U.S. POSTAL 

SERVICE

Actions Needed to 

Strengthen the Capital 

Investment Process

Report to Congressional Requesters

January 2014

GAO-14-155

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-155, a report to 

congressional requesters

January 2014

U.S. POSTAL SERVICE

Actions Needed to Strengthen the Capital Investment

Process

Why GAO Did This Study

USPS has reached its statutory 

borrowing limit and has projected 

unsustainable losses. GAO’s prior 

work has stated USPS’s financial 

challenges hinder its ability to make 

capital investments. GAO was asked to 

review USPS’s capital investment 

process. 

This report addresses the extent to 

which USPS follows leading practices 

for four phases of capital investments: 

planning, selecting, managing, and 

evaluating. GAO identified the phases 

and leading practices primarily by 

analyzing the Office of Management 

and Budget’s capital investment guide 

and compared them with USPS’s 

policies and practices. External 

stakeholders with both public and 

private-sector experience reviewed the 

leading practices and found them to be 

reasonable for USPS. To examine how 

USPS policies were applied in specific 

cases, GAO reviewed 5 of 28 capital 

investments greater than $25 million 

that were approved for funding since 

fiscal year 2007.

What GAO Recommends

USPS should, among other 

recommendations, modify some of its 

capital investment policies to more 

closely align with leading practices, 

particularly for planning, selecting, and 

evaluating capital investments and

regularly examine the extent to which 

managers reassess projects. USPS 

partially concurred or concurred with all 

of GAO’s recommendations. GAO 

continues to believe that all of its 

recommendations are valid and 

implementation will help to improve 

USPS’s capital investment process as 

discussed further in this report. 

What GAO Found 

For each of the four phases of capital investments, USPS’s conformance with 

leading practices varied. There are several practices within each of the phases. 

GAO assessed conformance as “substantial” if USPS’s policy conformed to all or 

almost all elements of the practice, and as “partial” if USPS’s policy conformed to 

some elements, or GAO identified cases in the five projects reviewed where the 

policies were not consistently applied. 

For planning capital investments, USPS substantially conformed to most of the 

leading practices, such as identifying mission needs and gaps in services, 

reviewing and approving a framework for selecting its investments, and 

developing a long-term capital investment plan. However, USPS did not 

substantially conform to other practices such as evaluating alternative 

investments by considering whether an external entity could perform all or part of 

a function because USPS’s investment policies do not require such evaluations. 

However, USPS is not precluded from conducting such evaluations. Modifying its 

policies to require such evaluations could place USPS in a better position to 

ensure the evaluations are completed and to identify the best option for reducing 

costs and increasing the quality of investments.

For selecting capital investments, USPS substantially conformed to most of the 

leading practices, such as ranking and prioritizing, and linking its investments 

with budget considerations. However, consistent with its investment policy, USPS 

developed business cases for approval by project rather than following leading 

practices that call for using a portfolio approach of allocating resources based on 

overall organizational goals linked to the agency’s mission. Modifying policies to 

require a comprehensive portfolio approach would better enable USPS to 

consider projects alongside those that have been funded to select the mix of 

investments that best meets its mission needs. 

For managing capital investments, USPS conformance with leading practices 

was mixed. For example, consistent with leading practices, USPS established 

oversight for its capital investments and tracks cost, schedule, and performance 

data for initiatives. USPS policy requires comparing the planned-investment

timeline and performance metrics to actual results to reassess and determine 

whether to continue, amend, or terminate a project, consistent with leading 

practices. USPS managers, however, could only verify that such a reassessment 

occurred for one of the five projects GAO reviewed. Examining the extent to 

which managers regularly reassess projects to continue, amend, or stop a project 

would help to establish crucial accountability for limited resources.

For evaluating capital investments, USPS conformance with leading practices 

was partial. USPS policy calls for a comparison of actual return-on-investment 

and performance data for completed projects against expected results, 

consistent with leading practices. However, four of the five projects GAO 

reviewed did not have comparable return-on-investment data, thereby limiting the

ability of managers to assess the investment’s impact, identify modifications to 

potentially improve performance, and revise the investment process. Finally, 

USPS policy does not require incorporating best practices or lessons learned 

after project completion—another leading practice—which limits opportunities for 

USPS to improve its process in a way that could benefit future investments.

View GAO-14-155. For more information, 

contact Lorelei St. James at (202) 512-2834 or

stjamesl@gao.gov. 
Page i GAO-14-155 U.S. Postal Service

Letter 1 

Background 6

USPS’s Conformance to Leading Practices Varies by Capital 

Investment Phase 10

Conclusion 22

Recommendations for Executive Action 22

Agency Comments and Our Evaluation 23

Appendix I Scope and Methodology 27

Appendix II U.S. Postal Service’s Strategic Initiatives and Corresponding 

Delivering Results, Innovation, Value, and Efficiency (DRIVE) 

Initiatives 31

Appendix III Comments from the U.S. Postal Service 33

Appendix IV GAO Contact and Staff Acknowledgments 37

Tables

Table 1: Selected USPS Capital Projects 3

Table 2: USPS’s Capital Investment Planning and Project 

Approval 6

Table 3: Selected USPS Capital Projects (Dollars in Millions) 29

Figures

Figure 1: Flats Sequencing System, Palatine, Illinois 4

Figure 2: USPS Capital Investment Tollgates 7

Figure 3: USPS Capital Outlays, Fiscal Years 2003 to 2012 

(Dollars in Millions) 8

Figure 4: GAO Identified Capital Investment Phases and Leading 

Practices 10

Figure 5: USPS’s Conformance to Capital-Investment Leading 

Practices 10

Contents
Page ii GAO-14-155 U.S. Postal Service

Figure 6: USPS’s Conformance to Leading Practices for Planning 

Capital Investments 11

Figure 7: USPS’s Conformance to Leading Practices for Selecting 

Capital Investments 15

Figure 8: USPS’s Conformance to Leading Practices for Managing 

Capital Investments 17

Figure 9: USPS’s Conformance to Leading Practices for 

Evaluating Capital Investments 20

Abbreviations

APBS Automated Parcel and Bundle Sorter

CPIC Capital Planning and Investment Control

DBCS Delivery Bar Code Sorter

DQI Distribution Quality Improvement

DRIVE Delivering Results, Innovation, Value and Efficiency

FERS Federal Employment Retiree System

FSS Flats Sequencing System

IRC Investment Review Committee

OIG Office of Inspector General 

OMB Office of Management and Budget 

PARS Postal Automated Redirection System

ROI return on investment 

USPS U.S. Postal Service

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Page 1 GAO-14-155 U.S. Postal Service

 

441 G St. N.W.

Washington, DC 20548

January 7, 2014

The Honorable Thomas R. Carper

Chairman 

The Honorable Tom Coburn, M.D.

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Susan M. Collins

United States Senate

The U.S. Postal Service (USPS) has insufficient revenues to cover its 

expenses, has reached its statutory borrowing limit of $15 billion, and has 

projected unsustainable losses. In its fiscal year 2013 Integrated Financial 

Plan,1 USPS forecasted 4 months during the year when its average 

available funding was estimated at or below $1 billion—enough to cover 

just 4 days of expenses. USPS’s Postmaster General stated that this is 

an unacceptable level of resources for an organization with $65 billion in 

revenues. We added USPS to our High Risk List in 2009 due in part to 

the challenges USPS faces with this deteriorating financial situation.2

USPS is required to fulfill its mission of providing prompt, reliable, and 

efficient universal service to the public while remaining financially selfsustaining. USPS is bound by specific legal and other restrictions that 

limit its ability to make certain types of business decisions—such as 

eliminating particular lines of business, cutting back services, and/or 

altering its business model in ways that inhibit its universal service 

obligation. For example, in February 2013, USPS announced plans to 

transition to a new delivery schedule by August 2013 that would limit its 

Saturday mail delivery to packages and mail addressed to Post Office 

Boxes. However, USPS postponed its plans after some legislative issues 

were raised.

