Appeal of

RICHARD A. FERRARA

Under Contract No. HCR 18063
PSBCA Nos. 4286 & 4301

APPEARANCE FOR APPELLANT:
Edward P. Shaughnessy, Esq.

APPEARANCE FOR RESPONDENT:
Kevin A. Calamoneri, Esq.

OPINION OF THE BOARD

            Respondent, United States Postal Service, terminated its mail transportation contract with Appellant, Richard Ferrara, for default.  Respondent based the termination on Appellant’s alleged failure to perform the service required by the contract and his failure to supervise the route.  Respondent subsequently asserted a claim against Appellant for its cost to obtain service after the termination.  Appellant appealed the termination and assessment of excess reprocurement costs.

            An oral hearing was held, and the parties have filed post-hearing briefs.  Both entitlement and quantum are at issue (Transcript of Hearing, page (“Tr.”) 5).

FINDINGS OF FACT

            1.  Beginning in 1993, Appellant delivered mail to customers along a route originating at the Dingman’s Ferry, Pennsylvania Post Office pursuant to a contract with Respondent.  On June 16, 1997, the parties renewed the contract for the term from July 1, 1997, to March 31, 2001, at an annual rate of $37,123.47.  (Tr. 17-18, 165, 175; Appeal File, Tab (“AF”) 8, Contract Sections 11, 12).

            2.  The contract schedule required Appellant to deliver the mail daily except Sundays and holidays, arriving at the Dingman’s Ferry Post Office at 7:20 a.m. to case the mail, departing the post office at 11:38 a.m. to deliver the route, completing deliveries at 2:33 p.m., returning to the post office at 3:08 p.m. and casing mail at the post office until 3:28 p.m.  (Tr. 21-22, 55, 90-91; AF 8, Contract Section 12).

            3.  The contract required Appellant to

“provide either personal or representative supervision over the operation of the route.  The contractor or his route supervisor must maintain a phone and be easily contacted in the event of unexpected problems on the route.”  (AF 8, Contract Section 18.A; see Contract General Provision 8, ACCOUNTABILITY OF THE CONTRACTOR (PS Form 7407 (July 1992)).

            4.  The contract authorized the contracting officer to terminate the contract for default “[f]or [Appellant’s] failure to perform service according to the terms of the contract” (AF 8, Contract General Provision 16 (a)(1), TERMINATION BY THE POSTAL SERVICE FOR DEFAULT, PS Form 7407 (July 1992)).

            5.  The contract provided that the contracting officer could release a contractor who so requests “for reasons of physical disability which will prohibit the Contractor from adequately operating the route.”  A contractor obtaining such a release waives any indemnity claim.  (AF 8, Contract General Provision 15, RELEASE OF THE CONTRACTOR, PS Form 7407 (July 1992)).

            6.  Through June 17, 1998, Appellant’s performance was considered acceptable by the postmaster, even though his actual delivery times varied depending on the volume of mail and other factors and from time-to-time Appellant finished the route later than scheduled.  Appellant had never been repeatedly late over an extended period of time.  (Tr. 55-57, 79-80, 113-114).

            7.  On June 18, 1998, without prior notice to Respondent, Appellant stopped performing the route.  He had an appointment at a Veteran’s Administration Hospital that day and was unexpectedly admitted to the hospital, where he stayed, with only brief times away, until August 14, 1998.  (Tr. 169-170, 184, 188-189).  He never personally performed the contract after June 17, and he did not contact any of Respondent’s officials thereafter regarding the route at least through August 14, 1998.  (Tr. 22-23, 26-27, 34, 38, 47, 54, 93, 96, 104, 167, 178, 182, 187, 200-202, 258-259, 273; AF 5, 6).

            8.  Appellant’s wife also held a mail delivery contract for a route administered by the Dingman’s Ferry Post Office.  Before obtaining her own route, she had occasionally substituted for Appellant on his route, and even after she began her own route, there were occasions when she, with the consent of the Dingman’s Ferry Postmaster, performed both of the routes.  (Tr. 17-19, 23, 58-60, 89, 165-166, 177, 206, 209).  The schedule in her contract required her to arrive at the post office, begin and finish deliveries on her route and return to the post office at virtually the same times as established in Appellant’s contract for his route (Tr. 132-135, 210), but she often finished her route early (Tr. 211, 230).

