The U.S. Postal Service spends about $3 billion per year to move the mail by truck and does so under a special type of contract called a Highway Contract Route (HCR) contract. These contracts have unique contract clauses, and even their own lingo. For example, an HCR “amendment” is what the rest of the government contracting world would call a contract “modification.”

One of the biggest differences between HCR contracts and other government contracts is the Changes clause. Under an HCR contract, the contracting officer has limited ability to direct unilateral changes. The CO may only issue a unilateral change, called a “minor service change,” if the price impact would be $5,000 or less. Under a Contract Delivery Service (CDS) contract – a subset of HCR contracts for mailbox deliveries – unilateral changes must be $2,500 or less. Even for these changes, a contractor who disagrees with the CO’s determination may file a claim for additional compensation.

In addition to these monetary thresholds, unilateral changes are further restricted to certain types of changes. The only unilateral changes a CO can direct are an extension, a curtailment, a change in line of travel, a revision of route, and an increase or decrease in frequency of service or number of trips. The CO has no authority to unilaterally direct any other change, even if the price impact would be $5,000 or less. For example, the contracting officer may not unilaterally direct a contractor to change equipment or buy new equipment.

Any service change that is outside this scope, or would impact the contract price by more than $5,000 ($2,500 under a CDS contract), requires mutual agreement.  Since the contractor’s agreement is required for such changes, you do have some negotiating leverage. The Postal Service also has some leverage, as it could potentially terminate the contract if agreement cannot be reached.

As to termination, most HCR contracts contain a Termination with Notice clause, which allows either party to terminate the contract, without cost consequences, upon 60 days advance written notice. If the Postal Service does not provide sufficient advance notice, and in many cases it does not, it must pay the contractor for each day of short notice.  There are also three legal principles that limit the exercise of this clause.

Should you sign that contract amendment?

The limits on the CO’s ability to direct changes under the Changes clause instructs on which contract amendments you should not sign. For example, you should never sign any contract amendment that directs a change valued at $5,000 or less under an HCR contract. That’s because in those cases, the Postal Service can and should issue a contract amendment under its unilateral change authority. In fact, such a contract amendment should state on its face that it is being issued unilaterally and that your signature is not needed to make it effective.

When a unilateral amendment is issued, you might be asked to acknowledge receipt, but that is not the same thing as agreeing to the contents of the amendment. Signing a bilateral amendment means that you agree with the change as shown.  Your signature could be interpreted as a release of your rights to seek an adjustment to the price set by the contracting officer.  Instead, if USPS requests that you acknowledge receipt of the amendment, simply send an email to the contracting officer stating that you received it.

You should be particularly careful not to sign any amendment that eliminates work and says it is a “service change.”  There’s a big difference between changing a route and eliminating it, and you are entitled to 60 days advance written notice before any routes are eliminated, even if most of your routes remain untouched.

For example, the Postal Service might send you a “service change” that eliminates a trip and sets a new price, and then asks you to sign the amendment. Even if you agree with the new price for the remaining work, you should not sign this amendment unless you are willing to release your rights under the Termination with Notice clause. Because when a route is eliminated, it is really a partial termination and not a service change. And under a partial termination with notice, you are entitled to advance written notice (usually 60 days, sometime more). If you are not provided that advance notice, then you are entitled to payment for each day of short notice. But if you signed a contract amendment agreeing that such action is a service change, you most likely have signed away your opportunity to be compensated for that short notice.

Service changes that impact the contract price by more than $5,000 cannot be implemented without your agreement. For these changes, both parties must agree on the new requirements and new price. Assuming the parties wish to proceed with the new work, but haven’t yet agreed on a new price, you should protect your interests by reserving your rights to obtain a price adjustment.

For example, you could reserve your rights by adding the following sentence to the amendment:  “Contractor agrees to perform the change described in this amendment, but the parties have not yet agreed on a new contract price. Contractor reserves its rights to obtain an equitable price adjustment for all impacts relating to the amendment.”  As those who attended my last HCR seminar know, and as explained in the seminar materials, there is other language you could use that might be more appropriate to the particular circumstances. In any case, you should have something in writing that shows the amendment is not intended to be the final word on the matter.