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Government's Convenience Termination Was a Breach of Contract

A construction contractor was entitled to lost profits, according to the Civilian Board of Contract Appeals, because the government constructively terminated a portion of the contract for convenience by preventing the contractor from performing required unit price work, which constituted a breach of contract. The solicitation for renovation work required offerors to submit a firm-fixed lump sum price for base contract work and firm-fixed unit prices for 17 restoration work items. After the government suspended 11 of the unit price items, the contractor sought anticipatory profits for that work. The government denied it owed the claimed amount, arguing the work was never part of the contract, and even if it were, the contracting officer properly terminated the work for the government's convenience. On cross-motions for summary judgment, the board found a plain reading of the unit price definition and a solicitation amendment indicated the contractor was required to perform all of the unit price work specified in contract drawings. Although the unit prices initially covered work additional to tasks described as "allowances," after the government modified the solicitation there were no remaining allowances for those tasks, so the unit prices covered all of the required work. Thus, the contract unambiguously required the contractor to perform all of the total project quantity restoration work at the applicable rates specified on the unit price bid schedule.

Abuse of Discretion

Also, the government's assertion the contractor could only perform the unit price work by contract modification lacked merit and was inconsistent with the government's actions during contract performance. The government did not modify the contract to cover unit price work above the quantities estimated in the solicitation. Instead, the government simply paid the contractor at the unit prices for all of the work the contractor performed. A contract modification that obligated a specific amount of money to cover unit price work did not change the requirement for the contractor to perform all unit price work shown on the contract drawings. The government, therefore, constructively terminated a portion of the contract for convenience by precluding the contractor from performing some of the unit price work, which the government intended to award to another contractor at a lower price. While there are few limitations on the government's right to terminate for convenience, the government may not terminate a contract simply to obtain a better price for required work. Consequently, this abuse of contracting discretion constituted a breach of contract entitling the contractor to damages in the form of lost profits for the work the government improperly denied. (Sigal Construction Corp. v. GSA, CBCA, 92,876)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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