Summary of Changes - About.usps.com · 7-7.1.16 Vietnam Era Veterans Readjustment Assistance Act of 1974 7-7.1.16.1, Applicability, has been revised to change the threshold for application

Summary of Changes

Permanent Note: On May 1, 2006, the Interim Internal Purchasing Guidelines were replaced by the Postal Service's Supplying Principles and Practices (SPs and Ps).

The SPs and Ps have been updated to reflect the following:

Clause 4-2: Contract Terms and Conditions Required to Implement Policies, Statutes or Executive Orders

Clause 4-2 has been revised to add a section regarding Payment Offsets. This section provides information about the Postal Service’s participation in the Treasury Offset Program of the Department of Treasury’s Financial Management Service.

Process Step 2, Evaluate Sources

2-1 Develop Purchase Plan

The title of this topic has been revised as this section now addresses purchase plans only.

Section 2-1.1 has been retitled “General” and discusses purchase plans including a requirement for a written purchase plan for all purchases valued at $1 million or more.

Some minor rewrites have been made to 2-1.2, Preliminary Sourcing Strategy.

Section 2-1.3, Components of a Purchase Plan, has been revised by adding several new components, including sustainability, key milestones, and required reviews and approvals. The current paragraph discussing project plans and milestones has been deleted as superfluous.

Section 2-1.4, Purchase Plan Review and Approval, has been added. This section establishes that all purchase plans for contracts valued at $1 million or more must be reviewed and approved and directs readers to a new 2-41, Obtain Selected Reviews and Approvals, for more information regarding approval authorities and other information.

2-10 Determine Extent of Competition

Section 2-10.1, Market Surveillance, has been revised by rewriting the first and second sentences and deleting the phrase “and buying is anticipated.”

The text regarding reviews and approvals in 2-10.3, Noncompetitive Purchases, has been deleted and replaced by several new sections: 2-10.3.3, “Additional Information” section directs readers to 2-20, Develop and Finalize Sourcing Strategy, for further discussion of sole sourcing as a sourcing strategy; 2-10.3.4, Reviews and Approvals, addresses reviews and approvals of purchase plans (stating

February 2010 i

Supplying Principles and Practices

that the plans must include the business case for the proposed noncompetitive purchase as discussed in MI SP-2007-1) and contract awards and directing readers to a new 2-41, Obtain Selected Reviews and Approvals; and a new 2-10.3.5, Endorsements, section has been added to state that proposed noncompetitive purchases valued at $250K must be endorsed by the VP of the requesting organization.

2-11 Develop Life-Cycle Support Plan

2-11.3, Life-Cycle Phases, has been revised to add logistics support to the elements that should be included in the life-cycle support plan.

2-20 Develop and Finalize Sourcing Strategy

2-20.1, Sourcing Strategy, has been revised for clarity.

2-20.3, Single Sourcing, has been revised to make clear the difference between single sourcing and sole sourcing.

2-20.4, Sole Sourcing, has been slightly rewritten for clarity and to state that a client’s bona fide need for a sole source may justify this sourcing approach.

2-20.5, Noncompetitive Purchases, has been revised for clarity and to include new text directing readers to 2-10, Determine Extent of Competition and 2-41, Obtain Selected Reviews and Approvals topics. Lastly, 2-20.7, Other Considerations, has been added to highlight the discussion of prequalification and auctions.

2-24 Review and Finalize Request for Proposals

Some minor rewrites have been made throughout this topic, and 2-24.6, Approval Authorities, and 2-24.7, Actions Exceeding a Contracting Officer’s Delegated Authority, have been moved to the new 2-41, Obtain Selected Reviews and Approvals.

2-40 Produce Contract Award Recommendation

2-40.1, General, and 2-40.2, Recommendation, have been slightly rewritten for clarity.

A new 2-40.4, Required Preaward Activities, has been added to direct users to the new 2-41, Obtain Selected Reviews and Approvals, and 2-42, Postal Accountability and Enhancement Act-Related Reports, and to 3-1.1, Award and Notification.

