May 30, 1996
Appeal of
MARVIN WATSON
Under Contract No. 451800-89-P-0374
PSBCA No. 3716
APPEARANCE FOR APPELLANT:
Robert K. Serra, Esq.
APPEARANCE FOR RESPONDENT:
William A. Campbell, Jr., Esq.
OPINION OF THE BOARD
Appellant, Marvin Watson, operates a contract postal unit for Respondent, United States Postal Service. He has appealed from the contracting officer’s denial of his claim for an increase to his annual compensation under the contract and for compensation for services beyond the scope of his contract that Appellant claims were performed at Respondent’s request.
A hearing was held, and the parties have filed briefs.
Appellant has not shown that he is entitled to an increase to his annual compensation. Additionally, any extra-contractual service he provided was not performed at Respondent’s direction and, consequently, does not provide the basis for requiring Respondent to compensate him for such service.
FINDINGS OF FACT
1. On March 20, 1984, Respondent awarded Appellant an indefinite-term contract for the operation of a contract postal unit (“CPU”) in Long Beach, North Carolina, for $30,000 per year. The Long Beach CPU provides postal services, including post office boxes for 1056 customers, similar to a small post office, and Appellant pays the expenses of the operation such as rent, heat, and employee salaries. The unit operates Monday through Friday from 9:00 a.m. until 4:00 p.m. and from 9:00 a.m. until noon on Saturday. (Transcript, Pages (“Tr.”) 9, 10, 11; Appeal File, Tab (“AF”) 1, PS Form 7311, Specification Requirements, Contract Stations, Contract Branches, and Community Post Offices; Stipulation dated April 25, 1995 (“Stip.”), 1).
2. General Provision 23 of the contract addressed adjustments to the annual rate of compensation paid the contractor:
“PRICE ADJUSTMENT PROVISIONS -- The contractor may request an increase in the annual rate upon completion of the second full year of operation and upon completion of any two year period of operation thereafter during which the rate was not increased pursuant to these provisions. The proposal shall document in detail the proposed increase based upon one, or a combination of the following factors:
1. An increased benefit to the U.S. Postal Service during the two year period through (a) increased real revenue or transactions and/or (b) major physical improvements to the contract unit.
2. A direct cost increase prorated for the contract unit operation including (a) rent, (b) utilities, (c ) labor (only if the contractor has an employee(s) who operates the unit full or part time.) Example: If the contract unit is operated as an adjunct to a business, only that portion of the costs attributable to the contract unit may be submitted.
After evaluation the Contracting Officer may enter into negotiations with the contractor to arrive at an increase in the annual rate which is mutually acceptable to the contractor and the USPS. In consideration for the additional payment the contractor waives his rights to terminate the contract for one year. The Contracting Officer, after evaluation of the proposal, may deny any increase as not being cost-beneficial to the USPS. In that case the contractor may (1) continue the operation of the unit at the existing annual rate or (2) exercise his right of termination.” (AF 1, PS Form 7369, General Provisions for Contract Stations, Contract Branches, and Community Post Offices; Stip. 1).
3. Under General Provision 3 of the contract, either party could terminate the contract without liability by giving the other sixty days’ written notice (Id.).
4. The contract provided that modifications to the contract would only be recognized if they were “in writing and signed by the Contracting Officer” and that the contracting officer’s representative, who was the Southport, North Carolina Postmaster, “cannot change, modify, or terminate the contract.“ Appellant was aware that only the contracting officer could modify the contract. (Tr. 196-197; AF 1, Page 2 of 13, Section 12 of PS Form 7311, and General Provision 15).
5. Under the contract as awarded, the Southport Post Office was responsible for delivering mail to the Long Beach CPU for Appellant’s distribution to customers’ boxes and picking up outgoing mail for dispatch through Southport. (Tr. 11, 13, 16, 74, 96, 168, 193; AF 1; Respondent’s Exhibit (“RX”) 1).
6. By letter agreement dated July 23, 1985, the parties modified the contract to increase Appellant’s annual compensation to $39,000. Part of the consideration for the increase was the requirement, added by the letter agreement, that Appellant pick up mail for his box customers from the Southport Post Office Monday through Saturday before 8:30 a.m. and that he deliver the unit’s outgoing mail to Southport Monday through Friday, leaving Long Beach no earlier than 4:30 p.m. At the conclusion of the letter agreement, the contracting officer admonished Appellant, “You are not authorized additional payment for any special services you may choose to provide our customers and you must operate this contract in strict compliance as stated--no deviations and no additions or deletions.” Appellant signed the bottom of the letter indicating his acceptance of the modification terms. (Tr. 11-12, 265; AF 1B, 5; Stip. 2).
