The U.S. Postal Service's top marketing executive last year directed a $4.5 million sole-source contract to a former business associate.
The agency's Mailing and Shipping Services President, Robert Bernstock, hired Tatum LLC of Philadelphia in February 2009 to help modernize the Postal Service's Web site. The justification for the contract cites a Tatum executive's prior relationship with Bernstock as a reason for the sole-source contract award. The contract was obtained by Federal Times through a Freedom of Information Act request.
Elizabeth Shuttleworth, now a director at Tatum, manages the company's work with the Postal Service. She was vice president and chief information officer at Scotts Miracle-Gro Co. in 2005 and 2006 and at Vlasic Foods International from 1998 to 2001. Bernstock was president and CEO of Vlasic and president and chief operating officer of Scotts Miracle-Gro during those same periods.
Postal Service Inspector General David Williams is investigating Bernstock's approval of the Tatum contract and other sole-source deals to determine if he violated procurement rules, IG spokesman Wally Olihovik said.
The Tatum deal is the fourth no-bid contract Bernstock directed toward former business associates that Federal Times has learned of. In January, Federal Times reported that Bernstock had guided three separate contracts totaling more than $1.3 million to consultants Lynne Alvarez, Richard Sorota and Kimberly Wolfson. Bernstock worked with Alvarez when he was at Vlasic, with Wolfson at Nutrisystem, and with Sorota at Scotts Miracle-Gro. The IG is also investigating those deals.
The sole-source justification accompanying the Tatum contract, which Bernstock signed in May, said that Bernstock "is confident of Ms. Shuttleworth's knowledge, value, qualifications and ability to develop and implement highly complex information technology solutions in order to meet organizational objectives." The justification also cited her 20 years of experience as a business leader in IT, marketing, sales, operations and general management, and her expertise on managing highly complex IT strategies.
Contracting experts and open government advocates say that's not enough to award a no-bid contract. They say Bernstock's deals are concerning, and have the appearance of a conflict of interest.
"This sounds like another example from the top to steer a contract to the friends of senior government officials, which isn't appropriate," said Scott Amey, general counsel for the Project on Government Oversight. "This is the type of contracting that's known to be risky, and the Postal Service can't afford."
The Postal Service is in dire financial straits, largely because of declining mail volume. It finished fiscal 2009 with a $3.8 billion deficit and is expected to lose another $5 billion this year.
Neal Couture, executive director of the National Contract Management Association, said the Tatum sole-source justification "is weak."
"This fails the test of [not having] the appearance of a conflict of interest," Couture said. "Whether the postal executive has decided to award the contract to someone who's appropriate or not is almost irrelevant. This doesn't meet most agencies' definition of a sole-source requirement."
Tatum declined to comment for this story. Shuttleworth was reached by telephone, but also declined to comment. Postal Service spokesman Gerald McKiernan said Bernstock was unavailable for an interview.
McKiernan said that Bernstock did nothing wrong when directing the contract to Tatum and Shuttleworth. He said the ethics officer in the Postal Service's Office of General Counsel reviewed the contract in May 2009 and found there was no ethics violation.
The Postal Service says contracts of this kind are routine and do not violate the agency's procurement rules. Those rules allow for contracts to be awarded without competition if a supplier "can meet Postal Service needs quickly and efficiently and the benefits of doing so outweigh those that may be realized through competition."
But the Postal Service's procurement handbook says: "The Postal Service will attempt to avoid situations in which a supplier has an unfair competitive advantage."
By comparison, the Federal Acquisition Regulation, which does not cover the Postal Service, allows an agency to issue a sole-source contract only if there is one supplier who can do the job, if there is unusual urgency or an emergency such as a disaster or war, or for national security reasons.
Shuttleworth is in charge of coordinating and organizing more than a dozen other contractors working on the three-year, $147 million Web site and call center upgrade called Project Phoenix.
McKiernan said Project Phoenix "wasn't on track" in early 2009. He said the Postal Service needed to bring someone on quickly to direct it, and didn't have time to go through the standard competitive process.
"Some could see it as a plus," McKiernan said. Because Bernstock had worked with Shuttleworth in the past, he "had a way to evaluate her abilities and knew what she could get done."
Joe Adams, the Postal Service's general manager for online and marketing services overseeing Project Phoenix, said in an interview that there may have been other companies that could do the same work as Tatum, but not many.
"I don't know if they're the only one, but if they're not the only one, it's a very short list [of companies] that could bring the experience that we needed," Adams said. "The Postal Service hasn't done any large-scale projects like this before."
By the time Project Phoenix is done at the end of 2011, usps.com will allow customers to create online accounts, similar to sites such as Amazon.com, Adams said. Those profile accounts will make it easier for customers to track their mailed packages, consolidate the checkout process they don't have to conduct multiple transactions and put mail delivery on hold when they go on vacation.
Project Phoenix will also link those online accounts to the Postal Service's call centers. That way, if someone starts a purchase online but doesn't finish it, he can later have call center workers help him complete his purchase.