Appeal of

TNH ENTERPRISES, INC.
Under Contract Nos. HCR 89014, 89042 and 89044
PSBCA  No. 4044

APPEARANCE FOR APPELLANT:
Bruce A. Spanner, Esq.
Miller, Mertens & Spanner
1319 Lee Blvd.
Richland, WA  99352-4191

APEARANCE FOR RESPONDENT:
Robert E. O'Connell, Esq.
San Francisco Office
United States Postal Service
577 Airport Blvd., Suite 200
Burlingame, CA  94010-2040

OPINION OF THE BOARD

            Appellant, TNH Enterprises, Inc., has filed a timely appeal of the contracting officer’s final decision denying its claims for an economic price adjustment to its contracts with Respondent, United States Postal Service.  Appellant claims it is entitled to the price adjustment because of the decision by Las Vegas Postal Service officials to prohibit highway transportation contractors from parking their vehicles at the postal facility when not in use.  A hearing^[1] was held in Las Vegas, Nevada on September 30, 1997.  Both entitlement and quantum^[2] are at issue in this appeal.  By stipulation made at the hearing, Appellant withdrew its claim for an economic adjustment under HCR 89042, leaving for disposition in this appeal its claims under HCRs 89014 and 89044.

FINDINGS OF FACT

            1.  Appellant has performed mail transportation services for Respondent under Contract No. HCR 89044 since some time prior to 1987. (Transcript pages (Tr.) 56, 57). 

            2.  Until June 1987, the “head out” point for contract No. HCR 89044 was the Las Vegas General Mail Facility (GMF), located behind the Circus Circus hotel.  The Postal Service allowed highway transportation contractors, including Appellant, to park their trucks at this facility while not in use.  (Joint Stipulation (Stip.)).

            3.  In June 1987, the head out point for HCR 89044 was changed to the Las Vegas Processing & Distribution Center (P&DC).  This change in head out point was accomplished by a negotiated service change to the contract.  (Tr. 58; Stip.).

            4.  Appellant, as well as the other highway transportation contractors affected by the change in head out point, were informed at the time of the change that they could park their trucks at the Las Vegas P&DC when not in use.  (Tr. 116-119; Stip.).

            5.  Since parking was to be provided at the Las Vegas P&DC, Appellant did not include off-site parking costs in the negotiated service change (Tr. 58).

            6.  HCR 89014 was entered into between Respondent and Appellant in July 1987, as a split from HCR 89044 (Stip.).

            7.  HCR 89014 and HCR 89044 were renewed by Respondent, effective July 1, 1995, for a four year term (Appeal File Tab Nos. (AF) HCR 89014-13, HCR 89044-8).  In renewing these contracts, Appellant had not included costs associated with parking its vehicles off-site when not in use (Stip.).

            8.  Paragraph 18C of each renewal contract  (PS Form 7447), stated,  “[t]he contract rate must include all elements of cost the contractor expects to incur in performing the service.”  (AF HCR 89014-13, HCR 89044-8).

            9.  Each renewal contract also included Basic Surface Transportation Service Contract General Provisions (PS Form 7407, July 1992), which at clause 11 ADJUSTMENT OF COMPENSATION, provided that the contract’s “compensation may be adjusted by mutual agreement of the Contracting Officer and the Contractor in accordance with the provisions of this clause and the Management Instruction Governing Adjustments . . . which is hereby incorporated by reference.”  (AF HCR 89014-15, HCR 89044-11).

            10.  The applicable Management Instruction, PO-530-89-09, Economic Pay Adjustments For Advertised Highway and Inland Domestic Waters Contracts (11/03/89), provided a general policy that allowed “adjustments in the rate of compensation when changed economic conditions or operational requirements occur over which the contractor has little or no control, subject to the provisions of this instruction.”  The Management Instruction also provided, as a limitation, that “cost increases for items that were omitted in the original or renewal cost statement” are non-allowable increases.  (Respondent’s Supplemental Appeal File Tab No. (RSAF) 1).

            11.  From the time of the change in head out point to the Las Vegas P&DC in June of 1987, until August 8, 1996, Appellant parked its trucks at the P&DC when not in use (Tr. 59; Stip.).

            12.  As early as June 1995, (and before Appellant renewed the subject contracts), the contracting officer was aware that highway transportation contractors were permitted to park their vehicles at the Las Vegas P&DC when not in use and that, because of increased congestion, on-site parking might be eliminated in the future (Tr. 148).

