United States Postal Service: Opportunities to Strengthen IT
Investment Management Capabilities (15-OCT-02, GAO-03-3).
The U.S. Postal Service invests hundreds of millions of dollars
in information technology (IT) each year to support its mission
of providing prompt, reliable, and efficient mail service to all
areas of the country. It must support these operations through
the revenues it earns for its services. Growing operating
expenses and capital needs in the face of reduced revenues
highlight the need for the Postal Service to invest its IT
dollars wisely. Accordingly, the Senate Committee on Governmental
Affairs and its Subcommittee on International Security,
Proliferation, and Federal Services asked GAO to evaluate how
well the Postal Service manages its IT investments.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-3
ACCNO: A05283
TITLE: United States Postal Service: Opportunities to Strengthen
IT Investment Management Capabilities
DATE: 10/15/2002
SUBJECT: Financial management
Information technology
Investment planning
Investments
Postal service
Best practices
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GAO-03-3
A
Report to Congressional Committees
October 2002 UNITED STATES POSTAL SERVICE Opportunities to Strengthen IT
Investment Management Capabilities
GAO- 03- 3
Letter 1 Executive Summary 2
Purpose 2 Background 2 Results in Brief 5 Principal Findings 6
Recommendations for Executive Action 9 Agency Comments and Our Evaluation
10
Chapter 1 11
Introduction Postal Service*s Mission and Organization 11
Postal Service*s Information Technology Environment 14 Weaknesses in the
Postal Service*s Investment Management Process 15
Postal Service*s Approach to Investment Management 16 IT Investment
Management Framework 23 Objective, Scope, and Methodology 26
Chapter 2 28
Postal Service Boards Are Established but Operating without a Complete
Process
Guide 29 Executes Most Key
CTO Organization Oversees IT Investments 32 Foundational Practices
IT Project and System Information Is Maintained to Support Project
Management 36 Processes Ensure That IT Investments Support Business Needs
and
Meet User Needs 39 Structures Are in Place for Selecting IT Investment
Proposals 40
Chapter 3 43
Postal Service Shows Portfolio Selection Criteria Are Defined, but Do Not
Adequately
Address All Factors 45 Mixed Progress in IT Investments Are Not
Consistently Analyzed and Prioritized within Managing Its IT
the Context of a Portfolio 47 Investments as a An IT Investment Portfolio
Is Developed, but Project Expectations
Are Not Routinely Revised 50 Portfolio
Portfolio Performance Oversight Is Performed, but without Comprehensive
Guidance 53
Chapter 4 56
Postal Service Has Yet Policies and Procedures Are Defined, but Post-
Implementation Review Process Is Not Institutionalized 58
to Implement IT Investments Are Not Evaluated from the Perspective of
Portfolio Processes to Better
Performance 60 Meet Strategic Goals
Process for Managing Succession of Systems and Technology Is Not
Established 62 Activities for Benchmarking the Investment Process Are Not
Institutionalized 65 Potential Impacts of Leading Technologies Are Not
Routinely
Considered in Strategic Planning Efforts 66 Chapter 5
70 Conclusions,
Conclusions 70 Recommendations for Executive Action 70 Recommendations,
Agency Comments and Our Evaluation 72 and Agency Comments
Appendixes
Appendix I: Postal Service Projects with Major IT Components in
Development or Deployment 74
Appendix II: Postal Service IT Projects That GAO Reviewed 76 Enhanced
Security Capability Program 77 Organization Structure, Staffing and
Management 78 Point of Service ONE System 79 Surface- Air Management
System 79
Appendix III: Comments from the United States Postal Service 81
Appendix IV: GAO Contact and Staff Acknowledgments 83 GAO Contact 83
Acknowledgments 83
Tables Table 1: Stage Two* Critical Processes Required for Building the
Investment Foundation 28 Table 2: Summary of Results for Stage Two
Critical Processes and
Key Practices 29 Table 3: IT Investment Board Operation 31 Table 4: IT
Project Oversight 35 Table 5: IT Project and System Identification 38
Table 6: Business Needs Identification 40 Table 7: Proposal Selection 42
Table 8: Stage Three* Critical Processes Required for Developing a
Complete Investment Portfolio 43 Table 9: Summary of Results for Stage
Three Critical Processes and
Key Practices 44 Table 10: Portfolio Selection Criteria Definition 46
Table 11: Investment Analysis 49 Table 12: Portfolio Development 52 Table
13: Portfolio Performance Oversight 55 Table 14: Stages Four and Five*
Critical Processes Required for Improving the Investment Process and
Leveraging IT for
Strategic Outcomes 57 Table 15: Summary of Results for Stages Four and
Five Critical Processes and Key Practices 58
Table 16: Post- Implementation Reviews and Feedback 60 Table 17: Portfolio
Performance Evaluation and Improvement 62 Table 18: Systems and Technology
Succession Management 64 Table 19: Investment Process Benchmarking 66
Table 20: IT- Driven Strategic Business Change 69 Table 21: Postal Service
IT Projects in Development or
Deployment 74 Table 22: Postal Service IT Projects Selected by GAO for
Review 76 Table 23: POS ONE DARs 79
Figures Figure 1: The Five Stages of Maturity within ITIM 5 Figure 2:
Overview of the Organizational Structure of the Postal Service 13
Figure 3: Capital Planning and Budgeting Cycle 19 Figure 4: Process for
Approving Major New Projects 21 Figure 5: Project Control and Evaluation
Process 23 Figure 6: The Five Stages of Maturity with Critical Processes
25
Abbreviations
ACDCS Air Contract Data Collection System B& FA Budget and Financial
Analysis BCS Business Case System CAPE Capital and Program Evaluation CFO
Chief Financial Officer CIC Capital Investment Committee CIO Chief
Information Officer CPC Capital Projects Committee CPS Corporate Planning
System CTO Chief Technology Officer DAR Decision Analysis Report EIR
Enterprise Information Repository ESC Enhanced Security Capability IRB
Investment Review Board IT information technology ITIM information
technology investment management OSS& M Organization Structure, Staffing
and Management POS ONE Point of Service ONE PTRS Program Tracking and
Reporting System SAMS Surface- Air Management System
Executive Summary Purpose The United States Postal Service invests
hundreds of millions of dollars
each year in information technology (IT) to provide prompt, reliable, and
efficient mail service to all areas of the country. The Postal Service is
intended to be self- supporting from postal operations and is mandated to
break even over time. Yet the Postal Service is currently facing a
financial
crisis brought about by declining revenues and growing operating expenses
and capital needs. In April 2001, GAO designated the Postal Service*s
transformational efforts and long- term outlook as High Risk, 1 noting
that the Postal Service is at growing risk of not being able to continue
its
mission of providing the current level of universal service throughout the
nation while maintaining reasonable rates and remaining largely
selfsupporting through postal revenues.
A successful method of helping to improve operational effectiveness and
efficiency is to implement a structured process for maximizing the value
and minimizing the risk of IT investments. GAO*s research into the
management practices of leading organizations demonstrates that effective
management of investments requires the use of disciplined, structured
investment management processes. Given the Postal Service*s large
expenditures for IT and its deteriorating financial position, the Chairmen
and Ranking Minority Members of the Senate Committee on Governmental
Affairs and its Subcommittee on International Security, Proliferation, and
Federal Services requested that GAO assess the Postal Service*s IT
investment management capabilities. In addressing this request, GAO used
its IT Investment Management Framework 2 and assessed the Postal Service
against the different stages of this framework. Background With nearly
800,000 career employees, the Postal Service is the second
largest U. S. employer compared with U. S. private sector organizations,
with a mission that remains vital to the nation*s communication and
commerce even in an age of overnight delivery services and electronic
communications. It maintains an extensive infrastructure, consisting of
over 38, 000 post offices, branches, and stations and 350 major mail 1 U.
S. General Accounting Office, Transformation Challenges Present
Significant Risks,
GAO- 01- 598T (Washington, D. C.: Apr. 4, 2001). 2 U. S. General
Accounting Office, Information Technology Investment Management: A
Framework for Assessing and Improving Process Maturity (Exposure Draft),
GAO/ AIMD10. 1. 23 (Washington, D. C.: May 2000).
processing and distribution facilities. The Postal Service relies heavily
on IT throughout its operations and management processes to run the
machines that process and sort mail, efficiently assign long- distance
transportation of mail to alternative surface and air carriers, support
pointof- service terminals, collect and analyze inventory and sales
information, process payroll and accounts payable, and perform other
activities. Communication networks also play a vital role in linking
together various elements of the Postal Service*s infrastructure and
transmitting information to various locations for storage, processing, and
analysis. For fiscal year
2002, the Postal Service approved approximately $583 million for IT,
including funds for both capital investments and operating expenses.
The Postal Service has reported that it is providing customers with added
value; improving the efficiency of operations; containing costs; fostering
a performance- based culture; and improving management of enabling
functions, such as financial management, purchasing, and IT. 3 The Postal
Service has established the specific goal of obtaining organizationwide
connectivity through IT to enable it to enhance security, add valuable
product features, and manage its operations in real time. Based on
research into the IT investment management practices of leading private-
and public- sector organizations, GAO has developed an information
technology investment management maturity (ITIM) framework. This framework
identifies critical processes for successful IT investment organized into
a framework of five increasingly mature stages.
The ITIM is intended to be used both as a management tool for implementing
these processes incrementally and as an evaluation tool for determining an
organization*s current level of maturity. The overriding purpose of the
framework is to encourage investment processes that increase business
value and mission performance, reduce risk, and
increase accountability and transparency in the decision process. This 3
United States Postal Service, United States Postal Service Transformation
Plan.
(Washington, D. C.: Apr. 1, 2002).
framework has been used in several GAO evaluations 4 and has been adopted
by a number of agencies.
These agencies have used ITIM for purposes ranging from self- assessment
to redesign of their IT investment management processes. The five stages
of the framework represent increasing levels of maturity in managing IT
investments. Stages two, three, four, and five each build on the preceding
one and represent steps toward achieving more stable and effective
processes for managing IT investments. With the exception of the first
stage* characterized by the general absence of investment management
processes* each maturity stage consists of critical processes that must be
implemented and institutionalized for the organization to satisfy the
requirements of that stage and be able to advance to the next stage. These
critical processes are further broken down into key practices* the
specific
tasks and conditions that must be in place for an organization to
effectively implement the necessary critical processes. Figure 1 shows
ITIM*s five stages of maturity.
4 U. S. General Accounting Office, Information Technology: INS Needs to
Strengthen Its Investment Management Capability, GAO- 01- 146 (Washington,
D. C.: Dec. 29, 2000); U. S. General Accounting Office, Information
Technology Management: Coast Guard Practices Can Be Improved, GAO- 01- 190
(Washington, D. C.: Dec. 12, 2000); U. S. General Accounting Office,
Information Technology Management: Social Security Administration
Practices Can Be Improved, GAO- 01- 961 (Washington, D. C.: Aug. 21,
2001); U. S. General Accounting Office, Information Technology: DLA Needs
to Strengthen Its Investment Management Capability, GAO- 02- 314
(Washington, D. C.: Mar. 15, 2002).
Figure 1: The Five Stages of Maturity within ITIM Source: GAO.
Results in Brief The Postal Service has established significant
capabilities for managing its IT investments. It has in place numerous
foundational practices for
selection and control, such as a detailed review and approval process for
new projects, tracking of project cost and schedule data, and
identification of its business needs, and it involves users in project
development. These stage two processes provide assurance that the projects
selected meet the
Service*s organizational needs and will be completed on time and within
budget. However, the Postal Service has yet to develop comprehensive
guidance to address all aspects of the investment management process. Such
guidance would allow the Service to better coordinate its IT investment
management process and ensure that the process is performed
consistently throughout the organization. The Postal Service performs many
of the practices that are key to a stage three level of maturity, such as
managing a portfolio of IT investments. For example, the Service performs
many of the activities for developing a portfolio of investments and
overseeing these investments. However, the
processes for annually selecting and overseeing the investment portfolio
are not documented. Further, the Postal Service does not analyze,
prioritize, or select its portfolio using criteria that adequately address
cost, benefit, schedule, and risk. Accordingly, the Postal Service cannot
ensure that it is selecting the investments that will maximize returns to
the
organization, taking into account the appropriate level of risk. Finally,
the Postal Service has a number of steps to take before it has attained
the maturity of a stage four or five organization* systematically
improving the investment process and using IT to achieve business
outcomes. For example, the Postal Service does not either regularly
evaluate the performance of completed projects or have a process to
evaluate its investment portfolio or to manage the succession of its IT
investments. Further, the Service does not have a process to measure
itself against other organizations and is not yet in a position to use
evaluation
techniques to continually improve both the investment portfolio and the
investment process to better achieve strategic outcomes.
Principal Findings Postal Service Executes
To develop sound capabilities in investment management, an organization
Most Key Foundational must first be capable of controlling its investments
so that they finish Practices predictably within established cost and
schedule expectations, and it must have in place basic capabilities for
selecting new IT investments. An organization must also have an
established investment board that is
responsible for managing its investments and investment processes. The
Postal Service has established many basic investment selection and control
capabilities. At the enterprise level, it manages all capital investments
through a consistent set of management processes. Still, opportunities
exist to strengthen aspects of core enterprisewide practices for IT
investment management. For example, the Postal Service has not
developed organizationwide policies and procedures to guide the different
enterprise- level management entities involved in the investment process.
Nor has it developed guidance for management oversight of IT projects. As
a result, it may not reap the benefits of a consistent and coordinated
approach to investment management to be gained by institutionalizing those
practices that it is performing.
Postal Service Shows Mixed Organizations need to create a complete
investment portfolio* consisting
Progress in Managing Its IT of projects that are proposed, under
development, and in operation* and Investments as a Portfolio
continuously assess and manage their investments on the basis of expected
and actual cost, benefit, schedule, and risk data. Taking such a portfolio
perspective enables organizations to assess their investments
comprehensively, considering proposals along with previously funded
investments and selecting the mix of investments that best meets their
mission needs. The perspective of the portfolio enables organizations to
rise above selecting and controlling projects that best meet the
objectives of narrow program areas to selecting and controlling projects
that best meet the organization*s overall goals.
The Postal Service performs a number of practices that are key to
developing and managing a complete investment portfolio. For example, it
provides adequate resources for analyzing investments and developing the
portfolio. The Service validates the cost, benefit, schedule, and risk
data it uses in analyzing investments. The Service also assigns its IT
investments to logical categories and distributes its portfolio selection
criteria throughout the organization. The Postal Service has not
established organizationwide policies and procedures for selecting,
analyzing, and overseeing its IT portfolio. While the Service selects its
annual investment portfolio using established criteria, these criteria do
not adequately address cost, benefit, schedule, and risk factors. Senior
executives do not receive sufficient information to aid them in selecting
and overseeing the portfolio. For example, the quarterly Investment
Highlights provides information on the status of projects, but it does not
include complete information on costs. Further,
the Postal Service does not have a defined process for reporting problems
in a project*s performance to senior executives.
Because the Postal Service lacks established policies and procedures for
selecting, analyzing, and overseeing its investment portfolio, and because
its selection criteria are inadequate, it risks choosing individual
investments in an ad hoc fashion. A portfolio developed in this way may
not best meet the Service*s needs. In addition, because information they
need for oversight is incomplete, senior executives may be unable to
determine whether the investment portfolio is performing as expected.
Postal Service Has Yet to As an organization builds its investment
management capabilities, it should Implement Higher Level begin using
evaluation techniques to improve its investment processes and Processes to
Better Meet its portfolio while maintaining mature control and selection
processes. The Strategic Goals
post- implementation review is a key tool for comparing the outcome of a
completed investment with the expectations described in its business case.
Another higher level process is planning for the retirement of systems and
their replacements, so that low- value systems are retired to make way for
higher- value systems, and the transition between systems is smooth.
Finally, an organization that completes the implementation of its
selection, control, and evaluation processes should seek to continuously
improve its capabilities for using IT investments to support and improve
business outcomes.
Within these higher- level processes, the Postal Service has developed
guidance and training for performing post- implementation reviews. In
addition, the Postal Service prepares an integrated financial plan that
includes an estimate of overall return on investment. It has also
allocated resources for identifying strategic uses for emerging
technologies. The Postal Service, however, is not regularly performing
postimplementation reviews of completed investments to determine whether
they have achieved the expected benefits at the estimated cost or to
determine if investment management processes should be revised. Nor has
the Postal Service evaluated the performance of its investment portfolio
beyond determining the return on investment. While the Postal Service has
developed guidance for the retirement of systems, it does not have a
process for routinely identifying and analyzing investments for succession
and planning for their migration to their successors. The Postal Service
also lacks a process for benchmarking other organizations* investment
management approaches with the intention of improving its own internal
processes. Finally, the Postal Service does not have a process for
identifying, evaluating, and implementing leading- edge IT products and
processes to achieve strategic changes to the business. Although these
weaknesses are associated with high- level maturity processes, performing
additional key practices in these areas will help the
Postal Service to better evaluate and continuously improve its management
processes and its investment and portfolio performance, learn from other
organizations, and use breakthrough technologies to improve strategic
outcomes.
