ny ____________________________________________________ DENIED: May 19, 1994 ____________________________________________________ GSBCA 12512 BETAKUT USA INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. William R. Troy, Vice President of BETAKUT USA INC., Newark, CA, appearing for Appellant. David L. Frecker, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges HENDLEY, BORWICK, and NEILL. BORWICK, Board Judge. This is an appeal by BETAKUT USA INC. (Betakut), contesting the termination for default of an indefinite quantity contract for grass shears by a contracting officer of the General Services Administration (GSA). The contracting officer terminated the contract because of Betakut's anticipatory repudiation of the contract when it stated, and subsequently repeated, its unwillingness to supply, if need be, conforming grass shears beyond the estimated requirements stated in the contract. The contract, however, required Betakut to supply an amount equal to ten times the estimated peak monthly supply potential. The parties submitted their dispute on the record pursuant to Rule 11. We conclude that the reasons offered by Betakut do not excuse its anticipatory repudiation and deny the appeal. Findings of Fact 1. On March 13, 1992, GSA awarded to Betakut indefinite quantity contract GS-07F-51230 for grass shears of Type 1, Class 2 as defined by Federal Specification GGG-S-280F (Aug. 2, 1972). Appeal File, Exhibit 1 at 8 and Exhibit 4. The shears were to: "operate in an up and down action at right angles to the cutting plane of the blades." Id., Exhibit 4, 3.10 at 5.[foot #] 1 2. Items six through eight were distinguished by delivery destination and estimated quantity, as set forth in the following table: ITEM NO. DESTINATION ESTIMATED PEAK ESTIMATED MONTHLY REQUIREMENT 2-YEAR REQUIREMENT 6 Palmetto, GA (3) 252 648 7 Burlington, NJ (3) 216 540 8 Stockton, CA (5) 252 1,080 Appeal File, Exhibit 1 at 9. The number in parenthesis in front of the estimated peak monthly requirement is the expected number of orders to be placed during the contract period. Id., Exhibit 1 at 5. Betakut bid a unit price of $4.99 for all items. Id. at 8. 3. In their bids, offerors were requested to indicate their monthly supply potential, which was defined as "the total quantity per month which they are willing to provide." Appeal File, Exhibit 1, I-FSS-110(a) at 56. For its monthly supply potential for items six, seven, and eight, Betakut put in its bid: "more than 10 times monthly peak requirements." Id., I- FSS-110(b) at 56.[foot #] 2 The contract required Betakut to fill all orders for awarded items, received in any one month, that did not exceed its stated monthly supply potential. In this regard the contract provided: For each offered item or group of offered items awarded pursuant to this solicitation, the Contractor shall be obligated to fill all orders for the items awarded (regardless of destination) received during any one calendar month after the effective date of the contract if the aggregate total quantity of such orders does not exceed either: (1) his stated monthly supply potential, or, (2) if no monthly supply potential is stated, 125 percent of the estimated peak monthly requirement. Id., I-FSS-110(c) at 56. 4. The Default clause, FAR 52.249-8 (1984), incorporated into the contract by reference, provided in pertinent part: ----------- FOOTNOTE BEGINS --------- [foot #] 1 The shears were of the draw type, i.e. "the action shall be by bar or rod pulling or pushing the top blade across the stationary lower blade." Appeal File, Exhibit 4, 3.10 at 4. [foot #] 2 Betakut's monthly supply potential was thus at least 7,200 items (10 x 720). ----------- FOOTNOTE ENDS ----------- (a)(1) The Government may, subject to paragraphs (c) and (d) below, 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. . . . . . . . (2) The Government's right to terminate this contract under subdivision[] (1)(ii) . . . above, may be exercised if the Contractor does not cure such failure within 10 days . . . after receipt of the notice from the Contracting Officer specifying such failure. . . . . (g) If, after termination, it is determined that the Contractor was not in default, or that the default was excusable, the rights and obligations of the parties shall be the same as if the termination had been issued for the convenience of the Government. Appeal File, Exhibit 3, 52.249-8 at 22. 5. By facsimile on December 17, 1992, Betakut advised GSA that: We prepared for delivery the estimated quantity of 2268 pieces. To date, we have shipped 1980 pieces. We can ship the last 288 pieces as soon as orders are received. We are not prepared to ship any quantities above the original two year estimate. Appeal File, Exhibit 7. The contracting officer did not receive the facsimile at that time. Appeal File, Exhibit 8. 