Appeals of

ANDREW M. JOHNSON

Under Contract No. HCR 99332

PSBCA Nos. 5175, 5210 and 5242

APPEARANCE FOR APPELLANT:
George R. Guinn, Esq.

APPEARANCE FOR RESPONDENT:
Stephen D. Lobaugh, Esq.
Office of the General Counsel
United States Postal Service

OPINION OF THE BOARD

            Appellant, Andrew M. Johnson, has appealed from three final decisions of the contracting officer in connection with his contract with Respondent, United States Postal Service, for the delivery of mail on a route originating at the Pasco, Washington, Processing and Distribution Facility.  The final decisions appealed from were two decisions terminating his contract for default and assessing excess reprocurement costs, and a third decision denying his monetary claim, which was in the amount of $108,000.  In this proceeding, only entitlement is at issue with respect to Appellant’s monetary claim, while both entitlement and quantum are at issue with respect to Respondent’s excess reprocurement cost claim (Hearing Transcript, page (Tr.) 5).  A hearing was held in Pasco, Washington.

FINDINGS OF FACT

            1.  On or about July 17, 2002, Appellant’s contract, HCR 99332, was renewed for the period of July 1, 2002, through June 30, 2006, at an annual rate of $36,000.  The contract required Appellant to case (sort) and deliver mail on a daily (except Sundays and Holidays) basis, along a route originating at Respondent’s Pasco, Washington, Processing and Distribution Facility (P&DF).  The contract designated the Plant Manager of the P&DF (who was also the postmaster for Pasco) as the Administrative Official.  The Administrative Official had the responsibility for handling day-to-day supervisory duties over contractors, but did not have authority to amend the contract.  The Plant Manager had the authority to delegate the Administrative Official duties to someone else at the facility.  (Trial Notebook,[1] Tab (TN) 1; Tr. 18, 29, 31).

            2.  Contract clause B.5, “Screening/Identification Requirements,” required the contractor to complete and submit to the Administrative Official, for each employee who had mail handling responsibilities, a Form 2025 (Contract Personnel Questionnaire), an FD-258 (Fingerprint Card), and, for any employee hired as a driver, a driving record for the previous five years.  The contract provided that the Administrative Official would issue a temporary identification badge, pending the completion of the “screening procedure.”  Upon satisfactory completion of that process, a permanent badge was to be issued.  If the results of the screening were unsatisfactory, privileges granted the employee would be revoked.  (TN 1).

            3.  Under the contract’s “Termination for Default” and “Events of Default” clauses, the contracting officer had the authority to terminate the contract for the contractor’s failure to perform service according to the terms of the contract (TN 1, clauses H.4, H.5).

            4.  Under the contract’s “Claims and Disputes” clause, Appellant was required to “proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under the contract ….”  The definition of “claim” in the clause includes disputes over assertions by either party related to contract interpretation.  (TN 1, clause H.2).

            5.  Under the contract’s “General Requirements and Prohibitions” clause, Appellant was required to “deny access to the mail to any employees or personnel when required to do so by the contracting officer.”  (TN 1, clause B.3.h).

            6.  In October 2002, the Postal Inspection Service took over the responsibility for screening drivers (Stipulation, paragraph (Stip.) 4).

            7.  Appellant employed two substitute drivers, and at some time prior to May 2003, he submitted the documents required by clause B.5 (Finding 2) to a Supervisor of Customer Services (“Supervisor”), who had been designated by the head of the P&DF to act as Administrative Official for Appellant’s contract.  The Supervisor then issued temporary identification badges to the two employees.  (Stip. 2; Tr. 75, 96, 108, 120, 190, 243; TN 29).

            8.  On May 12, 2003, the Supervisor received the original screening documents for both drivers back from the Inspection Service, along with a cover sheet indicating that a PS Form 2181-C (“Authorization and Release – Background Investigation”) was required for each driver.  Form 2181-C authorized third parties to disclose to Postal Service officials information regarding the applicant’s “fitness and suitability to perform services under contract with the USPS.”  Form 2181-C was not among the forms expressly required to be submitted by Appellant under clause B.5 of his contract (Finding 2).  (Stip. 5, 6; TN 1, 18, 19, 27, 28).

            9.  On May 12, 2003, the Supervisor approached Appellant at his case – where mail was sorted prior to delivery – and directed him to fill out Forms 2181-C for his two employees.  Appellant declined to fill out the forms, stating that Form 2181-C was not part of his contract.  (Stip. 7).

