UNITED STATES GOVERNMENT PRINTING OFFICE CONTRACT APPEALS BOARD ASSOCIATED GRAPHICS SERVICES, INC. Contract No. 56595 Program 390-S Decision dated January 12, 1981 GPO CAB No. 76-12 VINCENT T. McCARTHY, Chairman DREW SPALDING, Member THOMAS O. MAGNETTI, Member (Mr. Samuel Sooper, originally a member of the Board adjudicating this appeal, resigned from the GPO and was replaced by Mr. Magnetti.) Preliminary Statement This is a decision on an appeal entered by Associated Graphics Services, Inc. (hereinafter referred to as the contractor). 1/ The appeal disputes the final decision of the Contracting Officer terminating for default a contract for photocomposition services. The appeal is taken pursuant to Article 29 (the "Disputes" clause) of the GPO Contract Terms No. 1, as incorporated by reference into the Contract Specifications (Sec. 1.2) and the Bid and Acceptance document of this contract (Exhibits 1 and 1-A of the Appeal File respectively). 2/ 1/ There is some question as to the timeliness of this appeal. Under the terms of Article 29 of the United States Government Printing Office Contract Terms No. 1, approved July 1, 1943, Rev. July 15, 1970, the decision of the Contracting Officer deciding any dispute arising under the Contract directs the contractor to make any appeal of that decision within 30 days from the receipt of that decision. In the instant case, the contractor's appeal period ended on September 23, 1976. By letter dated September 22, 1976, the contractor requested an extension of five working days to properly organize its appeal (Exhibit 14, Appeal File). The appeal was to be ready for proper presentation by September 30, 1976. The actual appeal was received at the GPO on October 1, 1976, although it was dated September 20, 1976-two days earlier than the date on the letter asking for the extension (Exhibit 15, Appeal File). 2/ Hereafter, unless otherwise noted, every citation is to an Exhibit in the Appeal File. The contract (Contract No. 56595, Program 390-S) required the contractor to provide photocomposition for various area handbooks as requisitioned from the Government Printing Office (hereafter the GPO) by the Department of the Army. The final decision of the Contracting Officer terminated the contract because the Contractor failed to perform the basic requirements specified in the contract and failed to deliver within the time specified (Exhibit 10, A.F.). In accordance with a request of the contractor, a hearing before a panel of members of the GPO Contract Appeals Board was held from May 23, 1978, to June 2, 1978. 3/ The decision of this Board is based solely upon the record as evidenced by the documents and exhibits that constitute the Appeal File and the testimony and the exhibits taken at this hearing. Statement of Facts Responding to a GPO solicitation, the contractor submitted a bid for photocomposition services involved in producing foreign area handbooks for the Department of Army. As its bid was deemed to be the lowest responsive bid to the specifications, a pre-award survey of the Contractor's plant was conducted by the GPO on May 12, 1976. This survey was taken not only because the 3/ A prehearing conference was held regarding this appeal on May 19, 1978. contractor had never worked on a GPO contract before but also because it was necessary to determine the capability of the contractor to perform according to the specifications of the contract. At this survey, some concern was voiced over the ability of the contractor to meet the schedules and delivery dates outlined in the contract specifications. Of particular worry was the fact that the contractor had in its possession only one direct-input keyboard / photocomposition computer which would have to be used for all phases of the photocomposition work; i.e., setting, revising, correcting, etc. Additional problems would arise if the nature of the work required orders to run concurrently. The pre-award survey cautioned that in light of the contractor's capabilities, its performance on the contract would have to be closely monitored (Exhibit 3, A.F.). On the strength of the contractor's representations that it had ordered additional machinery and that, if necessary, it would work 24 hours a day to fulfill the terms of the contract, the contract was awarded to the contractor on May 21, 1976 (Exhibits 3 and 18, A.F.). Under this contract, print orders were to be issued for each foreign area handbook. The specifications required that when such a print order was issued, the Government would provide the contractor with the manuscript copy of the handbook. Specific dates for the submission of these manuscripts copies to the Contractor could not be predetermined. (Sec. 2.18(b), Specifications, Exhibit 1, A.F.). The Contractor would then have six working days after notification of availability of the manuscript and print order to deliver reader's proofs of photocomposed pages of up to 400 pages of manuscript copy. One additional working day would be allowed for each additional 72 pages of manuscript copy (Sec. 2.18(c)(1), supra ), These photocomposed pages (reader's