HANDYMAN 
Handyman Insurance, Termination for Default Held Improper
A contractor performed a project involving the construction of stone dike extensions and other work at four sites on the Mississippi River. Nelson, Inc. ASBCA No. 57201 (December 15, 2015). One of the issues was whether the four distinct sites were separable for purposes of applying the Termination for Default clause (FAR 52.249-10). In other words, the question was whether the contractor could be terminated for failing to diligently prosecute the work on one of the four work sites, even though the overall contract allowed 165 days for completion. The Board stated that “Where a contract is separable (sometimes also referred to as severable, or divisible) and a contractor is delinquent only as to a separable part of the contract work, it is improper for the contracting officer to terminate for default the entire contract.” The contractor would not be prohibited from continuing performance on any of the sites where work was being performed in a timely manner.
However, the Board ruled that the termination for default was improper as to all of the sites. On two of the sites, “Friars Point” and “Crow Island,” no separate Notices to Proceed were issued and, consequently, the time for performance of the work at those sites never commenced and there was no completion date or “delay” in performance at either site. The Board stated that “Without a start and completion date, there is no yardstick to measure whether Nelson failed to diligently prosecute the work at those separable sites.” As to the other two sites, “Loosahatchie” and “Robinson Crusoe,” the Board found that the Corps failed to properly consider time extensions that were due and miscalculated the required completion dates at those sites. As a result, the Board found that the default termination was “precipitate and unjustified.”
The decision applied the well-established requirement that the government has the burden of proving that the termination for default was justified. Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 764 (Fed. Cir. 1987). Discount Co. v. United States, 554 F.2d 435, 441, cert. denied, 434 U.S. 938 (1977), interprets the clause to require the government to demonstrate a “lack of diligence such that the government [cannot] be assured of timely completion” (emphasis added). In Lisbon Contractors, 828 F.2d at 765, the Federal Circuit construed the clause to require “a reasonable belief on the part of the contracting officer that there was no reasonable likelihood that the [contractor] could perform the entire contract effort within the time remaining for contract performance.” Since there has been a greater willingness on the part of some government agencies to terminate contracts for default, contractors are well advised to do everything possible to prevent premature terminations and to be mindful of the considerable burden imposed on the government.
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