[Federal Register Volume 69, Number 160 (Thursday, August 19, 2004)]
[Rules and Regulations]
[Pages 51364-51368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18772]


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POSTAL SERVICE

39 CFR Part 601


Issue 3 of the Purchasing Manual; Incorporation by Reference

AGENCY: Postal Service.

ACTION: Final rule.

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SUMMARY: The Postal Service announces the publication of Issue 3 of the 
Postal Service Purchasing Manual. Issue 3 supersedes previous editions 
of the Purchasing Manual, and is incorporated by reference in the Code 
of Federal Regulations.

EFFECTIVE DATE: This final rule is effective on August 19, 2004. The 
incorporation by reference of the Purchasing Manual, Issue 3 is 
approved by the Director of the Federal Register as of August 19, 2004.

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

SUPPLEMENTARY INFORMATION: Issue 1 of the Purchasing Manual was issued 
on January 31, 1997, as the successor to former USPS Publication 41, 
the U.S.

[[Page 51365]]

Postal Service Procurement Manual. At that time, purchasing 
organizations were advised that, pending the updating of contract-
writing systems, the purchasing organizations could determine, subject 
to specific limitations, when and to what extent they may adopt its 
policies and procedures. The Purchasing Manual then became fully 
effective on January 27, 2000.
    Subsequently, updated editions of the Purchasing Manual were issued 
on January 31, 2002 (Issue 2), and December 25, 2003 (Issue 3). Pending 
the updating of purchasing support systems for consistency with the new 
policies contained in Issue 3, purchasing organizations were advised 
that they might adopt the policies and procedures contained in Issue 3 
immediately, or might continue to follow the policies and procedures 
contained in Issue 2. If a purchasing organization adopted Issue 3 
policies and procedures for any category or categories of purchases, it 
would be required to use those policies and procedures consistently for 
that category or categories, and not revert to previous policies and 
procedures. Contracting officers were required to ensure that 
solicitations and other purchasing documents made prospective offerors 
fully aware of the authority (Issue 3 or Issue 2, as revised through 
April 18, 2002) pursuant to which an individual purchase was made. 
Particular care was required that previous versions of provisions and 
clauses were not used in purchases made under the policies and 
procedures of Issue 3, and vice versa. To date, the Postal Service has 
not formally transitioned from PM Issue 2 to PM Issue 3 primarily 
because of problems in updating purchasing support systems for 
consistency with the new policies contained in Issue 3. The end of this 
transition period will be announced in the Federal Register.
    The Purchasing Manual is published and available to all users on 
the World Wide Web at http://www.usps.com/business, and contains the 
Postal Service's purchasing policy.
    It will be noted that on March 24, 2004 (69 FR 13786), the Postal 
Service published a proposed rule in the Federal Register entitled 
``Purchasing of Property and Services''. In this document, the Postal 
Service proposed 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. That earlier, ongoing rulemaking is proceeding 
separately and independently, and should not be considered to be a part 
of this current notice.
    On June 28, 2004 (69 FR 36018), the Postal Service published in the 
Federal Register a detailed discussion of the policy changes and other 
major features contained in Issue 1 of the Purchasing Manual. 
Subsequently, on July 29, 2004 (69 FR 45270) the Postal Service 
published a detailed discussion of the policy changes and other major 
features contained in Issue 2 of the Purchasing Manual. The following 
is a similar discussion of the most significant changes in Postal 
Service purchasing policy contained in Issue 3.

Purchasing Manual Issue 3--Major Policy Changes

    Overview: Issue 3 of the Postal Service Purchasing Manual continues 
the efforts of the Postal Service (1) to reflect the best practices of 
the private and public sectors, (2) to streamline the purchasing 
process and ensure it concentrates on furthering the business and 
competitive interests of the Postal Service, and (3) to provide a 
policy structure that furthers the Postal Service's use of supply chain 
management business practices. Issue 3 also contains the cumulative 
changes made to Issue 2 of the Purchasing Manual between January 31, 
2002, and December 25, 2003. A discussion of all significant changes 
contained in Issue 3 is available to all users on the World Wide Web at 
http://www.usps.com/business.
    Organizational Changes: The restructuring of Purchasing and 
Materials into Supply Management has resulted in numerous changes in 
organization names (i.e., Purchasing and Materials is now called Supply 
Management) and managerial titles and authorities. These changes are 
reflected throughout Purchasing Manual Issue 3.

