BOARD OF CONTRACT APPEALS U.S. GOVERNMENT PRINTING OFFICE WASHINGTON, DC 20401 In the Matter of ) ) the Appeal of ) ) PRINTGRAPHICS ) Docket No. GPOBCA 04-97 Jacket No. 794-074 ) Purchase Order R-8232 ) For the Appellant: Printgraphics, Vandalia, Ohio, by Steve Kistler, pro se. For the Government: Kerry L. Miller, Esq., Associate General Counsel, U.S. Government Printing Office. Before BERGER, Ad Hoc Chairman. DECISION AND ORDER1 Printgraphics (Appellant), 1170 Industrial Park Drive, Vandalia, Ohio, appeals the assessment of excess reprocurement costs following the termination for default of its contract identified as Jacket 794-074, Purchase Order R-8232. For the reasons that follow, the appeal is GRANTED. I. BACKGROUND 1. On September 10, 1996 the contract, for the production of 46,000 sets of a "Pay Advice Mailer," was awarded to the Appellant at a price of $1,931.54. Rule 4 File, Tab E.2 2. On December 10, the contract was terminated for default after the Appellant twice was unable to produce an acceptable product. Rule 4 File, Tab I. 3. The Contracting Officer conducted a reprocurement by soliciting quotations from potential vendors, with delivery required by December 16. Two responses were received. Moore Business Forms, the only other competitor on the original competition, submitted a quotation for the same price-$2,195.58-it had quoted originally. However, it offered a delivery date of December 27. The other vendor, Specialized Printed Forms, Inc., quoted a price of $4,997. Rule 4 File, Tab M. That vendor, during preaward conversations with GPO, subsequently informed GPO that it could deliver only a portion of the items by December 16, and would need until December 23 to deliver the rest. When Moore Business Forms, in response to a GPO inquiry, indicated that it could not deliver a partial quantity by December 16, GPO contacted the customer agency to determine if its needs warranted paying the higher price for a partial delivery by December 16. The agency responded that it was almost out of the mailers and would need the partial delivery to meet a December 20 pay day. Declaration of GPO Contracting Officer Michael J. Atkins (hereafter Atkins Declaration). A purchase order was then issued to Specialized Printed Forms, Inc., calling for delivery of four cartons by December 16 and the remainder by December 23. Rule 4 File, Tab N. 4. Excess reprocurement costs in the amount of $3,065.46, representing the difference between the original contract price and the reprocurement purchase order price of $4,997, were then assessed against the Appellant. Rule 4 File, Tab O. II. DISCUSSION The Appellant does not challenge the termination of its contract for default; it seeks relief only for what it views as "excessive charges" for the reprocurement. The "Default" clause of the contract, GPO Contract Terms, Solicitation Provisions, Supplemental Specifications, and Contract Clauses, Contract Clauses, ¶ 20, GPO Pub. 310.2, effective December 1, 1987 (Rev. 9-88), provides that the Government, upon terminating a contract for default, "may acquire, under the terms and in the manner the Contracting Officer considers appropriate, supplies or services similar to those terminated, and the contractor will be liable to the Government for any excess costs for those supplies or services." The Government has a duty to mitigate the defaulted contractor's liability, however, and it is therefore the Government's burden to demonstrate the propriety of the repurchase and its entitlement to the amount claimed as excess reprocurement costs. K.C. Printing Co., GPOBCA 2-91 (February 22, 1995), slip op. at 18, 1995 WL 488531. To meet this burden, the Government must show that (a) the reprocurement contract was performed under substantially the same terms and conditions as the original contract; (b) it acted within a reasonable time following default to reprocure; (c) it employed a reprocurement method that would maximize competition under the circumstances; (d) it obtained the lowest reasonable price; and (e) the work has been completed and final payment made so that the excess cost assessment is based upon liability for a sum certain. Gold Country Litho, GPOBCA 22-93 (September 30, 1996), slip op. at 26, 1996 WL 812956 (quoting from K.C. Printing Co., supra, at 18-19), aff'd in part and vacated in part, GPOBCA 22-93 (March 17, 1997), slip op., 1997 WL 742506; Univex International, GPOBCA 23-90 (July 5, 1996), slip op. at 4, 1996 WL 812959; Asa L. Shipman's Sons, Ltd., GPOBCA 06-95 (August 29, 1995), slip op. at 28, 1995 WL 818784; Sterling Printing, Inc., GPOBCA 20-89 (March 