Appeal of
JEFF TALANO
Under Contract Nos. HCR 54433 and HCR 54443
PSBCA Nos. 3695 & 3696

APPEARANCE FOR APPELLANT:
Jeff Talano

APPEARANCE FOR RESPONDENT:
Christopher W. Zadina, Esq.

OPINION OF THE BOARD

            Appellant, Jeff Talano, has appealed the decisions of the Contracting Officer assessing against Appellant reprocurement and administrative costs arising from the termination for default of Highway Contracts HCR  54433 and HCR 54443.  A hearing was held, at the request of the parties, in Chicago, Illinois.  Appellant, however, did not attend this hearing.  Accordingly, Appellant’s case will be treated as a record submission in accordance with 39 C.F.R. §§955.12 and 955.20.

FINDINGS OF FACT

PSBCA No. 3695

            1.  On July 16, 1992, Appellant was awarded Contract No. HCR 54433, at an annual rate of $35,800, for the transportation of mail between Wausau and Medford, Wisconsin.  Service under the contract was to begin on July 25, 1992, and continue through June 30, 1996.  (Appeal File 3695 (AF 3695), Tab 1).

            2.  The contract included Basic Surface Transportation Services Contract General Provisions, PS Form 7407T, (March 1989).  General Provisions 10, Payment,  required that compensation be paid to the contractor in installments at the close of each four-week accounting period of the Postal Service.  General Provisions 16, Termination by the Postal Service for Default, stated in pertinent part as follows:

“(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 contrary to the instructions of the Contracting Officer.

* * *

(b)  Termination of the right to perform under this contract or of this contract under Clause 16, shall not impair the right of the Postal Service to damages from the Contractor, and such damages may be assessed and liquidated for the purpose of set off or counterclaim in the settlement of any claim of the Contractor against the Postal Service arising under this contract.”  (AF 3695, Tab 1).

            3.  On March 19, 1994, Appellant called Respondent and stated that he was not going to continue performing his contract.  Again on March 21, 1994, Appellant informed Respondent that he quit performance of his contract because he had not been paid for previously performed work.  Appellant never showed up again to perform his route.  (Transcript page (Tr.) 42; AF 3695, Tab 7).

            4.  By final decision dated March 24, 1994, the contracting officer terminated the contract for default pursuant to clause 16 of the General Provisions because of Appellant’s abandonment of performance  (AF 3695, Tab 6).  Appellant did not file an appeal of this final decision.

            5.  On March 22, 1994, Respondent awarded emergency contract 544QU to cover the services provided by defaulted contract HCR 54433  (AF 3695, Tab 8).  Four current Postal Service contractors in the Wausau, Wisconsin, area were solicited, and the emergency contract was awarded to the lowest bidder in the amount of $54,487.50, for the period March 22, through September 16, 1994  (Tr. 62; AF 3695, Tab 8).  Services were rendered and payment made by the Postal Service under this emergency contract  (AF 3695, Tab 8; Tr. 59).

            6.  By final decision dated August 3, 1994, reprocurement costs in the amount of $4,300.80, and administrative costs in the amount of $325.00, (for a total of $4,625.80) were assessed against Appellant under HCR 54433.  Reprocurement costs were calculated by charging Appellant the incrementally greater daily cost of the emergency contract, $51.20, multiplied by 84 days.  (AF 3695, Tab 5).  Respondent considered 84 days to be a reasonable period of time in which to place a new contract under the normal bidding process  (Tr. 56, 57).  No assessment was made for the permanent replacement contract which was awarded under the normal bidding process  (Tr. 56, 57).  Administrative costs in the amount of $325.00 were determined by multiplying the hourly wage rates of the Postal Service personnel working on the reprocurement by the number of hours worked (four hours of secretarial time and 10.3 hours of transportation specialist time)  (AF 3695, Tab 5).

            7.  Respondent had previously withheld the sum of $7,068.95 from monies’ due Appellant under contract HCR 54433.  The excess reprocurement costs of $4,625.80 were subtracted from the withheld funds (leaving $2,443.15), and the balance was applied against the excess reprocurement costs resulting from Respondent’s default termination of Appellant’s other contract, HCR 54443.  (AF 3695, Tab 5).

