U.S. GOVERNMENT PRINTING OFFICE
BOARD OF CONTRACT APPEALS
STUART M. FOSS, Administrative Law Judge
Appeal of STEPHENSON, INC.
Docket No. GPO BCA 02-88
Jacket No. 185-894 & 185-895
Purchase Order 66028
December 20, 1991
DECISION AND ORDER
This appeal, timely filed by Stephenson, Inc., 5731 General
Washington Drive, Alexandria, VA 22312 (hereinafter called
Appellant), is from the final decision, dated December 17, 1987,
of Contracting Officer, Mr. William E. Flood (Contracting
Officer) of the U.S. Government Printing Office, Washington, D.C.
(hereinafter called Respondent or GPO) partially terminating its
contract identified as Purchase Order 66028, 1/ dated July 23,
1987, Jacket No. 185-894 for default. The decision of the
Contracting Officer was based on the Appellant's inability to
deliver "an acceptable product within the schedule limitations"
under the terms of the contract. 2/ For the reasons which
follow, the decision of the Contracting Officer partially
terminating the contract for default, is hereby affirmed (R4
File, Tab D). 3/
BACKGROUND
The relevant facts in this appeal are not in dispute. The
Appellant and GPO entered a contract on July 23, 1987, by means
of Purchase Order 66028. Although the Purchase Order included
two Jacket Numbers, only one -- Jacket No. 185-894 -- is involved
in this appeal. Jacket No. 185-894 was a contract for the
printing and binding of 20,000 copies of a USPS publication
entitled "1987 WILDLIFE AMERICA, A Collection of Commemorative
Stamps (WILDLIFE AMERICA)." According to the contract
specifications, WILDLIFE AMERICA was a "60-page publication with
a separate wraparound cover, Singer sewn, case-bound" (R4 File,
Tab B, p. 1). The contract specifications also provided for a
dust cover for each book (R4 File, Tab B, p. 1). As previously
noted, among other terms and conditions, the contract was subject
to the 1981 QATAP. In that regard, the specifications explicitly
stated (in "Quality Assurance Levels and Standards") that the
contractor would be held to "Level 1" for both printing and
finishing attributes (R4 File, Tab B, p. 5). In addition, the
specifications required the contractor to ship the books to the
USPS' Philatelic Marketing Division in Kansas City, Missouri, by
September 30, 1987 (R4 File, Tab B, p. 7). The Appellant
submitted a bid of $102,720.00 to produce this publication and
was awarded the contract (R4 File, Tabs C and D). 4/
The record reveals that the Appellant produced and shipped the
books within the time frame established by the contract, but when
they were received by the USPS' Kansas City facility it was
discovered that 18,000 copies (of the 20,000 ordered) were
defective. 5/ On October 3, 1987, Mr. Gordon C. Morison,
Assistant Postmaster General, Philatelic Affairs Department,
wrote to Mr. John J. Davin, his counterpart in the Procurement
and Supply Department, and told him, in pertinent part:
. . . [W]e found that all of the books are missing a
critical four-page outer signature in the text section. . .
.
Those 20,000 books were to go on sale this month, priced at
$24.95 each. They were to be marketed as Christmas gifts and
were to be featured in various promotions being released this
month, including our November/December mail order catalog, a
special holiday gift catalog and through a Christmas gift direct
mail campaign to major corporation executives. All promotional
ads guaranteed delivery before Christmas. Shipments were to
begin in October; anticipated revenue was $600,000 [?]. 6/
The new books are inferior and cannot be sold. And, since were
are asking a premium price for these items, we will not deliver a
patched product to purchasers. Therefore, since we will not be
able to meet our delivery commitments of this product, we want to
cancel this order and return the books to the contractor for
destruction.
. . .
Due to these circumstances, promotional activity for this product
has been brought to a halt, and the item is being deleted from
our forthcoming mail order program. [Original emphasis].
(R4 File, Tab E). 7/ On October 9, 1987, Morison's letter, along
with a copy of the defective book, was forwarded to Mr. Jack
Marken, Chief of the Respondent's Contracts Branch, by the
General Manager of the USPS' Printing Division, Mr. Garth
Shepherd, who reiterated that the USPS: (1) would not accept the
books as delivered; (2) would not market a patched or repaired
product; and (3) requested cancellation of the purchase order and
destruction of the books by the Appellant (R4 File, Tab E). 8/ A
GPO Notice of Quality Defects containing this information was
also completed on October 9, 1987 (R4 File, Tab E). 9/
The record discloses that on October 14, 1987, after receiving
the USPS' complaint, Mr. Gerald F. Flemion, a Printing Specialist
in the PPD's Quality Assurance Branch, telephoned Mr. Tim Bowns,
the Appellant's Account Manager, and informed him that the books
which had been shipped to Kansas City were defective in that
pages were missing (R4 File, Tab F). Bowns told Flemion that "he
was aware of this," and that the Appellant had "tipped in [the]
missing pages [and] sent [them to the] USPS" (R4 File, Tab F).
10/ Bowns also indicated that the Appellant was waiting for the
USPS to call back to see if tipping in the missing pages was
acceptable. At 9:30 a.m. the following day, October 15, 1987,
Flemion telephoned Mr. Chuck Jernigan of the USPS and was
informed that the "[p]roduct was not acceptable with pages tipped
in" (R4 File, Tab F). At 9:45 p.m., after concluding his
conversation with Jernigan, Flemion called Bowns and told him
that "tipped in pages were not acceptable" to the USPS. However,
a half-hour later, at 10:15 a.m., Flemion called Bowns again at
Marken's request, and asked that two copies of the books with
tipped in pages be sent to GPO so that the Respondent could
evaluate them (R4 File, Tab F). The Appellant complied with the
Respondent's request around 1:00 p.m. that same day, and two
copies of the repaired books were given to Marken (R4 File, Tab
F). See, App. Exh. Nos. 2 and 5.
In agreement with the USPS, GPO also found the repaired books to
be unacceptable. Consequently, on October 19, 1987, Flemion
telephoned Jernigan and asked him if the USPS would accept the
job with a discount (R4 File, Tab F). The same day, Flemion also
called Ms. Paula Wood, the Appellant's Customer Service Manager,
and inquired "if that's the best they [could] do on tip[ped] in
[pages]" (R4 File, Tab F). By October 21, 1987, Flemion still
had not heard from Jernigan regarding accepting the books at a
discounted price ("corrected or not corrected"), so he telephoned
Jernigan again and was informed that no decision had been made by
higher authority but a meeting was scheduled for that day in
which the issue would be discussed (R4 File, Tab F).
Flemion retired on October 29, 1987, with the issue still
unresolved, and responsibility for Jacket No. 185-894 was
transferred to Mr. Rick Brzozowski (R4 File, Tab F). See,
Response to Appellant's First Set of Interrogatories (May 23,
1988), Response to Interrogatory 2.A. On November 5, 1987, after
waiting two weeks without hearing from Flemion, the Appellant
sent two copies of a second repaired version of WILDLIFE AMERICA
to the Respondent (addressed to Flemion), which had the tipped in
pages closer to the spine. App. Exh. Nos. 4 and 6. As the
Appellant acknowledged in its accompanying letter, the new
samples had not been requested by the either the USPS or the
Respondent, but it was interested in resolving the matter as
quickly as possible. 11/ App. Exh. No. 3. The second set of
tipped in books was also unacceptable. 12/ Therefore, on
November 9, 1987, Brzozowski telephoned Bowns to discuss another
approach which might make the books acceptable, namely, cutting
out the text, pasting in the missing four page outer signature,
reprinting the covers and recovering the book (R4 File, Tab F).
Bowns suggested that perhaps the Appellant could salvage the
covers and redo the text instead, but he would check and call
back. On November 18, 1987, Bowns telephoned Brzozowski to let
him know that the job had been shipped back to the bindery (R4
File, Tab F). The following day, Brzozowski asked Bowns to sent
him two samples of the corrected books, and the Appellant
responded by immediately dispatching one sample from the original
printing and one from the second printing with original covers
(R4 File, Tab F). See, App. Exh. No. 1; SHR, p. 4.
The record reveals that on November 25, 1987, Mr. Robert G. Cox,
the Superintendent of GPO's Departmental Account Representative
Division, telephoned the USPS requesting certain information
concerning the agency's marketing plans for WILDLIFE AMERICA. In
response, Shepherd wrote Cox on November 30, 1987, attaching the
requested information -- a June 1987 flyer and an article from
the September 1987 issue of the "Memo to Mailers" newsletter --
which indicated that the hard cover (Executive Gift) edition of
WILDLIFE AMERICA would be available for purchase in October 1987
(R4 File, Tab G). 13/ Furthermore, Shepherd made clear that
despite this earlier wide publicity given by the USPS to the
proposed availability of this Executive Gift edition, the agency
could not "use the book if the printing contractor is allowed to
reprint due to the errors made in the initial production" (R4
File, Tab G).
On December 4, 1987, Flood, who was now personally involved in
the matter, telephoned Wood and asked her to send him six copies
of books repaired by removing the covers, inserting the four
missing pages, and then replacing the covers (or repaired by any
other method which would hide the corrections) (R4 File, Tab H).
He expressly told Wood that he was making this request in an
attempt to avoid default. Wood responded that she would first
have to check with bindery subcontractor. Later that day, Wood
contacted Flood (around 3:55 p.m.) and promised that six side-
sewn books would be sent to him by the following Wednesday (R4
File, Tab H). She also asked Flood if the USPS would accept
reprints in case the repaired books were not acceptable.
However, a few days later, on December 7, 1987, Wood telephoned
Flood to inform him the books could not be side-sewn, and
therefore, no further samples of corrected books were being sent
to the Respondent (R4 File, Tab H; PHT, p. 10). 14/ The
following day, Wood called Flood again and offered to supply
tipped in books at a discount in order to settle the matter. At
Flood's request, Cox contacted the USPS with the Appellant's
proposed resolution, but he was told that the offer of discounted
tipped in books was unacceptable (R4 File, Tab H). Thereafter,
Flood called Wood and informed her that the Appellant's proposal
had been rejected.
On December 9, 1987, the day after his last conversation with
Wood, Flood wrote to the Respondent's CRB seeking its approval to
terminate the Appellant's contract under Jacket No. 185-894 for
default (R4 File, Tab I). As the Contracting Officer explained,
in pertinent part:
When Jacket 185-894 was delivered on September 30,1987, it was
discovered that the copies were bound without a four-page outer
signature [Exhibit citation omitted]. The contractor's offer to
modify the bad books by tipping in the missing pages [Exhibit
citation omitted], was met with a negative reply from the [USPS],
because it would be considered an inferior and patched product.
The [USPS] insists that the product was to be used as a Christmas
promotion, which would generate as much as $499,000 in revenue,
and reprinting to correct the defect would cause a delay which
might hinder it's [sic] marketability. The [USPS] requests that
the job be terminated and all of the offending copies be
destroyed.
The CRB concurred with the Contracting Officer's proposed action.
Therefore, on December 17, 1987, the Appellant was notified that
its contract was partially terminated for default because of its
"inability to deliver the 20,000 copies required on Jacket No.
185-894, as an acceptable product and within the schedule
limitations" (R4 File, Tab J). 15/ This appeal to the Board from
the Contracting Officer's termination action followed on January
22, 1988 (R4 File, Tab K).
POSITIONS OF THE PARTIES
The Appellant admits that it was in default. However, in its
brief filed with the Board on June 6, 1990, the Appellant
contends that notwithstanding its actual default in this matter,
the Respondent waived its right to terminate the contract by
waiting an unreasonable length of time to exercise it, thus
creating the inference that time was no longer of the essence.
Appeal File (hereinafter APPF), Tab 34, pp. 5, 7 (Appellant's
Brief, dated June 4, 1990). The Appellant argues that while it
was clear that time was of the essence to the USPS with respect
to WILDLIFE AMERICA, the Respondent acted as if time was of no
concern at all; i.e., although the Appellant had sent the
Respondent samples of corrected books on three occasions between
September 30, 1987 and December 17, 1987, apart from sporadic
discussions with the Appellant concerning discounts and various
methods of repairing the books, the Respondent allowed two months
to pass without taking any action or making any decisions
regarding further performance by the Appellant. Thus, the
Appellant argues that the Respondent not only created the
impression that time was no longer of the essence, but
considering the USPS' interest in timely performance of the
contract, the Respondent's delay went beyond the "reasonable
period" of forbearance usually accorded to the Government in such
termination cases. APPF, Tab 34, p. 7. Instead, the
Respondent's dilatory conduct in this instance was such that it
created a waiver of its right to terminate for default. Id.
The Appellant also contends that the Respondent's failure to
provide the Appellant with timely instruction and direction when
it was ready, willing and able to complete performance of the
contract, amounted to a breach of the Respondent's implied duty
to cooperate with the Appellant. APPF, Tab 34, pp. 5, 8.
