DENIED: August 20, 1996 GSBCA 13165, 13166 PRO/DES, INC., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Albert B. Cook, CEO of PRO/DES, Inc., Vernon, CT, appearing for Appellant. John E. Cornell and Michael D. Tully, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges HYATT, VERGILIO, and GOODMAN. GOODMAN, Board Judge. Appellant, Pro/Des, Inc. (Pro/Des), entered into contract number GS-20-F-40235 (the contract) with respondent, the General Services Administration (GSA), to supply caulking guns. In these consolidated appeals, appellant challenges the GSA contracting officer's decisions to terminate for default various purchase orders and the requirement to supply goods conforming with a national stock number (NSN) under the contract.1 A hearing on ____________________ 1 Appellant's complaint challenged the decisions to default terminate, demanded damages in the amount of $150,000, and alleged tortious conduct. In Pro/Des, Inc. v. General Services __________________________________ Administration, GSBCA 13165, et al., 95-2 BCA 27,659, this ______________ ______ Board granted respondent's motion to dismiss counts I, III, IV, and V of appellant's complaint, as these counts sounded in tort, and dismissed sua sponte count II of the complaint to the extent ___ ______ that the count supported a claim for monetary damages, as appellant had not submitted a claim for monetary relief to the contracting officer as required by the Contract Disputes Act of 1978 (CDA). the merits was held in Boston, Massachusetts, on May 14, 1996. We deny the consolidated appeals. Findings of Fact The Contract 1. On May 23, 1994, GSA awarded the contract to Pro/Des. Pursuant to the contract, appellant was awarded contract items 1 and 2, caulking guns, NSNs 5120-00-293-3208 (3208) and 5120-00- 679-5655 (5655), for an indefinite quantity. Appeal File, Exhibit 2. 2. The NSN 3208 caulking gun is a Type I, Style 2 caulking gun. The NSN 5655 caulking gun is a Type III caulking gun. Both conform with federal specification GGG-C-120B, dated August 22, 1988. Appeal File, Exhibit 2, Standard Form 33 at 2-3 (GSA Form 7921). 3. Federal specification GGG-C-120B reads, in relevant part: 3.9 Workmanship Caulking guns furnished under this specification shall be free from rust, burrs and sharp edges. . . . . 4.3.1. Visual Inspection The sample guns selected in accordance with 4.2.2 shall be visually examined for the defects listed in table II. . . . If the number of defective guns in the lot sample exceeds the number allowed by [Military Standard] MIL-STD-105,[2] the lot represented by the samples shall be rejected. Table II- Defects . . . . Gun not properly assembled. . . . . Gun not free of burrs and sharp edges. ____________________ 2 During contract performance, GSA quality assurance personnel selected inspection samples, and determined acceptance levels of goods, in accordance with the standards set forth in Military Standard 105. Transcript at 141, 148-49. Appeal File, Exhibit 4 at 4-6. 4. The contract also contains the following: Workmanship: Details of workmanship shall be in accordance with the best commercial standards . . . . Fasteners shall be firmly secured and show no evidence of deformation, cross threading, or hazardous burrs . . . . There shall be no interference, binding or galling of parts. External and bearing surfaces shall be free of tool and gouge marks, nicks, or other surface imperfections. The item shall be clean and free of corrosion and debris (e.g., chips, shavings, slivers) or other foreign material. The item shall be free from manufacturing defects (e.g., loose, missing, binding or misaligned parts, sharp or rough external edges, corners or surfaces) and material workmanship defects (e.g., pits, rips, fins, burrs . . . ) which may adversely impact the item's serviceability, durability, safety, or appearance. Appeal File, Exhibit 2, Standard Form 33 at 2 (GSA Form 7921). 5. The contract required delivery to be made at destination within ninety calendar days after receipt of order. Appeal File, Exhibit 2, Standard Form 33 at 26. 6. The contract contains clause 552.246-70 (DEC 1990), "Source Inspection by Quality Approved Manufacturer." Appeal File, Exhibit 1, Standard Form 33 at 23-25. 7. The contract also contains clause F-FSS-285 (APR 1984), entitled "Waiver of Delivery Schedule," which reads as follows: (a) None of the following shall be regarded as an extension, waiver, or abandonment of the delivery schedule or a waiver of the Government's right to terminate for default: (i) delay by the Government in terminating for default; (ii) acceptance of delinquent deliveries; and (iii) acceptance or approval of samples submitted either after default in delivery or in insufficient time for the Contractor to meet the delivery schedule. (b) Any assistance rendered to the Contractor on this contract or acceptance by the Government of delinquent goods or services hereunder, will be solely for the purpose of mitigating damages, and is not to be construed as an intention on the part of the Government to condone any delinquency, or as a waiver of any rights the Government may have under subject contract. Appeal File, Exhibit 2, Standard Form 33 at 27. 