U.S. Government Printing Office Board of Contract Appeals AMERICAN DRAFTING & LAMINATING CO. GPO BCA 6-85 April 15, 1986 MICHAEL F. DiMARIO, Administrative Law Judge OPINION This appeal, timely filed on April 12, 1985, by American Drafting and Laminating Company (hereinafter Appellant), P.O. Box 62464, Virginia Beach, VA 23462 arises under the Disputes Article of Government Printing Office Contract Terms No. 1, GPO Publication 310.2.- Revised October 1, 1980, which such publication was incorporated in and made a part of a certain contract between Appellant and the U.S. Government Printing Office (hereinafter Respondent), identified as Jacket No. 538-374, Purchase Order E-9652, dated January 29, 1985. The appeal is from the final decision of the GPO Contracting Officer, Douglas R. MacBride, of February 26, 1985, terminating the contract "for default because your firm failed to make progress on the contract and you are inexcusably delinquent in providing the ordered products by the contractual ship date." (Appeal File hereinafter R4 File, Tab N) The decision of the Contracting Officer is reversed and the case is remanded back to the Contracting Officer for processing in accordance with this decision. STATEMENT OF FACTS On January 29, 1985, Appellant was telephonically contacted by a representative of Respondent's Hampton, VA Regional Printing Procurement Office and invited to bid on a contract for the acquisition and printing of some 15,000 +/- 4% mailing envelopes requisitioned from Respondent by the National Aeronautics and Space Administration (hereinafter NASA). The Government was to furnish camera copy to the successful bidder by February 1, 1985. The envelopes, themselves, were to be furnished by the contractor and were to be constructed from light brown Kraft paper with basis weight 28 lbs. per 500 sheets, size 17 x 22", trim size 9 1/2 x 12 1/2", open sided, diagonal or center seamed with gummed flap (2 1/4" depth min.). The completed product was to be boxed in units of 500 and shipped to NASA Langley Research Center by February 11, 1985. Appellant by return telephone call gave its quotation of $988 for the given quantity with an added rate of $65 per additional one thousand. Three other firms quoted prices to the Government. Based upon the quotations, Respondent, by Purchase Order E-9652 dated January 29, 1985, awarded the job to Appellant. Appellant claims receipt of the Purchase Order on February 4, 1985. Appellant claims that this late receipt of the Purchase Order and materials gave it an "automatic extention [sic] of delivery date to 13 February 1985 in accordance with U.S. Government Printing Office Contract Terms No. 1, Part 1-10(c) and 2-11(c)(1)." Be that as it may, the facts in the record show that on February 12, 1985, Penny Milladge, Procurement Assistant, Hampton Regional Printing Procurement Office, GPO, telephoned Appellant and spoke to its employee Debra Tase "on Jacket 538-374 due for 2/11." Tase's notes of that conversation reflect the following: "ODPC [Old Dominion Paper Company] misguided on envelopes required for job. Envelopes are a special order and generally take 4 weeks to get. RIS [RIS Paper Company] happened to have 13,500 9 1/2 x 12 5/8 envelopes due in today, remainder in 1 week. If we get envelope on 2/12 will ship 2/13.. Tase's notes for 2/12/85 show a status check with RIS and resultant advice that envelopes were not shipped from the mill until 2/12/85 with anticipated delivery date to Appellant of 2/15/85. The notes further show that Tase called Milladge and advised her of this information on 2/12/85. Appellant by letter of February 13, 1985, was nevertheless given notice of its failure to perform within the time required by the terms of the contract and that the Government was considering termination for default unless Appellant could show by written response within 5 days of receipt of the notice that the "failure to perform arose out of causes beyond your control and without fault or negligence on your part." On 2/14/85 Tase again checked with RIS and was assured that the envelopes would be delivered on 2/15/85 as promised. On 2/15 at approximately 12:30 p.m. Milladge called Tase to see if envelopes had been received. Tase advised her that they had not been. Later that day Tase called one "Judy Rule," identified elsewhere as Judy A. Ruehle, Printing Officer, GPO Hampton, about the acceptability of the change in envelope size. Ruehle then checked with one "C. Pruitt" of NASA who apparently accepted the change provided there was no additional cost to the Government (Rule 4 file, Tab J). Tase was so advised (Tase's telephone note of 2/15/84). Subsequently that same day, Ruehle spoke to Tase (Rule 4 file, Tab K) (the conversation taking place after the apparent receipt of the envelopes from RIS) advising her that the envelopes were in fact side seamed rather than diagonal seamed as