There is objective evidence. There is subjective evidence. And sometimes, it is a combination of both A case cannot go much worse when a court’s opinion starts with the following: “This case concerns a contract in which a number of disputes, poor practices, and conflicting personalities created a climate of dishonesty, distrust, and lack of effective communication. This resulted in a default termination, and performance concluded more than a year late on a time-critical project.”
In Alutiiq Manf. Contractors, LLC v. United States, the contractor who had been awarded a fixed price, time sensitive contractor to repair pavement at an Air Force base filed suit against the Department of Defense (“Agency”), alleging it had been wrongfully terminated for default. The Agency, through its contracting officer, determined that the contractor could not timely complete the project and, thus, terminated the contractor for default. On appeal, the Court of Federal Claims held that the contracting office lacked a reasonable belief as to the completion of the project. Accordingly, the termination for default was converted to a termination for convenience.
During project performance, the Agency issued a termination for default on the following three grounds: (1) the contractor’s alleged failure to “prosecute the construction project with the diligence that will ensure its completion within the time specified in the contract”; (2) the contractor’s alleged failure to “provide adequate assurances that it would complete the construction within the time specified in the contract”; and (3) the contractor’s alleged failure to adhere to contractual provisions such as providing “adequate supervision on a recurring basis” and compliance with requirements concerning the qualifications of key personnel. The Agency’s construction manager outlined fives “acts or omissions” in justifying his decision to terminate for default:
- the contractor’s inability to secure an asphalt subcontractor;
- personnel gaps in contractor’s management team;
- the contractor’s failure to submit project records and as-built drawings;
- the contractor’s failure to submit routine documents and photos; and
- “a belief of the onsite government personnel that the project is now at least 10% behind schedule”
The court concluded that the Agency could not justify its default termination by merely showing that the contractor was behind schedule. The contracting officer’s decision, according to the court, must be based upon “tangible, direct evidence reflecting the impairment of timely completion.” The court wrote: “It is an objective inquiry that does not turn on the CO’s subjective beliefs.”
In the end, the court said the Agency’s decision was clouded by a bad relationship. The opinion is a good reminder for all those contracting with the government to document all delays, whether with revised schedules, letter’s and emails explaining the schedule circumstances, or photos and videos of the completed work.