PSBCA No. 6288, 6388, 6510


December 16, 2015

JTD LOGISTICS LLC v. UNITED STATES POSTAL SERVICE

PSBCA Nos. 6288, 6388, 6510

APPEARANCE FOR APPELLANT:
Deborah Williams
President, JTD Logistics LLC

APPEARANCE FOR RESPONDENT:
Jessica J. Stringer, Esq.
United States Postal Service Law Department

OPINION OF THE BOARD

Appellant, JTD Logistics LLC (JTD), has appealed three contracting officer’s final decisions.  The first terminated for default JTD’s mail transportation contract with Respondent, United States Postal Service.  The second denied JTD’s $573,098.85 claim for damages.  The third assessed $18,622 in excess reprocurement costs against JTD.  We uphold the termination for default, deny JTD’s monetary claim, and deny the Postal Service’s claim for excess reprocurement costs.1

FINDINGS OF FACT

  1. On July 6, 2009, the Postal Service issued a solicitation for mail transportation service between Waco Priority Annex and Copperas Cove, Texas.  The solicitation required proposals be submitted by August 6, 2009.  (AF Tab 7 at 36).2
  2. Item 4 of the solicitation stated that the contract term would begin August 22, 2009.  Item 5 provided that the contract term would end March 31, 2013.  (AF Tab 7 at 36).
  3. The solicitation’s “Notes to Offerors” section stated:  “[t]he contract will be awarded not less than 15 day(s) prior to the term beginning date as stated in Item 4, or subsequent date as ordered by the Contracting Officer.”  (Stip. 3; AF Tab 7 at 36).
  4. On August 6, 2009, JTD submitted a $312,599.37 offer (excluding fuel) in response to the solicitation.  On August 7 and August 13, 2009, JTD’s Manager acknowledged receipt of two amendments to the solicitation, neither of which changed the beginning of the contract term (August 22, 2009).  (Stip. 4, 6-8; AF Tab 7 at 11, 13, 14, 24, 25).
  5. On August 17, 2009, the Postal Service conducted a pre-award conference with JTD, whose representative indicated that JTD would be prepared to begin performance of the contract on August 22, 2009.  Also on August 17, 2009, the Postal Service’s contracting officer notified JTD that it was awarded the contract.  (Resp. Exh. 3; Stip. 15; AF Tab 7 at 9, 17, 18, 35).
  6. Section B of the contract, “Statement of Work and Specifications,” was labeled “Effective 08/22/2009” at the top of each page.  Under the contract schedule, which was part of the Statement of Work, JTD was required to perform sixteen trips daily, one of which (Trip A-1) began at 11:30 p.m. and ended at 1:50 a.m. the next day.  (AF Tab 7 at 37-38).
  7. Clause 2.3.1.r of the contract’s Terms and Conditions provided:
         Order of Precedence.  Any inconsistencies in the provisions of a solicitation, [or] a contract awarded under a solicitation . . . will be
         resolved by giving precedence in the following order:
             (1)  The Statement of Work and Specifications,
             (2)  The solicitation provisions and instructions . . . .
    (AF Tab 8 at 93).
  8. The contract’s Termination for Default clause provided that
         [t]he Postal Service may terminate this contract . . . for default by the supplier, or if the supplier fails to provide the Postal Service, upon
         request, with adequate assurances of future performance.  In the event of termination for default, the Postal Service will not be liable to
         the supplier for any amount of supplies or services not accepted, and the supplier will be liable to the Postal Service for any and all rights
         and remedies provided by law . . . .
    (AF Tab 8 at 92). 
  9. The contract’s Events of Default clause provided:
         The supplier’s right to perform this contact is subject to termination under the clause entitled Termination for Default.  The following
         constitute events of default, and this contract may be terminated pursuant to that Clause.
              (a)  The supplier’s failure to perform service according to the terms of the contract . . . .
    (AF Tab 8 at 99). 
  10. The contract’s Excusable Delays clause provided:
         [T]he supplier will not be in default by reason of any failure in performing this contract in accordance with its terms (including any failure
         by the supplier to make progress in the prosecution of the work that endangers performance) if the failure arises out of causes beyond
         the control and without the fault or negligence of the supplier.
    (AF Tab 8 at 97).
  11. In the morning of August 21, 2009, JTD advised the Postal Service that it was continuing with preparations to start performance at 11:30 p.m. that night (AF Tab 6 at 8).  However, JTD’s representative later advised the Postal Service’s contract specialist that JTD would be unable to commence service that evening.3  The JTD representative further advised that JTD would be ready to commence service on Monday night, August 24, and the contract specialist agreed that JTD could begin the service as of that evening.  (Resp. Exh. 4, ¶ 1; Stip. 21).
  12. On August 22, 2009, JTD applied for a loan from a credit union, which was approved on August 24, 2009 (Stip. 23).
  13. The Postal Service obtained coverage from another supplier for JTD’s August 22 and 23 trips, and for all but the 11:30 p.m. trip on August 24, 2009.  JTD did not provide any contract service.  (Stip. 21, 22).
  14. On August 24, 2009, JTD’s representative informed the acting contracting officer that JTD would be unable to commence service that night because it did not have the necessary equipment (Resp. Exh. 4, ¶ 6).  Thereafter, on that date, the contracting officer issued a final decision terminating JTD’s contract for default for its failure to provide service under the contract (Stip. 24; AF Tab 3).
  15. Effective August 26, 2009, the Postal Service entered into an emergency replacement contract with a different supplier for the service included in JTD’s contract.  The term of the emergency contract expired on February 19, 2010.  The annual rate of the emergency contract was $571,700, but the record does not indicate whether that amount included or excluded fuel.  (Resp. Exh. 1 at 7).
  16. On September 1, 2009, JTD filed a timely appeal of the termination, which was docketed as PSBCA No. 6288 (Stip. 25; AF Tab 1).  In another letter of the same date to the contracting officer, JTD asked that the termination be revoked and the contract be reinstated.  In that letter, JTD complained that it had not been given 15 days between award and service commencement, as specified in the solicitation (see Finding 3).  In addition, JTD alleged that the contracting officer had allowed three days after August 22 to begin service but did not wait that amount of time before terminating the contract.  In this regard, JTD noted that the three-day period included a weekend, during which no banking activities are conducted.  (AF Tab 2).
  17. On April 28, 2011, JTD filed a claim4 seeking $573,098.85, the contract proceeds it contended it would have received to that date had the contract not been terminated for default.  JTD also indicated that its claim amount would increase by $26,049.95 per month.  (Stip. 26; 1st Supp. AF Tab 1).
  18. On May 13, 2011, the contracting officer issued a final decision denying the claim.  JTD filed a timely notice of appeal, which was docketed as PSBCA No. 6388.  (1st Supp. AF Tabs 2, 3).
  19. On March 28, 2013, the contracting officer issued a final decision demanding payment of $18,622 for 90 days (not the entire year) of excess reprocurement costs resulting from the default termination.  The contracting officer based this calculation on the difference between the annual rate in JTD’s contract and the replacement contract rate.  JTD filed a timely notice of appeal, which was docketed as PSBCA No. 6510.  (2nd Supp. AF Tabs 1-3).

