APPEAL OF HORIZON GRAPHICS Docket No. VABCA-7207GPO Department of Veterans Affairs Board of Contract Appeals 2005-1 B.C.A. (CCH) P32,828; 2004 VA BCA LEXIS 3 December 15, 2004 APPEARANCES Robert Gacek, President, Horizon Graphics, Eden Prairie, Minnesota, for the Appellant. Roy E. Potter, Esq., Trial Attorney, Washington, D.C., for the U.S. Government Printing Office. OPINION BY ADMINISTRATIVE JUDGE THOMAS BACKGROUND This appeal was originally docketed by the Government Printing Office Board of Contract Appeals (GPOBCA 01-03) on May 28, 2003. The Public Printer subsequently decided to discontinue the GPOBCA and, by Interagency Agreement, dated June 7, 2004, designated this Board to hear appeals of final decisions by GPO Contracting Officers and the Board docketed this appeal as VABCA-7207GPO on July 29, 2004. The Appellant, Horizon Graphics, hereinafter "Appellant" or "Horizon" is seeking $ 115.48 for guillotining the original booklets and $ 2,348.50 for reprinting the booklets. GPO is seeking $ 103.91 for the cost of shipping the original booklets back to Horizon to be corrected. STATEMENT OF FACTS On September 18, 2002, the Department of Interior, Fish and Wildlife Service (Fish and Wildlife), submitted Standard Form 1 (SF1), Printing and Binding Requisition to the Public Printer for booklets (The Sacramento Environmental Program Guide) composed of 3 leaves of paper, each copied on two sides and folded in a graduated sequence for a total of 12 text pages, saddle stitched to match sample. The paper was to be Bright White 70 # Book, smooth finish. The request included a statement that "Accurate folding and binding of pages is paramount for this project." Ten copies were to be sent to Glenda M. Franich at Fish and Wildlife, Portland, Oregon, and the remainder to the Sacramento National Wildlife Refuge. (R4, tab,1) To meet the request, Purchase Order R8884, Jacket 792-440 (PO) was issued to Horizon on October 2, 2002, by the GPO Seattle Regional Printing Procurement Office (SRPPO) for 3,500 copies at a cost of $ 2,348.50. The trim size was 8 1/2 x 6 15/16 finished size, quality level was 3, as defined by the GPO Quality Assurance Through Attributes Program (QTAP)(GPO PUB 310.1) and shingle style binding was required. Digital media for copy was furnished and a sample book was given as a construction guide. Proofs were required. The delivery date was October 21, 2002. The designated contract administrator was Michael Dunn. (R4, tab 2) Contract Modification 1 was issued on October 8, 2002, authorizing Appellant to color correct one photo, make type corrections, and provide a digital proof that was to be shipped to Fish and Wildlife. The quantity was reduced by 165 copies to offset the cost of making the required modifications. No additional performance time was given. (R4, tab 3) By letter dated October 30, 2002, to Mr. Dunn, Ms. Franich of Fish and Wildlife, notified GPO that the copies had been received and that: 1) the paper quality was less than desired; 2) the quality of printing was inferior because the registration of page headings was off in some areas as marked for attention on the color proofs; 3) trimming was not correct; and, 4) the samples were not properly shipped. Fish and Wildlife questioned whether QTAP Level II or level III should have been ordered due to the tight registration of type and wildlife images. According to the letter, Ms. Franich had discussed the problems with Appellant and was told Horizon had not received the sample booklet shown to be provided with the PO. According to Ms. Franich, Appellant told her that the problems were the result of ordering only a Level III print job and the specifications for a saddle stitched job did not require trimming on three sides and staggered page design was very difficult. The letter enclosed 25 random samples and a few that had been hand trimmed by Ms. Franich. (R4, tab 4) The Record does not show whether Ms. Franich's letter had been received by GPO when it paid Horizon the full contract price on November 13, 2002. According to Calvin Anderson, Chief, Commercial Examination Section, Procurement Accounting Division, Office of the Controller, GPO, the payment was $ 2,301.53 ( $ 2,348.50 minus $ 46.97, prompt payment discount allowed by the Contract). Under its PAYMENTS ON PURCHASE ORDER clause, GPO Contract Terms, Contract Clauses, 24, GPO pays its contractors upon receipt of contractor vouchers, which may precede quality assurance inspection. On November 19, 2002, Ms. Franich returned the booklets to Horizon to be trimmed. (R4, tab 13) According to the Final Decision, after receiving the returned booklets, Mr. Gacek, President of Appellant, spoke to Dale Hammargren, an employee in Contracting Officer (CO) Atkins' office, and agreed to do the trimming but only if GPO paid for the shipping. Mr. Hammargren refused to pay the shipping. Mr. Hammargren's title and position are not identified in the Record other than as a member of the procurement office. (R4, tab 19) By fax dated November 21, 2002, Mr. Gacek, requested a "final written decision" for a modification to guillotine cut the booklets and re- shrink wrap and box the booklets at a cost of $ 215.15 (later reduced to $ 115.48). In its brief, Horizon states "The booklets showed up on our dock without prior notice. We