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entitled 'Information Technology: U.S. Postal Service Needs to 
Strengthen System Acquisition and Management Capabilities to Improve 
Its Intelligent Mail® Full Service Program' which was released on 
November 30, 2009. 

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Report to Congressional Requesters: 

United States Government Accountability Office: 
GAO: 

October 2009: 

Information Technology: 

U.S. Postal Service Needs to Strengthen System Acquisition and 
Management Capabilities to Improve Its Intelligent Mail® Full Service 
Program: 

GAO-10-145: 

GAO Highlights: 

Highlights of GAO-10-145, a report to congressional requesters. 

Why GAO Did This Study: 

In 2003, the United States Postal Service (USPS) initiated the 
Intelligent Mail® program, which is intended to use information-rich 
standardized barcodes to track mail and thus provide USPS and mailers 
with better and timely information. A major component of this program 
is the Full Service program, which, among other things, is intended to 
build a system that improves the visibility into end-to-end mail 
processing operations through the use of new barcodes, and create 
efficiencies by streamlining and automating certain aspects of the 
process. GAO was asked to determine (1) the current status and plans 
for the Intelligent Mail® Full Service program and (2) if the Postal 
Service has capabilities in place to successfully acquire and manage 
the Intelligent Mail® Full Service program. GAO obtained and analyzed 
USPS documentation, reviewed previous GAO reports, interviewed 
officials, and compared acquisition best practices with USPS’s 
practices. 

What GAO Found: 

Program officials have completed key activities for implementing the 
Intelligent Mail® Full Service program, such as deploying the first 
phase of the program; however, the current schedule for the program has 
been delayed by almost 10 months. As a result, the second phase of the 
program is not expected to be implemented until the end of November 
2009. In addition, key functions of the program that were originally 
intended to be delivered have been deferred. Moreover, the life-cycle 
cost that program officials prepared does not capture all the costs 
associated with the acquisition and implementation of the program. As a 
result, program officials lack an accurate total cost estimate. 
Finally, the first deployed phase is currently experiencing operational 
problems. 

While the Full Service program has taken steps to implement acquisition 
management activities, it does not have the full set of capabilities it 
needs to fully manage the acquisition. 

Table: Summary of the Full Service Program Acquisition Management 
Capabilities: 

Capability: Project planning; 
Status: Initiated, but key activities remain to be completed, such as 
developing an overall project plan that identifies the full scope of 
the Full Service program and identifying key deliverables beyond the 
second phase. 

Capability: Project monitoring and control; 
Status: Key steps taken, but the prime contractor for the development 
of the Full Service program also manages program management office 
activities, including assessing the quality of deliverables and 
overseeing the program’s schedule, issues, and risks, which creates a 
conflict of interest because of the risk that the contractor will not 
evaluate its own products in a completely objective manner. 
 
Capability: Requirements development and management; 
Status: Initiated, but USPS has not finalized or validated a core set 
of requirements for the Full Service program. 

Capability: Risk management; 
Status: Initiated, but key activities remain to be performed, such as 
establishing a risk management process that ensures a comprehensive 
list of risks is maintained and complete mitigation strategies are 
developed. 

Capability: Product integration; 
Status: Initiated, but program officials have not developed a systems 
integration plan regarding the plans for conducting product integration 
for the entire Full Service program, which includes the integration of 
approximately 30 systems. 

Source: GAO analysis of USPS data. 

[End of table] 

A key cause of the program’s acquisition management weaknesses in the 
areas of project planning, risk management, and product integration is 
that USPS organizational policies do not set forth sufficient 
requirements for establishing effective practices in these areas. 
Weaknesses exist in the program monitoring and control area because the 
program management contract creates a conflict of interest by requiring 
that the contractor assess the quality of its own deliverables and 
oversee the program’s schedule, issues, and risks. Without these 
management capabilities in place, USPS increases the risk that this 
program will continue to encounter problems in meeting its performance, 
schedule, and cost objectives. 

What GAO Recommends: 

GAO is recommending that the Postmaster General take several actions to 
improve the management of the program, including developing a 
comprehensive cost estimate and sound acquisition and development 
policies. In written comments on a draft of this report, USPS agreed 
with three of GAO’s recommendations, disagreed with three, and did not 
comment on one. GAO continues to believe that adoption of key 
acquisition practices is essential. 

View [hyperlink, http://www.gao.gov/products/GAO-10-145] or key 
components. For more information, contact David A. Powner at (202) 512-
9286 or pownerd@gao.gov. 

[End of section] 

Contents: 

Letter: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Briefing to the House Oversight and Government Reform 
Subcommittee Staff: 

Appendix II: Comments from the United States Postal Service: 

Appendix II: IGAO Contact and Staff Acknowledgments: 

Abbreviations: 

CMMI-ACQ: Capability Maturity Model® Integration for Acquisition: 

CMMI-Dev: Capability Maturity Model® Integration for Development: 

FAR: Federal Acquisition Regulation: 

IMB/SASP: Intelligent Mail® Barcode/Seamless Acceptance and Service 
Performance: 

IT: information technology: 

SEI: Software Engineering Institute: 

USPS: United States Postal Service: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

October 29, 2009: 

The Honorable Stephen F. Lynch: Chairman: 
Subcommittee on Federal Workforce, Postal Service and the District of 
Columbia: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable Danny K. Davis: 
House of Representatives: 

In 2003, the United States Postal Service (USPS) initiated the 
Intelligent Mail® program, which is intended to use information-rich 
standardized barcodes to track mail and thus provide USPS and mailers 
with better and timely information about the mail. As part of this 
program, USPS has initiated the Full Service program, which is intended 
to (1) build a system that improves the visibility into end-to-end mail 
processing operations through the use of new barcodes, (2) gather more 
comprehensive and detailed service performance information and measure 
it against established performance standards, and (3) create 
efficiencies by streamlining and automating certain aspects of the 
process USPS uses to verify mail from commercial mailers. In May 2009, 
we issued a report that described the Intelligent Mail® program and 
stated that key management actions were not taken, such as developing a 
comprehensive strategic plan; preparing information about the program's 
costs, including its anticipated savings or cost reductions; and 
establishing a risk mitigation plan. In addition, we highlighted 
commercial mailers' concerns about the implementation of the program. 
[Footnote 1] 

At your request, we conducted a follow-up review on this program to 
determine (1) the current status and plans for the Intelligent Mail® 
Full Service program and (2) if the Postal Service has capabilities in 
place to successfully acquire and manage the Intelligent Mail® Full 
Service program. 

This report summarizes the information we provided to your staff during 
our September 9, 2009, briefing, which was updated to indicate that the 
agency's position on our findings and recommendations were revised by 
written comments provided October 15, 2009. The full briefing 
materials, including our scope and methodology, are included as 
appendix I. 

We conducted this performance audit from February 2009 to October 2009, 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

In summary, we made the following major points: 

* Program officials have completed key activities for implementing the 
Full Service program, including the first phase being deployed in May 
2009 and activities beginning for the second phase. However, USPS 
officials currently plan to deliver the program in multiple phases in 
lieu of the original plan, which was to deliver the entire Full Service 
program by January 2009. As a result, the first of two planned phases 
of the program was deployed in May 2009, and the second phase is 
expected to be implemented by the end of November 2009. In addition, 
key functionality (including automating aspects of the mail acceptance 
process) that was originally intended to be delivered in these two 
planned phases has been deferred. Program officials have recently 
stated that they plan to have future phases to incorporate the deferred 
functionality; however, they have not made any commitments to do so. In 
addition, the life-cycle cost that program officials prepared does not 
capture all the costs associated with the acquisition and 
implementation of the program, such as costs to integrate several USPS 
systems. Finally, the first deployed phase is currently experiencing 
operational problems, thus requiring program officials to develop 
patches to resolve the issues. 

* While the Intelligent Mail® Full Service program has implemented 
initial acquisition management activities, it does not have the full 
set of capabilities it needs to fully manage the acquisition. For 
example, the Full Service program has established a program office and 
assigned a USPS project manager, but the program has not developed an 
overall project plan that identifies the full scope of the Full Service 
program or identified key deliverables beyond release 2. Also, the 
program office tracks the milestones and dependencies of the program; 
however, a conflict of interest exists because the prime contractor for 
the development of the Full Service program also manages program 
management office activities. Although USPS officials have told us they 
use strategies to avoid potential conflicts, such as utilizing a 
separate program management team from the system development team, they 
have not provided us with evidence that they have a formal mitigation 
plan in place to address the conflict that exists. In addition, the 
program office has defined initial business requirements for releases 1 
and 2, but USPS has not finalized or validated a complete set of 
requirements for the Full Service program, which would include high- 
level requirements that USPS plans to deliver in future releases. Also, 
although the program office has assigned responsibility for managing 
the risks, it has not established a risk management process that 
ensures a comprehensive list of risks is maintained and complete 
mitigation strategies are developed. Additionally, while the program 
office has identified approximately 30 systems that will need to be 
integrated in the Full Service program, it has not developed a Systems 
Integration Plan describing the plan for conducting product integration 
for the entire Full Service program. Until USPS fully implements key 
acquisition management processes, the Intelligent Mail® Full Service 
program is at risk of continuing to encounter problems in meeting its 
performance, schedule, and cost objectives. 

Conclusions: 

The current schedule for the full implementation of the Full Service 
program has been delayed by almost 10 months, and key functionality 
that was originally intended to be delivered in the program has been 
deferred indefinitely. In addition, the life-cycle cost estimate that 
program officials prepared does not capture all the costs associated 
with the acquisition and implementation of the program. As a result, 
program officials lack an accurate total cost estimate. Moreover, the 
first deployed release is experiencing performance issues. 

While the Full Service program has implemented initial acquisition 
management activities, it does not have the full set of capabilities 
needed to fully manage the acquisition. A key cause of the program's 
acquisition management weaknesses in the areas of project planning, 
risk management, and product integration is that USPS organizational 
policies do not set forth sufficient requirements for establishing 
effective practices in these areas. Weaknesses exist in the program 
monitoring and control area because the program management contract 
creates a conflict of interest by requiring that the contractor assess 
the quality of its own deliverables and oversee the program's schedule, 
issues, and risks. 

