January 28, 1994
Appeal of
DAVID SAHAGIAN
Under Contract No. HCR 97055
PSBCA Nos. 3385, 3416
APPEARANCE FOR APPELLANT:
Michael R. Sahagian, Esq.
APPEARANCE FOR RESPONDENT:
Robyn M. A. Sembenini, Esq.
OPINION OF THE BOARD
Appellant, David Sahagian, appeals the contracting officer's partial denial of his request for a price adjustment under a highway transportation contract with the United States Postal Service, Respondent, after Respondent unilaterally added five stops to his route (Docket No. 3385). In Docket No. 3416, Appellant appeals the contracting officer's denial of an adjustment to reflect the decreased fuel economy of his vehicle as a result of the service change, additional mail on the route, and of the aging of the vehicle. A hearing was held at Appellant's request, and both entitlement and quantum are to be addressed (Transcript of Hearing, page ("Tr.") 4).
FINDINGS OF FACT
1. Appellant held a contract with the Postal Service to transport mail between the Portland, Oregon, Airport Mail Facility and Tillamook, Oregon, from March 12, 1988, to June 30, 1991. In March of 1991, the parties began negotiations to renew the contract (Stipulation of Facts filed June 7, 1993 ("Stip.") ¶¶ 1, 2; Appeal File Tab ("AF") 1; Tr. 11, 40).
2. The renewal contract was entered in April of 1991 for the term July 1, 1991, through June 30, 1995, at an annual rate of $29,165.24 (Stip. ¶ 3; AF 2; Supplemental Appeal File Tab ("SAF") 1, 2).
Additional Stops - PSBCA No. 3385
3. On or about March 27, 1992, Respondent notified Appellant that the Postal Service would be adding five stops to his contract route effective April 5, 1992. The contract originally required nine stops. (Stip. ¶ 6; AF 2, 27; Tr. 9, 11, 17).
4. Appellant considered the additional compensation proposed by Respondent, $95.15 per year, inadequate, and did not begin the new service on April 5 (AF 9; Tr. 10).
5. Respondent's contract specialist reached Appellant by telephone along his route on April 6. In order to get the service started, Respondent and Appellant agreed to additional compensation of $15 per day for the additional stops on a temporary basis until they could negotiate a permanent adjustment (AF 10; Tr. 10-11, 46-48). As a result, Appellant began serving the additional stops (Tr. 11-12).
6. It took Appellant five to ten minutes to make each of the additional stops, more during periods of heavy mail volume, but he was able to make the additional stops within the same schedule by giving up his breaks and working harder (SAF 7; Tr. 11-12, 18-21, 27, 45-46, 61, 67).
7. When discussions with Appellant did not produce agreement on compensation for the additional stops, Respondent ordered them added to the contract as an "insignificant minor service change," with additional compensation of $412.95 per year, effective May 30, 1992 (Stip. ¶ 8; AF 2, U.S. Postal Service Basic Surface Transportation Services Contract General Provisions, PS Form 7407T, March 1989 ("GP"), 12; AF 22, 27; Tr. 49, 65). The ordered adjustment consisted of an increase in annual operational costs of $349.51 ($0.26729 per mile, the then-current rate in Appellant's contract for his variable operational costs, multiplied by the additional 1307.6 annual miles resulting from the service change[1]) and a $63.44 increase for fuel costs (which was the product of Appellant's then-current per-gallon fuel cost and 52 gallons, which was calculated by dividing the additional miles by the vehicle's fuel economy (25 miles per gallon) from the renewal cost statement) (AF 27). The ordered adjustment recognized Appellant's approved labor rate of $7.24807 per hour, but included nothing for his increased labor or responsibility (id.).
8. In his discussions with Respondent over the price of the adjustment, Appellant was adamant that he be paid the $15 per day increase he seeks in Docket No. 3385 (AF 24-26; Tr. 25-26, 46-48). Appellant based that figure on his experience, and did not, at the hearing or in negotiations with Respondent, provide a more precise or particular justification for a $15 per day adjustment (Tr. 24, 27, 29).
