B-165493, DEC. 29, 1970

B-165493, DEC. 29, 1970

CONTRACTS - SERVICE CONTRACT ACT OF 1965 THE SERVICE CONTRACT ACT OF 1965, 41 U.S.C. 351 APPLIES TO THE FOUR STAR MAIL ROUTE CONTRACTS WHICH HUGHES TRANSPORTATION OF ROADSTOWN, INC., IS PERFORMING FOR THE POST OFFICE, WHERE ALL THE CONTRACTS WERE CONTINUED BY RENEWAL FOR THE PERIOD OF JULY 1, 1967 TO JUNE 30, 1970, BUT SINCE THERE WAS NO WAGE DETERMINATION IN EFFECT FOR THE STAR MAIL HAULING CONTRACTS AT THE TIME THEY WERE RENEWED THE MINIMUM WAGE RATES SET BY THE FAIR LABOR STANDARDS ACT, 29 U.S.C. 201-219, BECAME THE MINIMUM RATES UNDER THE CONTRACTS.

TO HUGHES TRANSPORTATION OF ROADSTOWN, INC.:

REFERENCE IS MADE TO YOUR LETTERS DATED MAY 2 AND SEPTEMBER 18, 1970, IN WHICH YOU RAISE THREE QUESTIONS RELATIVE TO THE ADMINISTRATION OF FOUR STAR ROUTE CONTRACTS WHICH YOU ARE PERFORMING FOR THE POST OFFICE DEPARTMENT. YOU REQUEST THAT THIS OFFICE PROVIDE YOU WITH ANSWERS TO SUCH QUESTIONS FOR YOUR GUIDANCE IN THE FILING OF APPLICATIONS FOR RATE INCREASES BASED UPON YOUR INCREASED COSTS OF OPERATIONS.

THE RECORD INDICATES THAT THE CONTRACTS IN QUESTION WERE ORIGINALLY AWARDED AT VARIOUS DATES BEGINNING IN 1959. THREE OF THE CONTRACTS HAD BEEN EXTENDED SO AS TO EXPIRE ON JUNE 30, 1967, WHILE THE FOURTH WAS ORIGINALLY AWARDED ON APRIL 24, 1965, BUT ALSO EXPIRED ON JUNE 30, 1967. ALL OF THE CONTRACTS WERE RENEWED SO AS TO COVER THE PERIOD JULY 1, 1967, TO JUNE 30, 1971.

YOUR FIRST QUESTION IS WHETHER THE SERVICE CONTRACT ACT OF 1965, 41 U.S.C. 351, WHICH WAS ENACTED ON OCTOBER 22, 1965, AND WAS TO BECOME EFFECTIVE ON JANUARY 20, 1966, SHOULD APPLY TO THESE CONTRACTS DURING THE PERIOD JULY 1, 1967, THROUGH JUNE 30, 1971. IF OUR ANSWER TO THIS QUESTION IS IN THE AFFIRMATIVE, YOU ASK TO BE ADVISED WHY THE PHILADELPHIA REGION OF THE POST OFFICE DEPARTMENT HAS BEEN PERMITTED TO CLAIM THAT THE ACT WILL NOT APPLY UNTIL RENEWAL TIME IN JULY 1971.

THE CIRCUMSTANCES GIVING RISE TO THE QUESTIONS APPEAR TO BE ESSENTIALLY THAT, AS EXTENDED FROM JULY 1, 1967, ALL OF THE CONTRACTS IN QUESTION CONTAIN POST OFFICE DEPARTMENT NOTICE 82, "ADDITIONAL GENERAL PROVISIONS FOR SERVICE CONTRACTS," WHICH PROVIDED, IN PERTINENT PART, AS FOLLOWS:

