Vogard Printing Corporation Contract Appeals Board Panel 84-7 January 7, 1986 Kerry L. Miller, Chairman Carol F. Cini, Member Franklin P. Delaine, Member. PRELIMINARY STATEMENT Vogard Printing Corporation, (hereinafter "appellant") has filed a timely appeal from the final decision of the contracting officer which assessed excess reprocurement costs against appellant following the contracting officer's default termination of appellant's contract for Program B346-S, Purchase Order 27463. Appellant appealed the final decision in accordance with the "disputes" clause of the contract. Article 2-3, Contract Terms No. 1, GPO Publication 310.2, Revised October 1, 1980. In accordance with Contract Terms No. 1 and GPO Instruction 110.10B, entitled "Board of Contract Appeals Rules of Practice and Procedure," the.GPO Contract Appeals Board has jurisdiction over this matter. As appellant has not requested a hearing, the decision of the Board is based solely on the record of this appeal, consisting of an appeal file containing 21 exhibits. FINDINGS OF FACT 1. Invitations for bid on Program B346-S were mailed to thirty-two contractors. Exhibit 3. 2. At the bid opening on December 21, 1983, seven "no bids" and ten responses were received. Exhibit 3. 3. Program B346-S was a contract for the printing of Farmline magazine for the U.S. Department of Agriculture (USDA). The contract called for the production of self-cover pamphlets requiring such operations as composition, two-color printing, binding, packing and distribution. The specifications anticipated one order per month for approximately four months. The contract required printing attributes at Quality Level III, and finishing attributes at Quality Level III. The contract also specified that inspection levels (from MIL- STD-105) were as follows: a) nondestructive tests - general inspection level I; b) destructive tests - special inspection level S-II. Exhibit 2, p. 2. 4. Appellant's net bid of $13,796.45 was the lowest bid. Appellant was contacted by telephone and asked to review and confirm the bid. Appellant reviewed and confirmed by telephone. Exhibit 7. Appellant by letter dated April 4, 1983, signed by Gerald G. Vogele, President, Vogard Printing Corporation, stated that he had reviewed the contract and found that the prices quoted by Vogard in its bid were correct as quoted. Exhibit 5. 5. Appellant was awarded the contract for Program B346-S on April 7, 1983. Exhibit 8. 6. Print Order No. 301 calling for 5,912 copies of Farmline magazine was issued to appellant on June 1, 1983. Exhibit 9, p.l. By memorandum dated July 6, 1983, Eric Van Chantfort, Economics Management Staff, USDA, complained that the copies printed by appellant did not meet the contract specifications for Quality Level III. According to Chantfort, 600 copies were inspected and approximately 300 copies contained serious printing defects. Exhibit 9, pp. 4, 5. The appellant was notified of the defects by letter dated July 19, 1983, and was requested to provide a written explanation of how the defects occurred and the steps to be taken by the appellant to prevent similar defects from occurring in the future. Exhibit 9, p. 3. The appellant did not respond to this letter. The contracting officer decreased the purchase order by 10.1% because of the appellant's failure to meet the production quality attributes. Exhibit 9, p. 3. 7. Print Order 302 was issued on July 15, 1983, calling for 5,899 copies of the July 1983 Farmline magazine. Exhibit 10, p. 1. The copies inspected by the USDA were found to contain numerous printing defects, including improper trim size, misaligned fold on cover and a blue screen on the cover. In addition, the USDA found that there was a double image on page 4, spotting on the photographs and show-through on several pages. Exhibit 10, p. 4. An inspection by GPO confirmed these complaints. Exhibit 10, p. 7. By letter dated August 30, 1983, the appellant was notified of the defects in Print Order 302. Exhibit 13, p. 4. The appellant responded in a letter dated September 12, 1983, in which he blamed the majority of the defects on press misfeeds. He claimed that his employees pulled most of the "bad" copies caused by the misfeeds and he challenged the agency's estimate of 30% "bad" copies. Exhibit 13, p. 1. On September 15, 1983, Purchase Order 27463 was decreased by 25% of the invoice billing price due to the failure of the product to meet the specified quality attributes. Exhibit 10, p. 2. 8. Print Order 303 was issued on August 26, 1983, calling for 5,270 copies of the August / September issue of Farmline magazine. Exhibit 11, p. 1. By letter dated October 4, 1983, the USDA informed GPO that the centerfold folio was not bound into the issue as required by the contract specifications. Exhibit 11, p. 6. The appellant was informed of this defect in a letter from Darwin Hughes, Contracting Officer. The appellant was given 10 days to provide a written explanation of the cause of the defects and to describe the steps being taken to assure the problem would not reoccur. Exhibit 11, p. 3. The appellant did not respond to this letter. On October 31, 1983, Purchase Order 27463 was decreased by 6.9% of the billing price for 800 departmental copies and 13.4% of the invoice billing price on 260 Superintendent of Documents copies based on the above cited defects. Exhibit 11, p. 2. 