Harry Hoffman & Sons Printing

GPO BCA 7-86
April 20, 1987
Michael F. DiMario, Administrative Law Judge


     This appeal, timely filed by Harry Hoffman & Sons Printing,
     903 Jefferson Avenue, Buffalo, NY 14204 (hereinafter
     "Appellant"), is from the November 17, 1986, final decision
     of George W. Watson, Contracting Officer, on behalf of the
     United States Government Printing Office (hereinafter
     "Respondent"), allowing only $5,197.49 of $11,200 in claimed
     additional costs incurred by Appellant in accelerating the
     production and shipment of a certain printed product
     entitled "United States Naval Academy Catalog 1986-1987."
     The appeal is granted for the reasons set forth hereinbelow.


     Respondent, by Purchase Order 62296 dated January 15, 1986,
     awarded Appellant a fixed price contract, Jacket No.
     486-842, in the amount of $158,259.50 for the production and
     distribution of a publication entitled "United States Naval
     Academy Catalog 1986-1987." The contract required Appellant
     to furnish and bear the costs for "all materials and
     operations" except for certain base art and camera copy
     materials to be furnished by Respondent. Some 35,000 of the
     catalogs were to be produced with tear cards for removal and
     use in applying to the Academy. The furnished materials were
     to be available for pick up by Appellant by January 24,
     1986, with the completed job to be shipped on or before
     April 11, 1986.

     On January 16, 1986, the Navy Department requested that the
     quantity be increased to 100,762; the additional 12,000
     copies to be without tear cards. This increased the contract
     amount by $17,892 based upon Appellant's quoted added rate
     of $1,491 per thousand copies. The additional copies were
     also to be shipped on the original ship date of April 11th.
     Contract Modification 0737 dated January 23, 1986,
     reflecting these changes was issued as a Supplemental
     Agreement to the original contract.

     The furnished materials (artwork and camera copy) were not
     made available to Respondent until February 27, 1986. Since
     this delay was caused by the Government the ship date was
     automatically adjusted in accordance with the terms of the
     contract from April 11, 1986 to May 19, 1986. In the
     meantime, however, the Navy Department (hereinafter "the
     Department") by memorandum dated February 26, 1986,
     requested that Respondent accelerate delivery of 35,000
     copies with tear cards to a mailing contractor in Sussex, DE
     by April 25, 1986, in order for the catalogs to be sent to
     high schools throughout the nation prior to their summer
     closing. They also requested that the balance of their order
     (65,000 copies without tear cards) be delivered to.the
     Academy itself not later than May 1, 1986. (See Appeal File,
     hereinafter "R4 File," Tab G.)

     Appellant's Jerry Kenny, in response to a telephone query
     from Respondent's Ron Cully, advised Cully by return call of
     March 11, 1986, that it's price for meeting such accelerated
     delivery was $11,200. This price was telephonically approved
     by the Navy on March 12, 1986, with the proviso that the
     proposed delivery dates must be met.

     Contract Modification 0925 dated March 17, 1986, was then
     prepared by Respondent to reflect this proposed change in
     contract terms. The modification in pertinent part states:

   The agreed upon amount of $11,200 is your estimate of the cost
   for such acceleration.

   Payment will be made not to exceed $11,200 and only for the
   actual additional expense incurred by you in accordance with
   the provisions contained in GPO Pub. 310.2, Part II,  2-25.

     The  modification bears the signatures of J. G. Marken,
     3/20/86, Contracting Officer for the Public  Printer (i.e.,
     Respondent),  and Gregory M. Clemons April 1, the person
     authorized to sign "Contractor's Agreement/Acknowledgment"
     on behalf of Appellant. (R4 File, Tab O) (Documents in the
     appeal file identity Mr. Clemons as Appellant's Production