contacted GPO prior to this faxed document and asked them what we were supposed to do with them. GPO said to trim the head and foot or trim head or foot alone to remedy the concern of the customer." Mr. Gacek also asked the Contracting Officer (no name used) to advise the customer that the booklets were ready to be picked up. (R4, tab 5) The record contains no explanation as to why Horizon did not ship the trimmed booklets at this time. The next day, CO, David Goldberg forwarded samples to GPO in Washington, D.C., for evaluation as a QTAP quality Level III item and cited trim size as the only complaint. (R4, tab 6) Inspector Christine Ridge inspected the samples and found the paper attribute did not "equal" the specifications and there were problems with cover position and text overlay, assigning 20 major defects to each and recommended the booklets be rejected and reprinted. (R4, tab 7) On December 13, 2002, the GPO Quality Control and Technical Department (QCTD) advised Ms. Ridge that the paper was not equal to the Specification "No. 1 Offset, Smooth-Finish, JCP A61, 105 gsm (70lb)" and assigned 40 demerits. QCTD also advised that the paper had excessively low burst strength, but was equal for finish and assessed no demerits for smoothness or caliper. By letter dated January 3, 2003, to Mr. Gacek, CO Goldberg confirmed an earlier telephone conversation (actual date unknown) rejecting the booklets because the paper did not meet the specifications and the cover position and text overlays. (R4, tab 9) According to the Final Decision, Mr. Gacek had called Dale Hammargren and offered a 25% discount. Mr. Hammargren rejected the offer because the "order was unacceptable." (R4, tab 19). Mr. Gacek then faxed the Contracting Officer (no name used) asking for the film work because he had already returned it to Fish and Wildlife. (R4, tab 10) Also on January 3, Mr. Gacek asked the GPOBCA for an expedited appeal of the rejection stating that prior to November 21, 2002, Horizon had advised the Seattle office of GPO that three sided trimming was not practical, and the Contract did not require trimming after gathering and stitching. Mr. Gacek also stated Fish and Wildlife had returned the booklets, that Horizon had guillotined them and asked for a contract modification to pay for that effort. He also asked for an extension of time while he asked Weyerhaeuser to test the burst strength. Finally, he stated the booklets had now been trimmed and since the paper was a major defect not a critical one, he would reduce the price based on the testing. In a separate letter, Mr. Gacek asked Ms. Ridge to reconsider her recommendation to reject and reprint. (R4, tab 12) Weyerhaeuser Technical Service representative, Kirk Frisinger, responded to Appellant on January 6, 2003. The burst strength averaged 23.1 pounds per square inch. In a separate fax to Mr. Gacek, Mr. Frisinger stated the results were "not good." He pointed out that burst strength did not relate to print quality but was more relevant to filled items such as milk cartons, etc. (R4, tab 15) On January 8, 2003, Ms. Franich returned the filmwork to Horizon. In her letter, Ms. Franich confirmed that she returned the original order to Horizon on November 19, 2002. She stated that if the trimming had been done, the booklets had not yet been shipped back by Horizon. She stated there was a desperate need for the booklets at a national workshop on January 13, 2003, and requested a substantial supply be received by January 12. (R4, tab 13) A hand written note, author unknown, dated January 13, 2003, states that "Michelle (Horizon Graphics) will deliver 150 program guides to Sacramento National Wildlife Refuge." There is a line across the page under which it says "then the rest of the order will be reprinted and delivered at a later date." Under that is "reprint shipped 1/21/03 Michelle K DH". (R4, tab 16) According to the Final Decision, the reprinted booklets were shipped on January 21, 2003, and were accepted. The Record does not state what booklets, if any, were shipped for the January 13, 2003 meeting. On May 13, 2003, Mr. Gacek sent two faxes to CO Atkins. In the first, he stated: 1. David Goldberg told us we would have to completely reprint the order-Not acceptable. 2. Prior to that he said to trim the books flush. 3. We received this letter stating from your customer to trim the bottom edge which we did-and Dave Goldberg was notified that this was done and given a price to repair as not stated on contract. (R4, tab 18) In the second fax, Mr. Gacek asked for a final decision. He stated he trimmed the order based on Ms. Franich's January 8, 2003, letter but was prevented from shipping them by CO Goldberg. Mr. Gacek asked for $ 76.98 (trimming), $ 37.50 (shrink-wrapping), $ 26 (repack boxes) and $ 2,348.50 for reprinting. This adds up to more than the $ 115.48 Appellant is seeking. A comprehensive final decision denying Horizon's requests for compensation and seeking payment of the shipping costs for returning the booklets was issued May 21, 2003, by CO Atkins. In what appears to be a direct conflict with the rejection of the 25% discount offer, the Final Decision states that the CO "was expecting you to return the corrected product to the department. Since you refused to deliver the corrected product and