Appeal of

SCOTT STECKLER

Under Contract No. HCR 585A1

PSBCA No. 6302

APPEARANCE FOR APPELLANT:
Scott Steckler

APPEARANCE FOR RESPONDENT:
Melissa Mortimer, Esq.
Office of the General Counsel
United States Postal Service

OPINION OF THE BOARD

            Appellant, Scott Steckler, appeals a decision by Respondent, United States Postal Service, assessing him excess reprocurement costs resulting from Respondent’s termination for default of his mail transportation contract.  The propriety of the default termination itself is not contested.  We rule for Respondent.  

FINDINGS OF FACT

            1.         Appellant and Respondent were parties to HCR 585A1, for the transportation and delivery of mail, with a term from July 1, 2008, through June 30, 2012, at a $38,716.80 annual rate (Appeal File Tab (AF) 1; Stipulations of Non-Contested Facts (Stip.) 1).

            2.         On January 22, 2009, Respondent’s contracting officer terminated the contract for default, effective immediately (AF 2; Stip. 6).  The termination final decision noted that section C.3.1.7 of the contract entitles Respondent to recover its actual excess costs for the remainder of the contract term (AF 2).

            3.         Section C.3.1.7 of the contract, Termination for Default, provided, in relevant part, that in the event of default, ”the supplier will be liable to the Postal Service for any and all rights and remedies provided by law.”  (AF 1 at 38).

            4.         Appellant does not contest the validity of the termination for default as a defense to Respondent’s claim for excess reprocurement costs (August 9, 2010 Order, April 22, 2010 Order, March 31, 2010 Order; Joint Report, April 19, 2010).

            5.         On January 22, 2009, Respondent solicited by telephone emergency replacement service from five potential contractors, and received four offers.  The emergency solicitation required service to begin the next day and continue until June 30, 2009, subject to no-cost termination by the Postal Service on 24 hours’ notice.  The offers received were for $48,000, $53,000, $58,000, and $90,000 per year[1] (AF 4-5).  However, the lowest two offers were withdrawn, one due to a medical emergency and the other due to insufficient start-up time.  Respondent awarded the emergency contract to the lower of the two remaining offers.  (AF 4 at 123-27; Declaration of R. Luke (Luke Decl.), ¶ 3).  

            6.         The emergency contract’s term extended from the day following termination of Appellant’s contract, January 23, 2009, through June 30, 2009, at an annualized $58,000 rate (AF 4-5; Stip. 7; Luke Decl., ¶ 3).  

            7.         The emergency contract contained the same mileage and delivery points as Appellant’s terminated contract, and during its term cost Respondent $8,593.90 more than Appellant’s contract would have cost for the comparable 159-day period (AF 8 at 171; Luke Decl., ¶¶ 4-5).  Respondent has paid the costs of the emergency contract in full (Luke Decl., ¶ 5 and Exhibit 1 thereto).

            8.         On March 24, 2009, Respondent issued a solicitation for regular replacement service, to start the day following expiration of the emergency contract.  Nine offers were received.  Respondent awarded the contract to the lowest offeror, for a term from July 1, 2009, through June 30, 2013, at a $38,800 annual rate (AF 6-7; Stip. 8; Luke Decl., ¶ 6). 

            9.         The regular replacement contract contained the same mileage and delivery points as Appellant’s terminated contract, and will cost Respondent $1,585.84 more than Appellant’s contract would have cost for the comparable 1,096-day period that remained under Appellant’s terminated contract (AF 8 at 171; Luke Decl., ¶¶ 7-8).  Respondent has paid the costs of the contract performed, at least to June 30, 2010 (Luke Decl., ¶ 8 and Exhibit 2 thereto).

            10.       Respondent incurred $1,093.61 in administrative costs to reprocure these contracts, representing the cost for the time expended by its personnel, printing and postage expenses (AF 8 at 171; Luke Decl., ¶ 9).

            11.       On October 19, 2009, Respondent’s contracting officer issued a final decision, holding Appellant liable for $11,273.34 in damages owed, consisting of the damages referenced in Findings 7 ($8,593.90 for emergency contract), 9 ($1,585.84 for regular contract), and 10 ($1,093.61 for administrative costs), covering the period from the default of Appellant’s contract through the date his contract would have expired but for the termination (AF 8; Stip. 9; Luke Decl., ¶ 10).  The reprocurement final decision referenced as its basis Clause 2.3.1.m, which does not appear in the contract in the record (AF 1, 8). 

            12.       Respondent offset $2,306.80 from money Appellant had earned under the terminated contract, which it applied against its excess reprocurement costs (AF 8; Stip. 10).

            13.       By letter dated November 30, 2009, Appellant appealed the final decision assessing excess reprocurement costs (AF 9).

            14.       The parties agreed to submit the appeal on the written record without an oral hearing, pursuant to 39 CFR § 955.12 (April 22, 2010 Order; Joint Report, April 19, 2010).  The parties submitted jointly executed Stipulations of Non-Contested Facts.  Respondent submitted a sworn witness declaration and filed a legal brief.  Appellant did not submit evidence or a brief.  Both entitlement and quantum are in issue (April 22, 2010 Order).

DECISION

            As Appellant did not submit evidence or a brief, we discern his arguments from his notice of appeal, complaint, and a letter he submitted to the Board.  Appellant argues that the cost of the emergency contract was unreasonably high compared to his contract rate, that he was not given an opportunity to arrange for his own replacement services so as to minimize his exposure, and that he was unable to find in his contract Clause 2.3.1.m, on which the final decision stated Respondent’s assessment of excess reprocurement costs was based.[2] 

            Respondent argues that it followed proper procedures in replacing the service that had been performed pursuant to the terminated contract, that it minimized such costs to the extent possible, and that it is entitled to be made whole for the damages it incurred due to Appellant’s termination.

