May 12, 2006
Appeal of
G & S TRANSFER INC.
Under Contract No. HCR 444CE
PSBCA No. 5240
APPEARANCE FOR APPELLANT:
Gary Begue
APPERANCE FOR RESPONDENT:
Douglas J. Colton, Esq.
Office of the General Counsel
OPINION OF THE BOARD
Appellant, G & S Transfer Inc., held a mail transportation contract with Respondent, United States Postal Service. During the contract term, the Department of Transportation changed its regulations governing minimum required off-duty periods for truck drivers in a manner that Appellant claims increased its cost of performing the contract. The contracting officer denied Appellant’s claim for such costs, and Appellant filed this appeal.
At the parties’ election, the appeal is being decided on the record without an oral hearing. The parties submitted additional evidence, including declarations of witnesses, and briefs in support of their positions. Entitlement only is at issue in this proceeding (Order dated June 21, 2005).
FINDINGS OF FACT
1. Beginning in 1999, Appellant held contract
HCR 444CE for the transport of mail between Respondent’s
2. In April 2003, as Appellant’s contract was about to expire, Respondent sent Appellant an Inquiry Concerning Renewal of Transportation Services Contract form asking Appellant whether it was interested in renewing the contract for another four years, commencing July 1, 2003. If interested, Appellant was to submit a renewal cost statement reflecting the “cost[s], wages, and return on investment you expect, beginning with the renewal date of the contract.” That cost statement was to be the basis for the parties’ negotiation of the contract price for the renewal period. The Inquiry form pointed out that adjustments to the rate of compensation after renewal would be allowed in accordance with the procedures set out in the applicable Management Instruction (Respondent’s publication) governing such adjustments. (AF 1 (pp. 5240.0029-.0030)).
3. On
4. The contract provided that Appellant was “responsible, without additional expense to the Postal Service, for . . . complying with any applicable federal, state, and municipal laws, codes, and regulations in connection with the performance of the contract.” (AF 1, Clause H.12, PERMITS AND RESPONSIBILITIES (SERVICES) (Clause B-30) (January 1997); see also Clause H-19, LAWS AND REGULATIONS APPLICABLE (Clause B-80) (January 1997); Stip. 8).
5. The contract authorized adjustment of Appellant’s compensation during the contract term by mutual agreement, and provided that any such adjustment would be made in accordance with the Postal Service Management Instruction governing such adjustments in effect on the date of the adjustment (AF 1, Clause H.7, ADJUSTMENTS TO COMPENSATION (Clause B-65) (January 1997)).
6. Management Instruction PM-4.4.1-2004-1 (February 25, 2004), entitled “Economic Pay Adjustments for Highway and Inland Domestic Water Contracts,” implements Respondent’s authority under 39 U.S.C. 5005 (b)(1) to adjust mail transportation contract rates of compensation “because of increased or decreased costs resulting from changed economic conditions occurring during the term of the contract.” The Management Instruction stated Postal Service policy to “allow … an adjustment in the rate of compensation when changed economic conditions or operational requirements occur over which the supplier has little or no control, subject to the provisions of this management instruction.” (AF 1; Management Instruction PM-4.4.1-2004-1, Section 11).
7. The adjustments allowed by the Management Instruction during the term of the contract included adjustments to reflect increased driver costs resulting from, among other things, “increased hours necessitated by service change orders, new or revised statutes, or other changed conditions affecting the hours required to perform the service.” (Management Instruction PM-4.4.1-2004-1, Section 62.l.(3)).
8. The contract schedule required one daily trip
each way between
For the return
Therefore, the time between arrival
and departure at
9. In submitting its renewal cost statement and
other pre-renewal information and in pricing the renewal contract, Appellant calculated
its costs based on its intention to use a single driver for each
Youngstown-Clinton-Youngstown round trip.
The driver would drive the
10. The contract contained the following:
“B.6 SAFETY REQUIREMENTS
The supplier shall conduct its
operations under this contract in full compliance with (i)
the United States Department of Transportation (DOT) Motor Carrier Safety
Regulations, as set out in 49 C.F.R. Parts 390-397, (ii) all other applicable
federal laws and regulations, and (iii) all applicable state laws and
regulations. … In addition, the supplier shall meet each and every one of the following
requirements:
* * *
g. Hours of Service for Drivers
Drivers will not be permitted or required to exceed the hours of ‘on duty’ and ‘driving time’ as specified by the Department of Transportation (DOT).”
