ASCOT TAG & LABEL COMPANY, INC.
GPO BCA 14-85
August 7, 1987
Michael F. DiMario, Administrative Law Judge
Opinion
This appeal, timely filed by Ascot Tag & Label Company,
Inc., 130 JFK Drive, Bloomfield, NJ 07003 (hereinafter
"Appellant"), is from the final decision of George W.
Watson, Contracting Officer, U.S. Government Printing Office
(hereinafter "Respondent"), dated August 26, 1985,
completely terminating the contract between the parties
known as Purchase Order 52462, Jacket 465-107, "for default
because of . . . failure to deliver a product per
specifications within the time required and failure to
correct quality deficiencies from the first rejection." The
decision of the Contracting Officer is affirmed and the
appeal denied for the reasons set forth hereinbelow.
Background
By Purchase Order 52462, Jacket No. 465-107, dated January
31, 1985, Respondent competitively awarded Appellant a
contract upon the requisition of the United States Postal
Service (hereinafter "USPS") to produce some 13,658,000 +
not to exceed 25,000, plus one set of film negatives of
certain parcel post delivery tags in strict accordance with
Appellant's January 17, 1985, bid quotation of $158,675, 2
percent discount - 20 days, and Respondent's specifications
of January 4, 1985, as amended by mail-o-gram amendment No.
1 dated January 8, 1985. In pertinent part the contract
called for six different 6 1/4 x 3 1/8" colored tags
corresponding to each day of the week, except Sunday, to be
produced in equal quantities of 2,049,000, except blue tags,
of which some 3,408,000 were to be produced. Shipping date
was to be F.O.B. destination by March 15, 1985, to multiple
locations throughout the United States for each such form in
accordance with specified "Distribution and Quantity List."
(Rule 4 File, hereinafter "R4 File," Tab B.) The contract
also required the Appellant to furnish product inspection
samples and set certain specified Quality Assurance Levels
and standards to be met; namely:
Product Quality Levels:
(a) Printing Attributes - Level IV.
(b) Finishing Attributes - Level IV.
Inspection Levels (from MIL-STD-105):
(a) Non-destructive Tests - General Inspection
Level I.
(b) Destructive Tests - Special Inspection
Level S-2.
Specified Standards: The specified standards for the
attributes requiring them shall be:
Attribute Specified Standard
P-7. Type Quality and OK Proofs
Uniformity
R4 File, Tab A, Page 3 of 6.
In addition, shortly after the award of the contract, i.e.,
February 5, 1985, Respondent's Contracting Officer, Jack G.
Marken, wrote to Appellant's Charles DeFranza stating:
Although we are awarding your firm the contract for the
referenced jacket, please understand that we do not condone
your firm's poor shipping/delivery performance record. Our
Contract Compliance Officer has previously written to you
regarding this performance.
Through award of this contract we are affording you an
opportunity to demonstrate affirmatively your ability to
meet all of the contract requirements. Your performance on
this contract will be closely monitored. Our resources are
committed to insure contract compliance so that we can
provide our customer agencies with the services and
products as ordered.
Your understanding of our responsibilities in these matters
is greatly appreciated.
Id. at Tab C.
That same date the Appellant received from the Government
the reprint copy which was to serve as manuscript copy for
the job. This, however, was some 7 business days after such
copy was originally due to be received. As a result, the
shipment date was adjusted to March 29, 1985. Following
receipt of the copy Appellant proceeded to produce required
proofs furnishing these without copy to Respondent on March
11, 1985. These were rejected by Respondent on March 18,
1985, due to printer's errors (PE's). Appellant made the
necessary corrections, furnished revised proofs to
Respondent on March 20, (Id. at Tab D), and received
Respondent's "OK to Print" on March 25, 1985 (Id. at Tab F &
G). The job or a portion thereof was then run and shipped by
Appellant. One hundred and four cartons were received by the
Postal Service, Eastern Area Supply Center, on April 1,
1985. The Postal Service, however, found that the product
was not in conformance with the specifications inasmuch as
"[f]orm numbers were not on tags and printing on backs was
smeared" and so notified Respondent. (Id. at Tab H.) The
following day, April 2, 1985, Respondent notified
Appellant's Ed Smilowitz of this discrepancy at which time
Smilowitz advised that "no other bad tags have gone out"; he
"will call when he finds out schedule for pick-up,
correction and redelivery." (Id. at Tab J.) A U.S. Postal
Service routing slip from one Larry Fallon to Darwin Hughes,
identified elsewhere in the file as Darwin Hughes, Chief,
Quality Assurance Section, Printing Procurement Department,
GPO, shows:
This order is for 13 million tags. Contractor shipped 104
cartons to Eastern Area Supply Center. Random samples
enclosed. Job is unacceptable.
