U.S. GOVERNMENT PRINTING OFFICE
BOARD OF CONTRACT APPEALS
STUART M. FOSS
Administrative Judge
Appeal of GRAPHICS IMAGE, INC.
Jacket No. 692-117, Purchase Order R-9440
Docket No. GPO BCA 13-92
August 31, 1992
DECISION AND ORDER
This appeal, timely filed by Graphics Image, Inc., 561 Boston
Post Road, Milford, Connecticut 06460 (hereinafter Appellant or
Contractor), is from the final decision of Contracting Officer
Michael Atkins of the U.S. Government Printing Office's
(hereinafter Respondent or GPO or Government) Regional Printing
Procurement Office, Seattle, Washington 98134-2397 (SRPPO), dated
December 31, 1991, terminating the Appellant's contract
identified as Jacket No. 692-117, Purchase Order R-9440, for
default for failing to adhere to the contract schedule (R4 File,
Tab D). 1/ For the reasons which follow, the decision of the
Contracting Officer is hereby REVERSED. 2/
SUMMARY FINDINGS OF FACT 3/
1. On December 19, 1991, the Respondent issued Purchase Order
R-9440 to the Appellant procuring 1,000 copies of a 60-page
perfect-bound book entitled "Value Engineering Program Booklet,"
from the Appellant for a contract price of $8,870.00 (R4 File,
Tab A). The original photography, Government-furnished computer
cartridge, and all supplemental information was shipped to the
Appellant via Federal Express on December 20, 1991, with
scheduled delivery December 21, 1991, a Saturday (R4 File, Tab
G).
2. Attached to the Purchase Order were "Special Printing
Requirements," including, inter alia:
1. ART PREPARATION
a. Booklet layout has been prepared on Mackintosh [sic] computer
system using PageMaker 4.01 program. Five PageMaker files make
up entire book, and have been written onto a 44 megabyte
removable SyQuest data cartridge. (Illustrations were created in
Adobe 3.0 and Freehand 4.0, BUT all have been imported and placed
into position in PageMaker files.) 4/
2. PRINTING
* * * * * * * * * *
b. We will send data cartridge and photographs directly to the
printing contractor via express mail within one day of receiving
notification of contract award from GPO.
* * * * * * * * * *
4. PROOFING
a. Request Chromalin proofs on all pages from approval prior to
printing.
b. Request blueline proof of entire book gathering and binding
for approval prior to printing.
c. Request press check at printing. Please consider travel
expenses for 3 persons' travel to press check in evaluating
lowest [bidder] (R4 File, Tab A). [Emphasis added.]
3. Although the contract provides that the customer-agency will
have two workdays after receipt to review page proofs, an
examination of the Purchase Order discloses that no date is
established in the contract for the Contractor to furnish proofs
to the ACOE or obtain the customer-agency's pre-printing approval
(R4 File, Tab A). 5/
4. Because the ACOE required the books for a conference in
Washington, DC on January 10, 1992, the contract required that
the work was to be completed and delivered to the customer-
agency, F.O.B. ACOE's Portland, Oregon dock, by January 3, 1992
(R4 File, Tabs A, C and G).
5. The Government-furnished material - original photography, the
computer data cartridge and all supplemental information - was
sent to the Appellant by Federal Express on December 20, 1991,
and was received the following day, a Saturday (R4 File, Tabs A
and G).
6. On or about December 30, 1991, when the customer-agency still
had not received the proofs, Joan M. H. Ouchida (Ouchida), the
ACOE's Lead Visual Information Specialist for this contract,
telephoned the SRPPO to inquire about their status, and was told
to contact the Appellant directly (R4 File, Tab G). 6/
Accordingly, Ouchida called the Appellant and they discussed, in
general, the problems the Contractor was having with the
Government-furnished computer cartridge (R4 File, Tab G). When
she "pressed" the Appellant for a date by which proofs would be
available for examination, Ouchida was informed that they would
be ready by January 2, 1992 (R4 File, Tabs B and G). Ouchida and
the Appellant also discussed a revised schedule under which the
job would still be delivered by the required date, and which
involved sending the proofs directly to Ouchida's house over a
weekend (R4 File, Tab G). See also, RTC, p. 6. Ouchida did not
agree to the Appellant's proposed new schedule (R4 File, Tab G).
Since her conversation with the Appellant caused her to doubt
whether the Contractor could provide the books in time for the
meeting, Ouchida telephoned the Contracting Officer and asked him
to look into the situation (R4 File, Tab G). See also, RTC, p.
6.
7. On or about December 30, 1991, in response to Ouchida's
telephone call, an SRPPO employee telephoned the Contractor to
inquire about the status of proofs (R4 File, Tab G). However,
the employee was unable to speak to anyone at the Appellant's
facility who could provide the necessary information (R4 File,
Tab B). The following day, December 31, 1991, the Contracting
Officer spoke to Michael B. Cone, the Appellant's Customer
Service Representative, and was told that: (a) the production of
negatives from the Government-furnished computer cartridge was
slower than it should have been; (b) the problem stemmed from the
fact that the Contractor was having trouble with the computer
cartridge it had been sent; and (c) the Appellant possessed
state-of-the-art equipment so anyone would have the same problem
(R4 File, Tab B). 7/ However, Cone also stated that the problems
had been solved and the proofs would be available to the ACOE on
January 2, 1992 (R4 File, Tabs B and C).
8. The Appellant's problems with the Government-furnished
computer cartridge were essentially two-fold: (a) the coin
artwork was saved and incorporated into Aldus PageMaker in the
form of PICT files instead of EPS files, and had to be converted;
and (b) the VE Master small artwork was also incorrectly
constructed. See, Statement of the Appellant's Claim, dated May
12, 1992, Affidavit of Michael B. Cone. 8/ It took the Appellant
a total of two calendar days to correct these technical problems.
Id.
