U.S. Postal Service
Intelligent Mail Benefits May Not Be Achieved if Key Risks Are Not Addressed Gao ID: GAO-09-599 May 6, 2009Over 80 percent of the approximately 200 billion mail pieces processed and delivered by the U.S. Postal Service (USPS) last year was sent by commercial mailers that barcode, sort, or transport mail to get lower postage rates. Starting in May 2009, USPS will encourage these mailers to use new barcodes that have increased capabilities as part of Intelligent Mail, a new program. According to USPS, Intelligent Mail is the most complex change it has ever undertaken. GAO was asked to describe (1) the Intelligent Mail program and the status of implementation efforts and (2) the key risks to implementing Intelligent Mail and how USPS is addressing these risks. GAO reviewed USPS and regulatory documents, public comments, and interviewed USPS officials, mailers, and mailer representatives involved in developing this program.
The Intelligent Mail program is a USPS effort to encourage commercial mailers to use standardized barcodes that will improve the ability to track mail. The program is centered on a new barcode that can uniquely identify a mail piece. While Intelligent Mail could provide benefits to both mailers and USPS, it will also require both to make significant changes to their processes and information systems. USPS expects to be prepared to begin implementation in May 2009. After that, USPS will phase in price incentives and other functions in November 2009 and will require mailers to use the new barcode by May 2011 to qualify for lower postage rates. Successful implementation of Intelligent Mail faces two key risks--(1) USPS's management approach and (2) mailers may not choose to participate in the program--which if not addressed, could limit achieving Intelligent Mail benefits. USPS has taken some steps to address these risks, such as a phased approach. However, USPS has not followed some key program management practices to reduce risks, raising questions about whether USPS and mailers will be able to meet schedule and program objectives. For example, USPS (1) lacks a comprehensive strategy, including all planned phases and the specific functions and systems to be implemented in each phase; goals and measures of success; and a risk mitigation plan to address the risks that could impact the Intelligent Mail program as a whole; and (2) lacks information on costs and savings attributable to the Intelligent Mail program, including a baseline and mechanism to track and measure actual savings, which are needed to measure program performance. The second risk is that program success is dependent on mailer participation, and it is uncertain whether pricing and other incentives will encourage mailers to participate to the extent anticipated. Some mailers have said they find the pricing incentives insufficient to recover their investment in the program. The Postal Regulatory Commission has also noted that uncertainty may lead mailers to delay adoption. Low mailer adoption could affect USPS's ability to report representative delivery service results, as required to comply with service performance reporting requirements, but USPS has not said how it would address this risk.
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-09-599, U.S. Postal Service: Intelligent Mail Benefits May Not Be Achieved if Key Risks Are Not Addressed
This is the accessible text file for GAO report number GAO-09-599
entitled 'U.S. Postal Service: Intelligent Mail Benefits May Not Be
Achieved if Key Risks Are Not Addressed' which was released on May 6,
2009.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
May 2009:
U.S. Postal Service:
Intelligent Mail Benefits May Not Be Achieved if Key Risks Are Not
Addressed:
GAO-09-599:
GAO Highlights:
Highlights of GAO-09-599, a report to congressional requesters.
Why GAO Did This Study:
Over 80 percent of the approximately 200 billion mail pieces processed
and delivered by the U.S. Postal Service (USPS) last year was sent by
commercial mailers that barcode, sort, or transport mail to get lower
postage rates. Starting in May 2009, USPS will encourage these mailers
to use new barcodes that have increased capabilities as part of
Intelligent Mail, a new program. According to USPS, Intelligent Mail is
the most complex change it has ever undertaken.
GAO was asked to describe (1) the Intelligent Mail program and the
status of implementation efforts and (2) the key risks to implementing
Intelligent Mail and how USPS is addressing these risks. GAO reviewed
USPS and regulatory documents, public comments, and interviewed USPS
officials, mailers, and mailer representatives involved in developing
this program.
What GAO Found:
The Intelligent Mail program is a USPS effort to encourage commercial
mailers to use standardized barcodes that will improve the ability to
track mail. The program is centered on a new barcode that can uniquely
identify a mail piece. While Intelligent Mail could provide benefits to
both mailers and USPS, it will also require both to make significant
changes to their processes and information systems. USPS expects to be
prepared to begin implementation in May 2009. After that, USPS will
phase in price incentives and other functions in November 2009 and will
require mailers to use the new barcode by May 2011 to qualify for lower
postage rates.
Figure: Example of a Mail Piece Containing an Intelligent Mail Barcode
and Program Benefits:
[Refer to PDF for image: illustration]
Illustration of an envelope containing address, return address, and
Intelligent Mail barcode.
Intended program benefits:
* Increased efficiency and reduced costs;
* Reduced amount of undeliverable as addressed mail;
* Better service information;
* Price reductions and other benefits for mailers.
Source: U.S. Postal Service.
[End of figure]
Successful implementation of Intelligent Mail faces two key risks”(1)
USPS‘s management approach and (2) mailers may not choose to
participate in the program”which if not addressed, could limit
achieving Intelligent Mail benefits. USPS has taken some steps to
address these risks, such as a phased approach. However, USPS has not
followed some key program management practices to reduce risks, raising
questions about whether USPS and mailers will be able to meet schedule
and program objectives. For example, USPS:
* lacks a comprehensive strategy, including all planned phases and the
specific functions and systems to be implemented in each phase; goals
and measures of success; and a risk mitigation plan to address the
risks that could impact the Intelligent Mail program as a whole; and;
* lacks information on costs and savings attributable to the
Intelligent Mail program, including a baseline and mechanism to track
and measure actual savings, which are needed to measure program
performance.
The second risk is that program success is dependent on mailer
participation, and it is uncertain whether pricing and other incentives
will encourage mailers to participate to the extent anticipated. Some
mailers have said they find the pricing incentives insufficient to
recover their investment in the program. The Postal Regulatory
Commission has also noted that uncertainty may lead mailers to delay
adoption. Low mailer adoption could affect USPS‘s ability to report
representative delivery service results, as required to comply with
service performance reporting requirements, but USPS has not said how
it would address this risk.
What GAO Recommends:
GAO recommends that the Postmaster General address the risks to
successful implementation of Intelligent Mail by developing (1) a
comprehensive Intelligent Mail strategy; (2) attributable cost and
savings information; and (3) a plan that addresses how USPS will
mitigate risks, including the implications of the impact of lower-than-
anticipated customer adoption of Intelligent Mail. USPS agreed to
recommendations one and three and has begun implementing them, but
stated that it already has cost information.
View [hyperlink, http://www.gao.gov/products/GAO-09-599] or key
components. For more information, contact Phillip Herr at (202) 512-
2834 or herrp@gao.gov.
[End of section]
Contents:
Letter:
Background:
Intelligent Mail Program Seeks to Provide Better Mail Tracking
Information and Begins Phased Transition in May 2009:
The Intelligent Mail Program May Not Achieve All of Its Intended
Benefits if Key Risks Are Not Addressed:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Significant Dates in the Intelligent Mail Program, 2001 to
2011:
Appendix III: Comments from the U.S. Postal Service:
Appendix IV: GAO Contact and Staff Acknowledgments:
Figures:
Figure 1: Example of Different Barcodes on a Letter:
Figure 2: Example of an Intelligent Mail Barcode, Including Its
Information Fields:
Figure 3: Selected Mail Operations Involved with Full Service
Intelligent Mail:
Abbreviations:
OIG: U.S. Postal Service Office of the Inspector General:
PRC: Postal Regulatory Commission:
USPS: U.S. Postal Service:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
May 6, 2009:
The Honorable Stephen F. Lynch:
Chairman:
Subcommittee on Federal Workforce, Postal Service, and the District of
Columbia:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Danny K. Davis:
House of Representatives:
Over 80 percent of the approximately 200 billion mail pieces processed
and delivered by the U.S. Postal Service (USPS) last year was sent by
commercial mailers that barcode, sort, or transport mail in exchange
for lower postage rates.[Footnote 1] Starting in May 2009, USPS will
encourage these mailers to use new standardized Intelligent Mail
barcodes which will make it easier to track and provide information
about the mail's progress through the processing system. USPS says the
Intelligent Mail program is the most complex program it has ever
undertaken, involving changes to almost 30 different systems, and that
it will benefit both commercial mailers and USPS.
To assist Congress in understanding USPS's Intelligent Mail program,
you asked us to address (1) what the Intelligent Mail program is and
the status of USPS's implementation efforts and (2) the key risks to
implementing Intelligent Mail and how USPS addressed them.
