December 14, 2011

Appeal of

SAZIE WILSON
d/b/a
GIL TRUCKING                                                                                                                                 

Under Contract No. HCR 10531                      

PSBCA No. 5247                    

APPEARANCE FOR APPELLANT:         
James D. Hartt, Esq.

APPEARANCE FOR RESPONDENT:     
Eugenia Izmaylova, Esq.
Office of the General Counsel
United States Postal Service    

OPINION OF THE BOARD[1]

Appellant, Sazie Wilson, doing business as Gil Trucking, has filed an appeal from a contracting officer’s decision terminating for default his mail transportation contract with Respondent, United States Postal Service. At the election of the parties, the appeal is being decided on the record, 39 C.F.R. §955.12, without an oral hearing.

FINDINGS OF FACT

1. Contract HCR 10531 was renewed in July 2001 for the period beginning July 1, 2001, and ending June 30, 2005. The contract rate at the time of award was $176,888.60 per annum.  The contract required Appellant to transport mail, in both directions, between the Westchester, New York Processing and Distribution Center (P&DC) and various destinations within 18 miles of the P&DC. Appellant was generally required to operate between seven and nine round trips on Mondays through Saturdays, and two trips on Sundays.[2]  A manager at the P&DC was identified in the contract as the Administrative Official (AO), charged by the contracting officer with administering and supervising the contract.  (Appeal File Tab (AF) 1, pp. 1, 6-8, 33).[3]

2. The contract required Appellant to “carry all mail tendered for transportation under this contract … with certainty, celerity, and security, in accordance with the operating schedule.” In addition, Appellant was required to “have readily available sufficient stand-by equipment … to prevent delays in emergencies such as mechanical failures ….”  (AF 1, clauses B.2.a and B.3.a (pp. 11, 13)).

3. The contract’s “Termination for Default” clause (clause B-13; January 1997 (modified)) provided, in part, that,

a. (1) The Postal Service may, … by written notice of default to the supplier, terminate this contract in whole or in part if the supplier fails to:

(a)  Complete the requirements of this contract within the time specified in the contract or any extension;

(b)  Make progress, so as to endanger performance of this contract …; or

(c)  Perform any of the other provisions of this contract (but see subparagraph a.(2) following).

(2)  The Postal Service’s right to terminate this contract under a.(1)(b) and (c) above may be exercised if the supplier does not cure the failure within three days … after receipt of the notice from the contracting officer specifying the failure ….

*     *     *

g.  If, after termination, it is determined that the supplier was not in default, or that the delay was excusable, the rights and obligations of the parties will be the same as if the termination had been issued for convenience.

(AF 1, clause H.4 (p. 34.5)).

4. By letter dated December 5, 2002, citing four instances of late service and six instances of omitted service in the previous three weeks, the Transportation Networks manager at the P&DC advised Appellant that she considered contract service to be unsatisfactory.  The manager warned Appellant that if service did not improve, she would recommend either substantial fines or that the contract be terminated.  (AF 7).

5. In an April 5, 2004 letter, citing 11 instances of omitted service and nine instances of late service since the previous October, the manager again complained to Appellant about unsatisfactory service.  She warned Appellant that if satisfactory service was not immediately reestablished, she would recommend that the contract be terminated.  (AF 9, 10).

6. Between August 10 and October 29, 2004, Appellant ran at least 22 trips late and failed to run at least seven trips (AF 20, pp. 143-172).

7. By letter dated November 2, 2004, the manager, citing a list of irregularities she stated had occurred since the April 5, 2004 letter was issued, stated that she considered Appellant’s performance unsatisfactory, due to “frequent breakdowns, drivers not maintaining schedule and omitted service.”  The manager indicated that she was considering recommending termination, but stated that before she did so she requested that Appellant attend a formal conference on November 15, 2004.[4]  (AF 12).

8. Between November 5 and December 6, 2004, Appellant ran at least five trips late and failed to run at least two trips (AF 20, pp. 174-181).