PSBCA No. 3696

            8.  On July 16, 1992, Appellant was also awarded Contract No. HCR 54443, at an annual rate of $20,000, for the transportation of mail between Stevens Point and Nelsonville, Wisconsin.  Service under this contract was to commence on July 25, 1992, and continue through June 30, 1996.  This contract included General Provisions 10, Payments, and 16, Termination by the Postal Service for Default, identical to those found in HCR 54433.  (AF 3696, Tab 1).

            9.  The Stevens Point contract required Appellant to utilize a straight truck with specified minimum interior dimensions.  Appellant was also required to have readily available a standby truck meeting the same requirement.  (AF 3696, Tab 1).

            10.  Appellant began experiencing truck breakdowns within months of commencing performance.  These breakdowns caused late performance of his route.  Appellant did not have the required backup equipment, but instead used a pickup truck with half the carrying capacity of his straight truck whenever the straight truck was unavailable.  On occasion, therefore, Appellant would have to run additional trips in the same day to deliver the mail.  As a consequence of the multiple trips caused by using the smaller truck, as well as equipment breakdowns, Appellant ran late on approximately 60 trips during his performance of this contract.  Appellant failed to show at all to perform his route on eight to ten occasions during the first fifteen months of his contract performance.  (Tr. 12, 13, 18; AF 3696, Tab 7).

            11.  In October 1993, in response to Appellant’s frequent “no shows,” Respondent awarded a backup contract to deliver the mail on those occasions which Appellant failed to perform.  On other occasions where Appellant failed to show, Postal Service personnel, using Postal Service vehicles, would transport the mail on Appellant’s route.  (Tr. 19, 21).

            12.  Beginning on December 20, 1993, Appellant started using a trailer made of particle board which was towed behind his pickup truck.  The trailer had numerous safety violations, including loose wiring, no lighting, and an improper latch.  (Tr. 14).

            13.  Appellant was informed by the contracting officer, in a telephone call, as well as by letter dated December 22, 1993, that the use of the trailer violated the terms of his contract and that he had to replace the trailer and pickup truck with a straight truck of the proper dimensions within three days.  Respondent further informed Appellant that it would not release the mails to him for transport in the trailer.  (Tr. 17; AF 3696, Tab 7).

            14.  On December 22, 1993, Respondent gave Appellant a ”final warning” that the Postal Service may terminate the contract for default unless Appellant restored and maintained satisfactory service within three days of his receipt of the warning letter  (AF 3696, Tab 7).

            15.  Thereafter, between December 24, 1993, and January 17, 1994, Appellant failed to show to perform his route on eleven days.  On numerous other occasions during this period Appellant utilized the previously unauthorized trailer, or  used a personal automobile that, likewise, did not meet the requirements of the contract.  (AF 3696, Tab 7).

            16.  On January 31, and February 1 and 2, 1994, Appellant was unable to perform because his equipment was inoperable  (AF 3696, Tab 7).

            17.  On February 2, 1994, by final decision, the contracting officer terminated HCR 54443 for default pursuant to General Provisions 16(a)(1) (failure to perform service according to the terms of the contract), and 16(a)(10) (Contractor’s transportation equipment is insufficient, inadequate, or otherwise inappropriate for service)  (AF 3696, Tab 6).  Appellant did not file an appeal of this final decision.

            18.  During the month of December 1993, Appellant performed five extra trips under contract No. HCR 54443  (AF 3696, Tab 9).  The value of these trips was approximately $500.00.  Appellant did not submit an invoice or file a claim for payment for these extra trips and was not ever paid for them.  (Tr. 31).  However, during the time period November 1993 to January 1994, Appellant failed to perform thirteen trips.  Respondent did not impose any deductions against Appellant for failing to perform these thirteen trips.  In fact, Appellant was paid as if he had performed them.  (Tr. 32-34).

            19.  On February 8, 1994, Respondent awarded emergency contract 544NU, at an annual rate of $67,555, for the period February 9 through July 30, 1994, to cover the services previously provided under defaulted contract HCR 54443  (AF 3696, Tab 8).  Respondent solicited bids for this contract by telephone from three existing contractors who had the necessary insurance, the type of equipment required for the route, as well as screened drivers who could commence performance in a relatively short period of time  (Tr. 52, 53).  However, only one contractor submitted a bid and that contractor was awarded the emergency contract  (Tr. 51-54).  Services were rendered and payment made by the Postal Service under this emergency contract  (Tr. 59: AF 3696, Tab 8).

