Board of Contract Appeals General Services Administration Washington, D.C. 20405 THIS OPINION WAS INITIALLY ISSUED UNDER PROTECTIVE ORDER AND IS BEING RELEASED TO THE PUBLIC IN ITS ENTIRETY ON JULY 6, 1998 _______________________________________ DENIED: June 15, 1998 _______________________________________ GSBCA 14054-SSA INTEGRATED SYSTEMS GROUP, INC., Appellant, v. SOCIAL SECURITY ADMINISTRATION, Respondent. Shelton H. Skolnick and Bruce Trimble of Skolnick & Leishman, P.C., Derwood, MD, counsel for Appellant. Seth Binstock and Lyman Goon, Office of General Counsel, Social Security Administration, Baltimore, MD, counsel for Respondent. Before Board Judges WILLIAMS, VERGILIO, and GOODMAN. WILLIAMS, Board Judge. Integrated Systems Group, Inc. (ISG) challenges the Social Security Administration's (SSA's) termination for cause of its contract to supply commercial products due to ISG's failure to deliver products on schedule. ISG admits that it failed to deliver any products, but contends that the termination was improper for several reasons. First, ISG asserts that it made an obvious mistake in bid on contract line item number (CLIN) 4, discovered after award, and that the contracting officer should have issued a decision on ISG's mistake claim instead of insisting on performance. ISG argues that it was not required to continue performance, because the Disputes clause incorporated into this contract, Federal Acquisition Regulation (FAR) 52.233-1, by its terms only required a contractor to proceed diligently with performance if a claim "arising under the contract" was pending, and a mistake claim does not arise under the contract. Second, ISG contends that it made another unilateral mistake by certifying that it would provide domestic end products compliant with the Buy American Act, but learned after award the products it proposed on eight separate CLINs were foreign end products. ISG never offered to substitute domestic end products at its original offer price. Instead, ISG requested that SSA reevaluate those products as foreign end products, but SSA refused, asserting that ISG's offer to deviate from its contract did not excuse its failure to perform. Third, ISG argues that the termination was invalid because SSA failed to issue a cure notice and to recognize excusable delays on ISG's part. Fourth, ISG contends that its mistakes in pricing on CLIN 4 and in certifying that it offered domestic end products on eight line items rendered the contract void ab initio, thus excusing ISG from performing and leaving no contract to terminate. Alternatively, ISG claims the contract was voidable at its option. We deny the appeal, finding that the termination for cause was warranted because ISG miscertified that it would supply domestic end products and repudiated the contract by refusing to either deliver domestic end products or provide the Government with assurance of future performance in accordance with the terms of the contract. ISG's refusal to supply domestic end products constituted an independent justifiable ground for the termination for cause. Even if ISG had prevailed on its CLIN 4 mistake claim and the contract price had been reformed to its satisfaction, ISG would have been required to supply domestic end products in accordance with its certification -- an obligation ISG had advised the Government it would not fulfill. Finally, as a matter of law, the contract did not suffer from the type of threshold infirmity which rendered it void ab initio. ISG's alternative contention that the contract was voidable at its option comes too late. At the time it raised its CLIN 4 mistake claim and continuing until the date performance was due, ISG never sought to rescind or void its contract. Rather, ISG affirmed its contract and requested reformation of its CLIN 4 pricing. Because ISG did not seek to void its contract (either in its entirety or as to CLIN 4) during the performance period, it is estopped from claiming its contract should now be declared void as an excuse for its failure to perform. Findings of Fact The Solicitation Pursuant to FAR Part 12.6, Streamlined Procedures for Evaluation and Solicitation of Commercial Items, SSA issued a combined synopsis/solicitation, number SSA-RFP-96-2582 (the solicitation), for computer cabling products. The solicitation was published in the Commerce Business Daily (CBD) on April 25, 1996, and amended on May 10, 1996. Appeal File, Exhibit 2. SSA intended to use the products acquired under the solicitation separately, but offerors were required to submit prices on all or none of the twenty-four line items. Transcript at 30; Appeal File, Exhibit 2. Because SSA was installing local area networks (LANs) throughout the country, the agency required these products to be warehoused and dispersed to the regions as needed. Transcript at 57-58. According to the contracting officer, warehouse supplies of some of these products "were getting low and . . . there's a criticality that the award be awarded within a time frame to meet [the agency's] needs." Id. at 58. Section B of the solicitation, Cost/Price Tables, identified twenty-four CLINs. Appeal File, Exhibit 2. The solicitation contemplated award of a firm fixed price/indefinite quantity (IDIQ) contract for a base year and two one-year option periods. Id. For each CLIN, a minimum and maximum quantity was listed. "SSA was required to order, and the contractor to furnish at least the stated minimum quantity of supplies." Appeal File, Exhibit 2 at 1. The solicitation listed or incorporated the FAR provisions applicable to this procurement, including FAR 52.212-2, Evaluation -- Commercial Items; 52.212-4, Termination for Cause; 52.233-1, Disputes; 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders Commercial Items; 52.225-3, Buy American Act -- Supplies; 52.225-9, Buy American Act -- Trade Agreements -- Balance of Payments; and 52.225-21, Buy American Act -- North American Free Trade Agreement (NAFTA) Implementation Act -- Balance of Payments Program. Id. The solicitation provided that "the solicitation document and incorporated provisions and clauses are those in effect through Federal Acquisition Circular 90-37." Id. The solicitation advised offerors that the Buy American Act and the Trade Agreements Act would apply on a CLIN basis, and required offerors to certify if they offered Buy American Act compliant domestic end products, designated country end products under the Trade Agreements Act or NAFTA, or Caribbean Basin end products. Appeal File, Exhibit 2; Transcript at 32-33. Any end products excluded from the certification were to be listed separately by CLIN along with the country of origin for each. Appeal File, Exhibit 2. The solicitation provided that offers would be evaluated by giving certain evaluation preferences to domestic end products. Id., Exhibit 2. The factors used to evaluate offers, in descending order of importance, were "lowest price and technical acceptance." Id., Exhibit 2 at 4. The solicitation described the items to be acquired under CLIN 4 as follows: Token Ring Mounting Cabinets 72" H, 29" W, 26" D with locking doors, front door of Plexiglas, rear Steel Door, removable side panels, adjustable rails on the inside, all doors must be attached to cabinet -- min = 25ea/max = 200 each[.] Appeal File, Exhibit 2 at 3. The Disputes clause incorporated into this contract, FAR 52.233-1, required that a contractor proceed diligently with performance pending resolution of claims "arising under" the contract. FAR 52.233-1(i), Alternate I, which was not incorporated into this contract, provided: Alternate I (Dec 1991). If it is determined under agency procedures, that continued performance is necessary pending resolution of any claim arising under or relating to the contract, substitute the following paragraph (i) for the paragraph (i) of the basic clause: (i) The Contractor shall proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under or relating to the contract, and comply with any decision of the Contracting Officer. The Termination clause incorporated into this contract, FAR 52.212-4(m), provided, in pertinent part: Termination for cause. The Government may terminate this contract, or any part hereof, for cause in the event of any default by the Contractor, or if the Contractor fails to comply with any contract terms and conditions, or fails to provide the Government, upon request, with adequate assurances of future performance. ISG's Initial Proposal ISG prepared its proposal by forwarding copies of Section B of the request for proposals (RFP) to three vendors from whom it solicited quotes, then entering the quotes into a spreadsheet and letting a computer program select the lowest quote. Transcript at 116-17. Each line item was then marked up by a fixed percentage. Id. at 117. ISG did not provide the rest of the solicitation, which contained the Buy American Act requirements, to the vendors. Id. at 119. The quotes received were not binding commitments from the vendors. Id. at 144. On May 21, 1996, ISG timely submitted a proposal. ISG's proposal included a certification that each end product proposed was a domestic end product; it did not list any products as excluded from that certification. Appeal File, Exhibit 3; Transcript at 32-33. For CLIN 4, Token Ring Mounting Cabinets, ISG's proposed unit price per year was: Base Year Option Year 1 Option Year 2 $954.50 $871.50 $788.50 Appeal File, Exhibit 3. For evaluation purposes, the agency assumed that it would purchase twenty-five of these items each year. Id., Exhibits 11, 18. Results of the Initial Evaluation Nine offerors, including ISG, were included in the competitive range. Appeal File, Exhibit 9 at 11. On the basis of proposing only domestic end items, ISG's offer received an evaluation preference. Transcript at 33. With respect to ISG's CLIN 4 proposal, the technical evaluation team noted that ISG had not included technical references. On June 17, the contracting officer sent ISG a letter stating that ISG's proposal was considered to be within the competitive range and was technically unacceptable, but capable of being made acceptable. Appeal File, Exhibit 8. With respect to CLIN 4, the contracting officer indicated that ISG's proposal appeared to meet the specifications, but that SSA required the technical references before a determination of acceptability could be made. Id. at 1. The Government prepared an independent cost estimate (IGCE)for this procurement. Transcript at 35; Appeal File, Exhibit 13. The IGCE for CLIN 4 was higher than the CLIN price of ISG and the other two low offerors. Transcript at 35; Appeal File, Exhibit 13. Specifically, for the base year, the IGCE for CLIN 4 was $32,500 and the CLIN 4 prices in the initial proposals were: ISG, $23,862.50; Offeror A, $23,800; and Offeror B, $26,550. Transcript at 35; Appeal File, Exhibit 13. The total base year prices of the three lowest initial proposals and the IGCE were: ISG: $198,872.95 Offeror A: $194,086.53 Offeror B: $198,176.94 IGCE: $203,788.30 Appeal File, Exhibit 13. Revised Proposals On June 21, ISG submitted a revised price proposal and included technical references for the mounting cabinets. Appeal File, Exhibit 10. The mounting cabinets shown