8. A clause entitled "52.249-8, Default (Fixed-Price Supply and Service) (APR 1984)," is incorporated by reference3 and reads, in pertinent part: (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 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. 48 CFR 52.249-8 (1995); GSA Form 3507 (Rev. 10/91) at 22. First Article Testing 9. On June 20, 1994, Pro/Des advised GSA that the first article samples for NSNs 3208 and 5655 were ready for inspection and/or testing. Appeal File, Exhibit 82; Transcript at 10. 10. On June 29, 1994, GSA's quality assurance specialist (QAS) performed first article testing and inspection of appellant's samples for both NSNs and approved both first article samples. Appeal File, Exhibit 6; Transcript at 11. 11. By letter dated July 8, 1994, Pro/Des was notified of GSA's acceptance of the first article samples for both NSNs manufactured by Kenmar. Appeal File, Exhibit 7; Transcript at 12. ____________________ 3 Contract clause A-FSS-23 (NOV 1992), entitled "GSA Form 3507, Supply Contract Clauses," incorporates the October 1991 edition of GSA Form 3507, Supply Contract Clauses, into the contract by reference. Appeal File, Exhibit 2, Standard Form 33 at 20. Issuance of Purchase Orders 12. On or before July 28, 1994, GSA issued the following purchase orders for NSN 5655. Number Quantity AWK6263-1 1,290 FWK6263-2 186 AWK4399-1 2,652 Appeal File, Exhibit 92 at 6. Second First Article Testing 13. By letter dated August 24, 1994, appellant requested to have an additional first article test conducted by GSA for another NSN 5655 caulking gun. Appellant offered to provide GSA with a NSN 5655 caulking gun manufactured by Viking, a change of manufacturer from that previously inspected and approved by GSA. Appeal File, Exhibit 9; Transcript at 14-15. 14. On September 2, 1994, the QAS inspected and rejected the "Viking" NSN 5655 caulking gun tendered for the second "first article test." Appeal File, Exhibit 12; Transcript at 15-16, 99- 101. GSA notified Pro/Des of the rejection by letter dated September 6, 1994. Appeal File, Exhibit 13; Transcript at 16-17. By letter dated September 7, 1994, Pro/Des acknowledged receipt of GSA's September 6, 1994 letter and advised GSA that it would be providing GSA the previously-approved "Kenmar" NSN 5655 caulking gun. Appeal File, Exhibit 14. 15. On October 12, 1994, appellant notified the QAS that it wanted to ship a caulking gun for NSN 5655 other than the "Kenmar" caulking gun previously inspected and approved by GSA on June 29, 1994. Appeal File, Exhibit 15. 16. The first article sample caulking gun for NSN 5655 approved by the QAS was silver in color and had a zinc plating finish as a rust preventative on the barrel. Appeal File, Exhibits 17, 72 at 5, 87 at 1, Exhibit 100. 17. By letter dated October 17, 1994, Pro/Des requested permission to ship GSA caulking guns for NSN 5655 manufactured by Pro/Des which differed from the first article sample previously approved by the QAS. The letter stated that the caulking guns have either a zinc blue chromate plating or a black powder coat finish on the caulking gun barrels for rust prevention, and requested permission to furnish GSA either of the two Pro/Des NSN 5655 caulking guns (i.e., the zinc blue chromate plated or a black powder coat finish) for orders placed under the contract. Appeal File, Exhibit 16; Transcript at 150-53. 18. By letter dated October 18, 1994, the GSA administrative contracting officer (ACO) advised appellant that GSA had already inspected and approved a first article sample for NSN 5655 caulking guns. The letter also stated that GSA inspected and disapproved a second "first article" test, which was for a different sample of NSN 5655 caulking guns Pro/Des wished to supply GSA, and further stated that GSA would conduct a third "first article" test for NSN 5655 caulking guns manufactured by Pro/Des, but that GSA was only willing to allow one approved item to be delivered during the course of the contract. Appeal File, Exhibit 17; Transcript at 153. 