specified. Ruehle then told Tase that the envelopes were not acceptable. She also advised her to answer the "Show Cause" letter. Ruehle's note reflected that "[A]t this time ADL has no env & don't know where they can get Diagonal [sic] seam env to print job." On February 15, 1985, Appellant responded to the "Show Cause" letter stating in pertinent part that they had originally ordered the paper stock "from Dillard Paper Company on February 6, 1985. [And that] Dillard, among the several area major paper distributors, was the sole supplier stating that stock would be provided within the allotted time" and that Appellant "had notified GPO by fastest means (telephone conversation between Ms. Debra Tase/ADL and Ms. Penny Milladge/GPO) on 12 February 1985 that delivery schedule problems were being incurred due to the paper subcontractor's inability to provide required stock as promised." Appellant attached a letter from Dillard to support its contention that "unforeseeable causes beyond control and without fault or negligence on the part of American Drafting & Laminating are the basis for the performance delay." Appellant gave further assurance that delivery would be made "within two working days of receipt of proper material from its subcontractor." The referenced attached letter dated February 15, 1985, on Dillard Paper Company stationery and bearing the signature "Paul L. Sumner" in pertinent part states: When you first contacted me for a quotation on the 9 1/2 x 12 1/2 brown Kraft 28# booklet envelopes, I contacted our supplier and secured pricing and delivery information. Those prices and delivery dates we then passed on to you. Upon the award of the bid to your firm and your call to me to order said envelopes, I then placed an order with the manufacturer. At that time the manufacturer informed me that the price they quoted me was incorrect and that the envelopes they had in stock at the time of quotation had been sold and they did not anticipate a delivery date any sooner than four weeks. Official File, Tab 1, Attachment 2 Respondent apparently rejected this explanation since on February 26 GPO Hampton employee Dave Sever telephoned Appellant and advised that GPO was going to default Appellant and put the job back out for bid with a charge back to Appellant of any excess reprocurement costs because the requisitioning department, NASA, could not wait any longer for delivery of the ordered envelopes. Appellant's President Thomas Keith, Jr., telephoned back to Sever advising that Articles 2-18 and 2-21 of GPO Contract Terms No. 1 indicate that a subcontractor's failure is not grounds for default of a prime contractor, that he still hadn't found a supplier to furnish the envelope, and that he intended to appeal any termination "because in his opinion the job should have been canceled at no cost and returned to GPO." That same day the "Notice of Termination" for default was sent to Appellant. Prior to receipt of the "Notice of Termination" on February 28, 1985, Appellant apparently continued its effort to locate the proper envelopes since its notes of 2/26/85 show receipt of a telephone message for one Dick Lassiter from "[M]gr paper sales Unijax Inc., Norfolk, Va 2:45 P.M. . . ." In addition four undated notes of telephone conversations were furnished by Appellant to support its contention that: All efforts were made to locate proper specification envelopes. None were available without lengthy special orders to manufacturer's mill according to industry sources: Dillard - Old Dominion Paper Division, RIS Paper, Unijax Inc, and Wilcox- Walter-Furlong Paper Company. Assistance in this impossible situation was needed due to the paper industry's inability to provide the envelopes, clearly beyond the control of ADL or its paper suppliers. An indefinite schedule extension would be necessary while awaiting the envelopes from the subcontractor. Official File, Tab 3 On March 6, 1984, Respondent reprocured the job from Union Envelope Company, Box 27007, Richmond, VA, the firm which had given the lowest quotation on the original solicitation but had not been awarded the contract at that time because it apparently was unable to meet the stated delivery schedule of February 11, 1985, the earliest date it could ship being March 1, 1984. (Rule 4 File, Tab C) Under the reprocurement, a delivery date of 4/12/85 was established. Union's price of $871.50 per 15,000 +/- 4% and $58.10 per additional one thousand, remained the same as its original quotation. This was lower than the award price to Appellant. As a result, there were no excess costs to be recovered from Appellant. However, the default remained a matter of record and it is from this judgment by the Contracting Officer that Appellant has appealed. ARGUMENTS Appellant's complaint by way of argument states that: 1. The government charge that ADL "has failed to make progress on the contract" is erroneous. ADL's performance as the contractor was as could be commonly and reasonably expected: Supplies were ordered from a major, reliable source who had stated materials were available. Supplies were quickly reordered from a second source when the first subcontractor was unable to provide. When supplies that did not meet specifications were delivered by the second, other known suppliers were again queried as to availability of the envelopes. None were found available. The government was kept informed by telephone and letter of this progress. 