UNITED STATES GOVERNMENT PRINTING OFFICE
CONTRACT APPEALS BOARD
Sales Aids, Incorporated
Appeal dated November 18, 1980
Decision dated July 31, 1981
Panel 14-80
THOMAS O. MAGNETTI, Chairman
DENNIS R. CHASTAIN, Member
JAMES A. MEADOWS, Member
PRELIMINARY STATEMENT
This is a decision on a timely appeal entered by Sales Aids,
Inc. (hereafter referred to as the contractor). The appeal
disputes the final decision of the Contracting Officer
terminating the contractor for default. The appeal is taken
pursuant to Article 3 (the "Disputes" clause) of the GPO
Contract Terms No. 1, GPO Publication 310.2, August 1, 1979.
This document was incorporated by reference into the
Specifications and the Contractor's bid on this contract.
Exhibits 3 and 5, respectively of the Appeal File (hereafter
A.F.). The contract required the contractor to produce sets
of tabbed dividers for the Department of Commerce to be used
in export regulation manuals. The final decision of the
Contracting Office held that the contractor failed to perform
in accordance with the terms of the contract.
In accordance with GPO Instruction 110.10A, titled "Board of
Contract Appeals Rules of Practice and Procedure," the
decision of this panel is based solely upon the record which
contains the documents and exhibits constituting the Appeal
File.
STATEMENT OF FACTS
On March 29, 1980, in accordance with the standard GPO
contract award procedures, Purchase Order No. 12910 for the
procurement of white divider cards was awarded to the
contractor. Exhibit 7, A.F. Under this contract, the
contractor was required to print up 10,519 sets of tabbed
divider index sheets. Exhibit 3, A.F. Each of these sets
consisted of 28 tabbed dividers for a total of 294,532 tabbed
dividers. These dividers were to be made from white index
paper with dimensions of 25-1/2 x 30-1/2 inches. According to
these specifications, the paper stock was supposed to weigh
220 lbs per 1,000 sheets and correspond to the performance
standards established for that category of index paper in
the "Government Paper Specification Standards, No. 8," JCP K10,
November 30, 1977. Under this category, this type of paper had
to have an average thickness of 0.0090 inches. A tolerance of
plus or minus 0.0005 inch in this thickness was allowed for paper
weighing 220 pounds. Additionally, a tolerance of 10% was
allowed in the basic weight of the paper allowing a contractor to
deliver paper weighing anywhere from 242 lbs. to 198 lbs. per
1,000 sheets. The product was to be produced in strict
accordance with the specifications, and was to be shipped on or
before May 21, 1980.
On May 30, 1980, the Department of Commerce notified the GPO
that the contractor had delivered goods which failed to comply
with the paper weight specifications. Exhibit 8, A.F. Since
this non-conformance apparently rendered the dividers useless
for the purpose intended, the Department informed the GPO that
it did not want to accept the job. Based upon this complaint,
on June 4, 1980, the forms were tested by a GPO Quality
Assurance Specialist. Exhibit 9, A.F. The test revealed that
the weight per 1,000 of these divider sheets was 171.4 pounds.
This was more than 26 pounds less than the most tolerant
weight permitted by the specifications (198 lbs.). Moreover,
the test for the caliper (thickness) of the paper indicated
that the paper was only 0.00751". This was appreciably
thinner than the specifications would have allowed (the
caliper tolerance range was 0.00945" to 0.00855").
Based on the complaint and the test results, in June the GPO
rejected the sets of dividers delivered by the contractor and
informed the contractor that it would have to replace these
defective goods with dividers that conformed to the
specifications. To accommodate the requirement to reprint,
the Contracting Officer extended the date of delivery to July
9, 1980. Exhibit 10, A.F.
As delivery had not been accomplished by August 5, 1980, the
GPO notified the contractor that, due to its failure to
perform within the allotted schedule, the Government was
considering terminating the contract for default. Exhibit 11,
A.F. The contractor was given 5 days to respond to this
notice. On August 6, 1980, the contractor telephonically
informed the GPO that it would reproduce the job. Exhibit 13,
A.F. Sometime afterward (around August 14, 1980), the
contractor notified the GPO by an undated letter that it would
not receive the correct paper stock until September 8, 1980,
and that it would take 3 to 4 weeks longer to reproduce the
job. Exhibit 12, A.F. It also stated that the reason it
delayed in reproducing the job was that it had been led to
believe by Mr. Richard Isadore, an employee of the Department
of Commerce, that the original shipment would be accepted by
the GPO at a 20% discount.
