Appeal of
ARTHUR L. JOHNSON
Under Contract No. HCR 18270
PSBCA No. 3894

APPEARANCE FOR APPELLANT:
Arthur L. Johnson

APPEARANCE FOR RESPONDENT:
Linda S. Stewart, Esq.

OPINION OF THE BOARD

            Appellant, Arthur Johnson, has filed a timely appeal of the decision of the contracting officer to terminate for default his mail transportation service contract with Respondent, the United States Postal Service.  The parties have elected to submit this appeal on the record in accordance with 39 C.F.R. §955.12.

FINDINGS OF FACT

            1.  On May 19, 1995, Appellant was awarded Contract No. HCR 18270, at an annual rate of $23,377.00^[1], for the transportation and box delivery of mail between Albrightsville and Indian Mountain Lakes, Pennsylvania.  As part of the delivery service, Appellant was required to also case and load the mail into his vehicle.  The contract term began on July 1, 1995 and was to continue until March 31, 1999.  (Appeal File Tab (AF) 7).

            2.  The contract included Basic Surface Transportation Services Contract General Provisions, Postal Service Form 7407, July 1992, which in clause 4.(b)(2), SERVICE REQUIREMENTS AND PROHIBITIONS, required:

“The contractor may also be required to prepare and maintain a list of names of the customers served, arranged in alphabetical order with the box number opposite each name; accept mail addressed to customers on the route and arrange it in order of delivery, or place it in the proper individual sacks for delivery, and mark up and forward mail for customers of the route who have filed a change of address order and make appropriate entry in the list of names of customers served.”  (Id.).

            3.  Clause 16, TERMINATION BY THE POSTAL SERVICE FOR DEFAULT, permitted the Postal Service to terminate the contract for default if the contractor failed to perform according to the terms of the contract  (Id.).

            4.  Under the schedule stated in the contract, Appellant was to report to the post office each morning by 7:45 a.m. for casing of mail.  However, specification paragraph 13. B, SERVICE REQUIREMENTS, required the contractor to report in sufficient time each day to case, load and depart on schedule  (Id.).     

            5.  The Albrightsville Postmaster is the administrative postmaster for all Contract Box Delivery contracts at the Albrightsville Post Office, including Appellant’s contract.  It was the postmaster’s responsibility to train and supervise Appellant.^[2]  (Supplemental Appeal File Tab (SAF) 3).

            6.  Prior to commencement of contract performance, beginning on June 14, 1995, the Albrightsville Postmaster gave Appellant seven hours of training on how to perform the tasks required by his contract.  Subsequent to commencement of the contract, the postmaster twice accompanied Appellant while he performed his route to show him how to properly accomplish the tasks required by the contract.  (AF 6X; SAF 3).

            7.  In response to pre-award questions, Appellant stated he would employ his wife as a back-up driver.  However, after award Appellant hired another helper for his route.  The Albrightsville Postmaster provided Appellant’s employee the same training received by Appellant.  (SAF 3).

            8.  From the beginning of his contract performance, Appellant failed to properly perform his route.  The Albrightsville Postmaster, however, did not initially document Appellant’s service deficiencies (by issuing to him Contract Route Irregularity Reports (Form 5500s)).  She hoped that through “on the job” experience and her supervision, Appellant’s performance would improve.  (Id.).

            9.  Appellant’s performance did not improve.  Customer complaints regarding Appellant’s performance increased.  Thirty-three customers signed a petition complaining about poor service, while other customers wrote letters or made telephone calls to the postmaster to complain about Appellant’s service.  (AF 6A, 6D, 6E, 6H, 6W).

            10.  Prior to the commencement of Appellant’s contract, in December of 1994, the box numbers for HCR 18270 were changed.  Immediately thereafter, the casing operation was remarked to reflect the changed numbers.  However, correspondence for customers on the route continued to be received bearing the old numbers.  At the beginning of Appellant’s contract, the postmaster would routinely write the correct box number on each piece of incorrectly addressed mail.  The postmaster expected, however, (and advised Appellant of her expectations) that within a reasonable period of time, Appellant would be able to cross-reference and correct the box numbers himself.   Appellant, however, never managed to properly perform this function.  When mail requiring correction was given to Appellant for delivery, it was often left in the office.  The postmaster would then have to retrieve this mail, correct the addresses herself, and then return it to Appellant for delivery the next day.  (SAF 3).

