Contents. 3 Supplier Relations. 3.1 Introduction General

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1 Supplier Relations a 3 Supplier Relations 3.1 Introduction General It is the intent of the Postal Service to establish strong, mutually beneficial relations with its suppliers in order to meet its business and competitive objectives. Postal Service purchases are intended to foster partnerships with suppliers in which both parties work toward a common goal. The nature of the partnership is determined by the potential impact of the supplier s performance on the Postal Service s competitive and financial position, and therefore some partnerships are closer and more interdependent than others. The type of partnership will also determine other aspects of the relationship, such as communications, purchasing method, performance incentives, and rewards for exceptional quality. Contracting officers must manage supplier relations to ensure that business and competitive objectives are met or exceeded Supply Chain Management The Postal Service uses the supply chain management business philosophy and associated business practices to further its business and competitive objectives. In general terms, the supply chain is a series of business organizations working together to create and provide value to customers. Supply chain management is the analysis and adjustment of the purchasing process and supply stream as required to meet customer demand and lower overall costs. 3.2 Supplier Diversity General a General. The Postal Service focuses on the entire business community for quality supplies and services that meet or exceed operational needs. Small, minority, and woman-owned businesses are therefore an important part of the Postal Service s goal to establish and maintain a strong supplier base that reflects the diversity of the American supplier community. May 19,

2 3.2.1.b Interim Internal Purchasing Guidelines b c d Supplier Diversity. Supplier diversity is the proactive business process that seeks to provide suppliers with equal access to purchasing opportunities. It promotes supplier participation reflective of the American supplier community and encourages economic development. Effective supplier diversity ensures that no suppliers are excluded from competition on the basis of race, color, religion, sex, age or national origin. Contracting Officers. Contracting officers must manage supplier diversity as a strategic business initiative vital to the success of the Postal Service. Contracting officers must ensure that: 1. The supplier base reflects the diversity of the American supplier community, and 2. The Postal Service is taking full advantage of the entrepreneurial spirit, capabilities, competitive pricing, new processes and products, and innovations offered by small, minority, and woman-owned businesses. Definitions 1. Small business. A business, including an affiliate (see a.1), that is independently owned and operated, is not dominant in producing or performing the supplies or services being purchased, and has no more than 500 employees, unless a different size standard has been established by the Small Business Administration (see 13 CFR 121, particularly for different size standards for airline, railroad, and construction companies). For subcontracts of $50,000 or less, a subcontractor having no more than 500 employees qualifies as a small business without regard to other factors. 2. Affiliates. Businesses connected by the fact that one controls or has the power to control the other, or a third party controls or has the power to control both. Factors such as common ownership, common management, and contractual relationships must be considered. Franchise agreements are not considered evidence of affiliation if the franchisee has a right to profit in proportion to its ownership and bears the risk of loss or failure. 3. Dominant. Being a controlling or major influence in a market in which a number of businesses are primarily engaged. Factors such as business volume; number of employees; financial resources; competitiveness; ownership or control of materials, processes, patents, and license agreements; facilities; sales territory; and nature of the business must be considered. 4. Minority business. A minority business is a concern that is at least 51 percent owned by, and whose management and daily business operations are controlled by, one or more members of a socially and economically disadvantaged minority group, namely U.S. citizens who are Black Americans, Hispanic Americans, Native Americans, or Asian Americans. (Native Americans are American Indians, Eskimos, Aleuts, and Native Hawaiians. Asian Americans are U.S. citizens whose origins are Japanese, Chinese, Filipino, Vietnamese, Korean, Samoan, Laotian, Kampuchea (Cambodian), Taiwanese, in the U.S. Trust Territories of the Pacific Islands or in the Indian subcontinent.) 76 May 19, 2005

