Board of Contract Appeals General Services Administration Washington, D.C. 20405 ____________________ December 4, 1998 ____________________ GSBCA 14682-RELO In the Matter of TERRY L. HANSEN Terry L. Hansen, Shreveport, LA, Claimant. Lillian Gonzalez, Director, Department of Defense Education Activity, Arlington, VA, appearing for Department of Defense. NEILL, Board Judge. Claimant, Mr. Terry L. Hansen, is a former employee of the Department of Defense Dependents School (DoDDS). In 1987, he accepted a teaching post at the Wiesbaden Middle School in Germany. He agreed to a two-year tour of duty and signed the required transportation agreement according to which he would repay costs associated with his move to Germany in the event he failed to remain in Government service for a period slightly in excess of one school year. Mr. Hansen did not remain in Government service for the minimum period stated in the agreement. The Department of Defense subsequently demanded repayment of the costs of moving him to his assignment. Mr. Hansen does not deny liability for some of these expenses but has protested the specific amount sought. His efforts to resolve his disagreement with the agency have proven unsuccessful. Because the agency is unable to verify or document the amount of its claim, we settle this dispute between Mr. Hansen and his agency by adjusting downward the amount in controversy to the figure proposed by Mr. Hansen himself. We are persuaded, based upon the rationale provided by him, that the figure he proposes is fair and reasonable. Background On August 6, 1987, Mr. Hansen was issued orders authorizing travel to Wiesbaden, Germany. The orders provided for the shipment and non-temporary storage of his household goods and for shipment of his 1985 Nissan automobile. They specified that the household goods to be shipped and stored could not exceed 18,000 pounds. Block 18 of the orders showed a total of $13,000 in estimated costs. The costs were broken out as follows: Per diem $550, Travel $48.15, and Household Goods $11,875. Prior to receiving his orders, Mr. Hansen executed a transportation agreement under the terms of which he agreed to repay the Government for the costs of transportation and subsistence, as well as for movement and storage of his household goods and personal effects to his new duty station, in the event he did not serve for a minimum period of slightly more than one school year. On November 7, 1987, shortly after arrival in Wiesbaden, Mr. Hansen resigned his post for personal and professional reasons. DoDDS declined to waive the provisions of his transportation agreement. Thus began a long and convoluted story of the Government's efforts to seek reimbursement from Mr. Hansen pursuant to his transportation agreement. At the time of Mr. Hansen's resignation, personnel services for DoDDS employees in the region were maintained by the Army s Wiesbaden Civilian Personnel Office. In February 1988, this personnel office wrote to the transportation office for the military community in Wiesbaden for a determination of Mr. Hansen's liability to the Government under the transportation agreement. Apart from some invoices regarding non-temporary storage of the employee's household goods, the transportation office was unable to provide any information concerning his liability under the transportation agreement. In replying to the Personnel Office, the transportation office explained that all other records concerning Mr. Hansen's expenses were maintained by the 266th Theater Finance Command (TFC) in Heidelberg. The Army s Civilian Personnel Office in Wiesbaden, accordingly, forwarded Mr. Hansen's case to the 266th TFC for collection action. By letter dated May 16, 1988, the 266th TFC made its first demand to Mr. Hansen. The letter explained that the Command had received a statement of liability for $13,000 for violation of the transportation agreement. Mr. Hansen was advised that if payment was not received within thirty days, interest and late charges "may" be assessed in accordance with the Debt Collection Act as implemented through Army regulations. The letter also advised that, if payment was not received within sixty days, this debt would be forwarded to the Army Finance Accounting Center in Indianapolis, Indiana for collection through other Government agencies or civilian collection agencies. Another demand for $13,000 was made by the 266th TFC four months later in a letter dated September 16, 1988.[foot #] 1 In the ----------- FOOTNOTE BEGINS --------- [foot #] 1 Other documentation in the agency report refers to this demand letter, but no copy of the letter itself has been provided. ----------- FOOTNOTE ENDS ----------- absence of any reply to this letter, the 266th TFC repeated its demand for $13,000 a little over six months later in a letter dated March 28, 1989. No claim for interest was asserted in this letter. It simply warned that the case would be forwarded to the DoDDS office in Alexandria, Virginia, if payment was not made within thirty days. The 266th TFC did not follow through on this warning. Instead, it retained the case in Heidelberg. The matter apparently lay dormant until September 11, 1992. At that time, the 266th TFC once more wrote to Mr. Hansen, this time to advise him that it had made an