Postal Service Contracting

HCR Seminar Postal Contracting Brochure 2016_3Unpaid for work you performed on your HCR contract?  Can’t agree with the Postal Service on a contract price adjustment?  Not given a chance to bid on new work in your area?

Learn about remedies for these problems at our new seminar, “Claims and Disagreements under Postal Service HCR contracts.”  Husch Blackwell partner David Hendel will present the seminar on January 19, 2016, at 9:00 – 10:30 a.m., at the Golden Nugget Hotel in Last Vegas, NV.

The seminar focuses on two areas where HCR contractors have substantial rights and remedies. First, we examine the claims process, which gives contractors the right to recover funds for various Postal Service actions – or inactions. We describe the activities that potentially generate claims, how to prepare a claim, when to bring a claim, and how claims are processed and resolved. We review actual claims that arose from service changes and describe how courts have ruled on them. We also provide a list of do’s and don’ts when preparing and submitting claims.

Second, we describe the “disagreement” process, which allows contractors to protest a Postal Service procurement action or award decision. We explain the grounds for bringing a disagreement, deadlines and filing requirements, and decisions by the USPS Supplier Disagreement Resolution Officer (SDRO).

The seminar is presented in conjunction with the Central/Western Area regional meeting of the National Star Route Mail Contractors Association. Separate registration is required. For Star Route Association members, the seminar fee is $195; for non-members, $295.  A $50 discount applies to each additional person who attends from the same company. Those wishing to register may go to https://www.regonline.com/hcr  or contact seminar coordinator Shana Hoy at  816.983.8809 at shana.hoy@huschblackwell.com.

PSBCA sealThe first Board of Contract Appeals to fully enter the digital age is the Postal Service Board of Contract Appeals, which recently issued new rules on electronic filing.  Although the PSBCA hears claims against the agency that provides U.S. Mail, that method of filing will no longer be allowed (absent permission). The Postal Service, however, is not a Luddite agency and has embraced modern technology in running its business.

Effective July 2, 2015, PSBCA filings must be made electronically unless permission to submit physical filings is requested and obtained. The website for electronic filing is https://uspsjoe.justware.com/JusticeWeb.  Online filers must use this exact web address. Omitting the initial “https://” – or the final “justiceweb” – results in an error message.  To assist users, the Board has created a PSBCA tutorial on electronic filing. Continue Reading U.S. Postal Service board enters the digital age

Top U.S. Postal Service Suppliers for Fiscal Year 2014

As it did last year and each of the previous eleven, Federal Express Corporation topped the list of the U.S. Postal Service’s largest suppliers in Fiscal Year 2014. EnergyUnited, which provides consolidated telecommunications and energy billing services to the Postal Service, once again held the second spot.

The list of the top five USPS suppliers in FY 2014 also includes mail hauler Pat Salmon & Sons, Inc., Victory Packaging, and transportation supplier Kalitta Air, LLC.

The top ten USPS suppliers in FY 2014 includes United Airlines, Inc., Hewlett-Packard Co., Accenture Federal Services, Wheeler Bros., Inc., and Northrop Grumman Corporation.

The full list of the Top 150 USPS Suppliers is compiled every year by David P. Hendel, a partner in Husch Blackwell’s Government Contracts Practice Group. David focuses his practice on representing contractors that do business with the United States Postal Service.

All of the recent Top 150 USPS Suppliers lists are available here:

 

OIG report - Jan 25 2015 - cover snippetEver since the Postal Service “defaulted” on its annual $5.5 billion payment to the U.S. Treasury for retiree pre-funding obligations, it has been assumed that USPS is a pauper agency. But a new white paper issued by the USPS Office of Inspector General concludes that the value of the Postal Service’s real estate holdings, and other factors, far outweigh its retiree obligations.

The OIG estimated the Postal Service’s total retiree healthcare and pension liabilities at $403.8 billion. That’s a lot of stamps, but the Postal Service has already set aside $356.6 billion (83 percent) of this amount, leaving an unfunded liability of $86.6 billion.  The OIG concluded that when this $86.6 billion is considered in conjunction with four factors, the agency’s assets would fully cover these obligations, and then some.

The Postal Service’s real estate holdings is the most important factor. The Postal Service values its real estate assets at book value, which is $13.2 billion. But book value considers only the original purchase price and depreciation, not what these assets would actually sell for. The OIG estimates the fair market value of these assets as high as $85 billion. That figure would offset all but $1.6 billion of the Postal Service’s unfunded liability.