9. By letter dated November 30, 2004, the manager again requested that Appellant attend a formal conference, this time on December 8, 2004.  She warned that Appellant’s “failure to comply with this meeting will result in immediate suspension of your Highway Contract Route.”  The parties met on December 8, 2004, at which meeting the manager informed Appellant that she expected service to be “totally satisfactory” for the remaining term of the contract.  (AF 13, 15).

10. On December 9, 2004, Appellant operated one trip 35 minutes late.  On December 11, Appellant failed to operate at least three of his trips, and on December 13, he failed to operate one trip.  (AF 20, pp. 182-186).

11. In an email message dated Monday, December 13, 2004, the contracting officer indicated that he had been contacted by a senior plant manager at the Westchester P&DC complaining of Appellant’s missed trips and of the “extraordinary lengths” the manager had to go through to cover the service.  After evaluating the irregularity reports and the efforts by the AO, through letters and meetings, to improve Appellant’s service, the contracting officer directed a subordinate to draft a default termination letter, with termination to occur by the middle of the week.  (AF 16; Declaration of H. Martinez, dated November 13, 2009).

12. In a final decision dated December 16, 2004, the contracting officer terminated Appellant’s contract for default, effective as of the close of business on December 17, 2004, “for failure to perform service according to the terms of the contract.”  Simultaneously with the termination, the contracting officer issued a Contract Route Service Order suspending Appellant’s pay until further notice.  (AF 18, 19).  Appellant filed a timely appeal of the termination.

DECISION

Respondent, which has the burden of proof in this termination for default appeal, see Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987); Charli Selsa Schiver d/b/a NGX-Schiver, PSBCA No. 4545, 02-2 BCA ¶ 31,937; Douglas Cremer, PSBCA No. 3108, 93-2 BCA ¶ 25,565, argues primarily that termination was justified by Appellant’s delivery delays and failures, and argues that the contracting officer’s decision to terminate was within his discretion.

Appellant challenges the default termination on a number of grounds. First, Appellant takes the position that the termination was improper, and should be converted to a termination for convenience, because the contracting officer failed to give Appellant a three-day notice and opportunity to cure before terminating for default. Appellant argues that a three-day notice was mandated by paragraph a.(2) of the Termination for Default Clause (Finding 3), and was a prerequisite to the exercise of the contracting officer’s right to terminate.  Moreover, Appellant argues, in failing to give him the opportunity to cure before terminating the contract, the contracting officer acted arbitrarily and capriciously.

Second, Appellant argues that his ability to perform the contract adequately was adversely affected because he was denied raises “consistent with other suppliers and [his] financial situation.” Appellant cites as support for this argument that many of the irregularity reports from his route reflected mechanical breakdowns as the reason for service delays and omissions, and asserts that the “routine” mechanical breakdowns were caused by a shortage of funds available for maintenance of his trucks.

Finally, as relief for the allegedly improper termination, Appellant demands payment in the amount of $105,379.41, which he alleges is the unpaid contract amount through the end of the contract term (June 2005), plus an unspecified amount representing the “full value of raises appellant was entitled to but did not receive.” In addition, Appellant seeks the relief set out in paragraph g of the Termination for Default clause – which provides for the conversion of an invalid termination for default to a termination for convenience (Finding 3).

Respondent replies that the contract did not require it to give the three-day cure notice that Appellant has argued was mandated.  In the alternative, Respondent contends that the conferences held by, and letters sent by, the Administrative Official (Findings 4, 5, 7, 9) provided any necessary notice.

With regard to Appellant’s argument alleging arbitrary, capricious, and bad faith actions by the contracting officer, Respondent argues that there was a rational, operations-based reason for the contracting officer’s exercise of his discretion to terminate.  Respondent also argues that there is no evidence of any specific intent to harm Appellant, which, Respondent contends, is a prerequisite to a finding of bad faith.