        Thereafter, Appellant began production on the product.
        Book blues and Kodalines were due in GPO from Appellant
        by March 31. When they were not received, Respondent's
        Cully contacted Clemons by telephone advising him that he
        "was concerned that [Appellant's] proposed schedule was
        slipping." According to Cully, Clemons assured him "that
        he was aware of slippage and that they were doing
        everything they could to expedite job, and that they are
        dedicated to making agreed upon ship dates." At that time
        Cully and Clemons also set the press sheet inspection
        date for April 11, 1986. (R4 File, Tab Q)

     A series of telephone notes by JGM (Jack G. Marken) in the
     R4 file then indicate problem events as they transpired
     during the press sheet inspection. Among these are findings
     by Mr. Walter Burroughs, Respondent's press sheet inspector,
     of "poor paper & ink. Covers would not register. 2-7 forms
     on another job being run. 220 illus rejected not reshot."
     (R4 File, Tab U)

     One note reflecting a conversation with Ralph Hutton,
     Appellant's Production Manager, states: "Mr. Hoffman
     [Appellant's President - Mel Hoffman] will be back this
     afternoon or tomorrow morning with a production plan." (R4
     File, Tab U)

     Another such note, the same day, reflects a telephone
     discussion between Hutton and Marken, wherein Marken asked
     "for a prod plan and . . . why our job had been lifted. He
     [Hutton] will work on the plan and have Mr. Hoffman call
     me." (R4 File, Tab U)

     A subsequent note that same day reflecting another
     conversation between Hutton and Marken states: "Covers OK'ed
     Forms 14-27 running now 10 are done 4 of the bal they may
     run partials Will be back to press Thur 4-24 Will run
     partials on the lst 14 to meet the schedule." (R4 File, Tab

     A 4-21 note by Cully reflects that he instructed Clemons by
     telephone "to ship 50 of the 35,000 copies to" the Public
     Affairs office, U.S. Naval Academy "no later than 4-25-86."
     (R4 File, Tab V)

     On April 30, 1986, note (R4 File, Tab W), subject "late
     delivery" recommending that a "show cause letter be sent" to
     Appellant states:

   - order scheduled to ship 4/11/86, adjusted to 4/25/86 partial
   @ destination and 5/1/86 complete @ destination

   - per Greg Clemons @ Hoffman - order to deliver complete

   - K cites mechanical problems with subcontractor for binding
   as reason for late delivery

   - approximately 33,568 books completed before breakdown

   - subcontractor had to order new motor

   - subcontractor expects to complete binding 5/5/86 and deliver

   - recommend show cause letter be sent

     Tab W also reflects the decision of Marken dated 5/1/86 not
     to send such letter. A note by Cully of a telephone
     conversation with Clemons dated May 14 shows the following
     shipments by Appellant:

26,880          No T/C [tearcards]      4-29
28,160          No T/C                  5-2
 9,999          No T/C                  5-5
 1,710          No T/C                  5-13

35,000          W/ TC                   4-24

The note also reflects a 1% shortage of 1,528 copies from what
the Appellant's invoice showed it actually shipped with the
question of whether this shortage was "OK/?" and a notation
showing "No D.H.." A further notation states "will ship final
5-14 (  )" (R4 File, Tab X) DH is identified in the notes as Dave
Haddock of the Department of the Navy with a note of 5-15
reflecting that "Dept. needs shortage by 5-30." Subsequently on
5-19 the Department and the GPO agreed to the short shipment.

     On 5-27 Cully advised Appellant's Hoffman that "GPO was
     paying basic contract price plus increased qty. price minus
     shortage. Told K to submit itemized claim for add'l payment
     for AA's and labor records clearly substantiating actual
     add'l exp. for acceleration [sic] of scheduled delivery."
     (R4 File, Tab AA)

     By letter of May 27, 1986 (R4 File, Tab BB), Appellant
     furnished GPO with itemized total overtime costs in the
     amount of $17,915.17 to support its claim for payment of its
     $11,200 estimated additional costs for acceleration of
     shipping dates. Upon receipt of such information Cully
     called Clemons and questioned the basis for certain press
     charges. He was advised that the figures represented
     standard hourly charges for such work. It was pointed out by
     Cully that the original bid price contained the normal
     hourly charge and Appellant was only entitled to overtime

     By letter of June 5, 1986 (R4 File, Tab FF), Respondent's
     Marken advised Appellant that:

The Government is anxious to reimburse you for this additional
work; however, to comply with the contract terms, the Government
must be able to determine the real additional cost. . . . Article
2-25, . . . of U.S. Government Printing Office Contract Terms No.
1, which states:  . . . .