"(A) COMPENSATION. EACH SERVICE EMPLOYEE EMPLOYED IN THE PERFORMANCE OF THIS CONTRACT BY THE CONTRACTOR OR ANY SUBCONTRACTOR SHALL BE PAID NOT LESS THAN THE MINIMUM MONETARY WAGE AND SHALL BE FURNISHED FRINGE BENEFITS IN ACCORDANCE WITH THE WAGES AND FRINGE BENEFITS DETERMINED BY THE SECRETARY OF LABOR, OR HIS AUTHORIZED REPRESENTATIVE, AS SPECIFIED IN ANY ATTACHMENT TO THIS CONTRACT. IF THERE IS SUCH AN ATTACHMENT, ANY CLASS OF SERVICE EMPLOYEE WHICH IS NOT LISTED THEREIN, BUT WHICH IS TO BE EMPLOYED UNDER THIS CONTRACT, SHALL BE CLASSIFIED BY THE CONTRACTOR SO AS TO PROVIDE A REASONABLE RELATIONSHIP BETWEEN SUCH CLASSIFICATIONS AND THOSE LISTED IN THE ATTACHMENT, AND SHALL BE PAID SUCH MONETARY WAGES AND FURNISHED SUCH FRINGE BENEFITS AS ARE DETERMINED BY AGREEMENT OF THE INTERESTED PARTIES, WHO SHALL BE DEEMED TO BE THE CONTRACTING AGENCY, THE CONTRACTOR, AND THE EMPLOYEES WHO WILL PERFORM ON THE CONTRACT, OR THEIR REPRESENTATIVES. IF THE INTERESTED PARTIES DO NOT AGREE ON A CLASSIFICATION OR RECLASSIFICATION WHICH IS, IN FACT, CONFORMABLE, THE CONTRACTING OFFICER SHALL SUBMIT THE QUESTION, TOGETHER WITH HIS RECOMMENDATION, TO THE ADMINISTRATOR OF THE WAGE AND HOUR AND PUBLIC CONTRACTS DIVISIONS, DEPARTMENT OF LABOR, OR HIS AUTHORIZED REPRESENTATIVE, FOR FINAL DETERMINATION. FAILURE TO PAY SUCH EMPLOYEES THE COMPENSATION AGREED UPON BY THE INTERESTED PARTIES OR FINALLY DETERMINED BY THE ADMINISTRATOR, OR HIS AUTHORIZED REPRESENTATIVE, SHALL BE A VIOLATION OF THIS CONTRACT. NO EMPLOYEE ENGAGED IN PERFORMING WORK ON THIS CONTRACT SHALL IN ANY EVENT BE PAID LESS THAN THE MINIMUM WAGE SPECIFIED UNDER SECTION 6(A)(1) OF THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED ($1.60 PER HOUR).

"(C) MINIMUM WAGE. IN THE ABSENCE OF A MINIMUM WAGE ATTACHMENT FOR THIS CONTRACT, NEITHER THE CONTRACTOR NOR ANY SUBCONTRACTOR UNDER THIS CONTRACT SHALL PAY ANY OF HIS EMPLOYEES PERFORMING WORK UNDER THE CONTRACT (REGARDLESS OF WHETHER THEY ARE SERVICE EMPLOYEES) LESS THAN THE MINIMUM WAGE SPECIFIED BY SECTION 6(A)(1) OF THE FAIR LABOR STANDARDS ACT OF 1938 ($1.60 PER HOUR). HOWEVER, IN CASES WHERE SECTION 6(E)(2) OF THE FAIR LABOR STANDARDS ACT OF 1938 IS APPLICABLE, THE RATES SPECIFIED THEREIN WILL APPLY. NOTHING IN THIS PROVISION SHALL RELIEVE THE CONTRACTOR OR ANY SUBCONTRACTOR OF ANY OTHER OBLIGATION UNDER LAW OR CONTRACT FOR THE PAYMENT OF A HIGHER WAGE TO ANY EMPLOYEE."

IN VIEW THEREOF, AND IN VIEW OF OTHER APPLICABLE PROVISIONS OF THE SERVICE CONTRACT ACT, IT IS OUR OPINION THAT YOUR FOUR CONTRACTS WERE SUBJECT TO THE ACT. THE FIRST PORTION OF YOUR QUESTION IS ANSWERED ACCORDINGLY.

