BOARD OF CONTRACT APPEALS
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON, DC 20401
In the Matter of )
)
the Appeal of )
)
WICKERSHAM PRINTING COMPANY, INC. ) Docket No. GPOBCA 23-96
Program D688-S )
Purchase Order 95912 )
For the Appellant: Wickersham Printing, Lancaster, Pennsylvania,
by Frederic G. Antoun, Jr., Attorney at Law, Chambersburg,
Pennsylvania.
For the Government: Kerry L. Miller, Esq., Associate General
Counsel, U.S. Government Printing Office.
Before BERGER, Ad Hoc Chairman.
DECISION ON MOTIONS FOR SUMMARY JUDGMENT AND ORDER
Wickersham Printing Company, Inc. (Appellant), 2959 Old Tree
Drive, Lancaster, Pennsylvania requests summary judgment on
its appeal of the assessment of excess reprocurement costs
that followed the termination for default of its requirements
contract for loose-leaf printed products under Program D688-S,
awarded by the U.S. Government Printing Office (GPO or
Respondent) for the June 1, 1996-May 31, 1997 contract year.
The Respondent also moves for summary judgment. For the
reasons which follow, the Appellant's motion is DENIED and the
Respondent's motion is GRANTED.
I. BACKGROUND
1. On April 19, 1996, the contract was awarded to the
Appellant by Purchase Order 95912 following competitive
bidding. Rule 4 File, Tab 10.1 The Appellant, although not
the low bidder, was the low responsible bidder at a total
discounted estimated price of $194,851.10. Rule 4 File, Tabs
3, 4, 9.
2. The contract contained several line items for varieties
of paper expected to be required for contract performance.
The estimated quantity for the first line item of paper, 50-
lb. white offset book paper, was 11,511,000 sheets. The next
highest quantity, for white vellum-finish cover paper, was
228,000. Rule 4 File, Tab 1 at 13, 18. The contract also
contained a "Paper Price Adjustment" clause which provided for
paper price adjustments in the event a specified price index
published by the Bureau of Labor Statistics (BLS) increased or
decreased by more than 5 per cent. Rule 4 File, Tab A at 3.
3. The contract was terminated for default on July 17, 1996
because of the Appellant's inability to meet delivery
requirements. The termination notice advised the Appellant
that the terminated items might be reprocured and that the
Appellant would be held liable for any excess costs of
reprocurement. Rule 4 File, Tab 34.
4. The Contracting Officer then contacted Goodway Graphics
of Virginia, Inc., the next low bidder. That company agreed
to perform the balance of the contract at the prices it had
offered on the original procurement. The Contracting Officer
estimated the difference in cost between the
defaulted contract prices and Goodway Graphics' prices for the
remaining 10-1/2 months of the contract as $20,483.19. Rule 4
File, Tab 37.
5. GPO's Contract Review Board (CRB), by a two to one vote,
concurred in awarding the reprocurement contract to Goodway
Graphics. The dissenting member did not agree that the cost
of reprocurement had been adequately mitigated. He stated
that the cost of paper had dropped 5 percent between April and
May and that there was "no information as yet of the reduction
between May and July," although he noted that "[a]s an
indication of the trend, paper dropped 9 % between March and
May." Rule 4 File, Tab 37.
6. The reprocurement contract was awarded to Goodway
Graphics on July 22, 1996, by Purchase Order 93232. Rule 4
File, Tab 38. Excess reprocurement costs on orders placed
under this contract totaled $20,741.09. Declaration of
Contracting Officer John R. Scott (hereafter Scott
Declaration). GPO collected that amount by deducting it from
other funds owed to the Appellant. Brief in Support of
Appellant's Motion for Summary Judgment (hereafter App. Brf.)
at 4.