            10.  On the same date, the Supervisor drafted a letter to Appellant reiterating that the applications for his employees had been returned by the Inspection Service and that certain additional information needed to be submitted.  The letter advised Appellant that his two employees would “not be allowed on postal premises until our office has received official clearance from the Postal Inspection Service.”  The Supervisor left the letter at Appellant’s case, along with the original paperwork that had been returned by the Inspection Service and the Inspection Service cover sheet indicating what additional information was needed.  The Supervisor also completely filled out a blank Form 2181-C for each employee, leaving open only the signature and date blocks, and left them at Appellant’s case with the letter.  (Stip. 8; TN 4, 18, 19, 27, 28; Tr. 77, 78, 200, 208).

            11.  On May 14, 2003, the Supervisor, along with the Pasco Postmaster, again informed Appellant that the screening documentation for his two drivers was incomplete and ordered Appellant to complete a Form 2181-C for each driver.  Appellant again refused on the basis that the forms were not required by his contract and that they were redundant.  On the same date, Appellant also delivered a letter to the Supervisor, which letter he intended to be a response to her letter of May 12, 2003.  In the letter Appellant stated that he believed his drivers had the ability to perform, were trustworthy and reliable, and were not barred by law or Postal Service regulation from performing duties in his absence.  Appellant also stated that he saw no reason why his drivers had not received permanent clearance, and indicated that he would await a response.  (Stip. 9-11; TN 5; Tr. 208-213).

            12.  On May 15, 2003, the Supervisor again instructed Appellant to fill out the Forms 2181-C.  Appellant again declined to do so.  (Stip. 12).

            13.  On the morning of May 16, 2003, the Supervisor approached Appellant’s case, where one of his substitute drivers was working, and directed the driver to relinquish her temporary identification badge, stating that she was not cleared to be on the premises, and directed the driver to leave the premises.  At that point, Appellant returned to the case from elsewhere in the building and confronted the Supervisor.  A heated exchange ensued, during which the Supervisor advised Appellant that his driver had to return her badge and leave the premises, or the signed paperwork (including the Form 2181-C) would have to be turned in.  Appellant advised the Supervisor that he did not recognize her authority to make that demand, and that she should put it in writing.  Shortly thereafter the Supervisor left the area to seek guidance from the postmaster.  At the postmaster’s direction, the Supervisor returned to Appellant’s location, accompanied by another supervisor, to renew her demand that the substitute driver turn in her badge and leave the premises if the Supervisor didn’t get the signed paperwork.  The second supervisor stayed about 20 feet from the case, while the first supervisor renewed her discussion with Appellant.  The discussion between the Supervisor and Appellant again became heated, with the two only inches apart.  After a short amount of conversation, Appellant bumped the Supervisor, with his shoulder or chest contacting her upper chest.  The two immediately stepped back and no further physical contact took place.  (Stip. 14; Tr. 79-86, 89, 91, 93, 98, 129-134, 163-164, 168-169, 183-184; contra Tr. 136, 219, 225, 244).

            14.  Following this incident, the Supervisor again left the area and consulted with the postmaster, who returned with the Supervisor and directed Appellant to leave the premises and not return.  Appellant complied with the postmaster’s direction.  (Stip. 15; Tr. 85-86, 119, 222).

            15.  Shortly after the incident, a Postal Service Threat Assessment Team, headed by the Manager, EEO Dispute Resolution, for the Spokane District Office, conducted an evaluation of the incident, based on statements (written and oral) from the supervisors involved, a statement from a former supervisor, and a statement from another contractor.  Appellant declined to speak to the Threat Assessment Team when invited, but did write a letter to the contracting officer explaining his position.  In a report dated May 21, 2003, the Threat Assessment Team concluded that there had been contact between Appellant and the Supervisor, initiated by Appellant.[2]  (TN 6).

            16.  When faced with this type of incident it was the contracting officer’s practice to deny the contractor access to the facility while the Threat Assessment Team performed its fact finding efforts, and to compensate the contractor if the allegation was not confirmed.  By letter dated May 22, 2003, the contracting officer briefly reviewed the events since May 16, and advised Appellant that his removal from the facility on May 16 did not relieve him from the obligation to comply with his contract.  The contracting officer directed Appellant to restore service by May 24, 2003, or face the possible default termination of his contract.  The contracting officer gave the same message to Appellant by telephone, suggesting that Appellant might continue service by use of a hired driver and suggested that Appellant contact other contractors to seek help in finding a qualified driver.  (Stip. 16; Tr. 22, 52; TN 7).

