Fry Communications, Inc.
GPO BCA 22-84
February 20, 1986
Michael F. DiMario, Administrative Law Judge
Opinion
This appeal, timely filed by Fry Communications, Inc., 800 W.
Church Road, Mechanicsburg, PA 17055 (hereinafter "Fry" or
"Appellant"), arises under the disputes clause of the U.S.
Government Printing Office Contract Terms No. 1, (GPO Pub.
310.2) dated October 1, 1980, which was incorporated in and
.made a part of a certain contract identified as Purchase
Order No. 05899, Jacket No. 438-615, dated April 6, 1984,
between Appellant and the U.S. Government Printing Office
(hereinafter "GPO" or "Respondent"). The contract in the
amount of $8,019 was for the production of 12,000 size 8 1/2 x
11", 144-page Export Trading Companies Guidebooks for the
Department of Commerce. The appeal is from the final decision
of James L. Leonard, Contracting Officer, GPO, of July 10,
1984, affirming his earlier decision to accept the product at
a 18.9 percent discount in price because
"[t]est results showed that the paper was not equal to
specifications in color." (Appeal File, hereinafter "R4 file",
Tab 8) The appeal is remanded back to the contracting officer for
reconsideration for the reasons set forth hereinbelow.
Statement of Facts
The contract specifications (R4 file, Tab 1) required that the
contractor furnish the following in producing the required
product:
PAPER - COLOR AND KIND (must be of a uniform shade in each copy)
Contractor will furnish
JCP Basis - 500 Sheets
Code No.* (Size) (Weight)
Inches Pounds
Text - White Offset Book A60 25 x 38 50
Cover - White Litho Coated L1O 20 x 26 80
Cover
*Must be in accordance with JCP Paper Specification Standards, in
effect on date of this order.
. . . .
Moreover, the specifications state that: "Quality Assurance
Through Attributes (GPO Pub. 310.1) in effect on date of this
order, applies. Level 3." (R4 file, Tab 1)
One-thousand copies were to be delivered to the Department of
Commerce by April 9, 1984, and apparently were so delivered.
However, on April 14, 1984, G. F. Flemion, Printing
Specialist, Quality Assurance Section, Printing Procurement
Department, GPO, inspected the product in accordance with the
contract terms and found from a sample of some 32 books that
there was an apparent color deviation in the paper; and that
the defect was major (32 demerits). He recommended having the
paper tested and, if his judgment of deficiency was correct,
accepting the product at an 18.9 percent reduction in price
(R4 file, Tab 2) pursuant to.the Quality Assurance Through.
Attributes Program ("QATAP") discount guidelines (GPO Pub.
310.1, supra).
On April 30, 1984, Sylvia S. Y. Subt, Chief, Paper and
Physical Testing Division, Quality Control and Technical
Department, GPO, issued a report stating that the products
tested for "[c]olor, finish, formation, and cleanliness [did
not] match . . ." the "Standard Sample . . ." for "JCP A60,
50-pound . . ." offset paper in that the color was "[e]
xcessively dark and red. DE (FMC-II) = 8.7 (36 demerits)." The
products were thus "[n]ot equal to specifications. Wrong color
of text paper. Each publication (for text only) is assessed 36
demerits." (R4 file, Tab 3)
By letter dated May 2, 1984, Appellant was notified of the
finding and the proposed decrease of "up to 18.9% of the
invoice billing price." (R4 file, Tab 4) On May 17, 1984, a
contract modification reflecting this change and the reason
therefore was issued to Appellant (R4 file, Tab 5).
Appellant apparently sent letters on May 15, May 17, and July
3, 1984, attempting to perfect an appeal by taking exception
with the test results "[p]ursuant to the disputes clause in
contract terms No. 1. . ." [based] upon belief that the paper
used] "is equal to the terms in the
contract." [and] "was of uniform shade and therefore not subject
to . . ." the proposed price reduction (R4 file, Tab 6).