Recommendations for To strengthen the Postal Service*s capabilities for
investment management
Executive Action and address the weaknesses discussed in this report, we
recommend that the Postmaster General develop a plan that initially
focuses on correcting
the weaknesses in critical processes associated with maturity stages two
and three before addressing the weaknesses at maturity stages four and
five, because critical processes at the lower stages provide the
foundation for building those at higher maturity stages. The plan should
be developed within 6 months. At a minimum, the plan should specify an
approach to
develop comprehensive guidance that defines and describes the complete
investment management process, unifies existing processes enterprisewide,
and reflects changes in processes as they occur;
develop additional process guidance, as needed, to completely define the
operations and decision- making processes of investment boards and other
management entities involved in managing IT investments;
ensure that cost, benefit, schedule, and risk expectations are set and
approved in the original business case for each investment; that accurate
and complete actual cost, benefit, schedule, and risk data are
tracked against these expectations; and that status information on these
four criteria is periodically reported to executive- level investment
boards; and
establish a structured, transparent, and documented portfolio selection
process that assesses, prioritizes, selects, and funds investments
according to established portfolio selection criteria, including explicit
cost, benefit, schedule, and risk criteria.
The Postmaster General should ensure that the plan specifies measurable
goals and time frames, prioritizes initiatives, designates a senior
manager responsible and accountable for directing and controlling the
improvements, and establishes review milestones. After addressing the
stage two and three processes, the Postal Service should create processes
required for stages four and five that, at a minimum
ensure that guidance for conducting post- implementation reviews is
complete, including criteria for selecting systems for review, and that
post- implementation reviews are conducted on all appropriate systems,
establish a process for evaluating and improving portfolio performance,
establish a process for managing the succession of systems and
technology,
establish a process to benchmark the investment processes of leading
organizations to identify opportunities for improvement, and
establish a process to employ IT investments strategically to improve
business outcomes. Agency Comments and
The Postal Service*s Chief Financial Officer provided written comments on
Our Evaluation
a draft of this report (reprinted in app. III). In these comments, the
Postal Service stated that the report offered an opportunity to consider
changes and improvements in its IT investment management processes. The
Service added that it would carefully evaluate each of the report*s
recommendations to determine the necessary actions for adopting and
integrating key practices outlined in the GAO ITIM model that are
appropriate for the Postal Service.
The Postal Service identified a few key points where it differed from
GAO*s IT investment management framework. In succession planning, the
Postal Service stated that it uses an institutionalized portfolio approach
to address
the succession of its IT hardware, software, and systems. While this
approach may be appropriate as part of a succession management process,
our evaluation found that the Postal Service does not have a process for
regularly reviewing the performance of existing systems against
established criteria.
The Postal Service also provided comments pertaining to postimplementation
reviews that describe cost studies, the budget process, and the activities
of the Office of Inspector General as satisfying this critical process. We
disagree with the Postal Service in this matter. While guidance
for cost studies does exist, budget activities and Inspector General
evaluations do not satisfactorily address the requirements of this
critical process, and the Service provided evidence of only three
postimplementation cost studies having been conducted since 1990.
Chapt er 1
Introduction Postal Service*s The Postal Reorganization Act of 1970 (P. L.
91- 375) created the United Mission and
States Postal Service, an independent, self- supporting organization,
replacing the former United States Post Office Department. The act
Organization
charges the Postal Service with binding the nation together through the
personal, educational, literary, and business correspondence of the people
and providing reliable and efficient mail services to all areas of the
country. The Postal Service is intended to be self- supporting from postal
operations
and is mandated to break even over time. With nearly 800,000 career
employees, the Postal Service is the second largest employer compared with
U. S. private sector organizations. It has an extensive infrastructure,
consisting of more than 38,000 post offices, branches, and stations; 240,
000 delivery routes to over 137 million delivery addresses; a fleet of
215,000 vehicles; 350 major processing and distribution facilities; and
nearly 800,000 career employees.
The Postal Service is now facing a financial crisis brought about by
declining revenues and growing operating expenses and capital needs,
including the cost of existing and new investments in information
technology (IT). In February 2002, we reported significant declines in the
Postal Service*s net income from fiscal year 1995 to fiscal year 2001 and
a net loss of $1. 68 billion in fiscal year 2001 alone, resulting in part
from declining mail volumes and from terrorist incidents. 5 In April 2001,
we placed the Postal Service*s transformational efforts and long- term
outlook on our High- Risk list, noting that the Postal Service is at
growing risk of not being able to continue its mission of providing the
current level of universal service throughout the nation while maintaining
reasonable rates and remaining largely self- supporting through postal
revenues.
The Postal Service has acknowledged the need for a new business model in
light of these events and various trends now shaping the delivery services
marketplace, such as consumer interest in new service types and increasing
security concerns. Other increases in the cost of doing business, such as
the rising costs of retirement and health benefits, heighten the need for
action. To conserve cash and limit debt, the Postal Service has
continued its freeze on capital spending for most facility projects, and
its 5 U. S. General Accounting Office, U. S. Postal Service: Deteriorating
Financial Outlook Increases Need for Transformation, GAO- 02- 355
(Washington, D. C.: Feb. 28, 2002). U. S. General Accounting Office, U. S.
Postal Service: Financial Outlook and Transformation Challenges, GAO- 01-
733T (Washington, D. C.: May 15, 2001).
total budgeted capital outlays have declined in fiscal year 2002 for the
third consecutive year to $2.2 billion.
The Postal Service has reported that it plans to respond to these trends
by providing customers with added value, improving the efficiency of
operations, containing costs, fostering a performance- based culture, and
improving its management of enabling functions such as financial
management, purchasing, and IT. 6 The Postal Service has established the
specific goal of connecting all of its components through IT, to enable it
to enhance security, add valuable product features, and manage its
operations in real time.
The Postal Service accounts for its expenditures in separate expense and
capital accounts, according to Generally Accepted Accounting Principles to
which public financial reporting by U. S. corporations must conform.
Expenditures categorized as *expense* generally comprise operating costs
and are primarily funded through a general operating budget. Expenditures
categorized as *capital* are for one- time costs, are project- specific,
and are depreciated.
The Postal Reorganization Act vested direction of the Postal Service in an
eleven- member Board of Governors, including nine appointed by the
President. The nine governors appoint the Postmaster General, who is the
Chief Executive Officer, and who, with the nine governors, appoints the
Deputy Postmaster General. The Postal Service*s executive vice presidents
are the Chief Operating Officer and the Chief Financial Officer. The
Postal Service has senior vice presidents for Government Relations and
Public Policy, Human Resources, Operations, Office of the Chief Marketing
Officer, and Office of the Chief Technology Officer. Figure 2 shows an
overview of the Postal Service*s current organizational structure.
6 United States Postal Service, United States Postal Service
Transformation Plan (Washington, D. C.: April 2002).
Figure 2: Overview of the Organizational Structure of the Postal Service
Source: U. S. Postal Service.
Postal Service*s The Postal Service has come to rely increasingly on IT.
In the early 1980s, it Information
used data centers and mainframe computers to support administrative
functions such as personnel, accounting, and payroll processing. In the
Technology
mid- 1980s, the Postal Service began to incorporate IT into its core
business Environment
activities by interconnecting various components of its mail processing
system through telecommunications and automation. Today, the organization
relies on IT throughout the full range of its operations and
management processes to run the machines that process and sort mail,
assign mail efficiently to alternative surface and air carriers, support
pointof- service terminals, collect and analyze inventory and sales
information, process payroll and other accounts payable, and perform other
activities. Communication networks also play a vital role in linking
together various elements of the Postal Service*s infrastructure and
transmitting information to various locations for storage, processing, and
analysis. The Postal
Service expended approximately $700 million for IT in fiscal year 2002 and
plans to spend about $1 billion for IT in fiscal year 2003.
The Postal Service currently manages almost 650 IT systems and
applications that operate in support of postal functions. It has 24 IT-
related projects in development or recently completed, each estimated to
cost at least $10 million. The total investment cost estimated for these
projects since 1997 is more than $2 billion, ranging from about $10
million to about
$404 million per project. (See app. I for a list of the Postal Service*s
ITrelated projects currently in progress.) Projects with major IT
components in development or implementation phases include the following:
Point of Service ONE* A retail point- of- sale information system that
is intended to replace outdated retail terminals at postal retail windows
and provide more timely and accurate information.
Associate Office Infrastructure* Expected to support a common
information system for retail, delivery, and administrative operations in
post offices.
Delivery Operations Information System* Scheduled to replace three
current information systems and assist delivery unit supervisors in
managing office activities, planning street activities, and managing route
inspection and adjustment activities.
Time and Attendance Collection System* Expected to replace five existing
time and attendance systems and enable labor resources
to be more efficiently allocated by providing supervisors with accurate,
real- time labor data by type of work being performed.
Advanced Computing Environment* A major infrastructure modernization
initiative that is expected to replace existing workstations and
transitions applications to a Web- based environment.
Weaknesses in the Given the challenges the Postal Service currently faces,
effective Postal Service*s
management of its existing and new IT investments is crucial if it is to
provide the service expected while remaining self- supporting. However,
Investment recent reviews, performed by the Postal Service*s Office of
Inspector Management Process
General (OIG) and by us, have raised some concerns regarding the Service*s
investment management. The OIG has identified weaknesses in the management
of some investments in recent years. For example, in September 2001, the
OIG reported that projects have been proposed to the Board of Governors
for approval without adequate documentation and analyses and that other
projects may not achieve anticipated performance and financial results. 7
In March 2001, the OIG*s review of the Delivery Operations Information
System found weaknesses in the methods and
assumptions that were used to derive figures on estimated savings and
return on investment. 8 In September 1999, the OIG found that Point of
Service ONE was not achieving the results outlined in its business case. 9
The Postal Service has made enhancements to its investment policies and
procedures to address the issues the OIG raised. In September 2000, we
identified a number of issues with the management of the Postal Service*s
e- commerce program, including inconsistencies in reviewing and approving
e- commerce initiatives and deficiencies in the financial data reported.
We made several recommendations to the Postal Service that addressed these
issues. This program was subsequently scaled back by the
7 United States Postal Service, Office of Inspector General, Decision
Analysis Report Process, DA- AR- 01- 005 (Arlington, VA: Sept. 27, 2001).
8 United States Postal Service, Office of Inspector General, Delivery
Operations Information System, DA- AR- 01- 003 (Arlington, VA: Mar. 29,
2001). 9 United States Postal Service, Office of Inspector General, Point
of Service ONE, DA- AR- 99002 (Arlington, VA: Sept. 20, 1999).
Postal Service, as both revenues and customer response fell below
expectations. 10 Postal Service*s
Several individuals and oversight boards are involved in managing IT
Approach to investments, from reviewing and approving a proposed IT
project, through
the process of budgeting for it and monitoring it once it is implemented,
Investment
and evaluating it at its conclusion. These individuals and oversight
boards Management
and their roles are described below.
Board of Governors* Eleven- member board that governs the Postal
Service; comprises the Postmaster General, the Deputy Postmaster General,
and nine Presidential appointees; expected to approve any project with
capital and *expense investment* 11 costs of $10 million or
more.
Capital Projects Committee (CPC)* Three members of the Board of
Governors who are to review proposals for any new project with capital and
expense investment costs of $10 million or more and make recommendations
to the full Board on whether to approve it.
Postmaster General* Chief Executive Officer of the Postal Service and a
member of the Board of Governors; expected to approve or review any
project with capital and expense investment costs of $7.5 million or more.
Establish Team* Comprises the Deputy Postmaster General, the Chief
Financial Officer, the Chief Operating Officer, the Chief Marketing
Officer, the Senior Vice Presidents of Operations and Human Resources,
the Controller, and a field vice president; is to set financial and
nonfinancial goals for the Postal Service at the start of its annual
planning and budgeting process and determine funding for existing and
proposed IT projects as part of the budget formulation process.
10 U. S. General Accounting Office, U. S. Postal Service: Postal
Activities and Laws Related to Electronic Commerce, GAO/ GGD- 00- 188
(Washington, D. C.: Sept. 7, 2000) and U. S. General Accounting Office, U.
S. Postal Service: Update on E- commerce Activities and Privacy
Protections, GAO- 02- 79 (Washington, D. C.: Dec. 21, 2001). 11 Expense
investments are a special category of expense. They are generally one-
time expenditures in support of the development or deployment of a major
project. Routine operating expenses are not considered expense
investments.
Capital Investment Committee (CIC)* Comprises the Chief Technology
Officer (CTO) and other senior executives. Is to review proposals for any
project with capital and expense investment costs of $7. 5 million or
more.
Deploy Team* Comprises several vice presidents; with the Establish Team,
is to determine funding for IT projects as part of the Postal Service*s
annual planning and budgeting process.
Vice President of Finance (Controller)* Is to review and validate
proposals for any project with capital and expense investment costs of $5
million or more.
Capital and Program Evaluation (CAPE)* Group within the Finance
Department under the Controller. During the review process for new
projects, is expected to validate the assumptions and cost, benefit, and
schedule estimates; prepare the Postal Service*s 5- year Capital
Investment Plan (CIP); monitor projects with capital and expense
investment costs of $5 million or more; and perform cost studies of
selected completed projects.
Chief Technology Officer (CTO) Organization* Comprises the Office of the
CTO and the Information Technology Department headed by the Chief
Information Officer (CIO). The CTO organization assists other functional
units in developing business cases for projects that have an IT component.
It is also involved in the project concurrence process, where feedback on
a project is given to the sponsoring organization by functional areas and
relevant field units. The CTO organization is also responsible for
developing systems standards and requirements for organizationwide
compliance. At the strategic level, the CTO and CIO recommend and present
corporatewide IT projects before the Establish Team during the annual
capital planning cycle. CTO Investment Review Board* Three- member board
comprises the CTO, CIO, and Manager of IT Value; is to manage the process
of
selecting projects within the CTO organization, review the performance of
all IT projects in development, and conduct detailed reviews of selected
IT projects on a monthly basis.
The Postal Service has established a number of capital planning,
investment control, and budgeting processes to manage its IT investments.
These include processes for (1) developing the investment portfolio, (2)
approving major new projects, and (3) controlling and evaluating projects.
Process for Developing the The Postal Service*s annual capital planning
and budgeting cycle begins in Investment Portfolio
January with a process called the CustomerPerfect! management cycle. The
Establish Team and the Deploy Team, composed of Postal Service executives,
manage this annual organizationwide direction- setting process, led by
Operations and aided by the Budget and Financial Analysis (B& FA) and the
Capital and Program Evaluation (CAPE) groups within the Finance
Department. The Establish Team is expected to align the organization*s
targets and goals with its commitment to listen to the three *voices* that
represent aspects of its mission: the Voice of the Business (financial
benefits), the Voice of the Customer (customer satisfaction), and the
Voice of the Employee (employee satisfaction). The Establish Team is to
review project and program funding requests and make preliminary selection
and funding decisions on the basis of how the requests fit the
organization*s mission and budget. This process sets the Postal Service*s
financial and nonfinancial goals for the year. Figure 3 provides detail on
the Postal Service*s capital planning and budgeting cycle.
Figure 3: Capital Planning and Budgeting Cycle
Source: U. S. Postal Service documents.
Process for Approving The process for approving major new IT projects is
the same as for any
Major New Projects other new projects with capital costs of $5 million or
more. These major
projects are to proceed through the formal approval process and are
monitored by the Finance Department in conjunction with the program
sponsors when they are in development and implementation phases.
The process for approving proposed capital investments is defined in the
Postal Service*s F- 66 manual. 12 The process begins with the sponsoring
unit preparing a Decision Analysis Report (DAR), which presents the
business case for the proposed project. Figure 4 provides detail on the
process for approving major new projects.
12 United States Postal Service, General Investment Policies and
Procedures: Handbook F- 66, (April 1999, revised February 2002).
Figure 4: Process for Approving Major New Projects
Source: US. Postal Service.
Control and Evaluation During a capital project*s life cycle, control and
evaluation are
Process accomplished through two processes. Project sponsors are to
produce
quarterly compliance reports that summarize the project*s status. These
reports are to be used by CAPE, along with other financial information, to
produce the quarterly Investment Highlights that are distributed to the
Board of Governors and others to present the status of Board- approved
projects. This project oversight process continues for 18 months beyond a
project*s initial implementation. The Program Performance Group, part of
CAPE, studies selected projects that are still in development to determine
whether they remain on track to achieve cost goals. The Program
Performance Group may also conduct cost studies, after implementation, to
determine whether cost goals have been met. Changes in scope, schedule, or
total capital funding needed for a project trigger the requirement for a
modified DAR, which must be reviewed and approved through the same process
as the original DAR.
At the operational level, the CTO organization*s project managers and
portfolio managers conduct the day- to- day oversight of IT projects,
including those sponsored outside of the CTO organization, by tracking
performance of IT projects in the Program Tracking and Reporting System
(PTRS) and reporting project status every month to the CTO Investment
Review Board. When problems are identified, they are addressed through
interaction with the sponsoring organization, which may choose to bring
the issue to senior executives if the problem is likely to affect their
ability to meet their objectives.
IT investments that are not funded by capital funds are controlled and
evaluated through the annual budget process. Executive- level oversight is
performed through annual reviews of program descriptions called
*program narratives,* which provide input to the budget decision. At the
operational level, ongoing oversight is performed through routine tracking
of system operation. Figure 5 shows the Postal Service*s project control
and evaluation process.
Figure 5: Project Control and Evaluation Process
Source: U. S. Postal Service.