According to the Appellant, as soon as the defects in the 18,000
case bound copies of WILDLIFE AMERICA were discovered, it could
have reprinted corrected copies of the book and shipped them to
the USPS in ample time for its October sales promotion. 16/
However, it was misled to its detriment by the Respondent into
believing that some form of repair or discount would eventually
be acceptable. APPF, Tab 34, p. 6.
Finally, the Appellant claims that the USPS had a "hidden agenda"
in seeking to cancel this contract. See, APPF, Tab 34,
p. 8. See also, PHT, pp. 9-14. The Appellant argues that the
USPS sales figures show that the hard cover copies of WILDLIFE
AMERICA did not sell as well as the soft bound version. Thus,
according to the Appellant, there is an inference that the USPS
"took advantage" of Appellant's default and "seized upon the
opportunity" to cancel the poor sellers. See, APPF, Tab 34. As
the Board understands the Appellant's position, this accusation
-- that the USPS, with the collusion of GPO, engaged in a
conspiracy to cancel the contract -- is tantamount to an
allegation of bad faith dealing on the part of the Government.
For all of these reasons, therefore, the Appellant believes that
the Contracting Officer's default termination decision must be
vacated and set aside, and the matter remanded to him with
directions to convert the termination into one of convenience of
the Government. APPF, Tab 34, p. 8.
The Respondent, on the other hand, contends that the Contracting
Officer properly defaulted the Appellant in this case and his
decision should be affirmed. APPF, Tab 35, pp. 7-8 (Respondent's
Brief, dated July 2, 1990). In the Respondent's view, the
products delivered by the Appellant were "severely defective."
APPF, Tab 35, p. 7. Accordingly, the Respondent's position is
anchored in the well-settled principle of public contract law
which entitles Government to strict compliance with its contract
specifications. APPF, Tab 35, p. 3 (citing, Jefferson
Construction Co. v. United States, 151 Ct. Cl. 75 (1960); Red
Circle Corporation v. United States, 185 Ct. Cl. 1, 8 (1968);
American Electric Contracting Corp. v. United States, 579 F.2d
602, 608 (1978); Dependable Printing Company, Inc., GPO BCA 5-84
(1985)). Under this doctrine, the Government can enforce strict
compliance either by rejecting nonconforming supplies, or
accepting them at a reduced price, and the choice is
discretionary with the agency; i.e., a contractor cannot compel
the Government to accept defective products at a discount, even
if the defects are relatively minor. APPF, Tab 35, p. 4 (citing,
Famous Model Co., Inc., ASBCA No. 12,526, 68-1 BCA � 6,902
(1968); Cherry Meat Packers, Inc., ASBCA No. 8,974, 1963 BCA �
3,937 (1963)). The Respondent believes that the Contracting
Officer in this case acted reasonably in rejecting the defective
product and defaulting the Appellant. In that regard, the
Contracting Officer knew that: (1) the USPS believed that the
nature of the publication militated against the salability of a
patched or repaired publication; and (2) the tight time schedule
associated with the USPS' guarantee of prior-to-Christmas
delivery precluded a reprint of the book. Id.
With respect to the Appellant's claim that GPO waived its right
to terminate the contract for default because it waited until
December before acting, the Respondent argues that failure to
terminate a contract immediately after the right accrues does not
constitute a waiver. APPF, Tab 35, pp. 4-5 (citing, Frank A.
Pelliccia v. United States, 208 Ct. Cl. 278, 525 F.2d 1035 (Ct.
Cl. 1975)). Rather, the law gives a contracting officer a
reasonable amount of time to investigate the facts and decide
what course of action will be in the Government's best interest.
During this so-called "forbearance period" the Government may
terminate at any time, without prior notice. APPF, Tab 35, p. 5
(citing, Raytheon Service Co., ASBCA No. 14,746, 70-2 BCA �
8,390)). Furthermore, the Respondent believes that the Appellant
has neither alleged nor proved an indispensable element of the
"waiver" theory -- i.e., that the Government has indicated a
willingness to have the contractor continue performance. 17/ Id.
Indeed, as the Respondent sees it, because the Appellant had
completed the work under the contract and delivered the books,
the conclusion is inescapable that there was no continued
performance and no detrimental reliance by the Appellant. APPF,
Tab 35, p. 5 (citing, Doyle Shirt Manufacturing Corporation v.
United States, 462 F.2d 1150 (Ct. Cl. 1972)). Moreover, the
Respondent observes that the Appellant has neither alleged nor
offered any evidence of detrimental reliance or injury due to
GPO's termination of the contract. APPF, Tab 35, p. 5, n. 5.
Accordingly, the Respondent submits that the Contracting Officer
properly exercised his discretion to terminate the contract for
default, and urges the Board to affirm that decision. APPF, Tab
35, pp. 5-6.
DISCUSSION 18/
The sole issue before the Board is whether or not the Contracting
Officer erroneously terminated the Appellant's contract under
Jacket No. 185-894 for default. Stated otherwise, the question
is whether or not the Respondent's conduct with respect to the
contract after the September 30, 1987, was so dilatory and
misleading, or otherwise erroneous or defective, that it
effectively lost its right to terminate the contract. If so,
under the terms of the "Default" clause applicable to the
contract, the Appellant would be allowed to recover for the work
performed. 19/
See, e.g., Chavis and Chavis Printing, supra, Sl. op. at 9;
Bonnar-Vawter, GPOCAB [No Docket Number], Sl. op. at 5 (1975)
(citing, Racon Electric Company, ASBCA, 1,962 BCA � 3,528
(October 3, 1962)). 20/
Among other things, the "Default" clause which applies in this
case allows the Contracting Officer, on written notice of default
to the contractor, to terminate a contract, in whole or in part,
"[i]f the contractor fails to make delivery of the supplies or to
perform the services within the time specified herein or any
extension, thereof;. . .". 1980 Contract Terms, 2-18(a)(1).
Such clauses have uniformly been held to apply not only to late
deliveries of the contracted for goods, see, e.g., Chavis and
Chavis Printing, supra, Sl. op. at 12-15; Jomar Enterprises,
Inc., GPO BCA 13-86 (May 25, 1989), Sl. op. at 3-5, but also to
the timely delivery of nonconforming supplies. 21/ See, e.g.,
KOPA Kopier Produckte, ASBCA No. 29,471, 85-3 BCA � 18,367; Meyer
Labs, Inc., ASBCA No. 18,347, 77-1 BCA � 12,539. Moreover, no
"cure notice" is required where a contract is to be terminated
because of the contractor's failure to timely deliver or perform.
22/ See, e.g., Kit Pack Company, Inc., supra, 89-3 BCA � 22,151;
Norm Hodges and Associates, Inc., GPOCAB 2-82, Sl. op. at 3
(1982); Sales Aids, Inc., GPOCAB 14-80, Sl. op. at 6 (1981).
However, because a default termination is a drastic action, it
may only be taken for good cause and on the basis of solid
evidence. 23/ See, e.g., Mary Rogers Manley d/b/a Mary Rogers
Real Estate, HUDBCA No. 76-27, 78-2 BCA � 13,519; Decatur Realty
Sales, HUDBCA No. 75-26, 77-2 BCA � 12,567.
There should be no question but that on September 30, 1987, when
the Appellant delivered a product to the USPS which failed to
conform to the specifications, it was in actual default of the
contract; indeed, the Appellant admits as much. See, e.g.,
Chavis and Chavis Printing, supra, Sl. op. at 13. The general
rule, as indicated by the Respondent, is that the Government is
entitled to strict compliance with its specifications. 24/ See,
e.g., Rose Printing Company, GPO BCA 2-87 (June 9, 1989), Sl. op.
at 6 (and cases cited therein); Fry Communications, Inc., GPO BCA
1-87 (June 1, 1989), Sl. op. at 5; Mid-America Business Forms
Corporation, GPO BCA 8-87 (December 30, 1988), Sl. op. at 18-19.
See also, Astro Dynamics, Inc., ASBCA No. 28,320, 83-2 BCA �
16,900; Arnold Diamond, Inc., ASBCA No. 12,335, 68-1 BCA � 8,672.
Therefore, the Respondent would have been within its rights to
terminate the contract immediately. See, e.g., Nuclear Research
Associates, Inc., ASBCA No. 13,563, 70-1 BCA � 8,237 (where the
contractor's delivery was late by one day, the Armed Services
Board of Contract Appeals upheld the default termination, stating
that "once an appellant has failed to deliver on time, the
Government, absent excusable cause of delay, has an indefensible
right to terminate the contract, unless its own conduct deprives
it of that right."). See also, e.g., Northeastern Manufacturing
and Sales, ASBCA No. 35,493, 89-3 BCA � 22,093; Appli Tronics,
ASBCA No. 31,540, 89-1 BCA � 21,555; Riggs Engineering Co., ASBCA
No. 26,509, 82-2 BCA � 15,955; R & O Industries, Inc., GSBCA No.
4,804, 80-1 BCA � 14,196; M. H. Colvin Co., GSBCA No. 5,209, 79-2
BCA � 13,981; KOPA Kopier Produckte, supra, 85-3 BCA � 18,367.
As a practical matter, however, the Government rarely terminates
contracts for slight delays, much less immediately. 25/ See,
e.g., ACL-FILCO Corporation, ASBCA No. 26,196, 83-1 BCA � 16,151
("It has often been noted, . . . , that neither the Government
nor the contractor is well served by a precipitously taken
decision to terminate a contract for default . . .").
Consequently, it is well-settled that the Government does not
waive its right to terminate a defaulted contract because it
fails to do so immediately when the right to terminate accrues.
See, Frank A. Pelliccia v. United States, supra, 525 F.2d 1035
(1975). Instead, a contracting officer has a reasonable period
of time to investigate the facts and to determine what course of
action would be in the best interest of the Government as the
non-defaulting party. During this forbearance period the
Government may terminate the contract at any time, without prior
notice. See, e.g., Raytheon Service Co., supra, 70-2 BCA �
8,390; Lapp Insulator Co., ASBCA No. 13,303, 70-1 BCA � 8,219,
mot. for reconsid. denied 70-2 BCA � 8,471. Under the law, the
extent of a reasonable forbearance period depends on the facts
and circumstances of each individual case. 26/ See, e.g., H. N.
Bailey & Associates v. United States, 196 Ct. Cl. 156, 449 F.2d
387 (1971); Methonics, Incorporated v. United States, 210 Ct. Cl.
685 (1976).
Although the decision to terminate a defaulted contract is a
matter largely within a contracting officer's discretion, there
are four doctrines in Government contract law -- three of which
are expressly raised by the Appellant and the other one which is
implied -- that have the effect of forestalling such an action in
appropriate circumstances. First, the Appellant seeks the
protection of the so-called DeVito doctrine, see, D. Joseph
DeVito v. United States, supra, 413 F.2d. 1147, which holds that
the Government may waive its right to terminate a contract for
default if it takes an unreasonable amount of time to exercise
that right, and the defaulting contractor relies to its detriment
on the Government's delay. Second, the Appellant contends that
the Respondent's dilatory conduct between September 30, 1987 and
December 17, 1987 -- a 78-day period marked by, according to the
Appellant, the Respondent's failure to communicate with it about
solving the defective book problem or give it further advice and
direction concerning continued performance -- amounted to a
breach of the Respondent's implied duty to cooperate with the
Appellant to complete performance under the contract. 27/ The
Appellant's third defense arises by implication from its argument
concerning the Respondent's alleged breach of its duty to
cooperate; namely, that it is entitled to the protection of the
so-called "substantial compliance" rule in this case. See, e.g.,
Radiation Technology, Inc. v. United States, 177 Ct. Cl. 227, 366
F.2d 1003 (1966). Finally, the Appellant alleges that the
termination of its contract for the case bound version of
WILDLIFE AMERICA was not bona fide, but rather the Government
acted in bad faith, in order to cancel a large order of books
which were selling poorly. The Board will discuss each of these
defenses separately.
1. Waiver
The first defense raised by the Appellant to the Respondent's
default action is the so-called DeVito doctrine. 28/ See, D.
Joseph DeVito v. United States, supra, 413 F.2d. 1147 (1969). In
DeVito, the Court held that time is of the essence in any
contract containing fixed dates for performance. 29/ Id., 413
F.2d at 1154. Consequently, the Court found that when a contract
has not been terminated for default within a reasonable time
after the due date has passed, an inference is created that time
is no longer of the essence. Id. That is, in the absence of a
new delivery date, the law will assume that the Government has
elected to have the contractor continue with performance and the
Government will be estopped from terminating the contract, so
long as the constructive election not to terminate continues and
the contractor proceeds with performance. Id. As outlined by
the DeVito Court:
The necessary elements of an election by the non-defaulting party
to waive default in delivery under a contract are (1) failure to
terminate within a reasonable time after the default under
circumstances indicating forbearance, and (2) reliance by the
contractor and continued performance by him under the contract,
with the Government's knowledge and implied or express consent.
[Emphasis added.]
Id. The Court also indicated that the determination of what
constitutes a reasonable time for the Government to terminate a
contract after default depends on the circumstances. 30/ Id.
