HUDBCA No. 99-G-7604-C12
ALL SOUTH PROPERTIES, INC
Ireland, III, Esq.
Porterfield, Harper & Mills, P.A.
22 Inverness Center Parkway
P.O. Box 530790
Birmingham, AL 35243-0790
M. Kasson, Esq.
Office of Counsel
U.S. Department of Housing
and Urban Development
451 7th Street, SW, Room 10246
Washington, D.C. 20410
DECISION BY ADMINISTRATIVE JUDGE LYNN J. BUSH
October 15, 1997
All South Properties, Inc. (All South or Appellant) has appealed the contracting officer's final written decisions terminating for default All South's real estate asset management (REAM) contract with the United States Department of Housing and Urban Development (HUD, Government or Appellee), and denying All South's monetary claim for compensatory damages and anticipatory profits. By Order dated April 29, 1993, the HUD Board of Contract Appeals (Board) granted the Government's motion to join the two cases. The parties waived the opportunity for hearing and elected to have these appeals decided on the record pursuant to Board Rule 11, submitting documentary evidence and legal briefs. Jurisdiction lies with the Board under the Contract Disputes Act (CDA) of 1978, 41 U.S.C. §§601 et. seq..
FINDINGS OF FACT
1. On October 25, 1991, All South was awarded Real Estate Asset Management (REAM) contract number 062-92-696 by HUD to provide management and related services for single family properties owned by or in the custody of HUD in the geographic area known as the Birmingham West Area in Alabama. (Appeal File (AF) Tab 2.1 at 1, B-1, C-1.) This negotiated procurement was a firm-fixed price, indefinite-quantity, contract with cost-reimbursement portions. (AF Tab 2.1 at L-6.) The effective date of the contract was November 1, 1992, with a performance period of twelve months from that date, with option periods. (AF Tab 2.1 at F-1.)
2. The contract provisions required that, on the effective date of the contract, the awardee be furnished a listing of assigned properties, along with the current status of each property and the need for any specific services for any particular property or group of properties. (AF Tab 2.1 at C-1, C-7.) The contract stated that, 14 days after receipt of this listing, the awardee was to inspect each property and perform any needed services within the time frames specified by the contract. (AF Tab 2.1 at C-1, C-7.)
3. Section C of the contract set forth the various contract service requirements for the properties in the form of service items. (AF Tab 2.1 at C-2 - C-6.) Section C contained 39 service items, with certain service items required to be performed for all properties while other service items were dependent upon the property's needs. Many service items were continuing responsibilities which the awardee had to perform on a recurring basis for the entire time the property remained in HUD's possession. (AF Tab 2.1 at C-2 - C-6.)
4. The time requirements for performance of the service items varied. Service item 12 required that all conditions which presented safety hazards were to be eliminated within 24 hours of discovery by the awardee. Service items 1 and 24 required that the awardee perform an initial inspection of all properties within 14 days of contract commencement and every 14 days thereafter. Service item 3 required that, within 48 hours of property assignment, All South was to perform the initial inspection of newly assigned properties and post HUD warning signs. The contract allowed up to five days after assignment for such services as: notifying police and state authorities of HUD's interest - service item 4; notifying HUD of damage to property - service item 6; securing and winterizing swimming pools and operating systems/equipment - service items 9-10; providing HUD with defective paint inspection reports - service item 13; and assuming responsibility for keys and lock boxes - service item 14. Other service requirements were to be provided on an "as conditions warrant" basis (e.g., overall cleaning and the removal of interior and exterior trash and debris - service item 7; securing the property against unauthorized entry and damage by elements - service item 8; and yard maintenance - service item 15). (AF Tab 2.1 at C-2 - C-6.)
5. Section B of the contract contained the compensation provisions of the contract. Section B.2, paragraph A, provided that, as full compensation for performance of all services set forth in Section C, the contractor was to be paid $1,198.25 for each HUD-owned property assigned for the first year. That fee was payable in installments, with 30% to be paid at the time HUD listed the property for sale and the remaining 70% to be paid when the sale closed. Section B.2, paragraph A, Note 2 provided that, in the event properties were unsold when the contract expired or the contract was partially or fully terminated for the convenience of HUD, the contractor was to be paid a negotiated amount for documented expenses, with any partial per property payments not to exceed the prices stated above. Section B.2, paragraphs B-C, set forth a per-property fee of $545.00 for performance of service requirements set forth in Section C of the contract relating to vacant lots, and $647.50 per-property for custodial duties on non-HUD owned properties. A very limited number of cost reimbursable items were enumerated in Section C of the contract. (AF Tab 2.1 at B-1, C-1.)
