April 26, 1993
Appeal Of
D'S NATIONWIDE INDUSTRIAL SERVICES, INC.
Under Contract No. HCR 95034
PSBCA No. 3071
APPEARANCE FOR APPELLANT:
Donald Glaude
APPEARANCE FOR RESPONDENT:
Elena V. Alejandre, Esq.
OPINION OF THE BOARD
Appellant has timely filed an appeal from a decision of a Contracting Officer terminating its highway transportation contract for default. A hearing was held at the election of the parties.
Findings of Fact
1…Respondent, United States Postal Service, issued solicitation number 948-165-89 on June 30, 1989, seeking bids for a contract for highway transporta-tion services between San Jose and Gilroy, California, for the period from September 1989 to June 1993. Appellant, D's Nationwide Industrial Services, Inc., submitted the low bid on July 31, 1989, in the amount of $60,000 per annum (Appeal File (AF)-1).
2. Included in the solicitation was a copy of PS Form 7407T, "Basic Surface Transportation Services Contract General Provisions" (March 1989), the general provisions which were to be included in the transportation contract (AF-3). Paragraph 16 of the general provisions was entitled "Termination By the Postal Service for Default" and provided in pertinent part:
"(a) The Contracting Officer may terminate this contract for default:
(1) For Contractor's failure to perform service according to the terms of the contract
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(3) For the Contractor's disobedience of the instructions of the Contracting Officer." (AF-5)
3. Also attached to the solicitation and to be included in the contract was a copy of PS Form 7382 (Dec. 1984), "Additional General Provisions For Service Contracts." That provision stated that the contract would be subject to the Service Contract Act of 1965, as amended (41 U.S.C. §351 et. seq.). Thus the contractor was required to pay each service employee certain minimum wages and fringe benefits set forth in a Department of Labor wage determination attached to the contract (AF-5).
4. Paragraph (i) of Form 7382, supra, stated:
(i) The contracting officer shall withhold or cause to be withheld from the Government prime contract under this or any other Government contract with the prime contractor such sums as an appropriate official of the Department of Labor requests or such sums as the contracting officer decides may be necessary to pay underpaid employees employed by the contractor or subcontractor. In the event of failure to pay any employees subject to the Act all or part of the wages or fringe benefits due under the Act, the agency may, after authorization or by direction of the Department of Labor and written notification to the contractor, take action to cause suspension of any further payment or advance of funds until such violations have ceased.
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(AF-5).
5. On August 8, 1989, the Contracting Officer wrote Appellant and asked that the bid price be confirmed as the Contracting Officer was concerned that Appellant had incorrectly estimated the number of hours required to perform the contract and did not intend to pay its drivers the minimum wage required by the Service Contract Act (AF-10; Transcript (Tr.) 44, 53).
6. Appellant responded to the Contracting Officer with a letter dated August 11, 1989, which stated that the contract could be performed at the price bid. In regard to the amount of wages paid, Appellant stated that the hourly rate paid would be $8.046, an amount less than that contained in Service Contract Act wage determination. Appellant contended that it did not have to pay the minimum wage as partners of the firm, not employees, would be driving the route[1] (AF-1).
7. Thereafter a pre-award meeting was held between Appellant's Manager and the Contracting Officer. At the meeting the Manager assured the Contracting Officer that he had obtained Department of Labor approval of his proposed method of operation and payment and that the wage determination requirements were not applicable, since principals and not employees would be performing the contract (Tr. 44, 49, 52-53).
8. On August 28, 1989, Appellant was awarded Contract No. HCR 95034 as the low responsive, responsible bidder under solicitation number 948‑165‑89. Appellant's contract term was to commence September 9, 1989 (AF-1).
9. During contract performance Appellant received numerous citations for contract irregularities on PS Forms 5500 (AF-13, 15, 20). Appellant replied in writing to the Administrative Postmaster on one occasion as an explanation to the charged irregularity (failure to perform a trip) as follows: "Truck was tampered with by unknown person or persons. This is the third incident in which the tampering of our truck has resulted in this company receiving PS Form 5500 for failure to perform. . . ." (Respondent's Exhibit 10). Subsequently in a letter to the Contracting Officer dated July 27, 1990, Appellant requested a conference to discuss tampering with its equipment (vandalism) on postal premises (AF-33).
10. As a result of the July 27, 1990, letter the Contracting Officer met with Appellant's representative to discuss the alleged tampering. The Contracting Officer thereafter contacted the San Jose Post Office and requested that the matter be investigated. Appellant made no further complaints to the Contracting Officer regarding vehicle tampering (Tr. 111-12).
11. Respondent's manager of logistics in San Jose investigated the tampering charge, but was unable to substantiate it. In addition he found no pattern of tampering either with Appellant's vehicle or with the vehicles owned by other contractors (Tr. 130-134).