In subsequent cases, the Claims Court described the standard to
be applied in such situations as follows:
The overriding test is whether [G]overnment action[s] between
default by the contractor and termination action by the [G]
overnment were such as to reasonably indicate an election by the
[G]overnment to continue the contract despite a contractor's
failure to timely deliver contract items.
Northrop Carolina, Inc. v. United States, 213 Ct. Cl. 670 (1977),
adopting the Trial Judge's opinion at 22 CCF at � 80,535, 85,754.
See also, Prestex, Inc., supra, 81-1 BCA � 14,882. In other
cases, the Claims Court has made clear that since the DeVito rule
applies only when the Government's forbearance from demanding its
right to timely performance is coupled with continued performance
by the contractor, the real focus of inquiry is on the
contractor's reliance, not on the Government's failure to have
insisted upon strict adherence to the terms of the delivery
schedule. See, A.B.G. Instrument & Engineering, Inc. v. United
States, 593 F.2d 394, 403-04 (Ct. Cl. 1979). However, it must be
emphasized that in order to bring itself under the protection of
the rule, a contractor's activity during the post-delivery period
must be productive performance or tangible progress. See, e.g.,
Frank A. Pelliccia v. United States, supra, 525 F.2d 1035 (1975);
Prestex, Inc., supra, 81-1 BCA � 14,882 (and cases cited
therein). See also, Phoenix E. Incorporated, ASBCA No. 25,872,
82-1 BCA � 15,729 (the contractor's continued performance must be
substantial).
The Board's task under DeVito is to determine: (1) whether the
time taken by the Respondent between September 30, 1987 (the date
the Appellant defaulted on the contract), and December 17, 1987
(the date the Respondent terminated the contract), was
unreasonable under the circumstances, and (2) whether the
Appellant continued performance under the contract in detrimental
reliance on the Respondent's delay. Both elements must be
satisfied in order to establish a DeVito waiver.
Applying the principles of DeVito to this appeal, the answer to
the Board's initial inquiry -- whether the Respondent's 78-day
delay in terminating the Appellant's contract for default was
reasonable or not -- depends on the substance of the contacts
between the parties from September 30, 1987, to December 17,
1987. Specifically, the central question facing the Board is
whether the Respondent's conduct between the time the Appellant
defaulted and the date the contract was terminated ". . .was
such as to reasonably indicate an election by the [Respondent] to
continue the contract despite [the Appellant's] failure to timely
deliver [conforming] contract items." Northrop Carolina, Inc. v.
United States, supra, 213 Ct. Cl. 670. Furthermore, in applying
the DeVito rule here, the Board is mindful that it must look at
all of the circumstances confronting the parties to decide
whether the Respondent's delay was reasonable or excessive. 31/
D. Joseph DeVito v. United States, supra, 413 F.2d. at 1154;
Methonics,
Incorporated v. United States, supra, 22 CCF � 80,350, 210 Ct.
Cl. 685; H.N. Bailey & Associates v. United States, supra, 449
F.2d 387.
At the outset, the Board believes that it would be worthwhile to
review the relevant facts. The Appellant sent nonconforming
books to the USPS on September 30, 1987. However, the first
indication that the Respondent had of the Appellant's default was
Shepherd's October 9, 1987, letter to Marken, forwarding
Morison's initial complaint and a copy of the defective product
(R4 File, Tab E). Thereafter, notwithstanding the USPS'
position, voiced from the outset, concerning its unwillingness to
market patched or repaired books, and its demand that the
purchase order be canceled, the record indicates that the
Respondent refused to act "precipitously" in terminating the
contract for default. ACL-FILCO Corporation, supra, 83-1 BCA �
16,151. Instead, the Respondent took time to investigate the
facts and to determine what course of action would be in the best
interest of the Government. Frank A. Pelliccia v. United States,
supra, 525 F.2d 1035; Harold Burgmayer Real Estate, Inc., supra,
88-3 BCA � 21,063; Environmental Tectonics Corporation, ASBCA No.
29,947, 87-1 BCA � 19,382.
In that regard, the Respondent initiated a series of coordinated
contacts involving the USPS and the Appellant with a view toward
seeing if the contractor's product could be conformed to the
specifications. However, at the time the Respondent became
involved in the matter, the Appellant already knew that it had
delivered defective books and had begun dealing with the USPS
directly with respect to remedying the situation. Thus, on
October 14, 1987, Bowns informed Flemion that the Appellant had
made corrections a week earlier by tipping in the missing pages
and had sent samples to the USPS. Bowns also told Flemion that
he was waiting to hear from the USPS to learn if the repairs were
acceptable. The following day, October 15, 1987, when Flemion
called the USPS, he was told by Jernigan that the Appellant's
corrections were not acceptable -- a message which Flemion
immediately relayed to Bowns. Nonetheless, Flemion asked Bowns
to send GPO two copies of repaired books like the ones sent to
the USPS so the Respondent could make its own evaluation. As a
result of this independent examination, the Respondent agreed
with the USPS that the repaired books were of poor quality and
unacceptable. 32/
Although it judged the tipped in corrections to be
unsatisfactory, the Respondent did not abandon its efforts to
find a solution to the problem. Instead, between October 19,
1987, and his retirement on October 29, 1987, Flemion: (1) spoke
to the Appellant about making better tipped in repairs to the
books (October 19, 1987); and (2) talked to the USPS on two
occasions concerning accepting the job at a discount price
(October 19, 1987 and October 21, 1987). Thereafter, on November
5, 1987, the Appellant sent the Respondent two corrected copies
of WILDLIFE AMERICA, which had the tipped in pages closer to the
spine. On
November 9, 1987, Flemion's successor, Brzozowski, telephoned
Bowns to discuss a totally different approach to repairing the
books which, in essence, involved tearing them apart and pasting
in the missing pages. Nine days later, on November 18, 1987,
Bowns informed Brzozowski that the repairs had been made and the
job had been sent to the bindery subcontractor. He also had two
copies of the newly corrected books delivered to Brzozowski the
following day. 33/ On December 4, 1987, after the Thanksgiving
holiday, Flood called Wood and requested six copies of books
repaired essentially in accordance with Brzozowski's instructions
(or any other method which hid the corrections) because the "[j]
ob needs to be perfect" (R4 File, Tab H). At this time, Wood
raised the possibility of reprinting the books. On December 7,
1987, Wood informed Flood that the books could not be side-sewn,
and thus the only corrected copies produced by the Appellant were
those which had the missing pages tipped in. In a final effort
to settle the matter, Wood called Flood on December 8, 1987, and
offered to supply WILDLIFE AMERICA repaired with tipped in pages,
at a discount. However, the USPS rejected this proposal.
Consequently, on December 9, 1987, Flood initiated steps to
terminate the contract for default.
As previously indicated, the Government is entitled to take a
reasonable time after the right to terminate accrues to determine
what course of action will be in its best interest. In the
opinion of the Board, it does not appear that the time taken in
this case was excessive. It is apparent from the record that the
elapsed time was taken up by tripartite discussions over ways to
fix the defective books which might satisfy the USPS, the
Appellant's attempts to produce acceptable corrections, and
multiple reviews of the Appellant's repairs by both the
Respondent and the USPS (on three separate occasions during this
period -- October 15, 1987, November 5, 1987, and November 19,
1987 -- the Appellant sent GPO sample copies of corrected books
for its inspection). Cf., ACL-FILCO Corporation, supra, 83-1 BCA
� 16,151. Specifically, at various times during this period the
parties talked about: (1) repairing the book by tipping in the
missing pages; (2) making corrections which would involve cutting
out the text, replacing the missing pages, and recovering the
book; (3) the possibility of reprinting the books; and (4) the
acceptance of the books, corrected or uncorrected, at a discount
price. Since these discussions involved three separate parties
-- the Respondent, the Appellant and the USPS -- and their
respective management organizations, the Board believes that it
was reasonable to anticipate that the resolution process would
take longer than if only two parties were involved. In this
case, not only was there a need to coordinate information and
responses among all of the parties during this period, but the
situation was compounded by the fact that the communications were
free and unstructured; e.g., the Appellant could and did discuss
matters with the USPS directly
and inform the Respondent afterward. Indeed, in the Board's
opinion, the ease and informality with which the parties
exchanged views and information should surprise no one since they
were not strangers; i.e., the Appellant was also the successful
printing contractor for the previous edition of WILDLIFE AMERICA
and it is reasonable to expect that the parties would have
developed a comfortable business relationship as a by-product of
that prior experience. 34/
It is manifest to the Board that the Respondent spent the time
between September 30, 1987, and December 17, 1987, attempting to
ascertain whether there was any possibility of conforming the
books which had been delivered to the USPS to the contract
specifications. Only when it was determined, within a reasonable
time the Board believes, that acceptable repairs were not
feasible was the contract terminated. See, KOPA Kopier
Produckte, supra, 85-3 BCA � 18,367. See also, e.g., Computer
Products International, Inc., ASBCA Nos. 26,107, 26,130, 83-2 BCA
� 16,889; Environmental Tectonics Corporation, supra, 87-1 BCA �
19,382. Accordingly, in the judgment of the Board, the time
taken by the Respondent between September 30, 1987, when the
Appellant defaulted, and December 17, 1987, when the contract was
terminated, was a period of reasonable forbearance and did not
constitute a waiver of the Government's right to default the
contract. Id. Much longer periods have occurred without the
Government losing
the right to enforce the contract. 35/
As for the second prong of the DeVito rule in this matter, the
Board sees nothing in the facts before it to warrant the
conclusion that the effort expended by Appellant between
September 30, 1987, and December 17, 1987, amounted to
detrimental reliance. It is well recognized that for detrimental
reliance to occur under DeVito there must be: (1) conduct by a
contracting officer which the contractor reasonably believes
constitutes encouragement to proceed with performance of the
contract after the delivery date has passed; and (2) incurrence
of costs related to performance by the delinquent contractor in
reliance thereon. See, e.g., General Products Corporation, ASBCA
No. 16,658, 72-2 BCA � 9,629; Franklin Instrument Company, Inc.,
IBCA No. 1270-6-79, 81-1 BCA � 14,970.
It seems clear to the Board that there was no "continued
performance," as that term is understood in the context of the
DeVito rule, by the Appellant after September 30, 1987. 36/ The
entire focus of dealings between the parties concerned repairing
or replacing the defective books. Thus, in the time allotted for
performance under the contract, the Appellant had completed the
work and delivered a nonconforming product. See, e.g., Doyle
Shirt Manufacturing Corporation V. United States, supra, 462 F.2d
1150. Furthermore, it seems not to be contended, and nothing in
the record would support such a finding, that the work which did
occur on the rejected books after September 30, 1987, was
"productive" work, within the meaning of the DeVito rule. See,
e.g., Environmental Tectonics Corporation, supra, 87-1 BCA �
19,382; ("trouble shooting" and attempting to bring the delivered
product into conformance with specifications, are post-production
tasks). See also, Frank A. Pelliccia v. United States, supra,
555 F.2d at 1043.
Assuming for the sake of argument that the Appellant's attempts
to satisfy the contract by repairing the nonconforming books with
tipped in pages constituted "performance," it is clear that the
originator of such a solution was the Appellant itself; indeed,
the Appellant had sent samples of the repaired books to the USPS
at least five days before the Respondent became involved in the
matter (October 14, 1987). 37/ Thus, it can not be said that the
Respondent "encouraged" the Appellant to continue performance
after September 30, 1987, as required by the DeVito rule. See,
e.g., Centroid, Inc., supra, 86-1 BCA � 18,644. Stated
otherwise, even though the Contracting Officer wanted to examine
the repairs made by the Appellant, he did not urge or initiate
the Appellant's efforts to correct the books, and it is highly
unlikely that he would have done so in light of the USPS'
outright rejection of a patched or repaired product. 38/ ACL-
FILCO Corporation, supra, 83-1 BCA � 16,151. Furthermore, in the
Board's judgment, the Appellant's "performance" efforts after
September 30, 1987, do not amount to "substantial performance,"
within the meaning of DeVito. See, e.g., Environmental Tectonics
Corporation, supra, 87-1 BCA � 19,382 ("trouble shooting" and
tasks related to complying with the specifications do not
constitute substantial performance). Compare, Prestex, Inc.,
supra, 81-1 BCA � 14,582 (substantial performance consisted of
the contractor continuing to expend efforts to solve the problems
of its subcontractor and to develop another source of supply, and
the Government accepting a partial delivery). Moreover, there is
nothing in the record, nor has the Appellant offered any
evidence, that it suffered additional expense, or was otherwise
prejudiced, as a result of the delay between its default and the
termination of the contract by the
Respondent. See, e.g., Belmont Instrument Corporation, ASBCA No.
18,861, 77-1 BCA � 12,332; Environmental Tectonics Corporation,
supra, 87-1 BCA � 19,382.
