U.S. Postal Service: Status of Inspector General's		 
Recommendations on the Supplier Diversity Program (06-OCT-03,	 
GAO-04-57R).							 
                                                                 
This report supplements our previous report responding to a	 
Congressional request for current information on the		 
representation of minorities and women at the U.S. Postal Service
(USPS). USPS's program to attract and award contracts to small,  
minority, and women-owned businesses is referred to as supplier  
diversity. In recent years, the USPS Office of Inspector General 
(OIG) has questioned the reliability of data related to the	 
Supplier Diversity Program, such as the dollar value of contracts
awarded to small, minority, and women-owned businesses. In a	 
September 2001 report, the OIG made nine recommendations that it 
said would improve the reliability of this data. Our objective	 
was to determine the status of USPS efforts to address the	 
recommendations contained in the OIG report. To address our	 
objective, we obtained, reviewed, and analyzed documentation from
USPS and interviewed USPS and OIG officials concerning the status
of these recommendations.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-57R 					        
    ACCNO:   A08665						        
  TITLE:     U.S. Postal Service: Status of Inspector General's       
Recommendations on the Supplier Diversity Program		 
     DATE:   10/06/2003 
  SUBJECT:   Data collection					 
	     Performance measures				 
	     Postal service					 
	     Program evaluation 				 
	     Small business					 
	     Data integrity					 
	     Labor force					 
	     Labor statistics					 
	     Minorities 					 
	     Women						 
	     Postal service employees				 
	     Statistical data					 
	     USPS Supplier Diversity Program			 

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GAO-04-57R

United States General Accounting Office Washington, DC 20548

October 6, 2003

The Honorable Henry A. Waxman
Ranking Minority Member
Committee on Government Reform
House of Representatives

The Honorable Danny K. Davis
Ranking Minority Member
Subcommittee on Civil Service and Agency Organization
Committee on Government Reform
House of Representatives

Subject: U.S. Postal Service: Status of Inspector General's
Recommendations on the Supplier Diversity Program

This report supplements our previous report to you responding to your
request for current information on the representation of minorities and
women at the U.S. Postal Service (USPS).1 USPS's program to attract and
award contracts to small, minority, and women-owned businesses is referred
to as supplier diversity. In recent years, the USPS Office of Inspector
General (OIG) has questioned the reliability of data related to the
Supplier Diversity Program, such as the dollar value of contracts awarded
to small, minority, and women-owned businesses. In a September 2001
report, the OIG made nine recommendations that it said would improve the
reliability of this data. As agreed with your offices, our objective was
to determine the status of USPS efforts to address the recommendations
contained in the OIG report. To address our objective, we obtained,
reviewed, and analyzed documentation from USPS and interviewed USPS and
OIG officials concerning the status of these recommendations.

Results in Brief

USPS has addressed the nine OIG recommendations. According to USPS
officials, they have taken actions to implement the OIG's nine
recommendations, and they consider the recommendations closed. USPS
believes that the actions taken have addressed the OIG's concerns and have
strengthened the reliability of data related to its Supplier Diversity
Program. The OIG agreed that its recommendations have been implemented
and, as a result, it also believes that the reliability of USPS supplier
diversity data has improved. Furthermore, USPS provided us with documents

1See U.S. Postal Service: Data on Career Employee Diversity, GAO-03-745R
(Washington, D.C.: Sept. 15, 2003).

showing the actions that it has taken to address the OIG recommendations.
However, we did not independently determine whether the actions taken by
USPS improved the reliability of its supplier diversity data.

Background

According to USPS, its Supplier Diversity Program seeks to provide
suppliers with equal access to contracting opportunities. The program is
intended to promote supplier participation reflective of the American
supplier community and to encourage economic development. Its premise is
that effective supplier diversity ensures that no suppliers are excluded
from competition on the basis of race, color, religion, sex, age, or
national origin. USPS has identified the program as a strategic business
initiative vital to the success of the Postal Service. As such, USPS said
that it must ensure that it is taking full advantage of the
entrepreneurial spirit, capabilities, competitive pricing, products, and
innovations offered by small, minority, and women-owned businesses.

