June 18, 1997
Appeal of
KEVIN WAGONER
Under Contract No. HCR 67660
PSBCA No. 3993
APPEARANCE FOR APPELLANT:
Kevin Wagoner
APPEARANCE FOR RESPONDENT:
Cary L. Katznelson, Esq.
OPINION OF THE BOARD
Appellant, Kevin Wagoner, has appealed from a decision of the contracting officer terminating Appellant’s highway transportation contract for default and assessing him excess reprocurement costs as a result of the termination. The parties have elected to submit the appeal on the record pursuant to 39 C.F.R. §955.12.
FINDINGS OF FACT
1. On May 31, 1994, Respondent, the United States Postal Service, awarded Appellant a renewal of Highway Transportation Contract, HCR 67660, for the transportation and box delivery of mail between Jennings and Dresden, Kansas. The contract term was for four years commencing on July 1, 1994, and ending June 30, 1998. The annual rate for the service to be performed was $21,819.62. (Appeal File Tab (AF) 1).
2. The contract included Basic Surface Transportation Services Contract - General Provisions, Postal Service Form 7407, July 1992, which in clause 4(a), SERVICE REQUIREMENTS AND PROHIBITIONS, requires the contractor to “. . . carry all mail tendered for transportation under this contract . . . with certainty, celerity, and security. . . .” Clause 8, ACCOUNTABILITY OF THE CONTRACTOR, and clause 13, DAMAGES, of the General Provisions provide, inter alia, that the contractor remains accountable and answerable in damages for the faithful performance of his obligations under the contract, including any loss or damage to the mail due to loss, rifling, damage, wrong delivery, depredation upon and other mistreatment of the mail by the contractor or his agents or employees (AF 1).
3. Pursuant to General Provisions clause 16(a)(1), (2), and (6), TERMINATION BY THE POSTAL SERVICE FOR DEFAULT, the contract may be terminated for default for the contractor’s failure to perform service according to the terms of the contract; the contractor is the subject of administratively determined violations of the Postal laws and regulations and other laws related to the performance of the service; or if he fails to properly account, deliver and pay over moneys, mail and other property pursuant to clause 8 of the contract (AF 1).
4. Based on complaints received from customers along Appellant’s route, the Postal Inspection Service began an investigation to determine whether mail entrusted to Appellant was being properly handled. A postal inspector prepared three First Class control letters bearing the return address of Nabisco in Fort Worth, Texas. The letters were addressed to various individuals in Jennings and Norcatur, Kansas, and each contained $3.00 in identifiable coins and currency. Only one of the control letters was to an actual address on Appellant’s route. The second control letter was a “no such number/address” and the third control letter was a “misthrow” destined for a town (Norcatur) not delivered out of the Jennings Post Office. These last two control letters should have been returned to the postmaster for further processing. (AF 5).
5. On July 31, 1996, the Jennings Postmaster placed the three control letters in a tray with other First Class mail to be cased by Appellant. At approximately 10:15 a.m., Appellant left on his route without returning any of the control letters to the postmaster. He returned to the post office in the afternoon and again did not give any of the control letters to the postmaster at that time. (AF 5).
6. Upon his return to the post office on July 31, 1996, a postal inspector requested permission from Appellant to search his vehicle. Appellant consented to the search. The search produced the “misthrow” and “no such number/address” control letters, both of which had been opened and the money removed. (AF 5).
7. Appellant admitted to the postal inspectors that he had rifled the control letters and that he had, in the past, rifled other mail from which he had removed lighters and cameras. Appellant admitted that he had been rifling mail and removing its contents for the past three to four years. (AF 5).
8. Appellant’s contract was terminated for default, effective July 31, 1997, (See Finding 11, infra.). Immediately thereafter, a contract specialist of Respondent contacted the postmasters of both Jennings and Dresden, Kansas, to obtain the names of potential contractors in the area in order to assure the delivery of mail on Appellant’s route without further disruption. Respondent then attempted to call three potential contractors to solicit bids for an emergency service contract to replace the services provided by Appellant. The contract specialist contacted two of the three contractors, but only one submitted a bid. (Respondent’s Supplemental Exhibits (RSE) 5).
9. Emergency Service Contract No. HCR 676FU, at an annual rate of $50,385.38, was awarded to the only contractor submitting a bid. The contract began on August 2, 1996, and was to end on December 6, 1996. The contract was for the same route and the same annual mileage as in Appellant’s defaulted contract. The contract was subject to termination by the Postal Service upon 24 hours’ notice. (RSE 1, 4, 5).
10. Emergency Service Contract No. HCR 676FU was terminated on November 22, 1996, after 112 days of performance and upon the commencement of performance by a permanent replacement contractor[1]. The contractor was paid for his performance of the emergency services. (RSE 1-4).
11. On August 12, 1996, the contracting officer issued a final decision terminating Appellant’s contract for default, effective July 31, 1997, because of Appellant’s admission of rifling and stealing from the mails entrusted to him (AF 2).
