Efforts underway to reverse USPS fleet deal

Lawmakers and lawyers for an Ohio electric vehicle company are working to undo the United States Postal Service's award of a 10-year, $6 billion contract to build the new fleet of mail trucks that would be mostly fueled by gasoline to Oshkosh Defense.

After USPS announced it had selected Oshkosh Defense, the Ohio startup electric vehicle maker Workhorse Group met with the USPS to discuss its bid-selection process. Whatever transpired in those talks, Workhorse promptly hired the powerhouse law firms Akin Gump Strauss Hauer & Field and Mound Cotton Wollan & Greengrass to challenge the contract award.

Three Ohio Democrats quickly lined up behind Workforce, which is based outside Cincinnati in Loveland. Sen. Sherrod Brown and Reps. Tim Ryan and Marcy Kaptur called on the Biden Administration and the USPS to halt the contract so the bidding rules and award can be reviewed.

This is familiar territory for Oshkosh Defense, which has landed in court twice over 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 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. A consistent theme in the more than 60 failed lawsuits Trump's lawyers brought to overturn the election was that ballots that arrived late 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.

'Wasted Opportunity'

"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 he is postmaster general. DeJoy told Congress he would be there for a long time, which some took as a mocking of presidential and Congressional majority power.

President 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 it would have four members from each party plus an 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 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 reticent because, as deeply experienced as it is in Washington lobbying and contracting, it learned that DeJoy had no real plan to deliver EVs?

DeJoy, Again

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.

This is familiar territory for Oshkosh Defense, which has landed in court twice over the past six years over contracts it won from the U.S. Army totaling more than $12 billion.

Oshkosh Sued

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 new 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.

DeJoy strikes again as $4.5 billion order for new mail trucks misses several important opportunities

The multibillion-dollar deal for the shiny new fleet of battery-powered U.S. Postal Service vehicles could be a missed opportunity for addressing climate change and strengthening American manufacturing.

The USPS awarded the 10-year, multibillion-dollar deal to Oshkosh Defense, an American military contractor based in Wisconsin.

As part of the deal, the USPS will make a $482 million advance payment to Oshkosh to complete its vehicle design and build-out and tool a manufacturing plant for the project. That's good news for the parent company whose debt has the lowest corporate bond rating from Moody's, just one step above junk bonds.

Oshkosh originally joined with Ford Motor Co. on its proposal, submitting an early prototype based on a Ford Transit van. But Ford's name is missing from the contract announcements and both Oshkosh and Ford declined to comment on Ford's role in sealing the deal and fulfilling the contract. That's odd given Ford's commitment to becoming an EV, or Electric Vehicle, company.

The full contract price has not been revealed, though it's estimated to be between $4.5 billion and $6.3 billion to procure a new fleet. And it could be well above that depending on the cost per vehicle.

According to Government Executive Magazine, in the initial request for information documents, USPS expected to pay $25,000 to $30,000 per vehicle, which seems astoundingly low, considering the custom specifications.

Underbidding to win a contract and then when the government is committed to submitting demands for much more is, of course, an old trick by military contractors.

Despite the Biden administration's push for a green energy future, only a 10th of the trucks will be electric.

The rest will burn gasoline, though they are designed so that the traditional fossil fuel engines can be replaced with electric motors and batteries later. That may just be an empty promise to curb criticism as retrofitting gas trucks to be electric sounds like an unnecessary expense when the vehicles could be delivered as electric from the get-go.

An all-electric fleet was proposed by a small domestic electric vehicle company, Workhorse Group, in Loveland, Ohio. Workhorse became a Wall Street darling as its stock grew from $2 in March 2020 to about $40 in February. It built prototypes. But USPS expressed concerns about whether a company with only 150 employees could tackle a purchase order of this magnitude.

There's another troubling aspect to the deal with Oshkosh Defense. Though the USPS selected an experienced American firm, the contract requires only that final vehicle assembly take place in the United States. That means Oshkosh can procure parts from international manufacturers instead of buying American.

'Global Purchasing Capabilities'

And that's just how Oshkosh seems to do business. According to its 2020 annual report, the contractor does not have a buy-American strategy. Instead "many costly components such as chassis, engines and transmissions" for the vehicles it manufactures are purchased by utilizing "strategic global purchasing capabilities."

Oshkosh Defense is a $2.2 billion subsidiary of Oshkosh Corporate, which pulled in $6.8 billion in revenue in 2020 from various sectors of vehicle manufacturing from fire trucks to concrete mixers to garbage trucks. That's down from a total of $8.4 billion in fiscal year 2019.

Zach Mottl, head of the Coalition for a Prosperous America (CPA), which advocates for balanced trade and more domestic manufacturing, expressed concerns:

"Postal service procurement offers a tremendous opportunity to strengthen America's automotive and electric vehicle supply chains.

"It would be a tragedy if postal vehicles were primarily made in Mexico or China, even if the assembly takes place here. CPA member companies and other manufacturers should be called upon to provide electric motors, batteries, chassis, and other components."

