DISMISSED IN PART FOR LACK OF JURISDICTION, DENIED IN PART: April 22, 1993 GSBCA 12147 COSMECHEM CO., INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Frank R. Prince, President, Cosmechem Co., Inc., Baltimore, MD, appearing for Appellant. Tenley Carp, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges PARKER, HENDLEY, and WILLIAMS. WILLIAMS, Board Judge. This appeal arises from a contract for an alkaline pipe- cleaning compound which was awarded to Cosmechem Company, Inc. (Cosmechem) by the General Services Administration (GSA). Cosmechem is challenging the termination for default of two purchase orders issued under the contract. GSA terminated the purchase orders because Cosmechem failed to deliver the product by the delivery date, refused to negotiate for an extension, and the product did not pass inspection on two occasions. In addition, Cosmechem demands $2,425.38, which it claims to have incurred due to conflicting instructions given by GSA employees. This appeal was filed on October 26, 1992, and on December 10, 1992, appellant requested either the small claims or the accelerated procedure. The Board processed the case under the small claims procedure and conducted a hearing on March 16, 1993. For the first time in its posthearing brief respondent argued that the Board lacks jurisdiction over the monetary claim because it was never presented to a contracting officer for decision. We agree and dismiss that claim for lack of jurisdiction. Since the only claim before us is appellant's challenge to the termination for default, we cannot process the appeal under the small claims procedure. Flamemaster Corp. v. General Services Administration, GSBCA 12281 (Mar. 29, 1993); Marci Enterprises, Inc. v. General Services Administration, GSBCA 12197 (Feb. 17, 1993). Accordingly, appellant's election of the small claims procedure is rescinded. For the reasons stated below, the appeal of the termination for default is denied. Findings Of Fact The Contract On April 22, 1992, GSA awarded contract number GS-10F-49876, a requirements contract for the supply of alkaline pipe-cleaning compound, to Cosmechem. Appeal File, Exhibit 1. The contract period was from June 1, 1992, through May 31, 1994, and the total estimated dollar value of the contract was $8,791.44. Id. The product was to comply with Commercial Item Description A-A-1911, as amended by the contract. Appeal File, Exhibit 1 at 7. The commercial item description for the alkali pipeline- cleaning compound provided, in pertinent part: Salient Characteristics. The product shall be a uniform, free-flowing, granular mixture conforming to the following requirements: Composition Ingredient Percent Flake Sodium Hydroxide 49-59 Sodium Nitrate 27-33 Sodium Chloride 10-12 Aluminum Cuttings 3.8-4.6 Sieve size. The finished product shall pass completely through a No. 3-1/2 US Standard Sieve (5.6 mm mesh). Id., Exhibit 7 at 2. The performance requirements included in the contract were: Performance: Place 100 ml of distilled water at 15 to 20 (degrees) C into a 200 ml or larger tall form beaker. Suspend a thermometer in the beaker so that it does not touch the sides or bottom of the beaker. When 30 grams of the product is added to the water in the beaker: a. there shall be active churning of the aluminum particles; b. the final temperature of the water shall be not less than 78 degrees C; and c. after 10 minutes, no insoluble alkali cake shall remain in the beaker. (A black flocculent precipitate due to impurities in the aluminum is permitted). Appeal File, Exhibit 1 at 7. The contract also included specific packaging, packing, and marking requirements, including: PACKING: Twelve (12) units packaged as specified above shall be packed in a close-fitting corrugated fiberboard box conforming to Section 6(a), Rule 41 of the Uniform Freight Classification and Item 222 of the National Motor Freight Classification (275 minimum burst). Closure of the boxes shall be in accordance with Section 7 of Rule 41 of the Uniform Freight Classification. Gross weight of box and contents shall not exceed 65 pounds. MARKING: Standard Marking shall be in accordance with Federal Standard FED-STD-123F, dated May 15, 1991; and shall include environmental, precautionary and/or hazardous marking required by law or regulation governing product use, transportation/shipping, stocking and storage. SPECIAL MARKING shall include: (1) Lot or Batch Number (2) Dates of manufacture and reinspection (24 months) (3) Instructions for use Appeal File, Exhibit 1 at 9. GSA's specification manager, who is also a trained chemist, testified that "[d]uring the three years that I worked