on the references were manufactured by Great Lakes Case & Cabinet Company, Inc. (Great Lakes). ISG's proposed price for CLIN 4 did not change from its earlier proposal. The offerors' proposed unit prices for CLIN 4 in the base year were as follows: ISG - $ 954.50 Offeror A - $ 952.00 Offeror B - $1,062.00 Offeror C - $ 748.11 Offeror D - $1,360.00 Offeror E - $1,061.25 Offeror F - $ 938.89 Offeror G - $1,120.00 Offeror H - $ 966.00 Id., Exhibit 11. On June 26, SSA determined that ISG had the lowest priced proposal at $544,733. Id. BAFOs On July 12, SSA called for best and final offers (BAFOs). Appeal File, Exhibit 16. On July 19, ISG submitted its BAFO. Id., Exhibit 17. The unit prices per year for CLIN 4 for offerors[foot #] 1 at BAFO were: Offeror Base Year Option Year 1 Option Year 2 ISG $ 84.36 $ 79.18 $ 76.96 Offeror A $ 952.00 $ 980.00 $1,008.00 Offeror B $1,041.00 $1,052.00 $1,062.00 Offeror D $1,360.00 $1,360.00 $1,360.00 Offeror E $1,061.25 $1,114.30 $1,170.00 Offeror F $ 938.89 $ 985.83 $1,035.13 Offeror G $1,120.00 $1,210.00 $1,380.00 Offeror H $ 966.00 $1,062.60 $1,168.86 Id., Exhibits 11, 18. The IGCE for the unit price for CLIN 4 was $1,300. Id., Exhibit 1; Transcript at 84. The total evaluated prices of BAFOs of the offerors were: Total Evaluated Offeror Price ISG $490,766 Offeror A $604,334 ----------- FOOTNOTE BEGINS --------- [foot #] 1 Offeror C did not submit a BAFO. ----------- FOOTNOTE ENDS ----------- Offeror B $622,547 Offeror D $682,301 Offeror E $698,011 Offeror F $717,191 Offeror G $723,736 Offeror H $853,033 Appeal File, Exhibit 19. Only two offerors, ISG and Offeror B, revised their prices at BAFO. ISG's total price was lowered by almost $54,000 between revised and BAFO submissions. Id., Exhibits 11, 19. Offeror B's total BAFO price was $4,156 lower than its revised price. Id. The contracting officer testified as follows regarding ISG's BAFO: Q Did you notice anything unusual about ISG's [BAFO] price at the time that [BAFOs] were submitted? A I noticed it was lower than the other offerors that came in. Q Were you in any way concerned about that? A No. Q Why weren't you concerned? A Because in today's competitive market there's [sic] a lot of hungry vendors out there, and they're all playing gamesmanship, and I had no reason to believe that this was not another one of those games being played with computer tight [sic] materials. Transcript at 36-37; see id. at 81, 94. Specifically, with respect to CLIN 4 at BAFO, the contracting officer testified that she noticed ISG's BAFO price was lower than ISG had proposed in its initial and revised proposals. Id. at 37. She stated that she was not concerned about the lower price, explaining: "I thought it was a strategy on her part. Perhaps they had some in a warehouse somewhere. Maybe they tested the market. I didn't know. I just made assumptions, and I was not alarmed." Id.; see id. at 81. She also noticed that the CLIN 4 unit price for ISG was $84.36 as opposed to the IGCE of $1,300 at the time she accepted ISG's offer. Id. at 96. Award ISG's BAFO was evaluated as proposing domestic end products based on its certification. Transcript at 32. Technical acceptability was determined on a pass-fail basis. Id. at 59. Based upon ISG having the lowest-priced, acceptable offer, SSA selected ISG for award. Appeal File, Exhibits 19, 20. On September 9, ISG's president traveled to Baltimore, Maryland, to meet with the contracting officer to sign the contract. Transcript at 21. Prior to the signing, the contracting officer commented to ISG's president that ISG's price was significantly lower than the other vendors' proposed prices. Id. at 23, 27; Appeal File, Exhibit 21. The contracting officer did not refer to a specific CLIN. Transcript at 23. Nor did the contracting officer ask ISG's president to verify the prices before she signed the contract. Id. at 27-28. At that time, the contracting officer did not believe that ISG had made a mistake in its BAFO. Id. at 37-38. The contract called for delivery of products within thirty days of contract award, i.e., by October 9. Appeal File, Exhibit 2; Transcript at 39. ISG's Post-Award Discovery of its Alleged Mistakes On September 18, ISG's contract administrator called the contracting officer to ask if the Buy American Act applied to this acquisition. The contracting officer responded that the Buy American Act did apply as set forth in the solicitation. Appeal File, Exhibit 23. By letter dated September 25, ISG advised the contracting officer it had made a significant mistake in its BAFO by proposing a unit price of $84.36 for CLIN 4 for the base year. Appeal File, Exhibit 27. ISG requested "the Government's permission to correct the error and continue performance" and alleged that the correct price for CLIN 4 should have been the "market price" of $1,465.20 per unit in the base year -- over $1,300 more per unit than ISG's BAFO price, over $500 per unit higher than its initially proposed unit price of $954, and higher than the price of any other offeror for this CLIN. ISG further stated that the corrected total base year price for CLIN 4 should be $36,630. Id. ISG determined that the $84.36 BAFO price for CLIN 4 was provided by a subcontractor, Americable, which misread the relevant part number. Transcript at 124, 130-31.