            13.  By memorandum dated July 5, 1996, the contracting officer informed Appellant, as well as all other highway transportation contractors at the Las Vegas P&DC, that effective August 8, 1996, they could no longer park their trucks at the facility when not in use (AF HCR 89014-9A, HCR 89044-5A).

            14.  Appellant had no control over the change in policy concerning on-site parking.  Moreover, prior to the issuance of the memorandum on July 5, 1996, Appellant was not given any notice of the change of the on-site parking policy.  (Tr. 72, 161).

            15.  Beginning August 8, 1996, Appellant began parking the truck used in HCR 89044 at its parking facilities, which is 13.5 miles and 20 to 30 minutes (depending on the time of day) away from the Las Vegas P&DC.  This truck made two round trips each day to and from the Las Vegas P&DC.  (Tr. 103, 104).  Appellant investigated, but could not find any off-site parking at a closer location (Tr. 83-85).

            16.  Two vehicles were used by Appellant under HCR 89014.  After being ordered to park off-site, Appellant initially parked both trucks at its own parking facilities.  Later, however, Appellant allowed its drivers to park the trucks at their own residences.  One driver resided 13.5 miles from the Las Vegas P&DC and made one 27 mile round-trip each day of contract operation.  (Tr. 64-66).  The second vehicle was parked at the residence of its driver, at a location 2.9 miles from the Las Vegas P&DC.  (Tr. 66, 67).  This truck made one round-trip each day and it took the driver 10 minutes to travel the 2.9 miles.^[3]

            17.  On August 14, 1996, Appellant submitted a claim under HCR 89044 for the increased costs resulting from not being able to park its trucks on-site (AF HCR 89044-4).

            18.  On August 26, 1996, Appellant submitted a claim under HCR 89014, for the increased costs resulting from not being able to park its trucks on-site (AF HCR 89014-8).  These costs included increased wages incurred as a result of its drivers traveling to and from the P&DC from its off-site parking location, additional vehicle operational costs and parking rental costs (Stip.).

            19.  By final decision dated October 28, 1996, the contracting officer denied Appellant’s claims under both contracts (AF HCR 89014-5, HCR 89044-3).

            20.  On January 14, 1997, Appellant filed a timely appeal of the contracting officer’s decisions under HCR 89014 and HCR 89044 (AF HCR 89014-2, HCR 89044-2).

DECISION

Entitlement    

            Appellant argues that it is entitled to an economic price adjustment of its contracts because the change in parking policy was a “changed economic condition or operational requirement,” as defined in Management Instruction PO-530-89-09, over which it had no control.  Appellant argues that it was not aware of any impending changes in the on-site parking policy at the time of renewing its contracts in July 1995, and did not, and should not have, included any costs related to having to park off-site in its renewal bids.  Appellant further argues that it detrimentally relied on the assurances of Postal Service officials in 1987 that on-site parking would be available at the Las Vegas P&DC.  This reliance, Appellant further argues, was reinforced by being allowed to continue to have on-site parking for over nine years after the move from the “Circus Circus” GMF.          

            Respondent argues that since the contracts involved in this appeal do not require the Postal Service to provide parking, Appellant is not entitled to compensation for being denied the right to park on-site.  Respondent further argues that it was unreasonable for Appellant to continue to rely on the Postal Service allowing on-site parking because they had not received any assurance from the contracting officer that on-site parking would continue to be provided.  Respondent points out that an economic adjustment to the contract is not allowed by the Management Instruction for bid errors or omissions from costs statements (see Finding of Fact No. (FOF) 10), and argues that allowing recovery would adversely impact the competitive bidding process.

            We find no merit to Respondent’s argument that Appellant should not have relied on the continued availability of on-site parking when submitting its cost statements for contract renewals.  Moreover, as explained below, we conclude that the availability of on-site parking at the Las Vegas P&DC became an implied condition of Appellant's contracts.

            Since at least 1987, both at the “Circus Circus” GMF and at the Las Vegas P&DC (including at the time of the most recent contract renewal in 1995), Respondent's local officials allowed Appellant to park its contract vehicles on-site when those vehicles were not in use  (FOF 1, 11).  Accordingly, when pricing contract renewals in 1995, Appellant did not expect to incur costs related to parking off-site and it properly did not include these costs  (FOF 7).