II. DISCUSSION
The "Default" clause of the contract, GPO Contract Terms,
Solicitation Provisions, Supplemental Specifications, and
Contract Clauses, Contract Clauses, � 20, GPO Pub. 310.2,
effective December 1, 1987 (Rev. 9-88), provides that the
Government, upon terminating a contract for default, "may
acquire, under the terms and in the manner the Contracting
Officer considers appropriate, supplies or services similar to
those terminated, and the contractor will be liable to the
Government for any excess costs for those supplies or
services." The Government has a duty to mitigate the
defaulted contractor's liability, however, and it is therefore
the Government's burden to demonstrate the propriety of the
repurchase and its entitlement to the amount claimed as excess
reprocurement costs. K.C. Printing Co., GPOBCA 2-91 (February
22, 1995), slip op. at 18, 1995 WL 488531. To meet this
burden, the Government must show that (a) the reprocurement
contract was performed under substantially the same terms and
conditions as the original contract; (b) it acted within a
reasonable time following default to reprocure; (c) it
employed a reprocurement method that would maximize
competition under the circumstances; (d) it obtained the
lowest reasonable price; and (e) the work has been completed
and final payment made so that the excess cost assessment is
based upon liability for a sum certain. Gold Country Litho,
GPOBCA 22-93 (September 30, 1996), slip op. at 26, 1996 WL
812956 (quoting from K.C. Printing Co., supra, at 18-19),
aff'd in part and vacated in part, GPOBCA 22-93 (March 17,
1997), slip op., 1997 WL 742506; Univex International, GPOBCA
23-90 (July 5, 1996), slip op. at 4, 1996 WL 812959; Asa L.
Shipman's Sons, Ltd., GPOBCA 06-95 (August 29, 1995), slip op.
at 28, 1995 WL 818784; Sterling Printing, Inc., GPOBCA 20-89
(March 28, 1994), slip op. at 52-53, 1994 WL 275104, recon.
denied, GPOBCA 20-89 (July 5, 1994), slip op., 1994 WL 377592.
The Appellant, which challenges only the assessment of excess
reprocurement costs and not the default termination itself,
concedes that the Respondent has satisfied criteria (a), (b),
and (e). It asserts, however, that the facts establish that
the Respondent did not employ a reprocurement method that
maximized competition and did not obtain the lowest reasonable
price. This assertion is based on the Respondent's failure to
seek competitive bids for the reprocurement when, the
Appellant states, the Respondent knew or should have known
that paper prices had undergone "a dramatic drop." App. Brf.
at 7.
Government contracting officers have broad discretionary
powers to determine the appropriate method of reprocurement
following a termination for default. Big Red Enterprises,
GPOBCA 07-93 (August 30, 1996), slip op. at 43, 1996 WL
812960. Thus, even though they have an obligation to mitigate
the defaulted contractor's damages by selecting a
reprocurement method that will maximize competition and result
in the best or lowest reasonable price, an unrestricted, fully
competitive approach is not always required. The Government
must simply act reasonably and prudently under the
circumstances. See Gold Country Litho, supra, at 30-31. For
example, if the Government's needs are sufficiently urgent,
negotiation of a reprocurement contract with a single source
or a limited number of sources is permissible notwithstanding
that a fully competitive approach might produce a better
price. Consolidated Airborne Sys., Inc. v. United States, 348
F.2d 941 (Ct. Cl. 1965); H & H Mfg. Co. v. United States, 168
Ct. Cl. 873 (1964); Ross & McDonald Contracting, GmbH, ASBCA
38154, 94-1 BCA � 26,316.
Further, and more germane to the case at hand, when it is
reasonable to believe that the results of the original
competition provide either the same or better pricing than
what would be obtainable from a new competition, the award of
a reprocurement contract to the bidder next in line for award
in the original procurement, at that bidder's original
pricing, is also permissible. See Gold Country Litho, supra,
at 32; Asa L. Shipman's Sons, Ltd., supra; Rainbow Connection,
Inc., ASBCA 33583, 88-3 BCA � 20,922. As the Comptroller
General has stated, notwithstanding that normally the
Government is expected to obtain the best price available
through the "crucible of competition," Olivetti Corp. of
America, B-187369, Feb. 28, 1977, 77-1 CPD � 146, "it is
reasonable to award a repurchase contract to the next low
responsive, responsible bidder on the original solicitation at
its original bid price provided that there is a relatively
short time span between the original competition and the
default and there is a continuing need for the items."