Stop all shipments until GPO checks contractor's
capability, per D. Steele. This job has a nation wide [sic]
distribution therefore immediate action necessary. Notify
Pete or me.
Id. at Tab K.
A notation in the file dated April 3, 1985, then shows that
Respondent's Contract Compliance Section recommended that
corrective action be taken immediately. Thereafter, on April 4,
1985, the Postal Service furnished samples to Respondent and
advised that its Western Region had also received some "1.4 mil.
tags, all bad, 4 out of 6 did not have form nos." Smilowitz was
again notified by Respondent. (Id. at Tab J.) A further Tab J
notation shows "Darwin [Hughes] looking into." That same date the
Postal Service sent Respondent 16 random samples for inspection
together with a "Notice of Quality Defects" which reflected the
following quality defects for printing: "Hickies or spots,"
"extraneous marks," "image skewness," "type quality - not
uniform," "type quality - broken characters." The Notice also
reflected as additional remarks that "[r]einforced patches
falling off, not drilled correctly. Inferior printing job, No Tag
#. These sample [sic] are from Base Shipment Only, WASC samples
to follow if needed." The Notice form was further marked under
"Action Requested" to show "[q]uality does not meet
specifications and the material can not [sic] be utilized. It is
requested that the entire order be reprinted or corrected." with
an additional handwritten note stating: "Stop all shipments at
once." (Id. at Tab M.)
On April 9, 1985, upon inspection of materials returned to
Appellant's plant, Respondent's representative Mr. Ambrosino
found:
[A] lot of bad one [sic] with dirt marks, double impression,
but [none] . . . where patch was off.
Contractor has one machine running job, and said he is
running three shift (and he does not no [sic] which shift
produce [sic] bad ones) Contractor has informed me that he
is going to put a 2nd & 3rd machine on this order.
(Id. at Tab N.)
The contractor was then given the opportunity to correct the
problem and apparently pulled and corrected 50% of the products,
the remainder being acceptable, in its judgment, as first
printed. (Id. at Tab FF.)
At that time Ambrosino apparently informed Hughes that the
quality had improved and would send in samples for Hughes'
verification. Notwithstanding this improvement, the
following day, April 10, 1985, the Contracting Officer
telegraphically sent Appellant a "Show Cause" notice
advising Appellant that "since you have failed to perform
the schedule requirements [of the contract] the government
is considering terminating the . . . contract [for]
'default' . . . ." The letter went on to request that
Appellant present to the Contracting Officer in writing
within 5 days of receipt of the said notice "any facts
bearing on the question." (Id. at Tab N.)
Meanwhile, by transmittal of April 16, 1985, Appellant sent
Hughes additional samples which it hoped would meet with
approval. These were in turn sent to Fallon of USPS on April
19 for his review. Additionally, by letter of April 18th,
Appellant answered the show cause notice stating:
As you already know, Ascot Tag & Label Co. Inc. has been
delayed approx. 3 weeks because of proof sumittals [sic] on
your jacket #465-107. Upon receiving the purchase order
#52462 we did not see any copy or instructions on original
specifications noting a form number was required on these
tags. All we received were previous tags with a faintly
penciled form # in an irregular manner which we took to be
an indentifying [sic] number for the aforementioned tags,
as our enclosed proof. Ascot Tag & Label was told to hold
up and submit proofs, which we did, three times, causing
approx. 15 working days delay in production of the order.
An extenuating factor in further slowing production of
this order was the fact that Ascot Tag & Label had
purchased a press to facilitate speedy production. This
press was supposed to be delivered Feb. 1, 1985. We did
not receive this press until April 11, causing a
tremendous overload on our existing presses.
Ascot was also told to hold up production as of April 4,
1985 due to a quality inspection initiated by GPO. We
are presently conducting that inspection under the
supervision of Sal Ambrosino from GPO N.Y.C.
Ascot Tag & Label would like to add the fact that we
have already purchased $70,000 worth of material and are
responsible for $30,000 more. This tag material was
bought contractually and slit to press sized rolls. We
would consider it a great hardship to have to assume
cost of this tag material with no financial return.