Additionally, according to USPS, to demonstrate its commitment to reaching
small, minority, and women-owned businesses, it has developed a 5-year
supplier diversity plan. The plan focuses on maintaining a strong supplier
base that includes small, minority, and women-owned businesses. While it
does not set specific dollar goals, the plan is intended to ensure that
USPS spends an increasing amount of its procurement dollars on goods and
services from diverse businesses through fiscal year 2003. To monitor its
progress, USPS tracks-yearly-the number of transactions and dollars
awarded to small, minority, and women-owned businesses.

In 2001, the OIG conducted a review of the Supplier Diversity Program,
specifically addressing contracting for supplies, services, and equipment
purchases. The objectives of this review were to assess the reliability of
supplier diversity data from fiscal year 1999 and to evaluate USPS's
effectiveness in achieving supplier diversity spending plans. The OIG
found that the supplier diversity data for fiscal year 1999 were
unreliable because prime-contracting dollars awarded to small, minority,
and women-owned businesses were overstated and subcontracting data were
unsupported and unverified. Due to the unreliability of the supplier
diversity data, the OIG could not determine whether the USPS was achieving
its supplier diversity spending plans. The OIG concluded that supplier
diversity data could not be used for tracking general trends, management
diagnostics, benchmarking, and reporting. As a result, the OIG made nine
recommendations that it said would improve supplier diversity data
reliability and correct the errors identified.

USPS Has Implemented Supplier Diversity Program Recommendations

According to USPS, it has taken actions to address the OIG report's nine
recommendations and considers the recommendations closed. In addition, we
confirmed with the OIG that it considers the recommendations closed.
Furthermore, USPS provided us with documents showing the specific
implementation actions that it has taken in response to each OIG
recommendation.

Table 1 shows each of the recommendations, the specific actions taken, and
the dates that the actions taken to implement the recommendations were
completed.

Table 1: USPS OIG Recommendations, USPS Actions, and Completion Dates

Recommendation Completion number Description of recommendation USPS
actions taken date

1 	The Vice President (VP), Purchasing and Materials, should develop and
implement contract administration procedures on updating the procurement
database and contract files when changes occur in a supplier's
socioeconomic status.

2 	The VP, Purchasing and Materials, should correct the socioeconomic
classification in the procurement database of the suppliers of the 14
contracts identified in the OIG report.

As recommended, USPS developed a purchasing and materials Administrative
Instruction and added it to the purchasing manual to be used for all
purchasing activities. USPS corrected the socioeconomic status designation
of the contracts in question.

                                   5/31/2002

                                   10/29/2001

The VP, Purchasing and Materials, USPS corrected the 10/29/2001
should, for the remaining 104 contract socioeconomic status
actions identified in the OIG report, designation of the
reconcile contract files to the procurement contracts in question.
database and correct errors in
socioeconomic status of suppliers.

The VP, Purchasing and Materials, should USPS agreed to 9/21/2001
archive the procurement database at the document and retain data
end of the fiscal year as support for for each accounting
annual supplier diversity statistical period, which includes the
reports. end of the fiscal year.

The VP, Purchasing and Materials, should As recommended, USPS 5/31/2002
establish and implement standard criteria developed a purchasing
for recording basic pricing agreement and materials
amounts in the procurement database. Administrative Instruction

and added it to the purchasing manual to be used for all purchasing
activities.

The VP, Purchasing and Materials, should As recommended, USPS 5/31/2002
revise the purchasing manual to include developed a purchasing
policy requiring contracting personnel to and materials
de-obligate unused funds from contracts Administrative Instruction
and the procurement database when and added it to the
contracts are terminated or cancelled. purchasing manual to be

used for all purchasing activities.

