GORDON T. SMART

PSBCA No. 6123                    

APPERANCE FOR APPELLANT
Gordon T. Smart

APPERANCE FOR RESPONDENT
Lori J. Dym, Esq.

OPINION OF THE BOARD[1]

            Appellant, Gordon T. Smart, has appealed from the contracting officer’s final decisions terminating for default his mail delivery contract with Respondent, United States Postal Service, and assessing excess reprocurement costs against him.  At the parties’ election, the appeal is being decided on the written record, without an oral hearing.  39 U.S.C. §955.12.  Only entitlement is at issue in this proceeding (Order of January 8, 2008).

FINDINGS OF FACT

            1.  Appellant was awarded contract HCR 98670 on February 9, 2007, for a term beginning February 24, 2007,[2] and ending June 30, 2008, at an annual contract rate of $33,600.  The contract required Appellant to deliver mail to approximately 300 customer boxes along a specified route, beginning and ending at the Carson, Washington Post Office.  The contract required Appellant to report to the Carson Post Office at 8:30 a.m., “case” (sort) the mail for his route, load the sorted mail into his vehicle, depart the post office at 11:15 a.m., and return at 3:44 p.m. after delivering the mail on his route.  Appellant was required to operate the route on a daily basis, except for Sundays and holidays.  (AF 9, pp. 280, 289-91, 293).

            2.  As a box delivery contractor, Appellant was required by his contract to “…deposit all mail matter received … from a post office into the appropriate customer mail boxes … placed along the line of the route” and pick up mail left by customers “when a signal is displayed to indicate that a box contains mail to be taken.”  Appellant was also generally required to perform “all other related services … as directed by the contracting officer or authorized representative.”  (Contract clauses B.1.4.f and B.3.j (AF 9, pp. 292, 295, 296)).

            3.  Under clause 2.3.1.m of the Terms and Conditions of the contract, Respondent had the right to terminate the contract for default, “… for default by the supplier, or if the supplier fails to provide the Postal Service, upon request, with adequate assurances of future performance.”  Under the “Events of Default (March 2006)” clause, incorporated into the contract by reference at clause 2.3.1.s (8), the contract could be terminated for “[t]he supplier's failure to perform service according to the terms of the contract….” (AF 9, pp. 315-17).

            4.  The Carson Postmaster was designated as the contract’s Administrative Official (AO), with responsibilities for the day-to-day administration and supervision of Appellant’s performance.  Among her duties in that position, the AO was responsible for documenting any failures or irregularities in the performance of the contract.  The AO was instructed by her superiors to record such events whenever they occurred.  (Declaration of D.J. Walker (Walker Decl.), ¶3; AF 9, p. 308).

            5.  Postal Service Form 5500, “Contract Route Irregularity Report,” is a form used by Respondent’s personnel to record deficiencies in a contractor’s service.  After being filled out by a Postal Service employee, the form is sent to the contractor for comment.  After receipt of the contractor’s comments - when provided - the deficiency is designated either as chargeable or excusable by Respondent.  (E.g., AF 6, p. 39).  All of the Forms 5500 (“5500s”) in the record of this appeal were initially issued to Appellant by the AO and then later designated by her as chargeable.  Except for some details on very few occasions, Appellant did not challenge the accuracy of the deficiencies alleged by the AO in the 5500s she issued.  (AF 6).

            6.  In addition to the case in which Appellant was to sort mail for delivery, Appellant was assigned a “throwback case” which he was to use to separate mail that he received at the post office but which, for various reasons, was not deliverable on his route.  Mail belonging in the throwback case was to be separated into various categories - e.g., undeliverable as addressed (UAA); undeliverable bulk business mail (UBBM); mail to be forwarded; mail endorsed[3] for particular treatment; mail to be delivered to post office boxes, etc. - and each category had its own slot in the case.  Particularly relevant to this appeal, undeliverable bulk business mail was mail that the Postal Service was authorized to discard.  Therefore, pieces mistakenly placed in the UBBM separation of the throwback case were subject to being discarded along with the mail that properly belonged in that separation.  In addition, mail mistakenly placed in the UAA separation would be returned to the sender, even if the mail was deliverable or intended to be forwarded.  (Walker Decl., ¶¶ 12, 17; AF 6, p. 101).

            7.  Appellant began contract performance on February 24, a Saturday.  By 9 p.m., he was unable to finish his route and stopped for the night.  He kept the undelivered mail in his vehicle overnight and completed his deliveries the next day.  The AO issued a 5500 to Appellant because he kept the mail in his vehicle overnight instead of returning it to the post office for safekeeping.  (AF 6, p. 39).

