Responding to FAR Cure Notice & Show Cause Letters in Government Contracting

Theodore P. Watson, Government Contracts Attorney. Termination for default cases on appeal often fails.  The general reason for such a failure rate is because of your response to a show cause notice in government contracting.  Another reason is that your response to FAR cure notice or some version of a letter of concern in government contracting situations for non-performance was inadequate. Developing a well-thought-out response that addresses the agency’s concerns can go a long way – even preventing a termination for Default.

• Many terminations for default appeal cases fail because the contractor submitted an inadequate response to the government’s notice to cure letter or show cause.
• When responding, you should focus on developing a road map that illustrates how you will solve the contracting officers’ concerns regardless of who is at fault.
• Failure to address every issue that the contracting officer addresses in your cure notice can lead to devastating results.

When responding to a cure notice, you want to increase your chances of gaining the government’s trust while at the same time avoiding a termination for default. Learning how to respond to the government’s notice to cure letters can help.

The reality is that when you receive a government cure notice,  letter of concern, or show cause letter, the government has already put the wheels in motion for termination for default against you. Therefore, companies should take the response very seriously and not just roll the dice.

• The government tends to win many terminations for default cases on appeal because of insufficient responses to notice of cure or show-cause notices to the contractor for nonperformance.

What is a Cure Notice Letter Under Federal Acquisition Regulations  (FAR)?

Did the CO Give You Enough Notice and Opportunity to Cure? The Contracting Office typically sends a FAR cure notice letter when the prime contractor does not make progress or violates some other aspect of the contract’s terms and conditions. The notice to cure letter informs you of the specific problem and should give you enough notice and opportunity to cure the defect. The government usually gives ten days to cure the failure. The notice gives the contractor an opportunity to present its side of the story while still giving the government some satisfaction that the contract can still be performed.

• In some situations, a government cure notice is not required.
• If, for some reason, you need more time, request an extension in writing and explain your reason for the extension request.

Receiving a notice to cure letter from the federal government is a serious matter and is usually a warning sign that a termination for default is likely to occur.

Federal Acquisition Regulations FAR Part 49.402-3 clearly states that: 

When a default termination is in consideration, the Government shall decide on the appropriate termination action (i.e., default, convenience, or no-cost cancellation) only after review by contracting and technical personnel, and by counsel, to ensure the propriety of the proposed action. The administrative contracting officer shall not issue a show cause notice for non performance to the contractor for nonperformance or FAR cure notice letter without the prior approval of the contracting office, which should be obtained by the most expeditious means.

General Approach When Responding to a FAR Cure Notice in Government Contracting

Your goal is to respond carefully and to avoid some of the common and costly landmines that most federal contractors make. Although asserting your concerns or rights is important when you respond to the cure notice letter, the best approach is to properly and legally protect your interests by developing a sound record at the contracting officer level.

• Without responding to the specific concerns of the contracting officer, your run the risk of losing your case on appeal
• In addition to responding to the contracting officer’s concerns, you must certainly address issues that were out of your control or were in direct control of the government.
• You do not want to request that the CO change the terms of the contract in order for you to perform.

You can accomplish this by writing a detailed response that addresses the specific concerns of the contracting officer, and also has all of the ingredients for preserving any legal rights that you may have for an appeal. As stated earlier, one of the many reasons why contractors fail to overcome a termination for default that immediately follows your cure notice response, is that response was insufficient to overcome the contracting officer’s concerns. 

Did the Contracting Officer Issue a Letter of Concern?

Tips for Your Government Cure Notice Response

A government contracting notice of cure response should be in writing in addition to taking immediate action. Your cure notice response should be strategic with the understanding that the Contracting Officer may be ready to issue the default termination.  Your response must address each and every item that the contracting officer addresses. You want to accomplish this task regardless of fault. If you are not familiar with responding to a cure notice letter, seeking professional help is your best bet.

Tip: When responding to the government cure notice, you want to show evidence of when you received the notice. This provides a record that your cure notice response was timely. Always request, in writing, any extension. Until the contracting officer approves the extension, you still must respond by the directed date.

Tip: Responding to a federal cure letter mainly focuses on a detailed approach to resolving the government’s concerns while addressing issues that are not your fault, and that you should receive some level of credit (compensation or otherwise).

Tip: Address every point that the contracting officer identifies as a potential problem. You want to accomplish this first and then address any fault or intervening situations that you believe to be causing the problem.

The following are but a few additional suggested points to include in your efforts to prepare and file a cure notice response to the contracting officer.

• You want to articulate detail for detail and explain your case and why the government should not issue a termination for default.
• Many companies make the mistake of responding to the contracting officer’s notice to cure by only asserting blame on the government. This approach almost always fails and ends up in a sure termination for default.
• The better approach is to gain the respect of the agency by articulating why there was an error in the Agency’s judgment while developing a concise plan of action to resolve the problem.
  • The plan should show the contracting officer that you can complete the work according to the contract terms and conditions.
  • Always avoid requesting material changes to the terms and conditions of the contract when outlining your plan of action.

