According to USPS  documentation on its capital spending processes, these reasons include:  to support USPS’s organizational objectives and strategic plan,  to help sustain existing operations and meet USPS’s universal service  obligation,  to protect the health and safety of employees and customers or meet  legal requirements, or  to generate a positive return-on-investment—such as by increasing  revenues or decreasing costs—thus improving USPS’s finances. For example, in the absence of adequate revenues  that would cover all of USPS’ expenses, these uncertainties may affect  the extent to which USPS can undertake its identified capital-spending  plans. Starting in fiscal year 2009,  USPS sharply decreased its capital spending for several years, in  response to decreased volume and revenues; however, USPS now plans  to increase its spending. Specifically, USPS projects average annual  capital-spending cash outlays of $2.4 billion from fiscal years 2018  through 2028—about 70 percent more than the average of $1.4 billion  from fiscal years 2007 through 2017. While this projected  spending is largely driven by plans to acquire a new fleet of delivery  vehicles, USPS also projects increased spending in the other categories  of facilities, information technology, and mail-processing equipment. For  example, in May 2017 USPS approved a capital spending project to  construct a mail-processing facility in Nashville, Tennessee. USPS’s Projected Capital Spending Will Likely Involve Prioritization Decisions

Although USPS is projecting increased capital spending over the next 10  years, it has reported that it faces uncertainties, such as the level of future  revenues, that could affect its ability to undertake planned and projected  spending. We have previously testified that USPS continues to face a serious  financial situation with insufficient revenues to cover its expenses. This uncertain financial outlook may result in USPS changing its current  capital-spending plans, including setting new priorities across its planned  projects and other business needs. Various Processes Support USPS’s Ability to Address Uncertainties and Risks That Affect Capital Spending

		USPS Has Processes Designed to Identify Uncertainties and Risks That Affect Capital Spending

USPS has processes that can help it to identify uncertainties and risks  that could affect its capital spending and adjust its spending to changing  circumstances. Identifying and Analyzing Project Risks

Individual capital projects face inherent risks—such as technological,  operational, and integration risks. As a result, USPS can determine  an annual capital spending budget based on the most recent conditions,  including the most recent revenue forecasts, and consider possible  tradeoffs—such as those between capital spending and other spending  needs such as operating expenses. According to USPS officials, USPS’s capital-spending  process also allows USPS to respond to contingencies. Agency Comments

We provided a draft of this report to USPS for review and comment. Via email, USPS also provided technical comments, which  we incorporated as appropriate. Postal  Service’s (USPS) projected capital spending over the next 10 years and  (2) assess whether USPS’s processes support its ability to address  uncertainties and risks that affect its capital spending. To address USPS’s planned capital spending over the next 10 years, we  reviewed USPS data on capital spending from fiscal years 2007 through  2017 and USPS documentation on projected capital spending from fiscal  years 2018 through 2028.
Why GAO Did This Study

USPS faces significant financial challenges as it continues to experience declining mail volumes and revenues. Capital spending is needed to support USPS's operations, but can be affected by various uncertainties and risks, such as those related to future business activities and revenues. In the past, USPS has reduced its capital spending in response to declining revenues.
GAO was asked to review USPS's capital-spending plans and examine how its capital-spending processes address uncertainties and risks. This report: (1) describes USPS's projected capital spending over the next 10 years and (2) assesses whether USPS's processes support its ability to address uncertainties and risks that affect its capital spending.
GAO reviewed USPS data and information on actual capital spending from fiscal years 2007 to 2017 and projected capital spending for fiscal years 2018 through 2028. GAO also reviewed USPS reports on 14 approved capital projects in fiscal years 2017 and 2018, selected to provide a mix of project type and value; examined documentation related to USPS's processes that affect capital spending and compared USPS's processes to internal control standards adopted by USPS; and interviewed USPS officials.
On a draft of this report, USPS provided technical comments, which GAO incorporated as appropriate.

What GAO Found

The United States Postal Service (USPS) projects increased capital spending over the next 10 years. According to USPS, this spending will support its mission and improve its financial position. USPS projects average annual capital cash outlays of $2.4 billion from fiscal years 2018–2028—about 70 percent more than the $1.4 billion average from fiscal years 2007–2017 (see figure). For example, USPS plans to acquire a new fleet of delivery vehicles starting in 2019 to replace its aging existing fleet and plans to purchase new mail-processing equipment to increase efficiency. However, USPS faces a serious financial situation with insufficient revenues to cover expenses. This uncertainty may result in USPS's making capital-spending prioritization decisions that can lead to tradeoffs across planned capital projects and potentially between capital spending and other organizational needs such as operational expenses. Such prioritization could lead to USPS's undertaking less capital spending than currently projected in the absence of increased revenues or decreased expenses.
USPS has processes that help it identify the uncertainties and risks that may affect its capital spending and adjusts its capital spending accordingly, in line with internal control standards adopted by USPS. For example, USPS identifies organizational uncertainties, such as mail volumes and revenues, as part of its strategic planning process and considers them when creating its capital spending budget. It also identifies individual project risks through a project review process, and considers tradeoffs inherent in different project scenarios. USPS's processes also allow it to respond to these uncertainties and risks. Specifically, USPS sets a capital-spending budget in its overall financial plan, to help ensure that spending is in line with expected resources. USPS's process also allows it to shift funds if needed, such as to repair a facility damaged during a natural disaster. USPS also reviews individual capital projects during implementation and can change specifications or time frames based on changing circumstances.