The contracting officer, Mr. Leonard, contacted Appellant's
Mr. Ron Wentz by telephone on July 10, 1984, and made a
handwritten memorandum of the conversation. The memorandum
reflects that Mr. Wentz apparently said that he believed the
discount should be 3 to 4% but was told the price reduction
would stand, and that it was much better to accept this than
to have the entire job rejected subject to reprinting (R4
file, Tab 7). The contracting officer's final decision letter
followed (R4 file, Tab 8).
By letter of July 24, 1984, Appellant wrote to the Public
Printer, GPO, perfecting the appeal in accordance with the
terms of the disputes clause, supra. The letter stated in
pertinent part that:
The test results did not state which standard applies to this
test. We also take exception because the standard sample sent to
us does not meet the cromaticity standard. In this we ask that
contract modification 0203 be dropped as we met all standards
that we had control over in the printing of this job. The text
stock passed all the tests that were asked for and was all of one
shade per contract"
R4 file, Tab 9.
The contracting officer apparently believed that this "letter
did not address the final decision of the contracting officer
. . ." and would thus not be accepted as a letter of appeal
(R4 file, Tab 10).
The Appellant sent another letter of July 31, 1984,
specifically referencing the "final decision by the
contracting officer" (R4 File, Tab 11)..
This letter apparently satisfied the contracting officer's
requirement for specificity, since Appellant was notified of
receipt of the appeal and that it was being forwarded to the
Board of Contract Appeals for decision.
By letter of October 1, 1984, Appellant requested an informal
hearing and added the following points to its written record:
(A) The text stock used in this publication closely matches the
standard sample for color. We will bring our sample at the time
of the hearing and show the board what we mean.
(B) The test for the color attribute is subjective. Thus a
contractor cannot know in advance of performance if his paper is
going to be judged in conformance. Nor can he tell from job to
job how it will be judged because the paper may be judged by
different inspectors or by the same inspector in a different
mood. Nor can he be sure he is on an equal footing with other
contractors. Nor can he convey to his paper suppliers the paper
standard which is required.
(C) Compounding the subjectivity of the test for paper color
conformance is the fact that standard viewing conditions are not
described in the QATAP book. The degree of color conformance
varies by the way it is viewed as we will demonstrate at the
hearing.
Official File, Tab 5.
Thereafter, a procedural change occurred in the Board of
Contract Appeals structure causing Appellant to renew its
request for an informal hearing and to restate points A, B,
and C, supra (Official file, Tab 7).
Subsequently, a prehearing conference was held wherein
Appellant was represented by Mr. Henry Fry, its President. The
prehearing conference report (Official file, Tab 11) reflects
that upon convening the hearing the undersigned presiding
hereat briefly stated the facts in the appeal asdescribed
above and then asked Mr. Fry if they were substantially
correct. Mr. Fry advised that they were but stated that he was
withdrawing his earlier position that the standard sample did not
itself meet the chromaticity standard. Thereafter, the report in
pertinent part reflected:
Mr. Fry went on to say he did not understand the DE (FMC II) =
8.7 coordinates (referring to the specification). The
undersigned explained that the DE reference is to the
mathematical calculations that the testing personnel use in
computing the test results. Mr. Fry had additional questions
concerning how the standard relates to the QATAP; how it
relates to mismatched shades; how many points may a product be
off from the standard before demerits are assessed. At this
point the undersigned gave Mr. Fry a copy of page 21 from the
QATAP to review; specifically, the section that refers to
"Demerit Table."
. . . .
After some discussion between the parties, it was agreed that
. . . Mr. [John A.] Tanner, [Quality Control & Technical
Department] QT&TD, [be made] available for questioning. Upon .
. . arrival Mr. Tanner was called as a witness by the
undersigned and asked the following:
Q. Explain the testing process used in this instance.
A. The testing was done by machine, an abridgespectrophotometer.
Q. Does the person using the machine need any special
qualifications?
A. No. The machine makes the judgment; it is not subjective.
Q. Does the machine calculate the demerits?
A. No. The numbers do not indicate demerits but the total color
deficiency. The demerits assigned for this relative deficiency
come from another source document and were determined after a 5-
year study of gathering responses from various individuals. GPO
presented these figures to the Joint Committee on Printing
("JCP") and the JCP adopted these numbers.
