August 27, 1998
Appeal of
WERNER LEMBKE d/b/a LEMBKE TRUCKING
Under Contract No. HCR 55295
PSBCA No. 3875
APPEARANCE FOR APPELLANT:
Timothy C. Cook, Esq.
APPEARANCE FOR RESPONDENT:
Cary L. Katznelson, Esq.
Christopher M. Zadina, Esq.
OPINION OF THE BOARD
Appellant, Werner Lembke, has filed a timely appeal of the contracting officer's decision to terminate for default his highway transportation contract with Respondent, United States Postal Service. Also at issue is the decision of the contracting officer to assess Appellant with $325.00 in excess reprocurement costs. The parties have elected to submit the appeal on the record in accordance with 39 C.F.R. §955.12.
FINDINGS OF FACT
1. On June 14, 1993, Respondent awarded Appellant Renewal Contract No. HCR 55295, at an annual rate of $305,438.60, for the transportation of mail between the Minneapolis/St. Paul, Minnesota Bulk Mail Center (BMC), and Wausau, Wisconsin. The term of the contract was from July 1, 1993, to June 30, 1994. The contractor was required to have two tandem axle tractors, and to perform one overnight round trip (trip nos. 801/802) (the "early" trip) on a daily basis, and another overnight trip (trip nos. 803/804) (the "late" trip) on a daily basis except for Saturday night/Sunday morning and holiday nights. The late trip included a stop at the Marshfield, Wisconsin Post Office on the return leg (trip 804). (Appeal File Tab (AF) 1).
2. The contract included Basic Surface Transportation Services Contract General Provisions, PS Form 7407 (July 1992), which in clause 6, INSURANCE REQUIREMENTS, required the contractor to maintain liability insurance, "continuously in effect," on all the vehicles used in performing the contract. Clause 12, CHANGES, required the contractor to proceed diligently with all service changes and extra trips ordered unilaterally by the contracting officer. (AF 1).
3. General Provisions clause 16, TERMINATION BY THE POSTAL SERVICE FOR DEFAULT, provided in pertinent part as follows:
"(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;
(2) If 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;
(3) For the Contractor's disobedience of the instructions of the Contracting Officer;
* * *
(11) If the Contractor employs any individual, in connection with the contract, contrary to the instructions of the Contracting Officer;
* * *
(13) If the Contractor fails to establish and maintain continuously in effect insurance as required by Clause 6, or fails to provide proof of insurance prior to commencement of service and thereafter as required by the Contracting Officer.
(b) Termination of the right to perform under this contract or of this contract under Clause 16, shall not impair the right of the Postal Service to damages from the Contractor, and such damages may be assessed and liquidated for the purpose of setoff or counterclaim in the settlement of any claim of the Contractor against the Postal Service arising under this contract." (AF 1).
4. On May 17, 1994, the term of the contract was extended, at the then current rate, to June 30, 1997 (AF 2).
5. On October 21, 1994, Respondent, by certified letter (signed for by Appellant), requested that Appellant send his payroll records to Respondent within 20 days of receipt of the letter. Respondent never received a reply from Appellant. (Declaration of Donald Clevenger; Supplemental Declaration of Richard Chancellor; AF 11).
6. In December of 1994, as a result of violations of the Service Contract Act, Appellant was placed on the Department of Labor's debarred bidders list for a three year period (Declaration of Donald Clevenger; AF 11).
7. On December 2, 1994, the contracting officer issued a Contract Route Service Order, effective December 4, 1994, changing the operating schedule for trip numbers 803 and 804 (the late trip), compressing the time by 35 minutes on trip number 803 and 55 minutes on trip number 804, to meet critical arrival times at the Minneapolis/St. Paul BMC. Of the 55-minute time reduction on trip 804, 45 minutes represented a compression of the time for the stop at the Marshfield, Wisconsin Post Office from one hour to fifteen minutes. (AF 3).
8. Appellant was required to change trailers at the Marshfield, Wisconsin Post Office. At the time of the December 2 changes, the Marshfield Postmaster changed the schedule for loading the departing trailer to insure that it was loaded before Appellant's arrival each day and ready for immediate departure. This change in operations was done to assist Appellant in meeting the new schedule. (Supplemental Declarations of Donald Clevenger and Mike Mikeworth).
