U.S. GOVERNMENT PRINTING OFFICE
BOARD OF CONTRACT APPEALS

The Appeals of AUTOMATED DATATRON, INC.
Docket Nos. GPO BCA 25-87 & 26-87
April 12, 1989

MICHAEL F. DiMARIO
Administrative Law Judge

OPINION RESPECTING LEGAL ISSUES AND
ORDER
DENYING APPELLANT'S MOTION FOR PROTECTIVE ORDER AND
GRANTING RESPONDENT'S MOTION TO COMPEL

   On May 18, 1988, this Board held a hearing on Appellant's
   "Motion for a Protective Order" respecting certain discovery
   requests made by Respondent.  The Board at that time, pursuant
   to the request of Appellant, agreed to hold a decision on the
   Motion in abeyance pending resolution of certain legal
   questions underlying Appellant's theory of recovery.  In this
   regard, the parties were asked to brief the following
   questions:

1.  Whether the Government, if it in fact knowingly accepted
nonconforming goods during the earlier term of the contract, is
now estopped from rejecting nonconforming goods for the remainder
of the contract.

2.  If the Government has no knowledge whatsoever that they were
nonconforming, can the Government now, having accepted
nonconforming goods without knowledge, reject them for the
remainder of the contract?

3.  To what degree can the Government require strict application
of its specifications?  Is two-tenths of a millimeter a
reasonable variation from the specification?

4.  At what point is the Government estopped from rejecting goods
which have been delivered to it and for which it has made
payment?

   It is the sense of the Board that the following Synopsis of
   Law, derived and composited exclusively from the submissions
   of the parties, fairly represents the applicable law1 which
   must be applied to the facts of Appellant's various pending
   claims in order to ascertain their merits.  The wording is
   largely that of the parties sans their gratuitous arguments
   respecting the underlying matter in dispute.  Accordingly, the
   citations have not been verified by the Board.

Synopsis of Law

   1.  The Government is generally entitled to require strict
   compliance with its contract specifications, including those
   of fixed-price supply contracts, Jefferson Construction Co. v.
   United States, 151 Ct. Cl. 75 (1960); Red Circle Corp. v.
   United States, 185 Ct. Cl. 1, 8 (1968); American Electric
   Contracting Corp. v. United States, 579 F.2d 602, 608 (1978);
   Dependable Printing Company, Inc., GPO BCA 5-84 (1985), and
   can enforce this right at any time prior to final acceptance;
   Maizel Laboratories, Inc., ASBCA 8597, 1963 BCA  3898, stated
   at 19,351.  Strict compliance is especially appropriate where
   the specifications are clear, unambiguous, and objectively
   ascertainable by the contractor; Herley Industries. Inc., 72-2
   BCA  9,749 (1972) mot.  for reconsid. denied, 73-1 BCA 
   9,922 (1973); Arrow Lacquer Corp., 58-2 BCA  2,002 (1958).  A
   principal purpose of
the rule is to ensure that the integrity of the competitive
bidding system will not be compromised, Ideal Restaurant Supply
Co., VACAB 570, 67-1 BCA  6237 (1967).

   Specifications are designed to elicit and define the essential
   qualities necessary in the procurement of a product.  Strict
   compliance or conformance with specifications or contract
   requirements means that the Government has a right to get
   exactly what it asked for in the solicitation for contractual
   performance.  Nichols & Co. v. United States, 156 Ct. Cl. 358
   (1962), cert. denied, 371 U.S. 959 (1963); Rohr Industries,
   Inc., 82-1 BCA  15,732.  Thus, a contractor must comply with
   the Government's requirements and cannot substitute its views
   for those of the Government, Maxwell Dynamometer Co. v. United
   States, 386 F.2d 855 (Ct. Cl. 1967), even if the substitution
   would result in a superior product.  Nichols & Co. v. United
   States, supra. Likewise, a contractor's view that a particular
   specification's high tolerance was not needed is irrelevant,
   even if the view is proven correct and the specification in
   question is found to add nothing to the value of the product
   involved.  Gramercy Machine Corp. v. United States, 228 Ct.
   Cl. 825 (1981) aff'g 74-1 BCA  10,611 (1974).