offset against his continued indebtedness. The offset was in the amount of $22.61 which represented a FICA/Medicare refund to which he would otherwise have been entitled. No mention is made of any claim for interest in the notice of offset. Sometime in the following year, 1993, the 266th TFC finally sent Mr. Hansen's case forward. The case was not referred to DoDDS, however, but to the Defense Finance and Accounting Service (DFAS) office in Denver, Colorado. At that time, DFAS received what the 266th TFC later described as "a complete packet" establishing a debt against Mr. Hansen. Sometime thereafter (material in the record does not indicate precisely when), DFAS advised Mr. Hansen by letter that he owed the Department of Defense $13,000 in shipping costs plus $2,847.60 in interest. Mr. Hansen contends that he tried to get DFAS to help him resolve the matter but all he received in return were monthly form letters. By letter dated September 2, 1996, he filed a formal protest of the claim with DFAS. In mid-September, DFAS forwarded the letter of protest to the 266th TFC for further information and comment. In early October 1996, the 266th TFC wrote to DFAS, explaining that it could not respond to the letter of protest without having the "complete packet" of materials it had previously furnished to DFAS in 1993. Seven months passed before DFAS responded to this request from the 266th TFC. By letter dated June 10, 1997, DFAS provided another copy of Mr. Hansen's letter of protest and asked the Finance Center to validate the debt and respond to the letter of protest. Nothing in the record, as it currently exists, indicates that DFAS ever received a reply from the 266th TFC. Indeed, other documentation strongly suggests that nothing was received. Sometime in mid-1997, Mr. Hansen retained counsel to assist him in resolving his dispute over the Government's claim for transportation and shipping costs. His attorney sent an inquiry concerning the status of the case to DFAS. DFAS replied by letter dated July 18, 1997. The letter assured the attorney that DFAS had requested DoDDS to review the matter but cautioned that he should allow ninety days for the review to be completed. On March 6, 1998, over seven months later, Mr. Hansen's attorney wrote DFAS to inquire concerning the status of the DoDDS review. We find nothing in the agency report indicating that a reply was ever sent by DFAS to this inquiry from Mr. Hansen s attorney. Instead, the report contains a copy of a memorandum dated March 24, 1998, from DFAS to DoDDS. The subject line of the memorandum reads: "Indebtedness (First Request)." In the text of the memo a DFAS claims examiner explains that an inquiry had been received concerning Mr. Hansen's account and his debt of $12,977.39.[foot #] 2 Copies of the debtor's correspondence were said to be attached to this memorandum. DoDDS was asked to assist in the review of Mr. Hansen s case since DFAS did not have "documentation or expertise to answer the debtor's technical questions." Slightly over four months later, by memorandum dated July 30, 1998, DoDDS replied to DFAS that it had no records regarding Mr. Hansen since, at the time he resigned, all personnel services for DoDDS employees were provided by the Army Civilian Personnel Office at Wiesbaden. Thereafter, his records should have been sent to the National Personnel Records Center in St. Louis, Missouri.[foot #] 3 Nevertheless, based upon a review of the materials furnished by DFAS, DoDDS opined that the records, if not already destroyed, were maintained by the 266th TFC in Heidelberg. Also on July 30, 1998, DoDDS replied directly to Mr. Hansen. In a brief memorandum to him, the chief of the Personnel Center explained that DoDDS had no records relating to the Government's claim and that any concern he had regarding this claim should have been addressed to the DoDDS transportation management representative, which in this case was the Transportation Office in Wiesbaden. The chief of the Personnel Center provided Mr. Hansen with the address and telephone number of that office. He also advised that if Mr. Hansen disagreed with the agency's adjudication of his claim, this Board could be requested to review the matter. Shortly thereafter, by letter dated August 19, Mr. Hansen formally requested the Board to undertake such a review. Discussion Mr. Hansen does not deny that he is indebted to the Government as a result of his resigning from his teaching position in Wiesbaden. Rather, he objects to the amount of the assessment against him. In his letter of protest to DFAS, as well as in his submission to the Board for this case, he objects ----------- FOOTNOTE BEGINS --------- [foot #] 2 We understand this figure to represent a claim for $13,000 without interest, less the earlier offset of $22.61. [foot #] 3 The record contains copies of an inquiry sent to the Records Center in August 1989 by the 266th TFC. The inquiry does not appear to have produced any files or information other than Mr. Hansen s last known address. ----------- FOOTNOTE ENDS ----------- to the use of the $13,000 figure, which was nothing more than the total of the estimated costs shown on his travel orders for per diem, travel, and shipment and storage of household goods. He points out that the estimate of $11,875 for household goods was apparently based on an allowable maximum of 18,000 pounds at a per pound rate of sixty-six cents. His own household goods, when put into storage, weighed no more than 4337 pounds,[foot #] 4 and the specification weight of his automobile is 3538 pounds. Together they total 7875 pounds, which is less than forty-four percent of the allowable maximum of 18,000. For this reason, Mr. Hansen objects strongly to an alleged debt based on the assumption that he shipped 18,000 pounds. While Mr. Hansen does not object to the application of the sixty-six cent per pound rate to the shipment of his household goods, he objects to use of this rate for shipment of his automobile. He explains that to ship his car back to the United States from Germany he paid a rate of approximately twenty-eight cents a pound. As to travel and per diem, Mr Hansen contends that the only cost involved in these categories was that relating to his air travel. He writes that a one-way commercial fare from the United States to Germany is approximately $650. However, because his flight to Germany was on a military chartered aircraft, he contends that the cost for his flight should be less than that figure. He has offered, therefore, to pay $500 as the cost of this flight. In his letter of protest sent to DFAS in 1996, Mr. Hansen proposed a settlement of the Government's claim along the lines set out above. Given the information we have been able to glean from the agency's report, it is more or less clear why he has not received a response to his proposal from the Government. The Government is apparently unable to verify and substantiate the amount of its claim. Indeed, the initial use of the figure of $13,000, based solely on the estimated costs listed in Mr. Hansen's travel orders, suggests to us that there may well have been a serious problem in substantiating the specific amount of this claim from the start. The inquiry sent by the Wiesbaden Civilian Personnel Office to the local transportation office produced only limited documentation and the suggestion that any additional documentation should be sought from the 266th TFC office in Heidelberg. At that point, the Personnel Office appears to have given up any effort on its part to assemble a specific claim and instead passed the entire matter on to the Heidelberg office. It was this office which then elected to assert a claim based on the $13,000 estimate in Mr. Hansen s ----------- FOOTNOTE BEGINS --------- [foot #] 4 Among the few invoices provided to the Wiesbaden Civilian Personnel Office by the local transportation office is an invoice for storage. The invoice is contained in the record and states that the weight of Mr. Hansen's household goods is 4337 pounds. ----------- FOOTNOTE ENDS ----------- travel orders rather than on documentation which both the Transportation Office and the Army s Civilian Transportation Office in Wiesbaden believed were available at the Heidelberg office. The agency report in this case includes DoDDS' entire case file on Mr. Hansen. It is a sparse file and, according to the agency representative, consists of nothing more than what has been provided by DFAS -- presumably earlier this year when DFAS sought DoDDS' assistance in reviewing the claim. We assume this was the material which DFAS had previously received in the "complete packet" the 266th TFC claimed to have forwarded to DFAS in 1993. Ironically enough, when DFAS turned to the 266th TFC in 1996, it was told that it would have to provide the 266th TFC with a copy of this packet before the 266th TFC could provide any comment. The conclusion we draw from this request is that, by 1996, the 266th TFC had lost track of or destroyed its own files on Mr. Hansen. In short, the truth of the matter appears to be that the Government's original claim for $13,000 simply cannot be verified or substantiated at this time. In asking us to review this matter, Mr. Hansen states: "For years I have been trying to get someone in DOD to review this claim, as I believe it to be excessive." He also states that he asked DFAS for help in resolving the claim but received only monthly form letters in reply. The record contains no evidence of any informal overtures to DFAS on Mr. Hansen's part prior to his formal letter of protest of September 2, 1996. Nevertheless, even if Mr. Hansen remained silent until that time, that hardly excuses the Government from its responsibility of maintaining the documentation necessary to verify and support what it has continued to treat as an outstanding claim. Statute provides that "records pertaining to claims and demands by or against the Government of the United States . . . may not be disposed of . . . until the claims, demands, and accounts have been settled and adjusted in the General Accounting Office, except upon the written approval of the Comptroller General of the United States." 