BOARD OF CONTRACT APPEALS
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON, DC 20401
In the Matter of )
)
the Appeal of )
)
UNIVERSAL PRINTING COMPANY ) Docket No. GPO BCA 09-90
Jacket No. 563-541 )
Purchase Order K-0469 )
DECISION AND ORDER
This appeal, timely filed by Universal Printing Company,
Southwest Sales Office, Suite 212, 115 Executive Way, Dallas,
Texas 75115 (hereinafter the Appellant or Contractor),1 is
from the final decision, dated January 24, 1990, of
Contracting Officer, Mr. Richard W. Wildbrett (hereinafter
Contracting Officer), of the U.S. Government Printing Office's
(hereinafter Respondent or GPO or Government), Dallas Regional
Printing Procurement Office (hereinafter DRPPO) denying the
Appellant's claim for additional compensation in the amount of
$16,620.89 on Jacket No. 563-541, Purchase Order K-0469 (R4
File, Tabs I and L).2 For the reasons which follow, the
Contracting Officer's decision is MODIFIED, and the
Appellant's claim is ALLOWED to the fair and reasonable amount
of $8,310.45.3
I. BACKGROUND4
On December 12, 1988, the DRPPO issued an Invitation for Bids
(IFB) to procure 10,050 copies of a four (4) color saddle-
stitched pamphlet,5 estimated at 48 pages plus cover, entitled
"The Fifth Army Citizen Soldier" (Citizen Soldier) for the
Department of the Army (Army) (R4 File, Tabs A). The IFB
specifications provided, in pertinent part:
MATERIAL FURNISHED: 94 pieces of double spaced, typewritten
manuscript copy and approximately 90 to 100 full color
photoprints or 35mm color transparencies.
COMPOSITION: It is estimated that there will be 48 pages of
text matter set flush left and right, on a 14 pica line
length, in 11 on 12 point type. Heads will be set in 13
point boldface (upper and lower case) and subheads will be
set in 11 on 12 point boldface (upper and lower case).
PAGE MAKE-UP: Make up into pages 44 x 61 picas, including
folios, (contractor to provide at the time of page make-up)
consisting generally of three 14 pica columns. The
Department will furnish a lay-out dummy, with the returned
galley proofs, to be followed for exact page make-up.
CORRECTIONS: All corrections, whether they be contractor's
errors or author's alterations must be made prior to
production of the final camera repro copy and must be
cleanly mortised, spliced or stripped in. Paste over will
not be acceptable.
COPY PREPARATION: All textmatter prints in black ink.
There will be approximately 90 to 100 four-color process
illustrations ranging in size from 2-1/4 x 3-1/4" to full
8-1/2 x 11" page size. See "Schedule of Prices".
* * * * * * * * * *
FORMAT: Covers 1 through 4 print in four-color process.
Text prints head to head in four-color process, no blanks.
NOTE: This order must be produced on offset press equipment
capable of printing four colors on one side of one sheet in
one operation (four printing units).
* * * * * * * * * *
BINDING: Saddle[-]stitch in two places on the 11"
dimension.
PROOFS AND PRESS SHEET INSPECTION: Reader's galley proofs,
page proofs, press progressive proofs, prior-to-production
samples and an on-line press sheet inspection are required
for this order.
GALLEY PROOFS: Prior to page make-up, the contractor must
submit for approval four (4) sets of reader's galley
proofs, along with all furnished material. One set of the
galley proofs must be waxed for mounting. The [Army] will
paste up a page dummy for exact placement of the typematter
and the halftone illustrations. The proofs and dummy will
be withheld no more than fifteen (15) workdays from receipt
in the GPO and the photoprints or transparencies for the
illustrations will be furnished with the return of the
proofs and dummy.
PAGE PROOFS: After page make-up and prior to submission of
the press proofs, the contractor must submit for approval
four (4) sets of page proofs with all elements, text and
illustrations in positions. The text may be Xerox or equal
copy and the illustrations must be PMT or equal, cropped,
sized and pasted in position. The page proofs will be
withheld no more than fifteen (15) workdays after receipt
in GPO.
PROGRESSIVE PROOFS AND SAMPLES: Prior to printing, the
contractor must submit for approval 4 complete sets of
press proofs, collated in proof books and 6 prior-to-
production samples. The proofs and samples must be printed
on the paper and in the inks that will be used for the
complete production and the samples must be trimmed, folded
and bound in exact accordance with these specifications.
NOTE: The samples may be hand folded and trimmed.
The proofs and samples will be checked for quality and
compliance with these specifications, approved or
disapproved and returned to the contractor within fifteen
(15) working days after receipt in the Government Printing
Office, Dallas, TX. If, in the opinion of the GPO, the
proofs are not a true representation of the furnished art,
(objectionable or serious shift in hue, saturation, or
lightness) or contain noticeable defects (misregister,
voids, hickies, etc.) they will be rejected and returned to
the contractor for correction and reproofing at no
additional expense to the Government. The schedule . . .
CANNOT be extended to allow for such reproofing.
* * * * * * * * * *
PRESS SHEET INSPECTION: A Government representative will
inspect press sheets ar the beginning of production run to
ensure that press sheets match the approved press proof(s)
and to approve any required corrections or changes. The
inspection will be at the contractor's plant and the GPO
must be notified at least five workdays in advance of he
commencement of production. . . .
Delays caused by the contractor's failure to notify the GPO
at least five workdays in advance of the production run or
failure of the press sheets to match the approved press
proofs will be the responsibility of the contractor and the
schedule CANNOT be extended due to these delays.
* * * * * * * * * *
SCHEDULE: See "Notice of Compliance with Schedules",
Article 12, Contract Clauses, GPO Contract Terms, dated
December 1, 1987.
Material will be furnished by-January 6, 1989
Galley proofs delivered to Dallas RPPO by-January 17, 1989
Galley proofs and dummy returned to contractor by-February
7, 1989
Page proofs delivered to Dallas RPPO by-February 17, 1989
Page proofs returned to contractor by-March 13, 1989
Progressive proofs delivered to Dallas RPPO by-March 24,
1989
Progressive proofs returned to contractor by-April 14, 1989
Ship complete on or before-May 5, 1989
* * * * * * * * * *
DETERMINATION OF AWARD: The Government will determine the
lowest bid by applying the prices quoted in the "Schedule
of Prices" to the following units of production which are
the estimated requirements to produce the products
specified herein. These units do not constitute, nor ar
they to be construed as, a guarantee of the volume of work
required. The following item designations correspond to
those listed in the "Schedule of Prices".
1. a. 1 2. a. 1 3. a. 3,285 4. a. (1) 1
b. 4 b. 4 b. 4 (2) 100
c. 150
d. 5 b. (1) 1
e. 50 (2) 100
See, R4 File, Tab A, pp. 1-3, 6-7.6
Since GPO Contract Terms was incorporated by reference, the
contract also included a supplemental specification concerning
"Author's Alterations", which states:
Author's alterations consist of all marks made by the
author at variance with the original manuscript as
submitted to the contractor, but do not include corrections
marked by the editor due to the failure of the contractor
to follow copy literally. Author's alterations shall be
charged on a per-line basis. In tabular matter, each line
in a single column will be considered one line. Display
lines will be paid for at the original line setting rate.
The charge for deleting or transposing type lines without
setting and inserting new material will be a one-line
charge for each group, regardless of the number of lines in
the group. Proofs of any deleted matter must be submitted
with the voucher to obtain payment. If, after the pages
are made up, the contractor is required to transpose type
from one column to another, or from one page to another,
the contractor will be entitled to charge only two lines of
author's alterations per transposition. If the contractor
is required to transpose within a makeup page such
components as a table or space for an illustration, he/she
will be entitled to charge two lines of alterations for
each affected column. For example, transposition of a
table which is printed across three columns will result in
a charge of six lines.
(a) Minimum charge. One minimum charge will be allowed
for author's alterations each time proofs are submitted
by the Government for alterations. The charge shall be
indicated in the specifications.
(b) Maximum charge. The maximum charge allowable for
author's alterations on any one galley or page shall be
an amount equal to the cost of setting that galley or
page from manuscript copy.
(c) Proof of charge. Charges for author's alterations
will not be honored unless the voucher which is
submitted to the Government Printing Office is supported
by all marked proofs, or facsimiles thereof, showing
author's alteration marks. Charges will not be allowed
for proofing operations or materials which are due to
the fault of the contractor.
see, GPO Contract Terms, Supplemental Specifications, Art. 17
(Author's Alterations), as well as the standard GPO "Changes"
clause, which provides, in pertinent part:
(a) The Contracting Officer may at any time, by written
order, and without notice to the sureties, if any, make
changes within the general scope of this contract in any
one or more of the following:
(1) Drawings, designs, or specifications when the
supplies furnished are to be specially manufactured for
the Government in accordance with the drawings, designs,
or specifications.
* * * * * * * * * *
(b) If any change causes an increase or decrease in the
cost of, or the time required for, performance of any part
of the work, whether or not changed by the order, the
Contracting Officer shall make an equitable adjustment in
the contract price, the delivery schedule, or both, and
shall modify the contract.
* * * * * * * * * *
(e) Failure to agree to any adjustment shall be a dispute
under article 5 "Disputes." However, nothing in this
article shall excuse the contractor from proceeding with
the contract as changed.
See, GPO Contract Terms, Contract Clauses, Art. 4 (Changes).7
On December 22, 1988, the Appellant submitted the following
bid for this job:
1. Composition (including 4 sets of galley proofs)
a. First 48 pages (8-1/2 x 11") $ 2,886.00
b. Each additional page (8-1/2" x 11") or
fraction thereof $ 57.00
c. Head and Caption lines-18 picas or
fraction thereof-per page $ N/C
d. Additional Proofs (8-1/2 x 11")
if required-per page $ .08
e. Author's Alterations-per line $ .94
(A minimum of 15 lines will be allowed)
NOTE: Charges for Author's Alterations will not be honored
unless the voucher submitted to GPO is supported by a copy
of the proofs showing all changes.
2. Page make-up (Including full page Illustration and
4 sets of page proofs)
a. First 48 pages (8-1/2 x 11") $ 1,646.00
b. Each additional page (8-1/2 x 11") or
fraction thereof $ 38.55
3. FILMS AND PROGRESSIVE PROOFS: Prices quoted are all-
inclusive for the cost of all materials, opaquing and
services including stripping of illustrations and
positioning for compositioning. All measurements will be
based on the printed image size rather than the trim size
of the finished films.
a. Four-color process separations (per
square inch) $ 2.19
b. Four-color progressive proofs
(includes one full-color proof and
one progressive proof book on the
stock and in the inks to be used)
(each set) $ 875.00
4. PRINTING AND BINDING: Prices quoted must be all-
inclusive for printing, binding and all paper.
Makeready/ Running
Per
Setup
100 copies
(1)
(2)
a. First 48 pages plus cover $ 3,840.00 $
188.72
b. Additional 4 page signatures $ 1,224.00 $
8.70
See, R4 File, Tab C; Complaint, p. 1. The Contractor's total
estimated cost for the work was $40,461.75 (R4 File, Tab C).
On January 4, 1989, the DRPPO issued Purchase Order No. K-0469
to the Appellant, who was the low bidder,8 awarding it the
contract to produce 10,050 copies of the Citizen Soldier, at
an estimated contract price of $40,461.75 (R4 File, Tab E).
Although the Purchase Order indicates that the Appellant was
expected to complete production and delivery of the Citizen
Soldier by May 5, 1989, as provided in the contract schedule
(R4 File, Tabs A, p. 6 and E), the final publication was not
shipped until January 31, 1990, nearly nine months later.
See, Complaint, p. 3; App. Mem., p. 4, ¶ 23. The reason for
this delay is explained by the following undisputed chronology
of events:
1. On January 5, 1989, in accordance with the contract
schedule, the Appellant picked up the Government furnished
material, namely, the typewritten manuscript copy for a 48
page, saddle-stitched pamphlet, with covers, as well as the
photoprints and/or transparencies for the color
illustrations. Complaint, p. 1; App. Mem., p. 1., ¶¶ 4, 5;
Res. Brf., p. 2.
2. On January 9, 1989, after completing the typesetting
from the manuscript copy, the Appellant delivered the
galley proofs to the DRPPO, well ahead of the contract
schedule (January 17, 1989). Complaint, p. 1; App. Mem., p.
1, ¶ 6; Res. Brf., p. 2. See, R4 File, Tab A, p. 6.
3. After the galley proofs were furnished to the DRPPO, the
Respondent asked the Appellant to reset the type in two
different type sizes so the Army should compare sizes with
the original type, and decide which they wanted to use.
The Contractor complied with these instructions, and on
January 17, 1989, sent the DRPPO two additional galley
proofs of the publication with the type changes.
Complaint, p. 1; App. Mem., p. 2, ¶ 7.
4. On February 15, 1989, nearly a week later than the date
provided in the contract schedule (February 7, 1989), the
DRPPO returned the two galley proofs and a dummy layout,
and instructed the Contractor to make page proofs.
Complaint, p. 1; App. Mem., p. 2, ¶ 8; Res. Brf., p. 2. In
order to comply with the DRPPO's directions, the Appellant
had to go through the job twice, because the Army had used
two different editors in making revisions, and set 164
typed lines of changes. The Contractor figures this
additional work took eight (8) hours to accomplish, and
none of that time was covered by its bid quote.9
Complaint, p. 1; App. Mem., p. 2, ¶ 8.
5. After making all of the author's alterations, the
Appellant composed the pages, sized all illustrations, and
then shot and stripped the entire job. On February 23,
1989, the Contractor furnished the required page proofs to
the DRPPO.10 Complaint, p. 1; App. Mem., p. 2, ¶ 9.
6. Sometime between February 23, 1989, and July 15, 1989,
the Respondent told the Appellant that there would be major
changes in the Citizen Soldier, and that the Contractor
would be receiving new copy and instructions from the
Government. App. Mem., p. 2, ¶ 10.
7. On July 15, 1989, more than two months after the
original contract completion date (May 5, 1989) had lapsed,
the DRPPO furnished the Appellant with a computer disk, and
instructed the Contractor to use it to reset the text,
totally replacing the existing type.11 Complaint, p. 2;
App. Mem., p. 2, ¶ 11. The art work, transparencies, or
illustrations were not given to the Contractor at that
time. The Appellant attempted to comply with the DRPPO's
new instructions, but because the disk contained numerous
unrecognizable codes, the Contract was unable to use it for
that purpose, and informed GPO that it would need hard copy
of the new type in order to read it. Complaint, p. 2; App.
Mem., p. 2, ¶ 11.
8. On July 24, 1989, the Appellant received the hard copy
it had requested from the DRPPO, as well as the art work,
dummy layout, and other materials which were not furnished
on July 15, 1989.12 Complaint, p. 2; App. Mem., p. 3, ¶
12; Res. Brf., p. 2. Using this material, the Contractor
was instructed to rest the type, make up the pages by
pasting the new text on the existing art boards, and shoot
progressive proofs. Complaint, p. 2; App. Mem., p. 3, ¶
12; Res. Brf., p. 2. Pursuant to these directions, and
following the hard copy as a guide, the Appellant began to
reset the job from the furnished computer disk. However,
after setting the new type in galley format, the Appellant
discovered that the text had been completely rewritten and
would not fit the existing page layout. Complaint, p. 2;
App. Mem., p. 3, ¶12. As a result, none of the original
page layouts could be salvaged, and a major part of the
film already produced was unusable. Accordingly, the DRPPO
instructed the Contractor to make new galley proofs and
submit them along with the original pay layout. Complaint,
p. 2.; App. Mem., p. 3, ¶ 12.
