BOARD OF CONTRACT APPEALS
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON, DC 20401
In the Matter of )
)
the Appeal of )
)
QUALITYPE, INC. ) Docket No. GPOBCA 21-95
Program 1020-S )
Purchase Order R-0143 )
Print Order 80000 )
For the Appellant: Qualitype, Inc., Macedon, New York, by
Frederic G. Antoun, Jr., Attorney at Law, Chambersburg,
Pennsylvania.
For the Respondent: Kerry L. Miller, Esq., Associate General
Counsel, U.S. Government Printing Office.
Before BERGER, Ad Hoc Chairman.
DECISION AND ORDER
Qualitype, Inc. (Appellant), 201 Heather Lane, Macedon, New York,
timely appealed the April 26, 1995, final decision of Contracting
Officer Michael J. Atkins of the Seattle Regional Procurement
Office of the U.S. Government Printing Office (Respondent),
determining that Qualitype had been billing incorrectly for work
done under its contract and directing that the amount erroneously
paid be recovered. For the reasons which follow, the Contracting
Officer's decision is AFFIRMED and the appeal is DENIED.
I. BACKGROUND
1. The Appellant was awarded the Program 1020-S requirements
contract, calling for reproduction proofs for the Fishery
Bulletin, a publication of the National Oceanic and Atmospheric
Administration, for the 1993-1994 period and again for the
1994-1995 period.
2. Under these contracts, the Government furnished magnetic
media data files, and hard copy output of the data files
containing author's alterations. The contractor was required to
insert these author's alterations into the data files.
3. The contracts' Schedule of Prices contained the following
items for composition work:
A. Author's Alterations (the minimum charge shall
be $10.00 per print order, when applicable):
(1) Alterations marked on hard copy (or
manuscript copy) that requires insertion
into furnished data files, requested
before proofs/repros are delivered to
the Government (text editing):
(a) Text matter. . . . . . . . per 1,000 characters. . . .
$_________
(b) Tabular matter. . . . . .per 1,000 characters. . . .
$_________
(2) Alterations marked on proofs (made
subsequent to delivery of proofs to
the Government):
* * * * *
B. Electronic photocomposition charges (from
telecommunicated and/or storage media). . . per page. . . .$
________
Rule 4 File, Tabs D and H.1
4. For the 1993-1994 contract, the Appellant bid a unit price
of $ .001 for item A(1)(a) and a unit price of $9 for item B,
with a total evaluated bid price of $15,879.33. Rule 4 File, Tab
E. Billings under the contract totaled $9,272. Gov't Exh. No.
1.2
5. For the 1994-1995 contract, the Appellant bid unit prices of
$12.50 for item A(1)(a) and $2 for item B. The evaluated bid
price was $9,673.97. Rule 4 File, Tab I.
6. After performing in response to the first print order under
the 1994-1995 contract, the Appellant submitted a voucher for
$12,854. This was followed by a voucher for work performed under
the second print order in the amount of $16,490.50. Rule 4 File,
Tab J. Since these voucher amounts exceeded the Respondent's
estimates by a significant amount, the Contracting Officer was
informed; he then contacted the Appellant and learned that the
Appellant was billing under item A(1)(a) for the total number of
characters in a document to which author's alterations were made,
instead of for just the number of author's alterations (per
character) actually made.
7. The Contracting Officer, believing that the Appellant was
entitled to be paid only for the number of actual author's
alterations and therefore had not billed in accordance with the
contract, issued a final decision informing the Appellant that
GPO's Financial Management Service (FMS) had been directed to
recover the amounts already paid the Appellant in excess of what
the Contracting Officer considered to be proper. Rule 4 File,
Tab K.
II. DISCUSSION
The issue presented by this appeal is simple-what is meant by the
contractual language providing for payment for author's
alterations for text matter "per 1,000 characters"? Both parties
insist that the meaning is clear and unambiguous. They are,
however, 180 degrees apart on what that meaning is. The
Appellant states that the language calls for pricing and payment
"based on the number of 1,000 characters in the document to be
edited," App. Brf. at 4, while the Respondent asserts that the
language can mean only that the contractor is to be paid for the
number of 1,000 characters that are changed by author's
alterations. Each also insists that only its interpretation make
sense and reflects what the contractor should be paid for in
light of the effort the contractor is called upon to put forth.