2-41 Obtain Selected Reviews and Approvals

This new topic combines new and current text concerning the most commonly required, purchasing-related, reviews and approvals. It is not intended to be comprehensive and does not include all of the actions requiring review and approval contained in the SPs and Ps. It does not include the requirement that the use of a letter contract must be approved by a Portfolio manager, for example. It incorporates text from some current topics (such as that addressing contractual

ii SPs and Ps

actions exceeding a contracting officer’s authority), adds text from other current sources, and adds new text addressing new matters like review and approval of purchase plans and contract awards and consultations with the Law Department. Specifics follow:

2-41.1, General, discusses the value of reviews and approvals. It also directs readers to the Actions Requiring Review, Approval, Consultation and Concurrence Exhibit in the Users Aids section of the SPs and Ps for a comprehensive list of all purchasing-related actions requiring review, approval, consultation or concurrence.

2-41.2, Reviews and Approvals of Contract Awards, Modification and Terminations: 2-41.2.1 General, establishes the review and approval requirements and 2-41.2, Review and Approval Authorities, established the review and approval authorities. 2-41.2.3, Terminations, discusses these purchasing-related actions and necessary reviews and approvals.

2-41.3, Review and Approval Process, delineates the review and approval process.

2-41.4, Reviews and Approvals of Purchase Plans Valued at $1 Million and More, addresses these reviews and approvals.

2-41.5, Noncompetitive Contractual Actions and Purchase Plans and 2-41.6, Actions Exceeding a Contracting Officer’s Delegated Authority, is revised text from 2-20, Develop and Finalize Sourcing Strategy.

2-41.9, Consultation with Assigned Counsel and the Law Department. This section has been added to alert contracting officers and purchase/SCM teams to the types of supplying-related matters which should be discussed with assigned counsel and the Law Department.

2-42 Postal Accountability and Enhancement Act-Related Reports and Certifications

This new topic discusses the reporting and quarterly certification requirements of the Postal Accountability and Enhancement Act.

Process Step 3, Select Suppliers

3-1 Award Contract and Notify Suppliers

3-1.1, Award and Notification, has been revised to include new material describing the sort of information unsuccessful offerors should be told in their written notifications.

3-5 Appoint Contracting Officer’s Representative

3-5.2, Evaluate Background and Training, has been revises to state that COR training and certifications are available through the Contracting Officer’s Representative training course 34Q0108, accessible through the Learning

February 2010 iii


Management System (LMS), and that, in addition to the Standards of Ethical Conduct for Employees of the Executive Branch, all CORs must be familiar with the Supplemental Standards of Ethical Conduct for Employees of the Postal Service.

Process Step 5, Measure and Manage Supply

5-8 Contract Modifications

5-8.1, Types, is a new header applicable to the discussion that follows on types of modifications.

5-8.2, Reviews, Approvals and Reports, is a new section stating that all contract modifications valued at $100,000 or more must be approved by the appropriate authority, and that modifications valued at $25 million or more must be reported to the Disclosure Committee. Cross references to 2-41, Obtain Selected Reviews and Approvals and 2-42, Postal Accountability and Enhancement Act are provided.

5-13 Terminate Contract. This topic has been revised in the first paragraph by adding a statement regarding the Postal Accountability and Enhancement Act-related reporting requirement for any termination with a potential termination liability of $25 million or more.

7 General Practices

7-3.1 Bonds

Several changes related to the Miller Act and performance and payment bonds have been made in this General Practice. Specifics follow:

7-3.1.5, Performance Bonds, and 7-3.1.6, Payment Bonds, have been slightly rewritten for clarity.

7-3.1.7, Performance and Payment Bonds for Construction Contracts, has been revised. A new 7-3.1.7.a, Miller Act, states that the Act requires performance and payment bonds for contracts valued at more than $100,000, and a new 7-3.1.7.b, Contracts Exceeding $100,000, discusses this matter further. A new 7-3.1.7.c, Contracts Less than $100,000, states that a payment bond or alternate payment protection plan is not required for construction contacts valued at $100,000 or less.

