Appeal of
ROBERT E. DAVIS
Under Contract No. HCR 39015
PSBCA No. 3400

APPEARANCE FOR APPELLANT:
J. Hatcher Graham, Esq.

APPEARANCE FOR RESPONDENT:
Larry Donell Blanchard, Esq.

OPINION OF THE BOARD

            Appellant, Robert E. Davis, has appealed the termination for default of his highway transportation contract with Respondent, United States Postal Service.  A hearing was held in this matter.  Only entitlement is at issue.                                                        

FINDINGS OF FACT

            1.  On June 29, 1992, Respondent's Memphis Transportation Management Service Center ("TMSC") awarded Appellant contract HCR 39015 for the highway transport of mail on four trips daily between Jackson and Gulfport, Mississippi, with an interim stop in Hattiesburg, Mississippi.  The manager of the Jackson postal facility ("Jackson") was designated the administrative official under the contract.  The annual rate under the contract was $187,300, and its term was from July 13, 1992, until June 30, 1996.  (Appeal File Tab ("AF") O; Transcript Page ("Tr.") 26, 39, 53, 69).

            2.  The contract required Appellant to provide three two-axle, single drive tractors and four 45-foot, tandem-axle trailers with roll-up rear doors and an "E" Track load restraint system (AF O, Sections 15, 15.I, 15.H, Attachment A, Load Restraint System; Tr. 17, 30, 31).  Appellant was also required to have available standby equipment of the same type to prevent delays in emergencies, including mechanical failures (AF O, Section 15.C).

            3.  The contract required Appellant to position (spot) one trailer at the dock at Jackson for preloading by postal personnel prior to trip 1, which was scheduled to depart Jackson at 12:25 a.m.  (AF O, Sections 13.E., 15.D, schedule; Tr. 15-16, 61-62, 70, 106-107).

            4.  By the time contract performance began on July 13, Appellant had acquired three tractors but only three trailers, and two of these had side-by-side doors instead of roll-up doors.  (Tr. 66-68, 73-75).  Appellant's failure to have proper equipment by the contract commencement date was not caused by Respondent.

            5.  Appellant contacted Mr. Alsobrook, the official in the Memphis TMSC who administered Appellant's contract, and was given until July 23[1] to spot a trailer at Jackson for preloading and until August 20 to have exclusively roll-up door trailers (Tr. 67, 105-106).  Although Mr. Alsobrook was not the contracting officer named in Appellant's contract, he was a contracting officer (Tr. 94, 105).  Mr. Alsobrook did not put his consent in writing, but he told Appellant he would call Jackson.  In a telephone conversation on or about July 31, the Jackson transportation manager acknowledged to Appellant receiving notice from Mr. Alsobrook that the required equipment would be in use by August 20.  (AF J, p. 2; Tr. 57, 95).

            6.  PS Form 5500, Contract Route Irregularity Report, is a multi-copy form used by Respondent to notify transportation contractors of deficiencies in their performance.  Respondent's employees at the point where the irregularity occurs note the deficiency in section 1 of the form, and two copies are sent to the contractor through the contract's administrative official.  Section 2 provides space for the contractor to reply.  Section 2 is prefaced, "Complete this section and return it to the Administrative Official within 10 days.  Failure to reply will be taken as admission that the facts as stated in Section 1 above are correct."  Section 3 provides space for the comments of postal officials, including whether the deficiency is chargeable, i.e. unexcused, after reviewing the contractor's response.  If the contractor does not reply, Respondent considers the identified deficiency to be chargeable.  (Tr. 10-14, 27, 37, 53-54; Examples of Form 5500 are contained in AF J).

            7.  Respondent issued Form 5500s noting that a trailer had not been spotted at the dock in Jackson for preloading on July 13-15, 17-19, 21-24 and August 1, 4-9 (AF H; AF J, pp. 14-19, 21, 26, 27, 30, 31, 34-36, 48, 49, 51).  In a July 23 letter, the administrative official advised Appellant of equipment deficiencies including the lack of a trailer for preloading on trip 1 and admonished that unless performance conformed to the requirements of the contract by July 30, Jackson would forward the file to the Memphis TMSC and ask for contact termination (AF M; AX 1, pp. 31-32).  This letter was sent by certified mail and was received by Appellant (id.).

