U.S. Government Printing Office Board of Contract Appeals Panel 2-79 Drew Spalding, Chairman Robert Armentrout, Member Raymond J. Garvey, Member Appeal of Custom Printing Company December 19, 1979 This decision results from a timely appeal filed by Custom Printing Company (appellant), 920 Maple Street, Owensville, Missouri 65066. The appeal was taken pursuant to Article 29 (Disputes clause) of U.S. Government Printing Office Contract Terms No. 1, approved July 1, 1943, revised July 15, 1970, which was integrated as part of the original contract. The decision of the U.S. Government Printing Office Board of Contract Appeals (the Board) is rendered in accordance with the procedures provided in Government Printing Office (GPO) Instruction 110.10, dated June 6, 1979. Findings of Facts On June 20, 1977, Print Order 6465 was issued by GPO to the appellant under Program 414-M, for the printing and binding of 24,100 copies of an 8 1/2" x 11" book entitled Mental Retardation: Past and Present for delivery to the Department of Health, Education and Welfare (HEW). The print order indicated a "must" shipping date of July 30, 1979, See Appeal File (AF), Exhibit 4). The contract was valued at $15,579 (AF, Exh. 2). Program 414-M was a multiple award term contract for the printing and binding of books and pamphlets on an "accelerated schedule basis" in the Washington, D.C., area during the period February 1, 1977 through January 31, 1978. Under this program contractors were permitted to bid on four separate categories of work relating to the size of the orders which would be placed thereunder. In this instance the appellant had bid on Category 4, amounting to orders of 5,000 or more copies (of the book, pamphlet, etc.) with over 96 text pages per copy (AF, Exh. 1; para. 1.17). Two other contractors had bid in this category and had lower aggregate abstracted prices for Print Order 6465. They were telephonically offered the contract by the Contracting Officer's representative; however, these firms were unable to meet the shipping date and declined the offer (Contracting Officer's Statement, dated October 17, 1977). Thereafter, the appellant was offered and accepted the contract on June 20, 1977. Despite the fact that the appellant was required to undergo an illustration position proof inspection on June 26, 1977, which was not required by the program specifications, the appellant printed and bound the books and met the shipping date. Shortly thereafter, on July 20, 1977, the Acting Chief of the Printing Section of HEW, in a memorandum to GPO, indicated that HEW would not accept the work produced by the appellant. The reasons given for their rejection were: 1. Uneven ink coverage and smearing. 2. Halftone production was very poor including the loss of detail and picking. 3. The paper used in the book did not meet the standards required by the contract. 4. A number of pages were creased. (AF, Exh. 5). As a result of this memo, the Quality Control Division of GPO conducted a test regarding the opacity of the paper used. The specifications required an opacity of 91 percent (para. 2.10-1(a)). The test results showed the paper used 88 percent opacity rating or a difference of -3 percent from the contract requirement (AF, Exh. 6). In addition, the Superintendent of the Typography and Design Division of GPO indicated in a memorandum dated August 5, 1977, that a sample of the books produced by the appellant had been inspected and showed: ". . . substandard printing quality and film reproduction. "There is a considerable loss of detail in the illustrations, and the poor inking make [sic] the book difficult to read." Uneven ink coverage, dirty halftone illustrations, insufficient blanket printing pressures, ink scumming and lint picking, and lack of detail in halftones were also cited by the Superintendent of Typography and Design as deficiencies in the product. (AF, Exh. 7). The president of the appellant company, Mr. Elbert (Gene) E. Clark, was apprised of the HEW complaint, and recommendation that the work be rejected, by telephone during the week of August 8, 1977. He requested a meeting with the Contracting Officer and this was held on August 25, 1977. At this meeting additional books from the appellant's production run were examined along with the proofs and photographs used to produce the illustrations. According to the Contracting Officer, Mr. Clark agreed that there were quality problems with the printing and he offered to accept a 20 percent reduction in the purchase price, however, he refused the request of the Contracting Officer to reprint the order. HEW, in turn, declined the offer of the 20 percent discount and on September 7, 1977, the Contracting Officer issued a final termination notice (AF, Exh. 10). This notice, after advising the appellant that the default was taken in accordance with Articles 13 and 18 of the GPO Contract Terms No. 1, states further: "The Government may procure, upon such terms and in such manner as the Contracting Officer may deem appropriate, supplies and services similar to those so terminated, and your firm shall be liable to the Government for excess costs for such similar supplies." (AF, Exh. 10) Prior to the termination notice, on August 30, 1977, Mr. Clark had written to the GPO asking that certain facts be considered before the rejection of appellant's work was finalized. In summary, the appellant made the following contentions: 1. The print order had a very short period of time before delivery was required [total of 10 days from June 20 through June 30, 1977]. 