3 Supplier Relations b 5. Woman-owned business. A concern at least 51 percent of which is owned by a woman (or women) who is a U.S. citizen, controls the firm by exercising the power to make policy decisions, and operates the business by being actively involved in day-to-day management. 6. Number of employees. Average employment (including domestic and foreign affiliates), based on the number of people employed (whether full-time, part-time, or temporary), during each pay period of the preceding 12 months, or, if the business has been in existence less than 12 months, during each pay period of its existence Sourcing a b c Definition. Sourcing is the process of identifying and assessing the qualifications, capabilities, and performance of suppliers. There are two types of sourcing. The first is performed to locate suppliers for a specific purchase. The second, presourcing, is performed to locate suppliers for anticipated purchases. Sourcing should not be confused with prequalification (see 3.5.2), which is a process whereby a supplier s ability to meet specific Postal Service requirements is evaluated. Responsibilities 1. Purchase Teams. Purchase teams must ensure that market research is performed in a business-like and objective manner. 2. Contracting Officers. The contracting officer brings to the purchase team knowledge of a diverse supplier base. This knowledge requires continuous, proactive market research by all contracting officers and purchasing organizations to create a strong supplier base that will promote the spirit and intent of this section, chapter, and manual. Assistance. Purchase teams should contact Supply Chain Management Strategies for sourcing assistance. The Small Business Administration and the Department of Commerce s Minority Business Development Agency and affiliated Regional Minority Purchasing Councils can also help in identifying small, minority, and woman-owned businesses for a specific purchase, and can provide information on their qualifications and capabilities Subcontracting with Small, Minority, and Woman-owned Businesses a b General. So that the Postal Service may fully realize the benefit of a supplier base that reflects the diversity of the American supplier community, suppliers are encouraged to use small, minority, and woman-owned businesses as subcontractors to the maximum extent consistent with effective contract performance. Reports. Each supplier awarded a contract valued at $500,000 or more must submit calendar-quarter reports (purchase teams may require more frequent submittals) on its subcontracting activity for that contract. Three types of reporting methods may be used: (1) reports showing direct subcontract awards awarded under the Postal Service contract; (2) reports showing May 19,

4 3.2.3.c Interim Internal Purchasing Guidelines subcontracting activity that is allocable to the Postal Service contract using generally accepted accounting practices; or (3) reports that are a combination of the two. During discussions (see c), the purchase team and the supplier must negotiate and agree to which type of report will be used c d e Subcontracting Plans. Plans which specifically address subcontracting with small, minority, and woman-owned businesses are required for all contracts valued at $1 million or more. Unless formally waived by the contracting officer for urgent and compelling business reasons, or for the reasons addressed in d.1.(b), suppliers must submit the plans with their proposals, and plans must be agreed to before award of the contract (small businesses are exempt from this requirement). Provision 3-1, Notice of Small, Minority, and Woman-owned Business Subcontracting Requirements, which discusses the plan requirement and exempts small businesses from the requirement, is incorporated by reference in Provision 4-1, Standard Solicitation Provisions, and must be checked-off by contracting officers for all solicitations for contracts estimated to value $1 million or more, except when an indefinite-delivery contract or ordering agreement will be used and the purchase team determines that requiring a plan would not be feasible. Contract Clauses 1. Contracts Valued at $1 million or More. Except for the instances listed below, all contracts valued at $1 million or more must include Clause 3-1, Small, Minority, and Woman-owned Business Subcontracting Requirements. This clause is incorporated by reference in Clause 4-2, Terms and Conditions Required to Implement Policies, Statutes, or Executive Orders, and must be checked-off by contracting officers as appropriate. Clause 3-1 requires that the supplier prepare a contract-specific plan for subcontracting and reporting on such subcontracting activity, and that the plan be agreed to by the Postal Service prior to contract award. The clause is not included under the following circumstances: (a) When the contract is awarded to a small business; (b) When the contract is an indefinite delivery contract or ordering agreement and the purchase team determines that requiring a plan would be impractical or unworkable. 2. Contracts Valued at $500,000 or More. All contracts expected to be valued at $500,000 ($250,000 for design and construction contracts) or more must include Clause 3-2, Participation of Small, Minority, and Woman-owned Businesses. The clause is incorporated by reference in Clause 4-2, and must be checked-off by contracting officers as appropriate. Clause 3-2 requires that suppliers report their subcontracting activity by calendar-quarter. The report must be one of the types discussed in b. Purchasing Organization Reports. Each purchasing organization must collect, compile, and report by calendar quarter on the number of suppliers submitting reports and the number and dollar value of subcontracts and purchase orders placed by Postal Service suppliers with small, minority, and 78 May 19, 2005