6. Under the terms of this fixed-price contract, the awardee assumed the risk that a property or properties might remain on HUD's inventory for a lengthy period of time, thus requiring the contractor to perform a significant amount of contract services in order to earn its fixed fee. However, there were also times that a property might sell right away and remain in HUD's inventory for only a very short period of time. In those instances, the contractor could be paid its fixed fee for performing substantially less work. Overall, the structure of the contract was such that a contractor's timely and effective performance was crucial in preparing the properties for prompt sale, this inured to the benefit of both HUD and the contractor. (Contracting Officer Ruggs Affidavit at 4-5.)
7. Section L of the contract's Request for Proposals (RFP) required all offerors to provide a detailed description of all prior and current work experience relevant to the procurement. (AF Tab 2.1, Section L.3(b).) Potential offerors were informed that, in determining who would be selected for contract award, the Government wanted the contractor with the most experience and that price was a secondary consideration. (AF Tab 2.1 at M-1; Tab 4.1 at 10.) All South's proposal stated that All South and its principal, Mr. Sam Wehby, had served as a general contractor in the field of residential construction, repairs, and remodeling. All South stated that it had experience in negotiating with plumbers, electricians, painters, carpenters, locksmiths, clean-up crews, etc.. All South's stated field of expertise included working with maintenance workers and the company represented that it had property management experience, which it said required finding dependable and reliable workmen. (AF Tab 2.1, Section L, subsection 3.) In response to the "Technical and Management Factors" portion of the RFP, All South stated that: "The Contractor is ready and has a staff of subs, ready to meet the requirements as outlined in Section C. The Contractor has necessary facilities, materials, supplies, equipment, labor, and other related services as indicated." (AF Tab 2.1.)
8. A pre-proposal conference was held on September 27, 1991 and verbatim notes from that meeting were sent to all potential offerors receiving a copy of the proposal. (AF Tab 4.1 at 1-2.) At the conference, the contract provisions and requirements were explained and offerors were told that they had to assume responsibility for all requirements listed in Section C (e.g., winterization, lawn maintenance, and cleanup): "If you are awarded the contract and the previous contractor did not winterize or cleanup, it is your responsibility." (AF Tab 4.1 at 10.) The offerors were warned repeatedly during this meeting that if the previous contractor or mortgage company did not leave the assigned properties clean or had failed to maintain the yard, those responsibilities would fall upon the awardee, with no additional compensation. (AF Tab 4.1 at 9-11.) The payment provisions of the contract were also discussed at the conference, including certain circumstances, described in Section B.2, paragraph A, Note 2, in which the Government required that the awardee provide documentation of expenditures in order to receive payment for services rendered. (AF Tab 4.1 at 2, 3, 11.)
9. The contract stated it was anticipated that the awardee's inventory would consist of approximately 69 properties. (AF Tab 2.1, Section L.17.) During the period of contract performance, an average of 69 properties was assigned to All South. (Yarbrough Affidavit at 4; Gee Affidavit at 2.)
10. HUD provided one training session for All South, which was held on October 29, 1991. (AF Tabs 3.1, 4.2, Complaint at 3-4.) By letter dated November 8, 1991, Cynthia Yarbrough, Chief of the Property Disposition Branch, wrote to All South, stating that a field inspection of All South's inventory had been conducted at the end of October. The letter also provided All South with a list of findings and service requirements with respect to these properties and requested that All South inspect and correct identified problems. (AF Tab 3.2.) The November 8th letter was issued pursuant to the directives set forth in section C-7 of the contract and did not constitute a letter of deficiency. (AF Tab 2.1 at C-7.)
11. After All South began performance of the contract, the HUD staff started their standard inspections of the properties assigned to All South in order to verify contract compliance. Dottie M. Gee was the realty specialist specifically assigned to monitor All South's contract performance and assigned to inspect the properties in All South's inventory. (Gee Affidavit at 1.) Ms. Gee was supervised by Cynthia S. Yarbrough, Chief of Property Disposition. (Yarbrough Affidavit at 1.) The HUD Birmingham staff inspected approximately ten percent or more of each REAM contractor's inventory per month, with ten percent of each property category included. Sampling was performed on a random basis. The HUD Property Maintenance Inspection Reports (Form 9519-A) were completed on-site and the results of those monthly inspections were communicated to All South in writing. (Yarbrough Affidavit at 4-5; Gee Affidavit at 2; AF Tabs 4.8 - 4.11.)
