BOARD OF CONTRACT APPEALS
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON, DC 20401
In the Matter of )
)
the Appeal of )
)
VP PRINTING, INC. ) Docket No. GPOBCA 30-96
Jacket No. 752-587 )
Purchase Order H-6490 )
For the Appellant: VP Printing, Inc., South Elgin, Illinois, by
Viresh Patel and Pamela Patel, pro se.
For the Respondent: Joyce B. Harris, Esq., Assistant General
Counsel, U.S. Government Printing Office.
Before BERGER, Ad Hoc Chairman.
DECISION AND ORDER
VP Printing, Inc. (Appellant), 360 Industrial Drive, South Elgin,
Illinois, appeals the decision of the U.S. Government Printing
Office (GPO or Respondent) to terminate for default its contract
to print a 1997 course catalog for the Defense Logistics Agency
under Jacket 752-587, Purchase Order H6490. It also appeals the
assessment of the excess costs of reprocurement. For the reasons
which follow, the decisions to terminate for default and assess
excess reprocurement costs are AFFIRMED, with the Respondent
entitled to excess reprocurement costs to the extent indicated in
this decision.
I. BACKGROUND
1. On August 9, 1996, the contract, in the amount of $12,845,
was awarded to the Appellant through small purchase procedures.
The contract called for the delivery of 2,002 catalogs to the
Defense Department in Columbus, Ohio by September 4. Rule 4
File, Tab A.1
2. Upon delivery the catalogs were considered to be unacceptable
by the customer agency. The ultimate user of the catalogs, the
Defense Logistics Agency's Civilian Personnel Support Office,
complained about the color, the grainy texture of the covers,
poor quality binding, and other matters. Rule 4 File, Tab D.
The Defense Printing Service (DPS) then advised GPO
telephonically that the catalogs contained the following defects:
poor ink quality; scumming; the index for section 2 was printed
in blue ink while all other indexes were in black ink; and the
perfect binding was damaged.2 Rule 4 File, Tab B. The Appellant
was telephonically notified by GPO that the catalogs might have
to be reprinted.
3. On September 13 a GPO official inspected the 13 random
samples of the catalog and found the catalogs to be rejectable.
This official identified the deficiencies as Type Quality and
Uniformity; Process Color Match; Conspicuous Single Page Defect
(Bubbles in coating of covers); Hickies and Spots; Solid or
Screen Tints Color Match; and Extraneous Marks.3 Rule 4 File,
Tab D. The Contracting Officer, on that same date, sent the
Appellant a "SUSPECT LETTER" identifying these defects (without
specifying the nature of the Conspicuous Single Page Defect) and
advising that corrective action would be necessary. Rule 4 File,
Tab C.
4. On September 16, a representative of the Appellant advised
GPO that it would not reprint because it was in the process of
moving and had no presses available. He suggested that instead
of a reprint the contract price be discounted. Rule 4 File, Tab
E.
5. On September 17, the Contracting Officer sought the
concurrence of GPO's Contract Review Board (CRB) with terminating
the Appellant's contract for default. The Contracting Officer
advised the (CRB) of the defects set forth in the September 13
"SUSPECT LETTER" and that the Appellant was unable to reprint
because it was moving and had no presses available. The CRB
concurred in the default termination. Rule 4 File, Tab F.
6. On September 18 the contract was terminated for default.
Rule 4 File, Tab G. The Appellant refused the Respondent's
subsequent requests to return films and other Government-
furnished material. Rule 4 File, Tabs H, I.
7. Thereafter, GPO, again using its small purchase procedure,
sought quotations for a reprocurement contract under Jacket
752-920. The low quotation, for $13,600, was not accepted
because the quoter was determined to be nonresponsible.
Respondent's Brief (hereafter Resp. Brf.), Atchs. 2, 3. The next
low quotation, for $18,596, was rejected because the quoter could
not meet the delivery date. Resp. Brf., Atch. 4. The
reprocurement contract was awarded on September 30 to Monarch
Litho, Inc. at a price of $21,961. Rule 4 File, Tab W. Excess
costs of reprocurement in the amount of $9,116 (the difference
between the Appellant's contract price and the reprocurement
contract price) were assessed against the Appellant on January 2,
1997. Rule 4 File, Tab R.
8. On December 5, GPO's Quality Assurance Section reported that
it had examined the 13 random samples and that its inspection
results were consistent with the conclusion reached in the
earlier inspection report that the catalogs were rejectable.
Rule 4 File, Tab P.
II. DISCUSSION
The Appellant asserts that the Respondent acted in bad faith in
rejecting the catalogs and terminating the contract for default.
According to the Appellant, the customer agency rejection was
based on items that for the specified PQL of 3 were not
deficiencies or for which it was not responsible, in part because
they resulted from the Government's production specifications.
