Is a contractor entitled to be paid for performing additional work if that work can be accomplished within the contract’s delivery schedule?  The answer is a resounding yes.  There is no such thing as non-compensable “extra time” under a Postal Service HCR contract.  While some officials may believe a contractor is not entitled to additional pay for service changes that do not extend the delivery schedule, this is a dangerous misunderstanding of HCR contracts, as established by a recent case decided by the U.S. Court of Federal Claims.

In Keeter Trading Company, Inc. v. United States, 85 Fed. Cl. 613 (2009), postal officials contended that the contractor needn’t be paid for additional work because it was already performing all of the required work ahead of schedule.  Keeter, the contractor, held an HCR contract requiring him to receive, sort, and deliver mail to 250 boxes in Yellville, Arkansas at an annual rate of about $39,000.  A dispute arose when the contracting officer issued a Route Service Order which instructed Keeter to serve an additional 52 mailboxes along a branch of his existing route.  The contracting officer unilaterally determined that the change would result in a $1,087 increase in the contract price.

Keeter, however, did not accept this edict.  Keeter contended that the additional work associated with the new boxes should be priced according to the formula provided in the contract for servicing additiional boxes.  But the Postal Service did not apply the formula becuase the local Postmaster observed that Keeter “regularly had extra time during the period covered by his schedule.”  Similarly, the Administrative Official insisted that Keeter should have no additional time added to his contract for the new boxes because he only used 45 minutes of the one hour and 15 minutes already allotted for casing the mail.  In addition, postal officials noted that the contract allotted one hour to drive between two points on the route.  Since Keeter only used 30 minutes of that time, no extra time should be added to the schedule for additional mileage.

Keeter strenuously disagreed with the Postal Service’s contention that he was not entitled to additional pay and time for the additional work.  He wrote the following to the Postal Service:

[The AO] is saying that I am being allowed from 8:30 to 9:30 to get from Summit to Peel and it doesn’t take that long.  It doesn’t, but why does that matter?  I am a contractor.  I am not an hourly employee.  I am getting paid to perform a task within my own expenses.

Keeter went on to note that he found a way to perform the route faster by making an extra trip along the way, but “never dreamed this would be used against me.”  In addition, Keeter noted that when casing the mail, unlike the other contractors, he worked straight through without socializing or taking smoking breaks.  The court agreed with Keeter that no contractual provision allowed the Postal Service to disregard the price adjustment formula simply because there is “extra time” in the schedule unused by the contractor.

In retaliation for Keeter’s refusal to go along with the AO’s edict, the AO began issuing daily deficiency notices under PS Form 5500 for “failure to observe contract schedule.”  This alleged failure consisted of Keeter’s arriving and leaving the post office earlier than his scheduled time.  The court rejected these deficiency notices, noting that Keeter had been arriving and leaving the post office earlier than scheduled for the previous one and a half years without any prior concern.  In addition, the contracting officer confirmed that there was nothing wrong with the contractor arriving early, getting his work done, and leaving early.  This was further confirmed by the standard practice in the post office, where carriers were allowed to leave the post office for their routes by 8:00 a.m. if the local newspaper had not arrived by then.

At trial, the Postal Service defended the actions of its officials by contending, among other things, that the contract’s price adjustment formula for delivery to additional boxes was optional.  The court, however, found that the Postal Service’s argument made no sense and application of the contract formula was mandatory.  The court also noted that the policy provision the Postal Service attempted to rely upon for its position could not override a mandatory contract provision.

In the end, the court found that four separate postal officials, including procurement officials, acted in bad faith toward Keeter, entitling Keeter to an award of damages for breach of contract, interest, and lost profits.  In addition, Keeter is eligible to recover attorney fees under the Equal Access to Justice Act.

All of this started from the errant assumption that an HCR contractor had “extra time” in its contract and therefore needn’t be compensated for the imposition of additional work that could be accomplished within the contract schedule.