Postal Service has not designated 

responsibility for managing the IT succession process..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided for conducting IT succession activities.; Rating: Not 

executed.; Summary of evidence: The Postal Service has no formal 

process for conducting IT succession activities..



Key practice: Type of practice : 2. Investment board members exhibit 

core competencies in IT succession decisional activities.; Rating: Type 

of practice : Not executed.; Summary of evidence: Type of practice : 

According to Postal Service officials, decisions on the management of 

systems and technology succession are made between business unit 

managers and CTO organization staff, not by members of an investment 

board..



Key practice: Type of practice : 3. Information from the IT project and 

system inventory is used by the IT investment board.; Rating: Type of 

practice : Not executed.; Summary of evidence: Type of practice : The 

Postal Service’s enterprise-level investment boards do not use 

information from the IT project and system inventory for succession 

management..



Type of practice: Activities; Key practice: 1. The IT investment board 

develops criteria for identifying IT investments that may meet 

succession status.; Rating: Not executed.; Summary of evidence: The 

Postal Service does not have criteria for identifying IT investments 

that may meet succession status..



Key practice: Type of practice : 2. IT investments are periodically 

analyzed for succession and appropriate investments are identified as 

succession candidates.; Rating: Type of practice : Not executed.; 

Summary of evidence: Type of practice : The Postal Service does not 

have a process in place for periodically analyzing IT investments to 

see if they are eligible for succession. CTO organization officials 

have told us that the Service instead uses the annual budgeting process 

and critical events such as the recent Year 2000 computing challenge as 

opportunities to analyze investments for succession..



Key practice: Type of practice : 3. The interdependency of each 

investment with other investments in the IT portfolio is analyzed.; 

Rating: Type of practice : Not executed.; Summary of evidence: Type of 

practice : While the Establish Team performs trade-off analyses as a 

part of the organization’s annual budget formulation process, including 

some consideration of the interdependencies of its IT programs, 

projects, and systems, the interdependency of each investment with 

other investments in the IT portfolio is not analyzed in the context of 

systems and technology succession management..



Key practice: Type of practice : 4. The IT investment board makes a 

succession decision for each candidate IT investment.; Rating: Type of 

practice : Not executed.; Summary of evidence: Type of practice : The 

Postal Service does not have a formal process for identifying 

candidates for succession. In addition, no investment board has 

responsibility for making decisions on succession management..



Source: GAO.



[End of table]



Activities for Benchmarking the Investment Process Are Not 

Institutionalized:



In stages two through four, organizations ensure that sound investments 

are selected, controlled, and evaluated within the context of the IT 

investment management process and the enterprisewide portfolio. In the 

stage five level of maturity, a shift in orientation occurs as 

organizations evolve toward using information on leading technologies 

to identify opportunities for business change and to implement changes 

in their overall business process. Benchmarking the investment process 

allows organizations to identify opportunities for improvement and to 

implement measurable improvements in their IT investment management 

processes so that these processes meet or exceed those used by best-in-

class organizations. Improvements can include using innovative 

investment oversight tools and techniques or improving the feedback 

mechanisms for lessons learned. According to ITIM, investment process 

benchmarking includes (1) defining policies and procedures for using 

benchmarking to improve the IT investment management process, 

(2) collecting baseline data on the organization’s current IT 

investment management process, (3) identifying and benchmarking 

external comparable best-in-class processes for IT investment 

management, and (4)  improving the organization’s investment management 

processes.



The Postal Service has not fully executed any of the seven key 

practices required to implement this critical process. While there have 

been some efforts to identify best practices from best-in-class 

organizations and incorporate these practices into the Postal Service’s 

IT investment management processes (such as the CTO organization’s use 

of lessons learned in benchmarking to develop the BCS), the Postal 

Service has not defined policies and procedures for improving the IT 

investment management process using benchmarking. It also does not have 

any institutionalized processes to routinely (1) collect baseline data 

on the organization’s current IT investment management process, 

(2) identify and benchmark external best-in-class processes for IT 

investment management in comparable organizations, or (3) actually 

improve the organization’s investment management processes. Without 

these processes, the Postal Service is less likely to learn from best-

in-class organizations, which will hinder any concerted effort to 

improve its IT investment management processes.



Table 19 shows the rating for each key practice required to implement 

the critical process for investment process benchmarking at the stage 

five level of maturity and summarizes the evidence that supports these 

ratings.



Table 19: Investment Process Benchmarking:



Type of practice: Organizational commitments; Key practice: 1. The 

organization has written policies and procedures for improving its IT 

investment management process using benchmarking.; Rating: Not 

executed.; Summary of evidence: The Postal Service has not developed 

written policies and procedures for improving its IT investment process 

through the use of benchmarking techniques..



Key practice: Type of practice : 2. A senior official is designated to 

manage the benchmarking activities.; Rating: Type of practice : Not 

executed.; Summary of evidence: Type of practice : The Postal Service 

has not designated a senior official to manage benchmarking 

activities..



Type of practice: Prerequisites; Key practice: 1. Adequate resources 

are provided for conducting process benchmarking activities.; Rating: 

Not executed.; Summary of evidence: Investment process benchmarking is 

not an institutionalized process at the Postal Service..



Key practice: Type of practice : 2. Organizational managers and staff 

with responsibilities in this area are trained in process benchmarking 

techniques or are experienced in using these techniques.; Rating: Type 

of practice : Not executed.; Summary of evidence: Type of practice : 

The Postal Service has not designated responsibility for performing 

benchmarking activities and has not provided staff with training or 

experience in this process..



