In the Matter of the Proposed Suspension of May 13, 1982

 AUSTIN HATCHER, JR.

 and

 M. L. HATCHER PICK-UP AND DELIVERY
 SERVICE, INC.
 3181 Patterson Street
 at
 Greensboro, NC 27407 

 P.S. Docket No. 12/177

 APPEARANCES FOR RESPONDENT:
 Jamie S. Gorelick, Esq.
 Seth P. Waxman, Esq.
 Miller, Cassidy, Larroca & Lewin
 2555 M Street, N.W.
 Washington, DC 20037

 APPEARANCE FOR POSTAL SERVICE:
 Robert A. Scherr, Esq.
 Assistant General Counsel
 Transportation Division
 U. S. Postal Service
 Washington, DC 20260

 Cohen, James A.  

I. STATEMENT OF THE CASE

By letter dated November 6, 1981, the Assistant Postmaster General, Mail Processing Department, notified Austin Hatcher, Jr., (the Respondent) that he, M.L. Hatcher Pick-up and Delivery Service, Inc. (Hatcher) and its officers, and any other company in which Respondent has a substantial interest or control, were suspended from contracting with the U. S. Postal Service for a temporary period not exceeding 120 days. The letter alleged, as cause for the suspension, that Respondent falsely represented that team drivers would be used during the renewal period of Highway Contract Route Number 01112, and that, relying on this representation, the Postal Service paid him additional money under the contract. The letter advised that "this matter is currently being investigated by the Office of the United States Attorney, Boston, Massachusetts, with a view toward determining whether the matter would be presented to a grand jury for appropriate indictment" and that the maximum 120 day suspension period "may be extended for a further 120 days if a debarment proceeding or prosecutive action is still pending."

By letter dated November 25, 1981, Respondent appealed the suspension and requested an evidentiary hearing as authorized by 39 C.F.R. § 957.27(c). The request for a hearing was granted and the Postal Service agreed to make certain witnesses available to Respondent for depositions. However, on December 30, 1981, the Postal Service filed a Notice of Non-disclosure of Evidence which stated that, based upon a letter from the United States Attorney, District of Massachusetts, it "declines to make any Postal Service witnesses available for interrogation or to produce any other evidence in this matter." The notice attached the referenced letter from the United States Attorney, dated December 22, 1981, which stated, in part, that "it is imperative that evidence in this matter not be disclosed pending final resolution of the Grand Jury's inquiry and any resultant criminal charges."

On December 30, 1981, the Postal Service filed a Motion for Summary Denial of Appeal. Respondent filed an opposition thereto on January 21, 1982, which argued his right to a full evidentiary hearing.

At a prehearing conference held with the parties on February 9, 1982, the Postal Service was directed to produce the evidence supporting the suspension for the Judicial Officer's in camera inspection, and to give Respondent additional specified information regarding the alleged misrepresentation as to the use of team drivers. This information was subsequently furnished. On February 10, 1982, the Postal Service filed its in camera evidence.

By letter dated February 26, 1982, Respondent was notified by the Assistant Postmaster General, Mail Processing Department, that effective March 5, 1982, the suspension would be extended for another 120 days "because the investigation by the Office of the U. S. Attorney and any proceedings which may follow from the . . . irregularities have not been completed. . . ."

At a prehearing conference held with the parties on March 31, 1982, Respondent was advised that he would be given the opportunity to present in camera rebuttal evidence and to submit a brief on its argument that the suspension constituted a de facto debarment. Respondent filed his in camera evidence and memoranda on de facto debarment and "further allegations" on April 13, 1982.

Also on April 13th, Respondent filed a letter requesting that the Postal Service's notices of non-renewal on Contract Routes 27091-27094 be stayed pending a decision on the suspension. As directed by Order dated April 16, 1982, the parties filed memoranda on the Judicial Officer's authority to grant this request. The Postal Service also filed responses to Respondent's memoranda on de facto debarment and "further allegations."

II. PROCEDURAL ISSUES

Respondent has raised a number of due process issues regarding this appeal, which are addressed below.

Respondent argues that the present suspension constitutes a de facto debarment and therefore entitles him to a full evidentiary hearing. The Postal Service contends, however, that the suspension is not a de facto debarment.

