BOARD OF CONTRACT APPEALS
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON, DC 20401
In the Matter of )
)
the Appeal of )
)
QUESTAR PRINTING, INC. ) Docket No. GPO BCA 19-94
Jacket No. 362-553 )
Purchase Order 96583 )
For the Appellant: Questar Printing, Inc., Chicago, Illinois, by
Frederic G. Antoun, Jr., Esq., Attorney At Law, Chambersburg,
Pennsylvania.
For the Government: Roy K. Potter, Esq., Assistant General
Counsel, U.S. Government Printing Office.
Before FOSS, Administrative Judge.
DECISION AND ORDER
I. STATEMENT OF THE CASE
By Notice of Appeal, dated May 16, 1994, Questar Printing, Inc.
(Appellant or Contractor), 5825 S. Western Avenue, Chicago,
Illinois 60636, filed a timely appeal of the final decision of
Contracting Officer Robert C. Davis, dated April 21, 1994, of the
U.S. Government Printing Office's (Respondent or GPO or
Government), Printing Procurement Department (PPD), Washington,
DC 20401, terminating the Appellant's contract, identified as
Jacket No. 362-553, Purchase Order 96583, for default. See GPO
Instruction 110.12, Subject: Board of Contract Appeals Rules of
Practice and Procedure, dated September 17, 1984, Rules 1(a) and
2 (Board Rules). The reason given by the Contracting Officer for
the default was that the Contractor had "failed to make delivery
of the product in accordance with the specifications." See R4
File, Tab K.1 See also RPTC, at 3. A two-day evidentiary
hearing in the appeal was conducted by the Board on January 30
and 31, 1995, respectively, at which both parties were
represented by counsel, who, thereafter, filed timely briefs on
the issues involved.2 Board Rules, Rules 17 through 24, 26 and
27. For the reasons which follow, the final decision of the
Contracting Officer in is hereby REVERSED, and the appeal is
GRANTED.
II. BACKGROUND
The relevant facts are essentially uncontroverted, and are set
forth here as presented in R4 File, and the hearing transcript,
including the parties' exhibits.
1. On December 30, 1993, GPO issued an Invitation for Bid
(IFB) for Jacket No. 362-553, a contract for the production of
7,100 copies of a loose-leaf publication entitled "Civilian
Benefits Guide" (Guide) for the U.S. Department of
Transportation/U.S. Coast Guard (Coast Guard or customer-agency)
(R4 File, Tab A, at 1). The Guide was to be produced in an 80-
page version (6,000 copies), and another of 84 pages (1,100
copies) (R4 File, Tabs A, at 1, and C).
2. Among other things, the IFB provided, in pertinent part:
* * * * * * * * * *
Any contract which results from this Invitation to Bid will be
subject to the applicable articles of GPO Contract Terms (Pub.
310.2, effective December 1, 1987 (Rev. 9-88) [hereafter GPO
Contract Terms] and Quality Assurance Through Attributes Program,
Rev. November 1989 (GPO Pub. 310.1) [hereinafter QATAP].
* * * * * * * * * *
PRODUCT: Cloth-covered three-ring binder with opening/closing
levers, a looseleaf publication with a separate one-piece cover,
and a set of tab dividers. Publication prints in two versions,
one with 80 pages and the other with 84 pages. Binder cover
prints in four inks and text and tab dividers print 4-color
process.
* * * * * * * * * *
SIZE: Binder - 295 (bind) x 273 mm (111/2 {bind} x 103/4"), 38
mm (11/2") capacity; to fit sheet size 216 x 279 mm (81/2 x 11").
Publication Cover - 232 x 279 mm (9_ x 11").
Publication Text - 216 x 279 mm (81/2 x 11").
Tab Dividers - 229 (includes 13 mm lip) x 279 mm (9" {includes
1/2 lip} x 11").
GOVERNMENT TO FURNISH: Four SyQuest 44 MB 133 mm (51/4")
removable cartridges, one 89 mm (31/2") double sided floppy disk,
and one Maxwell HS-4/90S digital data storage tape. Furnished
media was processed on a Macintosh Model IIci, System 6.0.7,
using Aldus Pagemaker 4.2, Adobe Illustrator 3.0, Adobe Photoshop
2.0.1, and Retrospect 2.0A software. Files are in program
format. Typefaces included in files are: Adobe's Helvetica
Regular, Light, Light Oblique, Black, and Black Oblique; Palatino
Roman, Italic, Bold, and Bold Italic; and Zapf Dingbats.
Directories of SyQuest cartridge contents; folder contents;;
linked graphic items and pertinent page number.
Low resolution color prototypes.
Required fonts.
Cromalins of photographs.
Black and white photocopy of cover; labeled and accompanying list
of Position-Description-File Name.
Listing of high resolution interior photo placement and file
names.
Sample binder with full color comp [composite] of publication and
dividers.
GPO Form 892 proof label.
One reproduction proof, Form 905 (R3/90) with labeling and
marking specifications.
Identification markings such as register marks, ring folios,
rubber stamped jacket numbers, commercial identification marks of
any kind, etc., except GPO imprint, form number, and revision
date, carried on copy or film, must not print on finished
product.
CONTRACTOR TO FURNISH: All materials and operations, other than
those listed under "Government to Furnish," necessary to produce
the product(s) in accordance with these specifications.
* * * * * * * * * *
PROOFS: One set of Dylux, or similar proofs, trimmed to size, and
one set of one-piece laminated or electrophotography color
proofs. These proofs must have illustrations and text matter
composited. Sublimation, inkjet, photographic, andoverlay proofs
are not acceptable. Proofs cannot simulate PMS inks; colors must
be an exact match. The proofs must have color control bars, tint
patches and dot gain scale (such as, Brunner, GATF, GRETAG, or
RIT) repeated across sheet.
* * * * * * * * * *
The contractor must not print prior to receipt of an "OK to
print."
STOCK/PAPER:
* * * * * * * * * *
Publication Text: White No. 2 Coated Text, Dull Finish, basis
weight 148 gsm (25 x 38", 100 lbs. per 500 sheets), equal to JCP
A262. All text paper used in each copy must be of a uniform
shade.
Publication Cover and Tab Dividers: White No. 2 Coated Cover,
Dull Finish, basis weight 216 gsm (20 x 26", 80 lbs. per 500
sheets), equal to JCP L62.
Binder Covering: Light blue linen finish impregnated book cloth,
equal to Industrial Coating Group's Arrestox B 41550.
PRINTING: Print publication cover and text and tab dividers head-
to-head in 4-color process. Contractor to match final "Ok'd"
press sheets. Print binder cover in black and white plus a match
of Pantone's 185 red and 280 blue opaque inks.
Format: Publication cover prints face and back in 4-color
process. . . . Text prints with type, line and tones in 4-color
process throughout. Tab dividers print full coverage 4-color
process on face and back.
Binder cover prints on cover 1 and spine with type and line in
the four inks.
Must be printed on a press capable of printing four colors in a
single pass through the press (minimum four printing units).
PRESS SHEET INSPECTION: Final makeready press sheets will be
inspected and approved at the contractor's plant for the purpose
of establishing specified standards for use during the actual
press run. Upon approval of the sheets, contractor is charged
with maintaining those standards throughout the press run (within
QATAP tolerances when applicable) and with discarding all
makeready sheets that proceeded approval. See GPO Publication
315.3 (Guidelines for Contractors Holding Press Sheet
Inspections) issued September 1991. Note: A press sheet
inspection is for the purpose of setting specific standards that
are to be maintained throughout the entire run. It does not
constitute a prior approval of the entire run.
* * * * * * * * * *
BINDING: Die-cut all tab dividers with a 13 mm (1/2") lip, round
cornered on tab only. . . .
Trim publication cover and text four sides. Drill publication
cover and text and tab dividers with three 8 mm (5/16") diameter
holes centered on the 279 mm (11") side, 108 mm (41/4") center to
center. Center of holes to be 10 mm (_") from left edge.
* * * * * * * * * *
QUALITY ASSURANCE LEVELS AND STANDARDS: The following levels and
standards shall apply to these specifications:
Product Quality Levels:
(a) Printing Attributes-Level II.
(b) Finishing Attributes-Level II.
Inspection Levels (From MIL-STD-105):
(a) Non-destructive Tests-General Inspection Level I.
(b) Destructive Tests-Special Inspection Level S-2.
Specified Standards: The specified standards for the attributes
requiring them shall be:
Attribute Specified Standard
P-7. Type Quality and Uniformity O.K. Press Sheets
P-9. Solid and Screen Tint Color Match O.K. Press Sheets
P-10. Process Color Match O.K. Press Sheets
Special Instructions: In the event that inspection of press
sheets is waived by the Government, the following listed
alternate standards (in order of precedence) shall be the
Specified Standards:3
P-7. "OK" proofs.
P-9. "OK" proofs, Pantone Matching System color.
P-10. "OK" proofs.
* * * * * * * * * *
QUALITY ASSURANCE RANDOM COPIES: In addition to the Departmental
Random Copies (Blue Label), the contractor may be required to
submit quality assurance random copies to test for compliance
against specifications. The purchase order/specifications will
indicate the number required, if any. When ordered, the
contractor must divide the entire order into equal sublots and
select a copy from a different general area of each sublot. The
contractor will be required to execute a statement furnished by
GPO certifying that copies were selected as directed. Copies
will be paid for at the running rate offered int he contractor's
bid and their cost will not be a consideration for award. A copy
of the purchase order/specifications must be included.
* * * * * * * * * *
SCHEDULE: Furnished material will be available for pick up at
the U.S. Government Printing Office, 27 G St., NW, Washington,
D.C. 20401, on January 11, 1994.
Submit proofs as soon as the contractor deems necessary in order
to comply with the shipping schedule. Proofs will be withheld 7
workdays from receipt in the GPO until they are made available
for pickup by the contractor.
* * * * * * * * * *
Ship complete to arrive at destinations on or before February 3,
1994.
* * * * * * * * * *
See R4 File, Tab A, at 1-7. [Emphasis added.]
3. The IFB was sent to 15 potential contractors, and GPO
received five (5) responsive bids-from the Appellant, Southern
California Graphics (SCG), Monarch, French Bray, Inc. (French
Bray), and Eckhart & Co. (Eckhart) (R4 File, Tabs B and K). Tr.
11-12. From lowest to highest, the offers were as follows: (a)
Appellant-$89,690.00; (b) SCG-$117,064.00; (c)
Monarch-$118,811.00; (d) French Bray-$127,942.00; and (e)
Eckhart-$165,056.85 (R4 File, Tabs B and K, CRB Memorandum).
4. Because its bid was 23.4% lower than the second lowest
offer, Contracting Officer Adams called the Appellant and asked
it to review and confirm its bid. Tr. 233. See also PPR, Chap.
XI, Sec. 6, � 3(g)(1)(i). In response, the Contractor affirmed
that it intended to bid $89,690.00 on Jacket No. 362-553, and
that it was aware of the next lowest offer (R4 File, Tab W). See
Tr. 231, 233, 331. Accordingly, on January 14, 1994, the
Respondent issued Purchase Order 96583 to the Appellant awarding
it the job at its quoted price (R4 File, Tab C). The Purchase
Order also informed the Contractor that it was expected to ship
the Guide in time to arrive at the listed destinations "on or
before February 3, 1994" (R4 File, Tab C). Tr. 179.
5. The record indicates that from the moment it received the
contract, the Appellant's performance was hampered by a number
internal and external delays, most of which the Respondent admits
were not the fault of the Contractor. First, it is undisputed
that the Government delivered the GFM to the Contractor on
January 14, 1994, not January 11, 1994, as required in the
contract schedule (R4 File, Tab A, at 6). Tr. 192. Second, the
contract was awarded during one of the severest winters in
memory, and a massive cold wave had all but shut down Chicago,
the site of the Appellant's plant, causing a further delay in
starting the job.4 Tr. 169, 205. Third, contract performance
took place against the backdrop of a trucker's strike-which did
not end until April 1994-that created a serious obstacle for the
Contractor with respect to shipping the entire product, and to a
lesser degree in working with its suppliers and subcontractors.5
Tr. 67, 166-67, 205. Consequently, by letter dated January 21,
1994, the Contractor asked the GPO to "extend ship-delivery date
by adding 3 weeks", because of the "lateness in sending [the] GFM
. . . and the extreme low tempartures [sic] in Chicago that left
most businesses closed" (R4 File, Tab D). Tr. 169, 192, 205-06.
Although the Respondent did not grant the full amount of time
requested by the Appellant, by facsimile transmission on or about
February 3, 1994, GPO notified the Contractor that the delivery
schedule was extended two weeks (R4 File, Tab E).6 However, the
message also told the Appellant that: "This job has a must at
destination date of February 18, 1994" (R4 File, Tabs E and K).7
6. Between January 29, 1994, and February 14, 1994, the
Appellant prepared the first proofs of the text and divider tabs,
provided them to the Government, made the requested author's
alterations on the returned proofs, and sent out revised proofs
for review. Tr. 46. The record also reveals that when the
approved proofs were returned to the Contractor, it noticed that
there were black die cutting lines on the film for the tabs as
part of the image. Tr. 47-48, 58, 134, 137; App. Exh. No. 18.
It is undisputed that the problem was an error in the GFM, and
was caused by the fact that the person who designed the Guide had
left the outline of exactly where to cut the tabs on the magnetic
disk (R4 File, Tab A, at 1-2).8 Tr. 48-49, 52, 55-56, 58, 188.
As a consequence, when outputted from the magnetic media, all of
the tabs had black border lines. Tr. 47-48, 55-56; App. Exh.
Nos. 8 and 9.9
7. The parties discussed the tab problem several times between
February 8 and February 16, 1994, in an effort to find a way to
eliminate the black border (R4 File, Tab F). Tr. 52-56. Indeed,
the Government agreed with the Appellant that the lines should
not have been on the GFM, and that they had to be removed from
the tabs-the question was how? Tr. 53-54. In that regard,
several possible solutions were explored, including carefully
trimming each tab separately on a flatbed die-cutter, having the
customer-agency fix the GFM, or authorizing the Contractor to
correct the film output from the magnetic disk so the tabs could
be printed as originally planned. Tr. 53, 56-57, 61. The
Appellant told the Respondent that its price for correcting the
film output was approximately $2,800.00, while cutting the tabs
on a flatbed cutter would add $5,000.00 to the cost of the
contract.10 Tr. 60, 411-12.
8. After discussing the options with Maher, Janowicz
recommended die-cutting as the proper course to follow in this
instance. Tr. 60. Maher seemed to agree, but first asked the
Appellant to return the approved proofs to see if GPO's T & D
Division could solve the die-cutting line problem. Tr. 58. It
is undisputed that Maher later called Janowicz instructing him to
die-cut the tabs as best he could and by whatever means he chose,
and ignore the black borders.11 Tr. 59, 72, 128, 216-17. In
that regard, Maher explained that it was a matter of cost as far
as the Coast Guard was concerned, because the customer-agency
simply had no more money to invest in the job. Tr. 57, 94,
121-22, 127, 404. Two representatives of the customer-agency,
identified in the record only as Lock and Fisher, also telephoned
Janowicz and told him that while they did not want the black
borders on the tabs, the job had already exhausted their budget,
and they could not "spend a single penny more" to fix the problem
(R4 File, Tab F, Letter from Lindsey Hammonds, Chief, Contract
Administration, Coast Guard to Chuck Crawford, Customer Service
Representative, GPO) (hereinafter Hammonds Letter).12 Tr. 94,
121-22, 126-27.
9. Thereafter, on February 23, 1994, GPO issued Contract
Modification No. 2 to the Appellant changing the specifications
for the tab dividers as follows:
DEPTH is changed from 11" to 10-15/16" to allow trim off of 1/32"
top and bottom to eliminate cut lines which print on each
divider.
WIDTH to be held to 8-1/2" with a 1/2" tab, however the cut line
may print at bind edge (only) of each divider provided it is
minimal; the tab to be cut to remove as much of the cut line as
possible and still hold the width as stated herein.
There shall be no additional costs to the Government for this
change.
See R4 File, Tab F; App. Exh. No. 14. [Emphasis added.] Because
the Contractor was required to perform the changed work without
compensation, it did not sign the contract modification, but
instead returned it to the Government. Tr. 74, 110-11; App. Exh.
No. 14.
10. Contract Modification No. 2 also provided: "The balance of
the specification remain[s] unchanged, except the 'Ship complete
to arrive at destination' date shall be set with a subsequent
Contract Modification[.]" (R4 File, Tab F; App. Exh. No. 14). It
is undisputed that no such modification was ever officially
issued by the Respondent. Tr. 71, 199, 216. (But see Factual
Finding No. 16, infra, regarding App. Exh. No. 15).
11. By letter dated March 4, 1994, the Coast Guard effectively
rescinded Contract Modification No. 2 when it informed the
Respondent that since it did not have the money to correct the
tab problem, it was willing to live with the job as ordered, and
therefore GPO should tell the Appellant to cut the tabs in
accordance with the original specifications (R4 File, Tab F,
Hammonds Letter). Tr. 217. However, there is nothing in the
record to indicate if this information was ever conveyed to the
Contractor, and the Appellant believes that the problem with
respect to the black borderlines was never resolved; indeed, the
record shows that no "OK to print" was ever given for the tab
dividers.13 Tr. 106, 245, 312-13. On the other hand, the
parties agree that since the tab defect resulted from an error in
the GFM provided by the Coast Guard, responsibility for the
delays which occurred in the production of the Guide because of
the problem was the Government's, and not the Contractor's. Tr.
188.
12. Another major problem surfaced after the Appellant received
the GFM and the artwork, and had its ink supplier, Gans Ink &
Supply Co. (Gans), produce a "draw-down" of the color scheme for
the Guide's binder,14 which left some doubt in the Contractor's
mind about its offset printing equipment being able to match the
color intensity desired by the Coast Guard on the blue linen
substrate. Tr. 407-08; App. Exh. No. 3. It took extra time for
the Contractor to explore a possible solution with GPO, discussed
infra, which constituted another delay. Tr. 19-20, 40, 413. In
that regard, Gans' "draw-down," which was prepared on February
24, 1994, shows that two of the opaque ink colors, white and to a
lesser extent, red, failed to reproduce as required on the blue
cloth background. Tr. 19, 29; App. Exh. No. 3. The color white
was a particular problem because Gans had used three "hits" of
ink on the blue fabric,15 and still failed to achieve a color
match against the sample provided.16 Tr. 19, 22-23, 25; App.
Exh. Nos. 2.
13. The parties agree that once the Appellant saw how difficult
it would be to achieve an exact color match on the blue binder
cover, its President, Ireneusz ("Eric") Janowicz, telephoned
Maher to discuss the problem, and was told to follow the color
markup furnished by the Coast Guard, otherwise the job would be
rejected. Tr. 19-20, 28, 41, 84, 401, 409, 413-14; App. Exh. No.
2. When Maher also said that the customer-agency would insist on
full compliance with the colors it provided, Janowicz asked to
see a binder from the previous job, and was informed that no such
sample was available.17 Tr. 20, 41, 85, 403, 413-14; App. Exh.
No. 2. Since an absolute color match was required, Janowicz and
Maher discussed two possible solutions to the problem-silk
screening and foil stamping.18 Tr. 28-29, 30, 89-90. Silk
screening was rejected primarily because of its expense; i.e., it
would have exceeded the Appellant's budget for the job.19 Tr.
29-30, 143. Therefore, Janowicz suggested stamping the blue
substrate with white foil as a less costly method for giving the
best color match. Tr. 28-29, 30-31, 38, 89-90, 143, 145-46, 402,
409; App. Exh. No. 5.20 However, foil stamping had its own
drawback in this case, namely, that by applying pressure to the
binder substrate the fabric would stretch resulting in a slight
variation in the image register.21 Tr. 32, 38, 98, 141, 100,
158-59, 303, 306; App. Exh. No. 6.22 On the other hand, while
the registration would be slightly off, Janowicz was confident
that the color match would be perfect. Tr. 39, 100. Maher told
Janowicz that he would check with the Coast Guard about foil
stamping the binder cover, but meanwhile the Contractor was not
to do anything until the customer-agency gave its approval.23
Tr. 33, 38-39. Thereafter, on March 2, 1994, almost two weeks
after the "must" delivery date of February 18, 1994, Maher sent
the Appellant a facsimile transmission approving its proposed
solution, and instructing it to proceed with white foil stamping
on the binders.24 Tr. 39-40, 45, 103; App Exh. No. 7. This
message was the only communication from the Respondent regarding
foil stamping; i.e., no contract modification was ever issued
authorizing foil stamping, nor did the Government ever agree to
pay additional compensation for this process. Tr. 31, 66. It is
undisputed that white foil stamping cured the color match problem
on the binder for both red and white opaque inks.25 Tr. 42,
44-45, 105-06, 146-47, 149-51, 247-48, 371; App. Exh. Nos. 5 and
20.
