Contractor's appeal filed on May 5, 1983
Hearing held on November 7, 1983
Decision dated May 3, 1984

Contract Appeals Board
Panel 83-3


   Edward Brothers, Inc. (hereafter the contractor) has appealed the 20.3% reduction of the
   contract price taken by a Contracting Officer of the U.S. Government Printing Office (GPO).  The
   reduction was taken because the contractor failed to produce the standard of quality required by
   the contract for halftone illustrations.  The contractor appealed the decision in accordance
   with the "Disputes" clause of the contract.  Article 2-3, Contract Terms No. 1, GPO Publication
   310.2, revised October 1, 1980.  The appeal was timely filed. 1/ The contractor asserts that,
   since the GPO was partially responsible for the poor quality of the printed material, no price
   reduction should have been taken.

   The GPO Contract Appeals Board has jurisdiction over this appeal pursuant to GPO Instruction
   110.10B, entitled "Board of Contract Appeals Rules of Practice and Procedure" and Contract Terms
   No. 1, supra.  This decision is based solely on the record which consists of the 56 exhibits in
   the Appeal File and the testimony provided at an informal hearing held on November 7, 1983.


1.  A contract to produce the Occupational Outlook Handbook, 1982-83 Edition, was awarded to the
contractor by the GPO on February 16, 1982.  Exhibit 7 of the Appeal File.  The contract called for
the production of approximately 160,000 copies of a 486 page book in black ink with halftone
illustrations (128,000 paperbound books).  Exhibit 2.  Purchase Order 22344 incorporated by
reference the contract specifications.  Exhibit 7.  The specifications incorporated by reference
GPO Contract Terms No.l, supra, and the GPO Quality Assurance Through Attributes Program (QATAP),
GPO Publication 310.1, revised June 1981.  Exhibits 2, 54.

2.  The quality for printing the Occupational Outlook Handbook had to meet standard for Level III
of the QATAP.  Exhibit 2, p. 5.  In order for the contractor to attain the specified standard for
halftone illustration, it would have to match the quality of the camera copy.  Exhibit 2, p. 6.
The printing attribute established for the halftone match was set out in the QATAP.  Exhibit 54,
Printing Attribute No. 8, p. 18.

3.  The GPO submitted a copy of the handbook which was printed in the previous year to the
contractor as a sample of the required margins.  Exhibit 2.

4.  On April 15, 1982, the GPO determined that the quality in the halftones in the paperbound
copies which had been submitted by the contractor was below standard.  Exhibits 25, 26.  As of this
time, the contractor had printed 80,000 copies of the Handbook.  Exhibit 31.

5.  Using visual inspection methods, fifty copies of the Handbook were inspected by Norman
Campbell, an Inspector of the GPO Quality Assurance Section.  Testimony of Norman Campbell.  The
inspection indicated that there was a major defect in the halftones contained in each book.
Exhibit 34.  A 20.3% reduction in the contract price for the defective 80,000 books was

6.  The contractor was informed by a Contract Modification, that because of the unsatisfactory
quality of the halftones in the 80,000 paperbound copies of the Handbook, the contract price for
this number of books would be reduced by 20.3%.  Exhibits 37, 38.

7.  The problem with the quality of the halftones was resolved and the remainder of the contract
was produced without further problems.  Exhibit 45.

8.  The contractor protested the reduction in price in a letter to the Contracting Officer dated
May 14, 1982.  Exhibit 48.  The Contracting Officer issued a final decision on July 14, 1982,
stating that because the contractor had not complied with the standards required for halftone
quality by the contract, that a price reduction was imposed in accordance with the QATAP.  Exhibit

9.  The reduction in the contract price ultimately charged the contractor was $31,522.55.  Exhibit

10. The contractor appealed this price reduction by letter dated May 5, 1983. Id; see also Footnote
No. 1.

11. On November 7, 1983, a hearing was held at the request of the contractor.  At that hearing, the
contractor was represented by Walter F.  Hamilton, Jr., Executive Vice President, Edwards[sic]
Brothers, Inc, who also testified on behalf of the contractor.


   It is undisputed that the 80,000 copies of the Handbook produced by the contractor did not meet
   the standards established in the QATAP for halftone match for Level III publications.  Finding
   of Fact No. 5.  This was admitted by the contractor's representative.  Testimony of Mr.
   Hamilton.  Due to the loss of detail in the halftones, the copies that had been inspected were
   found to be defective.  Exhibit 34; see also Exhibit 54, p. 18.  For an example of this failure
   to obtain the quality level for the halftone match, see page 83 of the Occupational Outlook
   Handbook.  Exhibit 55.  Since all of the samples that were inspected contained the same poor
   quality in the halftones, one major defect was assessed for all of the fifty copies inspected.
   Exhibit 34.  The discount table in the QATAP for fifty major defects permits a reduction of
   20.3% in the contract price.  Exhibit 54, p. 44.

   The contractor asserts that the GPO should share the responsibility for the defective quality in
   the halftones.  This argument is based on the contention that the GPO approved paper that would
   not permit the quality of halftone match that was established in the specifications.  For
   guidance on the quality of the halftone, the contractor relied on the copy of the previous
   printing of the Handbook that the GPO furnished to the contractor.  According to the contractor,
   the quality of halftone in that handbook was considerably worse than what the contractor
   produced.  The contractor alleges that no other guidance was furnished by the GPO.  Also, the
   contractor contends that, because the GPO did not request a pre-production conference; did not
   send a representative to guide the contractor; and did not request proofs, it did not follow its
   own procedures and contributed to the contractor's belief that the GPO was not interested in the
   quality of the work.