IT Investment Based on research into the IT investment management
practices of leading
Management private- and public- sector organizations, we have developed an
information
technology investment management maturity (ITIM) framework. This Framework
framework identifies critical processes for successful IT investment
organized into a framework of five increasingly mature stages. 13 The ITIM
is intended to be used both as a management tool for implementing these
processes incrementally and as an evaluation tool for determining an
organization*s current level of maturity. The overriding purpose of the
framework is to encourage investment processes that increase business
value and mission performance, reduce risk, and increase accountability
and transparency in the decision process. This framework has been used in
several GAO evaluations 14 and has been adopted by a number of agencies.
These agencies have used ITIM for purposes ranging from self- assessment
to redesign of their IT investment management processes.
ITIM is a hierarchical model comprising five *maturity stages.* These
maturity stages represent steps toward achieving stable and mature
processes for managing IT investments. Each stage builds upon the lower
stages; the successful achievement of each stage leads to improvement in
the organization*s ability to manage its investments. With the exception
of the first stage, each maturity stage is composed of *critical
processes* that must be implemented and institutionalized for the
organization to achieve
that stage. These critical processes are further broken down into key
practices that describe the types of activities an organization should be
performing to successfully implement each critical process. An
organization may be performing key practices from more than one maturity
stage at one time. This is not unusual, but efforts to improve investment
management capabilities should focus on becoming compliant with lower
stage practices before addressing higher stage practices.
Stage two in the ITIM framework encompasses building a sound investment
management process* by developing the capability to control projects so
they finish predictably within established cost and schedule expectations*
and establishing basic capabilities for selecting new IT projects. Stage
three requires that an organization continually assess proposed and
ongoing projects as parts of a complete investment portfolio:
an integrated and competing set of investment options. This approach
enables the organization to consider the relative cost, benefit, and risk
of newly proposed investments along with those previously funded and to
identify the optimal mix of IT investments to meet its mission,
strategies, and goals. Stages four and five require the use of evaluation
techniques to
13 GAO/ AIMD- 10. 1. 23. 14 GAO- 01- 146; GAO- 01- 190; GAO- 01- 961; GAO-
02- 314.
continuously improve both the investment portfolio and investment
processes to better achieve strategic outcomes. Figure 6 shows the five
maturity stages and the associated critical processes.
Figure 6: The Five Stages of Maturity with Critical Processes
Source: GAO.
As defined by the model, each critical process consists of *core elements*
that indicate whether the implementation and institutionalization of a
process can be effective and repeated. Key practices must be executed to
fulfill the core elements and implement the critical process. The core
elements are as follows:
Organizational commitments* Actions taken by management to ensure that
the critical process is established and will endure. Key practices
typically involve establishing organizational policies and engaging the
sponsorship of senior management.
Prerequisites* Conditions that must exist within an organization to
enable it to successfully implement a critical process. Key practices
typically involve allocating resources, establishing organizational
structures, and providing training.
Activities* Actions that must be taken to implement a critical process.
An activity occurs over time and has recognizable results. Key practices
typically involve establishing procedures, performing and tracking work,
and taking corrective actions as necessary.
Objective, Scope, and The objective of our review was to assess the Postal
Service*s capabilities
Methodology for effectively managing its IT investments. To determine
these capabilities
and the organization*s level of maturity in managing its IT investments,
we applied our ITIM framework and the associated assessment method. As a
part of the ITIM assessment method, we obtained documentary and
testimonial evidence and observed demonstrations of several internal
systems showing the organization*s execution of various key practices. We
evaluated the Postal Service against 14 critical processes in maturity
stages
two, three, four, and five. We did not evaluate the Postal Service on key
practices for one critical process in stage three* Authority Alignment of
IT Investment Boards* because major IT capital investments are managed by
the same oversight entities, and we determined that this critical process
was not applicable.
To determine whether the Postal Service had implemented the 14 critical
processes we assessed, we first reviewed documentation relating to the
organization*s IT investment management practices, including written
policies, procedures, and guidance that it had developed, and other forms
of documentation that provided evidence that these practices had been
executed. Documents included the Postal Service*s F- 66 manual,
Investment Highlights reports, executive memoranda, program narratives
required for the annual budget formulation, DARs, performance indicators,
and the minutes from meetings of the CIC, the CPC, and the Board of
Governors. We also reviewed a variety of administrative and system
documents from the CTO organization, including evidence of its formulation
process for IT investment proposals and its oversight process
for IT investments. We interviewed a number of senior officials, including
the Chief Financial Officer (CFO), the CTO, and the CIO. Within the Office
of the CFO, we also spoke with the Manager of Capital and Program
Evaluation and the
Manager of Corporate Budget. Within the Office of the CTO, we interviewed
the Manager of IT Value and a representative from the
Enterprise Architecture Office. We also spoke with senior officials from
the functional units, such as the Manager of Logistics Systems, the
Manager for Human Resources Technology Management, and the Manager of
Customer Service Operations.
As part of the analysis, we selected four projects, representing a range
of functional units, stages of development, and sizes, and examined them
to determine the extent to which the Postal Service*s policies and
procedures for IT investment management were being implemented. The
projects we
selected for review were (1) Enhanced Security Capability, (2)
Organization Structure, Staffing and Management, (3) Point of Service ONE,
and (4) Surface- Air Management System. Appendix II contains additional
information on each of the projects we reviewed. To perform the project
reviews, we reviewed project management documentation such as DARs,
project management plans, and PTRS reports. To clarify information
in these documents and gain further insight we also interviewed managers
in the sponsoring functional units, project managers, and the members of
the project management teams. The teams included staff who had been
assigned responsibility for project oversight within the Office of the
Chief Technology Officer. We compared the evidence we collected through
document reviews and
interviews to the detailed requirements for each key practice and critical
process that is specified in the ITIM. In accordance with the ITIM
assessment method, we considered a key practice to have been *executed*
when we determined, by team consensus, that sufficient evidence existed
to confirm that the Postal Service was executing the practice in
accordance with stated ITIM criteria. When we determined that there were
significant weaknesses in the Postal Service*s execution of a practice or
found insufficient evidence of its execution, we concluded that the
practice was not executed. Once the key practices were assessed, we
determined which of the 14 critical processes had been implemented. A
critical process was determined to be *implemented* when all related key
practices were designated as executed. Otherwise, according to the ITIM
assessment method, the critical process would not be considered to have
been
implemented. We conducted our work at the Postal Service*s headquarters
offices in Washington, D. C., from October 2001 through July 2002, in
accordance with generally accepted government auditing standards.
Postal Service Executes Most Key
Chapt er 2
Foundational Practices At the stage two level of maturity in the IT
investment management framework, an organization has attained repeatable,
basic selection and control processes and successful IT investment control
processes at the project level. In other words, the organization can
select projects that meet established selection criteria and can identify
expectation gaps early and take appropriate steps to address them.
According to ITIM, critical processes at this stage include (1) defining
investment review board operations, (2) developing processes to determine
the progress of individual IT projects, (3) creating an inventory of IT
investments, (4) identifying IT project and systems business needs, and
(5) developing a
basic process for selecting new IT proposals. Table 1 shows the purpose of
each critical process in stage two.
Table 1: Stage Two* Critical Processes Required for Building the
Investment Foundation
Critical process Description
IT investment board To define and establish the governing board( s)
responsible operation for selecting, controlling, and evaluating
investments. IT project oversight To regularly determine each IT project's
progress toward cost and schedule milestones using established criteria,
and take corrective actions when milestones are not achieved. IT project
and system
To create and maintain an IT project and system inventory to
identification assist in managerial decision- making.
Business needs To ensure that each IT program and project supports the
identification organization's business needs and meets users' needs.
Proposal selection To ensure that an established, structured process is
used to select new IT proposals. Source: GAO.
The Postal Service is executing nearly 90 percent of the key practices
associated with stage two critical processes. Specifically, the Postal
Service is carrying out all of the key practices associated with selecting
proposals that meet established criteria, aligning IT projects with the
organization*s business needs, and maintaining information on IT projects
and systems in an inventory. The Postal Service has yet to execute a few
key practices associated with
establishing an IT investment management foundation. For example, the
Postal Service does not have guidance defining the overall framework for
its IT investment management process, and policies and procedures for
project oversight are not documented. When the Postal Service implements
the remaining critical processes associated with stage two, it will
acquire the additional key controls needed to fully implement basic
control processes. For example, with an investment management process
guide, the Postal Service will gain assurance that IT investment
activities will be performed in a consistent and cost- effective manner.
Table 2 summarizes the status of the Postal Service*s critical processes
for
stage two, showing how many associated key practices it has executed.
Table 2: Summary of Results for Stage Two Critical Processes and Key
Practices Key
Total required practices
by critical Percentage of key Critical process
executed process practices executed
IT investment board operation 4 6 67% IT project oversight 9 11 82 IT
project and system identification 7 7 100
Business needs identification 8 8 100 Proposal selection 6 6 100
Totals 34 38 89%
Source: GAO.
The following discussion provides information on steps the Postal Service
has taken to implement each of these critical processes.
Boards Are Established The creation of decision- making bodies or boards
is central to the IT but Operating without investment management process.
At the stage two level of maturity,
organizations define one or more boards, provide resources to support a
Complete Process
their operations, and appoint members who have expertise in both Guide
operational and technical aspects of proposed investments. Resources
provided to support the operations of IT investment boards typically
include top management*s participation in creating the board( s) and
defining their scope and formal evidence acknowledging management*s
support for board decisions. The boards operate according to a written IT
investment process guide tailored to the organization*s unique
characteristics, thus ensuring that consistent and effective management
practices are implemented across the organization. 15 Once board members
are selected, the organization ensures that they are knowledgeable about
policies and procedures for managing investments. Organizations at the
stage two level of maturity also take steps to ensure that executives and
line managers support and carry out the decisions of the IT investment
board. According to ITIM, an IT investment management process guide should
be a key authoritative document that the organization uses to initiate and
manage IT investment processes and should provide a
comprehensive foundation for policies and procedures developed for all
other related processes.
The Postal Service has executed four of the six key practices for this
critical process by establishing investment boards; providing adequate
resources for related activities; appointing experienced senior- level
executives to the boards; and implementing policies, procedures, and
processes to ensure that executives and line managers support and carry
out decisions made by the boards.
However, the Postal Service has yet to develop a written,
organizationspecific process guide to direct the operations of the
investment boards. While the F- 66 manual provides general guidance on the
organization*s investment management process, it does not constitute an IT
investment process guide because it does not sufficiently define the
investment
process. Specifically, the manual does not include information on the
roles of the Establish Team and the CTO Investment Review Board. In
addition, it does not provide detail on the processes followed by other
boards involved in the investment management process (e. g., the CIC and
CPC). Finally, the manual does not identify the manner in which investment
boards* processes are to be coordinated with other key organizational
plans and processes (such as the budget formulation process). Without an
investment management process guide, the Postal Service lacks the
assurance that IT investment activities will be coordinated and performed
in a consistent and cost- effective manner. Table 3 shows the rating for
each key practice required to implement the
critical process for establishing IT investment board operation at the
stage two level of maturity. Each of the *executed* ratings shown below
15 According to ITIM, a process is a sequence of steps performed for a
given purpose, and a process guide is a document that defines the unique
manner in which the general IT investment guidance will be implemented
within the organization.
represents an instance where, based on the evidence provided by Postal
Service officials, we concluded that a specific key practice was currently
being executed by the organization.
Table 3: IT Investment Board Operation Type of practice Key practice
Rating Summary of evidence
Organizational 1. An organizationspecific Not executed. The Postal Service
has not developed an investment process guide to
commitments IT direct its board operations. While the F- 66 manual
provides general investment process
guidance on the organization*s investment management process, it does
guide is created to not constitute an investment management process guide
in that it does not direct each board's
(1) include information on the roles of the Establish Team and the CTO
operations. Investment Review Board, which are responsible for selecting
IT
investments to be funded in the budget formulation process and performing
project oversight functions; (2) provide detail on the processes followed
by other boards involved in the investment management process (e. g., the
CIC and the CPC); or (3) identify the manner in which investment boards*
processes are to be coordinated with other key organizational plans and
processes (such as the budget formulation process).
2. Organization Executed. The Postal Service has several processes in
place to ensure that executives and line executives and line managers
support and carry out decisions made by managers support the oversight
boards with investment management responsibility. For
and carry out IT example, the Postal Service uses *accountability letters*
similar to Senior
investment board Executive Service contracts to ensure that the executives
and line decisions. managers support the decisions of the investment
boards.
Prerequisites 1. Adequate Executed. Adequate resources, such as supporting
staff, are available for investment resources are
board operations. provided for operating each IT
investment board. 2. Board members Executed. Members of Postal Service
investment boards are senior- level executives understand the who have
extensive experience with the organization*s operations and IT
investment board's investment management approach. policies and procedures
and exhibit core competencies in using the IT investment approach via
training, education, or experience.
(Continued From Previous Page)
Type of practice Key practice Rating Summary of evidence
Activities 1. Each IT Executed. The CPC, CIC, and Establish Team include
members who have extensive investment board is knowledge and experience of
business and IT investment management. created and defined
The CFO or CTO are members of the boards and contribute IT knowledge with
board and expertise. membership integrating both IT and business
knowledge. 2. Each IT Not executed. The Postal Service has not developed a
written organization- specific investment board
process guide for IT investment management. As a result, the Postal
operates according Service*s enterprise- level investment boards are
operating without to written policies documented policies and procedures.
and procedures in the organizationspecific
IT investment process guide.
Source: GAO.
CTO Organization Investment boards should effectively oversee IT projects
throughout all Oversees IT
life- cycle phases (concept, design, testing, implementation, and
operations/ maintenance). At the stage two level of maturity, investment
Investments boards should review each project*s progress toward predefined
cost and schedule expectations, using established criteria and performance
measures, and should take corrective actions to address cost and milestone
variances.
According to ITIM, effective project oversight requires, among other
things, (1) having written polices and procedures for project management;
(2) developing and maintaining an approved management plan for each IT
project; (3) making up- to- date cost and schedule data for each project
available to the oversight boards; (4) reviewing each project*s
performance by regularly comparing actual cost and schedule data with
expectations; (5) ensuring that corrective actions for each under-
performing project are documented, agreed to, implemented, and tracked
until the desired outcome is achieved; and (6) having written policies and
procedures for oversight of IT projects.
The Postal Service has executed most of the key practices in the area of
project oversight. For example, the Postal Service has developed several
policies and procedures for project management, including the Program
Management Process Guidelines, which are high- level project
management guidelines used for all projects; the more- detailed Software
Process Standards and Procedures used by the Postal Service*s business
solution centers to develop and maintain systems; and the recently- issued
Integrated Solutions Methodology, which provides a process for managing a
system*s development throughout the life- cycle phases. In addition, IT
projects have an approved, up- to- date project management plan, in
accordance with project management guidelines. Data on a project*s actual
cost and schedule are provided to the CTO Investment Review Board, 16
which is responsible for overseeing the performance of IT projects, and to
other oversight groups as appropriate. Actual cost and schedule data for
the four projects we reviewed were provided to (1) the CTO Investment
Review Board in the form of PTRS reports, (2) the Board of Governors
through quarterly Investment Highlights reports featuring capital
expenditures and schedule data, and (3) field and headquarters offices
through accounting and management reports featuring data on projects*
actual capital and expense costs. 17
Finally, the CTO Investment Review Board regularly oversees the
performance of projects by comparing actual cost and schedule data to
expectations and performs special reviews of projects that do not meet
expectations. When these reviews are performed, corrective actions are
defined, documented, agreed to by the program manager and the CTO
Investment Review Board, and tracked until the desired outcome is
achieved. According to the IT program manager for Organization Structure,
Staffing and Management (OSS& M), special meetings were held for this
project to address schedule performance issues. Also, officials from the
CTO organization stated that the office generates reports listing projects
that are not meeting cost, schedule, or customer satisfaction expectations
and brings them to management*s attention so that *special reviews* can be
performed. These reports identify the manager and group responsible for
the project, provide a summary of the problem, the status of the
resolution, and a target date for resolving the problem. The CTO
Investment Review Board tracks action items to resolve the problem until
they are completed.
16 The CTO Investment Review Board (CTO IRB) is comprised of the Postal
Service*s CTO, Vice President for Information Technology, and Manager for
IT Value. According to Postal Service officials, the CTO IRB proposes IT
infrastructure investments on the basis of business case analyses and
performs regular reviews of these and other investments sponsored by
business units to monitor expense and capital expenditures and project
plans and schedules, track contributions, and resolve any issues or
concerns. 17 One of the four projects we reviewed, Enhanced Security
Capability, is actually a program
comprising over 30 different initiatives. See appendix II for information
on this program.
Notwithstanding these strengths, the Postal Service has a few weaknesses
in its oversight of IT projects. First, while the Postal Service has
written policies and procedures addressing how the CTO Investment Review
Board is to oversee IT investments, it does not have any that sufficiently
define the Establish Team*s role in the oversight process. The F- 66
manual, for example, notes that senior management is to continually review
the
performance of capital projects and discusses some mechanisms that could
be used for this purpose (e. g., compliance reports). However, it does not
provide specifics on the role of the Establish Team or define processes
for oversight of projects beyond the initial deployment phase. Without
adequate policies and procedures, project oversight may not be performed
consistently. In addition, without these policies and procedures, the
Postal Service lacks the transparency that is helpful in both
communicating and
demonstrating how project oversight is performed. Second, the Postal
Service*s investment boards do not adequately oversee project performance
by comparing actual cost data to expectations. Specifically, while the
Establish Team and CTO Investment Review Board each compare actual cost
data to annual budget expectations, the Postal Service could not
demonstrate that these boards compared the data to original expectations
established in the DAR. In addition, while the Investment Highlights used
by executives to monitor project performance
contains schedule information, it does not contain complete information on
actual project costs because it does not report operating expenses.
