In the Matter of         )
the Appeal of            )
KPT, INC.                )      Docket No. GPOBCA 14-97
Program D632-S           )
Purchase Order 95847     )

For the Appellant:  KPT, Inc., Dallas, Texas, by Anthony W.
Hawks, Esq., Alexandria, Virginia.

For the Respondent:  Roy E. Potter, Esq., Assistant General
Counsel, U.S. Government Printing Office.

Before BERGER, Ad Hoc Chairman.


   KPT, Inc. (Appellant), 11262 Indian Trail, Dallas, Texas,
   appeals the July 16, 1997, final decision of U.S. Government
   Printing Office (GPO or Respondent) Contracting Officer Jack
   Scott denying KPT's request for an equitable adjustment under
   its requirements contract (Program D632-S, Purchase Order
   95847) for Direct Deposit Notices used by the Social Security
   Administration (SSA).  The equitable adjustment claim arises
   out of the Government's ordering substantially less than the
   contract's estimated quantities.  For the reasons which
   follow, the Contracting Officer's decision is AFFIRMED  and
   the appeal is DENIED.


   1.  On February 22, 1996, the Appellant was awarded a term
   contract for the period March 1, 1996 to April 30, 1998.  Rule
   4 File, Tab H.1 The contract called for the production of
   Direct Deposit Notices in both English and Spanish versions,2
   as well as a brochure in English and Spanish versions, which
   encouraged the use of direct deposit and were to be sent to
   Social Security beneficiaries receiving checks sent through
   the mail.  Rule 4 File, Tab A.
   2.  The contract set forth estimated quantities for the first
   year's production.  For example,  the contract set forth an
   estimated quantity of 1,728,000 English language brochures and
   an estimated quantity of 72,000 Spanish language brochures.
   The contract provided for the issuance of monthly print orders
   specifying the quantities of forms and brochures needed.  The
   contract further provided that the contractor was to complete
   all production and mailing within 6 workdays of the
   availability of a print order and Government-furnished
   material.  Rule 4 File, Tab A.
   3.  By letters of  June 23 and July 14, 1997, the Appellant
   requested financial relief for an inventory of 485,000
   brochures that were about to become obsolete.  Rule 4 File,
   Tabs I , K. The Appellant explained that it had had the
   brochures printed in reliance on the estimated quantities in
   the contract, but that the average monthly order for the first
   year had been 85,000 rather than the estimated quantity of
   150,000 (1.8 million brochures divided by 12 months), and now
   it was about to be left with 485,000 brochures that could no
   longer be used because SSA was changing the text of the
   brochures, as it had the right to do.  The Appellant requested
   reimbursement in the amount of $16.33 per thousand (it had bid
   $ .50 per hundred), or a total of $7,920.05.  The Contracting
   Officer denied the request, Rule 4 File, Tabs J, L, and KPT


   The Appellant, asserting that it would not have been left with
   any obsolete brochures had the monthly orders placed under the
   contract matched  the estimates contained in the contract,
   focuses its arguments on the validity of those estimates.  It
   argues that the estimates "cannot be considered reasonable"3
   and that the Government has failed to produce satisfactory
   evidence of using due care in preparing the estimates.  It
   therefore believes it is entitled to an equitable adjustment
   to reimburse it for the cost of the 485,000 brochures it could
   not use.
   The contract contained GPO's standard requirements contract
   language, specifying that "... the Government shall order from
   the contractor all the items set forth which are required to
   be purchased by the Government activity identified on page 1."
   The contract also included the following:  "This is a
   requirements contract ....  The quantities of items specified
   herein are estimates only, and are not purchased hereby.
   Except as may be otherwise provided in this contract, if the
   Government's requirements for the items set forth herein do
   not result in orders in the amounts or quantities described as
   'estimated', it shall not constitute the basis for an
   equitable price adjustment under this contract."  Rule 4 File,
   Tab A.

