February 13, 2001
Appeal of
M.D.R.-RIC
Under Contract No. HCR 60211
PSBCA No. 4472
APPEARANCE FOR APPELLANT:
Ricardo Leal
APPEARANCE FOR RESPONDENT:
Cary L. Katznelson, Esq.
OPINION OF THE BOARD
Appellant, Richardo Leal d/b/a M.D.R.-RIC, has filed a timely appeal of the decision of the contracting officer to terminate for default his highway transportation contract with Respondent, the United States Postal Service. Also at issue is the decision of the contracting officer to assess Appellant with $48,892.59 in excess reprocurement costs. The parties have elected to submit the appeal on the record in accordance with 39 C.F.R. §955.12.
1. On May 28, 1996, Respondent awarded Appellant a Transportation Services Renewal Contract for Regular Service for the transportation of mail between Busse Surface Hub, Illinois, and Quincy, Illinois, with return service and intermediate stops at Chicago Metro and Galesbury, Illinois. The contract required one trip in each direction, seven days a week. The term of the contract was from July 1, 1996, to June 30, 2000, at an annual rate of $158,300.72. (Appeal File Tab (AF) B, pages 3-6).
2. Paragraph 15. A of the contract’s specifications required, in relevant part, that the contractor have readily available sufficient stand-by equipment of the same type of vehicle specified for contract performance to perform extra trips, and to prevent delays in emergencies caused by equipment failure and poor weather conditions (AF B, page 10).
3. The contract also required, under Basic Surface Transportation Services Contract, General Provisions (PS Form 7407, July 1992), clause 8, ACCOUNTABILITY OF THE CONTRACTOR, that the contractor give personal or representative supervision to the operation of the route and be easily contacted in the event of emergencies to give personal or representative attention to the problem at hand. This clause, as well as General Provisions clause 13, DAMAGES, further provided that the contractor would be accountable in damages for the faithful performance and obligations assumed by the contractor under the contract (AF B, pages 21-23).
4. General Provisions clause 16, TERMINATION BY THE POSTAL SERVICE FOR DEFAULT, authorized the contracting officer to terminate the contract for default for the contractor’s failure to perform service according to the terms of the contract, or if the contractor’s transportation equipment was insufficient, inadequate or otherwise inappropriate for the service required by the contract (AF B, pages 23, 24).
5. Between August 24, 1997, and March 17, 1998, Appellant received 6 contract irregularity reports for failing to run the route. Additional irregularity reports were issued primarily for delays and Appellant’s failure to run the route according to contract requirements. (Declaration of Shirley A. Vaughn and attachments thereto).
6. On March 17 and 18, 1998, Appellant failed to perform service without notifying the Postal Service. As a consequence, Respondent temporarily suspended Appellant’s right to perform the contract and arranged for emergency service for Appellant’s route during the period from March 19 through March 22, 1998. Appellant was notified of this action by letter dated March 19, 1998, and advised that he must contact Respondent by close of business on March 20, 1998, and show cause why his contract should not be terminated for default. Appellant contacted Respondent and was allowed to continue contract performance. (AF C, page 70; AF E, page 105; Declaration of Thomas R. Miller).
7. Appellant again failed to perform service on September 13, 1998. Respondent’s officials were unable to contact Appellant to determine the cause of this failure to perform because the telephone numbers Appellant had listed as a point of contact had been disconnected (AF E, page 104; Declarations of Shirley A. Vaughn and Thomas R. Miller).
8. By letter dated September 16, 1998, Respondent’s contracting officer notified Appellant that he was required to contact the Postal Service by close of business on September 18, 1998, and show cause why his contract should not be terminated for default because of the failure to perform service on September 14, 1998 (AF E, page 104).
9. On September 22, 1998, Appellant met with Respondent’s officials and was informed that he must immediately restore service to a satisfactory level, or his contract would be terminated. Appellant was also informed that he must furnish a telephone number where Postal officials could easily reach him. (Declaration of Thomas R. Miller).
10. Appellant subsequently failed to perform one of the daily trips under his contract on November 11 and December 21, 1998. In response, on December 22, 1998, Respondent’s contracting officer issued Appellant a final warning that his contract may be terminated for default if he failed to restore service under the contract to a satisfactory level within three days of receipt of the letter. (AF D, E, pages 82, 107, 113; Declaration of Thomas R. Miller).
11. On January 5 and January 11, 1999, Appellant failed to perform service under the contract. When contacted by Respondent’s officials, Appellant stated that his trucks were inoperable and that he did not know when they would be fixed. (Declaration of Gloria Bush).
12. Appellant was also contacted on January 11, 1999, by the contracting officer and stated that he did not know when his equipment would be back in operation because of the weather. Based on this information, the contracting officer decided to terminate Appellant’s contract for default, effective January 11, 1999, because of Appellant’s failure to perform service according to the terms of the contract. In making this decision, the contracting officer considered that other mail transportation contractors were able to perform their routes as scheduled, in the same weather conditions that Appellant claimed prevented him from performing. (AF C, page 64; Declarations of Thomas R. Miller and Gloria E. Bush).
13. The Postal Service immediately began efforts to obtain emergency service for the route by soliciting offers from five contractors. Three contractors submitted offers, and the reprocurement contract was awarded to the lowest offeror, at a rate of $336,714.00 per annum, to commence on January 12, 1999, and terminate on July 11, 1999. (AF D, pages 83-100; Declarations of Thomas R. Miller and Gloria E. Bush).