9. At the request of the Contracting Officer, on January 2,
1992, Ouchida supplied a duplicate computer cartridge to the
ACOE's local service bureau, Portland Ad Type, Inc. (Portland
Ad), for testing (R4 File, Tab G). See also, SRPPO Memorandum,
p. 2. Portland Ad reported to the ACOE that its tests revealed
the coin artwork imaged as EPS files and did not require
conversion from PICT to EPS (R4 File, Tab G). Also, when
Portland Ad ran the job using the duplicate computer cartridge,
it was able to produce the entire book in 4 hours and 45 minutes
(R4 File, Tab G). See also, SRPPO Memorandum, p. 2.
10. However, the second problem described by the Appellant - the
incorrect construction of the VE Master small artwork on the data
cartridge - was also discovered by Ouchida on the duplicate
computer cartridge at a press check on the reprocured contract on
January 6, 1992 (R4 File, Tab G). 9/ It took an ACOE operator an
hour to correct this defect (R4 File, Tab G). Thereafter, new
films were imaged by Portland Ad within 30 minutes, delivered to
the printer within three hours, and the pages were approved
within 12-18 hours of discovering the original problem, following
a second press check (R4 File, Tab G). The Appellant took 6 1/2
hours and a loss of one (1) calendar day to correct this problem
on the original computer cartridge. See, Statement of the
Appellant's Claim, supra, Affidavit of Michael B. Cone.
11. Following his conversation with Cone on December 31, 1991,
the Contracting Officer decided to terminate the Appellant's
contract for default (R4 File, Tabs C, D and E). Accordingly,
the same day the Contracting Officer sent a memorandum to the
CRB, seeking its approval for the proposed termination action and
immediate reprocurement, explaining:
This order was awarded to [the Appellant] . . . with a deliver
date of 01/03/92.
On 12/30/91 the [C]ontractor was called by this office for status
of the proof; as our records indicated not receiving a proof as
of 12/30/91.
The [C]ontractor was unable to provide proof status information
[until] 12/31/91. At which time the [C]ontractor indicated that
they would not have a proof sent [until] 01/03/92.
Our customer-agency must have this book by 01/10/92 as it is a
time dated product for a conference. Since it is impossible for
the contractor to comply with the schedule and there is a usage-
product date of 01/10/92, the Contracting Officer request[s]
concurrence to terminate Jacket 692-117 for complete default and
reprocured [sic] immediately. 10/
(R4 File, Tabs C and E).
12. As further explained by the Contracting Officer in a later
memorandum to the Board:
. . . [M]y decision to terminate for default was three phased: a)
[t]he Appellant claimed that they were generating one page per 8
hours and they "thought" that they could have proofs by January
3, 1992, [this] was subjective and unreliable in my opinion; b)
[t]he [ACOE] informed GPO that the publication was required for a
conference on January 10, 1992; c) [t]he [ACOE] was asked their
opinion as to the time that may be required to out-put [sic] the
entire cartridge. They consulted [Portland Ad] who prepared the
cartridge, and after testing a duplicate, stated that it should
require from 20-40 minutes per page - depending on the contents
and colors of the page. I then conversed with an unsuccessful
bidder regarding their estimated time for out-put [sic] and their
answer was consistent with that of [Portland Ad]. 11/
Based on the above scenario, I therefore decided to terminate
Jacket 692-117 for default. See, SRPPO Memorandum , pp. 1-2.
13. After receiving the memorandum from the Contracting Officer
on December 31, 1991, the CRB gave its immediate approval to the
proposed termination for default; however, one of its members
placed the following notation on the memorandum: "* See CT
[Contract Terms] Article 20, Default-CO [Contracting Officer]
cannot default before scheduled ship date without cure notice."
(R4 File, Tab E). 12/ See, GPO Contract Terms, GPO Publication
310.2, Effective December 1, 1987 (Rev. 9-88), Contract Clauses,
� 20 (Default) (GPO Contract Terms).
14. As soon as he received the CRB's approval for his action, the
Contracting Officer sent a letter to the Appellant, dated
December 31, 1991, terminating the contract for default for
failure to adhere to the schedule, effective immediately (R4
File, Tab D). The Appellant was also told that it would be liable
for excess reprocurement costs (R4 File, Tab D). 13/
15. On or about January 2, 1992, the SRPPO reprocured the books
from Riddle Press (Riddle) for $13,775.00, and immediately
initiated steps to recover $4,905.00 in excess reprocurement
costs from the Appellant (R4 File, Tab F). Production under the
reprocurement contract began on January 6, 1992, and was
completed by Riddle sometime on January 7, 1992 (R4 File, Tab G).
To arrive in time for the meeting on January 10, 1992, the ACOE
had the initial copies hand carried from Portland to Washington,
DC at an additional cost of $495.00, instead of having them
shipped by commercial carrier or the U.S. Postal Service (R4
File, Tab G).
ISSUES PRESENTED
This case presents four issues for the consideration of the
Board:
1. Was the Appellant entitled to an opportunity to cure its
failure to provide proofs before the Contracting Officer could
terminate the contract for default?
2. Was the Contracting Officer in error to terminate the contract
for default prior to the delivery date because he believed the
inability of the Contractor to supply proofs before January 3,
1992, made it impossible for the contractor to comply with the
schedule?
3. Was the Contracting Officer's decision to terminate the
Appellant's contract for default prior to the delivery date under
the circumstances here, an abuse of discretion?
4. Was the Appellant's delay in providing proofs due to a
defective Government-furnished computer cartridge, so that it is
excused from liability for excess reprocurement costs?
SUMMARY CONCLUSIONS 14/
Since the ultimate question which the Board must decide is
whether or not the Contracting Officer erroneously terminated the
Appellant's contract for default under the circumstances of this
case, certain legal principles should be kept in mind at the
outset. First, a default termination is a drastic action which
may only be taken for good cause and on the basis of solid
evidence. 15/ See, e.g., R.C. Swanson Printing and Typesetting
Company, GPO BCA 31-90 (February 6, 1992), Sl. op. at 25;
Stephenson, Inc., GPO BCA 02-88 (December 20, 1991), Sl. op. at
20 (citing, 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).