The Appellant further states that its interpretation is
longstanding and reflects its prior course of dealing with GPO,
including the prior year's Program 1020-S contract.
Resolution of this matter is controlled by well-established
principles of contract interpretation. The Board has had several
occasions to set forth and discuss these principles at length,
see, e.g., Custom Printing Co., GPOBCA 28-94 (March 12, 1997),
slip op. at 30-35, 1997 WL 128720; MPE Business Forms, Inc.,
GPOBCA 10-95 (August 16, 1996), slip op. at 42-48, 1996 WL
812877; The George Marr Co., GPOBCA 31-94 (April 23, 1996), slip
op. at 41-44, 1996 WL 273662, and need not do so again here.
Briefly stated, the fact that two contracting parties have
different interpretations of the same contract language raises
the possibility that the language is ambiguous, RD Printing
Associates, Inc., GPOBCA 23-94 (February 24, 1998), slip op. at
6, 1998 WL 148997; B & B Reproductions, GPOBCA 09-89 (June 30,
1995), slip op. at 22, 1995 WL 488447, although the disagreement
over the proper interpretation of the contract language does not
automatically mean that there is an ambiguity. International
Business Investments, Inc. v. United States, 17 Cl. Ct. 122
(1989), aff'd without op., 895 F.2d 1421 (Fed. Cir. 1990); United
Computer Supplies, Joint Venture, GPOBCA 26-94 (January 23,
1998), slip op. at 14, 1998 WL 148845. To be ambiguous the
disputed language must be susceptible to more than one reasonable
interpretation. The George Marr Co., supra, at 41. Determining
whether contract language is susceptible to two or more
reasonable interpretations and thus ambiguous requires a careful
reading not only of the disputed language but of the contract as
a whole so that all of its provisions are given effect. MPE
Business Forms, Inc., supra, at 45-46; The George Marr Co.,
supra, at 43-44; see IPI Graphics, GPOBCA 04-96 (April 9, 1998),
slip op. at 7, 1998 WL ____.
When considered by itself, the phrase "per 1,000 characters"
obviously is susceptible to both proffered interpretations-it
could refer to all the characters in the document, and it could
refer to the characters changed by author's alterations. When
the contract is read as a whole, however, only one of those
interpretations is reasonable.
The contract is for the production of photo reproduction proofs,
with the contractor required to engage in such operations as
photocomposition and page makeup. The contract's Schedule of
Prices divides the composition work for which the contractor is
to be reimbursed into two categories: author's alterations (made
both prior and subsequent to delivery of proofs by the
contractor), and electronic photocomposition. While typesetting
was a requirement of the contract (the contract stated that "the
typesetting is considered more difficult than average," that a
"moderate portion of the typesetting will be multiline
equations," and that "30 percent of the typesetting will be
tabular"), the contract also made it clear that significant
keying was not envisioned or required. The contract
specifications identified the work as composition from "furnished
word processing storage media and/or telecommunicated data" and
precluded the contractor from re-keying or altering the data
"unless so specified." The contract further stated that "[a]
pproximately 10% of the above copy will require contractor to key
from manuscript copy; this operation will be paid for under
'author's alterations (text editing).'" "Text editing" was
defined as "[e]ditorial changes indicated on hard copy or
manuscript copy that is to be inserted within furnished data
files." (Emphasis supplied.)
These provisions establish the contract as one requiring
photocomposition work with data that to a significant extent has
been keyed and is furnished to the contractor in electronic
storage (diskettes or tapes) or teleprocessed format, with some
keying required from furnished manuscripts. As such, it is not
reasonable to read the Schedule of Prices section of the contract
as providing for payment to the contractor as though the
contractor had to key an entire document. It is axiomatic that
the contractor is entitled to be paid for, and the Government is
required to pay for, the work ordered under a contract.
("Payment is the Government's principal contractual obligation .
