You are given two reports by the government agency.  

Report 1:
USPS has a wide range of domestic competitive products that are a growing sector of its business. The volume of USPS’s competitive products increased from approximately 750 million pieces in fiscal year 2008 to 4.9 billion pieces in fiscal year 2017. Revenue from these products increased from about 10 percent of all USPS mail revenues in fiscal year 2008 to about 28 percent in fiscal year 2017 (see fig. 1). USPS forecasts that continued growth in e-commerce will increase the volume of its competitive products, especially for the “last-mile” delivery service to consumers—which involves delivery from retail locations and fulfillment centers (i.e., where online orders are processed, packaged, and shipped out to USPS for delivery) to customers. USPS reported that in fiscal year 2017, revenue from competitive products exceeded USPS’s expectations by $500 million due to the growth in e-commerce and successful marketing and sales campaigns. USPS expects increased competition, though, in the first- and last-mile delivery services—collection and delivery of packages—from other delivery providers. To remain competitive in the competitive product delivery market, USPS officials have stated that information gained from scanning is leveraged to provide customers with real-time visibility for the location of a competitive product in USPS’s delivery process as well as accurate estimates of the delivery time of USPS’s competitive products. Further, USPS’s latest strategic plan states that this information is one factor used to reduce its own costs through optimizing its network, including processing facilities, post offices, and numerous other facilities across the United States, and streamlining its operations. USPS delivers competitive products across the nation, which it divides into seven postal areas comprised of 67 postal districts (see fig. 2). Managers at each level—postal area, postal district, and post office—are responsible for overseeing and reporting on the performance of the level below them. For example, each district manager is accountable to the area vice president. Postmasters, who manage individual post offices, are accountable to district managers and also monitor the performance of employees at their post office. To track the movement of competitive products, USPS leverages automation (i.e., scanning by postal-processing equipment) and passive and active scan technology (i.e., scanning devices used by postal employees) to capture barcode information. In addition, when competitive products are not able to go through all the automated scans, USPS employees are to manually scan barcodes that have been placed on each item. These barcodes link the item with information in USPS’s databases such as: the delivery address, the type of USPS product, and when the item was accepted by USPS. According to USPS procedures, competitive products could be scanned up to 13 times to generate visibility necessary for USPS, mailers, and customers to track their packages as they move through USPS’s network (see fig. 3). For example, the first scan of the product—the “Acceptance” scan—is made when the item is dropped off at the post office or by a carrier if the product is picked up at a mailbox or customer address. The last scan—the “Acceptable Delivery Event” scan—generally means the item was successfully delivered to the addressee or that a delivery attempt was made (e.g., the product requires a signature but the recipient was not at home so another attempt will need to be made or the recipient will need to pick up the product). The interim scans reflect the product’s progress through the postal network, including through mail-processing plants and equipment. The scan data are transmitted to USPS’s data systems throughout the day. Scan information from these systems is available to USPS managers as well as mailers and customers who wish to track the progress of their items. USPS’s employees use devices to scan competitive products in postal facilities and on delivery routes (see scans 1, 2, and 11–13 in fig. 3). Carriers usually use a handheld Mobile Delivery Device (MDD) to scan a package’s barcode. MDDs contain Global Positioning System (GPS) technology and transmit package scanning data and carrier location data using a cellular network. USPS employees working inside post offices or other facilities use similar scanning devices without GPS technology, such as the handheld Intelligent Mail Device (IMD) to perform the manual scans (see fig. 4). USPS reports we reviewed indicate that competitive products are almost always scanned and scanned correctly. USPS has an overall organizational goal of accurately scanning 100 percent of all mail pieces—both competitive and other products—that have a barcode. This includes scanning each competitive product at several points from acceptance, as described earlier. However, individual management employee-performance goals for scanning are set slightly lower than 100 percent, as USPS officials stated that they recognize that some scanning issues, such as for missing or damaged barcodes, may occur across post offices. According to USPS data we reviewed for the first three quarters of fiscal year 2018, all but one of USPS’s 67 districts met USPS’s scanning goals for all five required scans for competitive products. Additionally, in one district we visited, a USPS internal report showed that every group of post offices in the district met its scanning goal for the arrival-at-unit scan for the week, the preceding 4 weeks, and the year-to- date periods, and all but one group of post offices met their scanning goals for the acceptable delivery scan for the same measurement period. In addition, representatives for mailers we interviewed that use USPS’s competitive products stated that they were generally satisfied with USPS’s scanning performance. Representatives of all the major mailers we spoke with that rely on USPS’s delivery network said they believed that USPS is generally scanning competitive products accurately, although issues still occur. Representatives of mailers told us that they receive scanning data from USPS for their items throughout the day, with some mailers receiving the data every 15 minutes, a rate that allows them to track their items through USPS. Some mailers use this information to calculate the expected time of delivery and monitor USPS’s progress against their own estimates of delivery time to measure USPS’s performance. Representatives for major mailers we spoke with said they also get complaints from customers if items are late, lost, or inaccurately scanned, so the customers provide another source of information on any scanning issues. Four of the five representatives for major mailers we interviewed that sent items via USPS competitive products told us that they have seen improvement in USPS’s scanning performance in recent years. Additionally, all of the representatives for mailers we spoke with stated that USPS has increased the amount of scanning and the information provided from the scans in recent years. Although USPS has a high scanning rate, some missed and inaccurate scans for competitive products do occur, errors that could potentially affect millions of competitive products. For example, several USPS OIG reports between 2016 and 2018 found that instances of missed or inaccurate scans still occurred both nationwide and that in nine USPS districts they analyzed, were due in part, to post office personnel not always following proper scanning procedures and post office supervisors not adequately monitoring how scanning procedures were implemented. For example, the USPS OIG analyzed approximately 2 billion delivery scans over a 6-month period in 2017 and found that 1.9 million delivery scans (about 0.1 percent) occurred at the post office instead of at the delivery address and were considered improper scans. Furthermore, examples of USPS’s internal reports we reviewed containing scanning performance results showed that a small percentage of competitive mail items had not been scanned. For example, one USPS internal report for a district we visited showed that for one week, USPS employees in the district missed about 0.73 percent of the expected delivery scans for competitive products. Due to USPS’s large volume of competitive products, a small percentage of products not scanned can represent large numbers of items. For example, about 155,000 competitive products were missing a delivery scan in one district’s 2018 year-to-date report we reviewed. Additionally, the representatives of mailers we interviewed also reported occasional scanning issues with USPS’s competitive products. Most of the mailers’ representatives stated that when they see competitive items missing scanning data, it is generally an isolated situation and USPS usually fixes the issue. According to these representatives, USPS provides them with points of contact to