The False Claims Act case against Lance Armstrong lasted longer than his 7 year Tour de France win streak.

While the settlement of the False Claims Act case against Lance Armstrong has generated a press release, a quick online search didn’t produce a copy of the actual agreement. So I filed a Freedom of Information Act request and the next day the Department of Justice provided me a copy of the Lance Armstrong settlement agreement.  Thank you, Team DOJ!  Below is my take on that agreement and what it tells us about the case.

The settlement amount

The settlement agreement provides that Lance Armstrong will pay $5 million to the Government and $1.65 million to the relator Floyd Landis. To put this in context, the Postal Service had paid about $40 million to sponsor Team Postal. Trebling that amount, and throwing in civil penalties and investigative costs, bumps up potential damages to well over $100 million. The settlement amount was thus less than 7 cents on the dollar.

Damages was always the Government’s weakness – because there weren’t any. This should have been apparent at the outset from the contemporaneous USPS reports on how much publicity and new revenue the Team Postal sponsorship had generated. These reports were poppycock, of course, but they still posed insurmountable problems for the Government’s case.

Continue Reading What the Lance Armstrong Settlement Agreement Tells Us about the Government’s Case

As part of our postal industry practice, we annually compile a list of the Top 150 USPS suppliers based on data received under the Freedom of Information Act.

In FY 2017, USPS spent $13.9 billion on outside purchases and rental payments, an increase of $181 million over last year.  The biggest increase went to the top 10 USPS suppliers. That group received a total of $3.9 billion, up $400 million from last year and accounting for 28 percent of the Postal Service’s total spend. The Top 150 suppliers received $9.2 billion, about two-thirds of the agency’s total spend. Only 81 suppliers collected revenues exceeding $25 million in 2017.

As it has since 2002, Federal Express Corporation lands atop the list, this year with $1.61 billion in revenues—about a $68 million drop from its 2016 earnings. FedEx carries package and letter mail for the Postal Service. FedEx’s air cargo network contract with the Postal Service has been extended several times, and the latest extension takes it to September 29, 2024.

Continue Reading Top 150 U.S. Postal Service suppliers get more in FY 2017

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. Continue Reading The unique Changes clause in Postal Service HCR contracts

Similar to a Termination for Convenience clause, a Termination with Notice clause (often found in U.S. Postal Service contracts) allows a party to end a contract without breaching it. Under the clause, either party may terminate the contract without cost consequences by providing advance written notice – usually 60 days – to the other party. The Postal Service Board of Contract Appeals (PSBCA) addressed the limits that apply to the exercise of this clause in a decision on two closely related cases. Cook Mail Carriers, Inc., PSBCA No. 6583, and Patricia Joy Sasnett, PSBCA No. 6584, issued on March 24, 2017.

Cook and Sasnett each had separate Highway Contract Route contracts to transport mail at designated times between various points in Alabama. In March 2014, the Postal Service made changes to its processing network that affected several contractors, including Cook and Sasnett. While the network changes could have been effected by modifying their contracts, the Contracting Officer (CO) instead exercised the Termination with Notice clause.

When he terminated the contracts, the CO misunderstood the network changes.  He thought the changes were needed because the Gadsden, AL mail processing facility was closing.  In fact, the Gadsden facility was already closed and revised routes were needed because other mail transportation hubs were being relocated.

Propriety of the termination

Cook and Sasnett filed claims asserting the terminations were improper and the case ended up at the Postal Service Board of Contract Appeals (PSBCA). Examining the Termination with Notice clause, the PSBCA noted that while it does not include any express limitations, its use “is not truly unlimited.”  The PSBCA then considered whether the CO’s action was proper under three separate legal principles. Continue Reading Three legal principles that limit the Termination with Notice clause

Leslie Arkansas Post Office
The termination of a $34,000 mail delivery contract serving this post office in Leslie, AR could result in three standard clauses being declared unlawful on thousands of USPS transportation contracts.