While organizational policies exist for requirements development and 
management, weaknesses exist in this area, in part, because USPS 
decided not to follow USPS's organizational policies for system 
acquisition and instead followed a truncated program management 
approach in an effort to deliver the system in a compressed time frame. 
Without these processes in place, USPS increases the risk that this 
project will continue to encounter problems in meeting its performance, 
schedule, and cost objectives. 

Given that release 2 is expected to be implemented by the end of 
November 2009 and decisions about future releases need to be made, 
having the key elements of a sound acquisition management capability in 
place will be crucial to the program's success in meeting its goal. 

Recommendations for Executive Action: 

To ensure that USPS adequately manages the acquisition of the 
Intelligent Mail® Full Service program, we recommend that the 
Postmaster General take seven actions. Specifically, we recommend that 
the Postmaster General direct the Chief Information Officer and Senior 
Vice President of Intelligent Mail and Address Quality to: 

* Develop a comprehensive cost estimate to include both government and 
contractor costs over the program's full life cycle, from the inception 
of the program through design, development, deployment, and operation 
and maintenance to retirement. 

* Complete an overall program plan for the entire Full Service program, 
including an overview of the program's scope of all releases, 
deliverables and functionality within these releases, plans to phase 
out the approximately 30 barcodes currently being utilized, assumptions 
and constraints, roles and responsibilities, staffing and training 
plans, and the strategy for maintaining the plan. 

* Reconsider the current contract arrangement to avoid having the 
contractor evaluate its own performance. 

* Define the core set of requirements for the entire program and use 
them as a basis for developing a reliable cost estimate. 

* Develop a risk management process that enables the program officials 
to develop an adequate risk management plan that fully addresses the 
scope of their risk management efforts; ensures that a comprehensive 
list of risks and complete mitigation plans are identified and tracked; 
and includes milestones, mitigating actions, thresholds, and resources 
for significant risks. 

* Develop and maintain a systems integration plan for release 2 and 
beyond. 

We are also recommending that the Postmaster General direct USPS's 
Chief Information Officer to include in USPS's Technical Solution Life 
Cycle policy guidance for programs to develop (1) complete program 
plans that define overall budget and schedule, key deliverables and 
milestones, assumptions and constraints, description and assignment of 
roles and responsibilities, staffing and training plans, and an 
approach for maintaining these plans; (2) specific requirements for 
programs to establish a robust risk management process that identifies 
potential problems before they occur, such as requiring programs to 
develop a risk management plan; and (3) system integration plan that 
include all systems to be integrated with the system, roles and 
responsibilities for all relevant participants, the sequence and 
schedule for every integration step, and how integration problems are 
to be documented and resolved. 

Agency Comments and Our Evaluation: 

We obtained written comments on a draft of this report from the USPS 
Senior Vice President of Intelligent Mail and Address Quality, which 
are reprinted in appendix II. USPS agreed with three of our 
recommendations, disagreed with three, and did not comment on one. 

Specifically, USPS agreed that (1) the current contract arrangement 
should be reconsidered to avoid having the contractor evaluate its own 
performance, (2) a comprehensive risk management process should be 
developed, and (3) a system integration plan for release 2 and beyond 
should be developed and maintained. The agency further stated that it 
has and will continue to enable these capabilities. In previously 
commenting on our briefing slides, USPS disagreed with aspects of our 
findings on these issues or provided additional information that we 
incorporated as appropriate. USPS's subsequent written comments on this 
draft report, which recognize the need to implement these 
recommendations, provide greater assurance of program success. 

The Senior Vice President stated that the disagreement with three of 
our recommendations may be the result of our use of the 2003 
Intelligent Mail® strategy document to measure the program's 
performance. However, we reviewed and analyzed many documents to form 
the basis of our findings and conclusions on the program's performance. 
The 2003 strategy was just one of the many documents we used, as it 
represented the original baseline and justification for the program. To 
report on the progress of the program since its inception, we measured 
the program against original plans, while acknowledging that USPS has 
made multiple modifications to the implementation dates. 

USPS also stated that we relied on the 2003 strategy to determine 
delays to the program. This comment is inaccurate. As we stated in this 
report, we relied on the January 2008 Intelligent Mail® Advance Notice 
of Proposed Rulemaking in the Federal Register to identify the 
originally proposed implementation time frame. We also reported the 
subsequent revisions that USPS made to the program's implementation 
schedule. 

The Senior Vice President disagreed with our recommendation to develop 
a comprehensive cost estimate. He stated such an activity would consume 
a significant amount of funding, time, and resources, while providing 
little or no value. However, as stated in our GAO Cost Estimating and 
Assessment Guide,[Footnote 2] developing a realistic cost estimate is 
essential because it enables program officials to evaluate resource 
requirements at key decision points, develop performance measurement 
baselines, and establish effective resource allocations. Additionally, 
cost estimates should be comprehensive and should include both 
government and contractor costs throughout the program's full life 
cycle, from the inception of the program through design, development, 
deployment, and operation and maintenance to retirement. While we 
acknowledge that preparing a realistic cost estimate may require some 
amount of effort, we believe the benefits of having an accurate total 
cost estimate for the entire program to make better informed resource 
allocation decisions, clearly merit its completion. 

With regard to our recommendation to complete an overall program plan 
for the entire Full Service program, the Senior Vice President stated 
that, while USPS plans to start updating the Intelligent Mail® strategy 
on an annual basis, it plans to remain focused on its clearly defined 
actions for the current releases, rather than planning for future 
releases. However, industry best practices specifically state that a 
project plan is the essential document used to manage and control the 
execution of a project. In order for the project plan to be an 
effective and useful document, it should consider all phases of the 
project's life cycle. Program officials should also ensure that all 
plans affecting the project are consistent with the overall project 
plan to ensure that all releases and associated functionality 
seamlessly fit together. As we state in our report, without such a plan 
that describes the full scope of the program, including how many 
releases are envisioned, USPS lacks an overarching approach for 
incorporating future releases into the program. Additionally, without 
this information, USPS may not be able to ensure the program is 
accomplishing its complete set of goals within the specified cost and 
schedule objectives. 

Regarding our recommendation to define a core set of requirements for 
the entire program and use them to develop reliable cost estimates, the 
Senior Vice President stated that the program must remain dynamic and 
that any attempt to define the entire program and its associated cost 
is a waste of funding and resources. We are not recommending that USPS 
define all detailed system-level requirements at the outset of the 
program; rather, we are recommending that USPS develop a roadmap of the 
program's high-level requirements. As we state in this report, without 
a core set of high-level requirements, it will be difficult for USPS to 
focus appropriately on the next release and to hold itself accountable 
for delivering a system that meets USPS's and mailers' needs. Defining 
these requirements is especially important given the functionality that 
is being deferred in the first two releases. 

USPS program officials did not state whether they agreed or disagreed 
with our recommendation that USPS include in its Technical Solution 
Life Cycle policy guidance for programs to develop (1) complete program 
plans, (2) specific requirements for programs to establish a robust 
risk management process, and (3) a system integration plan. 

As agreed with your office, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
from its issue date. At that time, we will send copies of this report 
to interested congressional committees and other interested parties. In 
addition, the report will be available at no charge on the GAO Web site 
at [hyperlink, http://www.gao.gov]. 

Should you or your offices have questions on matters discussed in this 
report, please contact me at (202) 512-9286 or at pownerd@gao.gov. 
Contact points for our Offices on Congressional Relations and Public 
Affairs may be found on the last page of this report. GAO staff who 
made key contributions to this report are listed in appendix III. 

Signed by: 

David A. Powner: 
Director, Information Technology Management Issues: 

[End of section] 

Appendix I: Briefing to the House Oversight and Government Reform 
Subcommittee Staff: 

Information Technology: U.S. Postal Service Needs to Strengthen System 
Acquisition and Management Capabilities to Improve Its Intelligent 
Mail® Full Service Program: 

Briefing for staff members of the Subcommittee on Federal Workforce, 
Postal Service, and the District of Columbia, Committee on Oversight 
and Government Reform: 

House of Representatives: 

September 9, 2009 

Table of Contents: 

* Introduction: 
* Objectives, Scope, and Methodology: 
* Results in Brief: 
* Background: 
* Results: 
- Objective 1: Full Service Program Status and Plans; 
- Objective 2: Adequacy of Acquisition Management Capabilities; 
* Conclusions: 
* Recommendations for Executive Action: 
* Agency Comments and Our Evaluation: 

[End of section] 

Introduction: 

The U.S. Postal Service (USPS) relies heavily on information technology 
(IT) to support its mission of providing prompt, reliable, and 
efficient mail service to all areas of the country. Starting in May 
2009, as part of a program referred to as the Intelligent Mail® 
program, USPS began to encourage commercial mailers[Footnote 3] to use 
new standardized barcodes which are intended to make it easier to track 
and provide information about the mail’s progress as it flows through 
the mail stream. According to USPS officials, this information is 
important to their efforts to improve efficiency and reduce costs. 

The Intelligent Mail® program encompasses numerous programs, including 
a major initiative known as the Full Service program. This initiative 
is intended to: 

* build a system that improves the visibility into end-to-end mail 
processing operations through the use of new barcodes, 

* gather more comprehensive and detailed service performance 
information and measure it against established performance standards, 
and, 

* create efficiencies by streamlining and automating certain aspects of 
the process USPS uses to verify mail from commercial mailers. 

USPS is planning to implement the program in multiple software releases—
thus far it has committed to implementing two releases: the first one 
was deployed in May 2009 and the other is planned to be implemented by 
November 2009. Program officials have recently stated that they also 
plan to have future releases; however, they have not made any 
commitments to do so or obtained funding approval. 

USPS says the Full Service program is one of the most complex programs 
it has undertaken—it will involve the integration of approximately 30 
different systems and is intended to benefit both commercial mailers 
and USPS. 

[End of section] 

Objectives, Scope, and Methodology: 

As agreed, our objectives were to determine: 

* the current status and plans for the Intelligent Mail® Full Service 
program and, 

* if the Postal Service has capabilities in place to successfully 
acquire and manage the Intelligent Mail® Full Service program. 