Type of practice: Activities; Key practice: 1. Baseline data are 

collected for the organization’s IT investment management processes.; 

Rating: Not executed.; Summary of evidence: The Postal Service has not 

taken steps to measure components of its investment management 

processes to provide a baseline against which expected and actual 

process changes may be measured..



Key practice: Type of practice : 2. External comparable best-in-class 

IT investment management processes are identified and benchmarked.; 

Rating: Type of practice : Not executed.; Summary of evidence: Type of 

practice : External comparable best-in-class processes for IT 

investment management were identified and benchmarked for some 

processes, including the CTO organization’s business case development 

process. However, the Postal Service does not have an institutionalized 

process for benchmarking the investment management process..



Key practice: Type of practice : 3. Improvements are made to the 

organization’s investment management processes.; Rating: Type of 

practice : Not executed.; Summary of evidence: Type of practice : 

Improvements were made to some processes as a result of benchmarking 

(e.g., the CTO organization’s investment management process). However, 

the Postal Service does not have an institutionalized process for 

benchmarking the investment management process..



Source: GAO.



[End of table]



Potential Impacts of Leading Technologies Are Not Routinely Considered 

in Strategic Planning Efforts:



Information technologies can provide opportunities for an organization 

to move dramatically in new directions to meet its goals. Thus, once an 

organization finds it can competently manage its enterprisewide 

portfolio of investments, it should actively seek out opportunities to 

use alternative technologies.



According to ITIM, stage five organizations provide adequate resources 

for conducting IT-driven activities that can result in strategic 

business change. These may include developing an advanced IT 

laboratory, test center, or library; conducting technical research; 

employing internal staff and external experts or reviewers; and 

obtaining supporting tools. Stage five organizations also develop 

applicable written policies and procedures and designate an official to 

oversee their implementation. The central focus of these activities is 

to follow technological events and to identify and evaluate 

technologies that appear to offer strategic business-changing 

capabilities. Once a conclusion has been reached that specific 

technology offers the organization significant opportunities, senior 

managers plan for and implement changes to the organization’s business 

processes. Organizations at a stage five level of maturity may create 

an advanced technology group, a cross-departmental group of experts, or 

technology centers of excellence. Finally, to strengthen management on 

these types of activities, mature organizations designate 

responsibility for this key practice to a single senior-level manager.



The Postal Service has executed two of the six key practices required 

to implement this critical process by designating responsibility to 

specific organizational units to support activities aimed at IT-driven 

strategic business change and by providing a range of related 

resources. However, steps have yet to be taken to execute the remaining 

key practices, including creating and maintaining a knowledge base of 

state-of-the-technology IT products and processes; actively 

identifying technologies with business-changing capabilities; and 

planning and implementing strategic changes to business processes on 

the basis of the capabilities of these technologies.



The Postal Service has assigned responsibilities to several units that 

could leverage IT to implement strategic business change, including its 

Transformation Plan Office, Office for Strategic Planning, and the CTO 

organization. Also, within the CTO organization, the Information 

Technology unit has established the positions of Enterprise Architect 

and Manager of Technology Standards. To ensure standardization, the 

Postal Service has also developed the IT Infrastructure Toolkit process 

and established the Enterprise Architecture Councils and the Management 

Steering Committee.



The Postal Service is also providing a range of resources that could be 

used to support the critical process of IT-driven strategic business 

change. The Service is funding a testing laboratory and has established 

Integrated Business Solutions Systems Centers and developed an IT 

Toolkit system and associated processes. The IT Toolkit system serves 

as a repository of information on technologies and application systems 

that have been approved for use within the Postal Service.



In addition, the Postal Service’s CTO organization is taking several 

steps to initiate changes to the business process based on currently 

available state-of-the-practice IT approaches. First, the CTO has 

developed a plan for a corporate database called the Corporate Data 

Mart, which could serve as a repository of data from 35 separate Postal 

Service systems. According to Postal Service officials, the CTO 

organization is working with each functional unit to determine which 

legacy systems will transition to the data mart and plans to 

incorporate future systems in the data mart. This transition may 

eliminate costly legacy systems or avoid the investment cost to replace 

them. The CTO organization is sponsoring the Advanced Computing 

Environment initiative to transition to a less costly distributed 

computing environment. According to officials, under this approach, 

activities will be standardized, centralized, and reengineered such 

that the costs per Postal Service user will be reduced.



These accomplishments can be helpful to the Postal Service, 

particularly in light of its financial difficulties and the need to 

identify new, more cost-effective ways of accomplishing its mission. By 

continuing to foster a more coordinated approach to using IT 

investments to achieve its business goals, using resources from across 

the organization, and disseminating information that is gathered more 

broadly, the Postal Service can more effectively capitalize on 

opportunities uncovered by efforts already underway.



Table 20 shows the rating for each key practice required to implement 

the critical process for IT-driven strategic business change at the 

stage five level of maturity and summarizes the evidence that supports 

these ratings.



Table 20: IT-Driven Strategic Business Change:



Type of practice: Organizational commitments; Key practice: 1. The 

organization has written policies and procedures for conducting IT-

driven strategic business change activities.; Rating: Not executed.; 

Summary of evidence: The Postal Service does not have written policies 

and procedures for conducting IT-driven strategic business change 

activities..



