[Federal Register Volume 69, Number 57 (Wednesday, March 24, 2004)]
[Proposed Rules]
[Pages 13786-13793]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6395]


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POSTAL SERVICE

39 CFR Part 601


Purchasing of Property and Services

AGENCY: Postal Service.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Postal ServiceTM proposes to amend its 
regulations in order to implement the acquisition portions of its 
Transformation Plan (April 2000) and the similar recommendations of the 
President's Commission on the United States Postal Service (July 2003) 
as they relate to the acquisition of property and services in 
accordance with 39 U.S.C. 101, 401, 403, 404, and 410.

DATES: Written comments must be received on or before April 23, 2004.

ADDRESSES: Written comments should be mailed to Michael J. Harris, 
Supply Management Infrastructure, United States Postal Service, 475 
L'Enfant Plaza, SW., Room 4130, Washington, DC 20260-6201. Copies of 
all written comments will be available for inspection and photocopying 
between 9 a.m. and 4 p.m., Monday through Friday, at the Library, 
United States Postal Service, 475 L'Enfant Plaza, SW., Room 11800, 
Washington, DC 20260, (202) 268-2900.

FOR FURTHER INFORMATION, CONTACT: Michael J. Harris, (202) 268-3569.

SUPPLEMENTARY INFORMATION: The Board of Governors of the Postal Service 
has determined in the Transformation Plan that challenging times 
require the Postal Service to change its business model and practices 
to meet the challenge of the future in order to fulfill its charter to 
serve the American public. As part of that challenge, the Postal 
Service determined to ``revise purchasing regulations to allow for the 
acquisition of goods and services in a manner similar to that followed 
by businesses.'' Transformation Plan (April 2002), p. v.
    The President's Commission on the Postal Service also has 
recommended the Postal Service exercise the ``latitude to conduct its 
procurement with fewer substanti[ve] regulations'' pursuant to 
authority granted by Congress in the Postal Reorganization Act, Report 
(July 2003), p. 94. The Commission expressed its view that ``it is 
inappropriate to apply regulations * * * aimed at traditional agencies 
to a Federal entity required to finance its own multi-billion dollar 
operations.'' Rather, the public will benefit greatly if the Postal 
Service applies purchasing practices by leading corporate enterprises. 
In accordance with the Transformation Plan and the Commission's 
recommendations, the Postal Service proposes to replace all of its 
current purchasing regulations with those discussed here.

Section-by-Section Analysis

Section 601.100 Purchasing Policy

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

Section 601.101 Effective Date

    The effective date of the new regulations will be set at some point 
in the future after consideration is given to public comments and the 
final regulations have been published. Sufficient time will be provided 
to prospective suppliers and members of the public to become acquainted 
with the new regulations.

Section 601.102 Revocation of Prior Purchasing Regulations

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

[[Page 13787]]

Section 601.103 Applicability and Coverage

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

Section 601.104 Postal Purchasing Authority

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

Section 601.105 Business Relationships

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

Section 601.106 Canceling Business Relationships

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

Section 601.107 Alternative Dispute Resolution

    This section states the Postal Service's policy to try to resolve 
disputes through alternative dispute resolution procedures, if 
possible. Whenever a person disputes a Postal Service decision under 
these regulations, the Postal Service contracting officer must consider 
alternative dispute procedures as a means of resolving the disagreement 
with the supplier. Illustrations of various types of dispute resolution 
procedures are listed. No supplier, however, will be required to use 
such procedures if the supplier chooses not to do so.

Section 601.108 Ombudsman and Dispute Resolution

    This section states the Postal Service's policy that all 
disagreements that arise between suppliers or potential suppliers and 
the Postal Service regarding all aspects of solicitations, awards of 
contracts, and related matters should be resolved quickly and 
inexpensively, preferably through alternative dispute resolution, but 
if not, by an ombudsman appointed by the Postal Service. An expedited 
procedure is provided to resolve any such disagreements quickly and 
with finality. The ombudsman is expected to give a written decision 
within 30 to 60 days after receiving notice of a disagreement from a 
supplier or prospective supplier. Decisions of the ombudsman will be 
final and binding, with limited exceptions specified in this section of 
the regulations.
    This section also provides that it does not apply to disputes 
arising under the Contract Disputes Act or with respect to disputes 
about debarment, suspension, and ineligibility from government 
contracting under Sec.  601.113.

