A contractor performed a project involving the construction of stone dike extensions and other work at four sites on the Mississippi River. Nelson, Inc. ASBCA No. 57201 (December 15, 2015). One of the issues was whether the four distinct sites were separable for purposes of applying the Termination for Default clause (FAR 52.249-10). In other words, the question was whether the contractor could be terminated for failing to diligently prosecute the work on one of the four work sites, even though the overall contract allowed 165 days for completion. The Board stated that “Where a contract is separable (sometimes also referred to as severable, or divisible) and a contractor is delinquent only as to a separable part of the contract work, it is improper for the contracting officer to terminate for default the entire contract.” The contractor would not be prohibited from continuing performance on any of the sites where work was being performed in a timely manner.
Termination for Default
Defenses to a Termination for Default
In a post published in 2013, we addressed the use of termination for default as a weapon. Unfortunately, construction contractors who fall behind schedule are automatically on the defensive and they rarely find that contracting officers are willing to concede government responsibility. The government, of course, is in a difficult position when it must explain to its customer – the end-user – that the scheduled completion date will not be met. All too often, instead of admitting that the contractor is not responsible, the threat of a termination for default is held over the contractor’s head because it is easier to blame the contractor than to admit that the government made a mistake.…
Continue Reading Defenses to a Termination for Default
Termination for Default as a Weapon
There is no doubt that the government has the right, and even the responsibility, to terminate a contract completely or partially for default “if the contractor fails to (a) make delivery of the supplies or perform the services within the time specified in the contract, (b) perform any other provision of the contract, or (c)…
Court Throws Out Government Claim for Excess Reprocurement Costs
By: Edward T. DeLisle
If a government agency terminates a construction contractor for default, it cannot then sit on its hands. The agency must re-procure and complete that project within some reasonable amount of time. Failure to do so may result in the dismissal of any subsequent claim for excess costs to reprocure and finish…
Court Reverses Termination for Default and Criticizes the Army Corps of Engineers for Failing to Acknowledge Its Defective Design
By: Michael H. Payne
A decision was issued by the United States Court of Federal Claims on December 20, 2011, in Martin Construction Co. v. United States, a case involving a Corps of Engineers construction project in North Dakota. Martin was represented by Michael Payne and Joseph Hackenbracht, of Cohen Seglias Pallas Greenhall …
Termination for Default Sustained in Barracks Renovation Case
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 Termination for Default Sustained in Barracks Renovation Case