5 Supplier Relations woman-owned businesses. Summary reports must be forwarded to Purchasing and Materials Supplier Development and Diversity organization Classification Codes Purchases made from small, minority, and woman-owned businesses must be coded by socioeconomic classification. The codes shown in Exhibit are used to identify contracts and orders by socioeconomic classification. Exhibit Socioeconomic Classification Codes Code Classification A Small business B Small minority-owned B1 Black american B2 Hispanic American B3 Native American B4 Asian American C Small womer-owned E Small, minority woman-owned E1 Black American E2 Hispanic American E3 Native American E4 Asian american I Large business J Large minority-owned J1 Black american J2 Hispanic American J3 Native American J4 Asian American K Large, Woman-owned L Large Minority Woman-owned L1 Black American L2 Hispanic American L3 Native American L4 Asian American S Nonprofit, Educational, other Gov t & Utilities T NIB & NISH W Federal Prison Industries UNICOR Z Foreign Supplier May 19,

6 3.3 Interim Internal Purchasing Guidelines 3.3 Mandatory Sources General If the following sources can meet Postal Service requirements, they must be considered before purchasing certain commodities Existing Assets Existing assets are supplies, equipment, or services already within the Postal Service or available under a current contract. Before purchasing new supplies or services, purchase teams should always consider: 1. Reutilization of surplus materials, when economically practical; 2. Supplies within existing inventories; and 3. Orders against existing contracts Workshops for People Who are Blind or Severely Disabled a b General. The Javits-Wagner-O Day Act (41 U.S.C ) requires that the Postal Service and other federal agencies purchase certain supplies and services from qualified workshops which employ people who are blind or severely disabled. The Committee for Purchase from People Who Are Blind or Severely Disabled determines which supplies and services must be purchased and their price. Procurement Lists. Supplies and services provided by people who are blind or severely disabled are listed in the Committee s Procurement List. Additions and deletions are published in the Federal Register as they occur. The list is available at the Committee s Web site ( or may be obtained by submitting General Services Administration (GSA) Form 457, Federal Publications Mailing List Application, to: GSA CENTRALIZED MAILING LISTS SERVICE PO BOX 6477 FORT WORTH TX c Ordering 1. General. Except as stated in c.2, supplies and services must be ordered from the central nonprofit agency designated on the Procurement List, or from the workshops concerned. 2. Exceptions. Supplies and services contained on the Procurement List may not be purchased from commercial sources unless authorized by the agency or the Committee for Purchase from People Who Are Blind or Severely Disabled. The Committee will grant an exception when the agency cannot meet the requirement within the period specified, and commercial sources can. It may also grant an exception when the quantity involved is insufficient for economic production by the workshop. If a purchase exception is granted because of required 80 May 19, 2005

7 Supplier Relations a delivery dates, orderers must initiate the purchase within 15 days, unless additional time is allowed by the agency. Orderers must send a copy of the solicitation to the agency. 3. Compliance with Orders. If a workshop fails to comply with the terms of an order, and the problem cannot be resolved with the workshop, the order must be canceled. Quality-related problems that cannot be resolved with the workshop must be referred to the agency. When an order is canceled, the agency must be notified and requested to reallocate the order if practicable. If reallocation is not practicable, a purchase exception will be given by the agency People Who Are Blind or State Licensing Agencies for the Blind People who are blind and licensed under the provisions of the Randolph-Sheppard Act (20 U.S.C. 107 et seq.) or by a state licensing agency must be given priority for the operation of food vending services in Postal Service facilities. See Handbooks AS-707H, Contracting for Food Services, and EL-602, Food Service Operations Defense Energy Support Center Under an interagency agreement with the Defense Energy Support Center (DESC), Postal Service facilities whose fuel requirement is 20,000 gallons or more per product at any given location must purchase fuel (gasoline, gasohol, diesel fuel, heating, and kerosene) from DESC suppliers. See Administrative Support Manual (ASM) 543 and Government Sources General Various government sources can meet Postal Service requirements. Contracting officers should therefore consider the following sources when the quality, delivery terms and prices offered are competitive with those offered in the commercial marketplace Federal Prison Industries, Inc. (UNICOR) a General 1. The Postal Service uses Federal Prison Industries, Inc. (UNICOR) as a source of supply for: (a) Mailbag requirements exceeding the capacity of the Mail Equipment Shops; and (b) May obtain other products and services available from FPI. May 19,

