Purchasing of Property and Services, 20291-20299 [05-7751]

Agencies

• Postal Service

[Federal Register Volume 70, Number 74 (Tuesday, April 19, 2005)]
[Rules and Regulations]
[Pages 20291-20299]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-7751]


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POSTAL SERVICE

39 CFR Parts 211 and 601


Purchasing of Property and Services

AGENCY: Postal Service.

ACTION: Final rule.

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SUMMARY: The Postal ServiceTM is amending its regulations in 
order to implement the acquisition portions of its Transformation Plan 
(April 2002) and the similar recommendations of the President's 
Commission on the United States Postal Service (July 2003) as they 
relate to the acquisition of property, goods and services in accordance 
with 39 U.S.C. Sec. Sec.  101, 401, 403, 404, and 410.

DATES: Effective Date: May 19, 2005.

FOR FURTHER INFORMATION, CONTACT: Michael J. Harris, (202) 268-5653.

SUPPLEMENTARY INFORMATION:

Background

    The Board of Governors of the Postal Service has determined in the 
Transformation Plan that challenging times require the Postal Service 
to continually improve its business practices to meet the challenge of 
the future in order to fulfill its charter to serve the American 
public. As part of that challenge, the Postal Service determined to 
``revise purchasing regulations [where possible] to allow for the 
acquisition of goods and services in a manner similar to that followed 
by businesses.'' Transformation Plan (April 2002), p. v.
    The President's Commission on the Postal Service also has 
recommended that the Postal Service exercise the ``latitude to conduct 
its procurement with fewer substanti[ve] regulations'' pursuant to 
authority granted by Congress in the Postal Reorganization Act Report 
(July 2003), p. 94. The Commission expressed its view that ``it is 
inappropriate to apply regulations * * * aimed at traditional agencies 
to a Federal entity required to finance its own multi-billion dollar 
operations.'' Rather, the public will benefit greatly if the Postal 
Service applies purchasing practices used by leading corporate 
enterprises. In accordance with the Transformation Plan and the 
Commission's recommendations, the Postal Service is replacing all of 
its current purchasing regulations with those discussed here.
    The Postal Service published in the Federal Register on March 24, 
2004 [Vol. 69, No. 57, pages 13786-13793], proposed rules, invited 
comments by members of the public on or before April 23, 2004, and 
received 20 responses and comments, some of which were by membership 
associations or organizations.

Discussion of Comments

    Given that the Postal Service does business with approximately 
25,000 suppliers per annum, very few commented on the proposed 
regulations. We view that as an indication that the supplier community 
is satisfied with the proposed regulations and did not have serious 
reservations about the proposed regulations. Some responders expressed 
positive views of the proposed regulations. The critical comments may 
generally be placed in three categories, as follows:
    1. Revocation of previous purchasing regulations. Several 
responders expressed a view that revocation of the previous regulations 
would lead to a lack of transparency and also expressed a view that the 
Postal Service's non-binding guidelines should be made available to the 
public, so the public will know more about the Postal Service's 
acquisition policies and practices.
    When Congress passed the Postal Reorganization Act it exempted the 
Postal Service from most governmental purchasing regulations in order 
to give it the flexibility to operate in a manner akin to those in the 
private sector. The Postal Service, in its transformed purchasing 
regulations, seeks to fulfill that Congressional policy by adopting 
regulations which will allow it to obtain the best products or services 
to meet its needs at fair and reasonable prices. In other words, the 
Postal Service seeks to focus upon and to obtain the best value in its 
acquisitions. The new regulations, as well as Supplying Principles and 
Practices now under development, are designed to permit flexibility to 
the Postal Service so it may respond to market conditions in acquiring 
the best property, goods and services it believes meet its needs at a 
fair and reasonable

[[Page 20292]]

price. Best value and supply-chain management will be most conducive to 
the mission of the Postal Service and will allow it to continue to 
serve its customers, the supplier community, and the general public 
well. These regulations have the force and effect of law. The Supplying 
Principles and Practices, currently being drafted, will provide 
flexible, modern supply-chain management throughout the Postal Service. 
These Principles and Practices will not have the force or effect of 
law. During the time period between these regulations becoming 
effective and the completion of the new Supplying Principles and 
Practices, a set of Interim Internal Purchasing Guidelines will provide 
guidance to Postal Service contracting officers. The Guidelines will 
not have the force and effect of law.
    Public oversight of the Postal Service will not be diminished, as 
those charged now with such functions will continue to do so. In 
addition, the Postal Service has added an ombudsman (discussed further 
below) to assist it in obtaining the best goods and services to meet 
its needs at the best prices. Review by the ombudsman will be available 
to members of the supplier community to resolve any disagreements they 
are unable to resolve with contracting officers or management.
    Some responders asked that internal Postal Service guidelines be 
made available to the public. Given that much information about the 
Postal Service is available to the public through the Freedom of 
Information Act and other means, the Postal Service will place many of 
its internal processes, including its Supplying Principles and 
Practices, on its web page. Those materials will not be postal 
regulations and will not have the force or effect of law, as they are 
designed to permit flexibility to address changing market conditions. 
The Supplying Principles and Practices will not be binding regulations 
of the Postal Service. The public should be guided by and may rely upon 
the regulations contained herein, 39 CFR Part 601, rather than the 
Supplying Principles and Practices, which are intended for internal use 
only to assist the Postal Service in obtaining best value and 
efficiently conducting its supply chain functions. The Supplying 
Principles and Practices will be advisory and illustrative of 
approaches that may generally be used by Postal Service employees, but 
will be intended to provide for flexibility and discretion in their 
application to specific business situations. The Supplying Principles 
and Practices, therefore, will create no rights, substantive or 
procedural, enforceable against the Postal Service. Those materials may 
be altered or superseded at any time without notice.
    The supplier community will continue to be notified in individual 
solicitations as to how proposals generally will be evaluated and how 
the Postal Service will determine best value. Debriefings will continue 
to be available upon request.
    2. Declining to accept or consider proposals. Several responders 
expressed the view that those parts of the new regulations dealing with 
cancellation of business relationships should not be adopted, as 
existing contracts could be terminated and because Postal Service 
contracting officers will act arbitrarily to cease doing business with 
suppliers. We do not believe those concerns are realistic. We are re-
naming this section of the regulations to more precisely state that the 
Postal Service will not accept or consider proposals from persons or 
organizations that do not meet reasonable business expectations. 
Declining to accept or consider a proposal should not be confused with 
cancellation of an existing contract. The Postal Service may continue 
to terminate a contract for its convenience or for default, as it has 
done in the past.
    Only the vice president of Supply Management (not contracting 
officers) is authorized to decide that the Postal Service will decline 
to accept or consider proposals from any prospective supplier, and that 
is expected to be a rare occurrence that would be made only after 
careful analysis of the basis of the action.
    The purpose of this part of the regulation is to provide the Postal 
Service with the ability, in a forthright manner, to decline to do 
business with a company or organization that has demonstrated a record 
of poor performance. It is not in the best interest of Postal Service 
customers, the supplier community, or the general public for the Postal 
Service to acquire property, goods, or services from companies that do 
not perform adequately.
    As a safeguard, any company or organization from which the Postal 
Service decides not to accept or consider its proposals will receive 
written notice of the reason(s) why and an opportunity to provide 
countervailing evidence, justification, or other reasons, e.g., that 
the problem has been corrected.
    3. Ombudsman. Most comments favored adoption of this dispute-
resolution mechanism. There was some concern that the ombudsman could 
not consider the Interim Internal Purchasing Guidelines or the 
Supplying Principles and Practices, whichever is in effect. Either set 
of guidelines, however, will address the process by which the Postal 
Service seeks suppliers while the ombudsman will focus on the best 
value considerations and business decisions made by the contracting 
officer to determine which supplier should be awarded a contract. That 
is, the organization that offers the best products or services to meet 
the Postal Service's needs at a fair and reasonable cost will be 
awarded a contract. Those are best-value considerations that the 
ombudsman will focus upon in resolving disputes.

