United States General Accounting Office 

Washington, DC 20548 

October 6, 2003 


The Honorable Henry A. Waxman 


Ranking Minority Member 


Committee on Government Reform


House of Representatives 


The Honorable Danny K. Davis 


Ranking Minority Member 


Subcommittee on Civil Service and Agency Organization


Committee on Government Reform


House of Representatives 


Subject: U.S. Postal Service: Status of Inspector General’s Recommendations on the 

Supplier Diversity Program 

This report supplements our previous report to you responding to your request for 

current information on the representation of minorities and women at the U.S. Postal 

Service (USPS).1

 USPS’s program to attract and award contracts to small, minority, 

and women-owned businesses is referred to as supplier diversity. In recent years, the 

USPS Office of Inspector General (OIG) has questioned the reliability of data related 

to the Supplier Diversity Program, such as the dollar value of contracts awarded to 

small, minority, and women-owned businesses. In a September 2001 report, the OIG 

made nine recommendations that it said would improve the reliability of this data. As 

agreed with your offices, our objective was to determine the status of USPS efforts to 

address the recommendations contained in the OIG report. To address our objective, 

we obtained, reviewed, and analyzed documentation from USPS and interviewed 

USPS and OIG officials concerning the status of these recommendations. 

Results in Brief 

USPS has addressed the nine OIG recommendations. According to USPS officials, 

they have taken actions to implement the OIG’s nine recommendations, and they 

consider the recommendations closed. USPS believes that the actions taken have 

addressed the OIG’s concerns and have strengthened the reliability of data related to 

its Supplier Diversity Program. The OIG agreed that its recommendations have been 

implemented and, as a result, it also believes that the reliability of USPS supplier 

diversity data has improved. Furthermore, USPS provided us with documents 

1

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

GAO-04-57R Postal Service Supplier Diversity Program 
showing the actions that it has taken to address the OIG recommendations. 

However, we did not independently determine whether the actions taken by USPS 

improved the reliability of its supplier diversity data. 

Background 

According to USPS, its Supplier Diversity Program seeks to provide suppliers with 

equal access to contracting opportunities. The program is intended to promote 

supplier participation reflective of the American supplier community and to 

encourage economic development. Its premise is that effective supplier diversity 

ensures that no suppliers are excluded from competition on the basis of race, color, 

religion, sex, age, or national origin. USPS has identified the program as a strategic 

business initiative vital to the success of the Postal Service. As such, USPS said that 

it must ensure that it is taking full advantage of the entrepreneurial spirit, capabilities, 

competitive pricing, products, and innovations offered by small, minority, and 

women-owned businesses. 

Additionally, according to USPS, to demonstrate its commitment to reaching small, 

minority, and women-owned businesses, it has developed a 5-year supplier diversity 

plan. The plan focuses on maintaining a strong supplier base that includes small, 

minority, and women-owned businesses. While it does not set specific dollar goals, 

the plan is intended to ensure that USPS spends an increasing amount of its 

procurement dollars on goods and services from diverse businesses through fiscal 

year 2003. To monitor its progress, USPS tracks—yearly—the number of 

transactions and dollars awarded to small, minority, and women-owned businesses. 

In 2001, the OIG conducted a review of the Supplier Diversity Program, specifically 

addressing contracting for supplies, services, and equipment purchases. The 

objectives of this review were to assess the reliability of supplier diversity data from 

fiscal year 1999 and to evaluate USPS’s effectiveness in achieving supplier diversity 

spending plans. The OIG found that the supplier diversity data for fiscal year 1999 

were unreliable because prime-contracting dollars awarded to small, minority, and 

women-owned businesses were overstated and subcontracting data were 

unsupported and unverified. Due to the unreliability of the supplier diversity data, 

the OIG could not determine whether the USPS was achieving its supplier diversity 

spending plans. The OIG concluded that supplier diversity data could not be used for 

tracking general trends, management diagnostics, benchmarking, and reporting. As a 

result, the OIG made nine recommendations that it said would improve supplier 

diversity data reliability and correct the errors identified. 

USPS Has Implemented Supplier Diversity Program Recommendations 

According to USPS, it has taken actions to address the OIG report’s nine 

recommendations and considers the recommendations closed. In addition, we 

confirmed with the OIG that it considers the recommendations closed. Furthermore, 

USPS provided us with documents showing the specific implementation actions that 

it has taken in response to each OIG recommendation. 

Page 2 GAO-04-57R Postal Service Supplier Diversity Program 
Table 1 shows each of the recommendations, the specific actions taken, and the dates 

that the actions taken to implement the recommendations were completed. 

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

Recommendation Completion 

number Description of recommendation USPS actions taken date 

1 	 The Vice President (VP), Purchasing and 

Materials, should develop and implement 

contract administration procedures on 

updating the procurement database and 

contract files when changes occur in a 

supplier’s socioeconomic status. 

2 	 The VP, Purchasing and Materials, should 

correct the socioeconomic classification in 

the procurement database of the 

suppliers of the 14 contracts identified in 

the OIG report. 

As recommended, USPS 

developed a purchasing 

and materials 

Administrative Instruction 

and added it to the 

purchasing manual to be 

used for all purchasing 

activities. 

USPS corrected the 

socioeconomic status 

designation of the 

contracts in question. 

5/31/2002 

10/29/2001 

The VP, Purchasing and Materials, USPS corrected the 10/29/2001


should, for the remaining 104 contract socioeconomic status 


actions identified in the OIG report, designation of the 


reconcile contract files to the procurement contracts in question. 


database and correct errors in


socioeconomic status of suppliers. 