            11.  Initially, the postmaster attempted to correct Appellant’s unsatisfactory performance by informally counseling him concerning his deficiencies (AF 6V).    However, on August 29, 1995, the postmaster requested Appellant to attend a formal counseling conference with her on September 1, 1995, to discuss his unsatisfactory contract performance.  Appellant did not respond to this request and did not attend the conference.  A second conference was scheduled for September 7, 1995, and was held as scheduled.  At this conference Appellant was advised that he must immediately restore and maintain contract service at a satisfactory level for the remainder of the contract term.  Appellant was further advised at this time that his failure to do so could result in the termination for default of his contract.  (AF 5A; SAF 3).

            12.  Appellant’s performance did not improve after this conference.  Between September 11 and September 19, 1995, Appellant was issued eight additional Form 5500s.  On September 11, Appellant misdelivered mail order prescription medication.  This was the second occurrence of misdelivery of prescription medicine to the same address in seventeen days.  Appellant did not respond to the Form 5500 issued for this irregularity.  On the same date, Appellant failed to follow office procedures on placement of outgoing mail and clearance of PS Form 3849 (parcel delivery notices (SAF 10)).  Appellant claimed that the postmaster had changed office procedures regarding the placement of outgoing mail.  (AF 4B).

            13.  On September 12, Appellant failed to follow his contract schedule, resulting in delayed delivery of mail.  Appellant’s excuse was that the volume of mail was heavy on this date.  (Id.).

            14.  On September 13, the postmaster instructed Appellant to report early (6:30 a.m.) for work to case the delayed mail from September 12.  Appellant reported at 7:45 a.m. (his usual reporting time) and failed to leave on time for his route.  In his response Appellant claimed that the postmaster merely suggested  that he report early.  (Id.).

            15.  On September 16, Appellant either misdelivered or delayed delivery of mail to fifteen addresses.  Appellant offered no excuse for this irregularity.  (Id.).

            16.  On September 18, Appellant damaged mail by forcing it into the mail delivery slot.  Appellant was also cited for arguing with the postmaster and insubordination.  Appellant disagreed that he was insubordinate, but offered no excuse for the damaged mail.  (Id.).

            17.  On September 19, Appellant failed to observe a hold order for one customer and misdelivered six pieces of mail of other customers.  Appellant claimed that the hold order, although dated September 18, was not received by him until September 19, thereby causing the failure to observe the hold order.  Appellant did not dispute the misdeliveries.  (Id.).

            18.  On September 20, 1995, the contracting officer sent Appellant a final warning letter citing the eight recently issued Form 5500s.  Appellant was warned that unless satisfactory service was restored and maintained for the duration of the contract, within three days of receipt of the warning letter, the contract may be terminated for default.  (AF 4A).

            19.  Appellant responded to the contracting officer’s warning letter on September 22, 1995, and claimed that racism was the cause of his difficulties.  Appellant alleged that he and his helper were subjected to racial slurs by the customers in the community they served and that these were the same customers who complained to the postmaster, which in turn, caused the postmaster to write up Appellant for unsatisfactory performance.  Appellant further alleged that some of his customers were sabotaging his performance by moving mail to incorrect boxes after he delivered it.  Finally, Appellant complained that the postmaster treated him and his helper in a condescending manner.  (AF 2A).

            20.  Based on Appellant’s response to the contracting officer’s warning letter, the contracting officer had the Manager of Post Office Operations, Lancaster District, conduct an investigation into the allegations raised by Appellant.  Appellant, as well as other Postal Service employees at the Albrightsville Post Office were interviewed in this investigation.  The investigator found no evidence of racism at the post office.    In fact, during his own interview, Appellant stated that he did not believe he had been subjected to racial discrimination by anyone at the Albrightsville Post Office.  He further stated that he had received adequate training and that the postmaster would try to help him correct his mistakes, but that she wanted perfection.  The investigator concluded that the allegations raised by Appellant were unfounded, at least with respect to the Albrightsville Post Office.  The investigator also found that the postmaster had not treated Appellant or his helper differently than other workers at the post office and that she had taken reasonable actions in responding to Appellant’s allegations of racial slurs by customers.  (AF 2F; SAF 2).