USPS’s limited budgetary resources heighten the importance of making 

wise capital investments to modernize and improve productivity. 

 

1 The Integrated Financial Plan is an executive summary document that includes the 

operating plan, capital investment plan, and financing plan for the fiscal year.

2 GAO, High-Risk Series: Restructuring the U.S. Postal Service to Achieve Sustainable 

Financial Viability, GAO-09-937SP (Washington, D.C.: July 28, 2009). 
 

Page 2 GAO-14-155 U.S. Postal Service

USPS’s limited resources have constrained its funding for capital 

investments3

To describe the extent to which USPS follows leading practices, we 

compared USPS’s process for planning, selecting, managing, and 

evaluating capital investments to leading practices. We identified leading 

practices for the four phases—planning, selecting, managing, and 

evaluating capital investments—through analysis and review of the Office 

of Management and Budget’s (OMB) Capital Programming Guide 

supplement to Circular A-11. This guide identifies leading practices from 

government agencies and the private sector. We also reviewed examples 

of executive agency implementation of the Capital Planning and 

Investment Control (CPIC) process.

to fulfill its primary mail-delivery mission and restructure and 

modernize its operations. For example, about 10 years ago, USPS was 

scheduled to replace large portions of its approximately 210,000-vehicle 

fleet, but has deferred the replacements—as well as other capitalinvestment needs—due to a shortage of funds. As packaging and 

shipping continue to be an area of revenue growth, it will be important for 

USPS to invest in vehicles to effectively serve that market and meet its 

mission of providing prompt, reliable, and efficient mail service to all areas 

of the country. Effective capital investments can improve productivity, 

provide much-needed cost savings, and prevent larger, more costly 

expenses in the future. You asked us to review USPS’s capital 

investments. This report addresses the extent to which USPS conformed 

to leading practices for planning, selecting, managing, and evaluating its 

capital investments.

4

 

3 For the purpose of this report, capital investments include land, structures, equipment 

(including motor and aircraft fleets), and intellectual property (including software), that 

have an estimated useful life of 2 years or more. Capital investments exclude items 

acquired for resale in the ordinary course of operations or held for the purpose of physical 

consumption, such as operating materials and supplies.

We identified leading practices that 

are applicable to USPS’s distinctive situation of having certain 

characteristics of a public agency and a private corporation. Internal and 

external subject matter experts with experience in both the public and 

private sectors reviewed the leading practices we identified and found 

them to be reasonable for USPS capital investments. We then compared 

4 Capital Planning and Investment Control (CPIC) is a process that executive branch 

agencies use to select, manage, and evaluate information technology investments in 

alignment with the process for making budget, financial, and program management 

decisions in order to maximize the value of investments while assessing and managing 

risk.
 

Page 3 GAO-14-155 U.S. Postal Service

the identified leading practices to USPS’s capital investment process. To 

understand USPS’s capital investment process, we reviewed USPS 

policies and related documentation and interviewed USPS officials.

For more in-depth review, we also selected 5 of 28 capital investment 

projects that were high cost (each greater than $25 million) and were 

approved for funding after USPS experienced net losses in fiscal year 

2007. From the 28 projects, we selected the four projects that had a 

projected positive return on investment according to USPS, were not 

specific to a particular geographic area, and were completed by fiscal 

year 2012. We included a fifth project that is fully deployed, but not yet 

complete due to the need for numerous and significant software updates. 

For each of these projects, we reviewed documentation and interviewed 

program managers to gather more detailed information about how USPS 

policies were applied in specific cases and to determine whether USPS 

policies were consistently followed for the selected projects (see table 1). 

Findings from our review of the selected capital investments do not 

support generalizations about the overall extent to which USPS followed 

leading practices for its capital investments, but rather illustrate whether 

and how policies were applied in specific cases. See also table 3 for more 

details on these five projects.

Table 1: Selected USPS Capital Projects

Capital investment projects Description 

Automated Parcel and Bundle Sorter 

(APBS)—Service Life Extension Program

APBS machines add new hardware and software to extend the useful life of existing 

parcel and bundling machines by at least 10 years and add new automation 

capabilities. 

Additional Delivery Bar Code Sorters (DBCS 

6) and stacker modules

DBCS is a multi-level, high-speed machine that reads barcodes and sorts letter mail to 

bins sorted by Zip Code and is the central component of USPS’s letter automation 

program. 

Distribution Quality Improvement (DQI) 

Program—Phase 2

DQI software enables USPS to encode the 9 percent of mail that cannot be bar-coded 

due to incorrect or incomplete addresses.

Postal Automated Redirection System 

(PARS)—Letter Incentive

A national PARS software database automatically forwards undeliverable-asaddressed mail.

Flats Sequencing System (FSS), Phase 1 FSS machines automate the sorting of flat-sized mail into delivery sequence (see fig. 

1). USPS officials told us that FSS is fully deployed but not considered complete as 

software updates are numerous and significant. 

Source: GAO summary of USPS information.
 

Page 4 GAO-14-155 U.S. Postal Service

Figure 1: Flats Sequencing System, Palatine, Illinois

Note: The Flats Sequencing System is USPS’s most costly investment ever. It is a large, complex 

machine requiring about 30,000 square feet in order to sort flat-sized mail into delivery sequence at 

much higher speeds and productivity than a manual process.

Our analysis identified for each investment phase—planning, selecting, 

managing, and evaluating—a series of leading practices that should be 

followed while the projects are within that phase. We used two separate 

rating scales to assess the leading practices and capital investment

phases. For each leading practice, we assessed USPS’s level of 

conformance, as follows:

• Substantial: USPS policy conformed to all or almost all elements.

• Partial: either (1) USPS policy conformed to some elements; or (2) 

USPS policy conformed substantially, but we identified instances in 

the five projects we reviewed where the policies were not consistently 

applied.

• Minimal/none: USPS policy conformed to few or no elements.
 

Page 5 GAO-14-155 U.S. Postal Service

Then, for each investment phase, we assessed USPS’s overall level of 

conformance, as follows:

• High: USPS substantially conformed to all or almost all of the leading 

practices.

• Medium: USPS substantially conformed to multiple leading practices.

• Low: USPS substantially conformed to one or none of the leading 

practices.

To report on USPS’s expenditures on capital investments for the past 10 

years and to identify projects that met our selection criteria, we requested 

data from USPS. We assessed the reliability of these data through review 

of related documents and interviews with knowledgeable agency officials. 

We found the data sufficiently reliable for our purposes of reporting on the 

amounts spent by USPS on capital investments during the past 10 years, 

and for selecting the five high-cost capital investments we reviewed. For 

more information on our scope and methodology, see appendix I.

We conducted this performance audit from March 2013 to January 2014

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objective.
 

Page 6 GAO-14-155 U.S. Postal Service

USPS’s capital investment process incorporates two main activities: 

planning and project approval (see table 2).