[foot #] 2 ISG's vice president testified as follows regarding ISG's mistake in the CLIN 4 pricing: At initial bid submission the marketing rep had more time to review the cost model and noted that this one line item was markedly cheaper between different vendors. She recognized that there must be some kind of a mistake and chose not the lowest but the second ----------- FOOTNOTE BEGINS --------- [foot #] 2 Americable priced a token ring mounting bracket -- a bare rack, instead of a cabinet with a front and back and walls. Transcript at 123-26; Appellant's Exhibit 51. ----------- FOOTNOTE ENDS ----------- lowest bid to be used in initial submission. Somehow between initial submission and negotiations [and] best and final, the actual electronic copy of that spreadsheet was lost and had to be recreated. So, in the process of reentering the prices of those three vendors, redoing the formula which automatically took the lowest of three prices, it didn't occur to her that there was . . . an exception that she had had to program into the original spreadsheet, so she let the computer one more time automatically calculate across the prices and get a final price marked up. Id. at 121-22. On September 26, the contracting officer sent ISG a letter identifying the information that ISG should submit in order to allow SSA to process the mistake claim, including: Any other evidence that will serve to establish the mistake, the manner in which the mistake occurred, and the bid actually intended. Explanation as to why you are requesting the mistake be corrected to the market price of $1,465.20 rather than to the initial and revised proposed price of $954.50 for this CLIN. Appeal File, Exhibit 29. By letter dated September 30, ISG sent information concerning the alleged mistake in bid to SSA. Id., Exhibit 34. ISG stated: On 22 May 1996, ISG provided the Social Security Administration its original submission reflecting for CLIN 4 a unit price of $954.50, as indicated in Attachment No. 1. This quote was based on ISG's cost of $830, a price provided by our vendor Computer Systems Products, Inc., Attachment No. 2. The quote provided by our vendor, unknown to ISG, was for the frame only and did not include sides or doors as required by the specifications, Attachment No. 3. On 20 May 1996, ISG was also given a quote from Americable, Attachment No. 4, in the amount of $73.90. Although ISG recognized the error made by Americable for record keeping purposes, an entry was made onto our worksheets for the amount indicated. Between the period of our previous submission on 21 June 1996, and BAFO, due to a human error the worksheets were deleted from a workstation hard drive where they resided. As a result, the information lost was recreated from ISG's server however, the incorrect price was never changed. Consequently, the amount of $84.36 offered to the Government was the price indicated in BAFO, Attachment No. 5. Id. ISG reiterated that it wished to continue performance; it did not seek rescission of its contract. Id. SSA received this information on October 2. This information submitted by ISG was not sufficient for the contracting officer to render a decision on ISG's mistake claim. Transcript at 42. She explained: [ISG's submitted information] was not sufficient. It contained some inconsistencies which I brought to their attention through a telephone record. . . . [I]n that conversation I acknowledged I received their letter, and I was confused about the attachments. For example, I had said the original bid is at attachment 2; the revised bid is attachment 2, also. I was confused about what they meant. And they had no support for their quote of $1,465.20, and before I could proceed I would need some inconsistencies corrected and some additional information. Q Have you ever made the determinations required by FAR 14.407-4 to act on a mistaken bid claim and correct the contract ------? A No, I have not made a determination. I have not received all the information I need to convince me, clear and convincing evidence that it was a mistaken bid. Id. at 42-43; Appeal File, Exhibit 35. On October 2, the contracting officer called ISG and expressed concern about the $1,465.20 unit price requested by ISG for CLIN 4 in its reformation request, because it was higher than quotes from other vendors. Appeal File, Exhibit 35.[foot #] 3 On October 3, the contracting officer called to confirm that ISG would be making the scheduled delivery on October 9, but ISG's contract administrator stated that no equipment had been purchased yet -- ISG was waiting for a notice to proceed. Appeal File, Exhibit 37; Transcript at 47. The contracting officer stated that "the company was expected to proceed and deliver the equipment [by] . . . October 9." Transcript at 47. That same day, October 3, ISG replied with two letters. Appeal File, Exhibit 38. The first letter stated that ISG understood that "performance under the subject contract, excluding CLIN 4, shall continue while [the agency's] legal counsel reviews the enclosed documentation." Id. at 1. In the second October 3 letter, ISG claimed that the price it had originally proposed for CLIN 4, $954.50 per unit in the base year, was also a mistake. Id. at 2-3; Transcript at 144. ISG claimed that the $954.50 price was the token ring mounting cabinet without the required sides and doors. Id. ISG also provided further information and documentation in support of its revised price for CLIN 4 -- a quote it had received on September 20 for the Great Lakes cabinet in the amount of $1,221 -- and stated: "[B]ased on our pricing strategy, the cost ISG offered to the Government in our letter dated 25 September 1996 was $1,465.20." Appeal File, Exhibit 38 at 2; see id., Attachment 6. Appellant's vice president testified that $1,465.20 was ISG's price for the Great Lakes cabinet based upon its cost of $1,221 plus a fixed markup. Transcript at 131-32; see Appellant's Exhibit 