U.S. Government Printing Office Office of the General Counsel Contract Appeals Board Vincent T. McCarthy, Chairman Jay E. Eisen, Member Drew Spalding, Member Panel 77-11 Appeal of International Business Machines Corporation April 21, 1978 This is an appeal filed on November 1, 1977, by International Business Machines Corporation, One Metropolitan Plaza, P.O. Box 3658, San Francisco, California, 94119, also referred to herein as the contractor or appellant, under the "Disputes" clause of the contract. It concerns Jacket 796-404, Purchase Order R1316, GPO Form 1026, Contract for Marginally Punched Continuous Forms, December 1, 1976 - May 31, 1977, U.S. Government Printing Office. I. Findings of Fact a. This case arises out of a contract entered into by the appellant and the U.S. Government Printing Office, herein referred to as the GPO, for the production of 10,000 marginally punched continuous forms, 9" x 4". b. The customer agency, Energy Research and Development Administration, (ERDA), submitted requisition #OR-3968 for the forms to the Regional Printing Procurement Division, Government Printing Office, Seattle, Washington on November 3, 1976. The Procurement Officer solicited several contractors by telephone who specialized in manufacturing business forms, including the appellant. A representative of the appellant visited the procurement office in January 1977 and picked up a printed form produced in connection with a former procurement as a facsimile or sample only. Telephone solicitations were made on February 21 to February 28, 1977, and the appellant was the sole bidder. c. The appellant's bid in the amount of $1,691.30 was accepted and confirmed by the issuance of Purchase Order R1316, Jacket 796-404, on February 28, 1977, with a shipment date of May 28, 1977. The document provided for the production of: "Quantity 10,000 + 10% sets; Description Document receipt, per specifications. In strict accordance with your quote and our specifications. Dated 2/28/77." d. In addition, the purchase order contained an entry as follows: "Purchased: F.O.B.: XX Per specifications" e. The specifications for Form No. 54-7600-028 titled "Document Receipt" was transmitted to the contractor on February 28, 1977. The specifications on page 2 of a 3-page document made reference to changes as follows: "Ordering agency will furnish X Reprint Copy X With Changes Add New Logo on Plies 2 and 3" f. In accordance with the schedule, the contractor made shipment of the manufactured forms on May 28, 1977. g. The customer agency (ERDA), on July 14, 1977, advised GPO that the contractor failed to conform to the changes required in specifications to wit: adding "New Logo on Plies 2 and 3". They, therefore, rejected the order. h. The contractor was advised by letter, dated July 14, 1977, of the possibility of rejecting the printing because of their failure to produce an acceptable product in conformance with the specifications. The contractor refused to cure the error by a reprint and defended its position in that its verbal bid was for an exact reprint and no copy change was ever received by them. The only copy received was a sample of a previous printing. The contractor admitted to failing to observe the notation on the specifications for the change and relied the repeat sample for production purposes. i. The appellant refused to accept responsibility for the error and declined to reprint the form. The Contracting Officer, by letter dated October 7, 1977, notified the contractor that the contract is terminated for default by reason of its inability to deliver a product in accordance with the specifications; that the action is taken as provided in Article 18 of the U. S. Government Printing Office Contract Terms No. 1. j. The contractor appealed to the Public Printer by letter dated November 1, 1977. The contractor, in its letter of August 12, 1977, indicated that they never agreed to or accepted the referenced Article 18, GPO Contract Terms No. 1 as part of the contract. k. The method of procurement as provided in the specifications states the following: "(2) X Purchased through GPO other than Form 1026" The specifications provide in a footnote as listed on GPO Form 1026a (Specifications for Marginally Punched Continuous Forms) the following: "All the provisions of GPO Form 1026, Contract for Marginally Punched Continuous Forms, in effect at the date of the purchase order, are incorporated herein by reference and are an integral part of these specifications. Exceptions: When the method of procurement is other than GPO Form 1026, and there is any conflict between the provisions of GPO Form 1026 and those of the specifications, the specification provisions shall prevail." l. Since it is apparent that there is not any conflict between the provisions of GPO Form 1026, Contract for Marginally Punched Continuous Forms, December 1, 1976, and the specifications herein, the provisions of GPO Form 1026 prevail. Paragraph 2.27 of GPO Form 1026 contains the usual disputes provision concerning decisions on questions of fact arising under the contract to be decided by the Contracting Officer in event of failure to agree, with a right of appeal within 30 days after receipt of a copy of the decision. II. Opinion The immediate questions in this appeal are the following: (1) Whether a binding bilateral contract resulted from the parties' negotiations; (2) Whether appellant's failure to deliver the forms ordered as described in the specifications upon the issuance of the purchase order was a default provided for under the contract. It is concluded that this Board has jurisdiction to determine a dispute concerning the existence or non-existence of a enforceable obligation, including whether a purchase order (unilateral offer) has ripened into an obligation binding on the offerer. The appellant's oral quotation was an offer which the Government reasonably accepted when it issued an authorization to proceed in the form of GPO Form 2669, Purchase Order R1316, accompanied by specifications provided in GPO Form 1026a. The facts here clearly show, that the contractor in reliance of the Government's offer through the issuance of the Purchase Order and specifications made progress and tendered performance and delivery which respondent rejected because of the failure of the contractor to comply with the specifications. From this evidence, we conclude that there has been sufficient performance to constitute a binding bilateral agreement. Ordnance Part and Engineering Co., ASBCA 12820, 68-1 BCA ¶ 6870; Waterman Instrument Corporation, ASBCA 11392, 66-2 BCA ¶ 5783. The Board, in addition, must decide if appellant was justified in not following strictly the provisions of the specifications, relying on their quotation for an exact reprint of the previous order with identical print copy, or if the Government was correct in demanding exact compliance with specifications. Paragraph 2.26(a), GPO Form 1026, Contract for Marginally Punched Continuous Forms, provides in pertinent part the following: "(a) In case any form was found to be . . . not in conformity with the requirements of the specifications the ordering agency shall have the right to reject such articles, or require their correction. If the contractor fails to proceed properly with the replacement or correction thereof, the ordering agency may by contract or otherwise, replace or correct such forms and charge to the contractor the excess cost occasioned the ordering agency thereby, or the ordering agency may terminate the right of the contractor to proceed as provided in the contract and charge to the contractor the excess cost occasioned thereby." Further, the following appears on the Purchase Order R1316, Jacket No. 796-404: "The Public Printer reserves the right to reject all or any portion of consignments which are not in accordance with specifications." From the statements made in the appellant's letters, particularly where it states that IBM responded with a quotation which was for a true reprint, we conclude that the deficiencies mentioned by the Contracting Officer in his letter of October 7, 1977, were in fact a material departure from the technical requirement of the specifications which called for a change in the addition of a "New Logo on Plies 2 and 3". Contracting Officers have the right to insist upon strict compliance with specifications. There is no legal requirement that the forms tendered by the contractor not wholly in accordance with the specifications be accepted in substitution for the forms specified in the contract. It is a well established basic principle that the Government is ordinarily entitled to get complete compliance exactly in accordance with the details of the specifications, and that deviations in performance in the finished product are not acceptable if the finished product does not satisfy the needs of the procurement. Ideal Restaurant Supply Co., Inc., VACAB No. 570, 68-1 BCA ¶ 6327. To summarize, based on the evidence of record, we conclude that the forms tendered by the contractor did not comply with the contract specifications. We consider that the Contracting Officer was justified in insisting upon strict compliance therewith. In view of the foregoing the appeal is denied.