9. On October 12, 1983, a Cure Notice was sent to the appellant informing him that his "failure to deliver a product of acceptable quality" on Print Order 301, 302 and 303 was endangering performance of the contract. The appellant was warned that unless the condition was cured, the GPO may terminate the contract for default. Appellant was given 10 days to present in writing "the measures adopted which have cured" the performance problems. Exhibit 15. The appellant did not respond to this Cure Notice. 10. Print Order 304 was issued on October 11, 1983, calling for 5,273 copies of the October / November issue of Farmline magazine. Exhibit 12, p. 1. By letter dated November 16, 1983, USDA informed GPO that it was rejecting the shipment of the October / November Farmline and requesting an immediate reprint. Exhibit 12, p. 2. USDA complained that type was deleted on page 4 which was present on the color key and page blues. This missing type caused the deletion of two paragraphs "critical to a proper understanding of the theme on which the two lead articles are based." The USDA also noted several other minor defects in the issue including extraneous marks on the cover, "picking" on the back cover and PMS screen tones not properly matched. Exhibit 12, p. 3. The appellant failed to deliver the reprinted order on schedule. 11. By letter dated November 18, 1983, appellant was notified that the contract for Program B346-M, Purchase Order 27463 was being terminated for default because the appellant failed to deliver an acceptable product on Print Order 301, 302 and 303, and because Print Order 304 was delivered late. Also cited was the appellant's failure to answer the Cure Notice dated October 12, 1983. Exhibit 17. 12. By letter dated January 23, 1984, the appellant was notified that all print orders subsequent to Print Order 304 would be reprocured at an estimated price.difference of $5,358.95. Exhibit 18. 13. Appellant appealed this Final Decision in a letter dated February 8, 1984. Exhibit 1. 14. By memorandum dated February 17, 1984, the GPO Contract Review Board concurred with the recommendation of the Contract Specialist, Term Contracts Division, to waive the assessment of excess reprocurement costs for the reprocurement of the first Farmline issue subsequent to Print Order 304. The memorandum noted that for the above-mentioned Print Order, the Government failed to mitigate damages. Exhibit 19. The appellant was informed of this decision in a letter dated February 28, 1984, which revised the estimate of excess reprocurement costs from $5,358.95 to $2,160.84. Exhibit 20. DECISION The first issue presented by this appeal is whether the Government properly terminated this contract for default in accordance with the terms of the contract. In cases of default, the Government has the initial burden of showing that the contractor had defaulted in its performance of the contract. Caskel Forge Inc., ASBCA No. 6205, 61-1 BCA � 2,891; National Aviation Electronics, Inc., ASBCA No. 18256, 74-2 BCA � 10,677. Once the default has been established, the contractor then has the burden of demonstrating that the default was excusable. B.M. Harrison Electrosonics, Inc., ASBCA No. 7684, 1963 BCA � 3,736; Hy-Cal Engineering Corp., NASA BCA Nos. 871-18 and 772-7, 75-2 BCA � 11,399; see also Article 2-18, supra. The Government justified its termination for default on the grounds that the appellant "failed to deliver an acceptable product on print orders 301, 302 and 303, and delivered late on print order 304." In addition, the Government cited the appellant's failure to answer a cure notice. The Government clearly possesses the contractual right to terminate the unperformed portion of the contract for these reasons. In the instant case, the burden of proof placed upon the Government to demonstrate that the appellant had defaulted on the contract is easily met. The record indicates the appellant continually failed to produce printed material which met with contract specifications. See Findings of Fact 6-10. Although appellant previously supplied an affidavit from one of his employees stating he recalled that Print Order #302 "as a whole looked good," Exhibit 13, p. 3, he provided no additional evidence with regard to the other defective print orders. This affidavit is unpersuasive in light of evidence that Print Order #302 was inspected and found to have extensive defects. See Inspection Report, Exhibit 10, p. 7. The record, therefore, makes out a prima facie case of a failure to perform. The Government is entitled to enforce strict compliance with the specifications found in its contracts. American Electric Contracting Corp. v. United States, 579 F.2d 602, 608 (Ct. Cl. 1978); Decatur Realty Sales, HUD BCA No. 75-26, 77-2 BCA � 