8 3.4.2.b Interim Internal Purchasing Guidelines 2. Price and delivery terms must be reasonable compared with those available in the commercial marketplace (as determined by market research or other means not involving obtaining competitive proposals) b Ordering. Supplies and services available from FPI are listed in its Schedule of Products brochure. This brochure and individual product and service catalogs (which provide detailed ordering instructions) are available at FPI s Web site ( and are available from: UNICOR CORPORATE DIVISION FEDERAL PRISONS INDUSTRIES INC 320 FIRST ST NW WASHINGTON DC General Services Administration a General. The General Services Administration (GSA) offers a wide variety of potential sources. Among these sources are: 1. GSA Supply System. GSA depots stock supplies commonly used by government agencies, as described in the GSA Supply Catalog and the GSA Stores Stock Catalog. These catalogs may be ordered using GSA Form 457, Publications Mailing List Application. 2. Federal Supply Schedules (a) General. Federal Supply Schedules (FSS) are summaries of ordering contracts negotiated by GSA s Federal Supply Service. They include Single-Award, Multiple-Award and New Item Introductory schedules. GSA s terms and conditions, rather than those used by the Postal Service, apply to orders placed against FSSs. (b) Information. The FSS Program section of the GSA Supply Catalog lists the supplies and services available on the Schedules. Copies of the Schedules and GSA s Federal Supply Schedule Program Guide may be accessed at or may be ordered by sending GSA Form 457 to: GSA CENTRALIZED MAILING LIST SERVICE DENVER FEDERAL CENTER BLDG 41 DENVER CO Information Technology. Information technology is available under GSA programs and contracts. See d Defense Logistics Agency Supplies available from the Defense Logistics Agency (DLA) are described in the Federal Supply Catalog for Civil Agencies, published by DLA and available from: COMMANDER DEFENSE LOGISTICS SERVICE CENTER (DLSC-APPP) BATTLE CREEK MI May 19, 2005

9 Supplier Relations b Department of Veterans Affairs The Department of Veterans Affairs makes medical supplies and equipment available to designated Postal Service installations. See Handbook AS-701, Material Management, for ordering instructions Government Printing Office Printing may be purchased from the Government Printing Office (GPO). See ASM Commercial Suppliers General Except for those commodities available from the mandatory sources listed in 3.3, it is Postal Service policy to purchase its requirements from commercial suppliers using business practices and terms and conditions customary to the commercial marketplace or from the government sources listed in Prequalification a b Introduction. The Postal Service prequalifies suppliers in order to enhance competition and ensure quality performance. In addition to improving competition and performance, prequalification can also shorten cycle time and strengthen relations between the Postal Service and its suppliers. Contracting officers should consider prequalifying suppliers whenever appropriate. General 1. Prequalified suppliers are firms or individuals whose record of performance in the marketplace (commercial or governmental or both) has demonstrated their ability to perform to consistently high standards of quality and reliability. 2. Prequalification opportunities must be publicized in accordance with e and However, particular purchases or series of purchases competed solely among prequalified suppliers (see b.3) need not be publicized, although purchase teams may do so if in the business or competitive interests of the Postal Service. 3. Purchase teams may limit competition solely to prequalified suppliers. Such decisions must be based on the business rationale for the particular purchase (or series of purchases) and its relationship to the business and competitive needs of the Postal Service. These decisions are matters of the purchase team s judgment, as are those determining whether to prequalify suppliers and what means to use. In addition, when in the business interests of the Postal Service, purchase teams may also consider adding suppliers to previously established lists when capable suppliers which did not participate in the prequalification May 19,

