The Air Force awarded a contract for commercial items without much of an evaluation. Indeed, the contracting officer conceded this was a “situation of people signing off on technical evaluations and not realizing the consequences of doing so.” Unhappy with the agreement, the Air Force terminated for convenience. The contractor, however, had fully performed and was ready to deliver when the Air Force terminated. The ASBCA found the Air Force was within its rights to terminate. Nevertheless, the agency had to pay the contractor the full price for the items.
Appeal of ATECH, Inc., ASBCA No. 62764
Background
The Air Force needed parts for the BAK-12 aircraft arresting system. The Air Force published a notice of intent to issue a sole source contact for the parts to the ESCO Zodiac Aerospace. The notice, however, allowed other suppliers to submit capability statements.
ATECH, Inc. submitted a capability statement in response to the notice. The Air Force liked what it saw. ATECH proposed to supply parts at a lower price than ESCO. Without further ado, the Air Force entered a contract with ATECH.
But the Air Force later learned that ATECH was not authorized to supply the parts the Air Force needed. The Air Force decided it no longer wanted to buy the parts from ATECH. Right before the ATECH was about to deliver, the Air Force terminated for convenience.
ATECH submitted a settlement proposal seeking the full price—$85,000—for the parts. ATECH even offered to deliver the parts at a discount. The Air Force refused to accept the parts.
ATECH asked for a final decision. The Air Force struggled to come up with a justification. Internally, the contracting officer complained that this was a “classic situation of people signing off on technical evaluations and not realizing the consequences of doing so.” The Air Force ended up issuing a conclusory decision that simply denied termination costs. ATECH appealed to the ASBCA.
Analysis
Termination for Convenience
In the absence of a clear abuse of discretion, a contracting officer’s decision to terminate for convenience is conclusive. Here, the Air Force received advice that ATECH was not authorized to sell the parts, and that the parts had not been subjected to a preapproval process. Given that these parts were essential to ensure aircraft safety, the Air Force was within its discretion to cancel the contract. The board noted the Air Force had quickly approved the contract with an email, stating simply, “Looks like it should work.” The Air Force was entitled to require a higher level of scrutiny for the procurement process.
Payment
The board, however, found the Air Force’s refusal to pay unreasonable. The Air Force could have rejected the parts as nonconforming under the contract’s commercial items clause. But the Air Force never allowed ATECH to deliver the parts for inspection, so it could couldn’t avail itself to this clause.
FAR 52.212-4 provides that upon a termination for convenience, the contractor shall be paid a percentage of the price reflecting the percentage of work performed. Here, ATECH had proven it had performed 100% of the contract and was ready to deliver parts. The board found that ATECH was entitled to recover the full price of the parts.
ATECH is represented by Christopher L. Lockwood of Womble Bond Dickinson (US) LLP and Jerome S. Gabig. The government is represented by Jeffrey P. Hildebrant and Isabelle P. Cutting of the Air Force.
–Case summary by Craig LaChance, Senior Editor