Addressing Appellant’s contention with respect to the three-day cure notice first, we agree with Respondent that such a notice was not required under the language of the contract.  As we have previously held, failures to perform required trips – or delays in their performance – were failures to complete the contract requirements within the time specified and, therefore, fell within paragraph a.(1)(a) of the Termination for Default clause (Finding 3).  Kemcorp, PSBCA No. 4454, 00-2 BCA ¶ 31,146 at 153,829.  Thus, the cure notice specified under paragraph a.(2) was not a prerequisite to a termination on that basis,[5] and we do not accept Appellant’s contention to the contrary.[6]

As noted above, Respondent has the burden of proving the propriety of the default termination.  In this instance, we consider Appellant’s failure to operate at least three trips on December 11 and one trip on December 13, when combined with Appellant’s earlier performance failures and the warnings from the AO, to constitute a substantial failure of performance and to justify the termination, unless Appellant can demonstrate either that these performance failures were excusable or that the contracting officer’s decision to terminate the contract constituted an abuse of discretion.  See, e.g., Lissa Aichele, PSBCA No. 5354, 09-2 BCA ¶ 34,259; Janet L. Fox and Todd Fox, PSBCA Nos. 6159, 6169, 09-1 BCA ¶ 34,082 at 168,507, and cases cited therein.

Appellant does not deny that these failures occurred, and his only argument for excusability appears to be his contention that he was unable to maintain his trucks properly because he was denied certain, undefined “raises” consistent with other suppliers.  While Appellant made this argument in his brief, there is no record evidence directly supporting his contention.  We note that there is no indication in the reports for the deficiencies that directly led to his termination that the missed trips were caused by mechanical breakdowns (Finding 10).  Rather there are simply notations that Appellant failed to report to run those trips. In addition, Appellant has failed to offer evidence showing that Respondent’s failure to pay appropriate “raises”, if it occurred at all, was the primary or controlling cause of Appellant’s failure to perform satisfactorily.  See, e.g., E&J Trucking, PSBCA Nos. 5092, 5188, 09-1 BCA ¶ 34,073 at 168,475; Todd’s Letter Carriers, PSBCA Nos. 4904-4920, 5002, 5003, 05-2 BCA ¶ 33,121 at 164,136, and cases cited therein. Accordingly, Appellant has not shown the failures that led to this termination to be excusable.

We turn next to Appellant’s contention that the contracting officer abused his discretion when terminating the contract for default.  In order to find an abuse of discretion, a decision must be found to be arbitrary and capricious.  United States Fidelity & Guarantee Co. v. United States, 676 F.2d 622, 630 (Ct. Cl. 1982).  The Court of Claims also set out four separate factors which should be used in determining if conduct by a government official is arbitrary and capricious.  These are: (1) evidence of subjective bad faith on the part of the official; (2) if there is “no reasonable basis” for the decision; (3) the amount of discretion given to the official, i.e., the greater the discretion granted, the more difficult it will be to prove the decision was arbitrary and capricious; and, (4) whether there has been a proven violation of an applicable statute or regulation.  United States Fidelity & Guarantee, 675 F.2d at 630, citing Keco Industries, Inc. v. United States, 492 F.2d 1200 (Ct. Cl. 1974).

To prove bad faith, Appellant must demonstrate, by the equivalent of clear and convincing evidence, a specific intent to harm Appellant.  Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234, 1239 (Fed. Cir. 2002); see, e.g., Gary W. Noble, PSBCA No. 4094, 00-1 BCA ¶ 30,602 (on reconsideration).  Appellant’s argument is somewhat unclear, but he appears to be contending that the contracting officer had prejudged the situation and had already decided to terminate the contract at the time he gave his subordinate the direction to prepare a termination letter (Finding 11), without first allowing Appellant the opportunity to “cure” the default.