            8.  On Monday, February 26, Appellant again left mail in his vehicle overnight, failed to deliver one parcel and failed to pick up outgoing mail from one customer box.  The AO issued another 5500 to him as a result of these errors.  (AF 6, p. 40).

            9.  Typically, it takes an inexperienced box-delivery contractor, such as Appellant, several weeks to learn the tasks associated with operating such a route.  (Declaration of R. Luke (Luke Decl.), ¶¶ 3, 6, 7).  Nevertheless, on Tuesday morning, February 27, after only two delivery days, the AO and another postal official (whose position was not identified in the record) had an “Official Discussion” with Appellant regarding his performance.  Appellant was urged to improve his performance immediately and was warned that if he did not do so, steps would be taken to terminate his contract and hold him accountable for any resulting emergency reprocurement damages.  (AF 4, p. 7; AF 6, p. 44).

            10.  That evening, Appellant returned to the post office at 5:30 p.m. without finishing his route, and refused the AO’s order to complete his deliveries.  The AO issued a 5500 reflecting that Appellant had not completed his route.  (AF 6, p. 42; Walker Decl., ¶ 9).

            11.  Between February 28 and March 23, the AO issued 18 additional 5500s to Appellant.  The 5500s primarily described delivery errors and errors related to Appellant’s use of the throwback case.[4]  The principal delivery errors, which occurred repeatedly, included delivering to a single address mail pieces intended for multiple, separate locations;[5] delivering mail to “dead” boxes - i.e. boxes not associated with an address on the sorting case; and delivering mail to the wrong address.  The AO indicated to Appellant that the source of many of the delivery errors was his failure to check mail as he removed the sorted mail from his case and placed it in trays for delivery, and his failure to check the mail when placing it in the boxes on his route.  The AO noted repeatedly on the 5500s that Appellant was not “fingering” the mail – i.e., checking each piece before placing it in the box - as she had directed.  With regard to the throwback case, Appellant was repeatedly placing deliverable mail in the throwback case, and was placing mail not deliverable on his route in the wrong throwback case slots.  These errors, had they not been caught and corrected by the AO, would have caused deliverable mail to be delayed, to not be provided the service for which a mailer had paid, to be improperly returned to sender (UAA) or, if wrongly placed in the UBBM slot, to be destroyed.  (AF 6, pp. 44-95; Walker Decl., ¶ 14).

            12.  On March 24, the AO held a formal conference with Appellant to discuss what she termed his unsatisfactory service.  There were four topics discussed at the conference:  Appellant’s failure to follow the AO’s instructions in a number of areas; omitted service (not picking up mail from customers and leaving some mail behind at his case); missed deliveries (deliveries to incorrect addresses and delivering mail with multiple addresses to a single address); and throwback errors (Appellant still not understanding the throwback case, despite several training sessions and daily error correcting by the AO).  The AO warned that unless Appellant took corrective action, she would refer the file to the contracting officer, and that such referral could result in contract termination and an assessment of damages.  (AF 4, pp. 11-17; Walker Decl., ¶ 13).

            13.  Following the conference, the AO issued 5500s to Appellant on each day from March 26 through March 30.  The deficiencies covered by the 5500s continued to include both misdeliveries and throwback case errors, including mail improperly being placed in the UBBM and UAA sections of the throwback case.  The 5500s also included reports of customer complaints of repeated misdeliveries of mail for the same addresses; leaving mail at an address despite the fact that the customer had no mail box and received her mail through a post office box; and forwarding of mail for which there was no forwarding order.  (AF 6, pp. 96-109).

            14.  In a March 31 memorandum, the AO advised Appellant that she believed his performance had not improved since the March 24 conference, referencing 5500s issued from March 24 through March 30.[6]  In the memorandum, the AO asked that Appellant take whatever actions were necessary to restore and maintain satisfactory service within seven days of receipt of the memorandum.  The AO warned that if he did not do so, she would refer the entire file to the contracting officer “for appropriate attention.”  (AF 4, p. 18).

            15.  Appellant received 5500s from the AO on nearly a daily basis after receiving the March 31 memorandum.  The 5500s continued to cover misdeliveries - including mail delivered to “dead” boxes, mail delivered in error to route boxes of customers with PO boxes, and mail not delivered because the addresses were not on Appellant’s case although they should have been.  The 5500s also continued to describe errors made by Appellant in placing mail in the throwback case - including placing deliverable mail in both the UBBM and UAA slots.  (AF 6, pp. 110-129).

