U.S. Postal Service: Actions Needed to Strengthen the Capital Investment Process
Highlights
What GAO Found
For each of the four phases of capital investments, USPS's conformance with leading practices varied. There are several practices within each of the phases. GAO assessed conformance as "substantial" if USPS's policy conformed to all or almost all elements of the practice, and as "partial" if USPS's policy conformed to some elements, or GAO identified cases in the five projects reviewed where the policies were not consistently applied.
For planning capital investments, USPS substantially conformed to most of the leading practices, such as identifying mission needs and gaps in services, reviewing and approving a framework for selecting its investments, and developing a long-term capital investment plan. However, USPS did not substantially conform to other practices such as evaluating alternative investments by considering whether an external entity could perform all or part of a function because USPS's investment policies do not require such evaluations. However, USPS is not precluded from conducting such evaluations. Modifying its policies to require such evaluations could place USPS in a better position to ensure the evaluations are completed and to identify the best option for reducing costs and increasing the quality of investments.
For selecting capital investments, USPS substantially conformed to most of the leading practices, such as ranking and prioritizing, and linking its investments with budget considerations. However, consistent with its investment policy, USPS developed business cases for approval by project rather than following leading practices that call for using a portfolio approach of allocating resources based on overall organizational goals linked to the agency's mission. Modifying policies to require a comprehensive portfolio approach would better enable USPS to consider projects alongside those that have been funded to select the mix of investments that best meets its mission needs.
For managing capital investments, USPS conformance with leading practices was mixed. For example, consistent with leading practices, USPS established oversight for its capital investments and tracks cost, schedule, and performance data for initiatives. USPS policy requires comparing the planned-investment timeline and performance metrics to actual results to reassess and determine whether to continue, amend, or terminate a project, consistent with leading practices. USPS managers, however, could only verify that such a reassessment occurred for one of the five projects GAO reviewed. Examining the extent to which managers regularly reassess projects to continue, amend, or stop a project would help to establish crucial accountability for limited resources.
For evaluating capital investments, USPS conformance with leading practices was partial. USPS policy calls for a comparison of actual return-on-investment and performance data for completed projects against expected results, consistent with leading practices. However, four of the five projects GAO reviewed did not have comparable return-on-investment data, thereby limiting the ability of managers to assess the investment's impact, identify modifications to potentially improve performance, and revise the investment process. Finally, USPS policy does not require incorporating best practices or lessons learned after project completion--another leading practice--which limits opportunities for USPS to improve its process in a way that could benefit future investments.
Why GAO Did This Study
USPS has reached its statutory borrowing limit and has projected unsustainable losses. GAO's prior work has stated USPS's financial challenges hinder its ability to make capital investments. GAO was asked to review USPS's capital investment process.
This report addresses the extent to which USPS follows leading practices for four phases of capital investments: planning, selecting, managing, and evaluating. GAO identified the phases and leading practices primarily by analyzing the Office of Management and Budget's capital investment guide and compared them with USPS's policies and practices. External stakeholders with both public and private-sector experience reviewed the leading practices and found them to be reasonable for USPS. To examine how USPS policies were applied in specific cases, GAO reviewed 5 of 28 capital investments greater than $25 million that were approved for funding since fiscal year 2007.
Recommendations
USPS should, among other recommendations, modify some of its capital investment policies to more closely align with leading practices, particularly for planning, selecting, and evaluating capital investments and regularly examine the extent to which managers reassess projects. USPS partially concurred or concurred with all of GAO’s recommendations. GAO continues to believe that all of its recommendations are valid and implementation will help to improve USPS’s capital investment process as discussed further in this report.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Office of the Postmaster General | To strengthen USPS's capital investment process related to USPS policy and consistent application of leading practices, the Postmaster General and executive leaders should establish a time frame for developing a clear, detailed, single-source, standard set of policies and procedures that reflect the capital investment selection phase. |
In 2014, GAO reported that USPS process for planning capital investments substantially conformed to the leading practice that reviews and approves the framework for selecting its investments. USPS has several different sources of guidance for capital investments. The most comprehensive guidance was USPS's "General Investment Policies and Procedures: Handbook F-66." Program managers told GAO that they also use USPS's Technology Acquisition Management Process Guidelines as their primary guidance. This guidance, however, did not include the updates made in December 2011. These various sources comprised USPS's framework for selecting its investments. USPS officials told GAO that the current guidance was a slide presentation available on the agency's internal website. They also said that they were planning to update the guidance, but did not provide a time frame for completing this effort. Thus, while USPS had reviewed and approved a framework for selecting its investments, it did not have a clear, single-source, standard set of policies and procedures that reflect the selection framework. A single-source guide could enable better transparency for selecting investments. Such transparency would establish crucial accountability for limited resources. Therefore, GAO recommended that USPS establish a time frame for developing a clear, detailed, single-source, standard set of policies and procedures that reflect the capital investment selection phase. In 2018, GAO confirmed that USPS not only established a time frame but also began efforts to update its F-66 guidance into a single source of procedures that better reflect the capital investment selection phase. Specifically, USPS incorporated its entire framework for selecting capital investments into its F-66 guidance, including criteria for prioritizing/selecting certain capital investments over others. Furthermore, USPS made the F-66 handbook its authoritative single-source for capital investment guidance. The F-66 guidance now serves as the single-source, standard set of policies and procedures that will reflect the selection framework. As a result, USPS may be in a better position to hold its managers accountable for completing the effort as intended. Moreover, a single-source guide may enable better transparency for selecting investments. Such transparency would establish crucial accountability for limited resources