            17.  Shortly after receiving the contracting officer’s May 22 letter, Appellant returned to the P&DF and attempted to resume service.  After reentering the facility, Appellant was confronted by the Postal Service Supervisor and the postmaster, who had Appellant escorted off the premises by the police.  Thereafter, the contracting officer told Appellant not to go back onto the Postal Service premises.  Appellant made no further attempts to return to the facility, and there is no evidence Appellant made any further attempts to resume performance of the contract.  (Tr. 56, 106, 223-224; TN 8).

            18.  In a May 27, 2003 letter to the contracting officer, Appellant explained his version of his attempt to resume service, and complained that he had been directed by the contracting officer to resume service but was prevented from doing so when he reentered the facility.  Appellant stated that he awaited further instructions from the contracting officer, and pronounced himself “ready, willing, and able to perform.”  (TN 8).

            19.  By final decision dated July 14, 2003, the contracting officer terminated Appellant’s contract for default, effective May 16, 2003.  In the letter, the contracting officer mentioned the incident involving the Supervisor, but cited Appellant’s failure to provide service on his route after May 16 as the basis for the termination.  (Stip. 17; TN 14; Tr. 23, 53-55, 59, 64, 65, 68).  Appellant filed a timely appeal of the final decision, which appeal was docketed as PSBCA No. 5175.[3]

Appellant’s Claim

            20.  By letter dated May 19, 2004, Appellant filed a certified claim with the contracting officer seeking the recovery of at least $108,000.  Appellant demanded the payment of three years of payments under his contract, at $36,000 per year.  In addition, Appellant demanded payments, unspecified in amount, for three years of “[g]asoline at market rates” and three years of “[i]nterest at the statutory rate.”  (TN 16).

            21.  By final decision dated July 8, 2004, the contracting officer denied Appellant’s claim in its entirety, based on the fact that the contract had been terminated for default.  Appellant filed a timely appeal,[4] which appeal was docketed as PSBCA No. 5210.

Reprocurement

            22.  From May 17 through May 23, 2003, Appellant’s route was covered by a Postal Service rural route carrier.  Respondent incurred total costs of $1,032.57 for office and street time, training of a replacement carrier by the Pasco Postmaster and the rural carrier, and mileage charges for the rural carrier’s vehicle.  (Form HC181, attached to the contracting officer’s final decision dated October 28, 2004 (“HC181”); Tr. 23, 72).

            23.  For the period of May 24 through November 14, 2003, the route was operated under an emergency contract.  The contract rate for the emergency contract was lower than the rate for Appellant’s contract.  (HC181; Tr. 24).

            24.  During the period the emergency contract was in effect, Respondent issued a solicitation seeking a permanent replacement contract.  Respondent sent out 48 solicitation packages in response to requests, but received only one offer.  Respondent awarded a replacement contract, for the same service as was required by Appellant’s contract, at a rate of $50,224.68 per annum.  (Tr. 25, 26; HC181).

            25.  In a final decision dated October 28, 2004, the contracting officer demanded the payment of $35,118.22 in excess reprocurement costs.  Included in that sum was the $1,032.57 incurred for the period of May 17 through May 23, 2003 (Finding 22), plus $34,187.54 representing the excess cost under the replacement contract for the period of November 15, 2003, through June 30, 2006.  Appellant was credited with the amount of $101.89, which represented money otherwise owed Appellant for services rendered but not paid for at the time of the default termination of his contract.  (Tr. 23-27; HC181).  Appellant filed a timely appeal of that final decision, which appeal was docketed as PSBCA No. 5242.

DECISION

Termination (PSBCA No. 5175)

            Respondent has the initial burden of proving that the default termination was justified by Appellant’s failure to perform in accordance with the contract.  Linda Copman, PSBCA Nos. 4889, 4903, 03-2 BCA ¶ 32,342; Charli Selsa Schiver d/b/a NGX-Schiver, PSBCA No. 4545, 02-2 BCA ¶ 31,937.  Respondent cites three grounds in support of the contracting officer’s decision to terminate Appellant’s contract.  First, Respondent argues that Appellant failed to provide service on his route through a substitute driver after he was banned from the Pasco facility.  Second, Respondent argues that Appellant breached his contract by intentionally shoving the supervisor in violation of the Postal Service’s policy of zero tolerance for violence in the workplace.  Finally, Respondent contends that Appellant breached his contract by virtue of an insubordinate attitude toward Postal Service managers and his consistent refusal to follow their instructions.