at GSA as the specification manager, I never received a single complaint about CID-A-A-1911. And, in fact, other contractors have met this specification." Affidavit of Arthur (Tex) Miller (Miller Affidavit) (February 3, 1993) 6. The contract further provided that products supplied were to be commercial items: The offeror signing the offer certifies that the product(s) offered meet the requirements of the Commercial Item Description (CID) and are the offeror's commercial or commercial-type product(s) . . . . A 'commercial product' is a product such as an item, material, component, subsystem, or system (1) regularly used for other than Government purposes and (2) sold or traded to the general public in the course of normal business operations at prices based on established catalog or market prices. Appeal File, Exhibit 1 at 48. The product was to be delivered within forty-five calendar days after receipt of a purchase order. Appeal File, Exhibit 3. The contract incorporated by reference a termination for default clause, 48 CFR 52.249-8, Default, Fixed-Price Supply and Services (Apr. 1984), which stated: "the Government may . . . terminate this contract in whole or in part if the Contractor fails to-- (i) Deliver the supplies or to perform the services within the time specified in this contract or any extension." Id., Exhibits 1, 24. Under the Inspection of Supplies-Fixed Price clause in the contract, the Government expressly reserved the right "to inspect and test all supplies called for by the contract, before acceptance, at all times and places, including the point of manufacture." Appeal File, Exhibit 1 at 22. GSA's Initial Inspection Pursuant to the contract, GSA issued delivery orders AWB03361 and FWB03362 for 348 cans and 252 cans of the cleaning compound, respectively; both orders specified a delivery date of August 20, 1992. At the time Cosmechem submitted its offer, Cosmechem had never previously made the alkali cleaning compound required by the commercial item description. Transcript at 169-86. GSA conducted an initial inspection and test of the product on August 7, 1992. Appeal File, Exhibit 12. GSA's supervisory quality assurance specialist (QAS) explained the testing process as follows: The performance test is basically taking a beaker, test tube type glass container, filling it with . . . 100 milliliters of distilled water, which is approximately four ounces. Selecting a sample from the bottle of the cleaning compound, approximately a teaspoon, it's 30 grams an ounce more or less. You're going to take the beaker, take a thermometer, suspend the thermometer into the solution, pour in the measured amount of solution and the product is supposed to actively churn and the temperature rise shall meet a temperature reading from the requirements 78 degrees C. After ten minutes . . . there should be no insoluble alkali cake or aluminum cuttings. Transcript at 19-20. The supervisory QAS further described appellant's product's performance at that test: Upon witnessing the test, when Cosmechem initially poured the ingredients into the test tube, it had a spontaneous reaction and it erupted out of his container. . . . It flew out and it filled the room with a gas that choked us while we were witnessing this test. We had to go outside to catch our air. If this product had been shipped this way, I think it would have caused serious injury to somebody in the field. Transcript at 20-21. Cosmechem's president characterized what transpired as follows: Now, it started to sort of like boil is the word. The gas naturally comes off with any product. [GSA's supervisory QAS] jumped back. He was physically and obviously shaken and afraid. I don't know what his habits are, but probably what he does when this happens is he wants to smoke and he went outside to smoke before the test was completed. Transcript at 149. In addition to this problem, the compound failed to actively churn, and insoluble alkali cake remained in the beaker after the ten-minute period had elapsed. Appeal File, Exhibit 12; Transcript at 79-80, 82.