In this regard, the Appellant believes that the Government
specified the wrong color for this printing job and simply
"looked for other defects" once it decided it didn't want what
the Appellant printed. The Appellant also believes that the
Respondent is not entitled to assess excess reprocurement costs
because the reprocurement contract reflected major changes and
thus was essentially "a new job."
The Respondent's position is quite simple. It states that the
Appellant did not provide a conforming product and refused the
Contracting Officer's direction to reprint, either of which is a
proper basis for default. It further states that it is entitled
to assess excess reprocurement costs against the Appellant
because there were only minor changes to the reprocurement
contract that had no impact on price and because it complied with
the various other elements it must satisfy to be entitled to such
costs.
The rules governing terminations of contracts for default
emanate primarily from contract "default" clauses and applicable
regulations. The "Default" clause in GPO contracts provides that
the Respondent, by written notice to the contractor, may
terminate a contract in whole or in part if the contractor fails
to (1) deliver the supplies or perform the required services
within the time specified or any extensions thereof; (2) make
progress, so as to endanger performance; or (3) perform any other
contract provision. GPO Contract Terms, Solicitation Provisions,
Supplemental Specifications, and Contract Clauses, GPO
Publication 310.2, effective December 1, 1987 (Rev. 9-88)
(hereafter GPO Contract Terms), Contract Clauses, ¶ 20. The
failure to deliver within the time specified encompasses both a
failure to meet the contract delivery schedule and a failure to
deliver, in accordance with that schedule, a product that
conforms to the specifications. The Standard Register Co., Inc.,
GPOBCA 25-94 (March 23, 1998), slip op. at 8, 1998 WL 350448. A
default termination, however, is a drastic action which may be
taken only for good cause and on the basis of solid evidence,
with the contracting agency having the burden of proving the
basis for the default but with the contractor having the burden
of showing that its failure to perform was excusable. Venture,
Ltd., GPOBCA 01-96 (September 26, 1997), slip op. at 13-14, 1997
WL 742427; Big Red Enterprises, GPOBCA 07-93 (August 30, 1996),
slip. op. at 24-25, 1996 WL 812960; Vanier Graphics, Inc., GPOBCA
12-92 (May 17, 1994), slip. op. at 47-48, 1994 WL 275102.
Moreover, because the clause provides that the Government "may"
terminate for default when one of the specified grounds for
default is present, a default termination is a discretionary act
subject to challenge as an abuse of discretion. Darwin Constr.
Co. v. United States, 811 F.2d 593 (Fed. Cir. 1987); Schlesinger
v. United States, 390 F.2d 702 (Ct. Cl. 1968); Vatex America,
GPOBCA 08-96 (October 14, 1998), slip op. at 4, 1998 WL 750866;
Artisan Printing Inc., GPOBCA 15-93 (February 6, 1998), slip op.
at 8, 1998 WL 149001; Rose Printing, Inc., GPOBCA 32-95 (December
16, 1996), slip op. at 21, 1996 WL 812880.
To meet its burden, the Respondent has furnished copies of
various documents and the 13 random samples that were inspected.
These documents include (1) the Notice of Quality Defects from
DPS and a list of problems with the catalog, along with a listing
of discrepancies prepared by the Civilian Personnel Support
Office (Rule 4 File, Tab D, as supplemented); (2) a plain sheet
of paper which the Respondent identifies in its Rule 4 File List
of Exhibits as an inspection report and which lists as defects
Type Quality and Uniformity, Process Color Match, Conspicuous
Page Defect (bubbles in coating of covers), Hickies and Spots,
Solid or Screen Tints Color Match, and Extraneous Marks (Rule 4
File, Tab D); (3) a letter dated October 7, 1996 from the
Contracting Officer to the Appellant advising that while the
examination of the 13 random samples showed defects for Hickies
and Spots, Extraneous Marks, and Solid or Screen Tints Color
Match, rejection was not based on these attributes, but on Type
Quality and Uniformity ("13 books each had a major defect due to
broken characters), Process Color Match ("3 books had a major
defect due to an objectional shift between the specified standard
and the sample causing a definite change of color"), and
Conspicuous Single Page Defect ("3 books had a major defect for
bubbles in the UV coating") (Rule 4 File, Tab L); (4) a formal
inspection report dated December 4, 1996 signed by the Chief of
GPO's Quality Assurance Section finding 28 major defects
involving broken characters, objectionable color shifts, and
bubbles in the cover coatings (Rule 4 File, Tab O); and (5) a
December 5, 1996 memorandum from the Chief of the Quality
Assurance Section to Respondent's Director, Procurement Services,
advising that that Section's inspection produced results
consistent with GPO's earlier inspection. The memorandum stated
that "[t]he basis for the rejection was primarily the result of
poor presswork. The cover contained broken type that varied from
sample to sample and the process color match for both cover and
text varied from sample to sample." Rule 4 File, Tab P.