work with to resolve scanning issues immediately and on a regular basis. However, one major mailer’s representative we spoke with stated that even though USPS’s employees are generally good at scanning packages, inaccurate delivery scanning is an issue. The representative stated that about 8 to 10 percent of the company’s products sent through USPS were scanned by carriers as delivered, but not at the customer’s delivery address—contrary to USPS’s standard operating procedures for scanning. The representative stated that, although this percentage has decreased in recent years, the mailer would like to see that number decrease further because delivery to the destination address assures them that the item was left as close as possible to the customer. USPS is taking some steps to address missed or inaccurate scans. For example, USPS officials stated that the current electronic scanning device carried by almost all carriers on their routes does not prevent scanning a mail item as delivered to an address that is not the delivery address associated with the item’s barcode information. They also stated that USPS is updating scanning devices to alert carriers when they scan items as delivered when not physically at the correct delivery address. According to USPS officials, as of May 2018, 80 percent of hand-held electronic scanning devices used by USPS carriers had this functionality and that this functionality is being fine-tuned. This capability, though, still does not preclude all scanning errors, as it only affects the final delivery scan. USPS officials also stated that employees may still encounter scanning issues, such as damaged barcodes, which could lead to missed scans. USPS has not based its operational policies and procedures, such as those that support the accurate scanning of competitive products, on any standards for internal controls. USPS officials told us that they have not used any specific criteria for designing, implementing, and operating an internal control system for meeting its operational policies and internal controls, such as those that help ensure competitive products are accurately scanned. According to USPS officials, USPS does not follow the COSO Framework to design, implement or evaluate its operational internal controls as they believe that the COSO Framework standards are traditionally related to internal controls over financial reporting. In addition, USPS officials stated that USPS is not required to follow Standards for Internal Control in the Federal Government, and therefore USPS does not follow these standards as well. Instead, USPS officials stated that USPS has designed its operational policies and internal controls over the years based on its unique responsibilities, management experience, and sound business practices. However, officials could not identify any specific standards or framework they had followed. We have reported that standards for the design, implementation, and operation of their internal-control system provide an overall framework for establishing and maintaining an effective internal-control system—which is a key factor in achieving an entity’s mission. Further, internal controls help managers achieve desired results through effective stewardship of public resources. USPS has options to choose from in selecting standards for internal controls. Two widely used standards are the COSO Framework and Standards for Internal Control in the Federal Government, which was adapted for federal entities from the COSO Framework. Both standards are designed to help an entity design, implement, and maintain an effective internal-control system. Such a system should encompass all aspects of an entity’s objectives, including operations, reporting, and compliance objectives, and can help an entity adapt to shifting environments, evolving demands, changing risks, and new priorities. Non-federal entities can adopt either of these standards in their efforts to design, implement, and operate an effective internal control system. As stated above, we found that the COSO Framework to be a reasonable and relevant set of internal control standards to evaluate USPS’s operational internal-control activities. However, we and the USPS OIG have applied both the COSO Framework and Standards for Internal Control in the Federal Government in evaluating USPS’s operational internal controls in recent reports. Without standards for an effective internal-control system for its operational policies and procedures for scanning competitive products, USPS may miss opportunities to improve how it achieves its mission to deliver those important products. USPS management has designed standard operating procedures to provide assurance that competitive products are scanned accurately. We found some of these procedures to be consistent with the COSO Framework, which states that an organization should deploy control activities through policies that establish what is expected and procedures that put policies into action. USPS has developed a scanning policy for its products, stating that “properly scanning all barcodes will result in World Class Visibility and be instrumental in retaining and growing our shipping business and providing valuable data to drive improved operational performance and reduce costs.” USPS also has procedures that establish the responsibilities of employees for accurately scanning barcodes for competitive products at various points in the mail flow. Although USPS officials stated that employees should rely on prompts from their scanning devices to ensure scans are done correctly, USPS communicates these procedures in three main ways: documents, such as City Carrier Handbook and Rural Carrier Handbook, that outline scanning procedures and that explain carriers’ duties, including scanning; job aids, such as posters showing proper scanning procedures (see fig. 5); and, standard work steps or guidance that lists procedural steps either for competitive products or for scanning mail in general (see fig. 6). Following these procedures is important to fulfill USPS’s scanning goals. As stated above, the USPS OIG found instances of missed or inaccurate scans for competitive items in recent reports. Further, the USPS OIG also recently found that USPS employees at all 15 postal facilities it visited in the Los Angeles District did not follow correct scanning procedures for USPS’s competitive Parcel Return Service product, leading to inconsistent counts for these products. Such errors can put USPS at risk of not collecting revenue for these products. The USPS OIG has made several recommendations in its recent reports to USPS management to reinforce the importance of these procedures to employees. USPS officials agreed with some of these recommendations and stated that they are taking action to address them. While reinforcing these procedures can be helpful, we found that USPS’s scanning procedures may not provide the necessary assurance for accurate scanning because they are not consistent. For example: The USPS’s City Carrier Handbook states that mail with a barcode should be scanned at the delivery point (or address). However, a standard operating procedures document for city carriers at a post office we visited stated that carriers must scan each delivery confirmation mail piece but did not specify that this scan had to be at the delivery point or address. Locally developed procedures may not be uncommon, as one district manager told us that USPS headquarters allows managers to make a certain amount of flexibility to adapt the standard operating procedures for each post office. The USPS document, SCANNING at a Glance: Delivering 100% Visibility, states that all mail items that require delivery scanning should be scanned at the delivery address, but this document also provides additional scanning procedures not contained in the City Carrier Handbook and other standard operating procedures documents we examined. In particular, the document contained procedures for scanning to account for mail being held for customers on vacation; scanning items correctly to account for mail not delivered to business that were closed; and for mail that was refused by the addressee. This inconsistency in USPS’s scanning procedures has likely occurred because many of the documents have been updated at different times and have not always reflected new operations. For city carriers, the online version of the USPS’s City Carrier Handbook was last updated in April 2001. USPS officials stated that the most recent update regarding scanning was issued in November 2015 via a separate Postal Bulletin. Further, a separate standard operating procedure document for city carriers at a post office we visited was dated June 2006. For rural carriers, the most recently updated scanning procedures we found was dated 2013. As a result, some of these documents are not updated with the latest information on new scanning procedures. In a related example, the USPS OIG