Appeal of

L. P. FLEMING, JR. INC
Under Contract No. HCR 275DE
PSBCA No. 5197

APPEARANCE FOR APPELLANT:
Daniel J. Donahue, Esq.
Wickwire Gavin, P.C.

APPEARANCE FOR RESPONDENT:
Michael F. Kiely, Esq.
Office of the General Counsel
United States Postal Service

OPINION OF THE BOARD

            Appellant, L.P. Fleming, Jr. Inc., has appealed from the contracting officer’s denial of its claim for additional costs incurred in performing its contract with Respondent, United States Postal Service, for the transportation of mail by truck between Raleigh, North Carolina, Roanoke, Virginia, and Binghamton, New York.  Appellant claims increased costs allegedly incurred because of a change in the Department of Transportation regulations regarding maximum allowable driving time and minimum required rest periods for truck drivers.  Both entitlement and quantum are at issue in this proceeding.

FINDINGS OF FACT

            1.  Contract HCR 275DE was awarded to Appellant on or about July 10, 2002, for the period beginning on July 27, 2002, and ending June 30, 2006.  The contract, in the amount of $314,708 per annum, required Appellant to transport mail in both directions between Postal Service facilities in Raleigh, North Carolina and Binghamton, New York, with an intermediate stop in Roanoke, Virginia.  (Appellant’s Exhibit (AExh.) 5; Stipulation paragraphs (Stip.) 1-3)).

            2.  The contract required one trip from Raleigh to Binghamton each day except Sundays and certain holidays, and one trip from Binghamton to Raleigh each day except Mondays and the day after certain holidays.  The contract schedule for each Raleigh to Binghamton trip was as follows:

12:00 p.m.      Load at Raleigh

12:30 p.m.      Leave Raleigh

3:55 p.m.        Arrive at Roanoke

4:10 p.m.        Leave Roanoke

1:35 a.m.        Arrive at Binghamton

2:05 a.m.        Finish unloading at Binghamton

The contract schedule for each Binghamton to Raleigh trip was as follows:

9:15 a.m.        Load at Binghamton

9:45 a.m.        Leave Binghamton

7:10 p.m.        Arrive at Roanoke

7:25 p.m.        Leave Roanoke

10:50 p.m.      Arrive at Raleigh

11:20 p.m.      Finish unloading at Raleigh

(AExh. 5; Stip. 5).

            3.  The contract, as awarded, contained the following clause regarding driving time:

“B.6     SAFETY REQUIREMENTS

The supplier shall conduct its operations under this contract in full compliance with (i) the United States Department of Transportation (DOT) Motor Carrier Safety Regulations, as set out in 49 C.F.R. Parts 390-397, (ii) all other applicable federal laws and regulations, and (iii) all applicable state laws and regulations.… In addition, the supplier shall meet each and every one of the following requirements:

*     *     *

g.         Hours of Service for Drivers

Drivers will not be permitted or required to exceed the hours of ‘on duty’ and ‘driving time’ specified below:

(1)       Definitions

On duty time   -   That time from which the driver begins work or is required to be in readiness to work until the driver is relieved from work and all responsibilities for performing work.

Driving time   -   That time spent on a moving vehicle and any interval not in excess of ten minutes when the driver is on duty but not on a moving vehicle.

Week   -   Any period of 168 consecutive hours beginning at the time the driver reports for duty.

24 consecutive hours   -   Any such period starting when the driver reports for duty.

(2)       Maximum On Duty Time

Drivers shall not remain on duty for more than sixty hours in any week; providing that a supplier operating vehicles on every day of the week may permit drivers to remain on duty for a total of not more than 70 hours in any period of 192 consecutive hours.

(3)       Maximum Driving Time

Weekly maximum driving time will not exceed the maximum on duty time shown above.  Driving time is further restricted to the following maximums in any period of 24 consecutive hours:

(a)       10 hours if the driver operates every day.  This may be expanded to 12 hours in order to complete a run during adverse road or weather conditions.

(b)       12 hours if the driver has at least 8 hours rest between runs and at least every third day off.

