a

GAO

United States General Accounting Office

Report to Congressional Committees

October 2002 UNITED STATES 

POSTAL SERVICE

Opportunities to 

Strengthen IT 

Investment 

Management 

Capabilities

GAO-03-3
Why GAO Did This Study

The U.S. Postal Service invests

hundreds of millions of dollars in

information technology (IT) each

year to support its mission of

providing prompt, reliable, and

efficient mail service to all areas

of the country. It must support

these operations through the

revenues it earns for its services.

Growing operating expenses and

capital needs in the face of

reduced revenues highlight the

need for the Postal Service to

invest its IT dollars wisely.

Accordingly, the Senate

Committee on Governmental

Affairs and its Subcommittee on

International Security,

Proliferation, and Federal

Services asked GAO to evaluate

how well the Postal Service

manages its IT investments.

October 2002

UNITED STATES POSTAL SERVICE

Opportunities to Strengthen IT

Investment Management Capabilities

The full report, including GAO's objectives, scope, methodology, and analysis is available at www.gao.gov/cgi-bin/getrpt?GAO-03-3. For additional

information about the report, contact Joel C. Willemssen (202-512-6408), WillemssenJ@gao.gov.

What GAO Recommends

GAO recommends that the

Postmaster General take several

actions, including the following:

(1) using a portfolio approach to

IT investment management,

including establishing explicit

cost, benefit, schedule, and risk

criteria; and (2) evaluating the

performance of investments as a

whole in order to capture and

institutionalize “lessons learned”

to improve the investment

process. In written comments on

a draft of the report, the Postal

Service expressed differing views

on a few key points but stated

that the report provides an

opportunity to consider changes

and improvements to its

investment management

processes.

Highlights of GAO-03-3, a report to the Senate Committee on Governmental Affairs and the

Subcommittee on International Security, Proliferation, and Federal Services

United States General Accounting Office

G A O

Accountability Integrity Reliability

Highlights

What GAO Found

The Postal Service has in place many of the foundational capabilities

required for managing IT investments described in GAO’s IT Investment

Management framework, illustrated below. Proposed major projects go

through established review processes and must be approved at a high level

before being implemented. Control processes also are in place.

Although the Postal Service evaluates proposed IT projects before

investing in them, it does not fully manage these investments from a

portfolio perspective by assessing projects on the basis of indicators that

clearly link performance to initial selection criteria. Such a portfolio

approach would enable the Postal Service to consider proposed projects

along with those that have already been funded and to select the mix of

investments that best meets its mission needs.

The Postal Service has not yet attained the key attributes associated with

the most capable organizations, such as evaluating the performance of

investments as a whole, capturing “lessons learned,” and institutionalizing

these lessons to benefit the organization. Until it addresses areas such as

these, the Postal Service will not be in a position to continually improve its

investment process and leverage its IT capabilities for strategic outcomes.

The Five Stages of Maturity within GAO’s IT Investment Management Framework

Source: GAO.
Page i GAO-03-3 U.S. Postal Service IT Investment Management

Contents

Letter 1

Executive Summary 2

Purpose 2

Background 2

Results in Brief 5

Principal Findings 6

Recommendations for Executive Action 9

Agency Comments and Our Evaluation 10

Chapter 1

Introduction

11

Postal Service’s Mission and Organization 11

Postal Service’s Information Technology Environment 14

Weaknesses in the Postal Service’s Investment Management 

Process 15

Postal Service’s Approach to Investment Management 16

IT Investment Management Framework 23

Objective, Scope, and Methodology 26

Chapter 2

Postal Service 

Executes Most Key 

Foundational Practices

28

Boards Are Established but Operating without a Complete Process 

Guide 29

CTO Organization Oversees IT Investments 32

IT Project and System Information Is Maintained to Support Project 

Management 36

Processes Ensure That IT Investments Support Business Needs and 

Meet User Needs 39

Structures Are in Place for Selecting IT Investment Proposals 40

Chapter 3

Postal Service Shows 

Mixed Progress in 

Managing Its IT 

Investments as a 

Portfolio

43

Portfolio Selection Criteria Are Defined, but Do Not Adequately 

Address All Factors 45

IT Investments Are Not Consistently Analyzed and Prioritized within 

the Context of a Portfolio 47

An IT Investment Portfolio Is Developed, but Project Expectations 

Are Not Routinely Revised 50

Portfolio Performance Oversight Is Performed, but without 

Comprehensive Guidance 53
Contents

Page ii GAO-03-3 U.S. Postal Service IT Investment Management

Chapter 4

Postal Service Has Yet 

to Implement 

Processes to Better 

Meet Strategic Goals

56

Policies and Procedures Are Defined, but Post-Implementation 

Review Process Is Not Institutionalized 58

IT Investments Are Not Evaluated from the Perspective of Portfolio 

Performance 60

Process for Managing Succession of Systems and Technology 

Is Not Established 62

Activities for Benchmarking the Investment Process Are Not 

Institutionalized 65

Potential Impacts of Leading Technologies Are Not Routinely 

Considered in Strategic Planning Efforts 66

Chapter 5

Conclusions, 

Recommendations, 

and Agency Comments

70

Conclusions 70

Recommendations for Executive Action 70

Agency Comments and Our Evaluation 72

Appendixes

Appendix I: Postal Service Projects with Major IT Components in 

Development or Deployment 74

Appendix II: Postal Service IT Projects That GAO Reviewed 76

Enhanced Security Capability Program 77

Organization Structure, Staffing and Management 78

Point of Service ONE System 79

Surface-Air Management System 79

Appendix III: Comments from the United States Postal Service 81

Appendix IV: GAO Contact and Staff Acknowledgments 83

GAO Contact 83

Acknowledgments 83

Tables Table 1: Stage Two—Critical Processes Required for Building the 

Investment Foundation 28

Table 2: Summary of Results for Stage Two Critical Processes and 

Key Practices 29

Table 3: IT Investment Board Operation 31

Table 4: IT Project Oversight 35

Table 5: IT Project and System Identification 38
Contents

Page iii GAO-03-3 U.S. Postal Service IT Investment Management

Table 6: Business Needs Identification 40

Table 7: Proposal Selection 42

Table 8: Stage Three—Critical Processes Required for Developing a 

Complete Investment Portfolio 43

Table 9: Summary of Results for Stage Three Critical Processes and 

Key Practices 44

Table 10: Portfolio Selection Criteria Definition 46

Table 11: Investment Analysis 49

Table 12: Portfolio Development 52

Table 13: Portfolio Performance Oversight 55

Table 14: Stages Four and Five—Critical Processes Required for 

Improving the Investment Process and Leveraging IT for 

Strategic Outcomes 57

Table 15: Summary of Results for Stages Four and Five Critical 

Processes and Key Practices 58

Table 16: Post-Implementation Reviews and Feedback 60

Table 17: Portfolio Performance Evaluation and Improvement 62

Table 18: Systems and Technology Succession Management 64

Table 19: Investment Process Benchmarking 66

Table 20: IT-Driven Strategic Business Change 69

Table 21: Postal Service IT Projects in Development or 

Deployment 74

Table 22: Postal Service IT Projects Selected by GAO for Review 76

Table 23: POS ONE DARs 79

Figures Figure 1: The Five Stages of Maturity within ITIM 5

Figure 2: Overview of the Organizational Structure of the Postal 

Service 13

Figure 3: Capital Planning and Budgeting Cycle 19

Figure 4: Process for Approving Major New Projects 21

Figure 5: Project Control and Evaluation Process 23

Figure 6: The Five Stages of Maturity with Critical Processes 25
Contents

Page iv GAO-03-3 U.S. Postal Service IT Investment Management

Abbreviations

ACDCS Air Contract Data Collection System

B&FA Budget and Financial Analysis

BCS Business Case System

CAPE Capital and Program Evaluation

CFO Chief Financial Officer

CIC Capital Investment Committee

CIO Chief Information Officer

CPC Capital Projects Committee

CPS Corporate Planning System

CTO Chief Technology Officer

DAR Decision Analysis Report

EIR Enterprise Information Repository

ESC Enhanced Security Capability 

IRB Investment Review Board

IT information technology

ITIM information technology investment management

OSS&M Organization Structure, Staffing and Management

POS ONE Point of Service ONE

PTRS Program Tracking and Reporting System

SAMS Surface-Air Management System
United States General Accounting Office

Washington, D.C. 20548

Page 1 GAO-03-3 U.S. Postal Service IT Investment Management

A

October 15, 2002 Letr

The Honorable Joseph I. Lieberman

Chairman

The Honorable Fred Thompson

Ranking Minority Member

Committee on Governmental Affairs

United States Senate

The Honorable Daniel K. Akaka

Chairman

The Honorable Thad Cochran

Ranking Minority Member

Subcommittee on International Security, 

Proliferation and Federal Services

Committee on Governmental Affairs

United States Senate

In response to your request, this report addresses the Postal Service’s capabilities in information 

technology (IT) investment management. The Postal Service invests hundreds of millions of dollars 

each year in information technology to provide prompt, reliable, and efficient mail service to all areas 

of the country. Our evaluation determined that the Postal Service is executing many of the 

foundational practices necessary for managing these investments, but the Postal Service has 

additional opportunities to implement more mature and effective processes. We are making 

recommendations to strengthen the Postal Service’s investment management capabilities.

We are sending copies of this report to the Chairman and Ranking Minority Member of the House 

Committee on Government Reform, the Chairmen and Ranking Minority Members of the House and 

Senate Committees on Appropriations, the Postal Service’s Postmaster General/Chief Executive 

Officer, and the Postal Service’s Chief Financial Officer. We will also make copies available to others 

on request. In addition, the report will be available at no charge on the GAO Web site at 

http://www.gao.gov.

Staff acknowledgments are included in appendix IV. If you have any questions about this report, 

please contact me by telephone at (202) 512-6408 or by E-mail at WillemssenJ@gao.gov.

Joel C. Willemssen

Managing Director, Information Technology Issues
Page 2 GAO-03-3 U.S. Postal Service IT Investment Management

Executive Summary

Purpose The United States Postal Service invests hundreds of millions of dollars 

each year in information technology (IT) to provide prompt, reliable, and 

efficient mail service to all areas of the country. The Postal Service is 

intended to be self-supporting from postal operations and is mandated to 

break even over time. Yet the Postal Service is currently facing a financial 

crisis brought about by declining revenues and growing operating expenses 

and capital needs. In April 2001, GAO designated the Postal Service’s 

transformational efforts and long-term outlook as High Risk,1 noting that 

the Postal Service is at growing risk of not being able to continue its 

mission of providing the current level of universal service throughout the 

nation while maintaining reasonable rates and remaining largely selfsupporting through postal revenues. 

A successful method of helping to improve operational effectiveness and 

efficiency is to implement a structured process for maximizing the value 

and minimizing the risk of IT investments. GAO’s research into the 

management practices of leading organizations demonstrates that effective 

management of investments requires the use of disciplined, structured 

investment management processes. Given the Postal Service’s large 

expenditures for IT and its deteriorating financial position, the Chairmen 

and Ranking Minority Members of the Senate Committee on Governmental 

Affairs and its Subcommittee on International Security, Proliferation, and 

Federal Services requested that GAO assess the Postal Service’s IT 

investment management capabilities. In addressing this request, GAO used 

its IT Investment Management Framework2

 and assessed the Postal Service 

against the different stages of this framework.

Background With nearly 800,000 career employees, the Postal Service is the second 

largest U.S. employer compared with U.S. private sector organizations, 

with a mission that remains vital to the nation’s communication and 

commerce even in an age of overnight delivery services and electronic 

communications. It maintains an extensive infrastructure, consisting of 

over 38,000 post offices, branches, and stations and 350 major mail 

1

U.S. General Accounting Office, Transformation Challenges Present Significant Risks, 

GAO-01-598T (Washington, D.C.: Apr. 4, 2001).

2

U.S. General Accounting Office, Information Technology Investment Management: A 

Framework for Assessing and Improving Process Maturity (Exposure Draft), GAO/AIMD10.1.23 (Washington, D.C.: May 2000). 
Executive Summary

Page 3 GAO-03-3 U.S. Postal Service IT Investment Management

processing and distribution facilities. The Postal Service relies heavily on 

IT throughout its operations and management processes to run the 

machines that process and sort mail, efficiently assign long-distance 

transportation of mail to alternative surface and air carriers, support pointof-service terminals, collect and analyze inventory and sales information, 

process payroll and accounts payable, and perform other activities. 

Communication networks also play a vital role in linking together various 

elements of the Postal Service’s infrastructure and transmitting information 

to various locations for storage, processing, and analysis. For fiscal year 

2002, the Postal Service approved approximately $583 million for IT, 

including funds for both capital investments and operating expenses.

The Postal Service has reported that it is providing customers with added 

value; improving the efficiency of operations; containing costs; fostering a 

performance-based culture; and improving management of enabling 

functions, such as financial management, purchasing, and IT.3

 The Postal 

Service has established the specific goal of obtaining organizationwide 

connectivity through IT to enable it to enhance security, add valuable 

product features, and manage its operations in real time. 

Based on research into the IT investment management practices of leading 

private- and public-sector organizations, GAO has developed an 

information technology investment management maturity (ITIM) 

framework. This framework identifies critical processes for successful IT 

investment organized into a framework of five increasingly mature stages. 

The ITIM is intended to be used both as a management tool for 

implementing these processes incrementally and as an evaluation tool for 

determining an organization’s current level of maturity. The overriding 

purpose of the framework is to encourage investment processes that 

increase business value and mission performance, reduce risk, and 

increase accountability and transparency in the decision process. This 

3

United States Postal Service, United States Postal Service Transformation Plan. 

(Washington, D.C.: Apr. 1, 2002).
Executive Summary

Page 4 GAO-03-3 U.S. Postal Service IT Investment Management

framework has been used in several GAO evaluations4 and has been 

adopted by a number of agencies.

These agencies have used ITIM for purposes ranging from self-assessment 

to redesign of their IT investment management processes. The five stages 

of the framework represent increasing levels of maturity in managing IT 

investments. Stages two, three, four, and five each build on the preceding 

one and represent steps toward achieving more stable and effective 

processes for managing IT investments. With the exception of the first 

stage—characterized by the general absence of investment management 

processes—each maturity stage consists of critical processes that must be 

implemented and institutionalized for the organization to satisfy the 

requirements of that stage and be able to advance to the next stage. These 

critical processes are further broken down into key practices—the specific 

tasks and conditions that must be in place for an organization to effectively 

implement the necessary critical processes. Figure 1 shows ITIM’s five 

stages of maturity.

4

U.S. General Accounting Office, Information Technology: INS Needs to Strengthen Its

Investment Management Capability, GAO-01-146 (Washington, D.C.: Dec. 29, 2000); U.S. 

General Accounting Office, Information Technology Management: Coast Guard Practices

Can Be Improved, GAO-01-190 (Washington, D.C.: Dec. 12, 2000); U.S. General Accounting 

Office, Information Technology Management: Social Security Administration Practices 

Can Be Improved, GAO-01-961 (Washington, D.C.: Aug. 21, 2001); U.S. General Accounting 

Office, Information Technology: DLA Needs to Strengthen Its Investment Management 

Capability, GAO-02-314 (Washington, D.C.: Mar. 15, 2002).
Executive Summary

Page 5 GAO-03-3 U.S. Postal Service IT Investment Management

Figure 1: The Five Stages of Maturity within ITIM 

Source: GAO.

Results in Brief The Postal Service has established significant capabilities for managing its 

IT investments. It has in place numerous foundational practices for 

selection and control, such as a detailed review and approval process for 

new projects, tracking of project cost and schedule data, and identification 

of its business needs, and it involves users in project development. These 

stage two processes provide assurance that the projects selected meet the 

Service’s organizational needs and will be completed on time and within 

budget. However, the Postal Service has yet to develop comprehensive 

guidance to address all aspects of the investment management process. 

Such guidance would allow the Service to better coordinate its IT 

investment management process and ensure that the process is performed 

consistently throughout the organization.

The Postal Service performs many of the practices that are key to a stage 

three level of maturity, such as managing a portfolio of IT investments. For 

example, the Service performs many of the activities for developing a 

portfolio of investments and overseeing these investments. However, the 
Executive Summary

Page 6 GAO-03-3 U.S. Postal Service IT Investment Management

processes for annually selecting and overseeing the investment portfolio 

are not documented. Further, the Postal Service does not analyze, 

prioritize, or select its portfolio using criteria that adequately address cost, 

benefit, schedule, and risk. Accordingly, the Postal Service cannot ensure 

that it is selecting the investments that will maximize returns to the 

organization, taking into account the appropriate level of risk. 

Finally, the Postal Service has a number of steps to take before it has 

attained the maturity of a stage four or five organization—systematically 

improving the investment process and using IT to achieve business 

outcomes. For example, the Postal Service does not either regularly 

evaluate the performance of completed projects or have a process to 

evaluate its investment portfolio or to manage the succession of its IT 

investments. Further, the Service does not have a process to measure itself 

against other organizations and is not yet in a position to use evaluation 

techniques to continually improve both the investment portfolio and the 

investment process to better achieve strategic outcomes.

Principal Findings

Postal Service Executes 

Most Key Foundational 

Practices 

To develop sound capabilities in investment management, an organization 

must first be capable of controlling its investments so that they finish 

predictably within established cost and schedule expectations, and it must 

have in place basic capabilities for selecting new IT investments. An 

organization must also have an established investment board that is 

responsible for managing its investments and investment processes.

The Postal Service has established many basic investment selection and 

control capabilities. At the enterprise level, it manages all capital 

investments through a consistent set of management processes. Still, 

opportunities exist to strengthen aspects of core enterprisewide practices 

for IT investment management. For example, the Postal Service has not 

developed organizationwide policies and procedures to guide the different 

enterprise-level management entities involved in the investment process. 

Nor has it developed guidance for management oversight of IT projects. As 

a result, it may not reap the benefits of a consistent and coordinated 

approach to investment management to be gained by institutionalizing 

those practices that it is performing.
Executive Summary

Page 7 GAO-03-3 U.S. Postal Service IT Investment Management

Postal Service Shows Mixed 

Progress in Managing Its IT 

Investments as a Portfolio

Organizations need to create a complete investment portfolio—consisting 

of projects that are proposed, under development, and in operation—and 

continuously assess and manage their investments on the basis of expected 

and actual cost, benefit, schedule, and risk data. Taking such a portfolio 

perspective enables organizations to assess their investments 

comprehensively, considering proposals along with previously funded 

investments and selecting the mix of investments that best meets their 

mission needs. The perspective of the portfolio enables organizations to 

rise above selecting and controlling projects that best meet the objectives 

of narrow program areas to selecting and controlling projects that best 

meet the organization’s overall goals.

