BOARD OF CONTRACT APPEALS
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON, DC 20401
In the Matter of )
)
the Appeal of )
NIMBUS MANUFACTURING, INC. ) Docket No. GPOBCA 21-96
Program C642-S )
Purchase Order 93124 )
Print Order 40003 )
For the Appellant: Nimbus Manufacturing, Inc., Silver Spring,
Maryland, by Frederic G. Antoun, Jr., Attorney at Law,
Chambersburg, Pennsylvania.
For the Government: Thomas Kelly, Esq., Assistant General
Counsel, U.S. Government Printing Office.
Before BERGER, Ad Hoc Chairman.
DECISION ON MOTION AND CROSS-MOTION
FOR SUMMARY JUDGMENT AND ORDER
Nimbus Manufacturing, Inc. (Appellant), 1523 Hugo Circle, Silver
Spring, Maryland, timely appealed the July 23, 1996, final
decision of Contracting Officer Jack Scott of the U.S. Government
Printing Office (Respondent or GPO), partially terminating the
Appellant's contract (Program C642-S, Purchase Order 93124) for
default. Both parties have moved for summary judgment. For the
reasons discussed below, the Respondent's motion is GRANTED and
the Appellant's motion is DENIED.
I. BACKGROUND
1. On or about March 27, 1996, Nimbus was awarded a term
contract encompassing the production and delivery of Compact
Discs-Read Only Memory (CD-ROMs), with accompanying self-mailers,
for the Air Force. The specifications required delivery within 5
workdays of notification to the contractor of the availability of
a print order and associated Government-furnished material. Rule
4 File, Tab A.1
2. On June 19, Print Order 40003, for a quantity in excess of
22,500 CD-ROMs was issued. The Print Order specified a shipping
date of June 28. Rule 4 File, Tab I.
3. The Appellant did not ship by that date because of
difficulties associated with receiving the mailers. Rule 4 File,
Tab S.
4. On July 1, 3, and 8, a Nimbus representative talked with an
Air Force official regarding the delay. In the July 1
conversation the Nimbus representative informed the Air Force of
the delay but promised a partial shipment to arrive on that date.
In the July 3 conversation, initiated by the Air Force to see why
the promised shipment had not arrived, Nimbus referred to
shipping problems associated with the mailers, but said it
thought it would be able to deliver on July 8; the Air Force
official reminded Nimbus of the 5-day turn-around requirement,
explaining that time-sensitive material was involved. In the
July 8 conversation, the Nimbus representative said that the
mailers had been lost in shipment, and that Nimbus would deliver
as soon as it received the mailers. The Air Force official
stated that the shipment was "long overdue" and that the Air
Force "was not happy with this late shipment." In a subsequent
conversation on that date, the Nimbus representative advised that
the mailers had been located and that the CD-ROMs would be
delivered to the Air Force on July 10. The Air Force official
replied that the product "was really of no value ... because of
the time sensitive material on the disk ... that the August issue
was soon to be released," and that the order would be coming in
"to[o] late to mail to the field." Rule 4 File, Tab S.
5. On July 8, GPO was informed for the first time that the
Appellant had not met the contract delivery schedule. GPO was
also advised by the Appellant on that date that it expected to be
able to deliver on July 10. GPO then issued a Show Cause notice
to the Appellant, advising that it was considering terminating
the contract for default and giving the Appellant 5 days to
present any facts bearing on the question of whether the failure
to perform arose from causes beyond the Appellant's control and
without Appellant's fault or negligence. The notice specified
that it was not the intention of the Government to condone any
delinquency or to waive any rights under the contract. Rule 4
File, Tab K.
6. Some time on July 10, the Air Force informed GPO that the
CD-ROMs still had not been delivered. The Contracting Officer
then directed the Air Force not to accept delivery. Delivery was
attempted on that date (the parties disagree as to whether that
was before or after the Contracting Officer's directive was
received), but the Air Force refused to accept it.2 Shortly
thereafter, the Respondent telephonically informed the Appellant
that the Print Order was "canceled."