Key practice: Type of practice : 2. An official is designated to manage 

the activities within this critical process.; Rating: Type of practice 

: Executed.; Summary of evidence: Type of practice : Responsibility for 

ensuring IT-driven strategic business change is distributed across 

several Postal Service units, including the Transformation Plan Office, 

Office for Strategic Planning, and the CTO organization..



Type of practice: Prerequisite; Key practice: 1. Adequate resources are 

provided for conducting IT-driven strategic business change 

activities.; Rating: Executed.; Summary of evidence: The Postal Service 

is providing a range of resources related to identifying opportunities 

for IT-driven strategic business change. These include funding a 

testing laboratory, acquiring expertise from consulting firms, 

establishing an Enterprise Architect and Integrated Business Solutions 

Systems Centers, and developing an Information Technology Toolkit 

system..



Type of practice: Activities; Key practice: 1. The organization creates 

and maintains a knowledge base of state-of-the-technology IT products 

and processes.; Rating: Not executed.; Summary of evidence: The Postal 

Service has not created a knowledge base of state-of-the-technology IT 

products and processes. However, the CTO organization has created a 

database of approved IT products called the IT Toolkit..



Key practice: Type of practice : 2. Information technologies with 

strategic business-changing capabilities are identified and 

evaluated.; Rating: Type of practice : Not executed.; Summary of 

evidence: Type of practice : The Postal Service does not have an 

institutionalized process for conducting studies of emerging trends, 

events, and technologies with the potential to strategically change its 

business processes..



Key practice: Type of practice : 3. Strategic changes to the business 

processes are planned and implemented based on the capabilities of 

identified information technologies.; Rating: Type of practice : Not 

executed.; Summary of evidence: Type of practice : The Postal Service 

does not have a process in place to implement business processes based 

on the capabilities of leading-edge information technologies it has 

identified. However, decisions on changes to business processes are 

currently being made in order to incorporate state-of-the-practice IT 

approaches and technologies such as desktop outsourcing, data 

warehousing, and data center consolidation..



Source: GAO.



[End of section]



Chapter 5 Conclusions, Recommendations, and Agency Comments:



Conclusions:



Information technology provides key core operational capabilities that 

the Postal Service must rely on to achieve its mission. Only by 

effectively and efficiently managing its IT resources can the Postal 

Service gain opportunities to further leverage its IT investments and 

make better allocation decisions among many investment alternatives.



The Postal Service has in place most of the foundational practices 

required to ensure that IT investments are being selected and monitored 

to support its overall objectives. A comprehensive process guide for 

investment management and written policies and procedures for 

management oversight of investments will allow the Postal Service to 

better coordinate its IT investment activities and ensure that they are 

performed consistently. Once the Service has fully implemented all the 

critical processes for stage two, it will have the controls necessary 

to allow it to effectively manage its IT investments.



The Postal Service shows mixed progress in managing its IT investments 

as a portfolio. The Service performs many portfolio development and 

oversight activities. However it lacks policies and procedures for 

managing its portfolio. It has not defined criteria that allow it to 

effectively analyze, prioritize, and select its investments from a 

portfolio perspective. In addition, the Postal Service’s reporting of 

performance data is largely limited to capital projects, which are a 

smaller portion of its portfolio than are operating expenses. Until the 

Service fully implements critical processes associated with managing 

investments as a complete portfolio, it will not have ready access to 

the data it needs to make informed decisions about competing 

investments.



The ability of the Postal Service to continue to improve its investment 

management process is contingent on its ability to learn from its 

current practices and investments and from other organizations. The 

Service currently has no institutionalized processes to learn from its 

own experience and from other organizations. Such processes can 

contribute to the long-term success of the Postal Service’s IT 

portfolio and support its mission.



Recommendations for Executive Action:



To strengthen the Postal Service’s capabilities for investment 

management and address the weaknesses discussed in this report, we 

recommend that the Postmaster General 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;



* 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;



* 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; and:



* 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.



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 for review, and that 

post-implementation reviews are conducted on all appropriate systems;



* establish a process for evaluating and improving portfolio 

performance;



* establish a process for managing the succession of systems and 

technology;



* establish a process to benchmark the investment processes of leading 

organizations to identify opportunities for improvement; and:



* establish a process to employ IT investments strategically to improve 

business outcomes.



Agency Comments and Our Evaluation:



The Postal Service’s Chief Financial Officer provided written comments 

on a draft of this report (reprinted in app. III). In these comments, 

the Postal Service stated that the report offered an opportunity to 

consider changes and improvements in its IT investment management 

processes. The Service added that it would carefully evaluate each of 

the report’s recommendations to determine the necessary actions for 

adopting and integrating key practices outlined in the GAO ITIM model 

that are appropriate for the Postal Service.



The Postal Service also identified key points where it stated that it 

differs from GAO’s IT investment management framework. The Postal 

Service also explained that it uses a hierarchy of delegations to 

select and oversee its investments, from the Board of Governors through 

the lowest level of management, to ensure that senior management can 

concentrate on strategic issues and the most significant projects. We 

did observe this structured approach to the selection and oversight 

process and have recognized it in our report.



In succession planning, the Postal Service stated that it uses an 

institutionalized portfolio approach to address the succession of its 

IT hardware, software, and systems. According to the Postal Service, 

this approach enables senior management to determine strategically 

driven solutions based on priorities, lessons learned, available 

technology, best practices, affordability, risk assessments, and 

business needs. Our guidance suggests that, while each of these aspects 

may be appropriate as part of a succession management process, 

effective succession management entails regularly reviewing the 

performance of existing systems against established criteria. Such a 

process allows an organization to identify systems that should be 

retained, modified, replaced, or otherwise disposed of in a timely 

manner. However, as we stated in our report, the Postal Service does 

not have such a process.



