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The automatic conversion strategy assumes that conversion of single-line OCRs to multi-line capability is technically feasible and legally viable and could be accomplished

with no degradation in performance. single-line OCR vendors would have

Questions have the ability to do

been raised as

to whether the

the conversions

and/or whether

other vendors -- perhaps more experienced with multi-line OCRs -- the conversions without having access to proprietary information. would be to reissue the Phase II request for proposals (RFP) with single- to multi-line convertibility and/or with a procurement split multi-line OCRs.

would be able to do A possible solution additional criteria on between single- and

A split procurement would be intended to provide a stronger push to further improve multi-line OCR performance and perhaps provide a greater incentive for competition in the development of both multi-line OCRs and single- to multi-line conversion kits. OTA found that, overall, a 90-10 split procurement shows the second highest projected economic return, only marginally less than automatic conversion but higher than hedge conversion.

Under the 90-10 split procurement option, USPS would cancel the current Phase 11 procurement, immediately reissue an RFP for 90 percent of the single-line OCRs (363 instead of 403), and simultaneously initiate release-loan testing of the multi-line OCR. A new RFP for procurement of the other 10 percent of Phase 11 OCRs, but using multi- line technology (40 multi-line OCRs), would be issued as soon as possible, probably in about 2 years. The single-line OCRs (252 from Phase I and 363 from Phase II) would be converted to multi-line as soon as a conversion kit has been successfully developed and tested.

The 90-10 option would result in a delay of about 2 to 3 months in procurement of the 90 percent Phase 11 single-line OCRs (the time required to reissue the RFP and receive and evaluate new bids). Procurement of the other 10 percent would be delayed about 2 to 3 years (the time required to complete release-loan testing of, issue an RFP on, and receive and evaluate bids for multi-line OCRs). OTA found that the cost of this delay for 10 percent of the Phase II procurement is very small, and would be negligible if the split procurement resulted in significantly higher multi-line OCR performance than would otherwise be the case.

In sum, the 90-10 split procurement option is intended to reduce the uncertainty associated with automatic conversion by providing a greater incentive to companies to further improve multi-line OCR performance and to develop the best possible conversion kits.

OTA is not recommending one option over another,








but simply pointing out the highest projected economic

return, followed in order by the 90-10 split procurement, hedge

split procurement. All multi-line performance.







conversion, and 50-50 kits that provide high

The principal question is how to stimulate development of the best possible

conversion objective, companies.

kit. OTA believes that some outside competition would help achieve this and that it will be necessary to provide incentives to attract the best One incentive is to keep open the decision on which company will do the

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