UNITED STATES GOVERNMENT PRINTING OFFICE CONTRACT APPEALS BOARD Appeal of the Churchill Business Forms Company Decision dated March 28, 1980 Panel 21-79 Thomas O. Magnetti, Chairman Louis E. DeNoya, Member Richard A. Morrison, Member Preliminary Statement This is the decision on a timely appeal entered by the appellant, Churchill Business Forms Company (hereafter referred to as the contractor). This appeal disputes the final decision of the Contracting Officer assessing liquidated damages against the contractor. The appeal was taken pursuant to Article 29 (the "Disputes" clause) of the Government Printing Office Contract Terms No. 1 as incorporated by reference into the Bid and Acceptance of this contract (Jacket No. 274-898). See Exhibit 4 of the Appeal File. 1/ The contract required this contractor to provide marginally punched continuous forms for the Department of Health, Education, and Welfare. Because of late delivery of some of these ordered forms, the Government assessed liquidated damages in a total amount of $7,281.41. The contractor appealed this assessment by letter dated September 14, 1979. The contractor contended that it was not responsible for the late delivery as the delinquent deliveries were caused by the contractor's paper supplier (Exhibit 14). In accordance with a request of the contractor for an informal hearing before a panel of members of the Contract Appeals Board, a hearing was held on February 29, 1980. At that hearing the contractor was ably represented by its designee, Mr. Sean O. Lane, and the Government was ably represented by Mr. James C. Lane, Jr., Esquire. The decision of this Board is based solely upon the record as evidenced by the documents and exhibits that constitute the Appeal File and the testimony taken at the hearing. This procedure is in accordance with GPO Instruction 110.10 titled "Board of Contract Appeals Rules of Practice and Procedure", dated June 6, 1979. Statement of Facts On October 19, 1978, in accordance with Government Printing Office (hereafter GPO) contract award procedures, a purchase order for Jacket No. 274-898 was issued by the GPO to the contractor for the printing of 6,147,000 marginally punched continuous forms with a shipping date of on or before January 19, 1979. These forms were to be in four parts, with each part a different color stock. The contractor received the notice of award on October 23, 1978, and the Purchase Order 70485 on October 25, 1978. Paper in the four colors, green, white, salmon and goldenrod, was ordered by the contractor from Fraser Paper Co. and delivered to the contractor in November of 1978. In December 1978 the contractor began to use the paper and had run through two-thirds of it before discovering that a portion of the goldenrod segment of the paper stock was unable to be used. 2/ However, because of an alleged severe paper shortage experienced by the paper industry during the winter season, the contractor did not receive any replacement paper from its supplier until late January and early February. As a consequence of this delay, the contractor was unable to meet the shipment schedule for some of its shipments. Exhibit 8 provides a breakdown of those quantities that were shipped late (just under 2,100,000 forms) and the number of days each order was. shipped late. All amounts were finally shipped to their various destinations by February 23, 1979. The Government assessed liquidated damages for the amount of time each shipment was late. The total amount assessed was $7,281.41 (Exhibit 8). The formula for assessing these damages can be found in GPO Form 1026, "Contract For Marginally Punched Continuous Forms", Sec. 2.19, pg. 6. This document was effective from June 1, 1978 through November 30, 1978 and was incorporated by reference into the Specifications for this contract. (Exhibit 2). 3/ The Government's final payment reflected this deduction for the liquidated damages. 4/ By letter dated July 30, 1979, the contractor asked the GPO to review and remove the levy of liquidated damages on the contractor or grant a retroactive extension on the shipment dates. This request was based upon the claim that the delay in shipments was not due to any negligence on the part of the contractor. On August 2, 1979, the Contracting Officer wrote to the contractor that the rejection of paper was no reason to authorize the extension of a shipping schedule. The contractor, again by letter, dated August 17, 1979, requested the Contracting Officer to review his decision. In accordance with the "Disputes" clause of GPO Contract Terms No. 1, the GPO denied this request for relief in a letter As requested by letter dated October 15, 1979, a hearing was held on February 