The Postal Service provided comments pertaining to post-implementation 

reviews that describe cost studies, the budget process, and the 

activities of the Office of Inspector General (OIG) as satisfying this 

critical process. We disagree with the Postal Service in this matter. 

While guidance for cost studies does exist, the Service provided 

evidence of only three post-implementation cost studies having been 

conducted since 1990. The Postal Service’s budget process does not 

satisfactorily address this critical process. Specifically, the budget 

process does not capture lessons learned and disseminate them to other 

projects and work processes in order to improve them, and this is a 

major objective of post-implementation reviews. Finally, while OIG does 

conduct evaluations from which lessons learned may be drawn and used to 

improve other projects and work processes, OIG evaluations are not part 

of the regular systems life cycle.



[End of section]



Appendixes:



Appendix I: Postal Service Projects with Major IT Components in 

Development or Deployment:



Table 21: Postal Service IT Projects in Development or Deployment:



Project name: Associate Office Infrastructure Phase II Deployment; 

Approval 

date: 11/1997; Sponsoring

unit: IT; Approving

board: BOG; Approved

capital costs

in thousands: $207,416.



Project name: Commitment Management--Integrated Operations Management 

Pilot; Approval 

date: 09/1998; Sponsoring

unit: EN/IP; Approving

board: BOG; Approved

capital costs

in thousands: 33,921.



Project name: CONFIRM; Approval 

date: 10/2000; Sponsoring

unit: MK; Approving

board: PMG; Approved

capital costs

in thousands: 9,253.



Project name: Corporate Call Phase III Deployment; Approval 

date: 06/1998; Sponsoring

unit: MK; Approving

board: BOG; Approved

capital costs

in thousands: 255,761.



Project name: Delivery Operations Information System Deployment; 

Approval 

date: 08/2000; Sponsoring

unit: OP/IP; Approving

board: BOG; Approved

capital costs

in thousands: 127,620.



Project name: Delivery Operations Information System Research and 

Development; Approval 

date: 06/1998; Sponsoring

unit: OP/IP; Approving

board: BOG; Approved

capital costs

in thousands: 39,987.



Project name: e-Commerce IT & Virtual Store Modification; Approval 

date: 02/2000; Sponsoring

unit: IP/MK; Approving

board: PMG; Approved

capital costs

in thousands: 9,705.



Project name: Enhanced Security Capability Program Implementation; 

Approval 

date: 11/2000; Sponsoring

unit: IT; Approving

board: BOG; Approved

capital costs

in thousands: 43,343.



Project name: Field Retail Operations Group; Approval 

date: 01/1999; Sponsoring

unit: FI; Approving

board: COO; Approved

capital costs

in thousands: 3,444.



Project name: Forwarding Control Systems; Approval 

date: 08/1998; Sponsoring

unit: EN; Approving

board: BOG; Approved

capital costs

in thousands: 33,874.



Project name: Identification Code Sort & CM-IOM; Approval 

date: 09/1998; Sponsoring

unit: EN; Approving

board: BOG; Approved

capital costs

in thousands: 156,500.



Project name: Integrated Data System--Upgrade; Approval 

date: 01/2001; Sponsoring

unit: EN; Approving

board: BOG; Approved

capital costs

in thousands: 33,787.



Project name: Letter Recognition Enhancement Program; Approval 

date: 05/2001; Sponsoring

unit: EN; Approving

board: BOG; Approved

capital costs

in thousands: 222,403.



Project name: Mail Evaluation, Readability & Lookup Instrument--Phase 

II; Approval 

date: 10/2001; Sponsoring

unit: EN/MK; Approving

board: BOG; Approved

capital costs

in thousands: 141,118.



Project name: Mail Evaluation, Readability & Lookup Instrument--Phase 

II Research and Development; Approval 

date: 07/2000; Sponsoring

unit: EN/MK; Approving

board: BOG; Approved

capital costs

in thousands: 45,400.



Project name: Mail Item Retrieval Systems Modernization--Phase II 

Research and Development; Approval 

date: 08/2000; Sponsoring

unit: EN; Approving

board: COO; Approved

capital costs

in thousands: 1,713.



Project name: Net Post--Mailing On-Line System; Approval 

date: 11/1999; Sponsoring

unit: MK; Approving

board: BOG; Approved

capital costs

in thousands: 18,638.



Project name: Organization Structure, Staffing & Management System; 

Approval 

date: 07/2001; Sponsoring

unit: FI/HR; Approving

board: PMG; Approved

capital costs

in thousands: 9,000.



Project name: PARS; Approval 

date: 04/2002; Sponsoring

unit: EN/OP; Approving

board: BOG; Approved

capital costs

in thousands: 307,640.



Project name: Point of Service ONE--Stage IIB Deployment; Approval 

date: 04/2000; Sponsoring

unit: MK; Approving

board: BOG; Approved

capital costs

in thousands: 403,900.



Project name: Postal Field Computing Infrastructure; Approval 

date: 01/2001; Sponsoring

unit: IT; Approving

board: BOG; Approved

capital costs

in thousands: 41,562.