(AF 1 (pp. 5240.0019-.0021); Stip. 8).
11. At the time of contract renewal (June 2003),
the DOT hours-of-service regulations provided, among other restrictions, for a
maximum of 10 hours of driving time following an 8-hour off-duty period (AF 2; see,
e.g., 68 Fed. Reg. 22,456, 22,491 (
12. Appellant initially performed the contract as
it had planned, using one driver to perform each round trip. Appellant’s drivers generally arrived at
13. Respondent does not ordinarily verify or police a highway contractor’s compliance with DOT requirements, and there was no evidence presented that the contracting officer was aware that Appellant’s intended method of performance at the time of renewal and actual performance thereafter did not comply with the then-existing DOT requirement that the driver have 8 hours off-duty between trips (Declaration of Keith L. Harris, ¶ 3).
14. Before the end of 2003, Respondent’s contracting officer notified Appellant of the coming change in the DOT hours-of-service regulations and asked Appellant to describe how its operation of the route would be impacted by the new regulations (AF 4).
15. By letter dated
16. By letter of
17. By letter of
18. To meet the 10-hour off-duty requirement, Appellant
hired another driver at the
19. In a final decision dated
20. Once the claim was denied, Appellant asked
for and, on
21. Appellant filed a timely appeal of the final decision (AF 17).
DECISION
Appellant argues that it is entitled to an adjustment in compensation because its costs of performing the contract were increased by changed operational requirements—i.e., the revised DOT regulations—over which Appellant had no control.
Respondent argues that Appellant’s responsibility under the contract to comply with all applicable laws and regulations (Finding 4) places on Appellant the risk that such regulations might change during the course of the contract and makes Appellant responsible for any increases in costs caused by the change in the DOT requirements. Respondent also argues that the coming change in the DOT requirements was known at the time Appellant entered into the renewal contract and that, therefore, any costs attributable to the change were not recoverable as they were not “unforeseen.”
While Respondent’s
arguments may pertain to the typical fixed-price contract under which the
contractor generally bears the risk that its costs of performing the contract
will increase, the compensation scheme under Appellant’s mail transportation
contract is different. Appellant’s
contract included an Adjustment to Compensation clause (Finding 5) that provided
for an adjustment to Appellant’s compensation in accordance with the applicable
Management Instruction. See W.D. “Dub”
Therefore, Appellant
is not barred from an adjustment in its rate of compensation. However, as Respondent points out, Appellant
was not complying with the DOT hours-of-service requirements in existence at
the beginning of its contract, given the gap of less than 6 hours between the
scheduled arrival and departure at Clinton and the evidence that Appellant’s
drivers did not have 8 hours off-duty between trips (Findings 8, 12). Thus, from the beginning of the contract,
Appellant should have been incurring costs necessary to comply with the
then-existing 8-hour off-duty requirement, and it is not entitled to recover
those costs as an adjustment. Appellant
may recover only cost increases “resulting from” the increase of the off-duty
requirement from
Appellant also argues
that it was induced to continue performance and incur additional costs by the
contracting officer’s advice that Respondent was seeking an exemption from the
new requirement and his instruction that Appellant maintain records regarding
the additional costs it was incurring (Finding 17). Appellant argues it would have ceased
performance immediately had it not been for this inducement and that Respondent
should be liable for the costs Appellant otherwise would have avoided. Although Respondent eventually released
Appellant from its obligation to provide services under the contract (Finding
20), Appellant has not shown it had a right under the contract or other
authority to such a release or to cease performance without liability. Appellant has not shown any binding promise
by Respondent that Appellant would be compensated if it continued to provide
the service it had contracted to provide under contract HCR 444CE. See Edward L. Bledsoe, Runette G. Bledsoe, PSBCA No. 4933, 04-1 BCA
¶ 32,440.
To the extent
discussed above, the appeal is sustained, and it is otherwise denied. We
remand to the parties for a determination of the cost difference between Appellant
providing the driver 8 hours off-duty and providing 10 hours off-duty at the
Norman D. Menegat
Administrative
Judge
Board Member
I concur:
David I. Brochstein
Administrative Judge
Acting Chairman