UNITED STATES GOVERNMENT PRINTING OFFICE
CONTRACT APPEALS BOARD

Appeals of Knepper Press
Appeals dated December 21, 1983
Hearing held on July 11, 1984
Decision dated October 2, 1984

Contract Appeals Board  84-2 and 84-3
THOMAS O. MAGNETTI
WILLIAM R. ROSE
JOEL E. REEVES  (dissent)

PRELIMINARY STATEMENT

Knepper Press Co. (hereafter the contractor) has appealed the
final decision of the U.S. Government Printing Office (GPO)
Contracting Officer terminating two contracts for default that
the contractor had with the GPO.  Excess costs for reprocuring
the two defaulted contracts were assessed against the contractor.
The contractor appealed both of these default actions in a timely
fashion pursuant to the "Disputes" clause.  Article 2-3, Contract
Terms No. 1, GPO Publication 310.2, revised October 1, 1980.  In
accordance with Contract Terms No. 1 and GPO Instruction 110.10B,
entitled "Board of Contract Appeals Rules of Practice and
Procedure," the GPO Contract Appeals Board has jurisdiction over
this matter.

Although the contractor appealed the two separate default
actions, the issues raised by the contractor in the two appeals
were identical.  Therefore, at the hearing which had been
requested by the contractor, the two appeals were consolidated by
the Board Chairman without objection from either the contractor
or the Contracting Officer.  As a result of this consolidation,
there will be one decision covering both appeals.  The decision
of this Board is based solely on the record of these two appeals,
identified as 2-84 and 3-84.  This record consists of a
consolidated appeal file which includes documents relevant to
both appeals, testimony provided at a hearing held on July 11,
1984, and a post-hearing submission from the Contracting Officer
which relates to the assessment of reprocurement costs.

STATEMENT OF FACTS

1.  By Purchase Order 29784 dated June 27, 1983, the contractor
was awarded a contract, identified as Program C40-S, to produce a
looseleaf, self-covered book entitled "Changes to Sailing
Directions." The term of this contract was one year, July 1,
1983, to June 30, 1984.  Prior to the award of the contract, the
contractor confirmed the bid price.  Exhibit 6, File 2-84.

2.  By Purchase Order 30307 dated June 28, 1983, the contractor
was awarded a contract, identified as Program A832-S, to produce
a perfect bound book entitled "List of Lights and Radio
Navigational Aids." The term of this contract was one year, July
1, 1983, to June 30, 1984.  The contractor confirmed the price it
submitted as a bid.  Exhibit 6, file 3-84.

3.  By letter dated September 12, 1983, the contractor returned
all materials furnished by the GPO under Program C40-S, claiming
that it could no longer perform the contract for the price which
it had originally bid.  Exhibit 10, File 2-84.  Prior to
notifying the GPO that it did not intend to perform work under
this contract, the contractor had performed work under Print
Orders 301 through 304 which had been issued pursuant to the
contract.  A similar letter dated September 19, 1983, was sent to
the GPO stating that the contractor did not intend to continue
work on Program A832-S.  Exhibit 11, File 3-84.  All materials
which the GPO had furnished in relation to this contract were
returned with this letter.  At the time the contractor notified
the GPO of its intention not to perform the contract, it had not
performed any work on this contract.

4.  As a result of the contractor's abandonment of work on the
two contracts, the GPO terminated the two contracts for default.
In the letters notifying the contractor of the default action,
the contractor was informed that it would be liable for any
excess costs that might arise in reprocuring the defaulted
contracts.

5.  The excess cost for reprocuring Program C40-S was $3,236.93.
The excess cost for reprocuring Program A832-S was $8,892.33.
Excess costs were assessed only for work performed by successor
contractors during the same period of time as the term of the
original contracts.  See the Contracting Officer's post-hearing
submission.  The GPO set off the excess costs for reprocuring
these two contracts from funds that were due and owing the
contractor.

6.  In two letters, both of which were dated December 21, 1983,
the contractor challenged the terminations for default and the
assessment of excess costs for reprocuring the defaulted
contracts.

7.  At the hearing held on July 11, 1984, the contractor
contended that the contracts should have been terminated by the
GPO at no cost to it because the escalating cost of paper had not
been factored into its bid on the respective contracts.
According to the testimony of the contractor's representatives,
the cost of paper increased in mid-1983 after it had bid on the
two contracts and this increase had not been taken into account
when it had submitted the two bids.  In addition, the contractor
alleged that because it lacked perfect binding equipment to
perform the contract in accordance with the contract schedule,
the GPO should have never awarded it the contracts.  The
contractor's challenge to the assessment of excess costs of
reprocurement consisted of the allegation that there had been a
substantive change in the term of the contract under which work
was reprocured, and that, because the term of the reprocured
contracts differed from the term of the original contracts, the
contractor should no longer be responsible for any excess costs
of reprocurement.