Without comparisons of complete actual cost data to original expectations,
Postal Service executives may not be able to easily determine whether the
projects they have selected are progressing as planned or whether
corrective actions are needed.
Table 4 shows the rating for each key practice required to implement the
critical process for project oversight at the stage two level of maturity
and summarizes the evidence that supports these ratings.
Table 4: IT Project Oversight Type of practice Key practice Rating Summary
of evidence
Organizational 1. The organization has Executed. The Postal Service has
developed written policies and procedures for commitments written policies
and
project management, including Program Management Process
procedures for project
Guidelines, Software Process Standards and Procedures, and an management.
Integrated Solutions Methodology.
2. The organization has Not executed. The CTO Investment Review Board has
written policies and written policies and
procedures for overseeing projects. However, there are no written
procedures for policies and procedures that sufficiently address how the
Establish management oversight of Team is to oversee projects. For
example, the F- 66 manual does not IT projects.
provide specifics on the role of the Establish Team or on how this team is
to oversee capital projects that have been deployed for over 18 months or
ongoing infrastructure- type projects. Prerequisites 1. Adequate resources
are
Executed. The Postal Service has adequate resources for performing IT
project provided to assist the
oversight, including managers and staff assigned responsibility for board(
s) in overseeing IT this activity, and systems that capture information on
actual costs, projects. schedule, and risk.
2. Each IT project has and Executed. The Postal Service*s project
management procedures require that an maintains an approved approved
project management plan be maintained for each IT project. project
management plan
In addition, cost and schedule controls are applied during project that
includes cost and
reviews. Approved project management plans were maintained for the
schedule controls.
four projects we reviewed, and cost and schedule controls were applied
during project reviews. 3. An IT investment board Executed. The Postal
Service has a number of oversight boards with is operating. responsibility
for managing IT investments, including the Establish Team, the CIC, the
CPC, the Board of Governors, and the CTO
Investment Review Board. 4. Information from the IT
Executed. IT project and system information is used by the CTO Investment
project and system Review Board to support executive management*s project
inventory is used by the IT management responsibilities. investment board
as applicable. Activities 1. Each project*s up- to Executed. Projects* up-
to- date cost and schedule data are provided to the CTO date cost and
schedule
Investment Review Board, the Establish Team, and other oversight data are
provided to the groups as appropriate. Actual cost and schedule data for
the four appropriate IT investment projects we reviewed were provided to
(1) the CTO Investment board.
Review Board through the Program Tracking and Reporting System (PTRS), a
tool used by the Board to monitor IT project performance, and (2) other
oversight groups through quarterly reports featuring capital expenditures
and schedule data and monthly financial reports featuring actual capital
and expense cost data of projects.
(Continued From Previous Page)
Type of practice Key practice Rating Summary of evidence
2. Using established Not executed. The Postal Service*s investment boards
do not adequately oversee criteria, the IT investment project performance
by comparing actual cost data to expectations. board oversees each IT
Specifically, while the Establish Team and CTO Investment Review project's
performance Board each compare actual cost data to annual budget
expectations, regularly by comparing
the Postal Service could not demonstrate that these boards actual cost and
schedule compared the data to original expectations established in the
DAR. In data to expectations.
addition, while the Investment Highlights used by executives to monitor
project performance contains schedule information, it does not contain
complete information on actual project costs in that it does not report
operating expenses. 3. The IT investment board
Executed. Special reviews of projects that have not met predetermined
performs special reviews of
standards are performed. According to the IT program manager for projects
that have not met
OSS& M, special meetings were held for this project to address
predetermined schedule performance issues. performance standards. 4.
Appropriate corrective
Executed. Appropriate corrective actions for each under- performing
project are actions for each underperforming defined, documented, and
agreed to by the oversight board and the
project are project manager. defined, documented, and
agreed to by the IT investment board and the project manager.
5. Corrective actions are Executed. Corrective actions are implemented and
tracked to help ensure that implemented and tracked an agreed- upon
outcome is achieved. until the desired outcome
is achieved. Source: GAO.
IT Project and System To make good management decisions, an organization
must know how Information Is
funds are being expended toward acquiring, maintaining, and deploying its
IT investments. Implementing this critical process requires an
organization Maintained to Support
to identify all projects and systems within the organization and create
one Project Management
or more repositories or inventories of information about them. This
information is required to track the organization*s IT resources to
provide a basis for analyses showing major cost and management factors and
trends. An IT project and systems inventory can take many forms and does
not have to be centrally located or consolidated. The guiding principles
for developing the inventory are that the information maintained should be
accessible where it is of the most value to investment decision makers and
relevant to the management processes and decisions that are being made.
According to ITIM, organizations at the stage two level of maturity
provide adequate resources for tracking IT projects and systems, designate
responsibility for managing the project and system identification process,
and develop related written policies and procedures. Resources required
for this purpose typically include managerial attention to the process;
staff; supporting tools; an inventory database; inventory reporting,
updating and
query tools; and a method for communicating inventory changes to affected
parties. Stage two organizations develop and maintain information on their
IT projects and systems in one or more inventories according to written
procedures, recording changes in data as required, and maintaining
historical records. Access to this information is provided on demand to
decision makers and other affected parties. The Postal Service has
executed all of the key practices for this critical process. The Service
has established a number of repositories of information on its IT projects
and systems in the form of the Enterprise Information Repository (EIR),
and automated systems such as PTRS that track actual cost, schedule,
benefit, and risk associated with the Postal Service*s IT programs and
projects. Members of the Postal Service*s
investment boards have access to the systems used to maintain information
on the organization*s IT programs and projects. Information is maintained
in these databases because they are also used for other purposes. For
example, project managers input up- to- date systems and project status
information to PTRS; the Corporate Planning System (CPS) and PTRS are
updated automatically as financial transactions are processed. Finally,
the Postal Service retains records showing changes in the information
maintained on each IT investment over time and provides these records to
its investment boards.
Table 5 shows the rating for each key practice required to implement the
critical process for IT project and system identification at the stage two
level of maturity and summarizes the evidence that supports these ratings.
Table 5: IT Project and System Identification Type of practice Key
practice Rating Summary of evidence
Organizational 1. The organization has written policies Executed. The
Postal Service has written policies and procedures commitments and
procedures for identifying its IT
for the Program Tracking and Reporting System PTRS projects and systems
and collecting, in and EIR. Information captured in these systems is an
inventory, information about the IT relevant to the investment management
process. projects and systems which is relevant to the investment
management process.
2. An official is assigned responsibility for Executed. The CTO
organization is responsible for maintaining
managing the IT project and system PTRS and EIR. identification process
and ensuring the inventory meets the needs of the investment management
process.
Prerequisite 1. Adequate resources are provided for Executed. Postal
Service officials stated that adequate staff support identifying IT
projects and systems and is available to identify programs, projects, and
systems, collecting relevant information into an and provided evidence of
staffing levels in key units
inventory. including IT Value and the CTO organization.
Activities 1. The organization's IT projects and Executed. Information on
IT projects and systems is maintained in systems are identified and
specific PTRS and EIR. information about them is collected in an
inventory. 2. Changes to IT projects and systems Executed. Project
managers ensure that systems and project status are identified, and change
information is information is kept up to date in PTRS and that cost
maintained in the inventory.
amounts captured in financial and corporate planning systems are updated
automatically as financial transactions are processed. 3. Information from
the inventory is Executed. IT investment decision makers and other
affected parties available on demand to decision makers have access to the
various systems used to capture IT
and other affected parties. project and system information. Although this
information is available on demand, a number of systems must be accessed
in order to obtain complete information on expected and actual costs,
benefits, schedule, and risks.
4. The IT project and system inventory Executed. Historical records are
maintained for the primary systems and its information records are that
contain IT project and system information, PTRS and maintained to
contribute to future EIR. Project managers also input up- to- date systems
and investment selections and assessments. project status information to
EIR and PTRS, and the CPS and PTRS are updated automatically as financial
transactions are processed. Finally, the Postal Service is retaining
records that show changes in the information
maintained on each IT investment over time and providing these records to
its investment boards.
Source: GAO.
Processes Ensure That Defining business needs for IT projects helps ensure
that projects support IT Investments Support
the organization*s mission goals and meet users* needs. This critical
process creates the link between the organization*s business objectives
and Business Needs and its IT management strategy. According to ITIM,
effectively identifying Meet User Needs
business needs requires, among other things, (1) developing policies and
procedures for identifying business needs and associated users for IT
projects, (2) defining the organization*s business needs or stated mission
goals, (3) defining business needs for projects, and (4) identifying users
for projects who will participate in the project*s development and
implementation.
The Postal Service has executed all of the key practices for this critical
process. The Service*s business needs are defined in a number of
documents, including the organization*s strategic plan and recent
Transformation Plan. Business needs and project users are being identified
and defined in accordance with policies and procedures, and users are
involved in project management throughout a project*s life cycle. For
example, the project management team for Point of Service ONE conducts
interviews to ensure that the system is providing the information needed
for decision making, and staff working in field locations tested
Point of Service ONE software to provide input on modifications required
to support their needs. The business needs and associated users of the
four projects we reviewed were clearly identified and defined in the DARs
used to obtain project approval and in other project justification
documentation.
In addition, users of these projects were involved in project development
activities through direct collaboration with CTO staff, user groups, and/
or change control groups. Because the Postal Service is executing all the
key practices associated with identifying business needs, it has increased
confidence that its IT projects will meet both business needs and users*
needs.
Table 6 shows the rating for each key practice required to implement the
critical process for business needs identification at the stage two level
of maturity and summarizes the evidence that supports these ratings.
Table 6: Business Needs Identification Type of practice Key practice
Rating Summary of evidence
Organizational 1. The organization has written
Executed. The Postal Service has written policies and procedures for
commitment policies and procedures for
identifying business needs (and the associated users) in its F- 66
identifying the business needs manual, Program Management Process Guide,
and Integrated
(and the associated users) of Solutions Methodology.
each IT project. Prerequisites 1. Adequate resources are
Executed. According to Postal Service officials, adequate resources are
provided for identifying
provided for identifying business needs and associated users. business
needs and associated Program managers in the CTO organization also have
methods and users.
tools for analyzing business needs, identifying users, and converting
business needs into statements of technical requirements.
2. The organization has defined Executed. Business needs are defined in
the Postal Service*s strategic plans, business needs or stated
integrated financial plan, annual performance plans and reports, and
mission goals.
Postal Service Transformation Plan.
3. IT staff are trained in Executed. CTO organization staff with assigned
project management business needs identification. responsibilities are
trained and experienced in the process of
identifying business needs and developing technical solutions to meet
these needs. In addition, they collaborate with business units in
developing solutions to ensure that business needs are met. Business units
are directly involved in this process. 4. IT projects and systems are
Executed. Information on IT systems and projects is maintained in a number
of identified in the IT project and
systems, including PTRS and EIR. system inventory.
Activities 1. The business needs for each Executed. Policies and
procedures require that the business needs for each IT IT project are
clearly identified
project be clearly identified and defined. The business needs for the and
defined. four projects we reviewed were clearly identified and defined.
2. Specific users are identified Executed. Policies and procedures require
that the specific users be identified for each IT project. for each IT
project. Specific users were identified for the four IT
projects we reviewed. Source: GAO.
Structures Are in Place As a basic step in the direction of implementing
mature stage two
for Selecting IT processes, an organization must develop a sound process
for selecting IT proposals and projects. Once adequate resources are
provided and an
Investment Proposals official is designated with responsibility for
selecting proposals, stage two organizations establish a structured
selection process. Resources required
for selecting proposals typically include managerial time and attention,
staff, and supporting tools and methodologies. Executives analyze and
prioritize the proposals and make related funding decisions according to
an established, structured process.
The Postal Service has executed all of the key practices pertaining to
selecting IT proposals: executives and managers follow established
selection processes, the CFO has been designated with responsibility for
the organization*s budget formulation process, adequate resources are
being provided to support related activities, a structured process is in
place for developing new IT proposals, and executives analyze and
prioritize the proposals according to established selection criteria.
Postal Service executives and managers follow established processes for
selecting IT investments. Specifically, functional units, the Finance
Department*s CAPE group, the Establish Team, and the organization*s
enterprise- level investment boards all follow established processes for
proposing, prioritizing, and selecting IT investments. Officials reported
that the Establish Team operates in accordance with established management
cycle processes supported by the organization*s CPS and that these
processes, although not documented, are generally understood by
members of the team. Finally, the CTO organization has developed selection
criteria for that unit*s proposed IT investments that are incorporated in
its new Business Case System (BCS).
Table 7 shows the rating for each key practice required to implement the
critical process for proposal selection at the stage two level of maturity
and summarizes the evidence that supports these ratings.
Table 7: Proposal Selection Type of practice Key practice Rating Summary
of evidence
Organizational 1. Executives and managers follow Executed. Executives and
managers follow established processes for commitments an established
selection process. selecting IT investments that are embodied in the
Service*s
capital planning and budget formulation processes. 2. An official is
designated to Executed. The Postal Service has formally designated
responsibility for manage the proposal selection
the annual budget formulation process to the CFO. process. Prerequisite 1.
Adequate resources are Executed. Adequate resources are available to
support proposal
provided for proposal selection selection activities in the functional
units, the Finance
activities. Department, the CTO organization, and the Establish Team.
Activities 1. The organization uses a Executed. Proposals for new
investments are developed by the structured process to develop new
functional units, and the CTO organization has a structured IT proposals.
process for supporting the development of IT- related proposals. 2.
Executives analyze and prioritize Executed. Vice presidents of the Postal
Service*s functional units new IT proposals according to develop and rank
proposals for new IT investments, and the established selection criteria.
Establish Team analyzes and prioritizes the proposals annually, along with
existing IT investments, according to established criteria. 3. Executives
make funding Executed. The Establish Team makes funding decisions for new
IT decisions for new IT proposals proposals according to an established
process as part of the
according to an established Postal Service*s budget formulation
activities. Team members
process. are executive- level officers.
Source: GAO.
Postal Service Shows Mixed Progress in
Chapt er 3
Managing Its IT Investments as a Portfolio An IT investment portfolio is
an integrated, enterprisewide collection of investments that are assessed
and managed collectively based on common criteria. Managing investments
within the context of such a portfolio is a conscious, continuous, and
proactive approach to expending limited resources on an organization*s
competing initiatives in light of the relative benefits expected from
these investments. Taking an enterprisewide perspective enables an
organization to consider its investments
comprehensively so that the collective investments optimally address its
mission, strategic goals, and objectives. This portfolio approach also
allows an organization to determine priorities and make decisions about
which projects to fund based on analyses of the relative organizational
value and risks of all projects, including projects that are proposed,
under development, and in operation.
According to ITIM, critical processes performed by organizations at the
stage three level of maturity include (1) defining portfolio selection
criteria, (2) engaging in project- level investment analysis, (3)
developing a complete portfolio based on the investment analysis, and (4)
maintaining oversight
over the investment performance of the portfolio. In addition,
organizations with more than one board that selects IT projects for
funding must align the authority of their IT investment boards. Although
authority
alignment is a critical process for the stage three level of maturity, we
did not assess it in this study, because the Postal Service has a single
set of organizationwide investment processes that apply to IT investments.
Table 8 shows the purpose of each critical process in stage three.
Table 8: Stage Three* Critical Processes Required for Developing a
Complete Investment Portfolio
Critical process Description
Portfolio selection criteria To ensure that the organization develops and
maintains definition IT portfolio selection criteria that support its
mission, organizational strategies, and business priorities. Investment
analysis To ensure that all IT investments are consistently analyzed and
prioritized according to the organization*s
portfolio selection criteria. Portfolio development To ensure that an
optimal IT investment portfolio with manageable risks and returns is
selected and funded.
Portfolio performance To ensure that each IT investment portfolio achieves
its oversight cost, benefit, schedule, and risk (CBSR) expectations.
Source: GAO
The Postal Service has executed many of the key practices associated with
stage three critical processes. For example, the organization*s portfolio
selection criteria are distributed throughout the organization, and they
are reviewed and modified as appropriate. In addition, executives examine
the mix of proposals and investments across portfolio categories in making
funding selections. However, many key practices still need to be executed
before the Postal Service can effectively manage its IT investments from a
portfolio perspective. For example, the Postal Service has not defined the
policies and procedures for any of the stage three critical processes. In
addition, the Service has not developed portfolio selection criteria that
adequately address cost, benefit, schedule, and risk. Until the Service
fully implements critical processes associated with managing investments
as a complete portfolio, it will not have ready access to the data needed
to make informed decisions about competing investments.
Table 9 summarizes the status of the Postal Service*s stage three critical
processes, showing how many associated key practices it has executed.
Table 9: Summary of Results for Stage Three Critical Processes and Key
Practices Tot al required
Percentage of key Key practices
by critical practices
Critical process executed process
executed
Portfolio selection criteria definition 4 6 67% Investment analysis 2 7 29
Portfolio development 6 9 67 Portfolio performance oversight 6 9 67
Totals 18 31 58%
Source: GAO.
The following discussion provides information on the steps the Postal
Service has taken toward implementing each of the critical processes.
