Terminations Of Government Contracts

"Terminations need not necessarily be the end"

Two days of intense instruction in the rules, the ramifications and the remedies involved in termination of contracts for default and for the Government’s convenience.

An unpleasant feeling. That (and we may be understating it) is what Government contractors customarily get when you raise the subject of contract terminations. And it is probably the reason for the absence of programs devoted exclusively to what is one of the “trauma-topics” in Government procurement. We suspect, in other words, a reaction by some that teaching terminations is like teaching trouble...and nobody wants to learn about trouble.

But we are of a different view. We believe that if you learn about trouble, you can learn to avoid it. Trouble for contractors-who may suffer from having their contracts terminated for default or for the Government’s convenience. Trouble for the Government-which, if it improperly initiates or pursues termination actions, can end up paying more (and getting less) than if it let things stand or resorted to other alternatives.

So Federal Publications developed this unusual program-Terminations Of Government Contracts. And a distinguished faculty has been retained to present it. Its worth is such that we are pleased to offer it to the public.

Both Government and contractor representatives will learn, for example, the grounds for default termination; the valid excuses for default; the damages which may result; and the structured procedures which must be followed. Knowing this (a) contractors may (in given circumstances) be able to convince Government representatives that contemplated default terminations are inappropriate, or may be able to lessen the impact of a termination and (b) the Government will be better able to determine whether (and, if so, how) termination actions should be pressed. Similarly, both parties will be armed with the knowledge necessary to correctly proceed with, and realize maximum reasonable returns from, terminations for the Government’s convenience. All this will be provided to you in two concentrated days of lectures- supplemented by a special course Manual that is yours for future reference.

The time you spend with us will be a trying one-but trying only in terms of the sincerity of purpose necessary to profit from the intense pace of instruction. Keep in mind that (to put it rather whimsically) it is not the intent of this course to instruct you in how to behave at your own funeral. Rather, we seek to guide you in how to prevent such an unhappy consequence or-should it occur-in how to salvage some measure of benefit. Remember...terminations need not necessarily be the end.

Special courses, such as this one, have special characteristics. And ideally, each such customized course requires the services of instructors who have special attributes. . . attributes which meld naturally with the subject and its nuances. Contract Termination is no exception—in fact, if anything, its complexities and consequences impose even greater than normal demands upon the instructors. They must not only be thoroughly conversant with the twists and turns of terminations—they must also be able to convey their expertise to their audience. We are fortunate to have retained a Course Faculty who admirably satisfy these requirements.

Terminations of Government Contracts Course Curriculum

INTRODUCTION

Types of Terminations
1. Default By Contractor
2. Convenience of The Govt
3. No-Cost
Govt vs. Commercial Contracts
1. Distinctions in the Settings
2. Comparison of Rights
3. Comparison of Remedies
4. Ethics Issues

DEFAULT TERMINATION

Standard Contract Clauses
1. What They Say-A Briefing
2. Similarities & Differences
Default vs. Contract Breach
1. Substantive & Procedural Comparisons
2. Contractor & Govt Pros-&-Cons
Govt Right To Terminate
1. Can It Terminate
2. Should It Terminate-The Factors
3. Alternatives To Default Termination
4. Govt Internal Procedures
Grounds for Default
1. Failure To Deliver On Time
  1. Time deemed of the “essence”
  2. Determining the delivery date-first articles, prepods and end items
  3. Partial deliveries
2. Failure To Meet Specifications
  1. “Strict Compliance” doctrine
  2. Contract interpretation factors
  3. Non-conforming work
  4. Govt waiver of specifications
  5. Preproduction models
  6. “Substantial performance” doctrine
3. Failure To Make Progress
  1. Types of progress failures
  2. Govt “cure notice” requirements
  3. Adequacy of contractor’s cure
4. Anticipatory Breach of Contract
  1. Inability to perform
  2. Repudiation & abandonment
  3. Govt demand for assurances
  4. Contractor’s insolvency
5. Failure To Perform Other Provisions
  1. Material contract provisions
  2. Non-material contract provisions
6. Incorrect Grounds for Default
  1. Wrong reason
  2. Existence of other proper reasons
  3. Consequences
Default Excuses
1. General Concepts
  1. Causes “beyond the control & without fault of negligence” of contractor
  2. forseeability of causes
  3. Effect of excusable delay
2. Changes in the Work
3. Defective Specifications
4. Impossibility of Performance
  1. Subjective vs. objective
  2. Actual
  3. Practical or commercial
  4. Contractor assumption of risk
5. Delays
  1. Govt granting of approvals
  2. Govt inspection
  3. Payments by Govt
  4. Labor shortages
  5. Contractor lack of capability
  6. Contractor lack of financing
  7. Inadequate contractor staff & equipment
6. Govt Interference With Performance
7. Govt Failure To Disclose Information
8. Govt-Furnished Property
9. Work Suspensions & Stoppages
10. Differing Site Conditions
11. Govt Sovereign Acts
12. Subcontractor Delays
  1. Lower tier subcontractors
  2. Designated subcontractors
  3. Sole source subcontractor
13. Acceleration of Performance
14. Other Default Excuses
  1. Acts of God or public enemy
  2. Strikes
  3. Unusually severe weather
  4. Unanticipated economic conditions
  5. Embargoes
Proving Excusable Delay
1. Extent of Delay
2. Notice Requirements
3. Concurrent Delay
4. Mitigation of Delay
Govt Waiver of Delivery Date
1. Waiver vs. forbearance
  1. Waiver-elements & consequences
  2. Forbearance-elements & consequences
  3. Govt waiver actions
  4. Contractor reliance
  5. Forbearance becoming waiver
2. Termination After Waiver
  1. Setting a new delivery schedule
  2. Contractor inability to perform
  3. Govt right to terminate
Excess Reprocurement Costs
1. Contractor’s General Liability
2. Measurement of Costs
3. Timeliness of Govt Reprocurement
4. Govt Methods of Reprocurement
5. Similarity of Reprocured Work
6. Govt Completion of Work
Recovery of Progress Payments
1. Govt Right To Recover
2. Value of Govt-Accepted Inventory
3. Cost Reimbursement Contract Situations
4. Deferred Payment Agreements
Liquidated Damages
1. Definition
2. Validity of Damages Amount
3. Substitute for Actual Damages
4. Negotiation of Limitations
5. Apportionment of Concurrent Delay
6. Assessment & Collection
7. Contractor Relief From Liability
Cost-Type Contract Damages
1. The Contract Provisions
2. Measurement of Damagess
Other Damages
1. Govt Administrative Costs
2. Incidental Damages
3. Consequential Damages
Contesting The Default
1. Challenging Validity of Termination
2. Challenging Reprocurement Cost Assessment
3. Methods & Techniques of Proof
4. Contracting officers, Appeal Boards & Courts
5. Reinstatement of Contract

