Better Early than Never: Court of Federal Claims Dismisses Challenge to Default Termination as Five Years Late, Despite Contractor’s Timely Appeal of Denial of Certified Claim
Construction and Procurement Law News, Q2 2022
The Court of Federal Claims has confirmed that a termination for default is a contracting officer’s final decision triggering the Contract Disputes Act (“CDA”) appeal deadlines. The recent case of Bowman Construction Co. v. United States involved a contract between a contractor (“Bowman”) and the National Park Service for the construction of a bicycle trail at a national park in Minnesota. In October 2012, the government terminated Bowman’s contract for default. Bowman did not appeal the termination. In fact, after Bowman’s surety settled with the government and sued Bowman for those costs, Bowman entered a confession of judgment, a legally binding pledge to pay those amounts to the surety. In October 2017, Bowman filed a certified claim challenging the termination for default. The contracting officer denied the claim, and Bowman appealed to the Court of Federal Claims less than one year later. Bowman’s complaint contained counts for allegedly improper termination for default, breach of the duty of good faith and fair dealing, and nonpayment for work the government allegedly accepted before the termination for default.
The CDA requires a contractor to appeal a contracting officer’s final decision to the Court of Federal Claims within 12 months of receipt of the final decision (within 90 days, if appealing to the Boards of Contract Appeals). Here, Bowman filed its appeal within 12 months of the contracting officer’s 2017 decision, five years after the 2012 termination for default. The government moved to dismiss the complaint, and the court granted the motion (except for the allegations of non-payment, which fell under the CDA’s general 6-year statute of limitations for contract claims). The court explained that any claims relating to the termination for default and confessed judgment amount were untimely because the 12-month statute of limitations ran from the October 2012 termination for default, not the denial of the 2017 certified claim. Thus, Bowman could not recover any costs that could have been recovered under a termination for convenience settlement, had it successfully and timely challenged the termination for default in 2013.
Contractors should be mindful that the Court of Federal Claims considers a termination for default letter as a contracting officer’s final decision triggering the CDA appeals deadlines. Thus, contractors should raise any and all challenges relating to a termination for default pursuant to the CDA appeals timeline (12 months if the appeal is to the Court of Federal Claims and 90 days if the appeal is to the Board of Contract Appeals). The Court of Federal Claims is likely to dismiss as untimely any subsequent claim that involves a challenge to the termination for default, even if the contractor, like Bowman, otherwise properly follows the CDA claim and appeals process for that claim. When the contractor settles with the government, as it did in Bowman’s case, this will require careful negotiations with the surety to allow the defaulted contractor to pursue its claim for wrongful termination against the government.