To address these issues we (1) reviewed and analyzed USPS documents
related to developing and implementing the Intelligent Mail program;
(2) interviewed officials from USPS, the USPS Office of the Inspector
General (OIG), the Postal Regulatory Commission (PRC), and commercial
mailers--which included representatives from some companies that
participated in the development of the Intelligent Mail program and
commercial mailer associations that represented a majority of the mail
sent; (3) visited USPS and commercial mailer facilities, including
facilities where mail is printed and sorted; (4) reviewed USPS's
management approach based on practices and industry standards developed
by leading organizations, such as the Software Engineering Institute
and the Chief Information Officers Council,[Footnote 2] to effectively
manage major programs and minimize risks; and (5) analyzed comments
submitted primarily by commercial mailers and mailer associations in
response to USPS Federal Register notices. We conducted this
performance audit from September 2008 to April 2009 in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives. See appendix I for further information
on our scope and methodology.
Background:
The mailing industry includes businesses, organizations, and other
parties that send and rely on mail to maintain contact with their
customers. The industry also encompasses mail preparers, including
printers and businesses that send or receive mail on behalf of a third
party. Collectively, we refer to these two groups as commercial
mailers, who in 2008 accounted for 86 percent of all mail processed by
USPS. Although commercial mailers number in the millions, approximately
200 of the largest mailers account for around 30 percent of the total
mail volume.
Since the 1970s, the use of barcodes and automation has increased
efficiency in USPS mail processing operations. Commercial mailers have
been encouraged to use barcodes through pricing incentives, allowing
USPS to cut costs and increase efficiency in its mail processing
operations. In particular, automated mail processing machines can sort
mail with barcodes containing delivery information faster than mail
sorted manually. Over the past three decades, the number and type of
barcodes increased along with technology changes, and in 2003 USPS
estimated that there were more than 30 different barcodes in use. These
barcodes include the following:
* POSTNET, which contains delivery information that enables automated
sorting of the mail to the carrier's route level. Mailers receive a
postage discount when they print POSTNET barcodes on their mail.
* PLANET, which is a barcode that contains identification numbers to
enable tracking mail in USPS's mail processing system but contains less
information than the Intelligent Mail barcode.
* Certified mail service, which provides mailers notification when mail
arrives at its destination.
The use of numerous barcodes has led to some drawbacks, such as a
cluttered mail piece (see fig. 1). Additionally, whenever USPS adds or
upgrades its mail processing equipment, it has to ensure that the
equipment remains compatible with each of the relevant barcodes.
Figure 1: Example of Different Barcodes on a Letter:
[Refer to PDF for image: illustration]
Illustration of an envelope containing the following barcodes:
* Certified mail label;
* PLANET Code;
* POSTNET Code.
Source: U.S. Postal Service and GAO.
[End of figure]
Intelligent Mail Program Seeks to Provide Better Mail Tracking
Information and Begins Phased Transition in May 2009:
Through Intelligent Mail, USPS plans to use standardized barcodes to
track mail and thus provide USPS and mailers with more information.
This information is important to USPS's efforts to improve efficiency
and reduce costs. In addition, it could provide mailers with the status
of mail as it moves through USPS's mail processing system, improving
predictability of delivery, as well as providing information on whether
some mail--such as bill payments and movie returns--has been sent.
Although both USPS and mailers could benefit from the program,
implementing the program will require both parties to make considerable
changes to their systems and processes. USPS is completing its
development of the Intelligent Mail program and plans to implement the
program in phases, with the first phase starting in May 2009 and an
additional phase planned for November 2009.
Intelligent Mail Seeks to Provide More Information through the Use of
Standardized Barcodes:
The overall concept of Intelligent Mail is to provide better
information and improve efficiency by using standardized barcodes to
continuously track the mail as it passes through USPS's mail processing
system. The program has been led by USPS with input and involvement
from the mailing industry. The Intelligent Mail concept was articulated
in a 2001 report by the Mailing Industry Task Force, which was led by
chief executives of 11 mailing industry companies and USPS's Deputy
Postmaster General. This task force noted that Intelligent Mail would
help ensure that mail processing is responsive to customer needs. Since
then, USPS has been involved with developing and planning the
Intelligent Mail program. For a timeline of the significant events in
the development of the Intelligent Mail program, see appendix II.
Beginning in May 2009, mailers who choose to participate in Intelligent
Mail have two options that offer different incentives based on the
level of effort required for mailers to comply:[Footnote 3]
* Basic Service. Requires mailers to apply an Intelligent Mail barcode
and populate the relevant fields, but not include unique numbers in the
barcode. Mailers who implement Basic Service will receive a postage
discount for using a barcode (as they would using a POSTNET barcode)
but will not receive the postage discount or other benefits associated
with Full Service.
* Full Service. Requires mailers to populate and apply a barcode, but
unlike Basic Service, the barcode must contain a number that is unique
to the particular mail piece. Full Service mailers must also uniquely
barcode any trays or containers they use to package mail and submit
electronic documentation of their mailings. USPS provides pricing
discounts and other incentives for mailers implementing Full Service
because it requires mailers to make more changes and results in the
greatest benefit for USPS.
The Intelligent Mail program is centered on the Intelligent Mail
barcode, a standardized barcode that is information-rich and expands
the ability to track individual mail pieces (see fig. 2). This barcode
is capable of containing the same information as the current POSTNET
and PLANET barcodes combined, in addition to other data, which
eliminates the need for multiple barcodes on the same mail piece. The
new barcode contains:
* a mailer identification number, assigned by USPS, which enables USPS
to identify the sender of the mail piece, and:
* a unique number, generated by the mailer, which enables USPS to track
the same mail piece as it travels through its processing system.
Since 2006, USPS has permitted mailers to use the Intelligent Mail
barcode which enabled mailers to test their ability to print the
barcode to conform to USPS standards. In fiscal year 2008, USPS
estimated that over 580 mailers had begun using the barcode.
Figure 2: Example of an Intelligent Mail Barcode, Including Its
Information Fields:
[Refer to PDF for image: illustration]
Information fields:
Fields 1-2: empty;
Fields 3-5: Service type;
Fields 6-14: Mailer identification number;
Fields 15-20: Unique number[A];
Fields 21-31: Delivery address information.
Source: U.S. Postal Service and GAO.
[A] The unique number is either six digits (as shown in the shaded
area) or nine digits, depending on the mail volume of the mailer.
Mailers using Basic Service do not have to provide a unique number.
[End of figure]
Intelligent Mail Is Expected to Benefit USPS and Mailers by Providing
Enhanced Information and Mail Tracking:
USPS has identified several ways it expects the implementation of
Intelligent Mail to benefit USPS and mailers:
* Improve efficiency, reduce costs, and improve timeliness of delivery.
USPS says it will be able to use information from Intelligent Mail to
improve its processing system. For example, USPS expects it will be
able to better identify and diagnose problems, such as systemic
bottlenecks that result in costly manual sorting and delivery delays.
Also, USPS plans to use Intelligent Mail to create efficiencies by
streamlining and automating the process it uses to accept mail from
commercial mailers, which is currently time-and labor-intensive.
* Reduce the amount of mail that must be forwarded, which can involve
extra handling by USPS and delays in delivery. As an incentive to adopt
Full Service Intelligent Mail, USPS will provide free notification when
intended recipients have moved and filed a change-of-address with USPS,
a service mailers previously paid for. This feature, known as Address
Correction Service, could help USPS meet its goal of reducing the
amount of mail that cannot be delivered as addressed. In exchange for
this free service, USPS requires mailers to update their mailing lists
in order to avoid paying additional fees.
* Provide better service to mailers. Through Intelligent Mail, USPS
plans to provide better service to mailers through real-time feedback.
For example, as another incentive to adopt Full Service Intelligent
Mail, USPS will provide mailers information on when their mail entered
USPS's system, known as Start the Clock. This information, which was
not previously offered by USPS, is helpful because it enables USPS to
respond to mailer inquiries on missing or delayed mail. Also, since
Intelligent Mail will be uniquely identified, USPS will have the
ability to isolate and give special handling to a specific mail piece,
which creates an opportunity for USPS to offer mailers new products and
services.
* Service performance measurement capability. Intelligent Mail will
allow USPS to gather more comprehensive and detailed service
performance information and measure it against established performance
standards, which will help keep USPS accountable to its stakeholders.
The 2006 Postal Accountability and Enhancement Act required USPS to
develop a system to measure service performance and report to
PRC.[Footnote 4] The service performance measurement system proposed by
USPS to meet this requirement relies on data from Intelligent Mail.
* Financial incentives. USPS is also offering a financial incentive to
mailers. Specifically, those who adopt Full Service Intelligent Mail
will receive a postage discount, in addition to other worksharing
discounts. Mailers who use Full Service will receive a three-tenths of
1 cent discount for each First-Class Mail piece they send, while
Standard Mail and periodicals[Footnote 5] will receive a discount of
one-tenth of 1 cent for each piece.[Footnote 6]
Implementation of Intelligent Mail Involves Many Changes for Mailers
and USPS:
According to USPS, Intelligent Mail is the most complex project it has
undertaken. It also indicated that preparing for and implementing
Intelligent Mail will involve considerable changes for both mailers and
USPS, including significant changes to information and software systems
used by both mailers and USPS.[Footnote 7] The overall commercial mail
process using Intelligent Mail, including how it impacts mailer and
USPS operations, is shown in figure 3.