12. On January 31, 1992, HUD sent All South a letter stating that monthly inspections had been performed in December 1991 and again on January 24, 1992. The letter enumerated deficiencies in 20 properties (11 properties from the December inspection and 9 properties from the January inspection), and stated that although All South's bi-monthly inspection reports indicated that Appellant was aware that repairs were needed on the properties, All South had failed to have the repairs done. Overall, All South's performance deficiencies fell under one of three categories: (1) failure to properly secure the property (service item 8); (2) failure to address safety hazards (service item 12); and (3) failure to ensure the properties were maintained in a presentable condition at all times [interior/exterior maintenance and cleaning; yard care] (service items 7 and 15). (AF Tab 3.3.)
13. Service item 8 required that the awardee "[s]ecure property to prevent unauthorized entry and damage by elements - see Exhibit 3" (AF Tab 2.1 at C-2.) Exhibit 3 - Service Number 8 (AF Tab 2.1 at C-8), provides, in pertinent part:
Securing of Property
Upon acquisition of the property by HUD within five (5) days of assignment to the AMB, the property shall be secured against unauthorized entry and damage by the elements. Services to be performed include but at (sic) not limited to the following:
1. HUD will furnish keys when available.
If not available, the AMB will be . . . requested to install the Kwik-set master lock. . . . Padlock and hasp (for garage door or outbuildings only) . . .
5. swimming pools will be secured to the maximum extent. All fencing, gates, and gate locks shall be repaired to prevent unauthorized entry . . . .
14. Service item 12 required that the awardee: "Eliminate conditions which present safety hazards - see Exhibit 5" (AF Tab 2.1 at C-2.) Exhibit 5 -Service Number 12 states, in relevant part: "The Contractor shall ensure that any condition which presents a health or safety hazard is identified and corrected within 24 hours of discovery." (AF Tab 2.1 at C-15.)
15. Service item 7 required that the awardee: "Remove and properly dispose of interior and exterior trash and debris; leave property broom clean (See Exhibit 11)." (AF Tab 2.1 at C-2.) Exhibit 11- Service item 7 (AF Tab 2.1 at C-23) directed the awardee to:
REMOVE ALL COBWEBS FROM INTERIOR
CLEAN ENTRANCE, INCLUDING DAMP MOB (sic)
REMOVE ALL TRASH AND DEBRIS FROM INTERIOR
REMOVE ALL TRASH AND DEBRIS FROM OUTSIDE
SWEEP AND WIPE WITH DAMP CLOTH ALL
CABINETS,INSIDE AND OUT
CLEAN APPLIANCES THOROUGHLY, INSIDE AND
BROOM SWEEP AND DAMP MOP ALL FLOORS
CLEAN AND SANITIZE ALL TUBS,SINKS,SHOWERS,
COMMODES, CABINETS, AND COUNTERTOPS (MUST
INCLUDE ALL KITCHEN AND BATH FIXTURES)
[Capitalization in original]
16. Service item 15 required that the awardee: "Ensure that grass and shrubbery are cut/trimmed in
professional-like manner; that clippings are properly removed; that snow is removed from walkways and sidewalks; and that with respect to these items, properties are maintained in a presentable condition at all times. (edging required)" (AF Tab 2.1 at C-3.) The contract specified that: (1) grass was to be cut every 14 days and edging done every other mowing during lawn mowing season (March 15 - November 15); (2) all clippings, debris, leaves, junk and trash were to be removed from the premises; (3) grass, weeds, brushes and trees were to be trimmed; and (4) hedges and shrubbery were to be clipped as needed, but at least three times per year. (AF Tab 2.1 at C-16 and C-17.)
17. Taken as a whole, the deficiencies cited in HUD's January 31, 1992 letter to All South were not insignificant. For example, there were instances of safety hazards at four properties, including a dangerous deck lacking support beams; broken glass on the floor of one property; a large hole on a front porch; and dangerous nails protruding out of a board at another property. There were several instances of All South's failure to secure properties and there were numerous instances of Appellant's failure to maintain the properties in a presentable or marketable condition (interior/exterior cleaning and yard care deficiencies). (AF Tab 3.3.)
18. All South's February 17, 1992 response to HUD's January 31, 1992 letter complained that the many deficiencies noted and repairs required were the result of neglect by the previous REAM contractor. All South went on to blame its delay on the need to get acquainted with the contract and properties and the need to get acquainted with responsible subcontractors. Appellant, however, stated that it had taken care of the problems set forth in HUD's letter, with only follow-up work remaining at the time of its response. (AF Tab 3.4.)
