When the government terminates your company for default (otherwise known as termination for cause), understanding your rights and the contract termination process can be crucial to your company’s future.
For example, a disastrous mistake many contractors make is not realizing that they must preserve their right to appeal as early as the cure notice or show cause stages. Appellate courts consistently dismiss cases because the basic Contract Disputes Act requirements have not been met and companies did not present enough evidence and legal assertions at the contracting officer level.
The termination for default appeal process begins when the contracting agency issues you a cure notice. As a general rule, the cure notice must specify progress failures in sufficient detail to allow you to effectively cure any defaults unless you have already been made aware of the failures.
Contracting Officer’s Decision to Issue Termination for Cause
The termination for default process under the FAR requires the contracting officer to consider various factors to support his or her decision. This includes:
- Providing an explanation for the contractor’s failure;
- Whether supplies or services are available from other sources;
- The need for supplies or services balanced against the time it would take to obtain them from another source, and
- The effect a termination would have your other contracts.
This list is not exhaustive. Failure to consider any of the above factors does not make the termination for cause invalid.
Avoid Costly Mistakes With Contract Termination Process for Appealing Defaults
Oftentimes, government contractors have reason to believe that the default termination was unlawful and unjustified. The contract termination process for T4D appeals allows you to challenge the agency’s decision to the various boards of contract appeals or Court of Federal Claims. When the government issues you a show cause letter, this is the point where contractors should be extremely careful not to make deadly legal mistakes.
- The termination appeal letter is subject to the Contract Disputes Act (CDA).
- If you decide to appeal the default, then you must provide notice to a Board or court within ninety (90) days from the date you receive the contracting officer’s final decision.
- The Board lacks jurisdiction over any appeal filed outside of this 90-day period, which is statutory and cannot be waived.
Tip: Appellate Courts have previously held that sending multiple copies of a contracting officer’s final decision, without indicating which of them is intended to begin the running of the appeal period, confuses a contractor as to the required timelines.
Tip: Both large business and small business termination process require you to first address your claims to the Contracting Officer before you can raise them in the termination appeal letter.
- The appellate court does not have jurisdiction to hear new allegations on appeal.
Contract Termination Process and Default Notifications
If the government’s contract termination for default process appears appropriate, the contracting officer should, if practicable, notify the contractor in writing of the possibility of the termination.
This contract termination letter shall put the contractor on notice and the contractor should pay special attention to the contractual liabilities if the contract is terminated for default.
The notice should also ask the contractor to show cause why the contract should not be terminated for default. This a critical part of the contract termination process because it allows you to state your position to the agency before the final termination decision is made. At this stage, companies should respond with detail and supporting evidence.
The notice may further state that failure by the contractor to present an explanation may be taken as an admission that no valid explanation exists. When appropriate, the notice may invite the contractor to discuss the matter at a conference. See also Grounds Supporting Termination for Default Letter of Government Contracts.
Small Business Contract Termination for Default Process: The termination of contract for default process requires that if your company is a small business, the contracting officer shall immediately provide a copy of any cure notice or show cause notice to the contracting office’s small business specialist and the Small Business Administration Regional Office nearest to you. This another important protection the contract termination process.
- The contracting officer should, whenever practicable, consult with the small business termination specialist before proceeding with a default termination.
- When a contract is terminated for default or a procedure authorized by FAR 402-4 is followed, the contracting officer shall prepare a memorandum for the contract file explaining the reasons for the action taken.
For additional help with the T4D contract termination process, and appealing your termination for cause letter, call a government contracts lawyer at 1-866-601-5518. FREE INITIAL CONSULTATION.