proofs) would then be delivered to the GPO, which would submit them to the Department of the Army for indexing (Sec. 2.13 [a-k], supra ). Reader's proofs were required to be clean, legible, in conformity with the copy submitted. The specifications further required that the proofs be free from error. This last requirement followed the word "caution" and was set off in capital letters (Sec. 2.13[c], supra ). The requirement that the contractor's work be free from error and of first class workmanship is reiterated in both Secs. 1.8 and 2.11-2 of the Specifications. The Department of the Army was not required or expected to proofread the proofs and the contractor was to be solely responsible for the typographic accuracy of the finished product. To avert the possibility of submitting proofs which were in error, it was suggested in Sec. 2.13 (d) that the contractor proofread the reader's proofs at least twice prior to submission. If there were contractor's errors within the proofs that were serious enough in the opinion of the Government to require revision, such revised proofs were to be provided and delivered at no expense to the Government. However, no extra time could be allowed for reproofing, as all operations had to be accomplished within the original production schedule established in the specifications (See 2.13(d), supra ). The necessity for the contractor to meet the time schedule is emphasized in Section 1.10 of the Specifications which reads as follows: "SPECIAL NOTICE OF CAUTION TO BIDDERS.- (a) This is a scheduled job and the contractor MUST maintain the schedule provided herein. (b) If the contractor refuses or fails to make shipments on an order within the time specified, or any extension thereof, the Government may by written notice terminate the right of the contractor to proceed with shipments or such part or parts thereof where there has been a delay. In such event, the Government may purchase the required services, materials, or supplies in the open market or secure the services, materials, or supplies by contract or otherwise, and the contractor and his sureties shall be liable to the Government for any excess costs occasioned thereby: Provided, That the contractor shall not be charged for any excess costs occasioned by unforeseeable causes beyond the control and without the fault or negligence of the contractor, . . . and delays of a subcontractor due to such causes . . . Provided, further, That the contractor shall, within 10 calendar days from the beginning of any such delay, notify the contracting officer in writing of the causes of delay." Print Order 12, Area Handbook for Cuba, was issued and the manuscript copy made available to the contractor on June 10, 1976. On that date, the Contractor requested an extension of the schedule as it was in the process of moving to a new location. A one day extension was granted by the Contracting Officer (Exhibit 4, A.F.). Although the reader's proofs were due on July 2, 1976, they were not finally delivered until July 13, 1976 - five working days late.Id. A second print order (No. 13), Area Handbook for Sierra Leone, was issued and a manuscript copy made available to the contractor on June 25, 1976, with a delivery date of July 13, 1976, (this date was based upon the contractor's receipt of the copy on June 28, 1976). The page proofs were not finally received until July 22, 1976, seven working days late. Id. A cure notice/show cause order, dated July 23, 1976, was sent to the contractor warning about the possible consequences of the failure "to maintain the delivery schedule requirements of Program 390-S." The contractor was asked to provide a suitable justification for the delinquent delivery in order to avoid a termination based on the late deliveries (Exhibit 5, A.F.). Although the contractor responded to the cure notice on July 28, 1976, the reply did not sufficiently justify the late deliveries to the satisfaction of the Contracting Officer (Exhibits 6 and 7, A.F.). Separate from the GPO's dissatisfaction with the contractor's late deliveries, the Department of the Army sent a memorandum dated July 28, 1976, complaining of the contractor's unsatisfactory performance as to the delivery and the quality of the proofs (Exhibit 8, A.F.). The memorandum enumerated in two pages the deficiencies and numerous errors found in the page proofs. The Army further claimed that the contractor's failure to meet the delivery dates caused delays in the Area Handbook program which jeopardized the ability to meet the production commitments of that program. It was evident to the Army, based upon the contractor's performance up to that date, that the contractor would not be able to meet either the quality requirements or the production schedules for the handbooks to be produced under the contract. The Army then requested in this letter that the appropriate steps be taken to terminate the contract for default. A decision was made by the Contracting Officer to terminate the contract and this decision was supported by the GPO Contract Review Board. On August 13, 1976, a termination notice was sent to the contractor