recently found that employees at three of the six USPS facilities the USPS OIG visited did not have an adequate understanding of the procedures for processing election and political mail due, in part, to guidance that was not updated, even though the procedures were centrally documented on an internal USPS website. USPS officials recognized this issue and stated that these handbooks are not updated regularly as the content of the handbooks are subject to labor negotiations. Therefore, new procedures are presented to USPS employees outside of the handbooks. However, given that these efforts rely on employees to orally communicate information, having consistent documented procedures is even more important. In addition to stating that the organization should deploy control activities through policies and procedures, the COSO Framework states that senior management should communicate objectives clearly through the organization so that other management and personnel understand their individual roles in the organization. By not having consistent procedures, USPS risks not clearly communicating to its employees how they should carry out scanning procedures and therefore contributing to scanning errors. As discussed below, USPS officials told us that management updates its procedures typically through regular meetings with employees, which are documented in handouts or slides. USPS officials stated that management stresses the importance of scanning and that employees should follow the prompts on their electronic devices when scanning competitive products. However, employees can still scan competitive products as delivered even if they are not, as device prompts can be misread, misinterpreted, or ignored. Furthermore, even with current prompts, scanning errors can and do occur. Consistent procedures, clearly communicated to employees, have become increasingly important as USPS hires new employees to handle, in part, anticipated growth in the volume of competitive packages. For example, GAO analysis of USPS data showed that USPS’s carrier workforce increased by 6.4 percent between fiscal years 2015 and 2017. The USPS OIG has found that these new employees require training and guidance to properly perform their roles and to reduce turnover. In addition to deploying policies and procedures to achieve an organization’s objectives, the COSO Framework states that an organization should internally communicate objectives and responsibilities that are necessary to support the functioning of internal controls. This process can be accomplished through training and meetings. Specifically, the COSO Framework states that training should enable individuals to develop competencies appropriate for assigned roles and responsibilities, among other things, and that active forms of communication such as face-to-face meetings are often more effective than passive forms such as broadcast e-mails and intranet postings. To communicate how its procedures should be correctly implemented, USPS has developed both initial and on-going training for employees. USPS officials stated that new employees are formally trained in scanning procedures when they start their employment. For example, carriers are trained how to use USPS’s electronic scanning devices, when to scan competitive items, the correct codes to use for different delivery situations (i.e., signature required, vacation holds, how to code where a package was left at a delivery address). Any new procedures can be introduced through presentations given by managers during meetings, as described below. Required regular meetings may be tracked by USPS management to ensure they are completed. Some district officials we spoke with stated that they certify that their employees have received required training and send that certification to area and USPS headquarters officials. Additional training also helps USPS reinforce correct scanning procedures. When scanning procedures are not being followed or scanning goals are not met at a post office, USPS officials stated that reminders of the correct procedures designed to reinforce USPS’s scanning procedures are presented to employees through presentations, posters, job aids, and additional documents such as carriers’ handbooks. For example, the representative of the major mailer we spoke with that had 8 to 10 percent of competitive products not scanned to the final delivery address stated that training was needed for both new and experienced carriers to reinforce that they should scan items at the delivery address. To further ensure the accurate scanning of competitive products, USPS reported that it holds internal and external meetings. Specifically, these meetings are designed to: Reinforce procedures: Post office managers can use stand-up talks— weekly meetings between management and employees at the post office—to discuss scanning issues with employees and opportunities to address those issues. For example, the postmaster at one post office we visited stated that this post office reinforces the standard work procedures designed to improve the scanning performance of employees during these meetings. Carriers and clerks can ask questions and learn why they are asked to do something or how to do a specific task, allowing for additional training and reinforcement of procedures. For example, we reviewed a handout developed by USPS headquarters to provide managers with talking points for service talks. This handout provided information on carriers delivering and scanning accurately and instructions on scanning at point of delivery on rural routes. Introduce new procedures: USPS officials told us that post office managers use stand-up talks to introduce new procedures and processes with carriers and clerks. For example, postmasters stated that they used these meetings to introduce and train carriers on new scanning features at the post offices. USPS district and area management develop and disseminate memos and handouts to assist managers conducting these meetings. We reviewed handouts USPS provided to managers for service talks. These handouts provided information on the rollout of some of the most recent scanning procedure changes. Continuously improve operations: District managers we interviewed stated that post offices with low scanning performance scores are placed on a district’s list of underperforming post offices. USPS district managers we interviewed told us that they meet with these post offices to determine how each post office plans to improve its scanning performance. District management also conducts audits of underperforming post offices and post offices that are in need of improvement. Our review of one district office’s service review checklist identified the key areas of audit for underperforming post offices. Reassess procedures: Representatives of mailers we interviewed told us that they meet with USPS representatives to discuss ways USPS can share scanning information for competitive products. Given that inaccurate scans can and do occur, it is important that postal managers explore and investigate any instances of missed or inaccurate scans. To do so, USPS managers—including area vice presidents, district managers, and postmasters—use a variety of reports as tools to ensure that the required scans are made at the appropriate place and time, and take action to monitor the status of competitive products, track lost items, and identify scanning issues. USPS headquarters designs reports used by managers to review performance at the local level across the country. Managers at each level are responsible for overseeing and reporting on the performances of the level below them. For example, the postmaster monitors performance of employees at the post office and is accountable to the district manager. In turn, each district manager is held accountable by the area vice president. To monitor performance of scanning of competitive products, these managers have access to several USPS data systems to generate reports. They can use the reports to monitor scanning performance of carriers and clerks at each post office and to identify the causes of scanning issues, such as missing or incorrect scans. Managers can also use these reports to track the status of competitive products or to investigate customer complaints of lost items. Some examples of reports available to managers include the following: Report 1: USPS officials told us that each post office receives this report from their District Office. The report identifies competitive products that do not have all the required scans, such as scans when the item arrives at the post office or when a delivery attempt was made. For example, one district official sends postmasters weekly reports on competitive products that do not have all the required scans. The officials told us that these reports help managers investigate the cause of incorrect scans identified in the report and how to prevent future occurrences. Report 2: USPS officials