BOARD OF CONTRACT APPEALS U.S. GOVERNMENT PRINTING OFFICE WASHINGTON, DC 20401 In the Matter of ) ) the Appeal of ) ) WICKERSHAM PRINTING COMPANY, INC. ) Docket No. GPOBCA 23-96 Program D688-S ) Purchase Order 95912 ) For the Appellant: Wickersham Printing, Lancaster, Pennsylvania, by Frederic G. Antoun, Jr., Attorney at Law, Chambersburg, Pennsylvania. For the Government: Kerry L. Miller, Esq., Associate General Counsel, U.S. Government Printing Office. Before BERGER, Ad Hoc Chairman. DECISION ON MOTIONS FOR SUMMARY JUDGMENT AND ORDER Wickersham Printing Company, Inc. (Appellant), 2959 Old Tree Drive, Lancaster, Pennsylvania requests summary judgment on its appeal of the assessment of excess reprocurement costs that followed the termination for default of its requirements contract for loose-leaf printed products under Program D688-S, awarded by the U.S. Government Printing Office (GPO or Respondent) for the June 1, 1996-May 31, 1997 contract year. The Respondent also moves for summary judgment. For the reasons which follow, the Appellant's motion is DENIED and the Respondent's motion is GRANTED. I. BACKGROUND 1. On April 19, 1996, the contract was awarded to the Appellant by Purchase Order 95912 following competitive bidding. Rule 4 File, Tab 10.1 The Appellant, although not the low bidder, was the low responsible bidder at a total discounted estimated price of $194,851.10. Rule 4 File, Tabs 3, 4, 9. 2. The contract contained several line items for varieties of paper expected to be required for contract performance. The estimated quantity for the first line item of paper, 50- lb. white offset book paper, was 11,511,000 sheets. The next highest quantity, for white vellum-finish cover paper, was 228,000. Rule 4 File, Tab 1 at 13, 18. The contract also contained a "Paper Price Adjustment" clause which provided for paper price adjustments in the event a specified price index published by the Bureau of Labor Statistics (BLS) increased or decreased by more than 5 per cent. Rule 4 File, Tab A at 3. 3. The contract was terminated for default on July 17, 1996 because of the Appellant's inability to meet delivery requirements. The termination notice advised the Appellant that the terminated items might be reprocured and that the Appellant would be held liable for any excess costs of reprocurement. Rule 4 File, Tab 34. 4. The Contracting Officer then contacted Goodway Graphics of Virginia, Inc., the next low bidder. That company agreed to perform the balance of the contract at the prices it had offered on the original procurement. The Contracting Officer estimated the difference in cost between the defaulted contract prices and Goodway Graphics' prices for the remaining 10-1/2 months of the contract as $20,483.19. Rule 4 File, Tab 37. 5. GPO's Contract Review Board (CRB), by a two to one vote, concurred in awarding the reprocurement contract to Goodway Graphics. The dissenting member did not agree that the cost of reprocurement had been adequately mitigated. He stated that the cost of paper had dropped 5 percent between April and May and that there was "no information as yet of the reduction between May and July," although he noted that "[a]s an indication of the trend, paper dropped 9 % between March and May." Rule 4 File, Tab 37. 6. The reprocurement contract was awarded to Goodway Graphics on July 22, 1996, by Purchase Order 93232. Rule 4 File, Tab 38. Excess reprocurement costs on orders placed under this contract totaled $20,741.09. Declaration of Contracting Officer John R. Scott (hereafter Scott Declaration). GPO collected that amount by deducting it from other funds owed to the Appellant. Brief in Support of Appellant's Motion for Summary Judgment (hereafter App. Brf.) at 4. II. DISCUSSION The "Default" clause of the contract, GPO Contract Terms, Solicitation Provisions, Supplemental Specifications, and Contract Clauses, Contract Clauses, ¶ 20, GPO Pub. 310.2, effective December 1, 1987 (Rev. 9-88), 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. 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., GPOBCA 20-89 (March 28, 1994), slip op. at 52-53, 1994 WL 275104, recon. denied, GPOBCA 20-89 (July 5, 1994), slip op., 1994 WL 377592. The Appellant, which challenges only the assessment of excess reprocurement costs and not the default termination itself, concedes that the Respondent has satisfied criteria (a), (b), and (e). It asserts, however, that the facts establish that the Respondent did not employ a reprocurement method that maximized competition and did not obtain the lowest reasonable price. This assertion is based on the Respondent's failure to seek competitive bids for the reprocurement when, the Appellant states, the Respondent knew or should have known that paper prices had undergone "a dramatic drop." App. Brf. at 7. Government contracting officers have broad discretionary powers to determine the appropriate method of reprocurement following a termination for