2. The government charge that "you are inexcusably delinquent in providing the ordered products" is erroneous. ADL complied with contract provisions concerning schedule delays and provided information which explained the cause and justification for the delays. Considering that delinquency was beyond control of ADL, an unspecified length extention [sic] of delivery schedule was requested. The government was kept informed by telephone and assured in writing that delivery would be made as soon as possible. No schedule extention [sic] decision was received. 3. Termination for Default and the governments decision that "your firm shall be held liable to the government for any excess costs" is unreasonable. It is not reasonable in light of: (a) the paper industry's inability to furnish the specified envelopes in sufficient time, (b) the government's superior knowledge or suspicion prior to contract award that the envelopes were not immediately available, (c) Contract Terms No. 1, Part 2-18(2) (c) which releases the contractor from liability in instances of subcontractor default of this nature, (d) the contractors verbal and written attempts to comply and cooperate with the Government Printing Office, (e) and the contractor's proposal for cancellation or termination with assurance that no costs would be claimed of the government. The reasonable contracting [sic] Officer would recognize the spirit of the regulations and best interest of both government and contractor to reduce time expended, paperwork, and aggrevation [sic] to all involved, as well as the courtesy to a government/ contractor team member of having a default on his business record through no fault of his own. Contract Terms No. 1, Part 2-18(e) may provide for a finding of excusable circumstances for this termination as well as such other relief the public printer may find appropriate. It is so appealed. Official File, Tab 1 GPO's telephone notes of 4/9/85 conversation with Appellant's Mr, Keith, in response to the appeal letter states: K [contractor] has some erroneous facts Complaint para. #5 - GPO had 4 Bidders on job! [complaint] para. #8 - No justification - bid means K has material or reasonable assurance he can obtain envelope in time to produce. [complaint] para. #10 - Paper industry's - why only 4 suppliers. Industry? Come on. Why no Double Env., Union Envelope, US [sic] Envelope - Largest in industry. Para 1 - K had failed to beginning [sic] printing the envelopes. Had not recieved [sic] envelopes in plant and stated no plates or negs made yet due to K waiting for envelopes coming in. (That's no progress) 2-26-85 T. Keith JR to ME. DGS para 2 - Inecusably [sic] delinquent. K couldn't even tell if or when job would be completed. para 3 - (a) Paper industries, RIS, Dillard, Unijax. Wilcox- Walter do not constitute the paper INDUSTRY! para 3 - (b) superior knowledge - of Gov't GPO rec'd 4 bids on envelopes. No indication that envelopes were not available. (c) K failed to read last clause in para 2-18 2(c) "unless the supplies or services to be furnished by the subcontractor were obtainable from other source in time to permit the contractor to meet the required delivery schedule." (e) not within authority of GPO to grant K's offer because he had accepted order & notified GPO in writing he would not be able to produce job for an indefinite and undeterminable period. 4/9/85 3:20 pm To 3:45 Tried to negotiate for a settlement of the dispute K says the fact that no money is involved makes it attractive to drop the appeal however ADL does not want a record of "DEFAULT" on its name. Whenever they bid jobs for other agencies it asked [asks] have you ever been defaulted? ADL does not want to say YES. Willing to withdraw appeal if CO is willing to withdraw action of default. Stambaugh/DGS 4/9/85 4:00 Per CO, no dice. K failed to comply with ship date. dmf/DGS Rule 4 file, Tab P Appellant's exceptions to GPO's assertions are set forth in a letter to the Board dated 6/7/85, as follows: 1. Exhibit M, Paragraph 5 confirms that the GPO was kept informed of the status of Purchase Order E-9652 by ADL and knew that the orders would be delivered, although late, within four weeks or approximately 20 March 1985. This delay was termed unacceptable by the contracting officer. Exhibit O, reprocurement of the order, allowed the new contractor, an envelope manufacturer, in excess of thirty days or until 12 April 1985 to fill the same order. This date and 35 day procurement period apparently was acceptable, although it emphasized the unreasonableness of not allowing an extention [sic] to the initial ten day period allowed ADL. 2. Exhibit P, Page 1, comments on complaint paragraph #8, infers ADL has no justification for failure to perform within time provided; further stating ". . . bid means contractor has reasonable assurance he can obtain envelopes in time." ADL's bid was submitted with this reasonable assurance from a paper distrubutor [sic]. This is confirmed in Exhibit I by subcontractor Dillard Paper Company, who explains their default. 