Workhorse Pursues Long-Shot Bid to Overturn Postal Truck Award

(Bloomberg) -- Workhorse Group Inc. faces a tough road to overturn its loss of a $6 billion contract award to build trucks for the U.S. Postal Service due to regulations designed to protect the integrity of government bidding and keep politics out.

The company itself forecast a “prolonged process” Thursday as it considers challenging Oshkosh Corp.’s win in the contest to build a next-generation fleet to replace the Postal Service’s decrepit, polluting mail trucks.

Workhorse will likely turn first to an internal U.S. Postal Service process and from there can go to federal court, according to experts in contracting. Its best hope may lie with a change in the service’s governing board proposed by President Joe Biden. But even that isn’t a guarantee.

Critics have said the postal contract doesn’t comport with Biden’s order for the government to transform its fleet into clean-energy vehicles. The Postal Service operates 225,000 vehicles, making it the largest part of the federal fleet. Many of the current USPS vehicles only get about 10 miles per gallon, or worse gas mileage than a Humvee.

But only 10% of the Oshkosh mail-delivery vehicles are to be electric, Postmaster General Louis DeJoy told lawmakers the day after the Feb. 23 contract award. He said they have an option to build more electric but that would cost billions of dollars more. Oshkosh says its vehicles will be fuel efficient.

Workhorse shares have been reeling since the Wisconsin-based rival bidder was awarded the 10-year contract to build as many as 165,000 postal trucks. Workhorse closed down 3.1% to $14.46 in New York trading. Oshkosh was off 2.1% at $106.52 at the close on Thursday.

Electric-truck maker Workhorse, based in Loveland, Ohio, said it met Wednesday with representatives of the Postal Service to learn more about the agency’s surprise decision.

“Yesterday’s meeting with the USPS marked the first step in what we expect may be a prolonged process to explore our options and possibly pursue further action,” Duane Hughes, Workhorse’s chief executive officer, said in a statement on Thursday.

Workhorse has retained Akin Gump Strauss Hauer & Feld LLP and Mound Cotton Wollan & Greengrass LLP and “will also look to other options available to us,” Hughes said.

Katie Hoxtell, an Oshkosh spokeswoman, declined to comment on the award citing a non-disclosure agreement. David Partenheimer, a spokesman for the Postal Service, said it had no comment after the meeting with Workhorse.

A first challenge to the award would be heard by the Postal Service’s supplier disagreement official, said Glenn Smith, a contracts attorney with Wheeler Upham in Grand Rapids, Michigan.

Reasons for the challenge can include things such as a flawed evaluation of the proposal, conflicts of interest, or violations of regulations, Smith said.

Barbara Kinosky, managing partner of Centre Law & Consulting, said the internal Postal Service review usually ends up confirming the selection. “These internal dispute resolution processes don’t really bring the relief” that contract losers seek, she said.

Decisions of the supplier disagreement official may be appealed to a federal court, but only on grounds that the decision was procured by fraud or criminal misconduct, or obtained in violation of the regulations, according to the Postal Service regulations.

“As a general matter, the odds are against the protester” in federal court, said W. Barron Avery, a partner at Baker & Hostetler in Washington. Such cases go to the U.S. Court of Federal Claims.

Biden Nominations

Representative Tim Ryan, an Ohio Democrat, said the best avenue to overturn the reward may be by fast-tracking Biden’s three nominations to the agency’s board, who could shift control of the board from Republicans and replace DeJoy. The three await action by the U.S. Senate.

“Getting new board members in and a new head over there would be our best chance,” Ryan said in a phone interview. “That’s a step we can take and explore if this is a violation of President’s Biden’s order” on electrifying the government’s vehicle fleet.

The board reviews capital investments, a role that could give it a foothold to consider the vehicles contract.

Postal scholar Paul Steidler said he’s not sure the board could intervene in the contract. “The short answer is, probably not,” he said.

“It’s certainly something they shouldn’t do because it gets into micro-managing,” said Steidler, a senior fellow at the Lexington Institute.

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