12,567. The determination of whether a product conforms with the contract specifications must rest with the Contracting Officer, as this determination is within his discretion in administering a contract. Thomas W. Yoder Co. Inc., VACAB 997, 74-1 BCA � 10,424. The record further indicates that a cure notice was sent to the appellant on October 12, 1983, which the appellant failed to respond to. After issuance of such a notice, the Government is entitled to adequate assurances from a contractor that performance will continue in accordance with the contract specifications. A contractor's failure to provide such assurances justifies a termination for default. Lorch Electronics Corp., ASBCA Nos. 21496, 21749, 78-1 BCA � 12,911. The second issue to be resolved is whether the assessment of the excess costs of reprocurement was proper in this case. Following a valid default termination, one of the Government's most important contractual remedies is the right to assess the defaulted contractor the excess costs of reprocuring the unperformed part of, or if necessary, the entire contract from another contractor. Environmental Tectronics Corp., ASBCA No. 21204, 78-1 BCA � 12,986; see also Article 17(b). Under the terms of Article 2-18(c) a contractor: shall not be liable for any excess costs if the failure to perform the contract arises out of causes beyond the control and without the fault or negligence of the contractor. Such causes may include, but are not restricted 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 every case the failure to perform must be beyond the control and without the fault or negligence of the contractor. If the failure to perform is caused by the default of a subcontractor, and if such default arises out of causes beyond the control of both the contractor and subcontractor, and without the fault or negligence of either of them, the contractor shall not be liable for any excess costs for failure to perform, unless the supplies or services to be furnished by the subcontractor were obtainable from other sources in sufficient time to permit the contractor to meet the required delivery schedule. Stated simply, appellant will be excused from excess reprocurement costs if the failure to perform arose: 1) from causes beyond its control and without its fault or negligence or; 2) if the failure to perform was caused by the default of a subcontractor and if the default arose out of causes beyond the control of both the appellant and the subcontractor. The burden of proof is on the appellant to demonstrate that its failure to perform was due to causes beyond its control and without its failure or negligence. See Racon Electric Co., Inc., ASBCA No. 8020, 1962 BCA � 3528. A prime contractor is additionally responsible for delays caused by a subcontractor which affect the prime contractor's performance. Fidelity Construction Co. Inc., DOTCAB Nos. 75-19, 75-19A, 77-2 BCA � 12,831. The term "subcontractor" includes any supplier to the prime contractor. Emerson-Sack-Warner Corp., FAA CAP No. 66-2, 65-2 BCA � 5003. In his appeal appellant alleged that the problem of "bad copies" was not the fault of or caused by the negligence of Vogard Printing Corporation, but was caused by "bad paper". According to appellant "on two print orders we had to reschedule a press inspection because of bad paper which had an excess amount of dirt and lint. This caused the pressman to clean the plates and baskets every two hundred impressions . . . obviously not all runup sheets have [sic] been removed." Exhibit 1. Appellant did not specify which two print orders he alleges were affected by the "bad paper". Assuming arguendo that appellant used "bad paper" this would not excuse him from liability for excess costs. A contractor is obligated to have on hand the equipment and supplies needed to produce the publication that it had contracted to deliver. Litchfield Manufacturing Corp. v. United States, 338 F.2d 94 (Ct. Cl. 1964). Failure to do so is not such cause as would excuse untimely delivery or poor performance. Rex System Corp., ASBCA No. 11,327, 66-1 BCA � 5597; Universal Steel Strapping Co., ASBCA No. 10673, 65-2 BCA � 5066. If the "bad paper" was the sole cause of the default, the solution to this problem was within the appellant's control. There is no showing in the record that paper could not have been obtained from another source in sufficient time to permit the appellant to meet the required delivery schedule. Another solution to the "bad paper" problem would have been for the appellant to clean his plates more frequently and to have been more careful in culling out bad "runup" copies. Such solutions were entirely within the control of the appellant. Accordingly the Board finds that appellant has not met its burden of proving excusability from excess reprocurement costs. Based upon the above reasons, the decision of the Contracting Officer to terminate the contract for default and to assess costs of reprocurement against the appellant is upheld. Accordingly, the appellant's appeal is denied in its entirety.