UNITED STATES GOVERNMENT PRINTING OFFICE BOARD OF CONTRACT APPEALS ELGIN BUSINESS FORMS, INC., Appellant PANEL NUMBER 84-10 Neal H. Fine, Chairman Edwin P. Dolan, Member Brian T. Morrissey, Member ISSUE PRESENTED This decision concerns an appeal from Elgin Business Forms, Incorporated, pursuant to the disputes provisions of GPO Form 1026, Contract for Marginally Punched Continuous Forms, concerning the February 16, 1984 notice of determination for default issued by the Government Printing Office, Atlanta Regional Printing Procurement Contracting Officer. POSITIONS OF THE PARTIES A. Government Printing Office The Government Printing Office's (hereinafter GPO) basic contention is that the forms produced by Elgin Business Forms were not in accordance with the terms and conditions of the Contract For Marginally Punched Continuous Forms, Form 1026 (hereinafter contract) and the August 24, 1983 Print Order specifications (hereinafter specifications). GPO avers that the forms were tested on four different occasions and that at all times the forms failed to perform in a satisfactory manner on both the Honeywell PRU 1200 Printer and the decollating equipment at the Kennedy Space Center. GPO contends that the test results and the evidence presented at the hearing constitute a prima facie case of failure to perform and therefore the contract was properly terminated for default. B. Appellant Elgin Business Forms, Inc., (hereinafter referred to as Appellant or Contractor) avers that the product it produced fully satisfied the provisions of the contract and the specifications. Furthermore, since the forms were produced according to specifications any failure to run on the designated equipment was not the fault of the Contractor. FINDINGS OF FACT 1. The matter involves an August 24, 1983 contract with Elgin Business Forms, Inc. The NASA Kennedy Space Center was the ordering agency on Purchase Order F-5537, Print Order 641, Jacket Number 651-215, Requisition Number 3-00195. The contract was for the printing of 270,000 marginally punched continuous forms. The Print Order specifications required a 14-7/8" x 11", a six part form printed with gray or green ink on white paper with black interleaving marginally punched process carbons. The only equipment stated in the Print Order specifications was the Honeywell PRU 1200 Printer. There were to be 500 forms per carton, 20 cartons per pallet, and the estimated cost was $29,867.00. 2. The contract was issued pursuant to GPO Form 1026, revised 12/1/82, Contract for Marginally Punched Continuous Forms, for the 10 month period beginning December 1, 1982, ending September 30, 1983. 3. There is no dispute between the parties concerning the shipping and delivery date or the manner of packing. 4. Neither the ordering agency nor the GPO furnished a sample copy of the form to the Appellant. 5. On or about December 15, 1983, the GPO Atlanta Regional Printing Procurement Office (Atlanta RPPO) received a memorandum from Mr. James T. Courson of NASA Kennedy Space Center indicating that they had received 540 boxes of computer paper from Elgin Business Forms which were unacceptable because " . . . parts 5 and 6 were discolored, carbon was not in alignment with holes causing paper to jam printer; paper burst apart while decollating." (GPO Exhibit 1, Tab 3.) 6. On or about January 11, 1984, Mr. Jack Forman of the GPO Atlanta RPPO and Mr. Courson from NASA Kennedy Space Center inspected two boxes of forms produced by the Appellant. According to the January 18, 1984 memorandum of record from Mr. Courson, the paper was rejected by NASA because: "(1) the paper holes do not line up with carbon holes causing the printer to jam, (2) paper appears to be shaded, and (3) carbon rips when paper is decollated." (GPO Exhibit 1, Tab 8.) 7. On or about January 17, 1984, Mr. Courson of NASA and Mr. Thomas Edwards of Elgin Business Forms, inspected two cartons of paper. The results of the test were the printer stopped three times in box one because of alignment and two times because of improper stacking. With regard to box two, the paper did not jam on the feeder but jammed three times because of improper stacking, no chad was observed, and the printed forms were decollated with no problems. (GPO Exhibit 1, Tab 8.) 