THE SECOND PART OF YOUR FIRST QUESTION IS BASED UPON YOUR UNDERSTANDING THAT THE MANAGER OF THE HIGHWAY TRANSPORTATION BRANCH OFFICE IN THE PHILADELPHIA REGION OF THE POST OFFICE DEPARTMENT CLAIMS THAT THE ACT DOES NOT APPLY TO YOUR CONTRACTS, SINCE THE ACT WAS NOT EFFECTIVE WITH RESPECT TO CONTRACTS FOR THE TRANSPORTATION OF MAIL UNTIL JULY 1, 1968. FROM THE PRESENT RECORD WE ARE UNABLE TO ASCERTAIN THE EXACT NATURE OF THE ADVICE GIVEN YOU BY THE MANAGER OF THE HIGHWAY TRANSPORTATION BRANCH OFFICE. HOWEVER, THERE CAN BE NO DOUBT THAT THE SERVICE CONTRACT ACT IS APPLICABLE TO CONTRACTS FOR THE TRANSPORTATION OF MAIL AWARDED PRIOR TO JULY 1, 1968, AND, AS STATED ABOVE, THE ACT APPLIED TO YOUR CONTRACTS UPON THEIR RENEWAL IN 1967.

IT APPEARS, HOWEVER, THAT THERE MAY BE A MISUNDERSTANDING ON YOUR PART AS TO THE MANNER AND EXTENT TO WHICH THE ACT WAS APPLIED TO YOUR CONTRACTS. THUS, BECAUSE THERE WAS NO WAGE DETERMINATION IN EFFECT FOR STAR ROUTE MAIL HAULING CONTRACT DRIVERS IN THE PHILADELPHIA AREA AT THE TIME YOUR CONTRACTS WERE RENEWED, THE MINIMUM WAGE RATES ESTABLISHED BY THE FAIR LABOR STANDARDS ACT, 29 U.S.C. 201-219, BECAME THE MINIMUM WAGE RATES YOU ARE OBLIGATED TO PAY UNDER YOUR CONTRACTS. SEE 41 U.S.C. 351(B)(1). HISTORICALLY, THE FIRST WAGE DETERMINATIONS UNDER THE SERVICE CONTRACT ACT WERE MADE IN 1966, HOWEVER, THE DEPARTMENT OF LABOR WITHDREW, EFFECTIVE APRIL 22, 1967, ITS WAGE DETERMINATIONS ON LONG AND SHORT HAUL STAR ROUTE CONTRACTS UNTIL FURTHER NOTICE PUBLISHED IN THE FEDERAL REGISTER. 32 F.R. 6376. SUCH WITHDRAWN DETERMINATIONS WERE TO BE REPLACED WITH NEW DETERMINATIONS TO BE ISSUED IN THE NORMAL COURSE OF BUSINESS AFTER MARCH 7, 1968, 33 F.R. 4288. THERE WAS NO WAGE RATE DETERMINATION IN EFFECT FOR SOUTHEASTERN PENNSYLVANIA (PHILADELPHIA) UNTIL JANUARY 1969. (WAGE DETERMINATION 69 30 ESTABLISHED A RATE OF $3.27 PER HOUR BASED ON THE OVER -THE-ROAD SUPPLEMENTAL AGREEMENT OF THE TEAMSTERS UNION COVERING THE PERIOD APRIL 1, 1967 TO MARCH 31, 1970. THIS RATE WAS REVISED ON MAY 1, 1969 TO $3.43 PER HOUR). AS A RESULT ALL STAR ROUTE CONTRACTS WERE AWARDED AND RENEWED DURING THIS PERIOD (APRIL 22, 1967 - MARCH 7, 1968) WITHOUT A WAGE DETERMINATION. IT APPEARS, THEREFORE, THAT A WAGE RATE DETERMINATION WAS NOT INCLUDED IN YOUR CONTRACTS BECAUSE NONE WAS AVAILABLE IN THE PHILADELPHIA AREA AT THE TIME AT WHICH THE CONTRACTS WERE RENEWED.