default. Big Red Enterprises, GPOBCA 07-93 (August 30, 1996), slip op. at 43, 1996 WL 812960. Thus, even though they have an obligation to mitigate the defaulted contractor's damages by selecting a reprocurement method that will maximize competition and result in the best or lowest reasonable price, an unrestricted, fully competitive approach is not always required. The Government must simply act reasonably and prudently under the circumstances. See Gold Country Litho, supra, at 30-31. For example, if the Government's needs are sufficiently urgent, negotiation of a reprocurement contract with a single source or a limited number of sources is permissible notwithstanding that a fully competitive approach might produce a better price. Consolidated Airborne Sys., Inc. v. United States, 348 F.2d 941 (Ct. Cl. 1965); H & H Mfg. Co. v. United States, 168 Ct. Cl. 873 (1964); Ross & McDonald Contracting, GmbH, ASBCA 38154, 94-1 BCA ¶ 26,316. Further, and more germane to the case at hand, when it is reasonable to believe that the results of the original competition provide either the same or better pricing than what would be obtainable from a new competition, the award of a reprocurement contract to the bidder next in line for award in the original procurement, at that bidder's original pricing, is also permissible. See Gold Country Litho, supra, at 32; Asa L. Shipman's Sons, Ltd., supra; Rainbow Connection, Inc., ASBCA 33583, 88-3 BCA ¶ 20,922. As the Comptroller General has stated, notwithstanding that normally the Government is expected to obtain the best price available through the "crucible of competition," Olivetti Corp. of America, B-187369, Feb. 28, 1977, 77-1 CPD ¶ 146, "it is reasonable to award a repurchase contract to the next low responsive, responsible bidder on the original solicitation at its original bid price provided that there is a relatively short time span between the original competition and the default and there is a continuing need for the items." Performance Textiles, Inc., B-256895, August 8, 1994, 94-2 CPD ¶ 65; see International Technology Corp., B-250377.5, Aug. 18, 1993, 93-2 CPD ¶ 102; Hemet Valley Flying Service, 57 Comp. Gen. 703 (1978), 78-2 CPD ¶ 117. Obviously, however, where a significant amount of time has elapsed after the original competition, so that the prices from that competition may no longer reasonably reflect what would be realized in a new competition, or where, regardless of the time that has elapsed, market prices have decreased since the time of the original competition, it would not be reasonable for a contracting officer to rely on that original competition and simply make award to the next low bidder. See Made-Rite Tool Co., Inc., ASBCA 22127, 79-2 BCA ¶ 13,975 (difference between the defaulted contract price and the price of the second low bidder is not a proper basis for assessing excess reprocurement costs where the record shows that prices went down after the competition so that a reprocurement should have resulted in a price lower than or no higher than the defaulted contract price). Here the reprocurement occurred approximately 90 days after the original competition. During that period, the Appellant asserts, the cost of paper, a significant element of the contract pricing, had declined by 20.8 percent. The Appellant arrives at that figure by referring to (1) the dissenting CRB member's statement that paper prices dropped 5 percent between April and May 1996 and (2) the July 22-26, 1996 issue of Pulp & Paper Week,2 which for 50-lb. white paper showed a price decrease from $760 on May 1 to $640-$700 on July 1. The Appellant computes the decrease from $760 to $640 as one of 15.8 percent, and combines that with the earlier 5 percent decrease to reach the 20.8 percent figure. The Appellant concludes from this that it is entitled to summary judgment because under these circumstances the Respondent cannot show that its reprocurement method was appropriate or that it resulted in the lowest reasonable price. The Respondent, on the other hand, asserts that it acted reasonably and that the changes in the price of paper were far less dramatic than what the Appellant asserts them to be. In his Declaration, Contracting Officer Scott states that he chose to attempt to negotiate a contract with Goodway Graphics for several reasons: First, we had just gone through a formally advertised procurement a few months earlier that had resulted in [a] very competitive procurement. The top three responsible bidders submitted bids that were closely grouped together. I had no reason to believe that these prices were not reasonable or competitive or that further competition would result in materially lower prices. ... Second, the reprocurement was for only a reduced portion of the original requirements .... It has been my experience in 13 years as a procurement official at GPO that when you reduce contract requirements it results in increased unit prices, since