Interim Internal Purchasing Guidelines > 3 Supplier Relations > 3.2 Supplier Diversity

3.2 Supplier Diversity

3.2.1 General

3.2.1.a General. The Postal Service focuses on the entire business community for quality supplies and services that meet or exceed operational needs. Small, minority, and woman-owned businesses are therefore an important part of the Postal Service's goal to establish and maintain a strong supplier base that reflects the diversity of the American supplier community.

3.2.1.b Supplier Diversity. Supplier diversity is the proactive business process that seeks to provide suppliers with equal access to purchasing opportunities. It promotes supplier participation reflective of the American supplier community and encourages economic development. Effective supplier diversity ensures that no suppliers are excluded from competition on the basis of race, color, religion, sex, age or national origin.

3.2.1.c Contracting Officers. Contracting officers must manage supplier diversity as a strategic business initiative vital to the success of the Postal Service. Contracting officers must ensure that:

1. The supplier base reflects the diversity of the American supplier community, and

2. The Postal Service is taking full advantage of the entrepreneurial spirit, capabilities, competitive pricing, new processes and products, and innovations offered by small, minority, and woman-owned businesses.

3.2.1.d Definitions

1. Small business. A business, including an affiliate (see 3.7.1.a.1), that is independently owned and operated, is not dominant in producing or performing the supplies or services being purchased, and has no more than 500 employees, unless a different size standard has been established by the Small Business Administration (see 13 CFR 121, particularly for different size standards for airline, railroad, and construction companies). For subcontracts of $50,000 or less, a subcontractor having no more than 500 employees qualifies as a small business without regard to other factors.

2. Affiliates. Businesses connected by the fact that one controls or has the power to control the other, or a third party controls or has the power to control both. Factors such as common ownership, common management, and contractual relationships must be considered. Franchise agreements are not considered evidence of affiliation if the franchisee has a right to profit in proportion to its ownership and bears the risk of loss or failure.

3. Dominant. Being a controlling or major influence in a market in which a number of businesses are primarily engaged. Factors such as business volume; number of employees; financial resources; competitiveness; ownership or control of materials, processes, patents, and license agreements; facilities; sales territory; and nature of the business must be considered.

4. Minority business. A minority business is a concern that is at least 51 percent owned by, and whose management and daily business operations are controlled by, one or more members of a socially and economically disadvantaged minority group, namely U.S. citizens who are Black Americans, Hispanic Americans, Native Americans, or Asian Americans. (Native Americans are American Indians, Eskimos, Aleuts, and Native Hawaiians. Asian Americans are U.S. citizens whose origins are Japanese, Chinese, Filipino, Vietnamese, Korean, Samoan, Laotian, Kampuchea (Cambodian), Taiwanese, in the U.S. Trust Territories of the Pacific Islands or in the Indian subcontinent.)

5. Woman-owned business. A concern at least 51 percent of which is owned by a woman (or women) who is a U.S. citizen, controls the firm by exercising the power to make policy decisions, and operates the business by being actively involved in day-to-day management.

6. Number of employees. Average employment (including domestic and foreign affiliates), based on the number of people employed (whether full-time, part-time, or temporary), during each pay period of the preceding 12 months, or, if the business has been in existence less than 12 months, during each pay period of its existence.

3.2.2 Sourcing

3.2.2.a Definition. Sourcing is the process of identifying and assessing the qualifications, capabilities, and performance of suppliers. There are two types of sourcing. The first is performed to locate suppliers for a specific purchase. The second, presourcing, is performed to locate suppliers for anticipated purchases. Sourcing should not be confused with prequalification (see 3.5.2), which is a process whereby a supplier's ability to meet specific Postal Service requirements is evaluated.

3.2.2.b Responsibilities

1. Purchase Teams. Purchase teams must ensure that market research is performed in a business-like and objective manner.

2. Contracting Officers. The contracting officer brings to the purchase team knowledge of a diverse supplier base. This knowledge requires continuous, proactive market research by all contracting officers and purchasing organizations to create a strong supplier base that will promote the spirit and intent of this section, chapter, and manual.