In case of emergencies, the driver may complete the run without being in violation of these regulations.”  (emphasis added) (AExh. 5).

The same language appeared in all of the solicitations Appellant received from various Postal Service offices in 2003 (Tr. 107).

            4.  Contract Clause H.7 – “Adjustments to Compensation” – provided that the contractor’s compensation could be adjusted by mutual agreement, and that any such adjustment would be made in accordance with the clause and any Postal Service Management Instruction governing such adjustments.  Management Instruction PM-4.4.1-2004-1, entitled “Economic Pay Adjustments for Highway and Inland Domestic Water Contracts,” provided that the Postal Service policy was to “allow … an adjustment in the rate of compensation when changed economic conditions or operational requirements occur over which the supplier has little or no control, subject to the provisions of this management instruction.”  The Management Instruction also provided that “Proposal errors or omissions in the supplier’s cost statement are the responsibility of the supplier,” and made unallowable “[c]ost increases for items that were omitted in the original or renewal cost statement.”  (AF 1, 2; Tr. 3).

            5.  Contract Clause H.8 – “Changes” – required the contractor to “proceed diligently in accordance with service changes … ordered unilaterally by the contracting officer.”  Disputes concerning changes were to be resolved under the contract’s “Claims and Disputes” clause.  (AF 1).

            6.  At the time of contract solicitation and award, the DOT hours-of-service regulations provided, among other restrictions, for a maximum of 10 hours of driving time following an 8-hour off-duty period (see, e.g., 68 FR 22456, 22491 (April 28, 2003); 70 FR 49978, 49979 (August 25, 2005); AF 6).  Appellant’s president was aware of the difference between the DOT regulations and the Postal Service contract requirements with regard to the maximum driving time.  However, he assumed that the Postal Service would not have specified a maximum driving time of 12 hours unless it had gotten an exemption from the DOT regulation and he did not check further.  (Transcript page (Tr.) 23-38, 75, 108).

            7.  In pricing the contract, and as it actually operated the contract from the beginning, Appellant planned to use a single driver for each Raleigh-Binghamton-Raleigh round trip -- the same method of operation used by the contractor that previously held the contract.  The driver would drive the Raleigh to Binghamton trip, rest in the sleeper compartment of the truck, drive the return trip, and take the next day off.  Appellant did not plan to use, and/or pay, two drivers in the same truck cab at any time.  During the course of each trip, the drivers took breaks in excess of ten minutes for fueling and for meal and rest breaks, which were not chargeable as driving time (see Finding 3).  (Tr. 22-38; AExh. 5, p. 7).

            8.  Prior to award, Appellant’s president spoke to Respondent’s Contract Transportation Specialist and, among other topics, explained how he intended to operate the contract.  Following that conversation the Contract Specialist recommended award to Appellant, which recommendation was approved by the contracting officer.  (Tr. 31, 77; AExh. 4).

            9.  The contract schedule required arrival at the Binghamton facility by 1:35 a.m., with unloading completed by 2:05 a.m.  However, in order for a driver to have the required 8-hour rest period before beginning the return trip, it was necessary for unloading to be completed no later than 1:15 a.m. – i.e., eight hours before the 9:15 a.m. beginning of loading for the Binghamton to Raleigh return leg.  Appellant’s drivers, in fact, regularly arrived at Binghamton significantly in advance of the scheduled arrival time and unloading the truck was regularly completed by 1:15 a.m.  On those trips, the drivers were also able to complete the trip with less than 12 hours of driving time.  (AF 5 (pp. 5197.0179-0186, 0199-0202); Tr. 44-49, 69-70).

            10.  In April 2003, DOT published hours-of-service regulations providing for an increase in both the required off-duty period – from 8 to 10 hours – and in allowable driving time – from 10 to 11 hours.  Motor carriers and drivers were required to comply with the new regulations beginning January 4, 2004.  (68 FR 22456, 22514-22516 (49 C.F.R. §395.0(b)(2); 49 C.F.R. §395.3(a)(1)); AF 6).

