Contractors seeking to challenge a termination for default may first have to file a claim with the contracting officer. The Government can terminate a contract for default if the contractor fails to timely perform or falls so far behind that the Government believes that the contractor will not finish on time. Often the reason that the contractor falls behind in the schedule is that there were delays on the contract. Sometimes these delays are excusable (i.e., not the contractor’s fault and beyond its control) but the contractor has not received a time extension for these excusable delays. Alternatively, there may have been constructive changes to the contract that changed the scope of the work and delayed performance. In both those instances, the contractor will want to argue that the Government’s termination for default was improper because the contractor was entitled to more time to perform.
A recent decision of the Armed Services Board of Contract Appeals (“ASBCA”) is a reminder that just filing an appeal of the termination for default decision is not enough. If the contractor wants to assert defenses to the termination – such as excusable delay or constructive changes – it must file an affirmative claim for excusable delay or constructive changes with the Contracting Officer and appeal from the Contracting Officer’s final decision on that claim. DCX-CHOL Enterprises, Inc., ASBCA No. 61636 (July 11, 2019).
In the DCX-CHOL case, the government terminated two contracts to deliver sonar system subcomponents for default after the contractor missed the deadline for delivering first article testing samples. The contractor filed an appeal challenging the validity of the terminations and asserted defenses of government-caused delays, constructive changes to the contract, and government waiver of the schedule. The Government moved to strike the delay and constructive change defenses arguing that the ASBCA did not have jurisdiction to hear those defenses because the contractor never filed delay or constructive change claims with the Contracting Officer.
The ASBCA granted the motion to strike the defenses relying on the Federal Circuit’s decision in M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323 (Fed. Cir. 2010). In the Maropakis case, the Federal Circuit held that when a contractor seeks an adjustment of contract terms, the contractor must meet the jurisdictional requirements and procedural prerequisites of submitting a claim to the Contracting Officer for a final decision regardless of whether the contractor is asserting the claim as an affirmative claim or as a defense to a government action such as a termination for default. Absent a claim and a final decision on the claim, the boards of contract appeals and the courts lack jurisdiction over the defense.
The ASBCA held that DCX-CHOL’s affirmative defenses of excusable delay and constructive changes were claims that had to be submitted to the Contracting Officer for a final decision because the contractor was seeking to change the terms of the contract. Namely, the contractor was seeking a time extension or equitable adjustment to the contracts. Since the contractor had not submitted these claims to the Contracting Officer, the ASBCA lacked jurisdiction to decide the merits of these claims.
Contractors seeking to challenge a termination for default must carefully examine their defenses to the termination to see if they first need to file affirmative claims with the Contracting Officer. Not all defenses will require the submission of an affirmative claim. For example, a defense of prior material breach or waiver by the Government generally will not be considered a claim that has to be submitted to the Contracting Officer. To the extent, however, that the contractor is seeking to change the terms of the contract – such wanting a time extension or other equitable adjustment – the contractor will need to submit a claim to the Contracting Officer or it will not be able to assert its defense.