7. On July 12, the Air Force sent to GPO the 25 CD-ROMs that
were "inadvertently accepted" at the Air Force Electronic
Publishing Library. In an accompanying letter, the Air Force,
explaining why the other 22,025 had been rejected, stated that
the product is "extremely time sensitive and becomes outdated if
not received on the scheduled delivery date and that because of
the late shipment the CD-ROMs were of "no value" to the Air Force
and would have been destroyed if accepted. Rule 4 File, Tab N.
8. By letter of July 18, the Appellant responded to the Show
Cause notice, describing the problems it had encountered with its
mailer contractor and with shipping delays and explaining the
steps it had taken to deal with the situation. Rule 4 File, Tab
O.
9. On July 19, the Contracting Officer sought concurrence from
the Respondent's Contract Review Board to terminate for default
the Air Force's quantity of 22,050 CD-ROMs under Print Order
40003. Concurrence was granted on July 22. Rule 4 File, Tab P.
A "Notice of Termination-Partial" was sent to the Appellant the
next day. Rule 4 File, Tab Q.
II. DISCUSSION
Time is of the essence in all Government supply contracts.3
Simmonds Precision Products, Inc. v. United States, 546 F.2d 886
(Ct.Cl. 1976). The "Default" clause of the contract, GPO
Contract Terms, Solicitation Provisions, Supplemental
Specifications, and Contract Clauses, GPO Pub. 310.2, effective
December 1, 1987 (Rev. 9-88), Contract Clauses, � 20, therefore
permits the contracting officer, by written notice to the
contractor, to immediately terminate a contract for default if
the contractor fails to deliver the supplies or perform the
services within the time specified or any extension thereof.
While the Government has the right to terminate a contract
immediately for failure to make timely delivery, the Government
typically is more interested in production than in litigation,
Devito v. United States, 413 F.2d 1147 (Ct.Cl. 1969); thus, "[a]s
a practical matter ... the Government rarely terminates contracts
for slight delays, much less immediately," and instead may take a
reasonable period of time to determine the course of action that
would be in the Government's best interests. Stephenson, Inc.,
supra, at 21-22. However, if a contract is not 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
and, in the absence of a new delivery date, the Government may be
held to have waived, or to be estopped from exercising, its
right to terminate. De Vito v. United States, supra. The
necessary elements for such a holding are (1) a failure to
terminate within a reasonable time after default under
circumstances indicating forbearance, and (2) reliance by the
contractor on that failure to terminate by continuation of
performance, with the Government's knowledge and implied or
express consent. In other words, if the Government acts in such
a way as to indicate an election to continue performance after
the original delivery date and the contractor then relies on
those actions in continuing performance, the Government will have
waived its right to terminate because of the contractor's failure
to meet that original delivery date. See Questar Printing, Inc.,
supra, at 46-47; Stephenson, Inc., supra, at 26-27.
Accordingly, "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-failure to do either
will forfeit the Government's right to terminate ...." Questar
Printing, Inc., supra, at 49-50.
The Appellant asserts that the Government's actions in this case,
which it describes as "work[ing] with the contractor to get the
job completed and delivered as quickly as possible" and as
including discussions toward that end between "the contracting
officer's representative" and the Appellant as late as 12 days
after the original delivery date, along with the Appellant's
continued performance and effort to deliver, constitute a waiver
of the right to terminate for failure to meet the original June
28 delivery date. The Appellant further asserts that no new
delivery date was established or, alternatively, that a new
delivery date of July 10 was established which it met. The
Respondent's position is simply that it first learned of the
default situation on July 8, immediately issued a show cause
notice indicating the possibility of termination, and took no
other action inconsistent with an intention to terminate. As the
Respondent sees it, any view that the Appellant had regarding the
Government's acquiescence in a July 10 delivery came from its
dealings with an Air Force official or GPO's contract
administrator, neither of whom was authorized to change the
delivery terms of the contract.