Purchasing Manual Issue 3--Other Significant Changes

    Chapter 1, Authority, Responsibility and Policy: 1.1.2.b Supply 
Management Policy Committee. The Supply Management Policy Committee 
(SMPC) replaces the Purchasing Policy Committee. SMPC membership has 
changed to reflect the SM organization.
    1.4.1.b.4 Required Approvals has been revised to state that the 
Vice President (VP), Supply Management's (SM) approval of a proposed 
contract award or modification serves as the delegation of authority 
required by PM 1.4.2.d Actions Exceeding a Contracting Officer's 
Delegated Authority.
    1.4.2.c Delegations of Authority has been revised to state that, 
unless specifically limited in his or her letter of delegation, a 
contracting officer may award a contract regardless of commodity group.
    1.4.4.a.2 Appointment Authority has been revised to state that 
contracting officer appointment officials must keep a record of all 
letters of delegation, certificates of appointment, and documentation 
concerning a contracting officer's education, experience and training 
related to the individual CO's level.
    1.4.4.b.3 Qualifications has been revised in a number of areas to 
(1) specify that a certification as a certified purchase manager from 
the Institute of Supply Management meets the certification requirement 
for level I contracting officer; and (2) establish new training 
requirements.
    Chapter 2, Purchase Planning: 2.1.3.b.2 Responsibilities (Purchase 
Planning) has been revised to state that the purchase team has the 
responsibility to maintain and apply the cost and pricing models in 
order to optimize the total cost of ownership, and in 2.1.3.b.3, 
transportation planning matters have been added as areas in which 
materials professionals may offer expertise.
    2.1.5.b Elements (Individual Purchase Plans) has been revised to 
add two elements (subparagraphs 7 and 21) that a purchase plan should 
include.
    2.1.6.c.4 Reviews and Approvals (Noncompetitive Purchase Method) 
has been revised to clarify approval authority for noncompetitive 
purchases.
    2.1.7.b.3 Developing Strategies (Supplier Selection Strategy) has 
been revised to state that purchase teams should take care to ensure 
that solicitations do not include unnecessary minimum standards, 
mandatory feature call outs or other inappropriate limitations on 
supplier selection.
    2.2.1.c Clauses (Quality Requirements). This paragraph has been 
revised to discuss the use of new Clauses 2-1, Inspection and 
Acceptance and 2-2, Quality Management System. These clauses replace 
previous Clauses 2-1, Inspection and Acceptance--Supplies, 2-2, Quality 
Assurance I--Supplies, 2-3, Quality Assurance II--Supplies, 2-24, 
Inspection and Acceptance--Supplies--Nonfixed Price, 2-48, Inspection 
and Acceptance--Services, and 2-49, Quality Assurance--Services, all of 
which have been deleted.
    2.2.5.f F.O.B. Points (Delivery and Acceptance). Subparagraph 1 has 
been revised to state that solicitations should require offerors to 
include both f.o.b. origin and destination prices for transportation 
analysis and that such analysis is available from field material

[[Page 51366]]

