Payne Hackenbracht & Sullivan
Termination for Default
In order for the government to prevail in defending a termination for default, it must establish that its termination of the contract for default prior to the contract completion date was proper and correct. Lisbon Contractors, Inc. v. U.S., 828 F.2d 759 (Fed. Cir. 1987). Since a default termination is such a drastic action, the government also must show that its determination was well-grounded and supported by solid evidence. J.D. Hedin Construction Co. v. U.S., 408 F.2d 424 (Ct. Cl. 1969). Moreover, the agency must demonstrate by convincing evidence that there was no reasonable likelihood that the contractor could complete the work on time. Southwest Marine, Inc. San Pedro Division, ASBCA No. 28196, 86-2 BCA 19,005; Shipco General, Inc., ASBCA No. 29206, 86-2 BCA 18,973; Lisbon, supra. The untimely performance of work which does not affect the critical path does not provide a basis for a default termination. G.M. Shupe Inc. v. U.S., 5 Cl.Ct. 662 (1984). It is improper for the government to terminate a contractor for failure to make progress where the contractor reasonably can be expected to complete the project on time. See Shipco General, Inc., ASBCA No. 29206, 86-2 BCA 18973; Western Contracting Corporation ENG BCA Nos. 3835 et al., 82-1 BCA 15486; Lisbon, supra. The government must consider all relevant factors in determining whether to terminate a contract for default. Darwin Construction Company, Inc. v. U.S., 811 F.2d 593 (1987). If the totality of the circumstances indicates the unsupported and arbitrary nature of the decision to terminate for default the law requires conversion of the action to a termination for convenience. Executive Elevator Service, Inc., VABCA No. 2152, 87-2 BCA 19,849; Hewitt Contracting Co, Eng BCA Nos. 3790 et al., 79-2 BCA 14,016.
The FAR requires the contracting officer to consider a number of factors in order to justify a termination for default. (See FAR 49.402-3(f)).
Where the evidence establishes that an Appellant could have indeed completed performance by the extended date, then a termination for default for failure to complete is not proper. See Preston-Brady Co., VABCA No. 1849, 86-2 BCA 18,860; see also Hewitt Contracting Co., ENG BCA Nos. 3790 et al., 79-2 BCA 14,016, where the Board noted that the termination for default did not rest on a sound basis, because the CO acted on the postulate that the contractor was in default of a schedule to complete, when the time given the contractor for excusable delays was inadequate to cover the time actually due. More recently, in D. W. Sandau Dredging, ENG BCA No. 5812, 96-1 BCA 28,064, the Board overturned a default, determining that the CO had incorrectly failed to recognize additional time due a contractor as a result of a differing site condition. There the Board noted that the completion date that had to be used in analyzing whether there was a reasonable likelihood of the contractor completing performance in a timely manner was the original completion date plus the appropriate extension of time. AGBCA No. 94-165-1, Harry and Keith Mertz Construction, Inc.