Project name: PostalOne!--Phase I; Approval 

date: 11/1999; Sponsoring

unit: MK; Approving

board: BOG; Approved

capital costs

in thousands: 10,085.



Project name: PostalOne!--Phase II; Approval 

date: 05/2002; Sponsoring

unit: MK; Approving

board: BOG; Approved

capital costs

in thousands: 54,148.



Project name: Recognition Improvement Program; Approval 

date: 06/2000; Sponsoring

unit: EN; Approving

board: BOG; Approved

capital costs

in thousands: 131,150.



Project name: Self-Service Vending Machines Acquisition Post-

Deployment; Approval 

date: 08/1998; Sponsoring

unit: MK; Approving

board: BOG; Approved

capital costs

in thousands: 29,938.



Project name: Shared Services Accounting; Approval 

date: 04/2002; Sponsoring

unit: FI; Approving

board: PMG/COO; Approved

capital costs

in thousands: 9,481.



Project name: Standard Accounting for Retail--Retail Accounting; 

Approval 

date: 01/2001; Sponsoring

unit: FI/IP; Approving

board: BOG; Approved

capital costs

in thousands: 34,357.



Project name: Standard Accounting for Retail--General Ledger; Approval 

date: 02/2000; Sponsoring

unit: FI/IP; Approving

board: COO; Approved

capital costs

in thousands: 5,600.



Project name: Surface-Air Management System Deployment; Approval 

date: 07/2000; Sponsoring

unit: OP; Approving

board: BOG; Approved

capital costs

in thousands: 38,385.



Project name: Surface-Air Management System--Alaska; Approval 

date: 05/2001; Sponsoring

unit: OP; Approving

board: COO; Approved

capital costs

in thousands: 7,419.



Project name: Surface-Air Support System; Approval 

date: 06/2001; Sponsoring

unit: OP; Approving

board: BOG; Approved

capital costs

in thousands: 15,516.



Project name: Time & Attendance Collection System--National; Approval 

date: 01/2001; Sponsoring

unit: FI/IP; Approving

board: BOG; Approved

capital costs

in thousands: 46,673.



Project name: Time & Attendance Collection System--Pilot; Approval 

date: 08/2000; Sponsoring

unit: FI/IP; Approving

board: COO; Approved

capital costs

in thousands: 4,149.



Key:



BOG Board of Governors		IP Information Platform:



COO Chief Operating Officer  	IT Information Technology:	 	 	 			 	 	 		
Information Technology:



EN Engineering	               	MK Marketing:



GL  General Ledger     	 	OP Operations:



FI  Finance	       	 	PMG Postmaster General:



HR Human Resources :



Source: U.S. Postal Service documents.



[End of section]



Appendix II: Postal Service IT Projects That GAO Reviewed:



The ITIM assessment guidance recommends that case studies be conducted 

of selected IT investment projects to validate organization-level 

evidence and better understand the organization’s IT investment 

management process.[Footnote 19] Accordingly, we selected four projects 

for review from the list shown in appendix I to provide information on 

IT investments in a cross-section of sponsoring Postal Service 

organizations. To conduct our review, we interviewed managers 

responsible for the IT investments and members of the project 

management teams to obtain information on implementation of ITIM key 

practices. Table 22 summarizes key information on these investments.



Table 22: Postal Service IT Projects Selected by GAO for Review:



Title: Enhanced Security Capability Program

(ESC); Sponsoring unit: CTO/IT; Approved capital cost (in millions): 

$43.3; [Empty]; Investment purpose: To secure Postal Service mail 

processing, business operations, and electronic communications by 

providing enhanced security capabilities to networks, systems, and 

applications.; Date approved & approving entity: November 2000; Board 

of Governors.



Title: Organization, Structure Staffing & Management System (OSS&M); 

Sponsoring unit: CFO and Human Resources; Approved capital cost (in 

millions): $9.0; [Empty]; Investment purpose: To provide a foundation 

for the Postal Service’s new human resources and payroll systems.; Date 

approved & approving entity: July 2001; Postmaster General.



Title: Point of Service ONE (POS ONE)--Stage IIB; Sponsoring unit: 

Marketing; Approved capital cost (in millions): $403.9; [Empty]; 

Investment purpose: To provide a new platform for service delivery at 

13,504 sites, and replace the Postal Service’s existing Integrated 

Retail Terminals.; Date approved & approving entity: April 2000; Board 

of Governors.



Title: Surface-Air Management System (SAMS); Sponsoring unit: Network 

Operations Management; Approved capital cost (in millions): $38.4; 

[Empty]; Investment purpose: To replace Air Contract Data Collection 

System (ACDCS) and assign mail to alternative surface and air 

carriers.; Date approved & approving entity: July 2000; Board of 

Governors.



Source: U.S. Postal Service documents.



[End of table]



The sections below provide additional information on the investments we 

reviewed.



Enhanced Security Capability Program:



Enhanced Security Capability (ESC) is a comprehensive program to secure 

the Postal Service’s networks, systems, and applications. Its goals, as 

defined in the DAR, are threefold:



1. Create an environment that allows Postal Service employees, business 

partners, suppliers, and customers to conduct business in a secure and 

user-friendly environment.



2. Eliminate or prevent unauthorized use of and access to Postal 

Service systems and applications.



3. Deny unauthorized access to Postal Service networks while ensuring 

access to authorized users.