Rejecting the contractor's reason for delay and its offer to
produce a conforming product by October, the GPO terminated
the contractor for default on August 21, 1980. The
justification for this action was the failure of the
contractor to produce an acceptable product in a reasonable
time. Exhibit 14, A.F. The right to default contractors in
cases such as these is derived from the Article 12(b), titled
"Inspection and Test" and Article 17, titled "Default." See,
GPO Contract Terms No. 1, supra. Article 12(b) reads in part
as follows:
In case any supplies or lots of supplies are defective in
materials or manufacture or otherwise not in conformity with the
requirements of the contract, the GPO shall have the right either
to reject them (with or without instructions as to their
disposition) or to require their correction . . . . If the
contractor fails to promptly remove such supplies or lots of
supplies which are required to be removed, or promptly to replace
or correct such supplies or lots of supplies, the GPO either (i)
may by contract or
otherwise replace or correct such supplies and charge to the
contractor the cost occasioned the Government thereby, or (ii)
may terminate the contract for default as provided in the article
entitled "Default" of these contractual terms. (Emphasis added.)
Article 17, the Default clause reads in part as follows:
(a) The Government may, subject to the provisions of paragraph
(c) of this article, by written notice to the contractor,
terminate the whole or any part of the contract in any one of the
following circumstances:
If the contractor fails to make delivery of the supplies
. . . within the time specified herein or any extension thereof;
. . . . (Emphasis added.)
The contractor's appeal of this decision, dated November 18,
1980, challenged the Contracting Officer's final decision to
default the contractor. Exhibit 1, A.F. The contractor
contended that it had a legitimate reason for the delay in
producing a conforming product. It indicated that the delay
was caused because it had relied on the alleged
representations of Mr. Richard Isadore that the non-conforming
goods would be accepted by the GPO at a 20% discount in the
contract price. Further, the contractor complained that it
was not given a reasonable period of time to reproduce goods
that would conform to the contract specifications.
DISCUSSION
The language of the inspection clause gives the GPO the broad
right to reject goods which do not conform to the contract
specifications and/or order the contractor to correct these
defects discovered during the inspection process. If the
contractor fails to correct these defects within the delivery
schedule or within a reasonable period afterwards, the
Government can terminate the contractor for default. See
Articles 12(b) and 17(a), supra..
The Government is entitled to enforce strict compliance with
the specifications found in its contracts. H.L.C. &
Associates Construction Co. v. United States, 176 Ct. Cl. 285,
367 F.2d 586, 589 (1966); Decatur Realty Sales, HUD BCA No.
75-26, 77-2 BCA � 12,567. The determination of whether a
product conforms with the contract specifications must rest
with the Contracting Officer as this determination is within
his/her discretion in administering the contract, Thomas W.
Yoder Co., VACAB 997, 74-1 BCA � 10,424 (1974). Where the
specifications contain an imprecise statement of the contract
requirements, the standard for rejection of the contractor's
work becomes more subjective. However, no claim has been
raised by this appeal that the specifications were ambiguous
or imprecise as not to indicate what the contractor had to do
in order to produce a conforming divider. Rather the
specifications set out clearly what the contractor's
responsibilities were in order to comply with the contract.
In the instant case, the evidence clearly demonstrated that
the product as delivered by the contractor did not conform
with the specifications of the contract. Proof of this defect
was illustrated not only by the complaint lodged by the
Department of Commerce of May 30, 1980, but more specifically
by the quality assurance test run by the GPO on June 4, 1980.
Exhibits 8 and 9, respectively, A.F. This test revealed that
the dividers did not correspond to the weight and thickness
requirements set forth in the specifications and the
Government Paper Specifications Standards, supra. The
contractor, itself, did not dispute this evidence. Therefore,
the Board holds that the contractor tendered a product which
did not comply with the specifications within the time
allotted by the contract and the Contracting Officer was well
within his discretionary powers to reject the non-conforming
goods.
