January 5, 2000
Appeal of
DON WASYLK d/b/a KLYSAW
Under Contract No. HCR 52035
PSBCA Nos. 4186 & 4283
APPEARANCE FOR APPELLANT:
Don Wasylk
APPEARANCE FOR RESPONDENT:
Cary L. Katznelson, Esq.
Appellant, Don Wasylk d/b/a/ Klysaw, filed a timely appeal (PSBCA No. 4186) of the decisions of the contracting officer to terminate for default his mail transportation contract and to assess him for excess reprocurement costs. Subsequently, Appellant filed an appeal (PSBCA No. 4283) of the contracting officer’s decision to deny his claim for alleged damages resulting from the termination for default. At the election of the parties, the appeals have been consolidated and are being decided on the record in accordance with 39 C.F.R. §955.12.
FINDINGS OF FACT
1. On June 3, 1996, Respondent awarded Appellant Contract No. HCR 52035, for the transportation of mail between the Dubuque Annex Post Office and Manchester, Iowa, with intermediate delivery stops, for a four-year term beginning on July 1, 1996 and ending on June 30, 2000 (Appeal File Tab (AF) 1).
2. The solicitation for the service included a new Department of Labor Wage Determination (Revision 23). After receiving Appellant’s bid, but prior to award of the contract, the Department of Labor withdrew the new Wage Determination prepared for the route. As a consequence, Respondent substituted the former (lower) Wage Determination (Revision 22). Appellant agreed to amend and lower the amount of his bid by $518.40 to reflect the lower wage determination and accepted the contract in the adjusted amount of $45,655.60 per annum. (Declaration of Burt A. Gorges, ¶ 4).
3. The contract included Basic Surface Transportation Services Contract – General Provisions (PS Form 7407, July 1992), which in clause 4, SERVICE REQUIREMENTS AND PROHIBITIONS, provided:
“(a) The Contractor shall carry all mail tendered for transportation under this contract, whatever may be its size and weight with certainty, celerity, and security in accordance with the operation schedule and between the points fixed in the solicitation . . . “ (AF 1).
4. General Provisions clause 16, TERMINATION BY THE POSTAL SERVICE FOR DEFAULT, provided, in part, that the contracting officer may terminate the contract for default if the contractor failed to perform service according to the terms of the contract or for the contractor’s disobedience of the contracting officer’s instructions (AF 1).
5. The schedule of Appellant’s contract was determined based on a March 1996 Postal Service survey of the route. This survey examined the performance of the prior contractor in sorting, loading and delivering the mail on this route. (Declaration of Burt A. Gorges, ¶ 4 and Attachment A).
6. In accordance with the contract’s specifications, Appellant was required to arrive at the Dubuque Annex at 4:30 a.m. to begin sorting and loading the mail for trip 1, departing on the route by 5:15 a.m. and completing the morning route by arriving at Manchester, Iowa by 7:05 a.m. Appellant was then required to make a return trip leaving Manchester at 4:35 p.m. and arriving back at Dubuque at 6:25 p.m. (AF 1).
7. Section 13 of the specifications warned Appellant that the times shown for mail sortation and loading were estimates and that, prior to bidding, Appellant should determine the actual time his operation would require. This section also provided, “In order to maintain schedule, postal personnel may assist with loading and unloading.” (AF 1).
8. Section 17 of the specifications required that all drivers had to be screened and approved by the Postal Service prior to performing the route (AF 1).
9. On September 24, 1996, a Postal Service supervisor with responsibility for Appellant’s contract held a conference with Appellant to discuss ten instances where Appellant failed to perform service according to the contract’s requirements. These instances of unsatisfactory performance were documented on contract irregularity reports (PS Form 5500s). The irregularities included delivering mail to the wrong post office (two irregularities), driver arriving and departing late (five irregularities) and mechanical breakdowns (three irregularities). (AF 38).
10. Appellant assured Respondent that his driver would arrive on time but Appellant claimed that there was not enough time allowed at the beginning of the route (45 minutes) to sort and load all the mail (AF 38).
11. On October 3, 1996, transportation specialists for Respondent monitored Appellant’s contract performance. Appellant’s driver was observed while sorting and loading the mail in the morning as well as delivering mail on the route. Although Appellant’s employee performed the route in a timely fashion on this date, suggestions were offered to improve the sorting techniques being used by Appellant’s employee. In addition, Appellant’s work area was improved by moving the loading area closer to the mail sorting area and improving the lighting in the loading area. (Declaration of Burt A. Gorges, ¶ 8).