Table 2: USPS’s Capital Investment Planning and Project Approval 

Activity Reviewing authority Steps in planning and project approval

Planning Executive Leadership Team 

(executive leaders)

• Postmaster General

• Deputy Postmaster General

• Chief Operating Officer

• Chief Information Officer

• Chief Financial Officer

• General Counsel

• Chief Marketing and Sales 

Officer

• Chief Human Resources 

Officer

Each functional areaa

The executive leaders prioritize projects based on need and expected “return 

on investment.”

submits capital expenditure requests by project, 

including project type, location, cost, and any potential savings.

The Finance Infrastructure unit

b

c

The capital investment plan is incorporated into the Integrated Financial 

Plan—an executive summary document for the fiscal year. 

recommends projects for budget inclusion and 

returns the requests to the executive leaders for approval and inclusion in the 

capital investment plan.

Project approval Investment Review Committee 

(IRC)

• Chief Operating Officer

• Chief Information Officer

• Chief Financial Officer

• General Counsel

• Chief Marketing and Sales 

Officer

• Chief Human Resources 

Officer

For capital project requests: 

Exceeding $5 million, the IRC meets monthly to review the business case. An 

executive leader serves as a program sponsor and presents the business case 

to the IRC, which votes on whether to recommend investment. Postmaster 

General has final approval authority.

From $1 million to $5 million, a business case is required, and is submitted to 

the Technology Review Committee for review.

Less than $1 million, approvals are made by the Finance Infrastructure 

manager according to funding availability.

Source: GAO summary of USPS information.

a Functional areas include performance clusters, districts, plants, areas, headquarter units, and 

national programs.

b A “return on investment” is a figure of merit used to help make capital investment decisions that is 

calculated by considering the annual benefit divided by the investment amount.

c USPS’s Finance Infrastructure unit is responsible for aligning future capital investments with USPS’s 

strategic goals.

In addition, USPS implemented tollgates in December 2006 to enable 

IRC awareness, involvement, and decision making for all investments 

greater than $5 million (see fig. 2). According to USPS, tollgates are 

updates intended to keep the IRC informed by raising and resolving 

issues throughout the phases of the capital investment review and 

approval process.

Background
 

Page 7 GAO-14-155 U.S. Postal Service

Figure 2: USPS Capital Investment Tollgates

Note: USPS officials told us that as of December 2011, a sponsor is required to create a briefing for 

IRC review but is not required to make the presentation in person.

However, given its financial position, USPS is limited in its ability to 

finance capital investments and has spent $17.5 billion on capital 

investments over the past 10 fiscal years, but has sharply decreased its 

spending since fiscal year 2007 (see fig. 3).
 

Page 8 GAO-14-155 U.S. Postal Service

Figure 3: USPS Capital Outlays, Fiscal Years 2003 to 2012 (Dollars in Millions) 

Note: Real dollars based on fiscal year 2003.

Since 2009, USPS has taken the following actions, to address its financial 

situation, which affect its management of capital investments. For 

example:

• In 2009, USPS implemented a capital-spending freeze to conserve 

resources. Any capital initiative seeking funding must receive an 

exception-approval from USPS’s Finance and Planning unit 

demonstrating that the initiative (1) is needed for safety, health, or 

legal requirements, or (2) is required to sustain customer service, 

such as mail delivery, or (3) will have a high return on investment with 

a short payback period.

• In 2011, USPS created Delivering Results, Innovation, Value and 

Efficiency (DRIVE), a portfolio of strategic initiatives, which is intended 

to improve business strategy development and execution. DRIVE 

consists of managing a portfolio of 44 initiatives, half of which are 

active, that are intended to help close USPS’s income gap by 2015.

For example, one DRIVE initiative—Build a World Class Package 

Platform—seeks to build an infrastructure to support and promote 
 

Page 9 GAO-14-155 U.S. Postal Service

USPS’s growing package delivery business. USPS’s executive 

leaders developed and oversee the DRIVE initiatives. USPS’s Office 

of Inspector General (OIG) recently assessed DRIVE and found that 

the management process compares favorably to the identified 20 

best-in-class program management practices of 13 companies in the 

private sector.5

• In 2012, USPS developed a 5-year plan to restructure and modernize 

its operations and improve its financial situation. The 5-year plan 

estimates $2 billion annually for capital outlays for fiscal years 2015 

through 2017.

Notwithstanding these actions, our prior work6 has shown that although a 

successful capital investment depends on a range of factors,7

 

5 U.S. Postal Service, Office of Inspector General, Delivering Results, Innovation, Value, 

and Efficiency Management, DP-AR-13-008 (June 19, 2013).

following 

leading practices will more likely result in investments that meet mission 

needs, are well-managed, and achieve cost, schedule, and performance 

goals. Figure 4 shows the capital investment phases and the leading 

practices that we identified for each.

6 See for example, GAO, United States Postal Service: Opportunities to Strengthen IT 

Investment Management Capabilities, GAO-03-3 (Washington, D.C.: Oct. 15, 2002) and 

Assessing Risks and Returns: A Guide for Evaluating Federal Agencies’ IT Investment 

Decision-making, GAO/AIMD-10.1.13 (Washington, D.C.: Feb. 3, 1997). 

7 Capital investments have an element of risk due to factors outside of an agency’s 

control, such as greater than anticipated costs for raw materials and labor. Furthermore, 

success depends on not only planning and selecting, but also managing and evaluating 

practices at the project level.
 

Page 10 GAO-14-155 U.S. Postal Service

Figure 4: GAO Identified Capital Investment Phases and Leading Practices

In summary, we determined that USPS’s conformance to leading 

practices is medium for planning, selecting, and managing capital 

investment projects, and low for evaluating them, based on our review of 

USPS policy and the practices employed for the five selected projects. 

Figure 5: USPS’s Conformance to Capital-Investment Leading Practices

USPS’s Conformance 

to Leading Practices 

Varies by Capital 

Investment Phase
 

Page 11 GAO-14-155 U.S. Postal Service

USPS substantially conformed to three, and partially conformed to two, of 

five leading practices for planning capital investments (see fig. 6).

Figure 6: USPS’s Conformance to Leading Practices for Planning Capital 

Investments

Specifically, we found that USPS’s process for planning capital 

investments substantially:

• Identifies mission needs and gaps in service: Each year, USPS issues 

a capital commitment budget call to the executive leaders, vice 

presidents, and budget coordinators to identify mission needs and 

gaps in services. Executives are to work with their teams to submit 

their capital investment requests for the next fiscal year and include a 

brief narrative describing each proposed project, why it is needed, the 

amount needed for the project, and whether it supports a DRIVE 

initiative.

• Reviews and approves the framework for selecting investments:

USPS has several different sources of guidance for capital 

investments. The most comprehensive guidance is USPS’s General 

Investment Policies and Procedures.8

 

8

 USPS, General Investment Policies and Procedures: Handbook F-66 (Washington, D.C.: 

November 2005).

Since those policies and 

procedures were developed, USPS has created its tollgates (see 

figure 2). Program managers told us that they also use USPS’s 

Technology Acquisition Management Process Guidelines as their 

For Planning Capital 

Investments, USPS’s 

Conformance to Leading 

Practices Is Medium
 

Page 12 GAO-14-155 U.S. Postal Service

primary guidance.9 This guidance, however, does not include the 

updates made in December 2011. USPS also conducts annual 

internal investment overviews for selected projects. These various 

sources comprise USPS’s framework for selecting its investments.