indicating that the GPO was taking this action because the contractor did not comply with the specifications of the contract and failed to deliver within the time specified (Exhibit 10, A.F.). This action was based on Article 18(a) of GPO Contract Terms No. 1, incorporated by reference into both the Bid and Acceptance paper and Section 1.2 of the Specifications (Exhibits 1 and 1- A, A.F.), which authorizes the Government to terminate upon written notice the whole or any part of the contract in any of the following circumstances: "(i) If the Contractor failed to make delivery of the supplies or to perform the services within the time specified herein or any extension thereof; or (ii) 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 10 days (or such longer period as the contracting officer may authorize in writing) after receipt of notice from the contracting officer specifying such failure." After receipt of this termination notice, the contractor met with the Contracting Office on August 20, 1976, to discuss the deficiencies in its performance. At this meeting, the procedure for appealing this termination decision of the Contracting Officer was explained to the contractor. The contractor then appealed this decision to the Public Printer in a letter dated September 20, 1976, and received in the GPO on October 1, 1976. In the accompanying memoranda that the contractor asked for a hearing on this decision and set out reasons why, in its view, the GPO termination was unjust. In this material the contractor claimed that the delay was not due to causes within the control or the fault of the contractor, but because the Government issued two print orders concurrently; that the Government used different criteria and standards to judge the work of this contractor, as opposed to those applied to prior and subsequent contractors; that the mistakes within the page proofs were not of a nature to justify termination; and that the GPO failed to furnish the proper orientation, direction, or guidance to permit the contractor to perform within the contract specifications. (Exhibit 17, A.F., see also, Exhibit 19, A.F. and the Appellant's Brief for a more complete description of reasons presented by the contractor to excuse its non-performance). These assertions were answered in detail by the Contracting Officer in two letters to the contractor dated August 23 and September 7, 1976, respectively (Exhibits 11 and 7, A.F.; see also, Exhibit 20, A.F.). It should be noted that the contractor was advised by letter dated September 22, 1976, that it was responsible for the estimated cost differential of reprocurement for the remaining term of the contract. This amounted to over $4,840 (Exhibit 12, A.F.). The amount was to be deducted from the contractor's account. The replacement contractor, Photo Data Inc., was the second lowest responsive bidder in the original solicitation. A prehearing conference was held on May 19, 1978, regarding the procedures to be used and evidence to be presented at the schedule hearing. At this conference, the parties agreed that the only issue to be considered at the hearing would be the appropriateness of the termination. The hearing was held between May 23, 1978 and June 2, 1978, before three members of the GPO Contract Appeals Board and resulted in a five volume transcript of testimony from various witnesses, 27 Government exhibits in the Appeal File, 8 separate exhibits submitted by the contractor and 2 other Government exhibits. These constitute the entire record and are more or less relevant to the various issues raised at the hearing although some individual exhibits may have had little or no bearing on the ultimate decision of this Board. Discussion It is the decision of this Board that the contract (Print Orders 12 and 13, Program 390-S) was properly terminated in accordance with the procedures set forth in the contract because of the contractor's failure to perform the contract in a timely fashion. 4/ Therefore, the contractor's appeal of the Contracting Officer's decision to terminate the contract for default is denied. The contract in this appeal was terminated under the standard Default clause included within the United States GPO Contract Terms No. 1 (Article 18 [a] [i] and [ii]). As stated above, this document was incorporated by reference into the contract by not only the Specifications (Sec. 1.2, Exhibit 1, A.F.), but also by the Bid and Acceptance document which was signed by Mr. Lewis Fields, Executive Vice President, Associated Services, Inc., (Exhibit 1-A, A.F.), thus providing the contractor with, at the very least, constructive knowledge of these terms of the contract (Transcript Volume IV, pp. 183-184-hereafter Tr IV). 