_____________________________ GRANTED: September 14, 1994 _____________________________ GSBCA 12371 UNLIMITED SUPPLY COMPANY, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Henry W. Arrington, II, President of Unlimited Supply Company, Inc., Macon, GA, appearing for Appellant. David L. Frecker, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman), NEILL, and WILLIAMS. WILLIAMS, Board Judge. In this appeal filed on April 12, 1993, Unlimited Supply Company, Inc. (Unlimited Supply) challenges the termination for default of a purchase order for the supply of mixing bowls. Respondent, the General Services Administration (GSA), based the termination on appellant's alleged failure to deliver in timely fashion mixing bowls that held the requisite capacity. Appellant, which is proceeding pro se, contends that the delivered bowls conformed to the specifications, and that GSA had previously accepted the same size bowls in response to identical specifications. Appellant requests that the termination for default be converted to one for convenience. The parties have presented their cases on the record without a hearing. We conclude that respondent has not met its burden of proving that the termination for default was justified. Respondent could not terminate the contract for failure to meet the original delivery date, after respondent extended that delivery date. Further, appellant had supplied to GSA bowls made from the same mold in response to identical specifications under 2 numerous prior purchase orders, and those bowls were never rejected as nonconforming; this prior course of dealing prevents respondent from exacting strict compliance with the specifications without prior notice. Findings of Fact On December 7, 1992, respondent issued request for quotations number XD925 for 360 sets of stainless steel food mixing bowls, National Stock Number (NSN) 7330-00-685-5013. Appeal File, Exhibits 1, 2. The Commercial Item Description (CID), A-A-1079A, identified three bowls per set consisting of one each of sizes "A" (3/4 quart), "B" (1-1/2 quarts), and "D" (4 quarts). Appeal File, Exhibit 3. The CID permitted a capacity tolerance of ten percent above the respective required capacities, but no deviation below. Id. The Quality Assurance Provisions of the CID stated, in pertinent part: 4.1 Responsibility for inspection. Unless otherwise specified in the contract or purchase order, the contractor is responsible for the performance of all inspection requirements as specified herein. Except as otherwise specified in the contract or order, the contractor may use his own or any other facilities suitable for the performance of the inspection requirements specified herein, unless disapproved by the Government. The Government reserves the right to perform any of the inspections set forth in the specification where such inspections are deemed necessary to assure that supplies and services conform to prescribed requirements. . . . . 4.4 Sampling for visual and dimensional examination. A random sample of mixing bowls shall be selected from each lot in accordance with inspection level S-4, AQL (acceptable quality level) 4.0 expressed in terms of defects per hundred units. The sample unit shall be one mixing bowl. The sample mixing bowls shall be visually and dimensionally examined to verify compliance with table II and the remainder of this commercial item description.[[foot #] 1] All dimensions are absolute as defined in ASTM E 29. Id. ----------- FOOTNOTE BEGINS --------- [foot #] 1 Table II, a classification of defects, listed various types of defects, including "Any dimension not as specified." Appeal File, Exhibit 3. ----------- FOOTNOTE ENDS ----------- 3 On December 8, 1992, appellant quoted a unit price of $9.77 per set, and a total price of $3,517.20 for the 360 sets. On December 16, 1992, respondent awarded purchase order number S-W-XD925-5F to appellant for delivery by January 25, 1993, of 360 bowl sets at the quoted price. Appeal File, Exhibit 3. The purchase order incorporated the Default clause in 48 CFR 52.249-8 (1984), which provides: (a)(1) The Government may, . . . by written notice of default to the Contractor, 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; (ii) Make progress, so as to endanger performance of this contract (but see subparagraph (a)(2) below); or (iii) Perform any of the other provisions of this contract (but see subparagraph (a)(2) below). (2) The Government's right to terminate this contract under subdivisions (1)(ii) and (1)(iii) above, may be exercised if the Contractor does not cure such failure within 10 days (or more if authorized in writing by the Contracting Officer) after receipt of the notice from the Contracting Officer specifying the failure. Id. Prior Purchase Orders Between January 22, 1992, and February 9, 1993, appellant had supplied GSA with identical bowl sets under nineteen separate purchase orders. Letter to the Board from Appellant dated October 5, 1993, and attachments. These purchase orders sought the same size bowls and contained the identical NSN as that at issue here. Id. The bowl sets supplied under these purchase orders were all delivered to GSA distribution centers as follows: Date Order # Delivery Location Quantity Due Date 11/13/91 N-W-X3005-1 Burlington, NJ 120 01/22/92 11/14/91 S-W-X3046-2 Stockton, CA 126 01/23/92 11/14/91 A-W-X3046-1 Palmetto, GA 108 01/23/92 11/15/91 FXDS285471F Carteret, NJ 48 01/24/92 12/03/91 A-W-X4113-1 Palmetto, GA 102 02/11/92 01/30/92 N-W-X5394-2 Burlington, NJ 132 04/09/92 01/30/92 F-W-X5394-1 Ft. Worth, TX 84 04/09/92 02/14/92 S-W-X6710-2 Stockton, CA 84 04/24/92 4 02/14/92 A-W-X6710-1 Palmetto, GA 114 04/24/92 03/12/92 F-W-X6745-1 Ft. Worth, TX 78 05/21/92 04/30/92 F-W-X8473-1 Ft. Worth, TX 96 07/09/92 04/30/92 S-W-X8473-2 Stockton, CA 144 07/09/92 08/06/92 S-W-XC281-1 Stockton, CA 96 10/15/92 09/28/92 A-W-XD925-1 Palmetto, GA 240 11/07/92 09/28/92 N-W-XD925-3 Burlington, NJ 222 11/07/92 09/30/92 S-W-XD925-4 Stockton, CA 360 11/09/92 10/29/92 F-W-XD925-2F Ft. Worth, TX 132 11/20/92 12/18/92 A-W-XJ804-1F Palmetto, GA 120 01/27/93 12/31/92 A-W-XJ885-1F Palmetto, GA 108 02/09/93 Id. Appellant purchased all of these bowl sets and the bowl sets at issue from the same manufacturer; all bowl sets were made from the same mold. Letter to Board from Appellant dated June 15, 1993. GSA never rejected any of the bowls that appellant delivered in response to these purchase orders. Letter to Board from Appellant dated October 5, 1993. Under these orders, respondent accepted, inspected, and paid in full for the same size bowls rejected by respondent in this case. Id.[foot #] 2 On May 5, 1993, the contracting officer telephoned the Quality Assurance Specialist (QAS) at Palmetto, Georgia, to inquire about bowl sets with the same NSN that had been delivered by appellant to GSA under two prior purchase orders, AWXJ804-1F and AWXJ885-1F.[foot #] 3 Declaration of Administrative Contracting Officer (ACO) Richard Percoskie (Percoskie Declaration) (Sept. 29, 1993), and Attachments. The contracting officer wanted to verify whether the bowls submitted under those prior orders conformed to the requirements of the orders. Id. The QAS reported that the bowls did not meet the specifications, stating: "Size A Bowl should be 3/4 quart capacity, instead found 2 cup capacity. Size B should hold 1-1/2 quart capacity, instead found 1 quart capacity, size D should hold 4 quart capacity, instead found 3 quart capacity." Id. ----------- FOOTNOTE BEGINS --------- [foot #] 2 The Board granted respondent's request to submit evidence showing that it rejected appellant's bowls under previous contracts. Board's Order of September 23, 1993. However, respondent has submitted no such evidence. [foot #] 3 Purchase orders AWXJ804-1F and AWXJ885-1F involve bowls with the same NSN as the bowl sets at issue in this case. Attachments to Percoskie Declaration. Additionally, the purchase orders that were submitted by appellant showing prior orders (see above table) include order numbers AWXJ804-1F and AWXJ885-1F. Attachments to Letter to the Board from Appellant dated October 5, 1993. ----------- FOOTNOTE ENDS ----------- 5 However, respondent determined that "contractor liability does not exist for the nonconforming supplies" since they had been accepted by the Government after undergoing destination inspection." Id., Attachment at 1.[foot #] 4 There is no evidence to suggest that respondent advised appellant that the bowl sets delivered under these two prior purchase orders were nonconforming. Delivery Under the Current Purchase Order Appellant conducted its own inspection of the bowls to be supplied under this purchase order in January 1993; appellant performed a visual inspection and a dimensional inspection measuring capacity. Letter to the Board from Appellant dated October 5, 1993; Conference Memorandum dated September 16, 1993, at 2. Appellant's inspection report states that each size bowl, A, B, and D, held 100% of the capacity specified in the CID, A-A- 1079A. Id.