Tech

Workhorse says Postal Service broke its own rules in new mail truck contest

EV startup Workhorse has accused the United States Postal Service of bias in choosing defense contractor Oshkosh to build the next-generation mail truck, and claims the agency committed “countless errors” during the selection process. Workhorse also alleges that the new mail truck that Oshkosh and the USPS debuted in February is entirely different from the one the defense contractor tested during the yearslong competition, and that it doesn’t have a working prototype, something the startup says is blatant evidence of unfair treatment.

These new allegations are at the heart of the complaint that Workhorse filed in the US Court of Federal Claims on June 16th, which was unsealed this week. (The court had allowed time for Workhorse, the government, and Oshkosh to agree on certain redactions before making the complaint public.) If Workhorse can prove to the court that the USPS didn’t follow its own rules in giving the award to Oshkosh, there’s a chance that the judge could overturn the award.

While the court fight has only just begun, the outcome could have an impact on how quickly the USPS moves to electrify its fleet, something that President Biden has said is a priority for his administration. Oshkosh and the USPS have claimed that the new truck can be powered by either an internal combustion engine or an electric drivetrain, though neither has actually showed how. Oshkosh is supposed to make anywhere between 50,000 and 165,000 of them over the next 10 years, though Postmaster General Louis DeJoy said earlier this year that only 10 percent of the new fleet will be electric to start, and that shifting more of it to electric power would cost billions of dollars.

“While bid protests are a normal part of the government contracting process, we do not comment on such proceedings,” Oshkosh Defense said in a statement. The USPS said it does not comment on active litigation.

A new mail truck is something that is desperately needed, as most of the current vehicles (which were designed by defense contractor Grumman) have been on the road for decades and have blown past their expected retirement date. They lack modern safety features, air conditioning systems, and are costing the USPS hundreds of millions of dollars in maintenance. Some have even caught fire.

This is why, in 2015, the USPS kicked off a contest to develop a new mail truck, or “Next Generation Delivery Vehicle” (NGDV). But that competition has almost entirely played out in secret over the last half-decade. The nearly 60-page complaint that was made public this week, while written from Workhorse’s perspective, offers one of the most detailed looks at how the contest played out.

The Ohio startup would have received a much-needed boost from the USPS contract, which could ultimately be worth up to $6 billion. Workhorse says in the complaint that it spent “over $6 million designing, prototyping and refining a proposed NGDV.” It also paid $7 million to buy out manufacturing partner VT Hackney in 2019, which decided to drop out of the competition.

Workhorse built six prototypes of a delivery vehicle that it says was designed from the ground up, as opposed to Oshkosh’s original entrant, which was based on a Ford Transit. The startup says it completed the design in just one year and built these prototypes in “a mere eighteen weeks.”

“[Our] prototypes successfully completed the USPS test requirements of 24,000-mile durability testing and the 120 simulated delivery routes without any safety-critical incidents,” the company writes.

But when the prototype phase wrapped up, the startup argues that the USPS unfairly evaluated Workhorse’s prototypes and its ability to produce large quantities of the new mail truck. The USPS “failed to meaningfully notify Workhorse of perceived deficiencies in its proposal and that misled Workhorse as to the areas Workhorse needed to address in its updated proposal,” the company says, and ultimately the agency judged “Workhorse far more harshly and [held] it to far stricter standards” than Oshkosh or other competitors.

Specifically, Workhorse believes the USPS wrongly scored the startup on the various categories that the agency said it would evaluate in picking a winner — things like total cost of ownership, prototype performance, quality of the design and technical approach, and supplier capability.

Workhorse says that it told the USPS in its proposal that its electric vehicles, which have fewer moving parts, could “reduce long-term vehicle maintenance expenses by approximately 60 percent as compared to fossil-fueled trucks” despite similar up-front costs. This was something the USPS said it valued highly. In its solicitation for prototypes, the agency said it would pick the design that “offers the best value to the Postal Service,” with “value” defined as “weighing total cost of ownership, technical evaluation results, and risk.”

