United States Postal Service
Opportunities to Strengthen IT Investment Management Capabilities Gao ID: GAO-03-3 October 15, 2002The 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.
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 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.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-03-3, United States Postal Service: Opportunities to Strengthen IT Investment Management Capabilities
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Report to Congressional Committees:
October 2002:
United states Postal Service:
Opportunities to Strengthen IT Investment Management Capabilities:
GAO-03-3:
United States General Accounting Office Highlights:
U.S. POSTAL SERVICE:
Opportunities to Strengthen IT
Investment Management Capabilities:
Highlights of GAO-03-3, a report to the Senate Committee on
Governmental Affairs and the Subcommittee on International Security,
Proliferation, and Federal Services:
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.
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 ’best-in-class“ 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:
[See PDF for image]
Source: GAO:
[End of figure]
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.
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:
Table of Contents:
Letter:
Executive Summary:
Purpose:
Background:
Results in Brief:
Principal Findings:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Chapter 1:
Introduction:
Postal Service‘s Mission and Organization:
Postal Service‘s Information Technology Environment:
Weaknesses in the Postal Service‘s Investment Management
Process:
Postal Service‘s Approach to Investment Management:
IT Investment Management Framework:
Objective, Scope, and Methodology:
Chapter 2:
Postal Service Executes Most Key Foundational Practices:
Boards Are Established but Operating without a Complete Process Guide:
CTO Organization Oversees IT Investments:
IT Project and System Information Is Maintained to Support Project
Management:
Processes Ensure That IT Investments Support Business Needs and Meet
User Needs:
Structures Are in Place for Selecting IT Investment Proposals:
Chapter 3:
Postal Service Shows Mixed Progress in Managing Its IT Investments as
a Portfolio:
Portfolio Selection Criteria Are Defined, but Do Not Adequately Address
All Factors:
IT Investments Are Not Consistently Analyzed and Prioritized within the
Context of a Portfolio:
An IT Investment Portfolio Is Developed, but Project Expectations Are
Not Routinely Revised:
Portfolio Performance Oversight Is Performed, but without Comprehensive
Guidance:
Chapter 4:
Postal Service Has Yet to Implement Processes to Better Meet Strategic
Goals:
Policies and Procedures Are Defined, but Post-Implementation Review
Process Is Not Institutionalized:
IT Investments Are Not Evaluated from the Perspective of Portfolio
Performance:
Process for Managing Succession of Systems and Technology
Is Not Established:
Activities for Benchmarking the Investment Process Are Not
Institutionalized:
Potential Impacts of Leading Technologies Are Not Routinely Considered
in Strategic Planning Efforts:
Chapter 5:
Conclusions, Recommendations, and Agency Comments:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Postal Service Projects with Major IT Components in
Development
or Deployment:
Appendix II: Postal Service IT Projects that GAO Reviewed:
Enhanced Security Capability Program:
Organization Structure, Staffing and Management:
Point of Service ONE System:
Surface-Air Management System:
Appendix III: Comments from the United States Postal Service:
Appendix IV: GAO Contact and Staff Acknowledgements:
GAO Contact:
Acknowledgments:
Tables:
Table 1: Stage Two--Critical Processes Required for Building the
Investment Foundation:
Table 2: Summary of Results for Stage Two Critical Processes and Key
Practices:
Table 3: IT Investment Board Operation:
Table 4: IT Project Oversight:
Table 5: IT Project and System Identification:
Table 6: Business Needs Identification:
Table 7: Proposal Selection:
Table 8: Stage Three--Critical Processes Required for Developing a
Complete Investment Portfolio:
Table 9: Summary of Results for Stage Three Critical Processes and Key
Practices:
Table 10: Portfolio Selection Criteria Definition:
Table 11: Investment Analysis:
Table 12: Portfolio Development:
Table 13: Portfolio Performance Oversight:
Table 14: Stages Four and Five--Critical Processes Required for
Improving the Investment Process and Leveraging IT for Strategic
Outcomes:
Table 15: Summary of Results for Stages Four and Five Critical
Processes
and Key Practices:
Table 16: Post-Implementation Reviews and Feedback:
Table 17: Portfolio Performance Evaluation and Improvement:
Table 18: Systems and Technology Succession Management:
Table 19: Investment Process Benchmarking:
Table 20: IT-Driven Strategic Business Change:
Table 21: Postal Service IT Projects in Development or Deployment:
Table 22: Postal Service IT Projects Selected by GAO for Review:
Table 23: POS ONE DARs:
Figures:
Figure 1: The Five Stages of Maturity within ITIM:
Figure 2: Overview of the Organizational Structure of the Postal
Service:
Figure 3: Capital Planning and Budgeting Cycle:
Figure 4: Process for Approving Major New Projects:
Figure 5: Project Control and Evaluation Process:
Figure 6: The Five Stages of Maturity with Critical Processes:
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:
Letter October 15, 2002:
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:
Signed by Joel C. Willemssen:
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,[Footnote 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 self-supporting
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 Framework[Footnote
2] 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
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 point-of-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.[Footnote 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 framework has been used in several GAO evaluations
[Footnote 4]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.
Figure 1: The Five Stages of Maturity within ITIM:
[See PDF for image]
Source: GAO.
[End of figure]
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 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.
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.
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 post-
implementation 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.
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,
* 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 post-
implementation 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 post-implementation cost studies having been
conducted since 1990.
[End of section]
Chapter 1 Introduction:
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.[Footnote 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 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.[Footnote 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.
Figure 2: Overview of the Organizational Structure of the Postal
Service:
[See PDF for image]
Source: U.S. Postal Service.
[End of figure]
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 point-of-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 IT-related 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 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.[Footnote 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.[Footnote 8] In September
1999, the OIG found that Point of Service ONE was not achieving the
results outlined in its business case.[Footnote 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 Postal
Service, as both revenues and customer response fell below
expectations.[Footnote 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“[Footnote 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.
* 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.
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.
Figure 3: Capital Planning and Budgeting Cycle:
[See PDF for image]
Source: U.S. Postal Service documents.
[End of figure]
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.
The process for approving proposed capital investments is defined in
the Postal Service‘s F-66 manual.[Footnote 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.
Figure 4: Process for Approving Major New Projects:
[See PDF for image]
Source: US. Postal Service.