a bidder has fewer units of production to spread its fixed and overhead costs. Thus, a formal reprocurement would likely result in higher unit prices. ... Third, the default of Wickersham, and its delinquent performance had resulted in the need to quickly reestablish a source of supply.... In order to formally advertise I would not have been able to make award for several weeks, if not longer. Either the needs of the Department of Transportation would have gone unmet for that period of time, or its needs could have been met through the use of one-time procurements. This latter option would ... have resulted in much higher reprocurement costs as the economies of scale which are the basis for establishing term contracts would be lost. . . . . . ... To explore this possibility [that, as suggested by the Contract Review Board dissenting member, costs had not been sufficiently mitigated in light of paper price decreases], I reviewed the latest paper price statistics from [BLS]. These official statistics are ... distributed monthly to GPO contracting officers for use in calculating paper price adjustments. ... I found that paper prices had fallen by less than 5% (4.8%) from April to May 1996. I also found that no paper price adjustments were warranted for GPO contracts for the April to July time period .... I also saw that the larger paper price drops that had occurred in the earlier months of 1996 for offset book paper had almost slowed to a stop. Prices for offset paper dropped by only .9% from April to May 1996. This small price drop which directly affected only a portion of the contract price (35.7% of Goodway's total price) would have negligible effect on the total bid price. Accordingly, I concluded that there was little likelihood that should I formally readvertise that the paper prices would have a significant effect on reprocurement costs. ... I later learned that officially revised BLS statistics for that time period showed that paper prices generally decreased from April to July 1996 by 3.4%. Offset book paper prices actually increased during that time by 3.2%. In deciding motions for summary judgment, the Board is guided by Rule 56 of the Federal Rules of Civil Procedure, pursuant to which courts will grant such motions where the pleadings and supporting documents show that there are no genuine issues as to material facts and that the moving party is entitled to judgment as a matter of law. Composite Laminates, Inc. v. United States, 27 Fed. Cl. 310 (1992); Artisan Printing Inc., GPOBCA 15-93 (February 6, 1998), slip op. at 6, 1998 WL 149001; GraphicData, Inc., GPOBCA 35-94 (June 14, 1996), slip op. at 48, 1996 WL 812875. The burden is on the moving party to demonstrate that it is so entitled. Celotex Corp. v. Catrett, 477 U.S. 317 (1986). Where, as here, both parties have moved for summary judgment, the Board must consider each motion, with each party in its capacity as the opponent of summary judgment entitled to all applicable presumptions and inferences and with the evidence viewed in the light most favorable to the non-moving party. Kanehl v. United States, 38 Fed. Cl. 89 (1997); Bataco Ind., Inc. v. United States, 29 Fed. Cl. 318 (1993). The issue raised by this appeal is whether the Respondent failed in its duty to mitigate damages by not (1) acting reasonably in choosing its reprocurement method and (2) obtaining the lowest reasonable price. There is no hard and fast rule or formula for making this determination; whether the Respondent met its duty is a question of fact resolved by an inquiry into the reasonableness of the Respondent's actions. Puroflow Corp., ASBCA 36058, 93-3 BCA ¶ 26,191; Birken Mfg. Co., ASBCA 32590, 90-2 BCA ¶ 22,245. That inquiry properly focuses not only on the Respondent's duty to mitigate excess reprocurement costs but also on its duty to protect the Government's legitimate interests. WEDJ, Inc., ASBCA 27067, 86-3 BCA ¶ 19,169. To prevail on its motion the Appellant must show that the Contracting Officer knew or should have known that a better price than Goodway Graphics' likely would have been obtainable through a competitive reprocurement and that the Government's needs did not foreclose a competitive approach. To do this the Appellant has referenced the statement of the dissenting member of the CRB and an issue of Pulp & Paper Week as indicating a meaningful drop in paper prices that should have resulted in lower prices than those received on the original competition, and explained that any immediate needs of the customer agency could have been obtained through individual jackets until a competitive reprocurement could take place. The Appellant, however, while submitting evidence (the Ardinger Affidavit) indicating that Pulp & Paper Week is used by industry sources, has not shown that the Contracting Officer or any other GPO official knew of this publication or was aware of the specific information in it. According to the Contracting Officer, he obtained his information from BLS statistics which are furnished monthly to GPO contracting officers. Scott Declaration at 2-3. The dissenting CRB member also states that his information came from "BLS indices and not ...