. . ." John Cibinic, Jr. and Ralph C. Nash, Jr., Administration
of Government Contracts 1135 (Third ed. 1995) (hereafter Cibinic
& Nash, Administration)). The corollary, of course, is that the
contractor is not entitled to be paid for work it is not called
upon to do. See Sears Petroleum & Transport Corp., ASBCA 41401,
94-1 BCA ¶ 26,414. Since this contract calls for keying only to
reflect author's alterations (by inserting the changes within the
data files furnished), the only reasonable interpretation of the
disputed language is the Respondent's-that is, that "per 1,000
characters" refers to the number of characters changed by
author's alterations.3 Further evidence that the contractor is
to be paid for actual author's alterations only is provided by
the "Author's Alterations" clause incorporated into the contract
by reference. That clause requires the contractor to submit with
its vouchers "all marked proofs, or facsimiles thereof, showing
author's alteration marks." GPO Contract Terms, Solicitation
Provisions, Supplemental Specifications, and Contract Clauses,
GPO Pub. 310.2 (Rev. 9-88) (hereafter GPO Contract Terms),
Supplemental Specifications, ¶ 17. See Universal Printing
Co.,GPOBCA 9-90 (June 22, 1994), slip op. at 36 n. 37, 1994 WL
377586 (although the custom in the printing trade is to provide
documentation to support charges for author's alterations upon
request, under GPO contracts "such documentation is required."
(Emphasis in original.)) Although the Appellant's owner
testified that he has not furnished such documentation, HT 135,
this contract language clearly envisions reimbursement based on
actual alterations. There would be no need for such
documentation if the basis for reimbursement were total character
count.
This reading of the contract is buttressed by the contract
estimate of 540 for the line item in question. The Respondent's
estimate of a total of 540,000 characters of author's alterations
for the entire year (during which the contractor was to expect
four orders, each for a publication of approximately 150 pages)
was a clear indication that "per 1,000 characters" was not a
reference to the total character count of the publications since,
as the Appellant's own invoices show, Rule 4 File, Tab J, each
one contained more than one million characters. Although the
Appellant's owner testified that he knew, from his experience
with the prior year's contract, that the estimate "would be
inaccurate," HT 130, and was "pretty much meaningless," HT 131,
he was not free to so quickly and cavalierly dismiss that
estimate. In this regard, although the estimate was not binding
on either party and did not preclude orders that went beyond it,
the Government is required to exercise due care in developing
good faith, reasonable estimates based on all available
information and may not evaluate bids and award a contract on the
basis of quantities other than what are actually anticipated to
be ordered under the contract. United Computer Supplies, Joint
Venture, GPOBCA 26-94 (January 23, 1998), slip op. at 11, 1998 WL
148845; Shepard Printing, GPOBCA 37-92 (January 28, 1994), slip
op. at 23, 1994 WL 275077. While this does not foreclose the
possibility of some inaccuracy in the estimate, the gross
disparity between the estimate and the expectations of the
Appellant under its interpretation of the contract should have
alerted the Appellant to at least the possibility that its
interpretation was incorrect.
Moreover, the Appellant's appreciation of this latter possibility
should have been reinforced by the change made from the previous
year's estimate. Despite the common experience of the Respondent
and the Appellant with the previous year's contract, which had an
estimated quantity for these author's alterations of 750,000
characters, the Respondent did not raise the estimate for the
1994-1995 contract, as it reasonably would have been expected to
do if the "per 1,000 characters" language referred to the total
characters in the document. Instead, it lowered the estimate to
540,000. In the Board's view, the contract provisions discussed
above, when read together with this lower estimate, leave no room
for the Appellant's interpretation.4
The Appellant's owner, explaining the basis for his
interpretation, testified that making author's alterations and
performing text editing involves certain work, in particular with
respect to spacing and margins, HT 32, that goes well beyond
keying or re-keying characters. He stated:
"Well, as soon as the disk comes in, we convert it to a format
that is compatible with the equipment we are using. We delete
the unnecessary space ems, unnecessary carriage returns,
unnecessary tab stops, insert em spaces in literature cited
sections, insert em spaces for level 3 and level 4 headings,
replace hyphens with dashes between all numbers and month, re-key
all mathematical symbols, all mathematical equations, tables
supplied in text programs that are not compatible with IBM or
Macintosh. Sometimes . . . they have . . . some really, really
weird stuff that cannot be translated, we re-key the tables, and
then we repaginate, that is, in the next chapter, repaginate
author's alterations.