12. Appellant’s contract performance did not improve. Between December 26, 1996, and February 17, 1997, Respondent documented 15 additional instances of deficient performance of the route. These included two instances of delivering mail to the wrong location, failing to secure a safety lock, failure to make a holiday mail collection on two occasions, and the remainder for late arrivals and departures. (AF 35).
13. Respondent determined that Appellant’s continued poor performance was at least partially caused by the late arrival of certain mail for Appellant’s route at the Dubuque Annex. In order to assist Appellant in the performance of his route, on March 15, 1997, Respondent removed approximately 250-350 cubic feet of daily mail (representing 15% to 20% of the total mail volume) by deleting delivery to three intermediate post offices from his route. Appellant’s contract rate was not reduced as a result of this reduction of his route. (Declaration of Burt A. Gorges, ¶ 9).
14. Although Appellant’s contract performance improved after this action, the improvement was temporary. On June 7, 1997, Respondent held a formal conference with Appellant to discuss his continued unsatisfactory performance. Between May 31 and June 4, 1997, Appellant had been issued four irregularity reports for using an unauthorized driver on the route. Respondent informed Appellant that it would not tolerate any further use by Appellant of unauthorized drivers, and Appellant agreed to correct the situation. (Declaration of Burt A. Gorges; AF 29-32).
15. Between June 11 and July 7, 1997, Respondent documented an additional 12 chargeable irregularities for failing to perform the route (mechanical breakdown on June 24), and either late departures or late arrivals on his route (AF 28). In response, on July 10, 1997, the administrative official for Appellant’s contract issued Appellant a Final Request for Service Improvement. This letter required Appellant to take whatever action was necessary to restore and maintain satisfactory service within three days of receipt of the letter or face the possibility of having his contract terminated and damages assessed against him. Appellant received this letter on July 14, 1997. (Declaration of Burt A. Gorges, ¶ 11; AF 26).
16. Between July 21 and August 12, 1997, Appellant provided late service eleven times, failed to complete one trip and failed to follow the instructions of the contract’s administrative official on one occasion. Respondent sent Appellant an irregularity report notifying him of each deficiency. On August 26, 1997, the contracting officer issued Appellant a final warning letter requiring Appellant to restore and maintain satisfactory service within three days of receipt of the letter or face the possibility of having the contract terminated. Appellant received the letter on August 29, 1997. (Declarations of Richard Chancellor ¶ 4, and Burt A. Gorges, ¶ 12; AF 14, 15, 18). During this same period of time, a United Parcel Service strike caused an increase in the volume of mail Appellant carried on the route (Affidavit of Don Wasylk).
17. Between his receipt of the final warning from the contracting officer and September 20, 1997, Appellant failed to comply with the contract’s schedule on thirteen occasions (AF 12).
18. By final decision dated September 22, 1997, the contracting officer terminated Appellant’s contract for default, effective close of business September 26, 1997, for failing to perform service according to the terms of the contract (Declaration of Richard Chancellor, ¶ 5; AF 10).
19. Respondent competitively solicited bids for an emergency service contract from five bidders and awarded the contract to the lone bidder. The contract was for the same route, schedule and mileage as contained in Appellant’s contract and at an annual rate of $63,800. The contract was to begin on September 26, 1997,[1] and end on March 20, 1998. However, it was subsequently extended to June 30, 1998. (Declarations of Richard Chancellor, ¶ 6, Burt A. Gorges, ¶ 13 and Attachment B).
20. The emergency service contractor performed the route with very few problems and Respondent made payment under the emergency service contract. A permanent replacement contractor provided service on the route beginning on July 1, 1998. The replacement contractor also performed essentially the same route in a satisfactory manner.[2] (Declarations of Richard Chancellor, ¶ 7, Burt A. Gorges, ¶ 13, and Dennis Ehlers, ¶ 3).
21. On December 1, 1997, the contracting officer issued Appellant a final decision determining that $5,052.52 in excess reprocurement costs were incurred by Respondent as a result of Appellant’s default and assessing Appellant for that amount. The amount was determined by charging Appellant for the added daily cost of the emergency service contract for a 98-day period ($4,727.62) plus $325.00 in administrative costs incurred in awarding the emergency service contract. Respondent was then holding $1,771.71 in funds previously earned by Appellant under the contract. Therefore, the contracting officer determined that Appellant owed the Postal Service $3,280.81. (Declarations of Richard Chancellor, ¶ 8, Burt A. Gorges, ¶ 13; AF 6, 7, 11).
22. On December 16, 1997, Appellant timely appealed the contracting officer’s decision assessing excess reprocurement costs (PSBCA No. 4186).