DECISION

It has been the position of this Board that if a fixed price
contract does not have a price escalation clause or if the
Government is not responsible for the increase in costs, the
contractor must bear the risk of an unanticipated price increase
made by a supplier of material which is needed by that
contractor.  Appeal of B & W Press, GPO CAB 9-83, March 8, 1984.
Since there is no contract clause that would shift the burden of
such a price increase to the GPO and no evidence that the GPO is
responsible for the contractor's increased costs, the contractor
must bear the risk of the increase in its costs.

The contractor's argument that the.GPO should not have awarded
Program A832-S to the contractor because it lacked the
appropriate equipment to perform a contract requiring perfect
binding is also without merit.  The contractor's representatives
testified that its lack of perfect binding equipment meant that
it could not comply with the delivery schedule.  However, it is
the contractor's responsibility to have the capability to perform
work on a contract or the ability to obtain that work from
another source.  Appeal of Progress Graphics, Inc., GPO CAB 6-82,
May 3, 1982; Appeal of Associated Graphics Services, Inc., GPO
CAB 76-12, January 12, 1981.  The failure to have the means to
perform a contract is no excuse for repudiating a contract.
Furthermore, the GPO had a pre-award survey that indicated that
the contractor would contract this process out.  Exhibit 16, File
3-84.  The GPO also had confirmation from the contractor that it
could meet the schedule requirements of Program A832-S.  Exhibit
7, File 3-82.  Clearly, there was no reason for the GPO to doubt
that the contractor would not be able to perform the contract in
a timely fashion.

The Board finds, based upon the evidence of record, that the
contractor repudiated these contracts without reason or excuse.
Therefore, the termination of these contracts for default is
affirmed.

In regard to the issue of reprocurement, the contracts permit the
GPO to assess the contractor for any excess costs that might
arise from their reprocurement.  See Article 2-18(b), Contract
Terms No. 1.  However, the contractor has alleged that the
assessment of excess costs was unreasonable and represented the
failure on the part of the GPO to mitigate the excess costs of
reprocurement because the reprocured contracts were for a term
that extended beyond the term of the original contracts.  The
contractor has the burden of proving the allegation that the GPO
substantially changed the contract when it procured the work for
a period of time that extended beyond the term of the original
contracts.

Although it is true that the term of the reprocured contracts was
for period of time that exceeded the term of the original
contracts, 1/ there has been no evidence introduced into the
record to indicate that the letting of the contract for a period
that extended a few months beyond the term of the original
contract represented a failure on the part of the GPO to mitigate
the excess costs of reprocurement or a substantial change in the
contract.  Since no evidence was submitted by the contractor to
substantiate its allegations that the successor contractors
factored into their bids increases in costs that might have
occurred for the period of time which was beyond the term of the
original contract, the contractor has not met its burden of
proving that there was a substantive change in the reprocured
contracts.

Both of the reprocured contracts were awarded to the lowest
responsible bidders after the contracts were formally advertised.
Each contract required the same type of work as was required
under the defaulted contracts.  Moreover, the record indicates
that the excess costs of reprocurement were assessed only for
print orders that were issued during that period of time covered
by the original contracts.  The Board requires no further
evidence from the Contracting Officer to find that the assessment
of excess costs was reasonable in this case, and to affirm the
assessment of these costs against this contractor.

Accordingly, based upon the above reasoning, both of the
contractor's appeals are denied in their entirety.

1/ The term of the original contract identified as Program C40-S
was July 1, 1983 to June 30, 1984; the term of the reprocured
contract was from December 1, 1983 to November 30, 1984.  The
term of the original contract identified as Program A832-S was
July 1, 1983 to June 30, 1984; the term of the reprocured
contract was November 1, 1983 to October 31, 1984.

Dissent

Although I agree with the majority in its affirmance of the
termination of these two contracts for default, I must dissent
from their decision regarding the assessment of reprocurement
costs.  The record indicates that the excess costs of
reprocurement were assessed only for that period of time covered
by the original contracts.  However, the reprocured contracts
covered a period of time that extended beyond the original term
of the contracts.  See footnote on preceding page.  During a
period of increasing costs, a contractor would experience an
increase in his average unit costs.  Therefore, since these
contractors were bidding on a contract whose term covered a
period of time which extended beyond the original contracts, the
prospective bidders would have had to factor in, over the entire
term of the contract, higher costs which might occur in that
extended period of time.  This would mean that, although a print
order would have been generated in May 1984, the original
contractor would be erroneously held responsible for excess costs
for that print order that would have had increases in cost
factored into it to compensate the successor contractor for price
increases in labor and materials that might occur during that
period of time which was beyond the term of the original
contracts.

The contracts should have been reprocured for a period of time
that would coincide with the remainder of the original contract
term.  Without evidence from the GPO that the reprocurement of
these contracts for a period of time that extended beyond the
original term of the contract mitigated the excess cost of
reprocurement, the assessment of excess costs is not appropriate.

JOEL E. REEVES