ESC supports the Postal Service’s three “voices” by, among other 

things, providing the resources to secure the infrastructure and 

mission critical business applications (Voice of the Business), 

providing the necessary security to protect customers’ private data 

(Voice of the Customer), and providing additional assurances that 

employee data are secure (Voice of the Employee). It also supports the 

Transformation Plan’s near-term strategy to ensure the safety and 

security of mail customers and employees.



The DAR for this CTO organization-sponsored program was approved by the 

Board of Governors on November 13, 2000. It requested capital funds of 

about $43.3 million to secure the Postal Service’s networks, systems, 

and applications and establish the underlying program management 

structure. Efforts to implement ESC actually began in March 2000 with 

$873,000 in seed money. The initiation efforts included updating 

pertinent policies and procedures and creating a team to respond to 

security incidents.



In an effort to heighten security in response to the recent terrorist 

attacks and anthrax incidents, many objectives for the program were 

reprioritized, and program officials are consequently considering 

extending the schedule for completing fiscal year 2003 goals into the 

next fiscal year. According to the most recent status report on the 

program, additional capital funds would not be needed to accommodate 

the new schedule, if it is approved.



ESC is not a one-time effort but an ongoing program to secure Postal 

Service operations. It is managed as a collection of over 30 

initiatives, each one managed separately, with its own project plan, 

milestones, and schedules.



Organization Structure, Staffing and Management:



The purpose of Organization Structure, Staffing and Management (OSS&M) 

is to allow the Postal Service to easily manage its organizational 

structure by facilitating access to data and enabling it to model 

organizational structures and implement new structures quickly. OSS&M 

is intended to replace the Organization Management Staffing System, a 

legacy system with limited functionality and usage that does not meet 

current needs to manage organizational structures. It is being 

developed using commercial off-the-shelf technology.



While OSS&M can stand alone, it is to serve as the foundational piece 

for a human resources/payroll enterprise system that will integrate 

many Postal Service systems into one with the ultimate goal of having a 

single source for all employee data. The Postal Service currently uses 

a number of human resource and payroll systems that, according to 

Postal Service officials, duplicate data, connect through cumbersome 

interfaces, and operate under different processing cycles. The new 

human resources/payroll enterprise system will address these weaknesses 

by streamlining business processes and consolidating all the data about 

an employee into one central repository. OSS&M supports the 

Transformation Plan’s corporate shared services strategy. It is jointly 

sponsored by Human Resources and Finance.



The DAR for the project was approved by the Postmaster General on July 

23, 2001. It requested capital funds of $9 million for the national 

deployment of the system. Initial funding in the amount of $7 million 

had also been approved to conduct proof-of-concept and pilot activities 

and to assess the cost of operating the recommended off-the-shelf 

software in the Postal Service environment. The results of these 

activities were used as input to the DAR.



OSS&M was scheduled to be fully deployed in the spring of 2002. It has 

been delayed because of organizational changes and the additional time 

required for pilot testing. It is now scheduled to be deployed by 

December 1, 2002.



Point of Service ONE System:



The Point of Service ONE system (POS ONE) is a replacement system for 

the Postal Service’s existing retail terminals; it is approved to 

provide new terminals, application systems, network connections, and a 

data warehouse designed to support management decision-making. The 

Postal Service identified the need to replace its existing terminals in 

the early 1990s and approved $9.9 million in funding to identify 

alternative approaches. This work was performed in the mid-1990s, and 

information obtained from contractor bids was used to develop a DAR for 

POS ONE--Stage I. The Board of Governors approved that DAR and three 

others to fund work planned to be performed from June 1996 to September 

2001, and a fifth DAR for Stage III is under development for the next 

increment of work on the system. Dates and dollar amounts for these 

approved DARs are shown in table 23.



Table 23: POS ONE DARs:



DAR No.: 1; Approval date: June 1996; Capital funding

(in millions): $274.9.



DAR No.: 1-additional funding; Approval date: May 1998; Capital funding

(in millions): 53.7.



DAR No.: 2A; Approval date: June 1999; Capital funding

(in millions): 166.5.



DAR No.: 2B; Approval date: April 2001; Capital funding

(in millions): 403.9.



DAR No.: Total (approved POS ONE capital funding); Approval date: 

[Empty]; Capital funding

(in millions): $899.0.



Source: U.S. Postal Service documents.



[End of table]



Surface-Air Management System:



The Surface-Air Management System (SAMS) is a replacement system that 

provides critical transportation-related logistics capabilities by 

enabling the Postal Service to assign mail electronically to the least-

cost available surface and air carrier services. The legacy system that 

SAMS was designed to replace---the Air Contract Data Collection System 

(ACDCS)--was outmoded; it was designed in 1983 and in 1990 the 

manufacturer of the system informed the Postal Service that it would no 

longer provide operating system support. SAMS now serves as the Postal 

Service’s mail assignment engine to surface and air transportation 

services, laying the cornerstone for all future logistics systems. The 

program plan for SAMS shows that additional functionality expected to 

be provided using SAMS beyond ACDCS included indexed surface routes, 

capacity management, real-time carrier updates via electronic data 

interchange, automated tender considerations, local change auditing and 

reporting, electronic manifest tracking, improved maintenance of mail 

distribution tables, improved data capture capabilities, improved 

payment processing, stable and scalable infrastructure, and 

communications benefits. The program plan also shows that SAMS was 

expected to produce the following measurable benefits: decreased 

commercial air costs, increased utilization of surface routes, 

reliability and maintainability of SAMS software, decreased downtime, 

improved claims processing, decreased network costs, improved data 

collection capabilities for evaluation of air and surface routes, and 

decreased capacity overloading.



