OPINION OF THE BOARD

Appellant, ZuZu's Ranch Market, has appealed from the termination for default of its contract to operate a Contract Post Office Express Unit (“CPOE”) for Respondent, United States Postal Service. At the parties’ request, an oral hearing was scheduled to be held in San Diego, CA on a date agreed to by the parties. However, Appellant failed to fully comply with the Board's prehearing orders or to make its representative available for a prehearing telephone conference. As a result, Appellant was deemed to have waived a hearing, and the Board granted Respondent’s request to have the appeal considered on the record. Only entitlement is at issue.

FINDINGS OF FACT

1. Appellant was awarded Contract No. 052684-98-P-0809 on July 24, 1998, to operate the CPOE within its business establishment in San Marcos, CA for a period of three years from the CPOE’s commencement of operations (Appeal File (AF) Tab B, pp. 4 and 12).[1] The contract specified the CPOE operating hours and required that all employees of the CPOE “project a favorable image of the Postal Service while on duty” (AF Tab B, p. 9, and Attachment 2, p. 38). As a condition of award Appellant was required to furnish a bond to the Postal Service in the amount of $20,000 executed by an acceptable surety (AF Tab B, p. 26 and Attachment 2, p. 39).

2. Under the contract, Appellant was required to operate the CPOE “in accordance with the Domestic Mail Manual (DMM). . . [and] charge the customer the mailing rates and service fees specified in the DMM." (AF Tab B, p. 9). The contract prohibited Appellant from imposing a surcharge on the postal services it provided or increasing or decreasing the rates and fees established in the DMM (id.).

3. In the Contract Duration and Termination Clause (Contract Postal Unit) (February 1996), either party could terminate the contract on 60 days’ written notice or the contracting officer could terminate the contract on one day’s written notice if necessary to protect the Postal Service’s interest (AF Tab B, p. 12).

4. Appellant began operation of the CPOE in the late fall of 1998 (Declaration of Calvin J. Bizzle (Bizzle Decl.), ¶6). From July 2000 to January 2001, the contracting officer’s representative (COR) received numerous customer complaints regarding service at the CPOE (AF Tab F.2). During the same period Postal Service employees observed many instances of poor service and failures by Appellant to operate the CPOE in accordance with the contract requirements (id.).

5. By letter dated January 8, 2001, Appellant was notified that the CPOE would be temporarily closed as of January 9, 2001, because of irregularities in its performance and poor customer service (AF Tab E.2, p. 72). The letter listed the deficiencies in Appellant’s performance and advised Appellant that the Postal Service considered the unsatisfactory service a condition endangering performance of the contract which, if not cured within 10 days, could result in the termination of Appellant’s contract (id.). On the same date, the contracting officer issued Modification M002 temporarily closing the CPOE and suspending payment to Appellant effective January 9, 2001 (AF Tab C.3, p. 59).

6. Appellant responded by letter dated January 11, 2001, in which it apologized for the deficiencies and assured Respondent that in the future it would only staff the CPOE with trained, knowledgeable and customer-friendly employees, not overcharge customers, complete all forms correctly, and have the CPOE manned at all times (AF Tab C.2, pp. 56-58). Respondent agreed to reopen the CPOE with the understanding that the contract would be terminated permanently if Respondent continued to receive complaints about Appellant’s performance (AF Tab C.2, p. 55). By Modification M003 dated January 17, 2001, effective January 19, 2001, the CPOE was reopened and payment to Appellant was reinstated (AF Tab C.2, p. 54).

7. On January 24, 2001, Appellant failed to file a registry deposit or notify the District Accounting Office that one would not be filed (AF Tab F.1, p. 81). At the same time, Appellant’s accountability substantially exceeded its bond coverage due to its failure to return old stamp stock (id.).

8. On January 26, 2001, the COR spoke with Appellant’s representative regarding the daily registry deposit procedures (AF Tab F.1, p. 79). The COR reminded Appellant that a daily registry deposit was required when there were sales of $100 or more or if even one money order was sold. Appellant was also reminded that it was required to notify the District Accounting Office if it would not be making a daily deposit. Appellant acknowledged that it was required to notify the District Accounting Office if no daily deposit was going to be made, but stated it was unaware of the minimum dollar amount and money order requirements for deposits. (Id.).

9. On January 31, 2001, Appellant again failed to make a registry deposit or notify the District Accounting Office that one would not be made (AF Tab F.1, p. 80).

10. Because of Appellant’s history of operating problems, its failure to account for daily receipts and the potential for losses resulting from Appellant’s failure to adhere to accounting requirements for monies handled by the CPOE, Respondent determined that immediate termination of Appellant’s contract was necessary to protect the Postal Service’s interest (Bizzle Decl., ¶14). By final decision dated February 7, 2001, Appellant was notified that its contract was being terminated effective February 9, 2001, for its repeated failure to follow standard operating procedures (AF Tab E.1, p. 71). The final decision specified the deficiencies that had resulted in the temporary closure of the CPOE and the subsequent failures to file daily receipts as the bases for Respondent's decision to exercise its right to terminate the contract (Bizzle Decl., ¶14).

11. Appellant filed a timely appeal from the contracting officer’s final decision (AF Tab A, p. 1).

DECISION

Appellant contests the propriety of the termination on one day’s notice, asserting that it had corrected the problems that led to the temporary closure of the CPOE and that it was following the required accounting procedures at the time of the termination. Respondent contends that Appellant's contract was properly terminated due to Appellant's failure to operate the CPOE in accordance with the requirements of the contract and its failure to account for monies belonging to the Postal Service.

Under the Contract Duration and Termination Clause, the contracting officer had the right to terminate Appellant's contract on one day's notice if he determined termination was necessary to protect the interests of the Postal Service (Finding 3). During the July 2000 to January 2001 time frame, Appellant failed to comply with the terms of the contract and to provide satisfactory service to Postal Service customers (Finding 4). On at least two occasions shortly before termination Appellant did not follow the daily registry procedures despite being fully aware of what was required (Findings 7-9). Although Appellant asserts that it had corrected the problems that led to the temporary closure of the CPOE and that it was following the required accounting procedures at the time of the termination, the evidence establishes otherwise. After the CPOE was reopened, Appellant failed to follow the registry deposit procedures on two occasions and its accountability substantially exceeded its bond coverage. Appellant’s failure to comply with Respondent's direction to follow the required accounting practices and the resulting potential for financial loss to Respondent, coupled with the prior instances of contract noncompliance and deficient performance, provided sufficient justification for the contracting officer to conclude that termination was necessary to protect the interests of the Postal Service. See The General Store, PSBCA No. 3951, 98-1 BCA ¶29,573, recon. denied, 99-1 BCA ¶30,124; Swearingen Services, Inc., PSBCA No. 3793, 96-2 BCA ¶28,378. Therefore, we find no impropriety in the contracting officer’s exercise of his discretion to terminate the CPOE contract on one day’s notice.

Appellant’s appeal from the termination of its contract is denied.

James A. Cohen

Administrative Judge

Chairman

I concur: I concur:

___________________ ___________________

David I. Brochstein Norman D. Menegat

Administrative Judge Administrative Judge

Vice Chairman Board Member

[1] All references and page numbers refer to the Amended Appeal File filed by Respondent.