Section-by-Section Analysis

Section 211.2(a)(2)

    This section describes the regulations of the Postal Service. It is 
changed to reflect that the Postal Service Purchasing Manual and all 
other Postal Service purchasing regulations are revoked and replaced by 
those in Part 601.

Section 601.100 Purchasing Policy

    This section describes the policy of the Postal Service to acquire 
property and services in accordance with all applicable laws enacted by 
Congress. It is intended that the Postal Service will exercise the full 
powers granted by Congress to it with respect to the acquisition of 
property and services and will acquire goods and services in a manner 
akin to the best commercial practices in the private sector in order to 
serve the American public.

Section 601.101 Effective Date

    So that prospective suppliers and members of the public have 
sufficient time to become acquainted with the new regulations, the new 
regulations will become effective thirty days after publication in the 
Federal Register.

Section 601.102 Revocation of Prior Purchasing Regulations

    This section specifies that all other regulations dealing with any 
or all aspects of purchasing are revoked and will be of no further 
force or effect, excepting only as applied to solicitations issued and 
contracts signed prior to the effective date of these regulations. 
Examples of the revoked regulations are given.

Section 601.103 Applicability and Coverage

    This section makes it clear that the regulations apply to all 
acquisitions of property (except real property) and services.

[[Page 20293]]

Section 601.104 Postal Purchasing Authority

    This section discusses who is authorized to bind the Postal Service 
with respect to contracts involving the acquisition of property and 
services. Only certain people legally may bind the Postal Service. 
Those persons are identified by title or position in the regulations. 
The regulations also provide that other persons may be given authority 
by appropriate written delegation to enter into contracts to bind the 
Postal Service with respect to any and all purchasing matters. Absent 
specific authority, however, a person may not enter into a contract or 
commitment on behalf of the Postal Service or otherwise bind the Postal 
Service.

Section 601.105 Business Relationships

    This section states the Postal Service's expectation that it will 
be treated by each of its suppliers and prospective suppliers as a 
valued customer. This section also informs the supplier community that 
the Postal Service may cease accepting or considering proposals from 
any person or organization that fails to meet the Postal Service's 
expectations of high quality, prompt service, and overall 
professionalism.

Section 601.106 Declining To Accept or Consider Proposals

    This section states the Postal Service's policy that it may elect 
not to accept or consider proposals from persons or organizations that 
do not meet reasonable business expectations or provide a high level of 
confidence about current and/or future business relationships. Examples 
of the kind of behavior that may lead the Postal Service to cease 
considering or accepting proposals from a person or organization are 
given. The reasons that may cause the Postal Service to cease accepting 
or considering proposals under Sec.  601.106 with a potential supplier 
differ from the reasons that may cause the Postal Service to debar a 
supplier under Sec.  601.113. A decision not to accept or consider 
proposals may be informed by a supplier's unreasonable or 
unsatisfactory business practices while debarment is reserved for more 
egregious forms of supplier misconduct.
    This section also provides that when the Postal Service elects to 
exercise its right to cease accepting or considering proposals from any 
person or organization, the Postal Service will notify that person or 
organization, state the reason(s) it has taken that action, and give 
the person or organization an opportunity to question the Postal 
Service's actions. Dispute-resolution procedures have been created in 
the regulations to resolve disagreements over such decisions as well as 
some other matters.

Section 601.107 Initial Disagreement Resolution

    This section states the Postal Service's policy to initially 
attempt to address and resolve all business disagreements that arise 
between suppliers or potential suppliers and the Postal Service 
regarding all aspects of solicitations, awards of contracts, and 
related matters quickly and inexpensively, at the contracting officer 
or management level. Time lines have been established concerning the 
lodging of disagreements and their resolution.
    The Postal Service contracting officer must consider alternative 
dispute resolution procedures as a means of resolving such 
disagreements, which may be used if agreed to by both parties. 
Illustrations of various types of dispute resolution procedures are 
listed. No supplier, however, will be required to use such alternate 
dispute procedures if the supplier chooses not to do so.
    This section also provides that it does not apply to disputes 
arising under the Contract Disputes Act or with respect to disputes 
about debarment, suspension, and ineligibility from government 
contracting under Sec.  601.113.