4/ Since the Default clause of the contract (Article 18 [a] [i] of GPO Contracts Terms No. 1) provides the Government with the summary right to terminate the contract because of the contractor's failure to perform in accordance with the prescribed delivery schedule for photocomposition pages, it is unnecessary for this Board to reach the conclusion that the Government's termination for default must be based not only on the late delivery but also on the determination that the contractor did not perform the basic requirements specified in the contract. The Board recognizes that while both of these reasons were used as justification for the termination in the Government's Termination Notice (Exhibit 10, A.F.), either one, if proven, would be sufficient grounds for termination. Therefore, since the Board has determined that the default for late delivery was appropriate, there is no need to go further and base its decision on the appeal on both of these justifications. It should also be noted that the default termination for late delivery is permitted by Sec. 1.10 of the Specifications (Exhibit 1, A.F.). The Government believed this termination to be warranted on the grounds that the contractor failed to deliver the photocomposition pages within the time specified in the contract. In cases of default, the Government has the initial burden of proving that the contractor had defaulted in its performance of the contract. Caskel Forge Inc., ASBCA No. 6205, 61-1 BCA ¶ 2891; National Aviation Electronics, Inc., ASBCA No. 18256, 74-2 BCA ¶ 10,677. Moreover, default terminations as a species of forfeiture are to be strictly construed. J.D. Hedin v. United States, 187 Ct. Cl. 45 (1969). However, once the default has been established, the contractor then has the burden of showing that the default was excusable. B.M. Harrison, ASBCA No. 7684, 1963 BCA ¶ 3736; Hy-Cal Engineering Corp., NASA BCA Nos. 871-18 and 772-7, 75-2 BCA ¶ 11,399. Where it is concluded that the default has not been established or that the default was excusable, the termination is converted to one for convenience of the Government. This is pursuant to the provisions of the Default clause. In the instant case, the burden of proof placed upon the Government to demonstrate that the contractor had defaulted on the contract is easily met. Throughout the period of the contractor's performance, it failed to submit the photocomposed page proofs required by the contract in a timely fashion (Exhibits 4 and 20, A.F.; Tr IV, pp. 192-197). Despite the Government's forbearance of the contractor's difficulties and its repeated attempts to obtain timely delivery, the contractor continued to disregard the delivery dates for both print orders and delivered the first five days late, and the second seven days late (Exhibit 4, A.F.). The Government even provided the contractor with a one day extension in the delivery schedule for Print Order 12 (Tr IV, pg. 195). The record, therefore, makes out a prima facie case of a failure to perform. General Equipment Company, ASBCA 6415, 1964 BCA ¶ 4166. Faced with delays which disrupted the work schedule for the Area Handbook program, it was within the discretion of the Contracting Officer to terminate the contract. As discussed above, the contract terms legally permit an immediate termination action for failure to deliver goods or services at the appropriate time. Accord, Kan-Du Tool & Instrument Corp., ASBCA No. 23466, 79-2 BCA ¶ 13,907. The Default clause, while not requiring termination, gives the procuring agency discretion to do so in such a case as this. The existence of this discretion is undeniable. Schlesinger v. United States, 390 F.2d 702 (Ct. Cl. 1968). The Government is entitled to strict compliance with the contract requirements. Decatur Realty Sales, HUD BCA No. 75-26, 77-2 BCA ¶ 12,567. Timely submission of the page proofs was an essential requirement of this contract (Specifications, Secs. 1.10 [a], [b], 2.13 [d] and 2.18, Exhibit 1, A.F.). Prior to the award, the contractor was aware that time was of the essence (Tr II, pp. 36-37). The Contracting Officer believed that, given the nature of the contract and the pressing need for production of the handbooks, the delay in the delivery of the print orders represented a pattern of lateness which endangered further performance of the contract and was sufficient in and of itself to warrant termination of the contract (Tr V, pg. 39). Although not required to by Article 18 (a) (i), the Contracting Officer issued, on July 23, 1976, a cure notice/show cause order to the contractor in order that the contractor would be provided an opportunity to present any reasons or explanations that might excuse the delay (Exhibit 5, A.F.; Tr V, pp. 45-50). Since this particular contract provision allowed the Government to immediately terminate the contract for default if the contractor failed to make a timely delivery, there was no need for the Government to buttress the default termination based on untimely delivery with a ten-day cure notice requirement required by another contract provision (Art. 18 [a] [ii]; Tr V, pg. 47). The contracting Officer's determination that the contractor was unable to deliver a conforming product in a timely fashion was supported by the receipt of a letter from the Department of the Army describing the extensive errors present throughout the page proofs that had been submitted by the contractor (Exhibit 8, A.F.). The existence of these widespread errors violated several contract provisions (Specifications, Secs 1.8 and 2.13, Exhibit 1, A.F.). 