            With regard to its first argument, Respondent has demonstrated, and Appellant concedes, that Appellant failed to provide service under his contract at any time after May 16, 2003.  This failure is a sufficient basis to sustain a default termination, and shifts the burden to Appellant to present evidence of causes sufficient to excuse his failure to perform, Pamela J. Sutton, PSBCA No. 1622, 88-3 BCA ¶ 21,031 at 106,237, 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 primarily argues that his failure to perform is excused by the fact that he and his substitute drivers were unreasonably excluded from the Pasco facility by Respondent’s personnel, and that Respondent thereby materially breached the implied duties to cooperate and not to interfere with Appellant’s performance.  Appellant also contends that Respondent breached the implied duty of good faith and fair dealing when its supervisor and postmaster demanded that Appellant provide documents not required by his contract – i.e., the Forms 2181-C.  Appellant also argues that the demand by Respondent’s personnel that the forms be filled out and submitted constituted a constructive change to the contract.

            The Board is not persuaded by the evidence or Appellant’s arguments that Appellant’s failure to provide service under the contract after May 16, 2003, was excusable or that the termination for default represented an abuse of the contracting officer’s discretion.  Having been advised that there had been a physical confrontation between Appellant and a Postal Service supervisor at the Pasco facility, it was not unreasonable for the contracting officer to confirm the temporary denial of Appellant’s access to the facility while the Threat Assessment Team conducted its evaluation.  Under these circumstances, the contracting officer was also correct in informing Appellant that it was still his obligation to provide service under the contract by, for example, using hired drivers.  See Benjamin Mullins, PSBCA Nos. 5136, 5173, 05-1 BCA ¶ 32,918; Peter A. Sobiecki d/b/a Roadmax, PSBCA Nos. 4901, 4940, 04-1 BCA ¶ 32,600.

            Except for Appellant’s single attempt to return to the facility himself and resume servicing the route (Finding 17), there is no evidence he made any attempt to continue service.  As in Mullins, Appellant has not shown that he could not have continued operations through the use of substitutes.  Appellant argues that both he and his substitutes had been ordered from the facility on May 16, 2003.  While that is true, Appellant’s substitutes – or at least the one working that morning – had been directed to leave the facility only because Appellant had refused to have them sign the Forms 2181-C.  Notwithstanding the wording of the Supervisor’s earlier letter (Finding 10), during her discussions with Appellant on May 16, 2003, the Supervisor directed Appellant’s substitute to turn in her badge and leave the facility only if the signed Form 2181-C was not turned in.  There is no evidence that had the substitutes returned with signed forms after May 16, they would not have been allowed to perform the contract duties using their already issued temporary identification badges.  There is also no evidence that Appellant made any attempt to contact other contractors to locate other drivers who already had clearances, as the contracting officer had suggested.

            Appellant argues that the contract did not require him to submit Forms 2181‑C for his substitute drivers and that the direction by Respondent’s Administrative Official that he do so constituted an impermissible attempt to unilaterally modify the contract.  We need not decide whether Appellant was required to submit the Forms 2181-C, since, absent circumstances such as a material breach, under the wording of the Claims and Disputes clause he was required to proceed with performance of the contract while his “claim” was being resolved (Finding 4).  Aero Products Co., ASBCA No. 44030, 93-2 BCA ¶ 25,868.   Respondent’s demand that Appellant submit the disputed forms, even if incorrect under the contract (an issue we do not decide), did not constitute a material breach.  Satisfying Respondent’s demand to have the forms signed was a minor matter that would have taken, at most, minutes to satisfy, and would not have interfered in any material way with Appellant’s performance of his contract.  Therefore, the demand that Appellant provide signed forms did not serve to excuse his failure to continue performance.

            Further, under these facts, Respondent’s actions did not breach its duty of good faith and fair dealing and the related duties to cooperate and not hinder Appellant’s performance.  Whether there has been a breach of those duties is to be assessed under a reasonableness standard and depends upon “the particular contract, its context, and its surrounding circumstances.”  See, e.g., Tecom, Inc. v. United States, 66 Fed. Cl. 736, 770 (2005), citing Commerce International Co. v. United States, 338 F.2d 81, 167 Ct. Cl. 529, 536 (1964).  As noted above, the Board

does not consider Respondent’s actions with regard to Appellant to have been unreasonable, given the report of a physical confrontation.  With regard to Appellant’s substitutes, the temporary badges were usable by Appellant’s employees pending the outcome of the screening process.  Once Appellant precluded the satisfactory outcome of that process by refusing to have his substitute sign the Form 2181-C, based only on his contention that the form was not required by his contract, it was not unreasonable for the Supervisor to retrieve the temporary badge and direct Appellant’s substitute to leave the premises.  Therefore, contrary to Appellant’s argument, Respondent’s denial of access to Appellant and to his substitutes did not breach the implied contractual duties.

