You Can't Appeal a Termination Threat, Only a Final Decision

In normal English usage, the term “will” is normally used to express desire or to express futurity (particularly in regard to something a person intends to do, but hasn’t done yet.)  Merriam-Webster’s Collegiate Dict. 11th Ed. 2003.  The Army and its contracting officer (“CO”) seemed to ignore this linguistic convention in terminating a contract for commercial products including printers, keyboards, smart card readers and similar items it awarded to Winn Solutions on Sept. 13, 2023.  Winn Solutions LLC, ASBCA No. 63803, Sept. 18, 2024.

In a termination for cause (default) in a commercial items contract, Federal Acquisition Regulation (“FAR”) 12.403(c)(3) sets forth the procedures that CO’s shall follow:

When a termination for cause is appropriate, the contracting officer shall send the contractor a written notification regarding the termination. At a minimum this notification shall—

                                               i.          Indicate the contract is terminated for cause;

                                             ii.          Specify the reasons for termination;

                                           iii.          Indicate which remedies the Government intends to seek or provide a date by which the Government will inform the contractor of the remedy; and

                                           iv.          State that the notice constitutes a final decision of the CO and that the contractor has the right to appeal under the Disputes clause (see [FAR] 33.211).

Here is the sequence of events:

Sept. 13, 2023             Army awarded a contract to Winn for commercial products, and included  FAR 52.212-3, Contract Terms and Conditions-Commercial Products and                                       Commercial Services

Oct. 12, 2023              Bilateral contract modification extended delivery date to Dec. 12, 2023

Nov. 30, 2023             CO informed WINN that “if the contract is not or cannot be completed no                                      later than …12 Dec. 2023…the CO will terminate for cause …

January 5, 2023           CO by email informed WINN that its “failure to provide software systems…by the required delivery date…and that the CO will terminate for cause for failure to meet the terms and conditions of the contract.  This email was not identified as a CO Final Decision (“COFD”), contained no attachments terminating the contract for cause, and did not advise WINN of its appeal rights under the Contract Disputes Act.

January 5, 2024           CO by email again informed WINN that he “will terminate [WINN] for cause for failure to mee the terms and conditions…due to WINN’s alleged failure to provide the software systems by Dec. 12, 2023.  The email also was not identified as a COFD, contained no attachments terminating the contract for cause and did not advise WINN of its appeal rights under the CDA.  Instead it provided WINN with instructions on how to file a claim, invited WINN to attach claim documents, and stated the claim would be forwarded to the legal department.

Jan. 10, 2024               WINN filed its notice of appeal to the Board, alleging that the CO had terminated the contract for cause.

Feb. 5, 2024                Army informed WINN that the contract was not terminated for cause and that Army would be terminating the contract for convenience of the government.

Before reading the rest of this blog, ask yourself this: On January 10, 2024, could WINN

lawfully file a notice of appeal of the January 5, 2024 CO’s decision?  Take a pause before reading the next paragraph.

The Board noted that there was no documentation from the CO that this was a final decision, and no indication that there was any decision to appeal. The CO had merely warned that the contract would be terminated for cause if WINN failed to meet the terms and conditions of the contract.  And 41 USC § 7103(a) requires that any claim relating to a contract shall be the subject of a CO’s final decision or deemed denial.  In order for the Board to possess jurisdiction over an appeal from a default there needs to be a final decision terminating the contract, followed by a notice of appeal filed within 90 days of its receipt.  The Army CO never issued a COFD terminating the contract for cause—the CO only issued a threat or a warning.  The Board dismissed the appeal for lack of jurisdiction.

Takeaway:  The CO in this case should have followed the procedures in the FAR, if he or she had decided to terminate for cause.  Indeed, if only a threat or warning of the contractor was desired, a preferable approach would have been for the CO to send WINN a “Show Cause Notice” outlined in FAR 49.607, which states the government is “considering terminating the contract under the provisions for default in this contract.”  This would have made the CO’s intent quite clear.  Sending confusing emails to a contractor mentioning that WINN could file a claim is not consistent with the rules.  Finally, the contractor probably should have obtained government contracts counsel before it filed the appeal, and that counsel should have requested immediate clarification of the improper non-final CO decisions.

For other helpful suggestions on government contracting, visit:

Richard D. Lieberman’s FAR Consulting & Training at https://www.richarddlieberman.com/, and Mistakes in Government Contracting at https://richarddlieberman.wixsite.com/mistakes.