7-7.1.1 Service Contract Act

This General Practice has been revised in a number of areas. The discussion of Exemptions has been revised to reflect changes in the Department of Labor’s regulations, including revised conditional exemptions for maintenance, calibration and repair of certain equipment, and new conditional exemptions for other services. A discussion of price adjustments has been added; this new text addresses when price adjustments are necessary, and whether and to what extent the Postal Service and suppliers are responsible for absorbing costs in the event of a change in wage determinations for multiyear contracts and contracts with

iv SPs and Ps

options or renewals. Lastly, text discussing Notices of Intent and Minimum Wage Determinations have been updated to keep it current with DOL regulations and to highlight the e98 application process. A new Provision 9-4: Exemption from Application of the Service Contract Act to Contracts for Maintenance, Calibration, or Repair of Certain Equipment and Other Conditionally Exempted Contracts – Certification, Clause 9-12: Fair Labor Standards Act and Service Contract Act — Price Adjustment, and Clause 9-15: Exemption from Application of the Service Contract Act to Contracts for Maintenance, Calibration, or Repair of Certain Equipment and Other Conditionally Exempted Contracts – Requirements, have either been added or revised to reflect these changes. Specific citations follow:

7-7.1.1.2, Exemptions, has been rewritten for increased clarity and reorganized as 7-7.1.1.2.a, Statutory Exemptions, 7-7.1.1.2.b, Secretary of Labor Exemptions, 7-7.1.1.2.c, Exemption for the Maintenance, Calibration, or Repair of Certain Equipment, and 7-7.1.1.2.d, Other Conditionally Exempted Contracts. These paragraphs also contain revisions and additions to reflect updates in DOL regulations.

Current 7-7.1.1.3, Requirements, has been deleted and relevant information moved to other sections, and a new 7-7.1.1.3, Price Adjustments, has been added.

7-7.1.1.4, Provisions and Clauses, has been revised to change the provision and clause prescriptions.

Current 7-7.1.1.5, Notice of Intent, has been deleted and relevant information incorporated into a revised 7-7.1.1.5, Minimum Wage Determinations, which also has been revised to reflect new procedures.

Current 7-7.1.1.7, Award, has been revised to reflect new procedures and contract information, and renumbered as7-7.1.1.6.

7-7.1.5 Miller Act

This General Practice has been revised by deleting most of the material and providing readers a cross-reference to the discussion at 7-3.1, Bonds, and 7-3.1.7, Performance and Payment Bonds for Construction Contracts.

7-7.1.16 Vietnam Era Veterans Readjustment Assistance Act of 1974

7-7.1.16.1, Applicability, has been revised to change the threshold for application of the Act from $25,000 to $100,000. Clause 9-14: Affirmative Action for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans, has been similarly revised.

7-11 Supplier Suspension, Debarment and Ineligibility

Throughout: Throughout this topic, the phrase “debarment, suspension, and ineligibility” and variations thereof, has been changed to “suspension, debarment, and ineligibility,” and

February 2010 v


various parts have been rewritten and reorganized for clarity. Specific substantial changes follow:

7-11.2, Suspension and Debarment Coordinator, has been revised by deleting the statement that the Coordinator will assist the General Counsel and the Vice President, Supply Management, when a supplier opposes a proposed suspension or debarment. This text has been moved to 7-11.3, Supplier Recourse.

7-11.4, Supplier Capability Analysis, has been revised to state that proposals, quotations, or offers, from suspended, debarred, or ineligible suppliers (“listed suppliers”) may not be considered unless the VP, SM, has determined that doing so is in the best interests of the Postal Service, and that no award is made to a supplier on the GSA and USPS lists unless the award is consistent with the GSA Summary Code or has been determined to be in the Postal Service’s best interests by the VP, SM.

7-11.5, Effect of Suspension or Debarment on Existing Contracts. A new paragraph, 7-11.5.1, Existing Contracts, has been added and current text has been revised to state that contracting officers may not add new work to an existing contract, by exercise of an option or otherwise, unless the work is classified as an insignificant minor service change to a mail transportation contract or a minor administrative change. Exceptions to this policy are discussed in a new 7-11.5.3, Soliciting and Awarding Contracts.

7-11.5.2, Termination, is a new paragraph containing information on this subject.

