The Contractor's Perspective - Offering perspective on key developments in the law of government contracts

Oral contracts do exist, and the U.S. Postal Service cannot force you to sign a contract with different terms than previously agreed upon. That’s the take-way from a recent decision issued by the Postal Service Board of Contract Appeals (PSBCA) in a case called Sharon Roedel, PSBCA No. 6347, 6348, April 10, 2012.  The PSBCA found that the Postal Service breached an oral contract it had with Roedel, and that USPS owed her the profits and wages she would have earned under the six-month emergency contract. 

Husch Blackwell's Postal Service Contracting practice group today released its list of the top 10 U.S. Postal Service suppliers for fiscal year 2011. For the ninth straight year FedEx claimed the No. 1 spot. Another air carrier, Kalitta Air, Inc., which transports military mail bound for Iraq and Afghanistan, claimed the second spot. The list is compiled by David P. Hendel, a partner in the firm who has served clients' postal contracting needs for 30 years. 

New mandates on how evaluation criteria must be stated in Postal Service solicitations are required by the recently revised USPS Supplying Principles and Practices (SPP) manual. The SPP revisions were issued on December 12, 2011. The full text of the new SPP is available by clicking here. In addition to these changes, the Postal Service has introduced a new "Simplified Purchasing" method. Simplified Purchasing will be more streamlined than the traditional method, will commonly use oral solicitations, and may be used on procurements valued at up to $1 million. 

Doing business with the U.S. Postal Service has always been different from contracting with other federal agencies and commercial entities. As a starting point, the Postal Service is exempt from most federal procurement laws and regulations. such as the Federal Acquisition Regulation (FAR) and the Competition in Contracting Act (CICA). The Postal Service has its own special purchasing policies called the Supplying Principles and Practices. On top of these differences, the Postal Service is on the brink of insolvency. To help contractors understand and succeed within this special environment, our firm is presenting a full-day seminar on October 21, 2011 in Chicago on "What Every Postal Service Contractor Should Know."  

Contractors beware: the U.S. Postal Service Office of Inspector General (OIG) thinks that $1 out of every $20 spent by USPS on its contractors is fraudulent, and OIG is itching to find it. According to a July 18, 2011 OIG blog article, "conservative business estimates project up to 5 percent of contracted dollars are lost to fraud, meaning $1.45 billion of Postal Service funds are potentially at risk." While these numbers are fanciful, there is no doubt that the OIG is taking this seriously. Read on for more details.

Saving the Postal Service also requires reforming its contracting policies, according to a bill introduced by Rep. Issa (R-Calif.) on June 23, 2011. Prompted by the Postal Service's decision to stop paying into the federal retirement system and $27 billion in projected losses over three years, the bill would enact sweeping reforms. The "Postal Reform Act of 2011" would create two separate oversight bodies that would have broad, receivership-type authority to impose cost-cutting measures on the agency. While curing postal deficits is the primary goal, the bill specifically addresses postal procurement practices and would impact postal contracting in significant ways. Read on for the details.

What's more likely to sustain the default termination of your government contract—poor performance on your current contract or omitting a fact about your prior employment? According to a recent decision by the Postal Service Board of Contract Appeals, the latter is enough. A contractor's omission of key prior employment history was, by itself, a sufficient basis to terminate the contract for default.

The major developments that impacted Postal Service contracting in 2010, and trends for 2011, are explored in this one-hour webinar now available on the Husch Blackwell LLP website. Topics include:  USPS financial condition; impact of USPS Office of Inspector General investigations, newly issued procedures and policies for noncompetitive procurements; changes to the USPS Supplying Principles and Practices manual; green purchasing; and Congressional initiatives.  Click here to listen to the webinar or download the presentation materials.

The Postal Service recently issued a revised version of its purchasing policy manual, called the Supplying Principles and Practices (SPP).  The changes adopt recommendations made by the USPS Office of Inspector General (OIG) in two high-level reviews conducted in 2010. The revisions add new procedures and requirements applicable to noncompetitive procurements, and establish an internal Competition Advocate.  For more details, read on.

Postal Service contractors frequently employ their own language.  For example, to a postal contractor, a "highway contract" is not a contract to build a road but rather a contract to transport mail on a road. A new example of this postal-only language is something called a "disagreement."  This is the word used to describe what the rest of the government contract world would call a "protest."  The Postal Service's internal bid protest ("disagreement") procedures have been around now for several years, but have recently been revised, so this would be a good time to review them. 

Is a contractor entitled to be paid for performing additional work if that work can be accomplished within the contract's delivery schedule?  The answer is a resounding yes.  There is no such thing as non-compensable "extra time" under a Postal Service HCR contract.  While some officials may believe a contractor is not entitled to additional pay for service changes that do not extend the delivery schedule, this is a dangerous misunderstanding of HCR contracts, as established by a recent case decided by the U.S. Court of Federal Claims.

Our list of the top 150 U.S. Postal Service suppliers for fiscal year 2010 is now complete. Overall, more postal contractors saw revenue declines than increases.  However, the sharp decline in postal spending over the past several years has finally stabilized.  Postal Service spending in FY 2010 totaled $12 billion, just a 1 percent decrease from FY 2009.  By comparison, postal spending in FY 2009 declined by over 19 percent from FY 2008. 

Just over half of all outside spending—$6.32 billion—went to transportation.  About half of that figure—$3.2 billion—went to highway transportation.   Spending on highway transportation increased by 5.3 percent from last year as the Postal Services shifted mail from air to surface transportation.  Spending on domestic air transportation declined by 2 percent to $2 billion.  Spending on international air transportation declined by a whopping 26 percent to $449 million.  The Postal Service attributes this decline to lower mail volumes, decreases in foreign postal transaction fees, and lower air carrier rates.

Spending on the "Supplies and Services" category totaled $2.2 billion, only a slight decline from the prior year's level.  In the "Facilities" category, where the Postal Service's roughly 30,000 facilities make it the nation's largest tenant, spending declined by $86 million to $1.7 billion.