Wrongful Termination of Contract for Default -- ConstructionGovernment contractors may find themselves dealing with a unlawful termination of contract for default on a federal construction project.

Although it is clear that something is wrong with the termination action, many construction companies are not familiar enough with the underlying regulations that govern terminations for default. Therefore, the decision whether or not to appeal the contracting officer’s decision can be difficult.

As a general rule, the contracting officer has discretion on whether or not to terminate the contract. However, the contracting officer must not make a termination for cause decision in an “arbitrary and capricious manner.” See Darwin Constr. Co. v. United States, 811 F.2d 593, 596 (Fed. Cir. 1987).

Legal Requirements for Appealing Unlawful Termination of Contract for Default in Federal Government Construction

Unlike most government contract litigation cases, when you assert an unlawful termination of contract that stems from termination for default, the agency bears the legal burden of proof to show that the termination was justified. After that, you then have to provide evidence of excuse or a valid reason why the termination was unreasonable. DCX, Inc. v. Perry, 79 F.3d 132, 135 (Fed. Cir. 1996).

  • When you respond to a cure notice or show cause letter, you have to provide adequate assurances that you could timely perform according to the contract terms.  When responding to a cure notice from the CO, you also want to show that would be no delays in the performance of the contract. Read more about delays in construction contracts and FAR Changes Clause.

What happens when a delay in performance slows down your schedule?  The agency should not terminate your right to proceed under the default clause when such delay in completing the work results from unforeseeable circumstances beyond your control or without your fault or negligence. See FAR 52.249-10(b)(1). This includes:

  • Unusually severe weather conditions
  • Weather conditions that substantially impact site conditions

Construction contractors have an obligation to notify the contracting officer about any delays: The contracting officer should make a determination as to whether additional time is warranted. Failure to consider all of the important facts could result in a wrongful termination of construction contracts.  Courts look to the reasonableness of the CO’s decision to terminate the construction contract for default. Therefore, when retaining an attorney, you must provide every detail that shows why the agency termination actions were unreasonable. 

The government must justify final decision to terminate: The contracting agency must reasonably believe that there is a likelihood that you can perform the entire contract effort within the time remaining for contract performance. See Limitations on the Government’s Right to Terminate a Contract for Default.

When courts decide a wrongful termination of contract for default in government construction cases it is a question of law:  The facts and circumstances surrounding a termination for cause appeal are critical to the court’s legal decision. Therefore, you should keep track of all communications that show you acted reasonably, and that the wrongful termination for default actually occurred through no fault of your own.

 Contractor Termination Tips 

See more information about the FAR Changes Clause in Construction Contracts

Evidence Required When Appealing a Termination of Contract for Cause.

Termination for Default Process and Appeals

For help with wrongful termination contract appeals for a potential unlawful termination of contract for default on a government construction project, call our federal government construction contracts lawyers at 1-866-601-5518.

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