   2.  Inspection is the Government's primary means of ensuring
   that it receives what it bargained for.  2 B. Nash & J.
   Cibinic, Federal Procurement Law, 1552 (1980).  However,
   inspection is not meant to replace the contractor's required
   quality controls.2 The right to inspect is clearly for the
   benefit of the Government and creates no Government duty to
inspect.  Kaminer Construction Corp. v. United States, 488 F.2d
980 (Ct. Cl. 1973); Penguin Industries, Inc. v. United States,
530 F.2d 934 (Ct.Cl. 1976).3 Indeed, it has been held that even
the failure of a Government inspector to notify a contractor of
known defects does not relieve the contractor of his primary
responsibility of ensuring compliance with contract
specifications.  Rosendin Electric, Inc., 81-1 BCA  14,827
(1980).

   3.  Strict compliance can be enforced either by rejecting the
   defective product or, if for reasons of economy or urgency
   acceptance is in the Government's best interest, by requiring
   a price reduction for nonconforming work.  The Government is
   not required to accept nonconforming supplies, and the right
   to refuse the product is the prerogative of the procuring
   agency.

Famous Model Co., ASBCA No. 12526, 68-1 BCA  6,902 (1968).
Therefore, a contractor has no contractual right to force the
Government to accept defective products at a reduced price, even
if the defects are relatively minor, Cherry Meat Packers, Inc.,
ASBCA No. 8974, 1963 BCA  3,937 (1973), notwithstanding the fact
that on occasion a Board of Contract Appeals might hold, as a
matter of its delegated administrative discretion (rather than
law), that a particular deviation from specifications was too
minor to warrant spending significant additional funds by the
Government for its correction, Bruce Anderson Co., Inc., 83-2 BCA
 84,057; See also John McShain, Inc. v. United States, 412 F.2d
1281 (1969); or that "[I]n the real world of day-to-day
Government contracting and administration, alterations and
deviations from initial express specifications are frequent, if
not a matter of course." See Stockwell Rubber Co., Inc., 76-2 BCA
 12,130 (1976).

   4.  In general, when the Government accepts deliveries of
   nonconforming supplies under a contract, it does not waive
   specifications for subsequent deliveries under the same
   contract.  DeeLite Indus., Inc., 71-1 BCA   8,788, affirmed
   on rehearing, 72-1, BCA  9,258.  (Cf.  General Motors Corp.,
   72-1 BCA  9405 at 43,678.) Likewise, neither acceptance of
   defective goods under previous contracts for the same item
   with the current contractor, Doyle Shirt Mfg. Corp. v. United
   States, 462 F.2d 1150 (Ct. Cl. 1972); Respiration Technology
   Corp., 77-1 BCA  12,345; Shannon Luminous Materials Co., 71-2
   BCA  8,997; nor with other contractors, McDowell & Rapp
   Construction
Co., 73-1 BCA   9,834 (1972); R&M Mechanical Contractors, Inc.,
76-2 BCA  12,084, constitute conduct which alone can form the
basis of a waiver.

   Moreover, the Government is not estopped to reject defective
   work because of a prior, erroneous "approval" or "acceptance"
   by one of its inspectors, W.L. Spruill & Co., 71-2 BCA 
   8,930 (1971) , or because of the failure of the inspector to
   require correction of defects.  Penn Construction Co., 66-2,
   BCA  5,800; Ruscon Construction, 65-2 BCA   5,146; Robert
   McMullan & Sons, Inc., 77-1, BCA  12,456; Richard E.
   Alexander Co., 79-2 BCA  14,034.  Nor can the Government be
   estopped due to inadvertent acceptance of nonconforming goods
   without knowledge of the nonconformity.  Castle Construction
   Co., 84-1, BCA  17,041 (1983).

   5.  However, "[W]hen the government enters the marketplace . .
   . and puts itself in the position of one of its citizens
   seeking to enforce a contractual right . . . it submits to the
   same rules which govern legal relations among its subjects."
   See McQuagge v. United States, 197 F. Supp. 460 (W.D.La. 1961)
   and cases cited therein.  Accordingly, the strict enforcement
   rule falls when the Government waives or is otherwise estopped
   from enforcing its specifications.  Inet Power, NASABCA
   566-23, 68-1 BCA  7,020 (1968).

