BOARD OF CONTRACT APPEALS U.S. GOVERNMENT PRINTING OFFICE In the matter of ) ) the Appeal of ) ) INFORMATION PROCESSING ) Docket No. GPOBCA 10-99 SERVICES, INC. ) ) Program C855-S ) Purchase Order 94555 ) For the Appellant: Betty L. Hearn, President, and Bettie Gray, Operations Manager, Information Processing Services Inc., Alexandria, VA. For the Respondent: Roy E. Potter, Esq., Associate General Counsel, U.S. Government Printing Office. Before GARY E. GREENFIELD, Administrative Judge.1 DECISION This appeal arises out of a contract between the U.S. Government Printing Office (GPO) and Appellant, Information Processing Services, Inc. (IPS) that was terminated for the convenience of the Government. Appellant seeks $63,816.09 in termination costs which includes claims for lost profits and attorneys fees. For the reasons that follow, the Contracting Officer's final decision denying all claimed termination costs is AFFIRMED and all claims of Appellant are DENIED. FINDINGS OF FACT 1. Program C855-S was a single award requirements contract to provide proofreading services to the Internal Revenue Service (IRS) for the period beginning April 1, 1998, and ending March 31, 1999. The successful bidder was to provide an average of seven proofreaders per day. Rule 4 File, Tab A. 2. On March 31, 1998, the GPO awarded a term contract to IPS for one year (April 1, 1998-March 31, 1999). The contractor was to provide an average of seven proofreaders per day for initial proofreading and revisions of proofs of tax forms, instructional material, and other textual and tabular material at the IRS. 3. On May 5, 1998, the first of a series of contract modifications was entered into by GPO and Appellant each reducing temporarily the number of proofreaders to be provided. Rule 4 File, Tabs J-O. 4. By early June, it was obvious to both GPO and Appellant that there was to be a permanent reduction in the number of proofreaders to be provided. Rather than negotiate a permanent reduction, on or about June 8, 1998, Appellant's attorney asked that the GPO terminate the contract for convenience so a settlement claim could be made. Rule 4 File, Tabs J-O and P; Declaration of John R. Scott (GPO Contracting Officer for Program C855-S) executed March 2, 2000. 5. On June 12, 1998, the GPO Contracting Officer received a memorandum from the IRS asking that the contract be terminated for the convenience of the Government. Rule 4 File, Tab P. 6. The GPO Contract Review Board concurred on June 15, 1998, with the Contracting Officer that Program C855-S should be terminated for the convenience of the Government. Rule 4 File, Tab P. 7. On July 1, 1998, after obtaining guidance from the IRS and the required concurrence of the GPO Contract Review Board to terminate for convenience and to readvertise with the reduced requirement, the Contracting Officer issued a formal Notice of Termination - Convenience of the Government, effective July 31, 1998. Rule 4 File, Tabs P and Q. 8. On August 1, 1998, a new contract was entered into with a different contractor for the period beginning August 1, 1998 and ending March 31, 1999. Declaration of John R. Scott executed March 2, 2000. 9. On October 7, 1998, Appellant submitted a settlement proposal on GPO Form 911 for $63,816.09 consisting of $12,803.79 for general and administrative expenses, $28,146.26 for profit, $866.04 for settlement expenses, and $22,000 for additional rental space for training. Prior to this, the GPO had already paid a total of $39,709.17 to Appellant (less the 2 percent, 30- day prompt payment discount) for the work that was completed before the contract termination. Rule 4 File, Tabs R and U. 10. Pursuant to agency regulations, the Contracting Officer sought an audit of the claim by the GPO Office of Inspector General (OIG). See, GPO Printing Procurement Regulation (PPR), GPO Publication 305.3 (Rev. 10-90), Chap. XIV, Sec. 2.3h(1). On October 13, 1998, the Contracting Officer referred the settlement proposal to the GPO Inspector General. Rule 4 File, Tab S. 11. On December 2, 1998, the GPO Office of Inspector General (OIG) requested from Appellant documentation to support the settlement proposal. The OIG listed several records needed to