8. On January 27, 1984, Mr. Howard Harrison, GPO Contracting Officer, wrote to Elgin Business Forms, informed him that the forms supplied by his firm had been tested and "Do not meet the minimum requirements of the contract specifications and are therefore rejected." Elgin was instructed to pick up the entire order and replace it with an acceptable product not later than February 10, 1984. If the forms were not replaced the contract would be terminated for default. (GPO Exhibit 1, Tab 7.) 9. On or about January 30, 1984, Mr. Jack Forman of the Atlanta RPPO tested two cartons of the forms. Half of the first box was run on the designated Honeywell Printer with four jammings of the paper and one stacking problem. Box two jammed two times, had one stacking problem and at normal operating speed the decollating was unacceptable. (GPO Exhibit 1, Tab. 9.) 10. On February 16, 1984, Elgin Business Forms was sent a notice of termination for default. The contract was terminated for default because of the Contractor's failure to replace the rejected forms with those in accordance with specifications within the time specified. (GPO Exhibit 1, Tab 11.) 11. On February 29, 1984, Elgin Business Forms was notified by Howard Harrison, Atlanta RPPO Contracting Officer, that the Appellant had been held in default, but there were no excess reprocurement costs. (GPO Exhibit 1, Tab 12.) 12. On or about March 13, 1984, a notice of appeal from Elgin was received by the GPO Atlanta RPPO appealing the decision to terminate the contract. (GPO Exhibit 1, Tab 13.) 13. On June 13, 1984, Appeal Panel 10-84 issued an Order directing that a test on the forms be conducted by the Chief, GPO Quality Assurance Section or his designee within 14 days of the issuance of the Order and that the Appellant, Elgin Business Forms, have the right to be present to participate in the testing process. 14. On June 27, 1984, the Panel received the report of the test and inspection conducted Mr. Gary J. Lauffer, GPO Printing Specialist. (Panel Exhibit 2.) 15. On July 13, 1984, a hearing was held at the Government Printing Office at which representatives of both sides presented witnesses and testimony. Neither party chose to submit a post hearing brief. DISCUSSION AND DECISION The issue presented is whether the GPO's decision to terminate for default was proper. Perusal of the record leads the Panel to the inescapable conclusion that the GPO's determination was in error. The GPO found that the 270,000 forms produced by Appellant did not meet the contract's terms and conditions and therefore declared the Appellant in default. The burden of proof therefore rested with the GPO to establish that its determination was proper. Continental Chemical Corporation, GSBCA 2735, 69-2 BCA ¶ 7839. A. Neither the Contract Nor the Specifications Provide Specific Performance and Testing Standards or Requirements The dispute centers on the meaning and interpretation of certain provisions of the contract and specifications. The crux of the matter is the testing and measuring of performance. Section 2.20(c) of the contract provides that "special and performance tests shall be as described in the specifications." Section 301 of the contract provides: "Forms produced under the contract must be of first class workmanship in materials suitable for their intended use. All operations and materials such as printing, collating, punching, perforating, registration, joining, splicing, paper, and carbon leaves shall be such as will ensure satisfactory continuous operation over makes, kinds of equipment, and usage specified." (emphasis added) The Panel agrees with the conclusions of Mr. Lauffer that the criteria "satisfactory continuous operation" and "unsatisfactory performance" (section 2.20(e)) " . . . leave room for interpretation." (Panel Exhibit 2, p. 2.) The August 24, 1983 specifications do not establish any performance criteria usage tests or quality standards. While the contract is voluminous, the specifications are woefully vague and insufficient if their purpose was to ensure that NASA, the ordering agency, received a product which would meet its particular needs. The deficiency in the specifications in the contract is the glaring failure of the government to precisely state what its performance requirements were and how it would test to determine conformity with those requirements. While the specifications informed the Appellant that the forms would be run on a Honeywell PRU 1200 Printer they did not indicate the expected performance level. (Tr. 139.) Likewise, the specifications did not contain a performance standard for the