29, 1980, where the representative of the contractor explained the contractor's position, using various documents in the Appeal File for support. At the end of that hearing the Chairman asked whether and further evidence was to be tendered to supplement the record. Since neither party wished to submit further evidence, the Chairman closed the record. The issue to be decided by this Panel is whether the GPO properly assessed liquidated damages against the contractor. Discussion It is the decision of the Contract Appeals Board Panel that liquidated damages were properly assessed in accordance with the procedures set forth in the contract and the documents incorporated by reference thereto. The contractor's appeal from the Contracting Officer's decision to assess these damages is denied. Liquidated damage provisions, such as used in the instant case, are regarded as enforceable and not a penalty when the anticipated loss caused by a contractor's failure to fulfill the terms of his obligation under the contract are uncertain in amount or difficult to predict at the inception of the contract, and the amount stipulated is a fair and reasonable forecast of, and not disproportionate to, the presumable loss or injury. Bayou Culvert MFG., Inc., AGBCA No. 400, April 6, 1976, 76-1 BCA ¶ 11,796; Rex Trailer Co. v. United States, 350 U.S. 148 (1956). The validity of the liquidated damage clause depends on the reasonable anticipation of potential losses that a delay in delivery might cause. 5/ There is no need for the Government to suffer actual damages for this clause to be invoked as long as at the time the contract is awarded, the Government may reasonably expect to suffer damage if performance is delayed and the dollar amount of the damage is difficult to ascertain. Industrial & Commercial Construction, Inc., FAACAP No. 66-5, August 24, 1965, 65-2 BCA ¶ 5060. The contractor claimed, however, that the Government should, in this case, grant an extension in the shipment schedule or remove the assessment of liquidated damages. This might be justified on the grounds that the delay in delivery was excusable. The contractor contends that the cause of its delay was the lateness of its paper supplier in delivering the necessary material. The supplier had originally provided the paper, but sometime before the paper was to be used it was ruined. Immediately after this discovery the contractor reordered the paper. Due to the season, conforming paper could not be delivered in time to make timely delivery. 6/ Article 17 of GPO Contract Terms No. 1 envisions such excusable delays, stating in relevant part that: "Penalties and/or damages shall not be applied against the contractor for delays in delivery occasioned by unforeseeable causes beyond the control and without the fault or negligence of the contractor, . . ., and delays of a subcontractor due to such causes . . .: Provided, That the contractor shall, within 10 calendar days from the beginning of such delay, notify the contracting officer in writing of the cause of the delay: Provided further, That such notice to the contracting officer shall contain the justification for such delay." Therefore, if the contractor could show that the causes of the late delivery were unforeseeable and were beyond its control or of its subcontractor, then these delays could possibly be deemed excusable. Newport Shipyard, Inc., DCAB No. NOAA 6-77, November 16, 1979, 79-2 BCA ¶ 14,182. The burden of proof is on the contractor to establish the actual cause of the delay and that it was excusable within the meaning of the "Liquidated Damages" clause. AERO Precision Industries, Inc., ASBCA No. 17098, January 11, 1973, 73-1 BCA ¶ 9880. However, in the absence of a preponderance of evidence tending to refute the findings of the Contracting Officer, those findings will not be disturbed. Bannock Steel Corp., IBCA No. 452-8-64, April 22, 1965, 65-1 BCA ¶ 4804. A mere showing of diligence of the contractor is not sufficient to excuse it from liability for failing to perform the contract within the time specified. Bracewell Construction Co., GSBCA No. 1353, November 30, 1964, 65-1 BCA ¶ 4556. In the instant case, while the contractor failed in meeting its delivery dates because of its paper supplier's inability to obtain paper during a period of shortage, the reason why it was necessary for the contractor to reorder the paper from its supplier was because the originally ordered paper had been ruined by moisture. The contractor cannot now claim the paper shortage as the cause of the delay since it was the ruined paper that was the actual cause. Moreover, it is clear from the evidence that the paper was ruined while in control of either