            8.  On July 23, Appellant spotted the fourth trailer (albeit one with side-by-side doors) at the Jackson dock (Tr. 72-73, 91, 106-107).

            9.  On July 28, Appellant sent Jackson his responses to the Form 5500s issued through July 24 regarding the availability of a trailer for preloading, noting that he had not been able to acquire another trailer until July 23, that the Memphis TMSC was aware of the problem and that as of July 23 a trailer had been placed at the dock in Jackson for preloading (Appellant's Exhibit ("AX") 1, pp. 25, 29, 33, 35, 36, 37, 48, 50, 52).  On August 6 and 16 Appellant responded to the additional Form 5500s issued through August 9 regarding a trailer for preloading, noting that the trailer was at Jackson and had been since July 23 (AX 1, pp. 16-21, 23).  No Form 5500s were issued after August 9 regarding the absence of a trailer to preload (See AF H, J; RX 1).

            10.  Appellant was issued Form 5500s for equipment that failed to meet the requirements of the contract:  use of trailer with side-by-side doors instead of the required roll-up doors on July 14, 20, 24 and August 1, 14, 20 (AF J, pp. 6, 9, 21, 24, 32, 50); use of a single-axle or straight truck instead of the required double-axle tractor on July 15, 16 and August 18, 19 (AF J, pp. 7, 8, 40, 47); absence of the required restraint system in trailers on July 14, 19, 20, 31 (AF J, pp. 22, 32, 34, 50); and broken floor in trailer on July 16, 20 (AF J, pp. 33, 43).  None of the Form 5500s for nonconforming equipment reflect late service or failure to carry all the mail.

            11.  For the Form 5500s regarding use of improper equipment, Appellant sent Jackson his responses stating that the broken floor was due to abuse by postal employees loading Appellant's trailer and that the temporary use of nonconforming equipment was because of mechanical failures of his primary equipment or until conforming equipment could be obtained, which was to be by August 20 (AX 1, pp. 9-11, 26, 40, 42, 43, 45, 47, 51).

            12.  By August 20, all of Appellant's primary equipment met the requirements of the contract (Tr. 73, 92, 102), although his backup trailer had side-by-side doors, and he had a straight truck for use as a backup vehicle on occasion in addition to a backup tractor (Tr. 67, 68, 73, 74).  No Form 5500s for nonconforming equipment were issued after August 20 (AF H; RX 1).

            13.  Appellant was issued Form 5500s for delayed service on July 15 (missed trip), 16, 20, 23, 24, August 2, 11, 14, 17, 28, September 15, 16, 17 and October 14 (3 hours 15 minutes late arriving in Jackson), 24 (one hour late arriving at Jackson on trip 2 and 35 minutes late leaving Jackson on trip 1 (Respondent's Exhibit 1; AF H, pp. 3-7; AF J, pp. 9-13, 20, 23, 25, 28, 29, 43, 45, 46).

            14.  Appellant sent Jackson a reply to each of the Form 5500s issued up to September 17 related to delays in service, disputing some of the delays, explaining the reasons for the delays, accepting responsibility for many, explaining what he was doing to improve service and apologizing for the failures (AX 1; Tr. 79-82).  The last batch of responses was completed September 20 and sent to Jackson shortly thereafter (AX 1, pp. 1-5; Tr. 79-82).

            15.  Appellant's replies to the Form 5500s mentioned above were received by the Jackson office within a few days of Appellant's mailing, and all of Appellant's responses were in the hands of Jackson officials by the end of September.[2]

            16.  The Jackson transportation manager determined that all of the incidents reported on the Form 5500s were chargeable.  For all of those issued after July 19, he noted them to be chargeable fewer than ten days after issuance and always on the Postal Service copy of the form, which did not reflect Appellant's comments (AF H, J; RX 1; Tr. 39-40).