[foot #] 1 GSA's QAS supervisor also identified packing and marking problems; he testified that the contractor had packed twelve bottles in an intermediate container and then placed several intermediate containers into one shipping container. Transcript at 43-45. In the QAS supervisor's view, this violated the contract which required that twelve bottles be placed in one shipping container of 275-pound burst strength. Id. at 44-45. The QAS inspector explained that the reference to the 275-pound burst strength in the specification meant that this box with the twelve cans had to be the shipping container; he testified: Q Could you tell me specifically where it says that this 12 ounce container must be the shipping container? A Well, it's telling you to put a 275 minimum burst strength, National Freight Classification Code. That is the final wrap for this product. The shipping container is your final wrap. It says, 'Gross weight ----------- FOOTNOTE BEGINS --------- [foot #] 1 Appellant's president testified that there was no insoluble alkali cake in the beaker after ten minutes during the initial inspection. See Transcript at 149-50. We credit the ___ QAS supervisor's testimony to the contrary and the exhibits. See ___ Id. at 79-80, 82; Appeal File, Exhibits 11, 12. ___ ----------- FOOTNOTE ENDS ----------- of the box and contents shall not exceed 65 pounds,' . . . . Transcript at 70. Cosmechem's president claims that during an earlier visit by a different QAS inspector on approximately May 29, he was advised that six intermediate boxes each containing twelve bottles could be placed in one shipping container. Transcript at 68; see Appeal File, Exhibit 4. However, neither appellant nor respondent called this QAS inspector as a witness. Transcript at 138. The record of this QAS inspector's visit makes no mention of the approval of this method of packing. Appeal File, Exhibit 4. GSA's QAS supervisor testified that he did not discuss this May 29 visit with the QAS inspector because he was not her supervisor at the time; he became her supervisor some two months later on July 26. Transcript at 52; Appeal File, Exhibit 4. The QAS supervisor did not believe that the QAS inspector had required Cosmechem to "do anything that was outside the realm of the contract." Transcript at 68. Cosmechem's administrative assistant testified in a declaration that she "[was] cognizant of three different packaging and labeling changes requested by GSA of Cosmechem Company, Inc. in 1992." Declaration of Naomi Jackson Porter (March 5, 1993); Appellant's Exhibit A. She continued: "I am an employee of Cosmechem Company and was present at most, if not all GSA site inspections during August/September of 1992. I am aware of the requested change from a 6-pack (6X12X12oz) shipping container, to a 1-pack (12X12oz), then a 4-pack (4X12X12oz) because it was my responsibility to institute the above changes. New and different requirements were/are a normal part of each GSA visit." Id. Because the product was hazardous material, it was required to be marked in accordance with regulations specified in D-FSS- 440 as set forth in the contract. Appeal File, Exhibit 1 at 20. During the August 6 inspection, the contractor informed the Government's QAS supervisor that the product was exempt from these regulations, but the supervisor later learned that the product was not exempt. Transcript at 48, 65. On August 7, 1992, GSA issued a deficiency notice advising Cosmechem that the product failed to pass the performance test,[foot #] 2 that the contractor lacked the equipment that was necessary to perform the test, and that there were several marking deficiencies on the shipping and unit containers. Appeal File, Exhibit 12.[foot #] 3 In ----------- FOOTNOTE BEGINS --------- [foot #] 2 Cosmechem admitted that it did not have the standard sieve required at the initial test. [foot #] 3 The marking deficiencies included "incorrect purchase order on shipping cartons and no warning markings." Appeal File, Exhibit 12. ----------- FOOTNOTE ENDS ----------- response, Cosmechem wrote a letter to GSA stating it was submitting a sampling plan and product test results confirming compliance with specifications. Id., Exhibit 22.[foot #] 4 Cosmechem also requested another inspection and asked that it be scheduled on August 14 to permit Cosmechem to meet the August 20 delivery date. Id. The two purchase orders that are the subject of this appeal were to be delivered by August 20, 1992, but the product was not delivered by that date. Appeal File, Exhibit 1; Transcript at 191. On August 27, 1992, GSA issued a show cause notice to Cosmechem stating that because the purchase orders had not been delivered on time, the Government was considering terminating the orders for default. GSA gave Cosmechem the opportunity to present in writing any facts bearing on this matter by September 4. Appeal File, Exhibit 8. A second inspection was scheduled for September 1, 1992. Id., Exhibit 10. GSA's Second Inspection On September 1, 1992, product samples were tested again, on a second visit by GSA inspectors, and GSA determined that the product again failed to meet all of the contract specifications. Appeal File, Exhibits 11, 12. Although the