Bernstock update: Postal sole-source contracting rules tightened


The scandal involving former U.S. Postal Service executive Robert Bernstock has yielded what appear to be some big changes to the rules governing sole-source contracts. Postal Service spokeswoman Joanne Veto just sent me some amended contracting rules that were published this week in response to the Office of Inspector General’s investigation:

• First, most postal executives will no longer be able to approve their own department’s sole-source contracts worth more than $1 million. From now on, seven-figure deals awarded noncompetitively must be approved by Vice President for Supply Management Susan Brownell.

Under the old rules, all noncompetitive contracts worth more than $250,000 had to be approved by the vice president of the organization requesting the contract. This allowed Bernstock to steer contracts to former business associates and friends, and then approve the deals with little outside oversight.

However, this will not change the rules for noncompetitive contracts between $250,000 and $1 million. Three of the contracts Bernstock steered to former business associates fell squarely in that area.

• Second, contracting officers must make sure that all necessary reviews and approvals, price determinations and supplier evaluations are documented and included in the contract file. The OIG’s report found that many of the sole-source contracts Bernstock approved lacked crucial documents explaining why they needed to be awarded noncompetitively.

For example, Bernstock’s department cited a “compelling business interest” when it issued a noncompetitive consultancy contract to investment banker Kim Wolfson. But the OIG noted that the justification accompanying Wolfson’s contract cited no compelling reasons, such as urgency, and simply asserted that she has the necessary knowledge and qualifications to do the job.

• Lastly, Veto said the new language “seeks to make clear that contracting officers, managers and executives avoid a professional conflict of interest or the appearance of a potential conflict of interest when considering sole-source contracts.”

That strikes at what critics say is the most concerning part of this matter. Bernstock said he awarded almost $5.9 million to Wolfson, Lynne Alvarez, Richard Sorota, and Elizabeth Shuttleworth because he knew them and said he was confident they could get the job done (not to mention the fact that Wolfson had just been laid off from her job and asked Bernstock for help finding work). He directed a $1.5 million contract to Goldman Sachs, which was a major investor in Nutrisystem, where Bernstock is still a board member. And he approved a sixth sole-source marketing contract worth almost $15,600 to the brother of Lynne Alvarez.

Bernstock also seems to have been viewed by some at postal headquarters as untouchable. On page 28 of the report, one unnamed official said “Bernstock is seen as the savior of the Postal Service to fix retail,” and said he understood that Postmaster General John Potter approved Bernstock’s contracting deals. Even Treasurer Robert Pederson, who had to straighten out the mess of the Goldman Sachs contract — Bernstock first entered into an improper agreement with Goldman Sachs in October 2008, and the company started getting paid for work before a formal contract was signed — didn’t feel comfortable enough to speak up.

According to the OIG, “When asked why [Pederson] did not question or escalate his concerns that they failed to follow the process, he said, ‘I don’t think I had the political capital to tell Bernstock he should come to me first.’ ”

What does it say about the culture at L’Enfant Plaza when a senior official is biting his tongue because of a perceived lack of political capital?


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