A further cause for delay has been constant stopping for
inspection and inspection and samples being sent to
Washington periodically. We are in constant contact with
Darwin Hughes on a daily basis and he is well aware of
these delays.
Id. at Tab R.
When Appellant's letter of the 18th, supra, was received,
one of Respondent's representatives telephonically contacted
Smilowitz who advised that he did not expect to ship until
May 15, 1985 (Id. at Tabs R & S). A further notation (Id. at
Tab P) of conversations with "Ed, Ascot & Tag and Label
[sic]" dated April 18 shows "more samples complete 2 weeks."
On April 22, 1985, the Contract Compliance Section again
recommended corrective action be taken. Accordingly, the
Contracting Officer decided to send another cure notice and
to follow-up on any answer received. The record does not
show whether such letter was in fact sent. Be that as it
may, the file next reflects that "[a]ll defective tags were
replaced by the contractor the week of May 21." (Id. at Tab
SS, letter from Rucker to Spates, USPS, dated August 2,
1985.) Following this, an additional shipment of tags was
received by USPS San Francisco Bulk Mail Center June 3,
1985. Spot checks showed severe shortages in product count
and nonconformance with certain USPS configuration
requirements in that some 3,000 of the tags were "wire-wrap"
tags, i.e., designed to be secured to Postal sacks by
wrapping the wire onto the bags, instead of elongated slot
tags for insertion of strings (Id. at Tab Y) as specified in
the contract. (Id. at Tab A, page 2 of 6 under caption
"Binding.") There followed a second "Notice of Quality
Defects" from the USPS to Respondent dated June 26, 1985,
which in pertinent part reflected:
OTHER
Incorrect Packaging
. . . .
Quantity delivered short
. . . .
Additional Remarks
Eleven field sites (BMC) have not received any shipment of
tags. All other sites and supply centers report shortages of
approx 600 tags in each box of 2000. This equates to 1/3 to
50% shortage. Do not pay contractor until verified.
ACTION REQUESTED
. . . .
Quality does not meet specifications and the material can not
[sic] be utilized. It is requested that the entire order be
reprinted or corrected.
Other:
Id. at Tab V.
Chronologically, the file then shows another report dated
June 27, 1985, concerning a shipment received at the USPS
Los Angeles Bulk Mail Center showing that "[t]he cartons are
clearly marked to contain 2000 tags, however, they average
1350 per carton." (Id. at Tab Y.) This is followed by a
"Complaint Status Sheet" dated July 3 which reflects:
Container labels indicate quantity of 2,000 actual quantity is
1,250 to 1,500 per container. Tags have reinforced slots, but
some have been shipped with reinforced (round) holes instead
(unacceptable). 11 bulk mail centers (BMC's) haven't received
any. Formal complaint to follow 7-3 PM.
Id. at Tab W.
Elsewhere in the file a USPS letter shows that "[o]n July 18
. . . [Hq., USPS] received additional defective tag samples
from field destinations and submitted samples to GPO for
inspection. The GPO advised . . . [Hq., USPS] us on July 24
that the contractor was willing to reprint 20 percent of the
contract quantity to make up shortages. [Hq., USPS] rejected
the offer based on the Supply Center findings of a 35
percent shortage and significant quality defects. (Id. at
Tab SS, letter from Rucker to Spates, USPS, dated August 2,
1985.)
Thereafter, by letter of July 26, 1985, Mr. C. D. Steele, of
the Printing Division Hqs., USPS, directed to Hughes,
Contract Compliance, GPO, requested immediate default action
"due to the continuing problems and delays" caused by the
contractor. He also requested that the tags be reprocured
"from a responsible source of supply." In so doing he went
on to state that:
Due to the continuing problems and delays caused by the
contractor, we are requesting immediate action to default
Ascot Tag & Label Co., and to reprocure item from a
responsible source of supply.
This sack tag is an essential part of an intense effort to
improve the movement of Parcel Post mail. This effort has,
in effect, been stopped due to the inability of Ascot to
produce in a responsible manner. This is causing a
financial hardship and embarassment [sic] to the Postal
Service, which cannot and will not be tolerated any longer.
In addition to poor quality, incorrect printing, minor
shortages in each carton, incorrect quantities listed on
B/L's, 8 BMC's still reporting no shipments received and
other problems, we have now been advised by our Traffic
Branch that invoices are now coming in requesting payment
of shipping charges. Amendment #1, dated January 10, 1984,
should be 1985, specifies FOB Destination on all shipments.
