Appeals of

WEST WILSON ENTERPRISES

PSBCA Nos. 5203 and 5219

Under Contract No. HCR 633L0

APPEARANCE FOR APPELLANT:
Elbert Dorsey, Esq.
Collier, Dorsey & Carter, L.L.C.

APPEARANCE FOR RESPONDENT:
Douglas J. Colton, Esq.
Office of the General Counsel
United States Postal Service

OPINION OF THE BOARD

            Appellant, West Wilson Enterprises, has appealed the default termination of a contract with Respondent, United States Postal Service, for the transportation of mail in the vicinity of St. Louis, Missouri.  Appellant has also appealed Respondent’s claim for excess reprocurement costs.  A hearing was held in St. Louis, Missouri.  Both entitlement and quantum are at issue in this proceeding.

FINDINGS OF FACT

            1.  On June 20, 2001, contract no. HCR 633L0, between Appellant and Respondent, was renewed for a term beginning July 1, 2001, and ending on June 30, 2005.  At the time of renewal, the contract rate was $104,896.28 per annum.  (Appeal File, Tab (AF) 1, p. 1); Stipulation, paragraphs (Stip.) 3, 5, 6).

            2.  The contract required Appellant to provide two van-type trucks to transport mail between Respondent’s St. Louis, Missouri Processing and Distribution Center (P&DC) and Wright City and Jonesburg, Missouri.  Under its contract, Appellant was to dispatch two outbound trucks, one at 4:30 a.m. (Trip 1 (Trip 3 on Saturday)) and one at 5:00 a.m. (Trips 5 and 7) from Monday through Saturday.  The 4:30 a.m. truck served Wright City, by way of Foristell, Missouri, and was due in Foristell by 5:52 a.m. and in Wright City by 6:17 a.m.  The 5:00 a.m. truck served Jonesburg by way of Warrenton, Missouri.  That truck was due in Warrenton by 6:25 a.m. and in Jonesburg by 6:50 a.m.  (AF 1, p. 10).

            3.  The contract also required Appellant to operate two afternoon, inbound trips each day, Monday through Saturday, with trucks originating at Wright City (Trips 2 and 4) and Jonesburg (Trips 6 and 8) and terminating at the P&DC.  Appellant was also required to run a single outbound trip and a single inbound trip on Sundays.  Thus, in total, Appellant was required to operate 26 individual trips each week.  (Id.).

            4.  Respondent had the right to terminate the contract for default for, among other reasons, “[Appellant’s] failure to perform service according to the terms of the contract.”  In the event of a default termination, Respondent had the right to “acquire similar … services … and [Appellant] will be liable to the Postal Service for any excess costs.”  If, however, after termination, Appellant was found not to be in default, the rights of the parties were to be the same “as if the termination had been issued for convenience.”  (AF 1, pp. 34, 35 (“Termination for Default” and “Events of Default” clauses)).

            5.  Under the contract’s “Termination for Convenience” and “Changes” clauses, if the contract was terminated for Respondent’s convenience, Appellant would be entitled to recover liquidated damages in the amount of one-twelfth of the annual rate if the termination was in the fourth year of contract performance (AF 1, pp. 34, 37-38).

            6.  Postal Service Form 5500, “Contract Route Irregularity Report,” is used by Respondent’s personnel to record and report deficiencies in contract performance, including late or omitted service.  Forms 5500 are forwarded to the contractor, which has ten days to file a reply.  Thereafter, Respondent’s personnel decide whether to classify the deficiency as chargeable or non-chargeable (excused).  Text on the form directs Respondent’s employees to “prepare report on the spot when irregularity occurs.”  Further, employees are directed to “Report all irregularities,” but to “report late operations of 15 minutes or less OR those caused by legitimate reasons as Information Only.”  In addition, apart from the above Form 5500 language, it was Respondent’s practice to grant contractors 10 or 15 minutes leeway on meeting their schedules, as long as the delays did not occur on a consistent basis.  (Transcript, volume 1, pages (Tr. 1:) 34, 38-40, 43-45, 132, 161;[1] AF 4, p. 101 (typ.)).