7. Through subsequent contract modifications, all in writing and all signed by the contracting officer, the last in June 1990, Appellant’s compensation was raised to $73,029. No changes to the scope of work under the contract were associated with any of the modifications after 1985. (Tr. 13-14; AF 1C, 1D, 1F; Stip. 3).
8. In May of 1992, Appellant submitted a request to increase his annual compensation to $98,200. After obtaining the Southport Postmaster’s views, the contracting officer, in a letter of August 14, 1992, denied the request entirely, concluding that Appellant was adequately compensated considering the revenue generated by the Long Beach CPU.[1] He based his determination on the “cost per dollar generated”, a cost-revenue ratio calculated by dividing the annual rate the Postal Service paid to Appellant by the annual revenue for the Postal Service generated by the unit’s operations. The cost-revenue ratio for Appellant’s contract unit was substantially higher than that of other contract units in the area. In the denial letter, the contracting officer stated, “Since an increase is not being authorized for the next year, you may submit documentation on your next anniversary date for consideration.” (Tr. 14-15; AF 2; RX 2; Stip. 4, 5).
9. On August 13, 1993, Appellant submitted another request to the contracting officer for an increase to his annual compensation. Appellant pointed out that the revenue to the Postal Service generated by his contract unit had increased steadily over the years from $93,000 in the first year to $192,000 in 1990, $217,000 in 1991 and $222,000 in 1992. (Tr. 19, 23, 62; AF 2, 8A, 8B, 8C; Stip. 6).
10. Appellant’s August 13, 1993 letter also included a “bill for the extra trips to and from Southport to pick up and dispatch mail and packages, which were not covered in my contract and requested by the Southport Post Master.” The supporting bill showed a total claim of $12,255 for 1290 extra trips[2] Appellant claimed to have made from June 1, 1990, through May 31, 1993. (Tr. 121-122; AF 2; RX 2; Stip. 6).
11. Beginning in 1990, Appellant and his employees made extra trips to and from the Southport Post Office to pick up mail for Long Beach and to deliver outgoing mail for dispatch through Southport. On most days, not all of the Long Beach mail was ready when Appellant left Southport at 8:30 a.m. to return to open his contract unit, so Appellant or one of his employees usually came by the Southport Post Office later in the morning to pick up the rest of the Long Beach mail. Often, employees in the Southport Post Office would call Appellant to let him know when the mail was ready. Appellant also made many afternoon trips bringing outgoing mail to Southport for dispatch before the scheduled 4:30 p.m. trip during the week and on Saturday afternoons when he was not required to bring outgoing mail to Southport. Some of the extra trips were not round trips because they were made by one of Appellant’s employees who drove by Southport on his way from his home to Long Beach and could pick up leftover mail in the morning on his way to work and drop off outgoing mail in the afternoon on his way home. (Tr. 31-32, 90-94, 113, 128-130, 132-137, 170-172, 179, 207-208, 234, 258, 266, 307).
12. Had Appellant not made extra trips to pick up the mail in the mornings, the rest of the mail for Long Beach would have been delivered to his contract unit around noon by one of Respondent’s highway contract carriers serving Long Beach. However, Appellant’s customers preferred having all of their mail distributed to their post office boxes earlier. Appellant knew the customers would complain if their mail were not available until after noon, so he made the extra morning trips to keep them happy. Additionally, since Appellant closed the CPU at noon on Saturday, the highway contract carrier would not have delivered the Long Beach mail until about the time Appellant closed, and his customers could not have picked up the mail until the next business day. Had Appellant not made extra trips in the afternoon bringing the outgoing mail for dispatch, the highway contract carrier would have picked up the outgoing mail in Long Beach in the afternoon on his way back to Southport. On Saturday, it would have been inconvenient for Appellant to meet the highway contractor to turn over the outgoing mail later in the afternoon, long after Appellant had closed the CPU at noon. (Tr. 90-94, 100, 116, 132-137, 153, 169, 171-172, 198-199, 215-216, 219-220, 230; AF 5).
