U.S. Government Printing Office
Office of the General Counsel
Contract Appeals Board

Vincent T. McCarthy, Chairman
Jay E. Eisen, Member
Drew Spalding, Member
Panel 77-11

Appeal of International Business Machines Corporation
April 21, 1978

This is an appeal filed on November 1, 1977, by International
Business Machines Corporation, One Metropolitan Plaza, P.O. Box
3658, San Francisco, California, 94119, also referred to herein
as the contractor or appellant, under the "Disputes" clause of
the contract.  It concerns Jacket 796-404, Purchase Order R1316,
GPO Form 1026, Contract for Marginally Punched Continuous Forms,
December 1, 1976 - May 31, 1977, U.S. Government Printing Office.

I. Findings of Fact

a. This case arises out of a contract entered into by the
appellant and the U.S. Government Printing Office, herein
referred to as the GPO, for the production of 10,000 marginally
punched continuous forms, 9" x 4".

b. The customer agency, Energy Research and Development
Administration, (ERDA), submitted requisition #OR-3968 for the
forms to the Regional Printing Procurement Division, Government
Printing Office, Seattle, Washington on November 3, 1976.  The
Procurement Officer solicited several contractors by telephone
who specialized in manufacturing business forms, including the
appellant.  A representative of the appellant visited the
procurement office in January 1977 and picked up a printed form
produced in connection with a former procurement as a facsimile
or sample only.  Telephone solicitations were made on February 21
to February 28, 1977, and the appellant was the sole bidder.

c. The appellant's bid in the amount of $1,691.30 was accepted
and confirmed by the issuance of Purchase Order R1316, Jacket
796-404, on February 28, 1977, with a shipment date of May 28,
1977.  The document provided for the production of:

"Quantity 10,000 + 10% sets; Description Document receipt, per
specifications.  In strict accordance with your quote and our
specifications.  Dated 2/28/77."

d.   In addition, the purchase order contained an entry as
follows:

"Purchased: F.O.B.:  XX  Per specifications"

e. The specifications for Form No. 54-7600-028 titled "Document
Receipt" was transmitted to the contractor on February 28, 1977.
The specifications on page 2 of a 3-page document made reference
to changes as follows:

"Ordering agency will furnish

X  Reprint Copy

X  With Changes Add New Logo on Plies 2 and 3"

f. In accordance with the schedule, the contractor made shipment
of the manufactured forms on May 28, 1977.

g. The customer agency (ERDA), on July 14, 1977, advised GPO that
the contractor failed to conform to the changes required in
specifications to wit:  adding  "New Logo on Plies 2 and 3".
They, therefore, rejected the order.

h. The contractor was advised by letter, dated July 14, 1977, of
the possibility of rejecting the printing because of their
failure to produce an acceptable product in conformance with the
specifications.  The contractor refused to cure the error by a
reprint and defended its position in that its verbal bid was for
an exact reprint and no copy change was ever received by them.
The only copy received was a sample of a previous printing.  The
contractor admitted to failing to observe the notation on the
specifications for the change and relied the repeat sample for
production purposes.

i. The appellant refused to accept responsibility for the error
and declined to reprint the form.  The Contracting Officer, by
letter dated October 7, 1977, notified the contractor that the
contract is terminated for default by reason of its inability to
deliver a product in accordance with the specifications; that the
action is taken as provided in Article 18 of the U. S. Government
Printing Office Contract Terms No. 1.

j. The contractor appealed to the Public Printer by letter dated
November 1, 1977.  The contractor, in its letter of August 12,
1977, indicated that they never agreed to or accepted the
referenced Article 18, GPO Contract Terms No. 1 as part of the
contract.

k. The method of procurement as provided in the specifications
states the following:

"(2)  X  Purchased through GPO other than Form 1026"

The specifications provide in a footnote as listed on GPO Form
1026a (Specifications for Marginally Punched Continuous Forms)
the following:

"All the provisions of GPO Form 1026, Contract for Marginally
Punched Continuous Forms, in effect at the date of the purchase
order, are incorporated herein by reference and are an integral
part of these specifications.  Exceptions:  When the method of
procurement is other than GPO Form 1026, and there is any
conflict between the provisions of GPO Form 1026 and those of the
specifications, the specification provisions shall prevail."

l. Since it is apparent that there is not any conflict between
the provisions of GPO Form 1026, Contract for Marginally Punched
Continuous Forms, December 1, 1976, and the specifications
herein, the provisions of GPO Form 1026 prevail.  Paragraph 2.27
of GPO Form 1026 contains the usual disputes provision concerning
decisions on questions of fact arising under the contract to be
decided by the Contracting Officer in event of failure to agree,
with a right of appeal within 30 days after receipt of a copy of
the decision.

II.  Opinion

The immediate questions in this appeal are the following:

(1) Whether a binding bilateral contract resulted from the
parties' negotiations;

(2) Whether appellant's failure to deliver the forms ordered as
described in the specifications upon the issuance of the purchase
order was a default provided for under the contract.

It is concluded that this Board has jurisdiction to determine a
dispute concerning the existence or non-existence of a
enforceable obligation, including whether a purchase order
(unilateral offer) has ripened into an obligation binding on the
offerer.  The appellant's oral quotation was an offer which the
Government reasonably accepted when it issued an authorization to
proceed in the form of GPO Form 2669, Purchase Order R1316,
accompanied by specifications provided in GPO Form 1026a.  The
facts here clearly show, that the contractor in reliance of the
Government's offer through the issuance of the Purchase Order and
specifications made progress and tendered performance and
delivery which respondent rejected because of the failure of the
contractor to comply with the specifications.  From this
evidence, we conclude that there has been sufficient performance
to constitute a binding bilateral agreement.  Ordnance Part and
Engineering Co., ASBCA 12820, 68-1 BCA  6870; Waterman
Instrument Corporation, ASBCA 11392, 66-2 BCA  5783.

The Board, in addition, must decide if appellant was justified in
not following strictly the provisions of the specifications,
relying on their quotation for an exact reprint of the previous
order with identical print copy, or if the Government was correct
in demanding exact compliance with specifications.

Paragraph 2.26(a), GPO Form 1026, Contract for Marginally Punched
Continuous Forms, provides in pertinent part the following:

"(a) In case any form was found to be . . . not in conformity
with the requirements of the specifications the ordering agency
shall have the right to reject such articles, or require their
correction.  If the contractor fails to proceed properly with the
replacement or correction thereof, the ordering agency may by
contract or otherwise, replace or correct such forms and charge
to the contractor the excess cost occasioned the ordering agency
thereby, or the ordering agency may terminate the right of the
contractor to proceed as provided in the contract and charge to
the contractor the excess cost occasioned thereby."

Further, the following appears on the Purchase Order R1316,
Jacket No. 796-404:

"The Public Printer reserves the right to reject  all or any
portion of consignments which are not  in accordance with
specifications."

From the statements made in the appellant's letters, particularly
where it states that IBM responded with a quotation which was for
a true reprint, we conclude that the deficiencies mentioned by
the Contracting Officer in his letter of October 7, 1977, were in
fact a material departure from the technical requirement of the
specifications which called for a change in the addition of a
"New Logo on Plies 2 and 3".

Contracting Officers have the right to insist upon strict
compliance with specifications.  There is no legal requirement
that the forms tendered by the contractor not wholly in
accordance with the specifications be accepted in substitution
for the forms specified in the contract.

It is a well established basic principle that the Government is
ordinarily entitled to get complete compliance exactly in
accordance with the details of the specifications, and that
deviations in performance in the finished product are not
acceptable if the finished product does not satisfy the needs of
the procurement.  Ideal Restaurant Supply Co., Inc., VACAB No.
570, 68-1 BCA  6327.

To summarize, based on the evidence of record, we conclude that
the forms tendered by the contractor did not comply with the
contract specifications.  We consider that the Contracting
Officer was justified in insisting upon strict compliance
therewith.  In view of the foregoing the appeal is denied.