$6 Billion Contract Comes Under Congressional Scrutiny as Losing Bidder Weighs Legal Options
Lawmakers and lawyers for an Ohio electric vehicle company are working to undo the U.S. Postal Service’s award of a 10-year, $6 billion contract to Oshkosh Defense to build the fleet of mail trucks that would be mostly fueled by gasoline.
After USPS announced that it had selected Oshkosh, the rival startup called Workhorse Group met with the USPS to discuss its bid-selection process. Whatever transpired, Workhorse promptly hired the powerhouse law firms Akin Gump Strauss Hauer & Field and Mound Cotton Wollan & Greengrass to challenge the contract award.
Oshkosh Defense landed in court twice in the past six years over contracts it won from the U.S. Army totaling more than $12 billion.
Three Ohio Democrats quickly lined up behind Workhorse, which is based outside Cincinnati in Loveland. Sen. Sherrod Brown and Reps. Tim Ryan and Marcy Kaptur called on the Biden administration and USPS to halt the contract so the bidding rules and award can be reviewed.
Oshkosh Defense landed in court in the past six years over contracts it won from the U.S. Army totaling more than $12 billion.
The lawmakers, in their letter to President Joe Biden, sought a review to ensure the contract was not awarded through inappropriate political influence.
They took direct aim at Louis DeJoy, the North Carolina logistics executive and major Republican donor installed in June 2020 as postmaster general by Trump’s hand-picked USPS Board of Governors. DeJoy quickly set out to slow mail delivery just as millions of Americans were switching to mail-in ballots, partly to avoid possible coronavirus exposure at polls.
A consistent theme in the more than 60 failed lawsuits Trump’s lawyers brought to overturn the election was that late arrival ballots should not have been counted.
The lawmakers wrote that the “tainted tenure of Postmaster General DeJoy calls into question the awarding of this contract” and raises concerns about “inappropriate political influence.”
The lawmakers also complained that awarding the contract to Oshkosh, a longtime builder of military transport vehicles, is “without any commitment to making these vehicles either hybrid or 100% electric.” They noted that Biden promised to fulfill his desire to make the entire fleet of 650,000 federal vehicles battery-powered.
“We have serious concerns it could be a wasted opportunity to address the climate crisis and the reindustrialization of our manufacturing sector,” they wrote.
Taking it a step further, Rep. Kaptur – co-chair of the House Auto Caucus and chairwoman of the House Appropriations Subcommittee on Energy and Water Development – introduced a House resolution to halt the contract.
How long DeJoy will remain in power is uncertain. What is certain is that the contract with Oshkosh is safe so long as DeJoy is postmaster general. DeJoy told Congress he would be there for a long time, which some took as mocking presidential and Congressional majority power.
Biden does not have the authority to fire DeJoy because USPS is a corporation owned by the federal government and removal is the province of the USPS board.
Biden recently nominated two Democrats and an Independent to fill out the USPS board of governors. If all three are confirmed by the Senate, there would be four members from each party plus Independent Amber McReynolds, the chief executive of the National Vote at Home Institute.
New Board Members
Biden is hoping to shift the power on the board from Republican to Democratic. If McReynolds were to vote with the Democrats, as is widely anticipated, DeJoy could be removed. With DeJoy gone, USPS certainly would have options with its contract with Oshkosh, at least when it comes to the number of electric vehicles in the mix.
The contract is still in the design phase and only $482 million has been awarded so far, money the financially troubled defense contractor needed to assuage investor concerns. That money is to be used to complete the design and build a factory to make the mail trucks.
One issue in the award process is that Oshkosh is an established, albeit financially troubled, firm while Workhorse Group is a startup. The government has financed many startups, notably database maker Oracle. Had the initial USPS contract award been made to Workhorse it would have had the capital to build a factory and finish the design of an all-electric vehicle fleet. This means choosing either Oshkosh or Workhorse carried risks, but Workhorse would not have built any gasoline-powered trucks.