Section 601.109 Contract Claims and Procedures

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

Section 601.113 Debarment, Suspension, and Ineligibility

    This section sets forth the Postal Service's policies and practices 
regarding debarment, suspension, and ineligibility from contracting 
with the Postal Service and agencies of the Federal Government, and 
related matters. Debarment generally is considered for very serious 
offenses. Examples of such offenses are given in this section. 
Procedures to be followed by the Postal Service regarding debarment, 
suspension, and ineligibility are given in this section.
    Debarment is applicable to more serious instances of supplier 
misconduct as compared to a cessation of business under Sec.  601.106, 
which is akin to decisions by private organizations to choose not to do 
business with other private organizations for legitimate business 
reasons.
    In view of the matters discussed above, although exempt from the 
notice and comment requirements of the Administrative Procedure Act (5 
U.S.C. 553 (b)(c)) regarding proposed rulemaking by 39 U.S.C. 410 (a), 
the Postal Service invites comments on the following proposed 
amendments to part 601 of title 39, Code of Federal Regulations.

List of Subjects in 39 CFR Part 601

    Postal Service.

    1. Revise 601 to read as follows:

PART 601--PURCHASING OF PROPERTY AND SERVICES

Sec.
601.100 Purchasing policy.
601.101 Effective date.
601.102 Prior purchasing regulations.
601.103 Applicability and coverage.
601.104 Postal purchasing authority.
601.105 Business relationships.
601.106 Canceling business relationships.
601.107 Alternative dispute resolution.
601.108 Ombudsman and dispute resolution.
601.109 Contract claims and disputes.
601.110 Payment of claims.
601.111 Interest on claim amounts.
601.112 Review of adverse decisions.
601.113 Debarment, suspension, and ineligibility.

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


Sec.  601.100  Purchasing policy.

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


Sec.  601.101  Effective date.

    These regulations are effective on and after [reserved].


Sec.  601.102  Prior purchasing regulations.

    This part revokes, replaces, and supersedes all previous postal

[[Page 13788]]

purchasing regulations, including the Postal Contracting Manual, 
Procurement Manual, the Purchasing Manual (Issue 2 and Issue 3), and 
procurement handbooks, circulars, and instructions except as provided 
in Sec.  601.103.


Sec.  601.103  Applicability and coverage.

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


Sec.  601.104  Postal purchasing authority.

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


Sec.  601.105  Business relationships.

    A person or organization wishing to enjoy a continuing business 
relationship with the Postal Service in purchasing matters is expected 
to treat the Postal Service in the same manner as it would other valued 
customers of similar size and importance. The Postal Service reserves 
the right to cease business relations with a person or organization 
when that person or organization fails to meet reasonable business 
expectations of high quality, prompt service, and overall 
professionalism. In addition to terminating existing contracts for its 
convenience or for default, the Postal Service may cease or cancel a 
business relationship or it may undertake debarment, suspension, and 
ineligibility proceedings as provided in this part.


Sec.  601.106  Canceling business relationships.

    (a) General. The Postal Service may cancel its business 
relationship or decline to enter into a business relationship with a 
person or organization that does not meet reasonable business 
expectations or that does not provide a high level of confidence about 
current or future business relations. Typically, these sorts of 
unacceptable conduct and business practices will not rise to the level 
of unethical or criminal activities that could lead to the debarment, 
suspension, or ineligibility of a supplier. Unacceptable conduct or 
business practices include, but are not limited to:
    (1) Marginal or dilatory contract performance;
    (2) Failure to deliver on promises made in the course of dealings 
with the Postal Service;
    (3) Spurious, frivolous, or bad-faith litigation and/or claims;
    (4) Failure to respond promptly and completely to Postal Service 
inquiries and requests for information, without inadvertence or good 
reason;
    (5) Negotiating or dealing in bad faith with the Postal Service, 
including engaging in uncooperative practices;
    (6) Providing false or misleading information as to financial 
condition, ability to perform, or other material matters, including any 
aspect of performance on a contract; and
    (7) Engaging in other questionable or unprofessional conduct or 
business practices.
    (b) Notice. If the Postal Service elects to cancel its business 
relationship with a person or organization, the vice president, Supply 
Management, or his or her designee, will provide a written notice to 
the person or organization explaining:
    (1) The reasons for the cancellation;
    (2) the effective date of cancellation;
    (3) the scope of the cancellation;
    (4) the duration of the cancellation (this may be limited to a 
specified length of time or may extend indefinitely); and
    (5) the supplier's right to contest the cancellation.
    (c) Contesting cancellations. If a person or organization believes 
the cancellation is not merited, it may contest the matter in 
accordance with the ombudsman and supplier dispute-resolution 
procedures contained in this part, seek to resolve the matter by 
agreement through alternative dispute resolution, or both. The Postal 
Service may reconsider the matter and, if warranted, rescind or modify 
the cancellation.


