Vogard Printing Corporation

Contract Appeals Board
Panel 84-7
January 7, 1986

Kerry L. Miller, Chairman
Carol F. Cini, Member
Franklin P. Delaine, Member.

PRELIMINARY STATEMENT

   Vogard Printing Corporation, (hereinafter "appellant") has
   filed a timely appeal from the final decision of the
   contracting officer which assessed excess reprocurement costs
   against appellant following the contracting officer's default
   termination of appellant's contract for Program B346-S,
   Purchase Order 27463.  Appellant appealed the final 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.  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.  As appellant
   has not requested a hearing, the decision of the Board is
   based solely on the record of this appeal, consisting of an
   appeal file containing 21 exhibits.

FINDINGS OF FACT

   1. Invitations for bid on Program B346-S were mailed to
   thirty-two contractors. Exhibit 3.

   2. At the bid opening on December 21, 1983, seven "no bids"
   and ten responses were received.  Exhibit 3.

   3. Program B346-S was a contract for the printing of Farmline
   magazine for the U.S. Department of Agriculture (USDA).  The
   contract called for the production of self-cover pamphlets
   requiring such operations as composition, two-color printing,
   binding, packing and distribution.  The specifications
   anticipated one order per month for approximately four months.
   The contract required printing attributes at Quality Level
   III, and finishing attributes at Quality Level III.  The
   contract also specified that inspection levels (from MIL-
   STD-105) were as follows: a) nondestructive tests - general
   inspection level I; b) destructive tests - special inspection
   level S-II.  Exhibit 2, p. 2.

   4.  Appellant's net bid of $13,796.45 was the lowest bid.
   Appellant was contacted by telephone and asked to review and
   confirm the bid.  Appellant reviewed and confirmed by
   telephone.  Exhibit 7.  Appellant by letter dated April 4,
   1983, signed by Gerald G. Vogele, President, Vogard Printing
   Corporation, stated that he had reviewed the contract and
   found that the prices quoted by Vogard in its bid were correct
   as quoted.  Exhibit 5.

   5.  Appellant was awarded the contract for Program B346-S on
   April 7, 1983.  Exhibit 8.

   6.  Print Order No. 301 calling for 5,912 copies of Farmline
   magazine was issued to appellant on June 1, 1983.  Exhibit 9,
   p.l.  By memorandum dated July 6, 1983, Eric Van Chantfort,
   Economics Management Staff, USDA, complained that the copies
   printed by appellant did not meet the contract specifications
   for Quality Level III.  According to Chantfort, 600 copies
   were inspected and approximately 300 copies contained serious
   printing defects.  Exhibit 9, pp. 4, 5.  The appellant was
   notified of the defects by letter dated July 19, 1983, and was
   requested to provide a written explanation of how the defects
   occurred and the steps to be taken by the appellant to prevent
   similar defects from occurring in the future.  Exhibit 9, p.
   3.  The appellant did not respond to this letter.  The
   contracting officer decreased the purchase order by 10.1%
   because of the appellant's failure to meet the production
   quality attributes.  Exhibit 9, p. 3.

   7.  Print Order 302 was issued on July 15, 1983, calling for
   5,899 copies of the July 1983 Farmline magazine.  Exhibit 10,
   p. 1.  The copies inspected by the USDA were found to contain
   numerous printing defects, including improper trim size,
   misaligned fold on cover and a blue screen on the cover.  In
   addition, the USDA found that there was a double image on page
   4, spotting on the photographs and show-through on several
   pages.  Exhibit 10, p. 4.  An inspection by GPO confirmed
   these complaints.  Exhibit 10, p. 7.  By letter dated August
   30, 1983, the appellant was notified of the defects in Print
   Order 302.  Exhibit 13, p. 4.  The appellant responded in a
   letter dated September 12, 1983, in which he blamed the
   majority of the defects on press misfeeds.  He claimed that
   his employees pulled most of the "bad" copies caused by the
   misfeeds and he challenged the agency's estimate of 30% "bad"
   copies. Exhibit 13, p. 1.  On September 15, 1983, Purchase
   Order 27463 was decreased by 25% of the invoice billing price
   due to the failure of the product to meet the specified
   quality attributes.  Exhibit 10, p. 2.

   8. Print Order 303 was issued on August 26, 1983, calling for
   5,270 copies of the August / September issue of Farmline
   magazine.  Exhibit 11, p. 1.  By letter dated October 4, 1983,
   the USDA informed GPO that the centerfold folio was not bound
   into the issue as required by the contract specifications.
   Exhibit 11, p. 6.  The appellant was informed of this defect
   in a letter from Darwin Hughes, Contracting Officer.  The
   appellant was given 10 days to provide a written explanation
   of the cause of the defects and to describe the steps being
   taken to assure the problem would not reoccur.