   6.  In general, the Government will be estopped in
   circumstances where a board or court concludes that it would
   be unfair to allow the Government to enforce a contract right
   after a contractor has relied on an earlier waiver of that
   contract right based upon the well settled contract principle
   that when one party acts in a manner that causes another party
   to rely on that conduct to his or her detriment, the former
   party is prevented or estopped from repudiating the effects of
   those actions.  David J. Joseph Co. v. United States, 82 F.
   Supp. 345, 113 Ct. Cl. 3.  In this regard, the 9th Circuit in
   United States v. Georgia Pacific Company, 421 F.2d 92, 104
   (9th Cir. 1970), set out the four elements or requirements
   necessary to estop Government action:  (a) The Government must
   know the facts; (b) The Government must intend or induce the
   contractor to believe that it intended certain acts to be
   relied upon; (c) The contractor must be unaware of the true
   facts; and (d) The contractor must rely on the Government's
   actions to its detriment.

   7.  Thus, to prevail on a theory of waiver or estoppel based
   upon a prior acceptance of defective goods, a party must prove
   that:  (a) It provided a nonconforming product; (b) The
   Government had actual knowledge of the nonconformity.  Castle
   Construction Co., supra.  (However, actual knowledge can be
   imputed from the facts.  See Gresham & Company, Inc. v. United
   States, 470 F.2d 556 (Ct. Cl. 1972) citing Chernick v. United
   States, 372 F.2d 492, 178 Ct. Cl. 498 (1967) and other
   cases.); (c) There was a direct and unambiguous communication
   between the parties with regard to the acceptance of
   nonconforming goods.

Joseph Morton Co., 78-1 BCA  13,173 (1978); (d) The waiver of a
contract provision was made by a responsible officer assigned the
function4, not just any Federal employee whose work happens to be
connected with the contract.  Deloro Smelting & Refining Co. v.
United States, 317 F.2d 382 (Ct. Cl. 1963); (e) The Government
employee waiving the specification must have actual authority to
do so.  Apparent authority will not bind the Government.  Drake &
Piper.  Inc., 65-2 BCA  4,868; and (f) The waiver must have been
communicated to Appellant with an intent to induce Appellant to
believe that the Government intended Appellant to rely on the
waiver.  Merchant's National Bank of Mobile v. United States, 231
Ct. Cl. 563 (1982).

   It has been said that a "transaction, though . . . originally
   impeachable, becomes unimpeachable . . . when a party with
   knowledge or the means of knowledge of his rights and of the
   material facts does what amounts to a recognition of the
   transaction . . . ." Harvey Radio Laboratories, Inc. v. United
   States, 115 F. Supp. 44, at 449; 126 Ct. Cl. 383 at 391
   (1953), cert. denied, 346 U.S. 937, 74 S.Ct. 377, 98 L.Ed. 425
   (1954).  Accordingly,

Where work is accepted . . . under such circumstances that
knowledge of its imperfect performance may be imputed, the
acceptance will generally be deemed a waiver of the
defective performance.  But this rule does not apply to latent
defects.  The acceptance of work which has been defectively done,
the defects being unknown and not discoverable by inspection,
does not amount to a waiver of the imperfect performance.

City of Seaside v. Randles, 92 Or. 650, 180 p. 319, 324 (Or Sup.
Ct. 1919).

[W]hen the Government with full knowledge of a contractor's
quality control procedure permits the contractor to perform the
contract in accordance with such procedure, either as
constituting compliance with the quality control requirements or
an authorized deviation from such requirements, this results in a
waiver of any objections the Government might otherwise have
raised to the contractor's performance up to the time the
Government put the contractor on notice that its procedure is
unsatisfactory to the Government where, as here, retroactive
compliance is impossible.

Maizel Laboratories, Inc., ASBCA 8597, 1963 BCA  3898 at 19,351.

