U.S. Postal Service:

Purchasing Changes Seem Promising, but Ombudsman Revisions and Continued Oversight Are Needed

GAO-06-190: Published: Dec 15, 2005. Publicly Released: Dec 15, 2005.

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Katherine A. Siggerud
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Purchasing makes up a significant portion of annual expenses for the U.S. Postal Service (USPS). USPS has recently made significant changes to its purchasing regulations which, according to USPS, will result in a more businesslike purchasing process. Some stakeholders, including smaller suppliers who stated they rely on USPS for the majority of their business, have raised concerns about these changes. GAO was asked to (1) describe these changes, stakeholder views, and USPS's rationale for the changes and (2) assess how these changes reflect the principles of postal reform and practices of leading organizations and identify areas, if any, for continued oversight.

USPS has recently taken actions to streamline its purchasing regulations. The three main changes are (1) revoking and superseding its former purchasing regulations, handbooks, circulars, manuals, and guidelines and replacing them with streamlined regulations and interim internal guidance; (2) establishing new provisions for entering into business relationships with suppliers, including the process for declining to accept or consider proposals; and (3) creating a new process for resolving disputes, disagreements, or arguments between USPS and suppliers/potential suppliers, including the establishment of an ombudsman. Some postal stakeholders stated these were positive changes, while others raised concerns about the need or justification for such major changes; potential limitations on suppliers' ability to appeal USPS decisions; and how USPS officials would be held accountable for the fairness of purchasing decisions and its results (i.e., ability to achieve cost savings) given this additional flexibility and discretion. USPS stated these changes would result in a more flexible, efficient, businesslike purchasing system. GAO assessed USPS's new postal purchasing regulations and draft internal guidance against key principles of postal reform--flexibility, efficiency, accountability, and social responsibility--and the purchasing practices of leading organizations. GAO found that USPS's changes are generally consistent with these principles and practices of leading organizations, except for USPS's new ombudsman position. In addition to the ombudsman inconsistencies, concerns remain about how USPS's purchasing changes will be implemented. These concerns relate to the delayed issuance of USPS's final guidance, the potential impact on suppliers and USPS's ability to track and monitor its performance, and USPS's ability to achieve efficiencies under these new flexibilities while ensuring the fair and consistent treatment of suppliers. These inconsistencies and concerns will require continued oversight.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: In response to our recommendations, Postal officials told us that they talked to representatives from leading ombudsman-related organizations, conducted research, and benchmarked the practices of several private-sector companies. Based on this research, they agreed with us that their use of the title "ombudsman" is misleading and have revised their regulations in three areas by changing: 1)the Ombudsman title to Supplier Dispute Resolution Official (SDR official), 2) the confidentiality requirements related to material held in confidence by the SDR official, and 3) the process for resolving disagreements to require attempts to resolve disputes with contracting officers prior to lodging a disagreement with the SDR official. The Postal Service submitted a notice of these changes to the Federal Register on October 15th, and the regulations became effective on November 14th.

    Recommendation: The Postmaster General should take actions to address the inconsistencies in USPS's ombudsman with the leading principles and practices related to independence and impartiality. USPS should consult with expert ombudsman and dispute resolution organizations to explore options related to its intended purpose for the ombudsman position and alternatives for changing this position to conform to leading principles and practices. If USPS wants to retain the ombudsman position, it should revise (1) the ombudsman's reporting relationship to the purchasing organization so that it is independent and neutral; (2) the ombudsman's role so that it makes recommendations rather than final, binding decisions; and (3) the appeals provision so that it applies to the final, binding agency decision rather than the ombudsman's recommendation. Another alternative is that USPS could eliminate the ombudsman position and use other dispute resolution mechanisms, such as ADR. USPS could then designate another agency official to make the final, binding decision. For either alternative, USPS would need to change its regulations and guidance accordingly.

    Agency Affected: United States Postal Service


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