Postal Service Drops Part of Agreement With Perot

The Postal Service said Wednesday that it was shelving a major portion of a contract with Texas billionaire H. Ross Perot that drew fire from Congress and private industry and spawned a court test of the service’s purchasing rules.

At stake is a potentially lucrative deal to design and implement cost-saving procedures for the agency--a contract initially awarded to Perot’s company, Perot Systems Inc., without competitive bidding.

“This was clearly a mistake that I hope it is not too late to rectify,” Postmaster General Anthony M. Frank told two Senate subcommittees Wednesday.

Phase 2 of the arrangement, the portion that was criticized because of its lack of competition and its seemingly unlimited potential for payment, no longer will be part of the Perot contract, Frank said.

Instead, it will be opened to competitive bidding, “and Perot Systems would not compete for this business,” he told a joint hearing of the Senate Governmental Affairs subcommittees on federal services, post office and civil service and on oversight of government operations.

But Frank expressed the hope that one part of the deal, a six-month, $500,000 contract to study the agency and propose ways of saving money, can be resumed and completed by Perot.

Frank’s statement was the latest development in a flurry of activities kicked off on June 2, when he called a news conference to announce the Perot deal.

No Apologies

Perot, who earlier had turned down the job of postmaster general, had agreed to set up a new company to assist the agency, Frank said. The firm would do its initial work at cost, but in Phase 2 would make a profit by receiving a share of any savings that resulted from its work. The amount of that share was to be negotiated later.

Frank, who has been postmaster general only since March 1, told the hearings Wednesday that he approved the deal because of Perot’s proven ability to find innovative solutions to problems.

“I attempted to harness the unique talents of Ross Perot and his new company to save money for the Postal Service. . . . For that I have no apologies to make or regrets to express,” Frank said.

After the June announcement, Congress quickly criticized the no-bid deal and its payment system for Perot. Critics also said the postal service apparently ignored standard procedures for issuing contracts.

Two companies disappointed at not getting a chance to bid on the deal filed protests with the General Services Administration board of contract appeals on June 16. They are EDS Inc., Perot’s former company now owned by General Motors Corp., and Planning Research Corp.

Procedures Violated

On June 22, the Senate voted unanimously to call for a suspension of the deal until its General Accounting Office could study the contract and issue a report. The Postal Service agreed to suspend Phase 2, pending the report.

Then the General Services appeals panel ordered the entire contract suspended on July 8, ruling that it violated federal purchasing procedures. On Aug. 4, the panel followed up by ruling that the contract was void.

The Postal Service has appealed to a federal court, contending that it is exempt from the appeals agency. But it suspended work by the Perot group anyway, pending a ruling.

The GAO, meanwhile, completed its report, saying the deal was signed under very unusual circumstances and that it had “serious concerns” about it.