28, 1994), slip op. at 52-53, 1994 WL 275104, recon. denied, GPOBCA 20-89 (July 5, 1994), slip op., 1994 WL 377592. There is no question at all on this record with respect to the Respondent's satisfying criteria (b), (c), and (e). The record establishes that the reprocurement was conducted virtually simultaneously with the default3 and on a competitive basis, with the requirement publicly advertised and the reprocurement solicitation sent by fax to four printers believed to be able to perform the work and meet the delivery schedule, including Moore Business Forms, the only other responding vendor on the initial procurement. Atkins Declaration. There is also no question that the reprocurement contractor delivered the forms and was paid a specific sum, as set forth in a Declaration of Philip L. Jones, GPO's Chief, Examination and Billing Branch, Procurement Accounting Division, Office of the Comptroller. As for criterion (a), the original and reprocurement contracts are virtually identical. The only difference is in the required delivery time. The original contract imposed a 15- day4 delivery requirement. Rule 4 File, Tab E. The reprocurement contract, as advertised, imposed a 10-day delivery requirement, Rule 4 File, Tab M, although as awarded four cartons were to be delivered within 7 days with the balance of the mailers to be delivered within 14 days. Rule 4 File, Tab N. Although an expedited delivery schedule can result in a higher price, such a delivery schedule may become necessary as a result of the defaulted contractor's delinquencies. Mattatuck Mfg. Co., GSBCA 4847, 80-1 BCA ¶ 14,349; Roger James, ASBCA 18605, 75-1 BCA ¶ 11,054. Because both the original mailers and reprinted ones furnished by the Appellant on December 2 were defective, the customer agency found itself without sufficient forms for its December 20 pay date; thus, there was a need for delivery of satisfactory forms before that date, and that need was the direct result of the Appellant's inability to deliver such forms despite its two attempts to do so. Under such circumstances, the shorter delivery requirement in the reprocurement contract was reasonable and not a material deviation from the original contract that would defeat the Government's right to the excess costs of reprocurement. United States v. Warsaw Elevator Corp., 213 F.2d 517 (2d Cir. 1954); Mattatuck Mfg. Co., supra; Roger James, supra. The Respondent's excess cost assessment founders, however, on the remaining factor, the reasonableness of the reprocurement price. Although the reprocurement contract was awarded at a price in excess of 2-1/2 times the defaulted contract price, the record is devoid of any indication that the Contracting officer made a reasonable effort to determine the reasonableness of the reprocurement price offered by Specialized Printed Forms. The Board is well aware that a reprocurement price significantly higher than the original contract price does not automatically render the reprocurement price unreasonable. The Government's obligation is to act prudently to obtain the lowest reasonable price for the Government under the circumstances, and where it does so, exercising due care and diligence, a substantially higher reprocurement price may be considered reasonable. See Gold Country Litho, at 33-34; KC Printing Co., supra, at 23; Sterling Printing, Inc., supra, at 74. For example, where the next low bidder or offeror on a procurement is awarded a reprocurement contract at its original price, in most cases a simple showing of that fact will satisfy the Government's obligation since the Government will have acted prudently in accepting such an offer. See, e.g., Gold Country Litho, supra (reprocurement price 35 percent more than defaulted contract price); Asa L. Shipman's Sons, Ltd., supra (reprocurement price 39 percent higher than defaulted contract price). On the other hand, in other circumstances the Contracting Officer is expected to make an appropriate effort, typically through price analysis or negotiation techniques, to determine if a reprocurement price, whether obtained through competition or on a sole source basis, is reasonable. See Solar Labs., Inc., ASBCA 19957, 76-2 BCA ¶ 12,115; Wise Instrumentation & Control, Inc., NASABCA 1072-12, 75-2 BCA ¶ 11,478, recon. denied, 76-1 BCA ¶ 11,641 (rejecting Government rationale that reprocurement price was reasonable because unless it paid that price it was faced with not being able to obtain needed supplies in absence of give-and-take negotiations or price analysis). Thus, although reprocurement on a competitive basis typically will