2. Only after reviewing the print order which accompanied the camera-ready copy did appellant realize that there were 90 halftones that had to be printed. 1 3. Only after actual production was begun did the appellant discover that the imposition required bleeds on the nongutter side of the book. 4. It was working under severe time pressure and that any problem the agency might have had with a lack of contrast in the halftones and the grayness in printing was due in part to the appellant's emphasis on speed, in lieu of quality, and because some of the halftones were of poor quality in and of themselves. The appellant also contended that the job of printing and binding of this book should have been listed as a "display" job and appellant should have been given about "10 days to complete the job after the proofs had been approved." Further, if the job had been described accurately and produced under proper conditions, the price of the book would have been considerably higher (AF, Exh. 9). In response to the appellant's letter of August 30, 1977, the Contracting Officer wrote on September 9, 1977, and reiterated his conclusion that the quality was not adequate, adding that his determination to terminate was required by the "poor reproduction of the illustrations, hickies, uneven ink coverage and scumming. . ." (AF, Exh. 11). The Contracting Officer did, however, agree with the appellant that a "small" number of photographs was supplied to it which were difficult to reproduce and the lack of quality was not the appellant's fault. He also stated that the order was placed with Program 414-M as a result of the short schedule for delivery, concluding that except for the proof inspection, which could be covered by a change order, the job fell within the program specifications (AF, Exh. 11). The bids of 20 printers were solicited for the reprocurement contract. Only one of these, Port City Press, Inc., had bid on the original Program 414-M specifications. Five of these 20 printers responded quoting prices ranging from $24,751 (Phillips Brothers) to $41,000 (Pearl Pressman Liberty) (AF, Contracting Officer's Memorandum, November 29, 1977). The reprocurement contract was awarded to Phillips Brothers on September 29, 1977, with a final ship date of October 26, 1977. 2 On September 29, 1977, the appellant appealed the decision to terminate Print Order 6465. By letter dated September 30, 1977, the Contracting Officer informed appellant of the reprocurement of Print Order 6465 and indicated that excess costs would be deducted from appellant's account (AF, Exh. 13). 3 Additional findings of fact relevant to the decision are discussed in the discussion portion below. Discussion Neither the appellant nor the Contracting Officer has been represented by counsel during this proceeding. As a result, the Board has had to rely solely upon its own judgment in determining the factual and legal issues which were presented in the written submissions contained in the appeal file. No oral hearing was had before the Board and no other evidence was relied upon in arriving at our decision. A. Was Print Order No. 6465 properly within the scope of the Program 414-M specifications? In a letter dated November 21, 1977, responding to a Board request for further argument or evidence regarding its appeal, the appellant briefly stated certain "points" which it wished the Board to take into consideration before making its decision. These points, in summary, are as follows: 1. Program 414-M was an accelerated contract. 2. Work offered previously to the appellant under this program had been mostly line copy with an occasional small halftone, but no full size halftones bleeding on the top, bottom and right side. The previous work closely coincided with the description of the work given in the specifications on page 13 para. 2.11(b). 4 3. No mention is made of bleed pages in the specifications, which generally requires an added charge because of the necessity to use a wider roll of paper than if there are no bleeds. 4. Since the offered contract had bleed pages, it forced appellant to use 35 1/2 inch vellum finish 120 pound offset paper which it happened to have in stock. This paper was not correct for quality halftone work because it creates paper dust on the blankets. This can be removed adequate time is allowed in which to remedy the situation and still make the delivery date. 5. The reprocurement cost of $24,751 indicated in the Contracting Officer's letter of September 30, 1977, was a "realistic price" for this job. 6. This contract should not have been procured under Program 414-M, but separately as a "display" job. While the appellant has not said so explicitly, we construe this language to be a claim that the product called for by Print Order 6465 was not within the program specifications. The only statement from the Contracting Officer regarding this issue is contained in his letter to appellant dated September 9, 1977. There he states: "This order was placed on Program 414-M because of the short schedule. That requirement along with all other aspects of the order fall in line with the program specifications except for the proofs which could be covered by change order." (AF, Exh. 11) In no other materials in the Appeal File does the Contracting Officer offer any justification, based on the contract language, supporting this broad conclusion. After our review of the specifications, we are convinced that Program 414-M was not primarily intended for the type of book which was procured under Print Order 6465. 