U.S. GOVERNMENT PRINTING OFFICE BOARD OF CONTRACT APPEALS The Appeal of TOTAL REPRODUCTIONS, INC. Docket No. GPO BCA 16-88 February 2, 1990 MICHAEL F. DiMARIO Administrative Law Judge OPINION This appeal, timely filed by Total Reproductions, Inc., 6901 Hamlin, Lincolnwood, IL 60645 (hereinafter "Appellant"), is from the June 13, 1988, final decision of John J. O'Connor, Contracting Officer (C.O.), San Francisco Regional Printing Procurement Office (SFRPPO), U.S. Government Printing Office (GPO) (hereinafter "Respondent"), denying Appellant's request for adjustments in price reductions taken by Respondent in Contract Modifications SF 201-88 and SF 356-88, respectively. The decision of the Contracting Officer is reversed for the reasons set forth hereinbelow. BACKGROUND Appellant was competitively awarded a certain contract by Respondent's SFRPPO, identified as GPO Jacket No. 586-442, Purchase Order No. P1141, dated February 4, 1988, to produce given quantities of one letter and two different size 4-color process "Dear Dad" recruitment posters requisitioned from the Respondent by the Department of the Army (Dept. Req. No. 8-00047). The contract amount was $30,454.00 plus an added rate per 1,000 for the 11 x 16" poster of $375.49 and an added rate per 1,000 for the 16 x 20" poster of $481.88. Respondent was to furnish Appellant two sample posters from a previous printing (one with easel), two pieces camera copy with overlay for each poster, one 8 x 10" color transparency - shoot at two different focuses, and one 8 1/2 x 11" letter as camera copy. Appellant was to furnish all other materials and operations, including paper. Product was to be shipped complete, FOB contractor's city, to 2,406 destinations by February 19, 1988. R4 File, Tab B Subsequently, Appellant commenced production, scheduling a press inspection with Respondent for February 12, 1988. At that time certain problems were discovered with whether or not the Appellant should have varnished or applied an ultraviolet coating and whether or not it had used the right paper for the small poster. Therefore, Appellant did not make timely shipment and GPO's Quality Control and Technical Department was requested to test certain samples of the small poster paper for compliance with the specifications (R4 File, Tab L, page 1). As a result, Modification SF 181-88, dated February 18, 1988, was unilaterally issued by the Contracting Officer extending the delivery date to February 22, 1988, and reducing the contract price by 10 percent, or $3,045.40, as consideration for such extension, with the further proviso that if delivery were not made by February 22, 1988, the delivery date would be further extended to February 24, 1988, with an additional $3,045.40 reduction in price. R4 File, Tab J By letter dated February 24, 1988, Appellant's Richard Steinberg wrote to the Contracting Officer requesting that the Contract Modification be rescinded and that the deliver complete date be extended to February 25, 1988 and for reimbursement of $1,888 for certain paper stock used by it. The letter in pertinent part, states: . . . I cannot agree with your findings. There is just too much grey area in the way the specifications read regarding varnish versus U.V. Coating. This one issue alone is the difference between meeting the required schedule or not. There is also additional cost to us as a result which I truly believe should be borne by the government. In reading the specifications carefully under "Presswork", it clearly states "Posters = 4/ [sic] Color Process plus U.V. Coating or [sic] Varnish." This indicates an option to the printer of in-line or off-line varnishing, or off-line U.V. Coating. We chose the option of varnishing to be done in-line on press. Reading further down in the same area, it states: "Coat the 4/ [sic] Color process area with a clear varnish with Ultraviolet (UV) or [sic] UV [sic] Coating [sic]. 1 What this indicated to us was to use Sun Fast inks to prevent fading. This is what we were preparing to use. When John McManaman was asked about this he pulled out his own specifications to check. His specifications indicated that he wanted UV Coating only and nothing about varnish or UV Inhibitors for the 11 x 16 easel card. This is the point where our finishing schedule fell apart. As I explained to you, we were prepared to do all finishing and packing within a 3-day period beginning as late as Tuesday, February 16th. This was a rather tight schedule but all shipments would have been made by Friday, February 19th. As a result of the UV Coating requirements, we were unable to get started until Thursday evening, February 18th. Due to prior committments [sic] by our finishing source, he did not have the available resources needed for Friday and the weekend to at least finish by Monday, February 22nd. Due to his other committments [sic], the earliest he felt he could finish by was Wednesday, February 24th and possibly Thursday, February 25th. Although, as parts were finished, we would begin shipping earlier. R4 File, Tab K Subsequently, Appellant was apprised of the results of Respondent's paper tests wherein it was found that the paper was not equal to