Board of Contract Appeals General Services Administration Washington, D.C. 20405 ______________________ May 17, 2000 ______________________ GSBCA 15194-RATE In the Matter of DANZAS CORPORATION Thomas Jermann, Vice President, Corporate Services, Danzas Corporation, Bellevue, WA, appearing for Claimant. James F. Fitzgerald, Director, Transportation Audits Division, Office of Transportation and Property management, General Services Administration, appearing for General Services Administration. Col. James F. Quinn, Staff Judge Advocate, Headquarters, Military Traffic Management Command, Department of the Army, Falls Church, VA, appearing for Department of Defense. HYATT, Board Judge. Danzas Corporation has requested the Board's review of the General Services Administration s (GSA s) audit actions on 24 Government Bill of Lading (GBL) transactions. GSA issued overcharge assessments totaling $6,167.85 in connection with these transactions on the ground that requested services were not performed and thus were not properly charged to the Government. Background The transactions in issue involved twenty-four air freight shipments of freight all kinds (FAK) on GBLs issued to Danzas by the Department of Defense (DOD) during the period from June 3, 1996 until May 23, 1997.[foot #] 1 The shipments ----------- FOOTNOTE BEGINS --------- [foot #] 1 The following GBLs are in issue: GBL Number Ship Date Disputed Amount __________ _________ _______________ (continued...) ----------- FOOTNOTE ENDS ----------- originated at McClellan Air Force Base with deliveries to be made at various destinations in the Continental United States. The shipments were moved under Danzas DOD rate tender DZNA 45. Danzas airfreight rate tender number 45 covers door-to-door deliveries of FAK, excepting certain explosives. Appendix B of this tender sets forth various rates for next day, second day, and three-four day deliveries. There is no rate set forth for regular deliveries in a non-specific time-frame. With respect to all of the rates set forth, the tender provides for delivery by 2:30 p.m. Each GBL, either in block 15 or 18, was annotated with a request for NEXT DAY DELIVERY, OVERNIGHT DELIVERY, or NEXT DAY SERVICE. None of the shipments arrived in the time frame requested on the GBLs - many shipments arrived some 3-6 days after shipment. Nonetheless, Danzas submitted bills charging for next day service at the rates set forth in rate tender number 45. DOD paid the full amounts billed. In performing its post-payment audit responsibilities under 31 U.S.C. 3726, GSA s Audit Division (FBA) determined that Danzas was overpaid for these shipments because it had not provided the requested level of service. GSA issued 24 notices ----------- FOOTNOTE BEGINS --------- [foot #] 1 (...continued) 1. G-7532030 06/03/96 $ 698.55 2. G-7532822 06/17/96 $ 229.95 3. G-7532870 06/18/96 $ 113.29 4. G-7534152 07/13/96 $ 402.33 5. G-7534524 07/23/96 $ 237.10 6. G-7534641 07/25/96 $ 204.69 7. G-7534643 07/25/96 $ 99.52 8. G-7534642 07/25/96 $ 87.97 9. M-1126659 08/29/96 $ 235.29 10. M-1127718 09/24/96 $ 115.18 11. M-1130675 12/19/96 $1039.16 12. M-1130821 12/24/96 $ 241.59 13. M-1130822 12/24/96 $ 253.52 14. 1130823 12/24/96 $ 253.52 15. M-1130824 12/24/96 $ 501.24 16. M-1131394 01/16/97 $ 243.99 17. M-1131441 01/17/97 $ 174.42 18. M-1132114 02/06/97 $ 255.12 19. M-1135309 05/05/97 $ 253.19 20. M-1135356 05/08/97 $ 330.86 21. M-1135422 05/09/97 $ 41.48 22. M-1135585 05/14/97 $ 35.09 23. M-1135589 05/14/97 $ 48.65 24. M-1135899 05/23/97 $ 72.15 ----------- FOOTNOTE ENDS ----------- of overcharge, reducing payments to reflect the actual service provided. Danzas submitted reclaims to GSA, challenging the deductions on the ground that the shipments required widebody aircraft, and that many of the DOD destination installations were not located near large commercial airports, so that it was necessary to complete shipments by truck, which made it difficult to meet next day delivery requirements. In addition, Danzas contended that at the time GSA made the deductions Danzas had in effect a rules tender, approved by the Government, which, in paragraph 42, set forth the Danzas policy on service failure adjustments: Except as otherwise provided in this tender, or on tenders governed hereby, the Forwarder assumes no obligation to commence or complete transportation of a shipment within any specific period of time. In the event of a service failure, the maximum adjustment allowed will be 10 percent of the transportation charges on the airbill. Adjustments to accessorial fees will not be allowed. This rules tender had an effective date of May 14, 1997. Discussion Danzas does not assert that it in fact completed the deliveries on a timely basis. Rather, its defenses are predicated on geographic obstacles to next day service with remote installations, and on