` any other data." Declaration of Anthony A. Valentine. Thus, the Appellant's evidence does not establish that the Contracting Officer was on notice of a paper price decline of the magnitude represented by the Pulp & Paper Week publication. Morerover, the BLS statistics do not paint quite the same picture as the Appellant gleans from Pulp & Paper Week. As the Contracting Officer stated in his Declaration, the BLS data available to him in July 1996 and furnished as Attachment 1 to his Declaration show that paper prices had declined less than 5 percent from April to May, that offset paper prices had dropped by less than 1 percent for the same period, and that paper price adjustments on GPO contracts containing the Paper Price Adjustment clause were not warranted for the April--July period.3 Considering the totality of this evidence in the light most favorable to the Respondent (showing what appeared to be relatively small paper price declines since the original contract was awarded, coupled with the Contracting Officer's concern about the effect on pricing of reduced quantities and economies of scale), the Board cannot conclude that the Appellant has shown that the Contracting Officer failed to mitigate excess reprocurement costs by choosing an inadequate method of reprocurement. Accordingly, the Appellant is not entitled to judgment as a matter of law. Denial of the Appellant's motion does not mean that the Respondent is automatically entitled to the granting of its motion for summary judgment. Vanier Graphics, Inc., GPOBCA 12-92 (May 17, 1994), slip op. at 47, 1994 WL 275102. The Respondent's motion may be granted only if the Respondent satisfies its own burden of showing that its reprocurement actions were reasonable under the circumstances and were legally sufficient to meet its obligation to mitigate the cost of reprocurement. The factual picture painted by the existing evidence in support of the Respondent's motion is, in some respects, more than a little sketchy. First, the evidence does not establish what the Contracting Officer actually knew or should have known about the change in paper pricing from April to July. Although the Contracting Officer stated that GPO contracting officers receive the relevant BLS statistics monthly, the Contracting Officer appears to have given no consideration to any change in paper prices at the time he decided to negotiate only with Goodway Graphics despite the downward trend in paper prices reflected by the statistics available to him (furnished to the Board as Attachment 1 to the Scott Declaration) at that time. Moreover, while the Contracting Officer refers only to BLS data and relies only on BLS data in connection with the Paper Price Adjustment clause, the record is silent as to whether the Contracting Officer also was aware of the data from Pulp & Paper Week, described in the Ardinger Affidavit as a "primary and standard source for bid preparation" and a "primary source in accurate market paper prices," or of any other information bearing on the paper market situation. Second, when, in response to the CRB's dissenting member's concern about declining paper prices, the Contracting Officer examined the BLS data, he simply noted that paper prices had fallen just under 5 percent from April to May, that "the larger paper price drops" for offset paper that had occurred earlier in 1996 had "almost slowed to a stop" and had dropped less than 1 percent between April and May, and that paper price adjustments were not warranted for the April to July period. Contract price adjustments, however, are made pursuant to the adjustment clause only to the extent there is a change in the index in excess of 5 percent, so that the data did not foreclose the possibility that price decreases approaching 5 percent had continued during that period or that decreases in that range had occurred with respect to the offset paper. A monthly 5 percent decline in the price of offset paper, of course, could have resulted in lower bid prices for that paper even if that decline did not entitle GPO to a downward adjustment on its existing contracts. Also, while the Contracting Officer had concerns about higher unit prices resulting from reduced contract requirements on the reprocurement, a definite quantity contract was not involved here; the awarded contract was a requirements contract that anticipated the placement of 200 to 300 separate orders during the contract year. Each of these orders involves its own separate printing and other requirements, and, in light of the requirements nature of the contract, there was no guarantee that the orders or the contract's estimated quantities would be realized. KPT, Inc., GPOBCA 14-97 (November 