9. On August 1, 1989, the Appellant submitted the new
galley proofs and the existing art boards to the DRPPO, as
instructed. Complaint, p. 2; App. Mem., p. 3, ¶ 13.
10. Between August 1, 1989, and August 29, 1989, GPO and
the Army revised the layouts and the art boards to conform
to the new type. App. Mem., p. 3, ¶ 14.
11. On August 29, 1989, the Appellant received the galley
proofs, as revised, with a new layout from the DRPPO. The
new layout confirmed what the Contractor had discovered a
month earlier, namely, that the pamphlet had undergone
major changes, and that, as redesigned, the Citizen Soldier
consisted of 28 pages of text, not the 48 pages specified
in the IFB. Complaint, p. 2; App. Mem., p. 3, ¶ 15.
Indeed, only the original outside cover was still usable.
12. Between August 29, 1989, and September 28, 1989, the
Appellant proceeded to carry out the DRPPO's instructions
to prepare progressive page proofs. In that regard, the
Contractor unstripped all illustrations, including 48 four-
color separations, scrapped all existing line film
negatives, shot and stripped new line copy, restripped all
four-color illustrations, and produced the progressive
proofs. Complaint, p. 2; App. Mem., p. 3, ¶ 16.
13. On September 28, 1989, the Appellant submitted the
progressive page proofs and six prior-to-production samples
to the DRPPO.13 Complaint, p. 2; App. Mem., p. 3, ¶ 17;
Res. Brf., p. 3.
14. On October 2, 1989, the Appellant wrote to the DRPPO
asking for a contract modification to cover its additional
costs in making the changes to the Citizen Soldier (R4
File, Tab F). See, infra. Complaint, p. 2; App. Mem., p.
3, ¶ 18. Subsequently, the Contractor also submitted
separate claims for author's alterations, by letter dated
January 9, 1990, and for film charges, by letter dated
February 8, 1990 (R4 File, Tabs G and K).14 See, infra.
App. Mem., pp. 3-4, ¶¶ 18-19.
15. On December 6, 1989, the DRPPO returned the progressive
page proofs, which contained additional author's
alterations, to the Appellant.15 Complaint, p. 2; App.
Mem., p. 4, ¶ 20; Res. Brf., p. 4.
16. Between December 6, 1989 and December 27, 1989, the
Contractor made the required changes, and then scheduled a
press inspection. Although the inspection was originally
scheduled for December 27, 1989, at the DRPPO's request it
was postponed until January 9, 1990 (R4 File, Tab G).16
Complaint, p. 2; App. Mem., p. 4, ¶ 21.
17. On January 9, 1990, the DRPPO and the Army made the
press inspection, approved the job, and the Appellant went
into press production. Complaint, p. 3; App. Mem., p. 4, ¶
22.
18. On January 31, 1990, the Contractor shipped the
completed job to the Army, in accordance with the
contract's distribution instructions (R4 File, Tab G).
Complaint, p. 3; App. Mem., p. 4, ¶ 23. See, R4 File, Tab
A, pp. 5-6 (Shipping Instructions).
There is no dispute that the Appellant fully performed all of
the work required under the contract in a timely manner and to
the complete satisfaction of the Government.
II. THE CONTRACTOR'S CLAIM
As indicated above, this dispute began when the Appellant sent
a letter to the DRPPO on October 2, 1989, providing the
Respondent with information concerning its additional expenses
and asking for a contract modification reimbursing it for the
costs it would not otherwise have incurred but for the changes
and delays connected with the work on the Citizen Soldier (R4
File, Tab F). In that letter, the Contractor itemized its
claim, as follows:
1. a. Typesetting initial order per contract $
2,886.00
e. Author's alterations 164 @ $ .94 154.16
Rerun two galleys @ $48.00 ea[ch] 96.00
2. a. Page make[-]up 1,646.00
Total first set of camera copy $ 4,782.16
1. a. Resetting a total of 32 pages
Base price of $2,886.00 less 16 pages
@ $ 57.00 ea[ch] (-$912.00) $ 1,974.00
e. Author's alterations 4 @ $ .94 3.76
2. a. Page make[-]up second round
Base price of $1,646.00 less 16 pages
@ $38.55 ea[ch] (-$616.80) 1,029.20
Total cost to reset and remake $ 3,006.96
Total [c]ost for typesetting $ 7,789.1217
3.a. Price would obviously remain as quoted as this is to
be charged per square inch on work actually performed, and
up to now, we have not remade any four-color [separations].
b. This price would also remain unchanged as we are still
furnishing four sets of progressive proofs as originally
specified.
4.a. (1) and (2). These prices would obviously change due
to the extensive alterations. We are now running three
[different press configuration] signatures plus cover.18
With this in mind, our new prices for these two items are
as follows:
a. (1) Setup $14,688.00
a. (2) Running per 100 copies 92.75
Provided the [Army] doesn't make additional alterations to
the proofs, this should cover all of our additional costs.
See, R4 File, Tab F, pp. 2-3.
On January 9, 1990, the Contractor submitted another claim to
the DRPPO for making the author's alterations indicated in the
returned progressive page proofs (R4 File, Tab G). Noting
that its higher costs were due to the fact that the changes
were made to pages that had already been made up and
photographed, the Appellant informed the Respondent that the
new charges were:
1. Page 5-Redo process color map to knock
out color in highlighted area, leaving
the bold and light state borders, and
drop back in to print all one color red $450.00
Set new line copy @ 2 lines $ 15.00
Shoot and strip new line copy $ 42.00 507.00
2. Page 7-Set new line copy @ 2 lines $ 15.00
Shoot and strip new line copy $ 42.00 57.00
3. Page 14-Set new copy @ 2 lines $ 15.00
Shoot and strip new line copy $ 42.00 57.00
4. Page 20-Set new line copy @ 2 lines $ 15.00
Shoot and strip new line copy $ 42.00 57.00
5. Page 28-Set new line copy @ 3 lines $ 20.00
Shoot and strip new line copy $ 50.00 70.00
6. Recomposite one set of four-color
40" flats and three black only flats
@ $40.00 each 280.00
TOTAL COST FOR AUTHOR[']S ALTER-
ATIONS MARKED ON THE PRESS
PROGRESSIVE PROOFS $1,028.00
See, R4 File, Tab G, p. 1.
In response to these claims, the Contracting Officer sent a
letter, dated January 24, 1990, to the Contractor stating
that, by his calculations, the changes made to the Citizen
Soldier had reduced the contract price to $28,514.11 (R4 File,
Tab I).19 In that regard, the Contracting Officer figured the
allowable charges for the publication as follows:
1. Composition from manuscript, 48 pages + cover,
and associated author's alterations $
3,040.16
2. Page makeup, 36 pages + cover 1,337.60
3. Composition from new computer disk, 28 pages +
cover, and associated author's alterations
1,977.76
4. Page makeup, 28 pages + cover 1,029.20
5. Four-color separation, 46 photographs for a total
of 1,066 sq.in. 2,334.54
6. Four-color progressive proofs, 4 sets 2,500.00
7. Print, makeready 3,840.00
8. Print, running 11,426.85
9. Author's alterations to progressive proofs
1,028.00
TOTAL COST FOR THE ORDER $28,514.11
See, R4 File, Tab I. Attached to the Contracting Officer's
letter was Contract Modification No. K-1, dated the same day and
signed by him, decreasing the price of the pamphlet from an
estimated cost of $40,461.75 to "the agreed upon firm cost of
$28,514.11" (R4 File, Tab I).
The Appellant disagreed with the Contracting Officer's
calculations and refused to sign the Contract Modification.
Instead, on January 29, 1990, the Contractor set a letter to
the Contracting Officer, stating, in pertinent part:
Your Contract Modification Number K-1, ... is in error.
The total cost we agreed upon was as listed in our two
letters, dated October 2, 1989 and January 9, 1990, to your
office, not the $28,514.11 in the Contract Modification.
Actual bottom line figure we computed was $38,707.00. In a
phone conversation with Mr. Bollinger of your office we
expressed a willingness to compromise on one minor charge
($96.00 to return galleys) even though that was the amount
charged us. We do not agree on any other reduction.
See, R4 File, Tab J.
The record discloses that the parties discussed their dispute
over the telephone on February 7, 1990 (R4 File, Tab K). The
following day, the Appellant wrote another letter to the
Contracting Officer which confirmed their conversation, and
said, in pertinent part:
Our charges for Author's Alterations were fair and
reasonable. We responded to the alteration in the manner
we did for the convenience of the Government, so that
prices would flow with the original schedule of prices, and
your representative gave verbal approval. The fact is we
incurred a greater cost on the order up to the time we were
instructed to scrap what we had done and start over than we
estimated. But, because your representative requested we
reply with a cost quickly, we replied with estimated
figures in lieu of actual figures. These estimated figures
were low by $6,428.00 but, since we had already furnished
them to you, we were willing to honor them.
Now, 114 days after your representative accepts our figure,
you make a unilateral decision to reduce it $10,192.89.
Since you have refused to honor the figures we submitted in
October, we submit to you the following:
1. Original estimated cost for forty-eight pages plus
cover is $40,461.75.
2. Having done all the typesetting, page make[-]up,
camera and stripping on the original copy, we completed
approximately 50% of the work to be done. Total
invested up to this point [was] $20,230.00.
3. Starting over, we now produce 28 pages plus cover.
If you prorate the original cost to the Government (as
you apparently did to arrive at your figure) the cost
for this is $24,900.00. Add to this the cost of
alterations done after the progressive proofs were
returned and the cost comes to $25,928.00.
4. In actuality, for all work performed up to the time
we started over on this project, the total cost is
$15,395.00.
5. The total cost for all work performed to produce the
28 page plus cover version is $29,740.00 bringing a
total cost for the order to $45,135.00.
We now request the Contract Modification be amended or a
new one issued to reflect a total cost of $45,135.00 . . .
We also request you make your final decision by February
15, 1990 . . .
See, R4 File, Tab, pp. 1-2.
By letter dated February 12, 1990, the Contracting Officer
answered the Appellant's previous correspondence, reaffirming
his decision concerning the allowable charges, and denying the
Contractor's request for a new or revised Contract
Modification (R4 File, Tab L). The Contracting Officer's
reasons for his determination, in pertinent part, were as
follows:
. . . [T]he charges allowed, as itemized in my letter to
you on January 24, 1990, are accurate. Each of those
charges has been derived from your original quotation.
Except for the charges attributable to author's alterations
to press progress proofs, for which you are being paid in
accordance with the list of charges in your letter of
January 9, 1990, all of the charges allowed represent a
proportionate value for work performed.
With respect to the actual makeready and running of the end
product, it is reasonable to expect that the cost of a 28-
page product will be less than the cost of a 48-page
product. Again, the reduction in cost is proportionate to
the reduction in the number of pages in the finished
product versus the number of pages in the original
estimate. In every case, the charges I have allowed have
been derived directly from your original quotation
See, R4 File, Tab L. [Emphasis added.]
The Appellant timely appealed the Contracting Officer's
decision to the Board by letter dated February 16, 1990 (R4
File, Tab M).20
III. ISSUE PRESENTED
The sole question in this appeal is:
Is the Appellant entitled to additional compensation as an
equitable adjustment because of the changes made in the
Citizen Soldier by the Government, and if so, how much?
IV. POSITIONS OF THE PARTIES21
The issue before the Board is essentially a question of which
pricing mechanism-the Appellant's use of its bid estimates or
the Respondent's proportional reduction approach-has the best
chance of establishing a fair and reasonable price for the
work performed under the contract for the Citizen Soldier
before the Government decided to reduce the size of the
pamphlet. The positions of both parties on this question,
each of whom relies on the Contractor's original bid estimates
for support to some extent, can be briefly summarized.
In its appeal letter to the Board, the Appellant succinctly
stated the heart of its case:
[The Contracting Officer] is basing his decision to pay us
only $28,514.11 for the order on the fact that ". . . it is
reasonable to expect that the cost of a 28-page product
will be less than the cost of a 48-page product." We agree
wholeheartedly. In fact we are asking payment of
$29,740.00 for the 28-page product. What we cannot accept
is his decision to refuse payment on the work performed on
the original pamphlet. For that we request payment of
$15,395.00.
See, R4 File, Tab M, p. 1.22 Simply stated, the Appellant wants
to be paid for all of the pre-press work it performed on the
pamphlet before the Army changed it to a smaller publication.23
See, Complaint, p. 5.
First, the Appellant strenuously objects to the method chosen
by the Respondent to calculate the revised contract price.
Complaint, p. 5; App. Mem., p. 4. In that regard, the
Contractor argues that extrapolating the contract price for
the 28-page final version of the Citizen Solider by the simple
expedient of prorating the original bid estimates for a
booklet which was to have 20 more pages, is not only illogical
and unreasonable, but the approach is without justification as
a matter of industry practice and unfairly penalizes the
printer performing the work. Complaint, p. 5; App. Mem., p.
4; RPTC, p. 4. Insofar as the Respondent relies on the
language in the "Determination of Award" section of the
contract which says that there is no guarantee of any specific
units of production or any particular volume of work (R4 File,
Tab A, p. 7), the Appellant believes that the contract
provision has no relevance to this appeal. App. Mem., p. 4.
Thus, the Contractor does not dispute the Respondent's
interpretation of the "Determination of Award" language, in
principle, but contends that the real issue here concerns how
changes to the contract are to be priced when the "Schedule of
Prices" is silent on the matter; i.e., all line items in the
pricing schedule contemplate in a 48 page publication.24
Complaint p.5; App.Mem., p. 4. In the Appellant's view it is
not possible to simply prorate the price for a 48-page
pamphlet in order to determine the cost of production of a
booklet containing 20 pages less.25 App. Mem., p. 5. Rather,
the Contractor believes that its computation of the prices for
the revised version of the Citizen Soldier is both fair,
reasonable, and unimpeachable when all factors are considered.
App. Mem., p. 5.
Second, the Appellant contends that it is entitled to be
reimbursed for the costs it incurred prior to the revision of
the publication because the Contracting Officer did not manage
the situation properly. App. Mem., p. 5. In that regard, the
Contractor states that two courses were available to the
Contracting Officer once he became aware that there would be
extensive delays and substantial alterations in the product:
(1) terminate the contract for the convenience of the
Government, pay the Contractor for the work performed, and
rebid the job; or (2) negotiate a firm fixed price for both
the work already performed and the printing of the revised
booklet before continuing with production under the
contract.26 Id. (citing, PPR, Chap. VI, Sec. 3). The
Contracting Office took neither step in this case, but rather
allowed the job to go to press without any meaningful price
negotiations. App. Mem., pp. 5-6.