For all of these reasons, the Board finds the Appellant's
argument that the Respondent waived its right to terminate the
contract by waiting an unreasonable time to exercise its right,
to be without merit. Instead, the Board believes that the 78-day
delay in this case was a reasonable period of forbearance under
the circumstances. Furthermore, in the Board's view, the time
taken by the Respondent to determine which course of action would
be in its best interest was not excessive. Accordingly, in the
opinion of the Board, the DeVito doctrine is inapplicable under
the facts and circumstances herein. 39/ Cf., A.B.G. Instruments
& Engineering, Inc. v. United States, supra, 219 Ct. Cl. 381, 593
F.2d 394 (1979); DeVito v. United States, supra, 413 F.2d 1147;
Phil Rich Fan Manufacturing Company, Inc., ASBCA No. 12,770, 71-1
BCA � 8,694.
2. Implied Duty to Cooperate
The Appellant also claims that the Respondent's failure to give
it instructions and directions between September 30, 1987, and
December 17, 1987, deprived it of an opportunity to complete the
contract. It is the Appellant's contention that it could have
satisfied the contract by reprinting correct copies of WILDLIFE
AMERICA in ample time for the USPS' October sales promotion. The
Appellant states that it was ready, willing and able to complete
performance in this fashion, but the Respondent engaged in
conduct which detrimentally misled it into believing that some
form of repair or discount would eventually be acceptable.
Therefore, the Appellant believes that the Respondent breached
its implied duty to cooperate with the Appellant to complete
performance under the contract.
The Appellant's second defense relies on a well-settled principle
of public contract law which states that in every Government
contract there is an implied affirmative obligation on the part
of the Government that it will do whatever is necessary to enable
the contractor to perform. 40/ See, e.g., Nanofast, Inc., supra,
69-1 BCA � 7,566. (citing, The Kehm Corporation v. United
States, 119 Ct. Cl. 454, 93 F.Supp. 620 (1950); United States v.
Speed, 75 U.S. (8 Wall.) 77 (1868)). Under this doctrine, the
Government will be held liable for breaching its implied duty to
cooperate if it wrongfully fails or refuses to take some action,
within its control, which is essential for the contractor to
perform. 41/ In most cases applying this principle to excuse a
contractor's default, there is a clear nexus between the
Government's breaching conduct and the performance period itself.
See, e.g., Maitland Brothers Company and Maitland Brothers
Company and St. Paul Fire and Marine Insurance Company, ASBCA
Nos. 30,089, 30,764, 31,032, 32,071, 32,605, 34,659, 90-1 BCA �
22,367; Singleton Contracting Corporation, GSBCA No. 8,552, 90-1
BCA � 22,298; G. W. Galloway Company, ASBCA Nos. 17,436, 17,723,
17,836, 17,911, 18,324, 77-2 BCA � 12,640. Furthermore, whether
the Government is liable depends on the reasonableness of its
conduct under the circumstances. See, e.g., Ben C. Gerwick, Inc.
v. United States, 152 Ct. Cl. 69, 285 F.2d 432 (1961); Tolis Cain
Corporation, DOTCAB No. 72-2, 76-2 BCA � 11,954.
It is unnecessary for the Board to engage in a detailed survey of
the cases involving the Government's duty to cooperate with a
contractor for the purpose of this decision. However, it should
be noted that an agency's failure to supply the contractor with
pertinent information will breach that duty, see, e.g., Spectrum
Leasing Corporation, GSBCA Nos. 7,347, 7,379, 7,425-27, 90-3 BCA
� 22,984; Ballenger Corporation, DOTCAB No. 74-32, 84-1 BCA �
16,973, mod. on other grounds, 84-2 BCA � 17,277; Hardie-Tynes
Manufacturing Co., ASBCA No. 20,582, 76-2 BCA � 11,972, as will
unreasonable delays in both giving approvals called for in the
contract, and in accepting the contractor's products. See, e.g.,
Hoel-Steffen Construction Co. v. United States, 231 Ct. Cl. 128,
684 F.2d 843 (1982); Vogt Brothers Manufacturing Co. v. United
States, 160 Ct. Cl. 687 (1963); The Kehm Corporation v. United
States, supra, 93 F.Supp. 620. 42/ Furthermore, agencies will
breach their implied duty to cooperate if they unreasonably
disapprove suggestions for alternate methods of performance,
Albert C. Rondinelli, ASBCA No. 9,900, 65-1 BCA � 4,674, or, in
waiver situations, if they fail to inspect late deliveries,
refuse to allow the contractor to explain the use of delivered
equipment, and deny the contractor a reasonable opportunity to
correct minor defects. Nanofast, Inc., supra, 69-1 BCA � 7,566.
As expressed by the Armed Services Board of Contract Appeals in
Nanofast:
. . . [T]here is an implied affirmative obligation on the part of
the Government that it will do whatever is necessary on its part
to enable the contractor to perform. [Citations omitted.] In
this case, the Government had an implied obligation . . . to give
the contractor a reasonable opportunity to correct any
deficiencies and deviations of a correctable nature found by the
Government in the course of its testing and inspection which
could be corrected within a reasonable time. So
far as can be determined from the record, the equipment delivered
by appellant complied with the contract requirements, except for
some minor deviations of an easily correctable nature, which
appellant was ready, able and willing to correct. . . . The
contractor's failure after 20 January 1967 to bring the equipment
into full compliance with the applicable specifications before
the contract was terminated is excused by the Government's
refusal to enter into any discussions with appellant and give it
an opportunity to make any necessary corrections.
69-1 BCA � 7,566 at 35,049-50. 43/
The Appellant does not contend that the Respondent failed to meet
its contractual responsibilities prior to September 30, 1987 --
the production and delivery stage of the contract -- nor is there
support in the record for such a finding. 44/ Furthermore,
notwithstanding the Appellant's claim that it was ready, willing
and able to reprint correct copies of WILDLIFE AMERICA in ample
time for the USPS' October sales promotion, the record indicates
that it did not make such an offer until November -- too late for
the USPS' marketing program -- preferring until then to
concentrate on finding a way to make acceptable repairs. 45/
Therefore, any breach of the implied duty to cooperate in this
case would have to be based, as in Nanofast, on a perceived
obligation on the part of the Respondent to give the contractor
an opportunity to correct the defective books within a reasonable
time. However, in the Board's opinion, the Nanofast rule is
clearly inapposite to the circumstances involved in this appeal.
The Nanofast doctrine applies to situations where a contractor
timely delivers supplies with minor defects and is denied a
reasonable opportunity to correct them. In this case, however,
the record is replete with evidence that the Appellant was, in
fact, given a chance to repair the defects in WILDLIFE AMERICA,
but was unable to do so within a reasonable time. As the Board
has already stated, it is self-evident that between September 30,
1987, and December 17, 1987, the Respondent's focus was on
ascertaining if there was any way the defective books could be
conformed to the contract specifications so that the USPS would
accept them. Toward that end, it is uncontroverted that: (1) the
Respondent not only endorsed the Appellant's chosen method of
correcting the defect in the books -- tipping in the missing
pages -- but even made
suggestions to the Appellant for improving the quality of the
repair job with that technique by making the tip in closer to the
binding; (2) on two occasions during this period, the Respondent
monitored the Appellant's progress by asking for samples of the
corrected books for the purpose of making an independent
evaluation regarding the quality of the repairs; (3) when the
tipped in product proved to be unacceptable, it was the
Respondent who suggested an alternate repair method to the
Appellant, namely, tearing apart the book and recovering it after
the missing pages had been inserted; 46/ (4) as late as
December 4, 1987, the Appellant was contacted by the Contracting
Officer who was seeking samples of corrected books which had been
repaired in accordance with this alternate method; and (5) on at
least three occasions, both on its own initiative (October 19,
1987 and October 21, 1987) and at the Appellant's behest
(December 8, 1987), the Respondent asked the USPS to consider
accepting the repaired books at a discount, even though it knew
beforehand of the USPS' position rejecting a patched product for
its Christmas sales program. There is nothing in the record to
indicate that the Respondent's conduct was anything less than
sincere or was calculated to frustrate the Appellant's
performance. In the Board's view, all of the steps taken by the
Respondent are indicia of an attempt to cooperate with the
Appellant in an effort to fulfill its obligations under the
contract. Consequently, the
Board believes that the Appellant was afforded a fair and
reasonable opportunity to repair the defect in its shipment, and
the Respondent is not responsible for the fact that the
Appellant's efforts failed to bear fruit.
Furthermore, there is no comfort for the Appellant in the
Nanofast rule because it applies only where the defects are
"minor deviations of an easily correctable nature." A "minor"
deviation in this context would be a defect which is "lesser in
size, amount, number, extent, importance or rank." [Emphasis
added.] Webster's New World Dictionary (1988), p. 864. Thus, if
the doctrine was involved here the critical issue would be
whether the defect in this case -- missing pages -- can be
considered "minor" within the meaning of Nanofast. The answer to
that question is readily apparent from the 1981 QATAP, which is
made part of the Appellant's contract by reference.
QATAP is a program which "establishes attributes for quality and
. . . defines tolerances for those attributes for five quality
levels of printing." 1981 QATAP, Determination of Product
Quality, 2.a. The program rates those attributes against
allowable tolerances, and classifies deviations as either "major"
or "critical" defects -- the only two categories established --
in accordance with the applicable tolerance table. Id. A
"critical defect," for the purpose of QATAP, "is a serious
deviation from specifications." 1981 QATAP, Definitions, 1-3,
p. 1.
Similarly, a "major defect is a deviation from specifications
which is less serious than a critical defect." 47/ Id., 1-4, p.
1.
From its placement in the QATAP, "missing pages" is considered a
"finishing attribute." 1981 QATAP, Finishing Attributes, F-12,
p. 38. Contractor performance in this area is determined by
inspecting individual copies of publications and classifying
deviations from the specifications for each finishing attribute
as either a critical or major defect in accordance with the
tolerance table for that attribute. 48/ 1981 QATAP,
Determination of Product Quality, 4-2. An examination of the
"Tolerance Tables for Miscellaneous Finishing Attributes," for
"missing pages" discloses that deviations from all five PQL's are
considered "critical defects;" i.e., defects of the most serious
nature. 1981 QATAP, Finishing Attributes, F-12, p. 38. The
reason for such a strict classification with respect to "missing
pages" is clear -- by rating this deviation as a "critical
defect," and by making the QATAP part of each contract awarded by
GPO, the drafters believed that they could best achieve the goals
of ensuring the completeness of Government information and
protecting the Government's interest in receiving the product
quality it specified. See, Stabbe Senter
Press, supra, Sl. op. at 51-52 (missing recipe cards).
Therefore, any defense here based on the Nanofast doctrine would
have to be rejected for no other reason than the fact that the
QATAP considers books delivered with missing pages to have
"critical defects," not "minor deviations." 49/
In summary, the Board believes that there is absolutely no
evidence in this record to support the Appellant's contention
that the Respondent breached its implied duty to cooperate under
the circumstances herein. Certainly, the Appellant has not
alleged a failure by the Respondent to meet its responsibilities
prior to September 30, 1987, when the Appellant was expected to
complete performance under the contract by delivering the books,
nor would the record support such a finding. Similarly, there is
no substance to the Appellant's claim that it was deprived it of
an opportunity to satisfy the contract by reprinting correct
copies of WILDLIFE AMERICA by the Respondent's misleading conduct
concerning repairs or discounts; instead, the record shows that
the Appellant did not offer to reprint the book until November,
much too late for the USPS' Christmas marketing program.
Furthermore, contrary to
the Appellant, the Board believes that the two months required to
reach a decision regarding termination of the contract was not
due to any indecisiveness by the Respondent, but rather, was a
product of the delays inherent in a tripartite communication
process, as well as the Respondent's desire to give the Appellant
a fair and reasonable opportunity to repair the serious defect in
the book. Moreover, the Board finds compelling the record
evidence showing that despite its awareness of the USPS' position
excluding a repaired product from its Christmas sales program,
the Respondent nonetheless repeatedly tried to persuade the USPS
to accept the books with tipped in pages at a discount.
Considering this record as a whole, the Board finds that between
September 30, 1987, and December 17, 1987, the Respondent fully
cooperated with the Appellant in its attempt to make the books
acceptable to the USPS and to fulfill its obligations under the
contract. 50/ See, e.g., Ben C. Gerwick, Inc. v. United States,
supra, 285 F.2d 432 (1961); Tolis Cain Corporation, supra, 76-2
BCA � 11,954. Accordingly, for all of these reasons, the Board
concludes that there is no merit to the Appellant's claim that
the Respondent breached its implied duty to cooperate with it to
complete performance under the contract.
3. Substantial Compliance
The Appellant's third defense to the Respondent's termination
action is the so-called "substantial compliance" rule, which like
the Nanofast doctrine, also affords defaulting contractors an
opportunity to correct minor defects in shipments to the
Government. In that regard, although the Government's right to
terminate accrues, inter alia, upon the contractor's timely
delivery of nonconforming goods, see, e.g., Northeastern
Manufacturing and Sales, supra, 89-3 BCA � 22,093; Applied
Devices Corporation, ASBCA No. 23,945, 86-3 BCA � 19,089, it is
also true that even if the supplies are defective termination may
not be warranted. Nanofast, Inc., supra, 69-1 BCA � 7,566, at
35,051. In fact, under certain circumstances where a contractor
delivers nonconforming goods immediate termination will not be
proper. See, e.g. Astro Dynamics, Inc., ASBCA No. 28,381. 88-3
BCA � 20,832.
