Theodore Watson, Esq ( Government Contract Attorney)

As a government contractor, your ability to collect prompt payment from the federal government is essential to your success.  The Federal Acquisition Regulation includes law that supports timely payment by the government.  As government contract attorneys, we sometimes have to represent contractors by assisting them in receiving payment for unpaid invoices.

Prompt Payment

The Prompt Payment Act (PPA), as enacted by Congress requires the government to pay invoices by the required due date. As practical matter, the federal government usually pays invoices within 30 days. However, this does not always happen.

Conditions of Payment

If you don’t submit a proper invoice then, you will have a hard time demanding payment and interest.  Most contractors are now signed up with Wide Area Workflow. This process is designed to speed up payment of invoices. Invoices for progress payments  should be certified under FAR 52.232-5. Nevertheless, the government must notify you if you have submitted a defective invoice.

Am I entitled to Interest?

The Prompt Payment Act does not allow interest if the government and the contractor do not agreement on the amount invoiced (disputed invoice). Also, contractors should be aware that if they are paid for work that does not conform to the contract requirements, then the government may be entitled to interest.

Subcontractor payments

The prime contractors on government projects are also supposed to pay subcontractors within 7 days after receiving payment from the government. Failure to do this will incur interest.

However, prime contractors are not required to pay a sub contractor for work that is not timely or accurately performed under the subcontract. Some government contract attorneys forget this point when dealing with prompt payment act issues, and focus solely on whether the government has paid the prime.

Subcontractors should be aware that complaining to the government will not solve the problem simply because the government has no privity of contract with subcontractors.  The basis for payment is the terms and conditions of the subcontract not the prime contract.

What can I do to ensure that the quality of work does not harm prompt payment?

As a matter of practice, you can keep in close communication with government contracting and quality assurance personnel. Written communication and project reports can reduce prompt payment act issues.

For information, feel free to contact our office or call us at 720.941.7200 for representation.

By Theodore Watson - Government Contract Attorney

When you bid for a government contract, part of the award encompasses a Change Clause in the Federal Acquisition Regulations ( FAR) . An aspect of the clause entails equitable adjustment which includes cost and time elements.

In sum, a government contractor is entitled to equitable adjustment whenever a change orderdecreases or increases the contact’s time or cost. Typically the adjustment is made after the change since actual amounts are not known.  Having a government contract attorneyact on your behalf can be beneficial because of the nuances that can occur. You adjustments must be carefully scrutinized ot ensure that you get all of your entitlements.

Change orders can be initiated by either the contractor of the government. Then, the parties or their attorneys discuss the matters  and exchange pertinent information. Once discussions with the government procurement officials have taken place, the result is generally a equitable adjustment in the cost.

Although government contracts generally favor bilateral changes, the government can still unilaterally change the contract scope. As this occurs, the scope of the change is articulated, the contractor will then account for cost of changes, and then enter into discussions with the government.

The Court of Claims have redefined equitable adjustments as the goal of keeping the contractor whole when the government modifies the contract. See Bruce Construction Co. v. United States. Contact us for additional information or call our firm at 720.941.7200 for representation.

Lorraine Stark, Esq.

As a practical matter, Colorado has replaced the term “custody” to “allocation of parental responsibilities.” This was due to the fact that parents tend to look at custody as their personal right instead of focusing on what is in the best interest of the child.  The new concept heightens the focus on the decision-making and parent obligations to the children.

What is legal custody in Colorado?

When a parent refers to legal custody in Colorado, it actually means the legal authority of the parent to make major decisions such as health, education and general welfare matters. Parents can do this solely or jointly.

What is Joint Custody is Colorado?

Joint custody means award of legal custody of the minor child to both parents. In sum, both parents get to make major decisions relating to the child.  Even if visiting times are split between parents, it is the ability to make major decisions that is the foundation of joint custody. 

Allocation of parental Responsibilities 

Parental responsibilities under Colorado family law pertains to the parenting time and decision-making aspects that focus on the best interest of the child. 

What should parents do to facilitate custody cases? 

First, parents in Colorado should attempt to address decision-making at the onset of a divorce or separation. Obviously, not all issues will be agreed upon. Before hiring a family law attorney, you should have at least tried to address parenting time, parenting schedules, decision-making at the very least. This can help to reduce attorney fees while minimizing the disputed issues.

