November 1, 2000
Appeal of
KEMCORP
Under Contract No. HCR 19032
PSBCA No. 4454
APPEARANCE FOR APPELLANT:
Charles B. Kemner
APPEARANCE FOR RESPONDENT:
Daniel M. Curts, Esq.
Appellant, Kemcorp, has appealed the termination for default of its highway transportation contract with Respondent, United States Postal Service. The parties have elected to submit the appeal on the record pursuant to 39 C.F.R. §955.12. Although given an opportunity to do so, Appellant did not file a brief. Its arguments have been gleaned from its August 26, 1999 letter, which was accepted as its Complaint, and its January 7, 2000 response to Respondent’s Memorandum in Lieu of an Answer.
1. On June 18, 1998, Respondent renewed Contract No. HCR 19032 for transportation of mail. [1] The term of the renewed contract was from July 1, 1998, to June 30, 2002, at an annual rate of $228,414. (Appeal File Tab (“AF”) 7).
2. Under the contract, Appellant was required to perform more than 100 trips per week between Respondent’s Philadelphia Processing and Distribution Center and a number of surrounding post offices. According to the contract schedule, there were at least 16 trips per day, six days per week. (AF 7, Contract Statement of Work and Specifications; Appellant’s January 7, 2000 Letter).
3. The contract authorized Respondent to terminate the contract for default if Appellant failed to perform according to the terms of the contract (AF 7, Contract Paragraphs H.4, TERMINATION FOR DEFAULT (Clause B-13) (January 1997) (Modified) and H.5, EVENTS OF DEFAULT (Clause B-69) (January 1997)).
4. If the basis for a termination of the contract was Appellant’s failure to complete the requirements of the contract within the time specified, the contract did not require Respondent to provide advance notice and an opportunity to cure before terminating. However, if the termination was for Appellant’s failure to perform any other provision of the contract or for Appellant’s failure to make progress, the contract required that Respondent first give Appellant notice of the performance failure (cure notice) and three days after receipt of the cure notice to correct the deficiency. (AF 7, Contract Paragraph H.4, TERMINATION FOR DEFAULT (Clause B-13) (January 1997) (Modified)).
5. Appellant had a contractual duty to supervise its operations to ensure that the contract was sufficiently performed (AF 7, Contract Paragraph H.6, ACCOUNTABILITY OF THE SUPPLIER (HIGHWAY) (Clause B-64) (January 1997)).
6. On May 22, 1999, Appellant failed to perform (omitted) three trips (AF 4).
7. On May 24, 1999, an administrative official in Respondent’s Philadelphia office, who was responsible for the day-to-day administration of the contract, called Appellant’s operations manager to discuss the irregularities of May 22 and a late run on May 24. The administrative official and Appellant discussed needed improvements in service. (AF 4).
8. In the nine days following the telephone conference, Appellant was 35 minutes late on one trip on May 26, was 50 minutes late on one trip on May 27, omitted four trips on May 29, was 45 minutes late on one trip on June 1 and omitted one trip on June 2. Each of these incidents was reported on a PS Form 5500, Contract Route Irregularity Report, a copy of which was provided to Appellant. (AF 4).
9. On June 3, 1999, the administrative official conducted another telephone conference with Appellant to discuss the continuing irregularities and desired improvements in service. The administrative official notified Appellant that she was requesting that the contracting officer terminate Appellant’s contract because of a failure to lock the truck’s cargo compartment, recent lateness and unacceptable service. (AF 4).
10. On June 3, the administrative official faxed a letter to the contracting officer listing the irregularities between May 22 and June 2, summarizing her conversation with Appellant’s representative and requesting termination of Appellant’s contract (AF 4).
11. On June 4, 1999, the contracting officer sent Appellant a letter identifying the recent instances of unsatisfactory performance (Finding 10) and warning,
“You are further notified that this is a final warning, and that the Postal Service may terminate your contract for failure to perform unless satisfactory service is restored immediately upon receipt of this letter, and maintained for the remaining term of the contract.” (AF 4).