It is clear from these and other documents that the Government's
position with respect to the defects present in the catalogs and
the basis for rejecting the catalogs has not been consistent.
First, the customer agency's original concerns involved, among
other things, color, grainy texture, and poor binding, and the
Appellant is very insistent that the primary focus of the initial
complaint that was transmitted telephonically by the Respondent
was about the color used to print the catalogs. The initial GPO
inspection report, however, does not explicitly refer to
incorrect color, grainy texture, or poor binding, but instead
refers to defects under the Type Quality and Uniformity, Process
Color Match, Hickies and Spots, Solid or Screen Tints Color
Match, and Extraneous Marks attributes, and to a Conspicuous
Single Page Defect (bubbles in the cover coating). These were
also the areas identified in the "SUSPECT LETTER" sent to the
Appellant, in the memorandum sent to the CRB, and, with the
exception of Extraneous Marks, in the termination letter sent to
the Appellant. Subsequently, however, the Contracting Officer
informed the Appellant that the defects upon which the
termination was based did not include Hickies and Spots,
Extraneous Marks, and Solid or Color Tints Color Match, and
thereafter GPO's Quality Assurance Section found that the
catalogs were rejectable without regard to those defects.
Second, there are discrepancies regarding the extent of the
deficiencies that were used as the basis for the termination.
The Contracting Officer's October 7 letter to the Appellant
states that all 13 samples had a major defect under Type Quality
and Uniformity, but the December 4 inspection report completed by
GPO's Quality Assurance Section identifies only 8 major defects,
one each for samples 1 through 6 and samples 12 and 13. The
October 7 letter states that 3 books had a Process Color Match
defect, but the December 4 report identifies 4 books with this
defect. The October 7 letter and December 4 report are
consistent in that they both reflect 3 major defects under
Conspicuous Single
Page Defect, but the December 4 report also finds another 13
major defects under Process Color Match because each sample
contains a color shift from the "c-prints" on page 1-11.
The fact that the defects found by the GPO inspection were
different from those as described by the customer agency is of no
consequence since the contract is between GPO and the Appellant
and it is GPO's findings that are controlling. See French Bray,
Inc., GPOBCA 16-96 (August 21, 1998), slip op. at 13, 1998 WL
640415 ("[o]nly the GPO contracting officer has the authority 1/4
to determine that a contractor-furnished product is defective 1/4
and customer agency complaints do not always result in a GPO
determination that a product is defective."). Moreover, the fact
that a second inspection of the samples was made does not impeach
the validity of the first inspection--a second inspection by the
Quality Assurance Section can be a helpful tool in verifying the
basis for a Contracting Officer decision that a shipment was
rejectable. See, e.g., Univex International, GPOBCA 23-90 (July
31, 1995), slip op. at 23, 1995 WL 488438, recon. denied, GPOBCA
23-90 (February 7, 1996), slip op., 1996 WL 112554. What is
disturbing, however, are GPO's own shifting bases for rejecting
the catalogs and its differing calculations of the number of
defects in the 13 sample copies. Such disparities do little to
inspire confidence in the uniform application of GPO's QATAP.
Nonetheless, what matters ultimately is not whether GPO's
documentation is inconsistent, but whether GPO has established a
proper basis for rejection of the catalogs and termination of the
contract for default.
In resolving that question, the Board is concerned with the basis
for the Contracting Officer's decision at the time it was made.
See Custom Printing Co., GPOBCA 28-94 (March 12, 1997), slip op.
at 28 n.43, 1997 WL 128720, aff'd, GPOBCA 28-94 (July 10, 1997),
slip op., 1997 WL 742505. Insofar as the record shows, the basis
for the Contracting Officer's rejection of the catalogs was the
September 13 inspection report. That report is less than a model
of clarity. While it identifies defects under six attributes,
it appears to rely only on the first three listed attributes as
the basis for rejection. It is also difficult to determine from
the inspection report alone whether the numbers in the report
associated with these first three attributes refer to the number
of defects found or to the specific sample number in which a
defect was found. Moreover, there is little or no indication of
the precise nature of the problems or, for some of the defects,
exactly where among the samples the problems were found. In
addition, for one of the attributes, Process Color Match, there
is no indication of how it was determined that a major defect
existed. Under QATAP, there can be a major defect for this
attribute only if demerits are assessed for each process color
match deficiency and an appropriate Average Demerit Level (ADL)
is calculated. QATAP manual at 23; see n.3, supra. The report
is completely silent on this point, with no indication of any
demerit assessment or calculation of an ADL.
While in many cases involving rejection of the contractor's work
the Government's burden is essentially met through its furnishing
of an inspection report, an inadequate inspection report is not
fatal to the Respondent's position where there is other evidence
to establish the propriety of rejection and default. Daniels
Press, Inc., GPOBCA 18-95 (September 23, 1998), slip op. at 5,
1998 WL 750875; Shepard Printing, GPOBCA 23-92 (April 29, 1993),
slip op. at 19, 22, 1993 WL 526848; see Mozip Sign Co., supra, at
5. Here, while the Board is unable, on the basis of the
September 13 inspection report alone, to determine that the
Respondent properly rejected the catalogs, other evidence of
record does provide a basis for the Board to so determine.