The next factor is the impact of interest rates. Over the past few years, interest rates have been at historically low levels, and this may have skewed current day assumptions about USPS’s long-term liability. Changes in interest rates have a dramatic effect. The OIG cites to a study that found even a modest 1.25 percent increase in the current interest rate would reduce unfunded liabilities by $72.3 billion.

Requiring postal retirees to use Medicare as their primary health insurer, backed up by their postal health care plans, would further reduce the Postal Service’s retiree healthcare liability by $42.9 billion. This would require a change in the law, but various postal reform bills have already proposed this change.

Demographics is the fourth factor considered by the OIG. The Postal Service’s unfunded obligation is based on demographics associated with federal employees. But the demographics of the average postal worker is significantly different than the average federal employee. Applying postal specific demographics would reduce unfunded liability by $8.5 billion.

Taking into account all of these factors, the OIG concludes that the Postal Service has more than enough assets to cover its future obligations to retirees. Lawmakers, take note!

UPDATE (February 25, 2015):  USPS Chief Financial Officer Joe Corbett does not agree that the value of USPS assets could be as high as $85 million. During his presentation at a meeting of the Association for Postal Commerce (Postcom), he stated this estimate fails to take into account that many facilities were built specifically to suit USPS needs and would not ideally suit other businesses or operations. Corbett estimated the Postal Service’s real estate holdings to be worth about $25 billion.

David Williams Operations Update at PostCom June 2012Not your typical federal agency, the U.S. Postal Service is an “independent establishment” of the executive branch of the United States government. (39 U.S.C. § 201.)  As a result, many federal procurement rules do not apply to the Postal Service. Here are the major differences between USPS’s purchasing policies and those of other federal agencies:

  1. Not only is the Federal Acquisition Regulation (FAR) inapplicable, but the Postal Service’s own special purchasing rules were not issued as regulations. Instead, the agency considers its Supplying Principles and Practices manual to be “advisory” and non-binding.
  2. While the rest of the federal government is bound by the Competition in Contracting Act and must obtain “full and open competition,” the Postal Service has no such mandate. When it competes a requirement, it need only obtain “adequate competition whenever appropriate.”
  3. All purchases are conducted as negotiated procurements; there are no Invitation for Bids (IFBs). All proposals are evaluated on a “best value” basis.
  4. The Truth in Negotiation Act (TINA) does not apply to the Postal Service. The Postal Service, however, sometimes employs a contract clause that imposes a similar requirement. TINA’s statutory exceptions therefore do not apply, so the Postal Service could seek cost information when other agencies would be prohibited from doing so.
  5. There are no mandatory set-aside procurements for small, disadvantaged businesses, and USPS does not participate in the SBA’s Section 8(a) program. The Postal Service does actively seek diversity in its procurements, and tracks contract and subcontract awards to small, minority-owned, and women-owned businesses.
  6. Prequalification of contractors is regularly used by the Postal Service to limit competition to prequalified suppliers.
  7. Postal Service acquisitions are made with agency funds, and thus there are no legal restrictions on multi-year procurements or limitations imposed by Congressional funding.
  8. The Postal Service can seek title to intellectual property, not just unlimited rights. The Postal Service may also limit contractors from selling intellectual property developed for USPS to postal competitors.
  9. In the proposal evaluation and award process, there are no competitive range determinations or regulations governing Best and Final Offers (BAFOs). The term “discussions” has its ordinary dictionary meaning, and discussions may be held multiple times with one offeror and less frequently with other offerors. Revised proposals need not be submitted on a common cut-off date. Once a prospective awardee is selected, the Postal Service can conduct pre-award negotiations with the selected offeror.
  10. The GAO has no authority to consider protests involving Postal Service purchases. Instead, the Postal Service has its own internal “disagreement” process and a Supplier Disagreement Resolution Official (SDRO). The SDRO, however, is not independent of Supply Management and does not make any documentation available to the protester. Protests can also be brought before the U.S. Court of Federal Claims.

postaltrucks_iStock_000002377862Medium (2)“Long-Life Vehicles” turned out to be a fully appropriate name for the fleet of 163,000 carrier vehicles the Postal Service first bought in 1987. Now looking to replace them, the Postal Service recently issued a Request for Information and Sources Sought notice for its “Next Generation Delivery Vehicle” (NGDV). Companies have until March 5, 2015 to submit their comments and pre-qualification responses. The Postal Service will then determine which companies will be eligible to receive the RFP for competitive prototype development.