   8.  Moreover, even where the Government has no knowledge that
   certain goods were nonconforming, it may still be precluded,
   under certain facts and circumstances, from later rejecting
   those nonconforming goods after having accepted them.  For
   example, not all acceptances are made formally, and the
   Government is often held to have impliedly accepted the work.
   Whether an implied acceptance had occurred depends, of course,
   upon the facts of each individual case.  In this regard it has
   been held that implied acceptance occurs when a contractor
   informs the Government of its inability to meet specifications
   and the Government nonetheless exhorts the contractor to
   continue performance, Inet Power, supra, at 32,440, or when
   the Government takes the contractor's work and uses it without
   complaint or reservation of right, Silent Hoist & Crane Co.,
ASBCA 9872, 1964 BCA  4,488, or where the supplies are retained
an unreasonable length of time by the Government without
acceptance or rejection, J.R. Simplot Co., ASBCA 3952 59-1 BCA 
2,112 (1959); Cudahy Packing Co., 109 Ct. Cl. 833 (1948), or when
there is unreasonable delay in issuing rejection, Max Bauer Meat
Packer, Inc. v. United States, 198 Ct. Cl. 97, 458 F.2d 88.  (See
also  UCC  2-602(1) which states that acceptance can occur when
a buyer neglects to make an effective rejection in a timely
fashion.)

   A contract requirement for the benefit of a party becomes dead
   if that party knowingly fails to exact its performance, over
   such an extended period, that the other side reasonably
   believes the requirement to be dead.  Where a party has
   administered an initially unambiguous contract in such a way
   as to give a reasonably intelligent and alert opposite party
   the impression that a contract requirement has been suspended
   or waived, the requirement cannot be suddenly revived in the
   future to the prejudice of a party who has changed his
   position in reliance on supposed suspension.  See Gresham &
   Company, supra. 470 F.2d 542 at 554.

   Moreover, "where a contract has been performed and a
   stipulated consideration has been paid, the general
   presumption is that the transaction is closed and this
   presumption operates against the government as well as against
   private individuals." McQuagge v. United States, supra.  See
   Dubois Construction Corp. v. United States, 98 F. Supp. 590,
   120 Ct. Cl. 139 (1951) and
Poole Engineering & Machine Co. v. United States, 57 Ct. Cl. 232,
234.  But a contract's "Warranty" clause5 or the discovery of
latent defects, City of Seaside v. Randles. supra, may give the
Government additional rights which survive acceptance.

   9.  Once strict compliance is waived, a contractor is entitled
   to reasonably adequate notice that the Government would no
   longer approve noncompliance.  Litton Systems Inc. v. United
   States,  449 F.2d 392, 401 (Ct.  Cl.  1971).  Additionally,
   depending upon the circumstances, once the Government demands
   strict compliance after such waiver, the contractor may be
   entitled to an equitable adjustment.  Gresham & Co.  Inc. v.
   United States, 470 F.2d 542 (Ct. Cl. 1972); Herley Industries,
   Inc., 81-1 BCA  15,155 (1981).  For example, in General
   Motors Corp.. supra, the Government contended that it had a
   right to still reject nonconforming products delivered after
   an initial set of products had been delivered and accepted
   under the same contract.  The Board, in response, pointed out
   however, that because the Government was sanctioning the
   continuation of production with the knowledge of the defect in
   the items tendered for delivery, the contractor was entitled
   to an equitable
adjustment.

   10.  While Appellant is entitled to present evidence of bad
   faith on the part of the Government, National Factors, Inc. v.
   United States, 492 F.2d 1383, 1385-86 (Ct. Cl. 1974); see also
   Allied Materials & Equipment Co. Inc. v. United States, 569
   F.2d 62, 565 (Ct.  Cl.  1978), such evidence must show a
   specific intent to injure Appellant in order for it to be
   considered by this Board or a court of law, Kalvar Corp. v.
   United States, 543 F.2d 1298, 1302 (Ct.  Cl.  1976), cert.
   denied, 434 U.S.  830 (1977).  There is an inherent
   presumption that public officials act in good faith.  Knotts
   v. United States, 121 F. Supp. 630, 631 (Ct. Cl. 1954).

OPINION

   Given the above "Synopsis of Law," it is the opinion of this
   Board that:

   1.  The Government may be estopped from strictly enforcing
   Program B-154-S length specification for diazo duplicate
   microfiche if Appellant proves, by a preponderance of
   substantial evidence, that the CO, as the responsible officer
   having actual authority to waive contract specifications under
   the contract, had actual or imputed knowledge of the
   nonconformance of the microfiche as to its length, and did
   waive the diazo microfiche length limitation provisions of
   such specification by actual or implied acceptance of such
   microfiche, and did communicate such acceptance to Appellant
   in such a clear and unambiguous manner as
to convey the sense of waiver to Appellant in order to induce
continued performance in accordance with such waiver; and that
Appellant, in reliance upon such communication, did in fact
continue its performance and will be injured by the Government's
action if estoppel is not granted.

