3083OP

April 14, 1992

Appeal of

DAVID E. MICKEL

Under Contract No. HCR 37339

PSBCA No. 3083

APPEARANCE FOR APPELLANT:

David E. Michel

APPEARANCE FOR RESPONDENT:

L. Donell Blanchard, Esq.

OPINION OF THE BOARD

This appeal is from a Contracting Officer’s decision terminating Appellant David E. Michel’s highway transportation contract for default because of alleged fuel overcharges. The parties elected to have the appeal decided on the record in accordance with 39 C.F.R. §955.12.

FINDINGS OF FACT

1. Appellant entered into a renewal of his highway transportation contract (HCR 37339) with the United States Postal Service (Respondent) for a term from July 1, 1988, through June 30, 1992. The contract required Appellant to provide daily, except Sunday and holidays, headout and return mail transportation service between Chattanooga and Madisonville, Tennessee, with intermediate stops (Appeal File Tab (AF) D).

2. The contract contained PS Form 7407 (Oct. 1986), “Basic Surface Transportation General Provisions,” (GP) which included a standard Claims and Disputes clause (GP clause 2). GP clause 16(a) of the contract permitted Respondent to terminate the contract for default “(2) if the Contractor is the subject to administratively determined violations of the Postal laws and regulations and other laws related to the performance of the service;” and “(7) if the Contractor . . . (c) is not reliable, trustworthy or of good character.” (Id.). However, in accordance with GP clauses 16(c) and 17, if the Contractor is found not to be in default or the default was excusable, the termination is converted into a convenience termination with the contractor entitled to liquidated damages under a formula prescribed in GP clause 12(d). (Id.).

3. By GP clause 11, the parties could mutually agree to compensation adjustments in accordance with Management Instruction PO 530-81-4, as amended, revised, or reissued as of the date of adjustment (id.). As pertinent here, the revised Management Instruction PO 530-89-09 (November 3, 1989), permitted adjustments for changes in fuel costs based on the “actual or prevailing self-service fuel price per gallon.” To obtain an adjustment, the contractor had to submit a fuel certification for the price of all fuel purchased from each supplier during a 28-day period showing the type of fuel purchased, the type of purchase (retail, for example), and the names, locations and phone numbers of the fuel suppliers. The contractor was also required to provide “documentation of the actual price (in the form of receipts/-invoices, etc.)” when deemed necessary or appropriate, but at least once a year. (Respondent’s Supplemental Evidence (Resp. SE) exhibit B).

4. For calculation of fuel cost adjustments, the Management Instruction provided that increases or decreases are to be based on the allowed gallons shown on the “last approved cost statement, multiplied by the average price per gallon for the 28-day period shown on the certification. The average cost per gallon is a weighted average based on the quantity of fuel purchased at each price.” (Id.). The Instruction further provided that the Contracting Officer may verify the contractor’s prices from the suppliers. The Contracting Officer will also aggregate “fuel prices from a reasonable number of sources in general metropolitan areas where contractors purchase fuel to establish prevailing fuel rates.” (Id.).

5. In addition, the Management Instruction provided that to avoid continuous reimbursement to a contractor at a higher rate, all contracts may be reviewed monthly by the contracting officer to identify instances where it is suspected that contractor is being allowed reimbursement for fuel costs greater than those actually being incurred.” (Id.). It also stated that where the amount being “allowed exceeds the current prevailing self service price. . .by at least 3 cents per gallon in the area where the fuel is purchased and at least 60 days have elapsed from the effective date of the last fuel adjustment and no new fuel certification has been filed, the contracting officer may require the contractor to file a new certification.” A new fuel allowance will then be computed on the basis of the new certification if the change from the last fuel adjustment has been at lest 3 cents per gallon. (Id.).

