Government Contracts Default Termination Failed to Consider Applicable Factors
Monday, July 29, 2019

Default Termination Failed to Consider Applicable Factors

By Government Contracts Editorial Staff

The Court of Federal Claims ordered the government to convert a termination for default to a termination for convenience because, regardless of whether the contractor could have timely completed the runway repair contract, the contracting officer’s termination decision was not based on a reasonably held belief that the contractor could not finish the project. The government issued a letter of concern and initial cure notice regarding the contractor’s personnel issues, failure to obtain an asphalt subcontractor and submit a quality control plan and routine documents, and “unreasonable” schedules. Although the contractor made personnel changes and submitted an asphalt design, revised baseline schedule, and quality control plan that the government approved, the government issued a revised cure notice. In response, the contractor developed a recovery schedule that anticipated completing the project two days before the contract’s projected completion date. After the CO’s representative performed a “quick glance” analysis of the recovery schedule, the CO issued a notice terminating the contract for default because of the contractor’s inability to secure an asphalt subcontractor; personnel gaps in the contractor’s management team; the contractor’s failure to submit records, as-built drawings, routine documents, and photos; and “a belief of the onsite government personnel that the project [was] at least 10% behind schedule.”

Dishonesty and Hostility. A termination for default must be based on the CO’s reasonable belief “that there was no reasonable likelihood that the [contractor] could perform the entire contract effort within the time remaining for performance” (34 CCF ¶75,358) and “tangible, direct evidence reflecting the impairment of timely completion” (47 CCF ¶78,039). Here, the government’s termination analysis considered only two of the factors set out in FAR 49.402-3(f): the terms of the contract and applicable laws and regulations, and the contractor’s specific failures. It did not consider excusable delay, such as rain delays, the urgency of the need of the runway, or the period of time required for other sources to complete performance—the “improvident” termination delayed completion of the time-critical project by approximately one year. The analysis also failed to consider “other pertinent facts and circumstances,” such as the contractor’s improved performance after personnel changes and the problems with the asphalt specifications. It appeared the government made the termination decision before receiving the contractor’s recovery schedule, and the COR’s dishonesty and hostility towards the contractor undercut the CO’s ability to form an independent and reasonable belief regarding the contractor’s ability to complete the contract on time. (Alutiiq Mfg. Contractors, LLC v. U.S., FedCl, 63 CCF ¶81,689)

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