Portfolio Selection To manage IT investments effectively, an organization
needs to establish
Criteria Are Defined, rules or *selection criteria* for determining how to
allocate scarce funding to existing and proposed investments. Thus, the
process of developing an
but Do Not Adequately IT investment portfolio necessarily involves
defining appropriate cost,
Address All Factors benefit, schedule, and risk criteria for evaluating
individual proposals for
investments. To ensure that the organization*s strategic goals,
objectives, and mission will be satisfied by the investments, the criteria
should have an enterprisewide focus that reflects these strategic goals.
Further, if an organization*s mission or business needs and strategies
change, criteria for selecting investments should be reexamined at the
portfolio level. Portfolio selection criteria should be disseminated
throughout the organization to ensure that decisions concerning
investments are made in a consistent
manner and that this critical process is institutionalized. To achieve
this result, project managers, organizational planners, and other decision
makers should receive information on the organization*s selection criteria
and address the criteria in IT proposals and business cases, project
oversight activities, and strategic and business planning processes.
Resources required for this critical process typically include the time
and attention of executives involved in the process, adequate staff, and
supporting tools.
The Postal Service has executed four of the six key practices for this
critical process. First, adequate resources are available to conduct
portfolio selection criteria definition activities. Second, several
working groups, including the Establish Team, are tasked with creating and
modifying portfolio selection criteria. Third, portfolio selection
criteria in the form of performance indicators and targets and program
narratives that
are required for budget formulation are distributed throughout the
organization. Fourth, the Establish Team performs periodic reviews of the
portfolio selection criteria and, in doing so, considers the
organization*s
current strategic goals and objectives, changing the criteria from year to
year as required by current circumstances and priorities.
Nonetheless, the Postal Service has yet to develop written guidance
establishing procedures to be followed in creating, modifying, and using
criteria for selecting a portfolio. Postal Service officials use annual
performance plans, performance indicators and targets, and program
narrative requirements as portfolio selection criteria. While these
criteria are based on the Postal Service*s mission, goals, strategies, and
priorities,
they are not adequate because they do not address cost, benefit, schedule,
and risk considerations in a manner that (1) provides sufficient and
meaningful cost, benefit, schedule, and risk information to effectively
assess investments and (2) would allow the Service to compare them against
one another, prioritize them, and select those that best meet its needs
and priorities. For example, program narratives do not include complete
cost information. While expected capital costs are reported for the next 6
years, expense is only reported through the end of the current fiscal
year. Further, the criteria do not include a weighting schema or other
method that would allow the Establish Team to compare the risk- adjusted
returns of competing investments. The CTO organization uses such criteria
to prioritize investments and assist in making selection decisions.
Without portfolio selection criteria that adequately address cost,
benefit, schedule,
and risk considerations, Postal Service officials have less assurance that
they are selecting the mix of investments that best meets the
organization*s needs and priorities. Table 10 shows the rating for each
key practice required to implement the critical process for defining
proposal selection criteria at the stage three level of maturity and
summarizes the evidence that supports these ratings.
Table 10: Portfolio Selection Criteria Definition Type of practice Key
practice Rating Summary of evidence
Organizational 1. The organization has written
Not executed. The Postal Service does not have written policies commitment
policies and procedures for creating and procedures for creating and
modifying IT
and modifying IT portfolio selection portfolio selection criteria.
criteria. Prerequisites 1. Adequate resources are provided Executed.
Adequate resources are available to conduct IT for selection criteria
definition proposal selection criteria definition activities, activities.
including the Establish Team, which develops portfolio selection criteria
each year as part of the budget formulation process. 2. A working group is
designated to Executed. The Establish Team is responsible for creating and
be responsible for creating and modifying the Postal Service*s IT
portfolio selection modifying the IT portfolio selection
criteria. criteria.
(Continued From Previous Page)
Type of practice Key practice Rating Summary of evidence
Activities 1. The enterprisewide IT investment Not executed. While the
Establish Team approves portfolio board approves the core IT portfolio
selection criteria based on the Postal Service*s selection criteria,
including cost, mission, goals, strategies, and priorities, these benefit,
schedule, and risk criteria, criteria are not adequate because they do not
based on the organization's mission,
address CBSR considerations in a manner that (1) goals, strategies, and
priorities.
provides sufficient and meaningful information to effectively assess
investments and (2) would allow the Postal Service to compare investments
against one another, prioritize them, and select those that best meet the
Service*s needs and priorities.
2. The IT portfolio selection criteria Executed. The Postal Service
distributes portfolio selection are distributed throughout the
criteria in the form of strategic and annual organization. performance
plans, performance indicators and targets, and program narrative
requirements used for budget formulation. 3. The IT portfolio selection
criteria
Executed. The Establish Team reviews the Postal Service*s IT are reviewed
using cumulative portfolio selection criteria each year. In these
experience and event- driven data and
reviews, the Team considers the organization*s modified, as appropriate.
strategic goals and objectives, changing the criteria that it uses from
year to year as required by current circumstances and priorities. Source:
GAO.
IT Investments Are Not This critical process ensures that all IT
investments are consistently Consistently Analyzed analyzed and
prioritized according to the organization*s portfolio selection
criteria, which should include cost, benefit, schedule, and risk and
Prioritized within considerations. According to ITIM, effective investment
analysis requires, the Context of a among other things, that (1) portfolio
selection criteria have been Portfolio
developed; (2) cost, benefit, schedule, and risk data are assessed and
validated for each investment; (3) the investment review board compares
each investment against the organization*s portfolio selection criteria;
and (4) the investment review board creates a ranked list of investments
using the portfolio selection criteria.
The Postal Service has executed two of the key practices in this area.
First, the Postal Service has adequate resources for analyzing
investments, including CAPE and other dedicated staff. Second, the Postal
Service ensures that cost, benefit, schedule, and risk data concerning IT
investments are validated. The Service does this in two particular
instances: (1) during the development of the DAR, the document for
approving capital projects, there is a validation step in which Finance
Department staff independently verify the accuracy and integrity of the
data presented and a validation memo is signed by the Controller to
confirm that the data are correct; (2) as part of the annual budget
formulation process, the data submitted on the various budget proposals
are reviewed, and thus validated, by various levels of management up to
the senior vice president of the functional unit sponsoring a proposal.
Nevertheless, the Postal Service has a number of weaknesses in the way it
analyzes investments for portfolio management. First, it does not have
policies and procedures that sufficiently address this critical process.
Its F- 66 manual includes some procedures for analyzing proposed
investments; however, it does not specify an approach for analyzing
existing investments to make portfolio selection decisions. Nor does it
describe a process to establish portfolio selection criteria that
adequately incorporate cost, benefit, schedule, and risk considerations.
In addition, it does not address capital projects that have been deployed
for more than 18 months or ongoing infrastructure- type projects. Second,
while investments are analyzed by executives during the approval process,
through the review of quarterly status reports, and during the annual
budget formulation activities, these investments are not assessed against
portfolio selection criteria that adequately consider cost, benefit,
schedule, and risk factors. The F- 66 manual does not explicitly require
the preparation of a risk assessment when the DAR is developed for a new
investment. Further, when the Establish Team reviews budget documents as
part of the annual budget formulation process, these documents do not
provide sufficient information on cost, benefit, and risk to determine
whether investments are progressing according to the approved DAR
parameters.
Table 11 shows the rating for each key practice required to implement the
critical process for analyzing investments at the stage three level of
maturity and summarizes the evidence that supports these ratings.
Table 11: Investment Analysis Type of practice Key practice Rating Summary
of evidence
Organizational 1. The organization has written Not executed. The Postal
Service does not have policies and procedures that commitment policies and
procedures for
sufficiently address this critical process. The F- 66 manual analyzing IT
investments. includes procedures for analyzing investments, for example,
by validating DAR information. However, these guidelines do not
(1) specify how the Establish Team is to analyze investments or use
investment analysis data to make portfolio selection decisions; (2)
recommend the use of portfolio selection criteria that adequately
incorporate CBSR considerations; (3) apply to
capital projects that have been deployed more than 18 months or to ongoing
infrastructure- type projects; or (4) provide guidance on how projects are
to be evaluated against one
another (e. g., there are no specific provisions for dealing with projects
that are conflicting, overlapping, or redundant). Prerequisites 1.
Adequate resources are
Executed. The Postal Service has adequate resources for analyzing provided
for investment analysis investments, including dedicated staff (e. g.,
CAPE staff who activities.
validate DARs) and tools. 2. IT investment portfolio
Not executed. While the Postal Service has developed portfolio selection
selection criteria have been
criteria, these criteria are not adequate because they do not developed.
address CBSR considerations in a manner that (1) provides sufficient and
meaningful information to effectively assess investments and (2) would
allow the Service to compare investments against one another, prioritize
them, and select those that best meet the Service*s needs and priorities.
3. Information from the IT project Not executed. The Postal Service*s
investment boards with management and system inventory is used by
responsibility do not use information from the IT project and the IT
investment board.
system inventory for analyzing investments in the context of portfolio
management.
Activities 1. Each IT investment board Executed. The Postal Service
ensures that CBSR data for IT investments ensures that the CBSR data and
are validated through the DAR process and management*s other required data
are validated
review of CBSR data submitted during the budget formulation for each
investment within its cycle. span of control.
2. Each IT investment board Not executed. While the Establish Team
analyzes all IT investments, it does so assesses each of its IT
with portfolio selection criteria that are not adequate because
investments with respect to the
they do not address CBSR considerations in a manner that (1) IT portfolio
selection criteria.
provides sufficient and meaningful information to effectively assess
investments and (2) would allow the Postal Service to compare investments
against one another, prioritize them, and
select those that best meet the Service*s needs and priorities. 3. Each IT
investment board
Not executed. While the Postal Service*s Establish Team evaluates and
ranks prioritizes its full portfolio of IT
the organization*s full portfolio of existing and new IT investments using
the portfolio investments, it does so with criteria that do not adequately
selection criteria.
address cost, benefit, schedule, and risk. Source: GAO.
An IT Investment At the stage three level of maturity, organizations
design processes for Portfolio Is Developed, developing an IT portfolio
and develop written policies and procedures to
ensure that projects are selected that best fit their strategic business
but Project direction, needs, and priorities. Each organization has
practical limits on
Expectations Are Not funding, the risks it is willing to take, and the
length of time for which it will Routinely Revised
incur costs on a given investment before benefits are realized. To address
these limits, stage three organizations group existing and proposed IT
investments into predefined logical categories, for example, by cost or by
type of investment (i. e., facilities or equipment). Once this is
accomplished, organizations can compare investments and proposals within
and across the portfolio categories and select the best overall portfolio
for funding.
According to ITIM, the portfolio development process cannot be performed
well unless certain conditions are first satisfied, including (1)
providing adequate resources for a portfolio development process; (2)
appointing to IT investment boards people who exhibit core competencies in
developing portfolios; (3) analyzing individual IT investments, including
validating
associated cost, benefit, schedule, and risk data; and (4) defining
investment categories. Organizations should also create written policies
and procedures for establishing and maintaining the portfolio development
process. Assuming that this foundation is in place, the IT investment
boards of stage three organizations assign each investment to a portfolio
category, examine the mix of existing and proposed investments across
these categories, and make selections for funding. Each IT investment
board also establishes annual cost, benefit, schedule, and risk
expectations for individual IT projects and gathers and validates data on
actual performance. A repository of information on developing portfolios
is established, updated, and maintained. Resources required for this
critical process typically include staff, supporting tools for developing
portfolios, and managerial time and attention to portfolio development.
The Postal Service has executed six of the nine key practices for this
critical process by providing adequate resources to implement this
critical process; assigning competent managers to the board responsible
for the portfolio development process; developing common portfolio
categories; assigning IT programs and projects to portfolio categories on
the basis of established criteria; examining the mix of proposals and
investments across the common portfolio categories and making selection
decisions for
funding; and establishing, updating, and maintaining repositories of
portfolio information.
Postal Service officials reported that adequate management time and staff
resources are available for this critical process. In addition, several
systems are in use that support portfolio development activities,
including PTRS, BCS, and CPS. Postal Service officials stated that the
organization provides training in the use of these systems. Moreover,
members of the Postal
Service*s enterprise- level investment boards are senior- level executives
who have had many years of experience in the organization and in working
with the IT investment management process. The Postal Service also has
defined common IT investment portfolio categories for the organization.
The Postal Service*s IT investments are considered to relate either to
corporatewide or functional unit activities and are further classified by
funding type (capital or expense) and investment type (facilities,
equipment, field, or other), as provided for in the organization*s F- 66
manual and budget instructions.
Postal Service programs and projects are now being assigned to portfolio
categories based on the criteria described above. Further, the Establish
Team examines the organization*s entire portfolio of IT investments
annually and then selects programs and projects for funding. The Postal
Service collects and stores information relating to the portfolio
development process in a variety of forms ranging from IT project and
systems inventories and finance/ budget and corporate planning systems to
manual backup books maintained by the Finance Department.
Even though these important steps in stage three portfolio development
have been taken, some weaknesses remain. The Postal Service has yet to
develop written policies and procedures for establishing and maintaining
portfolio information on its IT investments. The Postal Service has
defined investment categories in its F- 66 manual 18 but has not developed
written policies and procedures for establishing and maintaining portfolio
information on IT investments. Moreover, even though the CTO
organization monitors data on the performance of IT projects, the
Establish Team does not perform complete analyses of the performance of
individual
18 The Postal Service classifies its investments as either capital or
expense. Section 1- 4 of the F- 66 Manual states that capital investments
are investments in real property or personal property that are charged to
an asset account. Examples of capital investments include real property,
leasehold improvements, and personal property investments (equipment or
vehicles). Expense investments include lease agreements, research and
development projects, new products and services, and major operating
expense investments. Expense investments are accounted for as expenses on
the balance sheet. Routine operating
expenses associated with the day- to- day business of the organization are
not considered to be investments.
investments or establish cost, benefit, schedule, and risk expectations
for each investment annually.
While the Establish Team reviews investments each year from a strategic
planning and funding perspective, neither the analyses it performs nor the
Investment Highlights reports on the projects provided to the Board of
Governors adequately consider actual benefit and risk or contain complete
information on cost. For example, the business case for the Surface- Air
Management System includes information on over a dozen different types
of qualitative benefits expected to be obtained by investing in that
project. However, Investment Highlights reports provided to the Board of
Governors only include information on the number of installations
completed to date. In addition, although information on projects* capital
costs is included in Investment Highlights, information on operating
expenses is not. As a result, information on these aspects of project
performance is not routinely provided to the Board of Governors. Without
complete cost, benefit, schedule, and risk data, Postal Service executives
do not have the information needed to analyze and compare all investments
and select those that best fit with the strategic business direction,
needs,
and priorities, of the organization. Table 12 shows the rating for each
key practice required to implement the critical process for portfolio
development at the stage three level of maturity and summarizes the
evidence that supports these ratings. Table 12: Portfolio Development
Type of practice Key practice Rating Summary of evidence
Organizational 1. The organization has written Not executed. The Postal
Service has not developed written policies and commitment policies and
procedures for
procedures for establishing and maintaining an IT portfolio establishing
and maintaining the
development process. portfolio development process. Prerequisites 1.
Adequate resources are provided Executed. Adequate management time, staff
resources, and training for executing the portfolio development
are available to perform this critical process, and various process.
automated systems capture information on the Postal Service*s IT
investment portfolio. 2. Board members exhibit core Executed. Members of
the Postal Service*s Capital Investment competencies in portfolio
Committee and Establish Team are senior- level executives development.
who have extensive experience with the organization*s operations and the
IT investment management process.
(Continued From Previous Page)
Type of practice Key practice Rating Summary of evidence
3. Individual IT investments have been Not executed. The Postal Service
ensures that IT investments* CBSR
analyzed and their cost, benefit, data are validated. However, the
Establish Team analyzes schedule, and risk data have been
IT investments using portfolio selection criteria that do not validated.
adequately address cost, benefit, schedule, and risk. 4. The organization
has defined its Executed. The Postal Service investment categories in its
F- 66 common portfolio categories. manual are based on type of expenditure
(capital or
expense), type of investment (facilities, equipment, field, other), and
expected total cost (under $5 million, $5 million to under $7.5 million,
$7. 5 million to under $10 million, and $10 million or more). Activities
1. Each IT investment board assigns Executed. The Postal Service assigns
IT programs and projects to
investment proposals to a portfolio portfolio categories on the basis of
established criteria category. contained in its F- 66 manual.
2. Each IT investment board examines Executed. The Establish Team examines
portfolios of investments the mix of proposals and investments categorized
based on total expected capital costs and across the common portfolio
makes selections for funding. categories and makes selections for funding.
3. Each IT investment board approves Not executed. Although, according to
Finance Department officials, or modifies the annual CBSR management may
approve or modify project expectations expectations for each of its
selected IT
at any time, there is no process for routinely doing so. The investments.
Establish Team does not routinely approve or modify cost, benefit,
schedule and risk expectations for each existing and new IT investment on
an annual basis. However, the CTO Investment Review Board does evaluate
CBSR data for all projects with IT components. 4. A repository of
portfolio
Executed. The Postal Service collects and stores information relating
development information is to the portfolio development process in
multiple repositories established, updated, and maintained. ranging from
IT project and systems inventories and financial and corporate planning
systems to project managers* records and manual backup books maintained by
the Finance Department for Board of Governors
programs and projects. Source: GAO.
Portfolio Performance The purpose of this critical process is to ensure
that each IT investment
Oversight Is achieves its cost, benefit, schedule, and risk expectations.