[End of figure]
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 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.
Figure 5: Project Control and Evaluation Process:
[See PDF for image]
Source: U.S. Postal Service.
[End of figure]
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 organized into a framework of five increasingly mature
stages.[Footnote 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
evaluations[Footnote 14]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 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:
[See PDF for image]
Source: GAO.
[End of figure]
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
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
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.
[End of section]
Chapter 2: Postal Service Executes Most Key Foundational Practices:
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:
Critical process: IT investment board operation; Description: To define
and establish the governing board(s) responsible for selecting,
controlling, and evaluating investments..
Critical process: IT project oversight; Description: 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..
Critical process: IT project and system identification; Description: To
create and maintain an IT project and system inventory to assist in
managerial decision-making..
Critical process: Business needs identification; Description: To ensure
that each IT program and project supports the organization‘s business
needs and meets users‘ needs..
Critical process: Proposal selection; Description: To ensure that an
established, structured process is used to select new IT proposals..
Source: GAO.
[End of table]
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 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:
Critical process: IT investment board operation; Key practices
executed: 4; Total required
by critical process: 6; Percentage of key practices executed: 67%.
Critical process: IT project oversight; Key practices executed: 9;
Total required
by critical process: 11; Percentage of key practices executed: 82.
Critical process: IT project and system identification; Key practices
executed: 7; Total required
by critical process: 7; Percentage of key practices executed: 100.
Critical process: Business needs identification; Key practices
executed: 8; Total required
by critical process: 8; Percentage of key practices executed: 100.
Critical process: Proposal selection; Key practices executed: 6; Total
required
by critical process: 6; Percentage of key practices executed: 100.
Critical process: Totals; Key practices executed: 34; Total required
by critical process: 38; Percentage of key practices executed: 89%.
Source: GAO.
[End of table]
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 practices are implemented across the organization.
[Footnote 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, organization-
specific 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 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: Organizational commitments; Key practice: 1. An
organization-specific IT investment process guide is created to direct
each board‘s operations.; Rating: Not executed.; Summary of evidence:
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)..
Key practice: Type of practice : 2. Organization executives and line
managers support and carry out IT investment board decisions.; Rating:
Type of practice : Executed.; Summary of evidence: Type of practice :
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..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided for operating each IT investment board.; Rating:
Executed.; Summary of evidence: Adequate resources, such as supporting
staff, are available for investment board operations..
Key practice: Type of practice : 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.; Rating: Type of practice : Executed.;
Summary of evidence: Type of practice : Members of Postal Service
investment boards are senior-level executives who have extensive
experience with the organization‘s operations and IT investment
management approach..
Type of practice: Activities; Key practice: 1. Each IT investment board
is created and defined with board membership integrating both IT and
business knowledge.; Rating: Executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. Each IT investment board operates
according to written policies and procedures in the organization-
specific IT investment process guide.; Rating: Type of practice : Not
executed.; Summary of evidence: Type of practice : 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..
Source: GAO.
[End of table]
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
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,[Footnote 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.[Footnote 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.
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.
Table 4: IT Project Oversight:
Type of practice: Organizational commitments; Key practice: 1. The
organization has written policies and procedures for project
management.; Rating: Executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. The organization has written
policies and procedures for management oversight of IT projects.;
Rating: Type of practice : Not executed.; Summary of evidence: Type of
practice : 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..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided to assist the board(s) in overseeing IT projects.; Rating:
Executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. Each IT project has and maintains
an approved project management plan that includes cost and schedule
controls.; Rating: Type of practice : Executed.; Summary of evidence:
Type of practice : 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..
Key practice: Type of practice : 3. An IT investment board is
operating.; Rating: Type of practice : Executed.; Summary of evidence:
Type of practice : 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..
Key practice: Type of practice : 4. Information from the IT project and
system inventory is used by the IT investment board as applicable.;
Rating: Type of practice : Executed.; Summary of evidence: Type of
practice : IT project and system information is used by the CTO
Investment Review Board to support executive management‘s project
management responsibilities..
Type of practice: Activities; Key practice: 1. Each project‘s up-to-
date cost and schedule data are provided to the appropriate IT
investment board.; Rating: Executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. Using established criteria, the IT
investment board oversees each IT project‘s performance regularly by
comparing actual cost and schedule data to expectations.; Rating: Type
of practice : Not executed.; Summary of evidence: Type of practice :
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..
Key practice: Type of practice : 3. The IT investment board performs
special reviews of projects that have not met predetermined performance
standards.; Rating: Type of practice : Executed.; Summary of evidence:
Type of practice : 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..
Key practice: Type of practice : 4. Appropriate corrective actions for
each under-performing project are defined, documented, and agreed to by
the IT investment board and the project manager.; Rating: Type of
practice : Executed.; Summary of evidence: Type of practice :
Appropriate corrective actions for each under-performing project are
defined, documented, and agreed to by the oversight board and the
project manager..
Key practice: Type of practice : 5. Corrective actions are implemented
and tracked until the desired outcome is achieved.; Rating: Type of
practice : Executed.; Summary of evidence: Type of practice :
Corrective actions are implemented and tracked to help ensure that an
agreed-upon outcome is achieved..
Source: GAO.
[End of table]
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 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.
Table 5: IT Project and System Identification:
Type of practice: Organizational commitments; Key practice: 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.; Rating: Executed.; Summary of evidence: 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..
Key practice: Type of practice : 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.; Rating: Type of practice : Executed.; Summary of
evidence: Type of practice : The CTO organization is responsible for
maintaining PTRS and EIR..
Type of practice: Prerequisite; Key practice: 1. Adequate resources are
provided for identifying IT projects and systems and collecting
relevant information into an inventory.; Rating: Executed.; Summary of
evidence: 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..
Type of practice: Activities; Key practice: 1. The organization‘s IT
projects and systems are identified and specific information about them
is collected in an inventory.; Rating: Executed.; Summary of evidence:
Information on IT projects and systems is maintained in PTRS and EIR..
Key practice: Type of practice : 2. Changes to IT projects and systems
are identified, and change information is maintained in the inventory.;
Rating: Type of practice : Executed.; Summary of evidence: Type of
practice : 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..