decollator which is an integral part of the process. Although the specifications fail to contain a particular brand of decollating equipment, the Panel finds that the failure to state any performance level for the decollator is a critical deficiency on the part of the government. The Appeal File and the record indicate that the forms were subject to several tests. Unfortunately, except for the test ordered by the Panel, the reports contained in the Official Appeal File neither contain a statement of sampling nor performance criteria. For example, the December 9, 1983 memo from Mr. Courson of NASA to Mr. Faour of the GPO Atlanta RPPO only states that they had received 540 cartons of forms " . . . which were unacceptable." (GPO Exhibit 1, Tab 3.) The memo does not state the number of boxes tested, how or when they were tested, or most importantly what were the acceptability criteria. Similarly, there is a memo from Mr. Courson which states that on January 11, 1984, he and Mr. Forman inspected two boxes and rejected them because "paper holes do not line up with carbon holes causing the printer to jam, paper appears to be shaded, and carbon rips when paper is decollated." (GPO Exhibit 1, Tab 8.) The Panel finds that the inspection of two boxes out of 540 is not an adequate sample upon which to default this contract. Society Brand Hat Co., ASBCA 6904, 1962 BCA ¶ 3349. Mr. Lauffer, who is very experienced in statistical quality control, determined that the appropriate sample size was 13 boxes of forms. (Tr. 144, Panel Exhibit 2.) Likewise, the Panel finds that the tests conducted on January 17 and 30, 1984, were defective because of the sample size and the failure to specifically state the expected performance level. The GPO did not sustain its burden of proving that the forms produced by Elgin did not meet the specifications. Pams Products, Inc., ASBCA 15,847, 72-1 BCA ¶ 9401. The Panel was not presented with any evidence which proved that the Appellant had not met the standard of satisfactory continuous operation. In the absence of any definition by the government the Panel construes the requirement of "satisfactory continuous operation" to mean something less than continuous operation. If the forms were expected to run continuously without any stoppages, the contract should not have used the term "satisfactory." The term satisfactory implies to the Panel a contemplated standard of operation which expects some stoppages. The Panel is unaware of any product which runs continuously without ever stopping. The question then is how many stoppages constitute satisfactory? The Panel believes that "satisfactory" like "beauty" is in the eye of the beholder. It is an imprecise term which should have been defined exactly in the specifications. 1/ The record indicates that NASA Kennedy Space Center had used this type of form for approximately ten years. (Tr. 123.) During this long period of time NASA should have established a specific performance standard by which it would measure acceptability. However, both the Official Appeal File and Hearing Record are devoid of any evidence of NASA's past experience. Such evidence or even common trade practice performance standards for this type of form would have given the Panel a basis of comparison with the existing test results. Gholson, Byars & Holmes Construction Co. v. United States, 173 Ct. Cl. 374 (1965). The GPO and NASA had the obligation to use language in the contract or the specifications which conveyed its intent with clarity. NAB-LORD Associates, PSBCA 398, 80-1 BCA ¶ 14,346. The burden of the ambiguity in the contract and specifications must fall solely on the GPO which developed the specifications. Peter Kiewit Sons' Co. v. United States, 109 Ct. Cl. 390 (1947). B. The GPO Did Not Support Its Burden of Proof It has been held in many contract appeal cases that when the government contracts for supplies to be manufactured in accordance with government specifications that ordinarily there is an implied warranty on the part of the government that if the specifications are followed a satisfactory product will result. United States. v. Spearin, 248 U.S. 132 (1918). In this regard there was no evidence presented to prove that the forms produced by the Appellant did not meet the stated requirements in the specifications. The size, color of ink and paper, the type of carbon as stated in the specifications were all complied with by the Appellant. (Tr. 