If the actual expense incurred is less than the authorized
maximum amount, GPO's liability shall extend to that lesser
amount only.

   You are requested to present a complete breakdown, supported
   by documentation such as payroll and production records, that
   will clearly enable the Government to determine the actual
   additional expenses incurred.

     Appellant responded by letter of June 10, 1986 (R4 File, Tab
     GG), enclosing their job cost analysis. In addition
     Appellant in pertinent part stated:

You will note from the total, we had considerably more overtime
charges than that which has been stated in your modification
order. In addition, you will please note, we used over nine
thousand pounds of additional paper for the split run which
amounted to $4,566.72. Our outside vendor, who did the perfect
binding, charged an additional $898.00 for the split run and also
as a result of the split run, we had to remake twelve plates at
$42.00 each, a total of $505.00. If we add these various items,
the total additional charges amount to $24,995.61, for which the
only charge made to the Government Printing Office is $11,200.00.
Also, realize that our total cost on this job was $214,350.35 and
the recovery in our billing only amounts to $185,853.31, or a
loss of $28,497.04 plus freight costs which do not appear on this

     Thereafter, Respondent's George M. Watson, by letter of June
     16, 1986 (R4 File, Tab LL), issued the Final Decision of the
     Contracting Officer which in pertinent part stated:

   All aspects of your claim have been carefully reviewed. An
   examination of the cost analysis sheets you submitted reveals
   that you failed to subtract the straight time from the
   overtime rate. This straight time was included in your
   original bid and does not represent an actual additional
   expense to expedite the order. According to our calculations
   the actual additional expense incurred was $3,394.32.

   Regarding your claim of incurring additional costs because of
   a split run, it should be noted that the need for a split run
   became necessary due to start up problems which were not
   caused by the Government.

   Therefore, the total allocable actual additional expenses
   substantiated are $3,394.32.

     Thereafter, by letter of June 19, 1986, Appellant sent its
     Notice of Appeal to the Public Printer. The Notice in turn
     was received and docketed by this Board on June 30, 1986.
     The letter, addressing Mr. Watson's letter of June 16,
     supra, in pertinent part states:

   You have calculated the difference between the straight time
   and the overtime that was involved in producing this job. The
   amount that you have reached was taken from our production
   records and is a raw cost that does not take into
   consideration the normal profit that printers will make. Our
   normal markup would be an additional 10% to the cost for
   overhead and an additional 10% for profit. That figure should
   be $4,107.13 in place of the $3,394.32.

   Your third paragraph in which you make mention of the split
   run is completely wrong. The startup [sic] problem never
   entered into these figures because our commitment of delivery
   would have been accomplished despite the delays caused by
   start up [sic] problems, most of which were the result of an
   arbitrary approval. We were requested by the Government
   Printing Office representative to accelerate the delivery of
   this job and the only way that could be accomplished was to
   make a split run. I must emphasize that the normal delivery
   under the contract terms could have been easily accomplished
   by us. Therefore, the split run was necessary to make the
   delivery required by the Government Printing Office and
   covered under your contract modification #62295.

   Therefore, the additional amount of paper that was used for
   the split run of $4,566.72 should be paid. The additional
   charge for the split run perfect binding of $898.00 should be
   paid, and the $505.00 for additional plates should be paid.

   The shipping costs were increased by $569.00 in order to make
   the split run delivery instead of delivery of the entire job
   at the same time.

