Government Contracts Terminations for Cause Were Improper
Wednesday, August 8, 2018

Terminations for Cause Were Improper

By Government Contracts Editorial Staff

Appeals from terminations for cause were sustained in part by the Armed Services Board of Contract Appeals because the government waived the delivery dates for some deliverables. The government terminated the contracts to provide arms and accessories for delivery in Iraq for the contractor’s failure to make timely deliveries and to provide adequate assurance of delivery. The contractor argued the government waived the original delivery dates for one contract by acquiescing to an installment schedule that extended far beyond the contractual due date and requesting the latest updated delivery schedule for the purpose of modifying the contract. To prove waiver, a contractor must show failure to terminate within a reasonable time after default under circumstances indicating forbearance, and reliance by the contractor on the failure to terminate and continued performance under the contract, with the government’s knowledge and implied or express consent (15-1 BCA ¶36,073).

Affirmatively Waived. Here, the contracting officer was aware that the delivery date would not be met, and he indicated he would try to modify the contract to reflect the new delivery dates before he was reassigned. Although the there was no agreement on a revised delivery schedule, the government, through the CO, affirmatively waived the original contract delivery date. This conclusion was not affected by the fact that the successor CO did not recognize that a waiver had occurred. The board further concluded the contractor relied on the government’s waiver to its detriment. In particular, as a result of the contractor’s reliance on the government’s assent to more expensive United States ammunition and slower shipment by sea, the contractor lost the opportunity to buy less expensive ammunition that met the contract specifications. Accordingly, the termination for cause was improper and converted to a termination for convenience. (AEY, Inc., ASBCA, ¶95,510)

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