That other evidence consists of the 13 random samples. According
to the Contracting Officer, the catalogs were rejected because
these samples contained major defects in the areas of Type
Quality and Uniformity, Process Color Match, and Conspicuous
Single Page Defect. The Board has examined these samples and
determined that while the Contracting Officer's conclusions are
not entirely supported or consistent with QATAP, the samples do
indeed contain a variety of defects that under QATAP made the
catalogs rejectable.
First, the Board's inspection reveals, with respect to attribute
P-7, Type Quality and Uniformity, that each of the 13 samples has
more than four broken type characters on the rear cover. Under
QATAP that means each sample is assigned 20 demerits and, based
on those demerits, assessed a major defect for this attribute.
QATAP manual at 2, 3, 18. Thus, the Board finds the Contracting
Officer's assessment of 13 major defects for this attribute to be
appropriate.
Second, with respect to attribute P-10, Color Process Match, the
Board discerns from an inspection of the original color
photographs furnished by the agency, Rule 4 File, Tab Z, and the
colors of the reproduced photographs in the catalogs a noticeable
color shift in the skin tones of the individuals in the
photographs on page 1-11. According to QATAP, an objectionable
shift, resulting in the assignment of 20 demerits, "is a shift
between the specified standard and the sample causing a definite
change of color. Examples are fleshtones shifting slightly
toward a yellow or magenta hue 1/4." QATAP manual at 23. The
specified standard here, set forth in the purchase order, was the
photoprints, Rule 4 File, Tab A; the fleshtones in the
reproduced photographs clearly have shifted from those in the
original photoprints. While it is not clear from the record on
what basis the Contracting Officer concluded that 3 of the sample
catalogs contained a major defect under this attribute (the
original inspection report merely stated that there were at least
three instances of an "objectionable shift" while the later
inspection report referred to two different Process Color Match
problems: an objectionable shift from certain of the samples to
the remaining samples, and an objectionable color shift from the
"c-prints"), the Board's inspection confirms that all 13 samples
suffer from what is clearly under QATAP an objectionable color
shift from the color photoprints. However, it is not apparent to
the Board how an assignment of 20 demerits for this deficiency
results in an assessment of a major defect. A major defect can
be assessed only if the ADL for all pages exceeds 4; each
catalog contains more than 100 pages, and there is no indication,
nor is it otherwise apparent to the Board, how it was determined
that the ADL for attribute P-10 exceeds 4. Accordingly, the
Board does not find support for the assessment of a major defect
under attribute P-10.4
Third, while the Board's inspection confirms the existence of
bubbles on some of the sample covers, the Contracting Officer's
assessment of 3 major defects for a Conspicuous Single Page
Defect for bubbles in the coating of the covers is clearly
inconsistent with QATAP. The QATAP manual describes Conspicuous
Single Page Defects as follows:
When one or more pages have been assessed demerits for a printing
attribute but the ADL does not exceed 4, a single major defect
will be assessed for that printing attribute if one or more pages
is so conspicuously defective that it significantly impairs the
quality of the entire copy. Examples include a large hickey at
the focal point of an illustration, a single page with extremely
light (but legible) type, large ink spots, large oil spots, and
large off-color spots in illustrations.
QATAP manual at 3. The problem here is that a cover coating with
bubbles is not a printing
defect; it is a finishing defect. According to the QATAP manual,
bubbles are encompassed by
Finishing Attribute F-11, Damaged Covers. The manual provides
that for finishing attributes the Conspicuous Single Page Defect
provision does not apply. "Instead, for each finishing
attribute, the individual item is inspected and if necessary,
assessed a major defect or a critical defect in accordance with
the applicable tolerance table." QATAP manual at x. Thus, the
assessment of major defects under the Conspicuous Single Page
Defect provision was improper. What the Respondent should have
done was examine the covers in accordance with attribute F-11
measurement procedures5 and then determine whether to assess a
defect pursuant to the tolerance table for attribute F-11, which,
for the PQL involved here, provides for assessment of a major
defect if the bubbles occur over more than 10 percent of the
surface of the cover. QATAP manual at 42. Its failure to
evaluate the catalogs under attribute F-11 instead of the
Conspicuous Single Page Defect provision is not necessarily
fatal, however. If the Board can determine that a defect relied
on by the Contracting Officer to reject a shipment is properly
assessable as such under QATAP, the Respondent's reliance on an
inappropriate attribute instead of the correct one will not
preclude affirmance of the rejection. See Daniels Press, Inc.,
supra, at 6 (the Board determined from the samples that it was
appropriate to assess a major defect for roller marks under
attribute P-2 instead of under attributes F-8 and F-9, as the
Respondent believed).