   Therefore we feel that we should be entitled to no less than
   the $10,645.85. I also call attention of the contract officer
   to the fact that this matter has been extended and delayed and
   the money involved has been paid for materials and labor. We
   should also be getting a service charge. Therefore, your
   prompt attention to this appeal will be greatly appreciated.

     Subsequently, by letter of July 23, 1986 (R4 File, Tab UU),
     Watson advised Appellant in pertinent part that:

   In a continuing effort to settle this dispute, we request that
   you furnish us whatever documentation in your possession in
   support of your claim. For example, in your letter of June 10,
   1986 and also in your appeal, you indicate many costs
   incurred, however, you have only submitted a computer printout
   as justification. This in itself is not sufficient. In order
   for us to evaluate your costs, each one must be fully
   validated as how to it occurred and all supporting
   documentation must be submitted including the identification
   of operation numbers.

   Further, concerning the "split run," please reiterate why and
   when the splits occurred, how many copies were run per split,
   and supply any records that would verify the additional use of
   stock and plates.

   Finally, based on the shipping documents supplied with your
   billing, at least a part of this job was delivered after the
   agreed-upon accelerated dates in the contract modification.
   This will have to be a factor in these negotiations.

     Thereafter, by letter of August 13, 1986 (Official File, Tab
     15), Appellant advised Watson that:

   In response to your letter of July 23rd, enclosed you will
   find proof of the additional costs that were incurred as a
   result of the GPO requesting a split run on the Naval Academy
   catalog. You will find an invoice from Riverside Bindery which
   indicates the additional cost of the perfect binding. You will
   find operation record cards used by our personnel in our
   pressroom in order to accommodate the split run. You will find
   an invoice for additional amounts of paper to take care of the
   spoilage encountered in the startup of the additional
   makereadies for the split run. You will also find a letter
   memo which relates to the supposed late delivery and also
   freight documents to support our additional freight charges.

   In the final conclusion, I must make this statement. When we
   are requested to quote on various projects for the GPO and are
   the successful bidder, at no time are we asked to justify our
   total selling price. This I assume to be a GPO procedure. I
   want to know why in good faith we present your representative
   a quotation for a split run per their request, receive their
   approval for same and accomplish same, and following the
   delivery of the split run, receive a modification of the
   original purchase order which contains language other than
   that was on the original quotation for the split run.

     Subsequently, by letter .of September 17, 1986 (Official
     File, Tab 8), this Board advised Appellant that: "Pursuant
     to GPO Instruction 110.12 dated September 17, 1984, Rule
     6.(b), concerning an Answer to your Complaint in the above-
     captioned appeal, the Board enters a general denial on
     behalf of the Government."

     In response Appellant, by letter of September 25, 1986
     (Official File, Tab 9), requested a formal hearing before
     this Board.

     Watson, in response to Appellant's August 13th letter,
     supra, then sent a letter to Appellant dated September 29,
     1986, wherein he offered Appellant a sum of $5,197.49 to
     resolve the matter.

     Appellant, by letter of October 20, 1986 (Official File, Tab
     10), rejected this offer. Thereafter, Respondent's Watson by
     letter of November 17, 1986 (Official File, Tab 12), issued
     his second final decision letter which in pertinent part

   Since we have offered an increase in the allowable charges
   based on additional information supplied, we are rescinding
   the final decision dated June 16, 1986, and are issuing this
   new final decision.

   As stated in our letter of September 29, 1986, the additional
   information you supplied was carefully evaluated and we
   concluded that some expenditures were reimbursable as a result
   of the requested accelerated schedule. However, as pointed out
   in our letter of July 23, 1986, a significant fact is that you
   did not meet the accelerated schedule for some deliveries as
   required by Contract Modification No. 0925 dated March 17,

   The total sum of allowable charges are [sic] as follows:

Previously allowed amount..................$3,394.32
Binding setup...................  ........... 605.00
Eight additional plates (back to press)...  . 336.00
Additional paper (Printing and Binding).. ..  230.88
Sub total..................................$4,565.90
   10% Profit...............................  469.59
Additional freight to Rochester.......... ..  175.00
Allowable Total                            $5,197.49

     That same date this Board wrote to Appellant to set a
     prehearing conference date based upon the original appeal.
     Upon receipt of this notice Appellant telephonically advised
     this Board that as he indicated in his letter of October 20,
     supra, he desired to continue his original appeal and to go
     directly to hearing on the matter rather than to hold a
     prehearing conference. Accordingly, a hearing was set for
     and convened on January 6, 1987.

