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You May Collect Damages For Improper Termination Procedure, If You Prove Prejudice

Friday, February 12, 2010 02:57 am


To recoup damages after the federal government terminates your contract for default, you have to first get the termination converted to one for convenience -- since only that type pays up. FAR entitles a contractor terminated for convenience to payment for work performed, plus a fair profit. However, you won't get your due by simply claiming the government acted improperly.

Replaced with no recourse? Ouch.

In United Partition Systems, Inc. v. United States, 2009

U.S. Claims Lexis 385 (Nov. 19, 2009), the U.S Air Force improperly terminated for default since its contracting officer (CO) did not have the authority to do so. The court converted the termination to one for convenience and awarded contractor United Partition Systems, Inc. (United) $87,000 plus interest, finding there was no doubt that United was prejudiced.

The key to United's success was not that the wrong CO issued the termination but that the Air Force had hired a replacement contractor before giving United an opportunity to cure the alleged defects. At trial, United showed it had been responsive to the Air Force's defect allegations, while the Air Force did not submit United's excusability defense for a decision until two years after it had already terminated United's contract and hired a replacement.

The Air Force claimed United wasn't harmed since it had notified United that an alleged failure to meet fire-rating requirements for the modular building was grounds for termination.

That notification was insufficient, however, since (a) the Air Force was inconsistent [...]

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