Appeal of ATC Decal Company
Jacket No. 672-527
Appeal received January 29, 1981.
Decision dated July 14, 1981.

Panel 3-81


This is a decision on a timely appeal entered by ATC Decal
Company (hereafter referred to as the contractor).  This appeal
disputes the final decision of the Contracting Officer
terminating the contractor for default.  The appeal is taken
pursuant to Article 3 (the "Disputes" clause) of the GPO Contract
Terms No. 1 (GPO Publication 310.2, August 1, 1979) as
incorporated by reference into the Purchase Order and
Specifications of this contract.

The contract (Jacket No. 672-527) required the contractor to
produce decals for the U.S. Air Force.  The final decision of the
Contracting Officer held the product was unacceptable due to its
poor quality, and terminated the contract for default following
the contractor's refusal to correct the defects.

In accordance with GPO Instruction 110.10A titled "Board of
Contract Appeals Rules of Practice and Procedure", the decision
of this panel is based solely upon the record as evidenced by the
documents and exhibits that constitute the Appeal File.


On August 12, 1980, in accordance with GPO contract award
procedures, GPO Purchase Order K 7027 for the procurement of a
certain quantity of decals was awarded to the contractor as its
bid was the lowest responsive bid that complied with the
specifications.  The contractor was required to print 2,600
irregularly shaped die-cut decals in 5 colors on 3-4 mil vinyl
with pressure sensitive adhesive.  The Government furnished
samples for each of the decals ordered.  There were various
quantities ordered in four different sizes.  The decals were to
be produced in strict accordance with the specifications and
shipping was to be completed by September 12, 1980.  The
contract's total cost was $1,495.00.

The Department of the Air Force notified the GPO.by letter dated
September 19, 1980, that after inspection, the delivered decals
were "unacceptable due to the poor quality of the product." The
Air Force printing officer included samples of the defective
items within this complaint and requested that a product of
higher quality be obtained.  Following the receipt of this
letter, Mr. Charles V. Booth, the quality assurance specialist in
the GPO Dallas Regional Printing Procurement Office, attempted to
communicate the Government's dissatisfaction to the contractor
and requested the reprinting of the order.  However, evidence
indicates that the contractor was unwilling to correct the

The Contracting Officer then proceeded to send a notice dated
September 30, 1980, to the contractor informing it that because
the printing was unacceptable, the entire order was rejected.
The Contracting Officer pointed out that the colors in the decals
were mottled with broken borders and the die cutting was ragged.
Moreover, the product did not match the color samples furnished
by the Government.  The contractor was thereby notified that
based upon the poor quality of the proffered items and the
unwillingness of the contractor to correct the defect, the
Contracting Officer was considering terminating the contract for
default.  The Contracting Officer did afford the contractor the
opportunity to present within 5 days of receipt of this notice a
written justification for its failure or unwillingness to

As stated above, the notice of rejection and proposed termination
was sent to ATC Decal Company on September 30, 1980.  On October
23, 1980, the envelope containing the notice was returned
unclaimed.  Mr. Booth then attempted unsuccessfully to contact
the contractor by phone on three separate occasions.  See the
Memorandum from the Contracting Officer to the GPO Contract
Review Board dated October 29, 1980.

A notice of termination 1/, dated October 31, 1980, was sent to
the contractor stating that this final decision to terminate for
default was based upon the contractor's unwillingness to correct
the defects in the quality of the delivered goods by reprinting
the order in accordance with the specifications.  The right to
default contractors in cases such as these is derived from the
Article 12(b), titled "Inspection and Test" and Article 17,
titled "Default" of GPO Contract Terms No. 1 which had been
incorporated by reference into the Purchase Order and
Specifications of this contract.  Article 12(b) reads in part as

"In case any supplies or lots of supplies are defective in
materials or manufacture or otherwise not in conformity with the
requirements of the contract, the GPO shall have the right either
to reject them (with or without instructions as to their
disposition) or to require their correction. . . . If the
contractor fails to promptly remove such supplies or lots of
supplies which are required to be removed, or promptly to replace
or correct such supplies or lots of supplies, the GPO either (i)
may by contract or otherwise replace or correct such supplies and
charge to the contractor the cost occasioned the Government
thereby, or (ii) may terminate the contract for default as
provided in the article entitled "Default" of these contractual

The contractor's appeal of this decision was received at the GPO
on January 29, 1981.  The appeal challenged the default
termination as being arbitrary and capricious, claiming that the
proffered decals were in

1/ The notice of termination was addressed to the same location
as the notice of rejection and proposed termination for default
that was returned to the GPO unclaimed.  This was also the
address that was on the Purchase Order for the contract.  The
Panel must assume from the documents within the Appeal File and
the fact that the contractor responded to the final decision of
the Contracting Officer that this was the contractor's place of
business and was the proper address to send this correspondence.

compliance with contract specifications.  The contractor further
claimed that the GPO had no right to charge it for the excess
costs of reprocurement.

lt should be noted that the contractor was advised by letter
dated December 30, 1980, that it would be responsible for the
excess cost involved in the reprocurement of the contract.  The
amount of those costs was $227.25 and was incurred when the GPO
contracted for the work from the next higher and only other
bidder on the original job.

In accordance with GPO Instruction 110.1A, this appeal is now
being decided on material contained in the Appeal File which
includes a number of decals originally submitted by the
contractor as allegedly conforming goods and rejected by
Contracting Officer as not in conformance with the
specifications.  These decals were provided by the Contracting
Officer at the request of the Panel chairman.  Also the Appeal
File now includes a certificate provided by the Contracting
Officer relating to the procedure used in reprocuring this


I. Following a determination by the Contracting Officer that the
decals submitted by the contractor did not comply with the
specifications or did not match the samples as furnished by the
Government, was this termination for default proper?