CONVENIENCE TERMINATION

General Considerations
1. Nature of Convenience Termination
2. The Standard Clauses-A Briefing
3. Total vs. Partial Terminations
4. How Convenience Terminations Occur
  1. Contracting officer’s written notice
  2. Erroneous default termination
  3. Erroneous contract cancellation
  4. Constructive terminations
5. Limitations On Govt Right To Terminate
6. Reinstatement of Terminated Contract
Termination Procedures
1. Notice of Termination
2. Work Stoppage
3. Notice To Subcontractors
4. Conferences
5. Disposition of Inventory
6. Settlement of Subcontractors’ Claims
  1. Prime’s negotiations with subs
  2. Settlement authority
  3. Govt approval & Assistance
Contractor’s Dollar Recovery
1. General Rights To Costs & Profit
2. Applicable Cost Principles
  1. Federal Acquisition Regulation
  2. Agency Implementation
  3. Equitable considerations
  4. Reallocation of costs
3. Performance Costs
  1. Pre-contract costs
  2. Initial & preparatory costs
  3. Complete work
  4. Incomplete work
  5. Materials
  6. Non-specification work
4. Post-Termination Costs
  1. Continuing costs
  2. Unabsorbed overhead
  3. Idle facilities
  4. Loss of useful value
  5. Unexpired leases
  6. Disruption & inefficiency
5. Profit
  1. Factors in determining amount
  2. Profit on subcontracted work
  3. Anticipated profit
6. Loss Contracts
  1. “Adjustment for loss” formula
  2. Avoiding the loss formula
7. Contractor's Settlement Expenses
  1. Types of recoverable costs
  2. Documentation required
Partial Terminations
1. Partial Termination vs. Deductive Change
2. Cost of Performing Terminated Work
3. Price Adjustment for Remaining Work
  1. Purpose
  2. Loss of “learning curve” benefits
  3. Reduced material quantities
  4. Other recoverable costs
4. Special Procedures
The Settlement Proposal
1. Purpose
2. Inventory Basis vs. Total Cost Basis
3. No-Cost Settlements
4. Submitting The Settlement Proposal
5. Review Procedures
6. Settlement Negotiations
  1. Negotiation standards
  2. Partial settlement
  3. Settlement Review Board
  4. Contracting officer’s negotiation memorandum
  5. Payment
  6. Retention of records
7. The Results
Disputes
1. Contract Disputes Act of 1978
2. Appeals To Boards & Courts
3. Methods of Presentation & Proof
4. Subcontracting Litigation

Course Faculty

Neil H. O’Donnell Partner in the San Francisco law firm of Rogers, Joseph, O’Donnell & Phillips, where he concentrates on Government contract matters • Member of the American Bar Association’s Public Contract Law Section and Chairman of that Section’s Committee on Disclosure of Information • Lecturer on a variety of procurement issues for business and professional associations • Undergraduate degree, magna cum laude, from Williams College; Juris Doctor degree from Yale Law School, where he served as an Editor of the Yale Law Journal.

Aaron P. Silberman Partner in the San Francisco law firm of Rogers Joseph O’Donnell, where he concentrates on government contracts and construction matters • Counsels contractors, subcontractors, and suppliers in the construction, defense, technology, and service industries on contracts for federal, state and local public entities; helps clients evaluate, negotiate and draft solicitations, proposals and bids; negotiates and evaluates proposed contract terms; litigates bid protests of public contract awards; investigates and litigates claims for delay, disruption, payment, defects, and fraud or false claims; and advises and represents clients in connection with contract terminations, suspension and debarment, bond requirements, mechanics liens and other payment issues, and disabled access issues • Lectures on government contracts and construction law subjects, including false claims, terminations, primesubcontractor payment issues, Building Information Modeling (BIM), green building, IT procurements, abandonment/cardinal change claims, disabled access, and licensing • Currently serves as co-chair of the ABA Public Contract Law Section’s Construction Division, chair of the Specialty Trade Contractors & Suppliers Division of the ABA Forum on the Construction Industry, and co-chair of the Design Professional Liability Subcommittee of the ABA Litigation Section’s Construction Committee • B.B.A., University of Michigan, with honors; J.D., University of California Los Angeles Law School, 1992, with honors; Editor, Environmental Law Review