The Postal Service performs a number of practices that are key to 

developing and managing a complete investment portfolio. For example, it 

provides adequate resources for analyzing investments and developing the 

portfolio. The Service validates the cost, benefit, schedule, and risk data it 

uses in analyzing investments. The Service also assigns its IT investments 

to logical categories and distributes its portfolio selection criteria 

throughout the organization.

The Postal Service has not established organizationwide policies and 

procedures for selecting, analyzing, and overseeing its IT portfolio. While 

the Service selects its annual investment portfolio using established 

criteria, these criteria do not adequately address cost, benefit, schedule, 

and risk factors. Senior executives do not receive sufficient information to 

aid them in selecting and overseeing the portfolio. For example, the 

quarterly Investment Highlights provides information on the status of 

projects, but it does not include complete information on costs. Further, 

the Postal Service does not have a defined process for reporting problems 

in a project’s performance to senior executives.

Because the Postal Service lacks established policies and procedures for 

selecting, analyzing, and overseeing its investment portfolio, and because 

its selection criteria are inadequate, it risks choosing individual 

investments in an ad hoc fashion. A portfolio developed in this way may not 

best meet the Service’s needs. In addition, because information they need 

for oversight is incomplete, senior executives may be unable to determine 

whether the investment portfolio is performing as expected.
Executive Summary

Page 8 GAO-03-3 U.S. Postal Service IT Investment Management

Postal Service Has Yet to 

Implement Higher Level 

Processes to Better Meet 

Strategic Goals 

As an organization builds its investment management capabilities, it should 

begin using evaluation techniques to improve its investment processes and 

its portfolio while maintaining mature control and selection processes. The 

post-implementation review is a key tool for comparing the outcome of a 

completed investment with the expectations described in its business case. 

Another higher level process is planning for the retirement of systems and 

their replacements, so that low-value systems are retired to make way for 

higher-value systems, and the transition between systems is smooth. 

Finally, an organization that completes the implementation of its selection, 

control, and evaluation processes should seek to continuously improve its 

capabilities for using IT investments to support and improve business 

outcomes.

Within these higher-level processes, the Postal Service has developed 

guidance and training for performing post-implementation reviews. In 

addition, the Postal Service prepares an integrated financial plan that 

includes an estimate of overall return on investment. It has also allocated 

resources for identifying strategic uses for emerging technologies. 

The Postal Service, however, is not regularly performing postimplementation reviews of completed investments to determine whether 

they have achieved the expected benefits at the estimated cost or to 

determine if investment management processes should be revised. Nor has 

the Postal Service evaluated the performance of its investment portfolio 

beyond determining the return on investment. While the Postal Service has 

developed guidance for the retirement of systems, it does not have a 

process for routinely identifying and analyzing investments for succession 

and planning for their migration to their successors. The Postal Service 

also lacks a process for benchmarking other organizations’ investment 

management approaches with the intention of improving its own internal 

processes. Finally, the Postal Service does not have a process for 

identifying, evaluating, and implementing leading-edge IT products and 

processes to achieve strategic changes to the business. 

Although these weaknesses are associated with high-level maturity 

processes, performing additional key practices in these areas will help the 

Postal Service to better evaluate and continuously improve its management 

processes and its investment and portfolio performance, learn from other 

organizations, and use breakthrough technologies to improve strategic 

outcomes. 
Executive Summary

Page 9 GAO-03-3 U.S. Postal Service IT Investment Management

Recommendations for 

Executive Action

To strengthen the Postal Service’s capabilities for investment management 

and address the weaknesses discussed in this report, we recommend that 

the Postmaster General develop a plan that initially focuses on correcting 

the weaknesses in critical processes associated with maturity stages two 

and three before addressing the weaknesses at maturity stages four and 

five, because critical processes at the lower stages provide the foundation 

for building those at higher maturity stages. The plan should be developed 

within 6 months. At a minimum, the plan should specify an approach to

• develop comprehensive guidance that defines and describes the 

complete investment management process, unifies existing processes 

enterprisewide, and reflects changes in processes as they occur;

• develop additional process guidance, as needed, to completely define 

the operations and decision-making processes of investment boards and 

other management entities involved in managing IT investments;

• ensure that cost, benefit, schedule, and risk expectations are set and 

approved in the original business case for each investment; that 

accurate and complete actual cost, benefit, schedule, and risk data are 

tracked against these expectations; and that status information on these 

four criteria is periodically reported to executive-level investment 

boards; and

• establish a structured, transparent, and documented portfolio selection 

process that assesses, prioritizes, selects, and funds investments 

according to established portfolio selection criteria, including explicit 

cost, benefit, schedule, and risk criteria.

The Postmaster General should ensure that the plan specifies measurable 

goals and time frames, prioritizes initiatives, designates a senior manager 

responsible and accountable for directing and controlling the 

improvements, and establishes review milestones. After addressing the 

stage two and three processes, the Postal Service should create processes 

required for stages four and five that, at a minimum

• ensure that guidance for conducting post-implementation reviews is 

complete, including criteria for selecting systems for review, and that 

post-implementation reviews are conducted on all appropriate systems,

• establish a process for evaluating and improving portfolio performance,
Executive Summary

Page 10 GAO-03-3 U.S. Postal Service IT Investment Management

• establish a process for managing the succession of systems and 

technology,

• establish a process to benchmark the investment processes of leading 

organizations to identify opportunities for improvement, and

• establish a process to employ IT investments strategically to improve 

business outcomes.

Agency Comments and 

Our Evaluation

The Postal Service’s Chief Financial Officer provided written comments on 

a draft of this report (reprinted in app. III). In these comments, the Postal 

Service stated that the report offered an opportunity to consider changes 

and improvements in its IT investment management processes. The Service 

added that it would carefully evaluate each of the report’s 

recommendations to determine the necessary actions for adopting and 

integrating key practices outlined in the GAO ITIM model that are 

appropriate for the Postal Service.

The Postal Service identified a few key points where it differed from GAO’s 

IT investment management framework. In succession planning, the Postal 

Service stated that it uses an institutionalized portfolio approach to address 

the succession of its IT hardware, software, and systems. While this 

approach may be appropriate as part of a succession management process, 

our evaluation found that the Postal Service does not have a process for 

regularly reviewing the performance of existing systems against 

established criteria. 

The Postal Service also provided comments pertaining to postimplementation reviews that describe cost studies, the budget process, and 

the activities of the Office of Inspector General as satisfying this critical 

process. We disagree with the Postal Service in this matter. While guidance 

for cost studies does exist, budget activities and Inspector General 

evaluations do not satisfactorily address the requirements of this critical 

process, and the Service provided evidence of only three postimplementation cost studies having been conducted since 1990. 
Page 11 GAO-03-3 U.S. Postal Service IT Investment Management

Chapter 1

Introduction Chapter 1

Postal Service’s 

Mission and 

Organization

The Postal Reorganization Act of 1970 (P.L. 91-375) created the United 

States Postal Service, an independent, self-supporting organization, 

replacing the former United States Post Office Department. The act 

charges the Postal Service with binding the nation together through the 

personal, educational, literary, and business correspondence of the people 

and providing reliable and efficient mail services to all areas of the country. 

The Postal Service is intended to be self-supporting from postal operations 

and is mandated to break even over time. With nearly 800,000 career 

employees, the Postal Service is the second largest employer compared 

with U.S. private sector organizations. It has an extensive infrastructure, 

consisting of more than 38,000 post offices, branches, and stations; 240,000 

delivery routes to over 137 million delivery addresses; a fleet of 215,000 

vehicles; 350 major processing and distribution facilities; and nearly 

800,000 career employees.

The Postal Service is now facing a financial crisis brought about by 

declining revenues and growing operating expenses and capital needs, 

including the cost of existing and new investments in information 

technology (IT). In February 2002, we reported significant declines in the 

Postal Service’s net income from fiscal year 1995 to fiscal year 2001 and a 

net loss of $1.68 billion in fiscal year 2001 alone, resulting in part from 

declining mail volumes and from terrorist incidents.5

 In April 2001, we 

placed the Postal Service’s transformational efforts and long-term outlook 

on our High-Risk list, noting that the Postal Service is at growing risk of not 

being able to continue its mission of providing the current level of universal 

service throughout the nation while maintaining reasonable rates and 

remaining largely self-supporting through postal revenues.

The Postal Service has acknowledged the need for a new business model in 

light of these events and various trends now shaping the delivery services 

marketplace, such as consumer interest in new service types and 

increasing security concerns. Other increases in the cost of doing business, 

such as the rising costs of retirement and health benefits, heighten the need 

for action. To conserve cash and limit debt, the Postal Service has 

continued its freeze on capital spending for most facility projects, and its 

5

U.S. General Accounting Office, U.S. Postal Service: Deteriorating Financial Outlook 

Increases Need for Transformation, GAO-02-355 (Washington, D.C.: Feb. 28, 2002). U.S. 

General Accounting Office, U.S. Postal Service: Financial Outlook and Transformation 

Challenges, GAO-01-733T (Washington, D.C.: May 15, 2001).
Chapter 1

Introduction

Page 12 GAO-03-3 U.S. Postal Service IT Investment Management

total budgeted capital outlays have declined in fiscal year 2002 for the third 

consecutive year to $2.2 billion. 

The Postal Service has reported that it plans to respond to these trends by 

providing customers with added value, improving the efficiency of 

operations, containing costs, fostering a performance-based culture, and 

improving its management of enabling functions such as financial 

management, purchasing, and IT.6

 The Postal Service has established the 

specific goal of connecting all of its components through IT, to enable it to 

enhance security, add valuable product features, and manage its operations 

in real time. 

The Postal Service accounts for its expenditures in separate expense and 

capital accounts, according to Generally Accepted Accounting Principles 

to which public financial reporting by U.S. corporations must conform. 

Expenditures categorized as “expense” generally comprise operating costs 

and are primarily funded through a general operating budget. Expenditures 

categorized as “capital” are for one-time costs, are project-specific, and are 

depreciated. 

The Postal Reorganization Act vested direction of the Postal Service in an 

eleven-member Board of Governors, including nine appointed by the 

President. The nine governors appoint the Postmaster General, who is the 

Chief Executive Officer, and who, with the nine governors, appoints the 

Deputy Postmaster General. The Postal Service’s executive vice presidents 

are the Chief Operating Officer and the Chief Financial Officer. The Postal 

Service has senior vice presidents for Government Relations and Public 

Policy, Human Resources, Operations, Office of the Chief Marketing 

Officer, and Office of the Chief Technology Officer. Figure 2 shows an 

overview of the Postal Service’s current organizational structure.

6

United States Postal Service, United States Postal Service Transformation Plan

(Washington, D.C.: April 2002).
Chapter 1

Introduction

Page 13 GAO-03-3 U.S. Postal Service IT Investment Management

Figure 2: Overview of the Organizational Structure of the Postal Service

Source: U.S. Postal Service.
Chapter 1

Introduction

Page 14 GAO-03-3 U.S. Postal Service IT Investment Management

Postal Service’s 

Information 

Technology 

Environment

The Postal Service has come to rely increasingly on IT. In the early 1980s, it 

used data centers and mainframe computers to support administrative 

functions such as personnel, accounting, and payroll processing. In the 

mid-1980s, the Postal Service began to incorporate IT into its core business 

activities by interconnecting various components of its mail processing 

system through telecommunications and automation. Today, the 

organization relies on IT throughout the full range of its operations and 

management processes to run the machines that process and sort mail, 

assign mail efficiently to alternative surface and air carriers, support pointof-service terminals, collect and analyze inventory and sales information, 

process payroll and other accounts payable, and perform other activities. 

Communication networks also play a vital role in linking together various 

elements of the Postal Service’s infrastructure and transmitting information 

to various locations for storage, processing, and analysis. The Postal 

Service expended approximately $700 million for IT in fiscal year 2002 and 

plans to spend about $1 billion for IT in fiscal year 2003.

The Postal Service currently manages almost 650 IT systems and 

applications that operate in support of postal functions. It has 24 IT-related 

projects in development or recently completed, each estimated to cost at 

least $10 million. The total investment cost estimated for these projects 

since 1997 is more than $2 billion, ranging from about $10 million to about 

$404 million per project. (See app. I for a list of the Postal Service’s ITrelated projects currently in progress.) Projects with major IT components 

in development or implementation phases include the following:

• Point of Service ONE—A retail point-of-sale information system 

that is intended to replace outdated retail terminals at postal retail 

windows and provide more timely and accurate information. 

• Associate Office Infrastructure—Expected to support a common 

information system for retail, delivery, and administrative operations 

in post offices. 

• Delivery Operations Information System—Scheduled to replace 

three current information systems and assist delivery unit 

supervisors in managing office activities, planning street activities, 

and managing route inspection and adjustment activities. 

• Time and Attendance Collection System—Expected to replace 

five existing time and attendance systems and enable labor resources 
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Page 15 GAO-03-3 U.S. Postal Service IT Investment Management

to be more efficiently allocated by providing supervisors with 

accurate, real-time labor data by type of work being performed. 

• Advanced Computing Environment—A major infrastructure 

modernization initiative that is expected to replace existing 

workstations and transitions applications to a Web-based environment. 

Weaknesses in the 

Postal Service’s 

Investment 

Management Process

Given the challenges the Postal Service currently faces, effective 

management of its existing and new IT investments is crucial if it is to 

provide the service expected while remaining self-supporting. However, 

recent reviews, performed by the Postal Service’s Office of Inspector 

General (OIG) and by us, have raised some concerns regarding the 

Service’s investment management. The OIG has identified weaknesses in 

the management of some investments in recent years. For example, in 

September 2001, the OIG reported that projects have been proposed to the 

Board of Governors for approval without adequate documentation and 

analyses and that other projects may not achieve anticipated performance 

and financial results.7 In March 2001, the OIG’s review of the Delivery 

Operations Information System found weaknesses in the methods and 

assumptions that were used to derive figures on estimated savings and 

return on investment.8

 In September 1999, the OIG found that Point of 

Service ONE was not achieving the results outlined in its business case.9

The Postal Service has made enhancements to its investment policies and 

procedures to address the issues the OIG raised. In September 2000, we 

identified a number of issues with the management of the Postal Service’s 

e-commerce program, including inconsistencies in reviewing and 

approving e-commerce initiatives and deficiencies in the financial data 

reported. We made several recommendations to the Postal Service that 

addressed these issues. This program was subsequently scaled back by the 

7

United States Postal Service, Office of Inspector General, Decision Analysis Report 

Process, DA-AR-01-005 (Arlington, VA: Sept. 27, 2001).

8

United States Postal Service, Office of Inspector General, Delivery Operations 

Information System, DA-AR-01-003 (Arlington, VA: Mar. 29, 2001).

9

United States Postal Service, Office of Inspector General, Point of Service ONE, DA-AR-99-

002 (Arlington, VA: Sept. 20, 1999).
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Page 16 GAO-03-3 U.S. Postal Service IT Investment Management

Postal Service, as both revenues and customer response fell below 

expectations.10

Postal Service’s 

Approach to 

Investment 

Management

Several individuals and oversight boards are involved in managing IT 

investments, from reviewing and approving a proposed IT project, through 

the process of budgeting for it and monitoring it once it is implemented, 

and evaluating it at its conclusion. These individuals and oversight boards 

and their roles are described below.

• Board of Governors—Eleven-member board that governs the Postal 

Service; comprises the Postmaster General, the Deputy Postmaster 

General, and nine Presidential appointees; expected to approve any 

project with capital and “expense investment”

11 costs of $10 million or 

more.

• Capital Projects Committee (CPC)—Three members of the Board of 

Governors who are to review proposals for any new project with capital 

and expense investment costs of $10 million or more and make 

recommendations to the full Board on whether to approve it.

• Postmaster General—Chief Executive Officer of the Postal Service 

and a member of the Board of Governors; expected to approve or review 

any project with capital and expense investment costs of $7.5 million or 

more.

• Establish Team—Comprises the Deputy Postmaster General, the Chief 

Financial Officer, the Chief Operating Officer, the Chief Marketing 

Officer, the Senior Vice Presidents of Operations and Human Resources, 

the Controller, and a field vice president; is to set financial and 

nonfinancial goals for the Postal Service at the start of its annual 

planning and budgeting process and determine funding for existing and 

proposed IT projects as part of the budget formulation process.

10U.S. General Accounting Office, U.S. Postal Service: Postal Activities and Laws Related to 

Electronic Commerce, GAO/GGD-00-188 (Washington, D.C.: Sept. 7, 2000) and U.S. General 

Accounting Office, U.S. Postal Service: Update on E-commerce Activities and Privacy 

Protections, GAO-02-79 (Washington, D.C.: Dec. 21, 2001).

11Expense investments are a special category of expense. They are generally one-time 

expenditures in support of the development or deployment of a major project. Routine 

operating expenses are not considered expense investments.
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• Capital Investment Committee (CIC)—Comprises the Chief 

Technology Officer (CTO) and other senior executives. Is to review 

proposals for any project with capital and expense investment costs of 

$7.5 million or more.

• Deploy Team—Comprises several vice presidents; with the Establish 

Team, is to determine funding for IT projects as part of the Postal 

Service’s annual planning and budgeting process.

• Vice President of Finance (Controller)—Is to review and validate 

proposals for any project with capital and expense investment costs of 

$5 million or more. 

• Capital and Program Evaluation (CAPE)—Group within the 

Finance Department under the Controller. During the review process for 

new projects, is expected to validate the assumptions and cost, benefit, 

and schedule estimates; prepare the Postal Service’s 5-year Capital 

Investment Plan (CIP); monitor projects with capital and expense 

investment costs of $5 million or more; and perform cost studies of 

selected completed projects.

• Chief Technology Officer (CTO) Organization—Comprises the 

Office of the CTO and the Information Technology Department headed 

by the Chief Information Officer (CIO). The CTO organization assists 

other functional units in developing business cases for projects that 

have an IT component. It is also involved in the project concurrence 

process, where feedback on a project is given to the sponsoring 

organization by functional areas and relevant field units. The CTO 

organization is also responsible for developing systems standards and 

requirements for organizationwide compliance. At the strategic level, 

the CTO and CIO recommend and present corporatewide IT projects 

before the Establish Team during the annual capital planning cycle. 

• CTO Investment Review Board—Three-member board comprises the 

CTO, CIO, and Manager of IT Value; is to manage the process of 

selecting projects within the CTO organization, review the performance 

of all IT projects in development, and conduct detailed reviews of 

selected IT projects on a monthly basis.
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Page 18 GAO-03-3 U.S. Postal Service IT Investment Management

The Postal Service has established a number of capital planning, 

investment control, and budgeting processes to manage its IT investments. 