            11.  By letter dated August 28, 2003, Respondent’s contracting officer notified Appellant of the change in the hours-of-service regulations, but advised Appellant that the Postal Service intended to request an exemption from the change.  The contracting officer’s letter asked Appellant to describe how it would continue to perform its service under the new regulation and to provide the estimated cost impact for the changes.  (Stip. 8).

            12.  In September 2003, Appellant explained to the contracting officer that unless the Postal Service was exempt from the new regulations, Appellant would have to start running team drivers to be in compliance with the new DOT regulations.  (Stip. 9).

            13.  By February 2004, the Postal Service had not received a response to its request for an exemption.  By letter dated February 18, 2004, Appellant informed the Postal Service that it would comply with the new regulations by using team drivers, necessitating the hiring of additional drivers and obtaining different equipment (tractors with two berths).  Appellant requested reimbursement for these additional costs.  (Stip. 10‑12; AF 4).

            14.  By letter dated February 20, 2004, the contracting officer stated that he could not make a final decision concerning Appellant’s request for reimbursement until after DOT ruled on the Postal Service’s pending request for an exemption.  The letter further stated:

“The contract and schedule requirement[s] still stand.  I would ask that you observe the law, fulfill the schedule and submit a request to cover any excess costs.

While I have not thoroughly reviewed your plan for operating service with HOS [Hours of Service] regulation; my initial reaction is that your proposed solution may be cost prohibitive.  I can offer no guarantee for driver permanent positions, and I will not make a commitment to a permanent change in the annual rate.

At this point, you may submit detailed and documented monthly invoices for excess costs associated with  temporary measures put in place.”  (Stip. 13; AF 4).

            15.  By letter dated March 10, 2004, Appellant notified the contracting officer that it had begun running team drivers on March 2, 2004 (Stip. 14; AF 4).

            16.  The contracting officer replied to Appellant’s March 10 letter by a letter dated March 11, 2004.  The contracting officer again stated that he would not make a final decision until the DOT acted upon the pending exemption request.  The contracting officer again confirmed:

“The contract and schedule requirement[s] still stand, you must [observe] the law, fulfill the schedule and submit a request to cover any excess costs….

At this point, you may submit detailed and documented monthly invoices for excess costs associated with temporary measures put in place.”  (Stip. 15; AF 5).

            17.  As directed by the contracting officer, Appellant invoiced the Postal Service for additional costs it incurred using two drivers per round trip.  Appellant submitted invoices dated March 31, 2004, in the amount of $6,679.33; dated April 28, 2004, in the amount of $13,151.06; and dated May 16, 2004, in the amount of $12,942.52, for a total of $32,772.91.  The amounts claimed were Appellant’s actual costs incurred for salaries and hotel expenses for the extra drivers.  Hotel expenses were incurred because at the time Appellant was operating tractors with only a single berth, and needed a place for the second driver to rest.  (Stip. 16; AF 4; Tr. 67, 196).

            18.  By letter dated June 12, 2004, Appellant asked the contracting officer about the status of the $32,772.91 which it asserted was due and owing (Stip. 17).

            19.  In a final decision dated July 8, 2004, the contracting officer denied Appellant’s claim for $32,772.91 on the basis that it was not the revised hours-of-service regulation that required Appellant to utilize additional manpower, since “[e]ach trip currently (and previous to January 2004) requires more than twelve (12) hours drive time.”  In addition, the contracting officer stated that in only 22 of 128 instances had Appellant’s drivers arrived early enough to “support your HOS [hours of service] claim.”  (AF 3).  Appellant filed a timely appeal of the final decision.

DECISION

            Appellant argues primarily that when the contracting officer wrote to Appellant and directed that it comply with the revised Department of Transportation hours-of-service regulations while meeting the existing contract schedule, the contracting officer changed the contract and entitled Appellant to compensation for the additional costs it incurred as a result of the change.  In addition, Appellant relies on the provisions of the Postal Service Management Instruction that set out Respondent’s policy of providing adjustments to compensation for highway contracts caused by changed operational requirements – i.e., the revised DOT regulations - over which Appellant had no control.