14. The emergency service contractor performed the route, and received payment at the contract-specified rate for the term of the contract (AF D, pages 101-103).
15. On July 6, 1999, the contracting officer issued a final decision assessing Appellant with $48,892.57 of default damages. This amount was determined by subtracting the annual rate of Appellant’s contract, $164,305.31,[1] from the annual rate of the emergency contract, $336,714.00, and then dividing the remainder by 365 to obtain a daily difference of $471.53. This daily rate was then multiplied by 103 days of emergency service to obtain a product of $48,567.59. Administrative costs of $325.00 were also assessed against Appellant ($325.00 represents the salary costs of the Postal Service employees that conducted the reprocurement), for a total of $48,892.57 in default damages. Appellant’s pre-termination unpaid earnings of $4,509.71 were withheld and credited to Appellant, leaving a total of $44,382.86 in excess costs and expenses. (AF A; AF C, page 63; AF D, pages 75, 83, 101-103; Declarations of Thomas R. Miller and Gloria E. Bush).
16. Appellant filed a timely appeal of the decision of the contracting officer to assess default damages against him (Notice of Appeal).
Respondent argues that the decision of the contracting officer to terminate Appellant’s contract for default was justified by Appellant’s failure to perform after receiving numerous warnings that his contract may be terminated if he failed to improve service. Respondent also argues that it acted reasonably to minimize excess reprocurement costs by awarding the replacement emergency service contract to the lowest of three bidders and assessing Appellant for only 103 days of emergency service. Appellant argues that his default was excusable because his failure to perform was caused by equipment failures and bad weather.
Termination for Default
Respondent has the burden of proving that its decision to terminate the contract for default was justified, but once having done so, the burden shifts to Appellant to present evidence of excusable causes for the default. See Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA ¶ 26,419. Respondent has met its burden in this appeal.
Appellant’s contract performance was unsatisfactory, and he was first warned on March 19, 1998, that his contract may be terminated for default if he did not improve service (Finding of Fact Nos. (FOF) 5, 6). Appellant received a similar warning on September 22, 1998, because of unsatisfactory service and because of Respondent’s inability to contact him (FOF 7-9). Appellant received a final warning on December 22, 1998, after he failed to perform service on November 11 and December 21, 1998 (FOF 10). Under these circumstances, Appellant’s failure to perform service on January 5 and January 11, 1999, coupled with his previous failures to perform, justified the contracting officer’s decision to terminate the contract for default (FOF 11, 12).
Appellant’s arguments that his failure to perform was excusable because of equipment failures and bad weather are unpersuasive. The contracting officer, in deciding to terminate Appellant’s contract for default, considered the fact that other mail transportation contractors were able to perform their routes in the same weather conditions that Appellant claimed prevented him from performing (FOF 12). See ODI Transportation, PSBCA No. 3157, 93-1 BCA ¶ 25,383. Moreover, Appellant was required under the contract to have readily available stand-by equipment to enable him to perform despite equipment failures or bad weather (FOF 2). Appellant has not shown that his failure to perform was excusable because of bad weather or equipment failures.
Based on the record in this appeal, we conclude that the contracting officer’s decision to terminate Appellant’s contract for default was justified and that Appellant has failed to show that his default was excusable.
Excess Reprocurement Costs
Appellant has not challenged the sufficiency of Respondent’s reprocurement efforts, or the reasonableness of the price obtained. Nevertheless, we have examined the reprocurement and conclude that the assessment is reasonable under the circumstances.
Immediately after his decision on January 11, 1999, to terminate Appellant’s contract for default, the contracting officer began efforts to obtain emergency replacement service for Appellant’s route and schedule. Five potential contractors were solicited and three submitted offers. Respondent then awarded the emergency service contract to the lowest offeror, at the rate of $336,714.00 per annum, to commence on January 12, 1999. The emergency service contractor performed the route and was paid for the service at the contract rate. (FOF 13, 14).
Although the emergency contract was awarded at an annual rate considerably higher than Appellant’s contract ($336,714.00 vice $164,305.31), Respondent made a reasonable effort to maximize competition under the time constraints imposed by Appellant’s inability to continue performing the route (FOF 11). The emergency service contract was awarded, after an abbreviated competitive procurement, for a limited duration (six months). The abbreviated nature of the procurement process, as well as the limited duration of the emergency service contract can justify a higher price for the service than a contract for a longer duration that is obtained through the normal procurement process. See Kevin Wagoner, PSBCA No. 3993, 97-2 BCA ¶ 29,056; Daniel Soutiere, PSBCA No. 2279, 89-1 BCA ¶ 21,272; Bowman’s Transport Co., PSBCA Nos. 1088, 1089, 1092, 84-1 BCA ¶ 17,217. Although the emergency service contract had a six month term, Appellant was only assessed excess reprocurement costs for 103 days. On these facts, Respondent’s assessment of excess reprocurement costs is prima facie reasonable and, in fact, has not been challenged by Appellant. Kevin Wagoner, supra.
Accordingly, Respondent’s assessment of $44,382.86 in default damages is upheld.
The 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] Appellant’s contract was awarded at an annual rate of $158,300.72 (see Finding of Fact No. 1). However, various adjustments to the contract rate raised the annual rate to $164,305.31 at the time of termination. (AF C, page 65; AF D, page 77).