            9.  Ms. Ferrara performed Appellant’s route beginning June 18, 1998, through July 11.  Although she was able to perform both routes, deliveries on Appellant’s route were substantially later than scheduled in his contract because Ms. Ferrara normally began delivering Appellant’s route between 2:00 and 3:00 p.m., after completing her own (Tr. 230; Appellant’s Exhibit  (“AX”) 1).  From June 18 through July 11, she finished delivering mail on Appellant’s route after 4:00 p.m. every day but one, after 5:00 p.m. on ten or eleven days, and after 6:00 p.m. on one day.  All mail scheduled for delivery on a given day was delivered on the scheduled day, just later in the day.  (Tr. 24, 27, 29, 30, 61-63, 75-76, 79-81, 84, 95, 98, 115, 139, 149, 216-225, 233; AF 12; AX 1).

            10.  During this period, Ms. Ferrara’s late return to the post office missed the outbound mail dispatch on at least one occasion, and the postmaster received at least two oral complaints but no formal written complaints from customers on Appellant’s route regarding delivery of their mail later in the day than usual (Tr. 32, 64-66; 73-75, 117, 138-139, 149, 214, 226-228).

            11.  Delivery of the mail on Appellant’s route substantially later than scheduled was not acceptable to Respondent over the long run (Tr. 99-101, 139, 142), and sometime before July 1, Respondent’s officials advised Ms. Ferrara that Respondent intended to terminate Appellant’s contract for default as of July 11 (Tr. 68, 103, 240-241, 275-276).  Respondent decided to let Appellant’s wife continue coverage of Appellant’s route during the time (about two weeks) necessary to place an emergency service contract (Tr. 41, 141-142).

            12.  On June 26, 1998, the postmaster sent to Appellant’s post office box a Contract Route Irregularity Report, PS Form 5500 (March 1995), citing as the service irregularity appellant’s failure to perform the service or provide a substitute since June 18, 1998.  (Tr. 28, 34, 92, 121; Respondent’s Exhibit (“RX”) 1).  Appellant never picked up the Form 5500 at his box (Tr. 69-70, 171), and the postmaster made no other effort to contact Appellant directly (Tr. 35, 58).  Respondent’s contracting officials made no attempt to reach Appellant, except through contacts with Appellant’s wife (Tr. 104-105, 119-120, 154-156, 171).

            13.  At least through August 14, Appellant’s wife’s attempts to reach him were unsuccessful (Tr. 234, 264).  He was not taking her calls to him at the hospital (Tr. 193).  She told the postmaster and the transportation contracts specialist that she had not been able to get in touch with Appellant or his doctors.  At Respondent’s request, she provided a written chronology of her attempts to contact him in which she asked that Appellant’s contract be transferred to her.  (Tr. 27, 36-39, 102, 105-106, 188, 192, 233, 265-270, 273, 276-277, 279; AF 6).  Neither she nor Respondent had any idea how long Appellant would be unreachable (Tr. 280).

            14.  Appellant’s wife was willing to perform Appellant’s route, but she was concerned about getting paid for the work, and she discussed with the postmaster and the transportation contract specialist whether Respondent would pay her (Tr. 77-79, 98, 103, 110-111, 236-237; AF 6).  Respondent eventually paid her $2,596.99 for the 24 days she covered Appellant’s route.  At the slightly higher rate per mile in her contract, this was $130.53 more than Appellant would have been paid for the same period under his contract (Tr. 110, 237; AF 5, 15).  Pay was suspended under Appellant’s contract effective June 18, 1998 (Tr. 161).