the specifications 2 since it measured only 0.01883 inches in thickness, a difference of minus six percent from the specified .020 inches and that the Government was unilaterally issuing a Contract Modification reducing the contract price. The Contract Modification No. 201/88, dated March 4, 1988, in pertinent part, states: Change is hereby made in Jacket 586-442 to the extent that to compensate the Government for accepting the small Poster printed on stock not meeting the specifications, the contract price is reduced by 25% of the quoted additional rate, or $5,944.48. Purchase Order P-1141 is hereby reduced in the amount of $5,944.48. Steinberg, thereafter, wrote to the SFRPPO, by letter dated March 8, 1988, in pertinent part, as follows: . . . Per your specifications, the paper required is a .020 to .022 thick coated-one-side or coated-two-side blanks. We opted to use .020 Coated-One Side (Bill Enclosed). The paper used was Starcote made by Federal Paper Board Company. All stock used was first run stock. No mill seconds were used. After my conversation with you regarding this problem I contacted our paper source to get more detailed information. They offered two explanations for the discrepancy. First, the mill has a 5% tolerance which is plus or minus .001 in their manufacture. I would expect that the government has a similar tolerance in paper specifications. A second very important point which should be noted here is that due to the various processes required on this job there could be a 5% to 8% thinning out due to pressure. For this jacket, the paper has been printed under high pressure, liquid laminated, and die- cut, all processes which exert squeeze on the sheet. Depending on the make-up of the stock, high density or low density, this thinning can vary, but it does exist. . . . As I read your specifications, my interpretation is that we can use either a .020, .021 or .022 coated-one-side or coated-two-side blank. I chose a .020 coated-one-side, bought the paper from a mill which the government, in a variety of specifications, has named as a source for this type of stock. . . . R4 File, Tab N, page 1 The enclosed bill referenced by Appellant, from Hobart/McIntosh, Elk Grove Village, IL, describes the paper which Appellant purchased as: 17000 LK99-15 20 PT. C1S SBS COVER 23 X 35 - 300M 1 LKFRT EXCESS FRT ***FFA REFER TO: H/M 35692 COMPLETE R4 File, Tab N, page 3 Thereafter, by letter, dated May 13, 1988, Steinberg again wrote to the Contracting Officer and, in pertinent part, stated: . . . After our last conversation, you were going to do some additional research regarding UV inhibitors and get back to me. In the meantime, I see that you have changed your specifications to correct this error. (See Jacket #587-285). In light of our discussions and these specification changes, I want your contract modification number SF-181-88 of February 4, 1988 rescinded. I cannot accept an arbitrary decision to reduce the price of this contract when the specifications are unclear and leave options on production methods. In addition, I request that a contract modification be issued for the additional monies requested for UV coating and to change the ship complete date. We performed according to the way the specifications were written and made the necessary adjustment when the error was discovered. We also have received your contract modification number 201-88, which requires a 25% reduction in the contract price because the paper for the easel card seems to be slightly below specifications. I have had some additional tests done by Federal Paper Company, who furnished the paper. They say that this stock falls within their specifications for a .020 sheet. Their tests put the range of the finished product in the .019 to .020 category. They have a plus or minus of 5%. In addition, pending atmospheric conditions such as temperature, humidity and pressure plus the printing processes that the sheet undergoes, there could be some decrease in the original thickness. Has any of this been taken into consideration before ramming a 25% reduction at us? I feel that if there is to be any reduction for this nicely printed and packaged job, 25% is way to [sic] steep. The customer has, in fact, distributed and used this product. To be fair, I have computed the difference in cost between a .020 and a .018 stock and would be willing to refund the difference. This difference for 17,500 sheets of 23 x 35 would be at $29.69/M sheets (Price Sheet Enclosed) or $519.58. I feel we ordered the correct sheet per the specifications and I'm willing to accept the minor deviation by the mill and prevailing conditions. . . . Please issue your final decision to me. . . . I am going to take this to appeals. R4 File, Tab O This was followed by the Contracting Officer's final decision letter, supra, wherein he stated, in pertinent part, After further review I cannot disprove your contention that the specifications could have been interpreted as allowing you an option to varnish rather than UV coat the small poster. With this in mind I will authorize payment of the additional cost of the UV coating not to exceed $1888.00 upon submission of evidence