14. The Appellant's production problems did not end with
resolving the color match problem, however. The record discloses
that on March 8, 1994, during the Respondent's press sheet
inspection at the Contractor's plant, a "ghosting" problem was
noticed by a pressmen in the words "work" and "life" in the color
bar mastheads of the various chapters of the Guide. Tr. 62-63,
243; App. Exh. Nos. 11 and 12.26 The Appellant brought the
problem to the attention of GPO's press inspector, Brzozowski,
who realized it was caused by another design error in the GFM's
magnetic tape.27 Tr. 243. Brzozowski immediately telephoned the
Coast Guard, and from his discussion with the customer-agency,
the Contractor was authorized to fix the problem. Tr. 64-65,
244. In that regard, the record shows that the mastheads were
corrected in the following manner: (a) for pages which had not
yet been printed, the Appellant made the appropriate changes in
the magnetic tape and then sent it to a subcontractor to prepare
new film work; and (b) for pages which were already printed, the
Contractor overprinted the two words in black ink to make them "a
little fatter."28 Tr. 65-66, 244. All told, these corrective
actions took about a week to accomplish, because by March 17,
1994, the Appellant was able to proceed with the final steps in
the production process. Tr. 244.
15. The record reveals that once the binder material had been
printed, the binders themselves were to be made by a
subcontractor, General Binding Corporation (GBC). Tr. 67; App.
Exh. No. 13. On March 17, 1994, seven workdays after the press
inspection, the Contractor sent the printed cover material for
7,100 binders to GBC. App. Exh. No. 13 (Attachment A).
Unfortunately, in trimming the material to fit the binders, GBC's
subcontractor, Ellis Bindery, Inc., overtrimmed 5,800 covers by
1/2"-only 1,300 binders were trimmed to contract specifications.
Tr. 67; App. Exh. Nos. 4 and 13 (Attachment B). When GBC
informed the Appellant of the mishap, Janowicz immediately
telephoned GPO and spoke to Maher. Tr. 68. He asked Maher if
the Respondent would accept a binder that was slightly narrower
than the dimensions called for in the contract, and was told that
only a full-size cover was acceptable. Tr. 68-69. Therefore, on
or about April 5, 1994, the Contractor reordered new cover stock
from its supplier, Industrial Coatings Group, Inc. (ICG). Tr.
69; App. Exh. No. 13 (Attachment D). However, when the new
fabric was delivered, the Appellant discovered that it was a
different shade of blue. Tr. 67, 69; App. Exh. No. 4 (Attached
Swatch). Accordingly, the Contractor again called GPO, this time
seeking permission to use the "off color" material, and when its
request was denied it contacted ICG to exchange the reordered
fabric for the right color linen.29 Tr. 70.
16. In the meantime, on March 23, 1994, the Contracting Officer
sent a "show cause" letter to the Appellant (R4 File, Tab H).
Tr. 77, 103, 178, 203. See PPR, Chap. XIV, Sec. 1, � 3.c.(1).
The Contracting Officer's letter notified the Appellant that the
Government was considering terminating the contract for default
because of its "failure to perform . . . in a timely manner," and
said that before such a decision was made it was necessary to
determine if the Contractor's lack of performance was for causes
beyond its control and without its fault or negligence (R4 File,
Tab H). Accordingly, the Appellant was given until March 28,
1994 (3 workdays), to present, in writing, any extenuating facts
tending to show that its failure was excusable, and it was warned
that a "failure to reply within this time may be considered as an
admission of fault or negligence." The Contractor's attention
was also invited to the provisions of the "Default" clause
setting forth the respective rights and obligations of the
Government and the Contractor in the event of a default. See GPO
Contract Terms, Contract Clauses, � 20 (Default). It is
undisputed that the Appellant did not provide a written response
to the "show cause" letter by March 28, 1994, as required.30 Tr.
103, 180-81, 203; R4 File, Tab K, CRB Memorandum.
17. On March 29, 1994, the Appellant received another contract
modification by facsimile transmission. Tr. 77, 198; App. Exh.
No. 15. The document, Contract Modification No. 3, dated March
30, 1994, provided:
Change is hereby made to Purchase Order 96583, Jacket 362-553 to
the effect that the "Ship complete to arrive at destination" date
of February 3, 1994, is extended to April 4, 1994. This
extension is made necessary due to difficulties experienced by
the contractor and is determined to be fair and reasonable.
See App. Exh. No. 15.31 There is no dispute that the original of
the contract modification was never mailed to the Appellant, nor
did the Contractor sign the copy it had received because, in its
view, the numerous problems it was experiencing made it
impossible to complete the contract in five workdays and deliver
the Guide by April 4, 1994. Tr. 75-76, 79, 131. The record
indicates that the contract modification was prepared by Maher in
an effort to reestablish a ship date through negotiation with the
Appellant. Tr. 198-201, 207. However, at the hearing
Contracting Officer Davis said that Maher lacked the authority to
make his proposal, and he (Davis) neither endorsed or adopted it;
indeed, he expressly repudiated this attempt to negotiate with
the Contractor over a new ship date. Tr. 206-07. Other than
Contract Modification No. 3, no further attempts were made to
arrange a new ship date by mutual agreement. Tr. 208.
18. Although Contract Modification No. 3 was unofficial, the
record shows that during this period Janowicz and Maher had
another discussion about delivery of the Guide, and the Appellant
said that a partial shipment of the order would be made on April
6, 1994 (R4 File, Tab K, CRB Memorandum). Subsequently, Janowicz
spoke to the Contracting Officer and told him that he would send
the shipping documents to GPO by facsimile transmission on April
8, 1994. It is undisputed that the Contractor did neither.
Instead, on April 11, 1994, Janowicz informed the Contracting
Officer that April 6, 1994, had only been a tentative date, but
that the Guide would definitely be shipped on April 14, 1994.
However, the record reveals that on April 14, 1994, Thomas E.
Nepi, Manager of GPO's Chicago Regional Printing Procurement
Office, visited the Appellant's plant, and noticed that the job
was not ready for delivery, and probably could not be shipped for
at least two more days (R4 File, Tabs I and K, CRB Memorandum).32
Tr. 104-05. Subsequently, on Saturday, April 16, 1994,33 the
Contractor delivered the partial shipment of 1,152 copies of the
Guide to its commercial carrier, Admiral Transport, and the
following Monday sent the shipping documents to the Contracting
Officer by facsimile transmission.34 Tr. 105.
19. On April 20, 1994, the Contracting Officer sought the
approval of the CRB to terminate the contract for complete
default (R4 File, Tab K, CRB Memorandum).35 In his memorandum,
the Contracting Officer justified default on the ground that "[t]
he ship dates had passed, and there didn't seem to be any
progress towards establishing [a new] ship date or producing the
product." Tr. 183, 203-04. However, the Contracting Officer
also indicated his willingness to convert the termination into a
partial default, and pay the Appellant for the shipment then en
route to the Coast Guard, if the books passed a random sample
inspection and were accepted by the Government. The Contracting
Officer asked the CRB to concur in his decision to repurchase the
contract, and noted that he had considered the relevant factors
in the PPR before seeking approval to default the contract.36
Id.
20. On April 21, 1994, the CRB approved both the Contracting
Officer's default and reprocurement proposals (R4 File, Tab K,
CRB Memorandum). That same day, by letter expressly entitled
"Notice of Termination Complete," the Contracting Officer
terminated the Appellant's contract for default because it
"failed to make delivery of the product in accordance with the
specifications[.]" (R4 File, Tab K).37 Tr. 80. The termination
notice also informed the Appellant that in the event the
Government exercised its right to repurchase the same or similar
items, the Contractor would be liable for excess reprocurement
costs.
21. The record reveals that when the Appellant received the
termination notice, Janowicz immediately telephoned the
Contracting Officer, and was told that everything depended on the
partial shipment of the Guide, and how the publication looked to
the Government. Shortly afterward, on April 25, 1994, the
Contractor wrote to the Contracting Officer describing its
subcontractor and supplier problems with respect to the binder
covers, and asked him to reconsider his decision to default the
contract. Tr. 104. Tr. 70, 107; App. Exh. No. 13. Thereafter,
on April 29, 1994, the date the Coast Guard received the partial
shipment, the Contracting Officer spoke to the Appellant's
attorney and reaffirmed his commitment to discuss the balance of
the order if the binders passed a Quality Level II inspection.
Tr. 184. In that regard, according to the Contracting Officer's
notes of that conversation, he:
Told Mr. Antoun that randoms had been pulled on the shipment
[and] that a lot was riding on the quality check. If the samples
do not meet the [specifications] then the termination would stand
[and] there would be no reconsideration.
Further stated that if the samples met [specifications], "that
would be a whole new ballgame."
See R4 File, Tab L (GPO Form 714). [Original emphasis.]
22. The Coast Guard received the partial shipment of the Guide
on April 29, 1994, having taken longer than usual to reach the
customer-agency because of the truckers strike (R4 File, Tab S).
Tr. 67, 166-67, 184-85. The record discloses that prior to the
receipt of the Guides, the Contracting Officer spoke to GPO's
inspector, Reesman, telling him that the order was late, and
since it was the initial shipment, the Respondent wanted to see
if the publication met the required quality standards. Tr. 348,
365-66, 392. Accordingly, when the shipment arrived, Reesman had
someone from his office randomly select 32 copies of the Guide
for the purposes of a quality assurance examination (R4 File, Tab
X).38 Tr. 334. Thereafter, on or about May 5, 1994, Reesman
tested the random samples against the standards set forth in
QATAP (R4 File, Tab L). Tr. 333-35, 388. Based on his
evaluation of the 32 samples, especially the fact that all of
them contained a major color match defect,39 Reesman determined
that the order was rejectable; indeed, he testified that under
QATAP rejection would have been warranted if just six of the 32
samples had that problem (R4 File, Tab L).40 Tr. 336, 347.
Similarly, Reesman found seven sample copies with an improper
register on the spine of the binders, and another seven with
skewed pages, either of which, standing alone, would have been
sufficient to reject the Contractor's product (R4 File, Tab L).41
Tr. 342, 347, 353. Accordingly, on May 10, 1994, after receiving
Reesman's inspection report, the Contracting Officer wrote to the
Appellant informing it that the partial shipment had been
rejected for defects under the following printing attributes: (a)
P-4: Register (Cover and Spine); (b) P-5: Text Skewness (Text and
Illustration Image Position); (c) P-7: Type Quality and
Uniformity (Cover); and (d) P-9: Solid or Screen Tints Color
Match (Tab Dividers) (R4 File, Tab L).42 Tr. 185. The effect of
the rejection of the partial shipment was to confirm the
termination as a complete default.
23. On May 20, 1994, the Respondent issued an IFB under Jacket
No. 368-529 to reprocure the contract (R4 File, Tab M). When
issued, the new IFB inadvertently omitted a key sentence from the
"PRINTING" specification; i.e., "Print binder cover in black and
white plus a match of Pantone's 185 red and 280 blue opaque
inks." However, the parties concur that once GPO amended the IFB
on May 25, 1994, restoring that language, the reprocurement
specifications were identical to the terms in the Appellant's
agreement (R4 File, Tab M). Tr. 82, 85, 229-29. It is also
undisputed that the Government used the month between April 21,
1994, when the original contract was defaulted, and May 20, 1994,
when the repurchase IFB was issued, to correct the errors in the
GFM. Tr. 215-16, 218. These changes ultimately allowed the
reprocurement contractor, Monarch, to produce the job as first
planned; i.e., on a 4-color offset press using opaque inks,
without silk screening or foil stamping. Tr. 213-15.
24. GPO received five (5) bids on the reprocurement
solicitation, including the Appellant's, which was the same as
its original offer (R4 File, Tabs O and W). Tr. 80, 153. From
the highest to lowest, the reprocurement bids were: (a)
Appellant-$89,690.00; (b) Monarch-$116,611.00; (c) S & S
Graphics-$123,340.00; (d) Techna-Graphics-$129,571.00; and (e)
French Bray-$129,528.00 (R4 File, Tabs O, CRB Memorandum, and W).
However, even
though the Contractor was the low bidder, the Respondent found it
nonresponsible for the following reason:
This is a REPURCHASE of Jacket 362-553. Questar Printing, Inc.
was defaulted due to non[-]performance on this contract. There
has been no evidence presented to show that the contractor has
remedied the situation(s) that caused the failures on the
original contract.
See Findings and Determination, dated June 2, 1994 (R4 File, Tabs
O and R). Tr. 80, 151, 155. By letter dated June 3, 1994, the
Contracting Officer wrote to the Appellant and informed it that
its offer was declared nonresponsible, and that the decision "was
made as a result of the default determination on the original
contract (Jacket 362-553)[.]" (R4 File, Tab Q). On June 7, 1994,
the Contractor timely protested the responsibility determination,
but its challenge was denied by the Respondent in a letter dated
June 9, 1994 (R4 File, Tabs S and T).43 Tr. 169.
25. On June 2, 1994, after receiving the CRB's approval, the
Contracting Officer issued Purchase Order 97046 awarding the
reprocurement contract to Monarch at its offer of $116,611.00 (R4
File, Tabs N and O). That same day, he also informed the FMS
that the Appellant's contract had been defaulted and the Guide
reprocured from Monarch (R4 File, Tab P). Accordingly, the FMS
was asked to recover any additional costs for the reprocurement
from the Contractor. The next day, June 3, 1994, Contracting
Officer notified the Appellant that the defaulted job had been
reprocured for $116,611.00, and that the amount of any excess
reprocurement costs would be deducted from its account (R4 File,
Tab Q). The repurchase resulted in excess reprocurement costs of
$26,921.00 (R4 File, Tab V). Tr. 155. The record indicates that
Monarch performed the contract to the satisfaction of the Coast
Guard and was paid for its work on August 29, 1994, by Electronic
Funds Transfer of $114,278,78 (the billed amount of $116,611.00
minus a prompt payment discount of $2,332.22) (R4 File, Tabs U
and V, Colvin Declaration, � 3; FMS Computer Printout). Tr.
209-10, 224, 226, 366; App. Exh. No. 21.
26. In the interim, by Notice of Appeal, dated May 16, 1994,
the Appellant timely appealed the Contracting Officer's default
termination decision to the Board. See Board Rules, Rules 1(a)
and 2. Thereafter, in its Complaint, which was filed with the
Board on June 27, 1994, the Contractor also protested the
Government's assessment of excess reprocurement costs. See
Board Rules, Rule 6(a).
III. ISSUES PRESENTED 44
1.Was the Contracting Officer's decision terminating the contract
for default proper and correct? Stated otherwise, has the
Appellant shown that the default action was procedurally
defective, or that its failure to perform arose from causes
beyond its control and without its fault or negligence, or beyond
the control and without the fault or negligence of its
subcontractor and supplier?
2.Has the Government proved its claim of entitlement to excess
reprocurement costs, and if so, in what amount?
IV. POSITIONS OF THE PARTIES
A. The Appellant
The Appellant presents three main defenses to the default action.
First, the Contractor contends that the termination based on a
failure to make a timely delivery of the Guide, is procedurally
defective because the Respondent had waived the original shipment
date and never established a revised schedule. See RPTC, at 4;
App. Brf., at 4; App. R. Brf., at 1. The Appellant's argument
rests on "black letter" law which states that if the Government
turns waives a contractor's failure to make delivery by the date
specified in the contract, it may not thereafter default the
contract without first setting a new contract due date and
notifying the contractor that it must deliver by then or suffer
the consequences. See App. Brf., at 4 (citing D. Joseph DeVito
v. United States, 188 Ct. Cl. 979, 413 F.2d 1147 (1969); E.L.
David Construction Co., ASBCA Nos. 29225 and 34387, 89-3 BCA �
22,140); App. R. Brf., at 2. In essence, the Contractor asserts
that the Government never fulfilled the promise it made in
Contract Modification No. 2 to set a new "ship complete to arrive
at destination" date by a subsequent contract modification, and
thus the Appellant cannot be defaulted for failing to deliver the
books on time. See RPTC, at 5; App. Brf., at 4; App. R. Brf., at
1; R4 File, Tab F. The Contractor also rejects the Respondent's
position, based on the "show cause" notice, that March 23, 1994,
was the reestablished shipping schedule, because the record
leaves no doubt that it was never notified prior to that date
that the Government expected the Guide to be shipped by then (Tr.
78-79, 196-98, 202-03). See App. Brf., at 3-4; App. R. Brf., at
1; R4 File, Tab H.
Second, the Appellant argues that the defective GFM and
inaccurate contract specifications were the main cause of its
failure to perform.45 See RPTC, at 5; App. Brf., at 4-5; App. R.
Brf., at 2. In that regard, the Contractor states that there
were only two critical quality complaints about its product-
roller marks and uneven color on the tab dividers, and poor
registration on the cloth cover.46 See App. Brf., at 4; App. R.
Brf., at 2. The Appellant contends that the roller marks and
color density shift on the tabs were directly related to the
design error in the GFM, requiring it to use a flatbed die-cutter
to eliminate the black borders, a process which for purposes of
efficiency does not segregate the tabs to be trimmed cut by
color, but rather mixes all sheets on the machine, thus making
color consistency difficult to maintain.47 See App. Brf., at 4;
App. R. Brf., at 2. As for the poor registration on the binder
cover, the Appellant alleges the problem is rooted in the last
sentence of the "PRINTING" specification, which requires that the
cover be printed ". . . in black and white plus a match of
Pantone's 185 red and 280 blue opaque inks[.]" (R4 File, Tab A,
at 3). See App. Brf., at 5; App. R. Brf., at 2. The Contractor
says even though this contract language seems to allow the use of
the inks specified "out of the can," GPO's warning that its
product would be rejected unless the binder exactly matched the
Coast Guard's mockup colorwise, created uncertainty because the
offset process could not achieve that result with opaque inks on
the blue cover fabric.48 See App. Brf., at 5; App. R. Brf., at
2; App. Exh. No. 2. Since silkscreening was out of the question
because of its cost, the Respondent was advised that the desired
colors could only be duplicated on the cover material by foil
stamping, but that such a process would affect the registration.
See App. Brf., at 5; App. R. Brf., at 2. The Appellant states
that because GPO was fully aware when it authorized foil stamping
that the registration would not be as tight as offset printing,
it should not now be heard to say the cover is rejectable for
that reason; rather, if there is any blame in this case, the
fault is the Respondent's for not allowing the GFM and
specification errors to be corrected prior to production. See
App. Brf., at 5-6 (citing American Electronics Laboratories, Inc.
v. United States, 774 F.2d 110 (Fed. Cir. 1985); App. R. Brf., at
3.
Finally, the Appellant states that even if the default could be
justified, excess reprocurement costs cannot be assessed because
GPO repurchased a totally different product from Monarch, and
failed to mitigate the Contractor's liability. See RPTC, at 6;
App. Brf., at 6; App. R. Brf., at 4-5. First, a defaulted
contractor is absolved of any liability for excess costs if the
repurchase contract is substantially or meaningfully changed,
since the Government's right to recover such costs is limited to
reprocurement of the same or similar work. See App. Brf., at 6;
App. R. Brf., at 4. See also GPO Contract Terms, Contract
Clauses, � 20(b) (Default). In this case, the Contractor relies
on the testimony of the Government's own witnesses to show that
GPO not only fixed the tab problem in the GFM before it issued
the repurchase IFB, but it also did not hold Monarch to the same
color match standard for the binder as the Appellant.49 See App.
Brf., at 6-7; App. R. Brf., at 4; App. Exh. Nos. 2 and 21. In
the Contractor's view, by relaxing the color match requirements,
and correcting the GFM prior to award to make die-cutting more
cost effective, the repurchase contract was significantly
different, and it cannot be said that Monarch was asked to print
a product which was substantially similar to the Appellant's.
See App. Brf., at 6-7; App. R. Brf., at 4; App. Exh. Nos. 20 and
21. Therefore, in light of this disparity between both
contracts, the Government has forfeited its right to excess
reprocurement costs.50 See App. Brf., at 7; App. R. Brf., at 4.