   This language has been recognized as giving rise to "an
   exclusive relationship between the Government and the
   contractor," but not to a guarantee that any particular work
   will be ordered.  The Government's obligations in connection
   with this type of contract "are merely to exercise due care in
   preparing the estimates" and to order from the contractor,
   "and no one else," the supplies or services needed by the
   ordering activity. McDonald & Eudy Printers, Inc., GPOBCA
   40-92 (January 31, 1994), slip op. at 14, 1994 WL 275096,
   quoting Shepard Printing, GPOBCA 37-92 (January 28, 1994),
   slip op. at 23-24, 1994 WL 275077.  (Emphasis in original.)
   Thus,  there is no entitlement to an equitable adjustment
   simply because the contract estimates were not borne out by
   the actual orders placed under the contract; such entitlement
   arises only from a showing that the Government failed to use
   due care, i.e., was negligent, in preparing the estimates.
   McDonald & Eudy Printers, Inc., supra, at 19.  It is the
   Appellant's burden to show, by a preponderance of the
   evidence, that the estimates were not prepared with due care.4
   Crown Laundry & Dry Cleaners, Inc. v. United States, 29 Fed.
   Cl. 506 (1993); RIM Advertising, GPOBCA 38-94 (September 24,
   1997), slip op. at 18, 1997 WL 742429; GraphicData, Inc.,
   GPOBCA 35-94 (June 14, 1996), slip op. at 61, 1996 WL 812875.
   The only evidence of record regarding the formulation of the
   estimates is a Declaration from SSA Printing Officer Nicholas
   E. Tagliareni dated October 7, 1998.  Mr. Tagliareni states
   that the estimates were prepared by an individual under his
   supervision who is now retired and unavailable and that no
   work papers were retained.  He therefore "reconstructed the
   preparation of the estimates" by comparing the estimates with
   those of the preceding Program D632-S contract (for which the
   Appellant was the contractor) and noting that the prior total
   estimate of approximately 2.4 million was reduced to 1.8
   million to reflect actual orders under the prior contract
   (approximately 1.3 million) along with an expected increase in
   new Social Security beneficiaries.  Mr. Tagliareni further
   states that the 1.8 million figure was subsequently not
   realized because there was an unexpected significant increase
   in the number of beneficiaries receiving direct deposit and
   therefore a corresponding decrease in those receiving checks
   by mail.  He attributes this increase in direct deposits to
   unanticipated legislation enacted in August 1996, pursuant to
   which SSA "required recipients with bank accounts to accept
   direct deposit of funds ...."
   The Appellant has introduced no evidence of its own.  Instead,
   it argues that in a case such as this one, where there is a
   "great disparity" between the estimates and what was actually
   ordered, it is the Government's burden to produce evidence
   establishing that it prepared the estimates with reasonable
   care and diligence.  The Appellant asserts that the
   Respondent's "paltry evidence and anemic explanation" of how
   the estimates were prepared fall short of meeting that burden.
   Appellant's Supplemental Brief (hereafter App. S. Brf.) at 4.
   The Respondent's burden is not what the Appellant makes it out
   to be.  The Appellant's argument is rooted in Viktoria Fit
   Int'l Spedition, ASBCA 39703, 92-2 BCA  24,968 and Huff's
   Janitorial Service, ASBCA 26860, 83-1 BCA  16,518, in which
   it was held that an appellant's burden of production to
   establish a lack of due care was satisfied solely by evidence
   of a very large disparity between the estimates and the actual
   quantities ordered and that the burden to show reasonable care
   in formulating the estimates then shifted to the Government.
   Subsequently, however,  the Court of Appeals for the Federal
   Circuit stated that this burden-shifting approach was "not
   well taken," Medart v. Austin, 967 F.2d 579 (1992), leading
   the Armed Services Board of Contract Appeals to declare that
   the reasoning of its Viktoria/Huff's line of cases (which it
   now described as having shifted the burden of persuasion) "was
   effectively overruled" by Medart v. Austin.  Apex Int'l
   Management Servs., Inc., ASBCA 37813, 94-1 BCA  26,299.
   Thus, the burden simply remains with the Appellant to show, by
   a preponderance of the evidence, that the Government failed to
   exercise due care.  Medart v. Austin, supra, at 581.
   The Appellant seeks to do that here by denigrating Mr.
   Tagliareni's explanation of how the estimates were derived.
   The Board certainly agrees that the explanation is not the
   strongest evidence that could be presented in a case such as
   this-it is somewhat sketchy and does not reflect either the