How to Increase Response Effectiveness 

When the government contracting officer sends you a government contract cure notice or a show cause letter, chances are the government is more than likely prepared to issue a termination for cause order (some agencies already have the default notice prepared.) Adopting best practices and a more refined approach can effectively increase your chances of persuading the contracting officer to reconsider her position and allow you to continue contract performance. When you respond to the Federal Acquisition Regulation cure notice, you want to first develop a written road map that addresses the contracting officer’s concerns. 

You must address the specific issues mentioned in the notice. If the contracting officer is asking you to do something not mentioned, contemplated or foreseeable in the contract, then take the time to explain. Discuss the fact that performing additional contract requests would cost the government more money. However, still, give a detailed explanation and plan of how and when the requirement will be accomplished.

There are several other points to cover when you write a response to the government’s cure notice letter.

• Avoid asking the contracting officer to change the terms of the contract. This could potentially set your company up for termination for default.

Here is a June  2016 case that proves the point of how important your cure notice responses to the government can be) (default termination justified by the contractor’s refusal to perform or to properly respond to cure notices after Government applied what the contractor believed was incorrect welding standards, especially when the contractor did not allege Government’s action was breach prior to termination), contractor’s motion for reconsideration denied.

Responding to Contracting Officers Show Cause Letter or Notice for Non Performance

When you respond to a show cause letter for nonperformance, you want to take a slightly different approach than a cure notice response. Chances are you are already past the cure notice phase and now have to explain why you should not be terminated for default. This response should also assert any legal excuses/ defenses that would allow non-performance.  This is important because the Boards of Contract Appeals and the Court of Federal Claims have strict rules about raising new arguments or issues on appeal that you did not present to the contracting officer’s level.

In your response,  explain why some of the reasons for non-performance may be the government’s fault.  Avoid hinging your entire answer to the show cause letter only blaming the government for the underlying problem. This almost always guarantees a bad result from the contracting officer.

As mentioned with a cure notice, with the issuance of a show cause letter,  the government usually makes a preliminary decision to terminate the contract for default. Your show cause response will have to convince the contracting officer why he or she should not issue the default notice. 

• In the case of a show cause for nonperformance, the government could even pursue a FAR termination for default. Courts will look at your plan of action versus who is at fault when evaluating your response.

ASSERT LEGAL DEFENSES 

Your government contract cure notice response should include LEGAL defenses. This is true for two reasons. First, it may help the contracting officer to agree a termination for default may not stand. Second, contractors should first include any legal wrongdoing by the government at the contracting officer level. This includes defenses as to why the notice to cure letter was improper. You should not try to introduce these allegations or defenses for the first time on appeal.  Consult with your lawyer on this important issue.

In addition to the above, consider the following:

• Discuss any entitlement of extra time, any pending requests for compensable time, and any extra time due to adverse weather conditions (or other reasons).
• Discuss the positive approaches that your company is taking to correct known problems
• Any other main points depending on your specific contract

Responding to Show Cause Letters for Non-Performance?

If you have to respond to a show cause letter under FAR 49, government contractors should primarily focus on ensuring the resolution of any cure notice issues or failure to make progress disputes. Each case is different. Therefore, unless you are an expert and doing this, you may want to seek professional help from an experienced government contract attorney. 

• If the government waives the delivery date, state this in your show cause response.
• If an attorney represents you, he or she should articulate why a termination for default would not be in the government’s best interest, or unsupportable on appeal would also help in the response.
• You should respond by presenting a plan and schedule showing the contracting officer how and when you will accomplish the remaining contract. The more detailed the better.

Tip: When it comes to knowing how to write a show cause notice reply, the government often issues a show cause as an initial step to a termination for default phase. Therefore, the contents of your show cause response are extremely important.

• Respond by showing why the government should not terminate the contract.
• Address issues where the government contributed to the problem.
• Provide extensive details about your intentions to solve the alleged problem.

Although you want to state reasons why the show cause notice for nonperformance may not have been appropriate, the bulk of the reply should focus on a detailed plan of action.

• If you only discuss why the government’s show cause was a mistake, appellate courts will agree with termination for default decision simply because your show cause response did not meet the technical or substantive legal requirements. 

An example of when a government contracting cure notice comes about is if the time remaining in the contract delivery schedule is not sufficient to permit a reasonable “cure” period of 10 days or more. Here, the agency may issue a show cause letter. 

Construction contract show cause letters are common in federal contracting. In addition to the required detailed response, an example of a good response could be the contractor showing how construction delays were beyond control and showing that the government caused delays or some other reason beyond the contractor’s control.

• On appeal to the various courts, issues related to an issued cure notice and show cause letter can be tricky and fact-based.

Government Contracting Letter Of Concern? What’s the Difference?

The approach to responding to the government’s letter of concern is not much different. As stated in the other situations, respond to all of the issues raised in the letter. In addition, point to areas that are out of your control. A third party reading your response should clearly see that not only did you respond to the government’s concerns but that you also outlined a plan of action.