Section 601.108 Ombudsman Disagreement Resolution

    This section states that if resolution of disagreements between a 
person or organization and the contracting officer or appropriate 
management level does not occur within ten calendar days, the 
disagreement may then be presented, addressed and resolved by an 
ombudsman appointed by the Postal Service. An expedited procedure is 
provided to resolve any such disagreements quickly and with finality. 
The ombudsman is expected to give a written decision within 30 days 
after receiving notice of a disagreement from a supplier or prospective 
supplier. Decisions of the ombudsman will be final and binding, with 
limited exceptions specified in this section of the regulations.
    This section also provides that it does not apply to disputes 
arising under the Contract Disputes Act or with respect to disputes 
about debarment, suspension, and ineligibility from government 
contracting under Sec.  601.113.

Section 601.109 Contract Claims and Procedures

    This section implements the Contract Disputes Act. The section is 
very similar to the current regulations regarding contract disputes and 
it does not reflect substantive changes.

Section 601.113 Debarment, Suspension, and Ineligibility

    This section sets forth the Postal Service's policies and practices 
regarding debarment, suspension, and ineligibility from contracting 
with the Postal Service. Debarment generally is considered for very 
serious offenses. Examples of such offenses are given in this section. 
Procedures to be followed by the Postal Service regarding debarment, 
suspension, and ineligibility are given in this section.
    Debarment is applicable to more serious instances of supplier 
misconduct as compared to a cessation of business relationships under 
Sec.  601.106, which is akin to decisions by private organizations to 
choose not to do business with other private organizations for 
legitimate business reasons.

List of Subjects in 39 CFR Parts 211 and 601

    Postal Service.

0
Therefore, for the reasons set forth in the preamble, the Postal 
Service is amending part 211 and revising 601 as follows:

PART 211--APPLICATION OF REGULATIONS

0
1. The authority citation for part 211 continues to read as follows:

    Authority: 39 U.S.C. 201, 202, 401(2), 402, 403, 404, 410, 1001, 
1005, 1209.

0
2. Revise Sec.  211.2(a)(2) to read as follows:


Sec.  211.2  Regulations of the Postal Service.

    (a) * * *
    (2) The Mailing Standards of the United States Postal Service, 
Domestic Mail Manual; the Postal Operations Manual; the Administrative 
Support Manual; the Employee and Labor Relations Manual; the Financial 
Management Manual; the International Mail Manual; and those portions of 
Chapter 2 of the former Postal Service Manual and chapter 7 of the 
former Postal Manual retained in force.
* * * * *

PART 601--PURCHASING OF PROPERTY AND SERVICES

0
3. Revise 601 to read as follows:

[[Page 20294]]

PART 601--PURCHASING OF PROPERTY AND SERVICES

Sec.
601.100 Purchasing policy.
601.101 Effective date.
601.102 Revocation of prior purchasing regulations.
601.103 Applicability and coverage.
601.104 Postal purchasing authority.
601.105 Business relationships.
601.106 Declining to accept or consider proposals.
601.107 Initial disagreement resolution.
601.108 Ombudsman disagreement resolution.
601.109 Contract claims and disputes.
601.110 Payment of claims.
601.111 Interest on claim amounts.
601.112 Review of adverse decisions.
601.113 Debarment, suspension, and ineligibility.

    Authority: 39 U.S.C. 401, 404, 410, 411, 2008, 5001-5605.


Sec.  601.100  Purchasing policy.

    It is the policy of the Postal Service to acquire property and 
services in accordance with 39 U.S.C. 410 and all other applicable 
public laws enacted by Congress.


Sec.  601.101  Effective date.

    These regulations are effective May 19, 2005.


Sec.  601.102  Revocation of prior purchasing regulations.

    All previous Postal Service purchasing regulations, including the 
Postal Contracting Manual, Procurement Manual, the Purchasing Manual 
(Issues 1, 2 and 3), and procurement handbooks, circulars, and 
instructions, are revoked and are superseded by the regulations 
contained in this part, except as provided in Sec.  601.103.


Sec.  601.103  Applicability and coverage.

    The regulations contained in this part apply to all Postal Service 
acquisition of property (except real property) and services. 
Solicitations issued and contracts entered into prior to the effective 
date of the regulations in this part will be governed by the 
regulations in effect at the time the contract was signed.


Sec.  601.104  Postal purchasing authority.

    Only the Postmaster General/CEO; the Postal Service's vice 
president of Supply Management; contracting officers with written 
statements of specific authority; and others designated in writing or 
listed in this part have the authority to bind the Postal Service with 
respect to entering into, modifying, or terminating any contract 
regarding the acquisition of property, services, and related purchasing 
matters. The Postal Service's vice president of Supply Management, or 
his or her designee, may also delegate in writing local buying 
authority throughout the Postal Service.


Sec.  601.105  Business relationships.

    A person or organization wishing to enjoy a continuing business 
relationship with the Postal Service in purchasing matters is expected 
to treat the Postal Service in the same manner as it would other valued 
customers of similar size and importance. The Postal Service reserves 
the right to cease accepting or considering proposals from a person or 
organization when that person or organization fails to meet reasonable 
business expectations of high quality, prompt service, and overall 
professionalism.


Sec.  601.106  Declining to accept or consider proposals.

    (a) General. The Postal Service may decline to accept or consider 
proposals from a person or organization that does not meet reasonable 
business expectations or does not provide a high level of confidence 
about current or future business relations. Typically, these sorts of 
unacceptable conduct and business practices will not rise to the level 
of unethical or criminal activities that could lead to the debarment, 
suspension, or ineligibility of a supplier. Unacceptable conduct or 
business practices include, but are not limited to:
    (1) Marginal or dilatory contract performance;
    (2) Failure to deliver on promises made in the course of dealings 
with the Postal Service;
    (3) Providing false or misleading information as to financial 
condition, ability to perform, or other material matters, including any 
aspect of performance on a contract; and
    (4) Engaging in other questionable or unprofessional conduct or 
business practices.
    (b) Notice. If the Postal Service elects to decline to accept or 
consider proposals from a person or organization, the vice president of 
Supply Management, or his or her designee, will provide a written 
notice to the person or organization explaining:
    (1) The reasons for the decision;
    (2) The effective date of the decision;
    (3) The scope of the decision;
    (4) The duration of the decision (this may be limited to a 
specified length of time or may extend indefinitely); and
    (5) The supplier's right to contest the decision.
    (c) Contesting Decisions. If a person or organization believes the 
decision not to accept or consider proposals is not merited, it may 
contest the matter in accordance with the ombudsman and disagreement-
resolution procedures contained in this part, seek to resolve the 
matter by agreement through alternative dispute resolution, or both. 
The Postal Service may reconsider the matter and, if warranted, rescind 
or modify the decision to decline to accept or consider proposals.


