Contract Performance Issues

In a recent decision issued on July 6, 2007, Appeals of FFR-Bauelemente + Bausanierung GmbH, ASBCA Nos. 52152, 54563, 54808, 54809, 55017, the Armed Services Board of Contract Appeals held that the government had shown that the Contracting Officer was “justifiably insecure about the contract’s timely completion” and that a termination for default was justified.  The CO and COR (Contracting Officer’s Representative) believed, based on experience with other Corps of Engineers barracks renovations, that nine months was needed for a contractor to perform the barracks renovation work.  After 113 days of the 290 day revised performance period (or almost 40% of the period) expired with little or no work accomplished by FFR (i.e., clearly less than 5% of contract work completed), the CO terminated FFR’s contract for default.  While over 40% of the original performance period had passed, FFR had not yet obtained necessary approvals to commence the initial item of renovation work under the contract, the performance of asbestos abatement. The lack of activity by FFR with respect to the contract obviously made the CO insecure about FFR’s timely completion of the barracks renovation work.

The contractor appeared to be having difficulty procuring a subcontractor to perform asbestos abatement work, failed to meet numerous contract progress milestones (timely submission of a BLG, mobilization within 15 days of issuance of NTP, and timely submission of its asbestos training certificates and other contract submittals), and apparently did not possess a contract performance history with respect to the barracks renovation that instilled confidence in the Contracting Officer.  These facts constituted further tangible, direct evidence that the CO was “justifiably insecure about the contract’s timely completion.”  Thus, the Board concluded that the government has met its prima facie burden of proving it was justified in terminating FFR’s contract for default.

A default termination is a drastic sanction, which should be imposed and sustained only on “good grounds and on solid evidence.” E.g., Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987).  Government contract provisions authorizing termination of a contract for default are a species of “forfeiture” and are to be strictly construed.  Forfeitures are not favored, and one who asserts that there has been a forfeiture is held to the letter of its authority.


Continue Reading

A recent decision by the Court of Federal Claims, AAB Joint Venture v. United States, (January 26, 2007), illustrates some of the subtleties of the Contract Disputes Act of 1978.  The contractor was awarded a design-build contract for a military storage complex.  The government provided a geotechnical report in the solicitation for the contractor’s use in preparing its proposal and subsequent design.  The contractor discovered, during construction, that the actual subsurface conditions differed materially from those represented in the government’s geotechnical report. Specifically, the report stated that the material was “limy dolomite rock, mostly massive and hard.”  However, the contractor discovered that there was less hard rock and more expansive, clayey material.  The latter material adversely affected the contractor’s plan to use shorter piles and spread footings for the building foundations.

The contractor submitted a certified claim to the contracting officer for the impact of the differing site conditions on the length of piles required for the perimeter of the structures, contending that the softer material required longer pile lengths.  When the government failed to issue a contracting officer’s decision, the contractor appealed to the Court of Federal Claims on the basis of a deemed denial of its claim. 

In its complaint, the contractor included a claim for the removal of unsuitable subsurface material in the footprint of the structures and requested a $412,000 equitable adjustment. The government objected to that part of the claim, arguing that the claim had not been presented to the contracting officer and, consequently, had not been certified. The government sought dismissal of the unsuitable material claim because the Court lacks jurisdiction to hear a claim that has not been presented to the contracting officer and certified.
Continue Reading

The U.S. Army Corps of Engineers awarded an $88 million contract for the construction of a fifty-three mile road around a tropical island in the North Pacific. During contract performance, the contractor submitted a certified claim contending that the contract clause, "Time Extensions for Unusually Severe Weather," was defective, resulting in a gross misrepresentation of the number of adverse weather days that could be anticipated during performance of the work.  The contractor also contended that reliance on the defective specification led to an increase in the cost to perform the work. The certified claim included costs incurred up to the date of the claim submission and costs estimated to be incurred in the future.

The United States Court of Federal Claims found that $50 million of the contractor’s certified claim of $63.4 million was clearly fraudulent. During the trial, witnesses, including the corporate officer who certified the claim, testified that the $50 million claim "was a means to get the Government’s attention, and to show the Government what would happen if it did not approve the new compaction method that plaintiff wanted."  The Court stated that this part of the certified claim was not submitted in good faith, and was not for an amount which the Plaintiff honestly believed it was entitled. Daewoo Engineering and Construction Co., LTD. v. U.S., No. 02-1914C, October 13, 2006.  Accordingly, the projected additional costs based on estimates, and not yet incurred, were found to be fraudulent.


Continue Reading

Although a contractor encountered subsurface conditions in a dredging project that it may not have anticipated, it was unable to prove that the hard material was a differing site condition.   The contractor’s claim was that it had encountered a Type I differing site condition. The Armed Services Board of Contract Appeals denied the claim, stating