Sec.  601.107  Alternative dispute resolution.

    It is the policy of the Postal Service to resolve purchasing 
disagreements through the use of alternative disputes resolution (ADR), 
whenever possible. The Postal Service supports and encourages the use 
of ADR as an effective way to understand, address, and resolve 
disagreements and conflicts. A person or organization disputing a 
Postal Service decision and the Postal Service contracting officer must 
consider the use of ADR to resolve a particular purchasing 
disagreement, regardless of the nature of the disagreement or when it 
occurs during the purchasing process. ADR methods include informal 
negotiation, mediation by a neutral third party, facilitation by the 
supplier ombudsman, and any other agreed-upon method.


Sec.  601.108  Ombudsman and dispute resolution.

    (a) Policy. From time to time, disagreements arise between 
suppliers, potential suppliers, and the Postal Service regarding 
solicitations, awards of contracts, and related matters. The Postal 
Service desires to resolve all such disagreements quickly and 
inexpensively in keeping with the regulations in this part, 39 U.S.C. 
410, and all other applicable public laws enacted by Congress. In 
resolving disagreements, non-Postal Service procurement rules or 
regulations and internal Postal Service purchasing guidelines will not 
apply or be taken into account.
    (b) Scope and applicability. In order to resolve disagreements and 
demands expeditiously, to reduce litigation expenses, inconvenience, 
and other costs for all parties, and to facilitate successful business 
relationships with Postal Service suppliers, the supplier community, 
and other persons, the following procedure is established as the sole 
and exclusive means to resolve disagreements arising in connection with 
awards of contracts for the purchase of property or services and all 
related matters. All disputes, protests, claims, disagreements, 
demands, or grievances of whatsoever nature (hereinafter 
``disagreements'') against the Postal Service arising in connection 
with the purchasing process, except claims that arise pursuant to a 
contract under the Contracts Disputes Act or claims concerning 
debarment, suspension, or ineligibility under Sec.  601.113 of this 
part, will be presented and resolved, with finality, under and in 
accordance with the sole and exclusive procedure established in this 
section.
    (c) A disagreement may be lodged by an organization or a person 
with respect to the cancellation of a business relationship, the terms 
of a Postal Service solicitation, the award of a contract, and/or 
related issues in regard to the purchasing process.
    (d) The disagreement must be lodged in writing and must state the 
factual circumstances relating to it, the remedy sought, and the 
rationale for the disagreement. Counsel is not required, but may be 
retained to assist in the disagreement. The person or organization 
lodging the disagreement must indicate in the disagreement

[[Page 13789]]

whether it is willing to attempt to resolve the matter through informal 
discussions, mediation, or another means of ADR.
    (e) The disagreement must be delivered to the ombudsman for the 
Postal Service within 15 calendar days of the time the grounds for the 
disagreement arose. The ombudsman may grant an extension of time to 
deliver a disagreement or to provide supporting information when 
warranted. Any request for an extension must set forth the reasons for 
the request, be made in writing, and be delivered to the ombudsman on 
or before the time to deliver a disagreement lapses. The address of the 
ombudsman is [reserved].
    (f) The ombudsman will promptly provide a copy of a disagreement to 
the contracting officer, who will promptly deliver a copy to other 
interested persons (i.e., actual or prospective offerors whose direct 
economic interests would be affected by the award of, or failure to 
award, the contract). The ombudsman will consider a disagreement and 
any response by other interested persons and appropriate Postal Service 
officials within a time frame established by the ombudsman. The 
ombudsman may also meet individually or jointly with the person or 
organization lodging the disagreement, other interested persons, and/or 
Postal Service officials, and may undertake other activities in order 
to obtain materials, information, or advice that may help to resolve 
the disagreement. The person or organization lodging the disagreement, 
other interested persons, or Postal Service officials must promptly 
provide all relevant, nonprivileged materials and other information 
requested by the ombudsman. After obtaining such information, 
materials, and advice as may be needed, the ombudsman will promptly 
issue a decision in writing resolving a disagreement and will deliver 
the decision to the person or organization lodging the disagreement, 
other interested persons, and appropriate Postal Service officials. If 
confidential or privileged material is needed in order to reach a 
decision, the ombudsman will notify the appropriate party to provide 
such material to the ombudsman only. The confidential material will be 
held in confidence by the ombudsman and will be returned to the party 
upon request at the conclusion of the matter.
    (g) In considering and in resolving a disagreement, the ombudsman 
will be guided by the regulations contained in this part and all 
applicable public laws enacted by Congress. Non-Postal Service 
procurement rules or regulations, revoked Postal Service regulations, 
and internal Postal Service purchasing guidelines will not apply or be 
taken into account in resolving disagreements.
    (h) A decision of the ombudsman will be final and binding on the 
person or organization lodging the disagreement, other interested 
persons, and the Postal Service. However, the person or organization 
that lodged the disagreement or another interested person may appeal 
the decision to a federal court with jurisdiction over such claims, but 
only on the grounds that the decision was procured by fraud or other 
criminal misconduct or was obtained in violation of the regulations 
contained in this part or an applicable public law enacted by Congress. 
Any such appeal must be filed with the clerk of court and a copy of the 
appeal must be delivered to the ombudsman within 15 calendar days of 
the date of receipt of the decision, or the appeal is waived.
    (i) It is intended that this procedure generally will resolve 
disagreements within approximately 30 to 60 days after the ombudsman 
receives the disagreement.


