USPS open to federal suit

In a ruling that may open up more protests of contract awards from government corporations, the Court of Federal Claims this month declared that the U.S. Postal Service is a federal agency and may be sued in federal court.

The court ruled that although USPS is an "independent establishment," it is still a federal agency, and therefore bid protests may be brought against it in the Court of Federal Claims.

The court order stems from a protest filed in April by Hewlett-Packard Co. against an estimated $500 million USPS contract award to Sun Microsystems Inc. for Unix servers and related technology.

In its protest, HP claimed that its proposal had been evaluated improperly and that the award decision was flawed.

Before the protest was heard, Sun, which was acting as intervenor in the suit, filed a motion to dismiss the protest. The company argued that the Court of Federal Claims does not have jurisdiction over USPS because, by law, USPS is not defined as a typical federal agency. USPS is considered an independent establishment of the executive branch of the government and is exempt from certain regulations, such as the Competition in Contracting Act and the Federal Acquisition Regulation. It is run by an 11-member board of governors, which includes the postmaster general, who is USPS' chief executive officer.

However, the court disagreed with Sun's argument and gave vendors a forum to file bid protests against USPS, which traditionally handles protests internally. The agency was exempted from the General Accounting Office and the now-defunct General Services Board of Contract Appeals bid protest jurisdiction.

"There is now $5 billion worth of [information technology] exposed to protest in the Court of Federal Claims," said Scott McCaleb, a lawyer with Wiley, Rein and Fielding, which represented HP in the case. USPS estimated it spent $5 billion over the past five years on IT services and products. "The precedent has been set," McCaleb said.

William Bennett, chief counsel for purchasing at USPS, said the agency is "disappointed in the ruling with regards to jurisdiction" and plans to appeal the decision. Because HP withdrew its protest against the award to Sun, USPS cannot appeal the judge's ruling at this time.

Bennett said he does not expect the ruling to "engender a flood of protest actions in court because bid protest actions are a fairly unusual event for us."

The ruling reverses traditional logic that USPS is shielded from bid protests, said William Kovacic, professor of law at George Mason University, Fairfax, Va. "This creates another avenue for overseeing the behavior of the Postal Service and would seem to have implications for other quasigovernmental institutions that may have thought [they were] out of the jurisdiction of the Court of Federal Claims," he said.

The decision is not a surprise, said Carl Peckinpaugh, a member of the government contracts section of the law firm Winston and Strawn, Washington, D.C. "Naturally a government corporation is a federal agency unless Congress specifically says you're not," Peckinpaugh said. "For most purposes a government corporation is a federal agency. The court has reconfirmed that."

Although the order provides another channel for vendors to file a protest against USPS, it will not necessarily be easy to do so, said Bob Dornan, senior vice president of Federal Sources Inc., McLean, Va. The Court of Federal Claims finds in favor of agencies about 90 percent of the time, he said, "so it's still an uphill battle."

Allan Burman, president of Jefferson Solutions LLC, Washington, D.C., said the ruling also may make it more difficult for USPS to compete with private mail delivery companies such as United Parcel Service and Federal Express. "The Postal Service is trying to make itself as competitive as it can," he said. "Anything that takes away this ability to compete like a business, I would say that is a negative factor."