For our first objective, we analyzed system documentation, including 
plans, status reports, meeting minutes, cost estimates, schedule 
estimates, reports on program management reviews, test plans, and other 
acquisition-related documents. We also compared the cost and schedule 
estimates to actual cost and schedule information. In addition, we 
compared contract deliverables to the actual milestones and 
deliverables achieved. Finally, we interviewed Postal Service officials 
and reviewed our previous reports and Inspector General reports to 
determine the program’s status and plans. 

For our second objective, we identified widely recognized industry 
standards for good acquisition and development practices, including 
processes defined in the Software Engineering Institute’s Capability 
Maturity Model® Integration for Acquisition (CMMI-ACQ) and for 
Development (CMMI-DEV).[Footnote 4] From this guidance we identified 
the following process areas as being the most relevant to our review: 
(1) project planning, (2) project monitoring and control, (3) 
requirements development and management, (4) risk management, and (5) 
product integration. We compared USPS documentation, such as 
organizational policies, contract information, status reports, meeting 
minutes, requirements for the program, process documentation, and risk 
information to SEI’s guidance on sound IT systems acquisition and 
management practices in the five process areas. We also interviewed 
Postal Service officials about these key process areas to help us 
understand whether the agency has the capabilities in place to 
successfully acquire and manage the program. 

We conducted this performance audit from February 2009 to August 2009 
at United States Postal Service headquarters in Washington, D.C., in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Results in Brief: 

Although USPS officials originally intended to deliver the entire Full 
Service program by January 2009, they currently plan to deliver the 
program in multiple releases—the first of two planned releases of the 
Full Service program was deployed on May 18, 2009. The second release 
is expected to be implemented by the end of November 2009. 
Additionally, key functionality that was originally intended to be 
delivered in these two planned releases has been deferred, including 
automating aspects of the mail acceptance process. Program officials 
have recently stated that they plan to have future releases to 
incorporate the deferred functionality; however, they have not made any 
commitments to do so or obtained funding approval. Program officials 
estimate that the life cycle cost of the program is $116.4 million, of 
which $65.9 million has been spent as of June 3, 2009. However, the 
life cycle cost estimate that program officials prepared does not 
capture all the costs associated with the acquisition and 
implementation of the program, such as costs to integrate approximately 
30 systems with the Full Service program. Moreover, the first deployed 
release is currently experiencing operational problems (e.g., applying 
inconsistent charges for certain mail pieces). Therefore, program 
officials are developing patches to resolve these issues and to 
implement system enhancements. 

While the Full Service program has implemented initial acquisition 
management activities, it does not have the full set of capabilities it 
needs to fully manage the acquisition. 

Table 1: Summary of the Full Service Program Acquisition Management 
Capabilities: 

Capability: Project planning; 
Status: Initiated, but key activities remain to be completed, such as 
developing an overall project plan that identifies the full scope of 
the Full Service program and identifying key deliverables beyond the 
second phase. 

Capability: Project monitoring and control; 
Status: Key steps taken, but the prime contractor for the development 
of the Full Service program also manages program management office 
activities, including assessing the quality of deliverables and 
overseeing the program’s schedule, issues, and risks, which creates a 
conflict of interest because of the risk that the contractor will not 
evaluate its own products in a completely objective manner. 
 
Capability: Requirements development and management; 
Status: Initiated, but USPS has not finalized or validated a core set 
of requirements for the Full Service program. 

Capability: Risk management; 
Status: Initiated, but key activities remain to be performed, such as 
establishing a risk management process that ensures a comprehensive 
list of risks is maintained and complete mitigation strategies are 
developed. 

Capability: Product integration; 
Status: Initiated, but program officials have not developed a systems 
integration plan regarding the plans for conducting product integration 
for the entire Full Service program, which includes the integration of 
approximately 30 systems. 

Source: GAO analysis of USPS data. 

[End of table] 

A key cause of the program’s immature management approach in the areas 
of project planning, risk management, and product integration is that 
USPS organizational policies do not set forth sufficient requirements 
for establishing effective practices in these areas. Weaknesses exist 
in the program monitoring and control area because the program 
management contract itself creates a conflict of interest by requiring 
the contractor to assess the quality of its own deliverables, and 
oversee the program’s schedule, issues, and risks. Although USPS 
officials have told us they use strategies to avoid potential 
conflicts, such as developing a separate program management team from 
the system development team, they have not provided us with evidence 
that they have a formal mitigation plan in place to address the 
conflict that exists. While organizational policies exist for 
requirements development and management, weaknesses exist in this area, 
in part, because USPS decided not to follow its organizational policies 
for system acquisition and instead followed a truncated program 
management approach in an effort to deliver the system in a compressed 
timeframe. 

Until USPS fully implements these key acquisition management processes, 
the Intelligent Mail® Full Service program is at risk of continuing to 
encounter problems in meeting its performance, schedule, and cost 
objectives. 

We are recommending that the Postmaster General direct USPS’s Chief 
Information Officer and Senior Vice President of Intelligent Mail and 
Address Quality to take the following actions to improve the management 
of its acquisition capabilities: (1) develop a comprehensive cost 
estimate; (2) complete a program plan for the entire Full Service 
program; (3) reconsider the current contract arrangement to avoid 
having the contractor review its own performance; (4) define 
requirements for the entire program and use them as a basis for 
developing a reliable cost estimate; (5) develop a robust risk 
management process; and (6) develop and maintain a systems integration 
plan for release 2 and beyond. 

We are also recommending that the Postmaster General direct USPS’s 
Chief Information Officer to include in USPS’s Technical Solution Life 
Cycle policy guidance for programs to develop (1) complete program 
plans; (2) specific requirements for programs to establish a robust 
risk management process; and (3) system integration plan. 

In e-mail comments on a draft of these briefing slides, the Senior Vice 
President of Intelligent Mail and Address Quality did not state whether 
he agreed or disagreed with our recommendation to develop a 
comprehensive cost estimate for the program. He disagreed with our 
findings and conclusions regarding the program’s acquisition management 
capabilities. Specifically, 

* With regard to project planning, the Senior Vice President stated 
that federal best practices do not reflect the dynamic environment that 
drives the scope, requirements, and schedule of future releases of the 
Full Service program. We disagree, as industry best practices call for 
an overarching plan that describes a program’s full scope in order to 
ensure that it is accomplishing its goals. 

* Regarding the current contract arrangement, he did not acknowledge 
that a conflict of interest exists. Although the contracting officer 
has identified this arrangement as a concern, program officials have 
not acknowledged this risk nor have they established formal mitigation 
plans to address it. 

* He further disagreed with our findings on requirements development 
and management, stating that there is not enough funding to define 
requirements for the full program. Without a core set of high-level 
requirements, however, USPS will face challenges in focusing on the 
next release and holding itself accountable to users’ needs. 

* Regarding risk management, the Senior Vice President noted that the 
program has a risk manager and a risk management process in place. 
However, we found that several key risks were not included in risk 
reports, complete mitigation plans were not developed, and they did not 
have a comprehensive risk management plan. 

* Regarding product integration, the Senior Vice President stated that 
the program provided us with a systems integration plan. However, these 
documents defined testing strategies, not a comprehensive system 
integration plan. 

Finally, USPS’s program officials did not state whether they agreed or 
disagreed with our recommendations that USPS modify its current policy 
to provide guidance for USPS programs to, among other things, develop 
complete program plans. 

[End of section] 

Background: Intelligent Mail® Program: 

Since the 1970s, the use of barcodes and automation has improved 
efficiency in USPS mail processing operations. Commercial mailers have 
been encouraged to use barcodes through pricing incentives, allowing 
USPS to cut costs and increase efficiency in its mail processing 
operations. In particular, automated mail processing machines can sort 
mail with barcodes containing delivery information faster than manual 
sorting. Over the past three decades, the number and type of barcodes 
increased along with technology changes, and in 2003 USPS estimated 
that there were more than 30 different barcodes in use. Two of the most 
commonly used barcodes are the following: 

* POSTNET, which contains delivery information that enables automated 
sorting of the mail to the carrier’s route level. Mailers receive a 
postage discount when they print POSTNET barcodes on their mail. 

* PLANET, which is a barcode that contains identification numbers to 
enable tracking mail in USPS’s mail processing system but contains less 
information than the new Intelligent Mail® barcode. 

According to USPS, the use and maintenance of numerous barcodes have 
become increasingly burdensome. For example, whenever USPS adds or 
upgrades its mail processing equipment, it has to ensure that the 
equipment remains compatible with each of the relevant barcodes. 
Additionally, printing numerous barcodes on mail pieces clutters the 
pieces, thus reducing the “real estate” that mailers have to advertise 
or print other information on their envelopes (see figure 1). 

Figure 1: Example of Different Barcodes on a Letter: 

[Refer to PDF for image: illustration] 

The following are indicated on the illustration: 
Certified mail label; 
PLANET Code; 
POSTNET Code. 

Source: U.S. Postal Service and GAO. 

[End of figure] 

In 2003, USPS initiated the Intelligent Mail® program, which is 
intended to use information-rich standardized barcodes to track mail 
and thus provide USPS and mailers with better and timelier information 
about the mail. Figure 2 illustrates the components of the Intelligent 
Mail® barcode. 

Figure 2: Example of an Intelligent Mail® Barcode, Including its 
Information Fields: 

[Refer to PDF for image: illustration] 

Included in illustration are the following numerical identifiers: 

1-2: [Empty]; 
3-5: Service type; 
6-14: Mailer identification number; 
15-20: Unique number[A]; 
21-31: Delivery address information. 

Source: U.S. Postal Service and GAO. 

[A] The unique number is either six digits (as shown in the shaded 
area) or nine digits, depending on the mail volume of the mailer. 

[End of figure] 

USPS has identified several ways it expects the implementation of 
Intelligent Mail® to benefit USPS and mailers: 

* Improve efficiency, reduce costs, and improve timeliness of delivery. 
USPS says it will be able to use information from Intelligent Mail® to 
improve its processing system. Also, USPS plans to use Intelligent 
Mail® to create efficiencies by streamlining and automating the process 
it uses to accept mail from commercial mailers, which is currently 
time- and labor-intensive. 