3. Exhibit P, Page 1, comment on complaint paragraph #10 and Exhibit P, Page 2, paragraph 3(a) concern ADL's use of the term "the paper industry." ADL's reference to the paper industry is not meant to include the entire paper industry of the United States. It refers only to that portion of the industry that ADL has present business contacts with or is able to establish business with to obtain envelopes. As the GPO knows, most paper manufacturers sell directly only to very large accounts; that is customers buying in repeated lots approximating tens of thousands of dollars. This is standard trade practice and cannot be changed by a small business in Virginia Beach. Orders of the nature of the envelopes must be reprocessed through a paper supply distributor. These distributors are the "paper industry" contacted by ADL who were unable to provide the envelopes in less than four weeks. As an example; Union Envelope company., the reprocurement supplier of the order, is very distributor oriented, particularly in Southern Virginia. They will not sell directly to small printing companies, but use as their prime distributors Dillard Paper Company and Virginia Paper Company. These are distributors that ADL routinely purchases from. 4. Exhibit P, Page 2, paragraph 1 states "no plates or negatives made yet . . . no progress." ADL at no time recalls stating no negatives were made. Plates are not made at ADL until shortly before the order goes to press, i.e., one or two days. This contributes to quality printing by reducing the chance of plate degradation due to effects of handling, dust and humidity. Negatives were made prior to 8 February in anticipation of envelope delivery from the initial vendor and are available to ADL. The government-furnished materials from which the negatives were produced were returned to GPO Newport News on or about 26 February 1985 when directed by the verbal termination. This was prior to the complaint being originated. FACT - Progress was made. 5. Exhibit P, Page 2, Paragraph 2 states the contractor couldn't even tell if or when the job would be completed. ADL stated in telephone conversations and paragraph 3 of its 15 February 1985 letter that the order would be delivered within two working days of envelope receipt. This would put delivery near mid-March. An exact date was not given because the expected receipt date from the supplier was not exact. This delivery timeframe was known to GPO as shown in GPO memorandum Exhibit M. 6. Exhibit P, Page 2, Paragraph 3(b) states there was no indication that envelopes were not available. Exhibit D indicates that Union Envelope Company, possibly the most knowledgeable of the original four offerers due to its envelope manufacturing position, required a production time of 30 days. Was this not a tipoff to the GPO? ADL and other offerers did not have this information, but relied on assurances from paper distributors as to envelope availability. It was unreasonable for GPO to require earlier delivery with this knowledge. Your consideration to the above exceptions is appreciated. Respectfully, /s/ Thomas L. Keith President dbt Official File, Tab 7 CONTRACT TERMS NO. 1 The pertinent provisions of Government Printing Office Contract Terms No. 1 referenced by Appellant and Respondent, supra, are set forth hereinbelow as follows: 2-11. Notice of Compliance With Schedules. (c) Extension of schedules. (1) In the event a delay is caused by any action of the Government, including failure to furnish purchase/print order, copy and/or materials as scheduled, the shipping schedule will be extended automatically by the total number of workdays that work was delayed PLUS 1 workday for each day of delay; such period of grace not to exceed 3 workdays. For example: Order, etc., 1 workday late + 1 workday grace = 2 workdays extension Order, etc., 2 workdays late + 2 workdays grace = 4 workdays extension Order, etc., 3 workdays late + 3 workdays grace = 6 workdays extension Order, etc., over 3 workdays late: total number of workdays late + 3 workdays grace = total number of workdays extension. 