compound did not spontaneously erupt or vigorously boil this time, a large amount of insoluble alkali cake remained in the beaker after ten minutes had elapsed. Id., Exhibit 11; Transcript at 27, 82. The contractor agreed that there was an insoluble cake present, but said that the product would still clean pipes. Transcript at 28; Appeal File, Exhibit 10. In addition, there were still marking deficiencies (incorrect purchase order on shipping cartons and no warning markings). Appeal File, Exhibit 12. The intermediate boxes did not have the requisite bar codes, which are used by GSA's customers to scan products. Transcript at 72-74. Cosmechem's Response to the Notice to Show Cause On September 2, 1992, Cosmechem's president responded to the show cause notice, admitting that samples tested on September 1 did not meet the ten-minute dissolution requirement. He stated: "[A] small cake at the bottom of the beaker required shaking or stirring to dissolve within the allotted ten-minute period. This will not greatly alter product performance since the use- directions call for a waiting period of thirty minutes (or overnight) followed by a flushing with water. Nevertheless, a ten-minute dissolution is a product specification." Appeal File, Exhibit 10. Cosmechem's president continued: "This problem is resolvable, however there will be a delay and I am not sure what your time constraints are for product delivery." Id. ----------- FOOTNOTE BEGINS --------- [foot #] 4 Neither the sampling plan nor the test results are in the record. ----------- FOOTNOTE ENDS ----------- GSA's Effort to Negotiate Following the expiration of the delivery time, the GSA contract specialist attempted to negotiate an extension in the delivery date, but no agreement was ever reached. Appeal File, Exhibit 14; Appellant's Answer to Interrogatory No. 16. In a memorandum to the file dated September 18, 1992, the contract administrator stated in pertinent part: I contacted Mr. Prince as we were to negotiate for the extension of the delinquent orders. Mr. Prince would not negotiate. He stated that he would rather cancel the contract than spend any more money on it. He has already spent $1,000. He want[s] an increase for this contract. (GSA to pay him more money.) I stated that he should send this request in writing. He will not do this - he wants GSA to send him, in writing, a statement regarding the specifications. . . . I stated . . . we needed to negotiate for the extended delivery dates of the delinquent orders, and that this was in lieu of termination. Mr. Prince will not negotiate. Appeal File, Exhibit 14. On September 24, 1992, the contract was terminated for default. Appeal File, Exhibit 15. The termination notice stated that the contractor "failed to deliver in accordance with the delivery clause of the contract." Id. Cosmechem's Excuse Cosmechem's president testified that because the performance standard only stated that the size of the aluminum could not exceed three and a half mesh,[foot #] 5 it permitted a wide range of acceptable particle sizes, and Cosmechem was unable to determine the correct aluminum particle size to create a product that would meet all of the contract specifications (i.e., active churning and no compound remaining in beaker following expiration of ten minutes). Transcript at 142-43. After the second inspection, Cosmechem was advised by GSA that "the larger the particle size of the aluminum less than [three] and a half mesh, the better the product would work." Transcript at 143. Cosmechem's president opined that GSA should have so advised him sooner: If there was a second line in [the standard] that said, 'GSA defines cuttings as three to four and a half mesh ----------- FOOTNOTE BEGINS --------- [foot #] 5 "Mesh" is a hole in a screen which the particle must pass through, therefore, it sets the particle size that must be used. Transcript at 145. ----------- FOOTNOTE ENDS ----------- and powders as anything from zero to three mesh,' or a simple statement, 'The larger the aluminum size particle, the better this product will work,' would have been a tremendous help. . . . It just goes to point out that individuals who knew this in advance, they know that you're a new company and offer no assistance. This is product that you're making for them for resale. Why would they not convey this information to you? Why would they not give you the opportunity for you to make samples, small samples, submit them for testing prior to issuing you a shipment order for hundreds of bottles of this material, which they then know that you'd be under pressure to produce? Id. at 144-45. Cosmechem utilized this advice