Second, the burden of proving the basis for the default is on the
Government, Lisbon Contractors v. United States, 828 F.2d 759
(Fed. Cir. 1987); Chavis and Chavis Printing, GPO BCA 209-90
(February 6, 1991), Sl. op. at 11 (and cases cited therein); R.C.
Swanson Printing and Typesetting Company, supra, Sl. op. at 28,
whereas the contractor has the burden of proving excusability.
Switlik Parachute Company v. United States, 216 Ct.Cl. 362
(1978); Davis v. United States, 180 Ct.Cl. 20 (1967); J.F. Whalen
and Company, AGBCA Nos. 83-160-1, 83-281-1, 88-3 BCA � 21,066; B.
M. Harrison Electrosonics, Inc., ASBCA No. 7684, 1963 BCA �
3,736; Hy-Cal Engineering Corporation, NASA BCA Nos. 871-18 and
772-7, 75-2 BCA � 11,399; Chavis and Chavis Printing, supra, Sl.
op. at 11-12 (and cases cited therein); R.C. Swanson Printing and
Typesetting Company, supra, Sl. op. at 28. The standard
"Default" clause identifies several grounds which have the effect
of excusing defaulting conduct by Government contractors,
including acts of the Government in either its sovereign or
contractual capacity. 16/ See, GPO Contract Terms, Contract
Clauses, � 20.(c). Government acts which may extinguish a
contractor's performance obligations include defective
specifications, Robert E. Moore Construction, AGBCA No. 85-262-1,
90-2 BCA � 22,803, and defective Government-furnished equipment.
Boque Electric Manufacturing Company, ASBCA No. 25184, 86-2 BCA �
18,925. However, the burden of proving Government defects falls
on the contractor, who must also show that such defects were the
cause of the problems in question. Editors Press Incorporated,
GPO BCA 03-90 (September 4, 1991) Sl. op. at 12-13; Fry
Communications, Inc., GPO BCA 1-87 (June 1, 1989), Sl. op. at 5
(citing, Bailfield Industries, Division A-T-O, Inc., ASBCA No.
18057, 77-1 BCA � 12,348).
Third, a default termination is a discretionary act which can be
challenged on an abuse of discretion standard. Darwin
Construction Company, Inc. v. United States, 811 F.2d 593 (Fed.
Cir. 1987); Quality Environment Systems v. United States, 7
Cl.Ct. 428 (1985); Schlesinger v. United States, 390 F.2d 702
(Ct. Cl. 1968); Executive Elevator Service, Inc., VABCA No. 2152,
87-2 BCA � 19,849, mot. for reconsider. denied, 87-3 BCA �
20,083. The burden is on the contractor to prove abuse of
discretion. Cf., Kit Pack Company, Inc., ASBCA No. 33135, 89-3
BCA � 22,151; Lafayette Coal Company, ASBCA No. 32174, 89-3 BCA �
21,963; Quality Environment Systems, Inc., ASBCA No. 22178, 87-3
BCA � 20,060.
Applying these principles to the facts in the record, the Board
reaches the following conclusions:
A. Under the circumstances here, the Contracting Officer's
failure to provide the Appellant with an opportunity to furnish
proofs before terminating the contract for default, was not a
fatal procedural error.
1. The Contracting Officer's decision to default the Appellant
for "failure to adhere to the schedule" is a termination based on
the Contractor's failure to "[m]ake progress, so as to endanger
performance." GPO Contract Terms, Contract Clauses, �20.(a)(1)
(ii).
2. Ordinarily, "progress" default terminations may not be
effectuated unless and until the Contracting Officer has served a
10-day "Cure Notice" on the contractor affording it an
opportunity to correct the situation endangering performance.
GPO Contract Terms, Contract Clauses, � 20.(a)(2); PPR, Chap.
XIV, Sec. 1, �3.c.(2). However, a 10-day "Cure Notice" is not an
absolute, because the Respondent's implementing regulations also
state:
If the Contracting Officer determines that a shorter period is
reasonable, and sufficient time remains in the contract delivery
schedule, such shorter period may be authorized, provided the
determination is supported and documented in the contract file.
If the time remaining in the contract delivery schedule is not
sufficient to permit a realistic "cure" period, the "Cure Notice"
shall not be issued. PPR, Chap. XIV, Sec. 1, � 3.c.(2).
[Emphasis added.]
3. A 10-day cure period, or reasonable shorter period, was out of
the question here because the Respondent first became aware that
no proofs had been furnished by the Contractor on December 30,
1991, and the Contracting Officer did not discuss the matter with
the Appellant until December 31, 1991 - only three workdays
before the contract delivery date (January 3, 1992). 17/
4. Since January 1, 1992, was a national holiday, and the
Appellant had indicated that it could not provide proofs until
January 2, 1992, at the earliest, it was patently clear to the
Contracting Officer that in the time remaining for contract
performance the ACOE would not have the contractually allowed two
workdays to review the proofs before the contract delivery date
(January 3, 1992) (R4 File, Tabs B, C, E and G). Therefore,
because, in his judgment, insufficient time was left in the
contract delivery schedule to permit a realistic "cure" period,
the Contracting Officer decided not to issue a "Cure Notice"
before terminating the contract for default.
5. The decision concerning whether or not a shorter cure period
is reasonable, realistic, and warranted in light of the contract
delivery schedule, is discretionary with the Contracting Officer.
Cf., Stephenson, Inc., supra, Sl. op. at 19-20, fn. 22 ("show
cause notice"). 18/ Furthermore, nothing in the rules require
the Contracting Officer to extend the contract delivery date in
order to provide a limited cure period; indeed, the rules imply
just the opposite-any brief cure period must occur within the
time allowed for contract performance.
6. In this case, the Contracting Officer exercised his discretion
to terminate the contract without affording the Appellant an
opportunity to cure its performance failure. Because that
decision is consistent with the rules in the PPR, it will not be
disturbed by the Board. 19/ Id. (citing, Stabbe Senter Press,
GPO BCA 13-85 and 19-85 (May 12, 1989), Sl. op. at 53).