Q. How often is the machine calibrated?
A. The machine is calibrated daily.
Q. (Mr. Fry) Can the "white tiles" go bad?
A. Not likely . . . they are made to last a lifetime.
Q. (Undersigned) Would it be helpful to see how the machine
actually works?
A. It takes at least 30 minutes to prepare the machine. Mr. Fry
did not think this would be helpful to him.
. . . .
Mr. Fry went on to say that he was totally unaware of any
[requirement for quantitative] testing of paper only
subjective testing in comparing sample to standard.
Mr. Tanner added that the 5-year study was for white paper.
There are no published standards as of yet for color paper.
Mr. Fry said he would like to see the paper showing the adopted
standard used by the testing personnel in making their
determinations.
There was a brief recess.
After the recess, Mr. Fry was handed a copy of the "Report by
GPO Paper Specification Committee" to the JCP. Mr. Fry asked
if this document had been referenced in the specification.
However, no one could answer that question on the spot. The
undersigned pointed out that on the specification it refers to
JCP A-60 with an asterisk which reads, "[m]ust be in
accordance with JCP Paper Specification Standards in effect on
the date of this order." Also referenced on the specification
is Publication 310.1, "QATAP", which was later determined to
still be in effect.
The undersigned added that it had not been determined that the
GPO Paper Report had been mentioned or referenced in the
specification. However, the basic specification adopts the
entire JCP standard. It was apparent to the undersigned that
GPO's testing people had based their results in this matter on
the GPO Paper Study Report.
Mr. Fry assumed that color was classified [in the QATAP] under
judgment characteristics, but according to the "GPO Paper
Study Report", color deficiency is not a judgment
characteristic. Mr. Fry asked on what QATAP grounds he had
been assessed demerits.
Q. (Undersigned) Mr. Tanner, with respect to the analysis of
paper and color (white), what QATAP portion do.you use to assess
demerits?
A. I am not sure off the top of my head. Mr. Tanner went on to
say that he referred to the numbers published in the "GPO Paper
Study Report."
Mr. Fry replied that they were not the same numbers. Mr. Fry
contends that the area he was found defective in is not
included in the QATAP. He felt the testing was subjective at
one time and was [therefore] never included in the present
QATAP.
Government counsel felt Mr. Fry's argument was "just a smoke
screen," but would need additional time to respond. [He] said
he would have the sample product available at the hearing to
compare to the finished product. He felt the difference in
color of paper would be obvious to see by all.
Mr. Fry then added the comparison of products could be done at
this time. In fact, he added, "I came prepared today to make
that comparison." Mr. Fry contends that there is not an
obvious difference.
The undersigned, for clarification purposes, asked Mr. Fry if
he wanted him to make that determination now on his own
without any technical results. Mr. Fry responded yes. (Prior
to making the visual comparison, the undersigned asked if
samples (standard sample and finished product) could be tested
one against the other by the GPO testing equipment, but the
response was that the standard sample had not been put
through. the equipment.)
The undersigned compared the record standard sample (only one
sheet of paper) with the finished product. (A sheet of white
paper was placed behind each piece of paper being reviewed.)
It was clear to the undersigned that there was a difference in
color. He inquired about the testing conditions at GPO and was
informed that a standard booth is used.
Mr. Fry felt there was an "OK" deviation. The undersigned went
on to say that often physical evidence is used and the ruling
authorities' subjective judgment often applies.
From his visual observation, the undersigned then ruled that
the paper submitted by Fry did not match the standard sample.
He informed the parties that he would confirm his decision in
writing.
The appeal comes before the Board for final written decision
in this form.
Issues
Issue 1 - Whether a product printed upon white paper which by
visual comparison and technical testing does not match in
color a contractually indicated standard sample is rejectable
under the terms of the contract.
Issue 2 - If found rejectable, is the discounted price at
which the Government indicates its willingness to accept the
defective product reasonable?