10 3.5.2.c Interim Internal Purchasing Guidelines c d e process are identified. Before being placed on the list, such suppliers must be evaluated in the same manner used to establish the original list, but the prequalification process need not be republicized. Similarly, if the purchase team decides that competition solely among prequalified suppliers would not ensure of the purchase, the purchase opportunity may be publicized or republicized. 4. When using prequalification, supplier-specific performance evaluation factors (past performance and supplier capability; see 2.1.9), are evaluated in order to decide which suppliers to include on the prequalified list. The supplier should be evaluated in the same manner as for any other purchase (see 2.1.9). Use. Prequalification may be used in either of two ways: (1) on an ongoing basis for commercially available goods or services purchased routinely; or (2) for an individual purchase or series of purchases. Determining the Prequalification Method 1. Any number of methods may be used to prequalify suppliers. When deciding on the method to be used (which should take place during the purchase planning phase), purchase teams must consider the particular purchase and the business and competitive needs of the Postal Service, and tailor the prequalification method to these considerations. 2. Determining the method should be based on: (a) The particular purchase (or series of purchases) and its relationship to the business and competitive needs of the Postal Service. (b) The dollar value or sensitivity of the purchase. (c) The complexity of the item being purchased. (d) The delivery schedule. Determining the Prequalified Suppliers 1. Publicizing. In addition to the publicizing requirements discussed in 3.5.3, purchase teams should use their market awareness to ensure that qualified suppliers are made aware of prequalification opportunities. Based on the state of the marketplace, announcements regarding prequalification opportunities should be made through whatever media are deemed most appropriate and effective. In addition, purchase teams must ensure that market research includes specific efforts to identify small, minority, and woman-owned businesses capable of meeting prequalification criteria and that these firms are encouraged to seek inclusion on prequalified lists. This effort must be outlined in any individual purchase plan (see b) that contemplates the use of prequalified suppliers. Purchase teams must also ensure that suppliers subcontracting plans are consistent with 3.2 when they will be considered in prequalification criteria. 2. Time Limits. The length of time in which the prequalification list will be in effect must be established and provided to suppliers before suppliers 84 May 19, 2005

11 Supplier Relations h are selected for the list. Limits will depend on the particular purchase and the business and competitive needs of the Postal Service (although lists must be reassessed periodically; see f.1), but in all cases must be reasonable in relation to standard commercial practices. 3. Selecting Suppliers (a) After the evaluation team (see 2.1.8) has reviewed and analyzed the supplier-specific information (see c), suppliers are placed on the prequalified list. All qualified suppliers need not be placed on the prequalified list if the purchase team determines (1) that a smaller group will provide adequate competition or (2) that some suppliers are considerably more qualified than others, thereby precluding purchase opportunities for the less qualified. During this process, the contracting officer, as business leader of the purchase team, must ensure: (1) That all suppliers are treated in a business-like manner, and that the inclusion or exclusion of a particular supplier is based on business reasons alone. (2) That enough suppliers are placed on the list to ensure adequate competition for subsequent purchases. (3) That any sensitive business information provided by a supplier is sufficiently protected from disclosure. 4. Notification. All suppliers who responded to the prequalification announcement must be notified of whether they were included or excluded from the prequalification list. Suppliers who have not been selected for the list must be provided the rationale so that they may better prepare for future prequalification opportunities f g h Maintaining Prequalified Lists 1. Reassessment. Periodically, purchase teams should reassess the suppliers included on a prequalified list in order to ensure that they remain qualified and reliable. Purchase teams should also consider whether new suppliers should be included on the list. Such opportunities must be publicized in accordance with 3.5.3, and interested suppliers are subjected to the same prequalification methods used to originally establish the list. 2. Removal. Purchase teams may decide to remove a supplier from a prequalified list, but only when the action is based on sound business reasons. The supplier must be informed of the removal and provided an explanation for the decision. Requests for Prequalified Lists. Subject to the restrictions of and Handbook AS-353, prequalification lists may be provided to parties seeking them, including businesses seeking subcontract opportunities. Competition. Purchase teams must ensure that purchases are competed among a sufficient number of prequalified suppliers to ensure adequate competition. The teams have broad discretion in determining when competition is adequate, but must make this determination based on the nature of the purchase, the marketplace, and the business and competitive May 19,