2-18. Default (a) The Government may, subject to the provisions of paragraph (c) of this article, by written notice of default to the contractor, terminate the whole or any part of the contract in any one of the following circumstances: (1) If the contractor fails to make delivery of the supplies or to perform the services within the time specified herein or any extension thereof; or (2) If the contractor fails to perform any of the other provisions of the contract, or so fails to make progress as to endanger performance of the contract in accordance with its terms, and in either of these two circumstances does not cure such failure within a period of 10 days (or such other period as the Contracting Officer may determine to be reasonable and authorize in writing) after receipt of notice from the Contracting Officer specifying such failure. (b) In the event the Government terminates the contract in whole or in part as provided in paragraph (a) of this article, the Government may procure, upon such terms and in such manner as the Contracting Officer may deem appropriate, supplies or services similar to those so terminated, and the contractor shall be liable to the Government for any excess costs for such similar supplies or services: Provided, That the contractor shall continue the performance of the contract to the extent not terminated under the provisions of this article. (c) Except with respect to defaults of subcontractors, the contractor shall not be liable for any excess costs if the failure to perform the contract arises out of causes beyond the control and without the fault or negligence of the contractor. Such causes may include, but are not restricted to, acts of God or of the public enemy, acts of the Government in either its sovereign or contractual capacity, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, and unusually severe weather; but in every case the failure to perform must be beyond the control of both the contractor and subcontractor, and without the fault or negligence of either of them, the contractor shall not be liable for any excess costs for failure to perform, unless the supplies or services to be furnished by the subcontractor were obtainable from other sources in sufficient time to permit the contractor to meet the required delivery schedule. . . . (e) If, after notice of termination of the contract under the provisions of this article, it is determined for any reason that the contractor was not in default under the provisions of this article, or that the default was excusable under the provisions of this article, the rights and obligations of the parties shall, if the contract contains a clause providing for termination for convenience of the Government, be the same as if the notice of termination had been issued pursuant to such article. If, after notice of termination of the contract under the provisions of this article it is determined for any reason that the contractor was not in default under the provisions of this article, and if the contract does not contain a clause providing for termination for convenience of the Government, the contract shall be equitably adjusted to compensate for such termination and the contract modified accordingly. Failure to agree to any such adjustment shall be a dispute concerning a question of fact within the meaning of the article entitled "Disputes" in Part II, Contract Terms No. 1. (f) The rights and remedies of the Government provided in this article shall not be exclusive and are in addition to any other rights and remedies provided by law or under the contract. 2-21. Delay in Deliveries. Damages shall not be applied against the contractor for delays in delivery occasioned by unforseeable causes beyond the control and without the fault or negligence of the contractor as detailed in paragraph (c) of the article entitled "Default" in Part II of these Contract Terms No. 1; provided, that the contractor shall, within 10 calendar days (by telephone or telegraph, confirmed promptly in writing, if the remaining production time is less than 10 days) from the beginning of such delay, notify the Contracting Officer in writing of the cause of the delay; provided further, that such notice to the Contracting Officer shall contain the justification for such delay. ISSUE The question presented by this appeal is whether or not in light of all the facts and circumstances hereinabove set forth Appellant "had failed to make progress on the contract" and was thus "inexcusably delinquent in providing the ordered products by the contractual ship date." DISCUSSION We find in reviewing the submitted documentation that there are no factual differences between the parties respecting the sequencing of events. The purchase order itself (Rule 4 File, Tab E) reflects that the contractor was "to receive furnished material by February 1, 1985." The Appellant's uncontroverted assertion is that it received such material on February 4, 1985. This is a period of 3 calendar days late. The original "ship