* Reduce the amount of mail that must be forwarded, which can involve 
extra handling by USPS and delays in delivery. USPS will provide free 
notification when intended recipients have moved and filed a change of 
address with USPS. Mailers previously had to pay for this service. This 
feature, known as the Address Correction Service, could help USPS meet 
its goal of reducing the amount of mail that cannot be delivered. 

* Provide better service to mailers. Through Intelligent Mail®, USPS 
plans to provide better service to mailers through real-time feedback. 
Also, since mail will be uniquely identified, USPS anticipates having 
the ability to isolate and give special handling to a specific mail 
piece, which creates an opportunity for USPS to offer mailers new 
products and services. 

* Financial incentives. USPS is also offering a financial incentive to 
mailers. Specifically, those who adopt Full Service Intelligent Mail® 
will receive a postage discount, in addition to other worksharing 
discounts.[Footnote 5] 

* Service performance measurement capability. Intelligent Mail® is 
expected to allow USPS to gather more comprehensive and detailed 
service performance information and measure it against established 
performance standards, which is intended to help keep USPS accountable 
to its stakeholders. This feature was also intended to enable USPS to 
meet requirements in the Postal Accountability and Enhancement Act of 
2006. 

Background: Intelligent Mail’s® Full Service Program: 

Intelligent Mail’s® Full Service program is intended to include custom 
software capabilities and supporting hardware that will enable mailers 
and the Postal Service to gain visibility into the mail stream and 
achieve the benefits of the Intelligent Mail® program. 

The Full Service program consists of developing new systems and 
integrating approximately 30 systems. The largest system development 
project within the Full Service program is the development of the 
Intelligent Mail® Barcode/Seamless Acceptance and Service Performance 
(IMB/SASP) system. It is intended to deploy an infrastructure that 
includes hardware and software capabilities needed to capture and store 
large volumes of mailing data and to acquire and implement a system 
that supports better service performance measurement as mandated by the 
Postal Accountability and Enhancement Act of 2006. It is also intended 
to automate several business mail verification activities. 

The 29 other systems are a combination of existing and new systems that 
need to integrate with the IMB/SASP system in order to share data. An 
example of one of the existing USPS systems that must be integrated 
with the IMB/SASP is Postal One—the main communications interface 
between USPS and mailers. Upgrades to PostalOne include designing a 
better external user interface, adding electronic documentation 
acceptance capabilities, and providing more options for mailers to 
access mail tracking information. 

The Facilities Database—a repository of all USPS facilities data, 
including facility names, addresses, physical characteristics, and 
services provided, is another system that USPS plans to integrate with 
IMB/SASP in order to attribute mail pieces to the appropriate 
locations. 

Table 2 provides a summary of the key functionality of the program. 

Table 2: Summary of Key Functionality Intended for the Full Service 
Program: 

Functionality: Enable the Intelligent Mail® Barcode Implementation; 
Description: This system will support USPS's vision of replacing 
multiple existing barcodes and labels with one standardized, 
information-rich code for letters, postcards, and flats (e.g. larger 
envelopes, catalogs, circulars, newspapers, and magazines) and 
submitting electronic documentation. Starting in May 2009, mailers have 
two options that offer different incentives based on the level of 
effort required for mailers to comply: 
Basic Service: Requires mailers to apply an Intelligent Mail® barcode 
and populate the relevant fields within the barcode, but does not 
require mailers to include unique numbers in the barcode. Mailers who 
implement the Basic Service option will receive a postage discount for 
using a barcode, but will not receive other benefits associated with 
Full Service option. 
Full Service: Requires mailers to populate and apply a barcode, but 
unlike the Basic Service option, the barcode must contain a number that 
is unique to the particular mail piece. Full Service mailers must also 
apply a unique barcode to any trays or containers they use to package 
mail and submit electronic documentation of their mailings. USPS 
provides pricing discounts and other incentives for mailers 
implementing Full Service option. 

Functionality: Support for Service Performance Measurement; 
Description: This functionality will support Service Performance 
reporting by collecting data when mail enters the mail stream, scanning 
customer mailings prepared with the Intelligent Mail® barcodes, and 
collecting the information associated with when a mail piece reaches 
its destination. 

Functionality: Automated Aspects of Mail Verification; 
Description: This functionality is intended to obtain scan data 
received from mail processing equipment and compare it to mailing data 
received electronically from the mailer, to verify that the mail is 
prepared according to the prices claimed by the mailer. 

Functionality: Upgrade Processing Network and IT infrastructure; 
Description: This functionality is intended to integrate existing and 
new systems in order to share data and store large volumes of mailing 
information. 

Source: GAO analysis of USPS data. 

[End of table] 

Several USPS groups support the execution of the Full Service program: 

* The Full Service Program Directors—the Senior Vice President of 
Intelligent Mail and Address Quality and the Chief Information Officer—
head the program. Their responsibilities include reviewing deliverables 
and conducting governance meetings that focus on the status of the 
program, issues, and risks. 

* The Program Management Office activities are performed by a 
contractor, Accenture, who reports directly to the Program Directors. 
The responsibilities for the contractor include program status 
reporting, communications management, scope and release management, 
issue and risk management, and selective quality deliverable audits. 

* The Marketing Technology and Channel Management group is the business 
organization responsible for business mail acceptance process re-
engineering and field deployment activities, including field 
preparedness, developing test plans, newsletters, and training and 
awareness. 

* The Sales and Marketing Portfolio is the IT organization responsible 
for development, integration, and systems deployment activities. 

Figure 3 graphically depicts the organizational structure for the Full 
Service Program. 

Figure 3: Simplified Full Service Organizational Structure: 

[Refer to PDF for image: illustration] 

Top level: 
* USPS Full Service Program Directors. 

Second level, reporting to USPS Full Service Program Directors: 
* Program Management Office (under the direction of Accenture); 
* Sales and Marketing Portfolio; 
* Marketing Technology and Channel Management. 

Third level, reporting to Sales and Marketing Portfolio: 
* Electronic Documentation Team; 
* Full Service Compliance Team; 
* System Testing Team. 

Third level, reporting to Marketing Technology and Channel Management: 
* Business Process Re-engineering Team; 
* Customer Interaction Team; 
* Field Deployment Team. 

Source: GAO analysis of USPS data. 

[End of figure] 

The program’s estimated life cycle cost is $116.4 million. In November 
2007, USPS awarded its first contract in a series of contracts for the 
Full Service program to the prime contractor, Accenture. As of June 3, 
2009, USPS has awarded $65.9 million in contracts for the Full Service 
program. The contracts for the requirements development, designing, 
building, and testing are firm fixed price.Footnote 6] 

Background: Prior GAO Review: 

In May 2009, we issued a report that described the Intelligent Mail® 
program and stated that key management actions were not taken, such as 
developing a comprehensive strategic plan; preparing information about 
the program’s costs, including its anticipated savings or cost 
reductions; and establishing a risk mitigation plan. In addition, we 
highlighted commercial mailers’ concerns about the implementation of 
the program.[Footnote 7] Specifically, the mailers stated that USPS 
communication efforts were insufficient; USPS and mailers may not be 
ready for implementation given USPS’s short time frame to 
simultaneously design, develop, test, and implement the Intelligent 
Mail® program; and the program’s pricing and benefits may not be 
sufficient to encourage mailers to participate. 

As such, we recommended that USPS develop a comprehensive Intelligent 
Mail® strategic plan, as well as develop a plan that addresses how USPS 
will mitigate program-level risks. In its response to our 
recommendations, USPS agreed to develop a comprehensive Intelligent 
Mail® strategy, including all planned phases and the associated 
functions and systems, program goals, and measures of success; and a 
plan that addresses how it will mitigate risks. 

[End of section] 

Objective 1: Full Service Program Status and Plans: 

Program officials have completed key activities for implementing the 
Full Service program, including deploying the first release on May 18, 
2009, and beginning activities for release 2. However, while USPS 
officials originally intended to deliver the entire Full Service 
program by January 2009, they currently plan to deliver the program in 
multiple releases—the first of two planned releases of the program was 
deployed on May 18, 2009. The second release is expected to be 
implemented by the end of November 2009. Therefore, full implementation 
of the program has been delayed by almost 10 months. Additionally, key 
functionality that was originally intended to be delivered in these two 
planned releases has been deferred, including automating aspects of the 
mail acceptance process. Program officials have recently stated that 
they plan to have future releases to incorporate the deferred 
functionality; however, they have not made any commitments to do so. In 
addition, the life cycle cost that program officials prepared does not 
capture all the costs associated with the acquisition and 
implementation of the program, such as costs to integrate several USPS 
systems. Moreover, the first deployed release is currently experiencing 
operational problems, thus requiring program officials to develop 
patches to resolve the issues. 

Objective 1: Full Service Program Status and Plans: Current 
Implementation Status: 

Although USPS officials originally intended to deliver the entire Full 
Service program by January 2009, they currently plan to deliver the 
program in multiple releases. The current implementation schedule for 
the Full Service program is as follows: 

Release 1: 

* May 11, 2009. USPS internally implemented the first release which 
enables certain functions, such as the Address Correction Service and 
electronic documentation. 

* May 18, 2009 and beyond. Mailers began testing their systems’ ability 
to access and electronically transmit documentation to USPS’s system. 

Release 2: 

* November 29, 2009. USPS plans to deploy the second release of the 
Full Service program and expects to begin offering price incentives to 
mailers that utilized the Full Service program. 

Future Releases: 

* No commitments have been made by program officials for future 
releases.[Footnote 8] 

By May 2011, the use of POSTNET and PLANET barcodes will be phased out 
and mailers seeking reduced automation-postage rates will be required 
to use Intelligent Mail® barcodes. Based on the current revised 
schedule, table 3 summarizes the key functionality by releases. 

Table 3: Summary of Key Functionality by Releases: 

Release 1 (May 2009): 

* Support the communication protocols used by mailers to electronically 
submit mailing information to USPS. 