44 U.S.C. 3309 (1994); see Bart J. Dubinsky, GSBCA 14546-RELO, 98-2 BCA 29,840; Tri-State Motor Transit Co., GSBCA 13877-RATE, 98-1 BCA 29,406. Despite the Government's inability to substantiate the amount it is claiming, Mr. Hansen admits liability under his transportation agreement for the cost of shipping his household goods and sending him to Germany. We, therefore, believe that the equitable settlement of this disputed claim would be to reduce the Government's claim to the reasonable parameters proposed by Mr. Hansen himself. For the cost of shipping 4337 pounds of household goods at a per pound rate of sixty-six cents, Mr. Hansen should pay the Government $2862.42. For the shipment of his car, the per pound rate of twenty-eight cents appears realistic, based as it is on Mr. Hansen's actual experience in returning the car to the United States. For shipping a car weighing 3538 pounds, he should pay the Government $990.64. Finally, for the cost of flying to Germany, he should pay the Government $500. Since the Government has already made an offset of $22.61, we find the total due the Government at this time to be $4330.45. What of the claim for interest said to have been sought by DFAS? Given the circumstances of this case, we deem it inappropriate that Mr. Hansen pay any interest on his debt. The first demand of the 266th TFC sent to Mr. Hansen in May 1988 is, at best, ambiguous on the matter of interest. It asserts the right to impose interest and could perhaps be interpreted as, at least, a threat to collect interest if payment were not made within thirty days. Nevertheless, the statement that interest may be assessed leaves the matter unresolved. The lack of any reference to interest in the demand letter of March 28, 1989, and in the notice of offset of September 11, 1992, convinces us that the ambiguous wording of the initial demand letter should not be read as a demand for interest. It is indeed true that under the Debt Collection Act of 1982, the agency was required at the time to seek interest on outstanding debts owed by individual persons to the Government. 31 U.S.C. 3717(a)(1) (1988). Nevertheless, under the Act, interest does not accrue until notice of the amount due is actually provided to the debtor. Id. 3717(b). While this provision of the Act itself refers merely to notice of the amount due, the Federal Claims Collection Standards implementing the Act are much more explicit in this regard. They require that the initial demand letter inform the debtor of the basis for the indebtedness and whatever rights the debtor may have to seek review within the agency. The letter should also inform the debtor of the applicable standards for assessing interest, penalties and administrative costs. 4 CFR 102.2(b) (1988). The 266th TFC demand letter of May 16, 1988, to Mr. Hansen hardly measures up to these requirements. In its report to us, the agency has not provided copies of any demand letter(s) which DFAS may have sent to Mr. Hansen after action on his debt was transferred by the 266th TFC to the DFAS Denver office in 1993. We, therefore, are unable to determine whether a proper demand for interest was ever made by DFAS after it assumed responsibility for collecting the debt. All the Government has proven to us through the agency report is that, by September 2, 1996, when Mr. Hansen submitted his formal protest letter, he had received a letter from DFAS informing him that he owed $13,000 plus $2847.60 in interest. As for the period following Mr. Hansen s protest letter of September 2, 1996, one certainly cannot attribute to him responsibility for the continued delay in resolving the Government s claim. Granted, DFAS promptly contacted the 266th TFC upon receipt of Mr. Hansen s letter of protest, and the 266th TFC replied within a few weeks. Nevertheless, it was over seven months before DFAS responded to this reply from the 266th TFC and, to the best of our knowledge, the 266th TFC never has responded to this belated reply from DFAS. Even more troublesome is the delay in responding to the concerns expressed by Mr. Hansen s attorney. In mid-1997, he wrote to DFAS and was assured at that time that DoDDS had been asked to review the matter but that this review would take ninety days. Not until the following year, however, when the attorney again inquired concerning the status of the matter, did DFAS actually pass the matter on for DoDDS review. Four months passed before DoDDS provided a reply to DFAS. The reply of DoDDS to DFAS and the memorandum DoDDS sent directly to Mr. Hansen in July 1988 have done nothing to resolve matters. By now DFAS knows all too well that a referral of the matter to the 266th TFC would be futile. As for DoDDS' suggestion that Mr. Hansen contact the transportation office in Wiesbaden, that would only mean embarking on a course which the Wiesbaden Civilian Transportation Office attempted to follow ten years ago without any notable success. In short, given the agency s failure to demonstrate that a proper demand was ever made for interest and the delay on the part of the Government either to verify or to negotiate a fair settlement of the claim, we conclude that Mr. Hansen need not pay any interest on the amount which we, in the exercise of our claim settlement authority under section 3702 of title 31 of the United States Code, now find to be due. This, of course, does not mean that the agency will not be entitled to interest on the amount found due herein if Mr. Hansen fails to make prompt payment. Pursuant to the terms of Mr. Hansen s transportation agreement, we find him indebted to his former agency in the amount of $4330.45. ____________________________ EDWIN B. NEILL Board Judge