YOUR SECOND QUESTION IS WHETHER A CONTRACTING OFFICER OR HIS AGENT IS PERMITTED TO IGNORE DECISIONS OF THE COMPTROLLER GENERAL BY CLAIMING THAT SUCH DECISIONS DO NOT APPLY TO MAIL CONTRACTS. THE BASIS FOR THIS QUESTION IS OUR DECISION OF MAY 1, 1969, B-165493, IN WHICH WE HELD THAT AN AGREEMENT BETWEEN A CONTRACTOR AND THE POSTMASTER GENERAL TO READJUST THE COMPENSATION, PURSUANT TO THE PROVISIONS OF 39 U.S.C. 6423, UNDER A STAR ROUTE CONTRACT WHICH WAS AWARDED PRIOR TO THE EFFECTIVE DATE OF THE SERVICE CONTRACT ACT, MUST BE REGARDED AS A NEW CONTRACT WHICH SHOULD THEREFORE INCORPORATE THE PROVISIONS OF THE SERVICE CONTRACT ACT. YOU STATE THAT SEVERAL OF YOUR CONTRACTS HAVE BEEN AMENDED SINCE JULY 1, 1967, AND THAT YOUR COMPENSATION HAS BEEN READJUSTED UNDER 39 U.S.C. 6423. VIEW OF OUR DECISION OF MAY 1, 1969, YOU CONTEND THAT IT WAS INCUMBENT UPON THE POST OFFICE DEPARTMENT, AT THE TIME OF SUCH AMENDMENTS, TO ALSO INCLUDE A WAGE RATE DETERMINATION IN EACH OF YOUR CONTRACTS AND TO INCREASE YOUR COMPENSATION SO AS TO REIMBURSE YOU FOR DIFFERENCES IN WAGE PAYMENTS, PRESUMABLY THE DIFFERENCE BETWEEN THE RATES SET OUT IN SUCH DETERMINATION AND THE RATES YOU ARE NOW PAYING.

WE MUST ADVISE THAT THE RATIONALE OF OUR DECISION OF MAY 1, 1969, WAS DIRECTED TO THE AMENDMENT OF CONTRACTS WHICH WERE NOT SUBJECT TO THE SERVICE CONTRACT ACT AT THE TIME OF THEIR AWARD OR LAST RENEWAL. SINCE YOUR CONTRACTS WERE SUBJECT TO THE SERVICE CONTRACT ACT AT DATE OF LAST RENEWAL OUR DECISION HAS NO ANALOGY WITH, OR APPLICATION TO, YOUR CONTRACTS.

YOUR FINAL QUESTIONS ARE WHETHER THE CONTRACTING OFFICER ACTED PROPERLY IN IGNORING COST FIGURES YOU SUBMITTED ON POD FORM 5478, IN SUPPORT OF YOUR REQUESTS FOR CONTRACT PRICE ADJUSTMENTS; IN SUBSTITUTING CONTRACT PRICES LESS THAN THOSE INDICATED BY YOUR COST FIGURES; AND IN ADVISING YOU THAT HE WOULD ADVERTISE FOR BIDS ON THE ROUTES IF YOU DID NOT CONSENT TO RENEWAL OF YOUR CONTRACTS AT THE CONTRACTING OFFICER'S PRICES.

THESE QUESTIONS ARE ESSENTIALLY THE QUESTIONS CONSIDERED BY THE POST OFFICE DEPARTMENT BOARD OF CONTRACT APPEALS IN 1966 AND 1967 IN DOCKET NOS. 250, 251, 252 AND 267. WITH ITS DECISION OF OCTOBER 30, 1968, THE BOARD FILED, AMONG OTHERS, THE FOLLOWING FINDINGS OF FACT:

"APPELLANT, IN CONNECTION WITH HIS APPLICATIONS FOR INCREASED PAY, FILED FORMS 5478.

"THE CONTRACTING OFFICER RECOMMENDED THE ALLOWANCE OF MOST OF THE INCREASES IN PAY SOUGHT BY APPELLANT, BUT INDICATED THAT THE RESULT OF DOING SO WOULD BE TO MAKE THE ROUTES NONCOMPETITIVE REQUIRING THE READVERTISING OF THOSE ROUTES AT THE EXPIRATION OF THE THEN CURRENT CONTRACTS.