Creating a Record to Preserve Your Rights to Appeal Starts Here

Knowing the difference when responding to either a notice to cure letter or a contractor show cause letter can help you build a sound record if the agency decides to eventually terminate your contract for default. FAR 49.402-3 regulates the various actions the contracting officer may take. You should grasp the potential for preserving your rights for an appeal or litigation early in the process. Most cases fail on appeal simply because responses to these two notices are inadequate.

You build a record by addressing the concerns that you have where the government may have caused the problem, or where there has been some level of an excusable delay. However, you must still present a detailed plan of action that articulates how you will meet the contract terms and conditions.

Tip: Conclusory responses without full detail in government contract cure notice responses can potentially arm the contracting officer with sufficient ammunition to issue a default termination.

Tip: Courts do consider a letter of concern under the FAR as notice by the contracting officer that there was a problem with performance.

Creating a record when you face a contractor’s notice of fault and an opportunity to cure is essential when there is an appeal. The main reason is that on appeal you generally cannot introduce new evidence or arguments that you did not present to the contracting officer. This is a common mistake made by government contractors.

What Are the Differences between the Government’s Notice To Cure Letter And Show Cause Notice For Nonperformance?

An example that distinguishes a FAR cure notice from a show cause letter is when the time for performance has passed, and the government issues a show cause letter. Here a cure notice FAR requirement would not be appropriate because the performance period is over. FAR Part 52.212-4(m) does not require a contract cure letter for failure to deliver on time. 

• When the government believes your performance under the contract is at risk, it might issue you a cure notice. On the other hand, if it believes that you violated the terms and conditions of the contract, it may issue a show cause notice.

AVOID COSTLY MISTAKES UNDER FAR 49.402-3

Government contractors often make the mistake of arguing with the agency in their response with nothing else. Although an answer to the show cause letter or government cure notice should have a substantive and legal basis for the agency’s error, the bulk of the response should focus on telling the agency how you will resolve the allegations (although they should not consider this an admission).

Then the rest of the response should address how the agency’s action violates the contract terms or why its directive goes against the scope of work requirements. There are often facts to support your belief that either a contract cure letter or show cause letter is not valid. Include as many of those supportable facts as possible.

Although there may be grounds for contesting each notice, it is important not to base your entire response solely on making the argument as to why you should not have to comply. This can prove costly if you have to appeal the contracting officer’s final decision.

OTHER COMMON MISTAKES TO AVOID

• Not addressing the agency’s points line by line.
• Not providing sufficient factual evidence related to causation.
• Not providing the government with a detailed plan of how and when the contractor will resolve the allegations.
• Not supporting allegations with documentation of credible evidence.

How Cure Notice Government Contracting Responses Can Impact Termination for Default Decisions

Federal contract cure notice responses should focus on a plan of action to comply with the contract terms. Since the agency has expressed its concern and alleged that something has gone wrong, you want to address those issues in your response. Regardless of who is at fault, you want to develop a clear path to successfully performing the rest of the contract. Your response sets the stage and record if the contracting officer later decides to terminate the contract for default and you have to file an appeal. Alternatively, perfection for how to respond to a show cause letter deals with convincing the agency why the contract should not be terminated for default. When responding to a notice to cure letter, keep in mind that the government has a right to demand assurances that you will comply with the terms and conditions of the contract.

Consider, at a minimum, the following:

• Show a detailed plan of action to complete the work or issues of concern.
• Avoid asking the CO to issue a new performance date since this can be tricky and lead to a default termination.
• Avoid a plan that changes the actual terms and conditions of the contract.
• Provide too much detail instead of too little.

The government does not always have to issue a cure notice before issuing a termination for default, also referred to as a termination for cause. Instead, the government may terminate if justified.

Under FAR Part 52.249-8(a)(l)(i), the government is not mandated to issue a cure notice before termination. However, if performance is endangering the progress of the contract according to the terms and conditions, except for a delivery schedule deadline, the government contracting agency must issue a cure notice. See FAR part 49.402.

However, if performance is endangering the progress of the contract according to the terms and conditions, except for a delivery schedule deadline, the government contracting agency must issue a FAR cure notice. See FAR 49.402. Get information about converting a termination for default into one for convenience.

It is generally improper to terminate a contract for default before the cure period ends. 

This rule applies when the contracting officer gratuitously allows the contractor a cure period. The reason behind the notice to cure letter rule is for the contracting officer to consider a contractor’s steps taken to remedy delinquent performance during the entire cure period.  

The reason behind the rule is for the contracting officer to consider a contractor’s steps taken to remedy delinquent performance during the entire cure period.  

• If the gratuitous (not mandatory) cure notice is offered, the CO must wait until the cure period ends.
• Responding to a cure letter should not depend on proposed changes to the contract.
• A response should articulate how and when you intend to perform the contract terms.

Note

• Courts not only look at the appeal complaint to make its decision, it primarily looks at the record leading up to the contracting officer’s decision.
• How you respond to a cure notice or show cause letter is the most important part of any appeals court decision.

If you are a small business or large federal contractor and need help with your FAR cure notice response or show cause responses, call our federal contracting attorneys for help today at 1-866-601-5518. We offer a FREE Initial Consultation and NATIONWIDE help.