Proving Excusable and Compensable Delays in Termination for Default Appeals

Contractors may encounter delays when performing government contracts that increase the time or cost of performance. Contractors typically bear the risk of such increases for delays that are avoidable or otherwise within their control. When both the government and the contractor are responsible for a delay, neither party can recover damages unless the delay can be clearly apportioned and the increased expenses can be attributed to each party. To establish entitlement to an extension based on an excusable delay or to monetary damages for a compensable delay, contractors must demonstrate that the delay was caused by unforeseen events beyond their control and without their fault or negligence. In addition, contractors must show that the unforeseeable events delayed the overall contract completion timeline by impacting the critical path of performance. Notably, in cases involving a delivery schedule extended by the parties’ agreement, delays caused by either party before the agreement are excluded from consideration, so neither party may recover for delays before the date of the agreement. The government may terminate a contract for default due to the contractor’s failure to complete contract performance in a timely manner. Once terminated for this cause, the contractor may prove the excusability of the delay to convert the default termination into a termination for the government’s convenience. However, an impact on the overall schedule and the critical path must be demonstrated to establish the compensability of the delay.

In Armed Services Board of Contract Appeals (ASBCA) No. 61898, a decision issued on March 28, 2023, the contractor’s default termination for failing to render timely performance was converted into a termination for convenience after the contractor established the excusability of the delay. However, the contractor was unable to recover monetary damages for the delay after the Board determined that although the excusable portion of the delay was caused by the government, the contractor had failed to demonstrate how that delay impacted the critical path of performance. Furthermore, the contractor could not recover for the remainder of the delay because both parties were found responsible for it. In April 2016, the U.S. Air Force (USAF) placed the delivery order in question under an indefinite-quantity contract to engineer, furnish, install, and test maintenance holes and to install a 288-strand fiber-optic cable at Eglin Air Force Base in Florida. The delivery order had an initial period of performance until September 30, 2016, which was extended to September 30, 2018, over the course of the parties’ execution of eight bilateral modifications. After the eighth bilateral modification was executed on May 3, 2018, the contractor inquired about a pending government approval for certain previously proposed coupler and fiber solutions. The government failed to approve these items until June 13, 2018, after which the contractor completed the coupler installation in August 2018.

Following the installation, the USAF identified some errors and warned the contractor that no further extensions would be granted to the period of performance. On September 20, 2018, the contractor requested an extension of the performance period after informing the government of its position that it had completed the cabling installation and was now performing curative work to correct latent defects. The request for extension was not granted and a day after the period of performance expired on September 30, 2018, the USAF instructed the contractor to stop work and remove its equipment from the site. On October 23, 2018, the government terminated the delivery order for default, citing the contractor’s failure to perform services on time and in accordance with the specifications. The USAF informed the contractor of its intent to acquire similar work from another contractor in the area with no anticipated re-procurement costs. The government did not pay the contractor’s invoices and failed to consider any excusable delay factors listed under Federal Acquisition Regulation (FAR) 49.402-3. The contractor filed a timely notice of appeal with the ASBCA challenging the termination for default. The contractor later submitted a claim requesting $312,917.84 for performance costs and $460,627.06 for delays, which the contracting officer (CO) denied. The contractor appealed the CO’s denial of this claim to the ASBCA, where it was consolidated with its earlier appeal. 

First to be addressed were the contractor’s allegations of government-caused delays prior to the parties’ execution of the eighth bilateral modification on May 3, 2018. The ASBCA decision noted that, in cases involving extensions to the delivery schedule with the parties’ agreement, any delays occurring before the agreement are not considered. The ASBCA cited its precedent and explained that when the parties agree to a new delivery schedule, they agree to let bygones be bygones and to expunge any prior delinquencies by the government or the contractor. Here, because the parties executed a modification on May 3, 2018, extending the performance period to September 30, 2018, any causes of delay by either party before May 3, 2018, could not be considered by the Board. Next, regarding the delay after May 3, 2018, the Board found that the contractor had demonstrated excusable delay because, when executing the eighth modification, the CO was on notice that the contractor was awaiting government approval of the proposed coupler and cable solutions to perform the corrective work. Despite this notice, the government did not provide the approval until June 13, 2018, 41 days after the execution of the eighth modification. Therefore, the contractor had demonstrated the excusability of the government-caused delay, and the default termination was converted into a termination for convenience.

In making its decision, the ASBCA determined that the contractor would have completed timely performance had it not been for the 41-day government-caused delay in approving the proposed coupler and cable following the eighth bilateral modification. Accordingly, the contractor was entitled to compensation for its performance costs consistent with a termination for convenience under FAR 52.212-4(l). However, while the contractor was also able to recover for certain additional work not required by the contract, its claim for compensable delay failed. In this regard, the contractor had alleged 78 days of government-caused delay following the execution of the May 3, 2018 bilateral modification. Of the 78 days, the contractor had established a 41-day government-caused excusable delay, sufficient to overturn the default termination. However, the contractor failed to address concurrency or the impact of the government-caused delay on the project’s critical path. Thus, while the government-caused delay in this case was enough to convert a default termination into one for the government’s convenience, the contractor had failed to establish that the delay was also compensable. Finally, the contractor could also not recover for the alleged delays in the period after the June 13, 2018 approval and before the expiration of the extended period of performance on September 30, 2018, because the Board determined that both parties shared responsibility for those delays, with no clear apportionment between them.

A contractor’s failure to deliver timely performance establishes a prima facie case of default termination. If terminated for default on this basis, it is the contractor’s burden to establish that its failure to meet the performance deadline was excusable or that the government’s decision to terminate was arbitrary, capricious, or an abuse of discretion. If the contractor can establish that the delay in performance was government-caused or excusable, the default termination may be converted into a termination for convenience. The contractor may then obtain payment for the work performed under the contract’s termination for convenience clause. Furthermore, while not a procedural issue in the case described above as the contractor sought monetary damages, contractors need not state a sum certain when asserting a government-caused delay defense to a default termination. When entering into a bilateral agreement to extend the delivery schedule, contractors should be mindful that any delays caused by either party before the execution of the agreement are eliminated from consideration, as the revised recovery schedule supersedes all past events. It is also worth noting that once the previous schedule is waived and a new delivery deadline is established by mutual agreement of the parties, the government may not coerce the contractor into delivering before the new deadline by threatening to terminate for default.

This Federal Contract Claims Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.