   recollection of the individual who prepared the estimates or
   any contemporary documentation bearing on the matter.  It also
   does not directly reflect the Contracting Officer's position
   with respect to the estimates, a matter of controlling
   importance since SSA, as the customer agency, is not a party
   to the contract and ultimately what is at issue here is not
   whether  SSA's actions were reasonable but whether the
   Contracting Officer acted reasonably and with due care in
   accepting the estimates.  RIM Advertising, supra, at 17-19,
   24; GraphicData, Inc., supra, at 60-62.
   On the other hand, since the estimates were formulated by an
   individual who worked for Mr. Tagliareni and was under his
   supervision, and since Mr. Tagliareni presumably was aware of
   the elements appropriate for consideration in formulating the
   estimates, his "reconstruction" of what occurred, to reflect
   both the prior year's experience and his agency's expectation
   regarding new beneficiaries,  is not implausible and is
   facially reasonable under the circumstances.  Thus, for the
   Appellant to prevail, it must show that the estimates prepared
   as described by Mr. Tagliareni reflect a lack of due care and
   that the Contracting Officer knew or should have known that
   the estimates were suspect.  The Appellant has not done so.
   It has complained about the disparity between the estimates
   and what actually happened during performance and about the
   "paltry" evidence offered by the Government, but it has not
   produced any evidence that would enable the Board to conclude
   that the estimates were negligently prepared or that the
   Contracting Officer did not exercise due care in accepting
   them.  Compare Crown Laundry & Dry Cleaners, Inc. v. United
   States, supra (while it is reasonable for a contracting
   officer to rely on estimate of needs provided by user
   activities, contracting officer does not exercise due care
   when he accepts estimates he believes to be exaggerated) with
   RIM Advertising, supra, and GraphicData, supra (contracting
   officer had no reason to know customer agency did not provide
   most current information).  Indeed, the Appellant makes no
   reference at all to the Contracting Officer.  In short, the
   Appellant has not sustained its burden of proof.5
   Moreover, the Board is not convinced that the Appellant would
   be entitled to relief even if there were evidence of a lack of
   due care.  Relief in these cases generally has been predicated
   on the contractor's reliance on the estimates in formulating
   its bid or offer.  See RIM Advertising, supra, at 19;
   GraphicData, supra, at 62.  Thus, contractors have received
   equitable adjustments to compensate them for bidding lower
   prices than they would have had they been furnished proper
   estimates, thereby enabling them to recoup higher operational
   expenses or start-up costs and unabsorbed overhead, Crown
   Laundry and Dry Cleaners, Inc. v. United States, supra; Fa.
   Kammerdiener GmbH & Co., KG, supra; Ambulance Service &
   Transport of Marlin, supra, and for incurring extra costs
   resulting from significantly more work than anticipated.
   Womack v. United States, supra; see also GraphicData, supra
   (higher performance costs).   Here, however, the Appellant's
   claim is not predicated on its reliance on the estimates to
   formulate its bid prices, but on its post-award approach to
   performing the contract, i.e., ordering a large quantity of
   brochures in advance of receiving the monthly print orders.
   The Appellant took this approach even though the contract
   provided that the Government could "require the contractor to
   make changes to the format(s)/text, of any of the items, at
   any time during the term of the contract.  Therefore,
   preprinting or stock-piling of any of the components is at the
   contractor's own risk."  Rule 4 File, Tab A at 10.  This
   provision made clear that SSA could make text changes at any
   time and in connection with any print order, and clearly
   placed the risk of preprinting the brochures on the Appellant.
   Thus, had SSA changed the text shortly after the Appellant had
   the brochures printed, the Appellant would have had no valid
   claim for the cost of those brochures even though it would
   have been left with a significantly higher quantity than
   485,000.  In other words, regardless of the accuracy of the
   estimates, preprinting the brochures carried with it the risk
   that all or some of the brochures would not be usable and that
   the Appellant would be stuck with the printing cost.  In light
   of the contract warning about preprinting or stockpiling, the
   Appellant simply took a business risk6 when it chose to have a
   large quantity of brochures printed in advance of receiving
   print orders, see McDonald &