These include processes for (1) developing the investment portfolio, (2) 

approving major new projects, and (3) controlling and evaluating projects.

Process for Developing the 

Investment Portfolio

The Postal Service’s annual capital planning and budgeting cycle begins in 

January with a process called the CustomerPerfect! management cycle. 

The Establish Team and the Deploy Team, composed of Postal Service 

executives, manage this annual organizationwide direction-setting process, 

led by Operations and aided by the Budget and Financial Analysis (B&FA) 

and the Capital and Program Evaluation (CAPE) groups within the Finance 

Department. The Establish Team is expected to align the organization’s 

targets and goals with its commitment to listen to the three “voices” that 

represent aspects of its mission: the Voice of the Business (financial 

benefits), the Voice of the Customer (customer satisfaction), and the Voice 

of the Employee (employee satisfaction). The Establish Team is to review 

project and program funding requests and make preliminary selection and 

funding decisions on the basis of how the requests fit the organization’s 

mission and budget. This process sets the Postal Service’s financial and 

nonfinancial goals for the year. Figure 3 provides detail on the Postal 

Service’s capital planning and budgeting cycle. 
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Page 19 GAO-03-3 U.S. Postal Service IT Investment Management

Figure 3: Capital Planning and Budgeting Cycle

Source: U.S. Postal Service documents.

Process for Approving 

Major New Projects

The process for approving major new IT projects is the same as for any 

other new projects with capital costs of $5 million or more. These major 

projects are to proceed through the formal approval process and are 

monitored by the Finance Department in conjunction with the program 

sponsors when they are in development and implementation phases.
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The process for approving proposed capital investments is defined in the 

Postal Service’s F-66 manual.12 The process begins with the sponsoring unit 

preparing a Decision Analysis Report (DAR), which presents the business 

case for the proposed project. Figure 4 provides detail on the process for 

approving major new projects.

12United States Postal Service, General Investment Policies and Procedures: Handbook 

F-66, (April 1999, revised February 2002).
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Figure 4: Process for Approving Major New Projects

Source: US. Postal Service.

Control and Evaluation 

Process

During a capital project’s life cycle, control and evaluation are 

accomplished through two processes. Project sponsors are to produce 

quarterly compliance reports that summarize the project’s status. These 

reports are to be used by CAPE, along with other financial information, to 

produce the quarterly Investment Highlights that are distributed to the 
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Board of Governors and others to present the status of Board-approved 

projects. This project oversight process continues for 18 months beyond a 

project’s initial implementation. The Program Performance Group, part of 

CAPE, studies selected projects that are still in development to determine 

whether they remain on track to achieve cost goals. The Program 

Performance Group may also conduct cost studies, after implementation, 

to determine whether cost goals have been met. Changes in scope, 

schedule, or total capital funding needed for a project trigger the 

requirement for a modified DAR, which must be reviewed and approved 

through the same process as the original DAR. 

At the operational level, the CTO organization’s project managers and 

portfolio managers conduct the day-to-day oversight of IT projects, 

including those sponsored outside of the CTO organization, by tracking 

performance of IT projects in the Program Tracking and Reporting System 

(PTRS) and reporting project status every month to the CTO Investment 

Review Board. When problems are identified, they are addressed through 

interaction with the sponsoring organization, which may choose to bring 

the issue to senior executives if the problem is likely to affect their ability 

to meet their objectives. 

IT investments that are not funded by capital funds are controlled and 

evaluated through the annual budget process. Executive-level oversight is 

performed through annual reviews of program descriptions called 

“program narratives,” which provide input to the budget decision. At the 

operational level, ongoing oversight is performed through routine tracking 

of system operation. Figure 5 shows the Postal Service’s project control 

and evaluation process.
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Figure 5: Project Control and Evaluation Process

Source: U.S. Postal Service.

IT Investment 

Management 

Framework

Based on research into the IT investment management practices of leading 

private- and public-sector organizations, we have developed an information 

technology investment management maturity (ITIM) framework. This 

framework identifies critical processes for successful IT investment 
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organized into a framework of five increasingly mature stages.13 The ITIM 

is intended to be used both as a management tool for implementing these 

processes incrementally and as an evaluation tool for determining an 

organization’s current level of maturity. The overriding purpose of the 

framework is to encourage investment processes that increase business 

value and mission performance, reduce risk, and increase accountability 

and transparency in the decision process. This framework has been used in 

several GAO evaluations14 and has been adopted by a number of agencies. 

These agencies have used ITIM for purposes ranging from self-assessment 

to redesign of their IT investment management processes.

ITIM is a hierarchical model comprising five “maturity stages.” These 

maturity stages represent steps toward achieving stable and mature 

processes for managing IT investments. Each stage builds upon the lower 

stages; the successful achievement of each stage leads to improvement in 

the organization’s ability to manage its investments. With the exception of 

the first stage, each maturity stage is composed of “critical processes” that 

must be implemented and institutionalized for the organization to achieve 

that stage. These critical processes are further broken down into key 

practices that describe the types of activities an organization should be 

performing to successfully implement each critical process. An 

organization may be performing key practices from more than one maturity 

stage at one time. This is not unusual, but efforts to improve investment 

management capabilities should focus on becoming compliant with lower 

stage practices before addressing higher stage practices. 

Stage two in the ITIM framework encompasses building a sound 

investment management process—by developing the capability to control 

projects so they finish predictably within established cost and schedule 

expectations—and establishing basic capabilities for selecting new IT 

projects. Stage three requires that an organization continually assess 

proposed and ongoing projects as parts of a complete investment portfolio: 

an integrated and competing set of investment options. This approach 

enables the organization to consider the relative cost, benefit, and risk of 

newly proposed investments along with those previously funded and to 

identify the optimal mix of IT investments to meet its mission, strategies, 

and goals. Stages four and five require the use of evaluation techniques to 

13GAO/AIMD-10.1.23.

14GAO-01-146; GAO-01-190; GAO-01-961; GAO-02-314.
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Page 25 GAO-03-3 U.S. Postal Service IT Investment Management

continuously improve both the investment portfolio and investment 

processes to better achieve strategic outcomes. Figure 6 shows the five 

maturity stages and the associated critical processes.

Figure 6: The Five Stages of Maturity with Critical Processes 

Source: GAO.

As defined by the model, each critical process consists of “core elements”

that indicate whether the implementation and institutionalization of a 

process can be effective and repeated. Key practices must be executed to 

fulfill the core elements and implement the critical process. The core 

elements are as follows:

• Organizational commitments—Actions taken by management to 

ensure that the critical process is established and will endure. Key 

practices typically involve establishing organizational policies and 

engaging the sponsorship of senior management.

• Prerequisites—Conditions that must exist within an organization to 

enable it to successfully implement a critical process. Key practices 
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typically involve allocating resources, establishing organizational 

structures, and providing training.

• Activities—Actions that must be taken to implement a critical process. 

An activity occurs over time and has recognizable results. Key practices 

typically involve establishing procedures, performing and tracking 

work, and taking corrective actions as necessary.

Objective, Scope, and 

Methodology

The objective of our review was to assess the Postal Service’s capabilities 

for effectively managing its IT investments. To determine these capabilities 

and the organization’s level of maturity in managing its IT investments, we 

applied our ITIM framework and the associated assessment method. As a 

part of the ITIM assessment method, we obtained documentary and 

testimonial evidence and observed demonstrations of several internal 

systems showing the organization’s execution of various key practices. We 

evaluated the Postal Service against 14 critical processes in maturity stages 

two, three, four, and five. We did not evaluate the Postal Service on key 

practices for one critical process in stage three—Authority Alignment of IT 

Investment Boards—because major IT capital investments are managed by 

the same oversight entities, and we determined that this critical process 

was not applicable. 

To determine whether the Postal Service had implemented the 14 critical 

processes we assessed, we first reviewed documentation relating to the 

organization’s IT investment management practices, including written 

policies, procedures, and guidance that it had developed, and other forms 

of documentation that provided evidence that these practices had been 

executed. Documents included the Postal Service’s F-66 manual, 

Investment Highlights reports, executive memoranda, program narratives 

required for the annual budget formulation, DARs, performance indicators, 

and the minutes from meetings of the CIC, the CPC, and the Board of 

Governors. We also reviewed a variety of administrative and system 

documents from the CTO organization, including evidence of its 

formulation process for IT investment proposals and its oversight process 

for IT investments.

We interviewed a number of senior officials, including the Chief Financial 

Officer (CFO), the CTO, and the CIO. Within the Office of the CFO, we also 

spoke with the Manager of Capital and Program Evaluation and the 

Manager of Corporate Budget. Within the Office of the CTO, we 

interviewed the Manager of IT Value and a representative from the 
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Enterprise Architecture Office. We also spoke with senior officials from the 

functional units, such as the Manager of Logistics Systems, the Manager for 

Human Resources Technology Management, and the Manager of Customer 

Service Operations.

As part of the analysis, we selected four projects, representing a range of 

functional units, stages of development, and sizes, and examined them to 

determine the extent to which the Postal Service’s policies and procedures 

for IT investment management were being implemented. The projects we 

selected for review were (1) Enhanced Security Capability, 

(2) Organization Structure, Staffing and Management, (3) Point of Service 

ONE, and (4) Surface-Air Management System. Appendix II contains 

additional information on each of the projects we reviewed. To perform the 

project reviews, we reviewed project management documentation such as 

DARs, project management plans, and PTRS reports. To clarify information 

in these documents and gain further insight we also interviewed managers 

in the sponsoring functional units, project managers, and the members of 

the project management teams. The teams included staff who had been 

assigned responsibility for project oversight within the Office of the Chief 

Technology Officer. 

We compared the evidence we collected through document reviews and 

interviews to the detailed requirements for each key practice and critical 

process that is specified in the ITIM. In accordance with the ITIM 

assessment method, we considered a key practice to have been “executed”

when we determined, by team consensus, that sufficient evidence existed 

to confirm that the Postal Service was executing the practice in accordance 

with stated ITIM criteria. When we determined that there were significant 

weaknesses in the Postal Service’s execution of a practice or found 

insufficient evidence of its execution, we concluded that the practice was 

not executed. Once the key practices were assessed, we determined which 

of the 14 critical processes had been implemented. A critical process was 

determined to be “implemented” when all related key practices were 

designated as executed. Otherwise, according to the ITIM assessment 

method, the critical process would not be considered to have been 

implemented.

We conducted our work at the Postal Service’s headquarters offices in 

Washington, D.C., from October 2001 through July 2002, in accordance with 

generally accepted government auditing standards.
Page 28 GAO-03-3 U.S. Postal Service IT Investment Management

Chapter 2

Postal Service Executes Most Key 

Foundational Practices Chapte2r

At the stage two level of maturity in the IT investment management 

framework, an organization has attained repeatable, basic selection and 

control processes and successful IT investment control processes at the 

project level. In other words, the organization can select projects that meet 

established selection criteria and can identify expectation gaps early and 

take appropriate steps to address them. According to ITIM, critical 

processes at this stage include (1) defining investment review board 

operations, (2) developing processes to determine the progress of 

individual IT projects, (3) creating an inventory of IT investments, 

(4) identifying IT project and systems business needs, and (5) developing a 

basic process for selecting new IT proposals. Table 1 shows the purpose of 

each critical process in stage two.

Table 1: Stage Two—Critical Processes Required for Building the Investment 

Foundation

Source: GAO.

The Postal Service is executing nearly 90 percent of the key practices 

associated with stage two critical processes. Specifically, the Postal Service 

is carrying out all of the key practices associated with selecting proposals 

that meet established criteria, aligning IT projects with the organization’s 

business needs, and maintaining information on IT projects and systems in 

an inventory. 

The Postal Service has yet to execute a few key practices associated with 

establishing an IT investment management foundation. For example, the 

Postal Service does not have guidance defining the overall framework for 

its IT investment management process, and policies and procedures for 

Critical process Description

IT investment board 

operation

To define and establish the governing board(s) responsible 

for selecting, controlling, and evaluating investments.

IT project oversight To regularly determine each IT project's progress toward cost 

and schedule milestones using established criteria, and take 

corrective actions when milestones are not achieved. 

IT project and system 

identification 

To create and maintain an IT project and system inventory to 

assist in managerial decision-making.

Business needs 

identification

To ensure that each IT program and project supports the 

organization's business needs and meets users' needs.

Proposal selection To ensure that an established, structured process is used to 

select new IT proposals.
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Foundational Practices

Page 29 GAO-03-3 U.S. Postal Service IT Investment Management

project oversight are not documented. When the Postal Service implements 

the remaining critical processes associated with stage two, it will acquire 

the additional key controls needed to fully implement basic control 

processes. For example, with an investment management process guide, 

the Postal Service will gain assurance that IT investment activities will be 

performed in a consistent and cost-effective manner. 

Table 2 summarizes the status of the Postal Service’s critical processes for 

stage two, showing how many associated key practices it has executed.

Table 2: Summary of Results for Stage Two Critical Processes and Key Practices

Source: GAO.

The following discussion provides information on steps the Postal Service 

has taken to implement each of these critical processes.

Boards Are Established 

but Operating without 

a Complete Process 

Guide 

The creation of decision-making bodies or boards is central to the IT 

investment management process. At the stage two level of maturity, 

organizations define one or more boards, provide resources to support 

their operations, and appoint members who have expertise in both 

operational and technical aspects of proposed investments. Resources 

provided to support the operations of IT investment boards typically 

include top management’s participation in creating the board(s) and 

defining their scope and formal evidence acknowledging management’s 

support for board decisions. The boards operate according to a written IT 

investment process guide tailored to the organization’s unique 

characteristics, thus ensuring that consistent and effective management 

Critical process

Key

practices

executed

Total required

by critical

process

Percentage of key

practices executed

IT investment board operation 4 6 67%

IT project oversight 9 11 82

IT project and system 

identification 7 7 100

Business needs identification 8 8 100

Proposal selection 6 6 100

Totals 34 38 89%
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Foundational Practices

Page 30 GAO-03-3 U.S. Postal Service IT Investment Management

practices are implemented across the organization.15 Once board members 

are selected, the organization ensures that they are knowledgeable about 

policies and procedures for managing investments. Organizations at the 

stage two level of maturity also take steps to ensure that executives and 

line managers support and carry out the decisions of the IT investment 

board. According to ITIM, an IT investment management process guide 

should be a key authoritative document that the organization uses to 

initiate and manage IT investment processes and should provide a 

comprehensive foundation for policies and procedures developed for all 

other related processes. 

The Postal Service has executed four of the six key practices for this 

critical process by establishing investment boards; providing adequate 

resources for related activities; appointing experienced senior-level 

executives to the boards; and implementing policies, procedures, and 

processes to ensure that executives and line managers support and carry 

out decisions made by the boards.

However, the Postal Service has yet to develop a written, organizationspecific process guide to direct the operations of the investment boards. 

While the F-66 manual provides general guidance on the organization’s 

investment management process, it does not constitute an IT investment 

process guide because it does not sufficiently define the investment 

process. Specifically, the manual does not include information on the roles 

of the Establish Team and the CTO Investment Review Board. In addition, 

it does not provide detail on the processes followed by other boards 

involved in the investment management process (e.g., the CIC and CPC). 

Finally, the manual does not identify the manner in which investment 

boards’ processes are to be coordinated with other key organizational 

plans and processes (such as the budget formulation process). Without an 

investment management process guide, the Postal Service lacks the 

assurance that IT investment activities will be coordinated and performed 

in a consistent and cost-effective manner. 

Table 3 shows the rating for each key practice required to implement the 

critical process for establishing IT investment board operation at the stage 

two level of maturity. Each of the “executed” ratings shown below 

15According to ITIM, a process is a sequence of steps performed for a given purpose, and a 

process guide is a document that defines the unique manner in which the general IT 

investment guidance will be implemented within the organization.
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Page 31 GAO-03-3 U.S. Postal Service IT Investment Management

represents an instance where, based on the evidence provided by Postal 

Service officials, we concluded that a specific key practice was currently 

being executed by the organization. 

Table 3: IT Investment Board Operation

Type of practice Key practice Rating Summary of evidence

Organizational 

commitments

1. An organizationspecific IT 

investment process 

guide is created to 

direct each board's 

operations. 

Not executed. The Postal Service has not developed an investment process guide to 

direct its board operations. While the F-66 manual provides general 

guidance on the organization’s investment management process, it does 

not constitute an investment management process guide in that it does not 

(1) include information on the roles of the Establish Team and the CTO 

Investment Review Board, which are responsible for selecting IT 

investments to be funded in the budget formulation process and 

performing project oversight functions; (2) provide detail on the processes 

followed by other boards involved in the investment management process 

(e.g., the CIC and the CPC); or (3) identify the manner in which investment 

boards’ processes are to be coordinated with other key organizational 

plans and processes (such as the budget formulation process).

2. Organization 

executives and line 

managers support 

and carry out IT 

investment board 

decisions. 

Executed. The Postal Service has several processes in place to ensure that 

executives and line managers support and carry out decisions made by 

the oversight boards with investment management responsibility. For 

example, the Postal Service uses “accountability letters” similar to Senior 

Executive Service contracts to ensure that the executives and line 

managers support the decisions of the investment boards.

Prerequisites 1. Adequate 

resources are 

provided for 

operating each IT 

investment board.

Executed. Adequate resources, such as supporting staff, are available for investment 

board operations.

2. Board members 

understand the 

investment board's 

policies and 

procedures and 

exhibit core 

competencies in 

using the IT 

investment approach 

via training, 

education, or 

experience. 

Executed. Members of Postal Service investment boards are senior-level executives 

who have extensive experience with the organization’s operations and IT 

investment management approach.
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Foundational Practices

Page 32 GAO-03-3 U.S. Postal Service IT Investment Management

Source: GAO.

CTO Organization 

Oversees IT 

Investments 

Investment boards should effectively oversee IT projects throughout all 

life-cycle phases (concept, design, testing, implementation, and 

operations/maintenance). At the stage two level of maturity, investment 

boards should review each project’s progress toward predefined cost and 

schedule expectations, using established criteria and performance 

measures, and should take corrective actions to address cost and milestone 

variances. 

According to ITIM, effective project oversight requires, among other things, 

(1) having written polices and procedures for project management; 

(2) developing and maintaining an approved management plan for each IT 

project; (3) making up-to-date cost and schedule data for each project 

available to the oversight boards; (4) reviewing each project’s performance 

by regularly comparing actual cost and schedule data with expectations; 

(5) ensuring that corrective actions for each under-performing project are 

documented, agreed to, implemented, and tracked until the desired 

outcome is achieved; and (6) having written policies and procedures for 

oversight of IT projects. 