management specialists and Headquarters. Subparagraph 3 has been 
revised to add shipment base points to the areas that may be specified 
as f.o.b. destination.
    2.2.10.c Sharing Savings (Value Engineering). This paragraph has 
been revised to change the sharing scheme to one that is based on a 
negotiated arrangement contained in the contract. Paragraph 2.2.10.e 
Evaluation has been revised to for clarity, and Clause 2-22, Value 
Engineering, has been revised to reflect these changes.
    2.2.11 Price Reduction. This new section states that when they plan 
to award strategically-sourced or long-term contracts, purchase teams 
must consider the inclusion of new Clauses 2-48, Most Favored Customer 
Pricing and 2-49, Cost/Price Reduction. The new clauses are included in 
Appendix B.
    2.2.12 Investment Recovery. This new section states that an 
effective and efficient investment recovery plan can further the Postal 
Service's supply chain management goals, and directs purchase teams to 
include new Provision 2-8, Investment Recovery, in solicitations when 
it is determined that investment recovery will play a significant role 
in the overall success of the purchase. The new provision is included 
in Appendix A.
    2.4.4.h Provision (Cost-Reimbursement Contracts). This new 
paragraph requires purchase teams to include new Provision 2-9, 
Accounting System Guidelines--Cost Type Contracts, in all solicitations 
for cost-type contracts the estimated value of which is $100,000 or 
more. The provision requires pre-award review and approval of the 
potential supplier's cost accounting system by the Postal Service's 
Inspector General or representative, and delineates the elements 
required in such accounting systems. The new provision is included in 
Appendix A.
    Chapter 3, Supplier Relations: 3.3.3.b Procurement Lists (Workshops 
for People who are Blind or Severely Disabled) has been revised to 
state that additions and deletions to the Procurement List are 
published in the Federal Register as they occur.
    3.4.5 Department of Veterans Affairs has been revised to provide 
the proper name of this department.
    3.7 Debarment, Suspension and Ineligibility. This subchapter has 
been revised extensively. Some of the highlights of the revision are:
    3.7.1.a Definitions contains a new set of relevant definitions.
    3.7.1.c Treatment of Suppliers on the Postal Service and GSA List 
has been rewritten and now states that suppliers proposed for debarment 
are treated the same as those which are debarred or suspended and 
excluded from receiving contracts unless other treatment is approved by 
the Vice President, Supply Management. In addition, the VP, SM, may 
direct the termination for default of any contracts with a supplier 
which has been debarred, suspended or made ineligible.
    3.7.1.d Causes for Debarment has been rewritten to add to the 
causes for which a supplier may be debarred, and to state that the 
existence for several of the causes for debarment will be established 
by a preponderance of the evidence.
    3.7.1.e Mitigating Factors is a new section, and contains a series 
of factors the VP, SM, should consider when deciding whether debarment 
is warranted.
    3.7.1.f Period of Debarment has been revised in paragraph 2., to 
state that the VP, SM, may refer requests for removal from debarment or 
a reduction of the period of debarment to the Judicial Officer for a 
hearing and findings of fact which the VP will then consider.
    3.7.1.g Procedural Requirements for Debarment has been revised to 
state that debarment decisions are made based on the preponderance of 
the evidence, and that, if there are questions regarding material 
facts, that the VP, SM, may (1) seek additional information or (2) 
request the Judicial Officer to hold fact-finding hearings on the 
matter. The VP, SM, may reject findings when they are deemed arbitrary 
or capricious or clearly erroneous.
    3.7.1.m Solicitation Provision is a new section that requires that 
offerors complete a new paragraph e. of Provision 4-3, Representations 
and Certifications, when the contract value is expected to exceed 
$100,000.
    Chapter 4, Purchasing: 4.2.2.e Solicitation Provisions. This 
paragraph has been revised to state (1) that when a purchase team 
decides to modify, supplement or add to Provision 4-1, Standard 
Solicitation Provisions, or paragraphs b. and c. of Provision 4-2, 
Evaluation, counsel need not be consulted if a provision already 
contained in Appendix A, Solicitations, will replace similar subject 
matter in Provision 4-1 or b. and c. of Provision 4-2; and (2) that 
counsel should be consulted when the evaluation scheme to be used in 
Provision 4-2 is unusual, particularly complex, or there are other 
circumstances under which such consultation is advisable. Similar 
changes are reflected in A.2.1, Solicitation Contents in Appendix A, 
Solicitations.
    4.2.5.d.3 Documentation (Best Value Determinations) has been 
revised to state that this documentation should include the extent and 
result of any discussions with the supplier awarded the contract and 
any other offerors.
    4.2.7.a Clause 4-1 General Terms and Conditions has been revised to 
state that replacing subject matter contained in this clause with the 
text of a PM clause addressing the same subject matter does not require 
consultation with counsel. Similar changes are reflected in B.2.1 in 
Appendix B, Contract Clauses.
    4.2.7.b Clause 4-2 Contract Terms and Conditions Required To 
Implement Policies, Statutes, or Executive Orders has been revised to 
state (1) that neither this clause nor any of the clauses added by 
reference may be modified unless a deviation has been reviewed and 
approved by an individual at a higher level than the contracting 
officer who holds deviation approval authority; and (2) that any 
changes to paragraph b of this clause (Examination of Records) must be 
reviewed by assigned counsel and the Office of the Inspector General 
before a related deviation request is submitted.
    4.2.7.d Modifying Clauses has been revised to agree with the 
revision to 4.2.7.a and 4.2.7.b, above.
    4.5.5.a.6 Definitions (Information Technology) has been revised to 
provide a new definition of this term.
    4.5.5.b.6 Security Considerations (Information Technology) has been 
revised to state that purchase teams ensure that specifications or 
statements of work for IT purchases address the security aspects of the 
Business Impact Assessment (BIA).
    Chapter 5, Contract Pricing: 5.2.12.d Educational Institutions has 
been revised to reference the new Office of Management and Budget 
Circular (OMB Circular A-21) that establishes the indirect cost rates 
for cost-reimbursement contracts with educational institutions and to 
provide a new source for the Directory of Federal Contract Audit 
Offices.
    Chapter 6, Contract Administration: 6.1.2.a.7 Contracting Officer 
Responsibilities (Contract Administration Functions) has been revised 
to state that, when appropriate, the contracting officer is responsible 
for including in the contract file the business reason for a particular 
action.
    Chapter 7, Bonds, Insurance and Taxes: 7.1.8.g.1 Contract 
Modifications (Execution of Bonds) has been revised to state that, when 
a contract modification increases the contract price, the supplier and 
the surety must execute a consent of surety and increase the penal 
amount, and submit it to the contracting officer.