A review of the cases in this area indicates that there is no
hard and fast rule dictating at exactly what point a Government
delay in terminating a contract for default will constitute a
waiver of the right to terminate. (For example, a delay of 78
days was found in Stephenson, Inc., supra, to be a reasonable
period of forbearance, while in another case a delay of 57 days
was held to reflect an intention to allow contract performance to
continue. See Westinghouse Elec. Corp., ASBCA 20306, 76-1 BCA �
11,883.) Because the contracting officer is allowed a reasonable
time to investigate the facts and determine the best course of
action, Precision Dynamics, Inc., ASBCA 42955, 97-1 BCA � 28,846;
Eraklis Eraklidis, ASBCA 40110, 91-3 BCA � 24,188, whether a
period of delay is considered to be a reasonable period of
forbearance as opposed to an election to permit the contract to
proceed depends upon the facts and circumstances of each case.
H.N. Bailey & Assocs. v. United States, 449 F.2d 387 (Ct.Cl.
1971); Precision Dynamics, Inc., ASBCA 41360, 97-1 BCA � 28,722.
Where the facts and circumstances indicate that the Government,
through its actions, words, or inaction, led the contractor to
believe that the Government had elected to have the contract
continue, a waiver will be found; where the circumstances fall
short of indicating that the Government made such an election,
the Government's right to terminate will survive the delay. See
John Cibinic, Jr. and Ralph C. Nash, Jr., Administration of
Government Contracts (Third Ed. 1995) 968-69 and cases collected
therein.
The facts in this case, when viewed most favorably to the
Appellant, do not permit the conclusion that the Government
waived its right to terminate for the failure to deliver on June
28. First, none of the conversations between Nimbus and the Air
Force involved an affirmative statement by the Air Force official
to the effect that Nimbus should continue with performance. On
July 1 Nimbus stated its intention to make a partial delivery
that day; on July 3 Nimbus spoke of delivery on July 8; on July 8
Nimbus reported an additional delay and then in a subsequent
conversation indicated it would deliver on July 10. Nothing in
the record suggests that the Air Force encouraged or agreed to
these later deliveries. Rather, the Air Force made it clear on
July 3 that the 5-day contract delivery period was important to
the Air Force because time-sensitive material was involved, and
on July 8 indicated in the initial conversation its unhappiness
with the contractor's tardiness and then later stated that
delivery on July 10 would be of no value to the Air Force. While
the Air Force official never told Nimbus not to bother attempting
delivery and apparently was willing to accept the shipments
promised for July 1 and July 8 if delivery actually took place on
the promised dates, the facts of record clearly reflect that the
Air Force, rather than affirmatively inducing that continued
performance, was essentially doing no more than reacting to the
Appellant's "optimistic projections." See H.N. Bailey & Assocs.
v. United States, supra. Moreover, even if it could be said that
the Air Force had agreed to an extended delivery date, that date
was not later than July 8. When Nimbus failed to deliver by July
8 and subsequently told the Air Force it would deliver on July
10, the Air Force told Nimbus that it was not adhering to its
contract and that CD-ROMs delivered on July 10 would be of no
value to the Air Force. This is hardly consistent with the
notion that the Air Force considered July 10 to be a new,
acceptable delivery date.
Second, and in any event, the Air Force's conversations with
Nimbus are irrelevant. While Nimbus's contract was a "direct
deal" contract, pursuant to which the Air Force could issue print
orders directly to the Appellant and certain direct contact
between Nimbus and the Air Force was authorized, the Air Force
had no authority to change the terms of the contract; that
authority remained with the GPO contracting officer. Fry
Communications, Inc., GPOBCA 30-94 (March 30, 1998), slip op. at
6, 1998 WL ______; Swanson Printing Co., GPOBCA 27-94 and 27-94A
(November 18, 1996), slip op. at 4, n.9, 34, 1996 WL 812958;
Printing Procurement Regulation, GPO Pub. 305.3 (Rev. 10-90)
(hereafter PPR), Chap. XII, Sec. 1, � 2. Nimbus was specifically
informed of that fact in the Contracting Officer's contract award
letter of March 27, 1996.4 Thus, Nimbus knew that no one in the
Air Force had the authority to change the contract delivery date.