The Postal Service has executed most of the key practices in the area of 

project oversight. For example, the Postal Service has developed several 

policies and procedures for project management, including the Program 

Management Process Guidelines, which are high-level project 

Activities 1. Each IT 

investment board is 

created and defined 

with board 

membership 

integrating both IT 

and business 

knowledge.

Executed. The CPC, CIC, and Establish Team include members who have extensive 

knowledge and experience of business and IT investment management. 

The CFO or CTO are members of the boards and contribute IT knowledge 

and expertise.

2. Each IT 

investment board 

operates according 

to written policies 

and procedures in 

the organizationspecific IT 

investment process 

guide.

Not executed. The Postal Service has not developed a written organization-specific 

process guide for IT investment management. As a result, the Postal 

Service’s enterprise-level investment boards are operating without 

documented policies and procedures.

(Continued From Previous Page)

Type of practice Key practice Rating Summary of evidence
Chapter 2

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Foundational Practices

Page 33 GAO-03-3 U.S. Postal Service IT Investment Management

management guidelines used for all projects; the more-detailed Software 

Process Standards and Procedures used by the Postal Service’s business 

solution centers to develop and maintain systems; and the recently-issued 

Integrated Solutions Methodology, which provides a process for managing 

a system’s development throughout the life-cycle phases. In addition, IT 

projects have an approved, up-to-date project management plan, in 

accordance with project management guidelines. Data on a project’s actual 

cost and schedule are provided to the CTO Investment Review Board,16 

which is responsible for overseeing the performance of IT projects, and to 

other oversight groups as appropriate. Actual cost and schedule data for 

the four projects we reviewed were provided to (1) the CTO Investment 

Review Board in the form of PTRS reports, (2) the Board of Governors 

through quarterly Investment Highlights reports featuring capital 

expenditures and schedule data, and (3) field and headquarters offices 

through accounting and management reports featuring data on projects’

actual capital and expense costs.17

Finally, the CTO Investment Review Board regularly oversees the 

performance of projects by comparing actual cost and schedule data to 

expectations and performs special reviews of projects that do not meet 

expectations. When these reviews are performed, corrective actions are 

defined, documented, agreed to by the program manager and the CTO 

Investment Review Board, and tracked until the desired outcome is 

achieved. According to the IT program manager for Organization Structure, 

Staffing and Management (OSS&M), special meetings were held for this 

project to address schedule performance issues. Also, officials from the 

CTO organization stated that the office generates reports listing projects 

that are not meeting cost, schedule, or customer satisfaction expectations 

and brings them to management’s attention so that “special reviews” can be 

performed. These reports identify the manager and group responsible for 

the project, provide a summary of the problem, the status of the resolution, 

and a target date for resolving the problem. The CTO Investment Review 

Board tracks action items to resolve the problem until they are completed.

16The CTO Investment Review Board (CTO IRB) is comprised of the Postal Service’s CTO, 

Vice President for Information Technology, and Manager for IT Value. According to Postal 

Service officials, the CTO IRB proposes IT infrastructure investments on the basis of 

business case analyses and performs regular reviews of these and other investments 

sponsored by business units to monitor expense and capital expenditures and project plans 

and schedules, track contributions, and resolve any issues or concerns. 

17One of the four projects we reviewed, Enhanced Security Capability, is actually a program 

comprising over 30 different initiatives. See appendix II for information on this program.
Chapter 2

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Notwithstanding these strengths, the Postal Service has a few weaknesses 

in its oversight of IT projects. First, while the Postal Service has written 

policies and procedures addressing how the CTO Investment Review Board 

is to oversee IT investments, it does not have any that sufficiently define 

the Establish Team’s role in the oversight process. The F-66 manual, for 

example, notes that senior management is to continually review the 

performance of capital projects and discusses some mechanisms that could 

be used for this purpose (e.g., compliance reports). However, it does not 

provide specifics on the role of the Establish Team or define processes for 

oversight of projects beyond the initial deployment phase. Without 

adequate policies and procedures, project oversight may not be performed 

consistently. In addition, without these policies and procedures, the Postal 

Service lacks the transparency that is helpful in both communicating and 

demonstrating how project oversight is performed.

Second, the Postal Service’s investment boards do not adequately oversee 

project performance by comparing actual cost data to expectations. 

Specifically, while the Establish Team and CTO Investment Review Board 

each compare actual cost data to annual budget expectations, the Postal 

Service could not demonstrate that these boards compared the data to 

original expectations established in the DAR. In addition, while the 

Investment Highlights used by executives to monitor project performance 

contains schedule information, it does not contain complete information 

on actual project costs because it does not report operating expenses. 

Without comparisons of complete actual cost data to original expectations, 

Postal Service executives may not be able to easily determine whether the 

projects they have selected are progressing as planned or whether 

corrective actions are needed.

Table 4 shows the rating for each key practice required to implement the 

critical process for project oversight at the stage two level of maturity and 

summarizes the evidence that supports these ratings.
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Table 4: IT Project Oversight

Type of practice Key practice Rating Summary of evidence

Organizational 

commitments

1. The organization has 

written policies and 

procedures for project 

management.

Executed. The Postal Service has developed written policies and procedures for 

project management, including Program Management Process 

Guidelines, Software Process Standards and Procedures, and an 

Integrated Solutions Methodology.

2. The organization has 

written policies and 

procedures for 

management oversight of 

IT projects.

Not executed. The CTO Investment Review Board has written policies and 

procedures for overseeing projects. However, there are no written 

policies and procedures that sufficiently address how the Establish 

Team is to oversee projects. For example, the F-66 manual does not 

provide specifics on the role of the Establish Team or on how this 

team is to oversee capital projects that have been deployed for over 

18 months or ongoing infrastructure-type projects. 

Prerequisites 1. Adequate resources are 

provided to assist the 

board(s) in overseeing IT 

projects.

Executed. The Postal Service has adequate resources for performing IT project 

oversight, including managers and staff assigned responsibility for 

this activity, and systems that capture information on actual costs, 

schedule, and risk.

2. Each IT project has and 

maintains an approved 

project management plan 

that includes cost and 

schedule controls.

Executed. The Postal Service’s project management procedures require that an 

approved project management plan be maintained for each IT project. 

In addition, cost and schedule controls are applied during project 

reviews. Approved project management plans were maintained for the 

four projects we reviewed, and cost and schedule controls were 

applied during project reviews. 

3. An IT investment board 

is operating.

Executed. The Postal Service has a number of oversight boards with 

responsibility for managing IT investments, including the Establish 

Team, the CIC, the CPC, the Board of Governors, and the CTO 

Investment Review Board.

4. Information from the IT 

project and system 

inventory is used by the IT 

investment board as 

applicable. 

Executed. IT project and system information is used by the CTO Investment 

Review Board to support executive management’s project 

management responsibilities. 

Activities 1. Each project’s up-todate cost and schedule 

data are provided to the 

appropriate IT investment 

board.

Executed. Projects’ up-to-date cost and schedule data are provided to the CTO 

Investment Review Board, the Establish Team, and other oversight 

groups as appropriate. Actual cost and schedule data for the four 

projects we reviewed were provided to (1) the CTO Investment 

Review Board through the Program Tracking and Reporting System 

(PTRS), a tool used by the Board to monitor IT project performance, 

and (2) other oversight groups through quarterly reports featuring 

capital expenditures and schedule data and monthly financial reports 

featuring actual capital and expense cost data of projects.
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Source: GAO.

IT Project and System 

Information Is 

Maintained to Support 

Project Management 

To make good management decisions, an organization must know how 

funds are being expended toward acquiring, maintaining, and deploying its 

IT investments. Implementing this critical process requires an organization 

to identify all projects and systems within the organization and create one 

or more repositories or inventories of information about them. This 

information is required to track the organization’s IT resources to provide a 

basis for analyses showing major cost and management factors and trends. 

An IT project and systems inventory can take many forms and does not 

have to be centrally located or consolidated. The guiding principles for 

developing the inventory are that the information maintained should be 

accessible where it is of the most value to investment decision makers and 

relevant to the management processes and decisions that are being made. 

According to ITIM, organizations at the stage two level of maturity provide 

adequate resources for tracking IT projects and systems, designate 

2. Using established 

criteria, the IT investment 

board oversees each IT 

project's performance 

regularly by comparing 

actual cost and schedule 

data to expectations.

Not executed. The Postal Service’s investment boards do not adequately oversee 

project performance by comparing actual cost data to expectations. 

Specifically, while the Establish Team and CTO Investment Review 

Board each compare actual cost data to annual budget expectations, 

the Postal Service could not demonstrate that these boards 

compared the data to original expectations established in the DAR. In 

addition, while the Investment Highlights used by executives to 

monitor project performance contains schedule information, it does 

not contain complete information on actual project costs in that it does 

not report operating expenses.

3. The IT investment board 

performs special reviews of 

projects that have not met 

predetermined 

performance standards.

Executed. Special reviews of projects that have not met predetermined 

standards are performed. According to the IT program manager for 

OSS&M, special meetings were held for this project to address 

schedule performance issues.

4. Appropriate corrective 

actions for each underperforming project are 

defined, documented, and 

agreed to by the IT 

investment board and the 

project manager. 

Executed. Appropriate corrective actions for each under-performing project are 

defined, documented, and agreed to by the oversight board and the 

project manager. 

5. Corrective actions are 

implemented and tracked 

until the desired outcome 

is achieved.

Executed. Corrective actions are implemented and tracked to help ensure that 

an agreed-upon outcome is achieved. 

(Continued From Previous Page)

Type of practice Key practice Rating Summary of evidence
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Page 37 GAO-03-3 U.S. Postal Service IT Investment Management

responsibility for managing the project and system identification process, 

and develop related written policies and procedures. Resources required 

for this purpose typically include managerial attention to the process; staff; 

supporting tools; an inventory database; inventory reporting, updating and 

query tools; and a method for communicating inventory changes to 

affected parties. Stage two organizations develop and maintain information 

on their IT projects and systems in one or more inventories according to 

written procedures, recording changes in data as required, and maintaining 

historical records. Access to this information is provided on demand to 

decision makers and other affected parties.

The Postal Service has executed all of the key practices for this critical 

process. The Service has established a number of repositories of 

information on its IT projects and systems in the form of the Enterprise 

Information Repository (EIR), and automated systems such as PTRS that 

track actual cost, schedule, benefit, and risk associated with the Postal 

Service’s IT programs and projects. Members of the Postal Service’s 

investment boards have access to the systems used to maintain information 

on the organization’s IT programs and projects. Information is maintained 

in these databases because they are also used for other purposes. For 

example, project managers input up-to-date systems and project status 

information to PTRS; the Corporate Planning System (CPS) and PTRS are 

updated automatically as financial transactions are processed. Finally, the 

Postal Service retains records showing changes in the information 

maintained on each IT investment over time and provides these records to 

its investment boards.

Table 5 shows the rating for each key practice required to implement the 

critical process for IT project and system identification at the stage two 

level of maturity and summarizes the evidence that supports these ratings.
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Page 38 GAO-03-3 U.S. Postal Service IT Investment Management

Table 5: IT Project and System Identification

Source: GAO.

Type of practice Key practice Rating Summary of evidence

Organizational 

commitments

1. The organization has written policies 

and procedures for identifying its IT 

projects and systems and collecting, in 

an inventory, information about the IT 

projects and systems which is relevant to 

the investment management process.

Executed. The Postal Service has written policies and procedures 

for the Program Tracking and Reporting System PTRS 

and EIR. Information captured in these systems is 

relevant to the investment management process.

2. An official is assigned responsibility for 

managing the IT project and system 

identification process and ensuring the 

inventory meets the needs of the 

investment management process.

Executed. The CTO organization is responsible for maintaining 

PTRS and EIR. 

Prerequisite 1. Adequate resources are provided for 

identifying IT projects and systems and 

collecting relevant information into an 

inventory.

Executed. Postal Service officials stated that adequate staff support 

is available to identify programs, projects, and systems, 

and provided evidence of staffing levels in key units 

including IT Value and the CTO organization.

Activities 1. The organization's IT projects and 

systems are identified and specific 

information about them is collected in an 

inventory. 

Executed. Information on IT projects and systems is maintained in 

PTRS and EIR. 

2. Changes to IT projects and systems 

are identified, and change information is 

maintained in the inventory.

Executed. Project managers ensure that systems and project status 

information is kept up to date in PTRS and that cost 

amounts captured in financial and corporate planning 

systems are updated automatically as financial 

transactions are processed. 

3. Information from the inventory is 

available on demand to decision makers 

and other affected parties.

Executed. IT investment decision makers and other affected parties 

have access to the various systems used to capture IT 

project and system information. Although this information 

is available on demand, a number of systems must be 

accessed in order to obtain complete information on 

expected and actual costs, benefits, schedule, and risks.

4. The IT project and system inventory 

and its information records are 

maintained to contribute to future 

investment selections and assessments.

Executed. Historical records are maintained for the primary systems 

that contain IT project and system information, PTRS and 

EIR. Project managers also input up-to-date systems and 

project status information to EIR and PTRS, and the CPS 

and PTRS are updated automatically as financial 

transactions are processed. Finally, the Postal Service is 

retaining records that show changes in the information 

maintained on each IT investment over time and providing 

these records to its investment boards.
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Processes Ensure That 

IT Investments Support 

Business Needs and 

Meet User Needs 

Defining business needs for IT projects helps ensure that projects support 

the organization’s mission goals and meet users’ needs. This critical 

process creates the link between the organization’s business objectives and 

its IT management strategy. According to ITIM, effectively identifying 

business needs requires, among other things, (1) developing policies and 

procedures for identifying business needs and associated users for IT 

projects, (2) defining the organization’s business needs or stated mission 

goals, (3) defining business needs for projects, and (4) identifying users for 

projects who will participate in the project’s development and 

implementation.

The Postal Service has executed all of the key practices for this critical 

process. The Service’s business needs are defined in a number of 

documents, including the organization’s strategic plan and recent 

Transformation Plan. Business needs and project users are being 

identified and defined in accordance with policies and procedures, and 

users are involved in project management throughout a project’s life cycle. 

For example, the project management team for Point of Service ONE 

conducts interviews to ensure that the system is providing the information 

needed for decision making, and staff working in field locations tested 

Point of Service ONE software to provide input on modifications required 

to support their needs. The business needs and associated users of the four 

projects we reviewed were clearly identified and defined in the DARs used 

to obtain project approval and in other project justification documentation. 

In addition, users of these projects were involved in project development 

activities through direct collaboration with CTO staff, user groups, and/or 

change control groups. Because the Postal Service is executing all the key 

practices associated with identifying business needs, it has increased 

confidence that its IT projects will meet both business needs and users’

needs.

Table 6 shows the rating for each key practice required to implement the 

critical process for business needs identification at the stage two level of 

maturity and summarizes the evidence that supports these ratings.
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Table 6: Business Needs Identification

Source: GAO.

Structures Are in Place 

for Selecting IT 

Investment Proposals

As a basic step in the direction of implementing mature stage two 

processes, an organization must develop a sound process for selecting IT 

proposals and projects. Once adequate resources are provided and an 

official is designated with responsibility for selecting proposals, stage two 

organizations establish a structured selection process. Resources required 

for selecting proposals typically include managerial time and attention, 

staff, and supporting tools and methodologies. Executives analyze and 

prioritize the proposals and make related funding decisions according to an 

established, structured process. 

Type of practice Key practice Rating Summary of evidence

Organizational 

commitment

1. The organization has written 

policies and procedures for 

identifying the business needs 

(and the associated users) of 

each IT project.

Executed. The Postal Service has written policies and procedures for 

identifying business needs (and the associated users) in its F-66 

manual, Program Management Process Guide, and Integrated 

Solutions Methodology. 

Prerequisites 1. Adequate resources are 

provided for identifying 

business needs and associated 

users.

Executed. According to Postal Service officials, adequate resources are 

provided for identifying business needs and associated users. 

Program managers in the CTO organization also have methods and 

tools for analyzing business needs, identifying users, and converting 

business needs into statements of technical requirements.

2. The organization has defined 

business needs or stated 

mission goals.

Executed. Business needs are defined in the Postal Service’s strategic plans, 

integrated financial plan, annual performance plans and reports, and 

Postal Service Transformation Plan.

3. IT staff are trained in 

business needs identification.

Executed. CTO organization staff with assigned project management 

responsibilities are trained and experienced in the process of 

identifying business needs and developing technical solutions to 

meet these needs. In addition, they collaborate with business units in 

developing solutions to ensure that business needs are met. 

Business units are directly involved in this process.

4. IT projects and systems are 

identified in the IT project and 

system inventory.

Executed. Information on IT systems and projects is maintained in a number of 

systems, including PTRS and EIR.

Activities 1. The business needs for each 

IT project are clearly identified 

and defined.

Executed. Policies and procedures require that the business needs for each IT 

project be clearly identified and defined. The business needs for the 

four projects we reviewed were clearly identified and defined. 

2. Specific users are identified 

for each IT project.

Executed. Policies and procedures require that the specific users be identified 

for each IT project. Specific users were identified for the four IT 

projects we reviewed. 
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The Postal Service has executed all of the key practices pertaining to 

selecting IT proposals: executives and managers follow established 

selection processes, the CFO has been designated with responsibility for 

the organization’s budget formulation process, adequate resources are 

being provided to support related activities, a structured process is in place 

for developing new IT proposals, and executives analyze and prioritize the 

proposals according to established selection criteria.

Postal Service executives and managers follow established processes for 

selecting IT investments. Specifically, functional units, the Finance 

Department’s CAPE group, the Establish Team, and the organization’s 

enterprise-level investment boards all follow established processes for 

proposing, prioritizing, and selecting IT investments. Officials reported that 

the Establish Team operates in accordance with established management 

cycle processes supported by the organization’s CPS and that these 

processes, although not documented, are generally understood by 

members of the team. Finally, the CTO organization has developed 

selection criteria for that unit’s proposed IT investments that are 

incorporated in its new Business Case System (BCS).

Table 7 shows the rating for each key practice required to implement the 

critical process for proposal selection at the stage two level of maturity and 

summarizes the evidence that supports these ratings.
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Page 42 GAO-03-3 U.S. Postal Service IT Investment Management

Table 7: Proposal Selection

Source: GAO.

Type of practice Key practice Rating Summary of evidence

Organizational 

commitments

1. Executives and managers follow 

an established selection process.

Executed. Executives and managers follow established processes for 

selecting IT investments that are embodied in the Service’s 

capital planning and budget formulation processes. 

2. An official is designated to 

manage the proposal selection 

process.

Executed. The Postal Service has formally designated responsibility for 

the annual budget formulation process to the CFO. 

Prerequisite 1. Adequate resources are 

provided for proposal selection 

activities.