[[Page 51367]]

    Chapter 8, Patents and Data Rights: No significant changes have 
been made in this Chapter.
    Chapter 9, Labor Policies: 9.4.5.l Liquidated Damages has been 
revised to state that, under certain circumstances, when the VP, SM, 
finds that an assessment of liquidated damages is incorrect, the VP may 
adjust the damages, or release the supplier, lessor or subcontractor 
from liability when the amount of damages is $500 or less.
    9.7.2.e Contracts With a Religious Corporation, Association, or 
Educational Institution or Society (Exempt Contracts) is a new 
paragraph that states that, when contracting with these types of 
organizations, it is not a violation of Section 202 of Executive Order 
11246 to employ individuals of a certain religion to perform work 
connected with the carrying-on of such an entity. Previous paragraphs 
9.7.2.e and 9.7.2.f are renumbered as 9.7.2.f and 9.7.2.g.
    9.10 Veterans has been revised as a result of the passage of the 
Veterans' Employment Opportunities Act and the Secretary of Labor's 
related implementing regulations. Clause 9-14 Affirmative Action for 
Special Disabled Veterans, Veterans of the Vietnam Era, and Other 
Eligible Veterans has been similarly revised.
    Appendix A, Solicitations: A.2.1 Solicitation Contents has been 
revised along the lines discussed in 4.2.2.e, above.
    Provision 2-8 Investment Recovery is a new provision and has been 
added as discussed in 2.2.12 above.
    Provision 2-9 Accounting System Guidelines--Cost Type Contracts is 
a new provision that has been added as discussed in 2.4.4.h above.
    Provision 4-1 Standard Solicitation Provisions paragraph b., Period 
for Acceptance of Offers, has been deleted.
    Provision 4-3 Representations and Certifications has been revised 
to include a new paragraph e (Certification Regarding Debarment, 
Proposed Debarment, and Other Matters) as discussed in 3.7 above.
    Appendix B, Contract Clauses: B.2.1 Clause 4-1 General Terms and 
Conditions has been revised along the lines discussed in 4.2.7.d, 
above.
    B.2.2 Clause 4-2 Contract Terms and Conditions Required To 
Implement Policies, Statutes, or Executive Orders has been revised 
along the lines discussed in 4.2.7.a and d, above.
    Clauses 2-1 Inspection and Acceptance and 2-2 Quality Management 
System. As discussed in 2.2.1.c, above, this clause and Clause 2-2 
replace previous Clauses 2-1, 2-2, 2-3, 2-24, 2-48 and 2-49.
    Clause 2-9 Definition of Delivery Terms and Supplier's 
Responsibilities has been revised for clarity.
    Clause 2-22 Value Engineering Incentive has been revised along the 
lines of 2.2.10.c above.
    Clauses 2-48 Most Favored Customer Pricing and 2-49, Cost/Price 
Reduction are two new clauses as discussed in 2.2.11 above.
    Clause 3-2 Participation of Small, Minority and Woman-Owned 
Businesses has been revised in b.(1) by stating that showing the amount 
of money paid to subcontractors during the reporting period is one of 
the methods by which suppliers report subcontracting activity.
    Clause 4-1 General Terms and Conditions has been revised by adding 
new c.1.(e) which states that the delivery or performance schedule is 
one of the contractual elements the contracting officer may change 
under the Changes paragraph of this clause. Paragraph m. has also been 
revised to state that the debarment, suspension, or ineligibility of a 
supplier, its partners, officers, or principal owners may constitute an 
act of default under the contract, and that act will not be subject to 
notice and cure pursuant to any termination of default provision of the 
contract.
    Clause 4-2 Contract Terms and Conditions Required To Implement 
Policies, Statutes, or Executive Orders. Paragraph b., Examination of 
Records, has been revised. In addition, no changes may be made to this 
paragraph before (1) consultation with assigned counsel and the Office 
of the Inspector General and (2) a deviation has been reviewed and 
approved by a higher level than the contracting officer who holds 
deviation approval authority.
    Clause 4-5 Inspection of Professional Services has been revised by 
deleting the final sentence.
    Clause 4-14 Software Development Warranty has been revised for 
clarity.
    Clause 7-5 Errors and Omissions has been revised for clarity.
    Clause 8-1 Patent Rights has been revised by removing the reference 
to Form 7398, Report of Inventions and Subcontracts (this form is 
obsolete) and by stating that the reports required under this clause 
must be in a form acceptable to the contracting officer.
    Clause 9-14 Affirmative Action for Special Disabled Veterans, 
Veterans of the Vietnam Era, and Other Eligible Veterans has been 
revised to reflect the changes discussed in 9.10 above.
    Appendices D Rules of Practice in Proceedings Relative to Debarment 
and Suspension From Contracting and E, Rules of Practice Before the 
Postal Service Board of Contract Appeals: These appendices have been 
revised to correct obsolete mailing addresses.