Third, the Appellant contends that the Contracting Officer was
only interested in obtaining the Citizen Soldier for the Army
at the lowest possible price, and was not concerned with the
matter of fair compensation for the Contractor. App. Mem., p.
6. The Appellant says this is particularly true with respect
to its claim for $6,427.90 for the cost of unutilized film
work on the original specifications. Id. (citing, Complaint,
p. 3). Since the Respondent has not challenged the
reasonableness of the Contractor's charges,27 it should be
liable for the amount claimed because the Government-ordered
changes made the previously performed work unusable. Id.
Furthermore, GPO's contention that the Appellant should bear
the cost of the disputed film work because it was done
prematurely without the approval of the Government, is not
supported by the facts. The Contractor says that it is
uncontradicted that GPO did, indeed, approve the initial
composition of the original 48 page pamphlet, subject to
author's alterations, which were made prior to performing the
film work. Id. See also, RPTC, pp. 7-8. In the Appellant's
view, the Respondent's claim that it had not told the
Contractor to proceed with the camera work, merely disguises
the real reason the films had to be scrapped; i.e., because
the original pamphlet was completely redesigned by the
Government. App. Mem., p. 6. Accordingly, for these reasons
the Appellant asks the Board to overrule the Contracting
Officer and sustain its claim. App. Mem., p. 7.
The Respondent, on the other hand, argues that the Contracting
Officer's conclusion that the Appellant was only entitled to
be paid $28,514.11 for the work performed producing the
Citizen Soldier is fully justified. Res. Brf., p. 5. The
Contracting Officer based his calculations for the job on the
Contractor's own initially quoted prices. RPTC, p. 5.
Furthermore, the "Determination of Award" provisions of the
contract placed the Contractor on notice that the number of
pages could vary, more or less, from the contract estimates,
and the Government would have to base any equitable adjustment
on the bid figures in order to prorate the costs of the actual
work (R4 File, Tab A, p. 7). Id. In this case, the
Contracting Officer used those bid estimates to compute the
amount due th Appellant for the author's alterations and other
changes resulting from the Government's reduction of the size
of the book (R4 File, Tab I, Items 1-3). RPTC, p. 6.
However, the Contracting Officer did not reimburse the
Contractor for film work because, at this stage, the
Government had not approved anything beyond typesetting.
RPTC, pp. 6-7. Consequently, if the Appellant produced
negatives and film work which were later unusable, it did so
prematurely and the Government did not have to pay for it.
RPTC, p. 7.
The Respondent also believes that the Appellant's equitable
adjustment approach is illogical, undocumented, and
insupportable. Res. Brf., p. 6. While the parties are in
essential agreement with respect to the amount claimed for
composition and page make-up, they disagree on the charges for
progressive proofs and printing the pamphlet. Res. Brf., p.
5. As GPO sees it, the Contractor's figures for progressive
proofs and setup make no sense, because it asks for the
original contract price for fewer pages than estimated, on the
one hand, while it says that 32 pages of setup work cost
nearly four times more than the original 48 pages, on the
other. Id. In any event, the Respondent contends that the
Appellant has failed to provide sufficient documentation to
support its claim. Id.
Finally, the Respondent contends the law holds that when the
Government deletes a separately priced item of work from a
contract, the stated contract item price, rather than the
amount the work would have cost, is the proper measure of the
contract price adjustment. Res. Brf., pp. 5-6 (citing,
Gregory & Reilly Associates, Inc., FAACAP No. 65-30, 65-2 BCA
¶ 4,918; Groesbeck-Durbin, Inc., DOT CAB No. 70-24, 72-1 BCA ¶
9,251; Holtzen Construction Company, AGBCA No. 413, 75-2 BCA ¶
11,378). Even though a contractor may suffer a loss of profit
from application of this rule, the parties should be held to
the bargained for item price in computing equitable
adjustments. Res. Brf., p. 6. Moreover, a reduction in the
amount of work does not authorize a repricing of the entire
contract. Accordingly, the Respondent urges the Board to deny
the appeal, and affirm the Contracting Officer's decision.
Id.
V. DECISION28
When this appeal was filed with the Board on February 16,
1990, no one expected that more than four years would pass
before the Contractor received a decision. Consequently, the
appeals process itself has probably compounded the frustration
felt by the Appellant with this procurement.29 Some of the
delay experienced in processing this case, of course, occurred
because the Board, instead of directing an audit of the claim,
allowed the parties to fritter away time discussing possible
audit schemes.30 On two occasions recently, the Board has
expressed its preference for audited claims. See, Banta
Company, GPO BCA No. 03-91 (November 15, 1993), Sl. op. at 57;
R.C. Swanson Printing and Typesetting Company, GPO BCA 15-90,
Decision on Motion for Reconsideration and Order (December 20,
1993), Sl. op. at 14 (hereinafter R.C. Swanson II). The state
of this record, which is nothing short of awful, only confirms
the Board in that opinion.31 The Board's time is too
precious, considering its small staff and the demands of its
heavy caseload, to spend doing the work of the parties by
sorting out the various aspects of their respective claims.
Accordingly, in the future, if in the judgment of the Board
the clarification of a claim on appeal is necessary in order
to resolve a dispute, it will remand the matter to the
Contracting Officer, through Government Counsel, with
instructions to have the claim audited, and will dismiss the
appeal without prejudice until the audit is complete.32 Board
Rules, Rule 13(c). See, National Council of Negro Women, LBCA
No. 84-BCA-18, 84-2 BCA ¶ 17,436, at 86,827. The Board is
confident that, in the long run, this new policy will buttress
a major purpose of the Board's preliminary procedures, namely,
obtaining fully disclosure of relevant and material facts.
Board Rules, Preface to Rules, ¶ VI.D.
The Board admits that it could done a better job policing the
time it had allowed the parties to find a path out of the
wilderness which is this record. However, the Respondent and
the Appellant should also recognize that they are not
blameless either. From the Government's standpoint, this
procurement was not only plagued by a customer-agency which
could not make up its mind, but the DRPPO mishandled the
project in the face of the Army's uncertainty, and only made a
bad situation worse. Generally, deletions of major portions
of work are not authorized by the "Changes" clause. See,
Nager Electric Company, Inc. and Keystone Engineering
Corporation v. United States [16 CCF ¶ 80,367], 194 Ct.Cl.
835, 851-53, 442 F.2d 936, 945-46 (1971) (hereinafter Nager
Electric Company); Capital Electric Company, GSBCA No., 5122,
81-2 BCA ¶ 15,281; Burroughs Corporation, GSBCA No. 5019, 79-2
BCA ¶ 14,083, mot. for reconsid. denied, 80-2 BCA ¶ 14,487;
Celesco Industries, Inc., ASBCA No. 22251, 79-1 BCA ¶ 13,604;
Toke Cleaners, IBCA 1008-10-73, 74-1 BCA ¶ 10,633. See
generally, John Cibinic, Jr. and Ralph C. Nash, Jr.,
Administration of Government Contracts 2d ed., (The George
Washington University, 1986), pp. 292-93 (hereinafter Cibinic
and Nash). Instead, where, as here, the Government deletes
significant portions of the work by contract modification, or
otherwise, the matter is usually treated as a partial
termination for convenience. See, J. W. Bateson Company v.
United States [8 CCF ¶ 71,867], 308 F.2d 510 (5th Cir. 1962);
H. L. Yoh Company, Inc. v. United States [8 CCF ¶ 71,469], 153
Ct.Cl. 104 (1961); Manis Drilling, IBCA No. 2658, 93-3 BCA ¶
25,931; Celesco Industries, Inc., supra, 79-1 BCA ¶ 13,604;
Frederick Construction Company, ASBCA No. 12108, 68-1 BCA ¶
6,832; Doughboy Industries, Inc., FAACAP No. 67-3, 66-2 BCA ¶
5,712. As explained by the Department of Interior Board of
Contract Appeals:
Both the Changes and the Termination for Convenience
clauses provide a mechanism for the deletion of contract
work. However, when major portions of the contract work
are deleted, the Termination for Convenience clause is more
appropriate where no additional work is substituted in its
place. Similarly, deletion of a minor item of work is
considered to be within the ordinary coverage of the
Changes clause. Industrial Consultants, Inc., VABCA No.
3249, 91-3 BCA ¶ 24,326 at 121,551. The use of the
Termination for Convenience clause is more appropriate for
a reduction of the number of units or supplies to be
delivered; elimination of identifiable items of work;
reduction in the quantity of work required under the
contract; or similar reductions in contract tasks. Celesco
Industries, Inc., ASBCA No. 22251, 79-1 BCA ¶ 13,604 at
66,682-83.
Manis Drilling, supra, 93-3 BCA ¶ 25,931, at 128,980. [Emphasis
added.] See also, Skidmore, Owings & Merrill, ASBCA No. 5115,
60-1 BCA ¶ 2,570; Nolan Brothers, Inc., ASBCA No. 43778, 58-2 BCA
¶ 1,910. In this case, the Board finds itself in agreement with
the Appellant's argument that rather than proceeding as if this
was a normal contract modification situation, the Contracting
Officer should have exercised the Government's rights under the
contract's "Termination for the Convenience of the Government"
clause, GPO Contract Terms, Contract Clauses, Art. 19, once he
saw that the extensive author's alterations being made by the
Army were causing major disruptions in the contract performance
schedule, substantially reducing the product for which bids had
been solicited, and increasing the Contractor's costs.33
Compare, e.g., R.C. Swanson Printing and Typesetting Company, GPO
BCA 15-90, Decision and Order (March 6, 1992) (a Department of
Justice contract for typesetting legal briefs from manuscript
copy was terminated for the convenience of the Government by GPO
when the customer-agency decided it also wanted to transmit brief
copy in an electronic format); Graphic Litho Company, Inc., GPO
BCA 17-85 (September 30, 1988) (after extensive delays, a
Department of Agriculture contract for the production of maps was
terminated for convenience by GPO because the customer-agency
still had not indicated when it would have the corrected
Government-furnished material ready for the contractor).
Certainly, there was ample opportunity for the Contracting
Officer to do so, especially between February 23, 1989, and July
15, 1989, a period of nearly five months, when the job was in
limbo. The Contracting Officer's failure to exercise his
convenience termination authority directly contributed to the
subsequent problems experienced by both parties in trying to
assess the impact of the changes on the Appellant's costs, and
helps to explain why their results are so wildly different.34
Celesco Industries, Inc., supra, 79-1 BCA ¶ 13,640, at 66,682.
On the other hand, even though the Board believes that matters
would have been cleaner if the Contracting Officer had
terminated the contract for convenience at the beginning,
instead of trying to fit all of the Army's alterations under
the umbrella of the "Changes" clause, it is also aware that in
most cases agency boards of contract appeals will not disturb
a contracting officer's choice of procedure, particularly
where the contractor has not challenged the exercise of that
discretion. See, Condor Reliability Services, Inc., ASBCA No.
40538, 90-3 BCA ¶ 23,254; Goetz Demolition Company, ASBCA No.
39129, 90-3 BCA ¶ 23,241; Kinetic Engineering & Construction,
Inc., ASBCA No. 30726, 89-1 BCA ¶ 21,397; Celesco Industries,
Inc., supra, 79-1 BCA ¶ 13,604. Thus, the ASBCA has said:
The question of whether work should be deleted under the
Changes clause or the Termination clause is best left to
the circumstances of each case and where the parties
proceeded by means of a deductive change we will not alter
that treatment absent a compelling reason. [Citation
omitted.] Here, we see no reason whatever, and none is
provided to us by the parties, to disturb the parties'
treatment of the termination of identifiable items of work
through a deductive change.
Goetz Demolition Company, supra, 90-3 BCA ¶ 23,241, at 116,618.
See also, Condor Reliability Services, Inc., supra, 90-3 BCA ¶
23,254, at 116,675; Kinetic Engineering & Construction, Inc.,
supra, 89-1 BCA ¶ 21,397, at 107,871-72; Celesco Industries,
Inc., supra, 79-1 BCA ¶ 13,604, at 66,683. From the outset, this
dispute has been treated by the parties as one involving a
deductive change under the "Changes" clause, and their respective
monetary claims have been crafted with an eye toward traditional
equitable adjustment rules. Since the parties have presented
this appeal in its "Changes" clause form, and the Board can find
no "compelling reason" to take a different approach, consistent
with established Board policy it will leave their judgement
undisturbed. See, Shepard Printing (1993), supra, Sl. op. at
14-15, fn. 20; Stephenson, Inc., supra, Sl. op. at 19-20, fn. 22;
Stabbe Senter Press, GPO BCA 13-85 and 19-85 (May 12, 1989), Sl.
op. at 53.
The Appellant also made a significant contribution to the
confused state of this record. No doubt is was too much to
expect the Contractor to submit a pristine claim given the
turmoil of the actual procurement. However, the history of
this claim shows that the Appellant, both in substance and
approach, fell far short of providing the sort of cooperation
and assistance that is normally expected from someone asking
for money from the Government. In that regard, the claim was
deficient in at least three respects.
First, the piecemeal fashion in which the Contractor submitted
its claim to the Contracting Officer-i.e., the total claim was
submitted in three parts over a five month period, on October
2, 1989, January 9, 1990, and February 8, 1990, respectively
(R4 File, Tabs F, G, and K)-was hardly conducive to orderly
processing. Since GPO's Contracting Officers are required by
the agency's procurement rules to attempt to negotiate claim
settlements before issuing final decisions, the casual manner
in which the Appellant delivered the separate pieces of its
total claim only frustrated the regulatory purpose. PPR,
Chap. X, Sec. 1, ¶ 4.
Second, and perhaps more importantly, the regulations describe
a properly filed claim as possessing certain essential
characteristics, namely: (1) it must be made in good faith;
(2) it must honestly and accurately reflect of the
contractor's belief of the contract liability of the
Government; (3) it must be prepared from the contractor's
books of account in accordance with Government recognized cost
principles and accounting practices; (4) it must be accurate,
complete, and current as of the date of submission; and (5) it
must be prepared for the purpose of furnishing a basis for
settlement. PPR, Chap. X, Sec. 1, ¶ 3. These requirements
are somewhat mirrored in the Board Rules regarding Complaints.
Board Rules, Rule 6(a). However, in this case the Appellant
has submitted a claim which, to be charitable, may be
described as practically indecipherable. For example, 65
percent of the Contractor's claim is in a single line item-
makeready/setup charges (item 4.a(1)).35 Originally, the
Appellant estimated that makeready/setup would cost $3,840.00
(R4 File, Tab C). By the time the Appellant had completed
making all of the Army's alterations, that figure had
ballooned to $14,688.00. To be blunt, the adjusted amount
does not inspire much trust or confidence as a proper claim
under the regulations because simple arithmetic shows that
$14,688.00 is exactly 3.825 times $3,840.00. On the surface,
therefore, rather than being an accurate and complete
statement of the Appellant's costs as reflected in its
accounting ledgers, or at least a rational and honest estimate
of them, the revised makeready/setup charge looks suspiciously
like the result of some arbitrary formula. Claims prepared on
such a basis are uniformly rejected by agency boards of
contract appeals.36 See, e.g., Ordnance Materials, Inc.,
ASBCA No. 32371, 88-3 BCA ¶ 20,910 (a contractor's appeal for
an equitable adjustment was denied because his claim was based
on the arbitrary formula he used in preparing his bid rather
than on the actual increase in his costs stemming from the
Government's change order).