Discussion
Despite the undersigned's oral ruling upon his visual
comparison of the contested product and standard sample that
the colors of the two products are distinguishable one from
another, the determination of issue number one is still
necessary since pursuant to the contract certain defective
paper products are acceptable within limits. Moreover, other
paper products which fall outside such limits, if deemed
rejectable, may be accepted at the discretion of the
contracting officer at a discounted price.
The first issue raises a question of law and as such, any
decision by an administrative Board on such issue is
reviewable by the Federal Courts (Wunderlich Act, 41 U.S.C. ��
321 and 322). The second issue raises a question of fact
pursuant to a contractual provision, infra.
The examination of issue number one must necessarily start
with the contract. The key provisions are set forth in part in
each of the contract documents; i.e., the purchase order,
Contract Terms No. 1, QATAP, and U.S. Government Paper
Specification Standards (hereinafter "JCP Paper Specification
Standards"). Accordingly, it will be helpful to examine those
provisions for comparison purposes to aid our analysis.
(THE CONTRACT)
(1) The contract purchase order incorporating the paper
specification specifies that the required 25 x 38" 50 lb.
Offset Book paper, JCP Code. A-60, "[m]ust be in accordance
with JCP Paper Specification.Standards, in effect on date of
this order."
(2) The purchase order also specifies that "Quality Assurance
Through Attributes Program (GPO Pub. 310.1) in effect on date
of this order, applies. Level 3 [and that] U.S. Government
Contract Terms No. 1 (GPO Pub. 310.1), in effect on date of
this order, applies."
Level III is not defined in the QATAP Contract Terms but
within separate guidance given all contractors on such terms.
Such guidance in pertinent part states:
Level III: (Good Quality)
Level III conformance is typically required for products which
contain illustrations used for identification or which must
transmit precise information even though minute detail is not
required.
These products typically involve above average quality
workmanship, materials, composition, typography, reproducibles
and production methods. Products in this level typically
require clean, sharp printing of single- or multi-color work
(general process work) and halftone reproductions up to 150
line screen. Finishing must be held to above average standards
of accuracy, durability and appearance.
(3) The order also required that two copies of the finished
product be mailed "to GPO Quality Assurance Section Marked:
Inspection Sample".
(4) Article 2-12(a) of U.S. Government Printing Office
Contract Terms No. 1, revised October 1, 1980, provides that:
(a) All supplies (which term, throughout this. article,
includes without limitation, raw materials, components,
intermediate assemblies, and end products) shall be subject to
inspection and test by the Government, to the extent
practicable at all times and places including the period of
manufacture, and in any event prior to acceptance.
(b) In case any supplies or lots of supplies are defective in
materials or manufacture or otherwise not in conformity with
the requirements of the contract, the GPO shall have the right
either to reject them (with or without instructions as to
their disposition) or to require their correction. . . . If
the contractor fails . . . to promptly replace or correct such
supplies or lots of supplies, the GPO either (i) may by
contract or otherwise replace or correct such supplies and
charge to the contractor the cost occasioned the Government
thereby, or (ii) may terminate the contract for default as
provided in the article entitled "Default" of these contract
terms. Unless the contractor corrects or replaces such
supplies within the established delivery schedule, the
Contracting Officer may require the delivery of such supplies
at a reduction in price which is equitable under the
circumstances. Failure to agree to such reduction of price
shall be a dispute concerning a question of fact within the
meaning of the article entitled "Disputes" of these contract
terms.
(5) The JCP Paper Specification Standards of December 1, 1981,
for JCP A-60 printing paper require that in its color "[p]aper
shall conform to the standard sample(s) as adopted by the
Joint Committee on Printing.. (For information only, the
chromaticity coordinates and luminance value for the standard
adopted by the Joint Committee on Printing are: x=0.316, y=
0.326, and Y=83.0 pct.) "Sampling and testing shall be
conducted in accordance with standards in Part 2, Paper
Specification Standards."