"DEPARTMENT HEADQUARTERS INDICATED TO THE CONTRACTING OFFICER THAT THE RECOMMENDED INCREASES IN PAY WERE EXCESSIVE AND SUGGESTED THAT APPELLANT BE ALLOWED APPROXIMATELY $10,000 ON AN INTERIM BASIS FOR ALL ROUTES.

"AT A MEETING HELD IN THE OFFICE OF THE CONTRACTING OFFICER ON APRIL 25, 1967, THE PARTIES NEGOTIATED AN INCREASE IN COMPENSATION WHICH WAS APPROXIMATELY $10,000.

"AT THE APRIL 25, 1967, MEETING THE CONTRACTING OFFICER'S REPRESENTATIVES INDICATED THAT INCREASED PAY IN EXCESS OF APPROXIMATELY $10,000 PER ANNUM WOULD PREVENT RENEWAL OF THE CONTRACTS AND WOULD REQUIRE THAT THE ROUTES IN QUESTION BE ADVERTISED FOR COMPETITIVE BIDS.

"READVERTISING A ROUTE DOES NOT NECESSARILY DEPRIVE A CURRENT CONTRACTOR OF THE ROUTE BECAUSE HE IS ELIGIBLE TO SUBMIT A BID WHEN THE ROUTE IS READVERTISED, IF HE IS IN OTHER RESPECTS QUALIFIED.

"AT THE APRIL 25, 1967, MEETING NO DURESS, COERCION OR UNDUE INFLUENCE OF ANY KIND WAS EXERTED UPON THE APPELLANT. ON THE CONTRARY, MANY SUGGESTIONS WERE MADE IN AN EFFORT TO BENEFIT THE CONTRACTOR, WHOSE SERVICES ARE HIGHLY REGARDED BY OFFICIALS OF THE PHILADELPHIA REGION.

"THERE IS NO PERSUASIVE OR CREDIBLE EVIDENCE OF ANY MISCONDUCT ON THE PART OF ANY POSTAL EMPLOYEE OR OFFICIAL, BUT THERE IS AMPLE EVIDENCE OF PATIENT AND CONSIDERATE TREATMENT OF APPELLANT BY POSTAL PERSONNEL.

"FACED WITH THE ALTERNATIVES OF (1) HAVING TO COMPETE WITH OTHER BIDDERS FOR THE CONTRACTS TO PROVIDE SERVICE OVER THESE ROUTES AND (2) AMENDING THE FORMS 5478 SO AS TO REDUCE THE AMOUNT OF THE INCREASES ORIGINALLY ASKED, APPELLANT, OF HIS OWN VOLITION, CHOSE THE LATTER COURSE. APPELLANT AMENDED, SIGNED AND RETURNED THE FORMS ON MAY 3, 1967."

UNDER THE TERMS OF THE DISPUTES CLAUSE IN EACH OF YOUR CONTRACTS, YOU AGREED THAT THE FACTS FOUND BY THE BOARD WOULD BE FINAL AND CONCLUSIVE UNLESS THEY WERE DETERMINED BY A COURT OF COMPETENT JURISDICTION TO HAVE BEEN FRAUDULENT OR CAPRICIOUS OR ARBITRARY OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR AS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. THESE FACTUAL FINDINGS BY THE BOARD ARE BINDING ON THIS OFFICE, JUST AS THEY ARE UPON YOU AND UPON THE COURTS. WE FIND NOTHING IN THE PRESENT RECORD BEFORE THIS OFFICE WHICH WOULD REQUIRE OR JUSTIFY A CONCLUSION THAT THE FINDINGS SET OUT ABOVE SHOULD NOT BE CONSIDERED FINAL AND CONCLUSIVE. WE ARE THEREFORE, UNABLE TO CONCLUDE THAT THE CONTRACTING OFFICER ACTED IMPROPERLY IN THE NEGOTIATION OF PRICE INCREASES ON THE LAST RENEWAL OF YOUR CONTRACTS.