7-11.5.3, Soliciting and Awarding Contracts, is a new paragraph stating that in certain circumstances, contracting officers may solicit and award contracts, or add new work to existing contracts, of suspended, debarred or ineligible suppliers. Such actions must be reviewed and approved by the VP, SM, and the approval process in contained in this paragraph and a new paragraph 7-11.5.4, Request to Do Business with a Suspended, Debarred, or Ineligible Supplier.

Clauses and ProvisionsClause 1-1: Privacy Protection was updated to reflect the correct date of (July 2007)

Clause 9-12: Fair Labor Standards Act and Service Contract Act — Price Adjustment, has been revised to clarify the price adjustment process, and to state that the supplier and the CO will negotiate whether and to what extent either party will absorb the costs of a wage change.

Clause 9-14: Affirmative Action for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans, has been revised to reflect the new $100,000 threshold for application of the Vietnam Era Veterans Readjustment Assistance Act of 1974.

vi SPs and Ps

Clause 9-15: Exemption from Application of the Service Contract Act to Contracts for Maintenance, Calibration, or Repair of Certain Equipment and Other Conditionally Exempted Contracts – Requirements, is a new clause delineating the requirements for exemption from the Service Contract Act.

Provision 9-4: Exemption from Application of the Service Contract Act to Contracts for Maintenance, Calibration, or Repair of Certain Equipment and Other Conditionally Exempted Contracts – Certification, is a new provision delineating the certification requirements for exemption from the Service Contract Act.

Tools and TechniquesA Purchase Plan Template has been added to 2-1, Develop Purchase Plan.

A Request for Business with Debarred or Suspended Supplier has been added to 7-11, Supplier Suspension, Debarment and Ineligibility.

Codification:The SPs and Ps have been enhanced using the Alternate Codification Format. Codification is a system for numbering the chapters, subchapters, parts, and sections of a document. The codified version also provides an added measure of effectiveness in future search and reference capabilities.

The following table is an illustration of the Standard and Alternate Codification Formats:

Standard Alternate

5 Chapter Name51 Subchapter Name511 Part Name511.1 Section Name511.11 Section Namea. Itemb. Item52 Subchapter Name521 Part Name522 Part Name

2 Chapter Name2–1 Subchapter Name2–1.1 Part Name2–1.1.1 Section Name2–1.1.1.1 Section Name2–1.1.1.2 Section Name2–2 Subchapter Name2–3 Subchapter Name2–3.1 Part Name2–3.1.1 Section Name2–3.1.2 Section Name

February 2010 vii


This page intentionally left blank

viii SPs and Ps

Contents

Introduction to the Postal Service Supplying Principles and Practices . . . . 1

United States Postal Service Supplying Principles . . . . . . . . . . . . . . . . . . . . . 3General Overview of United States Postal Service Supplying Principles. . . . . . . . . . . . . . . . 3

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Purpose of Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Responsible Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Change Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Postal Service Supplying Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Authority and Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Best Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Ethics and Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Business Ethics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Post-Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Environmental Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

People and Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Professionalism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Empowerment and Risk-taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Performance Based Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Planning and Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Best Practices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Strategic Planning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Market Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Forecasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Leveraging Spend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Demand Management and Product Standardization . . . . . . . . . . . . . . . . . . . . . . 9

Statutory and Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Supplier Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Supplier Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Teaming and Communications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

1 USPS Supplying Practices Process Step 1: Identify Needs . . . . . . . . . . . . . . 131-1 Define and Understand Client Needs, Goals, and Strategies. . . . . . . . . . . . . . . . . . . . . . . . . 13

1-1.1 Client Focusing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

February 2010 iii


1-1.2 Quadrant Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

1-1.2.1 Quadrant I: Noncore/Customized Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1-1.2.2 Quadrant II: Core/Customized Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1-1.2.3 Quadrant III: Noncore/Standard Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1-1.2.4 Quadrant IV: Core/Standard Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1-2 Form Purchase/SCM Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1-2.1 Assigning Roles and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1-2.2 Team Charters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1-2.3 Project Kickoff Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1-2.4 Members and Types of Purchase/SCM Teams. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

1-3 Identify Key Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

1-3.1 Prioritize and Understand Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

1-4 Prepare Preliminary Business Justification for the Need . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

1-4.1 Strategic Fit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

1-4.2 Achievability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

1-4.3 Affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

1-4.4 Business Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

1-4.5 Commercial Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

1-4.6 Other Topics Considered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