Performance Textiles, Inc., B-256895, August 8, 1994, 94-2 CPD
� 65; see International Technology Corp., B-250377.5, Aug. 18,
1993, 93-2 CPD � 102; Hemet Valley Flying Service, 57 Comp.
Gen. 703 (1978), 78-2 CPD � 117. Obviously, however, where a
significant amount of time has elapsed after the original
competition, so that the prices from that competition may no
longer reasonably reflect what would be realized in a new
competition, or where, regardless of the time that has
elapsed, market prices have decreased since the time of the
original competition, it would not be reasonable for a
contracting officer to rely on that original competition and
simply make award to the next low bidder. See Made-Rite Tool
Co., Inc., ASBCA 22127, 79-2 BCA � 13,975 (difference between
the defaulted contract price and the price of the second low
bidder is not a proper basis for assessing excess
reprocurement costs where the record shows that prices went
down after the competition so that a reprocurement should have
resulted in a price lower than or no higher than the defaulted
contract price).
Here the reprocurement occurred approximately 90 days after
the original competition. During that period, the Appellant
asserts, the cost of paper, a significant element of the
contract pricing, had declined by 20.8 percent. The Appellant
arrives at that figure by referring to (1) the dissenting CRB
member's statement that paper prices dropped 5 percent between
April and May 1996 and (2) the July 22-26, 1996 issue of Pulp
& Paper Week,2 which for 50-lb. white paper showed a price
decrease from $760 on May 1 to $640-$700 on July 1. The
Appellant computes the decrease from $760 to $640 as one of
15.8 percent, and combines that with the earlier 5 percent
decrease to reach the 20.8 percent figure. The Appellant
concludes from this that it is entitled to summary judgment
because under these circumstances the Respondent cannot show
that its reprocurement method was appropriate or that it
resulted in the lowest reasonable price.
The Respondent, on the other hand, asserts that it acted
reasonably and that the changes in the price of paper were far
less dramatic than what the Appellant asserts them to be. In
his Declaration, Contracting Officer Scott states that he
chose to attempt to negotiate a contract with Goodway Graphics
for several reasons:
First, we had just gone through a formally advertised procurement
a few months earlier that had resulted in [a] very competitive
procurement. The top three responsible bidders submitted bids
that were closely grouped together. I had no reason to believe
that these prices were not reasonable or competitive or that
further competition would result in materially lower prices.
... Second, the reprocurement was for only a reduced portion of
the original requirements .... It has been my experience in 13
years as a procurement official at GPO that when you reduce
contract requirements it results in increased unit prices, since
a bidder has fewer units of production to spread its fixed and
overhead costs. Thus, a formal reprocurement would likely result
in higher unit prices.
... Third, the default of Wickersham, and its delinquent
performance had resulted in the need to quickly reestablish a
source of supply.... In order to formally advertise I would not
have been able to make award for several weeks, if not longer.
Either the needs of the Department of Transportation would have
gone unmet for that period of time, or its needs could have been
met through the use of one-time procurements. This latter option
would ... have resulted in much higher reprocurement costs as the
economies of scale which are the basis for establishing term
contracts would be lost.
. . . . .
... To explore this possibility [that, as suggested by the
Contract Review Board dissenting member, costs had not been
sufficiently mitigated in light of paper price decreases], I
reviewed the latest paper price statistics from [BLS]. These
official statistics are ... distributed monthly to GPO
contracting officers for use in calculating paper price
adjustments.