Sec.  601.107  Initial disagreement resolution.

    It is the policy of the Postal Service and in the interest of 
suppliers to resolve potential disagreements by mutual agreement at the 
contracting officer or appropriate management level. Therefore, all 
disputes, protests, claims, disagreements, or demands of whatsoever 
nature (hereinafter ``disagreements'') against the Postal Service 
arising in connection with the purchasing process, except claims that 
arise pursuant to a contract under the Contract Disputes Act or claims 
concerning debarment, suspension, or ineligibility under Sec.  601.113, 
must be lodged with the responsible contracting officer for resolution 
within 10 days of the date the disagreement arose. If the matter is not 
resolved within 10 days following the lodging of the dispute, the 
disagreement may be lodged with the Ombudsman as described in Sec.  
601.108. Alternative dispute resolution (ADR) procedures may be used, 
if agreed to by both parties. The Postal Service supports and 
encourages the use of ADR as an effective way to understand, address, 
and resolve disagreements and conflicts. A person or organization 
disagreeing with a Postal Service decision and the Postal Service 
contracting officer must consider the use of ADR to resolve a 
particular purchasing disagreement, regardless of the nature of the 
disagreement or when it occurs during the purchasing process. ADR 
methods include informal negotiation, mediation by a neutral third 
party, and any other agreed-upon method.


Sec.  601.108  Ombudsman disagreement resolution.

    (a) Policy. From time to time, disagreements may arise between 
suppliers, potential suppliers, and the Postal Service regarding awards 
of contracts and related matters that are not resolved as set forth in 
Sec.  601.107. When a disagreement under Sec.  601.107 is not resolved 
within ten calendar days of when it was lodged with the contracting 
officer, then the disagreement may be lodged with the ombudsman 
established in this part for final resolution. The Postal Service 
desires to resolve all such disagreements quickly and

[[Page 20295]]

inexpensively in keeping with the regulations in this part, 39 U.S.C. 
410, and all other applicable public laws enacted by Congress. In 
resolving disagreements, non-Postal Service procurement rules or 
regulations will not govern.
    (b) Scope and Applicability. In order to expeditiously resolve 
disagreements that are not resolved at the contracting officer or 
appropriate management level, to reduce litigation expenses, 
inconvenience, and other costs for all parties, and to facilitate 
successful business relationships with Postal Service suppliers, the 
supplier community, and other persons, the following procedure is 
established as the sole and exclusive means to resolve disagreements 
arising in connection with awards of contracts for the purchase of 
property (excluding real property) or services and all related matters. 
All disputes, protests, claims, disagreements, or demands of whatsoever 
nature (hereinafter ``disagreements'') against the Postal Service 
arising in connection with the purchasing process, except claims that 
arise pursuant to a contract under the Contract Disputes Act or claims 
concerning debarment, suspension, or ineligibility under Sec.  601.113, 
will be lodged with and resolved, with finality, by the ombudsman under 
and in accordance with the sole and exclusive procedure established in 
this section.
    (c) A disagreement may be lodged with the ombudsman by an 
organization or a person with respect to the Postal Service's decision 
not to accept or consider business proposals or the award of a 
contract.
    (d) The disagreement must be lodged in writing and must state the 
factual circumstances relating to it, the remedy sought, and the 
rationale for the disagreement. Counsel is not required, but may be 
retained to assist in the disagreement process. The person or 
organization lodging the disagreement must indicate in the disagreement 
whether it is willing to attempt to resolve the matter through informal 
discussions, mediation, or another means of ADR.
    (e) A disagreement must be lodged with the ombudsman within twenty 
calendar days after the time it was presented in Sec.  601.107. The 
ombudsman may grant an extension of time to lodge a disagreement or to 
provide supporting information when warranted. Any request for an 
extension must set forth the reasons for the request, be made in 
writing, and be delivered to the ombudsman on or before the time to 
lodge a disagreement lapses. The address of the ombudsman is: Attn: 
Ombudsman, United States Postal Service Headquarters, 475 L'Enfant 
Plaza, SW., Room 4110, Washington, DC 20260-6200.
    (f) The ombudsman will promptly provide a copy of a disagreement to 
the contracting officer, who will promptly notify other interested 
persons (i.e., actual or prospective offerors whose direct economic 
interests would be affected by the award of, or failure to award, the 
contract). The ombudsman will consider a disagreement and any response 
by other interested persons and appropriate Postal Service officials 
within a time frame established by the ombudsman. The ombudsman may 
also meet individually or jointly with the person or organization 
lodging the disagreement, other interested persons, and/or Postal 
Service officials, and may undertake other activities in order to 
obtain materials, information, or advice that may help to resolve the 
disagreement. The person or organization lodging the disagreement, 
other interested persons, or Postal Service officials must promptly 
provide all relevant, nonprivileged materials and other information 
requested by the ombudsman. After obtaining such information, 
materials, and advice as may be needed, the ombudsman will promptly 
issue a decision in writing resolving a disagreement and will deliver 
the decision to the person or organization lodging the disagreement, 
other interested persons, and appropriate Postal Service officials. If 
confidential or privileged material is needed in order to reach a 
decision, the ombudsman will notify the appropriate party to provide 
such material to the ombudsman only. The confidential material will be 
held in confidence by the ombudsman and will be returned to the party 
upon request at the conclusion of the matter.
    (g) In considering and in resolving a disagreement, the ombudsman 
will be guided by the regulations contained in this part and all 
applicable public laws enacted by Congress. Non-Postal Service 
procurement rules or regulations and revoked Postal Service regulations 
will not apply or be taken into account in resolving disagreements. 
Failure of any party to provide promptly requested information may be 
taken into account by the ombudsman in the decision.
    (h) A decision of the ombudsman will be final and binding on the 
person or organization lodging the disagreement, other interested 
persons, and the Postal Service. However, the person or organization 
that lodged the disagreement or another interested person may appeal 
the decision to a federal court with jurisdiction over such claims, but 
only on the grounds that the decision:
    (1) Was procured by fraud or other criminal misconduct; or
    (2) Was obtained in violation of the regulations contained in this 
part or an applicable public law enacted by Congress.
    (i) It is intended that this procedure generally will resolve 
disagreements within approximately 30 days after the ombudsman receives 
the disagreement. The time may be shortened or lengthened depending on 
the complexity of the issues and other relevant considerations.