13. For the mid-November through end of December Christmas season and after some holidays, there was more mail than the highway contract carrier could have handled, and if Appellant had not made extra trips to and from Southport, the post office would have had to make other arrangements. (Tr. 41, 45, 131, 133, 137, 142).
14. The postmaster and other employees in the Southport Post Office were aware that Appellant was making additional trips, but they did not think that Appellant expected payment for them. If the postmaster had thought Appellant expected to be paid for the extra trips, he would have ordered the extra trips stopped. Then, except for the required two trips per day by Appellant, Long Beach mail would have been handled by the contract carrier or through other arrangements made by Respondent when the carrier did not have room for it. The contracting officer was not aware that Appellant was making the extra trips, and he never directed Appellant to perform them. There was never any written amendment to the contract or other writing reflecting any agreement that Appellant would be paid for the extra trips, and Appellant knew that the trips were not required under his contract. Appellant’s August 13, 1993 “bill for extra trips” (Finding 10) was the first time Appellant had asked Respondent to pay for extra trips. (Tr. 86-87, 128, 130, 134, 144, 165-166, 170-173, 178-179, 231, 252-253, 259, 263).
15. Appellant stopped making extra trips in April 1994, and since then, Respondent has arranged for all mail deliveries to and pickups from Long Beach, except for the one morning pickup Monday through Saturday and the afternoon trip Monday through Friday that Appellant makes as required by the 1985 modification (Tr. 66, 109; AF 8D).
16. By letter dated May 19, 1994, the contracting officer responded to Appellant’s August 1993 adjustment request, denying an increase to the annual rate. The contracting officer decided that it did not make economic sense for Respondent to increase Appellant’s compensation, because the cost-revenue ratio for Appellant’s CPU was substantially (roughly four times) higher than the national average, and the contracting officer concluded that Appellant was adequately compensated for the amount of revenue generated by the Long Beach CPU. The contracting officer offered $2,902.50 to compensate Appellant for the extra trips he had made. The contracting officer made the offer assuming that the trips had been authorized, but when he eventually determined that extra trips had not been authorized, he concluded that Appellant was not entitled to any extra payment. (Tr. 35-39, 254-257, 267, 278, 290, 296, 314; AF 4; Stip. 7).
17. Some contract units in the area that also had a cost-revenue ratio higher than the national average, including two higher than Appellant’s, did get annual rate increases in the same general time frame (Tr. 281-282; Appellant’s Exhibit 1).
18. On July 5, 1994, Appellant, through counsel, stated his disagreement with the contracting officer’s rejection of an increase to his annual compensation. He restated the claim for the extra trips to be $19,768 for the period 1990 through 1994. (AF 6; Stip. 8).
19. When Appellant did not receive a response, he, on November 21, 1994, submitted a notice of appeal to the contracting officer. In addition to the claims previously mentioned in his July 5, 1994 claim, Appellant noted that he had made 95 additional extra trips to deliver reports to Southport which increased his claim to $20,725 for extra trips. (Complaint, Exhibit E).
DECISION
Contract Rate Adjustment
Appellant argues that his compensation under the contract should be increased because the business generated by his contract unit has grown substantially over the years causing an increase in his cost and effort of providing the service as well as an increased return to Respondent. He contends that comparing his cost-revenue ratio with those of other contract units was unreasonable because he provides service at the Long Beach CPU that is far superior to that of other CPUs. For that reason, he contends Respondent’s reliance on comparative cost figures is improper. He also points out that some contract units received increases even though they had cost-revenue ratios higher than his. Appellant also argues that the contracting officer in rejecting his 1992 adjustment promised him that he would receive an increase the following year.
Respondent argues that compared to other contract units the compensation for the Long Beach contract unit is excessive and that no increase is in order. Additionally, Respondent argues that Appellant’s remedy, as set forth in the contract, in the event an increase is not awarded by the contracting officer, was to perform under the old price or terminate the contract by providing 60 days’ notice.
Appellant, as the party seeking an adjustment under the contract, has the burden of demonstrating by a preponderance of the evidence that he is entitled to the claimed increase to his annual rate. See David Sahagian, PSBCA Nos. 3385, 3416, 94-2 BCA ¶ 26,688; Geneva C. Stone, PSBCA No. 3104, 93-1 BCA ¶ 25,453. Appellant has shown that the revenue generated by the CPU has increased, but, although the Price Adjustment clause of the contract identifies costs of operation and revenue generated as factors to be addressed in a request for an adjustment (Finding 2), the clause does not guarantee an increase to Appellant’s annual rate upon a showing that his costs and revenue have increased. See Jack Swedberg, PSBCA No. 3876, May 8, 1996.
