The objective was to assess whether the Postal Service applied domestic preference requirements during the award of vehicle and vehicle parts contracts.
Since the 1930s, the Buy American Act has required federal agencies to provide preferential treatment in its purchases of domestic end-products. The Postal Service is not subject to the Buy American Act, but prescribes a provision and clause for domestic preference when awarding supply contracts and has issued guidance for evaluating proposals offering domestic and foreign end-products in.
A domestic end-product is an unmanufactured end product mined or produced in the U.S., or an end-product manufactured in the U.S. provided that its components mined, produced, or manufactured in the U.S. exceeds 50 percent of the total cost.
As of October 2017, there were 57 active contracts and orders awarded under Supply Management’s Vehicle Acquisition, Research and Development, and Parts Team during fiscal years 2011–2017. We reviewed all 57 contracts, including 13 vehicle contracts, five Next Generation Delivery Vehicle prototype contracts, 34 vehicle parts contracts, two research and development contracts, and three General Services Administration contracts totaling $1.2 billion. The Postal Service domestic preference provision and clause were not applicable to six of the 57 contracts because they were either General Service Administration contracts, research or development contracts, or there was an approved deviation letter.
What the OIG Found
The Postal Service properly applied domestic preference requirements during the award of vehicle and vehicle parts contracts. However, we identified the following:
- Supplying Principles and Practices (SP&P) do not contain guidance for including the domestic preference provision and clause in supply solicitations and contracts, as it does for construction contracts.
- A prescribed clause was not incorporated in a vehicle parts contracts.
- Opportunities exist to enhance the supplier domestic preference certification process for vehicle parts contracts.
Further, we identified one Indefinite Delivery, Definite Quantity vehicle contract that did not have orders for purchases, as required.
These issues occurred because the domestic preference provision and clause for supplies were not included in the guidance due to management oversight during the development and updating of the SP&P; the contracting officer (CO) did not appropriately negotiate the terms and conditions by adding the prescribed clause in the new agreement; and, the domestic preference certification process is not explicit in requiring supplier affirmation of end-product origins due to management’s assessment that the current process was adequate.
When the aforementioned prescribed clause is not included in the contract, the Postal Service may not be able to obtain and examine the supplier’s records, enforce privacy, wage laws, and incorporate the domestic preference clause. Additionally, when the domestic preference Provision 1-2 and Clause 1-9 are not included in the SP&P, COs may not include the provision and clause in the solicitation and contract. Further, if the Postal Service domestic preference certification process does not require suppliers to affirm the origin of their end-products, the Postal Service could miss the opportunity to evaluate domestic end-products in accordance with policy. There was an annual average total of $21 million in unsupported contract costs for the two-year period of November 2015 to November 2017.
What the OIG Recommended
We recommended management revise SP&P Section 2-36 to include Provision 1-2: Domestic Source Certificate – Supplies (March 2006), and Clause 1-9: Preference for Domestic Supplies (March 2006) and reiterate requirements for incorporating prescribed clauses in renewed contracts. We also recommended management revise the domestic preference certification process for proposals to make the supplier certification more explicit in affirming end-products are domestic, and ensure deviation letters are developed for identified exceptions.