Sec.  601.109  Contract claims and disputes.

    (a) General. This section implements the Contract Disputes Act of 
1978, as amended (41 U.S.C. 601-613).
    (b) Policy. It is Postal Service policy to resolve contractual 
claims and disputes by mutual agreement at the level of an authorized 
contracting officer whenever possible. In addition, the Postal Service 
supports and encourages the use of alternative dispute resolution as an 
effective way to understand, address, and resolve conflicts with 
suppliers. Efforts to resolve differences should be made before the 
issuance of a final decision on a claim, and even when the supplier 
does not agree to use ADR, the contracting officer should consider 
holding informal discussions between the parties in order to resolve 
the conflict before the issuance of a final decision.
    (c) Contractor Claim Initiation. Supplier claims must be submitted 
in writing to the contracting officer for final decision. The 
contracting officer must document the contract file with evidence of 
the date of receipt of any submission that the contracting officer 
determines is a claim. Supplier claims must be submitted within 6 years 
after accrual of a claim unless the parties agreed to a shorter time 
period. The 6-year time period does not apply to contracts awarded 
prior to October 1, 1995.
    (d) Postal Service Claim Initiation. The contracting officer must 
issue a written decision on any Postal Service claim against a 
supplier, within 6 years after accrual of a claim, unless the parties 
agreed in writing to a shorter time period. The 6-year time period does 
not apply to contracts awarded prior to October 1, 1995, or to a Postal 
Service claim based on a supplier claim involving fraud.
    (e) Certified Claims. Each supplier claim exceeding $100,000 must 
be accompanied by a certification in accordance with the supplier's 
contract.

[[Page 20296]]

    (f) When the contracting officer determines that the supplier is 
unable to support any part of the claim and there is evidence or reason 
to believe the inability is attributable to either misrepresentation of 
fact or fraud on the supplier's part, the contracting officer must deny 
that part of the claim and refer the matter to the Office of Inspector 
General.
    (g) Decision and Appeal. (1) Contracting Officer's Authority. A 
contracting officer is authorized to decide or settle all claims 
arising under or relating to a contract subject to the Contract 
Disputes Act, except for:
    (i) Claims or disputes for penalties or forfeitures prescribed by 
statutes or regulation that a Federal agency administers; or
    (ii) Claims involving fraud.
    (2) Contracting Officer's Decision. The contracting officer must 
review the facts pertinent to the claim, obtain assistance from 
assigned counsel and other advisors, and issue a final decision in 
writing. The decision must include a description of the claim or 
dispute with references to the pertinent contract provisions, a 
statement of the factual areas of agreement and disagreement, and a 
statement of the contracting officer's decision with supporting 
rationale.
    (3) Insufficient Information. When the contracting officer cannot 
issue a decision because the supplier has not provided sufficient 
information, the contracting officer must promptly request the required 
information. Further failure to provide the requested information is an 
adequate reason to deny the claim.
    (4) Furnishing Decisions. The contracting officer must furnish a 
copy of the decision to the supplier by Certified Mail , return receipt 
requested, or by any other method that provides evidence of receipt.
    (5) Decisions on Claims for $100,000 or Less. If the supplier has 
asked for a decision within 60 days, the contracting officer must issue 
a final decision on a claim of $100,000 or less within 60 calendar days 
of its receipt. The supplier may consider the contracting officer's 
failure to issue a decision within the applicable time period as a 
denial of its claim, and may file a suit or appeal on the claim.
    (6) Decisions on Certified Claims. For certified claims over 
$100,000, the contracting officer must either issue a final decision 
within 60 calendar days of their receipt or notify the supplier within 
the 60-day period of the time when a decision will be issued. The time 
period established must be reasonable, taking into account the size and 
complexity of the claim, the adequacy of the supplier's supporting 
data, and any other relevant factors.
    (7) Wording of Decisions. The contracting officer's final decision 
must contain the following paragraph: ``This is the final decision of 
the contracting officer pursuant to the Contract Disputes Act of 1978 
and the clause of your contract entitled Claims and Disputes. You may 
appeal this decision to the Postal Service Board of Contract Appeals by 
mailing or otherwise furnishing written notice (preferably in 
triplicate) to the contracting officer within 90 days from the date you 
receive this decision. The notice should identify the contract by 
number, reference this decision, and indicate that an appeal is 
intended. Alternatively, you may bring an action directly in the United 
States Court of Federal Claims within 12 months from the date you 
receive this decision.
    (8) Additional Wording for Decisions of $50,000 or Less. When the 
claim or claims denied total $50,000 or less, the contracting officer 
must add the following to the paragraph: ``In taking an appeal to the 
Board of Contract Appeals, you may include in your notice of appeal an 
election to proceed under the Board's small claims (expedited) 
procedure, which provides for a decision within approximately 120 days, 
or an election to proceed under the Board's accelerated procedure, 
which provides for a decision within approximately 180 days. If you do 
not make an election in the notice of appeal, you may do so by written 
notice anytime thereafter.''
    (9) Additional Wording for Decisions Over $50,000 Up to $100,000. 
When the claim or claims denied total $100,000 or less, but more than 
$50,000, the contracting officer must add the following to the 
paragraph: ``In taking an appeal to the Board of Contract Appeals, you 
may include in your notice of appeal an election to proceed under the 
Board's accelerated procedure, which provides for a decision within 
approximately 180 days. If you do not make an election in the notice of 
appeal, you may do so by written notice anytime thereafter.''
    (10) Contracting officers must have sufficient information 
available at the time a final decision is issued on a claim so 
resolution of an appeal within the period set for an expedited 
disposition will not be delayed. Once an appeal is docketed, and 
expedited disposition is elected, contracting officers must devote 
sufficient resources to the appeal to ensure the schedule for 
resolution is met. Nothing in this part precludes an effort by the 
parties to settle a controversy after an appeal has been filed, 
although such efforts to settle the controversy will not suspend 
processing the appeal, unless the Board of Contract Appeals so directs.