supporting this claim. ($1,888.00 is the amount you requested in your letter of February 24). In documenting your claim you should show the cost of the UV coating minus the cost of varnishing (broken down as to plate, makeready, run, etc). Also you should subtract any savings you accrued in not using the Sun Fast inks upon which you based your original bid. With regard to the timeliness of this order, I do not however accept your contention that the UV coating caused your late delivery. I believe there is ample evidence to show that you were behind in production virtually from the beginning. In your letter of February 24 you made the following statements: ". . . . . we were prepared to do all finishing and packing within a 3-day period beginning as late as Tuesday February 16th. This was a rather tight schedule but all shipments would have been made by Friday, February 19th. As a result of the UV coating requirements, we were unable to get started until Thursday evening, February 18th. Due to prior commitments by our finishing source, he did not have the available resources needed for Friday and the weekend to at least finish by Monday, February 22nd. Due to his other commitments, the earliest he felt he could finish by was Wednesday, February 24th and possibly Thursday, February 25th." Our records indicate that it would have been impossible for you to follow the specifications and still maintain the schedule outlined in your earlier letter. On February 8, at 8:00 am you questioned Mr. Baker of this Office, about the 1 day proof hold time. During that conversation Mr. Baker pointed out that the 1 day hold could be accomplished because Army would do the proofing at your plant. He also reminded you that the specifications required 72 hours advance notice. On February 9, at 2 p.m. you informed this office that proofing could be done at 10:00 a.m., February 11. At this point it became evident that you were seriously behind schedule. According to the specifications the Government representative had 72 hours to attend the proofing at the contractor's plant. Therefore, for planning purposes, you were aware that proofing could be done as late as Friday, February 12, at 2 pm. In fact, with a 1 working day proof hold time, proof approval by the Government was not required until 2 pm February 16. (Monday February 15 was a Government holiday). Upon receipt of proof approval, if you had immediately given the 72 hours notice of press inspection required by the specifications; you could not have begun your presswork until 2pm Friday, February 19th. You have already stated that your finishing source had prior commitments which would not have enabled you to complete the order before February 24th or 25th. Contract modification SF 181-88 extended the delivery date twice, ultimately to February 24, in return for a total reduction of 20% of the contract price. It is obvious, from the facts which I have just outlined, that such adjustment would have been appropriate even if you produced the order with varnish rather than UV coating. In essence the specifications required that the contractor plan in his schedule at least 7 days from first notification to the Government of availability of proofs to receiving a final OK to proceed with presswork. In fact, the Government gave the OK to proceed with the presswork only 3 days after first notification of proof availability. This 4 day savings would have provided adequate time to accomplish the UV coating and still deliver on time had you been on schedule from the beginning of this job. In addition to this, Total Reproductions breached the contract in failing to allow the Government the opportunity to be present during the actual color separation process on the image enhancing equipment. This again, in essence, provided you with more production time and an unfair advantage over other bidders. It is also clear that the Government suffered some damage in not having the opportunity to consult with the color separator while the separations were being done. I feel that the Government, thru [sic] its handling the proofs and press inspection in less than half the time called for in the schedule, actually provided an adequate number of days to accomplish the UV coating. However I am willing to extend the date from February 19 to February 22 as an additional allowance for this operation. The final extension of time from February 22 to 24 and the corresponding reduction of 10% of the contract price will be retained as originally written in contract modification SF 181-88. You have also taken exception to modification number 201-88 which took a 25% reduction in the value of the small poster because the stock used did not meet specifications. Jacket 586-442 required that the small poster be printed on "White Board, 5 ply, C1S or C2S Blanks, .020 to .022" thick." The specifications are perfectly clear in the requirement for 5 ply blanks and the thickness of 5 plies is .021". We allowed the same deviation in thickness from the specified stock as you have stated is the tolerance called for by the mill. By your own admission you ordered an .020" stock rather than a 5 ply blank. It is not surprising