EXCLUSIVE-Workhorse to challenge USPS decision to award contract to Oshkosh - source

(Adds details, Workhorse declining comment)

WASHINGTON, June 16 (Reuters) - Electric vehicle company Workhorse Group will file a legal challenge to the U.S. Postal Service decision in February to award a multibillion-dollar, 10-year contract to Oshkosh Defense to manufacture a new generation of postal delivery vehicles, a source familiar with the matter told Reuters.

The contract, which could be worth more than $6 billion in total, allows for delivery of between 50,000 and 165,000 of the vehicles over 10 years that will be a mix of internal combustion-powered and battery-electric vehicles.

Workhorse had proposed building an all-electric vehicle fleet for USPS and has won the support of many U.S. lawmakers. USPS did not immediately comment. The bid protest will be filed in the U.S. Court of Federal Claims as early as Wednesday, the source said.

Workhorse declined to comment. Its shares were more than 10% higher on the Reuters report in midday trading.

Last month, the U.S. House Oversight and Reform Committee voted to authorize $8 billion for USPS.

Postmaster General Louis DeJoy has committed to at least 10% of the fleet being electric vehicles but he said in a letter in March to lawmakers that with government assistance the USPS could commit to making a majority of the fleet electric within 10 years. He added that the USPS needs about $8 billion to electrify the new fleet to the “maximum extent” feasible.

In January, U.S. President Joe Biden vowed to replace the U.S. government’s fleet of roughly 650,000 vehicles with electric models and has called for funding to electrify the fleet. (Reporting by Jarett Renshaw Writing by David Shepardson Editing by Heather Timmons and Mark Potter)