            17.  On August 14, the administrative official in Jackson wrote to Appellant listing the service failures that had occurred up to that date, pointing out that they were unacceptable, and directing Appellant to attend a meeting at Jackson on August 20 to discuss the unsatisfactory service.  The letter was sent by certified mail to Appellant's residence in Bonaire, Georgia, which is the address Appellant identified in his bid as his business address.  Despite two notices left by the post office, Appellant did not claim the letter even though he was in Bonaire and visited the post office at least once after the first notice and before the post office returned the letter to Jackson marked "unclaimed".  No meeting was held.  (AF O, J, p. 3-4; AX 1, pp. 10-14; Tr. 79-84).

            18.  On September 16, Jackson sent the contracting officer at the Memphis TMSC the Form 5500s issued since the inception of Appellant's contract and in the cover letter recommended that the contract be terminated.  The transmittal contained none of Appellant's responses to the Form 5500s, and the letter specifically noted that Appellant had not responded to the Form 5500s. (AF H).

            19.  On September 18, the Memphis TMSC contracting officer named in Appellant's contract sent Appellant a letter, signed by Mr. Alsobrook "for" the contracting officer, advising Appellant that Jackson had recommended that his contract be terminated.  The letter noted the deficiencies occurring since August 14 and Appellant's failure to attend the August 20 meeting scheduled by Jackson.  The letter closed,

"This letter notifies you that this is a final warning, and that the Postal Service may terminate your contract for failure to perform unless satisfactory service is restored within three (3) days of receipt of this letter, AND MAINTAINED FOR THE REMAINING TERM OF THE CONTRACT."

Despite two notices left by the post office, the first on September 21, Appellant did not claim the letter, and it was returned to the Memphis TMSC marked "unclaimed".  (AF G).

            20.  The contract required Appellant to "provide either personal or representative supervision over the operation of the route.  The contractor or the route supervisor must maintain a phone and be easily contacted in the event of unexpected problems on the route."  (AF O, Section 18.A; see AF O, Basic Surface Transportation Services Contract General Provisions, PS Form 7407T, March 1989, General Provision ("GP") 8 (a); Tr. 33).  Appellant had given postal officials telephone numbers where he could be reached in Mississippi, and he had an answering machine at his residence in Bonaire (Tr. 93), but there is no evidence Respondent attempted to call him.

            21.  Under General Provision 16 of the contract,

"(a)  The Contracting Officer may terminate this contract for default:

(1) For Contractor's failure to perform service according to the terms of the contract

***

(10) If the Contractor's transportation equipment is insufficient, inadequate, or otherwise inappropriate for the service"  (AF O, GP 16).

            22.  The contract also provided that if, after a termination for default, it were determined that the termination for default was improper, the action would be deemed to have been a termination for the convenience of the Postal Service as allowed under GP 17 (AF O, GP 16 (c)).  In such an event, the contractor would be entitled to liquidated damages equal to one-third of the annual contract price if the termination occurred during the first two years of the contract (AF O, GP 17, 12 (d)(1)).

            23.  In October, responsibility for Appellant's contract and the file were transferred from the Memphis TMSC to the Atlanta TMSC.  A new contracting officer became responsible for Appellant's contract.  (Tr. 9, 34-35).

            24.  In an October 29, 1992 final decision, the Atlanta contracting officer terminated Appellant's contract for default, effective November 2 (AF C).  In his final decision, the contracting officer cited General Provision 16 (a)(1) and stated as the reason for the termination, "We are taking this action because you have repeatedly failed to perform the contract in a timely manner and have not provided the required equipment to perform the contract." (Id.).  Before he decided to terminate the contract, the contracting officer called the Jackson transportation manager, who told him that Appellant had not responded to the Form 5500s (Tr. 36, 40).  The contracting officer found it important in deciding to terminate the contract that, as the contracting officer thought, Appellant had failed to reply to any of the Form 5500s issued over the course of the contract and that Appellant had failed to claim and respond to the August 14 and September 18 warning letters (Tr. 13, 16, 18, 19, 22, 23, 25, 26, 36, 40, 51).

