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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: March 24, 2004

SUBJECT: United States Postal Service (USPS); Purchasing of Property and Services

SOURCE: Federal Register, March 24, 2004, Vol. 69, No. 57, page 13786

AGENCIES: United States Postal Service (USPS)

ACTION: Proposed Rule

SYNOPSIS: USPS proposes to amend its regulations to implement the accquisition portions of its Transformation Plan and the similar recommendations of the President's Commission on the United States Postal Service regarding the acquisition of property and services.

EDITOR'S NOTE: The USPS regulations are in Title 39 of the Code of Federal Regulations (CFR), and the regulations pertaining to acquisition are in 39 CFR Part 601, Purchasing of Property and Services.

DATES: Comments on the proposed rule must be submitted on of before April 23, 2004.

ADDRESSES: Submit comments to Michael J. Harris, Supply Management Infrastructure, United States Postal Service, 475 L'Enfant Plaza, SW, Room 4130, Washington, DC 20260-6201.

FOR FURTHER INFORMATION CONTACT: Michael J. Harris, 202-268-3569.

SUPPLEMENTAL INFORMATION: In April 2002, the Board of Governors of the Postal Service adopted the Transformation Plan, which stated that challenging times require the USPS to change its business model and practices to meet the challenge of the future to serve the American public. As part of that challenge, the USPS determined to "revise purchasing regulations to allow for the acquisition of goods and services in a manner similar to that followed by businesses."

In July 2003, the President's Commission on the Postal Service also recommended the Postal Service exercise the "latitude to conduct its procurement with fewer substanti[ve] regulations" as authorized by the Postal Reorganization Act. The commission expressed its view that "it is inappropriate to apply regulations...aimed at traditional agencies to a federal entity required to finance its own multi-billion dollar operations." Rather, the commission thought the public would benefit greatly if the USPS applies purchasing practices of leading corporate enterprises. Therefore, in accordance with the Transformation Plan and the Commission's recommendations, the USPS proposes to replace all its current purchasing regulations in 39 CFR Part 601 with the following:

      601.100 Purchasing Policy.
      601.101 Effective Date.
      601.102 Prior Purchasing Regulations.
      601.103 Applicability and Coverage.
      601.104 Postal Purchasing Authority.
      601.105 Business Relationships.
      601.106 Canceling Business Relationships.
      601.107 Alternative Dispute Resolution.
      601.108 Ombudsman and Dispute Resolution.
      601.109 Contract Claims and Disputes.
      601.110 Payment of Claims.
      601.111 Interest on Claim Amounts.
      601.112 Review of Adverse Decisions.
      601.113 Debarment, Suspension, and Ineligibility.

The following are the significant provisions of the proposed 39 CFR 601:

• Section 601.102, Prior Purchasing Regulations, would state, "This part revokes, replaces, and supersedes all previous postal purchasing regulations, including the Postal Contracting Manual, Procurement Manual, the Purchasing Manual (Issue 2 and Issue 3), and procurement handbooks, circulars, and instructions except as provided in Sec. 601.103."
  
  
• Section 601.103, Applicability and Coverage, would state, "The regulations contained in this part apply to all Postal Service acquisition of property (except real property) and services."
  
  
• Section 601.104, Postal Purchasing Authority, would give the following people the sole authority to "bind the Postal Service with respect to entering into, modifying, or terminating any contract regarding the acquisition of property, services, and related purchasing matters": the USPS' Vice President, Supply Management; contracting officers with written statements of specific authority; and others designated in writing or listed in 39 CFR Part 601.
  
  
• Section 601.105, Business Relationships, would permit the USPS to "cease business relations with a person or organization when that person or organization fails to meet reasonable business expectations of high quality, prompt service, and overall professionalism. In addition to terminating existing contracts for its convenience or for default, the Postal Service may cease or cancel a business relationship or it may undertake debarment, suspension, and ineligibility proceedings as provided in this part."
  
  
• Section 601.106, Canceling Business Relationships, would permit the USPS to "cancel its business relationship or decline to enter into a business relationship with a person or organization that does not meet reasonable business expectations or that does not provide a high level of confidence about current or future business relations. Typically, these sorts of unacceptable conduct and business practices will not rise to the level of unethical or criminal activities that could lead to the debarment, suspension, or ineligibility of a supplier." It goes on to identify the following as the kinds of conduct and business practices that are unacceptable:

        "(1) Marginal or dilatory contract performance;
        "(2) Failure to deliver on promises made in the course of dealings with the Postal Service;
        "(3) Spurious, frivolous, or bad-faith litigation and/or claims;
        "(4) Failure to respond promptly and completely to Postal Service inquiries and requests for information, without inadvertence or good reason;
        "(5) Negotiating or dealing in bad faith with the Postal Service, including engaging in uncooperative practices;
        "(6) Providing false or misleading information as to financial condition, ability to perform, or other material matters, including any aspect of performance on a contract; and
        "(7) Engaging in other questionable or unprofessional conduct or business practices."

  It goes on to require that the vice president, Supply Management provide a written notice of the cancellation to the person or organization, and gives the person or organization the right to contest the cancellation "with the ombudsman and supplier dispute-resolution procedures contained in this part, seek to resolve the matter by agreement through alternative dispute resolution, or both. The Postal Service may reconsider the matter and, if warranted, rescind or modify the cancellation."
  
  
• Section 601.107, Alternative Dispute Resolution, states it is USPS policy to resolve purchasing disagreements through the use of alternative disputes resolution (ADR) whenever possible. "A person or organization disputing a Postal Service decision and the Postal Service contracting officer must consider the use of ADR to resolve a particular purchasing disagreement, regardless of the nature of the disagreement or when it occurs during the purchasing process. ADR methods include informal negotiation, mediation by a neutral third party, facilitation by the supplier ombudsman, and any other agreed-upon method."
  
  
• Section 601.108 Ombudsman and Dispute Resolution, states if ADR is unsuccessful or not employed, "all disputes, protests, claims, disagreements, demands, or grievances of whatsoever nature (hereinafter 'disagreements') against the Postal Service arising in connection with the purchasing process, except claims that arise pursuant to a contract under the Contracts Disputes Act or claims concerning debarment, suspension, or ineligibility...will be presented and resolved, with finality, under and in accordance with the sole and exclusive procedure established in this section." This procedure uses an ombudsman appointed by USPS. The ombudsman is expected to give a written decision within 30 to 60 days after receiving notice of a disagreement from a supplier or prospective supplier. Decisions of the ombudsman will be final and binding, but "the person or organization that lodged the disagreement or another interested person may appeal the decision to a federal court with jurisdiction over such claims, but only on the grounds that the decision was procured by fraud or other criminal misconduct or was obtained in violation of the regulations contained in this part or an applicable public law enacted by Congress."
  
  
• Section 601.109, Contract Claims and Procedures, implements the Contract Disputes Act, and is very similar to the current regulations regarding contract disputes.
  
  
• Section 601.113, Debarment, Suspension, and Ineligibility, articulates the USPS policies and practices regarding debarment, suspension, and ineligibility from contracting with the USPS and agencies of the federal government.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

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