5 10 However, the specifications did require printing and binding of books and pamphlets within certain broad constraints. Aside from this, there was no guarantee in any of the provisions as to exactly how much work, of what kind and with how many required operations would be contained in the print orders offered thereunder. While there were estimates in the specifications (see Footnote 5), these were not guaranteed as minimums nor can they be taken to exclude reasonable amounts of certain types and kinds of work. We do not find that the amount of halftones or that bleeds were present in the halftones were outside the scope of the Program specifications. B. Was the Contracting Officer warranted in terminating Print Order 6465? The specifications, paragraph 1.8(a), require that: "The workmanship in connection with the article or product manufactured under these specifications must be first class in every respect." Paragraph 2.11, entitled "Presswork", requires: "(a) clear, sharp, offset printing . . . . " Our review of the facts leads us to conclude that there really is no dispute between the parties regarding the quality.of the books supplied by appellant. In its letter dated November 21, 1977, appellant acknowledges that paper dust accumulated on the offset blankets. Also, in a letter dated June 19, 1978, it states "We do not believe that Custom Printing Company was completely blameless in this matter, nor do we believe that the Government Printing Office was without fault. A sharing of the blame and financial loss would also be in order." Moreover, there seems to be no substantial dispute by the appellant of the findings of the Acting Chief at HEW (AF, Exh. 5), the GPO Quality Control and Technical Department that the opacity of the paper was not up to contract requirements (AF, Exh. 6), or of the Superintendent of the GPO Typography and Design Division (AF, Exh. 7). There is also no contradiction by the appellant of the statement in the memorandum from the Contracting Officer to the GPO Contract Review Board dated September 2, 1977, which claims "[h]e [Mr. Clark] admitted that the printing wasn't the best, however, the schedule and furnished material dictated the poor quality" (AF, Exh. 8). 6 Article 13 of GPO Contract Terms No. 1, entitled "Inspection and Tests", provides for the rejection of material which is not in conformity with the specifications. With exceptions which are not relevant here, See Radiation Technology, Inc. v. United States, 177 Ct. Cl. 227, 366 F.2d 1003 (1966), the Government may require strict compliance with its contract specifications or may reject the offered product and default the contractor. See American Electric Contracting Corp. v. United States, 579 F.2d 602, 608 (Ct. Cl., 1978), Branz Mechanical Contractors, Inc., VACAB No. 1105, 74-2 BCA ¶ 10,854 (1974), and cases cited therein at footnote 9 at p. 51,630. Based upon the facts as recited above and the requirements of the contract, we conclude that the Contracting Officer acted properly in terminating the appellant on Print Order 6465 for failure to meet the quality requirements of the specifications. C. Is the excess cost determination properly before the Board? Despite our holding that the contract was properly terminated, there are other issues which we feel must be treated in the context of this appeal. One of these concerns the assessment of excess costs. However, before we can reach the substantive questions that surround the reprocurement, we first address the issue of whether this matter is properly before us. As noted above, the appellant was not represented by counsel. Presumably, had the appellant sought legal advice, the presentation of the facts and the definition of the issues would have been made with greater clarity. Be that as it may, in reviewing the communications between the Contracting Officer and the appellant attendant to this appeal, and for the reasons stated below, we conclude that this Board can properly address the Contracting Officer's decision on the reprocurement. To begin our analysis we quote from the sections of GPO Contract Terms No. 1, which were cited by the Contracting Officer in his termination letter dated September 7. 