... I found that paper prices had fallen by less than 5% (4.8%)
from April to May 1996. I also found that no paper price
adjustments were warranted for GPO contracts for the April to
July time period .... I also saw that the larger paper price
drops that had occurred in the earlier months of 1996 for offset
book paper had almost slowed to a stop. Prices for offset paper
dropped by only .9% from April to May 1996. This small price
drop which directly affected only a portion of the contract price
(35.7% of Goodway's total price) would have negligible effect on
the total bid price. Accordingly, I concluded that there was
little likelihood that should I formally readvertise that the
paper prices would have a significant effect on reprocurement
costs.
... I later learned that officially revised BLS statistics for
that time period showed that paper prices generally decreased
from April to July 1996 by 3.4%. Offset book paper prices
actually increased during that time by 3.2%.
In deciding motions for summary judgment, the Board is guided
by Rule 56 of the Federal Rules of Civil Procedure, pursuant
to which courts will grant such motions where the pleadings
and supporting documents show that there are no genuine issues
as to material facts and that the moving party is entitled to
judgment as a matter of law. Composite Laminates, Inc. v.
United States, 27 Fed. Cl. 310 (1992); Artisan Printing Inc.,
GPOBCA 15-93 (February 6, 1998), slip op. at 6, 1998 WL
149001; GraphicData, Inc., GPOBCA 35-94 (June 14, 1996), slip
op. at 48, 1996 WL 812875. The burden is on the moving party
to demonstrate that it is so entitled. Celotex Corp. v.
Catrett, 477 U.S. 317 (1986). Where, as here, both parties
have moved for summary judgment, the Board must consider each
motion, with each party in its capacity as the opponent of
summary judgment entitled to all applicable presumptions and
inferences and with the evidence viewed in the light most
favorable to the non-moving party. Kanehl v. United States,
38 Fed. Cl. 89 (1997); Bataco Ind., Inc. v. United States, 29
Fed. Cl. 318 (1993).
The issue raised by this appeal is whether the Respondent
failed in its duty to mitigate damages by not (1) acting
reasonably in choosing its reprocurement method and (2)
obtaining the lowest reasonable price. There is no hard and
fast rule or formula for making this determination; whether
the Respondent met its duty is a question of fact resolved by
an inquiry into the reasonableness of the Respondent's
actions. Puroflow Corp., ASBCA 36058, 93-3 BCA � 26,191;
Birken Mfg. Co., ASBCA 32590, 90-2 BCA � 22,245. That inquiry
properly focuses not only on the Respondent's duty to mitigate
excess reprocurement costs but also on its duty to protect the
Government's legitimate interests. WEDJ, Inc., ASBCA 27067,
86-3 BCA � 19,169.
To prevail on its motion the Appellant must show that the
Contracting Officer knew or should have known that a better
price than Goodway Graphics' likely would have been obtainable
through a competitive reprocurement and that the Government's
needs did not foreclose a competitive approach. To do this
the Appellant has referenced the statement of the dissenting
member of the CRB and an issue of Pulp & Paper Week as
indicating a meaningful drop in paper prices that should have
resulted in lower prices than those received on the original
competition, and explained that any immediate needs of the
customer agency could have been obtained through individual
jackets until a competitive reprocurement could take place.
The Appellant, however, while submitting evidence (the
Ardinger Affidavit) indicating that Pulp & Paper Week is used
by industry sources, has not shown that the Contracting
Officer or any other GPO official knew of this publication or
was aware of the specific information in it. According to the
Contracting Officer, he obtained his information from BLS
statistics which are furnished monthly to GPO contracting
officers. Scott Declaration at 2-3. The dissenting CRB
member also states that his information came from "BLS indices
and not ...` any other data." Declaration of Anthony A.