produce a reasonable price, the low bid or offer is not presumptively reasonable, and the contracting officer is not free to blindly accept the low offer--some inquiry must be made to establish that the offered price is in fact reasonable. T.M. Indus., ASBCA 21026, 77-1 BCA ¶ 12,451, recon. denied, 77-2 BCA ¶ 12,756 ("The special obligation of respondent to mitigate costs ... mandates a more thorough consideration of the reasonableness of bid prices than the easy assumption that the minimal 'competition' between two bidders with widely disparate bid prices assures a reasonable price."); K.C. Printing Co., supra, at 24; Sterling Printing, Inc., supra, at 76-77. In the absence of such an inquiry, the assessment of excess costs cannot stand. See Sterling Printing, Inc., supra (appeal of assessment of excess costs granted where, among other things, contracting officer accepted low bid on competition for reprocurement without making any inquiry as to its reasonableness); K.C. Printing, supra (appeal of excess cost assessment denied where contracting officer accepted low bid on reprocurement competition but, in response to appeal, rescinded assessment of $13,640 based on that bid and changed it to $4,201, the difference between the defaulted contract price and the price of the next acceptable bid under the original procurement). Here, although Moore Business Forms, the runner-up on the original procurement, offered its same price on the reprocurement, the Contracting Officer did not issue a purchase order to that company because Moore could not meet the delivery requirements. Instead, the Contracting Officer issued a purchase order to the only other company that responded to the reprocurement solicitation at a price that was not only more than 2-1/2 times the defaulted contract price but also more than twice the price offered by Moore. The record does not show, however, that the Contracting Officer attempted to determine the basis for Specialized Printed Form's significantly higher price, or, despite discussing that company's intended delivery schedule, attempted to even discuss its price or negotiate for a lower price. The record establishes only that the Contracting Officer sought guidance from the customer agency as to its delivery needs and willingness to pay the higher price. As indicated above, the Contracting Officer was not free to rely on the fact that he conducted a competition or that a refusal to pay Specialized Printed Forms its quoted price could mean he would not be able to obtain the mailers when needed. Wise Instrumentation & Control, Inc., supra; T.M. Indus., supra. For purposes of the mitigation rule, he was required to make some sort of inquiry to ensure that the reprocurement price was a reasonable one under the circumstances. Not only did he fail to do so, but that failure is particularly troublesome in light of the fact that the reprocurement contractor, while submitting a quotation that on its face met GPO's delivery requirements, backed away from those delivery terms and as a result received a purchase order that, except for four cartons of mailers, allowed the contractor a longer delivery period without any change in the price quoted. The Respondent offers no explanation as to why it considered the quoted price based on a specified delivery requirement to be reasonable for modified delivery terms that overall were less stringent than the specified requirement.5 The Board notes that on the abstract of quotations for the reprocurement, Rule 4 File, Tab M, someone has written "price fair & reasonable, based on prev. unit rate of $.10/set." The Respondent has provided no information regarding such a previous procurement. Thus, the Board is unable to determine when the prior procurement took place, what quantity of forms was involved, what the delivery terms were, and whether other terms and conditions were identical or similar to or significantly different from those in the reprocurement contract. In short, this vague reference to a prior procurement falls far short of establishing the reasonableness of the reprocurement price. Accordingly, the Board concludes that the Respondent has not met its burden of showing that it obtained the lowest reasonable reprocurement price, and the Respondent's excess cost assessment must be rejected for that reason. There is no question, however, that the Respondent incurred excess reprocurement costs. In cases such as this, where the Respondent fails in its burden to establish that the reprocurement contract price represents a proper basis for assessing costs against the defaulted contractor, the