19. Pro/Des did not request to have a third "first article" test or inspection performed for other NSN 5655 caulking guns and GSA did not conduct a third "first article" test. Transcript at 21. Request for Extension of Delivery Dates 20. On October 27, 1994, appellant requested GSA to extend the delivery dates for purchase orders AWK6263-1 and FWK6263-2 to November 15, 1994, and also requested GSA to extend the delivery date for purchase order AWK4399-1 to November 28, 1994. Appeal File, Exhibit 18; Transcript at 21-23. As consideration for extending the delivery dates for these purchase orders, appellant offered GSA a total of $545.20. Appeal File, Exhibit 18. 21. On October 28, 1994, by contract modification AS01, GSA accepted appellant's offer of consideration and granted Pro/Des' request to extend the delivery dates for the purchase orders. The modification states in part as follows: Purchase orders not delivered by the revised delivery date may result in Termination for Default . . . . Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. Appeal File, Exhibit 19. Rejection of Purchase Order FWK6263-2 22. On October 31, 1994, appellant notified GSA's QAS that Pro/Des' quality control manual and the first purchase order production were ready for inspection. Appeal File, Exhibit 20. 23. On November 4, 1994, the QAS inspected and rejected purchase order FWK6263-2 at appellant's facility. The reasons for the rejection of this purchase order included a lack of container markings and bar code labels, lack of testing and/or inspection documents for the goods produced, and a failure to comply with the requirements of federal standard 368A. Appeal File, Exhibit 21; Transcript at 24-27, 102-03. 24. On or about November 7, 1994, GSA's QAS issued a quality deficiency notice (QDN) notifying appellant of the deficiencies found with purchase order FWK6263-2. The QDN also stated that Pro/Des was required to furnish a written response to the QAS of the corrective action taken within five work days of receipt of the notice. Appeal File, Exhibit 21; Transcript at 104-08. 25. On November 8, 1994, the ACO requested a status report from Pro/Des on the delivery status of purchase order FWK6263-2. Appeal File, Exhibit 22. Correction, Approval, and Shipment of Purchase Order FWK6263-2 26. On November 9, 1994, appellant furnished to the QAS and the ACO its response to the QDN concerning purchase order FWK6263-2. Appellant's response stated that Pro/Des was forwarding a copy of its quality control manual to the QAS for review, that all shipping containers were properly labeled, that bar code labels were on the containers, and that the certificate of compliance and test reports for the goods were completed. Appeal File, Exhibit 23. 27. On November 15, 1994, the QAS approved appellant's corrective action taken in response to the QDN and authorized the goods produced for purchase order FWK6263-2 to be released for shipment. Appeal File, Exhibit 24; Transcript at 26-28, 104-07. On November 15, 1994, appellant shipped the caulking guns ordered pursuant to purchase order FWK6263-2. Termination of Purchase Order AWK6263-1 28. As of November 15, 1994, according to the QAS, appellant did not have the goods pursuant to purchase order AWK6263-1 ready for inspection or shipment, did not ship the goods pursuant to the purchase order, and never presented any other caulking guns to the GSA QAS for inspection pursuant to purchase order AWK6263-1. Appeal File, Exhibits 25, 27; Transcript at 28-30, 107-08, 153-54. 29. On November 15, 1994, the ACO requested and received the procuring contracting officer's (PCO s) concurrence to terminate purchase order AWK6263-1 for default. Appeal File, Exhibit 25; Transcript at 30-31. 30. As of November 21, 1994, appellant had not shipped the goods pursuant to purchase order AWK6263-1. On that date, the contracting officer issued a decision terminating purchase order AWK6263-1 for default for failure to deliver by the extended delivery date of November 15, 1994. Appeal File, Exhibit 26; Transcript at 30-31. Termination of Purchase Order AWK4399-1 and NSN 5655 31. On November 22, 1994, Pro/Des personnel informed the QAS that it did not have any additional caulking guns ready for inspection on that day, but that purchase order AWK4399-1 would be ready to be shipped by November 29, 1994. Appeal File, Exhibit 27. 32. On November 22, 1994, Pro/Des sent the ACO written notification that purchase order AWK4399-1 was ready to be shipped on November 26, 1994. Appeal File, Exhibit 28. 33. On November 28, 1994, the QAS inspected and rejected purchase order AWK4399-1 at appellant's facility. The reasons for the rejection of this purchase order concerned workmanship deficiencies with the tendered goods, and a failure of Pro/Des' quality control system to detect the defects. Appeal File, Exhibit 29; Transcript at 101-20, 142-43. 