Eudy Printers, Inc., supra, at 19-20; the Board does not believe
that this risk, clearly placed on the contractor, somehow shifted
to the Government by virtue of any negligently prepared
   The Appellant also raises another basis for relief.  It
   asserts that the normal rule imposing the risk of a quantity
   shortfall on the contractor does not apply to this situation
   because "the Government's own actions have resulted in a
   change of requirements." App. S. Brf. at 5.  Referring to Mr.
   Tagliareni's statement that the passage of legislation caused
   the increase in beneficiaries receiving direct deposit and the
   decrease in the need for the notices and brochures, the
   Appellant states that it was this legislative enactment, "an
   action ... wholly within the Government's control," that
   "constitutes a change in requirements."  App. S. Brf. at 6.
   In support of its position the Appellant relies on Maya
   Transit Co., ASBCA 20186, 75-2 BCA  11,552, and Desco
   Services Contractors, ASBCA 21856, 77-2 BCA  12,752.  In Maya
   Transit Co., the Government eliminated a school bus run for
   budgetary reasons rather than because the need for the run did
   not materialize.  The Armed Services Board of Contract Appeals
   held that internal budget limitations were not among the risks
   assumed by the contractor and found entitlement to an
   equitable adjustment.  In Desco, a technical order, which was
   contractually tied to the contract's "Changes" clause,  was
   revised to change certain vehicle maintenance service
   intervals from 4,000 to 6,000 miles, which led to a decrease
   in work for the contractor.  Again the contractor was found
   entitled to an equitable adjustment because while the
   "contractor takes the risk of the requirements falling short
   of the estimates ... he does not assume the risk that the
   Government may change requirements."
   These cases do not help the Appellant.  First, the continuing
   validity of the change in requirements language of Desco is
   questionable.  In a subsequent decision denying relief to a
   vehicle maintenance contractor after the vehicle fleet to be
   maintained was relocated, the Armed Services Board noted that
   "[a]lthough the [Desco] opinion contained some broad language
   that the contractor does not assume the risk that the
   Government may change the requirements, it is clear that the
   decision to allow relief was based on the particular text of
   the technical order."  East Bay Auto Supply, Inc., ASBCA
   25542, 81-2 BCA  15,204.  Second, the Government didn't
   change any requirements here as that term was used in Maya and
   Desco.  The statutory enactment itself-which did no more than
   encourage the use of electronic benefit transfer systems7-did
   not change any contract requirement, and whatever SSA did
   after enactment to obtain a higher number of new direct
   deposit beneficiaries was consistent with the program
   underlying the Appellant's contract-fostering the use of
   direct deposit.  Moreover, while  the Appellant certainly
   experienced a shortfall under the contract, the most
   significant quantity decline started near the end of the first
   year of the contract and for the most part occurred during the
   second year of the contract. Tagliareni Declaration, Exh. B.8
   Not only did the contract not contain any estimates whatsoever
   for the second contract year, but this means that regardless
   of the effect of SSA's post-enactment actions, the Appellant
   would still have had a very significant portion of the 485,000
   preprinted brochures on hand at the time of the text change.
   In short, the Board finds no merit to this argument.
                           III. ORDER