* Support Customer Supplier Agreements 

* Enable the service that identifies exactly when the mail enters the 
mail stream for mailers using the existing communication protocols. 

* Enable address correction for mailers using the existing 
communication protocols. 

* Support mailers’ appointment scheduling, data distribution, and 
miscellaneous messages. 

Release 2 (Nov. 09): 

* Support the Intelligent Mail® Barcode discount pricing for Full 
Service option. 

* Support the improved protocol for communicating with USPS. 

* Enable the service that identifies exactly when the mail enters the 
mail stream versus an estimate for mailers using a new communications 
protocol. 

* Enable address correction for mailers using a new communications 
protocol. 

* Support miscellaneous data messages for the new communication 
protocol. 

* Support the process of combining trays from multiple letter-size 
mailers together in order to qualify for postal discounts. 

* Support the printing of one or more pages that are not bound into a 
publication. 

* Support additional enhancements that were not provided in release 1. 

Source: GAO analysis of USPS data. 

[End of table] 

As of June 3, 2009, $65.9 million had been spent on the acquisition and 
implementation of the first release and the development of requirements 
for the second release. 

Objective 1: Full Service Program Status and Plans: Implementation Has 
Been Delayed: 

The current implementation schedule represents a significant delay from 
its original and revised implementation dates. Specifically, 

* In January 2008, USPS published the Intelligent Mail® Advance Notice 
of Proposed Rulemaking in the Federal Register, which originally 
proposed implementing all functionality of the program by January 2009. 
[Footnote 9] 

* In April 2008, USPS issued a revised Intelligent Mail® Federal 
Register notice which pushed back the implementation date to May 2009.
[Footnote 10] This was due to several concerns by the mailers, such as 
the compressed time period in which USPS planned to simultaneously 
design, test, and implement the program. Mailers were also concerned 
that they had not been provided with finalized IT requirements. 

* Subsequently, in November 2008, program officials planned to 
incrementally deliver functionality in multiple releases and delay full 
implementation further. Specially, they committed to delivering three 
releases—the first in May 2009, a second in September 2009, and a third 
in November 2009. According to USPS officials, the schedule was revised 
to accommodate the implementation of the Intelligent Mail® barcode and 
to allow mailers more time to make appropriate modifications to their 
systems and processes. 

* However, in January 2009, program officials again revised its 
schedule: they planned to deliver select functionality in a release in 
May 2009 and additional functionality in another release in November 
2009. According to program officials, they decided that delivering 
three releases in such a short time frame was too ambitious. 

See figure 4 for a summary of the Full Service program’s original and 
revised implementation schedule as of June 2009. 

Figure 4: Full Service Program Original and Revised Implementation 
Schedule, as of June 2009: 

[Refer to PDF for image: illustration] 

First contract awarded for the full service program: November 2007. 

Original release date: January 2008; All program functionality 
implemented by January 2009. 

Revised release date: April 2008; All program functionality implemented 
by May 2009. 

Revised release schedule: November 2008; Functionality delivered in 
three releases implemented by November 2009; 
Release 1 in May 2009; 
Release 2 in September 2009; 
Release 3 in November 2009. 

Revised release schedule: January 2009; Functionality delivered in two 
releases implemented by November 2009: 
Release 1 in May 2009; 
Release 2 in November 2009. 

Source: GAO analysis of USPS date. 

Note: While program officials have recently stated they also plan to 
have future releases to incorporate the deferred functionality, they 
have not made any commitments to do so or obtained funding approval. 

[End of figure] 

Objective 1: Full Service Program Status and Plans: Steps Have Been 
Taken to Implement Key Program Activities: 

To meet the current implementation schedule, USPS has been engaged in 
design and build activities for release 2. For example, program 
officials stated that they completed the requirements definition phase 
for the second release. Figure 5 shows the schedule for key activities 
for release 2 as of June 4, 2009. 

Figure 5: Schedule of Key Activities for Release 2, as of June 4, 2009: 

[Refer to PDF for image: illustration] 

First contract awarded for the full service program: November 2007. 

Release 2 Phases: 

Requirements defined: April-June, 2009; 
System design: June-July, 2009; 
System build and product testing: July-September, 2009; 
System integration testing: September, 2009; 
Customer acceptance testing: October, 2009; 
Deployment: November-December, 2009. 

Source: Agency data. 

[End of figure] 

Objective 1: Full Service Program Status and Plans Functionality Has 
Been Deferred: 

In addition to implementation delays, key functionality that was 
originally intended to be delivered in the two planned releases of the 
Full Service program has been deferred. Specifically, despite the fact 
that automating several aspects of the business mail verification 
process was one of the key justifications for the Full Service program, 
this function is not going to be delivered in the two releases. 
Additionally, USPS recently announced, in August 2009, that enabling 
the ability to better measure and report USPS’s service performance is 
no longer going to be delivered in the second release, as planned. 
According to USPS officials, service performance measurement 
functionality has been deferred because it was taking longer than 
planned to implement, and they wanted to be able to deliver other 
promised functionality in release 2 by November 29, 2009. This is 
especially problematic since USPS is legislatively required to develop 
a system to better measure and report its service performance to the 
Postal Regulatory Commission, and the Full Service program was the 
vehicle USPS planned to use to meet that mandate.[Footnote 11] 

While program officials announced on August 12, 2009, that they are 
aiming to develop a third release by March 12, 2010, program officials 
indicated that they have not obtained funding to implement this release 
or future releases. According to program officials, one of the primary 
reasons for not moving forward with such decisions is that funding for 
future releases may not be available as a result of USPS’s current 
financial situation.[Footnote 12] We recently reported that amid 
challenging economic conditions and a changing business environment, 
USPS is facing a deteriorating financial situation in which it does not 
expect to cover its expenses and financial obligations in fiscal years 
2009 and 2010.[Footnote 13] As a result, we added the financial 
condition of USPS to our high-risk list of federal areas in need of 
transformation. 

Objective 1: Full Service Program Status and Plans: Program Life Cycle 
Cost Was Not Completely Defined: 

According to industry best practices, programs must maintain current 
and well-documented cost estimates, and these estimates must encompass 
the full life cycle of the program. Specifically, as stated in the GAO 
Cost Estimating and Assessment Guide,[Footnote 14] cost estimates 
should be comprehensive in that they should include both government and 
contractor costs throughout the program’s full life cycle, from the 
inception of the program through design, development, deployment, and 
operation and maintenance to retirement. 

According to the business case, the life cycle cost estimate of the 
Full Service program is $116.4 million. This includes the costs to 
develop the custom software capabilities, necessary hardware to support 
the software capabilities, and operating and maintenance cost. 

However, the life cycle cost estimate excludes key costs associated 
with the acquisition and implementation of the Full Service program. 
For example, the estimate does not include: 

* costs related to the integration of the systems or, 

* the cost of future releases beyond release 2. 

Additionally, the life cycle cost has not been updated to reflect the 
significant changes that have been made to the program. While a revised 
business case to reflect the modified schedule and scope for the 
program was approved in June 2009, program officials did not update the 
life cycle cost of the program. 

According to program officials, they did not include all of the costs 
associated with integrating the system because they did not regard the 
costs to be significant enough to include. Additionally, officials 
stated that they did not include the costs of the future releases 
because they are uncertain if they are going to be able to deliver 
those releases. 

As a result, program officials lack an accurate total cost estimate for 
the entire Full Service program. 

Objective 1: Full Service Program Status and Plans: Operational 
Problems and System Enhancements Have Been Identified in First Release: 

In addition to implementation delays, deferred requirements, and an 
unreliable cost estimate, USPS is experiencing operational problems and 
has identified the need for system enhancements with the first release 
of the Full Service system. Program officials are working to address 
these problems and enhancements by implementing three patches. As of 
June 18, 2009, according to USPS officials, USPS and mailers had 
identified 73 issues. A portion of the issues were reportedly resolved 
in a patch that was deployed on June 7, 2009. Subsequently, another 
patch was deployed on July 19, 2009. 

Examples of issues reportedly resolved in these two patches include: 

* certain mailers and mail pieces were being incorrectly charged, 

* the system was not recognizing certain zone values, 

* the system was preventing mailers from putting Intelligent Mail® 
barcodes on certain mail pieces, 

* reporting functions were not working as intended, 

* system was not allowing mailers to enter certain information on 
individual mail pieces, and, 

* after logging into account and clicking through the available links, 
mailers were receiving an error message when they tried to return to 
the homepage. 

A third patch is scheduled to be deployed on August 16, 2009. Examples 
of operational problems and system enhancements intended to be 
addressed include: 

* system is incorrectly creating a finalized postage statement for 
mailers who canceled or updated a job, 

* system does not accept certain updates after postage statements are 
final and ready to accept payment, 

* inconsistent charges are being applied to a secured group of mail 
pieces, and, 

* certain electronic documentation is not being transmitted through the 
system. 

[End of section] 

Objective 2: Adequacy of Acquisition Management Capabilities: 
Acquisition Management Capabilities Are Needed: 

USPS Lacks Key Management Capabilities Essential to Effectively Acquire 
and Manage the Full Service Program: 

USPS is in the process of implementing key acquisition management 
controls, but it has yet to implement the full set of controls 
essential for acquiring and managing the Full Service program in a 
disciplined and rigorous manner. Specifically, it has not implemented 
certain process controls in the areas of: 

* project planning, 
* project monitoring and control, 
* requirements development and management, 
* risk management, and, 
* product integration. 

The primary cause of the program’s immature management approach in the 
areas of project planning, risk management, and product integration is 
that USPS organizational policies do not set forth sufficient 
requirements for establishing effective practices in these areas. While 
organizational policies exist for requirements development and 
management, weaknesses exist in this area in part because USPS decided 
not to follow its organizational policies for system acquisition and 
instead took a truncated program management approach in an effort to 
deliver the system in a compressed timeframe. 

Until USPS implements the full set of controls essential to effectively 
managing the program, it increases the risk that the Full Service 
program will continue to encounter problems in meeting its performance, 
schedule, and cost objectives. 