            16.  Through memoranda dated April 9 and 10, Appellant’s file was referred to the contracting officer, with a request that a three-day cure letter be issued to Appellant.  By letter dated April 26, 2007, and received by Appellant on April 28, the contracting officer gave Appellant ten days to take whatever action was necessary to restore service, and warned that failure to do so could result in a default termination and assessment of contract damages.  In the period between the memoranda and the contracting officer’s letter, the issuance of 5500s by the AO on nearly a daily basis had continued unabated.  The deficiencies recorded were of the same general type reflected in most of the previous 5500s - i.e., primarily throwback case errors and errors in deliveries.  (Walker Decl., ¶ 25; Luke Decl., ¶ 8; AF 4, pp. 21, 22, 23; AF 6, pp. 134-167).

            17.  After April 26 through and including May 10, Appellant continued to receive 5500s, primarily for throwback case errors - including mail erroneously placed in the UBBM and UAA slots - but also including some delivery errors (AF 6, pp. 167-192).

            18.  During the course of the AO’s term as postmaster at Carson, Washington, there were four or five other suppliers that serviced Appellant’s route prior to his term.  The AO received more customer complaints during the approximately three-month term of Appellant’s performance than she received during the full, multi-year terms of the other suppliers.  (Walker Decl., ¶¶ 2, 5, 18).

            19.  Appellant received six hours of paid training at the beginning of his contract term.  In addition, the AO provided repeated instruction to him concerning each task and procedure that the contract required.  The need to provide this repeated instruction and the need to monitor Appellant’s performance detracted from the performance of the AO’s other responsibilities as postmaster.  (Walker Decl., ¶¶ 6, 8; AF 6, pp. 135, 149).

            20.  In a final decision dated May 11, 2007, the contracting officer terminated Appellant’s contract for default, citing Appellant’s failure to improve service following receipt of the contracting officer’s April 26 letter.  The final decision also stated that Appellant would be advised once Respondent determined the amount of any damages owed.  (AF 2).  Simultaneously with the termination, the contracting officer issued a Route Service Order, PS Form 7440, suspending all pay to Appellant.  Appellant filed a timely notice of appeal with the contracting officer (AF 1; July 11, 2007 cover letter from contracting officer).

            21.  Following the termination, at the direction of the contracting officer, Respondent’s contract specialist solicited bids for replacement service from six possible suppliers.  Three of the six submitted offers and the contracting officer awarded a contract to the low offeror in the annual amount of $48,626.77, an increase of 44 percent over the $33,777.48 amount of Appellant’s contract at the time of termination.  The term of the replacement contract coincided with the remaining term of Appellant’s contract.  (Luke Decl., ¶¶ 10, 11).

            22.  In a final decision dated December 7, 2007, the contracting officer assessed reprocurement damages against Appellant in the amount of $5,200.29.  The claimed damages included excess contract costs for a period of 110 days plus administrative costs of $725.49.  (Luke Decl., ¶ 11; AF 3; Attachment to December 17, 2007 letter from former counsel for Respondent).[7]

            23.  Respondent issued a January 31, 2008 invoice to Appellant seeking payment of the $5,200.29 set out in the contracting officer’s December 7, 2007 final decision, but deducting from the total a “Final payment” amount of $1,017.95, leaving a balance of $4,182.34 (Attachment to Appellant’s June 9, 2008 letter to the Board).

DECISION

            Respondent, which has the burden of proof in this termination for default appeal, 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, argues primarily that Appellant failed to perform the basic duties of the contract – i.e., sorting and delivering the mail to the correct locations – in a satisfactory manner.  Respondent argues that too many items were improperly placed in the throwback case when they should have been delivered on the route.  Respondent also argues that, despite almost daily reminders, Appellant for too long continued to ignore or misunderstand the AO’s instructions regarding casing and delivery – particularly the instruction to check as he placed the sorted mail in delivery trays and as he placed the mail in customer boxes to make sure the mail was being sorted and delivered in the correct order.

            In order to prevail, Respondent must prove that the deficiencies in Appellant’s performance constituted a material breach of the contract.  If Respondent is able to do so, it has met its initial burden and the evidentiary burden then shifts to Appellant to present evidence of excusable causes, Charli Selsa Schiver d/b/a NGX-Schiver, PSBCA No. 4545, 02-2 BCA ¶ 31,937; Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA ¶ 26,419 at 131,429, or to present evidence showing that the termination represented an abuse of the contracting officer’s discretion, Jesse A. Farmer, PSBCA No. 2702, 91-3 BCA ¶ 24,181 at 120,941.