B. The Contracting Officer's decision to terminate the contract
for default prior to the delivery date was in error because the
Appellant was not in default.
1. The Contracting Officer's conclusion that termination for
default was justified in this case is rooted in a single
conversation he had with Cone on December 31, 1992 (the date of
termination). In their discussion, Cone told him that proofs
would not be available for the ACOE until January 2, 1992, at the
earliest, because the Appellant had just finished correcting
certain technological problems with the Government-furnished
computer cartridge. Previously, from Ouchida, he had learned
that the Appellant had suggested a new delivery schedule (R4
File, Tab G). See also, RTC, p. 6. The Contracting Officer
thought that Cone's commitment to have proofs ready on or about
January 2, 1992, was "subjective and unreliable," and was also
unsatisfactory because it would not afford the ACOE the
contractually allowed two workdays to review the proofs prior to
the contract delivery date. Therefore, he decided that immediate
termination of the Appellant's contract was in "the best interest
of the Government." PPR, Chap. XIV, Sec. 1, � 3.c.(2).
2. The Government may reasonably find performance to be
endangered when a contractor indicates that delivery will be
late, and seeks a time extension. Fitzgerald Laboratories, Inc.,
ASBCA No. 15205, 71-2 BCA � 9,029. In determining that the rate
of progress is "endangering" timely performance, the failure to
meet contract milestones or interim submission requirements is
often significant. 20/ Dubrow Electronic Industries, Inc., ASBCA
No. 8464, 65-1 BCA � 4,859; Melcor Electronics Corporation, ASBCA
No. 17211, 73-1 BCA � 10,015.
3. The Appellant's contract contains no "milestones" to meet;
i.e., the Purchase Order fails to establish a date by which page
proofs are to be received by the Government. However, the Board
agrees with the Contracting Officer that, under this contract, a
responsible contractor faced with a contract delivery date of
January 3, 1992, and knowing that proofs were required which the
ACOE could hold for two workdays, would allow sufficient time
within the contract schedule for the proofing process, production
and delivery. 21/ SRPPO Memorandum, p. 1.
4. The undisputed record facts are: (1) there was a delay in
furnishing the required proofs; (2) the Appellant knew that it
could not provide proofs in time to complete the contract within
the original delivery schedule; and (3) the Contractor was asking
for additional time to perform the contract. Consequently, on
these facts, it was reasonable for the Contracting Officer to
conclude on December 31, 1991, that performance under the
contract was endangered. GPO Contract Terms, Contract Clauses,
�20.(a)(1)(ii). Fitzgerald Laboratories, Inc., supra, 71-2 BCA
�9,029.
5. On the other hand, the Appellant has sustained its burden of
proof in this case in showing that the delay in furnishing proofs
was due to the fact that the Government-furnished computer
cartridge was defective and that time was needed to correct the
technical problems. Boque Electric Manufacturing Company, supra,
86-2 BCA � 18,925. See, GPO Contract Terms, Contract Clauses,
�20.(c).
6. One of the two problems claimed by the Appellant to be wrong
with the computer cartridge sent to it - the incorrect
construction of the VE Master small artwork on the data cartridge
- was also discovered by the ACOE on the duplicate computer
cartridge at a press check on the reprocured contract on January
6, 1992 (R4 File, Tab G) (R4 File, Tab G). 22/
7. The second technical defect - the coin artwork being
improperly saved and incorporated into Aldus PageMaker in the
form of PICT files, instead of correct EPS files - is disputed by
the Respondent. The Respondent relies on the tests made by
Portland Ad with the duplicate computer cartridge after the
contract had been terminated. However, test results obtained
from a duplicate computer cartridge are an insufficient basis to
conclude that the coin artwork was also properly saved on the one
sent to the Appellant two weeks earlier; i.e., the best evidence
of the technical problems faced by the Contractor would have been
the cartridge it received. 23/ Cf., Eagle Management, Inc.,
ASBCA No. 35902, 90-1 BCA � 22,513, at 112,997. Considering that
the duplicate cartridge was also faulty to the extent that the VE
Master small artwork was incorrectly constructed, the Board
believes that the Appellant's claim, supported by Cone's
affidavit, that the Government-furnished computer cartridge it
received was defective in the manner alleged, is true. 24/
8. Based on the same evidence, and essentially for the same
reasons, the Board concludes that the defects in the Government-
furnished computer cartridge was the proximate cause of the
Appellant's delay in furnishing proofs to the ACOE. 25/
Accordingly, in light of the foregoing analysis, the Board holds
that the Appellant was not in default at the time of the
termination. 26/ Pennsylvania Printed Products, supra, GPO BCA
29-87 (January 22, 1990), Sl. op. at 14.
9. Since the Appellant's delay in furnishing proofs was directly
traceable the Government's defective computer cartridge, the
Contractor was entitled to the benefit of the "Extension of
schedules" clause in GPO Contract Terms. GPO Contract Terms,
Contract Clauses, � 12.(c)(1). Cf., Pennsylvania Printed
Products, supra, Sl. op. at 13. Also cf., Marine Transport
Lines, Inc., ASBCA No. 28962, 86-3 BA � 19,164; FKC Engineering
Company, supra, 70-1 BCA � 8,312. Under that clause, when a
contractor's delay is the fault of the Government, the contract
delivery schedule is automatically extended by the total number
of workdays that the work was delayed, plus a grace period of one
workday for each day of delay, not to exceed three workdays.
Pennsylvania Printed Products, supra, Sl. op. at 13.
10. The Board accepts as credible the Appellant's estimate of the
hours and time lost in remedying each defect - 10 1/2 hours and a
loss of one (1) calendar day for the PICT file problem, and 6 1/2
hours and loss of one (1) calendar day for the VE file problem;
i.e., two workdays overall. See, Statement of the Appellant's
Claim, supra, Affidavit of Michael B. Cone. Therefore, under the
"Extension of schedules" clause, the Appellant was entitled to
have the contract delivery schedule extended four workdays
(Saturdays and Sundays are excluded). See, GPO Contract Terms,
Contract Clauses, � 12.(c)(1) (Example 2). Accordingly, applying
these provisions to the contract in question, the contract
delivery schedule should have been expanded by four workdays, or
until January 9, 1992, (since Saturday, January 4, 1992, and
Sunday, January 5, 1992, are not counted).