[foot #] 5 Appellant delivered 324 of the 360 bowl sets to respondent on January 15, 1993. Appeal File, Exhibits 5, 6. On February 18, 1993, the contracting officer signed a modification that extended the delivery due date to March 9, 1993, for the remaining bowl sets. Appeal File, Exhibit 6.[foot #] 6 The modification included a provision stating that "[t]he Government agrees to accept the contractor's offer of $243.79 (includes $150 administrative fee) for extending the delivery due dates of the above orders." Id. On February 19, 1993, a GSA student-intern supervised by a QAS performed an inspection on a sample from the 324 bowl sets delivered by appellant under purchase order SW-XD925-5. ----------- FOOTNOTE BEGINS --------- [foot #] 4 When the bowls under those prior purchase orders were originally received in Palmetto, Georgia, the examination and acceptance was performed by receiving personnel instead of by a trained QAS because the value of the orders was less than $2,500. These actions were in accordance with a GSA Quality Assurance Handbook, FSS-P-2901.5. Percoskie Declaration, Attachments. [foot #] 5 The president of Unlimited Supply "personally measured these bowls with a measuring cup and found both bowls to hold the exact quantities specified. Even though they were both filled to the rim they did not overflow." Appeal File, Exhibit 15. [foot #] 6 According to appellant, Unlimited Supply was having difficulty in receiving an order from the manufacturer; therefore, a partial shipment was made, and Unlimited Supply requested a delivery extension. ----------- FOOTNOTE ENDS ----------- 6 Declaration of Quality Assurance Specialist Rebecca Garcia (Garcia Declaration) (Aug. 27, 1993) 2. The inspection consisted of a capacity test using a sixteen-ounce, calibrated, "Fire King" brand measuring cup. Id. 4. The student intern and the QAS selected at random for inspection eight bowls of each size. Id. 3. According to the QAS "[t]he accept/reject level for this sampling method is to accept on one defect and reject upon finding a second defect." Id. The inspection was halted once defects were discovered in each of the first two samples of bowl sizes "B" and "D."[foot #] 7 Id. 5. According to the QAS' inspection report, the size B bowls were 1/3 cup short (5-2/3 cup capacity rather than 6) and the size D bowls were 2 cups short (14 cup capacity rather than 16). Appeal File, Exhibits 8, 9. The show cause letter also described size B bowls as 1/3 cup short. However, in her declaration filed in connection with this appeal, the QAS testified that size B was 2/3 cup short. Garcia Declaration 5. There is no explanation in the record for this discrepancy. The QAS rejected the entire 324-set shipment. Id.; Appeal File, Exhibit 7. On March 1, 1993, the GSA Administrative Contracting Officer issued a show cause letter notifying appellant of the inspection results and subsequent rejection of the shipment. Appeal File, Exhibit 9. Specifically, the show cause letter stated: [a] partial shipment of 324 SE of the supplies required under the above order was rejected at destination for the discrepancies listed below. Required Found In accordance with Commercial Item Description A-A-1079A Class 2 Size B: - 1-1/2 quart 1/3 cup short of 1-1/2 capacity quart capacity. Class 2 Size D: - 4 quart 2 cups short of 4 capacity quart capacity Unlimited Supply Company, Inc., has failed to perform the contractual obligation for timely delivery by reason of the rejection as well as not delivering the full order requirement and consideration is therefore being given to terminating your right to proceed.... ----------- FOOTNOTE BEGINS --------- [foot #] 7 According to the QAS, grounds for lot rejection exist with two defects; however, she personally performed tests on a third sample for supervisory and quality control purposes. Garcia Declaration 6. Her test results concurred with those of the student-intern. Id. ___ ----------- FOOTNOTE ENDS ----------- 7 Id. Appellant responded on March 10, 1993, stating that "[w]e have double checked our quality assurance procedures and feel certain that these bowls are the correct size; however, we are instructing ABF Freight Systems to pick up this shipment and return it to our warehouse . . . we will again do an inspection. . . [we] request your assistance in allowing us the opportunity to respond after completion of the inspection process." Appeal File, Exhibit 10. On March 18, 1993, the 324 sets of bowls were returned to appellant. Id., Exhibits 11, 12. On March 31, 1993, without further communication with appellant, the contracting officer terminated the purchase order for default, stating that appellant failed to deliver conforming supplies in accordance with the terms of the order. Appeal File, Exhibit 13.