            25.  There is no evidence that the Atlanta contracting officer had the Form 5500s for the October 14 and 24 irregularities when he decided to terminate the contract for default (see AF E, F, G, H; Tr. 54) or that Appellant was afforded an opportunity to respond to the charges in those Form 5500s.  Appellant was not given ten days to respond to the October 24 Form 5500 before the contract was terminated.

DECISION

            Respondent argues that the termination for default was justified by Appellant's failure to supply equipment conforming to the requirements of the contract and his many failures to meet the contract schedule.  It argues that it sent Appellant letters warning that continued failure to meet the requirements of the contract would result in termination and that Appellant failed to claim those letters.  Respondent contends that further instances of deficient performance after the final warning, when considered with Appellant's performance over the entire contract period, justified the termination for default.  In response to Appellant's arguments that he obtained permission to use nonconforming equipment for the first month of the contract, Respondent argues that the employee in the Memphis TMSC who Appellant contends gave him that permission was not the contracting officer and was not authorized to relax the requirements of the contract.

            Appellant argues that the termination was improper.  He argues that the contract does not explicitly require that a trailer be positioned in Jackson for preloading before trip 1, and that, therefore, citing him for his failure to do so was improper and cannot be a basis for the termination.  Additionally, he argues that the Memphis TMSC allowed him until July 23 to provide the fourth trailer at Jackson and that he did supply it on that date.  He contends that the Memphis TMSC allowed him until August 20 to have all trailers with roll-up doors and that he met that requirement by August 16.  Thus, he contends, the Form 5500s relating to nonconforming equipment are unjustified.  He admits that he used nonconforming equipment after August 16 but only as an emergency replacement when his primary equipment was not available.  He admits there were late trips caused by mechanical failures, but argues that occasional delays are to be expected on a route of this type and frequency and that the mechanical problems had declined dramatically, were under control at the time of the termination and were not sufficiently serious to warrant termination for default.

            Respondent has the  burden of demonstrating that the default termination was warranted by Appellant's performance under the contract, see Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987); Douglas Cremer, PSBCA No. 3108, 93-2 BCA ¶ 25,565, and it has not met that burden in this appeal.  The equipment violations were waived or corrected long before the termination, and Respondent has not shown that Appellant's performance deficiencies after the final warning letter materially breached the requirements of the contract.

Equipment

            At the beginning of the contract Appellant did not have all of the equipment required by the contract, and his failure was not excusable.  However, Mr. Alsobrook of the Memphis TMSC allowed Appellant until July 23 to supply a trailer at Jackson for preloading and until August 20 to have all four trailers with roll-up doors, and Appellant met the extended dates.

            Respondent argues that permission to delay the use of proper equipment was not given by the contracting officer named in the contract and was therefore not authorized.  However, Mr. Alsobrook was a contracting officer (albeit not the contracting officer named in the contract), he reported to the named contracting officer, and Mr. Alsobrook was the official in the Memphis TMSC who administered Appellant's contract.  He could have been expected to bring to the named contracting officer's attention Appellant's delays in obtaining the proper equipment and the need either to waive the requirements temporarily or to terminate the contract for noncompliance.  See Glenda R. Whitaker, PSBCA No. 3443, 94-2 BCA ¶ 26,643.  Under these circumstances, the named contracting officer should have known of Mr. Alsobrook's temporary waiver of the contract requirements and that Appellant, in reliance on such waiver, would continue his efforts to obtain proper equipment.  See Hom-Russ, Inc., ASBCA No. 46142, 94-2 BCA ¶ 26,635 at 132,483; Urban Laboratories, Inc., ASBCA No. 24905, 84-3 BCA ¶ 17,515 at 87,230.  This is sufficient evidence that Respondent temporarily waived the equipment delivery requirements.  See Gresham & Co. v. United States, 470 F.2d 542, 555-56 (Ct. Cl. 1972); Miller Elevator Co. v. United States, 30 Fed. Cl. 662, 686-87, 693-95 (1994).[3]

            In view of Respondent's temporary waiver of the equipment requirements and Appellant's delivery of proper equipment within the extended period, the Form 5500s citing the lack of a trailer for preloading and trailers without roll-up doors should not have been considered in determining whether to terminate the contract.  Cf. Gary A. Boyd, PSBCA No. 2182, 88-3 BCA ¶ 21,010.