            20.  By Final Decision dated August 3, 1994, reprocurement costs in the amount of $10,944.36, and administrative costs in the amount of $325.00, (for a total of $11,269.36) were assessed against Appellant under HCR 54443.  Reprocurement costs were determined by charging Appellant the incremental increased daily cost of the emergency contract as compared to HCR 54443 ($130.29), multiplied by 84 days.  The sum of $325.00 of administrative costs was determined in a manner identical to that calculated under contract HCR 54433.  (AF 3696, Tab 5; FOF 6).

            21.  Respondent had previously withheld $2,073.00 from Appellant and this sum was applied against the $11,269.36 of total excess reprocurement costs.  Similarly, Appellant was credited with $2,443.15, still due under Contract HCR 54433 (AF 3695, Tab 5; FOF 7), leaving a balance of $6,752.00 owed by Appellant to the Postal Service.  (AF 3696, Tab 5).

            22.  By letter dated August 10, 1994, Appellant appealed Respondent’s final decisions assessing default damages under both contracts, HCR 54433 and HCR 54443  (AF 3695, Tab 4; AF 3696, Tab 4).

DECISION

            Appellant contends he is not liable for excess reprocurement costs because his failure to perform was caused by Respondent’s refusal to pay compensation owed to Appellant under both contracts.  Appellant did not appeal Respondent’s decisions to terminate either contract for default.  He did appeal the assessment of reprocurement costs under both contracts.  With the exception of Appellant’s notice of appeal letter, Appellant offered no evidence in his defense, did not appear at the scheduled hearing and failed to submit a brief.^[1]

            Respondent asserted in its Answer the affirmative defense that the Board lacks subject matter jurisdiction over the propriety of the decisions to terminate the contracts for default because of Appellant’s failure to timely appeal those decisions.  On the merits, Respondent asserts the terminations for default were proper and the assessments reprocurement costs against the contracts were reasonable.

            Under Section 6(b) of the Contract Disputes Act, “a contracting officer’s decision . . .  shall be final and conclusive and not subject to review . . .  unless an appeal or suit is timely commenced.”  41 U.S.C. §606(b).  Section 7 of the Act requires that the Contractor’s appeal to this Board be filed “within ninety days from the date of receipt of a contracting officer’s decision.”  Id., at §7.  This statutory deadline for filing an appeal before a Board of Contract Appeals has been held to be jurisdictional.  Cosmic Construction Co. v. United States, 697 F. 2d 1389 (Fed. Cir. 1982).  Nevertheless, Boards of Contract Appeals, as well as the Court of Federal Claims (and its predecessors), have long held,  pursuant to the “Fulford doctrine,” (both before and after passage of the Contract Disputes Act) that the Board or court may examine the propriety of the default even though the default decision was not timely appealed if there has been a timely appeal of an excess reprocurement decision.  Southwest Marine, Inc., DOTBCA No. 1891, 96-1 BCA ¶ 27985; Kellner Equipment, Co., ASBCA No. 26006, 82-2 BCA ¶ 16,077 (and cases cited therein); D. Moody & Co. Inc. v United States, 5 Cl. Ct. 70, (1984); see also Z.A.N. Company v. United States, 6 Cl. Ct. 298 (1984); but see Ace Forestation, AGBCA No. 84-272-1, 87-3 BCA ¶ 20,218.  We are in agreement with this line of cases.^[2] Accordingly, we hold that Appellant may challenge the propriety of these default terminations, notwithstanding his failure to timely appeal the default itself, since he filed a timely appeal of a contracting officer’s final decision assessing excess reprocurement costs.

PSBCA No. 3695

TERMINATION FOR DEFAULT

            On March 19, 1994, Appellant unequivocally stated his intention to quit performing his contract and never showed up again to perform his route.  (Finding of Fact No. (FOF) 3).    This abandonment of performance of the contract, if not excusable or caused by Respondent’s material breach, justifies the decision to terminate the contract for default.  Michael N. Beckloff, PSBCA No. 2249, 89-2 BCA ¶ 21,767; Brooks E. Cook, PSBCA No. 1350, 86-3 BCA ¶ 19,073; Lawrence D. Bane, PSBCA Nos. 1440, 1491, 86-2 BCA ¶ 18,997, recon. denied, 86-3 BCA ¶ ¶ 19,252, 19,276.   Although Appellant argued in its notice of appeal letter that its abandonment of performance was justified by Respondent’s failure to pay for extra trips, no evidence was offered by Appellant to support this allegation.  Accordingly, Respondent’s decision to terminate the contract for default was proper.