            21.  Between September 20, 1995, and October 3, 1995, Appellant was issued six more irregularity reports.  (AF 3).  On September 20, September 25 and October 3, Appellant failed to observe a mail hold order, misdelivered mail and delivered other mail late.  On September 21, Appellant again failed to observe a mail hold order. On September 26, Appellant caused the delayed delivery of certified mail because of a misdelivery of the certified mail notice.  On September 29, Appellant misdelivered prescription medicine for the third time and delivered the package in an open condition.  (AF 3)

            22.  Appellant alleged that “tampering” caused two of these irregularities, (the misdelivery of the prescription medicine on September 29 and the misdeliveries of mail on October 3, 1995), and that the “hold order” of September 21, was misdated by the customer (Appellant’s Addendum No. 2).  However, he did not otherwise dispute the factual content of these six irregularity reports.  In three months of contract performance Appellant had been issued a total of eighteen irregularity reports.  (AF 3, 4B, 6F, 6G, 6K, 6R).

            23.  On October 6, 1995, the contracting officer terminated Appellant’s contract for default, effective October 11, 1995, for failure to perform according to the terms of the contract  (AF 1E).  The contracting officer based this decision on his own independent review of Appellant’s file, as well as on the information furnished to him by the investigator and the Albrightsville Postmaster  (SAF 1).  By letter dated October 16, 1995, Appellant timely appealed this final decision (AF 1C).

            24.  An emergency replacement contract was subsequently awarded at an annual rate of $27,500 (SAF 1) and, on December 22, 1995, by final decision, the contracting officer assessed $1,296.45 of excess reprocurement costs against Appellant.  This amount was determined by multiplying the incrementally greater daily cost of the replacement contract ($11.30/day)^[3] times 86 days, equaling $971.45.  Added to this figure was $325.00 in administrative costs.  (SAF 1).  The replacement contractor received 6-8 hours of training and provided improved service on the route.  As of March 8, 1996, the replacement contractor had not received an irregularity report.  (SAF 1, 3).

            25.  The assessment of $1,296.45 for excess reprocurement costs was offset against funds withheld under Appellant’s contract.  Appellant received the final decision assessing excess reprocurement costs on January 2, 1996, but has not filed a written appeal of that final decision to the Board (SAF 4).

DECISION

            Respondent contends the termination for default should be sustained because of the numerous incidents of Appellant’s deficient performance of contract requirements, as documented by the evidence in the record.  Respondent further argues that Appellant did not, for the most part, provide timely responses to the Form 5500s issued to him, and that the responses he did provide did not excuse the deficiencies noted.  Finally, Respondent argues that this Board lacks jurisdiction to rule on the propriety of the assessment of excess reprocurement costs since Appellant failed to timely appeal the contracting officer’s final decision assessing such costs.

            In his Complaint, (and Addenda thereto) Appellant contests fourteen of the eighteen irregularity reports issued against his contract performance and also generally charges that the termination of his contract was generated by harassment and unfair treatment by the postmaster as well as tampering by unidentified persons and that the numerous customer complaints were generated by racism (Appellant is an African-American whose route was in a predominantly white neighborhood).  Appellant seeks reinstatement of his contract, the loss of revenue for the remainder of his four year contract, as well as the funds that were withheld by Respondent to offset excess reprocurement costs. 

 DEFAULT TERMINATION

            Respondent has the burden of proving that the default was justified, but once having done so, the burden shifts to Appellant to present evidence of excusable causes.  Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA ¶ 26,419.  Having considered all the evidence in the record of this appeal, we conclude that Respondent has met its burden of proving that the default of this contract was justified.