. . . .
Id. at Tab AA.
Following receipt of this letter, Mr. Gary Lauffer, Printing
Specialist, GPO Quality Control Division, upon contact by
Mr. George Watson, GPO Printing Procurement Department,
advised that he would support a default since he had
inspected 70 percent of the order, found it 28 percent
short, and with 42 defects, the product being rejectable for
22 or more defects. .(Id. at Tab BB.) Lauffer had conducted
"formal acceptance samplings" on July 30 and 31, 1985, at
warehouses in New Jersey and Kansas.
The file contains Lauffer's undated, handwritten report
showing details of shortages and defects identified at that
time. (Id. at Tab Z.)
The file also contains a GPO Form 914 dated August 5
reflecting a telephone conversation between a GPO employee,
initials "JGM" (presumably, Jack G. Marken, supra) with one
"Mervis" of "P.S." (presumably Postal Service) which states:
"This is the 2nd delivery lst complaint April. Hickey's
Print Quality No form #'s K [contractor] did not correct
previous problems." (Id. at Tab CC.)
This is followed by another GPO Form 914 by the same JGM
dated the same date showing a telephone conversation with
one "Frances", Ascot Tag & Label, which shows:
K has offered to send 2-3 people to NJ and has to repack
all cartons in uniform cartons of 1500. Any shortage
made up in 3-4 weeks. Will take Blue label back to
inspect and redue [sic].
I advised K that acceptance of a rejectable job is a 25
percent price reduction.
Id. at Tab DD.
A third GPO Form 914 by JGM dated August 9 shows another
conversation with "Frances" of Ascot Tag & Label as follows:
April unusable tags were replaced with better tags even
though they were not perfect.
K claims he did not agree to the 7-22 make up date for the
shortage.
2,700,000 approx. replaced in April of 6,000,000 returned.
4-5 MM on hand on several million to complete.
He started to make up the shortage and had produce [sic]
500,000 tags when he stopped production to join Gary in the
inspection.
Id. at Tab EE.
On August 15, 1985, Marken, by memorandum to Respondent's
Contract Review Board (CRB) requested concurrence with a
default action on the entire order due to Appellant's
failure to deliver a product per specifications within the
time required. The memorandum reflects a chronology of
events including Appellant's then pending offer to make up
shortages, repack in uniform quantities of 1,500 per carton,
with delivery in 3 to 4 weeks at a 25 percent reduction.
Such offer was rejected by the Postal Service which instead
requested default on the complete contract because of
failure to correct quality deficiencies from the first
rejection. At the time of the memorandum Appellant had
already been paid $101,862.09. (Id. at Tab FF.)
Unanimous concurrence was granted by the CRB on August 21,
1985. This was followed by notice from the Contracting
Office, George M. Watson, to Smilowitz of complete
termination for default dated August 26, 1985, with possible
excess costs to be borne by Appellant for reprocurement of
the product. (Id. at Tab HH.)
Reprocurement of the contract was in fact made by Purchase
Order 61415, Jacket No. 484-657, to Dennison Manufacturing
Co., Framington, MA. (Id. at Tab LL.) Mr. Smilowitz was then
advised by letter of September 23, 1985, of this action and
that the excess costs would be deducted from Appellant's
account. (Id. at Tab MM.)
Thereafter, by letter dated September 12, 1985, Appellant
filed its notice of appeal which was itself perfected by
submission of a formal complaint dated October 24, 1985,
which in pertinent part recited:
Pursuant to Rule 6.(a), we are filing an orginal [sic] and two
copies of a complaint containing the data described in that
Rule, but we ask that our prior correspondence also be deemed
part of our appeal.
1. Ascot Tag & Label Co., has performed about twenty
contracts for THE GENERAL POST OFFICE (GPO) [sic] over the
past few years. Ten of them were direct contracts and
another ten, approximately were indirect as subcontractors.
2. All of these contracts so far as Ascot Tag & Label Co.
(Ascot) is aware were satisfactorily performed and accepted
by the GPO.
3. Under the circumstances, it is the position of Ascot
that they were completely qualified to handle the
particular order in the above caption of this letter.
4. Several problems developed which Ascot could not have
anticipated with respect to instant contract, but which
were certainly not Ascot's fault.
5. Ascot sent proofs as requested to the GPO and did
everything possible to accommodate the contracting officer
with respect to his desires.