9. Between October 11, 1993, and June 1, 1994, Appellant experienced delays in performing the route on 32 occasions. On June 2, 1994, Respondent held an informal discussion with Appellant to discuss the nine most recent occasions of delays in Appellant's contract performance. Appellant was notified at this conference that he must improve his performance or a formal conference would be held with him to further discuss the matter. He was also informed that he should reply to the irregularity reports he received for each delay so that Respondent could determine whether the delays were excusable. (AF 8F).
10. Between June 1, 1994, and December 2, 1994, Appellant failed to observe the contract schedule on 24 occasions. Subsequently, between December 2, 1994 and March 2, 1995, Appellant received another 17 irregularity reports for failing to observe the contract schedule. (AF 8E).
11. Respondent's representatives held a second informal conference with Appellant on March 16, 1995, to discuss the many instances of his failure to meet the contract schedule. At this meeting, Appellant contended that the removal of 35 minutes from trip 803 and 55 minutes from trip 804 (Finding of Fact No. 7) made the schedule too tight. (AF 8E).
12. On March 29 and 30, 1995 (Wednesday night to Thursday morning), Appellant's late trip[1] was surveyed by a Postal Service Network Specialist. This survey included an examination of the time allowed to change trailers at the Marshfield Post Office. The survey concluded that the time allowed to perform the route was adequate and did not disclose any unusual road construction or heavy traffic interfering with the schedule. (Supplemental Declaration of Mike Mikeworth and attachments thereto).
13. Between March 4, 1995, and April 4, 1995, Appellant experienced 18 delays in performing his contract, with eight delays of over an hour and two delays exceeding eleven hours. On April 13, 1995, another informal discussion was held between Appellant and representatives of Respondent. At this discussion, Appellant complained that he was often held beyond his scheduled departure by Postal Service officials and not given a late slip which would excuse his late arrival at the next stop. (AF 8D).
14. On May 30, 1995, Respondent required Appellant to attend a formal "unsatisfactory service" conference to address his repeated failure to meet the contract's schedule (including being cited for delayed performance in 24 additional irregularity reports between April 12, 1995, and May 23, 1995). Appellant was informed at this conference that the Postal Service required 100% on-time performance (excluding excusable delays) and that a failure to improve the service he was providing by June 9, 1995, and to maintain a satisfactory level of service, would result in the matter being forwarded to the contracting officer for appropriate action, which could include contract termination. (AF 8C).
15. On June 5, June 7 and June 8, 1995, Appellant again was late in performing the route (AF 8B).
16. On June 16, 1995, while driving trip 803, Appellant was detained by Minnesota State Police who were called to the scene by bystanders after Appellant's truck stopped on the side of the road. Appellant failed an alcohol breath test and was taken to a "detox" center. Appellant's truck and the trailer containing mail were impounded, and the trailer was not released until the next day. Evaluation of a blood sample taken at the scene later indicated that Appellant had a blood alcohol content which exceeded the state limit. As a result, Appellant was subsequently charged with driving under the influence of alcohol.[2] (Declaration of Charlie Aldean; Affidavit of Werner Lembke).
17. By letter dated June 20, 1995, the contracting officer temporarily denied Appellant driving privileges on Postal Service contracts and access to the mail[3]. In this letter, the contracting officer informed Appellant that the suspension would be lifted if he could demonstrate that the charge of driving under the influence of alcohol was not and would not be filed, or that the charge was dropped, or that he was found not guilty. The contracting officer informed Appellant that he could appeal this decision to the Manager, National Mail Transportation Purchasing, within five days of receipt of the letter. Appellant did not file an appeal. (Supplemental Declaration of Richard Chancellor; AF 9).
18. On June 20, 1995, Respondent was informed by Appellant's insurance agent, that the insurance Appellant carried on the trucks he used in performing the contract had been canceled, effective that date. At the same time, the insurance agent further informed Respondent that Appellant's insurance had previously been canceled from November 12 to November 27, 1993, and again was canceled on November 29, 1994, but had been rewritten with the same company, effective March 2, 1995. (Declaration of Donald Clevenger; AF 7, 10).
19. Because Appellant could not provide proof of insurance on June 20, 1995, one of his trips for that day had to be run by another contractor. However, on June 21, 1995, Appellant obtained insurance coverage and was allowed to run his routes. (Declaration of Donald Clevenger; AF 7).
20. On June 25, 1995, and again on July 5, 1995, in violation of the contracting officer's suspension of his driving privileges, Appellant drove his truck while performing the contract (AF 7, 9; Declaration of Robert Glimm).