Executed. Adequate resources are available to support proposal 

selection activities in the functional units, the Finance 

Department, the CTO organization, and the Establish Team.

Activities 1. The organization uses a 

structured process to develop new 

IT proposals.

Executed. Proposals for new investments are developed by the 

functional units, and the CTO organization has a structured 

process for supporting the development of IT-related 

proposals.

2. Executives analyze and prioritize 

new IT proposals according to 

established selection criteria.

Executed. Vice presidents of the Postal Service’s functional units 

develop and rank proposals for new IT investments, and the 

Establish Team analyzes and prioritizes the proposals 

annually, along with existing IT investments, according to 

established criteria.

3. Executives make funding 

decisions for new IT proposals 

according to an established 

process.

Executed. The Establish Team makes funding decisions for new IT 

proposals according to an established process as part of the 

Postal Service’s budget formulation activities. Team members 

are executive-level officers.
Page 43 GAO-03-3 U.S. Postal Service IT Investment Management

Chapter 3

Postal Service Shows Mixed Progress in 

Managing Its IT Investments as a Portfolio Chapte3r

An IT investment portfolio is an integrated, enterprisewide collection of 

investments that are assessed and managed collectively based on common 

criteria. Managing investments within the context of such a portfolio is a 

conscious, continuous, and proactive approach to expending limited 

resources on an organization’s competing initiatives in light of the relative 

benefits expected from these investments. Taking an enterprisewide 

perspective enables an organization to consider its investments 

comprehensively so that the collective investments optimally address its 

mission, strategic goals, and objectives. This portfolio approach also allows 

an organization to determine priorities and make decisions about which 

projects to fund based on analyses of the relative organizational value and 

risks of all projects, including projects that are proposed, under 

development, and in operation. 

According to ITIM, critical processes performed by organizations at the 

stage three level of maturity include (1) defining portfolio selection criteria, 

(2) engaging in project-level investment analysis, (3) developing a complete 

portfolio based on the investment analysis, and (4) maintaining oversight 

over the investment performance of the portfolio. In addition, 

organizations with more than one board that selects IT projects for funding 

must align the authority of their IT investment boards. Although authority 

alignment is a critical process for the stage three level of maturity, we did 

not assess it in this study, because the Postal Service has a single set of 

organizationwide investment processes that apply to IT investments. Table 

8 shows the purpose of each critical process in stage three.

Table 8: Stage Three—Critical Processes Required for Developing a Complete 

Investment Portfolio

Source: GAO

Critical process Description

Portfolio selection criteria 

definition

To ensure that the organization develops and maintains 

IT portfolio selection criteria that support its mission, 

organizational strategies, and business priorities.

Investment analysis To ensure that all IT investments are consistently 

analyzed and prioritized according to the organization’s 

portfolio selection criteria.

Portfolio development To ensure that an optimal IT investment portfolio with 

manageable risks and returns is selected and funded.

Portfolio performance 

oversight

To ensure that each IT investment portfolio achieves its 

cost, benefit, schedule, and risk (CBSR) expectations.
Chapter 3

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Managing Its IT Investments as a Portfolio

Page 44 GAO-03-3 U.S. Postal Service IT Investment Management

The Postal Service has executed many of the key practices associated with 

stage three critical processes. For example, the organization’s portfolio 

selection criteria are distributed throughout the organization, and they are 

reviewed and modified as appropriate. In addition, executives examine the 

mix of proposals and investments across portfolio categories in making 

funding selections. However, many key practices still need to be executed 

before the Postal Service can effectively manage its IT investments from a 

portfolio perspective. For example, the Postal Service has not defined the 

policies and procedures for any of the stage three critical processes. In 

addition, the Service has not developed portfolio selection criteria that 

adequately address cost, benefit, schedule, and risk. Until the Service fully 

implements critical processes associated with managing investments as a 

complete portfolio, it will not have ready access to the data needed to make 

informed decisions about competing investments.

Table 9 summarizes the status of the Postal Service’s stage three critical 

processes, showing how many associated key practices it has executed.

Table 9: Summary of Results for Stage Three Critical Processes and Key Practices

Source: GAO.

The following discussion provides information on the steps the Postal 

Service has taken toward implementing each of the critical processes.

Critical process

Key practices

executed

Total

required

by critical

process

Percentage of key

practices

executed

Portfolio selection criteria definition 4 6 67%

Investment analysis 2 7 29

Portfolio development 6 9 67

Portfolio performance oversight 6 9 67

Totals 18 31 58%
Chapter 3

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Managing Its IT Investments as a Portfolio

Page 45 GAO-03-3 U.S. Postal Service IT Investment Management

Portfolio Selection 

Criteria Are Defined, 

but Do Not Adequately 

Address All Factors 

To manage IT investments effectively, an organization needs to establish 

rules or “selection criteria” for determining how to allocate scarce funding 

to existing and proposed investments. Thus, the process of developing an 

IT investment portfolio necessarily involves defining appropriate cost, 

benefit, schedule, and risk criteria for evaluating individual proposals for 

investments. To ensure that the organization’s strategic goals, objectives, 

and mission will be satisfied by the investments, the criteria should have an 

enterprisewide focus that reflects these strategic goals. Further, if an 

organization’s mission or business needs and strategies change, criteria for 

selecting investments should be reexamined at the portfolio level. Portfolio 

selection criteria should be disseminated throughout the organization to 

ensure that decisions concerning investments are made in a consistent 

manner and that this critical process is institutionalized. To achieve this 

result, project managers, organizational planners, and other decision 

makers should receive information on the organization’s selection criteria 

and address the criteria in IT proposals and business cases, project 

oversight activities, and strategic and business planning processes. 

Resources required for this critical process typically include the time and 

attention of executives involved in the process, adequate staff, and 

supporting tools.

The Postal Service has executed four of the six key practices for this 

critical process. First, adequate resources are available to conduct 

portfolio selection criteria definition activities. Second, several working 

groups, including the Establish Team, are tasked with creating and 

modifying portfolio selection criteria. Third, portfolio selection criteria in 

the form of performance indicators and targets and program narratives that 

are required for budget formulation are distributed throughout the 

organization. Fourth, the Establish Team performs periodic reviews of the 

portfolio selection criteria and, in doing so, considers the organization’s 

current strategic goals and objectives, changing the criteria from year to 

year as required by current circumstances and priorities.

Nonetheless, the Postal Service has yet to develop written guidance 

establishing procedures to be followed in creating, modifying, and using 

criteria for selecting a portfolio. Postal Service officials use annual 

performance plans, performance indicators and targets, and program 

narrative requirements as portfolio selection criteria. While these criteria 

are based on the Postal Service’s mission, goals, strategies, and priorities, 

they are not adequate because they do not address cost, benefit, schedule, 

and risk considerations in a manner that (1) provides sufficient and 
Chapter 3

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Managing Its IT Investments as a Portfolio

Page 46 GAO-03-3 U.S. Postal Service IT Investment Management

meaningful cost, benefit, schedule, and risk information to effectively 

assess investments and (2) would allow the Service to compare them 

against one another, prioritize them, and select those that best meet its 

needs and priorities. For example, program narratives do not include 

complete cost information. While expected capital costs are reported for 

the next 6 years, expense is only reported through the end of the current 

fiscal year. Further, the criteria do not include a weighting schema or other 

method that would allow the Establish Team to compare the risk-adjusted 

returns of competing investments. The CTO organization uses such criteria 

to prioritize investments and assist in making selection decisions. Without 

portfolio selection criteria that adequately address cost, benefit, schedule, 

and risk considerations, Postal Service officials have less assurance that 

they are selecting the mix of investments that best meets the organization’s 

needs and priorities.

Table 10 shows the rating for each key practice required to implement the 

critical process for defining proposal selection criteria at the stage three 

level of maturity and summarizes the evidence that supports these ratings.

Table 10: Portfolio Selection Criteria Definition

Type of practice Key practice Rating Summary of evidence

Organizational 

commitment

1. The organization has written 

policies and procedures for creating 

and modifying IT portfolio selection 

criteria.

Not executed. The Postal Service does not have written policies 

and procedures for creating and modifying IT 

portfolio selection criteria. 

Prerequisites 1. Adequate resources are provided 

for selection criteria definition 

activities.

Executed. Adequate resources are available to conduct IT 

proposal selection criteria definition activities, 

including the Establish Team, which develops 

portfolio selection criteria each year as part of the 

budget formulation process.

2. A working group is designated to 

be responsible for creating and 

modifying the IT portfolio selection 

criteria.

Executed. The Establish Team is responsible for creating and 

modifying the Postal Service’s IT portfolio selection 

criteria. 
Chapter 3

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Page 47 GAO-03-3 U.S. Postal Service IT Investment Management

Source: GAO.

IT Investments Are Not 

Consistently Analyzed 

and Prioritized within 

the Context of a 

Portfolio

This critical process ensures that all IT investments are consistently 

analyzed and prioritized according to the organization’s portfolio selection 

criteria, which should include cost, benefit, schedule, and risk 

considerations. According to ITIM, effective investment analysis requires, 

among other things, that (1) portfolio selection criteria have been 

developed; (2) cost, benefit, schedule, and risk data are assessed and 

validated for each investment; (3) the investment review board compares 

each investment against the organization’s portfolio selection criteria; and 

(4) the investment review board creates a ranked list of investments using 

the portfolio selection criteria.

The Postal Service has executed two of the key practices in this area. First, 

the Postal Service has adequate resources for analyzing investments, 

including CAPE and other dedicated staff. Second, the Postal Service 

ensures that cost, benefit, schedule, and risk data concerning IT 

investments are validated. The Service does this in two particular 

instances: (1) during the development of the DAR, the document for 

approving capital projects, there is a validation step in which Finance 

Department staff independently verify the accuracy and integrity of the 

data presented and a validation memo is signed by the Controller to 

Activities 1. The enterprisewide IT investment 

board approves the core IT portfolio 

selection criteria, including cost, 

benefit, schedule, and risk criteria, 

based on the organization's mission, 

goals, strategies, and priorities.

Not executed. While the Establish Team approves portfolio 

selection criteria based on the Postal Service’s 

mission, goals, strategies, and priorities, these 

criteria are not adequate because they do not 

address CBSR considerations in a manner that (1) 

provides sufficient and meaningful information to 

effectively assess investments and (2) would allow 

the Postal Service to compare investments against 

one another, prioritize them, and select those that 

best meet the Service’s needs and priorities. 

2. The IT portfolio selection criteria 

are distributed throughout the 

organization.

Executed. The Postal Service distributes portfolio selection 

criteria in the form of strategic and annual 

performance plans, performance indicators and 

targets, and program narrative requirements used 

for budget formulation. 

3. The IT portfolio selection criteria 

are reviewed using cumulative 

experience and event-driven data and 

modified, as appropriate.

Executed. The Establish Team reviews the Postal Service’s IT 

portfolio selection criteria each year. In these 

reviews, the Team considers the organization’s 

strategic goals and objectives, changing the criteria 

that it uses from year to year as required by current 

circumstances and priorities.

(Continued From Previous Page)

Type of practice Key practice Rating Summary of evidence
Chapter 3

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Page 48 GAO-03-3 U.S. Postal Service IT Investment Management

confirm that the data are correct; (2) as part of the annual budget 

formulation process, the data submitted on the various budget proposals 

are reviewed, and thus validated, by various levels of management up to the 

senior vice president of the functional unit sponsoring a proposal. 

Nevertheless, the Postal Service has a number of weaknesses in the way it 

analyzes investments for portfolio management. First, it does not have 

policies and procedures that sufficiently address this critical process. Its 

F-66 manual includes some procedures for analyzing proposed 

investments; however, it does not specify an approach for analyzing 

existing investments to make portfolio selection decisions. Nor does it 

describe a process to establish portfolio selection criteria that adequately 

incorporate cost, benefit, schedule, and risk considerations. In addition, it 

does not address capital projects that have been deployed for more than 18 

months or ongoing infrastructure-type projects.

Second, while investments are analyzed by executives during the approval 

process, through the review of quarterly status reports, and during the 

annual budget formulation activities, these investments are not assessed 

against portfolio selection criteria that adequately consider cost, benefit, 

schedule, and risk factors. The F-66 manual does not explicitly require the 

preparation of a risk assessment when the DAR is developed for a new 

investment. Further, when the Establish Team reviews budget documents 

as part of the annual budget formulation process, these documents do not 

provide sufficient information on cost, benefit, and risk to determine 

whether investments are progressing according to the approved DAR 

parameters. 

Table 11 shows the rating for each key practice required to implement the 

critical process for analyzing investments at the stage three level of 

maturity and summarizes the evidence that supports these ratings. 
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Page 49 GAO-03-3 U.S. Postal Service IT Investment Management

Table 11: Investment Analysis

Source: GAO.

Type of practice Key practice Rating Summary of evidence

Organizational 

commitment

1. The organization has written 

policies and procedures for 

analyzing IT investments.

Not executed. The Postal Service does not have policies and procedures that 

sufficiently address this critical process. The F-66 manual 

includes procedures for analyzing investments, for example, by 

validating DAR information. However, these guidelines do not 

(1) specify how the Establish Team is to analyze investments or 

use investment analysis data to make portfolio selection 

decisions; (2) recommend the use of portfolio selection criteria 

that adequately incorporate CBSR considerations; (3) apply to 

capital projects that have been deployed more than 18 months 

or to ongoing infrastructure-type projects; or (4) provide 

guidance on how projects are to be evaluated against one 

another (e.g., there are no specific provisions for dealing with 

projects that are conflicting, overlapping, or redundant).

Prerequisites 1. Adequate resources are 

provided for investment analysis 

activities.

Executed. The Postal Service has adequate resources for analyzing 

investments, including dedicated staff (e.g., CAPE staff who 

validate DARs) and tools.

2. IT investment portfolio 

selection criteria have been 

developed.

Not executed. While the Postal Service has developed portfolio selection 

criteria, these criteria are not adequate because they do not 

address CBSR considerations in a manner that (1) provides 

sufficient and meaningful information to effectively assess 

investments and (2) would allow the Service to compare 

investments against one another, prioritize them, and select 

those that best meet the Service’s needs and priorities.

3. Information from the IT project 

and system inventory is used by 

the IT investment board.

Not executed. The Postal Service’s investment boards with management 

responsibility do not use information from the IT project and 

system inventory for analyzing investments in the context of 

portfolio management.

Activities 1. Each IT investment board 

ensures that the CBSR data and 

other required data are validated 

for each investment within its 

span of control.

Executed. The Postal Service ensures that CBSR data for IT investments 

are validated through the DAR process and management’s 

review of CBSR data submitted during the budget formulation 

cycle. 

2. Each IT investment board 

assesses each of its IT 

investments with respect to the 

IT portfolio selection criteria.

Not executed. While the Establish Team analyzes all IT investments, it does so 

with portfolio selection criteria that are not adequate because 

they do not address CBSR considerations in a manner that (1) 

provides sufficient and meaningful information to effectively 

assess investments and (2) would allow the Postal Service to 

compare investments against one another, prioritize them, and 

select those that best meet the Service’s needs and priorities. 

3. Each IT investment board 

prioritizes its full portfolio of IT 

investments using the portfolio 

selection criteria.

Not executed. While the Postal Service’s Establish Team evaluates and ranks 

the organization’s full portfolio of existing and new IT 

investments, it does so with criteria that do not adequately 

address cost, benefit, schedule, and risk.
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Page 50 GAO-03-3 U.S. Postal Service IT Investment Management

An IT Investment 

Portfolio Is Developed, 

but Project 

Expectations Are Not 

Routinely Revised 

At the stage three level of maturity, organizations design processes for 

developing an IT portfolio and develop written policies and procedures to 

ensure that projects are selected that best fit their strategic business 

direction, needs, and priorities. Each organization has practical limits on 

funding, the risks it is willing to take, and the length of time for which it will 

incur costs on a given investment before benefits are realized. To address 

these limits, stage three organizations group existing and proposed IT 

investments into predefined logical categories, for example, by cost or by 

type of investment (i.e., facilities or equipment). Once this is accomplished, 

organizations can compare investments and proposals within and across 

the portfolio categories and select the best overall portfolio for funding. 

According to ITIM, the portfolio development process cannot be performed 

well unless certain conditions are first satisfied, including (1) providing 

adequate resources for a portfolio development process; (2) appointing to 

IT investment boards people who exhibit core competencies in developing 

portfolios; (3) analyzing individual IT investments, including validating 

associated cost, benefit, schedule, and risk data; and (4) defining 

investment categories. Organizations should also create written policies 

and procedures for establishing and maintaining the portfolio development 

process. Assuming that this foundation is in place, the IT investment 

boards of stage three organizations assign each investment to a portfolio 

category, examine the mix of existing and proposed investments across 

these categories, and make selections for funding. Each IT investment 

board also establishes annual cost, benefit, schedule, and risk expectations 

for individual IT projects and gathers and validates data on actual 

performance. A repository of information on developing portfolios is 

established, updated, and maintained. Resources required for this critical 

process typically include staff, supporting tools for developing portfolios, 

and managerial time and attention to portfolio development.

The Postal Service has executed six of the nine key practices for this 

critical process by providing adequate resources to implement this critical 

process; assigning competent managers to the board responsible for the 

portfolio development process; developing common portfolio categories; 

assigning IT programs and projects to portfolio categories on the basis of 

established criteria; examining the mix of proposals and investments 

across the common portfolio categories and making selection decisions for 

funding; and establishing, updating, and maintaining repositories of 

portfolio information.
Chapter 3

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Page 51 GAO-03-3 U.S. Postal Service IT Investment Management

Postal Service officials reported that adequate management time and staff 

resources are available for this critical process. In addition, several systems 

are in use that support portfolio development activities, including PTRS, 

BCS, and CPS. Postal Service officials stated that the organization provides 

training in the use of these systems. Moreover, members of the Postal 

Service’s enterprise-level investment boards are senior-level executives 

who have had many years of experience in the organization and in working 

with the IT investment management process. The Postal Service also has 

defined common IT investment portfolio categories for the organization. 

The Postal Service’s IT investments are considered to relate either to 

corporatewide or functional unit activities and are further classified by 

funding type (capital or expense) and investment type (facilities, 

equipment, field, or other), as provided for in the organization’s F-66 

manual and budget instructions. 

Postal Service programs and projects are now being assigned to portfolio 

categories based on the criteria described above. Further, the Establish 

Team examines the organization’s entire portfolio of IT investments 

annually and then selects programs and projects for funding. The Postal 

Service collects and stores information relating to the portfolio 

development process in a variety of forms ranging from IT project and 

systems inventories and finance/budget and corporate planning systems to 

manual backup books maintained by the Finance Department. 