Postal Service regulations define "debarment" as "an exclusion from Government contracting and subcontracting for a reasonable, specified period of time . . ." and "suspension" as "a disqualification from Government contracting and subcontracting for a temporary period of time." Postal Contracting Manual (PCM) 1-605.3 states that suspended firms and individuals "shall be subject during the period of suspension to the same restrictions, conditions, and penalties set forth in 1-603," which, in turn, sets forth the "Treatment to be Accorded Firms or Individuals and their Affiliates in Debarred Status." These provisions require the conclusion that a suspension by the Postal Service is intended to be, and, in terms of impact constitutes, a temporary debarment. (Cf. Horne Brothers, Inc. v. Laird, 463 F.2d 1268, 1271 (D.C. Cir. 1972); Peter Kiewit Sons' CO. v. U. S. Army Corps of Engineers, Civ. Action No. 81-3192 (D.D.C. Feb. 26, 1982); and Black's Law Dictionary 1297 (revised fifth edition, 1979), which defines "suspension" as "a temporary cutting off or debarring one. . ."

Postal Service regulations permit a suspended party to request oral argument or a hearing before the Judicial Officer. 39 C.F.R. § 957.27(c). This accords with settled case law which recognizes that such suspensions are subject to due process procedures. Transco Security, Inc. of Ohio v. Freeman, 639 F.2d 318 (6th Cir. 1981); Horne Brothers, Inc. v. Laird, supra; Gonzalez v. Freeman, 334 F.2d 570 (D.C. Cir. 1964). However, a determination that due process applies to suspensions is not dispositive of the procedures required in a given case. Due process "procedures due one person in one situation are not mechanically the same as those due another in a different context. The government interests on the one hand and the individual interests on the other must be balanced . . ." Gonzalez v. Freeman, supra, 334 F.2d at 579. In this regard, a suspension is different from other forms of debarment in that it may parallel an ongoing criminal investigation based upon the same facts. Where disclosure of evidence upon which the suspension is based could compromise that investigation, the balancing of public and private interests permits less than a full evidentiary hearing. As the Court of Appeals for the D.C. Circuit has noted:

"There may be reasons why the Government should not be required to show any of its evidence to the contractor, particularly reasons of national security, or, more likely, the concern that such a proceeding may prejudice a prosecutorial action against the contractor. The Government may also be concerned that a suspended contractor may seek a proceeding not so much to obtain reinstatement as a bidder, but in order to obtain a discovery not generally provided to criminal defendants." Horne Brothers, Inc. v. Laird, Laird, 463 F.2d at 1271.

The court also stated that "where substantial Government interests would be prejudiced even by a disclosure of enough facts to show 'adequate evidence' for the suspension . . . an appropriate official of the Government, one vested with sufficient discretionary power, must make a formal determination that significant injury would result if a hearing were to be held . . ." and that in such circumstances a court - and presumably a reviewing administrative tribunal - "would have latitude to consider the problem of whether "adequate evidence" existed to support the suspension without courting injury to the Government's legitimate interests, by inspection in camera of at least some of the evidence held by the Government." 463 F.2d at 1272. Cf. Nashua Corporation, GSBCA No. 5892, 82-1 BCA § 15,637.

This in camera procedure is implicitly authorized by Postal Service regulations, which allows the Judicial Officer to "Take such other further action as may be necessary to properly preside over the debarment proceeding or suspension proceeding pursuant to § 957.27(c) and render decision therein." 39 C.F.R. § 957.15(j). Similarly, PCM 1-605.1(c) states that "The Judicial Officer shall, upon the basis of the papers submitted or upon other appropriate opportunity to be heard, expeditiously rule upon the validity of the suspension." Cf. Contract Master Services, Inc., P.S. Docket No. 5/18 (August 4, 1976).