In the lead case on this issue, Radiation Technology, Inc. v.
United States, supra, 366 F.2d 1003 (1966), the Claims Court was
asked to decide whether the Government could properly terminate a
contract for eight defective high voltage systems, which the
contractor had delivered on time, without granting the contractor
an opportunity to repair them. 366 F.2d at 1004. Both parties
agreed that the resolution of the dispute depended on the meaning
given to the term "delivery" in the default clause. 51/ In that
regard, the Government defended its action by arguing that
"delivery" meant delivery of conforming goods, i.e., delivery of
nonconforming supplies is equivalent to no delivery at all. 366
F.2d at 1005. The contractor, on the other hand, contended that
"delivery" merely referred to a physical transfer of goods, and
that under the contract the shipment of a nonconforming product
automatically entitled it to ten more days within which to
deliver conforming equipment. Id. The Court rejected both
positions as too "extreme." 52/ Instead, the Court elected to
define the default clause's use of term "delivery" as the
equivalent of a shipment which is in substantial compliance with
contract specifications. Id. Turning to the central issue in the
dispute -- whether a contractor who has delivered nonconforming
supplies is entitled to additional time after the expiration of
the specified or agreed on delivery date to cure the product
defects -- the Court applied the rule of reason, and held that:
Under the view which we espouse, the contractor is entitled to a
reasonable period in which to cure a nonconformity provided that
the supplies shipped are in substantial conformity with the
contract specifications.
366 F.2d at 1005-06. 53/ However, the Court made clear that the
right to cure was not unlimited, but had certain defined
boundaries:
In order to meet this requirement, it is incumbent at the outset
that the contractor demonstrate that he had reasonable grounds to
be believe that his delivery would conform to contract
requirements. Shipment alone is not an adequate badge of proof.
Further, the right to cure assumes that the defects complained of
are minor in nature and extent and are susceptible to correction
within a reasonable period of time. Where extensive repair or
readjustment is necessary in order to produce a fully operable
product, substantial performance cannot be found and summary
termination would be warranted. Other relevant considerations
bearing upon the question of compliance involve the usability of
the items, the nature of the product involved (whether it
involves complex precision instruments as opposed to a routine
production item), and the urgency of the Government's demand.
The greater such urgency the greater the requirement that
performance approach the overall level of strict conformity.
[Emphasis added.]
366 F.2d at 1006. 54/
A contractor who ships nonconforming goods is only protected by
the Radiation Technology rule to the extent he/she can satisfy
all elements of the test. Thus, the contractor must show that:
(1) a timely delivery of goods was made; (2) he/she reasonably
believed, in good faith, that the supplies conformed to the
contract when shipped and that they would be acceptable; and (3)
the defects are minor in nature and capable of correction within
a reasonable period of time. 55/ In the Board's opinion, the
Radiation Technology doctrine is inapplicable to the
circumstances of this case.
The Appellant has clearly satisfied the first element of the
Radiation Technology doctrine; i.e., there is no question but
that a timely shipment of the books was made. Similarly, the
Board finds that when the books were delivered, the Appellant
reasonably believed, in good faith, that they conformed to the
contract specifications and that they would be accepted; indeed,
because
both the error and the shipment had been made by its bindery
subcontractor, the Appellant remained unaware that the books were
defective until it was so informed by the USPS on October 7,
1987, a week after the delivery date. 56/ SHR, p. 2; PHT, p. 9.
However, the Board has already concluded that because the defect
in this case involved missing pages it was not minor in nature --
such deviations are defined as "critical defects" in the 1981
QATAP. Furthermore, the Board is not persuaded that the defect
in question was susceptible to correction within a reasonable
period of time, as evinced by the fact that the Appellant's
repeated attempts, over a two-month period, to repair the books
by tipping in the missing pages could not produce an acceptable
product. Therefore, essentially for the same reason that the
Nanofast rule does not apply to this appeal, the Board concludes
that the Radiation Technology doctrine is equally unavailable to
the Appellant; i.e., the defective books did not substantially
comply with the contract specifications and could not be modified
to conform to those requirements within a reasonable period of
time. See, e.g., Environmental Tectonics Corporation, supra,
87-1 BCA � 19,382; KOPA Kopier Produckte, supra, 85-3 BCA �
18,367; Renwin Metal Products, Inc., ASBCA No. 15413, 72-1 BCA �
9,233, mot. for reconsideration
denied, 72-1 BCA � 9,329.
The Board's conclusion in this regard is buttressed by two other
considerations mentioned by the Claims Court in Radiation
Technology -- the usability of the items and the urgency of the
Government's need. First, in agreement with the USPS, the
Contracting Officer found that not only were the books, as
originally received, inferior and unsalable, but tipping in the
missing pages did not improve the product. This decision was
wholly within the discretion of the Contracting Officer, and the
Board will not substitute its judgment for his. Cf., Stabbe
Senter Press, supra, Sl. op. at 53. Second, the Contracting
Officer accepted the USPS' position that its Christmas marketing
plan, which called for the sale and shipment of the books to
begin in mid-October 1987, 57/ precluded allowing the Appellant
to reprint the books to correct the defect because of the
adverse impact the delay would have had on the delivery
schedule. In that regard, the Board believes that the urgency
of the USPS' marketing needs is amply demonstrated in the
record, and it is appropriate to hold the Appellant to a level
of performance approaching strict conformity in this case.
Radiation Technology, Inc. v. United States, supra, 366 F.2d at
1006. Accordingly, for all of these reasons the Board rejects
the Appellant's claim that the Contracting Officer was in error
to terminate the contract without affording the Appellant an
opportunity to repair the defect in WILDLIFE AMERICA.
4. Bad Faith
The Appellant's final claim amounts to an allegation that in
order to cancel a large order of poor sellers, the USPS conspired
with the Respondent to terminate the contract for the case bound
version of WILDLIFE AMERICA. In effect, the argument advanced by
the Appellant is that the Respondent's decision to cancel the
contract was made in bad faith so that the USPS could escape a
bad bargain. The Appellant's contention is not supported by the
record in this case.
The Appellant's allegation is identical to the claim made by the
contractor in The Standard Register Company, GPO BCA No. 4-86
(October 28, 1987). Addressing the issue of bad faith in that
case, the Board stated, in pertinent part:
. . . the Appellant, . . . , alleges that the termination was the
result of the purported bad faith of the Library of Congress
personnel who wanted glue in the margins of the product rather
than crimping. While the Appellant is entitled to present
evidence of bad faith on the part of the Government, National
Factors, Inc. v. United States, 492 F.2d 1393, 1385-86 (Ct. Cl.
1974); see also, Allied Materials & Equipment Co., Inc. v. United
States, 569 F.2d 562, 565 (Ct. Cl. 1978), such evidence must show
a specific intent to injure the Appellant in order for it to be
considered by this Board or a court of law, Kalvar Corporation v.
United States, 543 F.2d 1298, 1302 (Ct. Cl. 1976), cert. denied,
434 U.S. 830 (1977), since there is an inherent presumption that
public officials act in good faith. Knotts v. United States, 121
F.Supp. 630, 631 (Ct. Cl. 1954). Moreover, in the case at hand,
there would have to have been proven that employees of each of
the two
separate agencies of Government acted in concert to achieve such
specific result. No such proof has been given. Indeed, no proof
has been given at all. Rather, [the] Appellant has offered a
bold assertion to this Board which cannot be acted upon.
[Emphasis added.]
Id., Sl. op. at 12-13.
Because of the strong presumption that Government officials
properly and honestly carry out their functions, an allegation of
bad faith must be established by "well-nigh irrefragable" proof.
See, e.g., Cotyvan Company, ASBCA No. 24,599, 89-3 BCA � 22,129,
at 11,356; Bruce Anderson Company, Inc., ASBCA Nos. 29,412,
32,247, 89-2 BCA � 21,872, at 110,027. "Irrefragable" proof
simply means evidence which is incapable of being refuted; i.e.,
indisputable evidence. Webster's New World Dictionary (1988), p.
714. In the Board's view, no such "irrefragable" proof of the
Respondent's bad faith exists in this record.
In the Board's opinion, the Appellant's reliance on the evidence
of poor sales and financial performance with regard to the hard
cover copies of WILDLIFE AMERICA, is more than offset by the fact
that the books it supplied to the USPS were defective, as the
Appellant admits, and this was the reason given by the
Contracting Officer for defaulting the contract; i.e., the
Appellant was unable to deliver "an acceptable product within the
schedule limitations" (R4 File, Tab J). Clearly, if the
Appellant had delivered conforming books to the USPS on the
contract due date, the agency would have been contractually bound
to accept them; indeed, all
indications in the record are that the USPS was ready to place
the books in its sales inventory at that time. Furthermore, the
Board believes that the very fact that the USPS placed a
procurement order for WILDLIFE AMERICA with the Respondent shows
that its original requirement was genuine. See, PHT, p. 12.
Moreover, it seems to the Board that if financial considerations
drove the USPS to seek cancellation of the contract, as suggested
by the Appellant, the agency would not have waited until the
fiscal year expired before raising the matter with GPO. See,
PHT, p. 14. The Appellant has offered no evidence or explanation
which would persuade the Board otherwise.
On the other hand, the USPS has consistently maintained
throughout these proceedings that it asked the Respondent to
terminate the contract because it was unwilling to offer a
patched or repaired book to its potential customers at the
premium price set for it. Furthermore, the Appellant's offer to
reprint the books came too late for the USPS' Christmas sales
delivery schedule. Consequently, the USPS ceased all promotional
activity with respect to WILDLIFE AMERICA. The judgment that the
books were no longer useful for the purposes intended because of
the Appellant's performance failures, was a business decision
made by management officials of the USPS within the scope of
their discretion, which the Contracting Officer accepted. The
Board is unable and unwilling to substitute its opinion for
theirs on the
basis of this record. Cf., Stabbe Senter Press, supra, Sl. op.
at 53.
Finally, there is absolutely nothing in the record which would
show that the employees of two separate Government entities --
GPO and the USPS -- set out to harm the Appellant or that they
acted in concert to achieve that specific result. On the basis
of the evidence, therefore, the Appellant's allegation of bad
faith is merely an unsupported assertion which is insufficient to
meet its required burden of proof. See, e.g., Fry
Communications, Inc. / InfoConversion Joint Venture, GPO BCA No.
9-85 (decision on remand) (August 5, 1971), Sl. op. at 33, n. 31
(citing, Tri-State Services of Texas, Inc., ASBCA No. 38,019,
89-3 BCA � 22,064); The Standard Register Company, supra, Sl. op.
at 12-13. See also, Singleton Contracting Corporation, GSBCA No.
8,548, 90-2 BCA � 22,748; Gemini Services, Inc., ASBCA No.
30,247, 86-1 BCA � 18,736. Accordingly, the Board finds that the
Appellant's claim that the Respondent acted in bad faith in
terminating its contract for WILDLIFE AMERICA, is without merit.
DECISION
Based on the foregoing discussion, the Board concludes that the
Contracting Officer appropriately exercised his discretion in
partially terminating the Appellant's contract for the printing
and binding of WILDLIFE AMERICA, for default. The Board finds
that although the Appellant delivered the books in question by
the contract due date, they were substantially defective. In the
Board's judgment, the 78 calendar days taken by the Respondent
between the date of actual default and the date of termination
was a reasonable period of forbearance under the circumstances to
consider what steps were in the best interest of the Government,
and did not waive the Respondent's right to cancel the contract.
Furthermore, the Board finds that the Respondent did not breach
its implied duty to cooperate with the Appellant to complete
performance under the contract by depriving the Appellant of an
opportunity to either reprint WILDLIFE AMERICA or to correct the
defects in the original shipment because: (1) the Appellant's
reprint offer was made too late for the USPS' marketing program;
(2) the Respondent did, in fact, give the Appellant a fair and
reasonable opportunity to repair the serious defect in the book;
and (3) the defect was "critical," not minor, and incapable of
being corrected within a reasonable period of time. Similarly,
because the defect in the books was serious and a satisfactory
correction could not be made within a reasonable period of time,
the Board finds that the so-called "substantial compliance" rule
is also inapplicable in this case. Finally, the Board finds that
there is no evidence to support the Appellant's claim of bad
faith by the Respondent and the USPS in the termination of the
contract. Accordingly, considering the record as a whole, the
appeal is denied and the decision of the Contracting Officer is
affirmed.
It is so Ordered.
_______________
1. Purchase Order 66028 included two Jacket Numbers -- Jacket
Nos. 185-894 and 185-895. Jacket No. 185-895, required the
printing and delivery of 70,000 copies each of a pamphlet,
envelope and label for the U.S. Postal Service (USPS) by August
2S, 1987 (Rule 4 File, Tabs B and D) (hereinafter R4 File). With
the acceptance of the pamphlets on September 3, 1987, the
Appellant completed its successful performance of that part of
the contract and it is not involved in this appeal.