Figure 3: Selected Mail Operations Involved with Full Service
Intelligent Mail:
[Refer to PDF for image: illustration]
Mailers:
Preparation:
Mailer prepares mail, calculates postage, and schedules mail drop-off
at USPS facility.
Intelligent Mail changes:
* Redesign mail piece to include unique barcodes on each mail piece,
and on each tray and container;
* Submit electronic documentation, including how mail pieces are placed
in trays and containers;
* Electronically schedule appointment prior to mail drop-off at a USPS
facility.
Intended benefits:
* Price incentives;
* Address correction and mail induction information at no charge;
* Efficiency improvements through electronic communication.
USPS:
Acceptance:
USPS accepts mail and verifies mail preparation and postage paid are
correct.
Intelligent Mail changes:
* Automate the mail verification process;
* Reconcile mail scan information to mailer‘s electronic documentation;
* Provide timely information to mailers regarding mail quality;
* Train staff on process changes.
Intended benefits:
* Efficiency improvements through further automation;
* More timely and less costly mail entry process;
* Improve quality control through USPS feedback to mailers.
USPS: Processing and delivery:
USPS processes and transports mail to final delivery destination.
Intelligent Mail changes:
* Create common infrastructure to read and transmit data throughout
mail processing;
* Create new centralized data storage system to provide better access
to information;
* Train staff on new systems and equipment.
Intended benefits:
* New capability to track individual mail pieces throughout processing;
* Enhanced diagnostic information will allow USPS to analyze system
performance and improve delivery reliability.
USPS: Measuring and reporting service performance:
USPS uses barcode scans to provide information to PRC and mailers.
Intelligent Mail changes:
* Develop systems to store and retrieve information from new barcodes;
* Establish methods to measure service performance;
* Develop reports on service performance for PRC and mailers.
Intended benefits:
• Provide mailers with information about their mail;
* Service performance information to meet statutory reporting
requirements.
Sources: U.S. Postal Service and GAO.
[End of figure]
Mailers:
Intelligent Mail requires significant changes to the way mailers
prepare and submit their mail. Mailers using Intelligent Mail will need
to redesign their mail pieces by populating and applying the new
barcode. Full Service mailers will also need to ensure that their
barcodes contain a unique tracking number. This means that each mail
piece a mailer sends within a 45-day period must have a number embedded
in its barcode that is different from every other piece of mail that
the mailer sends within that time frame. Full Service mailers must also
apply unique barcodes to mail trays and containers, and document which
mail pieces are contained in which tray and container. These changes
may result in significant process changes for mailers and may require
new software or staff training.
Mailers participating in Full Service Intelligent Mail must also make
changes to their information systems in order to submit documentation
electronically to USPS. The electronic documentation must contain
information on all of the Intelligent Mail barcodes used on the mail
pieces, trays, and containers; how the mail pieces, trays, and
containers fit together; and the identity of the mailer. While some
mailers currently submit electronic documentation, many currently
submit this information in hard copy format. Mailers must also provide
advance notification of their mail drop-off to a postal facility by
sending an electronic appointment and will need to ensure that their
software systems are able to communicate effectively with USPS's
systems. This may involve purchasing or upgrading software or hardware.
Mailers will also need to train their staff on how to use the new
software and how to communicate with USPS electronically.
USPS:
Intelligent Mail involves changes to USPS's operations. For instance,
USPS's current process for mail acceptance and verification is costly,
time-consuming, and labor-intensive. Mail acceptance and verification
involves mailers bringing mail to a postal facility, USPS accepting it
and verifying that it has been prepared according to postal standards,
and USPS verifying that the postage has been accurately calculated.
Currently, this process involves a postal official physically sampling
a portion of the mail to make sure it meets standards and is eligible
for the prices claimed in the mailer's documentation. With Intelligent
Mail, USPS plans to be able to scan mail pieces, trays, and containers,
and reconcile the information to the documentation that the mailer has
sent electronically. USPS envisions that, by using Intelligent Mail, it
can eventually automate the verification process and reduce its
reliance on manual tests of the mail, making it easier for mailers to
hand mail off, thus saving both USPS and mailers time and the related
costs. Furthermore, USPS has completed changes to software for its mail
processing equipment so it is capable of scanning the new barcodes.
USPS officials said they completed these upgrades as they were
performing other, routine software upgrades for this equipment.
In addition, USPS is changing its information technology systems. As
mailers start using Intelligent Mail, USPS expects to process scans
from millions of mail pieces containing new barcodes on a daily basis.
USPS is developing the information technology infrastructure to scan
and track individual mail pieces as they travel through its processing
system. First, USPS is developing a new Intelligent Mail information
technology system to process, manage, and store data from scanned
barcodes. USPS has acquired hardware and is using contractors to
develop software for this system. Second, USPS is integrating this new
system with existing USPS systems to share data, which requires changes
to almost 30 different systems and 59 different connections between
these systems. An example of one of the existing USPS systems that must
be integrated with the new Intelligent Mail system is PostalOne!, a
main communications interface between USPS and mailers. Upgrades to
PostalOne! include a better user interface design for mailers,
electronic documentation acceptance capabilities, and more options for
mailers to access Intelligent Mail tracking information.
USPS plans to use barcode scan information to measure its service
performance and report the results to PRC. However, USPS will need to
establish report content and format standards that comply with PRC
reporting requirements. In order to report service performance to PRC,
USPS will need to develop a strategy to aggregate information from mail
pieces that will be representative of all mail. USPS will also need to
develop standards for information that it will provide to mailers
regarding their own mail.
USPS Has an Aggressive Development Schedule to Implement Intelligent
Mail in May 2009 and Plans to Add to the Program in a Future Release:
USPS has said it will be ready to implement Intelligent Mail as planned
in May 2009. To meet this date, USPS has been engaged in an aggressive
program development schedule since June 2008 that involved defining
program requirements and designing, building and testing systems and
interfaces.[Footnote 8] According to USPS, it began defining the
requirements of the project in July 2008, designing the systems in
October 2008, and started building the systems in November 2008. USPS
tested the systems both internally and with mailers from February
through April 2009. A limited number of mailers have been involved in
testing and integrating their systems with USPS's systems. Despite this
aggressive schedule, a senior postal official told us that USPS
discovered that it could not implement all of the desired functions of
the system by May 2009, as originally planned. Further, he said that
additional functions may be added in future phases that will be
determined at a later date.
The general timeline for Intelligent Mail implementation is as follows:
* May 11, 2009. USPS plans to internally implement the first phase of
Intelligent Mail and expects to have the systems in place to provide
Full Service functions, including Address Correction Service and
electronic documentation.
* May 18, 2009 and beyond. Mailers will begin testing their systems'
ability to access and electronically transmit documentation to USPS's
system and will be ready to fully implement upon completing the tests,
which should take about 6 to 8 weeks according to a senior USPS
official.
* November 29, 2009. USPS plans to implement the second phase of
Intelligent Mail and expects to begin offering price incentives for
Full Service. USPS also plans to add other program functions, although
it had not finalized these plans when we met with USPS officials in
early April.
* May 2011. The use of POSTNET and PLANET barcodes will be phased out
and mailers seeking reduced automation postage rates will be required
to use Intelligent Mail barcodes.
Mailers will have approximately 6 months from May through November 2009
to test their systems and begin implementation before the price
incentives go into effect. USPS has estimated that by November 2009,
enough mailers will be participating in Full Service Intelligent Mail
so that it will account for 54 percent of First-Class automation
letters and 63 percent of Standard Mail Commercial and Nonprofit
automation letters. In fiscal year 2008, these types of automation
letters accounted for approximately 100 billion mail pieces.
As mailers complete testing and begin generating mail with Intelligent
Mail barcodes, USPS has said it is taking steps to ensure that the mail
acceptance process goes smoothly for mailers presenting mail at USPS
facilities. For example, USPS plans to conduct customized training for
both mailers and USPS employees at facilities where mailers will
present mail barcoded with Intelligent Mail barcodes. This training
will be conducted in the weeks before mailers plan to implement
Intelligent Mail. USPS officials also noted that they will offer
training at a national-level postal forum in May 2009 and will offer
materials that mailers can use to train their staffs.
The Intelligent Mail Program May Not Achieve All of Its Intended
Benefits if Key Risks Are Not Addressed:
Implementation of the Intelligent Mail program faces two key risks.