1977. Article 13 reads in relevant part: "In case any article is found to be defective in material or workmanship or not in conformity with the requirements of the specifications, the Government shall have the right to reject such articles, or require their correction. If the contractor fails to proceed properly with a replacement or correction thereof, the Government may, by contract or otherwise replace or correct such articles and charge to the contractor the excess cost occasioned the Government thereby, or the Government may terminate the right of the contractor to proceed as provided in the contract and charge the contractor the excess cost occasioned thereby." (Emphasis added.) Article 18, entitled "Default", reads in relevant part: "In the event the Government terminates this contract . . ., 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 cost for such similar supplies or services. . ." (Emphasis added.) The Contracting Officer in his termination letter, also specifically advised the appellant that it would be liable for excess costs (AF, Exh. 10). The appellant's letter of appeal dated September 29, 1977, makes no reference to excess costs. On the other hand, the appellant in another communication does make specific reference to the excess costs assessed alleging that the reprocurement cost was, in fact, closer to the actual value of the contract than was originally offered by the Government (see letter, dated November 21, 1977, para. 6). In another letter dated November 14, 1977, directed to the Board, the appellant requested a copy of the book that was printed under the reprocurement contract and a list of all the firms that were invited to bid on the reprocurement. While the appellant does not say so directly, we find this language to indicate an intent to appeal the assessment of excess costs. The Contracting Officer disagrees with this position. In response to a specific request of the Board for additional information or a position statement on the question of whether the excess cost were properly before the Board, he responded in full as follows: "The Contracting Officer views the assessment of excess costs separate from his decision to terminate the contract for Print Order 6465, Program 414-M for default. The Contractor has not furnished timely or written objection to the Contracting Officer to that assessment. "Therefore, the Contracting Officer believes the assessment of excess costs should not be before the Board." (Memorandum, dated June 19, 1978.) While there is no extended explanation (as can be seen from the above) of the Contracting Officer's position, we presume that it is based primarily on the failure of the appellant to separately enter his appeal and dispute the assessment of excess costs levied in the letter dated September 30, 1977 (AF, Exh. 13). 7 We believe that this fact situation falls in line with that of Conncor, Inc., GSBCA No. 4654, 77-1 BCA ¶ 12255. There the appellant unsuccessfully appealed the default termination, and it had not timely filed a subsequent appeal to the assessment of excess costs. Disregarding this, the Board concluded that the subject was properly before it for adjudication. Also, see El- Tronics, Inc., ASBCA No. 5457, 61-1 BCA ¶ 2961 (1961); Si Lite, Inc., GSBCA No. 2442, 68-1 BCA ¶ 7032. In accord with this line of so-called reverse "Fulford doctrine" cases, see Fulford Manufacturing Company, ASBCA Nos. 2143, 2144, 6 CCF ¶ 61,815 (1955), Pantronics, Inc., ASBCA No. 20982, 78-2 BCA ¶ 13,285, at p. 64,984 (appeal of excess costs assessment "opens-up" questions of validity of default termination), we hold that the matter of excess costs has also been appealed here and is properly before us for a decision on the propriety of the assessment. D. Were the excess costs proper? The Contracting Officer drafted an entirely new set of specifications to accomplish the reprocurement (AF, Exh. 12). We note initially that the amount of time between the date of receipt of production material by the contractor to the final ship date has been increased to 21 days, or more than double the amount of time under the original contract. Secondly, these specifications detail precisely the amount of line film, square finish halftones (and in what sizes) and how many strips and composites the contractor will receive from the GPO. Thirdly, in the Presswork section of the new contract, the contractor is informed of exactly how many bleeds and on what pages the contractor will have to produce. The contractor is also required to prepare two sets of blue line proofs for inspection by a representative of the Government who will look for "quality conformance" (AF, Exh. 12, p. 4, para. 6). Finally, and perhaps most significantly, the contract specifies that "A-1 quality workmanship [is] required throughout." The "Default" clause, Article 18 of GPO Contract Terms No. 1, requires that "supplies or services similar to those so terminated" may be procured by the Government and the excess costs shall be charged to the contractor under the defaulted contract. (Emphasis added.) While we are not unaware that a contracting officer had some flexibility in reprocuring the defaulted items, see Astro-Space Labs, Inc. v. United States, 200 Ct. Cl 282, 308, 470 F.2d 1003, 1017 (1972), the reprocurement contract must be essentially the same as the original, and without any material variation. In Moe Rosenberg v. United States, 76 Ct. Cl. 662 (1933), the Court said: "It has long since been held that where the Government by reason of a claimed default in performance of a contract elects under its terms to relet the contract and charge the increased cost, if any, to the defaulting contractor, such charge may not be sustained if in the reletting there is a material or substantial departure from the original contract terms." [Citations omitted.] 