Second, depending on the age of the child, parents should at least try to prepare children for the upcoming separation, keep arguments to a minimum and never show hatred or talk negatively about the other parent to the child. 

Parenting Plans

If you retain a Colorado child custody attorney, you should be able to give information about your efforts in formulating  workable parenting plan. Colorado courtslike it when parents come to court with matters already worked out.  Education matters should be addressed in the parenting plan, religious matters should be covered at a minimum.

Amount of parenting time as to child support

Colorado child support is based on a statutory formula. Of importance, the formula allows for the amount of overnights each parent spends with the child.

Supervised Parenting Time

A Colorado court may order supervised parenting time when there is a concern about the relationship between the child and one of the parents. However, this type of parenting should be short-term.

Grandparent visitation

Colorado has imposed statutory grandparent visitation. In the case of Troxel v. Granville, the Colorado Supreme Court address grandparent custody is favor of the grandparents.

Modification of Parenting Time

The UDMAand C.R.S. 14-1-129 addresses modification of parenting time. Child custody can be modified when it is in the child’s best interest.

Contact us for more information

If you are going through a divorce or legal separation, you should seriously address the pending matters with an experienced Colorado child custody attorney. Contact us today or call us at 720.941.7200

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By Peter B. Ford

Under Colorado law, partnerships are governed by the Revised Uniform Partnership Act of 1997 (”R.U.P.A.”). R.U.P.A. defines a partnership as “the association of two or more persons to carry on as co-owners a business for profit.” R.U.P.A. § 101(6) (emphasis added). While in its most simplistic sense, the term person refers to an individual, R.U.P.A. expands that term to mean a “corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.” Id. at § 101(10).

 Thus, the rules governing partnerships in Colorado are quite relaxed with respect to who and/or what can form a partnership. Furthermore, R.U.P.A does not require that the parties subjectively intend to form a partnership or draft a partnership agreement; the only requirement with respect to partnership formation is that the parties intend to carry on as co-owners a business for profit.

That being said, as a business person or entrepreneur, it is important that you take precautions when forming business relationships with other parties, especially considering the duties, rights and potential liabilities that a partnership entails.  Having a business partnership attorney craft a sound partnership agreement is key.

Although no formal partnership agreementis required to form a partnership, more often than not, the parties to a partnership govern the precise nature of their relationship though a written partnership agreement. A partnership agreement allows the parties to prescribe different rules (i.e. rules that differ from those defined under R.U.P.A.) that govern their business relationship. However, R.U.P.A. § 103 enumerates certain statutory provisions that are non waivable, meaning that even with the existence of a partnership agreement, certain rules must still be adhered to. For example, a partnership agreement may not:

• unreasonably restrict the right of access to books and records…;
• eliminate the duty of loyalty…;
• unreasonably reduce the duty of care…;
• eliminate the obligation of good faith and fair dealing…;
• vary the power to dissociate as a partner…except to require the notice…to be in writing…;
• vary the right of a court to expel a partner…;
• vary the requirement to wind up the partnership business in [certain] cases…; or
• restrict [the] rights of third parties under [R.U.P.A.]. Id.

So, why do partnership agreements exist? Why don’t partners merely shake hands and allow their business relationship to be governed by the statutory provisions of R.U.P.A? The answer is two-fold. First and foremost, a partnership agreement provides a business with structure and thus helps to avoid uncertainty. Second, by defining the rights, duties and liabilities of the partners, a partnership agreement precludes the automatic application of potentially unseemly statutory law. See When a Handshake Is Not Enough: Why You Need a Partnership Agreement, available at http://www.ozsmallbiz.net/partnership-agreements/. For example, with respect to business profits, absent a provision in the partnership agreement to the contrary, profits will be divided equally among the partners, regardless of each individual partner’s capital contribution or effort. Id. 

Similarly, unless stated otherwise in the partnership agreement, losses incurred by the business will be allocated among the partners in the same manner as profits. With respect to the liabilities of the company, absent a provision in the partnership agreement to the contrary, all partners will be held jointly and severally liable, meaning if one partner incurs a debt which he or she fails to pay, the creditor may opt to collect the entire debt from any partner. Id. 

Finally, with respect to business decisions, absent a provision in the partnership agreement to the contrary, each partner has an equal say in the business. Id. While allowing each partner to have an equal say in reaching business decisions seems fair and equitable, it often leads to disputes and could potentially lead to the dissolution of the business. Id. 

