Postal Service Adopts New “Best Commercial Practices” Acquisition Rules

On April 19, 2005, USPS issued a final rule completely replacing all USPS purchasing regulations, including the Postal Contracting Manual, Procurement Manual, and all purchasing manuals. The stated purpose of these sweeping changes is to allow USPS to acquire goods and services in a manner “akin to the best commercial practices in the private sector.” These new regulations culminate a trend in which USPS has sought to avoid regulation and outside oversight of its contracting practices.

Although USPS states its intention to retain some contracting advantages that only governments typically enjoy, such as the right to terminate a contract for convenience, these advantages would be introduced through contract clauses and thus subject to negotiation, like a commercial contract. Thus, while the new regulation purports to confer greater discretion on USPS, it also may provide opportunities for contractors to negotiate more favorable contract terms regarding audit rights and terminations for convenience, among others.

The new rules will become effective May 19, 2005. Contracts signed prior to May 19, 2005, will continue to be governed by the old regulatory scheme. Solicitations issued prior to May 19 and contracts signed on or after that date will be governed by the regulations in effect “at the time the contract was signed.”

Some of the key features of the new regulations include:

• A contractor would be required to “treat the Postal Service in the same manner it would other valued customers of similar size and importance.”
  
• Contract Disputes Act requirements and procedures remain in effect.
  
• A new provision allows USPS to decline to accept or consider proposals from suppliers that USPS determines does not “meet reasonable business expectations” or “does not provide a high level of confidence about current or future business relations.” This provision is intended to be distinct from suspension and debarment provisions and procedures. USPS is required to provide a supplier with notice and an opportunity to contest the USPS decision to not accept or consider its proposals before a USPS-selected ombudsman. Examples of unacceptable conduct include, but are not limited to:
  • Marginal or dilatory contract performance;
  • Failure to deliver on promises made in the course of dealings with USPS;
  • Providing false or misleading information as to financial condition, ability to perform, or other material matters, including any aspect of performance on a contract;
  • Engaging in other questionable or unprofessional conduct or business practices.
    
• The bid protest process is altered. Protests must be lodged with the contracting office within 10 days and, if not resolved, may then be submitted to a USPS-designated ombudsman.
  
• A new provision creates a process for resolving disputes before an ombudsman. Disputes to be reviewed by an ombudsman include bid protests and protests of a USPS decision not to accept or consider proposals from a supplier, but the ombudsman will not review CDA disputes nor suspension/debarment proceedings. Some features of the ombudsman process include:
  • Ombudsman determines the timetable and process for review and may engage in ex parte communications;
  • Ombudsman decisions may be “appealed” to a court, but purportedly only on grounds that the decision was procured by fraud or criminal misconduct, or in violation of regulations having the force and effect of law;
  • Non-USPS procurement rules and regulations “will not be taken into account.”
    
• The preamble to the final rule states that USPS intends to retain the right to terminate a contract for convenience or default.
  
• The new regulation eliminates standard USPS contract clauses, although USPS may reintroduce them in individual solicitations.
  
• The preamble states that USPS is in the process of drafting new "Supplying Principles and Practices" describing its internal acquisition policies and procedures. These Supplying Principles and Practices will “not have the force and effect of law,” but will be placed on the USPS website for information purposes. To fill the gap until the Supplying Principles and Practices are completed, USPS will prepare "Interim Internal Purchasing Guidelines," which also will not have the force and effect of law.