September 2, 1997
Appeal of
CARLOS D. DELBREY
Under Contract No. 428461-82-W-0121
PSBCA No. 3892
APPEARANCE FOR APPELLANT:
Neftali Cruz Perez, Esq.
APPEARANCE FOR RESPONDENT:
Geraldine O. Rowe, Esq.
OPINION OF THE BOARD
Appellant, Carlos D. Delbrey, has filed a timely appeal from a final decision of the contracting officer terminating Appellant’s contract with Respondent, the United States Postal Service, to operate a contract postal unit. At the election of the parties, the appeal is being decided on the record in accordance with 39 C.F.R. §955.12.
FINDINGS OF FACT
1. On July 6, 1982, Appellant was awarded Contract No. 428461-82-W-0121 to operate a contract postal unit (CPU) at “La Cumbre” Urbanization, Rio Piedras, Puerto Rico. The contract was for an indefinite term. The contract included Form 7369, General Provisions for Contract Stations, Contract Branches, and Community Post Offices, which in clause 3, TERMINATION provides:
“The contract may be terminated by either party upon sixty days written notice. In the event of such termination, neither party shall be liable for any costs except for payment in accordance with the payment provisions of the contract for the actual services rendered prior to the effective date of the termination. Should the Contracting Officer determine the contractor to be in default, the Contracting Officer shall terminate the contract by giving the Contractor one day’s notice thereof in writing.”
(Appeal File Tab (AF) 1).
2. Clause 7 of the General Provisions, INSPECTION OF CONTRACTOR WORK, provided as follows:
“The COR [Contracting Officer’s Representative] shall periodically review the Contractor’s performance to assure the Contractor is performing in accordance with postal rules and regulations. The COR will immediately bring to the attention of the Contractor all unsatisfactory service. If the Contractor continues to perform unsatisfactorily, the Contracting Officer will formally notify the Contractor in writing of the cause of the deficiencies and that the continued unsatisfactory performance may be cause for termination of the contract.” (AF 1).
3. Paragraph 18 of the Specification Requirements, Contract Stations, Contract Branches, and Community Post Offices, (Form 7311, dated January 22, 1982) provided that:
“The contractor shall be personally responsible, accountable and answerable for the faithful performance and discharge of all the duties and obligations assumed by him in this contract, whether or not he personally conducts the Contract Unit. The contractor shall be chargeable with all acts and omissions of his employees who assist in the conduct of the Contract Unit.” (AF 1).
4. Paragraph 19 of the same specifications provided that:
“All monies received from the operation of the Contract Unit are the property of the U.S. Postal Service, and not the property of the contractor. Such monies shall not be commingled with personal or other funds of the contractor, and shall not be used for any purpose other than in connection with the postal duties and functions of the Contract Unit. The contractor shall account for such monies at the close of each day’s business.” (AF 1).
5. Beginning in October of 1994, money orders were issued by the La Cumbre CPU in amounts substantially larger than the amounts indicated on the CPU’s receipts as received in payment for the money orders (Supplemental Appeal File, Tab (SAF) 1).
6. On or about May 25, 1995, the Finance Department of the San Juan, PR, Post Office notified the Postal Inspection Service of the irregularities in the money orders issued from the La Cumbre CPU (Appellant’s Brief, Exhibit A). The Postal Inspection Service commenced an investigation which included a financial review of the La Cumbre CPU on August 1, 1995[1] (Appellant’s Brief, Exhibit A; AF 9). This review (along with a recount conducted on August 16, 1995) disclosed shortages in money order revenues of $54,081.08[2], a $6,840.74 shortage in the station’s accountablilty, a stamp shipment shortage of $4,573.00 and a prior shortage in a suspense account of $2,510.71, for a total shortage of $68,005.53 (AF 9).
7. On August 2, 1995, Respondent’s contracting officer was informed of the results of the August 1, 1995 review of the La Cumbre CPU. Thereafter, on August 15, 1995, after consultation with inspectors from the Postal Inspection Service as well as with his District Manager, the contracting officer terminated the contract on one day’s notice. The contracting officer noted that he terminated the contract on one day’s notice “. . . in order to protect the interests of the Postal Service.” (AF 6, 7).
8. On September 25, 1995, Appellant filed a timely appeal of the contracting officer’s decision to terminate the contract (AF 12).
9. On January 15, 1997, a former part-time employee of the La Cumbre CPU was criminally indicted in Federal District Court for embezzling U.S. Postal Service funds in connection with the sale of 58 Postal Service money orders issued by the La Cumbre CPU (SAF 2).
DECISION
Respondent argues that, in light of the apparent theft of large sums of money through the misuse of postal money orders, the contracting officer properly exercised his discretion to terminate the subject contract on one day’s notice to protect the interest of the Postal Service. Appellant argues, however, that had the Postal Service properly inspected Appellant’s CPU in accordance with the requirements of the contract’s INSPECTION OF CONTRACTOR WORK clause, or immediately notified Appellant of the apparent irregularities in the money order transactions, Appellant could have corrected the problems before his contract was terminated. Having failed to notify Appellant of the problems in his own operation, Appellant argues that Respondent should be “estopped” from terminating the subject contract.
The contracting officer’s decision to terminate the contract on one day’s notice (in effect, for default) was proper. The August 1, 1995 financial review of the CPU disclosed sizeable losses from apparently illegal activity in the issuance and accounting of money orders issued from the CPU (Finding of Fact No. (FOF) 6). Appellant does not challenge the facts as alleged by Respondent with respect to the nature and cause of the losses. However, the facts do not support Appellant’s argument that Respondent failed to properly inspect Appellant’s CPU, or that Respondent failed to timely uncover the money order irregularities and act promptly[3] so as to warrant the application of the doctrine of equitable estoppel. The requirement of the INSPECTION clause to “periodically review the Contractor’s performance to assure the contractor is performing in accordance with postal rules and regulations” is satisfied by the January 1994 audit as well as the audit in August of 1995. The money order irregularities occurring at the La Cumbre CPU were not discovered until May 25, 1995. Thereafter, some period of time was needed for the Postal Inspection Service to investigate the matter, which culminated in the August, 1995 audit. (FOF 6). The time taken for the investigation was not unreasonable under the circumstances.
Although Appellant was not given a warning of unsatisfactory service prior to the termination, a one day notice termination, without prior warning, is a reasonable and proper response to immediately rectify a situation where, as here, Appellant was found to be in default as a result of serious money order irregularities and substantial cash shortages. See Robert A. and Sandra B. Moura, PSBCA Nos. 3460, 3622, 96-1 BCA ¶ 27,956. The fact that the illegal actions were being carried out by an employee of the CPU instead of Appellant himself does not defeat the propriety of the termination decision. Paragraph 18 of the specifications made it quite clear that Appellant was not only answerable and accountable for his own actions but that he was also chargeable for the actions of his employees (FOF 3).
Accordingly, the termination on one day’s notice was proper and this appeal is denied.
William K. Mahn
Administraive Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman
[1] The La Cumbre CPU had previously been audited by the Postal Service on January 14, 1994 (Appellant’s Brief, Exhibit A).
[2] This $54,081.08 figure represented shortages uncovered in money order revenue discovered by reviewing accounting periods one through seven of fiscal year 1995. After reviewing accounting periods eight through twelve of the same year, a total shortage in money order revenue of $90,479.31 was uncovered. (Supplemental Appeal File Tab (SAF) 1).
[3] The period of time between the issuance of a money order in October of 1994 and the discovery in May of 1995 that it was issued in an amount greater than its recorded amount is not unusual since the purchaser of a Postal Service money order is under no obligation to immediately redeem it.