BOARD OF CONTRACT APPEALS
U.S. GOVERNMENT PRINTING OFFICE
In the matter of )
)
the Appeal of )
)
INFORMATION PROCESSING ) Docket No. GPOBCA 10-99
SERVICES, INC. )
)
Program C855-S )
Purchase Order 94555 )
For the Appellant: Betty L. Hearn, President, and Bettie Gray,
Operations Manager, Information Processing Services Inc.,
Alexandria, VA.
For the Respondent: Roy E. Potter, Esq., Associate General
Counsel, U.S. Government Printing Office.
Before GARY E. GREENFIELD, Administrative Judge.1
DECISION
This appeal arises out of a contract between the U.S. Government
Printing Office (GPO) and Appellant, Information Processing
Services, Inc. (IPS) that was terminated for the convenience of
the Government. Appellant seeks $63,816.09 in termination costs
which includes claims for lost profits and attorneys fees. For
the reasons that follow, the Contracting Officer's final decision
denying all claimed termination costs is AFFIRMED and all claims
of Appellant are DENIED.
FINDINGS OF FACT
1. Program C855-S was a single award requirements contract to
provide proofreading services to the Internal Revenue Service
(IRS) for the period beginning April 1, 1998, and ending March
31, 1999. The successful bidder was to provide an average of
seven proofreaders per day. Rule 4 File, Tab A.
2. On March 31, 1998, the GPO awarded a term contract to IPS
for one year (April 1, 1998-March 31, 1999). The contractor was
to provide an average of seven proofreaders per day for initial
proofreading and revisions of proofs of tax forms, instructional
material, and other textual and tabular material at the IRS.
3. On May 5, 1998, the first of a series of contract
modifications was entered into by GPO and Appellant each reducing
temporarily the number of proofreaders to be provided. Rule 4
File, Tabs J-O.
4. By early June, it was obvious to both GPO and Appellant that
there was to be a permanent reduction in the number of
proofreaders to be provided. Rather than negotiate a permanent
reduction, on or about June 8, 1998, Appellant's attorney asked
that the GPO terminate the contract for convenience so a
settlement claim could be made. Rule 4 File, Tabs J-O and P;
Declaration of John R. Scott (GPO Contracting Officer for Program
C855-S) executed March 2, 2000.
5. On June 12, 1998, the GPO Contracting Officer received a
memorandum from the IRS asking that the contract be terminated
for the convenience of the Government. Rule 4 File, Tab P.
6. The GPO Contract Review Board concurred on June 15, 1998,
with the Contracting Officer that Program C855-S should be
terminated for the convenience of the Government. Rule 4 File,
Tab P.
7. On July 1, 1998, after obtaining guidance from the IRS and
the required concurrence of the GPO Contract Review Board to
terminate for convenience and to readvertise with the reduced
requirement, the Contracting Officer issued a formal Notice of
Termination - Convenience of the Government, effective July 31,
1998. Rule 4 File, Tabs P and Q.
8. On August 1, 1998, a new contract was entered into with a
different contractor for the period beginning August 1, 1998 and
ending March 31, 1999. Declaration of John R. Scott executed
March 2, 2000.
9. On October 7, 1998, Appellant submitted a settlement
proposal on GPO Form 911 for $63,816.09 consisting of $12,803.79
for general and administrative expenses, $28,146.26 for profit,
$866.04 for settlement expenses, and $22,000 for additional
rental space for training. Prior to this, the GPO had already
paid a total of $39,709.17 to Appellant (less the 2 percent, 30-
day prompt payment discount) for the work that was completed
before the contract termination. Rule 4 File, Tabs R and U.
10. Pursuant to agency regulations, the Contracting Officer
sought an audit of the claim by the GPO Office of Inspector
General (OIG). See, GPO Printing Procurement Regulation (PPR),
GPO Publication 305.3 (Rev. 10-90), Chap. XIV, Sec. 2.3h(1). On
October 13, 1998, the Contracting Officer referred the settlement
proposal to the GPO Inspector General. Rule 4 File, Tab S.
11. On December 2, 1998, the GPO Office of Inspector General
(OIG) requested from Appellant documentation to support the
settlement proposal. The OIG listed several records needed to
establish the validity of the claimed amounts for each area of
Appellant's claim. Rule 4 File, Tab T.