6. Ascot was required to submit, and did submit, three
different proofs at various times which caused a loss of
valuable time to Ascot.
7. Once approval was granted by the contracting officer of
the GPO, production time of 45 days, actually 28 working
days, was reduced to two weeks.
8. Ascot had crews of employees working day and night to
expedite this order. After approximately 4 to 6 million
tags were shipped, a halt to production was ordered by the
GPO. A question of printing quality had arisen according to
the GPO.
9. At its own expense, Ascot picked up all of the tags in
question, and hand-inspected them. Upon inspection, some
tags were deficient, but the majority of the 4 to 6 million
tags were found to be in good order and in acceptable form.
10. After reinspection by Ascot, these tags were repacked
and this created another unanticipated problem because of
the fact that Ascot was anxious to expedite the reshipment
of these tags, and unfortunately some of the workers did
not have a method of accurate counting.
11. This was an honest and unintentional mistake on the
part of Ascot. This is proven out by the fact that
different quantities of tags were found in all of the
boxes. The boxes that were used had been bought especially
for this particular order and; [sic] if packed properly,
should have contained 2,000 tags per box. The boxes
appeared to have been fully packed.
12. Ascot submits that total rejection by the GPO is
completely unfair and ruinous to Ascot.
13. There are millions of tags that are perfectly
acceptable which the GPO is now rejecting completely.
14. This total rejection is causing great financial
hardship to Ascot which is a minority employer, and layoffs
have already resulted as a direct result of this action on
the part of the contracting officer.
15. Many individuals and their families have suffered
substantially.
16. Another indirect financial burden that had been
placed upon Ascot resulted from the fact that Ascot
purchased additional machinery to accomendate [sic] the
size of this order and inexpectations [sic] of future
orders that would be forth coming [sic]. This
constituted an extreme expense to Ascot.
17. Charles DeFranza, the principal of Ascot went with a
GPO agent to Somerville, New Jersey and Pauline, Kansas to
inspect tags regarding shortages. While at these locations
samples were taken at random. Only one lot (the blue lot)
in Somerville, New Jersey was thought to be unexceptable
[sic].
18. All of the other lots were considered usable and/or
exceptable [sic] by the agent who remarked that if all the
lots were like the yellow lot, there would be no problem at
all.
19. In Pauline, Kansas, all the tags, the agent said,
looked much better than the tags in Somerville and were in
exceptable [sic] condition.
20. After inspections were made, a figure of 25% shortage
was determined by the GPO.
21. All of this time howver [sic] Ascot was still in
production and was instructed by the contracting officer to
make up the shortages and was being urged to expedite the
delivery.
22. Unfortunately a number of different GPO personnel had
contacted Ascot and in some instances gave conflicting
instructions. This caused a certain amount of hesitation,
confusion, and bewilderment as to the status of the order.
23. For example, Ascot at one point was told to halt
production which was done. About three weeks later, Mr.
George Watson, the contracting officer, reprimanded Ascot
and told them that they should not have stopped. Ascot was
told to make up the 25% shortage and proceeded to make up
more than a million tags but did not get a chance to ship
any of these made up tags.
24. Ascot was suddenly informed that the GPO considered
them indefault [sic].
25. Under the circumstances we submit that the GPO
contracting officer has been unreasonable and unduly harsh
in respect to this contract.
26. Ascot, a minority employer, has done everything
possible to satisfy the GPO and has a history of having
performed satisfactorily in the past. There was no
intention whatsoever to short the count in any of the boxes
which was solely the result of taking the tags back for
reinspection and then having them repacked, unfortunately
by workers who had no method of accurately counting. If the
boxes had been packed fully, the count would have been
accurate. Ascot has shown a complete willingness to
ameliorate any complaints of the GPO and spent a great deal
of money and time in trying to do anything possible to
satisfy the GPO. The large majority of the tags, we submit,
are in acceptable condition.
27. The total cancellation of this order will in all
likelihood destroy the business of Ascot and put many
people out of work. This would adversely affect their
families and the merchants in the community as well.
28. Ascot is ready, willing, and able to do anything
reasonable to rectify this situation but submits that a
declaration of total default is unwarranted. Most of the
tags are in clearly acceptable condition and Ascot has
demonstrated not only from its past performance, but its
response in the instant case as well, that it wishes to do
everything possible to please to [sic] GPO and we believe
has indeed gone out of its way to do so.