Lastly, the Appellant has not supported its claim with any
relevant or material documentation showing how it arrived at
its statement of costs.37 Apart from the material in the R4
File, only two pieces of documentary evidence were submitted
by the Appellant in the context of this appeal-the price
quotation from Colortek and its preliminary bid estimate for
another GPO contract (Program C598-S)-and the Board had
rejected both of them.38 See, Appellant's Letter of April 3,
1990, Exhibits A and B. As a consequence, despite the Board's
requests from the outset of the appeal for information which
would clarify the record either by means of a stipulation of
facts or an audit of the Appellant's claim, and the
opportunity afforded the parties to provide such evidence, the
record in this case is in no better shape than it was when it
crossed the Board's threshold four years ago.
In the end, the Board is left to puzzle its way through an
appeal record which is murky at best. Unfortunately, the
Board's analytical powers do not include clairvoyance.
However, the Board has a responsibility to put an end to this
controversy. See, Banta Company, supra, Sl. op. at 24. See
also, Lawrence D. Krause, AGBCA No. 76-118-4, 82-2 BCA ¶
16,129, at 80,073; Johnson, Drake & Piper, Inc., ASBCA No.
9824, 65-2 BCA ¶ 4868, at 23,073. Accordingly, when the board
considers the appeal record in light of traditional equitable
adjustment principles, it believes, for the following reasons,
that the Appellant is entitled to an additional reimbursement
of $8,310.45 from the Government.
A. Neither the Respondent's proportional approach nor the
Appellant's unsupported estimates furnish an adequate basis
for calculating the appropriate equitable adjustment in
this case. Instead, the Board Believes that a fair and
reasonable equitable adjustment is best determined by use
of the "jury verdict" technique.
Clearly, when the Government reduced the number of pages in
the Citizen Soldier, it expected there would be a concomitant
shrinkage in the contract price. See, Plaza Maya Limited
Partnership, GSBCA No. 9086, 91-1 BCA ¶ 23,425; Goetz
Demolition Company, supra, 90-3 BCA ¶ 23,241; Art Cap Company,
Inc., ASBCA No. 3793, 58-1 BCA ¶ 1,623. Therefore, the
central issue in this dispute concerns the quantum of relief;
i.e., how much of equitable adjustment should the Appellant
receive or, in the alternative, how much of a credit was due
the Respondent because of the page reduction. Banta Company,
supra, Sl. op. at 49. The answer to that question really
depends on the scope of the reduction in the Appellant's
contract performance which was brought about by the
Government's change in the size of the publication.
Consequently, when the Board looks at the record in this case,
it finds itself in agreement with the ASBCA which remarked, in
a similar situation:
It is unfortunate that the parties never concentrated on
the actual reduction of appellant's specific contractual
obligations . . . thereby contributing to their fruitless
efforts over a period of four years to reach an amicable
resolution.
Celesco Industries, Inc., supra, 79-1 BCA ¶ 13,604, at 66,682.
At the outset, perhaps it is best to restate certain elemental
principles concerning equitable adjustments so that the
parties may have a clear understanding of the guideposts
followed by the Board in resolving this dispute.
First, an equitable adjustment is basically a corrective
measure designed to keep a contractor whole when the
Government modifies a contract. J.F. Shea Company, Inc. v.
United States, 10 Cl.Ct. 620, 627 (1986) (citing, Bruce
Construction Corporation v. United States, supra, 163 Cl.Ct.
at 100, 324 F.2d at 518); Dick & Kirkman, Inc., VABCA Nos.
1545, 1581, 84-3 BCA ¶ 17,662, at 88,082; CRF, A Joint Venture
of CEMCO, Inc. and R.R. Communications, Inc., ASBCA No. 17340,
76-1 BCA ¶ 11,857, at 56,805 (hereinafter CRF, A Joint
Venture).
Second, the purpose of an equitable adjustment is to place a
contractor in the position it would have been in had the
change not occurred; i.e., the adjustment also should not
alter the contractor's profit or loss position from what it
was before the change occurred.39 J.F. Shea Company, Inc. v.
United States, supra 10 Cl.Ct. at 627; Pacific Architects &
Engineers, Inc. v. United States, 203 Ct.Cl. 499, 508, 491
F.2d 734, 739 (Ct.Cl. 1974); Nager Electric Company, supra,
194 Ct.Cl. at 851-53, 442 F.2d at 945-46; Keco Industries,
Inc. v. United States, 176 Ct.Cl. 983, 999-1002, 364 F.2d 838,
849-850 (1966), cert. denied, 386 U.S. 958
(1967); CRF, A Joint Venture, supra, 76-1 BCA ¶ 11,857, at
56,804; Hensel Phelphs Construction Company, ASBCA No. 15142,
71-1 BCA ¶ 8,796. See also, Cibinic and Nash, pp. 544-45.
Third, the burden of proof in establishing the total amount of
an equitable adjustment falls on the party who is claiming the
benefit of the adjustment. See, Cibinic and Nash, p. 504.
Thus, a contractor has the affirmative burden of proving the
amount of money to which it is entitled. Michael-Mark, Ltd.,
IBCA Nos. 2697, 2890, 2891, 2892, 2893, 2894, 2895, 94-1
BCA ¶ 26,453; Lemar Construction Company, ASBCA Nos. 31161,
31719, 88-1 BCA ¶ 20,429; Lawrence D. Krause, supra, 82-2 BCA ¶
16,129; Onetta Boat Works, Inc., ENGBCA No. 3733, 81-2 BCA ¶
15,279; Globe Construction Co., ASBCA No. 21069, 78-2 BCA ¶
13,337. Meanwhile, the Government must establish the amount of
the credit it took. Michael-Mark Ltd., supra, 94-1 BCA ¶ 26,453;
Zurfluh Enterprises, Inc., VABCA No. 1941, 85-1 BCA ¶ 17, 789;
CRF A Joint Venture, supra, 76-1 BCA ¶ 11,857; Hudson Garment
Company, Inc., ASBCA No. 4645, 60-1 BCA ¶ 2,628. Whether that
burden has been met is determined by the "preponderance of the
evidence" test. Teledyne McCormick-Selph v. United States, 214
Ct.Cl. 672, 558 F.2d 1000 (1977); Wilbur Smith & Associates,
Inc., ASBCA No. 35301, 89-3 BCA ¶ 22,025. See, Cibinic and Nash,
p. 504.
Fourth, the preferred method for establishing the amount of an
equitable adjustment is through the introduction of actual
cost data.40 See., e.g., Dawco Construction, Inc. v. United
States, supra, 930 F.2d at 882; Cen-Vi-Ro of Texas v. United
States, 210 Ct.Cl. 684 (1976); Buck Brown Contracting Co.,
IBCA No. 1119-7-76, 78-2 BCA ¶ 13,360; Engineered Systems,
Inc., DOTCAB No. 75-5, 76-2 BCA ¶ 12,211; Bregman Construction
Corporation, ASBCA No. 15020, 72-1 BCA ¶ 9,411. As a rule,
actual costs are proved through the introduction of the
contractor's accounting records, which will be accepted if
they have been audited by the Government and are unrebutted.
Celesco Industries, supra, 79-1 BCA ¶ 13,604. However, if the
accounting records are not available due to no fault of the
contractor, the costs may be established on the basis of
estimates, if they are supported by detailed, substantiating
data.41 See, e.g., R. G. Robbins & Company, ASBCA No. 27516,
83-1 BCA ¶ 16,420; Leopold Construction Company, ASBCA No.
23705, 81-2 BCA ¶ 15,277; Bailey Specialized Buildings, Inc.,
ASBCA No. 10576, 71-1 BCA ¶ 8,699.
Finally, the touchstone for determining the amount of an
equitable adjustment is the difference between what it
reasonably would have cost to perform the work as originally
required and what it reasonably cost to perform the work as
changed.42 General Builders Supply Co. v. United States, 187
Ct.Cl. 477 (1969); Michael-Mark Ltd., supra, 94-1 BCA ¶
26,453; Zurfluh Enterprises, Inc., supra, 85-1 BCA ¶ 17,789;
Dick & Kirkman, Inc., supra, 84-3 BCA ¶ 17,662; Lawrence D.
Krause, supra, 82-2 BCA ¶ 16,129; Celesco Industries, supra,
79-1 BCA ¶ 13,604; Jack Picoult, VABCA No. 1221, 78-1 BCA ¶
13,024. Whether a contractor's costs are reasonable is a
question of fact depending on the circumstances.43 Nager
Electric Company, supra, 194 Ct.Cl. at 851-53, 442 F.2d at
945-46.
The principle claim in this case is a Government claim; i.e.,
the Respondent issued a contract modification which took a
credit for the deleted work (R4 File, Tab I). Goetz
Demolition Company, ASBCA No. 39129; 90-2 BCA ¶ 22,756; P.X.
Engineering Company, supra, 89-2 BCA ¶ 21,859; ACS
Construction Company, Inc. of Mississippi, supra, 87-1 BCA ¶
19,660; Zurfluh Enterprises, Inc., supra, 85-1 BCA ¶ 17,789.
Consequently, the Respondent was obligated to prove how much
downward adjustment should be made.44 Nager Electric Company,
supra, 194 Ct.Cl. at 853, 442 F.2d at 946; Griffin Services,
Inc. v. General Services Administration, GSBCA Nos. 11022,
11178, 92-3 BCA ¶ 25,181; Jackson Engineering Company, Inc.,
supra, 85-3 BCA ¶ 18,418; R & E Electronics, Inc., VABCA Nos.
2227, 2299, 2300, 85-3 BCA ¶ 18,316; Globe Construction Co.,
supra, 78-2 BCA ¶ 13,337; G.L. Cory, Inc., GSBCA No. 4383,
77-2 BCA ¶ 12,824. In order to sustain its burden of proof,
the Respondent had to show: (1) the extent to which the
contract requirements were reduced; (2) the savings which
resulted therefrom; (3) the Contractor's effort was, in fact,
reduced by the contract change; and (4) the amount of downward
price adjustment it took was reasonable.45 R & E Electronics,
Inc., supra, 85-3 BCA ¶ 18,316; Zurfluh Enterprises, Inc.,
supra, 85-1 BCA ¶ 17,789; Celesco Industries, supra, 79-1 BCA
¶ 13,604; Southeastern Services, Inc., ASBCA No. 21278, 78-2
BCA ¶ 13,239; Industrial Textile Mills, Inc., ASBCA No. 18163,
73-2 BCA ¶ 10,232.
From its analysis of the record, the Board concludes that the
Respondent has not sustained its burden of proof.
Specifically, the Government has failed to show that the
Appellant's effort was, in fact, reduced by the contract
change. See, Banta Company, supra, Sl. op. at 51 (citing, ACS
Construction Company, Inc. of Mississippi, supra, 87-1 BCA ¶
19,660). In that regard, the method chosen by the Respondent
to revalue the contract price in this case is similar to the
technique used by GPO in Banta Company, an appeal which also
stemmed from the Government taking a credit for a reduced
number of pages based on a manipulation of the original bid
estimates, and the result is equally distorted. See, Banta
Company, supra, Sl. op. at 21, fn. 31. The Board rejected the
Respondent's theory in that case, reasoning, in pertinent
part:
. . . [T]he key to the Respondent's argument is its
assumption that the changes which reduced the number of
printed pages under each contract "undoubtedly" lowered the
level of production effort, meant that less raw materials
would be needed to perform the contracts, and were the
cause of the "dramatic" reduction in the Appellant's
potential losses under the contracts. [Citation to
Respondent's brief omitted.] However, GPO has offered no
evidence to support this premise beyond these mere
allegations and self-serving and conclusory statements,
which are insufficient to carry its burden of proof on the
"level of effort" issue. Cf., Fry Communications,
Inc./InfoConversion Joint Venture, GPO BCA 9-85, Decision
on Remand (August 5, 1991), Sl. op. 32-33, fn. 31 (citing,
Fry Communications, Inc./InfoConversion Joint Venture v.
United States, 22 Ct.Cl. 497, 510 (1991); Tri-State
Services of Texas, Inc., ASBCA No. 38010, 89-3 BCA ¶
22,064; Gemini Services, Inc., ASBCA No. 30247, 86-1 BCA ¶
18,736). . . .
See, Banta Company, supra, Sl. op. 51-52. [Original emphasis.]
Accord, Griffin Service, Inc. v. General Services Administration,
supra, 92-3 BCA ¶ 25,181.
Here, as in Banta Company, the fatal flaw in GPO's logic is
its assumption that a significant reduction in the number of
printed pages also substantially lowered the Appellant's
production costs. Such reasoning ignores a basic tenet of the
printing trade, namely, the most expensive copy of any book is
the first one off the press. Consequently, press time, make-
ready, labor, collating and binding costs would not have been
significantly affected simply by reducing the number of pages.
As the Board sees the pricing structure of the contract, each
line item describes an integral part of a production process
in which each step had to be accomplished before the next one
could begin, whether the final product was 48 pages or 28
pages. Therefore, consistent with its approach in Banta
Company, the Board rejects the Respondent's pricing stratagem
by which the Government calculates its credit for a reduced
number of pages by the simple expedient of prorating the
original bid estimates, without making a realistic assessment
of the impact of the changes on the contract work.46 Banta
Company, supra, Sl. op. at 51-52.
The Board recognizes that unlike Banta Company, where GPO
solicited single fixed-price bids for the overall contract,
here the Respondent asked for prices on a line item basis.
However, that fact alone does not militate in favor of a
different result. In the Board's view, GPO's use of different
bidding schemes in the two contracts merely creates a
distinction without a difference. The Respondent cites
several cases for the proposition that the item price rather
than the cost of the work is the proper measure of an
equitable price adjustment when the Government deletes a
separately priced item of work from a contract. Res.Brf., p.
6 (citing, Holtzen Construction Company, supra, 75-2 BCA ¶
11,378; Groesbeck-Durbin, Inc., supra, 72-1 BCA ¶ 9,251;
Gregory & Reilly Associates, Inc., supra, 65-2 BCA ¶ 4,918).
These cases merely demonstrate the analytical pitfalls which
can occur when too much reliance is place on construction
contracts where supply or services contracts are involved. In
construction contracts, the deleted items are usually complete
in and of themselves and severable from the remainder of the
contract work.47 See, Holtzen Construction Company, supra,
75-2 BCA ¶ 11,378, at 54,160.
Rather, the Board believes that the better analogy to the
present circumstances involves the service contract confronted
by the General Services Board of Contract Appeals (GSBCA) in
Griffin Services, Inc., supra. In that case, a building
maintenance contractor was warded a cleaning contract for four
Federal buildings. The contract price was an aggregate of
monthly prices for the provision of services at all locations
involved. At the same time, the contract also contained
breakdowns of the monthly maintenance costs applicable to each
building. When the Government closed one of the covered
buildings, it partially terminated the contract and reduced
the total contract price by he amount listed in the offer for
that building. The GSBCA rejected the Government's pricing
theory because it was inequitable for the following reason:
The Government's premise for reducing the appellant's
payment by the amount of appellant's offer in its bid for
the individual building is that the contract consisted of
line items rather than monthly prices. Thus, it maintains,
the deletion of one building required the deletion of that
line item in its entirety from the contract payment. We
have previously held, however, that in contracts containing
similar pricing schemes, the price per month must be take
as an aggregate offer and not merely as the sum of
severable line items. Griffin Services, Inc., GSBCA [No.]