            Additionally, as of August 16 and up to the termination, all of Appellant's primary equipment met the requirements of the contract.  No Form 5500s were issued after August 16 for nonconforming equipment except for use of a straight truck on August 18 and 19 and a trailer with side-by-side doors on August 20.  This limited use of nonconforming backup equipment was not shown to have affected adversely Appellant's performance of the contract, see Douglas Cremer, supra; Jack W. Davis, PSBCA No. 986, 82-2 BCA ¶ 16,064, and it did not continue after the final warning, cf. J & M Trucking, PSBCA No. 2804, 92-1 BCA ¶ 24,598.  As of the date he issued his final decision terminating the contact, the contracting officer's conclusion that Appellant had not provided the required equipment was in error.

Performance deficiencies

            Appellant admits that his performance was rough at the beginning of the contract, but by the time the Memphis contracting officer issued the final warning letter on September 18 (which would have been received by Appellant at the earliest on September 21) Appellant's performance had improved significantly.  After September 21, the only Form 5500s issued were for delays on October 14 and 24, and it is not clear that the Atlanta contracting officer was aware of those at the time he decided to terminate the contract.  Thus, notwithstanding the implication in the September 18 final warning letter that the contract would not be terminated if satisfactory service were restored and maintained, the contracting officer terminated the contract based on what was, so far as the contracting officer knew, an unblemished record of performance after the final warning.

            Moreover, Respondent has not shown that on a daily route with four trips per day such as Appellant's, the instances of delay in October violated the standard stated in the September 18 warning letter that required Appellant to maintain satisfactory (not perfect) service on the route.[4]

Failure to Respond to Form 5500s and Warning Letters

            The Atlanta contracting officer based his termination of the contract, in part, on incorrect information: he was advised that Appellant had not replied to any of the Form 5500s.  He took this to mean the contractor admitted that each of the Form 5500s reported a chargeable (unexcused) violation of contract requirements.  In fact, Jackson had received Appellant's responses.[5]  Appellant, in his replies to the Form 5500s, explained a number of the performance deficiencies, disputed a number of them, explained that he had been granted permission to supply conforming equipment late, and demonstrated an intention to correct those deficiencies he admitted and to improve service.  Many of the Form 5500s were determined by Jackson to be chargeable even before the 10-day reply period had expired, and all such determinations were made on the Postal Service copy of the form, suggesting Jackson did not consider Appellant's explanations.

            Because of Appellant's failure to claim and respond to the warning letters of August 14 and September 18, the contracting officer was not made fully aware of Appellant's defenses to the proposed termination action.  Appellant thus bears some responsibility for the termination action taken by Respondent.  See John S. Vayanos Contracting Co., PSBCA No. 2317, 89-1 BCA ¶ 21,494 at 108,294; Suffolk Environmental Magnetics, Inc., ASBCA No. 17593, 74-2 BCA ¶ 10771.  The Atlanta contracting officer, not unreasonably, took Appellant's failure to claim the August 14 and September 18 certified letters as evidence of Appellant's lack of concern for the performance problems or of lack of any excuse.  However, as discussed above, Appellant's performance improved after the final warning of September 18, and his failure to respond to the warnjng letters is not an independent ground for termination.

Conclusion

            Appellant's failure to supply proper equipment at the beginning of the contract and the numerous deficiencies in his early performance were not excusable, and cause for termination may have existed in July.  See Dawson Transportation Consultant Services, Inc., PSBCA No. 1341, 1986 WL 19560, January 6, 1986; Bowman's Transport Co., PSBCA Nos. 1088, 1089, 1092, 84-1 BCA ¶ 17,217.  However, instead of terminating the contract, Respondent temporarily waived certain of the equipment requirements.  By the time the contracting officer terminated the contract, Appellant had supplied proper equipment and dramatically improved his performance.  Respondent has not demonstrated that the two delays occurring in the approximately five weeks after the final warning justified the termination.  See Douglas Cremer, supra. 