6. Postal Service Inspectors initiated an investigation of Appellant’s fuel purchases after receiving a call on May 29, 1991, from a detective of the Madisonville, TN, Police Department. The call was based on a report to the police from the proprietor of the Magic Mart service station where Appellant had regularly purchased gas on credit that Appellant had stolen or embezzled credit slips from her store. Appellant had stopped doing business with that store in early April after a dispute with the proprietor about missing credit slips which the proprietor blamed on Appellant and which Appellant claimed were not its responsibility. There is no evidence that criminal proceedings based on the proprietor’s report or that any civil proceedings were ever brought against Appellant. (Affidavit of R. A. Mote and G. B. Roberts, Postal Inspectors (hereafter Inspector’s Affidavit); AF C; Appellant’s Supplemental Evidence (App. SE)).

7. The Inspectors concluded that Appellant overcharged Respondent for fuel as shown by exhibit 4 to the Inspectors’ report (AF C). Exhibit 4 consists of a summary from seven fuel certifications of Appellant, which included a list of Appellant’s certified cost per gallon, an average price per gallon based on Magic Mart’s (MGM) prices and the difference between the two. There are as follows (with the accounting periods designated alphabetically for easier reference purposes):

Accounting period Appellant’s MGM Average Price

Cost Per Price Difference

_____________________ Gallon________________ __ _________

(A) 12-17-88 – 01-13-89 0.986 0.089 -0.003

(B) 09-23-89 – 10-20-89 1.029 1.010 0.019

(D) 09-22-90 – 10-20-90 1.409 1.390 0.019

(E) 11-17-90 – 12-14-90 1.410 1.326 0.084

(F) 12-15-90 – 01-11-91 1.329 1.240 0.089

(G) 03-09-91 – 04-05-91 1.239 1.090 0.149

The price difference was then multiplied by a constant of 1028 gallons to reach a difference per account period (Acct. Per.) which amount was then multiplied by the number of accounting periods the rate was used to reach an (under) or over payment these are as follows:

Acccounting Difference per Number of (Under)

Period Acct. Per. Acct. Per. Over

___________________________________________Payment

(A) -3.08 9 ($27.76)

(B) 19.53 6 $117.19

(D) 19.53 2

(E) 86.35

(F) 91.49 5 457.46

(G) 153.17 4 612.69

_________

Total $1,272.66

Accounting period E above was not totaled as the certified cost was less than $.03 per gallon difference from the previous certification. Therefore, appellant’s payment from Respondent did not change. These figures encompassed a period from December 17, 1988, through June 28, 1991. (AF C).

8. The Inspectors used average gasoline prices from the Magic Mart only, explaining that Appellant’s other supplier did not have records of daily prices. The record contains Magic Mart’s prices for only one day – April 2, 1991 – on exhibit 3 of AF C. Exhibit 3 shows four fuel categories from which different prices can be computed: regular, unleaded, extra, and diesel. There is no explanation in the record concerning the difference between “regular” and “unleaded” gasoline in those categories, such as whether the “regular” gasoline was a type of unleaded or leaded gasoline. The computed price for “regular” gasoline that day was $1.103 and for “unleaded” gasoline the price was $1.200. In their affidavit and report the Inspectors do not state the type of fuel they used to compute Magic Mart’s average prices. However, as they attest that Magic Mart’s highest price per gallon during the period March 9 through April 5, 1991, was $1.10 per gallon, it appears they used Magic Mart’s “regular” fuel price to compute the average price (Inspectors’ Affidavit ¶8; see also ¶ 11 of their report (AF C)).

9. The evidence does not establish that Appellant’s certifications included purchases for goods other than fuel used under the contract or included payments for cash advanced to Appellant on credit at Magic Mart. Appellant’s certifications are supported by copies of checks or money orders to the suppliers in the amount of the total price shown on the certifications (AF C; App. SE). Also, the record does not establish that Appellant was required by the contract to purchase “regular” rather than “unleaded” gasoline. It is more likely that Appellant purchased “unleaded” gasoline rather than “regular” gasoline (id.). Appellant’s required fuel purchase plan for the renewal showed that Appellant contemplated using unleaded gasoline from self-service retail sources (AF D). Appellant’s fuel certifications and some receipts show use of unleaded gasoline (AF C; App. SE).

10. Appellant submitted the only other evidence of prevailing gasoline rates in the area during early 1991 – fuel purportedly purchased for Postal Service jeeps. Those fuel prices were closer to the prices Appellant used in his fuel certifications than those the Inspectors listed as Magic Mart average prices (App. SE).