Key practice: Type of practice : 3. Information from the inventory is
available on demand to decision makers and other affected parties.;
Rating: Type of practice : Executed.; Summary of evidence: Type of
practice : 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..
Key practice: Type of practice : 4. The IT project and system inventory
and its information records are maintained to contribute to future
investment selections and assessments.; Rating: Type of practice :
Executed.; Summary of evidence: Type of practice : 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..
Source: GAO.
[End of table]
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.
Table 6: Business Needs Identification:
Type of practice: Organizational commitment; Key practice: 1. The
organization has written policies and procedures for identifying the
business needs (and the associated users) of each IT project.; Rating:
Executed.; Summary of evidence: 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..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided for identifying business needs and associated users.;
Rating: Executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. The organization has defined
business needs or stated mission goals.; Rating: Type of practice :
Executed.; Summary of evidence: Type of practice : Business needs are
defined in the Postal Service‘s strategic plans, integrated financial
plan, annual performance plans and reports, and Postal Service
Transformation Plan..
Key practice: Type of practice : 3. IT staff are trained in business
needs identification.; Rating: Type of practice : Executed.; Summary of
evidence: Type of practice : 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..
Key practice: Type of practice : 4. IT projects and systems are
identified in the IT project and system inventory.; Rating: Type of
practice : Executed.; Summary of evidence: Type of practice :
Information on IT systems and projects is maintained in a number of
systems, including PTRS and EIR..
Type of practice: Activities; Key practice: 1. The business needs for
each IT project are clearly identified and defined.; Rating: Executed.;
Summary of evidence: 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..
Key practice: Type of practice : 2. Specific users are identified for
each IT project.; Rating: Type of practice : Executed.; Summary of
evidence: Type of practice : 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..
Source: GAO.
[End of table]
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.
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.
Table 7: Proposal Selection:
Type of practice: Organizational commitments; Key practice: 1.
Executives and managers follow an established selection process.;
Rating: Executed.; Summary of evidence: Executives and managers follow
established processes for selecting IT investments that are embodied in
the Service‘s capital planning and budget formulation processes..
Key practice: Type of practice : 2. An official is designated to manage
the proposal selection process.; Rating: Type of practice : Executed.;
Summary of evidence: Type of practice : The Postal Service has formally
designated responsibility for the annual budget formulation process to
the CFO..
Type of practice: Prerequisite; Key practice: 1. Adequate resources are
provided for proposal selection activities.; Rating: Executed.; Summary
of evidence: Adequate resources are available to support proposal
selection activities in the functional units, the Finance Department,
the CTO organization, and the Establish Team..
Type of practice: Activities; Key practice: 1. The organization uses a
structured process to develop new IT proposals.; Rating: Executed.;
Summary of evidence: 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..
Key practice: Type of practice : 2. Executives analyze and prioritize
new IT proposals according to established selection criteria.; Rating:
Type of practice : Executed.; Summary of evidence: Type of practice :
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..
Key practice: Type of practice : 3. Executives make funding decisions
for new IT proposals according to an established process.; Rating: Type
of practice : Executed.; Summary of evidence: Type of practice : 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..
Source: GAO.
[End of section]
Chapter 3: Postal Service Shows Mixed Progress in Managing Its IT
Investments as a Portfolio:
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:
Critical process: Portfolio selection criteria definition;
Description: To ensure that the organization develops and maintains IT
portfolio selection criteria that support its mission, organizational
strategies, and business priorities..
Critical process: Investment analysis; Description: To ensure that all
IT investments are consistently analyzed and prioritized according to
the organization‘s portfolio selection criteria..
Critical process: Portfolio development; Description: To ensure that an
optimal IT investment portfolio with manageable risks and returns is
selected and funded..
Critical process: Portfolio performance oversight; Description: To
ensure that each IT investment portfolio achieves its cost, benefit,
schedule, and risk (CBSR) expectations..
Source: GAO:
[End of table]
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:
Critical process: Portfolio selection criteria definition; Key
practices executed: 4; Total required
by critical process: 6; Percentage of key practices executed: 67%.
Critical process: Investment analysis; Key practices executed: 2; Total
required
by critical process: 7; Percentage of key practices executed: 29.
Critical process: Portfolio development; Key practices executed: 6;
Total required
by critical process: 9; Percentage of key practices executed: 67.
Critical process: Portfolio performance oversight; Key practices
executed: 6; Total required
by critical process: 9; Percentage of key practices executed: 67.
Critical process: Totals; Key practices executed: 18; Total required
by critical process: 31; Percentage of key practices executed: 58%.
Source: GAO.
[End of table]
The following discussion provides information on the steps the Postal
Service has taken toward implementing each of the critical processes.
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 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: Organizational commitment; Key practice: 1. The
organization has written policies and procedures for creating and
modifying IT portfolio selection criteria.; Rating: Not executed.;
Summary of evidence: The Postal Service does not have written policies
and procedures for creating and modifying IT portfolio selection
criteria..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided for selection criteria definition activities.; Rating:
Executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. A working group is designated to be
responsible for creating and modifying the IT portfolio selection
criteria.; Rating: Type of practice : Executed.; Summary of evidence:
Type of practice : The Establish Team is responsible for creating and
modifying the Postal Service‘s IT portfolio selection criteria..
Type of practice: Activities; Key practice: 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.; Rating: Not
executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. The IT portfolio selection criteria
are distributed throughout the organization.; Rating: Type of practice
: Executed.; Summary of evidence: Type of practice : 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..
Key practice: Type of practice : 3. The IT portfolio selection criteria
are reviewed using cumulative experience and event-driven data and
modified, as appropriate.; Rating: Type of practice : Executed.;
Summary of evidence: Type of practice : 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..
Source: GAO.
[End of table]
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 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.
Table 11: Investment Analysis:
Type of practice: Organizational commitment; Key practice: 1. The
organization has written policies and procedures for analyzing IT
investments.; Rating: Not executed.; Summary of evidence: 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)..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided for investment analysis activities.; Rating: Executed.;
Summary of evidence: The Postal Service has adequate resources for
analyzing investments, including dedicated staff (e.g., CAPE staff who
validate DARs) and tools..
Key practice: Type of practice : 2. IT investment portfolio selection
criteria have been developed.; Rating: Type of practice : Not
executed.; Summary of evidence: Type of practice : 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..