Valentine. Thus, the Appellant's evidence does not establish
that the Contracting Officer was on notice of a paper price
decline of the magnitude represented by the Pulp & Paper Week
publication. Morerover, the BLS statistics do not paint quite
the same picture as the Appellant gleans from Pulp & Paper
Week. As the Contracting Officer stated in his Declaration,
the BLS data available to him in July 1996 and furnished as
Attachment 1 to his Declaration show that paper prices had
declined less than 5 percent from April to May, that offset
paper prices had dropped by less than 1 percent for the same
period, and that paper price adjustments on GPO contracts
containing the Paper Price Adjustment clause were not
warranted for the April--July period.3 Considering the
totality of this evidence in the light most favorable to the
Respondent (showing what appeared to be relatively small paper
price declines since the original contract was awarded,
coupled with the Contracting Officer's concern about the
effect on pricing of reduced quantities and economies of
scale), the Board cannot conclude that the Appellant has shown
that the Contracting Officer failed to mitigate excess
reprocurement costs by choosing an inadequate method of
reprocurement. Accordingly, the Appellant is not entitled to
judgment as a matter of law.
Denial of the Appellant's motion does not mean that the
Respondent is automatically entitled to the granting of its
motion for summary judgment. Vanier Graphics, Inc., GPOBCA
12-92 (May 17, 1994), slip op. at 47, 1994 WL 275102. The
Respondent's motion may be granted only if the Respondent
satisfies its own burden of showing that its reprocurement
actions were reasonable under the circumstances and were
legally sufficient to meet its obligation to mitigate the cost
of reprocurement.
The factual picture painted by the existing evidence in
support of the Respondent's motion is, in some respects, more
than a little sketchy. First, the evidence does not establish
what the Contracting Officer actually knew or should have
known about the change in paper pricing from April to July.
Although the Contracting Officer stated that GPO contracting
officers receive the relevant BLS statistics monthly, the
Contracting Officer appears to have given no consideration to
any change in paper prices at the time he decided to negotiate
only with Goodway Graphics despite the downward trend in paper
prices reflected by the statistics available to him (furnished
to the Board as Attachment 1 to the Scott Declaration) at that
time. Moreover, while the Contracting Officer refers only to
BLS data and relies only on BLS data in connection with the
Paper Price Adjustment clause, the record is silent as to
whether the Contracting Officer also was aware of the data
from Pulp & Paper Week, described in the Ardinger Affidavit as
a "primary and standard source for bid preparation" and a
"primary source in accurate market paper prices," or of any
other information bearing on the paper market situation.
Second, when, in response to the CRB's dissenting member's
concern about declining paper prices, the Contracting Officer
examined the BLS data, he simply noted that paper prices had
fallen just under 5 percent from April to May, that "the
larger paper price drops" for offset paper that had occurred
earlier in 1996 had "almost slowed to a stop" and had dropped
less than 1 percent between April and May, and that paper
price adjustments were not warranted for the April to July
period. Contract price adjustments, however, are made
pursuant to the adjustment clause only to the extent there is
a change in the index in excess of 5 percent, so that the data
did not foreclose the possibility that price decreases
approaching 5 percent had continued during that period or that
decreases in that range had occurred with respect to the
offset paper. A monthly 5 percent decline in the price of
offset paper, of course, could have resulted in lower bid
prices for that paper even if that decline did not entitle GPO
to a downward adjustment on its existing contracts. Also,
while the Contracting Officer had concerns about higher unit
prices resulting from reduced contract requirements on the
reprocurement, a definite quantity contract was not involved
here; the awarded contract was a requirements contract that
anticipated the placement of 200 to 300 separate orders during
the contract year. Each of these orders involves its own
separate printing and other requirements, and, in light of the
requirements nature of the contract, there was no guarantee
that the orders or the contract's estimated quantities would
be realized. KPT, Inc., GPOBCA 14-97 (November 30, 1998),
slip op. at 4, 1998 WL ______; McDonald & Eudy Printers, Inc.,
GPOBCA 40-92 (January 31, 1994), slip op. at 14, 1994 WL
275096. Thus, there is at least a question as to whether the
higher quantity/lower unit price expectation typical in
definite quantity situations is a reasonable one in these
circumstances. Moreover, to the extent that it is a
reasonable one notwithstanding the requirements nature of the
contract, there is no explanation from the Contracting Officer
as to why it is reasonable to expect anything more than
nominally higher unit prices on the reprocurement in view of
the fact that approximately 10-1/2 months, more than 80
percent of the contract period, remained for the reprocurement
contractor. Exactly what the Contracting Officer's experience
has been that led him to his conclusions in this regard is not
on the record.