12. Appellant received the June 4 letter on June 7, and responded by letter of June 10, 1999, stating that the driver responsible for the late and omitted trips had been fired (AF 4).
13. Appellant failed to perform one trip on June 11 and four trips on June 12, 1999 (AF 4).
14. On June 17, 1999, the administrative official again requested that the contracting officer terminate Appellant’s contract for unsatisfactory service (AF 4).
15. By final decision dated June 28, 1999, the contracting officer terminated the contract for default for failure to perform according to the terms of the contract (AF 3). Appellant filed a timely appeal of that decision (AF 2).
Respondent argues that Appellant’s failure to perform according to the terms of the contract justified the contracting officer’s decision to terminate the contract for default. Appellant argues that its performance did not warrant termination, especially given Appellant’s 20-year history of satisfactorily performing Respondent’s highway transportation contracts.
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 cause. See Werner Lembke d/b/a Lembke Trucking, PSBCA No. 3875, 98-2 BCA ¶ 29,999; Jerome Bailey, PSBCA No. 3638, 95-1 BCA ¶ 27,447.
Appellant argues that given the large number of trips it was required to run each week (Finding 2), the few late and omitted trips at issue here were not sufficient to justify the termination. However, Respondent’s warnings—especially the contracting officer’s unambiguous final warning (Finding 11)—should have left no doubt in the minds of Appellant’s officials that its level of performance was not acceptable and that Respondent would not tolerate further performance deficiencies. Nevertheless, immediately after responding to the contracting officer’s final warning with assurances that the cause of the previous omitted trips had been corrected by firing the offending driver (Findings 11, 12), Appellant omitted five trips over two days (Finding 13), and offered no excuse for those omissions. While few in relation to the total number of scheduled trips, those trips omitted and performed late from May 22 through June 12 were significant breaches of the contract requirements. Furthermore, the omissions of June 11 and 12 came at a time when Appellant should have been focussing its attention on this contract because it knew that additional missed trips could trigger termination. Respondent had little reason to have faith in Appellant’s assurance that it had resolved the problem of omitted trips, and Appellant’s recurring performance failures justified the termination.
Appellant has not shown an excusable cause for the irregularities. Although Appellant claims that the performance deficiencies were the fault of individual drivers and that it did not know of the omissions until after they occurred, this excuse is insufficient. Appellant was responsible for providing dependable drivers or having back ups when necessary and for assuring that the service was performed according to the requirements of the contract. See Jerome Bailey, PSBCA No. 3638, 95-1 BCA ¶ 27,447; Arizona Barnes, PSBCA No. 945, 1981 PSBCA LEXIS 26, May 27, 1981. Appellant accuses Respondent’s officials of doing too little to notify it when its drivers did not perform, but it has shown no evidence of a breach of a contractual duty on Respondent’s part that would excuse Appellant’s own failures. That Appellant may have performed satisfactorily over the years under prior contracts for this and other routes and that it was performing other routes for Respondent did not serve to relax the performance requirements under this contract and did not excuse Appellant’s performance defaults under this contract. For these reasons, Appellant has not met its burden to provide adequate excuse for its contract defaults.
Appellant argues that the termination was improper because Respondent did not provide Appellant with the contract-required notice and an opportunity to cure prior to the termination. This argument is not supported in the record. The contracting officer gave Appellant notice and an adequate opportunity to correct the performance deficiencies prior to the termination (Findings 11, 13, 15). Additionally, as the performance failures that caused the termination were failures to complete the contract requirements within the time specified, Respondent was not required to afford notice and an opportunity to cure under the Termination for Default clause (Finding 4).
The appeal is denied.
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman
[1] The contract was awarded to KTS, Inc. (AF 7). However, in October 1998, Kemcorp was recognized as the contractor through a novation agreement (AF 6).