We ask for a reversal of the decision below and acceptance
of the shipment less 25% which will be rectified.
Official Record, Tab 6.
The complaint was answered on November 29, 1985, in
pertinent part as follows:
1. Respondent has insufficient information upon which to
base a response to paragraph 1.
2. Respondent has insufficient information upon which to
admit or deny paragraph 2; however, it is GPO's contention
that each contract must stand or fall on its own merits.
3. Paragraph 3 is admitted.
4. Respondent has insufficient information upon which to
base a response to paragraph 4.
5. The part of the sentence in paragraph 5 that says "Ascot
sent proofs as requested" is admitted; however, the
remainder of the paragraph is denied. The specifications
required the submission of two sets of color key proofs
before the printing of the tags. The proofs were to be of
each item with all elements in position and the margins
indicated thereon. What we received on March 6, 1985, were
photo prints, not color keys and all elements were not in
place and margins were not indicated. Consequently, the
proofs were rejected because they were not in accordance
with the specifications. On March 11, 1985, the second set
of proofs was received and was rejected on March 18, 1985.
The third and final set was received on March 20, 1985 and
was OK'd for print on March 25, 1985. None of the above
submissions were held over the allotted time as indicated
in the specifications, therefore, no additional time could
be allotted contractually. Page two of the specifications
forewarns the contractor that printing is not to take place
until an "OK to print" proof is received.
6. Paragraph 6 is denied. The specifications require only
one submission of two sets of proofs of each item. The
submission of additional proofs was due solely to the
negligence of Ascot. Had the proofs been submitted
correctly the first time, additional proofs would not have
been required. The valuable time lost is attributable to
the nonconformance by Ascot.
Contract Terms No. 1, which is incorporated by reference in
this contract, in paragraph 2-11, provides that if the
Government causes a delay in the ship date because of its
action the shipping schedule will be extended
automatically. At that time the contractor may request
additional time. However in this case, the Government did
not contribute to the delay. The sole responsibility lies
with Ascot for not adhering to the specifications when
proofs were submitted the first time.
7. Paragraph 7 is denied. We are not quite sure what is
meant by "[o]nce approval was granted by the Contracting
Officer . . . ." The schedule was extended to March 29,
1985 due to late copy. The proofs were OK'd on March 25,
1985 which left four days to produce the job. We do not
know where their day count is coming from.
8. Paragraph 8 is denied. Mr. Darwin Hughes, of our
Quality Assurance Division, called the appellant on
April 4, 1985 and informed him that the product was not
acceptable. At that time the appellant was informed of
the quality problems. However, when the inspector from
the New York Office went to Ascot, they had one press
running. See AF, Exh. N.
9. In paragraph 9, the fact that the appellant picked up
the rejected tags for inspection and replacement of
defective tags is admitted; however, the remainder of the
paragraph cannot be verified because GPO personnel were not
present while Ascot inspected the tags.
10. Paragraph 10 is denied. The contractor alleges that the
repacking after reinspection "created another unanticipated
problem . . . ." It does not seem logical that all the
cartons were short when only "some" of the workers did not
have a method of accurate counting. Statistically, the
cartons were 28% short on the entire order. Mr. Gary
Lauffer, a Printing Specialist in the Quality Control
Division, verified, through inspection, that the boxes were
fully packed and could not have held 2,000 tags.
11. Respondent has insufficient information upon which to
respond to the first sentence in paragraph 11. The
remainder of the paragraph is denied. Mr. Lauffer
personally weight-counted 106 cartons at the Somerville,
New Jersey warehouse and 80 cartons at the Pauline, Kansas
warehouse. The individual carton quantities ranged from
1,176 to 1,740. He did not discover any carton packed with
2,000 or more forms in it. Each carton appeared to be fully
packed. It is Mr. Lauffer's opinion that 2,000 tags could
not be packed into the cartons used.
12. Paragraph 12 is denied. In accordance with the quality
attributes portion of the contract, the tags are
rejectable. See AF, Exh. Z.
13. Paragraph 13 is denied. The Quality Assurance
Through Attributes Program, incorporated by reference in
this contract, provides that the acceptable quality
level (AQL) for this job is 1.0 critical defects per 100
items and/or 6.5 total defects per 100 items. The
sampling and inspection results show that this [sic] AQL
(6.5/100) items was [sic] greatly exceeded; i.e., the
job contains more defects than what is acceptable to the
Government; therefore, the entire job is rejectable. If
there were acceptable tags in the shipment they could
have been segregated by Ascot and used along with the
correction of the defective ones.