9. Respondent paid Appellant for the period from April 6 to May 29, 1992, at the $15 per day rate and thereafter at the annual rate as increased by the $412.95 change ordered by the contracting officer (AF 24, 27; Tr. 32).
10. By final decision dated October 1, 1992, the contracting officer denied Appellant's request for compensation in excess of the $412.95 previously ordered (AF 26). Appellant's appeal of that decision was docketed as PSBCA No. 3385 (Stip. ¶ 14).
Mileage Adjustment - PSBCA No. 3416
11. The contract and postal regulations incorporated by reference in the contract provided that adjustments to compensation could be made because of a change in the contractor's costs due to changed economic conditions or operational requirements occurring during the term of the contract (AF 2, GP 11(a)(1); Management Instruction PO‑530-89-09, Economic Pay Adjustments for Advertised Highway and Inland Domestic Water Contracts, November 3, 1989 ("MI") II.B., V.A.). However, the MI specifically precludes any increases resulting from items that were not included in the renewal cost statement (MI V.B.), and limits adjustments other than those based on changes in the Consumer Price Index to "actual cost changes documented by the contractor" (MI V.H.2.).
12. In Appellant's April 18, 1991, renewal cost statement, which was the basis for the renewal contract price, the fuel was reduced from the 5044 gallons per year used in calculating his original contract price to 4000 gallons per year, which decreased the fuel line item by $1148 (1044 gallons x $1.10/gallon) (SAF 4; Tr. 40). This decrease in gallons had the effect of increasing the fuel economy for Appellant's vehicle from the 20 miles per gallon shown for the original contract to 25 miles per gallon even though the vehicle was the same (Tr. 16, 20, 28-29, 40-41). However, Appellant's total renewal price was not affected by this realignment of costs because the $1148 taken from the fuel line item on the renewal cost statement was added to the operational cost line item (AF 2; SAF 1-2; Tr. 40-41, 68-69). Appellant agreed to this realignment of costs and signed the renewal cost statement reflecting the realignment (AF 2; Tr. 40-41).
13. Since Appellant first began carrying the route, the volume and weight of mail he has carried has increased (Tr. 12-13). The addition of five stops and the addition of mail forwarding after the 1991 renewal also increased the amount and weight of mail he carried on the route. From time to time, Appellant carried more than the 600 pounds of mail that he was required under the contract to carry, and he often carried more than 120 cubic feet of mail, specified in the contract as the minimum capacity for a vehicle to service the route (Tr. 13-14, 17, 28, 32, 37).
14. The fuel economy of Appellant's vehicle declined as the vehicle aged and with increased weight of mail. His vehicle currently gets 20 to 22 miles per gallon on the route (Tr. 14, 31, 61). The Gas Mileage Information supplied with the 1988 vehicle when Appellant purchased it new rated his vehicle at 21 miles per gallon for city driving and 23 miles per gallon for highway driving, but noted that actual mileage would vary depending on options, driving conditions, driving habits and the vehicle's condition (SAF 4).
15. By letter dated March 12, 1993, Appellant requested an adjustment to his contract price to reflect that his vehicle was not attaining the 25 miles per gallon used at the time of renewal. He attributed this difference to (1) increased weight of the mail due to an increase in priority mail on the route and (2) aging of the vehicle, pointing out that the vehicle, even when new, was not rated by the manufacturer to attain more than 23 miles per gallon unloaded (Stip. ¶ 15; SAF 4).
16. In a March 19, 1993, final decision, the contracting officer denied Appellant's request for an adjustment based on a lower miles-per-gallon figure. He pointed out that the contractor was required to provide 120 cubic feet of load space, and asked the contractor to advise if he was carrying in excess of that volume and more than 600 pounds of mail. Further, the aging of the vehicle, according to the contracting officer, should have been anticipated and taken into account when Appellant accepted the renewal price based on the cost statement showing 25 miles per gallon (Stip. ¶ 16; SAF 5). Appellant's appeal of that final decision was docketed as No. 3416 (Stip. ¶ 17).