Even though these important steps in stage three portfolio development 

have been taken, some weaknesses remain. The Postal Service has yet to 

develop written policies and procedures for establishing and maintaining 

portfolio information on its IT investments. The Postal Service has defined 

investment categories in its F-66 manual18 but has not developed written 

policies and procedures for establishing and maintaining portfolio 

information on IT investments. Moreover, even though the CTO 

organization monitors data on the performance of IT projects, the Establish 

Team does not perform complete analyses of the performance of individual 

18The Postal Service classifies its investments as either capital or expense. Section 1-4 of the 

F-66 Manual states that capital investments are investments in real property or personal 

property that are charged to an asset account. Examples of capital investments include real 

property, leasehold improvements, and personal property investments (equipment or 

vehicles). Expense investments include lease agreements, research and development 

projects, new products and services, and major operating expense investments. Expense 

investments are accounted for as expenses on the balance sheet. Routine operating 

expenses associated with the day-to-day business of the organization are not considered to 

be investments.
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Page 52 GAO-03-3 U.S. Postal Service IT Investment Management

investments or establish cost, benefit, schedule, and risk expectations for 

each investment annually.

While the Establish Team reviews investments each year from a strategic 

planning and funding perspective, neither the analyses it performs nor the 

Investment Highlights reports on the projects provided to the Board of 

Governors adequately consider actual benefit and risk or contain complete 

information on cost. For example, the business case for the Surface-Air 

Management System includes information on over a dozen different types 

of qualitative benefits expected to be obtained by investing in that project.

However, Investment Highlights reports provided to the Board of 

Governors only include information on the number of installations 

completed to date. In addition, although information on projects’ capital 

costs is included in Investment Highlights, information on operating 

expenses is not. As a result, information on these aspects of project 

performance is not routinely provided to the Board of Governors. Without 

complete cost, benefit, schedule, and risk data, Postal Service executives 

do not have the information needed to analyze and compare all investments 

and select those that best fit with the strategic business direction, needs, 

and priorities, of the organization. 

Table 12 shows the rating for each key practice required to implement the 

critical process for portfolio development at the stage three level of 

maturity and summarizes the evidence that supports these ratings.

Table 12: Portfolio Development

Type of practice Key practice Rating Summary of evidence

Organizational 

commitment

1. The organization has written 

policies and procedures for 

establishing and maintaining the 

portfolio development process.

Not executed. The Postal Service has not developed written policies and 

procedures for establishing and maintaining an IT portfolio 

development process. 

Prerequisites 1. Adequate resources are provided 

for executing the portfolio development 

process.

Executed. Adequate management time, staff resources, and training 

are available to perform this critical process, and various 

automated systems capture information on the Postal 

Service’s IT investment portfolio. 

2. Board members exhibit core 

competencies in portfolio 

development.

Executed. Members of the Postal Service’s Capital Investment 

Committee and Establish Team are senior-level executives 

who have extensive experience with the organization’s 

operations and the IT investment management process.
Chapter 3

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Page 53 GAO-03-3 U.S. Postal Service IT Investment Management

Source: GAO.

Portfolio Performance 

Oversight Is 

Performed, but without 

Comprehensive 

Guidance 

The purpose of this critical process is to ensure that each IT investment 

achieves its cost, benefit, schedule, and risk expectations. It builds on the 

critical process for IT project oversight at stage two by adding elements of 

benefit measurement and risk management to an organization’s investment 

control capability. Executive-level oversight of project-level risk and 

benefit management activities provides the organization with increased 

assurance that each investment will achieve the desired cost, benefit, 

schedule, and risk expectations.

3. Individual IT investments have been 

analyzed and their cost, benefit, 

schedule, and risk data have been 

validated. 

Not executed. The Postal Service ensures that IT investments’ CBSR 

data are validated. However, the Establish Team analyzes 

IT investments using portfolio selection criteria that do not 

adequately address cost, benefit, schedule, and risk.

4. The organization has defined its 

common portfolio categories.

Executed. The Postal Service investment categories in its F-66 

manual are based on type of expenditure (capital or 

expense), type of investment (facilities, equipment, field, 

other), and expected total cost (under $5 million, $5 million 

to under $7.5 million, $7.5 million to under $10 million, and 

$10 million or more). 

Activities 1. Each IT investment board assigns 

investment proposals to a portfolio 

category.

Executed. The Postal Service assigns IT programs and projects to 

portfolio categories on the basis of established criteria 

contained in its F-66 manual.

2. Each IT investment board examines 

the mix of proposals and investments 

across the common portfolio 

categories and makes selections for 

funding.

Executed. The Establish Team examines portfolios of investments 

categorized based on total expected capital costs and 

makes selections for funding.

3. Each IT investment board approves 

or modifies the annual CBSR 

expectations for each of its selected IT 

investments.

Not executed. Although, according to Finance Department officials, 

management may approve or modify project expectations 

at any time, there is no process for routinely doing so. The 

Establish Team does not routinely approve or modify cost, 

benefit, schedule and risk expectations for each existing 

and new IT investment on an annual basis. However, the 

CTO Investment Review Board does evaluate CBSR data 

for all projects with IT components. 

4. A repository of portfolio 

development information is 

established, updated, and maintained.

Executed. The Postal Service collects and stores information relating 

to the portfolio development process in multiple repositories 

ranging from IT project and systems inventories and 

financial and corporate planning systems to project 

managers’ records and manual backup books maintained 

by the Finance Department for Board of Governors 

programs and projects. 

(Continued From Previous Page)

Type of practice Key practice Rating Summary of evidence
Chapter 3

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Page 54 GAO-03-3 U.S. Postal Service IT Investment Management

According to ITIM, effective oversight of portfolio performance requires, 

among other things, that the investment board (1) has access to up-to-date 

cost, benefit, schedule, and risk data; (2) monitors the performance of each 

investment in its portfolio by comparing actual project-level cost, benefit, 

schedule, and risk data to the predefined expectations for the project; and 

(3) corrects poorly performing projects. 

The Postal Service is executing six of the nine key practices for this critical 

process by providing adequate resources for monitoring and controlling IT 

project performance and giving investment boards access to data on actual 

and expected cost, benefit, schedule, and risk that are maintained in the 

organization’s IT project and system inventory. In addition, the CTO 

Investment Review Board provides oversight for all IT projects by 

monitoring these data and providing feedback on performance to 

sponsoring organizations. These oversight activities include working with 

IT project management teams to identify and address any development and 

deployment issues that may arise.

Despite these strengths, however, the Postal Service has yet to develop 

policies and procedures that address performance oversight from a 

portfolio perspective. Moreover, while expectations are established in 

DARs or business cases that include cost, benefit, schedule, and risk, and 

the CTO organization monitors actual performance results, the Postal 

Service has not established a mechanism for revising expected benefit and 

risk expectations after its boards approve the investments or for notifying 

the Establish Team when an investment has not met cost, benefit, schedule, 

and risk expectations. Until the Postal Service executes all key practices 

associated with this critical process, senior executives will be less likely to 

determine whether the investments they have selected are delivering 

mission value at the expected cost and risk.

Table 13 shows the rating for each key practice required to implement the 

critical process for portfolio performance oversight at the stage three level 

of maturity and summarizes the evidence that supports these ratings.
Chapter 3

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Page 55 GAO-03-3 U.S. Postal Service IT Investment Management

Table 13: Portfolio Performance Oversight

Source: GAO.

Type of practice Key practice Rating Summary of evidence

Organizational 

commitment

1. The organization has written 

policies and procedures for 

monitoring and controlling portfolio 

performance.

Not executed. The Postal Service does not have policies and procedures 

that address portfolio performance oversight.

Prerequisites 1. Adequate resources are provided 

for monitoring and controlling the 

portfolio’s performance.

Executed. The Postal Service has adequate resources for monitoring 

and controlling the portfolio’s performance. They include 

the CTO Investment Review Board, portfolio managers, 

and PTRS.

2. Annual CBSR expectations are 

agreed upon for each IT investment.

Not executed. Cost, benefit, schedule, and risk expectations are 

established in projects’ DARs or business cases. While 

benefit and risk expectations may be revised through the 

annual budget process or a DAR modification, they are not 

reviewed and revised on an annual basis.

3. The IT investment board has 

access to up-to-date actual and 

expected CBSR data in a repository.

Executed. The Postal Service has systems and reports that capture 

up-to-date actual and expected cost, benefit, schedule, and 

risk. They include PTRS, used by the CTO Investment 

Review Board to monitor program performance; the 

program narratives developed for budget formulation 

purposes; and the DARs that define CBSR expectations.

Activities 1. Each IT investment board 

monitors the performance of each 

investment in its portfolio by 

comparing actual CBSR data to 

expectations.

Executed. The CTO Investment Review Board monitors each project’s 

performance by regularly comparing actual CBSR data to 

expectations. The Establish Team also does this through 

the program review it performs as part of the budget 

formulation activities.

2. Using established criteria, the IT 

investment board identifies its 

investments that have not met 

predetermined CBSR performance 

expectations.

Not executed. Using established criteria, the CTO Investment Review 

Board identifies investments that have not met CBSR 

criteria. However, the Postal Service does not have a 

defined process for notifying the Establish Team that an 

investment is not on track.

3. The IT investment board and the 

project manager determine the root 

cause of the poor performance.

Executed. The CTO Investment Review Board and project manager 

determine the root cause of poor project performance 

during project reviews.

4. The IT investment board and the 

project manager develop an action 

plan designed to remedy the 

identified cause(s) of poor 

performance.

Executed. The CTO Investment Review Board and project manager 

develop an action plan designed to remedy the identified 

cause(s) of poor performance.

5. Corrective actions are initiated 

and outcomes are tracked.

Executed. The CTO Investment Review Board tracks corrective 

actions until they are completed.
Page 56 GAO-03-3 U.S. Postal Service IT Investment Management

Chapter 4

Postal Service Has Yet to Implement 

Processes to Better Meet Strategic Goals Chapte4r

Organizations that achieve the stage four level of maturity evaluate their IT 

investment processes and portfolios to identify opportunities for 

improvement. At the same time, these organizations are able to maintain 

the mature control and selection processes that are characteristic of stage 

three in the ITIM model. A key tool for accomplishing this critical process 

is the post-implementation review, in which outcomes of individual IT 

investments are compared to the organization’s plans and expectations. 

This review typically results in identifying lessons learned from the 

investment experience that are used by the organization to improve its 

understanding of the key variables in the investment’s business case. 

Analyzing a number of post-implementation reviews can also provide 

insights into the organization’s overall IT investment management process. 

This analysis is facilitated by classifying individual investments into logical 

categories and using the lessons learned to fine-tune associated processes, 

as well as aspects of the portfolio. In addition, at stage four maturity, 

organizations are capable of systematically planning for and implementing 

decisions to discontinue or deselect obsolete, high-cost, and low-value IT 

investments and planning for successor investments that better support 

strategic goals and business needs.

Organizations acquire stage five capabilities when they create 

opportunities to shape strategic outcomes by learning from other 

organizations and continuously improving the manner in which they use IT 

to support and improve business outcomes. Thus, organizations at the 

stage five level of maturity benchmark their IT investment processes 

relative to other best-in-class organizations and conduct proactive 

monitoring for breakthrough information technologies that will allow them 

to significantly improve business performance. Table 14 shows the purpose 

of each critical process in stages four and five.
Chapter 4

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Processes to Better Meet Strategic Goals

Page 57 GAO-03-3 U.S. Postal Service IT Investment Management

Table 14: Stages Four and Five—Critical Processes Required for Improving the 

Investment Process and Leveraging IT for Strategic Outcomes

Source: GAO.

The Postal Service is executing five of the thirty-four key practices 

associated with the five critical processes in stages four and five. For 

example, it has policies and guidance for conducting post-implementation 

reviews and provides training to individuals involved in these activities. 

The Postal Service also provides resources for identifying opportunities for 

IT-driven strategic business change. However, it does not regularly capture 

lessons learned from post-implementation reviews, the performance of its 

portfolio, or benchmarking in order to improve its investment processes. In 

addition, it does not actively manage the succession of its IT systems or 

investments. Until it implements stage four and five critical processes, the 

Postal Service will not be positioned to effectively improve its IT 

investment management processes and successfully leverage IT to improve 

business outcomes.

Table 15 summarizes the status of the Postal Service’s critical processes for 

stages four and five and shows how many associated key practices it has 

executed. 

Critical process Description

Stage 4—Improving the Investment Process

Post-implementation 

reviews and feedback

To compare outcomes of recently implemented investments 

to the expectations for them and develop a set of lessons 

learned from these reviews.

Portfolio performance 

evaluation and 

improvement

To assess and improve overall IT investment portfolio 

performance and the investment management process.

Systems and technology 

succession management

To ensure that IT investments in operation are periodically 

evaluated and determine whether they should be retained, 

modified, replaced, or otherwise disposed.

Stage 5—Leveraging Information Technology for Strategic Outcomes

Investment process 

benchmarking

To identify and implement measurable improvements in the 

IT investment management processes so that the processes 

meet or exceed those used by best-in-class organizations.

IT-driven strategic 

business change

To dramatically improve business outcomes by strategically 

employing IT investments.
Chapter 4

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Processes to Better Meet Strategic Goals

Page 58 GAO-03-3 U.S. Postal Service IT Investment Management

Table 15: Summary of Results for Stages Four and Five Critical Processes and Key 

Practices

Source: GAO.

The following discussion provides information on steps the Postal Service 

has taken to implement each of the critical processes.

Policies and 

Procedures Are 

Defined, but PostImplementation 

Review Process Is Not 

Institutionalized 

Post-implementation reviews are performed (1) to examine differences 

between estimated and actual investment costs and benefits and possible 

ramifications for unplanned funding needs in the future and (2) to extract 

lessons learned about the investment selection and control processes that 

can be used as the basis for management improvements. Investments that 

have completed development and those that were terminated before 

completion should be reviewed promptly to identify potential management 

and process improvements. According to ITIM, this critical process 

involves identifying the projects to be reviewed; initiating reviews and 

developing policies and procedures for conducting the reviews; and 

ensuring that quantitative and qualitative data are collected, evaluated for 

reliability, and analyzed during the course of the reviews.

The Postal Service has executed three of the six key practices required to 

implement the critical process for post-implementation reviews. First, the 

CTO organization and Finance Department have each developed policies 

and procedures for performing post-implementation reviews. These 

Critical process

Key

practices

executed

Total required by

critical process

Percentage of

key practices

executed

Stage 4—Improving the Investment Process

Post-implementation reviews & 

feedback

3 6 50%

Portfolio performance evaluation & 

improvement

0 60

Systems & technology succession 

management

0 90

Totals 3 21 14%

Stage 5—Leveraging Information Technology for Strategic Outcomes

Investment process benchmarking 0 7 0

IT-driven strategic business change 2 6 33

Totals 2 13 15%
Chapter 4

Postal Service Has Yet to Implement 

Processes to Better Meet Strategic Goals

Page 59 GAO-03-3 U.S. Postal Service IT Investment Management

include the CTO organization’s Program Management Process Guidelines 

and the Finance Department’s National Cost Study Process. Second, 

according to Postal Service officials, the Service has adequate resources to 

perform review activities. Third, Postal Service staff are trained in 

conducting post-implementation reviews. 

The Postal Service, however, has several weaknesses in this critical 

process. First, no investment board has been assigned responsibility for 

(1) identifying projects for which post-implementation reviews are to be 

conducted and (2) ensuring that post-implementation reviews are initiated. 

Second, the Postal Service has no institutionalized process for routinely 

(1) identifying projects for which post-implementation reviews are to be 

conducted, (2) collecting quantitative and qualitative data while performing 

post-implementation reviews, and (3) developing lessons learned and 

improvement recommendations about the investment process and 

capturing them in a written product or knowledge base. This is evidenced 

by the fact that, while the Finance Department’s Program Performance 

Group is responsible for conducting post-implementation cost studies, only 

three of them have been performed since 1990. Until the Postal Service 

implements an institutionalized process for routinely performing postimplementation reviews, senior executives will lack key information 

needed to improve the performance of the IT investment portfolio as well 

as the investment management process.

Table 16 shows the rating for each key practice required to implement the 

critical process for post-implementation reviews at the stage four level of 

maturity and summarizes the evidence that supports these ratings.
Chapter 4

Postal Service Has Yet to Implement 

Processes to Better Meet Strategic Goals

Page 60 GAO-03-3 U.S. Postal Service IT Investment Management

Table 16: Post-Implementation Reviews and Feedback

Source: GAO.

IT Investments Are Not 

Evaluated from the 

Perspective of 

Portfolio Performance 

Stage four evaluations of portfolio performance enable organizations to 

determine what contribution their collected pools of IT investments are 

making to mission goals and needs. Evaluations of this sort are similar to 

post-implementation reviews involving individual projects, but different in 

that they apply to entire IT investment portfolios. This critical process 

seeks to determine how well IT investments are helping to achieve the 

strategic needs of the enterprise, satisfying the needs of individual units 

and users, and improving business performance through IT. Performance 

Type of practice Key practice Rating Summary of evidence

Organizational 

commitment

1. The organization has written 

policies and procedures for 

conducting post-implementation 

reviews.

Executed. The CTO organization and Finance Department have each 

developed policies and procedures for performing postimplementation reviews. The Postal Service has developed policies 

and procedures for performing post-implementation reviews. These 

include the Software Process Standards and Procedures, Integrated 

Solutions Methodology (ISM), Project Management Process 

Guidelines, and the National Cost Study Process. 

Prerequisites 1. Adequate resources are 

provided for conducting postimplementation reviews.

Executed. Postal Service officials stated that adequate resources are available 

for conducting post-implementation reviews.

2. Each IT investment board 

ensures that individuals 

conducting post-implementation 

reviews are trained.

Executed. Postal Service staff have received training in conducting postimplementation reviews. 

Activities 1. An IT investment board 

identifies the projects for which a 

post-implementation review will 

be conducted and a postimplementation review is initiated 

for each designated investment.

Not 

executed.

The Postal Service has not assigned any investment board with 

responsibility for identifying the projects for which a postimplementation review will be conducted and ensuring that postimplementation reviews are initiated. 

2. Quantitative and qualitative 

investment data are collected, 

evaluated for reliability, and 

analyzed during the postimplementation reviews.

Not 

executed.

The Postal Service does not have an institutionalized process for 

routinely performing post-implementation reviews. Only three postimplementation cost-studies have been performed since 1990.

3. Lessons learned and 

improvement recommendations 

about the investment process 

and the individual investment are 

developed, captured in a written 

product or knowledge base, and 

distributed to decision makers.

Not 

executed.