establish the validity of the claimed amounts for each area of Appellant's claim. Rule 4 File, Tab T. 12. On February 24, 1999, the GPO OIG issued its audit report and conclusions. The OIG concluded that all of Appellant's claims were unproven because IPS personnel did not provide any documentation to support or show how the entire amount was determined. In addition, the OIG audit found the claim for profit unallowable because anticipatory profits are unallowable. Finally, the OIG audit concluded that the claim for rental space for training was not only unproven, as were all the other claims, but was also unallowable because training was outside the scope of the contract. Rule 4 File, Tab U. 13. On March 1, 1999, the Contracting Officer issued the final decision denying all claims of Appellant on the basis that they were not supported by adequate documentation. Rule 4 File, Tab V. 14. Thereafter, Appellant filed a timely notice of appeal with the GPO Board of Contract Appeals (GPOBCA) on May 4, 1999. Rule 4 File, Tab Q. DISCUSSION Appellant questions whether the Contracting Officer acted properly in terminating the contract for convenience of the Government. Appellant also asserts a claim for termination costs. Respondent takes the position that the termination for convenience was within the discretion of the Contracting Officer. Respondent also takes the position that as a matter of law the Appellant is not entitled to some of the expenses claimed, and as for the other items, the claims are not adequately supported by the required documentation. The Contracting Officer's Right to Terminate for Convenience Appellant questions whether the Contracting Officer acted properly in terminating the contract. Program C855-S contained a termination for convenience clause that provided in part: The Government may terminate performance of work in whole or in part if the Contracting Officer determines that a termination is in the Government's interest. Clause 19(a), GPO Contract Terms, GPO Publication 310.2 (Rev. 9-88). That language is nearly identical to the standard Government-wide contract clauses contained in the Federal Acquisition Regulation (FAR). See 48 C.F.R. §§ 52.249-1(a), 52.249-2(a), 52.249-3(a), 52.249-4(a), 52-249-5(a). Decisions construing the Government-wide Termination for Convenience clauses hold that a Contracting Officer's election to terminate is conclusive in the absence of bad faith or a clear abuse of discretion. See Melvin R. Kessler, PSBCA Nos. 2820, 2972, 92-2 BCA ¶ 24, 857, at 123, 996 (citing John Reiner v. United States, 325 F.2d 438,442 (Ct. Cl. 1963), cert. den. 377 U.S. 931 (1964)), mot. for reconsid. denied 92-3 BCA ¶ 25, 092; Salisbury Industries v. United States, 905 F.2d 1518 (Fed. Cir. 1990)), mot. for reconsid. denied 92-3 BCA ¶ 25, 092. See also, Seaboard Lumber v. United States, 19 Cl. Ct. 310 (1989); Robert K. Adams, ASBCA No. 34519, 92-3 BCA ¶ 25, 165; Automated Services, Inc., DOTBCA No. 1753, 87-1 BCA ¶ 19, 459; ITG Corp., ASBCA No. 27285, 85-1 BCA ¶ 17,935. Any allegation of bad faith must be established by "well-nigh irrefragable" proof because there is a strong presumption that Government officials properly and honestly carry out their functions. See, e.g., Asa L. Shipman's Sons, Ltd., GPOBCA No. 06-95 (August 29, 1995), 1995 GPOBCA LEXIS 17, 1995 WL 818784, slip op. at 12, fn. 16. Accord Brill Brothers, Inc., ASBCA No. 42573, 94-1 BCA ¶ 26,352; Karpak Data and Design, IBCA No. 2944 et al., 93-1 BCA ¶ 25,360; Local Contractors, Inc., ASBCA No. 37108, 92-1 BCA ¶ 24, 491. The key to such evidence is that there must be a showing of a specific intent on the part of the Government to injure the contractor. See Stephenson, Inc., GPOBCA No. 2-88, (Dec. 20, 1991), 1991 GPOBCA LEXIS 14, 1991 WL 439274, slip op. at 54. Accord, Kalvar Corp. v. United States, 543 F.2d 1298, 1302 (Ct. Cl. 1976), cert. denied, 434 U.S. 830 (1977). See also, Solar Turbines, Inc. v. United States, 23 Cl. Ct. 142 (1991). Properly exercised, a contracting officer's discretion to act pursuant to the "Termination for Convenience" clause is very broad. See Caldwell & Santmyer, Inc., supra, 94-2 BCA at 133,625 (citing ARDCO, Inc., AGBCA Nos. 94-101-1, 