   On the record before it, the Board can only conclude that the
   Appellant has not shown that it is entitled to an equitable
   adjustment.  Accordingly, the Contracting Officer's final
   decision is AFFIRMED and the appeal is DENIED.

It is so Ordered.

November 30, 1998                  Ronald Berger
                        Ad Hoc Chairman
                        GPO Board of Contract Appeals


1    The Contracting Officer's appeal file, assembled pursuant to
Rule 4 of the Board's Rules of Practice and Procedure, was
delivered to the Board on November 26, 1997.  It is referred to
as the Rule 4 File, with an appropriate Tab letter also
indicated.  The Rule 4 File consists of 12 tabs identified as Tab
A through Tab L.
2    Two sets of Direct Deposit Notices were to be produced.  One
set was for new Social Security beneficiaries; the other was for
use in connection with claims from beneficiaries that mailed
checks had not been received.  The notices encouraged the use of
direct deposit for receipt of Social Security benefits instead of
mailed checks.
3    The Board has previously ruled that this was sufficient to
arguably  raise the question of "whether the estimates were
prepared with due care." KPT, Inc., GPOBCA 14-97 (September 16,
1998) (Decision and Order on Appellant's Motion to Conduct
Discovery and File Supplemental Brief), slip op. at 4, 1998 WL
4    The requirement that the Government exercise due care stems
from Womack v. United States, 389 F.2d 793 (Ct. Cl. 1968), the
seminal case in this area.  The court stated that bidders are
"entitled to rely on Government estimates as representing honest
and informed conclusions" and that the Government, while "not
required to be clairvoyant," must base its estimates "on all
relevant information that is reasonably available to it."  389
F.2d at 800-801. See also Chemical Technology, Inc. v. United
States, 645 F.2d 934 (Ct. Cl. 1981); Fa. Kammerdiener GmbH & Co.,
KG, ASBCA 45248, 94-3 BCA  27,197; Ambulance Service & Transport
of Marlin, VABCA 3485, 94-2 BCA  26,729.
5    The Board recognizes that an appellant can prevail on the
issue presented here without furnishing any direct evidence of
negligent preparation of estimates if the estimates on their face
are so grossly erroneous as to indicate a failure to exercise
reasonable care.   Emerald Maintenance, Inc., ASBCA 42908, 94-2
BCA  26,904.  The Board cannot conclude, however, that such is
the situation in this case, particularly in light of Mr.
Tagliareni's statement that the estimates, while higher than the
actual quantities ordered under the prior year's contract,
reflect an anticipated increase in new beneficiaries who would
receive their checks by mail.  The Board has no information
suggesting that there was no basis for this anticipated increase.
6   The Appellant says the contract's 6-day delivery requirement
compelled it to maintain an inventory of preprinted brochures.
The Contracting Officer points out that the Appellant was in that
position only because it elected to subcontract for the printing
of the brochures and not because of any contract requirement.
While the Board sees no need to deal with this assertion under
the facts and circumstances of this case, the Board observes that
the quantity of brochures the Appellant had preprinted far
exceeded any quantity needed to ensure meeting the monthly
delivery requirements.
7    The statute referred to apparently is Public Law 104-193,
the Personal Responsibility and Work Opportunity Reconciliation
Act of 1996.  See 15 U.S.C.  1693b(d) (Supp. II 1996).  Even if
the law had the effect of requiring use of direct deposit, under
the circumstances it appears that the Government would be
insulated from liability by the sovereign acts doctrine.  See
United States v. Winstar Corp., 518 U.S. 839 (1996) (affirming
Government liability under the particular circumstances of that
8    The Exhibit shows that for 9 of the first 10 months  the
total quantities ordered were in the 50,000-90,000 range, with
the number of English language notices for new beneficiaries
ranging from 51,714 to 69,016. (For July 1996 the numbers were
approximately double what they were for the other 9 months.)  For
the eleventh month, the order number for that notice dropped to
42,275; for the twelfth month the number declined to 38,660.
During the second year the orders for that notice ranged from
17,852 to 33,864.  The monthly average for that form was 62,763
for the first year, but only 21,932 for the second year.