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Develop Preliminary Investment Recovery Plan

Investment recovery is the identification, reuse, sale, or disposal of surplus or idle assets. Investment recovery can generate significant revenue and create cost savings, allowing the Postal Service to reduce waste and increase revenue. It can also protect the Postal Service from social and economic impacts associated with improper direct or secondary disposal of Postal Service property. The preliminary investment recovery plan proactively outlines future actions, preidentifies potential surplus and idle assets, and (based on the product) decides what will be done with those assets. It is a dynamic document that is revised and updated throughout the project life cycle.

The Client is responsible for developing the preliminary investment recovery plan, which must illustrate how the surplus or idle assets will be addressed. While investment recovery activities are not carried out until the Perform and Manage Investment Recovery Activities task of Process Step 6: End of Life, it is important to develop a preliminary investment recovery plan during Process Step 2: Evaluate Sources, because recovery must be addressed in conjunction with Develop Life Cycle Support Plan and must be addressed in the request for proposals (RFP), when it will play a significant role in the overall success of the purchase or have a large impact on the costs associated with the project. Investment recovery should be addressed by potential suppliers in proposals submitted in response to RFPs.

The Client, working with the Purchase/SCM Team develops the preliminary investment recovery plan following specific steps:

Identify surplus

Assess potential environmental impacts

Make preliminary decision

Identify Surplus

Surplus is any supply that will be:


No longer used

No longer operating

Excess inventory

Surplus results in or creates the following:

Poor space utilization

Tracking expenses

Maintenance costs

Insurance costs

Inventory costs (in excess of regular extra inventory necessary to have on hand to meet demand)

When a project enters into the final phase of its life cycle, these economic and operational considerations are used to identify when the equipment no longer effectively supports the original project or need. Because the identification process requires an estimate, the Client must rely on professional expertise and experience, as well as the professional expertise, experiences, and advice of the entire Purchase/SCM Team.

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Supplier Responsibilities

When solicitations include Provision 2-8: Investment Recovery, proposals must include an investment recovery plan to reuse the equipment or to eliminate or reduce final disposal costs. Final disposition must be environmentally responsible, eliminate or reduce landfill, and comply with all Federal, state, and local laws and regulations. Proposals must address the complete life cycle, including final disposition of the items being purchased.

Make Preliminary Decision

The preliminary decision in the development of an investment recovery plan is the determination of how to eliminate identified surplus materials at the conclusion of the asset's useful life:

Recycle (scrap)

Reallocate (relocate and redeploy)


Remarket (reselling to the supplier)




Recycle (Scrap)

Recycling surplus reduces the impact of Postal Service operations on the environment. The Client and Purchase/SCM Team will decide to recycle (scrap) an asset when it can no longer perform its intended function, cannot or should not be repaired, and cannot be sold as surplus. The value of the scrap material collected is determined by the material itself, its volume, and the geographical location of the scrap (relative to the proximity of dealers and the ease and efficiency of the collection process). The following five factors will determine the degree of success of a recycling (scrap) management program:

Current market for the particular material being scrapped and recycled

Type of scrap material (e.g., ferrous or nonferrous)

Condition of the materials (e.g., whether it is mixed, sorted, or clean)

Quantity of the material

Involvement of a knowledgeable process manager

The Postal Service will benefit from the expertise of the Supplier in the decision of whether to recycle an asset; however, the plan to recycle does not need to be incorporated into the RFP.

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Reallocate (Relocate and Redeploy)

Reallocating identified surplus is the actual relocation and redeployment of a material. Reallocating puts the material to work as part of its lifespan and avoids the cost of purchasing. For example, Postal Service trucks that sit idle in a warehouse in Arizona would be transferred to a California facility that can use them immediately. Although a material may no longer fulfill the purpose for which it was purchased, it still may fulfill other purposes pertinent to the Postal Service. The Purchase/SCM Team will determine when and where specific materials are fruitful to more than one project or use and convey this information to the Client. For reallocation to become a successful reality, the Purchase/SCM Team must communicate closely with any potentially concerned parties. However, the plan to reallocate does not need to be incorporated into the RFP.


Reselling surplus materials is the financial transaction of selling a material on the open market. Reselling generates revenue that improves short-term cash flow. Potential revenue will be determined through market research. Reselling is also appropriate for a forward auction, the traditional auction used when organizations want to sell off excess inventory, machinery, or equipment that is no longer in use to maximize revenue, which is discussed in the Auction topic of the Develop Sourcing Strategy task of Process Step 2: Evaluate Sources. The plan to resell does not involve the supplier and does not need to be included in the RFP. Data rights and intellectual property issues may need to be considered in the resale of property such as computer software. Additional information on data rights can be found in the Clarify Data Rights and Intellectual Property Issues topic of the Develop Sourcing Strategy task of Process Step 2: Evaluate Sources.