First, USPS's approach to developing and managing the program has not
followed certain key program management practices to reduce risks and
mailers have raised questions about whether USPS and mailers will be
able to meet schedule and program objectives. Second, USPS has said
that Intelligent Mail success is dependent on mailer participation in
the Full Service option, but it is uncertain whether pricing and other
incentives will encourage mailers to participate to the extent
anticipated. If these risks are not addressed, they could limit USPS's
ability to fully achieve the program's benefits.
Intelligent Mail Implementation May Be at Risk Due to USPS's
Development and Management Approach:
USPS's management approach to developing the Intelligent Mail program
has lacked critical program management elements that are considered
best practices. The lack of these elements may increase the program's
risk and raise questions about whether USPS will be able to meet
deadlines or program objectives. Specific elements of an effective
management approach that USPS lacks include:
* a comprehensive strategic plan;
* information about program costs, including its anticipated savings or
cost reductions; and:
* a risk mitigation plan.
In developing a large and complex effort such as the Intelligent Mail
program, these key elements are particularly important, and USPS could
benefit from best practices used by leading organizations. Best
practices are tried and proven methods, processes, techniques, and
activities that organizations define and use to minimize risks and
maximize chances for success. Experience has shown that organizations
that adopt and effectively implement best practices can reduce the
risks associated with implementing projects, including information
technology projects, to acceptable levels. For example, we have
previously reported that using best practices related to information
technology acquisitions can result in better outcomes--including cost
savings, improved service and product quality, and ultimately, a better
return on investment.[Footnote 9] Such practices have been identified
by leading organizations such as the Software Engineering Institute,
the Chief Information Officers Council, and in our prior work analyzing
best practices in industry and government.
Effective program management involves establishing and maintaining
plans defining project scope and activities, including a budget and
schedules, key deliverables, and milestones for key deliverables. An
effective risk management process identifies potential problems before
they occur, so that risk-handling activities may be planned and invoked
as needed across the life of the product and project to mitigate
adverse impacts on achieving objectives. Key activities include
identifying and analyzing risks, assigning resources, developing risk
mitigation plans and milestones for key mitigation deliverables,
briefing senior-level managers on high priority risks, and tracking
risks to closure.
In a separate review begun in March 2009, we are assessing the cost,
schedule, and performance status of the Intelligent Mail program and
whether the Postal Service has the capabilities to successfully acquire
and manage this program. To effectively manage major information
technology programs, organizations should use sound acquisition and
management processes to minimize risks and thereby maximize chances for
success. Such processes include project and acquisition planning,
requirements development and management, risk management, project
monitoring and control. Our work has shown that such processes are
significant factors in successful systems acquisitions and development
programs, and they improve the likelihood of meeting cost and schedule
estimates as well as performance expectations.
USPS Lacks Critical Program Management and Risk Mitigation Elements:
USPS lacks an up-to-date comprehensive Intelligent Mail strategic plan
to facilitate program management and accountability. A comprehensive
plan or strategy can provide a program's overall vision and goals,
including detailed milestones and measures of success which provide
meaningful guidance for planning and measuring progress. Such plans can
also establish deadlines for achieving objectives and assigning
responsibility for program implementation. USPS published an
Intelligent Mail Corporate Plan in 2003, which described its overall
vision for Intelligent Mail and three specific strategies for achieving
this vision. USPS said that it would periodically update this plan;
however, USPS has not provided periodic updates, despite making major
changes to the Intelligent Mail program. For example, USPS has
announced two implementation phases for Intelligent Mail--May 2009 and
November 2009--but USPS is still defining key requirements for the
November phase and possible future phases. Also, it is not clear when
certain functions and the associated systems, such as automated mail
verification, will be implemented. In other areas, USPS has developed
comprehensive strategic plans that were periodically updated and that
provided an overview of the major phases and activities that would be
completed in each phase. For years, dating back to the 1990s, USPS
developed and periodically updated its Corporate Automation Plan that
identified its vision, goals, expected savings, and actions planned for
each phase to achieve a completely barcoded and fully automated mail
processing system. Similarly, USPS developed and updated its Corporate
Flats Strategy that detailed the decision points and activities planned
for the three major phases related to improving flat mail processing.
USPS also lacks program cost information associated with Intelligent
Mail, including a baseline and mechanism to track and measure actual
savings. Having reliable cost estimates is critical to support
management decisions about budget development, resource requirements,
and allocation, as well as to measure performance. According to USPS,
one of the key benefits of the Intelligent Mail program is to reduce
operating costs, which are primarily workhour costs, by increasing the
use of mail information to improve the efficiency of its automated mail
processing operations. A senior USPS official told us that attributing
efficiencies and costs savings directly to the Intelligent Mail program
would be difficult because USPS is initiating numerous programs to
reduce costs and would be unable to isolate and attribute cost savings
only to the Intelligent Mail program. We recognize the difficulty of
directly attributing costs, but USPS could measure how Intelligent Mail
implementation affects two processes--mail acceptance and verification.
As we mentioned earlier, USPS envisions that, by using Intelligent
Mail, it can eventually automate its acceptance and verification
processes and reduce its reliance on manual tests of the mail, making
it easier for mailers to hand mail off, thus saving both USPS and
mailers time and the related costs. Since these processes are directly
affected by the implementation of Intelligent Mail, their associated
costs and savings could be identified and attributed to the Intelligent
Mail program. By tracking these costs, USPS could measure how the
Intelligent Mail program actually reduces operating costs in these
areas.
Finally, USPS lacks a program-level risk mitigation plan--a plan that
identifies and addresses potential weaknesses before they adversely
affect the Intelligent Mail program. According to USPS officials, the
Intelligent Mail program is the most complex effort initiated in USPS
history and its successful implementation is important to the future of
USPS. However, the program is vulnerable to several areas of risk that
USPS has not addressed. For example, USPS has said that Intelligent
Mail success is dependent on mailer participation in the Full Service
option, but it has not stated how it would address the impact of lower
than anticipated mailer participation. USPS has developed a process to
identify and address technical risks related to, for example,
integrating the Intelligent Mail system with existing USPS systems, but
it has not developed a more strategic-level risk mitigation plan that
discusses how it will address the key risk areas that could impact the
program as a whole, such as lower-than-anticipated mailer
participation, resource limitations or schedule delays.
Mailers Had Concerns about USPS's Development of the Intelligent Mail
Program:
During the program's development over the past 2 years, many mailers
expressed their concerns regarding these risks in comments to the
Federal Register, PRC, and in industry newsletters. In January 2008,
USPS published the Intelligent Mail Advance Notice of Proposed
Rulemaking in the Federal Register, which proposed implementing the
Intelligent Mail program in January 2009.[Footnote 10] In April 2008,
USPS publicized a revised Intelligent Mail Federal Register notice
which pushed back the implementation date to May 2009 and proposed
incentives for Full Service participants.[Footnote 11] Based on our
review of the more than 460 comments submitted to USPS in response to
these notices, the concerns cited by mailers included the following:
* USPS communication efforts were insufficient, and mailers had
difficulty obtaining program information, including--until recently
[Footnote 12]--the expected Full Service discount, which prevented
mailers from determining their return on investment;
* mailer participation in Intelligent Mail will likely be affected by
mailers who may not be able to use Intelligent Mail barcodes due to the
technological challenge of printing the barcodes and storing all of the
electronic information;
* USPS had not provided finalized information technology requirements,
which impeded some company's efforts to budget for or develop the
necessary software; and:
* USPS and mailers may not be ready for implementation given USPS's
short-time period in which to simultaneously design, develop, test, and
implement the Intelligent Mail program.
In August 2008, USPS announced its Intelligent Mail Final Rule which
finalized the May 2009 implementation date and allowed mailers to use
POSTNET barcodes until May 2011.[Footnote 13] According to a major
industry newsletter published in August 2008, mailers remained
concerned with USPS's approach. They said they were unable to make the
return on investment and justify the expense without a substantial
price differential or, for some, the benefit of free Address Correction
Service with less restrictive time limits.
USPS Actions Address Some Implementation Concerns, but Others Remain:
USPS has taken some steps to address readiness and mailer concerns
regarding its management and its preparedness to implement the program.
It delayed implementation of the program from January 2009 to May 2009.
USPS has said it will also attempt to address mailer concerns about
management of the program by reaching out to them. In this regard, USPS
officials said they plan to mitigate implementation risks by working
with each mailer to customize its transition from using POSTNET
barcodes to Intelligent Mail barcodes. In addition, USPS also has
undertaken a variety of communication efforts to provide mailers with
updated program and technical information. For example, it established
four different workgroups as part of its Mailers' Technical Advisory
Committee.[Footnote 14] Each of these workgroups, comprised of mailing
industry representatives and USPS officials, seeks to resolve a
specific issue and offer recommendations to USPS. USPS also has
developed educational and training programs, such as the Intelligent
Mail University, a 1-day comprehensive course. In addition, USPS has
provided information through its traditional channels of
communications, such as through its Postal Customer Council
organization,[Footnote 15] at conferences, and on its Web site.
