Terminations For Convenience And Creedence Clearwater Revival: "Bad Moon Rising"

by Sheppard Mullin Richter & Hampton LLP
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The U.S. won’t be able to avoid a crippling debt crisis as long as Congress refuses to include defense spending . . . in the mix of program cuts to reduce federal spending, the co-chairman of the presidential debt commission said Tuesday.

Army Times, March 8, 2011, available here (see article below for link).

Terminations for the Government’s convenience developed as a tool to avoid enormous procurements upon completion of a war effort. Because public policy counseled against proceeding with wartime contracts after an end to [Civil War] hostilities the government, under certain circumstances, began to terminate contracts and settle with the contractor for partial performance.

Krygoski Constr. Co. v. United States, 94 F.3d 1537 (Fed. Cir. 1996)

It now is generally accepted that the federal budget must be reduced drastically, although just how drastically and where is still a matter for debate. But public policy already has “counseled against proceeding” with certain procurements, and the process of terminating increasing numbers of contracts for the convenience of the government already may have begun in earnest, as indicated by the following developments:

On January 13, 2011, the Commandant of the Marine Corps recommended cancellation of the Marine Corps Expeditionary Fighting Vehicle (“EFV”) because its costs had become “too onerous.” He did so in the face of the outspoken opposition of many senior Marine generals who believed that without the EFV the Marines would “have to begin abandoning the [amphibious] mission that has long been at the core of their identity.”

On February 4, 2011, the White House web site boasted that it has reduced contract spending from an annual 12% increase between 2000 and 2008, to a FY 2010 reduction to “$535 billion versus $550 billion in the prior year.” To accomplish this feat, agencies have, among other things, “ended unnecessary or unaffordable contracts, including contracts for weapons systems, information technology, financial management, operations and maintenance, transportation and fuel.” (emphasis in original). But the White House cautions that “[t]here is still much to be done to make sure every contracting dollar is well spent.”

This posting offers a brief review of the history and principles of the government’s right to terminate for convenience, including two recent decisions that illustrate just how minimal courts and Boards of Contract Appeals view the limits that exist on the Government’s authority to exercise that right.

Please see full article below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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