12. On February 24, 1999, the GPO OIG issued its audit report
and conclusions. The OIG concluded that all of Appellant's
claims were unproven because IPS personnel did not provide any
documentation to support or show how the entire amount was
determined. In addition, the OIG audit found the claim for
profit unallowable because anticipatory profits are unallowable.
Finally, the OIG audit concluded that the claim for rental space
for training was not only unproven, as were all the other claims,
but was also unallowable because training was outside the scope
of the contract. Rule 4 File, Tab U.
13. On March 1, 1999, the Contracting Officer issued the final
decision denying all claims of Appellant on the basis that they
were not supported by adequate documentation. Rule 4 File, Tab
V.
14. Thereafter, Appellant filed a timely notice of appeal with
the GPO Board of Contract Appeals (GPOBCA) on May 4, 1999. Rule
4 File, Tab Q.
DISCUSSION
Appellant questions whether the Contracting Officer acted
properly in terminating the contract for convenience of the
Government. Appellant also asserts a claim for termination
costs.
Respondent takes the position that the termination for
convenience was within the discretion of the Contracting
Officer. Respondent also takes the position that as a matter
of law the Appellant is not entitled to some of the expenses
claimed, and as for the other items, the claims are not
adequately supported by the required documentation.
The Contracting Officer's Right to Terminate for Convenience
Appellant questions whether the Contracting Officer acted
properly in terminating the contract. Program C855-S
contained a termination for convenience clause that provided
in part:
The Government may terminate performance of work in whole or in
part if the Contracting Officer determines that a termination is
in the Government's interest.
Clause 19(a), GPO Contract Terms, GPO Publication 310.2 (Rev.
9-88). That language is nearly identical to the standard
Government-wide contract clauses contained in the Federal
Acquisition Regulation (FAR). See 48 C.F.R. �� 52.249-1(a),
52.249-2(a), 52.249-3(a), 52.249-4(a), 52-249-5(a).
Decisions construing the Government-wide Termination for
Convenience clauses hold that a Contracting Officer's election
to terminate is conclusive in the absence of bad faith or a
clear abuse of discretion. See Melvin R. Kessler, PSBCA Nos.
2820, 2972, 92-2 BCA � 24, 857, at 123, 996 (citing John
Reiner v. United States, 325 F.2d 438,442 (Ct. Cl. 1963),
cert. den. 377 U.S. 931 (1964)), mot. for reconsid. denied
92-3 BCA � 25, 092; Salisbury Industries v. United States, 905
F.2d 1518 (Fed. Cir. 1990)), mot. for reconsid. denied 92-3
BCA � 25, 092. See also, Seaboard Lumber v. United States, 19
Cl. Ct. 310 (1989); Robert K. Adams, ASBCA No. 34519, 92-3 BCA
� 25, 165; Automated Services, Inc., DOTBCA No. 1753, 87-1 BCA
� 19, 459; ITG Corp., ASBCA No. 27285, 85-1 BCA � 17,935. Any
allegation of bad faith must be established by "well-nigh
irrefragable" proof because there is a strong presumption that
Government officials properly and honestly carry out their
functions. See, e.g., Asa L. Shipman's Sons, Ltd., GPOBCA No.
06-95 (August 29, 1995), 1995 GPOBCA LEXIS 17, 1995 WL
818784, slip op. at 12, fn. 16. Accord Brill Brothers, Inc.,
ASBCA No. 42573, 94-1 BCA � 26,352; Karpak Data and Design,
IBCA No. 2944 et al., 93-1 BCA � 25,360; Local Contractors,
Inc., ASBCA No. 37108, 92-1 BCA � 24, 491. The key to such
evidence is that there must be a showing of a specific intent
on the part of the Government to injure the contractor. See
Stephenson, Inc., GPOBCA No. 2-88, (Dec. 20, 1991), 1991
GPOBCA LEXIS 14, 1991 WL 439274, slip op. at 54. Accord,
Kalvar Corp. v. United States, 543 F.2d 1298, 1302 (Ct. Cl.
1976), cert. denied, 434 U.S. 830 (1977). See also, Solar
Turbines, Inc. v. United States, 23 Cl. Ct. 142 (1991).