Key practice: Type of practice : 3. Information from the IT project and
system inventory is used by the IT investment board.; Rating: Type of
practice : Not executed.; Summary of evidence: Type of practice : 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..
Type of practice: Activities; Key practice: 1. Each IT investment board
ensures that the CBSR data and other required data are validated for
each investment within its span of control.; Rating: Executed.; Summary
of evidence: 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..
Key practice: Type of practice : 2. Each IT investment board assesses
each of its IT investments with respect to the IT portfolio selection
criteria.; Rating: Type of practice : Not executed.; Summary of
evidence: Type of practice : 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..
Key practice: Type of practice : 3. Each IT investment board
prioritizes its full portfolio of IT investments using the portfolio
selection criteria.; Rating: Type of practice : Not executed.; Summary
of evidence: Type of practice : 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..
Source: GAO.
[End of table]
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.
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 manual[Footnote
18] 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 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: Organizational commitment; Key practice: 1. The
organization has written policies and procedures for establishing and
maintaining the portfolio development process.; Rating: Not executed.;
Summary of evidence: The Postal Service has not developed written
policies and procedures for establishing and maintaining an IT
portfolio development process..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided for executing the portfolio development process.; Rating:
Executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. Board members exhibit core
competencies in portfolio development.; Rating: Type of practice :
Executed.; Summary of evidence: Type of practice : 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..
Key practice: Type of practice : 3. Individual IT investments have been
analyzed and their cost, benefit, schedule, and risk data have been
validated.; Rating: Type of practice : Not executed.; Summary of
evidence: Type of practice : 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..
Key practice: Type of practice : 4. The organization has defined its
common portfolio categories.; Rating: Type of practice : Executed.;
Summary of evidence: Type of practice : 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)..
Type of practice: Activities; Key practice: 1. Each IT investment board
assigns investment proposals to a portfolio category.; Rating:
Executed.; Summary of evidence: The Postal Service assigns IT programs
and projects to portfolio categories on the basis of established
criteria contained in its F-66 manual..
Key practice: Type of practice : 2. Each IT investment board examines
the mix of proposals and investments across the common portfolio
categories and makes selections for funding.; Rating: Type of practice
: Executed.; Summary of evidence: Type of practice : The Establish Team
examines portfolios of investments categorized based on total expected
capital costs and makes selections for funding..
Key practice: Type of practice : 3. Each IT investment board approves
or modifies the annual CBSR expectations for each of its selected IT
investments.; Rating: Type of practice : Not executed.; Summary of
evidence: Type of practice : 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..
Key practice: Type of practice : 4. A repository of portfolio
development information is established, updated, and maintained.;
Rating: Type of practice : Executed.; Summary of evidence: Type of
practice : 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..
Source: GAO.
[End of table]
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.
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.
Table 13: Portfolio Performance Oversight:
Type of practice: Organizational commitment; Key practice: 1. The
organization has written policies and procedures for monitoring and
controlling portfolio performance.; Rating: Not executed.; Summary of
evidence: The Postal Service does not have policies and procedures that
address portfolio performance oversight..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided for monitoring and controlling the portfolio‘s
performance.; Rating: Executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. Annual CBSR expectations are agreed
upon for each IT investment.; Rating: Type of practice : Not executed.;
Summary of evidence: Type of practice : 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..
Key practice: Type of practice : 3. The IT investment board has access
to up-to-date actual and expected CBSR data in a repository.; Rating:
Type of practice : Executed.; Summary of evidence: Type of practice :
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..
Type of practice: Activities; Key practice: 1. Each IT investment board
monitors the performance of each investment in its portfolio by
comparing actual CBSR data to expectations.; Rating: Executed.; Summary
of evidence: 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..
Key practice: Type of practice : 2. Using established criteria, the IT
investment board identifies its investments that have not met
predetermined CBSR performance expectations.; Rating: Type of practice
: Not executed.; Summary of evidence: Type of practice : 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..
Key practice: Type of practice : 3. The IT investment board and the
project manager determine the root cause of the poor performance.;
Rating: Type of practice : Executed.; Summary of evidence: Type of
practice : The CTO Investment Review Board and project manager
determine the root cause of poor project performance during project
reviews..
Key practice: Type of practice : 4. The IT investment board and the
project manager develop an action plan designed to remedy the
identified cause(s) of poor performance.; Rating: Type of practice :
Executed.; Summary of evidence: Type of practice : The CTO Investment
Review Board and project manager develop an action plan designed to
remedy the identified cause(s) of poor performance..
Key practice: Type of practice : 5. Corrective actions are initiated
and outcomes are tracked.; Rating: Type of practice : Executed.;
Summary of evidence: Type of practice : The CTO Investment Review Board
tracks corrective actions until they are completed..
Source: GAO.
[End of section]
Chapter 4: Postal Service Has Yet to Implement Processes to Better Meet
Strategic Goals:
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.
Table 14: Stages Four and Five--Critical Processes Required for
Improving the Investment Process and Leveraging IT for Strategic
Outcomes:
Critical process: Stage 4--Improving the Investment Process.
Critical process: Post-implementation reviews and feedback;
Description: Stage 4--Improving the Investment Process: To compare
outcomes of recently implemented investments to the expectations for
them and develop a set of lessons learned from these reviews..
Critical process: Portfolio performance evaluation and improvement;
Description: Stage 4--Improving the Investment Process: To assess and
improve overall IT investment portfolio performance and the investment
management process..
Critical process: Systems and technology succession management;
Description: Stage 4--Improving the Investment Process: To ensure that
IT investments in operation are periodically evaluated and determine
whether they should be retained, modified, replaced, or otherwise
disposed..
Critical process: Stage 5--Leveraging Information Technology for
Strategic Outcomes.
Critical process: Investment process benchmarking; Description: Stage
4--Improving the Investment Process: 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..
Critical process: IT-driven strategic business change; Description:
Stage 4--Improving the Investment Process: To dramatically improve
business outcomes by strategically employing IT investments..
Source: GAO.
[End of table]
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.
Table 15: Summary of Results for Stages Four and Five Critical
Processes and Key Practices:
Critical process: Stage 4--Improving the Investment Process.