     Upon hearing the matter this Board determined that there
     were no factual disputes between the parties and that the
     principal question presented by the appeal, i.e., the extent
     of entitlement to compensation for accelerating delivery,
     was solely a matter of contract interpretation. As such, it
     is a legal question to be decided by the Board subject to
     the provisions of Article 2-3(b) U.S. Government Printing
     Office Contract Terms No. 1 (GPO Publication 310.2, Revised
     October 1, 1980) concerning finality.


     Since the question to be addressed is one of contract
     interpretation, we will focus our discussion on the contract

     First, it is undisputed that originally the contract was for
     a fixed price; the Appellant having agreed to produce and
     deliver 88,762 copies of the Naval Academy catalog in
     consideration of its being paid $158,260. Page 1 of the
     Invitation for Bids/Specification (R4 File, Tab B) for such
     original contract stated in pertinent part respecting this
     dispute that the contractor was to furnish "all materials
     and operations other than those listed under 'Government to
     Furnish' necessary to produce the products in accordance
     with these specifications." The "Government to Furnish" list
     enumerated the following items and no others:  Photoprints,
     transparencies, camera copy, a sample from a previous
     printing, one reproduction proof for shipping container
     labels, and a proof label.

     The contract further specified, among other things,
     technically described film negative, paper, production, and
     final product standards and provided for proof approval,
     press sheet inspection, sampling and testing to assure the
     attainment of certain specified quality attribute levels
     before final product acceptance. Type Quality and
     Uniformity, Halftone Match, Solid and Screen Tint Color
     match, and Process Color Match were all subject to being
     judged for conformance with the requisite attributes by the
     specified standard of "O.K. Press Sheets."

     The only conclusion which can reasonably be drawn from these
     provisions is that the basic contract required Appellant to
     provide all required paper, including that consumed as
     spoilage in the course of attempting to attain conformance
     with the specified standard of "O.K. Press Sheets" for the
     stated attributes, supra.

     It is equally clear that Contract Modification 0737 did not
     change these attributes, standards, or supply burden
     provisions, but simply increased volume and the concomitant
     fixed price in accordance with the previously agreed to
     added rate. Thus, up to this point in our analysis it is
     clear that Appellant was to produce 12,000 copies for the
     fixed price of $17,892 irrespective of how much makeready,
     platemaking, or paper spoilage was incurred.

     Turning now to the bargain between the parties for the
     acceleration of the delivery dates, we first examine
     Appellant's claim that its "quotation" was for a flat fee
     $11,200. Such "quotation" was telephonically given by
     Appellant's Jerry Kenny to Respondent's Ron Cully. The
     record and testimony was silent whether either party had the
     capacity to contractually bind his employer. But even if
     they had such capacity, the record shows that they did not
     even purport to make an agreement. Rather, Cully telephoned
     the proposed additional price consideration to the Navy
     Department for its approval. Thereafter, certain conditions
     were added by both the Department and Respondent's Contract
     Review Board before being communicated to Appellant in
     writing by Contract Modification 0925. This modification
     signed and dated March 20, 1986, by J. G. Marken, in his
     official capacity as Contracting Officer, either constituted
     a counteroffer of Appellant's oral quotation and as such was
     a rejection of it, or was an original offer by Respondent
     being delivered to Appellant. In either case, whether a
     counteroffer or original offer, Appellant by signature of
     Gregory M. Clemons on April 1, 1986, as the "person
     authorized to sign Contractor's Agreement/Acknowledgment"
     thereby accepted the terms expressed in the written
     modification. Thus, we conclude that the bargain reached by
     Appellant for the acceleration must be gleaned from the
     written contract modification itself.

