Paragraphs (a)(1)(ii) and (a)(1)(iii) of the standard Default clause for supply and services contracts refer to failure to make progress endangering performance or failure to perform a provision of the contract other than delivery on time. The government's right to terminate under these two provisions of the clause, however, only exists if the government issues a cure notice and gives the contractor at least 10 days to cure the failure. The 10 days may be extended in writing by the contracting officer.
The format for the cure notice is in FAR 49.607(a).
In preparing the cure notice, the government must specify the failures, provide a reasonable time for the contractor to cure them and suggest what the contractor needs to do to accomplish the cure. The contractor, on the other hand, may use the failure to provide the cure notice or its inadequacy as an absolute defense in its termination for default appeal.
So, how should a contractor respond to the cure notice?
The first rule is that this is serious business and the response must be robust, thorough, complete, detailed and persuasive. Now is the time to treat the matter very seriously and devote all the resources the contractor can muster to prepare a convincing response.
The contractor must show that the failure to perform arises from causes beyond control and without its fault or negligence. Show in detail. Among the listed possible causes are acts of the government in its contractual or sovereign capacity. Eight other possible causes are listed in the clause. But just asserting a cause from the list is not enough. Not by far. Each cause must be fully documented and supported. This is the time to put together every document the contractor can find to support its response.
Acts of the government in its contractual capacity often form the basis of a successful response to a cure notice. Now is the time to look for changes for which the government is responsible. Among these are defective specifications, failure to disclose vital information, lack of cooperation, interference from government personnel, commercial impracticability and lack of good faith and fair dealing. In other words, if the contractor has a request for equitable adjustment (REA) under the changes clause, now is the time to assert it in defense of the threat to terminate for default.
A valid REA defeats a termination for default. But the contractor has not finished its response by merely asserting a just cause for its failure. The contractor must go on to lay out a plan for how to cure the problems raised by the government. This may be the most difficult part of all because it may well involve the cooperation of the government. In the final analysis, a strong REA may carry the day and force the government to reconsider the propriety of termination for default.
bill@spriggsconsultingservices.com bill@spriggslawgroup.com
Thursday, January 25, 2018
Friday, January 19, 2018
GOVERNMENT WAIVER OF CONTRACT TERMS
The government can specify contract requirements even if they seem ill-advised. In fact, the government can require contractors to perform work which, by any reasonable standard, may be unnecessary and even stupid. It has long been held that the government "can engage a contractor to make snowmen in August, if [it spells] it out clearly." Rixon Electronics, Inc. v. United States, 536 F.2d 1345, 1351 (Ct. Cl. 1976).
Moreover, if the contractor fails to perform the work believing it to be unnecessary or ill-advised, the contractor may be terminated for default or the government may make a downward equitable adjustment under the Changes clause and deduct from payments owned the contractor the cost that the contractor would have incurred if it had complied with the contract. When all else fails, read the contract. Then, follow it.
However, the government may waive compliance with the contractual requirements through its actions or inactions and thereby be prevented from enforcing the requirements. We all are familiar with the doctrine of waiver of due date in default termination cases. However, the waiver doctrine has broader application and can shield a contractor from liability for failure to follow contract requirements which, by the government's action or inactions, appear to be unnecessary.
"There can be no doubt that a contract requirement for the benefit of a party becomes dead if that party knowingly fails to exact its performance, over such an extended period, that the other side reasonably believes the requirement to be dead." Gresham & Co. v. United States, 470 F.2d 542- 554 (Ct. Cl. 1972).
Breaking the rule down, the contractor must show the government acts "knowingly". Then there must be an extended period of time such that the contractor reasonably believes the government is not going to enforce the requirement. Because it is dead. Each case turns on its facts. So contractors are well-advised not to pronounce the requirement dead until it appears from the government's actions or inactions that the government knows of the requirement, has considered it and let sufficient time go by that a reasonable person would presume the requirement is dead.
The doctrine of waiver, akin to the doctrine of estoppel (preventing enforcement of an apparent right) is alive and well. It may also be true that a contract requirement is dead.
bill@spriggsconsultingservices.com bill@spriggslawgroup.com
Moreover, if the contractor fails to perform the work believing it to be unnecessary or ill-advised, the contractor may be terminated for default or the government may make a downward equitable adjustment under the Changes clause and deduct from payments owned the contractor the cost that the contractor would have incurred if it had complied with the contract. When all else fails, read the contract. Then, follow it.
However, the government may waive compliance with the contractual requirements through its actions or inactions and thereby be prevented from enforcing the requirements. We all are familiar with the doctrine of waiver of due date in default termination cases. However, the waiver doctrine has broader application and can shield a contractor from liability for failure to follow contract requirements which, by the government's action or inactions, appear to be unnecessary.
"There can be no doubt that a contract requirement for the benefit of a party becomes dead if that party knowingly fails to exact its performance, over such an extended period, that the other side reasonably believes the requirement to be dead." Gresham & Co. v. United States, 470 F.2d 542- 554 (Ct. Cl. 1972).
Breaking the rule down, the contractor must show the government acts "knowingly". Then there must be an extended period of time such that the contractor reasonably believes the government is not going to enforce the requirement. Because it is dead. Each case turns on its facts. So contractors are well-advised not to pronounce the requirement dead until it appears from the government's actions or inactions that the government knows of the requirement, has considered it and let sufficient time go by that a reasonable person would presume the requirement is dead.
The doctrine of waiver, akin to the doctrine of estoppel (preventing enforcement of an apparent right) is alive and well. It may also be true that a contract requirement is dead.
bill@spriggsconsultingservices.com bill@spriggslawgroup.com
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