Not Bound by Fed Rules

The USPS enjoys greater flexibility than other federal agencies to buy only American-made products. It does not have to follow the stipulations of international trade agreements where imported goods are treated the same as American-made products.

And there's the added incentive of President Joe Biden's initiative to strengthen American supply chains. Biden signed an executive order last week to rebuild domestic manufacturing capacity and create more jobs. But Biden does not have direct control over USPS, a government-sponsored corporation rather than a government agency like the old Post Office Department, which had been a Cabinet-level agency.

DeJoy Strikes Again

The modernization of the USPS vehicle fleet surely will add jobs and help the manufacturing economy, but it could do much more under the right leadership.

Postmaster General and CEO Louis DeJoy* is known for dangerously trying to manipulate the election with misinformation about mail-in votes.

While Trump touted an America-first policy, he did nothing to help American manufacturing. For example, from when Trump assumed office through the pre-pandemic year of 2019 exports of American goods to China fell 8.5%.

The irony is that Biden is taking steps to increase American manufacturing – less than two months in office. It's unclear if DeJoy will work to match Biden's agendas.

Few Electric Trucks

Another pain point of the new mail-truck deal is only 10% of the vehicles will be electric, a fact left out of the USPS announcement.

That any trucks would have gasoline engines emerged only when DeJoy was questioned at a House Oversight and Reform Committee hearing after the announcement. Biden wants to move the entire fleet of government vehicles to electric power as part of his sweeping climate agenda.

When asked why the numbers aren't reversed, with 90% of the new postal trucks being electric, DeJoy cited a lack of funds. He said if Congress or Biden wanted to give the USPS $3 billion to $4 billion, it could be done.

That would be a significant policy issue because USPS does not receive any taxpayer monies. It operates wholly on money earned from the sale of postage, products and services. Given Detroit's rapid move toward EVs and the fact that the losing American bidder would only make EVs, DeJoy's figures seem difficult to believe.

A contract for mostly, and perhaps only, gasoline-powered trucks represents another missed opportunity – this time to help the planet. The gas-powered vehicles could be converted down the road, however, or at least that is what DeJoy says though its hard to imagine it actually happening.

At least the new trucks will get better gas mileage than the current Grumman dinosaurs, which average around eight mpg.

"Our fleet modernization also reflects the Postal Service's commitment to a more environmentally sustainable mix of vehicles," DeJoy said in a statement. "Because we operate one of the largest civilian government fleets in the world, we are committed to pursuing near-term and long-term opportunities to reduce our impact on the environment."

More 'Fuel-Efficient'

The USPS says the new trucks will be "fuel-efficient low-emission" but has provided no specifics like mpg for fuel consumption while idling.

"It's disappointing that [the USPS contract] announcement does not immediately commit to electrifying one of our nation's largest vehicle fleets," Robbie Diamond, the CEO of nonprofit Securing America's Future Energy, said in a statement.

"This contract is a golden opportunity to stimulate the domestic EV market and supply chain, and a commitment to electrifying the [postal fleet] would provide a clear incentive for further domestic EV industry development along the entire supply chain, from minerals to markets."

The USPS operates some 230,000 vehicles, with 190,000 trucks delivering mail six or seven days a week. They are a mix of purpose-built and commercial-off-the-lot vehicles, as the new fleet will be. The new vehicles—dubbed the Next Generation Delivery Vehicles, or NGDVs—will replace the gas-guzzling Grumman LLVs (long-life vehicles), which were intended to be junked after 24 years. The oldest have been on the road since 1987, some 34 years ago. The newest were built in 1994.

Oshkosh, which initially teamed up with Ford in the bidding process, has yet to complete the design for the specialized right-hand-drive vehicles. That raises questions about whether it had the financial resources to finish the design work without the upfront infusion of cash from USPS.

But the company does have some experience building hybrid vehicles; its product offering includes a hybrid diesel-electric system. We couldn't find, however, any purely electric vehicle in its fleet of military and commercial offerings.

Assuming all goes well, the new vehicles will begin delivering mail in 2023, bearing fruit after a solicitation process going back to 2015, which began with 15 pre-qualified bidders. Initial contenders included Fiat Chrysler and Nissan. The bidding process had several hiccups along the way, from faulty prototypes to pandemic delays.

But the delivery of mail trucks may be further delayed. Should Workhorse Group, the Ohio electric vehicle startup company, appeal the selection of Oshkosh, expect further delays in getting new trucks no matter what kind of motors power them. Workhorse has asked for more information from the USPS on the selection of Oshkosh.

"The company intends to explore all avenues that are available to non-awarded finalists in a government bidding process," Workhorse said in a statement.

*Correction: Postmaster General Louis DeJoy was hired by the board of governors of the U.S. Postal Service, members of which are nominated by the president and confirmed by the Senate. DeJoy was erroneously identified as a Trump appointee in an earlier version of this story.

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