Postal Service:

Issues Related to Settling a Disputed Contract for Air Transportation

GGD-94-92: Published: Mar 24, 1994. Publicly Released: Mar 24, 1994.

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Pursuant to a congressional request, GAO provided information on the U.S. Postal Service's (USPS) court-approved settlement of a disputed contract for air transportation services, focusing on whether the: (1) payments to the awardee were legitimate; (2) settlement served the best interest of USPS; and (3) USPS followed proper contracting procedures by settling the dispute instead of resoliciting the procurement.

GAO found that: (1) the awardee's settlement payments represented the full settlement costs that might be due it under the contract's termination provisions and did not reflect any real work completed by the awardee; (2) the awardee used the settlement payments to cover its bid preparation and start-up costs, attorneys' fees, and commitment to purchase 23 Boeing 727 aircraft; (3) the awardee agreed to release the remaining litigants from any claims because one of the litigants agreed to purchase most of the aircraft; (4) USPS reasonably determined that the settlement would be less costly and quicker than resoliciting the procurement; (5) the financial benefits expected from the settlement were overstated because start-up operations after settlement took longer than expected; (6) no significant changes occurred between the time of the original award and the settlement that would have made resolicitation preferable; (7) the decision to resolve the procurement through litigation and a court-approved settlement was reasonable and in accordance with procurement regulations, and enabled USPS to satisfy its own needs and the interests of the litigants and the court; and (8) USPS would have been required to resolicit the procurement if it had not reached a settlement with the parties.

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