19. The January 31, 1992 letter was the first of several deficiency letters to be issued to All South, but Appellant's February 17th response was its last written reply to such notices. There is no evidence in the record that Appellant registered any verbal disagreements with the cited deficiencies set forth in any of the these letters at the time that they were issued to All South.
20. On February 27, 1992, HUD sent another letter to All South detailing deficiencies found in 15 properties during the February monthly inspection. Again, All South's deficiencies generally fell within the three categories identified in Finding of Fact No. 12. While the February 27th letter commended All South on having improved its performance since HUD's last inspection, All South was cautioned to review its contract requirements. (AF Tab 3.5.)
21. By letter dated April 10, 1992, HUD informed All South of the results of the monthly inspection, performed March 24-26, 1992. In that letter, HUD noted 11 properties with the same types of deficiencies enumerated in the January 31st and February 27th letters. Additionally, HUD informed All South that during the March inspection, 24% of All South's inventory had been inspected and, of that inventory, no yards had been cut, although grass cutting season had begun on March 15th. (AF Tab 3.6.)
22. HUD sent All South a cure notice on April 20, 1992. That notice referenced the April monthly inspection and stated that HUD had inspected 30 of All South's 69 properties. Twenty-five properties were cited with numerous deficiencies, a number constituting over one-third of All South's entire inventory. As in previous notices, the deficiencies were generally for a failure to properly secure the property; safety hazards; and for failure to maintain the property in a presentable/marketable condition (yard care and interior/exterior maintenance and cleaning). The deficiency letter pointed out that more than two properties exhibited hazardous conditions. HUD cited eight properties with deficiencies which had been previously brought to All State's attention either verbally or in HUD's April 10th deficiency letter. HUD also pointed out that, of the 30 properties inspected, yard maintenance was overdue on 20 and All South had still failed to cut any of the yards, even though grass cutting season had begun the previous month. Appellant was given ten days to cure all deficiencies. (AF Tab 3.9.)
23. Although All South did not respond in writing to the April 20, 1992 cure notice, All South met with HUD officials on April 20, 1992 to discuss how to improve its contract performance. A follow-up letter was issued by HUD on April 27, 1992, thanking All South for meeting with HUD officials and stating that All South would be given reasonable time to cure its deficiencies. The letter suggested that All South monitor its subcontractors more closely. (AF Tab 3.10.)
24. The May inspection reflected the same types of deficiencies previously noted, but in fewer properties (i.e., eight properties were listed with deficiencies), as stated in HUD's June 1, 1992 letter to All South. However, while there were deficiencies in a fewer number of properties, 50% of the properties listed had safety hazards included among their deficiencies. HUD's June 1, 1992 letter to All South listed the deficiencies observed during the May inspection and stated that, since enough time had passed for all deficiencies to have been corrected, HUD would inspect again within the next ten days. The letter concluded with a reiteration that All South's failure to comply with the terms of its contract could result in a termination of the contract. AF Tab 3.15.
25. All South's subsequent performance, as reflected in the June inspection report, was very poor. The June 8, 1992 inspection was performed jointly by Dottie Gee and Laura Owen, a HUD realty clerk; the June 9, 1992 inspection was performed jointly by Ms. Gee and Cynthia Yarbrough. (Gee Affidavit at 2; Yarbrough Affidavit at 5.) HUD's June inspection report cited deficiencies in 32 properties, nearly half of All South's inventory. AF Tabs 4.10 - 4.12. Again, the cited deficiencies fell within the same three categories: (1) failure to properly secure the property - service item 8; (2) failure to properly address safety hazards - service item 12; and (3) failure to ensure the properties were maintained in a presentable condition at all times - service items 7 and 15. Seven of the cited deficiencies involved safety hazards, while several others were for failure to properly secure the properties. Dozens of other deficiencies were cited for failure to maintain the properties in a presentable condition. (AF Tab 1.1.)
26. By letter dated June 29, 1992, HUD issued a notice of default, terminating All South's contract in its entirety after eight months of performance. The basis for the default termination was All South's repeated failures to comply with the performance requirements set forth in Section C of the contract; failure to correct deficiencies set forth in the April 20th cure letter; and the examples of deficiencies in 32 properties set forth in the default letter. AF Tab 1.1. By a final decision issued on February 8, 1993, the contracting officer denied All South's claim for compensation and other monetary damages in the amount of $340,468.68. (AF Tab 1.2.)