It builds on the
critical process for IT project oversight at stage two by adding elements
of Performed, but without
benefit measurement and risk management to an organization*s investment
Comprehensive control capability. Executive- level oversight of project-
level risk and
Guidance benefit management activities provides the organization with
increased
assurance that each investment will achieve the desired cost, benefit,
schedule, and risk expectations.
According to ITIM, effective oversight of portfolio performance requires,
among other things, that the investment board (1) has access to up- to-
date cost, benefit, schedule, and risk data; (2) monitors the performance
of each investment in its portfolio by comparing actual project- level
cost, benefit, schedule, and risk data to the predefined expectations for
the project; and (3) corrects poorly performing projects.
The Postal Service is executing six of the nine key practices for this
critical process by providing adequate resources for monitoring and
controlling IT project performance and giving investment boards access to
data on actual and expected cost, benefit, schedule, and risk that are
maintained in the organization*s IT project and system inventory. In
addition, the CTO Investment Review Board provides oversight for all IT
projects by monitoring these data and providing feedback on performance to
sponsoring organizations. These oversight activities include working with
IT project management teams to identify and address any development and
deployment issues that may arise. Despite these strengths, however, the
Postal Service has yet to develop policies and procedures that address
performance oversight from a portfolio perspective. Moreover, while
expectations are established in DARs or business cases that include cost,
benefit, schedule, and risk, and
the CTO organization monitors actual performance results, the Postal
Service has not established a mechanism for revising expected benefit and
risk expectations after its boards approve the investments or for
notifying the Establish Team when an investment has not met cost, benefit,
schedule, and risk expectations. Until the Postal Service executes all key
practices associated with this critical process, senior executives will be
less likely to determine whether the investments they have selected are
delivering mission value at the expected cost and risk.
Table 13 shows the rating for each key practice required to implement the
critical process for portfolio performance oversight at the stage three
level of maturity and summarizes the evidence that supports these ratings.
Table 13: Portfolio Performance Oversight Type of practice Key practice
Rating Summary of evidence
Organizational 1. The organization has written Not executed. The Postal
Service does not have policies and procedures commitment policies and
procedures for
that address portfolio performance oversight. monitoring and controlling
portfolio performance.
Prerequisites 1. Adequate resources are provided Executed. The Postal
Service has adequate resources for monitoring for monitoring and
controlling the and controlling the portfolio*s performance. They include
portfolio*s performance. the CTO Investment Review Board, portfolio
managers, and PTRS. 2. Annual CBSR expectations are
Not executed. Cost, benefit, schedule, and risk expectations are agreed
upon for each IT investment. established in projects* DARs or business
cases. While benefit and risk expectations may be revised through the
annual budget process or a DAR modification, they are not reviewed and
revised on an annual basis. 3. The IT investment board has Executed. The
Postal Service has systems and reports that capture access to up- to- date
actual and
up- to- date actual and expected cost, benefit, schedule, and expected
CBSR data in a repository.
risk. They include PTRS, used by the CTO Investment Review Board to
monitor program performance; the program narratives developed for budget
formulation purposes; and the DARs that define CBSR expectations.
Activities 1. Each IT investment board
Executed. The CTO Investment Review Board monitors each project*s monitors
the performance of each performance by regularly comparing actual CBSR
data to investment in its portfolio by expectations. The Establish Team
also does this through comparing actual CBSR data to
the program review it performs as part of the budget expectations.
formulation activities. 2. Using established criteria, the IT
Not executed. Using established criteria, the CTO Investment Review
investment board identifies its Board identifies investments that have not
met CBSR investments that have not met criteria. However, the Postal
Service does not have a predetermined CBSR performance defined process for
notifying the Establish Team that an expectations.
investment is not on track. 3. The IT investment board and the
Executed. The CTO Investment Review Board and project manager project
manager determine the root determine the root cause of poor project
performance cause of the poor performance.
during project reviews. 4. The IT investment board and the
Executed. The CTO Investment Review Board and project manager project
manager develop an action
develop an action plan designed to remedy the identified plan designed to
remedy the cause( s) of poor performance. identified cause( s) of poor
performance.
5. Corrective actions are initiated Executed. The CTO Investment Review
Board tracks corrective and outcomes are tracked. actions until they are
completed. Source: GAO.
Postal Service Has Yet to Implement
Chapt er 4
Processes to Better Meet Strategic Goals Organizations that achieve the
stage four level of maturity evaluate their IT investment processes and
portfolios to identify opportunities for improvement. At the same time,
these organizations are able to maintain the mature control and selection
processes that are characteristic of stage three in the ITIM model. A key
tool for accomplishing this critical process is the post- implementation
review, in which outcomes of individual IT investments are compared to the
organization*s plans and expectations. This review typically results in
identifying lessons learned from the investment experience that are used
by the organization to improve its understanding of the key variables in
the investment*s business case.
Analyzing a number of post- implementation reviews can also provide
insights into the organization*s overall IT investment management process.
This analysis is facilitated by classifying individual investments into
logical categories and using the lessons learned to fine- tune associated
processes, as well as aspects of the portfolio. In addition, at stage four
maturity, organizations are capable of systematically planning for and
implementing
decisions to discontinue or deselect obsolete, high- cost, and low- value
IT investments and planning for successor investments that better support
strategic goals and business needs.
Organizations acquire stage five capabilities when they create
opportunities to shape strategic outcomes by learning from other
organizations and continuously improving the manner in which they use IT
to support and improve business outcomes. Thus, organizations at the stage
five level of maturity benchmark their IT investment processes
relative to other best- in- class organizations and conduct proactive
monitoring for breakthrough information technologies that will allow them
to significantly improve business performance. Table 14 shows the purpose
of each critical process in stages four and five.
Table 14: Stages Four and Five* Critical Processes Required for Improving
the Investment Process and Leveraging IT for Strategic Outcomes Critical
process Description
Stage 4* Improving the Investment Process
Post- implementation To compare outcomes of recently implemented
investments reviews and feedback to the expectations for them and develop
a set of lessons learned from these reviews.
Portfolio performance To assess and improve overall IT investment
portfolio evaluation and
performance and the investment management process. improvement
Systems and technology To ensure that IT investments in operation are
periodically succession management evaluated and determine whether they
should be retained, modified, replaced, or otherwise disposed.
Stage 5* Leveraging Information Technology for Strategic Outcomes
Investment process To identify and implement measurable improvements in
the benchmarking IT investment management processes so that the processes
meet or exceed those used by best- in- class organizations. IT- driven
strategic To dramatically improve business outcomes by strategically
business change employing IT investments. Source: GAO.
The Postal Service is executing five of the thirty- four key practices
associated with the five critical processes in stages four and five. For
example, it has policies and guidance for conducting post- implementation
reviews and provides training to individuals involved in these activities.
The Postal Service also provides resources for identifying opportunities
for IT- driven strategic business change. However, it does not regularly
capture lessons learned from post- implementation reviews, the performance
of its portfolio, or benchmarking in order to improve its investment
processes. In addition, it does not actively manage the succession of its
IT systems or investments. Until it implements stage four and five
critical processes, the
Postal Service will not be positioned to effectively improve its IT
investment management processes and successfully leverage IT to improve
business outcomes. Table 15 summarizes the status of the Postal Service*s
critical processes for stages four and five and shows how many associated
key practices it has executed.
Table 15: Summary of Results for Stages Four and Five Critical Processes
and Key Practices
Key Percentage of
practices Total required by
key practices Critical process
executed critical process executed
Stage 4* Improving the Investment Process
Post- implementation reviews & 3 650% feedback Portfolio performance
evaluation &
0 60 improvement Systems & technology succession 0 90
management Tot al s 3 21 14%
Stage 5* Leveraging Information Technology for Strategic Outcomes
Investment process benchmarking 0 7 0 IT- driven strategic business change
2 6 33
Tot al s 2 13 15%
Source: GAO.
The following discussion provides information on steps the Postal Service
has taken to implement each of the critical processes.
Policies and Post- implementation reviews are performed (1) to examine
differences
Procedures Are between estimated and actual investment costs and benefits
and possible ramifications for unplanned funding needs in the future and
(2) to extract
Defined, but PostImplementation lessons learned about the investment
selection and control processes that can be used as the basis for
management improvements. Investments that Review Process Is Not
have completed development and those that were terminated before
completion should be reviewed promptly to identify potential management
Institutionalized and process improvements. According to ITIM, this
critical process
involves identifying the projects to be reviewed; initiating reviews and
developing policies and procedures for conducting the reviews; and
ensuring that quantitative and qualitative data are collected, evaluated
for reliability, and analyzed during the course of the reviews.
The Postal Service has executed three of the six key practices required to
implement the critical process for post- implementation reviews. First,
the CTO organization and Finance Department have each developed policies
and procedures for performing post- implementation reviews. These
include the CTO organization*s Program Management Process Guidelines and
the Finance Department*s National Cost Study Process. Second, according to
Postal Service officials, the Service has adequate resources to perform
review activities. Third, Postal Service staff are trained in conducting
post- implementation reviews.
The Postal Service, however, has several weaknesses in this critical
process. First, no investment board has been assigned responsibility for
(1) identifying projects for which post- implementation reviews are to be
conducted and (2) ensuring that post- implementation reviews are
initiated. Second, the Postal Service has no institutionalized process for
routinely (1) identifying projects for which post- implementation reviews
are to be conducted, (2) collecting quantitative and qualitative data
while performing post- implementation reviews, and (3) developing lessons
learned and improvement recommendations about the investment process and
capturing them in a written product or knowledge base. This is evidenced
by the fact that, while the Finance Department*s Program Performance Group
is responsible for conducting post- implementation cost studies, only
three of them have been performed since 1990. Until the Postal Service
implements an institutionalized process for routinely performing
postimplementation
reviews, senior executives will lack key information needed to improve the
performance of the IT investment portfolio as well as the investment
management process.
Table 16 shows the rating for each key practice required to implement the
critical process for post- implementation reviews at the stage four level
of maturity and summarizes the evidence that supports these ratings.
Table 16: Post- Implementation Reviews and Feedback Type of practice Key
practice Rating Summary of evidence
Organizational 1. The organization has written Executed. The CTO
organization and Finance Department have each commitment policies and
procedures for
developed policies and procedures for performing postimplementation
conducting post- implementation reviews. The Postal Service has developed
policies reviews.
and procedures for performing post- implementation reviews. These include
the Software Process Standards and Procedures, Integrated Solutions
Methodology (ISM), Project Management Process
Guidelines, and the National Cost Study Process.
Prerequisites 1. Adequate resources are Executed. Postal Service officials
stated that adequate resources are available provided for conducting post
for conducting post- implementation reviews. implementation reviews.
2. Each IT investment board Executed. Postal Service staff have received
training in conducting post ensures that individuals
implementation reviews. conducting post- implementation reviews are
trained. Activities 1. An IT investment board Not The Postal Service has
not assigned any investment board with
identifies the projects for which a executed. responsibility for
identifying the projects for which a post
post- implementation review will implementation review will be conducted
and ensuring that post
be conducted and a post implementation reviews are initiated.
implementation review is initiated for each designated investment.
2. Quantitative and qualitative Not The Postal Service does not have an
institutionalized process for
investment data are collected, executed. routinely performing post-
implementation reviews. Only three post evaluated for reliability, and
implementation cost- studies have been performed since 1990. analyzed
during the postimplementation reviews.
3. Lessons learned and Not The Postal Service does not have an
institutionalized process to improvement recommendations executed. develop
and capture lessons learned and improvement about the investment process
recommendations about the investment process and individual and the
individual investment are
investments. developed, captured in a written product or knowledge base,
and distributed to decision makers.
Source: GAO.
IT Investments Are Not Stage four evaluations of portfolio performance
enable organizations to Evaluated from the
determine what contribution their collected pools of IT investments are
making to mission goals and needs. Evaluations of this sort are similar to
Perspective of post- implementation reviews involving individual projects,
but different in Portfolio Performance that they apply to entire IT
investment portfolios. This critical process seeks to determine how well
IT investments are helping to achieve the strategic needs of the
enterprise, satisfying the needs of individual units and users, and
improving business performance through IT. Performance
information for an organization*s entire portfolio of investments has to
be compiled and analyzed and trends examined. Developing baseline
performance data is critical to making this a meaningful exercise.
According to ITIM, the process of addressing problems and opportunities
for improving the investment process and the investment portfolio usually
involves developing written policies and procedures for the investment
management process, creating recommendations for the IT investment board,
documenting the decision criteria used to measure portfolio performance,
deciding whether or not to implement each recommendation, and tracking the
progress made. Resources required for this critical process typically
include staff support, methods and tools to aid the teams conducting post-
implementation reviews, and current and historical portfolio data.
To advance to the stage four level of maturity, an organization must first
ensure that all of the prerequisites, commitments, and activities that are
characteristic of levels two and three have been put into place. The next
step is to develop written policies and procedures for evaluating and
improving its IT investment portfolio that include defining requirements
for measuring performance data. Cost, benefit, schedule, and risk must all
be fully considered to enable an organization to construct a picture of
the overall performance of its IT investment portfolio.
The Postal Service is not executing any of the six key practices for this
critical process. First, while the Establish Team reviews existing and
proposed IT investments each year as a part of the organization*s budget
formulation process, no evaluations are being done that are designed to
identify opportunities for improving portfolio performance. Also lacking
are written policies and procedures that define the organization*s key
measures and the methods used to assess portfolio performance, evaluation
methods, reporting requirements, and other applicable policies and
procedures. Because the Postal Service has not collected data for this
critical process, including baseline performance information on its IT
portfolio, it is more difficult to perform evaluations that could result
in recommendations for improving its process for selecting a portfolio.
Table 17 shows the rating for each key practice required to implement the
critical process for evaluating and improving the performance of the
portfolio at the stage four level of maturity and summarizes the evidence
that supports these ratings.
Table 17: Portfolio Performance Evaluation and Improvement Type of
practice Key practice Rating Summary of evidence
Organizational 1. The organization has written
Not executed. The Postal Service has not developed enterprise- level
commitment policies and procedures for
written policies and procedures for evaluating and evaluating and
improving the
improving the performance of its IT investment portfolios. performance of
its portfolio( s). Prerequisites 1. Adequate resources are provided Not
executed. The Postal Service does not perform enterprise- level for
conducting the portfolio
evaluations of portfolio performance. performance evaluation and
improvement process. 2. Board members who are
Not executed. The Finance Department does not perform enterprise- level
responsible for evaluating and activities to evaluate and improve
portfolio performance. improving the investment processes and investment
portfolio( s) exhibit core competencies in portfolio performance
evaluation and improvement.
Activities 1. Comprehensive IT portfolio Not executed. The Postal Service
has not developed comprehensive performance measurement data are
definitions of measurement data for IT portfolio defined and collected
using agreed performance or methods for collecting data of this sort. upon
methods.
Moreover, data are not collected on actual qualitative benefits, and the
risk data captured in Postal Service information repositories are
incomplete.
2. Aggregate performance data and Not executed. The Postal Service does
not collect the aggregate IT trends are analyzed. portfolio performance
data required to perform analyses of this sort.
3. Investment process and portfolio Not executed. The Postal Service has
not performed the analyses improvement recommendations are required to
serve as the basis for improving the investment developed and implemented.
and portfolio selection processes. Source: GAO.
Process for Managing Managing the succession of systems and technology
entails periodically
Succession of Systems evaluating IT investments to determine whether they
should be retained,
modified, replaced, or otherwise disposed of. According to ITIM, system
and Technology and technology succession management includes (1) defining
policies and Is Not Established
procedures for managing the IT succession process, (2) assigning
responsibility for the succession management process, (3) developing
criteria for identifying IT investments that may meet succession status,
and (4) periodically analyzing IT investments to determine whether they
are ready for succession. This critical process enables the organization
to recognize low- value or high- cost IT investments and augments the
routine replacement of systems at the end of their useful lives. This
critical process supports the development of a forward- looking, solution-
oriented view of
IT investments that anticipates future resource requirements and allows
the organization to plan appropriately. The Postal Service has not
performed any of the nine key practices required to implement this
critical process. For example, while the Postal Service*s project
management guidelines define procedures for retiring investments, they do
not describe how to review systems regularly to identify candidates for
retirement. According to officials from the CTO organization, decisions on
succession management are usually made
between business unit managers and CTO office staff (e. g., portfolio
managers), but no individual or group has been assigned responsibility for
managing the succession process from an enterprise perspective, which
would allow the Postal Service to better anticipate future resource
requirements. Finally, the Postal Service has neither defined the criteria
for identifying investments that may meet succession status nor taken
steps to regularly analyze IT investments for possible succession.
According to CTO organization officials, the Postal Service has retired or
replaced roughly 250 systems since 1998. However, this was not done within
the structure of an institutionalized succession management process.
Postal Service officials have stated that IT investments are reviewed, for
example, during the annual budget formulation process to
analyze them for possible succession. However, without an
institutionalized process for succession management, the Postal Service
may not be able to identify those IT investments that are eligible for
succession in enough time to minimize the effect of the transition on
their successors.
Table 18 shows the rating for each key practice required to implement the
critical process for managing the succession of systems and technology at
the stage four level of maturity and summarizes the evidence that supports
these ratings.