Critical process: Post-implementation reviews & feedback; Key practices
executed: Stage 4--Improving the Investment Process: 3; Total required
by critical process: Stage 4--Improving the Investment Process: 6;
Percentage of key practices executed: Stage 4--Improving the Investment
Process: 50%.
Critical process: Portfolio performance evaluation & improvement; Key
practices executed: Stage 4--Improving the Investment Process: 0; Total
required by critical process: Stage 4--Improving the Investment
Process: 6; Percentage of key practices executed: Stage 4--Improving
the Investment Process: 0.
Critical process: Systems & technology succession management; Key
practices executed: Stage 4--Improving the Investment Process: 0; Total
required by critical process: Stage 4--Improving the Investment
Process: 9; Percentage of key practices executed: Stage 4--Improving
the Investment Process: 0.
Critical process: Totals; Key practices executed: Stage 4--Improving
the Investment Process: 3; Total required by critical process: Stage 4-
-Improving the Investment Process: 21; Percentage of key practices
executed: Stage 4--Improving the Investment Process: 14%.
Critical process: Stage 5--Leveraging Information Technology for
Strategic Outcomes.
Critical process: Investment process benchmarking; Key practices
executed: Stage 4--Improving the Investment Process: 0; Total required
by critical process: Stage 4--Improving the Investment Process: 7;
Percentage of key practices executed: Stage 4--Improving the Investment
Process: 0.
Critical process: IT-driven strategic business change; Key practices
executed: Stage 4--Improving the Investment Process: 2; Total required
by critical process: Stage 4--Improving the Investment Process: 6;
Percentage of key practices executed: Stage 4--Improving the Investment
Process: 33.
Critical process: Totals; Key practices executed: Stage 4--Improving
the Investment Process: 2; Total required by critical process: Stage 4-
-Improving the Investment Process: 13; Percentage of key practices
executed: Stage 4--Improving the Investment Process: 15%.
Source: GAO.
[End of table]
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 Post-Implementation 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 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 post-implementation
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.
Table 16: Post-Implementation Reviews and Feedback:
Type of practice: Organizational commitment; Key practice: 1. The
organization has written policies and procedures for conducting post-
implementation reviews.; Rating: Executed.; Summary of evidence: The
CTO organization and Finance Department have each developed policies
and procedures for performing post-implementation 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..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided for conducting post-implementation reviews.; Rating:
Executed.; Summary of evidence: Postal Service officials stated that
adequate resources are available for conducting post-implementation
reviews..
Key practice: Type of practice : 2. Each IT investment board ensures
that individuals conducting post-implementation reviews are trained.;
Rating: Type of practice : Executed.; Summary of evidence: Type of
practice : Postal Service staff have received training in conducting
post-implementation reviews..
Type of practice: Activities; Key practice: 1. An IT investment board
identifies the projects for which a post-implementation review will be
conducted and a post-implementation review is initiated for each
designated investment.; Rating: Not executed.; Summary of evidence: The
Postal Service has not assigned any investment board with
responsibility for identifying the projects for which a post-
implementation review will be conducted and ensuring that post-
implementation reviews are initiated..
Key practice: Type of practice : 2. Quantitative and qualitative
investment data are collected, evaluated for reliability, and analyzed
during the post-implementation reviews.; Rating: Type of practice : Not
executed.; Summary of evidence: Type of practice : The Postal Service
does not have an institutionalized process for routinely performing
post-implementation reviews. Only three post-implementation cost-
studies have been performed since 1990..
Key practice: Type of practice : 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.; Rating: Type of practice :
Not executed.; Summary of evidence: Type of practice : 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..
Source: GAO.
[End of table]
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 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.
Table 17: Portfolio Performance Evaluation and Improvement:
Type of practice: Organizational commitment; Key practice: 1. The
organization has written policies and procedures for evaluating and
improving the performance of its portfolio(s).; Rating: Not executed.;
Summary of evidence: The Postal Service has not developed enterprise-
level written policies and procedures for evaluating and improving the
performance of its IT investment portfolios..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided for conducting the portfolio performance evaluation and
improvement process.; Rating: Not executed.; Summary of evidence: The
Postal Service does not perform enterprise-level evaluations of
portfolio performance..
Key practice: Type of practice : 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.; Rating: Type of practice : Not executed.;
Summary of evidence: Type of practice : The Finance Department does not
perform enterprise-level activities to evaluate and improve portfolio
performance..
Type of practice: Activities; Key practice: 1. Comprehensive IT
portfolio performance measurement data are defined and collected using
agreed upon methods.; Rating: Not executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. Aggregate performance data and
trends are analyzed.; Rating: Type of practice : Not executed.; Summary
of evidence: Type of practice : The Postal Service does not collect the
aggregate IT portfolio performance data required to perform analyses of
this sort..
Key practice: Type of practice : 3. Investment process and portfolio
improvement recommendations are developed and implemented.; Rating:
Type of practice : Not executed.; Summary of evidence: Type of practice
: The Postal Service has not performed the analyses required to serve
as the basis for improving the investment and portfolio selection
processes..
Source: GAO.
[End of table]
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 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.
Table 18: Systems and Technology Succession Management:
Type of practice: Organizational commitments; Key practice: 1. The
organization has written policies and procedures for managing the IT
succession process.; Rating: Not executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. An official is designated to manage
the IT succession process.; Rating: Type of practice : Not executed.;
Summary of evidence: Type of practice : According to officials in the
Offices of the CFO and CTO, the Postal Service has not designated
responsibility for managing the IT succession process..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided for conducting IT succession activities.; Rating: Not
executed.; Summary of evidence: The Postal Service has no formal
process for conducting IT succession activities..
Key practice: Type of practice : 2. Investment board members exhibit
core competencies in IT succession decisional activities.; Rating: Type
of practice : Not executed.; Summary of evidence: Type of practice :
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..
Key practice: Type of practice : 3. Information from the IT project and
system inventory is used by the IT investment board.; Rating: Type of
practice : Not executed.; Summary of evidence: Type of practice : The
Postal Service‘s enterprise-level investment boards do not use
information from the IT project and system inventory for succession
management..
Type of practice: Activities; Key practice: 1. The IT investment board
develops criteria for identifying IT investments that may meet
succession status.; Rating: Not executed.; Summary of evidence: The
Postal Service does not have criteria for identifying IT investments
that may meet succession status..
