B-164887, DEC. 2, 1968

B-164887, DEC. 2, 1968

TO INTERSTATE PRINTING AND LITHOGRAPH CORPORATION:

REFERENCE IS MADE TO A LETTER OF JULY 17, 1968, WITH ENCLOSURES, FROM CONGRESSMAN HERVEY G. MACHEN, CONCERNING A DISPUTE BETWEEN THE INTERSTATE PRINTING AND LITHOGRAPH CORPORATION, AND THE OFFICE OF ECONOMIC OPPORTUNITY (OEO), UNDER A CONTRACT CALLING FOR THE PRINTING OF A LARGE NUMBER OF BOOKS.

IT IS REPORTED THAT IN OCTOBER 1967 THE OEO INFORMATION CENTER REQUESTED THAT THE PROCUREMENT DIVISION OBTAIN THE SERVICES OF A PRINTING COMPANY TO FILL A HIGH PRIORITY ORDER FOR PRINTING THE STATE BY-STATE "SUMMARY OF FEDERAL PROGRAMS" FOR FISCAL YEAR 1967. THE INFORMATION CENTER DESIRED DELIVERY OF THE BOOKS WITHIN 10 WORKING DAYS AFTER RECEIPT BY THE PRINTER OF A COMPLETE SET OF COMPUTER MATS FOR ALL THE STATES SUITABLE FOR REPRODUCTION BY THE OFFSET METHOD AND AFTER RECEIPT OF OTHER GOVERNMENT- FURNISHED MATERIALS. MANY STATES HAD REQUESTED COPIES AS SOON AS POSSIBLE AND COPIES OF THE STATE OF MAINE BOOK WERE REQUIRED FOR A MEETING SCHEDULED FOR NOVEMBER 9, 1967.

A NUMBER OF WASHINGTON, D.C. AREA FIRMS, INCLUDING INTERSTATE, WERE CONTACTED AND A MEETING WITH SIX OF THEM WAS HELD ON OCTOBER 23, 1967, IN OEO'S OFFICES. SPECIFICATIONS FOR THE JOB WERE FURNISHED THE FIRMS AND THEY WERE ADVISED THAT AT LEAST 200 BOOKS WOULD BE REQUIRED FOR MOST STATES. INTERSTATE SUBMITTED THE LOW OFFER OF $0.98 PER PAGE FOR THE FIRST 100 BOOKS AND $0.35 PER PAGE FOR EACH ADDITIONAL BOOK. LITHOGRAPHIC PUBLICATIONS OF MARYLAND, INCORPORATED, WAS SECOND LOWEST AT $0.93 PER PAGE FOR THE FIRST 100 BOOKS AND $0.90 PER PAGE FOR EACH ADDITIONAL BOOK. IT IS REPORTED THAT INTERSTATE WAS AWARDED THE JOB UNDER PURCHASE ORDER NO. C89-1124, ALTHOUGH THE ORDER FORMS WERE NOT ACTUALLY ISSUED AT THAT TIME AS THE NUMBER OF PAGES AND BOOKS WAS NOT THEN KNOWN.

OEO REPORTS THAT DURING PERFORMANCES OF THE CONTRACT AND PRIOR TO THE SCHEDULED DELIVERY, INTERSTATE WAS REQUESTED TO PERMIT OEO PERSONNEL TO INSPECT THE WORK IN PROGRESS TO ASSURE QUALITY CONTROL. HOWEVER, ACCORDING TO OEO, PERMISSION WAS DENIED, AS WAS A REQUEST FOR PRELIMINARY COPIES OF THE WORK. ON NOVEMBER 13, 1967, MORE THAN A WEEK AFTER DELIVERY WAS TO HAVE BEEN MADE, OEO REPORTS THAT 15 COPIES OF THE BOOKS OF 11 STATES WERE DELIVERED. THESE BOOKS REPORTEDLY WERE OF "EXTREMELY POOR QUALITY," HAVING SUCH DEFECTS AS BLURRED OFFSET, STREAKED AND DIRTY PAGES, DUPLICATE COPIES OF SOME PAGES, WRINKLED INK LINES AND PAPER, IRREGULAR PRINTING OF TABBED SEPARATORS, BAD MARGIN CONTROL, POOR WATER CONTROL, IMPROPER DRILLING AND MOUNTING OF COVERS, USE OF DIFFERENT SHADES OF PAPER, AND UNEVEN PAGES.