   2.  The rule of finality may be applicable to Respondent's
   attempt to recover payment from Appellant made by check dated
   more than 120 days prior to Respondent's demand for strict
   compliance, unless the Respondent proves, by a preponderance
   of substantial evidence, that the defects alleged were latent
   and that the demand for strict compliance was made within a
   reasonable time after discovery of the defects.

   3.  Appellant may be entitled to be paid for those diazo
   microfiche which it delivered to Respondent which it alleges
   were collaterally rejected by Respondent upon a finding of
   rejectability of silver master and silver duplicate microfiche
   because of fingerprints, scratches, or other nonexcessive
   length defects, provided that Appellant proves, by a
   preponderance of substantial evidence, that the acceptable
   quality level requirements of the " Quality Assurance Through
   Attributes Program" (QATAP) contract provisions were not
   adhered to by Respondent respecting the rejection of such
   diazo microfiche and providing further that it can show that
   it timely appealed the rejection of such microfiche within the
   time requirements set in
the contract for such appeals.

   A more definitive ruling upon the legal question raised by
   Appellant cannot be given in the abstract but must be deferred
   until the presentation of factual evidence by the parties.

ORDER

   The Board has reviewed the transcript of the hearing and
   Appellant's submission respecting its "Motion For A Protective
   Order" and finds no basis whatsoever upon which to grant such
   Motion.  This Board follows the discovery rules of the Federal
   Rules of Civil Procedure, FRCP 26-37, which serve as a device
   to narrow and clarify the basic issues and as a device for
   ascertaining the facts or information as to the existence or
   whereabouts of facts relative to these issues.  Respondent has
   the right to obtain the fullest possible knowledge of the
   facts relating to the issues before trial limited only by
   privilege and relevancy standards.  Hickman v. Taylor, 329
   U.S. 495, 67 S. Ct.  385 (1947).  These discovery provisions
   are to be broadly and liberally construed to effect their
   purpose of adequately informing the litigants.  Schlagenhauf
   v. Holder, 379 U.S. 104, 85 S. Ct. 234 (1964); Herbert v.
   Lando, 441 U.S. 153, 99 S. Ct.  1635 (1979).

   FRCP 26(b)(1) sets forth the general rule that the parties may
   obtain discovery regarding any matter not privileged which is
   relevant to the subject matter involved.  The requirement of
relevancy must be const rued liberally with common sense.
Discovery should be allowed unless it is clear that the
information sought can have no possible bearing on the subject
matter.  La Chemise Lacoste v. Alligator Co., (1973 DC Del.), 60
FRD 164.  Rule 26(b)(1) has been construed broadly to encompass
any matter that bears on or reasonably could lead to other
matters that could bear on, any issue that is or maybe in a case.
Oppenhimer Fund, Inc. v. Sanders, 437 U.S. 340, 98 S. Ct. 2380
(1978).

   An objection on the grounds of undue burden is seldom
   sustained where the information sought lies wholly within the
   knowledge of one party and will not be revealed at all unless
   that party bears the burden of disclosing it.  United States
   v.  216 Bottles, (1965, ED NY), 36 FRD 695; King v. Georgia
   Power Co., (1970, ND Ga.), 50 FRD 134; Kainz v. Anhueser
   Busch, Inc., (1954, DC Ill.), 15 FRD 242; Kerr-McGee Corp. v.
   Texas Oklahoma Express, Inc., (1967, WD Okla.), 43 FRD 336.

   A party cannot simply state that interrogatories are
   burdensome or oppressive.  The Appellant must, and did not,
   make a specific, concise showing of substantive reasons why
   the interrogatories should not be answered.  Claims of burden
   that are wholly conclusionary should not prevail.  Flanagan v.
   Travelers Insurance Co., (1986, WD NY), 111 FRD 42; Trabon
   Engineering Corp. v. Eaton Mfg. Co., (1964, ND OH), 37 FRD 51.

