USPS’s New “Supplying Principles and Practices” Manual – First Look
On May 1, 2006, the Postal Service issued its long-awaited new purchasing policy manual called the "Supplying Principles and Practices" (SPP). This article provides a first look at this new set of purchasing policies, which replaces the Interim Internal Purchasing Guidelines issued May 19, 2005.
Before we visit the rooms, some housekeeping notes. There is no description of what this document is to be called, other than its title. Thus, it's up for grabs what to call it: manual, guidance, guidelines, instructions, policy statement — you name it.
Although the manual (that's what I'm calling it) is 656 pages long, other than page numbers there are no organization aids. So while there are 9 distinct sections (not counting the solicitation and contract clauses), you have to count them on your fingers since the sections are not numbered. Similarly, within each section, there are various levels and sub-levels of instructions (called steps, tasks, and topics), but no numerical organization. My guess is that the lack of numbering was intentional so the manual would not appear to be "regulations."
Enforceability of the SPP manual is an open question. The manual's opening page declares it is "intended for internal use only" and is "advisory and illustrative." (SPP, p. 1.) But the manual undeniably represents the Postal Service's purchasing policies and is meant to be followed by purchasing officials. Indeed, the word "must" is used 1550 times — almost three times per page! As I have written in various other articles on the topic, a reviewing court would likely find that the SPP manual contains the Postal Service's de facto regulations or represents the agency's purchasing policies. In either case, the agency is obligated to follow them. See Misaddressed Reform: the U.S. Postal Service's New Procurement Guidelines, Washington Legal Foundation Legal Backgrounder, Vol. 21 No. 1, January 13, 2006.
The manual is broken down into "Supplying Principles" (8 pages) and "Supplying Practices" (the rest of the manual). The Supplying Principles represent the Postal Service's overarching purchasing principles. The Supplying Practices are intended to be the means by which the Supplying Principles will be fulfilled. The eight Supplying Principles are: Authority and Responsibility; Best Value; Ethics and Social Responsibility; People and Culture; Planning and Strategies; Statutory and Regulatory Requirements; Supplier Relations; and Technology.
One intriguing sub-principle, entitled "Performance Based Culture," describes how the performance of purchasing officials will be assessed and rewarded. USPS internal "clients" and purchasing officials will annually agree on specific "goals," which will be the "metrics" by which their performance will be measured and rewarded. To the extent "cost savings" is one of those measurable goals, contracting officers will have further incentive to seek cost reductions from suppliers.
Under the "Supplier Relations" principle, fairness toward suppliers — which was eliminated in the Interim Internal Purchasing Guidelines — is back in. Suppliers are considered "essential and valued business partners ... and the Postal Service is committed to treating its suppliers in a fair, objective, and business-like manner." (SPP, p. 8.) The Postal Service will "manage supplier relationships based on the potential impact the supplier's performance will have on the Postal Service's operational and financial position." (SPP, p. 9.) This means that suppliers will not necessarily receive equal treatment; those suppliers who have a greater impact on USPS meeting its mission will receive greater attention.
Consolidation of purchasing requirements figures prominently in the new manual. For example, in the "Supplier Base" sub-principle, the manual provides that "optimizing the supply base will include efforts to consolidate purchases among a smaller group of more capable and strategic suppliers to reduce costs (including transaction costs) and to improve quality and performance." (SPP, p. 9.) Other sections of the manual similarly talk about "leveraging" purchase requirements among fewer suppliers to obtain costs savings and efficiencies. At the same time, however, the manual also states that USPS "understands that a diverse supplier base is important from both a performance and business standpoint" and will strive to maintain a "supplier base that reflects the diversity of the supplier community." (Id.)
The manual is replete with business-like purchasing terminology. The term "strategic" is used 410 times; "risk," 361 times; "client," 311 times; "market," 308 times; and "supply chain," 97 times. Cost reduction also figures prominently, with the term "reduction" used 186 times; "auction," 162 times; and "lever[age]," 88 times.
Quadrant analysis is used heavily throughout the manual. As shown in the accompanying chart, purchases are grouped into a quadrant, depending on whether the purchase is a standard or custom product/service, and whether USPS's need for it is core or noncore. Those products/services that are considered "standard" items and not "core" needs, are purchased like commodities, with price reduction pursued aggressively. By contrast, when USPS seeks to purchase products/services that are customized and are core to USPS's business needs, USPS will be looking for innovation and stronger working relationships with these key suppliers.
For example, transportation purchases are considered to be "Quadrant IV — Core/Standard Purchases." These services are essential to USPS business needs, but the service itself is considered standard, with many different sources of supply. In this quadrant, the Postal Service "must maximize commercial advantage (e.g., aggressively pursue lower prices and award contracts to suppliers with successful past performance and on-time deliveries)." (SPP, p. 20.) Consolidation and flexibility are key considerations:
"[USPS] in this quadrant should look for opportunities to centralize and concentrate purchasing and realize savings through leveraging spend. The Purchase/SCM Team must regularly reassess the market and maintain flexibility (e.g., be willing to switch suppliers frequently, although the products/services remain the same)."
Thus, in theory at least, transportation suppliers are subject to consolidation efforts and market reassessments to keep costs down. However, because transportation services are also "core" services, USPS purchasing officials must work closely with their internal client to ensure that the services being purchased will meet these core needs.
One completely new area is a section on the use of reverse auctions. Reverse auctions are to be considered when price is the key selection criteria. The manual warns, however, that reverse auctions depend on supplier support and keen competitive interest to work. Lack of competition or supplier interest can actually result in higher prices and alienated suppliers. Thus, the manual advises procuring officials to ensure that pricing is not the only driver for contract award. (SPP, pp. 184, 234.) Reverse auctions are also considered suitable only for "Standard/Core Purchases" of commodity type items. (SPP, p. 187.)
The Supplying Principles and Practices manual is not published in hard copy, but may be downloaded in pdf format from USPS's website (www.usps.com) or from our website.