21. On July 5, 1995, Appellant forwarded to Respondent's officials a copy of his driving record dated June 23, 1995. This copy of his driving record did not reflect the charge of driving while intoxicated since it was dated prior to the analysis of his blood test and charges being filed against him. The contracting officer did not consider this sufficient to lift the suspension of Appellant's driving privileges. (Supplemental Declaration of Richard Chancellor).
22. By final decision dated July 27, 1995, the contracting officer terminated Appellant's contract for default. The contracting officer cited Appellant's failure to perform the service according to the terms of the contract (as evidenced by the 128 irregularity reports he received); his disobedience of the contracting officer's suspension of his driving privileges; his failure to submit requested payroll records; his failure to maintain insurance continuously in effect, as required by the contract; and his employment of unscreened drivers on the route. (Declaration of Richard Chancellor; AF 4, 8A-E).
23. On the same date, Respondent procured an emergency service contract to replace the services provided by Appellant. Nine bids were received and an emergency service contract was awarded to the lowest bidder at an annual rate of $249,857. In a final decision dated August 22, 1995, Appellant was assessed $325 representing administrative costs incurred in awarding the reprocurement contract. (Declaration of Donald Clevenger; AF 5).
24. The emergency replacement contract was for the same service provided by Appellant under his defaulted contract. The emergency replacement contractor and successor contractor regularly achieved on-time performance of the route. (Supplemental Declaration of Donald Clevenger).
DECISION
TERMINATION FOR DEFAULT
Respondent argues that the decision to terminate Appellant's contract for default was justified by Appellant's repeated failure to perform the service according to the terms of the contract (as evidenced by the issuance of 128 irregularity reports); Appellant's disobedience of the contracting officer's suspension of his driving privileges; his failure to maintain insurance continuously in effect; and his violation of Service Contract Act requirements when he failed to submit requested payroll records in October 1994.
Appellant argues that his failure to perform service according to the contract's schedule was excusable because of heavy traffic, mechanical breakdowns, and the unilateral decision of the Postal Service to compress the schedule of trips 803 and 804. Appellant alleges in this regard that he was being singled out by Postal Service employees who were biased against him because of his German heritage. Appellant also argues that the contracting officer improperly suspended his driving privileges since the driving under the influence charges were eventually dropped and his driver's license was never revoked or suspended.
Appellant further argues that the only time the Postal Service issued an irregularity report for failure to maintain insurance was on June 20, 1995, and that he acted promptly in this instance to reinstate insurance coverage. Appellant asserts that Respondent waived its right to enforce the contract's insurance requirements since it never issued any other irregularity reports for failure to maintain insurance continuously in effect.
Finally, Appellant asserts that he complied with the contracting officer's direction in October of 1994, to submit payroll records by immediately mailing them and that, until the termination for default, the Postal Service never notified him that they had not received the records.
Respondent has the burden of proving that the termination for default was justified, but once it shows that Appellant failed to perform according to the terms of the contract, the burden shifts to Appellant to present evidence of excusable causes. Jerome Bailey, PSBCA No. 3628, 95-1 BCA ¶ 27,477 at 136,742; see also Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA ¶ 26,419 at 131,429, recon. denied, 94-2 BCA ¶ 26,951; Pamela J. Sutton, PSBCA No. 1622, 88-3 BCA ¶ 21,031 at 106,237.
Respondent had ample justification to terminate Appellant's contract for default. On May 30, 1995, Appellant was warned that his failure to improve contract performance and to maintain improved service would result in his contract performance being referred to the contracting officer for appropriate action, including the possibility of contract termination (Finding of Fact No. (FOF) 14). At the time of receiving this warning, Appellant had received 115 irregularity reports for unsatisfactory service, predominantly for delays in performing the route (FOF 9, 10, 13, 14).
Thereafter, on June 16, 1995, Appellant failed to perform his route when his truck was impounded by the Minnesota State Police and again on June 20, 1995, when he could not perform the route because he lacked insurance (FOF 16, 19).
Additionally, on at least two occasions Appellant disobeyed the contracting officer by driving the route after his driving privileges had been revoked as a consequence of being charged with driving under the influence of alcohol (FOF 20).