List of Subjects in 39 CFR Part 601

    Government procurement, Postal Service, Incorporation by reference.


0
In view of the considerations discussed above, the Postal Service 
hereby amends 39 CFR as follows:
0
1. The authority citation for part 601 continues to read as follows:

    Authority: 5 U.S.C. 552(a); 39 U.S.C. 401, 404, 410, 411, 2008, 
5001-5605.


0
2. Section 601.100 is revised to read as follows:


Sec.  601.100  Purchasing Manual; incorporation by reference.

    (a) Section 552(a) of Title 5, U.S.C., relating to public 
information requirements of the Administrative Procedure Act, provides 
in pertinent part that ``* * * matter reasonably available to the class 
of persons affected thereby is deemed published in the Federal Register 
when incorporated by reference therein with the approval of the 
Director of the Federal Register.'' In conformity with that provision, 
with 39 U.S.C. section 410(b)(1), and as provided in this part, the 
U.S. Postal Service hereby incorporates by reference its Purchasing 
Manual (PM), Issue 3, dated December 25, 2003. The Director of the 
Federal Register approves this incorporation by reference in accordance 
with 5 U.S.C. 552(a) and 1 CFR part 51. The PM is available for 
examination on the World-Wide Web at http://www.usps.com/business. You 
may inspect a copy at the U.S. Postal Service Library, 475 L'Enfant 
Plaza West SW., Washington, DC 20260-1641, or at the National Archives 
and Records Administration (NARA). For information on the availability 
of this material at NARA, call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
    (b) The current Issue of the PM is incorporated by reference in 
paragraph (a) of this section. Successive issues of the PM are listed 
in the following table:

------------------------------------------------------------------------
          Purchasing manual                     Date of issuance
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Issue 1..............................  January 31, 1997.
Issue 2..............................  January 31, 2002.
Issue 3..............................  December 25, 2003.
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0
3. Section 601.101 is revised to read as follows:

[[Page 51368]]

Sec.  601.101  Effective date.

    The provisions of the Purchasing Manual Issue 3, effective December 
25, 2003, are applicable with respect to all covered purchasing 
activities of the Postal Service.

Stanley F. Mires,
Chief Counsel, Legislative.
[FR Doc. 04-18772 Filed 8-18-04; 8:45 am]
BILLING CODE 7710-12-P