The US Postal Service (USPS) terminated a mail delivery contract for default. The USPS asserted a claim against the terminated contractor for reprocurement costs. The Postal Board of Contract Appeals denied the claim. The board found the USPS had not met its burden of proof. The agency couldn’t explain variable payments made under the replacement contract. Without an explanation, the board refused to place responsibility for those payments on the terminated contractor.
Angela Pugliese v. United States Postal Service, PSBCA No. 6856
Background
Angela Pugliese had a contract with the USPS to deliver and collect mail along a route in Alaska. In 2020, Pugliese was involved in a off-duty motor-vehicle accident. Undelivered mail, some of a year-old, was removed from her car. In light of this delivery failure, the USPS terminated Pugliese’s contract for default.
The USPS awarded a temporary replacement contract to Brittnae Tolliver. The Tolliver contract covered the services provided under the Pugliese contract. But the USPS paid slightly more the new Tolliver contract.
The USPS issued a final decision claiming Pugliese owed over $30,000 in reprocurement costs. Pugliese appealed to the Postal Service Board. The board held a hearing.
Analysis
Following a default termination, the USPS may recover any additional costs associated with reprocurement efforts to replace the terminated services. To recover costs, the USPS must show (1) the reprocured services were similar to the terminated services, (2) the USPS actually incurred excess reprocurement costs, and (3) the USPS acted reasonably to mitigate excess costs.
The board found the USPS had satisfied elements 1 and 3. The agency, however, had a problem with the second element. As an initial matter, the USPS had claimed costs it had not yet incurred. The USPS cannot recover excess reprocurement costs unless performance had been completed and payment made.
Additionally, the board found the USPS had not demonstrated entitlement for the payments made under the Tolliver contract. The Pugliese and the Tolliver contracts covered the same mail route. But each contract allowed for several contract-specific adjustments. For example, the contracts allowed for adjustment for vehicle replacement, taxes, registration fees, and fuel costs. The USPS had been unable to explain the explain the specifics of the variable payments made under the Tolliver contract. The contracting officer testified about the variable payments, but the USPS did not back that testimony up with contract logs of payment data. Without an explanation as to the variable payments, the board could not place responsibility for those payments on Pugliese.
–Case summary by Craig LaChance, Senior Editor