told us that this report is generated by district managers to proactively identify scanning irregularities, such as scans that may be out of sequence or multiple competitive products that are scanned at the same time but are for different addresses. District management can query postmasters about these scans and ask them to investigate the reason for the irregularities and determine if the scan was appropriate. Report 3: USPS officials told us that this report is generated by postmasters to monitor scanning status and performances for each competitive product that has received an arrival scan but lacks a delivery scan. While this may indicate a problem, it could also just reflect that the final scan had not been made by the end of the day or the scan that had not been uploaded into the USPS data systems when the report was generated. While having these reports are helpful, their full potential to help USPS managers may be limited because USPS lacks detailed and up-to-date standard operating procedures for how managers should use these reports or conduct other activities to efficiently investigate and resolve scanning issues. USPS’s Scanning Performance: Delivery Standard Operating Procedures for managers are a list of bullet points outlining managers’ responsibilities to meet scanning performance target goals and not a list of detailed procedures for managers to follow, such as how to use Report 1 to identify items that do not have all the required scans. In addition, USPS officials told us that this list has not been updated since approximately October 2005. The COSO Framework states that organizations should internally communicate information, including objectives and responsibilities for internal control, necessary to support the functioning of internal control. Further, it states that a process should be in place to communicate required information to enable all personnel to understand and carry out their internal-control responsibilities. Absent such communication, managers may take different actions to address problems or may have difficulty knowing where to find the appropriate information to locate a missing item to resolve a customer’s complaint quickly. For example, one post office manager told us that he will look at the scanning history in the USPS data systems to determine if the item received an acceptable delivery event scan or what the status of the item is on the route, while another post office manager told us he will use GPS data to see where the scans were made to determine if the item was delivered to the right address. If managers do not know where to find the appropriate information, they may spend more time investigating and be less efficient in resolving issues. Further, not having detailed standard operating procedures means managers may not be aware of all the reports available to them. For example, some post office managers told us that they use Report 3 while other post office managers told us that this report was not available to them. Without using Report 3, some managers told us that they look in several sources to find the same information needed to resolve the issue, such as locating a lost package. Some managers told us that USPS management discontinued the report because it was being misused by some managers. Specifically, managers told us that some managers were manually entering scanning or service-performance information retroactively to improve their performance scores. However, they told us that USPS management recently made Report 3 available to managers again but changed features to reduce any misuse. Additionally, USPS may miss opportunities to prevent scanning issues from happening again by not clearly communicating how managers should use the various reports to address specific scanning issues. For example, the USPS OIG recently determined that instances of missed and inaccurate scans for competitive products were a result of USPS management not adequately monitoring the implementation of those procedures. Without detailed procedures to guide managers in finding and using specific information in available reports and other tools, managers will not have consistent information to use to investigate and resolve customer complaints quickly or accurately. In addition, new managers may not know where to go for the most appropriate information and how to use this information to address some issues. As competitive products have become essential to USPS’s economic viability, it is increasingly important for USPS to accurately track them to remain competitive in this market. While USPS may be scanning most mail accurately, there continue to be instances where mail is not scanned accurately or is missing scans. Given the volume and growth in these competitive products, even a small percentage of inaccurately scanned products could be a large number of such products. Since USPS’s procedures were developed absent standards for internal control, the adoption of a set of internal control standards could enhance USPS’s efforts to continuously improve the design, implementation, and evaluation of its operational internal controls for scanning of competitive products. Further, since USPS’s standard operating procedures for scanning are located in numerous documents and are not always consistent—and given USPS’s reliance on stand-up talks and meetings to keep employees current—USPS employees may not always have accurate scanning procedures easily accessible to them. Having consistent standard operating procedures is increasingly important to ensure that employees are making accurate scans. Additionally, standard procedures that guide managers to investigate and resolve scanning issues would help managers more efficiently address these issues and ideally prevent these issues from happening again. To improve USPS’s competitive products scanning, we recommend that the Postmaster General take the following three actions. The Postmaster General should identify and adopt a set of internal control standards that can be used as the basis for operational internal-control activities, such as those for scanning competitive products. (Recommendation 1) The Postmaster General should improve the communication of standard operating procedures for scanning competitive products by, for example, updating or consolidating USPS documents, job aids, and standard work steps. (Recommendation 2) The Postmaster General should create standard operating procedures for managers on how to address inaccurate scans and use available reports to investigate and resolve scanning issues. (Recommendation 3) We provided a draft of this product to USPS for its review and comment. USPS’s comments are reproduced in appendix I. USPS stated that it cannot agree with our recommendation to identify and adopt a set of internal control standards for USPS’s operational internal control activities at this time. Although USPS has adopted an internal control framework for its financial internal control activities, USPS does not know what the benefits and costs are of adopting internal control standards for its operational internal control activities. As a result, USPS agreed to conduct a cost study to determine whether to commit resources to identifying and adopting a set of internal control standards for its operational internal control activities. We are encouraged that USPS is planning to conduct such a study and anticipate that performing this study will result in the implementation of an appropriate set of internal control standards. USPS agreed with the two recommendations regarding scanning procedures and committed to completing corrective actions by November of 2018. In its general comments, USPS noted that our reference to the USPS OIG’s report, Processing Readiness for Election and Political Mail for the 2018 Midterm Elections did not appear germane to the scanning of competitive mail. We recognize that this report was focused on a different type of mail, but as USPS noted in its letter, we use the OIG report as a related example of how USPS has taken efforts to improve the communication of its scanning procedures to employees. Therefore, we determined that our use of the report is appropriate. We have added information from the OIG report to characterize the OIG’s recommendations and USPS’s actions to address those recommendations. USPS also provided technical comments, which we incorporated as appropriate. We will send copies of this report to the appropriate congressional committees, the Postmaster General, the Chairman of the Postal Regulatory Commission, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff making key contributions to this report are listed in appendix II. In addition to the individual named above, Kyle Browning (Assistant Director); Greg Hanna (Analyst-in-Charge); Michael Hansen; Thanh Lu; John Mingus; Faye Morrison; Malika Rice; Amy Rosewarne; Crystal Wesco; Elizabeth Wood; and Matthew Zaun made key contributions to this report.

