Federal judge denies USPS request to reconsider $67M award in long-running tech dispute with Northrop Grumman

A U.S. Court of Federal Claims judge has denied a request by the U.S. Postal Service to reconsider a $67 million award to Northrop Grumman in a long-running dispute over the provision of postal sorting technology.

In an opinion issued on Oct. 17, Senior Judge Erik Bruggink rejected the government agency’s request to reconsider the merits of Northrop’s entitlement to the sum but agreed to reopen calculations of certain damages.

The latest order represents a step towards resolution in the disagreement over an $874 million firm-fixed-price contract, which was awarded to the federal contracting giant in 2007 to build and install 100 automated sorting machines for flat postal items. Items such as rectangular cards or envelopes, which are larger and heavier than letters but smaller than packages, are known in U.S. Postal Service terminology as “flats.”

Earlier this year in June, the federal judge entered an order in the case rejecting much of Northrop’s claim against USPS for breach of contract damages but awarded the company about $67 million plus interest as payment for the contract balance that remained due.

Despite denying the government’s request to reassess Northrop’s entitlement in the latest order, Bruggink agreed to reopen consideration of damages because of differences in how potential proof of damages was calculated and presented to the court.

Northrop first brought a wide-ranging complaint against USPS in May 2012, in which it issued multiple claims against the federal government agency including for breach of contract, constructive contract change, impracticability and defective specifications.

According to court documents, concerns arose after both parties entered into a prototype contract for a “flats” sorting system. Northrop Grumman sought to claim the cost of subsequent required changes to hardware and software needed to run the sorting machines, each of which would fill half a football field.

USPS then filed a counter-claim for lost savings, which it argued arose from delays and contractual failures during the rollout of the system. This was amended in 2018.

In his earlier opinion in June, Judge Bruggink said: “Ultimately, both parties suffered the foreseeable consequences of overconfidently entering into an enormous production contract before a single successful pre-production machine had been tested.” 

“That overconfidence coupled with subsequent mismanagement by the contracts and accounting administration teams on both sides had a ripple effect that led to ten years of litigation, which ends, in this court at least, without a clear win for either party,” he added.

The government has 60 days to appeal the decision to deny reconsideration of the $67 million award.

A spokesperson for USPS said: “It is USPS policy not to comment on pending litigation.” 

Former Northrop Grumman lead attorney John Chierichella said: “The outcome of the case is the correct one.”

“What remains to be seen is whether the government will continue to rack up interest fees on top of the award by further drawing out the process,” he added.

Northrop Grumman did not immediately respond to a request for comment.