Samples 7, 8, and 10 are marked "CSPD," which the Board takes to
mean Conspicuous Single Page Defect. The Board's inspection of
the front covers of these samples confirms that bubbles are
present and that they clearly cover far more than 10 percent of
the cover surface. Thus, the Board is satisfied that the
Contracting Officer's concern about these bubbles properly could
result in the assessment of three major defects, albeit under
attribute F-11 instead of for Conspicuous Single Page Defects.
As a result of these major defects properly assessable under
attributes P-7 and F-11, the catalogs were rejectable under
QATAP. However, the Appellant asserts that it should not be held
responsible for the broken type on the covers because it resulted
from what the Government furnished and from specification
requirements. According to the Appellant, the type "was supplied
by the agency," "the trouble was visible on the proof," and the
flood coating required by the specifications "increased" the
problem. The Appellant states in this regard that it has its
copy of the proof and film from original artwork.
The Board is not persuaded by this assertion. First, the under
the contract's "Government Furnished Property (GFP)" clause, GPO
Contract Terms, Contract Clauses, ¶ 7, incorporated by reference,
the Appellant was required to examine the material furnished by
the Government and notify the Respondent if there was any
disagreement "with the description or the requirements as
presented in the specification." This notice requirement is
buttressed by the QATAP-it provides that defects will not be
assessed for deviations from specifications caused by Government
Furnished Material (GFM) "if the contractor notifies the
Government prior to production that the GFM is not satisfactory."
QATAP manual at 3. A contractor claiming that GFM was inadequate
or unsuitable has the burden of proving that it notified the
Respondent in accordance with the terms of the contract.
Braceland Brothers, Inc., GPOBCA 01-93 (August 8, 1997), slip op.
at 28, 1997 WL 772400. The Appellant has offered no evidence on
this point. Second, while defective GFM may extinguish a
contractor's duty to perform, once the Respondent offers
evidence, such as inspection reports, to prove the basis for
rejection and default, the contractor has the burden of proving
that the GFM was defective and was the cause of the problem in
question. Shepard Printing, supra, at 12. The Appellant has not
done that here. It has simply alleged that the GFM caused the
broken type problem and that it has in its possession items that
would help establish that the GFM caused the problem; it has not,
however, furnished any evidence to the Board that would bear on
this matter. Third, the Board has been furnished, by the
Contracting Officer, a pre-production proof prepared by the
Appellant.6 The letters on the back cover of this proof are not
broken. Had the GFM been defective in this way, the proof would
have indicated such. While the Appellant states that the flood
coating requirement exacerbated the situation and led to the
broken letters on the finished product, it has offered no
evidence to support that assertion.
In short, the Board finds that the Appellant, with the burden of
proving, by a preponderance of the evidence,7 that the rejection
of the catalogs was improper notwithstanding the Respondent's
evidence, has failed to meet that burden. Moreover, inasmuch as
the record establishes a proper basis for the rejection of the
catalogs, the Appellant has also failed to meet its much heavier
burden of proving that the Respondent acted in bad faith8 by
rejecting the catalogs simply because the customer agency was
dissatisfied with the finished product as a result of the
agency's own specifications. See McDonald & Eudy Printers, Inc.,
GPOBCA 06-91 (May 6, 1994), slip op. at 37, 1994 WL 377581.
Accordingly, the Board concludes that the rejection of the
catalogs as defective was not improper.
Upon finding the catalogs to be rejectable, the Contracting
Officer had the choice of accepting them at a discount, ordering
the contractor to reprint them, or, if the defects were major,
terminating the contract for default. Daniels Press, Inc., supra,
at 7; IPI Graphics, GPOBCA 04-96 (April 9, 1998), slip op. at 14,
1998 WL 350490. Although the Appellant at one point argued that
the Contracting Officer should have accepted a discount rather
than require a reprint, this is a matter within the discretion of
the Contracting Officer. The Government has the right to insist
on strict compliance with its specifications, and it is the sole
arbiter of whether it will accept nonconforming goods at a
discount or insist on a reprint. McDonald & Eudy Printers, Inc.,
supra, at 31; Dependable Printing Co., Inc., GPOBCA 5-84
(September 12, 1985), slip op. at 26, 1985 WL 154847. If the
contractor refuses or fails to reprint in a timely fashion when
directed to do so,9 the contract may be terminated for default,
with the failure to reprint providing an independent basis for
the default termination. Big Red Enterprises, supra, at 29;
Sterling Printing, Inc., supra, at 37.
