NCR and IBM Win Postal Service Multiple Award

Electronic terminals for customers will improve service, expand offices' ability to handle new and enhanced products and services

Starting next year, the U.S. Postal Service will begin a massive upgrade of its retail operations with the installation of state-of-the-art computer registers, known as point-of-service (POS) terminals. The program, Point-of-Service ONE, or POS ONE, is a major Postal Service initiative to replace retail systems with commercial, off-the-shelf hardware and software, including support services and training.

The U.S. Postal Service has awarded contracts to IBM Corp., Armonk, N.Y., and NCR Corp., Dayton, Ohio, for $218 million, beginning the agency's largest multiyear purchase of retail terminals in its history.

The POS ONE program, a three-phase deployment of 73,000 terminals in 20,000 postal retail centers by the end of 1999, is potentially worth $1 billion, according to Postal Service officials. The new POS ONE retail systems will replace more than 63,000 outdated retail terminals in use around the nation.

In the first phase, IBM and NCR, formerly known as AT&T Global Information Solutions, will each deliver a total of 9,100 retail terminals to postal centers beginning next year.

NCR, which is becoming an independent company in the wake of AT&T's announced breakup in 1995, will begin delivering retail workstations in Richmond, Va., in early 1997, and will continue in other locations. The value of NCR's contract is $119 million. IBM, whose contract is valued at $99 million, will begin delivery of postal retail terminals starting in May 1997.

In phases 2 and 3, 53,800 more terminals will be installed.

U.S. Postal Service officials say the new electronic terminals will improve the quality of customer service and expand the ability of postal centers to handle new and enhanced products and services. Postal customers will be able to get ZIP code information and details on postal rules and regulations.

"Customers will like the easy-to-read display terminal that will face them. For example, customers mailing a package will be able to see the same cost and time comparisons that postal clerks see," said Pam Gibert, Postal Service vice president of retail.

POS ONE hardware components will include a modular scale, customer and clerk displays, credit/debit authorization devices, slip printer for money orders and customer receipts, a specialized reader for checks and a bar code scanner. POS ONE hardware and software will be based on Intel PC architecture, and its installations will run on a local area network. Postal customers can expect improved service for activities such as refilling postage meters, paying customs and applying for passports, according to Postal Service officials.

Ken Thornton, general manager of IBM Worldwide Government Industry, said IBM's strength was its track record with major private retail companies.

"We were able to capitalize on the best-of-breed solutions already developed and installed by our IBM retail industry teammates at some of the nation's largest retailers, like Wal-Mart and Dayton Hudson," Thornton said.

"Today, the consumers of government services expect a higher level of performance than ever before. However, these consumers are unwilling to pay more, and in some cases, feel they are already paying too much," Thornton said.

Mike Berman, vice president of business development and marketing for the public sector at NCR, said the Postal Service contract represents a significant achievement for the company, which is undergoing a separation from AT&T. He said NCR's core strengths are in retail operation solutions, such as the postal retail terminals, and data warehousing systems.

Earlier this year, NCR won a $150 million contract with the U.S. Defense Commissary Agency to replace store automation systems in all U.S. military commissaries worldwide.

Berman said the postal retail terminals improve the process of paying for mail services and products with automated, online check and debit/credit card authorization. Berman also pointed out that the terminals will enable postal centers to better track postal product inventory, such as special issue and commemorative stamps.

"A postal retail center need never run out of a popular stamp with the inventory management capability this system provides," Berman said.

David Hunter, manager of the POS ONE program at the U.S. Postal Service, said the overall system will greatly benefit Postal Service customers.

The system will enable customers to readily rent post office boxes and purchase money orders, according the Hunter. "There's no question this upgrade keeps us competitive in the retail environment," Hunter said.

The purpose of awarding the contract to two vendors in the first phase is to keep contract pricing low and to win better service and products through a continuous, competitive process, according to Hunter.

Hunter said the Postal Service will decide at an undetermined date whether to award the second and third phases of the contract to either one or both of the vendors.

He added that both vendors will be notified within four months about the selection criteria under which the winning vendor or vendors will be awarded subsequent contracts.

Bob Dornan, vice president of Federal Sources, a market research company in McLean, Va., said it's becoming fairly common to see federal agencies award contracts to more than one vendor on large, commodity-oriented, off-the-shelf technology purchases. He added that many agencies are required to do so because of federal acquisition reform rules, but said the U.S. Postal Service is not required to make multiple awards on its procurements.

"It's a common strategy for many agencies. It's done partly to generate competition at a higher level than we've seen in the past," Dornan said.

Dornan said multiple-award contracts increase the leverage of federal agencies to hold down vendor pricing over the life of a major procurement. Instead of having a single vendor win a contract by bidding low and then later winning contract award increases, the multiple-award process virtually eliminates that option, according to Dornan. "It used to be that a vendor would do what it could to win a contract, and it would make money later. That strategy now is much less diminished," Dornan said.

Hunter said the IBM and NCR retail workstations are nearly identical, differing only by the control keys operated by the postal clerk. He added the retail terminals will be deployed in post office sites to avoid having different retail terminals located in the same postal center.

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