12 3.5.3 Interim Internal Purchasing Guidelines needs of the Postal Service. All relevant purchases need not be competed among all suppliers included on a prequalified list, but all such suppliers must be treated fairly, and periodically given the opportunity to compete for purchases. Purchase teams must exercise sound business judgment when determining which prequalified suppliers will compete for a particular purchase, and must make a written determination that the suppliers selected to compete provide adequate competition Publicizing Purchase Opportunities and Contract Awards a b Policy 1. Purchase Opportunities (a) All competitive purchase opportunities valued at over $100,000, including prequalification opportunities, must be publicized unless (1) precluded by emergency, (2) suppliers have been prequalified (see e.1), (3) an advance notice of services sought was previously published as a part of purchase planning (see b.3), or (4) the purchase will be of commercially available goods or services, in which case the publicizing threshold is $1 million. (b) At the discretion of the purchase team, noncompetitive purchase opportunities of any value may be publicized when it is determined that such publicizing would improve the effectiveness of market research. 2. Contract Awards (a) To promote competition in subcontracting, the Postal Service announces contract awards, competitive or noncompetitive, having significant subcontract opportunities. Such awards must be publicized in the Governmentwide Point of Entry (GPE; see b.1). Although a matter of judgment, these are normally awards valued over $500,000 with individual subcontract opportunities over $50,000. Announcements of contract awards may also be made available for publication to newspapers, trade journals and magazines. (b) Other awards may be publicized, when in the judgment of the purchase team, such announcement would benefit future competition. (c) All noncompetitive contract awards valued at more than $1 million must be publicized in the GPE, and other media as appropriate, upon award. Methods 1. Governmentwide Point of Entry. Except for purchases of mail transportation (see d), solicitations must be synopsized in the GPE. The GPE, successor to the Commerce Business Daily, is the single point where most government purchasing opportunities and 86 May 19, 2005

13 Supplier Relations 3.7 contract awards can be accessed electronically by the public. The GPE is accessed via the Internet at This publicizing must occur as early in the purchasing process as possible, but not later than the date of issuing the solicitation. 2. Other Media. In addition to the GPE, purchase opportunities may be publicized via other electronic media, or in newspapers or trade journals, depending on three factors: (a) the purchase team s knowledge of the marketplace, (b) the business and competitive needs of the Postal Service, and (c) whether, following contract award, there will be significant subcontracting opportunities. Purchase teams should also consider publicizing in media that target diverse suppliers (see also Handbook P-1, General Purchasing Concepts and Practices). 3. Presolicitation Notices. Purchase teams wishing to identify suppliers may do so by issuing a presolicitation notice (also called a sources sought notice). The notice should (a) describe the upcoming Postal Service requirement and any applicable qualification requirements, (b) announce any planned presolicitation conferences, and (c) specify a date by which the notice must be returned to ensure inclusion on the solicitation mailing list Unsolicited Proposals a b c d Definition. Unsolicited proposals are offers to sell to the Postal Service the rights to ideas, concepts, products, processes, or technology. They are considered unsolicited because they are not submitted in response to a solicitation or request for proposals. Unsolicited Proposal Program. The Unsolicited Proposal Program (UPP) provides companies and entrepreneurs the opportunity to submit new technologies or ideas to improve postal operations. Procedural Information. Information concerning submittal and review of unsolicited proposals is contained in Publication 131, The Postal Service Unsolicited Proposal Program, available for review at: Acceptance. If an unsolicited proposal is found acceptable, and a noncompetitive purchase can be justified under one of the scenarios at (for example, because the supplier is a single source, or because a compelling business interest justifies the use of the noncompetitive process), the contracting officer negotiates a contract with the proposer. 3.6 Business Disagreements See 39 CFR Debarment and Suspension See 39 CFR 601. May 19,

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