            In considering the record before us, we take into account that it typically takes an inexperienced box-delivery contractor such as Appellant several weeks to learn the many tasks associated with operating such a route (Finding 9).  As a result, we have given little weight to deficiencies that occurred early in Appellant’s tenure.

            On the other hand, there were persistent deficiencies in Appellant’s performance that continued well beyond the learning period expected of a contractor.  Most notable were Appellant’s frequent misdeliveries and errors in placing mail in his throwback case.  These errors continued to occur on a near-daily basis from the time Appellant began performance, up to and including the day before the termination.  Each of these errors, while individually minor, was technically a breach of the contractual obligation to deposit all mail into the appropriate customer mailboxes and reroute mail through the throwback case, as directed by the AO (Finding 2).  In this instance, as noted above, Appellant’s persistent misdeliveries adversely affected Respondent’s customers and, in addition, generated numerous customer complaints that the AO, as postmaster, had to take time to deal with.  Further, Appellant’s persistent mistakes in the use of the throwback case would, to the extent the errors were not corrected by the AO, have caused mail to be delayed, to not receive the services paid for by the mailers, or to be destroyed.  Finally, the need for the AO to regularly monitor Appellant’s work to prevent and correct his errors also detracted from her ability to perform her other responsibilities.  These repeated deficiencies in Appellant’s performance, which continued well beyond the typical learning period, when considered as a whole, represented a substantial failure of performance and a material breach of the contract, justifying the decision of the contracting officer to terminate the contract for default.  See, e.g., Derrick Van Greene, PSBCA No. 5093, 5215, 07-1 BCA ¶ 33,471, recon. den. 2007 WL 5442324 (P.S.B.C.A., June 11, 2007); see also Nova Express, PSBCA Nos. 5091, 5207, 5213, 5267, 07-1 BCA ¶ 33,564, n. 10, recon. den., 07-2 BCA ¶ 33,660, aff’d, 289 Fed. Appx. 407 (Fed. Cir. 2008); Johnson Management Group CFC Inc., HUDBCA Nos. 96-C-132-C15, 97-C-109-C2, 99-2 BCA ¶ 30,520 at 150,705; San Antonio Const. Co., Inc., ASBCA No. 8110, 1964 BCA ¶ 4479. 

            The burden thus switches to Appellant to present evidence of excusable causes for his deficient performance or to demonstrate that the decision to terminate represented an abuse of discretion.  Appellant contends that the AO decided “to get rid of me for personal reasons,” and created what he terms a hostile work environment.  He argues that the AO issued 5500s to him for “vague and obtuse infractions of not following instructions and having a bad throwback case.”  He also contends that the AO solicited complaints against him from customers on his route.

            As noted above (Finding 5), with very few exceptions Appellant did not challenge the substance of the deficiencies described by the AO in the 5500s she issued, and we have no basis for questioning that Appellant’s performance suffered from the deficiencies alleged.  With one minor exception, Appellant does not argue that his deficiencies were excusable.  In that regard, Appellant questions only why the “dead” boxes were not marked as such before he began contract performance.  This was, however, a problem that he could have remedied early in his contract term, but which persisted as late as April 30 (AF 6, pp. 171-172).  With regard to the throwback case errors, which were the most persistent of his problems, Appellant did not contend that his errors were excusable and, in his responses to the 5500s, repeatedly expressed his hope and expectation that he would be able to learn to use the case without mistakes.

            The record also does not demonstrate that the decision to terminate the contract constituted an abuse of discretion.  The contracting officer, as is proper, relied on information about Appellant’s performance deficiencies provided primarily by another - i.e., the AO/postmaster.  See, e.g., Nuclear Research Corp. v. United States, 814 F.2d 647, 649-50 (Fed. Cir. 1987); Pacific Architects and Engineers, Inc. v. United States, 491 F.2d 734, 744 (Ct. Cl. 1974); Stephen Zucker, Packages Services Plus, PSBCA Nos. 3396-3398, 96-2 BCA ¶ 28,282.  Although Appellant argues that the AO was out to get rid of him, there is no indication that the AO fabricated any of the very detailed information recorded on the 5500s that she issued.  Moreover, the record lacks evidentiary support for Appellant’s allegation that the AO actively solicited complaints from customers, rather than simply having recorded the complaints of customers who brought them to her attention.  As noted above (Findings 7-10), the AO began to issue 5500s and record Appellant’s errors immediately after Appellant began contract performance, and well before the passage of the typical period for a contractor to learn the job (Finding 9).  Where, as here, the facts recorded in the early 5500s were accurate and there is no evidence that the AO took any actions with the specific aim of having Appellant’s contract terminated, the mere fact that the early 5500s were issued has no significance in the consideration of abuse of discretion.  Moreover, we have given little weight to those 5500s and conclude that the continuing deficiencies that occurred later in the contract performance period are sufficient to support the termination.