138.) The Panel finds it impossible to uphold a determination for default based upon the purported failure to meet unstated specifications. The government seeks to default the Appellant for failure to meet an unspecified performance standard. It therefore has the burden of proving that the rejected forms failed to meet the requirements of the contract. Hardeman-Monier-Hutcherson, A Joint Venture, ASBCA 11785, 68-1 BCA ¶ 6210. Since the government failed to present evidence of what constituted satisfactory continuous operation it cannot prevail on its default determination. The Panel is not persuaded that two or three brief stoppages in two boxes out of 540 constituted a failure to meet the requirements of the contract. C. The Inspection and Test Ordered by the Panel Were Not Dispositive The June 21 inspection and test performed in accordance with the Panel's Order were not dispositive of the issue. The problem with the test performed by Mr. Lauffer was the acceptability standard he utilized. The record reveals that his determination of "defective," as being the stoppage of the printer one or more times, was based solely on the opinion of Mr. Michael Hopkins, Shift Supervisor of the GPO Data Center Division. (Tr. 137.) Indeed, Mr. Lauffer noted that while he was at the Kennedy Space Center that he had not asked Mr. Kurjack, Supervisor of the NASA Computer Room, what were his acceptability criteria. (Tr. 141.) Mr. Hopkins was not told by Mr. Lauffer that he would be testing six-part marginally punched process carbon forms as opposed to nonprocessed forms. (Tr. 134.) Mr. Lauffer, not being familiar with this type of computer form, had no knowledge of whether there was a difference in the performance between processed and unprocessed forms. (Tr. 142, 143, 145.) Mr. Lauffer noted that if Mr. Hopkins had said that four stops per box was acceptable that he would have reached different conclusions. (Tr. 157.) While Mr. Hopkins had 15 years of experience in computer operations he was not familiar with the terms processed and unprocessed carbon. (Tr. 159.) Mr. Hopkins believed that there was no reason for the carbon to stop the printer. However, he testified that he did not have firsthand experience with six-part marginally punched process forms. (Tr. 164, 173, 174, 175.) The GPO Data Center used at maximum five-part forms which are not marginally punched processed carbon. The Panel critically views the Mr. Hopkins' statement that performance of a printer is a relative matter. (Tr. 166, 168, 169.) Mr. Hopkins testified that while in his experience he isn't used to printer stoppages, that each computer operation has different problems and requirements. He stated that someone else may consider more than one stoppage per box to be acceptable based on their own experience and work environment. Since there was no evidence presented concerning the experience of NASA with this type of form, the Panel has no reasonable basis to conclude that Mr. Hopkins' opinion should be controlling. (Tr. 141.) Accordingly, the Panel concludes that Mr. Lauffer's acceptability criteria is not controlling on the issue presented. The Panel does accept Mr. Lauffer's conclusion that the alleged tint on part six of the form was not a critical defect which would preclude use of the forms. (Tr. 145, 150.) He noted that the specifications weren't precise as to the amount of permissible deviation and variation in color between the parts of the form. The green stripe present on some of the forms introduced as exhibits was not seen by Mr. Lauffer in his inspection and test. (Tr. 150.) Furthermore, he noted that the stoppages he witnessed didn't take the operator more than five to ten seconds to rectify and that there was no loss of computer paper. (Tr. 152, 168.) D. Conclusion and Holding Accordingly, the Panel finds that the GPO's determination to terminate for default was improper. The GPO did not sustain its burden of proving that the forms produced by the Appellant were not in conformity with the contract and specifications. We therefore hold that Appellant should be compensated in accordance with the terms of the contract and specifications. October 19, 1984 _______________ 1/ "It is very well to say that those who deal with the government should turn square corners. But there is no reason why the square corners should constitute a one-way street." Federal Corp. Insurance Corp. v. Merrill, 322 U.S. 380, 387-88 (1947).