and eventually produced a product that met all contract requirements. Id. at 152. The successful product was not produced until after the required delivery date for the two purchase orders, and after the purchase orders had been terminated for default. Id. Appellant's Monetary Claim Cosmechem claims that it should be reimbursed for monies spent because of GSA's conflicting instructions and specifications as follows: Shipping cartons $1,316.38 Shipping labels 363.00 Labor 251.00 Chemicals 495.00 Total $2,425.38 Appeal File, Exhibit 17. Cosmechem did not present any of these monetary claims to the contracting officer for decision; therefore, there has been no final decision on these claims by the contracting officer. Discussion Jurisdiction Over Appellant's Monetary Claims Appellant claims that Cosmechem should be reimbursed in the amount of $495 for chemicals allegedly used in the product samples that were rejected by GSA inspectors. Furthermore, Cosmechem claims that because of verbal modifications made to shipping instructions by GSA employees, it was forced to purchase unnecessary shipping boxes and labels totaling $1,679,38. Appellant also claims related labor costs of $251. Cosmechem failed to present these claims to the contracting officer; therefore, they were never the subject of a contracting officer's final decision. As stated in Malone v. United States, 849 F.2d 1441, 1443 (Fed. Cir. 1988), "all contractor claims must be submitted in writing to the CO in order for a board of contract appeals (BCA) to have jurisdiction" (citing the Contract Disputes Act of 1978, 41 U.S.C. 605(a), 607(d) (1982)). In a case recently decided by this Board, Marci Enterprises, Inc. v. General Services Administration, GSBCA 12197 (Feb. 17, 1993), we reiterated that "this Board has jurisdiction to review only matters presented first to the contracting officer; a complaint specifying entitlement to a certain dollar amount filed with the Board, but not first with the contracting officer, does not vest us with jurisdiction over the monetary claim."[foot #] 6 Although the issue of the Board's jurisdiction was not raised until after the hearing, the Board cannot waive a requirement that Congress has imposed. Cf. W.M. Schlosser Company, Inc., v. United States, 705 F.2d 1336, 1338 (Fed. Cir. 1983) (the Board cannot waive the certification requirement imposed in the Contract Disputes Act, and unless the claim was certified as required under that Act, the Board should not have heard nor ruled on the issue). According to the Contract Disputes Act, a contractor must present each claim "against the government relating to a contract" to the contracting officer for decision. 41 U.S.C. 605(a) (1988). Propriety of the Termination for Default It is well established that the Government is entitled to enforce strict compliance with specifications. Cosmechem admittedly failed to meet contract performance specifications prior to the delivery date, in that the insoluble alkali cake remained in the beaker after the ten-minute testing period. Further, appellant's marking was deficient. However, after the date for delivery, the Government conducted a second inspection of the product and never rescheduled an extended delivery date, and some twenty-two days after the second inspection and thirty-four days after the delivery date, terminated the purchase orders for default. The Board questioned whether this conduct constituted a waiver of the delivery schedule such that the Government's termination for default was premature. Transcript at 257. As the United States Court of Claims recognized in DeVito v. United States, 413 F.2d 1147, 1153 (Ct. Cl. 1969), "[w]here the ----------- FOOTNOTE BEGINS --------- [foot #] 6 In Marci we further denied appellant's election _____ of the small claims procedure, noting that "since the remaining issue in this appeal [termination for default] does not involve a monetary claim, the Board's small claims procedure, available to contractors seeking $10,000 or less, cannot be invoked." Slip op. at 2. ----------- FOOTNOTE ENDS ----------- Government elects to permit a delinquent contractor to continue performance past a due date, it surrenders its alternative and inconsistent right under the [d]efault clause to terminate, assuming the contractor has not abandoned performance and reasonable time has expired for termination notice to be given." The Court in DeVito set forth the elements of such waiver as follows: "(1) failure to terminate within a reasonable time after the default under circumstances indicating forbearance, and (2) reliance by the contractor on the failure to terminate and continued