- Posted by John P. Ahlers
- On April 20, 2018
In a recent Board of Contract Appeals case, an Afghani general contractor performing work for the US government (Army) in Afghanistan got a wake-up call that when it comes to termination for convenience clauses, the boards and courts will, unless good cause is shown otherwise, strictly enforce deadline clauses. FAR 52.249-2 provides as follows:
- (e) After termination, the Contractor shall submit a final termination settlement proposal to the Contracting Officer in the form and with the certification prescribed by the Contracting Officer. The Contractor shall submit the proposal promptly, but no later than 1 year from the effective date of termination, unless extended in writing by the Contracting Officer upon written request of the Contractor within this 1-year period. However, if the Contracting Officer determines that the facts justify it, a termination settlement proposal may be received and acted on after 1 year or any extension. If the Contractor fails to submit the proposal within the time allowed, the Contracting Officer may determine, on the basis of information available, the amount, if any, due the Contractor because of the termination and shall pay the amount determined. (emphasis added).
The general contractor submitted a termination for convenience claim in the amount of $462,160 five years after its contract was terminated for convenience. The government moved to dismiss the contractor’s claim for failure to file within the FAR 52.249-2(e) one-year deadline. The Board agreed with the government and the contractor’s claim was barred by the requirement of the FAR that a termination settlement proposal must be filed within one year. The Board dismissed the contractor’s claim leaving it without any remedy for the costs it incurred prior to the government’s termination for convenience.
A particular trap exists for general contractors who fail to submit a subcontractor’s pass through termination claim within a year. A trap also exists for general contractors who sit on a termination claim for itself and its subcontractors, and then expose themselves not only to the general contractor’s own loss, but also to the damages of the subcontractors whose claim is deemed waived by the general’s lack of action.
That is what occurred in Ebasco Constructors, Inc. v. Ahtna, Inc. The general contractor, Ebasco, entered into an agreement with a native corporation, Ahtna, to perform work on the Alaskan Over the Horizon Radar project. Eventually, due to the cold war ending, the project was canceled. Ahtna was encouraged to submit a termination for convenience claim, which it did, and then Ebasco failed to follow-up on the claim against the government within the one-year deadline set forth in FAR 52.249-2. Ebasco lost its ability to recover monies from the government, but Ahtna commenced an arbitration against Ebasco and prevailed on its $1.7 million claim. Ebasco not only lost its opportunity to obtain payment for its termination for convenience damages from the government, but it ended up paying all of Ahtna’s claim costs, prejudgment interest, post-judgment interest, and attorney’s fees as well. A tough lesson for a general contractor that FAR deadlines mean what they say.
 Appeal of Black Bear Construction Company, ASBCA No. 61181, 2017 WL 5951381 (Nov. 14, 2017).
 932 P.2d 1312 (Alaska 1997).