Contract performance

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

The Government Can "Waive" a Construction Contract Completion Date

Usually, the government is not found to have "waived" a contract deadline in construction cases. (1374) In B.V. Construction, Inc., (1375) however, the lack of a liquidated damages clause coupled with the government's apparent complete lack of concern over the completion date, caused the ASBCA to find the government elected to waive the right to terminate the contract. Further, the government failed to properly re-establish a contract completion date. (1376)

On 7 June 1991, the National Aeronautics and Space Administration (NASA) contracted with B.V. Construction, Inc.(BV), to install a "patio covering known as a 'space frame.'" (1377) The initial completion date was 31 October 1991. (1378) A bilateral modification, signed by the contractor on 5 December 1991, extended the completion date to 17 January 1992. (1379) Nearly twenty months of differing site conditions, subcontractor problems, and design changes elapsed, with no definitive completion deadline re-established. During the twenty month gap, the parties exchanged letters and phone calls regarding, among other topics, design modifications, pricing of changes, and work schedules. (1380) BV continued work on the project and the contracting officer was aware of BV's efforts. (1381) On 27 September 1993, in an un-priced unilateral modification, the contracting officer required completion by 8 January 1994. (1382) On 22 December 1993, BV submitted a revised schedule showing final completion on 10 April 1994. (1383) Finally, on 11 February 1994, the contracting officer unilaterally set completion for 24 April 1994. (1384) The contracting officer did not indicate that she considered "BV's progress or lack thereof" since 22 December 1993--the date BV submitted its proposed schedule. (1385)

Additional problems ensued, and on 15 April 1994, the contracting officer issued BV two letters. The first denied BV additional time it had requested to complete the contract. (1386) The second, a cure notice, stated, "'the Government considers [BV's] failure to start space frame erection a condition that is endangering performance of the contract' and, 'unless this condition is cured within 10 days after receipt of this notice, the Government may terminate for default ... this contract.'" (1387) On 25 April 1994, BV informed the contracting officer that it required three to four weeks to complete the work. (1388) The termination contracting officer terminated the contract on 26 April 1994. (1389) The notification provided, "'the act constituting the default is the failure to commence space frame erection and failure to order necessary materials.'" (1390) In addition, the notification stated that "BV's failure to perform is not excusable and that BV's response to NASA's cure notice dated 15 April 1994 'did not reflect a satisfactory course of action for progressing with the work and completing the requirement by the required date.'" (1391)

The board first noted, in familiar language, that a "default termination is a drastic sanction." (1392) The board further explained that liability for monetary damages "are a species of 'forfeiture' and must be strictly construed." (1393) The board discussed the issue of waiver, first observing that NASA did not terminate the contract until two and a quarter years after the extended contract completion date of 17 January 1992. Citing DeVito v. United States, (1394) the board laid out the two elements required to establish the government elected to waive default: "(1) failure to terminate within a reasonable time after the default under circumstances indicating forbearance, and (2) reliance by the contractor on the failure to terminate and continued performance of the contract by the contractor with the government's knowledge and implied or express consent." (1395)