the supplier or the contractor. This being the case, the contractor has failed to establish that the cause of late receipt of the paper (i.e. the ruined paper) was beyond the control of either the contractor or the paper supplier. E.F. Blankenship Co., IBCA No. 516-9-65, May 27, 1966, 66-1 BCA ¶ 5594. By way of proof, the record contains only the documents submitted by the contractor. These documents demonstrate only that its supplier could not readily obtain the necessary supplies because of an alleged paper shortage. Since this alleged shortage was not the actual cause of the delay in performance, the cause and effect relationship necessary for the delay tc be considered excusable has not been established. Maverick Diversified, Inc., ASBCA No. 19454, February 12, 1975, 75-1 BCA ¶ 11,114. As the contractor has not shown that the late delivery arose from a cause beyond its control or its paper supplier's control, the delay is inexcusable and did not operate to relieve its responsibility to perform in a timely manner. Therefore, liquidated damages were properly assessed. George Mason Construction Co., Inc., GSBCA No. 3863, September 19, 1973, 73-2 BCA ¶ 10,258. Even if this Panel were to find that the delay was excusable, it would have difficulty in reducing the liquidated damages award since the contractor, by its own admittance at the hearing, did not comply with the contractual obligation to notify the Contracting Officer in writing within 10 calendar days of discovering the nature of any such delay. See Article 17 of GPO Contract Terms No. 1, supra. In cases of excusable delay, the contractor cannot prevail if there has not been this proper notification. Emlyn T. Linkous, GSBCA No. 3832, February 4, 1974, 74-1 BCA ¶ 10,473; Volta Electric Company, Inc.., NASA BCA No. 39, October 16, 1963, 1963 BCA ¶ 3871. While this Panel appreciates that the contractor has served the Government for 19 years and acted in this case, with a certain amount of diligence in delivering the delinquent paper shipments as quickly as possible, the Panel lacks jurisdiction to reform the contract in order to grant the contractor any equitable relief from its contractual obligations. Newark Construction Company, ASBCA No. 4292, Air Force Appeals Panel, September 20, 1957, 57-2 BCA ¶ 1459. Conclusion Based upon the above reasoning, the contractor's appeal for extension of the shipment dates or the removal of the assessment of liquidated damages is denied in its entirety. _______________ 1/ Hereafter, unless otherwise noted, every citation to an exhibit is from the Appeal File. 2/ The contractor has alleged that the paper was ruined by moisture that affected the paper sometime prior to it being sent to press. There was no evidence provided as to how or when the paper was in fact damaged. The paper was, however, so substandard that it, according to the contractor, was suitable only for scrap. See Exhibit 9. 3/ The Specifications were incorporated by reference into the Bid and Acceptance document signed by the President of the contracting company (Exhibit 3). The amount of liquidated damages is computed by a set formula the rate of one percent of the contract price for each working day the contractor has not shipped any part of the contract in accordance with the shipping dates. See GPO Form 1026, supra.dated August 27, 1979 (Exhibit 12). This final decision of the Contracting Officer was then appealed on September 14, 1979. In this letter, the contractor alleged that its delay was due to the paper supplier's inability to replace the spoiled paper in time to ship a finished product in a timely fashion, and that this was an "unforeseeable . cause beyond the control and without the fault or negligence of the contractor . . .." Further, the contractor stated that it had performed to the best of its ability and should not be penalized for supplying a quality product, albeit late. It had "acted in the Government's best interests to provide a quality product to the customer agency" (See Exhibit 14). 4/ Although the contract was invoiced on March 6, 1979, payment was not made by the GPO until July 15, 1979, over 100 days later. 5/ Since the validity of the operation of the "Liquidated Damages" clause has not been challenged by the contractor, this Board does not have to address the possibility that the use of this provision in this particular contract was not suitable or that the amount assessed bears no rational relationship to the probable damages the Government thought it would suffer during the negotiation of the contract. 6/ At the hearing, the contractor alleged that it had made reasonable efforts to obtain paper from alternative sources but apparently to no avail.