Industrial Printing Company

Contract Appeals Board
Panel 7-83
Thomas O. Magnetti, Chairman
Dennis R. Chastain,
James A. Meadows, Members

Preliminary Statement

   Industrial Printing Company (hereinafter the contractor) has
   appealed the decision of the Contracting Officer. That
   decision rejected the unused portion of a contract for
   marginally punched continuous forms which had been awarded the
   contractor.  The Contracting Officer made this decision
   because, according to the Government, the forms did not burst
   mechanically as required by the contract.  The contractor
   appealed the rejection of the forms in a timely fashion and in
   accordance with the "Disputes" clause of the contract.  See
   Paragraph 2.23, Contract For Marginally Punched Continuous
   Forms, Government Printing Office (hereinafter the GPO) Form
   1026, Rev. 6-1-81.  Exhibit 3 of the Appeal File.  Upon the
   request of the contractor, a hearing was held on June 6, 1984.

   Pursuant to the contract and GPO Instruction 110.10B, entitled
   "Board of Contract Appeals Rules of Practice and Procedure,"
   the GPO Board of Contract Appeals Board has jurisdiction over
   the matters raised in this appeal. The decision of the Board
   is based solely on the appeal record which consists of the 19
   exhibits accepted into the record and the transcript of the
   testimony of the witnesses taken at the hearing.

Findings of Fact

   1. By Purchase Order No. GP 52979a, Delivery Order No.
   DAHC31-82-F-0133, dated April 20, 1982, the contractor was
   awarded a contract by the Department of the Army to produce
   marginally punched continuous 6-part forms identified as DD
   Form 1348-1A (Brown).  Exhibit 2.  The contract was
   administered through the Government Printing Office's Program
   1026 for continuous marginally punched forms.  Exhibit 3.

   2. The specifications for this contract required the
   contractor to produce forms which were perforated horizontally
   and would burst mechanically in various bursters.  Exhibit 2,
   p. 3.

   3. According to the Paragraph 2.22 of the contract, all
   material produced under the contract was subject to
   inspection.  If any form was found to be defective in material
   or workmanship or not in conformity with the requirements of
   the specifications, the Government had the right to reject the
   forms or require their correction.  If the contractor then
   failed to proceed with replacement or correction, the
   Government had the right to replace or correct the forms at
   the contractor's expense or the Government had the right to
   terminate the right of the contractor to proceed and charge
   the contractor any excess costs resulting from that
   termination.  Final inspection was to be made after delivery
   and was to be conclusive except as regards latent defects,
   fraud, or such gross mistakes as amounted to fraud.  Exhibit
   3.

   4. The forms were delivered by the contractor on July 18,
   1982, and final acceptance was made at that time. Exhibit 8,
   Transcript, pp. 114-115, (hereinafter Tr. at 114-115).  A
   total of 1,378,865 forms were shipped by the contractor at a
   cost of $42,660.31.  Exhibits 2 and 13.

   5. On November 22, 1982, Nancy V. Kambic, Chief, Freight
   Planning Section, Transportation Division, New Cumberland Army
   Depot, Department of the Army, who had operated forms bursting
   equipment since 1980, obtained brown marginally punched
   continuous forms from boxes which were labeled as produced by
   Industrial Printing Company. 1/ Tr. at 33, 35, 45 and 49.
   Assisted by Rosanne A. Crankfield, Shipment Assistant,
   Transportation Division, Ms. Kambic attempted to process the
   forms through the Standard Register 1530 Forms Burster.  Ms.
   Kambic found that the forms would not tear at the horizontal
   perforation because the tearline was too strong to tear.  Tr.
   at 35-36, 79-80, 85-86 and 88.  As a result of the failure of
   the perforations to burst, the forms would either slide
   through the burster or the top sheet of the 6-part form would
   tear.  Tr. at 38.  See also, Exhibit 15.

   6. According to the testimony of Ms. Kambic, the perforation
   line on the forms was so strong that the forms had to be torn
   by hand or by scissors.  Tr. at 35-36 and 79-81.  Because of
   the need to use this brown form, 40,000 forms were used until
   the form could be obtained from another source.  Tr. at 72-74.
   Ms. Kambic further testified that she took forms from several
   boxes labeled Industrial Printing Company but none of the
   forms would burst properly.  Tr. at 64 and 76.  Unless
   separated by hand, because of this problem with the
   perforation, the forms were unusable.  Tr. at 91.

   7. Because Ms. Kambic ran other colored (red and blue) forms
   through the Standard Register 1530 forms burster on that day
   and encountered no problems with the other forms bursting
   along their perforations, she concluded that it was not a
   problem caused by the burster.  Tr. at 57-58 and 81.
   Representatives of the manufacturer of the Standard Register
   1530 Forms Burster determined that the problem was in the
   tearline of the brown forms produced by the contractor and not
   in the Standard Register 1530 Forms Burster.  Exhibits 5 and
   6, Tr. at 81.

   8. By letter dated December 2, 1982, Buford Vogel, the
   Contracting Officer informed the contractor of the problem
   with the horizontal perforation on the contractor's forms.
   Exhibit 4.

   9. On December 27, 1982, the contractor was invited to witness
   an attempt to burst the forms mechanically.  The contractor
   declined.  In April 1983, the contractor's representative was
   also asked to witness such a demonstration.  Exhibits 9, 11
   and 13. 2/  There is nothing in the record to indicate that
   the contractor's representative accepted this invitation.  In
   fact, in its appeal the contractor stated that it declined to
   attend any tests because of the travel expense.  Exhibit 1.

The contractor had ample opportunity either to attend the tests
run by the Government or to conduct tests prior to the hearing
where the test results could have been introduced and appropriate
witnesses cross examined.  In light of the inherent dangers of
accepting this document into evidence and the lack of its
probative value, the Board does not admit this material into the
record.