DECISION

We begin by addressing the termination for default, then JTD’s claim, and conclude by addressing the Postal Service’s claim for excess reprocurement costs.

Termination for Default – PSBCA No. 6288

The Postal Service has the burden of proof in a termination for default appeal.  See Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987).  In order to prevail, the Postal Service must prove that deficiencies in JTD’s performance constituted a material breach of the contract, not a minor violation.  See, e.g., Gordon T. Smart, PSBCA No. 6123, 11-1 BCA ¶ 23,695; Lee Aaron VanDyke, PSBCA No. 6140, 09-2 BCA ¶ 34,291.

If the Postal Service meets its initial burden of proof, the evidentiary burden shifts to JTD to present evidence of excusable causes.  See Trojan Horse Ltd. v. United States Postal Service, PSBCA No. 6474, 15-1 BCA ¶ 36,015.

JTD failed to commence service during the first three days of the contract (missing at least forty-seven trips).  The Postal Service then terminated the contract for default when JTD advised that it would be unable to perform on the night of August 24, 2009, contrary to its agreement with the Postal Service’s contract specialist (Findings 11-14).  These failures represent a material breach of the contract and justify the termination for default.  See Bowman’s Transport Co., PSBCA Nos. 1088, 1089, and 1092, 84-1 BCA ¶ 17,217 (failure to have the necessary vehicles on the first day of a mail transportation contract is a material breach).  We conclude that the Postal Service has met its initial burden of proof. 

JTD raises three arguments that its failure to perform is excusable.5  First, JTD argues that the start date was fifteen days after award of the contract (i.e., September 1, 2009 not August 22, 2009).  This argument is based on the solicitation’s Notes to Offerors section which said that “[t]he contract will be awarded not less than 15 day(s) prior to the term beginning date . . . .”  In contrast, the contract identifies the effective date as August 22, 2009, and the Statement of Work said that the work would begin on August 22, 2009.

The contract includes an order of precedence clause.   This clause requires that in the event of a conflict, the statement of work (contract begins on August 22, 2009) takes precedence over solicitation provisions and instructions (contract awarded not less than 15 days before start).  See R & W Constr. Co., PSBCA No. 2404, 90-1 BCA ¶ 22,381 (order of precedence clause used to resolve conflict within a contract).

This interpretation of the contract was confirmed during the pre-award conference.  JTD indicated that it would be prepared to begin work on August 22, 2009.  Therefore, contemporaneously with the contract award, there was no dispute that the start date would be August 22, 2009 (Finding 5).  In the days between award on August 17 and August 22, 2009, JTD indicated to the Postal Service not only that it was preparing to perform but that it would be ready to start performance with the first trip on August 21, 2009 at 11:30 p.m. (Finding 11).  Not until after the contract was terminated did JTD argue that it was entitled to fifteen days identified in the solicitation’s Notes to Offerors section.