(6) Part 2 of the JCP Paper Specification Standards captioned
"Testing Standards and Definitions" provides for testing "[c]
olor by visual comparison" and by "spectral reflectivity" and
under the caption "General Information" specifies that "[t]he
methods given in this Part of the Standards are required to be
used in measuring the characteristics of papers that are
specified in Part 1, Specifications."
Paper suppliers are required to make such tests as may be
necessary, to ensure the delivery of finished paper fully
complying with the applicable specifications and standard
samples. . . . All paper, including paper in the manufacturing
process, shall be subject to inspection as authorized or
required by the Committee.
Following the subcaption "[c]olor by visual comparison", part
2 specifies:
Use method T-508, with a qualified observer. A qualified
observer is a person with considerable experience in paper
color matching, who is able to attain a score of at least 75
in the ISCC Color Aptitude Test (obtainable through the
Federation of Societies for Paint Technology, 121 South Broad
Street, Philadelphia, Pa. 19103).
Following the subcaption "[c]olor by spectral reflectivity"
part 2 specifies: "Use method E-308 of ASTM." Under the
subcaption "[g]eneral information", supra, ASTM is identified
as the American Society of Testing and Materials, followed by
its address.
(7) Part 4 of the specification standards captioned
"Acceptance Criteria", specifies:
Paper that does not meet all specification values shall be
accepted with no discount providing that the minimum
acceptable Product Quality Index (PQI) of 70 is met.
The PQI for a specific paper is determined by assigning
demerits to each deficient quality characteristic based on
test results. The demerits assigned will vary with the
category of deficiency. A minor defect shall be assigned 4
demerits, a major defect 12 demerits, and a critical defect 36
demerits.
. . . .
Definitions:
Minor Defect: Any deficiency from specified values which does
not materially reduce the usability of the paper for its
intended purpose; or require special procedures for printing
or processing.
Major Defect: Any deficiency from specified values, other than
critical, that could result in failure, or materially reduce
the usability of the paper for its intended purpose; or may
require special procedures for printing or processing, or is a
significant deviation from specifications, established
standards, or average process capability, or may materially
affect the appearance of the product.
Critical Defect: Any deficiency from specified requirement
that judgment and experience indicate would result in the
paper being unusable for its intended purpose; or is a serious
departure from specifications, established standards, or
average process capability.
There follows a mathematical equation for computing the PQI;
namely, that: "Product Quality Index is equal to 100 minus the
sum of the assessed demerits [which] [e]xpressed
mathematically [is]
PQI=100 -- i=N
\ \Ci
/ /
i=1
Thereafter, part 4 states that "[p]aper having a PQI of 70 or
better shall be accepted at the contracted price as meeting
the intent and requirement of the specification. That having a
PQI below 70 shall be considered as critically defective,
subject to outright rejection."
There follows "[c]riteria for establishing the category of
defect and demerits . . .", however, no specific criteria are
set for "color" but such characteristic would necessarily have
to fall either in No. 23, "All Other Measurable
Characteristics" or No. 24, "Judgment Characteristics." If
held to come under the former characteristics, the category =
demerit
allocation would be:
Category Demerits
Minor 4
Major 24
Critical 36
While if found to be under the latter characteristic it would be:
Category Demerits
Minor 2
Major 14
Critical 36
(8) The Quality Assurance Through Attributes Program (GPO Pub.
310.1) as revised 6/1/81 in pertinent part provides that:
1-1. Quality Attribute - A quality attribute is a property of a
printed product which affects its quality. Examples are trim
size, image position, type quality, and paper.
. . . .
1-3. Critical Defect - A critical defect is a serious deviation
from specifications. Critical defects are designated in the
tolerance tables for finishing attributes and the paper
attribute.
1-4. Major Defect - A major defect is a deviation from
specifications which is less serious than a critical defect.
Major defects are designated in the tolerance tables for printing
attributes, finishing attributes, and the paper attribute.
1-5. Total Defects - Total defects are the sum of all critical
and all major defects (e.g., 3 critical defects + 2 major
defects = 5 total defects).