10841, 92-2 BCA ¶ 24,945.
Griffin Services, Inc. v. General Services Administration,
supra, 92-3 BCA ¶ 25,181, at 125,486. [Emphasis added.] As
the Board has already indicated, it believes that because of
the integrated nature of the production process under the
disputed contract, it is unreasonable to treat each line item
task as if it were a severable item within the pricing
structure of the disputed contract. Accordingly, for all of
these reasons, the Board finds and concludes that the
Government has failed to prove its claimed entitlement to a
price reduction on the basis taken.
As for the Appellant's equitable adjustment claim, that matter
is easily disposed of. The Contractor also had a burden of
proof in this case. First, it had to show the total amount of
money to which it is entitled. See, Lawrence D. Krause,
supra, 82-2 BCA ¶ 16,129; Onetta Boat Works, Inc., supra, 81-2
BCA ¶ 15,279; Globe Construction Co., supra, 78-2 BCA ¶
13,337; Click Company, Inc., GSBCA No. 3007, 70-1 BCA ¶ 8,335;
Campbell Company, General Contractor, Inc., IBCA No. 722, 69-1
BCA ¶ 7,574. Second, the Appellant had to demonstrate the
causal connection between its increased costs and the changes
ordered by the Government. Banta Company, supra, Sl. op. at
55, fn. 69. See also, S.W. Electronics & Manufacturing
Corporation v. United States, 228 Ct.Cl. 333, 655 F.2d 1078
(1981), aff'g, ASBCA No. 20698, 77-2 BCA ¶ 12,631; Jan-Beck
Associates, supra, 87-2 BCA ¶ 19,831, at 100,322 (citing,
Schoenfeld Associates, supra, 87-2 BCA ¶ 19,648). Third, the
Contractor had to prove that its costs were reasonable. See,
Celesco Industries, supra, 79-1 BCA ¶ 13,604; Triple "A"
Machine Shop, Inc., ASBCA No. 21561, 78-1 BCA ¶ 13,065; Cal
Constructors, ASBCA No. 21179, 78-1 BCA ¶ 12,992. See
generally, Cibinic and Nash, pp. 504-05. The Contractor has
shown none of these elements in this case.
The Board does not need to repeat its detailed criticisms of
the Appellant's claim.
Suffice it to say, while the Contractor elected to establish its
equitable adjustment costs on the basis of estimates, they are
not supported by the detailed, substantiating information which
is required. See, e.g., R.G. Robbins & Company, supra, 83-1 BCA
¶ 16,420; Leopold Construction Company, supra, 81-2 BCA ¶ 15,277;
Bailey Specialized Buildings, Inc., supra, 71-1 BCA ¶ 8,699.
Furthermore, the Board has already expressed its strong suspicion
that the Appellant's revised makeready/setup charge is the
product of some arbitrary formula, rather than an honest attempt
to approximate its actual increase in costs resulting from the
Government's change order, and hence is unacceptable on that
basis. See, Ordnance Materials, Inc., supra, 88-3 BCA ¶ 20,910.
Consequently, the Board has no benchmark by which to determine
the reasonableness of the Contractor's costs for performing the
work as originally required and as subsequently changed by the
Government. Zurfluh Enterprises, Inc., supra, 85-1 BCA ¶ 17,789;
Dick & Kirkman, Inc., supra, 84-3 BCA ¶ 17,662; Lawrence D.
Krause, supra, 82-2 BCA ¶ 16,129; Jack Picoult, supra, 78-1 BCA ¶
13,024. Since the Board is unable to determine the
reasonableness of the Appellant's costs on the basis of this
record, it must also conclude that the Appellant has failed to
sustain its burden of showing that its costs were reasonable
under the circumstances of this case. Banta Company, supra, Sl.
op. at 45 (citing, Michael, Inc., ASBCA No. 35653, 92-1 BCA ¶
24,412, at 121,863).
B. Applying the "jury verdict" method, the Board concludes
that the Respondent took too large a reduction in the
contract price because of the page deletions, and the
Appellant is entitled to additional compensation of
$8,310.45 as a fair and reasonable equitable adjustment in
this case.
Having rejected the cost computation methods advanced by both
parties, the Board now finds itself on the horns of a dilemma.
On the one hand, the Board cannot ignore the undisputed fact
that the Government directed the Appellant to make numerous
author's alterations to the Citizen Soldier on at least three
separate occasions, caused the Contractor to produce multiple
sets of varying galley and progressive page proofs, and
otherwise delayed completion of the contract of the contract
for nearly nine months. On the other hand, the Board knows
that while there is no standard by which to measure the
reasonableness of the Contractor's costs, it is nonetheless
inescapable that the contract changes ordered by the
Respondent had some cost impact. The law, however, provides a
way out of this conundrum.
In Banta Company, which also arose out of a contractor's claim
that the Government took too large a credit for page
deletions, the Board, as here, rejected the cost computations
of both parties, and applied the so-called "jury verdict"
method to establish a fair and reasonable equitable
adjustment.48 Banta Company, supra, Sl. op. at 46-47. See
also, Maryland Composition, supra, Sl. op. at 6 (Claim I,
Group I-Jacket Nos. 356-532, 397-529, 424-224, 470-631,
476-450, 732-414, 461-096-citing, Johnson, Drake & Piper,
Inc., supra, 65-2 BCA ¶ 4,868). Under the "jury verdict"
technique, where a board or court finds an entitlement to an
equitable adjustment but the evidence is incomplete, or the
amount cannot be determined with any degree of mathematical
precision, it may exercise its discretion to resolve
conflicting evidence concerning the claim and arrive at a fair
amount of compensation.49 Assurance Company v. United States,
813 F.2d 1202, 1205 (Fed. Cir. 1987); S.W. Electronics &
Manufacturing Corporation v. United States, supra, 228 Ct.Cl.
at 333, 655 F.2d at 1078; Electronic & Missile Facilities,
Inc. v. United States, 189 Ct.Cl. 237, 416 F.2d 1345, 1358
(1969). See also, Dawco Construction, Inc., ASBCA No. 42120,
92-2 BCA ¶ 24,915; Gricoski Detective Agency, GSBCA Nos.
8901(7823), 8922(7824), 8923(7825), 8924(7826), 8925(7827),
8926(7828), 90-3 BCA ¶ 23,131; E.W. Eldridge, Inc., ENGBCA No.
5269, 90-3 BCA ¶ 23,080; Harvey C. Jones, Inc., IBCA Nos.
2070, 2150, 2151, 2152, 2153, 2467, 90-2 BCA ¶ 22,762. The
key to the use of the "jury verdict" method is the presence of
sufficient evidence to permit the determination of a fair and
reasonable approximation of damages.50 J.E.T.S. Incorporated,
ASBCA No. 28083, 88-2 BCA ¶ 20,540, at 103,859 (citing,
Schuster Engineering, Inc. ASBCA Nos. 28760, 29306, 30683,
87-3 BCA ¶ 20,105). Thus, a trier of fact may allow recovery
if it determines that: (1) clear proof of injury exists; (2)
there is no more reliable method for computing damages; and
(3) there is sufficient evidence to make a fair and reasonable
approximation of damages.51 See, Dawco Construction, Inc. v.
United States, supra, 930 F.2d at 880 (citing, WRB Corporation
v. United States, 183 Ct.Cl. 409, 425 (1968)); Gricoski
Detective Agency, supra, 90-3 BCA ¶ 23,131; Harvey C. Jones,
Inc., supra, 90-2 BCA ¶ 22,762; J.E.T.S. Incorporated, supra,
88-2 BCA ¶ 20,540; Lawrence D. Krause, supra, 82-2 BCA ¶
16,129. In the Board's judgment, all of the elements
necessary for a "jury verdict" award are present in this case.
Consequently, that approach is the appropriate method for
resolving this dispute.52 Banta Company, supra, Sl. op. at
49. Accord, Gricoski Detective Agency, supra, 90-3 BCA ¶
23,131.
In Banta Company, unlike here, the contractor's claim had been
audited by the Respondent's OIG, and the Board was able to use
the audit report, which was part of the record, as a basis for
its recalculation of the amount of the Government's
deduction.53 Banta Company, Inc., supra, Sl. op. at 57
(citing, S.W. Electronics & Manufacturing Corporation v.
United States, supra, 228 Ct.Cl. 333, 655 F.2d at 1078; E.W.
Eldridge, Inc., supra, 90-3 BCA ¶ 23,080, at 115,901; Schuster
Engineering, Inc., supra, 87-3 BCA ¶ 20,105; Celesco
Industries, supra, 79-1 BCA ¶ 13,604; Pavement Specialists,
Inc., ASBCA No. 17410, 73-2 BCA ¶ 10,082). Obviously, that is
not possible in this case. However, while an audit of the
disputed claim would certainly have been helpful, the Board's
research discloses that even without an audit report there are
other ways to recompute a fair and reasonable equitable
adjustment using the "jury verdict" method. One well-accepted
device is simply to "split the difference" between the amount
claimed by each party. See, Sentry Insurance, A Mutual
Company, VABCA No. 2617, 91-3 BCA ¶ 24,094 (50 percent of the
contractor's invoiced costs, plus 15 percent for markup);
Gricoski Detective Agency, supra, 90-3 BCA ¶ 23,131 (amount
which was midway between the contractor's original demand and
the final bargaining position of the agency); Parkdale
Building Maintenance, ENGBCA No. 5232, 90-1 BCA ¶ 22,319
(average of the contractor's and Government's estimates);
Second Growth Forest Management, Inc., AGBCA No. 88-153-3,
89-1 BCA ¶ 21,569 (average of the contractor's and
Government's production rates); The Morrison Company, ASBCA
Nos. 26746, 26920, 26921, 83-1 BCA ¶ 16,417 (equitable
adjustment was midway between the amounts which the parties
claimed). See also, Delfour, Inc., VABCA Nos. 2049, 2215,
2539, 2540, 89-1 BCA ¶ 21,394 (50 percent of the amount
claimed by the contractor). Given the record the Board has to
deal with in this case, a "jury verdict" which sets the
Appellant's recovery midway between its claim and the amount
offered by the Respondent is the best way to break the
deadlock between the parties and resolve the conflicting
evidence concerning the amount that would be most reasonable
and fair in light of the Government's changes. See, Gricoski
Detective Agency, supra, 90-3 BCA ¶ 23,131, at 116,138-39;
Parkdale Building Maintenance, supra, 90-1 BCA ¶ 22,319, at
112,094; Delfour, Inc., supra, 89-1 BCA ¶ 21,394, at 107,862;
The Morrison Company, supra, 83-1 BCA ¶ 16,417, at 81,675.
Accordingly, the Board will allow the Appellant's claim to the
extent of $8,310.45, calculated as follows:
Appellant's claim $45,135.00
Government's offer 28,514.11
Difference between
claim and offer 16,620.89
50 percent of difference $ 8,310.45
The Board doubts that either party will be satisfied with this
compromise verdict. However, since they both contributed to
the shortcomings with this record, any dissatisfaction with
the Board's decision should also be shared equally.
VI. CONCLUSION
In summary, the Board concludes that while the Respondent was
entitled to some credit for the page deletions, it
underestimated the impact of the deductive changes and took
too much of a reduction in the price of the contract. Banta
Company, supra, Sl. op. at 59 (citing, R & E Electronics,
Inc., supra, 85-3 BCA ¶ 18,316; Zurfluh Enterprises, Inc.,
supra, 85-1 BCA ¶ 17,789; Celesco Industries, supra, 79-1 BCA
¶ 13,604). Consequently, while this decision allows the
Government less of a credit for the deleted work, the Board
believes that its "jury verdict" award represents a fair and
reasonable proximation of the Contractor's costs resulting
from the Government's page reductions. Id. (citing, E.W.
Eldridge, Inc., supra, 90-3 BCA ¶ 23,080; Arctic Corner,
supra, 86-3 BCA ¶ 19,304). Accord, Gricoski Detective Agency,
supra, 90-3 BCA ¶ 23,131; Parkdale Building Maintenance,
supra, 90-1 BCA ¶ 22,319; Delfour, Inc., supra, 89-1 BCA ¶
21,394; The Morrison Company, supra, 83-1 BCA ¶16,417.
Therefore, when the Board considers the quantum of relief
issue in light of the evidence, cases, authorities, and
applicable regulations, it ALLOWS the Appellant's claim to the
fair and reasonable amount of $8,310.45.54 The Contracting
Officer's decision is MODIFIED, accordingly.
ORDER
From the foregoing analysis, the Board finds and concludes
that: (1) both the Appellant and the Respondent have
miscalculated the appropriate equitable adjustment in this
case; (2) the "jury verdict" technique is the best method for
determining a fair and reasonable proximation of the
Contractor's costs resulting from the Government's page
reductions; and (3) applying the "jury verdict" method to this
case, the Appellant is entitled to additional compensation of
$8,310.45 as a fair and reasonable equitable adjustment.
THEREFORE, the Board MODIFIES the Contracting Officer's
decision and REMANDS the case with instructions that
appropriate arrangements be made to pay the Contractor in
accordance with this opinion. Banta Company, supra, Sl. op.
at 62; R.C. Swanson II, supra, Sl. op. at 15.
It is so Ordered.
June 22, 1994 STUART M. FOSS
Administrative Judge
_______________
1 The contract in dispute was awarded to the Appellant's
central office located at 1701 Macklind Avenue, St. Louis,
Missouri 63110. However, this appeal was filed by the
Contractor's Southwest Sales Office in Dallas, Texas.
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 March 22, 1990. GPO Instruction
110.12, Subject: Board of Contract Appeals Rules of Practice
and Procedure (GPO Instruction 110.12), dated September 17,
1984 (Board Rules), Rule 4. It will be referred to hereafter
as R4 File, with an appropriate tab letter(s) also indicated.
The R4 File consists of 13 documents identified as Tabs A
through M.
3 By letter dated April 3, 1990, the Appellant advised the
Board that it had selected the optional Accelerated
Procedure. Board Rules, Rules 12.1(b) and 12.3. However,
numerous delays have characterized this case from the
beginning. For example, although the Board docketed the
Contractor's appeal letter on February 22, 1990, an agency
reorganization soon afterward resulted in the reassignment of
the Board's only Administrative Judge to another senior
position within GPO. Consequently, it was not until March
11, 1991, more than a year after the appeal had been filed,
that the Board's new Administrative Judge was able to conduct
a prehearing telephone conference in the matter. See, Report
of Prehearing Telephone Conference, dated May 23, 1991, p. 1
(RPTC). As a result of that conference, the Board asked the
parties to formulate a stipulation of facts and verify the
Appellant's claim (which was unaudited) by September 3, 1991,
so that the Board could settle the record. Board Rules, Rule
13. See, Universal Printing Company, GPO BCA 9-90, Order
(August 16, 1991), p. 2. For the next 30 months the Board
had intermittent contact with the parties concerning their
progress, and was assured that they were actively discussing
the terms of an agreement which would establish a method for
clarifying the record and assist the Board in resolving the
dispute. Specifically, the Board was told that the parties
were exploring the possibility of creating a joint panel to
audit the Appellant's claim, and to make recommendations to
the Board regarding an appropriate equitable adjustment.