     As noted supra, Modification 0925 limits payment to
     Appellant in two respects; i.e. (1) "actual additional
     expenses incurred" provided (2) that such payment shall not
     exceed $11,200. Moreover, as with Modification 0737,
     Contract Modification 0925 by its very terms is a
     modification of the existing agreement and must be read in
     that light.

     Reading the basic contract, Modification 0737 and
     Modification 0925 as the complete agreement between the
     parties, we can find nothing in Modification 0925 which
     alters Appellant's obligation under the basic contract and
     Modification 0737 to provide at its expense all materials,
     supplies, and services except those expressly required to be
     provided by Respondent under the "Government to Furnish"
     clause, supra. Accordingly, it is this Board's opinion that
     Contract Modification 0925 entitles Appellant to be paid
     only those additional costs incurred by it in meeting the
     accelerated delivery date. Verified paper spoilage,
     makeready, platemaking, labor, and delivery costs can only
     be considered by the Contracting Officer to be includable if
     they were in fact additional costs incurred by Appellant in
     meeting the accelerated delivery date to those costs which
     the Appellant was to bear under the basic contract and
     Modification 0737. In making such determination, however,
     the Contracting Officer may not apply any judgment as to
     whether or not a particular practice employed by Appellant
     was prudent, if in fact that practice was used and did
     result in additional costs to him.

     Examining the paper spoilage dispute in light of these
     rules, we find that the Contracting Officer in his
     discretion determined that (1) there was in fact an
     additional cost for paper spoilage incurred by Appellant in
     accelerating delivery, but (2) the amount of such cost was
     to be measured by the GPO in-plant rate resulting in a
     dollar sum of $230.88. We express no judgment with respect
     to finding No. 1 but believe finding No. 2 to be erroneous,
     since it ignores actual costs and instead applies a rate
     which does not take into account the actual practices
     employed by Appellant. Pursuant to Contract Modification
     0925, actual costs should be paid once a determination is
     made that a cost is allowable. However, since it is not
     possible to determine actual additional paper spoilage for
     which Appellant is entitled to be paid under such
     modification from that spoilage which Appellant was to
     absorb under the basic fixed price contract, actual
     additional spoilage costs must be approximated. This can be
     done most easily by examining Appellant's paper invoices. In
     so doing, we find that on March 7, 1986, Appellant ordered a
     certain quantity of Sterling WEB Dull 260 paper basis weight
     70 lbs. from WESTVACO in the total dollar amount of
     $84,753.71. This apparently represented the total amount of
     Sterling WEB Dull 260 paper which Appellant anticipated it
     would need to produce the Naval Academy catalog. However, on
     April 14, 1986, a date which coincides with the period in
     which the product was actually being run, Appellant ordered
     an additional quantity of the same paper from WESTVACO in
     the dollar amount of $5,689.44. It is such amount that
     Appellant claims as an additional cost in meeting the
     acceleration. In such circumstances, we believe, in equity,
     that the amount claimed by Appellant is the appropriate sum
     to be paid. Other costs must be examined by the Contracting
     Officer in the same light.


     The appeal is granted and the case is remanded back to the
     Contracting Officer for processing in accordance with this


l/ GPO Publication 310.2,  Part II, Paragraph 2-25 states: 2-25.
Payment for Accelerated Delivery. Reimbursement to the contractor
for any additional costs incurred for accelerated delivery
authorized by the Contracting Officer, shall be paid upon
approval by GPO of the actual net increase in manufacturing
expense. A change order will be issued by the Contracting Officer
authorizing a maximum amount reimbursable to the contractor.
However, if the actual expense incurred is less than the
authorized maximum amount, GPO's liability shall extend to that
lesser amount only. In the determination of actual expenses
incurred, the Contracting Officer may require the contractor to
furnish labor records which will clearly substantiate the
additional expense incurred.