June 8, 1999
Appeal of
GARY W. NOBLE
Under Contract No. HCR 40314
PSBCA No. 4094
APPEARANCE FOR APPELLANT:
Regena Triplett, Esq.
Chris Ratliff Law Offices
P.O. Box 1379
Pikeville, KY 41502-1379
APPEARANCE FOR RESPONDENT:
Karren Dickson Vance, Esq.
Mid-Atlantic Office
United States Postal Service
400 Virginia Avenue, SW, Suite 650
Washington, DC 20024-2730
OPINION OF THE BOARD
Appellant, Gary Noble, operated a highway mail transportation route for many years under a contract with Respondent, United States Postal Service. Before renewing the contract in 1997, Respondent insisted that the route and Appellant’s compensation under the contract be substantially reduced. Appellant agreed under protest, and the contract was renewed, but Appellant filed this appeal of the actions taken by Respondent.
A hearing was held in Frankfort, Kentucky, and the parties filed post-hearing briefs. Entitlement only is at issue. (Transcript of Hearing, Page (“Tr.”) 5).
FINDINGS OF FACT
1. Appellant was awarded contract HCR 40314 for the highway transportation of mail to and from the Pikeville, Kentucky Post Office for the term July 1, 1993, to June 30, 1997, at an annual rate of $207,273.72. His contract included several trips each day between the Lexington, Kentucky Processing and Distribution Center (“P&DC”) and Pikeville and a daily stop at the Lexington Airport. (Tr. 184-185; Appeal File, Tab (“AF”) 2; Stipulation (“Stip.”) ¶ 1).
2. The contract provided that it could “be renewed by mutual agreement of the parties.” (AF 2, General Provision 27, RENEWAL).
3. The contract contained the standard Claims and Disputes clause (AF 2, General Provision 2, CLAIMS AND DISPUTES).
4. Changes to the service that resulted in changes to the contractor’s compensation by no more than $1000 could be imposed unilaterally by the contracting officer, but the contract required that larger changes were to be negotiated and agreed to by the contracting officer and the contractor. (AF 2, General Provision 12 (a)(2), CHANGES; Stip. ¶ 20).
5. Appellant used his tractor to haul Postal Service-owned trailers of mail between the Lexington P&DC and Pikeville. The trailers Appellant hauled originated and terminated at the Cincinnati Bulk Mail Center (“BMC”) and were part of a BMC-Lexington P&DC-Pikeville run. Another mail transportation contractor, E.C. Stanton, hauled the trailers between the Lexington P&DC and the BMC. (Tr. 14, 15, 32, 34-35, 37-39, 64, 69, 83-84; AF 2, 12, 13; Stip. ¶¶ 2, 7).
6. In 1996, Respondent changed its policy with respect to ownership of the trailers serving the Cincinnati BMC. Respondent intended to reduce sharply the number of trailers it provided for transporting the mail and to restructure its highway transportation contracts to require the contractors to transport the mail using their own trailers. (Tr. 82-83, 86, 89, 93, 99-100, 166, 176; AF 4, 13).
7. Because of their potential liability and the risk of damage to the trailers, highway contractors who supplied trailers on their routes did not want them hauled by other truckers. Accordingly, it was Respondent’s policy to restructure the routes in a way that avoided one contractor hauling a trailer belonging to another contractor. (Tr. 31-32, 34, 84-85, 94-95; AF 13; Stip. ¶ 6).
8. The Networks Specialist who supervised the highway contracts serving Lexington worked out a plan to restructure the routes that resulted in a reduction of service provided by Appellant. E.C. Stanton operated many contract routes out of the Cincinnati BMC, and the Networks Specialist concluded that withdrawing the Postal Service-owned trailers from his routes would require that Stanton purchase a fleet of 34 trailers. The Networks Specialist also determined that with his fleet of trailers, Stanton could take over the entire route between Cincinnati, Lexington and Pikeville without having to acquire additional trailers specifically for the Lexington-Pikeville part of the route. The Networks Specialist decided that Respondent’s interests would be best served by removing most of Appellant’s trips between Lexington and Pikeville from Appellant’s contract and assigning them to Stanton. The Lexington P&DC ultimately made that recommendation to the contracting officer. (Tr. 18, 20, 32-33, 38, 50, 66-67, 86, 117, 130-133; AF 13; Stip. ¶ 13).
9. In November 1996, the Networks Specialist advised Appellant that the Lexington office would recommend to the contracting officer that when Appellant’s contract was renewed after its June 30, 1997 expiration, the Lexington-Pikeville service he formerly provided with his tractor would not be part of the contract (Tr. 14-17; AF 3).