the service failure language in its rules tender. In rebutting GSA s notices of overcharges, Danzas recalculates the deductions based on its ten percent adjustment policy. The amounts in dispute (set forth in footnote 1) are the amounts sought to be recouped by Danzas, and represent the difference between the overcharges derived from the rates for the actual service provided, which is what GSA and the Military Traffic Management Command (MTMC ) believe should apply, and the next day service rates adjusted downward by ten percent. GSA and MTMC maintain that since the shipments were not delivered in the next day time frames specified, the charges were properly reduced to reflect the fees applicable to two, three, and four day delivery time frames. They also point out that at the time most of the shipments took place (as opposed to when the audit actions occurred), paragraph 42 was not in effect and would not, in any event, limit the government to a ten percent adjustment. In responding to Danzas contentions concerning geographic distances and obstacles, GSA questions the propriety of offering next day service when, as a practical matter, the carrier cannot provide this service. Although there may be delays associated with geographical distances from commercial airports to government installations, this can be accounted for appropriately by other, more straightforward, means, such as by incorporating distance into the transportation rates, assessing beyond charges as other carriers do, or offering more realistic service levels that can actually be accomplished for remote destinations. As to Danzas other argument, asserting that any downward adjustment of its next day rates must be limited to the ten percent adjustment for service failures under its rules tender 100, both GSA and MTMC make the point that this provision, even if applicable, was not in effect at the time the shipments were transported. Between June 3, 1996 and May 14, 1997, Danzas tender rate number 45 referenced DZNA Rules Tender 0001 for rules governing rates, charges and services provided by Danzas. This rules tender expired on January 31, 1991. The replacement rules tender, number 100, which incorporated the ten percent service failure adjustment, did not become effective until May 14, 1997. Thus, no particular rules governing the provision of services applied to the majority of the shipments. Only three shipments were made on or after the effective date of rules tender 100. Clearly, with respect to shipments originating prior to May 14, 1997, GSA s audit action was proper. When a shipper fails to deliver the services promised under a GBL, the contractor is limited to recovery on a quantum meruit basis. See Associated Air Freight, Inc., GSBCA 14908-RATE (May 11, 1999); Universal Transportation & Services, GSBCA 14491-RATE (Apr. 22, 1998). In this case, GSA substituted Danzas non-premium delivery rates (second, third, and fourth day service rates) as applicable. This approach resulted in the proper charges being paid for the services actually provided. With respect to the three shipments ostensibly covered by paragraph 42 of rules tender 100, we are still not persuaded that Danzas may resort to this paragraph in the circumstances presented. Both GSA and MTMC contend that the language in this paragraph is ambiguous, and we agree. The promise to deliver freight in a next day, second third, or fourth day time frame goes to the heart of the agreed-to bargain. It is inherently inconsistent to offer differing rates depending upon the time in transit and then assert that the shipper takes no responsibility for failing to provide premium services, other than a ten percent downward adjustment in premium rates, when those services have been charged for. Moreover, it is not clear what the term service failure includes or would apply to in these circumstances. In general, an ambiguity such as this should be construed against the drafter, which is Danzas. Reading the rate and rules tenders together, a shipper could reasonably conclude that a failure to provide next day services altogether would be remedied by payment of the lower rates applicable to second, third, and fourth day delivery, and that paragraph 42 simply sets forth a remedy for the carrier's failure to provide door-to-door service or to deliver by 2:30 p.m. To the extent a delivery is delayed beyond the fourth day after pick-up, it would make sense to apply the ten percent adjustment to the fourth day rates. This interpretation not only is reasonable, but gives effect to the entire agreement, including the promise to render premium services for the higher prices quoted. GSA thus properly resorted to actual rates with respect to the three shipments originating on and after May 14, 1997. The claim is denied. _________________________________ CATHERINE B. HYATT Board Judge