Contract performance

Army Lawyer, Jan, 2005 by Steven Patoir, Andrew Kanter, Michael Benjamin, James Dorn

FAR section 49.305-1(a) applies to cost-reimbursement contracts terminated for convenience. (1450) It provides, in pertinent part:

   The TCO shall determine the adjusted fee to be paid, if any, in
   the manner provided by the contract. The determination is
   generally based on a percentage of completion of the contract or
   of the terminated portion.... The contractor's adjusted fee shall
   not include an allowance for fee for subcontract effort included
   in subcontractors' settlement proposals. (1451)

The relevant contract termination clause, FAR section 52.249-6(g)(4)(i) similarly denies the prime contractor a fee for subcontractor effort. (1452) In determining the prime contractors' fee, FAR section 52.249-6(g)(4)(i) explicitly calls for "excluding subcontract effort included in subcontractors' termination proposals." (1453) Apparently, both parties failed to discuss FAR section 52.249-6. (1454)

Lockheed Martin argued that FAR section 49.305-1(a) did not apply to subpart 17.4 contracts. (1455) The board disagreed. Nothing in FAR parts 17 or 49 indicate that Leader Contracts are exempt from FAR section 49.305-1(a). (1456) Further, while the parties conducted robust negotiations, there is no evidence the parties intended any interpretation besides the plain meaning of these provisions. (1457)

Prior ASBCA precedent bolstered this interpretation of the two far clauses. Kollmorgen Corp., Electro-Optical Division, (1458) involved the interpretation of FAR section 52.249-6's predecessor clause. Regarding Kollmorgen's ability to receive a fee on subcontractor effort after termination of its CPFF contract, the board wrote, "The termination clause and the regulations are very clear that the prime contractor ... may not include a fee on subcontractor cost or effort included in the subcontractor's termination claim ... Kollmorgen may not collect a fee on the amount of the settlement with [its subcontractor,] Westinghouse." (1459)

Lockheed Martin also argued it should at least recover a profit for the SDRLs actually delivered by the subcontractors to NAVSEA. (1460) This ground was also not persuasive in the face of FAR section 49.305-1(a), the FAR clause at section 52.249-6, and Kollmorgen. The board concluded, the two FAR clauses mandated that "subcontract effort, delivered SDRLs or otherwise, must be excluded in determining prime contractor fee so long as the prime contract is CPFF." (1461)

The Helicopter that Never Took Off

In late February 2004, the Army announced the cancellation of the Comanche helicopter program. (1462) Although the Army had invested over $6.9 billion in the program, the termination was expected to save approximately $14 billion. (1463) As of August 2004, reports indicated that the prime contractors, Boeing and Sikorsky, were preparing their termination settlement proposals. (1464) Termination settlement estimates run from $480 million to several billion dollars. (1465)

Delivery Order Estimates Don't Lock in Government

Maggie's Landscaping, Inc., (1466) had a requirements contract to mow, clip and edge ninety-three areas at Aberdeen Proving Ground. (1467) The government issued monthly Delivery Orders (DOs) setting forth the "government's anticipated monthly requirements and clearly identified them as estimated mowing frequencies." (1468) Appellant knew the DOs contained estimates. (1469) Each week Maggie's would propose areas for mowing. The contracting officer's representative or alternate contracting officer's representative would then approve Maggie's list. Later, Maggie's prepared, and the government paid, monthly invoices based on actual mowing accomplished. (1470) The actual work, however, did not always match the monthly estimates. (1471) In all, actual mowing ordered was less each season that the DO estimates. (1472)