Defective Pricing - Postal Service Style

The U.S. Postal Service (USPS) does not require its contractors to certify that cost or pricing data is current, complete and accurate. The USPS reasons that if it required contractors to certify their cost or pricing data, contract costs will increase and that increase will be passed on to the Service.

The USPS Office of Inspector General (IG) doesn't think too highly of that policy. The IG wants the Service to change its policy to require supplies to certify their cost or pricing data when submitting proposals.

Prior to 2005, the USPS did require certification. In May of that year, the Postal Service replaced its Purchasing Manual, which had the effect of law, with the Supplying Principles and Practices, which are nonbinding guidelines intended for internal use. Because the guidelines are nonbinding, the Christian Doctrine does not apply. The Christian Doctrine only apples to laws that are required to be followed. The Christian Doctrine states that a mandatory clause involving important public policy will be read into a Government contract by operation of law even if the clause is left out of the contract.

The IG found that the Services purchasing policies have negatively impacted the prosecution of defective pricing cases. The IG noted that the U.S. Attorney's offices did not criminally prosecute supplies for submitting defective cost or pricing data in contracting actions valued at about $36 million and Special Agents within its own department did not pursue litigation for a supplier with an average annual spend of $122 million. Because of the lack of certification, prosecutors have a harder time proving fraud when defective data are knowingly submitted by a supplier.

As stated earlier, the IG recommended that the USPS begin requiring certification. The USPS disagreed stating that its interests are fully protected under existing policies and procedures. We probably have not heard the end of this matter.