30, 1998), slip op. at 4, 1998 WL ______; McDonald & Eudy Printers, Inc., GPOBCA 40-92 (January 31, 1994), slip op. at 14, 1994 WL 275096. Thus, there is at least a question as to whether the higher quantity/lower unit price expectation typical in definite quantity situations is a reasonable one in these circumstances. Moreover, to the extent that it is a reasonable one notwithstanding the requirements nature of the contract, there is no explanation from the Contracting Officer as to why it is reasonable to expect anything more than nominally higher unit prices on the reprocurement in view of the fact that approximately 10-1/2 months, more than 80 percent of the contract period, remained for the reprocurement contractor. Exactly what the Contracting Officer's experience has been that led him to his conclusions in this regard is not on the record. Nonetheless, notwithstanding this sketchy portrait, there is evidence of record, the final BLS statistics for the period involved, that leads the Board to conclude that summary judgment for the Respondent is appropriate. These statistics show that paper prices declined slightly from April (index 145.6) to July (index 140.6) but that offset paper prices increased (131.2 in April, 131.5 in May, 134.6 in June, and 135.4 in July). With offset paper prices actually going up each month from the time of bidding on the original contract until the reprocurement contract was let, there is no reason to believe that the market fluctuations in paper prices would have produced a decrease in paper and overall bid pricing in a competitive reprocurement for the Program D688-S contract. With no such decrease likely, the Appellant could not have been subjected to unreasonable excess reprocurement costs when the Contracting Officer awarded the replacement contract to the original next low bidder at that bidder's original prices. Thus, despite reservations about the basis for the Contracting Officer's conclusions, the Board finds, on the basis of the BLS data, that the Contracting Officer did not fail in his duty to the Appellant because, had the Contracting Officer conducted a competition for the reprocurement, the resulting bid prices would not likely have been lower than the original prices and well may have been higher, thereby subjecting the Appellant to greater reprocurement costs than are involved here. Disposing of a matter by summary judgment is appropriate where the submission of additional evidence could not reasonably be expected to change the result warranted by the evidence currently of record. Kanehl v. United States, 38 Fed. Cl. 762 (1997). In light of the BLS statistics reflecting what actually occurred during the time period in question, the Board must conclude that, regardless of whatever factual questions remain about the basis for the Contracting Officer's reprocurement approach, that approach did not adversely affect the Appellant with regard to its liability for the excess costs of reprocurement. Thus, the submission of additional evidence to resolve those factual questions would have no impact on the Board's ultimate conclusion that, because the Contracting Officer's approach resulted in the lowest reprocurement costs likely to be obtained, the Contracting Officer effectively fulfilled his duty to mitigate those costs when he awarded the reprocurement contract to Goodway Graphics. III. ORDER The Appellant's motion for summary judgment is DENIED. The Respondent's motion for summary judgment is GRANTED. It is so ordered. December 18, 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 January 14, 1997. It will be referred to as the Rule 4 File, with an appropriate Tab number also indicated. The Rule 4 File consists of 38 numbered tabs. 2 The Appellant provided a copy of the relevant pages of this publication as an attachment to an affidavit of Misti Ardinger, an employee of the Appellant's attorney. The affidavit (hereafter Ardinger Affidavit) states the employee "contacted several printing companies in an effort to find out their primary source for up-to-date market prices on paper. The private sector printing industry uses Pulp & Paper Week as a primary and standard source for bid preparation." The affidavit further states that the employee also "contacted Printing Industries of America ... and Graphic Arts Technical Foundation ..., both of which confirmed this publication as a primary source in accurate market paper prices." 3 As ultimately revised, the BLS Producer Price Index shows that paper prices declined substantially from January (index price 160.8) to April 1996 (index price 145.6), and then declined at a significantly lower rate from April through July (the index price declined to 142.5 in May, maintained that level in June, and then declined to 140.6 in July). For offset uncoated book paper, the Index shows a decline from 147.0 in January to 131.2 in April, but an increase in May (131.5), June (134.6), and July (135.4).