U.S. GOVERNMENT PRINTING OFFICE
CONTRACT APPEALS BOARD
APPEAL OF MERCHANT SERVICE COMPANY
Date: February 11, 1980
THOMAS O. MAGNETTI, Chairman
DREW SPALDING, Member
MEREDITH L. ARNESON, Member
Panel 76-16
Mr. Samuel Soopper, originally the chairman of the Board
adjudicating this appeal, was replaced by Mr. Arneson when
he resigned from the GPO on June 22, 1979.
Preliminary Statement
This is a timely appeal entered by the appellant Merchant Service
Company (hereinafter referred to as the contractor) and taken
pursuant to the "Disputes" clause present in Contracts 373 and
374. (Section 9 of the General Provisions [Transportational
Contracts] can be found in Exhibit A of the Appeal File,
hereafter A.F. This exhibit consists of the contracts entered
into between the GPO and the contractor.1/) The contracts
required the contractor to provide hauling services to the
Government. Following the decision of the Contracting Officer,
Samuel L. Story, terminating for default the contractor, this
appeal was filed with the Government Printing Office by letter
dated December 3, 1976. On January 9 and 10, 1978, a hearing was
held before the Government Printing Office Contract Appeals
Board.
The dispute centers around the contractor's performance under the
contracts. The Government maintained that because of this
performance the contractor was rightfully terminated for default
while the contractor contended that it was prevented from
continuing performance on the two contracts by actions of
Government employees.
This particular matter is somewhat complicated in that Merchant
Services was represented throughout the appeal process not by
counsel but by Mr. V. Jerome Wieman, the president of said
company. 2/ Mr. Wieman made the decision to represent the
contractor with full knowledge of the 1 complexity of this
appeal. (See the prehearing statement in the A. F.)
As the prehearing statement indicates, the decision which follows
is based solely upon the evidence of the record which consists of
the A. F., the hearing testimony and any documents submitted by
the parties and accepted as relevant and material by the Board.
Statement of Facts
While some of the facts set forth below were disputed by the
parties, the following provides the essentials of the contractual
relationship between the GPO and the contractor.
In July 1975 the contractor entered into two requirements
contracts with the GPO to transport bulk paper and other related
material to and from various locations in the Washington area._3/
During the administration of these contracts and until their
final termination in April 1976, the contractor experienced
difficulty in performing satisfactorily within the specifications
of the contracts. This was supported by the testimony given by
all the material witnesses at the appeal hearing as will be shown
herein below. The precise nature of the Government's
dissatisfaction with the contractor's compliance and performance
is documented in Exhibit D of the A.F. Contract No. 374 was also
a requirements contract for hauling
services with the same duration as Contract 373. The material
covered by this contract was roll and flat paper stock, envelopes
and knocked down cartons. This was to be hauled from the
Franconia Warehouse, the Central GPO plant and the GPO warehouse
on North Capitol Street to various Government agencies in the
D.C. area. Provision was also made for occasional hauling of
unweighed material between the GPO and the GSA Warehouses.
It should also be noted that both Contract 373 and Contract 374
contain the standard GPO "Changes'' clause (Article 2 of the
General Provisions, Exhibit A of A.F.) and the standard GPO
"Disputes" clause (Article 9 of the General Provisions, Exhibit A
of A.F.).
The contractor complained that its poor performance was a result
of a deteriorating working relationship between it and GPO
employees. It claimed that these difficulties were due to
actions of GPO employees, and alleged that it was the target of
acts of sabotage and misconduct on the part of Franconia
Warehouse employees. Some of these purported acts supposedly
resulted in damage to the contractor's equipment. The alleged
damage was discussed at a meeting in October 1975 attended by Mr.
Wieman, the Chief of the GPO Stores Division and the Director of
the GPO Materials Management Service. At that time it was
decided that in the future the GPO would supervise its employees
more closely, but that any compensation for any future incidents
would be forthcoming only upon showing of the proper notification
to the GPO and verification of the damage incurred (Contracting
Officer's Final Decision, Contract No. 374, pg. 7, Ex. I of the
A.F., No. 374).