Sec.  601.110  Payment of claims.

    Any claim amount determined in a final decision to be payable, less 
any portion previously paid, should be promptly paid to the supplier 
without prejudice to either party in the event of appeal or action on 
the claim. In the absence of appeal by the Postal Service, a board or 
court decision favorable in whole or in part to the supplier must be 
implemented promptly. In cases when only the question of entitlement 
has been decided and the matter of amount has been remanded to the 
parties for negotiation, a final decision of the contracting officer 
must be issued if agreement is not reached promptly.


Sec.  601.111  Interest on claim amounts.

    Interest on the amount found due on the supplier's claim must be 
paid from the date the contracting officer received the claim (properly 
certified, if required) or from the date payment would otherwise be 
due, if that date is later, until the date of payment. Simple interest 
will be paid at the rate established by the Secretary of the Treasury 
for each 6-month period in which the claim is pending. Information on 
the rate at which interest is payable is announced periodically in the 
Postal Bulletin.


Sec.  601.112  Review of adverse decisions.

    Any party may seek review of an adverse decision of the Board of 
Contract Appeals in the Court of Appeals for the Federal Circuit or in 
any other appropriate forum.


Sec.  601.113  Debarment, suspension, and ineligibility.

    (a) General. Except as provided otherwise in this part, contracting 
officers may not solicit proposals from, award contracts to, or consent 
to subcontracts with debarred, suspended, or ineligible suppliers.
    (b) Definitions. (1) Affiliate. A business, organization, person, 
or individual connected by the fact that one controls or has the power 
to control the other or by the fact that a third party controls or has 
the power to control both. Factors such as common ownership, common 
management, and contractual relationships may be considered. Franchise 
agreements are not conclusive evidence of affiliation if the franchisee 
has a right to profit in proportion to its ownership and bears the risk 
of loss or failure.

[[Page 20297]]

    (2) Debarment. An exclusion from contracting and subcontracting for 
a reasonable, specified period of time commensurate with the 
seriousness of the offense, failure, or inadequacy of performance.
    (3) General Counsel. This includes the General Counsel's authorized 
representative.
    (4) Indictment. Indictment for a criminal offense. An information 
or other filing by competent authority charging a criminal offense is 
given the same effect as an indictment.
    (5) Ineligible. An exclusion from contracting and subcontracting by 
an entity other than the Postal Service under statutes, executive 
orders, or regulations, such as the Davis Bacon Act, the Service 
Contract Act, the Equal Employment Opportunity Acts, the Walsh-Healy 
Public Contracts Act, or the Environmental Protection Acts and related 
regulations or executive orders, to which the Postal Service is subject 
or has adopted as a matter of policy.
    (6) Judicial Officer. This includes the acting Judicial Officer.
    (7) Suspension. An exclusion from contracting and subcontracting 
for a reasonable period of time due to specified reasons or the 
pendency of a debarment proceeding.
    (8) Supplier. For the purposes of this part, a supplier is any 
individual, person, or other legal entity that:
    (i) Directly or indirectly (e.g., through an affiliate) submits 
offers for, is awarded, or reasonably may be expected to submit offers 
for or be awarded, a Postal Service contract, including a contract for 
carriage under Postal Service or commercial bills of lading, or a 
subcontract under a Postal Service contract; or
    (ii) Conducts business or reasonably may be expected to conduct 
business with the Postal Service as a subcontractor, an agent, or as a 
representative of another supplier.
    (c) Establishment and Maintenance of Lists. (1) The vice president 
of Supply Management will establish, maintain, and distribute to 
purchasing offices a list of suppliers debarred or suspended by the 
Postal Service.
    (2) The General Services Administration (GSA) compiles and 
maintains a consolidated list of all persons and entities debarred, 
suspended, proposed for debarment, or declared ineligible by Federal 
agencies or the Government Accountability Office. GSA posts the list on 
the Internet and publishes a hardcopy of the list.
    (3) The vice president of Supply Management will notify the GSA of 
any Postal Service debarment, suspension, and change in the status of 
suppliers, including any of their affiliates, on the Postal Service 
list.
    (d) Treatment of Suppliers on Postal Service or GSA Lists. (1) 
Contracting officers will review the Postal Service and GSA lists 
before making a contract award.
    (2) Suppliers on the Postal Service list are excluded from 
receiving contracts and subcontracts, and contracting officers may not 
solicit proposals or quotations from, award contracts to, or, when a 
contract provides for such consent, consent to subcontracts with such 
suppliers, unless the vice president of Supply Management, or his or 
her designee, after consultation with the General Counsel, has approved 
such action. Suppliers on the Postal Service list may not provide goods 
or services to other persons or entities for resale, in whole or part, 
to the Postal Service and such other persons or entities are obligated 
to obtain and review the Postal Service list in order to exclude 
debarred or suspended suppliers from performing any part of a Postal 
Service contract.
    (3) Suppliers on the GSA list are assigned a code by GSA which is 
related to the basis of ineligibility. The vice president of Supply 
Management maintains a table describing the Postal Service treatment 
assigned to each code. Suppliers on the GSA list who are coded as 
ineligible are excluded from receiving contracts and subcontracts, and 
contracting officers may not solicit proposals or quotations from, 
award contracts to, or, when the contract provides for such consent, 
consent to subcontracts with such suppliers, unless the vice president 
of Supply Management, or designee, after consultation with the General 
Counsel, has approved such action. Suppliers on the GSA list may not 
provide goods or services to other persons or entities for resale, in 
whole or part, to the Postal Service and such other persons or entities 
are obligated to obtain and review the GSA list in order to exclude 
debarred or suspended suppliers from performing any part of a Postal 
Service contract.
    (4) Suppliers on the GSA list are assigned codes for which the 
table provides other Postal Service guidance, and are considered 
according to that guidance. When so indicated on the table, contracting 
officers must obtain additional information from the entity responsible 
for establishing the supplier's ineligibility, if such information is 
available.
    (5) The debarment, suspension, or ineligibility of a supplier does 
not, of itself, affect the rights and obligations of the parties to any 
valid, pre-existing contract. The Postal Service may terminate for 
default a contract with a supplier that is debarred, suspended, or 
determined to be ineligible. Except for service changes under mail 
transportation contracts, contracting officers may not add new work to 
the contract by supplemental agreement, by exercise of an option, or 
otherwise, except with the approval of the vice president of Supply 
Management or designee.
    (e) Causes for Debarment. (1) The vice president of Supply 
Management, with the concurrence of the General Counsel, may debar a 
supplier, including its affiliates, for cause such as the following:
    (i) Conviction of a criminal offense incidental to obtaining or 
attempting to obtain contracts or subcontracts, or in the performance 
of a contract or subcontract.
    (ii) Conviction under a Federal antitrust statute arising out of 
the submission of bids or proposals.
    (iii) Commission of embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, tax 
evasion, or receiving stolen property.
    (iv) Violation of a Postal Service contract so serious as to 
justify debarment, such as willful failure to perform a Postal Service 
contract in accordance with the specifications or within the time 
limit(s) provided in the contract; a record of failure to perform or of 
unsatisfactory performance in accordance with the terms of one or more 
Postal Service contracts occurring within a reasonable period of time 
preceding the determination to debar (except that failure to perform or 
unsatisfactory performance caused by acts beyond the control of the 
supplier may not be considered a basis for debarment); violation of a 
contractual provision against contingent fees; or acceptance of a 
contingent fee paid in violation of a contractual provision against 
contingent fees.
    (v) Any other offense indicating a lack of business integrity or 
business honesty.
    (vi) Any other cause of a serious and compelling nature that 
debarment is warranted.
    (2) The existence of a conviction in paragraph (e)(1)(i) or (ii) of 
this section can be established by proof of a conviction in a court of 
competent jurisdiction. If appeal taken from such conviction results in 
a reversal of the conviction, the debarment may be removed upon the 
request of the supplier, unless another cause or another basis for 
debarment exists.