[foot #] 8 The contracting officer stated that appellant's reply to the show cause notice was unacceptable because appellant offered no explanation for the failure to perform. Id. By letter dated April 6, 1993, appellant's president advised the administrative contracting officer that he had personally measured these bowls with a measuring cup and found both bowls, size B and size D, to hold the exact quantities specified. Appeal File, Exhibit 15. Appellant filed its Notice of Appeal with this Board on April 12, 1993. On September 3, 1993, appellant submitted a declaration to the Board that stated: Unlimited Supply Company feels . . . that we furnished the correct materials for this purchase order. These bowls are made for commercial practice and are spun on a machine which uses a standard mold. Since they are not touched by human hands there is no way each bowl could be a different size. Declaration of the President of Unlimited Supply, Henry W. Arrington, II (Arrington Declaration) (Sept. 3, 1993). Discussion GSA contends that the termination for default was justified because Unlimited Supply failed to deliver conforming bowls in accordance with the terms of the purchase order in timely ----------- FOOTNOTE BEGINS --------- [foot #] 8 Nothing in the record indicates that there was any correspondence between the parties during the period of time between appellant's response to the show cause letter and the termination for default. ----------- FOOTNOTE ENDS ----------- 8 fashion. It is well established that a default termination is a drastic sanction "which should be imposed (or sustained) only for good grounds and on solid evidence." J.D. Hedin Construction Co. v. United States, 408 F.2d 424, 431 (Ct. Cl. 1969)(citing Schlesinger v. United States, 390 F.2d 702, 709 (Ct. Cl. 1968). It is the Government's burden to prove, by a preponderance of the evidence, that the termination for default was proper. Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed Cir. 1987). We find that GSA has failed to meet this burden. Respondent first claims that because appellant failed to deliver conforming products by January 25, 1993, and thus failed to meet the delivery schedule, the default termination is justified. Respondent's Record Submission at 2-3. Respondent contends that the January 25, 1993, delivery date was never extended to March 9, 1993, because appellant failed to execute the contract modification form. Id. at 2. We reject this argument since respondent itself executed the extension form and proceeded to test the bowls some three weeks after the original delivery date. Thus, respondent waived delivery by the original due date. Respondent further contends that appellant failed to produce goods conforming to the specifications even by the extended delivery date, March 9, 1993. Respondent's Record Submission at 3. Although respondent has submitted a test report indicating that the size B and size D bowls did not meet the capacity requirements, the persons who performed these tests were not called to testify before the Board. This is problematic since there is an internal inconsistency in respondent's own evidence - - the QAS' declaration states that the size B bowls rejected here were 2/3 cup short while the test report and the show cause letter state that these size B bowls were 1/3 cup short. There were also discrepancies between the results of the capacity tests performed by the Government in Palmetto, Georgia, and those at issue here. According to the administrative contracting officer, the size A bowls delivered to Palmetto, Georgia, under two prior purchase orders failed to meet the capacity requirements in that they were 2 cup capacity instead of 3/4 quart, while the size A bowls supplied under the purchase order at issue here met the capacity requirements. Compare Percoskie Declaration, Attachments, with Appeal File, Exhibit 8. The size B bowls measured at Palmetto were found to be 1/2 quart or 2 cups short, whereas the size B bowls rejected here were found to be just 1/3 cup short. Id. The size D bowls measured at Palmetto were found to be 4 cups short, whereas the size D bowls rejected here were found to be only 2 cups short. Id. Moreover, appellant has