Government Contracts Conflict of Interest Didn’t Limit Convenience Termination Recovery
Tuesday, November 13, 2018

Conflict of Interest Didn’t Limit Convenience Termination Recovery

By Government Contracts Editorial Staff

An apparent conflict of interest did not limit the contractor’s recovery of termination for convenience costs, according to the Armed Services Board of Contract Appeals, because there is no requirement that a contractor be without fault to recover its costs and the government could not convert the termination to one for default. The dispute arose from a contract to manage the TRICARE Managed Care Support Program, which is a supplemental health benefit provided to military service members, military retirees, and their family members. Shortly after contract award, the Government Accountability Office sustained a protest, which required the government to issue a stop-work order. Among other things, GAO found there was the appearance of an impropriety because the contractor had hired a former government official and allowed him to work on part of the contractor’s proposal (24 CGEN ¶112,966). Six months after GAO issued its decision, and more than nine months after issuing the stop-work order, the government terminated the contract for convenience.

Termination for Convenience Provision. FAR 49.201, which sets forth the general principles for fixed-price contracts terminated for convenience, requires that the terminated contractor be compensated fairly for the work performed prior to the termination. The government argued that the contractor’s purported responsibility, due to its hiring of a former government official and creating the appearance of a conflict of interest, limited the contractor’s ability to recover pursuant to FAR 49.201. However, unlike the FAR’s termination for default provision, there is no requirement in FAR 49.201 that the contractor be without fault. Moreover, as the board had previously ruled, the government cannot convert a termination for convenience into a termination for default (76-2 BCA ¶12,018). Thus, the fact the government might have terminated the contract for default was irrelevant to resolving the contractor’s appeal regarding its termination settlement proposal, and the contractor was entitled to recover its allowable costs. (Phoenix Data Solutions LLC, ASBCA,¶95,598).

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