            15.  By final decision dated July 10, 1998, the contracting officer terminated Appellant’s right to perform under the contract effective close of business June 17, 1998, for Appellant’s failure to perform service according to the terms of the contract, noting that Appellant had abandoned the service (Tr. 106-107, 135-138, 142-144; AF 4).  The information available to the contracting officer at that time was that the mail on Appellant’s route was being delivered about two hours later than scheduled, that Appellant was not performing his contract personally and was not reachable and that no one knew when or if Appellant intended to resume performing the contract (Tr. 142, 159).  The contracting officer was also concerned that, regardless whether customers were filing formal complaints, delivery of the mail within the schedule set forth in the contract was important to providing quality delivery service and that it was important to correct this delivery problem before formal complaints were lodged (Tr. 139).  Appellant’s August 23, 1998 appeal of that final decision was docketed as PSBCA No. 4286.

            16.  Effective July 13, 1998, the service on Appellant’s route was performed by an emergency service contractor at an annual rate of $36,500 for the term July 13, 1998, through January 6, 1999, a period of 178 days (Tr. 41, 141; RX 2, 3).  That rate, slightly lower than Appellant’s had been, produced a savings to Respondent for that period of $304.38.^[1]

            17.  In a final decision dated September 30, 1998, the contracting officer assessed excess reprocurement costs in the amount of $484.24 against Appellant (AF 13).  The excess costs consisted of $353.68 in administrative costs associated with resoliciting the emergency service (AF 16) plus $130.56, which was the difference between the amount payable under Appellant’s contract for the period his wife performed the service (June 18-July 11) and the amount Respondent paid her at her contract rate for providing the service.  (Tr. 104-110, 142-145, 161-162; AF 15, 16).  Appellant’s October 7, 1998 appeal of that final decision was docketed as PSBCA No. 4301.

DECISION

            Respondent argues that the termination for default was justified by Appellant’s abandonment of his route.  Respondent contends that Appellant, without a word to Respondent, failed to perform the route personally or by a substitute.  Additionally, Appellant failed to supervise the route and failed to be easily contacted, as required by the contract.  Therefore, Respondent argues that the termination for default was justified and that it is entitled to recover its costs of reprocuring the service as claimed in the contracting officer’s second final decision.

            Appellant argues that although he did not perform the route personally, he had previously arranged for his wife to deliver his route in his absence and Respondent had agreed to this arrangement.  Therefore, as Appellant sees it, Ms. Ferrara was performing the route on his behalf as a substitute, and the route was not abandoned.  Respondent counters this by arguing that it, not Appellant, arranged with Ms. Ferrara to perform the route on an emergency basis.  Appellant also argues that one missed dispatch and two oral complaints about late delivery do not warrant termination of the contract.  Appellant asks that the termination be converted to one for Respondent’s convenience, entitling him to an indemnity payment under the contract.

PSBCA No. 4286 – Termination for Default

            The service provided by Appellant’s wife from June 18 through July 11 did not meet the requirements of the contract.  Appellant’s contract included a specific schedule that called for Appellant to deliver the mail beginning at about noon and concluding at about 2:30 p.m. (Finding 2).  Respondent did not find occasional late deliveries objectionable when Appellant performed the route (Finding 6), but the dramatic departure from the contract schedule occurring every day that Ms. Ferrara delivered both routes with no indication when or if delivery according to the contract schedule would resume was not acceptable to Respondent (Findings 9, 10, 11).  The consistent late delivery of the route was a breach of Appellant’s contract requirements, even though no mail was left undelivered (Finding 9) and no formal, written complaints were received (Findings 9, 10, 15).  See Robert E. Davis, PSBCA No. 4154, 99-1 BCA ¶ 30,385; Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA ¶ 26,419 recon. denied 94-2 BCA ¶ 26,951.

            Therefore, even if Ms. Ferrara was delivering the route on behalf of Appellant, as his substitute, the contract requirements were not being met, and there was no assurance that the nonconforming performance would be remedied.  Appellant was in breach of his contract, and the contracting officer was justified in terminating it for default.  See Roy Decker, PSBCA No. 3816, 96-2 BCA ¶ 28,585; Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA ¶ 26,419 recon. denied 94-2 BCA ¶ 26,951.