As stated above, Articles 12 and 17 of Contract Terms No. 1
permits the Government to default a contractor who has
supplied defective goods and does not replace them promptly.
Accord, Kan-Du Tool & Instrument Corp., ASBCA No. 23466, 79-2
BCA � 13,907. The Government did so in the case at bar. It
believed this termination was warranted on the grounds that
the contractor failed to deliver conforming dividers promptly
after it was informed that the work as delivered was rejected.
In cases of default, the Government has the initial burden of
proving that the contractor had defaulted in its performance
of the contract. Caskel Forge, Inc., ASBCA No. 6205, 61-1 BCA
� 2,891; National Aviation Electronics, Inc., ASBCA No. 18256,
74-2 BCA � 10,677. Default terminations as a species of
forfeiture are to be strictly construed. J.D. Hedin v. United
States, 187 Ct. Cl. 45 (1969). However, once the default has
been established, the contractor then has the burden of
showing that the default was excusable. B.M. Harrison, ASBCA
No. 7684, 1963 BCA � 3,736; Hy-Cal Engineering Corp., NASA
Nos. 871-18 and 772-7, 75-2 BCA � 11,399.
In the instant case, the burden of proof placed upon the
Government to demonstrate that the contractor had defaulted on
the contract is easily met. The contractor failed to submit
dividers that complied with the contract specifications in a
timely fashion. Exhibits 9 and 14, A.F. Despite the
Government's forbearance of the contractor's difficulties as
evidenced by the delivery extension it granted to the
contractor in June, the contractor failed to promptly deliver
a conforming product. The record, therefore, makes out a
prima facie case of a failure to perform. General Equipment
Company, ASBCA No. 6415, 1964 BCA � 4,166.
Faced with the probability that the tabbed dividers would not
be delivered until sometime in October, it was within the
discretion of the Contracting Officer to terminate the
contract. The Contracting Officer
moved to terminate the contract based upon the contractor's
failure to deliver dividers which conformed to the contract
specifications within the time allotted in the delivery schedule.
Exhibit 14, A.F. See, Simplex Manufacturing Corp., ASBCA Nos.
13897 and 14380, 71-1 BCA � 8,814; Associated Graphics, GPO BCA
No. 76-12, January 12, 1981.
Having established that the Government possessed the right to
terminate the contract for non-delivery of conforming goods
and exercised that right in the proper manner, the burden
shifts to the contractor to prove that the delay was
excusable. The contractor seeks to excuse its actions by
alleging that any delay was justified because it relied on
certain representations supposedly made by Mr. Richard Isadore
of the Department of Commerce that the GPO would accept the
defective goods and reduce the contract price. Other than
this bald assertion, it does not provide any evidence that Mr.
Isadore had made such representations. However, the Appeal
File contains a memorandum from Mr. Isadore that addresses the
nature of his communication with the contractor. This memo
did not indicate that any promises were made that the GPO
would accept the defective dividers at a discount. Exhibit
21, A.F. Moreover, there is other evidence to indicate that
the GPO was notified by Mr. Isadore that the contractor was
trying to pressure the Commerce Department to accept the
defective work. The GPO informed the contractor of its
responsibility to deal with the GPO as its contract was with
the GPO and not the Commerce Department. Exhibit 20, A.F.
Because Exhibits 20 and 21 which document the above
communications date from December 1980, they lack the
unqualified probative ability to disprove the contractor's
contention that it was misled by representations made by Mr.
Isadore and that it had the right to rely on these
representations. However, when one balances this
circumstantial evidence against the lack of proof offered by
the contractor on this issue, this Board determines that the
contractor had no right to delay
its performance on reliance on any verbal communication with Mr.
Isadore. Moreover, there is documentation that indicates that
the contractor attempted to obtain acceptance of the defective
work with a discount in early June after it was notified that it
would have to replace the job. These offers were refused.
Exhibit 19, A.F. If the contractor took a risk between June and
August of 1980 to wait and see if the GPO would accept the
defective goods and delayed in reproducing the job until the last
possible moment, as apparently it did, it cannot now try to
escape the consequences of its action.