5/ The extent and nature of these mistakes were described in the testimony of several Government witnesses (Tr IV, pp. 26-37, 81-86, 97, 103-105, 211). The errors were of such a serious nature that the page proofs were unusable for the purpose of indexing the work (Tr V, pp. 39-41). The specifications did have a provision for revision of the reader's proofs but 5/ The contractor's own expert witness testified that the work which the contractor provided did not meet the performance standards established in the contract (Tr 1, pp. 154-155, 160). Further, another of the contractor's expert witnesses testified that if the reader's proof pages had been proofread twice, as had been suggested by the contract specifications (Sec. 2.13 [d], Exhibit 1, A.F.), the errors would have been discovered by the contractor before the proofs were submitted to the Government (Tr 1, pg.97). also provided that no extra time would be allowed for reproofing as such an operation would have to be accomplished within the original production schedule allotted in the specifications (Specifications, Sec. 2.13 [d], Exhibit 1, A.F.). However, the proofs were delivered too late for any possible correction (Tr IV, pp. 213-218; Tr. V, pp. 40-41). The contractor was obligated to furnish page proofs for Print Order 12, 16 days after the manuscript copy was made available by the GPO, it had one day to furnish the index and five days to furnish the repros, a total of 22 days of production time. However, the contractor used 21 days just to produce the page proofs on this order. On Print Order 13, the contractor was required by the specifications to provide the page proofs in 11 days, the index in one day and the repros in five days. The scheduled time for this order totaled 17 days. The contractor delivered these page proofs in 18 days. The contractor had used all but one day of the total production time for the first print order when the page proofs were delivered on July 13, 1976. As for the second print order, the contractor had used more than the entire allotted production time when he delivered those page proofs on July 22, 1976. Consequently, it would have been impossible for the contractor to correct the extensive errors present throughout these page proofs within the schedule as the specifications required (Exhibit 20, A.F.). Therefore, the Contracting Officer, acting upon a reasonable determination that the deficiencies were such that they were incapable of correction within the production schedule, had no recourse but to move to terminate the contract based on the contractor's failure to deliver the reader's proofs within the time allotted in the delivery schedule and noncompliance with the basic requirements of the contract (Exhibit 10, A.F.). See, Simplex Manufacturing Corp., ASBCA Nos. 13897, 14380, 71-1 BCA ¶ 8814. 6/ Having established that the Government possessed the right to terminate the contract for late delivery and exercised that right in the proper manner, the burden shifts to the contractor to prove that the delays were excusable. The contractor provided various excuses for its noncompliance with the terms of the contract. The Board holds that it has not met its burden of proving any of them. --------------- 6/ It should be noted that the Government never waived its right to receive delivery in strict accordance with the contract specifications. Waiver of a delivery schedule requires at least two basic elements: "(1) conduct on the part of the Government which is reasonably believed by the delinquent contractor to constitute encouragement to proceed with performance of a contract after the delivery date has passed and (2) incurrence of such costs by a contractor in reliance upon such encouragement as to make inequitable termination of a contract for default without further notice or establishment of a new delivery date" Clark Cable Corp., ASBCA No. 17090, 72-1 BCA ¶ 9463; Security Parachute Company, ASBCA No. 20334, 76-1 BCA ¶ 11,722; DeVito v. United States, 413 F.2d 1147 (Ct. Cl. 1969). There was no such waiver here. Other than a one day extension granted on June 10, 1976, the contractor was denied further extensions of the delivery dates. Of added importance is the fact that the GPO's cure notice/show cause order stated that further assistance or acceptance of delinquent products or services by the Government could not be construed as a waiver of any of the contractual rights of the Government (Exhibit 5, A.F.). The contractor has alleged that it was impossible to perform the contract within the time constraints because of the damage sustained to the single keyboard in its possession while in the process of moving to a new location (Tr I, pg. 185; Tr. II, pp. 71-74, 119). However, the breakdown of this keyboard is not such a reason as could be considered beyond the contractor's control or without its fault. The contractor is obligated to have on hand the facilities needed to produce the photocomposition pages that it had contracted to deliver. Failure to have the necessary facilities or means is not such