Sec.  601.109  Contract claims and disputes.

    (a) General. This section implements the Contract Disputes Act of 
1978, as amended (41 U.S.C. 601-613).
    (b) Policy. It is Postal Service policy to resolve contractual 
claims and disputes by mutual agreement at the level of an authorized 
contracting officer whenever possible. In addition, the Postal Service 
supports and encourages the use of alternative dispute resolution as an 
effective way to understand, address, and resolve conflicts with 
suppliers. Efforts to resolve differences should be made before the 
issuance of a final decision on a claim, and even when the supplier 
does not agree to use ADR, the contracting officer should consider 
holding informal discussions between the parties in order to resolve 
the conflict before the issuance of a final decision.
    (c) Contractor claim initiation. Supplier claims must be submitted 
in writing to the contracting officer for final decision. The 
contracting officer must document the contract file with evidence of 
the date of receipt of any submission that the contracting officer 
determines is a claim. Supplier claims must be submitted within 6 years 
after accrual of a claim unless the parties agreed to a shorter time 
period. The 6-year time period does not apply to contracts awarded 
prior to October 1, 1995.
    (d) Postal service claim initiation. The contracting officer must 
issue a written decision on any Postal Service claim against a 
supplier, within 6 years after accrual of a claim, unless the parties 
agreed in writing to a shorter time period. The 6-year time period does 
not apply to contracts awarded prior to October 1, 1995, or to a Postal 
Service claim based on a supplier claim involving fraud.
    (e) Certified claims. Each supplier claim exceeding $100,000 must 
be accompanied by a certification in accordance with the supplier's 
contract.
    (f) Decision and appeal. (1) Contracting Officer's authority. A 
contracting officer is authorized to decide or settle all claims 
arising under or relating to a contract subject to the Contract 
Disputes Act, except for:
    (i) Claims or disputes for penalties or forfeitures prescribed by 
statutes or regulation that a Federal agency administers; or
    (ii) Claims involving fraud.
    (2) Contracting Officer's decision. The contracting officer must 
review the facts pertinent to the claim, obtain assistance from 
assigned counsel and other advisors, and issue a final decision in 
writing. The decision must include a description of the claim or 
dispute with references to the pertinent contract provisions, a 
statement of the factual areas of agreement and disagreement, and a 
statement of the contracting officer's decision with supporting 
rationale.
    (3) Insufficient information. When the contracting officer cannot 
issue a decision because the supplier has not provided sufficient 
information, the contracting officer must promptly request the required 
information. Further failure to provide the requested information is an 
adequate reason to deny the claim.
    (4) Furnishing decisions. The contracting officer must furnish a 
copy of the decision to the supplier by Certified MailTM, 
return receipt requested, or by any other method that provides evidence 
of receipt.
    (5) Decisions on claims for $100,000 or less. If the supplier has 
asked for a decision within 60 days, the contracting officer must issue 
a final decision on a claim of $100,000 or less within 60 calendar days 
of its receipt. The supplier may consider the contracting officer's 
failure to issue a decision within the applicable time period as a 
denial of its claim, and may file a suit or appeal on the claim.
    (6) Decisions on certified claims. For certified claims over 
$100,000, the contracting officer must either issue a final decision 
within 60 calendar days of their receipt or notify the supplier within 
the 60-day period of the time