asked to pickup the films in order to reprint the product this office assumed that you preferred to reprint the product." Later, the Final Decision states "You were given a chance to correct the order, had you done so in a timely manner the customer would probably have accepted the order along with the other defects." DISCUSSION As we have noted on previous occasions, the fact that an appeal is submitted on the record does not relieve the party with the burden of proof from providing the Board with sufficient evidence to support its claim. D. M. Summers, Inc., VABCA No. 2750, 89-3 BCA P 22,123; Southland Construction Co., VABCA No. 2579, 89-2 BCA P 21,704; Jen- Beck Associates, VABCA Nos. 2107 et al., 87-2 BCA P 19,831 at 100,322-23. The parties, by electing to have this appeal decided on the record, took upon themselves the responsibility to provide this Board with adequate evidence upon which to make a finding in their favor. Appellant argues that it used a # 1 Opaque Offset Paper with a smooth finish. Horizon states it was never made aware of Interior's statement that accurate folding and binding of pages was paramount. Horizon points out that other purchase orders specifically stated binding on 3 sides and another says trim flush, thus creating confusion about what was required. Horizon states, without explanation, that there is no request for trimming pages in the SF1. Appellant's argument here appears misguided. Surely accurate binding would be anticipated in any circumstance. Appellant admits that there was a misregistration of sheets top and bottom because its contract bindery service mistakenly said a shingled booklet should not be trimmed head and foot. Horizon argues, however, that a lack of specific bindery instructions, errors, and mistakes by both parties caused great expense to Horizon. GPO argues that the CO established through the inspection process that the booklets did not meet the Contract's quality standards. Under the Contract, the CO can require strict compliance with the specifications or, if in the Government's best interests, accept a price reduction for the non-conforming items. Since this is a discretionary decision by the CO, GPO argues this Board may not substitute its judgment for that of the CO. Thus, Appellant has the burden to show the CO abused his/her discretion, which GPO says Appellant has not done. GPO cites numerous cases in its Brief, concluding with: The GPOBCA has on numerous occasions stated: ....the general rule is that the Government is entitled to strictly enforce compliance with its specifications, S.S. Silverblatt, Inc. v. United States, 433 F.2d 1314 (1970). Thus, the Government can refuse to acquiesce to a contractor's request that it be allowed to use substitute materials, Polyphase Contracting Corp., ASBCA 11787, 68-1, BCA Para. 6,759 (1967), even if such materials are superior. Nichols & Co. v. United States, 156 Ct. Cl. 358 (1962), cert. denied, 371 U.S. 959 (1963). Under the facts in this case, the discretion argument is not as pure as represented by GPO. We agree that the inspection record supports the rejection and Appellant has not persuasively refuted those inspection results. What is not clear from the record is what involvement, if any, GPO had in Horizon's failure to send the trimmed booklets to Fish and Wildlife and whether any consideration was given to whether or not it would have been in the Government's best interests to accept a price reduction. The order was delivered four days late on October 25, 2002. The order was properly rejected by Fish and Wildlife on October 30, 2002. On November 19, 2002, the order was returned to Appellant by Fish and Wildlife, who was apparently willing to live with the other deficiencies, asking only that the booklets be trimmed. Two days later, Appellant advises the CO the order has been trimmed as required and is ready for pick up. There is no explanation why Horizon did not ship the trimmed booklets. The most probable reason, based on the existing record, is that Appellant first wanted a Contract modification for the trimming ( $ 215.15) and the shipping costs ( $ 100) paid by GPO. However, there is no information as to what action, if any, the CO took based on the Fish and Wildlife fax. It is clear that GPO (at least one of its several contracting officers) knew that Fish and Wildlife was willing to accept the trimmed order but there is no evidence that any attempt was made to negotiate a price reduction. During the next 6 weeks, GPO inspected and Appellant tested the paper, etc., while Fish and Wildlife waited in vain for the trimmed order to be returned. Finally, on January 3, 2003, GPO sent Horizon the rejection letter and requested a reprint. Horizon issued a series of responses discussed above. Horizon acknowledged the return of the order to them and the request to trim, but never explained why it did not return them to Fish and Wildlife. It is near this point in time that Horizon made an offer to reduce the price 25%. Horizon received the less than favorableWeyerhaeuser report on paper quality on January 6, which may have triggered the price reduction offer. On January 8, 2003, Fish and Wildlife reinforced its desire for the now trimmed booklets with a urgent request to Horizon to send the booklets by January 12, 2003. Horizon