Taken together, some of these USPS efforts could be considered best
practices associated with effective program management; however, the
lack of other critical program management elements may expose the
project to unnecessary risk that it will not achieve its schedule and
performance objectives. In addition to these risks, other factors also
add to the program's risk, as follows:
* The Intelligent Mail program is highly complex and involves multiple
system integrations implemented concurrently in a short timeframe with
limited testing before implementation, which could make the program
susceptible to errors or unanticipated problems.
* The program continues to evolve as USPS defines requirements for
Phase 2.
* Program implementation may require considerable time with USPS
working directly with individual mailers to integrate their respective
systems. For example, it might require up to 8 weeks for a mailer to
gain approval from USPS to submit electronic documentation, during
which the mailer and USPS work together to resolve any technical
issues, according to a senior USPS official.
Last fall we interviewed representatives from nine companies involved
in the mailing industry that participated in the development of the
Intelligent Mail program. We also talked to representatives from six
commercial mailer trade associations who collectively represent most of
the mail sent. Some of these mailers expressed frustrations with USPS's
approach because, they said, it appeared to lack planning and
consistency, making it difficult for them to make their needed changes.
Some mailers cited the lack of an overall plan with dates, which caused
difficulty with their internal planning and resource assignment.
Without such a plan, it appeared that USPS was simultaneously making
decisions and implementing the program. For example, USPS announced it
would provide free Address Correction Service to Full Service
participants, and then subsequently announced a time limit for mailers
to use information and implement address changes. Mailers said that the
time limitation made it practically impossible to utilize the service.
Other mailers said that, even though Intelligent Mail required
substantial software changes and development, USPS continued to make
changes to program technical requirements and specifications, making it
difficult for them to respond in time for the planned implementation
date.
Financial Incentives May Not Be Sufficient to Encourage Mailers to
Participate in Full Service:
Another risk to the success of the Intelligent Mail program is that
mailers may not choose to participate in Intelligent Mail. Based on our
interviews and review of other industry and USPS documentation, the
Intelligent Mail Full Service option's pricing and other incentives may
not be sufficient to convince some mailers to participate. USPS
officials have told us that the success of Intelligent Mail is
dependent upon mailers participating in the Full Service option. Thus,
if mailers decline to participate, the program has a reduced chance of
succeeding.
Some mailers have said that the program's pricing and benefits are not
enough to provide sufficient incentives or even to recover their
investments. For example, a mailer association said its members had
hoped for a larger discount than USPS announced, considering the large
investments some companies had made in preparing for the Intelligent
Mail program. A mailer told us that in order for the company to recover
its costs, the discount would have to be one-half of 1 cent per mail
piece, or much higher than the announced price incentives. Costs for
mailers preparing for Full Service vary largely depending on the size
of the mailer. For example, some large mailers said they invested
millions of dollars to update and purchase hardware and software, while
some smaller mailers expected to invest tens of thousands of dollars.
Some mailers also expressed their concern about USPS's delay in
offering the price incentives. USPS delayed the effective date of the
price incentives from May 2009 to November 2009. Although USPS said it
did so because it does not want to punish mailers who do not adopt Full
Service immediately, some mailers who were planning on implementing
Intelligent Mail in May viewed this 6-month delay as problematic
because of the increased time to recover their implementation costs.
Finally, some mailers expressed concerns about the duration of the
discount after USPS announced it intends to offer the price incentives
on a temporary basis. According to USPS, these price incentives are not
expected to become a permanent part of its pricing schedule, meaning
the incentives would likely be phased out. USPS and mailers view the
financial incentives differently. According to USPS, the price
incentives are one of several benefits to encourage mailers to
participate in Full Service, while many mailers view the financial
incentives as the main benefit of Intelligent Mail. In addition to
concerns about financial incentives, mailers find Intelligent Mail
complex. USPS requires mailers to greatly change the way they prepare
and submit their mail in order to participate in Full Service and
mailers say these changes may discourage them from adopting it. A
mailing industry consultant wrote in a mailing association's newsletter
in March 2009 that mailers should just sit back and wait until the
"dust and dollars" settle before participating in Full Service because
the benefits provided by Intelligent Mail are not worth the required
effort or investment.
Other Intelligent Mail benefits offered by USPS may not appeal to some
mailers based on their various business needs and, thus, may not
motivate them to participate. For example, magazine mailers told us
they may benefit from receiving free Address Correction Service--a
service which provides information to mailers when recipients move.
Periodical mailers, including magazines, are currently required by USPS
to use Address Correction Service and must pay $.25 each time they are
notified of an address change. By adopting Full Service, these mailers
would receive, at no additional cost, a service they are currently
paying for. However, a newspaper association representative said that
none of the Intelligent Mail incentives will benefit small newspaper
publishers who enter newspapers at local postal delivery facilities,
thus bypassing USPS mail processing where the Intelligent Mail program
information is generated. Additionally, some mailers viewed the time
frame to incorporate updated address information into subsequent
mailings as too short. For example, under Address Correction Service,
the mailers have 30 days to update new address information without risk
of financial penalty, but one mailer told us more time is needed
because its mailings are sometimes prepared weeks in advance. If
mailers do not update the information within the required timeframe,
mailers might incur additional mailing costs from penalties assessed by
USPS.
Mailers are facing other pressures that could affect their decisions to
participate in Full Service, including a recession that has affected
their businesses and additional postal requirements. Some mailers are
reducing the amount of mail pieces sent out due to a worsening economy.
For example, advertising mail in fiscal year 2008 was adversely
affected by the economy--particularly credit card, mortgage, and home
equity solicitations--as well as the continued shift from mail to
electronic communication. Mailers also face other, additional USPS
requirements unrelated to Intelligent Mail but which coincide with its
implementation. These unrelated requirements may affect mailer
participation in Full Service. Within the last year, USPS required
mailers to simultaneously implement several programs, including changes
to the standards for preparing some mail and the frequency that mailers
must update their address information. A mailer, referring to
Intelligent Mail and other new requirements, wrote in an association
newsletter that USPS will permanently lose customers if it continues to
make mailing more difficult and complex by creating new requirements
and increasing prices. Thus, due to costs incurred to implement
Intelligent Mail, the reduction in mail volume, and additional postal
requirements, some mailers have questioned the value the Intelligent
Mail program will add to their businesses.
USPS says that the incentives it is offering to encourage mailers to
participate in the Full Service option are appropriate to get Full
Service adoption started and recognize the investments mailers must
make to implement Intelligent Mail. According to USPS, the value of
Intelligent Mail lies in the enhanced value of the information it
provides, and not only in any discount that may accompany its
introduction. Furthermore, USPS said it could increase the incentive
later if the adoption rate is too low. USPS also points out that, in
addition to the financial discount, Full Service mailers will have
access to Address Correction Service and Start the Clock information. A
senior USPS official told us that the value of these other services
should provide enough benefit for most mailers to justify the expense
of implementing Intelligent Mail. However, according to a mailer
association, many mailers placed a higher value on the discount,
calling it the main incentive to participate in Full Service.
Without sufficient numbers of customers participating in Intelligent
Mail, USPS may not realize several benefits of the program.
Specifically, USPS may not realize the intended long-term benefit of
discontinuing its existing, manual acceptance and verification process
for mailers who use an automated one for Intelligent Mail. Similarly,
USPS's ability to improve customer service by providing tracking
information on individual mail pieces will be limited. With this
improved tracking capability, USPS could identify problem areas in its
processing and delivery of a mail piece, while mailers could determine
the reasons behind the delivery of late mail, including an incorrect
address or a plant delay. These services to customers, however, are
only available through the Full Service option because mail pieces in
Basic Service are not given unique tracking numbers. Further, it is not
clear what Intelligent Mail information will be provided to Full
Service customers and what price USPS may charge for this information.
Finally, USPS's ability to meet its statutory requirement[Footnote 16]
to measure and report on how well it is meeting its overall delivery
performance standards could be hindered by low mailer adoption rates.
The 2006 Postal Accountability and Enhancement Act required USPS to
report on the speed and reliability of delivery for each market-
dominant product.[Footnote 17] According to PRC, the mail data USPS
will use to measure its performance must be representative in order to
produce meaningful results. However, USPS's measurement system only
measures the performance of Full Service mail (and not Basic Service
mail), which may result in a nonrepresentative sample. PRC views mailer
adoption of Full Service Intelligent Mail as critical to producing
accurate performance measures from data representative of a cross
section of mail and notes that mailer uncertainty about Intelligent
Mail requirements, implementation dates and discount rates may delay
adoption. PRC has stated that it will monitor Intelligent Mail
implementation to assure that accurate and representative data are
obtained by requiring USPS to report quarterly on its Intelligent Mail
implementation progress.
Conclusions:
USPS is implementing a program to enable it to have much greater
insight into the mail but preparations for Intelligent Mail require
considerable work by both USPS and many of its commercial customers.