Nonetheless, notwithstanding this sketchy portrait, there is
evidence of record, the final BLS statistics for the period
involved, that leads the Board to conclude that summary
judgment for the Respondent is appropriate. These statistics
show that paper prices declined slightly from April (index
145.6) to July (index 140.6) but that offset paper prices
increased (131.2 in April, 131.5 in May, 134.6 in June, and
135.4 in July). With offset paper prices actually going up
each month from the time of bidding on the original contract
until the reprocurement contract was let, there is no reason
to believe that the market fluctuations in paper prices would
have produced a decrease in paper and overall bid pricing in a
competitive reprocurement for the Program D688-S contract.
With no such decrease likely, the Appellant could not have
been subjected to unreasonable excess reprocurement costs when
the Contracting Officer awarded the replacement contract to
the original next low bidder at that bidder's original prices.
Thus, despite reservations about the basis for the Contracting
Officer's conclusions, the Board finds, on the basis of the
BLS data, that the Contracting Officer did not fail in his
duty to the Appellant because, had the Contracting Officer
conducted a competition for the reprocurement, the resulting
bid prices would not likely have been lower than the original
prices and well may have been higher, thereby subjecting the
Appellant to greater reprocurement costs than are involved
here.
Disposing of a matter by summary judgment is appropriate where
the submission of additional evidence could not reasonably be
expected to change the result warranted by the evidence
currently of record. Kanehl v. United States, 38 Fed. Cl. 762
(1997). In light of the BLS statistics reflecting what
actually occurred during the time period in question, the
Board must conclude that, regardless of whatever factual
questions remain about the basis for the Contracting
Officer's reprocurement approach, that approach did not
adversely affect the Appellant with regard to its liability
for the excess costs of reprocurement. Thus, the submission
of additional evidence to resolve those factual questions
would have no impact on the Board's ultimate conclusion that,
because the Contracting Officer's approach resulted in the
lowest reprocurement costs likely to be obtained, the
Contracting Officer effectively fulfilled his duty to mitigate
those costs when he awarded the reprocurement contract to
Goodway Graphics.
III. ORDER
The Appellant's motion for summary judgment is DENIED. The
Respondent's motion for summary judgment is GRANTED.
It is so ordered.
December 18, 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 January 14, 1997. It will be referred
to as the Rule 4 File, with an appropriate Tab number also
indicated. The Rule 4 File consists of 38 numbered tabs.
2 The Appellant provided a copy of the relevant pages of this
publication as an attachment to an affidavit of Misti Ardinger,
an employee of the Appellant's attorney. The affidavit
(hereafter Ardinger Affidavit) states the employee "contacted
several printing companies in an effort to find out their primary
source for up-to-date market prices on paper. The private sector
printing industry uses Pulp & Paper Week as a primary and
standard source for bid preparation." The affidavit further
states that the employee also "contacted Printing Industries of
America ... and Graphic Arts Technical Foundation ..., both of
which confirmed this publication as a primary source in accurate
market paper prices."
3 As ultimately revised, the BLS Producer Price Index shows
that paper prices declined substantially from January (index
price 160.8) to April 1996 (index price 145.6), and then declined
at a significantly lower rate from April through July (the index
price declined to 142.5 in May, maintained that level in June,
and then declined to 140.6 in July). For offset uncoated book
paper, the Index shows a decline from 147.0 in January to 131.2
in April, but an increase in May (131.5), June (134.6), and July
(135.4).