[[Page 13790]]

when a decision will be issued. The time period established must be 
reasonable, taking into account the size and complexity of the claim, 
the adequacy of the supplier's supporting data, and any other relevant 
factors.
    (7) Wording of decisions. The contracting officer's final decision 
must contain the following paragraph: ``This is the final decision of 
the contracting officer pursuant to the Contract Disputes Act of 1978 
and the clause of your contract entitled Claims and Disputes. You may 
appeal this decision to the Postal Service Board of Contract Appeals by 
mailing or otherwise furnishing written notice (preferably in 
triplicate) to the contracting officer within 90 days from the date you 
receive this decision. The notice should identify the contract by 
number, reference this decision, and indicate that an appeal is 
intended. Alternatively, you may bring an action directly in the United 
States Court of Federal Claims within 12 months from the date you 
receive this decision.
    (8) Additional wording for decisions of $50,000 or less. When the 
claim or claims denied total $50,000 or less, the contracting officer 
must add the following to the paragraph: ``In taking an appeal to the 
Board of Contract Appeals, you may include in your notice of appeal an 
election to proceed under the Board's small claims (expedited) 
procedure, which provides for a decision within approximately 120 days, 
or an election to proceed under the Board's accelerated procedure, 
which provides for a decision within approximately 180 days. If you do 
not make an election in the notice of appeal, you may do so by written 
notice anytime thereafter.''
    (9) Additional wording for decisions over $50,000 up to $100,000. 
When the claim or claims denied total $100,000 or less, but more than 
$50,000, the contracting officer must add the following to the 
paragraph: ``In taking an appeal to the Board of Contract Appeals, you 
may include in your notice of appeal an election to proceed under the 
Board's accelerated procedure, which provides for a decision within 
approximately 180 days. If you do not make an election in the notice of 
appeal, you may do so by written notice anytime thereafter.''


Sec.  601.110  Payment of claims.

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


Sec.  601.111  Interest on claim amounts.

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


Sec.  601.112  Review of adverse decisions.

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


Sec.  601.113  Debarment, suspension, and ineligibility.

    (a) General. Except as provided otherwise in this part, contracting 
officers may not solicit proposals from, award contracts to, or consent 
to subcontracts with debarred, suspended, or ineligible suppliers.
    (b) Definitions. (1) Affiliate. A business, organization, person, 
or individual connected by the fact that one controls or has the power 
to control the other or by the fact that a third party controls or has 
the power to control both. Factors such as common ownership, common 
management, and contractual relationships may be considered. Franchise 
agreements are not conclusive evidence of affiliation if the franchisee 
has a right to profit in proportion to its ownership and bears the risk 
of loss or failure.
    (2) Debarment. An exclusion from contracting and subcontracting for 
a reasonable, specified period of time commensurate with the 
seriousness of the offense, failure, or inadequacy of performance.
    (3) General Counsel. This includes the General Counsel's authorized 
representative.
    (4) Indictment. Indictment for a criminal offense. An information 
or other filing by competent authority charging a criminal offense is 
given the same effect as an indictment.
    (5) Ineligible. An exclusion from contracting and subcontracting by 
an entity other than the Postal Service under statutes, executive 
orders, or regulations, such as the Davis Bacon Act, the Service 
Contract Act, the Equal Employment Opportunity Acts, the Walsh-Healy 
Public Contracts Act, or the Environmental Protection Acts and related 
regulations or executive orders, to which the Postal Service is subject 
or has adopted as a matter of policy.
    (6) Judicial Officer. This includes the acting Judicial Officer.
    (7) Suspension. An exclusion from contracting and subcontracting 
for a reasonable period of time due to specified reasons or the 
pendency of a debarment proceeding.
    (8) Supplier. For the purposes of this part, a supplier is any 
individual, person, or other legal entity that:
    (i) Directly or indirectly (e.g., through an affiliate) submits 
offers for, is awarded, or reasonably may be expected to submit offers 
for or be awarded, a Postal Service contract, including a contract for 
carriage under Postal Service or commercial bills of lading, or a 
subcontract under a Postal Service contract; or
    (ii) Conducts business or reasonably may be expected to conduct 
business with the Postal Service as a subcontractor, an agent, or as a 
representative of another supplier.
    (c) Establishment and maintenance of lists. (1) The vice president, 
Supply Management, will establish, maintain, and distribute to 
purchasing offices a list of suppliers debarred or suspended by the 
Postal Service.
    (2) The General Services Administration (GSA) compiles and 
maintains a consolidated list of all persons and entities debarred, 
suspended, proposed for debarment, or declared ineligible by Federal 
agencies or the General Accounting Office. GSA posts the list on the 
Internet and publishes a hardcopy of the list.
    (3) The vice president, Supply Management, will notify the GSA of 
any Postal Service debarment, suspension, and change in the status of 
suppliers, including any of their affiliates, on the Postal Service 
list.
    (d) Treatment of suppliers on Postal Service or GSA lists. (1) 
Contracting officers will review the Postal Service and GSA lists 
before making a contract award.
    (2) Suppliers on the Postal Service list are excluded from 
receiving contracts and subcontracts, and contracting officers may not 
solicit proposals or quotations from, award contracts to, or, when a 
contract provides for such consent, consent to subcontracts with