The contractor also claimed in its appeal letter and later, at
the hearing, that it was required to haul approximately 38 extra-
contractual loads between the period of January 1, 1976, through
March 31, 1976, from the North Capitol Street installation to the
Farrington Warehouse, and that some of these loads consisted of
surplus metal desks and other furniture (Transcript, Vol. I, pg.
75, Vol. II, pg. 141).
In addition to this atmosphere of contention between the
contractor and the GPO, there was some testimony alluding to
gratuities paid to certain employees at the Franconia Warehouse
by Mr. Wieman. This was documented by a report of a security
investigation conducted by the GPO Security Service (Exhibit H of
the A.F.). This investigation was initiated in response to a
complaint lodged against these employees by the contractor.
There was also direct hearing testimony of three witnesses who
were materially involved in the alleged misconduct (Mr. Wieman,
Mr. Charles Bugg, Jr., Assistant Chief of the Franconia
Warehouse, and Mr. Roger King, Chief of the Franconia Warehouse)
and Mr. Brito, Director of Security Service, who directed the
investigation. 4/
Moreover, the testimony of Mr. King and Mr. Bugg indicated that
contractor's performance was marred by incidents of labor unrest,
both at the outset of the contract and immediately preceding the
termination of the contract by the GPO in April 1976. While
there was differing speculation as to the cause and effect of
this unrest, it is not
really determinative of the basic issues of this appeal. It
would seem, however, that it was a strike by the local Teamsters
Union that triggered the events leading up to and resulting in
the termination of the contracts (Transcript, Vol. II, pp..
54-56).
On April 2, 1976, the contractor failed to appear with his
equipment at the Franconia Warehouse. That same day a TWX was
sent by the Contracting Officer, Samuel L. Story, to the
contractor directing it to contact the GPO. GPO employees
noticed on April 4, 1976, that the contractor's trucks and
equipment usually kept on the site had been removed. With no
response from the contractor forthcoming, a cure notice was
transmitted by telegram to the contractor on April 5, 1976,
stating that the contracts were endangered by the contractor's
failure to make deliveries. The contractor was given 24 hours to
cure this state of affairs (Exhibit C of the A.F.). On the fifth
of April, the GPO received a TWX from the contractor dated April
4, 1976, stating that the contractor was unable to perform under
the contract (Exhibit B of the A.F.). This inability to perform
was defended on the grounds that the alleged actions of GPO
employees "had run the contractor off the job", making further
performance impossible.
After receiving no notification from the contractor that it
intended to comply with the terms of the contracts 5/, on April
6, 1976, the GPO notified the contractor that it was being held
in default pursuant to Provision No. 8 of the contracts. The
Government's action was based upon the contractor's unilateral
abandonment of performance under the contracts. In support of
this, the Contracting Officer, in a letter to the Chairman of the
GPO Contract Review Board, stated that:
"The contractor, Merchant Service Company, has breached the
contracts [373 & 374] by their [sic] actions in breaking off
points of contact, and failed to perform the contracts in
accordance with the contract terms as of April 1, 1976. The
Government has been unable to contact the contractor to establish
further delivery due to all telephone numbers previously
established for contact being either changed to an unlisted
number or disconnected entirely." (Exhibit C of the A.F.)
On April 30, 1976, the contractor wrote to the Public Printer
transmitting a claim for monetary damages amounting to over
$88,000 against the GPO in connection with the terminated
contracts. This claim was broken down into 22 separate claims
that were individually dealt with in the Contracting Officer's
two final decisions. (See Exhibit I of the A.F., Nos. 373 and
374) As this letter was outside the proper administrative
channels, the contractor was advised by letter on September 14,
1976, that it must reconstitute this letter as if
it were a claim submitted to the Contracting Officer in
accordance with the "Disputes" clause of the contract. The
contractor did this by letter dated September 20, 1976. The
Contracting Officer then issued his final decision on November 9,
1976, holding that the terminations were proper (Exhibit I of the
A.F.)and rejecting all the claims submitted by the contractor
arising out of these terminated contracts. On December 3, 1976,
the contractor, through counsel, provided the required notice of
appeal. A hearing on the appeal was held before the GPO Contract
Appeals Board on January 9, and 10, 1978, at which time the
contractor was not represented by counsel.
Issues
The two issues as formulated in the prehearing statement are as
follows: 6/
1. Whether the contractor's performance on Contracts 373 and 374
was satisfactory, or whether the Government properly terminated
the contracts for default?