10. Appellant objected promptly to the proposed action (Tr. 16-19, 145; AF 3; Stip. ¶¶ 9, 10). He proposed that the mail be transferred at Lexington from Stanton's trailers to his trailers, but the Networks Specialist concluded that transferring the mail would have been too costly and time-consuming, given the staff available for loading and unloading trailers at the time of the runs in question (Tr. 85, 90). Appellant also told the Networks Specialist that he would buy any necessary trailers and take the entire Cincinnati-Lexington-Pikeville route himself. The Networks Specialist did not include Appellant’s offer in his recommendation to the contracting officer regarding the restructuring of the routes or ever communicate it to the contracting officer because he believed that was a matter for Appellant to take up directly with the contracting officer (Tr. 101-104, 116, 138).
11. In performing his analysis, the Networks Specialist had worked with general assumptions regarding costs, and he did not obtain competing prices from either Stanton or Appellant. Respondent never determined which contractor would have been able to provide the service at a lower price. (Tr. 130-133).
12. After reviewing the Lexington recommendation, the contracting officer determined that the recommended course of action was in the best interest of the Postal Service. At the time of his review, the contracting officer had before him a December 2, 1996 letter from Appellant, in which Appellant contended that the recommendation of the Networks Specialist was the result of favoritism towards Stanton (Tr. 144, 146-147; AF 3). The contracting officer found the operational recommendations to be sound and did not find that the recommendation was biased (Tr. 146-147).
13. It was Respondent’s practice only to renew contracts for the same service and price that existed in the contract at the time of expiration (Tr. 154, 178-179; United States Postal Service Purchasing Manual, Issue 1, January 31, 1997, Section 4.5.6.c[1]). Thus, if Appellant agreed, Respondent intended to amend Appellant’s contract before it expired to reduce Appellant’s schedule effective the close of business on June 30, 1997, the last day of the contract period (Tr. 81, 98, 162, 170-171, 173, 175). This was to be followed by renewal of the contract as of July 1, 1997, for the reduced service and price (Tr. 22-23, 81, 91-92, 145-147, 159, 171, 186; AF 4, 13). Had Appellant not agreed, Respondent would have allowed the contract to expire without renewal (Tr. 17, 24, 48-49, 63-64, 99, 152-154, 173, 178, 180, 183).
14. By letter dated March 10, 1997, the contracting officer formally advised Appellant that Respondent intended to restructure Appellant’s contract to eliminate all trips that ultimately originated or ended at the Cincinnati BMC (Tr. 146-147, 162; AF 4).
15. On March 17, 1997, Appellant wrote to the contracting officer stating his intention to appeal the proposed service change under the Claims and Disputes clause (Tr. 148; AF 6; Stip. ¶ 16).
16. On March 28, 1997, the contracting officer notified Appellant that the service change would go into effect at renewal. He further advised that his determination was a final decision and advised Appellant of his right to appeal under the Contract Disputes Act and the contract’s Claims and Disputes clause. (Tr. 148-149; AF 7; Stip. ¶ 17).
17. Respondent prepared an amendment that reduced the annual miles under Appellant’s contract from 222,345.3 to 88,343.9 and the annual compensation from $237,735.81[2] to $115,000 effective close of business on June 30, 1997. Appellant signed the amendment on May 9, 1997. (Tr. 24-29, 56, 58-60, 150-152, 185-186; AF 1, 5, 11, 12; Stip. ¶¶ 15, 18, 22).
18. Appellant agreed to this reduction because he realized that refusing could have led to the route being put out for bid—in which case he might end up with nothing remaining of his route (Tr. 48-49, 54-55, 187).
19. As reduced, the contract was renewed by agreement of the parties on May 28, 1997, for the period July 1, 1997, through June 30, 2001 (Tr. 25-27, 29-30, 48, 55, 60-61, 73, 92, 175, 186; AF 11; Stip. ¶¶ 21, 22).
20. The restructured service to Pikeville left both Stanton and Appellant with an early morning run from Pikeville to the Lexington P&DC. Because Stanton’s incoming trip from Lexington arrived at Pikeville before Appellant’s, the Networks Specialist assigned the first outbound trip to Stanton on a first-in-first-out theory. As the mail for the Lexington Airport had to be on the first outbound trip, this resulted in Stanton also getting the additional miles and compensation for the airport service that had previously been part of Appellant’s contract. (Tr. 37-39, 64, 73, 126-129, 160).
21. Through counsel’s letter of June 25, 1997, Appellant notified the contracting officer that he appealed the contracting officer’s March 28, 1997 final decision (AF 10).
22. Appellant had been performing the route since 1971, and it had been performed by members of his family at least since 1963 (Tr. 13, 39).
