December 14, 2011

Appeal of                                                                   

HAROLD N. COLERICK                                                          

Under Contract No. HCR 693AD                           

PSBCA No. 6356                    

APPEARANCE FOR APPELLANT:         
Harold N. Colerick                                                                           
 
APPEARANCE FOR RESPONDENT:     
Melissa M. Mortimer, Esq.
Office of the General Counsel
United States Postal Service

OPINION OF THE BOARD

Respondent, United States Postal Service, terminated the mail transportation contract of Appellant, Harold N. Colerick, by exercising a termination with notice provision.  Appellant claimed costs related to the termination and appeals the contracting officer’s rejection of those costs.  We deny the appeal.

FINDINGS OF FACT

            1.         Appellant entered into Transportation Services Renewal Contract No. HCR 693AD with Respondent, requiring Appellant to provide mail transportation services between Alliance, Nebraska and the Alliance Airport from July 1, 2009, through June 30, 2013 (AF 1; Stip. 2).[1] 

2.         The contract paid $26.52 per round trip, without an overall annual rate.  The number of trips was estimated as twice daily with some exceptions, and subject to “change due to the needs of the Postal Service and because of the air carrier schedule changes.” (AF 1 at p. 9; Stips. 3-4). 

3.         Trips for transportation of mail outside Alliance also were ordered by Respondent when planes servicing the Alliance airport were unable to land there.  Respondent paid Appellant for this additional service as extra trips at a negotiated rate.  (AF 1; Stip. 4-5; Manchego Decl. ¶ 11, Ex. B; Moran Decl. ¶ 3).

            4.         The contract included Issue 8 of Respondent’s standard set of Terms and Conditions (AF 1 at p. 3; Manchego Decl. ¶ 4).  Section 2.3.3 of those Terms and Conditions, Termination of Contracts, provided:

The clauses below captioned “Termination with Notice” and “Termination for the Postal Service’s Convenience” are in the alternative, so that only one of them is applicable to this contract, and not the other.  The designation of which of the two clauses applies will be established prior to renewal or award. . . .

(AF 1 at p. 41).  Section 2.3.3a, Termination with Notice, provided:

The contracting officer or the supplier, on 60 days written notice, may terminate this contract or the right to perform under it, in whole or in part, without cost to either party.

(AF 1 at p. 41).  Section 2.3.3b, Termination for the Postal Service’s Convenience, appeared thereafter.

5.         The first page of the contract was signed by both parties (AF 1 at p. 3).  The following pertinent language appeared on that page, in a section captioned Comments: 

Section 2.3.3a of the Terms and Conditions, Termination with Notice, is incorporated into this contract; however, it is modified to replace “on 60 days written notice” with “on 90 days written notice.” Section 2.3.3b, Termination for the Postal Service’s Convenience, does not apply.  . . .  Section 2.3.2b, Extra Trips, will be operated at 80% of the prevailing rate per mile at the time service is performed.

(id.).  Accordingly, and as expressly stipulated by the parties, the contract included the Termination with Notice clause (hereafter “notice termination”) and did not include the Termination for the Postal Service’s Convenience clause (hereafter “convenience termination.”).  (Stip. 9; Manchego Decl. ¶ 5, Ex. A).

6.         Respondent changed its mail processing network eliminating the need for this contract because air mail no longer would be sent to the Alliance airport (Manchego Decl. ¶ 6).  Accordingly, on April 2, 2010, Respondent informed Appellant that it was exercising the termination on notice clause and suspending service as of April 5 (Stip. 10; AF 2; Manchego Decl. ¶ 7; Colerick Aff. p. 1). 

7.         Before being notified of the termination, Appellant had purchased a more dependable truck to use for the contract.  If Appellant had been informed that the operational changes referenced in Finding 6 were going to be made, he would not have purchased this truck.  Following the termination referenced in Finding 6, Appellant no longer needed the truck and he has been unable to sell it.  (Colerick Aff. p. 1; AF 8).  Respondent did not instruct Appellant to purchase the truck (Stip. 8).