2. Whether extra-contractual services were required of the
contractor by the Government Printing Office and performed by the
contractor, and whether an equitable adjustment is necessary for
any such work?
Discussion
I. Termination for Default
It is the decision of this Board that the contracts (Nos. 373 &
374) were properly terminated in accordance with the procedures
set forth in the contracts. Therefore the contractor's appeal
from the Government decision to terminate for default is hereby
denied.
It is undisputed in the evidence that the contractor did abandon
its performance of the contracts. On April 2, 1976, the
contractor failed to appear for work as scheduled; it had
withdrawn its equipment from the Franconia Warehouse by April 4,
1976, and on April 5, 1976, the GPO received a telegram dated
April 4, 1976, from the contractor stating that it was no longer
able to perform under the contracts. This action was clearly a
violation of the Default Clause of the Contract (Provision 8 of
the General Provisions of Contracts 373 & 374) which reads in
part as follows:
"(8) Default
(a) The Government may, . . . terminate the whole or any part of
this contract in any one of the following circumstances:
(1) If the Contractor fails to pick up the commodities or perform
services, including delivery of services, within the time
specified herein.
(2) If the Contractor fails to perform any of the other
provisions of this contract or so fails to make progress as to
endanger performance of this contract in accordance with its
terms, and in either of these two circumstances does not cure
such failure within a period of 24 hours . . .."
The contractor justified this abandonment on the grounds that
Government mismanagement was making performance impossible. Mr.
Wieman, throughout his testimony (Transcript, Vol. I, pp..
120-154, Vol. II, pp.. 3-82), alleged that the Government
mishandled the scheduling of deliveries and material pickup
making it impossible for the contractor to comply with the
contracts' requirements. However, regardless of any dispute that
might arise under the contract between the contractor and the
Government, these contracts entitle the Government, as a matter
of procurement policy, to an almost unqualified right to obtain
timely performance. The "Disputes" clause (Provision 9 of the
General Provisions) provides that ". . . any dispute concerning a
question of fact arising under this contract shall be decided by
the Contracting Officer. . .. Pending final decision of a dispute
hereunder, the contractor shall proceed diligently with the
performance of the contract and in accordance of [sic] the
contract . . .." (Emphasis added.) This obligation to "proceed
diligently" pending the resolution of any dispute binds the
contractor to continue performance without interruption or delay.
Sterling Electronics, Inc., ASBCA No. 8450, 1964 BCA ¶ 4092.;
Stitching Systems, Inc., ASBCA No. 10924, 66-2 BCA ¶ 5732.
Under certain extenuating circumstances abandonment may be
excused if it is clear that Government prevented the contractor
from doing what it agreed to do. George Leary Construction Co.
v. United States, 63 Ct. Cl. 206, 225-226 (1927). In the
instant case there was no credible evidence presented that
indicated that continued performance was actually prevented by
Government interference.
Therefore, any disagreement between this contractor and the GPO
should have been resolved through the "Disputes" clause procedure
as provided for in the contract. Since it is indisputable that
abandonment of work without any justification or excuse is an
appropriate grounds for termination, this contract was properly
terminated for default. 7/ H.& H Manufacturing Company, Inc.,
168 Ct. Cl. 873, 879 (1964); Yukon Service, Inc. v. United
States, 215 Ct. Cl. 942 (1977); (Opinion of Trial Judge can be
found in 24 CCF ¶ 81827).
As for the issue of alleged damage caused to the contractor's
equipment by employees of the GPO which the contractor raised as
part of its justification for abandoning the contracts, Mr.
Wieman, under cross-examination, admitted that he did not know
when such damage occurred or how it occurred, or who was
responsible for it (Transcript, Vol. II, pp.. 35 and 76-79).
Without more substantial evidence of this alleged sabotage and
vandalism, the contractor has failed to
sustain its burden of proof as to this part of the claim that its
abandonment was justifiable. Empire State Tree Service, VACAB
No. 949, 71-1 BCA ¶ 8716, at pg. 40,500.
II. Extra-Contractual Services
We must now determine whether the contractor is entitled to an
equitable adjustment for the alleged extra-contractual work
performed by it at the request of certain GPO employees. This
Board decides the contractor does not deserve such adjustment.