Three standard clauses used in virtually all Postal Service surface transportation contracts are now on the chopping block. In an interim ruling, the Court of Federal Claims ordered the Postal Service to show why these three clauses should not be declared unlawful and unenforceable. Tabetha Jennings v. U.S., Fed. Cl. No. 14-132C, May 29, 2016.

The case involves the default termination of a $34,000 contract to provide mail delivery between Leslie and Timbo, Arkansas. Tabetha Jennings, the sole proprietor contractor, had provided service for seven years without any issues. Then, during a heavy volume Christmas season, a postmaster accused her of using a vehicle with insufficient capacity. The postmaster was wrong, but this charge led to other accusations. Eventually, the postmaster accused Jennings of conducting herself “in an unprofessional manner” and disrupting mail processing operations. These accusations, in turn, led the contracting officer to rescind Jennings’s security clearance and her access to postal premises and the mail.

Jennings disputed the accusations against her and presented statements from a different postmaster and from another contractor that backed her up. But the contracting officer was unmoved and did not lift the suspension of her security clearance. When Jennings failed to provide a substitute carrier to continue the service she had been barred from performing herself, the contracting officer terminated her contract for default. Continue Reading Court orders Postal Service to justify lawfulness of three standard clauses

Top 150 first page FY 2015Transportation and technology companies dominate the top 10 spots on the list of the Top U.S. Postal Service Suppliers for FY 2015.  Federal Express Corporation again tops the list, a position it has held since 2002. Overall, the Postal Service spent $12.5 billion on outside purchases, about half of it on transportation.

FedEx, now in the third year of a seven-year air cargo network contract, received nearly $1.4 billion in revenue, a 3 percent drop from last year. Package giant United Parcel Service is also among the agency’s top suppliers, earning $154 million in postal revenues and moving up from No. 12 to No. 11.

Other transportation-related companies in the top 10 include trucking company Salmon Companies, Inc. (No. 4, $229 million); Victory Packaging, logistics and distribution services provider for ReadyPost and other packaging supplies programs (No. 5, $212 million); commercial airline United Airlines, Inc. (No. 6, $197 million); and auto-parts supplier Wheeler Bros., Inc. (No. 9, $175 million). Not far behind are trucking company Eagle Express Lines, Inc., No. 12 ($140 million); cargo airline Kalitta Air, LLC, No. 15 ($97 million); and commercial airline Delta Air Lines, Inc., No. 16 ($93 million).

Technology-related companies on the list start with EnergyUnited Electric Membership Corporation, which provides telecommunication and energy billing services. EnergyUnited is again the Postal Service’s second-largest supplier with $440 million in revenue, most of which is paid out to other companies. At No. 3 is Honeywell International, Inc., which received $273 million under its contract to provide 225,000 Mobile Delivery Devices (MDD). Letter carriers use the MDD to scan mail and packages.

HP Enterprise Services, LLC, a provider of computer equipment, ranks No. 7 with $192 million in revenue, about $20 million more than last year. Accenture Federal Services, which provides enterprise technology and consulting services to the agency, is ranked No. 8 with $188 million. International Business Machines Corporation (IBM) and AT&T Corporation again placed in the Top 20. EMC Corporation, which recently won a Postal Service contract to provide information storage and management services, has already cracked the Top 20 with $81 million in postal revenue.

Rounding out the Top 10 with $159 million in revenue is Northrop Grumman Corporation, which operates the Postal Service’s central repair facility in Topeka, Kansas.

David Hendel, a partner at Husch Blackwell, has compiled annual lists of the top Postal Service contractors since 2002, including these lists from 2010 – 2014.

An agency must use-it or lose-it under a fixed-priced contract.  When an agency makes it impossible to receive a contractor’s service under a fixed-priced contract, it must still pay the full contract price. So long as the contractor is willing to live up to its end of the bargain, the contractor is entitled to payment regardless of whether it provided any service. And the agency’s failure to tender work does not itself serve as a constructive termination, so the contract remains in effect until actually terminated.