For more information on partnerships or other business entities, please feel free to contact Peter B. Ford, Esq. at Watson & Associates, LLC. or call 720.941.7200

Government contract law focuses primarily on government dealings with prime contractors. However, most prime contractors subcontract out parts of the contract. The question usually comes up as to what access does the subcontractor have to the contracting officer? 

Privity of Contract 

At some point in dealing with government contracts, a subcontractor learns the term ‘privity of contract’ pretty fast. In situations where the prime contract refuses to pay the sub. An recent article discusses the main issues relating to subcontractors and privity of contract matters. 

Privity of contract in essence means that the government has no legal relationship with the subcontractor and typically has no authority to act when problems arise between a prime and subcontractor. This part of government contract law is sometimes difficult to understand among small subcontractors. It is strongly advised to retain a government contract law attorney when entering into a prime-subcontract relationship.

Due to lack of privity of contract between the government and the subcontractor, the courts have frequently barred subcontractors from direct access to the Board of Contract Appeals and federal courts in actions against the government.

FAR 44 spells out policies related to government contracts and subcontractors. Another issue arises when RFP  are submitted where a subcontractor is utilized. Many government contract attorneys erroneously make the argument that since the government considered the past performance of subcontractor for award, then there should be privity.

This analysis will not past muster in the courts simply because considering the past performance of a subcontractor goes more to the intent and furtherance of the small business act to increase awards to small business  more than it does to establish rights of the government with subcontractors.

Flow Through Clauses

When a government contract is awarded, there are several clauses that are incorporated by reference. Examples of these clauses include : Inspection clause, termination clauses, changes clauses. The government has to protect themselves when something goes wrong in the contract performance. However, the privity of contract analysis stills holds true.

For example, if the prime contractor hires a subcontractor on a government construction project, when the performance of the subcontractor shows faulty workmanship, the government may request that the prime contractor remove the sub.

In addition, most government prime contractors incorporate the FAR clauses into their subcontracts to protect themselves. Another area to consider inclusion of flow through clauses include joint venture agreements, and mentor-protege agreements.

Subcontracting Plans

When the government awards a contract to a large business, and the amount is greater than $500,000, the prime contract requires a mandatory subcontracting plan.  This plan provides that the prime contractor make reasonable efforts to provide subcontracting opportunities for small businesses. Namely HUBZOne, SDB, Service Disabled Veteran small businesses. many consultants, including some government contract law attorneys, incorrectly that the law mandates that a prime has to subcontract. The correct approach however, is that the subcontracting plan is a goal that requires the prime only to show reasonable efforts.

Miller Act

Congress has not forgotten subcontractors in the entirety. In federal construction contracts, as compared to a private construction contract, a subcontractor can not place a lien on government property. Therefore, most construction contracts over $100,000 require performance and payment bonds. This is covered in the federal Miller Act.

In essence, the payment bond protects the subcontractor against non-payment for work that is propertly and timely performed. Does this mean that the subcontractor has a right to seek releif from the government? No. Instead, the subcontractor goes directly to the suretyto file a claim on the bond.

The privity of contract rule still applies to government contracts. For more information, feel free to contact our office online or call 720.941.7200

Theodore P. Watson , Esq

Watson & Associates, LLC

 Lorraine Stark, Esq.

Watson & Associates, LLC

Many parents in Colorado file for divorce but are sometimes do not have information related to how a court decides child custody cases. The governing Colorado law is the Uniform Dissolution OF Marriage Act.

Starting the custody action

Parents typically will file a petition for dissolution of marriage or legal separation. The petition must set forth the names, ages, addresses of any living children of the marriage and whether the wife is pregnant.

In other actions besides a divorce

A child custody proceeding seeking allocation of parental responsibilities can also  be filed absent a divorce. The parent will file a petition in the district court in the county where the child resides or where it can be found.

Notice requirements

In Colorado, under C.R.S. 14-10- 123(2), notice of the custody proceeding must be made to the child’s parent, guardian or custodian so that a response can be made.

Types of custody

Child custody may refer to physical or residential custody, legal custody or decision making. All of these situations apply. In February 1, 1999, the UMDA replaced the term “custody” with the phrase “allocation of parental responsibilities.”

Physical custody

This type of custody in Colorado refers to the physical location of the child or the child’s primary residence.