11. With a new contract due date of January 9, 1992, the
Appellant would have had ample time to furnish proofs to the
ACOE, have the customer-agency review them for two days, and
still have been able to complete the contract in time for the
January 10, 1992 meeting. Pennsylvania Printed Products, supra,
Sl. op. at 13.
C. The Contracting Officer's decision to terminate the
Appellant's contract for default prior to the delivery date was
an abuse of discretion under the circumstances herein.
1. While a contracting officer has the discretionary authority to
terminate a contract for default, the exercise of that discretion
must be fair and equitable. Lewis B. Udis v. United States,
supra, 7 Cl. Ct. at 387 (citing, Everett Plywood Corporation v.
United States, 512 F.2d 1082, 1090 (Ct.Cl. 1975)). Where a board
of contract appeals finds that a contracting officer's default
termination decision is arbitrary and capricious, it has the
authority to set the decision aside. 27/ Darwin Construction
Company, Inc. v. United States, supra, 811 F.2d at 596. 28/ See
also, Schlesinger v. United States, supra, 390 F.2d at 709;
Executive Elevator Service, Inc., supra, 87-2 BCA � 19,849, at
100,438.
2. Even if the Appellant was technically in default here, the
Board would still overturn the Contracting Officer because the
facts show that he acted arbitrarily and abused his discretion in
terminating the contract.
3. As previously noted, although the Contracting Officer states
that one factor in his decision to default the Appellant was the
output information obtained by the ACOE from Portland Ad, the
customer-agency did not send the duplicate cartridge to its local
service bureau for testing until January 2, 1992, after the
Appellant's contract was terminated (R4 File, Tab G). 29/ See,
SRPPO Memorandum, p. 2.
4. Even though the Contracting Officer was aware that the
Appellant was having a problem with the Government-furnished
computer cartridge before he spoke to Cone on December 31, 1991,
30/ his decision to terminate the contract for default did not
take that fact into consideration.
5. The Contracting Officer did not consider the Appellant's offer
to cure the situation under a new contract delivery schedule,
although it was clear that any reprocurement would not have the
books printed and to the ACOE any sooner, and in fact, the
reprocured job cost the Government 50% more to complete. Darwin
Construction Company, Inc. v. United States, supra, 811 F.2d at
599.
6. Perhaps most importantly, the Board sees nothing in the record
that would show the Contracting Officer considered the "eight
required regulatory factors," which must be taken into account
before a contract may be terminated for default. 31/ PPR, Chap.
XIV, Sec. 1, � 3.c.(3)(i)-(viii). The Board believes that three
of the eight provisions are of particular significance in this
case; i.e., PPR, Chap. XIV, Sec. 1, � 3.c.(3)(ii), (iv) and
(viii). They read, respectively, as follows:
(ii) The specific failure of the contractor and the excuses, if
any, made by the contractor for such failure;
* * * * * * * * * *
(iv) The urgency of the need for the supplies or services and the
period of time which would be required to obtain sources as
compared with the time in which delivery could be obtained from
the delinquent contractor;
* * * * * * * * * *
(viii) Any other pertinent facts and circumstances. 32/
The law in this instance is clear-the failure to comply with
these regulations is a factor to be considered in determining
whether a contracting officer committed an abuse of discretion in
taking an action which has the most serious consequences for a
contractor; i.e., termination for default. Darwin Construction
Company, Inc. v. United States, supra, 811 F.2d at 598; Executive
Elevator Service, Inc., supra, 87-2 BCA � 19,849, at 100,438.
7. Finally, the haste with which the Contracting Officer
defaulted the Appellant's contract - he spoke to the Appellant,
wrote to the CRB seeking approval to terminate the contract, and
issued his termination letter all on same day (December 31, 1991)
- suggests to the Board that he was impelled to act by a desire
to mollify Ouchida. However, the wish to mollify a customer-
agency is no basis for defaulting a contractor. Colorgraphics
Corporation, GPO BCA 16-87 (March 31, 1987), Sl. op. at 24 (� 5).
DECISION
The Board finds and concludes that the Respondent has not proved
that the Appellant was in default at the time of termination.
Moreover, even if a default existed, the Contracting Officer
acted arbitrarily and abused his discretion to terminate the
contract in this case. THEREFORE, the decision of the
Contracting officer is REVERSED, and the appeal is allowed. The
termination for default is converted to a termination for the
convenience of the Government, and is REMANDED to the Contracting
Officer with instructions to negotiate a settlement of payment to
be made to the Appellant accordingly. American Drafting &
Laminating Co, GPO BCA 6-85 (April 15, 1986), Sl. op. at 17;
Pennsylvania Printed Products, supra, Sl. op. 14.
It is so Ordered.
_______________
1. The Contracting Officer's appeal file, assembled pursuant to
Rule 4 of the Board's Rules of Practice and Procedure, was
delivered to the Board on April 10, 1992. GPO Instruction
110.12, Subject: Board of Contract Appeals Rules of Practice and
Procedure, dated September 17, 1984 (Board Rules), Rule 4. It
will be referred to hereafter as the R4 File, with an appropriate
Tab letter also indicated. As originally submitted, the R4 File
consisted of four documents identified as Tab A through Tab D.
