Hard Hat Case Notes

• Author: By Christopher M. Burke and Lauren P. McLaughlin
• Pages: 35-37

THE CONSTRUCTION LAWYER 35Spring 2020

Christopher M. Burke Lauren P. McLaughlin

Published in The Construction Lawyer, Volume 40, Number 2, Spring 2020. © 2020 American Bar Association. Reproduced with permission. All rights reserved. This information or any portion

thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

HARD HAT CASE NOTES

By Christopher M. Burke and Lauren P. McLaughlin

Christopher M. Burke is a partner with Varela, Lee, Metz

& Guarino, LLP in Tysons Corner, Virginia. Lauren P.

McLaughlin is a partner with Smith, Currie & Hancock

LLP in Tysons Corner, Virginia.

Court of Federal Claims Rules That Government’s Default

Termination Was Improper

Default termination cases are among the most hotly con-

tested construction disputes. In a recent decision from the

U.S. Court of Federal Claims, the court addressed the

reasonableness of a contracting ofcer’s determination

that a contractor was unable to timely complete a project.

In 2014, the government and Alutiiq Manufactur-

ing Contractors, LLC (AMC) entered into a xed-price

contract for the performance of certain repair works at

Buckley Air Force Base in Aurora, CO. AMC commenced

work in September 2014 and encountered some initial

delays brought on by AMC’s failure to timely provide cer-

tain submittals as required by the contract. While these

matters did cause some delay, the court determined that

“[w]hile there were clear deciencies in AMC’s contract

performance, those deciencies would not have been fatal

to completion of the contract within thirty days or less

of the 400-day performance deadline.”

Owing to AMC’s performance failures, the govern-

ment issued a letter of concern and, then, on March 24,

2015, issued a Cure Notice. In the Cure Notice, the gov-

ernment identied AMC’s problems with submittals and

criticized AMC’s construction schedules. The government

demanded that AMC cure the problems and warned that

the government may terminate the contract for default.

In the weeks following the Cure Notice, AMC responded

to the notice, made several personnel changes, and sub-

mitted a revised baseline schedule that was approved by

the government.

Despite these changes and schedule approval, on May

1, 2015, the government issued a Revised Cure Notice that

cited additional AMC failures in scheduling and man-

aging the work. In response to the Revised Cure Notice,

AMC made some additional personnel changes and sub-

mitted a letter wherein AMC complained that unforeseen

subsurface conditions and change orders had impaired

its scheduling practices. AMC also prepared and submit-

ted a recovery schedule that projected timely completion

of the project.

The government performed a “cursory” review of

AMC’s recovery schedule but did not perform a detailed

or critical path analysis of the schedule. Nevertheless, on

June 8, 2015, the government issued a termination for

default notice to AMC, citing, among other things, AMC’s

alleged failure to “prosecute the construction project with

the diligence that will ensure its completion within the time

specied in the contract.” The government also cited to the

“belief of the onsite government personnel that the project

is now at least 10% behind schedule.”

AMC led a complaint with the Court of Federal

Claims seeking, among other things, that the default ter-

mination be overturned and converted to a termination

for convenience. Following discovery, AMC led a motion

for summary judgment on the matter of the default ter-

mination, but the court held that issues of fact precluded

summary adjudication prior to trial. Following a trial

on the merits and post-trial submissions, the court took

up the issue of the propriety of the default termination.

The court ruled that the government’s default ter mi

-

nation was improper and that it would be converted to a

convenience termination. The court principally relied on

the standard set out in Lisbon Contractors, Inc. v. United

States, 828 F.2d 759 (Fed. Cir. 1987). The Lisbon case con-

cerned a default termination based on schedule-related

issues. In that case, the Federal Circuit ruled that in order

to sustain a default termination, the government must

demonstrate a “reasonable belief on the part of the con-

tracting ofcer that there was no reasonable likelihood

that the [contractor] could perform the entire contract

effort within the time remaining for contract perfor-

mance.” The AMC court also identied several factors

that should be considered in making such a determina-

tion, including: (i) percentage of work completed versus

time remaining for performance; (ii) failure to achieve

milestones; (iii) problems with subcontractors or sup-

pliers; and (iv) other pertinent performance factors. The

Lisbon court also noted the FAR provisions governing

default terminations, including the government’s duty

to review the “specic failure of the contractor and the

excuses for the failure.”