52. ISG offered to supply this Great Lakes Cabinet offered for $1,233.21 in option year 1 and $1,184.37 in option year 2. Appeal File, Exhibit 38. This would have made ISG's CLIN 4 evaluated reformed three-year price $97,069.50, and its total evaluated contract price $581,823. ISG would have remained the low-priced offeror. Id. Finally, ISG stated that it wished to continue performance under the contract and did not address whether CLIN 4 was excluded. Id. ISG did not seek rescission of its contract in either of its October 3 letters. Id. Despite the specific information ISG received on September 18 regarding the applicability of the Buy American Act, it was not until October 7, two days before the delivery due date, that ISG first alleged its Buy American Act mistake; ISG submitted a letter in which it claimed that, after award, in the process of verifying the country of origin of the products proposed, ISG learned that it had proposed foreign end products for eight of the CLINs -- 6, 16, 17, 18, 19, 20, 21, and 24. Appeal File, Exhibit 39. ISG requested that the items it ----------- FOOTNOTE BEGINS --------- [foot #] 3 Also on October 2, ISG sent a letter stating that the $84.36 BAFO price for CLIN 4 resulted from ISG passing along the quotation by Americable to ISG, enclosing Americable's technical literature. Appeal File, Exhibit 36. ----------- FOOTNOTE ENDS ----------- proposed for those CLINs be reevaluated as foreign end products in accordance with FAR 52.225-21, Buy American Act. Id. However, the contracting officer testified that she could not reevaluate a proposal after award. She stated that ISG had received an evaluation preference for offering domestic end products on the affected CLINs, but foreign end products would not have received the preference. Transcript at 50-51. In its October 7 letter, ISG also offered to supply an alternate cabinet to what it had offered on CLIN 4 -- an EMCOR token ring mounting cabinet for $954, in lieu of the Great Lakes token ring mounting cabinet for $1,465.20. Appeal File, Exhibit 39. The quotation submitted with ISG's letter stated that shipment would be thirty days ARO (after receipt of order), and the EMCOR cabinet was smaller than the dimensions required by the contract. On October 8, the contracting officer called ISG and reiterated that ISG was required by the terms and conditions to make delivery of all products, including CLIN 4, on October 9. Appeal File, Exhibit 40. ISG said that delivery on October 9 was impossible, since ISG had ceased purchasing activity for all CLINs after discovering the mistake on CLIN 4, and that it had not begun the ordering process because it was waiting to receive direction. Id. On October 8, the contracting officer sent ISG a letter confirming the October 8 discussion, stating that the Government interpreted ISG's statement that performance was impossible to be a repudiation of the contract, and asking ISG to confirm that it would perform in accordance with the terms and conditions of the contract. Appeal File, Exhibit 41. The letter also stated that if ISG did not perform in accordance with the terms of the contract, the Government intended to terminate the contract and seek the full damages permitted by law. Id. On October 9, the due date for delivery, ISG by letter indicated that it had not received final guidance on its request to correct its CLIN 4 pricing and asserted that "until correction of this matter is approved by the Government there is no valid contract between ISG and SSA." Appeal File, Exhibit 43. The letter further stated: ISG formally confirmed with its subcontractors the country of origin for the products which they intended to provide ISG for this contract. For many of the contract line items (as identified in our letter of October 4) the country of origin is not US. ISG asked the same vendors to provide a price quotation for US made products. The price would increase the contract value by a factor of 10. ISG's price proposal should therefore have been significantly less than the Government's own estimates and that provided by other vendors. The discrepancy must have been so dramatic as to virtually guarantee that ISG had made a mistake in its proposal. We are at a loss to explain why SSA failed to bring this to ISG's attention during discussions and/or prior to award. Under these circumstances it is clear that the [sic] there can be no valid contract between the parties. Therefore, there is no contract to terminate. And no "damages permitted by law" as you reference in your letter of October 8. . . . . If SSA will permit ISG to correct the error on CLIN 4 and to provide products as originally proposed (country of origin as noted in our earlier letter), ISG is still willing to proceed with performance. Some of the items can be delivered within a few days and the remainder of the items (notably the cabinets in CLIN 4) within the next 30 days. Id. By October 9, ISG had not delivered any of the products required under the contract. That same day the contracting officer telephoned ISG to ascertain if the company intended to make a partial delivery or "whether they were willing to work with the Government." Transcript at 112. However, the contracting officer "just didn't get a sense that they intended to do anything." Id. ISG's contract administrator testified that ISG had made an intentional decision not to deliver any product to SSA on October 9, based on its analysis "that the cost to provide all American made products was absolutely prohibitive." Id. at 165. On October 11, SSA terminated the contract for cause, stating: The reason