It therefore could not reasonably believe, on the basis of its
conversations with the Air Force, that there had been any
extension of the delivery date. See General Prods.Corp., ASBCA
16658, 72-2 BCA � 9,629 (contractor knew that administrative
contracting officer was not authorized to accept proposed
delivery schedule revision); Stephenson, Inc., supra at 34 ("for
detrimental reliance to occur ... there must be ... conduct by a
contracting officer which the contractor reasonably believes
constitutes encouragement to proceed ... after the delivery date
has passed ...." [emphasis added]). The Respondent's actions
during this time period do not remotely suggest any undue delay
or encouragement or inducement to the Appellant to continue
performance. The Respondent first learned of the failure to
deliver by the contract deadline on July 8 when the Air Force had
the matter brought to the attention of the contract
administrator. Shortly thereafter, the contract administrator
had a telephone conversation with the Appellant's representative
in which the representative stated that he anticipated being able
to deliver on July 10. The contract administrator, who also did
not have authority to change the delivery date, did not advise
Nimbus not to ship on that date, but there is no allegation that
she in any way requested, encouraged, or induced delivery on
that date. Later that day, the Contracting Officer issued his
show cause notice, stating that he was considering terminating
the contract for default and inviting the Appellant to explain
why it had not delivered by the contract deadline of June 28.
The Appellant received the show cause notice on July 12. Rule 4
File, Tab O.
Thus, the only contact between GPO and the Appellant prior to the
attempted delivery on July 10 was the telephone conversation on
July 8. (The Appellant states that it made another call to GPO
later on July 8 to confirm the July 10 delivery.) The
Appellant, while not asserting that the contract administrator
said anything to encourage the July 10 delivery, asserts that GPO
"acquiesced" in the July 10 delivery date because the contract
administrator did not direct it not to deliver on that date or
advise it to expect a termination for default notice. This
argument fails for several reasons. First, mere silence, without
more, normally will not constitute an election to permit
continued performance. ISC/Phonplex Corp. Instruments Sys.
Corp., ASBCA 16668, 73-2 BCA � 10,361. Second, as stated above,
only the Contracting Officer had the authority to change the
contract delivery date. The contract administrator had no such
authority. Thus, she could not, on behalf of the Government,
"acquiesce" in a July 10 or any other extended delivery date.
All the Appellant could reasonably expect from her, as GPO's
designated point of contact (so identified in the March 27 award
letter from the Contracting Officer) for this contract, was that
she would inform the Contracting Officer promptly of the
situation, something she appears to have done, as the Contracting
Officer issued his show cause notice later that same day.
Third, also as indicated above, the Contracting Officer, upon
learning of the situation, was entitled to a reasonable period of
time to determine the appropriate course of action, subject to
the need to act expeditiously as the Appellant was presumably
continuing to incur costs in its efforts to effect delivery by
July 10. ISC/Phonplex Corp. Instruments Sys. Corp., supra.
Here, the facts of record indicate that the Contracting Officer
(1) immediately upon learning of the Appellant's failure to
deliver on June 28 issued a show cause notice5 seeking
information as to whether that failure might be excusable, (2)
upon learning on July 10 that the customer agency could no longer
use the CD-ROMs because of the time-sensitive material involved,
concluded that a default termination (subject to the Appellant's
response to the show cause letter) was appropriate and took the
most immediate, direct action possible consistent with that
conclusion, directing the Air Force not to accept delivery 6 and
having the Appellant notified that the print order was
"canceled," and (3) after allowing time for the Appellant to
respond to the show cause notice,7 terminated the contract for
default on July 23 after requesting concurrence for such action
on July 19 from GPO's Contract Review Board8 and obtaining it on
July 22. The Board sees nothing in these facts that would permit
the conclusion that GPO failed to act expeditiously or within a
reasonable period after learning of the Appellant's failure to
timely deliver, or that GPO induced or encouraged the Appellant
to continue with its plans to attempt delivery on July 10. The
fact that the attempted delivery preceded the Appellant's receipt
of notice that the print order was "canceled" or that the
contract was terminated for default is of no consequence-once the
Appellant failed to deliver on time, the Government had the right
to terminate. Nuclear Research Assocs., Inc., ASBCA 13563, 70-1
BCA � 8,237.