Appellant has failed to demonstrate excusable causes for these failures to perform his contract according to its terms. Appellant claimed that the delays in performing his route were caused by the unilateral change in route schedules for trip numbers 803 and 804, which was issued by the contracting officer on December 2, 1994. However, Respondent conducted a route survey on March 29 and March 30, 1995, that indicated that the time allowed to perform the route was adequate (FOF 12). Moreover, of the 128 irregularity reports Appellant received during contract performance, 56 irregularity reports were issued to him for late performance prior to the December 2, 1994 schedule change. Although Appellant also argued that mechanical breakdowns and heavy traffic contributed to his delays in performance, he offered no specific proof on these issues and rarely claimed them as excuses at the time of receiving the numerous irregularity reports that cited him for delays in performance (FOF 9).
Appellant's argument that the December 2, 1994 schedule change contributed to numerous delays in performance is further rebutted by the fact that both the emergency reprocurement contractor and successor contractor were able to perform the same schedule in an on-time fashion (FOF 24). Finally, although Appellant alleged that Respondent's employees were biased against him because of his German heritage, he failed to offer any credible evidence of such bias.
Appellant's only excuse for driving the route while his driving privileges were suspended was that the contracting officer acted improperly in suspending his driving privileges since he ultimately was not convicted of driving under the influence. This argument does not provide justification for Appellant's disregard of the contracting officer's instructions. Appellant does not dispute that, although the charge was eventually resolved without a DUI conviction, he was originally charged with driving under the influence as a result of the incident on June 16, 1995 (FOF 16). Whether or not Appellant was convicted of the charge or had his driver's license suspended by the State of Minnesota, the evidence supports the contracting officer's action at the time to suspend Appellant's driving privileges based on his conclusion that Appellant had been driving while intoxicated. Appellant was obliged to comply with this suspension and if he believed the contracting officer's action was improper, to file a claim for any additional costs he incurred in hiring substitute drivers.
Moreover, at the time his driving privileges were suspended, Appellant was informed that if he disagreed with the suspension, he should appeal the decision within five days of receipt of the decision. Appellant did not file an appeal. (FOF 17).
Accordingly, based on the record of this appeal, we find that the contracting officer's decision to terminate the contract for default was justified, and that Appellant has failed to show any excusable grounds for his failure to comply with the contract's requirements.[4]
REPROCUREMENT COSTS
Respondent seeks to recover from Appellant $325 in administrative costs it incurred in awarding a reprocurement contract for the services provided by Appellant's defaulted contract. In claiming such reprocurement costs, Respondent has the burden of demonstrating that: (1) the reprocured services are the same as or similar to those involved in the terminated contract; (2) the Postal Service actually incurred excess reprocurement costs; and, (3) the Postal Service acted reasonably to mitigate the excess costs incurred. See Cascade Pacific International v. United States, 773 F. 2d 287, 293 (Fed. Cir. 1985); Arthur Johnson, PSBCA No. 3894, 97-1 BCA ¶ 28,773; Jim Lovett, PSBCA Nos. 3633, 3634, 95-1 BCA ¶ 27,516.
In this case, Respondent has not shown that it actually incurred any excess reprocurement costs. The annual rate of the reprocurement contract awarded to
replace Appellant's defaulted contract was $55,581.60 less than Appellant's defaulted contract (see FOF 1 and 23). Therefore, Respondent did not incur excess reprocurement costs since the total of the reprocurement contract price and the administrative expenses was less than the price of Appellant's contract.
CONCLUSION
The appeal of the termination for default is denied. The appeal is sustained to the extent that Respondent may not recover $325 in reprocurement costs it assessed against Appellant.
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] Appellant claimed that, although the contract's schedule was adequate for his early run, heavy traffic interfered with his ability to perform the late run since he arrived back in Minneapolis during the morning rush hour (Supplemental Affidavit of Werner Lembke).
[2] Appellant eventually resolved the charge through a plea agreement on December 30, 1996, in which he pleaded guilty to a public nuisance charge and all other charges were dismissed (Affidavit of Werner Lembke, Exhibit B).
[3] Appellant was also informed of the suspension of his driving privileges by a message left on his answering machine on June 19, 1995 (AF 9).
[4] Having upheld the decision to terminate the contract for default on the above cited grounds, there is no need to address whether the contracting officer waived the right to terminate for default on Appellant's failure to maintain insurance continuously in effect, since Respondent allowed Appellant to obtain further insurance and continue performance. Likewise, there is no need to address whether any failure to submit payroll records when requested to do so in October of 1994, justifies a decision to terminate for default in July 1995.