[[Page 13791]]

such suppliers, unless the vice president, Supply Management, or his or 
her designee, after consultation with the General Counsel, has approved 
such action. Suppliers on the Postal Service list may not provide goods 
or services to other persons or entities for resale, in whole or part, 
to the Postal Service and such other persons or entities are obligated 
to obtain and review the Postal Service list in order to exclude 
debarred or suspended suppliers from performing any part of a Postal 
Service contract.
    (3) Suppliers on the GSA list are assigned a code by GSA which is 
related to the basis of ineligibility. The vice president, Supply 
Management, maintains a table describing the Postal Service treatment 
assigned to each code. Suppliers on the GSA list who are coded as 
ineligible are excluded from receiving contracts and subcontracts, and 
contracting officers may not solicit proposals or quotations from, 
award contracts to, or, when the contract provides for such consent, 
consent to subcontracts with such suppliers, unless the vice president, 
Supply Management, or designee, after consultation with the General 
Counsel, has approved such action. Suppliers on the GSA list may not 
provide goods or services to other persons or entities for resale, in 
whole or part, to the Postal Service and such other persons or entities 
are obligated to obtain and review the GSA list in order to exclude 
debarred or suspended suppliers from performing any part of a Postal 
Service contract.
    (4) Suppliers on the GSA list are assigned codes for which the 
table provides other Postal Service guidance, and are considered 
according to that guidance. When so indicated on the table, contracting 
officers must obtain additional information from the entity responsible 
for establishing the supplier's ineligibility, if such information is 
available.
    (5) The debarment, suspension, or ineligibility of a supplier does 
not, of itself, affect the rights and obligations of the parties to any 
valid, pre-existing contract. The Postal Service may terminate for 
default a contract with a supplier that is debarred, suspended, or 
determined to be ineligible. Except for service changes under mail 
transportation contracts, contracting officers may not add new work to 
the contract by supplemental agreement, by exercise of an option, or 
otherwise, except with the approval of the vice president, Supply 
Management, or designee.
    (e) Causes for debarment. The vice president, Supply Management, 
with the concurrence of the General Counsel, may debar a supplier, 
including its affiliates, for cause such as the following:
    (1) Conviction of a criminal offense incidental to obtaining or 
attempting to obtain contracts or subcontracts, or in the performance 
of a contract or subcontract.
    (2) Conviction under a Federal antitrust statute arising out of the 
submission of bids or proposals.
    (3) Commission of embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, tax 
evasion, or receiving stolen property.
    (4) Violation of a Postal Service contract so serious as to justify 
debarment, such as willful failure to perform a Postal Service contract 
in accordance with the specifications or within the time limit(s) 
provided in the contract; a record of failure to perform or of 
unsatisfactory performance in accordance with the terms of one or more 
Postal Service contracts occurring within a reasonable period of time 
preceding the determination to debar (except that failure to perform or 
unsatisfactory performance caused by acts beyond the control of the 
supplier may not be considered a basis for debarment); violation of a 
contractual provision against contingent fees; or acceptance of a 
contingent fee paid in violation of a contractual provision against 
contingent fees.
    (5) Any other cause of a serious and compelling nature that 
debarment is warranted.
    (i) The existence of a conviction in paragraph (e)(1) or (2) of 
this section may be established by proof of a conviction in a court of 
competent jurisdiction. If appeal taken from such conviction results in 
a reversal of the conviction, the debarment may be removed upon the 
request of the supplier, unless another cause or another basis for 
debarment exists.
    The existence of any of the other causes in paragraphs (e)(1), (2), 
(3), (4), or (5) of this section may be established by a preponderance 
of the evidence, either direct or indirect, in the judgment of the 
debarring official.
    (ii) The criminal, fraudulent, or improper conduct of an individual 
may be imputed to the firm with which he or she is or has been 
connected when an impropriety was committed. Likewise, when a firm is 
involved in criminal, fraudulent, or other improper conduct, any person 
who participated in, knew of, or had reason to know of the impropriety 
may be debarred.
    (iii) The fraudulent, criminal, or other improper conduct of one 
supplier participating in a joint venture or similar arrangement may be 
imputed to other participating suppliers if the conduct occurred for or 
on behalf of the joint venture or similar arrangement, or with the 
knowledge, approval, or acquiescence of the supplier. Acceptance of the 
benefits derived from the conduct will be evidence of such knowledge, 
approval, or acquiescence.
    (f) Mitigating factors. (1) The existence of any cause for 
debarment does not necessarily require that a supplier be debarred. The 
decision to debar is within the discretion of the vice president, 
Supply Management, and must be made in the best interest of the Postal 
Service. The following factors may be assessed in determining the 
seriousness of the offense, failure, or inadequacy of performance, and 
may be taken into account in deciding whether debarment is warranted:
    (i) Whether the supplier had established written standards of 
conduct and had published internal control systems at the time of the 
activity that constitutes cause for debarment or had adopted such 
procedures prior to any Postal Service investigation of the activity 
cited as a cause for debarment.
    (ii) Whether the supplier brought the activity cited as a cause for 
debarment to the attention of the Postal Service in a prompt, timely 
manner.
    (iii) Whether the supplier promptly and fully investigated the 
circumstances involving debarment and, if so, made the full results of 
the investigation available to appropriate officials of the Postal 
Service.
    (iv) Whether the supplier cooperated fully with the Postal Service 
during in its investigation into the matter.
    (v) Whether the supplier paid or agreed to pay all criminal, civil, 
and administrative liability and other costs arising out of the 
improper activity, including any investigative or administrative costs 
incurred by the Postal Service, and made or agreed to make full 
restitution.
    (vi) Whether the supplier took appropriate disciplinary action 
against the individual(s) responsible for the activity that could cause 
debarment.
    (vii) Whether the supplier implemented and/or agreed to implement 
remedial measures, including those identified by the Postal Service.
    (viii) Whether the supplier instituted and/or agreed to institute 
new and/or revised review and control procedures and ethics programs.
    (ix) Whether the supplier had adequate time to eliminate 
circumstances within the supplier's organization that could lead to 
debarment.