34. On November 28, 1994, the Pro/Des contract administrator and the QAS could not agree on whether the caulking guns rejected by the QAS contained defects; however, the two did agree that it would be beneficial for other GSA personnel to view the rejected materials. Consequently, the QAS took the twelve rejected NSN 5655 caulking gun samples from purchase order AWK4399-1 and one first article sample, Appeal File, Exhibits 100-12 (thirteen caulking gun samples) to GSA for further evaluation. Transcript at 110-11. 35. The QAS compiled a memorandum listing the defects on the thirteen caulking gun samples for each gun. These defects included handle binding and not properly aligned, rivet too long and not properly rolled, nicks on side of barrel, burrs on edges of barrel, rivet mounting front end cap has burrs, plunger rod is binding on front end cap. Appeal File, Exhibit 86. 36. On or about November 28, 1994, the QAS furnished another QDN (second QDN) to appellant, setting forth the deficiencies found with purchase order AWK4399-1 on November 28, 1994. This QDN also notified Pro/Des that the contractor was required to furnish a written response to the QAS of the corrective action taken within five work days of receipt of the notice. Appeal File, Exhibit 29. 37. On November 30, 1994, the ACO sent appellant a cure notice regarding the second QDN requiring Pro/Des to take corrective action within ten calendar days following receipt of the letter, and also requiring Pro/Des to furnish the contracting officer written assurances of the corrective action taken in response to the cited deficiencies within ten calendar days of receipt of the notice. The cure notice further advised Pro/Des that "[i]f the above deficiency(s) recur, this may indicate that the deficiency has not been adequately cured. In such instances, the Government reserves the right to terminate the contract for default without further notice." Appeal File, Exhibit 31. 38. By letter dated December 2, 1994, Pro/Des provided the QAS and the ACO a written response to the second QDN. The letter acknowledged that the caulking guns produced for purchase order AWK4399-1 had nicks on the edges of the barrels and were not free of sharp edges. The letter further stated that with regard to the caulking guns produced for purchase order AWK4399-1, the riveting machine was malfunctioning (causing a "deformed rivet head") when the caulking guns were being manufactured and had been subsequently repaired; the caulking guns would be resorted, deburred, and repacked for GSA s inspection within seven days after receipt of the letter; Pro/Des was also increasing in- process inspection; and the caulking guns had been re-inspected and all guns not up to Government standard had been removed from the lot. Appeal File, Exhibit 32. 39. On or about December 5, 1994, a Small Business Administration (SBA) industrial specialist went to Pro/Des' facility and viewed a number of caulking guns produced for purchase order AWK4399-1 and found the same or similar types of defects in these guns as those exhibited by the sample rejects of November 28, 1994. Transcript at 82-84. 40. On December 6, 1994, the QAS recommended to the ACO that Pro/Des' proposed corrective action be found acceptable, subject to further review and on-site inspection. Appeal File, Exhibit 33. 41. On December 8, 1994, the ACO advised Pro/Des that the corrective action outlined in appellant's December 2, 1994, letter was acceptable to GSA, subject to further review and on- site inspection. The ACO scheduled a reinspection date of December 15, 1994, for the goods produced for purchase order AWK4399-1. Appeal File, Exhibits 34, 35. 42. On December 15, 1994, the ACO issued contract modification AS02, extending the delivery date of purchase order AWK4399-1 from November 28 to December 19, 1994. This modification reads in relevant part: This modification is issued at no cost to either party. Failure to meet the revised due date may result in termination for default. All other terms and conditions remain the same. Appeal File, Exhibit 37. 43. On December 15, 1994, the QAS reinspected and rejected the caulking guns tendered for purchase order AWK4399-1. Appeal File, Exhibits 40, 55, 58. During this reinspection, the QAS and his supervisor pointed out to Pro/Des personnel that deficiencies cited in the second QDN still existed; that additional problems were present -- finish removed and misaligned handles -- and that the caulking guns were not acceptable. Id., Exhibit 40; Transcript at 124-27, 146-48, 159-60. 44. On December 16, 1994, the ACO requested and received the PCO's concurrence to terminate NSN 5655 and purchase order AWK4399-1 for default. Appeal File, Exhibit 42. 