We have held that contractors may be bound by statements consistent with contract requirements which are made at pre-award conferences.  See Swede Constr. Corp., PSBCA No. 4099, 98-2 BCA ¶ 30,082; accord United Techs. Corp. Pratt & Whitney Grp., Gov’t Engines & Space Propulsion, ASBCA Nos. 46880 and 46881, 97-1 BCA ¶ 28,818 (government bound by contractor’s interpretation discussed with government officials prior to signing of contract).

Based on the effective date of the contract, the language in the Statement of Work, the understanding reached at the pre-award conference, and JTD’s representations just before August 22, 2009, we conclude that the contract’s start date was August 22, not September 1, 2009 as argued by JTD.  Given this conclusion, JTD’s first argument fails.

Second, JTD argues that it did not have enough time to secure financing.  We conclude that JTD’s failure to secure timely financing, through no fault of the Postal Service, did not excuse JTD’s failure to perform.  See Unimach Mfg., ASBCA No. 39883, 90-3 BCA ¶ 22,968 (financial problems not caused by wrongful government action do not form the basis to excuse a failure to perform).  Thus, we do not accept this argument.

Third, JTD argues that the Postal Service agreed to a 72-hour (three day) period beginning at 6:25 p.m. on August 22, 2009 to begin performance.  However, contrary to this argument, the parties agreed that JTD would commence performance on Monday night, August 24, 2009 (Finding 11).  On Monday afternoon JTD informed the Postal Service that it would it would be unable to perform on Monday night as agreed.  Thus we also do not accept this argument.

JTD’s appeal of the termination for default, PSBCA No. 6288, is denied.

JTD’s Claim – PSBCA No. 6388

JTD’s claim is based on the assumption that the default termination of its contract was unjustified.  Inasmuch as we have decided that the termination was justified, JTD’s appeal for damages is denied.  See Trojan Horse, 15-1 BCA ¶ 36,015 (denial of appeal challenging termination for default precludes appellant’s claim for breach damages).

The Postal Service’s Claim for Excess Reprocurement Costs – PSBCA No. 6510

In order to recover excess reprocurement costs, the Postal Service must prove that (1) the reprocured supplies or services are the same as or similar to those involved in the termination, (2) the Postal Service actually incurred excess costs, and (3) the Postal Service acted reasonably to minimize the excess costs resulting from the default.  See Cascade Pacific Int’l v. United States, 773 F.2d 287, 294 (Fed. Cir. 1985); Roger W. Holcombe, PSBCA Nos. 5365 and 6120, 11-1 BCA ¶ 34,725.

We focus on the third required element (acting reasonably to minimize excess costs).  The record contains no information regarding the process used to enter into the emergency contract – e.g., the number of sources contacted, the number and amounts of offers received, market research, award to the second low offeror of the original solicitation, or any other relevant information assuring that the award was reasonable.  See generally Cascade Pacific, 773 F.2d at 294.

In the absence of any evidence showing that the Postal Service acted reasonably to minimize excess costs, we conclude that the Postal Service has not met its burden of proof.6  See Lorah’s Hauling, PSBCA No. 4778, 04-1 BCA ¶ 32,502.  Accordingly, the appeal in PSBCA No. 6510 is sustained.

CONCLUSION AND ORDER

The Postal Service has proved that the termination for default was justified; accordingly, we rule in favor of the Postal Service.  JTD’s appeal in PSBCA No. 6288 is denied. 

Because we uphold the termination for default, JTD’s claim for damages based on an improper termination for default is unfounded.  The appeal in PSBCA No. 6388 is denied. 

Because the Postal Service did not prove that it acted reasonably to minimize excess reprocurement costs, we deny the Postal Service’s claim.  The appeal in PSBCA No. 6510 is sustained.

Peter F. Pontzer
Administrative Judge
Board Member

I concur:

Gary E. Shapiro
Administrative Chairman

Alan R. Caramella
Administrative Judge
Board Member
 

1 At the request of the parties, these appeals are being decided on the written record, without an oral hearing, in accordance with the Board’s Rules of Practice.  See 39 C.F.R. § 955.12. 

2 Citations to the appeal file are cited as “AF.”  Citations to the Joint Stipulations are cited as “Stip.”  Citations to the first supplemental appeal file are cited as “1st Supp. AF.”  Citations to the second supplemental appeal file are cited as “2nd Supp. AF.”

3 Trip A-1, which was scheduled to begin at 11:30 p.m. on that date, was scheduled to deliver its mail at 1:50 a.m. on August 22, the first official day of contract performance (see Finding 6, above) (AF Tab 7 at 37).

4 Certified by letter dated May 2, 2011 (1st Supp. AF Tab 1).

5 JTD did not submit evidence or file a brief.  Its positions have been gleaned from its Complaint and the letter described in Finding 15.

6 We do not address whether the Postal Service met the first two elements of the test.