The Postal Service began conceptual design work on SAMS in October 1999 

(Phase I) and detailed design and development work in March 2000 (Phase 

II). This work formed the basis for the SAMS DAR approved by the Board 

of Governors on July 11, 2000 for capital funding of $38.4 million.



[End of section]



Appendix III: Comments from the United States Postal Service:





RICHARD J. STRASSER, JR. CHIEF FINANCIAL OFFICER EXECUTIVE VICE 

PRESIDENT:



UNITED STATES POSTAL SERVICE:



October 4, 2002:



Mr. Joel C. Willemssen:



Managing Director, Information Technology Issues United States General 

Accounting Office Washington, DC 20548-0001:



Dear Mr. Willemssen:



Thank you for providing the Postal Service with the opportunity to 

review and comment on the draft report entitled, U.S. Postal Service: 

Opportunities to Strengthen IT Investment Management Capabilities.



The report clearly identifies that the Postal service has processes in 

place to manage its information technology investments. Consistent with 

the General Accounting Office’s information technology investment 

management (ITIM) model, the Postal Service is not only managing these 

investments effectively but is also addressing several key practices 

found at the higher levels of maturity in the model. Based on our 

reading of reports on other agencies previously evaluated by GAO, we 

are pleased to find that the Postal Service rates higher than any other 

department or agency reviewed to date. The Postal Service has a proven 

success record with our more mature investment portfolios of 

automation/mechanization equipment and facilities, and has replicated 

key practices of those systems in its IT portfolio management. This has 

enabled the cost effective advancement of Postal Service information 

technology.



Within its current IT management system, the Postal Service actually 

employs many of the key practices of the GAO ITIM model. Although the 

GAO ITIM model aims at current practices in the broad universe of 

federal agencies, we would hope that the final report and model would 

recognize the current enterprise-wide practices of the Postal Service.



After careful review of the report and discussions with the GAO team, 

we have identified the following key points in the ITIM model at which 

the Postal Service takes an approach to its investment management 

processes that, while differing from the [TIM model, is valid and 

appropriate for an organization of the Postal Service’s size and 

complexity.



Selection and Oversight:



The Postal Service’s well-established, enterprise-wide investment 

processes are used for selection and oversight of all investments, 

including IT investments. These processes are particularly important in 

ensuring that investments are affordable and reflect a strategic focus 

on business needs. To accomplish these objectives, the Postal Service 

uses a hierarchy of delegations to select and oversee its investments, 

from the Board of Governors through the lowest level of management, to 

ensure that senior management can concentrate on strategic issues and 

the most significant projects. Consonant with these practices, the 

chief technology officer’s (CTO) organization has established well-

defined internal methods and criteria to select, integrate, control, 

and manage IT investments. The CTO organization uses web-enabled tools 

for their selection and control activities. These postal-developed 

tools have been shared with several other organizations.



475 L’ENFANT PLAZA SW WASHINGTON DC 20260-5000 202-268-5272:



FAX 202-268-4364 www.usps Corn:



Succession Planning:



The Postal Service uses an institutionalized portfolio approach to 

address the succession of its IT hardware, software, and systems. This 

approach enables senior management to determine strategically driven 

solutions based upon priorities, lessons learned, available technology, 

best practices, affordability, risk assessments, and business needs. 

Software succession is:



managed through the Enterprise Architecture Councils, while hardware 

succession takes a more enterprise-wide approach. Systems succession is 

supported through the portfolio organization aligned to support the 

business units in their technology needs. The portfolios are also 

supported by external systems integrators who have met pre-determined 

standards for best-in-class attributes in these business areas. 

Structured protocols and practices such as these are specified in the 

higher levels of the ITIM model.



Post-Implementation Review:



The Postal Service continues to employ an enterprise-wide hierarchical 

approach to decision-making on Investment Management through the post-

implementation review process. This allows senior management to focus 

on making strategic decisions while other, more tactical, decisions are 

delegated farther down the management chain. The Postal Services uses 

the budget process to review programs throughout their life, including 

post-implementation, because it is the least costly, most timely and 

most visible method. Interim studies or post-implementation cost 

studies are conducted on major investments. Oversight is conducted by 

the Office of Inspector General at various points in projects’ life 

cycles. These review processes have been implemented enterprise-wide. 

Review results are provided to the appropriate management level so that 

project adjustments can be made quickly and efficiently. These reviews 

also provide feedback so that we can improve the effectiveness of our 

investment management processes.



These IT Investment Management processes and practices are but a part 

of the Postal Service’s rigorous system for managing all of its 

investments and ongoing costs. Successful as they have been in the 

past, the Postal Service recognizes these as dynamic processes and 

continually looks to improve them to maximize their effectiveness.



The Postal Service recognizes also that the GAO report offers just such 

an opportunity to consider changes and improvements in its IT 

Investment Management and will, therefore, consider the GAO 

recommendations for these processes.



The Postal Service wishes to work with GAO to identify specific 

improvements appropriate to its IT Investment Management processes. 

Because the Postal Service has a mature Investment Management process, 

we must acknowledge that any changes will need to be integrated 

thoroughly in the existing Postal Service framework. Accordingly, the 

Postal Service will carefully evaluate each of the report’s 

recommendations to determine the necessary actions for adopting and 

integrating key practices outlined in the GAO ITIM model that are 

appropriate for the Postal Service. Further, the Postal Service will 

develop an action plan for those GAO recommendations on IT Investment 

Management that it intends to adopt. Additionally, we will be happy to 

continue to work with and share our perspectives and experience with 

your staff as the GAO develops processes for the ITIM model that 

promote and enhance performance at the highest levels of IT Investment 

Management.