The basis of the contractor's claim is that the GPO allegedly
required the contractor to haul 38 extra-contractual loads during
the period from January 1, 1976, through March 31, 1976, and that
some of these loads consisted of surplus metal desks and other
furniture. Mr. Wieman testified at the hearing that while he
'vigorously" protested this extra-contractual work, the GPO
threatened to default the contractor if the work was not
accomplished (Transcript, Vol. 1, pg. 140-142).
Extra-contractual work, such as is claimed here, is usually
compensated for under a change order. Each of these contracts
provides in Provision 2 of the General Provisions for a procedure
for obtaining a change order to accommodate any change under the
contract. 8/ This provision reads as follows:
"(1) The Contracting Officer may, at any time, by a written
order . . ., make changes within the general scope of the
contract in any one or more of the following: (a)
Specifications, (b) work services, (c) the place of origin, (d)
the place of delivery, (e) tonnage to be shipped, or (f) amount
of Government-furnished property. If any such change causes an
increase or decrease in the cost of, or in the time required for,
performance of any part of the work or services under this
contract, whether changed or not changed by any such order, an
equitable adjustment shall be made in the contract price, or time
of performance, or both and the contract shall be modified in
writing accordingly. Any claim by eth [sic] Contractor for
adjustment under this clause must be asserted within 30 days from
the date of receipt by the Contractor of the notification of
change: Provided, however, That the Contracting Officer, if he
decides that the facts justify such action, may receive and act
upon any such claim asserted at any time prior to final payment
under this contract. Failure to agree to any adjustment shall be
dispute concerning a question of fact within the meaning of the
clause of this contract entitled 'Disputes'. However, nothing in
this clause shall excuse the Contractor from proceeding with the
contract as changed.'' (Emphasis added.)
The purpose of this clause is to reserve to the Government,
through the Contracting Officer, the right to make whatever
changes in the contract as are required by changed circumstances.
An important function
of the "Changes" clause is to require the contractor to proceed
with work pending a resolution of any dispute arising from the
claim while providing an administrative remedy to the contractor
in order to compensate it for additional costs. If, however, a
contractor refuses to perform due to an impasse developing over
the invocation of the "Changes" clause, it becomes subject to
termination for default. D. H. Dave & Gerben Contr. Co., ASBCA
No. 6257, 1962 BCA ¶ 3493; Max M. Stoeckert dba University Brick
& Tile Co. v. United States, 183 Ct. Cl. 152 (1968).
This procedure was, in fact, invoked early in the term of
contract No. 373 (See Footnote 3). By change order approved by
the Contracting Officer, the contractor had the contract amended
to reflect the difficulty encountered by the contractor in
hauling roll stock to the Senate Office Building. The increase
in the overall cost of the contract for the period covered by
this change order was estimated to be over $8,888 (Exhibit A of
the A.F., No. 373).
Although the contractor had used the change order procedure once
before, there were no change orders requested by it or submitted
to the GPO to adjust the contract terms to reflect the extra-
contractual work which the contractor allegedly was required to
perform (Transcript, Vol. II, pp.. 227-228).
Assuming, arguendo, that there were extra-contractual services
that added to the contractor's cost but went uncompensated, can
this Board order some adjustment be made? In the Court of Claims
case, General Bronze Corporation v. United States, 338 F.2d 117
(1964), the court stated that because the Contracting Officer did
not order in writing any changes during the term of the contract,
the contractor could not subsequently invoke the "Changes''
clause to receive compensation. As in the instant case, the
plaintiff in General Bronze was also aware of the contractual
requirement of the "Changes" clause since it had requested and
received in writing permission to deviate from the specifications
of the contract.
The court in Globe Indemnity Company, 102 Ct. Cl. 21 (1944),
citing Plumley v. United States, 226 U.S. 545 (1913), stated at
pg. 37:
"[i]t is seen . . . that there has been a complete failure to
comply with the provisions of article 4 [changed conditions] and
of article 3 [changes]. Both this court and the Supreme Court
have held that there can be no recovery for additional work
performed where there has been a failure to comply with these
provisions of the contract, or a similar provision contained in
article 5 [Extras]."