However, at the prehearing telephone conference held on April 13,
1992, Counsel for GPO stated that the R4 File had been collected
in a hurry because of the short time available under the Small
Claims (Expedited) Procedure, and he reserved the right to submit
additional documents for the file. See, Prehearing Conference
Report, dated April 29, 1992, p. 2, fn. 1 (hereinafter PCR). In
that regard, Counsel for GPO also told the Board that he would
supplement the R4 File by furnishing additional documents to
support the Respondent's position that: (1) the Government-
furnished material was adequate to enable the Appellant to adhere
to the contract schedule; and (2) GPO's Contract Review Board
(CRB) had duly approved the Contracting Officer's proposed
termination action before the "Notice of Termination" was issued
on December 31, 1991. See, PCR, p. 7. On May 27, 1992, the
Board received three documents from Counsel for GPO - two
memoranda and a statement from an employee of the customer-
agency, the Army Corps of Engineers (ACOE). These documents have
been made part of the R4 File and labeled Tabs E, F and G. It
should be noted that Tabs C and E are copies of the same document
- the Contracting Officer's memorandum, dated December 31, 1991,
to the Respondent's CRB requesting approval for his decision to
terminate the Appellant's contract. See, note 10 infra. Tab E
has the date and initials of the CRB members approving the
Contracting Officer's termination action.
2. In this case the Appellant had elected the Board's Small
Claims (Expedited) Procedure. Board Rules, Rules 12.1(a), (c)
and 12.2. See, Appellant's Election to Proceed Under Small
Claims Procedure, dated March 30, 1992. Since the amount in
dispute - $8,870.00 - does not exceed the $10,000.00 limit
prescribed under the Small Claims (Expedited) Procedure in Board
Rules 12.1(a), the Board has ruled that the matter is appropriate
for resolution under that procedure. Board Rules, Rule 12.1(d).
See, PCR, p.4, fn. 2.
3. In accordance with the Board rules concerning the Small
Claims (Expedited) Procedure, the Board's decision and order here
contains only summary findings of fact and conclusions. Board
Rules, Rule 12.2(c). Furthermore, the decision and order in this
case shall have no value as precedent in future appeals
considered by the Board. Board Rules, Rule 12.2(d).
4. At the telephone conference held on April 13, 1992, Counsel
for the Appellant explained that the PageMaker program is a
commonly used software for making full-page layouts, storing them
magnetically and then translating them to a printer to make
negatives. This program is well known in the printing industry
and is now available for use both on IBM and Macintosh equipment.
The program was developed by a firm called Aldus. See, Report of
Telephone Conference Under Small Claims (Expedited) Procedure,
dated April 29, 1992, at pp. 4-5 (hereinafter RTC).
5. According to the Contracting Officer, it is not GPO's
practice to specify the date proofs are due; instead, each
contractor is responsible for allowing enough time for the
proofing process, production and delivery, within the contract
schedule. See, Memorandum from Manager, Seattle RPPO to the U.S.
Board of Contract Appeals, dated May 8, 1992, Subject: Docket No.
GPO BCA 13-92, p. 1. (SRPPO Memorandum).
6. It seems from Ouchida's declaration that she was unaware that
Purchase Order R-9440 did not contain a firm date by which the
Appellant was to furnish proofs to the ACOE for review and pre-
printing approval (R4 File, Tab G) ("After the date by which
proofs had been requested and had not yet been received, I
contacted the GPO Seattle RPPO. . . . [and was told to] contact
the printer directly.").
7. The Contracting Officer denies that Cone informed him of the
defects in the Government-furnished computer cartridge during
this conversation. SRPPO Memorandum, p. 1. However, he must
have been aware that there was some problem with the cartridge
because it was one matter addressed by the Appellant and Ouchida
in their discussion (although without going into specifics) (R4
File, Tab G). A reasonable supposition, therefore, is that
Ouchida mentioned it to the Contracting Officer when she called
him and asked him to look into the situation.
8. In his Affidavit, Cone described the two problems as follows:
"Problem [No.] 1-[T]he coin artwork appearing on pages 2, 4, 6,
8, 10, 12, 14, 16, 18, 20, 22, 24, 26, 28, 32, 34, 36, and 38 was
created in Aldus Freehand and placed into Aldus Pagemaker as a
PICT file which is not recommended by Aldus when the intention is
to print the file to a postscript high resolution printer. . . .
When page 2, . . . containing seven PICT files was processed for
high resolution film output, it became apparent that a problem
with the PICT files existed. Being an ALDUS Registered Service
Bureau, we contacted the Aldus Technical Support group and after
consulting, it was determined that all PICT files would have to
be replaced with EPS files. [See, Aldus PrePrint User Manual,
Version 1.5 for Apple Macintosh Computers, p. 56 (Aldus
Manual).]. . . Problem [No.] 2-The VE Master small artwork used
on the front cover as well as on opening chapter pages, was
incorrectly constructed. Had the agency operator lasered out
color break pages, the problem would have been evident. . . .
Artwork was created using an outline which was assigned as a
black printer and a fill which was assigned as a spot color.
This caused the artwork to improperly print out on 2 different
color printers. [Aldus Manual, p. 76.]"
9. Ouchida also admits that the "Special Printing Requirements,"
prepared by the ACOE had misidentified the software versions for
illustrations as Adobe 3.0 and Freehand 4.0, instead of 3.01 and
4.01, respectively, but claims that either version should have
been importable into Aldus PrePrint (R4 File, Tabs A and G).
10. Under GPO's Printing Procurement Regulation, the Contracting
Officer must submit a proposal to terminate a contract for
default to the CRB for its review and concurrence. Printing
Procurement Regulation, GPO Publication 305.3 (September 1,
1988), Chap. I, Sec. 10, � 4.b.(i) (PPR). However, the
regulation also allows the Contracting Officer to take an action
contrary to the position of the CRB, provided that the CRB's
Chairperson is promptly notified and the reasons for the contrary
action are reduced to writing and made part of the permanent
file. Id., � 3.b.
11. Although the Contracting Officer claims that one factor in
his decision to default the Appellant was the output information
obtained by the ACOE from Portland Ad, the Board observes that
the customer-agency did not send the duplicate cartridge to its
local service bureau for testing until January 2, 1992, the first
work day after the Appellant's contract was terminated (December
31, 1991) (R4 File, Tab G).
12. Since the CRB is located in GPO's central office, and there
is a three-hour time difference between Washington, DC and
Seattle, the Board assumes that the Contracting Officer sent his
concurrence memorandum to the CRB by facsimile transmission and
obtained same day approval from the members in the same manner
(R4 File, Tab E).