In this case, a United States Attorney charged with the ongoing criminal investigation of Respondent stated that "it is imperative that evidence in this matter not be disclosed pending final resolution of the Grand Jury's inquiry and any resultant criminal charges." In view of this strong statement by a responsible Government official, in camera submission by the Postal Service was appropriate.*

After considering the Postal Service's evidence, the Judicial Officer determined that a balancing of public and private interests required disclosure of the in camera documents upon which the Postal Service relied as showing that Respondent represented that team drivers would be used.** Based upon this specific knowledge of the source of the alleged misrepresentation, Respondent submitted his own documentary evidence, also in camera. Both parties' submissions were carefully considered in determining whether adequate evidence existed to support this suspension. "Due process is satisfied by the high level administrative review of adequate evidence." Transco supra, 639 F.2d at 325. Accordingly, this appeal comported with due process protections as recognized in Gonzalez, Horne Brothers and Transco, supra.

Respondent has argued that the notice of suspension was not sufficient to satisfy due process. In Transco, supra, cited by

Respondent, the Court recognized the need to strike a balance between "notice to marshal evidence in their behalf so as to make the subsequent opportunity for an administrative hearing a meaningful one" and "the government's right to protect the secrecy of its ongoing criminal investigation by not disclosing its evidence at this stage of the proceedings." 639 F.2d at 324. In this regard, PCM 1-605.2(a)(1)(ii) states that, in the notice of suspension, "the irregularities should be described in general terms without disclosing the Government's evidence."

In the instant case, the Postal Service's notice, as supplemented by the additional information furnished to Respondent during the course of this proceeding regarding the nature and source of the alleged misrepresentation, was sufficiently specific to enable Respondent to understand and reply to the Postal Service's allegations. Respondent's subsequent in camera submission confirms this conclusion. Accordingly, the notice, as subsequently supplemented, comported with due process requirements.

Respondent argues that the present suspension essentially is based on a dispute as to his obligation to perform under the renewal contract. Respondent therefore concludes that the suspension is improper as not being based upon criminal activity.

PCM 1-605.1, Causes and Conditions for Suspension, provides in part:

"(a) A department head may, where the interest of the Government requires, with the concurrence of the General Counsel, suspend any firm or individual:

(1) Suspected, upon adequate evidence, of -

(i) Commission of fraud or a criminal offense as an incident to obtaining, or attempting to obtain, or in the performance of a public contract;

(ii) Violation of the Federal antitrust statutes arising out of the submission of bids and proposals; or

(iii) Commission of embezzlement, theft, forgery, bribery, falsification, or destruction of records, receiving stolen property, or any other offense indicating a lack of business integrity or business honesty, which seriously and directly affects the question of present responsibility as a Government contractor; or

(2) For other cause of such serious and compelling nature, affecting responsibility as a Government contractor, as may be determined by the department head to warrant suspension. A pending hearing for debarment may be a cause of such serious and compelling nature as to warrant suspension.

(b) A suspension invoked by another agency of Government may be the basis for the imposition of a concurrent suspension by a department head."

Respondent cites Mesa Contractors, et al., P.S. Protest Nos. 80-20 and 80-22 (July 29, 1980), for the proposition that the above section limits the imposition of a suspension to causes involving criminal activity. In Mesa Contractors, the Associate General Counsel, Office of Contracts and Property Law, looked to the debarment and suspension provisions of the PCM in order to flesh out the meaning of "integrity" for purposes of contracting officer responsibility determinations. In so doing, he characterized PCM 1-605.1(a)(iii) as defining "lack of business integrity . . . in an exclusively criminal context." (At page 5.) He did not, however, cite the remaining portions of the section.

These remaining portions make clear that much more than criminal activity is contemplated as cause for suspension. This conclusion is confirmed by 39 C.F.R. § 957.3(e), which defines "suspension" as disqualification "because a concern or individual is suspected upon adequate evidence of engaging in criminal, fraudulent, or seriously improper conduct."

In any event, Respondent's position that this matter involves nothing more than a contract dispute is rejected. The primary consideration in this case is not, as Respondent would argue, whether the renewal contract constituted a new agreement which did not incorporate Respondent's prior obligation to use team drivers. Characterization of the renewal contract as a new or old agreement is irrelevant to the allegation that Respondent induced the Postal Service to renew the contract at an increased cost by representing that team drivers would be used. This allegation removes the facts in dispute from the area of contract interpretation into that of misrepresentation and, perhaps, criminal conduct. Such an allegation, if supported by the record, is certainly of a sufficient "serious and compelling nature, affecting responsibility as a Government contractor" to constitute cause for suspension under PCM 1-605.1(a)(2).