            8.         On April 22, 2010, Respondent’s contracting officer transmitted a letter to Appellant with the subject line “Termination for Convenience – HCR 693AD” reiterating within the body of the letter that the contract had been terminated under the notice termination clause.  The letter asked Appellant to sign an enclosed PS Form 7406, Amendment to Transportation Services Contract, and to return it immediately.  (AF 3 at p. 125).

9.         Appellant complied with that request, and the same day signed the contract amendment that Respondent had prepared.[2]  The section of the amendment captioned Description of Amendment, provided in its entirety:

TERMINATION FOR CONVENIENCE

Effective close of business 04/05/2010, this contract its (sic) terminated pursuant to the Termination for Convenience clause.

Supplier agrees to waive the 90-day written notice for a one time payment of $2,408.82, representing 80% of the monthly rate for three (3) months.

Computation:  $1,235.29 (monthly rate) X 3 (months) X 65% = $2,408.82

(AF 3 at p. 130 (emphases added)). 

10.       Appellant’s contracting officer signed the amendment in May (the precise date is illegible), and Respondent paid Appellant $2,408.82 based on the amendment (AF 3 at p. 130; Stip. 11; Manchego Decl. ¶ 8).

11.       On April 27, 2010, the contracting officer signed PS Form 7440, Contract Route Service Order, which provided:

TERMINATION FOR CONVENIENCE – REGULAR TRANSPORTATION SERVICE

Effective close of business 04/05/2010, this contract is terminated pursuant to the Termination for Convenience clause. (AF 3 at p. 128).

            12.       On June 15, 2010, Appellant sent a letter to the contracting officer acknowledging that he had “received the pay to cover the 90 day termination,” but requesting additional payment for his purchase of a truck used for the contract and for other termination costs (AF 4).

13.       On August 3, 2010, Appellant submitted a $17,090.21 contract termination claim for his costs to purchase the truck used to perform the contract and for related insurance and taxes (Stip. 12; AF 6).

            14.       On September 2, 2010, Respondent’s contracting officer denied the claim and Appellant timely appealed (Stips. 13-14; AF 8-9).  Appellant’s notice of appeal acknowledged that the contract can be terminated without cost to either party, but he complained that the termination was costing him money and therefore, was not without cost (AF 8).

            15.       The appeal was submitted on the written record in lieu of an oral hearing.  Both entitlement and quantum are at issue. (March 31, 2011 Order).

DECISION

This case suffers from considerable confusion by both parties.  Appellant acknowledges that the contract was terminated based on the notice termination clause which allows termination at no cost.  Appellant believes, though, that because the termination was not without cost to him, he is entitled to further payment, under convenience termination principles.  For its part, prior to this litigation, Respondent repeatedly confused notice termination with convenience termination both in its internal documentation and in its correspondence with Appellant. 

If the contract were terminated properly under a notice termination clause, Appellant would be entitled to no compensation from Respondent other than payment for 90 days’ required service before the termination became effective.  This is the subject of the contract amendment (Findings 9-10) discussed below.  If however, Respondent terminated the contract based on a convenience termination clause, additional compensation such as the truck costs here at issue, if properly proved, could be payable.  See Elton T. Colvin, Jr., PSBCA Nos. 6220, 6241, 09-2 BCA ¶ 34,310.

The contract documents are clear and Appellant has stipulated that a notice termination clause was available to Respondent and not a convenience termination clause (Findings 4-5).  Therefore, once properly invoked, Respondent was permitted to terminate the contract without paying anything further to Appellant.  Appellant’s interpretation of the notice termination clause – that “without cost to either party” means that he should be made whole because there was a cost to him – is contrary to the plain and clear wording of the clause.