In summary judgment proceedings the parties are expected to go
beyond the basic pleadings, typically by relying on affidavits or
other evidence in the record. Artisan Printing Inc., GPOBCA
15-93 (February 6, 1998), slip op. at 16, 1998 WL 149001.
Neither the Appellant nor the Respondent has furnished affidavits
in this case-they both rely essentially on the Rule 4 File.
Despite this unusual posture, however, the Board is satisfied
that the undisputed facts of record permit the conclusion that
the Appellant was in default for failure to deliver by the
contractually required date of June 28, 1996, and that the
Respondent did not waive that delivery date by doing anything
that reasonably could be regarded as electing to continue
contract performance. Accordingly, the Board concludes that as a
matter of law the Appellant is not entitled to summary judgment
and that as a matter of law the Respondent is so entitled.
Therefore, the Appellant's motion is DENIED and the Respondent's
Cross-Motion is GRANTED.
It is so Ordered.
July 9, 1998 Ronald Berger
Ad Hoc Chairman
GPO Board of Contract Appeals
_______________
1 The Contracting Officer's appeal file, assembled pursuant to
Rule 4 of the Board's Rules of Practice and Procedure, was
delivered to the Board on November 20, 1996. It will be referred
to as the Rule 4 File, with an appropriate tab letter also
indicated. The Rule 4 File consists of 20 Tabs, denominated as
Tab A through Tab T.
2 The refused shipment was for a quantity of 22,025 sent to the
Air Force Publishing Distribution Center in Baltimore. According
to the Appellant, the much smaller quantities delivered to
depository libraries and the Air Force Publishing Office were
accepted. Complaint, � 11.
3 GPO printing contracts are considered supply contracts. Questar
Printing, Inc., GPOBCA 19-94 (June 12, 1997), slip op. at 43,
n.59, 1997 WL 742508; Stephenson, Inc., GPOBCA 02-88 (December
20, 1991), slip op. at 25, n.28, 1991 WL 439274.
4 The letter stated that "[r]epresentatives of the ordering
agency do not have authority to alter or change the
specifications, contract terms, or the print orders, once
issued." Respondent's Reply to Appellant's Motion for Summary
Judgment and Respondent's Cross-Motion for Summary Judgment,
Attachment A.
5Apparently, given the Appellant's receipt date of July 12,
the show cause notice was sent only by mail. Under the
circumstances, it would have been prudent for the Contracting
Officer to have sent the Appellant a copy of the notice by
facsimile transmission. (The Appellant's facsimile number
was provided in its bid and appears on its letterhead, copies
of which were in the contract file. Rule 4 File, Tabs D and
E.) Had he done so, the Appellant might have had a clearer
understanding of the Government's position before delivery
was attempted. His failure to do so, however, does not
change the result, as the Contracting Officer was not
required to issue the show cause notice at all (it is
recommended for issuance "where practicable," PPR, Chap. XIV,
Sec.1, � 3.c.(1)), and had he not done so he still would have
been entitled to a reasonable period from July 8 to determine
whether termination for default was in the Government's best
interests.
6Acceptance of supplies delivered after the contract due date has
been construed as a waiver of the due date. See, e.g., Patten
Co., Inc., ASBCA 35319, 89-3 BCA � 21,957; Aargus Poly Bag, GSBCA
4314, 76-2 BCA � 11,927.
7 In the Appellant's Memorandum in Support of Motion for Summary
Judgment, the Appellant states that "the contracting officer
issued a Show Cause notice on July 8, 1996, allowing the
contractor 5 days to cure the stated default ...." The Appellant
misconstrues the show cause letter. It did not give the
Appellant 5 days to cure the default; it gave the Appellant 5
days to explain why the default occurred. For a discussion of
the different purposes of a cure notice and a show cause letter,
see Questar, Inc., supra, at 51-53.
8 The Contracting Officer is required to seek Contract Review
Board concurrence prior to terminating a contract for default.
PPR, Chap. I, Sec.10, � 4.