Resnick v. American Dental Association, (1981, ND Ill.), 90 FRD
530.

   In determining whether discovery is unduly burdensome, courts
   take into account the needs of the case, the amount in
   controversy, and the importance of the issues at stake.  FRCP
   26(a), 26(b)(1)(iii).  Courts weigh the burden to the
   producing party against the need of the party seeking the
   information.  Halder v.  International Tel. & Tel. Co., (1977,
   ED NY), 75 FRP 657; Marshall v. S. K. Williams Co., (1978, ED
   Wisc.), 462 F.  Supp. 722.  The fact that interrogatories
   require a degree of work, research, and expense do not
   automatically render them objectionable.  A party cannot
   complain merely because in order to answer interrogatories it
   must compile information within its control or consult
   documents.  Rogers v. Tri-State Materials Corp., (1970, ND
   W.Va.) , 51 FRD 234; Erone Corp. v.  Skouras Theatres Corp.,
   (1958, SD NY), 22 FRD 494.  Respondent must have the
   information requested in order to answer Appellant's
   Complaint.  It is the Board's opinion that the information
   requested, with the exception of Interrogatory 12(c), is
   wholly within the knowledge of Appellant and will not be known
   to Respondent unless Appellant bears the burden.  The amount
   in controversy is substantial and the issues are numerous.
   Upon disclosure by Appellant, it may be necessary for
   Respondent to file an amended Answer.

   The information requested is not overly broad in scope or
   period of time.  Respondent has limited its requests to basic
   and relevant information which bears directly on the issues in
   this subject appeal.  Appellant must, and did not, make a
   specific, concise showing of which request(s) in Interrogatory
   1 were overbroad.  Conclusions, again, should not prevail.

   Further, discovery may be limited to matters encompassed by a
   stated period of time.  In Schenker v. Pepperidge Farm, Inc.,
   (1963, SD NY), 7 F Serv 2nd 684, the court permitted discovery
   of matters encompassed by a time period beginning two years
   before the period of statutory limitation.  Respondent's time
   frame is not unreasonable given the circumstances and issues
   involved in this appeal.

   Accordingly, this Board denies Appellant's "Motion For A
   Protective Order" and grants Respondent's "Motion to Compel,"
   with the single exception that Appellant need not comply with
   Interrogatory 12(c).

      IT IS SO ORDERED.

_______________

   lSee generally 1 B. Nash & J. Cibinic, Federal Procurement
   Law, 71-91 (Finality and Estoppel) (1980); Id. Vol. 2, Chapter
   23, 1586-1597 (Inspection, Acceptance, and Warranties).

   2The contract provides under Program B154-S, page 2 of the
   specifications, that the contractor must:  [P]rovide and
   maintain, within his own organization, an independent quality
   assurance organization of sufficient size and expertise to
   monitor the operations performed and inspect the products of
   each operation to a degree and extent that will insure the
   Government 's quality assurance, inspection, and acceptance
   provisions herein are [met].  The contractor shall perform or
   have performed the process controls, inspections and tests
   required to substantiate that the supplies provided under the
   contract conform to the specifications and contract
   requirements.

   3The contract provides under GPO "Contract Terms No. 1,"
   Article 2-12 (c) that:  [F]ailure to inspect and accept or
   reject the supplies shall neither relieve the contractor from
   responsibility for such supplies as are not in accordance with
   the contract requirements nor impose liability on the
   Government therefor."

   4The contract provides under GPO "Contract Terms No. 1,"
   Article 2-2, that:  "The Contracting Officer may at any time
   by a written order, and without notice to the sureties, make
   changes, within the general scope of the contract in any one
   of the following:  (i) drawings, designs, or specifications;
   (ii) method of shipment or packing; and (iii) place of
   delivery."

   5The contract provides under GPO "Contract Terms No. 1,"
   Article 2-13, that:  (a) "Notwithstanding inspection and
   acceptance by the Government, acceptance by the Government
   implied at law, payment, or any provision of the contract
   regarding the conclusiveness thereof, the contractor warrants
   for a period of 120 days from the date of the check tendered
   as final payment that:  (i) all supplies furnished under the
   contract are free from defect in material and workmanship and
   conform to the specifications and all other requirements of
   the contract; . . . ."