Key practice: Type of practice : 2. IT investments are periodically
analyzed for succession and appropriate investments are identified as
succession candidates.; Rating: Type of practice : Not executed.;
Summary of evidence: Type of practice : 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..
Key practice: Type of practice : 3. The interdependency of each
investment with other investments in the IT portfolio is analyzed.;
Rating: Type of practice : Not executed.; Summary of evidence: Type of
practice : 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..
Key practice: Type of practice : 4. The IT investment board makes a
succession decision for each candidate IT investment.; Rating: Type of
practice : Not executed.; Summary of evidence: Type of practice : 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..
Source: GAO.
[End of table]
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.
Table 19: Investment Process Benchmarking:
Type of practice: Organizational commitments; Key practice: 1. The
organization has written policies and procedures for improving its IT
investment management process using benchmarking.; Rating: Not
executed.; Summary of evidence: The Postal Service has not developed
written policies and procedures for improving its IT investment process
through the use of benchmarking techniques..
Key practice: Type of practice : 2. A senior official is designated to
manage the benchmarking activities.; Rating: Type of practice : Not
executed.; Summary of evidence: Type of practice : The Postal Service
has not designated a senior official to manage benchmarking
activities..
Type of practice: Prerequisites; Key practice: 1. Adequate resources
are provided for conducting process benchmarking activities.; Rating:
Not executed.; Summary of evidence: Investment process benchmarking is
not an institutionalized process at the Postal Service..
Key practice: Type of practice : 2. Organizational managers and staff
with responsibilities in this area are trained in process benchmarking
techniques or are experienced in using these techniques.; Rating: Type
of practice : Not executed.; Summary of evidence: Type of practice :
The Postal Service has not designated responsibility for performing
benchmarking activities and has not provided staff with training or
experience in this process..
Type of practice: Activities; Key practice: 1. Baseline data are
collected for the organization‘s IT investment management processes.;
Rating: Not executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. External comparable best-in-class
IT investment management processes are identified and benchmarked.;
Rating: Type of practice : Not executed.; Summary of evidence: Type of
practice : 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..
Key practice: Type of practice : 3. Improvements are made to the
organization‘s investment management processes.; Rating: Type of
practice : Not executed.; Summary of evidence: Type of practice :
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..
Source: GAO.
[End of table]
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 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 business-changing 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.
In addition, the Postal Service‘s CTO organization is taking several
steps to initiate changes to the business process based on currently
available state-of-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 cost-effective 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.
Table 20: IT-Driven Strategic Business Change:
Type of practice: Organizational commitments; Key practice: 1. The
organization has written policies and procedures for conducting IT-
driven strategic business change activities.; Rating: Not executed.;
Summary of evidence: The Postal Service does not have written policies
and procedures for conducting IT-driven strategic business change
activities..
Key practice: Type of practice : 2. An official is designated to manage
the activities within this critical process.; Rating: Type of practice
: Executed.; Summary of evidence: Type of practice : 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..
Type of practice: Prerequisite; Key practice: 1. Adequate resources are
provided for conducting IT-driven strategic business change
activities.; Rating: Executed.; Summary of evidence: 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..
Type of practice: Activities; Key practice: 1. The organization creates
and maintains a knowledge base of state-of-the-technology IT products
and processes.; Rating: Not executed.; Summary of evidence: 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..
Key practice: Type of practice : 2. Information technologies with
strategic business-changing capabilities are identified and
evaluated.; Rating: Type of practice : Not executed.; Summary of
evidence: Type of practice : 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..
Key practice: Type of practice : 3. Strategic changes to the business
processes are planned and implemented based on the capabilities of
identified information technologies.; Rating: Type of practice : Not
executed.; Summary of evidence: Type of practice : 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-the-practice IT
approaches and technologies such as desktop outsourcing, data
warehousing, and data center consolidation..
Source: GAO.
[End of section]
Chapter 5 Conclusions, Recommendations, and Agency Comments:
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 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;
* 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 disagree with the Postal Service in this matter.
While guidance for cost studies does exist, the Service provided
evidence of only three post-implementation 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.
[End of section]
Appendixes:
Appendix I: Postal Service Projects with Major IT Components in
Development or Deployment:
Table 21: Postal Service IT Projects in Development or Deployment:
Project name: Associate Office Infrastructure Phase II Deployment;
Approval
date: 11/1997; Sponsoring
unit: IT; Approving
board: BOG; Approved
capital costs
in thousands: $207,416.
Project name: Commitment Management--Integrated Operations Management
Pilot; Approval
date: 09/1998; Sponsoring
unit: EN/IP; Approving
board: BOG; Approved
capital costs
in thousands: 33,921.
Project name: CONFIRM; Approval
date: 10/2000; Sponsoring
unit: MK; Approving
board: PMG; Approved
capital costs
in thousands: 9,253.
Project name: Corporate Call Phase III Deployment; Approval
date: 06/1998; Sponsoring
unit: MK; Approving
board: BOG; Approved
capital costs
in thousands: 255,761.
Project name: Delivery Operations Information System Deployment;
Approval
date: 08/2000; Sponsoring
unit: OP/IP; Approving
board: BOG; Approved
capital costs
in thousands: 127,620.
Project name: Delivery Operations Information System Research and
Development; Approval
date: 06/1998; Sponsoring
unit: OP/IP; Approving
board: BOG; Approved
capital costs
in thousands: 39,987.
Project name: e-Commerce IT & Virtual Store Modification; Approval
date: 02/2000; Sponsoring
unit: IP/MK; Approving
board: PMG; Approved
capital costs
in thousands: 9,705.
Project name: Enhanced Security Capability Program Implementation;
Approval
date: 11/2000; Sponsoring
unit: IT; Approving
board: BOG; Approved
capital costs
in thousands: 43,343.
Project name: Field Retail Operations Group; Approval
date: 01/1999; Sponsoring
unit: FI; Approving
board: COO; Approved
capital costs
in thousands: 3,444.
Project name: Forwarding Control Systems; Approval
date: 08/1998; Sponsoring
unit: EN; Approving
board: BOG; Approved
capital costs
in thousands: 33,874.
Project name: Identification Code Sort & CM-IOM; Approval
date: 09/1998; Sponsoring
unit: EN; Approving
board: BOG; Approved
capital costs
in thousands: 156,500.