Exhibit 11, p. 3.  The appellant did not respond to this letter.
On October 31, 1983, Purchase Order 27463 was decreased by 6.9%
of the billing price for 800 departmental copies and 13.4% of the
invoice billing price on 260 Superintendent of Documents copies
based on the above cited defects.  Exhibit 11, p. 2.

   9.  On October 12, 1983, a Cure Notice was sent to the
   appellant informing him that his "failure to deliver a product
   of acceptable quality" on Print Order 301, 302 and 303 was
   endangering performance of the contract.  The appellant was
   warned that unless the condition was cured, the GPO may
   terminate the contract for default.  Appellant was given 10
   days to present in writing "the measures adopted which have
   cured" the performance problems.  Exhibit 15.  The appellant
   did not respond to this Cure Notice.

   10. Print Order 304 was issued on October 11, 1983, calling
   for 5,273 copies of the October / November issue of Farmline
   magazine. Exhibit 12, p. 1.  By letter dated November 16,
   1983, USDA informed GPO that it was rejecting the shipment of
   the October / November Farmline and requesting an immediate
   reprint.  Exhibit 12, p. 2.  USDA complained that type was
   deleted on page 4 which was present on the color key and page
   blues.  This missing type caused the deletion of two
   paragraphs "critical to a proper understanding of the theme on
   which the two lead articles are based." The USDA also noted
   several other minor defects in the issue including extraneous
   marks on the cover, "picking" on the back cover and PMS screen
   tones not properly matched.  Exhibit 12, p. 3.  The appellant
   failed to deliver the reprinted order on schedule.

   11.  By letter dated November 18, 1983, appellant was notified
   that the contract for Program B346-M, Purchase Order 27463 was
   being terminated for default because the appellant failed to
   deliver an acceptable product on Print Order 301, 302 and 303,
   and because Print Order 304 was delivered late.  Also cited
   was the appellant's failure to answer the Cure Notice dated
   October 12, 1983.  Exhibit 17.

   12. By letter dated January 23, 1984, the appellant was
   notified that all print orders subsequent to Print Order 304
   would be reprocured at an estimated price.difference of
   $5,358.95.  Exhibit 18.

   13. Appellant appealed this Final Decision in a letter dated
   February 8, 1984.  Exhibit 1.

   14.  By memorandum dated February 17, 1984, the GPO Contract
   Review Board concurred with the recommendation of the Contract
   Specialist, Term Contracts Division, to waive the assessment
   of excess reprocurement costs for the reprocurement of the
   first Farmline issue subsequent to Print Order 304.  The
   memorandum noted that for the above-mentioned Print Order, the
   Government failed to mitigate damages.  Exhibit 19.  The
   appellant was informed of this decision in a letter dated
   February 28, 1984, which revised the estimate of excess
   reprocurement costs from $5,358.95 to $2,160.84.  Exhibit 20.

DECISION

   The first issue presented by this appeal is whether the
   Government properly terminated this contract for default in
   accordance with the terms of the contract.

   In cases of default, the Government has the initial burden of
   showing that the contractor had defaulted in its performance
   of the contract.  Caskel Forge Inc., ASBCA No. 6205, 61-1 BCA
    2,891; National Aviation Electronics, Inc., ASBCA No. 18256,
   74-2 BCA  10,677.  Once the default has been established, the
   contractor then has the burden of demonstrating that the
   default was excusable. B.M. Harrison Electrosonics, Inc.,
   ASBCA No. 7684, 1963 BCA  3,736; Hy-Cal Engineering Corp.,
   NASA BCA Nos. 871-18 and 772-7, 75-2 BCA  11,399; see also
   Article 2-18, supra.

   The Government justified its termination for default on the
   grounds that the appellant "failed to deliver an acceptable
   product on print orders 301, 302 and 303, and delivered late
   on print order 304." In addition, the Government cited the
   appellant's failure to answer a cure notice.  The Government
   clearly possesses the contractual right to terminate the
   unperformed portion of the contract for these reasons.  In the
   instant case, the burden of proof placed upon the Government
   to demonstrate that the appellant had defaulted on the
   contract is easily met.  The record indicates the appellant
   continually failed to produce printed material which met with
   contract specifications.  See Findings of Fact 6-10.  Although
   appellant previously supplied an affidavit from one of his
   employees stating he recalled that Print Order #302 "as a
   whole looked good," Exhibit 13, p. 3, he provided no
   additional evidence with regard to the other defective print
   orders.  This affidavit is unpersuasive in light of evidence
   that Print Order #302 was inspected and found to have
   extensive defects.  See Inspection Report, Exhibit 10, p. 7.
   The record, therefore, makes out a prima facie case of a
   failure to perform.