therefore that both your tests and ours found the paper to be below the minimum .020" thickness. The small poster was clearly rejectable however, in lieu of rejection we accepted the product with a 25% reduction. I therefore, will not make any adjustment in the reduction taken under contract modification 201-88. R4 File, Tab P The Contracting Officer unilaterally issued Contract Modification No. SF 356-88, dated June 13, 1988, in conjunction with the letter as follows: Change is hereby made in Jacket 586-442 as follows: Contract Modification SF 181-88 (dated 2-4-88) is cancelled [sic] in its entirety. To accomplish UV coating of the small poster by subcontract the schedule is adjusted as follows: The requirement for 72 hours notice for review of proofs and color separation during the separation process is waived. In addition, the requirement for 72 hour notice for press inspection is reduced to 20 hours. The scheduled delivery date is also extended from February 19 to February 22, 1988. These changes are necessary to reflect the fact that the absolute requirement for UV coating, rather than varnishing, was unclear in the specifications. For the additional expense incurred in the application [of] UV coating rather than varnishing, you will be reimbursed in an agreed upon amount not to exceed $1,888.00. Further change is made to the effect that the delivery date is extended from February 22 to February 24, 1988. For this extension, the contract price is reduced by 10% or $3,045.40. Purchase Order P-1141 is hereby reduced in the net amount of $1,157.40. Thereafter, Steinberg, by letter of July 12, 1988, appealed to the Board. The letter, in pertinent part, states: . . . My appeal is based upon two aspects of this contract, delivery schedule penalties and interpretation of paper stock (specifications enclosed). Regarding delivery schedule, we agreed to meet the schedule by acceptance of the order. We were prepared to meet the final "at destination" date of February 19, 1988. We worked closely with both GPO San Francisco and the Army to achieve this date. It was then discovered that there was an error in the writing of the specifications which seemed to allow us the option of varnish or U.V. coating. This in fact was not the case. The Army wanted U.V. coating only. Up to this point, with everyone's cooperation, the schedule would have been met. As a result of changing from an in-line, on press varnish to an off-line, subcontracted U.V. coating, we required as [sic] additional four working days to complete the job. The error was discovered on Friday afternoon, February 12, 1988, at the press inspection. It was not until Monday, February 15, that we were able to send the job to a U.V. coating source who was not able to deliver it back to us until Thursday afternoon, February 18. As I had explained to Mr. O'Connor, our source for doing the easel assembly and packaging, due to other committments [sic], was unable to complete this work until February 25. In summary, as of February 12, when we went to press, we were on a schedule which would have met the final ship date. Due to an error in the specifications we required an additional four working days. I feel the 10% penalty which Mr. O'Connor has imposed is unfair in light of these arguments. We wish to have it rescinded. In addition to the late penalty, we have also received notification of a $5,944.48 reduction as a result of paper meeting specifications. My interpretation of the specifications were to supply a C-1S board either .020, .021, or .022. Based upon the tight schedule, my interpretation was that any of those three thicknesses were acceptable, giving me the option, based upon availability to meet the schedule. I was able to find a good, first run, .020 board which I felt met these specifications. I did not feel there were any shortcuts taken with the stock. As a matter of reference, the stock was visually checked here in our plant with a micrometer by one of the GPO representatives present at the press inspection who indicated to us that it seemed OK. . . . By internal Government Memorandum, dated July 19, 1988, the Contracting Officer notified Respondent's Financial Management Service to take the following action: Jacket 586-442 was awarded to Total Reproductions in the amount of $30,454.00. The VO PS History File indicates that the full amount (minus the prompt payment discount) has been paid. Since the award, several adjustments have taken place: Contract Modification 181-88 was written but subsequently cancelled [sic] by Mod #356-88. Contract Modifications #201-88 and 356-88 are adjustments to the purchase order which remain in effect and should be reflected in an adjustment to the contractors [sic] account. Modification #201-88 reduces the purchase order amount by $5,944.48, for the use of paper not equal to the specifications. Modification #356-88 pays the contractor additional money for application of a UV coating. It also extends the delivery date in return for a reduction in the purchase order amount. The net result is a reduction of $1,157.40. The combined effect of these two modifications is a reduction in the original purchase order amount of $7,101.88. Please take the necessary action to recover this amount from any monies owed to this contractor. R4 File, Tab S Subsequently, a prehearing conference was held on March 14, 1989, at which time the Appellant, Steinberg, stated that at no time did he request additional time to complete the order and that he did not agree with or sign any of the Contract Modifications. The Appellant indicated that the tests which he had done (Appellant's letter of May 13, 1988, supra ) found the paper to be between .0192 to .0197 inches in thickness and, as a result, that he had sent additional samples to GPO to be tested but never heard any more from GPO. Appellant was not familiar with the ply of the paper but indicated that the paper he had purchased was of a purported higher grade than the specifications required. Appellant further stated that he felt that the 25 percent reduction bore no rational relationship to any injury to the Government. On the other hand, the Contracting Officer indicated that this reduction was based upon the GPO Quality Assurance Through Attributes Program (QATAP) paper attributes tables. The Appeal comes now before the Board in this form for decision. DISCUSSION The Board, having thoroughly examined the facts of the case in the light of the contract between the parties, concludes that both modifications under appeal should be vacated. First, the contract adopts all the terms and conditions of U.S. Government Printing Office Contract Terms No. 1, Revised October 1, 1980 (GPO Publication 310.2), by reference on page 1 of the Specifications. Those terms have no provision granting the Contracting Officer authority to impose a price reduction in consideration of his unilaterally extending the contract schedule in anticipation of probable contractor default in delivery. Rather, they contemplate in Article 2-18(a)(1) that "If the contractor . . . so fails to make progress as to endanger performance of the contract in accordance with its terms . . . " he be given reasonable notice of the potential default and an opportunity to "cure" such defect prior to the Government's taking default action by either terminating the contract or, under Article 2-19, allowing the contractor to deliver the requisite product beyond the established delivery date subject to a reduction of the contract price. Such reduction is to be by way of "actual damages" to the Government unless the parties have overridden such provision elsewhere in the contract, which in this case they have not done. The term "Actual Damages" contemplates that the Government has suffered some real injury measurable in dollars. In the case at bar there is no evidence that the 10 percent figure is related to any real injury whatsoever. (The unrequested relinquishment of a contractual entitlement to time for review of proofs is clearly not an injury encompassed within such concept.) Rather, it is taken as a matter of reduced contractual "consideration" owed by the Government to the contractor -- an entirely different legal concept from "damages" owed by the contractor to the Government as compensation for resultant injuries caused by the delay. The Contracting Officer clearly exceeded his authority in this regard. 3 Moreover, the facts support a conclusion that the delay in delivery was excusable. While the Board itself would not have acquiesced to the contractor's contention that the contract was ambiguous respecting the small poster coating, this being a post award claim, once such acquiescence was given, the Government became liable for the delay. Thus, the contractor was entitled to an automatic extension of the contract schedule (such extension to be measured in "work days," not calendar days) under the provisions of Article 2-11, with the possibility of even more time if such were requested and demonstrated to be necessary. Additionally, if the coating process demanded by the Government required the use of a subcontractor, as the contractor claims, the scheduling delay caused by such use would indeed constitute an unforeseeable cause beyond the control and without the fault or negligence of the contractor. Thus, no damages of any sort could be imposed given the provisions of Article 2-21. The facts, while inconclusive on this point, tend to support the contractor's claim. Second, the Board is in disagreement with the Contracting Officer's conclusions respecting the small poster paper: (1) The Board finds the specifications to be ambiguous as alleged in that the dictionary defines the word "to" both to denote a "series" as alleged by Appellant and "limits" 4 as alleged by the Contracting Officer. Moreover, the use of the term "5 ply" in the "Specifications," coupled with the mere fact that one company, Beveridge, as shown by Respondent, manufactures its .021 stock only in 5 ply, is insufficient proof to alter this conclusion. There are untold numbers of other paper manufacturers, including those who specially manufacture to order who might produce .020 or .022 5 ply stock. Additionally, there is nothing in the record to show that the stock furnished by Appellant was not 5 ply. Nor, in the knowledge of this Board, could such "ply" provision