Assuming arguendo that Mr. Isadore did make the alleged
representations and the contractor did feel that it could
reasonably rely on them, this still could not be used as an
excuse for the contractor's delay. Mr. Isadore had no
authority to make these representations as this contract was
with the GPO and the contractor should have dealt directly
with the Contracting Officer. It is well established that the
Government is not bound by the acts of unauthorized agents
with only apparent authority. Federal Crop Insurance Corp. v.
Merrill, 332 U.S. 380 (1947); General Electric Co., ASBCA No.
11990, 67-1 BCA � 6,377. Authority to bind the Government
must either be express or implied actual authority. Since Mr.
Isadore had neither, he could not bind the Government by his
actions in any way. The contractor was informed of this when
it was told it had to deal exclusively with the Government.
Exhibit 20, A.F. On page 2 of its letter of appeal, the
contractor acknowledged that Mr. Isadore had no more than
apparent authority. Exhibit 1, A.F.
The contractor further contends that it was not afforded a
reasonable time to produce an acceptable product. Ordinarily,
when the Government elects to reject defective goods, it must
give the contractor the opportunity to correct the defect.
Radiation Technology, Inc. v. United States, 177 Ct. Cl. 277,
366 F.2d 1003 (1966). Here the opportunity to correct the
defects by reprinting the order was provided to the
contractor. By letter dated June 12, 1980, the GPO notified
the contractor that the work was unacceptable and would have
to be reprinted. Exhibit 10, A.F. In this letter, the
delivery date was extended to July 9, 1980, but the contractor
was cautioned that the replacement would have to be in strict
accordance with the contract specifications. When the
contractor had not delivered by August 5, 1980, the GPO sent
it a show cause notice. Exhibit 11, A.F. The contractor
responded that it could tender a conforming product by
October, and based on this unsatisfactory response, the
Government terminated the contract for default.
Radiation Technology stands for the proposition that a
contractor should be provided a reasonable period of time to
cure minor defects. The length of this period should vary
according to the nature of the deficiency and the urgency of
the Government's needs. Case law has not established what a
reasonable cure period should be. Nor has there been
established a right to a specific amount of time. Each case
must be decided on its own facts. Given the time period
envisioned for performance in the contract specifications
(approximately one month), the amount of time estimated to
reprint the job (expected delivery date sometime in October)
requested by this contractor in its August 14 letter, hardly
seems reasonable. This is especially true when the facts
demonstrate, as they do here, that the contractor deliberately
delayed in reproducing the job in a vain attempt to get the
Commerce Department to accept the originally tendered goods.
The Board also holds that the Contracting Officer followed the
proper procedures when he issued the show cause notice on
August 5, 1980. This action did not provide an additional
extension for the contractor. In Aargus Poly Bag, GSBCA No.
4314, 76-2 BCA � 11,927, the General Services Board discussed
the effect of such a show cause order when issued after the
delivery date has passed.
The Default clause permits the Government to immediately
terminate the whole or any part of a contract where the
contractor fails to deliver the supplies within the time
specified in the contract. However, it is to the mutual
benefit of the parties for the Government to forbear where the
contractor appears capable of performance and the Government
might be willing to accept late deliveries. Thus, in the
administration of supply contracts, it has become an almost
routine practice for the Government to issue a show-cause
notice prior to termination; not so much, in our opinion, to
determine excusability, but rather, to gain information
relative to the contractor's performance capability. . . .
Thus, we conclude that the Government, whatever its motive,
may see fit, at any time, to terminate and permit the
Appellant [the contractor] to show excusability at a later
date under 11(e) of the Default Clause [Article 17(c) of GPO
Contract Terms No. 1].
As can be seen from the above facts, the contractor was
provided plenty of time to provide a conforming product and
its claim that it was not is now rejected. It is apparent
that these defects were so serious that they could not be
corrected within any reasonable period of time and, therefore,
as the defective work was obviously due to the contractor's
own actions, the Contracting Officer was justified in
terminating the contract. Radiation Technology, supra.
DECISION
Based upon the above reasoning, the decision of the
Contracting Officer to terminate the contractor for default is
upheld. Accordingly, the contractor's appeal is hereby denied
in its entirety.