6. On February 10, 1993, GSA issued a purchase order for 324 Type 1, Class 2 grass shears to be delivered at GSA's Southeast Distribution Center, Palmetto, GA. In response, Betakut shipped 120 grass shears but refused to fill the order for the remaining 204. On the face of the return invoice of February 24, Betakut stated: PLEASE NOTE THAT THE BALANCE OF THIS ORDER IS CANCELED. WE HAVE SHIPPED THE FULL ESTIMATED QUANTITY ON [THE SOLICITATION]. NO ADDITIONAL SHEARS ARE AVAILABLE UNDER TERMS OF THIS CONTRACT Appeal File, Exhibit 7.[foot #] 3 7. On April 6, 1993, a GSA procurement specialist called Betakut's vice president to inquire whether Betakut would ship the remaining 204 shears in the purchase order. Betakut's vice president explained that Betakut had bid on the contract to reduce accumulated un-ordered inventory of shears manufactured under two previous requirements contracts; and that Betakut had already shipped the estimated requirements on this contract. Appeal File, Exhibit 6. The procurement specialist explained that: (1) the estimated requirements were estimates, (2) that in her view GSA could order more or less than the estimates, (3) that Betakut took a risk on bidding on a requirements contract rather than on a definite quantity contract, and (4) that GSA could terminate the contract for default and assess excess reprocurement costs if Betakut failed to fulfill the terms of the delivery order. Id. 8. On April 6, Betakut sent the contracting officer duplicate copies of Betakut's facsimile of December 17 and invoice unilaterally refusing to deliver the remaining 204 grass shears. Appeal File, Exhibit 7. In response, the contracting officer sent Betakut a show cause notice which stated in pertinent part: You advised our office that your firm bid on this contract to dispose of previously accumulated inventory. You further advised our office that your firm had no intention of delivering additional quantities under this order or this contract because your firm only had enough inventory for the quantity equal to the contract's estimated requirements. Id., Exhibit 8. The contracting officer advised Betakut that the above statements, coupled with Betakut's unilateral cancellation of further deliveries under the purchase order and the statements in Betakut's memorandum of December 17, constituted anticipatory repudiation. Id. The contracting officer requested a written response from Betakut regarding its intention to honor the terms and conditions of the contract. Id. 9. Betakut's vice president responded with a letter, complaining about GSA's under-ordering on two other requirements contracts for grass shears, one awarded in 1985, one awarded in 1988, and also complained that GSA had under-ordered barber shears in a contract awarded in 1988. Appeal File, Exhibit 9. The vice president complained that Betakut incurred costs for the grass shears it did deliver under the contract GS-07F-51230 as Betakut had to adjust the Rockwell hardness of its commercially ----------- FOOTNOTE BEGINS --------- [foot #] 3 The facsimile was sent to a Ms. Robbie Anderson, a GSA quality assurance specialist. Appeal File, Exhibits 7, 8. ----------- FOOTNOTE ENDS ----------- produced shears to meet government specifications. Id.[foot #] 4 Betakut's response discussed whether its facsimile of December 17 had been received by GSA. Finally, Betakut's vice president suggested that it be allowed to substitute its model 605, a Type 1 Class 1 grass shear, which Betakut's vice president described as "the most popular type." Id. The Type 1 Class 1 grass shear has a handgrip where "the plane of operation . . . is parallel to the cutting plane of the blades." Appeal File, Exhibit 4, 3.9.2.1 at 4. 10. On August 19, another GSA procurement specialist advised Betakut's vice president that GSA was reviewing Betakut's request for a deviation, but that all terms and conditions of the contract remain unless GSA decided to issue a modification. Appeal File, Exhibit 10. 11. On April 30, the contracting officer rejected Betakut's request for a deviation, stating that the "item you propose to furnish does not have the primary features described in the contract or in the supply catalog we furnish to our customer agencies." Appeal File, Exhibit 11. The contracting officer noted that Betakut's response to the show cause letter did not demonstrate that Betakut would perform in accordance with the contract's terms and conditions, and terminated the contract for default including two outstanding purchase orders. Id. Discussion The contracting officer terminated Betakut's contract for default because of Betakut's anticipatory repudiation of its contract. Findings 8, 11. To establish anticipatory repudiation, the words or conduct of the contractor must: (1) manifest a positive, unconditional and unequivocal declaration of fixed purpose, (2) not to perform the contract, (3) in any event at any time. Stanley Jewell, GSBCA 10348, 90-3 BCA 23,283, at 116,761. Betakut told GSA in December of 1992 and