 

 Report 2:
NASA’s mission is to drive advances in science, technology, aeronautics, and space exploration, and contribute to education, innovation, our country’s economic vitality, and the stewardship of the Earth. To accomplish this mission, NASA establishes programs and projects that rely on complex instruments and spacecraft. NASA’s portfolio of major projects ranges from space satellites equipped with advanced sensors to study the Earth to a telescope intended to explore the universe to spacecraft to transport humans and cargo to and beyond low-Earth orbit. Some of NASA’s projects are expected to incorporate new and sophisticated technologies that must operate in harsh, distant environments. The life cycle for NASA space flight projects consists of two phases— formulation, which takes a project from concept to preliminary design, and implementation, which includes building, launching, and operating the system, among other activities. NASA further divides formulation and implementation into phase A through phase F. Major projects must get approval from senior NASA officials at key decision points before they can enter each new phase. Figure 1 depicts NASA’s life cycle for space flight projects. Formulation culminates in a review at key decision point C, known as project confirmation, where cost and schedule baselines are established and documented in a decision memorandum. To inform those baselines, each project with a life-cycle cost estimated to be greater than $250 million must also develop a joint cost and schedule confidence level (JCL). The JCL initiative, adopted in January 2009, is a point-in-time estimate that, among other things, includes all cost and schedule elements, incorporates and quantifies known risks, assesses the impacts of cost and schedule to date, and addresses available annual resources. NASA policy requires that projects be baselined and budgeted at the 70 percent confidence level. The agency baseline commitment established at key decision point C includes cost and schedule reserves held at the project—those within the project manager’s control—and NASA headquarters level. Cost reserves are for costs that are expected to be incurred—for instance, to address project risks—but are not yet allocated to a specific part of the project. Schedule reserves are extra time in project schedules that can be allocated to specific activities, elements, and major subsystems to mitigate delays or address unforeseen risks. NASA’s current portfolio of major space telescopes includes three projects—WFIRST, TESS, and JWST—that vary in cost, complexity, and phase of the acquisition life cycle. WFIRST, a project that entered the concept and technology development phase and established preliminary cost and schedule estimates in February 2016, is in the earliest stages of the acquisition life cycle. With preliminary cost estimates ranging from $3.2 billion to $3.8 billion, this project is an observatory designed to perform wide-field imaging and survey of the sky at near-infrared wavelengths to answer questions about the structure and evolution of the universe and to expand our knowledge of planets beyond our solar system. The current design includes a 2.4 meter telescope that was built and qualified for another federal agency over 10 years ago; the project is evaluating which components to reuse and which to modify, refurbish, or build new. TESS—a smaller project whose latest cost estimate is approximately $337 million—is targeted to launch in March 2018 and will be used to conduct the first extensive survey of the sky from space for transiting exoplanets. And finally, JWST, with a life-cycle cost estimate of $8.835 billion, is one of NASA’s most complex projects and top priorities. The telescope is designed to help understand the origin and destiny of the universe, the creation and evolution of the first stars and galaxies, and the formation of stars and planetary systems. With a 6.5-meter primary mirror, JWST is expected to operate at about 100 times the sensitivity of the Hubble Space Telescope. JWST’s science instruments are to detect very faint infrared sources and, as such, are required to operate at extremely cold temperatures. To help keep these instruments cold, a multi-layered tennis-court-sized sunshield is being developed to protect the mirrors and instruments from the sun’s heat. We have reported for several years on the JWST project, which has experienced significant cost increases and schedule delays. Prior to being approved for development, cost estimates for JWST ranged from $1 billion to $3.5 billion, with expected launch dates ranging from 2007 to 2011. Before 2011, early technical and management challenges, contractor performance issues, low levels of cost reserves, and poorly phased funding levels caused JWST to delay work after confirmation, which contributed to significant cost and schedule overruns, including launch delays. The Chair of the Senate Subcommittee on Commerce, Justice, Science, and Related Agencies requested from NASA an independent review of JWST in June 2010. In response, NASA commissioned the Independent Comprehensive Review Panel, which issued its report in October 2010. The panel concluded that JWST was executing well from a technical standpoint, but that the baseline cost estimate did not reflect the most probable cost with adequate reserves in each year of project execution, resulting in an unexecutable project. Following this review, Congress in November 2011 placed an $8 billion cap on the formulation and development costs for the project and NASA rebaselined JWST with a life-cycle cost estimate of $8.835 billion that included additional money for operations and a planned launch in October 2018. The new baseline represented a 78 percent increase to the project’s life-cycle cost from the original baseline and a launch date in October 2018, a delay of 52 months. The revised life-cycle cost estimate included a total of 13 months of funded schedule reserve. Our ongoing work indicates that these three projects are each making progress in line with their phase of the acquisition cycle, but also face challenges in execution. Some of these challenges are unique to the projects themselves and some are common among the projects in NASA’s portfolio. For example, when projects enter the integration and test phase, unforeseen challenges can arise and affect the cost and schedule for the project. Table 1 provides more details about the current acquisition phase, cost, and schedule status of NASA’s major space telescope projects based on our ongoing work. WFIRST. NASA’s preliminary cost and schedule estimates for the WFIRST project are currently under review as the project responds to findings in the WFIRST Independent External Technical/Management/Cost Review. This independent review was conducted to ensure the mission’s scope and required resources are well understood and executable. NASA initiated this review in April 2017 to address the National Academies’ concerns that WFIRST cost growth could endanger the balance of NASA’s astrophysics program and negatively affect other scientific priorities. The review found that the mission scope is understood, but not aligned with the resources provided and concluded that the mission is not executable without adjustments and/or additional resources. For example, the study team found that NASA’s current forecasted funding profile for