DECISION
Appellant argues that the contract’s Changes clause (Finding 4) precludes Respondent from deleting the service from his route without first negotiating the change with him. However, Respondent did negotiate the level of service and compensation with Appellant, and Appellant agreed to the changes. Appellant has not shown that Respondent’s use of its bargaining superiority at the time of renewal to accomplish the reduction of the scope of his contract was improper or that Respondent violated any implied duty of fair dealing under the contract. Either party to the contract was free to choose not to renew (Finding 2), and Appellant has not shown that Respondent’s intention to allow the contract to expire had he failed to agree to the service amendment (Finding 13) violated Appellant’s rights under the contract. Driving a hard bargain, even one that causes Appellant considerable financial loss, did not constitute duress or breach the implied duty of fair dealing under Appellant’s expiring contract. See Systems Technology Associates, Inc. v. United States, 699 F.2d 1383, 1387 (Fed. Cir. 1983); Johnson v. Drake & Piper, 209 Ct. Cl. 313, 322, 531 F.2d 1037, 1043 (1976); Biological Surveys, Inc., GSBCA No. 8713-COM, 88-2 BCA ¶ 20,522. Appellant has not shown any basis, including that Appellant and his family had held the contract for the service in question for many years, for finding that Respondent had an obligation to award the combined Cincinnati-Lexington-Pikeville route to him.[3]
Appellant charges that the decision to reassign his routes to E.C. Stanton was motivated by Respondent’s officials’ “favoritism” towards Stanton. Appellant asserts that favoritism was shown by the Networks Specialist assigning Stanton the first morning run from Pikeville and thus the Lexington airport service (Finding 20), failing to advise the contracting officer that Appellant would be willing to acquire trailers to perform the entire run (Finding 10), and not giving Appellant extra runs under his renewed contract. However, Appellant has not shown that improper bias or bad faith drove the Networks Specialist’s recommendations or the contracting officer’s actions. Appellant has not shown that the operational determination to consolidate the Cincinnati-Lexington-Pikeville route or the decision to assign them (including the airport service) to Stanton’s contract were made in bad faith. There was no showing that the Networks Specialist’s failure to pass on Appellant’s proposal to the contracting officer was due to favoritism.
The contracting officer was aware of Appellant’s favoritism charge when he considered the recommendation, yet he concurred in the recommendation after determining that it was a sound plan from an operational standpoint. It may have been that there were other ways, even cheaper ways (Finding 11), to accomplish Respondent’s goal of having the Cincinnati-Lexington-Pikeville service provided without Postal Service trailers, but Appellant has not shown that Respondent acted in bad faith. He has not shown that the restructuring of his route stemmed from a desire to punish or harm him, which is what he must show to establish bad faith on the part of Respondent’s officials, as opposed to an exercise of Respondent’s business judgment. See Jared Paul Carlson d/b/a The Roasted Coffee Bean, PSBCA No. 4006, 98-2 BCA ¶ 29,847, citing Kalvar Corp. v. United States, 543 F.2d 1298, 1301-1302 (Ct. Cl. 1976), cert. denied, 434 U.S. 830 (1977); Krygoski Constr. Co. v. United States, 94 F.3d 1537, 1541 (Fed. Cir. 1996), cert. denied, 137 L.Ed.2d 819, 117 S. Ct. 169 (1997). Appellant did not allege that the contracting officer personally acted in bad faith, and the contracting officer’s handling of the amendment and subsequent renewal of Appellant’s contract was not shown to have been an abuse of discretion. [4]
The appeal is denied.
[1] The Purchasing Manual’s predecessor, the Postal Service Procurement Manual, described the same practice. Procurement Manual, Publication 41, TL-8, July 12, 1995, section 12.4.10.c.
[2] Through amendment of the contract occurring during its term, Appellant’s annual compensation had been increased from that originally stated in the contract (AF 12).
[3] Respondent argues that Appellant’s appeal must be dismissed to the extent Appellant is seeking to overturn Respondent’s decision not to renew the contract under the original terms and conditions. Since Appellant is not seeking to overturn a nonrenewal decision, we need not address Respondent’s jurisdictional argument.
[4] Appellant contends that the combined route should have been put out for bid so he would have had an opportunity to compete based on price. We express no view on this as any challenge to the method of awarding the combined route to E.C. Stanton would be in the nature of a protest and would be beyond the Board’s jurisdiction. See Coastal Corp. v. United States, 713 F.2d 728 (Fed. Cir. 1983); Dill’s Star Route, Inc., PSBCA 3699, 95-2 BCA ¶ 27,608. Furthermore, we could not order restoration of the service to Appellant’s route, even if he were to prevail, because the Board lacks authority to order such reinstatement. See Weststates Transportation, Inc., PSBCA No. 3764, 97-1 BCA ¶ 28,633, Triple B. Trucking, PSBCA No. 2939, 92-1 BCA ¶ 24,506.