Transportation companies again dominate this year’s Top 150 U.S. Postal Service Suppliers list. All told, USPS spent nearly $16 billion on purchases in FY 2018, about $900 million more than last year.  Not surprisingly for an agency charged with moving the mail, six of the top ten contractors provide transportation services or equipment.

The Top 150 list has been compiled annually since 1999 by David Hendel, a partner in the firm’s Technology, Manufacturing, and Transportation group and leader of the firm’s Postal Contracting team.  The list is compiled from data received in response to Freedom of Information Act requests.

The Postal Service spent $15.9 billion on all outside purchases in FY 2018, of which $9.8 billion went to the agency’s Top 150 suppliers. The Top 150 received $540 million more than last year’s Top 150 group, and $1.5 billion more than those in FY 2016.

The top 10 largest suppliers earned $4.2 billion, which is one quarter of the Postal Service’s total spend and $700 million more than last year’s Top 10.  They also collected $3 billion more than the next ten largest suppliers.
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Every year or so, the U.S. Postal Service changes the standard Terms and Conditions that apply to its newly awarded Highway Contract Route (HCR) and Contract Delivery Service (CDS) contacts. When this occurs, the new terms only apply to newly awarded contracts–existing contracts are unaffected and retain the same terms as when awarded.

But this year, the Postal Service has sought to apply new Terms and Conditions to existing CDS contracts as well as newly awarded ones. In an email to its CDS contractors, the Postal Service asked them to sign, without any “alterations or additions,” a contract modification that incorporated the new terms. If the contractor did not so, the Postal Service’s email threatened contract termination:

“Because of the Postal Service’s interest in maintaining consistency across its many CDS contracts, please note that a failure to respond to this correspondence … may lead the Postal Service to consider termination of the subject contract.”

After receiving this email, many contractors asked me: “Can the Postal Service really do this?” In my opinion, several legal arguments, if upheld, would make the resulting modification unenforceable. For example, the modification might fail for lack of consideration, because it gave the Postal Service what it wanted without giving anything that contractors valued in return. And it might fail for violation of the implied covenant of good faith and fair dealing, because it seeks to recapture benefits that were foreclosed at the time of contract award. But I think the best argument against its enforceability is based on the legal theory of coercion and duress. Normally, this is a difficult argument to make, but here the elements seem apparent from the Postal Service’s email itself.
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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.
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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.
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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

Top 150 USPS Suppliers in FY 2013Federal Express Corporation was the U.S. Postal Service’s largest contractor in fiscal year 2013. The next largest USPS supplier was EnergyUnited, which provides consolidated telecommunication and energy billing services. Military air mail transportation provider Kalitta Air was third. Six of the Postal Service’s top 10 suppliers served the agency’s transportation needs. The Top 150 USPS supplier list is compiled annually by David P. Hendel, a partner in Husch Blackwell LLP’s Government Contracts practice group who focuses on Postal Service contracting matters.


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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.


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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.”  


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