            7.  Between the beginning of the contract (July 1, 2001) and February 10, 2002, Appellant was issued a total of six Forms 5500 deemed chargeable by Respondent.  Respondent required Appellant’s owner to attend a conference on October 9, 2001, to discuss unsatisfactory service.  (AF 4, pp. 143, 145, 146, 147, 149, 151; Stip. 16).

            8.  On February 22, 2002, Appellant’s owner met with Respondent’s Manager, Transportation Networks, and a Network Specialist to discuss a Form 5500 issued on February 10, 2002, for emptying a collection box early (AF 2, p. 81-82; Tr. 1: 7, 156; Stip. 17).

            9.  Between March 2, 2002, and April 5, 2003, Appellant was issued a total of 19 chargeable Forms 5500 (AF 4, pp. 93, 122, 124-139, 144).

            10.  On April 7, 2003, Appellant’s owner was required to participate in another meeting with Respondent’s personnel to discuss the deficiencies in Appellant’s performance.  Appellant’s owner was warned that Appellant’s overall performance was considered unacceptable and must show improvement, or a final warning letter regarding service improvement would be issued.  By letter to Appellant dated April 15, 2003, the Manager, Transportation Networks, at the P&DC, who was also the Administrative Official for the contract, formally notified Appellant that he considered Appellant’s performance unsatisfactory, and that if Appellant failed to restore satisfactory service within 90 days, he would refer the entire file to the contracting officer for “appropriate attention,” which could result in termination of Appellant’s contract.  (AF 2, p. 79; AF 3, p. 94; Tr. 1: 9; Stip. 17).

            11.  Between April 17, 2003, and February 13, 2004, Appellant was issued 11 chargeable Forms 5500 (AF 4, pp. 111-117, 119-121; Respondent’s 5500 File (5500File), p. 69).

            12.  On February 19, 2004, Appellant’s owner and Respondent’s P&DC personnel held a telephone conference, during which Respondent’s personnel agreed to allow Appellant to implement a proposal to adjust the contract schedule for the period of February 20 – March 4, 2004.  The purpose of the adjustment was to allow Appellant to maintain service with one truck while a blown engine was replaced in the other.  (AF 3, pp. 91-92).

            13.  On February 21, 2004, the Administrative Official formally referred the contract file to the contracting officer, and asked that he take necessary action to restore and maintain an acceptable level of service (5500File, p. 64).

            14.  During the period from February 20 through March 4, 2004, when the special schedule was in effect (Finding 12), Appellant was issued Forms 5500 for failing to operate one trip and operating three others late (AF 4, pp. 105-110).

            15.  Between March 16 and April 14, 2004, Appellant was issued four Forms 5500 for omitted service and late operations (AF 4, pp. 101-104).

            16.  On or about April 27, 2004, the Administrative Official sent a letter to Appellant, informing Appellant that the contract file had already been referred to the contracting officer on February 21, 2004, and expressing the opinion that service had not improved since the conference held the year before – on April 7, 2003.  (AF 3, p. 89).

            17.  On May 31, 2004, Appellant failed to operate inbound Trip 6 and on June 1, 2004, combined the mail for both morning trips on one truck (AF 5, pp. 153-154).

            18.  By letter dated June 8, 2004, the contracting officer issued Appellant what he termed a “final warning,” stating that the Postal Service may terminate the contract for failure to perform, “unless satisfactory service is immediately restored and maintained for the remaining term of the contract.”  (AF 3, p. 87).

            19.  On July 12, 2004, Appellant’s owner drove the truck for Trip 1, due to depart the St. Louis P&DC at 4:30 a.m.  She arrived at the loading dock at 4:00 a.m. but, because of Postal Service delays, she was unable to leave the dock until 4:52 or 4:53 a.m.  Appellant’s second truck (Trip 5), which was due to arrive at the dock at 4:30 a.m. and depart the P&DC at 5:00 a.m., was at the P&DC but was unable to pull into the dock to begin loading until the Trip 1 truck (and one other truck) left the dock.  Thus, the Trip 5 truck did not reach the dock until approximately 4:55 a.m.  (Tr. 2: 74-76, 80).