As we have previously reported,[Footnote 15] to effectively manage 
major IT programs, organizations must use sound acquisition and 
management processes to minimize risks and thereby maximize chances for 
success. Such processes have been identified by leading organizations 
such as the Software Engineering Institute, the Chief Information 
Officer’s Council, and in our prior work analyzing best practices in 
industry and government. In particular, the CMMI-ACQ[Footnote 16] and 
CMMI-DEV[Footnote 17] have defined a suite of key acquisition process 
control areas that are necessary to manage system acquisitions in a 
rigorous and disciplined fashion. These process areas include: 

* project planning, 
* project monitoring and control, 
* requirements development and management, 
* risk management, and, 
* product integration. 

Project Planning: 
Effective project planning involves establishing and maintaining plans 
that define project scope and activities, including overall budget and 
schedule, key deliverables and milestones for key deliverables, 
assumptions and constraints, description and assignment of roles and 
responsibilities, staffing and training plans, and an approach for 
maintaining these plans. It also involves obtaining stakeholder 
commitment to the project plan.[Footnote 18] 

The Full Service program officials have: 

* established a program office for the Full Service program and 
assigned a USPS project manager; 

* hired a contractor to carry out program management activities 
including tracking schedule, issues, and risks for the program; 

* identified the tasks and organizational roles and responsibilities 
for release 1; 

* developed a program plan for release 2 that identifies key 
deliverables and milestones for these deliverables; and; 

* developed a business case for the Full Service program. 

While officials have developed a business case for the Full Service 
program and a program plan for release 2, there still is no 
comprehensive program plan that includes the full scope of the program, 
including how many releases are planned and the specific functions and 
systems to be implemented in each release; its plans to standardize and 
consolidate the over 30 barcodes currently being used; assumptions and 
constraints about the program; a description and assignment of roles 
and responsibilities; staffing and training plans; and the strategy for 
maintaining the program plan. In addition, program officials have not 
yet obtained commitment from internal and external stakeholders on the 
program plan for release 2. Such a plan is often used to form a 
baseline for the program and to obtain buy-in from stakeholders. 

A key reason that these activities have not been completed is that 
USPS’s policy that outlines the steps that programs should follow when 
developing, acquiring, enhancing, and/or maintaining IT systems—
referred to as the Technical Solution Life Cycle policy—does not 
require that officials develop a comprehensive plan for their programs. 

Until program officials develop a complete program plan that supports 
the Intelligent Mail® Strategic Plan, which we previously recommended, 
[Footnote 19] and includes the details on the full scope of the Full 
Service program, USPS may not be able to ensure that the program is 
moving in the right direction. Without this assurance, it is more 
likely to encounter unanticipated changes in direction—which could 
affect cost, schedule, and deliverables. 

Project Monitoring and Control: 

Project monitoring and control involves providing oversight of the 
contractor’s and the project office’s performance, in order to allow 
appropriate corrective actions if actual performance deviates 
significantly from the plan. Key activities in tracking both the 
contractor’s and the project office’s performance include communicating 
status, taking corrective actions, and determining progress.[Footnote 
20] In addition, organizations should have IT investment management 
boards comprised of key executives to regularly track the progress of 
major systems acquisitions. These boards should be able to adequately 
oversee the project’s progress toward cost and schedule milestones and 
its risks. The board should also employ early warning systems that 
enable it to take corrective actions at the first sign of cost, 
schedule, and performance slippages.[Footnote 21] 

With regard to project monitoring and control activities, program 
officials: 

* track the milestones and dependencies of the program; and; 

* review the activities, status, and results of the process with higher 
level program management, USPS senior executives representing both IT 
and business units, and the contractor. 

However, the main contractor performing the development and 
implementation functions of the Full Service program is also the 
contractor carrying out USPS’s program management activities. 
Specifically, according to the Program Management Office contract, the 
contractor is responsible for: 

* assessing the quality of program deliverables; 

* overseeing the program’s schedule, issues, and risks; 

* assessing the project plan’s critical path which is necessary for 
examining the effects of any activity slipping along this path;
[Footnote 22] 

* developing project status materials for USPS program officials, 
including bi-weekly detailed status reports to the program manager and 
weekly status reports to IT management and project teams; and; 

* participating in weekly deliverable reviews from other USPS internal 
and external suppliers, including documenting all meeting minutes, and 
action items. 

The roles that the contractor plays as both a manager of the Full 
Service program and as a supplier of products for the program create a 
conflict of interest because of the risk that the contractor will not 
evaluate its own products in a completely objective manner. USPS 
program officials stated that they do not think that this is an issue 
because the company’s program management staff work on a separate team 
from the system development staff and the two teams do not interact; 
however, this arrangement still requires the contractor to assess the 
quality of its own deliverables, and oversee the program’s schedule, 
issues, and risks. USPS officials have not provided us with evidence 
that they have a formal mitigation plan in place to address the 
conflict that exists under the contract. 

While we recognize that USPS is not required to comply with the Federal 
Acquisition Regulation (FAR), these regulations can be instructive 
since they are used by federal agencies for acquiring goods and 
services.[Footnote 23] According to the FAR, an underlying principle is 
that, in order to avoid a conflict of interest, a contractor should not 
have conflicting roles that might bias a contractor’s judgment. 
[Footnote 24] 

Until program officials reconsider having the same contractor that is 
developing and implementing the system be responsible for helping USPS 
oversee the program, USPS will increase its risk of unexpected cost 
increases, schedule delays, and performance shortfalls. 

Requirements Development and Management: 

Requirements development involves eliciting, analyzing, and validating 
customer and stakeholder needs and expectations. Requirements 
management involves establishing an agreed-upon set of requirements, 
ensuring traceability between operational and product requirements, and 
managing any changes to the requirements in collaboration with 
stakeholders.[Footnote 25] 

With regard to requirements development and management, program 
officials have: 

* defined the initial business requirements dated August 16, 2007, for 
release 1; 

* defined requirements for release 2; and; 

* developed a change control process for managing changes to the 
requirements. 

While USPS has defined the requirements for release 1 and release 2, it 
has not finalized or validated the core set of requirements for the 
Full Service program, which would include high-level requirements that 
USPS plans to deliver in future releases. These core requirements would 
need to be further defined as the program begins to focus on the next 
release. Program officials stated that they did not fully define the 
program’s requirements because the requirements are still evolving. 

Until program officials define the core set of requirements for the 
program it will be difficult for USPS to hold itself accountable to 
delivering a system that meets USPS’s and mailers’ needs. 

Risk Management: 

An effective risk management process identifies potential problems 
before they occur, so that risk-handling activities may be planned and 
invoked as needed across the life of the product and project in order 
to mitigate adverse impacts on achieving objectives. Key activities 
include assigning resources, identifying and analyzing risks, and 
developing risk mitigation plans and milestones for key mitigation 
deliverables. Additionally, a risk management strategy addresses the 
specific actions and management approach used to perform and control 
the risk management program. It also includes identifying and involving 
relevant stakeholders in the risk management process.[Footnote 26] 

With regard to risk management, program officials have: 

* assigned responsibility for managing the risks and; 

* identified and analyzed selected risks associated with schedule, 
performance, and testing. Examples of the selected program-level risks 
include: 

- limited mailer adaptation and adoption can affect future Full Service 
releases, 

- program success measurements are not defined, 

- parallel program activities have caused resource constraints, 

- components of scope have not been planned for release 2, and, 

- mailers require significantly more support than estimated to assist 
them with the implementation of the Intelligent Mail® barcode. 

However, they did not adequately identify all risks. For example, 

* While the USPS contracting officer indicated in the program 
management contract’s price negotiation memorandum that having the same 
company perform program management activities as well as development 
and implementation activities for the Full Service program is a major 
concern, program officials have not identified this as a risk or 
established a complete mitigation strategy. 

* Program officials stated that they include the list of risks the 
system development contractor identifies as part of the program 
management office’s risk reports. However, as of July 16, 2009, there 
was no evidence in the reports that contractor risks were being 
identified or mitigated. 

* While program officials are concurrently conducting activities for 
release 2 and unplanned post-deployment efforts for release 1, they 
have not identified potential schedule delays in release 2 as a risk or 
established a mitigation plan. 

Moreover, as we have previously reported,[Footnote 27] USPS lacks a 
risk mitigation plan, and therefore we recommended that USPS develop a 
plan that addresses how it will mitigate program-level risks. Although 
USPS agreed with this recommendation, it has not yet developed complete 
risk mitigation plans. During this review we found that while USPS 
recently finalized a risk management plan for release 2, it is not 
comprehensive and does not fully address the scope of the risk 
management effort, including discussing techniques for risk mitigation, 
defining adequate risk sources and categories, and identifying and 
involving relevant stakeholders to promote commitment and understanding 
of the process. 

The program’s weaknesses in the risk management area are partly due to 
the fact that USPS’s Technical Solution Life Cycle policy does not set 
forth sufficient requirements regarding risk management. 

Until program officials fully implement and institutionalize a risk 
management process that ensures the comprehensiveness of the risks 
identified, there is an increased probability that unanticipated risks 
may occur that could have a critical impact on the Full Service 
program’s cost, schedule, and performance. 

Product Integration: 

The scope of this process area is to achieve complete product 
integration through progressive assembly of product components. A 
critical aspect of this area is the management of internal and external 
interfaces of the products and product components to ensure 
compatibility among the interfaces. Attention should be paid to 
interface management throughout the project.[Footnote 28] In addition, 
a systems integration plan should be developed to identify all systems 
to be integrated, define roles and responsibilities of all relevant 
participants, establish the sequence and schedule for every integration 
step, and describe how integration problems are to be documented and 
resolved.[Footnote 29] 

With regard to product integration, program officials have identified 
approximately 30 systems that will need to be integrated in the Full 
Service program. However, USPS officials have stated that the number of 
systems that need to be integrated could change, and they are not yet 
aware of which specific systems will need to be integrated in release 2 
or in possible future releases. In addition, while program officials 
stated they have several program documents, such as testing strategies, 
they do not have a system integration plan, which is intended to 
support the deployment strategy and describe to key stakeholders in 
each integration step what needs to be done to effectively integrate 
the various systems. The program office also lacks documentation of the 
process associated with updating and maintaining the integration of the 
systems. 