The Price Adjustment clause specifically authorizes the contracting officer to deny an increase if, after evaluation of Appellant’s proposal, he determines that an increase would not be “cost-beneficial to the USPS.” The contracting officer denied Appellant’s August 1993 adjustment request, after evaluating the proposal and comparing Appellant’s cost-revenue ratio to that of other units, because he determined that Appellant’s rate was adequate for the amount of revenue generated. He determined that it would not be cost-beneficial to Respondent to increase Appellant’s compensation. The contracting officer’s action is precisely within the scope of the Price Adjustment clause and did not constitute an abuse of the contracting officer’s discretion. Moreover, Appellant had been specifically warned that he would not be compensated for providing special services to customers of the CPU (Finding 6).
Appellant has not shown the contracting officer’s denial of an adjustment to have been a breach of the implied duty of good faith and fair dealing that exists between the contracting parties. See Jack Swedberg, PSBCA No. 3876, May 8, 1996; Banks Trucking, PSBCA No. 3528, 96-1 BCA ¶ 28,132; Robert L. Merwin & Co., GSBCA No. 6621, 83-2 BCA ¶ 16,745 at 83,273; 6800 Corp., GSBCA No. 5880, 83-2 BCA ¶ 16,581 at 82,449-50; Restatement (Second) of Contracts § 205 (1979). The contracting officer is not required by this implied duty of fair dealing to offer an increase or to make other concessions, and that Appellant finds the contracting officer’s denial unacceptable does not mean that the contracting officer failed to act in good faith. See 6800 Corp., GSBCA No. 5880, 83-2 BCA ¶ 16,581 at 82,449-50. Appellant did not show that the circumstances of those CPU contractors granted increases notwithstanding a cost-revenue ratio higher than his were comparable to those of his CPU or otherwise demonstrate that granting increases to other CPU operators indicates bad faith on Respondent’s part.
Appellant testified that the contracting officer denied a rate increase in 1992 because funds for such increases were tight and that the contracting officer assured Appellant that he would be taken care of in the next year’s (1993) adjustment. The contracting officer who allegedly made that representation did not testify at the hearing, but Respondent’s contemporaneous correspondence refutes the existence of any promise by the contracting officer to give Appellant an adjustment in 1993 to make up for his denial of the 1992 adjustment request. In his August 14, 1992 letter to Appellant denying the increase (Finding 8), the contracting officer stated unequivocally that the basis for the denial was Respondent’s assessment that, when compared to other CPUs, Appellant’s compensation was excessive in relation to the revenue generated by his contract unit and that the contracting officer believed that Appellant’s compensation was fair and reasonable. He did not refer to any budget limitations. Moreover, the contracting officer’s only mention of an adjustment for the next year was to point out that because Appellant received no adjustment in 1992, he could submit another request the following year instead of waiting the two years between requests otherwise mandated by the contract’s Price Adjustment clause. (Findings 2, 8).
Appellant has not demonstrated entitlement to an increase to his annual rate of compensation. Accordingly, this part of the appeal is denied.
Extra Trips
Appellant contends he made over 2000 extra trips between Long Beach and Southport from 1990 through 1994. He argues that the contracting officer and the postmaster knew of the trips and agreed orally that Appellant would be compensated for them. He also argues that twice a month he was required to bring a report of his financial operations to Southport and that he should be compensated for those (95) trips.
Respondent argues that Appellant has not demonstrated with any reliability the number of trips he made and that, in any event, any extra trips were not authorized or directed by the contracting officer. Respondent denies that there was an agreement that Respondent would pay Appellant for the trips and contends that Appellant performed any such trips for his own purposes.