for the termination is ISG's failure to deliver acceptable products in accordance with the delivery schedule set forth in the contract. ISG has not provided SSA with any information which would excuse its failure to perform. ISG alleged a mistake in its bid after award and sought reformation of the contract award price. ISG's request for reformation of the contract does not excuse ISG's failure to perform. At the time that ISG informed the Government that it would not perform the contract, the Government was considering ISG's request to reform the award price. The Government expected that ISG would perform as required during processing of its request. Appeal File, Exhibit 44 at 1. On January 6, 1997, ISG appealed the contracting officer's decision requesting that the Board convert the termination for cause to a termination for the convenience of the Government.[foot #] 4 Discussion Was the Termination for Cause Justified? The Government has the burden of proving by a preponderance of the evidence that a termination for default was proper. E.g., Lisbon Contractors, Inc. v. United States, 828 F.2d 759 (Fed. Cir. 1987). Once the Government has presented a prima facie case showing that the termination was proper, however, the burden of going forward with evidence to rebut the Government's case shifts to the contractor. Itra Coop Association, GSBCA 7974, 90-1 BCA 22,410, at 112,563. A termination for cause, such as SSA effected here, is equivalent to a termination for default, so these rules govern this case. There is no dispute that ISG failed to deliver any products. Thus, the Government has made a prima facie showing that the termination was proper, and the burden shifts to ISG to come forward with evidence to rebut the Government's case. ISG claims its alleged mistakes in CLIN 4 pricing and its "inadvertent" Buy American Act miscertification either excused its nonperformance or rendered its contract void ab initio, leaving nothing for the Government to terminate. ISG's position is not supported by the facts or the law. ISG's refusal to deliver domestic end products in accordance with its Buy American Act certification justified the termination for cause. As the Armed Services Board of Contract Appeals held in Sunox, Inc., ASBCA 30025, 85-2 BCA 18,077, a contractor's unilateral mistake in supplying non-domestic goods after certifying the products would be ----------- FOOTNOTE BEGINS --------- [foot #] 4 ISG incorporated its notice of appeal into its complaint. ----------- FOOTNOTE ENDS ----------- Buy American Act compliant is not the type of mistake which warrants relief from a termination for default.[foot #] 5 The board explained: "A unilateral mistake of this sort is not beyond the control or without the fault or negligence of the contractor and therefore is not a basis for relief from the default on the contract." 85-2 BCA at 90,752. To the extent that ISG now contends that it reasonably interpreted the solicitation as requiring a single Buy American Act certification for all CLINs, such an argument is wholly unsupported by the solicitation itself.[foot #] 6 The solicitation clearly required exceptions to Buy American Act compliance to be listed by CLIN separately along with the country of origin for each CLIN. Similarly, ISG's suggestion that the Government insisted it deliver noncompliant foreign end products is not accurate; i.e., SSA advised ISG to deliver products in accordance with its certification. After award ISG neither supplied nor offered to supply domestic end products in accordance with its certification.[foot #] 7 Instead, ISG advised the Government that supplying domestic end products would have "increase[d] the contract value by a factor of 10" and offered to supply foreign end products, which would have been evaluated in a less preferential fashion. Appeal File, Exhibit 43. ISG's failure to deliver products in accordance with the terms and conditions of its contract justified the termination. Alternatively, the termination is justified based upon ISG's miscertification. H&R Machinists Co., ASBCA 38440, 91-1 BCA 23,373. ISG s failure to inquire of its subcontractors is not a mistake. A proper certification mandates an inquiry by the certifying official to provide a reasonable basis for the certification. ----------- FOOTNOTE BEGINS --------- [foot #] 5 ISG also alleges mutual mistake, but this contention fails for lack of evidence; there is no suggestion in the record that the contract was entered into with an erroneous understanding on the part of the Government. [foot #] 6 Moreover, ISG did not make this argument in its correspondence contemporaneously with its notification to SSA of its alleged Buy American Act mistake. Appeal File, Exhibits 39, 43. [foot #] 7 ISG's so-called offer to perform was conditioned on the Government's allowing provision of foreign end products, contrary to ISG's certification. ISG's offer to perform also was questionable in light of its starkly contradictory contention that "there is no contract to terminate." Appeal File, Exhibit 43. ----------- FOOTNOTE ENDS ----------- Did the Pendency of ISG's CLIN 4 Mistake Claim Prevent the Government from Terminating ISG's Contract for Cause? ISG, glossing over its Buy American Act miscertification, asks the Board to hold that the pendency of its CLIN 4 mistake claim before the contracting officer at the time performance was due precluded the Government from terminating the contract for cause. ISG argues that because its mistake claim did not "arise under" the contract but only "related to" the contract, it was not obligated to continue with