III. FINDINGS OF FACT

The following findings of fact are based upon the record, including the in camera submissions of both parties.

1. Respondent is vice president of Hatcher, a family owned and operated trucking company located in Greensboro, North Carolina, which does business with the Postal Service as a mail transportation contractor (Affidavit of Austin Hatcher, Jr., dated April 9, 1982).

2. Respondent is the Hatcher officer primarily responsible for Postal Service contracting and personally conducted all negotiations and completed all forms relating to the renewal of Contract Route No. 01112. (Id.)

3. Contract Route No. 01112 ("the contract"), a contract for the transportation of mail between Springfield, Massachusetts, and Greensboro, North Carolina, was originally awarded to Hatcher on May 18, 1976. (In camera.)

During 1979, the Department of labor issued regulations which resulted in increased labor costs for the use of team drivers. (In camera.) As a result, on November 16, 1979, Respondent sent a letter to the Postal Service Transportation Management Office, Springfield, Massachusetts, seeking "adjustment for labor" under the contract. The letter attached a completed PS Form 7653, "Cost Statement Highway Transportation Contracts", which claimed $158,975 in annual labor cost based on the new rates for team drivers. Specifically, this labor cost was figured on 22, 646 hours at $7.02 per hour.

5. As a result of the increased labor costs for team drivers, the Postal Service allowed the contractor an increase of $82,179 per annum under the contract, effective December 8, 1979. (PS Form 7440, "Contract Route Service Order," dated December 7, 1979.) The manager of the Postal Service Transportation Management Office sent Respondent a letter dated December 3, 1979, and signed by Respondent on December 6, 1979, which specified that the increase was "for the compliance with the Department of Labor Team Driver regulations."

6. After negotiation with Respondent, the Postal Service renewed the contract, effective December 31, 1979 through June 30, 1981. (Transportation Service Renewal Contract signed by contracting officer on January 28, 1980.) The amount of the renewal contract was determined by cost data furnished by Respondent, as reflected by a completed PS Form 7468-A signed by Respondent on January 25, 1980.

7. Labor cost is identified on this form as $246,879 per annum based on 35,168 hours at a rate of $7.02 per hour.

8. The labor cost specified on this form, when compared with that specified on Form 7463 dated November 15, 1979, supra, constitutes adequate evidence to support a suspicion that Respondent's claimed annual labor cost of $246,879 during the renewal term was based on the use of team drivers. This suspicion is also supported by the understanding of the parties as gleaned from the record.

9. The record contains adequate evidence to support the suspicion that team drivers were not used during at least the major portion of the renewal period. (In camera.)

IV. DECISION

This record contains adequate evidence to support a suspicion that Respondent induced the Postal Service to pay additional compensation during the renewal term of Contract Route No. 01112 by representing that team drivers would be used. Respondent's in camera submission is insufficient to rebut this conclusion.

Accordingly, Respondent's suspension was authorized under PCM 1-605.1(a), supra, and is sustained. The period of suspension is authorized under PCM 1-605.2(c), which allows extension of an 120 day suspension for an additional 120 days "upon written determination of the reasons and necessity therefor," and is sustained. Contract Master Services, Inc., P.S. Docket No. 5/18 (January 21, 1977).

In so concluding, no determination need be made as to whether the instant record would support a debarment action or a finding of criminal culpability. Horne Brothers v. Laird, supra, 463 F.2d at 1271 and Transco Security Inc., of Ohio v. Freeman, supra, 639 F.2d at 324. Nor has any determination been made as to whether Respondent violated Department of Labor or Department of Transportation regulations during the renewal term of the contract.

In view of the conclusion that this suspension is sustained, Respondent's request that notices of non-renewal on Contract Routes 27091-27094 be stayed need not be considered.

*Respondent, in requesting permission to submit his own evidence in camera, noted that "the concern that prompted the government's refusal to make its evidence available to the contractor - discovery of its evidence in the potential criminal case - applies equally to Hatcher and warrants submission of Hatcher's evidence without disclosure to the government . . . In light of the potential criminal prosecution here, a protective order preserving the confidentiality of Hatcher's evidence is the accepted practice." (Respondent's Memorandum Re Further Proceedings at Page 10.)

**Other in camera documents were not disclosed.