45. On December 19, 1994, the ACO issued a decision terminating for default appellant's right to proceed with NSN 5655 and all outstanding purchase orders for that NSN, including purchase order AWK4399-1. Appeal File, Exhibit 44. Appeals 46. On January 23, 1995, Pro/Des filed its notices of appeal of the decisions of November 21 and December 19, 1994, Appeal File, Exhibits 59, 60, which were docketed as GSBCA 13165 and 13166. Appeal File, Exhibit 61. 47. At the hearing on the merits, appellant cross-examined respondent's witnesses. At the conclusion of respondent's case, appellant elected not to present witness testimony. Appellant argued during closing argument that respondent had not met its burden of proof, appellant did not default on any contractual requirements, "for whatever reason, [respondent] never wanted Pro/Des to be the contractor," and that the inspection and rejection of the caulking guns did not follow any commercially accepted standard. Transcript at 170-72. 48. The record demonstrates that the inspected caulking guns were in the condition described by respondent -- containing burrs, misalignments, sharp edges, or other variations from the specification requirements. Appeal File, Exhibits 100-12. 49. A briefing schedule was established allowing for posthearing briefs and reply briefs. Respondent filed a posthearing brief. Appellant did not file a posthearing brief or a reply to respondent's brief. Discussion Pro/Des contends that GSA improperly terminated the purchase orders and NSNs under the contract. The Government has the burden of proving that a default termination is warranted because it is a "drastic action . . . 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). GSA has met its burden of proof -- it properly terminated the purchase orders and the NSN for default.4 We deny both appeals. GSBCA 13165 ____________________ 4 Appellant presented a very limited rebuttal of respondent's case. Findings 47, 49. The contract allowed the Government, by written notice of default, to terminate the contract in whole or in part if the contractor failed to deliver the supplies within the time specified in this contract or any extension, or failed to comply with provisions of the contract. Finding 8. Timely performance embraces two requirements: the goods must conform to contract specifications and must be delivered by the specified due date. Nash Metalware Co. v. General Services Administration, GSBCA 11951, et al., 94-2 BCA 26,780. This appeal concerns the termination for default of purchase order AWK6263-1. At the request of Pro/Des, the delivery date for this purchase order was extended to November 15, 1994 by contract modification. Findings 20-21. When the QAS was present at Pro/Des's facility on November 15, 1994, appellant neither presented the goods relating to the purchase order for inspection nor made delivery of the goods by the extended delivery date. Finding 28. As Pro/Des had not presented the goods for inspection as of the extended delivery date, respondent terminated the purchase order for default. Findings 29-30. We find that respondent's termination for default of this purchase order was proper and deny appellant's appeal of the default termination of this purchase order. GSBCA 13166 In this appeal, the goods were tendered for inspection pursuant to purchase order AWK4399-1 on November 28, 1994. However, the goods were found defective and rejected for reasons stated in the contract included under faulty workmanship. Findings 3-4, 33-36, 48. Following the November 28, 1994, rejection, the purchase order delivery date, by means of contract modification, was further extended to December 19, 1994. Findings 20-21. On December 15, 1994, Pro/Des again tendered caulking guns for inspection for purchase order AWK4399-1. Two GSA quality inspectors found the same defects as those in the lot tendered for inspection on November 28, 1994, in addition to other defects. Finding 43.5 Thereafter, Pro/Des did not tender additional caulking guns for inspection nor did it deliver caulking guns pursuant to purchase order AWK4399-1 by December 19, 1994, the extended delivery date. Respondent terminated the purchase order and the NSN for default. Findings 44-45. ____________________ 5 Appellant s allegation that the inspection and rejection of the caulking guns failed to follow a commercially acceptable standard, Finding 47, ignores the unrebutted evidence that the guns which were inspected were rejected for standards of defective workmanship which were clearly set forth in the contract. Findings 3-4, 33-36, 48. We find that respondent's termination for default of this purchase order and NSN was proper and deny appellant's appeal of the default termination. Decision The consolidated appeals are DENIED. ________________________ ALLAN H. GOODMAN Board Judge We concur: __________________________ ________________________ CATHERINE B. HYATT JOSEPH A. VERGILIO Board Judge Board Judge