14. In paragraph 14, we regret any hardship on the
appellant; however, the Contracting Officer cannot
accept a product that is not equal to specifications.
15. The answer to paragraph 15 is the same as in
paragraph 14 above.
16. Paragraph 16 is denied. In paragraph 3 of their
complaint, Ascot asserts they were completely qualified
to handle this order. In this paragraph they indicate
that they have a financial burden because they purchased
additional machinery to accommodate the size of this
order. As far as the Government is concerned they were
qualified to do this order. We are not responsible for
the purchasing of new equipment; this is a managerial
decision.
17. The first and second sentences in paragraph 17 are
admitted. The remainder of the paragraph is denied.
Shortages were found in all cartons counted. Mr. Lauffer
remembers stating that the blue forms appeared to be the
worst in quality. He made no statements to the effect
that the other five lots were acceptable.
18. Paragraph 18 is denied. Mr. Lauffer remembers
telling Mr. DeFranza that he did not believe the minimum
quality requirements of the contract were attained;
however, he also stated that he could not make any
official statements before performing the formal
acceptance sampling/inspection procedures.
19. Paragraph 19 is denied. According to Mr. Lauffer, he
did not tell Mr. DeFranza that the tags in the Pauline,
Kansas warehouse were acceptable as to quality or the
number of tags packed in each carton.
20. Paragraph 20 is denied. The inspection report
indicates that the cartons at the New Jersey and Kansas
warehouses were packed on the average of 28% short, not
25% short as stated in the complaint. It is to be noted
that most of the boxes were short more than 28%.
21. Respondent has insufficient information upon which
to respond to paragraph 21 because we do not know what
time period is being referred to.
22. Paragraph 22 is denied.
23. Paragraph 23 is denied.
24. Paragraph 24 is denied. Ascot was given the
opportunity, over a long period of time, to correct the
discrepancies found in the tags. Default proceedings
were instituted only as a last resort.
25. Paragraph 25 is denied. To the contrary, we believe
the Contracting Officer acted reasonably and did what
had to be done under the circumstances. Ascot was given
every opportunity to correct the deficiencies.
26. Respondent has insufficient information upon which
to admit or deny the first sentence in paragraph 26. The
second sentence is denied. It is the contractor's
responsibility to mark the label with the amount packed
in the respective carton. If the contractor had run the
full quantity there should have been more cartons used.
The third sentence is denied. From Mr. Lauffer's personal
experience of weight-counting the cartons, he does not
believe that the cartons, as manufactured, could be packed
with 2,000 tags. We believe this discounts the theory that
if the boxes had been fully packed the count would be
accurate. The inspection report indicates the boxes were in
fact fully packed. See AF, Exh. Z. Respondent has
insufficient information upon which to admit or deny the
fourth sentence. The fifth sentence is denied. Again, the
quality inspection results show that the acceptable quality
level of 6.5 total defects per 100 items was exceeded.
Therefore, statistically the entire order is rejectable. In
summation of this paragraph, it is inconceivable that the
shortage is solely a result of repacking when the entire
order was not repacked. The inspection report clearly
indicates an average of 28% short on the entire order, not
just the reshipped portion. The appellant must agree with
the overall shortage because he is willing to make up, or
"rectify" as he puts it, a 25% shortage as is stated in
paragraph 28 of the complaint.
27. With regard to paragraph 27, please refer to our
comment in paragraph 14.
28. Paragraph 28 is denied. The quality inspection results
show that the acceptable quality level of 6.5 total defects
per 100 items was grossly exceeded. The defects, as found,
total 42. See AF, Exh. Z. To reiterate, the entire order
was statistically sampled in accordance with the attributes
program and the total defects found far exceeded the
allowable, therefore, the order was rejected. At Exhibit EE
of the appeal file are notes taken by Mr. Marken,
Contracting Officer, while talking to Mr. DeFranza of
Ascot. By appellant's own admission, they replaced
defective tags with not so perfect tags. It is clear that
the Contractor did not have a quality control system in
effect that would prevent the Government from receiving
additional defective tags.
Wherefore, the Board is requested to deny the appeal in its
entirety.
Official File, Tab 11.
