EPA several times that funds were needed to obtain the CPU's and that Xerox would retain title to "its" equipment until it was fully paid therefor. For example, on Aug. 20, 1975, Xerox told this to EPA in a letter and EPA acknowledged same (Tab 30). On Sept. 12, 1975, STA told EPA by letter that the lease option had expired on June 30, that there were no funds in the contract

for lease or purchase of Xerox equipment, that Xerox was ready to ship the equipment for the contract but would not do so until payment was made, that STA was no longer able to finance the contractual agreement, and that the only way out that STA saw was for EPA to come up with the money and exercise the purchase options (Tab 31). (However, the Board reads Article VA as only allowing the Government to buy leased equipment prior to June 30, 1975, unless prior thereto the lease was properly extended. Thus either STA was in error in its interpretation of the purchase option or was really suggesting a bilateral agreement under Article 10(B)). STA reiterated this position in a Sept. 23, 1975 letter (Tab 33). The Government responded with a proposed Mod. 10 that extended the CPU rental period from "the effective date of rental initiation *** and continue for a period of one (1) year" (Tab 36). STA returned this unsigned and pointed out that the lease option had already expired, and that the proposed Mod. did not cite funds, nor state rental or maintenance rates. STA suggested other changes

(Tab 36). On October 1, 1975, STA again alerted EPA (Tab 37). On Oct. 31, 1975, STA proposed two alternative methods to obtain the CPU's. Both proposals would expire unless accepted by close of business Nov. 10, 1975 (Tab 40). On Nov. 12, 1975, EPA in a long letter reviewed the negotiations resulting from the Mod. 5 change order, made a "final offer," and concluded (erroneously) that it understood that it could have several more weeks to select one of the two alternatives proposed by STA on Oct. 31. It said "EPA will select one of the two alternatives" (Tab 42). STA replied and reviewed the contract history and situation in a long Nov. 17, 1975, letter, and, in effect, rejected EPA's Mod. 5 final offer (Tab 44). EPA did not issue a final decision on Mod. 5 as it had said it would in its Nov. 12 letter, but instead wrote its Dec. 8, 1975, letter (Tab 47), which again acknowledged that Mod. 5 was a change order and professed not to understand how lack of agreement on the contract price could affect performance of the contract (Tab 47). STA replied by a letter dated Dec. 10 and said in part as follows:

STA cannot meet the agreed-to schedule without the Xerox 550 computers and associated interface equipment. At the present time, and since June 30, 1975, there has been no contract vehicle or obligation of funds by the Government for the acquisition of the computer equipment.

[I]t is unrealistic to threaten default to STA for non-performance on the contract when the burden of performance

lies with the Government to provide adequate financing for the system contracted for.

(Tab 48).

4.24 On Dec. 18, STA advised EPA that STA's offer in its Oct. 31 letter had expired on Nov. 10 and that EPA's Nov. 12 letter was too late to be a timely acceptance. STA enclosed a letter from CitiCorp (not part of our Tab 49) notifying STA of the expiration of the credit arrangements but saying that new credit might be arranged if EPA gave (1) accounting and appropriation data and (2) the total funds obligated for the first year's lease (Tab 49). On Jan. 9, 1976, EPA "directed" STA to obtain the computers "pursuant to the terms and conditions of the subject contract." Next EPA issued a Mod. 13 under the changes clause purporting to extend the lease period for 1 year (Tab 14). STA returned it saying it was unauthorized by the changes clause (Tabs 51 and 54). EPA agreed and said the Mod. had been issued in error and was rescinded (Tab 56). On Jan. 16, 1976, STA offered a new proposal with equipment priced at $1,471,211.10 for Phases I and II, and said that 10 percent thereof was needed as advance lease payments (Tab 52). It also enclosed a proposed revised Article 11 and 12, and a new schedule. On Jan. 22, STA supplied the new proposed price for the required maintenance contract (Tab 55). EPA replied by a letter dated January 23, 1976, directing STA

to obtain the computers and purporting to unilaterally establish a new delivery schedule. It also said "it is mutually agreed that delivery of the Xerox 550 computers to the EPA Ann Arbor facility is a necessary condition to enable you to successfully pursue completion of the contract" (Tab 57). And the letter then said "since the initiation of the

required rental period has not yet occurred [because the computers had not been obtained or installed], the June 30, 1975, expiration date for the rental period has become nugatory and we will deem the contract to provide for expiration thirty (30) days after initiation of the rental period." But the letter said nothing about being a final decision nor about money. STA questioned this letter (Tabs 58 and 60). EPA replied on Feb. 11, 1976, as follows:

It is the desire of the Government to currently contract for the first option year of equipment rental and mainteInance under Contract 68-01-2782. Upon the conclusion of negotiations of proposed Modification No. 13 to Contract 68-01-2782, it is EPA's intent to fund this requirement initially in the amount of $150,000 which is presently reserved as follows:

Currently Obligated (Article

22.C of Contract 68-01-2782) - $ 42, 626 68X0108 E00725 613556EDD2 31.12

68X0108 E00919 613556EDD2 31.12

90,000

17,374

$150,000

(Tab 61.) STA replied by letter dated Feb. 19 (Tab 62) and concluded by saying that "we are on

4.27 On Mar. 8, 1976, the Government issued a letter terminating the contract for default saying in part as follows:

You have, without legal excuse, failed to deliver the Xerox 550 computers to the Environmental Protection Agency (EPA) Mobile Service Air Pollution Control Laboratory by Mar. 5, 1976, as required by Contract No. 68-01-2782 of Aug. 15, 1974, and the Agency's extension thereof, dated Feb. 19, 1976. Further you unequivocally repudiated further performance under the contract in a meeting held Mar. 3, 1976 in the office of the Director of the EPA Contracts Management Division. Effective immediately, Contract No. 6801-2782 is therefore terminated for default and your right to proceed further with the performance of the contract has ceased *

(Tab 69).

Part I-The Government Frustrated Performance by Failing to Timely Buy or Extend the Lease for the Computers

[1] Our ultimate conclusions of law are as follows:

(1) The parties signed the contract with the expectation that STA would obtain and install the computers before May 30, 1975, and that EPA would lease them for 1 month, and that

(2) EPA would exercise its Article 10 option to extend the computer (table 1) rental option (in the month of June 1975) by giving pre

liminary notice May 31, 1975 (Art. 10A), and sign and deliver a SF30 before June 30, 1975 (Art. VA and 10(B)), or that

(3) EPA would, during June 1975 or during a properly unilaterally extended lease period (or one later extended by mutual agreement), buy the computers taking a rental credit of 80 percent for the rent for months 1-12 and 40 percent of the rent paid during the 13th and subsequent months.

(4) EPA did not exercise its option under Article 10 to extend the computer lease period.

(5) The time when the Government could unilaterally exercise its option to extend the computer lease expired July 1, 1975.

(6) The parties by early Mar. 1976 failed to conclude a bilateral agreement to revive the Government's right to lease (and buy) the computers (and other table 1 equipment).

(7) Neither Mod. 1 nor Mod. 5 were the preliminary notice nor the exercise of the option to extend the lease period of the computers.

(8) Nothing EPA did after June 1975 constituted an exercise of the option to extend the lease period of the computers.

(9) STA acted reasonably in continuing performance until Mar. 1976 in the expectation that EPA would obtain funds and enter into a bilateral supplemental agreement under Article 10(B) and thereby establish new rights and duties with respect to lease of computers.

(10) STA was justified in stopping work under the contract in Mar. 1976. Cf. Seven Sciences, ASBCA No. 21079 (Aug. 30, 1977), 77-2 BCA par. 12,730; and cases cited in National Tire Company, Inc., ASBCA No. 18739 (July 16, 1975), 75-2 BCA par. 11,400 at 54,282; G. W. Galloway Co., ASBCA No. 17436 (June 30, 1977), 77-2 BCA par. 12,640 at 61.298; Restatement of the Law of Contracts (1932) Sec. 288 pp. 426, 427; 17A C.J.S. Contracts, $$ 422 (1), 422 (2), fn. 74, § 424, § 452, § 456c; cf. also 17A C.J.S. Contracts, § 578, fn. 71.15, § 461, §§ 610, 614, 463 (2), 464, 468, 473, 505B; Williston on Contracts 3d edition, secs. 677, 677A, 677B; Corbin, Contracts, 1962 edition, sections 1252, 1255, 1256, 1257, 1264, 1320, 1322, 1323; Ned C. Hardy, AGBCA No. 74-111 (Nov. 11, 1977), 77-2 BCA par. 12,848; cf., C. W. Schmid v. United States, 173 Ct. Cl. 302 (1965).

[2] Part II-The Government Waived the Original Delivery Schedule, and Failed to Carry its Burden of Proof That the New Schedule it Attempted to Establish Was Reasonable for it and STA Under the Circumstances Then Existing.

We reach the following conclusions of law in regard to the delivery or performance schedule aspect of this case.

(11) The Government waived the original performance schedule. AMECOM Division, Litton Sys