Based on this understanding, the Board, in effect, suspended
further proceedings in the appeal. On March 25, 1994, the
parties sent the Board a proposed stipulation which would
have, inter alia, withdrawn the appeal and submitted the
issues to binding arbitration. The Board appreciates that
the idea of using alternate dispute resolution procedures is
currently in vogue, see, 140 CONG. REC. No. 70, S6593-94
(daily ed. June 8, 1994) (statement of Sen. Wellstone); 24
Agencies Sign OFPP Pledge to Use ADR, 61 FED. CONT. REP.
(BNA) No. 20, pp. 670-72 (May 23, 1994), although the concept
is not without its critics, see, Richard C. Reuben, The Dark
Side of ADR, 14 CAL. LAWYER No. 2, pp. 53-58 (February 1994).
However, the simple fact is that the Board has no authority
to divest itself of its jurisdiction over appeals from final
decisions of GPO contracting officers. Board Rules, Preface
to Rules, ¶ I. The Board's jurisdiction is not statutory,
but rather is derivative and contractual, and flows from the
Public Printer's right, as the agency officer authorized by
law to contract on behalf of the United States, see, 44
U.S.C. § 502, to delegate his appeal authority to the Board
by regulation and the provisions of the contract. See, GPO
Instruction 110.10C, Subject: Establishment of the Board of
Contract Appeals, dated September 17, 1984, ¶ 3; GPO Contract
Terms, Solicitation Provisions, Supplemental Specifications,
and Contract Clauses, GPO Publication 310.2, Effective
December 1, 1987 (Rev. 9-88), Art. 5(b) (Disputes) (GPO
Contract Terms). See also, The Wessel Company, Inc., GPO BCA
8-90 (February 28, 1992), Sl. op. at 32-33; Automated
Datatron, Inc., GPO BCA 20-87 (March 31, 1989), Sl. op. at
4-5; Bay Printing, Inc., GPO BCA 16-85 (January 30, 1987);
Peak Printers, Inc., GPO BCA 12-85 (November 16, 1986), Sl.
op. at 6. Indeed, as an arm of the Legislative branch of
Federal Government, GPO is not an "agency" covered by either
the Contract Disputes Act of 1978 (CDA), 41 U.S.C. § 601 et
seq., or the Administrative Procedure Act (APA), 5 U.S.C. §
551 et seq., including the 1990 and 1992 amendments to the
APA concerning alternative means of dispute resolution in the
administrative process, 5 U.S.C. § 571 et seq. See,
Tatelbaum v. United States, 749 F.2d 729, 730 (Fed. Cir.
1984) (CDA does not apply to GPO contract disputes).
Therefore, no legal basis exists for the Board to voluntarily
waive its appellate authority over contract disputes
involving GPO and the contractors who do business with the
agency, and allow the parties to name their own final
arbiters from the private sector. Thus, the Board would not
approve the proposed stipulation. See, Universal Printing
Company, supra, Order Settling the Record (April 15, 1994),
p. 3 (citing, GPO Instruction 110.10C, Subject: Establishment
of the Board of Contract Appeals, dated September 17, 1984,
¶¶ 4, 5). See also, Board Rules, Preface to Rules, ¶ I
(Jurisdiction for Considering Appeals). Since nearly three
years had elapsed without any meaningful progress on a
stipulation of facts or a method to verify the Appellant's
claim, the Board settled the record. See, Universal Printing
Company, supra, Order Settling the Record, p. 4.
Accordingly, notwithstanding the Appellant's election of the
optional Accelerated Procedure, this matter, for all
practical purposes, has been processed under the Board's
regular procedure for handling cases submitted on the record
without a hearing. Board Rules, Rule 11. See, McDonald &
Eudy Printers, Inc., GPO BCA 06-91 (May 6, 1994), Sl. op. at
1, fn. 2.
4 Since the parties were unsuccessful in providing the Board
with a stipulation of facts, see, note 3 supra, the factual
description of this case is based on the R4 File, the
Appellant's Complaint, dated March 1, 1990, the Respondent's
Informal Brief, dated July 1, 1991 (Res. Brf.), and the
Appellant's Post Conference Memorandum, dated July 29, 1991
(App. Mem.). The facts, which are essentially undisputed,
are recited here only to the extent necessary for this
decision.
5 In pamphlet binding, there are basically two methods of
stitching the signatures together after they have been
collated; i.e., saddle-stitching and side-stitching. In
saddle-stitching, the booklet is placed on a saddle beneath a
mechanical stitching head, and staples are forced through the
backbone or spine of the booklet. This type of binding it
the simplest and least expensive. See, Pocket Pal,
International Paper Company, Memphis, Tennessee (14th ed.,
1989), pp. 149-50.
6 In addition to being subject to all the terms and
conditions of GPO Contract Terms, see, note 3 supra, the
contract was also covered by the Respondent's Quality
Assurance Through Attributes Program (R4 File, Tab A, p. 1).
See, GPO Contract Terms, Quality Assurance Through Attributes
Program for Printing and Binding, GPO Publication 310.1,
dated September 2, 1986.
7 An examination of the "Changes" clause in GPO Contract
Terms discloses that the wording is identical to the standard
Government "Changes" clause for fixed-price contracts. See,
FAR § 52.243-1 (Changes-Fixed-Price).
8 The bid abstract shows that three other printers competed
for the work-Monarch Litho (bid of $151,637,85); Gulf
Printing (bid of $85,539,75); and Hart Graphics (bid of
$50,647.85) (R4 File, Tab D).
9 At first blush, the Appellant's statement that it did not
include the labor and time necessary to accomplish the
additional work in its original bid price would tend to
discredit its own job estimates. See, KRW, Incorporated,
DOTBCA No. 2572, 94-1 BCA ¶ 26,435, at 131,538. However, for
at least the past 20 years, in order to avoid the subjective
judgments inherent in charging for author's alterations on a
time basis, such changes under GPO contracts have been paid
for on a "per line" basis. GPO Contract Terms, Supplemental
Specifications, Art. 17 (Author's Alterations). See,
Maryland Composition, No GPOCAB Docket Number (December 30,
1974), Sl. op. at 7 (Claim II-Jacket No. 465-238).
Consequently, the time taken by the Appellant to perform the
additional work is not relevant. (It should be noted that
Maryland Composition was decided by one of the ad hoc
contract appeals panels which considered appeals from final
decisions of GPO Contracting Officers prior to the
establishment of the Board in 1984. GPO Instruction 110.10C,
Subject: Establishment of the Board of Contract Appeals,
dated September 17, 1984. Decisions of these ad hoc panels
are cited by the Board in its decisions as GPOCAB. While the
Board is not bound by the decisions of the ad hoc panels, its
policy is to follow their rulings where applicable and
appropriate. See, Shepard Printing, GPO BCA 23-92 (April 29,
1993), Sl. op. at 14, fn. 19 (hereinafter Shepard (1993));
R.C. Swanson Printing and Typesetting Company, GPO BCA 15-90
(march 6, 1992), Sl. op. at 28, fn. 30; Stephenson, Inc., GPO
BCA 02-88 (December 20, 1991), Sl. op. at 18, fn. 20; Chavis
and Chavis Printing, GPO BCA 20-90 (February 6, 1991), Sl.
op. at 9, fn. 9.).
10 Under the contract schedule, this task should have been
accomplished by February 17, 1989 (R4 File, Tab A, p. 6).
However, because the Respondent had returned the galley
proofs and dummy layout on February 15, 1989, instead of
February 7, 1989, the schedule was automatically extended a
like amount of time by operation of the contract, so the
Appellant actually set the page proofs to the DRPPO a day or
two early. See, GPO Contract Terms, Contract Clauses, Art.
12.(c) (Extension of Schedules).
11 The Contractor notes that the original specifications only
called for composition from "typewritten manuscript copy",
not from a "floppy disk"; i.e., from hard copy and not by
electronic means. Complaint, p. 2; App. Mem., p. 2, ¶ 11.
See, R4 File, Tab A, p. 1 (Material Furnished).
12 The Respondent recalls this as occurring on July 21, 1989.
Res. Brf., p. 2.
13 The Respondent recalls this as occurring on September 27,
1989. Res. Brf., p. 3.
14 According to the Appellant, all of these charges were
either approved by the Contract Administrator or are
undisputed. App. Mem., pp. 3-4, ¶¶ 18, 19. See, R4 File,
Tab K. In that regard, the record indicates that the DRPPO's
Contractor Administrator for the contract in dispute was Bill
Bollinger (R4 File, Tabs G and J). See also, Complaint, p.
3.
15 Accompanying the proofs was a letter from the Contracting
Officer to the Appellant telling it to proceed with the
production run once it made the two necessary corrections;
i.e., (1) the author's alterations on pages 5, 7, 14, 20 and
28, as marked on the proofs; and (2) deleting the brown
screen from the red screened Fifth Army area of the
illustration on page 5. See, Letter from R. W. Wildbrett,
Contract Officer to Morey Mast, Universal Printing Company,
dated December 6, 1989. The Contracting Officer's letter was
not in the R4 File, but rather was furnished to the Board by
the Appellant, as an attachment to its letter of June 11,
1991, in which it commented on the RPTC and restated its
position in this appeal. See, Letter from Morey Mast, Sales
Manager, Southwest Region, Universal Printing Company, to the
Board of Contract Appeals, dated June 11, 1991. Although the
Board is willing to believe that the Contracting Officer's
failure to make this letter part of the R4 File was
unintentional, there is also no doubt that this document was
pertinent to appeal and should have been included. In that
regard, the Government's obligation in preparing the appeal
file is to search its records diligently so that it submits
to the Board as complete a file as may be assembled under the
circumstances. It goes without saying that the Government
may not, with respect to those documents actually reviewed
during compilation of the appeal file, limit inclusion only
to those documents which support its position. It should be
emphasized that selective omission of pertinent documents is
contrary to the requirements of Rule 4 of the Board Rules.
See, P.J. Dick Contracting, Inc., VABCA No. 3177R-82R, 93-1
BCA ¶ 25,263, at 125,838. See also, Bethlehem Steel
Corporation, ASBCA No. 29459, 86-3 BCA ¶ 19,159.
16 The Board assumes that the postponement was due to the
Christmas-New Year's holiday season. As the Board has
remarked in the past, customarily little work is accomplished
at that time of year in the typical Government agency or
business firm. See, Graphics Image, Inc., GPO BCA 13-92
(August 31, 1992), Sl. op. at 15, fn. 17.
17 On January 11, 1990, the Contractor revised its claim by
deleting the $96.00 charge for rerunning two galleys, thus
changing the total cost for typesetting to $7,693.12 (R4
File, Tabs F, p. 2, and J).
18 The bracketed words were inserted in place of the word
"mixed", which was crossed out (R4 File, Tab F, p. 3).
19 The appeal file contains a handwritten document entitled
"Recap-Charges for J 563-541" which shows the computations
made by the Contract Compliance Officer in arriving at the
revised contract price (R4 File, Tab H). RPTC, pp. 2, 7;
Res. Brf., p. 2. Essentially, the Contract Compliance
Officer accepted the Appellant's figures for: (a) typesetting
the pamphlet as initially ordered and making 164 line of
author's alterations ($2,886.00 + 154.16 = $3,040.16); (b)
resetting the Citizen Soldier as a 32 page publication and
making 4 lines of author's alterations ($2,886.00 - 912.00 +
3.76 = $1,997.76); (c) the page make-up for the revised
pamphlet ($1,646.00 - $616.80 = $1,029.20); and (d) the
entire claim for making the author's alterations on the
progressive page proofs ($1,028.00). On the other hand, the
Contract Compliance Officer rejected the Contractor's
calculations for: (a) the page make-up on the original order
($1,646.00 for 48 pages); (b) the makeready/setup charges for
the revised publication ($14,688.00); and (c) the new running
rate of $92.75 (which would have made the cost for printing
1,050 copies of the Citizen Soldier $13,912.50). Instead,
the Contract Compliance Officer recomputed these costs.
First, he reduced the page make-up cost on the original order
by $308.40 (40 pages at the additional page rate in the
Appellant's bid of $38.55 per page) to $1,337.60. Then for
printing and binding costs, the Contract Compliance Officer:
(a) retained the makeready/setup charges in the original bid
estimate ($3,840.00); (b) established a new running rate of
$180.02 by subtracting the additional rate for four page
signatures ($8.70) from the bid estimate for running 100
copies ($188.72); (c) calculated a signature rate of $60.00
(based on a 16 page signature) by dividing the new running
rate ($180.02) by the number of signatures in the originally
ordered booklet (48 ( 16 = 3); and (d) used the signature
rate to compute the cost of running 1,050 copies of the
Citizen Soldier in three different configurations
($10,552.50) and the additional rate to calculate the cost of
running the covers ($874.35), for a total printing, binding,
and distributing cost of $11,426.85. Finally, for the film
and proof work, the Contracting Officer: (a) calculated a
price for four-color process separations of $2,334.54 by
determining that the 46 photographs in the Citizen Soldier
totaled 1,066 square inches and then multiplying that figure
by the bid estimate price ($2.19); and (b) computed a cost of
$2,500.00 for the progressive proofs by applying the bid
estimate rate to the four sets of proofs produced (4 sets x
$875.00 each set = $3,500.00) and then subtracting the cost
of two press forms (there were 7 press forms in each set of
proofs, so the cost of each press form was $125.00; i.e.,
$875.00 ( 7 = $125.00) from each of the four sets ($125.00 x
2 press forms = $250.00 x 4 sets = $1,000.00). See
generally, Res. Brf., pp. 2-5.
20 A question arose during the processing of this appeal
about whether or not the Contracting Officer's letter of
January 24, 1990, was a "final decision" within the meaning
of GPO's regulations-a condition precedent to the Board's
assertion of jurisdiction in this appeal (R4 File, Tab I).
See, Printing Procurement regulation, GPO Publication 305.3
(September 1, 1988), Chap. X, Sec. 1, ¶ 4.d (PPR). See also,
Board Rules, Preface to Rules, ¶ I (Jurisdiction for
Considering Appeals). The parties, from the outset, have
construed this letter to be a final decision, and the
Contracting Officer's subsequent letters of February 12, 1990
and April 8, 1994, only reaffirmed that view. See, R4 File,
Tab L; Letter from R.W. Wildbrett, Contract Officer to Board
of Contract Appeals, dated April 8, 1994. In any event,
attached to the Contracting Officer's letter of January 24,
1990, was Contract Modification K-1, dated the same day,
decreasing the price of the Appellant's contract from
$40,461.75 to the "firm cost" of $28,514.11 (R4 File, Tab I).