[[Page 13792]]

    (x) Whether the supplier's senior officers and mid-level management 
recognize and understand the seriousness of the misconduct giving rise 
to debarment.
    (2) The existence or nonexistence of mitigating factors or remedial 
measures such as those in paragraph (f)(1) of this section is not 
determinative whether or not a supplier should be debarred. If a cause 
for debarment exists, the supplier has the burden of demonstrating, to 
the satisfaction of the debarring official, that debarment is not 
warranted or necessary.
    (g) Period of debarment. (1) When an applicable statute, executive 
order, or controlling regulation of other agencies provides a specific 
period of debarment, that period applies. In other cases, debarment by 
the Postal Service should be for a reasonable, definite, stated period 
of time, commensurate with the seriousness of the offense or the 
failure or inadequacy of performance. Generally, a period of debarment 
should not exceed 3 years. When debarment for an additional period is 
deemed necessary, notice of the proposed additional period of debarment 
must be furnished to the supplier as in the case of original debarment.
    (2) Except as precluded by an applicable statute, executive order, 
or controlling regulation of another agency, debarment may be removed 
or the period may be reduced by the vice president, Supply Management, 
when requested by the debarred supplier and when the request is 
supported by a reasonable justification, such as newly discovered 
material evidence, reversal of a conviction, bona fide change of 
ownership or management, or the elimination of the causes for which 
debarment was imposed. The vice president, Supply Management, may, at 
his or her discretion, deny any request or refer it to the Judicial 
Officer for a hearing and for findings of fact, which the vice 
president, Supply Management, will consider when deciding the matter. 
When a debarment is removed or the debarment period is reduced, the 
vice president, Supply Management, must state in writing the reason(s) 
for the removal of the debarment or the reduction of the period of 
debarment.
    (h) Procedural requirements for debarment. (1) The vice president, 
Supply Management, will initiate a debarment proceeding by sending the 
supplier a written notice of proposed debarment. The notice will be 
served by sending it to the last known address of the supplier by 
Certified Mail, return receipt requested. A copy of the notice will be 
furnished to the Office of Inspector General. The notice will state 
that debarment is being considered; the reason(s) for the proposed 
debarment; the anticipated period of debarment and the proposed 
effective date; and, within 30 days of receipt of the notice, the 
supplier may submit, in person or in writing, or through a 
representative, information and argument in opposition to the proposed 
debarment. In the event a supplier does not submit information or 
argument in opposition to the proposed debarment to the vice president, 
Supply Management, within the time allowed, the debarment will become 
final with no further review or appeal.
    (2) If the proposed debarment is based on a conviction or civil 
judgment, the vice president, Supply Management, may decide whether 
debarment is merited based on the conviction or judgment, including any 
information received from the supplier. If the debarment is based on 
other circumstances or if there are questions regarding material facts, 
the vice president, Supply Management, may seek additional information 
from the supplier and/or other persons, and may request the Judicial 
Officer to hold a fact-finding hearing on such matters. The hearing 
will be governed by rules of procedure promulgated by the Judicial 
Officer. The vice president, Supply Management, may reject any findings 
of fact, in whole or in part, when they are clearly erroneous.
    (3) When the vice president, Supply Management, proposes to debar a 
supplier already debarred by another government agency for a period 