Part of the reason that these activities have not been completed is 
that USPS’s Technical Solution Life Cycle policy does not set forth 
sufficient requirements regarding product integration and does not 
require that programs develop system integration plan and associated 
documentation regarding updating and maintaining the integration of the 
systems. 

Until program officials develop these key product integration 
documents, USPS will be limited in its ability to ensure that the 
product is integrated, functioning properly, and delivered on time and 
within budget to the users. 

[End of section] 

Conclusions: 

The current schedule for the full implementation of the Full Service 
program has been delayed by almost 10 months, and key functionality 
that was originally intended to be delivered in the program has been 
deferred indefinitely. In addition, the life cycle cost estimate that 
program officials prepared does not capture all the costs associated 
with the acquisition and implementation of the program. As a result, 
program officials lack an accurate total cost estimate. Moreover, the 
first deployed release is experiencing performance issues. 

While the Full Service program has implemented initial acquisition 
management activities, it does not have the full set of capabilities 
needed to fully manage the acquisition. A key cause of the program’s 
immature management approach in the areas of project planning, risk 
management, and product integration is that USPS organizational 
policies do not set forth sufficient requirements for establishing 
effective practices in these areas. Weaknesses exist in the program 
monitoring and control area because the program management contract 
itself creates a conflict of interest by requiring the contractor to 
assess the quality of its own deliverables, and oversee the program’s 
schedule, issues, and risks. Although USPS officials have told us they 
use strategies to avoid potential conflicts, such as developing a 
separate program management team from the system development team, they 
have not provided us with evidence that they have a formal mitigation 
plan in place to address the conflict that exists. 

While organizational policies exist for requirements development and 
management, weaknesses exist in this area, in part, because USPS 
decided not to follow USPS’s organizational policies for system 
acquisition and instead followed a truncated program management 
approach in an effort to deliver the system in a compressed timeframe. 
Without these processes in place, USPS increases the risk that this 
project will continue to encounter problems in meeting its performance, 
schedule, and cost objectives. 

Given that release 2 is expected to be implemented by the end of 
November 2009 and decisions about future releases need to be made, 
having the key elements of a sound acquisition management capability in 
place will be crucial to the program’s success in meeting its goal. 

[End of section] 

Recommendations for Executive Action: 

To ensure that USPS adequately manages the acquisition of the 
Intelligent Mail® Full Service program, we recommend that the 
Postmaster General direct the Chief Information Officer and Senior Vice 
President of Intelligent Mail and Address Quality to take the following 
six actions: 

* Develop a comprehensive cost estimate to include both government and 
contractor costs over the program’s full life cycle, from the inception 
of the program through design, development, deployment, and operation 
and maintenance to retirement. 

* Complete an overall program plan for the entire Full Service program, 
including an overview of the program’s scope of all releases, 
deliverables and functionality within these releases, plans to phase 
out the approximately 30 barcodes currently being utilized, assumptions 
and constraints, roles and responsibilities, staffing and training 
plans, and the strategy for maintaining the plan. 

* Reconsider the current contract arrangement to avoid having the 
contractor evaluate its own performance. 

* Define the core set of requirements for the entire program and use 
them as a basis for developing a reliable cost estimate. 

* Develop a risk management process that enables the program officials 
to develop an adequate risk management plan that fully address the 
scope of their risk management efforts; ensures that a comprehensive 
list of risks and complete mitigation plans are identified and tracked; 
and includes milestones, mitigating actions, thresholds, and resources 
for significant risks. 

* Develop and maintain a systems integration plan for release 2 and 
beyond. 

We are also recommending that the Postmaster General direct USPS’s 
Chief Information Officer to include in USPS’s Technical Solution Life 
Cycle policy, guidance for programs to develop (1) complete program 
plans that define overall budget and schedule, key deliverables and 
milestones, assumptions and constraints, description and assignment of 
roles and responsibilities, staffing and training plans, and an 
approach for maintaining these plans; (2) specific requirements for 
programs to establish a robust risk management process that identifies 
potential problems before they occur, such as requiring programs to 
develop a risk management plan; and (3) system integration plan that 
include all systems to be integrated with the system, roles and 
responsibilities for all relevant participants, the sequence and 
schedule for every integration step, and how integration problems are 
to be documented and resolved. 

[End of section] 

Agency Comments and Our Evaluation: 

We received comments via e-mail from the Senior Vice President of 
Intelligent Mail and Address Quality on a draft of these briefing 
slides.[Footnote 30] He did not state whether he agreed or disagreed 
with our recommendation to develop a comprehensive cost estimate. The 
Senior Vice President disagreed with our findings and conclusions 
regarding the program’s acquisition management capabilities. 

* With regard to project planning, he stated he disagreed with the 
static approach suggested in our briefing. He stated that the scope, 
requirements, and schedule of future releases are driven by a dynamic 
environment both internal and external to USPS. However, as we state in 
the briefing, industry best practices show that it is important to have 
an overarching program plan that describes the full scope of the 
program, including how many releases are planned, in order to ensure 
that the program is accomplishing its goals within the specified cost 
and schedule objectives. 

* Regarding project monitoring and control activities, the Senior Vice 
President provided additional clarifying information on executive-level 
oversight, which we have incorporated into the briefing as appropriate. 
He did not acknowledge that a conflict of interest exists. While the 
USPS contracting officer identified that having the same company 
perform program management activities as well as development and 
implementation activities for the Full Service program is a concern, 
the program office has not identified that this arrangement is a 
conflict of interest. In fact, the program office has not even 
identified this arrangement as a risk that it tracks in its risk 
tracking process. Despite this, program officials have explained 
actions they are taking to mitigate the potential risk of a conflict of 
interest, such as establishing separate teams for the program 
management staff and system development staff. However, they have not 
presented us with any evidence of a formal mitigation plan that is in 
place to address the actual conflict of interest that is introduced by 
the responsibilities that are specified in the program management 
office contract, which states that the contractor must assess the 
quality of deliverables and oversee the program’s schedule, issues, and 
risks. Unless USPS reconsiders the current contract arrangement to 
avoid having the contractor evaluate its own performance, there is an 
increased risk that the conflict of interest will negatively impact the 
program. 

* Regarding our findings with regard to requirements development and 
management activities, the Senior Vice President stated that he 
disagreed because there is not enough approved funding to define the 
requirements for the full program—they only received funding for a 
portion of the program. However, as we state in the briefing, without a 
core set of high-level requirements, it will be difficult for USPS to 
focus appropriately on the next release and to hold itself accountable 
to delivering a system that meets USPS's and mailers' needs. Defining 
these requirements is especially important given the functionality that 
is being deferred in the first two releases. 

* Regarding risk management activities, he stated that the program has 
a defined, active, cross-program process and a risk manager who is 
responsible for managing this process. While we acknowledge that the 
program has developed a tracking process, which includes assigning 
responsibility for managing and identifying risks, several key risks, 
such as the risk for potential schedule delays in release 2 as a result 
of conducting concurrent activities for release 2 and release 1, were 
not included by the program office as part of their risk reports and 
complete mitigation plans were not developed. Additionally, the 
recently finalized risk management plan for release 2 is not 
comprehensive and does not fully address the scope of the risk 
management effort. Until USPS develops a strategy for ensuring a 
comprehensive list of risks and that includes mitigation efforts, it 
increases the probability that unanticipated risks may occur that could 
have a critical impact on the program’s cost, schedule, and 
performance. 

* The Senior Vice President disagreed with our finding on product 
integration activities. He stated that a systems integration plan for 
conducting product integration was provided to us. However, the 
documents provided to us included testing strategies and not a system 
integration plan, which is intended to support the deployment strategy 
and to describe to key stakeholders in each integration step what needs 
to be done to effectively integrate the various systems. Until these 
key product integration documents are developed, USPS will be limited 
in its ability to ensure that the product is integrated and functioning 
properly. 

Additionally, USPS program officials did not state whether they agreed 
or disagreed with our recommendation that USPS include in its Technical 
Solution Life Cycle policy, guidance for programs to develop (1) 
complete program plans; (2) specific requirements for programs to 
establish a robust risk management process; and (3) system integration 
plan. 

[End of Briefing Slides section] 

Appendix II: Comments from the United States Postal Service: 

United States Postal Service: 
Thomas G. Day: 
Senior Vice President: 
Intelligent Mail And Address Quality: 
475 L'Enfant Plaza, SW: 
Washington DC, 20260-4400: 
202-268-6200: 
Fax: 202-268-4402: 

October 15, 2009: 

David A. Powner: 
Director, Information Technology Management Issues: 
U.S. Government Accountability Office (GAO): 
441 G Street, NW: 
Room 4721: 
Washington, DC 20548-0001: 

Dear Mr. Powner: 

This letter is the USPS response to the draft GAO report "Information 
Technology: U.S. Postal Service Needs to Strengthen System Acquisition 
and Management Capabilities to Improve Its Intelligent Mail Full 
Service Program". 

Over the course of the last nine months the Postal Service has worked 
closely with GAO Auditors to provide information and in-depth 
explanations about the Intelligent Mail® program. As the report 
indicates, the U.S. Postal Service has been responsive to a variety of 
finding and recommendations. The summary of the draft report lists five 
Acquisition Management Capabilities; 1) Project Planning; 2) Project 
Monitoring and Control; 3) Requirements Development and Management; 4) 
Risk Management and 5) Product Integration. In all five capabilities 
the GAO found that USPS had initiated steps to ensure the capability 
was in place. 

Despite the actions initiated by USPS to enhance these Acquisition 
Management Capabilities, the draft report continues to cite 
deficiencies. In several instances USPS is in agreement with the GAO 
finding and recommendation. Where we are in agreement, USPS has and 
will continue to enable these capabilities. However, there are several 
findings and recommendations to which there is a fundamental 
disagreement. 

The disagreement may result from GAO's continued use of the 2003 
Intelligent Mail® strategy document. For example, the draft report 
indicates "the program has been delayed by almost 10 months." This 
"delay" is measured against an original vision of Intelligent Mail® 
implementation in January 2009 and assumes that at that time ALL 
functionality would be in place at that time. 