            The appeal is sustained.  The termination for default is converted to a termination for convenience, and the matter is remanded to the contracting officer for a determination of the relief to which Appellant is entitled.

Norman D. Menegat
Administrative Judge
Board Member

I concur:
James A. Cohen
Administrative Judge
Chairman

I concur:
James D. Finn, Jr.
Administrative Judge
Vice Chairman

[1]  Except as otherwise noted, all dates referred to in this decision are in 1992.

[2]  Appellant's Exhibit 1, which consists of copies of the Form 5500s bearing Appellant's response in section 2 of each form, was admitted into evidence over Respondent's objection that it had not been given notice of Appellant's intention to submit those documents as required by the Board's pre-hearing order.  Appellant testified that he reviewed the Form 5500s issued by Jackson, contacted his drivers for information when necessary, wrote his comments in section 2, signed and dated the forms, took them to his local post office within a day or two of completing the response and mailed them to Jackson (Tr. 78-83).  The documents were admitted, but, in view of the possible prejudice to Respondent from the lack of advance notice, the record was left open for Respondent to determine what, if any, evidence it wished to offer to address Appellant's Exhibit 1 (Tr. 82, 83, 110).  Shortly after the hearing, Respondent advised that it would make no further submission, and the record was closed.

[3]  In Gregory Hilderbrand d/b/a Nevertheless Messenger Service, PSBCA No. 1734, 88-3 BCA ¶ 20,833, relied upon by Respondent, the contractor's truck failed to meet the requirements of the contract and, as was its right, the Postal Service refused to permit temporary use of the nonconforming equipment.  The termination for default for the contractor's failure to perform the service because of the lack of equipment was sustained.  The waiver granted Appellant distinguishes this appeal from Hilderbrand.

[4]  In Henry Lee Yon, PSBCA No. 932, 81-1 BCA ¶ 15,076, the Board upheld the default termination of a highway contract for performance deficiencies on two occasions following a five-month period of no deficiencies after a "final warning."  However, in that appeal the contractor had a history of poor service related to equipment failures followed by periods of good service followed again by performance deficiencies.  In view of that history, the most recent deficiencies took on greater significance than they otherwise would have.  Therefore, even though the number of failures in this appeal is comparable to the number in Yon, Appellant's deficiencies were not as serious (omitted serviced on two trips in Yon plus delays on two other trips) and there was no history of up and down performance that would justify the termination action.  In fact, the trend in Appellant's performance was one of steady improvement, and the contracting officer's evaluation of Appellant's performance history was faulty because of erroneous information and his failure to consider Appellant's explanations of the prior reported irregularities.

           Respondent contends other decisions of the Board, Charles C. Razor d/b/a Razor Trucking, PSBCA No. 1569, 88-2 BCA ¶ 20,572, recon. denied 88-2 BCA ¶ 20,700, Riley E. Thompson, PSBCA No. 1410, 86-2 BCA ¶ 19,001, and Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA ¶ 26,419, recon. denied, May 23, 1994, in which contract terminations were sustained, require that Appellant's appeal be denied.  In those decisions, the incidents of contract performance failures after the final warning were more numerous and more serious than those in this appeal, and the contracts were terminated promptly.

[5]  Appellant, having established that his replies were addressed to Jackson, taken to his local post office and properly mailed, is entitled to the presumption that they were received by Jackson within a few days after mailing.  See Hagner v. United States, 285 U.S. 427, 430 (1932); Cozzolino Constr. Co., PSBCA No. 703, 81-1 BCA ¶ 14,899.  Respondent did not rebut this presumption.  Cf. Sherwin v. United States, 436 F.2d 992, 1005 (Ct. Cl. 1971).