USPS officials told us that the current guidance is a slide presentation 

available on the agency’s internal website. They also said that they 

are planning to update the guidance, but did not provide a time frame 

for completing this effort. Thus, while USPS has reviewed and 

approved a framework for selecting its investments, it does not 

currently have a clear, single-source, standard set of policies and 

procedures that reflect the selection framework. A time frame for 

completing efforts to update its policies and procedures into a singlesource guide could better position USPS to hold its managers 

accountable for completing the effort as intended. Moreover, a singlesource guide could enable better transparency for selecting 

investments. Such transparency would establish crucial accountability 

for limited resources.

• Develops a long-term capital investment plan: USPS has a 10-year 

capital investment plan that is used for internal-planning purposes, 

even though actual capital investments depend on budgetary 

resources.

In addition, we found that USPS’s process for planning capital 

investments partially:

• Links investments to its strategic plan: USPS has linked capital 

investments to strategic initiatives listed in its 5-year business plan, 

which was developed in 2012 to bring USPS to a point of financial 

viability. The business plan addresses financial challenges facing 

USPS, actions the agency plans to take to address its financial 

outlook, and external factors USPS believes could inhibit it from 

financial viability. USPS’s 5-year business plan also contains seven 

“strategic initiatives” that are linked to DRIVE initiatives (see app. II for 

more detail). USPS refers to its 5-year business plan as its strategic 

plan. However, USPS’s business plan focuses on the agency’s 

financial condition while a traditional strategic plan is more 

comprehensive and is intended to address the agency’s overall 

 

9

 USPS, Technology Acquisition Management: Process Guidelines 2.0 (September 2010).
 

Page 13 GAO-14-155 U.S. Postal Service

mission.10

While USPS does link its capital investments to its business plan, its 

financial constraints limit its ability to implement capital investments. For 

example, according to USPS OIG officials, USPS has already deferred, 

and may need to further defer, investments to replace its fleet of delivery 

vehicles and comprehensive facility maintenance. If USPS is unable to 

obtain planned revenues or cost savings, it may need to significantly limit 

future capital investments to those needed to meet safety and health 

needs, and legal obligations. According to USPS, the inability to replace 

aging or potentially obsolete vehicles and infrastructure could affect its 

quality of service and lead to a loss of business and increased costs. In 

our 2011 report on USPS’s aging fleet,

For example, there may be nonfinancial external factors, 

traditionally identified in a strategic plan, that could affect USPS’s 

ability to achieve some of the DRIVE initiatives.

11

• Evaluates alternative investments: USPS policy states that it seeks to 

determine viable alternatives, but its policy does not take into account 

whether an external entity, such as the private sector, could perform 

part or all of a mail-processing or delivery function—as OMB guidance 

(leading practices) advises.

we found that the majority of 

USPS’s delivery vehicles are approaching the end of their expected 

operational lives. We recommended that USPS develop a strategy for 

addressing its delivery fleet needs that considers the effects of likely

operational changes and legislative fleet requirements. In 2013, USPS 

officials told us that they were taking steps to implement our 

recommendation, including studying the issues raised in our report.

12

 

10 Our prior work has shown that strategic planning is the starting point and foundation for 

defining what the agency seeks to accomplish, identifying the strategies it will use to 

achieve desired results, and then measuring how well it succeeds in reaching resultsoriented goals and achieving objectives. See GAO, Agencies’ Strategic Plans Under 

GPRA: Key Questions to Facilitate Congressional Review (Version 1), 

While USPS has contracted with private 

sector entities to support USPS’s functions, USPS policy does not 

require consideration of whether it would be advantageous for a 

GAO/GGD-10.1.16

(Washington, D.C.: May 1, 1997). 

11 GAO, United States Postal Service: Strategy Needed to Address Aging Delivery Fleet, 

GAO-11-386 (Washington, D.C.: May 5, 2011). 

12 Specifically, OMB A-11 guidance states that management should assess whether the 

investment needs to be undertaken by the requesting agency because no alternative 

private sector or governmental source can better support the function. 
 

Page 14 GAO-14-155 U.S. Postal Service

private sector entity to support part or all of a processing or delivery 

function. For example, USPS contracted for the development of its PARS 

software system, but did not consider whether a private sector entity—

either in partnership with USPS or independently—could perform part or 

all of the function of automatically redirecting undeliverable mail. USPS 

officials, however, told us that a provision in its labor contracts limits its 

ability to consider external entities for supporting an entire function; 

however, USPS is not specifically prohibited from doing so.13 The

officials added that USPS has a Strategic Initiative Action Group that 

reviews, approves, and monitors proposed outsourcing initiatives to 

ensure that they meet the requirements of these bargaining unit 

agreements. However, USPS did not provide evidence that it took such 

consideration for its mail-processing or delivery functions. It is also not 

clear whether USPS considered certain strategies used by foreign postal 

operators. For example, according to the USPS OIG, contracting with 

private operators to sell aging vehicles could provide immediate cash, 

and leasing a new fleet of vehicles could result in the operational benefits 

of having a modern fleet without assuming fixed costs.14 Until USPS 

modifies its policies to require such consideration, USPS may not be 

placing itself in a position to identify the best option for reducing costs 

and increasing the quality of its capital investments. USPS officials told 

us, however, that many foreign postal operations have been privatized 

and are not subject to the same government oversight as USPS. In 

February 2011, we also reported on how the strategies of foreign 

posts’ can inform USPS modernization.15

 

13 USPS’s labor contracts with the American Postal Workers Union and National Postal 

Mail Handlers Union include a provision (Article 32) stating that when evaluating 

subcontracting proposals, USPS must consider five factors—public interest, cost, 

efficiency, availability of equipment, and qualification of employees—and determine 

whether subcontracting will have a “significant impact” on work performed by postal 

employees covered by collective bargaining agreements. If so, USPS must compare the 

costs of performing proposed work with postal employees and with a contractor, notify the 

affected union that USPS is considering subcontracting, and consider union input before 

making a decision. 

14 USPS’s OIG reported on a strategy used by foreign postal operators to sell their aging 

vehicle fleet to a private firm specializing in leasing, financing, and vehicle fleet 

management, which then leases a new fleet of vehicles to the postal operator and 

provides maintenance services. United States Postal Service Office of Inspector General, 

Public-Private Partnerships: Best Practices and Opportunities for the Postal Service,

RARC-WP-13-011 (June 24, 2013). 

15 GAO, U.S. Postal Service: Foreign Posts’ Strategies Could Inform U.S. Postal Service’s 

Efforts to Modernize, GAO-11-282 (Washington, D.C.: Feb.16, 2011). 
 

Page 15 GAO-14-155 U.S. Postal Service

USPS substantially conformed to three, and partially conformed to two, of 

five leading practices for selecting capital investments (see fig. 7).

Figure 7: USPS’s Conformance to Leading Practices for Selecting Capital 

Investments

Specifically, we found that USPS’s process for selecting capital 

investments substantially:

• Ranks and prioritizes investments based on mission needs and 

projected return on investment: After USPS makes its initial budget 

call, the executive leaders rank and prioritize capital requests based 

on need, the expected return on investment, the impact on customer 

experience, and the ability to support key initiatives.

• Submits business cases to an external entity: As part of the IRC 

review process, USPS submits business cases for all projects with 

total funding over $5 million to its OIG for review. For investments $25 

million or greater, USPS OIG shares its assessments and conclusions 

with the USPS program sponsor, USPS headquarters officials, the 

IRC,16 and with Congress.

 

16 USPS OIG attends the monthly IRC meeting as a non-voting member. The IRC is 

intended to establish USPS investment direction, policy, and procedures; ensure 

compliance with investment policy procedures; and prioritize resource utilization. The IRC 

reviews and votes on individual projects greater than $5 million in combined total capital 

and expense investment. 

