Contractor Could Not Have Been Coerced Into Agreeing to Termination that It Proposed; Appeal of Exceed Resources, Inc., ASBCA 61652

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Government’s motion for summary judgment on contractor’s breach claim is granted. The government argued the contractor’s claim was barred by a release the contractor signed when it agreed to terminate the contract. The contractor argued it been coerced into signing the release, contending that if it had not signed the termination, the agency would have forced the contractor to work for free and perform at a significant loss. The board found that the contract contained a limitation of funds of clause that would have prevented the contractor working for free. What’s more, the contractor could not prove that it had been coerced into signing the termination, because the contractor had proposed the termination. A party cannot involuntarily accept terms that it proposes.

NASA awarded a contract for secretarial and administrative support to Exceed Resources. As Exceed was transitioning into performance, a dispute arose between the two parties concerning hours and benefits.  Exceed wrote a letter to NASA stating that the contract was based on a mistake. Exceed requested an equitable adjustment. The company also stated that it would be willing to entertain a termination for convenience.

NASA accepted Exceed’s offer for a termination for convenience. The parties entered a bilateral modification to terminate. The modification contained a release by which Exceed agreed to waive any further claims it had against the government. As part of the termination, NASA paid Exceed for the phase-in costs the company had incurred.

Three years after terminating the contract, Exceed submitted a claim to NASA, claiming the agency had breached the contract. Exceed sought $2.5 million in lost profits. NASA denied the claim. Exceed appealed to the ASBCA. NASA moved for summary judgment on the breach claim.

The board noted at the outset that lost profits are not generally available for a termination for convenience. Indeed, the board noted that Exceed’s burden was even higher because it signed a plain and unambiguous release. There was nothing in the record that indicated Exceed had proposed an exception to the release for lost profits.

The board reasoned that Exceed could only recover lost profits if it was able to prove a bad faith termination. Although the board found Exceed’s arguments somewhat confusing, it appeared that Exceed contended it had been coerced into the termination when the contracting officer changed the minimum value of the contract.

The draft contract stated that the contract value was between $700,000 and $73 million. When the contracting officer signed the contract, he had inserted into $800,000 into the blank box on SF 1449. Exceed claimed that this had been a ploy to force the company to perform the maximum amount of work under the contract for a negligible, price. Thus, Exceed argued, it had no choice but sign the termination.

The board found this argument unpersuasive. First, it noted that the contracting had to put some number on SF 1449, and the $800,000 inserted was within the range contemplated by the contract. Additionally, the contract contained a limitation of funds clause, which stated the contractor could not be forced to work for free beyond the amount allocated to the contract. It turned out the contracting officer had inserted the $800,000 because that had been the amount presently available to payment under the contract. Given the limitations of fund clause, it would have been impossible for the agency to force Exceed to work for free.

Moreover, the board noted that to prove duress, Exceed had to show that it had involuntarily accepted NASA’s terms. Exceed could not meet this requirement because it had proposed the termination. Given that Exceed had proposed the termination, it seemed unlikely that the contracting officer would find it necessary to make a threat. The board opined that no rational factfinder could believe that Exceed had been coerced in these circumstances.

Exceed is represented by Celsius Rebello. The government is represented by Scott W. Barber, Warnecke Miller, and Vincent A. Salgado of NASA.

ASBCA - Exceed Resources