Project name: Integrated Data System--Upgrade; Approval
date: 01/2001; Sponsoring
unit: EN; Approving
board: BOG; Approved
capital costs
in thousands: 33,787.
Project name: Letter Recognition Enhancement Program; Approval
date: 05/2001; Sponsoring
unit: EN; Approving
board: BOG; Approved
capital costs
in thousands: 222,403.
Project name: Mail Evaluation, Readability & Lookup Instrument--Phase
II; Approval
date: 10/2001; Sponsoring
unit: EN/MK; Approving
board: BOG; Approved
capital costs
in thousands: 141,118.
Project name: Mail Evaluation, Readability & Lookup Instrument--Phase
II Research and Development; Approval
date: 07/2000; Sponsoring
unit: EN/MK; Approving
board: BOG; Approved
capital costs
in thousands: 45,400.
Project name: Mail Item Retrieval Systems Modernization--Phase II
Research and Development; Approval
date: 08/2000; Sponsoring
unit: EN; Approving
board: COO; Approved
capital costs
in thousands: 1,713.
Project name: Net Post--Mailing On-Line System; Approval
date: 11/1999; Sponsoring
unit: MK; Approving
board: BOG; Approved
capital costs
in thousands: 18,638.
Project name: Organization Structure, Staffing & Management System;
Approval
date: 07/2001; Sponsoring
unit: FI/HR; Approving
board: PMG; Approved
capital costs
in thousands: 9,000.
Project name: PARS; Approval
date: 04/2002; Sponsoring
unit: EN/OP; Approving
board: BOG; Approved
capital costs
in thousands: 307,640.
Project name: Point of Service ONE--Stage IIB Deployment; Approval
date: 04/2000; Sponsoring
unit: MK; Approving
board: BOG; Approved
capital costs
in thousands: 403,900.
Project name: Postal Field Computing Infrastructure; Approval
date: 01/2001; Sponsoring
unit: IT; Approving
board: BOG; Approved
capital costs
in thousands: 41,562.
Project name: PostalOne!--Phase I; Approval
date: 11/1999; Sponsoring
unit: MK; Approving
board: BOG; Approved
capital costs
in thousands: 10,085.
Project name: PostalOne!--Phase II; Approval
date: 05/2002; Sponsoring
unit: MK; Approving
board: BOG; Approved
capital costs
in thousands: 54,148.
Project name: Recognition Improvement Program; Approval
date: 06/2000; Sponsoring
unit: EN; Approving
board: BOG; Approved
capital costs
in thousands: 131,150.
Project name: Self-Service Vending Machines Acquisition Post-
Deployment; Approval
date: 08/1998; Sponsoring
unit: MK; Approving
board: BOG; Approved
capital costs
in thousands: 29,938.
Project name: Shared Services Accounting; Approval
date: 04/2002; Sponsoring
unit: FI; Approving
board: PMG/COO; Approved
capital costs
in thousands: 9,481.
Project name: Standard Accounting for Retail--Retail Accounting;
Approval
date: 01/2001; Sponsoring
unit: FI/IP; Approving
board: BOG; Approved
capital costs
in thousands: 34,357.
Project name: Standard Accounting for Retail--General Ledger; Approval
date: 02/2000; Sponsoring
unit: FI/IP; Approving
board: COO; Approved
capital costs
in thousands: 5,600.
Project name: Surface-Air Management System Deployment; Approval
date: 07/2000; Sponsoring
unit: OP; Approving
board: BOG; Approved
capital costs
in thousands: 38,385.
Project name: Surface-Air Management System--Alaska; Approval
date: 05/2001; Sponsoring
unit: OP; Approving
board: COO; Approved
capital costs
in thousands: 7,419.
Project name: Surface-Air Support System; Approval
date: 06/2001; Sponsoring
unit: OP; Approving
board: BOG; Approved
capital costs
in thousands: 15,516.
Project name: Time & Attendance Collection System--National; Approval
date: 01/2001; Sponsoring
unit: FI/IP; Approving
board: BOG; Approved
capital costs
in thousands: 46,673.
Project name: Time & Attendance Collection System--Pilot; Approval
date: 08/2000; Sponsoring
unit: FI/IP; Approving
board: COO; Approved
capital costs
in thousands: 4,149.
Key:
BOG Board of Governors IP Information Platform:
COO Chief Operating Officer IT Information Technology:
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.
[End of section]
Appendix II: Postal Service IT Projects That GAO Reviewed:
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.[Footnote 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:
Title: Enhanced Security Capability Program
(ESC); Sponsoring unit: CTO/IT; Approved capital cost (in millions):
$43.3; [Empty]; Investment purpose: To secure Postal Service mail
processing, business operations, and electronic communications by
providing enhanced security capabilities to networks, systems, and
applications.; Date approved & approving entity: November 2000; Board
of Governors.
Title: Organization, Structure Staffing & Management System (OSS&M);
Sponsoring unit: CFO and Human Resources; Approved capital cost (in
millions): $9.0; [Empty]; Investment purpose: To provide a foundation
for the Postal Service‘s new human resources and payroll systems.; Date
approved & approving entity: July 2001; Postmaster General.
Title: Point of Service ONE (POS ONE)--Stage IIB; Sponsoring unit:
Marketing; Approved capital cost (in millions): $403.9; [Empty];
Investment purpose: To provide a new platform for service delivery at
13,504 sites, and replace the Postal Service‘s existing Integrated
Retail Terminals.; Date approved & approving entity: April 2000; Board
of Governors.
Title: Surface-Air Management System (SAMS); Sponsoring unit: Network
Operations Management; Approved capital cost (in millions): $38.4;
[Empty]; Investment purpose: To replace Air Contract Data Collection
System (ACDCS) and assign mail to alternative surface and air
carriers.; Date approved & approving entity: July 2000; Board of
Governors.
Source: U.S. Postal Service documents.
[End of table]
The sections below provide additional information on the investments we
reviewed.
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 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.
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:
DAR No.: 1; Approval date: June 1996; Capital funding
(in millions): $274.9.
DAR No.: 1-additional funding; Approval date: May 1998; Capital funding
(in millions): 53.7.