DECISION
Appellant argues that he is entitled to an adjustment in the amount of the $15 per day Respondent agreed to when the five new stops were added to the route. As he must work harder and give up his breaks to complete the route with the additional stops within the contract time frame, Appellant contends he should earn $8.50 per hour for all the contract hours as opposed to the $7.24807 per hour shown on his most recent cost statement. He contends that Respondent, during settlement discussions, agreed to Appellant's proposed increases to the operational and fuel costs and that, therefore, only the adjustment for his labor remains in doubt. Appellant also contends he is entitled to an adjustment in the contract price to reflect a decline in the fuel economy of his vehicle because Respondent has increased the loads he must carry and because his vehicle has experienced declining fuel economy as it ages. He contends the 25 miles-per-gallon figure used in the renewal cost statement should be reduced to 20 miles per gallon (thus increasing the annual fuel and fuel cost) because the figure used in the renewal cost statement was arbitrary and exceeded what the vehicle could attain even when new and unloaded.
Respondent concedes that Appellant is entitled to an adjustment for the additional stops, but argues that $15 per day is not warranted. Respondent urges that Appellant has not shown what, if any, increase to his labor costs has resulted from the additional stops, that he has not justified a rate of $8.50 per hour, and that he is not entitled to additional compensation for his time because he is able to complete the route within the contract schedule even after the new stops were added. As to the mileage adjustment, Respondent argues that Appellant's vehicle and the mileage it could obtain were known when the contract renewal was negotiated and that Appellant cannot now receive an adjustment of the price and underlying cost statement he agreed to. Finally, Respondent contends Appellant has not shown that there has been an increase in the volume and weight of mail he has been required to carry.
As both entitlement and quantum are to be decided in these appeals, it is Appellant's burden to demonstrate by a preponderance of the evidence his entitlement to an adjustment, John A. Darcy and Pamela A. Darcy, PSBCA No. 2810, 91-2 BCA ¶ 23,977; Geneva C. Stone, PSBCA No. 3104, 93-1 BCA ¶ 25,453, as well as the amount of any adjustment he is entitled to receive, Paul A. Mason, PSBCA No. 1570, 87-1 BCA ¶ 19,654 recon. denied 87-3 BCA ¶ 19,982; Newell Clothing Co., ASBCA No. 28306, 86-3 BCA ¶ 19,093.
Respondent does not contest Appellant's entitlement to an adjustment for the additional stops. In the ordered adjustment increasing Appellant's annual compensation by $412.95, Respondent recognized Appellant's increased fuel and operational expenses associated with the miles added to the route to serve the new stops. Appellant has not demonstrated by a preponderance of the evidence that the allowances for those items by the contracting officer were insufficient.[2] That Respondent, in an offer of settlement that Appellant refused, may have offered to accept Appellant's claimed operational costs is not evidence that Appellant's figure is correct or conceded. See Rule 408, Federal Rules of Evidence.
Respondent's ordered adjustment did not include any increase in compensation for Appellant's time in serving the new stops. That Appellant can perform the extra service within the contract schedule does not prove that no extra time was required. It is undisputed that it took him at least five to ten minutes, more during periods of heavy volume, to make each stop, and he should recover his labor costs that are generally supportable by evidence in the record. See Golden West Builders, PSBCA No. 3378, 93-3 BCA ¶ 26,195; American Federal Contractors, Inc., PSBCA No. 1359, 87-1 BCA ¶ 19,595 at 99,119. Allowing an average of 8 minutes for each of the five stops results in an increase of 167.64 hours annually, for which Appellant is entitled to compensation (8 minutes (0.13333 hour)/stop x 5 stops/trip x 251.46 trips/year). Appellant's hourly rate at the time the stops were added was
$7.24807.[3] However, under the contract, Appellant's hourly rate is subject to adjustment over time due to changed economic conditions. Because the record does not reflect what, if any, wage rate adjustments have been made since the service was ordered, we are unable to calculate Appellant's recovery with precision. We leave it to the contracting officer to calculate the adjustment, including the portion retroactive to May 30, 1992, by multiplying the increased hours by the wage rate, as it may have been adjusted from time to time, applicable to those hours.