1-6. Acceptable Quality Levels (AQL's) - The AQL's are the
maximum number of defects per 100 copies that the Government
will accept at the contract price. Unless otherwise specified,
the AQL's are 1.0 for critical defects and 6.5 for total
defects.
. . . .
1-11. Standard Viewing Conditions Standard viewing conditions
are those defined in "ANSI PH2.32-1972 American National
Standard Viewing Conditions for the Appraisal of Color Quality
and Color Uniformity in the Graphic Arts, Part 1, 'Viewing
Conditions for the Appraisal of Color Quality in the Graphic
Arts'."
2. DETERMINATION OF PRODUCT QUALITY
a. QATAP establishes attributes for quality and it defines
tolerances for those attributes for five quality levels of
printing. When attributes deviate from the allowable
tolerances, the deviations will be classified as either major
or critical defects pursuant to the applicable tolerance
table.
. . . .
3. DETERMINING ACCEPTABILITY - Because.inspection of all
copies of a publication is usually impractical, the Government
will utilize statistical sampling to determine quality. When
the Government determines that both the number of critical
defects and the number of total defects in the lot or batch do
not exceed their respective AQL's, the lot or batch will be
accepted at the contract price. MIL-STD-105D will be used to
make this determination.
If the defects exceed both AQL's, the Government will have the
option of having the lot or batch replaced, having the defects
corrected, or accepting the lot or batch with an equitable
reduction in the contract price. The discount tables contained
in Appendices A & B will be used as a guide by the Contracting
Officer to determine reductions. Failure to agree to such
reduction of price shall be a dispute concerning a question of
fact within the meaning of the article entitled "Disputes" of
Contract Terms No. 1. In all cases it is the intent of the
Government that the products meet the quality required in the
specifications.
4. CATEGORIES OF ATTRIBUTES - Quality attributes are divided
into three categories which consist of printing attributes,
finishing attributes, and the paper attribute.
(9) The "Paper Attributes" on page 39, et seq., of the QATAP
cover acidity, alpha cellulose, basis weight, bursting
strength, etc., but have no express standards for "color".
They do, however, in item 22 cover "all other measurable
characteristics" and in item 23 "judgment characteristics".
The same is almost identically true of the "Acceptance
Criteria", part 4, of the JCP Paper Specification Standards.
The two criteria listings differ only in respect to the
characterization of the category of deficiency. In the QATAP,
items 22 and 23 define such deficiencies as insignificant,
significant, and excessive, while the JCP Paper Specification
Standards refer to these as minor, major, and critical,
clearly referring back to the definitional statement for such
terms set forth in paragraph (7) herein above.
Analysis
Analyzing the above provisions, it becomes clear that "color"
falls under either a judgment characteristic or measurable
characteristic under both the QATAP and the JCP Paper
Specification Standards. It is also clear that if it is deemed
to be a judgment characteristic, then such judgment must be
made by a person meeting certain established
qualifications and be undertaken under certain prescribed viewing
conditions. The judgment, however, is subjective and visually
made by comparison with the standard sample. The person making
such judgment is to then characterize the compared product
according to such judgment as having no defects, minor defects,
major defects, or critical defects and allocate demerits
according to a table correlated with such characterization; i.e.,
critical defect = 36 demerits. Demerits are then used within the
prescribed formula to determine Product Quality Level (PQL) and
if above 70 the product must be accepted, but if below 70 the
product must be rejected. If rejected or more accurately,
rejectable, the product may be accepted by the contracting
officer at a discount, such being determined under the discount
tables appearing on pages 42 through 46 of the QATAP.
The same process is generally carried out if color is deemed a
"measurable" characteristic with testing by spectral
reflectivity except that in such instance there is a
requirement that the testing procedure follow certain
technical standards. No technical standard for product color
variations itself has been adopted. The standard to be met is
still the match of the product with the standard sample using
the same acceptance criteria based upon the same system of
demerits and PQL formulation. Despite precise measurements,
the allocation of demerits still requires a subjective
characterization of any defective product as one with no
defects, or minor, major, or critical defects, etc. It is this
very subjectivity to which the Appellant is objecting. The
contract provisions, however, seem to allow for this
subjectivity while at the same time recognizing that they may
not always result in a proper judgment being made. Thus, there
are
provisions allowing the matter of rejection or discount amount to
be appealable under the "Disputes" article of Contract Terms No.