In this instance the Contracting Officer, advised that the
catalogs were unacceptable to the customer agency, informed the
Appellant by letter of September 13, 1996 of the need for
corrective action, Rule 4 File, Tab C, but, according to GPO's
contract file, in a subsequent telephone conversation on
September 16 the Appellant's president informed the Contracting
Officer that the company was moving from its current location,
that no presses would be available, and that the company could
not reprint the order. Rule 4 File, Tab E. That the Appellant
declined to reprint is also indicated in its letter to the Board
of December 16, 1996, wherein the Appellant's president states
that "[o]ur response was that there was no point to reprint the
job because they still wouldn't like the PMS color." The Board
is satisfied from this record that the Appellant manifested a
clear intent not to reprint the catalogs. Accordingly, the Board
concludes that the Contracting Officer was warranted in
terminating the contract for default.
That leaves the question of the Appellant's liability for the
excess costs of reprocurement. The Appellant asserts that the
reprocurement contract contained several changes from the initial
contract, that these changes were major, and that in effect the
reprocurement was a "new job" for which the Appellant has no cost
liability.
The "Default" clause 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. Wickersham Printing Co., Inc.,
GPOBCA 23-96 (December 18, 1998), slip op. at 4, 1998 WL ______;
Printgraphics, GPOBCA 04-97 (November 12, 1998), slip op. at 3,
1998 WL ______; 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., supra.
The Appellant argues that criterion (a) is not satisfied because
major changes were made to the original contract specifications.
It points to a replacement of an index appearing in the back of
the catalog, correction of color shifts, and changes in the
widths of horizontal and vertical rules throughout the book as
major changes, and identifies as "really major changes" the
substitution of Pantone 640 blue for the Pantone 636 originally
specified and the elimination of the flood coating requirement
for the cover.
The Government bears the initial burden of proving that a
reprocurement contract, both in terms of the supplies purchased
and the terms and conditions of the contract, is similar to or
substantially the same as the original contract. Sterling
Printing, Inc., supra, at 58. Similarity, however, is all that
is required-the replacement contract need not be identical to the
initial contract. Id. Thus, minor changes to the contract will
not defeat the Government's right to reprocurement costs.
Moreover, for a change to be considered "material" rather than
minor, it must have a pecuniary impact, that is, it must cause a
substantial increase in the price of the reprocurement contract.
Id. at 59; Big Red Enterprises, supra, at 41. Where a
reprocurement contract appears to be basically similar to the
original contract notwithstanding that some changes were made, it
is the contractor's burden to show that the changes caused an
unreasonable increase in the repurchase price. Gold Country
Litho, supra, at 27 n.13; Big Red Enterprises, supra, at 42;
Sterling Printing, Inc., supra, at 61.
In A & E Copy Center, GPOBCA 38-92 (September 25, 1996), slip
op., 1996 WL 812881, the Board held that a reprocurement contract
was substantially different from the original contract because,
among other things, it imposed a QATAP PQL of 4 while the
original contract did not impose a specific PQL, provided a more
stringent requirement for paper, and contained GFM changes that
had a clear impact on contractor cost. However, where a
reprocurement contract included production changes and such
revisions as changed quality assurance levels, a new press sheet
inspection requirement, and a requirement that revised proofs to
be furnished at no expense to the Government, the Board held that
the original and repurchase contacts were substantially similar.
The Board noted that while the production changes resulted in a
marked contrast in physical appearance between the books produced
under the two contracts with respect to the colors, the finish on
the covers, and the text paper, the books had the same
"functional purpose and use" and that the original contractor had
furnished no evidence showing that any of the changes had
resulted in a higher reprocurement cost. The Board concluded
that the two contracts were similar and that the changes did not
defeat the Government's right to reprocurement costs. Sterling
Printing, Inc., supra, at 61-63.
In this case, the initial and reprocured catalogs clearly have
the same functional purpose and use. They also are identical in
most respects: for example, the quantity ordered, the number of
pages, the types of paper to be used, the binding requirement,
the quality assurance requirements, and the requirement for
proofs all remained the same.10 While the Appellant points to
several changes in the reprocurement contract, it offers no
evidence that these changes resulted in increased costs. In
fact, the Appellant does not even allege that the cost of the
reprocurement contract increased because of these changes-the
Appellant's position seems to be that the existence of the
changes is sufficient to excuse it from liability for excess
reprocurement costs. As indicated above, however, that is not
the law-the changes must have a meaningful monetary impact
resulting in higher reprocurement costs if the defaulted
contractor is to be freed from its liability for those costs.11
It is certainly not apparent to the Board why the changes would
have such an impact. For example, the change in color from
Pantone 636 to Pantone 640 would seem to have no cost impact, and
the Board is not aware of why the elimination of a requirement-to
flood coat the cover-would result in a cost increase. The Board
is also unaware of why the other changes-the substitution of a
revised 3-page index for the original 3-page index, correction of
color shifts, and change in rule widths-would have any meaningful
cost impact. Thus, as in Sterling Printing, Inc., supra, the
Board must conclude that the original and reprocurement contracts
are similar and that the Appellant has not met its burden of
showing that the changes in the reprocurement contract caused
reprocurement costs to unreasonably increase.
