U.S. GOVERNMENT PRINTING OFFICE BOARD OF CONTRACT APPEALS The Appeal of FEDERAL ENVELOPE COMPANY Docket No. GPO BCA 7-87 June 16, 1989 MICHAEL F. DiMARIO Administrative Law Judge OPINION This appeal, timely filed by Federal Envelope Company, 5000 Kingston Street, Denver, CO 80239 (Appellant), is from the December 23, 1986, final decision of Raymond MacDonald, Contracting Officer (CO), United States Government Printing Office, Denver Regional Printing and Procurement Office, Denver, CO 80225-0347 (Respondent), terminating the contract identified as Purchase Order M-0515, Jacket No. 673-267, for default pursuant to the Article entitled "Default," "U.S. Government Printing Office Contract Terms No. 1" 1/ for "failure to furnish envelopes in exact accordance with specifications." The appeal is denied and the decision of the CO affirmed for the reasons set forth hereinbelow. 1/ Article 2-18 of "U.S. Government Printing Office Contract Terms No. 1," GPO Publication 310.2 - Revised October 1, 1980, was incorporated into the contract by reference thereto under the caption "Notice" on page 1 of the specifications. (R4 File, Tab 2.) BACKGROUND Appellant was awarded the above-cited contract on October 22, 1986, in the amount of $9,121.50 in strict accordance with its quotation of October 10, 1986, and Respondent's undated specifications. (Rule 4 File, hereinafter "R4 File," Tab 2.) The specifications called for the production of 45,000 +/- 10 percent, 10 x 13" self-sealing envelopes. The flaps were to be 3" in depth with a 2-3/4" adhesive strip and a 3" release liner. The throat depth was to be 3/8". The specifications further provided that "GPO WILL FURNISH f.o.b. contractor's plant -- Sample envelope, contractor to typeset approximately 6 type lines and one horizontal rule." Further instructions under the caption "PRESSWORK" stated: "Margins: Follow sample: Adequate gripper." (R4 File, Tab 2.) No other instructions pertinent to this appeal were given in the specifications. Delivery was to be made to Respondent's Public Documents Distribution Center (PDDC) by November 25, 1986. Upon delivery of the completed products to Respondent's PDDC and a determination that the envelope flaps were only 2" in depth (R4 File, Tab 4), the CO, by letter dated December 10, 1986, directed Appellant to correct the order by January 7, 1987, at no additional cost to the Government, with the further advice to Appellant that the defective product would be destroyed by the Government upon receipt of the reprint. (R4 File, Tab 5.) By telephone call of December 11, 1986, Appellant asserted that it had ordered 3" flap envelopes from its subcontractor. Appellant was told that notwithstanding such fact, it was responsible for meeting the specifications and could either reprint the order as requested or the Government would terminate the contract for default with Appellant then being liable for any excess costs of reprocurement. At that point, Appellant asked if the Government would accept the defective order at a reduced price. Appellant was told that the Government could not do that since 3 lower bidders than Appellant had been found nonresponsive because they had qualified their bids in a similar way respecting the size of the flap they could provide; thus, it would now be prejudicial to these bidders if the Government were to accept Appellant's defective product. (R4 File, Tab 6.) The following day, December 12, 1986, Appellant was sent a "cure notice" because of its indication during the phone conversation that it might be unable or unwilling to reprint the order. Appellant was thereby afforded the opportunity to present in writing within 7 days from receipt of the notice, a statement of its intentions regarding the reprinting of the order with the further demand that unless it committed to reprint within a reasonable time or could present facts to show that the original decision of the Government to reject the product was incorrect, the Government might terminate the contract for default pursuant to the "Default" Article of "U.S. Government Printing Office Contract Terms No. 1." (R4 File, Tab 7.) In an undated response, Appellant asserted in pertinent part that: Upon receipt of . . . order #673-267 on 10/18/86, we immediately placed this order with one of our tyvek manufacturing companies that we deal with. When this job was quoted, it was quoted per your specificaitons [sic] exactly. The sample provided by you was a 2"flap which was previously used by the Pueblo Documents Distribution Center. We indicated your requests for a 3" flap and forwarded your sample to our supplier. At this point we were confident that what we had ordered was exactly what you had requested. On November 10, 1986, we were notified by this manufacturing plant that this order was