13. The Appellant received the Contracting Officer's termination
letter by facsimile transmission late on December 31, 1991.
Appellant's Brief, dated June 12, 1992, p. 2 (App. Brf.).
14. The record on which the Board's decision is based consists
of: (1) the Notice of Appeal, dated March 30, 1992; (2) the R4
File (Tabs A-G); (3) the Statement of the Appellant's Claim,
dated May 12, 1992; (4) the Memorandum from Manager, Seattle RPPO
to the U.S. Board of Contract Appeals, dated May 8, 1992,
Subject: Docket No. GPO BCA 13-92; (5) the Answer, dated May 27,
1992; (6) the Report of Telephone Conference, dated April 29,
1992; (7) the Appellant's Brief, dated June 12, 1992; and (8) the
Respondent's Brief, dated June 12, 1992.
15. Default terminations - as a species of forfeiture - are
strictly construed. See, D. Joseph DeVito v. United States, 188
Ct.Cl. 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).
16. While the excusable events listed in the "Default" clause,
all of which must be beyond the control and without the fault or
negligence of the contractor, are set forth in the context of
relieving the contractor from responsibility for excess
reprocurement costs, it is well-settled that the same occurrences
operate to extend the time available for performance and makes
termination prior to that time improper. See, e.g., FKC
Engineering Company, ASBCA No. 14856, 70-1 BCA � 8,312.
17. The Board takes judicial notice that the contract
performance period in this case - December 19, 1991 to January 3,
1992 - contained the Christmas and New Year's holidays, which
fell on consecutive Wednesdays. Furthermore, experience tells us
that while December 24, 1991, and December 31, 1991, may have
been nominal workdays, as a rule little work is accomplished on
Christmas Eve and New Years Eve in the typical Government agency
or business firm. Hence, unless the Appellant worked weekends on
the contract, four workdays were effectively subtracted from the
total contract performance period of 12 workdays. Stephenson,
Inc., supra, Sl. op. at 24, fn. 27; American Drafting and
Laminating Company, GPO BCA 6-85 (June 26, 1986), Sl. op. at 15.
Also see, Powerline Oil Company, EBCA Nos. 278, 280-283, 290,
296, 300-305, 307, 321, 91-2 BCA � 23,789.
18. In Stephenson, Inc., the Board observed that 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). GPO Contract
Terms, Contract Clauses, � 20.(a)(1)(i). See, e.g., Kit Pack
Company, Inc., supra, 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). See, PPR, Chap. XIV, Sec. 1, � 3.c.(1).
19. The Respondent's alternative argument based on doctrine of
"anticipatory repudiation" is unsupported by this record.
Respondent's Brief, dated June 12, 1992, p. 4 (R. Brf). As the
Armed Services Board of Contract Appeals stated in Fairfield
Scientific Corporation: "The hallmark of anticipatory repudiation
is that there must be a 'definite and unequivocal manifestion of
intention on the part of the repudiator that he will not render
the promised performance when the time fixed for it in the
contract arrives.' Corbin on Contracts � 973. Therefore, to
constitute an anticipatory repudiation the alleged repudiator's
words or conduct must manifest 'a positive, unconditional, and
unequivocal declaration of fixed purpose not to perform the
contract in any event or at any time.' Dingley v. Oler, 117 U.S.
490, 503 (1886)." Fairfield Scientific Corporation, supra, 78-1
BCA � 13,082, at 63,908. See also, Beeston, Inc., ASBCA No.
38969, 91-3 BCA � 24,241. Instead of "a positive, unconditional,
and unequivocal declaration of fixed purpose not to perform the
contract in any event or at any time," the record in this case is
replete with evidence that the Appellant remained, at all times,
ready and willing to perform the contract; indeed, when the
contract was terminated it had already corrected the problems
with the computer cartridge and was trying to work out an
alternative schedule to get the books to the ACOE in time for the
January 10, 1992, meeting.
20. It should be noted, however, that the right to terminate
does not necessarily arise from a missed milestone. Ubique,
Ltd., DOTCAB No. 71-28, 72-1 BCA � 9,340.).
21. Although the Board shares the view expressed by the
Contracting Officer regarding the Contractor's responsibilities
under this contract, it does not subscribe to his opinion that
"[i]t is not GPO's practice to specify the date proofs are due, .
. .". SRPPO Memorandum, p. 1. While the Contracting Officer's
statement has some surface support in the fact that the "Proof
Required" Box on GPO Form 2676 has no date line, the Board
believes that his interpretation of GPO practice is too sweeping.
The Board has observed in other cases that other contracting
officers have, in fact, written in a date for proofs to be
received in the "Proof Required" Box. See, e.g., Blaine Hudson
Printing, GPO 06-92 (August 13, 1992). Therefore, the Board sees
the matter as not so much one of practice, but rather as a
contracting officer's preference based on the particular
circumstances of each procurement. However, as the Board has
stated on numerous occasions, its authority is purely derivative
and contractual, and it must decide disputes within the
parameters of the contract under review. See, e.g, B. P.
Printing and Office Supplies, GPO BCA 14-91 (August 10, 1992),
Sl. op. at 14; R. C. Swanson Printing and Typesetting Company,
GPO BCA 15-90 (March 6, 1992), Sl. op. at 27; The Wessel Company,
GPO BCA 08-90 (February 28, 1992), Sl. op. at 32-33; Bay
Printing, Inc., GPO BCA 16-85 (January 10, 1987), Sl. op. at 9;
Peake Printers, Inc., GPO BCA 12-85 (November 12, 1986), Sl. op.
at 6.
22. There is also agreement by the parties that the "Special
Printing Requirements," had misidentified the software versions
for illustrations as Adobe 3.0 and Freehand 4.0, instead of 3.01
and 4.01, respectively. See, note 9 supra.
23. Questions relating to the weight of the evidence in the
record are matters wholly within the discretion of the Board.
Board Rules, Rule 13 (c). B. P. Printing and Office Supplies,
supra, Sl. op. at 22. See, Board Rules, Rule 20.