27. All South asserts that HUD delayed in listing 8 properties for sale, which it contends were ready for listing at the time of the default termination of its contract and for which Appellant contends it should be compensated. (Complaint at 29.) All South presented no evidence in support of its claim that HUD delayed listing the 8 properties. The Government, on the other hand, presented credible evidence that HUD acquired the 8 properties approximately three weeks prior to All South's default termination and that the properties were assigned to Appellant within one to three business days after HUD acquired them. (Yarbrough Affidavit at 11-12.) Appraisals were promptly requested by HUD and, based upon an analysis of a report on the processing time-frames generated by HUD's automated tracking system, the 8 properties were appraised and listed well within HUD's average time-frame. (Yarbrough Affidavit at 11-13, Exh. 1.) We find, in the absence of evidence to the contrary, that there was no delay on the part of HUD in the listing of the 8 properties cited by Appellant.
All South's complaints before the Board contend that the termination of its contract for default as well as the contracting officer's final decision denying its monetary claim are not warranted. All South asserts that it is entitled to the reimbursement of a portion of its fixed unit price for the management of 35 properties that either had not yet been listed for sale or that had not yet sold at the time that its contract was terminated for default. All South also claims entitlement to anticipatory profits.
Termination For Default
Default termination is a drastic action which should only be taken for good cause and on the basis of solid evidence. ABC Group, HUDBCA No. 88-3384-C3, 88-3 BCA 20,990; Mary Rogers Manley dba Mary Rogers Real Estate, HUDBCA No. 76-27, 78-2 BCA 13,519, citing Decatur Realty Sales, HUDBCA No. 75-26, 77-2 BCA 12,567. However, the Government is entitled to strict compliance in contract performance. Id. In an appeal from a termination for default, the Government has the initial burden of proving that Appellant failed to perform in accordance with the terms of the contract. Servicemaster of West Central Georgia, DOT CAB No. 1096, 80-2 BCA 14,676. Where, as in this case, the Government terminates a contract for default after the expiration of a cure period, it bears the burden of proving either (1) failure by the contractor to cure deficiencies in performance set forth in the cure notice; or (2) new defaults after the issuance of the cure notice. C.G. Ashe Enterprises, Inc., ASBCA Nos. 23169, 23277, 80-1 BCA 14,370; Pride Unlimited, Inc., ASBCA No. 17778, 75-2 BCA 11,436, motion for reconsideration denied, 75-2 BCA 11,631.
A service contract has a new "delivery" date established every time the performance of the services is required. Thus, there is literally a "default" whenever there is less than 100 percent complete and on time performance of the service at the end of any given performance period. Emancar, Inc., HUDBCA No. 80-534-C12, 82-1 BCA 15,531 at 77,022; Edward E. Davis Contracting, Inc., ASBCA No. 22646, 80-1 BCA 14,422 at 71,083. Since occasional failures to render perfect performance during each service performance is inherent in such contracts, a termination for default will be sustained only if the performance failure is more than de minimis and reasonably substantial. Id. at 71,083; San Antonio Construction Co. Inc., ASBCA No. 8110, 1964 BCA 4479.
The evidence in the record clearly shows that early on and throughout most of All South's performance on the contract, All South failed to satisfactorily perform its contractual obligations by repeatedly rendering a substantial number of deficient services in contract performance. Appellant established a pattern of failure to timely deliver key requirements over the life of the contract, with only short intervals during which All South properly performed the required services in a timely fashion. Several deficiency letters notifying Appellant of deficient performance were sent to All South over the life of the contract. The April 20, 1992 cure notice issued by HUD reflected that over one-third of All South's inventory had been cited with deficiencies. The May inspection results reflected that while the number of properties with deficiencies had declined during that period, 50% of those properties displayed unaddressed safety hazards. The June 29, 1992 letter of default revealed that nearly one-half of Appellant's inventory suffered from deficiencies.
Appellant's performance deficiencies were not of a minor nature or so infrequent that they could be considered insubstantial. Further, while there is evidence that All South would willingly go back and correct the numerous performance deficiencies brought to its attention on a continuous basis by HUD personnel, those remedial actions did not exonerate or cure the contractor's primary failures. See Pride Unlimited, Inc., supra, at 54,500. All South's default was not so much occasioned by a failure to correct the deficiencies when brought to its attention, but "in failing to perform the particular required task at the time when, and in the manner in which the contract required it to be performed." Id. at 54,500, citing ACME of Colorado, ASBCA No. 7974, 1963 BCA 3914. All South's repeated deficiencies created a pattern which reflected a substantially deficient performance. We find that the nature of the deficiencies (safety, security and "marketability" ), the volume of deficiencies, and the continuing occurrences of the deficiencies, factored together, resulted in a substantial failure to meet contract obligations sufficient to justify termination of the contract for default.