            Respondent argues that Appellant is not entitled to a cost adjustment for complying with the new hours of service regulations because the cost of a second driver should have been included in Appellant’s original proposal.  Respondent’s position is that Appellant was required to abide by the DOT regulations in effect at the time of award – which allowed drivers to drive only ten hours after eight hours off duty – rather than the “more liberal” hours-of-service provisions in the contract – which allowed twelve hours of driving after eight-hours off duty.  In addition, Respondent argues that, even if the twelve-hour language is found to represent the contract requirement, Appellant’s performance demonstrated that it was unable to perform the contract with only one driver per round trip and still comply with that time restriction.

            Having considered the arguments by both sides, we conclude that Appellant is entitled to compensation for the excess costs it incurred.  Appellant interpreted the specific language of the solicitation to mean that its drivers could drive for 12 hours following an 8-hour rest and be in compliance with the contract requirements, notwithstanding that the then-current DOT regulations provided a 10-hour driving time limitation.  Appellant’s president recognized the potential conflict but concluded that the Postal Service must have received some sort of dispensation from the 10-hour requirement since it had included very specific language providing for a 12-hour limitation – both in the solicitation he was then considering and in other solicitations he had received from other Postal Service offices.

            Moreover, at least until this dispute reached the hearing stage Respondent agreed with Appellant’s understanding that the 12-hour limitation was the operative contract language.  Prior to contract award, Appellant’s president met with Respondent’s Contract Specialist and explained how he intended to operate the contract.  There is no evidence the Contract Specialist expressed any objection to Appellant’s explanation and, in fact, he thereafter recommended award.  Further, in denying Appellant’s claim for additional costs, the contracting officer based his decision on his understanding that the contract as awarded required more than 12 hours of driving for each trip and on his understanding that, in any event, Appellant had met the 12-hour driving time limitation in only 22 of 128 instances.  The contracting officer expressed no belief that Appellant had been obligated by the contract language to meet the 10-hour driving limitation of the DOT regulations, now argued for by Respondent, rather than the 12-hour limitation expressly included in the contract language.

            Appellant’s interpretation of the contract requirements was reasonable and was shared by Respondent at the time of award and thereafter.  Under these circumstances, that interpretation of the contract language governs.  See, e.g., Blinderman Constr. Co.  v. United States, 695 F.2d 552, 558 (Fed. Cir. 1982); The Boeing Co., ASBCA No. 37579, 90-3 BCA ¶ 23,202 at 116,438.  Therefore, when the contracting officer directed Appellant to perform the contract in accordance with the revised DOT regulations, that direction had the effect of changing the contract provisions governing both the allowable driving time and the required off-duty time.

            Appellant’s president had priced Appellant’s offer based on being able to operate with a single driver performing each round trip, followed by a day off.  That this pricing scheme was reasonable is shown by the fact that Appellant’s drivers were regularly able to complete the trips driving 12 hours or less.  The change ordered by the contracting officer had the effect of making Appellant’s original scheme for running the route impermissible under the contract.  The drivers were no longer allowed to drive up to 12 hours, but were restricted to a maximum of 11 hours.  In addition, a 10-hour, rather than an 8-hour, rest period was required before the same driver could drive the return trip, which was also limited by the 11-hour maximum.  Therefore, it was no longer permissible under the contract for a single driver to operate the round trip.  Appellant’s response to the contracting officer’s direction, as it advised the contracting officer in advance, was to run the route using teams of drivers.  This required Appellant to hire additional drivers and incur their salary costs and the costs of hotel space in order to operate within the dictates of the revised DOT regulations.

            Because of the change, Appellant is entitled to an increase in its compensation for operating the contract.  Respondent does not contest the quantum of damages alleged by Appellant (Respondent’s brief, note 2).  Accordingly, Appellant is entitled to recover the amount of $32,772.91, plus Contract Disputes Act interest.

            The appeal is sustained.[1]

David I. Brochstein
Administrative Judge
Vice Chairman

I concur
James A. Cohen
Administrative Judge
Chairman

I concur:

Norman D. Menegat
Administrative Judge
Board Member

[1] Because of this result, we do not address Appellant’s contention that the Postal Service Management Instruction also provides for an increase in compensation.