Properly exercised, a contracting officer's discretion to act
pursuant to the "Termination for Convenience" clause is very
broad. See Caldwell & Santmyer, Inc., supra, 94-2 BCA at
133,625 (citing ARDCO, Inc., AGBCA Nos. 94-101-1, 94-193-1,
1994 WL 45000 (Feb. 16, 1994); Michael J. Earl, PSBCA No.
3332, 93-3 BCA � 26, 234). One obvious exception is when the
Government enters into a contract with no intention of
fulfilling its promises, it may not use a termination for
convenience to avoid a breach of contract claim. See
Torncello v. United States, 231 Ct. Cl. 20, 681 F.2d 756
(1982). However, recent decisions from the U.S. Court of
Appeals for the Federal Circuit have reaffirmed the principle
that in the absence of bad faith or clear abuse of discretion,
the Contracting Officer's decision to terminate for
convenience is conclusive. See T & M Distributors, Inc. v.
United States, 185 F.3d 1279 (Fed. Cir. 1999); Krygoski Const.
Co. v. United States, 94 F.3d 1537 (Fed. Cir. 1996) cert.
denied, 520 U.S. 1210 (1997); Caldwell & Santmyer, Inc., v.
Glickman, 55 F.3d 1578 (Fed. Cir. 1995); Salisbury Industries
v. United States, 905 F.2d 1518 (Fed. Cir. 1990).
This clause gives the Contracting Officer the broad right to
terminate without cause and limits the Appellant's recovery to
costs incurred, reasonable profit on work completed, and costs
of preparing the termination settlement proposals. Recovery
of anticipated profit is precluded.
Under a termination for convenience clause, performance of
work under a contract may be terminated by the Government in
whole or in part whenever the Contracting Officer determines
such termination to be in the best interests of the
Government.
On June 12, 1998, the GPO Contracting Office received a
memorandum from the IRS asking that the contract be terminated
for the convenience of the Government. Rule 4 File, Tab P.
The GPO Contract Review Board concurred on June 15, 1998,with
the Contracting Officer that Program C855-S should be
terminated for the convenience of the Government. Rule 4
File, Tab P.
The Contracting Officer was well within his contractual rights
to terminate this contract for convenience in the best
interests of the Government. The unrebutted evidence of
record is that the contract was terminated for convenience due
to a reduction in the IRS's proofreading requirements.
Therefore, the Board concludes that the Contracting Officer
had the right to terminate Program C855-S for the convenience
of the Government and that his exercise of that right was not
an abuse of discretion.
Entitlement to Convenience Termination Costs
When the Government terminates contracts for the convenience
of the Government, it owes contractors the duty to fairly
compensate them for legitimate termination costs. In the
instant appeal, the Contracting Officer appropriately
exercised his discretion to terminate Program C855-S for
convenience. The analysis now shifts to an examination of the
termination claims made by the Appellant. The Appellant
submitted a settlement proposal on GPO Form 911 for
$63,816.09, consisting of $12,803.79 for general and
administrative expenses, $28,146.26 for profit, $866.04 for
settlement expenses, and $22,000 for additional rental space
for training. GPO paid a total of $39,709.17 to Appellant
(less the 2 percent, 30-day prompt payment discount) for the
work that was completed before the contract termination.
Appellant submitted a claim for $22,000 for additional rental
space for training as part of its settlement proposal. The
Contracting Officer concluded that the entire $22,000 for
rental space for training was unallowable based on the
Qualifications/Production Standards of Contractor Personnel
Section of the contract which required "A minimum of two years
of professional editorial proofreading experience with a
firm/company/agency which is/was regularly engaged in the
printing, publishing or editorial field."
The Board agrees that the cost for the rental space for
training is unallowable under the contract. Accordingly,
Appellant's claims for $22,000 for additional rental space for
training is DENIED.
The actual incurrence of costs is a prerequisite to recovery
under a termination for convenience; i.e., if the contractor
has incurred no cost, there is no recovery. See R.C. Swanson
Printing & Typesetting Co., Supplemental Decision, GPOBCA No.
15-90 (July 1, 1993), slip op. at 19, 1993 GPOBCA LEXIS 26,
1993 WL 526638 (citing Building Maintenance Specialists, Inc.,
ENG BCA No. 5654, 90-3 BCA � 23,032). Accord, Lisbon
Contractors, Inc. v. United States, 828 F.2d 759, 767 (Fed.