            The evidence establishes that, from the commencement of the contract, Appellant’s performance was unsatisfactory and remained unsatisfactory until the contract was terminated.  Numerous complaints were received by the postmaster from postal customers, including the submission of a petition, signed by thirty-three customers, concerning Appellant’s deficient performance.  (Finding of Fact Nos. (FOF) 8, 9, 10).

            In the beginning of Appellant’s performance, his deficiencies were not documented.  When they persisted, however, the postmaster began issuing Form 5500s to Appellant whenever his performance was unsatisfactory.  (FOF 8).  Initially, the postmaster informally counseled Appellant concerning his deficiencies.  However, on September 7, 1995, he received formal counseling concerning performance failures.  At this formal counseling session he was advised that unless he restored and maintained satisfactory performance, his contract may be terminated for default.  (FOF 11).  However, after the formal counseling session Appellant’s performance did not improve, as evidenced by the eight irregularity reports issued to him over the next twelve days (FOF 12).

            Appellant’s performance did not improve even after receiving a final warning letter from the contracting officer.  Between September 20, 1995, when the warning letter was issued, and October 3, 1995, Appellant received six more irregularity reports.  These six reports indicated that Appellant was repeatedly committing the same contract deficiencies.  (FOF 17).

            Respondent having demonstrated that Appellant failed to perform according to the terms of the contract, the burden shifts to Appellant to present evidence of excusable causes,  Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA ¶ 26,419 at 131,429, recon. denied 94-2 BCA ¶ 26,951; Pamela J. Sutton, PSBCA No. 1622, 88-3 BCA ¶ 21,031 at 106237, or to show that the termination was an abuse of the contracting officer’s discretion.  Jesse A. Farmer, PSBCA No. 2702, 91-3 BCA ¶ 24,181 at 120,941; Quality Environment Systems, Inc., ASBCA No. 22178, 87-3 BCA ¶ 20,060, at 101, 569.

            Appellant, for his part, has failed to establish that his unsatisfactory contract performance was excusable.  Of the eighteen Irregularity Reports he received during contract performance, he provided responses to only fourteen.  Of his fourteen responses, Appellant specifically denied only one, the charge of insubordination issued on September 18, 1995.  (FOF 13).  Although Appellant alleged that some of the irregularities were caused by “tampering”, he offered no evidence to support this charge.  Overall, Appellant’s responses to the irregularity reports he received tend to acknowledge their factual content.  (FOF 13, 17).

            Appellant’s allegations that his contract was terminated for default because of racism, harassment and unfair treatment by the postmaster are likewise unsupported by any evidence in the record.  Before he made the decision to terminate Appellant’s contract, the contracting officer had these allegations investigated by the Manager of Post Office Operations for the Lancaster District.  The investigator concluded that the charges were unfounded.  The investigator found that the postmaster had not treated Appellant or his helper differently than other workers at the post office and that the postmaster had taken reasonable actions in response to Appellant’s allegations of racial slurs by Postal Service customers.  Finally, Appellant admitted to the investigator that he did not believe he had been subjected to racial discrimination by any Postal Service employee at the Albrightsville Post Office, and that he had received adequate training.  (FOF 16).

            Based on the record of this appeal, we find that the contracting officer’s decision to terminate Appellant’s contract for default was justified and that Appellant has failed to show any excusability for his default.

EXCESS REPROCUREMENT COSTS

            In his appeal, Appellant is seeking the return of retained earnings under the contract, from which $1,296.45 was withheld to offset excess reprocurement costs  (FOF 22).  Respondent argues, however, that we lack jurisdiction to address this issue since Appellant did not timely appeal the December 22, 1995 final decision which assessed excess reprocurement costs against Appellant.  We disagree.  Having timely appealed the contracting officer’s final decision to terminate his contract for default, Appellant need not also file an appeal of the subsequent final decision in order to challenge, in this proceeding, the assessment of reprocurement costs.  Hubbard Trucking, Inc., PSBCA No. 3701, Nov. 18, 1996, slip op.; see also Dynamic Products Co. , PODBCA No. 2, Jan. 6, 1959; Tom Warr, IBCA No. 2360, 88-1 BCA ¶ 20,231; Pantronics Inc., ASBCA No. 20982, 78-2 BCA ¶ 13,285: El-Tronics Inc., ASBCA No. 5457, 61-1 BCA ¶ 2961.

