Postal Procurement:

An Assessment of Postal Purchasing Practices

GGD-88-65: Published: May 12, 1988. Publicly Released: May 12, 1988.

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In response to a congressional request, GAO reviewed the procurement policies, processes, and practices of the U.S. Postal Service (USPS) and its Board of Governors to determine the: (1) controls USPS applied to large contracts to help deter fraud and ensure that the government was getting what if paid for; and (2) extent to which members of the Board of Governors were involved in selecting contractors.

GAO found that: (1) USPS normally applied generally accepted controls to the 109 large contracts it reviewed; (2) all of the 48 negotiated contracts reviewed had written approvals at a level above the contracting officer; (3) USPS used the Commerce Business Daily (CBD) to publicize 82 of the 92 contracts it was required to; (4) contracting officials determined contractors' responsibility in terms of productivity and financial strength before awarding contracts in all cases; (5) USPS performed audits of contractors' prices, when warranted, to determine price reasonableness; (6) contract files included the documents used to justify accepting the contract price for all 48 negotiated contracts; and (7) 59 of the 61 formally advertised solicitations received multiple bids. GAO also found recurring weaknesses in USPS procurement practices in 44 of the 109 contracts, including: (1) lack of data justifying its sole-source contracts; (2) unwarranted costs incurred for minority business enterprise (MBE) contracts; (3) the use of basic ordering agreements (BOA) for large orders without competition; (4) lack of documentation of fair and reasonable prices in its negotiated contract files; and (5) use of restrictive, incomplete, or outdated specifications. In addition, GAO found that: (1) Board members were generally not involved in contractor selection; and (2) USPS implemented a 3-year plan to improve procurement and supply, including a new procurement manual.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: USPS assigned the new Office of Technical Support responsibility for the adequacy and quality of specification packages. USPS has also hired a consulting firm to improve the technical data packages used for large dollar recurring procurements.

    Recommendation: The Postmaster General should direct the Assistant Postmaster General, Procurement and Supply, to take action to improve USPS purchasing practices for large-dollar contracts by reinforcing the requirement that specifications used should be accurate, complete, and current.

    Agency Affected: United States Postal Service

  2. Status: Closed - Implemented

    Comments: The new USPS Procurement Manual advocates internal focus on steps to systemize, standardize, and document negotiated contract cost and price analysis techniques. USPS is also establishing a new Contract Pricing Division that is expected to provide additional staff and expertise in cost/price analysis techniques.

    Recommendation: The Postmaster General should direct the Assistant Postmaster General, Procurement and Supply, to take action to improve USPS purchasing practices for large-dollar contracts by emphasizing the need to include convincing evidence in the contract file that the price of negotiated contracts is fair and reasonable.

    Agency Affected: United States Postal Service

  3. Status: Closed - Implemented

    Comments: USPS has established a maximum order limitation for office equipment BOA and is establishing limits for all BOA by commodity class. To ensure competition, a minimum of three qualified firms are required when BOA are used.

    Recommendation: The Postmaster General should direct the Assistant Postmaster General, Procurement and Supply, to take action to improve USPS purchasing practices for large-dollar contracts by establishing maximum order limitations for BOA, and publicizing orders over a stated limit in CBD to provide other firms the opportunity to compete.

    Agency Affected: United States Postal Service

  4. Status: Closed - Implemented

    Comments: USPS is developing a MBE program to obtain a better balance between MBE contracting and good business decisions. A management instruction was issued on February 1, 1989, that will discourage the practice of subcontracting a substantial portion of MBE contracts to non-MBE firms. Past policy of allowing MBE contracts to be awarded when the price is 110 percent of postal estimate has been eliminated.

    Recommendation: The Postmaster General should direct the Assistant Postmaster General, Procurement and Supply, to take action to improve USPS purchasing practices for large-dollar contracts by strengthening review procedures and criteria to ensure that MBE contracts will not result in unwarranted costs.

    Agency Affected: United States Postal Service

  5. Status: Closed - Implemented

    Comments: USPS issued an instruction on May 17, 1989, that requires a thorough justification review and specific approval for all noncompetitive contract awards. The Office of Procurement initiated a process that requires a structural review of the requisitioning activity's sole-source justification, endorsement by the contracting officer, and clearance through the Director before submitted for approval.

    Recommendation: The Postmaster General should direct the Assistant Postmaster General, Procurement and Supply, to take action to improve USPS purchasing practices for large-dollar contracts by requiring written justification approving sole-source procurements to include information on: (1) the efforts to find competition and the circumstances that prevented a competitive award; (2) reasons why only one contractor was determined to have the capability and experience required; and (3) plans to ensure future purchases are made competitively.

    Agency Affected: United States Postal Service

  6. Status: Closed - Implemented

    Comments: To enhance competition, the new USPS Procurement Manual calls for the contracting officer to identify at least those acceptable brands for standard, commercially available products.

    Recommendation: The Postmaster General should direct the Assistant Postmaster General, Procurement and Supply, to take action to improve USPS purchasing practices for large-dollar contracts by emphasizing that use of brand name purchase descriptions restricts competition and requiring explicit justification for specification of brand names.

    Agency Affected: United States Postal Service

 

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