Since the Government has established a prima facie case justifying the default termination of the contract, the burden shifts to Appellant to substantiate an affirmative defense which would excuse its default. Appellant has the burden of proving that the alleged default did not occur, or that the default was due to causes beyond Appellant's control, or without its fault or negligence. Military Aircraft Sales, Inc., ASBCA No. 47689, 96-2 BCA 28,287 at 141,223; Gillett Machinery Rebuilders, Inc., ASBCA Nos. 28341, 28958, 89-3 BCA 22,021 at 110,760. Appellant has not asserted that its performance failures were excusable. Instead, All South has challenged the propriety of the assessment of deficiencies, contending that: (1) the deficiencies were issued based on discrimination; (2) All South was held to a higher performance standard relative to that applied to other contractors; and (3) the cited deficiencies never occurred or had been corrected and thus, were just a pretext to get rid of All South.
All South asserts that its president, Sam Wehby, is a Lebanese American, and that All South was improperly terminated by HUD based, in part, on "selective and discriminatory practices". Appellant fails to identify specific improper conduct by HUD personnel in setting forth its allegations based on discrimination, and only indirectly states that it was discriminated against because of Mr. Wehby's national origin. To the extent that All South does allege that HUD's termination of its contract for default was based upon discriminatory practices, this Board lacks jurisdiction to hear such a claim. The Swanson Group, Inc., ASBCA No. 47,677, 96-2 BCA 28,565; The ABC Group, HUDBCA No. 88-3384, 88-3 BCA 20,990; H.T. Engineers and Contractors, Inc., VABCA No. 2456, 86-3 BCA 19,321.
All South also asserts that HUD officials abused their discretion by holding All South to a higher standard than other REAM contractors in the area. Appellant contends that other REAM contractors in the Birmingham area were not scrutinized as closely as All South, nor were they required to adhere to the terms of the contract to the extent that HUD required All South to do so. In order to overcome the Government's prima facie case, based upon allegations of abuse of discretion, All South must rebut the presumption that HUD officials acted in good faith and conscientiously discharged their duties. Dieleman Construction Co., ENGBCA No. 6213, 96-2 BCA 28,430; Schmalz Construction, Ltd., AGBCA Nos. 86-207-1,86-229-1,86-255-1, 91-3 BCA 24,183. Appellant has failed to sufficiently rebut this presumption.
The factors to be considered by the courts and boards in such cases are: (1) whether there was subjective bad faith on the part of the contracting officer; (2) whether there was a reasonable basis for the decision to terminate; (3) the amount of discretion granted the contracting officer; and (4) whether there was a proven violation of statute or regulation. Schmalz, supra, at 120,963; Sayco Ltd., ASBCA No. 36105 91-1 BCA 23,568 at 118,165. Bad faith requires "well-nigh irrefragable proof" that the termination was motivated by a malicious intent to injure the contractor. Schmalz, supra, at 120,963; Darwin Construction Co. v. United States, 811 F.2d 593 (Fed. Cir. 1987). All South's generalized, unsubstantiated allegations of bad faith do not meet the stringent test set forth. The persistent pattern of deficient performance by Appellant properly served as the Government's basis for termination of the contract for default and there has been no demonstration of the violation of any statute or regulation by HUD that would make the termination otherwise improper. The contracting officer's exercise of discretion was well within the parameters set forth in Federal Acquisition Regulation (FAR) 49.402-3(f) for terminating a contract for default.
Appellant has failed to demonstrate that HUD officials abused their discretion by holding All South to a higher standard of performance than other REAM contractors. The rule is well settled that the Government is entitled to performance in strict compliance with contract specifications and has the right to insist upon the quality of performance called for by the contract even though it may have accepted, under previous or future contracts, a lower level of quality than that to which it was entitled. Pride Unlimited, supra, at 54,503; Atlas Fabricators, Inc. ASBCA No. 17556, 75-2 BCA 11,350; Associated Food Service, Inc., ASBCA Nos. 6883, 7678, 1962 BCA 3443. In an analogous case, the Postal Service Board of Contract Appeals has stated: "Whether other contractors were also guilty of violations of their contracts has no bearing, in and of itself, on whether Appellant's contract was properly terminated." Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA 26,419. We agree.