The Appellant does not challenge the reprocurement with respect
to criteria (b), (c), (d), and (e), and the Board is satisfied
that the Respondent has met its burden of proof with respect to
those criteria. In this regard, the Board is aware of no reason
why 12 days from termination to reprocurement, a period that
apparently would have been shorter had the Appellant promptly
returned the GFM, should not be considered a reasonable period
under the circumstances here. See, e.g., Univex International,
supra (GPO acted reasonably and without undue delay in awarding
reprocurement contract 18 days after default termination). The
use of competitive small purchase procedures, the same
procurement method used initially, also was an appropriate
reprocurement method for maximizing competition under the
circumstances. Venture, Ltd., supra, at 26. The Government also
obtained the lowest reasonable price given its more stringent
delivery requirements, the inability of the two lower-cost
vendors on the reprocurement to meet those delivery and other
requirements, and the fact that the original competition, with a
less stringent delivery requirement, produced prices that ranged
up to $26,205. Resp. Brf., Atch. 6. Finally, the Government has
shown that the work has been completed by the reprocurement
contractor and that the amount of $21,521.78 ($21,961 less a 2
percent prompt payment discount of $439.22) was paid to that
contractor. Rule 4 File, Tab Q.
The Board notes that the Appellant has been assessed excess
reprocurement costs in the amount of $9,116, the difference
between the original purchase order price of $12,845 and the
reprocurement contractor's undiscounted price of $21,961. The
rule followed by the Board, however, is that the defaulted
contractor is entitled to the benefit of the prompt payment
discount taken on the repurchase contract. See Venture, Ltd.,
supra, at 28 n.15; Questar Printing, Inc., GPOBCA 19-94 (June 12,
1997), slip op. at 74 n.77; Gold Country Litho, supra, at 36.
Although the Board has left undisturbed GPO's failure to reduce
excess reprocurement costs by the prompt payment discount in
cases where the amount was trifling or de minimis, see Venture,
Ltd., supra (discount amount $158), in the context of this case
the Board considers the discount of $439.22 to be more than a
trifling amount. The assessment of excess reprocurement costs
therefore will be reduced by that amount.
III. ORDER
Except for the amount of excess reprocurement costs assessed, the
Contracting Officer's decisions to terminate the Appellant's
contract for default and to assess excess reprocurement costs are
AFFIRMED and the appeal is DENIED. The matter is remanded to the
Contracting Officer for revision of the assessment of excess
reprocurement costs from $9,116 to $8,676.78 to reflect the
prompt payment discount realized on the reprocurement contract.
It is so Ordered.
January 26, 1999 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 February 12, 1997. It is referred to
as the Rule 4 File, with an appropriate Tab letter also
indicated. The Rule 4 File originally consisted of 15 tabs
identified as Tab A through Tab O. The Respondent subsequently
furnished Tabs P through AA and additional documents which were
made a part of Tab D.
2 The Notice of Quality Defects subsequently sent to the
Respondent by DPS along with 13 random samples identified the
problems as follows: (1) "check pantone color"; (2) "Binding on
side split"; (3) "Section 2. wrong color & not in black ?."; (4)
"Marks on covers"; (5) Smu[d]g[e]s on page ii"; (6) "color not
consistent ?"; and (7) "Delivery personnel ? dropped job outside
?."
3 The deficiencies were identified in terms of the attributes
found in GPO's Quality Assurance Through Attributes Program, see
GPO Contract Terms, Quality Assurance Through Attributes Program
for Printing and Binding (QATAP), GPO Pub. 310.1, effective May
1979 (rev. April 1996) (hereafter QATAP manual). The QATAP is a
GPO quality assurance program that provides for the use of
objective measurements to determine whether printed products are
defective. Printing Procurement Regulation, GPO Pub. 305.3 (rev.
10-90), Chap. XIII, Sec. 1, ¶ 3.a; Fry Communications, Inc.,
GPOBCA 30-94 (March 30, 1998), slip op. at 10, 1998 WL 350492.
The QATAP, based on the use of 30 measurable properties which are
referred to as quality attributes (and are divided into printing
attributes, finishing attributes, and paper attributes), provides
for the assessment of a specified number of demerits when
deficiencies are found and for categorization of the defects as
either major or critical. This will vary depending upon the
Product Quality Level (PQL) required for the contract. Whether a
lot is acceptable or rejectable depends upon whether the major
and critical defects identified through this process exceed the
Acceptable Quality Level (AQL). The AQL is 1 critical defect
per 100 items and 6.5 total defects. Products with defects that
exceed the AQL are not considered acceptable. QATAP manual at
xi, 1; see Mozip Sign Co., GPOBCA 03-97 (October 20, 1998), slip
op. at 3-4, 1998 WL 750867. The purchase order here incorporated
the QATAP by reference and specified a PQL of 3.