1-5 Assess Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

1-5.1 Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20


1-6 Involve Suppliers Early . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

1-6.1 Recommended Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

1-6.2 Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

1-6.3 Postal Service Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

1-6.4 Supplier Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

1-7 Develop Preliminary TCO Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

1-7.1 Design Cost Model(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

1-7.2 Calculate the Preliminary TCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25


1-8 Identify Cost Reduction Levers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

1-8.1 Determine Possible Levers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

1-8.2 Develop Preliminary TCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

1-8.3 Example of Relevant Cost Component Areas Analysis . . . . . . . . . . . . . . . . . . . . . . . . 27


1-8.4.1 Quadrant I: Custom/Noncore Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

1-8.4.2 Quadrant II: Custom/Core Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

1-8.4.3 Quadrant III: Standard/Noncore Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

1-8.4.4 Quadrant IV: Standard/Core Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28


1-9 Develop Demand Management Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

1-9.1 Independent and Dependent Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

iv SPs and Ps

Contents

1-9.2 Internal and External Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

1-9.3 Usage and Product Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

1-9.4 Inventory Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

1-9.5 Forecasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

1-10Conduct Market Research and Benchmarking Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

1-10.1 Market Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

1-10.2 Benchmarking Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

1-10.2.1 Step 1: Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

1-10.2.2 Step 2: Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

1-10.2.3 Step 3: Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

1-10.2.4 Step 4: Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

1-10.3 Benchmarking Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

1-11Define Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

1-11.1 Methodologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

1-11.2 Determine Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

1-11.3 Requirement Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

1-12Analyze State of Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

1-12.1 Analysis of Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

1-12.2 Leverage Existing Assets/Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

1-12.3 Buy or Purchase a Commercial Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

1-12.4 Make or Build a Custom Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

1-12.5 Make vs. Buy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

1-13Revisit/Update Resource Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

1-13.1 Resource Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

1-13.2 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39


1-14Develop, Issue, and Analyze Responses from RFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

1-14.1 Develop RFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

1-14.2 Issue RFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

1-14.3 Analyze Responses to RFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

1-14.4 Other Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41


1-14.6 Clauses and Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

1-15Manage Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

1-15.1 Risk Management Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

1-15.2 Benefits of Risk Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

1-15.3 Risk Identification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

1-15.4 Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

1-15.5 Risk Response Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

1-15.6 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

1-15.7 Risk Tracking and Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

1-15.8 Risk Reaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

1-16Conduct Make vs. Buy Decision Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

February 2010 v


1-16.1 Strategic Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

1-16.2 Operating Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

1-16.3 Cost Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

1-16.4 Justify Postal Service Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49






1-17Analyze Unsolicited Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

1-17.1 Receipt of Unsolicited Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

1-17.2 The Unsolicited Proposal Program Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

1-17.3 Initial Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

1-17.4 Discussion and Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

1-17.5 Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

1-17.6 Denial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

1-18Develop Logistics Support Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

1-18.1 Operating Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

1-18.2 Product Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

1-18.3 Development and Deployment Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

1-18.4 Maintenance Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

1-18.5 Current and Projected Demand Patterns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

1-18.6 Supply Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

1-18.7 Provisioning Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

1-18.8 Consumables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

1-18.9 Test Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

1-18.10 Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

1-18.11 Distribution Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

1-18.12 Customer Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

1-18.13 Process Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

1-18.14 Data Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

1-18.15 Investment Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

1-18.16 Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58


1-19Update Business Justification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

1-19.1 Strategic Fit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

1-19.2 Achievability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

1-19.3 Affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

1-19.4 Business Option Appraisal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

1-19.5 Commercial Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61


vi SPs and Ps

Contents

2 USPS Supplying Practices Process Step 2: Evaluate Sources . . . . . . . . . . . 632-1 Develop Purchase Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

2-1.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

2-1.2 Preliminary Sourcing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

2-1.3 Components of a Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

2-1.4 Purchase Plan Review and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65


2-2 Start Request for Proposal Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

2-2.1 Requests for Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

2-2.2 Statement of Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

2-2.3 Statement of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

2-2.4 Performance Work Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

2-2.5 Specifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

2-2.6 Product Descriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68


2-3 Update/Refine Total Cost of Ownership Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