            Accordingly, because Appellant has failed to demonstrate an excusable basis for his failure to continue service under his contract, the termination for default was proper, and Appellant’s appeal in PSBCA No. 5175 is denied.[5]

Appellant’s Claim (PSBCA No. 5210)

            In his claim, Appellant demanded the payment of damages for Respondent’s alleged breach of its implied duties under the contract.  Inasmuch as the Board has concluded that Respondent’s actions did not constitute a breach of contract, there is no basis for the payment of damages to Appellant, and his appeal in PSBCA No. 5210 is denied.

Reprocurement Assessment (PSBCA No. 5242)

            To recover its excess costs of providing service after terminating Appellant's contract, Respondent has the burden of demonstrating that the reprocured services were the same as, or similar to, those involved in Appellant's contract and that

Respondent acted reasonably to minimize the excess costs incurred.  See Linda Copman, PSBCA Nos. 4889, 4903, 03-2 BCA ¶ 32,342, citing Cascade Pacific International v. United States, 773 F.2d 287, 293 (Fed. Cir. 1985); Don Wasylk d/b/a Klysaw, PSBCA Nos. 4186, 4283, 00-1 BCA ¶ 30,844.

            Respondent has demonstrated that the service it reprocured following the termination of Appellant’s contract was the same as the service required under the terminated contract, and has explained the process it followed in the reprocurement.  Appellant has not argued that the process Respondent followed was deficient, and has not questioned the quantum of the proposed recovery by Respondent.  Appellant argues only that he should not be required to pay any damages because the termination was improper due to Respondent’s actions – a position the Board has rejected.

            Accordingly, Respondent may recover the amount it has demanded in excess reprocurement costs, and Appellant’s appeal in PSBCA No. 5242 is denied.[6]  However, because at the time of the hearing in these appeals, the contract period had not yet run, recovery is contingent on Respondent providing evidence that it has actually paid to the reprocurement contractor the amounts it claims.  Rellen H. Clark, PSBCA Nos. 4096, 4097, 99-1 BCA ¶ 30,210, and cases cited therein.

David I. Brochstein
Administrative Judge
Vice Chairman

I concur:                                                                      I concur:         
William A. Campbell                                                 Norman D. Menegat
Administrative Judge                                                Administrative Judge
Chairman                                                                   Board Member

[1]   The Appeal File and the parties’ hearing exhibits were incorporated into a single volume, entitled “Trial Notebook.”  The original Appeal File documents were incorporated as Trial Notebook Tabs (“TN”) 1-16, Respondent’s exhibits were incorporated as TN 17-21, and Appellant’s exhibits as TN 22-31.  The Trial Notebook also contained, at Tab 32, what is apparently the transcript of a deposition taken of Appellant on April 13, 2005.  That transcript was not entered into evidence, and has not been considered in deciding these appeals.

[2]  Although the contracting officer apparently faxed Appellant’s letter to the Threat Assessment Team, as of the time the team issued its report, it had not received the letter (TN 6, 7, 30).

[3]   For reasons unexplained in the record, Appellant’s notice of appeal was not forwarded to the Board until July 2004.

[4]   Although there is no record of a separate notice of appeal from the contracting officer’s final decision, the Board concluded that Appellant’s Complaint in PSBCA No. 5175, which was filed on August 13, 2004, and sought the same recovery as Appellant’s claim, sufficed as a notice of appeal from the contracting officer’s July 8, 2004 final decision (Order of November 4, 2004).  See Auburn Flying Service, PSBCA Nos. 1509, 1510, 86-3 BCA ¶ 19,273; Chemical Technology, Inc., ASBCA No. 22325, 80‑1 BCA ¶ 14,424 at 71,093.  

[5]   Because of this resolution, we do not address Respondent’s other arguments in support of the termination.

[6]   If not already included in the calculation, Appellant is entitled to a credit for the amount saved by Respondent under the emergency contract and a credit for the amount that would have been paid to him under his contract for the period during which the rural carrier was providing service (see Findings 22, 23).  Richard A. Ferrara, PSBCA Nos. 4286, 4301, 00-1 BCA ¶ 30,847; Werner Lembke d/b/a Lembke Trucking, PSBCA No. 3875, 98-2 BCA ¶ 29,999.  It is not clear from the Form HC181 that these credits have been figured into the amount demanded.