concurrent with such debarment, the debarment proceedings before the 
Postal Service may be based entirely upon the record of evidence, 
facts, and proceedings before the other agency, upon any additional 
facts the Postal Service deems relevant, or on the decision of another 
government agency. In such cases, the findings of facts by another 
other government agency may be considered as established, but, within 
30 days of the notice of proposed debarment, the supplier may submit, 
in person or in writing, or through a representative, any additional 
facts, information, or argument to the vice president, Supply 
Management, and/or the Judicial Officer and to explain why debarment by 
the Postal Service should not be imposed.
    (4) Questions of fact to be resolved by a hearing before the 
Judicial Office will be based on the preponderance of the evidence.
    (5) After consideration of the circumstances and any information 
and argument submitted by the supplier, the vice president, Supply 
Management, in consultation with the General Counsel, will issue a 
written decision regarding whether the supplier is debarred, and, if 
so, for the period of debarment. The decision will be mailed to the 
supplier by Certified Mail, return receipt requested. A copy of the 
decision will be furnished to the Office of the Inspector General. The 
decision will be final and binding, unless (a) the decision was 
procured by fraud or other criminal misconduct or (b) the decision was 
obtained in violation of the regulations contained in this part or an 
applicable public law enacted by Congress.
    (i) Causes for suspension. The vice president, Supply Management, 
may suspend any supplier, including any of its affiliates, if:
    (1) The supplier commits, is indicted for, or is convicted of fraud 
or a criminal offense incidental to obtaining, attempting to obtain, or 
performing a government contract, violates a Federal antitrust statute 
arising out of the submission of bids and proposals, or commits or 
engages in embezzlement, theft, forgery, bribery, falsification or 
destruction of records, receipt of stolen property, or any other 
offense indicating a lack of business integrity or business honesty or
    (2) If the Postal Service has notified a supplier of its proposed 
debarment under this Part.
    (j) Period of suspension. A suspension will not exceed 1 year in 
duration, except a suspension may be extended for reasonable periods of 
time beyond 1 year by the vice president, Supply Management. The 
termination of a suspension will not prejudice the Postal Service's 
position in any debarment proceeding. A suspension will be superceded 
by a decision rendered by the vice president, Supply Management, under 
paragraph (h)(5) of this section.
    (k) Procedural requirements for suspension. (1) The vice president, 
Supply Management, will notify a supplier of a suspension or an 
extension of a suspension and the reason(s) for the suspension or 
extension in writing sent to the supplier by Certified Mail, return 
receipt requested, within 10 days after the effective date of the 
suspension or extension. A copy of the notice will be furnished to the 
Office of the Inspector General.
    (2) The notice will state the reason(s) for the suspension or 
extension.
    (3) Within 30 days of notice of suspension or an extension, a 
supplier may submit to the vice president, Supply Management, in 
writing, any information or reason(s) the supplier believes makes a 
suspension or an extension inappropriate, and the vice

[[Page 13793]]

president, Supply Management, in consultation with the General Counsel, 
will consider the supplier's submission, and, in their discretion, may 
revoke a suspension or an extension of a suspension. If a suspension or 
extension is revoked, the revocation will be in writing and a copy of 
the revocation will be sent to the supplier by Certified Mail, return 
receipt requested. A copy of the revocation will be furnished to the 
Office of the Inspector General.

Neva Watson,
Attorney, Legislative.
[FR Doc. 04-6395 Filed 3-23-04; 8:45 am]
BILLING CODE 7710-12-U