To recover for the extra trips, Appellant must demonstrate that Respondent agreed to pay for the extra trips or directed him to make them. See Len Co. & Associates v. United States, 385 F.2d 438, 443, 181 Ct. Cl. 29, 38 (1967); Knight Architects Engineers Planners, Inc., PSBCA No. 3474, 94-3 BCA ¶ 27,178. He has not done so. To support his argument that the parties agreed he would be paid for the extra trips, Appellant testified that in 1990 he discussed the trips with the contracting officer, and that the contracting officer asked him to continue making the extra trips and, as had the Southport Postmaster according to Appellant’s testimony, agreed that Appellant would be paid for the trips. Contradicting that testimony, however, is the complete absence of mention of such agreement in Respondent’s internal communications and letters to Appellant. Additionally, in all of his correspondence in the record, including the August 13, 1993 claim (Findings 9, 10), Appellant never mentioned an agreement with the contracting officer or the postmaster that he would be paid for the extra trips. He only mentioned that the postmaster had requested the extra trips. If Appellant, when submitting his August 1993 claim for the extra trips, believed that the contracting officer or the postmaster in the past had agreed to pay for the trips, he surely would have mentioned such agreement when seeking payment. Also, before filing the August 13, 1993 claim, Appellant had made no inquiry or complaint regarding Respondent’s failure to make any payments or otherwise increase his compensation as would have been required under an agreement Appellant now says was entered into in 1990 to pay him for extra trips. It is extremely unlikely that Appellant would have performed the extra trips for three years without complaining about not being paid if he truly expected payment and if the contracting officer had promised in 1990 that Appellant would be compensated for the service.
Appellant also never raised any question about the absence of a written agreement. The contract clearly provided that only the contracting officer could modify the contract requirements and only in writing, and Appellant was aware of these limitations (Findings 2, 4, 6). The two trips per day negotiated in 1985 were arranged with the contracting officer who committed Respondent to pay for them as part of Appellant’s annual rate of compensation and memorialized the agreement in writing (Finding 6). Appellant had always submitted his adjustment requests to and negotiated with the contracting officer, and those negotiations that resulted in an agreement were always followed by execution of a written modification by the contracting officer (Finding 7). Through his experience with the 1985 modification, Appellant knew exactly how Respondent would go about formally adding trips to his contract requirements. Appellant has not shown that Respondent agreed in 1990 or at any other time to pay for extra trips.
Additionally, there is no evidence that the contracting officer or the postmaster or any other employee insisted or required that Appellant make extra trips. Respondent’s employees’ notifying Appellant when mail was ready for pick up did not amount to a direction or order that he perform an extra trip. See Lott Constructors, Inc., ENG BCA No. 5852, 93-1 BCA ¶ 25,449 at 126,763.
After submission of his August 13, 1993 claim for extra trips, Appellant continued to make extra trips until April 1994, the month before the contracting officer issued his decision. Respondent did not breach any duty of fair dealing by failing to stop the extra trips or to point out that they were not required by the contract, see Chris Berg, Inc. v. United States, 197 Ct. Cl. 503, 445 F.2d 1037 (1972); Maxwell Dynamometer Co. v. United States, 181 Ct. Cl. 607, 630, 386 F.2d 855 (1967); BH Services, Inc., ASBCA No. 39460, 93-3 BCA ¶ 26,082 at 129,643, because Appellant was fully aware that he was not obliged to make the extra trips. He had not been ordered to perform them, and he was aware he could stop performing without contractual consequence, as he finally did in April 1994.
Appellant made the extra trips to provide superior service for the customers of the Long Beach CPU by having their mail ready in their post office boxes as early as possible, and he was willing to make extra trips to improve the delivery and dispatch of Long Beach mail. While that desire and Appellant’s efforts to provide high-quality service to his customers are commendable, he has not shown an agreement by Respondent that he would be paid for extra-contractual work, a direction by Respondent that he make extra trips or an acquiescence by Respondent in his extra work knowing Appellant expected to be paid for it. Accordingly, Appellant is not entitled to compensation for the extra trips. See Baltimore and Ohio R.R. v. United States, 261 U.S. 592 (1923); J. A. Ross Company v. United States, 126 Ct. Cl. 323 (1953); The Stephens Associates, PSBCA No. 976, 83-1 BCA ¶ 16,234 at 80,664; Paul A. Mason, PSBCA No. 1335, 86-1 BCA ¶ 18,722.
The appeal 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] The contracting officer at that time was the same contracting officer who had granted Appellant’s 1990 increase (AF 1F). He retired in late 1992 and did not testify at the hearing, but his successor did.
[2] “Extra trips” as used in Appellant’s claim and in this decision refer to trips Appellant made between his CPU and the Southport Post Office in addition to those Appellant was required to make pursuant to the 1985 modification to his contract (Finding 6).