Postal Contracting:
Year in Review and Year Ahead
February 7, 2012
David P. Hendel
202-378-2356
david.hendel@huschblackwell.com
Kyle J. Gilster
202-378-2303
kyle.gilster@huschblackwell.com
The State of the Postal Service
“The situation we have is
unsustainable.”
Postmaster General
Patrick Donahoe
Revenues vs. Expenses
USPS debt (in $ billions)
Looming USPS obligations
Mail volume by product
Mail revenue by product
2012 expense initiatives
1.
2.
3.
4.
network optimization and consolidation
seeking closure of 3,600 post offices
delivery-route optimization
negotiating new contracts with NALC and
Mailhandlers unions
5. eliminate Saturday delivery
USPS revenue initiatives
1. First Class mail price increase in
January 2012
2. Restructure competitive pricing for
shipping products
3. recover FERS over-funding: $11
billion
USPS Organizational Structure
Supply Management organization
chart
Anemic capital spending
Source: USPS Form 10-K for FY 2011
USPS Network and
Service Standard
Changes
USPS Supplying Principles
and Practice manual
January 2011 revisions
SPP
Revisions
(Jan. 2011)
• Noncompetitive
Purchase Request
(NPR) process
• Competition
Advocate
• Out of scope
change orders
Noncompetitive Purchase Request Process
Competition Advocate
Out of Scope Change Orders
USPS Supplying Principles
and Practice manual
December 2011 revisions
SPP
Revisions
(Dec. 2011)
• Proposal
evaluation
• Past performance
and supplier
capability
• Simplified
Purchasing
Best value defined
Past performance and supplier
capability
Price vs. non-price factors
Simplified Purchasing
USPS OIG Reports and
Investigations
USPS Role in the Digital Age
February 24, 2011 and April 19, 2011
Contract Data Management
April 27, 2011
OIG conclusions:
• errors found in 137 of 139 electronic
contract files examined, valued at
$2.1 billion
Management of HCR Voyager
Card Program
June 7, 2011
• OIG:
– $48 million in HCR excess
fuel purchases over 2 years
• Management response:
– Voyager program resulted
in 72.3 million gallons of
contracted fuel not used
– saved USPS $212.9 million
or 15% of contracted-for
gallons
Postal Service Work Rules and
Compensation Systems
September 19, 2011
• Per delivery labor
costs:
– City carrier = $0.591.
– Rural carrier= $0.496.
– CDS carrier = $0.36.
Contracting out and the impact
of the Service Contract Act
USPS OIG Steps Up Fraud
Investigations
$13 million VMF bribery scandal
• Detroit VMF
• 5 employees indicted
• steered $13 million in
contracts for vehicle
repairs
Would this be possible, or continued for so long, if
USPS had binding procurement regulations?
Legal Decisions
Tip Top Construction, Inc.
PSBCA No. 6351, April 1, 2011
• claims consultant
costs recoverable
• when pricing new or
changed work under
contract
• SPP as “guidelines”
backfires on USPS
Supplier Disagreement
Resolution Official (SDRO)
decisions
J.C.N Construction, Inc.
December 13, 2011
• CO misapplied RFP’s
stated evaluation
methodology
• directs termination for
convenience of
awardee’s contract
U.S. Court of Federal
Claims
Online auction failure
Both companies shown as low
bidder on Emptoris
ABC Inc.
XYZ, Inc.
You are the low
bidder.
You are the low
bidder.
Copyright infringement
USPS Inspection Service agents can be
sued for retaliatory prosecution
• Moore v. Hartman
• 25 years and
running
Senate Committees and
Senators
• Homeland Security and
Governmental Affairs
• Chair: Senator Lieberman (I-CT)
• Republican Ranking:
Senator Collins (R-ME)
• Postal Subcommittee Chair:
Senator Carper (D-DE)
House Committee and
Representatives
• The Committee of jurisdiction is
the Committee on Oversight and
Government Reform
• Chairman-Rep. Issa (R-CA)
Democratic Ranking MemberRep. Cummings (D-MD)
Proposed legislation
• 21st Century Postal Service Act of
2011
• Postal Reform Act of 2011 (House)
• Postal Operations Sustainment and
Transformation (Post) Act of 2011
• U.S. Postal Service Improvement
Acts of 2011
• Federal Employees’ Compensation
Reform Act of 2011
Predictions for 2012
• Wait-and-see until Congress acts
• Have aggressive cost-cutting efforts
run their course?
• Reduction in suppliers
• Prequalification and competition
• Pent-up demand
• Aggressive OIG scrutiny and contract
fraud investigations
Thank You
If you have any questions, feel free to contact us at:
David P. Hendel
202-378-2356
david.hendel@huschblackwell.com
Kyle J. Gilster
202-378-2303
kyle.gilster@huschblackwell.com
Husch Blackwell, LLP
750 17th Street, NW, Suite 1000
Washington, D.C. 20006-4656
www.huschblackwell.com
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