The VP, Purchasing and Materials, should USPS added a footnote to
4/19/2002
include corrections to fiscal years' 1999 the Fiscal Year 2001
and 2000 statistics for small, minority, and Purchasing Assessment
women-owned businesses when Report providing specific
developing the Purchasing Assessment corrections to diversity
Report for fiscal year 2001. data for fiscal years 1999

and 2000.

Recommendation Completion number Description of recommendation

USPS actions taken date

8 	The VP, Purchasing and Materials, should advise contracting officers
that section 6.2.3 of the Purchasing Manual extends to subcontracting
submittals and requires contracting personnel to review subcontract data
submitted by prime suppliers.

USPS said that this recommendation is existing policy; however, during
training for its Purchasing Review for Excellence Program provided to
operational purchasing managers, USPS agreed to reinforce the requirement
to maintain reports in the contract files.

                                   9/21/2001

9 	The VP, Purchasing and Materials, should require that quarterly
subcontracting reports submitted by suppliers be maintained.

USPS said that this recommendation is existing policy; however, during
training for its Purchasing Review for Excellence Program provided to
operational purchasing managers, USPS agreed to reinforce the requirement
to maintain reports in the contract files.

                                   9/21/2001

Source: GAO analysis of USPS data.

A USPS official told us that implementing these recommendations has helped
to improve overall supplier diversity data.

According to the OIG, it received and reviewed documentation of USPS
actions taken to address the nine recommendations. The OIG said that it
has closed all nine recommendations because it believes that the actions
taken by USPS were responsive. The OIG also said that it believes that the
reliability of USPS supplier diversity data has improved as a result of
implementing the recommendations.

We reviewed documents USPS provided us showing the specific implementation
actions that it has taken in response to each OIG recommendation. The
documentation shows that USPS has addressed each of the nine
recommendations. However, we did not evaluate whether the implementation
of the recommendations has improved the reliability of the USPS supplier
diversity data.

Agency Comments

We requested comments on a draft of this report from the Postmaster
General. We received comments from USPS Vice President, Supply Management,
that USPS agrees with the report's description of the actions USPS has
taken to improve the reliability of its supplier diversity data. Further,
he stated that USPS would continue to maintain an active supplier
diversity program, which provides small businesses an opportunity to
compete for its business. Additionally, he said that USPS is committed to
improving and maintaining purchasing system data integrity to ensure
accurate reporting and analysis of results. Finally, he said that as part
of a recent restructuring, a team was created that is solely dedicated to
the furtherance of data integrity within the Supply Management
organization, and USPS continues to review data accuracy as part of its
internal review program.

Scope and Methodology

To address our objective, we obtained, reviewed, and analyzed data and
documentation from USPS and interviewed USPS officials about the Supplier
Diversity Program and the actions the USPS has taken concerning data
reliability issues. We obtained and reviewed the USPS Purchasing Manual
describing the purpose, goals, and objectives of the Supplier Diversity
Program. In addition, we obtained and reviewed information from the USPS
Audit Tracking System regarding the status of OIG recommendations related
to the Supplier Diversity Program. To determine whether the OIG had closed
related recommendations, we interviewed the OIG and obtained relevant
documentation. We performed our work from July 2003 through September 2003
in accordance with generally accepted government auditing standards.

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days from its issue date. At that
time we will send copies of this report to the Chairman, House Committee
on Government Reform, and the Chairman, Subcommittee on Civil Service and
Agency Organization; the Chairman and Ranking Minority Member, Senate
Committee on Governmental Affairs; the Postmaster General; and to other
interested parties. We will also make copies available to others upon
request. In addition, the report will be available at no charge on the GAO
Web site at www.gao.gov.

If you have any questions about this report or the enclosed data, you may
contact me on (202) 512-4232 or at [email protected]. Major contributors to
this assignment included Sherrill Johnson, Dwayne Curry, and Tanisha
Stewart.

Bernard L. Ungar

Director, Physical Infrastructure Issues

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