II. Were the reprocurement of the contract and the assessment of
excess costs due to that reprocurement reasonable and proper?


I.  The language of the inspection clause gives the GPO the broad
right to reject goods which do not conform to the contract
specifications and/or order the contractor to correct these
defects discovered during the inspection process.  If the
contractor fails to correct these defects within the delivery
schedule or within a reasonable period afterwards, the Government
can terminate the contractor for default.  See Article 12(b),

These rights are derived from the rule that the Government is
entitled to enforce strict compliance with the specifications
found in its contracts.  H. L. C. & Associates Construction Co.
v. United States, 176 Ct. Cl. 285, 367 F.2d 586, 589 (1966)- The
determination of whether a product conforms with the contract
specifications must rest with the Contracting Officer and is
within his/her discretion in the administration of the contract.
Thomas W. Yoder Co., VACAB 997, 74-1 BCA  10,424 (1974).  Where
the specifications contain an imprecise statement of the contract
requirements, the standard for rejection of the contractor's work
becomes more subjective.  However, no claim has been raised by
this appeal that the specifications were ambiguous or imprecise
as not to indicate what the contractor had to do in order to
produce a conforming decal.  Rather, the substance of this appeal
is whether the Contracting Officer abused his discretion by
rejecting the decals which the contractor alleges conform to the
contract specifications.

Because the acceptance or rejection of nonconforming goods is
within the discretion of the Contracting Officer, this Board's
review of the action must be limited to a determination whether
he "exceeded the allowable limits of the exercise of his
discretion." Thomas Yoder, supra, at 49,251.  If the Contracting
Officer's decision is neither unreasonable, under the
circumstances of the case, nor arbitrary or capricious, then
there is no violation of the Government's contractual duty and
the Board will not substitute its judgment for that of the
Contracting Officer in determining whether a certain product does
or does not comply with the requirements of the Government as set
forth in the contract specifications.  Id.

In the case at bar, the decals as delivered by the contractor to
the Department of the Air Force in accordance with the contract
were inspected by the Air Force Printing Officer.  He determined
the decals to be unacceptable and so notified the GPO, forwarding
samples of the unacceptable decals to the Contracting Officer.
From these samples the Contracting Officer ascertained that the
colors used on the decals were mottled and had broken borders.
Additionally, the die-cutting along the border of the decals was
ragged and uneven.  Because of these defects, it was determined
that the decals did not match the color samples as furnished by
the Government.  Based on the presence of these defects the
Contracting Officer decided to reject the delivery and require

An inspection of several of the decals submitted to the Board as
representative of the work provided to the Government by the
contractor indicates that the defects as set out in the letter to
the contractor dated September 30, 1980, were indeed present in
the decals.  See Panel's Exhibit No. 2.  The Contracting Officer
was, therefore, well within his discretionary powers to reject
the nonconforming goods.

Ordinarily, when the Government elects to reject defective goods,
it must give the contractor the opportunity to correct the
defect.  Radiation Technology, Inc. v. United States, 177 Ct. Cl.
227, 366 F.2d 1003 (1966).  Here the opportunity to correct the
defects by reprinting the order was provided to the contractor.
On September 26, 1980, the GPO contacted the contractor and
informed it that the work was unacceptable and would have to be
reprinted.  The contractor refused to do so.  A notice of
rejection and proposed termination was then sent to the
contractor.  On September 30, 1980, although it was apparently
mailed to the contractor'scorrect business address, it was
unclaimed.  When the letter was
returned to the GPO by the Post Office, three further attempts
were made to contact the contractor telephonically, all
unsuccessful.  Faced with the inability to obtain a conforming
product, the GPO had no recourse but to hold the contractor in
default.  This action was justified in light of the contractor's
obduracy in refusing to tender decals that were acceptable to the

II. Following a valid default termination, one of the most
important of the Government's remedies is the right to assess the
defaulted contractor for the excess costs of reprocuring the
unperformed part of, or if necessary, the entire contract from
another contractor. This right to recover excess costs is
contained in the default clause of the Contract Terms No. 1
(Article 17).  The three elements of a Government claim for
excess reprocurement are similarity -- the Government must
repurchase products substantially similar to those that were to
be provided by the defaulted contractor, incurrence -- the
Government must actually reprocure and thereby incur extra costs,
and mitigation -- the Government must act reasonably to minimize
the excess costs and damages that resulted from the default.
Environmental Tectonics Corp., ASBCA 21204, 78-1 BCA  12,986
(1978).  The elements of similarity and incurrence are clearly
established by the record.  Subsequent to the termination, the
Contracting Officer reprocured the identical contract from the
second lowest bidder on the original contract for the same price
that it had bid on original contract.  The contract price for
this reprocurement was $227 over the defaulted contractor's price
and represented the amount assessed as an excess cost.

The Government clearly mitigated the excess costs of
reprocurement by contracting the second lowest bidder and
awarding the contract for the price which the successor company
had originally bid.  See Panel's Exhibit No. 1.  Since only two
companies had provided responsive bids on original contract, it
is reasonable to believe.that further
solicitation of other firms would not have resulted in lower
prices and therefore would have been unnecessary.  San Antonio
Construction Co., Inc.  ASBCA 8110, 1964 BCA  4479.  Therefore,
the reprocurement procedure as used in these particular
circumstances was logical and justifiable.


Based upon the above reasoning, the decision of the Contracting
Officer to terminate the contractor for default and to assess
against it the excess costs of reprocurement are upheld.
Accordingly, the contractor's appeal is hereby denied in its