94-193-1, 1994 WL 45000 (Feb. 16, 1994); Michael J. Earl, PSBCA No. 3332, 93-3 BCA ¶ 26, 234). One obvious exception is when the Government enters into a contract with no intention of fulfilling its promises, it may not use a termination for convenience to avoid a breach of contract claim. See Torncello v. United States, 231 Ct. Cl. 20, 681 F.2d 756 (1982). However, recent decisions from the U.S. Court of Appeals for the Federal Circuit have reaffirmed the principle that in the absence of bad faith or clear abuse of discretion, the Contracting Officer's decision to terminate for convenience is conclusive. See T & M Distributors, Inc. v. United States, 185 F.3d 1279 (Fed. Cir. 1999); Krygoski Const. Co. v. United States, 94 F.3d 1537 (Fed. Cir. 1996) cert. denied, 520 U.S. 1210 (1997); Caldwell & Santmyer, Inc., v. Glickman, 55 F.3d 1578 (Fed. Cir. 1995); Salisbury Industries v. United States, 905 F.2d 1518 (Fed. Cir. 1990). This clause gives the Contracting Officer the broad right to terminate without cause and limits the Appellant's recovery to costs incurred, reasonable profit on work completed, and costs of preparing the termination settlement proposals. Recovery of anticipated profit is precluded. Under a termination for convenience clause, performance of work under a contract may be terminated by the Government in whole or in part whenever the Contracting Officer determines such termination to be in the best interests of the Government. On June 12, 1998, the GPO Contracting Office received a memorandum from the IRS asking that the contract be terminated for the convenience of the Government. Rule 4 File, Tab P. The GPO Contract Review Board concurred on June 15, 1998,with the Contracting Officer that Program C855-S should be terminated for the convenience of the Government. Rule 4 File, Tab P. The Contracting Officer was well within his contractual rights to terminate this contract for convenience in the best interests of the Government. The unrebutted evidence of record is that the contract was terminated for convenience due to a reduction in the IRS's proofreading requirements. Therefore, the Board concludes that the Contracting Officer had the right to terminate Program C855-S for the convenience of the Government and that his exercise of that right was not an abuse of discretion. Entitlement to Convenience Termination Costs When the Government terminates contracts for the convenience of the Government, it owes contractors the duty to fairly compensate them for legitimate termination costs. In the instant appeal, the Contracting Officer appropriately exercised his discretion to terminate Program C855-S for convenience. The analysis now shifts to an examination of the termination claims made by the Appellant. The Appellant submitted a settlement proposal on GPO Form 911 for $63,816.09, consisting of $12,803.79 for general and administrative expenses, $28,146.26 for profit, $866.04 for settlement expenses, and $22,000 for additional rental space for training. GPO paid a total of $39,709.17 to Appellant (less the 2 percent, 30-day prompt payment discount) for the work that was completed before the contract termination. Appellant submitted a claim for $22,000 for additional rental space for training as part of its settlement proposal. The Contracting Officer concluded that the entire $22,000 for rental space for training was unallowable based on the Qualifications/Production Standards of Contractor Personnel Section of the contract which required "A minimum of two years of professional editorial proofreading experience with a firm/company/agency which is/was regularly engaged in the printing, publishing or editorial field." The Board agrees that the cost for the rental space for training is unallowable under the contract. Accordingly, Appellant's claims for $22,000 for additional rental space for training is DENIED. The actual incurrence of costs is a prerequisite to recovery under a termination for convenience; i.e., if the contractor has incurred no cost, there is no recovery. See R.C. Swanson Printing & Typesetting Co., Supplemental Decision, GPOBCA No. 15-90 (July 1, 1993), slip op. at 19, 1993 GPOBCA LEXIS 26, 1993 WL 526638 (citing Building