2-3.1 TCO Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

2-3.2 TCO Estimate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

2-3.3 TCO Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69


2-4 Formulate Project Budget and Request Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

2-4.1 Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

2-4.2 Request Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

2-4.3 Supply Chain Management Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71


2-5 Perform Value Chain Mapping and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

2-5.1 Importance of Value Chain Mapping and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

2-5.2 Constructing a Value Chain Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

2-5.3 Activity Based Costing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

2-5.4 Key Performance Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

2-6 Involve Suppliers in Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

2-6.1 Identification of the Right Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

2-6.2 Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

2-6.3 Well-Documented and Understood Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

2-6.4 Purchase/SCM Team Project-Level Expertise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79


2-7 Conduct Should-Cost Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

2-7.1 When to Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

2-7.2 Sources for Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

2-7.3 Possible Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

2-7.4 Components of a Should-Cost Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82


2-8 Conduct Spend Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

February 2010 vii


2-8.1 Spend Analysis Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

2-8.2 Define and Extract Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

2-8.3 Review Item Purchase History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

2-8.4 Validation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

2-8.5 Refine and Classify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

2-8.6 Analyze Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

2-8.7 Identify Opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86


2-9 Perform Switching-Cost Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

2-9.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

2-9.2 Types of Switching Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

2-10Determine Extent of Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

2-10.1 Market Surveillance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

2-10.2 Competitive Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

2-10.3 Noncompetitive Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

2-10.3.1 Business Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

2-10.3.2 Switching Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

2-10.3.3 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

2-10.3.4 Reviews and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

2-10.3.4.1Purchase Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

2-10.3.4.2Contract Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

2-10.3.5 Endorsements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89


2-11Develop Life-Cycle Support Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

2-11.1 Component Categories and Supporting Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

2-11.2 Life Cycle Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

2-11.3 Life-Cycle Phases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

2-11.4 Concept Development Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

2-11.5 Planning and Specification Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

2-11.6 Purchase Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

2-11.7 Production and Deployment Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

2-11.8 Operations (Use) and Support Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

2-11.9 Relocation and Disposal Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

2-11.9.1 Relocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

2-11.9.2 Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94



2-12Develop Preliminary Investment Recovery Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

2-12.1 Identify Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

2-12.2 Supplier Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

2-12.3 Make Preliminary Decision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

2-12.4 Recycle (Scrap) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

2-12.5 Reallocate (Relocate and Redeploy) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

viii SPs and Ps

Contents

2-12.6 Resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

2-12.7 Remarket (Resell to the Supplier) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

2-12.8 Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

2-12.9 Remanufacture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

2-12.10 Remove . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98








2-13Purchase From Mandatory Sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

2-13.1 Javits-Wagner-O’Day Act (41 U.S.C. 46—48c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

2-13.2 Randolph-Sheppard Act (20 U.S.C. 107 et seq.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

2-13.3 Defense Energy Support Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100


2-14Clarify Data Rights and Intellectual Property Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

2-14.1 The Postal Service’s Motivation on Data Rights and Intellectual Property . . . . . . . . . 101

2-14.2 Defining Data Rights and Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

2-14.3 Technical Data Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

2-14.4 Computer Software Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

2-14.5 Special Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

2-14.6 Existing Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

2-14.7 Patent Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

2-14.8 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

2-14.9 Limited and Restricted Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

2-14.10 Royalties and License Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

2-14.11 Repair Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

2-14.12 Professional Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

2-14.13 Purchase/SCM Team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106


2-15Consider Auctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

2-15.1 Forward Auction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

2-15.2 Reverse Auctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

2-15.3 Postal Service Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

2-15.4 State of the Marketplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

2-15.5 Number of Qualified Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

2-15.6 Commodity Product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

2-15.7 Buyer’s Importance to Potential Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

2-15.8 Excess Capacity in Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

2-15.9 Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

2-15.10 Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

February 2010 ix


2-15.11 Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

2-15.12 Supplier Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

2-15.13 Auction Services and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

2-15.14 Key Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112







2-16Consider Performance-Based Contracting Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . 113

2-16.1 Appropriate Circumstances for Use of Performance-Based Contracts . . . . . . . . . . . 114

2-16.2 Different Types of Performance-Based Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

2-16.3 Key Elements of Performance-Based Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

2-16.4 Indicators and Performance Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

