When a government contractor is terminated for reasons other than default, the response from the contractor is often to evaluate the contracting officer’s decision and rationale for the termination and determine if an appeal is warranted. Government contractors sometimes appeal a contracting officer’s decision to terminate their contract by alleging bad faith and an abuse of discretion. While the contractor may legitimately believe that the contracting officer acted in bad faith or abused their discretion, proving its allegations and convincing the Court of Federal Claims or a Board of Contract Appeals to reverse the contracting officer’s decision is no simple task. Even a contracting officer who terminated a contract based on a mistaken understanding of the facts and circumstances may not constitute bad faith or an abuse of discretion.
Recently the Postal Service Board of Contract Appeals (“PSBCA”) had the opportunity to address this situation in the consolidated appeals of Cook Mail Carriers, Inc. v. United States Postal Service and Patricia J. Sasnett v. United States Postal Service. PSBCA No. 6583, 6584 (March 24, 2017). In these appeals two government contractors – Cook Mail Carriers, Inc (“Cook”) and Patricia J. Sasnett (“Sasnett”) – who provide mail transportation services in Alabama for the US Postal Service were terminated due to revisions in the mail routes directed at simplifying the transportation network, pooling resources, managing workloads, and gaining contract administration efficiencies. The contracting officer invoked the Postal Service’s “Termination with Notice” clause in order to terminate these contracts, a clause that allows either party to terminate the contract, without cost, provided proper notice (60 days) is given.
When the contracting officer decided to terminate the Cook and Sasnett contracts he believed that the need for revised routes was due to a mail processing plant in Gadsden, Alabama being closed and merged into a larger facility in Birmingham, Alabama. However, after the termination, the contracting officer learned that the Gadsden facility had previously been closed and the reason for the revised routes was due to mail transportation hubs (as opposed to processing plants) being relocated to Fort Payne and Boaz, Alabama.
Cook and Sasnett appealed the contracting officer’s decision arguing, among other points, that the contracting officer’s decision to terminate the contracts on 60 days’ notice (as permitted by the Termination with Notice provisions of the respective contracts) was made in bad faith or constituted an abuse of his discretion.
While the contracting officer terminated the contracts under the Termination with Notice clause, which does not include any express limitation to its use, the contracting officer’s exercise of the clause is not truly unlimited. A decision to exercise that clause can breach the contract if it was made in bad faith or as an abuse of discretion. Continue Reading Does a Contracting Officer’s Mistake about the Reasons for a Termination Constitute Bad Faith or an Abuse of Discretion?