In a letter dated January 20, 1984, the contractor alleged that
it had scheduled a test on the 1530 Forms Burster and would
present the results of the test at the hearing.  No such test
results were presented at the hearing.

   10. It.was the determination of the Contracting Officer that
   the forms were defective in that they would not burst
   mechanically and were, therefore, not in conformance with the
   contract's specifications.  Exhibits 7 and 8.  By letter dated
   July 14, 1983, the Contracting Officer notified the contractor
   of the specific problem with the forms and informed it that
   the Army was rejecting the unused portion of the contract
   (1,156,000 forms).  Exhibit 9.  The contractor was directed to
   replace the forms within 30 days or be responsible for the
   cost to the Government of replacing the forms from another
   source.

   11. The contractor responded by letter dated August 11, 1983,
   in which it did not acknowledge any problem with the forms and
   referred the matter to the GPO.  Exhibit 10.  The forms were
   not replaced.

   12. By letter dated August 26, 1983, Edwina Mercer,
   Contracting Officer for the Army, provided the contractor with
   a final decision that the forms produced under Order
   DAHC31-82-F-0133 were rejected because they were not in
   conformance with the specifications as those specifications
   related to bursting mechanically.  Exhibit 12.

   13. Prior to the Contracting Officer's final decision the Army
   completed additional testing using the forms supplied by the
   contractor on a new burster, the Standard Register 2500 and on
   other equipment.  Exhibits 11, 13, 14 and 15; Tr. at 40, 42,
   82-84, 86-87, 90 and 96.

   14. By letter dated September 16, 1983, the contractor
   appealed the Contracting Officer's final decision alleging
   that the forms were perforated properly and were not
   defective.  The contractor asserted that the problem was in
   the Army's forms burster.

DECISION

   The contract specifications required the contractor to produce
   marginally punched continuous forms which would burst
   mechanically.  In the instant case, the Government has the
   burden of proof of proving that the forms did not conform to
   the contract specifications. Hardeman-Monier-Hutchinson, ASBCA
   11785, 9 G.C.  94.

   The overwhelming weight of the evidence, unrebutted by the
   contractor, demonstrated that the forms supplied by the
   contractor would not burst mechanically.  According to the
   credible testimony of Ms. Kambic, the horizontal tearline
   perforation was too strong to burst in the Standard Forms 1530
   Forms Burster.  The forms when placed in the forms burster
   either tore or slid through without bursting.  As a result the
   forms had to be separated manually.  There was no indication
   in the record that the bursting problem was due to the
   equipment used.  On the contrary, the evidence indicates that
   the Army's burster was examined and determined to be running
   properly and to be adequate for the job.  Exhibit 5.  No
   evidence was introduced that indicated that either the
   procedures or the equipment used by the Army were
   inappropriate or were the cause of the problem.  Moreover,
   there was no evidence in the record to demonstrate that the
   specifications relating to the forms burster were too
   imprecise or inadequate. 3/

   Although final acceptance had been made and the forms
   purchased in July 1982, under the contract the Government had
   the right to reject forms after this had occurred in cases
   where latent defect wasdiscovered. The testimony of the
   Government's witnesses indicated that the forms had no
   observable defect and that the defect which caused the forms
   not to burst in the forms burster was not visible to the naked
   eye.  See Tr. at 114-118; Exhibits 16 and 17.  Furthermore,
   the Government was not obligated to test the forms when they
   were delivered to ascertain.that they would burst
   mechanically.  Given the nature of the defect, i.e.,that the
   perforation was visible in.the form but would not burst by
   mechanical means, the Board rules that the defect is latent.
   Therefore, the Government had legitimate grounds to reject the
   forms and require their replacement.  As this was a latent
   defect and the Government gave the contractor ample notice and
   opportunity to replace the defective forms, it was appropriate
   for the Contracting Officer to reject the unused forms in
   accordance with the contract.

   Based upon the evidence of record, the Board rules that the
   forms provided by the contractor were defective.  The
   contractor was obliged to replace the defective forms or bear
   any additional cost of their replacement.  The contractor
   having failed to do so, the Government had the contractual
   right to reject the forms and require their replacement.
   Accordingly, the contractor's appeal of the Contracting
   Officer's decision to reject the forms is denied in its
   entirety.

September 16, 1986
_______________

1/ At the hearing, the contractor's representative questioned Ms.
Kambic concerning her assertion that the forms in the various
boxes which were used or tested were produced by the contractor.
Ms. Kambic's testimony regarding the producer (Industrial
Printing Company) of the forms was credible.  The contractor
failed to submit any evidence which would have indicated that the
forms were not produced by the contractor.  Based upon the
evidence in the record, the Board rules that the forms as
introduced into the hearing record were produced by the
contractor.  Exhibits 16 and 17.

2/ In July 1984, the contractor submitted a letter dated July 24,
1984, regarding a test of 6-ply carbon forms which were
mechanically burst on a Standard Register 2500 Forms Burster.
This document which was submitted after the hearing does not
identify the forms that were burst or demonstrate that the test
was conducted with forms identical to those supplied to the Army
under this contract.  Moreover, there is no indication that the
test took place in the presence of representatives of the
Contracting Officer or that they were invited to observe.

3/ As Exhibit 19, the contractor introduced into the record a
document entitled "Policies, Ethics, Customs and Practices in the
Business Forms Industry" and published on October 10, 1983.  As
the provisions of the contract at issue were clear on their face
and this document was published after the specifications for the
contract were drafted, this document has little probative weight.
Therefore, it is unnecessary to rely on Exhibit 19 in arriving at
a decision on this appeal.