July 12, 1993
Appeal of
MICHAEL J. EARL
Under Contract No. 284218-89-P-0406
PSBCA No. 3332
APPEARANCE FOR APPELLANT:
Michael J. Earl
APPEARANCE FOR RESPONDENT:
Maria T. Robinson, Esq.
OPINION OF THE BOARD
Appellant has timely appealed a Contracting Officer's decision to terminate his contract to operate the Ritchey, Missouri, Contract Station. At the election of the parties the appeal has been submitted on the record.
FINDINGS OF FACT
1. Appellant was awarded contract number 287530-85-W-0006 on May 3, 1985, to operate a contract station located at Ritchey, Missouri, for an indefinite term at an annual price of $3600 (Appeal File (AF)-1). The number of the contract was changed to 284218-89-P-0406 on April 29, 1991. By contract modification effective May 1, 1990, the contract price was reduced to $500 per year (AF-4).
2. The contract contained the following standard termination clause in its General Provisions (PS Form 7369, Jan. 1984):
"5. Termination of Contract
You or USPS may end (terminate) this contract on 60-days' written notice. The contracting officer may end the contract if necessary to protect the USPS' interests after a 1-day written notice."
The Contract General Provisions also contained the following inspection clause:
"11. Inspection of Work
The COR [Contracting Officer's Representative] inspects your performance to make sure it is done according to the contract. The COR immediately reports any poorly done work to you. If you continue to do poor work, the contracting officer warns you in writing to improve your work or the USPS may end the contract." (AF-1A)
3. By letter dated May 18, 1989, the Postmaster, Granby, Missouri, was designated the COR, and as such was responsible for monitoring the overall operation of the contract station and assuring compliance with all contract terms and requirements. The letter authorized and directed the COR to perform the duties and functions described in Handbook AS-707F, Contracting for Contract Postal Units, which duties and functions were summarized in the letter. Appellant was furnished a copy of the May 18, 1989, letter (AF-3).
4. On June 16, 1992, the COR sent a memorandum to the MSC Director of Marketing, Springfield, Missouri, which summarized an inspection of the contract station operated by Appellant. The memo stated:
"The following discrepancies were found:
A check for $143.60 dated May 2, 1992 and signed by Michael Earl was being held in Earl's stamp credit in place of cash.
The store was filthy. It has no running water or bathroom facilities.
There is no telephone.
A section of 60 post office boxes have been standing idle for six years. Over this time none have been rented.
The Granby rural carrier collects approximately 5 letters weekly from this location.
Annual postal income from this station is approximately $720.00 and they are paid $500.00 annually for operating the Contract Station. Revenue has been declining for the past year.
Due to the unsanitary conditions along with the absence of any real community need for this station I feel it is not economically feasible to continue service at the Ritchey Contract Station." (AF-6)
5. By letter dated June 26, 1992, Appellant was advised by the Marketing Department, Springfield, Missouri, that effective close of business June 30, 1992, Appellant's contract was cancelled. The reasons given for the cancellation were:
"1) extremely low revenue generation
2) limited usage by surrounding community
3) no use of P. O. boxes
4) recent Postal Service audit revealed misuse of funds." (AF-6)
6. By final decision letter dated June 30, 1992, the Contracting Officer notified Appellant that effective close of business August 31, 1992, Appellant's contract was being terminated. The reason for the termination action was stated:
"An audit by the Postmaster, Granby, Missouri conducted on June 8, 1992 found the following discrepancy: A check for $143.60 dated May 2, 1992 and signed by Michael Earl was being held in Earl's stamp credit in place of cash. This is in violation of postal regulations and of your contract. PS Form 7311, Sept. 1983 of your contract, specifies in paragraph 3.a. of contractor responsibilities: 'All monies received from the CPU are USPS property and must only be used for postal functions and CPU operations'; and in 3.c. 'When the CPU is closed or unattended, all monies and postage supplies - including blank money orders - must be locked in the safe with at least 3 complete turns of the dial.' " (AF-7)
7. A Postal Service regulation does exist which requires contract station operators to deposit all checks on the date of receipt (Appellant's submission). The record is unclear as to whether that regulation is contained in Handbook AS‑707F, referenced in the May 18, 1989, letter, a copy of which was sent to Appellant (see Finding of Fact No. 3). Appellant was unaware of the check deposit regulation and had never been specifically advised of it by Respondent. The final audit of Appellant's contract station showed no monetary deficiencies (Appellant's submission).
8. On January 14, 1993, the Contracting Officer sent Appellant a letter rescinding and superseding the June 30, 1992, termination letter and converting the termination to one for convenience effective August 31, 1992 (AF-7).
DECISION
Appellant has requested that the Board overturn the termination action and order Appellant's contract reinstated. He alleges that under the contract's "Inspection of Work" clause he was entitled to a warning from the Contracting Officer to improve his work and an opportunity to do so prior to any termination action being taken, that the June 30, 1992, final decision letter contained erroneous bases for the termination, and that the termination action was unwarranted as he had no knowledge of the requirement that all checks be deposited on the day of receipt.
In regard to the requested remedy of contract reinstatement no authority to order reinstatement rests with the Board. Paul A. Mason, PSBCA No. 1187, 84-3 BCA ¶ 17,752, recon. denied, 85-1 BCA ¶ 17,735; Spaulding Radiator Service, PSBCA No. 1068, 82-2 BCA ¶ 16,088; Hector Rivera Ruiz, PSBCA No. 1756, 88‑3 BCA ¶ 20,829. Thus, Appellant's remedy, if any, is limited to monetary recovery.
The contract provided for two alternate termination notices. The first was a 60-day notice, similar to a termination for convenience. The other was a one-day notice, in effect a termination for default. In regard to the latter, the Inspection of Work Clause contemplated a prior warning to the contractor from the Contracting Officer and an opportunity by the contractor to improve contract performance if the reason for termination was to be based on poor contract performance. We do not read the 60-day convenience termination notice to require any such prior warning to be given to the contractor.
We have held that a termination provision similar to the present one gives the Contracting Officer great latitude and discretion and that an election to terminate will be upheld unless exercised in bad faith or constitutes an abuse of discretion. E. Gerald Hanes, PSBCA No. 3082, 92-3 BCA 25,127; citing Salisbury Industries v. United States, 905 F.2d 1518, 1521 (Fed. Cir. 1990); On Time Postal Services Inc., PSBCA No. 2528, 90-2 BCA ¶ 22,698.
The record does not support a holding that the Contracting Officer acted in bad faith or abused his discretion in terminating Appellant's contract. Notwithstanding Appellant's inadvertent violation of a Postal Service regulation pertaining to deposit of checks, sufficient reason existed for termination. As outlined in the COR's June 16, 1992, memo, the annual revenue to the Postal Service from the contract station was only $720 and of that amount $500 was paid to Appellant. Revenue was declining, and a section of post office boxes had been idle for six years. Approximately five letters weekly were collected from the station, indicating little community need. These facts would justify a termination for convenience.
Appellant's lack of knowledge of the "same day" check deposit rule does not alter our conclusion. While it is unfortunate that postal officials apparently never advised Appellant of this regulation, no bad faith on the part of the Contracting Officer can be implied from such inaction. Further, any stigma to Appellant flowing from the June 30, 1992, termination letter was removed by the Contracting Officer's January 14, 1993, letter which rescinded the June 30 termination and substituted it with a notice which cast no aspersions on Appellant.
In summary, sufficient and reasonable basis existed for a 60-day termination. No basis exists for recovery by Appellant. The appeal is denied.
James D. Finn, Jr.
Administrative Judge
Vice Chairman
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Board Member