Appeal of

FLAMINGO INDUSTRIES LTD.

Under Contract No. 102590-97-B-1770

PSBCA No. 4121

APPEARANCE FOR APPELLANT:
George P. Eshoo, Esq.

APPEARANCE FOR RESPONDENT:
Peter J. Henry, Esq.

OPINION OF THE BOARD ON MOTION FOR SUMMARY JUDGMENT

            Appellant, Flamingo Industries Ltd., has appealed from the decision of the contracting officer terminating for default its contract with Respondent, United States Postal Service, to produce a quantity of mail sacks.  Respondent has filed a motion seeking summary judgment in its favor in this appeal.  For the purpose of deciding this motion, the following findings of fact are made.

FINDINGS OF FACT

            1.  Contract No. 102590-97-B-1770 was awarded to Appellant on May 30, 1997.  The contract required Appellant to produce and deliver a total of 2,000,000 woven plastic mail sacks, at a minimum rate of 100,000 per week for three weeks beginning the week of June 30, 1997, and 200,000 per week thereafter until completion (with a final delivery of 100,000 units) during the week of September 15, 1997.  The contract price was $0.535 per unit, for a total contract price of $1,070,000.  (Respondent's Appeal File Tab (RAF) 1 (Sec. C, ¶7; Sec. I, att. 7A)).

            2.  As part of the contract, Appellant indicated that it would be producing the sacks in two locations – Oakland, California and Houston, Texas.  The contract contained a First Article Approval clause, applicable only to the Oakland facility, which required Appellant to deliver ten sacks as first articles for Postal Service testing within 15 days of contract award – i.e., by June 14, 1997.  (RAF 1 (Sec. A, ¶1b)).

            3.  By letter dated July 22, 1997, Appellant informed Respondent that the machinery at both of its factories was incapable of producing sacks of the length required by the contract and that this problem had only been discovered after they had begun production.  Appellant stated that special parts to solve the problem had been ordered and were expected to be delivered that week.  Appellant indicated that it expected to begin shipping after the first week in August and to make up all lost time.  (RAF 22).

            4.  Appellant did not ship any sacks from the beginning of the contract through the week ending August 15, 1997.  By letter of August 15, 1997, the contracting officer partially terminated for default the portion of the contract representing deliveries that had not been made from the beginning of the contract to that date.  The total quantity terminated was 1,100,000 sacks.  (RAF 18).

            5.  On or about September 2, 1997, Appellant shipped a quantity of at least 72,000 sacks and also submitted the first article quantity of ten sacks from the Oakland facility.  Both the 72,000 sacks and the first articles were received on September 10, 1997.  By letter to Appellant, dated September 15, 1997, the contracting officer disapproved the first article samples, citing five specific deficiencies:

1.  One dimension, required to be 0.75 in. with a tolerance of ±0.25 in. was measured at 1.25 in. – i.e., beyond allowable tolerance.
2.  Side seam used on samples was not one of the allowed seams, per FED-STD-751.
3.  Identification markings on the sacks printed in red, instead of the required black.
4.  "Recyclable" symbol printed in two places, rather than only one place as required by the specification.
5.  Contract number not printed on the sacks, as required.  Also, month and year of manufacture printed instead of just year, as required by specifications.  (RAF 8, 10-15).

            6.  By letter dated September 16, 1997, Appellant, through its president, Arthur Wah, replied to the contracting officer's letter of rejection.  In his letter, Mr. Wah stated that, with the exception of no. 2, all the deficiencies listed above (Finding 5) could be and would be corrected.  With respect to no. 2, the type of seam, Appellant argued that the seam used was the same as had been used in earlier sacks provided by Appellant and that it was stronger and more easily automated than the seam specified in the contract specifications.   Mr. Wah asked to come to Washington, DC to discuss this matter with the appropriate people and asked the contracting officer if she would arrange such a meeting.  (RAF 9).

            7.  In a final decision dated September 19, 1997, the contracting officer terminated for default the balance of the contract, with the exception of the 72,000 sacks received on September 10, 1997 (Finding 5).  The contracting officer stated that any specification-compliant sacks received by September 19 would be considered for acceptance solely for the purpose of mitigating damages.  Appellant filed a timely appeal of the termination.  (RAF 8). 

DECISION

            In order to prevail on a motion for summary judgment, Respondent must show that there are no disputed issues of material fact and that it is entitled to a decision in its favor as a matter of law.

            We have considered Respondent's motion, Appellant's response thereto, Respondent's reply to Appellant's response, and Appellant's response to Respondent's proposed findings of uncontroverted facts.  Viewing the record in the light most favorable to Appellant, as we must in deciding Respondent's motion for summary judgment, United States v. Diebold, Inc., 369 U.S. 654, 655; Hotel Systems, Inc., PSBCA Nos. 3253-3258, 93-3 BCA ¶ 25,922, we are persuaded that Appellant has made out a sufficient case that there are at least some disputed issues of material fact to make summary judgment inappropriate.

            Appellant argues that, based on a course of dealing between it and Respondent, it expected that the sacks it offered for acceptance would be accepted, because sacks had been accepted under earlier contracts, notwithstanding the existence of what Appellant characterizes as similarly minor deficiencies.  In the alternative, Appellant also argues that because the deficiencies in the first article were minor (an issue of fact), it was entitled to a reasonable period to correct them before Respondent could have terminated the contract for default – i.e., that substantial performance had occurred.

            Further, Appellant argues that the contracting officer did not exercise her discretion in deciding to terminate the contract for default, but merely followed directions mandated by others within the Postal Service.  Specifically, Appellant alleges that personnel in Respondent's Mail Transport Equipment division required that Appellant's contract be terminated in order to allow them to procure sacks from a different company.  The degree of the contracting officer's failure to exercise her discretion, if any, is a material factual issue in dispute in this appeal.

            Each of the above arguments^[1] raises questions of fact which should be addressed by the Board in resolving this appeal.  Therefore, as indicated above, although Appellant has not offered a great deal in the way of specific evidence to support its arguments, in our opinion there is sufficient evidence for us to conclude that the motion for summary judgment should be denied and that the hearing in this appeal, scheduled for October 19, 1998, should proceed.

            Respondent's motion for summary judgment is denied.

David I. Brochstein
Administrative Judge
Vice Chairman

I concur:
James A. Cohen
Administrative Judge
Chairman

I concur:
William K. Mahn
Administrative Judge
Board Member

[1]  Appellant also argues that there were a number of telephone calls between it and the contracting officer and/or a member of her staff during the early part of the contract in which Appellant was led to believe that its failure to meet the delivery dates would be "waived" and that it was obligated under the circumstances only to "do its best" to make deliveries.  In support of this argument, Appellant cites only to telephone records it allegedly provided to Respondent during discovery.  However, Appellant failed to provide those records (or any other relevant evidence in support of this argument) to the Board.  Accordingly, while we note this argument as potentially raising a material issue of disputed fact, we do not rely on it in denying Respondent's motion.