23. On September 8, 1998, Appellant filed another appeal with the Board in which he claimed $277,728.60 in damages (PSBCA No. 4283). Specifically, Appellant claimed: (a) the return of $1,771.76 retained by the Postal Service at the time of termination;[3] (b) $638.80, representing the amount by which Appellant reduced his annual rate to reflect the lower wage determination inserted in his contract prior to award (See Finding of Fact No. (FOF) 2); (c) $2,812.80, representing the wage costs of working an additional ˝ hour each day on the contract beyond the estimated time contained in the contract’s specifications; (d) $172,500 in lost profits in four contracts he and his sons bid on but were not awarded; and (e) $100,000.00 in pain and suffering. This claim was subsequently certified and referred to the contracting officer for a final decision. On December 7, 1998, the contracting officer denied the claim in its entirety.
DECISION
Contentions of the Parties
Respondent argues that the repeated failure of Appellant to perform the route according to the terms of the contract justifies the decision to terminate the contract for default. Respondent further argues that its reprocurement of emergency services was reasonable since it used competitive bidding procedures to reprocure the same service Appellant had provided under the defaulted contract and only assessed Appellant for the additional costs of 98 days of emergency replacement service. Finally, Respondent argues that there is no merit to Appellant’s arguments that Respondent harassed Appellant in the performance of his contract and, further, that Appellant is barred from recovering the alleged damages claimed because they represent consequential damages and/or claims for pain and suffering or punitive damages which are not recoverable contract damages. In this regard, Respondent notes that a portion of the damages claimed represent lost profits from various other contracts that were not awarded to Appellant.
Appellant argues that the termination for default of his contract was not justified because he was not allowed sufficient time in the morning to sort and load the mail. Appellant asserts that Postal Service personnel should have assisted him in loading mail on busy days. Appellant notes in this regard that the United Parcel Service strike occurred during the latter part of his contract performance and that this strike caused his mail volume to increase. Finally, Appellant argues that the irregularity reports he received while performing the route represented harassment of him by the Postal Service.
Termination for Default
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. Werner Lembke d/b/a Lembke Trucking, PSBCA No. 3875, 98-2 BCA ¶ 29,999 and cases cited therein.
Respondent’s decision to terminate the contract for default was justified by the record in this appeal. Appellant failed to meet the requirements of the contract on at least 65 occasions, which were reported in irregularity reports prior to the contracting officer’s decision to terminate the contract for default (Finding of Fact Nos. (FOF) 9, 12, 14, 15, 16, and 17). Despite numerous counseling sessions with Appellant, reorganizing and improving the lighting in the Appellant’s work area, and the removal of 15%-20% of Appellant’s mail volume, at no reduction in the contract annual rate, Appellant’s performance never improved more than temporarily (FOF 9, 11, 13, 14). After receiving a final warning from the contracting officer on August 26, 1997, to restore and maintain satisfactory service on the route or face the possibility of contract termination, Appellant violated the contract schedule on 13 more occasions (FOF 16, 17).
The record does not support Appellant’s allegation that the contract schedule did not allow sufficient time to sort and load the mail each morning. The schedule was based on a survey of the route in March 1996, just prior to issuing the solicitation for Appellant’s contract (FOF 5). This schedule was only intended as an estimate (see FOF 7), and Appellant could have arrived earlier to begin sorting and loading the mail. To the extent mail may have arrived late on occasion at Dubuque, or that the mail volume may have increased subsequent to the survey, these circumstances were alleviated by Respondent’s decision to remove 15%-20% of the mail volume from Appellant’s route in March 1997 (FOF 13). Although Appellant’s performance temporarily improved after this action, Appellant’s long-term performance did not improve, as evidenced by the additional 40 contract irregularities on the route prior to contract termination in September 1997 (FOF 14-17). Many of these PS Form 5500s noted irregularities other than late arrivals and departures. For example, Appellant was cited on four occasions for using unauthorized drivers on the route (FOF 14). Although the UPS strike may have temporarily increased the volume of mail he handled, this occurrence does not excuse his overall unsatisfactory performance in performing the route, both before and after the strike. Finally, we note that, although the contract permitted assistance by Postal Service personnel (FOF 7), this language did not obligate Respondent’s personnel to assist Appellant in sorting and loading. Appellant has not demonstrated or even argued that he bid the contract relying on the assistance of Respondent in performing the route.
Respondent’s efforts to document Appellant’s unsatisfactory performance of his route, by issuing the numerous irregularity reports in the record, did not constitute harassment. Appellant has not shown that the reports were unjustified or that Respondent’s officials did anything other than accurately document Appellant’s unsatisfactory performance.
Accordingly, we conclude that the contracting officer’s decision to terminate the contract for default was justified.