Maintenance Specialists, Inc., ENG BCA No. 5654, 90-3 BCA ¶ 23,032). Accord, Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 767 (Fed. Cir. 1987); J.W. Cook & Sons, Inc., ASBCA No. 39691, 92-3 BCA ¶ 25,053, at 124,863 (citing Tubergen & Associates, Inc., ASBCA Nos. 34106, 34107, 90-3 BCA ¶ 23,058); Youngstrand Surveying, AGBCA No. 90-150-1, 92-2 BCA ¶ 25,017, at 124, 694 (citing Roberts International Corp., ASBCA No. 15118, 71-1 BCA ¶ 8869); R.G. Robbins & Co., Inc., ASBCA No. 27516, 83-1 BCA ¶ 16,420. The contractor has the burden of establishing the amount of incurred costs, and, in the absence of evidence to the contrary, the Contracting Officer's termination allowance will be accepted, Roberts Int'l Corp., ASBCA 15118, 71-1 BCA ¶ 8869. See also, Delaware Tool & Die Works, Inc., ASBCA 14033, 71-1 BCA ¶ 8860, recons. denied, 72-1 BCA ¶ 9206, where the contractor had no proof of the costs incurred in the terminated portion of the work. It is preferable to establish incurred costs from accounting records. However, if the accounting records are not available, due to no fault of the contractor, the costs may be established on the basis of estimates, FAR 49.206-1(c); Bailey Specialized Bldgs., Inc., ASBCA 10576, 71-1 BCA ¶ 8699. Even if estimates are used, the contractor still has the burden of proof. See Clary Corp., ASBCA 19274, 74-2 BCA ¶ 10,947, where the board stated that, although the burden need not be met through the use of accounting records, it cannot be carried by unsupported allegations. The Contracting Officer, who relied upon an audit recommendation from the GPO Office of Inspector General (OIG), concluded that Appellant was not entitled to any of the settlement proposal costs because the Appellant did not provide any documentation to support or show how the Appellant arrived at its settlement proposal. During the September 17, 1999, Prehearing Telephone Conference before GPOBCA Judge Ronald Berger, the Appellant was informed by Judge Berger that the information provided by the Appellant to support the Appellant's settlement proposal claims did not contain the very detailed specific documentation necessary to substantiate its claim. Appellant was given the opportunity to submit additional substantiating documentation for Appellant's settlement proposal claims. Appellant provided information similar to its initial submission, without any additional detailed specific documentation to prove its claims. The Board has reviewed the multiple submissions of documents by the Appellant, and the Board concludes that Appellant has failed to provide any specific detailed documentation in support of any of its claims in the settlement proposal. Lost Profits Claim Appellant also seeks to recover lost profits as part of this appeal as a component of Appellant's termination for convenience claim. A contractor terminated for convenience may not recover anticipated profits as part of its termination for convenience cost claim. Salisbury Indus. v. United States, 905 F.2d 1518, 1522 (Fed. Cir. 1990); G.C. Casebolt Co. v. United States, 190 Ct. Cl. 783, 421 F.2d 710, 713 (1970); Nolan Bros., Inc. v. United States, 405 F.2d 1250 (Ct. Cl. 1969). Perhaps the major impact of the termination for convenience procedure is that it relieves the Government from the obligation of paying anticipated profits for unperformed work if it terminates the contractor's performance of the work. Dairy Sales Corp. v. United States, 219 Ct. Cl. 431, 593 F.2d 1002 (1979), aff'g Dairy Sales Corp., ASBCA No. 20193, 75-2 BCA ¶ 11,613). See PPR, Chap. XIV, Sec. 2.3.n. Accord, D.E.W. & D.E. Wurzbach, JV, ASBCA No. 50796, 98-1 BCA ¶ 29,835 at 146,055; Steelcare, Inc., GSBCA No. 5491, 81-1 BCA ¶ 15,143, at 74, 901. Therefore, Appellant's claim for anticipated profits is DENIED. CONCLUSION For the foregoing reasons, the Contracting Officer's final decision regarding entitlement to termination for convenience costs is AFFIRMED and all claims of Appellant are DENIED. July 14, 2000 GARY E. GREENFIELD Administrative Judge _______________ 1 Appointed ad hoc member of U.S. Government Printing Office Board of Contract Appeals on April 5, 2000, pursuant to GPOBCA Rules of Practice and Procedure, § I.C.