January 15, 1999

Appeal of

RELLEN H. CLARK

Under Contract Nos. HCR 32017 & 32060

PSBCA Nos. 4096 & 4097

APPEARANCE FOR APPELLANT:

Rellen H. Clark

APPEARANCE FOR RESPONDENT:

Larry Donell Blanchard, Esq.

OPINION OF THE BOARD

            Appellant, Rellen H. Clark, has filed timely appeals from two final decisions of the contracting officer terminating for default her mail transportation contracts with Respondent, the United States Postal Service.  Appellant also appeals the damages assessed against her as a result of the terminations.  The parties have elected to submit the appeals on the record in accordance with 39 C.F.R. § 955.12.

FINDINGS OF FACT

            1.  Appellant was a contractor for Respondent on two mail transportation and box delivery contracts in Middleburg, Florida.  The first contract, HCR 32017,  at an annual rate of $21,620.46, had a term of July 1, 1995, to June 30, 1999.  The second contract, HCR 32060, at an annual rate of $19,549.20, had a term of June 30, 1994, to June 30, 1998.  (Appeal File 4096 & 4097 Tabs (AF 4096) I & (AF 4097) 9).

2.  The contracts included Basic Service Transportation Services Contract General Provisions (PS Form 7407, July 1992), which, in Clause 4(a), SERVICE REQUIREMENTS AND PROHIBITIONS, required the contractor to “. . . carry all mail tendered for transportation under this contract . . . with certainty, celerity, and security.”  Furthermore, Clause 8(c), ACCOUNTABILITY OF THE CONTRACTOR, provides:  “The Contractor shall remain accountable and answerable in damages . . . for all acts and omissions of the Contractor or the Contractor’s employees . . . which acts [or] omissions include loss, rifling, damage, wrong delivery, depredation upon, and other mistreatment of mail or due to fault or negligence of any of the foregoing, their agents, or employees.”  (AF Tabs 4096 I & 4097 9).

            3.  The contracts also included, General Provisions Clause 16(a)(1), (2), and (6), TERMINATION BY THE POSTAL SERVICE FOR DEFAULT, which stated that the contract may be terminated for default for the contractor’s failure to perform service according to the terms of the contract; if the contractor is the subject of administratively determined violations of the Postal laws and regulations and other laws related to the performance of the service; or if he fails to properly account, deliver and pay over moneys, mail and other property pursuant to Clause 8 of the contract.  (Id.).

            4.  On February 20, 1996, based on information received from an arrest in Brooklyn, New York, concerning stolen credit cards, the Postal Inspection Service began investigating Appellant and her employees.  The investigation led to the arrests on January 24, 1997 (and subsequent conviction), of three individuals, two of whom were employees of Appellant, for theft from the mails and use of stolen credit cards.  (AF 4096 C & 4097 3; Respondent's supplemental evidence).

            5.  At least as early as the Summer of 1996, Appellant became aware of the fact that her employees were involved with theft of the mails. (AF 4096 C & 4097 3).

6.  Appellant also allowed an individual who had not been approved for access to the mail to help deliver mail on the contracts.  This individual used credit cards stolen from the mail and stole and forged checks from the mail.  (AF 4096 C & 4097 3).

7.  Effective close of business January 24, 1997, Appellant's right to perform under Contract Nos. HCR 32017 and HCR 32060 was terminated.  Service on the routes was obtained under emergency contracts HCR 320FT and HCR 320KV.  (AF 4096 G & 4097 7).

8.  On April 23, 1997, the contracting officer issued two final decisions, formally terminating the contracts for default with an effective date of close of business January 24, 1997.  The contracting officer terminated the contracts for default because Appellant had employed individuals who were not reliable and trustworthy and who had stolen from the mails and because Appellant was aware of the thefts.  (AF 4096 H & 4097 8).

            9.  By final decision dated June 19, 1997, the Contracting Officer informed Appellant that the Postal Service determined the amount of damages owed, as a result of the failure to perform service on HCR 32017, equaled $607.41.  The Contracting Officer stated that the Postal Data Center was holding $1,443.54 for service performed on HCR 32017 between January 4, 1997, and January 24, 1997, and that the damages would be deducted from this amount.  (AF 4096 E).