Therefore, in light of the above cases and since the contractor
was aware of the procedure and did not comply with the
contractual terms, it can not recover for any extra-contractual
work under this theory of recovery.
There is, however, a separate line of cases which have sought to
soften what is considered the harsh Plumley doctrine. See,
Eldon H. Crowell, "Changes & Differing Site Conditions", Section
F, Federal Publications Inc., Concentrated Course in Government
Contracts, Volume II (1975). In an effort to avoid the
Government's unjust enrichment from uncompensated work, the
courts in these cases have helped develop the "constructive
change" doctrine. A constructive change order is defined as:
"Any conduct by a C. 0. [Contracting Officer] (or other
Government representative authorized to order changes) which is
not a formal change order, but which has the effect of requiring
you [the contractor] to perform work different from that
prescribed by the original terms of your contract, constitutes a
constructive change order . . . entitling you to relief under the
'Changes' clause."
vom Baur, Constructive Change Order, Edition II, Briefing Papers,
No. 73-5, Govt. Contractor (1973) at pg. 2.
The "constructive change" doctrine is the mechanism used to
direct the Government to retroactively compensate the contractor
for work which it should have been properly compensated for under
the "Changes" or "Extra" clauses during the term of the contract.
In Lippincott & Margulies, Inc. (1968) GSBCA No. TD-2, 68-2 BCA ¶
7367, the Board denied a contractor's claim for additional
compensation because the extra work performed was not ordered
orally by anyone authorized to act for the Contracting Officer.
In the instant case there has been no convincing evidence
presented that the Contracting Officer, or someone authorized by
the Contracting Officer to make such a request, directed the
contractor to perform the alleged extra-contractual work. The
Board can conclude that under these facts the "constructive
change" doctrine cannot be invoked by the contractor.
The contractor did argue that it was threatened with default if
the extra-contractual work was not performed and because of this
the contractor performed the services without informing the
Contracting Officer. If the Board were to accept this as true,
the contractor still would not recover any further compensation
since it has failed in its burden of proving by substantial
evidence the validity and amounts of added cost incurred by the
extra-contractual work. A A A Construction Company, IBCA-55,
57-2 BCA ¶ 1510. In light of this lack of documentation, this
Board adopts the statement made by the contracting office that:
"It is true that the commodities said to have been hauled
(subject to GPO verification) are not set forth in the contract;
however, you would have to demonstrate that such change . . .
increased the cost of performance of any part of the services
required under the contract. You did not provide documentation
which would substantiate an increase in cost." (Tab I of the A.F.
for No. 373, pg. 5.)
Based upon the above reasoning the claim for equitable adjustment
is hereby denied.
III. Admissability of Certain Evidence
The contractor has sought to introduce three separate documents
into evidence contending that both are relevant and material to
the determination of its appeal.
The Board, at the prehearing conference, accepted the first
document for identification only as the Board's Exhibit I and
reserved for a later date the determination of admissibility.
The contents of the handwritten note allude to the necessity for
the contractor to obtain specific 1 information as basis for some
sort of unidentified investigation and also of the necessity of
reporting incidents of damage at the time of their occurrence.
The decision of the Board is to exclude this evidence. At the
hearing the contractor failed to establish by any formal proof,
whether direct or indirect, the authentication of the document
and its author. Authentication or "ownership" of the writing is
required before the introduction of any writing into evidence.
McCormick on Evidence, 2nd Ed., Chap. 22 (1972). Normally, the
lack of proper authentication might not be sufficient reason to
exclude a document since this Board is less rigid in its
evidentiary requirements than a Federal court. However, in this
particular case, when the contents of the note are taken into
account, the document has little probative value or relevance to
the issues of this particular appeal. Thus, since any relevance
the unauthenticated note might have for the contractor's defense
or Board's decision is minimal, it is hereby excluded.
The second document in question was identified at the prehearing
conference as "Exhibit J" and is a diagram drawn up by the
contractor referring to the successor carrier's performance. It
is the Board's decision that this document is irrelevant and
immaterial.
Materiality deals with the relationship between the issues of the
case and the particular fact that the evidence tends to prove.
Relevancy deals with the requirement that the evidence must
logically tend to prove a material fact. Azimow's Estate.v.
