oversight

U.S. Postal Service: Status of Inspector General's Recommendations on the Supplier Diversity Program

Published by the Government Accountability Office on 2003-10-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States General Accounting Office
Washington, DC 20548




          October 6, 2003 


          The Honorable Henry A. Waxman 

          Ranking Minority Member 

          Committee on Government Reform

          House of Representatives 


          The Honorable Danny K. Davis 

          Ranking Minority Member 

          Subcommittee on Civil Service and Agency Organization

          Committee on Government Reform

          House of Representatives 


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

          This report supplements our previous report to you responding to your request for
          current information on the representation of minorities and women at the U.S. Postal
          Service (USPS).1 USPS’s program to attract and award contracts to small, minority,
          and women-owned businesses is referred to as supplier diversity. In recent years, the
          USPS Office of Inspector General (OIG) has questioned the reliability of data related
          to the Supplier Diversity Program, such as the dollar value of contracts awarded to
          small, minority, and women-owned businesses. In a September 2001 report, the OIG
          made nine recommendations that it said would improve the reliability of this data. As
          agreed with your offices, our objective was to determine the status of USPS efforts to
          address the recommendations contained in the OIG report. To address our objective,
          we obtained, reviewed, and analyzed documentation from USPS and interviewed
          USPS and OIG officials concerning the status of these recommendations.

          Results in Brief


          USPS has addressed the nine OIG recommendations. According to USPS officials,
          they have taken actions to implement the OIG’s nine recommendations, and they
          consider the recommendations closed. USPS believes that the actions taken have
          addressed the OIG’s concerns and have strengthened the reliability of data related to
          its Supplier Diversity Program. The OIG agreed that its recommendations have been
          implemented and, as a result, it also believes that the reliability of USPS supplier
          diversity data has improved. Furthermore, USPS provided us with documents

          1
              See U.S. Postal Service: Data on Career Employee Diversity, GAO-03-745R (Washington, D.C.: Sept. 15, 2003).

                                                          GAO-04-57R Postal Service Supplier Diversity Program
showing the actions that it has taken to address the OIG recommendations.
However, we did not independently determine whether the actions taken by USPS
improved the reliability of its supplier diversity data.

Background


According to USPS, its Supplier Diversity Program seeks to provide suppliers with
equal access to contracting opportunities. The program is intended to promote
supplier participation reflective of the American supplier community and to
encourage economic development. Its premise is that effective supplier diversity
ensures that no suppliers are excluded from competition on the basis of race, color,
religion, sex, age, or national origin. USPS has identified the program as a strategic
business initiative vital to the success of the Postal Service. As such, USPS said that
it must ensure that it is taking full advantage of the entrepreneurial spirit, capabilities,
competitive pricing, products, and innovations offered by small, minority, and
women-owned businesses.

Additionally, according to USPS, to demonstrate its commitment to reaching small,
minority, and women-owned businesses, it has developed a 5-year supplier diversity
plan. The plan focuses on maintaining a strong supplier base that includes small,
minority, and women-owned businesses. While it does not set specific dollar goals,
the plan is intended to ensure that USPS spends an increasing amount of its
procurement dollars on goods and services from diverse businesses through fiscal
year 2003. To monitor its progress, USPS tracks—yearly—the number of
transactions and dollars awarded to small, minority, and women-owned businesses.

In 2001, the OIG conducted a review of the Supplier Diversity Program, specifically
addressing contracting for supplies, services, and equipment purchases. The
objectives of this review were to assess the reliability of supplier diversity data from
fiscal year 1999 and to evaluate USPS’s effectiveness in achieving supplier diversity
spending plans. The OIG found that the supplier diversity data for fiscal year 1999
were unreliable because prime-contracting dollars awarded to small, minority, and
women-owned businesses were overstated and subcontracting data were
unsupported and unverified. Due to the unreliability of the supplier diversity data,
the OIG could not determine whether the USPS was achieving its supplier diversity
spending plans. The OIG concluded that supplier diversity data could not be used for
tracking general trends, management diagnostics, benchmarking, and reporting. As a
result, the OIG made nine recommendations that it said would improve supplier
diversity data reliability and correct the errors identified.

USPS Has Implemented Supplier Diversity Program Recommendations

According to USPS, it has taken actions to address the OIG report’s nine
recommendations and considers the recommendations closed. In addition, we
confirmed with the OIG that it considers the recommendations closed. Furthermore,
USPS provided us with documents showing the specific implementation actions that
it has taken in response to each OIG recommendation.



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

Table 1: USPS OIG Recommendations, USPS Actions, and Completion Dates
 Recommendation                                                                                   Completion
 number             Description of recommendation                  USPS actions taken             date
 1	                 The Vice President (VP), Purchasing and        As recommended, USPS           5/31/2002
                    Materials, should develop and implement        developed a purchasing
                    contract administration procedures on          and materials
                    updating the procurement database and          Administrative Instruction
                    contract files when changes occur in a         and added it to the
                    supplier’s socioeconomic status.               purchasing manual to be
                                                                   used for all purchasing
                                                                   activities.
 2	                 The VP, Purchasing and Materials, should       USPS corrected the             10/29/2001
                    correct the socioeconomic classification in    socioeconomic status
                    the procurement database of the                designation of the
                    suppliers of the 14 contracts identified in    contracts in question.
                    the OIG report.
 3                  The VP, Purchasing and Materials,              USPS corrected the             10/29/2001

                    should, for the remaining 104 contract         socioeconomic status 

                    actions identified in the OIG report,          designation of the 

                    reconcile contract files to the procurement    contracts in question. 

                    database and correct errors in

                    socioeconomic status of suppliers. 