The Contractor's second reason for denying the Government excess
costs is based on the rejection of its low bid and the award to
Monarch of the reprocured work at a substantially higher price
(30%), which it says amounts to a failure to the mitigate damages
flowing from the default, as required by law. See RPTC, at 6;
App. R. Brf., at 4-5. In effect, the Appellant says that its
inability to meet the shipping schedule under the original
contract was not a legitimate reason for finding its
reprocurement bid nonresponsible, because the record shows that
all of the causes for its initial failure-unusually severe
weather, truckers strike, problems with the binder cover, tab
divider borders, etc.-had been resolved, and would not be a
problem on the repurchase. See App. R. Brf., at 5; R4 File, Tab
Q. Moreover, the Contractor contends that since the Guide was
substantially produced at the time it was defaulted (the only
work which remained to be done was to insert the already printed
tabs and pages in the binders that were on order), it would have
been more economical for the Government to simply let it finish
the job, and deliver a product which met the contract
specifications in all respects. See App. R. Brf., at 4-5.
Consequently, since it made the same offer for the repurchase
contract as its original bid, the Appellant believes that it is
unfair to allow excess costs in this case, because there was an
opportunity to avoid such costs altogether and GPO simply ignored
it. See App. R. Brf., at 5. Accordingly, for all of these
reasons, the Appellant asks the Board to: (1) overturn the
default termination decision; (2) direct the Respondent to
purchase the materials produced under the original contract; and
(3) cancel the excess reprocurement cost assessment, refunding to
the Contractor any monies already deducted. See App. Brf., at 7;
App. R. Brf., at 5.
B. The Respondent
The Respondent, on the other hand, alleges that the termination
for default in this case was proper, and that it is entitled to
recover $26,921.00 in excess reprocurement costs. See RPTC, at
4; Res. Brf., at 2-3. First, GPO denies that the default was
procedurally defective, as alleged by the Appellant. See Res.
Brf., at 3. The Government says that the contract was terminated
because the Contractor failed to deliver 7,100 copies of the
Guide by March 23, 1994, the revised "ship complete to arrive at
destinations" date established by the Contracting Officer,
calculating "from the date all problems causing the delay were
resolved," and communicated to the Appellant by the "show cause"
letter of the same date (R4 File, Tab H).51 See RPTC, at 4; Res.
Brf., at 3, n. 2. When the Contractor did not explain its
reasons for non-delivery by March 28, 1994, the response date set
forth in the "show cause" notice, and thereafter by its conduct
"evidenced an inability to make progress" with respect to
performance, the Contracting Officer took the "only reasonable
action available;" i.e., he defaulted the Appellant.52 See Res.
Brf., at 3, n. 3.
Second, the Respondent frankly admits that after defaulting the
Appellant on April 21, 1994 (R4 File, Tab K), it agreed to
receive a partial shipment of the Guide from the Contractor,
accept the delivered product if it passed inspection, and
consider purchasing the remainder of the ordered binders. See
Res. Brf., at 4, n. 4. However, GPO states that its examination
clearly showed that the partial shipment was rejectable for
defects in four QATAP printing attributes: (1) P-4-Register
(Cover and Spine); (2) P-5-Text Skewness (Text and Illustration
Image Position); (3) P-7-Type Quality and Uniformity (Cover); and
(4) P-9-Solid or Screen Tints Color Match (Tab Dividers). See
RPTC, at 4; Res. Brf., at 4. Furthermore, the Government alleges
that all of these problems were the Appellant's fault and
responsibility. See Res. Brf., at 4-5. In that regard, GPO
agrees that the poor register on the binder cover was the direct
result of the Contractor's decision to use foil stamping to
satisfy the color specifications, but claims that the Appellant
itself is responsible for that defect because there is no proof
in the record that the Government waived the register
requirements. See Res. Brf., at 4. Similarly, the Respondent
says that the Contractor was solely responsible for the color
match defects on the tab dividers, since it alone made the
decision to eliminate the black borders by die-cutting the
sheets, and that process caused the color variation. See Res.
Brf., at 5. Besides, GPO questions the Appellant's explanation
for the color match problem, insisting instead that there is
substantial record evidence showing that the true source of the
color defect was the condition of the Contractor's press and its
chosen method of operation. Id. Therefore, in light of the
Appellant's failure to meet the contract specifications, the
Government believes that the default termination in this case was
justified. See RPTC, at 4; Res. Brf., at 7-8.
Finally, GPO argues that it has satisfied all of the elements
necessary to support its claim for excess reprocurement costs in
the amount of $26,921.00. See RPTC, at 4; Res. Brf., at 6-7. In
that regard, the Respondent states that it has submitted proof
that: (1) the reprocurement contract was performed under
substantially the same terms and conditions as the original
contract;53 (2) it repurchased the Guide within a reasonable time
following the default action; (3) it chose a reprocurement method
that maximized competition; (4) it obtained the lowest reasonable
price; and (5) the work was completed and final payment was made
to Monarch. See Res. Brf., at 6. Furthermore, the Government
contends the reprocurement was not tainted by its refusal to
accept the Appellant's low bid for the repurchase contract, but
rather, the offer was properly declared to be nonresponsible
because of the Contractor's previous inability to timely deliver
the Guide, or otherwise make substantial progress toward
performance.54 See Res. Brf., at 7. Accordingly, for all of
these reasons, the Respondent asks the Board to sustain the
Contracting Officer's default
termination decision, and affirm his assessment of excess
reprocurement costs in the amount of $26,921.00. See Res. Brf.,
at 7-8.
IV. DISCUSSION
Despite its complex factual record, reduced to its essentials,
this appeal is a typical default termination case. It is
undisputed that on April 21, 1994, the date the Contracting
Officer issued the termination notice effecting a default as of
April 6, 1994, the Appellant had failed to "ship complete to
arrive at destinations" all copies of the publication ordered by
the Coast Guard, and indeed, even the partial shipment still had
not been delivered.55 Therefore, the only issue before the
Board, apart from the Government's claim for excess reprocurement
costs, is whether or not the Contractor's defense is legally
sufficient, either procedurally or on the merits, or both, so
that it may be excused from the consequences of its failure to
perform? In answering this question, the Board must keep certain
well-settled principles in mind.
First, a default termination is a drastic sanction which may only
be taken for good cause and on the basis of solid evidence.56
See Rose Printing, Inc., supra, slip op. at 19; Gold Country
Litho, supra, slip op. at 15; A & E Copy Center, supra, slip op.
at 16; Big Red Enterprises, supra, slip op. at 24; Asa L.
Shipman's Sons, Ltd., supra, slip op. at 16; Univex
International, supra, slip op. at 17; K.C. Printing Co., GPO BCA
02-91 (February 22, 1995), slip op. at 10, 1995 WL 488531;
Shepard Printing, supra, slip op. at 10; Stephenson, Inc., supra,
slip op. at 20. Accord Lisbon Contractors, Inc. v. United
States, 878 F.2d 759, 765 (Fed. Cir. 1987); H.N. Bailey &
Associates v. United States, 449 F.2d 387, 391 (Ct. Cl. 1971);
Phoenix Petroleum Co., ASBCA No. 42763, 96-2 BCA � 28,284, at
142,211; Foremost Mechanical Systems, Inc., supra, 95-1 BCA at
136,495; Marci Enterprises, Inc., GSBCA No. 12197, 94-1 BCA �
26,563, at 132,182; Lanzen Fabricating, Inc., ASBCA No. 40328,
93-3 BCA � 26,079, at 129,608; Brandywine Prosthetic-Orthotic
Service, Ltd., VABCA No. 3441, 93-1 BCA � 25,250, at 125,764.
Consequently, the Government has the burden of proving the basis
for the default, while the contractor is responsible for showing
that its failure to perform was excusable.57 See Rose Printing,
Inc., supra, slip op. at 19; Gold Country Litho, supra, slip op.
at 15; A & E Copy Center, supra, slip op. at 16; Big Red
Enterprises, supra, slip op. at 25; Asa L. Shipman's Sons, Ltd.,
supra, slip op. at 16-17; Univex International, supra, slip op.
at 18; K.C. Printing Co., supra, slip op. at 10; Shepard
Printing, supra, slip op. at 11; Chavis and Chavis Printing, GPO
BCA 20-90 (February 6, 1991), slip. op. at 11, 1991 WL 439270.
Accord Lisbon Contractors v. United States, supra; Jerry W. Ikard
d/b/a Ikard Manufacturing Co., ASBCA Nos. 37405, 37406, 37407,
37408, 96-2 BCA � 28,577, at 142,643; Phoenix Petroleum Co.,
supra, 96-2 BCA at 142,211; Praoil, Sr.L., ASBCA Nos 41499,
44369, 94-2 BCA � 26,840, at 133,501; L.W. Schneider, Inc., ASBCA
Nos. 44533, 45181, 95-2 BCA � 27,774, at 138,484; Foremost
Mechanical Systems, Inc., supra, 95-1 BCA at 136,495; Marci
Enterprises, Inc., supra, 94-1 BCA at 132,182; Lanzen
Fabricating, Inc., supra, 93-3 BCA at 129,608; Brandywine
Prosthetic-Orthotic Service, Ltd., supra, 93-1 BCA at 125,764;
Cantrill Development Corp., ASBCA Nos 30160, 30693, 30717, 89-2
BCA � 21,635 at 108,849. A failure by the Government to meet its
burden of proof converts the default into a termination for
convenience, and the contractor is allowed to recover for the
work performed. See GPO Contract Terms, Contract Clauses, �
20(g); PPR, Chap. XIV, Sec. 1, � 2.b. See also Rose Printing,
Inc., supra, slip op. at 20; Gold Country Litho, supra, slip op.
at 16; A & E Copy Center, supra, slip op. at 16-17; Big Red
Enterprises, supra, slip op. at 25; Asa L. Shipman's Sons, Ltd.,
supra, slip op. at 17; Univex International, supra, slip op. at
18; K.C. Printing Co., supra, slip op. at 11; Graphics Image,
Inc., supra, slip. op. at 24-28; Stephenson, Inc., supra, slip
op. at 17-18; Chavis and Chavis Printing, supra, slip op. at 9.
Accord Composite Laminates, Inc. v. United States, 27 Fed. Cl.
310, 322 (1992); Bailey Specialized Buildings, Inc. v. United
States, 186 Ct. Cl. 71, 86, 404 F.2d 355, 362-63 (1968);
Brandywine Prosthetic-Orthotic Service, Ltd., supra, 93-1 BCA at
125,766 (citing Executive Elevator Service, Inc., VABCA No. 2152,
87-2 BCA � 19,849); J.J. Seifert Machine Co., ASBCA No. 41398,
91-2 BCA � 23,705, at 118,673.
Second, where the default termination is based on untimely
performance, the contractor's burden of proof is four-fold: (1)
to prove affirmatively that the delay was caused by or arose out
of a situation which was beyond the contractor's control and
without its fault or negligence; (2) to show that performance
would have been timely but for the occurrence of the event which
is claimed to excuse the delay; (3) to demonstrate that it took
every reasonable precaution to avoid foreseeable causes for delay
and to minimize their effect; and (4) to establish a precise
period of time that performance was delayed by the causes
alleged. See Rose Printing, Inc., supra, slip op. at 20; Gold
Country Litho, supra, slip op. at 16; Big Red Enterprises, supra,
slip op. at 26; Asa L. Shipman's Sons, Ltd., supra, slip op. at
17; Univex International, supra, slip op. at 18-19; K.C. Printing
Co., supra, slip op. at 11; Chavis and Chavis Printing, supra,
slip op. at 12. This burden must be carried by substantial
evidence-unsupported reasons by way of explanation are not
enough-and the contractor must also show that the delay in
contract performance was due to unforeseeable causes beyond its
control and without any contributory negligence on its part. See
Rose Printing, Inc., supra, slip op. at 21; Gold Country Litho,
supra, slip op. at 16-17; Big Red Enterprises, supra, slip op. at
26; Asa L. Shipman's Sons, Ltd., supra, slip op. at 18; Univex
International, supra, slip op. at 19; K.C. Printing Co., supra,
slip op. at 11; Chavis and Chavis Printing, supra, slip op. at
12-13.
Third, GPO's "Default" clause provides that a contracting officer
may, upon written notice of default to the contractor, terminate
a contract, in whole or in part, if the contractor fails to: (1)
deliver the supplies or perform the required services within the
time specified or any extension which may have been granted; (2)
make progress on the work, so as to endanger performance of the
contract; or (3) perform any of the other provisions of the
contract. See GPO Contract Terms, Contract Clauses, � 20(a)(1)
(I),(ii),(iii); PPR, Chap. XIV, Sec. 1, � 3.a. Furthermore,
where a contract is terminated for default and the work must be
reprocured, the contractor will be held responsible for excess
procurement costs and possible liquidated damages. See GPO
Contract Terms, Contract Clauses, �� 20(b), 22(d). However, the
contractor is excused from paying such reprocurement costs or
damages if the failure to perform or to deliver on time results
from causes beyond its control and without its fault or
negligence.58 See GPO Contract Terms, Contract Clauses, ��
20(c), 22(e), 23. Such causes include, but are not limited to,
acts of God or of the public enemy, acts of the Government in
either its sovereign or contractual capacity, fires, floods,
epidemics, quarantine restrictions, strikes, freight embargoes,
and unusually severe weather-but in each case, the failure to
perform must be beyond the control and without the fault or
negligence of the contractor. See GPO Contract Terms, Contract
Clauses, � 20(c). See also Rose Printing, Inc., supra, slip op.
at 18; Gold Country Litho, supra, slip op. at 14; A & E Copy
Center, supra, slip op. at 15; Big Red Enterprises, supra, slip
op. at 24; Asa L. Shipman's Sons, Ltd., supra, slip op. at 16;
Univex International, supra, slip op. at 17; K.C. Printing Co.,
supra, slip op. at 9; Chavis and Chavis Printing, supra, slip.
op. at 11. Where the failure to perform is caused by the default
of a supplier or subcontractor, the cause of the default must be
beyond the control of both the contractor and subcontractor, and
without the fault or negligence of either, in order for the
contractor not to be liable for any excess costs for failure to
perform, unless the subcontracted supplies or services could have
been secured from other sources in sufficient time to meet the
required delivery schedule. See GPO Contract Terms, Contract
Clauses, � 20(d). See also Rose Printing, Inc., supra, slip op.
at 18-19; Gold Country Litho, supra, slip op. at 14-15; A & E
Copy Center, supra, slip op. at 15; Big Red Enterprises, supra,
slip op. at 24; Asa L. Shipman's Sons, Ltd., supra, slip op. at
16; Univex International, supra, slip op. at 17; K.C. Printing
Co., supra, slip op. at 10; Chavis and Chavis Printing, supra,
slip op. at 11.
Finally, a default termination is a discretionary act which can
be challenged on an abuse of discretion standard. See Rose
Printing, Inc., supra, slip op. at 21; Gold Country Litho, supra,
slip op. at 17; A & E Copy Center, supra, slip op. at 17; Big Red
Enterprises, supra, slip op. at 26; Asa L. Shipman's Sons, Ltd.,
supra, slip op. at 18; Univex International, supra, slip op. at
19; K.C. Printing Co., supra, slip op. at 12; Graphics Image,
Inc., supra, slip op. at 24-25; Shepard Printing, supra, slip op.
at 12. Accord Darwin Construction Co., Inc. v. United States,
811 F.2d 593 (Fed. Cir. 1987); Quality Environment Systems v.
United States, 7 Cl. Ct. 428 (1985); Jamco Constructors, Inc.,
VABCA Nos. 3271, 3516T, 94-1 BCA � 26,405, reconsid. denied, 94-2
BCA � 26,792; Walsky Construction Co., ASBCA No. 41541, 94-1 BCA
� 26.264, reconsid. denied, 94-2 BCA � 26,698. The contractor
has the burden of proof with respect to abuse of discretion. See
Rose Printing, Inc., supra, slip op. at 21; Gold Country Litho,
supra, slip op. at 17; A & E Copy Center, supra, slip op. at 18;
Big Red Enterprises, supra, slip op. at 26; Asa L. Shipman's
Sons, Ltd., supra, slip op. at 18; Univex International, supra,
slip op. at 19; K.C. Printing Co., supra, slip op. at 12; Shepard
Printing, supra, slip op. at 12. Accord Kit Pack Co., Inc.,
ASBCA No. 33135, 89-3 BCA � 22,151; Lafayette Coal Co., ASBCA No.
32174, 89-3 BCA � 21,963. However, a contracting officer is
deemed to have acted arbitrarily or capriciously and abused his
or her discretion if there is no reasonable basis for the
termination for default. See Graphics Image, Inc., supra, slip
op. at 25. Accord Brandywine Prosthetic-Orthotic Service, Ltd.,
supra, 93-1 BCA at 125,764 (citing Hoel-Steffen Construction
Company v. United States, 331 Ct. Cl. 128, 684 F.2d 843 (1982)).
Examining the record in light of these principles convinces the
Board that the Respondent's default termination decision cannot
be sustained because the Appellant was not in default at the
time. Indeed, it is unnecessary for the Board to address the
extent to which the Contractor and its subcontractor and supplier
are culpable for the failure to perform, because the Government's
procedural errors are so obvious as to leave no doubt that the
default action was fatally flawed. In that regard, the record
indicates that GPO made two major mistakes, either one of which
would be sufficient to overturn the default in this case; i.e.,
(1) the Contracting Officer's "show cause" notice of March 23,
1994, was ineffective as a so-called "DeVito cure," and thus a
new "ship complete to arrive at destinations" date was not
properly reestablished; and (2) in figuring March 23, 1994, as
the revised shipping schedule, the Contracting Officer misapplied
the contract's "Extension of schedules" clause, see GPO Contract
Terms, Contract Clauses, � 12(c)(1) (Notice of Compliance With
Schedules).
A. The Respondent did not properly reestablish the shipping
schedule, and thus the Appellant could not be defaulted for a
failure to timely deliver the Guide.
There is no disagreement about the relevant facts giving rise to
the "reestablishment" issue in this case, nor is there any
misunderstanding about the basic principles which apply. The
parties differ only with regard to whether the Respondent
complied with the proper procedures, mandated by law and
regulation, for setting a new delivery date. The thrust of the
Appellant's "waiver" argument, based on language in Contract
Modification No. 2, is that in the absence of a "subsequent
Contract Modification" establishing March 23, 1994, as the
revised "ship complete to arrive at destinations" schedule, GPO
cannot default the Contractor for failing to deliver the Guide by
that date.59 See RPTC, at 5; App. Brf., at 4 (citing D. Joseph
DeVito v. United States, supra; E.L. David Construction Co.,
supra); App. R. Brf., at 1; R4 File, Tab F. The Respondent,
however, asserts that the new shipping schedule of March 23,
1994, was unilaterally and properly established and communicated
to the Contractor by the "show cause" letter of the same date.
See RPTC, at 4; Res. Brf., at 3, n. 2. R4 File, Tab H. The
Government bears the burden of proof on the "reestablishment"
issue. See Jerry W. Ikard d/b/a Ikard Manufacturing Co., supra,
96-2 BCA at 142,643; Phoenix Petroleum Co., supra, 96-2 BCA at
142,211; Foremost Mechanical Systems, Inc., supra, 95-1 BCA at
136,495; Marci Enterprises, Inc., supra, 94-1 BCA at 132,182;
Lanzen Fabricating, Inc., supra, 93-3 BCA at 129,608. On this
record, it is clear that GPO has failed to prove its case.
The Government candidly admits, as contended by the Appellant,
that prior to issuance of the "show cause" notice, the Contractor
was not otherwise informed that March 23, 1994, was also the
revised "ship complete to arrive at destinations" date under the
contract. Tr. 78-79; 196-97, 202-03. In that regard, the
following exchange between Counsel for the Appellant and the
Contracting Officer at the hearing is particularly illuminating:
Mr. Antoun: . . . [T]he contractor was never notified that their
ship date was March 23; is that correct?
Mr. Davis: I think you are correct.
Mr. Antoun: So, using [GPO Contract Terms], if I understand your
testimony correctly, but using a combination of contract terms,
vendor's request, and what I will call-and in fairness to you-
your concept of how this should be treated fairly and
appropriately to resolve this reasonably to the contractor, you
compiled some dates and came up with March 23rd, correct?
Mr. Davis: Correct.
Mr. Antoun: You then did not notify the contractor that was their
ship date?
Mr. Davis: Correct.
Mr. Antoun: You didn't give them-
Mr. Davis: We gave them a show cause.
Mr. Antoun: . . . When the contractor got the show cause letter .
. . it simply told them that they didn't perform in a timely
manner and that the Government was considering terminating the
contract.
I presume this is the same letter you would send me if I was
failing to make appropriate progress or didn't have proofs on
time.