2-16.5 Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

2-16.6 Quality Assurance Plan and Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

2-16.7 Considerations for Using a Performance-Based Contract . . . . . . . . . . . . . . . . . . . . . 116







2-17Determine Need for Progress or Advance Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

2-17.1 Advance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

2-17.2 Progress Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118



2-18Select Contract Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

2-18.1 Contract Selection Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

2-18.2 Contract Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

2-18.3 Firm Fixed Price Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

2-18.4 Fixed-Price Incentive Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

2-18.5 Fixed-Price Contract with Economic Price Adjustment. . . . . . . . . . . . . . . . . . . . . . . . 121

2-18.6 Cost-Reimbursement Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

2-18.6.1 Cost Plus Incentive Fee Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

2-18.6.2 Cost Plus fixed-fee Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

2-18.6.3 Cost Plus Award Fee Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

2-18.6.4 Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

2-18.6.5 Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

2-18.7 Time and Materials Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

2-18.8 Indefinite-Delivery Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

x SPs and Ps

Contents

2-18.9 Performance-Based Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

2-18.10 Letter Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

2-18.11 Ordering Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127



2-19Consider Use of Renewals and Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

2-19.1 Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

2-19.2 Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

2-19.3 Consideration of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

2-19.4 Options in Solicitation-Related and Contractual Documents . . . . . . . . . . . . . . . . . . . 131



2-20Develop and Finalize Sourcing Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

2-20.1 Sourcing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

2-20.1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

2-20.1.2 Sourcing Types. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

2-20.2 Multiple Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

2-20.3 Single Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

2-20.4 Sole Sourcing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

2-20.5 Noncompetitive Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135


2-20.7 Other Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

2-21Define Supplier Diversity Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

2-21.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

2-21.2 Supplier Diversity Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

2-21.3 Supporting Supplier Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

2-21.4 Management Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

2-21.5 Communication/Outreach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

2-21.6 Sourcing Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

2-21.7 Subcontracting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

2-21.8 Training and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

2-21.9 Tracking Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

2-21.10 Performance Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

2-21.11 Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141



2-22Prequalify Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

2-22.1 Evaluation Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

2-22.1.1 Past Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

2-22.1.2 Supplier Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

2-22.2 Preliminary Prequalification Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

2-22.3 Selecting Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

2-22.4 Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

February 2010 xi


2-22.5 Reassessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

2-23Define Contract Management Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

2-23.1 Measurable Performance Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

2-23.2 Aspects of Performance Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

2-23.3 Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

2-23.4 Sources for Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

2-23.5 Metrics Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

2-23.6 Defining the Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147


2-24Review and Finalize Request for Proposals (RFP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

2-24.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

2-24.2 Types of Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

2-24.3 Presolicitation Workshops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

2-24.4 Verify Available Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

2-24.5 Draft RFPs Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

2-24.6 Contract Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149



2-25Form Proposal Evaluation Team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

2-25.1 Identification of Proposal Evaluation Team Members . . . . . . . . . . . . . . . . . . . . . . . . . 150

2-25.2 Identifying and Selecting Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

2-25.3 Identifying and Selecting Functions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152


2-26Develop Proposal Evaluation Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

2-26.1 Best Value Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

2-26.2 Proposal Evaluation Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

2-26.3 Proposal Evaluation Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154







2-27 Issue RFPs and Publicize Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

2-27.1 Publicizing Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

2-27.2 Availability of the RFPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

2-27.3 Government Point of Entry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

2-27.4 Other Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

2-27.5 Presolicitation Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

2-27.6 Preproposal Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158


2-28Conduct Reverse Auctions Where Appropriate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

2-28.1 Plan and Define Auction Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

xii SPs and Ps

Contents

2-28.2 Determine Software Platform/Service Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

2-28.3 Communication and Training. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

2-28.4 Conduct Auction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

2-28.5 Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161


2-29 Issue Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

2-29.1 Amendment Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

2-29.2 Validation and Verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

2-29.3 Failure to Acknowledge Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162


2-30Receive and Record Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

2-30.1 Modification and Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

2-30.2 Late Proposals and Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163


2-31 Implement Proposal Evaluation Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

2-31.1 Proposal Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

2-31.2 Individual Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

2-31.3 Comparative Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

2-31.4 Communications with Potential Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165



2-32Assess Technology Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

2-32.1 Personnel Checking the Technology Implications. . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