EXCESS REPROCUREMENT COSTS

            Respondent has made a prima facie showing that it attempted to mitigate damages when it reprocured Appellant’s defaulted contract and that the costs it incurred were reasonable under the circumstances.  Respondent solicited bids from four current Postal Service contractors in the Wausau area and awarded the emergency contract to the lowest bidder.  Services were rendered and payment made to this emergency contractor.  (FOF 5).  In its final decision assessing these excess reprocurement costs against Appellant, Respondent charged Appellant the incrementally greater daily cost of this emergency contract ($51.20 per day) for an 84-day period of time.  This 84-day period represents the time it typically takes Respondent to solicit a permanent replacement contractor under the normal bidding process.  (FOF 6).

            In addition to the incremental increased cost of the emergency contractor, Respondent charged Appellant with $325.00 of administrative costs associated with putting the emergency contract in place.  This amount was determined by multiplying the hourly wages of the Postal Service personnel working on the reprocurement by the number of hours they worked.  (FOF 6).  Appellant has offered no evidence to rebut the reasonableness of Respondent’s mitigation efforts or the amounts charged.  Absent such rebuttal, we conclude Respondent may recover the excess reprocurement costs assessed.  This appeal is denied.

PSBCA No. 3696

TERMINATION FOR DEFAULT

            The deterioration of Appellant’s performance, despite Respondent’s warning letter sent on December 22, 1993 (FOF 14, 15), Appellant’s failure to utilize the contractually specified equipment (FOF 10, 13, 15) and, finally, Appellant’s failure to perform mail delivery on January 31, February 1 and February 2, 1994 (FOF 16), provide sufficient basis to uphold the decision to terminate the contract for default.

            Appellant’s only defense is the claim that Respondent failed to pay Appellant for extra trips he performed prior to his default.  Appellant never submitted an invoice or filed a claim for these extra trips.  During this same time period Appellant was paid for thirteen trips which he hadn’t performed.  (FOF 18).  Finally, Appellant hasn’t shown that Respondent’s failure to pay for five extra trips had any effect on his ability to perform the contract.  Under these circumstances, Respondent’s failure to pay for five extra trips does not amount to a material breach that would excuse a default in performance.

EXCESS REPROCUREMENT COSTS

            Respondent followed a very similar process to that used in PSBCA No. 3695 in soliciting emergency services to replace Appellant’s defaulted contract.  Bids were solicited from three qualified contractors and the contract was awarded to the one contractor submitting a bid.  The emergency services were performed and payment was made.  (FOF 19).  Respondent’s administrative cost of $325.00, incurred in soliciting the emergency service contract, was calculated in a manner identical to that in PSBCA No. 3695 (FOF 20).

            Having competitively solicited the emergency services, and limiting the assessment against Appellant to the increased cost of the emergency contract until a permanent replacement contract could be solicited under normal bidding procedures, Respondent has made a prima facie showing of reasonably mitigating the reprocurement costs incurred.  Again herein, Appellant made no attempt to rebut the prima facie reasonableness of Respondent’s efforts.  Accordingly, the excess reprocurement costs incurred by Respondent, as a result of Appellant’s default of Contract HCR 54443, may properly be assessed against Appellant and this appeal is denied.

CONCLUSION

            The appeals in PSBCA Nos. 3695 and 3696 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]  Although Respondent appeared at the hearing and presented evidence to support its position, it also failed to file a brief.

^[2]  In a pre-Contract Disputes Act case, Dynamic Products Co., PODBCA No. 2, January 6, 1959, the reverse situation was presented to the Board.  That is, there had been a timely appeal of the default, but the appeal of the assessment of excess reprocurement cost was untimely.  The Board held, however, that a contractor could appeal either at the time of a notice of default or at the time of the assessment of excess reprocurement cost, citing Fulford Mfg. Co., ASBCA Nos. 2143, 2144, May 20, 1955.  Therefore, the propriety of the assessment of excess reprocurement costs could be considered since the default had been timely appealed.