76 Ct. Cl. at 679. The solicitation of 20 bidders for the reprocurement contract tends to support the conclusion that the contracting officer attempted to mitigate the damages assessable against the appellant. See Office Equipment Co., ASBCA No. 5040, 59-2 BCA ¶ 2302. Nevertheless, the price increase for these purportedly "similar" services of approximately 60 percent (from $15,579 to $24,751), we regard as fully supportive of our basic conclusion that the reprocurement contract was, in fact, materially different from Print Order 6465. 8 As a result, we now hold that the reprocurement price cannot form the basis for measuring the reasonable excess costs and therefore we sustain this portion of appeal. See G. O'Connor, AGBCA No. 75-154, 78-1 BCA ¶ 12,981. DECISION Upon our review of the written record, based on our findings of fact and for the reasons stated above, we accordingly: 1. Deny the appeal from the termination for default. 2. Sustain the appeal as to excess costs and order the Contracting Officer to remit to appellant the amount of excess costs assessed. _______________ 1 While the appellant's letter does not speak to the issue directly, presumably the telephonic offer from GPO did not include information about the number of halftones contained in the book. There is no other information contained in the submissions of the Contracting Officer which would support a contrary finding. 2 The original ship date on the reprocurement contract was October 18, 1977. This date was changed to October 26, 1977, by an amendment dated September 16, 1977 (AF, Exh. 12). No explanation for this enlargement of time is contained in the appeal file. 3 While the appeal file does not indicate that any change order was ever issued for the proof inspection conducted at the appellant's plant, we assume that the excess costs assessed approximate the difference between the price the contractor would have received had the job been accepted, $15,579, and the reprocurement price, $24,751. This.amount is approximately $9,200. 4 Paragraph 2.11(b) provides as follows: "While it is anticipated that most of the jobs ordered under these specifications will consist of typed pages and line illustrations, some jobs will also contain halftones. Solid reverse printing on covers may also be ordered. Full ink coverage must be maintained. All lengthwise backstrip titles must read down, unless otherwise specified on print order." 5 The provisions of the specifications which strongly suggest the type of work which would be procured thereunder are contained in paragraphs 1.8(b), entitled "Workmanship", 2.11 entitled "Presswork", subparagraph (b) (quoted above in Footnote 4) and Section 3, entitled "Basis of Award". In the Basis of Award section, the contractor is advised of the approximate number of operations that the Government estimates it could anticipate being required to perform during one month's production. For Category 4 orders the contract estimates that it would have to produce six (6) square finish halftones in Format "B" (which included the trim size of 8-1/2" x 11", or the same as Print Order 6465) (See paras. 2.4(b)(2) and 3.1, page 25, Category 4, IV (c)(2) and para. 4.1 entitled "Schedule of Prices", Category 4, IV (c)(2) at page 34). While 6 halftones per month is only an estimate and not a guarantee of the amount of work which would be ordered under the program contract (See para. 3.1(c)), it is wholly out of line with the 90 halftones which the appellant found once he received Print Order 6465. Further, we find no provisions mentioning bleeds which the contractor might encounter. Despite this, since the contract does indicate that halftones may be present in the work to be procured, and since the appellant (by its own admission) acknowledges that a bleed of a halftone requires a larger size of paper, we believe it was incumbent upon it to have the proper paper available at the time that it received the print order, or, in the alternative, to have investigated the possibility that there would be bleeds in some of the work offered and to be prepared with the appropriate paper. See Oakland Industries, ASBCA No. 5813, 61-1 BCA ¶ 2900 (1960). 6 The Board was supplied a copy of the book produced by the appellant and a copy produced by the reprocurement contractor. Assuming, without deciding, that these books are representative of the work that was produced by both of these printers, we observe that the quality of the reprocurement contractor's product is clearly superior to that of the appellant. 7 The Contracting Officer's letter simply indicates that excess costs will be deducted from appellant's account based upon a reprocurement cost of $24,751. It does not state a specific dollar figure, and importantly, it does indicate that this was a final decision of the Contracting Officer to which the appellant could appeal. 8 The Contracting Officer does not indicate his reasons for not awarding the contract to the next higher contractor (who could meet the new shipping date) as determined by the abstract of prices on Program 414-M (see AF, Exh. 2). Except for the inadequacies in the Program specifications, we fail to see why one of these contractors could not have been the most obvious source to produce the reprocured books. This fact also contributes to our conclusion that the reprocurement contract was materially different from the original.