            20.  Late slips are issued by Postal Service dock personnel whenever the Postal Service causes delays in contractor operations – including when a truck arrives at a facility but finds no dock space available.  Late slips are supposed to be issued whenever there are delays, but it was the practice of St. Louis P&DC dock personnel to issue late slips only when delays exceeded 15 minutes.  Appellant’s Trip 1 truck received a late slip on July 12, 2004, but the Trip 5 truck did not.  (Tr. 1:  139, 155).

            21.  After leaving the P&DC, the Trip 5 truck arrived at Warrenton at 6:45 a.m., 20 minutes after its scheduled 6:25 a.m. arrival time.  On the way to Warrenton, the Trip 5 driver had stopped to refuel, as was Appellant’s practice on some days.  Even with the fuel stop, the truck normally reached Warrenton before 6:25 a.m.  The Warrenton postmaster issued a Form 5500 reflecting the late arrival.  (AF 5, p. 152; Tr. 1: 204, 209-212; Tr. 2: 84, 85, 142).

            22.  Two days later, Appellant’s owner learned of the July 12 late operation from her driver.  She contacted the Network Specialist at the P&DC to complain about the fact that her driver had not received a late slip, even though she believed he must have been delayed at the P&DC.  The Network Specialist told her that he would check into the matter and told her not to worry about it.  She did not receive the Form 5500 from July 12 until almost a month later – after the termination.[2]  (Tr. 2: 82-84).

            23.  By letter dated July 20, 2004, the Administrative Official forwarded the July 12 Form 5500 to the Contract Specialist responsible for Appellant’s contract.  The Contract Specialist discussed the matter with the contracting officer beginning on July 26, 2004, and they concluded that the contract should be terminated for default.  In a final decision dated July 30, 2004, the contracting officer terminated the contract for default.  On the same date, the contracting officer issued a Route Service Order suspending all payments to Appellant.  As of that date, Appellant was owed $6,090.13 for services performed prior to that date.  Other than the Form 5500 issued on July 12, 2004, there is no evidence that any other Forms 5500 were issued to Appellant after the June 8, 2004 final warning letter (Finding 18).  (AF 8, 9, 10, 13; 5500File, p. 41; Tr. 2: 48, 53, 67; Stip. 27, 28).

            24.  Appellant filed a timely appeal of the default termination, which appeal was docketed as PSBCA No. 5203 (AF 11).

Reprocurement

            25.  On July 29, 2004, the Contract Specialist issued a solicitation for replacement service on an emergency basis, with service to begin on July 31, 2004.  The Contract Specialist contacted numerous possible sources by telephone and sent out six solicitation packages by fax.  Only one company responded with an offer - in the amount of $215,000 per annum – and award was made to that offeror.  (Supplement to the Appeal File, pp. 26, 80-87; Tr. 2: 64).

            26.  In a final decision dated October 25, 2004, the contracting officer assessed Appellant the amount of $27,536.73 in excess reprocurement costs[3] plus $325.00 for administrative costs in soliciting and awarding the replacement contract.  (AF 10, 13; Stip. 29, 30).

            27.  Appellant filed a timely appeal of the reprocurement assessment, which appeal was docketed as PSBCA No. 5219.

DECISION

            In PSBCA No. 5203, Respondent has the burden of proving 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); Charli Selsa Schiver d/b/a NGX-Schiver, PSBCA No. 4545, 02-2 BCA ¶ 31,937; Douglas Cremer, PSBCA No. 3108, 93-2 BCA ¶ 25,565.  Respondent argues that Appellant’s overall performance of the services required by the contract, particularly the number of missed and delayed trips, was sufficiently below the performance level required by the contract to justify the contracting officer’s exercise of his discretion to terminate the contract for default.  Respondent takes issue with Appellant’s concentration on the events of July 12, 2004, arguing that Appellant was not terminated just because of that single incident, but because of Appellant’s earlier, multiple failures to abide by the contract requirements.

            Appellant’s limited argument concentrates on the incident of July 12, 2004, calling into question whether Appellant’s Trip 5 truck actually arrived late at Warrenton.

