UNITED STATES GOVERNMENT PRINTING OFFICE
CONTRACT APPEALS BOARD

APPEAL OF INTERNATIONAL LITHOGRAPHING
Contractor's Appeal dated April 12, 1984.
Decision dated March 22, 1985.
CAB Panel No. 84-15
Kerry L. Miller, Chairman
James K. Mehan, Oliver E. Hassell, Members

   International Lithographing (hereinafter the contractor) has
   filed a timely appeal from the decision of the Contracting
   Officer to assess a 25% reduction in the cost of Print Order
   2, Program 1761-S, Jacket 769-048, Purchase Order K-0890.  The
   contractor appealed this decision in accordance with the
   "Disputes" clause of the contract.  Article 2-3, Contract
   Terms No. 1, GPO Publication 310.2, revised October 1, 1980.

   The jurisdiction of the GPO Contract Appeals Board over this
   appeal is established pursuant to GPO Instruction 110.10B,
   entitled "Board of Contract Appeals Rules of Practice and
   Procedure," and pursuant to Contract Terms No. 1, supra.  As
   the contractor was given the opportunity to have its appeal
   heard at an informal hearing, but did not so request, this
   decision is based solely on the record, an appeal file
   containing ten (10) exhibits. 1/


STATEMENT OF FACTS

   1.  A contract to print four quarterly issues of Air Defense
   Artillery Magazine, was awarded to the contractor by the GPO.
   Exhibit 6.  The contract called for the production of
   approximately 12,000 copies of each issue of a 64-page self-
   cover, saddle-stitched magazine, printed in two colors.
   Exhibit 7, p. 5.  Section 1 of the contract specifications
   noted that "any contract which results from this Invitation
   for Bid will be subject to all terms and conditions of "GPO
   Contract Terms No. 1, supra and the GPO Quality Assurance
   Through Attributes.Program (QATAP), GPO Publication 310.1,
   revised June 1981.  Exhibit 7, p. 2.

   2.  The quality for printing and finishing the Air Defense
   Artillery Magazine had to meet with the standard for level III
   of the QATAP.  Exhibit 7, p. 3.

   3.  Print Order No. 2 dated January 3, 1984, was issued to
   contractor, and called for printing of 12,000 copies of the
   winter issue of Air Defense Artillery Magazine with a shipping
   date of January 25, 1984.  The print order also required the
   contractor to send 15 advance copies to ADA Magazine, Fort
   Bliss, Texas by courier.  Exhibit 6

   4.  After receiving a complaint from the customer agency that
   there was a loss of text the Contracting Officer requested a
   random selection of 32 magazines and determined that the text
   loss was consistent throughout the 32 samples.  Exhibit 10.

   5.  By letter dated March 19, 1984, the Contracting Officer
   informed contractor that "the magazines received by our
   customer agency suffered seven typelines of image loss on page
   43." The Contracting Officer decided that because the
   magazines were time-dated publications, they would be
   accepted, however, a 25% reduction in the cost of the print
   order was assessed "to protect the interest of the Government
   for accepting the defective magazines." Exhibit 3.

   6.  A contract modification was issued pursuant to Article
   2-13, Contract Terms No. 1, reducing the cost of the print
   order from $8,246.00 to $6,184.50.  Exhibits 2, 4.

   7.  By letter dated April 12, 1984, the contractor appealed
   the contract modification.  The contractor did not dispute the
   fact that the contractor had made an error in printing,
   however, he stated "It is our feeling that we should not be
   penalized so heavily for a first time error made while
   carrying out our part of the contract in the time frame
   allotted." Exhibit 1.

DECISION

   The Contractor does not dispute that the finished product
   submitted to the customer agency had 7 typelines of text
   missing from page 43.  See Exhibit 5.  Neither does the
   contractor dispute the fact that the loss of text results in a
   significant loss of information to the reader of the
   publication.  Instead the contractor argues that he should not
   be penalized so heavily because his error was a result of the
   short time limitation contained in the contract.  Contractor
   claims that extensive changes were required by the agency
   after the agency received the blueline and that this resulted
   in the need to reshoot 15 pages.  Contractor states that
   normally when this many changes occur the contractor submits a
   second blueline to the agency for final approval, however,
   because the contract called for the magazine to be shipped
   within 5 days of receipt of the blueline, the contractor did
   not have time to submit a second proof for approval.