The management approach USPS is taking has several key risks that have
raised concerns about whether USPS will be able to implement the
program on schedule and with all program functions in place. USPS does
not have a comprehensive strategy that includes information about all
the phases planned, the numerous functions and systems upgrades
included, when they will be implemented, the program's goals, the
baseline costs, and expected cost savings. Consequently, it will be
difficult for USPS to measure Intelligent Mail's performance or to
account for its results. Overall, at the program level, key risks
include the uncertainty about whether mailers will find the incentives
offered by USPS appealing enough to participate in the program,
resource limitations, and schedule delays. Although USPS is aware of
these risks, it has no plan for dealing with them should these
potential problems materialize. As a result, the implementation efforts
are at risk of taking longer and costing more and achievement of the
program's intended benefits may be delayed.
Recommendations for Executive Action:
To help ensure that USPS addresses these risks to the successful
implementation of Intelligent Mail, we recommend that the Postmaster
General take the following three actions: (1) develop a comprehensive
Intelligent Mail strategic plan that defines all planned phases and
their associated functions and systems and includes program goals and
measures of success; (2) develop cost and savings information for the
activities that can be attributed to the Intelligent Mail program,
including the baseline and metrics to be used to track cost savings
achieved; and (3) develop a plan that addresses how USPS will mitigate
program-level risks, including the implications of lower-than-
anticipated customer adoption of the Full Service Intelligent Mail
option, resource limitations, and schedule delays.
Agency Comments and Our Evaluation:
The U.S. Postal Service provided written comments on a draft of this
report in a letter from the Senior Vice President, Intelligent Mail and
Address Quality dated April 27, 2009. These comments are reproduced in
appendix III, and our evaluation of them is summarized below. Based on
the comments provided, we made minor modifications to some portions of
this report.
USPS agreed with our findings that it lacked an up-to-date
comprehensive Intelligent Mail strategic plan and a program-level risk
mitigation plan. It agreed to implement our first recommendation--to
develop a comprehensive Intelligent Mail strategy, including all
planned phases and the associated functions and systems, program goals,
and measures of success--and our third recommendation--to develop a
plan that addresses how it will mitigate risks, including the
implication of lower-than-anticipated customer adoption of the Full
Service Intelligent Mail option. USPS did not agree with our finding
that it lacks program cost information, including an estimate of
overall Intelligent Mail program costs and a capability to measure
savings, and did not agree to fully implement our second
recommendation, that it develop cost information.
USPS said it will implement our first recommendation by completing an
update to its 2003 Intelligent Mail Corporate Plan within weeks. It
said the update will detail (1) efforts completed, (2) implementation
plans for its two planned phases, (3) items to be included for a
possible third phase, (4) a vision of future upgrades, and (5) enabling
features and capabilities on Intelligent Mail. This will facilitate
improved program management and accountability. However, USPS did not
commit to defining program goals and measures of success, which we
believe are critical components of a comprehensive strategic or
Corporate Plan.
USPS did not agree to fully implement our second recommendation because
it said that it has detailed program cost information and that costs
are being closely managed and monitored. In addition, USPS generally
disagreed with our finding that it should develop metrics to measure
cost savings associated with its Intelligent Mail effort. USPS said
that although the Intelligent Mail program would provide benefits that
should reduce costs, as well as improve efficiency and service, it did
not anticipate a specific cost or other benefit from its Intelligent
Mail investment, in part because these costs or benefits could not be
measured. USPS explained that there was no sound financial method to
specifically attribute cost reductions to Intelligent Mail when it is
also implementing other efforts to reduce costs. We recognize the
difficulty of directly attributing costs to the Intelligent Mail
program and agree with USPS that the activities associated with the
acceptance and verification of commercial mail are most directly
related to the Intelligent Mail program. USPS said that it already has
a baseline and mechanism in place to track the cost and work hours
associated with these activities. Although USPS did not provide us with
this baseline, we agree that measuring and tracking the costs and
savings associated with the acceptance and verification activities
would be the most directly attributable performance indicator. We have
modified our recommendation accordingly, as we continue to believe that
cost and savings information is critical to provide USPS management
with a means for measuring the outcome of its Intelligent Mail efforts.
USPS could address our recommendation by including a discussion of its
baseline and cost tracking mechanism in its Corporate Plan.
USPS agreed to implement our third recommendation by exploring the risk
analysis and potential mitigation required if mailer adoption rates
fall significantly below expectation, either as a separate document or
as a part of the Intelligent Mail Corporate Plan. In response to our
finding that it did not have a risk mitigation plan, USPS said that, at
a technical level, the Intelligent Mail program has an extremely
detailed risk mitigation plan that outlines both the process to
identify risks and approaches to mitigate these risks. However, USPS
also acknowledges that the risk associated with low mailer adoption is
a valid program-level concern. We believe that including a discussion
of how USPS plans to address key risks in an updated Corporate Plan is
appropriate. Our recommendation was not limited only to risks
associated with mailer adoption, and we continue to believe that USPS
should identify and address other risks at the program level, such as
resource limitations or schedule delays, and also include them in its
Corporate Plan.
We are sending copies of this report to the Chairman and Ranking Member
of the House Committee on Oversight and Government Reform; the Ranking
Member of its Subcommittee on Federal Workforce, Postal Service, and
the District of Columbia; the Chairman and Ranking Member of the Senate
Committee on Homeland Security and Governmental Affairs; the Chairman
and Ranking Member of its Subcommittee on Federal Financial Management,
Government Information, Federal Services, and International Security;
the Postmaster General; and other interested parties. In addition, the
report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staffs have any questions regarding this report, please
contact me at herrp@gao.gov or by telephone at (202) 512-2834. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report. GAO staff that made key
contributions to this report are listed in appendix IV.
Signed by:
Phillip Herr:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Scope and Methodology:
This report addresses (1) what the Intelligent Mail program is and the
status of the U.S. Postal Service's (USPS) implementation efforts and
(2) the key risks to implementing Intelligent Mail and how USPS has
addressed them.
To address the first objective, we obtained documentation from and
interviewed USPS officials involved in developing and managing the
Intelligent Mail program. Documented information from USPS included
annual reports, comprehensive operating statements, relevant decision
analysis reports, quarterly investment highlights, and Intelligent Mail
federal register notices, technical guides, readiness plans, schedules,
presentations, and training material. Documented information from the
Postal Regulatory Commission (PRC) included USPS proposals and
responses, PRC questions and rulings, and public comments. We also
coordinated with the USPS Office of Inspector General (OIG), who was
conducting at least two audits of the Intelligent Mail program at the
same time as our review, and reviewed reports resulting from these
audits, released in March 2009, in addition to other OIG reports. To
determine key changes required for USPS and mailers to prepare for the
Intelligent Mail program, we compared USPS current and proposed changes
to mail acceptance, verification, and processing and toured USPS and
mailer facilities, including a presort and printing facility.
To address the second objective--risks to implementing the Intelligent
Mail program and how USPS addressed them--and to obtain the perspective
of mailers, we interviewed representatives from 9 companies involved in
the mailing industry who participated in the development of the
Intelligent Mail program. We contacted these companies directly or
through trade associations. We also talked to representatives from six
commercial mailer trade associations who collectively represent most of
the mail sent. For example, one association said its members, which
consist of over 50 profit and nonprofit organizations and major mailing
associations, generate 70 percent of all mail. Documented information
included association newsletters, written minutes of meetings held with
USPS and letters written by the associations to USPS or PRC officials.
We attempted to interview mailers from small companies to obtain their
perspective on the Intelligent Mail program, but we were told by the
largest mailer association--representing both large and small and the
greatest cross section of commercial mailers--that smaller companies
were not as familiar with the Intelligent Mail program and, thus, were
reluctant to talk to us. USPS officials told us that to comply with
Intelligent Mail standards, many smaller companies would either rely on
vendors, such as software vendors, to provide software updates that
included Intelligent Mail capabilities or pay larger mail preparation
companies to prepare their mail.
We also obtained and reviewed information from the Mailer's Technical
Advisory Committee, a venue for USPS to share information with mailers
and receive advice and recommendations from workgroups established by
the group's leadership, which is comprised of USPS and mailing industry
officials. We reviewed documentation from the Mailer's Technical
Advisory Committee, including written meeting minutes, and
documentation of issues that workgroups have identified and are working
on or have resolved and monitored weekly teleconferences held by
individual workgroups. We attended a local meeting in Dallas, Texas of
a Postal Customer Council, which is a national program comprised of
over two hundred local-level councils that provide a forum for mailers
to exchange ideas for improved mail service and discuss new and
existing USPS products, programs, regulations, and procedures. At the
Postal Customer Council, we participated in Intelligent Mail
presentations given by USPS and observed presentations given by top
USPS leadership. We also attended a presentation of USPS's Intelligent
Mail University, a 1-day USPS training course in Washington, D.C. for
mailers.