Cir. 1987); J.W. Cook & Sons, Inc., ASBCA No. 39691, 92-3 BCA
� 25,053, at 124,863 (citing Tubergen & Associates, Inc.,
ASBCA Nos. 34106, 34107, 90-3 BCA � 23,058); Youngstrand
Surveying, AGBCA No. 90-150-1, 92-2 BCA � 25,017, at 124, 694
(citing Roberts International Corp., ASBCA No. 15118, 71-1 BCA
� 8869); R.G. Robbins & Co., Inc., ASBCA No. 27516, 83-1 BCA �
16,420.
The contractor has the burden of establishing the amount of
incurred costs, and, in the absence of evidence to the
contrary, the Contracting Officer's termination allowance will
be accepted, Roberts Int'l Corp., ASBCA 15118, 71-1 BCA �
8869. See also, Delaware Tool & Die Works, Inc., ASBCA 14033,
71-1 BCA � 8860, recons. denied, 72-1 BCA � 9206, where the
contractor had no proof of the costs incurred in the
terminated portion of the work. It is preferable to establish
incurred costs from accounting records. However, if the
accounting records are not available, due to no fault of the
contractor, the costs may be established on the basis of
estimates, FAR 49.206-1(c); Bailey Specialized Bldgs., Inc.,
ASBCA 10576, 71-1 BCA � 8699. Even if estimates are used, the
contractor still has the burden of proof. See Clary Corp.,
ASBCA 19274, 74-2 BCA � 10,947, where the board stated that,
although the burden need not be met through the use of
accounting records, it cannot be carried by unsupported
allegations.
The Contracting Officer, who relied upon an audit
recommendation from the GPO Office of Inspector General (OIG),
concluded that Appellant was not entitled to any of the
settlement proposal costs because the Appellant did not
provide any documentation to support or show how the Appellant
arrived at its settlement proposal.
During the September 17, 1999, Prehearing Telephone Conference
before GPOBCA Judge Ronald Berger, the Appellant was informed
by Judge Berger that the information provided by the Appellant
to support the Appellant's settlement proposal claims did not
contain the very detailed specific documentation necessary to
substantiate its claim. Appellant was given the opportunity
to submit additional substantiating documentation for
Appellant's settlement proposal claims. Appellant provided
information similar to its initial submission, without any
additional detailed specific documentation to prove its
claims.
The Board has reviewed the multiple submissions of documents
by the Appellant, and the Board concludes that Appellant has
failed to provide any specific detailed documentation in
support of any of its claims in the settlement proposal.
Lost Profits Claim
Appellant also seeks to recover lost profits as part of this
appeal as a component of Appellant's termination for
convenience claim. A contractor terminated for convenience
may not recover anticipated profits as part of its termination
for convenience cost claim. Salisbury Indus. v. United
States, 905 F.2d 1518, 1522 (Fed. Cir. 1990); G.C. Casebolt
Co. v. United States, 190 Ct. Cl. 783, 421 F.2d 710, 713
(1970); Nolan Bros., Inc. v. United States, 405 F.2d 1250 (Ct.
Cl. 1969).
Perhaps the major impact of the termination for convenience
procedure is that it relieves the Government from the
obligation of paying anticipated profits for unperformed work
if it terminates the contractor's performance of the work.
Dairy Sales Corp. v. United States, 219 Ct. Cl. 431, 593 F.2d
1002 (1979), aff'g Dairy Sales Corp., ASBCA No. 20193, 75-2
BCA � 11,613). See PPR, Chap. XIV, Sec. 2.3.n. Accord,
D.E.W. & D.E. Wurzbach, JV, ASBCA No. 50796, 98-1 BCA � 29,835
at 146,055; Steelcare, Inc., GSBCA No. 5491, 81-1 BCA �
15,143, at 74, 901.
Therefore, Appellant's claim for anticipated profits is
DENIED.
CONCLUSION
For the foregoing reasons, the Contracting Officer's final
decision regarding entitlement to termination for convenience
costs is AFFIRMED and all claims of Appellant are DENIED.
July 14, 2000 GARY E. GREENFIELD
Administrative Judge
_______________
1 Appointed ad hoc member of U.S. Government Printing Office
Board of Contract Appeals on April 5, 2000, pursuant to GPOBCA
Rules of Practice and Procedure, � I.C.