Legal Custody

Legal custody refers to the ability and authority of the parent to make major decisions concerning the health, education and general welfare of the child. Legal custody may be sole or joint

Allocation Of Parental Responsibilities

This part of a custody case in Colorado includes parenting time and decision-making responsibilities , in the best interest of the child. Colorado law recognizes the Tender Years Doctrine which premises the fact that a child of young age is better suited in the custody of the mother. This puts fathers at a great disadvantage. However, this presumption can be dispelled by showing that the mother is an unfit parent.

How Parenting time is decided

C.R.S.14-10-124 sets out the factors that a Colorado family law court will consider when deciding a custody case. They include:

• Wishes of the Child’s Parents : This analysis just doesn’t stop at what the parents want but also why they want it.
• Proof of parent’s wishes: Your child custody lawyer should present evidence of the parent’s testimony, conversations with third parties regarding wishes for parenting time.
• Wishes of the Child: A Colorado custody court will also consider the child’s wishes depending on the child’s age and maturity level. Evidence and proof of the child wishes is also paramount when preparing for a child custody case.
• Relationship between the child, parents, siblings, and others: When deciding a child custody case, Denver courts seriously consider the relationship of the child to other siblings and family members.  The best interest of the child is paramount here.
• Adjustment of the child to home, school, and community: This factor can include preschool, day care and community involvement ( as the child gets older).
• Physical and mental health of all individuals involved. Colorado courts heavily weigh this factor when deciding parenting time.  Stability of the  parent, mental illness. Your attorney must make sure that these allegations are substantiated.
• Ability to encourage the sharing of love, affection, and contact: Colorado child custody cases look at his factor with a narrow eye. Children best interest is protected when  both parents foster affection and support the child’s interest.
• Past pattern of involvement with the child: A Colorado family law court will also consider previous relationship with the child. For example, who’s  the primary caretaker, medical treatment, attending school activities and more.

As you meet with you family law attorney in Denver or any other city in Colorado, ensure that you have a thorough understanding of child custody and parenting time procedures. The best way t handle this situation would be to sit  with with the other parent and discuss what would be in the child’s best interest. 

For more information, contact  our office online or call 720.941 7200

When spouses divorce or file for legal separation in Colorado, the Uniform Dissolution of Marriage Act (UMDA) governs their rights. When spouses enter into marital agreements the agreement defines specific rights during the marriage or in the event of divorce or death. 

The goal is to develop rights that may be different under the above statute. C.R.S. 14-2-303(1) state that a marital agreement is an agreement either between spouses in contemplation of marriage; between current spouses, but only if both parties sign the agreement before filing for divorce or legal separation in Colorado. 

Are Marital Agreements Enforceable? 

Colorado general enforces martial agreements. The Colorado Marital Agreement Act governs the validity if the agreement is entered after July 1, 1986. 

What are Defenses to a Marital Agreement?

In Colorado if a spouse can effectively show that the marital agreement was not entered into on a voluntary basis, then  the agreement may be voidable. 

In addition, if the spouse can show that the other did not provided him or her with a fair and reasonable disclosure of property, then the marital agreement may also be voidable. 

How Can I Meet the Disclosure Requirement? 

A financial affidavit found in the court forms could suffice for a reasonable disclosure of finances and property. The exchange of tax returns may be advisable. 

Can I Contract Away Child Support? 

A marital agreement may not adversely affect the right of children to receive child support. If you want to address certain issues like trusts, educational accounts etc. then a court may uphold the agreement. 

Can a martial Agreement Affect Child Custody or Parenting Time? 

In Colorado, parents may not contract away parenting time or child custody rights. However, they may agree upon set schedules 

When you are considering drafting a martial agreement in Colorado, you should seriously consider retaining a family law attorney. Failure to o this could have a drastic impact on the agreement as to enforceability. 

For more information contact Watson & Associates, LLC at 720. 941.7200.

Theodore P. Watson, Esq

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 By Theodore P. Watson, Esq

 The government has chosen to accomplish contracts by performance based methodology. In a nutshell, the federal contracting agencies now let the contractor tell them how the end result will be accomplished. 

Why Performance Based Acquisitions? 

Government Performance and Results Act of 1993 was an effort by congress and the executive branch to reform federal acquisitions. Congress realized that small businesses and government contractors did not want to do business with the government because the contract documents were voluminous, tedious and the contractor had “no breathing room.” Hence, the ‘red tape’ theory. In order to stimulate interest again and to generate more taxes from small businesses the idea of performance based contracts came about. 