1. With respect to any such appeal, the amount of discount is
deemed to be a question of fact rather than question of law in
recognition, we presume, of the subjectivity of such judgment.
Thus far from our analysis it would appear that the Respondent
followed precisely the provisions of the contract and afforded
the Appellant the requisite rights to which it was entitled.
The product was being judged in accordance with what appeared
to those making the judgment to be all of the requirements of
the contract. Both inspectors' (Mr. Flemion and Mr. Tanner)
assessments of demerits to the product were based upon "color"
being a judgment characteristic, and that the product was
defective in a major (32 demerits) or critical (36 demerits)
way based upon their assessment of the defects. Moreover, Mr.
Tanner's judgment was buttressed by an additional supposition
that differences in "color" could be measured scientifically
by calibrated equipment and that demerits could be allocated
pursuant to standards arrived at from study results compiled
over a 5-year period of time although unpublished. In either
case, once demerits were determined, the discount was arrived
at by reference to the discount table for critical defects
appearing on pages 42 and 43 of the QATAP.
The problem with judgments so made is not their qualified
subjectivity which after all are the same kinds of judgments
which physicians, judges, and other professionals must
regularly make. The problem is that they overlook an important
element of the characterization requirements.set forth in the
definitional section of the JCP Paper Specification
Standards, supra, for minor, major, and critical defects. That
is, to look at the defects with respect to whether or not they
"materially reduce the usability of the paper for its intended
purpose," or they "result in the paper being unusable for its
intended purpose" (in this case, as a guidebook for the
Department of Commerce). This examination requirement is set
forth in standards adopted by the JCP pursuant to law and
therefore has the force and effect of law. Thus, there is a legal
requirement to make a.judgment of the defective product against
its intended use. It does not appear in any of the documentation
or testimony that such judgment was made. If such judgment were
to be made, however, it does seem that mere acceptance of the
product at any discount whatsoever militates against it being
deemed "unusable for its intended purpose" and thus "critically"
defective as it has been characterized. Moreover, if such
judgment were that the usability of the product has been
materially reduced by the color defect, the question which must
still be addressed is the rational extent of such reduction. Is
18.9% as the contracting officer has determined by mechanical
application of the QATAP reasonable? This is the very question
raised by our statement of the second issue in this appeal. It
seems to this Board that the use of the QATAP discount table
provision in this manner is tantamount to having a liquidated
damage provision which is confiscatory and penalizing and thus,
against public policy as we have held in the appeal of Edwards &
Broughton, Co., GPO BCA 6-84, wherein at page 5 we said:
This Board has ruled that this method of adjusting.the contract
price using the QATAP operates as a liquidated
damage clause. Appeal of Edward Brothers, Inc., GPO CAB 3-83, May
3, 1984. In order to have an enforceable liquidated damage
clause, the clause must fix damages that are reasonable
compensation for the harm caused by the contractor's failure to
perform. Priebe & Sons v. United States, 332 U.S. 407 (1947). As
the Board stated in Edward Brothers, the discount tables cannot
be applied mechanically. Rather, they must be utilized on a case-
by-case basis. Although liquidated damage clauses are used where
damages are difficult to estimate at the time the contract is
awarded, the liquidated damages assessed must bear some rational
relation to the actual damages suffered by the Government.
Graybar Electric Company, Inc., ICBA No. 773-4-69, 70-1 BCA �
8121.
Decision
The case is remanded back to the contracting officer for
reconsideration of his final decision in light of this
opinion. If after reconsideration the contracting officer
finds that his prior judgment is still supported, he is
directed to submit documentation of such support back to the
Board through counsel with appropriate copy to Appellant. The
Board will retain jurisdiction to determine the
appropriateness of such contracting officer's judgment as part
of this appeal.