4 It is also apparent to the Board that there is a color shift,
as the Quality Assurance Section found, among the samples: at
least two of the catalogs have covers with a different shade of
blue from that found on the others. While this suggests that at
least two of the samples deviated from the specified color
(Pantone 288), under QATAP a defect can be assessed for attribute
P-10 only for a shift between the specified standard and the
sample. The specified standard for attribute P-10 here was not
the Pantone color; the purchase order identified only
"photoprints" as the standard for attribute P-10 (Pantone match
was identified as the standard for attribute P-9, Solid and
Screen Tint Color Match). No photoprints setting forth the
standard for how the catalog covers should appear have been
furnished to the Board. Thus, the Board is unable to conclude
that the assessment of any defects for this color shift would be
proper.
5 Damaged covers are to be measured by the placement of a clear
plastic grid, consisting of 1/4 inch squares, over the surface of
the damaged cover and then calculating the percentage of squares
that cover the damage. QATAP manual at 42.
6 A copy of a job progress report furnished by the Appellant
indicates that the Appellant submitted an initial set of proofs
(the contract required proofs by August 19, 1996) and then, after
their return on August 25, submitted a second set of proofs on
August 26. The cover of the proof furnished to the Board
contains the ink notation "New 8/26/96."
7 Preponderance of the evidence means such evidence that, when
weighed against that opposed to it, is more convincing. In other
words, it is the "greater weight of evidence." Braceland
Brothers, Inc., supra, at 23.
8 Because there is a presumption that Government officials
properly and honestly carry out their functions, an allegation of
bad faith must be established by "well-nigh irrefragable" proof.
McDonald & Eudy Printers, Inc., supra, at 36; Sterling Printing,
Inc., GPOBCA 20-89 (March 28, 1994), slip op. at 23 n.35, 1994 WL
275104, recon. denied, GPOBCA 20-89 (July 5, 1994), slip op.,
1994 WL 377592.
9The contractor's obligation is to proceed in accordance with
the directions to reprint, even if the contractor believes
that the original printing was not properly rejectable. In
such a case the contractor may file a claim for the extra
work, and if the claim is denied, appeal to this Board.
Sterling Printing, Inc., supra, at 44-45. Contractors have
been known to prevail in such appeals. See, e.g., Custom
Printing Co., supra; Professional Printing of Kansas, Inc.,
GPOBCA 2-93 (May 19, 1995), slip op., 1995 WL 488488.
10 The two contracts are different with respect to delivery. The
original contract contained a 26 calendar day delivery
requirement; the reprocurement contract allowed only a 14
calendar day delivery period. Although an expedited delivery
schedule can result in a higher price, where such a delivery
schedule becomes necessary as a result of the defaulted
contractor's delinquencies, that shorter delivery period is
viewed as a reasonable Government requirement rather than as a
material deviation from the original contract that would defeat
the Government's right to excess reprocurement costs. See
Printgraphics, supra, at 6, and cases cited therein. Here, the
original required delivery date was September 4; after the
September 18 termination for default, the Appellant refused to
return the GFM in its possession, and the Respondent states that
the delay engendered by that refusal necessitated a shorter
delivery schedule when the reprocurement contract was finally
awarded on September 30. Resp. Brf. at 13. In this regard, the
record shows that the customer agency insisted on a "must have"
date of October 15. Resp. Brf., Atch. 4. Under the
circumstances, the Board considers the shorter delivery
requirement in the reprocurement contract to be reasonable and
not a material deviation from the initial contract.
11 In some cases it has been held that a contractor will not be
liable for excess reprocurement costs if the contract
requirements have been relaxed on reprocurement and the
contractor could have performed given that relaxation, see, e.g.,
Blake Constr. Co., GSBCA 4013, 75-2 BCA ¶ 11,487, or if the
relaxation indicates that the Government did not want the item
originally described, see B & M Constr., Inc., AGBCA 90-165-1,
93-1 BCA ¶ 25,431; Hoffman Indus., Inc., ASBCA 3435, 57-2 BCA
1468, or if the relaxation is so substantial the reprocurement
contract cannot be considered similar to the original contract.
See Cosmos Eng'g, Inc., ASBCA 24270, 25524, 88-2 BCA ¶ 20,795.
To the extent the changes here could be said to involve a
relaxation of requirements, the Board notes that the most
significant change-elimination of the flood coating requirement
for the cover-resulted from the Appellant's refusal to timely
return the GFM, which led the Contracting Officer to change the
cover requirement to save production time. (According to the
Respondent, the original cover requirement necessitated at least
a day for the ink to dry before binding could be done without
damage to the cover. Resp.Brf. at 11 n.8.) Under the
circumstances, the Board considers the above cases to be
inapposite to this situation.