performance. ISG contends that FAR 52.233-1, which was incorporated into this contract, only required contractors to proceed with performance if claims "arising under" the contract were pending before the contracting officer. ISG reasons that because the contract did not include FAR 52.233-1, Alternate I, the clause which requires that contractors continue with performance while claims "relating to the contract" are pending, it was not obligated to continue performance. The Government asserts that the Board lacks jurisdiction over appellant's CLIN 4 mistake "claim" and request for reformation since there has been no final decision by the contracting officer on this claim which has been appealed to the Board. Transcript at 84. The Board, in exercising its de novo review, has jurisdiction to consider appellant's alleged mistake insofar as it has been raised as a defense to the termination. The pendency of ISG's request for reformation of CLIN 4 did not prevent SSA from terminating the contract for cause given appellant's wholesale repudiation of its obligation to deliver domestic end products. Even if ISG is correct that it was not required to continue with performance of CLIN 4, or the entire contract, pending resolution of its mistake claim, this circumstance is not sufficient to rebut such independent ground for termination. It is uncontroverted that ISG repudiated its obligation to provide domestic end products under this all-or- none contract. The termination clause expressly empowered SSA to terminate the contract if the contractor failed to comply with any contract terms and conditions. Further, even if the contracting officer had granted ISG's request for reformation of CLIN 4, ISG would have remained the low-priced offeror. Thus, ISG would still have been obligated to perform in accordance with its certification and its contract could have been terminated for its refusal to supply domestic end products.[foot #] 8 ----------- FOOTNOTE BEGINS --------- [foot #] 8 Moreover, as indicated in its correspondence of October 3, ISG itself understood that delivery of all CLIN items except CLIN 4 was required. ISG s statement belies its later contention that its performance was delayed by the contracting officer s failure to issue a decision on its mistake claim more expeditiously. ----------- FOOTNOTE ENDS ----------- The pending mistake claim was not an impediment to SSA's termination here because ISG continued to avow the existence of its contract, seeking only reformation of CLIN 4 pricing. Given the existence of the contract, there were independent grounds justifying termination in this case -- i.e., ISG's miscertification, and its repudiation of its contractual obligation to deliver domestic end products under eight CLINs. Should the Board Now Grant Rescission of ISG's Contract Based upon its CLIN 4 Mistake? Appellant's contention that the Government must now void and rescind its entire contract based upon its CLIN 4 mistake also fails. Rescission is not a remedy the Board can fashion nunc pro tunc when a contractor did not seek such relief during the performance period and its performance under a contract subsequently went awry for unrelated reasons. Had ISG requested the contracting officer to void or rescind its contract before the performance date, instead of seeking to increase its CLIN 4 price and supply foreign end products contrary to its certification, the contracting officer could have granted rescission. Indeed, there is ample authority to support the conclusion that ISG made an apparent mistake in its CLIN 4 pricing which triggered the contracting officer's duty to verify; the contracting officer noticed the radical drop in ISG's unit pricing on CLIN 4 between its earlier offers and its BAFO (base year $954.50 to $84.36), ISG's CLIN 4 BAFO was only 6.5% of the Government's CLIN 4 price estimate and at BAFO all seven other offerors' CLIN 4 base year prices were at least ten times greater than ISG's. E.g., BCM Corp. v. United States, 2 Cl. Ct. 602 (1983), (citing Ruggiero v. United States, 420 F.2d 709, 713 (Ct. Cl. 1970)); Marshall J. Doke, Jr., Mistakes in Government Contracts -- Error Detection Duty of Contracting Officer, 18 S.W.L.J. 1 at 16-26 (1964). FAR 12.102(b), 15.508, and 14.407-1 make such a duty to verify mandatory: After the opening of bids, contracting officers shall examine all bids for mistakes. In cases of apparent mistakes and in cases where the contracting officer has reason to believe that a mistake may have been made, the contracting officer shall request from the bidder a verification of the bid, calling attention to the suspected mistake. 48 CFR 14.407-1 (1995) (emphasis added). By recognizing that a possible mistake had been made, but speculating that ISG had "gamed" the procurement, and failing to verify ISG's offer, the contracting officer violated FAR 14.407-1. The contracting officer's failure to verify ISG's offer in the face of its apparent mistake would have rendered the contract voidable at ISG's option and capable of rescission. P.T. Service Co., GSBCA 7589, et al., 85-3 BCA 18,430. However, this circumstance gives ISG no solace in the overall scheme of this case. A contract which is found to be capable of rescission is a valid contract up until the time of rescission. United International Investigative Service v. United States, 26 Cl. Ct. 892, 900 (1992), rev'd on other grounds, 109 F.3d 734 (Fed. Cir. 1997) ("Until the contract is rescinded, however, the parties continue to owe each other contractual responsibilities," citing, Restatement (Second) of Contracts 7 cmt. e).; accord Rodriguez v. Vuono, 