HT 62. He further stated that making author's alterations
affects not only the line and page on which the alterations are
made but also the ensuing pages. HT 65. The Appellant suggests
that in large measure it is all of this work, involving the
entire text of the document being created, that makes reasonable
its interpretation that it is entitled to payment based on the
total character count of the document.
The Appellant's position is flawed, primarily because it equates
this work described in the quoted testimony with author's
alterations/text editing and considers text editing to be editing
of the entire text regardless of the number of changes made. In
this regard, the Appellant's owner testified:
To me, and probably every other printer out there, text editing
means just that, it is text editing. So, if you supply to me
10,000 characters on disk, and you make 2,000 changes, you get
charged for 10,000 characters, and that is text editing.
HT 213-14. The contract, however, defined text editing "for
purposes of this contract" as editorial changes on hard or
manuscript copy to be inserted into the furnished data files.
This is obviously a far more limited concept of text editing than
the Appellant's; it is also one that is consistent with the
concept of author's alterations as described in the Schedule of
Prices ("[a]lterations marked on hard copy (or manuscript copy)
that requires insertion into finished data files") and in the
"Author's Alterations" provision of the Supplemental
Specifications5 (". . . all marks made by the author at variance
with the original manuscript as submitted to the contractor . . .
." GPO Contract Terms, Supplemental Specifications, ¶ 17).
Thus, while the record provides no basis to question the
Appellant's statement that it performs the tasks described and
that the tasks affect most or all of the text, under the contract
most of those tasks are not text editing and, since they go well
beyond the insertion of marked changes, are not author's
alterations. In fact, most of those tasks, involving formatting
and layout, would be required even if there were no author's
alterations at all. Logically, then, under this contract the
Appellant's reimbursement for this work should be realized not
through the author's alterations line item, but through the
Appellant's per page price for electronic photocomposition.
While the Appellant was free to structure its bid, within
reasonable limits,6 as it chose, and could, as the Respondent
suggests that it did, shift composition charges into the pricing
for author's alterations, Resp. Brf. at 3, the Appellant cannot
expect reimbursement for author's alterations when the work
performed is not encompassed by the author's alterations line
item of the contract. To the extent that some of this work is
directly related to author's alterations because when changes are
made text often shifts from one location or one page to another,
thereby requiring reformatting and repagination,7 the Board notes
that the Appellant, rather than any contract requirement, is
responsible for its having to perform some portion of the work
because of its preferred approach to sequencing the tasks
involved.8 Moreover, while reformatting and repagination
may be required as a result of author's alterations, those tasks,
as discussed above, are not encompassed by this contract's line
item for pre-proof author's alterations.
The Appellant also asserts that its interpretation of the
contract is reasonable because of its prior course of dealing
with GPO. The Appellant states that "[i]n all cases prior to the
instant dispute where the contract called for 'per 1,000
characters' text editing prices, invoices billing the line item
price multiplied by the number of thousand character units in the
entire text were submitted" and paid. App. Brf. at 8. The
Appellant identifies and relies on three contracts where this
occurred-the 1993-1994 Program 1020-S contract, and two other
contracts, for the 1023-S and 1098-S programs, also awarded by
Respondent's Seattle office.9
In all relevant respects regarding text editing and author's
alterations, the language of the specifications and the Schedule
of Prices in the 1993-1994 1020-S contract is the same as in the
1994-1995 contract. The 1023-S contract, for the procurement of
reproduction proofs for technical reports, also contained
virtually the same language. The 1098-S contract, for
reproduction proofs for the "Marine Fisheries Review", again
contained virtually the same language, except that it identified
25 percent instead of 10 percent as the approximate amount of
copy that would require keying and would be paid for under the
author's alterations line item.
Both the RESTATEMENT (SECOND) OF CONTRACTS and the Uniform
Commercial Code describe a course of dealing as a sequence of
conduct between the parties which fairly is to be regarded as
establishing a common basis of understanding for interpreting
their expressions and other conduct. See Longmire Coal Corp.,
ASBCA 31569, 86-3 BCA ¶ 19,110, recon. denied, 87-1 BCA ¶ 19,454.