The Postal Service anticipates making a single award to a supplier for up to 180,000 vehicles. With an anticipated price range of $25,000 to $30,000 per vehicle, that works out to a contract valued between $4.5 and $5.4 billion. But don’t expect the Federal Acquisition Regulation (FAR) and other bedrock federal procurement laws to apply to this purchase. The Postal Service is exempt from a wide-range of federal procurement rules and has its own purchasing policies called the Supplying Principles and Practices manual.

While the NGDVs are expected to share some design similarities with the current Long-Life Vehicle, the draft specifications describe many enhancements. The new vehicle must accommodate more package volume, have improved ergonomics and functionality, obtain better fuel economy, and produce lower harmful emissions. And, of course, neither snow nor rain nor gloom of night should stay these vehicles from the swift completion of their appointed rounds. If all goes to plan, the first delivery of 3,000 vehicles will be making their rounds by January 2018.

COVER of USPS OIG report Voyager capping Sept 30 2014Calling the Voyager fuel card program unmanageable and uneconomic, the USPS Office of Inspector General recommends that the Postal Service use another method to manage fuel under its HCR contracts. In its advisory report dated September 30, 2014, the OIG concludes that the Voyager fuel card program has cost more money that it saved and discourages fuel efficiency. The Postal Service spent $5.1 billion for 1.6 billion gallons of fuel for Highway Contract Route (HCR) contracts under the program over the last nine years.

Continue Reading Voyager card fuel program is unmanageable, says USPS OIG

USPS Integrated Financial Plan FY 2015Capital spending is making a comeback at the Postal Service from dangerously low levels. The Postal Service plans on tripling its capital spending commitments in Fiscal Year 2015. Under its recently issued Integrated Financial Plan for FY 2015, the Postal Service projects $2.2 billion in new capital commitments. This contrasts sharply with capital spending over the last five years, which was annually below $1 billion.

Capital spending commitments will be concentrated on previously deferred investment needed for aged and end-of-life equipment. Planned spending includes $800 million for mail processing equipment; $500 million for vehicles; $500 million for customer service and support equipment; and $400 million for facilities.

Total capital spending in FY 2014 was just $700 million, an anemic level for an entity that had $66 billion in total annual expenses. Postal Service capital spending has been limited to cash on hand as the agency long ago reached its statutory $15 billion debt limit. The agency also owes the U.S. Treasury $22 billion for unpaid retiree health care pre-funding mandates.

But the outlook for revenues in FY 2015 allows room from increased capital spending. Based on a projected 13 percent increase in package volume, and a moderate rise in Standard Mail volume, the Postal Service projects a $1.8 billion revenue increase from last year, with annual total revenue of $69.6 billion.

The Postal Service also expects to spend slightly more on transportation, supplies and services, and rents and utilities. Spending in these areas will increase from $13.3 billion to $14.9 billion. Transportation is projected to increase by $200 million to $6.6 billion as savings from transportation cost-reduction initiatives are offset by costs associated with network consolidations and increased volume.

Cover page - Nov 2014 postal seminarEvery Postal Service contractor should know the answer to certain fundamental questions: What procurement rules apply to the Postal Service and how do they differ from other agencies? What contract provisions are most likely to cause problems during performance? How do I identify and respond to changes and changed conditions? What recourse do I have when disputes arise?

That’s why our firm is presenting a full-day seminar on “Postal Service Contracting: What Every Contractor Should Know,” at the Westin Tysons Corner hotel on Thursday, November 6, 2014.

We start with the basics

We start with a primer on the creation, structure, and current management of the Postal Service. We provide vital background and statistical information that all postal contractors should know. We explore the pressing issues confronting the Postal Service today, its plans for the future, and how these issues will impact contractors. We conclude the session by setting out the 23 most important “culture pointers” encountered in the unique Postal Service contracting environment.

Continue Reading What every Postal Service contractor should know

Retaliating against an employee for reporting safety violations, the U.S. Postal Service asserted baseless terrorism charges against him. As a result, the employee was dismissed from his job, arrested, detained, harassed, criminally charged with committing acts of terrorism, and subjected to an extended campaign of public disparagement. That sounds like the exaggerated ranting of a would-be whistleblower seeking to cash in on a big pay day. But it’s not. These are the allegations made by the U.S. Department of Labor in a lawsuit it filed against its sister agency, the U.S. Postal Service, in an action filed in the U.S. District Court for the Eastern District of Missouri, Eastern Division, Case No. 4:14-cv-1233.

Continue Reading U.S. Postal Service plays the terrorist card against whistleblower