February of 1993: "We are not prepared to ship any quantities above the original two year estimate" and "no additional shears are available under terms of this contract". Findings 5, 6. These are unequivocal statements, and Betakut's resolute position was confirmed by its response to the contracting officer's show cause letter; it continued its refusal to deliver the required number of Type 1, Class 2 shears, but suggested the deviation. Finding 9. ----------- FOOTNOTE BEGINS --------- [foot #] 4 GSA's Rockwell hardness specifications were geared to steel blades with a carbon content of .30. According to Betakut's vice president, Betakut's blades had a carbon content of .70, i.e. a better quality steel, thus requiring less Rockwell hardness. GSA refused to allow a deviation in the specifications for Rockwell hardness. Appeal File, Exhibit 9. ----------- FOOTNOTE ENDS ----------- Betakut was wrong when it maintained that "no additional shears were available under the terms of the contract." The contract required Betakut to honor all orders within its monthly supply potential, which Betakut had itself established as "more than 10 times monthly peak requirements." Finding 3. Betakut was obligated to fill orders up to 7,200 shears per month, in accordance with the terms of the contract. GSA has the right to demand strict compliance with contract requirements. Custom Production Manufacturing Inc. v. General Services Administration, GSBCA 10393, 92-1 BCA 24,688, at 123,152. Appellant maintains that the contracting officer was "remiss in his duties by advising it five months late that additional quantities would be required," thus there was not the "required four months to remanufacture additional shears." Letter from Appellant to the Board (July 28, 1993). The contract established the general requirement, i.e. to deliver grass shears as long as the amount was within Betakut's monthly supply potential; the purchase order established the particular requirement, to deliver three hundred and twenty-four grass shears to Palmetto, Georgia. Betakut's unilateral decision to deliver only up to the estimated requirements does not change its contractual obligation. While the contracting officer's delay in responding to Betakut was unfortunate, it does not alter Betakut's contractual obligation. Betakut's practice of remanufacturing existing grass shears to meet the Government's hardness requirements does not change Betakut's contractual obligations. GSA did not contract for a manufacturing process; it contracted for timely delivery of quantities of the specified grass shears. Betakut's decision to remanufacture grass shears to meet the Government's hardness requirement is a matter of its own business judgment, for which it must bear the consequences. See New England Ordnance Inc., ASBCA 40459, 92-2 BCA 24,977 at 124,495 (use by contractor of custom-built and malfunctioning welding machine is exercise of business judgment which does not excuse contractor's failure to timely deliver goods). Betakut maintains that "[i]t was a series of errors by GSA in estimating the quantities on three different contracts that originated this situation. On the original GSA estimate [presumably the estimate for the 1985 contract] it was only 42% correct." Letter from Appellant to the Board (July 28, 1993). Voluntary business decisions affecting production or timely delivery are not excusable causes of default. Hardware & Industrial Tool Co., GSBCA 5354, 81-2 BCA 15,382, at 76,209. The Government did not force Betakut to adopt its strategy for administration of this contract. Betakut confuses its motive with GSA's actions. Here, Betakut gambled that it would obtain only those orders sufficient to exhaust its existing inventory of grass shears, without Betakut having to produce more. Finding 9; note 4. As this was Betakut's decision, it must live with the consequences. Betakut argues that its request for a deviation should have been granted, first because of GSA's alleged errors on past contracts and second because the grass shears with handles operating parallel to the plane of the blades are the most popular type. If Betakut was unhappy with the number of orders on past contracts, that was, and is, a matter for those contracts; unsatisfied grievances against the Government on past contracts cannot excuse Betakut's default on this one. Betakut, moreover, was required to deliver grass shears conforming to the design specifications in the contract, Finding 1; Note 1, regardless of whether its vice president thought that the product Betakut proposed to substitute was superior. Sunsav, Inc., GSBCA 7523-COM, et al., 86-3 BCA 19,290, at 97,547. Decision The decision of the contracting officer is sustained and the appeal is DENIED. _________________________ ANTHONY S. BORWICK Board Judge We concur: _________________________ _________________________ JAMES W. HENDLEY EDWIN B. NEILL Board Judge Board Judge