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.

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.

Unpaid 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

Calling the Voyager fuel card program unmanageable and uneconomic, the USPS Office of Inspector General recommends that the Postal Service use another method to manage fuel under its HCR contracts. In its advisory report dated September 30, 2014, the OIG concludes that the Voyager fuel card program has cost more money that it saved and discourages fuel efficiency. The Postal Service spent $5.1 billion for 1.6 billion gallons of fuel for Highway Contract Route (HCR) contracts under the program over the last nine years.

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.