Mr. Davis: It depends on when the contract said. If it said
before the ship date, it would have been a cure notice. When the
ship date is reached, it is a show cause notice.
Mr. Antoun: The show cause notice doesn't reference the exact
date either. Am I correct?
Mr. Davis: Correct.
Mr. Antoun: What you knew when you sent out the show cause was
that March 23rd was the date they were supposed to have shipped
by, and that is what triggered the date for sending out this
letter?
Mr. Davis: Yes.
* * * * * * * * * *
Tr. 196-98.
Aside from the patent unfairness of it all, the above testimony
also makes it clear that the Contracting Officer violated a
fundamental precept of Government procurement law, as well as
GPO's own regulations, by the manner and means which he utilized
to reestablish and advise the Appellant of the new contract "ship
complete to arrive at destination" date. One aspect of the rules
governing the "waiver doctrine" was spelled out by the Board in
Stephenson, Inc., supra. In that case, the Board upheld a
contracting officer's decision to default a contractor who had
made a timely delivery of the contract order, because all of the
books contained a substantial and critical defect, namely, four
missing pages in the text section.60 Although 78 calendar days
(or 46 workdays) had elapsed between the delivery of the books
and issuance of the default notice, the Board found that was a
reasonable period of forbearance under the circumstances for the
Government to consider what steps were in its best interest, and
thus its right to terminate the contract was not waived by the
delay.61 See Stephenson, Inc., supra, slip op. at 37, 58.
Rejecting the contractor's "DeVito doctrine" defense on the
ground that it had not demonstrated: (1) the time taken by GPO to
exercise its right was so unreasonable as to indicate
forbearance, and (2) it detrimentally relied on the Government's
delay by continuing contract performance, the Board explained,
inter alia, in pertinent part:
. . . In DeVito, the Court held that time is of the essence in
any contract containing fixed dates for performance. [D. Joseph
DeVito v. United States, supra], 413 F.2d at 1154. [Footnote
omitted.] 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. Id.
[Footnote omitted.]
See Stephenson, Inc., supra, slip op. at 25-26.62 [Emphasis
added.] Accord Jerry W. Ikard d/b/a Ikard Manufacturing Co.,
supra, 96-2 BCA at 142,645; Phoenix Petroleum Co., supra, 96-2
BCA at 142,212; Marci Enterprises, Inc., supra, 94-1 BCA at
132,182-83; Lanzen Fabricating, Inc., supra, 93-3 BCA at 129,608;
C3, Inc., ASBCA No. 38391, 91-2 BCA � 23,750, at 118,933; J.J.
Seifert Machine Co., supra, 91-2 BCA at 118,672-73; Jack L.
Hartman & Co, Inc., supra, 91-1 BCA at 118,081; Kings Point
Manufacturing Co., Inc., ASBCA No. 27201, 85-2 BCA � 18,043 at
90,574; R & O Industries, Inc., GSBCA No. 4800, 80-1 BCA � 14,195
at 69,874.
Apart from the fact that the contractor in Stephenson, Inc. was
solely responsible for the defects in its product, while the
Appellant was dealing primarily with the Government's errors and
lack of clarity in the contract, what distinguishes this appeal
from that case for "DeVito doctrine" purposes is the absence of
any shipment or delivery whatsoever prior to issuance of the
default notice. Thus, in Stephenson, Inc., where the contractor
made a timely delivery, albeit of nonconforming books, the
Board's task was to determine whether both elements of a DeVito
waiver-failure to terminate within a reasonable time after the
default and detrimental reliance-were established by the facts in
that case, so as to indicate GPO's intention to continue the
contract. See Stephenson, Inc., supra, slip op. at 27-28.
However, this appeal involves the other side of the "DeVito
doctrine" coin, namely, whether the Appellant's failure to ship
is excused because the Respondent neglected to establish a new
deadline for performance and make time again of the essence under
the contract.63
As indicated in the above excerpt from the Board's Stephenson,
Inc. opinion, under the "DeVito doctrine" time is of the essence
in any contract containing fixed dates for performance, and an
inference is created that time is no longer of the essence if the
Government fails to default the contract within a reasonable time
after the due date has passed without delivery.64 See
Stephenson, Inc., supra, slip op. at 25. Furthermore, the rule
prevents the Government from terminating the contract so long as
the contractor proceeds with performance in the absence of a new
delivery date. Id. Thereafter, according to the DeVito court:
The proper way . . . for time to again become of the essence is
for the Government to issue a notice under the Default clause
setting a reasonable but specific time for performance on pain of
default termination. The election to waive performance remains
in force until the time specified in the notice, and thereupon
time is reinstated as being of the essence. The notice must set
a new time for performance that is both reasonable and specific
from the standpoint of the performance capabilities of the
contractor at the time the notice is given.
See D. Joseph DeVito v. United States, supra, 188 Ct. Cl. at 991,
413 F.2d at 1154. [Emphasis added.] In a subsequent case, the
Claims Court amplified this view when it said, in pertinent part:
If the government waives its right to terminate for default on
one date, but wants to preserve its right to terminate for
default at some future date, it must establish a new time period
for performance, which must be reasonable considering all of the
circumstances. In the absence of a new time for completion, a
contractor would have a new open-ended right to continue to incur
costs ad infinitum and the government would be unable to ever
terminate the contract for default.
See Martin J. Simko Construction, Inc. v. United States, 11 Cl.
Ct. 257, 269 (1986) (citing Schlesinger v. United States, 182 Ct.
Cl. 571, 390 F.2d 702 (1968), partially vacated on other grounds,
852 F.2d 540 (Fed Cir. 1988). [Emphasis added.] See also Marci
Enterprises, Inc., supra, 94-1 BCA at 132,183, n. 1 ("The
underlying principle in termination of a contract containing
fixed performance dates is that time is of the essence. Thus,
when a due date has passed and the Government does not terminate
for default, an inference is created that time is no longer of
the essence. DeVito, 413 F.2d at 1154. Thereafter, the proper
way for the Government to proceed is 'to issue a notice under the
Default clause setting a reasonable but specific time for
performance on pain of default termination.' Id. (emphasis
added). Time is reinstated as being of the essence and a new
time for performance is given to the contractor."). Basically,
the rule is that once a delivery date has passed, and the
ordering agency has had a reasonable opportunity to determine
that the contractor has not complied with the delivery date, a
contracting officer should either issue a termination for default
or establish a new delivery date-the failure to do either will
forfeit the Government's right to terminate, particularly in a
supply contract such as this one. See e.g., Sun Cal, Inc. v.
United States, 21 Cl. Ct. 31 (1990) (termination of a delayed
contract for default was improper where the Government waived the
original construction completion date and failed to follow
procedures for establishing a new date); International Telephone
& Telegraph Corp., ITT Defense Communications Division v. United
States, 509 F.2d 541 (Ct. Cl. 1975) (in a waiver after breach
situation, the Government must clearly set a new schedule which
is both reasonable and specific); Marci Enterprises, Inc., supra
(supply contract for waterproof barrier material was improperly
terminated because the Government waived the delivery date when
it told the contractor to delay the first shipment for
inspection, and continued to encourage the contractor to correct
its deficiencies without establishing a new delivery date).
This principle has been codified in the Respondent's procurement
regulations pertaining to default terminations, which provide, in
pertinent part:
If the Government has taken any action which might be construed
as a waiver of the contract delivery or performance date, a
preliminary notice shall be sent to the contractor setting a new
date by which the contractor will be permitted to make delivery
or complete performance, reserving the GPO's right under the
"Default" clause. Dependent upon the circumstances in each case,
such a preliminary notice (i) shall call the contractor's
attention to his or her contractual liabilities should the
contract be terminated for default under subparagraph (a)(1) of
the article, (ii) may request an explanation of the contractor's
failure, (iii) may state that failure of the contractor to
present such explanation may be taken as an admission that no
valid explanation exists and (iv) may invite the contractor to
discuss the matter at a conference.
See PPR, Chap. XIV, Sec. 1, � 3.c.(1). [Emphasis added.] Except
for some minor word and sentence structure changes, the
underscored language above is substantially the same as the
procedure for default terminations described in Part 49 of the
FAR.65 See FAR � 49.402-3(c) (Procedure for default); 48 CFR �
49.402-3(c) (1996). Where, as here, GPO has adopted FAR
provisions as its own, the Board has consistently given them the
same interpretation that the Executive Branch contract appeals
boards and the courts apply to the FAR. See e.g., Media Press,
Inc., GPO BCA 03-93 (April 30, 1997), slip op. at 34, 1997 WL
_____ ("Changes" clause); Graphicdata, Inc., GPO BCA 35-94 (June
14, 1996), slip op. at 99, 1996 GPOBCA LEXIS 28 ("Changes"
clause); Banta Co., GPO BCA 3-91 (November 15, 1993), slip op. at
34, 1993 WL 526843 ("Changes" clause); McDonald & Eudy Printers,
Inc., GPO BCA 40-92 (January 31, 1994), slip op. at 11-12, 1994
WL 275096 ("Requirements" clause); Shepard Printing, GPO BCA
37-92 (January 28, 1994), slip op. at 21, 1994 WL 275077
("Requirements" clause); Sterling Printing, Inc., supra, slip op.
at 36 ("Disputes" clause). Accord United States v. Aguon, 851
F.2d 1158 (9th Cir. 1988); Van Cleef v. Aeroflex Corp., 657 F.2d
1094 (9th Cir. 1981); L.B. Foster v. Railroad Service, Inc., 734
F.Supp. 818 (N.D.Ill. 1990)).
As mapped out in DeVito, the way the Government typically
rectifies the lapse of a contract due date and reinstates time as
being of the essence is by issuing a "cure" notice establishing a
new delivery date, which will allow it to terminate the contract
in the event the contractor fails to deliver in accordance with
the new schedule. See Marci Enterprises, Inc., supra, 94-1 BCA
at 132,183; W.S. Jenks & Son, GSBCA No. 10278, 10424, 10425,
10446, 91-3 BCA � 24,262, at 121,298 (citing Papco Tool Corp.,
GSBCA No. 5679, 81-1 BCA � 15,077). In that regard, just as "[a]
ll default terminations are not the same," see Composite
Laminates, Inc. v. United States, 27 Fed. Cl. 310, 317 (1992),
under the procurement regulations, a "show cause" notice and a
"cure" notice are not the same, but rather they are distinct
instruments, serving different purposes and available for use at
different times in relation to an existing delivery schedule, see
PPR, Chap. XIV, Sec. 1, �� 3.c(1),(2). Generally, a "cure
notice" is required by the "Default" clause and authorized when a
contract is to be terminated for default before the delivery date
for reasons relating to a lack of progress in performance, or a
failure to satisfy any other material provision of the agreement
(such as not furnishing a required performance bond), and
operates as a condition precedent to the any right of the
Government terminate. Id., � 3.c(2); GPO Contract Terms,
Contract Clauses, �� 20(a)(1)(ii),(iii),(2). See Graphics Image,
Inc., supra, slip op. at 15. Also cf. Shepard Printing, supra,
slip op. at 13-14. Accord Davis Precision Machining, Inc. v.
United States, supra, 35 Fed. Cl. at 670; Composite Laminates,
Inc. v. United States, supra, 27 Fed. Cl. at 317; Universal
Fiberglass Corp. v. United States, 210 Ct. Cl. 206, 537 F.2d 393,
398 (1976); Bailey Specialized Buildings, Inc. v. United States,
186 Ct. Cl. 71, 82-83, 404 F.2d 355, 361 (1968). The purpose of
the cure period-normally 10 days-is to allow an errant contractor
an specific amount of time in which to correct identified
problems. See Graphics Image, Inc., supra, slip op. at 15.
Accord Brandywine Prosthetic-Orthotic Service, Ltd., supra, 93-1
BCA at 125,766 (citing Michael Chuprov dba Release Reforestation,
AGBCA Nos. 86-101-3, 86-216-3, 87-2 BCA � 19,778). However, this
notice may be used only after first ascertaining that time equal
to or greater than the cure period remains in the contract
delivery schedule or any extension to it, otherwise the
contracting officer is authorized to limit the cure period or
even eliminate it entirely.66 See PPR, Chap. XIV, Sec. 1, �
3.c(2). See also Hurt's Printing Co., Inc., supra, slip op. 4,
n. 6; at Graphics Image, Inc., supra, slip op. at 15-16. Accord
Lanzen Fabricating, Inc., supra, 93-3 BCA at 129,609 (citing FAR
� 49.607(a)). By contrast, a "show cause" notice-again normally
for a 10 day period-is not required by the "Default" clause,
because the contractor is already in default for a failure to
deliver or perform with respect to end items, and the Government
has the right to terminate without any advance notice. See
Shepard Printing, supra, slip op. at 13; Stephenson, Inc., supra,
slip op. at 19-20. Accord Composite Laminates, Inc. v. United
States, supra, 27 Fed. Cl. at 317; Bailey Specialized Buildings,
Inc. v. United States, supra, 186 Ct. Cl. at 82-83, 404 F.2d at
361. On the other hand, the regulations recommend a "show cause"
notice "where practicable." See PPR, Chap. XIV, Sec. 1, �
3.c(1). See also Graphics Image, Inc., supra, slip op. at 16;
Stephenson, Inc., supra, slip op. at 19-20, n. 22. Accord Lewis
B. Udis v. United States, 7 Cl. Ct. 379, 385-86 (1985); Lanzen
Fabricating, Inc., supra, 93-3 BCA at 129,609 (citing FAR �
49.607(b)). These differences were clearly understood by
Contracting Officer Davis, who thought that the circumstances
dictated the use of a "show cause" notice.67 Tr. 197-98, 202-03.
Therefore, the answer to the question of whether or not he
properly reestablished the "ship complete to arrive at
destinations" date under the contract depends on whether his
"show cause" letter of March 23, 1994, meets the legal
requirements of a "DeVito cure." See Brandywine Prosthetic-
Orthotic Service, Ltd., supra, 93-1 BCA at 125,765 (the contract
appeals board considered, inter alia, whether the contracting
officer's "show cause" notice constituted a valid cure notice
under applicable FAR regulations).
Contrary to the Appellant's belief and expectation, it was not
necessary for the Respondent to issue a formal contract
modification to reinstate the "ship complete to arrive at
destinations" date in this case, nor was it obligated to do so
despite using language to that effect in Contract Modification
No. 2 (R4 File, Tab F).68 See Sermor, Inc., ASBCA Nos. 29798,
30149, 30423, 94-1 BCA � 26,303, at 130,835. Rather, any means
short of a contract modification may be used to establish a new
shipping schedule, id. (citing Simplex Manufacturing Corp., ASBCA
Nos. 13897, 14380, 71-1 BCA � 8814; Max M. Goldhaber, ASBCA Nos.
8277, 8370, 65-2 BCA � 5083), including correspondence
denominated as a "show cause" notice,69 see Lanzen Fabricating,
Inc., supra, 93-3 BCA at 129,609; Brandywine Prosthetic-Orthotic
Service, Ltd., supra, 93-1 BCA at 125,765. Furthermore, a
contractor's agreement to the revised schedule, though desirable,
is not required, and a contracting officer can set the new
delivery date unilaterally, so long as proper notice is provided
to the contractor. See L.W. Schneider, Inc., ASBCA Nos. 44533,
45181, 95-2 BCA � 27,774, at 138,484; Engineering and
Professional Services, Inc., ASBCA No. 39164, 94-2 BCA � 26,762,
at 133,138; Sermor, Inc., supra, 94-1 BCA at 130,835. Lanzen
Fabricating, Inc., supra, 93-3 BCA at 129,608; C3, Inc., supra,
91-2 BCA at 118,933. However, in order to reestablish a
contractual delivery schedule making time again of the essence,
the notice, no matter what form it takes, must fix a specific new
date for performance which is reasonable at the time the notice
is given. See Martin J. Simko Construction, Inc. v. United
States, supra, 11 Cl. Ct. at 269; D. Joseph DeVito v. United
States, supra, 188 Ct. Cl. at 991, 413 F.2d at 1154; Sermor,
Inc., supra, 94-1 BCA at 130,835; Lanzen Fabricating, Inc.,
supra, 93-3 BCA at 129,609; C3, Inc., supra, 91-2 BCA at 118,933.
These two features of the notice-specific date and reasonable
time-are necessary to properly advise the contractor of the basis
for the proposed contracting officer's action, and the standard
against which its performance will be measured. See Lanzen
Fabricating, Inc., supra, 93-3 BCA at 129,609; Brandywine
Prosthetic-Orthotic Service, Ltd., supra, 93-1 BCA at 125,766;
Motorola Computer Systems, Inc., ASBCA No. 26794, 87-3 BCA �
20,032 at 101,416; Arctic Refrigeration & Air Conditioning, Inc.,
GSBCA No. 8073, 87-3 BCA � 20,078, at 101,655.
When weighed against these legal requirements, the Contracting
Officer's "show cause" letter of March 23, 1994, is ineffective
as a "DeVito cure." Indeed, his letter does not even satisfy the
requirements of the PPR for a "preliminary notice." In that
regard, the relevant language from the "show cause" notice is as
follows:
You are notified that [because of] your failure to perform on
Purchase Order 96583, Jacket [No.] 363-553, in a timely manner,
the Government Printing Office is considering terminating said
contract pursuant to the article entitled, "Default," United
States Government Printing Office Contract Terms.
Pending a final decision in this matter, it will be necessary to
determine whether your failure to perform arose out of causes
beyond your control and without fault or negligence on your part.
Accordingly, you are hereby afforded the opportunity to present,
in writing, any extenuating facts bearing on the question to the
Contracting Officer by March 28, 1994. . . .
See R4 File, Tab H. It is obvious from the above excerpt, that
the "show cause" letter does not advise the Appellant of a
specific new "ship complete to arrive at destinations" date by
which it is expected to finish the Guide and deliver it, nor does
it provide a reasonable time for the Contractor to complete
performance under the contract, and the notice is obviously not
"preliminary," as that term is used in GPO's procurement
regulation. Therefore, the "show cause" notice is legally
deficient as a vehicle for reestablishing the shipping schedule
and making time again of the essence in the contract. See Martin
J. Simko Construction, Inc. v. United States, supra, 11 Cl. Ct.
at 269; D. Joseph DeVito v. United States, supra, 188 Ct. Cl. at
991, 413 F.2d at 1154; Sermor, Inc., supra,
94-1 BCA at 130,835; Lanzen Fabricating, Inc., supra, 93-3 BCA at
129,609; C3, Inc., supra, 91-2 BCA at 118,933.
As for the "DeVito cure" requirement that the Appellant be given
a specific new date for performance, the only date fixed in the
"show cause" letter is March 28, 1994, and that was solely for
the purpose of receiving an explanation from the Contractor for
the default which the Contracting Officer believed had already
occurred. Indeed, the Respondent's position in this case is not
only that the revised "ship complete to arrive at destinations"
date under the contract was March, 23, 1994, once all delays were
taken into account, but it also admits, as mentioned above, that
it never provided the Appellant with any prior notification of
that fact. In another context, the Board has said that "the
Government 'is not required to be clairvoyant, '" see
Graphicdata, Inc., supra, slip op. at 62 (Government estimates of
work for "requirements" contracts) (citing Womack v. United
States, 182 Ct. Cl. 399, 389 F.2d 801 (1968); Contract
Management, Inc., ASBCA No. 44885, 95-2 BCA � 27,886; Fa.
Kammerdiener GmbH & Co., KG, ASBCA No. 45248, 94-3 BCA � 27,197;
Integrity Management International, Inc., ASBCA Nos. 34802,
35412, 36149, 37140, 89-3 BCA � 21,996), and it does not see any
reason why the Contractor should be a mind reader either.
Furthermore, it is not as if GPO was unaware of the procedure for
establishing a new contract date, it did so by facsimile
transmission on or about February 3, 1994, when it told the
Appellant that "[t]his job has a must at destination date of
February 18, 1994[.]" (R4 File, Tabs E and K). Moreover, putting
aside the question of whether a notification issued to the
Contractor on March 29, 1994, fixing a new "ship complete to
arrive at destinations" date of April 4, 1994, provides a
reasonable time for performance, clearly Maher's proposed
Contract Modification No. 3 would have satisfied the "DeVito
cure" requirements, because it informs the Appellant what the
Government expects and when it expects it with respect to the
delivery of the Guide. App. Exh. No. 15. Consequently, that
contract modification would have been the proper procedural
mechanism for reestablishing the contract due date. However, the
record amply demonstrates that Contract Modification No. 3 is
regarded by the Contracting Officer as nothing more than evidence
of a good faith, but nevertheless idle and unauthorized gesture
on Maher's part to negotiate a revised date after he had already
determined that the Contractor was in default for failing to ship
the complete order of the Guide on time.