Respondent does not concede that Appellant carried more mail than the contract required. Respondent's tender and Appellant's carriage of mail in excess of the quantities required in the renewal contract could entitle Appellant to additional compensation. Paul A. Mason, PSBCA No. 1335, 86-1 BCA ¶ 18,722 at 94,183. However, Appellant has not demonstrated any additional operating costs associated with his carriage of extra mail. See Paul A. Mason, PSBCA No. 1570, supra. Under the contract and applicable Management Instruction, adjustments for volume increases are limited to "actual cost changes documented by the contractor," yet Appellant has submitted no documentation of increased costs resulting from his claimed carriage of extra mail.[4] He has not established the days on which he claims to have carried additional mail, the amounts of extra mail carried (aside from his general, experience-based conclusion that he was carrying more than 600 pounds on some days), or any particular costs associated with carriage of such mail. He has not attempted to separate the effect such extra mail might have had on his vehicle's fuel economy from the decline attributable to the vehicle's aging. Appellant has not demonstrated his entitlement to additional compensation based on carriage of extra mail.[5] See Paul A. Mason, PSBCA No. 1570, supra.
At the time the contract renewal was negotiated and executed, Appellant knew the fuel economy of his vehicle and that it could be expected to decline as the vehicle aged. Nevertheless, he agreed to a cost statement that reflected use of less fuel per year than provided in the original contract. He was not mistaken about the fuel economy expectations for his vehicle or misled at renewal. See Atlas Corp. v. United States, 895 F.2d 745, 750 (Fed. Cir. 1990) cert. denied 498 U.S. 811; Fallen Trucking Co., Inc., PSBCA No. 3133, 3237, 93-2 BCA ¶ 25,827; Restatement (Second) Contracts, § 155 (1981). Additionally, with Appellant's agreement, the costs associated with the reduction were realigned to the operational cost line of the cost statement, so, notwithstanding the inclusion of 25 miles per gallon in the cost statement, it is not apparent Appellant suffered a true reduction in his compensation due to the realignment. That being the case, restoring the deduction to his fuel costs without a reduction to his operational costs would not be appropriate. Appellant has shown no reason to relieve him from his agreement to the renewal price as it reflects the price intended by the parties. See 2719 Building Partnership, PSBCA No. 1651, September 8, 1987.
The appeal in PSBCA No. 3385 is sustained to the extent of an increase, effective May 30, 1992, of 167.64 to the annual hours. Calculation of the precise adjustment by multiplying the additional hours by Appellant's applicable hourly rate, as it may have been adjusted from time to time, is remanded to the contracting officer. PSBCA No. 3385 is otherwise denied. PSBCA No. 3416 is denied.
Norman D. Menegat
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
James D. Finn, Jr.
Administrative Judge
Vice Chairman
[1] For purposes of calculating compensation, the contract listed the number of trips on which the new stops would be made as 251.46 (AF 2), which, when multiplied by the 5.2 additional miles each trip to serve the new stops, results in additional annual mileage of 1307.6 (Stip. ¶ 6; AF 27).
[2] In his discussions with Respondent, Appellant refused to consider any adjustment other than a continuation of the $15 per day agreed to as an interim measure. Before the Board and to the contracting officer, however, Appellant has offered no substantiation for the $15 per day figure. That rate was agreed to in haste by both parties in order to begin the service immediately, and both understood it was an interim figure until an adjustment could be negotiated. The figure did not represent Respondent's or Appellant's calculation of the increased costs Appellant would incur in serving the five extra stops.
[3] Appellant has not shown any basis for increasing his hourly rate to $8.50.
[4] That Appellant voluntarily supplied a vehicle larger than specified in the contract does not, in and of itself, entitle him to additional compensation. Paul A. Mason, PSBCA No. 1335, supra; E.D. Conto, PSBCA No. 962 (April 20, 1982).
[5] As discussed above, Appellant has not shown any increases in his operational costs due to the additional mail carried for the new stops. Consequently, we need not consider whether Appellant could have been entitled to an adjustment for that increase in weight even if the total route mail was still within the limits of the contract.