Thus, a prior course of dealing between the parties may establish
the meaning of disputed contract language. United Computer
Supplies, Joint Venture, supra, at 15. Contract payments can
establish a course of dealing. Healy Tibbits Builders, Inc.,
ASBCA 45269, 94-1 BCA ¶ 26,409. This prior course of dealing
concept is predicated on the presumption that where the parties
disputing contract terms have interpreted the provisions of a
similar, previously performed contract in a certain manner, they
intend the same meaning for those provisions in the disputed
contract. MPE Business Forms, Inc., supra, at 59, quoting
Publishers Choice Book Mfg. Co., GPOBCA 4-84 (August 18, 1986),
slip op. at 10-11, 1986 WL 181457; Cibinic & Nash, Administration
at 200. This presumption is rebuttable; it also requires that
both parties have actual knowledge of the prior course of dealing
and of its significance to the contract. See Cibinic & Nash,
Administration at 200, 202. The Appellant's argument founders on
this last point.
It is clear from the testimony that the Respondent was not
explicitly aware of how the Appellant was billing for author's
alterations under the three prior contracts and did not recognize
that it was paying on the basis of total text characters. In
this regard, the Contracting Officer testified that the
Appellant's invoices are not sent to him for review and payment
approval; rather, they go directly to FMS for payment. HT 148.
The Contracting Officer first learned that the Appellant was
billing for total text characters when FMS brought the
Appellant's invoices on the contract in dispute to his attention
because they far exceeded the estimates for the print orders
involved. HT 148. He stated that had he ever seen any of the
Appellant's invoices for any of the prior contracts "there is no
way they would have been paid for this" (total character count).
HT 197. FMS, which did see the Appellant's invoices on these
prior contracts, has no authority to interpret contracts; it is
responsible for reviewing contractors' vouchers and invoices,
matching them to receiving reports and to the contract/purchase
order, and processing payment. GPO Instr. 445.9, March 14, 1975.
FMS, during its voucher/invoice review, may find apparent
discrepancies in contractor billing amounts when they are
blatant, see, e.g., Swanson Printing Co., GPOBCA 27-94 (November
18, 1996), slip op. at 7-8, 1996 WL 812958 (billing included
charge for unauthorized second printing); RD Printing Associates,
Inc., GPOBCA 2-92 (December 16, 1992), slip op. at 7, 1992 WL
516088 (high dollar difference between billing amount and
perceived proper billing amount), and report the matter to the
Contracting Officer. In other cases it may not notice a
discrepancy until it makes a further invoice review at the end of
the contract term, see B & B Reproductions, GPOBCA 09-89 (June
30, 1995), slip op. at 7, 1995 WL 488447, or upon review of
additional invoices for work performed under subsequent print
orders. See Publishers Choice Book Mfg. Co., supra, at 6. In
still other cases, charged as it is with ensuring that
contractors are paid promptly, GPO Instr. 445.9, FMS may not
notice a billing discrepancy at all, and the matter will first be
brought to the Contracting Officer's attention by a customer
agency concerned that its printing bill is too high. See, e.g.,
United Computer Supplies, Joint Venture, supra, at 3; Olympic
Graphic Systems, GPOBCA 01-92 (September 13, 1996), slip op. at
5, 1996 WL 812957.