   It is clear from a review of the evidence that the contractor was, or should have been, aware of
   the quality that was expected in the halftone illustrations.  The specifications established the
   quality level that had to be met for halftone illustration and specified that the halftones had
   to match the camera copy.  Exhibit 2, pp. 5-6.  The camera copy was furnished to the contractor.
   Exhibit 2, p. 2.  The QATAP set out the allowance for deviation for this printing attribute.
   Exhibit 54, p. 18-20.  There was no reason for the contractor to rely on the copy of the
   previous year's Handbook for any guidance other than as a sample for margins.  The reason for
   furnishing this handbook to the contractor was clearly set out in the contract specifications.
   Exhibit 2, p. 2; see also Exhibit 19.

   If the contractor used paper that would not permit the required quality of work, it did so at
   its own risk.  The contractor stated that it would not ordinarily use the type of paper, which
   the GPO had approved and it used for these 80,000 books, for documents containing halftone
   illustrations.  However, the evidence of record indicates that the same paper stock was used to
   produce handbooks that conformed to the standards for halftone illustration.  Exhibit 45.

   The contractor has not demonstrated that the GPO took any affirmative action that might have
   justified the contractor's deviance from the required standard for halftone quality.  The
   requirements that the contractor participate in a pre-production conference or furnish proofs
   were contract provisions which were designed to benefit the GPO.  The GPO could forego such
   actions without waiving its right to the contractor's strict adherence to the contract
   specifications.  Therefore, the Government's inaction did not relieve the contractor's duty to
   comply with the specifications.  Because there was no action on the part of the GPO that would
   indicate that the agency would be satisfied with poor performance, the contractor had no right
   to believe that the GPO would be satisfied with substandard performance.

   The contractor also argues that the assessment of the 20.3% reduction in the contract price was
   "too simple, unreasoning and very unfair".  Testimony of Mr. Hamilton.  The price reduction was
   taken in accordance with the formula set out in the QATAP.  The purpose of QATAP is to ensure
   strict adherence to the descriptions of printing and finishing attributes for each level of
   printing and to assess a price reduction for failure to comply with the standards.  The method
   for adjusting the contract price operates as a liquidated damage clause.

   A liquidated damage clause permits the assessment of damages for a breach of contract and is
   used when actual damages caused by the failure to perform would be difficult to estimate
   accurately at the time the contract was entered into.  In order to have an enforceable
   liquidated damages clause, the clause must fix an amount of damages that is a reasonable
   forecast of just compensation for the harm caused by the contractor's failure to perform.
   Priebe & Sons v. United States, 332 U.S. 407 (1947).

   In the instant case, given the nature of the contractor's failure to perform, it would have been
   difficult to estimate the actual damage suffered by the GPO.  Although the defect in the
   halftones caused no information loss, the Government was entitled to receive a publication with
   pictures that were sufficiently clear for visual evaluation.  As the contractor supplied a
   product that seriously deviated from the contract specifications, it was liable for liquidated
   damages.  The reduction in contract price of 20.3% represents a reasonable estimate of the
   damage caused by the contractor's substandard performance. 2/ The Board holds that the 20.3%
   reduction in the contract price was an appropriate use of the liquidated damage clause as
   formulated in the price reduction tables of the QATAP.

   The record is unclear as to how the Contracting Officer computed the amount actually assessed
   this contractor as a price reduction.  Therefore, the Board remands the assessment of the exact
   amount of the price reduction to the Contracting Officer to ensure that the reduction was made
   in strict accordance with the Contract Modification.  Exhibits 37, 38.  The 20.3% reduction in
   price should have been limited to the price of the 80,000 defective Handbooks.  Proof of the
   appropriate price reduction should be submitted to the Board within 14 days of the date of this
   decision and communicated to the contractor.  If it is determined that the price reduction was
   computed incorrectly, a suitable adjustment in the amount owed by the contractor should be made.

   Based upon the above reasoning, the Board denies the contractor's appeal except to the extent
   that the Board directs the Contracting Officer to ensure that the price reduction was computed


1/ The appeal was filed more than ten months after the final decision of the contracting Officer.
However, this Board ruled.in Edward Brothers, Inc., GPO CAB 3-83 (September 19, 1983) that this
appeal was filed in a timely fashion.  The Board denied the GPO's Motion to Dismiss the Appeal, and
processed the appeal as if it had been filed within 90 days of the Contracting Officer's final

2/ The GPO has made major revisions in the QATAP since its issuance in 1979.  Prior to June 1981,
the price reduction tables permitted reductions of up to 50% of the contract price.  These tables
were revised following the decision in Printers II, Inc., GPO CAB 4-80, July 9, 1980.  However,
these tables cannot be applied mechanically.  The formula must be used by the Contracting Officer
on a case-by-case basis, only where actual damages are difficult to estimate at the time the
contract is awarded.  The liquidated damages must also bear some rational relation to the actual
damages suffered by the GPO.