Performance based contracts is s new way of doing business. The federal contracting officers have a hard time writing RFPs for this type of work because they are not supposed to tell the contractor how to perform the contract. Instead, only the end result is allowed. 

With that said, the government is allowed to let the contractor know the critical areas that the agency will be looking out for. This is usually summarized in the performance summary.  The government will tell the contractor the maximum allowable deficiencies allowed. 

One thing that the government fails to provide for is that the less mistakes allowed in a performance based contract, the price of the contract is higher. For example, the government often puts non critical items at a 100%. This means no mistakes allowed. As a result, the contract price skyrockets but the contract is not awarded because of high  pricing. The question becomes “who suffers?” 

Seven Steps to Performance Based Contracts 

The government has publicized seven steps to performance based contracts. This document serves as a tool to introduce the concepts. Contractors and government procurement agencies are highly encourage to learn these steps. 

Benefits of Performance Based Contracts

Performance-based service acquisition has many benefits. They include:

• Increased likelihood of meeting mission needs
• Focus on intended results, not process
• Better value and enhanced performance
• Less performance risk
• No detailed specification or process description needed
• Contractor flexibility in proposing solution
• Better competition: not just contractors, but solutions
• Contractor buy-in and shared interests
• Shared incentives permit innovation and cost effectiveness
• Less likelihood of a successful protest
• Surveillance: less frequent, more meaningful
• Results documented for Government Performance and Results Act reporting, as by-product of acquisition
• Variety of solutions from which to choose

What does a contractor need to know about performance- based contracts? 

First, contractors must be trained in this area. Our office provides training to both the federal, state and contractors in this area of procurement. This method is supposed to reduce bid pricing, allow for more innovative ideas, and avoid the “us against them approach” in government contracting. 

If contractors fail to become acclimated, then bid prices will still be high; resulting in less awards and less income to the business. 

Federal Rules

FAR 37.6 states: 

Subpart 37.6-Performance-Based Acquisition

37.600  Scope of subpart.

This subpart prescribes policies and procedures for acquiring services using performance-based acquisition methods.

37.601  General.

(a) Solicitations may use either a performance work statement or a statement of objectives (see 37.602).

(b) Performance-based contracts for services shall include-

(1) A performance work statement (PWS);

(2) Measurable performance standards (i.e., in terms of quality, timeliness, quantity, etc.) and the method of assessing contractor performance against performance standards; and

(3) Performance incentives where appropriate. When used, the performance incentives shall correspond to the performance standards set forth in the contract (see 16.402-2).

(c) See 12.102(g) for the use of Part 12 procedures for performance-based acquisitions.

37.602  Performance work statement.

(a) A Performance work statement (PWS) may be prepared by the Government or result from a Statement of objectives (SOO) prepared by the Government where the offeror proposes the PWS.

(b) Agencies shall, to the maximum extent practicable-

(1) Describe the work in terms of the required results rather than either “how” the work is to be accomplished or the number of hours to be provided (see 11.002(a)(2) and 11.101);

(2) Enable assessment of work performance against measurable performance standards;

(3) Rely on the use of measurable performance standards and financial incentives in a competitive environment to encourage competitors to develop and institute innovative and cost-effective methods of performing the work.

(c) Offerors use the SOO to develop the PWS; however, the SOO does not become part of the contract. The SOO shall, at a minimum, include-

(1) Purpose;

(2) Scope or mission;

(3) Period and place of performance;

(4) Background;

(5) Performance objectives, i.e., required results; and

(6) Any operating constraints.

37.603  Performance standards.

(a) Performance standards establish the performance level required by the Government to meet the contract requirements. The standards shall be measurable and structured to permit an assessment of the contractor’s performance.

(b) When offerors propose performance standards in response to a SOO, agencies shall evaluate the proposed standards to determine if they meet agency needs.

37.604  Quality assurance surveillance plans.

Requirements for quality assurance and quality assurance surveillance plans are in Subpart 46.4. The Government may either prepare the quality assurance surveillance plan or require the offerors to submit a proposed quality assurance surveillance plan for the Government’s consideration in development of the Government’s plan. 

Does state agencies have to follow performance based contracting? 

Generally speaking, the federal government can not dictate to the states how to procure or award contracts. However, when states accept government grants, there is a condition attached to accepting federal funds. Most state contracting agencies fail to acquire procurement based contract training and ultimately still pay higher prices for contracts to the general public.