All South contends that the deficiencies listed in the contracting officer's final decision were unfounded, incorrect and created solely as a pretext to terminate Appellant's contract. All South introduced 96 photographs to attempt to disprove the existence of the deficiencies cited in the final decision. However, these photographs and Appellant's explanation of them do not sufficiently rebut the documented deficiencies, set forth in HUD inspection reports, which were records, created on site, during the course of regularly conducted inspections. In many instances, All South's photographs show only one angle, one inside/outside view, or only one side of the property, and fail to prove that the deficiency did not exist. Additionally, the photographs were taken approximately one month after the June inspections were conducted. Such a significant lapse of time between the dates the deficiencies were documented (June 8-9, 1992) and when the photographs were taken (July 6-7, 1992) inherently erodes any weight which could be attributed to the reliability of the pictures in accurately portraying the condition of the properties on the dates the deficiencies were documented by HUD. Indeed, Appellant conceivably might have corrected some of the cited deficiencies during its performance of contractual duties just prior to its termination for default on June 29, 1992. Any such corrections would neither rectify Appellant's performance nor negate the basis for the termination since Appellant's repeated performance failures were the grounds for Appellant's default termination. In sum, we do not find Appellant's photographs and accompanying narrative convincing proof that All South performed its contract satisfactorily.
In its reply brief, All South contends that many of the deficiencies complained of appear to have merely been due to differences of opinion as to the interpretation of the HUD contract. All South then specifies three instances which it views as such differences. All South offers no more support for its assertion than the three examples cited. First, All South states that HUD's determination that it was deficient in securing a swimming pool with spliced joists rather than continuous joists was improper because the specified joists did not come in long enough lengths to cover the width of the pool. Implicit in Appellant's position is an assertion of impossibility of performance. To prevail on that issue, All South must allege and prove that performance was commercially impossible. AIW-Alton, Inc., ASBCA No. 47917, 95-2 BCA 27,875; SEPAC, Inc., ASBCA No. 39209, 94-3 BCA 27,052. Appellant has presented no proof whatsoever on this matter and, therefore, Appellant's claim of impossibility of performance fails for a lack of proof.
The second example relating to All South's contention of contract mis-interpretation is whether the contract permitted Appellant to secure a crawl space with a hasp. All South contends that the contract did not specifically identify how to secure a crawlspace and that therefore, it should have been permitted to secure the crawlspace with a hasp, alone. However, the Government, we believe, correctly points out that the contract directs that properties be secured with locks to prevent unauthorized entry and that where the term "hasp" is used (with respect to securing garage doors or outbuildings), the contractor is directed to use both a hasp and a padlock. We find All South's contract interpretation to be flawed. Appellant's contention that Dottie Gee gave verbal authorization to use a hasp must also fail, notwithstanding the explicit contract provision on this point, All South has presented no evidence that she had actual authority to make or modify a contract. Here, in order to prevail, it is All South's burden to show that the Government agent had actual authority to make or modify the contract and All South has failed to carry this burden of proof. See City of El Centro v. United States, 922 F.2d 816, 820 (Fed. Cir. 1990); Industrial Piping, Inc., HUDBCA No. 95-G-121-C5, 96-2 BCA 28,554.
The third example of contract interpretation disagreement is Appellant's contention that HUD officials unreasonably considered a burn hole in a deck to be a safety hazard and counted All South's failure to repair it as a deficiency. Although the term "safety hazard" is not specifically defined in the contract, it is not unreasonable to view a burn hole which, according to Appellant, was the size of a half dollar, as a possible safety hazard. However, irrespective of however it was termed, the burn hole could have been an eyesore and detracted from the marketability of the house. Service item 6 required the contractor to notify HUD of damage due to fire. Therefore, All South should have repaired or reported the burn hole to HUD, but did not do so. In any event, we do not attribute significant weight to this example of Appellant's allegations of contract mis-interpretation.
All South contends that vandalism created some of the deficiencies, but offers no proof other than its unsupported assertion that any significant portion of the cited deficiencies were created by vandalism. All South also asserts that many of the deficiencies were created by its subcontractors' deficient work, stating that part of its problems with contract performance stemmed from the difficulties it had in identifying and securing competent help. It appears somewhat disingenuous for All South to make this assertion after having specifically claimed, in its contract proposal, that it had the ability to find dependable and reliable workmen and after having stated that it had a staff of subcontractors ready to meet the contract requirements. Nevertheless, even if many of All South's failures were attributable to either a lack of adequate or competent subcontractors, the prime contractor is responsible for the unexcused performance failures of its subcontractors. Mary Rogers Manley dba Mary Rogers Real Estate, supra, at 66,248. There has been no showing that All South's subcontractors' defaults were excusable. Therefore, Appellant remains responsible for the performance failures of any of its subcontractors.