Table 18: Systems and Technology Succession Management Type of practice
Key practice Rating Summary of evidence
Organizational 1. The organization has written Not executed. While the
Postal Service has procedures in place for system commitments policies and
procedures for
retirements, it lacks written policies and procedures for managing the IT
succession managing the succession of the organization*s IT process.
investments. 2. An official is designated to Not executed. According to
officials in the Offices of the CFO and CTO, the manage the IT succession
Postal Service has not designated responsibility for managing process.
the IT succession process. Prerequisites 1. Adequate resources are Not
executed. The Postal Service has no formal process for conducting IT
provided for conducting IT succession activities. succession activities.
2. Investment board members Not executed. According to Postal Service
officials, decisions on the exhibit core competencies in IT
management of systems and technology succession are succession decisional
activities. made between business unit managers and CTO organization
staff, not by members of an investment board.
3. Information from the IT project Not executed. The Postal Service*s
enterprise- level investment boards do and system inventory is used by not
use information from the IT project and system inventory the IT investment
board.
for succession management. Activities 1. The IT investment board Not
executed. The Postal Service does not have criteria for identifying IT
develops criteria for identifying IT investments that may meet succession
status.
investments that may meet succession status. 2. IT investments are
periodically Not executed. The Postal Service does not have a process in
place for analyzed for succession and periodically analyzing IT
investments to see if they are eligible appropriate investments are for
succession. CTO organization officials have told us that identified as
succession
the Service instead uses the annual budgeting process and candidates.
critical events such as the recent Year 2000 computing challenge as
opportunities to analyze investments for succession.
3. The interdependency of each Not executed. While the Establish Team
performs trade- off analyses as a investment with other
part of the organization*s annual budget formulation process, investments
in the IT portfolio is including some consideration of the
interdependencies of its analyzed.
IT programs, projects, and systems, the interdependency of each investment
with other investments in the IT portfolio is not analyzed in the context
of systems and technology succession management.
4. The IT investment board Not executed. The Postal Service does not have
a formal process for makes a succession decision for identifying
candidates for succession. In addition, no each candidate IT investment.
investment board has responsibility for making decisions on succession
management. Source: GAO.
Activities for In stages two through four, organizations ensure that sound
investments Benchmarking the are selected, controlled, and evaluated
within the context of the IT
investment management process and the enterprisewide portfolio. In the
Investment Process stage five level of maturity, a shift in orientation
occurs as organizations Are Not
evolve toward using information on leading technologies to identify
Institutionalized opportunities for business change and to implement
changes in their overall business process. Benchmarking the investment
process allows organizations to identify opportunities for improvement and
to implement
measurable improvements in their IT investment management processes so
that these processes meet or exceed those used by best- in- class
organizations. Improvements can include using innovative investment
oversight tools and techniques or improving the feedback mechanisms for
lessons learned. According to ITIM, investment process benchmarking
includes (1) defining policies and procedures for using benchmarking to
improve the IT investment management process, (2) collecting baseline
data on the organization*s current IT investment management process, (3)
identifying and benchmarking external comparable best- in- class processes
for IT investment management, and (4) improving the organization*s
investment management processes. The Postal Service has not fully executed
any of the seven key practices required to implement this critical
process. While there have been some efforts to identify best practices
from best- in- class organizations and
incorporate these practices into the Postal Service*s IT investment
management processes (such as the CTO organization*s use of lessons
learned in benchmarking to develop the BCS), the Postal Service has not
defined policies and procedures for improving the IT investment management
process using benchmarking. It also does not have any institutionalized
processes to routinely (1) collect baseline data on the
organization*s current IT investment management process, (2) identify and
benchmark external best- in- class processes for IT investment management
in comparable organizations, or (3) actually improve the organization*s
investment management processes. Without these processes, the Postal
Service is less likely to learn from best- in- class organizations, which
will hinder any concerted effort to improve its IT investment management
processes. Table 19 shows the rating for each key practice required to
implement the critical process for investment process benchmarking at the
stage five level of maturity and summarizes the evidence that supports
these ratings.
Table 19: Investment Process Benchmarking Type of practice Key practice
Rating Summary of evidence
Organizational 1. The organization has written policies and Not executed.
The Postal Service has not developed written commitments procedures for
improving its IT investment
policies and procedures for improving its IT management process using
benchmarking. investment process through the use of benchmarking
techniques.
2. A senior official is designated to manage Not executed. The Postal
Service has not designated a senior the benchmarking activities. official
to manage benchmarking activities.
Prerequisites 1. Adequate resources are provided for Not executed.
Investment process benchmarking is not an conducting process benchmarking
activities. institutionalized process at the Postal Service. 2.
Organizational managers and staff with Not executed. The Postal Service
has not designated responsibilities in this area are trained in
responsibility for performing benchmarking process benchmarking techniques
or are
activities and has not provided staff with training or experienced in
using these techniques.
experience in this process. Activities 1. Baseline data are collected for
the Not executed. The Postal Service has not taken steps to organization's
IT investment management
measure components of its investment processes.
management processes to provide a baseline against which expected and
actual process changes may be measured.
2. External comparable best- in- class IT Not executed. External
comparable best- in- class processes for investment management processes
are
IT investment management were identified and identified and benchmarked.
benchmarked for some processes, including the CTO organization*s business
case development process. However, the Postal Service does not have an
institutionalized process for benchmarking the investment management
process.
3. Improvements are made to the Not executed. Improvements were made to
some processes as a organization's investment management result of
benchmarking (e. g., the CTO processes. organization*s investment
management process). However, the Postal Service does not have an
institutionalized process for benchmarking the
investment management process. Source: GAO.
Potential Impacts of Information technologies can provide opportunities
for an organization to
Leading Technologies move dramatically in new directions to meet its
goals. Thus, once an organization finds it can competently manage its
enterprisewide portfolio
Are Not Routinely of investments, it should actively seek out
opportunities to use alternative
Considered in Strategic technologies. Planning Efforts
According to ITIM, stage five organizations provide adequate resources for
conducting IT- driven activities that can result in strategic business
change. These may include developing an advanced IT laboratory, test
center, or
library; conducting technical research; employing internal staff and
external experts or reviewers; and obtaining supporting tools. Stage five
organizations also develop applicable written policies and procedures and
designate an official to oversee their implementation. The central focus
of these activities is to follow technological events and to identify and
evaluate technologies that appear to offer strategic business- changing
capabilities. Once a conclusion has been reached that specific technology
offers the organization significant opportunities, senior managers plan
for
and implement changes to the organization*s business processes.
Organizations at a stage five level of maturity may create an advanced
technology group, a cross- departmental group of experts, or technology
centers of excellence. Finally, to strengthen management on these types of
activities, mature organizations designate responsibility for this key
practice to a single senior- level manager. The Postal Service has
executed two of the six key practices required to implement this critical
process by designating responsibility to specific organizational units to
support activities aimed at IT- driven strategic
business change and by providing a range of related resources. However,
steps have yet to be taken to execute the remaining key practices,
including creating and maintaining a knowledge base of state- of- the-
technology IT products and processes; actively identifying technologies
with businesschanging capabilities; and planning and implementing
strategic changes to business processes on the basis of the capabilities
of these technologies.
The Postal Service has assigned responsibilities to several units that
could leverage IT to implement strategic business change, including its
Transformation Plan Office, Office for Strategic Planning, and the CTO
organization. Also, within the CTO organization, the Information
Technology unit has established the positions of Enterprise Architect and
Manager of Technology Standards. To ensure standardization, the Postal
Service has also developed the IT Infrastructure Toolkit process and
established the Enterprise Architecture Councils and the Management
Steering Committee.
The Postal Service is also providing a range of resources that could be
used to support the critical process of IT- driven strategic business
change. The Service is funding a testing laboratory and has established
Integrated Business Solutions Systems Centers and developed an IT Toolkit
system and associated processes. The IT Toolkit system serves as a
repository of information on technologies and application systems that
have been approved for use within the Postal Service.
In addition, the Postal Service*s CTO organization is taking several steps
to initiate changes to the business process based on currently available
stateof- the- practice IT approaches. First, the CTO has developed a plan
for a corporate database called the Corporate Data Mart, which could serve
as a
repository of data from 35 separate Postal Service systems. According to
Postal Service officials, the CTO organization is working with each
functional unit to determine which legacy systems will transition to the
data mart and plans to incorporate future systems in the data mart. This
transition may eliminate costly legacy systems or avoid the investment
cost to replace them. The CTO organization is sponsoring the Advanced
Computing Environment initiative to transition to a less costly
distributed computing environment. According to officials, under this
approach, activities will be standardized, centralized, and reengineered
such that the costs per Postal Service user will be reduced.
These accomplishments can be helpful to the Postal Service, particularly
in light of its financial difficulties and the need to identify new, more
costeffective ways of accomplishing its mission. By continuing to foster a
more coordinated approach to using IT investments to achieve its business
goals, using resources from across the organization, and disseminating
information that is gathered more broadly, the Postal Service can more
effectively capitalize on opportunities uncovered by efforts already
underway. Table 20 shows the rating for each key practice required to
implement the critical process for IT- driven strategic business change at
the stage five level of maturity and summarizes the evidence that supports
these ratings.
Table 20: IT- Driven Strategic Business Change Type of practice Key
practice Rating Summary of evidence
Organizational 1. The organization has written Not executed. The Postal
Service does not have written policies and commitments policies and
procedures for
procedures for conducting IT- driven strategic business conducting IT-
driven strategic change activities. business change activities.
2. An official is designated to Executed. Responsibility for ensuring IT-
driven strategic business manage the activities within this change is
distributed across several Postal Service units, critical process.
including the Transformation Plan Office, Office for Strategic Planning,
and the CTO organization.
Prerequisite 1. Adequate resources are Executed. The Postal Service is
providing a range of resources related
provided for conducting IT- driven to identifying opportunities for IT-
driven strategic business strategic business change
change. These include funding a testing laboratory, activities. acquiring
expertise from consulting firms, establishing an Enterprise Architect and
Integrated Business Solutions Systems Centers, and developing an
Information
Technology Toolkit system. Activities 1. The organization creates and Not
executed. The Postal Service has not created a knowledge base of
maintains a knowledge base of state- of- the- technology IT products and
processes. state- of- the- technology IT products However, the CTO
organization has created a database of and processes. approved IT products
called the IT Toolkit.
2. Information technologies with Not executed. The Postal Service does not
have an institutionalized
strategic business- changing process for conducting studies of emerging
trends, events, capabilities are identified and
and technologies with the potential to strategically change evaluated. its
business processes. 3. Strategic changes to the Not executed. The Postal
Service does not have a process in place to
business processes are planned implement business processes based on the
capabilities of and implemented based on the leading- edge information
technologies it has identified. capabilities of identified information
However, decisions on changes to business processes are technologies.
currently being made in order to incorporate state- of- the practice IT
approaches and technologies such as desktop outsourcing, data warehousing,
and data center consolidation.
Source: GAO.
Conclusions, Recommendations, and Agency
Chapt er 5
Comments Conclusions Information technology provides key core operational
capabilities that the Postal Service must rely on to achieve its mission.
Only by effectively and efficiently managing its IT resources can the
Postal Service gain opportunities to further leverage its IT investments
and make better allocation decisions among many investment alternatives.
The Postal Service has in place most of the foundational practices
required to ensure that IT investments are being selected and monitored to
support its overall objectives. A comprehensive process guide for
investment management and written policies and procedures for management
oversight of investments will allow the Postal Service to better
coordinate its IT investment activities and ensure that they are performed
consistently. Once the Service has fully implemented all the critical
processes for stage two, it will have the controls necessary to allow it
to effectively manage its IT investments. The Postal Service shows mixed
progress in managing its IT investments as a portfolio. The Service
performs many portfolio development and
oversight activities. However it lacks policies and procedures for
managing its portfolio. It has not defined criteria that allow it to
effectively analyze, prioritize, and select its investments from a
portfolio perspective. In addition, the Postal Service*s reporting of
performance data is largely limited to capital projects, which are a
smaller portion of its portfolio than are operating expenses. Until the
Service fully implements critical processes associated with managing
investments as a complete portfolio, it will not have ready access to the
data it needs to make informed decisions about competing investments.
The ability of the Postal Service to continue to improve its investment
management process is contingent on its ability to learn from its current
practices and investments and from other organizations. The Service
currently has no institutionalized processes to learn from its own
experience and from other organizations. Such processes can contribute to
the long- term success of the Postal Service*s IT portfolio and support
its mission.
Recommendations for To strengthen the Postal Service*s capabilities for
investment management
Executive Action and address the weaknesses discussed in this report, we
recommend that the Postmaster General develop a plan that initially
focuses on correcting
the weaknesses in critical processes associated with maturity stages two
and three before addressing the weaknesses at maturity stages four and
five, because critical processes at the lower stages provide the
foundation for building those at higher maturity stages. The plan should
be developed within 6 months. At a minimum, the plan should specify an
approach to
develop comprehensive guidance that defines and describes the complete
investment management process, unifies existing processes enterprisewide,
and reflects changes in processes as they occur;
develop additional process guidance, as needed, to completely define the
operations and decision- making processes of investment boards and other
management entities involved in managing IT investments;
ensure that cost, benefit, schedule, and risk expectations are set and
approved in the original business case for each investment; that accurate
and complete actual cost, benefit, schedule, and risk data are
tracked against these expectations; and that status information on these
four criteria is periodically reported to executive- level investment
boards; and
establish a structured, transparent, and documented portfolio selection
process that assesses, prioritizes, selects, and funds investments
according to established portfolio selection criteria, including explicit
cost, benefit, schedule, and risk criteria.
The Postmaster General should ensure that the plan specifies measurable
goals and time frames, prioritizes initiatives, designates a senior
manager responsible and accountable for directing and controlling the
improvements, and establishes review milestones. After addressing the
stage two and three processes, the Postal Service should create processes
required for stages four and five that, at a minimum
ensure that guidance for conducting post- implementation reviews is
complete, including criteria for selecting systems for review, and that
post- implementation reviews are conducted on all appropriate systems;
establish a process for evaluating and improving portfolio performance;
establish a process for managing the succession of systems and
technology;
establish a process to benchmark the investment processes of leading
organizations to identify opportunities for improvement; and
establish a process to employ IT investments strategically to improve
business outcomes. Agency Comments and
The Postal Service*s Chief Financial Officer provided written comments on
Our Evaluation
a draft of this report (reprinted in app. III). In these comments, the
Postal Service stated that the report offered an opportunity to consider
changes and improvements in its IT investment management processes. The
Service added that it would carefully evaluate each of the report*s
recommendations to determine the necessary actions for adopting and
integrating key practices outlined in the GAO ITIM model that are
appropriate for the Postal Service.
The Postal Service also identified key points where it stated that it
differs from GAO*s IT investment management framework. The Postal Service
also explained that it uses a hierarchy of delegations to select and
oversee its investments, from the Board of Governors through the lowest
level of management, to ensure that senior management can concentrate on
strategic issues and the most significant projects. We did observe this
structured approach to the selection and oversight process and have
recognized it in our report.
In succession planning, the Postal Service stated that it uses an
institutionalized portfolio approach to address the succession of its IT
hardware, software, and systems. According to the Postal Service, this
approach enables senior management to determine strategically driven
solutions based on priorities, lessons learned, available technology, best
practices, affordability, risk assessments, and business needs. Our
guidance suggests that, while each of these aspects may be appropriate as
part of a succession management process, effective succession management
entails regularly reviewing the performance of existing systems against
established criteria. Such a process allows an organization to identify
systems that should be retained, modified, replaced, or otherwise disposed
of in a timely manner. However, as we stated in our report, the Postal
Service does not have such a process.
The Postal Service provided comments pertaining to post- implementation
reviews that describe cost studies, the budget process, and the activities
of the Office of Inspector General (OIG) as satisfying this critical
process. We
disagree with the Postal Service in this matter. While guidance for cost
studies does exist, the Service provided evidence of only three
postimplementation cost studies having been conducted since 1990. The
Postal Service*s budget process does not satisfactorily address this
critical process. Specifically, the budget process does not capture
lessons learned
and disseminate them to other projects and work processes in order to
improve them, and this is a major objective of post- implementation
reviews. Finally, while OIG does conduct evaluations from which lessons
learned may be drawn and used to improve other projects and work
processes, OIG evaluations are not part of the regular systems life cycle.