Since the Contracting Officer's "show cause" letter does not give
the Appellant a specific "ship complete to arrive at
destinations" date, the second part of the "DeVito cure" test is
moot; i.e., there is simply no date against which the Board can
gauge whether the Contractor was allowed a reasonable amount of
time to complete performance under the contract. However, even
if the Board was to assume that the Contractor could have
"answered" the "show cause" notice to the Contracting Officer's
satisfaction by shipping the Guide by March 28, 1994 (the only
specific date mentioned), it would find that five calendar days
(three workdays) was too brief a time for performance in light of
all of the Government-caused delays which characterized this
contract, the last of which had been just recently resolved. See
Foremost Mechanical Systems, Inc., supra, 95-1 BCA at 136,496 (a
default termination was not justified where the time established
by a contract modification for the contractor to complete the
work, 10 calendar days, most of which fell during the Christmas
holiday period, was not reasonable). Thus, under either test of
reasonableness-DeVito's "performance capabilities of the
contractor at the time the notice is given" or Simko's
"reasonable considering all of the circumstances"-March 28, 1994,
would have been an unreasonable "ship complete to arrive at
destinations" date.
Perhaps the Board's biggest criticism of the "show cause" letter
is that it fails as an appropriate "preliminary notice" within
the meaning of the PPR. See PPR, Chap. XIV, Sec. 1, � 3.c(1).
As the Board has already noted, for a "preliminary notice" to
reestablish a contractual delivery schedule it must be provided
to the contractor before the Respondent declares the contract in
default, and is condition precedent to such an action.70 Its
purpose, of course, is not only to alert the contractor of the
Government's dissatisfaction with its performance, but also to
give the contractor a chance to meet the conditions of the
contact-in this case ship the Guide-without penalty. Such a
notice does more than simply toll the forebearance period between
the time default occurs and the notice is actually issued.
However, the "show cause" letter in question falls short of this
goal, because nothing therein expressly tells the Appellant that
it has until a date certain to complete performance of the
contract "or else." Therefore, by definition alone, the letter
is not a "preliminary notice," as contemplated by the procurement
regulation; indeed, the Board fails to see how such notice issued
on the contract due date could be "preliminary."
In all honesty, however, the Contracting Officer makes no
pretense about his "show cause" letter being a "preliminary
notice," within the meaning of the PPR. From the beginning of
this controversy, GPO has essentially argued that although the
Appellant was actually in default on March 23, 1994, the adjusted
target date for shipment, it nonetheless continued to deal with
the Contractor as a matter of forbearance for a month until April
21, 1994, when the default notice itself was issued, and thus it
retained its right to terminate the contract. Indeed, the
Respondent probably decided that the termination would be
effective on April 6, 1994, because that was the date by which
Janowicz, in post-"show cause" discussions with Maher, promised
to make a partial shipment of the Guide (R4 File, Tab K, CRB
Memorandum).71 See Sermor, Inc., supra, 94-1 BCA at 130,835 (the
contract was properly defaulted for failure to deliver, despite
the contractor's assertion that no due dates were in effect at
the time of termination, because the contractor failed to make
delivery in accordance with the new schedule that it had proposed
and that the government had accepted, thereby agreeing that the
reestablished completion date was reasonable, and obligating it
to make delivery in accordance with the new schedule. Citing
Geomar Engineering, Inc., ENG BCA No. 5569, 90-1 BCA � 22,425 at
112,636). That the law allows the Government a reasonable amount
of time after default to consider its options without
jeopardizing its right to terminate is not even in question. See
Stephenson, Inc., supra, slip op. at 37 (78 days was a reasonable
forbearance period). Accord Frank A. Pellicca v. United States,
208 Ct. Cl. 278, 525 F.2d 525 F.2d 1035 (1975); Harold Burgmayer
Real Estate, Inc., supra; Environmental Tectonics Corp., supra.
Also cf., Jack L. Hartman & Co, Inc., supra, 91-1 BCA at 118,083.
What is at issue here, is whether the Contracting Officer
properly reestablished any "ship complete to arrive at
destinations" whatsoever, and the Board finds that it did not.
Finally, there is some suggestion in the record that the
Appellant's failure to make progress toward completing the
contract was also a ground for default, although that was not a
given as a reason in the notice of termination (R4 File, Tab K).
See Res. Brf., at 3, n. 3. In fact, at the hearing, in response
to a question from the Board asking him to explain what he meant
by the words "failure to perform in a timely manner" in the
termination notice, the Contracting Officer stated: "[t]hat means
the contract is not being executed according to the schedules
established, . . . It means that the job has not been completed.
We can't see any progress towards completing the job, the
production of the job, . . .". Tr. 203-04. [Emphasis added.] It
is settled that a default termination because a contractor failed
to adhere to contract schedules is essentially a termination for
failing to "[m]ake progress, so as to endanger performance." See
Graphics Image, Inc., supra, slip op. at 14. See also GPO
Contract Terms, Contract Clauses, �� 20(a)(1)(ii) (Default); PPR,
Chap. XIV, Sec. 1, � 3.a. As a rule, such a termination under
the "Default" clause cannot be effectuated unless the contractor
first receives a ten-day notice, and to an opportunity to cure
the default. See GPO Contract Terms, Contract Clauses, �� 20(a)
(2) (Default); PPR, Chap. XIV, Sec. 1, � 3.c(2). See also
Graphics Images, Inc., supra, slip op. at 15. Accord Composite
Laminates, Inc. v. United States, supra, 27 Fed. Cl. at 317,322;
Bailey Specialized Buildings, Inc. v. United States, supra, 186
Ct. Cl. at 85, 404 F.2d at 362; Brandywine Prosthetic-Orthotic
Service, Ltd., supra, 93-1 BCA at 125,765-66. However, the Board
has noted that:
. . . [A] 10-day "Cure Notice" is not an absolute, because
[GPO'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).
See Graphics Image, Inc., supra, slip op. at 15. [Original
emphasis.] Accord Lanzen Fabricating, Inc., supra, 93-3 BCA at
129,609. Suffice it to say that in this case, for reasons
already expressed, without a binding shipping schedule the
Appellant could neither be in default for failing to deliver on
time, nor for failing to make "any progress toward completing the
job, the production of the job." Id. (citing Electronics of
Austin, ASBCA No. 24912, 86-3 BCA � 19,307 at 97,631). See also
Specialty Construction Co., ASBCA No. 21132, 78-2 BCA � 13,348,
at 65,255 ("However, since we have found that the Government
failed to establish a reasonable new delivery schedule, it is
difficult for us to understand how a default can be based on
failure to make progress. That action requires an effective
delivery schedule against which 'progress' can be judged.").
Based on the undisputed facts in this record, especially the
Contracting Officer's admission that the Appellant was not told
that March 23, 1994, was the reestablished "ship complete to
arrive at destinations" date prior to its receipt of the "show
cause" notice of the same date, the Board finds that the
Respondent never properly established a new shipping schedule
which would have made time again of the essence under the
contract. Therefore, the Board also finds that between the
issuance of the "show cause" letter on March 23, 1994, and the
termination for default notice on April 21, 1994, was there was
never an effective delivery date against which the Contractor's
performance could be measured. Consequently, the Respondent's
termination action based on the Appellant's failure to ship the
Guide by March 23, 1994, the "show cause" notice date, or April
6, 1994, the effective date of the default, or any other date in
the record after February 18, 1994, for that matter, was
procedurally defective, and thus invalid. Accordingly, the Board
concludes that GPO improperly terminated the contract for default
under the circumstances of this case. See D. Joseph DeVito v.
United States, supra, 188 Ct. Cl. at 991, 413 F.2d at 1154; Marci
Enterprises, Inc., supra, 94-1 BCA at 132,183-84; Engineering and
Professional Services, Inc., supra, 94-2 BCA at 133,138; Lanzen
Fabricating, Inc., supra, 93-3 BCA at 129,609 C3, Inc., supra,
91-2 BCA at 118,933; J.J. Seifert Machine Co., supra, 91-2 BCA
at 118,673.
B. The Contracting Officer misapplied the number of extra
workdays owed the Appellant for performance under the contract's
"Extension of schedules" clause due to the Government caused
delays, and defaulted the contract prematurely.
The Contracting Officer's procedural mistake in not properly
reestablishing the "ship complete to arrive at destinations" date
only compounded his initial error, namely, an erroneous
application of the number of additional workdays allowed the
Appellant by the "Extension of schedules" clause for completion
of the contract because of the delays attributable to the
Government. See GPO Contract Terms, Contract Clauses, � 12(c)
(1). In that regard, the Respondent has told us that the revised
shipping date of March 23, 1994, was arrived at by simply
figuring when all of the problems causing the delays were
resolved and adding 10 workdays for completion of the contract.
See RPTC, at 4; Res. Brf., at 3, n. 2. As with the
"reestablishment" issue, the Government had the burden of proof
on the "schedule extension" question as well. See Graphics
Image, Inc., supra, slip op. at 12; Pennsylvania Printed
Products, GPO BCA 29-87 (January 22, 1990), slip op. at 11-12,
1990 WL 454985; American Drafting & Laminating Co., GPO BCA 6-85
(April 15, 1986), slip op. at 14-15, 1986 WL 181459. On this
issue also, GPO has failed to prove its case.
The crux of the matter can be ascertained from the following
extracts of the Contracting Officer's hearing testimony:
[DIRECT EXAMINATION]
Mr. Potter: How many work days were called for in the
specifications?
Mr. Davis: That was 17 work days.
Mr. Potter: Do I understand you correctly that the March 23rd
ship date was calculated on the basis of giving the contractor 17
work days from the time that the problems were all resolved?
Mr. Davis: By that time, it would have been 10 work days. The
original 17 work days, 7 of those days were proof hold days.
Mr. Potter: What do you mean proof hold days?
Mr. Davis: Those were the days when we allowed-the Government
allows the proofs back from the contractor to T & D to the agency
and sent back to the contractor.
Mr. Potter: The seven days that was originally allotted, it took
a lot longer than that, I take it?
Mr. Davis: Yes.
Mr. Potter: That is what really happened here because of the
various delays, correct?
Mr. Davis: Absolutely.
Mr. Potter: So you calculated 10 days when all the problems were
solved and you came up with the 23rd of March; is that right?
Mr. Davis: Correct.
* * * * * * * * * *
[CROSS-EXAMINATION]
Mr. Antoun: In this case, it seems to me-and I could be wrong-
that the normal calculations of delay weren't made. Instead,
what the GPO did was it said all right, from this point forward,
as of this day, we think all the problems are solved, and
therefore, we'll add the original number of production days into
the schedule and arrive at a schedule almost pretending that we
are starting over again today. Something like that?
Mr. Davis: I believe when we picked the date, we did that pretty
much, but the date we picked included the delays, the Government
delays.
Mr. Antoun: Right.
Mr. Davis: If you took the 23rd and went back, whatever date we
picked at that point included-had already been extended by the
number of days that we had caused a delay.
Mr. Antoun: My question is: Can we reconstruct those days or is
it now too late for you to come in tomorrow or later today and
say I know how I got March 23rd. Right here it is. Three days,
plus two days grace, plus this, plus this, plus this. It comes
to March 23rd. Are we unable to do that?
Mr. Davis: It could perhaps be difficult.
Mr. Antoun: At some time when you calculated [that] March 23rd
was the new schedule, did you do it per [GPO Contract Terms],
days delay, plus grace days, or did you do it by saying I think
we are cleared up now, I am going to regenerate the original
schedule from this point forward.
Mr. Davis: We do that as a combination. We took all the grace
days and the extension days and the automatic extensions up to a
point and then went to the point where everything was settled and
then extended that date.
What I am telling you is I think we did it both ways. It was lot
of work to sit down and go through it at the time.
* * * * * * * * * *
Mr. Antoun: . . . When March 23rd was finally computed by you as
the date-and I want to be succinct as I can about this-when March
23rd was finally computed as the actual ship date-ship or
delivery-I don't recall what the contract requires-did you have
at that time or did Mr. Maher have at that time a methodology for
having calculated that date?
Mr. Davis: At that time, yes.
Mr. Antoun: Do you believe that would still be available in the
file or in writing at this point in time?
Mr. Davis: That would depend on what is in our computer. I don't
believe there is a written record of how we figured that, no.
Mr. Antoun: So if I was to tell you right now that I computed the
actual ship date and it was really April 15th, you wouldn't be
able to argue with me, would you?
Mr. Davis: I could have a pretty good argument with that.
Mr. Antoun: But you wouldn't have any documentary evidence to
prove I was wrong, would you?
Mr. Davis: No.
Tr. 179-80, 190-91, 195-96.
In summary, the Contracting Officer testified that he
unilaterally established March 23, 1994, as the new "ship
complete to arrive at destinations" date by a two-step process in
which he first figured the amount of extra time owed the
Appellant for all Government caused delays, and then added 10
more workdays (the time remaining after the seven workdays for
proofing were subtracted from the 17 workdays allowed for
contract performance). If the Board understands his testimony
correctly, by working backwards and subtracting those 10 extra
workdays from March 23, 1994, the Contracting Officer's formula
ended all extensions for the delays on March 9, 1994, the date
after Brzozowski's press inspection, which is what Counsel for
the Appellant suggested at the hearing. Tr. 190. However, as
the Contracting Officer's testimony also discloses, there is
nothing in the record, not even in his memorandum to the CRB
seeking approval to default the contract, indicating precisely
how he figured the date on which, in his opinion, "all the
problems were solved;" a fact he frankly admits. Tr. 196. On
that basis alone-the absence of any such written or documentary
evidence-the Board is justified in concluding that the Respondent
has not met its burden of proof with respect to showing that it
properly established March 23, 1994, as the revised "ship
complete to arrive at destinations" date under the contract,
because GPO's case rests entirely on the Contracting Officer's
unverified contention, amounting to little more than argument,
which standing alone cannot substitute for proof. See Big Red
Enterprises, supra, slip op. at 36 (citing Reese Manufacturing,
Inc., ASBCA No. 35144, 88-1 BCA � 20,358); Univex International,
supra, slip op. at 31; B & B Reproductions, GPO BCA 09-89 (June
30, 1995), slip op. at 39, 1995 WL 488447; Hurt's Printing Co.,
Inc., supra, slip op. at 29; Printing Unlimited, GPO BCA 21-90
(November 30, 1993), slip op. at 23, 1993 WL 516844. The Board
has never allowed such unsubstantiated assertions to form the
basis for recovery. See Big Red Enterprises, supra, slip op. at
36; B & B Reproductions, supra, slip op. at 39; Hurt's Printing
Co., Inc., supra, slip op. at 29; Printing Unlimited, supra, slip
op. at 23. Accord Singleton Contracting Corp., GSBCA No. 8548,
90-2 BCA � 22,748; Tri-State Services of Texas, Inc., ASBCA No.
38019, 89-3 BCA � 22,064)); Gemini Services, Inc., ASBCA No.
30247, 86-1 BCA � 18,736.
On the other hand, the Respondent's real problem, beyond the lack
of written or documentary evidence in the record, is the fact
that the Contracting Officer simply misapplied the extension
formula under the contract's the "Extension of schedules" clause.
In that regard, GPO Contract Terms provides, in pertinent part:
In the event a delay is caused by any action of the Government,
including failure to furnish purchase/print order, copy, GBL
and/or materials as scheduled, the shipping delivery schedule
will be extended automatically by the total number of workdays
that work was delayed PLUS 1 workday for each day of delay; such
period of grace for any schedule will not exceed 3 workdays. For
example:
Order, etc., 1 workday late + 1 workday grace = 2 workdays
extension
Order, etc., 2 workdays late + 2 workdays grace = 4 workdays
extension
Order, etc., 3 workdays late + 3 workdays grace = 6 workdays
extension
Order, etc., over 3 workdays late: total number of workdays late
+ 3 workdays grace = total number of workdays extension. No more
than 3 workdays grace will be allowed on any one order.
See GPO Contract Terms, Contract Clauses, � 12(c)(1). As
indicated above, the Contracting Officer says that when he
applied this formula to all of the delays caused by the
Government in this case, including the late delivery of the GFM,
and then restored the 10 workdays allowed under the contract for
performance after the approval of proofs, the "ship complete to
arrive at destinations" date was extended from February 3, 1994,
to March 23, 1994, which amounts to a total extension of 34
workdays. In the Board's view, the Appellant had more time than
that to complete the contract.
This case bears some similarity to the situation which the Board
faced in Graphic Images, Inc., to the extent that the Appellant
blames the defective GFM, in part, for its failure to ship the
Guide on time. In that appeal, the Board reversed the
contracting officer's "endangering performance" default
termination based on the contractor's failure to provide proofs
in accordance with the contract schedule, because the reason for
the delay was shown to be a defect in the Government-furnished
computer cartridge, which required time to correct. See Graphic
Images, Inc., supra, slip op. at 22 (citing Boque Electric
Manufacturing Co., ASBCA No. 25184, 86-2 BCA � 18,925). In
reaching its decision, the Board reasoned, in pertinent part,
that:
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 [Army Corps of Engineers, the customer-
agency] on the duplicate computer cartridge at a press check on
the reprocured contract on January 6, 1992 . . . [Footnote
omitted.]
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; . . . 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, . . . that the Government-
furnished computer cartridge it received was defective in the
manner alleged, is true. [Footnote omitted.]
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. Accordingly,
in light of the foregoing analysis, the Board holds that the
Appellant was not in default at the time of the termination.
[Footnote omitted.] 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-101/2 hours and
a loss of one (1) calendar day for the PICT file problem, and
61/2 hours and loss of one (1) calendar day for the VE file
problem; i.e., two workdays overall. . . . 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.
See Graphics Image, Inc., supra, slip op. at 20-23. [Original
emphasis.]
The above rationale is equally applicable in this case.
Indeed, a factual review of both cases discloses that the
Appellant has an even stronger case than the contractor in
Graphics Image, Inc. in at least three important respects.
First, in this appeal the Respondent does not dispute that
the GFM's electronic media contained numerous errors and
defects which created serious production problems for the
Contractor and required a substantial amount of time to
correct. By its own admission, the Government used the
month between the default termination and the issuance of
the reprocurement IFB to correct the errors in the GFM.
Tr. 213-16, 218. Second, apart from the bad electronic
media, the contract in this case contained additional
source for delay, namely a "PRINTING" specification which
was ambiguous concerning whether the words "in black and
white plus a match of Pantone's 185 red and 280 blue
opaque inks" referred to the colors on the binder cover
itself, or the label on the ink can.72 Apparently, either
by a post-default clarification, or the Coast Guard's
acquiescence, the repurchase contractor was allowed to
print the job as originally planned; i.e., on a 4-color
offset press using opaque inks directly "from the can."
And third, at least the Contracting Officer in this appeal
recognized that the contract's "Extension of schedules"
clause applied, and he attempted to calculate the
appropriate amount of additional time, even though he
reached an erroneous result.
Although the Respondent delivered the GFM three days late, that
Government caused delay was cured, in response to the Appellant's
request, by the schedule extension which established February 18,
1994, as new contract due date (R4 File, Tab E). Tr. 169,
192-93, 205-06. Therefore, the only unresolved delays in this
dispute involve the time needed for the parties: (1) to deal with
the customer-agency's design error which left the outline of the
black die cutting lines for the tab dividers on the GFM's
magnetic disk; (2) to discuss the color match problem on the blue
linen binder cover and decide on foil stamping as the method of
achieving the exact shade of white required by the Coast Guard;
and (3) to correct the "ghosting" problem with respect to the
words "work" and "life" in the color bar mastheads of the Guide,
which was first noticed during the press sheet inspection on
March 8, 1994, and was also caused by a design error in the
magnetic tape. In the Board's estimation, after reviewing the
evidence of record, the parties spent the most time addressing
the tab dividers, because nearly a month passed between the day
the problem was first discussed (February 8, 1994), and the day
the Coast Guard effectively overruled the solution set forth in
Contract Modification No. 2 by telling GPO that it would accept
the job as ordered because it was without additional funds to fix
the defect (March 4, 1994). That time period included 19
workdays. The time necessary to correct the mastheads involved
the second longest delay, a period of about seven (7) workdays
between March 8, 1994, and March 16, 1994, primarily because the
Appellant subcontracted for the new film work after it had fixed
the error on the magnetic tape. The parties took the least
amount of time solving the color match problem caused by the
ambiguous "PRINTING" specification-counting from the date of
Gans' "draw-down" (February 24, 1994), to the date Maher informed
the Appellant that the customer-agency had approved foil stamping
the binder cover (March 2, 1994), a period of five workdays
elapsed.