Both the funding approval document (Decision Analysis Report - DAR) and 
the strategic vision document were updated to reflect the current plans 
for Intelligent Mail®. In the case of the DAR, the approved document 
details both the approved funds and the defined functionality for 
Release 1 and 2. This funding document also indicates that should 
additional capital funds be required for further enhancements to 
Intelligent Mail another DAR would be developed. The strategic vision 
document was updated in July 2009 and is posted on-line for access by 
mailers. The intent is to update the strategic vision document on an 
annual basis. 

From the standpoint of USPS, the GAO is utilizing an outdated document 
as the standard for performance. While the overall vision for 
Intelligent Mail® remains relatively stable, the specific plans for 
implementation have evolved significantly. 

The passage of the Postal Accountability and Enhancement Act in 2006 
created a significantly modified regulatory environment. For example, 
there is now a requirement to report service performance for all market 
dominant products. Intelligent Mail® will serve as the cornerstone for 
performance measurement for Pre-sort First Class, Periodical and 
Standard Mail. None of this was envisioned when the original vision was 
created in 2003. Further, the Postal Regulatory Commission is now 
undertaking a rule-making process that will further revise the means by 
which Intelligent Mail® will be employed to fulfill this requirement. 

Since 2003 significant improvements in both hardware and software have 
modified the specific plans to implement Intelligent Mail®. Further, 
the economic situation has significantly impacted the financial 
position of the USPS and many of its commercial customers. The scope, 
scale and schedule for implementation of Intelligent Mail must take 
this into consideration. The pace of implementation may be slowed or 
quickened based upon the financial position of USPS and its commercial 
customers. 

Measuring USPS Intelligent Mail® program implementation against a 
static document does not make sense. We will continue to update 
implementation plans in accordance with the evolving needs and 
capabilities of both USPS and its commercial customers. The expectation 
of the creation of a long-term static document, let alone measuring 
against that document is unrealistic. 

The following recommendations were included in the Draft report: 

* Develop a comprehensive cost estimate to include both government and 
contractor costs over the program's full life cycle, from the inception 
of the program through design, development, deployment, and operation 
and maintenance to retirement. 

The USPS experience with the use of Barcodes in a production 
environment spans over 2 decades. It is extremely difficult to envision 
the timeframe in which the use of Intelligent Mail® Barcodes will be 
retired. The creation of such a document would consume a significant 
amount of funding, time and resources, while providing little or no 
value. USPS has and will continue to focus on defined scope and 
requirements to determine costs. 

* Complete an overall program plan for the entire Full Service program, 
including an overview of the program's scope of all releases, 
deliverables and functionality within these releases, plans to phase 
out the approximately 30 barcodes currently being utilized, assumptions 
and constraints, roles and responsibilities, staffing and training 
plans, and the strategy for maintaining the plan. 

As indicated the strategic vision document was updated in July 2009 and 
will be updated on an annual basis. In addition, USPS works closely 
with the Mailing Industry to define both scope and requirements for 
upcoming releases. Rather than devote both USPS and Industry resources 
to theoretical releases, we will remain focused upon clearly defined 
actions in the immediate future. 

As previously indicated, a number of outside factors (evolving 
regulatory environment, economic/financial situation, improvements in 
technology, needs of customers, etc) do not lend themselves to the 
creation of a static planning document. 

* Reconsider the current contract arrangement to avoid having the 
contractor evaluate its own performance. 

We are in agreement that this arrangement should be reconsidered. At 
this time we have evaluated the risk and have provided appropriate 
mitigation. Longer term we need to consider the use of other vendors 
and create a seamless transition to ensure ongoing effective program 
management. 

* Define the core set requirements for the entire program and use them 
as a basis for developing a reliable cost estimate. 

As indicated in the response to the second bullet, this must remain a 
dynamic program. Any attempt to define "the entire program" and the 
cost associated is a waste of funding and resources. 

* Develop a risk management process that enables the program officials 
to develop an adequate risk management plan that fully address the 
scope of their risk management efforts; ensures that a comprehensive 
list of risks and complete mitigation plans are identified and tracked; 
and includes milestones, mitigating actions, thresholds, and resources 
for significant risks. 

USPS is in agreement with the recommendation, however disagrees with 
the finding. The finding would indicate that USPS lacks a process for 
creating and managing risk. On the contrary a robust process has been 
in place for many months and is actively managed by the leadership of 
the Intelligent Mail® program. 

* Develop and maintain a system integration plan for release 2 and 
beyond. 

USPS is in agreement with this recommendation on a release by release 
basis. As scope, requirements and design are reviewed and agreed upon 
within a given release; system integration is a critical aspect of the 
review. Attempting to determine system integration plans beyond defined 
requirements/design is ill-advised and not a "best practice". 

Signed by: 

Thomas G. Day: 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

David A. Powner at (202) 512-9286 or pownerd@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Shannin G. O'Neill, 
Assistant Director; Neil Doherty; Rebecca E. Eyler; Mary D. Fike; 
Franklin Jackson; Lee McCracken; Niti Tandon; Christy A. Tyson; and 
Adam Vodraska made key contributions to this report. 

[End of section] 

Footnotes: 

[1] GAO, U.S. Postal Service: Intelligent Mail Benefits May Not Be 
Achieved if Key Risks Are Not Addressed, [hyperlink, 
http://www.gao.gov/products/GAO-09-599] (Washington, D.C.: May 2009). 

[2] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009). 

[3] Commercial mailers include businesses, organizations, and other 
parties that send and rely on mail to maintain contact with their 
customers. The commercial mailers also encompass mail preparers, 
including printers and businesses that send or receive mail on behalf 
of a third party. As of 2008, these mailers accounted for 86 percent of 
all mail processed by USPS. 

[4] Carnegie Mellon Software Engineering Institute, Capability Maturity 
Model® Integration for Acquisition (CMMI-ACQ), Version 1.2 (November 
2007) and Carnegie Mellon Software Engineering Institute, Capability 
Maturity Model® Integration for Development (CMMI-DEV) Version 1.2 
(August 2006). 

[5] This concept, known as worksharing, generally involves mailers 
qualifying for reduced postage rates by performing certain activities 
such as preparing and barcoding mail so it can be sorted by USPS 
automated equipment. 

[6] Under firm fixed price contracts, the agency and the contractor 
agree on a price and the contractor assumes full responsibility for all 
costs and the resulting profit or loss. 

[7] GAO, U.S. Postal Service: Intelligent Mail Benefits May Not Be 
Achieved if Key Risks Are Not Addressed, [hyperlink, 
http://www.gao.gov/products/GAO-09-599] (Washington, D.C.: May 2009). 

[8] While program officials announced on August 12, 2009, that they are 
aiming to develop a third release by March 12, 2010, program officials 
indicated that they have not obtained funding to implement this release 
or future releases. 

[9] 73 Fed. Reg. 1158 (Jan. 7, 2008). 

[10] 73 Fed. Reg. 23393 (April 30, 2008). 

[11] The 2006 Postal Accountability and Enhancement Act required USPS 
to develop a system to measure and report service performance to the 
Postal Regulatory Commission. 

[12] The Postmaster General testified in January 2009 that USPS was 
facing a potential net loss of $6 billion or more for fiscal year 2009. 
He noted that USPS anticipated continued deterioration due to the 
economic slowdown, as the financial, credit, and housing sectors are 
among its key business drivers. 

[13] GAO, Restructuring the U.S. Postal Service to Achieve Sustainable 
Financial Viability (New), [hyperlink, 
http://www.gao.gov/products/GAO-09-937SP] (Washington, D.C.: July 
2009). 

[14] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, GAO-09-3SP (Washington, 
D.C.: March 2009). 

[15] For example, GAO, Information Technology: Management Improvements 
Needed on Immigration and Customs Enforcement’s Infrastructure 
Modernization Program, [hyperlink, 
http://www.gao.gov/products/GAO-05-805] (Washington, D.C.: September 7, 
2005) and Census Bureau: Important Activities for Improving Management 
of Key 2010 Decennial Acquisitions Remain to be Done, [hyperlink, 
http://www.gao.gov/products/GAO-06-444T] (Washington, D.C.: March 1, 
2006). 

[16] Carnegie Mellon Software Engineering Institute, Capability 
Maturity Model® Integration for Acquisition (CMMI-ACQ), Version 1.2 
(November 2007). 

[17] Carnegie Mellon Software Engineering Institute, Capability 
Maturity Model® Integration for Development (CMMI-DEV), Version 1.2 
(August 2006). 

[18] CMMI-ACQ, Version 1.2 (November 2007) and The Institute of 
Electrical and Electronics Engineers, IEEE Standard for Software Life 
Cycle Processes—Project Management Plans, IEEE Standard 1058-1998 
(December 8, 1998). 

[19] [hyperlink, http://www.gao.gov/products/GAO-09-599]. 

[20] CMMI-ACQ, Version 1.2 (November 2007). 

[21] GAO, Information Technology Investment Management: A Framework for 
Assessing and Improving Process Maturity, [hyperlink, 
http://www.gao.gov/products/GAO-04-394G] (Washington, D.C.: March 
2004). 

[22] The critical path is the longest duration path through the 
sequenced list of key program activities. 

[23] 48 C.F.R. 1.101; 1.104; 2.101(b) (“Acquisition” defined). The FAR 
generally applies to acquisitions made with appropriated funds used to 
obtain supplies or services for the federal government. 

[24] 48 C.F.R. 9.505(a). 

[25] CMMI-ACQ, Version 1.2 (November 2007). 

[26] CMMI-ACQ, Version 1.2 (November 2007). 

[27] [hyperlink, http://www.gao.gov/products/GAO-09-599]. 

[28] CMMI-DEV, Version 1.2 (August 2006). 

[29] U.S. Department of Transportation, Federal Highway Administration, 
Systems Engineering Guidebook for ITS Version 2, January 2, 2007. 

[30] The Senior Vice President revised the agency’s position on GAO’s 
seven recommendations in written comments dated October 15, 2009. See 
appendix II. 

[End of section] 

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