delayed . . . . We . . . notified . . . your office as to . . . the approximate shipping date. Again confident that what we had ordered for you was exact. Upon rejection of this order . . . we immediately notified the manufacturer and were advised that they were unable to manufacture a 3" flap, a 2-3/4" adhesive strip, a 3" release liner and a throat depth of 3/8". We were advised by your office that specifications were stringent with absolutely no manuverability [sic] . . . . We then contacted three different manufacturers . . . and each one declined to produce this envelope . . . noting the specifications were beyond their machine capabilities. R4 File, Tab 8. Appellant further stated that it too was unable to reprint the product due to the specifications and "therefore must default on this order." (R4 File, Tab 8.) The notice of termination followed on December 23, 1986. Thereafter, by letter dated March 20, 1987, Appellant gave notice of its intent to appeal enclosing a copy of its undated response letter to Respondent's December 12, 1986, "cure notice," supra, and asserting that its "main concern is that the exact product could not and has not been supplied." (Official File, Tab 1.) A notice of docketing was sent to the Appellant by letter dated March 24, 1987, together with a copy of the U.S. Government Printing Office Instruction 110.12 entitled "Board of Contract Appeals Rules of Practice and Procedure" dated September 17, 1984. No formal complaint or other information was received from Appellant. On June 18, 1987, Appellant was advised by the Board that Government counsel denied Appellant's allegation of facts in their entirety and that as a result, the Board was entering a general denial in its docket on behalf of the Government pursuant to Rule 6.(b) of the Board's Rules, supra. (Official File, Tab E.) Subsequently, the Board has determined, through its own inquiry, that Respondent reprocured the exact product from Golden West Envelope Company (Golden West) of San Francisco, CA by Purchase Order M8780, Jacket No. 774-175 dated December 31, 1986, with the job to be delivered complete by February 27, 1987. (See Attachment 1.) Golden West was paid $9,855.30 on March 4, 1987, by Respondent for its work. (See Attachment 2.) However, because "[a]n inspection of samples supplied from this order reveal[ed] that the product failed to meet the specifications in the following areas: Adhesive strip was too narrow, approx. 2" wide when 2-3/4" required.", Contract Modification 567-87 was issued on April 29, 1987, decreasing Appellant's invoiced price by 15 percent, an amount of reduction agreed to by Golden West. (See Attachment 3.) Accordingly, Respondent issued a debit voucher in the amount of $1,478.30 on July 25, 1987, and received payment for the same as recovery for the debit on August 4, 1987. (See Attachment 4.) The matter is before the Board for decision upon the written record in this form, no request for a hearing having been received. FINDINGS OF FACT AND CONCLUSIONS OF LAW The Board, for its "Findings of Fact and Conclusions of Law," finds that there is no basis for Appellant's claim inasmuch as Appellant: (1) Offers no evidence that its contractor relied upon the sample as being in implied conformity with the specifications. Moreover, even if it had, it appears to the Board that the sample was furnished for the limited purposes expressed in the specifications; and (2) Admits in its undated letter of response to the CO's December 12, 1986, "cure notice," upon which it relies in its "Notice of Appeal," that its subcontractor was negligent in that: (A) Appellant based its bid upon the 3" flap requirement and expressly noted such requirement to the subcontractor when it furnished the Government sample. (2) The subcontractor intentionally manufactured the envelope with a 2" flap because it was "unable to manufacture a 3" flap, a 2-3/4" adhesive strip, a 3" release liner and a throat depth of 3/8"." In this regard, Article 2-18(c) of GPO Contract Terms No. 1, supra, provides: (c) Except with respect to defaults of subcontractors, the 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. . . . . 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. Moreover, the Board finds the facts presented, including the information respecting the 3 disqualified bidders and the 3 contractors purportedly checked by Appellant, to be insufficient probative evidence to support a factual conclusion of commercial impracticability respecting the 3" flap. This finding is buttressed by the additional fact that the product was reprocured with the same 3" flap requirement, albeit a discount was ultimately taken for the defect in adhesive strip size. Accordingly, the appeal is denied and the decision of the CO affirmed. IT IS SO ORDERED.