On this record, 31 workdays all told were consumed as the parties
dealt with production difficulties caused by either the defective
GFM or the lack of clarity in the contract, and the delays were
the entire responsibility of the Government. Therefore, under
the "Extension of schedules" clause, the Appellant was entitled
to 34 extra workdays (31 workdays late + 3 workdays grace) to
complete the contract. Ironically, this is the same result
achieved by the Contracting Officer under the method of
computation he used to establish a new "ship complete to arrive
at destinations" date of March 23, 1994, even though he seems to
have deviated from the contractual formula somewhat.73
Where the Board and the Contracting Officer part company on
the "Extension of schedules" issue, is in the selection of
the date from which to begin adding the 34 delay workdays to
the contract. In contrast to the Contracting Officer, who
apparently used the original contract due date of February 3,
1994, as the starting point,74 the Board counts the extra
time from February 18, 1994, the revised "ship complete to
arrive at destinations" date established by the Respondent's
facsimile message of February 3, 1994, because only the time
lost to the late delivery of the GFM was encompassed in that
extension.75 Furthermore, the Board excludes from its
workday computation February 21, 1994, which was Presidents'
Day, a national holiday. See Graphic Images, Inc., supra,
slip op. at 15, n. 17 (Christmas and New Years' holidays);
Stephenson, Inc., supra, slip op. 24, n. 27 (Columbus Day,
Veterans Day, and Thanksgiving Day). Accord Foremost
Mechanical Systems, Inc., supra, 95-1 BCA at 136,496
(Christmas). As the Board figures it, when the 34 extra
workdays are added to the performance schedule, the Appellant
had at least until April 8, 1994, to ship the Guide and
complete the contract. Consequently, the Contractor was not
in default either on March 23, 1994, the "show cause"
letter's revised shipping date, or on April 6, 1994, the
effective date of default set forth in the termination notice
(R4 File, Tabs H and K). See Graphic Images, Inc., supra,
slip op. at 22; Pennsylvania Printed Products, supra, slip
op. at 14; American Drafting & Laminating Co., supra, slip
op. at 17. Therefore, the Contracting Officer's decision to
terminate the contract for default was premature, and cannot
be sustained.76 See Graphic Images, Inc., supra, slip op.
at 22; Pennsylvania Printed Products, supra, slip op. at 14.
V. CONCLUSION
It is unnecessary to address the second issue in this appeal,
namely, whether the Government is entitled to excess
reprocurement costs in this case, because that question is a moot
point in light of the Board's finding that the Appellant was not
in default when the contract was terminated.77 See Graphics
Image, Inc., supra, slip op. at 22, n. 26; American Drafting &
Laminating Co., supra, slip op. at 17. Accord Foremost
Mechanical Systems, Inc., supra, 95-1 at 136,496. Since the
Contracting Officer's default action was procedurally defective
and thus improper, the remedy in this case, as set forth in the
"Default" clause, is to convert his decision into a termination
for the convenience of the Government. See GPO Contract Terms,
Contact Clauses, � 20(g); PPR, Chap. XIV, Sec. 1, � 2.b. See
also Graphics Images, Inc., slip op. at 28; See American Drafting
& Laminating Co., supra, slip op. at 17. Accord Darwin
Construction Co. v. United States, supra, 811 F.2d at 598;
Composite Laminates, Inc. v. United States, supra, 27 Fed. Cl. at
317, 322; S.M.S. Data Products Group v. United States, 17 Cl. Ct.
1, 10 (1989); Foremost Mechanical Systems, Inc., supra, 95-1 BCA
at 136,496; Brandywine Prosthetic-Orthotic Service, Ltd., supra,
93-1 BCA at 125,766; C3, Inc., supra, 91-2 BCA at 118,933; J.J.
Seifert Machine Co., supra, 91-2 BCA at 118,673. Indeed, this is
probably what the Contracting Officer himself should have done
during the first stages of performance once it became apparent
that the GFM was defective and the errors would require time to
correct. In that regard, the Board endorses the comment made by
the Administrative Judge in American Drafting & Laminating Co.,
which, under the circumstances, is equally applicable in this
case:
We think it abundantly clear from the foregoing that while it was
within the discretion of the Contracting Officer to terminate the
contract and seek reprocurement because at the time of
termination Appellant had no reasonable idea of when it would be
able to deliver the product, the termination should have been for
the convenience of the Government rather than Default, since the
contractor had acted as a reasonably prudent printing contractor
in like circumstances.
See American Drafting & Laminating Co., supra, slip op. at 17.
On the other hand, even though the Board has found the
default was improper because the Contracting Officer failed
to follow the procedural rules, it wants to make clear that
its holding should not be taken as condoning the Appellant's
failure to answer the Contracting Officer's "show cause"
letter of March 23, 1994. See Brandywine Prosthetic-
Orthotic Service, Ltd., supra, 93-1 BCA at 125,766 ("cure"
notice). While it cannot be said that the lack of a written
reply from the Contractor contributed significantly to what
followed, certainly ignoring such a notice is risky, if not
foolish, and in other circumstances a failure to respond
might lead to a conclusion that the Appellant had repudiated
the contract. Nevertheless, because the Respondent failed
to properly reestablish the contract's "ship complete to
arrive at destinations" date, and misapplied the "Extension
of schedules" clause, the default must be set aside.
Accordingly, for all of the foregoing reasons, the appeal in
GPO BCA 19-94 is sustained, and the termination for default
is converted to a termination for the convenience of the
Government. See GPO Contract Terms, Contact Clauses, �
20(g); PPR, Chap. XIV, Sec. 1, � 2.b.
ORDER
The Board finds and concludes that the Appellant could not be
defaulted for a failure to timely deliver the Guide because: (1)
the Respondent failed to follow the proper procedures in
reestablishing the "ship complete to arrive at destinations" date
under the contract; and (2) the Contracting Officer misapplied
the "Extension of schedules" clause in the context of this case,
and defaulted the contract prematurely. THEREFORE, the decision
of the Contracting Officer is REVERSED, and the appeal is
GRANTED. FURTHERMORE, the termination for default is converted
to a termination for the convenience of the Government, and the
appeal is REMANDED to the Contracting Officer with instructions
to negotiate a payment settlement with the Appellant accordingly.
See Graphics Image, Inc., supra, slip op. at 28; Pennsylvania
Printed Products, supra, slip op. 14; American Drafting &
Laminating Co., supra, slip op. at 17.
It is so Ordered.
June 12, 1997 STUART M. FOSS
Administrative Judge
_______________
1 The Contracting Officer's appeal file was assembled pursuant to
Rule 4 of the Board's Rules of Practice and Procedure, and
delivered to the Board on June 17, 1994. Board Rules, Rule 4(a).
It will be referred to hereafter as the R4 File, with an
appropriate tab letter also indicated. As originally submitted
to the Board, the R4 File contained fourteen (14) documents,
identified as Tabs A-N. See Report of Prehearing Telephone
Conference, dated January 27, 1995, at 2 (hereinafter RPTC).
Thereafter, at the prehearing conference held by the Board on
November 30, 1994, the Respondent supplemented the R4 File with a
copy of a memorandum, dated June 2, 1994, from John W. Adams, the
original Contracting Officer for the defaulted contract, see Tr.
230 (the court reporter's transcript for the hearing in this
matter shall be referred to herein as "Tr." followed by an
appropriate page number), to GPO's Contract Review Board
(hereinafter CRB), seeking its concurrence to award the
repurchase contract to Monarch Litho, Inc. (hereinafter Monarch).
See Printing Procurement Regulation, GPO Publication 305.3 (Rev.
10-90), Chap. I, Sec. 10, � 4.a.(1) (proposed award over
$25,000.00 to other than the bidder submitting the lowest
responsive bid) (hereinafter PPR). The memorandum was designated
as Tab O of the R4 File. See RPTC, at 4. The R4 File was
further augmented at the aforementioned hearing in this matter
with Tabs P (Adams' memorandum of June 2, 1994, to GPO's
Financial Management Service (hereinafter FMS) regarding the
recovery of excess reprocurement costs), Q (two letters from
Adams to the Appellant, both dated June 3, 1994, notifying it
that: (a) its bid on the repurchase contract was determined to be
nonresponsible; and (b) the reprocurement had been awarded to
Monarch for $116,611.00, and the Contractor was liable for excess
reprocurement costs), R (Adams' Findings and Determination of
nonresponsibility on the part of the Appellant, dated June 2,
1994, see also R4 File, Tab O), S (a letter dated June 7, 1994,
from the Contractor's attorney, Frederic G. Antoun, Jr., to Adams
protesting the amount of reprocurement costs assessed
(approximately $26,000.00 more than the original contract) as
excessive), T (Adams' response, dated June 9, 1994, to Antoun's
letter), U (the press inspection report, dated June 23, 1994, for
the reprocured job), V (the declaration of Robert D. Colvin,
Assistant Comptroller, Procurement Accounting Division, FMS,
attesting that Monarch completed the work and was paid for the
repurchased job (hereinafter Colvin Declaration), and a computer
printout showing the payment history), W (two handwritten
memoranda from Eric Janowicz, the Appellant's President, to Tony
(Anthony D.) Hooks, a Printing Specialist who worked for Adams,
reviewing and confirming, the Contractor's bid prices on the
original contract), and X (the report showing how Namon (Tony)
Seaborn, a Quality Inspection Technician in the PPD's Quality
Assurance Section, selected the random sample of 32 binders for
the purpose of inspecting the Appellant's product). See Tr.
172-6, 330-31, 396-97.
2 The Appellant's initial brief, entitled "Appellant's
Posthearing Memorandum," was submitted to the Board by facsimile
transmission on March 14, 1995 (a corrected page 5 was filed on
April 3, 1995), and will be referred to hereinafter as "App.
Brf.," with an appropriate page citation thereafter. The
Respondent's initial brief, entitled "Posthearing Reply
Memorandum," was submitted to the Board on March 28, 1995, and
will be cited as "Res. Brf.," with an appropriate page number
thereafter. Subsequently, on April 28, 1995, the Contractor
filed a reply brief, entitled "Appellant's Reply Memorandum,"
which will be referred to hereinafter as "App. R. Brf.," with an
appropriate page number thereafter. No answering brief was filed
by the Government. Furthermore, both the Appellant and GPO
introduced additional documentary evidence at the hearing, which
shall be cited as "App. Exh. No." and "GPO Exh. No.,"
respectively, followed by an appropriate number.
3 During the hearing, two of the Respondent's witnesses, Richard
Brzozowski, the Printing Specialist from GPO's Typography and
Design (T & D) Division who performed the press sheet inspection
at the Appellant's plant, see R4 File, Tab G, and Edward A.
Reesman, the Printing Specialist in the PPD's Quality Assurance
Section who performed the inspection on the random samples of the
Appellant's binders, see R4 File, Tab L, discussed the order of
precedence which governs when measuring the quality of a procured
product, see Tr. 258-59, 322-23, 417-18. Essentially, both
witnesses agreed that an approved press sheet takes precedence
over a proof, an approved proof trumps the specifications and/or
Government-furnished material, and in the absence of either an
approved proof or press sheet the specifications control. See
Tr. 322-23, 417-18. In Brzozowski's words: "Each sign off
operation throughout the job relieves the prior one." See Tr.
323.
4 The record shows that the Respondent knew about the bad
weather, and recognized that it was having an adverse impact on
the Appellant's ability to start the job. Tr. 205. Indeed,
Contracting Officer Davis, who replaced Adams on this contract,
testified that "It had been in the news. It was a big cold front
all over the county[,]" and "I realized it was cold." See Tr.
205-06.
5 Contracting Officer Davis was also aware of the transportation
strike, but said it was not a factor in considering the extra
amount of time which the Appellant was later given to make
delivery, because such additional time "has to be requested. . .
. in writing[,]" and the Contractor never made such a request.
See Tr. 205.
6 The record indicates that the Appellant's GPO contact, Francis
R. ("Dick") Maher, a PPD printing specialist supervised by
Contracting Officer Davis, forwarded the Contractor's request for
an extension to the customer-agency, and was told by the Coast
Guard that it could only "live with" two more weeks, not three.
Tr. 192, 206. Although the Contracting Officer testified that
the schedule extension did not include any allowance for the bad
weather, he did take into account not only the late delivery of
the GFM, but the time used by the parties in trying to resolve
problems discovered with the GFM itself. Tr. 192-93.
7 Also part of the facsimile transmission was Contract
Modification No. 1, dated February 3, 1994, which made certain
changes in the "DISTRIBUTION" specification of the contract (R4
File, Tab E).
8 The record leaves no doubt that the mistake was authored by the
Coast Guard employee who designed the Guide, and who apparently
knew very little about die-cutting. Tr. 47, 49, 58, 389-91.
9 The border lines were clearly contrary to the die-cutting
operation contemplated in the "BINDING" specification which was
based on a so-called "full bleed" product, meaning that the ink-
covered area should have been larger than the shape to be cut so
that when trimmed the color would extend to the edge of the tab.
Tr. 48-50, 164, 389-91. Under normal circumstances, the tab
dividers could have been cut by a device known as a "cookie
cutter," which the Appellant had intended to use, or on a flatbed
die-cutting machine. Tr. 51, 59, 61. The laser cutting machine
was capable of cutting inside the black outline with the
necessary precision, but the parties agreed that process was too
expensive for this type of product. Tr. 389-91.
10 The reason why die-cutting was much more expensive than
removing the black lines on the film was because a separate die
would have to be made for each tab, and the number of dies would
increase rapidly. Tr. 60, 411-12.
11 The record indicates that Brzozowski told Janowicz the same
thing at the press inspection. Tr. 119. Janowicz testified that
in light of these instructions he had intended to use the "cookie
cutter," but he subsequently discovered that the machine was
incapable of the tolerances required. Tr. 71-72, 410-11.
Consequently, the Appellant proposed to switch to the flatbed
die-cutter and cut each tab separately. Tr. 138, 410-11.
12 The record evidence indicates that the Guide had already cost
the Coast Guard $120,000.00 before it was sent to the printer.
Tr. 94, 121-22.
13 According to Brzozowski, the only tab divider shortcomings he
noticed during the press inspection concerned roller streaks and
color match; i.e., quality assurance problems in the printing
itself. Tr. 244-45, 254, 281.
14 In the industry, a "draw-down" describes an ink chemist's
method of roughly determining color shade by placing a small glob
of ink on the printing substrate or background, e.g., paper,
cloth, etc., and drawing down with the edge of a putty knife
spatula to get a thin film of ink. See Pocket Pal: A Graphic
Arts Production Handbook 14th ed., at 191 (International Paper
Co., 1989) (hereafter Pocket Pal). The purpose of a "draw-down"
is to show how certain colors will look on the substrate. Tr.
22-23. In this case, Gans prepared a "draw-down" using the four
colors listed in the "Printing" specification of the contract-
black, white, and Pantone's 185 red and 280 blue opaque inks-on a
light blue linen finish impregnated book cloth (R4 File, Tab A,
at 3). Tr. 21; App. Exh. No. 3.
15 A "hit" simply refers to the number of times the ink is
applied to the substrate. Tr. 22-23, 26.
16 The contract's "PRINTING" specification called for "a match of
Pantone's 185 red and 280 blue opaque inks" (R4 File, Tab A, at
3). During the hearing, the Board asked two of the Respondent's
witnesses, Brzozowski and Reesman, for their expert opinion on
the meaning of "color match" in this context, and got two
different responses. Brzozowski, agreed that an exact color
match with App. Exh. No. 2 was not possible because the ink was
being applied to a cloth cover. Tr. 274, 277. But, he said that
a printer could match Pantone 185 red with an opaque ink by
adding more pigment to the mix, and making it thicker, much like
covering a wall with two coats of paint. Tr. 315-16. Indeed, he
thought that since App. Exh. No. 2 was a laser output, not
printing, it was only suitable for use as a layout dummy. Tr.
278. In short, Brzozowski interpreted the "PRINTING" provision
as requiring an exact match of the colors specified, using the
Pantone Matching System (PMS) as a guide. Tr. 317. On the other
hand, Reesman said, in effect, that the label on the can of ink
was good enough for him. Tr. 395 ("I would look at the can of
ink that I have and see that it is 185 and 280 opaque ink, and
that it what I would use."). When pressed by the Board, he
stated that his answer would not change regardless of the color
of the background, blue or white. Tr. 396. Whether or not the
Appellant's instructions to Gans to match the binder colors on
App. Exh. No. 2 meant that it shared Brzozowski's view of the
contract language, see Tr. 407-08, the difference of opinion
between Brzozowski and Reesman clearly indicates that the
"PRINTING" specification is ambiguous.
17 The GFM included, inter alia, proofs and a generic binder, but
no sample of the previous edition of the Guide. Tr. 17; App.
Exh. Nos. 1 and 2. The Respondent denies that Maher told the
Appellant that no example of the previous binder was available,
but instead says that he indicated the Coast Guard was satisfied
with the prior version, and the Contractor should follow the
sample which had been provided with the GFM. See Answer, at 2, �
� 24, 25. However, Maher was not called as a witness, and there
is no other evidence from GPO in the record refuting Janowicz's
testimony to the contrary.
18 As Janowicz described the process at the hearing, foil
stamping is simply a method of placing another material (of any
color) under pressure over the substrate for the purpose of
imprinting an emblem as on a business card or stationary, or in
this case to lay another background against which to apply the
opaque inks. Tr. 31.
19 The record indicates that while the Appellant owns a silk
screening press, it primarily does offset work, and would have
had to contract out any silk screening on the Guide. Tr. 14, 91.
20 App. Exh. No. 5 is a proof of the binder material with the
colors printed over white foil. Tr. 34. The proof reader's
remarks in red ink are Brzozowski's. Tr. 251. Brzozowski
testified that he never "OK'd" a press sheet for the binder
cover. Tr. 313. In fact, he was not present when the Appellant
printed the binders, but rather had arranged with the Contractor
to have samples sent to him at GPO as soon as they were
available.
21 In printing, the term "register" means fitting two or more
images in exact alignment with each other. See Pocket Pal, at
203.
22 App. Exh. No. 6 is a note from the foil stamping subcontractor
to the Appellant stating that the "cloth material will not lay
flat coming off a roll, register will vary slightly. Paper stock
will register 100%." The subcontractor's letterhead is illegible
on the Board's copy of App. Exh. No. 6, and the firm is not
otherwise identified in the record." Furthermore, the exhibit is
undated, and the Board cannot read the subcontractor's signature,
although it assumes that the addressee "Val" is Val Krumplis, one
of the Contractor's partners. Tr. 133.
23 Maher also informed the Contracting Officer about the color
match problem on the binder. Tr. 214.
24 Janowicz indicated that when he received these instructions,
he understood that there was to be no compromise in the register.
Tr. 85.
25 During the press sheet inspection on March 8, 1994, Brzozowski
and the Appellant discussed the register problem caused by foil
stamping the binder cover. Tr. 96-97, 251-52. Although he was
there to inspect the text and not the cover, when the Contractor
showed him the binder Brzozowski expressed his opinion that
achieving proper register would be "tough" because the Contractor
was passing the binder through the press before foil stamping it.
Tr. 252, 284. Furthermore, he apparently told the Appellant that
foil stamping the binder "one up" (foil stamping and inking in a
single operation), and not three (foil stamping first, and then
printing in separate operations), as was being done, would not
only improve the register quality, but would also reduce waste.
Tr. 113, 252, 255, 301. 304, 306, 309, 405-06. Although Janowicz
testified that Brzozowski did not make such a suggestion, the
fact was that the Contractor's press setup precluded "one
upping." Tr. 97-99, 113, 405-06.
26 The Appellant offered App. Exh. No. 10 as an example of the
way the masthead should have looked. Tr. 64.
27 The Board presumes that Brzozowski's entry on line 16 of his
report relates to the masthead problem (R4 File, Tab G). In that
regard, on line 16, which asks "Did anything occur (AA's or PE's)
that would lead the printer to request additional time or funds?
If so, describe[,]" Brzozowski answered "Yes. Agency missed type
on proofs."
28 The record indicates that Adams, who was the Contracting
Officer at the time, agreed with this course of corrective
action. Tr. 244. However, GPO never issued a contract
modification authorizing the Appellant to fix the Coast Guard's
error in the mastheads. Tr. 66.