[[Page 20298]]

    (3) The existence of any of the other causes in paragraphs 
(e)(1)(iii), (iv), (v), or (vi) of this section can be established by a 
preponderance of the evidence, either direct or indirect, in the 
judgment of the debarring official.
    (4) The criminal, fraudulent, or improper conduct of an individual 
may be imputed to the firm with which he or she is or has been 
connected when an impropriety was committed. Likewise, when a firm is 
involved in criminal, fraudulent, or other improper conduct, any person 
who participated in, knew of, or had reason to know of the impropriety 
may be debarred.
    (5) The fraudulent, criminal, or other improper conduct of one 
supplier participating in a joint venture or similar arrangement may be 
imputed to other participating suppliers if the conduct occurred for or 
on behalf of the joint venture or similar arrangement, or with the 
knowledge, approval, or acquiescence of the supplier. Acceptance of the 
benefits derived from the conduct will be evidence of such knowledge, 
approval, or acquiescence.
    (f) Mitigating Factors. (1) The existence of any cause for 
debarment does not necessarily require that a supplier be debarred. The 
decision to debar is within the discretion of the vice president of 
Supply Management, with the concurrence of the General Counsel, and 
must be made in the best interest of the Postal Service. The following 
factors may be assessed in determining the seriousness of the offense, 
failure, or inadequacy of performance, and may be taken into account in 
deciding whether debarment is warranted:
    (i) Whether the supplier had established written standards of 
conduct and had published internal control systems at the time of the 
activity that constitutes cause for debarment or had adopted such 
procedures prior to any Postal Service investigation of the activity 
cited as a cause for debarment.
    (ii) Whether the supplier brought the activity cited as a cause for 
debarment to the attention of the Postal Service in a prompt, timely 
manner.
    (iii) Whether the supplier promptly and fully investigated the 
circumstances involving debarment and, if so, made the full results of 
the investigation available to appropriate officials of the Postal 
Service.
    (iv) Whether the supplier cooperated fully with the Postal Service 
during its investigation into the matter.
    (v) Whether the supplier paid or agreed to pay all criminal, civil, 
and administrative liability and other costs arising out of the 
improper activity, including any investigative or administrative costs 
incurred by the Postal Service, and made or agreed to make full 
restitution.
    (vi) Whether the supplier took appropriate disciplinary action 
against the individual(s) responsible for the activity that could cause 
debarment.
    (vii) Whether the supplier implemented and/or agreed to implement 
remedial measures, including those identified by the Postal Service.
    (viii) Whether the supplier instituted and/or agreed to institute 
new and/or revised review and control procedures and ethics programs.
    (ix) Whether the supplier had adequate time to eliminate 
circumstances within the supplier's organization that could lead to 
debarment.
    (x) Whether the supplier's senior officers and mid-level management 
recognize and understand the seriousness of the misconduct giving rise 
to debarment.
    (2) The existence or nonexistence of mitigating factors or remedial 
measures such as those above is not determinative whether or not a 
supplier should be debarred. If a cause for debarment exists, the 
supplier has the burden of demonstrating, to the satisfaction of the 
vice president of Supply Management that debarment is not warranted or 
necessary.
    (g) Period of Debarment. (1) When an applicable statute, executive 
order, or controlling regulation of other agencies provides a specific 
period of debarment, that period applies. In other cases, debarment by 
the Postal Service should be for a reasonable, definite, stated period 
of time, commensurate with the seriousness of the offense or the 
failure or inadequacy of performance. Generally, a period of debarment 
should not exceed 3 years. When debarment for an additional period is 
deemed necessary, notice of the proposed additional period of debarment 
must be furnished to the supplier as in the case of original debarment.
    (2) Except as precluded by an applicable statute, executive order, 
or controlling regulation of another agency, debarment may be removed 
or the period may be reduced by the vice president of Supply Management 
when requested by the debarred supplier and when the request is 
supported by a reasonable justification, such as newly discovered 
material evidence, reversal of a conviction, bona fide change of 
ownership or management, or the elimination of the causes for which 
debarment was imposed. The vice president of Supply Management may, at 
his or her discretion, deny any request or refer it to the Judicial 
Officer for a hearing and for findings of fact, which the vice 
president of Supply Management will consider when deciding the matter. 
When a debarment is removed or the debarment period is reduced, the 
vice president of Supply Management must state in writing the reason(s) 
for the removal of the debarment or the reduction of the period of 
debarment.
    (h) Procedural Requirements for Debarment. (1) After securing the 
concurrence of the General Counsel, the vice president of Supply 
Management will initiate a debarment proceeding by sending the supplier 
a written notice of proposed debarment. The notice will be served by 
sending it to the last known address of the supplier by Certified Mail, 
return receipt requested. A copy of the notice will be furnished to the 
Office of Inspector General. The notice will state that debarment is 
being considered; the reason(s) for the proposed debarment; the 
anticipated period of debarment and the proposed effective date; and, 
within 30 days of the notice, the supplier may submit, in person or in 
writing, or through a representative, information and argument in 
opposition to the proposed debarment. In the event a supplier does not 
submit information or argument in opposition to the proposed debarment 
to the vice president of Supply Management within the time allowed, the 
debarment will become final with no further review or appeal.
    (2) If the proposed debarment is based on a conviction or civil 
judgment, the vice president of Supply Management with the concurrence 
of the General Counsel, may decide whether debarment is merited based 
on the conviction or judgment, including any information received from 
the supplier. If the debarment is based on other circumstances or if 
there are questions regarding material facts, the vice president of, 
Supply Management may seek additional information from the supplier 
and/or other persons, and may request the Judicial Officer to hold a 
fact-finding hearing on such matters. The hearing will be governed by 
rules of procedure promulgated by the Judicial Officer. The vice 
president of Supply Management may reject any findings of fact, in 
whole or in part, when they are clearly erroneous.
    (3) When the vice president of Supply Management proposes to debar 
a supplier already debarred by another government agency for a period 
concurrent with such debarment, the debarment proceedings before the 
Postal Service may be based entirely upon the record of evidence, 
facts, and proceedings before the other agency,