            However, at least as early as June 1995, and prior to the time of Respondent's most recent renewals of the subject contracts, Respondent’s contracting officer was aware that Appellant was provided on-site parking (FOF 12).  Although the contracting officer was also aware that on-site parking might be eliminated in the future, he accepted Appellant's renewal contract cost statements that omitted parking related costs without advising Appellant concerning the uncertainty of on-site parking in the future.  By awarding the renewal contracts without the inclusion of any costs related to parking off-site and with knowledge that on-site parking was historically provided, the contracting officer acquiesced in, and was bound by, Appellant's understanding that the contracts included the availability of on-site parking.  See Fallen Trucking Co., Inc., PSBCA Nos. 3133, 3237, 93-2 BCA ¶ 25,827 (where one party to a contract knows or has reason to know what the other intends when entering the agreement, it cannot later claim it thought something else was intended and the former is bound by the latter's intention). 

            Under these circumstances, the subsequent decision in July of 1996 to no longer allow Appellant to park on-site was a change to Appellant's contracts for which Appellant is entitled to compensation to reflect its costs related to parking off-site.

Quantum

            By stipulation, the parties have agreed to the methodology for computing quantum.  The Board is to decide only whether Appellant obtained off-site parking at a reasonable distance from the Las Vegas P&DC and what are reasonable average travel times between the Las Vegas P&DC and the various off-site parking locations used by Appellant^[4].

            Appellant conducted a search for off-site parking before concluding that parking at its own facility (for HCR 89044), which is 13.5 miles from the Las Vegas P&DC, or at its drivers’ residences (for HCR 89014), which are 2.9 and 13.5 miles, respectively, from the Las Vegas P&DC, were the most reasonable locations (FOF 15, 16).  Respondent offered no contradictory evidence and we find that the sites selected by Appellant were at reasonable distances from the Las Vegas P&DC.

            The evidence offered by Appellant established that an average travel time from the Las Vegas P&DC to its parking facility 13.5 miles away is 30 minutes per trip  (FOF 15).

            We have also found that 30 minutes per trip was a reasonable travel time for the first of the two trucks used by Appellant under HCR 89014, since this truck was similarly parked 13.5 miles from the Las Vegas P&DC.  The second truck was parked 2.9 miles away from the P&DC and we have found 10 minutes was a reasonable one-way trip time from this location.  (FOF 16).

            We conclude, therefore, that a distance of 13.5 miles and a time of 30 minutes per trip and 2.9 miles and 10 minutes per trip, are to be used in the stipulated methodology to determine the adjustment to be made to contracts HCR 89014 and HCR 89044.

            Accordingly, this appeal is sustained. 

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]  The hearing in this appeal was consolidated with the hearing in PSBCA No. 4045 and PSBCA No. 4048.

[2]  The parties have entered into a stipulation as to the methodology for computing quantum.  However, the Board is asked to make findings with respect to the mileage to the off-site parking facilities obtained by Appellant and the time necessary to travel from the off-site parking location to the Las Vegas Processing & Distribution Center.  (Transcript  pages (Tr.) 108-114; Joint Stipulation).

[3]  The only evidence in the record concerning the travel time of the second driver on HCR 89014 is that the driver parks the vehicle at his home in a residential area at a distance of 2.9 miles from the Las Vegas P&DC.  We have concluded from this limited evidence that an average speed of 15 to 20 miles per hour, including stops and starts, is a reasonable speed for traveling 2.9 miles through a residential area.  At this speed, 10 minutes per one-way trip approximates the average time for the trip from this location. 

[4]  Respondent argues in its brief, notwithstanding the agreed upon stipulation, that any compensation recovered by Appellant should be limited to two-thirds of the amount which would otherwise be determined from the agreed upon methodology.  Respondent bases this argument on the fact that another highway transportation contractor at a San Jose, California Postal Service facility, who was granted a contract adjustment in 1976 because of being denied on-site parking, was limited to two-thirds of the costs resulting from being denied parking.  (Appellant's Exhibit 1).

However, the details of the negotiation 20 years earlier that resulted in a two-thirds recovery by another contractor at a different facility are not in the record of this appeal.  Moreover, the parties to this appeal have already stipulated to the manner in which compensation will be determined, should entitlement be found.  Accordingly, we find no merit to this argument.