            Respondent has the burden of demonstrating that: (1) the reprocured services are the same or similar as 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 incurred.  See Cascade Pacific International v. United States, 773 F.2d 287, 293 (Fed. Cir. 1985); Jim Lovett, PSBCA Nos. 3633, 3634, 95-1 BCA ¶ 27,516.  We have, however, allowed Respondent to contingently recover excess reprocurement costs, notwithstanding a failure to prove in an appeal that those costs were incurred, subject to a showing that payment under the reprocurement contract has been made.  See Bowman’s Transport Co., PSBCA Nos. 1088,1089, 1092, 84-1 BCA ¶ 17,217; Louis Brown, PSBCA No. 763, 80-2 BCA ¶ 14,577.

            Respondent issued its final decision assessing Appellant for 86 days of the excess costs of the replacement contract on December 22, 1995.  This assessment was made only 71 days after the termination for default and clearly at a point in time when Respondent could not have actually incurred all of those costs.  Thus, Respondent’s recovery of excess costs must be predicated on providing Appellant proof of having actually incurred those costs.  See Louis Brown, PSBCA No. 763, 80-2 BCA ¶ 14,577.

            While Respondent has presented little evidence to support the excess costs assessment, the record is sufficient for the Board to conclude that Respondent is entitled to recover reasonable excess costs which do not reflect a failure to mitigate damages.  J. Morizzo Transportation Corp., PSBCA No. 1108, 84-1 BCA ¶ 17,231.

            The record shows that the emergency replacement contract was awarded at an annual rate of $27,500 and that Appellant was assessed for the incrementally greater daily cost of the replacement contract as compared with the daily cost of Appellant’s contract ($11.30/day).  In addition, Appellant was assessed $325.00 of administrative costs associated with awarding the emergency contract.  (FOF 24).  The $27,500 annual amount of the emergency contract is significantly lower than the second lowest bid of $31,368.88 on the solicitation which led to Appellant’s contract (FOF 1).  We have previously recognized that an emergency replacement contract may command a higher price than its longer fixed term predecessor and that, in determining the cost of emergency service, a price differential may be allowed “to reflect the difference between the nature and circumstances of the original contract and the emergency contract.”  Id.  Accordingly, we conclude that the emergency contract, in the annual amount of $27,500, which is significantly lower than the second lowest bid on the original procurement, is a reasonable amount.  Respondent may, therefore, recover the incrementally greater daily cost of the emergency contract for the 86-day period which was assessed.  Furthermore, we have previously found that, absent any rebuttal by Appellant, it is reasonable to incur $325.00 of administrative costs in awarding an emergency replacement contract.  See Jeff Talano, PSBCA Nos. 3695, 3696, Nov. 14,1996, slip op., at 12.

CONCLUSION

            The contracting officer’s decision to terminate Appellant’s contract for default is upheld.  Furthermore, Respondent may recover excess reprocurement costs in the amount of $1,296.45, subject to the Postal Service presenting evidence to Appellant establishing that it has, in fact, paid the replacement contractor for the costs assessed.

William K. Mahn
Administrative Judge
Board Member

I concur:
James A. Cohen
Administrative Judge
Chairman

I concur:
David I. Brochstein
Administrative Judge
Vice Chairman

^[1]  Appellant’s bid was the lowest of three bids submitted.  Of the two other bids submitted, one was in the amount of $31,368.88 and the other was $66,562.06.  (Supplemental Appeal File, Tab (SAF) 9).

^[2]  Contract Specification 18. E, ADDITIONAL INFORMATION, stated that the administrative postmaster would provide three hours of route training per day for two days and the training would be equivalent to the training currently provided to rural carriers (AF 6).

^[3]  The difference between the annual rate of the emergency contract, $27,500, and Appellant’s contract, $23,377, was $4,123  (See Finding of Fact 1).