All South, in this case, has not carried its evidentiary burden and has not rebutted the Government's evidence that the termination for default was properly based upon a pattern of recurring performance failures that affected overall administration of the contract or that these failures were de minimus or excusable. The termination of All South's contract for default was justified.
All South claims that it should be paid for work that it performed on 8 properties which it states were ready for listing at the time of default termination and for work on 27 properties which it states were ready for sale at the time of the termination of its contract for default. All South states that it should be paid 30% of the fixed-unit price of $1,198.25 per property for each of the 8 houses on which Appellant performed work in preparing those homes for listing. All South also contends that it should be paid 70% of the contract fixed-unit price per property for work performed in preparing the 27 properties for closing. Appellant states that it in no way impeded the listing or sale of any of the properties, and that it is inequitable for HUD to have reaped the benefit of All South's work and not pay Appellant for that work. HUD argues that the terms of the contract are clear and do not provide for compensation in the case of a default. HUD also contends that the contracting officer rejected portions of the services claimed as having been rendered on the 35 properties and that, in any event, All South has failed to document expenses for services performed under the contract.
Section B of the contract contains the contract's compensation provisions. It provides that the contractor was to receive a $1,198.25 fixed-unit price, per property, in two installment payments for successful, on time performance of the services required under section C of the contract. Under section B, if the contractor properly performed all requisite services in a timely fashion, the contractor was entitled to 30% of the fixed-unit price at the time HUD listed the property for sale and the remaining 70% was to be paid when the sale closed. The contract provided that if there were properties unsold when the contract either expired or was partially or fully terminated for the convenience of the Government, the contractor was to be paid a negotiated amount for documented expenses.
Section B is silent with respect to compensation for a contractor who has performed services on properties in his inventory, but whose contract is terminated for default prior to the listing or sale of these properties. However, section I-4 of the contract incorporates, by reference, FAR 52.249-8, Default (Fixed-Price Supply and Service)(APR 1984), which states, in pertinent part: "The Government shall pay contract price for completed supplies delivered and accepted." FAR 52.249-8 (f). The default clause makes no such similar reference to payment for services rendered and accepted. However, even if the Board were to construe the default clause as allowing All South to claim entitlement for services accepted, but not compensable under section B of the contract, entitlement alone is insufficient insofar as All South must also establish the quantum which it claims. Soledad Enterprises, Inc., ASBCA Nos. 20376, 20423, 20424, 20425, 20426, 77-2 BCA 12,552.
In this case, All South has failed to provide any documentation of time and expenses spent on the claimed services. Appellant has acknowledged this omission, apparently in the mistaken belief that such documentation was unnecessary. Even under the best of circumstances, if Appellant had not been terminated for default and, instead, had been terminated for the convenience of the Government, a strict accounting of documented expenses would have been required. That requirement was clearly set forth in the contract and was further emphasized to offerors in the pre-
All South also asserts that, under the equitable doctrine of quantum meruit, it should be paid for the disputed services and that HUD should not be unjustly enriched irrespective of whether the contract specifies that it should be paid for services performed when there is a default termination of the contract. Appellant's claim for monetary compensation based upon equitable doctrines must fail. This Board lacks jurisdiction to grant equitable relief based upon any theory of quantum meruit, a contract implied-in-law, or unjust enrichment. Cousins Contracting, Inc., ASBCA No. 50382, 97-1 BCA 28,906; Amplitronics, Inc., ASBCA No. 44119, 94-1 BCA 26,520; David Contractors, Inc., HUDBCA No. 87-2452-C15, 88-3 BCA 20,963.
Finally, All South's claim for anticipated, but unearned profits are unrecoverable in this action and must be dismissed for failure to state a claim for which relief may be granted. Olin Jones Sand Co. v. United States, 225 Ct. Cl. 741, 742 (1980); Rhen v. United States, 17 Cl. Ct. 140 (1989). Anticipatory profits are only recoverable in cases of contract breach by the Government. There is no evidence in this case that would support a finding of breach. Rather, Appellant's contract was properly terminated for default.
Based upon the foregoing findings of fact and conclusions of law, we uphold the termination of All South's contract for default and deny its monetary claim. Appellant's appeals are DENIED.
|David T. Anderson|
|Jean S. Cooper|