BECAUSE OF THESE AND OTHER DEFECTS A MEETING WAS HELD ON NOVEMBER 14, 1967, BETWEEN MR. GUTHRIE, PRESIDENT OF INTERSTATE, AND OEO PERSONNEL. MR. GUTHRIE CLAIMED THAT THE SAMPLES DELIVERED WERE NOT REPRESENTATIVE OF THE JOB AS A WHOLE AND INVITED OEO PERSONNEL TO INSPECT THE WORK IN PROGRESS. OEO PERSONNEL IMMEDIATELY WENT TO INTERSTATE'S SHOP. THEY REPORTED BACK WITHIN A MATTER OF HOURS THAT THE SAME "POOR QUALITY WAS APPARENT IN THE BOOKS NOT YET COLLATED AND THAT THE PLANT WAS INADEQUATE TO HANDLE A JOB OF SUCH MAGNITUDE WITH THE REQUIRED QUALITY.' ALTHOUGH OEO CONSIDERED THE POSSIBILITY OF HAVING INTERSTATE REDO THE BAD PAGES, THIS COURSE OF ACTION WAS NOT FOLLOWED BECAUSE OF INTERSTATE'S LATE DELIVERY, UNSATISFACTORY QUALITY OF WORK, AND INADEQUATE CAPACITY. THEREFORE, BY LETTER DATED NOVEMBER 15, 1967, INTERSTATE WAS NOTIFIED THAT ITS CONTRACT WAS TERMINATED.

A CONTRACT WAS THEREAFTER AWARDED TO THE SECOND LOW BIDDER, LITHOGRAPHIC PUBLICATIONS OF MARYLAND, INCORPORATED, FOR A TOTAL PRICE OF $28,000. IS REPORTED THAT HAD INTERSTATE SATISFACTORILY COMPLETED THE JOB, THE COST AT ITS CONTRACT PRICE WOULD HAVE BEEN $20,000. MR. GUTHRIE CLAIMED THAT INTERSTATE HAD INCURRED EXPENSES OF $7,500 PRIOR TO TERMINATION OF ITS CONTRACT. SINCE THE EXCESS COSTS OF REPROCUREMENT WERE $8,000, OEO AND INTERSTATE EXECUTED A MUTUAL RELEASE OF ALL CLAIMS ON NOVEMBER 15, 1967.

IT IS YOUR CONTENTION THAT THE RELEASE WAS OBTAINED UNDER DURESS AND SHOULD, THEREFORE, BE SET ASIDE AND INTERSTATE'S "OUT OF POCKET" EXPENSES OF $7,500 PAID. THE CLAIM OF DURESS IS BASED UPON THE CIRCUMSTANCES UNDER WHICH THE RELEASE WAS OBTAINED. ACCORDING TO MR. GUTHRIE, HE WAS CALLED TO OEO'S OFFICES THE DAY AFTER THE INITIAL DELIVERY WAS MADE "SUPPOSEDLY TO DISCUSS SOME MINOR ERRORS.' HE STATES THAT "AFTER 2 HOURS OF CONTINUAL ARGUMENT, AND AFTER GUARANTYING TO MAKE ANY AND ALL CHANGES REQUESTED * * * THEY ARBITRARILY REJECTED EVERYTHING THAT I HAD OFFERED. AT TIMES, THERE WERE FOUR OR FIVE MEN FIRING QUESTIONS AT ME, AND I ANSWERED ALL QUESTIONS.' HE ALSO STATES THAT HE WAS ACCUSED OF ATTEMPTING FRAUD BY FIXING UP THOSE COPIES GOING TO THE OEO OFFICES AND SENDING DEFECTIVE COPIES TO THE WAREHOUSE. AS TO OEO PERSONNEL'S TRIP TO THE PLANT, HE STATES THAT "THEY WOULD NOT GIVE US A CHANCE TO CORRECT THE BOOKS IN PRODUCTION.' WITH REGARD TO SIGNING THE RELEASE, HE SAYS THAT HE WAS TOLD BY THE CONTRACTING OFFICER THAT "IF I TRIED TO FIGHT THEIR ACTIONS, THE GOVERNMENT WOULD CHARGE ME $5,000 COST TO REPRODUCE THE PAPER PRINT OUT MATS PLUS THE DIFFERENCE IN MY BID AND THAT OF THE NEXT LOWEST BID. THIS POINT, I WAS SO DISTURBED I WOULD HAVE SIGNED ALMOST ANYTHING. SO I SIGNED A RELEASE.'

MR. GUTHRIE ALSO DISPUTES THE DEGREE OF DEFICIENCY IN THE WORK AND ATTRIBUTES PART OF IT TO THE GOVERNMENT'S ACTIONS. HE CLAIMS THAT THE BOOKS WERE ON SCHEDULE UNTIL THE GOVERNMENT ORDERED A CHANGE IN COLLATING OF THE BOOKS AND ELIMINATING A SECTION AND ONE TAB. HE SAYS A FURTHER CHANGE INVOLVING THE FIRST 18 PAGES COMMON TO ALL 52 BOOKS REQUIRED A COMPLETE STOP IN PRODUCTION. THESE CHANGES NECESSITATED TAKING THE BOOKS APART AND REPLACING PAGES, RESULTING IN LOSS OF TIME AND QUALITY.