the WFIRST project would require the project to slow down activities starting in fiscal year 2020, which would result in an increase in development cost and schedule. NASA agreed with the study team’s results and directed the project to reduce the cost and complexity of the design in order to maintain costs within the $3.2 billion cost target. The project is currently identifying potential ways to reduce the scope of planned activities (called “descopes”), assessing the science impact of those descopes, and then developing recommendations for the Astrophysics Division leadership. An example of a descope that may be considered is the requirement for WFIRST to be “star-shade ready,” which means the design must be compatible with a star-shade device that is positioned between it and the star being observed to block out starlight while allowing the light emitted by the planet through. TESS. The TESS project is currently holding cost and schedule reserves consistent with NASA center requirements, but there are no longer headquarters-held cost reserves to cover a delay if the project cannot launch as planned in March 2018. According to a project official, the project is holding 16 days of schedule reserve to its target March 2018 launch readiness date, which includes 6 days for the completion of integration and test, and 10 days for launch operations. The project previously used schedule reserves to accommodate the delayed delivery of its Ka-band transmitter, which is essential for TESS as it transmits the mission data back to Earth, due to continued performance and manufacturing issues. The two main risks to the March 2018 launch date are if: 1) SpaceX requires additional time past December 2017 for NASA’s Launch Services Program to certify that TESS can fly on its upgraded launch vehicle—certification is necessary because it will be the first time that NASA will use this version of the vehicle—and 2) any issues are identified during the remainder of environmental testing. The project is also conducting additional testing on its spare camera at temperatures seen in space to better understand expected camera performance on orbit. TESS will use four identical, wide field-of-view cameras to conduct the first extensive survey of the sky from space for transiting exoplanets. However, during thermal testing, the project found that the substance attaching the lenses to the camera barrel places pressure on the lenses and causes the cameras to be slightly out of focus. In June 2017, NASA directed the project to proceed with integrating the cameras—as they are expected to meet TESS’s top level science requirements even with the anomaly. At its most recent key decision review in August 2017, NASA reallocated $15 million of TESS’s headquarters-held reserves to the WFIRST project. While this had the effect of decreasing life cycle costs for TESS, it also increased risk as the project no longer has any additional headquarters-held cost reserves to cover a launch delay past March 2018. JWST. The JWST project continues to make progress towards launch, but the program is encountering technical challenges that require both time and money to fix and may lead to additional delays, beyond a delay recently announced. While the project has made much progress on hardware integration and testing over the past several months, it also used all of its remaining schedule reserves to address various technical issues, particularly on the spacecraft element. In September 2017, the JWST project requested from the European Space Agency—who will contribute the Ariane V launch vehicle—a launch window from March to June 2019, or 5 to 8 months later than the planned October 2018 launch readiness date, established in 2011. The project based this request on the results of a schedule risk assessment that incorporated inputs from the contractor on expected durations of ongoing spacecraft element integration work and other challenges that were expected to increase schedule. With the later launch window to June 2019, the project expected to have up to 4 months of new schedule reserves. However, shortly after requesting the revised launch window, the project learned from its contractor that up to another 3 months of schedule reserve use is likely, due to lessons learned from conducting deployment exercises of the sunshield, such as reach and access limitations on the flight hardware. As a result, and pending further examination of the schedule, the project now has approximately one month of schedule reserve to complete environmental testing of the spacecraft element and the final integration phase. The final integration phase is where the instruments and telescope will be integrated with the spacecraft and sunshield to form the completed observatory. As I previously noted, our work has shown the integration and test is the riskiest phase of development, where problems are most likely to be found and schedules slip. Given the risks associated with the integration and test work ahead, coupled with a level of schedule reserves that is currently well below the level stated in the procedural requirements issued by the NASA center responsible for managing JWST, additional delays to the project’s revised launch readiness date of June 2019 are likely. As a result, the funding available under the Congressional cost cap of $8 billion may be inadequate as the contractor will need to continue to retain higher workforce levels for longer than expected to prepare the mission for a delayed launch. As Congress, NASA, and the science community consider future telescope efforts, it will be exceedingly important to shape and manage new programs in a manner that minimizes cost overruns and schedule delays. This is particularly important for the largest programs as even small cost increases can have reverberating effects. NASA’s telescope and other science projects will always have inherent technical, design, and integration risks because they are complex, specialized, and often push the state of the art in space technology. But too often, our reports find that management and oversight problems—which can include poor planning, optimistic cost estimating, funding gaps, lax oversight, and poor contractor performance, among other issues—are the real drivers behind cost and schedule growth. To its credit, NASA has taken significant steps, partly in response to our past recommendations, to reduce acquisition risk from both a technical and management standpoint, including actions to enhance cost and schedule estimating, provide adequate levels of reserves to projects, establish better processes and metrics to monitor projects, and expand the use of earned value management to better monitor contractor performance. For example, in November 2012, we found that NASA employee skill sets available to analyze and implement earned value management vary widely from center to center, and we recommended that NASA conduct an earned value management skills gap analysis to identify areas requiring augmented capability across the agency, and, based on the results of the assessment, develop a workforce training plan to address any deficiencies. NASA concurred with this recommendation and developed an earned value management training plan in 2014 based on the results of an earned value management skills gap analysis that was conducted in 2013. Moreover, in recent years, we have found that many of the projects