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| Office of the Postmaster General | To strengthen USPS's capital investment process related to USPS policy and consistent application of leading practices, the Postmaster General and executive leaders should modify capital investment policies to more closely align with the following leading practices, including: (1) for planning capital investments, consider whether an external entity could better support all or part of a desired function when evaluating alternative capital investment options; (2) for selecting capital investments, use a portfolio approach for developing business cases and finalizing and allocating resources; and (3) for evaluating capital investments, seek and leverage external oversight and review, from a consultant or peer reviewer, and require that best practices and lessons learned be incorporated into the review process. |
The U.S. Postal Service's (USPS) deteriorating financial situation and budgetary resources heighten the importance of making wise capital investments to modernize and improve productivity. In 2014, GAO reported that for the four phases of capital investment, USPS conformance with leading practices varied. For planning capital investments, USPS substantially conformed to most of the leading practices. However, USPS did not substantially conform to other practices such as evaluating alternative investments by considering whether an external entity could perform all or part of a function because USPS's investment policies did not require such evaluations. For selecting capital investments, USPS substantially conformed to most of the leading practices. However, consistent with its investment policy, USPS developed business cases for approval by project rather than following leading practices that call for using a portfolio approach of allocating resources based on overall organizational goals linked to the agency's mission. For evaluating capital investments, USPS partially conformed to the leading practice of (1) leveraging external oversight and review of its capital investments because the agency did not seek oversight or feedback from its OIG or other entities, such as a consultant or peer reviewer; (2) incorporating best practices and lessons learned into the investment process because USPS did not require developing or updating best practices after completion of a capital investment project. Consequently, USPS not substantially following all leading practices may result in inefficient spending of limited resources, thereby putting USPS at even further financial risk. Therefore, GAO recommended that USPS modify capital investment policies to more closely align with the following leading practices for planning, selecting and evaluating capital investments. In 2018, GAO confirmed that for planning capital investments, USPS revised its policy to include a thorough evaluation of viable alternatives, including potential use of an external entity. For selecting capital investments, USPS developed a portfolio approach to consolidate capital investments in its corporate plan through its Delivering Results, Innovation, Value and Efficiency (DRIVE) efforts, a portfolio of strategic initiatives, which is intended to improve business strategy development and execution. For evaluating capital investments, USPS agreed to continuously evaluate the need to hire consultants when necessary or when it identifies an internal lack of expertise. Furthermore, USPS is requiring its capital investment sponsors to include lessons learned as part of their current process of submitting an update on the status of a project after it has been fully deployed and constructed. As a result, USPS can substantially following all leading practices to better ensure that it's investments are well-managed and achieve cost, schedule, and performance goals, an accomplishment that in turn could enhance USPS's financial viability.
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| Office of the Postmaster General | To strengthen USPS's capital investment process related to USPS policy and consistent application of leading practices, the Postmaster General and executive leaders should regularly examine the extent to which executives and program managers consistently follow all leading practices, particularly for: (1) identifying problems and reassessing risk while managing a project; and (2) evaluating the cost, schedule, and performance results of completed projects. |
The U.S. Postal Service's (USPS) deteriorating financial situation and limited budgetary resources heighten the importance of making wise capital investments to modernize and improve productivity. In 2014, GAO reported that USPS's conformance with leading practices for managing capital investments was mixed. For the leading practice of reassessing risk by identifying investments that are over budget, behind schedule, performing poorly, and lacking capability, USPS policy requires comparing the planned-investment timeline and performance metrics to actual results to reassess and determine whether to continue, amend, or terminate a project, consistent with leading practices. USPS managers, however, could only verify that such a reassessment occurred for one of the five projects GAO reviewed. Examining the extent to which managers regularly reassess capital investment projects to continue, amend, or stop a project would help to manage risk, given limited resources. Regarding evaluating cost, schedule, and performance results of implemented investments-another leading practice-USPS policy calls for a comparison of the actual return-on-investment and performance data for completed projects, against the expected return-on-investment (ROI) and performance results in the business case. However, the detailed capital investment reports for four of the five projects GAO reviewed did not have observed ROI data that could be compared to expected ROI, and two projects did not have actual performance metrics compared to their expected results. Performance measures help to identify problems, evaluate underlying factors, and determine needed adjustments. Therefore GAO recommended that USPS regularly examine the extent to which executives and program managers consistently follow all leading practices, particularly for: (1) identifying problems and reassessing risk while managing a project; and (2) evaluating the cost, schedule, and performance results of completed projects. In 2018 GAO confirmed that USPS implemented a tollgate process-a set of practices that all capital project managers are to follow-to regularly examine the extent to which executives and program managers consistently follow all leading practices. This process is designed to identity and resolve problems and avoid costly delays from project inception through review and approval. To identify problems and reassess risk while managing a project, USPS revised its policy to require project sponsors provide a status-update when a project is at 50 percent deployment. This update is to provide a comparison on the actual amount invested versus planned and any impact on the ROI so that problems can be identified and risks reassessed. To evaluate the cost, schedule, and performance results of completed projects, USPS revised its policy to require project sponsors provide a comparison on the actual amount invested versus planned and any impact on the ROI to inform and identify lessons learned. As a result, USPS will be in better position to ensure that its investments are well managed and achieve cost, schedule and performance goals.
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