11. Appellant’s wife computed the average fuel prices following instructions from a Postal Service employee by adding total prices paid to the two different suppliers during and accounting period and dividing them to obtain an average price. There is insufficient information to determine whether this was a “weighted average” as prescribed in the Management Instruction. (Affidavit of Carolyn Michel; App. SE; but see Inspectors’ Affidavit and Report (AF C)).

12. Following the investigation of Appellant’s fuel purchases by Postal Service Inspectors (AF C) and based on their report, the Contracting Officer by decision dated August 16, 1991, determined that Appellant had overcharged Respondent for fuel purchases. The Contracting Officer terminated Appellant’s contract for default for “administratively determined violations of laws and regulations and other laws related to the performance of the service,” citing GP clause 16(a)93) [he apparently meant subparagraph (2)]. (AF B). Appellant then appealed to this Board.

DECISION

Appellant has presented many arguments to support his position that he did not file false fuel certifications and that Respondent followed improper procedures in conducting the investigation and in terminating the contract. We need only address the propriety of the default termination.

Respondent has the burden to prove the default termination was warranted. Road Service, Inc., PSBCA No. 1023, 83-1 BCA ¶ 16,218, aff’d on recon., 93-1 BCA ¶ 16,465. Respondent argues that the default termination was proper under GP clause 16(a)92) of the contract because Appellant made false statements that fuel costs had increased more than three cents per gallon during certified 28-day periods.

Respondent’s contention that Appellant falsely certified the prices for gasoline primarily rests on the Inspectors’ reliance on statements from the proprietor of Magic Mart station and use of prices obtained from her. Appellant’s proof on appeal raised doubts about the circumstances and possible reasons for the proprietor’s actions in making a report about him.

The record has gaps and unexplained inconsistencies from both parties. Especially lacking is detailed information concerning the fuel types and prices used by the Inspectors in their report. We have found that the Inspectors used Magic Mart’s prices for “regular” gasoline; whereas, it is more likely that Appellant purchased gasoline at Magic Mart’s “unleaded” price (Finding 9). If there was a constant $.10 difference between the “regular” and “unleaded” prices of Appellant’s suppliers, this difference is enough to account for most of the price differences shown in the Inspectors’ report. The only other evidence relating to prevailing prices in the area tends to support Appellant’s position rather than that of Respondent.

The record does not clearly establish a basis for the default termination. Unlike cases relied on by Respondent where there was clear evidence of the falsity of a contractor’s submissions,* there is insufficient evidence to conclude that Appellant made false statements in his fuel certifications in order to gain increased compensation. Thus, we are unable to conclude that the contract should be terminated under GP 16(a)(2) or (7)(c).

Accordingly, Appellant’s appeal is granted and the default termination is converted to a convenience termination. Appellant’s relief is limited to the liquidated damages provided in the contract (see Finding 2). This matter is remanded to the Contracting Officer for calculation of the amount of those damages.

Joan B. Thompson

Administrative Judge

Board Member

I concur:

James A. Cohen

Administrative Judge

Chairman

I concur:

James D. Finn, Jr.

Administrative Judge

Vice Chairman

*_/ Leo Swanton, PSBCA No. 2641, 91-1 BCA ¶ 23,632; Anthony Tanghare, PSBCA Nos. 57, 58, 59, 73-2 BCA ¶10,264; and Contract Master Services, Inc., PSBCA No. 273 (February 28, 1978), aff’d, Contract Master Services, Inc. v. United States, 225 Ct. Cl. 735 (1980) (upholding default terminations under GP clause 16(a)7)(c) as the contractor was found to be unreliable, untrustworthy, and lacking good character because he filed false submissions for contract price adjustments). To the same effect see Delmus L. Greene, PSBCA Nos. 1135-1138, 84-3 BCA ¶ 17,615; Nathan Dal Santo, PSBCA Nos. 1214, 1215, 84-1 BCA ¶ 17,051, aff’d on recon., 84-1 BCA ¶ 17,194.