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Remarket (Resell to the Supplier)

Remarketing is the selling of surplus material back to the supplier. Suppliers frequently buy back used equipment to protect proprietary technology and prevent competition from being able to sell identical material. Potential revenue realized by remarketing will be compared with potential revenue realized by reselling. After a Price Analysis has been conducted, the results will be communicated to the Client, and a plan will be selected. When remarketing is part of the preliminary plan, Purchase/SCM teams must ensure that Provision 2-8: Investment Recovery is included in the solicitation.


Returning identified surplus is a nonfinancial transaction of providing surplus material (e.g., delivery and industrial equipment) to the supplier for a credit. Provision 2-8: Investment Recovery requires suppliers to provide an investment recovery plan in their proposals, therefore Purchase/SCM Teams should include Provision 2-8 when an investment recovery plan is required.


Remanufacturing identified surplus is the use of components of a material alone or combined with others to create a new material or product (e.g., mail transportation equipment and spare parts). Except for locks, manufacturing is not a core competency of the Postal Service, so remanufacture may be a rare solution for the disposal of surplus and idle assets. Remanufacture would be appropriate when an internal Postal Service project that has decided to make a product has been identified by the Purchase/SCM Team, and these surplus or idle assets can be leveraged to reduce the costs associated with the new product or service. Because the decision to remanufacture will lead to the utilization of surplus to strategically make in-house another product at the Postal Service, as outlined in Conduct Make vs. Buy Decision Analysis, it does not require supplier involvement and should not be in the RFP.

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Removal is the process of disposing of surplus material (e.g., old office furniture). Disposal is often costly, but by giving the item away (to free space, save on depreciation and tracking expenses, and cut maintenance and insurance costs), the costs of disposal in the long run can be reduced or negated. The Purchase/SCM Team should research whether such actions would indeed negate disposal costs. Because removal by the Postal Service is potentially costly and may require supplier involvement, solicitations for contracts that contemplate removal must contain Provision 2-8: Investment Recovery.

Quadrant Approach

A quadrant approach classifies all Postal Service purchases into four categories, depending on their impact on the Postal Service core competencies (noncore versus core) and complexities (standard versus custom). Because a preliminary investment recovery plan outlines what to do at the end of the project lifespan and is developed before the completion of a purchase, the Quadrant Approach should be leveraged by the Client to guide the decision to recycle, reallocate, resell, remarket, return, remanufacture, or remove, as shown in Figure 2.7.

Figure 2.7

Four Quadrants

drawing showing four quadrants for figure 2.7

Quadrant I: Noncore/Customized Purchases

Surplus and idle items in this quadrant will be recycled or reallocated and do not need to be addressed by proposals because both are in-house activities. The strategic approach regarding Quadrant I calls for supply continuity, and these items should be used multiple times.

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Quadrant II: Core/Customized Purchases

Surplus and idle items from Quadrant II will be recycled, reallocated, resold, remarketed, or returned. Remarketing and return require supplier collaboration and should be addressed by proposals. These items are vital to the Postal Service's operations and therefore may necessitate recycling or reallocation. They are also vital in the market, are of high value, and therefore can warrant reselling, remarketing, or return. Note: These items are specific to the Client's goals and strategies, but have been customized to the Client's business function, so reselling or remarketing may be compromised.

Quadrant III: Noncore/Standard Purchases

Surplus and idle items in Quadrant III will be recycled, reallocated, resold, or removed. Removal requires supplier collaboration and therefore should be addressed by proposals. These items have many sources and many options and provide low value to the end Client. Most of these items (e.g., office supplies) should be recycled, reallocated, or removed. However, certain items are desired by external organizations, have a resale value, and should be resold (e.g., information technology).

Quadrant IV: Core/Standard Purchases

Surplus and idle items in Quadrant IV have many alternatives and many sources and are readily available in the marketplace. Items of this standard nature can have various functions and therefore can be useful both internally and externally. These items will be recycled, reallocated, resold, remarketed, returned, remanufactured, or removed and should be addressed by proposals because these disposal options require supplier collaboration.

Other Topics Considered

Conduct Market Research and Benchmarking Analysis topic, Decide on Make vs. Buy task, Process Step 1: Identify Needs

Clarify Data Rights and Intellectual Property Issues topic, Develop Sourcing Strategy task, Process Step 2: Evaluate Sources

Finalize Investment Recovery Plan topic, Plan for Contract Management task, Process Step 3: Select Suppliers

Implement Investment Recovery Plan topic, Manage Demand task, Process Step 5: Measure and Manage Supply

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Clauses & Provisions

Provision 2-8: Investment Recovery

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