Contracting

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FedEx was the U.S. Postal Service’s largest contractor in fiscal year 2012 in a list of the agency’s Top 150 suppliers compiled and released today by Husch Blackwell’s Postal Service Contracting practice group. This marks a decade of Federal Express Corporation holding the No. 1 spot on the list. The next largest USPS supplier is military mail shipper Kalitta Air. Six of the Postal Service’s top ten suppliers served the agency’s transportation needs. The list is compiled annually by David P. Hendel, a partner in the firm whose government contracts practice focuses on Postal Service contracting matters.

While dozing over some catalogs that had arrived in the mail, I was visited by three Postal Service ghosts:  the Ghosts of Postal Past, Postal Present, and Postal Future.

The Ghost of Postal Past

The Ghost of Postal Past was a merry ole soul, though not even that old. He presented himself to me as he was in Fiscal Year 2006 – just six years ago. Back then, he was quite large. He had 673 processing facilities, 36,721 retail and delivery facilities, and a total volume of 213 billion pieces of mail. He had revenues of nearly $73 billion – almost $3 billion more than the year before. This had been his fourth consecutive year of positive net income, and the seventh consecutive year of increasing total factor productivity.

Contractors are entitled to recover consultant and attorney costs reasonably incurred in preparing, pricing, and negotiating a change order under federal government contracts, including U.S. Postal Service contracts. That’s the holding in Tip Top Constr., Inc. v. Donahoe, 695 F.3d 1276 (Fed. Cir. 2012). The court overturned a Postal Service Board of Contract Appeals decision that had erroneously limited the contractor’s recovery of these costs. End result: if an agency changes your contract (whether by unilateral direction or constructive change), your request for an equitable price adjustment may include reasonable consultant and attorney costs.

The Postal Service spent $2.8 billion on 16,993 Highway Contract Route (HCR) contracts in 2011, according to a newly released audit report by the U.S. Postal Service Office of Inspector General (OIG).  The OIG conducted the audit to assess the integrity of data in the Transportation Contract Support System (TCSS). OIG found the TCSS data is accurate. In a spot-check of 196 sampled contracts, OIG did not find a single data error. But there was one area of disagreement with management. OIG contended that 94% of the sampled contracts did not have proper funding approval documentation prior to contract award. Postal management disagreed with this conclusion, saying that advance funding approval was obtained through other methods.

A double whammy has hit the U.S. Postal Service. At the close of business on August 1, 2012, the Postal Service failed to make a $5.5 billion payment owed the U.S. Treasury. And on September 30, 2012, the Postal Service defaulted on another $5.6 billion payment. Will this $11.1 billion default impact postal contractors?  No it won’t, according to the agency. But it certainly won’t help those who are doing business with the Postal Service.

Yet another U.S. Postal Service manager has pled guilty to fraud and corruption charges relating to USPS transportation contracts. In March 2012, the former USPS Manager of Postal Vehicle Service Operations for the Bay Valley District in Oakland, CA was indicted in a $4.4 million fraudulent billing scheme. Last year, five Postal Service officials at the Detroit, MI Vehicle Maintenance Facility were charged with similar crimes. One might well wonder how many more such episodes need to be uncovered before the Postal Service issues binding procurement regulations and institutes effective protest procedures. Here’s what happened in the most recent case.

Personal use of an undeliverable coupon by a mail delivery contractor violated postal regulations but did not justify the default termination of her contract.  The particular post office had allowed others in the office to use such undeliverable items, though that local practice violated postal regulations.  Although the Postal Service Board of Contract of Contract Appeals (PSBCA) decided the case in the contractor’s favor, one judge dissented and believed the termination was justifiable.  See Laura K. McNew, PSBCA No. 6286, April 23, 2012.

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.

Doing business with the U.S. Postal Service has always been different than contracting with other federal agencies and commercial entities. As an independent agency, the Postal Service is exempt from most federal procurement laws and regulations. That’s why our firm is presenting a full-day seminar on “Postal Service Contracting: What Every Contractor Should Know,” at the Westin Tysons Corner hotel on Thursday, May 10, 2012. Click here to learn more or click here to register.

Postal Service contracting highlights in 2011, and a look ahead to 2012, will be the focus of a complimentary webinar presented by Husch Blackwell on Tuesday, February 7, 2012 at 1 p.m. EST.

Postal contractors continue to be impacted by USPS cost-cutting efforts, reductions in requirements, and a renewed emphasis on obtaining competition. These pressures, …