   The Government is entitled to enforce strict compliance with
   the specifications found in its contracts. American Electric
   Contracting Corp. v. United States, 579 F.2d 602, 608 (Ct. Cl.
   1978); Decatur Realty Sales, HUD BCA No. 75-26, 77-2 BCA 
   12,567.  The determination of whether a product conforms with
   the contract specifications must rest with the Contracting
   Officer, as this determination is within his discretion in
   administering a contract.  Thomas W. Yoder Co. Inc., VACAB
   997, 74-1 BCA  10,424.

   The record further indicates that a cure notice was sent to
   the appellant on October 12, 1983, which the appellant failed
   to respond to.  After issuance of such a notice, the
   Government is entitled to adequate assurances from a
   contractor that performance will continue in accordance with
   the contract specifications.  A contractor's failure to
   provide such assurances justifies a termination for default.
   Lorch Electronics Corp., ASBCA Nos. 21496, 21749, 78-1 BCA 
   12,911.

   The second issue to be resolved is whether the assessment of
   the excess costs of reprocurement was proper in this case.

   Following a valid default termination, one of the Government's
   most important contractual remedies is the right to assess the
   defaulted contractor the excess costs of reprocuring the
   unperformed part of, or if necessary, the entire contract from
   another contractor.  Environmental Tectronics Corp., ASBCA No.
   21204, 78-1 BCA  12,986; see also Article 17(b).

   Under the terms of Article 2-18(c) a contractor:

shall not be liable for any excess costs if the failure to
perform the contract arises out of causes beyond the control and
without the fault or negligence of the contractor.  Such causes
may include, but are not restricted to, acts of God or of the
public enemy, acts of the Government in either its sovereign or
contractual capacity, fires, floods, epidemics, quarantine
restrictions, strikes, freight embargoes, and unusually severe
weather; but in every case the failure to perform must be beyond
the control and without the fault or negligence of the
contractor.  If the failure to perform is caused by the default
of a subcontractor, and if such default arises out of causes
beyond the control of both the contractor and subcontractor, and
without the fault or negligence of either of them, the contractor
shall not be liable for any excess costs for failure to perform,
unless the supplies or services to be furnished by the
subcontractor were obtainable from other sources in sufficient
time to permit the contractor to meet the required delivery
schedule.

   Stated simply, appellant will be excused from excess
   reprocurement costs if the failure to perform arose: 1) from
   causes beyond its control and without its fault or negligence
   or; 2) if the failure to perform was caused by the default of
   a subcontractor and if the default arose out of causes beyond
   the control of both the appellant and the subcontractor.  The
   burden of proof is on the appellant to demonstrate that its
   failure to perform was due to causes beyond its control and
   without its failure or negligence.  See Racon Electric Co.,
   Inc., ASBCA No. 8020, 1962 BCA  3528.  A prime contractor is
   additionally responsible for delays caused by a subcontractor
   which affect the prime contractor's performance.  Fidelity
   Construction Co. Inc., DOTCAB Nos. 75-19, 75-19A, 77-2 BCA 
   12,831.  The term "subcontractor" includes any supplier to the
   prime contractor.  Emerson-Sack-Warner Corp., FAA CAP No.
   66-2, 65-2 BCA  5003.

   In his appeal appellant alleged that the problem of "bad
   copies" was not the fault of or caused by the negligence of
   Vogard Printing Corporation, but was caused by "bad paper".
   According to appellant "on two print orders we had to
   reschedule a press inspection because of bad paper which had
   an excess amount of dirt and lint.  This caused the pressman
   to clean the plates and baskets every two hundred impressions
   . . . obviously not all runup sheets have [sic] been removed."
   Exhibit 1.  Appellant did not specify which two print orders
   he alleges were affected by the "bad paper".

   Assuming arguendo that appellant used "bad paper" this would
   not excuse him from liability for excess costs.  A contractor
   is obligated to have on hand the equipment and supplies needed
   to produce the publication that it had contracted to deliver.
   Litchfield Manufacturing Corp. v. United States, 338 F.2d 94
   (Ct. Cl. 1964).  Failure to do so is not such cause as would
   excuse untimely delivery or poor performance.  Rex System
   Corp., ASBCA No. 11,327, 66-1 BCA  5597; Universal Steel
   Strapping Co., ASBCA No. 10673, 65-2 BCA  5066.

   If the "bad paper" was the sole cause of the default, the
   solution to this problem was within the appellant's control.
   There is no showing in the record that paper could not have
   been obtained from another source in sufficient time to permit
   the appellant to meet the required delivery schedule.  Another
   solution to the "bad paper" problem would have been for the
   appellant to clean his plates more frequently and to have been
   more careful in culling out bad "runup" copies.  Such
   solutions were entirely within the control of the appellant.

   Accordingly the Board finds that appellant has not met its
   burden of proving excusability from excess reprocurement
   costs.

   Based upon the above reasons, the decision of the Contracting
   Officer to terminate the contract for default and to assess
   costs of reprocurement against the appellant is upheld.
   Accordingly, the appellant's appeal is denied in its entirety.