Also, the federal government could award more budget dollars to state governments when the state adopts similar minority based and small business programs that are substantially similar to federal programs. 

If you need more information, training or consulting in performance based contracts, contact us at 720 941 7200.

By: Theodore P. Watson, Esq

 Congress, through the Small Business Act, has charged executive procurement agencies to award government contracts to small businesses to the maximum extent possible. There is much dispute and concern as to whether small businesses actually get their fair share of federal contracts. 

All contracting agencies have a goal of awarding 23% of contracting dollars to small businesses. Within this amount there are set goals for service disabled veteran owned businesses, woman-owned, small disadvantaged businesses, and HUBZone firms. One must keep in mind that these are goals and not mandates as incorrectly published by other writers. 

Governing laws

 The federal acquisition regulation (FAR) is the primary procurement law for government contracting agencies. Regardless of the agency, procurement officials must follow these guidelines. Of importance is that an agency can divert away from the main FAR regulations to create local rules to compliment the unique missions.

However, an agency can not invent new rules or create rules or policy that contradicts congressional intent. 

How to become successful in small business contract awards 

The key to successful award of contracts under the government small business program is to learn how to become competitive, learn how to market to the federal government and master how to take advantage of subcontracting, teaming and joint ventures. Without these efforts, the government can justify , as they frequently do, why commercial services and products are not awarded to small businesses. 

What should you do first? 

As potential government contractor, the first inquiry should always be whether or not the government does in fact purchase your service or product. Chances are it does. 

After finding who your target market is a potential government small business contractor should then align their capabilities to meet the demand. 

Can I sell services and products outside of my state? 

Yes you can. As opposed to state government contracting, federal procurement law allows contractors to reach across state lines. Most small business contractors fear to venture outside of their comfort zone. However, this can be a grave mistake.

Federal contracts are awarded every day to successful bidders that are not located in the dame state as the procuring government agency. In fact, government procurement officials should not create RFPs that on their face favors in state contractors over out of state bidders. This can be viewed as unconstitutional. 

What training do I need to become a government contractor? 

As for any new business venture, a new federal small business contractor must have someone on its team that understands how the game is played. Government contracting is a very lucrative business. However, federal procurement law is full of complex regulations and rules. If your budget and business plan allows, you should consider hiring an experienced government contract consultant that understands the procurement process. 

The SBA offers training for small businesses and government contractors. However, the government is also reducing manpower. Therefore, training can be very limited and the content may not always help your specific business initiatives. 

Past Performance Matters 

One of the major concerns for federal small business contractors is that they may not possess enough experience to bid for government contractors. This line of thinking is not exactly true. Congress new that to encourage small business to bid on government contracts that there should be rules to offset this fear. 

Federal procurement laws provide that a small business should not be rated negatively for lack of past performance. However, contracting officers do not always adhere to this guidance. Small businesses can help overcome low scores on past performance by taking advantage of teaming arrangements with contractors that do have the experience. Joint ventures are also other mechanisms to use. You should start seeking out credible teaming partners early. 

How do I qualify to be a federal small business? 

Unlike the commercial sector, federal procurement laws are governed by definitions, definitions and more definitions. To become eligible as a federal contractor, government contract law only requires you to be registered on CCR. 

Then, you can assign up to 20 NAICS codes to tell the government what exactly you offer. It is each of these codes that sets out the important qualifications. For sample, each NAICS code distinguishes between large and small businesses by the amount of gross revenues or the amount of employees. 

Where do I find Qualified Federal Procurement Consultants? 

Many businesses advertise as government contract consultants. Many of them recruit prior government contracting officers. This can be a benefit. However, new small business contractors seek federal contract consultants that also understand the small business program and understand the legal aspects of federal procurement law. 

At Watson & Associates,LLC we staff our federal procurement and small business consulting team with prior government contracting officials and government contract lawyers. 

For more information, contact us online or call us at (720) 941.7200

By Peter B. Ford, Esq.

The right of the federal government to terminate a federal government contract for default lies within the Federal Acquisition Regulations (the “F.A.R.”) which mandates that nearly all federal government contracts include a Default clause. See Adrian L. Bastianelli III et al., Federal Government Construction Contracts 337 (2003). Default clauses can be traced as far back as the Civil War, and as government contracting has evolved over time so has the language typically found in a Default clause. Id.