The answer was forwarded to Appellant by letter of the
Administrative Assistant to the Board dated December 3,
1985. A careful review of the file discloses that no
affirmative request for a hearing as required by GPO Rule 8
was ever made by Appellant. As a result this matter has lain
dormant in the files of this Board. Accordingly, this Board
on its own motion has deemed it appropriate to decide the
appeal on the record in accordance with the provision of GPO
Rule 11. The matter is thus before the Board in this form
for decision.
Discussion
The contract in this case arose upon issuance of Purchase
Order 52462 dated January 31, 1985. That purchase order, as
stated above, was made "[i]n strict accordance with"
Respondent's specifications. Those specifications in
addition to the provisions identified, supra, in pertinent
part state: "Any contract which results from this Invitation
for Bid will be subject to all terms and conditions of U.S.
Government Printing Office Contract Terms No. 1, Rev. Oct.
1, 1980 (GPO Pub. 310.2)."
Among those terms and conditions are the following pertinent
provisions:
2-11.(c) Extension of schedules.
(1) In the event a delay is caused by any action of the
Government, including failure to furnish purchase/print
order, copy and/or materials as scheduled, the shipping
schedule will be extended automatically by the total number
of workdays that work was delayed PLUS 1 workday for each
day of delay; such period of grace not to exceed 3
workdays. . . . .
(2) If, as a result of Government-caused delay, additional
time is required beyond that provided for in paragraph (c)
(1) of this Article 2-11, the contractor shall mail or
otherwise furnish a written request to the Contracting
Officer within 10 calendar days from the end of the
Government-caused delay. If, in the opinion of the
Contracting Officer, additional time beyond the 10 calendar
days for submitting such written request is warranted, it
may be granted. If time does not permit written
notification, telephone or telegraphic notification can be
made. In those cases, written confirmation must be promptly
provided.
(3) In the event no adjustment of schedule has been
requested, the contractor will be considered to be
delinquent if shipment has not been made by the date
established by the automatic extension.
(4) In the event an adjustment of schedule has been
requested by the contractor and is approved by the
Contracting Officer, the contractor will be required to
meet the adjusted shipping date and will be considered to
be delinquent if it is not met.
Article 2-18. Default.
(a) The Government may, subject to the provisions of
paragraph (c) of this article, by written notice of default
to the contractor, terminate the whole or any part of the
contract in any one of the following circumstances:
(1) If the contractor fails to make delivery of the
supplies or to perform the services within the time
specified herein or any extension thereof; or
(2) If the contractor fails to perform any of the other
provisions of the contract, or so fails to make progress as to
endanger performance of the contract in accordance with its
terms, and in either of these two circumstances does not cure
such failure within a period of 10 days (or such other period
as the Contracting Officer may determine to be reasonable and
authorize in writing) after receipt of notice from the
Contracting Officer specifying such failure.
. . . .
(c) Except with respect to defaults of subcontractors, the
contractor shall not be liable for any excess costs if the
failure to perform the contract arises out of causes beyond
the control and without the fault or negligence of the
contractor.
Examining the evidence in light of these provisions, this
Board holds as a finding of fact that Appellant was in
default of the contract, that such default did not arise out
of causes beyond the control and without the fault or
negligence of the Appellant, and that Respondent did not
cause or materially contribute to the delay. To begin with,
Appellant was given the prescribed contractual remedy for
the Government caused delay in furnishing materials.
Secondly, the Government was entitled to the specified
periods of time for its proof reviews. Moreover, the delay
in approval was caused by printer's errors (Appellant's
errors) and not those of the Government. The Government gave
its timely O.K. to print immediately upon receipt of
satisfactory proofs as provided for in the contract. In
addition, the Government attempted to work with Appellant to
remedy all of the problems it was encountering.
Nevertheless, the Government properly continued to put the
Appellant on notice of its potential default and the
reprocurement which could result therefrom.
While this Board recognizes that Appellant was working
diligently to overcome its problems, it nevertheless finds
that it had not in fact overcome them to the satisfaction of
the customer agency or Respondent within the limitations of
the contract terms. It was thus wholly within the discretion
of the Contracting Officer to terminate the contract for
default, to reprocure the product from another vendor, to
charge the excess costs back to Appellant, and to recover
any payments previously made, notwithstanding any hardships
which might be caused to Appellant, its employees, or their
families as alleged by Appellant.
Thus, this Board, which derives its powers solely from the
"Default" clause of the contract itself and cannot rightly
enlarge or vary its terms, affirms the decision of the
Contracting Officer and denies the appeal.