be readily tested for by the Government's own laboratories. This being the case, the interpretation of the specifications must go against the interest of the Government as the drafting party. (Contract interpretation is a matter of law and not of fact and must be dealt with accordingly.) (2) The Board also finds that the contract is silent respecting the application of any special paper standard for the small poster paper, although "Government Paper Specification Number 8," dated April 1977, is made applicable to the white offset book paper specified for the letter. Given this, the Board must conclude that the parties intended sub-silentio the adoption of those standards extant in the paper industry. But the request for tests (R4 File, Tab L) shows that the instruction to the Government's laboratory was to test the samples "for compliance with Government Paper Specifications Standards." And we must assume that that is what the laboratory did in making its determination that the paper was defective. Accordingly, we conclude that the Government has failed to prove that the paper was, in fact, defective. (3) Even if this were not the case, the Board would reverse the imposition of the 25 percent reduction in price, since such reduction is totally inconsistent with the intent of the contract. Article 2-12 of Contract Terms No. 1 in pertinent part provides that " . . . Unless the contractor corrects or replaces such supplies within the established delivery schedule, the Contracting Officer may require delivery of such supplies at a reduction in price which is equitable under the circumstances." (Emphasis added by the undersigned.) Clearly, a 25 percent reduction is not what was contemplated within the meaning of the term "equitable," especially since there is no evidence whatsoever of diminished product usability. Moreover, the Contracting Officer when asked in the prehearing conference to explain how he had arrived at the reduction responded that he had used the QATAP; i.e., Respondent's Quality Assurance Through Attributes Program (GPO Publication 310.1), even though the contract did not adopt the QATAP for the paper attribute but only for printing and registration attributes. Ignoring this fact, we have nevertheless examined the 9-2-86 version of the QATAP. From this we conclude that the correct application of the Paper Attribute provision as a measure of Product Quality would not have resulted in a discount at all. Paragraph 4-3 of that publication provides that the paper characteristic will be tested in accordance with the current edition of "Government Paper Specification Standards." That edition was determined by the Board to be the May 1, 1986, revision. In "Part 4 - Acceptance Criteria" the revision shows that paper which has no special designation in a contract solicitation and which when tested is shown to be "4-8 pct" at variance with the specification is categorized as a "Major defect" and is to receive 12 demerits. Interpolating these demerits in the Tolerance Table for the "Paper Attribute" under QATAP, paragraph 4-3, we find that a product which receives less than 31 demerits is to be classified (in contradistinction to the paper specification standard) as having no defects at all. Since the Government's tests show the paper tested to be minus 6 percent defective, we conclude that it should not have been rejected under this standard. For all of the above reasons the Board reverses the final decision of the Contracting Officer in its entirety and remands the case back to the Contracting Officer for payment to the contractor of the full contract price and appropriate correction of all records respecting the contractor's performance. It is so Ordered. _______________ 1 The pertinent provision of the specifications under the caption "PRESSWORK," sub-caption "Format," states: . . . Item 2, Small Poster, 11/16", type prints in black ink, illustration prints in 4-color process w/type reversed out to white for 63,325 copies. Coat the 4color process area (approx llx12 7/8") with a clear varnish with ultraviolet (UV) inhibitor and firmly attach a suitable easel, approx. 15" high and approx. .040" to .045" thick, single wing, self-locking chipboard or cardboard, centered on the 11" bottom dimension. Follow sample furnished. Item 3, Large Poster, 16x20", type prints in black ink, illustration prints in 4-color process w/type reversed out to white for 8,775 copies. Coat the 4-color process area (approx. 16x17 5/8" with a clear, non-yellowing gloss varnish. 2 The specifications require the contractor to furnish for the small poster "White Board, 5 ply, C1S or C2S blanks, .020 to .022 inches thick." 3 The Supreme Court of the United States, in the case of Cooke v. United States, 91U.S.389 (1874), at 398, has said that when the United States Government "comes down from its position of sovereignty and enters the domain of commerce, it submits itself to the same laws that govern individuals there." As an axiom of this, a Government Contracting Officer has no authority over a contractor's performance by mere virtue of his office. 4 WEBSTER'S NEW COLLEGIATE DICTIONARY, G. & C. Merriam Company, at 1225-1226 (1977).