Saving the Postal Service also requires reforming its contracting policies, according to a bill introduced by Rep. Issa (R-Calif.) on June 23, 2011. Prompted by the Postal Service's decision to stop paying into the federal retirement system and $27 billion in projected losses over three years, the bill would enact sweeping reforms. The "Postal Reform Act of 2011" would create two separate oversight bodies that would have broad, receivership-type authority to impose cost-cutting measures on the agency. While curing postal deficits is the primary goal, the bill specifically addresses postal procurement practices and would impact postal contracting in significant ways. Read on for the details.

The Postal Reform Act of 2011

The bill attempts to solve postal deficits by creating two separate bodies with strict cost-cutting agendas that would oversee agency actions. While these bodies would receive recommendations from the agency, they ultimately have the power to set agency policy and demand agency compliance. These bodies would trump the powers of postal officials and its Board of Governors.

The first new body, the Commission on Postal Reorganization, would recommend closures of postal facilities. Unless overruled by an up-or-down vote of Congress, these recommendations will be enacted. The Commission's goal is to save $1 billion per year by closing post offices, another $1 billion per year by closing mail processing facilities, and achieve a 30% reduction in management facilities.

Another separate new body, the Postal Service Financial Responsibility and Management Assistance Authority, would have broad powers over postal budgets and financing, including the authority to renegotiate collective bargaining agreements and contracts. The authority over contracts would apply to new contracts and the modification, extension, or renewal of existing contracts.

Impact on postal contractors by the new Authority

While the bill is directed to big picture solutions, it also focuses a surprising amount of attention on contracting matters. Thus, actions by the Authority could have the following impacts on postal contractors:

  • The Authority has approval authority over USPS budgets, financing, expenditures, capital purchases, and sales of assets. Spending on postal contracts thus come within the purview of the Authority.
  • Mandatory prior approval by the Authority is required for new contracts and leases. The Authority is given discretion to specify which contracts are subject to this mandatory approval process. Even if such contracts are approved, the approval process will add at least one to two weeks of additional lead time before a contract can be executed.
  • The Authority may at any time submit recommendations to the Postal Service on "reforming procurement practices, and placing other controls on expenditures."

"Postal Contracting Reform"

In addition, the bill contains a separate title on "Postal Contracting Reform." These reforms appear to be prompted by the OIG investigation of former USPS President of Mailing Service, Robert Bernstock. That investigation determined that procedures for awarding noncompetitive contracts were not followed and there were potential conflicts of interest. These areas are addressed directly in the postal contracting reform section of the bill.

Competition advocate

The bill would require USPS to establish a competition advocate. The competition advocate would be responsible for promoting the "contracting out of Postal Service functions that the private sector can perform equally well or better, and at lower cost."  By contrast, the Postal Service has recently been moving in the opposite direction, bringing work in-house to be performed by existing employees.

The competition advocate would also be responsible for promoting competition "to the maximum extent practicable consistent with obtaining best value by promoting the acquisition of commercial items and challenging barriers to competition." Currently, the Postal Service has no statutory or regulatory requirement to seek any level of competition. USPS's de facto procurement regulation--the Supplying Principles and Practices (SPP) manual--requires only that the agency obtain "adequate competition whenever feasible." This is a far cry from the competition maximization that would be required under Rep. Issa's bill.

Finally, the competition advocate would be responsible for reviewing the agency's procurement activities and preparing an annual report. The annual report would describe the initiatives required to promote contracting out and competition, and the existing barriers to doing so.

"No excuses" policy for delegated authority

The bill would impose a "no excuses" policy on senior procurement executives and contracting officers who delegate their authority to other agency representatives. Under the bill, senior procurement executives have "ultimate responsibility and accountability for the award and administration of postal contracts" notwithstanding any delegations of authority. Similarly, contracting officers must "maintain an awareness of and engagement in the activities being performed on postal contracts" they have cognizance over. All delegations of contracting authority must also be made publicly available by posting on the agency's website.

Posting of noncompetitive purchase requests

Under the bill, USPS must post on its public website any noncompetitive purchase request for a noncompetitive contract valued at $250,000 or more. The posting must also spell out the rationale for a noncompetitive award.

Ethical issues

The bill would require contracting officers to identify and submit to the agency's ethics official any ethical issues relating to a proposed contract. All postal employees involved in a noncompetitive purchase request would also be required to file a written certification that discloses any "covered relationship." Employees would be required to certify that they will not take any action with respect to a procurement that would affect the financial interests of a friend or relative, or would give the appearance of the use of public office for private gain. In the wake of the Bernstock investigation, the Postal Service adopted similar rules, but these would become mandatory under the bill.

In addition, a contractor would be required to timely disclose to the contracting officer any conflict of interest with a covered employee. Any contract involved in the violation of 18 U.S.C. Chapter 11 (bribery, grafts, conflicts of interest) would be void and the agency could recover all amounts expended under it.

Contractors also face tremendous liability for failing to report a conflict of interest. If a contractor fails to timely disclose a conflict of interest to the appropriate contracting officer, and such action would constitute an offense under 41 U.S.C. § 2105, the Postal Service may void the contract and recover any amounts expended under it. The enormous potential liability for failure to report a conflict of interest will require contractors to become thoroughly familiar with applicable conflict of interest rules.