For the Respondent to be bound to a particular contract
interpretation as a result of a course of dealing, that course of
dealing "had to involve a GPO contracting officer or someone with
authority to act on [his] behalf . . . ." United Computer
Supplies, Joint Venture, supra, at 16. The record in this case
establishes that the Contracting Officer had no actual knowledge
that the Appellant, under its prior 1020- -S contract and the
prior 1023-S and 1098-S contracts, billed and was paid on the
basis of total text characters. Moreover, even if FMS' knowledge
could be imputed to the Contracting Officer, see Western
Avionics, Inc., ASBCA 33158, 88-2 BCA ¶ 20,662, the record here
falls short of establishing that FMS itself knew of the
Appellant's billing approach on the previous contracts. As the
Respondent points out in its briefs, because the Appellant's "per
1,000 characters" price on those contracts was very low (a tenth
of a cent on the 1020-S contract, 25 cents on the other two
contracts), its nominal billing prices for author's alterations
(only $10, the contract-specified minimum charge, for the 1020-S
contract, and an average of $104 per print order for the 1023-S
contract and $42 for the 1098-S contract) did not alert FMS to
the Appellant's basis for the billings or to any reason to
question the billed amounts. The Appellant has introduced no
evidence showing that either the Contracting Officer or FMS knew
or should have known of the precise basis for the prior billings
and payments. Thus, the Appellant has not
met its burden of proof to establish a prior course of dealing
here, and its course of dealing argument accordingly must fail.
III. ORDER
For the foregoing reasons, the Board concludes that the Appellant
was not entitled to reimbursement for author's alterations on the
basis of total characters in the edited document. ACCORDINGLY,
the Contracting Officer's final decision is AFFIRMED and the
appeal is DENIED.
It is so Ordered.
April 21, 1998 Ronald Berger
Ad Hoc Chairman
GPO Board of Contract Appeals
_______________
1 The Contracting Officer's appeal file, assembled pursuant to
Rule 4 of the Board's Rules of Practice and Procedure, was
delivered to the Board on September 15, 1995. It will be
referred to as the Rule 4 File, with an appropriate Tab letter
also indicated. The Rule 4 File consists of 12 tabs identified
as Tab A through Tab L.
2 A hearing was held in this matter on December 3, 1996. The
transcript of the hearing will be referred to as HT with
appropriate page citations. Exhibits introduced into evidence at
the hearing are identified as either App. Exh. or Gov't Exh.
followed by the appropriate number.
3 In so concluding, the Board is mindful that the answer might be
otherwise if the nature of the contract were different. For
example, in Fry Communications, Inc.\InfoConversion Joint
Venture, GPOBCA 8-84 (May 19, 1986), slip op., 1986 WL 181460,
the contractor was also to engage in photocomposition work based
on text and other data furnished through manuscript copies and
various electronic formats. There, however, the scope of the
contract was stated to be "data capture," the contract provided
for payment to the contractor for initial data capture "per 1,000
characters"of output, and the Schedule of Prices contained line
items for initial data capture from each possible format
(manuscript, word processing media, magnetic tapes, and
teleprocessing), with each line item price being "all inclusive."
Under that structure the contractor could indeed expect to be
paid its initial data capture bid price for each 1,000 characters
of output.
4 The best that can be said for the Appellant's position is that
there was a patent ambiguity between the estimate and the meaning
ascribed by the Appellant to the "per 1,000 characters" language.
The Appellant made no inquiry about this ambiguity, however, and
it is well-settled that in such a case the ambiguity is construed
against the Appellant. Allied Technology Group, Inc. v. United
States, 39 Fed. Cl. 125, 138 (1997); MPE Business Forms, supra,
at 44.
5 This provision, incorporated into the contract by reference,
states that "[a]uthor's alterations shall be charged on a per-
line basis." There is no explanation in the record for the use
of the different pricing and reimbursement approach at issue
here.
6 The Schedule of Prices warned that the Contracting Officer
"reserved the right to reject any offer that contains prices for
individual items of production . . . that are inconsistent or
unrealistic in regard to other prices in the same offer . . . ."
7 The Respondent points out that with the advent of computer-
based composition and the "consignment of hot metal Linotype
machines to the trash heap," this work is virtually accomplished
automatically because computer programs "'reflow' and repaginate
the text without . . . manual intervention." Resp.R.Brf. at 2.
8 The Appellant testified that rather than key the author's
alterations first and then format, etc., it preferred to engage
in the formatting work first and then make the author's
alterations because of "dictionary factors" (related to foreign
language text) and considerations relating to mathematical
equations. It admitted, however, that it could make the author's
alterations first. HT 117-21.
9 The Appellant's owner, during his testimony, also referred to
another contract, for the 535-S program. HT 123. However, no
part of this contract was entered into evidence and the Appellant
made no mention of this contract in its brief.