12. In a letter dated April 9, 1991, the Regional Administrator, Department of Labor, San Francisco, advised the Contracting Officer that as a result of an investigation of Appellant's contract under the Service Contract Act, it had been determined that Appellant had failed to pay prevailing wage rates and had refused to make restitution of the back wages. The Department of Labor requested that funds in the amount of $27,471.92 be withheld from payments due Appellant under its contract (AF-22). The Contracting Officer duly notified Appellant and complied with the request (AF-23, 24).
13. Appellant protested the payment withholding to the Contracting Officer by letter dated April 19, 1990 (sic) (AF-24). On April 23, 1991, Appellant advised the Contracting Officer by telephone that unless the funds in issue were released, performance under the contract would cease (Tr. 8). On that same date Appellant faxed a letter to the Contracting Officer which stated:
"Referring to our telephone conversation April 23, 1991, concerning contract 95034, Wage Determination has informed this partnership that all partners working contract 95034 must receive the current Federal Wage Determination, which your office should have been fully aware of.
My attempt to resolve this problem or come to a reasonable solution interested you none.
This company must immediately stop performance on this contract to comply with Wage Determination. If your concerns change and you are willing to discuss the issue, please feel free to call our office." (AF-26).
14. At approximately 12:45 p.m. on April 23, 1991, Appellant ceased performance of its contract (AF-3, 32; Tr. 10, 25-26). By final decision dated April 24, 1991, the Contracting Officer terminated Appellant's contract for default pursuant to paragraph 16(a)(1) and (3) of the contract's general provisions (AF‑27). Appellant appealed the termination by letter dated July 19, 1991 (AF‑31).
Decision
Appellant challenges the termination action on four grounds: (a) that Respondent was negligent in not conducting a proper investigation of the alleged tampering of its vehicle, which according to Appellant cost $35,000 to repair and adversely affected contract performance; (b) that Appellant was not afforded a hearing prior to the withholding of funds; (c) that the Contracting Officer should have helped Appellant to resolve the problem with the Department of Labor or find an alternate solution; and (d) that the Contracting Officer should merely have suspended Appellant's contract rather than terminated it.
Appellant's first challenge to the termination action has no merit. The record indicates that when the issue of tampering was brought to the attention of the Contracting Officer an investigatory process was initiated. No specific instances of tampering with Appellant's vehicle were found, nor was any pattern of tampering uncovered. In any event the alleged tampering occurred some nine months prior to the default termination and had absolutely no relationship to Appellant's failure to make payments in accordance with the wage determination and the cessation of performance of its contract.
Likewise, Appellant's other bases to challenge the termination action, all somewhat interrelated, provide no grounds for relief. Appellant's contract clearly stated that the Service Contract Act was applicable and that wages and fringe benefits had to be paid as specified in the Department of Labor wage determination. The Contracting Officer specifically queried Appellant's representative as to Appellant's understanding of its obligations under the Service Contract Act. In response, Appellant's representative assured the Contracting Officer that the Department of Labor had approved its plan to utilize "partners" to drive the contract route, thus avoiding the wage determination requirements. Having brought the matter fully to Appellant's attention and receiving such assurances from Appellant the Contracting Officer fulfilled any and all obligations in this area which existed as a prerequisite to awarding the contract to Appellant. Paragraph (i) of Form 7382 (Finding of Fact No. 4, supra) obligated the Contracting Officer upon notice from the Department of Labor to suspend payment of contract funds as he did here. No right of hearing exists before the Contracting Officer withholds funds at the request of the Department of Labor.[2] Further, Appellant has not shown that the Contracting Officer acted unreasonably in withholding the funds or that the Contracting Officer should have taken additional actions to help Appellant resolve its problems with the Department of Labor.
Appellant unequivocally repudiated its contract on April 23, 1991, when it advised the Contracting Officer that it was stopping performance "to comply with the wage determination." That refusal to perform constituted an anticipatory breach of its contract which justified the termination action. Rodney McCoy, PSBCA Nos. 3990, 3046, 93-BCA ¶25,248; K. C. Dodge, PSBCA No. 1748, 88-3 BCA ¶20,947. In fact on that day at approximately 12:45 p.m. Appellant actually ceased performing the contract. Under these circumstances, the Contracting Officer did not abuse his discretion in terminating Appellant's contract. Accordingly, we hold the default action was warranted and was taken properly. The appeal is denied.
James D. Finn, Jr.
Administrative Judge
Vice Chairman
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Board Member
[1] According to the letter, a partnership agreement was furnished to the Contracting Officer. The record is unclear as to the actual legal status of Appellant since by its name it appears to be a corporate entity.
[2] Appellant has available to it the procedures set forth in 29 C.F.R. parts 6 and 8 to determine its right to the withheld funds.