The VP, Purchasing and Materials, should USPS agreed to 9/21/2001 


archive the procurement database at the document and retain data 


end of the fiscal year as support for for each accounting 


annual supplier diversity statistical period, which includes the 


reports. end of the fiscal year. 


The VP, Purchasing and Materials, should As recommended, USPS 5/31/2002 


establish and implement standard criteria developed a purchasing 


for recording basic pricing agreement and materials 


amounts in the procurement database. Administrative Instruction 


and added it to the 

purchasing manual to be 

used for all purchasing 

activities. 

The VP, Purchasing and Materials, should As recommended, USPS 5/31/2002 


revise the purchasing manual to include developed a purchasing 


policy requiring contracting personnel to and materials 


de-obligate unused funds from contracts Administrative Instruction 


and the procurement database when and added it to the 


contracts are terminated or cancelled. purchasing manual to be


used for all purchasing 

activities. 

The VP, Purchasing and Materials, should USPS added a footnote to 4/19/2002 


include corrections to fiscal years’ 1999 the Fiscal Year 2001 


and 2000 statistics for small, minority, and Purchasing Assessment 


women-owned businesses when Report providing specific 


developing the Purchasing Assessment corrections to diversity 


Report for fiscal year 2001. data for fiscal years 1999 


and 2000. 

Page 3 GAO-04-57R Postal Service Supplier Diversity Program 

3 

4 

5 

6 

7 
Recommendation Completion 

number Description of recommendation USPS actions taken date 

8 	 The VP, Purchasing and Materials, should 

advise contracting officers that section 

6.2.3 of the Purchasing Manual extends 

to subcontracting submittals and requires 

contracting personnel to review 

subcontract data submitted by prime 

suppliers. 

USPS said that this 

recommendation is 

existing policy; however, 

during training for its 

Purchasing Review for 

Excellence Program 

provided to operational 

purchasing managers, 

USPS agreed to reinforce 

the requirement to 

maintain reports in the 

contract files. 

9/21/2001 

9 	 The VP, Purchasing and Materials, should 

require that quarterly subcontracting 

reports submitted by suppliers be 

maintained. 

USPS said that this 

recommendation is 

existing policy; however, 

during training for its 

Purchasing Review for 

Excellence Program 

provided to operational 

purchasing managers, 

USPS agreed to reinforce 

the requirement to 

maintain reports in the 

contract files. 

9/21/2001 

Source: GAO analysis of USPS data. 

A USPS official told us that implementing these recommendations has helped to 

improve overall supplier diversity data. 

According to the OIG, it received and reviewed documentation of USPS actions taken 

to address the nine recommendations. The OIG said that it has closed all nine 

recommendations because it believes that the actions taken by USPS were 

responsive. The OIG also said that it believes that the reliability of USPS supplier 

diversity data has improved as a result of implementing the recommendations. 

We reviewed documents USPS provided us showing the specific implementation 

actions that it has taken in response to each OIG recommendation. The 

documentation shows that USPS has addressed each of the nine recommendations. 

However, we did not evaluate whether the implementation of the recommendations 

has improved the reliability of the USPS supplier diversity data. 

Agency Comments 

We requested comments on a draft of this report from the Postmaster General. We 

received comments from USPS Vice President, Supply Management, that USPS 

agrees with the report’s description of the actions USPS has taken to improve the 

reliability of its supplier diversity data. Further, he stated that USPS would continue 

to maintain an active supplier diversity program, which provides small businesses an 

opportunity to compete for its business. Additionally, he said that USPS is committed 

to improving and maintaining purchasing system data integrity to ensure accurate 

reporting and analysis of results. Finally, he said that as part of a recent 

restructuring, a team was created that is solely dedicated to the furtherance of data 

integrity within the Supply Management organization, and USPS continues to review 

data accuracy as part of its internal review program. 

Page 4 GAO-04-57R Postal Service Supplier Diversity Program 
Scope and Methodology 

To address our objective, we obtained, reviewed, and analyzed data and 

documentation from USPS and interviewed USPS officials about the Supplier 

Diversity Program and the actions the USPS has taken concerning data reliability 

issues. We obtained and reviewed the USPS Purchasing Manual describing the 

purpose, goals, and objectives of the Supplier Diversity Program. In addition, we 

obtained and reviewed information from the USPS Audit Tracking System regarding 

the status of OIG recommendations related to the Supplier Diversity Program. To 

determine whether the OIG had closed related recommendations, we interviewed the 

OIG and obtained relevant documentation. We performed our work from July 2003 

through September 2003 in accordance with generally accepted government auditing 

standards. 

Unless you publicly announce its contents earlier, we plan no further distribution of 

this report until 30 days from its issue date. At that time we will send copies of this 

report to the Chairman, House Committee on Government Reform, and the 

Chairman, Subcommittee on Civil Service and Agency Organization; the Chairman 

and Ranking Minority Member, Senate Committee on Governmental Affairs; the 

Postmaster General; and to other interested parties. We will also make copies 

available to others upon request. In addition, the report will be available at no charge 

on the GAO Web site at www.gao.gov. 

If you have any questions about this report or the enclosed data, you may contact me 

on (202) 512-4232 or at ungarb@gao.gov. Major contributors to this assignment 

included Sherrill Johnson, Dwayne Curry, and Tanisha Stewart. 

Bernard L. Ungar 

Director, Physical Infrastructure Issues 

(543065) Page 5 GAO-04-57R Postal Service Supplier Diversity Program 
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