An Inconvenient Contract Terminated for Convenience

I suspect a word more colorful than “whoops” was said when the Air Force discovered that it had a awarded a contract to a supplier that technically was not permitted to furnish the part that was ordered. However, what followed that realization was not a whoops moment.

This story comes from a decision that was decided last fall by the Armed Services Board of Contract Appeals in which a contractor was appealing the denial of its claim to be paid in full for the parts it fabricated under the contract. See Appeal of ATECH, Inc., ASBCA No. 62764 (October 21, 2022) The contract, awarded by the Air Force, called for the awardee to furnish parts for use in what are known as “aircraft arresting systems” that are used “to engage and safely stop a hook-equipped aircraft.” Initially, the Air Force had believed only one supplier was able to furnish the part, so it issued a notice of sole source procurement. The notice allowed others to submit proposals if they could supply the part, which the appellant in this case did. Given that the contractor proposed a price that was substantially cheaper than the other supplier, the Government awarded the contract to the appellant.

However, it was later discovered by the Air Force that the contractor was not on the list of companies that were authorized to furnish the part. As it turned out, the Air Force’s review was a bit rushed. In any event, the Air Force terminated the contract for convenience and directed the contractor to submit a termination settlement proposal for that portion of the work it had performed prior to the termination date.

Unfortunately for the Air Force, the contractor had completed the fabrication of the parts and so it requested to be paid in full. At this point, it should be noted that there was no evidence that the contractor misled the Air Force when it submitted its proposal; nevertheless, it clearly was not on the list of eligible suppliers for whatever reason. In any event, the Air Force refused to pay the contractor in full even though it was also undisputed in the evidence proffered in the case that all of the work was complete at the time of termination. Clearly, the Board was unimpressed with any of the Air Force’s arguments and found that the contractor was entitled to full payment.

What I find troubling about this case is that I can see little justification for it to have required an appeal to the Board and for that appeal to run its course over what is a drop in the drop in the drop in the bucket of the Air Force’s budget. The Air Force should have just paid the claim and learned a well-deserved lesson, which is to not rush procurement decisions, even small ones such as this, where, as here, there was no apparent emergency. And then, once the whoops moment has occurred, just own the mistake and pay the bill. I certainly would have written the check, but who am I?