It is well-settled that a unilateral contract modification by
the Government reducing the price of a contract constitutes a
formal and final action equivalent to a final decision by the
Contracting Officer from which a contractor can appeal. See,
Goetz Demotion Company, ASBCA No. 39129, 90-2 BCA ¶ 22,756;
P.X. Engineering Company, ASBCA No. 38215, 89-2 BCA ¶ 21,859;
Systron Donner, Inertial Division, ASBCA No. 31148, 87-3 BCA
¶ 20,066. Like section 8(e) of the CDA, 41 U.S.C. § 607(e),
the Board Rules contemplate the just and inexpensive
resolution of disputes without unnecessary delay. Board
Rules, Preface to Rules, ¶ VI.C. (Administration and
Interpretation of Rules). Consequently, the Board agrees
with the Armed Services Board of Contract Appeals (ASBCA)
that, as a rule, a contractor is not required to go through
the "charade" of filing a claim and requesting a decision
from the Contracting Officer where, as here, the Government
has issued a unilateral modification reducing the contract
price, because that would be an unnecessary, delaying and
expensive formality. See, P.X. Engineering Company, supra,
89-2 BCA 21,859, at 109,952.
21 As indicated previously, both parties submitted written
briefs setting forth their respective positions on the issues
in this appeal. See, note 4 supra. The Board's
understanding of the parties is based on the Appellant's
Complaint, the formal briefs filed by the parties, and the
discussions at the prehearing conference on March 11, 1991.
22 Although it would appear from the appeal letter that the
gap between the parties with respect to the contract price
for the 28-page pamphlet is only $1,225.89-a modest
difference of opinion in the context of this case-in reality,
their disagreement is much larger. In that regard, it is
clear that the Contractor is willing to accept $29,740.00
only for the 28-page Citizen Soldier, while the Contracting
Officer tendered $28,514.11 in payment for the whole job.
23 At the conclusion of the prehearing telephone conference
on March 1, 1991, there was no disagreement about the fact
that the Government owed the Appellant at least $28,514.11,
which had not yet been paid to the Contractor. RPTC, p. 9,
fn. 1. GPO's Printing Procurement Regulation provides: "In
the event of an appeal, the amount, if any, determined to be
payable in the decision of the Contracting Officer, less any
portion previously paid, should be paid in advance of any
decision by the board without prejudice to the rights of
either party or the appeal." See, PPR, Chap. X, Sec. 1, ¶
5.g. The Board has been advised that since the conference
the Contractor has submitted a proper invoice for the
undisputed amount of $28,514.00, and has been paid.
Therefore, the amount of the original claim still in
controversy is $16,620.89 ($15,395.00 + 1,225.89).
24 The crux of the Appellant's argument is that the
Government's changes to the publication were so extensive
that the apart from the separation of the front and outside
covers and restripping, all of the work it had done on the
48-page pamphlet was lost and it had to start the pre-press
work afresh. RPTC, p. 4. Thus, the Appellant believes that
it is justified in asking the Government to reimburse it for
the preparatory work it did on the 48-page pamphlet which
could not be salvaged for the final product. RPTC, pp. 4-5,
8. Insofar as the Contractor also contends that the gap
between the original order for a 48-page Citizen Soldier and
the final 28-page product was so large as to be
unconscionable, see, RPTC, p. 8, its argument is tantamount
to an allegation that the Respondent was acting in bad faith.
However, the Board has held on numerous occasions that
because of the strong presumption that Government officials
properly and honestly carry out their functions, an
allegation of bad faith must be established by "well-nigh
irrefragable" proof. See, e.g., Sterling Printing, Inc., GPO
BCA 20-89 (March 28, 1994), Sl. op. at 23, fn. 35; Hurt's
Printing Company, Inc., GPO BCA 27-92 (January 21, 1994), Sl.
op. at 11, fn. 15; Shepard Printing (1993), supra, Sl. op. at
7-8, fn. 11; B. P. Printing and Office Supplies, GPO BCA
14-91 (August 10, 1992), Sl. op. at 16; The Standard Register
Company, GPO BCA 4-86 (October 28, 1987); Sl. op. at 12-13.
Accord, Karpak Data and Design, IBCA No. 2944 et al., 93-1
BCA ¶ 25,360; Local Contractors, Inc., ASBCA No. 37108, 92-1
BCA ¶ 24,491. The key to such evidence is that there must be
a showing of a specific intent on the part of the Government
to injure the contractor. Kalvar Corporation v. United
States, 543 F.2d 1298, 1302 (Ct.Cl. 1976), cert. denied, 434
U.S. 830 (1977). See, Stephenson, Inc., supra, Sl. op. at
54. In the Board's view, no such "irrefragable" proof of the
Respondent's bad faith exists in this record. Certainly,
there is absolutely nothing to show that the employees of two
separate Government entities-GPO and the Army-set out to harm
the Appellant or that they acted in concert to achieve that
specific result. See, e.g., Sterling Printing, Inc., supra,
Sl. op. at 23, fn. 35; Stephenson, Inc., supra, Sl. op. at
57.
25 Among other things mentioned by the Appellant, the
"Schedule of Prices" only asks for makeready/setup and
running prices based on "four page signatures" (R4 File, Tab
A, p. 9), and not on any other basis. App. Mem., p. 5.
Furthermore, the Contractor says that the Contracting Officer
ignored the most basic fact in the printing trade; i.e., that
on the type of press used for the job, it costs more per page
to produce the smaller size book (28 pages) than the larger
one (48 pages). RPTC, p. 4. Consequently, reducing the size
of the Citizen Soldier from 48 pages to 28 pages would
produce savings only in the use of paper and ink, which would
be minimal at best, and would not affected the costs for
press time, make-ready, labor, collating and binding. App.
Mem., p. 5.
26 Indeed, the Appellant says that if the Contracting Officer
had informed it earlier in the production process of his
intention to reprice the contract for the smaller version of
the Citizen Soldier on the basis of prorating the original
bid estimates, the Contract itself would most likely have
refused to proceed, and demanded a termination for
convenience. App. Mem., p. 6.
27 The Appellant enclosed two documents with its letter of
April 3, 1990, to the Board, identified as Exhibits A and B,
respectively. The first document was a price quotation from
Colortek, Inc. (Colortek), a film shop located in Dallas,
Texas, showing charges of $6,336.00 for separations and
$6,469.00 for stripping work on a 40-page sample, plus cover,
of the Citizen Solider. See, Letter from Morey Mast, Sales
Manager, Southwest Region, Universal Printing Company to
Board of Contract Appeals, dated April 3, 1990 (hereinafter
Appellant's Letter of April 3, 1990), Exhibit A. Since
Colortek's quote is dated March 27, 1990, it was obviously
solicited by the Contractor solely for the purpose of this
appeal. The Board assumes that Colortek's quotation is
intended to show that the Appellant's charges for the same
work are in accord with prices in the industry, and hence its
claim for film work is reasonable. The Board would be
willing to accept Colortek's price quotation as evidence if
the Appellant had subcontracted the work to that firm, see,
Fireman's Fund Insurance Company, ASBCA No. 39666, 91-1 BCA ¶
23,372 (citing, Delco Electronics Corporation v. United
States [35 CCF ¶ 75,679], 17 Cl.Ct. 302 (1989)), or there was
some other proof of privity of contract between them; e.g.,
producer-supplier. See, Sterling Printing, Inc., supra, Sl.
op. at 8 and 35, fns. 13 and 47 (report on quality of paper
from contractor's paper supplier). Accord, Atlantic Electric
Company, GSBCA No. 6016, 83-1 BCA ¶ 16,484. In the absence
of such proof, Colortek's price quotation is entitled to
little evidentiary weight beyond that of argument. Board
Rules, Rule 13(c). See, RD Printing Associates, Inc., GPO
BCA 02-92 (December 16, 1992), Sl. op. 10 and 13, fns. 11 and
15 (memorandum from customer-agency employee supporting
contractor's interpretation of the contract, and revised
pricing specification from the succeeding contract). See
also, Merchant's Service Company, No GPOCAB Docket Number
[GPO Contract Nos. 373 and 374] (February 11, 1980), Sl. op.
at 18-20. Accord, Hildebrand and Day, AGBCA No. 82-183-1,
82-188-1, 83-1 BCA ¶ 16,321 (affidavit attached to brief).
The second document, a preliminary estimate prepared by the
Appellant on March 29, 1990, for bid purposes on another GPO
contract-Program C598-S-covering the production of a saddle-
stitched pamphlet with a page count of between 24 to 48
pages, is also of no help to the Contractor in proving its
claim. See, Appellant's Letter of April 3, 1990, Exhibit B.
The Contractor contends that its estimate for Program C598-S,
which does not include film work, will demonstrate the
unreasonableness of the Contracting Officer's decision to
calculate the revised contract price by prorating the
original bid estimates. Apart from the "bootstrap" nature of
this argument, the Board has already indicated that its
narrow jurisdictional mandate prevents it from considering
matters pertaining to other contracts unrelated to the one
involved in this case. See, note 3 supra (and cases cited
therein). Consequently, except for default termination cases
where a reprocurement contract is under review because the
contractor is contesting the assessment of excess
reprocurement costs, see, e.g., Sterling Printing, Inc.,
supra, Sl. op. at 55-63, the Board has consistently refused
to consider matters outside the scope of the disputed
contract. See, Shepard Printing (1993), supra, Sl. op. at 7,
fn. 11; B. P. Printing and Office Supplies, supra, Sl. op. at
14-15. Accordingly, the Board will not consider the
Appellant's estimates for Program C598-S in the context of
this case.
28 The record on which the Board's decision is based consists
of: (a) the Appellant's Complaint; (b) the R4 File, Tabs A-M;
(c) the Report of Prehearing Telephone Conference; (d) the
Respondent's Informal Brief; and (e) the Appellant's Post
Conference Memorandum.
29 The extent of the Contractor's palpable frustration can be
seen in its letter of October 2, 1989, when it told the
DRPPO: ". . . [B]oy are we going to be happy to see this job
come to an end." See, R4 File, Tab F, p. 3.
30 See, note 3 supra.
31 The appeal was submitted to the Board for resolution on
the record. Board Rules, Rule 11. See, RPTC, p. 2;
Appellant's Letter of April 3, 1990. It is well-settled that
even though an appellant selects a Rule 11 proceeding for its
appeal, it is still responsible for providing adequate
evidence to allow a contract appeals board to make a finding
in its favor. Shumate Constructors, Inc., VABCA No. 2772,
90-3 BCA ¶ 22,946, at 115,192 (citing, Jan-Beck Associates,
VABCA Nos. 2107 et al., 87-2 BCA ¶ 19,831; Shoenfeld
Associates, VABCA Nos. 2104, 2510-2517, 87-2 BCA ¶ 19,648).
Although there is enough undisputed evidence here to decide
the issues, the record contains certain evidentiary conflicts
which perhaps could have resolved if the parties had agreed
to a stipulation of facts, on the one hand, or a method for
auditing the Appellant's claim, on the other, as requested by
the Board. See, note 3 supra. However, the Board cannot
avoid its responsibility, and we make our decision on the
record as we find it. Shumate Constructors, Inc., supra,
90-3 BCA ¶ 22,946, at 115,192.
32 Under GPO Contract Terms, where, as here, the pricing of
any contract modification is in dispute, the Contracting
Officer has the right to audit the contractor's books,
records, documents and other data related to negotiating,
pricing or performing the modification. See, GPO Contract
Terms, Contract Clauses, Art. 40 (Audit-Sealed Bidding). The
same right is accorded to GPO's Office of the Inspector
General (OIG). Id. However, by its terms, this clause only
applies when the contract amount exceeds $100,000.00.
Consequently, the Board's policy, announced in this decision,
merely extends the Government's auditing rights to sealed bid
contracts of lesser value. The comparable contract clause
for other types of contracts (e.g., cost-reimbursement,
incentive, time-and-materials, labor-hour, or price
redeterminable contracts, etc.) is GPO Contract Terms,
Contract Clauses, Art. 42 (Audit-Negotiation).
33 Indeed, the observations made by the authors of the book
"Getting It Printed: How to Work with Printers and Graphic
Arts Services to Assure Quality, Stay on Schedule, and
Control Costs", seem particularly apropos. In that regard,
they say, in pertinent part: "Final costs almost always
exceed quotes because of changes from the original
specifications. . . . Most alterations take place during film
preparation, not press or bindery work. Printers usually
base estimates and quotes on specifications, not final copy.
. . . Alterations also occur when customers change their
minds between writing specifications and producing camera
ready copy. . . . The cost of alterations varies from almost
free to very expensive, depending on the nature of the
changes and at what stage they occur. We use the rule of
thumb that a change that costs $5 at the pasteup stage will
cost $50 at the negative stage and $500 on press [in other
words, at multiples of 1, 10 and 100]. . . . After negatives
are stripped, any change in format such as a revised page
count, a new trim size, or a different number of colors means
major alteration costs. New formats require at least partial
restripping and may require refiguring the entire job." Mark
Beach, Steve Shepro, and Ken Russon, Getting It Printed: How
to Work with Printers and Graphic Arts Services to Assure
Quality, Stay on Schedule, and Control Costs, (Coast to Coast
Books, Portland, Oregon, 1986), pp. 90-91 (hereinafter Beach,
Shepro, and Russon). [Emphasis added.]
34 The regulations and case law make it clear that
adjustments to the contract price on account of Government-
ordered changes are on a cost basis. GPO Contract Terms,
Contract Clauses, Art. 4.(b). See, Bruce Construction
Corporation v. United States [9 CCF ¶ 72,325], 163 Ct.Cl. 97,
324 F.2d 516 (1963); ACS Construction Company, Inc. of
Mississippi, ASBCA No. 33550, 87-1 BCA ¶ 19,660.
35 The unpaid cost of film work ($6,427.97), which was
submitted to the Contracting Office on February 8, 1990,
represents 39 percent of the claim.
36 The Board cannot tell whether the Contractor's adjusted
running rate for 10,050 copies of the Citizen Soldier is also
derived from some arbitrary formula. (Although there was a
58 percent reduction in the number of pages in the pamphlet-
from 48 to 28-the downward revision in the running rate was
only 49 percent-from $188.75 to $92.75.) Indeed, the Board
has no idea how the Appellant computed the new figure since
it has not supplied any supporting documentation. However,
it is unnecessary for the Board to answer that question.
Suffice it to say, that when the Board compares the
Contracting Officer's calculation for running the pamphlet
($11,426.85) with the Appellant's approximately 18 percent
lower figure ($9,321.38) for the same work, it wonders if the
parties are even dealing with the same contract.
37 In that regard, a basic custom of the printing trade is to
charge for author's alterations, which represents work
performed in addition to the original specifications, at
current rates and support the charges with documentation upon
request. Beach, Shepro, and Russon, p. 176. However, for
author's alterations performed under GPO contracts such
documentation is required. GPO Contract Terms, Supplemental
Specifications, Art. 17.(c) (Author's Alterations-Proof of
charge).
38 See, note 27 supra.
39 The reason for this approach was stated in Bruce
Construction Corporation: "Since the purpose underlying such
adjustments is to safeguard the contractor against increased
costs engendered by the modification, it appears patent that
the measure of damages cannot be the value received by the
Government, but must be more closely related to and
contingent upon the altered position in which the contractor
finds himself by reason of the modification." Bruce
Construction Corporation v. United States, supra, 163 Ct.Cl.
at 100, 324 F.2d at 518.
