Potential Impact(s) of a Termination for Default on Contractors

With over four decades of experience in government contracting, the termination for default attorneys at Malyszek & Malyszek can help you navigate through the tough procedures and expose unauthorized agency termination of contract actions.

A Termination for Default has serious penalties for the contractor and the government. The government may be held responsible for costs if the default is altered to a Convenience Termination. This doesn’t constrain the government from Terminating for Default; however the contracting officer must be able to show that he considered the cost and time impact at the time the termination verdict was made. A contractor must reveal such a Default Termination in bidding for new work. If the contract work is 80% complete, it would be economically wasteful to terminate for default because the procurement costs would be extreme.

Some potential impacts would be:

  • Return progress, partial or advance payments
  • Liable for excess costs of reprocurement or completion of the contract
  • Liable for actual or liquidated damage
  • Government may appropriate the contractor’s material, inventory, construction plant and equipment at the site, under supply contracts, drawings and plans with the price for the items to be negotiated
  • Contractor is entitled only to receive payment only for work accepted by the government
  • Contractor may be subject to debarment

Termination for Default in federal government contracting can be an overwhelming blow to your company. Besides a suspension and debarment or criminal conviction, getting a termination for default in your record will be severe from the government.

If not controlled correctly, the government can assess damages such as hiring another contractor to perform the tasks. Your performance record will be seriously impacted. Understanding and implementing a good legal defense is critical.

We direct contractors through the complex guidelines to see if the government contracting agency contributed to the default action or acted unlawfully. If there is an investigation, our defense lawyers will help you to properly evaluate the record and protect your legal rights.

As a construction contractor, although your contract was terminated for default and you received a termination letter, you may still be entitled to payment for work that was properly performed in agreement with the contract before termination.

If your contract contains the Default Clause at 52.249-8, the Government has the right to terminate the contract completely or partially for default if you fail to:

• Perform the services within the time specified in the contract
• Perform any other provision of the contract
• Make progress and that failure endangers performance of the contract

The most important thing for a contractor to know about Terminations for Default is that it should be avoided at all costs. Contact the lawyers at Malyszek & Malyszek today for a FREE consultation regarding your Termination for Default matters.