UNITED STATES GOVERNMENT PRINTING OFFICE CONTRACT APPEALS BOARD Appeal of Kaufman DeDell Printing, Inc. Program Nos. 65-S & 77-S Appeal dated December 8, 1978 Hearing held on June 17, 1980 Decision dated September 5, 1980 Panel 79-12 Thomas O. Magnetti, Chairman Louis A. Lopez, Member Paul L. Hollenbach, Member 2 Preliminary Statement This is a decision on a timely appeal entered by Kaufman DeDell Printing, Inc., 1715 Teall Avenue, Syracuse, New York (hereinafter referred to as the contractor). The appeal disputes the decision of the Contracting Officer to terminate Purchase Order 51468 (Program 77-S) and Purchase Order 52039 (Program 65- S) for default. The appeal was taken pursuant to Article 29 ("Disputes'' clause) of Government Printing Office (hereinafter the GPO) Contract Terms No. 1 as incorporated by reference into the Bid and Acceptance document of this contract (Exhibits 3 and 12 of the Appeal File). 1/ The contracts required the contractor to print and bind two pamphlets. The first was titled "Translog" and was ordered by the Department of the Army. The other pamphlet was for the Department of Justice and titled ."Immigration and Naturalization Operations Instructions and Regulations''. The decision of the Contracting Office to terminate for default was based upon a determination that further performance was jeopardized by the seizure of the contractor's plant by the Internal Revenue Service (IRS). Following this termination, Program 77-S was readvertised and awarded to another contractor with a cost increase over $3,000. The total amount of the excess costs for this reprocurement was apparently recovered from the contractor. In accordance with a request of the contractor dated December 8, 1978, an informal hearing before a panel of members of the Contract Appeals Board was held on June 17, 1980. The contractor did not appear at this hearing and did not provide a suitable excuse for its absence. The hearing was convened and the Government rested its case upon the Appeal File. Therefore, the decision of this Panel is based solely upon the record as evidenced by the documents and exhibits that constitute that Appeal File. This procedure is duly authorized by GPO Instruction 110.10 titled "Board of Contract Appeals Rules of Practice and Procedure", dated June 16, 1979. Statement of Facts In accordance with GPO contract award procedures, purchase orders for Jackets 260-827 (Program 77-S) and 261-001 (Program 65-S) were issued to the contractor on December 13, 1977 and January 6, 1978, respectively. Under Program 77-S (Purchase Order 51468) the contractor was required to produce saddle-stitched pamphlets with a separate cover. Composition, negative making, printing, binding and packing for mailing and delivery were also required. Although no specific quantity could be guaranteed, anticipated requirements indicated that approximately 13,500 copies per issue would be ordered on a monthly basis over the term of the contract January 1, 1978 through December 1, 1978 (Exhibit 2). Program 65-S (Purchase Order 52039) required the contractor to supply looseleaf, self-covered pamphlets, using the offset printing process. The contract included binding, packing, mailing and shipment. While no specific quantity or number of pages was guaranteed, it was estimated that there would be approximately 24 orders of between 7,000 to 8,500 copies per order requested during the contract period (Exhibit 11). On November 9, 1978, the Contracting Officer, Paul Barlow, received a letter from the IRS stating that on October 31, 1978, the IRS had seized the contractor's premises on which the main office and printing shop were located. This action was motivated by the failure of the contractor to make the proper payment of payroll taxes. The GPO was further notified in this letter of the intention of the IRS to conduct an auction sale and dispose of the seized personal property to satisfy the overdue taxes (Exhibit 17). Responding to this, the GPO sent a cure notice to the contractor dated November 21, 1978, cautioning the contractor that the seizure of the plant caused such a condition that. further performance on the two contracts seemed endangered. The contractor was warned that if the condition was not suitably cured within ten days the GPO would terminate the contracts for default pursuant to Article 18 of US GPO Contract Terms No. 1 (Exhibit 19). The response to this cure notice proffered by the contractor was considered by the Contracting Officer to be insufficient as an explanation (See Exhibits 20 and 22). Therefore, the Contracting Officer terminated the contracts on December 1, 1978, stating that: "You are notified that your contracts, identified as (1) Purchase Order 51468, Program 77-S, Jacket 260-827, Print Order 10 and print orders for the balance of the term; and (2) Purchase Order 52039, Program 65-S, Jacket 261-001, Print Orders 14, 15, and 16 and print orders for the balance of the term, are hereby terminated for default because of the seizure of your plant by the Internal Revenue Service, your failure to ship or furnish documentation of shipment of the four print orders mentioned above, and your failure to substantiate your claim of continued operation.'' This decision was appealed by the contractor in a letter dated December 8, 1978, on the grounds that it was allegedly able to supply the work as required by the contracts. Subsequently on January 16, 1979, the GPO notified the contractor that this appeal was to be handled in accordance with the "Disputes" claim, Article 29, Contract Terms No. 1. On August 3, 1979, the contractor requested an informal hearing which was then scheduled for June 17, 1980. The contractor was notified of this hearing date by letters from the GPO Special Projects Office and the Chairman of the GPO Contract Appeals Panel dated May 5 and 6, 1980, respectively. The contractor acquiesced to that date. The hearing was convened at 10:00 a.m. on June 17, 1980, however, neither the contractor nor any of its representative were present, with no excuse forthcoming explaining the absence. As in any case of the unexcused absence of one of the parties, the Panel proceeded with the hearing and the contractor's case was considered to be submitted on the written record. This procedure is in accordance with Paragraph 13(d) of the aforementioned GPO Instruction 110.10. The contractor was duly notified of this by letter dated June 18, 1980. On June 23, 1980, the GPO received a letter from the contractor dated June 13, 1980 and postmarked June 19, 1980, referring to an earlier request of May 22, 1980, for a continuance in the hearing date. There was, however, no evidence of such a request in either the Panel's file or in the file kept in the GPO Special Projects Office. The Chairman of the Panel, by letter dated June 24, 1980, asked for evidence proving the existence of this request for a continuance. The contractor was told to respond within 10 days after receipt of the letter (which would have been by July 7, 1980). As no response from the contractor was forthcoming, the Chairman informed the contractor by letter dated July 11, 1980, that the Panel would decide the appeal based solely upon the written record as submitted pursuant to GPO Instruction 110.10 §§ 12, 13 (d) and 16. In accordance with these regulations, the record was closed on August 1, 1980, the contractor refusing a further opportunity to supplement the record with either documents or exhibits which would have been relevant or material. Discussion The issue on appeal is whether the Government was correct in terminating this contractor for default because its premises had been seized by the IRS. In its decision to terminate, the Contracting Officer cited Article 18, the default clause of GPO Contract Terms No. 1. This article allows the Government to default a contractor: "(i) If the contractor fails to make delivery of the supplies or to perform the services within the time specified herein or any extension thereof; or (ii) If the contractor fails to perform any of the other provisions of this contract, or so fails to make progress as to endanger performance of this contract in accordance with its terms, and in either of these two circumstances does not cure such failure within a period of 10 days (or such longer period as the contracting officer may authorize in writing) after receipt of notice from the contracting officer specifying such failure.'' Article 18(a). In the case at bar, the Contracting Officer determined that the seizure of the plant and attachment of the personal property on the premises by the IRS so endangered the contractor's continued performance of the contract that he felt justified in requiring the contractor to cure the situation within a specified amount of time. 2/ The contractor did not provide the necessary assurances as required by the Contracting Officer as the contractor's response did not document ownership or lease of appropriate printing press equipment (Exhibit 24). The Contracting Officer had no recourse but to terminate the contractor for default. Given the above circumstances, the Contracting Officer was justified in regarding the evidence provided to him as establishing the possibility of the contractor not being able to continue performance on these two contracts. The contractor claimed that further performance would continue due to the availability of production facilities at locations other than the seized premises (Exhibits 18 and 22). Although the contractor alleged that production would not be interrupted, it has failed to support these allegations with any substantial proof. 3/ Such allegations do not constitute a basis for acceptance of a claim. American Cleaners, ASBCA No. 18139, January 14, 1974, 74-1 BCA ¶ 10, 441. Conclusion Even though the contract's performance period had not expired, these two contracts were properly terminated for default because the contractor's severe financial difficulties justified a determination that it would not be able to complete performance. Therefore, this appeal is denied in its entirety. _______________ 1/ Hereinafter, unless otherwise noted, every citation is to an exhibit in the Appeal File. 2/ It should be noted here that this was not a case where performance could be excused since the condition that endangered performance was well within the responsibility of the contractor. If the contractor's payroll taxes had been paid on time, the IRS would never have seized the contractor's premises. Therefore, the financial difficulties encountered by the contractor do not constitute a cause or excuse for performance which might be considered beyond the contractor's control or without its fault. 3/ Exhibit 20, the contractor's response to the GPO's cure notice, alludes to certain extensions in the delivery date of certain of the print orders. While the GPO was not obliged to grant this request and did not do so, it does give some indication that the contractor was experiencing difficulty in performing the contracts after the seizure of its plant.