            10.  Default Damages for HCR 32017 were computed by subtracting the defaulted contract's annual rate ($28,567.29) from the annual rate of the replacement contract ($30,307.00), equaling $1,739.71 and dividing this sum by 365.25 days to provide a daily rate difference of $4.76.  This amount was then multiplied by 90 days to equal a total replacement service cost assessment of $428.68.  Incurred administrative costs in the amount of $178.73 were added for a total monetary damages of $607.41.  (AF 4096 F).

            11.  By another final decision dated June 19, 1997, the Contracting Officer informed Appellant that the Postal Service determined that the amount of damages owed, as a result of the failure to perform service on HCR 32060, equaled $1,285.14.  The Contracting Officer stated that the Postal Data Center was holding $1,324.81 for service performed on HCR 32060 between January 4, 1997, and January 24, 1997, and that the damages would be deducted from this amount.  (AF 4097 5).

12.  Default Damages for HCR 32060 were computed in a manner similar to that used under HCR 32017.  However, several replacement contracts were awarded over a 90-day period to provide services on this route.  The total difference between Appellant's defaulted contract's rate during this 90-day period and the rates incurred under the replacement contracts was $1,106.41.  Incurred administrative costs in the amount of $178.73 were then added for a total monetary damages of $1,285.14.  (AF 4097 6).

13.  On July 14, 1997, Appellant filed timely appeals of the decisions reached by the Contracting Officer.  (AF 4096 B & 4097 2).

DECISION

            Respondent argues that the decision of the contracting officer to terminate Appellant’s contracts for default was a proper response to the theft of the mail by Appellant’s employees.  Additionally, Respondent argues that Appellant should be charged with the costs of reprocuring replacement contracts.  In response, Appellant argues that the theft of the mail was committed by her employees and not herself and, therefore, termination of the contracts for default was improper.

The theft of mail by Respondent's employees is a serious breach of Appellant's obligation to carry the mail with certainty, celerity and security.  Although Appellant argues that she was unaware of the thefts, we have found otherwise (see Finding of Fact No. (FOF) 5).  Appellant is responsible for the acts of her employees (FOF 2), and the decision of the contracting officer to terminate Appellant’s contracts for the acts of her employees, more specifically, for rifling and stealing the contents of mail entrusted to them, as well as the use of an unauthorized employee, was entirely proper.  See Kevin Wagoner, PSBCA No. 3993, 97-2 BCA ¶ 29,056; Richard Lewis Danel, PSBCA No. 3470, 94-2 BCA ¶ 26,687; Bonnie Dolin, PSBCA No. 2394, 92-2 BCA ¶ 25,014; Karen L. Wilson, PSBCA No. 1494, 86-3 BCA ¶ 19,256.

The remaining question is whether Respondent may recover the excess reprocurement costs it has assessed against the Appellant.  Respondent procured replacement services immediately after the terminations for default.  (FOF 7).  The costs associated with the replacement contracts were minimal ($428.68 under HCR 32017 and $1,106.41 under HCR 32060, see FOF 10, 12), and, on their face, appear reasonable (and their reasonableness has not been challenged by Appellant).  Some increase in contract price is to be expected when emergency replacement service is procured.  The administrative costs of $178.73 incurred by Respondent in reprocuring the services provided under each of the defaulted contracts are likewise reasonable.  See Arthur L. Johnson, PSBCA No. 3894, 97-1 BCA ¶ 28,773; see also, Jeff Talano, PSBCA Nos. 3695, 3696, 97-1 BCA ¶ 28,628.

Although Respondent offered no evidence of having actually incurred the excess costs it seeks, contingent recovery of excess reprocurement costs is permissible subject to a showing that payment under the reprocurement contract has been made.  See Arthur L. Johnson, PSBCA No. 3894, 97-1 BCA ¶ 28,773; see also, Bowman's Transport, PSBCA Nos. 1088, 1089, 1092, 84-1 BCA ¶ 17,217; Louis Brown, PSBCA No. 763, 80-2 BCA ¶ 14,577.

Accordingly, Respondent may recover its excess reprocurement costs subject to a showing that payment under the reprocurement contracts has actually been made.

CONCLUSION

            Accordingly, Appellant’s appeals from the terminations for default are denied.  Excess reprocurement costs may be recovered from Appellant, subject to the Postal Service presenting evidence to Appellant establishing that it has, in fact, paid the replacement contractors for the costs assessed.

William K. Mahn

Administrative Judge

Board Member

I concur

James A. Cohen

Administrative Judge

Chairman

I concur:

David I. Brochstein

Administrative Judge

Vice Chairman