2. The contract is governed by GPO Contract Terms No. 1. GPO
Publication 310.2 (Rev. October 1980) (198O Contract Terms),
Quality Assurance Through Attributes Program. GPO Publication
310.1 (Rev. June 1981) (1981 QATAP), and Department of Labor Wage
and Hour (DoL WH) Publication 1313, which are incorporated by
reference (Rule 4 File, Tab B, p. 1).
3. Flood was not the original Contracting officer for Jacket No.
185-894, but he was assigned responsibility for the contract on
July 27, 1987, less than a week after it was awarded to the
Appellant (R4 File. Tab D). The record discloses that on
November 23, 1987, nearly four months after his designation as
contracting officer, Flood received the Appellant's contract file
(R4 File, Tab H). This was about the same time that he became
actively involved in the contract compliance process flowing from
the Appellant's default. See, Status Hearing Report (May 8,
1990), p. 8 (SHR).
4. The record indicates that the Appellant was also the printing
contractor for both the case bound and soft cover versions of
WILDLIFE AMERICA under a previous contract with the Respondent --
Jacket No. I74-606 (R4 File. Tab B, Printing and Binding
Requisition and attached memorandum, dated June 12, 1987, p. 2).
Indeed, the Appellant had successfully completed Jacket No.
174-606 only a month before it was awarded the contract at issue
here. See, Preliminary Hearing Transcript (November 28, 1988),
P. 11 (PHT).
5. The 18,000 defective books shipped by the Appellant
represented 90 percent of the amount ordered under the contract
(20,000 books).
6. The Board's case file contains a poor copy of the letter in
question; much of the text is indistinct, including the
anticipated revenue figure used by Morison. The Board's "best
guess" is that the anticipated revenue figure is $600,000, but it
could just as well be $500,000 -- the copy of the letter in the
file prevents the Board from saying with certainty which figure
was used by Morison. Moreover, it should be noted that the
record contains a third anticipated revenue figure for the hard
bound version of WILDLIFE AMERICA -- $499,000 -- which was the
figure the USPS gave GPO in response to a later inquiry, and
which the contracting officer used in seeking the concurrence of
the Contract Review Board (CRB) to terminate the Appellant's
contract for default (R4 File, Tab I). In the Board's judgment,
however, the exact anticipated revenue figure is not
determinative; suffice it to say that the USPS expected a
considerable income from the projected sales of these books.
7. The missing signature consisted of the first two and last two
pages of the publication, including the table of contents.
Apparently, the missing signature was actually the cover of the
softbound version of WILDLIFE AMERICA and was to have been
included in the hardbound edition. See, SHR, p. 2. Furthermore,
the record indicates that the error was made by the Appellant's
bindery subcontractor. Id. However, it is well-settled that a
contractor is liable for the performance failures of its
subcontractors unless it can show that those shortcomings
occurred without the negligence of the contractor or
subcontractor, or for reasons beyond the control of either of
them. See, e.g., Chavis and Chavis Printing, GPO BCA 20-90
(February 6, 1991), Sl. op. at 13 (and cases cited therein); Rose
Printing Company, GPO BCA 2-87 (June 9, 1989), Sl. op. at 6;
J.M.T. Machine Co., Inc., ASBCA Nos. 23,928, 24,298, 24,536, 85-l
BCA � 17,820; Charles H. Siever, ASBCA No. 24,814, 83-1 BCA �
16,242; International Electronics Corp. v. United States, 227 Ct.
Cl. 208, 646 F.2d 496 (1981). See also, 1980 Contract Terms. �
2-18(c). This record is devoid of any such evidence.
8. The Board recognizes that the USPS' reason for wanting to
cancel the contract -- waiting for new books to be printed (since
it would not accept a patched or repaired product) would preclude
it from meeting its delivery commitments -- might imply a request
to GPO to terminate the contract for convenience. However, the
Board observes that the books shipped by the Appellant were, in
fact, defective, and the USPS did requisition them. See, PHT. p.
12. In any event, the decision on whether to terminate a
contract, and how to terminate it (whether by default or for
convenience), are matters wholly within the discretion of the
Contracting Officer and not the customer-agency, see, 1980
Contract Terms. �� 2-17(a), 2-18(b), (d), just as he/she is the
only person authorized to alter or modify the contract. See, 1980
Contract Terms. � 2-2. See also, e.g., Castillo Printing Company,
GPO BCA 10-90 (May 8, 1991), Sl. op. at 44-45 (and cases cited
therein).
9. The Notice of Quality Defects indicates that the matter was
referred to GPO's Printing Procurement Department (PPD) on
October 14, 1987, with the date of resolution shown as December
17, 1987 (when the contract was terminated for default) (R4 File,
Tab E). This two-month time gap forms the heart of the dispute
between the parties.
10. The record indicates that the Appellant had delivered the
repaired books to the USPS by October 9, 1987, nearly a week
earlier. See, Appellant's Exhibit No. 3 (App. Exh. No.).
Furthermore, the record discloses that tipping in missing pages
is a common industry repair technique. PHT, p. 10.
11. Neither the Respondent nor the USPS had requested these
samples. However, since the accompanying letter was addressed to
Flemion, it seems clear that these repairs were accomplished in
response to his inquiry of October 19, 1987. App. Exh. No. 3.
12. At the Status Hearing conducted by the Board on April 3,
1990, the contracting officer stated that both attempts at
repairing WILDLIFE AMERICA by tipping in the missing pages were
unsatisfactory because of the poor quality of glue used by the
Appellant. See, SHR, p. 5.
13. The USPS' marketing plan for WILDLIFE AMERICA is attached to
the Response to Appellant's First Set of Interrogatories (May 23,
1988), and included a consignment arrangement with the Hallmark
chain of stores; the plan contemplated the Executive Gift Set
being available in mid-October. See, Memorandum from Cathy
Caggiano to Mr. Davison and Mr. Morison, dated August 12, 1987,
p. 2.
14. In summary, on three separate occasions between September
30, 1987, and December 17, 1987, the Appellant sent sample copies
of WILDLIFE AMERICA repaired with tipped in pages to the
Respondent; i.e., on October 15, 1987 (to Flemion), November 5,
1987 (to Flemion), and November 19, 1987 (to Brzozowski). App.
Exh. Nos. 1, 2. and 4. When the second set of corrected books
was delivered, Flemion had retired and they were received by Ms.
Diane Smith, a GPO employee who is not further identified in the
record. App. Exh. No. 4. At the Status Hearing, the Appellant
introduced into evidence two versions of its repair work-
identified respectively as the Appellant's first and second
tipped in samples-which were made part of this record. App. Exh.
Nos. 5 and 6. An examination of the Appellant's exhibits by
Flood, who was present at the hearing, disclosed that he had not
seen one of them. SHR, pp. 3, 5. From the discussion which
followed it was apparent that although the Appellant had
submitted two versions of repaired copies to the Respondent,
Flood had only seen the one received by Brzozowski (the second
sample), whereas the version requested by Flemion (the first
sample) had been lost. Id., pp. 6, 8-9. According to the
record, the Appellant actually sent two versions of its repair
work to Flemion, with the missing pages in the second one
(November 5, 1987) being tipped in closer to the spine. App.
Exh. Nos. 3 and 4. On reflection, therefore, it seems that the
Respondent has misplaced both the October 15, 1987, and the
November 5, 1987 copies of the Appellant's repair work.
Moreover, since the Appellant made only two attempts to correct
WILDLIFE AMERICA with tipped in pages, then the one sent to
Brzozowski on November 19, 1987 (and seen by Flood), must have
been a duplicate of the lost November 5, 1987, version.
15. The Appellant was also notified that in the event of
reprocurement of the product, it would be liable for any excess
costs (R4 File. Tab J). However, the publication was canceled
and no reprocurement costs were incurred. Therefore, that issue
is not involved in this appeal. See, 1980 Contract Terms. �
2-18(b).
16. The Respondent urges the Board not to consider the
Appellant's argument that it would have been possible for it to
reprint WILDLIFE AMERICA and still make the delivery schedule.
In the Respondent's opinion, the Appellant's position is based on
unproven data regarding its production capacity, which is not a
part of the stipulated record, and there is no evidence that the
Appellant ever offered to reprint this publication; instead, the
Appellant insisted on making a tipped in correction, even after
the USPS rejected such a repair. APPF. Tab 35, p. 4, n. 3.
contrary to the Respondent's view of the record, the Board
believes that the Appellant did, in fact, raise the possibility
of reprinting the book, both with the USPS sometime around
November 25, 1987, and with the contracting officer, albeit not
until December 4, 1987. See, R4 File. Tab G ("Based on this
information, I am sure you can understand why we [USPS] cannot
use the book if the printing contractor is allowed to reprint due
to the errors made in the initial production."), Tab H ("Side sew
books (6) by Wednesday -- if not acceptable, will agency accept
reprint? -- Paula/WF 3:55"). The Appellant's proposal to
reprint the book was transmitted to the USPS, which rejected it
because the offer was made too late for the customer-agency's
marketing program. See, R4 File. Tab I ("The Department insists
that the product was to be used as a Christmas promotion, which
would generate as much as $499,000 in revenue, and reprinting to
correct the defect would cause a delay which might hinder it's
[sic] marketability."). However, in light of the Board's
conclusion, infra, with respect to the central issue in this
appeal -- i.e., whether or not GPO waived its right to terminate
the contract in this case for default -- it is unnecessary for
the Board to rule on the Respondent's evidentiary objections.
See, e.g., W.M.Z. Manufacturing Company, Inc., ASBCA No. 28410,
84-3 BCA � 17,569, at p. 87,554.
17. The Respondent is probably correct that "[m]ost waiver cases
involve situations where the contractor is in default for failure
to meet the delivery schedule and the Government does nothing to
terminate the contract, thereby allowing the contractor to
continue performance and incur costs." APPF. Tab 35, p. 5
(citing, Scandia Manufacturing Co., ASBCA No. 20,888, 76-2 BCA �
11,949)). However, the Government can lose its right to
terminate a contract for default in other situations as well.
See. e.g., Husky Industries, Inc., GSBCA No. 5,478, 80-1 BCA �
14,299 (where performance under a non-severable definite quantity
contract was virtually complete, and the government had already
paid for and used the portion of the goods already shipped, it
was improper to terminate the remainder of the contract for
failing to make progress); Baifield Industries, Division of A-T-
O, ASBCA Nos. 14,582, 14,583, 72-2 BCA � 9,676 (the Government
could not reject defective supplies accepted prior to the default
termination on the ground that acceptance was conditional pending
Government conducted performance tests; the government's only
remedy was to require correction of the defects). Compare, e.g.,
Artisan Electronics Corporation v. United States, 205 Ct. Cl.
126, 499 F.2d 606 (1974) (where the deliveries are in increments,
the entire contract, rather than just the deliveries on which the
contractor is in default, can be terminated); Novelty Products
Company, ASBCA No. 21,077, 78-1 BCA � 12,989 (even if the
government waived its right to terminate for the contractor's
late delivery of the first increment, there was no waiver of the
delivery dates for subsequent installments and the Government
retained the right to terminate the contract for default upon the
contractor's failure to deliver any of the later increments).
18. In reaching its decision, the Board has considered all of
the documents listed on the parties Joint Record List (JRL),
which was submitted to the Board on April 20, 1990. APPF, Tab 31.
The Board accepted the JRL by order, dated May 3, 1990. APPF,
Tab 32. As shown in the JRL, by agreement of the parties, the
record in this case consists of: (1) the Pleadings (Appellant's
complaint; Respondent's Answer; Appellant's First Set of
Interrogatories; Appellant's Motion to compel Discovery; Response
to Appellant's Motion to compel Discovery; Appellant's Reply to
Response to Appellant's Motion to Compel Discovery; Respondent's
Supplemental Response to Appellant's First Set of
Interrogatories; Respondent's letter of May 16, 1989,
transmitting USPS response to Interrogatory 3a of Appellant's
First Set of Interrogatories; Appellant's Response to
Respondent's Supplemental Response to Appellant's First Set of
Interrogatories; Respondent's letter of June 28, 1989, responding
to Appellant's Response to Respondent's Supplemental Response to
Appellant's First Set of Interrogatories; Appellant's Second Set
of Interrogatories and Requests for Production of Documents;
Response to Appellant's Second Set of Interrogatories and
Requests for Production of Documents; Motion to Compel Discovery
to Appellant's Second Set of Interrogatories and Requests for
Production of Documents); (2) the Rule 4 File (Tabs A-L); (3)
Appellant's supplementation of the Rule 4 File (App. Exh. Nos. 1
to 4); (4) Transcript of November 28. 1988, preliminary hearing:
(5) Board Summary of April 3, 1990. Status Hearing: and (6) two
Appellant exhibits. repaired books with tipped in pages,
received into evidence on April 3, 1990 (App. Exh. Nos. 5 and 6).