DAR No.: 2A; Approval date: June 1999; Capital funding
(in millions): 166.5.
DAR No.: 2B; Approval date: April 2001; Capital funding
(in millions): 403.9.
DAR No.: Total (approved POS ONE capital funding); Approval date:
[Empty]; Capital funding
(in millions): $899.0.
Source: U.S. Postal Service documents.
[End of table]
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, 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.
[End of section]
Appendix III: Comments from the United States Postal Service:
RICHARD J. STRASSER, JR. CHIEF FINANCIAL OFFICER EXECUTIVE VICE
PRESIDENT:
UNITED STATES POSTAL SERVICE:
October 4, 2002:
Mr. Joel C. Willemssen:
Managing Director, Information Technology Issues United States General
Accounting Office Washington, DC 20548-0001:
Dear Mr. Willemssen:
Thank you for providing the Postal Service with the opportunity to
review and comment on the draft report entitled, U.S. Postal Service:
Opportunities to Strengthen IT Investment Management Capabilities.
The report clearly identifies that the Postal service has processes in
place to manage its information technology investments. Consistent with
the General Accounting Office‘s information technology investment
management (ITIM) model, the Postal Service is not only managing these
investments effectively but is also addressing several key practices
found at the higher levels of maturity in the model. Based on our
reading of reports on other agencies previously evaluated by GAO, we
are pleased to find that the Postal Service rates higher than any other
department or agency reviewed to date. The Postal Service has a proven
success record with our more mature investment portfolios of
automation/mechanization equipment and facilities, and has replicated
key practices of those systems in its IT portfolio management. This has
enabled the cost effective advancement of Postal Service information
technology.
Within its current IT management system, the Postal Service actually
employs many of the key practices of the GAO ITIM model. Although the
GAO ITIM model aims at current practices in the broad universe of
federal agencies, we would hope that the final report and model would
recognize the current enterprise-wide practices of the Postal Service.
After careful review of the report and discussions with the GAO team,
we have identified the following key points in the ITIM model at which
the Postal Service takes an approach to its investment management
processes that, while differing from the [TIM model, is valid and
appropriate for an organization of the Postal Service‘s size and
complexity.
Selection and Oversight:
The Postal Service‘s well-established, enterprise-wide investment
processes are used for selection and oversight of all investments,
including IT investments. These processes are particularly important in
ensuring that investments are affordable and reflect a strategic focus
on business needs. To accomplish these objectives, the Postal Service
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. Consonant with these practices, the
chief technology officer‘s (CTO) organization has established well-
defined internal methods and criteria to select, integrate, control,
and manage IT investments. The CTO organization uses web-enabled tools
for their selection and control activities. These postal-developed
tools have been shared with several other organizations.
475 L‘ENFANT PLAZA SW WASHINGTON DC 20260-5000 202-268-5272:
FAX 202-268-4364 www.usps Corn:
Succession Planning:
The Postal Service uses an institutionalized portfolio approach to
address the succession of its IT hardware, software, and systems. This
approach enables senior management to determine strategically driven
solutions based upon priorities, lessons learned, available technology,
best practices, affordability, risk assessments, and business needs.
Software succession is:
managed through the Enterprise Architecture Councils, while hardware
succession takes a more enterprise-wide approach. Systems succession is
supported through the portfolio organization aligned to support the
business units in their technology needs. The portfolios are also
supported by external systems integrators who have met pre-determined
standards for best-in-class attributes in these business areas.
Structured protocols and practices such as these are specified in the
higher levels of the ITIM model.
Post-Implementation Review:
The Postal Service continues to employ an enterprise-wide hierarchical
approach to decision-making on Investment Management through the post-
implementation review process. This allows senior management to focus
on making strategic decisions while other, more tactical, decisions are
delegated farther down the management chain. The Postal Services uses
the budget process to review programs throughout their life, including
post-implementation, because it is the least costly, most timely and
most visible method. Interim studies or post-implementation cost
studies are conducted on major investments. Oversight is conducted by
the Office of Inspector General at various points in projects‘ life
cycles. These review processes have been implemented enterprise-wide.
Review results are provided to the appropriate management level so that
project adjustments can be made quickly and efficiently. These reviews
also provide feedback so that we can improve the effectiveness of our
investment management processes.
These IT Investment Management processes and practices are but a part
of the Postal Service‘s rigorous system for managing all of its
investments and ongoing costs. Successful as they have been in the
past, the Postal Service recognizes these as dynamic processes and
continually looks to improve them to maximize their effectiveness.
The Postal Service recognizes also that the GAO report offers just such
an opportunity to consider changes and improvements in its IT
Investment Management and will, therefore, consider the GAO
recommendations for these processes.
The Postal Service wishes to work with GAO to identify specific
improvements appropriate to its IT Investment Management processes.
Because the Postal Service has a mature Investment Management process,
we must acknowledge that any changes will need to be integrated
thoroughly in the existing Postal Service framework. Accordingly, the
Postal Service will 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. Further, the Postal Service will
develop an action plan for those GAO recommendations on IT Investment
Management that it intends to adopt. Additionally, we will be happy to
continue to work with and share our perspectives and experience with
your staff as the GAO develops processes for the ITIM model that
promote and enhance performance at the highest levels of IT Investment
Management.
Should you or your staff wish to discuss any of these comments further,
my staff and I are available at your convenience.
Sincerely,
Richard J. Strasser, Jr.:
Signed by Richard J. Strasser, Jr.:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
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.
FOOTNOTES
[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/AIMD-10.1.23 (Washington, D.C.: May 2000).
[3] United States Postal Service, United States Postal Service
Transformation Plan. (Washington, D.C.: Apr. 1, 2002).
[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).
[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).
[6] United States Postal Service, United States Postal Service
Transformation Plan (Washington, D.C.: April 2002).
[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).
[10] U.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).
[11] Expense 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.
[12] United States Postal Service, General Investment Policies and
Procedures: Handbook
F-66, (April 1999, revised February 2002).
[13] GAO/AIMD-10.1.23.
[14] GAO-01-146; GAO-01-190; GAO-01-961; GAO-02-314.
[15] According 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.
[16] The 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.
[17] One 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.
[18] The 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.
[19] ITIM Exposure Draft, Appendix III, Guidance for Conducting an ITIM
Assessment, pages 158-159.
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