Workhorse Group claims the U.S. Postal Service treated it shabbily and never intended to consider its bid for new mail trucks while allowing Oshkosh Truck Corp. to switch its proposed vehicle and lobby to win the multibillion-dollar contract despite a nondisclosure agreement.
Those are among the highlights of a 58-page partially redacted filing Workhorse made public Tuesday in its attempt to overturn the contract that the Postal Service awarded in February to Oshkosh (NYSE: OSK).
The surprising decision led Workhorse (NASDAQ: WKHS) shares to lose half their value in two days of trading. While expecting Workhorse to win the contract, retail investors bid up Workhorse shares in a so-called short squeeze to defeat investors betting on Workhorse’s share price to tumble.
“The USPS’ actions with respect to this procurement were arbitrary, capricious and without rational basis,” Workhorse attorney Thomas McLish wrote in the June 16 complaint that had been under seal in the U.S. Court of Federal Claims in Washington.
“Had the USPS conducted the procurement in accordance with applicable law, the solicitation requirements and fundamental fairness, Workhorse would have been awarded the contract,” McLish wrote.
Workhorse was stunned by the Feb. 23 decision when the Postal Service said it was awarding an initial $482 million to Oshkosh to finish the design of its Next Generation Delivery Vehicle. Oshkosh said last week it is retooling a factory in Spartanburg, South Carolina, to build the first of the new vehicles for delivery in 2023.
“While bid protests are a normal part of the government contracting process, we do not comment on such proceedings,” Oshkosh spokesperson Alexandra Hittle told FreightWaves in a statement.
“Had the USPS conducted the procurement in accordance with applicable law, the solicitation requirements and fundamental fairness, Workhorse would have been awarded the contract.”Workhorse attorney Thomas McLish
Oshkosh has a long track record as a defense contractor to the government, including building the Mine Resistant Ambush Protected all-terrain vehicle that replaced the legendary HUMVEE as the military’s main ground transportation in hostile areas. Earlier this month, it was awarded a $942.9 million contract to update the U.S. Army Stryker infantry carrier vehicles.
Workhorse, Oshkosh and Turkey’s Karsan Bus & Coach Co. were finalists for the postal contract.
Workhorse said the Postal Service never took it seriously and strung along the electric delivery van maker with no intention of awarding it the contract.
“The USPS evidently decided early in the NGDV program that Workhorse would not be the awardee, but it chose not to inform Workhorse of this fact, instead allowing and even encouraging Workhorse to continue to pursue the contract. In the meantime, the USPS put its thumb on the scale against Workhorse,” the filing said.
Workhorse further alleged that Oshkosh went around the nondisclosure agreement each of the competitors signed and lobbied Congress and the White House for the contract. Workhorse said Ford Motor Co. (NYSE: F), which was an Oshkosh co-bidder, did likewise.
The Ford Transit mystery
Workhorse has struggled both financially and operationally for several years. It lives primarily on money borrowed from hedge funds and while it has a backlog of orders for its composite body electric delivery van, it has struggled in ramping up production, completing just seven vehicles in the first quarter.
Workhorse said it designed an innovative all-electric vehicle from the ground up to meet the Postal Service’s specific requirements.
Oshkosh repurposed a Ford Transit van as its prototype in the competition that began in 2015. Oshkosh dropped the Ford vehicle between the prototype and production stage, showing a new vehicle, Workhorse said..
Ford told FreightWaves it is supplying key parts for both the battery-electric and internal combustion engine versions of the new mail trucks, including the engine and transmission for the conventionally powered truck
Electric versus internal combustion
Workhorse proposed a battery-electric powered mail truck to replace the aging and fire-prone Grumman vehicles that make up most of the service’s 200,000-vehicle fleet. The contract that Workhorse said is worth $3.1 billion — earlier estimates placed it at around $6 billion — would cover 50,000 to 165,000 postal vehicles over the next 10 years.
Oshkosh, which makes severe service vehicles like fire trucks, has no experience in light-duty commercial vehicles. It said as much in its 10-K filing with the Securities and Exchange Commission last year. It also does not have significant electric vehicle capabilities, though it recently showed two electric vehicles from its fire and emergency vehicles segment.
“The NGDV contract with Oshkosh Defense includes both zero-emission battery electric vehicles (BEV) and fuel-efficient low-emission internal combustion engine vehicles (ICE) and we have the resources and capabilities to deliver any mix the USPS orders,” Oshkosh said in its statement.
What Workhorse wants
Workhorse wants the claims court to grant a permanent injunction, overturning the award to Oshkosh and reopening the bidding process.
“Workhorse will be irreparably harmed and have no adequate remedy at law for the USPS’ unlawful actions if the award to Oshkosh stands,” the company’s filing said.
“Workhorse would no longer have the opportunity to compete fairly for the award. Workhorse also will have no other avenue by which to recoup the potential profits it would have received had it been awarded the NGDV contract.”