19. Among other GPO rules and regulations, the Appellant's
contract was governed by the terms and conditions set forth in
1980 Contract Terms (R4 File. Tab B, p. 1). See, note 2 supra.
Shortly before this appeal was filed with the Board, 1980
Contract Terms was superseded by GPO Contract Terms. GPO
Publication 310.2, effective December 1, 1987 (Rev. 9-88) (1988
Contract Terms). An examination of the "Default" clause in the
two regulations discloses that they differ somewhat with respect
to the language applicable to a contractor who successfully
challenges the default termination of a GPO contracting officer.
The current "Default" provisions simply state, in pertinent part:
"If, after termination, it is determined that the contract was
not in default, or that the default was excusable, the rights
and obligations of the parties shall be the same as if the
termination had been issued for the convenience of the
Government." See, 1988 Contract Terms. � 20(g). In contrast,
the "Default" clause which govern. the Appellant's contract
provides, in pertinent part: "If, after notice of termination of
the contract under the provisions of this article, it is
determined for any reason that the contractor was not in default
..., or that the default was excusable ..., the rights and
obligations of the parties shall, if the contract contains a
clause providing for termination for convenience of the
Government, be the same as if the notice of termination had been
issued pursuant to such article. If, after notice of termination
of the contract under the provisions of this article it is
determined for any reason that the contractor was not in default
..., and if the contract does not contain a clause providing for
termination for convenience of the Government, the contract shall
be equitably adjusted to compensate for such termination and the
contract modified accordingly." [Emphasis added.] See, 1980
Contract Terms. � 2-18(e). In other words, whereas the current
"Default" clause automatically converts an erroneous default
termination in to a termination for convenience, the 1980
"Default" provisions would allow such a conversion only if the
contract itself expressly provided for such a result; otherwise,
a successful Appellant's remedy is limited to an equitable
adjustment and a contract modification. In practical effect,
this is a distinction without a difference. While the
Appellant's contract contains no specific clause which would
automatically convert an erroneous default termination into one
for the convenience of the Government, as in 1988 Contract Terms.
� 20(g), nonetheless there is a termination for convenience
provision in 1980 Contract Terms. See, 1980 Contract Terms. �
2-17. Since all of 1980 Contract Terms is incorporated by
reference in the Appellant's contract, the remedy requested by
the Appellant -- vacation of the default termination and
conversion of the Contracting Officer's decision into one of
convenience for the Government -- could be granted by the Board.
APPF, Tab 34, pp. 1, 8.
20. The Board was established by the Public Printer in 1984.
GPO Instruction 110.10c, Subject: Establishment of the Board of
Contract Appeals, dated September 17, 1984. Prior to the Board's
creation, appeals from decisions of GPO Contracting Officers were
considered by ad hoc Contract Appeals Boards (the decisions of
these ad hoc boards are hereinafter cited as GPOCAB). While the
decisions of these ad hoc boards are not legally binding on the
Board, it is the Board's policy to follow them where applicable
and appropriate. See, e.g., Chavis and Chavis Printing, supra,
Sl. op. at 9, n. 9.
21. The rationale for this dual application of the default
clause is simple. As explained by Cibinic and Nash: "While
these clauses explicitly make untimely performance the basis for
the default action, it is important to recognize that nearly
every Government contract spells out the contractor's required
performance in terms of the nature of the product or service
which is to be delivered or performed as well as the time by
which these performance efforts are to be completed. Thus, in
order for the contractor to render 'timely performance,' two
basic requirements must be satisfied. The product, service or
construction work must conform to the required design/performance
characteristics, and the product must be delivered or the work
completed by the specified due date." [Emphasis added.] John
Cibinic, Jr. & Ralph C. Nash, Jr., Administration of Government
Contracts 2d ed., (The George Washington University, 1986), p.
677 (hereinafter Cibinic and Nash).
22. Similarly, the omission of a "show cause notice" by the
Government is not a procedural defect to a termination based on
the contractor's failure to make timely deliveries or perform
timely services. See, e.g., Kict Pack Company, Inc., ASBCA No.
33,15, 89-3 BCA � 22,151, at 111,486-87 (citing, H. N. Bailey &
Associates, ASBCA No. 21,300, 77-2 BCA � 12,681, at 61,553). On
the other hand, use of a show cause notice is required when
practicable. Lewis B. Udis v. United States, 7 Cl. Ct. 379,
385-86 (1985). In that regard, the procurement regulation in
effect when the Appellant was awarded the contract in question,
like the procurement rules in other Federal agencies, recommended
the issuance of a show cause letter, "where practicable," prior
to the default termination of a contract for failure to make
timely deliveries or perform services within the time required by
the contract. GPO Printing Procurement Regulation. GPO P305.3 /
December 1980 / PP, ch. VII, � 1, � 3(c)(l). The record contains
no evidence of any show cause letter being issued by the
Respondent in this case, and the Board assumes that, in fact, no
such letter was sent to the Appellant. On the basis of the
record, it seems to the Board that the Contracting Officer simply
made the determination that it was impracticable to issue such a
show cause letter under the circumstances herein. Because this
decision was within the discretion of the Contracting Officer,
and since the Appellant has not challenged that determination,
the Board will not disturb the Contracting Officer's judgment.
cf., Stabbe Senter Press, GPO BCA 13-85 and 19-85 (May 12, 1989),
Sl. op. at 53.
23. Default terminations -- as a species of forfeiture -- are
strictly construed. See, D. Joseph DeVito v. United States, 188
Ct. C1. 979, 413 F.2d 1147, 1153 (1969). See also, Murphy, et
al. v. United States, 164 Ct. Cl. 332 (1964); J. D. Hedin
Construction Co. v. United States, 187 Ct.Cl. 45, 408 F.2d 424
(1969).
24. Generally, where the Government insists on strict
compliance, it bears the initial "burden of persuasion" to show
that the work it rejects does, in fact, deviate from the
specifications. See, e.g., International Lithographing, GPO BCA
1-88 (December 29, 1989), Sl. op. at 20 (citing, Fillip Metal
Cabinet Company, GSBCA No. 7,695, 87-2 BCA � 19,822 (1987);
Hardeman-Monier-Hutcherson, ASBCA No. 11,785, 67-I BCA � 6,210
(1967); Ramar Co., ASBCA No. 9,644, 72-2 BCA � 9,644 (1972); Pams
Product., Inc., ASBCA No. 15,847, 72-1 BCA � 9,401 (1972)). The
Government usually meets this burden by advising the contractor
of the results of the inspection it has conducted. The burden
then shifts to the contractor to prove that the Government's
findings are invalid for one reason or another. Id., Sl. op. at
21 (citing, Universal Steel Stripping Co., ASBCA No. 13,686, 69-2
BCA � 7,799 (1969); C. W. Roen Construction Co., DOTCAB Nos.
75-43, 75-43A, 76-2 BCA � 12,215 (1976); Continental Chemical
Corp., GSBCA No. 4,483, 76-2 BCA � 11,948 (1976)). However, the
need for such proof is obviated in this case by the Appellant's
concession that the 18,000 books in question were defective.
See, e.g., Chavis and Chavis Printing, supra, Sl. op. at 9, 13.
25. See, Cibinic and Nash. n. 21 supra, at p. 677. As the Court
of Claims observed in DeVito, "[t]he Government is habitually
lenient in granting reasonable extensions of time for contract
performance, for it is more interested in production than in
litigation." D. Joseph DeVito v. United States, supra, 413 F.2d
at 1153. .
26. It has been observed that there is no clear demarcation
between reasonable forbearance and waiver. See, Westinghouse
Electric Corporation, ASBCA No. 20306, 76-1 BCA � 11,883 (1976).
Consequently, when this flexible test is applied, the result can
be rather lengthy Government forbearance periods before the
actual default termination is effected. See, e.g., Kit Pack
Company, Inc., supra, 89-3 BCA � 22,151 (27 days); Harold
Burgmayer Real Estate, Inc., HUDBCA No. 8S-3404C5. 88-3 BCA �
21,063 (89 days); Centroid, Inc., ASBCA No. 29,463, 86-1 BCA �
18,644 (74 days); KOPA Kopier Produckte, supra, 85-3 BCA � 18,367
(5 weeks); W.M.Z. Manufacturing Company, Inc., supra, 84-3 BCA �
17,569 (66 days); ACI-FILCO Corporation, supra, 83-1 BCA � 16,151
(5 months); H. N. Bailey & Associates, ASBCA No. 21,300, 77-2 BCA
� 12,681 (33 days); General Products Corporation, ASBCA No.
16,658, 72-2 BCA � 9,629 (40 days). Indeed, in one case
discovered by the Board, the Armed Services Board of Contract
Appeals upheld a default termination effectuated more than 3
years after the contractor actually defaulted on the contract.
See, EL-ABD Engineering, ASBCA No. 32,023, 88-2 BCA � 20,555.
27. This 78-day period is the total number of calendar days from
September 30, 1987 (the date of actual default) to December 17,
1987 (the date of termination). However, there were only 54 work
days over that time span. In that regard, the Board takes
judicial notice of the fact that three Federal holidays occurred
during this time frame Columbus Day (Monday, October 12, 1987);
Veteran's Day (Wednesday, November 11, 1987); and Thanksgiving
Day (Thursday, November 26, 1987). The record also shows that
the Respondent was not made aware of the Appellant's
nonconforming shipment until October 9, 1987. The record does
not explain why the USPS waited nearly 10 calendar days to notify
the Respondent that the Appellant had shipped nonconforming
books, and that the contract was in default as of September 30,
1987. If this 10-day gap is taken into consideration, then the
actual claimed forbearance period in this matter is only 68
calendar days (or 46 work days).
28. In Government contract law, the principle of waiver is more
accurately referred to as estoppel. It is a significant issue in
supply contracts, since a contractor who continues performance
while in default frequently incurs costs which will not be
recovered if the Government later properly terminates for
default. See, Harold Burgmayer Real Estate, Inc., supra, 88-3
BCA � 21,063 (citing, Acme Process Equipment Co. v. United
States, 171 Ct. Cl. 324, 347 F.2d 509 (1965), rev'd on other
grounds, 385 U.S. 138 (1966)). also cf., EL-ABD Engineering,
supra, 88-2 BCA � 20,555, at 103,917 (citing, G & G Industries,
Inc., ASBCA No. 26,111, 84-1 BCA � 16,999). Printing contracts
awarded by GPO, such as the one here, are considered supply
contracts. The principle does not apply to situations where the
work performed after the due date is not wasted, because the
contractor cannot be deemed to have changed its position to its
detriment. See, Olsen Plumbing and Heating Co., ASBCA Nos.
17,965, 18,411, 75-1 BCA � 11,203 (and cases cited therein).
29. As subsequently interpreted, DeVito's "time is of the
essence" rule means that asserted facts regarding urgency are
legally irrelevant; i.e., there is simply no necessity that there
be an urgency to a delivery date requirement for time to be of
the essence. See, e.g., Control Mechanisms, Inc., ASBCA No.
27,180, 84-2 BCA � 17,330. A view contrary to DeVito was
expressed in the Trial Judge's opinion adopted by the claims
court in Franklin E. Penney Co. v. United States, 207 Ct. Cl.
842, 524 F.2d 668 (1975). In Penney, the Court observed, as
dicta, that a contract can be substantially performed and
therefore not subject to default when delivery is slightly late,
but only when time is not of the essence; i.e., whether time is
of the essence depends upon the nature of the contract and the
particular circumstances of the case. However, both before and
after Penney, the court stated that time is of the essence in all
Government supply contracts containing a delivery date unless the
Government has waived it. See, e.g., D. Joseph DeVito v. United
States, supra, 413 F.2d 1147 (Ct. C1. 1969); Simmons Precision
Products, Inc. v. United States, 646 F.2d 886 (Ct. Cl. 1976).
Therefore, the Board believes that the essential elements of the
Penney doctrine -- i.e., the nature of the contract and the
particular circumstances of the case -- are just additional
factors to be considered in deciding whether a waiver has
occurred, and that DeVito expresses the law with regard to time
being of the essence in any contract containing fixed dates for
performance.
30. As indicated in note 26 supra, the point at which the period
of forbearance ends and a waiver occurs varies greatly.
Normally, a waiver will be found where the Government takes some
action which gives the contractor the impression that the
original delivery date no longer applies. For example, the
Government may accept late deliveries. See, e.g., Patten Company,
Inc., ASBCA No. 35,319, 89-3 BCA � 21,957; Aargus Poly Bag,
GSBCA No. 4,3I4, 76-2 BCA � 11,927; Prestex, Inc., ASBCA Nos.
21,284, 21,372, 21,453, 21,467, 23,184, 81-1 BCA � 14,882
(partial deliveries), issue change orders. See, e.g., Klein v.