            When the contracting officer issued his June 8, 2004 final warning letter, he advised Appellant that the contract might be terminated for default “unless satisfactory service is immediately restored and maintained ….”  (Finding 18).  By so doing, he made the possibility of termination contingent on, at a minimum, the occurrence of another chargeable irregularity representing a material failure to meet the contract requirements.  Charles West, PSBCA No. 3655, 96-1 BCA ¶ 28,211; Robert E. Davis, PSBCA No. 3400, 94-3 BCA ¶ 27,164.  Absent proof of such an irregularity, a default termination will not be sustained. Further, absent proof of such a chargeable irregularity, we need not decide whether Appellant’s record of performance prior to the issuance of the final warning “reflected a sufficient accumulation of significant performance irregularities to support a termination for default ….”  Charles West, supra, at 140,807.

            In this instance, there is disagreement as to whether the late operation on July 12, 2004, that triggered the termination was a chargeable deficiency.[4]  The answer to that question depends on whether the departure of the Trip 5 truck was, in fact, sufficiently delayed by the Postal Service to excuse the late arrival at Warrenton.  Appellant offered hearsay evidence in the form of testimony from its owner that the driver had told her that he did not leave the dock until 12 or 13 minutes after the scheduled departure time.  Respondent offered hearsay evidence in the form of testimony from its Network Specialist that when he investigated the incident – at least a week after it occurred – he was told by the loading dock personnel that, although the truck pulled up to the dock approximately 25 minutes late, they had been able to load the truck in five minutes and get it on its way by 5:00 a.m. – i.e., on time.  Neither party offered testimony or other direct evidence by anyone with personal knowledge of what had occurred on the dock and when the truck actually departed.[5]  While the Board may consider hearsay evidence, “in order for hearsay evidence to be considered as a basis for the Board's fact findings necessary for the resolution of the dispute, it must be sufficiently convincing to a reasonable mind and reveal sufficient assurance of its truthfulness.”  See Fred Schwartz, ASBCA No. 23183, 80-1 BCA ¶ 14,272 and cases cited therein.

            A default termination is a drastic sanction that should be sustained only when based on reasonable grounds and solid evidence.  See Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987); J.D. Hedin Constr. Co. v. United States, 408 F.2d 424, 431 (Ct. Cl. 1969).  Under the facts of these appeals, we do not consider either party’s evidence on the contested point sufficiently reliable to support a factual finding in its favor, and we have made none.  Accordingly, we conclude that Respondent, by failing to demonstrate the occurrence of a chargeable irregularity after the final warning letter was issued, has failed to satisfy its burden of proof regarding the default termination.

            Accordingly, the appeals are sustained.  The termination for default is converted to a termination for convenience and, consequently, Respondent may not recover any excess reprocurement costs.  Appellant is entitled to payment of $8,821.03 as the indemnity specified in the Changes clause (Findings 5, 25) and to the return of the $6,090.13 withheld from it at the time of the termination, for a total of $14,911.16.

David I. Brochstein
Administrative Judge
Vice Chairman

I concur:                                                                      I concur:
William A. Campbell                                                     Norman D. Menegat
Administrative Judge                                                  Administrative Judge
Chairman                                                                     Board Member

[1]   The transcript of the first day of proceedings is designated volume 1.  The transcript of the second day is designated volume 2.

[2]   Appellant’s owner replied in writing to the Form 5500 after receiving it, by adding her response on the reverse side of the document.  However, neither party was able to locate a copy of the response for inclusion in the record.  (Tr. 5).

[3]   Based on the difference between the amount of the replacement contract ($215,000) and the amount of Appellant’s contract at the time of termination ($105,852.31), prorated over 91 days (AF 10).

[4]   We specifically do not address the question of whether, even if deemed chargeable, this single instance of late operation four weeks after the issuance of the final warning letter would have been sufficient to qualify as a material failure to meet contract requirements.

[5]   In its brief and reply brief, Respondent makes reference to a single page in the record that is labeled “TIMES DAILY LOG REPORT” and appears to reflect that the Trip 5 truck was loaded between 4:50 a.m. and 4:59 a.m. and that it departed at exactly 5:00 a.m. on July 12, 2004 (5500File, p. 43).  While there was some general testimony about the existence and function of the TIMES system (Tr. 1: 28, 158-160, 219-220), the record contains no direct evidence regarding the recording of, and thus the reliability of, the type of data appearing on this page.  Therefore, we do not rely on the contents of the page as evidence of the truck’s actual departure time.