29 The extent to which the Appellant kept the Respondent informed
about it difficulties in producing the Guide, and the progress it
was making, if any, is a matter of disagreement between the
parties. See Complaint, at 5, � 43; Answer, at 4, � 43. In that
regard, the Contractor says that it constantly maintained verbal
contact with either Maher or Adams (the first Contracting
Officer) during the relevant period, while GPO alleges that
between March 3, 1994, and early April 1994, a time frame which
includes the press inspection on the job, it had little or no
communication with the Appellant. Id. See also R4 File, Tab K,
CRB Memorandum. However, the Board finds it hard to believe that
the Appellant did not keep the appropriate persons in GPO
apprised of its production troubles, since, after all, it needed
their co-operation and permission to resolve the numerous
problems it was experiencing. Indeed, such silence on the part
of the Contractor would have been inconsistent with its past
behavior on a job it thought was a "nightmare," see Tr. 67, 75,
which was to promptly alert the Government about the roadblocks
being thrown up by the defective GFM, as required by the terms of
the contract. See GPO Contract Terms, Contract Clauses, � 7
(Government Furnished Property (GFP)). In short, there is
nothing in this record to indicate anything other than that the
Appellant tried diligently, if unsuccessfully, to meet its
obligations under the agreement.
30 The Contractor contends that it discussed the matter orally
with GPO after it received the "show cause" notice. See
Complaint, at 5, � 44. However, Janowicz frankly admitted at the
hearing that he did not provide a written answer to the "show
cause" notice, essentially because the truckers strike and the
problems with GBC and ICG precluded the establishment of a new
shipping date with any reasonably certainty. Tr. 103. GPO, on
the other hand, alleges that "[i]n a letter to the Public
Printer, Appellant claims they failed to answer the show cause
letter because it was misplaced by the person who signed for it."
Answer, at 4, � 44. The Board, however, is unable to find a copy
of the letter referred to by the Respondent in the R4 File, nor
was it introduced as a Government exhibit during the hearing.
Similarly, none of the Respondent's witnesses testified that the
Appellant provided a different reason for not answering the "show
cause" letter than the excuse Janowicz gave at the hearing.
Thus, GPO has failed to establish that the Contractor gave a
prior inconsistent reason for not answering the "show cause"
letter, and Janowicz's explanation is uncontradicted. See FED.
R. EVID. 613. In any event, there is no dispute that the
Appellant did not respond, in writing, to the "show cause"
notice, which, after all, is the essential point.
31 The record copy of App. Exh. No. 15 is extremely faded and
difficult to read, but it is not totally illegible. Tr. 76.
32 Nepi reported to Contracting Officer Davis that the Appellant
was still in the process of assembling the Guide; i.e., the
binders were not assembled, there was no cover fabric in the
plant, and the tab dividers were still at the die-cutters (R4
File, Tab I). Tr. 104-05.
33 Since the days of the week are "capable of accurate and ready
determination by resort to sources whose accuracy cannot be
questioned," in this case a calendar, the Board takes judicial
notice of the fact April 16, 1994, was a Saturday, for the
purposes of this decision. FED. R. EVID. 201(b)(2). See
Graphics Image, Inc., GPO BCA 13-92 (August 31, 1992), slip. op.
at 15-16, n. 17, 1992 WL 487875. Accord Powerline Oil Co., EBCA
Nos. 278, 280-83, 290, 296, 300-05, 307, 321, 91-2 BCA � 23,789,
at 119,146 (citing American Indians Residing on Maricopa-Ak Chin
Reservation v. United States, 667 F.2d 980, 999 (Ct. Cl. 1981),
cert. denied, 456 U.S. 989 (1982)).
34 Because the documents were sent "after hours," the Contracting
Officer did not receive them until the following morning,
Tuesday, April 19, 1994 (R4 File, Tab K, CRB Memorandum).
35 Under the Respondent'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.
See PPR, Chap. I, Sec. 10, � 4.b.(i). See also Gold Country
Litho, GPO BCA 22-93 (September 30, 1996), slip op. at 8, n. 5,
1996 WL 812956, vacated in part, 1997 WL _____ (March 17, 1997);
A & E Copy Center, GPO BCA 38-92 (September 26, 1996), slip op.
at 6, n. 10, 1996 WL 812881; Big Red Enterprises, GPO BCA 07-93
(August 30, 1996), slip op. at 16, n. 15, 1996 GPOBCA LEXIS 26;
Univex International, GPO BCA 23-90 (July 31, 1995), slip op. at
9; n. 12, 1995 WL 488438, reconsid. denied, 1996 WL 112554
(February 7, 1996), 1996 WL 812959 (July 5, 1996), Supplemental
Decision on Excess Reprocurement Costs and Order; Hurt's Printing
Co., Inc., GPO BCA 27-91 (January 24, 1994), slip op. at 7, n.
10, 1994 WL 275098.
36 In that regard, the PPR 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 PPR,
Chap. XIV, Sec. 1, � 3.c.(3). See also Asa L Shipman's Sons,
Ltd., GPO BCA 06-95 (August 29, 1995), slip op. at 8, n. 11, 1995
WL 818784, reconsid. denied, 1996 WL _____ (February 13, 1996);
Univex International, supra, slip op. at 10, n. 14; Shepard
Printing, GPO BCA 23-92 (April 29, 1993), slip op. at 26, n. 31,
1993 WL 526848; Graphics Image, Inc., supra, slip. op. at 26, n.
31. The PPR essential repeats the same requirements imposed on
Executive Branch contracting officers by the Federal Acquisition
Regulation (FAR). See FAR � 49.402-3(f)(1)-(7).
37 The effective termination date shown in the notice, April 6,
1993, is clearly a typographical error (R4 File, Tab K). Tr. 77,
103, 181. See also RPTC, at 3, n. 3. The correct date is
obviously April 6, 1994.
38 Reesman testified that the inspection of copies of the Guide
was an exception to the usual circumstances under which quality
testing is accomplished; i.e., there was no agency complaint, and
he was not examining quality assurance random copies. Tr. 365.
Indeed, he was unsure what the Contracting Officer was going to
do with the results. Tr. 365. Therefore, he did not fill in
the "Central Office Recommendation" line on his inspection report
(R4 File, Tab L). Tr. 364-65. However, Reesman's testimony that
GPO does not order quality assurance random copies on jobs with
binders, while perhaps true as a general rule, is at variance
with the contract in this case which called for such copies (R4
File, Tab A, at 6). Tr. 366.
39 Reesman candidly admitted that in evaluating the Guide for
printing attribute P-9 (Solid or Screen Tints Color Match), he
faced a dilemma-he did not have the "OK'd" press sheet required
by the contract, or the "OK'd" proofs. Tr. 336-37, 339.
Therefore, he did not test the color match against the PMS
system, but rather simply looked for roller streaks and ink
density shifts on the printed sheet. Tr. 336-37, 339, 381,
397-98. Reesman also just tested the pages, and testified that
he did not see any color match problem in the binder cover. Tr.
355.
40 During the hearing, the Respondent introduced four of 32
sample binders, as well as six tab dividers, which were
representative of the ones Reesman had examined, and asked him to
reevaluate them on the record. Tr. 337, 343, 348, 350, 355; Gov.
Exh. Nos. 1, 1-A to C, 2, 2-A to C, 3 and 4. In that regard, the
Guide had four different colored tab dividers; i.e., yellow,
green, blue and purple. Tr. 135-16. Examining the first binder,
Reesman determined that there were color match (P-9) defects (a
visible density shift in the green tab dividers and roller
streaks within the green and purple tab dividers), and register
problems (P-4) on the spine of the binder covers (the white
substrate showed under blue and black inks). Tr. 337, 339-40,
342, 375. The second binder had the same color match and
register problems as the first one. Tr. 343-46. In addition to
the color match defect, the third binder had a type quality and
uniformity problem on the spine (P-7), namely, the black ink had
doubled up when printed (most likely because the binder cover
moved during the printing process). Tr. 348-49. Reesman noted
that two of the 32 binders he examined had this P-7 defect, but
that was not sufficient, standing alone to reject the order. Tr.
349. The last binder had a color match problem and a text and
illustration image position defect (P-5); i.e., 13 pages were
skewed (pages 4.5, 4.7, 4.9, 4.11, 5.1, 5.3, 5.7, 6.1, 6.3, 6.5,
6.7, 6.9, and 6.11). Tr. 350-51. Reesman was also asked to
examine a fifth copy of the Guide which the Appellant had
introduced as an exhibit (App. Exh. No. 20). Tr. 356. From his
inspection, he concluded that while the Contractor's copy had a
perfectly acceptable binder cover as to type quality and
register, it too had color match problems in the tab divider, as
well as an uneven trim on the tabs, 13 skewed pages (pages 2.13,
4.5, 4.7, 4.9, 4.11, 5.1, 5.3, 5.7, 6.3, 6.7, 6.9, 6.11, and
6.13), and thus like the random samples was rejectable for P-9
and P-5 defects. Tr. 359, 361, 363, 367, 388-89. Reesman
testified that the skewing probably occurred for one of three
reasons, namely, the pages themselves were crooked when printed,
or they were printed on a crooked plate, or they were trimmed
crooked. Tr. 351-53, 373-74. Of these alternatives, Reesman
thought the last reason was most likely because a job like the
Guide would not have been printed in sequence, but would have
been trimmed that way. Tr. 373-74. As for the other defects,
Reesman said that the color match problem (P-9) had two sources;
i.e., the visible density shift was due to an imbalance between
the ink and water on the 4-color press, and the roller streaks
were caused by an improper adjustment in the press itself. Tr.
346, 375-6. With respect to the register defect (P-4), he
guessed that the problem stemmed from printing the white
substrate and the other colors on the binder in separate
operations, and the binder simply did not line up properly with
each proceeding pass through the press. Tr. 346-47.
41 Reesman's inspection report also indicates that he found some
other defects, such as one copy with no drill holes, another with
hickies and spots (P-1) on the cover and poor register (P-4) in
the text, but the Guide was not rejected because of these
problems (R4 File, Tab L). Tr. 229, 353-55.
42 On or about May 12, 1994, the Contracting Officer also
telephoned the Appellant's attorney and told him that because of
the inspection results, GPO would not buy any of the shipped
binders (R4 File, Tab J).
43 GPO's response was written by a third Contracting Officer,
James L. Leonard, for Adams (R4 File, Tab T). In denying the
Appellant's protest, Leonard stated, for the first time, that the
default was also based on "quality" reasons, and not just a
failure to meet the delivery schedule. Id. Furthermore, it was
his view that ". . . factors other than price, such as
responsiveness and responsibility must be considered prior to the
award of a contract. An award made on the basis of price alone
would be a disservice to our customer if the contractor
subsequently defaulted or shipped late." Id.
44 The Board framed four questions for disposition during the
prehearing telephone conference. See RPTC, at 6-7.
Specifically, the Board saw the facts giving rise to the
following issues: (a) did the GFM supplied to the Contractor
differ from the description and/or the requirements of the
contract specifications, and was the magnetic disk, in fact,
properly designed and appropriate for producing the Guide; (b)
was the contract properly terminated for default because of the
Contractor's failure to make timely delivery of the Guide in
accordance with the contract specifications, as changed; (c) were
the 1,152 copies of the Guide delivered by the Contractor after
termination of the contract improperly rejected by the
Government, and if so, is the Appellant entitled to compensation
and in what amount; and (d) has the Government proven its
entitlement to the recovery of excess reprocurement costs in this
case? Id. However, these four questions really amount to only
two-in a nutshell, was the default action procedurally and
substantively proper, and if so, how much does the Appellant owe
the Government in excess reprocurement costs?
45 Aside from the fact that the magnetic disk it received as part
of the GFM contained a major design defect, i.e., the cut lines
for the tab dividers were not erased, the Contractor says that it
was also disadvantaged by the fact that it was not supplied with
a sample of the previous printing of the Guide. See App. R.
Brf., at 3-4. Certainly, such a sample would have provided the
Appellant with an idea of the quality standard it was expected to
meet if its product was to be considered acceptable. See
Professional Printing of Kansas, Inc., GPO BCA 2-93 (May 19,
1995), slip op. at 69, 1995 WL 488488 (citing Mid-American
Engineering and Manufacturing , ASBCA No. 20939, 78-1 BCA �
12,870, at 62,629). On the other hand, the Government was under
no obligation to furnish a sample of the previous binder unless
it had bound itself to do so by the terms of the agreement. See
Professional Printing of Kansas, Inc., supra, slip op. at 81, n.
83.
46 The Appellant says that the third quality defect-skewness of
some of the pages-would not have been a ground to reject the
order. See App. Brf., at 6. In any event, the Contractor states
that it could have fixed the skewness problem if the Respondent
had asked, and it would have been an easy task to replace the
incorrect pages because the Guide is a 3-ring binder. See App.
R. Brf., at 3.
47 The Contractor asserts that GPO eventually changed its mind
about trimming the Guide on a flatbed die-cutter, essentially
because of the cost involved, but by then the process was too far
along, and it was too late to reconfigure the printing layout.
See App. R. Brf., at 2.
48 The Board has already concluded that the "PRINTING"
specification is ambiguous. See note 16 supra. The Appellant
contends that any such ambiguity is latent, and hence its
interpretation should prevail. See App. Brf., at 5 (citing
Newsom v. United States, 230 Ct. Cl. 301, 676 F.2d 647, 650, n.
11 (1982). In such a case, the Contractor would be entitled to
the benefit of the doctrine of contra proferentum, and the
language would be construed against GPO, see Fry Communications,
Inc./InfoConversion Joint Venture v. United States, 22 Cl. Ct.
497, 503 (1991) (citing William F. Klingensmith, Inc. v. United
States, 205 Ct. Cl. 651, 657 (1974)); MPE Business Forms, Inc.,
GPO BCA 10-95 (August 16, 1996), slip op. at 43, 1996 GPOBCA
LEXIS 31; The George Marr Co., GPO BCA 31-94 (April 23, 1996),
slip op. at 42, n. 33, 1996 WL 273662; Professional Printing of
Kansas, Inc., supra, slip op. at 48, n. 64, if the Appellant was
able to show that it relied on its interpretation in formulating
its bid, see Fry Communications, Inc./InfoConversion Joint
Venture v. United States, supra, 22 Cl. Ct. at 510 (citing Fruin-
Conlon Corp. v. United States, 912 F.2d 1426, 1430 (Fed. Cir.
1990); Lear Siegler Management Services v. United States, 867
F.2d 600, 603 (Fed. Cir. 1990)); MPE Business Forms, Inc., supra,
slip op. at 44; The George Marr Co., supra, slip op. at 42, n.
33; Professional Printing of Kansas, Inc., supra, slip op. at
48, n. 64.
49 Although the Appellant relied principally on Reesman's
testimony, during the hearing all of the Respondent's witnesses
were extensively questioned by both Counsel about the quality and
appearance of Monarch's product. See Testimony of Contracting
Officer Davis, Tr. 212, 209-216, 218-19, 222-26; testimony of
Brzozowski, Tr. 320-25; testimony of Reesman, Tr. 356-57, 363-64,
367-71, 381-86.
50 Aside from any conclusions concerning excess reprocurement
costs which may be drawn from a comparison of the Guide produced
by the Appellant and the version printed by Monarch, the
Contractor also thinks that the Respondent has undercut its
rejection of the Contractor's product by accepting a replacement
with the same alleged defects. See App. Brf., at 6; App. R.
Brf., at 5. Indeed, the Appellant believes that its product was
treated differently by GPO, because not only was the reprocured
Guide not examined by the Government, but the Contractor's
publication received closer scrutiny than normal on the
instructions of the Contracting Officer. See App. Brf., at 6;
App. R. Brf., at 5. See also note 38 supra. In the Board's
view, whether or not Monarch's Guide met QATAP standards for
Quality Level II work is irrelevant to the issues in this case,
which deal exclusively with the propriety of the default action,
and the Government's entitlement to excess costs. Moreover, the
Appellant's assertion in this regard comes close to accusing the
Respondent of bad faith in its administration of the contract.
See App. Brf., at 6. However, the Board has said on numerous
occasions that an 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 Rose Printing, Inc., GPO BCA 32-95
(December 16, 1996), slip op. at 25-26, 1996 GPOBCA LEXIS 34; Big
Red Enterprises, supra, slip op. at 36-37; MPE Business Forms,
Inc., supra, slip op. at 27-28, n. 34; New South Press & Assoc.,
Inc., GPO BCA 14-92 (January 31, 1996), slip op. at 36, 1996 WL
112555; Asa L. Shipman's Sons, Ltd., supra, slip op. at 12, n.
16; Professional Printing of Kansas, Inc., supra, slip op. at 43,
n. 58; Universal Printing Co., GPO BCA 09-90 (June 22, 1994),
slip op. at 24, n. 24, 1994 WL 377586; B. P. Printing and Office
Supplies, GPO BCA 14-91 (August 10, 1992), slip op. at 16, 1992
WL 382917; Stephenson, Inc., GPO BCA 2-88 (December 20, 1991),
slip op. at 54, 1991 WL 439274; The Standard Register Co., GPO
BCA 4-86 (October 28, 1987), slip op. at 12-13, 1987 WL 228972.
Accord Brill Brothers, Inc., ASBCA No. 42573, 94-1 BCA � 26,352;
Karpak Data and Design, supra; Local Contractors, Inc., ASBCA No.
37108, 92-1 BCA � 24,491. "Irrefragable" proof simply means
evidence which is incapable of being refuted; i.e., indisputable
evidence. See Stephenson, Inc., supra, slip op. at 55 (citing
Webster's New World Dictionary 714 (3d ed. 1988) (hereinafter
Webster's). The key to such evidence is that there must be a
showing of specific intent on the part of the Government to
injure the Contractor. See Rose Printing, Inc., supra, slip op.
at 26; Big Red Enterprises, supra, slip op. at 37; MPE Business
Forms, Inc., supra, slip op. at 27-28, n. 34; New South Press &
Assoc., Inc., supra, slip op. at 36, n. 52; Stephenson, Inc.,
supra, slip op. at 54. Accord Kalvar Corp. Inc. v. United
States, supra, 211 Ct. Cl. at 199, 543 F.2d at 1302. See also
Solar Turbines, Inc. v. United States, 23 Cl. Ct. 142 (1991). No
such "irrefragable proof" of the Respondent's bad faith exists in
this record. Certainly, there is absolutely no evidence which
would show that GPO by itself, or in concert with the Coast
Guard, specifically set out to harm the Appellant. See Rose
Printing, Inc., supra, slip op. at 26; Big Red Enterprises,
supra, slip op. at 37; Asa L. Shipman's Sons, Ltd., supra, slip
op. at 12, n. 16; Stephenson, Inc., supra, slip op. at 57.
51 At the hearing, the Contracting Officer essentially testified
that the contract allowed the Appellant 17 workdays to fulfill
the contract from the date of award, but for many reasons the
original ship date of February 3, 1994, was impossible to attain
(R4 File, Tabs A, at 7, C). Tr. 179. However, since seven of
those workdays were set aside for the proofing process, by the
Contracting Officer concluded that only 10 workdays were left for
the Appellant to complete the contract once all the problems
causing the delay, e.g., the tab dividers, the mastheads, etc.,
were resolved. Tr. 179-80. By his calculations, when the
automatic extension due the Contractor for the Government delays
was also factored in, the new shipping schedule was March 23,
1994. Tr. 180, 189-90. See GPO Contract Terms, Contract
Clauses, � 12(c) (Notice of Compliance With Schedules).
52 The Respondent also asserts that while the Contractor first
alleged that it did not respond to the "show cause" letter
because it had been misplaced, and later claimed that its reply
was oral, not written, the fact is that at no time did the
Appellant challenge the new ship date. See Res. Brf., at 3.
53 The Respondent admits that it fixed the problems with the GFM
prior to reprocuring the Guide, but asserts that the corrections
did not change the essential character of the product or increase
its cost. See Res. Brf., at 6, n. 6 (citing Audiosears Corp.,
ASBCA No. 9850, 65-2 BCA � 5233). Indeed, the Government
believes the fact that the Appellant submitted the same offer on
both the original solicitation and the repurchase IFB not only
proves that the GFM changes were "price neutral," but also
establishes a valid yardstick for comparing reprocurement prices.
See Res. Brf., at 6 (citing Octagon Process, Inc., ASBCA No.
3981, 58-1 BCA � 1773).
54 To the extent that the Respondent also addresses the
Appellant's claim that Monarch's Guide s was held to a lesser
quality standard than the product it printed, and that the
reprocurement process itself is suspect because GPO accepted
Monarch's product with the same alleged defects as the
Contractor's, see Res. Brf., at 7, the Board has ruled that the
Appellant's contention is irrelevant to the issues in this case,
see note 50 supra. Likewise, for reasons already given, the
Board refuses to draw any "sinister inference" from the fact that
the Government accepted the repurchased Guide without a quality
assurance inspection, see Res. Brf., at 7, n. 8, because there is
absolutely no "irrefragable proof" of the Respondent's bad faith
in this record, see note 50 supra.