From the record, it appears that the contracting officer had, in fact, decided to terminate the contract at the time he directed the preparation of the termination letter.  However, by that time he had reviewed and evaluated the irregularity reports and considered the AO’s efforts to improve Appellant’s service, and there is no indication in the record that his decision was other than one based on that evaluation. We do not see in this record a demonstration that the contracting officer’s motivation was to harm Appellant. Moreover, as noted above, there was no contractual requirement to provide Appellant a notice and the opportunity to cure the deficiencies.  Accordingly, Appellant has not demonstrated subjective bad faith by the contracting officer.

Appellant does not address the second element – i.e., whether the contracting officer’s action had a reasonable basis.  As indicated above, however, there is no record evidence suggesting that the basis for the contracting officer’s termination action was other than the improvement of service – clearly a reasonable basis for the action.  Accordingly, this element militates in favor of Respondent.

With regard to the third element, Appellant argues only that the contracting officer’s discretion was limited by the requirement to provide a cure notice before terminating for default.  The Termination for Default clause affords the contracting officer broad discretion, particularly with respect to failures to complete contract requirements on time. As we have concluded that a cure notice was not required under these facts, we do not agree with Appellant’s argument that the contracting officer’s discretion was limited by that requirement. Accordingly, the third element also militates in favor of Respondent.

With regard to the fourth element, violation of a statute or regulation, Appellant again refers only to the failure to provide a cure notice, an alleged violation of a contract provision.  Inasmuch as such a failure, even if proved, would not constitute a violation of a statute or regulation, this element provides no support for Appellant’s position.

Accordingly, we conclude that Appellant has not demonstrated that the contracting officer’s decision to terminate the contract for default represented an abuse of his discretion.

Respondent has demonstrated that Appellant’s performance failures represented a substantial failure of performance, and Appellant has failed to demonstrate either that his performance failures were excusable or that the contracting officer’s decision to terminate the contract constituted an abuse of discretion.  Accordingly, Appellant’s appeal of the termination is denied.[7]

With regard to Appellant’s demands for relief, inasmuch as we have found the termination to be proper, Appellant’s demand that the termination be converted to one for convenience is denied.  The Board lacks jurisdiction to consider Appellant’s monetary demands inasmuch as there is no evidence they were first submitted to the contracting officer, which is a prerequisite to our jurisdiction.  Paragon Energy Corp. v. United States, 645 F.2d 966 (Ct. Cl. 1981); 41 U.S.C. §§7103, 7104.

The appeal is denied.

David I. Brochstein                                                                           
Administrative Judge                                                                                   
Vice Chairman

I concur:
William A. Campbell
Administrative Judge                                               
Chairman

I concur:                                                                     
Norman D. Menegat
Administrative Judge                                                                                   
Board Member

[1] Administrative Judge Gary E. Shapiro took no part in the Board’s consideration of this matter.

[2] With some variations on holidays.

[3] Appeal File Tab 1 contains the contract.  The version of the contract filed with the original Appeal File was incomplete, and the parties later submitted a replacement copy.  References in this Opinion to contract provisions are to provisions and page numbers in the latter version.

[4] The record contains no direct evidence regarding whether Appellant attended the conference, but the wording of the AO’s November 30, 2004 letter (Finding 9, below) suggests that he did not.

[5]  Consistent with this reading of the contract language, we note that it is physically impossible to “cure” the failure to timely perform a trip once the time has passed – no matter how long a cure period is allowed.

[6]  As a result, we need not and do not address Respondent’s alternate argument – i.e., that the conferences with, and letters from, the Administrative Official would have provided the requisite cure notice, had one been required by the contract.

[7]  The record contains a copy of a contracting officer’s decision assessing $24,251.70 in reprocurement damages against Appellant but no record of an appeal of that decision (see Respondent’s submittal dated May 20, 2005).  While we would have jurisdiction to consider the reprocurement assessment even in the absence of a timely appeal, e.g., Hubbard Trucking, Inc., PSBCA No. 3701, 04-2 BCA ¶ 32,667 (1996), neither party introduced any evidence with respect to that assessment or otherwise sought to litigate any related issues.  Accordingly, we do not address the reprocurement assessment in this Opinion.