            Appellant argues that the termination for default should be set aside because Respondent failed to provide him advance notice of the impending termination.  However, it is not apparent that Respondent’s efforts to contact Appellant would have been any more successful than his wife’s (Finding 13).  Furthermore, if Appellant had been supervising performance of the route and had been easily reachable, he would have known of the late deliveries and of Respondent’s impending termination of the contract, because his wife had been informed of it (Finding 11). ^[2]  See Roy Decker, PSBCA No. 3816, 96-2 BCA ¶ 28,585; Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA ¶ 26,419 recon. denied 94-2 BCA ¶ 26,951.

            Appellant argues that his hospitalization excused him from personally performing the contract.  While the contract does allow for the release of contractors in the event of physical disability preventing performance (Finding 5), Appellant never made a request to be released.  Furthermore, any such release would have been without the indemnity Appellant seeks in this proceeding.  (Finding 5).

            Finally, Appellant argues that Respondent’s officials reneged on an agreement they had made that if for any reason Appellant could no longer perform his route, it would be officially transferred to his wife.  Appellant failed to prove that there was such an agreement.  When Ms. Ferrara asked in the July 1 chronology that the Postal Service consider transferring Appellant’s contract to her (Finding 13), she never mentioned any agreement in place to guarantee such transfer.  Such an agreement was not mentioned in Appellant’s Complaint or in the notice of appeal.  We have not credited Appellant’s testimony that Respondent had agreed to such transfer.

            Even if we were to accept Appellant’s testimony that there were oral discussions regarding transfer of the contract to his wife, he has not alleged the participation in such conversations of the contracting officer.  Therefore, Appellant has not alleged that anyone with contracting officer authority made a commitment on behalf of the Postal Service to transfer the contract to his wife.  Respondent would not be bound by such a commitment made by its employees who do not have contracting authority.  See Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384, 68 S.Ct. 1, 3, 92 L.Ed. 10 (1947); Trauma Service Group v. United States, 104 F.2d 1321, 1325 (Fed. Cir. 1997); Jared Paul Carlson d/b/a The Roasted Coffee Bean, PSBCA No. 4006, 98-2 BCA ¶ 29,847 at n. 4.

PSBCA No. 4301 – Reprocurement Costs

            To recover excess costs of reprocurement, Respondent must demonstrate that it actually incurred costs in excess of what it would have paid Appellant for the service but for the termination and that such costs were reasonable.  See Werner Lembke d/b/a Lembke Trucking, PSBCA No. 3875, 98-2 BCA ¶ 29,999 at 148,366.  The additional payment to Appellant’s wife for performing his route through July 11 and Respondent’s administrative costs associated with procuring the emergency contract were reasonable and are recoverable by Respondent.  See Arthur L. Johnson, PSBCA No. 3894, 97-1 BCA ¶ 28,773 at 143,589.

            However, the emergency contract that became effective July 13 at a rate less than Respondent was paying Appellant resulted in a saving to Respondent of $304.38 for the 178 days of the replacement contract (Finding 16).  Appellant is entitled to a credit for the saving, see Werner Lembke d/b/a Lembke Trucking, PSBCA No. 3875, 98-2 BCA ¶ 29,999 at 148,366, and, accordingly, Respondent may recover only $179.86 in reprocurement costs.

            The appeal of PSBCA No. 4286 is denied.  The appeal of PSBCA No. 4301 is sustained insofar as Respondent’s reprocurement cost recovery is reduced to $179.86, and the appeal is otherwise denied.

Norman D. Menegat
Administrative Judge
Board Member

I concur:
James A. Cohen
Administrative Judge
Chairman

I concur:
David I. Brochstein
Administrative Judge
Vice Chairman

[1]  Appellant’s daily rate of $101.71 ($37,123.47/365=$101.71 (AF 8)) less the emergency contract daily rate of $100.00 ($36,500/365=$100.00 (RX 3)) results in a difference of $1.71 per day.  Multiplying this difference by the 178 calendar days of the emergency contract results in a saving of $304.38.

[2] Additionally, Respondent sent an irregularity notice to Appellant’s post office box identifying Appellant’s failure to perform the route or supply a substitute, but Appellant did not retrieve it (Finding 12).