Azimow, 230 N.E.2d 450 (1967). In the instant case this document
does not relate at all to the issues of the contractor's
abandonment and subsequent default or the extra-contractual
services alleged to have been provided by the contractor. The
evidence is not relevant in that it does.not tend to prove or
disprove any material facts of the case. Since this is a
requirements contract, the amount hauled daily by a successor
contractor is not relevant to the amounts required of the
defaulted contractor to haul.
The third set of documents contains copies of GPO Form 2161
purportedly covering shipments from Franconia Warehouse to GPO
Stores Division. Although these documents were not offered into
evidence at the hearing, the contractor referred to the documents
in its testimony, and over the objection of the Government
requested the right to send this evidence to the Board. The
Board reserved the right to rule on the admissibility of the
documents after their submission.
The Board now decides, in light of the policy to admit almost all
relevant evidence, to admit these documents. However, in
weighing our decision on this appeal, these documents have a
rather limited use since there is no way to determine from their
face exactly what is being hauled by the successor contractor and
under what circumstances the material is being hauled. Due to
this complete lack of foundation or authentication, the documents
are of little help in shedding light on what actually occurred
during the end of March and the beginning of April 1976 when the
contractor halted its performance under the contracts.
Decision
This appeal is denied.
_______________
1/ There is an A. F. for each of these contracts with identical
documents in each tab. The only essential difference between the
two can be found in Exhibits A and I which reflect the minor
distinctions between the two. A document referred to by exhibit
letter can be found under that letter in either A. F.
2/ Because of this pro se representation and in an effort to
afford due process to the contractor, the Board was not as rigid
as could be expected in certain evidentiary matters during the
course of this hearing. This leniency was graciously consented
to by the Government's counsel.
3/ Contract No. 373 was a requirements contract for hauling
services for the period of July 1, 1975 through September 30,
1976. The material to be hauled was flat paper, envelopes and
knocked down cartons which were to be packed on skids and pallets
and taken from the GPO Franconia Warehouse, Virginia to various
Government agencies in the D.C. commercial zone. Occasional
backhauls were also required. A change order (No. 300a), dated
January 19, 1976, amended the contract to include the hauling of
roll stock paper from the Franconia Warehouse to the Senate
Office Building.
4/ It was never satisfactorily determined by the GPO Security
Service whether these gratuities were solicited from Mr. Wieman
by GPO employees or whether the gifts were offered by Mr. Wieman
independent of any urging on the part of these employees.
(Transcript, Vol. 1, pp.. 109 & 110.) During this appeal, both
Messrs. Bugg and King claimed that, while they did accept the
gifts from the contractor, the gifts were unsolicited and they
did not alter their behavior towards the contractor.
(Transcript, Vol. II, pp.. 139-140 and 177-180.)
5/ Although the cure notice was transmitted to the contractor at
the same address used in all previous communications, Mr. Robert
Armentrout, GPO Contract Specialist, noted at 11:45 on April 6,
1976, that he had been contacted telephonically by Western Union
and had been told that the message was delivered but that there
was no one there by the name of Jerome Wieman to receive the
delivered telegram (Exhibit C of the A.F.). Western Union
verified this on April 8th by telegram which stated that the
April 5th telegram was undelivered.as the contractor was no
longer at 9101 51st Place, College Park, Maryland, and Western
Union was unable to obtain a new telephone number or new address
(Exhibit C, supra.).
6/ The statement of issues was determined on Thursday, January 4,
1979, at the prehearing conference. Present at the morning
meeting were the three Board members, Government counsel, the
Contracting Officer and V. Jerome Wieman, proprietor of the
Merchant Service Company. It should be noted that while the
contractor had made 22 separate claims for money damages caused
by various Government actions in his original claim against the
GPO (dated April 26, 1976), these claims are addressed only as
they are encompassed by the two issues as set forth and agreed to
by all the parties at the prehearing conference.
7/ Mr. Wieman testified that he knew that any dispute arising
under the contract had to be dealt with by the "Disputes" clause
(Transcript, Vol. II, pg. 5).
8/ Provision 3 of the General Provision sets out the procedure
for receiving compensation for "extras'' and reads as follows:
"Except as otherwise provided in this contract, no payment for
extras shall be made unless such extras and the price therefor
have been authorized in writing by the Contracting Officer."
(Emphasis added.)