Those are the lessons of Olbeter Enterprises, Inc., PSBCA No. 6543, January 12, 2016, involving a point-to-point mail transportation contract. During the course of the contract, the Postal Service closed one of its facilities, making it impossible for Olbeter to provide the contracted service. The Postal Service, however, did not issue a termination notice or contract modification. Instead, it allowed the contract to remain in force and continued to make full payment, occasionally ordering other work for which Olbeter was paid separately.

Nine months after the facility closure, the parties agreed to a convenience termination. Later, the Postal Service decided that the payments it had made during the nine-month closure period were over-payments. The Postal Service recovered those amounts by withholding payments under a different contract. Olbeter appealed the withholdings to the Postal Service Board of Contract Appeals.

At the PSBCA, the Postal Service contended that Olbeter knew the facility had been closed, that this made performance impossible, and that the Postal Service intended to terminate the contract. The Postal Service thus argued that the facility closure itself served to constructively terminate the contract. The Board disagreed. Whatever the Postal Service’s intentions may have been, and regardless of Olbeter’s knowledge of those intentions, the agency had not taken action to terminate the contract. In addition, the parties had agreed to a termination nine months after the facility closed and the Board would not supplant that agreement with a constructive retroactive termination.

The Postal Service next contended that it had breached the contract itself by not tendering any mail. Since it had breached the contract, the Postal Service argued, Olbeter was limited to recovering its expectancy damages, which were much less than nine months of payments. The Board rejected this argument, holding that the agency’s failure to tender mail was not a breach.

Finally, the Postal Service contended that allowing Olbeter to retain nine months of payments for service it did not perform would unjustly enrich Olbeter or constitute a windfall. The Board denied this argument as well, noting that unjust enrichment is an equitable doctrine that applies when parties do not have an express contract, and here an express contract existed. That contract simply did not provide the Postal Service a mechanism to withhold payment for service that the agency had made impossible to perform.  Olbeter was thus entitled to retain the payments it had received for the nine-month closure period.

The principle underlying the Olbeter decision would apply equally to any fixed-priced contract where the government made performance impossible or waived its right to receive performance. If the contract does not have a clause that directly addresses such events, and if no contemporaneous action is taken to terminate it, the agency remains obligated to pay the full contract price.

HCR Seminar Postal Contracting Brochure 2016_3Unpaid for work you performed on your HCR contract?  Can’t agree with the Postal Service on a contract price adjustment?  Not given a chance to bid on new work in your area?

Learn about remedies for these problems at our new seminar, “Claims and Disagreements under Postal Service HCR contracts.”  Husch Blackwell partner David Hendel will present the seminar on January 19, 2016, at 9:00 – 10:30 a.m., at the Golden Nugget Hotel in Last Vegas, NV.

The seminar focuses on two areas where HCR contractors have substantial rights and remedies. First, we examine the claims process, which gives contractors the right to recover funds for various Postal Service actions – or inactions. We describe the activities that potentially generate claims, how to prepare a claim, when to bring a claim, and how claims are processed and resolved. We review actual claims that arose from service changes and describe how courts have ruled on them. We also provide a list of do’s and don’ts when preparing and submitting claims.

Second, we describe the “disagreement” process, which allows contractors to protest a Postal Service procurement action or award decision. We explain the grounds for bringing a disagreement, deadlines and filing requirements, and decisions by the USPS Supplier Disagreement Resolution Officer (SDRO).

The seminar is presented in conjunction with the Central/Western Area regional meeting of the National Star Route Mail Contractors Association. Separate registration is required. For Star Route Association members, the seminar fee is $195; for non-members, $295.  A $50 discount applies to each additional person who attends from the same company. Those wishing to register may go to https://www.regonline.com/hcr  or contact seminar coordinator Shana Hoy at  816.983.8809 at shana.hoy@huschblackwell.com.