   Contractor's argument is unavailing.  Contractor appears to be
   arguing that the loss of text would.not have occurred if he
   had time to send another blueline to the agency for its
   approval, because the agency would have caught the mistake.
   However, this argument overlooks the fact that is the
   contractor's obligation to ensure that the product he produces
   meets the quality specifications set forth in the contract.
   This the contractor clearly failed to do.

   The contractor's other argument centers on the amount of the
   reduction in costs.  The contractor contends that a 25%
   reduction was too severe "for a first time error." Exhibit 1.
   The solicitation for Program 1761-S, Jacket 769-048, states
   that any contract resulting from the invitation for bid is
   subject to the terms and conditions of both U.S. GPO Contract
   Terms No. 1, revised October 1980 (GPO Pub. 310.2) and Quality
   Assurance Through Attributes Program (QATAP), revised June
   1981 (GPO Pub. 310.1).  The solicitation also states that the
   printing and finishing attributes are to be performed in
   accordance with level III product quality level.  Exhibit 7,
   p. 2.

   According to QATAP any loss of information in the publication
   is classified as a critical defect.  A loss of information is
   defined "as any omission of or damage to the printed image
   which impairs the transmission of the intended information."
   QATAP, p. 38.  The Contracting Officer had 32 copies of the
   magazine randomly selected and determined that all 32 samples
   suffered text loss.  In accordance with Appendix A to QATAP,
   since each of the 32 sample copies contained the one critical
   defect, for a total of 32 critical defects, the appropriate
   reduction in the contract price is 25%.  QATAP, p. 42.

   This Board has ruled that this method of adjusting the
   contract price using the QATAP operates as a liquidated damage
   clause.  Appeal of Edward Brothers, Inc., GPO CAB 3-83, May 3,
   1984.  In order to have an enforceable liquidated damage
   clause, the clause must fix damages that are reasonable
   compensation for the harm caused by the contractor's failure
   to perform.  Priebe & Sons v. United States, 332 U.S. 407
   (1947).  Although liquidated damage clauses are used where
   damages are difficult to estimate at the time the contract is
   awarded, the liquidated damages assessed must bear some
   rational relation to the actual damages suffered by the
   Government.  Graybar Electric Company, Inc., ICBA No.
   773-4-69, 70-1 BCA  8121.

   In the instant case, the printing defect caused a significant
   information loss.  The defective magazines were accepted by
   the customer agency because they were time-dated.  Thus, the
   Government and the readers of the magazine were damaged by the
   loss of information.  Accordingly, the 25% reduction bears a
   rational relation to the actual damages suffered by the
   Government.

   Under the terms of GPO Contract Terms No. 1, the contractor
   warranted that all supplies furnished under the contract are
   free from defects in material and workmanship and conform to
   the specifications and all other requirements of the contract.
   In the event that the contractor breaches this warranty, the
   Government, at its option, may either require the contractor
   to correct the defect or "retain the supplies or parts thereof
   which do not conform to the requirements of the contract . . .
   without correction or replacement, in which event the contract
   price shall be reduced by the amount which is specified by the
   contract or, if not specified, by an amount which is equitable
   under the circumstances." GPO Contract Terms 2-13(c).

   The action taken by the Contracting Officer to reduce the
   contract price by 25% was lawful, proper, in accordance with
   the terms of the contract, and bears some rational relation to
   the actual damages suffered by the Government.  Accordingly,
   the Board denies contractor's appeal.

_______________

1/ The appeal file originally contained eight exhibits.  By
letter dated August 17, 1984 the Board requested the GPO to
submit further evidence.  The response to that request has been
designated as Exhibit 9.  By letter dated January 24, 1985 the
Board made an additional request of the GPO for further evidence.
The response to that request has been designated as Exhibit 10.