            Following a default termination, Respondent is entitled to recover its reasonable damages resulting from the breach, measured by its additional costs associated with its reprocurement efforts to replace the terminated service.  See Cascade Pacific Intern. v. United States, 773 F.2d 287, 293-94 (Fed. Cir. 1985). Although the contract did not specifically provide for the assessment of excess reprocurement costs, Respondent has a common law right to the recovery of such costs (Finding 3) in the form of damages.  Michael N. Beckloff, PSBCA No. 2249, 89-3 BCA ¶ 22,118 (denying recon.).

              We must examine the actions taken by Respondent in light of all the relevant circumstances and determine if the contracting officer acted reasonably.  See Barrett Refining Corp., ASBCA Nos. 36590, 37093, 91-1 BCA ¶ 23,566, aff’d, 937 F.2d 623 (Fed. Cir. 1991) (Table).  This analysis includes consideration of whether the services Respondent reprocured were the same as, or similar to, those provided under the terminated contract, and whether Respondent acted reasonably to minimize the excess costs.  See Webco Transportation Corp., PSBCA Nos. 5276, 5315, 09-1 BCA ¶ 34,042.

            It is not disputed that the reprocured services are the same as or similar to those under the terminated contract (Findings 7, 9).  Respondent sought competitive offers both for the emergency and regular replacement contracts, and for both it accepted the lowest offers (Findings 6, 8).  In the absence of evidence to the contrary, this amounts to reasonable mitigation efforts.  See Todd’s Letter Carriers, PSBCA Nos. 4904, et al., 05-2 BCA ¶ 33,121, recon. denied, 2006 WL 6019558 (March 16, 2006); see also FFR-Bauelemente + Bausanierung, GmbH, ASBCA No. 52152, 07-2 BCA ¶ 33,627 (reasonableness demonstrated by adequate competition and use of efficient means to reprocure).

            Appellant counters with a generalized position that the emergency contract cost too much.  The $58,000 annualized cost for the emergency service is considerably higher than Appellant’s $38,717.80 rate or the regular replacement contract rate of $38,800.  However, due to the nature of Appellant’s acts resulting in the default termination (which is not at issue in this appeal), the contract was terminated immediately with the need for mail service to be replaced within a day.  The procedure used by Respondent to procure service within a day – competitive solicitation from a limited number of potential suppliers by telephone, with award to the lowest offeror – was reasonable.  See Jeff Talano, PSBCA Nos. 3695, 3696, 97-1 BCA ¶ 28,628; Mapa Trucking, Inc., PSBCA Nos. 4833, 4923, 06-1 BCA ¶ 33,191. 

            Respondent used the emergency service for approximately five months while it solicited permanent replacement service.  While the emergency contract cost considerably more than the terminated contract rate and the replacement contract rate, the disparity has not been shown to have been so unreasonable as to limit recovery.  See, e.g., M.D.R.-RIC, (reprocurement costs reasonable where six-month emergency contract cost double the terminated contract rate, following solicitation of five contractors and receipt of three offers with award to lowest offer); Kevin Wagoner, PSBCA No. 3993, 97-2 BCA ¶ 29,056 (where reprocurement had to occur immediately, soliciting three contractors and obtaining only one bid at more than double the rate of the terminated contract was not unreasonable). 

            We have no evidence before us to the effect that Respondent acted unreasonably or failed to minimize its reprocurement costs.  Moreover, our precedent repeatedly has recognized that the abbreviated nature of the procurement process, the short term of an emergency service contract, and the possibility of termination on 24 hours’ notice can justify a higher price for the service than a contract for a longer duration that is obtained through the normal procurement process.  See M.D.R.-RIC, PSBCA No. 4472, 01-1 BCA ¶ 31,302; Kevin Wagoner. 

            Respondent has been damaged for the entirety of the remainder of Appellant’s contract term, and damages incurred over the remaining term therefore are recoverable.  See Ross & McDonald Contracting, GmbH, ASBCA Nos. 38154, et al., 94-1 BCA ¶ 26,316; see also Andrew M. Johnson, PSBCA Nos. 5175, et al., 07-1 BCA ¶ 33,464, recon. denied, 07-1 BCA ¶ 33,582.

            Appellant has not challenged the assessment of administrative costs incurred by Respondent’s reprocurement process.  As the administrative costs were expended due to the default termination (Finding 10), they are also recoverable.  See Todd’s Letter Carriers.

            As to Appellant’s other arguments, Appellant has not alerted us to any requirement that he be allowed to participate in arranging for replacement service for his defaulted contract, and we are aware of no such requirement.  While Appellant is correct that Respondent’s reprocurement final decision (but not its termination final decision) referenced a contract provision number that was inaccurate (Findings 2-3, 11), Appellant has not been prejudiced thereby as the contract indeed allowed Respondent the recovery it seeks.

            Respondent has demonstrated entitlement to recovery of the $11,273.34 damages it assessed.  However, Respondent must credit Appellant with $2,306.80, which previously was offset from Appellant (Finding 12).  Because the regular replacement contract has not been completed through the term of Appellant’s terminated contract, Respondent’s recovery is contingent on its continued payment to the reprocurement contractor for the full amount it claims.  See Andrew M. Johnson.

The appeal is denied.

Gary E. Shapiro
Administrative Judge
Board Member

I concur:                                 I concur:
William A. Campbell                David I. Brochstein
Administrative Judge             Administrative Judge
Chairman                                Vice Chairman

[1] By comparison, Appellant’s terminated contract rate was $38,716.80 per year (Finding 1).

[2] Appellant also complained about generalized postal mismanagement which has no effect on resolution of this appeal.