3.2.2.c Assistance. Purchase teams should contact Supply Chain Management Strategies for sourcing assistance. The Small Business Administration and the Department of Commerce's Minority Business Development Agency and affiliated Regional Minority Purchasing Councils can also help in identifying small, minority, and woman-owned businesses for a specific purchase, and can provide information on their qualifications and capabilities.

3.2.3 Subcontracting with Small, Minority, and Woman-owned Businesses

3.2.3.a General. So that the Postal Service may fully realize the benefit of a supplier base that reflects the diversity of the American supplier community, suppliers are encouraged to use small, minority, and woman-owned businesses as subcontractors to the maximum extent consistent with effective contract performance.

3.2.3.b Reports. Each supplier awarded a contract valued at $500,000 or more must submit calendar-quarter reports (purchase teams may require more frequent submittals) on its subcontracting activity for that contract. Three types of reporting methods may be used: (1) reports showing direct subcontract awards awarded under the Postal Service contract; (2) reports showing subcontracting activity that is allocable to the Postal Service contract using generally accepted accounting practices; or (3) reports that are a combination of the two. During discussions (see 4.2.5.c), the purchase team and the supplier must negotiate and agree to which type of report will be used.

3.2.3.c Subcontracting Plans. Plans which specifically address subcontracting with small, minority, and woman-owned businesses are required for all contracts valued at $1 million or more. Unless formally waived by the contracting officer for urgent and compelling business reasons, or for the reasons addressed in 3.2.3.d.1.(b), suppliers must submit the plans with their proposals, and plans must be agreed to before award of the contract (small businesses are exempt from this requirement). Provision 3-1, Notice of Small, Minority, and Woman-owned Business Subcontracting Requirements, which discusses the plan requirement and exempts small businesses from the requirement, is incorporated by reference in Provision 4-1, Standard Solicitation Provisions, and must be checked-off by contracting officers for all solicitations for contracts estimated to value $1 million or more, except when an indefinite-delivery contract or ordering agreement will be used and the purchase team determines that requiring a plan would not be feasible.

3.2.3.d Contract Clauses

1. Contracts Valued at $1 million or More. Except for the instances listed below, all contracts valued at $1 million or more must include Clause 3-1, Small, Minority, and Woman-owned Business Subcontracting Requirements. This clause is incorporated by reference in Clause 4-2, Terms and Conditions Required to Implement Policies, Statutes, or Executive Orders, and must be checked-off by contracting officers as appropriate. Clause 3-1 requires that the supplier prepare a contract-specific plan for subcontracting and reporting on such subcontracting activity, and that the plan be agreed to by the Postal Service prior to contract award. The clause is not included under the following circumstances:

(a) When the contract is awarded to a small business;

(b) When the contract is an indefinite delivery contract or ordering agreement and the purchase team determines that requiring a plan would be impractical or unworkable.

2. Contracts Valued at $500,000 or More. All contracts expected to be valued at $500,000 ($250,000 for design and construction contracts) or more must include Clause 3-2, Participation of Small, Minority, and Woman-owned Businesses. The clause is incorporated by reference in Clause 4-2, and must be checked-off by contracting officers as appropriate. Clause 3-2 requires that suppliers report their subcontracting activity by calendar-quarter. The report must be one of the types discussed in 3.2.3.b.

3.2.3.e Purchasing Organization Reports. Each purchasing organization must collect, compile, and report by calendar quarter on the number of suppliers submitting reports and the number and dollar value of subcontracts and purchase orders placed by Postal Service suppliers with small, minority, and woman-owned businesses. Summary reports must be forwarded to Purchasing and Materials' Supplier Development and Diversity organization.

3.2.4 Classification Codes

Purchases made from small, minority, and woman-owned businesses must be coded by socioeconomic classification. The codes shown in Exhibit 3.2.4 are used to identify contracts and orders by socioeconomic classification.

Exhibit 3.2.4
Socioeconomic Classification Codes