The Postal Service does not have an institutionalized process to 

develop and capture lessons learned and improvement 

recommendations about the investment process and individual 

investments. 
Chapter 4

Postal Service Has Yet to Implement 

Processes to Better Meet Strategic Goals

Page 61 GAO-03-3 U.S. Postal Service IT Investment Management

information for an organization’s entire portfolio of investments has to be 

compiled and analyzed and trends examined. Developing baseline 

performance data is critical to making this a meaningful exercise. 

According to ITIM, the process of addressing problems and opportunities 

for improving the investment process and the investment portfolio usually 

involves developing written policies and procedures for the investment 

management process, creating recommendations for the IT investment 

board, documenting the decision criteria used to measure portfolio 

performance, deciding whether or not to implement each recommendation, 

and tracking the progress made. Resources required for this critical 

process typically include staff support, methods and tools to aid the teams 

conducting post-implementation reviews, and current and historical 

portfolio data.

To advance to the stage four level of maturity, an organization must first 

ensure that all of the prerequisites, commitments, and activities that are 

characteristic of levels two and three have been put into place. The next 

step is to develop written policies and procedures for evaluating and 

improving its IT investment portfolio that include defining requirements for 

measuring performance data. Cost, benefit, schedule, and risk must all be 

fully considered to enable an organization to construct a picture of the 

overall performance of its IT investment portfolio. 

The Postal Service is not executing any of the six key practices for this 

critical process. First, while the Establish Team reviews existing and 

proposed IT investments each year as a part of the organization’s budget 

formulation process, no evaluations are being done that are designed to 

identify opportunities for improving portfolio performance. Also lacking 

are written policies and procedures that define the organization’s key 

measures and the methods used to assess portfolio performance, 

evaluation methods, reporting requirements, and other applicable policies 

and procedures. Because the Postal Service has not collected data for this 

critical process, including baseline performance information on its IT 

portfolio, it is more difficult to perform evaluations that could result in 

recommendations for improving its process for selecting a portfolio.

Table 17 shows the rating for each key practice required to implement the 

critical process for evaluating and improving the performance of the 

portfolio at the stage four level of maturity and summarizes the evidence 

that supports these ratings.
Chapter 4

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Processes to Better Meet Strategic Goals

Page 62 GAO-03-3 U.S. Postal Service IT Investment Management

Table 17: Portfolio Performance Evaluation and Improvement

Source: GAO.

Process for Managing 

Succession of Systems 

and Technology 

Is Not Established

Managing the succession of systems and technology entails periodically 

evaluating IT investments to determine whether they should be retained, 

modified, replaced, or otherwise disposed of. According to ITIM, system 

and technology succession management includes (1) defining policies and 

procedures for managing the IT succession process, (2) assigning 

responsibility for the succession management process, (3) developing 

criteria for identifying IT investments that may meet succession status, and 

(4) periodically analyzing IT investments to determine whether they are 

ready for succession. This critical process enables the organization to 

recognize low-value or high-cost IT investments and augments the routine 

replacement of systems at the end of their useful lives. This critical process 

supports the development of a forward-looking, solution-oriented view of 

Type of practice Key practice Rating Summary of evidence

Organizational 

commitment

1. The organization has written 

policies and procedures for 

evaluating and improving the 

performance of its portfolio(s).

Not executed. The Postal Service has not developed enterprise-level 

written policies and procedures for evaluating and 

improving the performance of its IT investment portfolios. 

Prerequisites 1. Adequate resources are provided 

for conducting the portfolio 

performance evaluation and 

improvement process.

Not executed. The Postal Service does not perform enterprise-level

evaluations of portfolio performance. 

2. Board members who are 

responsible for evaluating and 

improving the investment processes 

and investment portfolio(s) exhibit 

core competencies in portfolio 

performance evaluation and 

improvement.

Not executed. The Finance Department does not perform enterprise-level

activities to evaluate and improve portfolio performance.

Activities 1. Comprehensive IT portfolio 

performance measurement data are 

defined and collected using agreed 

upon methods.

Not executed. The Postal Service has not developed comprehensive 

definitions of measurement data for IT portfolio 

performance or methods for collecting data of this sort. 

Moreover, data are not collected on actual qualitative 

benefits, and the risk data captured in Postal Service 

information repositories are incomplete.

2. Aggregate performance data and 

trends are analyzed.

Not executed. The Postal Service does not collect the aggregate IT 

portfolio performance data required to perform analyses of 

this sort. 

3. Investment process and portfolio 

improvement recommendations are 

developed and implemented.

Not executed. The Postal Service has not performed the analyses 

required to serve as the basis for improving the investment 

and portfolio selection processes. 
Chapter 4

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Processes to Better Meet Strategic Goals

Page 63 GAO-03-3 U.S. Postal Service IT Investment Management

IT investments that anticipates future resource requirements and allows 

the organization to plan appropriately.

The Postal Service has not performed any of the nine key practices 

required to implement this critical process. For example, while the Postal 

Service’s project management guidelines define procedures for retiring 

investments, they do not describe how to review systems regularly to 

identify candidates for retirement. According to officials from the CTO 

organization, decisions on succession management are usually made 

between business unit managers and CTO office staff (e.g., portfolio 

managers), but no individual or group has been assigned responsibility for 

managing the succession process from an enterprise perspective, which 

would allow the Postal Service to better anticipate future resource 

requirements. Finally, the Postal Service has neither defined the criteria for 

identifying investments that may meet succession status nor taken steps to 

regularly analyze IT investments for possible succession.

According to CTO organization officials, the Postal Service has retired or 

replaced roughly 250 systems since 1998. However, this was not done 

within the structure of an institutionalized succession management 

process. Postal Service officials have stated that IT investments are 

reviewed, for example, during the annual budget formulation process to 

analyze them for possible succession. However, without an 

institutionalized process for succession management, the Postal Service 

may not be able to identify those IT investments that are eligible for 

succession in enough time to minimize the effect of the transition on their 

successors.

Table 18 shows the rating for each key practice required to implement the 

critical process for managing the succession of systems and technology at 

the stage four level of maturity and summarizes the evidence that supports 

these ratings. 
Chapter 4

Postal Service Has Yet to Implement 

Processes to Better Meet Strategic Goals

Page 64 GAO-03-3 U.S. Postal Service IT Investment Management

Table 18: Systems and Technology Succession Management

Source: GAO.

Type of practice Key practice Rating Summary of evidence

Organizational 

commitments

1. The organization has written 

policies and procedures for 

managing the IT succession 

process.

Not executed. While the Postal Service has procedures in place for system 

retirements, it lacks written policies and procedures for 

managing the succession of the organization’s IT 

investments. 

2. An official is designated to 

manage the IT succession 

process.

Not executed. According to officials in the Offices of the CFO and CTO, the 

Postal Service has not designated responsibility for managing 

the IT succession process.

Prerequisites 1. Adequate resources are 

provided for conducting IT 

succession activities.

Not executed. The Postal Service has no formal process for conducting IT 

succession activities. 

2. Investment board members 

exhibit core competencies in IT 

succession decisional activities.

Not executed. According to Postal Service officials, decisions on the 

management of systems and technology succession are 

made between business unit managers and CTO 

organization staff, not by members of an investment board.

3. Information from the IT project 

and system inventory is used by 

the IT investment board.

Not executed. The Postal Service’s enterprise-level investment boards do 

not use information from the IT project and system inventory 

for succession management.

Activities 1. The IT investment board 

develops criteria for identifying IT 

investments that may meet 

succession status.

Not executed. The Postal Service does not have criteria for identifying IT 

investments that may meet succession status.

2. IT investments are periodically 

analyzed for succession and 

appropriate investments are 

identified as succession 

candidates.

Not executed. The Postal Service does not have a process in place for 

periodically analyzing IT investments to see if they are eligible 

for succession. CTO organization officials have told us that 

the Service instead uses the annual budgeting process and 

critical events such as the recent Year 2000 computing 

challenge as opportunities to analyze investments for 

succession.

3. The interdependency of each 

investment with other 

investments in the IT portfolio is 

analyzed.

Not executed. While the Establish Team performs trade-off analyses as a 

part of the organization’s annual budget formulation process, 

including some consideration of the interdependencies of its 

IT programs, projects, and systems, the interdependency of 

each investment with other investments in the IT portfolio is 

not analyzed in the context of systems and technology 

succession management. 

4. The IT investment board 

makes a succession decision for 

each candidate IT investment.

Not executed. The Postal Service does not have a formal process for 

identifying candidates for succession. In addition, no 

investment board has responsibility for making decisions on 

succession management.
Chapter 4

Postal Service Has Yet to Implement 

Processes to Better Meet Strategic Goals

Page 65 GAO-03-3 U.S. Postal Service IT Investment Management

Activities for 

Benchmarking the 

Investment Process 

Are Not 

Institutionalized 

In stages two through four, organizations ensure that sound investments 

are selected, controlled, and evaluated within the context of the IT 

investment management process and the enterprisewide portfolio. In the 

stage five level of maturity, a shift in orientation occurs as organizations 

evolve toward using information on leading technologies to identify 

opportunities for business change and to implement changes in their 

overall business process. Benchmarking the investment process allows 

organizations to identify opportunities for improvement and to implement 

measurable improvements in their IT investment management processes so 

that these processes meet or exceed those used by best-in-class 

organizations. Improvements can include using innovative investment 

oversight tools and techniques or improving the feedback mechanisms for 

lessons learned. According to ITIM, investment process benchmarking 

includes (1) defining policies and procedures for using benchmarking to 

improve the IT investment management process, (2) collecting baseline 

data on the organization’s current IT investment management process, 

(3) identifying and benchmarking external comparable best-in-class 

processes for IT investment management, and (4) improving the 

organization’s investment management processes. 

The Postal Service has not fully executed any of the seven key practices 

required to implement this critical process. While there have been some 

efforts to identify best practices from best-in-class organizations and 

incorporate these practices into the Postal Service’s IT investment 

management processes (such as the CTO organization’s use of lessons 

learned in benchmarking to develop the BCS), the Postal Service has 

not defined policies and procedures for improving the IT investment 

management process using benchmarking. It also does not have any 

institutionalized processes to routinely (1) collect baseline data on the 

organization’s current IT investment management process, (2) identify and 

benchmark external best-in-class processes for IT investment management 

in comparable organizations, or (3) actually improve the organization’s 

investment management processes. Without these processes, the Postal 

Service is less likely to learn from best-in-class organizations, which will 

hinder any concerted effort to improve its IT investment management 

processes. 

Table 19 shows the rating for each key practice required to implement the 

critical process for investment process benchmarking at the stage five level 

of maturity and summarizes the evidence that supports these ratings.
Chapter 4

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Processes to Better Meet Strategic Goals

Page 66 GAO-03-3 U.S. Postal Service IT Investment Management

Table 19: Investment Process Benchmarking

Source: GAO.

Potential Impacts of 

Leading Technologies 

Are Not Routinely 

Considered in Strategic 

Planning Efforts

Information technologies can provide opportunities for an organization to 

move dramatically in new directions to meet its goals. Thus, once an 

organization finds it can competently manage its enterprisewide portfolio 

of investments, it should actively seek out opportunities to use alternative 

technologies. 

According to ITIM, stage five organizations provide adequate resources for 

conducting IT-driven activities that can result in strategic business change. 

These may include developing an advanced IT laboratory, test center, or 

Type of practice Key practice Rating Summary of evidence

Organizational 

commitments

1. The organization has written policies and 

procedures for improving its IT investment 

management process using benchmarking.

Not executed. The Postal Service has not developed written 

policies and procedures for improving its IT 

investment process through the use of 

benchmarking techniques. 

2. A senior official is designated to manage 

the benchmarking activities.

Not executed. The Postal Service has not designated a senior 

official to manage benchmarking activities. 

Prerequisites 1. Adequate resources are provided for 

conducting process benchmarking activities.

Not executed. Investment process benchmarking is not an 

institutionalized process at the Postal Service.

2. Organizational managers and staff with 

responsibilities in this area are trained in 

process benchmarking techniques or are 

experienced in using these techniques.

Not executed. The Postal Service has not designated 

responsibility for performing benchmarking 

activities and has not provided staff with training or 

experience in this process.

Activities 1. Baseline data are collected for the 

organization's IT investment management 

processes.

Not executed. The Postal Service has not taken steps to 

measure components of its investment 

management processes to provide a baseline 

against which expected and actual process 

changes may be measured.

2. External comparable best-in-class IT 

investment management processes are 

identified and benchmarked.

Not executed. External comparable best-in-class processes for 

IT investment management were identified and 

benchmarked for some processes, including the 

CTO organization’s business case development 

process. However, the Postal Service does not 

have an institutionalized process for benchmarking 

the investment management process.

3. Improvements are made to the 

organization's investment management 

processes.

Not executed. Improvements were made to some processes as a 

result of benchmarking (e.g., the CTO 

organization’s investment management process). 

However, the Postal Service does not have an 

institutionalized process for benchmarking the 

investment management process.
Chapter 4

Postal Service Has Yet to Implement 

Processes to Better Meet Strategic Goals

Page 67 GAO-03-3 U.S. Postal Service IT Investment Management

library; conducting technical research; employing internal staff and 

external experts or reviewers; and obtaining supporting tools. Stage five 

organizations also develop applicable written policies and procedures and 

designate an official to oversee their implementation. The central focus of 

these activities is to follow technological events and to identify and 

evaluate technologies that appear to offer strategic business-changing 

capabilities. Once a conclusion has been reached that specific technology 

offers the organization significant opportunities, senior managers plan for 

and implement changes to the organization’s business processes. 

Organizations at a stage five level of maturity may create an advanced 

technology group, a cross-departmental group of experts, or technology 

centers of excellence. Finally, to strengthen management on these types of 

activities, mature organizations designate responsibility for this key 

practice to a single senior-level manager.

The Postal Service has executed two of the six key practices required to 

implement this critical process by designating responsibility to specific 

organizational units to support activities aimed at IT-driven strategic 

business change and by providing a range of related resources. However, 

steps have yet to be taken to execute the remaining key practices, including 

creating and maintaining a knowledge base of state-of-the-technology IT 

products and processes; actively identifying technologies with businesschanging capabilities; and planning and implementing strategic changes to 

business processes on the basis of the capabilities of these technologies. 

The Postal Service has assigned responsibilities to several units that could 

leverage IT to implement strategic business change, including its 

Transformation Plan Office, Office for Strategic Planning, and the CTO 

organization. Also, within the CTO organization, the Information 

Technology unit has established the positions of Enterprise Architect and 

Manager of Technology Standards. To ensure standardization, the Postal 

Service has also developed the IT Infrastructure Toolkit process and 

established the Enterprise Architecture Councils and the Management 

Steering Committee.

The Postal Service is also providing a range of resources that could be used 

to support the critical process of IT-driven strategic business change. The 

Service is funding a testing laboratory and has established Integrated 

Business Solutions Systems Centers and developed an IT Toolkit system 

and associated processes. The IT Toolkit system serves as a repository of 

information on technologies and application systems that have been 

approved for use within the Postal Service.
Chapter 4

Postal Service Has Yet to Implement 

Processes to Better Meet Strategic Goals

Page 68 GAO-03-3 U.S. Postal Service IT Investment Management

In addition, the Postal Service’s CTO organization is taking several steps to 

initiate changes to the business process based on currently available stateof-the-practice IT approaches. First, the CTO has developed a plan for a 

corporate database called the Corporate Data Mart, which could serve as a 

repository of data from 35 separate Postal Service systems. According to 

Postal Service officials, the CTO organization is working with each 

functional unit to determine which legacy systems will transition to the 

data mart and plans to incorporate future systems in the data mart. This 

transition may eliminate costly legacy systems or avoid the investment cost 

to replace them. The CTO organization is sponsoring the Advanced 

Computing Environment initiative to transition to a less costly distributed 

computing environment. According to officials, under this approach, 

activities will be standardized, centralized, and reengineered such that the 

costs per Postal Service user will be reduced. 

These accomplishments can be helpful to the Postal Service, particularly in 

light of its financial difficulties and the need to identify new, more costeffective ways of accomplishing its mission. By continuing to foster a more 

coordinated approach to using IT investments to achieve its business goals, 

using resources from across the organization, and disseminating 

information that is gathered more broadly, the Postal Service can more 

effectively capitalize on opportunities uncovered by efforts already 

underway.

Table 20 shows the rating for each key practice required to implement the 

critical process for IT-driven strategic business change at the stage five 

level of maturity and summarizes the evidence that supports these ratings.
Chapter 4

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Processes to Better Meet Strategic Goals

Page 69 GAO-03-3 U.S. Postal Service IT Investment Management

Table 20: IT-Driven Strategic Business Change

Source: GAO.

Type of practice Key practice Rating Summary of evidence

Organizational 

commitments

1. The organization has written 

policies and procedures for 

conducting IT-driven strategic 

business change activities.

Not executed. The Postal Service does not have written policies and 

procedures for conducting IT-driven strategic business 

change activities.

2. An official is designated to 

manage the activities within this 

critical process.

Executed. Responsibility for ensuring IT-driven strategic business 

change is distributed across several Postal Service units, 

including the Transformation Plan Office, Office for Strategic 

Planning, and the CTO organization.

Prerequisite 1. Adequate resources are 

provided for conducting IT-driven 

strategic business change 

activities.

Executed. The Postal Service is providing a range of resources related 

to identifying opportunities for IT-driven strategic business 

change. These include funding a testing laboratory, 

acquiring expertise from consulting firms, establishing an 

Enterprise Architect and Integrated Business Solutions 

Systems Centers, and developing an Information 

Technology Toolkit system. 

Activities 1. The organization creates and 

maintains a knowledge base of 

state-of-the-technology IT products 

and processes.

Not executed. The Postal Service has not created a knowledge base of 

state-of-the-technology IT products and processes. 

However, the CTO organization has created a database of 

approved IT products called the IT Toolkit.

2. Information technologies with 

strategic business-changing 

capabilities are identified and 

evaluated.

Not executed. The Postal Service does not have an institutionalized 

process for conducting studies of emerging trends, events, 

and technologies with the potential to strategically change 

its business processes. 

3. Strategic changes to the 

business processes are planned 

and implemented based on the 

capabilities of identified information 

technologies.

Not executed. The Postal Service does not have a process in place to 

implement business processes based on the capabilities of 

leading-edge information technologies it has identified. 

However, decisions on changes to business processes are 

currently being made in order to incorporate state-of-thepractice IT approaches and technologies such as desktop 

outsourcing, data warehousing, and data center 

consolidation. 
Page 70 GAO-03-3 U.S. Postal Service IT Investment Management

Chapter 5

Conclusions, Recommendations, and Agency 

Comments Chapte5r

Conclusions Information technology provides key core operational capabilities that the 

Postal Service must rely on to achieve its mission. Only by effectively and 

efficiently managing its IT resources can the Postal Service gain 

opportunities to further leverage its IT investments and make better 

allocation decisions among many investment alternatives. 