Workhorse says the USPS whiffed on how it calculated total cost of ownership, as it still gave Oshkosh the top score. It also claims the USPS wrongfully blamed Workhorse for an incident during testing where one of its prototypes rolled away into a ditch. The test driver — supplied by the USPS — was at fault in that crash, Workhorse claims.

While Workhorse has inked some small deals with big companies like UPS over the last few years, the company has struggled to make money, instead turning to loans from hedge funds and selling parts of its business to survive. The startup says the USPS “afforded undue weight to Workhorse’s prior experience” but doesn’t go into further detail in the complaint about how its history may have impacted the agency’s decision. Oshkosh, on the other hand, has a long history of bidding for and winning government contracts.

Still, Workhorse argues, the USPS “put its thumb on the scale against Workhorse.”

“No rational analysis could conclude that the best value for the USPS’s fleet for the next twenty years is a vehicle that has yet to be built (much less prototyped), uses an internal combustion engine rather than an emissions-free electric motor, and that almost certainly will be more expensive to own and operate than Workhorse’s existing and tested vehicle,” the startup writes.

According to the complaint, Workhorse initially tried to plead its case with the USPS outside of federal court. It filed a “good faith disagreement” with the USPS in March in an attempt to make the agency withdraw its award based on these complaints. But the company claims it was completely ignored by the USPS during nearly the entire 10-day response period. And at the end of that 10-day stretch, the USPS denied the attempt with what Workhorse describes as a particularly nasty letter that raised issues with the startup’s proposal that the agency hadn’t previously mentioned.

“[T]he USPS spent the resolution period authoring a lengthy screed aggressively attacking Workhorse and its years-long effort to assist the USPS in developing a first-rate NGDV,” Workhorse writes in the complaint. “The USPS delivered its scorched-earth ‘resolution’ decision to Workhorse on the evening of the tenth day, March 22, 2021.”

“Aside from its remarkably hostile tone, the USPS’s Response Letter is full of misleading statements, mischaracterizations, distortions, and strawman arguments. There can be little doubt that it was written for an audience other than Workhorse,” the startup writes.

In that letter, though, Workhorse says the USPS admitted that Oshkosh submitted two separate vehicle designs — one combustion engine and one electric — in the final phase of the contest that were different from the Ford-based van it had put through testing. It was the USPS that decided to combine these two proposals from Oshkosh, according to Workhorse.

Another thing Workhorse takes issue with is that Oshkosh does not have a history of developing electric vehicles. In late 2020, Oshkosh itself even warned investors in a filing with the SEC that it “may not have the expertise or resources” to compete as the market shifts to electric vehicles.

This is not just an ideological argument; Workhorse lays out the case in its complaint that Oshkosh’s inexperience with developing zero-emissions vehicles could cause trouble, as the USPS says it wants the new fleet to comply with the National Environmental Policy Act, which is supposed to make sure that the federal government “gives proper consideration to the environment prior to undertaking any major federal action that could significantly impact the environment.” There’s a chance, Workhorse argues, that the USPS may need to change the timeline or scope of the NGDV order — or terminate the contract entirely — if the fleet isn’t compliant.

“The USPS is gambling that not only will Oshkosh’s maiden foray into electric vehicle manufacturing be successful, but also that Oshkosh will succeed while at the same time producing hundreds of thousands of a gas-burning version,” Workhorse writes.

What’s more, Workhorse argues that Oshkosh improperly lobbied the House of Representatives, the White House, the USPS, and the Postal Regulatory Commission during the bidding process, as did Ford. Workhorse says this violated the NDA that the USPS made competitors sign as well as the ground rules for the contest. But Oshkosh wasn’t punished, while the USPS hammered Workhorse for making public statements about its prospects.

“In contrast to its complete disinterest in the Oshkosh team’s NGDV lobbying campaign aimed at every entity involved in the award decision and funding of the procurement, in violation of the NDA and the Ground Rules, the USPS castigated Workhorse for making innocuous and good-faith public statements confirming its participation,” the startup writes. “The double standard on display here is as troubling as it is obvious.”

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