2-32.2 Knowledge of the Postal Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

2-32.3 Feasibility of the Supplier Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167

2-32.4 Effect of the Solution on the Postal Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167

2-32.5 Viability of the Solution and Emerging Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . 168


2-33Perform Risk Analysis on Supplier Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

2-33.1 Risk Analysis Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

2-33.2 Proposal Risks Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

2-33.3 Proposal Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

2-33.4 Risk Analysis Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170


2-34Conduct Price/Cost Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

2-34.1 Comparison of Competitive Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172

2-34.2 Comparison with Regulated, Catalog, or Market Prices . . . . . . . . . . . . . . . . . . . . . . . 172

2-34.3 Comparison with Historical Prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

2-34.4 Pricing Noncompetitive Offers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

2-34.5 Use of Independent Cost Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

2-34.6 Cost Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

2-34.7 Allowable Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

2-34.8 Reasonableness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

February 2010 xiii


2-34.9 Allocable to the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

2-34.10 Unallowable Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

2-34.11 Cost Realism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

2-34.12 Allowances and Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

2-34.13 Cost or Pricing Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180



2-35Conduct Supplier Capability (Technical and Financial) Analysis . . . . . . . . . . . . . . . . . . . . . . 181

2-35.1 Supplier Capability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

2-35.2 Technical Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

2-35.3 Financial Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

2-35.4 Review Core Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

2-35.5 Reference Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

2-35.6 Performance With Previous Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

2-35.7 Supplier Audit History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

2-35.8 Preaward Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

2-35.9 Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

2-35.10 Assessing Subcontractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186


2-36Evaluate Foreign and Domestic Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

2-36.1 Domestic End Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

2-36.2 End Products from Designated WTO GPA and FTA Countries . . . . . . . . . . . . . . . . . . 187

2-36.3 Designated WTO GPA and FTA Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187

2-36.4 WTO GPA and FTA Eligibility Thresholds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

2-36.5 Lease, Rental, and Lease-Purchase Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

2-36.6 WTO GPA and FTA Service Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

2-36.7 Construction Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190

2-36.8 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

2-36.9 Non-Available Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191



2-37Hold Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194

2-37.1 Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194

2-37.2 Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

2-37.3 Potential Points of Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195


2-38Negotiate with Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

2-38.1 Negotiation Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196

2-38.2 Prepare for Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197

2-38.3 Best Alternative to a Negotiated Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197

2-38.4 Conducting Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

2-38.5 Documenting Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198


xiv SPs and Ps

Contents






2-39Subcontracting with SMWOBs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199

2-39.1 Subcontracting Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199

2-39.2 Suppliers Use of Subcontractors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200



2-40Produce Contract Award Recommendation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

2-40.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

2-40.2 Recommendation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

2-40.3 Contract File. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

2-40.4 Required Preaward Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202


2-41Obtain Selected Reviews and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

2-41.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

2-41.2 Reviews and Approvals of Contract Awards, Modifications and Terminations. . . . . . 203

2-41.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203

2-41.2.2 Review and Approval Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203

2-41.2.3 Terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203

2-41.3 Review and Approval Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203

2-41.4 Reviews and Approvals of Purchase Plans Valued at $1 Million and More. . . . . . . . . 204

2-41.5 Noncompetitive Contractual Actions and Purchase Plans . . . . . . . . . . . . . . . . . . . . . 205

2-41.6 Actions Exceeding a Contracting Officer’s Delegated Authority . . . . . . . . . . . . . . . . . 205

2-41.7 Reporting and Certifying Contractual Actions Valued at $25 Million or More . . . . . . . 205

2-41.8 Consultation with Assigned Counsel and the Law Department . . . . . . . . . . . . . . . . . 205

2-41.8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

2-41.8.2 Final Decisions on Contract Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206


2-42Postal Accountability and Enhancement Act Related Reports and Certifications . . . . . . . . . 207

2-42.1 Reports on Contractual Actions Valued at $25 Million or More. . . . . . . . . . . . . . . . . . 207

2-42.2 Quarterly Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

3 USPS Supplying Practices Process Step 3: Select Suppliers . . . . . . . . . . . . 2093-1 Award Contract and Notify Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

3-1.1 Award and Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209


3-2 Announce Award .