David Williams Operations Update at PostCom June 2012Not your typical federal agency, the U.S. Postal Service is an “independent establishment” of the executive branch of the United States government. (39 U.S.C. § 201.)  As a result, many federal procurement rules do not apply to the Postal Service. Here are the major differences between USPS’s purchasing policies and those of other federal agencies:

  1. Not only is the Federal Acquisition Regulation (FAR) inapplicable, but the Postal Service’s own special purchasing rules were not issued as regulations. Instead, the agency considers its Supplying Principles and Practices manual to be “advisory” and non-binding.
  2. While the rest of the federal government is bound by the Competition in Contracting Act and must obtain “full and open competition,” the Postal Service has no such mandate. When it competes a requirement, it need only obtain “adequate competition whenever appropriate.”
  3. All purchases are conducted as negotiated procurements; there are no Invitation for Bids (IFBs). All proposals are evaluated on a “best value” basis.
  4. The Truth in Negotiation Act (TINA) does not apply to the Postal Service. The Postal Service, however, sometimes employs a contract clause that imposes a similar requirement. TINA’s statutory exceptions therefore do not apply, so the Postal Service could seek cost information when other agencies would be prohibited from doing so.
  5. There are no mandatory set-aside procurements for small, disadvantaged businesses, and USPS does not participate in the SBA’s Section 8(a) program. The Postal Service does actively seek diversity in its procurements, and tracks contract and subcontract awards to small, minority-owned, and women-owned businesses.
  6. Prequalification of contractors is regularly used by the Postal Service to limit competition to prequalified suppliers.
  7. Postal Service acquisitions are made with agency funds, and thus there are no legal restrictions on multi-year procurements or limitations imposed by Congressional funding.
  8. The Postal Service can seek title to intellectual property, not just unlimited rights. The Postal Service may also limit contractors from selling intellectual property developed for USPS to postal competitors.
  9. In the proposal evaluation and award process, there are no competitive range determinations or regulations governing Best and Final Offers (BAFOs). The term “discussions” has its ordinary dictionary meaning, and discussions may be held multiple times with one offeror and less frequently with other offerors. Revised proposals need not be submitted on a common cut-off date. Once a prospective awardee is selected, the Postal Service can conduct pre-award negotiations with the selected offeror.
  10. The GAO has no authority to consider protests involving Postal Service purchases. Instead, the Postal Service has its own internal “disagreement” process and a Supplier Disagreement Resolution Official (SDRO). The SDRO, however, is not independent of Supply Management and does not make any documentation available to the protester. Protests can also be brought before the U.S. Court of Federal Claims.

postaltrucks_iStock_000002377862Medium (2)“Long-Life Vehicles” turned out to be a fully appropriate name for the fleet of 163,000 carrier vehicles the Postal Service first bought in 1987. Now looking to replace them, the Postal Service recently issued a Request for Information and Sources Sought notice for its “Next Generation Delivery Vehicle” (NGDV). Companies have until March 5, 2015 to submit their comments and pre-qualification responses. The Postal Service will then determine which companies will be eligible to receive the RFP for competitive prototype development.

The Postal Service anticipates making a single award to a supplier for up to 180,000 vehicles. With an anticipated price range of $25,000 to $30,000 per vehicle, that works out to a contract valued between $4.5 and $5.4 billion. But don’t expect the Federal Acquisition Regulation (FAR) and other bedrock federal procurement laws to apply to this purchase. The Postal Service is exempt from a wide-range of federal procurement rules and has its own purchasing policies called the Supplying Principles and Practices manual.

While the NGDVs are expected to share some design similarities with the current Long-Life Vehicle, the draft specifications describe many enhancements. The new vehicle must accommodate more package volume, have improved ergonomics and functionality, obtain better fuel economy, and produce lower harmful emissions. And, of course, neither snow nor rain nor gloom of night should stay these vehicles from the swift completion of their appointed rounds. If all goes to plan, the first delivery of 3,000 vehicles will be making their rounds by January 2018.