within the agency’s major project portfolio have improved their cost and schedule performance. Nevertheless, the extent to which NASA has adopted some of the following lessons learned within its portfolio of major projects is mixed, and NASA has an opportunity to strengthen its program management of major acquisitions, including its space telescopes, by doing so. Manage Cost and Schedule Performance for Large Projects to Limit Implications for Entire Portfolio. In 2013, following JWST’s cost increases and schedule growth, we found that though cost and schedule growth can occur on any project, increases associated with NASA’s most costly and complex missions can have cascading effects on the rest of the portfolio. For example, we found that the JWST cost growth would have reverberating effects on the portfolio for years to come and required the agency to identify $1.4 billion in additional resources over fiscal years 2012 through 2017, according to Science Mission Directorate officials. NASA identified approximately half of this required funding from the four science divisions within the Science Mission Directorate account. The majority of the cuts were related to future high priority missions, missions in the operations and sustainment phase, and research and analysis. In essence, NASA had to mortgage future high priority missions and research to address JWST’s additional resource needs. Similarly, the National Academy of Sciences has concluded in the past that it is important for NASA to have a clearly articulated and consistently applied method for prioritizing why and how its scarce fiscal resources are apportioned with respect to the science program in general and on a more granular level among component scientific disciplines. The academy noted that failure to do so could result in a loss of capacity, capability, and human resources in a number of scientific disciplines and technological areas that may take a generation or more to reconstitute once eliminated. NASA’s establishment of the WFIRST Independent External Technical/Management/Cost Review that I previously discussed is a step in the right direction to help ensure the Astrophysics Division incorporates this lesson learned. Establish Adequate Cost and Schedule Reserves to Address Risks. Twice in the history of the JWST program, independent reviewers found that the program’s planned cost reserves were inadequate. First, in April 2006, an Independent Review Team confirmed that the project’s technical content was complete and sound, but expressed concern over the project’s reserve funding, reporting that it was too low and phased in too late in the development lifecycle. The review team reported that for a project as complex as JWST, 25 to 30 percent total reserve funding was appropriate. The team cautioned that low reserve funding compromised the project’s ability to resolve issues, address risk areas, and accommodate unknown problems. As I previously mentioned, following additional cost increases and schedule threats, NASA commissioned the Independent Comprehensive Review Panel. In 2010, the panel again concluded JWST was executing well from a technical standpoint, but that the baseline cost estimate did not reflect the most probable cost with adequate reserves in each year of project execution, resulting in an unexecutable project. NASA heeded these lessons when it established a new baseline for JWST in 2011. For example, the revised schedule included more reserves than required by the procedural requirements issued by the NASA center responsible for managing JWST. We have found, however, that NASA has not applied this lesson learned to all of its large projects— most notably with its human spaceflight projects, including the Space Launch System, Orion Crew Capsule, and associated ground systems— and similar outcomes to the JWST project have started to emerge with these projects. We previously reported that all three of these programs were operating with limited cost reserves, which limited each program’s ability to address risks and unforeseen technical challenges. For example, we found in July 2016 that the Orion program planned to maintain very low levels of annual cost reserves until 2018. The lack of available cost reserves in the near term led to the program deferring work to address technical issues to stay within budget, and put the program’s future cost reserves at risk of being overwhelmed by deferred work. In April 2017, we also found that all three programs faced development challenges in completing work, and each had little to no schedule reserve remaining to the launch date—meaning they would have to complete all remaining work with minimal delay during the most challenging stage of development. We found that it was unlikely that the programs would achieve the planned launch readiness date and recommended that NASA reassess the date. NASA agreed with this recommendation and stated that it would establish a new launch readiness date. In November 2017, NASA announced that a review of the possible manufacturing and production schedule risks indicated a launch date of June 2020—a delay of 19 months—but the agency will manage to a December 2019 launch date because, according to NASA, they have put in mitigation strategies for those risks. We will follow-up on those mitigation strategies as part of future work on the human space exploration programs. Regularly and Consistently Update Project JCLs to Provide Realistic Estimates to Decision Makers. In 2009, NASA began requiring that programs and projects with estimated life-cycle costs greater than $250 million develop a JCL prior to project confirmation. This was a positive step for NASA to help ensure that cost and schedule estimates are realistic and projects are thoroughly planning for anticipated risks. This is because a JCL assigns a confidence level, or likelihood, of a project meeting its cost and schedule estimates. Our cost estimating best practices recommend that cost estimates should be updated to reflect changes to a program or be kept current as a program moves through milestones. As new risks emerge on a project, an updated cost and schedule risk analysis can provide realistic estimates to decision-makers, including the Congress. This is especially true for NASA’s largest projects as updated estimates may require the Congress to consider a variety of actions. However, there is no requirement for NASA projects to update their JCLs, and our prior work has found that projects—including JWST—do not regularly update cost risk analyses to take into account newly emerged risks. Our ongoing work indicates that of the 16 major projects currently in NASA’s portfolio that have developed JCL estimates, only 2 have reported updating their JCLs (other than required due to a rebaseline). For example, the Interior Exploration using Seismic Investigations, Geodesy, and Heat Transport Project (InSight), a Mars lander, updated its JCL after the project missed its committed launch date. As a result, the project was able to provide additional information to decision makers about the probability that it will meet its revised cost and schedule estimates. As a project reaches the later stages of development, especially integration and testing, the types of risks the project will face may change. An updated project JCL would provide both project and agency management with data on relevant risks that can