Hard Hat Case Notes

AuthorBy Christopher M. Burke and Lauren P. McLaughlin
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.
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.”

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