While the precise contractual language found in a Default clause is dependent on the type of government contract, more often than not, the federal government’s right to terminate a federal government contract for default is exercised due to a contractor’s failure to complete the contract by the mandated contract completion date or failure to make satisfactory progress gauged by percentage of contract completion. Id. at 344-46. For example, F.A.R. 52.249-9, which governs Default clauses for fixed-price research and development contracts, states that the federal government may terminate the contract for defaultif the contractor fails to “(i) [p]erform the work under the contract within the time specified in [the] contract or any extension; (ii) [p]rosecutethe work so as to endanger performance of [the] contract…; or (iii) [p]erform any of the other provisions of [the] contract….” F.A.R. 52.249-9(a)(1). Federal government contract attorneys, Theodore P. Watson & Associates, LLC, advise clients to pay very close attention to the language of a Default clause. Failure to reach contract milestones can lead to the government contract being terminated for default and the government contractor liable for damages such as excess reprocurement costs and even liquidated damages.

Three important notes on default terminations and government contracts

 First, the federal government’s right to terminate a contract for default is discretionary, meaning that upon a finding of default a contracting officer is not required to automatically terminate the contract. Bastianelli III at 339. In fact, the F.A.R. enumerates seven factors to be used by a contracting officer as a guide in determining whether to terminate a contract for default. Id. at 340. See F.A.R. 49.402-3(f). Second, as with all contractual agreements, upon notice of default, the contractor may assert defenses in an attempt to justify a failure to timely perform or a failure to make satisfactory progress. Bastianelli III at 344-50. A contractor charged with failure to timely perform the contract may argue substantial performance, excusable delay or government waiver of completion date as defenses to a termination for default. Id. at 344. Likewise, a contractor charged with failure to make satisfactory progress may argue similar defenses. Third, where a contracting officer terminates a government contract for defaultbased on the contractor’s failure to make satisfactory progress gauged by percentage of completion, the federal government must justify its termination by proving with “clear and convincing evidence” the inadaquecy of the contractor’s progress and the high improbaility that the contract will be completed by the completion date. Bastianelli III at 351. The federal government contract attorneys at Theodore P. Watson & Associates, LLC emphasize to clients the importance of knowing your rights and available defenses upon the termination of a federal government contract for default.

Legal Decisions

In a recent decision, the Armed Services Board of Contract Appeals (hereinafter “Armed Services”) upheld the termination for default of a federal government contractor awarded a contract by the Army Corps of Engineers, Europe District. Appeals of FFR-Bauelemente + Bausanierung GmbH, ASBCA Nos. 52152, 54563, 54808, 54809, 55017 (July 6, 2007). Appellant was originally awarded a fixed-price construction contract for the restoration of building 8246, Smith Barracks, Baumholder Germany. Id.at 1. The completiton date was 290 days, approximately nine months, following the date of the contract award. Id. at 20. After 113 days, approximately four months after the date of the contract award, the contracting officer concluded that appellant could not reasonably complete the contract by the contract completion date since virtually no work had been accomplished. Id. The contracting officer issued requests for proposals and awarded the remainder of the contract to another federal government contractor 60 days after appellant’s termination for default. Id. at 36.

Armed Services began its analysis by stating that a termination for default is a drastic sanction. Id. at 32. They stated further that a termination for default requires the existence of a reasonable belief on the part of the contracting officer that the contractor could not perform the the entire contract effort within the remaining time for contract performance. Id.  Armed Services held that the contracting officer had acted reasonably in determining that appellant could not complete the remainder of the contract by the contract completion date. They held further that the contracting officer had acted reasonably to minimize excess costs, obtain a reasonable price and mitigate its losses. Id.For that reason, appellant was held liable for the excess costs of reprocurement. Id. at 37. In addition, because the contracting officer was justified in terminating appellant’s contract for default, Armed Services held that the Army Corps of Engineers was also entitled to liquidated damages. Id. at 38. At Theodore P. Watson & Associates, LLC our federal government contract attorneysand consultants understand that a termination for default is not something to be taken lightly by a federalgovernment contractor. Fighting the federal government and avoiding excess repocurment costs and liquidated damages may not be an easy task, but it can be done, so long as you know your rights and have the proper legal guidance.         

For further information regarding this legal topic or any other aspect of federal government contract law, please feel free to call Peter B. Ford, Esq.  (720) 941.7200 at Theodore P. Watson & Associates, LLC. Or contact us online.

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