ALTHOUGH THERE WAS NO FORMALLY EXECUTED CONTRACT IN THIS CASE, ACCEPTANCE OF INTERSTATE'S OFFER CONSUMMATED A VALID AND BINDING CONTRACT. AUTHORITY FOR NEGOTIATING THIS CONTRACT UNDER THE CIRCUMSTANCES HERE REPORTED MAY BE FOUND IN 41 U.S.C. 252 (C) (2), AS IMPLEMENTED BY FEDERAL PROCUREMENT REGULATIONS 1.3-202, WHICH PERMITS NEGOTIATION WHERE THE PUBLIC EXIGENCY WILL NOT ADMIT OF THE DELAY INCIDENT TO ADVERTISING. SINCE AUTHORITY FOR NEGOTIATING EXISTS, AND THERE IS NO STATUTE OR REGULATION REQUIRING CONTRACTS OF THIS NATURE TO BE IN WRITING, AN ORAL CONTRACT IS JUST AS BINDING AS THOUGH IT WERE IN WRITING. ESCOTE MANUFACTURING COMPANY, INC. V UNITED STATES, 144 CT. CL. 452, 459.

IN THE ABSENCE OF THE STANDARD DEFAULT CLAUSE PRESCRIBED BY REGULATION FOR WRITTEN CONTRACTS, THE GOVERNMENT, AS IN THE CASE OF ANY AGGRIEVED CONTRACTOR, HAS THE COMMON LAW RIGHT TO TERMINATE A CONTRACT FOR BREACH. UNITED STATES V STANDARD RICE COMPANY, 323 U.S. 106. WHEN A CONTRACTOR WITHOUT LEGAL EXCUSE FAILS TO CARRY OUT ANY MATERIAL TERM OF HIS CONTRACT, HE IS THEN IN BREACH AND THE GOVERNMENT HAS THE RIGHT TO TERMINATE THE CONTRACT FOR DEFAULT. THE PROPRIETY OF ANY DEFAULT TERMINATION WILL DEPEND ON PROOF OF THE BREACH. APPEAL OF CLARK, ASBCA 9667, 64 BCA 4190 (1964). IN THE INSTANT CASE, WE BELIEVE OEO HAS PRESENTED SUFFICIENT EVIDENCE OF INTERSTATE'S BREACH WITH RESPECT TO AT LEAST THE QUALITY OF WORKMANSHIP, AND POSSIBLY WITH RESPECT TO TIME OF DELIVERY, ALTHOUGH THERE IS SOME EVIDENCE THAT THE FAILURE TO DELIVER ON TIME WAS EXCUSABLE. THEREFORE, IT IS OUR OPINION THAT OEO WAS JUSTIFIED IN TERMINATING THE CONTRACT FOR DEFAULT AND ESTABLISHING THE MEASURE OF DAMAGES AS THE EXCESS COSTS OF REPROCURING THE SERVICES. RUMLEY V UNITED STATES, 285 F.2D 773.

SINCE INTERSTATE'S CONTRACT WAS PROPERLY TERMINATED FOR DEFAULT, IT HAD NO RIGHT TO ANY "OUT OF POCKET" EXPENSES INCURRED PRIOR TO TERMINATION. THEREFORE, IT IS IMMATERIAL WHETHER INTERSTATE IS BOUND BY THE RELEASE OR MAY AVOID IT BECAUSE OF DURESS. HOWEVER, WE DO NOT BELIEVE THE CLAIM OF DURESS IS VALID SINCE THE THREAT TO DO WHAT ONE HAS A LEGAL RIGHT TO DO DOES NOT CONSTITUTE DURESS. MILTON BEATTY, ET AL. V UNITED STATES, 144 CT. CL. 203. MOREOVER, THE GOVERNMENT HAD A COMMON LAW RIGHT TO DAMAGES FOR BREACH OF CONTRACT WHICH SHOULD NOT HAVE BEEN RELEASED AS IT WAS. HOWEVER, SINCE THE PARTIES TO THE RELEASE APPARENTLY BELIEVED EACH HAD A VALID CLAIM WHICH HE WAS RELEASING IN CONSIDERATION OF THE RELEASE OF A VALID CLAIM AGAINST HIM, IT IS DOUBTFUL WHETHER THE GOVERNMENT WOULD BE SUCCESSFUL IN ATTEMPTING TO HAVE THE RELEASE SET ASIDE. THEREFORE, WE ARE NOT RECOMMENDING SUCH ACTION BY OEO.

IN THESE CIRCUMSTANCES, THERE IS NO BASIS UPON WHICH WE MAY PROPERLY ALLOW INTERSTATE'S CLAIM.