It appears that a considerable amount of Appellant’s confusion as to whether he was entitled to convenience termination costs was caused by Respondent, which used the terminology of notice termination and convenience termination carelessly and interchangeably.  In this regard, while Respondent initially informed Appellant that the notice termination clause was invoked (Finding 6), its next letter to Appellant referenced both a notice termination and convenience termination clause (Finding 8).  Furthermore, the contract amendment prepared by Respondent twice stated that the contract was terminated for convenience without mention of notice termination (Finding 9), as did Respondent’s internal order terminating the contract (Finding 11). Even the contracting officer’s referral of this appeal to the Board stated affirmatively that Respondent had terminated the contract for convenience (AF 9).  It is little wonder that Appellant was confused about the nature of the termination.

However, the initial termination notification letter identified the notice termination clause, and notice termination was the only available termination provision in the contract.  Moreover, the parties stipulated that the notice exercised the notice termination clause (Finding 6).  Therefore, Respondent’s sloppy use of critical terminology does not affect the outcome of this case.[3]

Termination under the notice termination clause was not effective until expiration of 90 days’ notice (Findings 4-5).  Because 90 days’ notice was not provided (Finding 6), the parties amended the contract to provide a payment to Appellant in exchange for his waiver of the required period of notice (Findings 8-10).  However, neither party addresses an issue that is obvious from review of the record – an inconsistency within that contract amendment. 

While the contract amendment was intended to resolve liability for Respondent’s failure to have provided the required notice, see Joe Garrett, Inc., PSBCA Nos. 3476, 3667, 95-1 BCA ¶ 27,357, it includes an obvious internal inconsistency, and potential mutual mistake.  The amendment recites that it is based on a payment of 80% of three month’s contract proceeds (which calculates to $2,964.69) but actually computes the payment based on 65% of three month’s contract proceeds ($2,408.82) (Finding 9).  The 65% calculation was paid (Finding 10).

Although Appellant’s affidavit is unclear concerning whether he means to pursue this issue, neither the $555.87 difference between the calculations nor any costs or damages related to the amount of notice given or to the contract amendment[s1]  was included in Appellant’s claims submitted to the contracting officer or addressed in the contracting officer’s decision.  Accordingly, we lack jurisdiction presently to reach any conclusion about the issue or provide any relief based on it.  See e.g., J. Leonard Spodek, PSBCA No. 6146, 10-2 BCA ¶ 34,547.[4]

CONCLUSION

Respondent terminated the contract based on the notice termination clause.  Accordingly, convenience termination costs such as those sought by Appellant are not recoverable.  The appeal is denied.

Gary E. Shapiro
Administrative Judge
Board Member

I concur:
William A. Campbell
Administrative Judge
Chairman

I concur:
David I. Brochstein
Administrative Judge
Vice Chaiman

[1] References to evidence will use the following conventions:

The appeal file will be referred to as AF, followed by the tab number; the stipulations of fact signed by the parties on July 18, 2011 will be referred to as Stips.; the July 27, 2011 declaration of Mr. B. Manchego will be referred to as Manchego Decl.; the July 27, 2011 declaration of Mr. J. Moran will be referred to as Moran Decl.; and the April 18, 2011 affidavit of Mr. Colerick will be referred to as Colerick Aff.

[2] The record is silent concerning negotiation of that amendment.

[3] Nor has Appellant demonstrated that he relied to his detriment on Respondent’s improper use of convenience termination language.

[4] Appellant may submit a monetary claim in this regard to the contracting officer.

 [s1]The state of the law regarding the remedy for failure to provide sufficient notice in a notice termination is not clear to me. While the approach of A’Prime seems right to me, it also seems to be contradicted by our Board in AJ Custodial Service, 05-2 BCA 33087, where we said the following when faced with a notice termination:

Terminating the contract on 30 days' written notice so that Respondent could obtain the desired service was authorized by the Termination on Notice clause of the contract. . . . Appellant was entitled to compensation for the full notice period, but Respondent compensated Appellant only through . . . the 29th day after the postmaster gave written notice of termination. Appellant is entitled to recover for the 30th day as well.

Since the proper remedy on that issue is not before us, I thought it best not to say either way.