Should you or your staff wish to discuss any of these comments further, 

my staff and I are available at your convenience.



Sincerely,

Richard J. Strasser, Jr.:

Signed by Richard J. Strasser, Jr.:



[End of section]



Appendix IV: GAO Contact and Staff Acknowledgments:



GAO Contact:



Lester P. Diamond, (202) 512-7957, DiamondL@gao.gov:



Acknowledgments:



In addition to the individual named above, John T. Christian, Joanne L. 

Fiorino, Peggy A. Hegg, Min S. Lee, Thomas F. Noone, Sabine R. Paul, 

and Margaret R. Sullivan made key contributions to this report.



FOOTNOTES



[1] U.S. General Accounting Office, Transformation Challenges Present 

Significant Risks, GAO-01-598T (Washington, D.C.: Apr. 4, 2001).



[2] U.S. General Accounting Office, Information Technology Investment 

Management: A Framework for Assessing and Improving Process Maturity 

(Exposure Draft), GAO/AIMD-10.1.23 (Washington, D.C.: May 2000).



[3] United States Postal Service, United States Postal Service 

Transformation Plan. (Washington, D.C.: Apr. 1, 2002).



[4] U.S. General Accounting Office, Information Technology: INS Needs 

to Strengthen Its Investment Management Capability, GAO-01-146 

(Washington, D.C.: Dec. 29, 2000); U.S. General Accounting Office, 

Information Technology Management: Coast Guard Practices Can Be 

Improved, GAO-01-190 (Washington, D.C.: Dec. 12, 2000); U.S. General 

Accounting Office, Information Technology Management: Social Security 

Administration Practices Can Be Improved, GAO-01-961 (Washington, D.C.: 

Aug. 21, 2001); U.S. General Accounting Office, Information Technology: 

DLA Needs to Strengthen Its Investment Management Capability, GAO-02-

314 (Washington, D.C.: Mar. 15, 2002).



[5] U.S. General Accounting Office, U.S. Postal Service: Deteriorating 

Financial Outlook Increases Need for Transformation, GAO-02-355 

(Washington, D.C.: Feb. 28, 2002). U.S. General Accounting Office, U.S. 

Postal Service: Financial Outlook and Transformation Challenges, GAO-

01-733T (Washington, D.C.: May 15, 2001).



[6] United States Postal Service, United States Postal Service 

Transformation Plan (Washington, D.C.: April 2002).



[7] United States Postal Service, Office of Inspector General, Decision 

Analysis Report Process, DA-AR-01-005 (Arlington, VA: Sept. 27, 2001).



[8] United States Postal Service, Office of Inspector General, Delivery 

Operations Information System, DA-AR-01-003 (Arlington, VA: Mar. 29, 

2001).



[9] United States Postal Service, Office of Inspector General, Point of 

Service ONE, DA-AR-99-002 (Arlington, VA: Sept. 20, 1999).



[10] U.S. General Accounting Office, U.S. Postal Service: Postal 

Activities and Laws Related to Electronic Commerce, GAO/GGD-00-188 

(Washington, D.C.: Sept. 7, 2000) and U.S. General Accounting Office, 

U.S. Postal Service: Update on E-commerce Activities and Privacy 

Protections, GAO-02-79 (Washington, D.C.: Dec. 21, 2001).



[11] Expense investments are a special category of expense. They are 

generally one-time expenditures in support of the development or 

deployment of a major project. Routine operating expenses are not 

considered expense investments.



[12] United States Postal Service, General Investment Policies and 

Procedures: Handbook 

F-66, (April 1999, revised February 2002).



[13] GAO/AIMD-10.1.23.



[14] GAO-01-146; GAO-01-190; GAO-01-961; GAO-02-314.



[15] According to ITIM, a process is a sequence of steps performed for 

a given purpose, and a process guide is a document that defines the 

unique manner in which the general IT investment guidance will be 

implemented within the organization.



[16] The CTO Investment Review Board (CTO IRB) is comprised of the 

Postal Service’s CTO, Vice President for Information Technology, and 

Manager for IT Value. According to Postal Service officials, the CTO 

IRB proposes IT infrastructure investments on the basis of business 

case analyses and performs regular reviews of these and other 

investments sponsored by business units to monitor expense and capital 

expenditures and project plans and schedules, track contributions, and 

resolve any issues or concerns.



[17] One of the four projects we reviewed, Enhanced Security 

Capability, is actually a program comprising over 30 different 

initiatives. See appendix II for information on this program.



[18] The Postal Service classifies its investments as either capital or 

expense. Section 1-4 of the F-66 Manual states that capital investments 

are investments in real property or personal property that are charged 

to an asset account. Examples of capital investments include real 

property, leasehold improvements, and personal property investments 

(equipment or vehicles). Expense investments include lease agreements, 

research and development projects, new products and services, and major 

operating expense investments. Expense investments are accounted for as 

expenses on the balance sheet. Routine operating expenses associated 

with the day-to-day business of the organization are not considered to 

be investments.



[19] ITIM Exposure Draft, Appendix III, Guidance for Conducting an ITIM 

Assessment, pages 158-159.



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