Appendi xes Postal Service Projects with Major IT
Appendi x I
Components in Development or Deployment Table 21: Postal Service IT
Projects in Development or Deployment Approved Approval Sponsoring
Approving capital costs Project name date unit board
in thousands
Associate Office Infrastructure Phase II Deployment 11/ 1997 IT BOG $207,
416 Commitment Management* Integrated Operations 09/ 1998 EN/ IP BOG 33,
921 Management Pilot CONFIRM 10/ 2000 MK PMG 9, 253
Corporate Call Phase III Deployment 06/ 1998 MK BOG 255, 761 Delivery
Operations Information System Deployment 08/ 2000 OP/ IP BOG 127, 620
Delivery Operations Information System Research and
06/ 1998 OP/ IP BOG 39, 987 Development e- Commerce IT & Virtual Store
Modification 02/ 2000 IP/ MK PMG 9, 705
Enhanced Security Capability Program Implementation 11/ 2000 IT BOG 43,
343 Field Retail Operations Group 01/ 1999 FI COO 3, 444 Forwarding
Control Systems 08/ 1998 EN BOG 33, 874 Identification Code Sort & CM- IOM
09/ 1998 EN BOG 156, 500 Integrated Data System* Upgrade 01/ 2001 EN BOG
33, 787 Letter Recognition Enhancement Program 05/ 2001 EN BOG 222, 403
Mail Evaluation, Readability & Lookup Instrument* Phase II 10/ 2001 EN/ MK
BOG 141, 118 Mail Evaluation, Readability & Lookup Instrument* Phase II
07/ 2000 EN/ MK BOG 45, 400 Research and Development Mail Item Retrieval
Systems Modernization* Phase II
08/ 2000 EN COO 1, 713 Research and Development Net Post* Mailing On- Line
System 11/ 1999 MK BOG 18, 638
Organization Structure, Staffing & Management System 07/ 2001 FI/ HR PMG
9, 000 PARS 04/ 2002 EN/ OP BOG 307, 640 Point of Service ONE* Stage IIB
Deployment 04/ 2000 MK BOG 403, 900 Postal Field Computing Infrastructure
01/ 2001 IT BOG 41, 562 PostalOne!* Phase I 11/ 1999 MK BOG 10, 085
PostalOne!* Phase II 05/ 2002 MK BOG 54, 148 Recognition Improvement
Program 06/ 2000 EN BOG 131, 150 Self- Service Vending Machines
Acquisition Post- Deployment 08/ 1998 MK BOG 29, 938 Shared Services
Accounting 04/ 2002 FI PMG/ COO 9, 481 Standard Accounting for Retail*
Retail Accounting 01/ 2001 FI/ IP BOG 34, 357 Standard Accounting for
Retail* General Ledger 02/ 2000 FI/ IP COO 5, 600 Surface- Air Management
System Deployment 07/ 2000 OP BOG 38, 385 Surface- Air Management System*
Alaska 05/ 2001 OP COO 7, 419 Surface- Air Support System 06/ 2001 OP BOG
15, 516
(Continued From Previous Page)
Approved Approval Sponsoring
Approving capital costs
Project name date unit board in thousands
Time & Attendance Collection System* National 01/ 2001 FI/ IP BOG 46, 673
Time & Attendance Collection System* Pilot 08/ 2000 FI/ IP COO 4, 149
Key: BOG Board of Governors IP Information Platform COO Chief Operating
Officer IT Information Technology EN Engineering MK Marketing GL General
Ledger OP Operations FI Finance PMG Postmaster General HR Human Resources
Source: U. S. Postal Service documents.
Postal Service IT Projects That GAO
Appendi x II
Reviewed The ITIM assessment guidance recommends that case studies be
conducted of selected IT investment projects to validate organization-
level evidence and better understand the organization*s IT investment
management process. 19 Accordingly, we selected four projects for review
from the list shown in appendix I to provide information on IT investments
in a cross- section of sponsoring Postal Service organizations. To conduct
our review, we interviewed managers responsible for the IT investments and
members of the project management teams to obtain information on
implementation of ITIM key practices. Table 22 summarizes key information
on these investments.
Table 22: Postal Service IT Projects Selected by GAO for Review Approved
capital cost
Date approved & Title Sponsoring unit (in millions) Investment purpose
approving entity
Enhanced Security CTO/ IT $43. 3 To secure Postal Service mail processing,
November 2000 Capability Program
business operations, and electronic Board of Governors
(ESC) communications by providing enhanced security capabilities to
networks, systems, and applications. Organization, Structure
CFO and Human $9. 0 To provide a foundation for the Postal July 2001
Staffing & Management Resources Service*s new human resources and
Postmaster General System (OSS& M)
payroll systems. Point of Service ONE
Marketing $403. 9 To provide a new platform for service April 2000 (POS
ONE)* Stage IIB delivery at 13, 504 sites, and replace the Board of
Governors
Postal Service*s existing Integrated Retail Terminals. Surface- Air
Network Operations $38. 4 To replace Air Contract Data Collection July
2000 Management System Management System (ACDCS) and assign mail to Board
of Governors (SAMS)
alternative surface and air carriers. Source: U. S. Postal Service
documents.
The sections below provide additional information on the investments we
reviewed.
19 ITIM Exposure Draft, Appendix III, Guidance for Conducting an ITIM
Assessment, pages 158- 159.
Enhanced Security Enhanced Security Capability (ESC) is a comprehensive
program to secure Capability Program
the Postal Service*s networks, systems, and applications. Its goals, as
defined in the DAR, are threefold: 1. Create an environment that allows
Postal Service employees, business partners, suppliers, and customers to
conduct business in a secure and
user- friendly environment. 2. Eliminate or prevent unauthorized use of
and access to Postal Service
systems and applications. 3. Deny unauthorized access to Postal Service
networks while ensuring
access to authorized users. ESC supports the Postal Service*s three
*voices* by, among other things, providing the resources to secure the
infrastructure and mission critical business applications (Voice of the
Business), providing the necessary security to protect customers* private
data (Voice of the Customer), and
providing additional assurances that employee data are secure (Voice of
the Employee). It also supports the Transformation Plan*s near- term
strategy to ensure the safety and security of mail customers and
employees.
The DAR for this CTO organization- sponsored program was approved by the
Board of Governors on November 13, 2000. It requested capital funds of
about $43.3 million to secure the Postal Service*s networks, systems, and
applications and establish the underlying program management structure.
Efforts to implement ESC actually began in March 2000 with $873,000 in
seed money. The initiation efforts included updating pertinent policies
and procedures and creating a team to respond to security incidents.
In an effort to heighten security in response to the recent terrorist
attacks and anthrax incidents, many objectives for the program were
reprioritized, and program officials are consequently considering
extending the schedule for completing fiscal year 2003 goals into the next
fiscal year. According to the most recent status report on the program,
additional capital funds
would not be needed to accommodate the new schedule, if it is approved.
ESC is not a one- time effort but an ongoing program to secure Postal
Service operations. It is managed as a collection of over 30 initiatives,
each
one managed separately, with its own project plan, milestones, and
schedules.
Organization Structure, The purpose of Organization Structure, Staffing
and Management (OSS& M) Staffing and
is to allow the Postal Service to easily manage its organizational
structure by facilitating access to data and enabling it to model
organizational Management structures and implement new structures quickly.
OSS& M is intended to replace the Organization Management Staffing System,
a legacy system with limited functionality and usage that does not meet
current needs to
manage organizational structures. It is being developed using commercial
off- the- shelf technology.
While OSS& M can stand alone, it is to serve as the foundational piece for
a human resources/ payroll enterprise system that will integrate many
Postal Service systems into one with the ultimate goal of having a single
source for all employee data. The Postal Service currently uses a number
of human
resource and payroll systems that, according to Postal Service officials,
duplicate data, connect through cumbersome interfaces, and operate under
different processing cycles. The new human resources/ payroll enterprise
system will address these weaknesses by streamlining business processes
and consolidating all the data about an employee into one central
repository. OSS& M supports the Transformation Plan*s corporate shared
services strategy. It is jointly sponsored by Human Resources and Finance.
The DAR for the project was approved by the Postmaster General on July 23,
2001. It requested capital funds of $9 million for the national deployment
of the system. Initial funding in the amount of $7 million had also been
approved to conduct proof- of- concept and pilot activities and to assess
the cost of operating the recommended off- the- shelf software in the
Postal Service environment. The results of these activities were used as
input to the DAR.
OSS& M was scheduled to be fully deployed in the spring of 2002. It has
been delayed because of organizational changes and the additional time
required for pilot testing. It is now scheduled to be deployed by December
1, 2002.
Point of Service ONE The Point of Service ONE system (POS ONE) is a
replacement system for
System the Postal Service*s existing retail terminals; it is approved to
provide new terminals, application systems, network connections, and a
data warehouse designed to support management decision- making. The Postal
Service identified the need to replace its existing terminals in the early
1990s and approved $9.9 million in funding to identify alternative
approaches. This work was performed in the mid- 1990s, and information
obtained from contractor bids was used to develop a DAR for POS ONE* Stage
I. The Board of Governors approved that DAR and three others to fund work
planned to be performed from June 1996 to September 2001, and a fifth DAR
for Stage III is under development for the next increment of work on the
system. Dates and dollar amounts for these approved DARs are shown in
table 23.
Table 23: POS ONE DARs Capital funding DAR No. Approval date (in millions)
1 June 1996 $274. 9 1* additional funding May 1998 53. 7 2A June 1999 166.
5 2B April 2001 403.9
Total (approved POS ONE capital funding) $899. 0
Source: U. S. Postal Service documents.
Surface- Air The Surface- Air Management System (SAMS) is a replacement
system that Management System
provides critical transportation- related logistics capabilities by
enabling the Postal Service to assign mail electronically to the least-
cost available surface and air carrier services. The legacy system that
SAMS was designed to replace-* the Air Contract Data Collection System
(ACDCS)* was outmoded; it was designed in 1983 and in 1990 the
manufacturer of the system informed the Postal Service that it would no
longer provide operating system support. SAMS now serves as the Postal
Service*s mail assignment engine to surface and air transportation
services, laying the cornerstone for all future logistics systems. The
program plan for SAMS
shows that additional functionality expected to be provided using SAMS
beyond ACDCS included indexed surface routes, capacity management,
real- time carrier updates via electronic data interchange, automated
tender considerations, local change auditing and reporting, electronic
manifest tracking, improved maintenance of mail distribution tables,
improved data capture capabilities, improved payment processing, stable
and scalable infrastructure, and communications benefits. The program plan
also shows that SAMS was expected to produce the following measurable
benefits: decreased commercial air costs, increased utilization of surface
routes, reliability and maintainability of SAMS software, decreased
downtime, improved claims processing, decreased network costs, improved
data collection capabilities for evaluation of air and surface routes, and
decreased capacity overloading.
The Postal Service began conceptual design work on SAMS in October 1999
(Phase I) and detailed design and development work in March 2000 (Phase
II). This work formed the basis for the SAMS DAR approved by the Board of
Governors on July 11, 2000 for capital funding of $38.4 million.
Comments from the United States Postal
Appendi x II I Service
Appendi x V I GAO Contact and Staff Acknowledgments GAO Contact Lester P.
Diamond, (202) 512- 7957, DiamondL@ gao. gov Acknowledgments In addition
to the individual named above, John T. Christian, Joanne L.
Fiorino, Peggy A. Hegg, Min S. Lee, Thomas F. Noone, Sabine R. Paul, and
Margaret R. Sullivan made key contributions to this report. (310424)
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a
GAO United States General Accounting Office
Why GAO Did This Study
The U. S. Postal Service invests hundreds of millions of dollars in
information technology (IT) each year to support its mission of providing
prompt, reliable, and efficient mail service to all areas of the country.
It must support these operations through the revenues it earns for its
services. Growing operating expenses and capital needs in the face of
reduced revenues highlight the need for the Postal Service to invest its
IT dollars wisely. Accordingly, the Senate Committee on Governmental
Affairs and its Subcommittee on International Security, Proliferation, and
Federal Services asked GAO to evaluate how well the Postal Service manages
its IT investments.
October 2002 UNITED STATES POSTAL SERVICE Opportunities to Strengthen IT
Investment Management Capabilities
The full report, including GAO's objectives, scope, methodology, and
analysis is available at www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 3. For
additional information about the report, contact Joel C. Willemssen (202-
512- 6408), WillemssenJ@ gao. gov.
What GAO Recommends
GAO recommends that the Postmaster General take several actions, including
the following: (1) using a portfolio approach to IT investment management,
including establishing explicit cost, benefit, schedule, and risk
criteria; and (2) evaluating the performance of investments as a whole in
order to capture and institutionalize *lessons learned* to improve the
investment process. In written comments on a draft of the report, the
Postal Service expressed differing views on a few key points but stated
that the report provides an opportunity to consider changes and
improvements to its investment management processes.
Highlights of GAO- 03- 3, a report to the Senate Committee on Governmental
Affairs and the Subcommittee on International Security, Proliferation, and
Federal Services United States General Accounting Office
G A O Accountability Integrity Reliability
Highlights What GAO Found
The Postal Service has in place many of the foundational capabilities
required for managing IT investments described in GAO*s IT Investment
Management framework, illustrated below. Proposed major projects go
through established review processes and must be approved at a high level
before being implemented. Control processes also are in place.
Although the Postal Service evaluates proposed IT projects before
investing in them, it does not fully manage these investments from a
portfolio perspective by assessing projects on the basis of indicators
that clearly link performance to initial selection criteria. Such a
portfolio approach would enable the Postal Service to consider proposed
projects along with those that have already been funded and to select the
mix of investments that best meets its mission needs.
The Postal Service has not yet attained the key attributes associated with
the most capable organizations, such as evaluating the performance of
investments as a whole, capturing *lessons learned,* and
institutionalizing these lessons to benefit the organization. Until it
addresses areas such as these, the Postal Service will not be in a
position to continually improve its investment process and leverage its IT
capabilities for strategic outcomes.
The Five Stages of Maturity within GAO*s IT Investment Management
Framework
Source: GAO.
Page i GAO- 03- 3 U. S. Postal Service IT Investment Management
Contents
Contents
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Contents
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Contents
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United States General Accounting Office Washington, D. C. 20548
Page 1 GAO- 03- 3 U. S. Postal Service IT Investment Management
A
October 15, 2002 Lett er
The Honorable Joseph I. Lieberman Chairman The Honorable Fred Thompson
Ranking Minority Member Committee on Governmental Affairs United States
Senate
The Honorable Daniel K. Akaka Chairman The Honorable Thad Cochran Ranking
Minority Member Subcommittee on International Security,
Proliferation and Federal Services Committee on Governmental Affairs
United States Senate
In response to your request, this report addresses the Postal Service*s
capabilities in information technology (IT) investment management. The
Postal Service invests hundreds of millions of dollars each year in
information technology to provide prompt, reliable, and efficient mail
service to all areas
of the country. Our evaluation determined that the Postal Service is
executing many of the foundational practices necessary for managing these
investments, but the Postal Service has additional opportunities to
implement more mature and effective processes. We are making
recommendations to strengthen the Postal Service*s investment management
capabilities.
We are sending copies of this report to the Chairman and Ranking Minority
Member of the House Committee on Government Reform, the Chairmen and
Ranking Minority Members of the House and Senate Committees on
Appropriations, the Postal Service*s Postmaster General/ Chief Executive
Officer, and the Postal Service*s Chief Financial Officer. We will also
make copies available to others on request. In addition, the report will
be available at no charge on the GAO Web site at http:// www. gao. gov.
Staff acknowledgments are included in appendix IV. If you have any
questions about this report, please contact me by telephone at (202) 512-
6408 or by E- mail at WillemssenJ@ gao. gov. Joel C. Willemssen Managing
Director, Information Technology Issues
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Executive Summary Page 3 GAO- 03- 3 U. S. Postal Service IT Investment
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Chapter 1
Chapter 1 Introduction
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Chapter 2
Chapter 2 Postal Service Executes Most Key Foundational Practices
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Chapter 2 Postal Service Executes Most Key Foundational Practices
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Chapter 2 Postal Service Executes Most Key Foundational Practices
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Chapter 2 Postal Service Executes Most Key Foundational Practices
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Chapter 2 Postal Service Executes Most Key Foundational Practices
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Chapter 2 Postal Service Executes Most Key Foundational Practices
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Chapter 2 Postal Service Executes Most Key Foundational Practices
Page 36 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 2 Postal Service Executes Most Key Foundational Practices
Page 37 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 2 Postal Service Executes Most Key Foundational Practices
Page 38 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 2 Postal Service Executes Most Key Foundational Practices
Page 39 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 2 Postal Service Executes Most Key Foundational Practices
Page 40 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 2 Postal Service Executes Most Key Foundational Practices
Page 41 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 2 Postal Service Executes Most Key Foundational Practices
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Page 43 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 44 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 45 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 46 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 47 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 48 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 49 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 50 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 51 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 52 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 53 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 54 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 3 Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio
Page 55 GAO- 03- 3 U. S. Postal Service IT Investment Management
Page 56 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 57 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 58 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 59 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 60 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 61 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 62 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 63 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 64 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 65 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 66 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 67 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 68 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 4 Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals
Page 69 GAO- 03- 3 U. S. Postal Service IT Investment Management
Page 70 GAO- 03- 3 U. S. Postal Service IT Investment Management
Chapter 5
Chapter 5 Conclusions, Recommendations, and Agency Comments
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Chapter 5 Conclusions, Recommendations, and Agency Comments
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Chapter 5 Conclusions, Recommendations, and Agency Comments
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Page 74 GAO- 03- 3 U. S. Postal Service IT Investment Management
Appendix I
Appendix I Postal Service Projects with Major IT Components in Development
or Deployment
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Page 76 GAO- 03- 3 U. S. Postal Service IT Investment Management
Appendix II
Appendix II Postal Service IT Projects That GAO Reviewed
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Appendix II Postal Service IT Projects That GAO Reviewed
Page 78 GAO- 03- 3 U. S. Postal Service IT Investment Management
Appendix II Postal Service IT Projects That GAO Reviewed
Page 79 GAO- 03- 3 U. S. Postal Service IT Investment Management
Appendix II Postal Service IT Projects That GAO Reviewed
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Page 81 GAO- 03- 3 U. S. Postal Service IT Investment Management
Appendix III
Appendix III Comments from the United States Postal Service
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Page 83 GAO- 03- 3 U. S. Postal Service IT Investment Management
Appendix IV
United States General Accounting Office Washington, D. C. 20548- 0001
Official Business Penalty for Private Use $300
Address Service Requested Presorted Standard
Postage & Fees Paid GAO Permit No. GI00
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