Convenience Terminations

By Craig Stetson

There is a lot wrong with this – common items, loss contract and lack of supporting data.  Notwithstanding the amount of claimed costs (small in this case), the contractor has the burden to support costs (entitlement and quantum) when submitting termination for convenience settlement proposals.  See FAR Part 49.

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ASBCA, 15-1 BCA ¶35,918 DODS, Inc.

ASBCA, No. 59510, March 12, 2015.Contract No. SPM4A7-09-M-B426.

Convenience Terminations: Settlements: Burden of Proof..– A contractor was awarded only a portion of its claimed termination for convenience settlement costs because the contractor failed to meet its burden of proving entitlement to all of the claimed costs and the amount of the claim exceeded the contract price. The appeal followed the conversion of the default termination of a $6,400 contract for aircraft formers to a convenience termination (12-2 BCA ¶35,078). The contractor submitted a termination settlement proposal under FAR 52.249-1 and a certified claim seeking $18,471, but the parties could not agree on a settlement amount and the claim was deemed denied. On appeal, the contractor was awarded $2,793. First, the contractor was awarded the costs of only one of four sheets of metal because the contractor failed to show it could not use the three remaining sheets on other work without sustaining a loss. Second, the $2,679 claimed for direct labor costs was unreasonable. An analysis of the contract price revealed the contractor allocated only $485 to direct labor costs, and the contractor presented no evidence on the economies of scale it might have achieved had it passed first article testing. The board used a jury verdict approach and found $300 for direct labor costs was reasonable given the circumstances. Third, the contractor claimed $9,147 for general and administrative expenses, but the board awarded $1,181, using a rate of 227.19% the Defense Contract Audit Agency computed for a related entity. Fourth, the contractor was entitled to no profit because it appeared the contractor would have incurred a loss had the entire contract been completed. Finally, the contractor was awarded only $937 of the $3,791 it claimed as settlement expenses because the remainder of the expenses represented litigation costs, which were unallowable under FAR 31.205-47(f)(1).

For the appellant: Mr. David Storey, President. For the government: E. Michael Chiaparas, Esq., DCMA Chief Trial Attorney, Douglas R. Jacobson, Esq., Trial Attorney, Defense Contract Management Agency, Bloomington, MN.

Terminations are an area of expertise and service offering from Capital Edge Consulting.

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