40 The reason for this bias was clearly stated by the Federal
Circuit in Dawco Construction, Inc. v. United States, when it
said: ". . . the `actual cost method' is preferred because
it provides the court, or contracting officer, with
documented underlying expenses, ensuring that the final
amount of the equitable adjustment will be just that-
equitable-and not a windfall for either the [G]overnment or
the contractor." Dawco Construction, Inc. v. United States,
930 F.2d 872, 882 (Fed. Cir. 1991), rev'g, 18 Cl.Ct. 682
(1990).
41 While the contractor's original or bid estimate can be
used to determine the cost of the work, later evidence, such
as purchase order prices or vendor quotations, are normally
better evidence of the costs that the contractor would have
incurred. See, e.g., Atlantic Electric Company, supra, 83-1
BCA ¶ 16,484. If there is no such evidence, the bid estimate
may be considered the best available proof of this amount.
Select Contractors, Inc., ENGBCA No. 3919, 82-2 BCA ¶ 15,869;
Dawson Construction Company, Inc., GSBCA No. 5672(5308)-Rein,
81-2 BCA ¶ 15,387, aff'd on reconsid., 82-2 BCA ¶ 15,914;
Onetta Boat Works, Inc., supra, 81-2 BCA ¶ 15,279; Pruitt,
Inc., ASBCA No. 18344, 73-2 BCA ¶ 10,213. But see, Ordnance
Materials, Inc., supra, 88-3 BCA ¶ 29,910. However, the use
of estimates does not change the burden of proof. Cf.,
Lagarelli Brothers Construction Company, Inc., ASBCA No.
34793, 88-1 BCA ¶ 20,363; Clary Corporation, ASBCA No. 19274,
74-2 BCA ¶ 10,927.
42 In Condor Reliability Services, Inc., the ASBCA stated:
"The rule applicable to the price is . . . `the difference
between the reasonable cost of performing without the change
or deletion and the reasonable cost of performing with the
change or deletion.' [Citation omitted.] The result should
not change the contractor's loss or profit position before
the change occurred. In other words, there should be no
repricing of the contract as a whole." Condor Reliability
Services, Inc., supra, 90-3 BCA ¶ 23,254, at 116,675-76.
[Emphasis added.]
43 As explained by the Claims Court: "The search for
`reasonability,' . . . , is not limited to inquiry of such
factors as `fair market value' or `historical cost.' . . .
The reasonable cost concept includes both `objective' and
`subjective' elements . . . The objective focus is on the
costs that would have been incurred by a prudent businessman
placed in a similar overall competitive situation . . .
However, unless it also takes into account the subjective
situation of the contractor, a test of `reasonable cost' is
incomplete. . . .". Nager Electric Company, supra, 194
Ct.Cl. at 851-53, 442 F.2d at 945-46.
44 Generally, the Government's credit for deleted work is
measured by the net cost savings to the contractor. S.N.
Nielsen Company v. United States, 141 Ct.Cl. 793 (1958);
Jackson Engineering Company, Inc., ASBCA No. 27104, 85-3 BCA
¶ 18,418; Unicom Systems, Inc., ASBCA No. 29468, 84-3 BCA ¶
17,675; N.G. Adair, Inc., ASBCA No. 25961, 83-2 BCA ¶ 16,887;
Fordel Films West, ASBCA No. 23071, 79-2 BCA ¶ 13,913;
Celesco Industries, supra, 79-1 BCA ¶ 13,604. See also,
Cibinic and Nash, pp. 483, 496. As explained by the ASBCA:
"When a change deletes work, the Government is entitled to an
amount equal to what it would have reasonably cost the
contractor to have performed the work. In other words, the
price reduction for the deletion should leave the contractor
in the same financial condition as it would have been if the
change order had not been issued. [Citation omitted.] While
the proper measure of the price reduction is what it would
have cost [the contractor] to perform the deleted work, the
ascertainment of this figure is not always easy since by
definition the `actual costs' of deleted work are not
available." ACS Construction Company, Inc. of Mississippi,
supra, 87-1 BCA ¶ 19,660, at 99,550. See also, Condor
Reliability Services, Inc., supra, 90-3 BCA ¶ 23,254, at
116,675-76. Obviously, if the contractor realized no savings
from a change, the Government will not be awarded a price
reduction. See, e.g., L.G. Lefler, Inc. v. United States, 6
Ct.Cl. 514 (1984).
45 Sustaining this evidentiary burden may not be an easy task
for the Government because deleted work is not actually
performed. ACS Construction Company, Inc. of Mississippi,
supra, 87-1 BCA ¶ 19,660, at 99,550. Consequently, a board
may have to find the requisite proof in the "comparative
reasonableness" of the estimates presented by the respective
parties. Jackson Engineering Company, Inc., supra., 85-3 BCA
¶ 18,418, at 92,492. Indeed, it has been noted that
estimates are used almost exclusively to establish the cost
of deleted work. Cibinic and Nash, p. 510. See, Arctic
Corner, ASBCA No. 29545, 86-3 ¶ 19,304.
46 This is not to say that the Government's changes had no
affect on the Contractor's performance under the contact
whatsoever. That there was some reduction in the contract
here is beyond cavil. However, what the record demonstrates
is a reduction in the number of pages per copy, not the
number of copies which had to be produced under each
contract. See, Banta Company, supra, Sl. op. at 53-54, fn.
66. Thus, while the Appellant had to print 201,000 less
pages (20 pages x 10,050 copies), it nonetheless still had to
produce 10,050 copies of the Citizen Soldier. The Respondent
assumes that because the Government required less pages,
ergo, less effort was required by the Contractor. To the
contrary, in the Board's view, the reduction in the amount of
paper and ink required to perform the contract is offset by
the increased activity on the part of the Contractor which
was necessary to make all of the author's alterations and
produce a pamphlet which was satisfactory to the Army. Id.
Accord, Celesco Industries, supra, 79-1 BCA ¶ 13,604. See
also, Beach, Shepro, and Russon, note 34 supra.
47 Even so, a contractor is still entitled to recover
reasonable and necessary expenses incurred exclusively for
the deleted item prior to its deletion. Groesbeck-Durbin,
Inc., supra, 72-1 BCA ¶ 9,251, at 42,899.
48 Unlike this appeal, Banta Company involved the application
of the "loss bid" rule, which forbids the use of an equitable
adjustment to either reduce or increase a contractor's profit
or loss, or convert a loss to a profit or vice versa. See,
Pacific Architects & Engineers, Inc. v. United States, supra,
203 Ct.Cl. at 508, 491 F.2d at 739; Nager Electric Company,
supra, 194 Ct.Cl. at 853, 442 F.2d at 946. Contrary to the
position asserted by the contractor, who had bid the
contracts in question at a loss and argued that the doctrine
should only apply to the original work but not the additional
work caused by the author's alterations, the Board held that
the "loss bid" rule applied to the entire contract; i.e.,
both the changed and unchanged work. Banta Company, supra,
Sl. op. at 28-30. Accord, BH Services, Inc., ASBCA No.
39460, 93-3 BCA ¶ 26,086.
49 The reason the "jury verdict" technique is usually viewed
as an evidentiary tool, rather than as a method of proof of
the amount itself, is simple enough. As explained by the
ASBCA: "There is neither a single nor a precise method of
arriving at the dollar amount of an equitable adjustment. In
general we seek to reach a figure as an equitable adjustment
which represents the cost to a reasonably efficient
contract[or] of performing the changed work under his
contract. Evidence of this amount may be found in the actual
costs of the particular contract, to the extent that those
costs are not shown to be other than reasonable, and in
engineering estimates of reasonable cost made by experts who
bring into play their experience and knowledge to attempt to
visualize the price at which that reasonably efficient
contractor could perform. Neither estimating nor accounting
are such exact arts that either can produce figures which
will be agreed to by all parties without legitimate argument.
We recognize that often, despite protestations to the
contrary, extreme positions on monetary entitlement are taken
during litigation. . . . [We must determine] . . . a figure
as the amount of an equitable adjustment . . . [which] . . .
ordinarily is . . . some place between the amount contended
for by each party to the litigation. . . . This is a figure
which in the view of the trier of the facts is fair in light
of all the facts of the case, or, put another way, is
supported by consideration of the entire record." Johnson,
Drake & Piper, Inc., supra, 65-2 BCA ¶ 4,868, at 23,073.
Similarly, the Department of Agriculture Board of Contract
Appeals has observed that: "It is not essential that the
amount be ascertainable with absolute exactness or
mathematical precision. [Citations omitted.] It is enough
if the testimony and evidence adduced is sufficient to enable
the court or board (acting as the jury) to make a fair and
reasonable approximation of the amount recoverable.
[Citations omitted.]" Lawrence D. Krause, supra, 82-2 BCA ¶
16,129, at 80,073. See also, Greenwood Construction
Corporation, Inc., AGBCA No. 75-127, 78-1 BCA ¶ 12,893. See
generally, Cibinic and Nash, pp. 519-22.
50 In essence, notwithstanding the requirement for proof of
costs, the cases disclose a hesitancy to completely deny
recovery in cases where it is reasonably certain that an
injury did, in fact, occur. See, e.g., Meva Corp. v. United
States, 206 Ct.Cl. 203, 220-21, 511 F.2d 548 (1975) (where
the court allowed a "jury verdict" recovery because it was
"equally clear" that the contractor suffered substantial
monetary damage in direct consequence of the Government's
breach of contract). See also, e.g., Harold Benson, AGBCA
No. 384, 77-1 BCA ¶ 12,490 (where the evidence did not
support the amount claimed by the contractor but did indicate
that the amount allowed by the contracting officer was too
low); Custom Roofing Company, ASBCA No. 19164, 74-2 BCA ¶
10,925 (where the board granted a "jury verdict" recovery
based on "rough estimates"); and Rocky Mountain Construction
Company, IBCA No. 1091-12-75, 77-2 BCA ¶ 12,692 (where the
board applied the "jury verdict" method to an item whose cost
was "totally unclear"). Indeed, under the "jury verdict"
technique, a board may even go so far as to make its own
calculations of an equitable adjustment if it is not
satisfied with the computations of either the contractor or
the Government. See, e.g., Steve P. Rados, Inc., AGBCA No.
77-130-4, 82-1 BCA ¶ 15.624; Varo, Inc., ASBCA No. 15000,
72-2 BCA ¶ 9,717. In short, the teaching of these cases is
that it is error for a trier of fact to totally deny a
contractor's claim when entitlement is clear and there is
some evidence upon which to base a "jury verdict" recovery.
See, e.g., Assurance Company v. United States, supra, 813
F.2d at 1205; S.W. Electronics & Manufacturing Corporation v.
United States, supra, 228 Ct.Cl. 333, 655 F.2d at 1088;
Electronic & Missile Facilities, Inc. v. United States,
supra, 189 Ct.Cl. 237, 416 F.2d at 1358; Eagle Paving, AGBCA
No. 75-156, 78-1 BCA ¶ 13,107. Thus, the "jury verdict"
method works in harmony with two purposes of the equitable
adjustment procedure in general, namely to recognize and give
appropriate consideration to the special circumstances of
each case, and to avoid blind computations of additional
costs or cost savings. G.M. Company Manufacturing Inc.,
ASBCA No. 2883, 57-2 BCA ¶ 1,505, at 5,234.
51 Even when proof of causation is not fully demonstrated, a
board may use the "jury verdict" approach to reduce the
amount claimed. See, e.g., Steve P. Rados, Inc., supra, 82-1
BCA ¶ 15,624, where the contractor had provided detailed
evidence of the events that had occurred and of the costs
which had been incurred, the board made its own computations
of the amount of claimed costs that were attributable to
Government action. Compare, Joseph Pickard's Sons Company v.
United States, 209 Ct.Cl. 643, 532 F.2d 739, 742 (1976)
(where the Claims Court refused to use the "jury verdict"
method to prove causation).
52 It is well-settled that a board of contract appeals has
the authority to recalculate the amount of a deduction taken
by the Government. Banta Company, Inc., supra, Sl. op. at 58
(citing, Mit-Con, Inc., ASBCA No. 43021, 92-1 BCA ¶ 24,632;
Arctic Corner, supra, 86-3 ¶ 19,304; R & E Electronics, Inc.,
supra, 85-3 BCA ¶ 18,316; Steve P. Rados, Inc. supra, 82-1
BCA ¶ 15,624; Varo, Inc., supra, 72-2 BCA ¶ 9,717).
53 The total amount of the contractor's claims in Banta
Company exceeded $100,000.00, and an audit was authorized
under GPO Contract Terms, Contract Clauses, Art. 40 (Audit-
Sealed Bidding). See, note 32 supra.
54 As indicated previously, although the original claim was
for $45,135.00, the unpaid portion which is still in dispute
amounts to only $16,620.89. See, note 23 supra. In
addition, the Appellant also asks the Board to award it
interest and/or the cost of funds in the amount of $5,796.00.
App. Mem., pp. 7-8. Apart from the fact that the Appellant's
claim for interest would have to be presented to the
Contracting Officer for a decision before the Board could
consider it, see, e.g., Shepard Printing, GPO BCA 37-92
(January 24, 1994), Sl. op. at 31-32; P.X. Engineering
Company, supra, 89-2 BCA ¶ 21,859, at 109,952, the simple
fact is that the Board has no authority to award interest.
It is well- settled that a contractor cannot recover interest
on a claim against the United States unless there is an
express provision in the contract or a relevant statute
permitting such payment. See, Maitland Brothers Company,
ASBCA No. 40388, 93-3 BCA ¶ 26,007 (citing, Fidelity
Construction Company v. United States [30 CCF ¶ 70,827], 700
F.2d 1379 (Fed. Cir. 1983)), motion for reconsid. denied,
94-1 BCA ¶ 26,285; Reese Industries, ASBCA No. 36077, 89-1
BCA ¶ 21,255. The contract in dispute here is subject to the
contract cost principles set forth in GPO Procurement
Directive 306.2, Contract Cost Principles and Procedures,
dated April 1, 1988 (CCPP). See, GPO Contract Terms,
Contract Clauses, Art. 45 (Contract Cost Principles and
Procedures). Those cost principles expressly disallow
interest on borrowings (however represented) and directly
associated costs. CCPP, ¶ 28. Since the Board takes its
authority from the contract itself, see, note 3 supra, it
cannot award a contractor compensation which is specifically
prohibited by its terms. Furthermore, the Board has already
ruled that GPO is not subject to the interest requirements of
the Prompt Payment Act of 1982, as amended (PPA), 31 U.S.C. §
3901 et seq., because the PPA uses the APA definition of
"agency" to define its coverage in terms of the Executive
branch, and GPO is a Legislative branch agency. See, Chavis
and Chavis Printing, supra, Sl. op. at 7, fn. 7. Similarly,
GPO is not an "executive agency" within the meaning of the
CDA. See, Tatelbaum v. United States, supra, 749 F.2d at
730. As a consequence, GPO is not subject to the interest
and prompt payment provisions of the CDA either. See, 41
U.S.C. §§ 611, 612(a),(b). Accordingly, the Appellant's
request for payment of interest in the amount of $5,796.00 is
hereby DENIED.