The Wheels Of CDA Case Law Go Round And Round: A Case Law Update All Through The Town (Or The First Half Of 2023)

JurisdictionUnited States,Federal
Law FirmArnold & Porter
Subject MatterGovernment, Public Sector, Government Contracts, Procurement & PPP
AuthorMs Kara Daniels and Amanda J. Sherwood
Published date08 August 2023

In this biannual case law update, we ask our readers to join us for a ride on our proverbial bus through developments in Contract Disputes Act case law in the first half of 2023. While CDA litigation is never simple, we take inspiration from time- and toddler-tested rhymes to navigate through the "dark, dark wood." If we cannot live up to the "Little Golden Books" of yore, we hope to at least avoid the travails of the "three blind mice."

"Humpty Dumpty Had a Great Fall": Making the Lemon of a Default Termination into the Lemonade of a Termination for Convenience-The first half of 2023 was marked by a veritable parade of Court and Board decisions converting contractor terminations for default into terminations for convenience. These decisions together provide hope and, in some cases, a road map, should a contractor ever have "a great fall," that "all the king's horses and all the king's men" could in fact put Humpty together again.

Why did Humpty Fall?: A pair of decisions granted the contractor relief from a default termination by finding the Government actually breached the contract before the contractor did. First, in Hughes Grp., LLC v. Dep't of Veterans Affairs, CBCA 5964, 23-1 BCA ' 38,297, the Civilian Board of Contract Appeals held that despite a contractor's performance problems, the agency's prior material breach waived its right to terminate the contract for cause. The VA issued 27 contract deficiency reports to its janitorial contractor, but rather than exercising its right under the contract to terminate for poor performance, the VA simply stopped paying the contractor. Months later, the VA finally paid the contractor in full, without reserving any rights, and then shortly thereafter issued a termination for default. The Board held because the "VA had no legal basis to stop paying Hughes while Hughes continued to work ... the VA breached the contract." Id. Further, the Board reasoned that when the agency paid the contractor in full, "the agency waived Hughes' performance deficiencies to date, and any subsequent campaign to terminate the contract required the VA to issue a new cure notice, which it did not do." Id. The Board explained that the contractor continued performance in reliance on the agency's promise of payment, and "the agency waived the termination due to the amount of time that passed" (five months). Id. The Board accordingly converted the termination to one for convenience.

Similarly, in Schneider Elec. Bldgs. Americas, Inc. v. U.S., 163 Fed. Cl. 708 (2023), the Court of Federal Claims overturned the Government's "drastic decision of terminating Schneider for default after receiving 91.45% of the value of the contract" for implementation of certain energy conservation measures (ECMs) at a Government facility. Id. at 725. The contract followed the structure of the National Energy Conservation Policy Act, whereby contractors incur the upfront costs of acquiring and installing energy savings measures, and in exchange receive a share of any resulting energy savings. One category of ECM the contractor installed were boilers; the Government claimed the boilers never worked properly and, after several alleged boiler failures, refused to pay the contractor's Year 5 invoice (later only remitting a partial payment). After a series of deteriorating interactions, the agency terminated the contract for default, which the Court found improper because, among other reasons, the agency's unilateral withholding of significant portions of the contractor's annual payments constituted a prior material breach. The Court eloquently concluded: "Feeling aggrieved by aspects of Schneider's performance-rightly or wrongly-the U.S.' freewheeling stroll down the road to default termination involved turning away from the paths specifically laid out by the Contract's terms. The party that hastily diverts from the path provided by the contract's terms is bound to meet its destiny on the road it took to avoid it." Id. at 725.

What if Humpty Was Pushed?: Another reason a tribunal may overturn a default termination is if the Government somehow caused or contributed to the contract performance issues. This is what happened in O-Tech Solutions, LLC, ASBCA 61898, 23-1 BCA ' 38,338, in which the Armed Services Board of Contract Appeals held a contractor's delay was excusable due to several Government-caused delays, rendering the default termination improper. Specifically, the Government delayed issuing approval for the contractor to proceed, despite the contracting officer being on notice that the contractor was unable to proceed without Government action. The Board found that had the Government granted the contractor an extension commensurate with the number of days it delayed the project, the contractor could have completed the project within the extended deadline. Because the contractor's default was excusable, the Board converted the termination to one for convenience.

The Government Cannot Turn Humpty into Alice's White Rabbit: In Consorzio Stabile GMG, 23-1 BCA ' 38, 347, the Board held the Navy's default termination of a contract for the design and construction of a vestibule in Bahrain was unjustified because the Navy had waived the project completion date and failed to establish a new deadline. Three weeks before the end of contract performance, the Navy "issued a partial notice to proceed for work that would take months to complete," and did not reserve its rights to impose the then-current contract completion date or assess liquidated damages. Id. In fact, the Board found that "at no time" after this limited notice to proceed did the Navy "even hint[]" that "time was still of the essence for the contract." Id. Up until issuing a show cause notice, the Navy and the contractor were attempting to negotiate a contract modification that included a time extension, and the Navy continued to routinely approve the contractor's submittals. The Board concluded that "the Navy's affirmative acts showed forbearance, which resulted in Consorzio's reliance to continue working on the Task Order." Id. Simply, the contractor could not be "late" when the "important date" was not set. The Board again sustained the contractor's appeal and converted the default termination into one for convenience.

Procedural Points for All the King's Horses: The CDA contains several procedural steeplechase hurdles that can trip up all the king's horses in their race to put Humpty together again, such as the presentment requirement. In H&M Assocs., LLC v. U.S., 165 Fed. Cl. 174 (2023), the contractor directly appealed a termination for default to the Court of Federal Claims, alleging not only that the default termination was improper but also that the Government had breached its duty to cooperate and duty of good faith and fair dealing. The Government moved to dismiss the contractor's claims seeking a modification of the contract or equitable adjustment on the ground that the Court lacked jurisdiction, and while conceding jurisdiction over the contractor's prior material breach claims, the Government moved to dismiss that one on the ground that the contractor failed to state a claim. Relying on the U.S. Court of Appeals for the Federal Circuit's decision in M. Maropakis Carpentry, Inc. v. U.S., 609 F.3d 1323 (Fed. Cir. 2010); 52 GC ' 225, the Court agreed that it lacked jurisdiction to award monetary relief or...

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