For Selecting Capital 

Investments, USPS’s 

Conformance to Leading 

Practices Is Medium
 

Page 16 GAO-14-155 U.S. Postal Service

• Links investments with budget considerations: USPS links capital 

investments with the overall budget when developing its annual 

Integrated Financial Plan. Specifically, as described in table 2, during 

budget planning, the Finance Infrastructure unit recommends projects 

for inclusion in the capital budget through a multi-step review process, 

the results of which are then incorporated into the Integrated Financial 

Plan. In fiscal year 2013, capital budget requests totaled 

approximately $2.1 billion, while forecasted capital needs totaled $752 

million.

USPS partially conformed to developing its business cases and allocating 

resources toward a desired portfolio. Investment portfolios are broad 

categories of investments that are linked by similar missions to better 

fulfill that specific mission and minimize overlapping functions. A portfolio 

perspective enables an organization to focus on projects that best meet 

its overall goals, rather than on projects that only meet the objectives of 

specific program areas. Given USPS’s financial condition, a portfolio 

approach is especially important. However, with the exception of the 

DRIVE initiative,17 USPS develops its business cases for approval and 

allocates resources by project rather than by portfolio. More specifically, 

USPS officials develop business cases for each specific project that 

include projected return on investment for approval and funding. As our 

prior work at federal agencies making substantial capital investments has 

shown,18 selecting investments on a project rather than portfolio approach 

may lead to duplicative functions that do not integrate well together to 

perform the desired mission. Furthermore, modifying USPS’s policies to 

require a comprehensive portfolio approach would enable USPS to 

consider proposed projects alongside those that have been funded to 

select the mix of investments that best meets its mission needs.

 

17 DRIVE consists of 44 strategic initiatives organized by broad categories. 

18 See for example, GAO, VA Real Property: Realignment Progressing, but Greater 

Transparency about Future Priorities Is Needed, GAO-11-197 (Washington, D.C.: Jan. 31, 

2011); and Department of Homeland Security: Billions Invested in Major Programs Lack 

Appropriate Oversight, GAO-09-29 (Washington, D.C.: Nov.18, 2008). 
 

Page 17 GAO-14-155 U.S. Postal Service

USPS substantially conformed to two, and partially conformed to two, of 

four leading practices for managing capital investments (see fig. 8). 

Figure 8: USPS’s Conformance to Leading Practices for Managing Capital 

Investments

Specifically, we found that USPS’s process for managing capital 

investments substantially:

• Establishes accountability and oversight for prudent use of resources: 

USPS policy establishes accountability and oversight of resources by 

assigning a leader to oversee capital investment projects. For 

example, the executive leaders assign one member as accountable 

for each DRIVE initiative. USPS assigned a program manager to each 

of the five selected projects that we reviewed. In addition to oversight, 

these program managers were responsible for directing and 

controlling program activities and addressing challenges. For 

example, with respect to challenges, the APBS program manager told 

us that he coordinated the logistics and timing of work for three 

individual contracts on his project—which included managing three 

requests for proposal, three statements of work, and three suppliers.

• Tracks cost, schedule, and performance data for investments: USPS 

policy calls for tracking cost, schedule, and performance data for 

investments with approved funding greater than $5 million. For DRIVE 

initiatives, USPS developed a dashboard to monitor the progress of 

financial and nonfinancial milestones and impacts. Generally, the 

dashboard flags cost, schedule, and performance milestones that are 

in danger of being missed or have been missed. For capital 

investments greater than $25 million, USPS issues an Investment 

Highlights publication semiannually to provide a detailed, singlesource overview. The Investment Highlights publication also contains 

For Managing Capital 

Investments, USPS’s 

Conformance to Leading 

Practices is Medium
 

Page 18 GAO-14-155 U.S. Postal Service

an electronic reference that tracks cost, schedule, and performance 

data for all capital investments over $5 million, including those for 

each of the five projects we reviewed. Program managers for the 

selected projects told us that updates might be provided to senior 

management more frequently—on a weekly, monthly, or as needed 

basis.

In addition, we found that USPS’s process for managing capital 

investments partially:

• Reassesses risk by identifying investments that are over budget, 

behind schedule, performing poorly, and lacking capability: While 

USPS policy reassesses risk by identifying investments that are over 

budget, performing poorly, and lacking capability, this practice was not 

consistently followed for the five projects we reviewed. Prior to 

December 2011, USPS policy stated that the IRC was to receive two 

briefings at the conversion and execution tollgates19 explaining how 

planned investment, timeline, and performance metrics were 

comparing to actual results. The purpose was to reassess and 

determine whether to continue, amend, or terminate a project.20

 

19 While USPS did not specify precisely when a conversion tollgate briefing was to occur, 

an execution tollgate briefing was to occur once 50 percent of an investment’s equipment 

was deployed or 50 percent of its major facility construction was complete.

USPS officials told us that they made an internal decision in 

December 2011 to no longer require in-person briefings and instead 

have executive leaders work more closely with program managers 

and staff. The executive leader is then responsible for updating the 

IRC on the project status. In addition, USPS policy calls for a program 

sponsor to prepare a modified business case with updated costs, 

timelines, benefits, and scope if a capital investment is expected to 

exceed its approved funding or deviate significantly from its approved 

scope. The modified business case is then presented to the original 

authorities who vote whether to approve the modification, which would 

include any corrective actions, in order to continue the capital 

investment. However, USPS officials could only verify that a 

reassessment decision to continue, amend, or terminate an 

investment occurred for one of the five projects we reviewed. While a 

conversion briefing was held for four of the projects, and a business 

20 Three of our selected projects were completed before December 2011—DBCS, DQI 

and PARS. APBS was completed in September 2012 and FSS is deployed and scheduled 

for completion in June 2014 due to needed software upgrades.
 

Page 19 GAO-14-155 U.S. Postal Service

case modification was held for the fifth, USPS officials could only 

provide evidence of an IRC reassessment for DBCS, which USPS 

decided to continue. Examining the extent to which managers 

regularly reassess projects to continue, amend, or stop a project, 

would help manage risk, given limited resources. 

• Identifies problems and implements corrective actions as needed:

USPS officials told us that executive leaders typically hold regular 

meetings with the program managers and other team members, 

meetings that have led to identifying problems and implementing 

corrective actions for continuing a project. For the five selected 

projects we reviewed, USPS did not provide documentation that such 

discussions were held. Effective decision making relies on free 

exchange of information among a variety of stakeholders—particularly 

those who might be skeptical about an investment and can provide 

constructive insight and information; the more open the process, the 

more likely errors in fact or methodology will be uncovered.21 The 

absence of a transparent reassessment of risk to identify projects that 

need to be amended or terminated inhibits USPS’s ability to 

implement needed corrective actions for projects that are over budget, 

behind schedule, or not meeting performance targets. Therefore, 

examining the extent to which managers identify problems and 

implement corrective actions can better position USPS to make the 

best use of its resources. 

 

21 National Research Council, Investments in Federal Facilities: Asset Management 

Strategies for the 21st Century (Washington, D.C.: 2004). 
 

Page 20 GAO-14-155 U.S. Postal Service

USPS partially conformed to the three leading evaluation practices (see 

fig. 9).