To identify risks associated with USPS's Intelligent Mail program
management approach, we worked with GAO's Information Technology team
which provided us analytical guidance in identifying relevant criteria.
We used criteria based on the practices of leading organizations, such
as the Software Engineering Institute and the Chief Information
Officer's Council, to effectively manage major programs and minimize
risks. In addition, we used criteria identified in the GAO Cost
Estimating and Assessment Guide: Best Practices for Developing and
Managing Capital Program Costs (GAO-09-3SP). We compared selected
criteria to information and documentation obtained from USPS to
identify areas where USPS's management approach for Intelligent Mail
did not match criteria for sound risk management.
In order to provide as broad a perspective as possible on mailer
concerns with USPS's implementation of the Intelligent Mail program, we
analyzed comments submitted in response to the January and April 2008
USPS Federal Register notices regarding Intelligent Mail, primarily by
commercial mailers and mailer associations. Specifically, we reviewed
two sets of mailer comments to two Federal Register notices: (1) the
Implementation of New Standards for Intelligent Mail Barcodes, Advance
Notice of Proposed Rulemaking (Advance Notice) in January 2008, 73 Fed.
Reg. 1158 (Jan. 7, 2008) and (2) the Implementation of New Standards
for Intelligent Mail Barcodes, Notice of Proposed Rulemaking (Proposed
Rule) in April 2008, 73 Fed. Reg. 23393 (Apr. 30, 2008). We took a
different analytical approach with each set of comments. Due to the
large number of comments USPS said it received in response to its
Advance Notice (nearly 400 written comments) and the intended use of
the results of the analysis, we determined the most appropriate method
to analyze these comments was to verify and validate USPS's summary of
these comments as published in the Proposed Rule. In the Proposed Rule,
there were 16 statements made by USPS in summarizing the comments. We
reviewed all of the original comments and found evidence of comments
supporting each of the 16 statements. For the second Federal Register
notice, the Proposed Rule, USPS said it received 67 sets of comments.
We determined the most appropriate method to analyze these comments was
to conduct a complete content analysis by reviewing and categorizing
all 67 comments.
We conducted this performance audit from September 2008 to April 2009
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: Significant Dates in the Intelligent Mail Program, 2001 to
2011:
Date: 2001;
Event: A report issued by the Mailing Industry Task Force, led by chief
executives from 11 industry-leading companies and the Deputy Postmaster
General of USPS, recommended Intelligent Mail as a way to respond to
customer's needs.
Date: January 2003;
Event: USPS established Intelligent Mail and Address Quality
organization to identify and shepherd efforts to develop Intelligent
Mail program.
Date: May 2003;
Event: USPS published Intelligent Mail Corporate Plan, which
established the vision of the program.
Date: 2004-2005;
Event: USPS finalized the format for the Intelligent Mail barcode.
Date: September 2006;
Event: USPS permitted mailers to begin using the Intelligent Mail
barcode on letter mail.
Date: December 2006;
Event: Postal Accountability and Enhancement Act signed into law,
requiring USPS to report on its service performance[A].
Date: January 2007;
Event: USPS announced that Intelligent Mail program will be fully
operational for all commercial mailers by 2009.
Date: July 2007;
Event: USPS published new specifications for the Intelligent Mail
barcode.
Date: January 2008;
Event: In Federal Register Advance Notice of Proposed Rulemaking, USPS
proposed to require mailers that get automation prices to use
Intelligent Mail starting January 2009[B].
Date: April 2008;
Event: In Federal Register Proposed Rule, USPS revised standards and
proposed that mailers will be eligible to use Intelligent Mail and
receive incentives for using Full Service starting May 2009[C].
Date: July 2008;
Event: The USPS Board of Governors approved funding to create an
infrastructure that will facilitate Intelligent Mail implementation.
Date: August 2008;
Event: In Federal Register Final Rule, USPS announced that it will
allow POSTNET barcodes until May 2011 and that it will start offering
Intelligent Mail Basic and Full Service in May 2009[D].
Date: February 2009;
Event: USPS announced price incentives for Intelligent Mail Full
Service.
Date: May 2009;
Event: USPS will make Intelligent Mail available for mailers to start
implementing and testing their systems.
Date: November 2009;
Event: Price incentives for Full Service mailers will go into effect
and USPS plans to add other program functions.
Date: May 2011;
Event: All mailers who get price incentives for using barcodes will be
required to use Intelligent Mail barcodes.
Source: GAO analysis of U.S. Postal Service documents.
[A] Pub. L. No. 109-435, 120 Stat. 3198 (2006).
[B] 73 Fed. Reg. 1158 (Jan. 7, 2008).
[C] 73 Fed. Reg. 23393 (April 30, 2008).
[D] 73 Fed. Reg. 49333 (Aug. 21, 2008).
[End of table]
[End of section]
Appendix III: Comments from the U.S. Postal Service:
Thomas G. Day:
Senior Vice President:
Intelligent Mail And Address Quality:
United States Postal Service:
476 L'Enfant Plaza:
Washington DC 20260-4400:
202-268-6200:
Fax 202-268-4492:
[hyperlink, http://www.usps.com]
April 27, 2009:
Mr. Phillip R. Herr:
Director, Physical Infrastructure Issues:
United States Government Accountability Office:
Washington, DC 20548-0001:
Dear Mr. Herr:
Thank you for providing the U.S. Postal Service with the opportunity to
review and comment on the draft report titled 'U.S. Postal Service:
Intelligent Mail Benefits May Not Be Achieved if Key Risks Are Not
Addressed' (GAO-09-599).
The GAO study of USPS Intelligent Mail® raises valid concerns about the
program, but fails to acknowledge specific aspects of the project
implementation that were provided to the audit team. Most glaring of
these omissions is the conscious decision of USPS Management to
implement Intelligent Mail® as a non-generative, infrastructure
investment. This decision was in recognition of the inability to
directly attribute and track cost reductions as the result of
Intelligent Mail® implementation.
Among the key findings of the study are concerns about USPS development
and management approach, risk mitigation plans and potential adoption
rates on the part of mailers. In addition, at a higher level, concern
was raised about the need for an updated strategic plan for Intelligent
Mail®. This response will address each of these issues.
Program Costs:
The study finds that USPS lacks "information about the overall program
costs, including its anticipated savings." In fact, USPS provided GAO
with very detailed information about the cost to implement Intelligent
Mail®. The program has been implemented with very rigorous controls for
both expense and capital investments. Specific proposals were developed
for individual components of the program. Each proposal had defined
requirements, deliverables and timelines; all of which were established
at a fixed price. In addition, there is very strict control of cash-
flow to insure that funds are only provided when necessary.
The fundamental disagreement with GAO Auditors has been in regard to
the topic of anticipated savings. As was previously identified, this is
the most glaring of the omissions in the study. USPS Management clearly
determined this is a non-generative infrastructure investment. This
decision was made after several months of debate and alternative
approaches were considered for the Decision Analysis Report (DAR).
While it is understood that Intelligent Mail® will provide benefits
that should reduce costs, as well as improve efficiency and service,
there is no sound financial method to specifically attribute these
reductions to Intelligent Mail®.
Intelligent Mail® will provide data and diagnostic information that
should lead to improvement in customer service, delivery, distribution
and transportation operations. However, given the myriad of programs
being implemented in these operations, there is no valid financial
method to attribute a portion of these savings to Intelligent Mail®.
Given this lack of a "clear line of sight", there is no sound basis to
either track or claim these reductions.
The one exception to this approach for cost reductions is the specific
activity associated with the acceptance and verification of commercial
mail. This activity takes place in Business Mail Entry Units and a
select group of Post Offices. The cost and work hours associated with
this activity are tracked separately from other operations. The
implementation of Intelligent Mail® and associated efforts, such as
Performance Based Verification (PBV), have anticipated cost reductions.
Both a historical baseline and tracking mechanism are in place for
these cost reductions.
Program Management:
The study raises concerns about the program management approach adopted
by USPS. In part, USPS Management acknowledges these issues. Given an
extended timeframe for implementation many, if not most, of the
recommendations from GAO would have been included in the Intelligent
Mail® program management approach. However, given the compressed
timeframe associated with a May 2009 implementation, a truncated
program management was established.
The Program Management approach implemented by USPS provided for
rigorous methods to ensure defined project scope and requirements are
achieved. There are clearly defined deliverables that included cost and
schedules, resource planning, as well as the tracking of key
milestones. Here are several highlights of the Program Management
approach currently employed by USPS:
1. Strong Business/IT senior executive sponsorship with easy escalation
for decision making.
2. Clear governance, status and communications process.
3. Standardized weekly process for reporting status.
4. Weekly checkpoints with set agenda (program schedule, milestones,
decisions, issues/risks, actions).
5. Progress on fact-based quantitative project management with delivery
metrics.