Ford and GM Opt Out
It is unclear why neither Ford nor General Motors, both of which have pledged to stop building gasoline-burning cars within the next 15 years, were not the prime bidders.
Ford entered the final bidding process as an Oshkosh partner with a prototype for the new mail truck based on the Ford Transit van, either as a hybrid or fully electric option. However, when the USPS announced it had awarded Oshkosh the contract, Ford was not mentioned by either company. And the auto giant remained silent.
Ford has big plans with EVs in its near future. In fact, president and CEO Jim Farley said the automaker is “all in” when it comes to electric vehicles, according to the company’s Q4 2020 earnings release. “The transformation of Ford is happening and so is our leadership of the EV revolution,” he said. Ford is allocating a whopping $29 billion in capital to the areas of electric vehicles and autonomous driving.
Curiously, telephone calls to Ford were sent to Oshkosh for comment. When asked if Ford were still partnering with Oshkosh on the mail fleet, an Oshkosh spokesperson said the company “was not releasing its supply chain” yet.
This raises an interesting issue for Congress. Did Ford become hesitant because, as deeply experienced as it is in Washington lobbying and contracting, it learned that DeJoy had no real plan to deliver EVs?
The bid award last month set off a firestorm after DeJoy revealed that he foresees only 10% of the up to 165,000 vehicle fleet being electric, with 90% gasoline-powered trucks. That only came out because he was questioned at a House Oversight and Reform Committee hearing after the announcement of the contract with Oshkosh.
A USPS spokesperson, in an email to DCReport, said the contract terms are secret. We think that raises serious questions about accountability for a government-sponsored organization, which we think should be as accountable as a federal agency as the old postal service was.
DeJoy tried to mollify congressional concerns by saying the gas-guzzlers could be retrofitted to be electric down the road, an absurd notion. It’s more likely that all of the new postal delivery trucks, which on average will travel 17 miles per day, will have gasoline engines.
Workhorse surely isn’t buying it. Among its options are to challenge the award with the Postal Service’s supplier disagreement official. Reasons for the challenge could run the gamut from conflicts of interest to a flawed evaluation of the proposal.
Workhorse could also appeal the bid-award decision in the U.S. Court of Federal Claims, but could only go that route if it can show the contract was awarded to Oshkosh Defense via fraud or criminal misconduct or obtained in violation of the regulations, according to the Postal Service regulations.
In 2019, Illinois truck maker Navistar sued Oshkosh Defense and the U.S. Army over the military’s decision to not competitively procure its Family of Medium Tactical Vehicles (FMTVs) and to extend its five-year contract with Oshkosh to 10 years. Since 2009, the Army has spent more than $6 billion on FMTVs from Oshkosh. The award was also challenged by BAE Systems, Tactical Vehicle Systems LP of Sealy, Texas.
The investigative arm of Congress, the Government Accountability Office, challenged the contract award and recommended “that if, at the conclusion of the reevaluation, Oshkosh is not found to offer the best value, the agency should terminate Oshkosh’s contract for the convenience of the government. We further recommend that Navistar and BAE be reimbursed the costs of filing and pursuing the successful grounds of their protests related to their challenge of technical and past performance evaluation issues, including reasonable attorney fees.”
The U.S. Court of Federal Claims eventually ruled in favor of the Army and Oshkosh. The Army argued its urgent need for the vehicles trumped a competitive process.
In 2015, Lockheed Martin challenged the Army’s contract award to Oshkosh to build a fleet of joint light tactical vehicles to replace Humvees, a deal worth nearly $7 billion. Lockheed first filed a protest with the U.S. government Accountability Office (GAO) which halted production for 100 days. Before that window ended, Lockheed switched gears and filed a lawsuit with the U.S. Court of Federal Claims. Lockheed eventually dropped its lawsuit in February 2016.
The Oshkosh spokesperson said only the USPS will determine the mix of vehicles and how much of the fleet will be electric, but noted they are “100% confident” they could meet an increase in electric vehicles if the fleet makeup changes.
Calls to Workhorse were not returned.
Additional reporting by David Cay Johnston