757 F. Supp. 141, 149 (D. P.R. 1991) (voidable contract is valid contract unless defrauded party rescinds contract). Where a contract is voidable, "the adversely affected party has the option of either ratifying the contract or being restored to the status quo ante. . . . Where the contract is voidable at the contractor's option, the contractor can lose his right to exercise the option of voiding the contract if instead of denying the contract's existence at the outset, the contractor proceeds to perform. Adler Construction Co. v. United States, 423 F.2d 1362, 1366 (Ct. Cl. 1970), cert. denied, 400 U.S. 993, reh'g denied, 401 U.S. 949 (1971). ISG wanted to continue its performance at a higher price and confirmed the basic contract, but then repudiated its contractual obligation by refusing to provide domestic end products. By committing itself to perform, ISG opted not to rescind its contract. ISG is estopped from contending the contract it ratified but repudiated should now be rescinded. Was the Contract Void by Virtue of the Contractor's Alleged Unilateral Mistakes in Pricing and Certification? Appellant's contention that its contract with the Government was rendered void ab initio by virtue of its alleged unilateral mistakes is erroneous as a matter of law.[foot #] 9 It ----------- FOOTNOTE BEGINS --------- [foot #] 9 Although ISG's contract would have been voidable at its option, due to the contracting officer's failure to verify its offer, the contract was not void ab initio. Further, as a _________ result of ISG's Buy American Act miscertification, the contract would have been voidable at the Government's option, not ISG's. E.g., Pacific Construction Co., ASBCA 24548, 81-1 BCA 15,017, ____ _________________________ at 74,310 ("The award of a contract . . . cannot be set aside at the instance of the one receiving the benefit on the ground that he is not entitled to it. This is a ground available only to those injured by the award action, not to the party that benefits by it. Such a contract is not void ab initio but is voidable __________ only at the option of the Government."); see also Aerospace __________ _________ Support Equipment, Inc., ASBCA 13579, 71-1 BCA ________________________ 8904, at 41,376 (award of a contract to a suspended contractor renders contract voidable at the option of the Government). ----------- FOOTNOTE ENDS ----------- is well established that a contract may be adjudged void ab initio where there exists the type of severe legal infirmity that would preclude the parties' exchange of promises from giving rise to an enforceable agreement. Thus, contracts executed in the absence of contractual authority or in serious violation of statute or regulation or in the absence of an appropriation would be void ab initio. E.g., Total Medical Management, Inc. v. United States, 104 F.3d 1314, 1321 (Fed. Cir. 1997), cert. denied, 118 S. Ct. 156 (1998) (memoranda of understanding which violated CHAMPUS regulations were plainly illegal and void ab initio); Godley v. United States, 5 F.3d 1473 (Fed. Cir. 1993) (Government contract tainted by fraud or wrongdoing is void ab initio); United States v. Amdahl Corp., 786 F.2d 387, 394-95 (Fed. Cir. 1986) (where contract award was plainly or palpably illegal, contract was void ab initio); SIU de Puerto Rico Caribe y Latino Americo v. Virgin Islands Port Authority, 42 F.3d 801 (3d Cir. 1994) (contract void where no authority to enter). No such threshold legal infirmities affected the formation of a valid contract here. An alleged unilateral mistake in pricing on the part of an offeror undiscovered until after award does not rise to the level of a serious legal impediment or cross the line of palpable illegality which renders the contract void ab initio. See John Reiner & Co. v. United States, 325 F.2d 438, 440 (Ct. Cl. 1963), cert. denied, 377 U.S. 931 (1964) ("In testing the enforceability of an award made by the Government where a problem of the validity of the invitation or the responsiveness of the accepted bid arises after award, the court should ordinarily impose the binding stamp of nullity only when the illegality is plain."). Was SSA Required to Issue a Cure Notice? ISG's assertion that the Government was required to issue a cure notice in this case lacks merit. The contractor miscertified regarding provision of domestic end products and repudiated its obligation to deliver such products. In light of these circumstances and the termination for cause clause in this contract, there was no need to issue a cure notice. Moreover, the contractor has suggested no purpose which could have been served by issuing a cure notice given the contractor's express communication to the Government that it was not required to perform; it was appellant's firm position that there was no contract, thus making a cure notice a futile gesture. It is well established that where the contractor manifests an intention not to perform the contract the Government need not issue a cure notice before terminating the contract for default. E.g., Chambers-Thompson Moving & Storage, Inc., ASBCA 43260, 93-3 BCA 26,033, at 129,408; American General Fabrication, Inc., ASBCA 43518, 92-2 BCA 24,955, at 124,362; Great Northern Forestry Service, AGBCA 85-260-1, et al., 90-2 BCA 22,668, at 113,877. Moreover, the termination here post-dated the delivery date established in the contract. Decision The appeal is DENIED. ________________________________ MARY ELLEN COSTER WILLIAMS Board Judge We concur: _______________________________ ________________________________ JOSEPH A. VERGILIO ALLAN H. GOODMAN Board Judge Board Judge