6. Baseline milestones and dependency program plan, integrated project
plan and business work plans.
7. Risk system of record provides tracking, and communication.
8. Embedded Program Management Office Model; cross-team coordination
and resource-loaded project plans.
9. Scope change control; formalized governance, traceability and
communication of change.
Although a truncated methodology, it has proven quite effective.
Despite an extremely compressed schedule, the successful implementation
of the Operating System environment on May 11 and the Test Environment
for Mailers on May 18 demonstrates how well this effort has worked.
In retrospect, the program could have been implemented in two parts. In
the first, with initial funding provided, all scope, requirements,
specifications, deliverables, timelines and resource planning would
have been determined. As a result of this initial effort, a second
funding document and project plan would have been created for the
actual implementation of Intelligent Mail®.
More than likely, it would still have required a multi-phase release
schedule. This approach would have delayed implementation until at
least 2011. Alternatively, the first phase would have had to begun
early in 2007. Given that this approach was not adopted in 2007 and
USPS Management did not want to delay implementation into 2010, the
decision was made to move forward with a somewhat truncated approach to
program management. While not optimal, the actual results have proven
it to be effective.
Risk Mitigation:
The study raises concerns about risk mitigation. At a technical level,
the Intelligent Mail® program has an extremely detailed risk mitigation
plan. The plan outlines both the process to identify and approaches to
mitigate these risks. Beyond a theory, this plan has been effectively
implemented throughout the various phases of implementation. Given the
actual performance of risk identification and mitigation throughout
this program, it is puzzling as to why this issue is even raised at a
technical level.
At an overall program level, Risk Mitigation has risen due to the issue
of Mailer Adoption of Intelligent Mail®. Here is the question: Will
Intelligent Mail® be successful if mailers do not choose to
participate? This is a valid issue that can, in part, be addressed in
an updated Strategic Plan for Intelligent Mail® which is currently
being developed.
USPS has already announced that all mailers must convert to the
Intelligent Mail® Basic format not later than May 2011 if they want to
qualify for automation discounts. In addition, the POSTNET code and
PLANET Code will "sunset" in May 2011. Therefore, by May 2011 the
overwhelming majority of commercial mail will be in an Intelligent
Mail® format. What remains to be seen is what percentage will be in a
Full-Service format.
Mailer Adoption:
USPS has three basic approaches by which to influence mailer adoption
of Full-Service Intelligent Mail®: 1) Value to Customer; 2) Price
Incentive; and 3) Mailing Requirements. USPS has actively employed both
the first and second approach. The Price Incentive will be implemented
in November 2009, with per piece incentives of three cents for First-
Class Mail and one cent for Periodicals and Standard Mail. Should these
price incentives and/or value to customers prove inadequate, USPS has
the flexibility to revise its strategy using any or all of these three
approaches referenced above.
What volume of Full-Service Intelligent Mail® adoption is necessary? To
answer this question three outcomes must be considered:
1) Volume is necessary to provide valuable internal data and diagnostic
reporting.
2) Volume/Points of entry is necessary to provide for representative
service measurement.
3) Volume is necessary to reduce work hours in the acceptance and
verification process.
In all three cases, USPS believes the combination of Value to Customer
and Price Incentives will provide the volume necessary to achieve the
desired outcomes. Perhaps the most difficult to assess is predicting
the amount of volume that would be used to provide reasonable
representation in service measurement. The challenge is not volume; it
is entry points. The Service Measurement requirement, agreed upon with
the Postal Regulatory Commission, is a District to District performance
matrix that should be valid on a quarterly basis. There is already more
than adequate Intelligent Mail® volume in the network to be
statistically valid to a destination level. The greatest challenge is
to get enough mailers to enter at each of the Districts to be
statistically valid from origin. This is not driven by volume, instead
it is the number of mailers who participate and where they are located.
Response to Recommendations:
The study provides for three recommendations to address risks:
1) Update Intelligent Mail Strategy;
2) Program cost information and metrics to be used to track savings;
and;
3) Plan to mitigate risks of lower than anticipated customer adoption.
1) USPS fully concurs with an updated version of the 2003 Intelligent
Mail Corporate Plan. This effort is underway and will be completed in
the next few weeks. This effort is based upon work completed as part of
a 2007 update that remains in draft. The 2009 update will detail
efforts completed; implementation plans for Release 1 (May 2009) and
Release 2 (November 2009); possible items for inclusion in a Release 3
(date to be determined based upon both need and funds availability);
vision of future upgrades; and enabling features/capabilities on
Intelligent Mail®.
2) As previously indicated, detailed program cost information already
exists and is being closely managed and monitored. The metrics to track
cost savings will be focused exclusively on reductions in the
acceptance/verification activities. The baseline is already established
and the tracking capability is in place.
3) USPS will explore the risk analysis and potential mitigation
required should mailer adoption rates fall significantly below
expectation. This can be produced as a separate document or as an
appendix to the Intelligent Mail Corporate Plan.
If you or your staff wish to discuss any of these comments further, we
are available at your convenience.
Sincerely,
Signed by:
Thomas G. Day:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Phillip Herr, (202) 512-2834 or herrp@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Teresa Anderson, Lauren
Calhoun, Wendy Dye, Brandon Haller, Emily Larson, Amy Rosewarne, and
Travis Thomson made key contributions to this report.
[End of section]
Footnotes:
[1] This concept, known as worksharing, generally involves mailers
qualifying for reduced postage rates by performing certain activities
such as preparing and barcoding mail so it can be sorted by USPS
automated equipment. See GAO, U.S. Postal Service: A Primer on Postal
Worksharing, [hyperlink, http://www.gao.gov/products/GAO-03-927]
(Washington, D.C.: July 31, 2003).
[2] The Software Engineering Institute is a federally funded research
and development center conducting software engineering research in
acquisition, process improvement and performance measurement, security,
and system interoperability and dependability. The Chief Information
Officers Council works to improve federal agency practices related to
the acquisition, modernization, use, sharing, and performance of
Federal government information resources.
[3] A third nonautomation option is also available for mailers that do
not qualify for automation discounts. Mailers using this option will
print Intelligent Mail barcodes on their mail pieces, but their mail
will not receive discounts or any of the increased automation that is
part of Intelligent Mail.
[4] Pub. L. No. 109-435, §§ 204, 301, 120 Stat. 3211-3212, 3218-3219
(2006) (codified at 39 U.S.C. §§ 3652, 3691).
[5] The four main mail classes that commercial mailers send include (1)
First-Class Mail, which includes bills, account statements, payments,
and business correspondence; (2) Standard Mail, which is primarily
advertising mail such as flyers, circulars, and solicitations; (3)
periodicals, which include mailed newspapers and magazines; and (4)
package services, which is primarily merchandise and large quantities
of printed material.
[6] This discount amounts to a $3.00 discount for every 1,000 pieces of
First-Class Mail and a $1.00 discount for every 1,000 pieces of
Standard Mail.
[7] GAO has an ongoing review that will separately report on USPS's
information technology management of the Intelligent Mail program,
including its systems, policies, procedures, and practices.
[8] For a more complete Intelligent Mail timeline, see appendix II.
[9] GAO, Financial Management Systems: Additional Efforts Needed to
Address Key Causes of Modernization Failures, [hyperlink,
http://www.gao.gov/products/GAO-06-184] (Washington, D.C.: Mar. 15,
2006).
[10] 73 Fed. Reg. 1158 (Jan. 7, 2008).
[11] 73 Fed. Reg. 23393 (April 30, 2008).
[12] USPS gave notice of the Intelligent Mail discounts on February 10,
2009, in its notice of market-dominant price adjustments posted on the
PRC Web site at [hyperlin,
http://www.prc.gov/Docs/62/62203/Notice_Consolidated.pdf].
[13] 73 Fed. Reg. 49333 (Aug. 21, 2008).
[14] The Mailers Technical Advisory Committee is a venue for USPS to
share information with mailers and receive advice and recommendations
from workgroups established by the group's leadership, which is
comprised of USPS and mailing industry officials.
[15] The Postal Customer Council program is a national program
comprised of more than two hundred local-level councils that provide
mailers with a forum for exchanging ideas for improved mail service and
discussing new and existing USPS products, programs, regulations, and
procedures.
[16] 39 U.S.C. §§ 3652, 3691.
[17] Pub. L. No. 109-35, § 204, 120 Stat. 3211-3212 (2006) (codified at
39 U.S.C. § 3652). Market-dominant products primarily include First-
Class Mail--domestic and international single-piece mail (e.g., bill
payments and letters) and domestic bulk mail (e.g., bills and
advertising); Standard Mail (mainly bulk advertising and direct mail
solicitations); periodicals (mainly magazines and local newspapers);
and some types of package services (primarily single-piece Parcel Post,
Media Mail, library mail, and bound printed matter).
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO‘s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO‘s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