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

                    archive the procurement database at the        document and retain data 

                    end of the fiscal year as support for          for each accounting 

                    annual supplier diversity statistical          period, which includes the 

                    reports.                                       end of the fiscal year. 

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

                    establish and implement standard criteria      developed a purchasing 

                    for recording basic pricing agreement          and materials 

                    amounts in the procurement database.           Administrative Instruction 

                                                                   and added it to the
                                                                   purchasing manual to be
                                                                   used for all purchasing
                                                                   activities.
 6                  The VP, Purchasing and Materials, should       As recommended, USPS           5/31/2002 

                    revise the purchasing manual to include        developed a purchasing 

                    policy requiring contracting personnel to      and materials 

                    de-obligate unused funds from contracts        Administrative Instruction 

                    and the procurement database when              and added it to the 

                    contracts are terminated or cancelled.         purchasing manual to be

                                                                   used for all purchasing
                                                                   activities.
 7                  The VP, Purchasing and Materials, should       USPS added a footnote to       4/19/2002 

                    include corrections to fiscal years’ 1999      the Fiscal Year 2001 

                    and 2000 statistics for small, minority, and   Purchasing Assessment 

                    women-owned businesses when                    Report providing specific 

                    developing the Purchasing Assessment           corrections to diversity 

                    Report for fiscal year 2001.                   data for fiscal years 1999 

                                                                   and 2000.




Page 3                                     GAO-04-57R Postal Service Supplier Diversity Program
 Recommendation                                                                                         Completion
 number                         Description of recommendation               USPS actions taken          date
 8	                             The VP, Purchasing and Materials, should    USPS said that this         9/21/2001
                                advise contracting officers that section    recommendation is
                                6.2.3 of the Purchasing Manual extends      existing policy; however,
                                to subcontracting submittals and requires   during training for its
                                contracting personnel to review             Purchasing Review for
                                subcontract data submitted by prime         Excellence Program
                                suppliers.                                  provided to operational
                                                                            purchasing managers,
                                                                            USPS agreed to reinforce
                                                                            the requirement to
                                                                            maintain reports in the
                                                                            contract files.
 9	                             The VP, Purchasing and Materials, should    USPS said that this         9/21/2001
                                require that quarterly subcontracting       recommendation is
                                reports submitted by suppliers be           existing policy; however,
                                maintained.                                 during training for its
                                                                            Purchasing Review for
                                                                            Excellence Program
                                                                            provided to operational
                                                                            purchasing managers,
                                                                            USPS agreed to reinforce
                                                                            the requirement to
                                                                            maintain reports in the
                                                                            contract files.
Source: GAO analysis of USPS data.


A USPS official told us that implementing these recommendations has helped to
improve overall supplier diversity data.

According to the OIG, it received and reviewed documentation of USPS actions taken
to address the nine recommendations. The OIG said that it has closed all nine
recommendations because it believes that the actions taken by USPS were
responsive. The OIG also said that it believes that the reliability of USPS supplier
diversity data has improved as a result of implementing the recommendations.

We reviewed documents USPS provided us showing the specific implementation
actions that it has taken in response to each OIG recommendation. The
documentation shows that USPS has addressed each of the nine recommendations.
However, we did not evaluate whether the implementation of the recommendations
has improved the reliability of the USPS supplier diversity data.

Agency Comments

We requested comments on a draft of this report from the Postmaster General. We
received comments from USPS Vice President, Supply Management, that USPS
agrees with the report’s description of the actions USPS has taken to improve the
reliability of its supplier diversity data. Further, he stated that USPS would continue
to maintain an active supplier diversity program, which provides small businesses an
opportunity to compete for its business. Additionally, he said that USPS is committed
to improving and maintaining purchasing system data integrity to ensure accurate
reporting and analysis of results. Finally, he said that as part of a recent
restructuring, a team was created that is solely dedicated to the furtherance of data
integrity within the Supply Management organization, and USPS continues to review
data accuracy as part of its internal review program.


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

           To address our objective, we obtained, reviewed, and analyzed data and
           documentation from USPS and interviewed USPS officials about the Supplier
           Diversity Program and the actions the USPS has taken concerning data reliability
           issues. We obtained and reviewed the USPS Purchasing Manual describing the
           purpose, goals, and objectives of the Supplier Diversity Program. In addition, we
           obtained and reviewed information from the USPS Audit Tracking System regarding
           the status of OIG recommendations related to the Supplier Diversity Program. To
           determine whether the OIG had closed related recommendations, we interviewed the
           OIG and obtained relevant documentation. We performed our work from July 2003
           through September 2003 in accordance with generally accepted government auditing
           standards.

           Unless you publicly announce its contents earlier, we plan no further distribution of
           this report until 30 days from its issue date. At that time we will send copies of this
           report to the Chairman, House Committee on Government Reform, and the
           Chairman, Subcommittee on Civil Service and Agency Organization; the Chairman
           and Ranking Minority Member, Senate Committee on Governmental Affairs; the
           Postmaster General; and to other interested parties. We will also make copies
           available to others upon request. In addition, the report will be available at no charge
           on the GAO Web site at www.gao.gov.

           If you have any questions about this report or the enclosed data, you may contact me
           on (202) 512-4232 or at ungarb@gao.gov. Major contributors to this assignment
           included Sherrill Johnson, Dwayne Curry, and Tanisha Stewart.


           Bernard L. Ungar




           Director, Physical Infrastructure Issues




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