12. On September 5, 1996, the contracting officer issued a second final decision assessing against Appellant $7,284.41 in excess reprocurement costs. This amount was determined by multiplying the incrementally greater daily rate of the emergency service contract as compared to Appellant’s contract ($76.91)[2], times 100 days[3], resulting in a sum of $7,691.00. The contracting officer then added $325.00 in administrative costs, representing the cost of the time spent by a secretary and a transportation specialist in soliciting and awarding the replacement contracts. Finally, the contracting officer credited Appellant with $731.59 which was due Appellant at the time of termination but had been withheld.
$7,691.00 Excess Cost of Emergency Contract
325.00 Administrative Costs
$8,016.00 Total Excess Reprocurement Costs
minus 731.59 Withheld Funds
$7,284.41 Balance Owed (AF 3).
13. On September 11, 1996, Appellant filed a timely appeal with the contracting officer of his decision to assess excess reprocurement costs (AF 4).
DECISION
The issues to be decided in this appeal are whether Respondent acted properly in terminating Appellant’s contract for default and, if so, whether Respondent reasonably mitigated the amount of excess reprocurement costs assessed against Appellant. Respondent argues that the decision of the contracting officer to terminate Appellant’s contract for default was a proper response to Appellant’s rifling the mail entrusted to him for delivery. Respondent further argues that since it made extensive efforts to maximize competition in soliciting an emergency replacement contract, it reasonably mitigated the excess reprocurement costs it seeks from Appellant, notwithstanding that only one contractor submitted a bid.
Appellant does not challenge the decision to terminate his contract for default, but does argue that the cost of the emergency replacement contract was too high and thus, impliedly argues that Respondent did not properly mitigate reprocurement costs. Appellant did not, however, submit any evidence into the record of this appeal.
Appellant’s theft of mail is a serious breach of his obligation to carry the mail with certainty, celerity and security. Therefore, the decision of the contracting officer to terminate Appellant’s contract for rifling and stealing the contents of mail entrusted to him for delivery was entirely proper. See Richard Lewis Danel, PSBCA No. 3470, 94-2 BCA ¶ 26,687; Bonnie Dolin, PSBCA No. 2394, 92-2 BCA ¶25,014; Karen L. Wilson, PSBCA No. 1494, 86-3 BCA ¶ 19,256. The only remaining question is whether Respondent may recover the excess reprocurement costs it has assessed against Appellant.
Immediately upon termination of Appellant’s contract, on July 31, 1996, Respondent began to solicit emergency service for Appellant’s route and schedule. The Postmasters of Jennings and Dresden, Kansas were contacted to obtain the names of potential contractors. Three potential contractors were identified, two were contacted and bids were solicited from them. However, only one contractor responded, and he was awarded an emergency service contract, at the annual rate of $50,385.38, to perform Appellant’s route. (Finding of Fact Nos. (FOF) 8, 9).
In determining whether these reprocurement efforts were reasonable, consideration must be given to the nature and time of the emergency. Upon learning of Appellant’s actions, the contracting officer had to act immediately to replace Appellant on the route to assure continued delivery of the mail. Under such time constraints, the fact that Respondent managed to obtain only one bid for the emergency services is not unreasonable. See Daniel Soutiere, PSBCA No. 2279, 89-1 BCA ¶ 21,272.
Services were rendered (and paid for) under the emergency services contract until November 22, 1996, after which a permanent replacement contractor began performance of Appellant’s former route (FOF 10). Appellant was assessed the excess costs of this emergency replacement contract for only a 100-day period instead of the 112 days actually performed. Furthermore, Appellant was not assessed any of the excess costs of the permanent replacement contract ($23,514.90 vice $22,313.39).
On these facts, Respondent’s assessment of excess reprocurement costs is prima facie reasonable. Although there is a sizeable disparity between Appellant’s annual contract price of $22,313.39 and the $50,385.38 annual rate of the emergency service contract, the facts indicate that Respondent made a reasonable effort to maximize competition under the time constraints caused by the need to replace Appellant immediately. The emergency service contract was of a limited duration and could be (and was) terminated on very short notice. (FOF 9, 10). This uncertain duration warrants a higher price for the service than a contract for a considerably longer, fixed duration. See Daniel Soutiere, supra.; see also Bowman’s Transport Co., PSBCA Nos. 1088, 1089, 1092, 84-1 BCA ¶ 17,217.
Appellant has failed to offer any rebuttal challenging the prima facie reasonableness of Respondent’s efforts to obtain emergency services to perform Appellant’s route after his contract was terminated for default. Accordingly, excess reprocurement costs in the amount of $7,284.41 may properly be assessed against Appellant.
This appeal is denied.
William K. Mahn
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman
[1] The permanent replacement contract was awarded at an annual rate of $23,514.90 (RSE 3, 4).
[2] At the time of termination for default, the annual rate of Appellant’s contract had increased to $22,313.39. ($50,385.38-$22,313.39=$28,071.99; $28,071.99¸365=$76.91) (AF 3).
[3] The contracting officer chose to assess Appellant for 100 days of performance of the emergency service contract which represented the number of days remaining in the accounting period at the time of Appellant’s default (16 days), plus three additional accounting periods (84 days) (AF 3). Actual performance of the emergency service contract continued for 112 days (RSE 1-4).