Figure 9: USPS’s Conformance to Leading Practices for Evaluating Capital 

Investments

Specifically, we found that USPS partially conformed to the leading 

practice of:

• Evaluating cost, schedule, and performance results of implemented 

investments: USPS policy calls for a comparison of the actual returnon-investment and performance data for completed projects, against 

the expected return-on-investment and performance results in the 

business case. This comparison is usually included in the detailed 

capital investment reports—based on compliance reports—that are 

used to create the Investment Highlights publication. To assist with 

evaluating an investment, the compliance reports are to be regularly 

updated.22 In addition, USPS sometimes performs a final performance 

study.23

 

22 The compliance reports are to be updated quarterly from the time a project is approved 

until two full quarters after the quarter in which the project is completed. 

However, the detailed capital investment reports for four of 

the five projects we reviewed did not have observed return-oninvestment data that could be compared to expected return on 

investment, and two projects did not have actual performance metrics 

compared to their expected results. To explain the missing 

comparisons, USPS officials told us that if a project is on budget and 

on schedule, they assume that it will achieve the expected return on 

23 USPS refers to these performance studies as after-cost studies, which are prepared for 

larger scaled projects or when a project experiences cost or schedule problems or has the 

potential to experience such problems. 

For Evaluating Capital 

Investments, USPS’s 

Conformance to Leading 

Practices Is Low
 

Page 21 GAO-14-155 U.S. Postal Service

investment. If performance data are missing, USPS officials told us 

that the program sponsor can ask the program manager for this 

information. One project, APBS, had complete return-on-investment 

and performance data comparable to its business case. Return-oninvestment measures provide managers with valuable insight 

regarding any financial benefit attributable to a project. Performance 

measures help to identify problems, evaluate underlying factors, and 

determine needed adjustments. The absence of updated return on 

investment and performance data means that USPS cannot 

completely (1) assess the investment’s impact on strategic 

performance, (2) identify modifications that may be needed to improve 

performance, and (3) revise the investment process based on lessons 

learned. As a result, regularly reassessing projects by reviewing 

actual performance results after investment completion can provide 

USPS with a valuable opportunity to gain feedback necessary for 

improving future capital investments.

• Leveraging external oversight and review of its capital investments:

For initiatives with approved capital funding greater than $25 million, 

USPS semiannually provides its OIG the Investment Highlights 

publication for informational purposes, but does not seek oversight or 

feedback from its OIG or other entities, such as a consultant or peer 

reviewer. Subject matter experts have found that a third party should 

evaluate a capital investment using a predetermined set of metrics 

that will result in real data on which to make improvements in the 

process or to inform future decisions on capital investments.24

External oversight and review is important and useful to hold an entity 

accountable for its performance.

• Incorporating best practices and lessons learned into the investment 

process: USPS does not require developing or updating best 

practices after project completion. Nevertheless, one of the program 

managers for a selected project that we reviewed told us that USPS 

identified, documented and followed industry best practices for 

program implementation—based on experience with various program 

vendors and contractors. Regarding lessons learned, USPS policy 

calls for documentation of “unexpected situations”25

 

24 National Research Council, Investments in Federal Facilities: Asset Management 

Strategies for the 21st Century (Washington, D.C.: 2004).

upon project 

25 Unexpected situations could include changes in planned cost, schedule, and 

performance. 
 

Page 22 GAO-14-155 U.S. Postal Service

completion but does not require communicating lessons learned to 

other program managers. One of the program managers for the five 

selected projects provided us with documented lessons learned, but 

could not provide evidence of how such lessons were used. Another 

program manager told us that sometimes, when a project is 

completed, managers are assigned to new projects without adequate 

time to document lessons learned on the completed project. The 

absence of documented best practices and lessons learned that could 

be incorporated into the capital investments process limits 

opportunities for USPS to improve its process in a way that could 

benefit future investments.

Given that USPS’s financial situation and the limitations of its business 

model hamper its ability to prevent future losses, it is crucial for USPS to 

use its scarce resources to prioritize and make wise capital investments, 

particularly those that reduce costs. USPS has taken positive steps in this 

direction, and our analysis of a range of projects shows that USPS

substantially followed the majority of leading practices for planning and 

selecting capital investments. USPS’s 5-year business plan, for example, 

is a positive step toward an agency-wide strategic plan that links capital 

investments to strategic initiatives. However, substantially following all

leading practices—including those for managing and evaluating capital 

investments—could better ensure that USPS’s investments are wellmanaged and achieve cost, schedule, and performance goals, an 

accomplishment that in turn could enhance USPS’s financial viability. 

Conversely, not substantially following all leading practices may result in 

inefficient spending of limited resources, thereby putting USPS at even 

further financial risk.

To strengthen USPS’s capital investment process, we are making three 

recommendations related to USPS policy and consistent application of 

leading practices. The Postmaster General and executive leaders should:

1. Establish a time frame for developing a clear, detailed, single-source, 

standard set of policies and procedures that reflect the capital 

investment selection phase;

2. Modify capital investment policies to more closely align with the 

following leading practices, including:

Conclusion

Recommendations for 

Executive Action
 

Page 23 GAO-14-155 U.S. Postal Service

• for planning capital investments, consider whether an external 

entity could better support all or part of a desired function when 

evaluating alternative capital investment options;

• for selecting capital investments, use a portfolio approach for 

developing business cases and finalizing and allocating 

resources; and

• for evaluating capital investments, seek and leverage external 

oversight and review, from a consultant or peer reviewer, and 

require that best practices and lessons learned be incorporated 

into the review process; and

3. Regularly examine the extent to which executives and program 

managers consistently follow all leading practices, particularly for: 

• identifying problems and reassessing risk while managing a 

project; and

• evaluating the cost, schedule, and performance results of 

completed projects.

We provided a draft of this report to USPS for review and comment. 

USPS provided comments, which are reprinted in appendix III. USPS 

concurred or partially concurred with our recommendations and stated 

that there are always opportunities for improvement and that it can clearly 

benefit from our recommended actions to strengthen its investment 

process. 

USPS partially concurred with our first recommendation that USPS 

establish a time frame for developing a clear, detailed, single-source set 

of standard policies and procedures that reflect the capital-investment 

selection phase. USPS responded that it plans to revise its General 

Investment Policies and Procedures handbook during the second quarter 

of fiscal year 2014 to include the capital-investment selection process. 

However, USPS also stated that an established capital selection process 

is already in place, although it is not included in the handbook. As 

described in the report, USPS has several sources of guidance and it 

does not have a clear, single-source, standard set of policies and 

procedures that reflect the selection framework. We are pleased that 

USPS has now established a time frame for developing such guidance, 

Agency Comments 

and Our Evaluation
 

Page 24 GAO-14-155 U.S. Postal Service

which could better position USPS to hold its managers accountable and 

better enable transparency for selecting investments.

USPS partially concurred with our second recommendation to modify its 

capital investment policies to more closely align with leading practices in 

the areas of planning, selecting, and evaluating capital investments.26

With regard to selecting capital investments by using a portfolio approach 

for developing business cases and finalizing and allocating resources, 

USPS partially concurred and stated that it uses an organization-wide 

portfolio approach for review during the capital-budget-planning process, 

and that it will continue to clearly communicate the portfolio approach and 

incorporate it into USPS’s revised investment policy. However, we found 

that USPS develops its business cases for approval and allocates 

resources by project rather than portfolio. As noted in the report, selecting 

investments on a project rather than portfolio approach may lead to 

duplicative functions that do not integrate well to perform the desired 

mission. Requiring a more comprehensive portfolio approach would 

enable USPS to consider proposed projects alongside those that have 

been funded to select the mix of investments that best meets its mission 

needs. Thus, we continue to believe that the USPS should use a portfolio 

approach for developing business cases to fully address the 

recommendation.

