Government Contracts Monitor

Short Take: Challenging a Default Termination – Be Timely or Be Out

September 8, 2014

A recent decision highlights the importance of understanding how and when a contractor can challenge a termination for default. In Guardian Angels Medical Service Dogs, Inc. v. The United States, COFC No. 14-20C, decided August 29, 2014, the contractor did not appeal the Contracting Officer’s (CO’s) default termination to the Court of Federal Claims (COFC) within the required 12 month period and, as a result, its challenge was time-barred.

Guardian was awarded a contract by the Veterans Administration to provide service dogs to veterans. Its performance faltered and on August 31, 2012, the CO issued a notice of termination for default – a government claim appealable to a Board of Contract Appeals or the COFC. A CO’s default decision is final unless the contractor appeals or files suit. 41 U.S.C. § 7104.

Guardian argued that on February 28, 2013 it filed a timely “claim” with the CO regarding its performance and, as a result, the 12-month statutory period for its appeal of the default did not begin to run until May 3, 2013, the date the CO denied Guardian’s claim. But Guardian was wrong: the filing of a certified claim with the CO “is irrelevant for the purpose of counting the twelve-month statutory period” to appeal a termination for default to the Court of Federal Claims or a Board.

As the Court stated, Guardian’s “argument evinces its fundamental misunderstanding of the nature of a termination for default under the procedural regime established by the Contract Disputes Act.” To challenge a CO’s decision to terminate for default, a contractor must file an action in the COFC or an appeal with a Board of Contract Appeals within 12 months from the date of receipt of the decision.

Guardian’s termination for default expressly stated that it had the right to appeal the decision under the Disputes Clause, FAR 52.233-1, which in turn states that the decision to terminate is final “unless the contractor appeals” as provided in the CDA, 41 U.S.C. chapter 71. The CDA in turn expressly states that a contractor may bring an action directly in the COFC within “12 months from the date of receipt of a contracting officer’s decision.” 41 U.S.C. § 7104(b). In short, Guardian was too late.

Attorneys

Lindsay Simmons