            Respondent has demonstrated that Appellant’s performance deficiencies represented a material breach of the contract, and Appellant has failed to prove that the deficiencies were excusable or that the termination was an abuse of discretion.  Accordingly, the appeal of the termination for default is denied.

            To recover its excess reprocurement costs, Respondent has the burden of demonstrating that the reprocured services were the same as or similar to those involved in Appellant's contract and that Respondent acted reasonably to minimize the excess costs incurred.  See Cascade Pacific International v. United States, 773 F.2d 287, 293 (Fed. Cir. 1985); Don Wasylk d/b/a Klysaw, PSBCA Nos. 4186, 4283, 00-1 BCA ¶ 30,844.  While Respondent presented evidence that it solicited bids for replacement service from six possible suppliers and awarded a replacement contract for the balance of Appellant’s contract term to the low offeror (Finding 21), it offered no evidence that the service provided under the replacement contract was the same as, or similar to, the service provided under Appellant’s contract.[8]  This shortcoming in Respondent’s evidence is particularly relevant where, as here, the replacement contract amount represented a substantial (44 percent) increase over the amount of Appellant’s contract, after the passage of only a few months.  See, e.g., Bowman’s Transport Co., PSBCA Nos. 1088, 1089, 1092, 84-1 BCA ¶ 17,217; J. Morizzo Transport Corp., PSBCA No. 1108, 84-1 BCA ¶ 17,231; Lorah’s Hauling, PSBCA No. 4778, 04-1 BCA ¶ 32,502.  Accordingly, Respondent may not recover any excess costs based on the difference in contract prices.  In addition, while Respondent might nevertheless recover its administrative costs, see Todd’s Letter Carriers, PSBCA Nos. 4904-4920, 5002, 5003, 05-2 BCA ¶ 33,121 at 164,137, Respondent offered no evidence to show how those costs were calculated or to show that they were reasonable.  Accordingly, Respondent may not recover those costs.  Appellant, however, is entitled to recover any funds that were otherwise due him under his contract but that were withheld from him at the time of the termination (Findings 20, 23).  This matter is remanded to the parties to negotiate the amount due.

            Accordingly, this appeal is sustained, as explained above, with respect to the recovery of excess reprocurement costs, but is otherwise denied.

David I. Brochstein
Administrative Judge
Vice Chairman

I concur

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

[1] Administrative Judge Gary E. Shapiro took no part in the Board’s consideration of this appeal.

[2] Unless otherwise indicated, all dates in the Findings of Fact are in 2007.

[3] “Endorsements” on mailpieces are authorized markings that show handling instructions, a special service, or a request for ancillary service (forwarding, return, or address correction service).  See USPS Publication 32, “Glossary of Postal Terms.”

[4] The AO routinely attached additional pages to the 5500s, explaining in great detail the deficiencies she was reporting.

[5] E.g., delivering to the first address on a street the mail for all the addresses on that street, because Appellant had banded together all the mail for the street before placing it in his tray and then failed to remove the band before delivering the mail.  (See AF 6, pp. 48, 53, 55).

[6] The referenced 5500 dated March 24 does not appear in the record.

[7] The record does not contain a formal notice of appeal from the December 7, 2007 final decision.  No such notice is required, however, where Appellant has timely appealed the underlying termination for default.  E.g., Nova Express, PSBCA Nos. 5091, 5207, 5213, 5267, 07-1 BCA ¶ 33,564, n. 10, recon. den., 07-2 BCA ¶ 33,660, aff’d, 289 Fed. Appx. 407 (Fed. Cir. 2008), citing Arthur L. Johnson, PSBCA No. 3894, 97-1 BCA ¶ 28,773 at 143,589.

[8] For example, Respondent did not offer into evidence a copy of the replacement contract.