submitted its own test report showing the bowls met the capacity requirements and has asserted that all the bowls were made from the same molds, thus raising a question in our minds as to whether the bowls met the capacity 9 requirements or not. In short, respondent, which has the burden of proof, failed to adduce sufficient probative evidence to persuade us that the bowls did not meet the capacity requirements. Praoil, S.r.L., ASBCA 41499, et al., 94-2 BCA 26,840 (where there is proof of differing test results and no additional evidence is presented, the issue of conformity with specification must be decided against the party having the burden of proof); Air-O-Plastik Corp., GSBCA 4802, et al., 81-2 BCA 15,338 (the appellant may rebut the presumption in favor of Government test reports by putting in its own evidence to show that the goods passed tests conducted by the appellant). While this failure of proof compels us to overturn the termination for default, there is an additional basis for such decision. Appellant has established by a preponderance of the evidence that under some nineteen purchase orders respondent had accepted identical bowls in response to identical specifications prior to the issuance of the show cause order. Appellant made its price quotation in reliance on these acceptances; it expected that identical bowls would again be considered by GSA to meet the specifications. Thus, even if the bowls did not meet the measurements required by the specifications, respondent cannot exact precise conformance with those specifications due to its prior course of dealing. As we recognized in General Security Services Corp. v. General Services Administration, GSBCA 11381, 92-2 BCA 24,897, at 124,169-70, "a contract requirement for the benefit of a party becomes dead if that party knowingly fails to exact its performance, over such an extended period, that the other side reasonably believes the requirement to be dead." In Paul A. James, PSBCA 283 (Apr. 12, 1977), aff'd, James v. United States Postal Service, Civil No. 77/86 (D. V. I. Aug. 31, 1979), the Postal Service Board invalidated a default termination which was based upon appellant's use of a smaller mail delivery vehicle than the contract required; appellant had been providing a smaller vehicle under predecessor contracts for over ten years. The Postal Board reasoned: "We conclude that the long standing course of conduct of the parties precluded termination for failure to provide a vehicle with 475 cubic foot capacity in the absence of a clear showing that the vehicle in use, . . . was unable to carry the amount of mail normally available for delivery. . . . In such circumstances, the default termination is legally deemed . . . to be a termination for convenience." Paul A. James, slip op. at 7. Appellant has established that GSA has on numerous occasions accepted bowls made from the same mold in response to the specifications at issue. The Government did not proffer any evidence suggesting that the bowls were not fit for their intended use. Nor did the agency advise appellant that it was going to demand strict compliance with the size requirements. We hold that given appellant's reliance on the agency's prior actions, the Government may not terminate the contract for 10 default for an alleged failure to meet specifications it may have previously relaxed without advising appellant that it was now going to demand a supposedly different degree of compliance with those requirements. ITRA Coop Association, GSBCA 7974, 90-1 BCA 22,410 (because an informal "accommodation" or side agreement was reached between appellant and the agency decreasing the time a technician was required to be available, a course of dealing was established, and the Government was not free to terminate the contract for default for the contractor's less frequent availability). Here, the agency did not advise appellant that contrary to its prior course of dealing, it would exact a different degree of compliance with the size requirements. As such, the agency cannot rely on appellant's alleged failure to provide bowls of the exact dimensions specified as a basis for terminating the purchase order for default. Decision The appeal is GRANTED. The termination for default of appellant's purchase order is converted to a termination for convenience. ____________________________ MARY ELLEN COSTER WILLIAMS Board Judge We concur: _____________________ _______________________ STEPHEN M. DANIELS EDWIN B. NEILL Board Judge Board Judge