Excess Reprocurement Costs
Respondent has the burden of demonstrating that: (1) the reprocured services are the same or similar as those involved in the terminated contract; (2) the Postal Service actually incurred excess costs; and, (3) the Postal Service acted reasonably to minimize the excess costs incurred. See Cascade Pacific International v. United States, 773 F.2d 287, 293 (Fed. Cir. 1985); Arthur L. Johnson, PSBCA No. 3894, 97-1 BCA ¶ 28,773; Jim Lovett, PSBCA No. 3634, 95-1 BCA ¶ 27,516. Respondent has met its burden in this case.
Respondent solicited and awarded an emergency service contract for the same route, mileage and service as contained in Appellant’s contract, and has paid for the emergency service provided (FOF 19, 20). The only remaining issue, therefore, is whether Respondent acted reasonably to minimize the excess costs.
By obtaining the service through competitively solicited offers, even though only one bidder responded to the solicitation, Respondent acted reasonably to mitigate the damage it would incur. See Kevin Wagoner, PSBCA No. 3993, 97-2 BCA ¶ 29,056. Additionally, at the time of the termination for default, Appellant’s contract had almost three more years to run. Nevertheless, in assessing the excess costs of reprocurement against Appellant, Respondent only charged Appellant for the daily difference between the rate of Appellant’s contract and the emergency service contract for a 98-day period ($4,727.62) plus $325.00 of administrative costs incurred in soliciting and awarding the emergency service contract. In these circumstances, Respondent acted reasonably in assessing reprocurement costs against Appellant.
Appellant has not offered any evidence to challenge or attempt to refute any of the above facts. Accordingly, Appellant is liable to repay the Postal Service $3,280.81 ($5,052.62 less $1,177.71 of funds earned by Appellant but retained by Respondent at the time of termination).
Appellant’s Claim for Damages
There is no merit to any of Appellant’s affirmative claims. Appellant seeks the return of $1,771.76 in contract earnings retained by Respondent at the time of termination. However, although Respondent retained $1,771.71 of Appellant’s earnings at the time of termination, Appellant was credited this amount in the assessment of excess reprocurement costs.
Appellant also seeks $638.80, representing the difference between his original bid’s annual rate and the annual rate at contract award, after the substitution of the lower Wage Determination. However, in accepting award of the contract, Appellant agreed to lower his bid amount by $518.40 per annum to reflect the lower wage determination used in his contract (FOF 2). Appellant has not demonstrated or even alleged that he was coerced or unduly influenced in agreeing to accept award of the contract at a slightly lower amount.
Appellant claims $2,812.80, allegedly representing the cost of arriving early to sort and load the mail for the route. However, Section 13 of the contract’s specifications forewarned Appellant that the times shown for mail sortation and loading were estimates and that, prior to bidding, Appellant should determine the actual time his operation required (FOF 7). Appellant has failed to show that the extra time his drivers required to sort and load the mail each morning was compensable under the contract (FOF 22).
Appellant also claims $172,500, allegedly representing lost profits on mail transportation contracts Appellant and his sons bid on but were not awarded to them. By Order of the Board dated September 24, 1998, issues concerning the award of other contracts were dismissed from these appeals. Appellant stated at that time that he had no objection to dismissal, but that he asserted the claim regarding the failure to be awarded the contracts only to show harassment by the Postal Service. Appellant has not shown that Respondent’s failure to award to him or his sons the four contracts was improper. Moreover, we have already concluded that Respondent’s issuance of irregularity reports did not constitute harassment (See Default Termination, supra), and we perceive no basis to support the harassment allegations by Respondent’s failure to award Appellant additional contracts.
Finally, Appellant claims $100,000 in pain and suffering damages for the alleged wrongful termination of his contract. However, we have already determined that the termination of Appellant’s contract was not wrongful. Furthermore, Appellant’s claim for damages for pain and suffering sounds in tort and is not recoverable before the Board. See Computer Power Support, PSBCA No. 3401, 94-2 BCA ¶ 26,626; Onice Ulmer, PSBCA No. 2938, 91-2 BCA ¶ 23,991.
Accordingly, Appellant’s affirmative claims are denied.
CONCLUSION
Appellant’s appeals in PSBCA Nos. 4186 and 4283 are denied in their entirety.
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’s truck broke down on September 25, 1997, and Appellant did not perform the route on September 26, 1997.
[2] Although the replacement contractor’s driver initially had difficulty in performing the route, once he gained experience, he performed in a satisfactory manner (Declaration of Dennis Ehlers).
[3] The Postal Service actually retained $1,771.71 (See FOF 21).