cause as would excuse untimely delivery under this contract. Rex System Corp., ASBCA No. 11,327, 66-1 BCA ¶ 5597; Universal Steel Strapping Co., ASBCA No. 10673, 65-2 BCA ¶ 5066. There was no convincing evidence presented by the contractor demonstrating that it attempted to obtain other equipment while its only keyboard was being repaired. Moreover, the possibility that the contractor might run into difficulty with just one photocomposition keyboard was brought to the contractor's attention at the pre-award survey (Tr IV, pp. 111-112, 147). The contractor further contends that the Government made strict contract compliance impossible by issuing print orders concurrently (Tr II, pp. 22, 130, 150, 166) and by delaying the issuing of the print orders by five weeks after the award of the contract (Tr II, pg. 38; Tr III, pg. 46). However, the contract specifications state that the specific date for submission of orders could not be predetermined (Sec. 2.18 [b], Exhibit 1, A.F., see also, Tr IV, pp. 99-100) and in any case the production schedule was set from the time the print order was issued so that any delay in issuing a print order would not work to a disadvantage for the contractor. The contractor was advised during the pre-award survey that orders could run concurrently (Tr IV, pp. 112, 150, 166). Section 2.3 (b) of the Specifications states that it was anticipated that there would be up to three orders issued per month. These orders would have to run concurrently since there are only 20 working days in a month and each order required an average of 10 to 15 days to produce page proofs. In fact, when confronted at the pre-award survey by the possibility of a heavy workload, the contractor represented to the officials representing the GPO that it could handle an increased workload by working day and night to keep up with the production schedule (Tr IV, pg. 167). Finally, the contractor alleged that the Government hindered performance on the contract and timely delivery by providing vague or defective specifications, no orientation, and conflicting instructions from various Government personnel (Tr I, pg. 196; II, pp. 20, 29, 41-42, 52-55; III, pp. 49, 51-53, 96-97). At the pre-award survey, the contractor was advised of his responsibility to perform according to the contract terms. During this survey, the Government officials spent some time discussing all the potential problem areas of the contract with Mr. Fields (Tr IV, pp. 129, 148-149, 166-169, 187). Furthermore, Mr. Fields claimed to have read and understood the contract and specifications prior to making its bid without notifying the Government of any defect in the contract terms or specifications (Tr II, pg. 42; III, pg. 86). When a contractor is presented with an obvious omission, inconsistency or discrepancy of significance within the specifications, it must consult the Government's representation if it expects to prevail. Wise Instrumentation and Control, Inc., NASA BCA Nos. 1072-12, 673-7, 75-2 BCA ¶ 11,478; see also, Vector Plastics Corp., ASBCA No. 9552, 65-2 BCA ¶ 5286. The contractor has failed in its burden of proving that the defective specifications made the contract impossible to perform. Assuming arguendo that this contract were impossible to perform, the contractor must provide to the Government, during the term of the contract, proper notice of the existence of and the basis for either the impossibility or the inability to perform. Suffolk Environmental Magnetics, Inc., ASBCA No. 17593, 74-2 BCA ¶ 10,771. There is no written record of this; only the contractor's self-serving statements made at the hearing to that effect. As to the claim that the contractor never received the promised orientation, testimony was provided that orientation was not provided new contractors (Tr IV, pg. 118). In regards to the contention made concerning the conflicting instructions, the contractor received from various Government officials, the contractor was provided the name of the Contracting Officer who administered the contract and the name of his agent, Mr. Oscar Daniels, with whom the contractor was to contact if problems were encountered (Print Order 12, Government Exhibit 2; Tr IV, pp. 178-180, 192). 7/ --------------- 7/ There is no need to resolve the issue raised by the contractor of the relevance of prior or subsequent contractors' performance on similar contracts and the standards used to judge their performance as opposed to the standards applied to this contractor since this Board is resolving this appeal strictly on the basis of this contractor's untimely delivery of the photocomposition for Area Handbooks on Cuba and Sierra Leone, Print Orders 12 and 13. It is therefore unnecessary for this Board to require the Government to divulge any information concerning other contractors' performance on these contracts. Decision In light of the above, the Board upholds the Contracting Officer's termination of this contract on the basis of the contractor's unjustified late delivery of the photocomposition for Print Orders 12 and 13 and hereby denies the contractor's appeal in its entirety.