United States, 285 F.2d 778 (Ct. Cl. 1961); Maurey Instrument
Corporation, ASBCA Nos. 11,644, 12,065, 67-2 BCA � 6,480,
approve waivers requested by the contractor. See, e.g., Baifield
Industries, Division of A-T-O, Inc., supra, 72-2 BCA � 9,676, ask
the contractor to correct deficiencies or suggest corrective
actions itself. See, e.g., Multi Electric Manufacturing, Inc.,
ASBCA No. 30,055, 85-1 BCA � 17,878; Baifield Industries,
Division of A-T-O, Inc., supra, 72-2 BCA � 9,676, or perform
acceptance inspections on the items after the delivery date.
Associates-Aircraft-Tool Manufacturing, Inc., ASBCA No. 7,255,
1963 BCA � 3,799; Multi Electric Manufacturing Inc., supra, 85-1
BCA � 17,878. On the other hand, in some circumstances
Government inaction can amount to a waiver of its right to
terminate a contract for default. See, e.g., Prestex, Inc.,
supra, 81-1 BCA � 14,882 (the fact that the contracting officer
was silent for more than 60 days after a show cause letter was
sent to the contractor, while he knew that the contractor was
continuing to perform and expend monies in an effort to comply,
was evidence of an intent to continue with the contract). See
also, e.g., Amercom Division, Litton Systems, Inc., ASBCA No.
19,687, 77-1 BCA � 12,329, affirmed, 77-2 BCA � 12,554;
Westinghouse EleCtric Corporation, ASBCA No. 20,306, 76-1 BCA �
11,883 (1976). However, an agreement by the Government to test a
sample of a product will not, in and of itself. act to waive the
delivery date and foreclose termination of the contract for
default. See, e.g., Fancy Industries, Inc., ASBCA No. 26,578,
83-2 BCA � 16,659 (prior to the delivery date); H. N. Bailey &
Associates v. United States, supra, 449 F.2d at 384-85 (after the
delivery date has passed).
31. While the Board agrees with the Appellant that the frequency
of contacts between the parties is a relevant factor in
determining the reasonableness of the Respondent's delay, it does
not believe, as the Appellant apparently does, that the factor is
of controlling significance. Rather, whether such contacts were
frequent or infrequent is just one factor which must be
considered by the Board, and it is not entitled to any greater
weight than any other factor.
32. See note 12 supra.
33. As indicated in note 14 supra, the Board believes that the
repaired version of WILDLIFE AMERICA which the Appellant sent to
Brzozowski on November 19, 1987 was a duplicate of the
unsolicited (and lost) November 5, 1987, corrections, and not a
completely reconstructed version. This second repair job was
also unacceptable.
34. See note 4 supra.
35. See note 26 supra.
36. For the purpose of this discussion, the Board has
disregarded the proposal that the USPS accept the defective books
at a discounted price. As the Respondent correctly points out,
the Government cannot be compelled to accept defective products
at a reduced price, even if the defects are relatively minor.
See, e.g., Famous Model Co, Inc., supra, 68-1 BCA � 6,902 (1968);
Cherry Meat Packers, Inc., supra, 1963 BCA � 3937. More
importantly, since the proposal referred to books already
produced, no "continued performance" would have been involved.
Therefore, the offer concerning a discount is irrelevant to the
discussion of the DeVito rule.
37. At the Status Hearing, the Board specifically asked the
Appellant if tipping in the missing pages was its method of
correcting the defect. SHR. pp. 3-4. In response, the
Appellant indicated that this repair technique was the result of
a mutual decision made by its employees and the Respondent's
Quality Control (QC) personnel. Id., p. 4. In the Board's view,
however, a better interpretation of the record, based on the
chronology of events, is that the Appellant itself made the
initial determination to repair the books by tipping in the
missing pages (a common repair technique in the industry) prior
to October 14, 1987, when the Respondent was first alerted to the
defect in the books and the method chosen to repair the error.
Thereafter, the Respondent's employees monitored the Appellant's
repair efforts and made suggestions for improvement.
38. This is not to say that the contracting officer was
uninterested in the effort being expended by the Appellant to
correct the bindery subcontractor's error. Rather, as the
record indicates, the contracting officer was more interested in
having the Appellant repair the book in accordance with
Brzozowski's instructions, which would have meant a total
reconstruction of the product (or by any other method which would
hide the corrections) because, in his view, the "[j]ob need[ed]
to be perfect" (R4 File, Tab H).
39. This case is also materially different from DeVito because
the court's rejection of the default termination in that case was
heavily influenced by the fact that at no time during the 48-day
period between the contractor's failure to deliver and his
receipt of the formal notice of termination, did he have any
inkling that the contracting officer was thinking in terms of
termination for default. See, Frank A. Pellicca v. United
States, supra, 525 F.2d at 1043. Here, of course, the Appellant
was expressly told by the contracting Officer on December 4,
1987, that default was under consideration but that he was trying
to avoid it.
40. See, Cibinic and Nash. note 21 supra, at pp. 221-22, 223-25.
There is also an implied negative obligation on the part of the
Government that it will not do that which will interfere with the
contractor in the performance of the contract. i.e., at pp.
222-23. See, e.g., Nanofast, Inc., ASBCA No. 12,545, 69-1 BCA �
7,566 (citing, George A Fuller Company, A Corporation v. United
States, 108 Ct. Cl. 70, 69 F.Supp. 409 (1947); Fern E. Chalendar
d/b/a Chalendar Construction Company of Springfield, Missouri v.
United States, 127 Ct. Cl. 557; Restatement. Contracts, �� 295
and 315). Both implied duties are part of every Government
contract. George A Fuller Company, A Corporation v. United
States supra, 69 F.Supp. 409.
41. See, Cibinic and Nash. note 21 supra, at p. 221.
42. In cases involving Government delays the relevant inquiry
is whether the delays constitute a breach of contract. United
States v. Howard P. Foley Company, 329 U.S. 64, 65 (1946); The
Kehm Corporation v. United States, supra, 93 F.Supp. at 624.
43. The Board's rationale in Nanofast was based on the standard
inspection Clause in the Armed Services Procurement Regulation
(ASPR) which gave the contractor specified rights to replace or
correct nonconforming supplies. ASPR 7-103.5. Indeed, for years
the ASBCA applied the cooperation rule only in cases where the
Government had an affirmative obligation under the contract, such
as performing inspections. See, Quality Controlled Stamping,
Inc., ASBCA No. 19,074, 74-2 BCA � 10,757, at 51,149 (citing,
Nanofast, Inc., supra, 69-1 BCA � 7,566). However, an
examination of more recent cases warrants the conclusion that
apart from the express language of the contract, the Government's
duty to cooperate can be imputed from responsibilities inherent
in the contractual relationship itself. See, e.g., Spectrum
Leasing Corporation, supra, 90-3 BCA � 22,984, at 116,437.
44. Under the contract, in order for the Appellant to print
WILDLIFE AMERICA the Respondent first had to furnish it with
certain materials, e.g., a complete set of color separate offset
films; a sample from a previous printing to be used as general
guide; approved press proofs from a previous printing; one
reproduction proof for shipping container labels; and a GPO Form
892 proof label (R4 File, Tab B, at p. 2). Clearly, a delay or
failure on the part of the Respondent to meet this obligation
would have breached its implied duty to cooperate with the
Appellant to complete performance under the contract. See, e.g.,
George A. Fuller Company, A Corporation v. United States, supra,
69 F.Supp. 409; The Kehm Corporation v. United States, supra, 93
F.Supp. at 624; Ballenger Corporation, supra, 84-1 BCA � 16,973,
mod. on other grounds, 84-2 BCA � 17,277.
45. See note 16 supra.
46. Thus, unlike the situation where a breach of the implied
duty to cooperate will be found from an agency's unreasonable
disapprovals of a contractor's proposal regarding alternate
methods of performance, see, Albert C. Rondinelli, supra, 65-1
BCA � 4,674, here the Respondent itself was suggesting
alternatives to the contractor.
47. Another important QATAP concept is that of "Product Quality
Levels (PQL's)," which specify the degree of quality required in
the final product. 1981 QATAP. Definitions, � 1-7, p. 1. In
that regard, the QATAP contains five PQL's ranging from Level I
(Best) to Level V (Functional); tolerances for attributes vary
with the PQL. Id.
48. Under the terms of the contract, the Appellant was expected
to perform at Level 1 (Best) with respect to "finishing
attributes" (R4 File, Tab B, "Quality Assurance Levels and
Standards," p. 5).
49. The Board is aware that it could be argued that the Nanofast
doctrine would never apply to a GPO printing contract because any
product flaw would be either a "critical" or a "major" defect
under the QATAP, by definition. However, the Board believes that
not every failure to meet the contract specifications is
necessarily a QATAP violation. Furthermore, the Board believes
that some defects defined as "major" within the QATAP could, in
appropriate circumstances, be considered "minor" deviations
within the meaning of the Nanofast rule. Obviously, the rule of
reason must be applied, and each case considered on its own
merits. The Board's conclusion here-that missing pages are a
"critical defect"-is not based solely on the letter of the QATAP,
but also rests on an understanding of the purposes of its
drafters, as expressed in recent Board precedent. See, Stabbe
Senter Press, supra, Sl. op. at 51-52.
50. In that regard, the Board finds itself in agreement with the
Court of Claims which has stated that: "[it] would be setting a
dangerous precedent to hold that the Government relinquished a
contract right for doing what merely amounts to lending a helping
hand to the contractor." Red Circle Corporation v. United
States, supra, 186 Ct. Cl. at 9 (cited in Quality Controlled
Stamping, Inc., supra, 74-2 BCA � 10,757, at 51,149).
51. The Board notes that the default Clause involved in
Radiation Technology is identical to the default Clause
applicable to this appeal. See, Radiation Technology. Inc. v.
United States, 366 F.2d at 1004-05; 1980 Contract Terms. ��
2-18(a),(b).
52. In the judgment of the Court, the contractor's view would
preclude the Government's right to affect summary termination so
long as timely delivery was made; i.e., the simple expedient of
making a timely shipment would allow a contractor to escape an
automatic termination, notwithstanding the distinct possibility
that the shipment might be substantially defective. Radiation
Technology, Inc. v. United States, supra, 366 F.2d at 1005.
Similarly, the Court thought that if delivery is measured against
the doctrine of strict conformity, it would invite the
possibility of a surprise rejection occurring subsequent to
timely shipment. When this is coupled with summary termination
authority, the Court believed that it would place too much power
in the hands of a contracting officer to reject the shipment and
deny a contractor the opportunity to cure a nonconformity in his
delivered product. Id.
53. In the court's view, "...even where time is of the essence;
i.e., where performance must occur by a given date, this factor
does not demand that performance be measured in terms of strict
conformity. It does require that performance be timely, but
assuming this, there would thereafter remain for inquiry the
question as to whether performance was substantial in other
respects." Radiation Technology, Inc. v. United States, supra,
366 F.2d at 1006.
54. The Radiation Technology doctrine is Clearly an
encroachment on the Government's right to terminate. However, it
is also apparent that the rule merely stays for a reasonable
period the Government's right to terminate, and not its right to
insist on 100 percent conforming goods; i.e., the doctrine
concerns time, not the supplies themselves. Furthermore, like
the DeVito rule regarding "waiver," the "substantial compliance"
principle (or "substantial conformity" as it is sometimes called)
of Radiation Technology, is most often applied to supply
contracts. See, note 28 supra. It is used to prevent surprise
rejections by the buyer after a contractor's timely shipment in
situations where performance departs in only minor respects from
that which has been promised. See, e.g., Environmental Tectonics
Corporation, ASBCA No. 20340, 76-2 BCA � 12,134.
55. In most cases involving the "substantial compliance" rule,
the timeliness of the contractor's shipment is generally not an
issue. Rather, the dispute usually involves the resolution of
questions of "reasonable belief" and the seriousness of the
defects. Absent such a "reasonable belief" by the contractor and
proof that only minor defects are involved, the supplier is not
entitled to the protection of the substantial compliance
principle. See, e.g., Introl Corporation, ASBCA No. 27,610, 85-2
BCA � 18,044 at 90,578 (citing, Radiation Technology, Inc. v.
United States, supra, 366 F.2d 1003); Environmental Tectonics
Corporation, supra, 76-2 BCA � 12,134 (the Radiation Technology
rule does not apply where the contractor knowingly ships goods
which do not conform to the requirements of the contract). Also
see, Norwood Precision Products, Textron, Inc., ASBCA Nos. 38095,
38196, 90-3 BCA � 23,200 (the reason that the parts were not
delivered on time was that the contractor knew they were
defective; thus, even if the contractor had shipped the parts, no
relief from default could have been obtained under the doctrine).
56. The general rule imputing the performance failures of
subcontractors to the prime contractor, see note 7 supra (and
the cases cited therein), is not relevant to this discussion.
There is nothing in the record to indicate that the bindery
subcontractor knew at the time it shipped WILDLIFE AMERICA to the
USPS that four pages were missing from the book. Thus, the Board
assumes that the subcontractor made an innocent mistake, and like
the Appellant, it had a good faith reasonable belief that the
books it sent to the USPS conformed to the contract
specifications.
57. See note 13 supra.