Board has taken the position that the appropriate course of action is to reduce the assessment, rather than eliminate it entirely, if the record provides a fair basis for calculating what the assessment should be. See Sterling Printing, Inc., supra, at 84. As the Board said in the cited case, "[w]here ... there is not enough evidence to determine if the winning reprocurement bid was reasonable, the most common method used for recalculating excess costs is simply to take the difference between the original contract price and the second low bid on the original contract." Id. at 84. That method is appropriate here. Accordingly, the Respondent is entitled to recover excess costs in the amount of $264.04, representing the difference between the Appellant's contract price and the price offered by Moore Business Forms both on the original procurement and the reprocurement. III. ORDER The appeal is GRANTED. The matter is remanded to the Contracting Officer for revision of the assessment of the excess costs of reprocurement from $3,065.46 to $264.04. It is so Ordered. November 12, 1998 Ronald Berger Ad Hoc Chairman GPO Board of Contract Appeals _______________ 1 The Appellant has elected to have its appeal decided pursuant to the Small Claims Procedure provided for by Rule 12.1 of the Board's Rules of Practice and Procedure. Under this procedure decisions are to be "brief," with "summary findings of facts and conclusions" and "shall have no value as precedent and, in the absence of fraud, shall be final and conclusive and may not be appealed or set aside." See VATEX America, GPOBCA 08-96 (October 14, 1998), slip op. at 1 n.1, 1998 WL 750866; Daniels Press, Inc., GPOBCA 18-95 (September 23, 1998), slip op. at 3 n.3, 1998 WL 750875; Kennedy Graphics, GPOBCA 15-98 (August 21, 1998), slip op. at 1 n. 1, 1998 WL 640419. 2 The Contracting Officer's appeal file, assembled pursuant to Rule 4 of the Board's Rules of Practice and Procedure, was delivered to the Board on May 19, 1997. It is referred to as the Rule 4 File, with an appropriate Tab letter also indicated. The Rule 4 File consists of 16 tabs identified as Tab A through Tab P. 3 The Contracting Officer acted very expeditiously in initiating and conducting the reprocurement after the decision was made to terminate for default, soliciting quotations for the reprocurement (on December 6, 1996) and issuing a purchase order to the reprocurement contractor (on December 9) even before formally issuing the terminating for default notice (on December 10). The Board has previously recognized the propriety of such a time sequence. See Rose Printing, Inc., GPOBCA 32-95 (December 16, 1996), slip op. at 39-42, 1996 WL 812880. 4 For both the original and the reprocurement contracts the Board computes the delivery times as running from the specified date that Government material was to be furnished to the contractor to the date delivery at destination was required. 5 There is also no evidence that the Contracting Officer considered the possibility of awarding two reprocurement contracts, one to satisfy its most urgent needs for the customer agency's upcoming pay date and another for the remaining quantity. In this regard, the delivery date offered by Moore Business Forms was only a few days later than the date the Respondent agreed to for the total quantity other than the four cartons to be delivered on December 16, which suggests the possibility that the customer agency's overall needs could have been satisfied with one delivery from Specialized Printed Forms for a relatively small quantity to satisfy its immediate needs and another delivery a short time later from Moore Business Forms for the remainder of the quantity for which the Respondent originally contracted. While the Board is in no position to state that Specialized Printed Forms would have agreed to deliver only a relatively small quantity or that if it did so its price would not have increased, the point is that the Contracting Officer, as part of his obligation to mitigate reprocurement costs, should have explored the possibility that splitting the reprocurement quantity into two contracts would have been a less costly approach. Although the Respondent may not routinely make multiple awards for partial quantities of a one-time fixed quantity requirement (as opposed to repetitive but less specific requirements for which term contracts are awarded, see, e.g., Swanson Printing Co., GPOBCA 27-94, 27-94A (November 18, 1996), slip op., 1996 WL 812958), the Respondent is not precluded from doing so, particularly where, as here, it utilizes small purchase procedures.