performance by him under the contract, with the Government's knowledge and implied or expressed consent." Id. at 1154. A review of the record in this case convinces us that these two requirements have not been met. Here, the Government indicated an intent to waive delivery only until the product could be tested a second time and appellant had responded to the show cause notice. Had appellant's product passed the second test, the Government would have been hard pressed to terminate the orders for default. But the products admittedly did not pass. As the Court of Claims recognized in Continental Chemical Corp. v. United States, 203 Ct. Cl. 711, 712 (1973), "GSA's testing of the substitute batch indicated a prospective willingness to waive the original default only if plaintiff's new [product] was satisfactory. Since it was not, GSA's forbearance cannot reasonably be deemed a waiver; at no time did the Government express any intention to waive its performance or its original notice." Cf. Multi Electric Manufacturing. Inc., ASBCA 30055, 85-1 BCA 17,878 (by inspecting the items after the delivery date and by suggesting corrective action that resulted in the contractor incurring additional costs, the Government indicated a desire that the work continue and, therefore, effectively waived the delivery date). Nor did GSA unduly delay in terminating the orders after the second failure. Rather, following this failure of the test, the Government attempted to negotiate an extended delivery date with the contractor, but the contractor refused to negotiate and effectively advised the Government that it was abandoning performance. Appellant's president told the contract administrator that he "would rather cancel the contract than spend any more money on it." Appeal File, Exhibit 14. This statement was made on September 18, 1992, and the Government terminated the purchase orders on September 23, 1992.[foot #] 7 ----------- FOOTNOTE BEGINS --------- [foot #] 7 Moreover, there was no evidence of additional costs incurred by appellant after the expiration of the August 20 delivery date. The only invoices that Cosmechem produced were an invoice for boxes purchased in June of 1992, Appeal File, (continued...) ----------- FOOTNOTE ENDS ----------- Appellant also appears to allege that the Government had knowledge that a certain size aluminum particle had to be used in order to create a product that met specifications, that the Government had a duty to disclose this information, and that the Government's failure to disclose the information made performance of the contract impossible. See Transcript at 144-45, 159, 166, 171. We reject this contention. Here, the solicitation called for a commercial product. Clearly, the attributes of using various sizes of aluminum particles to make the compound were not within the exclusive knowledge of the Government. It is not the Government's fault that, contrary to solicitation requirements, Cosmechem had never manufactured this product prior to being awarded the contract. It is the duty of the contractor to determine the nature of the elements of performance prior to award. Prestex, Inc., ASBCA 21284, et al., 81-1 BCA 14,882, at 73,608. Moreover, a GSA chemist testified that "[d]uring the three years that I worked at GSA as the specification manager, I never received a single complaint about CID-A-A-1911. And, in fact, other contractors have met this specification." Miller Affidavit 6. The Government is simply not obligated to disclose every difficulty that it believes that the contractor may encounter during performance. Specialty Assembling & Packing Co. v. United States, 355 F.2d 554, 567 (Ct. Cl. 1966). If the special information that the Government possesses is equally available from other sources, the Government is not required to disclose it. Prestex, Inc., 81-1 BCA 14,882, at 73,607-08. In conclusion, appellant failed to deliver any product conforming to the specifications by the delivery date or the extended inspection date, appellant's failure was not excusable, and the Government did not waive timely delivery. Decision The appeal is DISMISSED IN PART FOR LACK OF JURISDICTION, and DENIED IN PART. Appellant's election of the small claims procedure is rescinded. ____________________________ MARY ELLEN COSTER WILLIAMS Board Judge We concur: ----------- FOOTNOTE BEGINS --------- [foot #] 7 (...continued) Exhibit 26, and two invoices for chemicals purchased in June and July of 1992, Id., Exhibits 26, 27. ___ ----------- FOOTNOTE ENDS ----------- ____________________________ ____________________________ ROBERT W. PARKER JAMES W. HENDLEY Board Judge Board Judge