complete" date on the purchase order was February 11, 1985. Thus by operation of paragraph 2-11 of Contract Terms No. 1, supra, the "ship complete" date was automatically extended by 6 workdays. Examining a 1985 calendar for the month of February we take judicial notice that such extension date was February 19, 1985, rather than February 13 as asserted by Appellant. Accordingly, when Tase telephoned Milladge on February 12, 1985, to inquire as to the status of the procurement, Appellant had 7 remaining days for performance under the general terms of the contract. Appellant, although not initiating the conversation with Tase as implied by its Complaint, did, at that time, inform Respondent that it had incurred difficulty in obtaining the envelopes which it had timely ordered on February 6, 1985, from its supplier. At that time (February 12, 1985) Appellant told Respondent (1) that the envelopes were a special order and generally required 4 weeks to obtain; (2) that RIS Paper Company happened to have some 13,500 9 1/2 x 12 5/8 envelopes due in that day, with the remainder in 1 week; and (3) that if they received the envelopes from RIS by February 12 they would ship them on February 13. Respondent was thus on notice as to the difference in envelope size on that date. They were also promptly made aware later that day that the shipment would be delayed further because RIS, due to late shipping by the mill, did not anticipate receipt until February 15. Respondent erroneously issued its "Show Cause" letter to Appellant on February 13, 1985, some 6 days before the contractual ship date. Appellant checked with RIS on the 14th as a follow.up on the shipment. Respondent called Appellant at 12:30 on the 15th but the envelopes had not been received. That same day but before receipt of the envelopes, Respondent called Appellant to advise that the size difference was O.K. with NASA, the "ordering activity". This was some 4 days after being advised of the size change by Appellant. When the envelopes arrived thereafter on the 15th, Appellant immediately notified Respondent that they did not conform to the specifications respecting seam location. It was at that time that Respondent (Ruehle) advised her that the envelopes were not acceptable and to answer the "Show Cause" letter. Respondent was also aware that "[A]t this time ADL has no env and don't know where they can get Diagonal [sic] seam env to print job." Respondent answered the "Show Cause" letter that same date, setting forth the reasons for delay and attaching its supplier's letter corroborating its contention. Appellant continued to look for envelopes thereafter until February 26, not knowing that the Contracting Officer had requested concurrence to institute termination for Default by memorandum to Respondent's Contract Review Board of February 21, 1985, some 3 days after the contractual ship date. (Rule 4 File, Tab M) One of the reasons for the recommendations was that "[T]he Contracting Officer has determined that the soonest ship date by ADL would be approximately March 20, 1985. This delay is unacceptable to the department." The contract was thus terminated for Default on February 26, 1985, for failure to make progress. The reprocurement undertaken thereafter gave the contractor some 25 working days after receipt of materials to ship the product (Rule 4 File, Tab O) in contrast to the 8 working days after receipt of materials contemplated in the original purchase order and 11 working days afforded Appellant by the late receipt of materials. (These counts.of days are based upon the traditional 5-day workweek, Monday through Friday, using a 1985 calendar.) DECISION We think it abundantly clear from the foregoing discussion that while it was within the discretion of the Contracting Officer to terminate the contract and seek reprocurement because at the time of termination Appellant had no reasonable idea of when it would be able to deliver the product, the termination should have been for the convenience of the Government rather than Default, since the contractor had acted as a reasonably prudent printing contractor in like circumstances. Appellant went first to his usual supplier who gave certain assurances which without fault or negligence of either of them turned out to be erroneous. Appellant next sought out another respected vendor and obtained a substitute product which as it turned out did not meet acceptance. Appellant continued its quest until Respondent advised that the contract had been terminated. We do not believe, however, that the extended terms of the reprocurement give rise to any cause of action in Appellant. Indeed, given Respondent's experience with the procurement up to that time, we believe the extended term to be fully justified. Accordingly, we remand the case back to the Contracting Officer for processing as a termination for convenience of the Government.