With regard to planning capital investments by considering whether an 

external entity could better support all or part of a desired function when 

evaluating alternative investment options, USPS concurred. However, 

USPS stated it currently has procedures in place to consider viable 

options and provided examples of cases in which it has outsourced noncore functions. USPS further noted that it considers outsourcing work that 

is currently performed by bargaining unit employees and outsourcing will 

always be considered if it is in the financial best interest of USPS and 

meets collective-bargaining requirements. However, as noted in the 

report, USPS did not provide us with documentation that it considered 

outsourcing part or all of a mail-processing or delivery function. USPS 

could better conform to this leading practice if it considered the potential 

role of an external entity for all capital investments. This could place 

USPS in a better position to identify the best option for reducing costs and 

to increase the quality of its investments. 

 

26 USPS responded separately to the three aspects of this recommendation—planning, 

selecting, and evaluating capital investments. Our response to USPS’s comments 

addresses these three aspects within the recommendation.
 

Page 25 GAO-14-155 U.S. Postal Service

With regard to evaluating capital investments by seeking and leveraging 

external oversight and review and requiring that best practices and 

lessons learned be incorporated into the investment process, USPS 

concurred. However, USPS responded that it has previously contracted 

with highly respected external entities to review capital investment plans, 

and that it will continue to evaluate the need to hire consultants when 

necessary. While this is a positive practice, USPS can extend their 

external oversight and review when evaluating capital investments in 

addition to reviewing investment plans. In addition, external oversight and 

review are leading practices for all investments that could help USPS 

obtain data on which to make improvements in the process or to inform 

future investment decisions. USPS also stated that it will ensure that 

lessons learned and investment performance results are shared with its 

management and will be available for review on USPS’s internal website. 

With further regard to lessons learned, USPS also stated that it will 

ensure that each group is aware of the status of major investments and 

the lessons learned for current and future projects. However, USPS did

not state that it would modify its investment policies to require that best 

practices and lessons learned be incorporated into the review process. 

We continue to believe that USPS should modify its investment polices as 

recommended. The absence of consistent documents for all investments 

limits opportunities to improve the process to benefit future investments. 

USPS concurred with our third recommendation that it regularly examine 

the extent to which executives and program managers consistently follow 

all leading practices particularly for: identifying problems and reassessing 

risk while managing a project and evaluating the cost, schedule, and 

performance results of completed projects. USPS stated that it would 

require program sponsors to ensure that their presentations appropriately 

address project cost, schedule, and performance information. This is a 

positive step toward improving USPS’s ability to gain feedback necessary 

for improving future capital investments. 

As agreed with your office offices, unless you publicly announce the 

contents of this report earlier, we plan no further distribution until 30 days 

from the report date. At that time, we will send copies to the appropriate 

congressional committees, the Postmaster General, and other interested

parties. In addition, the report will be available at no charge on the GAO 

website at http://www.gao.gov. 
Page 26 GAO-14-155 U.S. Postal Service

If you or your staff have any questions on this report, please contact me 

at (202) 512-2834 or stjamesl@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Contact information and key contributors to the report are 

listed in appendix IV.

Lorelei St. James

Director

Physical Infrastructure Issues 
Appendix I: Scope and Methodology

Page 27 GAO-14-155 U.S. Postal Service

To describe the extent to which the U.S. Postal Service (USPS) follows 

leading practices, we compared USPS’s process for planning, selecting, 

managing, and evaluating capital investments to leading practices. We 

identified leading practices for the four phases—planning, selecting, 

managing, and evaluating capital investments—through analysis and 

review of the Office of Management and Budget (OMB) Capital 

Programming Guide supplement to Circular A-11, which identified leading 

practices from government agencies and the private sector,1 and 

examples of executive agency implementation of the Capital Planning 

and Investment Control (CPIC) process.2 We identified leading practices 

that are applicable to USPS’s business model, which requires it to fulfill its 

mission of providing prompt, reliable, and efficient universal service to the 

public while remaining financially self-sustaining. However, unlike a 

private corporation, USPS is bound by legal and other restrictions that 

limit its ability to make certain types of business decisions—such as 

eliminating particular lines of businesses, cutting back on services, and/or 

altering its business model in ways that inhibit its universal service 

provision. External3

 

1 For example, the programming guide identified establishing accountability and oversight 

when managing capital investments as a leading practice found in the private sector. 

and internal subject matter experts with experience in 

both the public the private sectors reviewed the leading practices we 

identified and found them to be reasonable for USPS capital investments 

as applicable. These experts all provided comments that we incorporated 

into our capital investment leading practices. We compared our identified 

leading practices to USPS’s capital investment process. To understand 

USPS’s capital investment process, we reviewed USPS policy, 

documentation, and testimonial evidence on the capital investment 

process. USPS officials reviewed our initial description and provided 

feedback, which we incorporated into our work. We also met with USPS 

officials responsible for the Delivering Results, Innovation, Value and 

Efficiency (DRIVE) strategic initiatives to assess the extent to which 

2 Capital Planning and Investment Control (CPIC) is a process that executive branch 

agencies use to select, manage, and evaluate information technology investments in 

alignment with the process for making budget, financial, and program management 

decisions in order to maximize the value of investments while assessing and managing 

risk.

3 The National Academies referred us to engineers with public and private capital 

investment expertise. The National Academies comprises four organizations: the National 

Academy of Sciences, National Academy of Engineering, Institute of Medicine, and 

National Research Council. 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 28 GAO-14-155 U.S. Postal Service

USPS conformed to the leading practice of linking its capital investments 

to its strategic plans. We also met with and obtained documentation from 

USPS’s Office of Inspector General (OIG), to obtain an overall 

assessment of USPS’s capital investment process.

To gather more detailed information about how USPS policies were 

applied in specific cases, and to determine whether USPS policies were 

consistently followed for a selection of high-cost capital investment

projects, we selected 5 of 28 projects that were approved for over $25 

million and were approved for funding after USPS experienced net losses 

in fiscal year 2007. From these 28 projects, we selected the four that had 

a positive projected return on investment as determined by USPS, were 

not specific to a particular geographical area,4 and were completed by 

fiscal year 2012. We included a fifth project (that was fully deployed, but 

not yet complete) due to USPS’s significant investment in the project (see 

table 3). We met with the program managers for each of the projects and 

reviewed documentation to assess the process for managing and 

evaluating these projects, and we conducted site visits to see four of the 

five projects. The selected investments do not support generalizations 

about the overall extent to which USPS followed leading practices for its 

capital investments, but rather illustrate whether and how policies were 

applied in specific cases. We also met with the USPS OIG to discuss 

USPS’s management and evaluation of the selected projects.

 

4 For example, we did not include a project aimed at expanding a postal-processing and 

distribution center for just a specific location. 
Appendix I: Scope and Methodology

Page 29 GAO-14-155 U.S. Postal Service

Table 3: Selected USPS Capital Projects (Dollars in Millions) 

Capital projects Description 

Fiscal 

year 

completed Cost 

Total 

projected 

savings

Automated Parcel and Bundle Sorter 

(APBS)— Service Life Extension 

Program 

APBS machines add new hardware and software to 

extend the useful life of existing parcel and bundling 

machines by at least 10 years and add new 

automation capabilities. 