still did not send the trimmed booklets. There was no reaction from GPO. The initial CO decision to reject and reprint was justified. However, when a customer has expressed a desperate need and is willing to accept product at a reduced price, giving no consideration to a reduction in price and continuing to reject and insist on a reprint may not be in the Government's best interests and may amount to an abuse of discretion. There were a number of GPO employees from the procurement office who played roles as contracting officer in this process: Michael Dunn, David Goldberg, Michael Atkins. However, Dale Hammargren, who rejected the 25% reduction in price, is not identified as a contracting officer nor is it revealed whether or when he shared news of the rejection with anyone else at GPO. It is not known whether Mr. Hammargren bothered to contact Fish and Wildlife or was aware of the customer's willingness to make do with the trimmed order. The Final Decision indicates the price reduction was rejected without discussion. When a contractor fails to deliver a product conforming to the printing required, the Contracting Officer may elect to discount the Appellant's invoice price by applying the provisions of the Respondent's Quality Assurance Through Attributes Program (QATAP), HT 97, see GPO Contract Terms, Quality Assurance Through Attributes Program, GPO Pub. 310.1, effective May 1979 (revised April 1996) (hereafter QATAP Manual), which were incorporated into the Contract by reference. The QATAP is a quality assurance program that provides for the use of objective measurements to determine whether printed products are defective and, if so, whether they should be rejected or whether the contract price should be discounted and by how much. Printing Procurement Regulation, Chap. XIII, Sec. 1, P 3.a. (R4, tab 2) The GPO Board has discussed the QATAP at length, see, e.g., Custom Printing Co., GPOBCA 28-94 (March 12,1997), slip op., 1997 WL 128720. In its brief, GPO admits that when noncomforming goods are tendered, the CO is given the authority to make a discretionary decision on whether to require correction or take a reduction in contract price. We agree. We are not substituting our judgment for that of the CO. Discretion requires reasonable inquiry and business judgment. This record contains no evidence of either having occurred in relation to this issue. The GPO's problems here are two fold. First, the CO failed to exercise any discretion when the discount offer was made. Second, there is a direct conflict in the Final Decision itself. On the one hand, the discount offer is rejected "as the order was unacceptable" and on the other, "This office was expecting you to return the corrected product to the department." Later, the Final Decision states "You were given a chance to correct the order, had you done so in a timely manner the customer would probably have accepted the order along with the other defects." The opportunity to correct came from Fish and Wildlife. The Record contains no documents that indicate GPO gave Appellant any affirmative indication that it could have corrected the order. Both parties here share the responsibility for the fracas that led to the reprint. This Board has previously held that where both parties share responsibility it is "appropriate to utilize the doctrine of comparative negligence which apportions damages according to fault." Ultra Construction Company, VABCA No. 1873, 85-2 BCA P 18,007 at 90,290. In apportioning damages, however, we believe that the Appellant must bear the major responsibility, particularly as it was Appellant that delivered nonconforming goods. Appellant is not entitled to the costs of making the goods partially acceptable ( $ 115.48) Appellant had a window of six weeks where it could have shipped the trimmed booklets and avoided the reprint issue. Instead, Horizon chose the unreasonable position that it must get paid to correct items it was responsible for before it would return the items. On the other hand, GPO was aware that the trimmed order would be acceptable to Fish and Wildlife but took no contract administration action to attempt to resolve the situation. We believe the Appellant, by submitting noncomforming goods and then refusing to ship the trimmed but still defective order until paid for the corrections, was the major contributor to this dispute. Appellant is entitled to 30% of the reprint cost ( $ 2,348.50), which is $ 704.55. Returning the order to Appellant for correction by Fish and Wildlife was a prudent and reasonable action under the facts in this case since the cost was occasioned by Appellant's failure to perform. We find GPO's claim for $ 103.91 is supported by sufficient evidence and the terms of the Contract. DECISION For the foregoing reasons, the appeal of Respondent, Horizon Graphics, under U.S. Government Printing Office Purchase Order No. R8884, VABCA-7207GPO, is DENIED with respect to the GPO's claim for shipping costs. GPO is entitled to a judgment of $ 103.91. The appeal is SUSTAINED in part, and Horizon is entitled to a judgment of $ 704.55; all other aspects of the appeal are DENIED. December 15, 2004 WILLIAM E. THOMAS Administrative Judge Panel Chairman We Concur: RICHARD W. KREMPASKY Administrative Judge PATRICIA J. SHERIDAN Administrative judge