55 As previously noted, Contracting Officer Leonard's letter of
June 9, 1994, indicated for the first time that quality reasons
were also a basis for the default (R4 File, Tab T). See note 43
supra. It is true, of course, that a default termination may be
sustained on any ground that existed at the time of the
termination other than the one given by the Contracting Officer
in the default notice. See Sterling Printing, Inc., GPO BCA
20-89 (March 28, 1994), slip op. at 37, n. 50, 1994 WL 275104,
reconsid. denied, 1994 WL 377592 (July 5, 1994). Accord Joseph
Morton Co., Inc. v. United States, 757 F.2d 1273, 1277 (Fed. Cir.
1985); Quality Granite Construction Co., Inc., ASBCA No. 43846,
93-3 BCA � 26,073; James B. Beard, D.O., ASBCA Nos. 42677, 42678,
93-3 BCA � 25,976. However, in this case there is no basis for
the Board to concur that the default was also predicated on the
quality failures of the Appellant's product. The record clearly
shows that on April 21, 1994, the date of the default notice, the
partial shipment was still with the carrier, and GPO had not yet
inspected the books. Consequently, Contracting Officer Leonard's
additional rationale is not in accord with the facts, and seems
to be little more than a post hoc argument. For the same reason,
the Respondent's arguments in this proceeding concerning the poor
quality of the Appellant's product are irrelevant. See RPTC, at
4; Res. Brf., at 4-5, 7-8.
56 Default terminations-as a species of forfeiture-are strictly
construed. See D. Joseph DeVito v. United States, supra, 413
F.2d at 1153, 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); Foremost Mechanical Systems,
Inc., GSBCA Nos. 12335, 12384, 95-1 BCA � 27,382.
57 Thus, in deciding whether to terminate a contract for default,
the contracting officer is required to exercise his or her
discretion to ensure that termination is in the best interest of
the Government. See PPR, Chap. XIV, Sec. 1, � 3.c.(2). See also
Davis Precision Machining, Inc. v. United States, 35 Fed. Cl.
651, 670 (1996) (citing Nuclear Research Corp. v. United States,
814 F.2d 647 (Fed. Cir. 1987)).
58 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
extend the time available for performance and make termination
prior to that time improper. See e.g., FKC Engineering Co.,
ASBCA No. 14856, 70-1 BCA � 8,312.
59 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 its
contract. See Stephenson, Inc., supra, slip op. at 24, n. 28
(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); Harold Burgmayer Real Estate, Inc., HUDBCA No. 88-3404-
C5, 88-3 BCA � 21,063; EL-ABD Engineering, ASBCA No. 32023, 88-2
BCA � 20,555; G & G Industries, Inc., ASBCA No. 26,111, 84-1 BCA
� 16,999). Accord Jack L. Hartman & Co., Inc., AGBCA No.
84-126-1, 91-1 BCA � 23,546, at 118,082, n. 1 (citing II R. Nash
and J. Cibinic, Federal Procurement Law 1687 (1980)). Printing
contracts awarded by GPO, such as the one here, are considered
supply contracts. See Stephenson, Inc., supra, slip op. at 25,
n. 28.
60 The book in question, "Wildlife America," was ordered by the
U.S. Postal Service (USPS) as a Christmas sales item. Between
September 30, 1987, when the books were received, and December
17, 1987, the date of termination, the Government attempted to
ascertain whether there was any possibility of correcting the
defect in time for the 1987 Christmas season. The contractor
initially proposed "tipping in" the missing pages, but that
solution was unacceptable to the USPS. By the time the
contractor agreed to reprint the books to specifications, it was
too late for USPS' marketing program. Under these circumstances,
the Board had no trouble in concluding that GPO had taken a
reasonable amount of time to determine that acceptable repairs
were not feasible, that its forbearance did not jeopardize its
right to terminate the contract, and that the default was
justified. See Stephenson, Inc., supra, slip op. at 33-34
(citing Environmental Tectonics Corp., ASBCA No. 29947, 87-1 BCA
� 19,382; KOPA Kopier Produckte, ASBCA No. 29471, 85-3 BCA �
18,367; Computer Products International, Inc., ASBCA Nos. 26107
and 26130, 83-2 BCA � 16,889).
61 The is no clear line of demarcation between reasonable
forbearance and waiver. See Stephenson, Inc., supra, slip op. at
22, n. 26 (citing Westinghouse Electric Corp., ASBCA No. 20306,
76-1 BCA � 11,883). Because the matter is determined by the
underlying circumstances of each case, forbearance periods can be
rather lengthy at times. See, e.g., Kit Pack Co., Inc., ASBCA
No. 33135, 89-3 BCA � 22,151 (27 days); Harold Burgmayer Real
Estate, Inc., supra (89 days); Centroid, Inc., ASBCA No. 29,463,
86-1 BCA � 18,644 (74 days); KOPA Kopier Produckte, supra (five
weeks); W.M.Z. Manufacturing Co., Inc., ASBCA No. 28410, 84-3 BCA
� 17,569 (66 days); ACL-FILCO Corp., ASBCA No. 26196, 83-1 BCA �
16,151 (five months); H. N. Bailey & Associates, ASBCA No. 21300,
77-2 BCA � 12,681 (33 days); General Products Corp., ASBCA No.
16658, 72-2 BCA � 9,629 (40 days). Indeed, in one case the Armed
Services Board of Contract Appeals upheld a termination
effectuated more than three years after the contractor actually
defaulted on the contract. See EL-ABD Engineering, supra.
62 The Board also observed that 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." See Stephenson, Inc.,
supra, slip op. at 26-27 (citing Northrop Carolina, Inc. v.
United States, 213 Ct. Cl. 670 (1977); Prestex, Inc., ASBCA Nos.
21284, 21372, 21453, 21467, 23184, 81-1 BCA � 14,882, reconsid.
denied, 81-2 BCA � 15,397). Moreover, the Board noted that in
other cases, the Claims Court made it 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 Stephenson, Inc., supra, slip op. at
27 (citing A.B.G. Instrument & Engineering, Inc. v. United
States, 593 F.2d 394, 403-04 (Ct. Cl. 1979).
63 As the Board observed in Stephenson, Inc., a waiver will
usually be found where the Government takes some action which
gives the contractor the impression that the original delivery
date no longer applies. See Stephenson, Inc., supra, slip op. at
26, n. 30. As examples, the Board noted that the Government may
accept late deliveries, see, e.g., Patten Co., Inc., ASBCA No.
35319, 89-3 BCA � 21,957; Aargus Poly Bag, GSBCA No. 4314, 76-2
BCA � 11,927; Prestex, Inc, supra (partial deliveries); issue
change orders, see, e.g., Klein v. United States, 285 F.2d 778
(Ct. Cl. 1961); Maurey Instrument Corp., ASBCA Nos. 11644,
12,065, 67-2 BCA � 6,480; approve waivers requested by the
contractor, see, e.g., Baifield Industries, Division of A-T-O,
Inc., ASBCA No. 14582, 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. 30055, 85-1
BCA � 17,878; Baifield Industries, Division of A-T-O, Inc.,
supra; or perform acceptance inspections on the items after the
delivery date, see e.g., Associate-Aircraft-Tool &
Manufacturing, Inc., ASBCA No. 7255, 1963 BCA � 3,799; Multi
Electric Manufacturing, Inc., supra. 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 (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. 19687, 77-1 BCA
� 12,329, reconsid. denied, 77-2 BCA � 12,554; Westinghouse
Electric Corp., 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., H. N. Bailey & Associates v. United States, 196 Ct. Cl.
166, 449 F.2d 376 (after the delivery date has passed); Fancy
Industries, Inc., ASBCA No. 26,578, 83-2 BCA � 16,659 (prior to
the delivery date).
64 In the decision, the Board also noted that "[a]s 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
Stephenson, Inc., supra, slip op. at 25, n. 29 (citing Control
Mechanisms, Inc., ASBCA No. 27,180, 84-2 BCA � 17,330). A view
contrary to DeVito was expressed by the Claims Court in Franklin
E. Penney Co. v. United States, 207 Ct. Cl. 842, 524 F.2d 668
(1975), where the court observed by way of dicta that, in so many
words, 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 the Penney case the Claims 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;
Simmonds Precision Products, Inc. v. United States, 212 Ct. Cl.
305, 546 F.2d 886 (1976).
65 FAR� 49-402-3(c) provides: ". . . [I]f the Government has
taken any action which might be construed as a waiver of the
contract delivery or performance date, the contracting officer
shall send a notice to the contractor setting a new date for the
contractor to make delivery or complete performance. This notice
shall reserve the Government's rights under the Default clause."
Indeed, the Board's research discloses that the PPR provision is
identical (except for "GPO" instead of "Government," and "right"
rather than "rights," in the last clause) to an earlier version
of the Executive Branch regulation. In that regard, Part 8 of
the Federal Procurement Regulation also stated: ". . . [I]f the
Government has taken any action which might be construed as a
waiver of the contract delivery or performance date, a
preliminary notice shall be sent to the contractor setting a new
date by which the contractor will be permitted to make delivery
or complete performance, reserving the Government's rights under
the Default clause." See 41 CFR � 1-8.602(d) (1983) (quoted in
Jack L. Hartman & Co, Inc., supra, 91-1 BCA at 118,083).
66 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,
and will not be disturbed by the Board, if it is consistent with
the rules in the PPR. See Hurt's Printing Co., Inc., supra, slip
op. at 4, n. 6 (citing Stabbe Senter Press, GPO BCA 13-85 and
19-85 (May 12, 1989), slip op. at 53, 1989 WL 384977); Graphics
Image, Inc., supra, slip op. at 16. See also Stephenson, Inc.,
supra, slip op. at 19-20, n. 22 ("show cause" notice).
67 Because it is not required, the failure to issue 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 Graphics Image, Inc.,
supra, slip op. at 16, n. 18; Stephenson, Inc., supra, slip op.
at 19, n. 22. Accord Kit Pack Co., Inc., supra, 89-3 BCA at
111,486-87 (citing H. N. Bailey & Associates, supra, 77-2 BCA at
61,553). Consequently, there is no basis for the Board to
disturb Contracting Officer Davis' choice of instruments in this
case. See Stephenson, Inc., supra, slip op. at 19-20, n. 22
("show cause" notice); Stabbe Senter Press, supra, slip op. at
53. Besides, the Board's generally policy is not to "second
guess" the Government as to procedure. See e.g., Media Press,
Inc., supra, slip op. at 2, n. 2; Graphicdata, Inc., supra, slip
op. at 97-98; Universal Printing Co., supra, slip op. at 33-34;
Shepard Printing, supra, slip op. at 14-15, n. 20. Accord Condor
Reliability Services, Inc., ASBCA No. 40538, 90-3 BCA � 23,254;
Goetz Demolition Co., ASBCA No. 39129, 90-3 BCA � 23,241; Kinetic
Engineering & Construction, Inc., ASBCA No. 30726, 89-1 BCA �
21,397; Celesco Industries, Inc., ASBCA No. 22251, 79-1 BCA �
13,604.
68 There also seems to have been some doubt on GPO's part about
the necessity for a contract modification to establish a new
"ship complete to arrive at destinations" date, as well, at least
that is the conclusion which may be drawn from Contract
Modification No. 3. App. Exh. No. 15. In that regard, the Board
notes that Contract Modification No. 3, which fixes April 4,
1994, as the new shipping schedule, is dated March 30, 1994, and
was transmitted to the Appellant on March 29, 1994, the day after
the time limit established in the "show cause" notice for the
Contractor's reply had expired. Id.; R4 File, Tab H. However,
as already found, no original of Contract Modification No. 3 was
ever sent to the Appellant, and it seems to have been nothing
more than an opening proposal by Maher in negotiations over a new
"ship complete to arrive at destinations" date. See Factual
Finding No. 16. More importantly, Contract Modification No. 3
was never effectuated, and indeed, it was expressly disavowed by
the Contracting Officer at the hearing. Id.; Tr. 206-07. Thus,
as far as the Respondent is concerned, the revised "ship complete
to arrive at destinations" date in this appeal remains March 23,
1994, the date of the "show cause" notice.
69 It seems odd that a "show cause" notice could be a proper
vehicle for a "DeVito cure," especially since "a standard show
cause notice is not a prerequisite to an effective default
termination for failure to deliver and is virtually useless
whenever the delivery schedule in a supply contract has been
disestablished." See Lanzen Fabricating, Inc., supra, 93-3 BCA
at 129,609. Indeed, the procurement regulations allow a "show
cause" notice to be waived if not practicable. See PPR, Chap.
XIV, Sec. 1, � 3.c.(1). See also Graphics Image, Inc., supra,
slip op. at 16; Stephenson, Inc., supra, slip op. at 19-20, n. 2.
However, the "show cause" paragraph of the procurement regulation
uses the term "preliminary notice" to describe the delivery date
reinstatement notice, and makes its use mandatory (". . . a
preliminary notice shall be sent . . ."). See PPR, Chap. XIV,
Sec. 1, � 3.c(1). The dictionary defines "preliminary" as
meaning "coming before or leading up to the main action,
discussion, business, etc.," see Webster's, at 1063, and, of
course, in this context "preliminary" refers to an action which
must be taken by the Government before it can declare the
contractor in default; i.e., a condition precedent as it were.
All of which leads the Board to conclude that the "preliminary"
notice required by the regulation is somewhat of a hybrid tool,
i.e., a "show cause" notice in form, but possessing the
attributes of a "cure" notice for the express and limited purpose
of reestablishing the contract due date-call it a "super show
cause" notice if you will-since the standard "cure" notice cannot
be used to revive a disestablished delivery schedule. See Lanzen
Fabricating, Inc., supra, 93-3 BCA at 129,609. Cf., Carlyle
Rubber, Co., Inc., ASBCA No. 23070, 79-2 BCA � 14,117 ("cure
notice" treated as a "show cause" letter).
70 See note 69 supra.
71 Apparently, even though the Contracting Officer disavowed it,
Maher's use of Contract Modification No. 3 to open negotiations
with the Appellant over a revised shipping schedule date achieved
its purpose. App. Exh. No. 15.
72 See note 16 supra.
73 The Board notes that while the record shows that the parties
were addressing the tab divider and color match problems during
the same period of time, the "Extension of schedules" clause
provides no guidance on how to handle overlapping delays caused
by multiple actions of the Government; i.e., the wording of the
clause clearly contemplates a delay tied to a single event. See
GPO Contract Terms, Contract Clauses, � 12(c)(1) (". . . a delay
is caused by any action of the Government, . . . [Emphasis
added.]). Thus, it is an open question whether such delays
should be accounted for separately and the makeup time allowed to
run consecutively, or whether delays which overlap should be
treated as concurrent events. In the circumstances of this case,
if the latter was the intent of the drafters of the clause, then
only 29 additional workdays, in the aggregate, would be due the
Appellant, because the color match delay would be subsumed in the
extra time allowed for the tab divider problem. However, it is
unnecessary to decide that question in this appeal, since the
Board and the Contracting Officer generally agree that the
Appellant was owed 34 extra workdays because of the Government
delays.
74 Indeed, it seems clear to the Board that the only way the
Contracting Officer could have concluded that March 23, 1994, was
the new "ship complete to arrive at destinations" date, under the
formula he used, see note 51 supra, was by basing his
calculations on the original shipping date under the contract.
75 As previously noted, the Contracting Officer testified that
the schedule extension also took into account the time which the
parties spent trying to resolve problems discovered with the GFM.
See note 6 supra. However, unless the Contracting Officer was
referring to GFM defects not at issue in this appeal, on February
3, 1994, the date of the facsimile message, no such matter seems
to have been under discussion. According to the record, the
earliest dealings between the parties concerning the tab divider
defect occurred on or about February 8, 1994, and of course, the
masthead error was not revealed until the press inspection on
March 8, 1994.
76 Even though the Contracting Officer improperly applied the
procedural requirements for effectuating a default, the Board
finds no basis for holding that he also abused his discretion in
this case. While his action may have been erroneous, it was not
so unreasonable as to warrant an abuse of discretion finding.
Cf. Brandywine Prosthetic-Orthotic Service, Ltd., supra, 93-1 BCA
at 125,764 (the contracting officer's default termination based
on either a failure to make timely deliveries or endangering
contract performance, was an abuse of discretion because the four
incidents in question were seven months old and had already been
cured by the contractor). Among other things, the record
indicates that the Contracting Officer considered the eight
relevant factors in the PPR before defaulting the Appellant (R4
File, Tab K, CRB Memorandum, at 2). See note 36 supra. Cf.
Graphics Image, Inc., supra, slip op. at 26-27 (the contracting
officer's failure to consider the PPR factors before terminating
the contract, as well the haste with which the action was taken,
supported an abuse of discretion finding). Accord AFIT, Inc.,
VABCA No. 3783, 94-3 BCA � 27,014; Container Systems Corp., Inc.,
ASBCA No. 40611, 94-1 BCA � 26,354; Etex Co., VABCA Nos. 3415,
3427-29, 93-3 BCA � 26,116; Michigan Joint Sealing, Inc., ASBCA
No. 41477, 93-3 BCA � 26,011. Moreover, the Board cannot
emphasize too strongly that an abuse of discretion finding is not
to be taken as a personal criticism of the contracting officer.
While it is customary to speak in terms of a contracting
officer's abuse of discretion, in reality the abuse of discretion
is committed by the contracting agency because the authority to
terminate is vested in "the Government," rather than the
"Contracting Officer," per se. See GPO Contract Terms, Contract
Clauses, � 20(a)(1) (Default); 48 CFR �� 52.249.5 through
52.249.10 (1996). See also PLB Grain Storage Corp., AGBCA Nos.
89-152-1, 89-153-1, 89-154-1, 91-205-1, 92-1 BCA � 24,731, at
123,429 (citing Sol O. Schlesinger, dba Ideal Uniform Cap Co. v.
United States, 182 Ct. Cl. 571, 390 F.2d 702 (1968)).
77 Although the Board will not consider the matter of excess
reprocurement costs in this appeal, it notes that in doing so it
leaves for another day the resolution of two important repurchase
issues. In that regard, the facts in this case involving the
reprocurement process show, inter alia, that: (a) the
Contractor's low bid on the repurchase IFB was rejected by the
Respondent on the ground that the default on the original
contract made its offer nonresponsible (R4 File, Tabs O, Q and
R); and (b) while the Government took a $2,332.22 prompt payment
discount when it paid Monarch, it assessed as excess costs
$26,921.00, representing the difference between the Appellant's
and the reprocurement contractor's undiscounted bids (R4 File,
Tabs U and V, Colvin Declaration, � 3; FMS Computer Printout).
Tr. 80, 151, 155, 209-10, 224, 226, 366. The first reserved
issue-whether or not the Government's refusal to deal with a
defaulted contractor forfeits its right to excess costs-is
discussed at length by Professors Cibinic and Nash in their
treatise on Federal procurement law. See John Cibinic, Jr. and
Ralph C. Nash, Jr., Administration of Government Contracts
1031-35 (3d ed. 1995). Essentially, the question boils down to
whether it can be said under the facts of a particular case that
the refusal to deal with the defaulted contractor or allow it to
participate in the reprocurement, amounts to a failure to
mitigate damages. Compare Birken Manufacturing Co., ASBCA No.
32590, 90-2 BCA � 22,845 (no penalty for holding the defaulted
contractor's bid nonresponsible), with World-Wide Development
Co., ASBCA No. 16608, 73-2 BCA � 10,140 (failure to deal with
defaulted contractor resulted in the loss of reprocurement costs
because the contractor's temporary inability to perform was cured
at the time of reprocurement). The second issue-whether the
defaulted contractor is entitled to the benefit of the prompt
payment discount by having its excess reprocurement cost
liability reduced accordingly-was addressed in Gold Country
Litho, and the Board answered the question in the affirmative
because that is the general rule. See Gold Country Litho, supra,
slip op. at 36. Accord Futura Systems, ENG BCA Nos. 6037, 6058,
6099, 95-2 BCA � 27,654, at 137,874; Professional Window & House
Cleaning, Inc., GSBCA Nos. 8268, 8775, 90-3 BCA � 22,982, at
115,402; Aerospace Components, Inc., ASBCA No. 28606, 84-3 BCA �
17,536, at 87,339-40; Industrial Fasteners of North America,
GSBCA No. 3634, 72-2 BCA � 9761, at 45,581.