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ConstructionWebLinks.com
In
December 1991, the U.S. government contracted with the Libertatia
Associates, Inc. (TLA) to perform grounds maintenance for
family housing and other areas of Fort Rucker Army, Alabama.
The contract was a requirements type. The government would
issue orders every two weeks for TLA to deliver its maintenance
services. The government had the contractual right to inspect
the work and to require re-performance of unacceptable portions
of the work. The government issued nine delivery orders
under the contract. Inspections of the work found parts
of the work to be unacceptable. The government ultimately
terminated TLA for default.
TLA
sued the government to convert the default termination into
a termination for convenience, which would contractually
entitle TLA to compensation for the termination and clear
its record. After a bench trial, the U.S. Court of Federal
Claims agreed with TLA, determined that the government had
terminated TLA in bad faith and ordered that the termination
be converted into a termination for convenience. The
Libertatia Associates, Inc. v. United States, 46 Fed.
Cl. 702 (Fed. Cl. 2000).
The
court's opinion began by noting that "default termination
is a drastic sanction which should be imposed (or sustained)
only for good grounds and on solid evidence." It is
the government's initial burden to show that the contractor
was in default of its contract. The burden then shifts to
the contractor to show that its failure to perform was excusable.
Government
officials are presumed to act in good faith. The contractor
has a heavy burden in overcoming this presumption. Other
cases had stated the burden as requiring "well nigh
irrefragable proof" (impossible to refute or controvert)
of bad faith. The court likened this standard to being greater
than the proof beyond a reasonable doubt required to convict
in criminal cases.
The
court instead used an alternate statement of the standard:
"evidence of some specific intent to injure the plaintiff."
In making its determination, the court must look to the
aggregate actions of all representatives at the government
agency.
The
court's decision was based heavily on testimony and evidence
concerning ill will and bad faith by the government's Contracting
Officer Representative (COR). The court pointed to evidence
and testimony indicating that the COR harbored "personal
animosity" toward TLA. The COR engaged in overzealous
inspections, which caused delay and added expense for the
plaintiff. The COR ordered unreasonable overtime performance
so that he could benefit personally from overtime pay for
his supervision.
In
advising TLA of its role, the COR expressly likened his
own role as that of "Jesus Christ" and his Contracting
Officer's role as that of "God." On a daily basis,
the COR expressed to government employees his personal animosity
toward TLA officers. In a meeting where the government represented
that TLA would have to purchase more equipment, the COR
stated that he would "break" TLA. When TLA was
terminated, the COR came into his office and held his hands
up "like it was somewhat amusing."
As
for the Contracting Officer, she accompanied her COR on
inspections. The evidence indicated that she was present
and may have heard the COR state an intent to "break"
TLA. The court concluded that the Contracting Officer was,
at the very least, on notice of the COR's bad faith yet
did nothing.
On
those facts, the court concluded that the government had
acted in bad faith. The government's actions excused any
contractual non-performance by TLA. Thus, the termination
for default was unjustified, and the court converted it
to a termination for convenience.
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