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; . . . ."