2012 Approved: 

$94.3

Actual: $60.3

$125.6

Additional Delivery Bar Code Sorters 

(DBCS 6) and stacker modules

DBCS is a multi-level, high-speed machine that reads 

barcodes and sorts letter mail to bins sorted by Zip 

Code and is the central component of USPS’s letter 

automation program. 

2008 Approved: 

$74.5

Actual: $75.7

$35.0 

Distribution Quality Improvement 

(DQI) Program—Phase 2

DQI software enables USPS to encode the 9 percent 

of mail that cannot be bar-coded due to incorrect or 

incomplete addresses.

2010 Approved: 

$60.4

Actual: $60.6

$27.0

Postal Automated Redirection 

System (PARS)—Letter Incentive

A national PARS software database automatically 

forwards undeliverable-as-addressed mail. 

2010 Approved: 

$45.4

Actual: $45.4

$19.3 

Flats Sequencing System (FSS), 

Phase 1

FSS machines automate the sorting of flat-sized mail 

into delivery sequence.

Fully 

deployed. 

Expected 

completion 

in 2014.

Approved: 

$1,493.0

a

Estimated 

upon 

completion: 

$1,279.0

$968.2 

Source: GAO summary of USPS information.

a USPS officials told us that FSS is fully deployed but not considered complete as software updates 

are numerous and significant.

Our analysis found that each investment phase—planning, selecting, 

managing, and evaluating—should consist of a series of leading practices 

that should be followed while the projects are within that phase. We used 

two different rating scales to assess the leading practices and capital 

investment phases. For each leading practice, we assessed USPS’s level 

of conformance, as follows:

• Substantial: USPS policy conformed to all or almost all elements.

• Partial: Either (1) USPS policy conformed to some elements; or (2) 

USPS policy conformed substantially, but we identified instances in 

the five projects we reviewed where the policies were not consistently 

applied.

• Minimal/none: USPS policy conformed to few or no elements.
Appendix I: Scope and Methodology

Page 30 GAO-14-155 U.S. Postal Service

Then, for each investment phase, we assessed USPS’s level of 

conformance, as follows:

• High: USPS substantially conformed to all or almost all of the leading 

practices.

• Medium: USPS substantially conformed to multiple leading practices. 

• Low: USPS substantially conformed to one or none of the leading 

practices.

To describe the effects of not substantially conforming to a leading 

practice, we reviewed prior GAO work and the work of others including 

the USPS OIG and the National Research Council, and OMB and CPIC 

guides.

To report on USPS expenditures on capital investments for the past 10 

years and to identify the five projects that met our selection criteria, we 

requested data from USPS. We assessed the reliability of these data 

through review of related documents and interviews with knowledgeable 

agency officials. We found the data sufficiently reliable for our purposes of 

reporting on the amount spent on capital investments in the past 10 years 

and for selecting the five high-cost capital investments we reviewed.

We conducted this performance audit from March 2013 to January 2014

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objective.
Appendix II: U.S. Postal Service’s Strategic 

Initiatives and Corresponding Delivering 

Results, Innovation, Value, and Efficiency 

(DRIVE) Initiatives

Page 31 GAO-14-155 U.S. Postal Service

USPS strategic initiativea Corresponding Delivering Results, Innovation, Value and 

 Efficiency (DRIVE) initiatives 

Operational initiatives

Networks Consolidation: A two-phase approach to consolidate 

approximately 200 mail-processing facilities and relocate 

equipment from the reduced volume workload for estimated 

savings of $3.4 billion by 2017. Phase 1 implemented in Spring 

2013, and Phase 2 is to begin in Spring 2014. 

Optimize Network Operations

Optimize Facility Footprint

Supply Chain Integration

Retail Optimization: In high-traffic post offices, increase selfservice equipment, and in rural areas, establish Village Post 

Officesb

Transform Access

for estimated savings of $1.6 billion by 2017. Integrate Costing and Pricing for Profitable Revenue Growth

Acquire, Grow, and Retain Customers 1 & 2

Improve Customer Experience 1 & 2

Build Funnel and Launch Innovations

Grow Small Business Revenue

Market New and Existing Products and Services 1 & 2 

Delivery Optimization: Increase mail delivery to centralized 

locations instead of curbside or door-to-door for estimated 

savings of $1.8 billion by 2017.

Optimize Delivery Operations

Shipping Growth 

Legislative initiatives 

5-Day Mail including 6-Day Package Delivery: Eliminate 

Saturday mail delivery and continue Saturday package delivery

in support of online purchases and commercial packages for 

estimated savings of $2 billion annually.

Optimize Delivery Operations

Legislative and Regulatory Agenda

Building a World Class Package Platform 

Postal Health Plan: Adopt a new USPS-administered health 

care plan for current employees and new hires, eliminating $5.7 

billion of prefunding to the federal health insurance program and 

transferring retirees into the new health care plan. Estimated 

savings are $8 billion annually through 2016.

Establish USPS Healthcare Plan

Legislative and Regulatory Agenda

Federal Employment Retiree System (FERS) overfunding 

refund: Reduce FERS obligation and normal cost contribution, 

based on USPS-specific assumptions and demographics for 

estimated savings of $0.3 billion annually.

Legislative and Regulatory Agenda

Workforce and non-personnel

Appendix II: U.S. Postal Service’s Strategic 

Initiatives and Corresponding Delivering 

Results, Innovation, Value, and Efficiency 

(DRIVE) Initiatives
Appendix II: U.S. Postal Service’s Strategic 

Initiatives and Corresponding Delivering 

Results, Innovation, Value, and Efficiency 

(DRIVE) Initiatives

Page 32 GAO-14-155 U.S. Postal Service

USPS strategic initiativea Corresponding Delivering Results, Innovation, Value and 

 Efficiency (DRIVE) initiatives 

Operational initiatives

Renegotiate and arbitrate with unions on wages and increase 

the proportion of non-career employees to 20 percent for 

estimated savings of $4.3 billion by 2017. 

Develop Labor Agreement to Build Future Workforce

Improve Employee Availability

Resolve Disputes Effectively

Analyze Workforce Needs and Manage the Change

Develop Talent

Employee Engagement Talent, Recruiting and Retention

Source: GAO summary of USPS information.

Note: Not all initiatives were active in fiscal year 2013; inactive initiatives are in italics.

a As identified in USPS’s 5-year business plan for achieving financial and operational viability and 

self-sufficiency.

b USPS launched a retail partnership, called the Village Post Office, in July 2011 in which existing 

small businesses provide a limited range of postal products and services in small communities where 

underutilized yet costly post offices may close, be consolidated with another nearby post office, or 

have their hours of service reduced
Appendix III: Comments from the U.S. Postal 

Service

Page 33 GAO-14-155 U.S. Postal Service

Appendix III: Comments from the U.S. Postal 

Service 
Appendix III: Comments from the U.S. Postal 

Service

Page 34 GAO-14-155 U.S. Postal Service
Appendix III: Comments from the U.S. Postal 

Service

Page 35 GAO-14-155 U.S. Postal Service
Appendix III: Comments from the U.S. Postal 

Service

Page 36 GAO-14-155 U.S. Postal Service
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 37 GAO-14-155 U.S. Postal Service

Lorelei St. James, (202) 512-2834 or stjamesl@gao.gov

In addition to the individual named above, Amelia Shachoy, Assistant 

Director; Samer Abbas; Amy Abramowitz; Russell Burnett; Jennifer 

Clayborne; Thanh Lu; Joshua Ormond; Amy Rosewarne; and Crystal 

Wesco made key contributions to this report. 

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(544188)
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