guide the project decisions. For example, in December 2012, we recommended the JWST project update its JCL. NASA concurred with this recommendation; however, we recently closed the recommendation because NASA had not taken steps to implement it and the amount of time remaining before launch would not have allowed the benefit of implementing the recommendation to be realized. An updated JCL may have portended the current schedule delays, which could have been proactively addressed by the project. Enhance Oversight of Contractors to Improve Project Outcomes. In December 2012, we found that the JWST project had taken steps to enhance communications with and oversight of its contractors. According to project officials, the increased communication allowed them to better identify and manage project risks by having more visibility into contractors’ activities. The project reported that a great deal of communication existed across the project prior to the Independent Comprehensive Review Panel; however, additional improvements were made. For example, the project increased its presence at contractor facilities as necessary to provide assistance; this included assigning two engineers on a recurring basis at a Lockheed Martin facility to assist in solving problems with an instrument. The JWST project also assumed full responsibility for the mission system engineering functions from Northrop Grumman in March 2011. NASA and Northrop Grumman officials both said that NASA is better suited to perform these tasks. We continue to see instances in our ongoing work that highlight the importance of implementing this lesson learned from JWST. For example, we found in 2017 that the Space Network Ground Segment Sustainment project—a project that plans to develop and deliver a new ground system for one Space Network site that provides essential communications tracking services to NASA and non-NASA missions—exceeded its original cost baseline by at least $401.7 million and been delayed by 27 months. The project has attributed some of the cost overruns and schedule delays to the contractor’s incomplete understanding of its requirements, which led to poor contractor plans and late design changes. The project also took steps to assign a new NASA project manager, increase physical presence at the contractor facility, and have more staff focused on validation and verification activities. In summary, NASA continues to make progress developing its space telescopes to help understand the universe and our place in it. But much like other major projects that NASA is developing, there continues to be an opportunity for NASA to learn from JWST and other projects that have suffered from cost overruns and schedule delays. Key project management tools and prior GAO recommendations that I have highlighted here today, could help to better position these large, complex, and technically challenging efforts for a successful outcome. We look forward to continuing to work with NASA and this subcommittee in addressing these issues. Chairman Babin, Ranking Member Bera, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact Cristina T. Chaplain, Director, Acquisition and Sourcing Management at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Molly Traci, Assistant Director; Richard Cederholm, Assistant Director; Carrie Rogers; Lisa Fisher; Laura Greifner; Erin Kennedy; and Jose Ramos. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Question: Write a one-page summary of the report 1.

Answer: USPS's competitive products have become increasingly important, comprising about 28 percent of USPS's total revenue. USPS scans these packages at various points throughout the postal network. When scans are inaccurate or missing, questions are raised about the veracity of USPS's data on scanning performance and can lead to customer complaints. GAO was asked to review USPS's scanning policies and procedures. In this report, GAO (1) describes USPS's scanning performance and (2) examines how USPS ensures accurate scanning. GAO reviewed USPS's policies and procedures and assessed them against internal control standards; interviewed officials from USPS and five high-volume mailers; and conducted site visits to six post offices in two USPS districts that represented a range of volume, number of routes, and performance. Mail products over which the United States Postal Service (USPS) does not exercise market dominance, such as many of its packages, are called competitive products. These items are scanned throughout the mail delivery system to track their progress (see figure). USPS data show that these products are almost always scanned. For example, USPS data showed that for the first three quarters of fiscal year 2018; all but one of USPS's 67 districts met their scanning goals. Additionally, mailers that account for a high volume of USPS's competitive products told GAO that they believed USPS was generally scanning products correctly. However, a small percentage of missed or inaccurate scans occur. For example, a report from one USPS district showed that for one week, 0.73 percent of the products delivered were missing a scan and that for the fiscal year to date almost 155,000 competitive products were missing a delivery scan. USPS has designed and implemented procedures and activities to help ensure accurate scanning, but some limitations could contribute to scanning errors. For example, USPS has not based its operational procedures for scanning on any internal control standards. USPS officials said the procedures were based on USPS's unique responsibilities, management experience, and sound business practices, but the officials could not identify specific standards or a framework that they followed as the basis for the procedures. USPS officials said they did not believe any internal controls standards applied to these procedures. By not basing procedures on standards, USPS may miss opportunities to improve how it achieves its mission to scan and measure the performance of competitive products. Additionally, USPS's scanning procedure documents, such as for outlining specific delivery scanning steps, are not always consistent, and USPS relies on more informal methods, such as meetings with employees to communicate changes. Thus, employees may not have accurate procedures available to them. Finally, USPS lacks procedures to help managers identify and address incorrect scans, address customer complaints or otherwise address scanning irregularities. For example, USPS's guidance for managers is limited to a list of bullet-points that do not detail the steps managers should follow to resolve scanning irregularities. In addition, this list has not been updated since 2005. Without consistent or detailed procedures, USPS's employees and managers may not scan items accurately or find information needed to resolve scanning issues—a situation that could hinder USPS's ability to reduce inaccurate or missing scans for these important mail products. GAO recommends that USPS: (1) identify and adopt internal control standards for its operational activities such as for scanning of competitive products; (2) improve the communication of procedures for scanning competitive products; and, (3) create procedures for supervisors on how to address inaccurate scans and resolve scanning issues. USPS agreed to explore addressing the first recommendation and agreed with the other two recommendations.