24. While denying that the Government-furnished computer
cartridge was defective, the Respondent also contends that under
the "Government Furnished Property" clause of GPO Contract Terms,
the Appellant had a duty to notify the Contracting Officer of
that fact, implying that the Contractor's failure to do so is
somehow fatal to its appeal. GPO Contract Terms, Contract
Clauses, � 7 (Government Furnished Property). R. Brf., pp. 2-3.
See also, RTC, p. 7. Among other things, the "Government
Furnished Property" clause tells us that: (1) failure of a
contractor to bring any discrepancies in Government-furnished
property to the attention of the Contracting Officer will not
relieve it of performance; and (2) any disagreement over the
discrepancy between the Contracting Officer and the contractor is
covered by "Disputes" clause. GPO Contract Terms, Contract
Clauses, � 5 (Disputes). Therefore, contrary to the Respondent,
the Board sees nothing in the "Government Furnished Property"
clause which would foreclose the Appellant's pursuit of this
appeal, particularly since the Government was not prejudiced by
the lack of notice. Cf., Michael, Inc., ASBCA No. 35653, 92-1
BCA � 24,412; Togaroli Corporation, ASBCA Nos. 32995 and 32996,
89-2 BCA � 21,864, mot. for reconsider. den. 89-3 BCA � 22,102.
25. The Board is compelled to observe that the Appellant and the
Contracting Officer (and the ACOE) were at opposite ends of the
country. Therefore, there is some merit to the Appellant's claim
that the contract was behind schedule from the beginning because
the Government-furnished material, which was sent by Federal
Express on December 20, 1991, was not delivered until Saturday,
December 21, 1991. App. Brf., p. 1. The record does not reveal
whether the cartridge defects were discovered on the date of
delivery, or on the next workday, Monday, December 23, 1992. In
any event, however, the Board believes that the real reason for
the Appellant's delay in furnishing page proofs was its need to
correct the cartridge, not the late start due to the late
delivery of the Government-furnished material (R4 File, Tabs A
and G).
26. In light of the Board's finding that the Appellant was not
in default, it is unnecessary to address the issue in this appeal
concerning whether or not the Appellant is excused from liability
for excess reprocurement costs.
27. The cases speak in terms of a board's "statutory" authority
to set aside the arbitrary and capricious default decisions of
contracting officers. Darwin Construction Company, Inc. v.
United States, supra, 811 F.2d at 596; Executive Elevator
Service, Inc., supra, 87-2 BCA � 19,849, at 100,438. The
authorities are referring, of course, to boards of contract
appeals established pursuant to the Contract Disputes Act of
1978, Pub. L. 95-563 (November 1, 1978), 92 Stat. 2383, 41 U.S.C.
� 601 et seq. The Board is not a creature of statute, but rather
its authority is purely derivative and contractual. The Wessel
Company, Inc., supra, Sl. op. at 32-33 (citing, Peake Printers,
Inc., supra, Sl. op. at 6). See also, Automated Datatron, Inc.,
GPO BCA 20-87 (March 31, 1989), Sl. op. at 4-5; Bay Printing,
Inc., supra, Sl. op. at 9. For GPO, the statutory authority to
enter and administer contracts is vested in the Public Printer of
the United States. See, 44 U.S.C. �� 301, 309, 501, 502 (1982).
GPO Instruction 110.10C, Subject: Establishment of the Board of
Contract Appeals, dated September 17, 1984, � 3. The Public
Printer, however, has delegated his authority to decide contract
appeals to the Board, which can act as fully and finally as might
the Public Printer. Id., � 5. See also, Board Rules, Preface to
Rules, � I (Jurisdiction for Considering Appeals). Therefore,
because the Board is acting on behalf of the Public Printer in
these appeals, its authority to set aside arbitrary and
capricious default decisions also has a "statutory" foundation.
28. In Darwin the Court specifically rejected the following
statement by the Armed Services Board of Contract Appeals in the
underlying decision [Darwin Construction Company, Inc., ASBCA No.
29340, 86-2 BCA � 18,959 at 95,733]: "[O]nce the right to
termination is acquired by the Government and if that right is
not lost by the Government because of its conduct, the Board will
uphold the termination for default without any inquiry by the
Board into the 'motives' or judgment of the contracting officer
leading to the decision to terminate [relying on Nuclear Research
Associates, Inc., ASBCA No. 13563, 70-1 BCA � 8,237]." The Court
stated, in pertinent part: "If we correctly understand the
purport and effect of that decision, we cannot agree with it,
because we think it is in conflict with the decisions of the
Court of Claims, as well as the decisions of the Claims Court . .
. . Also, it is our opinion that it imposes an erroneous
limitation on the statutory authority of boards of contract
appeals to set aside default decisions of contracting officers in
cases where the boards find that such decisions are arbitrary or
capricious." Darwin Construction Company, Inc. v. United States,
supra, 811 F.2d at 599.
29. See, note 11 supra.
30. See, note 7 supra.
31. PPR, Chap. XIV, Sec. 1, � 3.c.(3) lists eight factors which
"[t]he Contracting Officer shall consider" in determining whether
to terminate a contract for default: (i) the provisions of the
contract and applicable laws and regulations; (ii) the specific
failure of the contractor and the excuses, if any, made by the
contractor for such failure; (iii) the availability of the
supplies or services from other sources; (iv) the urgency of the
need for the supplies or services and the period of time which
would be required to obtain sources as compared with the time in
which delivery could be obtained from the delinquent contractor;
(v) the effect of a termination for default upon the contractor's
capability as a supplier under other contracts; (vi) the effect
of a termination for default on the ability of the contractor to
liquidate progress payments; (vii) the availability of funds to
finance repurchase costs which may prove uncollectible from the
defaulted contractor, and the availability of funds to finance
termination costs if the default is determined to be excusable;
and (viii) any other pertinent facts and circumstances. See
also, FAR � 49.402-3(f)(1)-(7).
32. For example, the fact that the contract performance period
here was brief-only 12 workdays-and included the Christmas and
New Year's holidays. See, note 17 supra.