[[Page 20299]]

upon any additional facts the Postal Service deems relevant, or on the 
decision of another government agency. In such cases, the findings of 
facts by another government agency may be considered as established, 
but, within 30 days of the notice of proposed debarment, the supplier 
may submit, in person or in writing, or through a representative, any 
additional facts, information, or argument to the vice president of 
Supply Management, and to explain why debarment by the Postal Service 
should not be imposed.
    (4) Questions of fact to be resolved by a hearing before the 
Judicial Office will be based on the preponderance of the evidence.
    (5) After consideration of the circumstances and any information 
and argument submitted by the supplier, the vice president of Supply 
Management, with the concurrence of the General Counsel, will issue a 
written decision regarding whether the supplier is debarred, and, if 
so, for the period of debarment. The decision will be mailed to the 
supplier by Certified Mail, return receipt requested. A copy of the 
decision will be furnished to the Office of the Inspector General. The 
decision will be final and binding, unless:
    (i) The decision was procured by fraud or other criminal misconduct 
or
    (ii) The decision was obtained in violation of the regulations 
contained in this part or an applicable public law enacted by Congress.
    (i) Causes for Suspension. The vice president of Supply Management 
may suspend any supplier, including any of its affiliates, if:
    (1) The supplier commits, is indicted for, or is convicted of fraud 
or a criminal offense incidental to obtaining, attempting to obtain, or 
performing a government contract, violates a Federal antitrust statute 
arising out of the submission of bids and proposals, or commits or 
engages in embezzlement, theft, forgery, bribery, falsification or 
destruction of records, receipt of stolen property, or any other 
offense indicating a lack of business integrity or business honesty; or
    (2) If the Postal Service has notified a supplier of its proposed 
debarment under this Part.
    (j) Period of Suspension. A suspension will not exceed 1 year in 
duration, except a suspension may be extended for reasonable periods of 
time beyond 1 year by the vice president of Supply Management. The 
termination of a suspension will not prejudice the Postal Service's 
position in any debarment proceeding. A suspension will be superseded 
by a decision rendered by the vice president of Supply Management, 
under paragraph (h)(5) of this section.
    (k) Procedural Requirements for Suspension. (1) The vice president 
of Supply Management will notify a supplier of a suspension or an 
extension of a suspension and the reason(s) for the suspension or 
extension in writing sent to the supplier by Certified Mail, return 
receipt requested, within 10 days after the effective date of the 
suspension or extension. A copy of the notice will be furnished to the 
Office of the Inspector General.
    (2) The notice will state the cause(s) for the suspension or 
extension.
    (3) Within 30 days of notice of suspension or an extension, a 
supplier may submit to the vice president of Supply Management in 
writing, any information or reason(s) the supplier believes makes a 
suspension or an extension inappropriate, and the vice president of 
Supply Management in consultation with the General Counsel, will 
consider the supplier's submission, and, in their discretion, may 
revoke a suspension or an extension of a suspension. If a suspension or 
extension is revoked, the revocation will be in writing and a copy of 
the revocation will be sent to the supplier by Certified Mail, return 
receipt requested. A copy of the revocation will be furnished to the 
Office of the Inspector General.

Stanley F. Mires,
Chief Counsel, Legislative.
[FR Doc. 05-7751 Filed 4-18-05; 8:45 am]
BILLING CODE 7710-12-U