Appeal of
BARCLAY, INC.
Under Contract No. HCR 38117 & HCR 38119
PSBCA No. 2154 & 2155
Appearance for Appellant
John Barclay
Appearance for Respondent
Patrice R. Dickey, Esq.
OPINION OF THE BOARD
Respondent, United States Postal Service, granted Appellant, Barclay, Inc., an economic cost adjustment for its two highway transportation contracts effective from the first day (February 14, 1987) of Respondent's accounting period in which Appellant's request for the cost adjustment was received. Appellant appealed the Contracting Officer's refusal to make the adjustment retroactive to the effective date of the wage determination (July 1, 1986). Appellant elected the accelerated procedure, and the appeal has been submitted on the written record.
FINDINGS OF FACT
Appellant was awarded highway transportation contracts HCR 38117 and 38119 to transport mail between Memphis, TN, and Springfield, MA, and between Memphis and Detroit, MI, respectively, for three-year terms from July 1, 1981 to June 30, 1984. Those contracts incorporated PS Form 7407 (Apr. 1979), "Basic Surface Transportation Service Contract General Provisions." Clause 11 thereof, "Adjustment of Compensation," allowed certain cost adjustments for increased or decreased operating costs. Except for certain restrictions not pertinent here, no time limitation for filing cost adjustment requests was prescribed, nor was there reference to a Management Instruction. (Appeal Files (AFs) 38117, 38119 Tab A).
In 1984 the parties negotiated renewals of the two contracts for an additional term each from July 1, 1984, to June 30, 1988, at an annual rate of $757,025 for HCR 38117 and of $409,060 for HCR 38119 (AFs 38117, 38119 Tab B). The renewal contracts included the October 1981 version of the General Provisions, PS Form 7407. Clause 11, "Adjustment of Compensation," was considerably shortened. Paragraph 1 thereof provided:
"Basis for adjustment
Contract compensation may be adjusted, by mutual agreement of the Contracting Officer and the Contractor in accordance with the provisions of this clause and Management Instruction PO-530-81-4, August 18, 1981, as amended, revised, or reissued as of the date of adjustment, which is hereby incorporated by reference." id.
Forms which were part of the renewal contract were listed and attached. They included Amendment Nos. 1-5 and 7 to PS Form 7407 (Oct. 1981). Amendment No. 5, relating to fuel compensation, stated that it superseded a specific item in Management Instruction PO-530-82-6. That Instruction (Formerly PO-530-81-4) was titled "Highway Contracts - Economic Pay Adjustments - Advertised Contracts." However, a copy of the Management Instruction was not listed as attached to the contract nor was Appellant furnished a copy of the instruction until sometime in November 1986 when Respondent's highway contract specialist mailed a copy after discussions with Appellant (id.; AFs 38117, 38119 Tabs D, E; Appellant's Notice of Appeal (App. N.A.) dated September 1, 1987).
By Contract Route Service Orders for both contracts dated May 15, 1986, Appellant was apprised that the attached "Wage Determination 77-193 (Rev. 10)," dated March 28, 1986, would be applicable to the contracts effective July 1, 1986 (AF 38117 page (p.) 82; AF 38119 p. 89).
On February 20, 1987, Appellant submitted a formal request for a cost adjustment to cover its employee pay increases due to the wage determination and for other cost adjustments, including decreased fuel costs (AF 38117 p. 90; AF 38119 p. 102). Appellant requested the wage rate increase retroactive to July 1, 1986, and included a copy of its payroll sheet (App. Complaint (Comp.) ¶ 1; Respondent's Answer (Ans.) ¶ 1). Respondent has not disputed that Appellant actually incurred the increased wage costs as of July 1, 1986.
After several communications between the parties, Respondent denied Appellant's request to make the adjustment retroactive to July 1, 1986; instead, it granted the request effective February 14, 1987, the first day of Respondent's accounting period in which Appellant's request for the adjustments was received. The Contracting Officer's decision of June 3, 1987, reaffirming that action was timely appealed to this Board. (AFs 38117, 38119 Tabs D, E). In denying the earlier date, Respondent relied on Management Instruction PO-530-82-6, specifically Paragraph IX-D under the heading "Effective Date." That paragraph provides:
"Adjustments in rate of compensation due to new wage determinations . . . are effective on the date the contractor actually incurs these increased costs, provided the adjustment request received within 60 days after the increased costs are incurred. If the adjustment request is not received within 60 days, the effective date is the first day of the accounting period in which the request is received." id.
The only explanation offered by Appellant for the delay in filing for the wage increase cost adjustment is that it was unaware of the Management Instruction until the copy was mailed to it in November 1986, which was "when everyone in our organization was operating at a 100% stage of effort to keep pace with the Postal Service's peak period." (Comp. ¶ 3). Another explanation is a suggestion from an employee of Respondent that it was to Appellant's advantage to delay cost adjustments because the downward adjustment for reduced fuel costs was greater than an upward adjustment for the wage increases (AF 38117 p. 92; AF 38119 p. 104).
DECISION
The only issue in this case is whether the cost adjustment should be made effective as of July 1, 1986, the date the costs were incurred due to the wage determination, or the February 14, 1987, date used by the Contracting Officer based on the Management Instruction.
Appellant did not file a brief. In its Notice of Appeal and Complaint Appellant's basic position is that it was not apprised of the time limitation for filing the cost adjustment. Appellant contends the service order giving notice of the wage determination should have advised of the time limitation, and the renewal contract should have listed the Management Instruction and attached it to the contract along with the other forms referred to in the contract. Although Appellant admits it received a copy of the Management Instruction in November 1986 when it was busy with the seasonal peak of mail, it offers no excuse for the further delay in failing to file the request until February 20, 1987.
As Respondent contends, Appellant is bound by the provisions in the Management Instruction even though it had no actual knowledge of the contents of the Instruction because the Instruction was incorporated in the contract by reference. Peoples Cartage, Inc., PSBCA No. 1254, 85-1 BCA ¶ 17,770, at 88,755.
In Peoples Cartage the contractor prevailed despite incorporation of the Management Instruction in its contract because the Board found circumstances making it practically impossible for the contractor to meet the 60-day requirement, and the contractor diligently filed the request.
The present case lacks such special circumstances. Appellant's excuse for the delay before receiving the Management Instruction in November 1986 is its lack of knowledge of the time limitation. Appellant offers no other explanation for its delay in requesting the adjustment prior to the Christmas season press of business, and no explanation for the nearly two-month delay after that time.
The contract does not provide for an automatic cost adjustment due to new Department of Labor wage determinations. Instead, under clause 11, the compensation "may be adjusted, by mutual agreement" of the parties. The Management Instruction sets forth guidelines for a Contracting Officer in reaching agreements for cost adjustments due to economic conditions over which a contractor has no control. Peoples Cartage, 85-1 BCA at 88,756.
While the Management Instruction should have been furnished to Appellant at the time of renewal, in the circumstances of this case we see no abuse of the Contracting Officer's discretion in refusing to make the adjustment effective prior to February 14, 1987. Contrast W. D. "Dub" Johnston, PSBCA No. 1076, 83-1 BCA ¶ 16,513. We will not disturb his determination of the effective date for the increased cost adjustment.
Appellant's appeal is denied.
Joan B. Thompson
Administrative Judge
Board Member
I concur
James A. Cohen
Administrative Judge
Chairman