Description
On January 16, 2003, FPI published in Federal Business Opportunities a 'good faith' notice regarding FPI's intent to manufacture containers for sale competitively (without using mandatory source) to the U.S. Postal Service (USPS). The January 16th notice explained that FPI does not consider USPS containers to be a 'new product' under FPI's guidelines because FPI has recorded sales in both the Federal Supply Classification (FSC) code and Standard Industrial Classification (SIC) which include USPS containers. Under FPI's guidelines, an item's FSC code and SIC code are the primary and secondary determinant of a 'specific product,' respectively. The January 16th notice stated that while FPI does not consider USPS containers to be a new product, FPI recognizes that a reasonable person may construe USPS containers to be a product separate and distinct from any other made by FPI. The notice requested that interested parties submit comments regarding FPI's proposed production of containers for the USPS on a competitive basis. FPI received comments in response to the January 16th notice from two interested parties. Both objected to FPI's proposal to manufacture containers for the USPS, as summarized below: The first commenter's submission stated: 1) USPS material handling equipment are not commercial items, and, as such, are itself a specific product, separate from anything else; 2) If FPI were to enter this market, FPI will monopolize the market and eliminate current suppliers. The second commenter's submission stated: 1) USPS containers are an industry unto themselves; 2) The USPS container being considered by FPI is only in the design stage. FPI must go through an extensive design and testing process for this item. Such a process would not be necessary if the item was not a 'new product'; 3) The material handling storage fabrication industry is primarily composed of small businesses, most of which are marked by recent sales decreases and excess capacity. The entry of FPI into this market would only create further hardship on the existing firms. FPI forwarded both sets of comments, in their entirety, to its Presidentially-appointed Board of Directors. It was the official decision of the Board of Directors that FPI may pursue manufacturing containers for the USPS on a competitive basis, without the use of mandatory source. In making its decision, FPI’s Board carefully considered all of the points raised in both sets of comments. The Board acknowledged that while there is no FSC code and SIC code exclusively for USPS containers, that does not equate to this item being a 'new product' under FPI’s guidelines. Other items (such as different styles of push carts, hand trucks and other material handling equipment) also fall within these categories. FPI has a history of sales in both the FSC code and the relevant SIC codes for USPS containers. The Board also considered the comment that containers for the USPS ought to be considered a 'new product' for FPI because of the necessary design and testing process for the item. The Board agreed that while containers for the USPS may be a 'new' item for FPI in a layman's sense because it is a prototype, that does not make it a 'new product' for purposes of product classification in accordance with FPI's published industry guidelines. Most importantly, FPI's Board stressed that FPI would only be allowed to obtain work manufacturing containers for the USPS via competitive means. The Board concluded that FPI may not use its mandatory source to obtain any business manufacturing containers for the USPS. The Board decided that because FPI would only be allowed to provide USPS containers on a competitive basis, it would essentially operate as just another potential vendor. Thus, any work awarded to FPI would be done so of the customer's own volition, because FPI was deemed to be the best source for the government. As such, arguments that FPI's entry into the market would cause an undue burden on the industry are not valid. The USPS will be notified that FPI is not a mandatory source for this item, and that FPI will bid for the work competitively. For these reasons, the Board decided that containers for the USPS are not a 'new product' as defined by FPI's expansion guidelines. FPI may manufacture containers for sale to the USPS on a competitive basis, without the use of mandatory source. USPS containers will be included within the specific product grouping 'FSC 3920 - Material Handling Equipment, Non Self-Propelled.' Interested parties have the right to raise questions at any time with FPI's Board of Directors. Any correspondence should be addressed to: Chief Administrative Officer, Research, Activation and Corporate Support, Federal Prison Industries, 320 First Street, NW, Washington, DC 20534.