The Postal Service has in place most of the foundational practices required 

to ensure that IT investments are being selected and monitored to support 

its overall objectives. A comprehensive process guide for investment 

management and written policies and procedures for management 

oversight of investments will allow the Postal Service to better coordinate 

its IT investment activities and ensure that they are performed consistently. 

Once the Service has fully implemented all the critical processes for stage 

two, it will have the controls necessary to allow it to effectively manage its 

IT investments. 

The Postal Service shows mixed progress in managing its IT investments as 

a portfolio. The Service performs many portfolio development and 

oversight activities. However it lacks policies and procedures for managing 

its portfolio. It has not defined criteria that allow it to effectively analyze, 

prioritize, and select its investments from a portfolio perspective. In 

addition, the Postal Service’s reporting of performance data is largely 

limited to capital projects, which are a smaller portion of its portfolio than 

are operating expenses. Until the Service fully implements critical 

processes associated with managing investments as a complete portfolio, it 

will not have ready access to the data it needs to make informed decisions 

about competing investments. 

The ability of the Postal Service to continue to improve its investment 

management process is contingent on its ability to learn from its current 

practices and investments and from other organizations. The Service 

currently has no institutionalized processes to learn from its own 

experience and from other organizations. Such processes can contribute to 

the long-term success of the Postal Service’s IT portfolio and support its 

mission.

Recommendations for 

Executive Action

To strengthen the Postal Service’s capabilities for investment management 

and address the weaknesses discussed in this report, we recommend that 

the Postmaster General develop a plan that initially focuses on correcting 

the weaknesses in critical processes associated with maturity stages two 
Chapter 5

Conclusions, Recommendations, and Agency 

Comments

Page 71 GAO-03-3 U.S. Postal Service IT Investment Management

and three before addressing the weaknesses at maturity stages four and 

five, because critical processes at the lower stages provide the foundation 

for building those at higher maturity stages. The plan should be developed 

within 6 months. At a minimum, the plan should specify an approach to

• develop comprehensive guidance that defines and describes the 

complete investment management process, unifies existing processes 

enterprisewide, and reflects changes in processes as they occur;

• develop additional process guidance, as needed, to completely define 

the operations and decision-making processes of investment boards and 

other management entities involved in managing IT investments;

• ensure that cost, benefit, schedule, and risk expectations are set and 

approved in the original business case for each investment; that 

accurate and complete actual cost, benefit, schedule, and risk data are 

tracked against these expectations; and that status information on these 

four criteria is periodically reported to executive-level investment 

boards; and

• establish a structured, transparent, and documented portfolio selection 

process that assesses, prioritizes, selects, and funds investments 

according to established portfolio selection criteria, including explicit 

cost, benefit, schedule, and risk criteria.

The Postmaster General should ensure that the plan specifies measurable 

goals and time frames, prioritizes initiatives, designates a senior manager 

responsible and accountable for directing and controlling the 

improvements, and establishes review milestones. After addressing the 

stage two and three processes, the Postal Service should create processes 

required for stages four and five that, at a minimum

• ensure that guidance for conducting post-implementation reviews is 

complete, including criteria for selecting systems for review, and that 

post-implementation reviews are conducted on all appropriate systems;

• establish a process for evaluating and improving portfolio performance;

• establish a process for managing the succession of systems and 

technology;
Chapter 5

Conclusions, Recommendations, and Agency 

Comments

Page 72 GAO-03-3 U.S. Postal Service IT Investment Management

• establish a process to benchmark the investment processes of leading 

organizations to identify opportunities for improvement; and

• establish a process to employ IT investments strategically to improve 

business outcomes.

Agency Comments and 

Our Evaluation

The Postal Service’s Chief Financial Officer provided written comments on 

a draft of this report (reprinted in app. III). In these comments, the Postal 

Service stated that the report offered an opportunity to consider changes 

and improvements in its IT investment management processes. The Service 

added that it would carefully evaluate each of the report’s 

recommendations to determine the necessary actions for adopting and 

integrating key practices outlined in the GAO ITIM model that are 

appropriate for the Postal Service.

The Postal Service also identified key points where it stated that it differs 

from GAO’s IT investment management framework. The Postal Service also 

explained that it uses a hierarchy of delegations to select and oversee its 

investments, from the Board of Governors through the lowest level of 

management, to ensure that senior management can concentrate on 

strategic issues and the most significant projects. We did observe this 

structured approach to the selection and oversight process and have 

recognized it in our report.

In succession planning, the Postal Service stated that it uses an 

institutionalized portfolio approach to address the succession of its IT 

hardware, software, and systems. According to the Postal Service, this 

approach enables senior management to determine strategically driven 

solutions based on priorities, lessons learned, available technology, best 

practices, affordability, risk assessments, and business needs. Our 

guidance suggests that, while each of these aspects may be appropriate as 

part of a succession management process, effective succession 

management entails regularly reviewing the performance of existing 

systems against established criteria. Such a process allows an organization 

to identify systems that should be retained, modified, replaced, or 

otherwise disposed of in a timely manner. However, as we stated in our 

report, the Postal Service does not have such a process.

The Postal Service provided comments pertaining to post-implementation 

reviews that describe cost studies, the budget process, and the activities of 

the Office of Inspector General (OIG) as satisfying this critical process. We 
Chapter 5

Conclusions, Recommendations, and Agency 

Comments

Page 73 GAO-03-3 U.S. Postal Service IT Investment Management

disagree with the Postal Service in this matter. While guidance for cost 

studies does exist, the Service provided evidence of only three postimplementation cost studies having been conducted since 1990. The Postal 

Service’s budget process does not satisfactorily address this critical 

process. Specifically, the budget process does not capture lessons learned 

and disseminate them to other projects and work processes in order to 

improve them, and this is a major objective of post-implementation 

reviews. Finally, while OIG does conduct evaluations from which lessons 

learned may be drawn and used to improve other projects and work 

processes, OIG evaluations are not part of the regular systems life cycle.
Page 74 GAO-03-3 U.S. Postal Service IT Investment Management

Appendix I

Postal Service Projects with Major IT Apendxies

Components in Development or Deployment ApendxiI

Table 21: Postal Service IT Projects in Development or Deployment

Project name

Approval 

date

Sponsoring

unit

Approving

board

Approved

capital costs

in thousands

Associate Office Infrastructure Phase II Deployment 11/1997 IT BOG $207,416

Commitment Management—Integrated Operations 

Management Pilot

09/1998 EN/IP BOG 33,921

CONFIRM 10/2000 MK PMG 9,253

Corporate Call Phase III Deployment 06/1998 MK BOG 255,761

Delivery Operations Information System Deployment 08/2000 OP/IP BOG 127,620

Delivery Operations Information System Research and 

Development

06/1998 OP/IP BOG 39,987

e-Commerce IT & Virtual Store Modification 02/2000 IP/MK PMG 9,705

Enhanced Security Capability Program Implementation 11/2000 IT BOG 43,343

Field Retail Operations Group 01/1999 FI COO 3,444

Forwarding Control Systems 08/1998 EN BOG 33,874

Identification Code Sort & CM-IOM 09/1998 EN BOG 156,500

Integrated Data System—Upgrade 01/2001 EN BOG 33,787

Letter Recognition Enhancement Program 05/2001 EN BOG 222,403

Mail Evaluation, Readability & Lookup Instrument—Phase II 10/2001 EN/MK BOG 141,118

Mail Evaluation, Readability & Lookup Instrument—Phase II 

Research and Development

07/2000 EN/MK BOG 45,400

Mail Item Retrieval Systems Modernization—Phase II 

Research and Development

08/2000 EN COO 1,713

Net Post—Mailing On-Line System 11/1999 MK BOG 18,638

Organization Structure, Staffing & Management System 07/2001 FI/HR PMG 9,000

PARS 04/2002 EN/OP BOG 307,640

Point of Service ONE—Stage IIB Deployment 04/2000 MK BOG 403,900

Postal Field Computing Infrastructure 01/2001 IT BOG 41,562

PostalOne!—Phase I 11/1999 MK BOG 10,085

PostalOne!—Phase II 05/2002 MK BOG 54,148

Recognition Improvement Program 06/2000 EN BOG 131,150

Self-Service Vending Machines Acquisition Post-Deployment 08/1998 MK BOG 29,938

Shared Services Accounting 04/2002 FI PMG/COO 9,481

Standard Accounting for Retail—Retail Accounting 01/2001 FI/IP BOG 34,357

Standard Accounting for Retail—General Ledger 02/2000 FI/IP COO 5,600

Surface-Air Management System Deployment 07/2000 OP BOG 38,385

Surface-Air Management System—Alaska 05/2001 OP COO 7,419

Surface-Air Support System 06/2001 OP BOG 15,516
Appendix I

Postal Service Projects with Major IT 

Components in Development or Deployment

Page 75 GAO-03-3 U.S. Postal Service IT Investment Management

Key:

BOG Board of Governors IP Information Platform

COO Chief Operating Officer IT Information Technology

EN Engineering MK Marketing

GL General Ledger OP Operations

FI Finance PMG Postmaster General

HR Human Resources 

Source: U.S. Postal Service documents.

Time & Attendance Collection System—National 01/2001 FI/IP BOG 46,673

Time & Attendance Collection System—Pilot 08/2000 FI/IP COO 4,149

(Continued From Previous Page)

Project name

Approval 

date

Sponsoring

unit

Approving

board

Approved

capital costs

in thousands
Page 76 GAO-03-3 U.S. Postal Service IT Investment Management

Appendix II

Postal Service IT Projects That GAO 

Reviewed ApendxiI

The ITIM assessment guidance recommends that case studies be 

conducted of selected IT investment projects to validate organization-level 

evidence and better understand the organization’s IT investment 

management process.19 Accordingly, we selected four projects for review 

from the list shown in appendix I to provide information on IT investments 

in a cross-section of sponsoring Postal Service organizations. To conduct 

our review, we interviewed managers responsible for the IT investments 

and members of the project management teams to obtain information on 

implementation of ITIM key practices. Table 22 summarizes key 

information on these investments.

Table 22: Postal Service IT Projects Selected by GAO for Review

Source: U.S. Postal Service documents.

The sections below provide additional information on the investments we 

reviewed.

19ITIM Exposure Draft, Appendix III, Guidance for Conducting an ITIM Assessment, pages 

158-159.

Title Sponsoring unit

Approved

capital cost

(in millions) Investment purpose

Date approved & 

approving entity

Enhanced Security 

Capability Program

(ESC)

CTO/IT $43.3 To secure Postal Service mail processing, 

business operations, and electronic 

communications by providing enhanced 

security capabilities to networks, systems, 

and applications.

November 2000

Board of Governors

Organization, Structure 

Staffing & Management 

System (OSS&M)

CFO and Human 

Resources

$9.0 To provide a foundation for the Postal 

Service’s new human resources and 

payroll systems.

July 2001

Postmaster General

Point of Service ONE 

(POS ONE)—Stage IIB

Marketing $403.9 To provide a new platform for service 

delivery at 13,504 sites, and replace the 

Postal Service’s existing Integrated Retail 

Terminals.

April 2000

Board of Governors

Surface-Air 

Management System 

(SAMS)

Network Operations 

Management

$38.4 To replace Air Contract Data Collection 

System (ACDCS) and assign mail to 

alternative surface and air carriers.

July 2000

Board of Governors
Appendix II

Postal Service IT Projects That GAO 

Reviewed

Page 77 GAO-03-3 U.S. Postal Service IT Investment Management

Enhanced Security 

Capability Program

Enhanced Security Capability (ESC) is a comprehensive program to secure 

the Postal Service’s networks, systems, and applications. Its goals, as 

defined in the DAR, are threefold:

1. Create an environment that allows Postal Service employees, business 

partners, suppliers, and customers to conduct business in a secure and 

user-friendly environment.

2. Eliminate or prevent unauthorized use of and access to Postal Service 

systems and applications.

3. Deny unauthorized access to Postal Service networks while ensuring 

access to authorized users.

ESC supports the Postal Service’s three “voices” by, among other things, 

providing the resources to secure the infrastructure and mission critical 

business applications (Voice of the Business), providing the necessary 

security to protect customers’ private data (Voice of the Customer), and 

providing additional assurances that employee data are secure (Voice of 

the Employee). It also supports the Transformation Plan’s near-term 

strategy to ensure the safety and security of mail customers and 

employees. 

The DAR for this CTO organization-sponsored program was approved by 

the Board of Governors on November 13, 2000. It requested capital funds of 

about $43.3 million to secure the Postal Service’s networks, systems, and 

applications and establish the underlying program management structure. 

Efforts to implement ESC actually began in March 2000 with $873,000 in 

seed money. The initiation efforts included updating pertinent policies and 

procedures and creating a team to respond to security incidents. 

In an effort to heighten security in response to the recent terrorist attacks 

and anthrax incidents, many objectives for the program were reprioritized, 

and program officials are consequently considering extending the schedule 

for completing fiscal year 2003 goals into the next fiscal year. According to 

the most recent status report on the program, additional capital funds 

would not be needed to accommodate the new schedule, if it is approved. 

ESC is not a one-time effort but an ongoing program to secure Postal 

Service operations. It is managed as a collection of over 30 initiatives, each 
Appendix II

Postal Service IT Projects That GAO 

Reviewed

Page 78 GAO-03-3 U.S. Postal Service IT Investment Management

one managed separately, with its own project plan, milestones, and 

schedules. 

Organization Structure, 

Staffing and 

Management 

The purpose of Organization Structure, Staffing and Management (OSS&M) 

is to allow the Postal Service to easily manage its organizational structure 

by facilitating access to data and enabling it to model organizational 

structures and implement new structures quickly. OSS&M is intended to 

replace the Organization Management Staffing System, a legacy system 

with limited functionality and usage that does not meet current needs to 

manage organizational structures. It is being developed using commercial 

off-the-shelf technology.

While OSS&M can stand alone, it is to serve as the foundational piece for a 

human resources/payroll enterprise system that will integrate many Postal 

Service systems into one with the ultimate goal of having a single source 

for all employee data. The Postal Service currently uses a number of human 

resource and payroll systems that, according to Postal Service officials, 

duplicate data, connect through cumbersome interfaces, and operate under 

different processing cycles. The new human resources/payroll enterprise 

system will address these weaknesses by streamlining business processes 

and consolidating all the data about an employee into one central 

repository. OSS&M supports the Transformation Plan’s corporate shared 

services strategy. It is jointly sponsored by Human Resources and Finance.

The DAR for the project was approved by the Postmaster General on July 

23, 2001. It requested capital funds of $9 million for the national 

deployment of the system. Initial funding in the amount of $7 million had 

also been approved to conduct proof-of-concept and pilot activities and to 

assess the cost of operating the recommended off-the-shelf software in the 

Postal Service environment. The results of these activities were used as 

input to the DAR.

OSS&M was scheduled to be fully deployed in the spring of 2002. It has 

been delayed because of organizational changes and the additional time 

required for pilot testing. It is now scheduled to be deployed by December 

1, 2002.
Appendix II

Postal Service IT Projects That GAO 

Reviewed

Page 79 GAO-03-3 U.S. Postal Service IT Investment Management

Point of Service ONE 

System

The Point of Service ONE system (POS ONE) is a replacement system for 

the Postal Service’s existing retail terminals; it is approved to provide new 

terminals, application systems, network connections, and a data 

warehouse designed to support management decision-making. The Postal 

Service identified the need to replace its existing terminals in the early 

1990s and approved $9.9 million in funding to identify alternative 

approaches. This work was performed in the mid-1990s, and information 

obtained from contractor bids was used to develop a DAR for POS ONE—

Stage I. The Board of Governors approved that DAR and three others to 

fund work planned to be performed from June 1996 to September 2001, and 

a fifth DAR for Stage III is under development for the next increment of 

work on the system. Dates and dollar amounts for these approved DARs 

are shown in table 23.

Table 23: POS ONE DARs

Source: U.S. Postal Service documents.

Surface-Air 

Management System

The Surface-Air Management System (SAMS) is a replacement system that 

provides critical transportation-related logistics capabilities by enabling 

the Postal Service to assign mail electronically to the least-cost available 

surface and air carrier services. The legacy system that SAMS was designed 

to replace-—the Air Contract Data Collection System (ACDCS)—was 

outmoded; it was designed in 1983 and in 1990 the manufacturer of the 

system informed the Postal Service that it would no longer provide 

operating system support. SAMS now serves as the Postal Service’s mail 

assignment engine to surface and air transportation services, laying the 

cornerstone for all future logistics systems. The program plan for SAMS 

shows that additional functionality expected to be provided using SAMS 

beyond ACDCS included indexed surface routes, capacity management, 

DAR No. Approval date

Capital funding

(in millions)

1 June 1996 $274.9

1–additional funding May 1998 53.7

2A June 1999 166.5

2B April 2001 403.9

Total (approved POS ONE 

capital funding) $899.0
Appendix II

Postal Service IT Projects That GAO 

Reviewed

Page 80 GAO-03-3 U.S. Postal Service IT Investment Management

real-time carrier updates via electronic data interchange, automated tender 

considerations, local change auditing and reporting, electronic manifest 

tracking, improved maintenance of mail distribution tables, improved data 

capture capabilities, improved payment processing, stable and scalable 

infrastructure, and communications benefits. The program plan also shows 

that SAMS was expected to produce the following measurable benefits: 

decreased commercial air costs, increased utilization of surface routes, 

reliability and maintainability of SAMS software, decreased downtime, 

improved claims processing, decreased network costs, improved data 

collection capabilities for evaluation of air and surface routes, and 

decreased capacity overloading.

The Postal Service began conceptual design work on SAMS in October 1999 

(Phase I) and detailed design and development work in March 2000 (Phase 

II). This work formed the basis for the SAMS DAR approved by the Board 

of Governors on July 11, 2000 for capital funding of $38.4 million.
Page 81 GAO-03-3 U.S. Postal Service IT Investment Management

Appendix III

Comments from the United States Postal 

Service ApendxiI
Appendix III

Comments from the United States Postal 

Service

Page 82 GAO-03-3 U.S. Postal Service IT Investment Management
Page 83 GAO-03-3 U.S. Postal Service IT Investment Management

Appendix IV

GAO Contact and Staff Acknowledgments ApendxiIV

GAO Contact Lester P. Diamond, (202) 512-7957, DiamondL@gao.gov

Acknowledgments In addition to the individual named above, John T. Christian, Joanne L. 

Fiorino, Peggy A. Hegg, Min S. Lee, Thomas F. Noone, Sabine R. Paul, and 

Margaret R. Sullivan made key contributions to this report. 

(310424)
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